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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
------------------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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<S> <C>
FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER
DECEMBER 31, 1996 1-12374
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ALUMAX INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<C> <C>
DELAWARE 13-2762395
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
</TABLE>
5655 PEACHTREE PARKWAY
NORCROSS, GEORGIA 30092
(PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE NUMBER: (770) 246-6600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS: ON WHICH REGISTERED:
-------------------- ---------------------
<C> <C>
Common Stock, $0.01 par value per share New York Stock Exchange
(including Stock Purchase
Rights relating thereto)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark whether the registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of January 31, 1997, 54,781,206 shares of the common stock of the
registrant were issued and outstanding. The aggregate market value of the common
stock held by non-affiliates of the registrant was $1,894,232,095 as determined
by the January 31, 1997 closing price of $35.00 for one share of common stock on
the New York Stock Exchange.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Annual Meeting of Stockholders of the registrant to
be held on May 29, 1997. Certain information therein is incorporated by
reference into Part III hereof.
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PART I
ITEM 1. BUSINESS
GENERAL
Alumax Inc. ("Alumax" or the "Company") is the third largest aluminum
company in the United States and the fourth largest in North America, based on
sales, and operates over 70 plants and other manufacturing and distribution
facilities in 22 states, Canada, Western Europe, Mexico, Australia, the People's
Republic of China and Poland. The Company is an integrated producer of aluminum
products, operating in a single segment: aluminum processing. Using alumina
purchased from one principal supplier, the Company produces primary aluminum
employing an electrolytic process at five reduction plants in the United States
and Canada. Primary products are sold externally or further processed by Alumax
into a broad range of semi-fabricated and fabricated products. The Company's
products are sold to a wide variety of markets, including transportation,
distributors, building and construction, consumer durables, and packaging.
Since becoming an independent public corporation in November 1993, Alumax
has taken several significant steps to increase stockholder value, position the
Company for future growth and strengthen its balance sheet. Alumax has devised
and implemented a four-point business strategy designed to (i) enhance the
Company's position as a low-cost producer of primary aluminum; (ii) grow in
transportation, aluminum's largest and fastest growing market; (iii) emphasize
the manufacture of more specialized, value-added products; and (iv) expand in
emerging global markets where the Company believes it will be able to capitalize
on its product strengths.
The four-point strategy has been complemented by the Company's continuing
efforts to increase its operational strengths and efficiencies, principally by
improving its business and product mix, enhancing its market share and unit
volume growth, reducing controllable costs and improving productivity. The
Company has also reconfigured its asset base by (i) disposing of various
businesses and assets which did not generate, and offered limited prospects of
yielding, acceptable returns or which were not integral to the Company's long-
range business activities and (ii) reinvesting the proceeds derived from such
dispositions into businesses having greater potential for future growth. In the
three years ended December 31, 1996, sales of businesses and assets generated
$770.0 million in cash and were comprised of the following major transactions:
- The September 1996 sale of certain of the Company's fabricated products
businesses in the United States and Western Europe to Euramax
International plc for $246.6 million. The sale did not include any of
Alumax's architectural aluminum operations in Europe or the United States,
nor did it include the Company's Magnolia Division in the United States.
The businesses sold had annual sales of $485.0 million in 1995 and $363.3
million in 1996 (through the date of disposition) and employed
approximately 2,100 persons.
- The June 1996 sale of the Company's investment in Mexican mining
interests to Minas Penoles, S.A. de C.V. for total consideration of $160
million.
- The January 1996 sale of a 23 percent undivided interest in the Company's
Mt. Holly primary aluminum reduction plant to a subsidiary of Glencore
Ltd. for $89.3 million, which the Company applied to the early retirement
of a $90.7 million promissory note due in May 1996. The sale reduced the
Company's ownership interest in the Mt. Holly plant to 50.33 percent.
- The March 1995 sale of a 14 percent undivided interest in each of the
Company's Intalco and Eastalco primary aluminum reduction plants to a
Japanese consortium for $147.6 million. The sale reduced the Company's
ownership interest in each such facility to 61 percent.
- The March 1994 open market sale of the Company's 37 percent interest in
Aztec Mining Company, an Australian corporation, for $75 million.
Sales of businesses and assets in 1996 generated after-tax gains of $140.4
million and raised proceeds of $495.9 million, which exceeded the total cost of
the $436.5 million Cressona Aluminum Company ("Cressona") acquisition on January
31, 1996 and enabled the Company to retire the debt acquired and
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incurred in connection with that transaction. Cressona, a privately held
Pennsylvania corporation and a leading manufacturer of extruded aluminum
products, has been merged with Alumax's other extrusions operations to form an
organization regarded as having the world's largest soft-alloy extrusion
manufacturing capacity. Active redeployment of assets, as described above and in
greater detail herein, has helped to reduce the Company's exposure to the
domestic building and construction market and to increase its presence in the
higher growth transportation and distribution sectors. It has also helped
strengthen the Company's balance sheet, resulting in a substantial increase in
stockholders' equity and a significant reduction in the ratio of total debt to
invested capital over the last three years. The Company will continue to manage
its asset base actively with a view toward strengthening its business and
product mix and enhancing its position in key aluminum markets.
The table below sets forth certain information concerning the Company's
production, metal shipments and sales by class of product during the last three
years. As used herein, a "tonne" means a metric ton equal to 2,204.6 pounds.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Production and metal shipments (in thousands of tonnes):
Sources of metal
Primary aluminum production............................ 686.3 650.9 680.7
Metal purchases (including scrap aluminum)(1).......... 419.6 355.3 364.5
-------- -------- --------
Total............................................. 1,105.9 1,006.2 1,045.2
======== ======== ========
Metal shipments
Aluminum processing (including tolling)
Primary products..................................... 374.3 416.6 423.8
Semi-fabricated products(2).......................... 574.5 414.3 488.7
Fabricated products(2)(3)............................ 133.3 142.6 166.8
-------- -------- --------
Total............................................. 1,082.1 973.5 1,079.3
======== ======== ========
Net sales by class of product (in millions):
Aluminum processing
Primary products....................................... $ 658.9 $ 724.5 $ 592.7
Semi-fabricated products(2)............................ 1,639.5 1,235.4 1,264.2
Fabricated products(2)(3).............................. 860.9 966.2 897.6
-------- -------- --------
Total............................................. $3,159.3 $2,926.1 $2,754.5
======== ======== ========
</TABLE>
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(1) The Company purchases scrap from various sources, including dealers,
fabricators and customers, for aluminum processing. It also purchases
primary aluminum to meet customer demand for premium products.
(2) In conjunction with the sale of certain Fabricated products businesses, net
sales and shipments for the Company's Magnolia operations have been
reclassified from Fabricated products to Semi-fabricated products.
Magnolia, which manufactures shower and tub enclosures, stadium seating and
other extruded products, has been transferred into the Company's extrusions
business.
(3) Included in Fabricated products metal shipments for the years ended December
31, 1996, 1995 and 1994 are billet shipments of 28,600, 26,800 and 51,700
tonnes, respectively.
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Information concerning the estimated distribution of the Company's sales
for the last three years is presented below. Sales to distributors increased
significantly in 1996 as a result of the acquisition of Cressona and the
Company's efforts to diversify its product lines.
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
OF SALES DOLLARS
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Primary aluminum and other raw material sales............... 22% 26% 24%
Processed product sales by market:*
Building and construction................................. 30 34 36
Transportation............................................ 17 15 16
Distributors.............................................. 16 10 9
Consumer durables......................................... 3 5 5
Packaging................................................. 4 4 6
Other..................................................... 8 6 4
--- --- ---
Total............................................. 100% 100% 100%
=== === ===
</TABLE>
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* Includes both semi-fabricated products and fabricated products. Transportation
consists primarily of sales to the automotive, truck, trailer and railcar
markets. Alumax does not have significant sales to the aircraft manufacturing
market.
Additional operating and geographic area financial information is presented
in Note 16 to the Financial Statements included elsewhere herein.
PRIMARY ALUMINUM PRICES
The aluminum industry is highly cyclical in nature. The Company's results
of operations and financial condition depend to a large degree on primary
aluminum prices, as well as conditions in the building and construction and
transportation industries. This price sensitivity impacts substantially all of
the Company's products to varying degrees, with less impact on the more
specialized and value-added products.
Primary aluminum prices, which are determined by worldwide supply and
demand conditions, declined significantly from 1989 through 1993 but have shown
general improvement over the last three years. The most commonly used index of
pricing in the aluminum industry is the average price per tonne as reflected by
the London Metal Exchange (the "LME"). The LME index is not necessarily
representative of prices actually realized by the Company but generally
approximates the trend with respect to Alumax's realized prices (exclusive of
the effects of the Company's price risk management strategy described below).
Using the LME index, the cyclical nature of aluminum pricing is illustrated in
the table below.
LME AVERAGE ANNUAL CASH PRICE*
(HIGH GRADE CONTRACT)
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US$ PER US$ PER
YEAR TONNE POUND
---- ------- -------
<S> <C> <C>
1980.................... 1,810 .82
1981.................... 1,300 .59
1982.................... 1,010 .46
1983.................... 1,480 .67
1984.................... 1,280 .58
1985.................... 1,080 .49
1986.................... 1,190 .54
1987.................... 1,590 .72
1988.................... 2,580 1.17
1989.................... 1,950 .88
</TABLE>
<TABLE>
<CAPTION>
US$ PER US$ PER
YEAR TONNE POUND
---- ------- -------
<S> <C> <C>
1990.................... 1,640 .74
1991.................... 1,300 .59
1992.................... 1,250 .57
1993.................... 1,140 .52
1994.................... 1,480 .67
1995.................... 1,810 .82
1996.................... 1,510 .68
1997-First Quarter
(through January
31)................... 1,576 .71
</TABLE>
- ---------------
* Adjusted for years prior to, and including, 1987 to reflect the introduction
of High Grade Contract.
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Market fundamentals relative to the supply and consumption of aluminum have
improved significantly since 1993, when aluminum prices reached historic lows on
an inflation-adjusted basis. The LME cash price increased substantially during
1994 and in early 1995, reaching a high of $.97 per pound during January 1995.
Inventory de-stocking and generally weaker economic conditions worldwide during
the second half of 1995, along with significant restarts of previously idled
production capacity, led to reported inventory (consisting of producer plus LME
terminal stocks) increases that lasted through January 1996. The level of
reported inventory remained relatively unchanged through August 1996, with ingot
stocks on the LME alone increasing through early November. During this period of
relatively flat overall consumption, producer and consumer activity on the LME
was subdued, which resulted in the LME cash price declining from $.75 per pound
at the beginning of January 1996 to an average of $.61 per pound during October
1996. Since that time, industry fundamentals have improved, and reported
inventories have declined. The LME cash price increased to a December average of
$.68 per pound and was $.72 per pound at January 31, 1997. Despite the general
improvements in average product prices that have been experienced since 1993,
there can be no assurance that recent price levels will be maintained.
Historically, the Company priced its primary aluminum production at market,
with realized prices closely tracking cyclical shifts in market prices. To
maintain market based pricing while entering into forward fixed price
arrangements required by certain customers and suppliers, the Company utilizes
futures contracts which effectively convert forward fixed price arrangements to
market prices as of specified settlement dates. The Company also may, from time
to time, establish a floor selling price for varying quantities of future
production, while preserving the opportunity to participate in upward price
movements. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Risk Management" and Note 15 to the Financial
Statements included elsewhere herein.
ALUMINUM PROCESSING
Primary products
The Company, through Alumax Primary Aluminum Corporation and several other
wholly-owned subsidiaries, produces and markets t-ingot and a variety of premium
primary products, including extrusion billet, slab and foundry ingot. These
products are consumed, by both the Company's downstream operations and third
party customers, in rolling mills, extrusion plants, foundries and remelt
operations. In 1996, over one-half of the Company's primary aluminum production
was sold to its downstream operations. The Company believes, based on its
ownership interest in the facilities described below and upon reports of
industry analysts, that the average primary aluminum reduction costs at its
facilities are well within the lower half of all aluminum reduction facilities
in the western world. The Company is committed both to maximizing its earnings
from the sale of premium primary products and to improving its cost position
relative to other primary aluminum producers.
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The table below summarizes the capacity of the five primary aluminum
reduction facilities in which the Company has an ownership interest and reflects
the Company's share of capacity.
<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP ALUMAX'S SHARE OF
INTEREST AS OF TOTAL AMOUNT OF TOTAL ANNUAL
FACILITY DECEMBER 31, 1996 NAMEPLATE CAPACITY NAMEPLATE CAPACITY
-------- ----------------- ------------------- -------------------
(TONNES PER YEAR)
<S> <C> <C> <C>
Lauralco
Deschambault, Quebec...................... 100.00% 215,000 215,000
Intalco
Ferndale, Washington...................... 61.00% 272,000 165,900
Eastalco
Frederick, Maryland....................... 61.00% 174,000 106,100
Mt. Holly
Goose Creek, South Carolina............... 50.33% 205,000 103,200
ABI
Becancour, Quebec......................... 24.95% 372,000 92,800
--------- -------
Total.................................. 1,238,000 683,000
========= =======
</TABLE>
During 1996, the above facilities produced an aggregate of 1,311,511 tonnes
of aluminum, of which the Company's share was 686,306 tonnes. In anticipation of
increased demand for primary aluminum by Alumax's downstream operations,
including Cressona, and in response to the availability of more favorably priced
electricity, the Company announced in the fourth quarter of 1995 that it was
restarting approximately 90,000 tonnes of annual primary aluminum production
capacity that had been previously idled. Approximately two-thirds of the
capacity restarted was at Intalco, with the remainder at Mt. Holly. The restarts
were completed by January 1996. The Company's smelter network is currently
operating at or above full nameplate capacity. Production enhancements put into
place during 1996 at Mt. Holly resulted in an increase in total nameplate
capacity from 182,000 to 205,000 tonnes per year at that facility.
A Japanese consortium, led by a subsidiary of Mitsui & Co. Ltd., owns an
aggregate 39 percent undivided interest in each of the Intalco and Eastalco
facilities. Subsidiaries of Century Aluminum Company, a publicly traded domestic
corporation, and Sudelektra Holding AG, a Swiss corporation, together own 49.67
percent of Mt. Holly. On January 26, 1996, a subsidiary of Glencore Ltd., a
Swiss corporation ("Glencore"), acquired a 23 percent ownership interest in Mt.
Holly from Alumax for $89.3 million which the Company applied to the early
retirement of a $90.7 million promissory note due in May 1996. In connection
with the sale, the share of the Company's 1996 production from Mt. Holly to
which Glencore was entitled under the terms of a tolling agreement that expired
in July 1996 was reduced from 90,719 to 48,980 tonnes on an annualized basis.
The Company recorded a pre-tax gain of $78.4 million ($48.6 million after-tax)
in respect of the sale. The 23 percent interest in Mt. Holly acquired by
Glencore in 1996 was subsequently transferred by merger to Sudelektra Aluminum
Corporation. A 26.67 percent interest in Mt. Holly already held by Glencore
comprised part of the assets spun off by Glencore in 1996 through an initial
public offering of shares in Century Aluminum Company.
Primary aluminum is produced by the reduction of alumina, which is refined
from bauxite, in a series of pots (potline) through an electrolytic process. The
Company does not mine bauxite or refine alumina. Alcoa of Australia Limited
("Alcoa of Australia") has been the Company's principal supplier of alumina for
over 20 years and currently provides substantially all of the alumina for the
Company's reduction operations under a long-term contract which, with renewal
options, expires in increments between 2007 and 2018. Pricing under the contract
is determined in part on a cost basis and in part on a market basis, providing
the Company with protection against spot market price extremes during periods of
tight supply and a secure source of supply with a reliable high-quality
producer, reportedly having the lowest costs of production in the world. The
Company believes that any additional supplies of alumina it may require, from
time to time in the foreseeable future, in excess of that supplied by Alcoa of
Australia can be obtained at competitive prices. While there has been no
interruption in supply during the period that Alcoa of Australia has supplied
the Company's alumina requirements, an extended interruption of supply of
alumina from Alcoa of Australia could have a material
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adverse effect on the Company's operations. Other raw materials needed for the
production of aluminum, such as petroleum coke, coal tar pitch and aluminum
fluoride, are purchased from third parties. The Company believes that it can
continue to obtain adequate supplies of these materials at competitive market
prices.
The primary aluminum reduction process, which strips the oxygen atoms from
the alumina molecule, requires substantial amounts of electric power. Lauralco,
Intalco, Eastalco, Mt. Holly and ABI purchase electricity under long-term
contracts which expire in the years 2014, 2001, 2000, 2000 and 2014,
respectively, subject to certain extension provisions. Except for Intalco, each
facility's contract is with a single supplier. Power rates for all of the
electricity supplied to ABI and Lauralco are linked to the prevailing price of
aluminum. The Eastalco power contract contains a profit sharing surcharge, which
is capped, that has floor and ceiling trigger prices which are linked to the
price of aluminum. In late 1995, Intalco entered into a series of new long-term
power contracts with the Bonneville Power Administration (the "BPA") and British
Columbia Power Exchange Corporation ("Powerex") to provide for all of its
electricity needs from September 1996 through 2001. Under the new contracts,
Intalco's power costs are no longer linked to the price of aluminum but are set
at a fixed rate. The power supply agreement with BPA requires further regulatory
approval, and legal challenges have been lodged against the long-term agreement
with BPA by a group of industrial consumers of electricity and a group
representing environmental interests. The Company believes these challenges will
be resolved favorably. In the event that the challenges to the agreement with
BPA are successful, the Company believes that it can enter the market to obtain
alternative power at competitive rates. Intalco has certain additional
agreements with BPA to purchase power during favorable pricing periods in the
spring months. The Company expects to meet its power requirements over the
foreseeable future pursuant to the aforementioned contracts. Interruptions of
power supply could have a material adverse impact on the Company by increasing
the cost of production of primary aluminum or necessitating a reduction in
production.
In January 1993, production at Intalco was reduced by approximately 25
percent in response to the curtailment by the BPA, due to drought conditions, of
hydroelectric power supplied to certain of the BPA's direct service industry
customers, including Intalco. Production at this facility was curtailed by an
additional 40,000 tonnes in the second quarter of 1994 due to adverse market
conditions. Production at the Mt. Holly plant was reduced by 20 percent in
February 1993 in response to adverse market conditions and the higher energy
costs at this facility compared to the energy costs at the Company's other
reduction facilities. As indicated above, the Company restarted all of this
previously idled production capacity in late 1995 and early 1996.
For information with respect to the credit agreement entered into in 1990
with a group of banks to finance the construction of the Lauralco primary
aluminum reduction facility, see Note 6 to the Financial Statements included
elsewhere herein.
Semi-fabricated products
Alumax Extrusions. Alumax Extrusions manufactures a broad line of
soft-alloy extruded products, as well as secondary billet to be sold to third
parties, at ten plants located in Pennsylvania, Tennessee, Florida, Arkansas,
Georgia, Mississippi, Illinois, South Dakota, Utah, and North Carolina. Its
shower and bath enclosures are distributed through eight service centers in
California, Florida, Georgia, North Carolina, Pennsylvania, Texas and
Washington. Alumax Extrusions also maintains an international presence, with
operations in Mexico and Australia. The Mexican operations consist of a
three-press extrusion plant in Monterrey, with distribution facilities in Mexico
City, Guadalajara and Hermosillo. An extrusion plant near Melbourne, Australia
began production of aluminum sheathing for the manufacture of co-axial
television cable in August 1996. Except for the plants located in North
Carolina, Melbourne and Monterrey, the eight service centers, and the
distribution facilities in Guadalajara and Hermosillo, which are leased, Alumax
Extrusions owns all of the aforementioned plants and facilities.
The sales volume and manufacturing capacity of Alumax Extrusions more than
doubled in 1996 when Alumax purchased all of the outstanding common shares of
Cressona, a leading independent manufacturer of extruded aluminum products, for
a cash cost, including expenses, of $436.5 million, net of $3.1 million of cash
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acquired. In conjunction with the acquisition, accounts payable, debt and other
liabilities of $87.4 million were acquired.
The Cressona facilities have been integrated with the Company's other
extrusion operations to form a unified manufacturing support group consisting of
twelve plants with a total of 45 presses that range in size from 700 to 6,000
tons. The combined operation is regarded as having the world's largest
soft-alloy extrusion manufacturing capacity. Its integrated resources include
complete melting, alloying and casting facilities for 18 alloys, one of the
industry's largest in-house shops for the design and production of tooling and
dies, and facilities for fabrication, assembly, painting and anodizing. Press
operations utilize both direct and indirect extrusion technology. The wide range
of press sizes and capacities offers scheduling flexibility and increased
manufacturing efficiency.
Alumax Extrusions' product line includes primary, semi-fabricated and
fabricated extruded aluminum alloys, parts and components. Available in circle
sizes up to 20 inches, product classifications extend to standard and custom
extruded shapes (solids, semi-hollows and hollows), standard and specialty rod
and bar, seamless and structural pipe and tube, seamless mechanical pipe and
tube, and seamless tubular bus conductors. Alumax Extrusions also produces
DIAMONDBACK(R) Slip-Resistant Systems, an integrated line of components and
accessories that are designed for improved safety on access, walking and working
surfaces.
The Cressona acquisition has provided the Company with improved process
control systems, including many advancements in Computer Integrated
Manufacturing (CIM). It has also created a more diversified product mix and
strengthened distribution capabilities. A resulting expansion of the customer
base, both in the distributor marketplace and Original Equipment Manufacturers
(OEM) accounts supplied by Cressona, will help offset seasonal and cyclical
fluctuations in other markets such as building and construction.
To recognize these expanded capabilities and to provide greater focus on
its key markets, Alumax Extrusions is organized into three distinct business
units: Alumax Building & Construction Products, Cressona Aluminum Company, and
Alumax Transportation Products. Although headquartered at different locations,
all three business units are supported by the unified manufacturing group. The
goal of this structure is to provide specialized sales and service designed to
satisfy customer requirements in the areas represented by the three business
units.
Alumax Building & Construction Products, headquartered in Plant City,
Florida, is a leading supplier principally to the residential and commercial
window and door market. Alumax Building & Construction Products is known for the
quality of its intricate and thin wall specialty extrusions. Utilizing five
paint lines, approximately 80 percent of the products are supplied with thermal
set polyester paint, Kynar resin coatings, anodized finishes, or high
performance coatings for corrosive environments. Representative products include
extrusions for windows, doors and shutters; shower doors and bath enclosures;
patio and pool enclosures up to 40 feet in length; light poles and flagpoles;
bridges, rail and decking; treatment plants and other infrastructure markets;
highway and street signs; clear and colored architectural shapes; louvers and
vents; ladders; conduit; and cable tray and conduit.
Cressona Aluminum Company is a leading supplier to the service center
industry. From its headquarters in Cressona, Pennsylvania, Cressona Aluminum
also services key OEM accounts in the machinery and equipment, electrical
switchgear and transmission, recreation, medical, and consumer durables markets.
Cressona Aluminum offers a broad product line of standard and custom extruded
shapes, extensive capabilities in pipe and tube, large circle size profiles, and
tight tolerance products that utilize indirect extrusion technology. Cressona
also markets a line of specialty rod and bar products that include ECON-O-ROD,
ACC-U-ROD(R), ECON-O-PLATE(R) and ACC-U-PLATE(R).
From its location in West Chicago, Illinois, Alumax Transportation Products
is a leading supplier to the automotive, truck, truck trailer, and railcar
markets. Its resources also include a technical center, product specialists,
engineering and design experts, and a fabrication support group to assist with
the growing usage of extrusions in the transportation industry. Representative
products include extruded profiles for automotive space frames, anti-lock brake
parts, automotive air bag components, bumper beam components, seating and window
components, truck and trailer bodies, recreational vehicle parts, and railcar
structural members.
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In the potential market for frame and chassis extrusions, Alumax
Transportation Products is developing solutions for joining and forming aluminum
structurals through the use of retrogression heat treatment (RHT) and
compression-fit (CF) technologies. RHT employs rapid, short-term and localized
heat treatment of aluminum to improve fatigue properties, ductility and
toughness. When used with appropriate fabrication processes, RHT offers
advantages in forming and bending large, complex profiles of hard tempers.
The growth in transportation and automotive uses of aluminum extrusions
reflects a move toward lightweight, fuel-efficient and environmentally
responsible future modes of transportation. To meet these requirements, Alumax
Transportation Products teams with other Alumax subsidiaries on product
development and technology interchange.
Alumax Mill Products. Alumax Mill Products produces flat rolled products
with both painted and mill finishes at mills in Lancaster, Pennsylvania, and
Texarkana, Texas. In addition, it operates facilities in Riverside, California
and Lancaster, Pennsylvania which produce semi-fabricated cast aluminum plate,
engineered to meet highly specialized industrial applications. The Lancaster and
Texarkana mills also produce limited quantities of sheet for beverage container
components. The Texarkana mill, which is currently under lease, will be
purchased by Alumax Mill Products in November 1997 for approximately $97 million
in cash.
Alumax Mill Products produces semi-fabricated products, including sheet,
plate, circles and blanks, which are used for building products, transportation
products, consumer durables, machinery and equipment and in other industrial
applications. A major portion of Alumax Mill Products' sales are to
distributors, who are supplied products consisting of painted, embossed, heavy
gauge and anodizing quality sheet. Alumax Mill Products also supplies a
substantial amount of non-heat treatable sheet to the automotive, truck and
marine markets. These products consist of automotive alloys, automotive trim,
brazing materials, truck body and trailer sheet, as well as painted sheet and
coil. Alumax Mill Products' sheet is used in a variety of other products,
including cookware and appliance name plates.
Some of Alumax Mill Products' markets are seasonal, notably the building
and construction market in which demand is generally lower in the fall and
winter seasons than in the spring and summer when the weather is more suitable
for construction.
Alumax Mill Products implemented a restructuring plan in 1994 with a view
toward consolidating, streamlining and modernizing its business over a four-year
period ending in 1997. As part of the plan, Alumax Mill Products closed its
Morris, Illinois mill and terminated sheet operations at its Riverside,
California mill during 1994 and is currently expanding and modernizing the
overall capabilities of the Lancaster and Texarkana mills. Costs of the
expansion and modernization, which are expected to be completed in 1997, are
expected to total approximately $91 million. The restructuring plan also
provided for the construction of a separate cast aluminum plate facility
adjacent to the Lancaster mill at a cost of approximately $26 million. This new
facility began commercial production in the third quarter of 1996.
Alumax Foils. Alumax Foils' facility in St. Louis, Missouri uses the
continuous casting process to produce aluminum sheet which is then processed
through rolling mills and heat treating ovens to manufacture foil in various
thicknesses, widths, tempers and alloys. Foil products are sold primarily to
commercial users in the flexible packaging, converter, food service and
pharmaceutical industries. The nature of these products and diversity of
customers insulates Alumax Foils from seasonal fluctuations. In 1996, Alumax
Foils completed construction of a new wide, light-gauge aluminum foil rolling
facility in Russellville, Arkansas. The plant, which will expand Alumax Foils'
overall production capacity by approximately 30 percent when fully operational,
includes two wide rolling mills, annealing ovens and ancillary equipment, all
dedicated to the production of light-gauge converter foil. Initial customer
shipments are expected to begin in the first quarter of 1997.
Fabricated products
Kawneer. Kawneer designs, manufactures and markets architectural aluminum
products and is a leading producer of such products in the United States and
Canada. Kawneer also sells its products for use in major construction projects
in foreign countries where it does not have production facilities, particularly
in the Far East.
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<PAGE> 10
Kawneer products are manufactured mainly from extruded aluminum shapes
which are fabricated into curtainwall, store front and entrance systems,
windows, framing and decorative aluminum products which are then anodized or
painted. Kawneer operates five integrated architectural plants, 15 service
centers and two additional manufacturing locations in the United States, which
include plants owned by Kawneer in Arkansas, California, Georgia, Indiana,
Michigan, Pennsylvania and Tennessee. Distribution is principally through
dealers, most of whom are glazing contractors. These products also may be sold
to building contractors and owners, and Kawneer has acted as a subcontractor for
entire wall or window systems on numerous major projects.
Demand for Kawneer's products generally follows the seasonal and cyclical
trends of the nonresidential construction industry. Kawneer believes that it is
well positioned to participate in the modest rate of growth expected to occur in
this market over the near term and remains committed to continue its efforts
aimed at reducing costs, improving productivity and enhancing product quality
and customer service.
Kawneer has international operations in Canada, the United Kingdom, France,
Germany, Poland and The Netherlands. It also participates in a joint venture in
Morocco. In Canada, Kawneer operates two integrated architectural plants which
provide most of the product that is sold for large overseas projects, as well as
two service centers. Two manufacturing plants located in France, and one each in
England and Germany, three of which are owned by Kawneer and one of which is
leased, provide architectural aluminum products very similar to those offered by
the operations in the United States. These products are marketed under the
Kawneer name in the United Kingdom and Western Europe. Kawneer also operates
service centers it leases in France, Poland and Morocco. Other international
operations of Kawneer include plants it owns in Wales and The Netherlands that
produce custom extrusions for sale throughout Western Europe. These plants also
provide extruded products to Kawneer's architectural companies for further
processing into architectural aluminum products. The billet needed for the
extrusion activities is supplied by a casting plant in The Netherlands. This
plant converts scrap and aluminum ingot into billet on a tolling basis and for
intra-company use and outside sales. In addition, Kawneer continues to pursue
opportunities in the former East-Bloc nations, principally through the sale and
distribution of Kawneer products in Poland.
In November 1996, Alumax announced that negotiations regarding the possible
acquisition of Eduard Hueck GmbH & Co. KG by the Company had been terminated by
mutual agreement. Hueck, based in Ludenscheid, Germany, is a manufacturer of
aluminum architectural products.
AEMP. Alumax Engineered Metal Processes ("AEMP") is engaged in the forming
of component parts with consistently high integrity and mechanical properties
using aluminum alloys. Marketing activities are focused almost exclusively on
the automotive market. AEMP maintains its headquarters in St. Louis, Missouri,
and a sales office in Detroit, Michigan. Activities in St. Louis include product
and process developments, marketing and support functions, and technical
support. During 1996, production increased steadily at AEMP's new $75 million
plant in Jackson, Tennessee. AEMP is utilizing its proprietary, semi-solid
forming technology to produce high integrity, near-net-shape auto components at
this facility. A majority of the parts produced are used in fluid containment
applications. At year-end 1996, the plant was operating at rates below design
capacity. Production is expected to increase progressively as part programs
become qualified by customers. A $15 million recycling facility was constructed
at Jackson during 1996 to reclaim scrap generated at the manufacturing plant,
enabling such material to be reused in the semi-solid forming technology
process. AEMP also completed construction of a $23 million plant at Bentonville,
Arkansas designed to manufacture larger component parts for the automobile
industry using its semi-solid forming technology. Start-up operations began on
schedule in the third quarter of 1996. The Bentonville facility is expected to
begin producing specialty automotive wheels in the first quarter of 1997. The
Company has also formed a joint venture company with Mitsui & Co., Ltd. of Japan
and Mitsui & Co. (U.S.A.), Inc. to license this proprietary technology to
companies exclusively in Japan.
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<PAGE> 11
OTHER ACTIVITIES
Alumax International Company
To further its objective to participate in growth opportunities in emerging
global markets, the Company, through Alumax International Company, a wholly
owned subsidiary ("AIC"), has entered into a joint venture with Yunnan Aluminum
Processing Factory in Kunming, China, providing for the annual production of
8,000 to 10,000 tonnes of light gauge aluminum foil for China's packaging
market. The Company has a 56 percent interest in the joint venture and will
invest $38 million in cash to develop a continuous cast foil operation. Alumax
Foils is expected to provide training, as well as management and technical
assistance, to the joint venture.
AIC is actively exploring other business opportunities on a worldwide
basis.
Alumax Materials Management
In 1996, the Company organized Alumax Materials Management, Inc. ("AMM"), a
wholly owned subsidiary, to provide certain services to other subsidiaries of
the Company. These services include primary products sales and customer service,
centralized procurement of all non-primary metal and selected non-metal inputs,
and use of the futures markets to hedge certain risks related to primary
aluminum prices, fixed forward sales, metal inventory positions, and energy
costs. AMM is also responsible for the centralized procurement of certain
shipping and freight services.
Product Distribution
Alumax produces and distributes products at all stages of the aluminum
product chain, from primary ingot to fabricated finished products, for a variety
of industrial, commercial and consumer markets. To reach these markets the
Company uses most common forms of product distribution channels -- wholesale
distributors, OEM manufacturers, traders, retail consumer goods outlets, agents,
manufacturers' representatives, general line and specialized dealers, and direct
sales. Many intermediate products, such as ingot, sheet and plate, are
distributed to other aluminum producers and fabricators for further processing
and distribution through many of these same channels.
Competition
The markets for most aluminum products are highly competitive. Primary
aluminum ingot is a commodity product, traded extensively on world metal
markets, and is thus very price sensitive. The market for premium ingot products
is also highly sensitive to pricing, but the Company believes that quality and
service are also important factors in competing with other premium product
manufacturers. Semi-fabricated and fabricated aluminum products compete
extensively on price, quality and service, not only within the aluminum products
industry but also with other materials, such as plastics, steel, copper, glass,
wood, fiberglass, zinc, lead, magnesium and paper. In markets where aluminum
products compete with other materials, the diverse characteristics of aluminum
are also significant factors in its competitiveness, particularly its light
weight and recyclability.
Price competition, product range and quality, and the ability to provide
technical assistance to customers are important aspects of the Company's overall
strategy. A number of producers with which the Company competes are
substantially larger in terms of total assets, operations and sales. Among the
Company's principal competitors are Alcan Aluminium Limited, Aluminum Company of
America and Reynolds Metals Company.
Research and Development
The Company continues to explore new technology, processes and products in
the aluminum industry. Research and development activities are conducted at the
Company's technical center in Golden, Colorado, and at various operating
facilities. Expenditures for research and development totalled $19.2 million,
$18 million and $11.4 million in 1996, 1995 and 1994, respectively.
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<PAGE> 12
Patents and Trademarks
The Company owns or licenses a significant number of patents relating to
various products and processes. The Company does not consider its business to be
materially dependent on any one particular patent or patent license. The Company
also owns a large number of trademarks, including the "Alumax" and "Kawneer"
trademarks, which the Company believes may be material to its business.
Employee and Labor Relations
At year-end 1996, the Company employed approximately 14,000 people
worldwide, including approximately 12,500 employees in the United States.
Approximately 4,400 employees are represented by labor unions under separate
labor agreements with various international unions. Management considers its
employee relations to be good. In 1997, three labor contracts, covering a total
of approximately 1,350 employees, will expire and are expected to be
renegotiated during the year.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state, local and foreign laws
and regulations including, among others, the Clean Air Act (including the 1990
amendments thereto), the Resource Conservation and Recovery Act and the Clean
Water Act and the regulations promulgated in connection therewith, concerning
the discharge of contaminants which may be emitted into the air and discharged
into the waterways and governing the use, discharge and disposal of hazardous
materials and wastes. The Company's present manufacturing facilities are
believed to be in substantial compliance with current laws and regulations.
Compliance with current laws and regulations has not had, and is not expected to
have, a material adverse effect on the Company's financial condition or results
of operations. Based on historical trends toward tighter environmental
standards, it appears likely that the Company will incur additional expenditures
to remain in compliance with federal and state environmental laws.
The Company also is involved in certain claims and legal proceedings that
relate to the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") or similar state laws that impose environmental liability. These
matters include claims and proceedings in which the Company has been named as a
defendant or "potentially responsible party" with respect to the disposal of
hazardous substances at 39 pending waste disposal sites which, in most
instances, were owned or operated by third parties. CERCLA and state laws can
impose joint and several liability on generators of hazardous substances placed
in waste disposal sites for investigative, remedial and other costs associated
with cleanup of those sites if hazardous substances have been released into the
environment. The Company's ultimate liability in connection with present and
future environmental claims will depend on many factors, including its
volumetric share of the waste at a given site, the remedial action required, the
total cost of remediation and the financial viability and participation of the
other entities which also sent waste to the site. Based upon current law and
information known to the Company concerning the size of the sites known to it,
their years of operation, the number of other financially viable and
participating past users and the amount of available insurance coverage,
Management believes that it has adequate reserves so that anticipated and
estimable liabilities that may result from these matters, and any expenditures
for remediation programs it may be required to undertake, either individually or
in the aggregate, are not expected to have a material adverse effect on the
financial condition or ongoing results of operations of the Company. The Company
is unaware of any additional environmental matters which, based on information
currently known to the Company, would have a material effect upon the Company's
financial condition or ongoing results of operations. See "Legal Proceedings"
below.
Legislation that would reauthorize and amend CERCLA is expected to be
reintroduced before Congress. The prospects for such legislative effort are
uncertain, as are any potential substantive changes that might result or impact
the Company's liability for cleanup costs in both pending and future claims.
The Company's expenditures for environmental remediation and compliance
amounted to $12.9 million in 1996, $12.7 million in 1995 and $5.3 million in
1994. Of those amounts, $8.8 million, $9.0 million and $4.9 million,
respectively, was capitalized and the balance, net of insurance recoveries, was
charged to reserves. Based on available information, the Company anticipates
making capital and operating expenditures
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<PAGE> 13
of approximately $13.0 million and $12.7 million in 1997 and 1998, respectively,
for environmental remediation and compliance.
RECENT HISTORY
The Company was incorporated in Delaware in 1973 and was operated as a
joint venture principally between AMAX Inc. ("Amax") and Mitsui & Co., Ltd.
until 1986. In 1986, Amax completed the acquisition of the remaining interest in
Alumax not already owned by it. On November 15, 1993 (the "Distribution Date"),
Amax effected a pro rata distribution (the "Distribution") of all of the
Company's outstanding common shares which it then held to the holders of Amax
common stock pursuant to an Agreement and Plan of Distribution, dated as of May
24, 1993, as amended as of November 15, 1993, between Amax and Alumax. The
Distribution occurred in connection with the merger (the "Merger") of Amax with
and into Cyprus Minerals Company pursuant to an Agreement and Plan of Merger,
dated as of May 24, 1993, as amended as of November 15, 1993. The Company has
operated as an independent, publicly held entity since the Distribution Date.
For a description of certain agreements between Amax and the Company entered
into in connection with the Distribution which define their rights and
obligations in respect of certain taxes, see "Legal Proceedings -- Tax Dispute
Regarding Consolidation with Amax."
ITEM 2. PROPERTIES
Information in response to this Item is set forth in Item 1 above.
ITEM 3. LEGAL PROCEEDINGS
Tax Dispute Regarding Consolidation with Amax
The Internal Revenue Service (the "IRS") has asserted that the Company and
certain of its subsidiaries were improperly included in Amax's consolidated
income tax returns for 1984, 1985 and 1986 and on that basis has asserted a
federal income tax deficiency against Alumax of approximately $129 million.
Interest on the deficiency through December 31, 1996, would be approximately
$276 million. In response to the IRS' notice of deficiency, the Company filed a
petition in United States Tax Court (the "Tax Court"), seeking a redetermination
in respect of the purported deficiency. The parties have waived their rights to
a trial, and the matter has been submitted to the Tax Court for decision based
upon the pleadings, stipulations, memoranda and other documents submitted, or to
be submitted, to the Tax Court by the parties. A decision by the Tax Court is
expected in late 1997.
In connection with the Distribution and the Merger, the Company and Amax
entered into the tax disaffiliation agreement, dated as of May 24, 1993 (the
"Tax Disaffiliation Agreement"), defining the rights and obligations of the
Company and Amax in respect of taxes following the consummation of those
transactions. Under the terms of the Tax Disaffiliation Agreement, the Company
has assumed responsibility for all proceedings regarding the purported
deficiency and payment of any additional taxes, along with penalties and
interest, which may ultimately be due.
Prior to the Distribution, Amax vigorously contested the IRS' assertions
regarding a deficiency, and the Company is pursuing the same course of action.
Payment of the deficiency, with interest thereon, would provide certain tax
benefits to the Company that would offset in part, in the year of payment and
within a prescribed carryforward period, the cost of paying such deficiency and
interest. Additionally, Amax has agreed with the Company to share certain tax
benefits available to Amax in the event an adverse determination is ultimately
made.
The Company believes that it has adequate reserves so that any unprovided
for net deficiency would not have a material adverse effect on the Company's
financial condition.
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<PAGE> 14
Stringfellow
In 1983, the United States and the State of California commenced an action
under CERCLA in the United States District Court for the Central District of
California against the Company and 30 other potentially responsible parties in
connection with the Stringfellow disposal site located at Glen Avon, California.
In a proceeding in the United States District Court for the Central District of
California, it was determined that both the defendants and the State of
California are responsible for certain costs associated with the cleanup of the
Stringfellow site. The issue of the allocation of liability among the defendants
and the State was tried before a Special Master who filed his Findings of Fact,
Conclusions of Law and Report and Recommendation of the Special Master Regarding
the State Share Fact Finding Hearing on November 30, 1993. On January 23, 1995,
the United States District Court entered an order adopting the findings,
conclusions and recommendations of the Special Master with certain
modifications, which did not adversely impact the Company. The order allocates
liability on the basis of two different types of legal claims, each of which has
a different legal standard of apportionment. As to CERCLA claims, the order
allocates liability as follows: 65 percent to the State, ten percent to
Stringfellow Quarry Company and 25 percent to all other parties (including the
Company). As to the claims asserted against the State under state law theories
such as negligence and breach of a mandatory duty, the order allocates 100
percent of the liability to the State.
On July 16, 1996, the State of California filed a motion for
reconsideration of the District Court's liability rulings against the State,
based upon the United States Supreme Court's decision in Seminole Tribe of
Florida v. Florida. That decision, issued in March 1996, reversed an earlier
Supreme Court decision which held that Congress had the authority to abrogate
protections of the Eleventh Amendment of the Constitution barring certain suits
against states in federal courts, including under CERCLA. In the motion, the
State contends that the Eleventh Amendment is a jurisdictional bar which cannot
be waived through conduct in litigation and that the State has not expressly
waived its Eleventh Amendment immunity. Consequently, the State argues that the
liability rulings against the State must be reversed or the defendants'
counterclaims limited to defensive recoupment. The defendants filed an
opposition to that motion on August 2, 1996, which maintains that Seminole Tribe
does not alter prior law by recognizing the Eleventh Amendment as a
jurisdictional bar nor does the case address the doctrine of defensive
recoupment. The opposition also asserts that Seminole Tribe does not affect the
question of waiver of Eleventh Amendment immunity by conduct in litigation or
the District Court's prior finding that the State waived its Eleventh Amendment
immunity through its conduct of the lawsuit. Oral argument on the State's
motion, as well as on a motion filed by the defendants for a ruling that CERCLA
liability cannot be imposed upon them retroactively and a joint motion of the
United States and the defendants for entry of a judgment which will permit the
parties to appeal, was made before the Special Master on November 13 and 14,
1996. The Special Master will submit written recommendations to the District
Court, after which the parties will be afforded an opportunity to present
objections prior to entry of an order by the court.
Based on information presently available, the Company does not believe that
any liability imposed in connection with the Stringfellow site will have a
material adverse effect on the Company's financial condition or ongoing results
of operations given the nature and extent of its involvement at the site and
available reserves.
Proceedings Relating to the Howmet Acquisition
In December 1990, the Company and two of its subsidiaries, among others,
were named as third-party defendants in a CERCLA action arising out of the
operation of the Blackbird Mine, a cobalt mine in Lemhi County, Idaho. The
third-party action was initiated by M.A. Hanna Company, Noranda Mining Company
and certain of their affiliates, all of which were defendants in a lawsuit
brought by the State of Idaho in the United States District Court for the
District of Idaho in 1983 seeking recovery of response costs incurred as a
result of alleged contamination resulting from cobalt mining in and around the
Blackbird Mine. The Company has been involved as a result of its 1983
acquisition of Howmet Corporation from Pechiney, a French corporation. It is
alleged that Howmet, along with certain of its predecessors and subsidiaries,
owned and operated the Blackbird Mine and engaged in extensive mining
activities.
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On June 21, 1993, the Department of Justice filed an action in the United
States District Court for the District of Idaho against the Company, one of its
subsidiaries and several other defendants seeking response costs and natural
resource damages occurring at or near the Blackbird Mine. On October 29, 1993,
the Department of Justice agreed to dismiss the Company as a defendant in such
action; however, a subsidiary of the Company remains a defendant.
Under the terms of an agreement with Pechiney, the Company, subject to
limited contributions, will be indemnified against liabilities associated with
the Blackbird Mine as well as other claims and suits arising from activities
predating and unrelated to the aluminum businesses acquired by the Company in
1983. The Company assigned certain rights in respect of insurance coverage to
Pechiney, but is entitled to receive a portion of any recoveries obtained by
Pechiney.
On August 22, 1991, the Company and certain of its subsidiaries filed an
action for declaratory relief seeking coverage for environmental claims and
damages for breach of contract against the primary and excess insurance carriers
which issued insurance policies to the Howmet corporate entities acquired by the
Company in 1983. The action was brought in the Superior Court of New Jersey,
Morris County and was consolidated with a similar suit between former affiliates
of the acquired entities and the carriers. A motion for summary judgment filed
by the insurance carriers with respect to the Blackbird Mine site on the basis
that Idaho law should be applied to that claim and coverage is not available
under Idaho law has been granted, in part, by the Court and a motion for
reconsideration of that ruling has been filed by Pechiney and the Company. An
adverse ruling on that motion or on appellate review, if sought, will not result
in additional liability to the Company for the Blackbird Mine site, based upon
the terms of the Company's agreement with Pechiney, but could reduce or
eliminate any insurance recovery for amounts already expended by the Company in
connection with that site.
The Company believes that it has adequate reserves so that payments to be
made and reasonably anticipated contributions required under the settlement
agreement with Pechiney will not have a material adverse effect on the financial
condition or ongoing results of operations of the Company.
Cressona Consent Decree
As indicated above, the Company acquired Cressona on January 31, 1996.
Cressona is subject to a consent decree (the "Consent Decree") entered into with
the United States of America to settle an action brought on behalf of the United
States Environmental Protection Agency (the "EPA"). That action was initiated in
the United States District Court for the Eastern District of Pennsylvania on
September 10, 1992, in respect of the remediation and disposal of
polychlorinated biphenyls ("PCBs") discovered at Cressona's facility at
Cressona, Pennsylvania. The PCBs were ingredients in lubricants and hydraulic
fluids used at that facility by the prior owner.
The Consent Decree, which was filed in the action on August 3, 1993,
specified actions that Cressona would undertake to fully characterize and
determine the extent of PCB contamination at the facility as well as criteria
and conditions to be met with respect to the remediation of such contamination.
In addition, the Consent Decree imposed certain reporting requirements,
established dates for the performance of specified actions to be taken, and
provided for stipulated penalties for failure to comply with requirements of the
Consent Decree or for discharges of PCBs in excess of specified concentrations.
Cressona has either substantially complied with the provisions of the Consent
Decree or sought modification of those requirements from the EPA. Cressona has
provided the EPA with extensive information to characterize the nature and
extent of the PCB contamination, has performed substantial remedial work and
proposed measures for remediation of the remaining contamination. The precise
nature and extent of further remedial activities which will be required and the
costs of those activities cannot be determined with certainty at this time and
may be subject to change depending upon results of further monitoring at the
facility as well as EPA concurrence with the additional remedial actions
proposed by Cressona. However, the Company believes that Cressona has adequate
reserves so that reasonably anticipated and estimable costs for remediation of
PCB contamination at the Cressona, Pennsylvania facility will not have a
material adverse effect on the financial condition or ongoing results of
operations of the Company.
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Other Environmental Matters
In addition to the Stringfellow and Blackbird Mine litigation, the Company
has been named as a defendant or identified as a potentially responsible party
at 37 other pending sites which, in most instances, were owned or operated by
third parties, including some sites relating to operations of the Pechiney
subsidiaries acquired in 1983. Unlike the Blackbird Mine and three other
mining-related sites, claims against the Company at sites relating to the
aluminum businesses acquired in 1983 do not fall within the indemnification
obligations of the Company's settlement agreement with Pechiney. In addition,
the Company and its subsidiaries have been named as defendants or potentially
responsible parties at sites associated with operations of its subsidiaries
which are unrelated to the Howmet acquisition. At virtually all sites, the
Company is one of many potentially responsible parties who are alleged to be
jointly and severally responsible for the response costs associated with the
sites.
Management periodically evaluates the Company's potential liability for
remediation and related costs at both its own and other parties' sites. Such
evaluations are based upon then current information, including alternative
methods of remediation, estimated costs for implementation of such alternatives,
the nature and the extent of the Company's involvement at the site in question,
and anticipated contributions of other potentially responsible parties. Once it
becomes probable that the Company will incur costs in connection with
remediation of a site and such costs can be reasonably estimated, the Company
establishes or adjusts its reserve for those projected costs.
Due to uncertainties associated with developing case law relating to
insurance coverage for environmental claims and remediation costs, insurance
recoveries are not considered in estimating the Company's share of remediation
costs at a site unless an insurance carrier has agreed to pay a portion of those
costs. Projections of remediation costs by their nature are imprecise and
reserves accrued by the Company represent Management's best estimate of such
costs based upon available information about known sites. It is not possible to
predict the amount or timing of future remediation costs which may be ultimately
determined or project costs for sites which may be identified in the future. It
should be recognized that a number of the Company's present and past facilities
have been in operation for many years and additional remediation activities may
be required as environmental laws and circumstances continue to evolve. The
Company believes that it has adequate reserves so that anticipated and estimable
liabilities that may result from sites known to it, and any expenditures for
remediation programs it may be required to undertake, either individually or in
the aggregate, are not expected to have a material adverse effect on the
financial condition or ongoing results of operations of the Company.
Other Legal Proceedings
Justice Department Inquiry. In August 1994, Alumax received a civil
investigative demand from the Antitrust Division of the Department of Justice
requesting documents and information principally relating to reductions in the
production of primary aluminum during the period from 1991 to the date of
demand. Alumax has cooperated with the Department in connection with this
inquiry.
Antitrust Action. Alumax and four other producers of primary aluminum,
together with The Aluminum Association, an industry trade association, were
served with a summons and complaint in March 1996, alleging violations of
California's State antitrust act (the Cartwright Act). The suit was originally
filed in the Superior Court for Los Angeles County, but was removed by the
defendants to the United States District Court for the Central District of
California. Plaintiff alleges that the defendants conspired, together with the
United States Government and the governments of several other sovereign nations,
to fix the prices of primary aluminum by agreeing to reduce production. The
allegations arise from the Memorandum of Understanding Concerning the Aluminum
Market ("MOU") negotiated by the United States and other governments in 1993 and
1994, and executed by them in Brussels in 1994, and the actions of the
defendants alleged to have been undertaken in connection with the MOU.
The complaint was brought by a California bicycle manufacturer as a
purported class action on behalf of all direct and indirect purchasers of
primary aluminum and aluminum products produced during the period from January
1, 1994 to March 5, 1996. The complaint seeks injunctive relief and recovery of
damages that,
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<PAGE> 17
when trebled, are alleged to be in excess of $26 billion. Following removal of
the action to the District Court, the defendants filed a motion to dismiss. Upon
considering that motion, plaintiff's opposition and the defendants' reply, the
Court by order dated May 28, 1996, converted the motion to dismiss to a motion
for summary judgment by the defendant-aluminum producers. In the same order, the
Court granted The Aluminum Association's motion to dismiss for lack of personal
jurisdiction. Following the filing of briefs in support and in opposition to
summary judgment, the Court granted summary judgment in favor of the
defendant-aluminum producers and dismissed the complaint with prejudice by order
dated July 1, 1996. The Court denied plaintiff's subsequent motion for
reconsideration by order entered on July 16, 1996.
On July 18, 1996, the plaintiff filed a notice of appeal to the United
States Court of Appeals for the Ninth Circuit from the United States District
Court's orders granting The Aluminum Association's motion to dismiss and the
aluminum producers' motion for summary judgment and the order denying the
plaintiff's motion for reconsideration. The parties are currently in the process
of submitting briefs to the United States Court of Appeals.
Patent Infringement Action. On August 17, 1995, the Company filed suit in
the United States District Court for the Eastern District of Arkansas against
Hot Metal Molding, Inc. alleging infringement of a process patent, United States
Patent 4687042 (the "042 patent"), held by the Company which is used in
semi-solid forming applications. The litigation is in the discovery phase and
was recently expanded by order of the Court to include Ormet Primary Aluminum
Corporation ("Ormet"), the exclusive North American licensee of Pechiney
Corporation's technology for casting thixotropic billet, and certain
subsidiaries and affiliates of Buhler International AG, a Swiss manufacturer of
die casting machines. Ormet has filed counterclaims alleging that the patent is
invalid, void and unenforceable and is seeking a declaratory judgment that the
042 patent would not be infringed by the use of Ormet's billet in any diecasting
application. The Company intends to vigorously pursue its infringement claims
while opposing the counterclaims of Ormet and other defendants.
Other. In addition to the matters described above, the Company and its
subsidiaries are also involved in the defense and handling of various judicial
proceedings and claims arising out of alleged defects in its products as well as
other matters occurring in the ordinary course of business. Management believes,
taking into account its reserves and insurance coverage, that these matters,
either individually or in the aggregate, will not have a material adverse effect
on the financial condition or ongoing results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
As of February 1, 1997, the names, offices with the Company, ages and years
of service as an officer of all Executive Officers of the Company were as
follows:
<TABLE>
<CAPTION>
YEARS AS
NAME OFFICE AGE OFFICER
---- ------ --- --------
<S> <C> <C> <C>
Allen Born Chairman and Chief Executive Officer 63 3
George P. Stoe Executive Vice President 51 6
Lawrence B. Frost Senior Vice President and Chief Financial Officer 54 10
Helen M. Feeney Vice President and Corporate Secretary 56 3
Eugene R. Greenberg Vice President 58 --
Jay M. Linard Vice President 51 --
Gary D. McDowell Vice President 54 2
Philippe G. Thaure Vice President 59 6
Michael T. Vollkommer Vice President and Controller 38 3
Robert P. Wolf Vice President and General Counsel 53 7
Thomas L. Gleason Treasurer 45 --
</TABLE>
16
<PAGE> 18
There are no family relationships, by blood, marriage or adoption, between
the above officers. All officers are elected until the next annual meeting of
the Board of Directors or until their respective successors are chosen and
qualified. There is no arrangement or understanding between any of the above
officers and any other person pursuant to which he or she was selected as an
officer.
The principal occupations and positions for the past five years of each of
the Executive Officers of the Company are as follows:
MR. BORN has been a Director of the Company since 1985, Chairman since
April 1993 and Chairman and Chief Executive Officer since November 1993.
For more than five years prior to November 1993, he had been Chief
Executive Officer of Amax and also served as Chairman of that company from
June 1988 to November 1993. Mr. Born was also Co-Chairman of Cyprus Amax
Minerals Company from November 1993 to November 1995 and Vice Chairman of
that company from November 1995 to May 1996.
MR. STOE has been an Executive Vice President, responsible for the
Company's semi-fabricated products businesses, since June 1994, after
having been President of Alumax Mill Products, Inc., a wholly owned
subsidiary of Alumax, from October 1990. In August 1995, he was given
additional responsibility for the Company's primary aluminum operations.
Mr. Stoe was elected a Director of the Company in December 1996.
MR. FROST has been Senior Vice President and Chief Financial Officer
of Alumax since May 1994, after having been a Vice President since November
1993. He also served as Treasurer of the Company from November 1993 to
October 1996. Prior to November 1993, he had been Treasurer of Amax from
January 1992 to November 1993.
MRS. FEENEY has been Vice President and Corporate Secretary of Alumax
since November 1993. For more than five years prior thereto, she had been
Corporate Secretary of Amax.
MR. GREENBERG was elected a Vice President of Alumax in December 1996
and has been President of Alumax Materials Management, Inc., a wholly owned
subsidiary of the Company, since September 1996. Before joining Alumax in
February 1996, Mr. Greenberg was vice president-materials of Commonwealth
Aluminum Company from 1991.
MR. LINARD was elected a Vice President of Alumax in December 1996 and
has been President of Alumax Extrusions, Inc., a wholly owned subsidiary of
the Company and formerly named Cressona Aluminum Company, for more than
five years.
MR. MCDOWELL has been a Vice President of Alumax since August 1994. He
joined the Company from Amax Energy, Inc., where he had been an Executive
Vice President since July 1989.
MR. THAURE has been a Vice President of Alumax for more than five
years and President of Alumax International Company and Alumax Technology
Corporation, each a wholly owned subsidiary of the Company, since February
1994. For more than five years prior thereto, he had been a Vice President
of Alumax Primary Aluminum Corporation, a wholly owned subsidiary of
Alumax.
MR. VOLLKOMMER has been a Vice President of Alumax since December 1995
and Controller of the Company since February 1994. He had served as
Director of Accounting at Amax from December 1992 to December 1993. Prior
to December 1992, he had been a Manager with the public accounting firm of
Coopers & Lybrand for more than five years.
MR. WOLF has been Vice President and General Counsel of Alumax for
more than five years. He also served as Secretary of Alumax from November
1989 to November 1993.
MR. GLEASON was elected Treasurer of the Company in November 1996. For
more than five years prior thereto, he held various executive and
managerial positions with Royal Bank of Canada, most recently serving as
Vice President of Corporate Banking for the Eastern region of the United
States.
17
<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock, par value $.01 per share, of the Company (the "Common
Stock") is listed on the New York, London, Toronto and Brussels Stock Exchanges.
The following table sets forth on a quarterly basis the high and low sales
prices of the Common Stock on the New York Stock Exchange for the two most
recent fiscal years:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter............................................. $29 5/8 $23 3/4
Second Quarter............................................ $31 7/8 $25 7/8
Third Quarter............................................. $37 7/8 $31 1/4
Fourth Quarter............................................ $34 1/2 $27 5/8
1996
First Quarter............................................. $40 $26 5/8
Second Quarter............................................ $36 1/2 $29 1/8
Third Quarter............................................. $34 $29
Fourth Quarter............................................ $34 1/8 $30 5/8
</TABLE>
The Company paid no dividends on the Common Stock in 1996 or 1995 and does
not expect to do so over the foreseeable future. Future Common Stock dividend
decisions will take into account several factors, including the then current
business results and cash requirements of the Company. In addition, the Company
has a loan agreement that contains, among other things, restrictions on the
payment of dividends by the Company. See Note 6 to the Financial Statements
included elsewhere herein.
At December 31, 1996, there were 10,088 holders of record of the Company's
Common Stock.
18
<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information of the
Company for each of the five years ended December 31, 1996 which has been
derived from the audited Financial Statements of the Company. The information
set forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" which follows this
section, and the Financial Statements and related notes included elsewhere
herein. Historical per share data for earnings and book value for periods prior
to 1993 have not been presented as the Company was not a publicly-held company
prior to 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales................................. $3,159.3 $2,926.1 $2,754.5 $2,347.3 $2,431.0
======== ======== ======== ======== ========
Earnings (loss) from operations........... $ 231.9 $ 305.8 $ 134.0 $ (116.1) $ (33.0)
Gain on sales of assets(a)................ 242.9 128.8 6.6
Interest expense, net(b).................. (62.8) (65.4) (72.6) (76.5) (47.7)
Other income, net......................... 10.6 7.3 4.4 6.0 1.5
Income tax provision (benefit)............ 172.6 139.1 25.7 (52.1) (16.0)
Cumulative effect of accounting
changes(c)............................. (3.8) (1.0)
-------- -------- -------- -------- --------
Net earnings (loss)(a).................... $ 250.0 $ 237.4 $ 46.7 $ (138.3) $ (64.2)
======== ======== ======== ======== ========
Earnings (loss) applicable to common
shares................................. $ 240.7 $ 228.1 $ 37.4 $ (147.6) $ (64.4)
======== ======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE(D)
Primary................................... $ 5.19 $ 5.05 $ .84 $ (3.33)
Fully diluted............................. $ 4.53 $ 4.33
FINANCIAL POSITION
Working capital........................... $ 660.6 $ 767.9 $ 706.9 $ 571.9 $ 498.0
Property, plant and equipment, net........ 2,027.4 1,611.9 1,523.3 1,571.1 1,626.5
Total assets.............................. 3,298.7 3,135.0 2,958.8 2,973.6 2,871.2
Long-term debt............................ 672.0 708.9 851.9 925.2 853.3
Total debt................................ 710.4 845.9 915.5 988.2 882.7
Stockholders' equity...................... 1,640.8 1,399.3 1,162.1 1,099.6 1,211.7
OTHER DATA
Total debt to invested capital............ 30.2% 37.7% 44.1% 47.3% 42.2%
Return on sales........................... 7.9% 8.1% 1.7% (5.9)% (2.6)%
Return on average stockholders' equity.... 16.4% 18.5% 4.1% (12.0)% (5.1)%
Return on average invested capital........ 13.5% 14.1% 4.8% (4.2)% (1.6)%
Book value per share(e)................... $ 30.00 $ 25.73 $ 21.45 $ 20.38
</TABLE>
- ---------------
(a) Included in 1996 is a pre-tax gain of $71.7 ($36.7 after-tax) related to the
sale of certain fabricated products businesses, a pre-tax gain of $92.8
($55.1 after-tax) related to the sale of mining interests and a pre-tax gain
of $78.4 ($48.6 after-tax) related to the sale of a 23 percent interest in
the Mt. Holly primary aluminum reduction plant. Included in 1995 is a
pre-tax gain of $128.8 ($81.3 after-tax) related to the sale of a 14 percent
interest in each of the Intalco and Eastalco primary aluminum reduction
plants. Included in 1994 is a pre-tax gain of $6.6 ($4.0 after-tax) related
to the sale of an Australian mining investment.
(b) Includes capitalized interest of $7.5 in 1996, $5.4 in 1995, and $41.7 in
1992.
(c) The 1993 results include a charge of $3.8 (net of $2 tax benefit) for
postemployment benefits related to the adoption of SFAS No. 112. The 1992
results include a charge of $79.8 (net of $46.7 tax benefit) for post
retirement health care and life insurance benefits related to the adoption
of SFAS No. 106 and a $78.8 tax benefit related to the adoption of SFAS No.
109.
(d) Per share data for 1993 are calculated on a pro forma basis using 44,354,000
average shares outstanding from November 15, 1993 through December 31, 1993,
as if such shares were outstanding throughout the year. Fully diluted
earnings per common share are omitted when anti-dilutive.
(e) Book value per share amounts are determined as if the Series A Preferred
Stock, which was converted to Common Stock in December 1996, had been
converted to Common Stock in each year presented.
19
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Millions of dollars, except per tonne amounts)
INTRODUCTION
The Company is an integrated producer of aluminum products, operating in a
single segment: aluminum processing. Using purchased alumina, the raw material
used to produce aluminum, the Company produces primary aluminum employing an
electrolytic process. Primary aluminum products are sold externally or further
processed into a broad range of semi-fabricated and fabricated products. The
Company's products are sold to a wide variety of markets, including
transportation, distributors, building and construction, consumer durables, and
packaging. The following should be read in conjunction with the Company's
consolidated financial statements and the notes thereto, which are contained
elsewhere herein.
Net earnings for the year ended December 31, 1996 totalled $250.0 as
compared to net earnings of $237.4 for the year ended December 31, 1995 and net
earnings of $46.7 for the year ended December 31, 1994. The 1996 and 1995
results represent the Company's third and fourth, respectively, most profitable
years since its incorporation in 1973.
Since becoming an independent public corporation in late 1993, management
has made significant progress in implementing a strategic plan designed to
strengthen the Company's balance sheet, enhance stockholder value and position
the Company for future growth. A significant component of this strategy includes
the sale of certain noncore assets and mature, low growth businesses, with
reinvestment of proceeds into high growth potential, core businesses. In the
three years ended December 31, 1996, the Company has completed the sale of
several such non-essential businesses and assets totalling $770 and has invested
nearly $1 billion into business expansion and strategic acquisitions. Proceeds
from the aforementioned sales include the following notable transactions:
- $235.0 from mining investments in Australia and Mexico;
- $236.9 from excess primary aluminum capacity; and
- $246.6 from the sale of certain fabricated products businesses ("Fab
Products") in the United States and Europe.
Dispositions in 1996 generated after-tax gains of $140.4 and raised proceeds of
$495.9, which exceeded the total cost of the $436.5 Cressona Aluminum Company
("Cressona") acquisition in January 1996 and enabled the Company to retire the
debt acquired and incurred to finance that acquisition. These transactions have
reduced the Company's exposure to the domestic building and construction market
and increased its presence in the higher growth transportation and distribution
sectors. Dispositions in 1995 generated an after-tax gain of $81.3 and raised
proceeds of $147.6. In 1994, dispositions generated an after-tax gain of $4.0
and raised proceeds of $75.0. These gains have been excluded from earnings from
operations in the Company's financial statements. In addition, proceeds of $6.1,
$3.2 and $42.2 were received in 1996, 1995 and 1994, respectively, from the sale
of various other assets.
Parallel with the progress of its strategic plan, the Company's balance
sheet has been substantially strengthened. Total stockholders' equity exceeds
$1.6 billion at December 31, 1996, up almost 50 percent since the Company became
an independent public corporation. The ratio of total debt to invested capital
was 30 percent at December 31, 1996, compared to 38 percent and 44 percent at
December 31, 1995 and 1994, respectively.
EARNINGS FROM OPERATIONS
Earnings from operations for the year ended December 31, 1996 totalled
$231.9 compared to earnings of $305.8 for the year ended December 31, 1995 and
of $134.0 for the year ended December 31, 1994. The lower 1996 earnings from
operations is attributable to lower aluminum prices and higher raw material,
research, business and product development costs. Included in 1996 earnings is
$3.7 related to the liquidation of LIFO inventories and $2.1 from the sale of
pollution credits. Included in 1995 earnings is a $7.3 reduction in the sheet
mill operations restructuring liability to account for lower than expected
costs, $5.1 from gains on sales
20
<PAGE> 22
of assets, and $1.4 related to the liquidation of LIFO inventories. The 1994
earnings include $5.2 of income related to the liquidation of LIFO inventories
and $2.3 in net gains on sales of assets.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net sales:
Aluminum processing:
Primary products....................................... $ 658.9 $ 724.5 $ 592.7
Semi-fabricated products(1)............................ 1,639.5 1,235.4 1,264.2
Fabricated products(1)................................. 860.9 966.2 897.6
-------- -------- --------
$3,159.3 $2,926.1 $2,754.5
======== ======== ========
Earnings from operations:
Aluminum processing....................................... $ 275.6 $ 339.7 $ 173.3
Corporate................................................. (43.7) (33.9) (39.3)
-------- -------- --------
$ 231.9 $ 305.8 $ 134.0
======== ======== ========
Sources and shipments (thousands of tonnes):
Sources of metal (unaudited)
Primary aluminum production............................ 686.3 650.9 680.7
Aluminum purchases..................................... 419.6 355.3 364.5
-------- -------- --------
1,105.9 1,006.2 1,045.2
======== ======== ========
Metal shipments (unaudited)
Aluminum processing:
Primary products....................................... 374.3 416.6 423.8
Semi-fabricated products(1)............................ 574.5 414.3 488.7
Fabricated products(1)(2).............................. 133.3 142.6 166.8
-------- -------- --------
1,082.1 973.5 1,079.3
======== ======== ========
</TABLE>
- ---------------
(1) In conjunction with the Fab Products sale, net sales and shipments for the
Company's Magnolia operation have been reclassified to Semi-fabricated
products. Magnolia, which manufactures shower and tub enclosures, stadium
seating and other extruded products, has been transferred into the
Company's extrusions business.
(2) Included in Fabricated products metal shipments are billet shipments of
28.6, 26.8 and 51.7 thousand tonnes for the years ended December 31, 1996,
1995 and 1994, respectively.
NET SALES AND SHIPMENTS
The Company generated record sales of $3,159.3 on record aluminum shipments
of approximately 1.1 million tonnes in 1996. Sales of $2,926.1 in 1995 and
$2,754.5 in 1994 were generated on aluminum shipments of approximately 1.0 and
1.1 million tonnes, respectively. The Company's net sales are sensitive to
changes in the world pricing of primary aluminum. The price sensitivity impacts
substantially all of the Company's products to varying degrees, with less impact
on the more specialized and value added products.
The LME cash price averaged $1,510 per tonne in 1996 compared with $1,810
and $1,480 per tonne in 1995 and 1994, respectively. The LME price declined
during 1996 from a January 1996 average of $1,590 per tonne to a December 1996
average of $1,500 per tonne. Net sales for 1996 reflect the impact of the annual
average price decline. Sales growth of 6 percent in 1995 is attributable to
improved pricing offset somewhat by a decline in shipments.
Primary products' external net sales in 1996 decreased nine percent on
shipment declines of ten percent directly resulting from higher internal
consumption from downstream operations. Primary production rose in 1996 as idled
capacity restarts of approximately 90,000 tonnes, which were announced in
November 1995,
21
<PAGE> 23
were completed in January 1996. The Company's smelter network is currently
operating at or above full nameplate capacity.
Primary products' external net sales in 1995 increased 22 percent on
shipment declines of two percent, having benefited from overall higher realized
selling prices in 1995 as compared to 1994. Primary production declined four
percent in 1995, reflecting the sale of a 14 percent undivided interest in the
Intalco and Eastalco aluminum reduction facilities on March 31, 1995.
Semi-fabricated products' net sales in 1996 increased 33 percent over 1995,
principally due to shipment increases of 39 percent. Substantially all of the
1996 increase in shipments was generated through the acquisition of Cressona,
which more than doubled the capacity of the Company's extrusion business,
creating an organization regarded as having the world's largest soft-alloy
extrusion manufacturing capacity. Slightly offsetting the impact of higher
shipments were lower prices in the Company's sheet mill operations. The sheet
industry continues to experience low pricing due to overcapacity which has
resulted primarily from displaced can sheet capacity. To address the issue of
low prices, the Company is upgrading its sheet facilities and is focusing its
manufacturing and marketing efforts on higher margin niche products while
transitioning away from commodity sheet products.
Semi-fabricated products' net sales in 1995 declined two percent from 1994
on shipment declines of 15 percent. The decline in shipments principally
reflects the closure of two sheet mill operations at Joliet, Illinois, and
Riverside, California, along with the impact of the August 1994 disposition of
an aluminum distribution business. The decline in shipments was offset by higher
realized prices in all businesses, particularly from strong demand of extruded
products in the transportation industry.
Fabricated products' net sales in 1996 declined 11 percent on a seven
percent decline in shipments. The Company sold Fab Products, which had sales of
$485.0 in 1995 and $363.3 in 1996 through the date of disposition, on September
25, 1996. This decline in sales was partially offset by an increase in sales to
the domestic building and construction market. General economic conditions in
the United States have had a positive impact on the domestic building and
construction markets, while European architectural sales declined because of
sluggish economic conditions in major European markets.
Fabricated products' 1995 net sales increased eight percent on a decline in
shipments of 15 percent. Higher realized pricing at all the Fabricated products
businesses more than offset lower volumes. Approximately 50 percent of the
volume decline in 1995 resulted from lower external billet sales in a secondary
aluminum operation in Europe.
COST AND EXPENSES
The Company's cost and expenses were $2,927.4 for 1996 compared to $2,620.3
for 1995 and $2,620.5 for 1994. The increase in total cost and expense levels in
1996 reflects the expanded volume from the Company's extrusion operations
combined with increases in raw material, research, business and product
development costs, partially offset by a volume reduction associated with the
Fab Products disposition.
In 1995, the Company incurred certain costs associated with the effects of
production curtailments, higher raw material and power costs, and external
aluminum purchases. However, total cost of goods sold remained flat in 1995 in
comparison to 1994 due to lower shipments.
Primary production during 1995 and 1994 was below total nameplate capacity
due to curtailments at the Company's Intalco and Mt. Holly primary aluminum
reduction facilities. These curtailments were made in response to certain power
curtailments initiated by the Bonneville Power Administration, a supplier of
power to the Intalco facility, and the then prevailing low world pricing of
aluminum. During the fourth quarter of 1995, in response to the anticipated
increase in demand for primary aluminum from the Company's downstream businesses
and the availability of favorably priced power, the Company announced the
restart of its curtailed capacity. The restarts were completed by January 1996
and the facilities are currently operating at capacity.
22
<PAGE> 24
Depreciation expense increased 27 percent in 1996 principally due to the
expansion of the Company's extrusions business and the effects of recent capital
spending programs. In 1995, depreciation expense decreased 5 percent compared
with 1994, primarily as a result of asset sales.
OTHER ITEMS AFFECTING NET EARNINGS
Other income, net
Other income, net for the years ended December 31, 1996, 1995 and 1994 was
$10.6, $7.3 and $4.4, respectively. Included in 1996 and 1995, respectively, are
$18.6 and $11.6 for dividends received from Mexican mining operations. Included
in 1994 are $12.6 for dividends received from Mexican mining operations and a
$1.9 loss from Alumax's equity share of operating results from an investment in
Australian mining operations. The Company sold its investments in the Mexican
and Australian mining operations during 1996 and 1994, respectively.
Interest expense, net
Gross interest expense was $74.1, $81.6 and $78.2 for the years ended
December 31, 1996, 1995 and 1994. Gross interest expense in 1996 decreased due
to lower interest rates compared to 1995. Gross interest expense in 1995 was
higher than in 1994 due to higher interest rates partially offset by lower
average borrowings. Interest income for the years ended December 31, 1996, 1995
and 1994 was $3.8, $10.8 and $5.6, respectively. Interest income was higher in
1995 due to higher interest rates and higher overall cash balances. Capitalized
interest in 1996 was $7.5 as compared to $5.4 in 1995.
Income taxes
The income tax provision for the year ended December 31, 1996 was $172.6
compared to an income tax provision of $139.1 and $25.7 in 1995 and 1994,
respectively. Effective tax rates differ from the statutory rate due to
provisions for prior years and provisions for state and foreign taxes. In
addition, the 1996 repatriation of foreign earnings associated with the sale of
Fab Products' businesses in Western Europe also contributed to an effective tax
rate higher than the statutory rate. In the first quarter of 1995, the Company
reversed a $13.4 federal income tax valuation allowance in anticipation of
utilization of the asset. This deferred tax asset has been subsequently
realized.
STRATEGIC TRANSACTIONS
The Company periodically implements strategic actions which it believes
afford it the opportunity to redeploy resources to enhance profitability and
growth. During 1996, 1995 and 1994 the following notable strategic transactions
occurred:
<TABLE>
<CAPTION>
DISPOSITION ACQUISITION PRE-TAX AFTER-TAX
PROCEEDS COST GAIN GAIN
----------- ----------- ------- ---------
<S> <C> <C> <C> <C>
1996:
Fab Products.................................. $246.6 $ 71.7 $ 36.7
Mexican Mining Investment..................... 160.0 92.8 55.1
Excess Primary Aluminum Capacity.............. 89.3 78.4 48.6
Cressona Aluminum Company..................... $436.5
------ ------ ------ ------
$495.9 $436.5 $242.9 $140.4
====== ====== ====== ======
1995:
Excess Primary Aluminum Capacity.............. $147.6 $128.8 $ 81.3
====== ====== ======
1994:
Australian Mining Investment.................. $ 75.0 $ 6.6 $ 4.0
====== ====== ======
</TABLE>
23
<PAGE> 25
Dispositions
On September 25, 1996, the Company sold certain fabricated products
businesses in Western Europe and in the United States for $246.6 in cash, net of
cash sold of $5.4. The Company recorded an after-tax gain of $36.7, net of a
$35.0 tax provision, in the third quarter of 1996.
In June 1996, the Company sold its investment in Mexican mining interests
for total consideration of $160 in cash. The Company recorded an after-tax gain
of $55.1, net of a $37.7 tax provision, in the second quarter of 1996.
In January 1996, the Company sold a 23 percent undivided interest in its
Mt. Holly primary aluminum reduction facility for $89.3, which the Company
applied to the early retirement of a $90.7 promissory note due in May 1996. The
Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in
the first quarter of 1996. This transaction reduced the Company's ownership in
the Mt. Holly facility to 50.33 percent.
In March 1995, the Company sold a 14 percent undivided interest in each of
the Company's Intalco and Eastalco primary aluminum reduction facilities for
cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5
tax provision, recorded in the first quarter of 1995. This transaction reduced
the Company's ownership in each facility to 61 percent.
In March 1994, the Company sold a 37 percent undivided interest in
Australian mining interests for $75.0 in cash. The Company recorded an after-tax
gain of $4.0, net of a $2.6 tax provision, in the first quarter of 1994.
Acquisition
On January 31, 1996, the Company purchased all of the common shares of
privately held Cressona for a cash cost, including expenses, of $436.5, net of
$3.1 of cash acquired. In conjunction with the acquisition, accounts payable,
debt and other liabilities of $87.4 were acquired. Cressona is a leading
manufacturer of extruded aluminum products.
The transaction has been accounted for as a purchase and the results of
operations of Cressona have been included in the consolidated financial
statements since January 31, 1996. The acquisition was financed with cash on
hand and $375 of borrowings obtained under available credit facilities. All of
these borrowings have been repaid.
Pro Forma Information
The following summary presents Alumax's unaudited pro forma consolidated
net sales, net earnings, and primary earnings per common share for 1996 and
1995, respectively, as if the acquisition of Cressona and the sale of Fab
Products each occurred on January 1, 1996 and 1995. The pro forma adjustments
for 1996 include the addition of Cressona's operating results for the month of
January 1996. Since the acquisition occurred on January 31, 1996, the Company's
actual results include Cressona from February 1, 1996 through December 1996.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Net sales........................................... $2,830.3 $2,910.1
Net earnings........................................ $ 243.6 $ 238.6
Primary earnings per common share................... $ 5.05 $ 5.07
</TABLE>
The pro forma results are based upon certain assumptions and estimates,
which the Company believes are reasonable. The pro forma results do not purport
to be indicative of results that actually would have been obtained had these
transactions occurred on January 1, 1996 or 1995, nor are they intended to be a
projection of future results.
24
<PAGE> 26
LIQUIDITY AND CAPITAL RESOURCES
Operating activities
Operations provided cash of $193.0 in 1996, compared to $254.7 in 1995 and
$10.5 in 1994. Lower cash flow is directly related to the decrease in earnings
from operations partially offset by working capital reductions, net of the
effects of the Cressona acquisition and the sale of Fab Products. Cash flow in
1994 and 1995 was negatively impacted by $14.5 and $3.0, respectively, due to
advance payments from a customer received in 1993 for future shipments of
primary aluminum. In addition, the Company incurred $14.9 and $42.9 of cash
costs during 1995 and 1994, respectively, related to the 1993 restructuring of
its sheet mill operations, which has been substantially completed.
Investing activities
Cash used in investing activities was $177.7 in 1996 compared with cash
used of $62.9 and cash provided of $36.8 in 1995 and 1994, respectively. As
described under "Strategic Transactions," the Company received net cash of
$59.4, $147.6 and $75 in connection with notable strategic transactions during
1996, 1995 and 1994, respectively. Additional proceeds of $6.1, $3.2 and $42.2
were received in 1996, 1995 and 1994, respectively from the sale of various
other assets. Capital expenditures were $243.2 in 1996 compared with $213.7 in
1995 and $80.4 in 1994.
During 1997, capital expenditures are expected to approximate $350 as the
Company continues its program of investing capital in new markets, technology
and facilities. As part of the 1997 capital spending, the Company, through its
subsidiary, Alumax Mill Products, Inc., exercised its option to purchase its
leased Texarkana rolling mill facility in November 1997 for approximately $97 in
cash. Further, during 1996, the Company entered into a joint venture with Yunnan
Aluminum Processing Factory in Kunming, China for the annual production of 8,000
to 10,000 tonnes of light gauge aluminum foil for China's packaging market.
Alumax will invest $38 of cash in the joint venture to develop a continuous cast
foil operation. As of December 31, 1996, the Company has invested approximately
$13 of cash in the joint venture.
Financing activities
Financing activities during 1996 consumed $186.6 of cash compared with cash
consumed of $78.9 in 1995 and $82 in 1994. The Company borrowed $375 under
available credit facilities in January 1996 to finance the acquisition of
Cressona. During the year, these borrowings were fully repaid. Total debt
repayments of $552.3 in 1996 also include $136.6 of early retirements,
principally consisting of $39.3 of Cressona debt acquired and a $90.7 promissory
note due in May 1996. Debt repayments of $69.6 and $72.7 in 1995 and 1994,
respectively, included early retirements and prepayments of $7.6 and $35.2,
respectively. There were no new borrowings in 1995 or 1994. Dividends totalling
$9.3 per annum were paid to holders of Alumax Series A Preferred Stock in 1996,
1995 and 1994. At December 31, 1996, 1995 and 1994, the Company's total debt to
invested capital was 30.2 percent, 37.7 percent and 44.1 percent, respectively.
Total debt outstanding was $710.4, $845.9 and $915.5, at December 31, 1996, 1995
and 1994, respectively.
In May 1995, the Company entered into a $400 revolving credit facility (the
"Credit Agreement") to replace its then existing revolving credit facility,
which was terminated. The Credit Agreement has a term of five years, expiring in
May 2000, with no provision for reduction in commitments during its term.
Interest on outstanding balances will be based on either a base rate or LIBOR
option. At December 31, 1996, the entire amount of the facility was available to
the Company. The Credit Agreement contains provisions for restricting the
incurrence of indebtedness by subsidiaries, as well as financial and other
covenants. Under the Credit Agreement, the Company and its consolidated
subsidiaries collectively are required to maintain tangible net worth of at
least $700 at any time, and the Company and certain of its subsidiaries,
excluding the Lauralco Project Group (see Note 6 to the Financial Statements
included elsewhere herein), are collectively required to maintain a ratio of
tangible net assets to funded debt of at least 2.0 to 1.0 at any time.
On January 17, 1996, the Company entered into a $400 bridge loan facility
to finance the acquisition of Cressona. All amounts outstanding under this
facility have been repaid and the facility has been retired.
25
<PAGE> 27
For further information relating to the Company's loan and credit
facilities and for a description of certain provisions contained in a loan
agreement which restrict the Company's ability to pay dividends, see Note 6 to
the Financial Statements included elsewhere herein. Under this restriction, at
December 31, 1996, $439.8 of retained earnings were available for the payment of
dividends on common stock.
Management believes current cash balances, anticipated cash flows from
operations and available funds from the revolving credit facility described
above are sufficient to meet the Company's planned level of capital spending and
to service its debt. As a result, in April 1996, the Company withdrew its shelf
registration with the Securities and Exchange Commission covering the issuance
of up to 9.2 million shares of common stock.
On November 4, 1996, the Company announced that it was redeeming all of the
outstanding shares of its $4.00 Series A Convertible Preferred Stock ("Preferred
Stock"), par value $1.00 per share, on December 18, 1996. Each share of the
Preferred Stock was redeemable at a price of $52.40 per share, plus an amount
equal to the quarterly dividend accrued on each share through the redemption
date for a total cash redemption price of $52.60 per share. As an alternative to
redemption, each share of the Preferred Stock was convertible at the option of
the holder into 4.11489 shares of the Company's Common Stock until the close of
business on December 4, 1996. In December 1996, the outstanding shares of
Preferred Stock were converted into approximately 9.6 million shares of Alumax
Common Stock.
Income Taxes
The Internal Revenue Service (the "IRS") has asserted that Alumax and
certain of its subsidiaries were improperly included in the 1984, 1985 and 1986
consolidated income tax returns of AMAX Inc., the Company's former parent
company, and on that basis has asserted a federal income tax deficiency against
Alumax of approximately $129. Interest on the deficiency through December 31,
1996, would be approximately $276. In response to the IRS' notice of deficiency,
the Company filed a petition in the United States Tax Court (the "Court"),
seeking a redetermination in respect of the purported deficiency. The parties
have waived their rights to a trial and the matter has been submitted to the
Court for decision based upon the pleadings, stipulations, memoranda and other
documents submitted, or to be submitted, to the Court by the parties. A decision
by the Court is expected in late 1997. Payment of the deficiency with interest
thereon would provide certain tax benefits to the Company that would offset in
part, in the year of payment and within the carryforward period, the cost of
paying the deficiency and interest. The Company believes that it has adequate
reserves so that any unprovided for net deficiency would not have a material
adverse effect on the Company's financial condition.
Risk Management
The Company utilizes certain financial instruments in connection with its
risk management. The risk of loss related to counterparty nonperformance under
financial instrument agreements at December 31, 1996 is not significant.
The Company enters into forward fixed price arrangements that are required
by certain customers and suppliers. The Company may utilize futures contracts
which effectively convert forward fixed price arrangements to market prices in
order to meet overall strategic objectives. Such contracts covered approximately
177,875 tonnes of aluminum at December 31, 1996 and mature at various dates
through 1999. Gains or losses with respect to these positions are reflected in
earnings concurrent with consummation of the underlying fixed price transaction.
Periodic value fluctuations of the futures contracts approximately offset the
value fluctuations of the underlying fixed price transactions.
The Company also may, from time to time, establish a floor selling price
for varying quantities of future production, while preserving the opportunity to
participate in upward price movements. This may be accomplished by entering into
forward sales of primary aluminum and purchases of call options, which together
provide the same price protection as purchasing put options, or by purchasing
put options alone, in a manner which correlates with the Company's production
and sales of primary aluminum. The strategy may be modified from time to time.
At December 31, 1996, the Company's commitments with respect to these financial
instruments covered approximately 324,000 tonnes of future production. The book
value and market value of these financial instruments were $16.8 and $7.4,
respectively, at December 31, 1996.
26
<PAGE> 28
Certain of the Company's foreign operating expenditures are denominated in
currencies other than the operations' functional currencies, which expose the
Company to exchange rate risks. In order to mitigate its exposure to exchange
rate risk where these conditions exist, the Company may utilize forward foreign
currency contracts. At December 31, 1996, the Company had outstanding $106 in
forward foreign currency contracts which principally mature during 1997. The
gains or losses related to these contracts are deferred and included in the
measurement of the related foreign denominated transactions. If these contracts
had been terminated at December 31, 1996, the Company would have received
approximately $1.3.
The Company's debt instruments and related interest rate hedges are
susceptible to market fluctuations based on changes in the cost of borrowing. At
December 31, 1996, the fair value of total debt approximated book value. The
Lauralco credit facility, which has a variable interest rate, required the
Company to establish facilities to effectively limit the interest rate exposure
of the commitment. To meet this requirement, the Company has obtained interest
rate swaps with notional amounts totalling $400 through October 26, 2000 and an
interest rate cap with a notional amount of $150 expiring October 26, 1998. This
program is designed to effectively cap interest rate exposure at a maximum of
approximately nine percent through October 26, 2000. The effective rate on this
debt amounted to 8.5 percent, 9.2 percent and 8.0 percent for the years ended
December 31, 1996, 1995 and 1994, respectively. The Company would have paid
approximately $37.9 to terminate these interest rate agreements at December 31,
1996.
The Company also purchases natural gas for its operations and enters into
forward contracts to eliminate the volatility in prices. At December 31, 1996,
none of these contracts is material.
Environmental Matters
The Company has been named as a defendant or identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") and similar state laws by governmental agencies and
private parties at 39 pending waste disposal sites which, in most instances,
were owned and operated by third parties. Management periodically evaluates such
matters and records or adjusts liabilities for remediation and other costs and
potential damages when expenditures for such costs are considered probable and
can be reasonably estimated.
The Company's ultimate liability in connection with present and future
environmental claims will depend on many factors, including its volumetric share
of the waste at a given site, the remedial action required, the total cost of
remediation and the financial viability and participation of the other entities
which also sent waste to the site. Based upon current law and information known
to the Company concerning the size of the sites known to it, their years of
operation, and the number of other past users, Management believes that it has
adequate reserves for the Company's probable share of the estimated aggregate
liability for the costs of remedial actions and related costs and expenses and
that such liability and related costs and expenses should not have a material
adverse effect on the financial condition or ongoing results of operations of
the Company. In addition, the Company establishes reserves for remedial measures
required from time to time at its own facilities. Any expenditures for
remediation programs it may be required to undertake, either individually or in
the aggregate, are not expected to have a material adverse effect on the
financial condition or ongoing results of operations of the Company. The
Company's environmental reserves totalled $29.6 and $22.8 at December 31, 1996
and 1995, respectively ($27.2 at December 31, 1995 with the inclusion of
Cressona). Management believes that the reasonably probable outcomes of these
matters will not materially exceed established reserves. Although the Company
believes it has coverage for some environmental claims under certain insurance
policies, insurance recoveries are not considered in estimating the Company's
share of remediation costs at a site unless an insurance carrier has agreed to
pay a portion of such costs. Insurance recoveries were not considered in
establishing reserves for any of these sites absent an agreement between the
carriers and the Company.
Management does not anticipate that commitments, operating expenses or
capital expenditures for environmental compliance through and including the next
fiscal year will have a material adverse effect on the Company's financial
condition or ongoing results of operations. Based on historical trends toward
tighter environmental standards, however, it appears likely that the Company
will incur additional expenditures to remain in compliance with federal and
state environmental laws. See also "Business -- Environmental Matters" in Part I
hereof.
27
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 29
Statements of Earnings for the Years Ended December 31,
1996, 1995 and 1994....................................... 30
Statements of Financial Position at December 31, 1996 and
1995...................................................... 31
Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994....................................... 32
Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994.................... 33
Notes to Financial Statements............................... 34
</TABLE>
28
<PAGE> 30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Alumax Inc.
We have audited the accompanying statements of financial position of Alumax
Inc. and its subsidiaries as of December 31, 1996 and 1995, and the related
statements of earnings, cash flows and changes in stockholders' equity for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Alumax Inc. and its
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
January 27, 1997
29
<PAGE> 31
ALUMAX INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
NOTE 1996 1995 1994
---- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C>
NET SALES...................................... $3,159.3 $2,926.1 $2,754.5
Cost and expenses:
Cost of goods sold........................... 2,522.0 2,285.7 2,290.1
Selling and general.......................... 267.3 225.5 215.3
Depreciation and amortization................ 138.1 109.1 115.1
-------- -------- --------
2,927.4 2,620.3 2,620.5
-------- -------- --------
EARNINGS FROM OPERATIONS....................... 231.9 305.8 134.0
Gain on sales of assets........................ 2 242.9 128.8 6.6
Interest expense, net.......................... 13 (62.8) (65.4) (72.6)
Other income, net.............................. 14 10.6 7.3 4.4
-------- -------- --------
EARNINGS BEFORE INCOME TAXES................... 422.6 376.5 72.4
Income tax provision........................... 4 172.6 139.1 25.7
-------- -------- --------
NET EARNINGS................................... 250.0 237.4 46.7
Preferred dividends............................ 10 (9.3) (9.3) (9.3)
-------- -------- --------
EARNINGS APPLICABLE TO COMMON SHARES........... $ 240.7 $ 228.1 $ 37.4
======== ======== ========
Earnings per common share:
Primary...................................... 10 $ 5.19 $ 5.05 $ .84
======== ======== ========
Fully diluted................................ 10 $ 4.53 $ 4.33
======== ========
Weighted average shares outstanding:
Primary...................................... 46.4 45.2 44.8
======== ======== ========
Fully diluted................................ 55.2 54.8 54.4
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 32
ALUMAX INC.
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
NOTE 1996 1995
---- -------- --------
(MILLIONS OF DOLLARS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents...................................... $ 34.6 $ 205.9
Accounts receivable, less allowance for doubtful accounts
(1996-$16.6; 1995-$17.7)............................... 439.1 437.8
Inventories............................................... 3 519.9 558.3
Deferred income taxes..................................... 4 54.5 69.4
Other current assets...................................... 37.7 19.6
-------- --------
Total current assets.............................. 1,085.8 1,291.0
-------- --------
Noncurrent Assets:
Property, plant and equipment, net........................ 5 2,027.4 1,611.9
Deferred income taxes..................................... 4 40.4 44.9
Other assets.............................................. 145.1 187.2
-------- --------
Total noncurrent assets........................... 2,212.9 1,844.0
-------- --------
TOTAL ASSETS................................................ $3,298.7 $3,135.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 162.6 $ 148.8
Accrued liabilities....................................... 224.2 237.3
Current maturities of long-term debt...................... 6 38.4 137.0
-------- --------
Total current liabilities......................... 425.2 523.1
-------- --------
Noncurrent Liabilities:
Long-term debt............................................ 6 672.0 708.9
Postretirement health care................................ 8 161.8 162.0
Deferred income taxes..................................... 4 154.0 125.7
Other liabilities......................................... 244.9 216.0
-------- --------
Total noncurrent liabilities...................... 1,232.7 1,212.6
-------- --------
Commitments and Contingencies............................... 9
Stockholders' Equity:
Preferred stock of $1.00 par value -- authorized
50,000,000 shares; issued and outstanding 2,333,320
shares of Series A Convertible Preferred Stock in
1995................................................... 10 -- 2.3
Common stock of $.01 par value -- authorized 200,000,000
shares; issued and outstanding 54,692,057 shares in
1996 and 44,780,179 shares in 1995..................... 10 .5 .4
Paid-in capital........................................... 920.2 909.5
Retained earnings......................................... 724.3 483.6
Cumulative foreign currency translation adjustment........ (4.2) 3.5
-------- --------
Total stockholders' equity........................ 1,640.8 1,399.3
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $3,298.7 $3,135.0
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 33
ALUMAX INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER
-----------------------------
NOTE 1996 1995 1994
---- ------- ------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings......................................... $ 250.0 $ 237.4 $ 46.7
Reconciliation of net earnings to net cash provided
by operating activities:
Depreciation and amortization........................ 138.1 109.1 115.1
Provision for doubtful accounts...................... 5.2 2.7 4.7
Gain on sales of assets.............................. 2 (242.1) (133.9) (8.9)
Deferred income taxes................................ 4 47.7 50.8 11.9
Other noncash items.................................. 8.5 5.7 6.0
Changes in operating assets and liabilities, net of
effects of acquisition/dispositions:
Accounts receivable............................... (25.4) .3 (106.3)
Inventories....................................... 3 17.7 (60.0) 27.3
Other current assets.............................. (21.8) 57.4 (39.7)
Accounts payable and accrued liabilities.......... 9.8 (51.2) (30.6)
Net change in other noncurrent assets and
liabilities..................................... 5.3 36.4 (15.7)
------- ------- -------
Net cash provided by operating activities......... 193.0 254.7 10.5
------- ------- -------
INVESTING ACTIVITIES:
Dispositions, net of cash sold....................... 502.0 150.8 117.2
Acquisitions, net of cash acquired................... (436.5) -- --
Capital expenditures................................. (243.2) (213.7) (80.4)
------- ------- -------
Net cash provided by (used in) investing
activities...................................... (177.7) (62.9) 36.8
------- ------- -------
FINANCING ACTIVITIES:
Repayments of long-term and short-term debt.......... 6 (552.3) (69.6) (72.7)
Proceeds from long-term and short-term debt.......... 6 375.0 -- --
Dividends paid....................................... 10 (9.3) (9.3) (9.3)
------- ------- -------
Net cash used in financing activities............. (186.6) (78.9) (82.0)
------- ------- -------
Net increase (decrease) in cash and equivalents........ (171.3) 112.9 (34.7)
Cash and equivalents at beginning of year.............. 205.9 93.0 127.7
------- ------- -------
Cash and equivalents at end of year.................... $ 34.6 $ 205.9 $ 93.0
======= ======= =======
Supplemental Cash Flow Information:
Income taxes paid, net............................... $ 98.0 $ 84.0 $ 10.0
Interest paid, net of amounts capitalized............ $ 66.5 $ 72.8 $ 83.9
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 34
ALUMAX INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
NOTE SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---- ------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock
At January 1................... 2.3 $ 2.3 2.3 $ 2.3 2.3 $ 2.3
Conversion to common stock..... 10 (2.3) (2.3) -- -- -- --
------ ------ ------ ------ ------ ------
At December 31................. -- -- 2.3 $ 2.3 2.3 $ 2.3
====== ====== ====== ====== ====== ======
Common Stock
At January 1................... 44.8 $ .4 44.6 $ .4 44.4 $ .4
Conversion of preferred
stock....................... 10 9.6 .1
Employee stock issuances....... 7 .3 .2 .2
------ ------ ------ ------ ------ ------
At December 31................. 54.7 $ .5 44.8 $ .4 44.6 $ .4
====== ====== ====== ====== ====== ======
Paid-in Capital
At January 1................... $909.5 $903.8 $897.8
Conversion of preferred
stock....................... 10 2.2
Employee stock issuances....... 7 8.5 5.7 6.0
------ ------ ------
At December 31................. $920.2 $909.5 $903.8
====== ====== ======
Retained Earnings
At January 1................... $483.6 $255.5 $218.1
Net earnings................... 250.0 237.4 46.7
Dividends on preferred stock... 10 (9.3) (9.3) (9.3)
------ ------ ------
At December 31................. $724.3 $483.6 $255.5
====== ====== ======
Cumulative Foreign Currency
Translation Adjustment
At January 1................... $ 3.5 $ .1 $(19.0)
Adjustment for foreign currency
translation................. (7.7) 3.4 19.1
------ ------ ------
At December 31................. $ (4.2) $ 3.5 $ .1
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 35
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The financial statements include the
consolidated accounts of all majority-owned subsidiaries over which Alumax Inc.
("Alumax" or the "Company") maintains control. Investments in companies over
which the Company has significant influence, but not a controlling interest, are
carried on the equity method of accounting. Investments in companies over which
the Company lacks significant influence are carried on the cost method of
accounting. All significant intercompany accounts and transactions have been
eliminated.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts of certain assets
and liabilities and disclosure of contingencies at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents -- Cash equivalents consist of highly liquid investments,
which are readily convertible into cash, with a maturity at date of acquisition
of three months or less.
Financial Instruments -- The Company may, from time to time, utilize
certain financial instruments in connection with its risk management. Amounts to
be paid or received on interest rate swaps and caps are included in interest
expense on an accrual basis. Amounts paid or received on settlement of future,
forward and option contracts, including any cost to purchase the contracts, are
recognized as a component of the related transaction and included in costs and
expenses, except for amounts paid or received on settlement of aluminum
contracts by the primary reduction facilities, which are included in net sales.
The fair value of financial instruments is determined by reference to market
value quotes, where available, and other valuation techniques, as appropriate.
Inventories -- Inventories are stated at the lower of cost or market, with
cost for a substantial portion of U.S. inventories determined under the last-in,
first-out (LIFO) method. The cost of other inventories is principally determined
under the first-in, first-out (FIFO) method.
Property, Plant and Equipment -- Property, plant and equipment is recorded
at cost. Depreciation and amortization of property, plant and equipment is
computed principally on the straight-line method over the estimated useful lives
of the assets. Certain pre-operating costs attributable to new operations of
major facilities are deferred and amortized over a period of approximately three
years. In determining impairment of facilities to be disposed, the Company
includes direct holding costs during the disposal period in its measurement of
net realizable value.
Stock-Based Compensation -- Compensation cost is measured under the
intrinsic value based method. Pro forma disclosures of net income and earnings
per share are presented, as if the fair value based method had been applied.
Revenue Recognition -- The Company recognizes revenue when title passes to
the customer.
Reclassifications -- Certain reclassifications have been made to prior
years' financial statements to conform with the 1996 presentation.
34
<PAGE> 36
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. STRATEGIC TRANSACTIONS
The Company periodically implements strategic actions which it believes
afford it the opportunity to redeploy resources to enhance profitability and
growth. During 1996, 1995 and 1994 the following notable strategic transactions
occurred:
<TABLE>
<CAPTION>
DISPOSITION ACQUISITION PRE-TAX AFTER-TAX
PROCEEDS COST GAIN GAIN
----------- ----------- ------- ---------
<S> <C> <C> <C> <C>
1996:
Fab Products.................................. $246.6 $ 71.7 $ 36.7
Mexican Mining Investment..................... 160.0 92.8 55.1
Excess Primary Aluminum Capacity.............. 89.3 78.4 48.6
Cressona Aluminum Company..................... $436.5
------ ------ ------ ------
$495.9 $436.5 $242.9 $140.4
====== ====== ====== ======
1995:
Excess Primary Aluminum Capacity.............. $147.6 $128.8 $ 81.3
====== ====== ======
1994:
Australian Mining Investment.................. $ 75.0 $ 6.6 $ 4.0
====== ====== ======
</TABLE>
Dispositions
On September 25, 1996, the Company sold certain fabricated products
businesses ("Fab Products") in Western Europe and in the United States for
$246.6 in cash, net of cash sold of $5.4. The Company recorded an after-tax gain
of $36.7, net of a $35.0 tax provision, in the third quarter of 1996.
In June 1996, the Company sold its investment in Mexican mining interests
for $160 in cash. The Company recorded an after-tax gain of $55.1, net of a
$37.7 tax provision, in the second quarter of 1996.
In January 1996, the Company sold a 23 percent undivided interest in its
Mt. Holly primary aluminum reduction facility for $89.3, which the Company
applied to the early retirement of a $90.7 promissory note due in May 1996. The
Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in
the first quarter of 1996. This transaction reduced the Company's ownership in
the Mt. Holly facility to 50.33 percent.
In March 1995, the Company sold a 14 percent undivided interest in each of
the Company's Intalco and Eastalco primary aluminum reduction facilities for
cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5
tax provision, recorded in the first quarter of 1995. This transaction reduced
the Company's ownership in each facility to 61 percent.
In March 1994, the Company sold a 37 percent undivided interest in
Australian mining interests for $75.0 in cash. The Company recorded an after-tax
gain of $4.0, net of a $2.6 tax provision, in the first quarter of 1994.
Acquisition
On January 31, 1996, the Company purchased all of the common shares of
privately held Cressona for a cash cost, including expenses, of $436.5, net of
$3.1 of cash acquired. In conjunction with the acquisition, accounts payable,
debt and other liabilities of $87.4 were acquired. Cressona is a leading
manufacturer of extruded aluminum products.
The transaction has been accounted for as a purchase and the results of
operations of Cressona have been included in the consolidated financial
statements since January 31, 1996. The acquisition was financed with
35
<PAGE> 37
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
cash on hand and $375 of borrowings obtained under available credit facilities.
All of these borrowings have been repaid.
Pro Forma Information
The following summary presents Alumax's unaudited pro forma consolidated
net sales, net earnings, and primary earnings per common share for 1996 and
1995, respectively, as if the acquisition of Cressona and the sale of Fab
Products each occurred on January 1, 1996 and 1995. The pro forma adjustments
for 1996 include the addition of Cressona's operating results for the month of
January 1996. Since the acquisition occurred on January 31, 1996, the Company's
actual results include Cressona from February 1, 1996 through December 31, 1996.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------
1996 1995
-------- --------
<S> <C> <C>
Net sales................................................... $2,830.3 $2,910.1
Net earnings................................................ $ 243.6 $ 238.6
Primary earnings per common share........................... $ 5.05 $ 5.07
</TABLE>
The pro forma results are based upon certain assumptions and estimates,
which the Company believes are reasonable. The pro forma results do not purport
to be indicative of results that actually would have been obtained had these
transactions occurred on January 1, 1996 or 1995, nor are they intended to be a
projection of future results.
NOTE 3. INVENTORIES
Inventories, at December 31, were comprised of:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Raw materials............................................... $323.7 $361.6
Work in process............................................. 87.3 105.9
Finished products........................................... 108.9 90.8
------ ------
$519.9 $558.3
====== ======
</TABLE>
Approximately 78 percent and 72 percent of inventory at December 31, 1996
and 1995, respectively, have been determined under the LIFO cost basis. The
excess of replacement cost over the LIFO basis of such inventory is
approximately $74.0 and $101.2 at December 31, 1996 and 1995, respectively. The
reduction in levels of LIFO valued inventories during 1996, 1995, and 1994
resulted in $3.7, and $1.4, and $5.2 of pre-tax income related to LIFO
liquidation, respectively.
36
<PAGE> 38
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4. INCOME TAXES
The income tax provision is comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Current:
Federal................................................. $ 84.1 $ 67.8 $ 2.0
Foreign................................................. 34.0 10.5 5.5
State................................................... 13.1 10.3 6.3
------ ------ -----
131.2 88.6 13.8
------ ------ -----
Deferred:
Federal................................................. 36.8 43.9 9.7
Foreign................................................. 4.3 5.0 2.2
State................................................... .3 1.6 --
------ ------ -----
41.4 50.5 11.9
------ ------ -----
Total........................................... $172.6 $139.1 $25.7
====== ====== =====
</TABLE>
The domestic and foreign components of earnings before income taxes are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Domestic.................................................. $396.4 $338.1 $45.0
Foreign................................................... 26.2 38.4 27.4
------ ------ -----
Total........................................... $422.6 $376.5 $72.4
====== ====== =====
</TABLE>
Reconciliation of the differences between income taxes computed at federal
statutory tax rates and the Company's consolidated income tax provision follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ -----
<S> <C> <C> <C>
Tax at federal statutory rate............................ $ 147.9 $131.8 $25.3
Foreign tax credits...................................... (110.4) -- --
Sale of foreign businesses............................... 86.8 -- --
Foreign taxes in excess of federal statutory rate........ 29.2 2.1 (1.9)
State income taxes, net of federal income tax benefit.... 10.2 7.7 4.1
Valuation allowance reversal............................. -- (13.4) --
Other, net............................................... 8.9 10.9 (1.8)
------- ------ -----
Total.......................................... $ 172.6 $139.1 $25.7
======= ====== =====
</TABLE>
The foreign provision for income taxes includes $28.7 of dividend
withholding taxes.
37
<PAGE> 39
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The approximate tax effects of cumulative temporary differences at December
31 are as follows:
<TABLE>
<CAPTION>
ASSET (LIABILITY)
--------------------
1996 1995
------- -------
<S> <C> <C>
Accrued expenses............................................ $ 52.2 $ 40.5
Book versus tax basis of inventory.......................... (2.2) (5.2)
Tax credit carryforwards.................................... -- 30.0
Allowance for doubtful accounts............................. 4.5 4.1
------- -------
Current, net................................................ 54.5 69.4
------- -------
Book versus tax basis of depreciable assets................. (208.0) (170.9)
Foreign capital cost allowance carryforward................. 59.8 64.2
Tax credit carryforwards.................................... -- 10.1
Postretirement health care accrual.......................... 56.6 56.7
Other....................................................... (22.0) (40.9)
------- -------
Noncurrent, net............................................. (113.6) (80.8)
------- -------
Total, net........................................ $ (59.1) $ (11.4)
======= =======
</TABLE>
At December 31, 1996, the Company has $225.2 in foreign capital cost
allowance carryforwards which accrued in periods prior to becoming an
independent public corporation in 1993. The Company has not provided for
domestic income taxes or foreign withholding taxes on $33.7 of foreign
subsidiaries' undistributed earnings as of December 31, 1996, which are
reinvested indefinitely.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Components of property, plant and equipment at December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land and improvements....................................... $ 60.4 $ 55.9
Machinery and equipment..................................... 2,455.1 2,079.5
Buildings................................................... 267.3 199.1
Other....................................................... 145.0 140.3
-------- --------
2,927.8 2,474.8
Less -- accumulated depreciation and amortization........... (1,036.8) (1,051.3)
-------- --------
1,891.0 1,423.5
Construction in progress.................................... 136.4 188.4
-------- --------
$2,027.4 $1,611.9
======== ========
</TABLE>
38
<PAGE> 40
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6. DEBT
Debt at December 31, consists of:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Lauralco debt, payable 1997 to 2003 -- variable rate........ $645.0 $682.5
Promissory note -- 10.0%.................................... -- 90.7
Revenue and pollution control bonds, payable 1997 to
2015 -- 3.8% to 9.5%...................................... 62.9 64.8
Other debt.................................................. 2.5 7.9
------ ------
710.4 845.9
Less -- current maturities.................................. (38.4) (137.0)
------ ------
Total long-term debt.............................. $672.0 $708.9
====== ======
</TABLE>
A project finance credit agreement was arranged in 1990 with a group of
banks permitting borrowings of up to $750 to finance construction of a primary
aluminum reduction plant in Quebec, Canada ("Lauralco Project Group"). The
credit agreement required the Company to establish facilities to effectively
limit the interest rate exposure on half of the commitment (Note 15). The
Company's rights to the Lauralco Project Group, including its ownership of the
reduction plant and its rights to various operating agreements, are pledged as
collateral under the credit agreement. The net book value of reduction plant
assets pledged is approximately $905.5 at December 31, 1996.
The project finance credit agreement contains, among other restrictions,
provisions limiting the declaration or payment of dividends to the Company by
certain subsidiaries engaged in Lauralco activities.
In May 1995, the Company entered into a $400 revolving credit facility (the
"Credit Agreement") to replace its then existing revolving credit facility,
which was terminated. The Credit Agreement has a term of five years, expiring in
May 2000, with no provision for reduction in commitments during its term.
Interest on outstanding balances will be based on either a base rate or LIBOR
option. At December 31, 1996, the entire amount of the facility was available to
the Company. The Credit Agreement contains provisions restricting the incurrence
of indebtedness by subsidiaries, as well as financial and other covenants. Under
the Credit Agreement, the Company and its consolidated subsidiaries are
collectively required to maintain tangible net worth of at least $700 at any
time, and the Company and certain of its subsidiaries, excluding the Lauralco
Project Group, are collectively required to maintain a ratio of tangible net
assets to funded debt of at least 2.0 to 1.0 at any time.
On January 17, 1996, the Company entered into a $400 bridge loan facility
to finance the Cressona acquisition. All amounts outstanding under this facility
have been repaid and the facility has been terminated.
The Company has a loan agreement that contains provisions restricting the
payment of dividends on the Alumax Common Stock. At December 31, 1996, $439.8 of
retained earnings are available for the payment of dividends on common stock
under this restriction.
Commitment and facility fees for revolving credit arrangements amounted to
$.6 in 1996. The annual principal payments of long-term debt for the five-year
period ending December 31, 2001 are: 1997-$38.4; 1998-$46.4; 1999-$68.9,
2000-$69.4 and 2001-$91.9.
NOTE 7. EMPLOYEE PENSION AND THRIFT PLANS
Pension plans cover substantially all employees of the Company and are
generally non-contributory. The benefits of salaried employee plans are based on
the projected unit credit method. The benefits of hourly
39
<PAGE> 41
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
employee plans are based on the unit credit method. The Company's funding policy
is to meet minimum funding requirements.
Net periodic pension cost is comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost -- benefits earned during the period........... $ 19.3 $ 15.6 $ 15.9
Interest cost on projected benefit obligations.............. 23.7 20.9 18.8
Actual return on assets..................................... (37.0) (42.9) (2.9)
Net amortization and deferral............................... 11.9 22.4 (19.8)
------ ------ ------
Net periodic pension cost................................. $ 17.9 $ 16.0 $ 12.0
====== ====== ======
</TABLE>
The following table sets forth the funded status of the Company's pension
plans and amounts recognized in its statements of financial position at December
31, 1996 and 1995 for its pension plans:
<TABLE>
<CAPTION>
ABO EXCEEDS
ASSETS EXCEED ABO ASSETS
----------------- ---------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation..................... $234.3 $174.5 $ 14.8 $ 58.8
====== ====== ====== ======
Accumulated benefit obligation (ABO).......... $257.1 $188.8 $ 16.8 $ 61.4
====== ====== ====== ======
Projected benefit obligation.................. $314.9 $236.4 $ 19.2 $ 63.3
Plan net assets at fair value................. 336.5 242.7 10.7 47.1
------ ------ ------ ------
Plan net assets in excess of (less than)
projected benefit obligation................ 21.6 6.3 (8.5) (16.2)
Unrecognized net (gain) loss.................. (6.6) 13.9 5.5 10.3
Unrecognized prior service cost............... 15.3 11.0 1.3 6.8
Unrecognized transition amounts............... (6.5) (7.2) .6 (.7)
------ ------ ------ ------
Prepaid (accrued) pension costs............... $ 23.8 $ 24.0 $ (1.1) $ .2
====== ====== ====== ======
</TABLE>
Plan assets consist of approximately 55 percent equities, 42 percent fixed
income and 3 percent cash and cash equivalents at December 31, 1996.
Key economic assumptions used in the above calculations at December 31,
were:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Settlement discount rate.................................... 7.5% 7.0% 8.0%
Rate of compensation increases.............................. 5.0% 5.0% 5.8%
Expected long-term rate of return........................... 9.0% 9.0% 9.0%
</TABLE>
Defined contribution employee thrift plans cover substantially all salaried
and certain hourly employees. Employee contributions are matched through Company
issuances of Alumax Common Stock. Alumax Common Stock issuances amounted to
$5.3, $4.9 and $5.3 in 1996, 1995 and 1994, respectively. Total administrative
expenses of these plans paid by the Company amounted to $5.6, $5.3 and $4.7 in
1996, 1995 and 1994, respectively.
NOTE 8. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees. A majority of the
Company's domestic employees may become eligible for such benefits if they reach
normal or, in certain cases, early retirement age while working for the Company.
40
<PAGE> 42
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of periodic cost for these postretirement benefits are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ------ ------
<S> <C> <C> <C>
Service cost -- benefits earned during the period......... $ 3.8 $ 3.7 $ 3.5
Interest cost on accumulated postretirement benefit
obligation.............................................. 9.2 10.0 8.7
Amortization of prior service cost and plan amendments.... (5.2) (5.3) (5.5)
Amortization of (gains) losses............................ .6 (.4) .1
----- ------ ------
Net periodic cost......................................... $ 8.4 $ 8.0 $ 6.8
===== ====== ======
</TABLE>
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded at December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees.................................................. $ 62.2 $ 61.2
Fully eligible active plan participants................... 18.4 17.6
Other active participants................................. 54.2 62.8
Unrecognized prior service cost and plan amendments....... 22.4 31.4
Unrecognized net gain (loss).............................. 4.6 (11.0)
------ ------
Liability for postretirement health care and life insurance
benefits.................................................. $161.8 $162.0
====== ======
</TABLE>
For measurement purposes, a 10.1 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1996. The rate was
assumed to decrease gradually to 5 percent through the year 2009 and remain at
that level thereafter. An increase in the assumed health care cost trend rates
by one percent in each year would increase the APBO as of December 31, 1996 by
11 percent and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by 11 percent. The
weighted-average discount rate used in determining the APBO as of December 31,
1996 and 1995 was 7.5 and 7.0 percent, respectively.
In addition to providing postretirement benefits to eligible retired
employees, the Company provides specified postemployment benefits to certain
former or inactive employees. Substantially all domestic employees may become
eligible to receive these benefits, which are either self-insured or provided
through the Company's insurance carriers.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Minimum commitments under long-term noncancelable operating leases,
principally for operating and office facilities, totalled $72.5 at December 31,
1996. Lease commitments for future periods are as follows: 1997-$25.8,
1998-$10.0, 1999-$6.7, 2000-$5.0, 2001-$4.2 and 2002 to 2013-$20.8. Rent expense
amounted to $23.0, $25.8 and $22.5 in 1996, 1995 and 1994, respectively. The
Company arranged for letters of credit in the amount of $182.0 at December 31,
1996, primarily relating to collateral support for certain financing
arrangements and a power contract guarantee.
The Company has a noncancelable long-term contract for the purchase of
alumina and both noncancelable and cancelable contracts for electric power for
its primary aluminum reduction plants. Power contracts for each plant, except
for Intalco, and the alumina contract are with single suppliers. The power
contracts expire in the years 2000 through 2014, subject to certain extension
provisions. The alumina contract, with renewal options, expires in increments
between 2007 and 2018. Contracted amounts of alumina and power approximate the
Company's anticipated requirements.
41
<PAGE> 43
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On September 30, 1996, the Company, through its subsidiary, Alumax Mill
Products, Inc., exercised its option to purchase its leased Texarkana rolling
mill facility in November 1997 for approximately $97 in cash.
During 1996, the Company entered into a joint venture with Yunnan Aluminum
Processing Factory in Kunming, China for the annual production of 8,000 to
10,000 tonnes of light gauge aluminum foil for China's packaging market. Alumax
will invest $38 of cash in the joint venture to develop a continuous cast foil
operation. As of December 31, 1996, the Company has invested approximately $13
of cash in the joint venture.
The Internal Revenue Service (the "IRS") has asserted that Alumax and
certain of its subsidiaries were improperly included in the 1984, 1985 and 1986
consolidated income tax returns of AMAX Inc. ("Amax"), the Company's former
parent, and on that basis has asserted a federal income tax deficiency against
Alumax of approximately $129. Interest on the deficiency through December 31,
1996, would be approximately $276. In response to the IRS' notice of deficiency,
the Company filed a petition in the United States Tax Court (the "Court")
seeking a redetermination in respect of the purported deficiency. The parties
have waived their rights to a trial and the matter has been submitted to the
Court for decision based upon the pleadings, stipulations, memoranda and other
documents submitted, or to be submitted, to the Court by the parties. A decision
by the Court is expected in late 1997. Payment of the deficiency with interest
thereon would provide certain tax benefits to the Company that would offset in
part, in the year of payment and within the carryforward period, the cost of
paying the deficiency and interest. The Company believes that it has adequate
reserves so that any unprovided for net deficiency would not have a material
adverse effect on the Company's financial condition.
The Company has been named as a defendant or identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act ("CERCLA") and similar state laws by governmental agencies and
private parties at 39 pending waste disposal sites which, in most instances,
were owned and operated by third parties. Management periodically evaluates such
matters and records or adjusts liabilities for remediation and other costs and
potential damages when expenditures for such costs are considered probable and
can be reasonably estimated.
The Company's ultimate liability in connection with present and future
environmental claims will depend on many factors, including its volumetric share
of the waste at a given site, the remedial action required, the total cost of
remediation and the financial viability and participation of the other entities
which also sent waste to the site. Based upon current law and information known
to the Company concerning the size of the sites known to it, their years of
operation, and the number of other past users, Management believes that it has
adequate reserves for the Company's probable share of the estimated aggregate
liability for the costs of remedial actions and related costs and expenses and
that such liability and related costs and expenses should not have a material
adverse effect on the financial condition or ongoing results of operations of
the Company. In addition, the Company establishes reserves for remedial measures
required from time to time at its own facilities. Any expenditures for
remediation programs it may be required to undertake, either individually or in
the aggregate, are not expected to have a material adverse effect on the
financial condition or ongoing results of operations of the Company. The
Company's environmental reserves totalled $29.6 and $22.8 at December 31, 1996
and 1995, respectively ($27.2 at December 31, 1995 with the inclusion of
Cressona). Management believes that the reasonably probable outcomes of these
matters will not materially exceed established reserves. Although the Company
believes it has coverage for some environmental claims under certain insurance
policies, insurance recoveries are not considered in estimating the Company's
share of remediation costs at a site unless an insurance carrier has agreed to
pay a portion of such costs. Insurance recoveries were not considered in
establishing reserves for any of these sites absent an agreement between the
carriers and the Company.
42
<PAGE> 44
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10. STOCKHOLDERS' EQUITY
Preferred Stock
On November 4, 1996, the Company announced that it was redeeming all of the
outstanding shares of the $4.00 Series A Convertible Preferred Stock ("Preferred
Stock"), par value $1.00 per share, on December 18, 1996. Each share of the
Preferred Stock was redeemable at a price of $52.40 per share, plus an amount
equal to the quarterly dividend accrued on each share through the redemption
date for a total cash redemption price of $52.60 per share. As an alternative to
redemption, each share of the Preferred Stock was convertible at the option of
the holder into 4.11489 shares of the Company's common stock until the close of
business on December 4, 1996. In December 1996, the outstanding shares of
Preferred Stock were converted into approximately 9.6 million shares of Alumax
Common Stock.
Common Stock
As of December 31, 1996, authorized and unissued shares of Alumax Common
Stock were reserved for the following purposes: 2,408,500 for issuance of stock
options and other stock compensation plans, 968,800 for issuance under employee
thrift and 721,800 for issuance pursuant to employee deferred compensation
agreements.
Primary earnings per share for 1996, 1995 and 1994 are based on average
shares outstanding over the year and include the impact of common stock
equivalents related to stock options and grants. The average number of shares
used to compute primary earnings per share was 46,409,000, 45,200,000 and
44,757,000 in 1996, 1995 and 1994, respectively. Fully diluted earnings per
share, which are omitted when anti-dilutive, also include conversion of the
Alumax Series A Preferred Stock. The average number of shares used to calculate
fully-diluted earnings per share was 55,251,000 and 54,846,000 in 1996 and 1995.
NOTE 11. STOCK-BASED COMPENSATION
Under its 1993 Long-Term Incentive Plan ("Long-Term Plan"), the Company may
grant stock options, stock appreciation rights, restricted stock and other
stock-based awards to salaried employees for up to an aggregate of 3,960,129
shares of common stock. The 1995 Employee Equity Ownership Plan ("Equity
Ownership Plan") provides for discretionary stock option grants to salaried
employees in lower grade levels up to an aggregate of 1,000,000 shares of common
stock. Under its Non-Employee Directors Stock Compensation Plan ("Directors
Stock Plan"), the Company is authorized to grant options up to an aggregate of
750,000 shares of common stock. Upon joining the Board of Directors, each
non-employee director of the Company was provided with a one time stock option
grant of 10,000 shares of common stock. Annually, stock grants for 850 shares of
common stock are issued to each non-employee director.
Options granted under the Long-Term Plan and the Equity Ownership Plan
generally vest two years after issue and have a term of ten years. Options
granted under the Directors Stock Plan vest ratably over three years. The
exercise price of options granted under each plan generally equals the market
price of the Company's stock on the date of grant. However, options may be
granted with differing vesting periods, terms and exercise prices. In 1996,
total options of 1,327,650 were granted, of which 687,800 were granted with a
vesting period of one to three years and a term of six years. Of these 687,800
options, 458,533 were granted with a weighted-average exercise price of $38.12,
which exceeded the market price at the date of grant.
In 1993 certain former Amax executives became executives of the Company and
were awarded 623,350 options, not pursuant to the Long-Term Plan. These options,
which have a market based exercise price of $23.61 and vest ratably over five
years, were granted in consideration of the cancellation without payment of
rights which the executives may have had under severance policies of Amax.
43
<PAGE> 45
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company may grant performance accelerated restricted stock to key
management employees under the terms of the Long-Term Plan. The annual stock
awards vest approximately ten years after grant date with accelerated vesting if
the Company meets certain cumulative net income objectives.
A summary of the status of the stock compensation plans as of December 31,
and changes during the years ended on those dates is presented below:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------- --------------------------
WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993........ 693,350 $23.19
Granted............................... 1,293,175 $26.68
Cancelled............................. (65,850) $27.13
---------
Outstanding at December 31, 1994........ 1,920,675 $25.41 148,003
=========
Granted............................... 821,850 $33.13
Exercised............................. (3,333) $19.44
Cancelled............................. (38,342) $25.50
---------
Outstanding at December 31, 1995........ 2,700,850 $27.76 296,008
=========
Granted (option value -- $11.24)...... 869,117 $32.16
Granted (option value -- $8.92)....... 458,533 $38.12
Exercised............................. (144,200) $26.80
Cancelled............................. (106,159) $31.87
---------
Outstanding at December 31, 1996........ 3,778,141 $29.95 1,463,484
========= =========
Range of option exercise prices:
$19.44 -- $27.13 (average life -- 7.5
years)............................. 1,706,541 $25.27 1,450,534 $25.55
========= ====== ========= ======
$30.63 -- $40.13 (average life -- 8.2
years)............................. 2,071,600 $33.81 12,950 $30.81
========= ====== ========= ======
</TABLE>
The following pro forma summary presents the Company's net earnings,
primary earnings per share and fully diluted earnings per share for the years
ended December 31, 1996 and 1995 as if compensation cost had been measured under
the fair value based method. The effects of the fair value of stock options in
the following pro forma disclosure are not likely to be representative of the
effects for future years because outstanding options vest over a period of up to
three years and awards are generally made during the fourth quarter of each
year.
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Pro Forma Information:
Net earnings.............................................. $247.1 $237.2
Primary earnings per common share......................... $ 5.13 $ 5.04
Fully diluted earnings per common share................... $ 4.48 $ 4.33
</TABLE>
The pro forma adjustments are determined using an option valuation model.
Option valuation models require the input of highly subjective assumptions,
including the expected stock price volatility. Because the Company's employee
stock options have characteristics significantly different from traded options,
and because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options. The following assumptions were used for the years ended December
31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Risk-free interest rate..................................... 5.9% 5.5%
Expected life............................................... 5.0 5.0
Expected volatility......................................... 26.0% 26.0%
Expected dividend yield..................................... -- --
</TABLE>
The Company also granted performance accelerated restricted stock awards of
64,680, 62,100, and 55,956 shares to certain employees in 1996, 1995 and 1994,
respectively. The fair value per share on the date of the
44
<PAGE> 46
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
grants was $34.25, $27.50 and $25.63, respectively. During the years ended
December 31, 1996, 1995 and 1994, compensation cost of $1.7, $1.0 and $.4,
respectively, has been recognized in connection with these awards.
NOTE 12. STOCKHOLDER RIGHTS AGREEMENT
On February 22, 1996, the Executive Committee of the Board of Directors of
the Company declared a dividend distribution of one right (a "Right") for each
outstanding share of Common Stock held of record at the close of business on
February 22, 1996. The Rights attach automatically to each share of Common Stock
outstanding as of February 22, 1996, and to each share of Common Stock issued
after February 22, 1996.
Each Right entitles the holder to purchase from the Company one
one-hundredth of a share of the Company's Participating Preferred Stock at an
exercise price of $130, subject to certain adjustments. The Rights will not be
exercisable or transferable apart from the Common Stock until either the tenth
business day after the announcement by a person or group of the commencement of
a tender or exchange offer for 15 percent or more of the Voting Stock or the
first date of announcement by the Company that a person or group has acquired
beneficial ownership of 15 percent or more of the Voting Stock (an "Acquiring
Person"). "Voting Stock" means shares of capital stock of the Company entitled
to vote generally in the election of directors. If the Company is consolidated
or merged with another company or 50 percent or more of its consolidated assets
or earning power are sold and, at the time, an Acquiring Person controls the
Company's Board of Directors, each holder of a Right will have the right to
receive, upon exercise at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which have a market
value of twice the then current exercise price of the Right. If any person
becomes an Acquiring Person, each holder of a Right other than by the Acquiring
Person (whose Rights will be void) will have the right to receive, upon exercise
at the then current exercise price of the Right, that number of shares of Common
Stock having a market value of twice the exercise price of the Right. The Rights
will expire on February 22, 2006 and may be redeemed for $.01 per Right at any
time prior to the time an Acquiring Person becomes such. Until a Right is
exercised, the record holder will have no rights as a stockholder of the
Company.
After the announcement that an Acquiring Person has become such and prior
to the acquisition by an Acquiring Person of 50 percent or more of the
outstanding Voting Stock, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such Acquiring Person) at an exchange ratio
of one share of Common Stock, or one one-hundredth of a share of the Company's
Participating Preferred Stock, per Right, subject to adjustment.
The Company's Board of Directors may amend the Rights Agreement, in any
respect, until the time an Acquiring Person becomes such. Thereafter, the
Company's Board of Directors may amend the Rights Agreement in any respect not
materially adverse to Rights holders generally.
NOTE 13. INTEREST EXPENSE, NET
Interest expense, net was comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest expense.......................................... $(74.1) $(81.6) $(78.2)
Interest income........................................... 3.8 10.8 5.6
Capitalized interest...................................... 7.5 5.4 --
------ ------ ------
$(62.8) $(65.4) $(72.6)
====== ====== ======
</TABLE>
45
<PAGE> 47
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14. OTHER INCOME, NET
Other income, net for the years ended December 31, 1996, 1995 and 1994 was
$10.6, $7.3 and $4.4, respectively. Included in 1996 and 1995 respectively, are
$18.6 and $11.6 for dividends received from Mexican mining operations. Included
in 1994 are $12.6 for dividends received from Mexican mining operations and a
$1.9 loss from Alumax's equity share of operating results from an investment in
Australian mining operations. The Company sold its investments in the Mexican
and Australian mining operations during 1996 and 1994, respectively.
NOTE 15. FINANCIAL INSTRUMENTS
The Company utilizes certain financial instruments in connection with its
risk management. The risk of loss related to counterparty nonperformance under
financial instrument agreements at December 31, 1996 is not significant.
The Company enters into forward fixed price arrangements that are required
by certain customers and suppliers. The Company may utilize futures contracts
which effectively convert forward fixed price arrangements to market prices in
order to meet overall strategic objectives. Such contracts covered approximately
177,875 tonnes of aluminum at December 31, 1996 and mature at various dates
through 1999. Gains or losses with respect to these positions are reflected in
earnings concurrent with consummation of the underlying fixed price transaction.
Periodic value fluctuations of the futures contracts approximately offset the
value fluctuations of the underlying fixed price transactions.
The Company also may, from time to time, establish a floor selling price
for varying quantities of future production, while preserving the opportunity to
participate in upward price movements. This may be accomplished by entering into
forward sales of primary aluminum and purchases of call options, which together
provide the same price protection as purchasing put options, or by purchasing
put options alone, in a manner which correlates with the Company's production
and sales of primary aluminum. The strategy may be modified from time to time.
At December 31, 1996, the Company's commitments with respect to these financial
instruments covered approximately 324,000 tonnes of future production. The book
value and market value of these financial instruments were $16.8 and $7.4
respectively, at December 31, 1996.
Certain of the Company's foreign operating expenditures are denominated in
currencies other than the operations' functional currencies, which expose the
Company to exchange rate risks. In order to mitigate its exposure to exchange
rate risk where these conditions exist, the Company may utilize forward foreign
currency contracts. At December 31, 1996, the Company had outstanding $106 in
forward foreign currency contracts which principally mature during 1997. The
gains or losses related to these contracts are deferred and included in the
measurement of the related foreign denominated transactions. If these contracts
had been terminated at December 31, 1996, the Company would have received
approximately $1.3.
The Company's debt instruments and related interest rate hedges are
susceptible to market fluctuations based on changes in the cost of borrowing. At
December 31, 1996, the fair value of total debt approximated book value. The
Lauralco credit facility, which has a variable interest rate, required the
Company to establish facilities to effectively limit the interest rate exposure
of the commitment. To meet this requirement, the Company has obtained interest
rate swaps with a notional amount totalling $400 through October 26, 2000 and an
interest rate cap with a notional amount of $150 expiring October 26, 1998. This
program is designed to effectively cap interest rate exposure at a maximum of
approximately nine percent through October 26, 2000. The effective rate on this
debt amounted to 8.5 percent, 9.2 percent and 8.0 percent for the years ended
December 31, 1996, 1995 and 1994, respectively. The Company would have paid
approximately $37.9 to terminate these interest rate agreements at December 31,
1996.
The Company also purchases natural gas for its operations and enters into
forward contracts to eliminate the volatility in prices. At December 31, 1996,
none of these contracts is material.
46
<PAGE> 48
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and equivalents and trade accounts
receivable. The fair value of these financial instruments approximated book
value at December 31, 1996. The Company places its cash and equivalents with
high credit quality institutions. At times, such investments may be in excess of
the Federal Deposit Insurance Corporation insurance limit. The Company routinely
assesses the financial strength of its customers and, as a consequence, believes
that its trade accounts receivable credit risk exposure is not significant.
NOTE 16. OPERATIONS AND GEOGRAPHIC DATA
The Company is an integrated producer of aluminum products, operating in a
single segment: aluminum processing. Alumax is the third largest aluminum
company in the United States and the fourth largest in North America, based on
sales, and operates over 70 plants and other manufacturing and distribution
facilities in 22 states, Canada, Western Europe, Mexico, Australia, the People's
Republic of China and Poland. Using alumina purchased from one principal
supplier, the Company produces primary aluminum at five reduction plants in the
United States and Canada. Primary products are sold externally or further
processed by Alumax into a broad range of semi-fabricated and fabricated
products. The Company's products are sold to a wide variety of markets,
including transportation, distributors, building and construction, consumer
durables, and packaging.
Domestic and Canadian sales and earnings from operations are combined in
the geographic data below, as Canadian assets are primarily aluminum reduction
facilities that toll alumina for U.S. operations and sales. Sales of primary
products to affiliated customers are accounted for at prices comparable to
unaffiliated customer sales.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operations data:
Net sales to unaffiliated customers:
Aluminum processing
Primary products....................................... $ 658.9 $ 724.5 $ 592.7
Semi-fabricated products............................... 1,639.5 1,235.4 1,264.2
Fabricated products.................................... 860.9 966.2 897.6
-------- -------- --------
$3,159.3 $2,926.1 $2,754.5
======== ======== ========
Net sales to affiliated customers........................... $ 713.9 $ 727.6 $ 655.7
======== ======== ========
Earnings from operations:
Aluminum processing....................................... $ 275.6 $ 339.7 $ 173.3
Corporate and other....................................... (43.7) (33.9) (39.3)
-------- -------- --------
$ 231.9 $ 305.8 $ 134.0
======== ======== ========
Identifiable assets:
Aluminum processing....................................... $3,063.7 $2,718.7 $2,636.2
Corporate and other....................................... 235.0 416.3 322.6
-------- -------- --------
$3,298.7 $3,135.0 $2,958.8
======== ======== ========
Geographic data:
Net sales:
United States and Canada.................................. $2,853.5 $2,548.0 $2,387.6
Europe and other international............................ 305.8 378.1 366.9
-------- -------- --------
$3,159.3 $2,926.1 $2,754.5
======== ======== ========
</TABLE>
47
<PAGE> 49
ALUMAX INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Earnings from operations:
United States and Canada.................................. $ 219.9 $ 273.9 $ 105.5
Europe and other international............................ 12.0 31.9 28.5
-------- -------- --------
$ 231.9 $ 305.8 $ 134.0
======== ======== ========
Identifiable assets:
United States and Canada.................................. $3,171.7 $2,820.6 $2,629.0
Europe and other international............................ 127.0 314.4 329.8
-------- -------- --------
$3,298.7 $3,135.0 $2,958.8
======== ======== ========
</TABLE>
A significant portion of the Company's sales are to the building and
construction, transportation and distributors markets. Concentrations of credit
risk with respect to the trade receivables, relating to sales into these as well
as other markets, are limited due to the large number of customers and the
widely dispersed geographic areas in which the Company's businesses operate. The
Company's one principal supplier of alumina has been its supplier for over 20
years under a long-term contract which, with renewal options, expires in
increments between 2007 and 2018. An extended interruption of alumina supply
from this supplier could have a material adverse effect on the Company's
operations. In addition, each of the Company's primary aluminum reduction
plants, except for Intalco, is supplied by a single source of electric power.
Although the Company may experience power curtailments from time to time, a
sudden or extended interruption of power at one or more of its primary aluminum
reduction plants could have a material adverse effect on the Company's
operations.
NOTE 17. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1996 QUARTERS 1995 QUARTERS
--------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $802.6 $851.4 $809.1 $696.2 $698.6 $721.2 $767.7 $738.6
------ ------ ------ ------ ------ ------ ------ ------
Earnings from operations...... $ 75.1 $ 64.4 $ 44.4 $ 48.1 $ 51.5 $ 76.5 $ 91.0 $ 86.8
------ ------ ------ ------ ------ ------ ------ ------
Net earnings(a)............... $ 95.4 $ 83.1 $ 52.4 $ 19.1 $110.4 $ 39.2 $ 43.0 $ 44.8
====== ====== ====== ====== ====== ====== ====== ======
Earnings per share:
Primary..................... $ 2.04 $ 1.77 $ 1.10 $ .34 $ 2.41 $ .82 $ .90 $ .94
====== ====== ====== ====== ====== ====== ====== ======
Fully diluted(b)............ $ 1.73 $ 1.50 $ .95 $ .35 $ 2.03 $ .71 $ .78 $ .82
====== ====== ====== ====== ====== ====== ====== ======
Primary -- pro forma(c)..... $ 1.73 $ 1.50 $ .95 $ .35
====== ====== ====== ======
</TABLE>
- ---------------
(a) Included in 1996 is a first quarter after-tax gain of $48.6 related to the
sale of a 23 percent interest in the Mt. Holly primary aluminum reduction
plant, a second quarter after-tax gain of $55.1 related to the sale of
mining interests and a third quarter after-tax gain of $36.7 related to the
sale of Fab Products. Included in 1995 is a first quarter after-tax gain of
$81.3 related to the sale of a 14 percent interest in each of the Intalco
and Eastalco primary aluminum reduction plants.
(b) The computation of fully diluted earnings per common share for the fourth
quarter of 1996 includes the effect of the conversion of the Preferred
Stock as if it had occurred at the beginning of the quarter.
(c) Pro forma amounts represent primary earnings per common share assuming the
conversion of the Preferred Stock had occurred at the beginning of the
year.
48
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item is incorporated herein by reference to
the sections entitled "Information Concerning Directors and Nominees", "Security
Ownership" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive Proxy Statement for the 1997 Annual Meeting of Stockholders
(the "Proxy Statement").
Information concerning Executive Officers required by this Item is
incorporated herein by reference to the section in Part I hereof entitled
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by reference to
the sections entitled "Directors' Meetings, Compensation and Committees,"
"Executive Compensation" and "Common Stock Performance Graph" in the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to this Item is incorporated herein by reference to
the section entitled "Security Ownership" in the Proxy Statement. Alumax knows
of no arrangements, including any pledges by any person of its securities, the
operation of which may at a subsequent date result in a change in control of the
Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this Item is incorporated herein by reference to
the sections entitled "Certain Transactions" and "Executive Employment and
Separation Agreements" in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES. The Company's
financial statements, the notes thereto and the report of the independent
accountants are set forth on pages 29 through 48 of this Form 10-K.
The following report and additional financial data should be read in
conjunction with the Company's financial statements:
Independent Accountant's Report of Coopers & Lybrand L.L.P. dated January
27, 1997 on the Company's financial statement schedule filed as a part
hereof for the fiscal years ended December 31, 1996, 1995 and 1994.
49
<PAGE> 51
Schedule II -- Valuation and Qualifying Accounts for the fiscal years ended
December 31, 1996, 1995 and 1994.
Schedules other than the one referred to above are omitted because they are
not required or the information is included in the financial statements or the
notes thereto.
EXHIBITS. Unless otherwise indicated, exhibits are incorporated by
reference to the exhibits filed with the Company's Registration Statement on
Form S-1 (Commission File No. 33-69442).
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
2.02 Agreement and Plan of Distribution, dated as of May 24,
1993, by and between AMAX Inc. and Alumax Inc.
2.03 Tax Disaffiliation Agreement, dated as of May 24, 1993, by
and between AMAX Inc. and Alumax Inc.
2.04 Amendment No. 1 to the Agreement and Plan of Distribution,
dated as of November 15, 1993, by and between AMAX Inc.
and Alumax Inc.*
3.01 Restated Certificate of Incorporation of the Company*
3.02 Restated By-laws of Alumax Inc., as amended on September 5,
1996, filed as Exhibit 3.01 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1996 and incorporated herein by reference.
4.01 Form of Common Stock Certificate
4.02 Rights Agreement, dated as of February 22, 1996, between
Alumax Inc. and Chemical Mellon Shareholder Services,
L.L.C., as Rights Agent, including as Exhibit A the forms
of Rights Certificate and Election to Exercise and as
Exhibit B the form of Certificate of Designation and Terms
of Participating Preferred Stock of the Company, filed as
Exhibit 4 to the Company's Current Report on Form 8-K,
dated February 22, 1996, and incorporated herein by
reference.
4.03 Credit Agreement, dated as of September 14, 1990, as amended
as of November 13, 1990 and as further amended as of
February 19, 1991, by and among Aluminerie Lauralco, Inc.,
as Borrower, Canalco, Inc., as Continuing Guarantor, and
Bank of Montreal and National Westminster Bank PLC, as
Arrangers, Bank of Montreal, as Agent, and the Banks named
therein
4.04 Credit Agreement, dated as of May 19, 1995, among Alumax
Inc., Royal Bank of Canada, as Agent, Arranger and Letter
of Credit Issuer, Canadian Imperial Bank of Commerce, as
Administrative Agent, and the Banks signatory thereto,
filed as Exhibit 4.01 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995 and
incorporated herein by reference
Note: No other long-term debt instrument issued by the Company
exceeds 10% of the consolidated total assets of the
Company and its subsidiaries. In accordance with paragraph
4(iii) of Item 601 of Regulation S-K, the Company will
furnish to the Commission upon request copies of long-term
debt instruments and related agreements
10.01 Form of Alumax Inc. Excess Benefit Plan**~
10.02 1993 Long-Term Incentive Plan (as Amended and Restated and
as Further Amended on October 3, 1996)**~
10.03 Deferred Compensation Plan (as Amended on October 3,
1996)**~
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.04 1993 Annual Incentive Plan (as Amended and Restated and as
Further Amended on October 3, 1996)**~
10.05 Executive Separation Policy*~
10.06 Non-Employee Directors Stock Compensation Plan (as Amended
on October 3, 1996)**~
10.07 Non-Employee Directors Deferred Compensation Plan (as
Amended on October 3, 1996)**~
10.08 Lease Agreement, dated as of November 25, 1986, by and
between Connecticut National Bank as Owner Trustee for the
benefit of U.S. West Capital Corporation under an Owner
Trust Agreement, dated as of November 25, 1986, and Alumax
Mill Products, Inc.
10.09 Facility Purchase Agreement, executed and effective as of
September 18, 1996, among Alumax Mill Products, Inc.,
Fleet National Bank and US WEST Financial Services, Inc.**
10.10 Restated Sales Agreement, dated as of January 1, 1986, as
amended and supplemented as of April 8, 1992 and April 9,
1992, by and between Alcoa of Australia Limited and Alumax
Inc. (Certain portions of this agreement have been deleted
and filed separately with the Secretary of the Securities
and Exchange Commission pursuant to a request for
confidential treatment.)
10.11 Power Sales Agreement, dated September 28, 1995, as amended,
between Intalco Aluminum Corporation and Bonneville Power
Administration (Certain portions of this agreement have
been deleted and filed separately with the Secretary of
the Securities and Exchange Commission pursuant to a
request for confidential treatment.)***
10.12 Power Sales Agreement, dated as of October 1, 1995, between
British Columbia Power Exchange Corporation and Intalco
Aluminum Corporation (Certain portions of this agreement
have been deleted and filed separately with the Secretary
of the Securities and Exchange Commission pursuant to a
request for confidential treatment.)***
10.13 Electric Service Agreement, dated as of July 1, 1993, by and
between Eastalco Aluminum Company and The Potomac Edison
Company*
10.14 Agreement for the Sale of Electric Power and Energy, dated
September 23, 1977, as amended, by and between the South
Carolina Public Service Authority and Alumax of South
Carolina
10.15 Electricity Contract, dated February 1, 1990, as amended on
October 15, 1992, by and between Aluminerie Lauralco, Inc.
and Hydro-Quebec (Certain portions of this agreement have
been deleted and filed separately with the Secretary of
the Securities and Exchange Commission pursuant to a
request for confidential treatment.)
10.16 Employment Agreement, As Amended and Restated as of December
5, 1996, between Alumax Inc. and C. Allen Born**~
10.17 Agreement, dated as of November 15, 1993, as amended as of
February 3, 1994, among AMAX Inc., Alumax Inc. and Helen
M. Feeney*~
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.18 Agreement, dated as of November 15, 1993, as amended as of
February 3, 1994, among AMAX Inc., Alumax Inc. and
Lawrence B. Frost*~
10.19 Agreement, dated as of March 10, 1994, between Alumax Inc.
and Helen M. Feeney, amending the Agreement, dated as of
November 15, 1993, as amended as of February 3, 1994****~
10.20 Agreement, dated as of March 10, 1994, between Alumax Inc.
and Lawrence B. Frost, amending the Agreement, dated as of
November 15, 1993, as amended as of February 3, 1994****~
10.21 Grantor Trust Agreement, dated as of October 10, 1994,
between Alumax Inc. and E. William Smethurst, Jr., filed
as Exhibit 10.24 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference.~
10.22 Stock Purchase Agreement, dated as of October 6, 1995, By
and Among the Shareholders of Cressona Aluminum Company,
as Sellers, and Alumax Inc., as Purchaser*****
10.23 Bridge Loan Agreement, dated as of January 17, 1996, among
Alumax Inc., The Chase Manhattan Bank, N.A., as
Syndication Agent, Royal Bank of Canada, as Documentation
and Administrative Agent, and the Banks signatory
thereto*****
10.24 Acquisition Agreement, dated March 31, 1995, among Eastalco
Aluminum Company, Eastalco Venture, Alumax of Maryland,
Inc. and Alumet Corporation, Atmos (U.S.A.) Incorporated
and Mitalco Inc., filed as Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1995 and incorporated herein by reference.
10.25 Acquisition Agreement, dated as of January 26, 1996, between
Alumax of South Carolina, Inc. and Glencore Primary
Aluminum Company, LLC*****
10.26 Purchase Agreement, dated as of June 24, 1996, between
Euramax International, Ltd. and Alumax Inc., filed as
Exhibit 10.01 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1996 and
incorporated herein by reference.
10.27 Agreement, dated as of June 28, 1996, by and between Minas
Penoles, S.A. de C.V. and The Fresnillo Company, filed as
Exhibit 10.01 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1996 and
incorporated herein by reference.
11.01 Calculation of Earnings per Common Share**
21.01 Subsidiaries of the Company**
23.01 Consent of Coopers & Lybrand L.L.P.**
24.01 Power of Attorney**
27.01 Financial Data Schedule ** (For SEC use only)
</TABLE>
- ---------------
* Previously filed as an exhibit to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.
** Filed herewith.
52
<PAGE> 54
*** Previously filed as an exhibit to Amendment No. 1 to the Company's 1995
Annual Report on Form 10-K/A and incorporated herein by reference.
**** Previously filed as an exhibit to Amendment No. 1 to the Company's 1993
Annual Report on Form 10-K/A and incorporated herein by reference.
***** Previously filed as an exhibit to the Company's 1995 Annual Report on Form
10-K and incorporated herein by reference.
~ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 601 of Regulation S-K.
REPORTS ON FORM 8-K. No Reports on Form 8-K were filed by the Company
during the quarter ended December 31, 1996.
53
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on February 10, 1997.
Alumax Inc.
By /s/ HELEN M. FEENEY
------------------------------------
HELEN M. FEENEY
Vice President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on February 10, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <C>
* Chairman, Chief Executive Officer and Director
- ----------------------------------------------------- (Principal Executive Officer)
ALLEN BORN
* Director
- -----------------------------------------------------
J. DENNIS BONNEY
* Director
- -----------------------------------------------------
HAROLD BROWN
* Director
- -----------------------------------------------------
L. DON BROWN
* Director
- -----------------------------------------------------
PIERRE DES MARAIS II
* Director
- -----------------------------------------------------
JAMES C. HUNTINGTON, JR.
* Director
- -----------------------------------------------------
W. LOEBER LANDAU
* Director
- -----------------------------------------------------
PAUL W. MACAVOY
* Director
- -----------------------------------------------------
GEORGE P. STOE
* Director
- -----------------------------------------------------
ANNE WEXLER
* Senior Vice President and Chief
- ----------------------------------------------------- Financial Officer
LAWRENCE B. FROST (Principal Financial Officer)
* Vice President and Controller
- ----------------------------------------------------- (Principal Accounting Officer)
MICHAEL T. VOLLKOMMER
*By /s/ HELEN M. FEENEY
- -----------------------------------------------------
HELEN M. FEENEY
As Attorney-in-Fact for each
of the persons indicated
</TABLE>
54
<PAGE> 56
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Alumax Inc.
Our report dated January 27, 1997, on our audits of the financial
statements of Alumax Inc. is included on page 29 of this Form 10-K. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed under Item 14 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
January 27, 1997
55
<PAGE> 57
ALUMAX INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------- ------------ ----------------------- --------------- ----------
ADDITIONS
-----------------------
(1) (2)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES EXPENSES FROM RESERVE(A) PERIOD
- ----------- ------------ ---------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Reserves deducted from assets.........
Accounts receivable, trade......... $17.7 $5.2 $ -- $ (6.3) $16.6
Year Ended December 31, 1995
Reserves deducted from assets
Deferred income taxes.............. $13.4 $ -- $ -- $(13.4) $ --
Accounts receivable, trade......... $20.1 $2.7 $ -- $ (5.1) $17.7
Year Ended December 31, 1994
Reserves deducted from assets
Deferred income taxes.............. $13.4 $ -- $ -- $ -- $13.4
Accounts receivable, trade......... $19.1 $4.7 $ -- $ (3.7) $20.1
</TABLE>
- ---------------
(a) 1996 amount includes $4.1 related to write-offs, net of recoveries, and $2.2
related to divestitures, net of acquisitions, which occurred in 1996.
56
<PAGE> 58
EXHIBIT INDEX
Unless otherwise indicated, exhibits are incorporated by reference to
exhibits filed with the Company's Registration Statement on Form S-1 (Commission
File No. 33-69442).
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
2.02 Agreement and Plan of Distribution, dated as of May 24,
1993, by and between AMAX Inc. and Alumax Inc.
2.03 Tax Disaffiliation Agreement, dated as of May 24, 1993, by
and between AMAX Inc. and Alumax Inc.
2.04 Amendment No. 1 to the Agreement and Plan of Distribution,
dated as of November 15, 1993, by and between AMAX Inc.
and Alumax Inc.*
3.01 Restated Certificate of Incorporation of the Company*
3.02 Restated By-laws of Alumax Inc., as amended on September 5,
1996, filed as Exhibit 3.01 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1996 and incorporated herein by reference
4.01 Form of Common Stock Certificate
4.02 Rights Agreement, dated as of February 22, 1996, between
Alumax Inc. and Chemical Mellon Shareholder Services,
L.L.C., as Rights Agent, including as Exhibit A the forms
of Rights Certificate and Election to Exercise and as
Exhibit B the form of Certificate of Designation and Terms
of Participating Preferred Stock of the Company, filed as
Exhibit 4 to the Company's Current Report on Form 8-K,
dated February 22, 1996, and incorporated herein by
reference
4.03 Credit Agreement, dated as of September 14, 1990, as amended
as of November 13, 1990 and as further amended as of
February 19, 1991, by and among Aluminerie Lauralco, Inc.,
as Borrower, Canalco, Inc., as Continuing Guarantor, and
Bank of Montreal and National Westminster Bank PLC, as
Arrangers, Bank of Montreal, as Agent, and the Banks named
therein
4.04 Credit Agreement, dated as of May 19, 1995, among Alumax
Inc., Royal Bank of Canada, as Agent, Arranger and Letter
of Credit Issuer, Canadian Imperial Bank of Commerce, as
Administrative Agent, and the Banks signatory thereto,
filed as Exhibit 4.01 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995 and
incorporated herein by reference
Note: No other long-term debt instrument issued by the Company
exceeds 10% of the consolidated total assets of the
Company and its subsidiaries. In accordance with paragraph
4(iii) of Item 601 of Regulation S-K,
the Company will furnish to the Commission upon request
copies of long-term debt instruments and related
agreements
10.01 Form of Alumax Inc. Excess Benefit Plan**~
10.02 1993 Long-Term Incentive Plan (as Amended and Restated and
as Further Amended on October 3, 1996)**~
10.03 Deferred Compensation Plan (as Amended on October 3,
1996)**~
10.04 1993 Annual Incentive Plan (as Amended and Restated and as
Further Amended on October 3, 1996)**~
10.05 Executive Separation Policy*~
10.06 Non-Employee Directors Stock Compensation Plan (as Amended
on October 3, 1996)**~
10.07 Non-Employee Directors Deferred Compensation Plan (as
Amended on October 3, 1996)**~
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.08 Lease Agreement, dated as of November 25, 1986, by and
between Connecticut National Bank as Owner Trustee for the
benefit of U.S. West Capital Corporation under an Owner
Trust Agreement, dated as of November 25, 1986, and Alumax
Mill Products, Inc.
10.09 Facility Purchase Agreement, executed and effective as of
September 18, 1996, among Alumax Mill Products, Inc.,
Fleet National Bank and US WEST Financial Services, Inc.**
10.10 Restated Sales Agreement, dated as of January 1, 1986, as
amended and supplemented as of April 8, 1992 and April 9,
1992, by and between Alcoa of Australia Limited and Alumax
Inc. (Certain portions of this agreement have been deleted
and filed separately with the Secretary of the Securities
and Exchange Commission pursuant to a request for
confidential treatment.)
10.11 Power Sales Agreement, dated September 28, 1995, as amended,
between Intalco Aluminum Corporation and Bonneville Power
Administration (Certain portions of this agreement have
been deleted and filed separately with the Secretary of
the Securities and Exchange Commission pursuant to a
request for confidential treatment.)***
10.12 Power Sales Agreement, dated as of October 1, 1995, between
British Columbia Power Exchange Corporation and Intalco
Aluminum Corporation (Certain portions of this agreement
have been deleted and filed separately with the Secretary
of the Securities and Exchange Commission pursuant to a
request for confidential treatment.)***
10.13 Electric Service Agreement, dated as of July 1, 1993, by and
between Eastalco Aluminum Company and The Potomac Edison
Company*
10.14 Agreement for the Sale of Electric Power and Energy, dated
September 23, 1977, as amended, by and between the South
Carolina Public Service Authority and Alumax of South
Carolina
10.15 Electricity Contract, dated February 1, 1990, as amended on
October 15, 1992, by and between Aluminerie Lauralco, Inc.
and Hydro-Quebec (Certain portions of this agreement have
been deleted and filed separately with the Secretary of
the Securities and Exchange Commission pursuant to a
request for confidential treatment.)
10.16 Employment Agreement, As Amended and Restated as of December
5, 1996 between Alumax Inc. and C. Allen Born**~
10.17 Agreement, dated as of November 15, 1993, as amended as of
February 3, 1994, among AMAX Inc., Alumax Inc. and Helen
M. Feeney*~
10.18 Agreement, dated as of November 15, 1993, as amended as of
February 3, 1994, among AMAX Inc., Alumax Inc. and
Lawrence B. Frost*~
10.19 Agreement, dated as of March 10, 1994, between Alumax Inc.
and Helen M. Feeney, amending the Agreement, dated as of
November 15, 1993, as amended as of February 3, 1994****~
10.20 Agreement, dated as of March 10, 1994, between Alumax Inc.
and Lawrence B. Frost, amending the Agreement, dated as of
November 15, 1993, as amended as of February 3, 1994****~
10.21 Grantor Trust Agreement, dated as of October 10, 1994,
between Alumax Inc. and E. William Smethurst, Jr., filed
as Exhibit 10.24 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference~
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.22 Stock Purchase Agreement, dated as of October 6, 1995, By
and Among the Shareholders of Cressona Aluminum Company,
as Sellers, and Alumax Inc., as Purchaser*****
10.23 Bridge Loan Agreement, dated as of January 17, 1996, among
Alumax Inc., The Chase Manhattan Bank, N.A., as
Syndication Agent, Royal Bank of Canada, as Documentation
and Administrative Agent, and the Banks signatory
thereto*****
10.24 Acquisition Agreement, dated March 31, 1995, among Eastalco
Aluminum Company, Eastalco Venture, Alumax of Maryland,
Inc. and Alumet Corporation, Atmos (U.S.A.) Incorporated
and Mitalco Inc., filed as Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1995 and incorporated herein by reference.
10.25 Acquisition Agreement, dated as of January 26, 1996, between
Alumax of South Carolina, Inc. and Glencore Primary
Aluminum Company, LLC*****
10.26 Purchase Agreement, dated as of June 24, 1996, between
Euramax International, Ltd. and Alumax Inc., filed as
Exhibit 10.01 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1996 and
incorporated herein by reference.
10.27 Agreement, dated as of June 28, 1996, by and between Minas
Penoles, S.A. de C.V. and The Fresnillo Company, filed as
Exhibit 10.01 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1996 and
incorporated herein by reference.
11.01 Calculation of Earnings per Common Share**
21.01 Subsidiaries of the Company**
23.01 Consent of Coopers & Lybrand L.L.P.**
24.01 Power of Attorney**
27.01 Financial Data Schedule** (For SEC use only)
</TABLE>
- ---------------
* Previously filed as an exhibit to the Company's 1993 Annual Report on
Form 10-K and incorporated herein by reference.
** Filed herewith.
*** Previously filed as an exhibit to Amendment No. 1 to the Company's 1995
Annual Report on Form 10-K/A and incorporated herein by reference.
**** Previously filed as an exhibit to Amendment No. 1 to the Company's 1993
Annual Report on Form 10-K/A and incorporated herein by reference.
***** Previously filed as an exhibit to the Company's 1995 Annual Report on Form
10-K and incorporated herein by reference.
~ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 601 of Regulation S-K.
<PAGE> 1
EXHIBIT 10.01
ALUMAX INC.
EXCESS BENEFIT PLAN
Effective as of November 15, 1993
and as Amended on August 3, 1995
<PAGE> 2
ALUMAX INC.
EXCESS BENEFIT PLAN
TABLE OF CONTENTS
PAGE
ARTICLE I
ESTABLISHMENT OF PLAN
..........................................................................1
ARTICLE 2
DEFINITIONS
Account...................................................................2
Beneficial Owner..........................................................2
Beneficiary...............................................................2
Board.....................................................................3
Change in Control.........................................................3
Code......................................................................5
Committee.................................................................5
Company Contribution......................................................5
Compensation..............................................................5
Effective Date............................................................5
Participant...............................................................6
Participant Account.......................................................6
Participant Contribution..................................................6
Plan......................................................................6
Plan Year.................................................................6
Prior Plan................................................................6
Retirement Plan...........................................................6
Thrift Plan...............................................................7
Valuation Date............................................................7
ARTICLE 3
PARTICIPATION
3.01 Participation in Excess Thrift Plan Benefits......................8
3.02 Participation in Excess Retirement Plan Benefits..................8
ARTICLE 4
EXCESS THRIFT PLAN BENEFITS
4.01 Participant Accounts..............................................9
4.02 Participant Contributions.........................................9
4.03 Company Contributions.............................................9
4.04 Vesting..........................................................10
4.05 Payment of Benefits..............................................10
4.06 Timing of Distributions..........................................11
<PAGE> 3
ARTICLE 5
EXCESS RETIREMENT PLAN BENEFITS
5.01 Accrual of Retirement Benefits...................................12
5.02 Surviving Spouse and Child Benefits..............................12
5.03 Vesting..........................................................12
5.04 Payment of Benefits..............................................12
5.05 Changes in Beneficiaries.........................................13
ARTICLE 6
GENERAL PROVISIONS
6.01 Funding..........................................................14
6.02 Modification, Amendment, Etc.....................................14
6.03 Termination and Discontinuance...................................14
6.04 Administration and Interpretation................................15
6.05 Appointment of Subcommittees.....................................15
6.06 No Contract of Employment........................................15
6.07 Facility of Payment..............................................15
6.08 Withholding of Taxes.............................................15
6.09 Nonalienation....................................................16
6.10 Construction.....................................................16
6.11 Defined Terms....................................................16
- ii -
<PAGE> 4
ALUMAX INC.
EXCESS BENEFIT PLAN
ARTICLE 1
ESTABLISHMENT OF PLAN
Alumax Inc. hereby establishes, effective as of November 15, 1993, a
deferred compensation plan which shall be known as the Alumax Inc. Excess
Benefit Plan. The purpose of the Plan is to provide pension benefits for those
employees whose retirement benefits and contributions under the Retirement Plan
For Salaried Employees of Alumax Inc. and its Subsidiaries (hereinafter the
"Retirement Plan") and the Alumax Inc. Thrift Plan For Salaried Employees
(hereinafter the "Thrift Plan") are reduced because of the non-discrimination
requirements of Sections 401(a)(4) and 410(b) of the Internal Revenue Code and
limitations imposed by Sections 401(a)(17) and 415 of the Internal Revenue
Code.
Upon the Effective Date, the liability for accrued benefits under the
AMAX Inc. Excess Benefit Plan (the "Prior Plan") corresponding to the interests
of employees of the Company (excluding former employees of AMAX Inc. who become
employees of the Company and whose accrued benefits under the Prior Plan are
paid out by AMAX Inc.) will be transferred to and assumed by the Plan.
Participants shall receive credit for all service recognized under the Prior
Plan, and accrued benefits under the Prior Plan shall become such Participants'
accrued benefits under this Plan except to the extent of any accrued
benefits under the Prior Plan that are paid out by AMAX Inc.
The Company intends that the benefits provided pursuant to the Plan shall
be unfunded and that no Participant's rights to benefits under the Plan shall
be greater than the rights of unsecured general creditors of the Company.
However, nothing herein shall prevent the Company from establishing appropriate
bookkeeping reserves (which are required herein), trust accounts, life insurance
contracts, or other funding and accounting mechanisms to discharge the Company's
obligations under the Plan provided that such funding or bookkeeping mechanisms
do not create rights for Plan Participants which will result in constructive
receipt of Plan benefits for income tax purposes or will cause the Plan not to
be deemed unfunded under Sections 4(a)(5) or 401(a)(1) of the Employee
Retirement Income Security Act of 1974 ("ERISA").
<PAGE> 5
ARTICLE 2
DEFINITIONS
Certain terms of this Plan have defined meanings which are set forth in
this Article and which shall govern unless the context in which they are used
clearly indicates that some other meaning is intended.
Account shall mean a bookkeeping account maintained by the Company to
which shall be credited contributions and adjusted as provided in Article 4.
Beneficial Owner, with respect to any securities, shall mean any person
who, directly or indirectly, has or shares the right to vote or dispose of such
securities or otherwise has "beneficial ownership" of such securities (within
the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on
February 1, 1991 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), including pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that (i) a
person shall not be deemed the Beneficial Owner of any security as a result of
any agreement, arrangement or understanding to vote such security (x) arising
solely from a revocable proxy or consent solicited pursuant to, and in
accordance with, the applicable provisions of the Exchange Act and the rules
and regulations thereunder or (y) made in connection with, or otherwise to
participate in, a proxy or consent solicitation made, or to be made, pursuant
to, and in accordance with, the applicable provisions of the Exchange Act and
the rules and regulations thereunder, in either case described in clause (x) or
clause (y) above whether or not such agreement, arrangement or understanding is
also then reportable by such person on Schedule 13D under the Exchange Act (or
any comparable or successor report), and (ii) a person engaged in business as
an underwriter or securities shall not be deemed to be the Beneficial Owner of
any securities acquired through such person's participation in good faith in a
firm commitment underwriting until the expiration of forty days after the date
of such acquisition.
Beneficiary shall mean any person or persons designated by a Participant
on a form provided by the Committee to receive benefits hereunder in the event
of the Participant's death. If any Participant shall fail to designate a
Beneficiary or shall designate a Beneficiary who shall fail to survive the
Participant, the Beneficiary shall be beneficiary designated under the Thrift
Plan for the benefits described in Article 4 and the Retirement Plan for the
benefits described in Article 5. If no surviving Beneficiary has been
designated under the Thrift or Retirement Plans, the Beneficiary shall be the
Participant's estate.
- 2 -
<PAGE> 6
Board shall mean the Board of Directors of Alumax Inc.
Change in Control shall mean the occurrence of any of the following
events:
(a) any person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or more
of the combined voting power of the Company's then outstanding
securities (a "20% Beneficial Owner"), provided, however, that (i)
the term "20% Beneficial Owner" shall not include any Beneficial
Owner who has crossed such 20% threshold solely as a result of an
acquisition of securities directly from the Company, or solely as
a result of an acquisition by the Company of Company securities,
until such time thereafter as such person acquires additional
voting securities other than directly from the Company and, after
giving effect to such acquisition, such person would constitute a
20% Beneficial Owner; and (ii) with respect to any person eligible
to file a Schedule 13G pursuant to Rule 13d-1(b)(1) under the
Exchange Act with respect to Company securities (an "Institutional
Investor"), there shall be excluded from the number of securities
deemed to be beneficially owned by such person a number of
securities representing not more than 10% of the combined voting
power of the Company's then outstanding securities;
(b) during any period of two consecutive years beginning after
November 15, 1993, individuals who at the beginning of such period
constitute the Board of Directors of the Company together with
those individuals who first become Directors during such period
(other than by reason of an agreement with the Company in
settlement of a proxy contest for the election of directors) and
whose election or nomination for election to the Board was
approved by a vote of at least two thirds (2/3) of the Directors
then still in office who either were Directors at the beginning of
the period or whose election or nomination for election was
previously so approved (the "Continuing Directors") cease for any
reason to constitute a majority of the Board of Directors of the
Company;
(c) the stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, or a reverse
stock split of any class of voting securities of the Company, or
the consummation of any such transaction if stockholder approval
is not obtained, other than any such
- 3 -
<PAGE> 7
transaction which would result in at least 75% of the total voting
power represented by the voting securities of the Company or the
surviving entity outstanding immediately after such transaction
being beneficially owned by persons who together owned at
least 75% of the combined voting power of the voting securities of
the Company outstanding immediately prior to such transaction,
with the relative voting power of each such continuing holder
compared to the voting power of each other continuing holder not
substantially altered as a result of the transaction; provided
that, for purposes of this paragraph (c), such continuity of
ownership (and preservation of relative voting power) shall be
deemed to be satisfied if the failure to meet such 75% threshold
(or to preserve such relative voting power) is due solely to the
acquisition of voting securities by an employee benefit plan of
the Company or such surviving entity or of any subsidiary of the
Company or such surviving entity;
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the
sale or disposition of all or substantially all the assets of the
Company; or
(e) any other event which the Board of Directors of the Company
determines shall constitute a change in Control for purposes of
this Plan;
provided, however, that a Change in Control shall not be deemed to have
occurred if one of the following exceptions applies:
(1) unless a majority of the Continuing Directors of the Company
determines that the exception set forth in this paragraph (1)
shall not apply, none of the foregoing conditions would have been
satisfied but for one or more of the following persons acquiring
or otherwise becoming the Beneficial Owner of securities of the
Company:
(A) any person who has entered into a binding agreement with
the Company, which agreement has been approved by
two-thirds (2/3) of the Continuing Directors, limiting the
acquisition of additional voting securities by such person,
the solicitation of proxies by such person or proposals by
such person concerning a business combination with the
Company (a "Standstill Agreement");
- 4 -
<PAGE> 8
(B) any employee benefit plan, or trustee or other fiduciary
thereof, maintained by the Company or any subsidiary of the
Company;
(C) any subsidiary of the Company; or
(D) the Company.
(2) Unless a majority of the Continuing Directors of the Company
determines that the exception set forth in this paragraph (2)
shall not apply, none of the foregoing conditions would have been
satisfied but for the acquisition by the Company of another entity
(whether by merger or consolidation, acquisition of stock or
assets, or otherwise) in exchange, in whole or in part, for
securities of the Company provided that, immediately following
such acquisition, the Continuing Directors constitute a majority
of the Board of Directors of the Company, or a majority of the
board of directors of any other surviving entity, and, in either
case, no agreement, arrangement or understanding exists at that
time which would cause such Continuing Directors to cease
thereafter to constitute a majority of the Board of Directors or
of such other board of directors.
Notwithstanding the foregoing, unless a majority of the Continuing
Directors determines otherwise, no Change in Control shall be deemed to have
occurred with respect to a particular Participant under this Plan if the Change
in Control results from actions or events in which such Participant is a
participant in a capacity other than solely as an officer, employee or director
of the Company.
Code shall mean the Internal Revenue Code of 1986, as amended.
Committee shall mean the Retirement Plan Committee designated in the
Retirement Plan.
Company shall mean Alumax Inc. and any affiliated company designated by
the Board whose employees are eligible to participate in the Plan.
Company Contribution shall mean the contribution made by the Company
described in section 4.03.
Compensation shall mean, for the purposes of Article 4, a Participant's
compensation as defined in the Thrift Plan and, for purposes of Article 5, a
Participant's compensation as defined under the Retirement Plan, both determined
without regard to the limitation imposed by Code Section 401(a)(17).
- 5 -
<PAGE> 9
Effective Date shall mean November 15, 1993.
Participant shall mean each participant in the Thrift Plan whose annual
additions (as defined in Code Section 415(c)(2)) in any Plan Year exceed (or
would exceed) the limitations imposed by Code Sections 415 (c)(1) or 415(e) or
whose contributions to the Thrift Plan are limited by reason of Code Section
401(a)(17) of the Code. In addition, Participant shall mean each participant
in the Retirement Plan whose annual benefit during a Plan Year exceeds the
limitations imposed by Code Sections 415(b) or 415(e) or whose benefit is
limited during such Plan Years by reason of Code Section 401(a)(17). To the
extent not otherwise described above, "Participant" shall also mean any
employee of the Company who participated in the Prior Plan.
Participant Account shall have the meaning set forth in Section 4.01
hereof.
Participant Contribution shall mean the amount of compensation the
receipt of which a Participant elects to defer and instead have credited to
the Participant's Account pursuant to Article 3 hereof, which election must be
made prior to the beginning of the period during which the compensation is
earned and for which amounts are contributed. A Participant shall not be
entitled to have a Participant Contribution made on his behalf for any Plan
Year unless (i) the Participant is precluded under Code Section 415 from making
the maximum permissible contribution under Section 4.01 of the Thrift Plan for
that Plan Year, or (ii) the Participant's compensation for determining the
contributions under Section 4.01 of the Thrift Plan is reduced by reason of
Code Section 401(a)(17). However, the maximum Participant Contribution the
Participant can make for the Plan Year shall be the difference between (x) 6%
of the Participant's compensation (within the meaning of Article 2 of the
Thrift Plan, but without regard to the limitation imposed by Code Section
401(a)(17) for the Plan Year), and (y) the Participant's actual contributions
for the Plan Year made pursuant to Section 4.01 of the Thrift Plan, except that
actual contributions made by a Participant in excess of 6% of the Participant's
Compensation (as defined in the Thrift Plan) shall be disregarded for this
purpose.
Plan shall mean the Alumax Inc. Excess Benefit Plan as set forth in
this document together with any subsequent amendments hereto.
Plan Year shall mean the calendar year.
Prior Plan shall have the meaning set forth in Article 1 hereof.
Retirement Plan shall mean the Retirement Plan For Salaried Employees
of Alumax Inc. and its Subsidiaries
- 6 -
<PAGE> 10
effective as of November 15, 1993 and as amended from time to time thereafter.
Thrift Plan shall mean the Alumax Inc. Thrift Plan For Salaried
Employees as effective November 15, 1993 and as amended from time to time
thereafter.
Valuation Date shall mean, for the purposes of Article 4, the Valuation
Date under the Thrift Plan and, for purposes of Article 5 the date of the
annual actuarial valuation under the Retirement Plan. Valuation Date shall
also mean such other dates as the Committee determines are necessary or
appropriate, to value the Accounts or accrued benefits of Participants
hereunder.
- 7 -
<PAGE> 11
ARTICLE 3
PARTICIPATION
3.01 Participation in Excess Thrift Plan Benefits
Prior to the beginning of each Plan Year, the Committee shall
provide to each Participant who is a participant in the Thrift Plan and
whose additions or contributions under the Thrift Plan are limited as a
result of the application of Code Sections 401(a)(17) or 415 with an
election form upon which the Participant may elect to make a Participant
Contribution. A Participant may make a Participant Contribution by
means of payroll deduction in any whole percentage of not less than 1%
nor more than 6% of the Participant's Compensation during any pay
period.
Such election shall remain in effect for the Plan Year or until revoked
by the Participant if sooner. Once revoked, a Participant may not make
a Participant Contribution to the Plan until the beginning of the next
Plan Year.
3.02 Participation in Excess Retirement Plan Benefits
Any Participant who is a participant in the Retirement Plan and
whose benefits under the Retirement Plan are limited as a result of the
exceptions applicable to certain Flight Crew Employees who are highly
compensated employees (within the meaning of Code Section 414(q)) under
Sections 1.27 and 3.02 of the Retirement Plan and the application of
Code Sections 401(a)(17) or 415 shall commence participation in this
Plan effective as of the first day of the Plan Year during which any
such limitation first applies.
- 8 -
<PAGE> 12
ARTICLE 4
EXCESS THRIFT PLAN BENEFITS
4.01 Participant Accounts
The Committee shall establish an Account for each Participant
(a "Participant Account") which shall be credited with the
Participant's Contributions, the Company Contributions and all
adjustments thereto.
4.02 Participant Contributions
All Participant Contributions made by a Participant since the
preceding Valuation Date shall be credited to the Participant's Account
as of each Valuation Date. Thereafter, the Participant's Contribution
Account shall be adjusted on each Valuation Date by the Committee to
reflect the income or loss that would have been credited under the
Thrift Plan had the Participant's Contributions been made thereunder.
4.03 Company Contributions
(a) Matching of Participant Contributions
On each Valuation Date, the Participant's Account shall
be credited with a Company Contribution determined as follows:
The Participant's Contributions under this Plan shall
be multiplied by 75% and the product shall be the Employer
Contribution as of each Valuation Date. In addition, in the
event that a Participant made the maximum permitted Pre-Tax
Contribution to the Thrift Plan and made no after-tax
contributions to the Thrift Plan, the match on the Participant's
Pre-Tax Contributions not matched under the Thrift Plan shall
be made hereunder and the amount of such unmatched Thrift Plan
contributions shall reduce the amount of Participant
Contributions hereunder.
The Company Contribution determined above shall be
adjusted as of each subsequent Valuation Date in accordance
with rules established by the Committee to reflect the income
or loss that would have been credited if the Employer
Contribution had been credited to the Participant's Employer
Matching Contribution Account pursuant to Section 4.02 of the
Thrift Plan on each Valuation Date.
(b) Matching of Thrift Plan Contributions
As of each Valuation Date, the Company shall credit
each Participant's Account with the amount by which the
Participant's Employer Matching Contribution Account under the
Thrift Plan is reduced on such Valuation Date to comply with
the requirements of Code Section 415. This Company Contribution
shall be adjusted as of each subsequent Valuation Date in
- 9 -
<PAGE> 13
accordance with rules established by the Committee to reflect
the income or loss that would have been credited if the
employer matching contributions had been credited to the
Participant's Account under the Thrift Plan on the Valuation
Dates specified in the Thrift Plan.
4.04 Vesting
A Participant's Account shall become nonforfeitable as follows:
(a) Contributions by Participants shall be nonforfeitable at all
times.
(b) Company Contributions shall become nonforfeitable in accordance
with the Vesting Schedule and Vesting Service rules set
forth in the Thrift Plan or upon retirement with the Company's
consent, if earlier. For this purpose, Participants shall
receive credit for Vesting Service prior to the Effective Date.
(c) Company Contributions shall become nonforfeitable as of the
date of a Change in Control.
Nothing in this Section shall be deemed to confer upon any
Participant rights greater than those of an unsecured general creditor
of the Company to payment of benefits hereunder.
4.05 Payment of Benefits
A Participant shall be entitled to receive payment of his Plan Account
from the Company as follows:
(a) Upon the Participant's retirement with the consent of the
Company, the Participant shall receive a single lump sum
payment equal to his Participant Account valued as of a
Valuation Date selected by the Committee, which shall be no
earlier than the Valuation Date immediately preceding or
coinciding with the Participant's Retirement Date and no later
than the date of distribution.
(b) In the event of the death of a Participant while employed by
the Company, the Participant's Account shall be paid to the
Participant's Beneficiary in a single lump sum. The
Participant's Account shall be valued as of a Valuation Date
selected by the Committee which shall be no earlier than the
Valuation Date preceding or coinciding with the Participant's
death and no later then the date of distribution.
- 10 -
<PAGE> 14
(c) In the event of the Participant's termination of employment
with the Company for reasons other than retirement
(with consent) or death, the Participant shall be entitled to
receive a distribution of the vested portion of his Account in
a single lump sum payment. The Participant's Account shall be
valued as of the Valuation Date immediately preceding or
coinciding with his termination of employment.
(d) Upon the occurrence of a Change in Control, each Participant
shall be entitled to receive a distribution of his
Participant Account in a single lump sum payment. Each
Participant's Account shall be valued as of the date of the
Change in Control or the Valuation Date coinciding with or
immediately preceding the date of distribution, whichever
produces the greater Account value.
4.06 Timing of Distributions
The Company shall make payment to a Participant becoming
entitled to receive a distribution of Plan benefits as soon as in
administratively feasible, but in no event later than 30 days after the
event entitling the Participant to payment.
- 11 -
<PAGE> 15
ARTICLE 5
EXCESS RETIREMENT PLAN BENEFITS
5.01 Accrual of Retirement Benefits
A Participant shall accrue, during each Plan Year, a benefit under the
Plan expressed as a monthly payment for the life of the Participant
commencing on the Participant's Normal Retirement Date under the
Retirement Plan. The benefit accrued under this Plan shall be equal
to the excess of (i) the Participant's Accrued Benefit under the
Retirement Plan for the Plan Year determined without regard to the
exceptions applicable to certain Flight Crew Employees who are highly
compensated employees (within the meaning of Code Section 414(q))
under Sections 1.27 and 3.02(e) of the Retirement Plan and Code
Sections 401(a)(17) or 415 over (ii) the Accrued Benefit under the
Retirement Plan for the Plan Year. A Participant also shall be
credited with any benefits accrued under the Prior Plan.
5.02 Surviving Spouse and Child Benefits
Each Plan Year a Participant shall accrue a surviving spouse and child
benefit under this Plan equal to the excess of the Surviving Spouse And
Child Allowance which would accrue under Section 4.05 of the Retirement
Plan for the Plan Year without regard to the exceptions applicable to
certain Flight Crew Employees who are highly compensated employees
(within the meaning of Code Section 414(q)) under Sections 1.29 and
3.02(e) of the Retirement Plan and the limitations of Code Sections
401(a)(17) and 415 over the Surviving Spouse And Child Allowance
actually accrued under the Retirement Plan for the Plan Year.
5.03 Vesting
Each Participant's Retirement and surviving spouse and child benefits
shall be nonforfeitable under this Plan to the extent the Participant's
accrued benefit is nonforfeitable under the Retirement Plan. However,
all Participants' retirement and surviving spouse benefits shall become
nonforfeitable upon a Change in Control regardless of whether such
benefits are nonforfeitable under the Retirement Plan.
5.04 Payment of Benefits
(a) Upon a Participant's termination of employment with the
Company, the Company shall commence payment to the Participant
of Excess Retirement Plan benefits accrued hereunder in the
same form and at the same time as the Participant receives
his Retirement Allowance under the Retirement Plan. To the
extent that the Participant's Retirement Income under the
Retirement Plan is subject to actuarial or other adjustment to
reflect the timing of commencement or form of benefit payment,
the Participant's benefit under this Plan shall be subject to
the same
- 12 -
<PAGE> 16
adjustments applied on the basis of the same actuarial
assumptions.
(b) In the event that a Participant dies while employed by the
Company, the Company shall pay to the Participant's surviving
spouse or child the surviving spouse and child benefits accrued
hereunder in the same form and at the same time as the surviving
spouse or child receives his Surviving Spouse And Child Allowance
under the Retirement Plan. To the extent that the Surviving
Spouse And Child Allowance is subject to actuarial or other
adjustments to reflect the time of commencement or form of benefit
payment under the Retirement Plan, the Participant's benefit under
this Plan shall be subject to the same adjustments applied on the
basis of the same actuarial assumptions.
(c) If the lump sum value of the benefits payable to a Participant or
his Beneficiary, determined in accordance with the actuarial
assumptions specified in the Retirement Plan, is less than
$50,000, then such lump sum amount shall be paid to such
Participant or Beneficiary as soon as administratively feasible
but in no event more than 30 days after the date such benefits
would otherwise have commenced.
5.05 Changes in Beneficiaries
A Participant who elects a survivor annuity may change his Beneficiary at
any time prior to his death. However, payments to the new Beneficiary
shall be made in the amount and for the life expectancy (determined at
the commencement of payments to the Participant) of the Beneficiary named
by the Participant at the time payments to the Participant commenced
hereunder. The Committee may, in its discretion, permit a Beneficiary to
elect to receive a lump sum distribution of payments hereunder,
determined in accordance with the actuarial assumptions specified in the
Retirement Plan.
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<PAGE> 17
ARTICLE 6
GENERAL PROVISIONS
6.01 Funding
All amounts payable in accordance with this Plan shall constitute a
contractual general unsecured obligation of the Company. Such amounts,
as well as any administrative costs relating to the Plan, shall be paid
out of the general assets of the Company. The amounts provided by this
Plan shall be paid from each Company's general assets or by such other
means as the Company deems advisable. A Participant shall have no title
to or beneficial interest in any assets set aside or acquired by a
Company to fund its obligations hereunder prior to its due date and to
the extent a Participant acquires the right to receive a payment from the
Company under this Plan, such right shall be no greater than that of an
unsecured general creditor of the Company.
6.02 Modification, Amendment, Etc.
The Board of Directors reserves the right to modify, amend in whole or in
part, discontinue benefit accrual under, or terminate the Plan at any
time. However, no modification or amendment shall be made to Section
6.03 and no modification, discontinuance, amendment or termination shall
adversely affect the right of any Participant to receive the benefits
accrued and the balance to the credit of such Participant's Account as of
the date of such modification, discontinuance, amendment or termination,
or the timing of receipt of such benefits.
6.03 Termination and Discontinuance
If the Company terminates the Plan, Participants shall continue to vest
in their accrued benefits and their Accounts in accordance with Sections
4.04 and 5.03, and benefits under the Plan shall be paid in the manner
and at the times indicated in Articles 4 and 5, unless the Board of
Directors determines, in its sole and absolute discretion, that
Participants will be fully vested in their Accounts, in which case
benefits under the Plan shall be paid within 30 days of such
determination. If benefit accruals have been discontinued under the
Plan, the Company may recommence such accruals at any time by appropriate
action.
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<PAGE> 18
6.04 Administration and Interpretation
The Committee shall have sole power and authority to construe, interpret
and administer the Plan. Any interpretation of the Plan by the Committee
or any administrative act by the Committee shall be final and binding on
all Participants. All rules relating to the conduct of business by the
Committee under the Retirement and Thrift Plans shall also apply to the
Committee in administering this Plan.
6.05 Appointment of Subcommittees
The members of the Committee may appoint from their number such
committees with such powers as they shall determine, may authorize one or
more of their number or any agent to execute or deliver any instrument or
instruments on their behalf, and may employ such counsel, agents and
other services as they may require in carrying out their duties. The
Committee shall, from time to time, maintain or cause to be maintained
all records which it shall deem necessary for purposes of the Plan.
6.06 No Contract of Employment
The establishment of the Plan shall not be construed as conferring any
legal rights upon any person for a continuation of employment, nor shall
it interfere with the rights of the Company to discharge any employee
and to treat him without regard to the effect which such treatment might
have upon him as a Participant in the Plan.
6.07 Facility of Payment
In the event that the Committee shall find that a Participant is unable
to care for his affairs because of illness or accident, the Committee
may direct that any benefit payment due him, unless claim shall have
been made therefor by a duly appointed legal representative, be paid to
his spouse, a child, a parent or other blood relative, or to a person
with whom he resides, and any such payment so made shall be a complete
discharge of the liabilities of the Company and the Plan therefor.
6.08 Withholding of Taxes
The Company shall deduct from each payment to be made under the Plan and
the Trust such income or other taxes as are required to be withheld
under applicable law.
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<PAGE> 19
6.09 Nonalienation
No benefit under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge,
and any attempt to do so by any Participant or creditor thereof shall be
void, nor shall any such benefit be in any manner liable for or subject
to garnishment, attachment, execution or levy, or liable for or subject
to the debts, contracts, liabilities, engagements or torts of a
Participant.
6.10 Construction
(a) The Plan shall be construed, regulated and administered under the
laws of the State of Georgia to the extent not preempted by ERISA
or other federal law.
(b) When used herein, the masculine pronoun shall include the feminine
pronoun, and the singular shall include the plural, where
appropriate.
6.11 Defined Terms
Capitalized terms which are not otherwise defined in this Plan shall
have the same meaning as set forth in the Thrift Plan and the
Retirement Plan.
IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed
and its seal to be hereunto affixed on the date indicated below, but effective
as of November 15, 1993.
ALUMAX, INC.
By: /s/ John A. Brader
--------------------------------
[CORPORATE SEAL] Title: Vice President
-----------------------------
Attest: Date: 12-27-93
------------------------ -------------------------------
PARTICIPATING COMPANIES
[List]
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<PAGE> 1
EXHIBIT 10.02
ALUMAX INC.
- --------------------------------------------------------------------------------
1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED
AS FURTHER AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
ALUMAX INC.
- --------------------------------------------------------------------------------
1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED
AS FURTHER AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
Page
1. Purpose........................................................ 1
2. Definitions.................................................... 1
3. Administration................................................. 3
a. Authority of the Committee................................ 3
b. Manner of Exercise of Committee Authority................. 3
c. Limitation of Liability................................... 3
d. Performance-Based Awards to "Designated Participants"..... 3
4. Stock Subject to Plan.......................................... 4
5. Eligibility.................................................... 4
6. Specific Terms of Awards....................................... 4
a. General................................................... 4
b. Options................................................... 5
c. Stock Appreciation Rights................................. 5
d. Restricted Stock.......................................... 6
e. Deferred Stock (Restricted Stock Units)................... 7
f. Bonus Stock and Awards in Lieu of Cash Obligations........ 7
g. Dividend Equivalents...................................... 7
h. Other Stock-Based Awards.................................. 8
i. Performance Awards........................................ 8
7. Certain Provisions Applicable to Awards........................ 9
a. Stand-Alone, Additional, Tandem and Substitute Awards..... 9
b. Performance Conditions.................................... 10
c. Term of Awards............................................ 10
d. Form of Payment Under Awards; Deferrals................... 10
e. Rule 16b-3 Compliance..................................... 10
8. Change in Control.............................................. 11
a. Definition of "Change in Control"......................... 11
b. Definition of "Change in Control Stock Value"............. 13
c. Definition of "Change in Control Settlement Value"........ 14
d. Acceleration and Cash-Out Upon a Change in Control........ 14
e. No Non-Exempt Section 16(b) Purchases Triggered........... 15
<PAGE> 3
ALUMAX INC.
- --------------------------------------------------------------------------------
1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED
AS FURTHER AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
Page
9. General Provisions............................................. 15
a. Compliance With Legal and Other Requirements............. 15
b. Limits on Transferability; Beneficiaries................. 15
c. Adjustments.............................................. 16
d. Taxes.................................................... 16
e. Changes to the Plan and Awards........................... 16
f. Limitation on Rights Conferred Under Plan................ 17
g. Unfunded Status of Awards; Creation of Trusts............ 17
h. Nonexclusivity of the Plan............................... 17
i. Payments in the Event of Forfeitures; Fractional Shares.. 17
j. Governing Law; Arbitration............................... 17
k. Effective Date; Plan Termination......................... 18
<PAGE> 4
ALUMAX INC.
1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED
1. Purpose. The purpose of this 1993 Long Term Incentive Plan as
Amended and Restated (the "Plan") is to assist Alumax Inc. (the "Company") and
its subsidiaries in attracting, retaining, and rewarding high caliber employees,
enabling such employees to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such employees
and the Company's stockholders, and providing such employees with performance
incentives to expend their maximum efforts in the creation of long term
shareholder value.
2. Definitions. The definitions of awards under the Plan, including
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock
granted as a bonus or in lieu of other awards, Dividend Equivalents, Other
Stock-Based Awards and Performance Awards, are set forth in Section 6 of the
Plan. Such awards, together with any other right or interest granted to a
Participant under the Plan, are termed "Awards." The definitions of terms
relating to a Change in Control of the Company are set forth in Section 8 of the
Plan.
For purposes of the Plan, the following additional terms shall be
defined as set forth below:
(a) "Board" means the Company's Board of Directors.
(b) "Beneficiary" with respect to members of the Executive
Group means the person, persons, trust or trusts which have been
designated by the Participant in his or her most recent written
beneficiary designation filed with the Company to receive the benefits
specified under this Plan in the event of the Participant's death;
Beneficiary with respect to all other Participants shall mean the
person, persons, trust or trusts which have been designated by the
Participant in his or her most recent beneficiary designation to
receive the benefits specified under the Company's Group Life Insurance
Plan. In either case, if there is no designated Beneficiary or
surviving designated Beneficiary, then Beneficiary shall mean the
person, persons, trust or trusts entitled by will or the laws of
descent and distribution to receive such benefits.
(c) "Cause" with respect to the forfeiture under the terms of
Award agreements in event of termination of employment means (i) the
willful and continued failure by the Employee to perform substantially
his or her duties with the Company (other than any such failure
resulting from the Employee's incapacity due to physical or mental
illness) after a written demand for substantial performance is
delivered to the Employee by the Chairman of the Board of Directors or
the President of the Company which specifically identifies the manner
in which the Employee has not substantially performed his or her
duties, (ii) the willful engagement by the Employee in conduct which is
not authorized by the Board of Directors of the Company or within the
normal course of the Employee's business decisions and is known by the
Employee to be materially detrimental to the best interests of the
Company or any of its subsidiaries, or (iii) the willful engagement by
the Employee in illegal conduct or any act of serious dishonesty which
adversely affects, or, in the reasonable estimation of the Board of
Directors of the Company, could in the future adversely affect, the
value, reliability or performance of the Employee to the Company in a
material manner. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board of Directors of the
Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the
<PAGE> 5
Employee in good faith and in the best interests of the Company.
Notwithstanding the foregoing, an Employee who is a member of the
Executive Group shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Employee a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors after
reasonable notice to the Employee and an opportunity for him or her,
together with his or her counsel, to be heard before the Board of
Directors, finding that, in the good faith opinion of the Board of
Directors, the Employee was guilty of the conduct set forth above in
(i), (ii) or (iii) of this sub-paragraph and specifying the particulars
thereof in detail.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be
deemed to include successor provisions and regulations thereunder.
(e) "Committee" means the Human Resources and Compensation
Committee of the Board of Directors of the Company, or such other Board
committee as may be designated by the Board to administer the Plan;
provided that the Committee shall at all times be comprised solely of
two or more outside directors satisfying the requirements of Section
162(m)(4)(C)(i) of the Code.
(f) "Company" means Alumax Inc., a Delaware corporation, or
any successor corporation.
(g) "Designated Participant" means any Participant who is
designated as such pursuant to Section 3(d).
(h) "Executive Group" means the Chief Executive Officer of the
Company and other key executives of the Company or its subsidiaries who
have been designated as such by the Chief Executive Officer with
Committee approval.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time. References to any provision of the
Exchange Act shall be deemed to include successor provisions thereto
and regulations thereunder.
(j) "Fair Market Value" means the fair market value of Stock,
Awards, or other property determined by the Committee or under
procedures established by the Committee. Unless otherwise determined by
the Committee, the Fair Market Value of Stock as of any given date
shall mean the closing sale price of Stock reported on the Composite
Tape for securities listed on the New York Stock Exchange in The Wall
Street Journal for such date, or, if no Stock was traded on that date,
on the next preceding day on which there was such a trade.
(k) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(l) "Participant" means a person who, as an employee of the
Company or a subsidiary, has been granted an Award under the Plan.
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<PAGE> 6
(m) "Plan" means this 1993 Long Term Incentive Plan as Amended
and Restated.
(n) "Stock" means the Company's Common Stock, $.01 par value,
and such other securities as may be substituted (or resubstituted) for
Stock pursuant to Section 4.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select
Participants, grant Awards, determine the type, number, and other terms and
conditions of, and all other matters relating to, Awards, prescribe Award
agreements (which need not be identical for each Participant) and rules and
regulations for the administration of the Plan, construe and interpret the Plan
and Award agreements and correct defects, supply omissions, or reconcile
inconsistencies therein, and to make all other decisions and determinations as
the Committee may deem necessary or advisable for the administration of the
Plan.
(b) Manner of Exercise of Committee Authority. The Committee shall
exercise sole and exclusive discretion on any matter relating to a Participant
subject to Section 16 of the Exchange Act if and to the extent necessary to
obtain the exemption under Rule 16b-3 under the Exchange Act. Any action of the
Committee shall be final, conclusive, and binding on all persons, including the
Company, its subsidiaries, Participants, persons claiming rights from or through
a Participant, and stockholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any subsidiary, or committees thereof,
the authority, subject to such terms as the Committee shall determine, to
perform administrative functions and, with respect to Participants not subject
to Section 16 of the Exchange Act, to perform such other functions as the
Committee may determine, to the extent permitted under Rule 16b-3 and applicable
law.
(c) Limitation of Liability. The Committee may appoint agents to assist
it in administering the Plan. The Committee and each member thereof shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or employee of the Company or a subsidiary, the
Company's independent certified public accountants, consultants or any other
agent assisting in the administration of the Plan. Members of the Committee and
any officer or employee of the Company or a subsidiary acting at the direction
or on behalf of the Committee shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and shall,
to the extent permitted by law, be fully indemnified and protected by the
Company with respect to any such action or determination.
(d) Performance-Based Awards to "Designated Participants." Prior to
March 31 of each year, the Committee may, in its sole discretion, designate any
Participant, whom it deems likely to be at the time compensation will be paid
under an Award a "covered employee" under Section 162(m) of the Code and whose
compensation may exceed $1 million in such year and be subject to the limitation
on tax deductibility under Section 162(m) of the Code, as a "Designated
Participant" to be granted an Award under this
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<PAGE> 7
Section 3(d) that will not be subject to such limitation on deductibility under
Section 162(m) of the Code. Notwithstanding any provision of the Plan to the
contrary, the Committee may, in its discretion, reduce but not increase the
amount payable under any such Award to such a Designated Participant. All
determinations by the Committee as to the achievement of Performance Objectives
(as described below in Section 6(i)) applicable to such an Award shall be made
in writing, and the Committee may not exercise discretion to modify the
Performance Objectives or the vesting conditions (other than with respect to the
death or disability of such Designated Participant or in the event of a Change
in Control) with respect to such Award if the exercise of such discretion would
cause such Award to fail to qualify as "performance-based compensation" within
the meaning of Section 162(m)(4)(C) of the Code.
4. Stock Subject to Plan. Subject to adjustment as provided in Section
9(c), the total number of shares of Stock reserved and available for issuance in
connection with Awards under the Plan shall be 3,000,000, plus 10% of the number
of shares issued after the effective date of the Plan (other than any issuance
under the Plan or any other compensation or benefit plan of the Company), except
any shares added as a result of issuances by the Company shall not be available
for grants of ISOs or Stock Appreciation Rights in tandem with ISOs. When Awards
are granted and while they are outstanding, shares relating to an Award will be
counted against the limitation set forth in this Section 4 in accordance with
Rule 16b-3; the Committee may adopt reasonable counting procedures, consistent
with Rule 16b-3, to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards), and make adjustments if
the number of shares actually distributed differs from the number of shares
previously counted in connection with an Award. Shares subject to an Award that
is forfeited or settled in cash or otherwise terminated without a distribution
of shares to the Participant, including shares withheld in payment of taxes
relating to Awards and the number of shares equal to the number of shares
surrendered in payment of the exercise price of Options (or any other Awards in
the nature of purchase rights) or taxes relating to Awards, will again be
available for Awards under the Plan, except that, if any such shares could not
again be available under Rule 16b-3 for Awards to a Participant who is subject
to Section 16 of the Exchange Act, such shares shall be available exclusively
for Awards to Participants who are not subject to Section 16. Any shares
delivered under the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
5. Eligibility. All salaried employees of the Company and its
subsidiaries, including any director or officer who is also such an employee,
are eligible to be granted Awards under the Plan. The foregoing notwithstanding,
directors of the Company who are not salaried employees and members of the
Committee shall not be eligible to be granted Awards under the Plan.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on
any Award or the exercise thereof, at the date of grant or thereafter
(subject to Section 9(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall
determine, including terms requiring forfeiture of Awards in the event
of termination of employment by the Participant. The Committee shall
retain full power to accelerate or waive, at any time, any term or
condition of an Award that is not mandatory under the Plan. Except in
cases in which the Committee is specifically authorized to require
other forms of
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<PAGE> 8
consideration by the Plan, or to the extent other forms of
consideration must by paid to satisfy the requirements of the Delaware
General Corporation Law, only services may be required as consideration
for the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of
Stock purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall be not less than the Fair
Market Value of a share on the date of grant of such Option except as
provided under Section 7(a) hereof.
(ii) Time and Method of Exercise. The Committee shall
determine the time or times at which or the circumstances under which
an Option may be exercised in whole or in part, the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Stock, other Awards or
awards issued under other Company plans, or other property (including
notes or other contractual obligations of Participants to make payment
on a deferred basis, such as through "cashless exercise" arrangements,
to the extent permitted by applicable law), and the methods by which
Stock will be delivered or deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of Section 422 of
the Code, including but not limited to the requirements that no ISO
shall be granted more than ten years after the effective date of the
Plan, no ISO shall be exercisable more than ten years after the date of
grant, and ISOs shall not be transferable otherwise than by will or the
laws of descent and distribution and shall be exercisable, during the
Participant's lifetime, only by the Participant.
(iv) Limitation. During any period of five
consecutive years under the Plan, a Participant may not be granted
Options covering more than 900,000 shares of Stock.
(c) Stock Appreciation Rights. The Committee is authorized to
grant Stock Appreciation Rights ("SARs") to Participants on the
following terms and conditions:
(i) Right to Payment. An SAR shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of Stock
on the date of exercise (or, if the Committee shall so determine in the
case of any such right other than one related to an ISO, the Fair
Market Value of one share at any time during a specified period before
or after the date of exercise, or, in the case of a "Limited SAR," the
Fair Market Value determined by reference to amounts paid or payable in
connection with a Change in Control of the Company, as specified by the
Committee), over (B) the grant price of the SAR as determined by the
Committee as of the date of grant of the SAR.
(ii) Other Terms. The Committee shall determine the
time or times at which and the circumstances under which an SAR may be
exercised in whole or in part, the method of exercise, method of
settlement, form of consideration payable in settlement, method by
which Stock will be delivered or deemed to be delivered to
Participants, whether
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<PAGE> 9
or not an SAR shall be in tandem or in combination with any other
Award, and any other terms and conditions of any SAR. Limited SARs that
may only be exercised in connection with a Change in Control or other
event as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
Limited SARs may be either freestanding or in tandem with other Awards.
(iii) Limitation. During any period of five
consecutive years under the Plan, a Participant may not be granted SARs
covering more than 900,000 shares of Stock.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall
be subject to such restrictions on transferability and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances, in such installments, or otherwise, as the Committee may
determine. Except to the extent restricted under the terms of the Plan
and any Award agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock or
the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by
the Committee, upon termination of employment during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company; provided
that the Committee may provide, by rule or regulation or in any Award
agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in
whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part
the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the Committee
shall determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may require
such certificates to bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock, the
Company to retain physical possession of the certificates, and/or the
Participant to deliver a stock power to the Company, endorsed in blank,
relating to the Restricted Stock.
(iv) Dividends. Dividends paid on Restricted Stock
shall be either paid at the dividend payment date in cash or in shares
of unrestricted Stock having a Fair Market Value equal to the amount of
such dividends, or the payment of such dividends shall be deferred
and/or the amount or value thereof automatically reinvested in
additional Restricted Stock, other Awards, or other investment
vehicles, as the Committee shall determine or permit the Participant to
elect. Unless otherwise determined by the Committee, Stock distributed
in connection with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk
of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed.
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<PAGE> 10
(v) Limitation. During any period of five consecutive
years under the Plan, a Participant may not be granted Restricted Stock
covering more than 900,000 shares of Stock.
(e) Deferred Stock (Restricted Stock Units). The Committee is
authorized to grant Deferred Stock to Participants, subject to the
following terms and conditions:
(i) Award and Restrictions. Delivery of Stock will
occur upon expiration of the deferral period specified for an Award of
Deferred Stock by the Committee (or, if permitted by the Committee, as
elected by the Participant). In addition, Deferred Stock shall be
subject to such restrictions as the Committee may impose, if any, which
restrictions may lapse at the expiration of the deferral period or at
earlier specified times, separately or in combination, in installments,
or otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by
the Committee, upon termination of employment (as determined under
criteria established by the Committee) during the applicable deferral
period or portion thereof to which forfeiture conditions apply (as
provided in the Award agreement evidencing the Deferred Stock), all
Deferred Stock that is at that time subject to deferral (other than a
deferral at the election of the Participant) shall be forfeited;
provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock will
be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Deferred Stock.
(iii) Limitation. During any period of five
consecutive years under the Plan, a Participant may not be granted
Deferred Stock covering more than 900,000 shares of Stock.
(f) Bonus Stock and Awards in Lieu of Cash Obligations. The
Committee is authorized to grant Stock as a bonus, or to grant Stock or
other Awards in lieu of Company obligations to pay cash under other
plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, such cash
amounts are determined under such other plans or the Participant's
election to receive an Award in lieu of such Company obligations is
made in a manner that complies with applicable requirements of Rule
16b-3 so that the acquisition of Stock or Awards hereunder shall be
exempt from liability under Section 16(b) of the Exchange Act. Stock or
Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee. During any period of five consecutive
years under the Plan, a Participant may not be granted more than
900,000 shares of bonus Stock or other Awards in lieu of cash
obligations. In addition, during any calendar year under the Plan, a
Participant may not be granted under the Plan bonus Stock or other
Awards in lieu of cash obligations valued at more than $3,000,000.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to
receive cash, Stock, other Awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee
may provide that
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<PAGE> 11
Dividend Equivalents will be paid or distributed when accrued or will
be deemed to have been reinvested in additional Stock, Awards, or other
investment vehicles as the Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants
such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to,
Stock, as deemed by the Committee to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable
debt securities, other rights convertible or exchangeable into Stock,
purchase rights for Stock, Awards with value and payment contingent
upon performance of the Company or any other factors designated by the
Committee, and Awards valued by reference to the book value of Stock or
the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of
such Awards. Stock delivered pursuant to an Award in the nature of a
purchase right granted under this Section 6(h) shall be purchased for
such consideration, paid for at such times, by such methods, and in
such forms, including, without limitation, cash, Stock, other Awards,
or other property, as the Committee shall determine. Cash awards, as an
element of or supplement to any other Award under the Plan, may also be
authorized pursuant to this Section 6(h). During any period of five
consecutive years under the Plan, a Participant may not be granted
awards under both Sections 6(h) and 6(i) of the Plan covering more than
900,000 shares of Stock. In addition, during any calendar year a
Participant shall not be granted Awards under both Sections 6(h) and
6(i) of the Plan having an aggregate value of more than $3,000,000.
(i) Performance Awards. Subject to the following provisions,
Performance Awards expressed as amounts of cash, Stock, a percentage of
an award pool specified by the Committee or other Awards may be granted
by the Committee in such form and upon such terms and conditions as the
Committee, in its discretion, may from time to time determine. Each
Performance Award shall specify the range and nature of the payment
which may be received by the Participant based upon the range of
performance to be achieved for specified Performance Objectives within
a specified Performance Period, as hereinafter defined.
(i) Performance Period. The Performance Period with
respect to each Performance Award shall be the period of time within
which the Performance Objectives relating to that Award are to be
achieved.
(ii) Performance Objectives, Performance Award Targets
and Award Ranges. Performance Objectives may specify measures or
performance of the Company as a whole, subsidiaries, or business units
within the Company or subsidiaries, measures of individual performance
of the Participant, or such other objectives (and combinations of
objectives), the achievement of which is expected to benefit the
Company and its stockholders. Performance Objectives for a Performance
Period may be established by the Committee with respect to an Award to
a Designated Participant from among the following: consolidated,
subsidiary or business unit operating profits before interest expense
and taxes, consolidated, subsidiary or business unit pre-tax profits,
consolidated, subsidiary or business unit cash flow, net income,
earnings per share, return on average equity, and/or return on invested
capital. The Performance Objectives applicable to any year shall be
established by the Committee on or before March 31 of such year. A
single Performance
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<PAGE> 12
Objective may be specified for different groups of Participants or for
individual Participants. As soon as practicable, the Committee (or the
Chief Executive Officer of the Company, if assigned by the Committee)
shall establish target Performance Awards and, if deemed appropriate,
Performance Award ranges for each Performance Period. Such target
Performance Awards will specify the amount payable to each Participant
upon 100% achievement of the Performance Objectives applicable to such
Participant. In addition, ranges may be established to determine
whether, and the extent to which, a portion of the Performance Award
shall be payable to a Participant if the applicable Performance
Objectives are not fully achieved, and whether, and the extent to
which, payments in addition to the target Performance Award shall be
made if the applicable Performance Objectives are exceeded.
The Committee (or the Chief Executive Officer, if assigned by the
Committee) is authorized at any time during or after a Performance
Period, in its sole and absolute discretion, to adjust, modify, or
specify new Performance Objectives, target Performance Award ranges,
and related terms and conditions, (x) in recognition of extraordinary
or nonrecurring items affecting the financial statements of the Company
or any subsidiary, or in response to changes in applicable laws,
regulations, or accounting principles, (y) with respect to any
Participant whose position or duties with the Company or any subsidiary
changes during a Performance Period, or (z) with respect to any person
who first becomes a Participant after the first date of the Performance
Period.
(iii) Earning of Performance Awards. As promptly as
practicable following the end of each Performance Period, the Committee
(or the Chief Executive Officer, if assigned by the Committee) shall
determine whether and the extent to which Performance Objectives
applicable to Participants were achieved and the Performance Awards
that correspond to such achievement and/or allocations as specified
under the Performance Award ranges for the Performance Period. The
Committee may, in its sole and absolute discretion, in view of the
Committee's assessment of the business strategy of the Company and
subsidiaries, performance of comparable organizations, economic and
business conditions, and any other circumstances deemed relevant,
increase or decrease final Performance Award amounts.
(iv) Termination of Employment. If a Participant's
employment has terminated prior to completion of a Performance Period,
the extent to which a Performance Award shall be deemed to have been
earned and payable shall be determined by the Committee, in its sole
discretion, at or after the time of grant.
(v) Distributions. A Performance Award, to the extent
that it has been earned, may be distributed in cash, Stock or other
Awards, in a lump sum, in installments, or a combination thereof as
determined by the Committee, in its sole discretion, at or after the
time of grant.
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or award granted under any plan of the Company, any
subsidiary, or any business entity to be
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<PAGE> 13
acquired by the Company or a subsidiary, or any other right of a Participant to
receive payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee shall
require the surrender of such other Award or award in consideration for the
grant of the new Award. In addition, grants of Awards in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of the
Company, in which the value of Stock subject to the Award is equal to the value
of the cash compensation (for example, Deferred Stock or Restricted Stock), or
in which the exercise price, grant price, or purchase price of the Award in the
nature of a right that may be exercised is equal to Fair Market Value of the
underlying Stock minus the value of the cash compensation surrendered (for
example, Options granted with an exercise price "discounted" by the amount of
the cash compensation surrendered), are specifically authorized.
(b) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee. Any
Award subject to such conditions may be denominated "performance shares,"
"performance units," or any other title deemed appropriate by the Committee.
(c) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event shall
the term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years (or such shorter term as may be required under Section 422 of the Code).
(d) Form of Payment Under Awards; Deferrals. Subject to the terms of
the Plan and any applicable Award agreement, payments to be made by the Company
or a subsidiary upon the exercise of an Option or other Award or settlement of
an Award may be made in such forms as the Committee shall determine, including,
without limitation, cash, Stock, other Awards, or other property, and may be
made in a single payment or transfer, in installments, or on a deferred basis.
Installment or deferred payments may be required by the Committee (subject to
Section 9(e) of the Plan) or permitted at the election of the Participant.
Payments may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments or the
grant or crediting of Dividend Equivalents in respect of installment or deferred
payments denominated in Stock.
(e) Rule 16b-3 Compliance.
(i) Six-Month Holding Period. Unless a Participant could
otherwise transfer Stock acquired under the Plan without incurring liability
under Section 16(b) of the Exchange Act, (a) Stock acquired under the Plan other
than upon exercise of a derivative security shall be held for at least six
months from the date of acquisition, and (b) at least six months shall elapse
from the date of acquisition of a derivative security to the date of disposition
of the derivative security (other than upon exercise or conversion) or
disposition of any Stock acquired upon exercise or conversion of such derivative
security.
(ii) Other Rule 16b-3 Compliance Provisions. It is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or
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<PAGE> 14
Rule 16a-1(c)(3) (as in effect prior to August 15, 1996) under the Exchange Act
in connection with any grant of Awards to or other transaction by a Participant
who is subject to Section 16 of the Exchange Act (except for transactions
exempted under alternative Exchange Act Rules or acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b). In addition, the per
share exercise price of any Option, grant price of any SAR, or purchase price
of any other Award conferring a right to purchase Stock shall be not less than
any specified percentage of the Fair Market Value of Stock at the date of grant
of the Award then required in order to comply with Rule 16b-3.
8. Change in Control.
(a) Definition of "Change In Control." For purposes of this Plan, the
term "Change in Control" shall mean the occurrence of any of the following
events after consummation of the spin-off of Stock by AMAX Inc. which resulted
in the registration of the Stock under Section 12 of the Exchange Act:
(i) any person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company representing 20 percent or more of
the combined voting power of the Company's then-outstanding securities (a "20%
Beneficial Owner"); provided, however, that (a) the term "20% Beneficial Owner"
shall not include any Beneficial Owner who has crossed such 20 percent threshold
solely as a result of an acquisition of securities directly from the Company, or
solely as a result of an acquisition by the Company of Company securities, until
such time thereafter as such person acquires additional voting securities other
than directly from the Company and, after giving effect to such acquisition,
such person would constitute a 20% Beneficial Owner; and (b) with respect to any
person eligible to file a Schedule 13G pursuant to Rule 13d-1(b)(1) under the
Exchange Act with respect to Company securities (an "Institutional Investor"),
there shall be excluded from the number of securities deemed to be beneficially
owned by such person a number of securities representing not more than 10
percent of the combined voting power of the Company's then-outstanding
securities;
(ii) during any period of two consecutive years beginning
after the Stock first became registered under Section 12 of the Exchange Act,
individuals who at the beginning of such period constitute the Board together
with those individuals who first became Directors during such period (other than
by reason of an agreement with the Company in settlement of a proxy contest for
the election of directors) and whose election or nomination for election to the
Board was approved by a vote of at least two-thirds (2/3) of the Directors then
still in office who either were Directors at the beginning of the period or
whose election or nomination for election was previously so approved (the
"Continuing Directors"), cease for any reason to constitute a majority of the
Board;
(iii) the stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company, or a reverse
stock split of any class of voting securities of the Company, or the
consummation of any such transaction if stockholder approval is not obtained,
other than any such transaction which would result
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<PAGE> 15
in at least 75% of the total voting power represented by the voting securities
of the Company or the surviving entity outstanding immediately after such
transaction being beneficially owned by persons who together owned at least 75%
of the combined voting power of the voting securities of the Company outstanding
immediately prior to such transaction, with the relative voting power of each
such continuing holder compared to the voting power of each other continuing
holder not substantially altered as a result of the transaction; provided that,
for purposes of this paragraph (iii), such continuity of ownership (and
preservation of relative voting power) shall be deemed to be satisfied if the
failure to meet such 75% threshold (or to preserve such relative voting power)
is due solely to the acquisition of voting securities by an employee benefit
plan of the Company or such surviving entity or any subsidiary of the Company or
such surviving entity;
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement for the sale
or disposition of all or substantially all the assets of the Company; or
(v) any other event which a majority of the members
of the Committee who are Continuing Directors determines shall constitute a
Change in Control for purposes of this Plan;
provided, however that a Change in Control shall not be deemed to have occurred
if one of the following exceptions applies:
(1) Unless a majority of the members of the Committee who are Continuing
Directors determines that the exception set forth in this paragraph (1)
shall not apply, none of the foregoing conditions would have been
satisfied but for one or more of the following persons acquiring or
otherwise becoming the Beneficial Owner of securities of the Company:
(A) any person who has entered into a binding agreement with the
Company, which agreement has been approved by two-thirds (2/3) of the
Continuing Directors, limiting the acquisition of additional voting
securities by such person, the solicitation of proxies by such person
or proposals by such person concerning a business combination with the
Company (a "Standstill Agreement"); (B) any employee benefit plan, or
trustee or other fiduciary thereof, maintained by the Company or any
subsidiary of the Company; (C) any subsidiary of the Company; or (D)
the Company.
(2) Unless a majority of the members of the Committee who are Continuing
Directors determines that the exception set forth in this paragraph (2)
shall not apply, none of the foregoing conditions would have been
satisfied but for the acquisition by the Company of another entity
(whether by merger or consolidation, the acquisition of stock or
assets, or otherwise) in exchange, in whole or in part, for securities
of the Company, provided that, immediately following such acquisition,
the Continuing Directors constitute a majority of the Board, or a
majority of the board of directors of any other surviving entity, and,
in either case, no agreement, arrangement or understanding exists at
that time which would cause such Continuing Directors to cease
thereafter to constitute a majority of the Board or of such other board
of directors.
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<PAGE> 16
(3) A majority of the members of the Committee who are Continuing Directors
determines that a Change in Control shall be deemed not to have
occurred.
Notwithstanding the foregoing, unless otherwise determined by a majority of the
Committee who are Continuing Directors, no Change in Control shall be deemed to
have occurred with respect to a particular Participant if the Change in Control
results from actions or events in which such Participant is a participant in a
capacity other than solely as an officer, employee, or director of the Company.
For purposes of the foregoing definition of Change in Control, the term
"Beneficial Owner," with respect to any securities, shall mean any person who,
directly or indirectly, has or shares the right to vote or dispose of such
securities or otherwise has "beneficial ownership" of such securities (within
the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on the
effective date of the Plan) under the Exchange Act, including pursuant to any
agreement, arrangement, or understanding (whether or not in writing); provided,
however, that (i) a person shall not be deemed the Beneficial Owner of any
security as a result of any agreement, arrangement, or understanding to vote
such security (A) arising solely from a revocable proxy or consent solicited
pursuant to, and in accordance with, the applicable provisions of the Exchange
Act and the rules and regulations thereunder or (B) made in connection with, or
otherwise to participate in, a proxy or consent solicitation made, or to be
made, pursuant to, and in accordance with, the applicable provisions of the
Exchange Act and the rules and regulations thereunder, in either case described
in clause (A) or clause (B) above whether or not such agreement, arrangement or
understanding is also then reportable by such person on Schedule 13D under the
Exchange Act (or any comparable or successor report), and (ii) a person engaged
in business as an underwriter of securities shall not be deemed to be the
Beneficial Owner of any securities acquired through such person's participation
in good faith in a firm commitment underwriting until the expiration of forty
days after the date of such acquisition.
(b) Definition of "Change in Control Stock Value." "Change in Control
Stock Value" shall mean the value of a share of Stock determined as follows:
(i) if the Change in Control results from an event
described in clause (iii) of the Change in Control definition in Section 8(a),
the highest per share price paid for shares of Stock of the Company in the
transaction resulting in the Change in Control;
(ii) if the Change in Control results from an event
described in clauses (i), (ii) or (v) of the Change in Control definition in
Section 8(a) and no event described in clauses (iii) or (iv) of the Change in
Control definition in Section 8(a) has occurred in connection with such Change
in Control, the highest sale price of a share of Stock of the Company on any
trading day during the sixty (60) consecutive trading days immediately preceding
and following the date of such Change in Control as reported on the New York
Stock Exchange Composite Tape and published in the Wall Street Journal; or
(iii) if the Change in Control results from an event
described in clause (iv) of the Change in Control definition in Section 8(a),
the price per share at which shares of Stock are redeemed or exchanged by their
holders in the transaction described in such clause (iv).
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<PAGE> 17
(c) Definition of "Change in Control Settlement Value." "Change in
Control Settlement Value" shall mean, with respect to a share of Stock, the
excess of the Change in Control Stock Value over the exercise, grant, or base
price of an Award covering such share of Stock, provided that, with respect to
any Option which is an ISO immediately prior to the election to receive the
Change in Control Settlement Value, the Change in Control Settlement Value shall
not exceed the maximum amount permitted for such Option to continue to qualify
as an ISO.
(d) Acceleration and Cash-Out Upon a Change in Control. Notwithstanding
any other provisions of this Plan to the contrary (except the provisions of
Section 7(e) hereof), in the event of a Change in Control the following
provisions shall apply:
(i) All outstanding Awards on the date of the Change in Control
in the nature of a right that may be exercised not previously exercisable shall
become fully and immediately exercisable on the date of such Change in Control,
and such Awards shall not be subject to termination upon the termination of
employment of the Participant; and
(ii) Unless waived by a given Participant, the restrictions,
deferral periods and limitations, and forfeiture conditions applicable to any
other Award granted under the Plan shall lapse and such Awards shall be deemed
fully vested, subject only to the restrictions on dispositions of equity
securities set forth in Section 7(e); and
(iii) Section 6(b)(iv) notwithstanding, any optionee who
holds an Option shall be entitled to elect, during the 60-day period immediately
following such Change in Control, in lieu of acquiring the shares of Stock
covered by such Option, to receive, and the Company shall be obligated to pay,
the Change in Control Settlement Value (as defined in Section 8(c) hereof) with
respect to shares of Stock up to the number of shares covered by such Option,
which amount shall be paid in cash; and
(iv) A Participant shall be entitled to elect, during the
60-day period immediately following such Change in Control, to surrender any
other Award and receive, in full settlement thereof, and the Company shall be
obligated to pay, the Change in Control Settlement Value with respect to the
number of shares of Stock covered by an Award in the nature of a right that may
be exercised, or the Change in Control Stock Value with respect to the number of
shares of Stock covered by any other type of Award, which amount shall in either
case be paid in cash; and
(v) Notwithstanding the provisions of Section 9(a), the
Board shall not, at any time following a Change in Control, impose any
conditions on any outstanding Award that have not been previously imposed as of
the date of such Change in Control, unless, in the written opinion of
independent counsel to the Company, such condition is necessary to comply with
any federal, state, or local securities or other law or regulation, or the rules
of any applicable securities exchange, and, in the good faith opinion of the
Board, compliance with such law, regulation or rule without the imposition of
such condition would be impracticable; and
(vi) In lieu of any other form of settlement authorized
under this Section 8(d), a Participant may elect under terms set by and subject
to approval of the Committee to receive Deferred Stock or Restricted Stock, or,
if authorized by the Committee, other
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<PAGE> 18
deferred forms of payment, in order to defer federal income taxation of the
Participant with respect to amounts payable hereunder; and
(vii) notwithstanding the provisions of Section 9(e) hereof, the
provisions of this Section 8 may not be amended in any respect following a
Change in Control except with the consent of any affected Participant.
(e) No Non-Exempt Section 16(b) Purchases Triggered. No Participant who
is then subject to Section 16 of the Exchange Act shall have any right to
receive a cash payment under Section 8(d) hereof if the acquisition of such
right would, under the circumstances, constitute a non-exempt purchase for
purposes of Section 16(b) of the Exchange Act.
9. General Provisions.
(a) Compliance With Legal and Other Requirements. The Plan, the grant,
exercise, and settlement of Awards thereunder, and the other obligations of the
Company under the Plan and any Award agreement shall be subject to all
applicable federal and state laws, rules, and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company may, in
its discretion, postpone the issuance or delivery of Stock under any Award until
completion of such registration or qualification of such Stock or other required
action under any federal or state law, rule, or regulation, listing or other
required action with respect to any stock exchange or automated quotation system
upon which the Stock or other Company securities are listed or designated, or
compliance with any other contractual obligation of the Company, as the Company
may consider appropriate, and may require any Participant to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of Stock in compliance with applicable
laws, rules, and regulations, listing or designation, or other contractual
obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other right
or interest of a Participant under the Plan, including any Award or right which
constitutes a derivative security as generally defined in Rule 16a-1(c) (as in
effect prior to August 15, 1996) under the Exchange Act, shall be pledged,
hypothecated, or otherwise encumbered or subject to any lien, obligation, or
liability of such Participant to any party (other than the Company or a
subsidiary), or assigned or transferred by such Participant otherwise than by
will or the laws of descent and distribution or to a Beneficiary upon the death
of a Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or his
or her guardian or legal representative, except that Awards and other rights
(other than ISOs and SARs in tandem therewith) may be transferred to one or
more Beneficiaries or other transferees during the lifetime of the Participant
in connection with the Participant's estate planning, and may be exercised by
such transferees in accordance with the terms of such Award, but only if and to
the extent such transfers are then permitted under Rule 16b-3, consistent with
the registration of the offer and sale of Stock on Form S-8 or a successor
registration form of the Securities and Exchange Commission or such other form
of registration statement as has in fact been filed in connection with the
Plan, and permitted by the Committee (subject to any terms and conditions which
the Committee may impose thereon). A Beneficiary, transferee, or other person
claiming any rights under the Plan from or through any Participant shall be
subject
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<PAGE> 19
to all terms and conditions of the Plan and any Award agreement applicable to
such Participant, except as otherwise determined by the Committee, and to any
additional terms and conditions deemed necessary or appropriate by the
Committee.
(c) Adjustments. In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Stock, or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and kind of shares
of Stock which may thereafter be issued in connection with Awards, (ii) the
number and kind of shares of Stock issued or issuable in respect of outstanding
Awards, and (iii) the exercise price, grant price, or purchase price relating to
any Award or, if deemed appropriate, make provision for payment of cash or other
property with respect to any outstanding Award; provided, in each case, that,
with respect to ISOs, no such adjustment shall be authorized to the extent that
such authority would cause the Plan to violate Section 422 of the Code. In
addition, the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, events described in the
preceding sentence) affecting the Company or any subsidiary or the financial
statements of the Company or any subsidiary, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and regulations
or business conditions.
(d) Taxes. The Company or any subsidiary is authorized to withhold from
any Award granted, any payment relating to an Award under the Plan, including
from a distribution of Stock, or any payroll or other payment to a Participant,
amounts of withholding and other taxes due in connection with any transaction
involving an Award, and to take such other action as the Committee may deem
advisable to enable the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax obligations relating to any Award.
This authority shall include authority for the Company to withhold or receive
Stock or other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations, either on a mandatory or
elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or Participants,
except that any such action shall be subject to the approval of the Company's
stockholders at the annual meeting next following such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the Stock
may then be listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to stockholders for approval;
provided that, without the consent of an affected Participant, no such Board
action may materially and adversely affect the rights of such Participant under
any Award theretofore granted to him. The Committee may waive any conditions or
rights under, or amend, alter, suspend, discontinue, or terminate, any Award
theretofore granted and any Award agreement relating thereto; provided that,
without the consent of an affected Participant, no such Committee action may
materially and adversely affect the rights of such Participant
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<PAGE> 20
under such Award. The foregoing notwithstanding, any performance condition
specified in connection with an Award shall not be deemed a fixed contractual
term, but shall remain subject to adjustment by the Committee, in its
discretion, at any time in view of the Committee's assessment of the Company's
strategy, performance of comparable companies, and other circumstances.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Participant or
employee the right to be retained in the employ of the Company or any of its
subsidiaries, (ii) interfering in any way with the right of the Company or any
of its subsidiaries to terminate any Participant's or employee's employment at
any time, (iii) giving a Participant or employee any claim to be granted any
Award under the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
stockholder of the Company unless and until Stock is duly issued or transferred
to the Participant in accordance with the terms of the Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to issue
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of the Company; provided that the Committee may authorize the creation
of trusts and deposit therein cash, Stock, other Awards, or other property, or
make other arrangements, to meet the Company's obligations under the Plan. Such
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of the trust may be authorized to dispose of
trust assets and reinvest the proceeds in alternative investments, subject to
such terms and conditions as the Committee may specify and in accordance with
applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable.
(i) Payments In the Event of Forfeitures; Fractional Shares. In the
event of a forfeiture of an Award with respect to which a Participant paid cash
or other consideration in order to satisfy requirements of the Delaware General
Corporation Law, the Participant shall be repaid the amount of such cash or
other consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
other Awards, or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.
(j) Governing Law; Arbitration. The validity, construction, and effect
of the Plan, any rules and regulations relating to the Plan, and any Award
agreement shall be determined in accordance with the Delaware General
Corporation Law, to the extent applicable, other laws (including those governing
contracts) of the State of Delaware, without giving effect to principles of
conflicts of laws, and applicable federal law. If any provision hereof shall be
held by a court of competent jurisdiction to be invalid and
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<PAGE> 21
unenforceable, the remaining provisions shall continue to be fully effective.
Any dispute or controversy arising under or in connection with this Plan shall
be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators
in accordance with the rules of the American Arbitration Association in effect
at the time of submission to arbitration. Judgement may be entered on the
arbitrators' award in any court having jurisdiction. For purposes of settling
any dispute or controversy arising hereunder or for the purpose of entering any
judgement upon an award rendered by the arbitrators, the Company and the
Participant hereby consent to the jurisdiction of any or all of the following
courts: (i) the United States District Court for the Northern District of
Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other
court having jurisdiction. The Company and the Participant hereby waive, to the
fullest extent permitted by applicable law, any objection which it may now or
hereafter have to such jurisdiction and any defense of inconvenient forum. The
Company and the Participant hereby agree that a judgement upon an award rendered
by the arbitrators may be enforced in other jurisdictions by suit on the
judgement or in any other manner provided by law.
(k) Effective Date; Plan Termination. The Plan became effective upon
its approval by stockholders of the Company on October 28, 1993. The amendment
and restatement of the Plan shall become effective upon its approval by the
stockholders of the Company at the 1995 Annual Meeting. The Plan shall terminate
at such time as no Stock remains available for issuance pursuant to Section 4
and the Company has no further obligations with respect to any Award granted
under the Plan.
- 18 -
<PAGE> 1
EXHIBIT 10.03
ALUMAX INC.
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN
AS AMENDED ON OCTOBER 3, 1996
- -------------------------------------------------------------------------------
<PAGE> 2
ALUMAX INC.
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN
AS AMENDED ON OCTOBER 3, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. Purposes ..................................................... 1
2. Definitions .................................................. 1
3. Administration ............................................... 2
4. Participation ................................................ 2
5. Deferrals .................................................... 2
6. Deferral Accounts ............................................ 3
7. Deferral of Certain Stock-Denominated Awards: Rabbi Trusts .. 4
8. Settlement of Deferral Accounts .............................. 5
9. Provisions Relating to Section 16 of the Exchange Act
and Section 162(m) of the Code ............................... 6
10. Statements ................................................... 7
11. Sources of Stock: Limitation on Amount of
Stock-Denominated Deferrals .................................. 7
12. Amendment/Termination ........................................ 7
13. General Provisions ........................................... 7
14. Effective Date ............................................... 8
</TABLE>
<PAGE> 3
ALUMAX INC.
- -------------------------------------------------------------------------------
DEFERRED COMPENSATION PLAN
- -------------------------------------------------------------------------------
1. PURPOSES. The purposes of this Deferred Compensation Plan (the "Plan")
are to provide certain highly compensated employees of Alumax Inc., (the
"Company") and its subsidiaries with the opportunity to elect to defer receipt
of specified portions of cash compensation and stock awards, and to have the
deferred amounts treated as if invested in specified investment vehicles. The
Plan is also intended to specify terms and conditions for deferral of awards
granted under the Company's 1993 Long Term Incentive Plan, 1993 Stock Option
Subplan for Key Executives, 1993 Annual Incentive Plan, employment agreements
and other compensation arrangements.
2. DEFINITIONS. In addition to the terms defined in Section 1 above, the
following terms used in the Plan shall have the meanings set forth below:
(a) "Administrator" shall mean the Secretary of the Company or other
executives to whom the Committee has delegated the authority to take action
under the Plan, except as may be otherwise required under Section 9.
(b) "Beneficiary" shall mean any person (which may include trusts and is
not limited to one person) who has been designated by the Participant in his or
her most recent written beneficiary designation filed with the Company to
receive the benefits specified under the Plan in the event of the Participant's
death. If no Beneficiary has been designated who survives the Participant's
death, then Beneficiary means any person(s) entitled by will or the laws of
descent and distribution to receive such benefits.
(c) "Change in Control" shall have the same meaning as defined in
Section 8(a)(ii) of the Company's 1993 Long Term Incentive Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
References to any provision of the Code or regulation (including a proposed
regulation) thereunder shall include any successor provisions or regulations.
(e) "Committee" shall mean the Human Resources and Compensation
Committee of the Board of Directors of the Company or a subcommittee thereof, or
such other Board committee as may be designated by the Board to administer the
Plan; provided that the Committee shall at all times be compirsed solely of two
or more outside directors satisfying the requirements of Section 162 (m) (4) (C)
(i) of the Code.
(f) "Deferral Account" shall mean the account or subaccount established
and maintained by the Company for specified deferrals by a Participant, as
described in Sections 6(a) and 7(a). Deferral Accounts will be maintained
solely as bookkeeping entries by the Company to evidence unfunded obligations of
the Company.
(g) "Disability" shall mean termination of employment due to the
Participant's inability to perform the duties of his or her own occupation due
to physical or mental incapacity as determined by the Committee or
Administrator.
<PAGE> 4
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended. References to any provision of the Exchange Act or rule thereunder
include any successor provisions or rules.
(i) "Participant" shall mean any full-time salaried employee of the
Company or any subsidiary (i) who is either a member of the Executive Group of
the Company or otherwise selected by the Committee or Administrator, (ii) who
will be eligible to become a Participant in the Plan if such employee receives
or is to receive compensation or awards permitted to be deferred under the Plan,
and (iii) who participates or makes an election to participate in the Plan.
(j) "Stock" shall mean Alumax Inc. Common Stock, $0.01 par value.
(k) "Valuation Date" shall mean the close of business on the last
business day of each calendar quarter; provided, however, that in the case of
termination of employment for reasons other than normal retirement or approved
early retirement under the applicable Company or subsidiary retirement plan,
death, or Disability, the Valuation Date means the close of business on the last
business day of the month in which employment terminates, and in the case of a
Change in Control of the Company, the Valuation Date shall be the date of such
Change in Control.
3. ADMINISTRATION.
(a) Committee Authority. The Committee and the Administrator shall
administer the Plan in accordance with its terms, and shall have all powers
necessary to accomplish such purpose, including the power and authority to
construe and interpret the Plan, to define the terms used herein, to prescribe,
amend and rescind rules and regulations, agreements, forms, and notices relating
to the administration of the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. Any actions of the
Committee or the Administrator with respect to the Plan shall be conclusive and
binding upon all persons interested in the Plan, except that any action of the
Administrator will not be binding on the Committee. The Committee and
Administrator may each appoint agents and delegate thereto powers and duties
under the Plan, except as otherwise limited by the Plan.
(b) Limitation of Liability. Each member of the Committee and the
Administrator shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any officer or other employee of
the Company or any subsidiary, the Company's independent certified public
accountants, or any executive compensation consultant, legal counsel, or other
professional retained by the Company to assist in the administration of the
Plan. Neither a member of the Committee, the Administrator, nor any officer or
employee of the Company or a subsidiary acting on behalf of the Committee or
Administrator shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and such
persons shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination, or
interpretation.
4. PARTICIPATION. Participation in the Plan is voluntary. The
Administrator will notify each employee of his or her eligibility to participate
in the Plan not later than 30 days (or such lesser period as may be practicable
in the circumstances) prior to any deadline for filing an election form.
-2-
<PAGE> 5
5. DEFERRALS. A Participant may elect to defer compensation or awards
which may be in the form of cash, Stock, Stock-denominated awards or other
property to be received from the Company or a subsidiary, including salary,
annual incentive award, long term award, shares received on stock option
exercise and compensation payable under other plans and programs, employment
agreements or other arrangements, or otherwise, as may be provided under the
terms of such plans, programs and arrangements or designated by the Committee;
provided, however, that a Participant may defer, with respect to a given year,
receipt of only that portion of the Participant's salary and annual incentive
award (or bonus) that exceeds the FICA maximum taxable wage base plus 1.45% of
all other wages of such Participant. In addition to such limitation, and any
terms and conditions of deferral set forth under plans, programs or arrangements
from which receipt of compensation or awards is deferred, the Committee may
impose limitations on the amounts permitted to be deferred and other terms and
conditions on deferrals under the Plan. Any such limitations, and other terms
and conditions of deferral, shall be set forth in the rules relating to the Plan
or election forms, other forms, or instructions published by the Committee
and/or the Administrator. The Committee and/or Administrator is authorized to
permit, in its discretion, further elective deferrals of amounts previously
deferred under this Plan. In addition, the Committee may mandate deferral of
payment in accordance with the Plan of all or a portion of the compensation or
awards to be received under plans or programs of the Company.
(a) Elections. Once an election form, properly completed, is received
by the Company, the elections of the Participant shall be irrevocable; provided,
however, that the Administrator may, in its discretion, permit a Participant to
change elections relating to a Deferral Account by filing a later election form.
(b) Date of Election. An election to defer compensation or awards
hereunder must be received by the Administrator prior to the date specified by
the Administrator. Under no circumstances may a Participant defer compensation
or awards to which the Participant has attained, at the time of deferral, a
legally enforceable right to current receipt of such compensation or awards.
6. DEFERRAL ACCOUNTS. The following provisions will apply to Deferral
Accounts other than those established under Section 7:
(a) Establishment; Crediting of Amounts Deferred. One or more Deferral
Accounts will be established for each Participant, as determined by the
Administrator. The amount of compensation or awards deferred with respect to
each Deferral Account will be credited to such Account as of the date on which
such amounts would have been paid to the Participant but for the Participant's
election to defer receipt hereunder. The amounts of hypothetical income and
appreciation and depreciation in value of such account will be credited and
debited to such Account from time to time. Unless otherwise determined by the
Administrator, cash amounts credited to a Deferral Account shall be deemed
invested in a hypothetical investment as of the date of deferral.
(b) Hypothetical Investment Vehicles. Subject to the provisions of
Sections 6(c) and 9, amounts credited to a Deferral Account shall be deemed to
be invested, at the Participant's direction, in one or more investment vehicles
as may be specified from time to time by the Administrator. The Administrator
may change or discontinue any hypothetical investment vehicle available under
the Plan in its discretion; provided, however, that each affected Participant is
given the opportunity, without limiting or otherwise impairing any other right
of such Participant regarding changes in investment directions, to redirect the
allocation of his or her Deferral Account deemed
-3-
<PAGE> 6
invested in the discontinued investment vehicle among the other hypothetical
investment vehicles, including any replacement vehicle.
(c) Allocation and Reallocation of Hypothetical Investments. A
Participant may allocate amounts credited to his or her Deferral Account to one
or more of the hypothetical investment vehicles authorized under the Plan.
Subject to the rules established by the Administrator, Participants may
reallocate amounts credited to his or her Deferral Account as of the Valuation
Date following the Participant's election to one or more of such hypothetical
investment vehicles, by filing with the Administrator a notice, in such form as
may be specified by the Administrator, not later than the 15th of the month
preceding such Valuation Date. The Committee or Administrator may, in its
discretion, restrict allocation into or reallocation by specified Participants
into or out of specified investment vehicles or specify minimum amounts that may
be allocated or reallocated by Participants.
(d) Rabbi Trusts. The Committee may, in its discretion, establish rabbi
trusts (including sub-accounts under such rabbi trusts), and deposit therein
amounts of cash, Stock, or other property not exceeding the amount of the
Company's obligations with respect to a Participant's Deferral Account
established under this Section 6. In such case, the amounts of hypothetical
income and appreciation and depreciation in value of such Deferral Account shall
be equal to the actual income on, and appreciation and depreciation of, the
assets in such rabbi trusts, including charges against such assets to reflect
all or a portion, if any, as specified by the Committee, of the Company's costs
resulting from payment of taxes on the income on and realized appreciation of
trust assets prior to the time the Company is entitled to a tax deduction for
payment of the Deferral Account. Other provisions of this Section 6
notwithstanding, the timing of allocations and reallocations of assets in such a
Deferral Account, and the investment vehicles available with respect to such
Deferral Account, may be varied to reflect the timing of actual investments of
the assets of such rabbi trust and the actual investments available to such
rabbi trust.
7. DEFERRAL OF CERTAIN STOCK-DENOMINATED AWARDS: RABBI TRUSTS.
(a) Establishment. Subject to any terms and conditions imposed by the
Committee, Participants may elect to defer, under the Plan, awards denominated
in Stock specified by the Committee or Administrator. In connection with such
deferral of a Stock-denominated award, a Deferral Account shall be established
for such Participant and a rabbi trust (including sub-accounts under such rabbi
trust) will also be established, on terms determined by the Committee, into
which the Company shall deposit a number of whole shares of Stock equal to the
number of shares subject to such deferred award (and cash in lieu of any
fractional share). In such case, the amounts of hypothetical income and
appreciation and depreciation in value of such Deferral Account shall be equal
to the actual income on, and appreciation and depreciation of, the assets in
such rabbi trust, including charges against such assets to reflect all or a
portion, if any, as specified by the Committee, of the Company's costs resulting
from payment of taxes on the income on and realized appreciation of trust assets
prior to the time the Company is entitled to a tax deduction for payment of the
Deferral Account.
(b) Investment of Rabbi Trust Assets. The trustee of each rabbi trust,
which shall be a party unaffiliated with the Company, shall be authorized, upon
written instructions received from the Administrator or investment manager
appointed by the Administrator, to invest and reinvest the assets of the trust
in accordance with the trust agreement, including the disposition of such Stock
and reinvestment of the proceeds in one or more investment vehicles designated
by
-4-
<PAGE> 7
the Administrator; provided that no such disposition shall be made until the
date that the shares of Stock subject to the deferred award would otherwise
have been transferable by the Participant. In no event shall a Participant who
is then subject to Section 16(a) of the Exchange Act have the right to direct
investments of amounts credited to such Deferral Account.
(c) Settlement. Subject to Section 8, the Participant shall be entitled
to receive, in settlement of a Deferral Account established under this Section
7, a cash payment in an amount equal to the value of the assets of such
Deferral Account as of the applicable Valuation Date; provided, however, that
the trustee may, at the direction of the Administrator, distribute assets of
the rabbi trust (other than a distribution of Stock to a Participant then
subject to Section 16(a) of the Exchange Act) to the Participant in settlement
of the Company's obligations to the Participant under the Deferral Account if
such distribution, and the authorization thereof, does not cause the rights of
a Participant subject to Section 16(a) of the Exchange Act relating to the
Deferral Account and rabbi trust to be deemed a "derivative security" within
the definition of Rule 16a-1(c)(3) (including subparagraph (i) thereunder)
under the Exchange Act.
8. SETTLEMENT OF DEFERRAL ACCOUNTS.
(a) Form of Payment. The Company shall settle a Participant's Deferral
Account, other than a Deferral Account established under Section 7 hereof, and
discharge all of its obligations to pay deferred compensation under the Plan
with respect to such Deferral Account, by payment of cash or, in the discretion
of the Committee, by delivery of other assets having a fair market value equal
to the amount of cash otherwise payable; provided, however, that Stock may be
delivered in settlement of any Stock-denominated award deferred under the
Company's 1993 Long Term Incentive Plan, 1993 Stock Option Subplan for Key
Executives, employment agreements or other arrangements if such award has been
continuously deemed invested in Stock under the Plan, except that Stock may not
be delivered to a Participant who is then subject to Section 16(a) of the
Exchange Act in settlement of an award subject to Section 7.
(b) Timing of Payments. Payments in settlement of a Deferral Account
shall be made at the date or dates (including upon the occurrence of specified
events), and in such number of installments, as may be directed by the
Participant in his or her election relating to such Deferral Account, or earlier
in the event of termination of employment by the Participant in the following
circumstances:
(i) In the event of termination of employment for reasons other than
normal retirement, early retirement approved by the Committee, or
Disability, a single lump sum payment in settlement of any Deferral
Account (including a Deferral Account with respect to which one or more
installment payments have previously been made) shall be made as promptly
as practicable following the next Valuation Date, unless otherwise
determined by the Administrator; or
(ii) In the event of a Change in Control, payments in settlement of any
Deferral Account (including a Deferral Account with respect to which one
or more installment payments have previously been made) will be made
within fifteen (15) business days following such Change in Control.
-5-
<PAGE> 8
(c) Financial Emergency and Other Payments. Other provisions of the
Plan (except Section 9) notwithstanding, if, upon the written application of a
Participant, the Committee or Administrator determines that the Participant has
a financial emergency of such a substantial nature and beyond the individual's
control that payment of amounts previously deferred under the Plan is warranted,
the Committee or Administrator may direct the payment to the Participant of all
or a portion of the balance of a Deferral Account and the time and manner of
such payment, and the Committee may direct such payments in other circumstances
if, in the exercise of its independent judgment, it determines that
circumstances beyond the individual's control warrant such action.
9. PROVISIONS RELATING TO SECTION 16 OF THE EXCHANGE ACT AND SECTION
162(M) OF THE CODE.
(a) Compliance with Section 16. With respect to a Participant who
is then subject to the reporting requirements of Section 16(a) of the Exchange
Act:
(i) Any function of the Committee under the Plan relating to such
Participant shall be performed solely by the Committee, if and to the
extent required to ensure the availability of an exemption under Rule
16b-3 or exclusion under Rule 16a-1(c) for such Participant with respect
to the Plan.
(ii) The provisions of Section 6(c) notwithstanding, no such
Participant may reallocate amounts credited to a Deferral Account into or
out of a Stock-denominated or Stock equivalent investment vehicle, unless
otherwise determined by the Committee.
(iii) To the extent necessary so that transactions by and rights of
such a Participant under the Plan are excluded from reporting under Rule
16a-1(c) (unless acknowledged by the Participant in writing with respect
to a specified transaction not to be excluded), if any provision of this
Plan or any rule, election form or other form, or instruction does not
comply with the requirements of such Rule as then applicable to such
transaction or right under the Plan, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
(b) Compliance with Code Section 162(m). It is the intent of the
Company that any compensation (including any award) deferred under the Plan by a
person who is, with respect to the year of payout, deemed by the Committee to be
a "covered employee" within the meaning of Code Section 162(m) and regulations
thereunder (including Proposed Regulation 1.162-27(c)(2)), which compensation
constitutes either "qualified performance-based compensation" within the meaning
of Code Section 162(m) and regulations thereunder (including Proposed Regulation
1.162-27(e)) or compensation not otherwise subject to the limitation on
deductibility under Section 162(m) and regulations thereunder (including as a
result of transition rules under Proposed Regulation 1.162-27(h)), shall not, as
a result of deferral hereunder, become compensation with respect to which the
Company in fact would not be entitled to a tax deduction under Code Section
162(m). Accordingly, unless otherwise determined by the Committee, if any
compensation would become so disqualified under Section 162(m) as a result of
deferral hereunder, the terms of such deferral shall be automatically modified
to the extent necessary to ensure that the compensation would not, at the time
of payout, be so disqualified.
-6-
<PAGE> 9
10. STATEMENTS. The Administrator will furnish statements to each
Participant reflecting the amount credited to a Participant's Deferral Accounts
and transactions therein not less frequently than once each calendar year.
11. SOURCES OF STOCK: LIMITATION ON AMOUNT OF STOCK-DENOMINATED
DEFERRALS. If Stock is deposited under the Plan in a rabbi trust pursuant to
Section 7 in connection with a deferral of a Stock-denominated award under the
Company's 1993 Long Term Incentive Plan, 1993 Stock Option Subplan for Key
Executives, or another plan, program, employment agreement or other arrangement
that provides for the issuance of shares, the shares so deposited shall be
deemed to have originated, and shall be counted against the number of shares
reserved, under such other plan, program or arrangement. The number of Stock
equivalents credited to such Deferral Accounts shall in no event exceed the
number of shares subject to the Stock-denominated awards deferred under the
Plan. The number of Stock equivalents otherwise credited to Deferral Accounts
of Participants who are subject to Section 16(a) of the Exchange Act shall not
exceed 2,000,000, subject to appropriate and proportionate adjustment to reflect
stock splits, dividends, and similar events. Shares actually delivered in
settlement of Deferral Accounts shall be originally issued shares or treasury
shares, in the discretion of the Committee; provided, however, that only
treasury shares shall be delivered hereunder to persons who are then "officers"
within the meaning of Section 312.03 of the Listed Company Manual of the New
York Stock Exchange (or any successor thereto).
12. AMENDMENT/TERMINATION. The Committee may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of Participants,
stockholders, or any other person; provided, however, that, without the consent
of a Participant, no such action shall materially and adversely affect the
rights of such Participant with respect to any rights to payment of amounts
credited to such Participant's Deferral Account. Notwithstanding the foregoing,
the Committee may, in its sole discretion, terminate the Plan and distribute to
Participants the amounts credited to their Deferral Accounts.
13. GENERAL PROVISIONS.
(a) Limits on Transfer of Awards; Beneficiaries. No right of a
Participant under the Plan shall be pledged, encumbered, hypothecated, or liable
for or subject to any lien, obligation, or liability of such Participant, or
shall be assignable or transferable by such Participant, otherwise than by will
or the laws of descent and distribution; provided, however, that a Participant
may designate a Beneficiary to receive any payment under the Plan in the event
of the death of the Participant.
(b) Receipt and Release. Payments (in any form) to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the compensation or awards
deferred and relating to the Deferral Account to which the payments relate
against the Company or any subsidiary thereof, the Committee, or the
Administrator, and the Administrator may require such Participant or
Beneficiary, as a condition to such payments, to execute a receipt and release
to such effect.
(c) Unfunded Status of Awards; Creation of Trusts. The Plan is intended
to constitute an "unfunded" plan for deferred compensation and Participants
shall rely solely on the unsecured promise of the Company for payment hereunder.
With respect to any payment not yet made to a Participant under the Plan,
nothing contained in the Plan shall give a Participant any rights that are
-7-
<PAGE> 10
greater than those of a general creditor of the Company; provided, however,
that the Committee may authorize the creation of trusts, including but not
limited to the trusts referred to in Sections 6 and 7 hereof, or make other
arrangements to meet the Company's obligations under the Plan, which trusts or
other arrangements shall be consistent with the "unfunded" status of the Plan
unless the Committee otherwise determines with the consent of each affected
Participant.
(d) Compliance. A Participant in the Plan shall have no right to
receive payment (in any form) with respect to his or her Deferral Account until
legal and contractual obligations of the Company relating to establishment of
the Plan and the making of such payments shall have been complied with in full.
In addition, the Company shall impose such restrictions on Stock delivered to a
Participant hereunder and any other interest constituting a security as it may
deem advisable in order to comply with the Securities Act of 1933, as amended,
the requirements of the New York Stock Exchange or any other stock exchange or
automated quotation system upon which the Stock is then listed or quoted, any
state securities laws applicable to such a transfer, any provision of the
Company's Certificate of Incorporation or Bylaws, or any other law, regulation,
or binding contract to which the Company is a party.
(e) Other Participant Rights. No Participant shall have any of the
rights or privileges of a stockholder of the Company under the Plan, including
as a result of the crediting of Stock equivalents or other amounts to a Deferral
Account, or the creation of any rabbi trust and deposit of such Stock therein,
except at such time as Stock may be actually delivered in settlement of a
Deferral Account. No provision of the Plan or transaction hereunder shall
confer upon any Participant any right to be employed by the Company or a
subsidiary thereof, or to interfere in any way with the right of the Company or
a subsidiary to increase or decrease the amount of any compensation payable to
such Participant. Subject to the limitations set forth in Section 13(a) hereof,
the Plan shall inure to the benefit of, and be binding upon, the parties hereto
and their successors and assigns.
(f) Tax Withholding. The Company and any subsidiary shall have the
right to deduct from amounts otherwise payable in settlement of a Deferral
Account any sums that federal, state, local or foreign tax law requires to be
withheld with respect to such payment. Shares may be withheld to satisfy such
obligations in any case where taxation would be imposed upon the delivery of
shares, except that shares issued or delivered under the Company's 1993 Long
Term Incentive Plan, 1993 Stock Option Subplan for Key Executives, employment
agreements or other arrangements, or any other plan or program of the Company
may be withheld only in accordance with the terms of such plan and any
applicable rules, regulations, or resolutions thereunder.
(g) Governing Law. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Georgia, without giving effect to
principles of conflicts of laws, and applicable provisions of the Delaware
General Corporation Law and federal law.
14. EFFECTIVE DATE. The Plan shall be effective as of August 4, 1994.
As adopted by the Human Resources and Compensation Committee on August 4, 1994.
-8-
<PAGE> 1
EXHIBIT 10.04
ALUMAX INC.
- --------------------------------------------------------------------------------
1993 ANNUAL INCENTIVE PLAN AS AMENDED AND RESTATED
AS FURTHER AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
ALUMAX INC.
- --------------------------------------------------------------------------------
1993 ANNUAL INCENTIVE PLAN AS AMENDED AND RESTATED
AS FUTHER AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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<S> <C> <C>
1. Purpose... ................................................................ 1
2. Definitions................................................................ 1
3. Administration............................................................. 3
4. Awards..................................................................... 4
(a) Performance Objectives, Target Awards and Award Levels............ 4
(b) Determination of Awards........................................... 5
(c) Payment of Final Awards........................................... 6
5. General Provisions......................................................... 7
(a) Taxes............................................................. 7
(b) Limitations on Rights Conferred under Plan and Beneficiaries...... 7
(c) Unfunded Status of Awards; Creation of Trusts..................... 8
(d) Governing Law; Arbitration........................................ 8
(e) Amendment and Termination of Plan and Awards...................... 8
(f) Effective Date.................................................... 8
6. Change in Control.......................................................... 9
(a) Payment of Awards................................................. 9
(b) Termination of Employment After a Change in Control............... 9
(c) Amendment and Termination of Plan and Awards...................... 9
(d) Other Plan Provisions Unaffected.................................. 9
</TABLE>
<PAGE> 3
ALUMAX INC.
1993 ANNUAL INCENTIVE PLAN AS AMENDED AND RESTATED
1. Purpose. The purpose of this 1993 Annual Incentive Plan as
Amended and Restated (the "Plan") is to assist Alumax Inc. (the "Company") and
its subsidiaries in motivating high performance employees who occupy key
positions and contribute to the growth and annual profitability of the Company
and its subsidiaries through the award of annual incentives.
2. Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below:
(a) "Award" means the fixed amount, percentage of Salary, or
portion of an Award Pool payable to a Participant as determined
pursuant to Section 4.
(b) "Award Level" means the percentage of a fixed amount or
Salary, or portion of an Award Pool, payable to a Participant based on
the level of Performance Objectives achievement as determined pursuant
to Section 4(a).
(c) "Award Pool" means a pool of funds specified by the
Committee (or the CEO, if assigned by the Committee), the source and
amount of which are determinable based on a formula or other
specification, out of which pool Awards may be allocated or made on a
discretionary basis to Participants. Award Pools may be designated for
the Company, one or more subsidiaries, or any business division or unit
thereof, and multiple Award Pools may be designated in any Performance
Year.
(d) "Beneficial Owner" is defined in Section 8 of the
Company's 1993 Long Term Incentive Plan.
(e) "Beneficiary" with respect to members of the Executive
Group means the person, persons, trust or trusts which have been
designated by the Participant in his or her most recent written
beneficiary designation filed with the Company to receive the benefits
specified under this Plan in the event of the Participant's death;
Beneficiary with respect to all other Participants shall mean the
person, persons, trust or trusts which have been designated by the
Participant in his or her most recent beneficiary designation to
receive the benefits specified under the Company's Group Life Insurance
Plan. In either case, if there is no designated Beneficiary or
surviving designated Beneficiary, then Beneficiary shall mean the
person, persons, trust or trusts entitled by will or the laws of
descent and distribution to receive such benefits.
(f) "Board" means the Company's Board of Directors.
(g) "Cause" means (i) the willful and continued failure by the
Participant to perform substantially his/her duties with the Company
(other than any such failure resulting from the Participant's
incapacity due to physical or mental illness) after a written demand
for substantial performance is delivered to the Participant by the CEO
or the President of the Company which specifically identifies the
manner in which the Participant has not substantially performed his
duties, (ii) the willful engagement by the Participant in conduct which
is not authorized by the Board of Directors of the Company or within
the normal course of the Participant's business decisions and is known
by the Participant to be materially detrimental to the best interests
of the Company or any of its subsidiaries, or (iii) the willful
engagement by the Participant in illegal
<PAGE> 4
conduct or any act of serious dishonesty which adversely affects, or,
in the reasonable estimation of the Board of Directors of the Company,
could in the future adversely affect, the value, reliability or
performance of the Participant to the Company in a material manner. Any
act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board of Directors of the Company or
based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Participant in good
faith and in the best interests of the Company. Notwithstanding the
foregoing, a Participant who is a member of the Executive Group shall
not be deemed to have been terminated for Cause unless and until there
shall have been delivered to the Participant a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of
the entire membership of the Board of Directors after reasonable notice
to the Participant and an opportunity for him, together with his
counsel, to be heard before the Board, finding that, in the good faith
opinion of the Board of Directors, the Participant was guilty of the
conduct set forth above in (i), (ii) or (iii) of this subparagraph and
specifying the particulars thereof in detail.
(h) "CEO" means the Chief Executive Officer of the Company.
(i) "Change in Control" is defined in Section 8 of the
Company's 1993 Long Term Incentive Plan as Amended and Restated.
(j) "Code" means the Internal Revenue Code of 1986, as amended
from time to time. References to any provision of the Code shall be
deemed to include successor provisions thereto and regulations
thereunder.
(k) "Committee" means the Human Resources and Compensation
Committee of the Board, or such other Board committee as may be
designated by the Board to administer the Plan; provided that the
Committee shall at all times be comprised solely of two or more outside
directors satisfying the requirements of Section 162 (m) (4) (C) (i) of
the Code.
(l) "Company" means Alumax Inc., a Delaware corporation or any
successor corporation.
(m) "Designated Participant" means any Participant who is
designated as such pursuant to Section 3(d).
(n) "Eligible Employee" means each officer and other salaried
employees of the Company or its subsidiaries who are deemed to impact
the Company's annual results, as determined by the Committee.
(o) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time. References to any provision of the
Exchange Act shall be deemed to include successor provisions thereto
and regulations thereunder.
(p) "Executive Group" means the Chief Executive Officer of the
Company and other key executives of the Company or its subsidiaries who
have been designated as such by the Chief Executive Officer with
Committee approval.
(q) "Participant" means an Eligible Employee designated to
participate in the Plan for a designated Performance Year.
- 2 -
<PAGE> 5
(r) "Plan" means this Alumax Inc. 1993 Annual Incentive Plan
as Amended and Restated.
(s) "Performance Objectives" mean the measures of performance
specified by the Committee (or the CEO, if assigned by the Committee)
in accordance with Section 4(a), the achievement of which will trigger
the vesting of Awards.
(t) "Performance Year" means the calendar year performance
during all or part of which a Participant's entitlement to receive
payment of an Award is based.
(u) "Salary" means a Participant's annual base salary rate as
in effect on September 30 of each Performance Year or, in the event of
a Participant's termination during a Performance Year, on the date of
termination.
(v) "Spinoff" means the distribution of shares of Common
Stock, $.01 par value, of the Company by AMAX Inc. to shareholders of
AMAX Inc. in connection with which the Company registered such class of
Common Stock with the Securities and Exchange Commission under Section
12 of the Exchange Act.
(w) "Stock" means the Company's Common Stock, $.01 par value,
and such other securities as may be substituted (or resubstituted) for
Stock.
(x) "Target Award" means a fixed amount, specified percentage
of a Participant's Salary, or specified portion of an Award Pool (or
combination thereof) payable based upon 100% achievement of Performance
Objectives.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered
by the Committee. The Committee shall have full and final authority, in
each case subject to and consistent with the provisions of the Plan, to
select Participants, grant Awards, determine the type, number, and
other terms and conditions of, and all other matters relating to,
Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of
the Plan, construe and interpret the Plan and Award agreements and
correct defects, supply omissions, or reconcile inconsistencies
therein, and to make all other decisions and determinations as the
Committee may deem necessary or advisable for the administration of the
Plan.
(b) Manner of Exercise of Committee Authority. The Committee
shall exercise sole and exclusive discretion on any matter relating to
a Participant subject to Section 16 of the Exchange Act if and to the
extent necessary to obtain the exemption under Rule 16b-3 under the
Exchange Act. Any action of the Committee shall be final, conclusive,
and binding on all persons, including the Company, its subsidiaries,
Participants, persons claiming rights from or through a Participant,
and stockholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of the Company or any
subsidiary, or committees thereof, the authority, subject to such terms
as the Committee shall determine, to perform administrative functions
and, with respect to
- 3 -
<PAGE> 6
Participants not subject to Section 16 of the Exchange Act, to perform
such other functions as the Committee may determine, to the extent
permitted under Rule 16b-3 and applicable law.
(c) Limitation of Liability. The Committee may appoint agents
to assist it in administering the Plan. The Committee and each member
thereof shall be entitled to, in good faith, rely or act upon any
report or other information furnished to him by any officer or employee
of the Company or a subsidiary, the Company's independent certified
public accountants, consultants, or any other agent assisting in the
administration of the Plan. Members of the Committee and any officer or
employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee shall not be personally liable for any action
or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action or
determination.
(d) Performance-Based Awards to "Designated Participants."
Prior to March 31 of each Performance Year, the Committee may, in its
sole discretion, designate any Participant, whom it deems likely to be
at the time compensation will be paid under an Award a "covered
employee" under Section 162(m) of the Code and whose compensation may
exceed $1 million in such year and be subject to the limitation on tax
deductibility under Section 162(m) of the Code, as a "Designated
Participant" to be granted an Award under this Section 3(d) that will
not be subject to such limitations on deductibility under Section
162(m) of the Code. Notwithstanding any provision of the Plan to the
contrary, the Committee may, in its discretion, reduce but not increase
the amount payable under any such Award to such a Designated
Participant. All determinations by the Committee as to the achievement
of Performance Objectives (as described below in Section 4(a)(i))
applicable to such an Award shall be made in writing, and the Committee
may not exercise discretion to modify the Performance Objectives or the
vesting conditions (other than with respect to the death or disability
of such Designated Participant or in the event of a Change in Control)
with respect to such Award if the exercise of such discretion would
cause such Award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m)(4)(C) of the Code.
4. Awards
(a) Performance Objectives, Target Awards and Award Levels.
(i) Prior to March 31 of each Performance Year, the
Committee (or the CEO, if assigned by the Committee) shall establish
Performance Objectives for such Performance Year. Performance
Objectives may specify measures of performance of the Company as a
whole, subsidiaries, or other business units within the Company or
subsidiaries, measures of individual performance of the Participant, or
such other objectives (and combinations of objectives) the achievement
of which is expected to benefit the Company and its stockholders. A
single Performance Objective may be specified for all Participants, or
separate Performance Objectives may be specified for different groups
of Participants or for individual Participants. The Performance
Objectives that may be established with respect to an Award in a
Performance Year to Designated Participants are consolidated,
subsidiary or business unit operating profits before interest expense
and taxes, consolidated, subsidiary or business unit pre-tax profits,
consolidated, subsidiary or business unit cashflow, net income,
earnings per share, return on average equity, and/or return on invested
capital.
- 4 -
<PAGE> 7
(ii) Prior to March 31 of each Performance Year, the
Committee (or the CEO, if assigned by the Committee) shall establish
Target Awards and, if deemed appropriate, Award Levels and/or Award
Pools. Such Target Awards will specify the Award payable to each
Participant upon 100% achievement of the Performance Objectives
applicable to such Participant. In addition, Award Levels may be
established to determine whether, and the extent to which, a portion of
the Target Award shall be payable to a Participant if the applicable
Performance Objectives are not fully achieved, and whether, and the
extent to which, payments in addition to the Target Award shall be made
if the applicable Performance Objectives are exceeded. In addition,
Award Pools may be established on a formula or discretionary basis, and
the payment of Awards and the amount of Awards may be contingent on the
allocation of funds to such Award Pools.
(iii) The Committee (or the CEO, if assigned by the
Committee) is authorized at any time during or after a Performance
Year, in its sole and absolute discretion, to adjust, modify, or
specify new Performance Objectives, Target Awards, Award Levels, Award
Pools, and related terms and conditions, (x) in recognition of
extraordinary or nonrecurring items affecting the financial statements
of the Company or any subsidiary, or in response to changes in
applicable laws, regulations, or accounting principles, (y) with
respect to any Participant whose position or duties with the Company or
any subsidiary changes during a Performance Year, or (z) with respect
to any person who first becomes a Participant after the first day of
the Performance Year.
(iv) The maximum Award that may be made to any
Participant in any Performance Year shall be $3,000,000.
(b) Determination of Awards.
(i) As promptly as practicable following the end of
each Performance Year, the Committee (or the CEO, if assigned by the
Committee) shall determine whether and the extent to which Performance
Objectives applicable to Participants were achieved, the extent to
which amounts are allocable to Award Pools, and the Awards that
correspond to such achievement and/or allocations as specified under
the Award Levels for the Performance Year. The Committee may, in its
sole and absolute discretion, in view of the Committee's assessment of
the business strategy of the Company and subsidiaries, performance of
comparable organizations, economic and business conditions, and any
other circumstances deemed relevant, increase or decrease final Award
amounts otherwise determined under the first sentence of this Section
4(b)(i).
(ii) Each Participant shall be entitled to an Award in
accordance with the Target Award and any Award Levels (as adjusted)
applicable to him or her based on the extent to which the Performance
Objectives applicable to him or her have been achieved and funds have
been allocated under any Award Pools applicable to him or her,
provided, however, that the Committee may determine, in its sole and
absolute discretion, that a Participant shall not receive an Award if
the Participant has received an unsatisfactory personal performance
assessment for the Performance Year (whether or not such personal
performance assessment was a component of the Participant's Performance
Objectives for the Performance Year).
(iii) Unless otherwise determined by the Committee, if a
Participant ceases to be employed by the Company or a subsidiary prior
to the end of a Performance Year for any
- 5 -
<PAGE> 8
reason other than death, retirement, disability (as determined by the
Committee) or transfer to a subsidiary, no portion of his or her Award
for such Performance Year shall be payable unless otherwise determined
by the Committee (or the CEO if assigned by the Committee). If such
cessation of employment results from such Participant's death,
retirement, disability (as determined by the Committee) or transfer to
a subsidiary or to another subsidiary, the Committee (or the CEO if
assigned by the Committee) shall estimate in its sole and absolute
discretion the level of achievement of Performance Objectives
applicable to such Participant and/or the estimated amount allocable to
any Award Pool applicable to such Participant during the period of such
Performance Year prior to such cessation, and such Participant or his
or her Beneficiary shall be entitled to receive payment of the
percentage of his or her Target Award or Award Level amount as
determined in accordance with this Section 4(b)(iii) for the pro rata
portion of such Performance Year during which such Participant was
employed by the Company or a subsidiary, unless payment of a greater
percentage is approved in the sole and absolute discretion of the
Committee.
(c) Payment of Final Awards.
(i) Except as otherwise provided in paragraph (ii) and
(iii) below, each Participant shall receive payment, in a cash lump
sum, of his or her final Award as soon as practicable following the
determination in respect thereof made pursuant to Section 4(b).
(ii) The Committee (or the CEO, if assigned by the
Committee) may specify that all or a portion of any Award shall be paid
by issuance or delivery of shares of the Company's Stock having a fair
market value, as determined by the Committee, equal to the cash value
of an Award at the date of grant or to the cash amount of the Award
that would otherwise have been payable at the date of payment. Such
shares shall be subject to such conditions, including deferral of
delivery, restrictions on transferability, deemed reinvestment of
dividends in additional shares, and other terms and conditions as shall
be specified by the Committee (or the CEO, if assigned by the
Committee). Stock issuable or deliverable under this provision to
Participants who are subject to Section 16 of the Exchange Act shall be
issued or delivered under the Company's 1993 Long Term Incentive Plan
(the "1993 Plan") in accordance with such terms and conditions as the
committee administering the 1993 Plan may specify for these purposes.
Shares issuable or deliverable under this provision to Participants who
are not subject to Section 16 of the Exchange Act may, but need not, be
issued or delivered under the 1993 Plan.
(iii) Each Participant shall have the right to defer his
or her receipt of part or all of any payment due with respect to all or
a portion of a final Award. Any Participant desiring to exercise this
right must file a timely election with the Committee on a form provided
by the Company. The portion of any Award, the payment of which has been
deferred pursuant to this Section 4(c)(iii), shall be deemed invested
from the date payment would have been made but for such deferral to the
date of payment in investment options as determined from time to time
by the Committee, such determination to be in accordance with the
requirements of Section 162(m) of the Code with respect to Designated
Participants. Amounts deferred hereunder, as adjusted to reflect
crediting of interest or changes in value resulting from the deemed
investment thereof, shall be non-forfeitable and shall be paid at the
date(s) specified pursuant to this Section 4(c); provided, however,
that nothing herein shall preclude a Participant from exchanging his or
her right to receive deferred amounts hereunder for non-transferable
awards
- 6 -
<PAGE> 9
or rights granted under another plan or arrangement of the Company, if
and to the extent that the Company offers such an exchange to the
Participant.
(iv) In the event of the death of a Participant, any
payments hereunder due to such Participant shall be paid to his or her
Beneficiary.
(v) In the event of a Change in Control, any payments
hereunder due to such Participant shall be paid in a cash lump sum no
later than fifteen (15) days after a Change in Control unless otherwise
provided in an irrevocable deferral election form filed prior to such
event.
5. General Provisions
(a) Taxes. The Company or any subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Participants to satisfy obligations
for the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority for the Company to withhold or
receive Stock or other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations, either on a mandatory or
elective basis in the discretion of the Committee.
(b) Limitations on Rights Conferred under Plan and
Beneficiaries.
(i) Neither status as a Participant nor receipt or
completion of a deferral election form shall be construed as a
commitment that any Award will become payable under the Plan. Nothing
in the Plan shall be deemed to give any Eligible Employee any right to
participate in the Plan except in accordance herewith.
(ii) Nothing contained in the Plan or in any documents
related to the Plan or to any Award shall confer upon any Eligible
Employee or Participant any right to continue as an Eligible Employee,
Participant or in the employ of the Company or a subsidiary or
constitute any contract or agreement of employment, or interfere in any
way with the right of the Company or a subsidiary to reduce such
person's compensation, to change the position held by such person or to
terminate the employment of such Eligible Employee or Participant, with
or without cause, but nothing contained in this Plan or any document
related thereto shall affect any other contractual right of any
Eligible Employee or Participant.
(iii) Except as specifically authorized in this Plan, no
benefit payable under, or interest in, this Plan (including any right
that may constitute a derivative security within the meaning of the
general definition of Rule 16a-1(c)(3) as in effect prior to August 15,
1996 under the Exchange Act) shall be transferable by a Participant
except by will or the laws of descent and distribution or otherwise be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any such attempted
action shall be void and no such benefit or interest shall be, in any
manner, liable for, or subject to, debts, contracts, liabilities,
engagements or torts of any Eligible Employee or Beneficiary. Any
attempt at transfer, assignment or other alienation prohibited by the
preceding sentence shall be
- 7 -
<PAGE> 10
disregarded and all amounts payable hereunder shall be paid only in
accordance with the provisions of the Plan.
(c) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any amounts payable to a Participant
pursuant to an Award, nothing contained in the Plan (or in any
documents related thereto), nor the creation or adoption of the Plan,
the grant of any Award, or the taking of any other action taken
pursuant to the provisions of the Plan shall give any such Participant
any rights that are greater than those of a general creditor of the
Company; provided, however, that the Committee may authorize the
creation of trusts or make other arrangements to meet the Company's
obligations under the Plan pursuant to any Award, which trusts or other
arrangements shall be consistent with the "unfunded" status of the Plan
unless the Committee otherwise determines with the consent of each
affected Participant.
(d) Governing Law; Arbitration. The validity, construction,
and effect of the Plan, any rules and regulations relating to the Plan,
and any Award agreement shall be determined in accordance with the
Delaware General Corporation Law, to the extent applicable, other laws
(including those governing contracts) of the State of Delaware, without
giving effect to principles of conflicts of laws, and applicable
federal law. If any provision hereof shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions shall continue to be fully effective. Any dispute or
controversy arising under or in connection with this Plan shall be
settled exclusively by arbitration in Atlanta, Georgia by three
arbitrators in accordance with the rules of the American Arbitration
Association in effect at the time of submission to arbitration.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction. For purposes of settling any dispute or controversy
arising hereunder or for the purpose of entering any judgment upon an
award rendered by the arbitrators, the Company and the Participant
hereby consent to the jurisdiction of any or all of the following
courts: (i) the United States District Court for the Northern District
of Georgia, (ii) any of the courts of the State of Georgia, or (iii)
any other court having jurisdiction. The Company and the Participant
hereby waive, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to such jurisdiction and
any defense of inconvenient forum. The Company and the Participant
hereby agree that a judgment upon an award rendered by the arbitrators
may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
(e) Amendment and Termination of Plan and Awards.
Notwithstanding anything herein to the contrary, the Board of Directors
may, at any time, terminate or, from time to time, amend, modify or
suspend the Plan and the terms and provisions of any Awards theretofore
awarded to any Participants which have not been settled by payment (or
would have been settled by payment but for an election to defer payment
made pursuant to Section 4(c)(iii)). No Award may be granted during any
suspension of the Plan or after its termination.
(f) Effective Date. The Plan became effective upon its
approval by stockholders of the Company on October 28, 1993. The
amendment and restatement of the Plan shall become effective upon its
approval by the stockholders of the Company at the 1995 Annual Meeting.
The Plan shall remain in effect until such time as it may be terminated
pursuant to Section 5(e).
- 8 -
<PAGE> 11
6. Change in Control.
(a) Payment of Awards.
(i) Notwithstanding any provision of this Plan to the
contrary, in the event of a Change in Control, a Participant shall be
entitled to receive an Award for the Performance Year in progress on
the date of such Change in Control, equal to a pro rata portion of his
or her full Target Award for such Performance Year as if 100% of the
Performance Objectives were fully met and full allocations had been
made to all Award Pools based on the number of days from the beginning
of the Performance Year to the date of the Change in Control. Such
Award shall be payable for all purposes of this Plan.
(ii) All amounts payable pursuant to this Section 6(a)
shall be made in a cash lump sum to the Participant no later than
fifteen (15) days after the date of a Change in Control unless
otherwise provided in an irrevocable deferral election form filed by
the Participant prior to such event. Nothing in the Plan shall prevent
the Committee from continuing Awards, to the extent not paid under this
provision, after a Change in Control.
(b) Termination of Employment After a Change in Control.
(i) Notwithstanding any provision of this Plan to the
contrary (including, without limitation, Sections 4(b)(iii) and
5(b)(ii) hereof), if at any time during the two-year period commencing
on the date of a Change in Control the employment of an Eligible
Employee who was a Participant at, or for the Performance Year in
progress at or immediately prior to, the date of a Change in Control
with the Company or a subsidiary is terminated for any reason other
than for Cause, then such Participant shall receive (to the extent not
otherwise paid under Section 6(a)) a lump sum payment in cash equal to
the sum of (x) a pro rata portion of his or her full Target Award on
the date of termination of employment based on the number of days
during the year such Participant was employed by the Company or a
subsidiary, and (y) any previously awarded and unpaid Award amounts.
(ii) All amounts payable pursuant to this Section 6(b)
shall be paid no later than fifteen (15) days after the date of
termination of employment of such Participant unless otherwise provided
in an irrevocable deferral election form filed by the Participant prior
to such event.
(c) Amendment and Termination of Plan and Awards.
Notwithstanding any provision of this Plan to the contrary (including,
without limitation, Section 5(e) hereof), upon the occurrence of a
Change in Control and at all times thereafter, neither the Board of
Directors nor the Committee may suspend, amend or modify the provisions
of this Section 6 or amend, modify, terminate or suspend this Plan, in
whole or in part, in any manner that would adversely affect the right
of any Eligible Employee or Participant to receive the Awards otherwise
provided under this Plan as of the effective date of such action.
(d) Other Plan Provisions Unaffected. Nothing in this Section
6 shall affect the operation of the provisions of this Plan prior to a
Change in Control.
- 9 -
<PAGE> 1
EXHIBIT 10.06
ALUMAX INC.
- --------------------------------------------------------------------------------
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
AS AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
ALUMAX INC.
- --------------------------------------------------------------------------------
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
AS AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purpose ................................................ 1
2. Definitions ............................................ 1
3. Administration ......................................... 4
4. Eligibility ............................................ 4
5. Stock Grants ........................................... 4
6. Deferral of Stock Grants ............................... 4
7. Stock Options .......................................... 6
8. Amendment and Termination .............................. 7
9. Adjustments for Changes in Capitalization .............. 7
10. Regulatory Compliance .................................. 8
11. Miscellaneous .......................................... 8
</TABLE>
<PAGE> 3
NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN
1. Purpose. The purpose of this Non-Employee Directors' Stock
Compensation Plan is to provide certain incentives and compensation to Eligible
Board Members of Alumax Inc. and to encourage the highest level of director
performance by providing such Eligible Board Members with a proprietary interest
in the Company by granting them shares of the Company's Common Stock, $.01 par
value, and options to purchase such stock.
2. Definitions. The following terms shall have the meanings specified
below.
(a) "Beneficial Owner", with respect to any securities, shall mean any
person who, directly or indirectly, has or shares the right to vote or dispose
of such securities or otherwise has "beneficial ownership" of such securities
(within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on
the effective date of the Plan) under the Exchange Act, including pursuant to
any agreement, arrangement or understanding (whether or not in writing);
provided, however, that (i) a person shall not be deemed the Beneficial Owner of
any security as a result of any agreement, arrangement or understanding to vote
such security (A) arising solely from a revocable proxy or consent solicited
pursuant to, and in accordance with, the applicable provisions of the Exchange
Act and the rules and regulations thereunder or (B) made in connection with, or
otherwise to participate in, a proxy or consent solicitation made, or to be
made, pursuant to, and in accordance with, the applicable provisions of the
Exchange Act and the rules and regulations thereunder, in either case described
in clause (A) or clause (B) above whether or not such agreement, arrangement or
understanding is also then reportable by such person on Schedule 13D under the
Exchange Act (or any comparable or successor report), and (ii) a person engaged
in business as an underwriter of securities shall not be deemed to be the
Beneficial Owner of any securities acquired through such person's participation
in good faith in a firm commitment underwriting until the expiration of forty
days after the date of such acquisition.
(b) "Beneficiary" shall mean the person or persons (including, without
limitation, any trustee) last designated by a Participant to receive the
benefits specified hereunder in the event of the Participant's death, or if
there is no designated Beneficiary or surviving Beneficiary, the Participant's
estate.
(c) "Board" shall mean the Company's Board of Directors.
(d) "Change in Control" shall mean the occurrence of any of the following
events:
(i) any person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 20 percent or more of the
combined voting power of the Company's then-outstanding securities (a "20%
Beneficial Owner"); provided, however, that (a) the term "20% Beneficial
Owner" shall not include any Beneficial Owner who has crossed such 20
percent threshold solely as a result of an acquisition of securities
directly from the Company, or solely as a result of an acquisition by the
Company of Company securities, until such time thereafter as such person
acquires additional voting securities other than directly from the Company
and, after giving effect to such acquisition, such person would constitute
a 20% Beneficial Owner; and (b) with respect to any person eligible to file
a Schedule 13G pursuant to Rule 13d-1(b)(1) under the Exchange Act with
respect to
<PAGE> 4
Company securities (an "Institutional Investor"), there shall be excluded
from the number of securities deemed to be beneficially owned by such
person a number of securities representing not more than 10 percent of the
combined voting power of the Company's then-outstanding securities;
(ii) during any period of two consecutive years beginning after the Stock
first became registered under Section 12 of the Exchange Act, individuals
who at the beginning of such period constitute the Board together with
those individuals who first became Directors during such period (other than
by reason of an agreement with the Company in settlement of a proxy contest
for the election of directors) and whose election or nomination for
election to the Board was approved by a vote of at least two-thirds (2/3)
of the Directors then still in office who either were Directors at the
beginning of the period or whose election or nomination for election was
previously so approved (the "Continuing Directors"), cease for any reason
to constitute a majority of the Board;
(iii) the stockholders of the Company approve a merger, consolidation,
recapitalization or reorganization of the Company, or a reverse stock split
of any class of voting securities of the Company, or the consummation of
any such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total voting
power represented by the voting securities of the Company or the surviving
entity outstanding immediately after such transaction being beneficially
owned by persons who together owned at least 75% of the combined voting
power of the voting securities of the Company outstanding immediately prior
to such transaction, with the relative voting power of each such continuing
holder compared to the voting power of each other continuing holder not
substantially altered as a result of the transaction; provided that, for
purposes of this paragraph (iii), such continuity of ownership (and
preservation of relative voting power) shall be deemed to be satisfied if
the failure to meet such 75% threshold (or to preserve such relative voting
power) is due solely to the acquisition of voting securities by an employee
benefit plan of the Company or such surviving entity or of any subsidiary
of the Company or such surviving entity; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale or
disposition of all or substantially all the assets of the Company;
provided, however, that a Change in Control shall not be deemed to have
occurred if one of the following exceptions applies:
(1) None of the foregoing conditions would have been satisfied but for one
or more of the following persons acquiring or otherwise becoming the
Beneficial Owner of securities of the Company: (A) any person who has
entered into a binding agreement with the Company, which agreement has been
approved by two-thirds (2/3) of the Continuing Directors, limiting the
acquisition of additional voting securities by such person, the
solicitation of proxies by such person or proposals by such person
concerning a business combination with the Company (a "Standstill
Agreement"); (B) any employee benefit plan, or trustee or other fiduciary
thereof, maintained by the Company or any subsidiary of the Company; (C)
any subsidiary of the Company; or (D) the Company.
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<PAGE> 5
(2) None of the foregoing conditions would have been satisfied but for the
acquisition by the Company of another entity (whether by merger or
consolidation, the acquisition of stock or assets, or otherwise) in
exchange, in whole or in part, for securities of the Company, provided
that, immediately following such acquisition, the Continuing Directors
constitute a majority of the Board, or a majority of the board of directors
of any other surviving entity, and, in either case, no agreement,
arrangement or understanding exists at that time which would cause such
Continuing Directors to cease thereafter to constitute a majority of the
Board or of such other board of directors.
Notwithstanding the foregoing, no Change in Control shall be deemed to have
occurred with respect to a particular Participant if the Change in Control
results from actions or events in which such Participant is a participant
in a capacity other than solely as an officer, employee or director of the
Company.
(e) "Change in Control Stock Value" shall mean the value of a share of
Stock determined as follows:
(i) if the Change in Control results from an event described in clause
(iii) of the Change in Control definition, the highest per share price paid
for shares of Stock of the Company in the transaction resulting in the
Change in Control;
(ii) if the Change in Control results from an event described in clauses
(i), (ii) or (v) of the Change in Control definition and no event described
in clauses (iii) or (iv) of the Change in Control definition has occurred
in connection with such Change in Control, the highest sale price of a
share of Stock on any trading day during the sixty (60) consecutive trading
days immediately preceding and following the date of such Change in Control
as reported on the New York Stock Exchange Composite Tape and published in
the Wall Street Journal; or
(iii) if the Change in Control results from an event described in clause
(iv) of the Change in Control definition, the price per share for which
shares of Stock are redeemed or exchanged by their holders in the
transaction described in such clause (iv).
(f) "Committee" shall mean the Human Resources and Compensation Committee
of the Board of Directors of the Company, or such other Board committee as may
be designated by the Board to administer the Plan.
(g) "Company" shall mean Alumax Inc., a Delaware corporation, or any
successor corporation.
(h) "Deferred Stock Account" shall mean the account maintained by the
Company for each Participant in accordance with Section 6 hereof.
(i) "Eligible Board Member" shall mean a member of the Board who is not
an employee of the Company or its subsidiaries or affiliates.
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<PAGE> 6
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(k) "Fair Market Value" shall mean the fair market value of Stock,
awards, or other property determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Stock as of any given date shall mean the closing sale
price of Stock reported on the Composite Tape for securities listed on the New
York Stock Exchange in the Wall Street Journal for such date, or, if no Stock
was traded on that date, on the next preceding day on which there was such a
trade.
(l) "Participant" shall mean the holder of a Stock Option or a person for
whom a Deferred Stock Account has been established.
(m) "Plan" shall mean this Non-Employee Directors Stock Compensation Plan.
(n) "Retirement" shall mean termination of service on the Board on or
after a Board member's attainment of age [70].
(o) "Stock" shall mean the Company's Common Stock, $.01 par value.
(p) "Stock Option" shall mean an option to purchase Stock granted
pursuant to Section 7 hereof.
3. Administration. The Committee shall have authority to interpret the
Plan; to adopt, amend, and rescind administrative regulations to further the
purposes of the Plan; to maintain or cause to be maintained all necessary
records for administration of the Plan; and to take any other action necessary
for the proper operation of the plan. However, the Committee shall have no
discretion to vary the amount or terms of awards granted under the Plan except
as provided in Section 9.
4. Eligibility. To be eligible to receive an award under the Plan, a
person must be an Eligible Board Member on the date of such award.
5. Stock Grants. Each Eligible Board Member shall be granted 850 shares
of Stock on February 1 of each year. Stock granted under this Section 5 shall
be fully vested and, subject to any restrictions imposed pursuant to Section
10, freely transferable.
6. Deferral of Stock Grants. An Eligible Board Member may elect to defer
the delivery of Stock scheduled to be delivered on any February 1 by filing a
deferral election pursuant to this Section 6.
(a) Deferral Election. To defer a Stock grant for any year, an Eligible
Board Member must file a written deferral election with the Company no later
than the July 31 immediately preceding the February 1 on which the Stock is
otherwise scheduled to be delivered. Notwithstanding the foregoing, a person
who first becomes an Eligible Board Member after July 31 may file a deferral
election within 30 days after the date such person becomes an Eligible Board
Member. The
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<PAGE> 7
deferral election shall state the number of shares of stock that the Eligible
Board Member elects to defer and the time when he or she desires distribution
of his or her Deferred Stock Account. An election to defer delivery of Stock
may be revoked or changed for future years if such revocation or change is made
by the July 31 preceding the date of the applicable Stock grant.
(b) Designation of Beneficiary. Upon forms provided by the Committee,
each Participant shall designate the Beneficiary or Beneficiaries to receive
the amounts distributable in the event of such Participant's death. A
Participant may from time to time change the designated Beneficiary or
Beneficiaries, without the consent of such Beneficiary or Beneficiaries, by
filing a new designation in writing with the Committee. The Company and the
Committee may rely upon the Beneficiary designation last filed in accordance
with the terms of the Plan.
(c) Credits to Account. Shares subject to a Participant's deferral
election shall be credited as deferred shares to a Deferred Stock Account
maintained by the Company for the benefit of the Participant. Whenever
dividends are paid with respect to shares of Stock, each Participant's Deferred
Stock Account shall be credited with additional shares of deferred stock
(including fractions) equal in value to the amount of the dividend paid on a
single share of Stock multiplied by the number of deferred shares (including
fractions) credited to the Participant's Deferred Stock Account as of the
record date for dividend purposes. For purposes of crediting dividends, the
value of Stock shall be determined as of the day dividends are actually paid on
Stock, using the closing market price of the Stock on the Composite Tape of the
New York Stock Exchange for that date. If the Composite Tape is not operating
on such date, or Stock is not traded there on such date, the value shall be
computed using the closing price on the next preceding business day on which
such Stock was traded thereon. The interest of a Participant in amounts
credited to his Deferred Stock Account shall be fully vested and nonforfeitable
at all times.
(d) Time of Distribution. A Participant may elect to have the balance of
his Deferred Stock Account distributed to him (i) as soon as reasonably
possible after the Participant ceases to be a member of the Board, or (ii) on
the January 1 over a specified number of years after the Participant ceases to
be a member of the Board. Such an election shall be made on the deferral
election filed pursuant to Section 6(a) and shall be irrevocable once made.
However, a Participant may elect a different distribution date for Stock
deferred in subsequent years by filing a change of deferral election as
provided in Section 6(a).
(e) Payment Upon Death. Notwithstanding any election under Section 6(d),
if a Participant dies prior to distribution of his Deferred Stock Account, the
balance of the credit of the Participant's Deferred Stock Account as of the
date of death shall be paid, as soon as reasonably possible thereafter, to the
Participant's Beneficiary.
(f) Methods of Payment. All distributions under the Plan shall be in the
form of shares of Stock based on the number of whole shares of deferred stock
credited to the Participant's Deferred Stock Account on the date as of which
the distribution occurs and a cash payment for any fraction of a share.
(g) Change in Control. Notwithstanding any provision of the Plan to the
contrary, in the event of a Change in Control, all shares of deferred stock
credited to a Participant's Deferred Stock Account shall be converted into cash
in an amount equal to the product of (i) the Change in Control
-5-
<PAGE> 8
Stock Value, multiplied by (ii) the number of shares of deferred stock that
have been credited to the Participant's Deferred Stock Account as of the date
of the Change in Control. The amount of cash resulting from the foregoing
conversion of shares of deferred stock in a Participant's Deferred Stock
Account shall, at the election of the Participant made in a manner approved by
the Committee, be credited to a bookkeeping account for such Participant or
paid out in a lump sum no later than fifteen (15) days after the date of the
Change in Control. If cash is credited to an account under the preceding
sentence, income shall be credited thereto from the date of the Change in
Control to the date of distribution at the base rate of Citibank, N.A., as in
effect from time to time during such period.
(h) Annual Reports. The Committee shall furnish each Participant with an
annual report indicating the number of shares of deferred stock credited to his
Deferred Stock Account as of the end of the preceding calendar year.
7. Stock Options. Each Eligible Board Member on December 1, 1993 shall
be granted a Stock Option to purchase 10,000 shares of Stock. Each person who
becomes an Eligible Board Member after such date shall be granted, on the first
Thursday in December after his election as an Eligible Board Member (and
provided he continues to be an Eligible Board Member on such date), a Stock
Option to purchase 10,000 shares of Stock. Stock Options granted under this
Section 7 shall be non-qualified Stock Options and shall have the following
terms and conditions:
(a) Exercise Price. The exercise price per share of Stock purchasable
under the Stock Option shall be the Fair Market Value of the Stock on the date
the Stock Option is granted.
(b) Option Term. The term of the Stock Option shall be ten years,
subject to earlier termination in the event of the optionee's death or
termination of service as an Eligible Board Member, as set forth below.
(c) Exercisability. Each Stock Option shall become exercisable with
respect to 3333 shares of Stock on the first anniversary of the date of grant,
an additional 3333 shares of Stock on the second anniversary of the date of
grant, and the remainder of the shares subject to the Stock Option on the third
anniversary of the date of grant, provided that the optionee is a member of the
Board on such date. Notwithstanding the preceding sentence, in the event of a
Change in Control, each Stock Option shall become fully vested and shall be
exchanged for cash in the amount equal to the excess of the Change in Control
Stock Value over the per share exercise price, multiplied by the number of
shares subject to the Stock Option.
(d) Method of Exercise. Each exercisable Stock Option may be exercised
in whole or in part at any time during the option period by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the
purchase price shall be made in cash (including cash equivalents), by delivery
of shares of Stock already owned by the optionee for at least six months, or
any combination of the foregoing. Stock delivered upon payment of the exercise
price shall be valued at the Fair Market Value of the Stock on the date of
exercise.
(e) Termination of Service as Board Member. If an optionee's status as a
member of the Board is terminated for any reason other than death, disability or
Retirement, his Stock Option may be exercised for a number of years from the
date of such termination equal to the number of full and partial years served as
an Eligible Board Member or the end of the option term, whichever occurs first,
and only to the extent such Stock Option was exercisable on the date of such
termination.
(f) Death of Board Member. If an optionee's status as member of the
Board is terminated by reason of the optionee's death, his Stock Option shall
become fully vested and may be exercised by his legal representatives only
until the end of the 12-month period following the optionee's death, or the end
of the option term, whichever occurs first.
(g) Disability or Retirement of Board Member. If an optionee's status as
a member of the Board is terminated by reason of the optionee's disability or
Retirement, his Stock Option shall become fully vested and may be exercised
throughout the remainder of the option term; provided, however, in the event of
the optionee's death following termination of his status as a member of
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<PAGE> 9
the Board by reason of the optionee's disability or Retirement, his Stock Option
may be exercised by his legal representatives only until the end of the 12-month
period following the optionee's death, or the end of the option term, whichever
occurs first.
(h) Non-transferability. No Stock Option shall be transferable by the
holder thereof other than by will or by the laws of descent and distribution.
During the optionee's lifetime, his Stock Option shall be exercisable only by
the optionee.
(i) No Stockholder Rights. An optionee shall have neither rights to
dividends nor other rights of a stockholder with respect to shares subject to a
Stock Option until he has given written notice of exercise and has paid for
such shares.
8. Amendment and Termination. The Board may discontinue the Plan at any
time or amend it from time to time. However, the Plan shall not be amended
more than once every six months, other than to comport with changes in the
Internal Revenue Code or the rules thereunder. Amendments may be made without
shareholder approval except as required to satisfy Rule 16b-3 under the
Exchange Act or other regulatory requirement. No amendment or discontinuance
of the Plan shall adversely affect any Stock Option previously granted without
the holder's written consent. The Company shall in no event have the power to
reduce the amount already credited to a Participant's Deferred Stock Account as
of the effective date of any discontinuance of the Plan nor to discontinue the
crediting of earnings on such amounts subsequent to said date. In the event of
a discontinuance of the Plan, the payment of a Participant's Deferred Stock
Account shall continue to be made in accordance with the provisions of the
Plan.
9. Adjustments for Changes in Capitalization. In the event of any merger,
reorganization, consolidation, sale of all or substantially all assets,
recapitalization, Stock dividend, Stock split, spin-off, split-up, extraordinary
dividend, distribution of assets or other change in corporate structure
affecting the Stock, a substitution or adjustment, as may be determined to be
appropriate by the Committee in its sole discretion, shall be made in the number
of shares subject to outstanding Stock Options, the exercise price per share of
outstanding Stock Options, the number of deferred shares credited to Deferred
Stock Accounts, and the amounts to be paid to or by award holders or the
Company, as the case may be, with respect to outstanding awards; provided,
however, that no such adjustment shall increase the aggregate value of any
outstanding award or affect any outstanding award more favorably than any other
outstanding award.
10. Regulatory Compliance. Each award under the Plan shall be subject to
the requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the Stock subject or related thereto
upon any securities exchange or under any state or federal law, (ii) the
consent or approval of any government regulatory body or (iii) an agreement by
the recipient of an award with respect to the disposition of Stock is necessary
or desirable (in connection with any requirement or interpretation of any
federal or state securities law, rule or regulation) as a condition of, or in
connection with, the granting of such award or the issuance, purchase or
delivery of Stock thereunder, such award shall not be granted or exercised, in
whole or in part, unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
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<PAGE> 10
11. Miscellaneous.
(a) No Interest in Assets. No Participant or any other person shall have
any interest in any shares of Stock credited to his Deferred Stock Account or in
any specific asset of the Company by reason of any amount credited to him
hereunder, nor any rights to receive any distribution under the Plan except as
and to the extent expressly provided in the Plan. There shall be no funding of
any benefits which may become payable on account of a deferral election
hereunder. No trust shall be created in connection with or by the execution or
adoption of this Plan. Any benefits which become payable hereunder shall be
paid from the general assets of the Company. Nothing in the Plan shall be
deemed to give any person any right to participate in the Plan, except in
accordance with the provisions of the Plan.
(b) Restriction Against Assignment. The Company shall pay all amounts
payable hereunder only to the person or persons designated by the Plan and not
to any other person or corporation. No part of a Participant's Deferred Stock
Account shall be liable for the debts, contracts, or engagements of any
Participant, his Beneficiaries, or successors in interest, nor shall it be
subject to execution by levy, attachment or garnishment or by any other legal
or equitable proceeding, nor shall any such person have any right to alienate,
anticipate, commute, pledge, encumber, or assign any benefits or payments
hereunder in any manner whatsoever.
(c) Receipt or Release. Any payment to any Participant or his Beneficiary
in accordance with the provisions of the Plan shall, to the extent thereof, be
in full satisfaction of all claims against the Committee and the Company and the
Committee may require such Participant or Beneficiary, as a condition precedent
to such payment, to execute a receipt and release to such effect.
(d) Payment on Behalf of Minor. In the event any amount becomes payable
under the Plan to a minor or a person who, in the sole judgment of the
Committee, is considered by reason of physical or mental condition to be unable
to give a valid receipt therefor, the Committee may direct that such payment be
made to any person found by the Committee, in its sole judgment, to have assumed
the care of such minor or other person. Any payment made pursuant to such
determination shall constitute a full release and discharge of the Committee and
the Company.
(e) Forfeiture. Any payment or distribution to a Participant under the
Plan which is not claimed by the Participant, Beneficiary, or other person
entitled thereto within three years after becoming payable shall be forfeited
and cancelled and shall remain with the Company and no other person shall have
any right thereto or interest therein. The Company shall not have any duty to
give notice that amounts are payable under the Plan to any person other than
the Participant and the designated Beneficiary or Beneficiaries.
(f) Withholding. The Company may deduct from the amount of all
distributions under the Plan any taxes required to be withheld by the Federal
or any State or local government.
(g) Governing Law; Arbitration. This Plan shall be construed,
administered and enforced according to the laws of the State of Delaware,
without regard to the conflict of laws principles thereof. Any dispute or
controversy arising under or in connection with this Plan shall be settled
exclusively by arbitration in Atlanta, Georgia by three arbitrators in
accordance with the rules of the American Arbitration Association in effect at
the time of submission to arbitration. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. For purposes of settling
any dispute or controversy arising hereunder or for the purpose of entering any
judgment upon an
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<PAGE> 11
award rendered by the arbitrators, the Company and each Participant hereby
consent to the jurisdiction of any or all of the following courts: (i) the
United States District Court for the Northern District of Georgia, (ii) any of
the courts of the State of Georgia, or (iii) any other court having
jurisdiction. The Company and each Participant hereby waive, to the fullest
extent permitted by applicable law, any objection which it may now or hereafter
have to such jurisdiction and any defense of inconvenient forum. The Company and
each Participant hereby agree that a judgment upon an award rendered by the
arbitrators may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
(h) Reimbursement of Legal Fees. All reasonable costs and expenses
(including fees and disbursements of counsel) incurred by a Participant in
seeking to obtain or enforce any payment, benefit or right provided under the
Plan shall be paid by the Company; provided; however, that the Participant
shall be required to repay any such amounts to the Company to the extent that
an arbitrator or a court of competent jurisdiction issues a final, unappealable
order setting forth a determination that the position taken by the Employee was
frivolous or advanced in bad faith.
(i) No Right of Continued Service. No award under this Plan shall confer
upon any member of the Board any right to continued service on the Board.
(j) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to shareholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable.
(k) Captions. Captions in this Plan are not part of the provisions
hereof and shall have no force or effect.
(l) Gender. The masculine gender as used herein includes the feminine
gender.
(m) Successors and Assigns. This Plan shall inure to the benefit of, and
be binding upon, the parties hereto and their successors and assigns.
(n) Effective Date. The Plan shall be effective upon approval by the
Company's shareholders.
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<PAGE> 1
EXHIBIT 10.07
ALUMAX INC.
- --------------------------------------------------------------------------------
NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN
AS AMENDED ON OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
ALUMAX INC.
- --------------------------------------------------------------------------------
NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN
AS AMENDED OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purpose................................................................ 1
2. Definitions............................................................ 1
3. Participation.......................................................... 4
a. Plan is Voluntary............................................. 4
b. Filing of Application......................................... 4
c. Designation of Beneficiary.................................... 5
4. Accrual of Benefits.................................................... 5
a. Deferred Compensation......................................... 5
b. Earnings...................................................... 5
c. Vesting....................................................... 6
5. Distribution of Benefits............................................... 6
a. Time of Distribution.......................................... 6
b. Payment Upon Death............................................ 6
c. Methods of Payment............................................ 6
6. The Administrator...................................................... 7
a. Appointment................................................... 7
b. Rights and Duties............................................. 7
c. Annual Reports................................................ 7
d. Information................................................... 7
e. Compensation, Indemnity and Liability......................... 8
7. Amendment and Discontinuance........................................... 8
a. Amendments.................................................... 8
b. Discontinuance of Plan........................................ 8
</TABLE>
<PAGE> 3
ALUMAX INC.
- --------------------------------------------------------------------------------
NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN
AS AMENDED OCTOBER 3, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
8. General Provisions..................................................... 8
a. No Interest in Assets......................................... 8
b. Restriction Against Assignment................................ 8
c. Receipt or Release............................................ 9
d. Payment on Behalf of Minor.................................... 9
e. Forfeiture.................................................... 9
f. Withholding................................................... 9
g. Governing Law; Arbitration.................................... 9
h. Captions...................................................... 10
i. Gender........................................................ 10
j. Successors and Assigns........................................ 10
k. Effective Date................................................ 10
9. Roll-Over for Former AMAX Inc. Directors................................ 10
</TABLE>
Annex A - Alumax Inc. Deferred Compensation Plan for Former Directors of AMAX
Inc.
<PAGE> 4
NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN
1. Purpose.
The purpose of this Non-Employee Directors' Deferred
Compensation Plan (the "Plan") is to assist Alumax Inc. (the "Company") in
recruiting qualified individuals to serve as non-employee members of the Board
of Directors of the Company, and to provide an incentive to such persons to
continue to serve the Company in that capacity.
2. Definitions.
Whenever the following terms are used herein, with the first
letter capitalized, they shall have the meanings specified below:
(a) "Account" means the account maintained by the
Administrator for each Participant which is to be credited, as hereinafter set
forth, with Stock equal in value to the amount of the Participant's Compensation
which is deferred pursuant to this Plan, together with the earnings thereon as
provided for herein.
(b) "Administrator" means the individual appointed by the
Board of Directors to administer the Plan.
(c) "Beneficial Owner", with respect to any securities, shall
mean any person who, directly or indirectly, has or shares the right to vote or
dispose of such securities or otherwise has "beneficial ownership" of such
securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are
in effect on the effective date of the Plan) under the Exchange Act, including
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided, however, that (i) a person shall not be deemed the
Beneficial Owner of any security as a result of any agreement, arrangement or
understanding to vote such security (A) arising solely from a revocable proxy or
consent solicited pursuant to, and in accordance with, the applicable provisions
of the Exchange Act and the rules and regulations thereunder or (B) made in
connection with, or otherwise to participate in, a proxy or consent solicitation
made, or to be made, pursuant to, and in accordance with, the applicable
provisions of the Exchange Act and the rules and regulations thereunder, in
either case described in clause (A) or clause (B) above whether or not such
agreement, arrangement or understanding is also then reportable by such person
on Schedule 13D under the Exchange Act (or any comparable or successor report),
and (ii) a person engaged in business as an underwriter of securities shall not
be deemed to be the Beneficial Owner of any securities acquired through such
person's participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Beneficiary" or "Beneficiaries" means the person or
persons (including, without limitation, any trustee) last designated by a
Participant to receive the benefits specified hereunder, in the event of the
Participant's death, or if there is no designated Beneficiary or surviving
Beneficiary, the Participant's estate.
<PAGE> 5
(e) "Board" means the Company's Board of Directors.
(f) "Board Member" shall mean a member of the Board who is not
an employee of the Company or its subsidiaries or affiliates.
(g) "Change in Control" shall mean the occurrence of any of
the following events:
(i) any person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 20
percent or more of the combined voting power of the Company's
then-outstanding securities (a "20% Beneficial Owner");
provided, however, that (a) the term "20% Beneficial Owner"
shall not include any Beneficial Owner who has crossed such 20
percent threshold solely as a result of an acquisition of
securities directly from the Company, or solely as a result of
an acquisition by the Company of Company securities, until
such time thereafter as such person acquires additional voting
securities other than directly from the Company and, after
giving effect to such acquisition, such person would
constitute a 20% Beneficial Owner; and (b) with respect to any
person eligible to file a Schedule 13G pursuant to Rule
13d-1(b)(1) under the Exchange Act with respect to Company
securities (an "Institutional Investor"), there shall be
excluded from the number of securities deemed to be
beneficially owned by such person a number of securities
representing not more than 10 percent of the combined voting
power of the Company's then-outstanding securities;
(ii) during any period of two consecutive years beginning
after the Stock first became registered under Section 12 of
the Exchange Act, individuals who at the beginning of such
period constitute the Board together with those individuals
who first became Directors during such period (other than by
reason of an agreement with the Company in settlement of a
proxy contest for the election of directors) and whose
election or nomination for election to the Board was approved
by a vote of at least two-thirds (2/3) of the Directors then
still in office who either were Directors at the beginning of
the period or whose election or nomination for election was
previously so approved (the "Continuing Directors"), cease for
any reason to constitute a majority of the Board;
(iii) the stockholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the
Company, or a reverse stock split of any class of voting
securities of the Company, or the consummation of any such
transaction if stockholder approval is not obtained, other
than any such transaction which would result in at least 75%
of the total voting power represented by the voting securities
of the Company or the surviving entity outstanding immediately
after such transaction being beneficially owned by persons who
together owned at least 75% of the combined voting power of
the voting securities of the Company outstanding immediately
prior to such transaction, with the relative voting power of
each such continuing holder compared to the voting power of
each other continuing holder not substantially altered as a
result of the transaction; provided that, for purposes of this
paragraph (iii), such continuity of ownership (and
preservation of relative voting power) shall be deemed to be
satisfied if the failure to meet such 75% threshold (or to
preserve such relative voting power) is due solely to the
acquisition of voting securities by an employee benefit plan
of the Company or such surviving entity or of any subsidiary
of the Company or such surviving entity;
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<PAGE> 6
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an
agreement for the sale or disposition of all or substantially
all the assets of the Company; or
(v) any other event which the Board determines shall
constitute a Change in Control for purposes of this Plan;
provided, however, that a Change in Control shall not be
deemed to have occurred if one of the following exceptions
applies:
(1) Unless a majority of the Continuing Directors of the
Company determines that the exception set forth in this
paragraph (1) shall not apply, none of the foregoing
conditions would have been satisfied but for one or more of
the following persons acquiring or otherwise becoming the
Beneficial Owner of securities of the Company: (A) any person
who has entered into a binding agreement with the Company,
which agreement has been approved by two-thirds (2/3) of the
Continuing Directors, limiting the acquisition of additional
voting securities by such person, the solicitation of proxies
by such person or proposals by such person concerning a
business combination with the Company (a "Standstill
Agreement"); (B) any employee benefit plan, or trustee or
other fiduciary thereof, maintained by the Company or any
subsidiary of the Company; (C) any subsidiary of the Company;
or (D) the Company.
(2) Unless a majority of the Continuing Directors of the
Company determines that the exception set forth in this
paragraph (2) shall not apply, none of the foregoing
conditions would have been satisfied but for the acquisition
by the Company of another entity (whether by merger or
consolidation, the acquisition of stock or assets, or
otherwise) in exchange, in whole or in part, for securities of
the Company, provided that, immediately following such
acquisition, the Continuing Directors constitute a majority of
the Board, or a majority of the board of directors of any
other surviving entity, and, in either case, no agreement,
arrangement or understanding exists at that time which would
cause such Continuing Directors to cease thereafter to
constitute a majority of the Board or of such other board of
directors.
Notwithstanding the foregoing, unless otherwise determined by
a majority of the Continuing Directors, no Change in Control
shall be deemed to have occurred with respect to a particular
Participant if the Change in Control results from actions or
events in which such Participant is a participant in a
capacity other than solely as an officer, employee or director
of the Company.
(h) "Change in Control Stock Value" shall mean the value
of a share of Stock determined as follows:
(i) if the Change in Control results from an event described
in clause (iii) of the Change in Control definition, the
highest per share price paid for shares of Stock of the
Company in the transaction resulting in the Change in Control;
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<PAGE> 7
(ii) if the Change in Control results from an event described
in clauses (i), (ii) or (v) of the Change in Control
definition and no event described in clauses (iii) or (iv) of
the Change in Control definition has occurred in connection
with such Change in Control, the highest sale price of a share
of Stock on any trading day during the sixty (60) consecutive
trading days immediately preceding and following the date of
such Change in Control as reported on the New York Stock
Exchange Composite Tape and published in the Wall Street
Journal; or
(iii) if the Change in Control results from an event described
in clause (iv) of the Change in Control definition, the price
per share for which shares of Stock are redeemed or exchanged
by their holders in the transaction described in such clause
(iv).
(i) "Committee" shall mean the Human Resources and
Compensation Committee of the Board of Directors of the Company or a
subcommittee thereof, or such other Board committee as may be designated by the
Board to administer the Plan.
(j) "Company" means Alumax Inc., a Delaware corporation, or
any successor corporation.
(k) "Compensation" means for any Plan Year all retainer,
meeting, committee and chair fees payable in cash to a Board Member for service
on the Board, before any reduction pursuant to this Plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(m) "Participant" means any Board Member who actually
participates in this Plan in any Plan Year and who is entitled to a benefit
hereunder.
(n) "Plan Year" shall mean each year beginning on the first
day of January and ending on the 31st day of December, commencing with the year
beginning on January 1, 1994.
(o) "Stock" means the Company's Common Stock, $.01 par value.
3. Participation.
(a) Plan is Voluntary.
Participation in the Plan is voluntary.
(b) Filing of Application.
To participate in the Plan for any Plan Year a Board Member
must file a written application with the Administrator no later than the June 30
immediately preceding such Plan Year. The Administrator shall notify each Board
Member of his prospective eligibility to participate in the Plan at least thirty
(30) days prior to the time he must file an application for participation.
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<PAGE> 8
Notwithstanding the foregoing, a person who first becomes a Board Member after
June 30 may file an application within 30 days of the date the individual
becomes a Board Member, and shall be effective to defer only Compensation earned
more than six months following the date of his application. The application for
participation shall signify the Board Member's acceptance of the benefits and
terms of the Plan, and state the portion of his Compensation that he elects to
defer and the time when the Board Member desires distribution of his benefits
under the Plan. An election to defer Compensation may be revoked or changed for
future Plan Years if such revocation or change is made at least six months prior
to the beginning of the Plan Year to which it relates. No deferral of
Compensation shall be effective and no Account shall be credited with deferred
Stock, unless and until the Committee approves the Participant's deferral
election.
(c) Designation of Beneficiary.
Upon forms provided by the Administrator, each Participant
shall designate the Beneficiary or Beneficiaries to receive the amounts
distributable in the event of such Participant's death. A Participant may from
time to time change the designated Beneficiary or Beneficiaries, without the
consent of such Beneficiary or Beneficiaries, by filing a new designation in
writing with the Administrator. [The spouse of a Participant shall join in any
designation of the Beneficiary or Beneficiaries other than such spouse.] The
Company and the Administrator may rely upon the Beneficiary designation last
filed in accordance with the terms of the Plan.
4. Accrual of Benefits.
(a) Deferred Compensation.
Each Board Member who elects to participate in this Plan for any Plan
Year must irrevocably elect to defer the receipt of all or a specified
percentage of his Compensation in accordance with the terms of Section 3(b).
Said amount shall be credited to such Board Member's Account in accordance with
Section 4(b) and shall be paid in accordance with Section 5.
(b) Earnings.
The amount of Compensation that each Participant elects to
defer under this Plan shall increase or decrease in value during the period of
deferral based on the market price of Stock. On the date the Plan is credited
with the deferred Compensation of a Participant (which shall be the same date
the Participant would have received such Compensation had a deferral election
not then been in effect), the Participant's Account shall be credited with a
number of shares of deferred Stock (including fractions) having a value equal to
the amount of the Participant's Compensation deferred on that date. The value of
Stock shall be determined using the closing market price of the Stock on the
Composite Tape of the New York Stock Exchange for that date. If the Composite
Tape is not operating on such date, or Stock is not traded there on such date,
the value shall be computed using the closing price on the next preceding
business day on which such Stock was traded thereon.
Whenever dividends are paid with respect to shares of Stock,
each Participant's Account shall be credited with additional shares of deferred
Stock (including fractions) equal in value to the amount of the dividend paid on
a single share of Stock multiplied by the number of shares of deferred Stock
(including fractions) credited to a Participant's Account as of the record date
for dividend purposes. For purposes of crediting dividends, the value of Stock
shall be
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<PAGE> 9
determined as of the day dividends are actually paid on Stock and in the same
manner as is used for crediting deferred Compensation to Accounts.
The number of shares of deferred Stock in each Participant's
Account shall be appropriately adjusted and modified upon the occurrence of any
stock split, reverse stock split, stock dividend, or stock consolidation.
Notwithstanding any provision of the Plan to the contrary, in the event of a
Change in Control, all shares of deferred Stock credited to a Participant's
Account shall be converted into cash in an amount equal to the product of (i)
the Change in Control Stock Value, multiplied by (ii) the number of shares of
deferred Stock that have been credited to each Participant's Account as of the
date of the Change in Control. The amount of cash resulting from the foregoing
conversion of shares of deferred Stock in a Participant's Account shall, at the
election of the Participant made in a manner approved by the Administrator, be
credited to such Participant's Account or paid out in a lump sum no later than
fifteen (15) days after the date of the Change in Control. If cash is credited
to a Participant's Account under this paragraph, income shall be credited
thereto from the date of the Change in Control to the date of distribution at
the base rate of Citibank, N.A., as in effect from time to time during such
period.
(c) Vesting.
The interest of each Participant in any benefit accrued
hereunder shall be fully vested and nonforfeitable at all times.
5. Distribution of Benefits.
(a) Time of Distribution.
A Participant may elect to have the balance of his Account
distributed to him (i) as soon as reasonably possible after the Participant
ceases to be a Board Member, or (ii) on the January 1 occurring a stated number
of years after the Participant ceases to be a Board Member in lump sum or up to
ten (10) installments. Such an election shall be made on the application filed
pursuant to Section 3(b) and shall be irrevocable once made. However, a
Participant may elect a different distribution date(s) for Compensation deferred
in subsequent years by filing a change of deferral election as provided in
Section 3(b).
(b) Payment Upon Death.
Notwithstanding any election under Section 5(a), if a
Participant dies prior to distribution of his Account, the balance of the credit
of the Participant's Account as of the date of death shall be paid, as soon as
reasonably possible thereafter, to the Participant's Beneficiary or
Beneficiaries.
(c) Methods of Payment.
Distributions under the Plan with respect to deferral
elections shall consist of shares of Stock equal to the number of whole shares
of Stock credited to the Participant's Account on the date as of which the
distribution(s) occurs and a cash payment for any fraction of a share. Each
Participant, or Beneficiary, agrees that prior to distribution of any benefit
under the Plan he will make such representations and execute such documents as
are deemed by the Administrator necessary to comply with applicable securities
laws.
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<PAGE> 10
6. The Administrator.
(a) Appointment.
An Administrator shall be appointed by the Board of Directors
to administer the Plan as provided herein.
(b) Rights and Duties.
The Administrator, on behalf of the Participants and their
Beneficiaries, shall enforce the Plan in accordance with its terms, shall be
charged with the general administration of the Plan, and shall have all powers
necessary to accomplish those purposes, including, but not by way of limitation,
the following:
(i) to compute and certify the amount and kind of benefits
payable to Participants and their Beneficiaries;
(ii) to maintain or to designate any person or entity to
maintain all the necessary records for the administration of
the Plan;
(iii) to make and publish such rules for the regulation of the
Plan as are not inconsistent with the terms hereof; and
(iv) to provide for disclosure of such information and filing
or provision of such reports and statements to Participants or
Beneficiaries under this Plan as the Administrator deems
appropriate.
All actions of the Administrator shall be conclusive on all persons interested
in the Plan except to the extent otherwise specifically indicated herein. The
Administrator may appoint a plan administrator and agents, and delegate thereto
such powers and duties in connection with the administration of the Plan as the
Administrator may from time to time prescribe.
(c) Annual Reports.
The Administrator shall furnish each Participant with an
annual report indicating the number of shares of Stock credited to his Account
as of the end of the preceding calendar year.
(d) Information.
To enable the Administrator to perform his functions, the Company shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their status as Board Members, their
contributions, and such other pertinent facts as the Administrator may require.
(e) Compensation, Indemnity and Liability.
The Administrator shall serve without bond, except as otherwise
required by law, and without compensation for his services hereunder. All
expenses of the Administrator shall be paid by the Company and the Company shall
furnish the Administrator with such clerical and other assistance as is
necessary in the performance of his duties.
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<PAGE> 11
The Administrator shall not be liable for any act or omission on his
part, excepting only his own willful misconduct or gross negligence. The Company
shall indemnify and save harmless the Administrator against any and all expenses
and liabilities arising out of his administration of the Plan, excepting only
expenses and liabilities arising out of his own willful misconduct or gross
negligence.
7. Amendment and Discontinuance.
(a) Amendments.
The Board shall have the right to amend the Plan from time to
time, and to amend or cancel any amendments; provided, however, that no
amendment shall reduce any amount already credited to a Participant's Account as
of the effective date of such amendment.
(b) Discontinuance of Plan.
It is the expectation of the Company that the Plan will be
continued indefinitely, but continuance of the Plan is not assumed as a
contractual obligation of the Company, and the right is reserved by the Company
at any time to reduce, suspend, or discontinue the Plan; provided, however, the
Company shall in no event have the power to reduce the amount already credited
to a Participant's Account as of the effective date of any such reduction,
suspension or discontinuance nor to discontinue the crediting of earnings on
such amounts subsequent to said date. In the event of a reduction, suspension or
discontinuance of the Plan, the payment of benefits accrued hereunder shall
continue to be made in accordance with the provisions of the Plan.
8. General Provisions.
(a) No Interest in Assets.
No Participant or any other person shall have any interest in
any shares of Stock credited to his Account or in any specific asset of the
Company by reason of any amount credited to him hereunder, nor any rights to
receive any distribution under the Plan except as and to the extent expressly
provided in the Plan. There shall be no funding of any benefits which may become
payable hereunder. No trust shall be created in connection with or by the
execution or adoption of this Plan. Any benefits which become payable hereunder
shall be paid from the general assets of the Company. Nothing in the Plan shall
be deemed to give any Board Member any right to participate in the Plan, except
in accordance with the provisions of the Plan.
(b) Restriction Against Assignment.
The Company shall pay all amounts payable hereunder only to
the person or persons designated by the Plan and not to any other person or
corporation. No part of a Participant's Account shall be liable for the debts,
contracts, or engagements of any Participant, his Beneficiaries, or successors
in interest, nor shall it be subject to execution by levy, attachment or
garnishment or by any other legal or equitable proceeding, nor shall any such
person have any right to alienate, anticipate, commute, pledge, encumber, or
assign any benefits or payments hereunder in any manner whatsoever.
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<PAGE> 12
(c) Receipt or Release.
Any payment to any Participant or his Beneficiary in
accordance with the provisions of the Plan shall, to the extent thereof, be in
full satisfaction of all claims against the Administrator and the Company and
the Administrator may require such Participant or Beneficiary, as a condition
precedent to such payment, to execute a receipt and release to such effect.
(d) Payment on Behalf of Minor.
In the event any amount becomes payable under the Plan to a
minor or a person who, in the sole judgment of the Administrator, is considered
by reason of physical or mental condition to be unable to give a valid receipt
therefor, the Administrator may direct that such payment be made to any person
found by the Administrator, in his sole judgment, to have assumed the care of
such minor or other person. Any payment made pursuant to such determination
shall constitute a full release and discharge of the Administrator and the
Company.
(e) Forfeiture.
Any payment or distribution to a Participant under the Plan
which is not claimed by the Participant, Beneficiary, or other person entitled
thereto within three years after becoming payable shall be forfeited and
cancelled and shall remain with the Company and no other person shall have any
right thereto or interest therein. The Company shall not have any duty to give
notice that amounts are payable under the Plan to any person other than the
Participant and the designated Beneficiary or Beneficiaries.
(f) Withholding.
The Company may deduct from the amount of all distributions
under the Plan any taxes required to be withheld by the Federal or any State or
local government.
(g) Governing Law; Arbitration.
This Plan shall be construed, administered and enforced
according to the laws of the State of Delaware, without regard to the conflict
of laws principles thereof.
Any dispute or controversy arising under or in connection with
this Plan shall be settled exclusively by arbitration in Atlanta, Georgia by
three arbitrators in accordance with the rules of the American Arbitration
Association in effect at the time of submission to arbitration. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. For purposes
of settling any dispute or controversy arising hereunder or for the purpose of
entering any judgment upon an award rendered by the arbitrators, the Company and
each Participant hereby consent to the jurisdiction of any or all of the
following courts: (i) the United States District Court for the Northern District
of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other
court having jurisdiction. The Company and each Participant hereby waive, to the
fullest extent permitted by applicable law, any objection which it may now or
hereafter have to such jurisdiction and any defense of inconvenient forum. The
Company and each Participant hereby agree that a judgment upon an award rendered
by the arbitrators may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
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<PAGE> 13
(h) Captions.
Captions in this Plan are not part of the provisions hereof
and shall have no force or effect.
(i) Gender.
The masculine gender as used herein includes the feminine
gender.
(j) Successors and Assigns.
This Plan shall inure to the benefit of, and be binding upon,
the parties hereto and their successors and assigns.
(k) Effective Date.
This Plan shall become effective upon its approval by
stockholders of the Company.
9. Roll-Over for Former AMAX Inc. Directors
This Plan shall also include, as a sub-plan, the Alumax Inc.
Deferred Compensation Plan for former directors of AMAX Inc., in the same form
as Annex A hereto.
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<PAGE> 1
EXHIBIT 10.09
FACILITY PURCHASE AGREEMENT
This Facility Purchase Agreement (the "Agreement")is entered into by
and between Alumax Mill Products, Inc., a Delaware corporation, with its
principal place of business at 12 Salt Creek Lane, Hinsdale, Illinois ("Alumax")
Fleet National Bank (formerly known as Shawmut Bank Connecticut, National
Association, formerly known as The Connecticut National Bank), with its
principal place of business at 777 Main Street, Hartford, Connecticut 06115, in
its individual capacity ("Fleet"), and not in its individual capacity but solely
as the Owner Trustee ("Owner Trustee") for U S WEST Financial Services, Inc., a
Colorado corporation ("USWFS"), with its principal place of business at 6200
South Quebec Street, Suite 350, Englewood, Colorado.
WHEREAS, USWFS is the successor-in-interest to U S WEST CAPITAL
CORPORATION, a New York corporation ("USWCC");
WHEREAS, Alumax, as Lessee, and Owner Trustee, as Lessor, entered into
a certain Facility Lease dated as of November 25, 1986 (the "Facility Lease")
concerning an aluminum container sheet plant and all additions and accessions
thereto located in Bowie County, Texas as more fully described in the Facility
Lease (the "Facility"); and
WHEREAS, Alumax, as Ground Lessor, and Owner Trustee, as Ground Lessee,
entered into a Ground Lease dated as of November 25, 1986 concerning certain
land in Bowie County, Texas on which the Facility is situated; and
WHEREAS, Alumax, as Site Lessee, and Owner Trustee, as Site Lessor,
entered into a Site Lease dated as of November 25, 1986 (the "Site Lease")
concerning certain land in Bowie County, Texas on which the Facility is
situated; and
WHEREAS, Alumax, as Lessee, Alumax Inc., as guarantor, USWCC (USWFS's
predecessor), as Owner Participant, Owner Trustee, and The Connecticut Bank and
Trust Company, National Association, as Indenture Trustee (whose interest has
been succeeded to by State Street Bank and Trust Company of Connecticut,
National Association), and various financial institutions (hereinafter, the
"Note Holders") entered into that certain Participation Agreement dated as of
November 25, 1986 relating to the leveraged lease financing of the Facility; and
WHEREAS, by the First Amendment to the Participation Agreement dated as
of December 31, 1990, Alumax (as Lessee), Alumax
<PAGE> 2
Inc. (the Guarantor), AMAX Inc., USWFS (as owner Participant), Owner Trustee
and in its individual capacity as "Owner Bank," certain Financial Institutions
listed on Schedule 1 to the Participation Agreement (the "Financial
Institutions"), and the State Street Bank and Trust Company of Connecticut,
successor to The Connecticut Bank and Trust Company, National Association,
(acting in its capacity as Indenture Trustee) agreed to delete Alumax Inc. as a
party to the Participation Agreement and release and discharge Alumax Inc. from
its Guaranty Agreement dated as of November 25, 1986 in return for the
substitution of AMAX Inc. as a party to the Participation Agreement and as the
guarantor of the obligations of Alumax under the Fundamental Agreements; and
WHEREAS, by the First Supplemental Indenture dated as of December 31,
1990, Owner Trustee and State Street Bank and Trust Company, successor to The
Connecticut Bank and Trust Company, National Association (acting solely in its
capacity as Indenture Trustee) agreed to amend the Indenture, Security Agreement
and the First Deed of Trust dated as of November 25, 1986 ("Indenture") to
release Alumax Inc. from its obligations under the Guaranty Agreement dated as
of November 25, 1986 and to substitute therefor the obligations of AMAX Inc.
under its Guaranty Agreement dated as of December 31, 1990 ("AMAX Guaranty");
and
WHEREAS, in connection with the spin-off of Alumax Inc. from AMAX Inc.
in November, 1993, Alumax, Alumax Inc., USWFS, the Owner Trustee, the Indenture
Trustee and the Financial Institutions entered into the Second Amendment to
Participation Agreement dated as of July 30, 1993 and agreed to amend the
Participation Agreement to release and discharge AMAX Inc. from its obligations
under the AMAX Guaranty and to substitute therefor the Guaranty Agreement of
Alumax Inc. dated as of July 30, 1993 ("Second Alumax Guaranty"); and
WHEREAS, in connection with the spin-off of Alumax Inc. from AMAX Inc.
in November, 1993, the Owner Trustee and the Indenture Trustee executed the
Second Supplemental Indenture dated as of July 30, 1993 and agreed to amend the
Indenture to substitute Alumax Inc. for AMAX Inc. as a party thereto and to
release and discharge AMAX Inc. from its obligations under the AMAX Guaranty and
to substitute in AMAX's place the obligations of Alumax Inc. under the Second
Alumax Guaranty.
WHEREAS, as a credit enhancement for the Second Alumax Guaranty, Alumax
Inc. and USWFS executed a Letter of Credit Agreement dated as of November 11,
1993 whereby Alumax Inc. agreed to and did provide to USWFS a letter of credit
for the benefit of USWFS with respect to the Second Alumax Guaranty; and
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<PAGE> 3
WHEREAS, as a credit enhancement for the Second Alumax Guaranty, Alumax
Inc. and Stonewall Insurance Company, Dixie Insurance Company, Windsor Insurance
Company and Great American Life Insurance Company, each a holder of one or more
notes issued under the Indenture, entered into letter agreements dated as of
November 5, 1993 whereby Alumax Inc. agreed to and did provide the foregoing
Note Holders with letters of credit for their benefit with respect to the Second
Alumax Guaranty; and
WHEREAS, pursuant to Section 4(a) of the Second Alumax Guaranty and by
further agreement of Owner Trustee, USWFS (acting as Owner Participant) dated as
of February 7, 1996, Alumax Inc. caused a letter of credit to be provided to the
Owner Trustee in the face amount of the outstanding Casualty Value, net of
existing letters of credit and other existing security. This letter of credit
was further subject to an assignment agreement between Alumax Inc. and the Owner
Trustee whereunder the letter of credit would be assigned and delivered to the
Indenture Trustee. This assignment was effected on March 29, 1996.
WHEREAS, USWFS is the successor by merger to USWCC; and
WHEREAS, USWFS, the Note Holders, the Owner Trustee and the Indenture
Trustee are parties to one or more trust and indenture agreements that relate to
the foregoing transactions; and
WHEREAS, pursuant to Section 21.1.2(A) of the Facility Lease, Alumax
has the option to purchase all, but not less than all, of the Facility and to
thereby terminate the Facility Lease and with it the Ground Lease and the Site
Lease and the related financing, trust, guaranty and facility support
agreements; and
WHEREAS, Alumax desires to exercise its option pursuant to Section
21.1.2(A) of the Facility Lease and to purchase the Facility, and Owner Trustee,
at the written direction of the Owner Participant, desires to sell the Facility
and to undertake all the actions required by the Fundamental Agreements to give
effect to Alumax's exercise of its option to purchase the Facility and to fully
pay and extinguish the rights of Fleet, the Owner Trustee, the Owner
Participant, the Indenture Trustee and the Note Holders in and to the Facility
and in and to the Fundamental Agreements, as amended or substituted, except such
Fundamental Agreements or portions thereof which are to survive the purchase of
the Facility by Alumax, as specifically set forth below.
NOW, THEREFORE, the parties agree as follows:
1. Terms and Definitions and Incorporation of Fundamental Agreements.
All capitalized terms not expressly defined in this Agreement shall have the
meaning given to such
3
<PAGE> 4
terms in the Facility Lease or in the Fundamental Agreement in which they are
defined. The phrase "Fundamental Agreement" shall have the meaning given to such
phrase in the Appendix X of the Participation Agreement. Any reference herein to
a Fundamental Agreement shall be to such agreement as it has been amended or
substituted. For reference purposes only, the definitions set forth in the
Fundamental Agreements are hereby incorporated herein by this reference.
2.Purchase and Sale Obligations. Alumax hereby agrees to purchase the
Facility and Owner Trustee agrees to bargain, transfer and sell the Facility to
Alumax, free and clear of all Lessor Liens and Owner Participant Liens, and to
terminate the Fundamental Agreements, except as set forth below, and to effect
the full payment of the Notes. Notwithstanding any contrary provision of this
Agreement, it is agreed that the Tax Indemnity Agreement shall remain in full
force and effect and shall only, terminate in accordance with Section 11
thereof, the terms and provisions of Sections 7.2, 7.3, 7.4 and 7.5 of the
Participation Agreement shall remain in full force and effect and shall only
terminate in accordance with the provisions of Sections 7.2.8 and 11.10 thereof,
and the terms and provisions in Section 3.2. of the Owner Trust Agreement shall
remain in full force and effect and shall not be terminated.
3. Purchase Price.
In consideration for conveying all right, title and interest in the
Leased Facility as provided in paragraph 2 herein to Alumax and for terminating
the Fundamental Agreements (to the extent set forth in paragraph 2 above), at
Closing Alumax will pay to Owner Trustee, the following sums (collectively, the
"Purchase Price"):
A. The sum of Six Hundred Thirty Four Thousand Nine Hundred
Forty and 87/100 Dollars ($634,940.87) (the prorated equity portion of the
January 1, 1998 Lease payment).
B. A sum equal to the entire outstanding principal balance of
the Notes (which, as of the Closing Date, is estimated to be approximately
$54,386,386.82) plus accrued interest of approximately $2,316,860.08 and all
other costs and expenses (except the Premiums) of securing the cancellation of
the Notes and the release and discharge of the Indenture and those Fundamental
Agreements securing the Notes.
C. Thirty-Five Million Nine Hundred Thousand and no/100
Dollars ($35,900,000.00) as hereinafter defined in this Agreement.
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<PAGE> 5
D. The Premiums required to be paid in connection with the
payment and discharge of the Notes.
The sums provided for in A, B and C above shall be deemed to constitute the Fair
Market Sales Value of the Facility. Lessor and Lessee expressly waive the
requirement to undertake and perform the Appraisal Procedure provided for in
Section 22.3 of the Facility Lease. Alumax shall not be entitled to pay any
portion of the Purchase Price by assuming all or any portion of the Notes but
rather, payment of the Purchase Price will be effected by wire transfer to the
account designated in writing to Alumax by Owner Trustee and confirmed in
writing by USWFS. Notwithstanding any term, calculation or formulation to the
contrary in the Facility Lease or any other Fundamental Agreement, the parties
acknowledge and agree that the Purchase Price has been fully negotiated between
them and accepted, and it shall supersede any other price or price determination
mechanism as may be called for in the Facility. Lease or any other Fundamental
Agreement. Each party acknowledges that it has made its own independent
determination as to the fair market value of the Facility and the fairness and
reasonableness of the Purchase Price. Further, the parties acknowledge and agree
that, having exercised its purchase option pursuant to Section 21.1.2(A) of the
Facility Lease, and having irrevocably covenanted and agreed herein to give the
Preliminary Election Notice required pursuant to Section 21.2 of the Facility
Lease and the Final Election Notice as required pursuant to Section 22.2 of the
Facility Lease, the duties of Owner Trustee to close the transaction evidenced
hereby and the duties of Alumax to pay the Purchase Price and close the
transaction evidenced hereby are and shall be deemed mandatory, both hereunder
and under the Facility Lease. Accordingly, Alumax hereby assumes and agrees to
pay the Purchase Price and acknowledges and agrees that such payment is required
hereunder and under the Facility Lease and that the Purchase Price constitutes
Supplemental Rent required to be paid by Alumax under the Facility Lease.
4. Covenants and Conditions to Closing.
A. Alumax shall perform the following covenants, each of which
shall also be conditions of the Obligation of Owner Trustee to close:
(1) Alumax shall pay the entire Purchase Price
at Closing.
(2) Alumax shall not commit an event of default
not timely cured or waived prior to Closing
under any of the Fundamental Agreements to
which it is a party.
5
<PAGE> 6
(3) Alumax shall execute and deliver all
necessary documents and take all necessary
steps required of Alumax to cause the
obligations of Owner Trustee and USWFS under
the Fundamental Agreements to which Alumax
is a party to be terminated at Closing,
except as set forth in Paragraph 2 above.
B. Conditions to Alumax's Obligation to close:
(1) The Owner Trustee shall have executed and
delivered to Alumax a quit claim deed and
bill of sale and other appropriate
instruments of conveyance, transfer or
assignment, conveying to Alumax, without any
recourse, representation or warranty
whatsoever, express or implied (except as
provided below), the entire right, title and
interest of the Owner Trustee in and to the
Facility, the Site, the Ground Lease, and
the Assigned Rights. Notwithstanding the
foregoing, the instruments of conveyance
shall contain a warranty against Lessor
Liens and Owner Participant Liens.
(2) The Owner Trustee shall have delivered
documents in a form reasonably acceptable to
Alumax evidencing the termination of the
Site Lease, the Facility Lease and the
Ground Lease and, subject to the exceptions
set forth in Paragraph 2 above, any other
Fundamental Agreement to which Alumax and
the Owner Trustee are parties or pursuant to
which Alumax has obligations and the
Facility and real property related thereto
are encumbered.
(3) Each of the original Notes shall be
delivered to the Closing marked "Paid in
Full."
(4) Subject to the limitations set forth in
Paragraph 2 above, the Owner Trustee and the
Indenture Trustee shall have delivered their
confirmations in writing that each and every
obligation owed and all fees payable by
Alumax under the Facility Lease, the
Indenture and any
6
<PAGE> 7
other Fundamental Agreement (except as set
forth in Paragraph 2 above) has been fully
satisfied and discharged and that each such
agreement (except as set forth in Paragraph
2 above) and all other security interests,
assignments and liens in favor of or arising
through Lessor have been terminated and
released, such confirmations and releases to
be in a form reasonably satisfactory to
Alumax.
(5) The July 30, 1993 guaranty of Alumax Inc.
and all prior guaranties of the obligations
of Alumax shall have been terminated with
such termination in a form reasonably
acceptable to Alumax.
(6) All original letters of credit and any
replacement letters of credit identified on
Schedule 1 hereto, issued for the account of
Alumax, shall be returned to Alumax, and all
agreements under which such letters of
credit were delivered shall be terminated.
(7) Title to the Facility shall not be
encumbered on the date of Closing by any
Owner Participant Lien not then being paid
and satisfied from the proceeds of this
transaction, or by any Lessor Lien.
5. Pre-Closing Covenants. From the date this Agreement is executed and
becomes effective to the Closing Date, the parties covenant to one another as
follows:
A. Alumax shall duly and timely perform all of its
obligations under the Facility Lease and each of the
Fundamental Agreements to which it is a party or
regarding which it has assumed obligations.
B. Within ten days from the date this Agreement is
executed by an authorized officer of Owner Trustee
and USWFS, and in all events prior to September 30,
1996, Alumax shall give the Preliminary Election
Notice required pursuant to Section 22.1. of the
Facility Lease, and conforming to the transaction set
forth in this Agreement. Within ten days thereafter,
Alumax shall give the Final Election Notice as
7
<PAGE> 8
required pursuant to Section 22.2. of the Facility
Lease, which notice shall set forth the election
agreed to pursuant to this Agreement.
C. Promptly upon receipt by the Owner Trustee of the
Final Election Notice provided for in (B) above, and
in all events within thirty days thereafter, the
Owner Trustee, pursuant to Section 2.03(f) of the
Indenture, shall give the Indenture Trustee the
notice provided for therein, and the Owner Trustee
shall undertake to timely perform all of the
obligations of the Owner Trustee and Lessor as
required under the Fundamental Agreements to give
full force and effect to Alumax's exercise of its
option to purchase the Facility.
D. Neither USWFS nor Fleet nor the Owner Trustee will
encumber, pledge, hypothecate, assign or otherwise
impair title in and to the Facility, the Ground Lease
or the Site Lease or their rights in and to the
Fundamental Agreements.
6. Indemnification by Alumax.
A. Indemnification. Alumax agrees to pay and indemnify Owner
Trustee and USWFS for any and all costs, expenses, interest, Premiums, penalties
or liability suffered by or incurred directly or indirectly in connection with
and arising under the Fundamental Agreements by reason of the prepayment of the
indebtedness evidenced by the Notes and secured, among other things, by the
Indenture or by reason of the determination of the Purchase Price on the basis
of a negotiated fair market value rather than on the basis of an appraisal. This
section shall specifically survive for a period of one year following the
closing contemplated herein and shall not be merged in the instruments of
closing. This indemnity specifically excludes any claim for damages or loss made
by USWFS or Owner Trustee based on any claim asserted by them that the Purchase
Price did not represent fair market value and any loss, cost expense, interest,
penalties or liability arising from or incurred directly or indirectly as a
result of the tortious act of USWFS or Owner Trustee. Alumax shall be given
prompt notice of any claim for indemnification made hereunder, and the exclusive
right to assume the defense and/or settlement thereof with counsel of its own
choosing. By entering into this indemnity, it is not the intent of the parties
to expand or extend any obligation of indemnity owed by Alumax to any parties
under the Fundamental Agreements except as expressly set forth herein.
8
<PAGE> 9
B. Reference is made to Paragraph 2 above for certain terms
and provisions of the Fundamental Agreements (including certain indemnification
provisions) which are not to be terminated at the Closing.
7. Representations and Warranties. Fleet, Owner Trustee and Alumax
represent and warrant to each other as follows:
A. that it has the full power and authority to enter
into this Agreement and that this Agreement
constitutes a legal, valid and binding obligation
enforceable against it in accordance with its terms;
B. that the person executing this Agreement has been
duly authorized and empowered to execute and deliver
this Agreement on behalf of such party; and
C. that the execution, delivery and performance of this
Agreement and action called for in furtherance of
this Agreement or contemplated thereby do not and
will not, to the best of such party's knowledge,
violate, conflict with, or result in a breach of any
of the terms of any indenture, agreement or
instrument to which it is a party or by which it is
bound, or constitute a default thereunder, and to the
best of its knowledge do not and will not violate any
law, rule, regulation, order, writ, judgement,
injunction, decree, determination, or award presently
in effect; and
D. that no consent, approval or authorization of, or
declaration, filing or registration with any (solely
with respect to Fleet, Connecticut or Federal)
regulatory authority is required to be made or
obtained in connection with the execution, delivery
and performance of this Agreement and the
consummation of the transactions contemplated hereby;
and
E. that the execution, delivery and performance of this
Agreement will not and do not violate any provision
of any of the incorporation and other documents under
which it is formed and organized; and
9
<PAGE> 10
8. Closing. The closing ("Closing") shall be held at the offices
of Alumax, 5655 Peachtree Parkway, Norcross, Georgia 30092
commencing at 9:00 a.m. on November 25, 1997 unless the
parties shall otherwise agree in writing. The Closing shall be
a physical closing with authorized representatives of each
party present, and at the Closing all funds and documents
shall be tendered and simultaneously exchanged.
9. Miscellaneous Covenants.
A. Each party will bear its own costs and expenses under
this Agreement, excepting that Alumax will pay the
expenses of the Owner Trustee and the Indenture
Trustee incurred by them in the proper execution of
the obligations set forth in Sections 5C or as may
otherwise be required by the transactions
contemplated by this Agreement, including the
reasonable fees and expenses of their counsel.
B. The costs to record transfer of title, filing fees,
transfer taxes, mortgage and lien release filing fees
and other similar fees, if any, shall be paid by
Alumax.
C. The cost of obtaining any title insurance commitment
or title insurance policy which Alumax may desire to
obtain shall be paid by Alumax.
D. Notices. Any notice required to be given hereunder
shall be in writing and delivered by U.S. Postal
Service, first class, postage prepaid addressed to
the party as set forth herein or by any national
next-day carrier . Notices shall be effective only
upon receipt.
If to Fleet or Owner Trustee:
Fleet National Bank
Corporate Trust Administration
777 Main Street
Hartford, Connecticut 06115
10
<PAGE> 11
With a copy to:
U S WEST Financial Services, Inc.
6200 South Quebec Street
Suite 350
Englewood, CO 80111
Attn: President
And with a copy to:
U S WEST, Inc.
Law Department
7800 East Orchard Road
Suite 480
Englewood, CO 80111
Attn: Senior Tax Counsel
If to Alumax:
Alumax Mill Products, Inc.
c/o Alumax Inc.
Law Department
5655 Peachtree Parkway
Norcross, Georgia 30092-2812
10. Environmental Cooperation. Alumax covenants and agrees to
reasonably cooperate with the owner Trustee and USWFS in connection with any
reasonable environmental study, audit or report which the Owner Trustee or USWFS
orders prior to the date of Closing with respect to the Site and/or the
Facility.
11. Confidentiality. Except as required by law or as either party may
reasonably determine is required to comply with regulatory or securities law or
regulation disclosure requirements, Alumax, Fleet and Owner Trustee each
covenant to the other that, without the other party's consent, (a) it will hold
in strict confidence all documents and other information concerning the
Facility and the Site, including, without limitation, the results of any
inspections made by any party hereto, and the other party and the other party's
business and properties, and (b) if the Closing should not occur, such
confidence shall be maintained and all such documents and information (if in
written form) shall, immediately after termination of this Agreement, be
returned to the party originally furnishing same, and (c) neither Alumax, Fleet
nor Owner Trustee, nor any of their affiliates will hold any press conference,
issue any press release, record this Agreement or any other document containing
any information concerning this Agreement or otherwise divulge the existence of
this Agreement or the terms contained herein to any prospective purchaser,
lender, investor or other third party or the public generally (except for their
11
<PAGE> 12
respective current investors, consultants, brokers/dealers, confidential legal
and accounting advisers and any prospective lenders providing financing for the
Facility (provided that any and all communications with such lenders shall be
private and confidential) and then only to the extent such terms are customarily
disclosed to the applicable person in connection with transactions similar to
the one contemplated hereby, and provided that any such investor, consultant,
broker/dealer, legal and accounting advisors and lenders are informed of the
confidentiality provisions of this section). Notwithstanding the foregoing,
Alumax, Fleet and the Owner Trustee shall cooperate to develop a mutually
acceptable joint statement to release to the press and public at or immediately
after the Closing. This section shall specifically survive the Closing and shall
not be merged into the instruments of closing. Notwithstanding the foregoing,
the obligations of this section shall not apply to matters which are disclosed
in the joint statement or are a matter of public record.
12. Disclaimer of Warranties and Representations -- "As Is -- Where
Is." Except as stated in this Agreement, neither Fleet, Owner Trustee nor USWFS
nor anyone acting for or on behalf of either of them has made any
representation, statement, warranty or promise, either written or oral,
concerning the Facility or the Site or the feasibility, desirability or
adaptability thereof for any particular purpose. All matters other than those
specifically addressed in this Agreement have been or shall be independently
verified by Alumax, and except as otherwise provided herein, Alumax is
purchasing the Facility and consummating the transaction described herein based
on its own examination and inspection, in its "as is, where is" physical
condition and state of repair, subject to all latent and patent defects. Alumax:
hereby waives and the Owner Trustee, Fleet and USWFS hereby disclaim all
warranties of any type or kind whatsoever with respect to the Facility and the
Site except as expressly set forth in this Agreement.
13. Waiver and Release. Except to the extent caused by a breach of any
of Fleet's or Owner Trustee's express representations set forth herein, Alumax,
for Alumax and Alumax's successors and assigns, releases Fleet, the Owner
Trustee, USWFS and their agents, employees, officers, directors, brokers,
contractors and representatives from, and waives any and all causes of action or
claims against any of such persons for (i) any and all liability attributable to
any physical condition of or at the Facility or the Site, including, without
limitation, the presence on, under or about the Facility or the Site of any
dangerous, harmful or hazardous substances and materials; (ii) any and all
liability resulting from the failure of the Facility or the Site to comply with
any applicable laws, including, without limitation, any environmental law; and
(iii) any liabilities, damages or injury arising from connected with or
otherwise caused by statements,
12
<PAGE> 13
opinions or information obtained from any of such persons with respect to the
Facility or the Site. Further, each party hereto releases each other party
hereto and waives any and all causes of action or claims based on the adequacy
of the Purchase Price or, except as expressly set forth herein, on any
statements or information, whether written or oral, provided by one party to the
other with respect thereto.
14. ARBITRATION OF DISPUTES. ANY CLAIM, CONTROVERSY OR DISPUTE
BETWEEN ALUMAX, FLEET, THE OWNER TRUSTEE, USWFS AND ALUMAX INC., OR ANY OF THEM,
WHETHER SOUNDING IN CONTRACT, STATUTE, TORT, FRAUD, MISREPRESENTATION OR OTHER
LEGAL THEORY, RELATED DIRECTLY TO THIS AGREEMENT, WHENEVER BROUGHT AND WHETHER
BETWEEN THE PARTIES TO THIS AGREEMENT OR BETWEEN ONE OF THE PARTIES TO THIS
AGREEMENT AND THE EMPLOYEES, AGENTS OR AFFILIATED BUSINESSES OF THE OTHER PARTY,
SHALL BE RESOLVED BY ARBITRATION AS PRESCRIBED IN THIS SECTION UNLESS SUCH
CLAIM, CONTROVERSY OR DISPUTE INVOLVES OTHER PARTIES FOR A PROPER AND COMPLETE
RESOLUTION THEREOF AND ONE OR MORE SUCH OTHER PARTIES DOES NOT AGREE TO
PARTICIPATE IN SUCH ARBITRATION. THE FEDERAL ARBITRATION ACT, 9 U.S.C. Sections
1-15, NOT STATE LAW, SHALL GOVERN THE ARBITRATION OF ALL SUCH CLAIMS.
A SINGLE ARBITRATOR WHO IS A RETIRED FEDERAL OR NEW YORK JUDGE SHALL
CONDUCT THE ARBITRATION UNDER THE THEN CURRENT RULES OF THE AMERICAN ARBITRATION
ASSOCIATION (THE "AAA"). THE ARBITRATOR SHALL BE SELECTED BY MUTUAL AGREEMENT
OF THE PARTIES, OR IF THEY ARE UNABLE TO REACH AGREEMENT ON THE ARBITRATOR
WITHIN THIRTY (30) DAYS OF WRITTEN NOTICE BY ONE PARTY TO THE OTHER INVOKING
THIS ARBITRATION PROVISION, IN ACCORDANCE WITH AAA PROCEDURES FROM A LIST OF
QUALIFIED PEOPLE MAINTAINED BY THE AAA. THE ARBITRATION SHALL BE CONDUCTED IN
NEW YORK CITY, NEW YORK AND ALL EXPEDITED PROCEDURES PRESCRIBED BY THE AAA RULES
SHALL APPLY.
THERE SHALL BE NO DISCOVERY OTHER THAN THE EXCHANGE OF INFORMATION
WHICH IS PROVIDED TO THE ARBITRATOR BY THE PARTIES. THE ARBITRATOR SHALL HAVE
AUTHORITY ONLY TO GRANT SPECIFIC PERFORMANCE AND TO ORDER OTHER EQUITABLE RELIEF
AND TO AWARD COMPENSATORY DAMAGES, BUT SHALL NOT HAVE THE AUTHORITY TO AWARD
PUNITIVE DAMAGES OR OTHER NONCOMPENSATORY DAMAGES OR ANY OTHER FORM OF RELIEF.
THE ARBITRATOR SHALL AWARD TO THE PREVAILING PARTY ITS REASONABLE ATTORNEYS'
FEES AND COSTS AND OTHER EXPENSES INCURRED IN THE ARBITRATION, EXCEPT THE
PARTIES SHALL SHARE EQUALLY THE FEES AND EXPENSES OF THE ARBITRATOR. THE
ARBITRATOR'S DECISION AND AWARD SHALL BE FINAL AND BINDING, AND JUDGMENT ON THE
AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION
THEREOF.
IF ANY PARTY FILES A JUDICIAL OR ADMINISTRATIVE ACTION ASSERTING CLAIMS
SUBJECT TO ARBITRATION AS PRESCRIBED HEREIN, AND ANOTHER PARTY SUCCESSFULLY
STAYS SUCH ACTION OR COMPELS ARBITRATION
13
<PAGE> 14
OF SAID CLAIMS, THE PARTY FILING SAID ACTION SHALL PAY THE OTHER PARTY'S COSTS
AND EXPENSES INCURRED IN SEEKING SUCH STAY OR COMPELLING ARBITRATION, INCLUDING
REASONABLE ATTORNEYS' FEES.
15. Miscellaneous Provisions.
A. Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of New York.
B. Business Day. If the date of the Closing is to occur
on a holiday or other non-business day, or if any
period of time set forth in this Agreement expires on
a holiday or other non-business day, then such date
of Closing or expiration date shall be on the
following business day.
C. Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Neither Alumax, Fleet nor owner Trustee shall have
the right to assign their rights or obligations under
this Agreement, in whole or in part, to any person or
entity without the prior written consent of the other
party, which consent shall not be unreasonably
withheld.
D. Captions and Headings. The captions and headings
contained in this Agreement are for convenience only
and are not a part of this Agreement.
E. Construction of Agreement. The parties hereto
acknowledge that they have each had the benefit of
independent counsel with regard to this Agreement and
that this Agreement has been prepared as a result of
the joint efforts of the parties and their respective
counsel. Accordingly, the parties agree that the
provisions of this Agreement shall not be construed
or interpreted for or against any part based upon
authorship.
F. Further Instruments. The parties agree to execute
such further instruments as may be reasonably
necessary in order to complete the transaction
contemplated hereby in accordance with the terms,
intent and purpose of this Agreement.
G. Third Party Beneficiary. USWFS is a third party
beneficiary of this Agreement and the
14
<PAGE> 15
representations, warranties, indemnities, covenants
and obligations of the parties set forth herein.
H. Complete Agreement. This is the complete agreement
between the parties as to the subject matter stated
herein and any and all prior written and verbal
negotiations and agreements are contained herein or
are superseded by the terms of this Agreement. This
Agreement may only be amended in a writing signed by
all parties hereto.
I. Trust Capacity of Fleet. This instrument is executed
by Fleet, not in its individual capacity, except as
specifically provided herein, but solely in its
capacity as owner/trustee under an owner Trust
Agreement dated November 25, 1986, for the benefit of
USWFS (the successor by merger to U S WEST Capital
Corporation).
J. Guaranty by Alumax, Inc. This Agreement shall not be
of any force or effect unless and until (a) it is
fully executed by the parties hereto, and (b) the
guaranty set forth below is executed by Alumax Inc.
K. A material default by either party pursuant to the
terms of the Facility Lease shall be deemed to
constitute a default hereunder, and a material
default hereunder by either of the parties shall be
deemed to constitute a default under the Facility
Lease.
EXECUTED AND EFFECTIVE as of the 18th day of September, 1996.
ALUMAX MILL PRODUCTS, INC.
By: /s/ Lawrence B. Frost
----------------------------------
Name: LAWRENCE B. FROST
--------------------------------
Title: Vice President
-------------------------------
FLEET NATIONAL BANK
not in its individual
capacity, except as
specifically provided
herein, but solely in its
capacity as Owner Trustee
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
15
<PAGE> 16
This instrument is executed by U S WEST Financial Services, Inc. ("USWFS") as
successor by merger to U S WEST Capital Corporation, for the purpose of
approving the above Facility Purchase Agreement and for the purpose of
authorizing and instructing Fleet National Bank, as Owner Trustee USWFS, to
execute the same in such capacity and to take any and all actions on behalf of
USWFS that are required to be taken by the owner Trustee or the Lessor to give
full effect to the exercise by Alumax of its option to purchase the Facility and
to close said purchase.
U S WEST Financial Services, Inc.
By: /s/ Robert L. Hirsch
------------------------------
Name: Robert L. Hirsch
----------------------------
Title: VP
---------------------------
Date: September 17, 1996
----------------------------
FOR GOOD AND VALUABLE CONSIDERATION, the receipt, adequacy and
sufficiency of which are hereby confessed and acknowledged, Alumax Inc. does
hereby guarantee the prompt, full and faithful performance by Alumax Mill
Products, Inc. of its obligations set forth in the above Facility Purchase
Agreement.
Executed as of the 19th day of September, 1996.
Alumax Inc.
By: /s/ Lawrence B. Frost
----------------------------------
Name: LAWRENCE B. FROST
--------------------------------
Title: Senior Vice President
-------------------------------
<PAGE> 17
SCHEDULE 1
<TABLE>
<CAPTION>
=====================================================================================================================
L/C Number Effect. Date Mat. Date Amount Beneficiary
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SBY-502267 11/11/93 12/31/96 39,200,000.00 U S WEST
Financial
---------------------------------------------------------------------------------------------------------------------
1269/Sl1085 11/09/93 01/20/97 3,883,109.09 Great American
Life Ins.
---------------------------------------------------------------------------------------------------------------------
1269/S11086 11/09/93 01/20/97 2,329,865.45 Windsor Insurance
Co.
---------------------------------------------------------------------------------------------------------------------
1269/S11088 11/09/93 01/20/97 2,329,865.45 Dixie Insurance Co.
---------------------------------------------------------------------------------------------------------------------
1269/S11113 11/09/93 01/31/97 1,718,664.08 American Life &
Casualty
---------------------------------------------------------------------------------------------------------------------
1269/S11087 11/09/93 01/20/97 3,106,487.27 Stonewall-Insurance
Co.
---------------------------------------------------------------------------------------------------------------------
9603061S287 3/18/96 12/30/96 47,816,683.00 State Street Bank
by way of
Assignment from
Fleet
=====================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.16
ALUMAX INC.
- --------------------------------------------------------------------------------
EMPLOYMENT AGREEMENT
FOR
C. ALLEN BORN
- --------------------------------------------------------------------------------
As Amended and Restated
as of December 5, 1996
<PAGE> 2
ALUMAX INC.
- --------------------------------------------------------------------------------
Employment Agreement
for
C. Allen Born
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment............................................................. 1
2. Period of Employment................................................... 1
(a) Duration Under Normal Circumstances........................... 1
(b) Termination Events............................................ 1
3. Duties During the Period of Employment................................. 2
4. Location of Employment................................................. 2
5. Current Cash Compensation.............................................. 2
6. Stock Options ......................................................... 2
(a) Grant ..................................................... 2
(b) Exercise Price................................................ 3
(c) Vesting....................................................... 3
(d) Term ..................................................... 3
(e) Exercise...................................................... 3
(f) Registration.................................................. 4
(g) Non-Transferability........................................... 4
7. Additional Stock Options............................................... 4
(a) Grant ..................................................... 4
(b) Exercise Price................................................ 4
(c) Vesting....................................................... 4
(d) Term ..................................................... 4
(e) Exercise...................................................... 5
(f) Registration.................................................. 5
(g) Non-Transferability........................................... 5
8. Stock Units ..................................................... 5
(a) Grant ..................................................... 5
(b) Vesting....................................................... 5
(c) Deferral of Payment........................................... 6
(d) Grantor Trust................................................. 6
(e) Dividends..................................................... 6
(f) Change in Control............................................. 6
</TABLE>
<PAGE> 3
ALUMAX INC.
- --------------------------------------------------------------------------------
Employment Agreement
for
C. Allen Born
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9. Effect of Change in Common Stock....................................... 6
10. Employee Benefits...................................................... 7
(a) Vacation and Sick Leave....................................... 7
(b) Regular Reimbursed Business Expenses.......................... 7
(c) Employee Benefit Plans or Arrangements........................ 7
(d) Employer's Executive Compensation Plans....................... 7
(e) Financial and Tax Advice...................................... 7
11. Termination............................................................ 8
(a) Death or Retirement............................................. 8
(b) Disability...................................................... 9
(c) Voluntary Termination by Employee without Good Reason........... 10
(d) Voluntary Termination by Employee with Good Reason,
or by Employer without Cause.................................... 10
(e) Termination by Employer with Cause ............................. 12
(f) Date of Payment................................................. 12
12. Definitions............................................................ 12
13. Excise Tax Gross-up.................................................... 17
14. Non-Competition and Non-Disclosure; Employee Cooperation............... 19
15. Governing Law; Disputes; Arbitration................................... 20
16. Notices................................................................ 20
17. Withholding............................................................ 21
18. Mitigation............................................................. 21
19. Successors; Binding Agreement.......................................... 21
20. Pension Credit and Additional Pension Credit........................... 21
21. Miscellaneous.......................................................... 22
</TABLE>
<PAGE> 4
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of November 15, 1993, by and between Alumax
Inc., a Delaware corporation ("Employer"), and C. Allen Born, an individual
("Employee"), as amended and restated as of December 5, 1996.
WHEREAS, Employer and Employee entered into an employment agreement
executed and effective as of November 15, 1993 (the "Agreement"); and
WHEREAS, Employer and Employee previously amended the Employment
Agreement by an Agreement dated March 11, 1994; and
WHEREAS, Employer and Employee wish to further amend the Employment
Agreement and in connection therewith to restate the Employment Agreement in its
entirety; and
WHEREAS, such amendment and restatement of the Employment Agreement was
approved by the Human Resources and Compensation Committee of the Board of
Directors of Employer at a meeting held on December 5, 1996.
IN CONSIDERATION OF the mutual covenants herein contained, and other
good and valuable consideration, the parties hereto agree as follows:
1. Employment. Employer hereby agrees to employ Employee, and
Employee agrees to serve, as Chairman of the Board of Directors and Chief
Executive Officer of Employer, during the Period of Employment as defined in
Section 2.
2. Period of Employment
(a) Duration Under Normal Circumstances. The "Period of
Employment" shall be the six-year period commencing November 15, 1993
(the "Commencement Date"), and ending on December 31, 1999.
(b) Termination Events. Notwithstanding anything in this
Section 2 to the contrary, the Period of Employment shall terminate
upon the earliest to occur of the following:
(i) the retirement of Employee upon or after
reaching age 65;
(ii) the retirement of Employee, with the consent
of Employer, prior to reaching age 65;
(iii) the Disability (as defined in Section 12) of
Employee and the expiration of the 30-day period referred to in the
definition of Disability without the actions referred to therein being
taken by Employee;
(iv) the death of Employee;
(v) the 90th day after service of notice by
Employee to Employer, in accordance with the provisions of Section 16,
that Employee elects to terminate the Period of Employment (a
"voluntary termination by Employee"); and
<PAGE> 5
(vi) the 90th day after service of notice by
Employer to Employee, in accordance with the provisions of Section 16,
that Employer elects to terminate the Period of Employment (a
"voluntary termination by Employer"), other than a termination by
Employer with Cause (in which event the Period of Employment shall
promptly terminate upon service of such notice).
3. Duties During the Period of Employment. Employee shall devote
his full business time, attention and best efforts to the affairs of Employer
and its subsidiaries during the Period of Employment and shall have such duties,
responsibilities and authority as shall be consistent with the position and
title of Chairman of the Board of Directors and Chief Executive Officer.
Employee may engage in other activities, such as activities involving
charitable, educational, religious and similar types of organizations (all of
which are deemed to benefit Employer), speaking engagements, and similar type
activities, and may serve on the board of directors of other corporations
approved by the Board of Directors of Employer, in each case to the extent that
such other activities do not materially detract from or limit the performance of
his duties under this Agreement, or inhibit or conflict in any material way with
the business of Employer and its subsidiaries. In addition, until November 15,
1996, Employee may serve as Co-Chairman of Cyprus AMAX Minerals Company on such
terms and conditions as the Board of Directors of Cyprus AMAX Minerals Company
and the Board of Directors of Employer may specify and may thereafter serve on
the Board of Directors of Cyprus AMAX Minerals Company.
4. Location of Employment.
(a) During the Period of Employment, Employer may only
require Employee to be based in or within 45 miles of Norcross,
Georgia, except that Employer may require Employee to be based more
than 45 miles from Norcross, Georgia if the relocation is to a
principal executive office of Employer.
(b) The Employer shall pay to, or reimburse Employee for,
on an after-tax basis, all reasonable expenses of relocation incurred
and substantiated by Employee in connection with the Employee's
relocation from his current principal residence to Georgia as well as
any subsequent principal residence relocation. In addition, the
Employer shall indemnify Employee, on an after-tax basis, against any
loss actually realized on the sale of Employee's principal residence
within twelve months of such relocation if Employee has reasonably
cooperated with Employer in connection with such sale.
5. Current Cash Compensation. Employer shall pay to Employee
during the Period of Employment a base annual salary of not less than $750,000
until January 1, 1996, and thereafter not less than $800,000 (or such greater
amount as may have been approved by the Board of Directors or the Committee in
its sole discretion), payable in substantially equal monthly installments during
each calendar year, or portion thereof, of the Period of Employment; provided,
however, that Employer agrees to review such base annual salary annually and in
light of such review may, in the sole discretion of the Board of Directors of
Employer or the Committee, increase such salary, taking into account such
factors as it deems pertinent.
6. Stock Options
(a) Grant. Immediately following the Commencement Date
and the end of the 120-Day Period (as defined in Section 12), Employer
shall grant to Employee non-qualified
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<PAGE> 6
stock options (the "Options") to acquire shares of common stock, par
value of $.01 per share, of Employer ("Common Stock"), in an aggregate
amount equal to 625,000 shares multiplied by a fraction, the numerator
of which is 20.125, and the denominator of which is the 120-Day Average
Price (as defined in Section 12). Employer and Employee agree that the
number of shares of Common Stock subject to the Options and any other
options granted or to be granted by Employer to Employee under the
Alumax Inc. 1993 Long Term Incentive Plan during any period of five
consecutive years following the Commencement Date shall not exceed
1,500,000 shares.
(b) Exercise Price. The exercise per share price of each
of the Options (the "Exercise Price") shall be equal to the 120-Day
Average Price.
(c) Vesting. The Options shall vest at the rate of 20%
per year on each of the first five anniversary dates of the
Commencement Date; provided, however, that (i) Options that have not
previously vested shall vest immediately, and all restrictions and
risks of forfeiture shall lapse, upon (A) the death or Disability (as
defined in Section 12) of Employee, (B) Employee's retirement on or
after age 65, (C) Employee's retirement on or after age 62 but before
age 65, if Employer's Board of Directors, in its sole discretion and
without taking into account any vote of Employee, approves the
immediate vesting of such Options upon such retirement, (D) termination
of Employee's employment by Employer without Cause (as defined in
Section 12), or by Employee with Good Reason (as defined in Section
12), or (E) a Change in Control (as defined in Section 12), and (ii)
Options that have not previously vested shall not vest, and shall be
immediately forfeited by Employee, upon (X) Employee's retirement
before age 65 unless Employer's Board of Directors, in its sole
discretion and without taking into account any vote of Employee,
approves the immediate (or future) vesting of such Options upon any
such retirement on or after age 62, or (Y) termination of Employee's
employment by Employer with Cause or by Employee other than with Good
Reason.
(d) Term. Vested Options may be exercised only within
the first ten years after the date of grant.
(e) Exercise. Except as described below, an Option that
is vested may be exercised only by:
(i) written notice of intent to exercise the Option
and (ii) payment or deemed payment of the Exercise Price to
Employer (contemporaneously with delivery of such notice) in
cash or Common Stock of equivalent Fair Market Value. In its
sole discretion the Committee may permit the Exercise Price to
be paid in the form of awards issued under the Employer's
compensation plans, or other property (including notes or
other contractual obligations of the Employee to make payment
on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law).
Common Stock utilized in full or partial payment of the
Exercise Price shall be valued at its Fair Market Value (as
defined in Section 12) on the date of exercise. In the event
of a Change in Control, the Employee shall be entitled to
elect, during the 60-day period immediately following such
Change in Control, in lieu of acquiring the shares of Common
Stock covered by the Options, to receive, and the Employer
shall be obligated to pay, the Change in Control Settlement
Value (as defined in Section 8(c) of the Alumax Inc. 1993
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<PAGE> 7
Long Term Incentive Plan) with respect to shares of Common
Stock up to the number of shares covered by the Options, which
amount shall be paid in cash.
(f) Registration. Employee shall sell shares of Common
Stock acquired upon the exercise of Options only pursuant to an
effective registration statement covering such sale or to an exemption
from registration under the Securities Act of 1933, as amended.
(g) Non-Transferability. The Options may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent and distribution.
An Option may be exercised, during the lifetime of Employee, only by
Employee or his guardian or legal representative.
7. Additional Stock Options
(a) Grant. In connection with the amendment and
restatement of this Agreement and the related extension of the Period
of Employment, Employer shall grant to Employee non-qualified stock
options (the "Additional Options") to acquire shares of Common Stock in
an aggregate amount equal to 687,800 shares. Employer and Employee
agree that the number of shares of Common Stock subject to the
Additional Options and any other options granted or to be granted by
Employer to Employee under the Alumax Inc. 1993 Long Term Incentive
Plan during any period of five consecutive years shall not exceed
900,000 shares.
(b) Exercise Price. The exercise price per share of each
of the Additional Options (the "Exercise Price") shall be (i) with
respect to 229,267 shares, the closing sale price of the Common Stock
reported on the Composite Tape for securities listed on the New York
Stock Exchange in The Wall Street Journal for December 5, 1996, or if
no Common Stock was traded on that date, on the next preceding day on
which there was such a trade (the "Basic Exercise Price"); (ii) with
respect to 229,267 shares, the Basic Exercise Price plus $4.00; and
(iii) with respect to the remaining 229,266 shares, the Basic Exercise
Price plus $8.00.
(c) Vesting. The Additional Options shall vest as
follows: (i) the 229,267 shares exercisable at the Basic Exercise Price
on November 15, 1997; the 229,267 shares exercisable at the Basic
Exercise Price plus $4.00 on November 15, 1998; and the remaining
229,266 shares on November 15, 1999; provided, however, that (i)
Additional Options that have not previously vested shall vest
immediately, and all restrictions and risks of forfeiture shall lapse,
upon (A) the death or Disability (as defined in Section 12) of
Employee, (B) termination of Employee's employment by Employer without
Cause (as defined in Section 12), or by Employee with Good Reason (as
defined in Section 12), or (C) a Change in Control (as defined in
Section 12), and (ii) Additional Options that have not previously
vested shall not vest, and shall be immediately forfeited by Employee,
upon (X) Employee's retirement before December 31, 1999 unless
Employer's Board of Directors, in its sole discretion and without
taking into account any vote of Employee, approves the immediate (or
future) vesting of such Additional Options upon any such retirement, or
(Y) termination of Employee's employment by Employer with Cause or by
Employee other than with Good Reason.
(d) Term. Vested Additional Options may be exercised
only within the first six years after the date of grant.
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<PAGE> 8
(e) Exercise. Except as described below, an Additional
Option that is vested may be exercised only by:
(i) written notice of intent to exercise the
Additional Option and (ii) payment or deemed payment of the
Exercise Price to Employer (contemporaneously with delivery of
such notice) in cash or Common Stock of equivalent Fair Market
Value. In its sole discretion the Committee may permit the
Exercise Price to be paid in the form of awards issued under
the Employer's compensation plans, or other property
(including notes or other contractual obligations of the
Employee to make payment on a deferred basis, such as through
"cashless exercise" arrangements, to the extent permitted by
applicable law). Common Stock utilized in full or partial
payment of the Exercise Price shall be valued at its Fair
Market Value (as defined in Section 12) on the date of
exercise. In the event of a Change in Control, the Employee
shall be entitled to elect, during the 60-day period
immediately following such Change in Control, in lieu of
acquiring the shares of Common Stock covered by the Additional
Options, to receive, and the Employer shall be obligated to
pay, the Change in Control Settlement Value (as defined in
Section 8(c) of the Alumax Inc. 1993 Long Term Incentive Plan)
with respect to shares of Common Stock up to the number of
shares covered by the Additional Options, which amount shall
be paid in cash.
(f) Registration. Employee shall sell shares of Common
Stock acquired upon the exercise of Additional Options only pursuant to
an effective registration statement covering such sale or to an
exemption from registration under the Securities Act of 1933, as
amended.
(g) Non-Transferability. Except as permitted under the
Alumax Inc. Long Term Incentive Plan, the Additional Options may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent and
distribution and may only be exercised, during the lifetime of
Employee, only by Employee or his guardian or legal representative.
8. Stock Units
(a) Grant. Immediately following the Commencement Date
and the end of the 120-Day Period, Employer shall grant to Employee
units of compensation (the "Units") each of which shall represent the
right to receive compensation paid in the form of one share of Common
Stock and the aggregate number of which shall equal $2,684,000 divided
by the 120-Day Average Price.
(b) Vesting. The Units shall vest at the rate of 20% per
year on each of the first five anniversary dates of the Commencement
Date; provided, however, that (i) Units that have not previously vested
shall vest immediately, and all restrictions and risks of forfeiture
shall lapse, upon: (A) the death or Disability of Employee; (B)
Employee's retirement on or after age 65;(C) Employee's retirement on
or after age 62 but before age 65 if Employer's Board of Directors, in
its sole discretion and without taking into account any vote of
Employee, approves the immediate vesting of such Units upon such
retirement; (D) termination of Employee's employment by Employer
without Cause or by Employee with Good Reason; or (E) a Change in
Control, and (ii) Units that have not previously vested shall not vest,
and shall be immediately forfeited by Employee, upon: (X) Employee's
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<PAGE> 9
retirement before age 65 unless Employer's Board of Directors, in its
sole discretion and without taking into account any vote of Employee,
approves the immediate (or future) vesting of such Units upon any such
retirement on or after age 62; or (Y) termination of Employee's
employment by Employer with Cause or by Employee other than with Good
Reason.
(c) Deferral of Payment. By the end of each calendar year
immediately preceding the calendar year in which any portion of the
Units are scheduled to vest in accordance with Section 8(b) above,
Employee shall file with Employer a written election form in which
Employee shall elect the date or dates on which the vested proceeds
(including shares of Common Stock) of the Grantor Trust established in
accordance with Section 8(d) below shall be paid out to Employee.
(d) Grantor Trust. Employer shall establish a trust (the
"Trust") pursuant to a grantor trust agreement substantially in the
same form as Annex A hereto (the "Trust Agreement"). The purpose of the
Trust shall be to hold the shares of Common Stock to meet the
Employer's obligation with respect to the grant of Units hereunder. The
trustee may be authorized to dispose of trust assets (including shares
of Common Stock) and reinvest proceeds in alternative investments,
subject to such terms and conditions as specified in the Trust
Agreement and in accordance with applicable law. Immediately following
the end of the 120-Day Period, Employer shall transfer to the Trust
shares of Common Stock (the "Shares") in an aggregate number equal to
$2,684,000 divided by the 120-Day Average Price. Employer shall direct
the trustee of the Trust to deliver Shares (and any income earned
thereon held by the Trust) corresponding to Units which have vested in
accordance with Section 8(b) above to Employee as soon as practicable
after the date of vesting; provided, however, in the event the Employee
elects to defer payment of vested proceeds (including Shares) beyond
the date of vesting pursuant to Section 8(c) above, Employer shall
direct the trustee to deliver proceeds on the dates elected by the
Employee pursuant to Section 8(c) above, or, if earlier, on a Change in
Control.
(e) Dividends. Dividends payable on Shares held in the
Trust shall be paid to the Trust.
(f) Change in Control. In the event of a Change in
Control (as defined in Section 12), the Employee shall be entitled to
elect, during the 60-day period immediately following such Change in
Control, to surrender Shares to the Employer and receive, in full
settlement thereof, and the Employer shall be obligated to pay in cash,
the Change in Control Stock Value (as defined in Section 8(b) of the
Alumax Inc. 1993 Long Term Incentive Plan) with respect to the number
of Shares surrendered.
9. Effect of Change in Common Stock. In the event that the
outstanding shares of Common Stock shall be changed into or exchanged for a
different number or kind of shares of stock of Employer or of another
corporation (whether by reason of merger, consolidation, recapitalization,
reclassification, stock dividend, split-up, combination of shares, or
otherwise), or in the event of any extraordinary cash dividend, spin-off,
distribution of assets (including stock of another corporation), or any other
action not in the ordinary course of business that has a material effect on the
equity represented by outstanding shares of Common Stock, appropriate
adjustments, if any, as determined by the Board of Directors of Employer or, at
Employee's election, an investment banking firm mutually acceptable to Employer
and Employee, shall be made in the number, kind, or exercise price of the
Options, the Additional Options and the Shares.
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<PAGE> 10
10. Employee Benefits
(a) Vacation and Sick Leave. Employee shall be entitled
to five weeks paid annual vacation, all paid Employer holidays and
reasonable sick leave.
(b) Regular Reimbursed Business Expenses. Employer shall
reimburse Employee for all expenses and disbursements reasonably
incurred and substantiated by Employee in the performance of his duties
during the Period of Employment.
(c) Employee Benefit Plans or Arrangements. In addition
to the cash compensation provided for in Section 5 hereof, Employee,
subject to meeting eligibility requirements and to the provisions of
this Agreement, shall be entitled to participate without discrimination
or duplication in all employee (including executive) benefit plans of
Employer, as presently in effect or as they may be modified or added to
by Employer from time to time, to the extent such plans are available
to other similarly situated executives or employees of Employer,
including, without limitation, plans providing retirement benefits,
medical insurance, life insurance, disability insurance, and accidental
death or dismemberment insurance.
(d) Employer's Executive Compensation Plans. In addition to
the cash compensation provided for in Section 5 hereof and the employee
benefits of Employer provided for in paragraph (c) of this Section 10,
Employee, subject to meeting eligibility requirements and to the
provisions of this Agreement, shall be entitled to participate without
discrimination or duplication in all executive compensation plans of
Employer, as presently in effect or as they may be modified or added to
by Employer from time to time, to the extent such plans are available
to similarly situated executives or employees of Employer, including,
without limitation, the Alumax Inc. 1993 Annual Incentive Plan and the
Alumax Inc. 1993 Long Term Incentive Plan (as the same may be modified,
replaced, or added to by Employer from time to time), and other stock
option plans, performance share plans, management incentive plans,
deferred compensation plans, and supplemental retirement plans;
provided that such compensation plans and programs, in the aggregate,
shall provide Employee with benefits and compensation and incentive
reward opportunities substantially no less favorable than those
provided by Employer for Employee under such plans and programs as in
effect on the date of this Agreement; and provided further that
Employer may take into account Employee's retirement in structuring his
awards under the executive compensation plans.
(e) Financial and Tax Advice. During (i) the Period of
Employment, (ii) the 12-month period following the termination of the
Period of Employment as a result of death or Disability, and (iii) the
three-year period following the voluntary termination by Employee with
Good Reason (as defined in Section 12) or the voluntary termination by
Employer without Cause (as defined in Section 12), or such shorter
period provided in Section 11, Employer shall provide Employee (or, if
Employee shall have died, his estate) at Employer's expense,
third-party professional financial and tax advisory services, primarily
oriented to planning in light of Employee's entitlement to compensation
and employee benefits and appropriate in light of the financial
circumstances of Employee (or his estate).
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<PAGE> 11
11. Termination
(a) Death or Retirement. If the Period of Employment
terminates pursuant to paragraph (b) of Section 2 as a result of (1)
the death of Employee, (2) the retirement of Employee upon or after
reaching age 65, or (3) the retirement of Employee, with the consent of
Employer, prior to reaching age 65, Employee (or Employee's estate)
will be entitled to receive only:
(i) the base salary otherwise payable under
Section 5 through the end of the month in which Employee's
employment is terminated, together with salary, compensation
or benefits which have been earned or become payable as of the
date of termination but which have not yet been paid to
Employee;
(ii) a prorated portion of the award to Employee
for the year of termination under the Alumax Inc. 1993 Annual
Incentive Plan, as the same may be modified, replaced or added
to by Employer from time to time, assuming all applicable
targets for the year of termination had been met, with such
award prorated based on the number of days during the year of
Employee's termination which precede such termination;
(iii) the PARS or other Performance Awards to the
Employee for the Performance Periods in progress as of the
date of termination under the Alumax Inc. 1993 Long Term
Incentive Plan, as the same may be modified, replaced or added
to by Employer from time to time, assuming all applicable
Performance Objectives for such Performance Periods had been
met, with such PARS or other Performance Awards payable in
shares of common stock or cash as determined by the Committee
administering such Plan in its discretion and any unvested
outstanding PARS not earned during completed Performance
Periods will be fully vested and payable in shares of common
stock or cash as determined by the Committee administering
such Plan in its discretion;
(iv) such other awards or bonuses as the Board of
Directors may in its sole discretion determine;
(v) during the 12-month period following the
termination of Employee's employment as a result of the death
of Employee, maintenance in effect for the continued benefit
of Employee's dependents of all insured and self-insured
employee medical and dental benefit plans in which Employee
was participating immediately prior to termination provided
that such continued participation is possible under the
general terms and conditions of such plans (and any applicable
funding media) and Employee's dependents continue to pay an
amount equal to the Employee's regular contribution for such
participation;
(vi) during the 12-month period following the
termination of Employee's employment as a result of the death
of Employee, the financial and tax advice set forth in
paragraph (e) of Section 10; and
(vii) such other compensation and benefits, if
any, as shall be determined to be applicable in accordance
with Employer's plans and practices as in effect on the date
of termination.
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<PAGE> 12
(b) Disability. If the Period of Employment terminates
pursuant to paragraph (b) of Section 2 as a result of Disability,
Employee will be entitled to receive only:
(i) the base salary otherwise payable under
Section 5 through the end of the month in which Employee's
employment is terminated, together with salary, compensation
or benefits which have been earned or become payable as of the
date of termination but which have not yet been paid to
Employee;
(ii) each month during the 12-month period
following the month in which Employee's employment is
terminated, the excess of (1) base annual salary at the rate
in effect under Section 5 on the date of termination, over (2)
the amount, if any, payable to Employee under Employer's
disability plan(s) or other arrangements for disability
compensation;
(iii) a prorated portion of the award to Employee
for the year of termination under the Alumax Inc. 1993 Annual
Incentive Plan, as the same may be modified, replaced or added
to by Employer from time to time, assuming all applicable
targets for the year of termination had been met, with such
award prorated based on the number of days during the year of
Employee's termination which precede such termination;
(iv) the PARS or other Performance Awards to
Employee for the Performance Periods in progress as of the
date of termination under the Alumax Inc. 1993 Long Term
Incentive Plan, as the same may be modified, replaced or added
to by Employer from time to time, assuming all applicable
Performance Objectives for such Performance Periods had been
met, with such PARS or other Performance Awards payable in
shares of common stock or cash as determined by the Committee
administering such Plan in its discretion, and any unvested
outstanding PARS not earned during completed Performance
Periods will be fully vested and payable in shares of common
stock or cash as determined by the Committee administering
such Plan in its discretion;
(v) term life insurance coverage at the expense
of Employer for the period from the date of termination of
Employee's employment to December 31, 1999 in a face amount
equal to the coverage maintained for Employee under
then-existing Employer benefit plans for which Employee shall
have the right to designate the beneficiaries, such coverage
to be maintained in the face amount which would from time to
time be applicable under such plans, provided such coverage
may be discontinued if at any time Employee accepts full time
employment with another employer;
(vi) during the 12-month period following the
termination of Employee's employment (or, if shorter, during
the period until the commencement of equivalent benefits from
a new employer), the financial and tax advice set forth in
paragraph (e) of Section 10; and
(vii) such other compensation and benefits, if
any, as shall be determined to be applicable in accordance
with Employer's plans and practices as in effect on the date
of termination.
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<PAGE> 13
(c) Voluntary Termination by Employee without Good
Reason. If the Period of Employment terminates pursuant to paragraph
(b) of Section 2 as a result of a voluntary termination by Employee
without Good Reason, Employee will be entitled to receive only:
(i) the base salary otherwise payable under
Section 5 through the day on which Employee's employment is
terminated, together with salary, compensation or benefits
which have been earned or become payable as of the date of
termination but which have not yet been paid to Employee;
(ii) to the extent possible, the opportunity to
convert group and individual life insurance and disability
insurance policies of Employer then in effect for Employee to
individual policies of Employee upon the same terms as
similarly situated employees of Employer may apply for such
conversions; and
(iii) such other compensation and benefits, if
any, as shall be determined to be applicable in accordance
with Employer's plans and practices in effect on the date of
termination.
(d) Voluntary Termination by Employee with Good Reason or
by Employer without Cause. If the Period of Employment terminates
pursuant to paragraph (b) of Section 2 as a result of a voluntary
termination by Employee with Good Reason, or a voluntary termination by
Employer without Cause, then Employee will be entitled to receive only:
(i) the base salary otherwise payable under
Section 5 through the end of the month in which Employee's
employment is terminated, together with salary, compensation
or benefits which have been earned or become payable as of the
date of termination but which have not yet been paid to the
Employee;
(ii) a prorated portion of the award to Employee
for the year of termination under the Alumax Inc. 1993 Annual
Incentive Plan, as the same may be modified, replaced or added
to by Employer from time to time, assuming all applicable
targets for the year of termination had been met, with such
award prorated based on the number of days during the year of
Employee's termination which precede such termination;
(iii) the PARS or other Performance Awards to
Employee for the Performance Periods in progress as of the
date of termination under the Alumax Inc. 1993 Long Term
Incentive Plan, as the same may be modified, replaced or added
to by Employer from time to time, assuming all applicable
Performance Objectives for such Performance Periods had been
met, with such PARS or other Performance Awards payable in
shares of common stock or cash as determined by the Committee
administering such Plan in its discretion, and any unvested
outstanding PARS not earned during completed Performance
Periods will be fully vested and payable in shares of common
stock or cash as determined by the Committee administering
such Plan in its discretion;
(iv) a lump-sum severance payment in an amount
equal to the product of (A) the base annual salary at the rate
in effect under Section 5 on the date of termination plus the
award to Employee for the year of termination under the Alumax
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<PAGE> 14
Inc. 1993 Annual Incentive Plan, as the same may be modified,
replaced or added to by Employer from time to time, assuming
all applicable targets for the year of termination had been
met, multiplied by (B) a multiplier equal to the number of
full and fractional years remaining between the date of
termination and December 31, 1999; provided that the payment
made pursuant to this paragraph (iv) shall be repaid by
Employee in the event Employee violates in any material
respect the provisions of Section 14 hereof;
(v) maintenance in effect for the continued
benefit of Employee and his dependents for a period
terminating on the earlier of (A) December 31, 1999 or (B) the
commencement of equivalent benefits from a new employer of:
(A) all insured and self-insured
medical and dental benefit plans in which Employee
was participating immediately prior to termination,
provided that Employee's continued participation is
possible under the general terms and conditions of
such plans (and any applicable funding media) and
Employee continues to pay an amount equal to
Employee's regular contribution for such
participation; and
(B) the group and individual life
insurance and disability insurance policies of
Employer then in effect for Employee; provided,
however, that if Employer so elects, or if such
continued participation is not possible under the
general terms and conditions of such plans or under
such policies, Employer shall, in lieu of the
foregoing, arrange to have issued for the benefit of
Employee and Employee's dependents individual
policies of insurance providing benefits
substantially similar (on an after-tax basis) to
those described in this paragraph (v), or, if such
insurance is not available at a reasonable cost to
Employer, Employer shall otherwise provide Employee
and Employee's dependents equivalent benefits (on an
after-tax basis); provided further that, in no event
shall Employee be required to pay any premiums or
other charges in an amount greater than that which
Employee would have paid in order to participate in
Employer's plans and policies;
(vi) for a period terminating on the earlier of
(A) three years after the date of termination of employment or
(B) the commencement of equivalent benefits from a new
employer, the financial and tax advice set forth in paragraph
(e) of Section 10;
(vii) for a period terminating one year after the
date of termination of employment, the benefits equivalent on
an after-tax basis to the additional benefits Employee would
have received under the employee benefit and executive
compensation plans, whether or not qualified for federal
income tax purposes (including, without limitation, all
qualified and non-qualified retirement plans, pension plans,
profit-sharing and other defined contribution plans and excess
benefit plans, but specifically excluding incentive
compensation, stock option and performance share plans) in
which Employee was participating immediately prior to
termination, as if Employee had received credit under such
plans for service and age with Employer during such period
following Employee's termination, with such benefits
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<PAGE> 15
payable by Employer at the same times and in the same manner
as such benefits would have been received by Employee under
such plans; and
(viii) such other compensation and benefits, if
any, as shall be determined to be applicable in accordance
with Employer's plans and practices in effect on the date of
termination.
(e) Termination by Employer with Cause. If the Period of
Employment terminates pursuant to paragraph (b) of Section 2 as a
result of a voluntary termination by Employer with Cause, Employee will
be entitled to receive only:
(i) the base salary otherwise payable under
Section 5 through the day on which Employee's employment is
terminated, together with salary, compensation or benefits
which have been earned or become payable as of the date of
termination but which have not yet been paid to Employee;
(ii) maintenance in effect for the continued
benefit of Employee and his dependents for a period
terminating three months after the date of termination (or, if
earlier, the commencement date of equivalent benefits from a
new employer), of all insured and self-insured medical and
dental benefit plans in which Employee was participating
immediately prior to termination provided that Employee's
continued participation is possible under the general terms
and conditions of such plans (and any applicable funding
media) and Employee continues to pay an amount equal to
Employee's regular contribution for such participation; and
(iii) such other compensation and benefits, if
any, as shall be determined to be applicable under the
circumstances in accordance with Employer's plans and
practices in effect on the date of termination.
(f) Date of Payment. Except as otherwise provided herein,
all cash payments and lump-sum awards required to be made
pursuant to the provisions of paragraphs (a) through (e) of
this Section 11 shall be made no later than the fifteenth day
following the date of Employee's termination.
12. Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
"Beneficial Owner," with respect to any securities, shall mean
any person who, directly or indirectly, has or shares the right to vote
or dispose of such securities or otherwise has "beneficial ownership"
of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as
such Rules are in effect on the date of this Agreement) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")),
including pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that (i) a person shall
not be deemed the Beneficial Owner of any security as a result of any
agreement, arrangement or understanding to vote such security (x)
arising solely from a revocable proxy or consent solicited pursuant to,
and in accordance with, the applicable provisions of the Exchange Act
and the rules and regulations thereunder or (y) made in connection
with, or otherwise to participate in, a proxy or consent solicitation
made, or to be made, pursuant to, and in accordance with, the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, in either case described in
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<PAGE> 16
clause (x) or clause (y) above whether or not such agreement,
arrangement or understanding is also then reportable by such person on
Schedule 13D under the Exchange Act (or any comparable or successor
report), and (ii) a person engaged in business as an underwriter of
securities shall not be deemed to be the Beneficial Owner of any
securities acquired through such person's participation in good faith
in a firm commitment underwriting until the expiration of forty days
after the date of such acquisition.
"Cause" shall mean (i) the willful engaging by Employee in
conduct which is not authorized by the Board of Directors of Employer
or within the normal course of Employee's business decisions and is
known by Employee to be materially detrimental to the best interests of
Employer or any of its subsidiaries, (ii) the willful engaging by
Employee in conduct which Employee knows is, or has substantial reason
to believe to be, illegal to the extent of a felony violation, or the
equivalent seriousness under laws other than those of the United
States, and which has effects on Employer or Employee materially
injurious to Employer, (iii) the engaging by Employee in any willful
and conscious act of serious dishonesty, in each case which the Board
of Directors of Employer reasonably determines affects adversely, or
could in the future affect adversely, the value, reliability or
performance of Employee to Employer in a material manner, (iv) the
willful and continued failure by Employee to perform substantially his
duties to Employer under this Agreement (including any sustained and
unexcused absence of Employee from the performance of his duties under
this Agreement, which absence has not been certified in writing as due
to physical or mental illness in accordance with the procedures set
forth in this Section 9 under "Disability"), after a written demand for
substantial performance has been delivered to Employee by the Board of
Directors specifically identifying the manner in which Employee has
failed to substantially perform his duties, or (v) the sustained and
unexcused absence of Employee from the performance of his duties under
this Agreement for a period of 180 days or more within a period of 365
consecutive days, regardless of the reason for such absence, unless
Employee demonstrates that such absence is due to Disability. Any act,
or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board of Directors of Employer or based upon the
advice of counsel for Employer shall be conclusively presumed to be
done, or omitted to be done, in good faith and in the best interests of
Employer, and shall not be deemed to constitute Cause under
subdivisions (ii) or (iii) of this definition. Notwithstanding the
foregoing, there shall not be deemed to be a voluntary termination by
Employer with Cause unless and until there shall have been delivered to
Employee a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board of
Directors of Employer at a meeting of such Board held after reasonable
notice to Employee and at which Employee has an opportunity, together
with his counsel, to be heard before such Board, finding that, in the
good faith opinion of such Board, Employee was guilty of the conduct
set forth above and specifying the particulars thereof in detail.
"Change in Control" shall mean the satisfaction of one or
more of the following conditions:
(i) any person is or becomes the Beneficial
Owner, directly or indirectly, of securities of Employer
representing 20 percent or more of the combined voting power
of Employer's then-outstanding securities (a "20% Beneficial
Owner"); provided, however, that (a) the term "20% Beneficial
Owner" shall not include any Beneficial Owner who has crossed
such 20 percent threshold solely as a result of an acquisition
of securities directly from Employer, or solely as a result of
an
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<PAGE> 17
acquisition by Employer of Employer securities, until such
time thereafter as such person acquires additional voting
securities other than directly from Employer and, after giving
effect to such acquisition, such person would constitute a 20%
Beneficial Owner; and (b) with respect to any person eligible
to file a Schedule 13G pursuant to Rule 13d-l(b)(1) under the
Exchange Act with respect to Employer securities (an
"Institutional Investor"), there shall be excluded from the
number of securities deemed to be beneficially owned by such
person a number of securities representing not more than 10
percent of the combined voting power of Employer's
then-outstanding securities;
(ii) during any period of two consecutive years
beginning after the commencement of the Period of Employment,
individuals who at the beginning of such period constitute the
Board of Directors of Employer together with those individuals
who first become Directors during such period (other than by
reason of an agreement with Employer in settlement of a proxy
contest for the election of directors) and whose election or
nomination for election to the Board was approved by a vote of
at least two-thirds (2/3) of the Directors then still in
office who either were Directors at the beginning of the
period or whose election or nomination for election was
previously so approved (the "Continuing Directors"), cease for
any reason to constitute a majority of the Board of Directors
of Employer;
(iii) the stockholders of Employer approve a
merger, consolidation, recapitalization or reorganization of
Employer, or a reverse stock split of any class of voting
securities of Employer, or the consummation of any such
transaction if stockholder approval is not obtained, other
than any such transaction which would result in at least 75%
of the total voting power represented by the voting securities
of Employer or the surviving entity outstanding immediately
after such transaction being beneficially owned by persons who
together owned at least 75% of the combined voting power of
the voting securities of Employer outstanding immediately
prior to such transaction, with the relative voting power of
each such continuing holder compared to the voting power of
each other continuing holder not substantially altered as a
result of the transaction; provided that, for purposes of this
paragraph (iii), such continuity of ownership (and
preservation of relative voting power) shall be deemed to be
satisfied if the failure to meet such 75% threshold (or to
preserve such relative voting power) is due solely to the
acquisition of voting securities by an employee benefit plan
of Employer or such surviving entity or of any subsidiary of
Employer or such surviving entity;
(iv) the stockholders of Employer approve a plan
of complete liquidation or dissolution of Employer or an
agreement for the sale or disposition of all or substantially
all the assets of Employer; or
(v) any other event which the Board of Directors
of Employer (not taking into account any vote of Employee)
determines shall constitute a Change in Control for purposes
of this Agreement; provided, however, that a Change in Control
shall not be deemed to have occurred if any of the following
conditions (each, an "exception") is satisfied:
(1) Unless a majority of the Continuing
Directors of Employer (not taking into account any
vote of Employee) determines that for purposes
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<PAGE> 18
of any or all of the provisions of this Agreement the
exception set forth in this paragraph (1) shall not
apply, none of the foregoing conditions would have
been satisfied but for one or more of the following
persons acquiring or otherwise becoming the
Beneficial Owner of securities of Employer: (A) any
person who has entered into a binding agreement with
Employer, which agreement has been approved by
two-thirds (2/3) of the Continuing Directors,
limiting the acquisition of additional voting
securities by such person, the solicitation of
proxies by such person or proposals by such person
concerning a business combination with Employer (a
"Standstill Agreement"); (B) any employee benefit
plan, or trustee or other fiduciary thereof,
maintained by Employer or any subsidiary of Employer;
(C) any subsidiary of Employer; or (D) Employer.
(2) Unless a majority of the Continuing
Directors of Employer (not taking into account any
vote of Employee) determines that for purposes of any
or all of the provisions of this Agreement the
exception set forth in this paragraph (2) shall not
apply, none of the foregoing conditions would have
been satisfied but for the acquisition by Employer of
another entity (whether by merger or consolidation,
the acquisition of stock or assets, or otherwise) in
exchange, in whole or in part, for securities of
Employer, provided that, immediately following such
acquisition, the Continuing Directors constitute a
majority of the Board of Directors of Employer, or a
majority of the board of directors of any other
surviving entity, and, in either case, no agreement,
arrangement or understanding exists at that time
which would cause such Continuing Directors to cease
thereafter to constitute a majority of the Board of
Directors or of such other board of directors.
(3) Unless a majority of the Continuing
Directors of Employer (not taking into account any
vote of Employee) determines that for purposes of any
or all of the provisions of this Agreement the
exception set forth in this paragraph (3) shall not
apply, none of the foregoing conditions would have
been satisfied but for Employee, or a person in which
Employee has a one-half of one percent (0.5%) or
greater equity interest, either singly or acting in
concert with one or more other persons, becoming a
20% Beneficial Owner.
(4) Employee determines that, for
purposes of any or all of the provisions of this
Agreement, none of the foregoing conditions shall be
deemed to have been satisfied.
(5) A majority of the Continuing
Directors (not taking into account any vote of
Employee) determines that a Change of Control shall
not be deemed to have occurred.
"Committee" shall mean the Human Resources and Compensation Committee
of the Employer's Board of Directors.
"Disability" shall mean the absence of Employee from his duties with
Employer on a full-time basis for one hundred eighty (180) days within any
period of three hundred and sixty-five (365) consecutive days as a result of
Employee's incapacity due to physical or mental illness as certified
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<PAGE> 19
in writing by a physician selected by Employee and reasonably acceptable to
Employer (it being understood that such physician shall be deemed to be
reasonably acceptable to Employer if, within a period of fifteen (15) days after
Employee notifies Employer of the name of such physician, Employer does not
object to the use of such physician), unless within thirty (30) days after
written notice to Employee by Employer, in accordance with the provisions of
Section 16, that Employee's employment is being terminated by reason of such
absence, Employee shall have returned to the full performance of Employee's
duties and shall have presented to Employer a written certificate of Employee's
good health prepared by a physician selected by Employee and reasonably
acceptable to Employer.
"Fair Market Value" of a share of Common Stock shall mean the closing
sale price of the Common Stock reported on the Composite Tape for securities
listed on the New York Stock Exchange in The Wall Street Journal on the trading
day immediately preceding the relevant valuation date (it being agreed that, if
such a closing price for the Common Stock is not so reported on such date, the
closing price on such day shall, for purposes of this paragraph, be deemed to be
the market price per share of the Common Stock on such date as determined in
good faith by the Board of Directors of Employer).
Voluntary termination by Employee with "Good Reason" shall mean a
voluntary termination by Employee resulting from the Employer (i) reducing
Employee's base annual salary as in effect immediately prior to such reduction
or reducing in a material respect Employee's opportunity to earn incentive
compensation as provided in Section 10(d) of this Agreement, (ii) effecting a
change in the position of the Employee which does not represent a promotion from
Employee's position provided for herein, (iii) assigning Employee duties or
responsibilities which are materially inconsistent with such position, (iv)
removing Employee from or failing to reappoint or reelect Employee to such
position, except in connection with a termination as a result of death,
Disability, voluntary termination by Employee, retirement by Employee or Cause,
(v) serving notice on Employee pursuant to Section 2(a) of this Agreement at any
time prior to Employee's reaching age 65, or (vi) otherwise materially breaching
its obligations under this Agreement, in each case after notice in writing from
Employee to Employer and a period of 30 days after such notice during which
Employer fails to correct such conduct.
"120-Day Average Price" of a share of Common Stock shall mean the
average of the closing sale prices of the Common Stock reported on the Composite
Tape for securities listed on the New York Stock Exchange in the Wall Street
Journal for the first 120 trading days on the New York Stock Exchange that the
Common Stock is fully listed on the New York Stock Exchange; provided, however,
that if before the end of such 120-day period (a) any person shall have
acquired, or publicly disclosed an intention or proposal to acquire (whether by
tender offer, exchange offer, or otherwise), Beneficial Ownership of securities
of Employer that would result in such person being a 20% Beneficial Owner, (b)
any person shall have proposed, or publicly announced an intention to propose, a
merger, consolidation or similar transaction involving Employer or any of its
subsidiaries (other than mergers, reorganizations, consolidations or
dissolutions involving existing subsidiaries of employer), (c) Employer shall
have publicly proposed, or publicly announced an intention to propose, the
disposition, by sale, lease, exchange or otherwise, of assets of Employer or its
subsidiaries representing 30% or more of the consolidated assets of Employer and
its subsidiaries or (d) the Board of Directors of Employer determines, in its
sole discretion, without regard to the vote of the Employee, that a third party
has taken action involving a possible Change in Control or a material part of
Employer's business or assets and such action is affecting the public trading
price of the Common Stock, the 120-day period shall be
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<PAGE> 20
deemed to have ended 10 calendar days prior to the date of the public
announcement of any such acquisition, disclosure, proposal or the making of such
determination.
"120-Day Period" shall mean the period of 120 days (or shorter period)
used to determine the 120-Day Average Price.
13. Excise Tax Gross-up. In the event that Employee becomes
entitled to one or more payments (with a "payment" including, without
limitation, the vesting of an option or other non-cash benefit or property,
whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with Employer or any affiliated company) (the "Total Payments"),
which are or become subject to the tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), (or any similar tax that may
hereafter be imposed) but not any such tax imposed as a result of or in
connection with the business combination between AMAX and Cyprus Minerals
Company (the "Excise Tax"), Employer shall pay to Employee at the time specified
below an additional amount (the "Gross-up Payment") (which shall include,
without limitation, reimbursement for any penalties and interest that may accrue
in respect of such Excise Tax) such that the net amount retained by Employee,
after reduction for any Excise Tax (including any penalties or interest thereon)
on the Total Payments and any federal, state and local income or employment tax
and Excise Tax on the Gross-up Payment provided for by this Section 13, but
before reduction for any federal, state or local income or employment tax on the
Total Payments, shall be equal to the sum of (a) the Total Payments, and (b) an
amount equal to the product of any deductions disallowed for federal, state or
local income tax purposes because of the inclusion of the Gross-up Payment in
Employee's adjusted gross income multiplied by the highest applicable marginal
rate of federal, state or local income taxation, respectively, for the calendar
year in which the Gross-up Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax,
(i) the Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, unless, and
except to the extent that, in the written opinion of independent
compensation consultants or auditors of nationally recognized standing
selected by Employer and reasonably acceptable to Employee
("Independent Auditors"), the Total Payments (in whole or in part) do
not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code
in excess of the base amount within the meaning of Section 280G(b)(3)
of the Code or are otherwise not subject to the Excise Tax,
(ii) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Total Payments or (B) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) of the Code
(after applying clause (i) above), and
(iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by Employer's Independent
Auditors appointed pursuant to clause (i) above in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
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<PAGE> 21
For purposes of determining the amount of the Gross-up Payment,
Employee shall be deemed (A) to pay federal income taxes at the highest marginal
rate of federal income taxation for the calendar year in which the Gross-up
Payment is to be made; (B) to pay any applicable state and local income taxes at
the highest marginal rate of taxation for the calendar year in which the
Gross-up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes if
paid in such year (determined without regard to limitations on deductions based
upon the amount of Employee's adjusted gross income); and (C) to have otherwise
allowable deductions for federal, state and local income tax purposes at least
equal to those disallowed because of the inclusion of the Gross-up Payment in
Employee's adjusted gross income. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time the Gross-up Payment is made, Employee shall repay to Employer at
the time that the amount of such reduction in Excise Tax is finally determined
(but, if previously paid to the taxing authorities, not prior to the time the
amount of such reduction is refunded to Employee or otherwise realized as a
benefit by Employee) the portion of the Gross-up Payment that would not have
been paid if such Excise Tax had been applied in initially calculating the
Gross-up Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax
is determined to exceed the amount taken into account hereunder at the time the
Gross-up Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-up Payment),
Employer shall make an additional Gross-up Payment in respect of such excess
(plus any interest and penalties payable with respect to such excess) at the
time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the thirtieth
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, Employer shall pay to Employee on such day an estimate,
as determined by Employer's Independent Auditors appointed pursuant to clause
(i) above, of the minimum amount of such payments and shall pay the remainder of
such payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code), as soon as the amount thereof can be determined. In
the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
Employer to Employee, payable on the fifth day after demand by Employer
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code). If more than one Gross-up Payment is made, the amount of each Gross-up
Payment shall be computed so as not to duplicate any prior Gross-up Payment.
Employer shall have the right to control all proceedings with the Internal
Revenue Service that may arise in connection with the determination and
assessment of any Excise Tax and, at its sole option, Employer may pursue or
forego any and all administrative appeals, proceedings, hearings and conferences
with any taxing authority in respect of such Excise Tax (including any interest
or penalties thereon); provided, however, that Employer's control over any such
proceedings shall be limited to issues with respect to which a Gross-up Payment
would be payable hereunder and Employee shall be entitled to settle or contest
any other issue raised by the Internal Revenue Service or any other taxing
authority. Employee shall cooperate with Employer in any proceedings relating to
the determination and assessment of any Excise Tax and shall not take any
position or action that would materially increase the amount of any Gross-up
Payment hereunder.
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<PAGE> 22
14. Non-Competition and Non-Disclosure; Employee Cooperation
(a) Without the consent in writing of the Board of
Directors of Employer, upon termination of Employee's employment for
any reason, Employee will not for a period of three years thereafter,
acting alone or in conjunction with others, directly or indirectly (i)
engage (either as owner, partner, stockholder, employer or employee) in
any business in which he has been directly engaged, or has supervised
as an executive, during the last two years prior to such termination
and which is directly in competition with a business conducted by
Employer or any of its subsidiaries; (ii) induce any customers of
Employer or any of its subsidiaries with whom Employee has had contacts
or relationships, directly or indirectly, during and within the scope
of his employment with Employer or any of its subsidiaries, to curtail
or cancel their business with such companies or any of them; (iii)
solicit or canvass business from any person who was a customer of
Employer or any of its subsidiaries at or during the two-year period
immediately preceding termination of Employee's employment; or (iv)
induce, or attempt to influence, any employee of Employer or any of its
subsidiaries to terminate his employment; provided, however, that the
limitation contained in clause (i) above shall not apply if Employee's
employment is terminated as a result of a voluntary termination by
Employee with Good Reason, a voluntary termination by Employer without
Cause or retirement upon reaching age 65 or thereafter; and provided
further, that the limitation contained in clause (i) above shall not
prohibit Employee from engaging in any business directly competitive
with Employer or any of its subsidiaries as a director, consultant or
private investor upon retirement upon reaching age 62 or thereafter
with the consent of a majority of the Board of Directors of Employer,
which consent shall not be unreasonably withheld. The provisions of
subparagraphs (i), (ii), (iii) and (iv) above are separate and distinct
commitments independent of each of the other subparagraphs. It is
agreed that the ownership of not more than 1/2 of 1% of the equity
securities of any company having securities listed on an exchange or
regularly traded in the over-the-counter market shall not, of itself,
be deemed inconsistent with clause (i) of this paragraph (a).
(b) Employee shall not, at any time during the Period of
Employment or following Employee's termination of employment for any
reason whatsoever, disclose, use, transfer or sell, except in the
course of employment with Employer, any confidential or proprietary
information of Employer and its subsidiaries so long as such
information has not otherwise been disclosed or is not otherwise in the
public domain, except as required by law or pursuant to legal process.
(c) Employee agrees to cooperate with Employer, by making
himself available to testify on behalf of Employer or any subsidiary or
affiliate of Employer, in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, and to assist
Employer, or any subsidiary or affiliate of Employer in any such
action, suit or proceeding, by providing information and meeting and
consulting with the Board of Directors of Employer or its
representatives or counsel, or representatives or counsel of Employer,
or any subsidiary or affiliate of Employer, as requested by such Board
of Directors, representatives or counsel. Employer agrees to reimburse
the Employee, on an after-tax basis, for all expenses actually incurred
in connection with his provision of testimony or assistance.
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<PAGE> 23
15. Governing Law; Disputes; Arbitration
(a) This Agreement is governed by and is to be construed,
administered and enforced in accordance with the laws of the State of
Delaware, without regard to the conflict of laws principles thereof. If
under such law, any portion of this Agreement is at any time deemed to
be in conflict with any applicable statute, rule, regulation, ordinance
or principle of law, such portion shall be deemed to be modified or
altered to the extent necessary to conform thereto or, if that is not
possible, to be omitted from this Agreement; and the invalidity of any
such portion shall not affect the force, effect and validity of the
remaining portion hereof.
(b) All reasonable costs and expenses (including fees and
disbursements of counsel) incurred by Employee in seeking to enforce
rights pursuant to this Agreement shall be paid or reimbursed to
Employee promptly by Employer, whether or not Employee is successful in
asserting such rights, except that Employee shall repay to Employer any
such amounts to the extent that an arbitrator or court issues a final,
unappealable order setting forth a determination that Employee's claim
was frivolous or advanced by Employee in bad faith; provided, however,
that with respect to any Change in Control, the Board of Directors of
Employer may determine that the repayment by Employee contemplated by
the immediately preceding clause of this paragraph shall not apply to
any claims arising out of such Change in Control, which determination
shall thereafter be irrevocable with respect to such claims.
(c) Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by
arbitration in Atlanta, Georgia by three arbitrators in accordance with
the rules of the American Arbitration Association in effect at the time
of submission to arbitration. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. For purposes of
settling any dispute or controversy arising hereunder or for the
purpose of entering any judgment upon an award rendered by the
arbitrators, Employer and Employee hereby consent to the jurisdiction
of any or all of the following courts: (i) the United States District
Court for the Northern District of Georgia, (ii) any of the courts of
the State of Georgia, or (iii) any other court having jurisdiction.
Employer and Employee further agree that any service of process or
notice requirements in any such proceeding shall be satisfied if the
rules of such court relating thereto have been substantially satisfied.
Employer and Employee hereby waive, to the fullest extent permitted by
applicable law, any objection which it may now or hereafter have to
such jurisdiction and any defense of inconvenient forum. Employer and
Employee hereby agree that a judgment upon an award rendered by the
arbitrators may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Subject to Section
15(b), Employer shall bear all costs and expenses arising in connection
with any arbitration proceeding pursuant to this Section 15.
Notwithstanding any provision in this Section 15, Employee shall be
entitled to seek specific performance of Employee's right to be paid
during the pendency of any dispute or controversy arising under or in
connection with this Agreement.
(d) Any amounts that have become payable pursuant to the
terms of this Agreement or any judgment by a court of law or a decision
by arbitrators pursuant to this Section 15 but which are not timely
paid shall bear interest at the prime rate in effect at the time such
payment first becomes payable, as quoted by The Chase Manhattan Bank,
New York, New York.
16. Notices. All notices under this Agreement shall be in writing
and shall be deemed effective when received (in Employer's case, by its
Secretary) or seventy-two (72) hours after deposit thereof in the U.S. mails,
postage prepaid, for delivery as registered or certified mail,
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<PAGE> 24
addressed, in the case of Employee, to him at his address specified below, and
in the case of Employer, to its principal United States corporate headquarters,
attention of the Secretary, or to such other address as Employee or Employer may
by notice designate in writing at any time or from time to time to the other
party. In lieu of notice by deposit in the U.S. mail, a party may give notice by
prepaid cable, telegram, telex or telecopy and such notice shall be effective
twenty-four (24) hours after it has been properly sent.
17. Withholding. All payments to be made to Employee under this
Agreement will be subject to required withholding taxes and other deductions.
18. Mitigation. Employee shall not be required to mitigate the
amount of any payment Employer becomes obligated to make to Employee in
connection with this Agreement, by seeking other employment or otherwise, and
except as expressly provided in this Agreement, amounts or other benefits to be
paid or provided to Employee pursuant to this Agreement shall not be reduced by
reason of Employee obtaining other employment or receiving similar payments or
benefits from another employer.
19. Successors; Binding Agreement
(a) Any Successor (as hereinafter defined) to Employer shall be
bound by this Agreement. Employer will seek to have any Successor assent to the
fulfillment by Employer of its obligations under this Agreement at Employee's
request. Failure of Employer to obtain such assent within thirty (30) days after
such request shall constitute Good Reason for termination by Employee of
Employee's employment and, upon a voluntary termination by Employee pursuant to
Section 2, shall entitle Employee to the benefits provided in Section 11(d). For
purposes of this Agreement, "Successor" shall mean any person that succeeds to,
or has the practical ability to control (either immediately or with the passage
of time), Employer's business directly, by merger or consolidation, or
indirectly, by purchase of the Employer's voting securities, all or
substantially all of its assets or otherwise.
(b) For purposes of this Agreement, "Employer" shall include any
corporation or other entity which is the surviving or continuing entity in
respect of any amalgamation, merger, consolidation, dissolution, asset
acquisition or other form of business combination.
20. Pension Credit and Additional Pension Credit
(a) The Employee shall be entitled to a supplemental pension
benefit equal to the excess, if any, of (x) over (y) where (x) and (y) are as
defined below:
(x) the pension benefit that would have been payable to
the Employee under the Alumax Retirement Plan for
Salaried Employees, as it may from time to time be
amended (or any successor plan which is a defined
benefit plan) (the "Plan") if the period of
employment with AMAX Inc. and the period September
15, 1981 through May 31, 1985 were included in
Employee's Benefit Service (as defined in the Plan).
The pension benefit determined under this clause (x)
shall be determined without regard to any limits
imposed by the Internal Revenue Code (currently
Sections 401(a)(17) and 415).
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<PAGE> 25
(y) the pension benefit paid or payable under any defined
benefit plan (whether or not qualified under the
Internal Revenue Code) sponsored by AMAX Inc. or
Alumax Inc. for which any of the periods of service
are included in the calculation of the pension
benefit calculated under clause (x) above.
The supplemental pension benefit shall commence as of the same
date and shall be paid in the same form as Employee's benefit under the Plan.
(b) To compensate the Employee for deferring his retirement and
reduced benefits resulting from such deferral as well as a loss of benefits
associated with the Employee's mandatory receipt of benefits under the defined
benefit plans (whether or not qualified under the Internal Revenue Code)
sponsored by AMAX Inc., the Employer agrees to pay the Employee the lump sum of
$1,175,876 at the time of expiration of the Period of Employment on December 31,
1999, in addition to and without offset of the pension benefits otherwise
payable to the Employee (the "Additional Pension Payment"). The Additional
Pension Payment shall be paid on a prorated basis (based upon the number of days
during the period between December 5, 1996 and December 31, 1999 expired prior
to the Employee's termination and the total number of days in such period) in
the event of (A) the death or Disability (as defined in Section 12) of Employee,
(B) termination of Employee's employment by Employer without Cause (as defined
in Section 12), or by Employee with Good Reason (as defined in Section 12), or
(C) a Change in Control (as defined in Section 12), but no Additional Pension
Payment shall be payable to the Employee (X) in the event of termination of
Employee's employment by Employer with Cause or by Employee other than with Good
Reason, or (Y) if Employee retires prior to December 31, 1999, unless Employer's
Board of Directors, in its sole discretion and not taking into account any vote
of Employee, approves such retirement and a prorated payment of the Additional
Pension Payment.
(c) The benefit entitlements of Employee provided in this Section
20 shall survive any termination of the Period of Employment pursuant to
Section 2.
21. Miscellaneous.
(a) Except to the extent that the terms of this Agreement confer
benefits that are more favorable to Employee than are available under any other
employee benefit or executive compensation plan of Employer in which Employee is
a participant, Employee's rights under any such employee (including executive)
benefit plan or executive compensation plan shall be determined in accordance
with the terms of such plan (as it may be modified or added to by Employer from
time to time).
(b) This Agreement constitutes the entire understanding between
Employer and Employee relating to employment of Employee by Employer and its
subsidiaries and supersedes and cancels all prior agreements and understandings
with respect to the subject matter of this Agreement and such other written
agreements, including the Executive Separation Policy of the Employer. Employee
shall not be entitled to any payment or benefit under this Agreement which
duplicates a payment or benefit received or receivable by Employee under such
prior agreements and understandings or under any employee (including executive)
benefit plan or executive compensation plan of the Employer.
(c) This Agreement may be amended but only by a subsequent written
agreement of the parties.
- 22 -
<PAGE> 26
(d) This Agreement shall be binding upon and shall inure to the
benefit of Employee, his heirs, executors, administrators and beneficiaries, and
shall be binding upon and inure to the benefit of Employer and its successors
and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the year and day first above written.
ALUMAX INC.
By
-------------------------------------
Vice President
----------------------------------------
C. Allen Born
Address of Employee for Purposes of
Notices:
----------------------------------------
----------------------------------------
- 23 -
<PAGE> 1
EXHIBIT 11.01
ALUMAX INC.
CALCULATION OF EARNINGS PER COMMON SHARE
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ----------------- -----------------
<C> <S> <C> <C> <C>
Primary earnings per common share:
1. Net earnings............................. $ 250.0 $ 237.4 $ 46.7
2. Deduct -- Series A Convertible Preferred
dividends.............................. (9.3) (9.3) (9.3)
------- ------- -------
3. Earnings applicable to common shares..... $ 240.7 $ 228.1 $ 37.4
======= ======= =======
4. Average primary shares outstanding (in
thousands)............................. 46,409 45,200 44,757
5. Primary earnings per common share (line 3
divided by line 4)..................... $ 5.19 $ 5.05 $ 0.84
======= ======= =======
Fully diluted earnings per common share:
6. Earnings applicable to common shares..... $ 240.7 $ 228.1 $ 37.4
7. Add -- Series A Convertible Preferred
dividends.............................. 9.3 9.3 9.3
------- ------- -------
8. Earnings applicable to common shares..... $ 250.0 $ 237.4 $ 46.7
======= ======= =======
9. Average fully diluted shares outstanding
(in thousands)......................... 55,251 54,846 54,440
10. Fully diluted earnings per common share
(line 8 divided by line 9)............. $ 4.53 $ 4.33 $ 0.84(A)
======= ======= =======
</TABLE>
- ---------------
(A) Antidilutive, therefore the same as primary.
<PAGE> 1
Exhibit 21.01
ALUMAX INC.
--------------------------------------------
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Subsidiary Place of
- ------------------ Incorporation
-------------
<S> <C>
Alamo Resources Corporation Delaware
Alumax Inc. Nevada
Alumax Aluminum Corporation Delaware
Alumax Asia Limited Hong Kong
Amax Asia Pacific Pty. Limited Australia
Alumax Astechnology, Inc. Delaware
Alumax Becancour, Inc. Delaware
Alumax de Mexico, S.A. de C.V. Mexico
Alumax Engineered Metal Processes, Inc. Delaware
Alumax Extrusions Australia Pty. Limited Australia
Alumax Extrusions B.V. Netherlands
Alumax Extrusions, Inc. Pennsylvania
Alumax Extrusions, Inc. New York
Alumax Extrusions Limited U.K.
Alumax Foil Industrial Redevelopment Corporation Missouri
Alumax Foils, Inc. Delaware
Alumax Holdings B.V. Netherlands
Alumax Holdings de Mexico, S.A. de C.V. Mexico
Alumax Holdings S.A. France
Alumax International Company Nevada
Alumax Japan, Inc. Delaware
Alumax Materials Management, Inc. Delaware
Alumax of Maryland, Inc. Delaware
Alumax Mill Products, Inc. Delaware
Alumax PD Holdings Pte. Limited (50% shareholder) Singapore
Alumax Polska Sp. z o.o. Poland
Alumax Primary Aluminum Corporation Delaware
Alumax Quebec, Inc. Wyoming
Alumax: Recycling B.V. Netherlands
Alumax Remelt Corporation Delaware
Alumax S.A. France
Alumax 6100 South Broadway Redevelopment Corporation Missouri
Alumax of South Carolina, Inc. Delaware
Alumax Technical Center, Inc. Delaware
Alumax Technical Services, Inc. Delaware
Alumax Technology Corporation Delaware
Alumax U.K. Limited U.K.
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Alumax Warehouse Corporation Delaware
Alumax of Washington, Inc. Delaware
Alumet Corporation Delaware
Aluminerie Lauralco, Inc. Delaware
Amax Asia, Inc. Delaware
Amax Holdings Australia Limited Western Australia
Amax Resources Australia Limited Western Australia
Asesoria Mexicana Empresarial, S.A. de C.V. Mexico
Canalco, Inc. Delaware
Comercializadora Exal, S.A. de C.V. Mexico
Compania Fresnillo, S.A. de C.V. (40% Shareholder) Mexico
Compania Minera La Reyna, S.A. de C.V. (40% Shareholder) Mexico
Compania Minera Las Torres, S.A. de C.V. (14.1% Shareholder) Mexico
Compania Minera Sabinas, S.A. de C.V. (40% Shareholder) Mexico
Compania Trans-Rio, S.A. de C.V. (37% Shareholder) Mexico
Eastalco Aluminum Company Delaware
Exal, S.A. de C.V. Mexico
Hillyard Aluminum Recovery Corporation Delaware
Honduras-Rosario Mining Company Delaware
I. de A., S.A. de C.V. (49% Shareholder) Mexico
Intalco Aluminum Company, Ltd. Canada
Intalco Aluminum Corporation Delaware
Kawneer Company Canada Limited Canada
Kawneer Company, Inc. Delaware
Kawneer Deutschland GmbH Germany
Kawneer Europe B.V. Netherlands
Kawneer France, Inc. Delaware
Kawneer France S.A. France
Kawneer Germany, Inc. Delaware
Kawneer Installations Limited U.K.
Kawneer Maroc S.A. (75% Shareholder) France
Kawneer Polska Sp. z o.o. Poland
Kawneer U.K. Limited U.K.
Lauralco, Quebec, Inc. Delaware
Lauralco, Superieur, Inc. Delaware
Lauralco, Trois-Rivieres, Inc. Delaware
Mt. Holly Plantation, Inc. Delaware
Murphy Properties, Inc. Delaware
Neptune Mining Company (36. 61% Shareholder) Delaware
Rosario Mining of Nicaragua, Inc. Delaware
Rosario Properties, Inc. Delaware
Rosario Resources Corporation New York
The Durango Corporation Delaware
The Fresnillo Company New York
Yunnan Xinmeilu Aluminum Foil Co., Ltd. (56% Shareholder) China
</TABLE>
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Alumax Inc. on Form S-8 (File Nos. 33-83006, 33-83008, 33-83010 and
33-86338) of our report dated January 27, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Alumax
Inc. as of December 31, 1996 and 1995, and for the years ended December 31,
1996, 1995, 1994, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
February 10, 1997
<PAGE> 1
EXHIBIT 24.01
POWER OF ATTORNEY
WITH RESPECT TO ANNUAL REPORT ON FORM 10-K
UNDER THE SECURITIES EXCHANGE ACT OF 1934
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and
directors, individually and collectively, hereby constitute and appoint Allen
Born, Helen M. Feeney, and Lawrence B. Frost, and each of them, their true and
lawful attorneys and agents to execute and deliver on behalf of any one or more
of them, in any one or more of their various capacities as officer or director
of the registrant, the Alumax Inc. Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, and any and all required amendments and
supplements thereto, for filing with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the undersigned and each of them hereby ratifying and confirming all
that said attorneys and agents, and each of them, shall do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has signed his or her name
hereto on the date set opposite his or her name.
February 6, 1997 /s/ Allen Born
------------------------------------------------------------
Allen Born, as Chairman, Chief Executive Officer
and Director (Principal Executive Officer)
February 6, 1997 /s/ Lawrence B. Frost
------------------------------------------------------------
Lawrence B. Frost, as Senior Vice President and
Chief Financial Officer (Principal Financial Officer)
February 6, 1997 /s/ Michael T. Vollkommer
------------------------------------------------------------
Michael T. Vollkommer, as Vice President and
Controller (Principal Accounting Officer)
<PAGE> 2
February 6, 1997 /s/ J. Dennis Bonney
------------------------------------------------------------
J. Dennis Bonney, as Director
February 6, 1997 /s/ Harold Brown
------------------------------------------------------------
Harold Brown, as Director
February 6, 1997 /s/ L. Don Brown
------------------------------------------------------------
L. Don Brown, as Director
February 6, 1997 /s/ Pierre Des Marais II
------------------------------------------------------------
Pierre Des Marais II, as Director
February 6, 1997 /s/ James C. Huntington, Jr.
------------------------------------------------------------
James C. Huntington, Jr., as Director
February 6, 1997 /s/ W. Loeber Landau
------------------------------------------------------------
W. Loeber Landau, as Director
February 6, 1997 /s/ Paul W. MacAvoy
------------------------------------------------------------
Paul W. MacAvoy, as Director
February 6, 1997 /s/ George P. Stoe
------------------------------------------------------------
George P. Stoe, as Director
February 6, 1997 /s/ Anne Wexler
------------------------------------------------------------
Anne Wexler, as Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.01
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-K OF ALUMAX INC. FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 456
<ALLOWANCES> 17
<INVENTORY> 520
<CURRENT-ASSETS> 1,086
<PP&E> 3,064
<DEPRECIATION> 1,037
<TOTAL-ASSETS> 3,299
<CURRENT-LIABILITIES> 425
<BONDS> 672
0
0
<COMMON> 1
<OTHER-SE> 1,640
<TOTAL-LIABILITY-AND-EQUITY> 3,299
<SALES> 3,159
<TOTAL-REVENUES> 3,159
<CGS> 2,522
<TOTAL-COSTS> 2,927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 63
<INCOME-PRETAX> 423
<INCOME-TAX> 173
<INCOME-CONTINUING> 250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 250
<EPS-PRIMARY> 5.19
<EPS-DILUTED> 4.53
</TABLE>
