<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Commonwealth Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
Dear Stockholder:
You are cordially invited to the Annual Meeting of Stockholders of
Commonwealth Industries, Inc. scheduled to be held at the Hyatt Regency
Louisville, 320 West Jefferson Street, Louisville, Kentucky, on Friday, April
23, 1999, 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 elect two directors to serve until
the Annual Meeting of Stockholders in 2002. You are also being asked to approve
an increase in the number of shares authorized for awards of options and
restricted stock to key employees and options and unrestricted stock to
non-employee directors under the Company's 1997 Stock Incentive Plan, to approve
a further amendment of that Plan to authorize the sale to key employees and to
provide for sale of unrestricted stock financed by Company full-recourse loans
and related 1999 Executive Incentive Plan and to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for 1999.
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> 3
COMMONWEALTH INDUSTRIES, INC.
500 West Jefferson Street
Citizens Plaza, Suite 1900
Louisville, Kentucky 40202-2823
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1999 Annual Meeting of Stockholders of Commonwealth Industries,
Inc. (the "Company") will be held at The Hyatt Regency Hotel, Louisville,
Kentucky, at 10:00 A.M., Eastern time, Friday, April 23, 1999, to consider and
take action with respect to the following matters:
(1) The election of two directors;
(2) Amendment of the 1997 Stock Incentive Plan to increase the number of
shares authorized for awards of options and restricted stock to key
employees and options and unrestricted stock to non-employee
directors;
(3) Approval of additional amendments to the 1997 Stock Incentive Plan to
permit the sale of up to 1,250,000 shares of unrestricted stock at
market value to key employees financed by full-recourse loans from the
Company and of a related 1999 Executive Incentive Plan;
(4) Approval of the selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for 1999; 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 26, 1999 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 17, 1999
<PAGE> 4
COMMONWEALTH INDUSTRIES, INC.
PROXY STATEMENT
This Proxy Statement is furnished to you in connection with
the solicitation of proxies by the Board of Directors of Commonwealth
Industries, Inc., a Delaware corporation (the "Company"), to be used at the
Annual Meeting of Stockholders (the "Meeting") to be held in Louisville,
Kentucky, on
April 23, 1999.
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
amendment of the 1997 Stock Incentive Plan to increase the number of shares
authorized for awards, for the additional amendments to the 1997 Stock Inventive
Plan, and adoption of the 1999 Executive 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 17, 1999 in connection with this
solicitation.
On the record date for the Meeting there were 15,949,000
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 a director. 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
Mark V. Kaminski and C. Frederick Fetterolf expire at the Meeting. The
Nominating Committee of the Board of Directors has nominated Mr. Kaminski and
Mr. Fetterolf for election in the class whose term expires in 2002. 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 Mr. Kaminski, Mr. Fetterolf and each of
the other directors of the Company is set forth below.
Mark V. Kaminski. Expiration of term, if elected, 2002.
Director since 1991. Age 43. President and Chief Executive Officer of the
Company. Mr. Kaminski joined the Company in 1987 as Marketing Manager. In 1989,
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., ARM Financial Group, Inc. and Indiana University
Athletics Board.
<PAGE> 5
Paul E. Lego. Expiration of term 2001. Director since 1995.
Age 68. 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, Orlimar Golf
Company and Consolidated Natural Gas Company. Mr. Lego is a trustee of the
University of Pittsburgh and a member of the Business Council.
Catherine G. Burke. Expiration of term 2000. Director since
1995. Age 59. Dr. Burke has been a member of 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, if elected, 2002.
Director since 1997. Age 70. 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 2001. Director since 1995.
Age 69. Mr. Merow was a 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 (18) in the Seligman
Group of Investment Companies. He also is a director and treasurer of the
Foreign Policy Association, an executive committee member of the United States
Council for International Business, Chairman of the American Australian
Association, Chairman of New York Presbyterian Healthcare Network, Inc., a
trustee of New York Presbyterian Hospital and Vice-Chairman of the United
States-New Zealand Council.
Victor Torasso. Expiration of term 2000. Director since 1995.
Age 70. Mr. Torasso was President of Wheeltek, Inc., an automotive aluminum
wheel manufacturing plant in Freemont, Indiana from 1986 to 1989. 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. Fetterolf (Chairman), Dr. Burke, Mr.
Lego 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 1998;
(a) recommends the engagement of independent auditors; (b) reviews with the
independent auditors the plans for and results of the audit engagement;
(c) approves professional services rendered by the independent auditors;
(d) reviews the independence of the independent auditors; (e) reviews the
adequacy of the internal controls of the Company and its subsidiaries, including
systems for monitoring risk, financial control and compliance with law;
(f) monitors potential conflicts of interest of directors and management;
(g) oversees the process of disclosure and communications; and (h) performs such
other duties as maybe assigned from time to time by the Board.
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<PAGE> 6
The Nominating Committee, which met two times during 1998;
(a) recommends to the Board or stockholders candidates for election as
directors; (b) recommends to the Board candidates for appointment as members of
Board committees; (c) recommends to the Board the compensation of the directors;
(d) monitors the governance practices of the Company and makes recommendations
to the Board for changes when appropriate; and (e) performs such other duties as
may be assigned from time to time by the Board. The Nominating Committee will
consider recommendations of candidates for election as directors 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 five times during 1998; (a) provides oversight of the management development
and compensation and human resources policies of the Company; (b) reviews and
recommends to the Board the compensation and other benefits of the senior
executives; (c) determines or administers the Company's stock incentive plans
and (d) performs such other duties as may be assigned from time to time by the
Board.
During 1998, there were seven 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 $10,000 ($25,000 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 2,500 shares of
Common Stock on the date the director becomes a non-employee director and on
each succeeding January 1. The option price is the mean between the highest and
lowest sales price of the Common Stock on the date of grant.
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 1998.
APPROVAL OF AMENDMENT TO 1997 STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to approval of the
stockholders, an amendment to the Company's 1997 Stock Incentive Plan (the "1997
Plan") to increase by 750,000 the number of shares which will be available for
the grant of awards thereunder the Plan. The proposed amendment to the 1997 Plan
is attached as Appendix A and is incorporated herein by reference.
The 1997 Plan currently authorizes awards for up to 600,000
shares. As a result of prior awards, as of February 26, 1999, only 25,500 shares
remained available for future awards. As discussed elsewhere in this proxy
statement, the long-term incentive plan of the Company relies on awards under
the 1997 Plan and, accordingly it is necessary to amend the 1997 Plan to
increase the number of shares available for additional awards.
3
<PAGE> 7
There follows a brief summary of the principal features of the
Plan. The Plan has been filed with the Securities and Exchange Commission
("SEC") 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 (the "Committee")
administers the 1997 Plan. On February 26, 1999 there were approximately 80
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 26, 1999 was $10.813.
The Committee may grant options under the 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 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 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
2,500 shares of Common Stock 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
4
<PAGE> 8
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
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 has a term of 10 years, expiring on April 16,
2007.
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 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.
Future benefits under the 1997 Plan are not determinable.
The Board of Directors recommends a vote FOR this proposal.
APPROVAL OF ADDITIONAL AMENDMENTS TO
THE 1997 STOCK INCENTIVE PLAN AND
OF THE 1999 EXECUTIVE INCENTIVE PLAN
As part of a program to increase executive ownership of stock
of the Company, the Management Development and Compensation Committee of the
Board of Directors (the "Committee") is considering the implementation of an
Executive Stock Purchase Program, as more fully described in the Board
Compensation Committee Report on Executive Compensation. To that end, the Board
of Directors has adopted, subject to approval, an additional amendment to the
1997 Stock Incentive Plan (the "1997 Plan") and a new 1999 Executive Incentive
Plan (the "1999 Plan").
The additional amendment to the 1997 Plan is attached as
Appendix B and is incorporated by reference. This amendment would permit the
Committee to authorize the sale of unrestricted shares of Common Stock to
selected executives at market value at the time of sale and allow the executives
to acquire such shares with the proceeds of a full-recourse loan from the
Company. Up to 1,250,000 shares would be made available for issuance pursuant to
this provision. To the extent not used for this purpose, such shares would not
be available for any other awards under the 1997 Plan. Although the number of
shares that would be purchased by eligible employees is not determinable, it is
anticipated
5
<PAGE> 9
that the number allocated for purchase at market value to each eligible employee
pursuant to the amendment to the 1997 Plan will not exceed the following
amounts:
<TABLE>
<CAPTION>
Name and Principal Position Number of Shares
--------------------------- ----------------
<S> <C> <C>
Mark V. Kaminski 400,000 shares of common stock
President & Chief Executive Officer
Donald L. Marsh, Jr. 250,000 shares of common stock
Executive Vice President
Chief Financial Officer and Secretary
Roderick Macdonald 150,000 shares of common stock
Executive Vice President - Alflex
Fred Mudge (*) 0 shares of common stock
Executive Vice President - Commonwealth Aluminum
Gerald L. Hadeen 35,000 shares of common stock
Vice President Engineering and Technology - Alflex
John J. Wasz 75,000 shares of common stock
Vice President Materials - Commonwealth Aluminum
All Executive Officers as a Group (11 persons) 1,075,000 shares of common stock
Non-Executive Officers as a group (10 persons) 175,000 shares of common stock
</TABLE>
(*) Mr. Mudge resigned his position with the Company in
September 1998.
As a part of the program to increase executive stock ownership
of stock of the Company, as well as to provide an additional vehicle to focus
and motivate the performance of the executives of the Company, the Board of
Directors has also adopted the 1999 Plan. The 1999 Plan provides an opportunity
for executives to earn incentive cash compensation for attaining financial and
operational objectives that are critical to the Company's ongoing growth and
profitability. If earned, this incentive cash compensation will help executives
to defray a portion of the repayment of loans incurred to purchase shares.
A summary of the 1999 Plan is set forth below but is qualified
in its entirety by reference to the full text of the 1999 Plan itself, which is
attached as Appendix C.
The 1999 Plan is being submitted to stockholders for purposes
of meeting the requirements for deductibility of certain compensation paid by
the Company under Section 162(m) of the Internal Revenue Code. Section 162(m)
limits the Company's deduction to $1 million per year per executive for certain
compensation paid to each of its Chief Executive Officer (the "CEO") and the
four highest compensated executives other than the CEO. Future incentive awards
under the 1999 Plan are not determinable.
The 1999 Plan has been designed and will be administered to provide
"performance based" incentives as set forth under Section 162(m) of the Code. A
Special Bonus may be granted in the discretion of the Committee to any executive
who the Committee believes may be a "covered employee," as defined in Section
162(m) of the Code. In general, the regulations under Section 162(m) exclude
from this limitation compensation that is calculated based on "objective"
performance criteria. The amount of any Special Bonuses will be based on
objective performance goals established by the Committee. The performance
criteria for Special Bonuses will be based upon one or more of the following
criteria: (i) before or after tax net income; (ii) earnings per share; (iii)
book value per share; (iv) stock price; (v) return
6
<PAGE> 10
on stockholders' equity; (vi) the relative performance of peer group companies;
(vii) expense management; (vii) return on investment; (ix) improvements in
capital structure; (x) profitability of an identifiable business unit or
product; (xi) profit margins; (xii) budget comparisons, and (xiii) total return
to the Company's stockholders. The Committee may determine in its sole
discretion the applicable performance period relating to any Special Bonus and
may include with respect to any award any change in control provision. Payment
of Special Bonuses may be deferred, in whole or in part, on a mandatory basis by
the Committee or electively by participants with Committee approval. The
Committee must certify as to the attainment of the applicable performance goals
prior to payment of any Special Bonus, and may reduce the amount of any Special
Bonus.
The maximum aggregate amount of Special Bonuses that may be
awarded to any individual employee during the period commencing on the effective
date of the 1999 Plan and ending on the fourth anniversary of such effective
date is $5 million. There is no requirement that the maximum amount be awarded.
The Board of Directors recommends a vote FOR this proposal.
APPROVAL OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit
Committee, has selected PricewaterhouseCoopers LLP as independent auditors to
audit the financial statements of the Company for 1999 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 PricewaterhouseCoopers LLP 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.
7
<PAGE> 11
BENEFICIAL OWNERSHIP OF COMMON STOCK
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of February 26, 1999, 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 10 and all directors and executive officers as a group, and
the percentage of the Common Stock such ownership represented on that date. 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 12,000 *
C. Frederick Fetterolf 6,000 *
Mark V. Kaminski 224,263 1.4%
Paul E. Lego 14,000 *
John E. Merow 24,000 *
Victor Torasso 8,000 *
Donald L. Marsh, Jr. 39,203 *
Roderick Macdonald 27,869 *
Fred N. Mudge(b) 3,900 *
Gerald L. Hadeen --- *
John J. Wasz 31,170 *
All directors and executive 404,885 2.5%
officers as a group (14 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 26, 1999 through the
exercise of options: Dr. Burke--4,000 shares; Mr. Fetterolf--2,000 shares;
Mr. Kaminski--60,000 shares; Mr. Lego--10,000 shares; Mr. Merow--4,000
shares; Mr. Torasso--4,000 shares; and all directors and executive officers
as a group--118,500 shares. Also includes shares held in the Company's
Performance Sharing Plan for Salaried Employees for the accounts of
individuals as follows: Mr. Kaminski--17,652 shares; Mr. Marsh--1,528
shares; Mr. Macdonald--714 shares; Mr. Hadeen--0 shares; Mr. Wasz--9,745;
and all directors and executive officers as a group--48,332 shares.
(b) Mr. Mudge resigned his position with the Company in September, 1998.
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.
8
<PAGE> 12
<TABLE>
<CAPTION>
Name and Address of No. of Shares Percent
Beneficial Owner Owned of Class
- ---------------- ----- --------
<S> <C> <C>
Merrill Lynch Asset Management Group 2,310,400(a) 14.5%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
Heartland Advisors, Inc. 1,799,875(b) 11.3%
790 North Milwaukee Street
Milwaukee, WI 53202
Franklin Resources, Inc. 1,593,400(c) 10.0%
777 Mariners Island Blvd.
San Mateo, CA 94404
John R. Simplot 1,500,000(d) 9.4%
Self Declaration of Revocable Trust
999 Main Street
Boise, Idaho 83702
Brinson Partners 1,181,700(e) 7.4%
209 South LaSalle
Chicago, IL 60604-1295
Dimensional Fund Advisors 960,700(f) 6.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401-1005
</TABLE>
(a) Based solely on a Schedule 13G filed on February 3, 1999 with the SEC.
Merrill Lynch & Co., Inc. reported shared power to vote and dispose of all
of the above noted shares of Common Stock. Merrill Lynch Global Allocation
Fund, Inc. also reported shared power to vote and dispose of 1,100,000 of
such shares.
(b) Based solely on a Schedule 13G dated January 13, 1999 filed with the SEC by
Heartland Advisors, Inc. The Schedule 13G reports that Heartland Advisors,
Inc. has (1) sole power to dispose of all of the 1,799,875 shares; and (2)
sole power to vote 812,225 shares.
(c) Based solely on a Schedule 13G dated January 22,1999, 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
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 shares; and (3) Charles B. Johnson
and Rupert H. Johnson, Jr. are principal stockholders of Franklin
Resources, Inc.
(d) Based solely on a Schedule 13D dated March 1, 1999 filed with the SEC by
John R. Simplot, Trustee. Simplot reported sole power to vote and dispose
of all of the above noted shares of Common Stock.
9
<PAGE> 13
(e) Based solely on a Schedule 13G filed on February 11, 1999 with the SEC. The
13G further reports that Brinson Partners, Inc. has shared power to dispose
and shared power to vote 1,181,700 shares.
(f) Based solely on a Schedule 13G filed on February 11, 1999 with the SEC.
Dimensional reported shared power to vote 960,700 shares.
EXECUTIVE COMPENSATION
The following table sets forth for the years 1996, 1997 and
1998 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 who were serving as executive officers on December 31,
1998 other than the chief executive officer, and Mr. Fred N. Mudge, who resigned
his position with the Company in September 1998 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
Number
of Shares
Name Restricted Underlying
and Principal Stock Stock LTIP All Other
Position Year Salary Bonus(a) Awards(b) Options Payouts Compensation(c)
- -------- ---- ------ -------- ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark V. Kaminski 1998 $575,000 $150,000 --- 40,000 --- $ 3,362
President and Chief 1997 $500,000 $250,000 --- 40,000 $106,658 $37,986
Executive Officer 1996 $380,004 $325,314 --- 40,000 $111,291 $36,753
Donald L. Marsh, Jr.
Executive Vice
President, Chief 1998 $300,000 $100,000 --- 10,000 --- $ 5,000
Financial Officer and 1997 $250,008 $121,254 --- 10,000 --- $11,718
Secretary 1996 $186,635 $153,908 $210,938 10,000 --- $65,513
Roderick Macdonald 1998 $210,000 $62,000 --- 10,000 --- $63,530
Executive Vice 1997 $190,008 $60,803 --- 10,000 $30,231 $ 7,994
President - Alflex 1996 $145,600 $60,682 --- 5,000 $34,469 $ 5,614
Fred N. Mudge
Executive Vice 1998 $256,883 --- --- 10,000 --- $ 4,737
President - 1997 $225,000 $63,563 --- 10,000 --- $ 4,800
Commonwealth Aluminum 1996 $ 37,500 $ 9,844 --- --- --- ---
Gerald L. Hadeen 1998 $160,000 $67,000 --- 5,000 --- $ 4,964
Vice President 1997 $160,000 $54,000 --- 5,000 --- $ 5,700
Engineering and 1996 $144,000 $65,250 --- --- --- $ 2,708
Technology-Alflex
John J. Wasz 1998 $171,492 $42,501 --- 5,000 --- $ 5,145
Vice President 1997 $170,004 $37,500 --- 5,000 $25,936 $ 6,914
Materials-Commonwealth 1996 $133,832 $40,767 --- 5,000 $31,472 $ 5,042
Aluminum
</TABLE>
10
<PAGE> 14
(a) The amounts reported in this column represent payments made in 1999, 1998
and 1997 with respect to 1998, 1997 and 1996 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, 1998 as follows: Mr. Kaminski--40,000 shares ($375,000)
and each of Messrs. Marsh, Macdonald and Wasz--12,500 shares ($117,188).
These dollar values are based upon the closing price of the Company's
Common Stock on the NASDAQ National Market on December 31, 1998 ($9.375 per
share).
(c) The amounts reported in this column include matching contributions to the
Company's Performance Sharing Plan, relocation expenses for Mr. Macdonald
of $60,894 in 1998 and $11,601 in 1997, relocation expenses for Mr. Marsh
of $65,513 in 1996 and contributions made by the Company to its Deferred
Compensation Plan.
The tables below show, for the named executive officers,
information regarding stock options granted during, or held at the end of 1998
pursuant to the Company's Stock Incentive Plans.
OPTIONS GRANTED IN 1998
<TABLE>
<CAPTION>
% of Potential
Total Realizable Value at
Number of Options Assumed Annual Rates of
Securities Granted to Stock Price Appreciation
Underlying Employees Exercise for 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 17.3% $14.50 1/1/08 $364,759 $924,371
Donald L. Marsh, Jr. 10,000 4.3% $14.50 1/1/08 $ 91,190 $231,093
Roderick Macdonald 10,000 4.3% $14.50 1/1/08 $ 91,190 $231,093
Fred N. Mudge 10,000 4.3% $14.50 1/15/01 $ 91,190 $231,093
Gerald L. Hadeen 5,000 2.2% $14.50 1/1/08 $ 45,595 $115,546
John J. Wasz 5,000 2.2% $14.50 1/1/08 $ 45,595 $115,546
</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 1998 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 SEC 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.
11
<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 20,000/120,000 0/$0
Donald L. Marsh, Jr. 0/30,000 0/$0
Roderick Macdonald 3,000/25,000 0/$0
Fred N. Mudge 0/20,000 0/$0
Gerald L. Hadeen 0/10,000 0/$0
John J. Wasz 3,000/15,000 0/$0
</TABLE>
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 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 credit the accounts of participants in the plan with amounts
(a) designed to make up for limitations contained in the Code on benefit
accruals under the Company's pension plan and (b) based on the application of
the Company's pension plan contribution rate applied to each participant's
compensation in excess of that covered by the Company's pension plan. The actual
amounts to be paid out will depend upon the amount of the deferral and the
credits and debits to the employees account.
PENSION BENEFITS
The Company maintains the Commonwealth Industries Pension Plan
(the "Pension Plan"), which provides benefits for eligible employees. Through
December 31, 1997 the Pension Plan was structured as a traditional, defined
benefit plan. Effective January 1, 1998, the present value of accrued benefits
under the Pension Plan was converted to a cash balance formula.
Under the cash balance formula, each participant has an
account, for record keeping purposes only, to which credits are allocated each
payroll period based upon a percentage (the "Applicable Percentage") of the
participant's base salary plus bonus paid in such period ("Pensionable
Earnings"). The Applicable Percentage is determined by the age of the
participant as of the end of the current calendar year. The following table
shows the Applicable Percentage used to determine credits at the age indicated.
<TABLE>
<CAPTION>
AGE APPLICABLE PERCENTAGE
<S> <C>
39 and under 3.5%
40 to 49 4.5%
50 to 54 6.0%
55 and older 8.0%
</TABLE>
As of December 31, 1998, the age of Messrs. Kaminski, Marsh, Macdonald,
Hadeen and Wasz was 44, 52, 51, 57, and 39, respectively.
12
<PAGE> 16
In addition, all balances in the accounts of participants earn
a fixed rate of interest which is credited annually. The interest rate for a
particular year is based on the 30 year Treasury Securities as specified by the
Commissioner of Internal Revenue. For 1998 the interest rate was 5.81%.
At retirement or other termination of employment, an amount
equal to the vested balance then credited to the account is payable to the
participant in the form of an immediate or deferred lump sum or annuity for the
entire benefit under the Pension Plan.
The table below sets forth the estimated annual benefit
payable to each of the named executive officers as a single life annuity at age
65 under the Pension Plan. The projections contained in the table are based on
the following assumptions: a) employment until age 65 at base salaries in effect
at December 31, 1998 with no increase in salary; b) annual bonuses equal to the
average bonus over each of the last five years (1994 through 1998) for which
such named executive officer was employed; c) interest credits at the actual
rates for all years through 1998, and the minimum rate of 5.25% for 1999 and
later years; and d) the conversion to a straight life annuity at normal
retirement age based on an interest rate of 5.25% and the 1983 Group Annuity
Mortality table, which sets forth generally accepted life expectancies.
<TABLE>
<CAPTION>
EXECUTIVE OFFICER TOTAL ANNUAL BENEFITS
<S> <C>
Mark V. Kaminski $58,166
Donald L. Marsh, Jr. $26,818
Roderick Macdonald $31,494
Fred N. Mudge -0-
Gerald L. Hadeen $13,217
John J. Wasz $68,423
</TABLE>
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into Severance Agreements with Messrs.
Kaminski, Marsh, Macdonald 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. The agreements 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
13
<PAGE> 17
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 (the "Committee") consists entirely of non-employee
Directors. The Committee approves the policies under which compensation is paid
or awarded to the Company's executive officers. The Committee has considered the
advice of an independent outside consultant in determining the appropriateness
and the level of compensation.
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 feels that executive
officers should have a significant portion of their pay "at risk" and tied to
the long term performance of the Company's stock.
Compensation Program. The Company's compensation program for
executive officers consists of three key elements: Base Salary, Annual Incentive
Compensation, and Long-Term Incentive Compensation and Stock Ownership. 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 long-term interests of stockholders by ensuring that executive
officers are compensated in a manner which aligns their interests with that of
stockholders. Thus compensation for the Company's executive officers places a
significant proportion of total remuneration at risk. Stock options are 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 long term ownership of the
Company's Common Stock by its executive officers and is considering a program to
significantly increase the amount of such ownership.
The Committee's judgments during 1998 regarding the
appropriate form and level of executive compensation payments and awards were
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.
The Committee also considered the compensation practices and
performance of other similar corporations, particularly 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 17, reflecting the Committee's
view that the employment market for 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 (the "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
14
<PAGE> 18
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 compensation
which is similar to positions at other companies with whom we compete for
compensation purposes in order to attract and retain superior executives to
carry out the work required to meet the Company's business objectives and
challenges.
The salaries to be paid to executive officers (other than the
CEO) are reviewed annually by the CEO and based on his assessment of the work
performance of each individual, he recommends the total remuneration for the
Executive Vice Presidents, subject to approval by the Committee. The Committee
sets the total remuneration for the CEO.
Annual Incentive Compensation. The purpose of the annual
incentive program is to provide variable pay based upon the performance of the
business and the work performance of individual executives.
In 1998, the annual incentive compensation plan gave each
executive officer the opportunity to earn an annual payment up to 50 percent of
his or her base salary, or more in exceptional cases. For each officer, 50% of
the annual incentive compensation was based on the financial performance of the
business as measured by return on capital employed and 50% was based on other
indicators of work performance and the officer's contribution to Company's
overall financial performance. Actual awards were based on the recommendations
of the CEO to the Committee for other corporate officers and were determined by
the Committee for the CEO.
Long-Term Incentive Compensation and Stock Ownership. The
purpose of the long-term incentive program is to align the longer term interests
of corporate officers with those of the stockholders. In 1998 long-term
incentives are provided through stock option grants [and restricted Common Stock
were there any awards].
Starting in 1999 the Committee would like to take further
measures to increase the extent of executive stock ownership and the degree of
both risk and reward in the compensation program for selected corporate
officers. This would be done via the implementation of an Executive Stock
Purchase Program, under which eligible participants would be permitted to
purchase shares of Company stock at fair market value. Such purchases would be
financed by the Company with interest bearing full-recourse loans, secured by
the shares. The interest rate would be established with reference to IRS
guidelines for such loans. Participants would be eligible to earn cash incentive
awards under the 1999 Executive Incentive Plan that is being submitted to
stockholders for approval, which, if earned, would help to defray repayment of a
portion of the loan (after taxes are paid). Such awards would be earned only to
the extent that corporate performance exceeds pre-established requirements. The
performance criteria will be based upon one or more of the criteria set forth in
the 1999 Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation for the Chief Executive Officer, Mr.
Kaminski, reflects the same elements and the same factors as those described
above. In addition, his leadership in dealing with major corporate challenges
including new labor agreements at the Lewisport and Ohio sites, efforts to
change work relationships and systems in all facilities and developing a
long-term corporate strategy were all important factors in our judgment of his
work performance.
The uncertainty among our customers as to the outcomes of the
labor negotiations at the Ohio and Kentucky plants as well as a management
decision to reduce bookings in order to protect our customers in case of a labor
action, resulted in reduced sales and production. These in turn led to lower net
profits and the impact on share price. The CEO has been effective in dealing
with these and many other
15
<PAGE> 19
issues confronting the Company. The turn-around in the fourth quarter of 1998
provides evidence of his leadership of the business. If the proposed Executive
Stock Purchase Program is implemented it is contemplated that Mr. Kaminski would
be eligible to purchase up to $5 million worth of Company stock at its full fair
market value utilizing the proceeds of a Company loan. Due to the recourse
nature of the loan, Mr. Kaminski would be personally liable for any shortfall
between the loan's balance (including accrued interest) and the value of the
stock. This creates true downside risk for him if the stockholder return of the
stock does not keep pace with the interest rate on the loan. To the extent that
preestablished performance goals are achieved, he may have an opportunity to
earn a deferred cash incentive award, which on an after tax basis could defray
some portion of the loan balance.
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 1998 did not exceed this limit. The Committee
continues to review issues relating to this compensation deduction limitation
and recommended to the Board the adoption of the 1999 Plan to comply with
section 162(m).
Catherine C. Burke, Chairman
C. Frederick Fetterolf, Member
Paul E. Lego, Member
Victor Torasso, Member
16
<PAGE> 20
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total
stockholder return since the Common Stock became publicly traded on March 10,
1995 with that of the Standard & Poor's Small Cap 600 and a peer group index
during the period March 10, 1995 through December 31, 1998. The graph assumes an
initial investment of $100.00 and the reinvestment of dividends (where
applicable).
COMMONWEALTH INDUSTRIES, INC.
3/95 12/95 12/96 12/97 12/98
---- ----- ----- ----- -----
Commonwealth Industries, Inc. $100 $112 $112 $107 $ 70
S&P SmallCap 600 $100 $124 $151 $189 $187
Self-determined Peer $100 $103 $109 $133 $ 76
THE PEER GROUP SELECTED BY THE COMPANY CONSISTS OF BIRMINGHAM STEEL CORPORATION,
CENTURY ALUMINUM COMPANY, CHAPARRAL STEEL, EASCO, INC., NORTHWEST STEEL & WIRE
COMPANY, OREGON STEEL MILLS, INC. AND QUANEX CORPORATION.
17
<PAGE> 21
STOCKHOLDER PROPOSALS
FOR THE 2000 ANNUAL MEETING
Proposals of stockholders to be considered for inclusion in
the Company's proxy statement and proxy for the 2000 annual meeting of
stockholders, which is expected to be scheduled on or about April 21, 2000, must
be received by the Secretary of the Company at its principal executive office,
500 West Jefferson Street, Citizens Plaza Suite 1900, Louisville, Kentucky
40202-2823, not later than November 18, 1999.
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. Based
upon these requirements and the expected date for the 2000 annual meeting of
stockholders, to be considered timely notice of such proposal must be received
by the Company between January 21, 2000 and February 29, 2000. 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. The total amount of
reimbursement of expenses is anticipated to be approximately $11,500 for the
Meeting.
Dated: March 17, 1999 Donald L. Marsh, Jr.
Secretary
18
<PAGE> 22
APPENDIX A
AMENDMENT TO THE
COMMONWEALTH INDUSTRIES, INC.
1997 STOCK INCENTIVE PLAN
THIS AMENDMENT TO THE COMMONWEALTH INDUSTRIES, INC. 1997 STOCK
INCENTIVE PLAN (the "Plan") is made and entered into by Commonwealth Industries,
Inc. (the "Company").
WHEREAS, pursuant to Section 16 of the Commonwealth
Industries, Inc. 1997 Stock Incentive Plan, the Board of Directors of
Commonwealth Industries, Inc. (the "Board") has the power and authority to amend
the Plan, subject to the approval of the Company's stockholders in respect of
certain amendments;
WHEREAS, the Board, has determined to amend the Plan to
increase the number of shares authorized for issuance thereunder, such amendment
being adopted subject to the approval of the Company's stockholders.
NOW, THEREFORE, the Plan is amended as follows:
1. The first sentence of section 4 of the Plan is hereby amended
to provide as follows:
"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 1,350,000, subject to adjustment pursuant to
Section 13 and to the following provisions."
2. The foregoing amendment shall be effective upon approval by
the stockholders of the Company.
IN WITNESS WHEREOF, Commonwealth Industries, Inc. has caused
this Amendment to the Plan to be executed by its duly authorized officer this
___ day of ________ 1999.
COMMONWEALTH INDUSTRIES, INC.
By: _______________________
Title: _______________________
A1
<PAGE> 23
APPENDIX B
AMENDMENT TO THE
COMMONWEALTH INDUSTRIES, INC.
1997 STOCK INCENTIVE PLAN
THIS AMENDMENT TO THE COMMONWEALTH INDUSTRIES, INC. 1997 STOCK
INCENTIVE PLAN (the "Plan") is made and entered into by Commonwealth Industries,
Inc. (the "Company").
WHEREAS, pursuant to Section 16 of the Commonwealth
Industries, Inc. 1997 Stock Incentive Plan, the Board of Directors of
Commonwealth Industries, Inc. (the "Board") has the power and authority to amend
the Plan, subject to the approval of the Company's stockholders in respect of
certain amendments;
WHEREAS, the Board, has determined to amend the Plan to
increase the number of shares authorized for issuance thereunder and to permit
the issuance of unrestricted shares of stock of the Company, such amendment
being adopted subject to the approval of the Company's stockholders.
NOW, THEREFORE, the Plan is amended as follows:
1. Paragraph 1 of Section 1 of the Plan is amended to provide as
follows:
"1. Purpose. Pursuant to the terms and conditions of the
Commonwealth Industries, Inc. 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 Industries, Inc. (the "Company") and (b)
restricted or unrestricted 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 and unrestricted Common Stock and shares
are referred to herein as `Awards.'"
2. The first sentence of Section 4 of the Plan is hereby amended
in its entirety to provide as follows:
"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 2,600,000 (of which no more than 1,350,000
shares may be issued pursuant to Awards under which a
Participant may pay less for such shares than their Fair
Market Value on the date of purchase), subject to adjustment
pursuant to Section 13 and to the following provisions."
B1
<PAGE> 24
3. The heading and first sentence of paragraph 1 of section 6 of
the Plan are amended to provide as follows:
"6. Restricted and Unrestricted Stock. The Committee may from
time to time award restricted or unrestricted Common Stock
under the Plan to eligible employees."
4. Section 6 of the Plan is amended by adding a new
paragraph at the end of such section to provide as follows:
"The transfer or sale of unrestricted shares of Common Stock
may be made on such terms and conditions as the Committee may
determine, and payment for such shares may be made in cash or
in such other manner as may be determined by the Committee,
including full-recourse loans by the Company, which may be
secured by all or a portion of such shares of Common Stock."
5. The foregoing amendments shall be effective upon their
approval by the stockholders of the Company.
IN WITNESS WHEREOF, Commonwealth Industries, Inc. has caused
this Amendment to the Plan to be executed by its duly authorized officer this
___ day of ________ 1999.
COMMONWEALTH INDUSTRIES, INC.
By: _______________________
Title: _______________________
B2
<PAGE> 25
APPENDIX C
COMMONWEALTH INDUSTRIES, INC.
1999 EXECUTIVE INCENTIVE PLAN
1. Purpose. The purpose of the 1999 Executive Incentive Plan (the
"Plan") is to advance the interests of Commonwealth Industries, Inc. (the
"Company") and it stockholders by providing incentives in the form of special
bonus awards to certain executives of the Company and any of its subsidiaries or
other related business units or entities ("Affiliates") who contribute
significantly to the strategic and long-term performance objectives and growth
of the Company and its Affiliates.
2. Administration. The Plan shall be administered by the Management
Development and Compensation Committee of the Board of Directors (the
"Committee"), as such committee is from time to time constituted. The Committee
may delegate its duties and powers in whole or in part (i) to any subcommittee
thereof consisting solely of at least two "outside directors," as defined under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), or
(ii) to the extent consistent with Section 162(m) of the Code, to any other
individual or individuals.
The Committee has all the powers vested in it by the terms of
the Plan set forth herein, such powers to include the exclusive authority to
select the executives to be granted bonus awards (the "Special Bonuses") under
the Plan, to determine the size and terms of the Special Bonus made to each
individual selected (subject to the limitation imposed below), to modify the
terms of any Special Bonus that has been granted (except with respect to any
modification which would increase the amount of compensation payable to a
"Covered Employee," as such term is defined in Section 162(m) of the Code), to
determine the time when Special Bonuses will be awarded, to establish
performance objectives in respect of Special Bonuses and to certify that such
performance objectives were attained. The Committee is authorized to interpret
the Plan, to establish amend and rescind any rules and regulations relating to
the Plan, and to make any other determinations which it deems necessary or
desirable for the administration of the Plan. The Committee may correct any
defect or supply any administration of the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan in the
manner and to the extent the Committee deems necessary or desirable to carry it
into effect. Any decision of the Committee in the interpretation and
administration of the Plan, as described herein, shall lie within its sole and
absolute discretion and shall be final, conclusive and binding on all parties
concerned. No member of the Committee and no officer of the Company shall be
liable for anything done or omitted to be done by him or her, by any other
member of the Committee or by any officer of the Company in connection with the
performance of duties under the Plan, except for his or her own willful
misconduct or as expressly provided by statute.
3. Participation. The Committee shall have exclusive power (except as
may be delegated as permitted herein) to select the executives of the Company
and its Affiliates who may participate in the Plan and be granted Special
Bonuses under the Plan ("Participants").
4. Special Bonuses under the Plan.
(a) In General. The Committee shall determine the amount of a
Special Bonus to be granted to each Participant in accordance with subsection
(b) below.
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<PAGE> 26
(b) Special Bonuses. (i) The Committee may in its discretion
award a Special Bonus to a Participant who it reasonably believes may be a
Covered Employee for the taxable year of the Company in which such Special Bonus
would be deductible, under the terms and conditions of this subsection (b).
Subject to clause (iii) of this Section 4(b), the amount of a Participant's
Special Bonus shall be an amount determinable from written performance goals
approved by the Committee while the outcome is substantially uncertain and no
more than 90 days after the commencement of the period to which the performance
goal relates or, if less, the number of days which is equal to 25 percent of the
relevant performance period. The maximum aggregate limit on Special Bonuses that
may be awarded this Plan to any Participant during the period commencing on the
Effective Date and ending on the fourth anniversary of the Effective Date is $5
million.
(ii) The amount of any Special Bonus will be based on
objective performance goals established by the Committee. The performance
criteria for Special Bonuses made under the Plan will be based upon one or more
of the following criteria as determined by the Board: (A) before or after tax
net income; (B) earnings per share; (C) book value per share; (D) stock price;
(E) return on stockholders' equity; (F) the relative performance of peer group
companies; (G) expense management; (H) return on investment; (I) improvements in
capital structure; (J) profitability of an identifiable business unit or
product; (K) profit margins; (L) budget comparisons; and (M) total return to
stockholders.
(iii) The Committee shall determine whether the performance
goals have been met with respect to any affected Participant and, if they have,
so certify and ascertain the amount of the applicable Special Bonus. No Special
Bonuses will be paid until such certification is made by the Committee.
(iv) The provisions of this Section 4(b) shall be administered
and interpreted in accordance with Section 162(m) of the Code to ensure the
deductibility by the Company or its affiliates of the payment of Special
Bonuses.
5. Designation of Beneficiary by Participant. The Committee or its
delegate shall create a procedure whereby a Participant may file, on a form to
be provided by the Committee, a written election designation of one or more
beneficiaries with respect to the amount, if any, payable in the event of the
Participant's death. The Participant may amend such beneficiary designation in
writing at any time prior to the Participant's death, without the consent of any
previously designated beneficiary. Such designation or amended designation, as
the case may be, shall not be effective unless and until received by the duly
authorized representatives of the Committee or its delegate prior to the
Participant's death. In the absence of any such designation, the amount payable,
if any, shall be delivered to the legal representative of such Participant's
estate.
6. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or right to be
paid a Special Bonus under the Plan. Determinations made by the Committee under
the Plan need not be uniform and may be made selectively among eligible
individuals under the Plan, whether or not such eligible individuals are
similarly situated. Neither the Plan nor any action taken hereunder shall be
construed as giving any employee or other person any right to continue to be
employed by or perform services for the Company of any Affiliate, and the right
to terminate the employment of or performance of services by any Participant at
any time and for any reason is specifically reserved to the Company and its
Affiliates.
(b) Except as may be approved by the Committee, a Participant's
rights and interest under the Plan may not be assigned or transferred,
hypothecated or encumbered in whole or in part either directly or by operation
of law or otherwise (except in the event of a Participant's death) including,
but not by way of limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner; provided, however, that, subject to
applicable law, any amounts payable to any Participant hereunder are
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<PAGE> 27
subject to reduction to satisfy any liabilities owed to the Company or any of
its Affiliates by the Participant.
(c) The Committee shall have the authority to determine in its
sole discretion the applicable performance period relating to any Special Bonus
and to include with respect to any award any change in control provision.
(d) The Company and its Affiliates shall have the right to deduct
from any payment made under the Plan any federal, state, local or foreign income
or other taxes required by law to be withheld with respect to such payment.
(e) The Company is the sponsor and legal obligor under the Plan,
and shall make all payments hereunder, other than any payments to be made by any
of the Affiliates, which shall be made by such Affiliate, as appropriate.
Nothing herein is intended to restrict the Company from charging an Affiliate
that employs a Participant for all or a portion of the payments made by the
Company hereunder. The Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the payment
of any amounts under the Plan, and rights to payment hereunder shall be no
greater than the rights of the Company's unsecured, subordinated creditors, and
shall be subordinated to the claims of the customers and clients of the Company.
All expenses involved in administering the Plan shall be borne by the Company.
(f) The validity, construction, interpretation, administration
and effect of the Plan and rights relating to the Plan and to Special Bonuses
granted under the Plan, shall be governed by the substantive laws, but not the
choice of law rules, of the State of Delaware.
(g) The Plan shall be effective as of April 23, 1999 (the
"Effective Date"), subject to the affirmative vote of the holders of a majority
of all shares of Common Stock of the Company present in person or by proxy at
the Annual Meeting of the Company to be held on April 23, 1999.
7. Plan Amendment or Suspension. The Plan may be amended or suspended
in whole or in part at any time and from time to time by the Committee.
8. Plan Termination. This Plan shall terminate upon the adoption of a
resolution of the Committee terminating the Plan.
9. Actions and Decisions Regarding the Business or Operations of the
Company and/or its Affiliates. Notwithstanding anything in the Plan to the
contrary, neither the Company nor any of its Affiliates nor their respective
officers, directors, employees or agents shall have any liability to any
Participant (or his or her beneficiaries or heirs) under the Plan or otherwise
on account of any action taken, or not taken, in good faith by any of the
foregoing persons with respect to the business or operations of the Company or
any Affiliates.
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<PAGE> 28
TOTAL SHAREHOLDER RETURNS
(Dividends Reinvested)
<TABLE>
<CAPTION>
ANNUAL RETURN PERCENTAGE
YEARS ENDING
COMPANY NAME/INDEX DEC95 DEC96 DEC97 DEC98
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMONWEALTH INDUSTRIES INC 11.60 0.46 -4.67 -34.11
S&P SMALLCAP 600 INDEX 24.09 21.32 25.58 -1.31
PEER GROUP 3.37 5.22 22.49 -42.69
</TABLE>
<TABLE>
<CAPTION>
BASE INDEXED RETURNS
PERIOD YEARS ENDING
COMPANY NAME/INDEX 3/10/95 DEC95 DEC96 DEC97 DEC98
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMONWEALTH INDUSTRIES INC 100 111.60 112.11 106.88 70.42
S&P SMALLCAP 600 INDEX 100 124.09 150.55 189.06 186.59
PEER GROUP 100 103.37 108.77 133.23 76.35
</TABLE>
<TABLE>
<CAPTION>
PEER GROUP COMPANIES
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BIRMINGHAM STEEL CORP
CENTURY ALUMINUM CO
CHAPARRAL STEEL COMPANY
COMMONWEALTH INDUSTRIES INC
EASCO INC
NORTHWESTERN STL&WIRE
OREGON STEEL MILLS INC
QUANEX CORP
</TABLE>
<PAGE> 29
Appendix D
PROXY
COMMONWEALTH INDUSTRIES, INC.
The undersigned acknowledge(s) receipt of the Notice of Meeting and Proxy
Statement for the Annual Meeting of Stockholders of Commonwealth Industries,
Inc. to be held on April 23, 1999, and appoint(s) 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 and on any other
business that may properly come before this 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, FOR APPROVAL OF PROPOSALS 2, 3 AND 4, AND IN THE
DISCRETION OF THE PROXY OR PROXIES ON ANY OTHER BUSINESS.
1. ELECTION OF DIRECTORS:
<TABLE>
<S> <C>
[ ] FOR all director nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all director nominees listed
below
</TABLE>
Director Nominees: Mark V. Kaminski, C. Frederick Fetterolf (each for a
three-year term)
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THE NAME OF
THE NOMINEE ON THE LINE BELOW
- --------------------------------------------------------------------------------
2. Proposal to ratify an amendment to the 1997 stock incentive plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify additional amendments to the 1997 stock incentive plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent auditors for 1999
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN AND RETURN THIS CARD AS SOON AS
POSSIBLE. MARK EACH VOTE WITH AN X IN THE BOX.
DATE: 1999
---------------------,
-------------------------------
SIGNATURE
-------------------------------
SIGNATURE (IF JOINTLY HELD)
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
