<PAGE> 1
SCHEDULE 14a
Information Required in Proxy Statement
Reg. Section 240.14a-101.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
COMMONWEALTH ALUMINUM CORPORATION
(Name of Registrant as Specified in Its Charter)
................................................................................
Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing fee (Check appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
O-11.
(1) Title of each class of securities to which transaction applies:
...............................................................
(2) Aggregate number of securities to which transaction applies:
...............................................................
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined:)
...............................................................
(4) Proposed maximum aggregate value of transaction:
...............................................................
(5) Total fee paid:
...............................................................
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Account Previously Paid:
...............................................................
(2) Form, Schedule or Registration Statement No.:
...............................................................
(3) Filing Party:
...............................................................
(4) Date Filed:
...............................................................
-2-
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Preliminary Proxy Materials
[LOGO]
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of
Commonwealth Aluminum Corporation scheduled to be held at The Jefferson Club,
2900 Citizens Plaza, Louisville, Kentucky, on Thursday, April 17, 1997,
commencing at 10:00 A.M., Eastern time. Your Board of Directors and management
look forward to greeting those of you who are able to attend in person.
At the meeting, you will be asked to consider and elect two directors
to serve until the Annual Meeting of Stockholders in 2000. You are also being
asked to approve a change in the name of the Company to Commonwealth
Industries, Inc. and the adoption of a 1997 Stock Incentive Plan and to ratify
the appointment of Coopers & Lybrand L.L.P. as the Company's independent
accountants for 1997. Information concerning those matters, as well as other
important information, is contained in the accompanying proxy statement which
you are urged to read carefully.
Whether or not you plan to attend in person and regardless of the
number of shares you own, it is important that your shares be represented and
voted at the meeting. Accordingly, you are requested to sign, date and mail
the enclosed proxy at your earliest convenience. Your shares will then be
represented at the meeting, and the Company will be able to avoid the expense
of further solicitation.
On behalf of the Board of Directors, thank you for your cooperation
and continued support.
Sincerely,
Mark V. Kaminski
President and Chief
Executive Officer
<PAGE> 4
Preliminary Proxy Materials
COMMONWEALTH ALUMINUM CORPORATION
1200 Meidinger Tower
Louisville Galleria
Louisville, Kentucky 40202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 Annual Meeting of Stockholders of Commonwealth
Aluminum Corporation (the "Company") will be held at The Jefferson Club, 2900
Citizens Plaza, Louisville, Kentucky, at 10:00 A.M. on April 17, 1997, to
consider and take action with respect to the following matters:
(1) The election of two directors;
(2) A change in the name of the Company;
(3) Adoption of the 1997 Stock Incentive Plan;
(4) Approval of the selection of Coopers & Lybrand L.L.P.
as the Company's independent accountants for 1997; and
(5) Such other business as may properly be brought before
the meeting or any adjournment thereof;
all as set forth in the Proxy Statement accompanying this Notice.
The close of business on February 19, 1997 has been fixed as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournment thereof.
Stockholders who do not expect to attend the meeting are
requested to sign and return the enclosed proxy in the enclosed postage-paid
return envelope.
By order of the Board of Directors,
Donald L. Marsh, Jr.
Secretary
March 14, 1997
<PAGE> 5
Preliminary Proxy Materials
COMMONWEALTH ALUMINUM CORPORATION
PROXY STATEMENT
This Proxy Statement is furnished to you in connection with
the solicitation of proxies by the Board of Directors of Commonwealth Aluminum
Corporation, a Delaware corporation (the "Company"), to be used at the Annual
Meeting of Stockholders (the "Meeting") to be held in Louisville, Kentucky, on
April 17, 1997.
If the accompanying form of proxy is properly completed and
returned, the shares to which it relates will be voted at the Meeting. If you
give instructions, the shares will be voted in accordance with your
instructions. If you give no instructions, your shares will be voted for the
election of the nominees for director set forth in this Proxy Statement, for
approval of the change of the name of the Company to Commonwealth Industries,
Inc., for adoption of the 1997 Stock Incentive Plan, for ratification of the
selection of auditors made by the Audit Committee of the Board of Directors,
and, as to any other business that may properly be brought before the Meeting
or any adjournment thereof, in the discretion of the proxy holders. You may
revoke your proxy by attending the Meeting and voting in person or by filing a
written notice or a later-dated proxy with the Secretary of the Company.
The Proxy Statement and the enclosed proxy are first being
mailed to stockholders on or about March 14, 1997 in connection with this
solicitation.
On the record date for the Meeting there were 10,202,500
shares of Common Stock of the Company outstanding and entitled to vote. Each
share of Common Stock is entitled to one vote. The presence, in person or by
proxy, of a majority of the outstanding shares will constitute a quorum. A
plurality of votes of the shares of Common Stock represented at the Meeting is
required for the election of directors. The affirmative vote of a majority of
the outstanding shares of Common Stock is required to approve the change of
name and the affirmative vote of a majority of the shares of Common Stock
represented at the Meeting is required for all other matters. Abstentions will
be treated as equivalent to negative votes, while proxies returned by brokers
as non-votes will not be counted as voting.
ELECTION OF DIRECTORS
There are six directors currently in office. The Board is
divided into three classes, and the members of each class hold office for a
term of three years. The term of one class expires each year.
At the Meeting, two directors are to be elected. The terms of
Catherine G. Burke and Victor Torasso expire at the Meeting. The Nominating
Committee of the Board of Directors has nominated Dr. Burke and Mr. Torasso for
election in the class whose term expires in 2000. Each has agreed to serve if
elected. If either should unexpectedly become unable or unwilling to serve,
the proxy holders may vote for such other person as the Nominating Committee
may recommend in his or her place.
Information concerning Dr. Burke, Mr. Torasso and each of the
other directors of the Company is set forth below.
Mark V. Kaminski. Expiration of term 1999. Director since
1991. Age 41. President and Chief Executive Officer of the Company. Mr.
Kaminski joined the Company in 1987 as Marketing Manager. In 1989,
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he was promoted to Vice President of Operations and in 1991 he became President
and Chief Executive Officer. Mr. Kaminski is a director of the Aluminum
Association, Washington, D.C.
Paul E. Lego. Expiration of term 1998. Director since 1995.
Age 66. Chairman of the Board of the Company. From 1990 until his retirement
in 1993, Mr. Lego was Chairman of the Board of Directors and Chief Executive
Officer of Westinghouse Electric Corporation. He is a director of PNC Bank
Realty Holding Company, USX Corp., Lincoln Electric Company and Consolidated
Natural Gas Company. Mr. Lego is a trustee of the University of Pittsburgh and
a member of the Business Council and the Board of Overseers of the New Jersey
Institute of Technology.
Catherine G. Burke. Expiration of term, if elected, 2000.
Director since 1995. Age 57. Dr. Burke has been on the faculty of the School
of Public Administration at the University of Southern California since 1973.
She has been a panelist and consultant to the Office of Technology Assessment
of the U.S. Congress and a member of the Los Angeles County Economy and
Efficiency Commission. Dr. Burke has provided management consultations to
public and private sector organizations in the United States, Canada,
Australia, England and Denmark.
C. Frederick Fetterolf. Expiration of term 1999. Age 68.
Director since January 1, 1997. Mr. Fetterolf was President and Chief
Operating Officer of Aluminum Company of America (Alcoa) from 1985 to 1991, and
served as President of Alcoa from 1983 to 1985. He is a director of Allegheny
Teledyne Corporation, Mellon National Bank, Union Carbide Corporation, Quaker
State Corporation, Praxair, Inc. and Dentsply International.
John E. Merow. Expiration of term 1998. Director since 1995.
Age 67. Partner in the law firm of Sullivan & Cromwell from 1965 through 1996
and Chairman and Senior Partner during the period 1987-1994. Mr. Merow is a
director of each of the investment companies (17) in the Seligman Group of
Investment Companies. He also serves as a governor of New York Hospital and
Chairman of the New York and Presbyterian Hospitals Care Network, Inc.,
Chairman of the American Australian Association, a director and Chairman of the
Executive Committee of the United States-New Zealand Council, a governor of the
Foreign Policy Association, a trustee of the U.S. Council for International
Business, a director of the Municipal Art Society of New York and Chairman of
the Municipal Art Society Council.
Victor Torasso. Expiration of term, if elected, 2000.
Director since 1995. Age 68. Management consultant to the aluminum industry
since 1990. From 1986 to 1989, he was President of Wheeltek, Inc., an
automotive aluminum wheel manufacturing plant in Freemont, Indiana. From 1958
until 1985, Mr. Torasso was employed by Anaconda and ARCO Aluminum during which
time he was Vice President and General Manager of the Mill Products Group. Mr.
Torasso supervised the design and start-up of a new $600 million single purpose
aluminum rolling mill in Logan County, Kentucky, was the works manager of an
aluminum smelter in Sebree, Kentucky, and was plant manager of an aluminum
rolling mill in Terre Haute, Indiana.
BOARD AND COMMITTEE MEETINGS
The standing committees of the Board of Directors are an Audit
Committee, the members of which are Mr. Lego (Chairman), Dr. Burke, Mr.
Fetterolf and Mr. Torasso; a Management Development and Compensation Committee,
the members of which are Dr. Burke (Chairman), Mr. Fetterolf, Mr. Lego and Mr.
Torasso; and a Nominating Committee, the members of which are Mr. Merow
(Chairman), Dr. Burke, Mr. Fetterolf, Mr. Lego and Mr. Torasso.
The Audit Committee, which met five times during 1996,
recommends the engagement of independent accountants, reviews with the
independent accountants the plans for and results of the audit engagement,
approves professional services rendered by the independent accountants, reviews
the independence of the
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independent accountants, considers the range of audit and non-audit fees and
reviews the adequacy of the Company's internal accounting controls.
The Nominating Committee, which met two times during 1996,
recommends candidates for election as directors. The Nominating Committee will
consider recommendations made by stockholders. Such stockholder
recommendations should be made in writing, addressed to the Nominating
Committee, attention of the Secretary of the Company.
The Management Development and Compensation Committee, which
met six times during 1996, provides oversight of the management, development
and compensation and human resources policies of the Company, reviews and
recommends to the Board or determines the compensation and other benefits of
the senior executives and administers the Company's stock incentive plans.
During 1996, there were eight meetings of the Board of
Directors of the Company. Each director of the Company attended 100% of the
meetings of the Board held during the period for which he or she was a director
as well as the Board Committees of which that director was a member.
COMPENSATION AND OTHER TRANSACTIONS WITH DIRECTORS; MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors who are not employees of the Company are paid an
annual retainer of $8,000 ($20,000 for the Chairman of the Board) and an
attendance fee of $1,000 for each day on which a meeting of the Board or of a
Board committee occurs, plus expenses. In addition, each director of the
Company who is not an employee of the Company is granted automatically 1,000
shares of Common Stock and a nonqualified 10-year option to purchase 1,000
shares of Common Stock (2,500 option shares in the case of a non-employee
Chairman of the Board) on the date the director becomes a non-employee
director and on each succeeding January 1. The option price is the fair market
value of the Common Stock on the date of grant and each option becomes
exercisable one year after the date of grant.
Sullivan & Cromwell, of which Mr. Merow was a partner in 1996,
provides legal services to the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and officers and persons who beneficially own more than
10% of its Common Stock ("reporting persons") to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and furnish a
copy thereof to the Company. Based solely upon a review of the copies of such
forms furnished to the Company and written representations from certain
reporting persons, the Company believes that all of the reporting persons
complied with all filing requirements applicable to them with respect to 1996.
APPROVAL OF CHANGE OF COMPANY NAME
The Board of Directors has declared advisable a change in the
name of the Company to Commonwealth Industries, Inc. (pursuant to an amendment
to the Company's Certificate of Incorporation) and submits the proposal to the
stockholders for their approval. The purpose of the change is to recognize
that, with the acquisition of the electrical conduit and armored cable business
of the Alflex division of CasTech Aluminum Group Inc. in 1996, and the possible
expansion of that and allied businesses, the Company's interests now extend
beyond aluminum. While the name of the Company would be changed, the aluminum
sheet operations of the
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<PAGE> 8
Company, which are conducted through subsidiary corporations, would continue to
be conducted under the Commonwealth Aluminum name.
The Board of Directors recommends a vote FOR this proposal.
APPROVAL OF 1997 STOCK INCENTIVE PLAN
The Board of Directors has adopted a 1997 Stock Incentive Plan
("1997 Plan"), subject to the approval of the stockholders. If the 1997 Plan
is not approved by stockholders, no awards will be made under the 1997 Plan.
The purpose of the Plan is to enhance the ability of the Company to attract and
retain employees and directors of outstanding ability and to provide them with
an interest in the Company parallel to that of the stockholders. If the 1997
Plan is approved, no further grants or awards will be made under the Company's
1995 Stock Incentive Plan ("1995 Plan").
The total number of shares which will be available for the
grant of awards under the 1997 Plan is 600,000, representing about 5.9% of the
10,202,500 shares of Common Stock of the Company outstanding on February 19,
1997. Shares subject to lapsed or canceled awards and shares surrendered or
withheld under the 1995 Plan or 1997 Plan in payment of the exercise price of
an option or in satisfaction of tax liabilities will be available for further
awards.
There follows a brief summary of the principal features of the
1997 Plan. The 1997 Plan has been filed electronically with this Proxy
Statement with the Securities and Exchange Commission and the following summary
is qualified in its entirety by reference to the full text of the 1997 Plan.
The 1997 Plan authorizes the grant of incentives in the form
of stock options and restricted stock to officers and other key employees and
of stock options and stock to non-employee directors. The Management
Development and Compensation Committee of the Board of Directors administers
the Plan. On February 19, 1997 there were approximately 60 employees and five
non-employee directors eligible to participate in the 1997 Plan. The closing
price of the Common Stock on the Nasdaq National Market on February 19, 1997
was $19.125.
The Committee may grant options under the 1997 Plan to
eligible employees selected by the Committee. No employee may be granted in
any year options to purchase more than 100,000 shares of Common Stock. The
options may be either nonqualified options or incentive stock options
qualifying under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). The Committee is to establish the option price at the time that
each option is granted, which may not be less than the fair market value of the
Common Stock at that time. Options granted under the 1997 Plan may be
exercised at such time as is determined by the Committee, but not more than 10
years from their date of grant. Unless the Committee otherwise provides, in
the event of the retirement, disability or death of an optionee, options then
exercisable generally will remain exercisable for one year but not longer than
their term. Upon termination of employment for any other reason, any
unexercised options generally will be canceled. Options may not be transferred
except by will or the laws of descent and distribution, except that the
Committee may permit an option to be transferred pursuant to a qualified
domestic relations order within the meaning of Section 414(p) of the Code or to
members of the holder's immediate family or trusts, partnerships or limited
liability companies established for such family members.
The Committee also may award to eligible employees selected by
the Committee shares of restricted Common Stock. Shares of restricted Common
Stock may not be transferred or pledged until the satisfaction of such
conditions, including the passage of time, as the Committee may determine,
provided that the
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<PAGE> 9
restricted period shall not be less than 12 months. Except as so restricted, a
holder of restricted Common Stock has all the rights of a stockholder,
including the rights to vote and receive dividends. The Committee also may
award restricted Common Stock in the form of restricted Common Stock units
having a value equal to an identical number of shares of Common Stock, in which
case payment by the Company at the end of the restricted period may be made in
Common Stock or cash as determined by the Committee.
Under the 1997 Plan, nonqualified 10-year options to purchase
1,000 shares of Common Stock (2,500 shares in the case of the Chairman of the
Board) are to be granted automatically to each director of the Company who is
not an employee of the Company on the date the director becomes a non-employee
director and on each succeeding January 1. The option price is the fair market
value of the Common Stock on the date of grant and each option becomes
exercisable one year from the date of grant. In the event of any termination
of service of a non-employee director, options then exercisable will remain
exercisable for one year but not longer than their term. The 1997 Plan also
provides that 1,000 shares of Common Stock shall be awarded to each
non-employee director upon becoming a non-employee director and on each
succeeding January 1.
In the event of a Change in Control of the Company, any option
or other award shall become vested, earned and exercisable in full and
restrictions applicable thereto shall lapse. A Change in Control may be (a) a
more than 50% change in the membership of the Board of Directors of the Company
not approved by the then current Board, (b) the acquisition by certain persons
of 20% or more of the outstanding Common Stock of the Company, (c) the approval
by the stockholders, or consummation, of certain mergers or other business
combinations or reorganizations which will cause the current stockholders to
own less than 60%, or certain persons or entities to own more than 20%, of the
outstanding voting securities of the surviving entity or the current members of
the Board to constitute less than a majority of the board of the surviving
entity, or (d) the approval by stockholders of a liquidation or dissolution of
the Company.
The Board of Directors may amend, suspend or terminate the
1997 Plan at any time, but upon or following the occurrence of a Change in
Control no amendment may adversely affect the rights of any person in
connection with an award previously granted.
The 1997 Plan will become effective upon approval by the
stockholders and will have a term of 10 years from its effective date.
The following is a general summary of the federal income tax
consequences of the grant and exercise of options granted under the 1997 Plan.
This summary is not intended to provide tax advice to recipients and holders of
awards.
Generally, the grant of options does not result in taxable
income to the recipient or a tax deduction for the Company.
The exercise of a nonqualified option will generally result in
taxable ordinary income to the option holder and a corresponding deduction for
the Company, in each case equal to the excess of the fair market value of the
shares on the date the option is exercised over the exercise price of the
option.
In the case of an incentive option, generally there will be no
recognition of income upon the exercise of the option. If there is no
disposition of the option shares until more than two years after the option was
granted and more than one year after the option was exercised, the gain or loss
realized by the optionee on the sale of the shares will be long-term capital
gain or loss, and the Company will not be entitled to any tax deduction by
reason of the grant or exercise of the option. However, if a disposition
takes place before the end of such holding periods, then, generally, the
optionee will realize ordinary income in the year of disposition in an amount
equal to the excess, if any, of the fair market value of the option shares at
the time of exercise (or, if less, the amount
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realized on the disposition of the option shares), over the exercise price
thereof, and the Company will be entitled to deduct an amount equal to such
income.
The Board of Directors recommends a vote FOR this proposal.
APPROVAL OF SELECTION OF AUDITORS
The Board of Directors, upon recommendation of the Audit
Committee, has selected Coopers & Lybrand L.L.P. as independent accountants to
audit the financial statements of the Company for 1997 and to perform other
appropriate accounting services. The Board of Directors is submitting the
selection to the stockholders for approval. It is expected that
representatives of Coopers & Lybrand L.L.P. will be present at the Meeting to
respond to appropriate questions and to make a statement if they desire to do
so.
The Board of Directors recommends a vote FOR this proposal.
OTHER BUSINESS
The Company has no knowledge of any business other than that
described above that will be presented at the Meeting. If any other business
should properly be brought before the Meeting, the persons named in the
accompanying form of proxy and acting thereunder will vote in accordance with
their judgment on such matters.
BENEFICIAL OWNERSHIP OF COMMON STOCK
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of February 19, 1997, the
number of shares of Common Stock of the Company beneficially owned by each
director, each executive officer named in the Summary Compensation Table
appearing on page 9 and all directors and executive officers as a group. Each
person has sole investment and voting power with respect to the shares set
forth below unless otherwise noted.
<TABLE>
<CAPTION>
Name of No. of Shares Percent
Beneficial Owner Owned(a) of Class
---------------- ----- --------
<S> <C> <C>
Catherine G. Burke 7,000 *
C. Frederick Fetterolf 2,000 *
Mark V. Kaminski 89,618 *
Paul E. Lego 7,000 *
John E. Merow 13,000 *
Victor Torasso 3,000 *
Donald L. Marsh, Jr. 12,864 *
Roderick Macdonald 19,256 *
Scott Davis 16,097 *
</TABLE>
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<TABLE>
<CAPTION>
Name of No. of Shares Percent
Beneficial Owner Owned(a) of Class
---------------- ----- --------
<S> <C> <C>
John J. Wasz 14,499 *
All directors and executive 238,670 2.3%
officers as a group (16 persons)
</TABLE>
- -------------------------
* Less than 1%
(a) Includes the following shares of Common Stock which the individual(s)
had the right to acquire within 60 days of February 19, 1997 through
the exercise of options: Dr. Burke--2,000 shares; Mr. Lego--5,000
shares; Mr. Merow--2,000 shares; Mr. Torasso--2,000 shares; and all
directors and executive officers as a group--11,000 shares. Also
includes shares held in the Company's Performance Sharing Plan for
Salaried Employees for the accounts of individuals as follows: Mr.
Kaminski--14,269 shares; Mr. Wasz--1,699 shares; Mr. Macdonald--457
shares; Mr. Marsh--364 shares; Mr. Davis--2,877 shares; and all
directors and executive officers as a group--24,149 shares.
OWNERSHIP BY OTHERS
The following table sets forth information with respect to
each person believed by the Company to be the beneficial owner of more than
five percent of the Company's Common Stock on the dates noted.
<TABLE>
<CAPTION>
Name and Address of No. of Shares Percent
Beneficial Owner Owned of Class
---------------- ----- --------
<S> <C> <C>
John R. Simplot 904,000(a) 8.9%
Self Declaration of Revocable Trust
999 Main Street
Boise, Idaho 83702
Goodman & Company LTD 980,700(b) 9.6%
40 King Street West
55th Floor
Toronto, Ontario, Canada
Franklin Resources, Inc. 675,500(c) 6.6%
777 Mariners Island Blvd.
San Mateo, CA 94404
Neuberger & Berman, LLC 577,500(d) 5.7%
605 Third Ave
New York, NY 10158
</TABLE>
(a) Based solely on a Schedule 13D dated January 28, 1997 filed with the
Securities and Exchange Commission (SEC) by John R. Simplot, Trustee.
Simplot reported sole power to vote and dispose of all of the above
noted shares of Common Stock.
(b) Based solely on a Schedule 13D dated December 19, 1995 filed with the
SEC by Goodman and Company LTD. The 13D further reports that Goodman
and Company has the sole power to vote and dispose of the above
mentioned shares.
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<PAGE> 12
(c) Based solely on a Schedule 13G dated February 12, 1997 filed with the
SEC by Franklin Resources, Inc., Franklin Advisory Services, Inc.,
Charles B. Johnson and Rupert H. Johnson, Jr. The Schedule 13G
reports that: (1) the 675,500 shares are beneficially owned by
investment companies or other managed accounts which are advised by
investment advisory subsidiaries of Franklin Resources, Inc.; (2)
advisory contracts grant to such advisory subsidiaries all voting and
investment power over the 675,500 shares; and (3) Charles B. Johnson
and Rupert H. Johnson, Jr. are principal stockholders of Franklin
Resources, Inc.
(d) Based solely on a Schedule 13G dated February 10, 1997 filed with the
SEC by Neuberger & Berman, LLC. The Schedule 13G reports that
Neuberger & Berman, LLC has: (1) shared power to dispose of the
577,500 shares; (2) sole power to vote 254,300 of these shares; and
(3) shared power to vote 92,800 of these shares.
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<PAGE> 13
EXECUTIVE COMPENSATION
The following table sets forth for the years 1994, 1995 and 1996 the annual and
long-term compensation paid or accrued for those years by the Company to the
chief executive officer and the four most highly compensated executives of the
Company during 1996 other than the chief executive officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Awards
------
No. of
Annual Compensation Shares
------------------- Restricted Underlying All
Name and Stock Stock LTIP Other
Principal Position Year Salary Bonus(a) Awards(b) Options Payouts Compensation(c)
------------------ ---- ------ -------- --------- ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark V. Kaminski(d) 1996 $380,004 $325,314 -- 40,000 $111,291 $ 36,753
President and Chief 1995 $315,000 $168,690 $560,000 20,000 $ 81,543 $ 4,500
Executive Officer 1994 $211,637 $ 99,764 -- -- $ 66,922 $ 4,500
Donald L. Marsh, Jr. (e) 1996 $186,635 $153,908 $210,938 10,000 -- $ 65,513
Executive Vice President, 1995 -- -- -- -- -- --
Chief Financial Officer and 1994 -- -- -- -- -- --
Secretary
Roderick Macdonald 1996 $145,600 $ 60,682 -- 5,000 $ 34,469 $ 5,614
Executive Vice President 1995 $127,200 $ 63,315 $175,000 3,000 -- $ 3,915
Corporate Systems 1994 $112,000 $ 55,508 -- -- -- $ 18,467
Scott T. Davis 1996 $128,808 $ 46,647 -- 5,000 $ 27,692 $ 3,796
Vice President 1995 $111,009 $ 52,075 $175,000 3,000 $ 19,368 $ 3,429
Operations 1994 $ 88,638 $ 34,722 -- -- $ 16,149 $ 2,649
John J. Wasz 1996 $133,832 $ 40,767 -- 5,000 $ 31,472 $ 5,042
Vice President 1995 $116,488 $ 55,959 $175,000 3,000 $ 23,342 $ 3,594
Marketing and Sales 1994 $104,008 $ 49,163 -- -- $ 19,372 $ 3,529
</TABLE>
(a) The amounts reported in this column represent payments made in 1997,
1996 and 1995 with respect to 1996, 1995 and 1994 under the Company's
incentive compensation and gainsharing plans.
(b) The amounts reported in this column represent the dollar value of the
award of restricted stock, calculated by multiplying the fair market
value of the Common Stock on the date of award by the number of shares
awarded. The restricted stock vests five years after the date of the
award thereof. Holders of restricted stock are entitled to receive
regular dividends. The named officers had non-vested restricted stock
award balances outstanding as of December 31, 1996 as follows: Mr.
Kaminski--40,000 shares ($615,000) and each of Messrs. Marsh,
Macdonald, Davis and Wasz--12,500 shares ($192,188). These dollar
values are based upon the closing price of the Company's Common Stock
on the NASDAQ National Market on December 31, 1996 ($15.375 per share).
(c) The amounts reported in this column include matching contributions to
the Company's Performance Sharing Plan, relocation expenses in 1994
for Mr. Macdonald ($18,467), relocation expenses for Mr. Marsh in 1996
($65,513) and contributions made by the Company to its Deferred
Compensation Plan.
9
<PAGE> 14
(d) In addition, Mr. Kaminski received in 1995 after the completion of the
initial public offering of the Common Stock of the Company a one-time
payment of $500,000 from Comalco Limited, the former owner of the
Company. This payment was made pursuant to his 1991 agreement with
Comalco designed to encourage continuity of leadership by Mr. Kaminski
in creating a turnaround of the Company and providing for a payment in
this amount at such time as the Company was sold.
(e) Mr. Marsh was first employed by the Company in March 1996.
The tables below show, for the named executive
officers, information regarding stock options granted during, or held
at the end of, 1996 pursuant to the Company's 1995 Stock Incentive
Plan.
OPTIONS GRANTED IN 1996
<TABLE>
<CAPTION>
Potential
% of Realizable Value at
Total Assumed Annual Rates
Number of Options of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term(b)
Options in Fiscal Price Expiration --------------
Name Granted(a) Year Per Share Date 5% 10%
- ---- ---------- --------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Mark V. Kaminski 40,000 30.7% $ 16.75 2/2/06 $421,359 $ 1,067,807
Donald L. Marsh, Jr. 10,000 7.7% $16.875 3/4/06 $106,126 $ 268,944
Roderick Macdonald 5,000 3.8% $ 16.75 2/2/06 $ 52,670 $ 133,476
Scott T. Davis 5,000 3.8% $ 16.75 2/2/06 $ 52,670 $ 133,476
John J. Wasz 5,000 3.8% $ 16.75 2/2/06 $ 52,670 $ 133,476
</TABLE>
(a) These options become exercisable three years from the date of grant.
(b) The amounts represent hypothetical realizable values of stock options
granted in 1996 at assumed rates of cumulative stock price
appreciation over the 10 year life of the options. These assumed
rates of appreciation are set by the proxy rules of the Securities and
Exchange Commission and are not intended to forecast appreciation of
the price of the Company's Common Stock. Actual gains, if any,
realized upon the exercise of stock options will depend upon the price
of the Company's Common Stock at the date of exercise.
10
<PAGE> 15
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year-End at Year-End
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- -------------
<S> <C> <C>
Mark V. Kaminski 0/60,000 0/$27,500
Donald L. Marsh, Jr. 0/10,000 0/$0
Roderick Macdonald 0/8,000 0/$ 4,125
Scott T. Davis 0/8,000 0/$ 4,125
John J. Wasz 0/8,000 0/$ 4,125
</TABLE>
The Company has defined benefit pension plans covering
substantially all salaried and hourly employees. Benefits are based primarily
upon years of service and employees' compensation during the last five years of
employment for salaried employees and stated amounts based upon job grade prior
to retirement for hourly employees.
The following table shows estimated annual benefits payable
upon retirement in specified compensation and years of service classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
----------------
Remuneration 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $28,139 $37,518 $46,896 $56,227 $65,657
$150,000 or more $34,139 $45,518 $56,898 $68,227 $79,657
</TABLE>
Compensation covered by the plans includes all bonuses. The
covered compensation for executive officers does not differ materially from the
Annual Compensation shown in the Summary Compensation Table. Benefits are
computed on a straight life annuity basis and are subject to deductions for
social security offset amounts.
The estimated credited years of service for Messrs. Kaminski,
Marsh, MacDonald, Davis and Wasz at December 31, 1996 were 9.6, .8, 3.0, 7.5
and 11.5, respectively.
DEFERRED COMPENSATION PLAN
Key employees designated by the Management Development and
Compensation Committee of the Board of Directors may elect to defer a portion
of their compensation pursuant to the Company's non-qualified
11
<PAGE> 16
unfunded Deferred Compensation Plan. Deferred amounts are credited or debited
with the equivalent of the investment experience of one or more investment
vehicles identified pursuant to the plan and selected by the participant and
are paid out upon retirement or under specified other circumstances. The
Company intends, but is not obligated, to make contributions to the accounts of
participants in the plan (a) designed to provide supplemental retirement
benefits in excess of the limitations contained in the Code on benefit
accruals under the Company's pension plan and (b) based on the application of
the Company's defined benefit pension plan contribution rate to each
participant's compensation in excess of that covered by the Company's defined
benefit pension plans. The actual amounts to be paid out will depend upon the
amount of the deferral, the amount of the Company's contribution and the
investment experience.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into Severance Agreements with Messrs.
Kaminski, Marsh, Macdonald, Davis and Wasz and certain other executive
officers of the Company. The purpose of the agreements is to secure the
executives' continued service and dedication in the event of an actual or
threatened Change in Control. They provide severance pay and continuation of
certain benefits if a Change in Control occurs and the executive's employment
is terminated (a) in anticipation of or during the two-year period following
the Change in Control (i) by the Company without cause or (ii) by the executive
for good reason or (b) by the executive for any reason during a 30-day window
period commencing one year after the Change in Control.
Generally, a Change in Control will be deemed to occur in the
case of (a) an acquisition by a person or group of 20% or more of the Company's
Common Stock (with certain exceptions), (b) a change in the majority of the
Board without the requisite approval of the incumbent Board, (c) a business
combination unless Company stockholders receive 60% or more of the voting stock
of the surviving Company, no person acquires more than 20% of such voting stock
and the Company Board members remain a majority of the continuing Board or (d)
stockholder approval of a liquidation of the Company.
Under the Severance Agreements, severance pay would equal
three times the sum of (a) the executive's base pay and (b) the greatest of the
executive's largest bonus during the prior three years or target bonus for the
year of the Change in Control or year of termination and, if payment pursuant
to the agreement or otherwise would be subject to the excise tax imposed by
Section 4999 of the Code for severance payments exceeding a certain amount, an
additional tax reimbursement payment such that the executive receives a net
amount equal to the amount the executive would have received if the excise tax
did not apply. Medical and other insurance benefits would be continued for
three years.
Also, upon a change of control as defined in the Company's
stock incentive plans, any stock options not then exercisable would become
fully exercisable and any shares of restricted Common Stock not then vested
would become fully vested.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Management Development and Compensation Committee of the
Board of Directors (Committee) consists entirely of non-employee directors.
The Committee approves all of the policies under which compensation is paid or
awarded to the Company's executive officers. The Company's compensation
program for executive officers consists of the following elements: base salary,
gainsharing, annual incentive compensation and long-term incentive
compensation. As described more fully below, each element of the Company's
executive compensation program has a somewhat different purpose.
The Committee believes this approach best serves both the
short and the long-term interests of stockholders by ensuring that executive
officers are compensated in a manner which aligns their interest with those
12
<PAGE> 17
of stockholders. Thus, the compensation plans for the Company's executive
officers place a significant proportion of total remuneration at risk.
One-half of the annual incentive compensation is determined by the objectively
measured financial performance of the business; the other half is subjectively
determined based on individual work performance and estimated contribution of
the officers to Company performance. Stock options are also a significant
portion of the executive officers' long-term compensation, the value of which
is directly related to stock price appreciation realized by the Company's
stockholders. The Committee encourages ownership of the Company's Common Stock
by its executive officers.
COMPENSATION PHILOSOPHY
The Committee believes remuneration must compare favorably to
that found in the larger society in order to attract and retain competent
executives to carry out the work required to meet corporate business
objectives. The Company rewards differentially based on the complexity of work
to be performed, the scope and impact of decisions required in a role and the
work performance of the role incumbent. Individual recognition and rewards are
linked to corporate objectives.
The Committee is cognizant that the Company operates in a
cyclical market and recognizes that executive compensation must not be
excessively raised during the up cycle, nor excessively reduced during down
cycles. The Company must pay for the work performance of corporate officers,
recognizing their work in down cycles is as important, or even more important,
than their work in up cycles. For this reason part of the pay which is at risk
is decided on a subjective basis. An executive who properly prepares for a
down cycle and seizes opportunities in up cycles should be rewarded
appropriately for his or her work performance.
COMPENSATION PROGRAM
All of the Committee's judgments during 1996 regarding the
appropriate form and level of executive compensation payments and awards were
ultimately based upon the Committee's assessment of the Company's executive
officers, the continuing demand for superior executive talent, the Company's
overall performance and the Company's future objectives and challenges.
Although the Committee did not rely upon a guideline or
formula based on any particular performance measure in 1996, the primary event
of 1996 was the acquisition of CasTech Aluminum Group Inc. The Committee
recognized this required major executive effort to negotiate the transaction,
to arrange the financing under favorable terms and conditions and to begin the
integration of the newly acquired business. In addition, at the Lewisport
facility there was continuing improvement in labor relations, record production
levels, and continuous quality and on-time improvements.
The Committee also considered the compensation practices of
other similar corporations, those of similar size in similar manufacturing
industries which are most likely to compete with the Company for the services
of executive officers. The companies considered by the Committee include a
larger number and broader range of companies than are included in the
Performance Graph shown on page 15, reflecting the Committee's view that the
employment market of the Company's executive officers includes a broader range
of companies than those which are appropriate for comparison for financial
performance purposes.
Base Salary. The chief executive officer (CEO) approves the
salary structure for each executive officer role taking into account the
responsibilities of the role, the criticality of the role to the achievement of
the Company's long and short-term objectives as well as information from
independent consultants as to the salary structures of firms which compete with
the Company for the services of executive officers.
The purpose of the base salary is to provide base compensation
which is market competitive in order to attract and retain superior executives
to carry out the work required to meet the Company's business objectives and
challenges.
13
<PAGE> 18
The salaries paid to executive officers (other than the CEO)
are reviewed annually by the CEO and, in the case of vice presidents, reviewed
by executive vice presidents as well. Based on such review, the CEO recommends
the total remuneration for these executive officers, subject to approval by the
Committee. The Committee sets the total remuneration for the CEO.
Annual Incentive Compensation. Annual incentive compensation
programs for executive officers consist of an Executive Incentive Compensation
Plan and gainsharing plan.
Under the Executive Incentive Compensation Plan, each
executive officer can earn up to 50% of his or her base salary, or more in
exceptional cases, with one-half the award based on the performance of the
Company during the year as measured by return on investment and one-half based
upon a subjective appraisal of the executive's individual performance relative
to goals established for the year. The awards are determined by the Committee,
after receiving the recommendations of the CEO.
The Company sponsors qualified defined contribution plans
(collectively, the performance sharing plan) covering the majority of its
employees. The Company matches a percentage of a participant's voluntary
contributions to its defined contribution plans, with the percentages varying
according to the business unit and location.
Long-Term Incentive Compensation. Long-term incentives are
provided through restricted Common Stock awards and stock option grants. They
also are provided through a Long-Term Incentive Plan which was in place while
the Company was not publicly owned and which will be allowed to expire at the
end of the current 1995-1997 three-year cycle. Under the Long-Term Incentive
Plan, executive officers receive payouts equal to a defined percentage of their
average annual base salary for a three-year employment period, based upon
results in relation to seven corporate performance goals. These seven goals
are sales volume, conversion cost, material margin, corporate profit,
productivity, delivery performance and safety.
Restricted stock awards and stock options are intended to
provide long-term incentives for the achievement of the Company's objectives
and to align executives' interest with those of the stockholders. Restricted
stock awards were made in 1995 at the time of the Company's initial public
offering (IPO) or at the time executives joined the Company. The restricted
stock vests five years from the date of award. Stock options were granted at
the time of the IPO and annually thereafter. They become exercisable three
years after the grant date. The awards and grants were made based upon
recommendations by a third party consultant, Towers Perrin, related to external
competitive factors and the level executive officers and managers had reached
in the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
The basis for the Committee's determinations regarding the
CEO's compensation in 1996 included his effectiveness in analyzing various
candidates for acquisition and for successfully acquiring CasTech Aluminum
Group Inc. The Committee was particularly impressed with the quality of his
negotiations; obtaining the required financing under favorable terms and
conditions; the integration of the newly acquired facilities into the
Commonwealth organization and the restructuring of the overall corporation. In
addition, he selected two outstanding Executive Vice Presidents who have
significantly improved the depth of the Company's executive management. He
continues to develop improved relationships with the financial community; to
lead the drive for continuous improvement of people and the organization,
systems and technologies; to provide decisive management of operational and
strategic issues; and to reinforce a culture of integrity, quality and
differential pay for differential performance. He has demonstrated excellent
stewardship of the Company's assets and has developed policies and controls
appropriate to a new publicly-owned corporation.
The key judgment the Committee made in determining the CEO's
1996 Compensation was its assessment of his ability and dedication to enhance
the long-term value of the Company for the stockholders by providing the
leadership and vision to grow the Company and to meet on-going challenges and
opportunities.
14
<PAGE> 19
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code limits the tax
deduction for individual compensation paid the CEO and the four other most
highly paid executives to $1 million annually, subject to certain exceptions.
Executive compensation in 1996 did not exceed this limit. The Committee
continues to review issues relating to this compensation deduction limitation.
Catherine C. Burke, Chairman
C. Frederick Fetterolf, Member
Paul E. Lego, Member
Victor Torasso, Member
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total
shareholder return since the Common Stock became publicly traded on March 10,
1995 with that of the Standard & Poor's Small Cap 600, the Nasdaq National
Market Index and two peer group indices during the period March 10, 1995
through December 31, 1996. The graph assumes an initial investment of $100.00
and the reinvestment of dividends (where applicable).
<TABLE>
<CAPTION>
Commonwealth NASDAQ Old Peer New Peer S & P Small
Aluminum Group Group Cap 600
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3/10/95 $100 $100 $100 $100 $100
12/31/95 $112 $132 $ 85 $101 $127
12/31/96 $112 $163 $110 $109 $154
</TABLE>
Previously, the Company used the Nasdaq National Market Index as its broad
equity market index for purposes of measuring stockholder performance.
However, during 1996, the Company's stock was added to the Standard & Poor's
600 Small Cap Index, an index of 600 companies designed to measure the
performance of small capitalization companies. The Company has adopted the S&P
Small Cap Index as its broad market index. The Company previously included ACX
Technologies, Inc., CasTech Aluminum Group Inc., Quanex Corporation and the
Company in its peer group. However, ACX Technologies, Inc. is no longer in the
aluminum business and the Company acquired CasTech Aluminum Group Inc. during
1996. Therefore, the Company has restructured its peer group to delete ACX
Technologies, Inc. and CasTech Aluminum Group Inc., and to add Birmingham Steel
Corporation, Century Aluminum Company, Chaparral Steel, Easco Inc., Northwest
Steel & Wire Company and Oregon Steel Mills, Inc. The above performance graph
includes the old market index and old peer group, as well as the Company's new
broad market index and new peer group.
15
<PAGE> 20
STOCKHOLDER PROPOSALS
FOR THE 1998 ANNUAL MEETING
Proposals of stockholders to be considered for inclusion in
the Company's proxy statement and proxy for the 1998 annual meeting of
stockholders must be received by the Secretary of the Company at its principal
executive office, 1200 Meidinger Tower, Louisville Galleria, Louisville,
Kentucky 40202, not later than November 14, 1997.
Under the Company's By-Laws, notice must be received by the
Company in advance of a stockholders' meeting to present any proposal to the
meeting or to nominate a person for election as a director. Such notice must
be delivered to the Secretary of the Company at its principal executive office
not less than 60, nor more than 90, days prior to the date of the meeting;
provided, that if the date of the meeting is first publicly announced or
disclosed less than 70 days prior to the date of the meeting, the notice must
be given not more than 10 days after the date is so announced or disclosed. A
stockholder filing a notice of a proposal must include certain information,
including the text of the proposal, the reasons therefor and any interest the
stockholder has in the proposal; any notice of nomination must include certain
information about the nominee; and all such notices must include the name and
address of the submitting stockholder and the number of shares held by the
stockholder. These By-Law requirements are separate from and in addition to
the Securities and Exchange Commission requirements that a stockholder must
fulfill to have a proposal included in the Company's proxy statement and proxy.
ADDITIONAL INFORMATION
The Company will bear the cost of soliciting proxies. In
addition to the use of the mails, directors, officers and regular employees of
the Company may solicit proxies personally or by telephone. The Company will
reimburse brokerage firms, nominees, custodians and fiduciaries for their
expenses in forwarding proxy materials to beneficial owners.
Dated: March 14, 1997 Donald L. Marsh, Jr.
Secretary
16
<PAGE> 21
APPENDIX A
COMMONWEALTH ALUMINUM CORPORATION
1997 Stock Incentive Plan
1. Purpose. Pursuant to the terms and conditions of the
Commonwealth Aluminum Corporation 1997 Stock Incentive Plan (the "Plan")
hereinafter set forth, the Committee specified in Section 2 may from time to
time award to eligible employees (a) options ("Options") to purchase shares of
the Common Stock, par value $.01 per share ("Common Stock"), of Commonwealth
Aluminum Corporation (the "Company") and (b) restricted Common Stock. In
addition, Options and shares of Common Stock shall be granted to non-employee
directors of the Company as provided in Section 7. All such Options,
restricted Common Stock and shares of Common Stock are referred to herein as
"Awards."
The purpose of the Plan is to enhance the ability of the
Company and its subsidiaries to attract and retain employees and directors of
outstanding ability and to provide employees and directors with an interest in
the Company parallel to that of the Company's stockholders.
2. Administration. The Plan shall be administered by the
Management Development and Compensation Committee of the Board of Directors
(the "Board") of the Company, or any successor committee appointed by the Board
(the "Committee"). It is intended that the Committee shall at all times
consist of two or more directors, each of whom is a non-employee director
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act") and an outside director within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
The Committee shall have full and final authority, in each
case subject to and consistent with the provisions
<PAGE> 22
of the Plan, to select employees of the Company or its subsidiaries who are to
receive Awards, to make Awards, to determine the type, number and other terms
and conditions of, and all matters relating to, Awards, to prescribe Award
agreements and rules and regulations for the administration of the Plan and
such agreements, to construe and interpret the Plan and Award agreements and to
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.
Any action of the Committee shall be final, conclusive and
binding upon all persons, including the Company and its subsidiaries and
stockholders, employees and directors who have been granted an Award
("Participants") and persons claiming rights from or through a Participant.
The Committee may delegate to officers or managers of the
Company or a subsidiary of the Company, or committees thereof, and to service
providers, the authority, subject to such terms as the Committee shall
determine, to perform administrative functions with respect to the Plan and to
Award agreements.
The Committee and each member thereof shall be entitled, in
good faith, to rely or act upon any report or other information furnished to
the Committee by any officer or employee of the Company or a subsidiary of the
Company, the Company's independent public accountants or any other adviser,
consultant or service provider assisting in the administration of the Plan.
Members of the Committee and any officer or employee of the
Company or a subsidiary of the Company acting at the direction of, or on behalf
of, the Committee shall not be personally liable for any action or
-2-
<PAGE> 23
determination taken or made in good faith with respect to the Plan or any Award
agreement, and shall, to the extent permitted by law, be fully indemnified by
the Company with respect to any such action or determination.
3. Eligibility. Individuals eligible to receive Awards
shall be the officers and other key employees of the Company and its
subsidiaries selected by the Committee and, solely as provided in Section 7,
each member of the Board who is not an employee of the Company or a subsidiary
of the Company ("Non-Employee Director").
4. Shares Subject to the Plan. The maximum number of shares
of Common Stock available for the grant of Awards under the Plan shall be
600,000, subject to adjustment pursuant to Section 13 and to the following
provisions. If an Award granted under the Plan or the Company's 1995 Stock
Incentive Plan ("1995 Plan") shall be canceled or expire without exercise of
the Award, the shares subject to such Award shall be added to the shares
available for Awards under the Plan. Any shares surrendered or withheld in
payment of the exercise price of an Option granted under the Plan or the 1995
Plan or in satisfaction of any tax liabilities resulting from an Award under
the Plan or the 1995 Plan, shall also be added to the number of shares
available for Awards under the Plan. Shares of Common Stock may be made
available under the Plan from authorized but unissued shares or from shares
reacquired by the Company.
The number of shares of Common Stock with respect to which
Options may be granted to any Participant during any calendar year shall not
exceed 100,000, subject to adjustment under Section 13.
5. Stock Options. The Committee may from time to time grant
Options under the Plan to eligible employees.
-3-
<PAGE> 24
Options may be either nonqualified Options ("Nonqualified Stock Options") or
Options which are intended to qualify under Section 422 of the Code ("Incentive
Stock Options").
The price at which shares may be purchased upon exercise of an
Option granted to an employee shall be fixed by the Committee, but shall be not
less than the Fair Market Value of the Common Stock on the day of grant.
Unless otherwise determined by the Committee, the "Fair Market
Value" of the Common Stock, as used in this Section 5 and elsewhere in the
Plan, as of any day, shall be the mean between the highest and lowest reported
sales price for that day of the Common Stock on the New York Stock Exchange
Composite Tape or, if not listed on such exchange, on any other national
securities exchange on which the Common Stock is listed or on NASDAQ, or, if no
Common Stock was traded on that day, on the next preceding day on which there
was such a trade.
Options granted to employees shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by the
Committee, but no Option shall be exercisable after the expiration of 10 years
from the date of grant. The Committee may alter or waive at any time any term
or condition of an Option that is not mandatory under the Plan.
The Option price of each share as to which an Option is
exercised shall be paid in full at the time of such exercise. The payment
shall be made (a) in cash, (b) by surrender of shares of Common Stock owned by
the holder of the Option for at least six months prior to exercise of the
Option, (c) to the extent authorized by the Committee, by surrender of shares
of Common Stock owned by the holder of the Option for less than six months
prior to the exercise of the Option (including shares of Common Stock otherwise
-4-
<PAGE> 25
receivable upon exercise of the Option), (d) through simultaneous sale through
a broker of shares acquired upon exercise, as permitted under Regulation T of
the Federal Reserve Board, (e) through additional methods prescribed by the
Committee or (f) by a combination of any such methods. Any shares of Common
Stock so delivered in payment shall be valued at their Fair Market Value on the
exercise date, or on such other date as determined by the Committee for
administrative convenience.
Except as otherwise determined by the Committee at or
subsequent to grant, any Option granted to an employee and outstanding at the
time of the termination of employment of that employee shall remain exercisable
as follows:
(a) In the event of the termination of employment of the
employee by reason of retirement on or after normal retirement date
pursuant to a retirement plan of the Company or any of its
subsidiaries or total and permanent disability, the holder may, at any
time within one year after that termination, but not later than the
date of expiration of the Option, exercise the Option to the same
extent, if any, as the Option was exercisable at the date of
termination under the terms of the Option. The Option shall expire
upon the termination of employment to the extent it was not then
exercisable, and otherwise upon the earlier of the expiration of the
one-year period or the date of expiration of the Option.
(b) In the event of the termination of employment by reason
of death of the employee, any person or persons (including the legal
representatives of the estate of the employee) who is the holder of
the Option or to whom the Option shall pass by will or by the laws of
descent and distribution may, at any time within one
-5-
<PAGE> 26
year after the date of death but not later than the date of expiration
of the Option, exercise the Option to the same extent, if any, as the
Option was exercisable at the date of death under the terms of the
Option. The Option shall expire on the date of death to the extent it
was not then exercisable, and otherwise upon the expiration of the
earlier of the one-year period or the date of expiration of the Option.
(c) In the event of the termination of employment for any
reason other than retirement, disability or death as aforesaid, the
Option shall expire upon the termination of employment.
For purposes of the Plan a leave of absence, authorized in
writing by the Company or a subsidiary of the Company, for military service or
illness, or for any other purpose if the period of such leave does not exceed
90 days, or for any other purpose if the leave exceeds 90 days but reemployment
is guaranteed by law or contract, shall not be deemed a termination of
employment.
No Option may be transferred except by will or the laws of
descent and distribution, provided that the Committee may determine that an
Option may be transferred pursuant to a qualified domestic relations order
within the meaning of Section 414(p) of the Code or by a Participant to one or
more members of the Participant's immediate family, or to trusts or
partnerships or limited liability companies established for such family
members. For this purpose, immediate family means, except as otherwise defined
by the Committee, the Participant's children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including half brothers
and sisters), in-laws and persons related by reason of legal adoption. Such
-6-
<PAGE> 27
transferees may transfer an Option only by will or the laws of descent or
distribution. An Option transferred pursuant to this paragraph shall remain
subject to the provisions of the Plan, including, but not limited to, the
provisions of this Section 5 relating to the exercise of the Option upon the
termination of employment of the Participant and shall be subject to such other
rules as the Committee shall determine. Except in the case of a holder's
incapacity, an Option shall be exercisable only by the holder thereof.
6. Restricted Stock. The Committee may from time to time
award restricted Common Stock under the Plan to eligible employees. Shares of
restricted Common Stock may not be sold, assigned, transferred or otherwise
disposed of, or pledged or hypothecated as collateral for a loan or as security
for the performance of any obligation or for any other purpose, for such period
(the "Restricted Period") as the Committee shall determine, except that the
Restricted Period shall not be less than 12 months. The Committee may define
the Restricted Period in terms of the passage of time or in any other manner it
deems appropriate. The Committee may alter or waive at any time any term or
condition of restricted Common Stock that is not mandatory under the Plan.
Unless otherwise determined by the Committee, upon termination
of a Participant's employment for any reason prior to the end of the Restricted
Period, the restricted Common Stock shall be forfeited and the Participant
shall have no right with respect to the Award.
Except as restricted under the terms of the Plan and any Award
agreement, any employee awarded restricted Common Stock shall have all the
rights of a stockholder including, without limitation, the right to vote
restricted Common Stock.
-7-
<PAGE> 28
If a stock certificate is issued in respect of shares of
restricted Common Stock, the certificate shall be registered in the name of the
employee but shall be held by the Company for the account of the employee until
the end of the Restricted Period.
The Committee may also award restricted Common Stock in the
form of restricted Common Stock units having a value equal to an identical
number of shares of Common Stock. Payment of restricted Common Stock units
shall be made in shares of Common Stock or in cash or in a combination thereof
(based upon the Fair Market Value of Common Stock on the day the Restricted
Period expires), all as determined by the Committee in its sole discretion.
7. Non-Employee Director Stock Options and Shares.
Nonqualified Stock Options to purchase 1,000 shares of Common Stock (2,500
shares in the case of a Non-Employee Director who is Chairman of the Board),
the number of shares being in each case subject to adjustment pursuant to
Section 13, shall be granted automatically to each Non-Employee Director (a)
upon the date such director joins the Board or becomes a Non-Employee Director
(or, in respect of the Option for the additional 1,500 shares (such number of
shares being subject to adjustment under Section 13) in the case of a
Non-Employee Director who is Chairman of the Board, becomes the Chairman) and
(b) on each succeeding January 1 which is not less than 90 days after the date
referred to in clause (a). In addition, a grant of 1,000 shares of Common
Stock shall be made automatically to each Non-Employee Director (a) upon the
date such director joins the Board or becomes a Non-Employee Director and (b)
on each succeeding January 1 which is not less than 90 days after the date
referred to in clause (a).
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The price at which shares may be purchased upon exercise of an
Option granted to a Non-Employee Director shall be the Fair Market Value of the
Common Stock on the day of grant.
Options granted to Non-Employee Directors shall become
exercisable one year from the date of the grant thereof. Each such Option
shall terminate 10 years from the date of grant unless sooner terminated by
reason of termination of service as a director.
Any Option granted to a Non-Employee Director and outstanding
at the time of the termination of service of that individual as a director for
any reason, to the extent exercisable at the date of termination, shall be
exercisable for one year following such termination of service, but in no event
beyond the term of the Option, and shall thereafter terminate.
Except as expressly provided in this Section 7, any Option
granted to a Non-Employee Director under the Plan shall be subject to the
general terms and conditions of the Plan.
8. Change in Control. In the event of a Change in Control,
as hereinafter defined, (a) all Options shall become vested and exercisable in
full, (b) the restrictions applicable to all shares of restricted Common Stock
shall lapse and (c) all restricted Common Stock granted in the form of share
units shall be paid out in shares of Common Stock. The Committee may, in its
discretion, include such further provisions and limitations in any Award
agreement as it may deem equitable, and may, in its sole discretion, make
payments with respect to restricted Common Stock units in cash in an amount
equal to the Fair Market Value of the Award as of the Change in Control.
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<PAGE> 30
A "Change in Control" means the occurrence of any of the
following events:
(a) individuals who on the Effective Date of the Plan
constitute the Board together with those individuals who first become directors
after that date (other than as a result of an actual or threatened election
contest for directors or an actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board) and whose election
or nomination for election to the Board was approved by a vote of at least
two-thirds of the directors then in office who either were directors on the
Effective Date 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;
(b) any person (as defined in Section 3(a)(9) and used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) ("Person"), other than the
Company, a subsidiary of the Company, an employee benefit plan sponsored or
maintained by the Company or a subsidiary of the Company or an underwriter
temporarily holding securities pursuant to an offering of such securities,
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act)("Beneficial Owner") of securities of the Company representing 20% or more
of the combined voting power of the Company's then outstanding securities
eligible to vote for the election of directors (the "Company Voting
Securities") unless the Person became such a Beneficial Owner as a result of a
purchase of Company Voting Securities directly from the Company in a
transaction approved by a majority of the Continuing Directors or pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of paragraph (c) of
this definition;
(c) the approval by the stockholders of the Company of a
reorganization, merger, consolidation, exchange
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<PAGE> 31
of shares or sale or other disposition of all or substantially all the assets
of the Company, or the consummation of any such transaction if stockholder
approval is not required or obtained, other than any such transaction pursuant
to which (i) the Beneficial Owners of the Company Voting Securities outstanding
immediately prior to the transaction will be the Beneficial Owners of more than
60% of the outstanding securities eligible to vote for the election of
directors of the corporation resulting from such transaction or of any
corporation of which such corporation is a wholly-owned subsidiary ("Parent
Corporation"), (ii) no Person, other than the corporation resulting from such
transaction or Parent Corporation, a subsidiary of such corporation or Parent
Corporation or an employee benefit plan sponsored or maintained by such
corporation or Parent Corporation or a subsidiary thereof, will become the
Beneficial Owner of securities of such corporation or Parent Corporation
representing 20% or more of the combined voting power of the then outstanding
securities eligible to vote for the election of directors of such corporation
or Parent Corporation except to the extent that such ownership existed with
respect to the Company Voting Securities prior to such transaction and (iii)
individuals who are Continuing Directors will constitute at least a majority of
the members of the board of directors of the corporation resulting from the
transaction or Parent Corporation; or
(d) the approval by stockholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control shall not
be deemed to occur solely because any Person acquires Beneficial Ownership of
more than 20% of the Company Voting Securities as a result of the acquisition
of Company Voting Securities by the Company which, by reducing
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<PAGE> 32
the number of Company Voting Securities outstanding, increases the percentage
of shares beneficially owned by such Person, provided that if a Change in
Control would occur as a result of such an acquisition by the Company (if not
for the operation of this sentence), and after the Company's acquisition such
Person becomes the Beneficial Owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting Securities
beneficially owned by such person, then a Change in Control shall occur.
9. Award Agreement. Each Award under the Plan shall be
evidenced by an agreement setting forth the terms and conditions, as determined
by the Committee, in addition to those set forth in the Plan, which shall apply
to such Award.
10. Withholding. The Company may deduct from any payment to
be made pursuant to the Plan the amount of any taxes required by law to be
withheld therefrom, or require a Participant to pay to the Company in cash such
amount required to be withheld prior to the issuance or delivery of any shares
of Common Stock or the payment of cash under the Plan. Such taxes may be paid
in cash, by surrender of shares of Common Stock or with shares of Common Stock
otherwise to be issued or delivered to the Participant, or by a combination
thereof, or in any other manner satisfactory to the Committee. Any shares of
Common Stock so delivered shall be valued at the Fair Market Value thereof on
the day immediately prior to exercise or payment of an Award.
11. No Right of Continued Employment. Nothing contained in
the Plan or in any Award shall confer upon any employee any right with respect
to the continuation of employment with the Company or any of its subsidiaries
or
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<PAGE> 33
interfere in any way with the right of the Company to terminate his or her
employment at any time. Nor shall anything contained in the Plan confer upon
any employee or other person any claim or right to any Award under the Plan.
12. Governmental Compliance. Each Award granted under the
Plan shall be subject to the requirement that if at any time the Committee
shall determine that the listing, registration or qualification of any shares
issuable or deliverable thereunder upon any securities exchange or under any
Federal or state law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition thereof or in connection
therewith, such Award may not be exercised and no shares may be delivered upon
the exercise or payment thereof unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
The Committee may require any person acquiring shares pursuant
to an Award to represent to and agree with the Company that such person is
acquiring the shares for investment and without a view to the distribution
thereof.
All certificates for shares of Common Stock delivered under
the Plan pursuant to an Award shall be subject to such stock-transfer orders
and other restrictions as the Committee may deem advisable under any federal or
state law or regulation or the requirements of any stock exchange or NASDAQ,
and the Committee may cause a legend or legends to be endorsed upon any such
certificate to make reference to such restrictions.
It is intended that the Plan satisfy the requirements of Rule
16b-3 under the Exchange Act so that Participants will be entitled to the
benefit of that Rule or any other rule promulgated under Section 16 of the
Exchange
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<PAGE> 34
Act and will not be subject to short-swing liability under Section 16.
Accordingly, if the operation of any provision of the Plan would conflict with
this intent, such provision to the extent possible shall be interpreted or
deemed amended so as to avoid such conflict.
13. Adjustments. In the event of any change in the
outstanding shares of Common Stock (including, but not limited to, the number
thereof) by reason of any stock dividend or split, recapitalization, merger,
consolidation, spinoff, combination or exchange of shares or other corporate
change, or of any distribution to holders of Common Stock other than regular
cash dividends, the number or kind of shares available for Awards under the
Plan (including the calendar year limit on certain Awards) and the number of
Options and shares to be issued to Non-Employee Directors may be adjusted by
the Committee as it shall in its sole discretion deem equitable and the number
and kind of shares subject to any outstanding Awards and the exercise price
thereof may be adjusted by the Committee as it shall in its sole discretion
deem equitable to preserve the value of such Awards.
14. No Segregation of Cash or Shares. The Plan is intended
to be an "unfunded" plan for incentive and deferred compensation. Nothing
contained herein shall give any person any rights greater than those of a
general creditor of the Company. The Committee may, in its sole discretion,
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments with respect to
Awards, provided that the existence of such trusts or other arrangements is
consistent with the unfunded status of the Plan.
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<PAGE> 35
15. No Rights Until Certificates Delivered. Except as
otherwise provided by the Committee in the applicable Award agreement, no
person shall have rights as a stockholder with respect to any shares of Common
Stock as a result of any Award until a certificate or certificates evidencing
such shares shall have been delivered to that person and, subject to Section
13, no adjustment shall be made for dividends or distributions or other rights
in respect of any share for which the record date is prior to the date on which
such person shall become the holder of record thereof.
16. Amendment. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time, provided that (a) no amendment shall
be made without stockholder approval if such approval is necessary to satisfy
any applicable tax or regulatory law or regulation and the Board determines it
is appropriate to seek stockholder approval, and (b) upon or following the
occurrence of a Change in Control no amendment may adversely affect the rights
of any person in connection with an Award previously granted.
17. Governing Law. The Plan and any Award agreement shall be
construed and its provisions enforced and administered in accordance with the
laws of the State of Delaware.
18. Effective Date. The effective date of the Plan shall be
the date upon which it is approved by the stockholders of the Company (the
"Effective Date").
19. Term of Plan. Subject to earlier termination pursuant to
Section 16, the Plan shall have a term of 10 years from its Effective Date.
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<PAGE> 36
APPENDIX B
Preliminary Proxy Material
PROXY
COMMONWEALTH ALUMINUM CORPORATION
The undersigned acknowledges receipt of the Notice of Meeting and Proxy
Statement for the Annual Meeting of Stockholders of COMMONWEALTH ALUMINUM
CORPORATION to be held April 17, 1997 and appoints Paul E. Lego, Mark V.
Kaminski and John E. Merow, and each of them, proxies, with power of
substitution, to attend the meeting, and any adjournments thereof, and vote all
shares the undersigned is entitled to vote upon the matters indicated [below]
[on the reverse side of this card] and on any other business that may properly
come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED. IF NO INSTRUCTIONS ARE GIVEN, YOUR PROXIES WILL VOTE FOR THE
NOMINEES LISTED IN ITEM 1 AND FOR ALL PROPOSALS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE NOMINEES AND
FOR ALL PROPOSALS.
1. ELECTION OF DIRECTORS ___FOR all nominees (except as
written on line below)
Nominees: Catherine G.
Burke, Victor Torasso
___WITHHOLD AUTHORITY TO VOTE
(for nominees listed below)
To withhold authority to vote for any nominee write the
name of the nominee on the line below
----------------------------------------------------------------------------
2. Approval of change of name ___FOR ___AGAINST ___ABSTAIN
3. Approval of 1997 Stock ___FOR ___AGAINST ___ABSTAIN
Incentive Plan
4. Approval of selection of ___FOR ___AGAINST ___ABSTAIN
Coopers & Lybrand LLP as
auditors.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN [ON THE REVERSE SIDE] AND RETURN
THIS CARD AS SOON AS POSSIBLE. MARK EACH VOTE WITH AN X IN THE BOX.
, 1997
----------------------------------
----------------------------------------
Signature
----------------------------------------
Signature (if jointly held)
<PAGE> 37
PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR(S) ON THIS PROXY. ONLY ONE
SIGNATURE IS REQUIRED IN THE CASE OF A
JOINT ACCOUNT. WHEN SIGNING IN A
REPRESENTATIVE CAPACITY, PLEASE GIVE
TITLE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
