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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 30, 2006
KAISER ALUMINUM CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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000-52105
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94-3030279 |
(State or Other Jurisdiction
of Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
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27422 Portola Parkway, Suite 350 |
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Foothill Ranch, California
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92610-2831 |
(Address of Principal Executive Offices)
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(Zip Code) |
(949) 614-1740
(Registrants telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Explanatory Note
In the first quarter of 2002, Kaiser Aluminum Corporation (the Company), its subsidiary
Kaiser Aluminum & Chemical Corporation (KACC) and certain of their affiliates filed petitions for
relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code), and in the
first quarter of 2003, certain additional affiliates of the Company and KACC filed petitions for
relief under chapter 11 of the Bankruptcy Code.
On February 6, 2006, the United States Bankruptcy Court for the District of Delaware (the
Bankruptcy Court) entered an order (the Confirmation Order) confirming the Second Amended Joint
Plan of Reorganization of Kaiser Aluminum Corporation, Kaiser Aluminum & Chemical Corporation and
Certain of Their Affiliates, as modified (the Plan). A summary of the material features of the
Plan is contained in the Companys Current Report on Form 8-K dated February 6, 2006 and filed with
the Securities and Exchange Commission (the SEC) on February 7, 2006 (the Plan Confirmation Form
8-K).
On May 11, 2006, the District Court for the District of Delaware entered an order affirming
the Confirmation Order and adopting the Bankruptcy Courts findings of fact and conclusions of law
regarding confirmation of the Plan. See the Companys Current Report on Form 8-K dated May 11,
2006 and filed with the SEC on May 17, 2006.
On July 6, 2006 (the Effective Date), the Plan became effective and was substantially
consummated, whereupon the Company emerged from chapter 11. This is one of two Current Reports on
Form 8-K filed by the Company with the SEC on the date hereof describing events relating to the
consummation of the Plan. Unless otherwise noted, the events described below occurred on the
Effective Date in connection with the consummation of the Plan.
Item 1.01 Entry into a Material Definitive Agreement
Exit Financing Facilities
On the Effective Date, the Company and certain subsidiaries of the Company entered into a new
Senior Secured Revolving Credit Agreement with JPMorgan Chase Bank, N. A., as administrative agent
and a lender, and the other financial institutions party thereto (the Revolving Credit Facility)
providing for a $200.0 million revolving credit facility, of which up to a maximum of $60.0 million
may be utilized for letters of credit. Under the Revolving Credit Facility, the Company is able to
borrow (or obtain letters of credit) from time to time in an aggregate amount equal to the lesser
of $200.0 million and a borrowing base comprised of eligible accounts receivable, eligible
inventory and certain eligible machinery, equipment and real estate, reduced by certain reserves,
all as specified in the Revolving Credit Facility agreement. The Revolving Credit Facility has a
five-year term and matures in July 2011, at which time all principal amounts outstanding under the
Revolving Credit Facility will be due and payable. Borrowings under the Revolving Credit Facility
bear interest at a rate equal to either a base rate or LIBOR, at the Companys option, plus a
specified variable percentage determined by reference to the then remaining borrowing availability
under the Revolving Credit Facility. The Revolving Credit Facility may, subject to certain
conditions and the agreement of lenders thereunder, be increased to up to $275 million at the
request of the Company.
Concurrently with the execution of the Revolving Credit Facility, the Company and certain
subsidiaries of the Company also entered into a Term Loan and Guaranty Agreement with JPMorgan
Chase Bank, N.A., as administrative agent and a lender, Wilmington Trust Company, as collateral
agent, and the other financial institutions party thereto (the Term Loan Facility). The Term
Loan Facility provides for a $50.0 million delayed draw term loan to Kaiser Aluminum Fabricated
Products, LLC, as borrower (KAFP), which may be drawn in a single borrowing within the first 30
days after the Effective Date and which is guaranteed by the Company and certain of its domestic
operating subsidiaries. The Term Loan Facility has a five-year term and matures in July 2011, at
which time all principal amounts outstanding under the Term Loan Facility will be due and payable.
Borrowings under the Term Loan Facility bear interest at a rate equal to either a base rate plus
2.50% or LIBOR plus 4.25%, at the Companys option.
Amounts owed under each of the Revolving Credit Facility and the Term Loan Facility may be
accelerated upon the occurrence of various events of default set forth in each such agreement,
including, without limitation, the failure to make principal or interest payments when due and
breaches of covenants, representations and warranties set forth in each such agreement.
The Revolving Credit Facility is secured by a first priority lien on substantially all of the
assets of the Company and certain of its domestic operating subsidiaries that are also borrowers
thereunder. The Term Loan Facility is secured by a second lien on substantially all of the assets
of KAFP, the Company and the Companys other domestic operating subsidiaries that are guarantors
thereof.
Both credit facilities place restrictions on the ability of the Company and certain of its
subsidiaries to, among other things, incur debt, create liens, make investments, pay dividends,
sell assets, undertake transactions with affiliates and enter into unrelated lines of business.
The preceding description of the Revolving Credit Facility is a summary and is qualified in
its entirety by the Revolving Credit Facility, which is filed as Exhibit 10.1 hereto and is
incorporated herein by reference. Similarly, the preceding description of the Term Loan Facility
is a summary and is qualified in its entirety by the Term Loan Facility, which is filed as Exhibit
10.2 hereto and is incorporated herein by reference.
Plans, Contracts or Arrangements in Which Directors or Executive Officers Participate
Director Compensation
On the Effective Date, the Companys Board of Directors (the Board) approved the following
compensation for each non-employee director:
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an annual retainer of $30,000 per year; |
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an annual grant of restricted stock having a value equal to $30,000; |
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a fee of $1,500 per day for each meeting of the Board attended in person and $750 per day for each such meeting attended
by phone; and |
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a fee of $1,500 per day for each Board committee meeting attended in person on a date other than a date on which a
meeting of the Board is held and $750 per day for each such meeting attended by phone. |
In addition, the Lead Independent Director receives an additional annual retainer of $10,000, the
Chairman of the Audit Committee of the Board receives an additional annual retainer of $10,000, the
Chairman of the Compensation Committee of the Board (the Compensation Committee) receives an
additional annual retainer of $5,000 and the Chairman of the Nominating and Corporate Governance
Committee of the Board (the Nominating and Corporate Governance Committee) receives an additional
annual retainer of $5,000, with all such amounts payable at the same time as the annual retainer.
Each non-employee director may elect to receive shares of common stock, par value $0.01 per share,
of the Company (Common Stock) in lieu of any or all of his or her annual retainer, including any
additional annual retainer for service as the Lead Independent Director or the Chairman of a
committee.
The first payment of annual retainers and the first grant of restricted stock pursuant to the
compensation arrangements described above will occur on August 1, 2006. The number of shares of
Common Stock to be received in the first grant of restricted stock, as well as the number of shares
of Common Stock to be received by any non-employee director electing to receive shares of Common
Stock in lieu of any or all of his or her first payment of the annual retainer (including any
additional annual retainer), will be based on the average of the closing price per share of Common
Stock on each of the 10 consecutive trading days immediately preceding August 1, 2006. See 2006
Equity and Performance Incentive Plan below.
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The Company reimburses all directors for reasonable and customary travel and other
disbursements relating to meetings of the Board and committees thereof, and non-employee directors
will be provided accident insurance with respect to Company-related business travel.
2006 Base Compensation
On the Effective Date, the Compensation Committee approved the annual base compensation rates,
payable during continued employment, of the Companys executive officers. The following table sets
forth the annual base compensation of the executive officers of the Company identified below (the
Named Executive Officers) for 2006 and 2005.
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Name
and Position |
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Base Compensation |
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Jack A. Hockema |
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2006 |
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$730,000 |
President, Chief Executive Officer and Director |
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2005 |
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$730,000 |
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Joseph P. Bellino |
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2006 |
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$350,000 |
Executive Vice President and Chief Financial Officer |
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2005 |
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n/a |
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John Barneson |
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2006 |
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$280,000 |
Senior Vice President and Chief Administrative Officer |
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2005 |
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$275,000 |
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John M. Donnan |
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2006 |
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$260,000 |
Vice President, Secretary and General Counsel |
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2005 |
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$260,000 |
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Daniel D. Maddox |
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2006 |
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$225,000 |
Vice President and Controller |
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2005 |
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$200,000 |
2006 Short-Term Incentive Programs and Targets
On the Effective Date, the Compensation Committee approved a short-term incentive plan (the
STI Program) for 2006. Awards under the STI Program are based upon (a) the Fabricated Products
business units operating income plus depreciation and amortization, as adjusted for extraordinary
items, which may be spread over a period of years based upon the recommendation of the Chief
Executive Officer and approval of the Compensation Committee, (b) the Fabricated Products business
units safety performance as measured by total case incident rate, (c) performance of the business
to which a participant is assigned, and (d) individual performance objectives. Under the STI
Program, a participant may receive between zero to three times the individuals target amount. Set
forth below are the minimum, target and maximum award amounts for each of the Named Executive
Officers for 2006.
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Name |
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Minimum |
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Target |
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Maximum |
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Award Amount |
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Award Amount |
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Award Amount |
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Jack A. Hockema |
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$ |
0 |
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$ |
500,050 |
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$ |
1,500,150 |
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Joseph P. Bellino |
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$ |
0 |
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$ |
175,000 |
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$ |
525,000 |
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John Barneson |
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$ |
0 |
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$ |
126,000 |
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$ |
378,000 |
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John M. Donnan |
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$ |
0 |
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$ |
117,000 |
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$ |
351,000 |
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Daniel D. Maddox |
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$ |
0 |
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$ |
75,000 |
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$ |
225,000 |
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A pro rata incentive award is earned based on actual eligibility during the performance period
if a participant in the STI Program (a) dies, (b) retires under normal retirement (age 62) or in
connection with full early retirement (position elimination), (c) is involuntarily terminated due
to position elimination, or (d) becomes disabled prior to December 31. Incentive awards are
forfeited for all voluntary terminations prior to the end of the performance period (December 31).
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The preceding description of the STI Program is a summary and is qualified in its entirety by
the Kaiser Aluminum 2006 Short Term Incentive Plan for Key Managers, which is filed as Exhibit 10.4
hereto and incorporated herein by reference.
Employment Agreement with Jack A. Hockema
On the Effective Date, the Company and Jack A. Hockema entered into an employment agreement
(the Hockema Employment Agreement), pursuant to which Mr. Hockema will continue his duties as
President and Chief Executive Officer of the Company and certain of the Companys subsidiaries.
Under the terms of the Hockema Employment Agreement, Mr. Hockema will receive an initial base
salary of $730,000 and have an annual short-term incentive target equal to 68.5% of his base
salary. The short-term incentive is (a) payable in cash, (b) subject to the Company meeting the
applicable underlying performance thresholds, and (c) subject to an annual cap of three times the
target. The Hockema Employment Agreement also provides that Mr. Hockema will receive an initial
long-term incentive grant of 185,000 restricted shares of Common Stock on the Effective Date and,
starting in 2007, annual equity awards (such as restricted stock, stock options and performance
shares) with an economic value of 165% of his base salary. See Restricted Stock Grants below.
The terms of all equity grants to Mr. Hockema will be similar to the terms of equity grants made to
other senior executives at the time they are made, except that, in any event, the grants will
provide for full vesting at retirement. Mr. Hockema is also entitled to severance and
change-in-control benefits under the terms of the Hockema Employment Agreement. In the event Mr.
Hockemas employment is terminated without cause or terminated by Mr. Hockema with good reason, Mr.
Hockema will be entitled to receive a lump-sum payment of two times the sum of his base salary and
short-term incentive target, plus the continuation of benefits for two years, and all of Mr.
Hockemas equity awards outstanding at that time will immediately vest. In the event Mr. Hockemas
employment is terminated without cause or terminated by Mr. Hockema with good reason within two
years following a change in control, Mr. Hockema will be entitled to receive a lump sum payment of
three times the sum of his base salary and short-term incentive target, plus the continuation of
benefits for three years, and all of Mr. Hockemas equity awards outstanding at that time will
immediately vest. The initial term of the Hockema Employment Agreement is five years and it will
be automatically renewed and extended for one-year periods unless either party provides notice one
year prior to the end of the initial term or any extension period. Mr. Hockema will also
participate in the various retirement and benefit plans for salaried employees.
The preceding description of the Hockema Employment Agreement is a summary and is qualified in
its entirety by the Hockema Employment Agreement, which is filed as Exhibit 10.5 hereto and
incorporated herein by reference.
Employment Agreement with Joseph P. Bellino
On the Effective Date, the Company and Joseph P. Bellino entered into an employment agreement
(the Bellino Employment Agreement), pursuant to which Mr. Bellino will continue his duties as
Executive Vice President and Chief Financial Officer of the Company and certain of the Companys
subsidiaries. The Bellino Employment Agreement replaced Mr. Bellinos previously disclosed
employment agreement with KACC on substantially identical terms. Under the terms of the Bellino
Employment Agreement, Mr. Bellino will receive an initial base salary of $350,000 and have an
annual short-term incentive target equal to 50% of his base salary. The short-term incentive is
(i) payable in cash, (ii) subject to the Company meeting the applicable underlying performance
thresholds, and (iii) subject to an annual cap of three times the target. For 2006, Mr. Bellinos
short-term incentive award will not be prorated. The Bellino Employment Agreement also provides
that Mr. Bellino will receive an initial long-term incentive grant of 15,000 restricted shares of
Common Stock on the Effective Date and, starting in 2007, annual equity awards (such as restricted
stock, stock options and performance shares) with an economic value of $450,000. The terms of all
equity grants will be similar to the terms of equity grants made to other senior executives at the
time they are made. Mr. Bellino is also entitled to severance and change-in-control benefits under
the terms of the Bellino Employment Agreement. In the event Mr. Bellinos employment is terminated
without cause or terminated by Mr. Bellino with good reason, Mr. Bellino will be entitled to
receive a lump-sum payment of two times his base salary plus the continuation of benefits for two
years, and all of Mr. Bellinos equity awards outstanding at that time will immediately vest. In
the event Mr. Bellinos employment is terminated without cause or terminated by Mr. Bellino with
good reason within two years following a change in control, Mr. Bellino will be entitled to receive
a lump-sum payment of three times the sum of his base salary and
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short-term incentive target, plus the continuation of benefits for three years, and all of Mr.
Bellinos equity awards outstanding at that time will immediately vest. The initial term of the
Bellino Employment Agreement is through May 15, 2009 and will be automatically renewed and extended
for one-year periods unless either party provides notice one year prior to the end of the initial
term or any extension period. Mr. Bellino will also participate in the various retirement and
benefit plans for salaried employees and be reimbursed for the cost of relocation and certain
temporary living expenses.
The preceding description of the Bellino Employment Agreement is a summary and is qualified in
its entirety by the Bellino Employment Agreement, which is filed as Exhibit 10.6 hereto and
incorporated herein by reference.
Employment Agreement with Daniel D. Maddox
On the Effective Date, the Company and Daniel D. Maddox entered into an employment agreement
(the Maddox Employment Agreement), pursuant to which Mr. Maddox will continue his duties as Vice
President and Controller of the Company and certain of the Companys subsidiaries. Under the terms
of the Maddox Employment Agreement, Mr. Maddox will receive an initial base salary of $225,000 and
have an annual short-term incentive target equal to $75,000, pro-rated for partial years. The
short-term incentive is (i) payable in cash and (ii) subject to the Company meeting the applicable
underlying performance thresholds. The Maddox Employment Agreement also provides that Mr. Maddox
will receive an initial long-term incentive grant of 11,334 restricted shares of Common Stock on
the Effective Date. See Restricted Stock Grants below. The terms of the equity grant to Mr.
Maddox are similar to the terms of equity grants made to other senior executives on the Effective
Date, except that, in any event, the grants will provide for full vesting upon the termination of
Mr. Maddoxs employment for any reason other than termination by the Company for cause. Mr. Maddox
is also entitled to payments and benefits (including any payments or benefits due because of a
change in control) under certain previously existing agreements and plans upon such termination of
his employment. The term of the Maddox Employment Agreement continues until the earlier of (a) a
mutually agreed upon termination date and (b) March 31, 2007. Mr. Maddox will also participate in
the various retirement and benefit plans for salaried employees.
The preceding description of the Maddox Employment Agreement is a summary and is qualified in
its entirety by the Maddox Employment Agreement, which is filed as Exhibit 10.7 hereto and
incorporated herein by reference.
Indemnification Agreements
As contemplated by the Plan, on the Effective Date the Company entered into indemnification
agreements with each of its directors and executive officers containing provisions that obligate
the Company to, among other things:
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indemnify, defend and hold harmless the director or officer to the
fullest extent permitted or required by Delaware law, except that,
subject to certain exceptions, the director or officer will be
indemnified with respect to a claim initiated by such director or
officer against the Company or any other director or officer of the
Company only if the Company has joined in or consented to the
initiation of such claim; |
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advance prior to the final disposition of any indemnifiable claim
any and all expenses relating to, arising out of or resulting from
any indemnifiable claim paid or incurred by the director or officer
or which the director or officer determines is reasonably likely to
be paid or incurred by him or her; and |
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utilize commercially reasonable efforts to cause to be maintained
in effect policies of directors and officers liability insurance
providing coverage that is at least substantially comparable in
scope and amount to that provided by the Companys policies of
directors and officers liability insurance at the time the
parties enter into such indemnification agreement. |
Such agreements are intended to provide rights to indemnification broader than the rights
available under Section 145 of the General Corporation Law of the State of Delaware (the DGCL)
and the Companys Amended
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and Restated Certificate of Incorporation (the Certificate of Incorporation) and to provide
all such protection in a manner enforceable by the Companys directors and executive officers
irrespective of, among other things, any amendment to the Certificate of Incorporation or the
Amended and Restated Bylaws (the Bylaws). See Item 5.03 Amendments to Articles of Incorporation
or Bylaws; Change in Fiscal Year Amendment and Restatement of the Certificate of Incorporation
and Bylaws below.
The preceding description of the indemnification agreements is a summary and is qualified in
its entirety by the Form of Director Indemnification Agreement, which is filed as Exhibit 10.8
hereto and incorporated herein by reference, the Form of Officer Indemnification Agreement, which
is filed as Exhibit 10.9 hereto and incorporated herein by reference, and the Form of Director and
Officer Indemnification Agreement, which is filed as Exhibit 10.10 hereto and incorporated herein
by reference.
2006 Equity and Performance Incentive Plan
As contemplated by the Plan, the 2006 Equity and Performance Incentive Plan (the Equity
Incentive Plan) became effective on the Effective Date. The following description of the Equity
Incentive Plan is a summary and is qualified in its entirety by the Equity Incentive Plan, which is
filed as Exhibit 10.11 hereto and incorporated herein by reference.
Shares Available Under the Equity Incentive Plan
Subject to certain adjustments that may be required from time to time to prevent dilution or
enlargement of the rights of participants under the Equity Incentive Plan, a maximum of 2,222,222
shares of Common Stock are available for issuance pursuant to the Equity Incentive Plan. Shares of
Common Stock issued pursuant to the Equity Incentive Plan may be shares of original issuance or
treasury shares or a combination of both.
Administration of the Equity Incentive Plan
The Equity Incentive Plan will be administered by a committee of non-employee directors of the
Board; as of the Effective Date, the Compensation Committee administers the Equity Incentive Plan.
The Compensation Committee may from time to time delegate all or any part of its authority under
the Equity Incentive Plan to a subcommittee of the Compensation Committee, as constituted from time
to time.
Persons Who May Participate in the Equity Incentive Plan
Officers of the Company and other key employees of the Company or one or more of its
subsidiaries, as well as the Companys non-employee directors, are eligible to participate in the
Equity Incentive Plan. As of the Effective Date, approximately 40 officers and other key employees
had been selected by the Compensation Committee to receive awards under the Equity Incentive Plan.
Form of Awards Available Under the Equity Incentive Plan
The forms of awards authorized under the Equity Incentive Plan are described below.
Option Rights
The Compensation Committee may, from time to time and upon such terms and conditions as it may
determine, authorize the granting to participants of options to purchase shares of Common Stock.
The exercise price of each stock option granted may not be less than the market value per
share on the date of the grant, and in the case of incentive stock options granted to an employee
owning more than 10% of the total combined voting power of all classes of shares of the Company or
one of its subsidiaries (i.e., a 10% shareholder), the option price per share may not be less than
110% of the market value per share on the date of the grant.
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Generally, no option right will be exercisable more than 10 years from the date of the grant,
and, in the case of incentive stock options granted to 10% shareholders, no such option right will
be exercisable more than five years from the date of the grant.
Vesting of stock options will be based on the required period or periods of continuous service
by the optionee, and may also be contingent upon the optionees achievement of certain management
objectives. In addition, a grant of option rights may provide for earlier exercise in the event of
termination of employment of the optionee, whether by retirement, death, disability or otherwise,
or a change in control.
Each option grant will specify the manner of payment for shares of Common Stock purchased upon
the exercise of an option.
The Compensation Committee may determine, at or after the date of the grant, that payment of
the option price of any option right (other than an incentive stock option) may be made in whole or
in part in the form of restricted stock or other shares of Common Stock that are forfeitable or
subject to restrictions on transfer, or in the form of restricted stock units.
Appreciation Rights
The Compensation Committee may authorize the granting (a) to any optionee, of tandem
appreciation rights in respect of option rights granted and (b) to any participant, of
free-standing appreciation rights.
A tandem appreciation right will be a right of the optionee, exercisable by surrender of the
related option right, to receive from the Company an amount determined by the Compensation
Committee, which will be expressed as a percentage of the spread (not exceeding 100 percent) of the
market value per share over the base price established for the appreciation right at the time of
exercise. The base price of a tandem appreciation right will be the option price of the related
option right. Tandem appreciation rights may be granted at any time prior to the exercise or
termination of the related option rights, except that a tandem appreciation right awarded in
relation to an incentive stock option must be granted concurrently with such incentive stock
option. A tandem appreciation right may be exercised only (a) at a time when the related option
right is exercisable and the spread is positive and (b) by surrender of the related option right
for cancellation. Similarly, the exercise of an option right will result in the cancellation on a
share-for-share basis of a tandem appreciation right in respect of such option right.
A free-standing appreciation right will be a right of the participant to receive from the
Company an amount determined by the Compensation Committee, which will be expressed as a percentage
of the spread (not exceeding 100 percent) of the market value per share over the base price
established for the appreciation right at the time of exercise. The base price of a free-standing
appreciation right may not be less than the market value per share on the date of grant. No
free-standing appreciation right will be exercisable more than 10 years from the date of grant.
The amount payable to a participant receiving a grant of appreciation rights under the Equity
Incentive Plan may be paid in cash, in shares of Common Stock or in any combination thereof and may
either grant to the participant or retain in the Compensation Committee the right to elect among
those alternatives. A grant may specify that the amount payable on exercise of the appreciation
right may not exceed a specified amount.
Vesting of appreciation rights will be based on waiting periods before exercise and
permissible exercise dates and may also be contingent upon the participants achievement of certain
management objectives. In addition, a grant of appreciation right may specify that such
appreciation right may be exercised in the event of, or earlier in the event of, termination of
employment of the participant, whether by retirement, death, disability or otherwise, or a change
in control.
Restricted Stock
The Compensation Committee may authorize the granting or sale of restricted stock to
participants. Restricted stock is shares of Common Stock that are issued to a participant subject
to such restrictions on transfer and vesting requirements as may be determined by the Compensation
Committee in accordance with the Equity
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Incentive Plan. Each grant or sale will constitute an immediate transfer of the ownership of
shares of Common Stock to the participant in consideration of the performance of services,
entitling such participant to voting, dividend and other ownership rights, but subject to the
substantial risk of forfeiture and restrictions on transfer in accordance with the Equity Incentive
Plan.
Except as provided below with respect to non-employee directors, each grant of restricted
stock will provide that the restricted stock covered by the grant will be subject to a substantial
risk of forfeiture for a period of not less than one year and may provide for earlier lapse of such
substantial risk of forfeiture in the event of termination of employment of the participant,
whether by retirement, death, disability or otherwise, or a change in control. Subject to the
foregoing, any grant of restricted stock may specify management objectives that, if achieved, will
result in the termination or early termination of the restriction(s) applicable to such restricted
stock.
Restricted Stock Units
The Compensation Committee may authorize the granting or sale of restricted stock units to
participants. Each grant or sale of restricted stock units will constitute an agreement by the
Company to deliver shares of Common Stock or cash to the participant in the future in consideration
of the performance of services, but subject to the fulfillment of such conditions (which may
include the achievement of management objectives) during the restriction period as the Compensation
Committee may specify.
Each grant or sale will be subject to a restriction period of not less than one year, as
determined by the Compensation Committee at the date of the grant, and may provide for the earlier
lapse or other modification of such restriction period in the event of termination of employment of
the participant, whether by retirement, death, disability or otherwise, or a change in control.
During the applicable restriction period, the participant will have no right to transfer any rights
under his or her award, will have no rights of ownership in the Common Stock underlying restricted
stock units and will have no right to vote such Common Stock.
Performance Shares and Performance Units
The Compensation Committee may authorize the granting of performance shares and performance
units that will become payable to participants upon achievement of specified management objectives
during the performance period.
The payment of performance shares or performance units which become payable to a participant
may be made in cash, in shares of Common Stock or in any combination thereof and may either grant
to the participant or retain in the Compensation Committee the right to elect among those
alternatives. A grant of performance shares may specify that the amount payable with respect
thereto may not exceed a specified amount.
The performance period with respect to each performance share or performance unit will be a
period of time that is not less than one year from the date of grant, and may be subject to earlier
lapse or other modification in the event of termination of employment of the participant, whether
by retirement, death, disability or otherwise, or a change in control.
Awards to Non-Employee Directors
The Board may, from time to time and upon such terms and conditions as it may determine,
authorize the granting to non-employee directors of option rights, appreciation rights or other
awards and may also authorize the grant or sale of Common Stock, restricted stock or restricted
stock units to non-employee directors.
Each grant of option rights to a non-employee director will specify an option price per share
of not less than the market value per share on the date of the grant. No such award will be
exercisable more than 10 years from the date of the grant. The payment to the Company upon
exercise of the option rights may be made in cash or in shares of Common Stock then owned by the
optionee for at least six months or in a combination of cash and such Common Stock.
8
Each grant of restricted stock to non-employee directors will be as described above except
that the period for which the restricted stock will be subject to substantial risk of forfeiture
may be less than one year.
Each grant of appreciation rights to non-employee directors will be as described above.
Each grant of restricted stock units to non-employee director will be as described above
except that the restricted period for the restricted stock units may be less than one year.
Non-employee directors may be awarded, or may be permitted to elect to receive pursuant to
procedures established by the Board, all or any portion of their annual retainer, meeting fees or
other fees in shares of Common Stock in lieu of cash.
Other Awards
Subject to certain limitations under applicable law, the Compensation Committee may grant
participants such other awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Common Stock or factors that may influence the
value of such shares. The Compensation Committee will determine the terms and conditions of such
awards. The payment of awards may be made in such forms including, without limitation, cash,
shares of Common Stock, other awards, notes or other property, as the Compensation Committee may
determine. The Compensation Committee may also grant cash awards as an element of or supplement to
any other award. Additionally, the Compensation Committee may grant Common Stock as a bonus, or
may grant other awards in lieu of the Companys other obligations under the Equity Incentive Plan.
Withholding Taxes
To the extent that the Company is required to withhold federal, state, local or foreign taxes
in connection with any payment made or benefit realized by a participant or other person under the
Equity Incentive Plan, and the amounts available to the Company for such withholding are
insufficient, it will be a condition to the receipt of the payment or the realization of the
benefit that the participant or such other person make arrangements satisfactory to the Company for
payment of the balance of the taxes required to be withheld. In the discretion of the Compensation
Committee, such arrangements may include relinquishment of a portion of such benefit.
Detrimental Activity by Participants
If a participant, either during employment or within a specified period after termination of
such employment, engages in specified conduct or activities determined by the Compensation
Committee to be detrimental to any significant interest of the Company, and the Compensation
Committee so finds, the participant must return to the Company, in exchange for payment by the
Company of any cash amount actually paid therefor by the participant (unless such payment is
prohibited by law), all shares of Common Stock that the participant has not disposed of that were
offered pursuant to the Equity Incentive Plan within a specified period prior to the date of the
commencement of such detrimental activity. With respect to any shares of Common Stock so acquired
that the participant has disposed of, the participant must pay to the Company in cash the
difference between any cash amount actually paid by the participant pursuant to the Equity
Incentive Plan and the market value per share of the Common Stock on the date of such acquisition.
To the extent that such amounts are not paid to the Company, the Company may, to the extent
permitted by applicable law, set off the amounts so payable to it against any amounts that may be
owing from time to time by the Company to the participant, whether as wages, deferred compensation
or vacation pay or in the form of any other benefit or for any other reason.
Transferability
Generally, no option right, appreciation right or other derivative security or award will be
transferable by the participant except by will or the laws of descent and distribution. An option
right (excluding incentive stock options), appreciation right or other derivative security or award
may be transferable upon the death of the participant to any one or more family members of the
participant, as designated in writing by the participant by means of a form of beneficiary
designation approved by the Company. An option right (excluding incentive stock
9
options), appreciation right or other derivative security or award may also be transferable by
the participant to any one or more family members of the participant, except that such transfer
will not be effective until notice of such transfer is delivered to the Company and any such
transferee will be subject to the same terms and conditions as the participant. Except as
otherwise determined by the Compensation Committee, option rights and appreciation rights will be
exercisable during the participants lifetime only by him or her or, in the event of the
participants legal incapacity to do so, by his or her guardian or legal representative acting on
behalf of the participant in a fiduciary capacity under state law and/or court supervision.
Term
The Equity Incentive Plan will expire on July 6, 2016. No grants will be made under the
Equity Incentive Plan after that date, but all grants made on or prior to such date will continue
in effect thereafter subject to the terms thereof and of the Equity Incentive Plan.
Termination and Amendment of the Equity Incentive Plan
The Board may, in its discretion, terminate the Equity Incentive Plan at any time. The
termination of the Equity Incentive Plan will not affect the rights of participants or their
successors under any awards outstanding and not exercised in full on the date of termination.
The Compensation Committee may at any time and from time to time amend the Equity Incentive
Plan in whole or in part. Any amendment which must be approved by the shareholders in order to
comply with applicable law or the rules of the principal securities exchange, association or
quotation system on which the common shares are then traded or quoted will not be effective unless
and until such approval has been obtained. The Compensation Committee will not, without the
further approval of the shareholders, authorize the amendment of any outstanding option right or
appreciation right to reduce the option price or base price. Furthermore, no option right will be
cancelled and replaced with awards having a lower option price without further approval of the
shareholders.
Restricted Stock Grants
On the Effective Date, grants of restricted stock were made to the Companys Named Executive
Officers as follows:
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|
|
|
|
|
|
|
Name |
|
Number of Shares of Restricted Stock |
|
|
|
Jack A. Hockema |
|
|
185,000 |
(1) |
|
|
Joseph P. Bellino |
|
|
15,000 |
(1) |
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John Barneson |
|
|
48,000 |
(1) |
|
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John M. Donnan |
|
|
45,000 |
(1) |
|
|
Daniel D. Maddox. |
|
|
11,334 |
(1) |
|
(1) |
|
The restrictions on 100% of such shares will lapse on the third anniversary of the
Effective Date or earlier in the event that the participant ceases to be an employee
because of death, disability, termination by the Company for any other reason other
than for cause or detrimental activity, or termination by the participant for good
reason or in the event of a change in control of the Company. |
The restricted stock grants were made pursuant to the Equity Incentive Plan. See 2006
Equity and Performance Incentive Plan above. The form of Restricted Stock Award Agreement used to
evidence the grants made to the Companys executive officers is attached hereto as Exhibit 10.12
and incorporated herein by reference.
As contemplated by the director compensation arrangements described above, on August 1, 2006,
each non-employee director will receive a grant of restricted stock having a value equal to
$30,000, based on the average of the closing price per share of Common Stock on each of the 10
consecutive trading days immediately preceding such date. The restrictions on 100% of such
restricted stock will lapse on August 1, 2007 or earlier in the event that
10
the participant ceases to be a non-employee director due to death or disability or in the
event of a change in control of the Company. The form of Restricted Stock Award Agreement that
will be used to evidence grants made to the Companys non-employee directors is attached hereto as
Exhibit 10.13 and incorporated herein by reference.
Restoration Plan
The Kaiser Aluminum Fabricated Products Restoration Plan (the Restoration Plan) became
operative as of the Effective Date, but is effective retroactively as of May 1, 2005. The purpose
of the Restoration Plan is to restore benefits that would have otherwise been payable to
participants under the Companys benefit plans but for the limitations on benefit accruals and
payments imposed by the Internal Revenue Code of 1986, as amended (the IRC). It is the intention
of the Company that the Restoration Plan meet all requirements necessary to qualify as a
nonqualified, unfunded, unsecured plan of deferred compensation within the meanings of Sections
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.
The following description of the Restoration Plan is a summary and is qualified in its entirety by
the Restoration Plan, which is filed as Exhibit 10.14 hereto and is incorporated herein by
reference.
Participation in the Restoration Plan is limited to those employees selected by the
Compensation Committee, which administers the Restoration Plan. Participation in the Restoration
Plan is limited to members of a select group of management or employees who in the sole and
exclusive judgment of the Compensation Committee, because of their position and responsibilities,
contributes materially to the continued growth, development and future business success of the
Company.
If, during any year, a participants matching employer contributions under the Kaiser Aluminum
Savings and Investment Plan (the Qualified Plan) are limited by IRC Section 401(a)(17), 402(g),
401(k), 401(m) or 415 (the Applicable IRC Provisions), an amount equal to the difference between
(i) the matching employer contributions that could have been made to the Qualified Plan but for the
Applicable IRC Provisions and (ii) the maximum matching employer contributions that could have been
made to a participants matching contribution account under the Qualified Plan taking into account
all Applicable IRC Provisions will be credited or contributed to such participants account (the
Matching Contribution Amount). In order to be eligible for these amounts, the participant must
have made salary deferral contributions to the Qualified Plan as of the date the participant first
becomes a participant in the Restoration Plan and as of the first day of each year thereafter. The
Company will also contribute or credit to the participants account an amount equal to a percentage
of the participants compensation, which percentage will be determined in accordance with a
participants years of service and age (the Fixed-Rate Contribution Amount). The Matching
Contribution Amount will be 100% vested at all times, and the Fixed-Rate Contribution Amounts will
vest 100% after five years of service or upon a change in control, death, disability or reaching
retirement age prior to a separation from service. All current participants have at least five
years of service and, accordingly, are 100% vested. If the participant is terminated for cause,
the participant will forfeit the Matching Contribution Amounts and the Fixed-Rate Contribution
Amounts. Additionally, the lump-sum actuarial equivalent amount of the benefit accrued to a
participant under the Kaiser Aluminum Supplemental Benefits Plan as of May 1, 2005 (the Prior SERP
Benefit Amount) are to be transferred to the Restoration Plan as soon as administratively feasible
after the Effective Date. The Prior SERP Benefit Amount, and all accretions thereon, will be fully
vested at all times.
Extension of Consulting Agreement with Edward F. Houff
Effective as of June 30, 2006, KACC and Edward F. Houff, the Chief Restructuring Officer of
the Company and KACC as of such date, entered into an amendment (the Houff Amendment) to the
Amended and Restated Non-Exclusive Consulting Agreement, which was effective as of August 16, 2005
(the Houff Consulting Agreement). The Houff Amendment had the effect of extending the term of
Mr. Houffs engagement, which would otherwise have ended June 30, 2006, through July 6, 2006 and
securing Mr. Houffs services as Chief Restructuring Officer through the earlier of emergence from
chapter 11 and July 6, 2006. Pursuant to the Houff Consulting Agreement, as modified by the Houff
Amendment, Mr. Houff will be compensated at an hourly rate of $450 for services to the Company and
KACC during the period from July 1, 2006 through July 6, 2006. In addition, KACC will reimburse
Mr. Houff for reasonable and customary expenses incurred while providing such services. In
accordance with the Houff Consulting Agreement, as modified by the Houff Amendment, on the
Effective Date,
11
Mr. Houff ceased to serve as the Chief Restructuring Officer, whereupon such position was
eliminated. A copy of the Houff Amendment is attached hereto as Exhibit 10.15 and is herein
incorporated by reference.
Agreements Relating to the Companys Securities
Stock Transfer Restriction Agreement
Pursuant to the Plan, on the Effective Date the Company, the trustee of the trust that
provides benefits for certain eligible retirees of KACC represented by the United Steelworkers of
America, AFL-CIO, CLC, the International Union, United Automobile, Aerospace and Agricultural
Implement Workers of America and its Local 1186, the International Association of Machinists and
Aerospace Workers, the International Chemical Workers Union Council of the United Food & Commercial
Workers, and the Paper, Allied-Industrial, Chemical and Energy Workers International Union,
AFL-CIO, CLC and their surviving spouses and eligible dependents (the Union VEBA Trust) entered
into a stock transfer restriction agreement (the Stock Transfer Restriction Agreement) with
respect to shares of Common Stock received, or to be received, by the Union VEBA Trust pursuant to
the Plan. The following description of the Stock Transfer Restriction Agreement is a summary and
is qualified in its entirety by the Stock Transfer Restriction Agreement, which is filed as Exhibit
10.15 hereto and is incorporated herein by reference.
Pursuant to the Stock Transfer Restriction Agreement, until the share transfer restrictions
provided for in the Certificate of Incorporation are released, except as described below the
trustee of the Union VEBA Trust will be prohibited from transferring or otherwise disposing of more
than 15% of the total number of shares of Common Stock issued pursuant to the Plan to the Union
VEBA Trust in any 12-month period without the prior written approval of the Board in accordance
with the Certificate of Incorporation. Pursuant to the Stock Transfer Restriction Agreement, the
trustee of the Union VEBA Trust also expressly acknowledged and agreed to comply with the
restrictions on the transfer of the securities of the Company contained in the Certificate of
Incorporation. See Item 5.03 Amendment to Articles of Incorporation or Bylaws; Change in Fiscal
Year Amendment and Restatement of the Certificate of Incorporation and Bylaws below.
Simultaneously with the execution and delivery of the Stock Transfer Restriction Agreement,
the Company and the trustee of the Union VEBA Trust entered into a registration rights agreement
(the Registration Rights Agreement) with respect to shares of Common Stock received, or to be
received, by the Union VEBA Trust pursuant to the Plan. (See Registration Rights Agreement
below for a description of the Registration Rights Agreement.) The Stock Transfer Restriction
Agreement provides that notwithstanding the general restriction on transfer described above:
|
(a) |
|
the transfer of shares of Common Stock by the Union VEBA Trust in an
underwritten offering contemplated by Section 2.1 of the Registration Rights Agreement
may include up to a number of shares of Common Stock equal to 30% of the total number
of shares of Common Stock received by the Union VEBA Trust pursuant to the Plan, so
long as (i) such number of shares of Common Stock is not more than (A) 45% of the total
number of shares of Common Stock received by the Union VEBA Trust pursuant to the Plan
less (B) the number of shares included in all other transfers previously effected by
the Union VEBA Trust during the 36 months immediately preceding such transfer or the
period commencing on the Effective Date and ending immediately prior to such transfer,
whichever period is shorter, and (ii) the shares of Common Stock requested to be
included in such underwritten offering by the Union VEBA Trust have a market value of
not less than $60.0 million on the date such request is made; |
|
(b) |
|
in the event no underwritten offering contemplated by Section 2.1 of the
Registration Rights Agreement has been effected, the transfer of shares of Common Stock
by the Union VEBA Trust in an underwritten offering contemplated by Section 3.5 of the
Registration Rights Agreement may include up to a number of shares of Common Stock
equal to (x) 45% of the total of shares of Common Stock received by the Union VEBA
Trust pursuant to the Plan less (y) the number of shares included in all other
transfers previously effected by the Union VEBA Trust during the 36 months immediately
preceding such transfer or the period commencing on the Effective Date and ending
immediately prior to such transfer, whichever period is shorter, so long as (i) no |
12
|
|
|
underwritten offering contemplated by Section 3.5 of such Registration Right
Agreement has been previously effected, (ii) the demand for such underwritten
offering is made by the Union VEBA Trust between March 31, 2007 and April 1, 2008,
and (iii) the shares of Common Stock requested to be included in such underwritten
offering by the Union VEBA Trust have a market value of not less than $60.0 million
on the date such request is made; and |
|
(c) |
|
in the event that the transfer by the Union VEBA Trust of shares of Common
Stock in such an offering includes a number of such shares greater than the number of
such shares that the Union VEBA Trust could so include under the general restriction on
transfer described above absent this exception, then for purposes of determining
whether any future transfer of shares of Common Stock by such person is permissible
under the general restriction, the Union VEBA Trust will be deemed to have effected the
transfer of such excess shares at the earliest possible date or dates the Union VEBA
Trust would have been permitted to effect such transfer under the general restriction
absent this exception. |
The Plan states that on the Effective Date, 11,439,900 shares of Common Stock will be
contributed to the Union VEBA Trust on the Effective Date. By order dated April 29, 2006, the
Bankruptcy Court permitted sales by the Union VEBA Trust and certain other parties prior to the
Effective Date so long as such sales were authorized by a Protocol for Pre-Effective Date Sales
attached to the order, which Protocol for Pre-Effective Date Sales was amended and restated by an
order of the Bankruptcy Court on June 5, 2006 (the Pre-Effective Date Sales Protocol). Prior to
the Effective Date, in accordance with the Pre-Effective Date Sales Protocol the Union VEBA Trust
sold interests entitling the purchasers thereof to receive 2,630,000 shares of Common Stock that
otherwise would have been issuable to the Union VEBA Trust on the Effective Date. Accordingly, on
the Effective Date, 8,809,900 shares of Common Stock were issued to the Union VEBA Trust. Pursuant
to the terms of the Pre-Effective Date Sale Protocol, unless the Company otherwise agrees or it is
determined in a ruling by the Internal Revenue Service that any such sale does not constitute a
sale of shares on or following the Effective Date of the Plan for purposes of the applicable
limitations of section 382 of the Internal Revenue Code, the shares attributable to a sale of all
or part of the interest of the Union VEBA Trust will be deemed to have been sold on or after the
Effective Date out of the permitted sale allocation under the Stock Transfer Restriction Agreement
as if sold at the earliest possible date or dates such sales would have been permitted thereunder
for purposes of determining the permissibility of future sales of shares under the Stock Transfer
Restriction Agreement. The Company has been informed that the Union VEBA Trust intends to seek
such a ruling from the Internal Revenue Service.
Registration Rights Agreement
General
On the Effective Date, the Company, the trustee of the Union VEBA Trust and certain parties
that, in accordance with the Pre-Effective Date Protocol, purchased from the Union VEBA Trust
interests entitling them to receive shares that otherwise would have been issuable to the Union
VEBA Trust on the Effective Date (the Other Parties) entered into the Registration Rights
Agreement. The following description of the Registration Rights Agreement is a summary and is
qualified in its entirety by the Registration Rights Agreement, which is filed as Exhibit 10.16
hereto and is incorporated herein by reference.
The Registration Rights Agreement provides the Union VEBA Trust and the Other Parties with
certain rights to require that the Company register the resale of the shares of Common Stock issued
to them pursuant to the Plan unless such securities (a) are disposed of pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the Securities Act), (b) are
distributed to the public pursuant to Rule 144 under the Securities Act, (c) may be freely sold
publicly without either registration under the Securities Act or compliance with any restrictions
under Rule 144 under the Securities Act, (d) have been transferred to any person, or (e) have
ceased to be outstanding (prior to the occurrence of any such event, such securities (together with
any shares of Common Stock issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, such securities) constitute Registrable Securities).
13
Demand Registration
Pursuant to Section 2.1 of the Registration Rights Agreement, during the period commencing on
the Effective Date and ending March 31, 2007, the Union VEBA Trust may (and, if so directed by its
independent fiduciary, will) demand that the Company prepare and file with the SEC a registration
statement (the Underwritten Registration) covering the resale of its Registrable Securities in an
underwritten offering. Following receipt of such a request, the Company will prepare and file the
Underwritten Registration and will use commercially reasonable efforts to cause the Underwritten
Registration to be declared effective under the Securities Act as soon as practicable after the
filing.
Each of the Other Parties will be provided the opportunity to include its Registrable
Securities in the underwritten offering covered by the Underwritten Registration. If any of the
Other Parties elects to participate in such underwritten offering and the managing underwriter or
underwriters of such underwritten offering advise the Company, the Union VEBA Trust and the Other
Parties that have elected to participate that, in its or their good faith judgment, the total
amount of Registrable Securities requested to be included in the Underwritten Registration exceeds
the amount of Registrable Securities that can be sold in the offering without being materially
detrimental to the success of the offering, then the Registrable Securities included in the
Underwritten Registration will be allocated among the Union VEBA Trust and the Other Parties that
have elected to participate on a pro rata basis based on the relationship of the number of
Registrable Securities requested to be included by each of them to the total number of Registrable
Securities requested to be included by all of them. The Company will use commercially reasonable
efforts to keep the Underwritten Registration continuously effective under the Securities Act
during the period commencing on the effectiveness thereof and ending on the day that is 60 calendar
days thereafter or such earlier date on which all Registrable Securities covered by the
Underwritten Registration have been sold pursuant thereto. The Company will not be required to
take any such action in response to a request for the Underwritten Registration if the Registrable
Securities requested by the Union VEBA Trust to be registered in the Underwritten Registration have
a market value of less than $60.0 million on the date the request is made. The Company will be
required to effect only one registration pursuant to Section 2.1 of the Registration Rights
Agreement. Except as described below, a registration requested as described above will not be
deemed to be effected if it has not been declared effective and kept effective as described above.
At any time prior to the effective date of such a registration, the Union VEBA Trust may (and, if
so directed by its independent fiduciary, will) revoke its request for registration; in such event,
either the Union VEBA Trust will reimburse the Company for all its out-of-pocket expenses incurred
in the preparation, filing or processing of such registration or the requested registration that
has been revoked will be deemed to have been effected. The managing underwriter or underwriters of
any underwritten offering contemplated by an Underwritten Registration will be selected by the
Union VEBA Trust subject to the approval of the Company, which approval will not be unreasonably
withheld. The Company will have customary rights to impose blackout periods with respect to any
demand for registration described above.
Shelf Registration
Commencing April 1, 2007, the Union VEBA Trust may (and, if so directed by its independent
fiduciary, will) demand that the Company prepare and file with the SEC a shelf registration
statement (the Initial Shelf Registration) covering the resale of all Registrable Securities held
by the Union VEBA Trust on a continuous basis under and in accordance with Rule 415 under the
Securities Act. Following receipt of such a request, the Company will prepare and file the Initial
Shelf Registration covering all Registrable Securities held by the Union VEBA Trust and will use
commercially reasonable efforts to cause the Initial Shelf Registration to be declared effective
under the Securities Act as soon as practicable after such filing. However, the Company will not
be required to take such action: (a) if the Company has effected a demand registration as
described above within the 180-day period preceding a shelf registration request; (b) if, at the
time of a shelf registration request, a demand registration request was made as described above
and has not been revoked and such registration has not yet been effected; or (c) if, at the time of
a shelf registration request, the Stock Transfer Restriction Agreement (see below Stock Transfer
Restriction Agreement) would prohibit the Union VEBA Trust from immediately selling a number of
shares of Common Stock greater than the number of shares of Common Stock it would then be permitted
to sell in compliance with the restrictions of Rule 144 under the Securities Act.
The Company will use commercially reasonable efforts to keep the Initial Shelf Registration
continuously effective under the Securities Act during the period (the Shelf Effectiveness
Period) commencing on the
14
effectiveness thereof and ending on the first date on which there ceases to be any Registrable
Securities held by the Union VEBA Trust. If the Initial Shelf Registration or any substitute shelf
registration statement (as described below) ceases to be effective for any reason at any time
during the Shelf Effectiveness Period, the Company will use commercially reasonable efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof. In the event that
any such order is not withdrawn within 45 days following the date thereof, the Company will (a)
file an amendment to such registration and use commercially reasonable efforts to cause such
registration, as so amended, to again become effective under the Securities Act as soon as
practicable after such filing or (b) file a separate shelf registration statement covering the
resale of all Registrable Securities for an offering on a continuous basis under and in accordance
with Rule 415 under the Securities Act (each, a Substitute Shelf Registration) and use
commercially reasonable efforts to cause such Substitute Shelf Registration to be declared
effective under the Securities Act as soon as practicable after such filing and to keep such
Substitute Shelf Registration continuously effective under the Securities Act for the remainder of
the Shelf Effectiveness Period.
The Initial Shelf Registration and any Substitute Shelf Registration will be effected on Form
S-3 (except that, if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, such registration will be on another appropriate form). The Initial Shelf
Registration and any Substitute Shelf Registration will cover the disposition of all Registrable
Securities in one or more underwritten offerings (subject to the provisions regarding underwritten
offerings as described below), block transactions, broker transactions, at-market transactions and
in such other manner or manners as may be reasonably specified by the Union VEBA Trust. The
Company will have customary rights to impose blackout periods with respect to any demand for the
Initial Shelf Registration, the filing of any amendment or Substitute Shelf Registration or the
continued use of the Initial Shelf Registration or any Substitute Shelf Registration.
Pursuant to Section 3.5 of the Registration Rights Agreement, if the Union VEBA Trust so
requests, the Company will effect pursuant to the Initial Shelf Registration or such Substitute
Shelf Registration, as applicable, an underwritten offering if (a) the Company has not so effected
an underwritten offering within the 180-day period next preceding such request and (b) the
Registrable Securities requested to be included in the underwritten offering have a then-current
market value of at least $10.0 million. The managing underwriter or underwriters of any
underwritten offering will be selected by the Union VEBA Trust, subject to the approval of the
Company, which approval will not be unreasonably withheld.
Piggyback Registration
If the Company registers equity securities for its own account or the account of any other
person (other than a registration statement in connection with a merger or reorganization or
relating to an employee benefit plan or in connection with an offering made solely to the
then-existing stockholders or employees of the Company), the Union VEBA Trust will be offered the
opportunity to include its Registrable Securities in such registration. Customary priority
provisions will apply in the context of an underwritten offering.
Expenses
Subject to provisions for reimbursement of the Company upon revocation of a request for
registration or an underwritten offering, the Company will bear all out-of-pocket registration
expenses in connection with the demand registration and the shelf registration, including in each
case up to $50,000 for one counsel to represent selling holder or holders of Registrable
Securities. All underwriting fees, discounts, selling commissions and stock transfer taxes
applicable to the sale of Registrable Securities will be borne by the applicable selling holder.
Rule 144
The Company will file all required SEC reports, and cooperate with the Union VEBA Trust, to
the extent required to permit the Union VEBA Trust to sell its Registrable Securities without
registration under Rule 144.
15
Director Designation Agreement with the USW
In accordance with the Plan, on the Effective Date, the Company and the United Steel, Paper
and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International
Union, AFL-CIO, CLC (formerly known as the United Steelworkers of America, AFL-CIO, CLC) (the
USW) entered into an agreement (the Director Designation Agreement) in order to effectuate
certain previously agreed upon rights of the USW to nominate individuals to serve on the Board and
specified committees thereof. The Director Designation Agreement provides that the USW has the
rights described below until December 31, 2012. The following description of the Director
Designation Agreement is a summary and is qualified in its entirety by the Director Designation
Agreement, which is filed as Exhibit 10.17 hereto and is incorporated herein by reference.
The Director Designation Agreement provides that the USW has the right, in connection with
each annual meeting of the Companys stockholders, to nominate as candidates to be submitted to
stockholders of the Company for election at such annual meeting the minimum number of candidates
necessary to ensure that, assuming (a) such candidates are included in the slate of director
candidates recommended by the Board in the proxy statement relating to such annual meeting and (b)
the stockholders of the Company elect each candidate so included, at least 40% of the members of
the Board immediately following such election are directors who were either designated by the USW
pursuant to the Plan or have been nominated by the USW in accordance with the Director Designation
Agreement. The Director Designation Agreement contains requirements as to the timeliness, form and
substance of the notice the USW must give to the Nominating and Corporate Governance Committee in
order to nominate such candidates. The Nominating and Corporate Governance Committee will
determine in good faith whether each candidate properly submitted by the USW satisfies the
qualifications set forth in the Director Designation Agreement, and, if the Nominating and
Corporate Governance Committee so determines that such candidate satisfies such qualifications,
will, unless otherwise required by its fiduciary duties, recommend such candidate to the Board for
inclusion in the slate of directors recommended by the Board in the proxy statement relating to
such annual meeting, and the Board will, unless otherwise required by its fiduciary duties, accept
such recommendation and direct that such director candidate be included in such slate of directors.
The Director Designation Agreement also provides that the USW has the right to nominate an
individual to fill a vacancy on the Board resulting from the death, resignation, disqualification
or removal of a director who was either designated by the USW to serve on the Board pursuant to the
Plan or has been nominated by the USW in accordance with the Director Designation Agreement. The
Director Designation Agreement further provides that, in the event of newly created directorships
resulting from an increase in the number of directors of the Company, the USW has the right to
nominate the minimum number of individuals to fill such newly created directorships necessary to
ensure that at least 40% of the members of the Board immediately following the filling of such
newly created directorships are directors who were either designated by the USW pursuant to the
Plan or have been nominated by the USW in accordance with the Director Designation Agreement. In
each such case, the USW will be required to deliver proper notice to the Nominating and Corporate
Governance Committee in accordance with the Director Designation Agreement, and the Nominating and
Corporate Governance Committee will determine in good faith whether each candidate properly
submitted by the USW satisfies the qualifications set forth in the Director Designation Agreement,
and, if the Nominating and Corporate Governance Committee so determines that such candidate
satisfies such qualifications, will, unless otherwise required by its fiduciary duties, recommend
to the Board that it fill the vacancy or newly created directorship, as the case may be, with such
candidate, and the Board will, unless otherwise required by its fiduciary duties, accept such
recommendation and fill the vacancy or newly created directorship, as the case may be, with such
candidate.
Each candidate nominated by the USW must satisfy (a) the applicable independence criteria of
the national securities exchange or association on which the Companys securities are then
principally traded or quoted, (b) the qualifications to serve as a director of the Company as set
forth in any applicable corporate governance guidelines adopted by the Board and policies adopted
by the Nominating and Corporate Governance Committee establishing criteria to be utilized by it in
assessing whether a director candidate has appropriate skills and experience, and (c) any other
qualifications to serve as director imposed by applicable law. A candidate nominated by the USW
may not be an officer, employee, director or member of the USW or any of its locals or affiliated
organizations as of the date of his or her designation as a candidate or election as a director.
16
Finally, the Director Designation Agreement provides that, so long as the Board maintains an
audit committee, executive committee or nominating and corporate governance committee, each such
committee will, unless otherwise required by the fiduciary duties of the Board, include at least
one director who was either designated by the USW to serve on the Board pursuant to the Plan or has
been nominated by the USW in accordance with the Director Designation Agreement (provided at least
one such director is qualified to serve on such committee as determined in good faith by the
Board).
Item 1.02 Termination of a Material Definitive Agreement
Termination of DIP Financing Facility
Pursuant to the Plan, on the Effective Date the Company entered into the Revolving Credit
Facility and the Term Loan Facility (see Item 1.01 Entry into a Material Definitive Agreement
Exit Financing Facilities above), whereupon the Companys Secured Super-Priority
Debtor-In-Possession Revolving Credit and Guaranty Agreement was terminated.
Termination of Certain Other Material Agreements
Pursuant to the Plan, on the Effective Date all of the obligations of the Company and its
affiliates with respect to the following material agreements were terminated:
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9-7/8% senior notes of KACC and the related indenture; |
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10-7/8% senior notes of KACC and the related indenture; |
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12-3/4% senior subordinated notes of KACC and the related indenture; |
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6-1/2% Jackson County, West Virginia, Refunding Pollution Control Revenue Bonds, Series
1978 (Kaiser Aluminum & Chemical Project) and the related indenture; |
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7-3/4% Parish of St. James, State of Louisiana, Solid Waste Disposal Revenue Bonds (Kaiser
Aluminum Project) Series 1992 and the related indenture; and |
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The Industrial Development Corporation of Spokane County, Washington, 7.60% Solid Waste
Disposal Revenue Bonds (Kaiser Aluminum & Chemical Corporation Project) Series 1997 and the
related indenture. |
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant
Exit Financing Facilities
The information set forth above under Item 1.01 Entry into a Material Definitive Agreement
Exit Financing Facilities is incorporated herein by reference.
VEBA Profit Sharing
As previously disclosed, pursuant to agreements reached with salaried and hourly retirees in
early 2004, in consideration for the agreed cancellation of the retiree medical plan, from and
after the Effective Date the Company will be obligated to make certain variable annual
contributions to the Union VEBA Trust and another trust that provides benefits for certain eligible
retirees of KACC and their surviving spouses and eligible dependents depending on its operating
results and liquidity. For information regarding the Companys obligations with respect to such
variable annual contributions, see Item 1.03 of the Plan Confirmation Form 8-K and Note 9 of Notes
to Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended
December 31, 2005.
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Item 3.03 Material Modification to Rights of Security Holders
Pursuant to the Plan, on the Effective Date, (a) all shares of the Companys common stock
issued and outstanding immediately prior to the Effective Date were cancelled without
consideration; (b) the Companys certificate of incorporation in effect immediately prior to the
Effective Date was amended and restated in its entirety (see Item 5.03 Amendments to Articles of
Incorporation or Bylaws; Change in Fiscal Year Amendment and Restatement of the Certificate of
Incorporation and Bylaws below); and (c) 20.0 million new shares of Common Stock were issued for
distribution in accordance with the terms of the Plan. See Item 8.01 Other Events below.
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of
Principal Officers
Members of the Board of Directors
As previously disclosed, as of the Effective Date all of the then existing members of the
Board (other than Jack A. Hockema, the President and Chief Executive Officer of the Company)
resigned and, pursuant to the Plan, George Becker, Carl B. Frankel, Teresa A. Hopp, William F.
Murdy, Alfred E. Osborne, Jr., Georganne C. Proctor, Jack Quinn, Thomas M. Van Leeuwen and Brett E.
Wilcox became directors of the Company. Mr. Hockema serves as Chairman of the Board. For
additional information regarding the new directors, see Item 5.02 of the Plan Confirmation Form
8-K.
Position of Chief Restructuring Officer Eliminated
On the Effective Date, Edward F. Houff ceased to serve as the Chief Restructuring Officer of
the Company, whereupon such position was eliminated. See Item 1.01 Entry into a Material
Definitive Agreement Plans, Contracts or Arrangements in Which Directors or Executive Officers
Participate Agreement Extension of Agreement with Edward F. Houff above.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
Amendment and Restatement of the Certificate of Incorporation and Bylaws
Pursuant to the Plan, on the Effective Date, the Companys certificate of incorporation and
bylaws were amended and restated in their entirety. The following description of the Certificate
of Incorporation and Bylaws is a summary and is qualified in its entirety by the Certificate of
Incorporation and Bylaws, which are filed as Exhibit 3.1 and Exhibit 3.2, respectively, hereto and
are incorporated herein by reference.
Authorized Capital Stock
Pursuant to the Certificate of Incorporation, the Company is authorized to issue 50.0 million
shares of capital stock, consisting of 45.0 million shares of Common Stock and 5.0 million shares
of preferred stock, par value $0.01 per share (Preferred Stock). As required by the Bankruptcy
Code, the Certificate of Incorporation provides that the Company will not issue nonvoting equity
securities; however, under the Certificate of Incorporation such restriction will (a) have no
further force and effect beyond that required under Section 1123 of the Bankruptcy Code, (b) only
have such force and effect for so long as Section 1123 of the Bankruptcy Code is in effect and
applicable to the Company, and (c) in all events may be amended or eliminated in accordance with
applicable law as from time to time may be in effect.
Holders of Common Stock are entitled to one vote for each share of Common Stock held of record
on each matter submitted to a vote of stockholders and do not have cumulative voting rights.
Holders of Common Stock are entitled to receive ratably dividends as may be declared by the Board
out of funds legally available for payment of dividends. In the event of a liquidation,
dissolution or winding up of the Company, holders of the Common Stock will be entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation preference of any
Preferred Stock. Holders of Common Stock do not have preemptive, subscription, redemption or
conversion rights.
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Preferred Stock may be issued in one or more series. The Board is authorized to issue the
shares of Preferred Stock in such series and to fix from time to time before issuance the number of
shares to be included in any such series and the designation, relative powers, preferences, rights
and qualifications, limitations or restrictions of such series. The authority of the Board with
respect to each such series includes, without limiting the generality of the foregoing, the
determination of any or all of the following:
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the number of shares of such series and the designation to distinguish the shares of such series from the shares of all
other series; |
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subject to the provisions of the Certificate of Incorporation regarding the issuance of non-voting equity securities
described above, the voting powers, if any, of the holders of such series and whether such voting powers are full or
limited in such series; |
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the redemption provisions, if any, applicable to such series, including without limitation the redemption price or prices
to be paid; |
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whether dividends on such series, if any, will be cumulative or noncumulative, the dividend rate of such series and the
dates and preferences of dividends on such series; |
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the rights of the holders of such series upon the voluntary or involuntary dissolution of, or upon any distribution of the
assets of, the Company; |
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the provisions, if any, pursuant to which the shares of such series are convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same or any other class or classes of stock, or any other
security, of the Company or any other corporation or other entity, and the rates or other determinants of conversion or
exchange applicable; |
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the right, if any, of holders of such series to subscribe for or to purchase any securities of the Company or any other
corporation or other entity; |
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the provisions, if any, of a sinking fund applicable to such series; and |
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any other relative, participating, optional or other special powers, preferences or rights of such series and
qualifications, limitations or restrictions. |
Restrictions on Transfer
In order to reduce the risk that any change in the ownership of the Company would jeopardize
the preservation of federal income tax attributes of the Company, including net operating loss
carryovers, for purposes of Sections 382 and 383 of the IRC, the Certificate of Incorporation
prohibits certain transfers of equity securities of the Company, including Common Stock, until the
earliest of (a) the 10th anniversary of the Effective Date, (b) the repeal, amendment or
modification of Section 382 of the IRC in such a way as to render the Company and all of its direct
or indirect subsidiaries no longer subject to the restrictions imposed by such section, (c) the
beginning of a taxable year of the Company in which no income tax benefits of the Company or any
direct or indirect subsidiary thereof in existence as of the Effective Date are currently available
or will be available, (d) the determination by the Board that the restrictions will no longer
apply, (e) a determination by the Board or the Internal Revenue Service of the Department of
Treasury of the United States of America that the Company is ineligible to use Section 382(l)(5) of
the IRC permitting full use of the income tax benefits of the Company or any direct or indirect
subsidiary thereof existing as of the Effective Date, and (f) an election by the Company for
Section 382(l)(5) of the IRC not to apply (the earliest being the Restriction Release Date).
Generally, the Certificate of Incorporation prohibits a transfer of equity securities, including
Common Stock, if either (a) the transferor holds 5% or more of the total fair market value of all
issued and outstanding equity securities (such person, a 5% Shareholder) or (b) as a result of
such transfer, either (i) any person or group of persons would become a 5% Shareholder or (ii) the
percentage stock ownership in the Company of any 5% Shareholder would be increased (any such
transfer, a 5% Transaction).
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The restrictions on transfer will not apply if:
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the transferor or transferee obtains the prior approval of the Board; |
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in the case of a 5% Transaction by any holder of equity securities (other than
the Union VEBA Trust), prior to such transaction, the Board determines in good faith,
upon request of the transferor or transferee, that such transfer is a 5% Transaction
(x) which, together with any 5% Transactions consummated during the period ending on
the date of consummation of such 5% Transaction and beginning on the later of (i) the
date three years prior thereto and (ii) the first day after the Effective Date (the
Testing Period), represent aggregate 5% Transactions involving transfers of less than
45% of the equity securities of the Company issued and outstanding at the time of
transfer and (y) which, together with any 5% Transactions consummated during the
Testing Period and all 5% Transactions that the Union VEBA Trust may consummate without
breach of the Stock Transfer Restriction Agreement during the three years following the
time of transfer, represent, during any period of three consecutive years during the
period consisting of the Testing Period and the three years thereafter, aggregate 5%
Transactions involving transfers of less than 45% of the equity securities issued and
outstanding at the time of transfer; or |
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in the case of a 5% Transaction by the Union VEBA Trust, such 5% Transaction
does not result in a breach of the Stock Transfer Restriction Agreement, so long as,
contemporaneously with such 5% Transaction, the Union VEBA Trust delivers to the Board
a written notice addressed to the Company setting forth the number and type of equity
securities involved in, and the date of, such 5% Transaction. See Item 1.01 Entry
into a Material Definitive Agreement Agreements Relating to the Companys Securities
Stock Transfer Restriction Agreement above. |
Any such approval or determination by the Board requires the affirmative vote of a majority of the
directors (assuming no vacancies). As a condition to granting any such approval or in connection
with making any such determination, the Board may, in its discretion, require (at the expense of
the transferor and/or transferee) an opinion of counsel selected by the transferor or the
transferee, which counsel must be reasonably acceptable to the Board, that the consummation of the
proposed transfer will not result in the application of any limitation under Section 382 of the IRC
on the use of the tax benefits described above taking into account any and all other transfers that
have been consummated prior to receipt of the request relating to the proposed transfer, any and
all other proposed transfers that have been approved by the Board prior to receipt of the request
relating to the proposed transfer and any and all other proposed transfers for which the requests
relating thereto have been received prior to receipt of the request relating to the proposed
transfer.
Each certificate representing equity securities issued prior to the Restriction Release Date,
including Common Stock, will contain a legend referring to these restrictions on transfer and any
purported transfer of equity securities of the Company, including Common Stock, in violation of
such restrictions will be null and void. The purported transferor will remain the owner of such
transferred securities and the purported transferee will be required to turn over the transferred
securities, together with any distributions received by the purported transferee with respect to
the transferred securities after the purported transfer, to an agent authorized to sell such
securities, if it can do so, in arms-length transactions that do not violate such restrictions.
If the purported transferee resold such securities prior to receipt of the Companys demand that
they be so surrendered, the purported transferee will generally be required to transfer the
proceeds from such distribution, together with any distributions received by the purported
transferee with respect to the transferred securities after the purported transfer, to such agent.
Any amounts so held by the agent will be applied first to reimburse the agent for its expenses,
then to reimburse the transferee for any payments made by the purported transferee to the
transferor, and finally, if any amount remains, to pay the purported transferor. Any resale by the
purported transferee will itself be subject to these restrictions on transfer.
20
Certain Provisions Having Anti-Takeover Effects
Introduction
Certain provisions of the Certificate of Incorporation and the Bylaws, together with certain
of the Companys contractual arrangements and applicable Delaware state law, may discourage or make
more difficult the acquisition of control of the Company by means of a tender offer, open market
purchase, proxy fight or otherwise. These provisions are intended to discourage, or may have the
effect of discouraging, certain types of coercive takeover practices and inadequate takeover bids
and are also intended to encourage a person seeking to acquire control of the Company to first
negotiate with the Company. Management believes that these measures, many of which are
substantially similar to the anti-takeover related measures in effect for numerous other
publicly-held companies, enhance the Companys potential ability to negotiate with the proponent of
an unsolicited proposal to acquire or restructure the Company, providing benefits that outweigh the
disadvantages of discouraging such proposals because, among other things, such negotiation could
improve the terms of such a proposal and protect the stockholders from takeover bids that the
directors of the Company have determined to be inadequate. A description of these provisions is
set forth below.
Classified Board of Directors
The Certificate of Incorporation divides the Board into three classes of directors serving
staggered three-year terms. The existence of a classified board will make it more difficult for a
third party to gain control of the Board by preventing such third party from replacing a majority
of the directors at any given meeting of stockholders.
Removal of Directors and Filling Vacancies in Directorships
The Certificate of Incorporation and Bylaws provide that directors may be removed by the
stockholders, with or without cause, only at a meeting of stockholders and by the affirmative vote
of the holders of at least 67% of the stock of the Company generally entitled to vote in the
election of directors. The Certificate of Incorporation and Bylaws provide that any vacancy on the
Board or newly created directorship may be filled solely by the affirmative vote of a majority of
the directors then in office or by a sole remaining director, and that any director so elected will
hold office for the remainder of the full term of the class of directors in which the vacancy
occurred or the new directorship was created and until such directors successor has been elected
and qualified. The limitations on the removal of directors and the filling of vacancies may deter
a third party from seeking to remove incumbent directors and simultaneously gaining control of the
Board by filling the vacancies created by such removal with its own nominees.
Stockholder Action and Meetings of Stockholders
The Certificate of Incorporation and Bylaws provide that special meetings of the stockholders
may only be called by the Chairman of the Board, the Chief Executive Officer or the President, or
by the Secretary of the Company within 10 calendar days after the receipt of the written request of
a majority of the total number of directors (assuming no vacancies), and further provide that, at
any special meeting of stockholders, the only business that may be considered or conducted is
business that is specified in the notice of such meeting or is otherwise properly brought before
the meeting by the presiding officer or by or at the direction of a majority of the directors
(assuming no vacancies), effectively precluding the right of the stockholders to raise any business
at any special meeting. The Certificate of Incorporation also provides that the stockholders may
not act by written consent in lieu of a meeting.
Advance Notice Requirements for Stockholder Proposals
The Bylaws provide that a stockholder seeking to bring business before an annual meeting of
stockholders provide timely notice in writing to the Secretary of the Company. To be timely, a
stockholders notice must be received by the Company not less than 60, nor more than 90, calendar
days prior to the first anniversary date of the date on which the Company first mailed proxy
materials for the prior years annual meeting of stockholders, except
21
that, if there was no annual meeting in the prior year or if the annual meeting is called for
a date that is not within 30 calendar days before or after that anniversary, notice must be so
delivered not later than the close of business on the later of the 90th calendar day prior to such
annual meeting and the 10th calendar day following the date on which public disclosure of the date
of the annual meeting is first made. The Bylaws also specify requirements as to the form and
substance of notice. These provisions may preclude stockholders from bringing matters before an
annual meeting of stockholders.
Director Nomination Procedures
The Bylaws provide that the nominations for election of directors by the stockholders will be
made either by or at the direction of the Board or a committee thereof, or by any stockholder
entitled to vote for the election of directors at the annual meeting at which such nomination is
made. The Bylaws require that stockholders intending to nominate candidates for election as
directors provide timely notice in writing. To be timely, a stockholders notice must be delivered
to or mailed and received at the Companys principal executive offices not less than 60, nor more
than 90, calendar days prior to the first anniversary of the date on which the Company first mailed
its proxy materials for the prior years annual meeting of stockholders, except that, if there was
no annual meeting during the prior year or if the annual meeting is called for a date that is not
within 30 calendar days before or after that anniversary, notice by stockholders to be timely must
be delivered not later than the close of business on the later of the 90th calendar day prior to
the annual meeting and the 10th calendar day following the day on which public disclosure of the
date of such meeting is first made. The Bylaws also specify requirements as to the form and
substance of notice. These provisions of the Bylaws may preclude stockholders from making
nominations of directors.
Authorized But Unissued Shares
As indicated above, the Certificate of Incorporation provides that the Company is authorized
to issue 50.0 million shares of capital stock, consisting of 45.0 million shares of Common Stock
and 5.0 million shares of Preferred Stock, and that the Board will have the authority, within the
limitations and restrictions stated in the Certificate of Incorporation, to issue the shares of
Preferred Stock in one or more series, and to fix the number of shares to be included in any such
series and the designation, relative powers, preferences, rights and qualifications, limitations or
restrictions of such series, including but not limited to any voting powers, redemption provisions,
dividend rights, liquidation preferences, conversion rights and preemptive rights.
Authorized but unissued shares of Common Stock and Preferred Stock under the Certificate of
Incorporation will be available for future issuance without stockholder approval, unless otherwise
required pursuant to the rules of any national securities exchange or association on which the
Companys securities are traded from time to time. These additional shares will give the Board the
flexibility to issue shares for a variety of proper corporate purposes, including in connection
with future public offerings to raise additional capital or corporate acquisitions, without
incurring the time and expense of soliciting a stockholder vote. The existence of authorized but
unissued shares of Common Stock and Preferred Stock could render more difficult or discourage an
attempt to obtain control of the Company by means of a proxy contest, tender offer or merger or
otherwise. In addition, any future issuance of shares of Common Stock or Preferred Stock, whether
or not in connection with an anti-takeover measure, could have the effect of diluting the earnings
per share, book value per share and voting power of shares held by the stockholders of the Company.
Limitation of Liability and Indemnification
The Certificate of Incorporation limits the liability of the Companys directors to the
fullest extent permitted by the DGCL. The DGCL provides that a corporation may limit the personal
liability of its directors for monetary damages for breach of that individuals fiduciary duties as
a director except for liability for any of the following: (a) a breach of the directors duty of
loyalty to the corporation or its stockholders; (b) any act or omission not in good faith or that
involves intentional misconduct or a knowing violation of the law; (c) certain unlawful payments of
dividends or unlawful stock repurchases or redemptions; or (d) any transaction from which the
director derived an improper personal benefit. This limitation of liability does not apply to
liabilities arising under federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
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Section 145 of the DGCL generally provides that a corporation may indemnify directors and
officers, as well as other employees and individuals, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed action, suit or proceeding in which such
person was or is a party or is threatened to be made a party by reason of such person being or
having been a director, officer, employee or agent of the corporation. The DGCL provides that
Section 145 is not exclusive of other rights to which those seeking indemnification may otherwise
be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. See Item 1.01 Entry into a Material Definitive Contract Plans, Contracts or
Arrangements in Which Directors or Executive Officers Participate Indemnification Agreements.
The Certificate of Incorporation provides that the Company is required to indemnify its
directors and officers to the fullest extent permitted or required by the DGCL, although, except
with respect to certain actions, suits or proceedings to enforce rights to indemnification, a
director or officer will only be indemnified with respect to any action, suit or proceeding such
person initiated to the extent such action, suit or proceeding was authorized by the Board. The
Certificate of Incorporation also requires the Company to advance expenses incurred by a director
or officer in connection with the defense of any action, suit or proceeding arising out of that
persons status or service as director or officer of the Company or as director, officer, employee
or agent of another enterprise, if serving at the Companys request. In addition, the Certificate
of Incorporation permits the Company to secure insurance to protect itself and any director,
officer, employee or agent of the Company or any other corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss.
Item 5.05 Amendments to the Registrants Code of Ethics, or Waiver of a Provision of the Code
of Ethics
On the Effective Date, the Board adopted the Kaiser Aluminum Corporation Code of Business
Conduct and Ethics (the Ethics Code). The Ethics Code constitutes a code of ethics as such
term is defined in Item 406(b) of Regulation S-K and is intended to satisfy the corporate
governance rules of the Nasdaq Stock Market, Inc. regarding a companys code of conduct. A copy of
the Ethics Code is attached hereto as Exhibit 14.1 and is incorporated herein by reference.
Item 8.01 Other Events
Exchange Act Registration/Termination of Registration
As indicated above (see Item 3.03 Material Modifications to Rights of Security Holders),
pursuant to the Plan, on the Effective Date: (a) all shares of the Companys common stock issued
and outstanding immediately prior to the Effective Date (Old Common Stock) were cancelled without
consideration; (b) the Companys certificate of incorporation in effect immediately prior to the
Effective Date was amended and restated in its entirety (see Item 5.03 Amendments to Articles of
Incorporation or Bylaws, Change in Fiscal Year Amendment and Restatement of the Certificate of
Incorporation and Bylaws above); and (c) 20.0 million new shares of Common Stock were issued for
distribution in accordance with the terms of the Plan. As a result of the amendment and
restatement of the Companys certificate of incorporation, the rights of holders of Common Stock
will be substantially different than the rights of holders of Old Common Stock and, consequently,
the Common Stock may be deemed to be a different class of securities than the Old Common Stock.
Accordingly, on the Effective Date the Company filed a Form 8-A with the SEC registering the Common
Stock pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the Exchange
Act), and thereafter filed a Form 15 with the SEC to terminate the registration of the Old Common
Stock under Section 12(g) of the Exchange Act and suspend its duty to file reports under Section 13
and Section 15(d) of the Exchange Act in connection with the Old Common Stock.
Listing on NASDAQ
As of the Effective Date, the Common Stock has been designated as a NASDAQ Global Market
Security by The Nasdaq Stock Market, Inc. The trading symbol for the Common Stock is KALU.
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Restructuring Transactions
In connection with the Effective Date, in accordance with the Plan, the following transactions
(the Restructuring Transactions) were consummated:
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Prior to the Effective Date, the following new entities were formed: (a) Kaiser
Aluminum Investments Company, a new Delaware corporation (KAIC), owned by the Company
to function as an intermediate holding company; (b) Kaiser Aluminum Fabricated
Products, LLC, a new Delaware limited liability company (i.e., KAFP), initially owned
by KACC, to hold the domestic assets associated with the Companys flat rolled products
and engineered products units; and (c) Kaiser Aluminum & Chemical Corporation, LLC, a
new Delaware limited liability company (KACC, LLC), owned by KAIC, to succeed to the
remaining assets and liabilities of KACC; |
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On the Effective Date, Texada Mines Ltd., Kaiser Aluminum & Chemical Canada
Investment Limited, Kaiser Aluminum & Chemical of Canada Limited and Refractories
Engineering & Supplies Limited were amalgamated to form Kaiser Aluminum Canada Limited,
a new Ontario corporation (KACL), 100% of the issued and outstanding shares of
capital stock of which was initially held by KACC; |
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On the Effective Date, (a) KACC transferred the assets associated with the flat
rolled products and engineered products units and all ownership interest in Kaiser
Bellwood Corporation to KAFP, and (b) Kaiser Bellwood Corporation was merged with and
into KAFP; |
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On the Effective Date following the transactions described above, KACC transferred
all its ownership interests in Anglesey Aluminium Limited, Trochus Insurance Co., Ltd.,
Kaiser Aluminium International, Inc., Kaiser Bauxite Company, KACL and KAFP to KAIC;
and |
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On the Effective Date following the transactions described above, KACC merged with
and into KACC, LLC, with KACC, LLC as the surviving entity. |
Following the Restructuring Transactions described above, the Company owns directly 100% of
the issued and outstanding shares of capital stock of KAIC, and KAIC owns 49% of the ownership
interests of Anglesey Aluminium Limited, 100% of the ownership interests of each of Trochus
Insurance Co., Ltd., Kaiser Aluminium International, Inc., Kaiser Bauxite Company and KACL, and
100% of the issued and outstanding membership interests of each of KAFP and KACC, LLC. KACL holds
the London, Ontario production facility and KAFP holds all other production facilities used by the
Fabricated Products business unit. KACC, LLC, as the successor by merger to KACC, holds various
non-operating properties.
Press Release Announcing Effective Date
A copy of the press release announcing the effectiveness of the Plan is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
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(c)
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Exhibits. |
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3.1
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Amended and Restated Certificate of Incorporation of Kaiser Aluminum Corporation (the
Company) (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 8-A
filed by the Company with the SEC on July 6, 2006). |
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3.2
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Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form 8-A filed by the Company with the SEC on July 6, 2006). |
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10.1
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Senior Secured Revolving Credit Agreement, dated as of July 6, 2006, among the Company,
Kaiser Aluminum Investments Company, Kaiser Aluminum Fabricated Products, LLC, Kaiser
Aluminium International, Inc., certain financial institutions from time to time party thereto,
as lenders, J.P.Morgan Securities Inc., The CIT Group/Business Credit, Inc. and JPMorgan
Chase Bank, N.A., as administrative agent. |
|
|
|
10.2
|
|
Term Loan and Guaranty Agreement, dated as of July 6, 2006, among Kaiser Aluminum Fabricated
Products, LLC, the Company and certain indirect subsidiaries of the Company listed as
Guarantors thereto, certain financial institutions from time to time party thereto, as
lenders, J.P.Morgan Securities Inc., JPMorgan Chase Bank, N.A., as administrative agent, and
Wilmington Trust Company, as collateral agent. |
|
|
|
10.3
|
|
Description of Compensation of Directors. |
|
|
|
10.4
|
|
2006 Short Term Incentive Plan for Key Managers. |
|
|
|
10.5
|
|
Employment Agreement, dated as of July 6, 2006, between the Company and Jack A. Hockema. |
|
|
|
10.6
|
|
Employment Agreement, dated as of July 6, 2006, between the Company and Joseph P. Bellino. |
|
|
|
10.7
|
|
Employment Agreement, dated as of July 6, 2006, between the Company and Daniel D. Maddox. |
|
|
|
10.8
|
|
Form of Director Indemnification Agreement. |
|
|
|
10.9
|
|
Form of Officer Indemnification Agreement. |
|
|
|
10.10
|
|
Form of Director and Officer Indemnification Agreement. |
|
|
|
10.11
|
|
Kaiser Aluminum Corporation 2006 Equity and Performance Incentive Plan (incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed by the Company with
the SEC on July 6, 2006). |
|
|
|
10.12
|
|
Form of Executive Officer Restricted Stock Award. |
|
|
|
10.13
|
|
Form of Non-Employee Director Restricted Stock Award. |
|
|
|
10.14
|
|
Kaiser Aluminum Fabricated Products Restoration Plan. |
|
|
|
10.15
|
|
Amendment to Amended and Restated Non-Exclusive Consulting Agreement, dated as of June 30,
2006, between Kaiser Aluminum & Chemical Corporation and Edward F. Houff. |
|
|
|
10.16
|
|
Stock Transfer Restriction Agreement, dated as of July 6, 2006, between the Company and
National City Bank, in its capacity as the trustee for the trust that provides benefits for
certain eligible retirees of Kaiser Aluminum & Chemical Corporation represented by the United
Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service
Workers International Union, AFL-CIO, CLC (formerly known as the United Steelworkers of
America, AFL-CIO, CLC) (the USW), the International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America and its Local 1186, the International Association of
Machinists and Aerospace Workers, the International Chemical Workers Union Council of the
United Food & Commercial Workers, and the Paper, Allied-Industrial, Chemical and Energy
Workers International Union, AFL-CIO, CLC and their surviving spouses and eligible dependents
(the Union VEBA Trust) (incorporated by reference to Exhibit 4.1 to the Registration
Statement on Form 8-A filed by the Company with the SEC on July 6, 2006). |
|
|
|
10.17
|
|
Registration Rights Agreement, dated as of July 6, 2006, among the Company, the Union VEBA
Trust and the other parties thereto (incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form 8-A filed by the Company with the SEC on July 6, 2006). |
25
|
|
|
10.18
|
|
Director Designation Agreement, dated as of July 6, 2006, between the Company and the USW
(incorporated by reference to Exhibit 4.3 to the Registration Statement on Form 8-A filed by
the Company with the SEC on July 6, 2006). |
|
|
|
14.1
|
|
Kaiser Aluminum Corporation Code of Business Conduct and Ethics. |
|
|
|
99.1
|
|
Press Release announcing Effective Date, dated July 6, 2006. |
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
KAISER ALUMINUM CORPORATION
(Registrant)
|
|
|
By: |
/s/ John M. Donnan
|
|
|
|
John M. Donnan |
|
|
|
Vice President, Secretary and General Counsel |
|
|
Date: July 6, 2006
27
INDEX TO EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Kaiser Aluminum Corporation (the
Company) (incorporated by reference to Exhibit 3.1 to the Registration Statement on
Form 8-A filed by the Company with the SEC on July 6, 2006). |
|
|
|
3.2
|
|
Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to
the Registration Statement on Form 8-A filed by the Company with the SEC on July 6,
2006). |
|
|
|
10.1
|
|
Senior Secured Revolving Credit Agreement, dated as of July 6, 2006, among the Company,
Kaiser Aluminum Investments Company, Kaiser Aluminum Fabricated Products, LLC, Kaiser
Aluminium International, Inc., certain financial institutions from time to time party
thereto, as lenders, J.P.Morgan Securities Inc., The CIT Group/Business Credit, Inc.
and JPMorgan Chase Bank, N.A., as administrative agent. |
|
|
|
10.2
|
|
Term Loan and Guaranty Agreement, dated as of July 6, 2006, among Kaiser Aluminum
Fabricated Products, LLC, the Company and certain indirect subsidiaries of the Company
listed as Guarantors thereto, certain financial institutions from time to time party
thereto, as lenders, J.P.Morgan Securities Inc., JPMorgan Chase Bank, N.A., as
administrative agent, and Wilmington Trust Company, as collateral agent. |
|
|
|
10.3
|
|
Description of Compensation of Directors. |
|
|
|
10.4
|
|
2006 Short Term Incentive Plan for Key Managers. |
|
|
|
10.5
|
|
Employment Agreement, dated as of July 6, 2006, between the Company and Jack A. Hockema. |
|
|
|
10.6
|
|
Employment Agreement, dated as of July 6, 2006, between the Company and Joseph P. Bellino |
|
|
|
10.7
|
|
Employment Agreement, dated as of July 6, 2006, between the Company and Daniel D. Maddox. |
|
|
|
10.8
|
|
Form of Director Indemnification Agreement. |
|
|
|
10.9
|
|
Form of Officer Indemnification Agreement. |
|
|
|
10.10
|
|
Form of Director and Officer Indemnification Agreement. |
|
|
|
10.11
|
|
Kaiser Aluminum Corporation 2006 Equity and Performance Incentive Plan (incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed by the Company
with the SEC on July 6, 2006). |
|
|
|
10.12
|
|
Form of Executive Officer Restricted Stock Award. |
|
|
|
10.13
|
|
Form of Non-Employee Director Restricted Stock Award. |
|
|
|
10.14
|
|
Kaiser Aluminum Fabricated Products Restoration Plan. |
|
|
|
10.15
|
|
Amendment to Amended and Restated Non-Exclusive Consulting Agreement, dated as of June
30, 2006, between Kaiser Aluminum & Chemical Corporation and Edward F. Houff. |
|
|
|
10.16
|
|
Stock Transfer Restriction Agreement, dated as of July 6, 2006, between the Company and
National City Bank, in its capacity as the trustee for the trust that provides benefits
for certain |
28
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
eligible retirees of Kaiser Aluminum & Chemical Corporation represented by
the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial
and Service Workers International Union, AFL-CIO, CLC (formerly known as the United
Steelworkers of America, AFL-CIO, CLC) (the USW), the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America and its Local 1186,
the International Association of Machinists and Aerospace Workers, the International
Chemical Workers Union Council of the United Food & Commercial Workers, and the Paper,
Allied-Industrial, Chemical and Energy Workers International Union, AFL-CIO, CLC and
their surviving spouses and eligible dependents (the Union VEBA Trust) (incorporated
by reference to Exhibit 4.1 to the Registration Statement on Form 8-A filed by the
Company with the SEC on July 6, 2006). |
|
|
|
10.17
|
|
Registration Rights Agreement, dated as of July 6, 2006, among the Company, the Union
VEBA Trust and the other parties thereto (incorporated by reference to Exhibit 4.2 to
the Registration Statement on Form 8-A filed by the Company with the SEC on July 6,
2006). |
|
|
|
10.18
|
|
Director Designation Agreement, dated as of July 6, 2006, between the Company and the
USW (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form 8-A
filed by the Company with the SEC on July 6, 2006). |
|
|
|
14.1
|
|
Kaiser Aluminum Corporation Code of Business Conduct and Ethics. |
|
|
|
99.1
|
|
Press Release announcing Effective Date, dated July 6, 2006. |
29