-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Smai6VH0yjwxvxQpKeXJ/8ROSNpTPzaKP/2XWrxjQZcPmvasI3lHECyyL+l4DO6n aUXRpBdYbul/RI8Cer3T/w== 0000950144-97-001088.txt : 19970221 0000950144-97-001088.hdr.sgml : 19970221 ACCESSION NUMBER: 0000950144-97-001088 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALUMAX INC CENTRAL INDEX KEY: 0000912600 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 132762395 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12374 FILM NUMBER: 97523033 BUSINESS ADDRESS: STREET 1: 5655 PEACHTREE PKWY CITY: NORCROSS STATE: GA ZIP: 30092 BUSINESS PHONE: 4042466600 MAIL ADDRESS: STREET 1: 5655 PEACHTREE PKWY CITY: NORCROSS STATE: GA ZIP: 30092 10-K 1 ALUMAX INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ------------------------ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED COMMISSION FILE NUMBER DECEMBER 31, 1996 1-12374
ALUMAX INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE 13-2762395 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
5655 PEACHTREE PARKWAY NORCROSS, GEORGIA 30092 (PRINCIPAL EXECUTIVE OFFICES) TELEPHONE NUMBER: (770) 246-6600 ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS: ON WHICH REGISTERED: -------------------- --------------------- Common Stock, $0.01 par value per share New York Stock Exchange (including Stock Purchase Rights relating thereto)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of January 31, 1997, 54,781,206 shares of the common stock of the registrant were issued and outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant was $1,894,232,095 as determined by the January 31, 1997 closing price of $35.00 for one share of common stock on the New York Stock Exchange. DOCUMENTS INCORPORATED BY REFERENCE Proxy Statement for the Annual Meeting of Stockholders of the registrant to be held on May 29, 1997. Certain information therein is incorporated by reference into Part III hereof. ================================================================================ 2 PART I ITEM 1. BUSINESS GENERAL Alumax Inc. ("Alumax" or the "Company") is the third largest aluminum company in the United States and the fourth largest in North America, based on sales, and operates over 70 plants and other manufacturing and distribution facilities in 22 states, Canada, Western Europe, Mexico, Australia, the People's Republic of China and Poland. The Company is an integrated producer of aluminum products, operating in a single segment: aluminum processing. Using alumina purchased from one principal supplier, the Company produces primary aluminum employing an electrolytic process at five reduction plants in the United States and Canada. Primary products are sold externally or further processed by Alumax into a broad range of semi-fabricated and fabricated products. The Company's products are sold to a wide variety of markets, including transportation, distributors, building and construction, consumer durables, and packaging. Since becoming an independent public corporation in November 1993, Alumax has taken several significant steps to increase stockholder value, position the Company for future growth and strengthen its balance sheet. Alumax has devised and implemented a four-point business strategy designed to (i) enhance the Company's position as a low-cost producer of primary aluminum; (ii) grow in transportation, aluminum's largest and fastest growing market; (iii) emphasize the manufacture of more specialized, value-added products; and (iv) expand in emerging global markets where the Company believes it will be able to capitalize on its product strengths. The four-point strategy has been complemented by the Company's continuing efforts to increase its operational strengths and efficiencies, principally by improving its business and product mix, enhancing its market share and unit volume growth, reducing controllable costs and improving productivity. The Company has also reconfigured its asset base by (i) disposing of various businesses and assets which did not generate, and offered limited prospects of yielding, acceptable returns or which were not integral to the Company's long- range business activities and (ii) reinvesting the proceeds derived from such dispositions into businesses having greater potential for future growth. In the three years ended December 31, 1996, sales of businesses and assets generated $770.0 million in cash and were comprised of the following major transactions: - The September 1996 sale of certain of the Company's fabricated products businesses in the United States and Western Europe to Euramax International plc for $246.6 million. The sale did not include any of Alumax's architectural aluminum operations in Europe or the United States, nor did it include the Company's Magnolia Division in the United States. The businesses sold had annual sales of $485.0 million in 1995 and $363.3 million in 1996 (through the date of disposition) and employed approximately 2,100 persons. - The June 1996 sale of the Company's investment in Mexican mining interests to Minas Penoles, S.A. de C.V. for total consideration of $160 million. - The January 1996 sale of a 23 percent undivided interest in the Company's Mt. Holly primary aluminum reduction plant to a subsidiary of Glencore Ltd. for $89.3 million, which the Company applied to the early retirement of a $90.7 million promissory note due in May 1996. The sale reduced the Company's ownership interest in the Mt. Holly plant to 50.33 percent. - The March 1995 sale of a 14 percent undivided interest in each of the Company's Intalco and Eastalco primary aluminum reduction plants to a Japanese consortium for $147.6 million. The sale reduced the Company's ownership interest in each such facility to 61 percent. - The March 1994 open market sale of the Company's 37 percent interest in Aztec Mining Company, an Australian corporation, for $75 million. Sales of businesses and assets in 1996 generated after-tax gains of $140.4 million and raised proceeds of $495.9 million, which exceeded the total cost of the $436.5 million Cressona Aluminum Company ("Cressona") acquisition on January 31, 1996 and enabled the Company to retire the debt acquired and 1 3 incurred in connection with that transaction. Cressona, a privately held Pennsylvania corporation and a leading manufacturer of extruded aluminum products, has been merged with Alumax's other extrusions operations to form an organization regarded as having the world's largest soft-alloy extrusion manufacturing capacity. Active redeployment of assets, as described above and in greater detail herein, has helped to reduce the Company's exposure to the domestic building and construction market and to increase its presence in the higher growth transportation and distribution sectors. It has also helped strengthen the Company's balance sheet, resulting in a substantial increase in stockholders' equity and a significant reduction in the ratio of total debt to invested capital over the last three years. The Company will continue to manage its asset base actively with a view toward strengthening its business and product mix and enhancing its position in key aluminum markets. The table below sets forth certain information concerning the Company's production, metal shipments and sales by class of product during the last three years. As used herein, a "tonne" means a metric ton equal to 2,204.6 pounds.
YEAR ENDED DECEMBER 31, ------------------------------ 1996 1995 1994 -------- -------- -------- Production and metal shipments (in thousands of tonnes): Sources of metal Primary aluminum production............................ 686.3 650.9 680.7 Metal purchases (including scrap aluminum)(1).......... 419.6 355.3 364.5 -------- -------- -------- Total............................................. 1,105.9 1,006.2 1,045.2 ======== ======== ======== Metal shipments Aluminum processing (including tolling) Primary products..................................... 374.3 416.6 423.8 Semi-fabricated products(2).......................... 574.5 414.3 488.7 Fabricated products(2)(3)............................ 133.3 142.6 166.8 -------- -------- -------- Total............................................. 1,082.1 973.5 1,079.3 ======== ======== ======== Net sales by class of product (in millions): Aluminum processing Primary products....................................... $ 658.9 $ 724.5 $ 592.7 Semi-fabricated products(2)............................ 1,639.5 1,235.4 1,264.2 Fabricated products(2)(3).............................. 860.9 966.2 897.6 -------- -------- -------- Total............................................. $3,159.3 $2,926.1 $2,754.5 ======== ======== ========
- --------------- (1) The Company purchases scrap from various sources, including dealers, fabricators and customers, for aluminum processing. It also purchases primary aluminum to meet customer demand for premium products. (2) In conjunction with the sale of certain Fabricated products businesses, net sales and shipments for the Company's Magnolia operations have been reclassified from Fabricated products to Semi-fabricated products. Magnolia, which manufactures shower and tub enclosures, stadium seating and other extruded products, has been transferred into the Company's extrusions business. (3) Included in Fabricated products metal shipments for the years ended December 31, 1996, 1995 and 1994 are billet shipments of 28,600, 26,800 and 51,700 tonnes, respectively. 2 4 Information concerning the estimated distribution of the Company's sales for the last three years is presented below. Sales to distributors increased significantly in 1996 as a result of the acquisition of Cressona and the Company's efforts to diversify its product lines.
APPROXIMATE PERCENTAGE OF SALES DOLLARS ---------------------- 1996 1995 1994 ---- ---- ---- Primary aluminum and other raw material sales............... 22% 26% 24% Processed product sales by market:* Building and construction................................. 30 34 36 Transportation............................................ 17 15 16 Distributors.............................................. 16 10 9 Consumer durables......................................... 3 5 5 Packaging................................................. 4 4 6 Other..................................................... 8 6 4 --- --- --- Total............................................. 100% 100% 100% === === ===
- --------------- * Includes both semi-fabricated products and fabricated products. Transportation consists primarily of sales to the automotive, truck, trailer and railcar markets. Alumax does not have significant sales to the aircraft manufacturing market. Additional operating and geographic area financial information is presented in Note 16 to the Financial Statements included elsewhere herein. PRIMARY ALUMINUM PRICES The aluminum industry is highly cyclical in nature. The Company's results of operations and financial condition depend to a large degree on primary aluminum prices, as well as conditions in the building and construction and transportation industries. This price sensitivity impacts substantially all of the Company's products to varying degrees, with less impact on the more specialized and value-added products. Primary aluminum prices, which are determined by worldwide supply and demand conditions, declined significantly from 1989 through 1993 but have shown general improvement over the last three years. The most commonly used index of pricing in the aluminum industry is the average price per tonne as reflected by the London Metal Exchange (the "LME"). The LME index is not necessarily representative of prices actually realized by the Company but generally approximates the trend with respect to Alumax's realized prices (exclusive of the effects of the Company's price risk management strategy described below). Using the LME index, the cyclical nature of aluminum pricing is illustrated in the table below. LME AVERAGE ANNUAL CASH PRICE* (HIGH GRADE CONTRACT)
US$ PER US$ PER YEAR TONNE POUND ---- ------- ------- 1980.................... 1,810 .82 1981.................... 1,300 .59 1982.................... 1,010 .46 1983.................... 1,480 .67 1984.................... 1,280 .58 1985.................... 1,080 .49 1986.................... 1,190 .54 1987.................... 1,590 .72 1988.................... 2,580 1.17 1989.................... 1,950 .88
US$ PER US$ PER YEAR TONNE POUND ---- ------- ------- 1990.................... 1,640 .74 1991.................... 1,300 .59 1992.................... 1,250 .57 1993.................... 1,140 .52 1994.................... 1,480 .67 1995.................... 1,810 .82 1996.................... 1,510 .68 1997-First Quarter (through January 31)................... 1,576 .71
- --------------- * Adjusted for years prior to, and including, 1987 to reflect the introduction of High Grade Contract. 3 5 Market fundamentals relative to the supply and consumption of aluminum have improved significantly since 1993, when aluminum prices reached historic lows on an inflation-adjusted basis. The LME cash price increased substantially during 1994 and in early 1995, reaching a high of $.97 per pound during January 1995. Inventory de-stocking and generally weaker economic conditions worldwide during the second half of 1995, along with significant restarts of previously idled production capacity, led to reported inventory (consisting of producer plus LME terminal stocks) increases that lasted through January 1996. The level of reported inventory remained relatively unchanged through August 1996, with ingot stocks on the LME alone increasing through early November. During this period of relatively flat overall consumption, producer and consumer activity on the LME was subdued, which resulted in the LME cash price declining from $.75 per pound at the beginning of January 1996 to an average of $.61 per pound during October 1996. Since that time, industry fundamentals have improved, and reported inventories have declined. The LME cash price increased to a December average of $.68 per pound and was $.72 per pound at January 31, 1997. Despite the general improvements in average product prices that have been experienced since 1993, there can be no assurance that recent price levels will be maintained. Historically, the Company priced its primary aluminum production at market, with realized prices closely tracking cyclical shifts in market prices. To maintain market based pricing while entering into forward fixed price arrangements required by certain customers and suppliers, the Company utilizes futures contracts which effectively convert forward fixed price arrangements to market prices as of specified settlement dates. The Company also may, from time to time, establish a floor selling price for varying quantities of future production, while preserving the opportunity to participate in upward price movements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Management" and Note 15 to the Financial Statements included elsewhere herein. ALUMINUM PROCESSING Primary products The Company, through Alumax Primary Aluminum Corporation and several other wholly-owned subsidiaries, produces and markets t-ingot and a variety of premium primary products, including extrusion billet, slab and foundry ingot. These products are consumed, by both the Company's downstream operations and third party customers, in rolling mills, extrusion plants, foundries and remelt operations. In 1996, over one-half of the Company's primary aluminum production was sold to its downstream operations. The Company believes, based on its ownership interest in the facilities described below and upon reports of industry analysts, that the average primary aluminum reduction costs at its facilities are well within the lower half of all aluminum reduction facilities in the western world. The Company is committed both to maximizing its earnings from the sale of premium primary products and to improving its cost position relative to other primary aluminum producers. 4 6 The table below summarizes the capacity of the five primary aluminum reduction facilities in which the Company has an ownership interest and reflects the Company's share of capacity.
PERCENTAGE OWNERSHIP ALUMAX'S SHARE OF INTEREST AS OF TOTAL AMOUNT OF TOTAL ANNUAL FACILITY DECEMBER 31, 1996 NAMEPLATE CAPACITY NAMEPLATE CAPACITY -------- ----------------- ------------------- ------------------- (TONNES PER YEAR) Lauralco Deschambault, Quebec...................... 100.00% 215,000 215,000 Intalco Ferndale, Washington...................... 61.00% 272,000 165,900 Eastalco Frederick, Maryland....................... 61.00% 174,000 106,100 Mt. Holly Goose Creek, South Carolina............... 50.33% 205,000 103,200 ABI Becancour, Quebec......................... 24.95% 372,000 92,800 --------- ------- Total.................................. 1,238,000 683,000 ========= =======
During 1996, the above facilities produced an aggregate of 1,311,511 tonnes of aluminum, of which the Company's share was 686,306 tonnes. In anticipation of increased demand for primary aluminum by Alumax's downstream operations, including Cressona, and in response to the availability of more favorably priced electricity, the Company announced in the fourth quarter of 1995 that it was restarting approximately 90,000 tonnes of annual primary aluminum production capacity that had been previously idled. Approximately two-thirds of the capacity restarted was at Intalco, with the remainder at Mt. Holly. The restarts were completed by January 1996. The Company's smelter network is currently operating at or above full nameplate capacity. Production enhancements put into place during 1996 at Mt. Holly resulted in an increase in total nameplate capacity from 182,000 to 205,000 tonnes per year at that facility. A Japanese consortium, led by a subsidiary of Mitsui & Co. Ltd., owns an aggregate 39 percent undivided interest in each of the Intalco and Eastalco facilities. Subsidiaries of Century Aluminum Company, a publicly traded domestic corporation, and Sudelektra Holding AG, a Swiss corporation, together own 49.67 percent of Mt. Holly. On January 26, 1996, a subsidiary of Glencore Ltd., a Swiss corporation ("Glencore"), acquired a 23 percent ownership interest in Mt. Holly from Alumax for $89.3 million which the Company applied to the early retirement of a $90.7 million promissory note due in May 1996. In connection with the sale, the share of the Company's 1996 production from Mt. Holly to which Glencore was entitled under the terms of a tolling agreement that expired in July 1996 was reduced from 90,719 to 48,980 tonnes on an annualized basis. The Company recorded a pre-tax gain of $78.4 million ($48.6 million after-tax) in respect of the sale. The 23 percent interest in Mt. Holly acquired by Glencore in 1996 was subsequently transferred by merger to Sudelektra Aluminum Corporation. A 26.67 percent interest in Mt. Holly already held by Glencore comprised part of the assets spun off by Glencore in 1996 through an initial public offering of shares in Century Aluminum Company. Primary aluminum is produced by the reduction of alumina, which is refined from bauxite, in a series of pots (potline) through an electrolytic process. The Company does not mine bauxite or refine alumina. Alcoa of Australia Limited ("Alcoa of Australia") has been the Company's principal supplier of alumina for over 20 years and currently provides substantially all of the alumina for the Company's reduction operations under a long-term contract which, with renewal options, expires in increments between 2007 and 2018. Pricing under the contract is determined in part on a cost basis and in part on a market basis, providing the Company with protection against spot market price extremes during periods of tight supply and a secure source of supply with a reliable high-quality producer, reportedly having the lowest costs of production in the world. The Company believes that any additional supplies of alumina it may require, from time to time in the foreseeable future, in excess of that supplied by Alcoa of Australia can be obtained at competitive prices. While there has been no interruption in supply during the period that Alcoa of Australia has supplied the Company's alumina requirements, an extended interruption of supply of alumina from Alcoa of Australia could have a material 5 7 adverse effect on the Company's operations. Other raw materials needed for the production of aluminum, such as petroleum coke, coal tar pitch and aluminum fluoride, are purchased from third parties. The Company believes that it can continue to obtain adequate supplies of these materials at competitive market prices. The primary aluminum reduction process, which strips the oxygen atoms from the alumina molecule, requires substantial amounts of electric power. Lauralco, Intalco, Eastalco, Mt. Holly and ABI purchase electricity under long-term contracts which expire in the years 2014, 2001, 2000, 2000 and 2014, respectively, subject to certain extension provisions. Except for Intalco, each facility's contract is with a single supplier. Power rates for all of the electricity supplied to ABI and Lauralco are linked to the prevailing price of aluminum. The Eastalco power contract contains a profit sharing surcharge, which is capped, that has floor and ceiling trigger prices which are linked to the price of aluminum. In late 1995, Intalco entered into a series of new long-term power contracts with the Bonneville Power Administration (the "BPA") and British Columbia Power Exchange Corporation ("Powerex") to provide for all of its electricity needs from September 1996 through 2001. Under the new contracts, Intalco's power costs are no longer linked to the price of aluminum but are set at a fixed rate. The power supply agreement with BPA requires further regulatory approval, and legal challenges have been lodged against the long-term agreement with BPA by a group of industrial consumers of electricity and a group representing environmental interests. The Company believes these challenges will be resolved favorably. In the event that the challenges to the agreement with BPA are successful, the Company believes that it can enter the market to obtain alternative power at competitive rates. Intalco has certain additional agreements with BPA to purchase power during favorable pricing periods in the spring months. The Company expects to meet its power requirements over the foreseeable future pursuant to the aforementioned contracts. Interruptions of power supply could have a material adverse impact on the Company by increasing the cost of production of primary aluminum or necessitating a reduction in production. In January 1993, production at Intalco was reduced by approximately 25 percent in response to the curtailment by the BPA, due to drought conditions, of hydroelectric power supplied to certain of the BPA's direct service industry customers, including Intalco. Production at this facility was curtailed by an additional 40,000 tonnes in the second quarter of 1994 due to adverse market conditions. Production at the Mt. Holly plant was reduced by 20 percent in February 1993 in response to adverse market conditions and the higher energy costs at this facility compared to the energy costs at the Company's other reduction facilities. As indicated above, the Company restarted all of this previously idled production capacity in late 1995 and early 1996. For information with respect to the credit agreement entered into in 1990 with a group of banks to finance the construction of the Lauralco primary aluminum reduction facility, see Note 6 to the Financial Statements included elsewhere herein. Semi-fabricated products Alumax Extrusions. Alumax Extrusions manufactures a broad line of soft-alloy extruded products, as well as secondary billet to be sold to third parties, at ten plants located in Pennsylvania, Tennessee, Florida, Arkansas, Georgia, Mississippi, Illinois, South Dakota, Utah, and North Carolina. Its shower and bath enclosures are distributed through eight service centers in California, Florida, Georgia, North Carolina, Pennsylvania, Texas and Washington. Alumax Extrusions also maintains an international presence, with operations in Mexico and Australia. The Mexican operations consist of a three-press extrusion plant in Monterrey, with distribution facilities in Mexico City, Guadalajara and Hermosillo. An extrusion plant near Melbourne, Australia began production of aluminum sheathing for the manufacture of co-axial television cable in August 1996. Except for the plants located in North Carolina, Melbourne and Monterrey, the eight service centers, and the distribution facilities in Guadalajara and Hermosillo, which are leased, Alumax Extrusions owns all of the aforementioned plants and facilities. The sales volume and manufacturing capacity of Alumax Extrusions more than doubled in 1996 when Alumax purchased all of the outstanding common shares of Cressona, a leading independent manufacturer of extruded aluminum products, for a cash cost, including expenses, of $436.5 million, net of $3.1 million of cash 6 8 acquired. In conjunction with the acquisition, accounts payable, debt and other liabilities of $87.4 million were acquired. The Cressona facilities have been integrated with the Company's other extrusion operations to form a unified manufacturing support group consisting of twelve plants with a total of 45 presses that range in size from 700 to 6,000 tons. The combined operation is regarded as having the world's largest soft-alloy extrusion manufacturing capacity. Its integrated resources include complete melting, alloying and casting facilities for 18 alloys, one of the industry's largest in-house shops for the design and production of tooling and dies, and facilities for fabrication, assembly, painting and anodizing. Press operations utilize both direct and indirect extrusion technology. The wide range of press sizes and capacities offers scheduling flexibility and increased manufacturing efficiency. Alumax Extrusions' product line includes primary, semi-fabricated and fabricated extruded aluminum alloys, parts and components. Available in circle sizes up to 20 inches, product classifications extend to standard and custom extruded shapes (solids, semi-hollows and hollows), standard and specialty rod and bar, seamless and structural pipe and tube, seamless mechanical pipe and tube, and seamless tubular bus conductors. Alumax Extrusions also produces DIAMONDBACK(R) Slip-Resistant Systems, an integrated line of components and accessories that are designed for improved safety on access, walking and working surfaces. The Cressona acquisition has provided the Company with improved process control systems, including many advancements in Computer Integrated Manufacturing (CIM). It has also created a more diversified product mix and strengthened distribution capabilities. A resulting expansion of the customer base, both in the distributor marketplace and Original Equipment Manufacturers (OEM) accounts supplied by Cressona, will help offset seasonal and cyclical fluctuations in other markets such as building and construction. To recognize these expanded capabilities and to provide greater focus on its key markets, Alumax Extrusions is organized into three distinct business units: Alumax Building & Construction Products, Cressona Aluminum Company, and Alumax Transportation Products. Although headquartered at different locations, all three business units are supported by the unified manufacturing group. The goal of this structure is to provide specialized sales and service designed to satisfy customer requirements in the areas represented by the three business units. Alumax Building & Construction Products, headquartered in Plant City, Florida, is a leading supplier principally to the residential and commercial window and door market. Alumax Building & Construction Products is known for the quality of its intricate and thin wall specialty extrusions. Utilizing five paint lines, approximately 80 percent of the products are supplied with thermal set polyester paint, Kynar resin coatings, anodized finishes, or high performance coatings for corrosive environments. Representative products include extrusions for windows, doors and shutters; shower doors and bath enclosures; patio and pool enclosures up to 40 feet in length; light poles and flagpoles; bridges, rail and decking; treatment plants and other infrastructure markets; highway and street signs; clear and colored architectural shapes; louvers and vents; ladders; conduit; and cable tray and conduit. Cressona Aluminum Company is a leading supplier to the service center industry. From its headquarters in Cressona, Pennsylvania, Cressona Aluminum also services key OEM accounts in the machinery and equipment, electrical switchgear and transmission, recreation, medical, and consumer durables markets. Cressona Aluminum offers a broad product line of standard and custom extruded shapes, extensive capabilities in pipe and tube, large circle size profiles, and tight tolerance products that utilize indirect extrusion technology. Cressona also markets a line of specialty rod and bar products that include ECON-O-ROD, ACC-U-ROD(R), ECON-O-PLATE(R) and ACC-U-PLATE(R). From its location in West Chicago, Illinois, Alumax Transportation Products is a leading supplier to the automotive, truck, truck trailer, and railcar markets. Its resources also include a technical center, product specialists, engineering and design experts, and a fabrication support group to assist with the growing usage of extrusions in the transportation industry. Representative products include extruded profiles for automotive space frames, anti-lock brake parts, automotive air bag components, bumper beam components, seating and window components, truck and trailer bodies, recreational vehicle parts, and railcar structural members. 7 9 In the potential market for frame and chassis extrusions, Alumax Transportation Products is developing solutions for joining and forming aluminum structurals through the use of retrogression heat treatment (RHT) and compression-fit (CF) technologies. RHT employs rapid, short-term and localized heat treatment of aluminum to improve fatigue properties, ductility and toughness. When used with appropriate fabrication processes, RHT offers advantages in forming and bending large, complex profiles of hard tempers. The growth in transportation and automotive uses of aluminum extrusions reflects a move toward lightweight, fuel-efficient and environmentally responsible future modes of transportation. To meet these requirements, Alumax Transportation Products teams with other Alumax subsidiaries on product development and technology interchange. Alumax Mill Products. Alumax Mill Products produces flat rolled products with both painted and mill finishes at mills in Lancaster, Pennsylvania, and Texarkana, Texas. In addition, it operates facilities in Riverside, California and Lancaster, Pennsylvania which produce semi-fabricated cast aluminum plate, engineered to meet highly specialized industrial applications. The Lancaster and Texarkana mills also produce limited quantities of sheet for beverage container components. The Texarkana mill, which is currently under lease, will be purchased by Alumax Mill Products in November 1997 for approximately $97 million in cash. Alumax Mill Products produces semi-fabricated products, including sheet, plate, circles and blanks, which are used for building products, transportation products, consumer durables, machinery and equipment and in other industrial applications. A major portion of Alumax Mill Products' sales are to distributors, who are supplied products consisting of painted, embossed, heavy gauge and anodizing quality sheet. Alumax Mill Products also supplies a substantial amount of non-heat treatable sheet to the automotive, truck and marine markets. These products consist of automotive alloys, automotive trim, brazing materials, truck body and trailer sheet, as well as painted sheet and coil. Alumax Mill Products' sheet is used in a variety of other products, including cookware and appliance name plates. Some of Alumax Mill Products' markets are seasonal, notably the building and construction market in which demand is generally lower in the fall and winter seasons than in the spring and summer when the weather is more suitable for construction. Alumax Mill Products implemented a restructuring plan in 1994 with a view toward consolidating, streamlining and modernizing its business over a four-year period ending in 1997. As part of the plan, Alumax Mill Products closed its Morris, Illinois mill and terminated sheet operations at its Riverside, California mill during 1994 and is currently expanding and modernizing the overall capabilities of the Lancaster and Texarkana mills. Costs of the expansion and modernization, which are expected to be completed in 1997, are expected to total approximately $91 million. The restructuring plan also provided for the construction of a separate cast aluminum plate facility adjacent to the Lancaster mill at a cost of approximately $26 million. This new facility began commercial production in the third quarter of 1996. Alumax Foils. Alumax Foils' facility in St. Louis, Missouri uses the continuous casting process to produce aluminum sheet which is then processed through rolling mills and heat treating ovens to manufacture foil in various thicknesses, widths, tempers and alloys. Foil products are sold primarily to commercial users in the flexible packaging, converter, food service and pharmaceutical industries. The nature of these products and diversity of customers insulates Alumax Foils from seasonal fluctuations. In 1996, Alumax Foils completed construction of a new wide, light-gauge aluminum foil rolling facility in Russellville, Arkansas. The plant, which will expand Alumax Foils' overall production capacity by approximately 30 percent when fully operational, includes two wide rolling mills, annealing ovens and ancillary equipment, all dedicated to the production of light-gauge converter foil. Initial customer shipments are expected to begin in the first quarter of 1997. Fabricated products Kawneer. Kawneer designs, manufactures and markets architectural aluminum products and is a leading producer of such products in the United States and Canada. Kawneer also sells its products for use in major construction projects in foreign countries where it does not have production facilities, particularly in the Far East. 8 10 Kawneer products are manufactured mainly from extruded aluminum shapes which are fabricated into curtainwall, store front and entrance systems, windows, framing and decorative aluminum products which are then anodized or painted. Kawneer operates five integrated architectural plants, 15 service centers and two additional manufacturing locations in the United States, which include plants owned by Kawneer in Arkansas, California, Georgia, Indiana, Michigan, Pennsylvania and Tennessee. Distribution is principally through dealers, most of whom are glazing contractors. These products also may be sold to building contractors and owners, and Kawneer has acted as a subcontractor for entire wall or window systems on numerous major projects. Demand for Kawneer's products generally follows the seasonal and cyclical trends of the nonresidential construction industry. Kawneer believes that it is well positioned to participate in the modest rate of growth expected to occur in this market over the near term and remains committed to continue its efforts aimed at reducing costs, improving productivity and enhancing product quality and customer service. Kawneer has international operations in Canada, the United Kingdom, France, Germany, Poland and The Netherlands. It also participates in a joint venture in Morocco. In Canada, Kawneer operates two integrated architectural plants which provide most of the product that is sold for large overseas projects, as well as two service centers. Two manufacturing plants located in France, and one each in England and Germany, three of which are owned by Kawneer and one of which is leased, provide architectural aluminum products very similar to those offered by the operations in the United States. These products are marketed under the Kawneer name in the United Kingdom and Western Europe. Kawneer also operates service centers it leases in France, Poland and Morocco. Other international operations of Kawneer include plants it owns in Wales and The Netherlands that produce custom extrusions for sale throughout Western Europe. These plants also provide extruded products to Kawneer's architectural companies for further processing into architectural aluminum products. The billet needed for the extrusion activities is supplied by a casting plant in The Netherlands. This plant converts scrap and aluminum ingot into billet on a tolling basis and for intra-company use and outside sales. In addition, Kawneer continues to pursue opportunities in the former East-Bloc nations, principally through the sale and distribution of Kawneer products in Poland. In November 1996, Alumax announced that negotiations regarding the possible acquisition of Eduard Hueck GmbH & Co. KG by the Company had been terminated by mutual agreement. Hueck, based in Ludenscheid, Germany, is a manufacturer of aluminum architectural products. AEMP. Alumax Engineered Metal Processes ("AEMP") is engaged in the forming of component parts with consistently high integrity and mechanical properties using aluminum alloys. Marketing activities are focused almost exclusively on the automotive market. AEMP maintains its headquarters in St. Louis, Missouri, and a sales office in Detroit, Michigan. Activities in St. Louis include product and process developments, marketing and support functions, and technical support. During 1996, production increased steadily at AEMP's new $75 million plant in Jackson, Tennessee. AEMP is utilizing its proprietary, semi-solid forming technology to produce high integrity, near-net-shape auto components at this facility. A majority of the parts produced are used in fluid containment applications. At year-end 1996, the plant was operating at rates below design capacity. Production is expected to increase progressively as part programs become qualified by customers. A $15 million recycling facility was constructed at Jackson during 1996 to reclaim scrap generated at the manufacturing plant, enabling such material to be reused in the semi-solid forming technology process. AEMP also completed construction of a $23 million plant at Bentonville, Arkansas designed to manufacture larger component parts for the automobile industry using its semi-solid forming technology. Start-up operations began on schedule in the third quarter of 1996. The Bentonville facility is expected to begin producing specialty automotive wheels in the first quarter of 1997. The Company has also formed a joint venture company with Mitsui & Co., Ltd. of Japan and Mitsui & Co. (U.S.A.), Inc. to license this proprietary technology to companies exclusively in Japan. 9 11 OTHER ACTIVITIES Alumax International Company To further its objective to participate in growth opportunities in emerging global markets, the Company, through Alumax International Company, a wholly owned subsidiary ("AIC"), has entered into a joint venture with Yunnan Aluminum Processing Factory in Kunming, China, providing for the annual production of 8,000 to 10,000 tonnes of light gauge aluminum foil for China's packaging market. The Company has a 56 percent interest in the joint venture and will invest $38 million in cash to develop a continuous cast foil operation. Alumax Foils is expected to provide training, as well as management and technical assistance, to the joint venture. AIC is actively exploring other business opportunities on a worldwide basis. Alumax Materials Management In 1996, the Company organized Alumax Materials Management, Inc. ("AMM"), a wholly owned subsidiary, to provide certain services to other subsidiaries of the Company. These services include primary products sales and customer service, centralized procurement of all non-primary metal and selected non-metal inputs, and use of the futures markets to hedge certain risks related to primary aluminum prices, fixed forward sales, metal inventory positions, and energy costs. AMM is also responsible for the centralized procurement of certain shipping and freight services. Product Distribution Alumax produces and distributes products at all stages of the aluminum product chain, from primary ingot to fabricated finished products, for a variety of industrial, commercial and consumer markets. To reach these markets the Company uses most common forms of product distribution channels -- wholesale distributors, OEM manufacturers, traders, retail consumer goods outlets, agents, manufacturers' representatives, general line and specialized dealers, and direct sales. Many intermediate products, such as ingot, sheet and plate, are distributed to other aluminum producers and fabricators for further processing and distribution through many of these same channels. Competition The markets for most aluminum products are highly competitive. Primary aluminum ingot is a commodity product, traded extensively on world metal markets, and is thus very price sensitive. The market for premium ingot products is also highly sensitive to pricing, but the Company believes that quality and service are also important factors in competing with other premium product manufacturers. Semi-fabricated and fabricated aluminum products compete extensively on price, quality and service, not only within the aluminum products industry but also with other materials, such as plastics, steel, copper, glass, wood, fiberglass, zinc, lead, magnesium and paper. In markets where aluminum products compete with other materials, the diverse characteristics of aluminum are also significant factors in its competitiveness, particularly its light weight and recyclability. Price competition, product range and quality, and the ability to provide technical assistance to customers are important aspects of the Company's overall strategy. A number of producers with which the Company competes are substantially larger in terms of total assets, operations and sales. Among the Company's principal competitors are Alcan Aluminium Limited, Aluminum Company of America and Reynolds Metals Company. Research and Development The Company continues to explore new technology, processes and products in the aluminum industry. Research and development activities are conducted at the Company's technical center in Golden, Colorado, and at various operating facilities. Expenditures for research and development totalled $19.2 million, $18 million and $11.4 million in 1996, 1995 and 1994, respectively. 10 12 Patents and Trademarks The Company owns or licenses a significant number of patents relating to various products and processes. The Company does not consider its business to be materially dependent on any one particular patent or patent license. The Company also owns a large number of trademarks, including the "Alumax" and "Kawneer" trademarks, which the Company believes may be material to its business. Employee and Labor Relations At year-end 1996, the Company employed approximately 14,000 people worldwide, including approximately 12,500 employees in the United States. Approximately 4,400 employees are represented by labor unions under separate labor agreements with various international unions. Management considers its employee relations to be good. In 1997, three labor contracts, covering a total of approximately 1,350 employees, will expire and are expected to be renegotiated during the year. ENVIRONMENTAL MATTERS The Company is subject to various federal, state, local and foreign laws and regulations including, among others, the Clean Air Act (including the 1990 amendments thereto), the Resource Conservation and Recovery Act and the Clean Water Act and the regulations promulgated in connection therewith, concerning the discharge of contaminants which may be emitted into the air and discharged into the waterways and governing the use, discharge and disposal of hazardous materials and wastes. The Company's present manufacturing facilities are believed to be in substantial compliance with current laws and regulations. Compliance with current laws and regulations has not had, and is not expected to have, a material adverse effect on the Company's financial condition or results of operations. Based on historical trends toward tighter environmental standards, it appears likely that the Company will incur additional expenditures to remain in compliance with federal and state environmental laws. The Company also is involved in certain claims and legal proceedings that relate to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or similar state laws that impose environmental liability. These matters include claims and proceedings in which the Company has been named as a defendant or "potentially responsible party" with respect to the disposal of hazardous substances at 39 pending waste disposal sites which, in most instances, were owned or operated by third parties. CERCLA and state laws can impose joint and several liability on generators of hazardous substances placed in waste disposal sites for investigative, remedial and other costs associated with cleanup of those sites if hazardous substances have been released into the environment. The Company's ultimate liability in connection with present and future environmental claims will depend on many factors, including its volumetric share of the waste at a given site, the remedial action required, the total cost of remediation and the financial viability and participation of the other entities which also sent waste to the site. Based upon current law and information known to the Company concerning the size of the sites known to it, their years of operation, the number of other financially viable and participating past users and the amount of available insurance coverage, Management believes that it has adequate reserves so that anticipated and estimable liabilities that may result from these matters, and any expenditures for remediation programs it may be required to undertake, either individually or in the aggregate, are not expected to have a material adverse effect on the financial condition or ongoing results of operations of the Company. The Company is unaware of any additional environmental matters which, based on information currently known to the Company, would have a material effect upon the Company's financial condition or ongoing results of operations. See "Legal Proceedings" below. Legislation that would reauthorize and amend CERCLA is expected to be reintroduced before Congress. The prospects for such legislative effort are uncertain, as are any potential substantive changes that might result or impact the Company's liability for cleanup costs in both pending and future claims. The Company's expenditures for environmental remediation and compliance amounted to $12.9 million in 1996, $12.7 million in 1995 and $5.3 million in 1994. Of those amounts, $8.8 million, $9.0 million and $4.9 million, respectively, was capitalized and the balance, net of insurance recoveries, was charged to reserves. Based on available information, the Company anticipates making capital and operating expenditures 11 13 of approximately $13.0 million and $12.7 million in 1997 and 1998, respectively, for environmental remediation and compliance. RECENT HISTORY The Company was incorporated in Delaware in 1973 and was operated as a joint venture principally between AMAX Inc. ("Amax") and Mitsui & Co., Ltd. until 1986. In 1986, Amax completed the acquisition of the remaining interest in Alumax not already owned by it. On November 15, 1993 (the "Distribution Date"), Amax effected a pro rata distribution (the "Distribution") of all of the Company's outstanding common shares which it then held to the holders of Amax common stock pursuant to an Agreement and Plan of Distribution, dated as of May 24, 1993, as amended as of November 15, 1993, between Amax and Alumax. The Distribution occurred in connection with the merger (the "Merger") of Amax with and into Cyprus Minerals Company pursuant to an Agreement and Plan of Merger, dated as of May 24, 1993, as amended as of November 15, 1993. The Company has operated as an independent, publicly held entity since the Distribution Date. For a description of certain agreements between Amax and the Company entered into in connection with the Distribution which define their rights and obligations in respect of certain taxes, see "Legal Proceedings -- Tax Dispute Regarding Consolidation with Amax." ITEM 2. PROPERTIES Information in response to this Item is set forth in Item 1 above. ITEM 3. LEGAL PROCEEDINGS Tax Dispute Regarding Consolidation with Amax The Internal Revenue Service (the "IRS") has asserted that the Company and certain of its subsidiaries were improperly included in Amax's consolidated income tax returns for 1984, 1985 and 1986 and on that basis has asserted a federal income tax deficiency against Alumax of approximately $129 million. Interest on the deficiency through December 31, 1996, would be approximately $276 million. In response to the IRS' notice of deficiency, the Company filed a petition in United States Tax Court (the "Tax Court"), seeking a redetermination in respect of the purported deficiency. The parties have waived their rights to a trial, and the matter has been submitted to the Tax Court for decision based upon the pleadings, stipulations, memoranda and other documents submitted, or to be submitted, to the Tax Court by the parties. A decision by the Tax Court is expected in late 1997. In connection with the Distribution and the Merger, the Company and Amax entered into the tax disaffiliation agreement, dated as of May 24, 1993 (the "Tax Disaffiliation Agreement"), defining the rights and obligations of the Company and Amax in respect of taxes following the consummation of those transactions. Under the terms of the Tax Disaffiliation Agreement, the Company has assumed responsibility for all proceedings regarding the purported deficiency and payment of any additional taxes, along with penalties and interest, which may ultimately be due. Prior to the Distribution, Amax vigorously contested the IRS' assertions regarding a deficiency, and the Company is pursuing the same course of action. Payment of the deficiency, with interest thereon, would provide certain tax benefits to the Company that would offset in part, in the year of payment and within a prescribed carryforward period, the cost of paying such deficiency and interest. Additionally, Amax has agreed with the Company to share certain tax benefits available to Amax in the event an adverse determination is ultimately made. The Company believes that it has adequate reserves so that any unprovided for net deficiency would not have a material adverse effect on the Company's financial condition. 12 14 Stringfellow In 1983, the United States and the State of California commenced an action under CERCLA in the United States District Court for the Central District of California against the Company and 30 other potentially responsible parties in connection with the Stringfellow disposal site located at Glen Avon, California. In a proceeding in the United States District Court for the Central District of California, it was determined that both the defendants and the State of California are responsible for certain costs associated with the cleanup of the Stringfellow site. The issue of the allocation of liability among the defendants and the State was tried before a Special Master who filed his Findings of Fact, Conclusions of Law and Report and Recommendation of the Special Master Regarding the State Share Fact Finding Hearing on November 30, 1993. On January 23, 1995, the United States District Court entered an order adopting the findings, conclusions and recommendations of the Special Master with certain modifications, which did not adversely impact the Company. The order allocates liability on the basis of two different types of legal claims, each of which has a different legal standard of apportionment. As to CERCLA claims, the order allocates liability as follows: 65 percent to the State, ten percent to Stringfellow Quarry Company and 25 percent to all other parties (including the Company). As to the claims asserted against the State under state law theories such as negligence and breach of a mandatory duty, the order allocates 100 percent of the liability to the State. On July 16, 1996, the State of California filed a motion for reconsideration of the District Court's liability rulings against the State, based upon the United States Supreme Court's decision in Seminole Tribe of Florida v. Florida. That decision, issued in March 1996, reversed an earlier Supreme Court decision which held that Congress had the authority to abrogate protections of the Eleventh Amendment of the Constitution barring certain suits against states in federal courts, including under CERCLA. In the motion, the State contends that the Eleventh Amendment is a jurisdictional bar which cannot be waived through conduct in litigation and that the State has not expressly waived its Eleventh Amendment immunity. Consequently, the State argues that the liability rulings against the State must be reversed or the defendants' counterclaims limited to defensive recoupment. The defendants filed an opposition to that motion on August 2, 1996, which maintains that Seminole Tribe does not alter prior law by recognizing the Eleventh Amendment as a jurisdictional bar nor does the case address the doctrine of defensive recoupment. The opposition also asserts that Seminole Tribe does not affect the question of waiver of Eleventh Amendment immunity by conduct in litigation or the District Court's prior finding that the State waived its Eleventh Amendment immunity through its conduct of the lawsuit. Oral argument on the State's motion, as well as on a motion filed by the defendants for a ruling that CERCLA liability cannot be imposed upon them retroactively and a joint motion of the United States and the defendants for entry of a judgment which will permit the parties to appeal, was made before the Special Master on November 13 and 14, 1996. The Special Master will submit written recommendations to the District Court, after which the parties will be afforded an opportunity to present objections prior to entry of an order by the court. Based on information presently available, the Company does not believe that any liability imposed in connection with the Stringfellow site will have a material adverse effect on the Company's financial condition or ongoing results of operations given the nature and extent of its involvement at the site and available reserves. Proceedings Relating to the Howmet Acquisition In December 1990, the Company and two of its subsidiaries, among others, were named as third-party defendants in a CERCLA action arising out of the operation of the Blackbird Mine, a cobalt mine in Lemhi County, Idaho. The third-party action was initiated by M.A. Hanna Company, Noranda Mining Company and certain of their affiliates, all of which were defendants in a lawsuit brought by the State of Idaho in the United States District Court for the District of Idaho in 1983 seeking recovery of response costs incurred as a result of alleged contamination resulting from cobalt mining in and around the Blackbird Mine. The Company has been involved as a result of its 1983 acquisition of Howmet Corporation from Pechiney, a French corporation. It is alleged that Howmet, along with certain of its predecessors and subsidiaries, owned and operated the Blackbird Mine and engaged in extensive mining activities. 13 15 On June 21, 1993, the Department of Justice filed an action in the United States District Court for the District of Idaho against the Company, one of its subsidiaries and several other defendants seeking response costs and natural resource damages occurring at or near the Blackbird Mine. On October 29, 1993, the Department of Justice agreed to dismiss the Company as a defendant in such action; however, a subsidiary of the Company remains a defendant. Under the terms of an agreement with Pechiney, the Company, subject to limited contributions, will be indemnified against liabilities associated with the Blackbird Mine as well as other claims and suits arising from activities predating and unrelated to the aluminum businesses acquired by the Company in 1983. The Company assigned certain rights in respect of insurance coverage to Pechiney, but is entitled to receive a portion of any recoveries obtained by Pechiney. On August 22, 1991, the Company and certain of its subsidiaries filed an action for declaratory relief seeking coverage for environmental claims and damages for breach of contract against the primary and excess insurance carriers which issued insurance policies to the Howmet corporate entities acquired by the Company in 1983. The action was brought in the Superior Court of New Jersey, Morris County and was consolidated with a similar suit between former affiliates of the acquired entities and the carriers. A motion for summary judgment filed by the insurance carriers with respect to the Blackbird Mine site on the basis that Idaho law should be applied to that claim and coverage is not available under Idaho law has been granted, in part, by the Court and a motion for reconsideration of that ruling has been filed by Pechiney and the Company. An adverse ruling on that motion or on appellate review, if sought, will not result in additional liability to the Company for the Blackbird Mine site, based upon the terms of the Company's agreement with Pechiney, but could reduce or eliminate any insurance recovery for amounts already expended by the Company in connection with that site. The Company believes that it has adequate reserves so that payments to be made and reasonably anticipated contributions required under the settlement agreement with Pechiney will not have a material adverse effect on the financial condition or ongoing results of operations of the Company. Cressona Consent Decree As indicated above, the Company acquired Cressona on January 31, 1996. Cressona is subject to a consent decree (the "Consent Decree") entered into with the United States of America to settle an action brought on behalf of the United States Environmental Protection Agency (the "EPA"). That action was initiated in the United States District Court for the Eastern District of Pennsylvania on September 10, 1992, in respect of the remediation and disposal of polychlorinated biphenyls ("PCBs") discovered at Cressona's facility at Cressona, Pennsylvania. The PCBs were ingredients in lubricants and hydraulic fluids used at that facility by the prior owner. The Consent Decree, which was filed in the action on August 3, 1993, specified actions that Cressona would undertake to fully characterize and determine the extent of PCB contamination at the facility as well as criteria and conditions to be met with respect to the remediation of such contamination. In addition, the Consent Decree imposed certain reporting requirements, established dates for the performance of specified actions to be taken, and provided for stipulated penalties for failure to comply with requirements of the Consent Decree or for discharges of PCBs in excess of specified concentrations. Cressona has either substantially complied with the provisions of the Consent Decree or sought modification of those requirements from the EPA. Cressona has provided the EPA with extensive information to characterize the nature and extent of the PCB contamination, has performed substantial remedial work and proposed measures for remediation of the remaining contamination. The precise nature and extent of further remedial activities which will be required and the costs of those activities cannot be determined with certainty at this time and may be subject to change depending upon results of further monitoring at the facility as well as EPA concurrence with the additional remedial actions proposed by Cressona. However, the Company believes that Cressona has adequate reserves so that reasonably anticipated and estimable costs for remediation of PCB contamination at the Cressona, Pennsylvania facility will not have a material adverse effect on the financial condition or ongoing results of operations of the Company. 14 16 Other Environmental Matters In addition to the Stringfellow and Blackbird Mine litigation, the Company has been named as a defendant or identified as a potentially responsible party at 37 other pending sites which, in most instances, were owned or operated by third parties, including some sites relating to operations of the Pechiney subsidiaries acquired in 1983. Unlike the Blackbird Mine and three other mining-related sites, claims against the Company at sites relating to the aluminum businesses acquired in 1983 do not fall within the indemnification obligations of the Company's settlement agreement with Pechiney. In addition, the Company and its subsidiaries have been named as defendants or potentially responsible parties at sites associated with operations of its subsidiaries which are unrelated to the Howmet acquisition. At virtually all sites, the Company is one of many potentially responsible parties who are alleged to be jointly and severally responsible for the response costs associated with the sites. Management periodically evaluates the Company's potential liability for remediation and related costs at both its own and other parties' sites. Such evaluations are based upon then current information, including alternative methods of remediation, estimated costs for implementation of such alternatives, the nature and the extent of the Company's involvement at the site in question, and anticipated contributions of other potentially responsible parties. Once it becomes probable that the Company will incur costs in connection with remediation of a site and such costs can be reasonably estimated, the Company establishes or adjusts its reserve for those projected costs. Due to uncertainties associated with developing case law relating to insurance coverage for environmental claims and remediation costs, insurance recoveries are not considered in estimating the Company's share of remediation costs at a site unless an insurance carrier has agreed to pay a portion of those costs. Projections of remediation costs by their nature are imprecise and reserves accrued by the Company represent Management's best estimate of such costs based upon available information about known sites. It is not possible to predict the amount or timing of future remediation costs which may be ultimately determined or project costs for sites which may be identified in the future. It should be recognized that a number of the Company's present and past facilities have been in operation for many years and additional remediation activities may be required as environmental laws and circumstances continue to evolve. The Company believes that it has adequate reserves so that anticipated and estimable liabilities that may result from sites known to it, and any expenditures for remediation programs it may be required to undertake, either individually or in the aggregate, are not expected to have a material adverse effect on the financial condition or ongoing results of operations of the Company. Other Legal Proceedings Justice Department Inquiry. In August 1994, Alumax received a civil investigative demand from the Antitrust Division of the Department of Justice requesting documents and information principally relating to reductions in the production of primary aluminum during the period from 1991 to the date of demand. Alumax has cooperated with the Department in connection with this inquiry. Antitrust Action. Alumax and four other producers of primary aluminum, together with The Aluminum Association, an industry trade association, were served with a summons and complaint in March 1996, alleging violations of California's State antitrust act (the Cartwright Act). The suit was originally filed in the Superior Court for Los Angeles County, but was removed by the defendants to the United States District Court for the Central District of California. Plaintiff alleges that the defendants conspired, together with the United States Government and the governments of several other sovereign nations, to fix the prices of primary aluminum by agreeing to reduce production. The allegations arise from the Memorandum of Understanding Concerning the Aluminum Market ("MOU") negotiated by the United States and other governments in 1993 and 1994, and executed by them in Brussels in 1994, and the actions of the defendants alleged to have been undertaken in connection with the MOU. The complaint was brought by a California bicycle manufacturer as a purported class action on behalf of all direct and indirect purchasers of primary aluminum and aluminum products produced during the period from January 1, 1994 to March 5, 1996. The complaint seeks injunctive relief and recovery of damages that, 15 17 when trebled, are alleged to be in excess of $26 billion. Following removal of the action to the District Court, the defendants filed a motion to dismiss. Upon considering that motion, plaintiff's opposition and the defendants' reply, the Court by order dated May 28, 1996, converted the motion to dismiss to a motion for summary judgment by the defendant-aluminum producers. In the same order, the Court granted The Aluminum Association's motion to dismiss for lack of personal jurisdiction. Following the filing of briefs in support and in opposition to summary judgment, the Court granted summary judgment in favor of the defendant-aluminum producers and dismissed the complaint with prejudice by order dated July 1, 1996. The Court denied plaintiff's subsequent motion for reconsideration by order entered on July 16, 1996. On July 18, 1996, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit from the United States District Court's orders granting The Aluminum Association's motion to dismiss and the aluminum producers' motion for summary judgment and the order denying the plaintiff's motion for reconsideration. The parties are currently in the process of submitting briefs to the United States Court of Appeals. Patent Infringement Action. On August 17, 1995, the Company filed suit in the United States District Court for the Eastern District of Arkansas against Hot Metal Molding, Inc. alleging infringement of a process patent, United States Patent 4687042 (the "042 patent"), held by the Company which is used in semi-solid forming applications. The litigation is in the discovery phase and was recently expanded by order of the Court to include Ormet Primary Aluminum Corporation ("Ormet"), the exclusive North American licensee of Pechiney Corporation's technology for casting thixotropic billet, and certain subsidiaries and affiliates of Buhler International AG, a Swiss manufacturer of die casting machines. Ormet has filed counterclaims alleging that the patent is invalid, void and unenforceable and is seeking a declaratory judgment that the 042 patent would not be infringed by the use of Ormet's billet in any diecasting application. The Company intends to vigorously pursue its infringement claims while opposing the counterclaims of Ormet and other defendants. Other. In addition to the matters described above, the Company and its subsidiaries are also involved in the defense and handling of various judicial proceedings and claims arising out of alleged defects in its products as well as other matters occurring in the ordinary course of business. Management believes, taking into account its reserves and insurance coverage, that these matters, either individually or in the aggregate, will not have a material adverse effect on the financial condition or ongoing results of operations of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended December 31, 1996. EXECUTIVE OFFICERS OF THE REGISTRANT As of February 1, 1997, the names, offices with the Company, ages and years of service as an officer of all Executive Officers of the Company were as follows:
YEARS AS NAME OFFICE AGE OFFICER ---- ------ --- -------- Allen Born Chairman and Chief Executive Officer 63 3 George P. Stoe Executive Vice President 51 6 Lawrence B. Frost Senior Vice President and Chief Financial Officer 54 10 Helen M. Feeney Vice President and Corporate Secretary 56 3 Eugene R. Greenberg Vice President 58 -- Jay M. Linard Vice President 51 -- Gary D. McDowell Vice President 54 2 Philippe G. Thaure Vice President 59 6 Michael T. Vollkommer Vice President and Controller 38 3 Robert P. Wolf Vice President and General Counsel 53 7 Thomas L. Gleason Treasurer 45 --
16 18 There are no family relationships, by blood, marriage or adoption, between the above officers. All officers are elected until the next annual meeting of the Board of Directors or until their respective successors are chosen and qualified. There is no arrangement or understanding between any of the above officers and any other person pursuant to which he or she was selected as an officer. The principal occupations and positions for the past five years of each of the Executive Officers of the Company are as follows: MR. BORN has been a Director of the Company since 1985, Chairman since April 1993 and Chairman and Chief Executive Officer since November 1993. For more than five years prior to November 1993, he had been Chief Executive Officer of Amax and also served as Chairman of that company from June 1988 to November 1993. Mr. Born was also Co-Chairman of Cyprus Amax Minerals Company from November 1993 to November 1995 and Vice Chairman of that company from November 1995 to May 1996. MR. STOE has been an Executive Vice President, responsible for the Company's semi-fabricated products businesses, since June 1994, after having been President of Alumax Mill Products, Inc., a wholly owned subsidiary of Alumax, from October 1990. In August 1995, he was given additional responsibility for the Company's primary aluminum operations. Mr. Stoe was elected a Director of the Company in December 1996. MR. FROST has been Senior Vice President and Chief Financial Officer of Alumax since May 1994, after having been a Vice President since November 1993. He also served as Treasurer of the Company from November 1993 to October 1996. Prior to November 1993, he had been Treasurer of Amax from January 1992 to November 1993. MRS. FEENEY has been Vice President and Corporate Secretary of Alumax since November 1993. For more than five years prior thereto, she had been Corporate Secretary of Amax. MR. GREENBERG was elected a Vice President of Alumax in December 1996 and has been President of Alumax Materials Management, Inc., a wholly owned subsidiary of the Company, since September 1996. Before joining Alumax in February 1996, Mr. Greenberg was vice president-materials of Commonwealth Aluminum Company from 1991. MR. LINARD was elected a Vice President of Alumax in December 1996 and has been President of Alumax Extrusions, Inc., a wholly owned subsidiary of the Company and formerly named Cressona Aluminum Company, for more than five years. MR. MCDOWELL has been a Vice President of Alumax since August 1994. He joined the Company from Amax Energy, Inc., where he had been an Executive Vice President since July 1989. MR. THAURE has been a Vice President of Alumax for more than five years and President of Alumax International Company and Alumax Technology Corporation, each a wholly owned subsidiary of the Company, since February 1994. For more than five years prior thereto, he had been a Vice President of Alumax Primary Aluminum Corporation, a wholly owned subsidiary of Alumax. MR. VOLLKOMMER has been a Vice President of Alumax since December 1995 and Controller of the Company since February 1994. He had served as Director of Accounting at Amax from December 1992 to December 1993. Prior to December 1992, he had been a Manager with the public accounting firm of Coopers & Lybrand for more than five years. MR. WOLF has been Vice President and General Counsel of Alumax for more than five years. He also served as Secretary of Alumax from November 1989 to November 1993. MR. GLEASON was elected Treasurer of the Company in November 1996. For more than five years prior thereto, he held various executive and managerial positions with Royal Bank of Canada, most recently serving as Vice President of Corporate Banking for the Eastern region of the United States. 17 19 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Common Stock, par value $.01 per share, of the Company (the "Common Stock") is listed on the New York, London, Toronto and Brussels Stock Exchanges. The following table sets forth on a quarterly basis the high and low sales prices of the Common Stock on the New York Stock Exchange for the two most recent fiscal years:
HIGH LOW ---- --- 1995 First Quarter............................................. $29 5/8 $23 3/4 Second Quarter............................................ $31 7/8 $25 7/8 Third Quarter............................................. $37 7/8 $31 1/4 Fourth Quarter............................................ $34 1/2 $27 5/8 1996 First Quarter............................................. $40 $26 5/8 Second Quarter............................................ $36 1/2 $29 1/8 Third Quarter............................................. $34 $29 Fourth Quarter............................................ $34 1/8 $30 5/8
The Company paid no dividends on the Common Stock in 1996 or 1995 and does not expect to do so over the foreseeable future. Future Common Stock dividend decisions will take into account several factors, including the then current business results and cash requirements of the Company. In addition, the Company has a loan agreement that contains, among other things, restrictions on the payment of dividends by the Company. See Note 6 to the Financial Statements included elsewhere herein. At December 31, 1996, there were 10,088 holders of record of the Company's Common Stock. 18 20 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial information of the Company for each of the five years ended December 31, 1996 which has been derived from the audited Financial Statements of the Company. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" which follows this section, and the Financial Statements and related notes included elsewhere herein. Historical per share data for earnings and book value for periods prior to 1993 have not been presented as the Company was not a publicly-held company prior to 1993.
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) OPERATING RESULTS Net sales................................. $3,159.3 $2,926.1 $2,754.5 $2,347.3 $2,431.0 ======== ======== ======== ======== ======== Earnings (loss) from operations........... $ 231.9 $ 305.8 $ 134.0 $ (116.1) $ (33.0) Gain on sales of assets(a)................ 242.9 128.8 6.6 Interest expense, net(b).................. (62.8) (65.4) (72.6) (76.5) (47.7) Other income, net......................... 10.6 7.3 4.4 6.0 1.5 Income tax provision (benefit)............ 172.6 139.1 25.7 (52.1) (16.0) Cumulative effect of accounting changes(c)............................. (3.8) (1.0) -------- -------- -------- -------- -------- Net earnings (loss)(a).................... $ 250.0 $ 237.4 $ 46.7 $ (138.3) $ (64.2) ======== ======== ======== ======== ======== Earnings (loss) applicable to common shares................................. $ 240.7 $ 228.1 $ 37.4 $ (147.6) $ (64.4) ======== ======== ======== ======== ======== EARNINGS (LOSS) PER COMMON SHARE(D) Primary................................... $ 5.19 $ 5.05 $ .84 $ (3.33) Fully diluted............................. $ 4.53 $ 4.33 FINANCIAL POSITION Working capital........................... $ 660.6 $ 767.9 $ 706.9 $ 571.9 $ 498.0 Property, plant and equipment, net........ 2,027.4 1,611.9 1,523.3 1,571.1 1,626.5 Total assets.............................. 3,298.7 3,135.0 2,958.8 2,973.6 2,871.2 Long-term debt............................ 672.0 708.9 851.9 925.2 853.3 Total debt................................ 710.4 845.9 915.5 988.2 882.7 Stockholders' equity...................... 1,640.8 1,399.3 1,162.1 1,099.6 1,211.7 OTHER DATA Total debt to invested capital............ 30.2% 37.7% 44.1% 47.3% 42.2% Return on sales........................... 7.9% 8.1% 1.7% (5.9)% (2.6)% Return on average stockholders' equity.... 16.4% 18.5% 4.1% (12.0)% (5.1)% Return on average invested capital........ 13.5% 14.1% 4.8% (4.2)% (1.6)% Book value per share(e)................... $ 30.00 $ 25.73 $ 21.45 $ 20.38
- --------------- (a) Included in 1996 is a pre-tax gain of $71.7 ($36.7 after-tax) related to the sale of certain fabricated products businesses, a pre-tax gain of $92.8 ($55.1 after-tax) related to the sale of mining interests and a pre-tax gain of $78.4 ($48.6 after-tax) related to the sale of a 23 percent interest in the Mt. Holly primary aluminum reduction plant. Included in 1995 is a pre-tax gain of $128.8 ($81.3 after-tax) related to the sale of a 14 percent interest in each of the Intalco and Eastalco primary aluminum reduction plants. Included in 1994 is a pre-tax gain of $6.6 ($4.0 after-tax) related to the sale of an Australian mining investment. (b) Includes capitalized interest of $7.5 in 1996, $5.4 in 1995, and $41.7 in 1992. (c) The 1993 results include a charge of $3.8 (net of $2 tax benefit) for postemployment benefits related to the adoption of SFAS No. 112. The 1992 results include a charge of $79.8 (net of $46.7 tax benefit) for post retirement health care and life insurance benefits related to the adoption of SFAS No. 106 and a $78.8 tax benefit related to the adoption of SFAS No. 109. (d) Per share data for 1993 are calculated on a pro forma basis using 44,354,000 average shares outstanding from November 15, 1993 through December 31, 1993, as if such shares were outstanding throughout the year. Fully diluted earnings per common share are omitted when anti-dilutive. (e) Book value per share amounts are determined as if the Series A Preferred Stock, which was converted to Common Stock in December 1996, had been converted to Common Stock in each year presented. 19 21 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Millions of dollars, except per tonne amounts) INTRODUCTION The Company is an integrated producer of aluminum products, operating in a single segment: aluminum processing. Using purchased alumina, the raw material used to produce aluminum, the Company produces primary aluminum employing an electrolytic process. Primary aluminum products are sold externally or further processed into a broad range of semi-fabricated and fabricated products. The Company's products are sold to a wide variety of markets, including transportation, distributors, building and construction, consumer durables, and packaging. The following should be read in conjunction with the Company's consolidated financial statements and the notes thereto, which are contained elsewhere herein. Net earnings for the year ended December 31, 1996 totalled $250.0 as compared to net earnings of $237.4 for the year ended December 31, 1995 and net earnings of $46.7 for the year ended December 31, 1994. The 1996 and 1995 results represent the Company's third and fourth, respectively, most profitable years since its incorporation in 1973. Since becoming an independent public corporation in late 1993, management has made significant progress in implementing a strategic plan designed to strengthen the Company's balance sheet, enhance stockholder value and position the Company for future growth. A significant component of this strategy includes the sale of certain noncore assets and mature, low growth businesses, with reinvestment of proceeds into high growth potential, core businesses. In the three years ended December 31, 1996, the Company has completed the sale of several such non-essential businesses and assets totalling $770 and has invested nearly $1 billion into business expansion and strategic acquisitions. Proceeds from the aforementioned sales include the following notable transactions: - $235.0 from mining investments in Australia and Mexico; - $236.9 from excess primary aluminum capacity; and - $246.6 from the sale of certain fabricated products businesses ("Fab Products") in the United States and Europe. Dispositions in 1996 generated after-tax gains of $140.4 and raised proceeds of $495.9, which exceeded the total cost of the $436.5 Cressona Aluminum Company ("Cressona") acquisition in January 1996 and enabled the Company to retire the debt acquired and incurred to finance that acquisition. These transactions have reduced the Company's exposure to the domestic building and construction market and increased its presence in the higher growth transportation and distribution sectors. Dispositions in 1995 generated an after-tax gain of $81.3 and raised proceeds of $147.6. In 1994, dispositions generated an after-tax gain of $4.0 and raised proceeds of $75.0. These gains have been excluded from earnings from operations in the Company's financial statements. In addition, proceeds of $6.1, $3.2 and $42.2 were received in 1996, 1995 and 1994, respectively, from the sale of various other assets. Parallel with the progress of its strategic plan, the Company's balance sheet has been substantially strengthened. Total stockholders' equity exceeds $1.6 billion at December 31, 1996, up almost 50 percent since the Company became an independent public corporation. The ratio of total debt to invested capital was 30 percent at December 31, 1996, compared to 38 percent and 44 percent at December 31, 1995 and 1994, respectively. EARNINGS FROM OPERATIONS Earnings from operations for the year ended December 31, 1996 totalled $231.9 compared to earnings of $305.8 for the year ended December 31, 1995 and of $134.0 for the year ended December 31, 1994. The lower 1996 earnings from operations is attributable to lower aluminum prices and higher raw material, research, business and product development costs. Included in 1996 earnings is $3.7 related to the liquidation of LIFO inventories and $2.1 from the sale of pollution credits. Included in 1995 earnings is a $7.3 reduction in the sheet mill operations restructuring liability to account for lower than expected costs, $5.1 from gains on sales 20 22 of assets, and $1.4 related to the liquidation of LIFO inventories. The 1994 earnings include $5.2 of income related to the liquidation of LIFO inventories and $2.3 in net gains on sales of assets.
YEAR ENDED DECEMBER 31, -------------------------------- 1996 1995 1994 -------- -------- -------- Net sales: Aluminum processing: Primary products....................................... $ 658.9 $ 724.5 $ 592.7 Semi-fabricated products(1)............................ 1,639.5 1,235.4 1,264.2 Fabricated products(1)................................. 860.9 966.2 897.6 -------- -------- -------- $3,159.3 $2,926.1 $2,754.5 ======== ======== ======== Earnings from operations: Aluminum processing....................................... $ 275.6 $ 339.7 $ 173.3 Corporate................................................. (43.7) (33.9) (39.3) -------- -------- -------- $ 231.9 $ 305.8 $ 134.0 ======== ======== ======== Sources and shipments (thousands of tonnes): Sources of metal (unaudited) Primary aluminum production............................ 686.3 650.9 680.7 Aluminum purchases..................................... 419.6 355.3 364.5 -------- -------- -------- 1,105.9 1,006.2 1,045.2 ======== ======== ======== Metal shipments (unaudited) Aluminum processing: Primary products....................................... 374.3 416.6 423.8 Semi-fabricated products(1)............................ 574.5 414.3 488.7 Fabricated products(1)(2).............................. 133.3 142.6 166.8 -------- -------- -------- 1,082.1 973.5 1,079.3 ======== ======== ========
- --------------- (1) In conjunction with the Fab Products sale, net sales and shipments for the Company's Magnolia operation have been reclassified to Semi-fabricated products. Magnolia, which manufactures shower and tub enclosures, stadium seating and other extruded products, has been transferred into the Company's extrusions business. (2) Included in Fabricated products metal shipments are billet shipments of 28.6, 26.8 and 51.7 thousand tonnes for the years ended December 31, 1996, 1995 and 1994, respectively. NET SALES AND SHIPMENTS The Company generated record sales of $3,159.3 on record aluminum shipments of approximately 1.1 million tonnes in 1996. Sales of $2,926.1 in 1995 and $2,754.5 in 1994 were generated on aluminum shipments of approximately 1.0 and 1.1 million tonnes, respectively. The Company's net sales are sensitive to changes in the world pricing of primary aluminum. The price sensitivity impacts substantially all of the Company's products to varying degrees, with less impact on the more specialized and value added products. The LME cash price averaged $1,510 per tonne in 1996 compared with $1,810 and $1,480 per tonne in 1995 and 1994, respectively. The LME price declined during 1996 from a January 1996 average of $1,590 per tonne to a December 1996 average of $1,500 per tonne. Net sales for 1996 reflect the impact of the annual average price decline. Sales growth of 6 percent in 1995 is attributable to improved pricing offset somewhat by a decline in shipments. Primary products' external net sales in 1996 decreased nine percent on shipment declines of ten percent directly resulting from higher internal consumption from downstream operations. Primary production rose in 1996 as idled capacity restarts of approximately 90,000 tonnes, which were announced in November 1995, 21 23 were completed in January 1996. The Company's smelter network is currently operating at or above full nameplate capacity. Primary products' external net sales in 1995 increased 22 percent on shipment declines of two percent, having benefited from overall higher realized selling prices in 1995 as compared to 1994. Primary production declined four percent in 1995, reflecting the sale of a 14 percent undivided interest in the Intalco and Eastalco aluminum reduction facilities on March 31, 1995. Semi-fabricated products' net sales in 1996 increased 33 percent over 1995, principally due to shipment increases of 39 percent. Substantially all of the 1996 increase in shipments was generated through the acquisition of Cressona, which more than doubled the capacity of the Company's extrusion business, creating an organization regarded as having the world's largest soft-alloy extrusion manufacturing capacity. Slightly offsetting the impact of higher shipments were lower prices in the Company's sheet mill operations. The sheet industry continues to experience low pricing due to overcapacity which has resulted primarily from displaced can sheet capacity. To address the issue of low prices, the Company is upgrading its sheet facilities and is focusing its manufacturing and marketing efforts on higher margin niche products while transitioning away from commodity sheet products. Semi-fabricated products' net sales in 1995 declined two percent from 1994 on shipment declines of 15 percent. The decline in shipments principally reflects the closure of two sheet mill operations at Joliet, Illinois, and Riverside, California, along with the impact of the August 1994 disposition of an aluminum distribution business. The decline in shipments was offset by higher realized prices in all businesses, particularly from strong demand of extruded products in the transportation industry. Fabricated products' net sales in 1996 declined 11 percent on a seven percent decline in shipments. The Company sold Fab Products, which had sales of $485.0 in 1995 and $363.3 in 1996 through the date of disposition, on September 25, 1996. This decline in sales was partially offset by an increase in sales to the domestic building and construction market. General economic conditions in the United States have had a positive impact on the domestic building and construction markets, while European architectural sales declined because of sluggish economic conditions in major European markets. Fabricated products' 1995 net sales increased eight percent on a decline in shipments of 15 percent. Higher realized pricing at all the Fabricated products businesses more than offset lower volumes. Approximately 50 percent of the volume decline in 1995 resulted from lower external billet sales in a secondary aluminum operation in Europe. COST AND EXPENSES The Company's cost and expenses were $2,927.4 for 1996 compared to $2,620.3 for 1995 and $2,620.5 for 1994. The increase in total cost and expense levels in 1996 reflects the expanded volume from the Company's extrusion operations combined with increases in raw material, research, business and product development costs, partially offset by a volume reduction associated with the Fab Products disposition. In 1995, the Company incurred certain costs associated with the effects of production curtailments, higher raw material and power costs, and external aluminum purchases. However, total cost of goods sold remained flat in 1995 in comparison to 1994 due to lower shipments. Primary production during 1995 and 1994 was below total nameplate capacity due to curtailments at the Company's Intalco and Mt. Holly primary aluminum reduction facilities. These curtailments were made in response to certain power curtailments initiated by the Bonneville Power Administration, a supplier of power to the Intalco facility, and the then prevailing low world pricing of aluminum. During the fourth quarter of 1995, in response to the anticipated increase in demand for primary aluminum from the Company's downstream businesses and the availability of favorably priced power, the Company announced the restart of its curtailed capacity. The restarts were completed by January 1996 and the facilities are currently operating at capacity. 22 24 Depreciation expense increased 27 percent in 1996 principally due to the expansion of the Company's extrusions business and the effects of recent capital spending programs. In 1995, depreciation expense decreased 5 percent compared with 1994, primarily as a result of asset sales. OTHER ITEMS AFFECTING NET EARNINGS Other income, net Other income, net for the years ended December 31, 1996, 1995 and 1994 was $10.6, $7.3 and $4.4, respectively. Included in 1996 and 1995, respectively, are $18.6 and $11.6 for dividends received from Mexican mining operations. Included in 1994 are $12.6 for dividends received from Mexican mining operations and a $1.9 loss from Alumax's equity share of operating results from an investment in Australian mining operations. The Company sold its investments in the Mexican and Australian mining operations during 1996 and 1994, respectively. Interest expense, net Gross interest expense was $74.1, $81.6 and $78.2 for the years ended December 31, 1996, 1995 and 1994. Gross interest expense in 1996 decreased due to lower interest rates compared to 1995. Gross interest expense in 1995 was higher than in 1994 due to higher interest rates partially offset by lower average borrowings. Interest income for the years ended December 31, 1996, 1995 and 1994 was $3.8, $10.8 and $5.6, respectively. Interest income was higher in 1995 due to higher interest rates and higher overall cash balances. Capitalized interest in 1996 was $7.5 as compared to $5.4 in 1995. Income taxes The income tax provision for the year ended December 31, 1996 was $172.6 compared to an income tax provision of $139.1 and $25.7 in 1995 and 1994, respectively. Effective tax rates differ from the statutory rate due to provisions for prior years and provisions for state and foreign taxes. In addition, the 1996 repatriation of foreign earnings associated with the sale of Fab Products' businesses in Western Europe also contributed to an effective tax rate higher than the statutory rate. In the first quarter of 1995, the Company reversed a $13.4 federal income tax valuation allowance in anticipation of utilization of the asset. This deferred tax asset has been subsequently realized. STRATEGIC TRANSACTIONS The Company periodically implements strategic actions which it believes afford it the opportunity to redeploy resources to enhance profitability and growth. During 1996, 1995 and 1994 the following notable strategic transactions occurred:
DISPOSITION ACQUISITION PRE-TAX AFTER-TAX PROCEEDS COST GAIN GAIN ----------- ----------- ------- --------- 1996: Fab Products.................................. $246.6 $ 71.7 $ 36.7 Mexican Mining Investment..................... 160.0 92.8 55.1 Excess Primary Aluminum Capacity.............. 89.3 78.4 48.6 Cressona Aluminum Company..................... $436.5 ------ ------ ------ ------ $495.9 $436.5 $242.9 $140.4 ====== ====== ====== ====== 1995: Excess Primary Aluminum Capacity.............. $147.6 $128.8 $ 81.3 ====== ====== ====== 1994: Australian Mining Investment.................. $ 75.0 $ 6.6 $ 4.0 ====== ====== ======
23 25 Dispositions On September 25, 1996, the Company sold certain fabricated products businesses in Western Europe and in the United States for $246.6 in cash, net of cash sold of $5.4. The Company recorded an after-tax gain of $36.7, net of a $35.0 tax provision, in the third quarter of 1996. In June 1996, the Company sold its investment in Mexican mining interests for total consideration of $160 in cash. The Company recorded an after-tax gain of $55.1, net of a $37.7 tax provision, in the second quarter of 1996. In January 1996, the Company sold a 23 percent undivided interest in its Mt. Holly primary aluminum reduction facility for $89.3, which the Company applied to the early retirement of a $90.7 promissory note due in May 1996. The Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in the first quarter of 1996. This transaction reduced the Company's ownership in the Mt. Holly facility to 50.33 percent. In March 1995, the Company sold a 14 percent undivided interest in each of the Company's Intalco and Eastalco primary aluminum reduction facilities for cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5 tax provision, recorded in the first quarter of 1995. This transaction reduced the Company's ownership in each facility to 61 percent. In March 1994, the Company sold a 37 percent undivided interest in Australian mining interests for $75.0 in cash. The Company recorded an after-tax gain of $4.0, net of a $2.6 tax provision, in the first quarter of 1994. Acquisition On January 31, 1996, the Company purchased all of the common shares of privately held Cressona for a cash cost, including expenses, of $436.5, net of $3.1 of cash acquired. In conjunction with the acquisition, accounts payable, debt and other liabilities of $87.4 were acquired. Cressona is a leading manufacturer of extruded aluminum products. The transaction has been accounted for as a purchase and the results of operations of Cressona have been included in the consolidated financial statements since January 31, 1996. The acquisition was financed with cash on hand and $375 of borrowings obtained under available credit facilities. All of these borrowings have been repaid. Pro Forma Information The following summary presents Alumax's unaudited pro forma consolidated net sales, net earnings, and primary earnings per common share for 1996 and 1995, respectively, as if the acquisition of Cressona and the sale of Fab Products each occurred on January 1, 1996 and 1995. The pro forma adjustments for 1996 include the addition of Cressona's operating results for the month of January 1996. Since the acquisition occurred on January 31, 1996, the Company's actual results include Cressona from February 1, 1996 through December 1996.
FOR THE YEAR ENDED DECEMBER 31, -------------------------- 1996 1995 -------- -------- Net sales........................................... $2,830.3 $2,910.1 Net earnings........................................ $ 243.6 $ 238.6 Primary earnings per common share................... $ 5.05 $ 5.07
The pro forma results are based upon certain assumptions and estimates, which the Company believes are reasonable. The pro forma results do not purport to be indicative of results that actually would have been obtained had these transactions occurred on January 1, 1996 or 1995, nor are they intended to be a projection of future results. 24 26 LIQUIDITY AND CAPITAL RESOURCES Operating activities Operations provided cash of $193.0 in 1996, compared to $254.7 in 1995 and $10.5 in 1994. Lower cash flow is directly related to the decrease in earnings from operations partially offset by working capital reductions, net of the effects of the Cressona acquisition and the sale of Fab Products. Cash flow in 1994 and 1995 was negatively impacted by $14.5 and $3.0, respectively, due to advance payments from a customer received in 1993 for future shipments of primary aluminum. In addition, the Company incurred $14.9 and $42.9 of cash costs during 1995 and 1994, respectively, related to the 1993 restructuring of its sheet mill operations, which has been substantially completed. Investing activities Cash used in investing activities was $177.7 in 1996 compared with cash used of $62.9 and cash provided of $36.8 in 1995 and 1994, respectively. As described under "Strategic Transactions," the Company received net cash of $59.4, $147.6 and $75 in connection with notable strategic transactions during 1996, 1995 and 1994, respectively. Additional proceeds of $6.1, $3.2 and $42.2 were received in 1996, 1995 and 1994, respectively from the sale of various other assets. Capital expenditures were $243.2 in 1996 compared with $213.7 in 1995 and $80.4 in 1994. During 1997, capital expenditures are expected to approximate $350 as the Company continues its program of investing capital in new markets, technology and facilities. As part of the 1997 capital spending, the Company, through its subsidiary, Alumax Mill Products, Inc., exercised its option to purchase its leased Texarkana rolling mill facility in November 1997 for approximately $97 in cash. Further, during 1996, the Company entered into a joint venture with Yunnan Aluminum Processing Factory in Kunming, China for the annual production of 8,000 to 10,000 tonnes of light gauge aluminum foil for China's packaging market. Alumax will invest $38 of cash in the joint venture to develop a continuous cast foil operation. As of December 31, 1996, the Company has invested approximately $13 of cash in the joint venture. Financing activities Financing activities during 1996 consumed $186.6 of cash compared with cash consumed of $78.9 in 1995 and $82 in 1994. The Company borrowed $375 under available credit facilities in January 1996 to finance the acquisition of Cressona. During the year, these borrowings were fully repaid. Total debt repayments of $552.3 in 1996 also include $136.6 of early retirements, principally consisting of $39.3 of Cressona debt acquired and a $90.7 promissory note due in May 1996. Debt repayments of $69.6 and $72.7 in 1995 and 1994, respectively, included early retirements and prepayments of $7.6 and $35.2, respectively. There were no new borrowings in 1995 or 1994. Dividends totalling $9.3 per annum were paid to holders of Alumax Series A Preferred Stock in 1996, 1995 and 1994. At December 31, 1996, 1995 and 1994, the Company's total debt to invested capital was 30.2 percent, 37.7 percent and 44.1 percent, respectively. Total debt outstanding was $710.4, $845.9 and $915.5, at December 31, 1996, 1995 and 1994, respectively. In May 1995, the Company entered into a $400 revolving credit facility (the "Credit Agreement") to replace its then existing revolving credit facility, which was terminated. The Credit Agreement has a term of five years, expiring in May 2000, with no provision for reduction in commitments during its term. Interest on outstanding balances will be based on either a base rate or LIBOR option. At December 31, 1996, the entire amount of the facility was available to the Company. The Credit Agreement contains provisions for restricting the incurrence of indebtedness by subsidiaries, as well as financial and other covenants. Under the Credit Agreement, the Company and its consolidated subsidiaries collectively are required to maintain tangible net worth of at least $700 at any time, and the Company and certain of its subsidiaries, excluding the Lauralco Project Group (see Note 6 to the Financial Statements included elsewhere herein), are collectively required to maintain a ratio of tangible net assets to funded debt of at least 2.0 to 1.0 at any time. On January 17, 1996, the Company entered into a $400 bridge loan facility to finance the acquisition of Cressona. All amounts outstanding under this facility have been repaid and the facility has been retired. 25 27 For further information relating to the Company's loan and credit facilities and for a description of certain provisions contained in a loan agreement which restrict the Company's ability to pay dividends, see Note 6 to the Financial Statements included elsewhere herein. Under this restriction, at December 31, 1996, $439.8 of retained earnings were available for the payment of dividends on common stock. Management believes current cash balances, anticipated cash flows from operations and available funds from the revolving credit facility described above are sufficient to meet the Company's planned level of capital spending and to service its debt. As a result, in April 1996, the Company withdrew its shelf registration with the Securities and Exchange Commission covering the issuance of up to 9.2 million shares of common stock. On November 4, 1996, the Company announced that it was redeeming all of the outstanding shares of its $4.00 Series A Convertible Preferred Stock ("Preferred Stock"), par value $1.00 per share, on December 18, 1996. Each share of the Preferred Stock was redeemable at a price of $52.40 per share, plus an amount equal to the quarterly dividend accrued on each share through the redemption date for a total cash redemption price of $52.60 per share. As an alternative to redemption, each share of the Preferred Stock was convertible at the option of the holder into 4.11489 shares of the Company's Common Stock until the close of business on December 4, 1996. In December 1996, the outstanding shares of Preferred Stock were converted into approximately 9.6 million shares of Alumax Common Stock. Income Taxes The Internal Revenue Service (the "IRS") has asserted that Alumax and certain of its subsidiaries were improperly included in the 1984, 1985 and 1986 consolidated income tax returns of AMAX Inc., the Company's former parent company, and on that basis has asserted a federal income tax deficiency against Alumax of approximately $129. Interest on the deficiency through December 31, 1996, would be approximately $276. In response to the IRS' notice of deficiency, the Company filed a petition in the United States Tax Court (the "Court"), seeking a redetermination in respect of the purported deficiency. The parties have waived their rights to a trial and the matter has been submitted to the Court for decision based upon the pleadings, stipulations, memoranda and other documents submitted, or to be submitted, to the Court by the parties. A decision by the Court is expected in late 1997. Payment of the deficiency with interest thereon would provide certain tax benefits to the Company that would offset in part, in the year of payment and within the carryforward period, the cost of paying the deficiency and interest. The Company believes that it has adequate reserves so that any unprovided for net deficiency would not have a material adverse effect on the Company's financial condition. Risk Management The Company utilizes certain financial instruments in connection with its risk management. The risk of loss related to counterparty nonperformance under financial instrument agreements at December 31, 1996 is not significant. The Company enters into forward fixed price arrangements that are required by certain customers and suppliers. The Company may utilize futures contracts which effectively convert forward fixed price arrangements to market prices in order to meet overall strategic objectives. Such contracts covered approximately 177,875 tonnes of aluminum at December 31, 1996 and mature at various dates through 1999. Gains or losses with respect to these positions are reflected in earnings concurrent with consummation of the underlying fixed price transaction. Periodic value fluctuations of the futures contracts approximately offset the value fluctuations of the underlying fixed price transactions. The Company also may, from time to time, establish a floor selling price for varying quantities of future production, while preserving the opportunity to participate in upward price movements. This may be accomplished by entering into forward sales of primary aluminum and purchases of call options, which together provide the same price protection as purchasing put options, or by purchasing put options alone, in a manner which correlates with the Company's production and sales of primary aluminum. The strategy may be modified from time to time. At December 31, 1996, the Company's commitments with respect to these financial instruments covered approximately 324,000 tonnes of future production. The book value and market value of these financial instruments were $16.8 and $7.4, respectively, at December 31, 1996. 26 28 Certain of the Company's foreign operating expenditures are denominated in currencies other than the operations' functional currencies, which expose the Company to exchange rate risks. In order to mitigate its exposure to exchange rate risk where these conditions exist, the Company may utilize forward foreign currency contracts. At December 31, 1996, the Company had outstanding $106 in forward foreign currency contracts which principally mature during 1997. The gains or losses related to these contracts are deferred and included in the measurement of the related foreign denominated transactions. If these contracts had been terminated at December 31, 1996, the Company would have received approximately $1.3. The Company's debt instruments and related interest rate hedges are susceptible to market fluctuations based on changes in the cost of borrowing. At December 31, 1996, the fair value of total debt approximated book value. The Lauralco credit facility, which has a variable interest rate, required the Company to establish facilities to effectively limit the interest rate exposure of the commitment. To meet this requirement, the Company has obtained interest rate swaps with notional amounts totalling $400 through October 26, 2000 and an interest rate cap with a notional amount of $150 expiring October 26, 1998. This program is designed to effectively cap interest rate exposure at a maximum of approximately nine percent through October 26, 2000. The effective rate on this debt amounted to 8.5 percent, 9.2 percent and 8.0 percent for the years ended December 31, 1996, 1995 and 1994, respectively. The Company would have paid approximately $37.9 to terminate these interest rate agreements at December 31, 1996. The Company also purchases natural gas for its operations and enters into forward contracts to eliminate the volatility in prices. At December 31, 1996, none of these contracts is material. Environmental Matters The Company has been named as a defendant or identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws by governmental agencies and private parties at 39 pending waste disposal sites which, in most instances, were owned and operated by third parties. Management periodically evaluates such matters and records or adjusts liabilities for remediation and other costs and potential damages when expenditures for such costs are considered probable and can be reasonably estimated. The Company's ultimate liability in connection with present and future environmental claims will depend on many factors, including its volumetric share of the waste at a given site, the remedial action required, the total cost of remediation and the financial viability and participation of the other entities which also sent waste to the site. Based upon current law and information known to the Company concerning the size of the sites known to it, their years of operation, and the number of other past users, Management believes that it has adequate reserves for the Company's probable share of the estimated aggregate liability for the costs of remedial actions and related costs and expenses and that such liability and related costs and expenses should not have a material adverse effect on the financial condition or ongoing results of operations of the Company. In addition, the Company establishes reserves for remedial measures required from time to time at its own facilities. Any expenditures for remediation programs it may be required to undertake, either individually or in the aggregate, are not expected to have a material adverse effect on the financial condition or ongoing results of operations of the Company. The Company's environmental reserves totalled $29.6 and $22.8 at December 31, 1996 and 1995, respectively ($27.2 at December 31, 1995 with the inclusion of Cressona). Management believes that the reasonably probable outcomes of these matters will not materially exceed established reserves. Although the Company believes it has coverage for some environmental claims under certain insurance policies, insurance recoveries are not considered in estimating the Company's share of remediation costs at a site unless an insurance carrier has agreed to pay a portion of such costs. Insurance recoveries were not considered in establishing reserves for any of these sites absent an agreement between the carriers and the Company. Management does not anticipate that commitments, operating expenses or capital expenditures for environmental compliance through and including the next fiscal year will have a material adverse effect on the Company's financial condition or ongoing results of operations. Based on historical trends toward tighter environmental standards, however, it appears likely that the Company will incur additional expenditures to remain in compliance with federal and state environmental laws. See also "Business -- Environmental Matters" in Part I hereof. 27 29 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Accountants........................... 29 Statements of Earnings for the Years Ended December 31, 1996, 1995 and 1994....................................... 30 Statements of Financial Position at December 31, 1996 and 1995...................................................... 31 Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994....................................... 32 Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1996, 1995 and 1994.................... 33 Notes to Financial Statements............................... 34
28 30 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Alumax Inc. We have audited the accompanying statements of financial position of Alumax Inc. and its subsidiaries as of December 31, 1996 and 1995, and the related statements of earnings, cash flows and changes in stockholders' equity for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alumax Inc. and its subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Atlanta, Georgia January 27, 1997 29 31 ALUMAX INC. STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, ------------------------------------ NOTE 1996 1995 1994 ---- -------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) NET SALES...................................... $3,159.3 $2,926.1 $2,754.5 Cost and expenses: Cost of goods sold........................... 2,522.0 2,285.7 2,290.1 Selling and general.......................... 267.3 225.5 215.3 Depreciation and amortization................ 138.1 109.1 115.1 -------- -------- -------- 2,927.4 2,620.3 2,620.5 -------- -------- -------- EARNINGS FROM OPERATIONS....................... 231.9 305.8 134.0 Gain on sales of assets........................ 2 242.9 128.8 6.6 Interest expense, net.......................... 13 (62.8) (65.4) (72.6) Other income, net.............................. 14 10.6 7.3 4.4 -------- -------- -------- EARNINGS BEFORE INCOME TAXES................... 422.6 376.5 72.4 Income tax provision........................... 4 172.6 139.1 25.7 -------- -------- -------- NET EARNINGS................................... 250.0 237.4 46.7 Preferred dividends............................ 10 (9.3) (9.3) (9.3) -------- -------- -------- EARNINGS APPLICABLE TO COMMON SHARES........... $ 240.7 $ 228.1 $ 37.4 ======== ======== ======== Earnings per common share: Primary...................................... 10 $ 5.19 $ 5.05 $ .84 ======== ======== ======== Fully diluted................................ 10 $ 4.53 $ 4.33 ======== ======== Weighted average shares outstanding: Primary...................................... 46.4 45.2 44.8 ======== ======== ======== Fully diluted................................ 55.2 54.8 54.4 ======== ======== ========
The accompanying notes are an integral part of these financial statements. 30 32 ALUMAX INC. STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, ---------------------- NOTE 1996 1995 ---- -------- -------- (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) ASSETS Current Assets: Cash and equivalents...................................... $ 34.6 $ 205.9 Accounts receivable, less allowance for doubtful accounts (1996-$16.6; 1995-$17.7)............................... 439.1 437.8 Inventories............................................... 3 519.9 558.3 Deferred income taxes..................................... 4 54.5 69.4 Other current assets...................................... 37.7 19.6 -------- -------- Total current assets.............................. 1,085.8 1,291.0 -------- -------- Noncurrent Assets: Property, plant and equipment, net........................ 5 2,027.4 1,611.9 Deferred income taxes..................................... 4 40.4 44.9 Other assets.............................................. 145.1 187.2 -------- -------- Total noncurrent assets........................... 2,212.9 1,844.0 -------- -------- TOTAL ASSETS................................................ $3,298.7 $3,135.0 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable.......................................... $ 162.6 $ 148.8 Accrued liabilities....................................... 224.2 237.3 Current maturities of long-term debt...................... 6 38.4 137.0 -------- -------- Total current liabilities......................... 425.2 523.1 -------- -------- Noncurrent Liabilities: Long-term debt............................................ 6 672.0 708.9 Postretirement health care................................ 8 161.8 162.0 Deferred income taxes..................................... 4 154.0 125.7 Other liabilities......................................... 244.9 216.0 -------- -------- Total noncurrent liabilities...................... 1,232.7 1,212.6 -------- -------- Commitments and Contingencies............................... 9 Stockholders' Equity: Preferred stock of $1.00 par value -- authorized 50,000,000 shares; issued and outstanding 2,333,320 shares of Series A Convertible Preferred Stock in 1995................................................... 10 -- 2.3 Common stock of $.01 par value -- authorized 200,000,000 shares; issued and outstanding 54,692,057 shares in 1996 and 44,780,179 shares in 1995..................... 10 .5 .4 Paid-in capital........................................... 920.2 909.5 Retained earnings......................................... 724.3 483.6 Cumulative foreign currency translation adjustment........ (4.2) 3.5 -------- -------- Total stockholders' equity........................ 1,640.8 1,399.3 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $3,298.7 $3,135.0 ======== ========
The accompanying notes are an integral part of these financial statements. 31 33 ALUMAX INC. STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER ----------------------------- NOTE 1996 1995 1994 ---- ------- ------- ------- (MILLIONS OF DOLLARS) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings......................................... $ 250.0 $ 237.4 $ 46.7 Reconciliation of net earnings to net cash provided by operating activities: Depreciation and amortization........................ 138.1 109.1 115.1 Provision for doubtful accounts...................... 5.2 2.7 4.7 Gain on sales of assets.............................. 2 (242.1) (133.9) (8.9) Deferred income taxes................................ 4 47.7 50.8 11.9 Other noncash items.................................. 8.5 5.7 6.0 Changes in operating assets and liabilities, net of effects of acquisition/dispositions: Accounts receivable............................... (25.4) .3 (106.3) Inventories....................................... 3 17.7 (60.0) 27.3 Other current assets.............................. (21.8) 57.4 (39.7) Accounts payable and accrued liabilities.......... 9.8 (51.2) (30.6) Net change in other noncurrent assets and liabilities..................................... 5.3 36.4 (15.7) ------- ------- ------- Net cash provided by operating activities......... 193.0 254.7 10.5 ------- ------- ------- INVESTING ACTIVITIES: Dispositions, net of cash sold....................... 502.0 150.8 117.2 Acquisitions, net of cash acquired................... (436.5) -- -- Capital expenditures................................. (243.2) (213.7) (80.4) ------- ------- ------- Net cash provided by (used in) investing activities...................................... (177.7) (62.9) 36.8 ------- ------- ------- FINANCING ACTIVITIES: Repayments of long-term and short-term debt.......... 6 (552.3) (69.6) (72.7) Proceeds from long-term and short-term debt.......... 6 375.0 -- -- Dividends paid....................................... 10 (9.3) (9.3) (9.3) ------- ------- ------- Net cash used in financing activities............. (186.6) (78.9) (82.0) ------- ------- ------- Net increase (decrease) in cash and equivalents........ (171.3) 112.9 (34.7) Cash and equivalents at beginning of year.............. 205.9 93.0 127.7 ------- ------- ------- Cash and equivalents at end of year.................... $ 34.6 $ 205.9 $ 93.0 ======= ======= ======= Supplemental Cash Flow Information: Income taxes paid, net............................... $ 98.0 $ 84.0 $ 10.0 Interest paid, net of amounts capitalized............ $ 66.5 $ 72.8 $ 83.9
The accompanying notes are an integral part of these financial statements. 32 34 ALUMAX INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
1996 1995 1994 ---------------- ---------------- ---------------- NOTE SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ---- ------ ------ ------ ------ ------ ------ (IN MILLIONS) Preferred Stock At January 1................... 2.3 $ 2.3 2.3 $ 2.3 2.3 $ 2.3 Conversion to common stock..... 10 (2.3) (2.3) -- -- -- -- ------ ------ ------ ------ ------ ------ At December 31................. -- -- 2.3 $ 2.3 2.3 $ 2.3 ====== ====== ====== ====== ====== ====== Common Stock At January 1................... 44.8 $ .4 44.6 $ .4 44.4 $ .4 Conversion of preferred stock....................... 10 9.6 .1 Employee stock issuances....... 7 .3 .2 .2 ------ ------ ------ ------ ------ ------ At December 31................. 54.7 $ .5 44.8 $ .4 44.6 $ .4 ====== ====== ====== ====== ====== ====== Paid-in Capital At January 1................... $909.5 $903.8 $897.8 Conversion of preferred stock....................... 10 2.2 Employee stock issuances....... 7 8.5 5.7 6.0 ------ ------ ------ At December 31................. $920.2 $909.5 $903.8 ====== ====== ====== Retained Earnings At January 1................... $483.6 $255.5 $218.1 Net earnings................... 250.0 237.4 46.7 Dividends on preferred stock... 10 (9.3) (9.3) (9.3) ------ ------ ------ At December 31................. $724.3 $483.6 $255.5 ====== ====== ====== Cumulative Foreign Currency Translation Adjustment At January 1................... $ 3.5 $ .1 $(19.0) Adjustment for foreign currency translation................. (7.7) 3.4 19.1 ------ ------ ------ At December 31................. $ (4.2) $ 3.5 $ .1 ====== ====== ======
The accompanying notes are an integral part of these financial statements. 33 35 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation -- The financial statements include the consolidated accounts of all majority-owned subsidiaries over which Alumax Inc. ("Alumax" or the "Company") maintains control. Investments in companies over which the Company has significant influence, but not a controlling interest, are carried on the equity method of accounting. Investments in companies over which the Company lacks significant influence are carried on the cost method of accounting. All significant intercompany accounts and transactions have been eliminated. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of certain assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents -- Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with a maturity at date of acquisition of three months or less. Financial Instruments -- The Company may, from time to time, utilize certain financial instruments in connection with its risk management. Amounts to be paid or received on interest rate swaps and caps are included in interest expense on an accrual basis. Amounts paid or received on settlement of future, forward and option contracts, including any cost to purchase the contracts, are recognized as a component of the related transaction and included in costs and expenses, except for amounts paid or received on settlement of aluminum contracts by the primary reduction facilities, which are included in net sales. The fair value of financial instruments is determined by reference to market value quotes, where available, and other valuation techniques, as appropriate. Inventories -- Inventories are stated at the lower of cost or market, with cost for a substantial portion of U.S. inventories determined under the last-in, first-out (LIFO) method. The cost of other inventories is principally determined under the first-in, first-out (FIFO) method. Property, Plant and Equipment -- Property, plant and equipment is recorded at cost. Depreciation and amortization of property, plant and equipment is computed principally on the straight-line method over the estimated useful lives of the assets. Certain pre-operating costs attributable to new operations of major facilities are deferred and amortized over a period of approximately three years. In determining impairment of facilities to be disposed, the Company includes direct holding costs during the disposal period in its measurement of net realizable value. Stock-Based Compensation -- Compensation cost is measured under the intrinsic value based method. Pro forma disclosures of net income and earnings per share are presented, as if the fair value based method had been applied. Revenue Recognition -- The Company recognizes revenue when title passes to the customer. Reclassifications -- Certain reclassifications have been made to prior years' financial statements to conform with the 1996 presentation. 34 36 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2. STRATEGIC TRANSACTIONS The Company periodically implements strategic actions which it believes afford it the opportunity to redeploy resources to enhance profitability and growth. During 1996, 1995 and 1994 the following notable strategic transactions occurred:
DISPOSITION ACQUISITION PRE-TAX AFTER-TAX PROCEEDS COST GAIN GAIN ----------- ----------- ------- --------- 1996: Fab Products.................................. $246.6 $ 71.7 $ 36.7 Mexican Mining Investment..................... 160.0 92.8 55.1 Excess Primary Aluminum Capacity.............. 89.3 78.4 48.6 Cressona Aluminum Company..................... $436.5 ------ ------ ------ ------ $495.9 $436.5 $242.9 $140.4 ====== ====== ====== ====== 1995: Excess Primary Aluminum Capacity.............. $147.6 $128.8 $ 81.3 ====== ====== ====== 1994: Australian Mining Investment.................. $ 75.0 $ 6.6 $ 4.0 ====== ====== ======
Dispositions On September 25, 1996, the Company sold certain fabricated products businesses ("Fab Products") in Western Europe and in the United States for $246.6 in cash, net of cash sold of $5.4. The Company recorded an after-tax gain of $36.7, net of a $35.0 tax provision, in the third quarter of 1996. In June 1996, the Company sold its investment in Mexican mining interests for $160 in cash. The Company recorded an after-tax gain of $55.1, net of a $37.7 tax provision, in the second quarter of 1996. In January 1996, the Company sold a 23 percent undivided interest in its Mt. Holly primary aluminum reduction facility for $89.3, which the Company applied to the early retirement of a $90.7 promissory note due in May 1996. The Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in the first quarter of 1996. This transaction reduced the Company's ownership in the Mt. Holly facility to 50.33 percent. In March 1995, the Company sold a 14 percent undivided interest in each of the Company's Intalco and Eastalco primary aluminum reduction facilities for cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5 tax provision, recorded in the first quarter of 1995. This transaction reduced the Company's ownership in each facility to 61 percent. In March 1994, the Company sold a 37 percent undivided interest in Australian mining interests for $75.0 in cash. The Company recorded an after-tax gain of $4.0, net of a $2.6 tax provision, in the first quarter of 1994. Acquisition On January 31, 1996, the Company purchased all of the common shares of privately held Cressona for a cash cost, including expenses, of $436.5, net of $3.1 of cash acquired. In conjunction with the acquisition, accounts payable, debt and other liabilities of $87.4 were acquired. Cressona is a leading manufacturer of extruded aluminum products. The transaction has been accounted for as a purchase and the results of operations of Cressona have been included in the consolidated financial statements since January 31, 1996. The acquisition was financed with 35 37 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) cash on hand and $375 of borrowings obtained under available credit facilities. All of these borrowings have been repaid. Pro Forma Information The following summary presents Alumax's unaudited pro forma consolidated net sales, net earnings, and primary earnings per common share for 1996 and 1995, respectively, as if the acquisition of Cressona and the sale of Fab Products each occurred on January 1, 1996 and 1995. The pro forma adjustments for 1996 include the addition of Cressona's operating results for the month of January 1996. Since the acquisition occurred on January 31, 1996, the Company's actual results include Cressona from February 1, 1996 through December 31, 1996.
FOR THE YEAR ENDED DECEMBER 31, ---------------------- 1996 1995 -------- -------- Net sales................................................... $2,830.3 $2,910.1 Net earnings................................................ $ 243.6 $ 238.6 Primary earnings per common share........................... $ 5.05 $ 5.07
The pro forma results are based upon certain assumptions and estimates, which the Company believes are reasonable. The pro forma results do not purport to be indicative of results that actually would have been obtained had these transactions occurred on January 1, 1996 or 1995, nor are they intended to be a projection of future results. NOTE 3. INVENTORIES Inventories, at December 31, were comprised of:
1996 1995 ------ ------ Raw materials............................................... $323.7 $361.6 Work in process............................................. 87.3 105.9 Finished products........................................... 108.9 90.8 ------ ------ $519.9 $558.3 ====== ======
Approximately 78 percent and 72 percent of inventory at December 31, 1996 and 1995, respectively, have been determined under the LIFO cost basis. The excess of replacement cost over the LIFO basis of such inventory is approximately $74.0 and $101.2 at December 31, 1996 and 1995, respectively. The reduction in levels of LIFO valued inventories during 1996, 1995, and 1994 resulted in $3.7, and $1.4, and $5.2 of pre-tax income related to LIFO liquidation, respectively. 36 38 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 4. INCOME TAXES The income tax provision is comprised of the following:
1996 1995 1994 ------ ------ ----- Current: Federal................................................. $ 84.1 $ 67.8 $ 2.0 Foreign................................................. 34.0 10.5 5.5 State................................................... 13.1 10.3 6.3 ------ ------ ----- 131.2 88.6 13.8 ------ ------ ----- Deferred: Federal................................................. 36.8 43.9 9.7 Foreign................................................. 4.3 5.0 2.2 State................................................... .3 1.6 -- ------ ------ ----- 41.4 50.5 11.9 ------ ------ ----- Total........................................... $172.6 $139.1 $25.7 ====== ====== =====
The domestic and foreign components of earnings before income taxes are as follows:
1996 1995 1994 ------ ------ ----- Domestic.................................................. $396.4 $338.1 $45.0 Foreign................................................... 26.2 38.4 27.4 ------ ------ ----- Total........................................... $422.6 $376.5 $72.4 ====== ====== =====
Reconciliation of the differences between income taxes computed at federal statutory tax rates and the Company's consolidated income tax provision follows:
1996 1995 1994 ------- ------ ----- Tax at federal statutory rate............................ $ 147.9 $131.8 $25.3 Foreign tax credits...................................... (110.4) -- -- Sale of foreign businesses............................... 86.8 -- -- Foreign taxes in excess of federal statutory rate........ 29.2 2.1 (1.9) State income taxes, net of federal income tax benefit.... 10.2 7.7 4.1 Valuation allowance reversal............................. -- (13.4) -- Other, net............................................... 8.9 10.9 (1.8) ------- ------ ----- Total.......................................... $ 172.6 $139.1 $25.7 ======= ====== =====
The foreign provision for income taxes includes $28.7 of dividend withholding taxes. 37 39 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The approximate tax effects of cumulative temporary differences at December 31 are as follows:
ASSET (LIABILITY) -------------------- 1996 1995 ------- ------- Accrued expenses............................................ $ 52.2 $ 40.5 Book versus tax basis of inventory.......................... (2.2) (5.2) Tax credit carryforwards.................................... -- 30.0 Allowance for doubtful accounts............................. 4.5 4.1 ------- ------- Current, net................................................ 54.5 69.4 ------- ------- Book versus tax basis of depreciable assets................. (208.0) (170.9) Foreign capital cost allowance carryforward................. 59.8 64.2 Tax credit carryforwards.................................... -- 10.1 Postretirement health care accrual.......................... 56.6 56.7 Other....................................................... (22.0) (40.9) ------- ------- Noncurrent, net............................................. (113.6) (80.8) ------- ------- Total, net........................................ $ (59.1) $ (11.4) ======= =======
At December 31, 1996, the Company has $225.2 in foreign capital cost allowance carryforwards which accrued in periods prior to becoming an independent public corporation in 1993. The Company has not provided for domestic income taxes or foreign withholding taxes on $33.7 of foreign subsidiaries' undistributed earnings as of December 31, 1996, which are reinvested indefinitely. NOTE 5. PROPERTY, PLANT AND EQUIPMENT Components of property, plant and equipment at December 31, are as follows:
1996 1995 -------- -------- Land and improvements....................................... $ 60.4 $ 55.9 Machinery and equipment..................................... 2,455.1 2,079.5 Buildings................................................... 267.3 199.1 Other....................................................... 145.0 140.3 -------- -------- 2,927.8 2,474.8 Less -- accumulated depreciation and amortization........... (1,036.8) (1,051.3) -------- -------- 1,891.0 1,423.5 Construction in progress.................................... 136.4 188.4 -------- -------- $2,027.4 $1,611.9 ======== ========
38 40 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6. DEBT Debt at December 31, consists of:
1996 1995 ------ ------ Lauralco debt, payable 1997 to 2003 -- variable rate........ $645.0 $682.5 Promissory note -- 10.0%.................................... -- 90.7 Revenue and pollution control bonds, payable 1997 to 2015 -- 3.8% to 9.5%...................................... 62.9 64.8 Other debt.................................................. 2.5 7.9 ------ ------ 710.4 845.9 Less -- current maturities.................................. (38.4) (137.0) ------ ------ Total long-term debt.............................. $672.0 $708.9 ====== ======
A project finance credit agreement was arranged in 1990 with a group of banks permitting borrowings of up to $750 to finance construction of a primary aluminum reduction plant in Quebec, Canada ("Lauralco Project Group"). The credit agreement required the Company to establish facilities to effectively limit the interest rate exposure on half of the commitment (Note 15). The Company's rights to the Lauralco Project Group, including its ownership of the reduction plant and its rights to various operating agreements, are pledged as collateral under the credit agreement. The net book value of reduction plant assets pledged is approximately $905.5 at December 31, 1996. The project finance credit agreement contains, among other restrictions, provisions limiting the declaration or payment of dividends to the Company by certain subsidiaries engaged in Lauralco activities. In May 1995, the Company entered into a $400 revolving credit facility (the "Credit Agreement") to replace its then existing revolving credit facility, which was terminated. The Credit Agreement has a term of five years, expiring in May 2000, with no provision for reduction in commitments during its term. Interest on outstanding balances will be based on either a base rate or LIBOR option. At December 31, 1996, the entire amount of the facility was available to the Company. The Credit Agreement contains provisions restricting the incurrence of indebtedness by subsidiaries, as well as financial and other covenants. Under the Credit Agreement, the Company and its consolidated subsidiaries are collectively required to maintain tangible net worth of at least $700 at any time, and the Company and certain of its subsidiaries, excluding the Lauralco Project Group, are collectively required to maintain a ratio of tangible net assets to funded debt of at least 2.0 to 1.0 at any time. On January 17, 1996, the Company entered into a $400 bridge loan facility to finance the Cressona acquisition. All amounts outstanding under this facility have been repaid and the facility has been terminated. The Company has a loan agreement that contains provisions restricting the payment of dividends on the Alumax Common Stock. At December 31, 1996, $439.8 of retained earnings are available for the payment of dividends on common stock under this restriction. Commitment and facility fees for revolving credit arrangements amounted to $.6 in 1996. The annual principal payments of long-term debt for the five-year period ending December 31, 2001 are: 1997-$38.4; 1998-$46.4; 1999-$68.9, 2000-$69.4 and 2001-$91.9. NOTE 7. EMPLOYEE PENSION AND THRIFT PLANS Pension plans cover substantially all employees of the Company and are generally non-contributory. The benefits of salaried employee plans are based on the projected unit credit method. The benefits of hourly 39 41 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) employee plans are based on the unit credit method. The Company's funding policy is to meet minimum funding requirements. Net periodic pension cost is comprised of the following:
1996 1995 1994 ------ ------ ------ Service cost -- benefits earned during the period........... $ 19.3 $ 15.6 $ 15.9 Interest cost on projected benefit obligations.............. 23.7 20.9 18.8 Actual return on assets..................................... (37.0) (42.9) (2.9) Net amortization and deferral............................... 11.9 22.4 (19.8) ------ ------ ------ Net periodic pension cost................................. $ 17.9 $ 16.0 $ 12.0 ====== ====== ======
The following table sets forth the funded status of the Company's pension plans and amounts recognized in its statements of financial position at December 31, 1996 and 1995 for its pension plans:
ABO EXCEEDS ASSETS EXCEED ABO ASSETS ----------------- --------------- 1996 1995 1996 1995 ------- ------- ------ ------ Actuarial present value of benefit obligations: Vested benefit obligation..................... $234.3 $174.5 $ 14.8 $ 58.8 ====== ====== ====== ====== Accumulated benefit obligation (ABO).......... $257.1 $188.8 $ 16.8 $ 61.4 ====== ====== ====== ====== Projected benefit obligation.................. $314.9 $236.4 $ 19.2 $ 63.3 Plan net assets at fair value................. 336.5 242.7 10.7 47.1 ------ ------ ------ ------ Plan net assets in excess of (less than) projected benefit obligation................ 21.6 6.3 (8.5) (16.2) Unrecognized net (gain) loss.................. (6.6) 13.9 5.5 10.3 Unrecognized prior service cost............... 15.3 11.0 1.3 6.8 Unrecognized transition amounts............... (6.5) (7.2) .6 (.7) ------ ------ ------ ------ Prepaid (accrued) pension costs............... $ 23.8 $ 24.0 $ (1.1) $ .2 ====== ====== ====== ======
Plan assets consist of approximately 55 percent equities, 42 percent fixed income and 3 percent cash and cash equivalents at December 31, 1996. Key economic assumptions used in the above calculations at December 31, were:
1996 1995 1994 ---- ---- ---- Settlement discount rate.................................... 7.5% 7.0% 8.0% Rate of compensation increases.............................. 5.0% 5.0% 5.8% Expected long-term rate of return........................... 9.0% 9.0% 9.0%
Defined contribution employee thrift plans cover substantially all salaried and certain hourly employees. Employee contributions are matched through Company issuances of Alumax Common Stock. Alumax Common Stock issuances amounted to $5.3, $4.9 and $5.3 in 1996, 1995 and 1994, respectively. Total administrative expenses of these plans paid by the Company amounted to $5.6, $5.3 and $4.7 in 1996, 1995 and 1994, respectively. NOTE 8. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. A majority of the Company's domestic employees may become eligible for such benefits if they reach normal or, in certain cases, early retirement age while working for the Company. 40 42 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The components of periodic cost for these postretirement benefits are as follows:
1996 1995 1994 ----- ------ ------ Service cost -- benefits earned during the period......... $ 3.8 $ 3.7 $ 3.5 Interest cost on accumulated postretirement benefit obligation.............................................. 9.2 10.0 8.7 Amortization of prior service cost and plan amendments.... (5.2) (5.3) (5.5) Amortization of (gains) losses............................ .6 (.4) .1 ----- ------ ------ Net periodic cost......................................... $ 8.4 $ 8.0 $ 6.8 ===== ====== ======
The actuarial and recorded liabilities for these postretirement benefits, none of which have been funded at December 31, are as follows:
1996 1995 ------ ------ Accumulated postretirement benefit obligation (APBO): Retirees.................................................. $ 62.2 $ 61.2 Fully eligible active plan participants................... 18.4 17.6 Other active participants................................. 54.2 62.8 Unrecognized prior service cost and plan amendments....... 22.4 31.4 Unrecognized net gain (loss).............................. 4.6 (11.0) ------ ------ Liability for postretirement health care and life insurance benefits.................................................. $161.8 $162.0 ====== ======
For measurement purposes, a 10.1 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 1996. The rate was assumed to decrease gradually to 5 percent through the year 2009 and remain at that level thereafter. An increase in the assumed health care cost trend rates by one percent in each year would increase the APBO as of December 31, 1996 by 11 percent and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by 11 percent. The weighted-average discount rate used in determining the APBO as of December 31, 1996 and 1995 was 7.5 and 7.0 percent, respectively. In addition to providing postretirement benefits to eligible retired employees, the Company provides specified postemployment benefits to certain former or inactive employees. Substantially all domestic employees may become eligible to receive these benefits, which are either self-insured or provided through the Company's insurance carriers. NOTE 9. COMMITMENTS AND CONTINGENCIES Minimum commitments under long-term noncancelable operating leases, principally for operating and office facilities, totalled $72.5 at December 31, 1996. Lease commitments for future periods are as follows: 1997-$25.8, 1998-$10.0, 1999-$6.7, 2000-$5.0, 2001-$4.2 and 2002 to 2013-$20.8. Rent expense amounted to $23.0, $25.8 and $22.5 in 1996, 1995 and 1994, respectively. The Company arranged for letters of credit in the amount of $182.0 at December 31, 1996, primarily relating to collateral support for certain financing arrangements and a power contract guarantee. The Company has a noncancelable long-term contract for the purchase of alumina and both noncancelable and cancelable contracts for electric power for its primary aluminum reduction plants. Power contracts for each plant, except for Intalco, and the alumina contract are with single suppliers. The power contracts expire in the years 2000 through 2014, subject to certain extension provisions. The alumina contract, with renewal options, expires in increments between 2007 and 2018. Contracted amounts of alumina and power approximate the Company's anticipated requirements. 41 43 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) On September 30, 1996, the Company, through its subsidiary, Alumax Mill Products, Inc., exercised its option to purchase its leased Texarkana rolling mill facility in November 1997 for approximately $97 in cash. During 1996, the Company entered into a joint venture with Yunnan Aluminum Processing Factory in Kunming, China for the annual production of 8,000 to 10,000 tonnes of light gauge aluminum foil for China's packaging market. Alumax will invest $38 of cash in the joint venture to develop a continuous cast foil operation. As of December 31, 1996, the Company has invested approximately $13 of cash in the joint venture. The Internal Revenue Service (the "IRS") has asserted that Alumax and certain of its subsidiaries were improperly included in the 1984, 1985 and 1986 consolidated income tax returns of AMAX Inc. ("Amax"), the Company's former parent, and on that basis has asserted a federal income tax deficiency against Alumax of approximately $129. Interest on the deficiency through December 31, 1996, would be approximately $276. In response to the IRS' notice of deficiency, the Company filed a petition in the United States Tax Court (the "Court") seeking a redetermination in respect of the purported deficiency. The parties have waived their rights to a trial and the matter has been submitted to the Court for decision based upon the pleadings, stipulations, memoranda and other documents submitted, or to be submitted, to the Court by the parties. A decision by the Court is expected in late 1997. Payment of the deficiency with interest thereon would provide certain tax benefits to the Company that would offset in part, in the year of payment and within the carryforward period, the cost of paying the deficiency and interest. The Company believes that it has adequate reserves so that any unprovided for net deficiency would not have a material adverse effect on the Company's financial condition. The Company has been named as a defendant or identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws by governmental agencies and private parties at 39 pending waste disposal sites which, in most instances, were owned and operated by third parties. Management periodically evaluates such matters and records or adjusts liabilities for remediation and other costs and potential damages when expenditures for such costs are considered probable and can be reasonably estimated. The Company's ultimate liability in connection with present and future environmental claims will depend on many factors, including its volumetric share of the waste at a given site, the remedial action required, the total cost of remediation and the financial viability and participation of the other entities which also sent waste to the site. Based upon current law and information known to the Company concerning the size of the sites known to it, their years of operation, and the number of other past users, Management believes that it has adequate reserves for the Company's probable share of the estimated aggregate liability for the costs of remedial actions and related costs and expenses and that such liability and related costs and expenses should not have a material adverse effect on the financial condition or ongoing results of operations of the Company. In addition, the Company establishes reserves for remedial measures required from time to time at its own facilities. Any expenditures for remediation programs it may be required to undertake, either individually or in the aggregate, are not expected to have a material adverse effect on the financial condition or ongoing results of operations of the Company. The Company's environmental reserves totalled $29.6 and $22.8 at December 31, 1996 and 1995, respectively ($27.2 at December 31, 1995 with the inclusion of Cressona). Management believes that the reasonably probable outcomes of these matters will not materially exceed established reserves. Although the Company believes it has coverage for some environmental claims under certain insurance policies, insurance recoveries are not considered in estimating the Company's share of remediation costs at a site unless an insurance carrier has agreed to pay a portion of such costs. Insurance recoveries were not considered in establishing reserves for any of these sites absent an agreement between the carriers and the Company. 42 44 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 10. STOCKHOLDERS' EQUITY Preferred Stock On November 4, 1996, the Company announced that it was redeeming all of the outstanding shares of the $4.00 Series A Convertible Preferred Stock ("Preferred Stock"), par value $1.00 per share, on December 18, 1996. Each share of the Preferred Stock was redeemable at a price of $52.40 per share, plus an amount equal to the quarterly dividend accrued on each share through the redemption date for a total cash redemption price of $52.60 per share. As an alternative to redemption, each share of the Preferred Stock was convertible at the option of the holder into 4.11489 shares of the Company's common stock until the close of business on December 4, 1996. In December 1996, the outstanding shares of Preferred Stock were converted into approximately 9.6 million shares of Alumax Common Stock. Common Stock As of December 31, 1996, authorized and unissued shares of Alumax Common Stock were reserved for the following purposes: 2,408,500 for issuance of stock options and other stock compensation plans, 968,800 for issuance under employee thrift and 721,800 for issuance pursuant to employee deferred compensation agreements. Primary earnings per share for 1996, 1995 and 1994 are based on average shares outstanding over the year and include the impact of common stock equivalents related to stock options and grants. The average number of shares used to compute primary earnings per share was 46,409,000, 45,200,000 and 44,757,000 in 1996, 1995 and 1994, respectively. Fully diluted earnings per share, which are omitted when anti-dilutive, also include conversion of the Alumax Series A Preferred Stock. The average number of shares used to calculate fully-diluted earnings per share was 55,251,000 and 54,846,000 in 1996 and 1995. NOTE 11. STOCK-BASED COMPENSATION Under its 1993 Long-Term Incentive Plan ("Long-Term Plan"), the Company may grant stock options, stock appreciation rights, restricted stock and other stock-based awards to salaried employees for up to an aggregate of 3,960,129 shares of common stock. The 1995 Employee Equity Ownership Plan ("Equity Ownership Plan") provides for discretionary stock option grants to salaried employees in lower grade levels up to an aggregate of 1,000,000 shares of common stock. Under its Non-Employee Directors Stock Compensation Plan ("Directors Stock Plan"), the Company is authorized to grant options up to an aggregate of 750,000 shares of common stock. Upon joining the Board of Directors, each non-employee director of the Company was provided with a one time stock option grant of 10,000 shares of common stock. Annually, stock grants for 850 shares of common stock are issued to each non-employee director. Options granted under the Long-Term Plan and the Equity Ownership Plan generally vest two years after issue and have a term of ten years. Options granted under the Directors Stock Plan vest ratably over three years. The exercise price of options granted under each plan generally equals the market price of the Company's stock on the date of grant. However, options may be granted with differing vesting periods, terms and exercise prices. In 1996, total options of 1,327,650 were granted, of which 687,800 were granted with a vesting period of one to three years and a term of six years. Of these 687,800 options, 458,533 were granted with a weighted-average exercise price of $38.12, which exceeded the market price at the date of grant. In 1993 certain former Amax executives became executives of the Company and were awarded 623,350 options, not pursuant to the Long-Term Plan. These options, which have a market based exercise price of $23.61 and vest ratably over five years, were granted in consideration of the cancellation without payment of rights which the executives may have had under severance policies of Amax. 43 45 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The Company may grant performance accelerated restricted stock to key management employees under the terms of the Long-Term Plan. The annual stock awards vest approximately ten years after grant date with accelerated vesting if the Company meets certain cumulative net income objectives. A summary of the status of the stock compensation plans as of December 31, and changes during the years ended on those dates is presented below:
OUTSTANDING EXERCISABLE -------------------------- -------------------------- WEIGHTED WEIGHTED NUMBER OF AVERAGE NUMBER OF AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE --------- -------------- --------- -------------- Outstanding at December 31, 1993........ 693,350 $23.19 Granted............................... 1,293,175 $26.68 Cancelled............................. (65,850) $27.13 --------- Outstanding at December 31, 1994........ 1,920,675 $25.41 148,003 ========= Granted............................... 821,850 $33.13 Exercised............................. (3,333) $19.44 Cancelled............................. (38,342) $25.50 --------- Outstanding at December 31, 1995........ 2,700,850 $27.76 296,008 ========= Granted (option value -- $11.24)...... 869,117 $32.16 Granted (option value -- $8.92)....... 458,533 $38.12 Exercised............................. (144,200) $26.80 Cancelled............................. (106,159) $31.87 --------- Outstanding at December 31, 1996........ 3,778,141 $29.95 1,463,484 ========= ========= Range of option exercise prices: $19.44 -- $27.13 (average life -- 7.5 years)............................. 1,706,541 $25.27 1,450,534 $25.55 ========= ====== ========= ====== $30.63 -- $40.13 (average life -- 8.2 years)............................. 2,071,600 $33.81 12,950 $30.81 ========= ====== ========= ======
The following pro forma summary presents the Company's net earnings, primary earnings per share and fully diluted earnings per share for the years ended December 31, 1996 and 1995 as if compensation cost had been measured under the fair value based method. The effects of the fair value of stock options in the following pro forma disclosure are not likely to be representative of the effects for future years because outstanding options vest over a period of up to three years and awards are generally made during the fourth quarter of each year.
1996 1995 ------ ------ Pro Forma Information: Net earnings.............................................. $247.1 $237.2 Primary earnings per common share......................... $ 5.13 $ 5.04 Fully diluted earnings per common share................... $ 4.48 $ 4.33
The pro forma adjustments are determined using an option valuation model. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The following assumptions were used for the years ended December 31:
1996 1995 ---- ---- Risk-free interest rate..................................... 5.9% 5.5% Expected life............................................... 5.0 5.0 Expected volatility......................................... 26.0% 26.0% Expected dividend yield..................................... -- --
The Company also granted performance accelerated restricted stock awards of 64,680, 62,100, and 55,956 shares to certain employees in 1996, 1995 and 1994, respectively. The fair value per share on the date of the 44 46 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) grants was $34.25, $27.50 and $25.63, respectively. During the years ended December 31, 1996, 1995 and 1994, compensation cost of $1.7, $1.0 and $.4, respectively, has been recognized in connection with these awards. NOTE 12. STOCKHOLDER RIGHTS AGREEMENT On February 22, 1996, the Executive Committee of the Board of Directors of the Company declared a dividend distribution of one right (a "Right") for each outstanding share of Common Stock held of record at the close of business on February 22, 1996. The Rights attach automatically to each share of Common Stock outstanding as of February 22, 1996, and to each share of Common Stock issued after February 22, 1996. Each Right entitles the holder to purchase from the Company one one-hundredth of a share of the Company's Participating Preferred Stock at an exercise price of $130, subject to certain adjustments. The Rights will not be exercisable or transferable apart from the Common Stock until either the tenth business day after the announcement by a person or group of the commencement of a tender or exchange offer for 15 percent or more of the Voting Stock or the first date of announcement by the Company that a person or group has acquired beneficial ownership of 15 percent or more of the Voting Stock (an "Acquiring Person"). "Voting Stock" means shares of capital stock of the Company entitled to vote generally in the election of directors. If the Company is consolidated or merged with another company or 50 percent or more of its consolidated assets or earning power are sold and, at the time, an Acquiring Person controls the Company's Board of Directors, each holder of a Right will have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of common stock of the acquiring company which have a market value of twice the then current exercise price of the Right. If any person becomes an Acquiring Person, each holder of a Right other than by the Acquiring Person (whose Rights will be void) will have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of Common Stock having a market value of twice the exercise price of the Right. The Rights will expire on February 22, 2006 and may be redeemed for $.01 per Right at any time prior to the time an Acquiring Person becomes such. Until a Right is exercised, the record holder will have no rights as a stockholder of the Company. After the announcement that an Acquiring Person has become such and prior to the acquisition by an Acquiring Person of 50 percent or more of the outstanding Voting Stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such Acquiring Person) at an exchange ratio of one share of Common Stock, or one one-hundredth of a share of the Company's Participating Preferred Stock, per Right, subject to adjustment. The Company's Board of Directors may amend the Rights Agreement, in any respect, until the time an Acquiring Person becomes such. Thereafter, the Company's Board of Directors may amend the Rights Agreement in any respect not materially adverse to Rights holders generally. NOTE 13. INTEREST EXPENSE, NET Interest expense, net was comprised of:
1996 1995 1994 ------ ------ ------ Interest expense.......................................... $(74.1) $(81.6) $(78.2) Interest income........................................... 3.8 10.8 5.6 Capitalized interest...................................... 7.5 5.4 -- ------ ------ ------ $(62.8) $(65.4) $(72.6) ====== ====== ======
45 47 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE 14. OTHER INCOME, NET Other income, net for the years ended December 31, 1996, 1995 and 1994 was $10.6, $7.3 and $4.4, respectively. Included in 1996 and 1995 respectively, are $18.6 and $11.6 for dividends received from Mexican mining operations. Included in 1994 are $12.6 for dividends received from Mexican mining operations and a $1.9 loss from Alumax's equity share of operating results from an investment in Australian mining operations. The Company sold its investments in the Mexican and Australian mining operations during 1996 and 1994, respectively. NOTE 15. FINANCIAL INSTRUMENTS The Company utilizes certain financial instruments in connection with its risk management. The risk of loss related to counterparty nonperformance under financial instrument agreements at December 31, 1996 is not significant. The Company enters into forward fixed price arrangements that are required by certain customers and suppliers. The Company may utilize futures contracts which effectively convert forward fixed price arrangements to market prices in order to meet overall strategic objectives. Such contracts covered approximately 177,875 tonnes of aluminum at December 31, 1996 and mature at various dates through 1999. Gains or losses with respect to these positions are reflected in earnings concurrent with consummation of the underlying fixed price transaction. Periodic value fluctuations of the futures contracts approximately offset the value fluctuations of the underlying fixed price transactions. The Company also may, from time to time, establish a floor selling price for varying quantities of future production, while preserving the opportunity to participate in upward price movements. This may be accomplished by entering into forward sales of primary aluminum and purchases of call options, which together provide the same price protection as purchasing put options, or by purchasing put options alone, in a manner which correlates with the Company's production and sales of primary aluminum. The strategy may be modified from time to time. At December 31, 1996, the Company's commitments with respect to these financial instruments covered approximately 324,000 tonnes of future production. The book value and market value of these financial instruments were $16.8 and $7.4 respectively, at December 31, 1996. Certain of the Company's foreign operating expenditures are denominated in currencies other than the operations' functional currencies, which expose the Company to exchange rate risks. In order to mitigate its exposure to exchange rate risk where these conditions exist, the Company may utilize forward foreign currency contracts. At December 31, 1996, the Company had outstanding $106 in forward foreign currency contracts which principally mature during 1997. The gains or losses related to these contracts are deferred and included in the measurement of the related foreign denominated transactions. If these contracts had been terminated at December 31, 1996, the Company would have received approximately $1.3. The Company's debt instruments and related interest rate hedges are susceptible to market fluctuations based on changes in the cost of borrowing. At December 31, 1996, the fair value of total debt approximated book value. The Lauralco credit facility, which has a variable interest rate, required the Company to establish facilities to effectively limit the interest rate exposure of the commitment. To meet this requirement, the Company has obtained interest rate swaps with a notional amount totalling $400 through October 26, 2000 and an interest rate cap with a notional amount of $150 expiring October 26, 1998. This program is designed to effectively cap interest rate exposure at a maximum of approximately nine percent through October 26, 2000. The effective rate on this debt amounted to 8.5 percent, 9.2 percent and 8.0 percent for the years ended December 31, 1996, 1995 and 1994, respectively. The Company would have paid approximately $37.9 to terminate these interest rate agreements at December 31, 1996. The Company also purchases natural gas for its operations and enters into forward contracts to eliminate the volatility in prices. At December 31, 1996, none of these contracts is material. 46 48 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and equivalents and trade accounts receivable. The fair value of these financial instruments approximated book value at December 31, 1996. The Company places its cash and equivalents with high credit quality institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit. The Company routinely assesses the financial strength of its customers and, as a consequence, believes that its trade accounts receivable credit risk exposure is not significant. NOTE 16. OPERATIONS AND GEOGRAPHIC DATA The Company is an integrated producer of aluminum products, operating in a single segment: aluminum processing. Alumax is the third largest aluminum company in the United States and the fourth largest in North America, based on sales, and operates over 70 plants and other manufacturing and distribution facilities in 22 states, Canada, Western Europe, Mexico, Australia, the People's Republic of China and Poland. Using alumina purchased from one principal supplier, the Company produces primary aluminum at five reduction plants in the United States and Canada. Primary products are sold externally or further processed by Alumax into a broad range of semi-fabricated and fabricated products. The Company's products are sold to a wide variety of markets, including transportation, distributors, building and construction, consumer durables, and packaging. Domestic and Canadian sales and earnings from operations are combined in the geographic data below, as Canadian assets are primarily aluminum reduction facilities that toll alumina for U.S. operations and sales. Sales of primary products to affiliated customers are accounted for at prices comparable to unaffiliated customer sales.
1996 1995 1994 -------- -------- -------- Operations data: Net sales to unaffiliated customers: Aluminum processing Primary products....................................... $ 658.9 $ 724.5 $ 592.7 Semi-fabricated products............................... 1,639.5 1,235.4 1,264.2 Fabricated products.................................... 860.9 966.2 897.6 -------- -------- -------- $3,159.3 $2,926.1 $2,754.5 ======== ======== ======== Net sales to affiliated customers........................... $ 713.9 $ 727.6 $ 655.7 ======== ======== ======== Earnings from operations: Aluminum processing....................................... $ 275.6 $ 339.7 $ 173.3 Corporate and other....................................... (43.7) (33.9) (39.3) -------- -------- -------- $ 231.9 $ 305.8 $ 134.0 ======== ======== ======== Identifiable assets: Aluminum processing....................................... $3,063.7 $2,718.7 $2,636.2 Corporate and other....................................... 235.0 416.3 322.6 -------- -------- -------- $3,298.7 $3,135.0 $2,958.8 ======== ======== ======== Geographic data: Net sales: United States and Canada.................................. $2,853.5 $2,548.0 $2,387.6 Europe and other international............................ 305.8 378.1 366.9 -------- -------- -------- $3,159.3 $2,926.1 $2,754.5 ======== ======== ========
47 49 ALUMAX INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1996 1995 1994 -------- -------- -------- Earnings from operations: United States and Canada.................................. $ 219.9 $ 273.9 $ 105.5 Europe and other international............................ 12.0 31.9 28.5 -------- -------- -------- $ 231.9 $ 305.8 $ 134.0 ======== ======== ======== Identifiable assets: United States and Canada.................................. $3,171.7 $2,820.6 $2,629.0 Europe and other international............................ 127.0 314.4 329.8 -------- -------- -------- $3,298.7 $3,135.0 $2,958.8 ======== ======== ========
A significant portion of the Company's sales are to the building and construction, transportation and distributors markets. Concentrations of credit risk with respect to the trade receivables, relating to sales into these as well as other markets, are limited due to the large number of customers and the widely dispersed geographic areas in which the Company's businesses operate. The Company's one principal supplier of alumina has been its supplier for over 20 years under a long-term contract which, with renewal options, expires in increments between 2007 and 2018. An extended interruption of alumina supply from this supplier could have a material adverse effect on the Company's operations. In addition, each of the Company's primary aluminum reduction plants, except for Intalco, is supplied by a single source of electric power. Although the Company may experience power curtailments from time to time, a sudden or extended interruption of power at one or more of its primary aluminum reduction plants could have a material adverse effect on the Company's operations. NOTE 17. QUARTERLY DATA (UNAUDITED)
1996 QUARTERS 1995 QUARTERS --------------------------------- --------------------------------- FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH ------ ------ ------ ------ ------ ------ ------ ------ Net sales..................... $802.6 $851.4 $809.1 $696.2 $698.6 $721.2 $767.7 $738.6 ------ ------ ------ ------ ------ ------ ------ ------ Earnings from operations...... $ 75.1 $ 64.4 $ 44.4 $ 48.1 $ 51.5 $ 76.5 $ 91.0 $ 86.8 ------ ------ ------ ------ ------ ------ ------ ------ Net earnings(a)............... $ 95.4 $ 83.1 $ 52.4 $ 19.1 $110.4 $ 39.2 $ 43.0 $ 44.8 ====== ====== ====== ====== ====== ====== ====== ====== Earnings per share: Primary..................... $ 2.04 $ 1.77 $ 1.10 $ .34 $ 2.41 $ .82 $ .90 $ .94 ====== ====== ====== ====== ====== ====== ====== ====== Fully diluted(b)............ $ 1.73 $ 1.50 $ .95 $ .35 $ 2.03 $ .71 $ .78 $ .82 ====== ====== ====== ====== ====== ====== ====== ====== Primary -- pro forma(c)..... $ 1.73 $ 1.50 $ .95 $ .35 ====== ====== ====== ======
- --------------- (a) Included in 1996 is a first quarter after-tax gain of $48.6 related to the sale of a 23 percent interest in the Mt. Holly primary aluminum reduction plant, a second quarter after-tax gain of $55.1 related to the sale of mining interests and a third quarter after-tax gain of $36.7 related to the sale of Fab Products. Included in 1995 is a first quarter after-tax gain of $81.3 related to the sale of a 14 percent interest in each of the Intalco and Eastalco primary aluminum reduction plants. (b) The computation of fully diluted earnings per common share for the fourth quarter of 1996 includes the effect of the conversion of the Preferred Stock as if it had occurred at the beginning of the quarter. (c) Pro forma amounts represent primary earnings per common share assuming the conversion of the Preferred Stock had occurred at the beginning of the year. 48 50 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information in response to this Item is incorporated herein by reference to the sections entitled "Information Concerning Directors and Nominees", "Security Ownership" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy Statement for the 1997 Annual Meeting of Stockholders (the "Proxy Statement"). Information concerning Executive Officers required by this Item is incorporated herein by reference to the section in Part I hereof entitled "Executive Officers of the Registrant." ITEM 11. EXECUTIVE COMPENSATION Information in response to this Item is incorporated herein by reference to the sections entitled "Directors' Meetings, Compensation and Committees," "Executive Compensation" and "Common Stock Performance Graph" in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information in response to this Item is incorporated herein by reference to the section entitled "Security Ownership" in the Proxy Statement. Alumax knows of no arrangements, including any pledges by any person of its securities, the operation of which may at a subsequent date result in a change in control of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information in response to this Item is incorporated herein by reference to the sections entitled "Certain Transactions" and "Executive Employment and Separation Agreements" in the Proxy Statement. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES. The Company's financial statements, the notes thereto and the report of the independent accountants are set forth on pages 29 through 48 of this Form 10-K. The following report and additional financial data should be read in conjunction with the Company's financial statements: Independent Accountant's Report of Coopers & Lybrand L.L.P. dated January 27, 1997 on the Company's financial statement schedule filed as a part hereof for the fiscal years ended December 31, 1996, 1995 and 1994. 49 51 Schedule II -- Valuation and Qualifying Accounts for the fiscal years ended December 31, 1996, 1995 and 1994. Schedules other than the one referred to above are omitted because they are not required or the information is included in the financial statements or the notes thereto. EXHIBITS. Unless otherwise indicated, exhibits are incorporated by reference to the exhibits filed with the Company's Registration Statement on Form S-1 (Commission File No. 33-69442).
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.02 Agreement and Plan of Distribution, dated as of May 24, 1993, by and between AMAX Inc. and Alumax Inc. 2.03 Tax Disaffiliation Agreement, dated as of May 24, 1993, by and between AMAX Inc. and Alumax Inc. 2.04 Amendment No. 1 to the Agreement and Plan of Distribution, dated as of November 15, 1993, by and between AMAX Inc. and Alumax Inc.* 3.01 Restated Certificate of Incorporation of the Company* 3.02 Restated By-laws of Alumax Inc., as amended on September 5, 1996, filed as Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996 and incorporated herein by reference. 4.01 Form of Common Stock Certificate 4.02 Rights Agreement, dated as of February 22, 1996, between Alumax Inc. and Chemical Mellon Shareholder Services, L.L.C., as Rights Agent, including as Exhibit A the forms of Rights Certificate and Election to Exercise and as Exhibit B the form of Certificate of Designation and Terms of Participating Preferred Stock of the Company, filed as Exhibit 4 to the Company's Current Report on Form 8-K, dated February 22, 1996, and incorporated herein by reference. 4.03 Credit Agreement, dated as of September 14, 1990, as amended as of November 13, 1990 and as further amended as of February 19, 1991, by and among Aluminerie Lauralco, Inc., as Borrower, Canalco, Inc., as Continuing Guarantor, and Bank of Montreal and National Westminster Bank PLC, as Arrangers, Bank of Montreal, as Agent, and the Banks named therein 4.04 Credit Agreement, dated as of May 19, 1995, among Alumax Inc., Royal Bank of Canada, as Agent, Arranger and Letter of Credit Issuer, Canadian Imperial Bank of Commerce, as Administrative Agent, and the Banks signatory thereto, filed as Exhibit 4.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 and incorporated herein by reference Note: No other long-term debt instrument issued by the Company exceeds 10% of the consolidated total assets of the Company and its subsidiaries. In accordance with paragraph 4(iii) of Item 601 of Regulation S-K, the Company will furnish to the Commission upon request copies of long-term debt instruments and related agreements 10.01 Form of Alumax Inc. Excess Benefit Plan**~ 10.02 1993 Long-Term Incentive Plan (as Amended and Restated and as Further Amended on October 3, 1996)**~ 10.03 Deferred Compensation Plan (as Amended on October 3, 1996)**~
50 52
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.04 1993 Annual Incentive Plan (as Amended and Restated and as Further Amended on October 3, 1996)**~ 10.05 Executive Separation Policy*~ 10.06 Non-Employee Directors Stock Compensation Plan (as Amended on October 3, 1996)**~ 10.07 Non-Employee Directors Deferred Compensation Plan (as Amended on October 3, 1996)**~ 10.08 Lease Agreement, dated as of November 25, 1986, by and between Connecticut National Bank as Owner Trustee for the benefit of U.S. West Capital Corporation under an Owner Trust Agreement, dated as of November 25, 1986, and Alumax Mill Products, Inc. 10.09 Facility Purchase Agreement, executed and effective as of September 18, 1996, among Alumax Mill Products, Inc., Fleet National Bank and US WEST Financial Services, Inc.** 10.10 Restated Sales Agreement, dated as of January 1, 1986, as amended and supplemented as of April 8, 1992 and April 9, 1992, by and between Alcoa of Australia Limited and Alumax Inc. (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.) 10.11 Power Sales Agreement, dated September 28, 1995, as amended, between Intalco Aluminum Corporation and Bonneville Power Administration (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.)*** 10.12 Power Sales Agreement, dated as of October 1, 1995, between British Columbia Power Exchange Corporation and Intalco Aluminum Corporation (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.)*** 10.13 Electric Service Agreement, dated as of July 1, 1993, by and between Eastalco Aluminum Company and The Potomac Edison Company* 10.14 Agreement for the Sale of Electric Power and Energy, dated September 23, 1977, as amended, by and between the South Carolina Public Service Authority and Alumax of South Carolina 10.15 Electricity Contract, dated February 1, 1990, as amended on October 15, 1992, by and between Aluminerie Lauralco, Inc. and Hydro-Quebec (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.) 10.16 Employment Agreement, As Amended and Restated as of December 5, 1996, between Alumax Inc. and C. Allen Born**~ 10.17 Agreement, dated as of November 15, 1993, as amended as of February 3, 1994, among AMAX Inc., Alumax Inc. and Helen M. Feeney*~
51 53
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.18 Agreement, dated as of November 15, 1993, as amended as of February 3, 1994, among AMAX Inc., Alumax Inc. and Lawrence B. Frost*~ 10.19 Agreement, dated as of March 10, 1994, between Alumax Inc. and Helen M. Feeney, amending the Agreement, dated as of November 15, 1993, as amended as of February 3, 1994****~ 10.20 Agreement, dated as of March 10, 1994, between Alumax Inc. and Lawrence B. Frost, amending the Agreement, dated as of November 15, 1993, as amended as of February 3, 1994****~ 10.21 Grantor Trust Agreement, dated as of October 10, 1994, between Alumax Inc. and E. William Smethurst, Jr., filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference.~ 10.22 Stock Purchase Agreement, dated as of October 6, 1995, By and Among the Shareholders of Cressona Aluminum Company, as Sellers, and Alumax Inc., as Purchaser***** 10.23 Bridge Loan Agreement, dated as of January 17, 1996, among Alumax Inc., The Chase Manhattan Bank, N.A., as Syndication Agent, Royal Bank of Canada, as Documentation and Administrative Agent, and the Banks signatory thereto***** 10.24 Acquisition Agreement, dated March 31, 1995, among Eastalco Aluminum Company, Eastalco Venture, Alumax of Maryland, Inc. and Alumet Corporation, Atmos (U.S.A.) Incorporated and Mitalco Inc., filed as Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995 and incorporated herein by reference. 10.25 Acquisition Agreement, dated as of January 26, 1996, between Alumax of South Carolina, Inc. and Glencore Primary Aluminum Company, LLC***** 10.26 Purchase Agreement, dated as of June 24, 1996, between Euramax International, Ltd. and Alumax Inc., filed as Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 and incorporated herein by reference. 10.27 Agreement, dated as of June 28, 1996, by and between Minas Penoles, S.A. de C.V. and The Fresnillo Company, filed as Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 and incorporated herein by reference. 11.01 Calculation of Earnings per Common Share** 21.01 Subsidiaries of the Company** 23.01 Consent of Coopers & Lybrand L.L.P.** 24.01 Power of Attorney** 27.01 Financial Data Schedule ** (For SEC use only)
- --------------- * Previously filed as an exhibit to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference. ** Filed herewith. 52 54 *** Previously filed as an exhibit to Amendment No. 1 to the Company's 1995 Annual Report on Form 10-K/A and incorporated herein by reference. **** Previously filed as an exhibit to Amendment No. 1 to the Company's 1993 Annual Report on Form 10-K/A and incorporated herein by reference. ***** Previously filed as an exhibit to the Company's 1995 Annual Report on Form 10-K and incorporated herein by reference. ~ Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. REPORTS ON FORM 8-K. No Reports on Form 8-K were filed by the Company during the quarter ended December 31, 1996. 53 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 10, 1997. Alumax Inc. By /s/ HELEN M. FEENEY ------------------------------------ HELEN M. FEENEY Vice President and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 10, 1997.
SIGNATURE TITLE --------- ----- * Chairman, Chief Executive Officer and Director - ----------------------------------------------------- (Principal Executive Officer) ALLEN BORN * Director - ----------------------------------------------------- J. DENNIS BONNEY * Director - ----------------------------------------------------- HAROLD BROWN * Director - ----------------------------------------------------- L. DON BROWN * Director - ----------------------------------------------------- PIERRE DES MARAIS II * Director - ----------------------------------------------------- JAMES C. HUNTINGTON, JR. * Director - ----------------------------------------------------- W. LOEBER LANDAU * Director - ----------------------------------------------------- PAUL W. MACAVOY * Director - ----------------------------------------------------- GEORGE P. STOE * Director - ----------------------------------------------------- ANNE WEXLER * Senior Vice President and Chief - ----------------------------------------------------- Financial Officer LAWRENCE B. FROST (Principal Financial Officer) * Vice President and Controller - ----------------------------------------------------- (Principal Accounting Officer) MICHAEL T. VOLLKOMMER *By /s/ HELEN M. FEENEY - ----------------------------------------------------- HELEN M. FEENEY As Attorney-in-Fact for each of the persons indicated
54 56 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Alumax Inc. Our report dated January 27, 1997, on our audits of the financial statements of Alumax Inc. is included on page 29 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed under Item 14 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Atlanta, Georgia January 27, 1997 55 57 ALUMAX INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (MILLIONS OF DOLLARS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - ---------------------------------------- ------------ ----------------------- --------------- ---------- ADDITIONS ----------------------- (1) (2) BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER DEDUCTIONS END OF DESCRIPTION OF PERIOD EXPENSES EXPENSES FROM RESERVE(A) PERIOD - ----------- ------------ ---------- ---------- --------------- ---------- Year Ended December 31, 1996 Reserves deducted from assets......... Accounts receivable, trade......... $17.7 $5.2 $ -- $ (6.3) $16.6 Year Ended December 31, 1995 Reserves deducted from assets Deferred income taxes.............. $13.4 $ -- $ -- $(13.4) $ -- Accounts receivable, trade......... $20.1 $2.7 $ -- $ (5.1) $17.7 Year Ended December 31, 1994 Reserves deducted from assets Deferred income taxes.............. $13.4 $ -- $ -- $ -- $13.4 Accounts receivable, trade......... $19.1 $4.7 $ -- $ (3.7) $20.1
- --------------- (a) 1996 amount includes $4.1 related to write-offs, net of recoveries, and $2.2 related to divestitures, net of acquisitions, which occurred in 1996. 56 58 EXHIBIT INDEX Unless otherwise indicated, exhibits are incorporated by reference to exhibits filed with the Company's Registration Statement on Form S-1 (Commission File No. 33-69442).
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.02 Agreement and Plan of Distribution, dated as of May 24, 1993, by and between AMAX Inc. and Alumax Inc. 2.03 Tax Disaffiliation Agreement, dated as of May 24, 1993, by and between AMAX Inc. and Alumax Inc. 2.04 Amendment No. 1 to the Agreement and Plan of Distribution, dated as of November 15, 1993, by and between AMAX Inc. and Alumax Inc.* 3.01 Restated Certificate of Incorporation of the Company* 3.02 Restated By-laws of Alumax Inc., as amended on September 5, 1996, filed as Exhibit 3.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996 and incorporated herein by reference 4.01 Form of Common Stock Certificate 4.02 Rights Agreement, dated as of February 22, 1996, between Alumax Inc. and Chemical Mellon Shareholder Services, L.L.C., as Rights Agent, including as Exhibit A the forms of Rights Certificate and Election to Exercise and as Exhibit B the form of Certificate of Designation and Terms of Participating Preferred Stock of the Company, filed as Exhibit 4 to the Company's Current Report on Form 8-K, dated February 22, 1996, and incorporated herein by reference 4.03 Credit Agreement, dated as of September 14, 1990, as amended as of November 13, 1990 and as further amended as of February 19, 1991, by and among Aluminerie Lauralco, Inc., as Borrower, Canalco, Inc., as Continuing Guarantor, and Bank of Montreal and National Westminster Bank PLC, as Arrangers, Bank of Montreal, as Agent, and the Banks named therein 4.04 Credit Agreement, dated as of May 19, 1995, among Alumax Inc., Royal Bank of Canada, as Agent, Arranger and Letter of Credit Issuer, Canadian Imperial Bank of Commerce, as Administrative Agent, and the Banks signatory thereto, filed as Exhibit 4.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995 and incorporated herein by reference Note: No other long-term debt instrument issued by the Company exceeds 10% of the consolidated total assets of the Company and its subsidiaries. In accordance with paragraph 4(iii) of Item 601 of Regulation S-K, the Company will furnish to the Commission upon request copies of long-term debt instruments and related agreements 10.01 Form of Alumax Inc. Excess Benefit Plan**~ 10.02 1993 Long-Term Incentive Plan (as Amended and Restated and as Further Amended on October 3, 1996)**~ 10.03 Deferred Compensation Plan (as Amended on October 3, 1996)**~ 10.04 1993 Annual Incentive Plan (as Amended and Restated and as Further Amended on October 3, 1996)**~ 10.05 Executive Separation Policy*~ 10.06 Non-Employee Directors Stock Compensation Plan (as Amended on October 3, 1996)**~ 10.07 Non-Employee Directors Deferred Compensation Plan (as Amended on October 3, 1996)**~
59
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.08 Lease Agreement, dated as of November 25, 1986, by and between Connecticut National Bank as Owner Trustee for the benefit of U.S. West Capital Corporation under an Owner Trust Agreement, dated as of November 25, 1986, and Alumax Mill Products, Inc. 10.09 Facility Purchase Agreement, executed and effective as of September 18, 1996, among Alumax Mill Products, Inc., Fleet National Bank and US WEST Financial Services, Inc.** 10.10 Restated Sales Agreement, dated as of January 1, 1986, as amended and supplemented as of April 8, 1992 and April 9, 1992, by and between Alcoa of Australia Limited and Alumax Inc. (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.) 10.11 Power Sales Agreement, dated September 28, 1995, as amended, between Intalco Aluminum Corporation and Bonneville Power Administration (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.)*** 10.12 Power Sales Agreement, dated as of October 1, 1995, between British Columbia Power Exchange Corporation and Intalco Aluminum Corporation (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.)*** 10.13 Electric Service Agreement, dated as of July 1, 1993, by and between Eastalco Aluminum Company and The Potomac Edison Company* 10.14 Agreement for the Sale of Electric Power and Energy, dated September 23, 1977, as amended, by and between the South Carolina Public Service Authority and Alumax of South Carolina 10.15 Electricity Contract, dated February 1, 1990, as amended on October 15, 1992, by and between Aluminerie Lauralco, Inc. and Hydro-Quebec (Certain portions of this agreement have been deleted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to a request for confidential treatment.) 10.16 Employment Agreement, As Amended and Restated as of December 5, 1996 between Alumax Inc. and C. Allen Born**~ 10.17 Agreement, dated as of November 15, 1993, as amended as of February 3, 1994, among AMAX Inc., Alumax Inc. and Helen M. Feeney*~ 10.18 Agreement, dated as of November 15, 1993, as amended as of February 3, 1994, among AMAX Inc., Alumax Inc. and Lawrence B. Frost*~ 10.19 Agreement, dated as of March 10, 1994, between Alumax Inc. and Helen M. Feeney, amending the Agreement, dated as of November 15, 1993, as amended as of February 3, 1994****~ 10.20 Agreement, dated as of March 10, 1994, between Alumax Inc. and Lawrence B. Frost, amending the Agreement, dated as of November 15, 1993, as amended as of February 3, 1994****~ 10.21 Grantor Trust Agreement, dated as of October 10, 1994, between Alumax Inc. and E. William Smethurst, Jr., filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated herein by reference~
60
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.22 Stock Purchase Agreement, dated as of October 6, 1995, By and Among the Shareholders of Cressona Aluminum Company, as Sellers, and Alumax Inc., as Purchaser***** 10.23 Bridge Loan Agreement, dated as of January 17, 1996, among Alumax Inc., The Chase Manhattan Bank, N.A., as Syndication Agent, Royal Bank of Canada, as Documentation and Administrative Agent, and the Banks signatory thereto***** 10.24 Acquisition Agreement, dated March 31, 1995, among Eastalco Aluminum Company, Eastalco Venture, Alumax of Maryland, Inc. and Alumet Corporation, Atmos (U.S.A.) Incorporated and Mitalco Inc., filed as Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1995 and incorporated herein by reference. 10.25 Acquisition Agreement, dated as of January 26, 1996, between Alumax of South Carolina, Inc. and Glencore Primary Aluminum Company, LLC***** 10.26 Purchase Agreement, dated as of June 24, 1996, between Euramax International, Ltd. and Alumax Inc., filed as Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 and incorporated herein by reference. 10.27 Agreement, dated as of June 28, 1996, by and between Minas Penoles, S.A. de C.V. and The Fresnillo Company, filed as Exhibit 10.01 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996 and incorporated herein by reference. 11.01 Calculation of Earnings per Common Share** 21.01 Subsidiaries of the Company** 23.01 Consent of Coopers & Lybrand L.L.P.** 24.01 Power of Attorney** 27.01 Financial Data Schedule** (For SEC use only)
- --------------- * Previously filed as an exhibit to the Company's 1993 Annual Report on Form 10-K and incorporated herein by reference. ** Filed herewith. *** Previously filed as an exhibit to Amendment No. 1 to the Company's 1995 Annual Report on Form 10-K/A and incorporated herein by reference. **** Previously filed as an exhibit to Amendment No. 1 to the Company's 1993 Annual Report on Form 10-K/A and incorporated herein by reference. ***** Previously filed as an exhibit to the Company's 1995 Annual Report on Form 10-K and incorporated herein by reference. ~ Management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. EX-10.01 2 EXCESS BENEFIT PLAN 1 EXHIBIT 10.01 ALUMAX INC. EXCESS BENEFIT PLAN Effective as of November 15, 1993 and as Amended on August 3, 1995 2 ALUMAX INC. EXCESS BENEFIT PLAN TABLE OF CONTENTS PAGE ARTICLE I ESTABLISHMENT OF PLAN ..........................................................................1 ARTICLE 2 DEFINITIONS Account...................................................................2 Beneficial Owner..........................................................2 Beneficiary...............................................................2 Board.....................................................................3 Change in Control.........................................................3 Code......................................................................5 Committee.................................................................5 Company Contribution......................................................5 Compensation..............................................................5 Effective Date............................................................5 Participant...............................................................6 Participant Account.......................................................6 Participant Contribution..................................................6 Plan......................................................................6 Plan Year.................................................................6 Prior Plan................................................................6 Retirement Plan...........................................................6 Thrift Plan...............................................................7 Valuation Date............................................................7 ARTICLE 3 PARTICIPATION 3.01 Participation in Excess Thrift Plan Benefits......................8 3.02 Participation in Excess Retirement Plan Benefits..................8 ARTICLE 4 EXCESS THRIFT PLAN BENEFITS 4.01 Participant Accounts..............................................9 4.02 Participant Contributions.........................................9 4.03 Company Contributions.............................................9 4.04 Vesting..........................................................10 4.05 Payment of Benefits..............................................10 4.06 Timing of Distributions..........................................11 3 ARTICLE 5 EXCESS RETIREMENT PLAN BENEFITS 5.01 Accrual of Retirement Benefits...................................12 5.02 Surviving Spouse and Child Benefits..............................12 5.03 Vesting..........................................................12 5.04 Payment of Benefits..............................................12 5.05 Changes in Beneficiaries.........................................13 ARTICLE 6 GENERAL PROVISIONS 6.01 Funding..........................................................14 6.02 Modification, Amendment, Etc.....................................14 6.03 Termination and Discontinuance...................................14 6.04 Administration and Interpretation................................15 6.05 Appointment of Subcommittees.....................................15 6.06 No Contract of Employment........................................15 6.07 Facility of Payment..............................................15 6.08 Withholding of Taxes.............................................15 6.09 Nonalienation....................................................16 6.10 Construction.....................................................16 6.11 Defined Terms....................................................16 - ii - 4 ALUMAX INC. EXCESS BENEFIT PLAN ARTICLE 1 ESTABLISHMENT OF PLAN Alumax Inc. hereby establishes, effective as of November 15, 1993, a deferred compensation plan which shall be known as the Alumax Inc. Excess Benefit Plan. The purpose of the Plan is to provide pension benefits for those employees whose retirement benefits and contributions under the Retirement Plan For Salaried Employees of Alumax Inc. and its Subsidiaries (hereinafter the "Retirement Plan") and the Alumax Inc. Thrift Plan For Salaried Employees (hereinafter the "Thrift Plan") are reduced because of the non-discrimination requirements of Sections 401(a)(4) and 410(b) of the Internal Revenue Code and limitations imposed by Sections 401(a)(17) and 415 of the Internal Revenue Code. Upon the Effective Date, the liability for accrued benefits under the AMAX Inc. Excess Benefit Plan (the "Prior Plan") corresponding to the interests of employees of the Company (excluding former employees of AMAX Inc. who become employees of the Company and whose accrued benefits under the Prior Plan are paid out by AMAX Inc.) will be transferred to and assumed by the Plan. Participants shall receive credit for all service recognized under the Prior Plan, and accrued benefits under the Prior Plan shall become such Participants' accrued benefits under this Plan except to the extent of any accrued benefits under the Prior Plan that are paid out by AMAX Inc. The Company intends that the benefits provided pursuant to the Plan shall be unfunded and that no Participant's rights to benefits under the Plan shall be greater than the rights of unsecured general creditors of the Company. However, nothing herein shall prevent the Company from establishing appropriate bookkeeping reserves (which are required herein), trust accounts, life insurance contracts, or other funding and accounting mechanisms to discharge the Company's obligations under the Plan provided that such funding or bookkeeping mechanisms do not create rights for Plan Participants which will result in constructive receipt of Plan benefits for income tax purposes or will cause the Plan not to be deemed unfunded under Sections 4(a)(5) or 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA"). 5 ARTICLE 2 DEFINITIONS Certain terms of this Plan have defined meanings which are set forth in this Article and which shall govern unless the context in which they are used clearly indicates that some other meaning is intended. Account shall mean a bookkeeping account maintained by the Company to which shall be credited contributions and adjusted as provided in Article 4. Beneficial Owner, with respect to any securities, shall mean any person who, directly or indirectly, has or shares the right to vote or dispose of such securities or otherwise has "beneficial ownership" of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on February 1, 1991 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that (i) a person shall not be deemed the Beneficial Owner of any security as a result of any agreement, arrangement or understanding to vote such security (x) arising solely from a revocable proxy or consent solicited pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder or (y) made in connection with, or otherwise to participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder, in either case described in clause (x) or clause (y) above whether or not such agreement, arrangement or understanding is also then reportable by such person on Schedule 13D under the Exchange Act (or any comparable or successor report), and (ii) a person engaged in business as an underwriter or securities shall not be deemed to be the Beneficial Owner of any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. Beneficiary shall mean any person or persons designated by a Participant on a form provided by the Committee to receive benefits hereunder in the event of the Participant's death. If any Participant shall fail to designate a Beneficiary or shall designate a Beneficiary who shall fail to survive the Participant, the Beneficiary shall be beneficiary designated under the Thrift Plan for the benefits described in Article 4 and the Retirement Plan for the benefits described in Article 5. If no surviving Beneficiary has been designated under the Thrift or Retirement Plans, the Beneficiary shall be the Participant's estate. - 2 - 6 Board shall mean the Board of Directors of Alumax Inc. Change in Control shall mean the occurrence of any of the following events: (a) any person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (a "20% Beneficial Owner"), provided, however, that (i) the term "20% Beneficial Owner" shall not include any Beneficial Owner who has crossed such 20% threshold solely as a result of an acquisition of securities directly from the Company, or solely as a result of an acquisition by the Company of Company securities, until such time thereafter as such person acquires additional voting securities other than directly from the Company and, after giving effect to such acquisition, such person would constitute a 20% Beneficial Owner; and (ii) with respect to any person eligible to file a Schedule 13G pursuant to Rule 13d-1(b)(1) under the Exchange Act with respect to Company securities (an "Institutional Investor"), there shall be excluded from the number of securities deemed to be beneficially owned by such person a number of securities representing not more than 10% of the combined voting power of the Company's then outstanding securities; (b) during any period of two consecutive years beginning after November 15, 1993, individuals who at the beginning of such period constitute the Board of Directors of the Company together with those individuals who first become Directors during such period (other than by reason of an agreement with the Company in settlement of a proxy contest for the election of directors) and whose election or nomination for election to the Board was approved by a vote of at least two thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved (the "Continuing Directors") cease for any reason to constitute a majority of the Board of Directors of the Company; (c) the stockholders of the Company approve a merger, consolidation, recapitalization or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, or the consummation of any such transaction if stockholder approval is not obtained, other than any such - 3 - 7 transaction which would result in at least 75% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together owned at least 75% of the combined voting power of the voting securities of the Company outstanding immediately prior to such transaction, with the relative voting power of each such continuing holder compared to the voting power of each other continuing holder not substantially altered as a result of the transaction; provided that, for purposes of this paragraph (c), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 75% threshold (or to preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of the Company or such surviving entity or of any subsidiary of the Company or such surviving entity; (d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition of all or substantially all the assets of the Company; or (e) any other event which the Board of Directors of the Company determines shall constitute a change in Control for purposes of this Plan; provided, however, that a Change in Control shall not be deemed to have occurred if one of the following exceptions applies: (1) unless a majority of the Continuing Directors of the Company determines that the exception set forth in this paragraph (1) shall not apply, none of the foregoing conditions would have been satisfied but for one or more of the following persons acquiring or otherwise becoming the Beneficial Owner of securities of the Company: (A) any person who has entered into a binding agreement with the Company, which agreement has been approved by two-thirds (2/3) of the Continuing Directors, limiting the acquisition of additional voting securities by such person, the solicitation of proxies by such person or proposals by such person concerning a business combination with the Company (a "Standstill Agreement"); - 4 - 8 (B) any employee benefit plan, or trustee or other fiduciary thereof, maintained by the Company or any subsidiary of the Company; (C) any subsidiary of the Company; or (D) the Company. (2) Unless a majority of the Continuing Directors of the Company determines that the exception set forth in this paragraph (2) shall not apply, none of the foregoing conditions would have been satisfied but for the acquisition by the Company of another entity (whether by merger or consolidation, acquisition of stock or assets, or otherwise) in exchange, in whole or in part, for securities of the Company provided that, immediately following such acquisition, the Continuing Directors constitute a majority of the Board of Directors of the Company, or a majority of the board of directors of any other surviving entity, and, in either case, no agreement, arrangement or understanding exists at that time which would cause such Continuing Directors to cease thereafter to constitute a majority of the Board of Directors or of such other board of directors. Notwithstanding the foregoing, unless a majority of the Continuing Directors determines otherwise, no Change in Control shall be deemed to have occurred with respect to a particular Participant under this Plan if the Change in Control results from actions or events in which such Participant is a participant in a capacity other than solely as an officer, employee or director of the Company. Code shall mean the Internal Revenue Code of 1986, as amended. Committee shall mean the Retirement Plan Committee designated in the Retirement Plan. Company shall mean Alumax Inc. and any affiliated company designated by the Board whose employees are eligible to participate in the Plan. Company Contribution shall mean the contribution made by the Company described in section 4.03. Compensation shall mean, for the purposes of Article 4, a Participant's compensation as defined in the Thrift Plan and, for purposes of Article 5, a Participant's compensation as defined under the Retirement Plan, both determined without regard to the limitation imposed by Code Section 401(a)(17). - 5 - 9 Effective Date shall mean November 15, 1993. Participant shall mean each participant in the Thrift Plan whose annual additions (as defined in Code Section 415(c)(2)) in any Plan Year exceed (or would exceed) the limitations imposed by Code Sections 415 (c)(1) or 415(e) or whose contributions to the Thrift Plan are limited by reason of Code Section 401(a)(17) of the Code. In addition, Participant shall mean each participant in the Retirement Plan whose annual benefit during a Plan Year exceeds the limitations imposed by Code Sections 415(b) or 415(e) or whose benefit is limited during such Plan Years by reason of Code Section 401(a)(17). To the extent not otherwise described above, "Participant" shall also mean any employee of the Company who participated in the Prior Plan. Participant Account shall have the meaning set forth in Section 4.01 hereof. Participant Contribution shall mean the amount of compensation the receipt of which a Participant elects to defer and instead have credited to the Participant's Account pursuant to Article 3 hereof, which election must be made prior to the beginning of the period during which the compensation is earned and for which amounts are contributed. A Participant shall not be entitled to have a Participant Contribution made on his behalf for any Plan Year unless (i) the Participant is precluded under Code Section 415 from making the maximum permissible contribution under Section 4.01 of the Thrift Plan for that Plan Year, or (ii) the Participant's compensation for determining the contributions under Section 4.01 of the Thrift Plan is reduced by reason of Code Section 401(a)(17). However, the maximum Participant Contribution the Participant can make for the Plan Year shall be the difference between (x) 6% of the Participant's compensation (within the meaning of Article 2 of the Thrift Plan, but without regard to the limitation imposed by Code Section 401(a)(17) for the Plan Year), and (y) the Participant's actual contributions for the Plan Year made pursuant to Section 4.01 of the Thrift Plan, except that actual contributions made by a Participant in excess of 6% of the Participant's Compensation (as defined in the Thrift Plan) shall be disregarded for this purpose. Plan shall mean the Alumax Inc. Excess Benefit Plan as set forth in this document together with any subsequent amendments hereto. Plan Year shall mean the calendar year. Prior Plan shall have the meaning set forth in Article 1 hereof. Retirement Plan shall mean the Retirement Plan For Salaried Employees of Alumax Inc. and its Subsidiaries - 6 - 10 effective as of November 15, 1993 and as amended from time to time thereafter. Thrift Plan shall mean the Alumax Inc. Thrift Plan For Salaried Employees as effective November 15, 1993 and as amended from time to time thereafter. Valuation Date shall mean, for the purposes of Article 4, the Valuation Date under the Thrift Plan and, for purposes of Article 5 the date of the annual actuarial valuation under the Retirement Plan. Valuation Date shall also mean such other dates as the Committee determines are necessary or appropriate, to value the Accounts or accrued benefits of Participants hereunder. - 7 - 11 ARTICLE 3 PARTICIPATION 3.01 Participation in Excess Thrift Plan Benefits Prior to the beginning of each Plan Year, the Committee shall provide to each Participant who is a participant in the Thrift Plan and whose additions or contributions under the Thrift Plan are limited as a result of the application of Code Sections 401(a)(17) or 415 with an election form upon which the Participant may elect to make a Participant Contribution. A Participant may make a Participant Contribution by means of payroll deduction in any whole percentage of not less than 1% nor more than 6% of the Participant's Compensation during any pay period. Such election shall remain in effect for the Plan Year or until revoked by the Participant if sooner. Once revoked, a Participant may not make a Participant Contribution to the Plan until the beginning of the next Plan Year. 3.02 Participation in Excess Retirement Plan Benefits Any Participant who is a participant in the Retirement Plan and whose benefits under the Retirement Plan are limited as a result of the exceptions applicable to certain Flight Crew Employees who are highly compensated employees (within the meaning of Code Section 414(q)) under Sections 1.27 and 3.02 of the Retirement Plan and the application of Code Sections 401(a)(17) or 415 shall commence participation in this Plan effective as of the first day of the Plan Year during which any such limitation first applies. - 8 - 12 ARTICLE 4 EXCESS THRIFT PLAN BENEFITS 4.01 Participant Accounts The Committee shall establish an Account for each Participant (a "Participant Account") which shall be credited with the Participant's Contributions, the Company Contributions and all adjustments thereto. 4.02 Participant Contributions All Participant Contributions made by a Participant since the preceding Valuation Date shall be credited to the Participant's Account as of each Valuation Date. Thereafter, the Participant's Contribution Account shall be adjusted on each Valuation Date by the Committee to reflect the income or loss that would have been credited under the Thrift Plan had the Participant's Contributions been made thereunder. 4.03 Company Contributions (a) Matching of Participant Contributions On each Valuation Date, the Participant's Account shall be credited with a Company Contribution determined as follows: The Participant's Contributions under this Plan shall be multiplied by 75% and the product shall be the Employer Contribution as of each Valuation Date. In addition, in the event that a Participant made the maximum permitted Pre-Tax Contribution to the Thrift Plan and made no after-tax contributions to the Thrift Plan, the match on the Participant's Pre-Tax Contributions not matched under the Thrift Plan shall be made hereunder and the amount of such unmatched Thrift Plan contributions shall reduce the amount of Participant Contributions hereunder. The Company Contribution determined above shall be adjusted as of each subsequent Valuation Date in accordance with rules established by the Committee to reflect the income or loss that would have been credited if the Employer Contribution had been credited to the Participant's Employer Matching Contribution Account pursuant to Section 4.02 of the Thrift Plan on each Valuation Date. (b) Matching of Thrift Plan Contributions As of each Valuation Date, the Company shall credit each Participant's Account with the amount by which the Participant's Employer Matching Contribution Account under the Thrift Plan is reduced on such Valuation Date to comply with the requirements of Code Section 415. This Company Contribution shall be adjusted as of each subsequent Valuation Date in - 9 - 13 accordance with rules established by the Committee to reflect the income or loss that would have been credited if the employer matching contributions had been credited to the Participant's Account under the Thrift Plan on the Valuation Dates specified in the Thrift Plan. 4.04 Vesting A Participant's Account shall become nonforfeitable as follows: (a) Contributions by Participants shall be nonforfeitable at all times. (b) Company Contributions shall become nonforfeitable in accordance with the Vesting Schedule and Vesting Service rules set forth in the Thrift Plan or upon retirement with the Company's consent, if earlier. For this purpose, Participants shall receive credit for Vesting Service prior to the Effective Date. (c) Company Contributions shall become nonforfeitable as of the date of a Change in Control. Nothing in this Section shall be deemed to confer upon any Participant rights greater than those of an unsecured general creditor of the Company to payment of benefits hereunder. 4.05 Payment of Benefits A Participant shall be entitled to receive payment of his Plan Account from the Company as follows: (a) Upon the Participant's retirement with the consent of the Company, the Participant shall receive a single lump sum payment equal to his Participant Account valued as of a Valuation Date selected by the Committee, which shall be no earlier than the Valuation Date immediately preceding or coinciding with the Participant's Retirement Date and no later than the date of distribution. (b) In the event of the death of a Participant while employed by the Company, the Participant's Account shall be paid to the Participant's Beneficiary in a single lump sum. The Participant's Account shall be valued as of a Valuation Date selected by the Committee which shall be no earlier than the Valuation Date preceding or coinciding with the Participant's death and no later then the date of distribution. - 10 - 14 (c) In the event of the Participant's termination of employment with the Company for reasons other than retirement (with consent) or death, the Participant shall be entitled to receive a distribution of the vested portion of his Account in a single lump sum payment. The Participant's Account shall be valued as of the Valuation Date immediately preceding or coinciding with his termination of employment. (d) Upon the occurrence of a Change in Control, each Participant shall be entitled to receive a distribution of his Participant Account in a single lump sum payment. Each Participant's Account shall be valued as of the date of the Change in Control or the Valuation Date coinciding with or immediately preceding the date of distribution, whichever produces the greater Account value. 4.06 Timing of Distributions The Company shall make payment to a Participant becoming entitled to receive a distribution of Plan benefits as soon as in administratively feasible, but in no event later than 30 days after the event entitling the Participant to payment. - 11 - 15 ARTICLE 5 EXCESS RETIREMENT PLAN BENEFITS 5.01 Accrual of Retirement Benefits A Participant shall accrue, during each Plan Year, a benefit under the Plan expressed as a monthly payment for the life of the Participant commencing on the Participant's Normal Retirement Date under the Retirement Plan. The benefit accrued under this Plan shall be equal to the excess of (i) the Participant's Accrued Benefit under the Retirement Plan for the Plan Year determined without regard to the exceptions applicable to certain Flight Crew Employees who are highly compensated employees (within the meaning of Code Section 414(q)) under Sections 1.27 and 3.02(e) of the Retirement Plan and Code Sections 401(a)(17) or 415 over (ii) the Accrued Benefit under the Retirement Plan for the Plan Year. A Participant also shall be credited with any benefits accrued under the Prior Plan. 5.02 Surviving Spouse and Child Benefits Each Plan Year a Participant shall accrue a surviving spouse and child benefit under this Plan equal to the excess of the Surviving Spouse And Child Allowance which would accrue under Section 4.05 of the Retirement Plan for the Plan Year without regard to the exceptions applicable to certain Flight Crew Employees who are highly compensated employees (within the meaning of Code Section 414(q)) under Sections 1.29 and 3.02(e) of the Retirement Plan and the limitations of Code Sections 401(a)(17) and 415 over the Surviving Spouse And Child Allowance actually accrued under the Retirement Plan for the Plan Year. 5.03 Vesting Each Participant's Retirement and surviving spouse and child benefits shall be nonforfeitable under this Plan to the extent the Participant's accrued benefit is nonforfeitable under the Retirement Plan. However, all Participants' retirement and surviving spouse benefits shall become nonforfeitable upon a Change in Control regardless of whether such benefits are nonforfeitable under the Retirement Plan. 5.04 Payment of Benefits (a) Upon a Participant's termination of employment with the Company, the Company shall commence payment to the Participant of Excess Retirement Plan benefits accrued hereunder in the same form and at the same time as the Participant receives his Retirement Allowance under the Retirement Plan. To the extent that the Participant's Retirement Income under the Retirement Plan is subject to actuarial or other adjustment to reflect the timing of commencement or form of benefit payment, the Participant's benefit under this Plan shall be subject to the same - 12 - 16 adjustments applied on the basis of the same actuarial assumptions. (b) In the event that a Participant dies while employed by the Company, the Company shall pay to the Participant's surviving spouse or child the surviving spouse and child benefits accrued hereunder in the same form and at the same time as the surviving spouse or child receives his Surviving Spouse And Child Allowance under the Retirement Plan. To the extent that the Surviving Spouse And Child Allowance is subject to actuarial or other adjustments to reflect the time of commencement or form of benefit payment under the Retirement Plan, the Participant's benefit under this Plan shall be subject to the same adjustments applied on the basis of the same actuarial assumptions. (c) If the lump sum value of the benefits payable to a Participant or his Beneficiary, determined in accordance with the actuarial assumptions specified in the Retirement Plan, is less than $50,000, then such lump sum amount shall be paid to such Participant or Beneficiary as soon as administratively feasible but in no event more than 30 days after the date such benefits would otherwise have commenced. 5.05 Changes in Beneficiaries A Participant who elects a survivor annuity may change his Beneficiary at any time prior to his death. However, payments to the new Beneficiary shall be made in the amount and for the life expectancy (determined at the commencement of payments to the Participant) of the Beneficiary named by the Participant at the time payments to the Participant commenced hereunder. The Committee may, in its discretion, permit a Beneficiary to elect to receive a lump sum distribution of payments hereunder, determined in accordance with the actuarial assumptions specified in the Retirement Plan. - 13 - 17 ARTICLE 6 GENERAL PROVISIONS 6.01 Funding All amounts payable in accordance with this Plan shall constitute a contractual general unsecured obligation of the Company. Such amounts, as well as any administrative costs relating to the Plan, shall be paid out of the general assets of the Company. The amounts provided by this Plan shall be paid from each Company's general assets or by such other means as the Company deems advisable. A Participant shall have no title to or beneficial interest in any assets set aside or acquired by a Company to fund its obligations hereunder prior to its due date and to the extent a Participant acquires the right to receive a payment from the Company under this Plan, such right shall be no greater than that of an unsecured general creditor of the Company. 6.02 Modification, Amendment, Etc. The Board of Directors reserves the right to modify, amend in whole or in part, discontinue benefit accrual under, or terminate the Plan at any time. However, no modification or amendment shall be made to Section 6.03 and no modification, discontinuance, amendment or termination shall adversely affect the right of any Participant to receive the benefits accrued and the balance to the credit of such Participant's Account as of the date of such modification, discontinuance, amendment or termination, or the timing of receipt of such benefits. 6.03 Termination and Discontinuance If the Company terminates the Plan, Participants shall continue to vest in their accrued benefits and their Accounts in accordance with Sections 4.04 and 5.03, and benefits under the Plan shall be paid in the manner and at the times indicated in Articles 4 and 5, unless the Board of Directors determines, in its sole and absolute discretion, that Participants will be fully vested in their Accounts, in which case benefits under the Plan shall be paid within 30 days of such determination. If benefit accruals have been discontinued under the Plan, the Company may recommence such accruals at any time by appropriate action. - 14 - 18 6.04 Administration and Interpretation The Committee shall have sole power and authority to construe, interpret and administer the Plan. Any interpretation of the Plan by the Committee or any administrative act by the Committee shall be final and binding on all Participants. All rules relating to the conduct of business by the Committee under the Retirement and Thrift Plans shall also apply to the Committee in administering this Plan. 6.05 Appointment of Subcommittees The members of the Committee may appoint from their number such committees with such powers as they shall determine, may authorize one or more of their number or any agent to execute or deliver any instrument or instruments on their behalf, and may employ such counsel, agents and other services as they may require in carrying out their duties. The Committee shall, from time to time, maintain or cause to be maintained all records which it shall deem necessary for purposes of the Plan. 6.06 No Contract of Employment The establishment of the Plan shall not be construed as conferring any legal rights upon any person for a continuation of employment, nor shall it interfere with the rights of the Company to discharge any employee and to treat him without regard to the effect which such treatment might have upon him as a Participant in the Plan. 6.07 Facility of Payment In the event that the Committee shall find that a Participant is unable to care for his affairs because of illness or accident, the Committee may direct that any benefit payment due him, unless claim shall have been made therefor by a duly appointed legal representative, be paid to his spouse, a child, a parent or other blood relative, or to a person with whom he resides, and any such payment so made shall be a complete discharge of the liabilities of the Company and the Plan therefor. 6.08 Withholding of Taxes The Company shall deduct from each payment to be made under the Plan and the Trust such income or other taxes as are required to be withheld under applicable law. - 15 - 19 6.09 Nonalienation No benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so by any Participant or creditor thereof shall be void, nor shall any such benefit be in any manner liable for or subject to garnishment, attachment, execution or levy, or liable for or subject to the debts, contracts, liabilities, engagements or torts of a Participant. 6.10 Construction (a) The Plan shall be construed, regulated and administered under the laws of the State of Georgia to the extent not preempted by ERISA or other federal law. (b) When used herein, the masculine pronoun shall include the feminine pronoun, and the singular shall include the plural, where appropriate. 6.11 Defined Terms Capitalized terms which are not otherwise defined in this Plan shall have the same meaning as set forth in the Thrift Plan and the Retirement Plan. IN WITNESS WHEREOF, the Company has caused this Plan to be duly executed and its seal to be hereunto affixed on the date indicated below, but effective as of November 15, 1993. ALUMAX, INC. By: /s/ John A. Brader -------------------------------- [CORPORATE SEAL] Title: Vice President ----------------------------- Attest: Date: 12-27-93 ------------------------ ------------------------------- PARTICIPATING COMPANIES [List] - 16 - EX-10.02 3 LONG TERM INCENTIVE PLAN 1 EXHIBIT 10.02 ALUMAX INC. - -------------------------------------------------------------------------------- 1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED AS FURTHER AMENDED ON OCTOBER 3, 1996 - -------------------------------------------------------------------------------- 2 ALUMAX INC. - -------------------------------------------------------------------------------- 1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED AS FURTHER AMENDED ON OCTOBER 3, 1996 - -------------------------------------------------------------------------------- Page 1. Purpose........................................................ 1 2. Definitions.................................................... 1 3. Administration................................................. 3 a. Authority of the Committee................................ 3 b. Manner of Exercise of Committee Authority................. 3 c. Limitation of Liability................................... 3 d. Performance-Based Awards to "Designated Participants"..... 3 4. Stock Subject to Plan.......................................... 4 5. Eligibility.................................................... 4 6. Specific Terms of Awards....................................... 4 a. General................................................... 4 b. Options................................................... 5 c. Stock Appreciation Rights................................. 5 d. Restricted Stock.......................................... 6 e. Deferred Stock (Restricted Stock Units)................... 7 f. Bonus Stock and Awards in Lieu of Cash Obligations........ 7 g. Dividend Equivalents...................................... 7 h. Other Stock-Based Awards.................................. 8 i. Performance Awards........................................ 8 7. Certain Provisions Applicable to Awards........................ 9 a. Stand-Alone, Additional, Tandem and Substitute Awards..... 9 b. Performance Conditions.................................... 10 c. Term of Awards............................................ 10 d. Form of Payment Under Awards; Deferrals................... 10 e. Rule 16b-3 Compliance..................................... 10 8. Change in Control.............................................. 11 a. Definition of "Change in Control"......................... 11 b. Definition of "Change in Control Stock Value"............. 13 c. Definition of "Change in Control Settlement Value"........ 14 d. Acceleration and Cash-Out Upon a Change in Control........ 14 e. No Non-Exempt Section 16(b) Purchases Triggered........... 15 3 ALUMAX INC. - -------------------------------------------------------------------------------- 1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED AS FURTHER AMENDED ON OCTOBER 3, 1996 - -------------------------------------------------------------------------------- Page 9. General Provisions............................................. 15 a. Compliance With Legal and Other Requirements............. 15 b. Limits on Transferability; Beneficiaries................. 15 c. Adjustments.............................................. 16 d. Taxes.................................................... 16 e. Changes to the Plan and Awards........................... 16 f. Limitation on Rights Conferred Under Plan................ 17 g. Unfunded Status of Awards; Creation of Trusts............ 17 h. Nonexclusivity of the Plan............................... 17 i. Payments in the Event of Forfeitures; Fractional Shares.. 17 j. Governing Law; Arbitration............................... 17 k. Effective Date; Plan Termination......................... 18 4 ALUMAX INC. 1993 LONG TERM INCENTIVE PLAN AS AMENDED AND RESTATED 1. Purpose. The purpose of this 1993 Long Term Incentive Plan as Amended and Restated (the "Plan") is to assist Alumax Inc. (the "Company") and its subsidiaries in attracting, retaining, and rewarding high caliber employees, enabling such employees to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such employees and the Company's stockholders, and providing such employees with performance incentives to expend their maximum efforts in the creation of long term shareholder value. 2. Definitions. The definitions of awards under the Plan, including Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of other awards, Dividend Equivalents, Other Stock-Based Awards and Performance Awards, are set forth in Section 6 of the Plan. Such awards, together with any other right or interest granted to a Participant under the Plan, are termed "Awards." The definitions of terms relating to a Change in Control of the Company are set forth in Section 8 of the Plan. For purposes of the Plan, the following additional terms shall be defined as set forth below: (a) "Board" means the Company's Board of Directors. (b) "Beneficiary" with respect to members of the Executive Group means the person, persons, trust or trusts which have been designated by the Participant in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under this Plan in the event of the Participant's death; Beneficiary with respect to all other Participants shall mean the person, persons, trust or trusts which have been designated by the Participant in his or her most recent beneficiary designation to receive the benefits specified under the Company's Group Life Insurance Plan. In either case, if there is no designated Beneficiary or surviving designated Beneficiary, then Beneficiary shall mean the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits. (c) "Cause" with respect to the forfeiture under the terms of Award agreements in event of termination of employment means (i) the willful and continued failure by the Employee to perform substantially his or her duties with the Company (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by the Chairman of the Board of Directors or the President of the Company which specifically identifies the manner in which the Employee has not substantially performed his or her duties, (ii) the willful engagement by the Employee in conduct which is not authorized by the Board of Directors of the Company or within the normal course of the Employee's business decisions and is known by the Employee to be materially detrimental to the best interests of the Company or any of its subsidiaries, or (iii) the willful engagement by the Employee in illegal conduct or any act of serious dishonesty which adversely affects, or, in the reasonable estimation of the Board of Directors of the Company, could in the future adversely affect, the value, reliability or performance of the Employee to the Company in a material manner. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the 5 Employee in good faith and in the best interests of the Company. Notwithstanding the foregoing, an Employee who is a member of the Executive Group shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors after reasonable notice to the Employee and an opportunity for him or her, together with his or her counsel, to be heard before the Board of Directors, finding that, in the good faith opinion of the Board of Directors, the Employee was guilty of the conduct set forth above in (i), (ii) or (iii) of this sub-paragraph and specifying the particulars thereof in detail. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include successor provisions and regulations thereunder. (e) "Committee" means the Human Resources and Compensation Committee of the Board of Directors of the Company, or such other Board committee as may be designated by the Board to administer the Plan; provided that the Committee shall at all times be comprised solely of two or more outside directors satisfying the requirements of Section 162(m)(4)(C)(i) of the Code. (f) "Company" means Alumax Inc., a Delaware corporation, or any successor corporation. (g) "Designated Participant" means any Participant who is designated as such pursuant to Section 3(d). (h) "Executive Group" means the Chief Executive Officer of the Company and other key executives of the Company or its subsidiaries who have been designated as such by the Chief Executive Officer with Committee approval. (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder. (j) "Fair Market Value" means the fair market value of Stock, Awards, or other property determined by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock as of any given date shall mean the closing sale price of Stock reported on the Composite Tape for securities listed on the New York Stock Exchange in The Wall Street Journal for such date, or, if no Stock was traded on that date, on the next preceding day on which there was such a trade. (k) "ISO" means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code. (l) "Participant" means a person who, as an employee of the Company or a subsidiary, has been granted an Award under the Plan. - 2 - 6 (m) "Plan" means this 1993 Long Term Incentive Plan as Amended and Restated. (n) "Stock" means the Company's Common Stock, $.01 par value, and such other securities as may be substituted (or resubstituted) for Stock pursuant to Section 4. 3. Administration. (a) Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Participants, grant Awards, determine the type, number, and other terms and conditions of, and all other matters relating to, Awards, prescribe Award agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award agreements and correct defects, supply omissions, or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. (b) Manner of Exercise of Committee Authority. The Committee shall exercise sole and exclusive discretion on any matter relating to a Participant subject to Section 16 of the Exchange Act if and to the extent necessary to obtain the exemption under Rule 16b-3 under the Exchange Act. Any action of the Committee shall be final, conclusive, and binding on all persons, including the Company, its subsidiaries, Participants, persons claiming rights from or through a Participant, and stockholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any subsidiary, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform administrative functions and, with respect to Participants not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, to the extent permitted under Rule 16b-3 and applicable law. (c) Limitation of Liability. The Committee may appoint agents to assist it in administering the Plan. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or employee of the Company or a subsidiary, the Company's independent certified public accountants, consultants or any other agent assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company or a subsidiary acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. (d) Performance-Based Awards to "Designated Participants." Prior to March 31 of each year, the Committee may, in its sole discretion, designate any Participant, whom it deems likely to be at the time compensation will be paid under an Award a "covered employee" under Section 162(m) of the Code and whose compensation may exceed $1 million in such year and be subject to the limitation on tax deductibility under Section 162(m) of the Code, as a "Designated Participant" to be granted an Award under this - 3 - 7 Section 3(d) that will not be subject to such limitation on deductibility under Section 162(m) of the Code. Notwithstanding any provision of the Plan to the contrary, the Committee may, in its discretion, reduce but not increase the amount payable under any such Award to such a Designated Participant. All determinations by the Committee as to the achievement of Performance Objectives (as described below in Section 6(i)) applicable to such an Award shall be made in writing, and the Committee may not exercise discretion to modify the Performance Objectives or the vesting conditions (other than with respect to the death or disability of such Designated Participant or in the event of a Change in Control) with respect to such Award if the exercise of such discretion would cause such Award to fail to qualify as "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code. 4. Stock Subject to Plan. Subject to adjustment as provided in Section 9(c), the total number of shares of Stock reserved and available for issuance in connection with Awards under the Plan shall be 3,000,000, plus 10% of the number of shares issued after the effective date of the Plan (other than any issuance under the Plan or any other compensation or benefit plan of the Company), except any shares added as a result of issuances by the Company shall not be available for grants of ISOs or Stock Appreciation Rights in tandem with ISOs. When Awards are granted and while they are outstanding, shares relating to an Award will be counted against the limitation set forth in this Section 4 in accordance with Rule 16b-3; the Committee may adopt reasonable counting procedures, consistent with Rule 16b-3, to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards), and make adjustments if the number of shares actually distributed differs from the number of shares previously counted in connection with an Award. Shares subject to an Award that is forfeited or settled in cash or otherwise terminated without a distribution of shares to the Participant, including shares withheld in payment of taxes relating to Awards and the number of shares equal to the number of shares surrendered in payment of the exercise price of Options (or any other Awards in the nature of purchase rights) or taxes relating to Awards, will again be available for Awards under the Plan, except that, if any such shares could not again be available under Rule 16b-3 for Awards to a Participant who is subject to Section 16 of the Exchange Act, such shares shall be available exclusively for Awards to Participants who are not subject to Section 16. Any shares delivered under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. 5. Eligibility. All salaried employees of the Company and its subsidiaries, including any director or officer who is also such an employee, are eligible to be granted Awards under the Plan. The foregoing notwithstanding, directors of the Company who are not salaried employees and members of the Committee shall not be eligible to be granted Awards under the Plan. 6. Specific Terms of Awards. (a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 9(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment by the Participant. The Committee shall retain full power to accelerate or waive, at any time, any term or condition of an Award that is not mandatory under the Plan. Except in cases in which the Committee is specifically authorized to require other forms of - 4 - 8 consideration by the Plan, or to the extent other forms of consideration must by paid to satisfy the requirements of the Delaware General Corporation Law, only services may be required as consideration for the grant (but not the exercise) of any Award. (b) Options. The Committee is authorized to grant Options to Participants on the following terms and conditions: (i) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share on the date of grant of such Option except as provided under Section 7(a) hereof. (ii) Time and Method of Exercise. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part, the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, including, without limitation, cash, Stock, other Awards or awards issued under other Company plans, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis, such as through "cashless exercise" arrangements, to the extent permitted by applicable law), and the methods by which Stock will be delivered or deemed to be delivered to Participants. (iii) ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, including but not limited to the requirements that no ISO shall be granted more than ten years after the effective date of the Plan, no ISO shall be exercisable more than ten years after the date of grant, and ISOs shall not be transferable otherwise than by will or the laws of descent and distribution and shall be exercisable, during the Participant's lifetime, only by the Participant. (iv) Limitation. During any period of five consecutive years under the Plan, a Participant may not be granted Options covering more than 900,000 shares of Stock. (c) Stock Appreciation Rights. The Committee is authorized to grant Stock Appreciation Rights ("SARs") to Participants on the following terms and conditions: (i) Right to Payment. An SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise (or, if the Committee shall so determine in the case of any such right other than one related to an ISO, the Fair Market Value of one share at any time during a specified period before or after the date of exercise, or, in the case of a "Limited SAR," the Fair Market Value determined by reference to amounts paid or payable in connection with a Change in Control of the Company, as specified by the Committee), over (B) the grant price of the SAR as determined by the Committee as of the date of grant of the SAR. (ii) Other Terms. The Committee shall determine the time or times at which and the circumstances under which an SAR may be exercised in whole or in part, the method of exercise, method of settlement, form of consideration payable in settlement, method by which Stock will be delivered or deemed to be delivered to Participants, whether - 5 - 9 or not an SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR. Limited SARs that may only be exercised in connection with a Change in Control or other event as specified by the Committee may be granted on such terms, not inconsistent with this Section 6(c), as the Committee may determine. Limited SARs may be either freestanding or in tandem with other Awards. (iii) Limitation. During any period of five consecutive years under the Plan, a Participant may not be granted SARs covering more than 900,000 shares of Stock. (d) Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions: (i) Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Committee may determine. Except to the extent restricted under the terms of the Plan and any Award agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder including, without limitation, the right to vote Restricted Stock or the right to receive dividends thereon. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock. (iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require such certificates to bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, the Company to retain physical possession of the certificates, and/or the Participant to deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock. (iv) Dividends. Dividends paid on Restricted Stock shall be either paid at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or the payment of such dividends shall be deferred and/or the amount or value thereof automatically reinvested in additional Restricted Stock, other Awards, or other investment vehicles, as the Committee shall determine or permit the Participant to elect. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed. - 6 - 10 (v) Limitation. During any period of five consecutive years under the Plan, a Participant may not be granted Restricted Stock covering more than 900,000 shares of Stock. (e) Deferred Stock (Restricted Stock Units). The Committee is authorized to grant Deferred Stock to Participants, subject to the following terms and conditions: (i) Award and Restrictions. Delivery of Stock will occur upon expiration of the deferral period specified for an Award of Deferred Stock by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, Deferred Stock shall be subject to such restrictions as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times, separately or in combination, in installments, or otherwise, as the Committee may determine. (ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award agreement evidencing the Deferred Stock), all Deferred Stock that is at that time subject to deferral (other than a deferral at the election of the Participant) shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Deferred Stock. (iii) Limitation. During any period of five consecutive years under the Plan, a Participant may not be granted Deferred Stock covering more than 900,000 shares of Stock. (f) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company obligations to pay cash under other plans or compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the Exchange Act, such cash amounts are determined under such other plans or the Participant's election to receive an Award in lieu of such Company obligations is made in a manner that complies with applicable requirements of Rule 16b-3 so that the acquisition of Stock or Awards hereunder shall be exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee. During any period of five consecutive years under the Plan, a Participant may not be granted more than 900,000 shares of bonus Stock or other Awards in lieu of cash obligations. In addition, during any calendar year under the Plan, a Participant may not be granted under the Plan bonus Stock or other Awards in lieu of cash obligations valued at more than $3,000,000. (g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to a Participant, entitling the Participant to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that - 7 - 11 Dividend Equivalents will be paid or distributed when accrued or will be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles as the Committee may specify. (h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be authorized pursuant to this Section 6(h). During any period of five consecutive years under the Plan, a Participant may not be granted awards under both Sections 6(h) and 6(i) of the Plan covering more than 900,000 shares of Stock. In addition, during any calendar year a Participant shall not be granted Awards under both Sections 6(h) and 6(i) of the Plan having an aggregate value of more than $3,000,000. (i) Performance Awards. Subject to the following provisions, Performance Awards expressed as amounts of cash, Stock, a percentage of an award pool specified by the Committee or other Awards may be granted by the Committee in such form and upon such terms and conditions as the Committee, in its discretion, may from time to time determine. Each Performance Award shall specify the range and nature of the payment which may be received by the Participant based upon the range of performance to be achieved for specified Performance Objectives within a specified Performance Period, as hereinafter defined. (i) Performance Period. The Performance Period with respect to each Performance Award shall be the period of time within which the Performance Objectives relating to that Award are to be achieved. (ii) Performance Objectives, Performance Award Targets and Award Ranges. Performance Objectives may specify measures or performance of the Company as a whole, subsidiaries, or business units within the Company or subsidiaries, measures of individual performance of the Participant, or such other objectives (and combinations of objectives), the achievement of which is expected to benefit the Company and its stockholders. Performance Objectives for a Performance Period may be established by the Committee with respect to an Award to a Designated Participant from among the following: consolidated, subsidiary or business unit operating profits before interest expense and taxes, consolidated, subsidiary or business unit pre-tax profits, consolidated, subsidiary or business unit cash flow, net income, earnings per share, return on average equity, and/or return on invested capital. The Performance Objectives applicable to any year shall be established by the Committee on or before March 31 of such year. A single Performance - 8 - 12 Objective may be specified for different groups of Participants or for individual Participants. As soon as practicable, the Committee (or the Chief Executive Officer of the Company, if assigned by the Committee) shall establish target Performance Awards and, if deemed appropriate, Performance Award ranges for each Performance Period. Such target Performance Awards will specify the amount payable to each Participant upon 100% achievement of the Performance Objectives applicable to such Participant. In addition, ranges may be established to determine whether, and the extent to which, a portion of the Performance Award shall be payable to a Participant if the applicable Performance Objectives are not fully achieved, and whether, and the extent to which, payments in addition to the target Performance Award shall be made if the applicable Performance Objectives are exceeded. The Committee (or the Chief Executive Officer, if assigned by the Committee) is authorized at any time during or after a Performance Period, in its sole and absolute discretion, to adjust, modify, or specify new Performance Objectives, target Performance Award ranges, and related terms and conditions, (x) in recognition of extraordinary or nonrecurring items affecting the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles, (y) with respect to any Participant whose position or duties with the Company or any subsidiary changes during a Performance Period, or (z) with respect to any person who first becomes a Participant after the first date of the Performance Period. (iii) Earning of Performance Awards. As promptly as practicable following the end of each Performance Period, the Committee (or the Chief Executive Officer, if assigned by the Committee) shall determine whether and the extent to which Performance Objectives applicable to Participants were achieved and the Performance Awards that correspond to such achievement and/or allocations as specified under the Performance Award ranges for the Performance Period. The Committee may, in its sole and absolute discretion, in view of the Committee's assessment of the business strategy of the Company and subsidiaries, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant, increase or decrease final Performance Award amounts. (iv) Termination of Employment. If a Participant's employment has terminated prior to completion of a Performance Period, the extent to which a Performance Award shall be deemed to have been earned and payable shall be determined by the Committee, in its sole discretion, at or after the time of grant. (v) Distributions. A Performance Award, to the extent that it has been earned, may be distributed in cash, Stock or other Awards, in a lump sum, in installments, or a combination thereof as determined by the Committee, in its sole discretion, at or after the time of grant. 7. Certain Provisions Applicable to Awards. (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or award granted under any plan of the Company, any subsidiary, or any business entity to be - 9 - 13 acquired by the Company or a subsidiary, or any other right of a Participant to receive payment from the Company or any subsidiary. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. In addition, grants of Awards in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company, in which the value of Stock subject to the Award is equal to the value of the cash compensation (for example, Deferred Stock or Restricted Stock), or in which the exercise price, grant price, or purchase price of the Award in the nature of a right that may be exercised is equal to Fair Market Value of the underlying Stock minus the value of the cash compensation surrendered (for example, Options granted with an exercise price "discounted" by the amount of the cash compensation surrendered), are specifically authorized. (b) Performance Conditions. The right of a Participant to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. Any Award subject to such conditions may be denominated "performance shares," "performance units," or any other title deemed appropriate by the Committee. (c) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided, however, that in no event shall the term of any ISO or an SAR granted in tandem therewith exceed a period of ten years (or such shorter term as may be required under Section 422 of the Code). (d) Form of Payment Under Awards; Deferrals. Subject to the terms of the Plan and any applicable Award agreement, payments to be made by the Company or a subsidiary upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards, or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. Installment or deferred payments may be required by the Committee (subject to Section 9(e) of the Plan) or permitted at the election of the Participant. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments denominated in Stock. (e) Rule 16b-3 Compliance. (i) Six-Month Holding Period. Unless a Participant could otherwise transfer Stock acquired under the Plan without incurring liability under Section 16(b) of the Exchange Act, (a) Stock acquired under the Plan other than upon exercise of a derivative security shall be held for at least six months from the date of acquisition, and (b) at least six months shall elapse from the date of acquisition of a derivative security to the date of disposition of the derivative security (other than upon exercise or conversion) or disposition of any Stock acquired upon exercise or conversion of such derivative security. (ii) Other Rule 16b-3 Compliance Provisions. It is the intent of the Company that this Plan comply in all respects with applicable provisions of Rule 16b-3 or - 10 - 14 Rule 16a-1(c)(3) (as in effect prior to August 15, 1996) under the Exchange Act in connection with any grant of Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act (except for transactions exempted under alternative Exchange Act Rules or acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of this Plan or any Award agreement does not comply with the requirements of Rule 16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, such provision will be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall avoid liability under Section 16(b). In addition, the per share exercise price of any Option, grant price of any SAR, or purchase price of any other Award conferring a right to purchase Stock shall be not less than any specified percentage of the Fair Market Value of Stock at the date of grant of the Award then required in order to comply with Rule 16b-3. 8. Change in Control. (a) Definition of "Change In Control." For purposes of this Plan, the term "Change in Control" shall mean the occurrence of any of the following events after consummation of the spin-off of Stock by AMAX Inc. which resulted in the registration of the Stock under Section 12 of the Exchange Act: (i) any person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then-outstanding securities (a "20% Beneficial Owner"); provided, however, that (a) the term "20% Beneficial Owner" shall not include any Beneficial Owner who has crossed such 20 percent threshold solely as a result of an acquisition of securities directly from the Company, or solely as a result of an acquisition by the Company of Company securities, until such time thereafter as such person acquires additional voting securities other than directly from the Company and, after giving effect to such acquisition, such person would constitute a 20% Beneficial Owner; and (b) with respect to any person eligible to file a Schedule 13G pursuant to Rule 13d-1(b)(1) under the Exchange Act with respect to Company securities (an "Institutional Investor"), there shall be excluded from the number of securities deemed to be beneficially owned by such person a number of securities representing not more than 10 percent of the combined voting power of the Company's then-outstanding securities; (ii) during any period of two consecutive years beginning after the Stock first became registered under Section 12 of the Exchange Act, individuals who at the beginning of such period constitute the Board together with those individuals who first became Directors during such period (other than by reason of an agreement with the Company in settlement of a proxy contest for the election of directors) and whose election or nomination for election to the Board was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved (the "Continuing Directors"), cease for any reason to constitute a majority of the Board; (iii) the stockholders of the Company approve a merger, consolidation, recapitalization or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result - 11 - 15 in at least 75% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together owned at least 75% of the combined voting power of the voting securities of the Company outstanding immediately prior to such transaction, with the relative voting power of each such continuing holder compared to the voting power of each other continuing holder not substantially altered as a result of the transaction; provided that, for purposes of this paragraph (iii), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 75% threshold (or to preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of the Company or such surviving entity or any subsidiary of the Company or such surviving entity; (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition of all or substantially all the assets of the Company; or (v) any other event which a majority of the members of the Committee who are Continuing Directors determines shall constitute a Change in Control for purposes of this Plan; provided, however that a Change in Control shall not be deemed to have occurred if one of the following exceptions applies: (1) Unless a majority of the members of the Committee who are Continuing Directors determines that the exception set forth in this paragraph (1) shall not apply, none of the foregoing conditions would have been satisfied but for one or more of the following persons acquiring or otherwise becoming the Beneficial Owner of securities of the Company: (A) any person who has entered into a binding agreement with the Company, which agreement has been approved by two-thirds (2/3) of the Continuing Directors, limiting the acquisition of additional voting securities by such person, the solicitation of proxies by such person or proposals by such person concerning a business combination with the Company (a "Standstill Agreement"); (B) any employee benefit plan, or trustee or other fiduciary thereof, maintained by the Company or any subsidiary of the Company; (C) any subsidiary of the Company; or (D) the Company. (2) Unless a majority of the members of the Committee who are Continuing Directors determines that the exception set forth in this paragraph (2) shall not apply, none of the foregoing conditions would have been satisfied but for the acquisition by the Company of another entity (whether by merger or consolidation, the acquisition of stock or assets, or otherwise) in exchange, in whole or in part, for securities of the Company, provided that, immediately following such acquisition, the Continuing Directors constitute a majority of the Board, or a majority of the board of directors of any other surviving entity, and, in either case, no agreement, arrangement or understanding exists at that time which would cause such Continuing Directors to cease thereafter to constitute a majority of the Board or of such other board of directors. - 12 - 16 (3) A majority of the members of the Committee who are Continuing Directors determines that a Change in Control shall be deemed not to have occurred. Notwithstanding the foregoing, unless otherwise determined by a majority of the Committee who are Continuing Directors, no Change in Control shall be deemed to have occurred with respect to a particular Participant if the Change in Control results from actions or events in which such Participant is a participant in a capacity other than solely as an officer, employee, or director of the Company. For purposes of the foregoing definition of Change in Control, the term "Beneficial Owner," with respect to any securities, shall mean any person who, directly or indirectly, has or shares the right to vote or dispose of such securities or otherwise has "beneficial ownership" of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on the effective date of the Plan) under the Exchange Act, including pursuant to any agreement, arrangement, or understanding (whether or not in writing); provided, however, that (i) a person shall not be deemed the Beneficial Owner of any security as a result of any agreement, arrangement, or understanding to vote such security (A) arising solely from a revocable proxy or consent solicited pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder or (B) made in connection with, or otherwise to participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder, in either case described in clause (A) or clause (B) above whether or not such agreement, arrangement or understanding is also then reportable by such person on Schedule 13D under the Exchange Act (or any comparable or successor report), and (ii) a person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (b) Definition of "Change in Control Stock Value." "Change in Control Stock Value" shall mean the value of a share of Stock determined as follows: (i) if the Change in Control results from an event described in clause (iii) of the Change in Control definition in Section 8(a), the highest per share price paid for shares of Stock of the Company in the transaction resulting in the Change in Control; (ii) if the Change in Control results from an event described in clauses (i), (ii) or (v) of the Change in Control definition in Section 8(a) and no event described in clauses (iii) or (iv) of the Change in Control definition in Section 8(a) has occurred in connection with such Change in Control, the highest sale price of a share of Stock of the Company on any trading day during the sixty (60) consecutive trading days immediately preceding and following the date of such Change in Control as reported on the New York Stock Exchange Composite Tape and published in the Wall Street Journal; or (iii) if the Change in Control results from an event described in clause (iv) of the Change in Control definition in Section 8(a), the price per share at which shares of Stock are redeemed or exchanged by their holders in the transaction described in such clause (iv). - 13 - 17 (c) Definition of "Change in Control Settlement Value." "Change in Control Settlement Value" shall mean, with respect to a share of Stock, the excess of the Change in Control Stock Value over the exercise, grant, or base price of an Award covering such share of Stock, provided that, with respect to any Option which is an ISO immediately prior to the election to receive the Change in Control Settlement Value, the Change in Control Settlement Value shall not exceed the maximum amount permitted for such Option to continue to qualify as an ISO. (d) Acceleration and Cash-Out Upon a Change in Control. Notwithstanding any other provisions of this Plan to the contrary (except the provisions of Section 7(e) hereof), in the event of a Change in Control the following provisions shall apply: (i) All outstanding Awards on the date of the Change in Control in the nature of a right that may be exercised not previously exercisable shall become fully and immediately exercisable on the date of such Change in Control, and such Awards shall not be subject to termination upon the termination of employment of the Participant; and (ii) Unless waived by a given Participant, the restrictions, deferral periods and limitations, and forfeiture conditions applicable to any other Award granted under the Plan shall lapse and such Awards shall be deemed fully vested, subject only to the restrictions on dispositions of equity securities set forth in Section 7(e); and (iii) Section 6(b)(iv) notwithstanding, any optionee who holds an Option shall be entitled to elect, during the 60-day period immediately following such Change in Control, in lieu of acquiring the shares of Stock covered by such Option, to receive, and the Company shall be obligated to pay, the Change in Control Settlement Value (as defined in Section 8(c) hereof) with respect to shares of Stock up to the number of shares covered by such Option, which amount shall be paid in cash; and (iv) A Participant shall be entitled to elect, during the 60-day period immediately following such Change in Control, to surrender any other Award and receive, in full settlement thereof, and the Company shall be obligated to pay, the Change in Control Settlement Value with respect to the number of shares of Stock covered by an Award in the nature of a right that may be exercised, or the Change in Control Stock Value with respect to the number of shares of Stock covered by any other type of Award, which amount shall in either case be paid in cash; and (v) Notwithstanding the provisions of Section 9(a), the Board shall not, at any time following a Change in Control, impose any conditions on any outstanding Award that have not been previously imposed as of the date of such Change in Control, unless, in the written opinion of independent counsel to the Company, such condition is necessary to comply with any federal, state, or local securities or other law or regulation, or the rules of any applicable securities exchange, and, in the good faith opinion of the Board, compliance with such law, regulation or rule without the imposition of such condition would be impracticable; and (vi) In lieu of any other form of settlement authorized under this Section 8(d), a Participant may elect under terms set by and subject to approval of the Committee to receive Deferred Stock or Restricted Stock, or, if authorized by the Committee, other - 14 - 18 deferred forms of payment, in order to defer federal income taxation of the Participant with respect to amounts payable hereunder; and (vii) notwithstanding the provisions of Section 9(e) hereof, the provisions of this Section 8 may not be amended in any respect following a Change in Control except with the consent of any affected Participant. (e) No Non-Exempt Section 16(b) Purchases Triggered. No Participant who is then subject to Section 16 of the Exchange Act shall have any right to receive a cash payment under Section 8(d) hereof if the acquisition of such right would, under the circumstances, constitute a non-exempt purchase for purposes of Section 16(b) of the Exchange Act. 9. General Provisions. (a) Compliance With Legal and Other Requirements. The Plan, the grant, exercise, and settlement of Awards thereunder, and the other obligations of the Company under the Plan and any Award agreement shall be subject to all applicable federal and state laws, rules, and regulations, and to such approvals by any regulatory or governmental agency as may be required. The Company may, in its discretion, postpone the issuance or delivery of Stock under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule, or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other Company securities are listed or designated, or compliance with any other contractual obligation of the Company, as the Company may consider appropriate, and may require any Participant to make such representations and furnish such information as it may consider appropriate in connection with the issuance or delivery of Stock in compliance with applicable laws, rules, and regulations, listing or designation, or other contractual obligations. (b) Limits on Transferability; Beneficiaries. No Award or other right or interest of a Participant under the Plan, including any Award or right which constitutes a derivative security as generally defined in Rule 16a-1(c) (as in effect prior to August 15, 1996) under the Exchange Act, shall be pledged, hypothecated, or otherwise encumbered or subject to any lien, obligation, or liability of such Participant to any party (other than the Company or a subsidiary), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant in connection with the Participant's estate planning, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are then permitted under Rule 16b-3, consistent with the registration of the offer and sale of Stock on Form S-8 or a successor registration form of the Securities and Exchange Commission or such other form of registration statement as has in fact been filed in connection with the Plan, and permitted by the Committee (subject to any terms and conditions which the Committee may impose thereon). A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject - 15 - 19 to all terms and conditions of the Plan and any Award agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee. (c) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock which may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Stock issued or issuable in respect of outstanding Awards, and (iii) the exercise price, grant price, or purchase price relating to any Award or, if deemed appropriate, make provision for payment of cash or other property with respect to any outstanding Award; provided, in each case, that, with respect to ISOs, no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422 of the Code. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence) affecting the Company or any subsidiary or the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions. (d) Taxes. The Company or any subsidiary is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority for the Company to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations, either on a mandatory or elective basis in the discretion of the Committee. (e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue, or terminate the Plan or the Committee's authority to grant Awards under the Plan without the consent of stockholders or Participants, except that any such action shall be subject to the approval of the Company's stockholders at the annual meeting next following such Board action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any Award theretofore granted to him. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue, or terminate, any Award theretofore granted and any Award agreement relating thereto; provided that, without the consent of an affected Participant, no such Committee action may materially and adversely affect the rights of such Participant - 16 - 20 under such Award. The foregoing notwithstanding, any performance condition specified in connection with an Award shall not be deemed a fixed contractual term, but shall remain subject to adjustment by the Committee, in its discretion, at any time in view of the Committee's assessment of the Company's strategy, performance of comparable companies, and other circumstances. (f) Limitation on Rights Conferred Under Plan. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Participant or employee the right to be retained in the employ of the Company or any of its subsidiaries, (ii) interfering in any way with the right of the Company or any of its subsidiaries to terminate any Participant's or employee's employment at any time, (iii) giving a Participant or employee any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until Stock is duly issued or transferred to the Participant in accordance with the terms of the Award. (g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to issue Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Stock, other Awards, or other property, or make other arrangements, to meet the Company's obligations under the Plan. Such trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. The trustee of the trust may be authorized to dispose of trust assets and reinvest the proceeds in alternative investments, subject to such terms and conditions as the Committee may specify and in accordance with applicable law. (h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable. (i) Payments In the Event of Forfeitures; Fractional Shares. In the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration in order to satisfy requirements of the Delaware General Corporation Law, the Participant shall be repaid the amount of such cash or other consideration. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. (j) Governing Law; Arbitration. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award agreement shall be determined in accordance with the Delaware General Corporation Law, to the extent applicable, other laws (including those governing contracts) of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal law. If any provision hereof shall be held by a court of competent jurisdiction to be invalid and - 17 - 21 unenforceable, the remaining provisions shall continue to be fully effective. Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration. Judgement may be entered on the arbitrators' award in any court having jurisdiction. For purposes of settling any dispute or controversy arising hereunder or for the purpose of entering any judgement upon an award rendered by the arbitrators, the Company and the Participant hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other court having jurisdiction. The Company and the Participant hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and the Participant hereby agree that a judgement upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgement or in any other manner provided by law. (k) Effective Date; Plan Termination. The Plan became effective upon its approval by stockholders of the Company on October 28, 1993. The amendment and restatement of the Plan shall become effective upon its approval by the stockholders of the Company at the 1995 Annual Meeting. The Plan shall terminate at such time as no Stock remains available for issuance pursuant to Section 4 and the Company has no further obligations with respect to any Award granted under the Plan. - 18 - EX-10.03 4 DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.03 ALUMAX INC. - ------------------------------------------------------------------------------- DEFERRED COMPENSATION PLAN AS AMENDED ON OCTOBER 3, 1996 - ------------------------------------------------------------------------------- 2 ALUMAX INC. - ------------------------------------------------------------------------------- DEFERRED COMPENSATION PLAN AS AMENDED ON OCTOBER 3, 1996 - -------------------------------------------------------------------------------
Page ---- 1. Purposes ..................................................... 1 2. Definitions .................................................. 1 3. Administration ............................................... 2 4. Participation ................................................ 2 5. Deferrals .................................................... 2 6. Deferral Accounts ............................................ 3 7. Deferral of Certain Stock-Denominated Awards: Rabbi Trusts .. 4 8. Settlement of Deferral Accounts .............................. 5 9. Provisions Relating to Section 16 of the Exchange Act and Section 162(m) of the Code ............................... 6 10. Statements ................................................... 7 11. Sources of Stock: Limitation on Amount of Stock-Denominated Deferrals .................................. 7 12. Amendment/Termination ........................................ 7 13. General Provisions ........................................... 7 14. Effective Date ............................................... 8
3 ALUMAX INC. - ------------------------------------------------------------------------------- DEFERRED COMPENSATION PLAN - ------------------------------------------------------------------------------- 1. PURPOSES. The purposes of this Deferred Compensation Plan (the "Plan") are to provide certain highly compensated employees of Alumax Inc., (the "Company") and its subsidiaries with the opportunity to elect to defer receipt of specified portions of cash compensation and stock awards, and to have the deferred amounts treated as if invested in specified investment vehicles. The Plan is also intended to specify terms and conditions for deferral of awards granted under the Company's 1993 Long Term Incentive Plan, 1993 Stock Option Subplan for Key Executives, 1993 Annual Incentive Plan, employment agreements and other compensation arrangements. 2. DEFINITIONS. In addition to the terms defined in Section 1 above, the following terms used in the Plan shall have the meanings set forth below: (a) "Administrator" shall mean the Secretary of the Company or other executives to whom the Committee has delegated the authority to take action under the Plan, except as may be otherwise required under Section 9. (b) "Beneficiary" shall mean any person (which may include trusts and is not limited to one person) who has been designated by the Participant in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under the Plan in the event of the Participant's death. If no Beneficiary has been designated who survives the Participant's death, then Beneficiary means any person(s) entitled by will or the laws of descent and distribution to receive such benefits. (c) "Change in Control" shall have the same meaning as defined in Section 8(a)(ii) of the Company's 1993 Long Term Incentive Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation (including a proposed regulation) thereunder shall include any successor provisions or regulations. (e) "Committee" shall mean the Human Resources and Compensation Committee of the Board of Directors of the Company or a subcommittee thereof, or such other Board committee as may be designated by the Board to administer the Plan; provided that the Committee shall at all times be compirsed solely of two or more outside directors satisfying the requirements of Section 162 (m) (4) (C) (i) of the Code. (f) "Deferral Account" shall mean the account or subaccount established and maintained by the Company for specified deferrals by a Participant, as described in Sections 6(a) and 7(a). Deferral Accounts will be maintained solely as bookkeeping entries by the Company to evidence unfunded obligations of the Company. (g) "Disability" shall mean termination of employment due to the Participant's inability to perform the duties of his or her own occupation due to physical or mental incapacity as determined by the Committee or Administrator. 4 (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. References to any provision of the Exchange Act or rule thereunder include any successor provisions or rules. (i) "Participant" shall mean any full-time salaried employee of the Company or any subsidiary (i) who is either a member of the Executive Group of the Company or otherwise selected by the Committee or Administrator, (ii) who will be eligible to become a Participant in the Plan if such employee receives or is to receive compensation or awards permitted to be deferred under the Plan, and (iii) who participates or makes an election to participate in the Plan. (j) "Stock" shall mean Alumax Inc. Common Stock, $0.01 par value. (k) "Valuation Date" shall mean the close of business on the last business day of each calendar quarter; provided, however, that in the case of termination of employment for reasons other than normal retirement or approved early retirement under the applicable Company or subsidiary retirement plan, death, or Disability, the Valuation Date means the close of business on the last business day of the month in which employment terminates, and in the case of a Change in Control of the Company, the Valuation Date shall be the date of such Change in Control. 3. ADMINISTRATION. (a) Committee Authority. The Committee and the Administrator shall administer the Plan in accordance with its terms, and shall have all powers necessary to accomplish such purpose, including the power and authority to construe and interpret the Plan, to define the terms used herein, to prescribe, amend and rescind rules and regulations, agreements, forms, and notices relating to the administration of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. Any actions of the Committee or the Administrator with respect to the Plan shall be conclusive and binding upon all persons interested in the Plan, except that any action of the Administrator will not be binding on the Committee. The Committee and Administrator may each appoint agents and delegate thereto powers and duties under the Plan, except as otherwise limited by the Plan. (b) Limitation of Liability. Each member of the Committee and the Administrator shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or other employee of the Company or any subsidiary, the Company's independent certified public accountants, or any executive compensation consultant, legal counsel, or other professional retained by the Company to assist in the administration of the Plan. Neither a member of the Committee, the Administrator, nor any officer or employee of the Company or a subsidiary acting on behalf of the Committee or Administrator shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and such persons shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action, determination, or interpretation. 4. PARTICIPATION. Participation in the Plan is voluntary. The Administrator will notify each employee of his or her eligibility to participate in the Plan not later than 30 days (or such lesser period as may be practicable in the circumstances) prior to any deadline for filing an election form. -2- 5 5. DEFERRALS. A Participant may elect to defer compensation or awards which may be in the form of cash, Stock, Stock-denominated awards or other property to be received from the Company or a subsidiary, including salary, annual incentive award, long term award, shares received on stock option exercise and compensation payable under other plans and programs, employment agreements or other arrangements, or otherwise, as may be provided under the terms of such plans, programs and arrangements or designated by the Committee; provided, however, that a Participant may defer, with respect to a given year, receipt of only that portion of the Participant's salary and annual incentive award (or bonus) that exceeds the FICA maximum taxable wage base plus 1.45% of all other wages of such Participant. In addition to such limitation, and any terms and conditions of deferral set forth under plans, programs or arrangements from which receipt of compensation or awards is deferred, the Committee may impose limitations on the amounts permitted to be deferred and other terms and conditions on deferrals under the Plan. Any such limitations, and other terms and conditions of deferral, shall be set forth in the rules relating to the Plan or election forms, other forms, or instructions published by the Committee and/or the Administrator. The Committee and/or Administrator is authorized to permit, in its discretion, further elective deferrals of amounts previously deferred under this Plan. In addition, the Committee may mandate deferral of payment in accordance with the Plan of all or a portion of the compensation or awards to be received under plans or programs of the Company. (a) Elections. Once an election form, properly completed, is received by the Company, the elections of the Participant shall be irrevocable; provided, however, that the Administrator may, in its discretion, permit a Participant to change elections relating to a Deferral Account by filing a later election form. (b) Date of Election. An election to defer compensation or awards hereunder must be received by the Administrator prior to the date specified by the Administrator. Under no circumstances may a Participant defer compensation or awards to which the Participant has attained, at the time of deferral, a legally enforceable right to current receipt of such compensation or awards. 6. DEFERRAL ACCOUNTS. The following provisions will apply to Deferral Accounts other than those established under Section 7: (a) Establishment; Crediting of Amounts Deferred. One or more Deferral Accounts will be established for each Participant, as determined by the Administrator. The amount of compensation or awards deferred with respect to each Deferral Account will be credited to such Account as of the date on which such amounts would have been paid to the Participant but for the Participant's election to defer receipt hereunder. The amounts of hypothetical income and appreciation and depreciation in value of such account will be credited and debited to such Account from time to time. Unless otherwise determined by the Administrator, cash amounts credited to a Deferral Account shall be deemed invested in a hypothetical investment as of the date of deferral. (b) Hypothetical Investment Vehicles. Subject to the provisions of Sections 6(c) and 9, amounts credited to a Deferral Account shall be deemed to be invested, at the Participant's direction, in one or more investment vehicles as may be specified from time to time by the Administrator. The Administrator may change or discontinue any hypothetical investment vehicle available under the Plan in its discretion; provided, however, that each affected Participant is given the opportunity, without limiting or otherwise impairing any other right of such Participant regarding changes in investment directions, to redirect the allocation of his or her Deferral Account deemed -3- 6 invested in the discontinued investment vehicle among the other hypothetical investment vehicles, including any replacement vehicle. (c) Allocation and Reallocation of Hypothetical Investments. A Participant may allocate amounts credited to his or her Deferral Account to one or more of the hypothetical investment vehicles authorized under the Plan. Subject to the rules established by the Administrator, Participants may reallocate amounts credited to his or her Deferral Account as of the Valuation Date following the Participant's election to one or more of such hypothetical investment vehicles, by filing with the Administrator a notice, in such form as may be specified by the Administrator, not later than the 15th of the month preceding such Valuation Date. The Committee or Administrator may, in its discretion, restrict allocation into or reallocation by specified Participants into or out of specified investment vehicles or specify minimum amounts that may be allocated or reallocated by Participants. (d) Rabbi Trusts. The Committee may, in its discretion, establish rabbi trusts (including sub-accounts under such rabbi trusts), and deposit therein amounts of cash, Stock, or other property not exceeding the amount of the Company's obligations with respect to a Participant's Deferral Account established under this Section 6. In such case, the amounts of hypothetical income and appreciation and depreciation in value of such Deferral Account shall be equal to the actual income on, and appreciation and depreciation of, the assets in such rabbi trusts, including charges against such assets to reflect all or a portion, if any, as specified by the Committee, of the Company's costs resulting from payment of taxes on the income on and realized appreciation of trust assets prior to the time the Company is entitled to a tax deduction for payment of the Deferral Account. Other provisions of this Section 6 notwithstanding, the timing of allocations and reallocations of assets in such a Deferral Account, and the investment vehicles available with respect to such Deferral Account, may be varied to reflect the timing of actual investments of the assets of such rabbi trust and the actual investments available to such rabbi trust. 7. DEFERRAL OF CERTAIN STOCK-DENOMINATED AWARDS: RABBI TRUSTS. (a) Establishment. Subject to any terms and conditions imposed by the Committee, Participants may elect to defer, under the Plan, awards denominated in Stock specified by the Committee or Administrator. In connection with such deferral of a Stock-denominated award, a Deferral Account shall be established for such Participant and a rabbi trust (including sub-accounts under such rabbi trust) will also be established, on terms determined by the Committee, into which the Company shall deposit a number of whole shares of Stock equal to the number of shares subject to such deferred award (and cash in lieu of any fractional share). In such case, the amounts of hypothetical income and appreciation and depreciation in value of such Deferral Account shall be equal to the actual income on, and appreciation and depreciation of, the assets in such rabbi trust, including charges against such assets to reflect all or a portion, if any, as specified by the Committee, of the Company's costs resulting from payment of taxes on the income on and realized appreciation of trust assets prior to the time the Company is entitled to a tax deduction for payment of the Deferral Account. (b) Investment of Rabbi Trust Assets. The trustee of each rabbi trust, which shall be a party unaffiliated with the Company, shall be authorized, upon written instructions received from the Administrator or investment manager appointed by the Administrator, to invest and reinvest the assets of the trust in accordance with the trust agreement, including the disposition of such Stock and reinvestment of the proceeds in one or more investment vehicles designated by -4- 7 the Administrator; provided that no such disposition shall be made until the date that the shares of Stock subject to the deferred award would otherwise have been transferable by the Participant. In no event shall a Participant who is then subject to Section 16(a) of the Exchange Act have the right to direct investments of amounts credited to such Deferral Account. (c) Settlement. Subject to Section 8, the Participant shall be entitled to receive, in settlement of a Deferral Account established under this Section 7, a cash payment in an amount equal to the value of the assets of such Deferral Account as of the applicable Valuation Date; provided, however, that the trustee may, at the direction of the Administrator, distribute assets of the rabbi trust (other than a distribution of Stock to a Participant then subject to Section 16(a) of the Exchange Act) to the Participant in settlement of the Company's obligations to the Participant under the Deferral Account if such distribution, and the authorization thereof, does not cause the rights of a Participant subject to Section 16(a) of the Exchange Act relating to the Deferral Account and rabbi trust to be deemed a "derivative security" within the definition of Rule 16a-1(c)(3) (including subparagraph (i) thereunder) under the Exchange Act. 8. SETTLEMENT OF DEFERRAL ACCOUNTS. (a) Form of Payment. The Company shall settle a Participant's Deferral Account, other than a Deferral Account established under Section 7 hereof, and discharge all of its obligations to pay deferred compensation under the Plan with respect to such Deferral Account, by payment of cash or, in the discretion of the Committee, by delivery of other assets having a fair market value equal to the amount of cash otherwise payable; provided, however, that Stock may be delivered in settlement of any Stock-denominated award deferred under the Company's 1993 Long Term Incentive Plan, 1993 Stock Option Subplan for Key Executives, employment agreements or other arrangements if such award has been continuously deemed invested in Stock under the Plan, except that Stock may not be delivered to a Participant who is then subject to Section 16(a) of the Exchange Act in settlement of an award subject to Section 7. (b) Timing of Payments. Payments in settlement of a Deferral Account shall be made at the date or dates (including upon the occurrence of specified events), and in such number of installments, as may be directed by the Participant in his or her election relating to such Deferral Account, or earlier in the event of termination of employment by the Participant in the following circumstances: (i) In the event of termination of employment for reasons other than normal retirement, early retirement approved by the Committee, or Disability, a single lump sum payment in settlement of any Deferral Account (including a Deferral Account with respect to which one or more installment payments have previously been made) shall be made as promptly as practicable following the next Valuation Date, unless otherwise determined by the Administrator; or (ii) In the event of a Change in Control, payments in settlement of any Deferral Account (including a Deferral Account with respect to which one or more installment payments have previously been made) will be made within fifteen (15) business days following such Change in Control. -5- 8 (c) Financial Emergency and Other Payments. Other provisions of the Plan (except Section 9) notwithstanding, if, upon the written application of a Participant, the Committee or Administrator determines that the Participant has a financial emergency of such a substantial nature and beyond the individual's control that payment of amounts previously deferred under the Plan is warranted, the Committee or Administrator may direct the payment to the Participant of all or a portion of the balance of a Deferral Account and the time and manner of such payment, and the Committee may direct such payments in other circumstances if, in the exercise of its independent judgment, it determines that circumstances beyond the individual's control warrant such action. 9. PROVISIONS RELATING TO SECTION 16 OF THE EXCHANGE ACT AND SECTION 162(M) OF THE CODE. (a) Compliance with Section 16. With respect to a Participant who is then subject to the reporting requirements of Section 16(a) of the Exchange Act: (i) Any function of the Committee under the Plan relating to such Participant shall be performed solely by the Committee, if and to the extent required to ensure the availability of an exemption under Rule 16b-3 or exclusion under Rule 16a-1(c) for such Participant with respect to the Plan. (ii) The provisions of Section 6(c) notwithstanding, no such Participant may reallocate amounts credited to a Deferral Account into or out of a Stock-denominated or Stock equivalent investment vehicle, unless otherwise determined by the Committee. (iii) To the extent necessary so that transactions by and rights of such a Participant under the Plan are excluded from reporting under Rule 16a-1(c) (unless acknowledged by the Participant in writing with respect to a specified transaction not to be excluded), if any provision of this Plan or any rule, election form or other form, or instruction does not comply with the requirements of such Rule as then applicable to such transaction or right under the Plan, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements. (b) Compliance with Code Section 162(m). It is the intent of the Company that any compensation (including any award) deferred under the Plan by a person who is, with respect to the year of payout, deemed by the Committee to be a "covered employee" within the meaning of Code Section 162(m) and regulations thereunder (including Proposed Regulation 1.162-27(c)(2)), which compensation constitutes either "qualified performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder (including Proposed Regulation 1.162-27(e)) or compensation not otherwise subject to the limitation on deductibility under Section 162(m) and regulations thereunder (including as a result of transition rules under Proposed Regulation 1.162-27(h)), shall not, as a result of deferral hereunder, become compensation with respect to which the Company in fact would not be entitled to a tax deduction under Code Section 162(m). Accordingly, unless otherwise determined by the Committee, if any compensation would become so disqualified under Section 162(m) as a result of deferral hereunder, the terms of such deferral shall be automatically modified to the extent necessary to ensure that the compensation would not, at the time of payout, be so disqualified. -6- 9 10. STATEMENTS. The Administrator will furnish statements to each Participant reflecting the amount credited to a Participant's Deferral Accounts and transactions therein not less frequently than once each calendar year. 11. SOURCES OF STOCK: LIMITATION ON AMOUNT OF STOCK-DENOMINATED DEFERRALS. If Stock is deposited under the Plan in a rabbi trust pursuant to Section 7 in connection with a deferral of a Stock-denominated award under the Company's 1993 Long Term Incentive Plan, 1993 Stock Option Subplan for Key Executives, or another plan, program, employment agreement or other arrangement that provides for the issuance of shares, the shares so deposited shall be deemed to have originated, and shall be counted against the number of shares reserved, under such other plan, program or arrangement. The number of Stock equivalents credited to such Deferral Accounts shall in no event exceed the number of shares subject to the Stock-denominated awards deferred under the Plan. The number of Stock equivalents otherwise credited to Deferral Accounts of Participants who are subject to Section 16(a) of the Exchange Act shall not exceed 2,000,000, subject to appropriate and proportionate adjustment to reflect stock splits, dividends, and similar events. Shares actually delivered in settlement of Deferral Accounts shall be originally issued shares or treasury shares, in the discretion of the Committee; provided, however, that only treasury shares shall be delivered hereunder to persons who are then "officers" within the meaning of Section 312.03 of the Listed Company Manual of the New York Stock Exchange (or any successor thereto). 12. AMENDMENT/TERMINATION. The Committee may amend, alter, suspend, discontinue, or terminate the Plan without the consent of Participants, stockholders, or any other person; provided, however, that, without the consent of a Participant, no such action shall materially and adversely affect the rights of such Participant with respect to any rights to payment of amounts credited to such Participant's Deferral Account. Notwithstanding the foregoing, the Committee may, in its sole discretion, terminate the Plan and distribute to Participants the amounts credited to their Deferral Accounts. 13. GENERAL PROVISIONS. (a) Limits on Transfer of Awards; Beneficiaries. No right of a Participant under the Plan shall be pledged, encumbered, hypothecated, or liable for or subject to any lien, obligation, or liability of such Participant, or shall be assignable or transferable by such Participant, otherwise than by will or the laws of descent and distribution; provided, however, that a Participant may designate a Beneficiary to receive any payment under the Plan in the event of the death of the Participant. (b) Receipt and Release. Payments (in any form) to any Participant or Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims for the compensation or awards deferred and relating to the Deferral Account to which the payments relate against the Company or any subsidiary thereof, the Committee, or the Administrator, and the Administrator may require such Participant or Beneficiary, as a condition to such payments, to execute a receipt and release to such effect. (c) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for deferred compensation and Participants shall rely solely on the unsecured promise of the Company for payment hereunder. With respect to any payment not yet made to a Participant under the Plan, nothing contained in the Plan shall give a Participant any rights that are -7- 10 greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts, including but not limited to the trusts referred to in Sections 6 and 7 hereof, or make other arrangements to meet the Company's obligations under the Plan, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. (d) Compliance. A Participant in the Plan shall have no right to receive payment (in any form) with respect to his or her Deferral Account until legal and contractual obligations of the Company relating to establishment of the Plan and the making of such payments shall have been complied with in full. In addition, the Company shall impose such restrictions on Stock delivered to a Participant hereunder and any other interest constituting a security as it may deem advisable in order to comply with the Securities Act of 1933, as amended, the requirements of the New York Stock Exchange or any other stock exchange or automated quotation system upon which the Stock is then listed or quoted, any state securities laws applicable to such a transfer, any provision of the Company's Certificate of Incorporation or Bylaws, or any other law, regulation, or binding contract to which the Company is a party. (e) Other Participant Rights. No Participant shall have any of the rights or privileges of a stockholder of the Company under the Plan, including as a result of the crediting of Stock equivalents or other amounts to a Deferral Account, or the creation of any rabbi trust and deposit of such Stock therein, except at such time as Stock may be actually delivered in settlement of a Deferral Account. No provision of the Plan or transaction hereunder shall confer upon any Participant any right to be employed by the Company or a subsidiary thereof, or to interfere in any way with the right of the Company or a subsidiary to increase or decrease the amount of any compensation payable to such Participant. Subject to the limitations set forth in Section 13(a) hereof, the Plan shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns. (f) Tax Withholding. The Company and any subsidiary shall have the right to deduct from amounts otherwise payable in settlement of a Deferral Account any sums that federal, state, local or foreign tax law requires to be withheld with respect to such payment. Shares may be withheld to satisfy such obligations in any case where taxation would be imposed upon the delivery of shares, except that shares issued or delivered under the Company's 1993 Long Term Incentive Plan, 1993 Stock Option Subplan for Key Executives, employment agreements or other arrangements, or any other plan or program of the Company may be withheld only in accordance with the terms of such plan and any applicable rules, regulations, or resolutions thereunder. (g) Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Georgia, without giving effect to principles of conflicts of laws, and applicable provisions of the Delaware General Corporation Law and federal law. 14. EFFECTIVE DATE. The Plan shall be effective as of August 4, 1994. As adopted by the Human Resources and Compensation Committee on August 4, 1994. -8- EX-10.04 5 ANNUAL INCENTIVE PLAN 1 EXHIBIT 10.04 ALUMAX INC. - -------------------------------------------------------------------------------- 1993 ANNUAL INCENTIVE PLAN AS AMENDED AND RESTATED AS FURTHER AMENDED ON OCTOBER 3, 1996 - -------------------------------------------------------------------------------- 2 ALUMAX INC. - -------------------------------------------------------------------------------- 1993 ANNUAL INCENTIVE PLAN AS AMENDED AND RESTATED AS FUTHER AMENDED ON OCTOBER 3, 1996 - --------------------------------------------------------------------------------
Page ---- 1. Purpose... ................................................................ 1 2. Definitions................................................................ 1 3. Administration............................................................. 3 4. Awards..................................................................... 4 (a) Performance Objectives, Target Awards and Award Levels............ 4 (b) Determination of Awards........................................... 5 (c) Payment of Final Awards........................................... 6 5. General Provisions......................................................... 7 (a) Taxes............................................................. 7 (b) Limitations on Rights Conferred under Plan and Beneficiaries...... 7 (c) Unfunded Status of Awards; Creation of Trusts..................... 8 (d) Governing Law; Arbitration........................................ 8 (e) Amendment and Termination of Plan and Awards...................... 8 (f) Effective Date.................................................... 8 6. Change in Control.......................................................... 9 (a) Payment of Awards................................................. 9 (b) Termination of Employment After a Change in Control............... 9 (c) Amendment and Termination of Plan and Awards...................... 9 (d) Other Plan Provisions Unaffected.................................. 9
3 ALUMAX INC. 1993 ANNUAL INCENTIVE PLAN AS AMENDED AND RESTATED 1. Purpose. The purpose of this 1993 Annual Incentive Plan as Amended and Restated (the "Plan") is to assist Alumax Inc. (the "Company") and its subsidiaries in motivating high performance employees who occupy key positions and contribute to the growth and annual profitability of the Company and its subsidiaries through the award of annual incentives. 2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth below: (a) "Award" means the fixed amount, percentage of Salary, or portion of an Award Pool payable to a Participant as determined pursuant to Section 4. (b) "Award Level" means the percentage of a fixed amount or Salary, or portion of an Award Pool, payable to a Participant based on the level of Performance Objectives achievement as determined pursuant to Section 4(a). (c) "Award Pool" means a pool of funds specified by the Committee (or the CEO, if assigned by the Committee), the source and amount of which are determinable based on a formula or other specification, out of which pool Awards may be allocated or made on a discretionary basis to Participants. Award Pools may be designated for the Company, one or more subsidiaries, or any business division or unit thereof, and multiple Award Pools may be designated in any Performance Year. (d) "Beneficial Owner" is defined in Section 8 of the Company's 1993 Long Term Incentive Plan. (e) "Beneficiary" with respect to members of the Executive Group means the person, persons, trust or trusts which have been designated by the Participant in his or her most recent written beneficiary designation filed with the Company to receive the benefits specified under this Plan in the event of the Participant's death; Beneficiary with respect to all other Participants shall mean the person, persons, trust or trusts which have been designated by the Participant in his or her most recent beneficiary designation to receive the benefits specified under the Company's Group Life Insurance Plan. In either case, if there is no designated Beneficiary or surviving designated Beneficiary, then Beneficiary shall mean the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits. (f) "Board" means the Company's Board of Directors. (g) "Cause" means (i) the willful and continued failure by the Participant to perform substantially his/her duties with the Company (other than any such failure resulting from the Participant's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant by the CEO or the President of the Company which specifically identifies the manner in which the Participant has not substantially performed his duties, (ii) the willful engagement by the Participant in conduct which is not authorized by the Board of Directors of the Company or within the normal course of the Participant's business decisions and is known by the Participant to be materially detrimental to the best interests of the Company or any of its subsidiaries, or (iii) the willful engagement by the Participant in illegal 4 conduct or any act of serious dishonesty which adversely affects, or, in the reasonable estimation of the Board of Directors of the Company, could in the future adversely affect, the value, reliability or performance of the Participant to the Company in a material manner. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company. Notwithstanding the foregoing, a Participant who is a member of the Executive Group shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors after reasonable notice to the Participant and an opportunity for him, together with his counsel, to be heard before the Board, finding that, in the good faith opinion of the Board of Directors, the Participant was guilty of the conduct set forth above in (i), (ii) or (iii) of this subparagraph and specifying the particulars thereof in detail. (h) "CEO" means the Chief Executive Officer of the Company. (i) "Change in Control" is defined in Section 8 of the Company's 1993 Long Term Incentive Plan as Amended and Restated. (j) "Code" means the Internal Revenue Code of 1986, as amended from time to time. References to any provision of the Code shall be deemed to include successor provisions thereto and regulations thereunder. (k) "Committee" means the Human Resources and Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan; provided that the Committee shall at all times be comprised solely of two or more outside directors satisfying the requirements of Section 162 (m) (4) (C) (i) of the Code. (l) "Company" means Alumax Inc., a Delaware corporation or any successor corporation. (m) "Designated Participant" means any Participant who is designated as such pursuant to Section 3(d). (n) "Eligible Employee" means each officer and other salaried employees of the Company or its subsidiaries who are deemed to impact the Company's annual results, as determined by the Committee. (o) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder. (p) "Executive Group" means the Chief Executive Officer of the Company and other key executives of the Company or its subsidiaries who have been designated as such by the Chief Executive Officer with Committee approval. (q) "Participant" means an Eligible Employee designated to participate in the Plan for a designated Performance Year. - 2 - 5 (r) "Plan" means this Alumax Inc. 1993 Annual Incentive Plan as Amended and Restated. (s) "Performance Objectives" mean the measures of performance specified by the Committee (or the CEO, if assigned by the Committee) in accordance with Section 4(a), the achievement of which will trigger the vesting of Awards. (t) "Performance Year" means the calendar year performance during all or part of which a Participant's entitlement to receive payment of an Award is based. (u) "Salary" means a Participant's annual base salary rate as in effect on September 30 of each Performance Year or, in the event of a Participant's termination during a Performance Year, on the date of termination. (v) "Spinoff" means the distribution of shares of Common Stock, $.01 par value, of the Company by AMAX Inc. to shareholders of AMAX Inc. in connection with which the Company registered such class of Common Stock with the Securities and Exchange Commission under Section 12 of the Exchange Act. (w) "Stock" means the Company's Common Stock, $.01 par value, and such other securities as may be substituted (or resubstituted) for Stock. (x) "Target Award" means a fixed amount, specified percentage of a Participant's Salary, or specified portion of an Award Pool (or combination thereof) payable based upon 100% achievement of Performance Objectives. 3. Administration. (a) Authority of the Committee. The Plan shall be administered by the Committee. The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Participants, grant Awards, determine the type, number, and other terms and conditions of, and all other matters relating to, Awards, prescribe Award agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award agreements and correct defects, supply omissions, or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan. (b) Manner of Exercise of Committee Authority. The Committee shall exercise sole and exclusive discretion on any matter relating to a Participant subject to Section 16 of the Exchange Act if and to the extent necessary to obtain the exemption under Rule 16b-3 under the Exchange Act. Any action of the Committee shall be final, conclusive, and binding on all persons, including the Company, its subsidiaries, Participants, persons claiming rights from or through a Participant, and stockholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any subsidiary, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform administrative functions and, with respect to - 3 - 6 Participants not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, to the extent permitted under Rule 16b-3 and applicable law. (c) Limitation of Liability. The Committee may appoint agents to assist it in administering the Plan. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him by any officer or employee of the Company or a subsidiary, the Company's independent certified public accountants, consultants, or any other agent assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company or a subsidiary acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. (d) Performance-Based Awards to "Designated Participants." Prior to March 31 of each Performance Year, the Committee may, in its sole discretion, designate any Participant, whom it deems likely to be at the time compensation will be paid under an Award a "covered employee" under Section 162(m) of the Code and whose compensation may exceed $1 million in such year and be subject to the limitation on tax deductibility under Section 162(m) of the Code, as a "Designated Participant" to be granted an Award under this Section 3(d) that will not be subject to such limitations on deductibility under Section 162(m) of the Code. Notwithstanding any provision of the Plan to the contrary, the Committee may, in its discretion, reduce but not increase the amount payable under any such Award to such a Designated Participant. All determinations by the Committee as to the achievement of Performance Objectives (as described below in Section 4(a)(i)) applicable to such an Award shall be made in writing, and the Committee may not exercise discretion to modify the Performance Objectives or the vesting conditions (other than with respect to the death or disability of such Designated Participant or in the event of a Change in Control) with respect to such Award if the exercise of such discretion would cause such Award to fail to qualify as "performance-based compensation" within the meaning of Section 162(m)(4)(C) of the Code. 4. Awards (a) Performance Objectives, Target Awards and Award Levels. (i) Prior to March 31 of each Performance Year, the Committee (or the CEO, if assigned by the Committee) shall establish Performance Objectives for such Performance Year. Performance Objectives may specify measures of performance of the Company as a whole, subsidiaries, or other business units within the Company or subsidiaries, measures of individual performance of the Participant, or such other objectives (and combinations of objectives) the achievement of which is expected to benefit the Company and its stockholders. A single Performance Objective may be specified for all Participants, or separate Performance Objectives may be specified for different groups of Participants or for individual Participants. The Performance Objectives that may be established with respect to an Award in a Performance Year to Designated Participants are consolidated, subsidiary or business unit operating profits before interest expense and taxes, consolidated, subsidiary or business unit pre-tax profits, consolidated, subsidiary or business unit cashflow, net income, earnings per share, return on average equity, and/or return on invested capital. - 4 - 7 (ii) Prior to March 31 of each Performance Year, the Committee (or the CEO, if assigned by the Committee) shall establish Target Awards and, if deemed appropriate, Award Levels and/or Award Pools. Such Target Awards will specify the Award payable to each Participant upon 100% achievement of the Performance Objectives applicable to such Participant. In addition, Award Levels may be established to determine whether, and the extent to which, a portion of the Target Award shall be payable to a Participant if the applicable Performance Objectives are not fully achieved, and whether, and the extent to which, payments in addition to the Target Award shall be made if the applicable Performance Objectives are exceeded. In addition, Award Pools may be established on a formula or discretionary basis, and the payment of Awards and the amount of Awards may be contingent on the allocation of funds to such Award Pools. (iii) The Committee (or the CEO, if assigned by the Committee) is authorized at any time during or after a Performance Year, in its sole and absolute discretion, to adjust, modify, or specify new Performance Objectives, Target Awards, Award Levels, Award Pools, and related terms and conditions, (x) in recognition of extraordinary or nonrecurring items affecting the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, regulations, or accounting principles, (y) with respect to any Participant whose position or duties with the Company or any subsidiary changes during a Performance Year, or (z) with respect to any person who first becomes a Participant after the first day of the Performance Year. (iv) The maximum Award that may be made to any Participant in any Performance Year shall be $3,000,000. (b) Determination of Awards. (i) As promptly as practicable following the end of each Performance Year, the Committee (or the CEO, if assigned by the Committee) shall determine whether and the extent to which Performance Objectives applicable to Participants were achieved, the extent to which amounts are allocable to Award Pools, and the Awards that correspond to such achievement and/or allocations as specified under the Award Levels for the Performance Year. The Committee may, in its sole and absolute discretion, in view of the Committee's assessment of the business strategy of the Company and subsidiaries, performance of comparable organizations, economic and business conditions, and any other circumstances deemed relevant, increase or decrease final Award amounts otherwise determined under the first sentence of this Section 4(b)(i). (ii) Each Participant shall be entitled to an Award in accordance with the Target Award and any Award Levels (as adjusted) applicable to him or her based on the extent to which the Performance Objectives applicable to him or her have been achieved and funds have been allocated under any Award Pools applicable to him or her, provided, however, that the Committee may determine, in its sole and absolute discretion, that a Participant shall not receive an Award if the Participant has received an unsatisfactory personal performance assessment for the Performance Year (whether or not such personal performance assessment was a component of the Participant's Performance Objectives for the Performance Year). (iii) Unless otherwise determined by the Committee, if a Participant ceases to be employed by the Company or a subsidiary prior to the end of a Performance Year for any - 5 - 8 reason other than death, retirement, disability (as determined by the Committee) or transfer to a subsidiary, no portion of his or her Award for such Performance Year shall be payable unless otherwise determined by the Committee (or the CEO if assigned by the Committee). If such cessation of employment results from such Participant's death, retirement, disability (as determined by the Committee) or transfer to a subsidiary or to another subsidiary, the Committee (or the CEO if assigned by the Committee) shall estimate in its sole and absolute discretion the level of achievement of Performance Objectives applicable to such Participant and/or the estimated amount allocable to any Award Pool applicable to such Participant during the period of such Performance Year prior to such cessation, and such Participant or his or her Beneficiary shall be entitled to receive payment of the percentage of his or her Target Award or Award Level amount as determined in accordance with this Section 4(b)(iii) for the pro rata portion of such Performance Year during which such Participant was employed by the Company or a subsidiary, unless payment of a greater percentage is approved in the sole and absolute discretion of the Committee. (c) Payment of Final Awards. (i) Except as otherwise provided in paragraph (ii) and (iii) below, each Participant shall receive payment, in a cash lump sum, of his or her final Award as soon as practicable following the determination in respect thereof made pursuant to Section 4(b). (ii) The Committee (or the CEO, if assigned by the Committee) may specify that all or a portion of any Award shall be paid by issuance or delivery of shares of the Company's Stock having a fair market value, as determined by the Committee, equal to the cash value of an Award at the date of grant or to the cash amount of the Award that would otherwise have been payable at the date of payment. Such shares shall be subject to such conditions, including deferral of delivery, restrictions on transferability, deemed reinvestment of dividends in additional shares, and other terms and conditions as shall be specified by the Committee (or the CEO, if assigned by the Committee). Stock issuable or deliverable under this provision to Participants who are subject to Section 16 of the Exchange Act shall be issued or delivered under the Company's 1993 Long Term Incentive Plan (the "1993 Plan") in accordance with such terms and conditions as the committee administering the 1993 Plan may specify for these purposes. Shares issuable or deliverable under this provision to Participants who are not subject to Section 16 of the Exchange Act may, but need not, be issued or delivered under the 1993 Plan. (iii) Each Participant shall have the right to defer his or her receipt of part or all of any payment due with respect to all or a portion of a final Award. Any Participant desiring to exercise this right must file a timely election with the Committee on a form provided by the Company. The portion of any Award, the payment of which has been deferred pursuant to this Section 4(c)(iii), shall be deemed invested from the date payment would have been made but for such deferral to the date of payment in investment options as determined from time to time by the Committee, such determination to be in accordance with the requirements of Section 162(m) of the Code with respect to Designated Participants. Amounts deferred hereunder, as adjusted to reflect crediting of interest or changes in value resulting from the deemed investment thereof, shall be non-forfeitable and shall be paid at the date(s) specified pursuant to this Section 4(c); provided, however, that nothing herein shall preclude a Participant from exchanging his or her right to receive deferred amounts hereunder for non-transferable awards - 6 - 9 or rights granted under another plan or arrangement of the Company, if and to the extent that the Company offers such an exchange to the Participant. (iv) In the event of the death of a Participant, any payments hereunder due to such Participant shall be paid to his or her Beneficiary. (v) In the event of a Change in Control, any payments hereunder due to such Participant shall be paid in a cash lump sum no later than fifteen (15) days after a Change in Control unless otherwise provided in an irrevocable deferral election form filed prior to such event. 5. General Provisions (a) Taxes. The Company or any subsidiary is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority for the Company to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations, either on a mandatory or elective basis in the discretion of the Committee. (b) Limitations on Rights Conferred under Plan and Beneficiaries. (i) Neither status as a Participant nor receipt or completion of a deferral election form shall be construed as a commitment that any Award will become payable under the Plan. Nothing in the Plan shall be deemed to give any Eligible Employee any right to participate in the Plan except in accordance herewith. (ii) Nothing contained in the Plan or in any documents related to the Plan or to any Award shall confer upon any Eligible Employee or Participant any right to continue as an Eligible Employee, Participant or in the employ of the Company or a subsidiary or constitute any contract or agreement of employment, or interfere in any way with the right of the Company or a subsidiary to reduce such person's compensation, to change the position held by such person or to terminate the employment of such Eligible Employee or Participant, with or without cause, but nothing contained in this Plan or any document related thereto shall affect any other contractual right of any Eligible Employee or Participant. (iii) Except as specifically authorized in this Plan, no benefit payable under, or interest in, this Plan (including any right that may constitute a derivative security within the meaning of the general definition of Rule 16a-1(c)(3) as in effect prior to August 15, 1996 under the Exchange Act) shall be transferable by a Participant except by will or the laws of descent and distribution or otherwise be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void and no such benefit or interest shall be, in any manner, liable for, or subject to, debts, contracts, liabilities, engagements or torts of any Eligible Employee or Beneficiary. Any attempt at transfer, assignment or other alienation prohibited by the preceding sentence shall be - 7 - 10 disregarded and all amounts payable hereunder shall be paid only in accordance with the provisions of the Plan. (c) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any amounts payable to a Participant pursuant to an Award, nothing contained in the Plan (or in any documents related thereto), nor the creation or adoption of the Plan, the grant of any Award, or the taking of any other action taken pursuant to the provisions of the Plan shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided, however, that the Committee may authorize the creation of trusts or make other arrangements to meet the Company's obligations under the Plan pursuant to any Award, which trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. (d) Governing Law; Arbitration. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan, and any Award agreement shall be determined in accordance with the Delaware General Corporation Law, to the extent applicable, other laws (including those governing contracts) of the State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal law. If any provision hereof shall be held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions shall continue to be fully effective. Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of settling any dispute or controversy arising hereunder or for the purpose of entering any judgment upon an award rendered by the arbitrators, the Company and the Participant hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other court having jurisdiction. The Company and the Participant hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and the Participant hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (e) Amendment and Termination of Plan and Awards. Notwithstanding anything herein to the contrary, the Board of Directors may, at any time, terminate or, from time to time, amend, modify or suspend the Plan and the terms and provisions of any Awards theretofore awarded to any Participants which have not been settled by payment (or would have been settled by payment but for an election to defer payment made pursuant to Section 4(c)(iii)). No Award may be granted during any suspension of the Plan or after its termination. (f) Effective Date. The Plan became effective upon its approval by stockholders of the Company on October 28, 1993. The amendment and restatement of the Plan shall become effective upon its approval by the stockholders of the Company at the 1995 Annual Meeting. The Plan shall remain in effect until such time as it may be terminated pursuant to Section 5(e). - 8 - 11 6. Change in Control. (a) Payment of Awards. (i) Notwithstanding any provision of this Plan to the contrary, in the event of a Change in Control, a Participant shall be entitled to receive an Award for the Performance Year in progress on the date of such Change in Control, equal to a pro rata portion of his or her full Target Award for such Performance Year as if 100% of the Performance Objectives were fully met and full allocations had been made to all Award Pools based on the number of days from the beginning of the Performance Year to the date of the Change in Control. Such Award shall be payable for all purposes of this Plan. (ii) All amounts payable pursuant to this Section 6(a) shall be made in a cash lump sum to the Participant no later than fifteen (15) days after the date of a Change in Control unless otherwise provided in an irrevocable deferral election form filed by the Participant prior to such event. Nothing in the Plan shall prevent the Committee from continuing Awards, to the extent not paid under this provision, after a Change in Control. (b) Termination of Employment After a Change in Control. (i) Notwithstanding any provision of this Plan to the contrary (including, without limitation, Sections 4(b)(iii) and 5(b)(ii) hereof), if at any time during the two-year period commencing on the date of a Change in Control the employment of an Eligible Employee who was a Participant at, or for the Performance Year in progress at or immediately prior to, the date of a Change in Control with the Company or a subsidiary is terminated for any reason other than for Cause, then such Participant shall receive (to the extent not otherwise paid under Section 6(a)) a lump sum payment in cash equal to the sum of (x) a pro rata portion of his or her full Target Award on the date of termination of employment based on the number of days during the year such Participant was employed by the Company or a subsidiary, and (y) any previously awarded and unpaid Award amounts. (ii) All amounts payable pursuant to this Section 6(b) shall be paid no later than fifteen (15) days after the date of termination of employment of such Participant unless otherwise provided in an irrevocable deferral election form filed by the Participant prior to such event. (c) Amendment and Termination of Plan and Awards. Notwithstanding any provision of this Plan to the contrary (including, without limitation, Section 5(e) hereof), upon the occurrence of a Change in Control and at all times thereafter, neither the Board of Directors nor the Committee may suspend, amend or modify the provisions of this Section 6 or amend, modify, terminate or suspend this Plan, in whole or in part, in any manner that would adversely affect the right of any Eligible Employee or Participant to receive the Awards otherwise provided under this Plan as of the effective date of such action. (d) Other Plan Provisions Unaffected. Nothing in this Section 6 shall affect the operation of the provisions of this Plan prior to a Change in Control. - 9 - EX-10.06 6 DIRECTORS STOCK COMPENSATION PLAN 1 EXHIBIT 10.06 ALUMAX INC. - -------------------------------------------------------------------------------- NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN AS AMENDED ON OCTOBER 3, 1996 - -------------------------------------------------------------------------------- 2 ALUMAX INC. - -------------------------------------------------------------------------------- NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN AS AMENDED ON OCTOBER 3, 1996 - --------------------------------------------------------------------------------
Page ---- 1. Purpose ................................................ 1 2. Definitions ............................................ 1 3. Administration ......................................... 4 4. Eligibility ............................................ 4 5. Stock Grants ........................................... 4 6. Deferral of Stock Grants ............................... 4 7. Stock Options .......................................... 6 8. Amendment and Termination .............................. 7 9. Adjustments for Changes in Capitalization .............. 7 10. Regulatory Compliance .................................. 8 11. Miscellaneous .......................................... 8
3 NON-EMPLOYEE DIRECTORS STOCK COMPENSATION PLAN 1. Purpose. The purpose of this Non-Employee Directors' Stock Compensation Plan is to provide certain incentives and compensation to Eligible Board Members of Alumax Inc. and to encourage the highest level of director performance by providing such Eligible Board Members with a proprietary interest in the Company by granting them shares of the Company's Common Stock, $.01 par value, and options to purchase such stock. 2. Definitions. The following terms shall have the meanings specified below. (a) "Beneficial Owner", with respect to any securities, shall mean any person who, directly or indirectly, has or shares the right to vote or dispose of such securities or otherwise has "beneficial ownership" of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on the effective date of the Plan) under the Exchange Act, including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that (i) a person shall not be deemed the Beneficial Owner of any security as a result of any agreement, arrangement or understanding to vote such security (A) arising solely from a revocable proxy or consent solicited pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder or (B) made in connection with, or otherwise to participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder, in either case described in clause (A) or clause (B) above whether or not such agreement, arrangement or understanding is also then reportable by such person on Schedule 13D under the Exchange Act (or any comparable or successor report), and (ii) a person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (b) "Beneficiary" shall mean the person or persons (including, without limitation, any trustee) last designated by a Participant to receive the benefits specified hereunder in the event of the Participant's death, or if there is no designated Beneficiary or surviving Beneficiary, the Participant's estate. (c) "Board" shall mean the Company's Board of Directors. (d) "Change in Control" shall mean the occurrence of any of the following events: (i) any person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then-outstanding securities (a "20% Beneficial Owner"); provided, however, that (a) the term "20% Beneficial Owner" shall not include any Beneficial Owner who has crossed such 20 percent threshold solely as a result of an acquisition of securities directly from the Company, or solely as a result of an acquisition by the Company of Company securities, until such time thereafter as such person acquires additional voting securities other than directly from the Company and, after giving effect to such acquisition, such person would constitute a 20% Beneficial Owner; and (b) with respect to any person eligible to file a Schedule 13G pursuant to Rule 13d-1(b)(1) under the Exchange Act with respect to 4 Company securities (an "Institutional Investor"), there shall be excluded from the number of securities deemed to be beneficially owned by such person a number of securities representing not more than 10 percent of the combined voting power of the Company's then-outstanding securities; (ii) during any period of two consecutive years beginning after the Stock first became registered under Section 12 of the Exchange Act, individuals who at the beginning of such period constitute the Board together with those individuals who first became Directors during such period (other than by reason of an agreement with the Company in settlement of a proxy contest for the election of directors) and whose election or nomination for election to the Board was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved (the "Continuing Directors"), cease for any reason to constitute a majority of the Board; (iii) the stockholders of the Company approve a merger, consolidation, recapitalization or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together owned at least 75% of the combined voting power of the voting securities of the Company outstanding immediately prior to such transaction, with the relative voting power of each such continuing holder compared to the voting power of each other continuing holder not substantially altered as a result of the transaction; provided that, for purposes of this paragraph (iii), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 75% threshold (or to preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of the Company or such surviving entity or of any subsidiary of the Company or such surviving entity; or (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition of all or substantially all the assets of the Company; provided, however, that a Change in Control shall not be deemed to have occurred if one of the following exceptions applies: (1) None of the foregoing conditions would have been satisfied but for one or more of the following persons acquiring or otherwise becoming the Beneficial Owner of securities of the Company: (A) any person who has entered into a binding agreement with the Company, which agreement has been approved by two-thirds (2/3) of the Continuing Directors, limiting the acquisition of additional voting securities by such person, the solicitation of proxies by such person or proposals by such person concerning a business combination with the Company (a "Standstill Agreement"); (B) any employee benefit plan, or trustee or other fiduciary thereof, maintained by the Company or any subsidiary of the Company; (C) any subsidiary of the Company; or (D) the Company. -2- 5 (2) None of the foregoing conditions would have been satisfied but for the acquisition by the Company of another entity (whether by merger or consolidation, the acquisition of stock or assets, or otherwise) in exchange, in whole or in part, for securities of the Company, provided that, immediately following such acquisition, the Continuing Directors constitute a majority of the Board, or a majority of the board of directors of any other surviving entity, and, in either case, no agreement, arrangement or understanding exists at that time which would cause such Continuing Directors to cease thereafter to constitute a majority of the Board or of such other board of directors. Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred with respect to a particular Participant if the Change in Control results from actions or events in which such Participant is a participant in a capacity other than solely as an officer, employee or director of the Company. (e) "Change in Control Stock Value" shall mean the value of a share of Stock determined as follows: (i) if the Change in Control results from an event described in clause (iii) of the Change in Control definition, the highest per share price paid for shares of Stock of the Company in the transaction resulting in the Change in Control; (ii) if the Change in Control results from an event described in clauses (i), (ii) or (v) of the Change in Control definition and no event described in clauses (iii) or (iv) of the Change in Control definition has occurred in connection with such Change in Control, the highest sale price of a share of Stock on any trading day during the sixty (60) consecutive trading days immediately preceding and following the date of such Change in Control as reported on the New York Stock Exchange Composite Tape and published in the Wall Street Journal; or (iii) if the Change in Control results from an event described in clause (iv) of the Change in Control definition, the price per share for which shares of Stock are redeemed or exchanged by their holders in the transaction described in such clause (iv). (f) "Committee" shall mean the Human Resources and Compensation Committee of the Board of Directors of the Company, or such other Board committee as may be designated by the Board to administer the Plan. (g) "Company" shall mean Alumax Inc., a Delaware corporation, or any successor corporation. (h) "Deferred Stock Account" shall mean the account maintained by the Company for each Participant in accordance with Section 6 hereof. (i) "Eligible Board Member" shall mean a member of the Board who is not an employee of the Company or its subsidiaries or affiliates. -3- 6 (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder. (k) "Fair Market Value" shall mean the fair market value of Stock, awards, or other property determined by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock as of any given date shall mean the closing sale price of Stock reported on the Composite Tape for securities listed on the New York Stock Exchange in the Wall Street Journal for such date, or, if no Stock was traded on that date, on the next preceding day on which there was such a trade. (l) "Participant" shall mean the holder of a Stock Option or a person for whom a Deferred Stock Account has been established. (m) "Plan" shall mean this Non-Employee Directors Stock Compensation Plan. (n) "Retirement" shall mean termination of service on the Board on or after a Board member's attainment of age [70]. (o) "Stock" shall mean the Company's Common Stock, $.01 par value. (p) "Stock Option" shall mean an option to purchase Stock granted pursuant to Section 7 hereof. 3. Administration. The Committee shall have authority to interpret the Plan; to adopt, amend, and rescind administrative regulations to further the purposes of the Plan; to maintain or cause to be maintained all necessary records for administration of the Plan; and to take any other action necessary for the proper operation of the plan. However, the Committee shall have no discretion to vary the amount or terms of awards granted under the Plan except as provided in Section 9. 4. Eligibility. To be eligible to receive an award under the Plan, a person must be an Eligible Board Member on the date of such award. 5. Stock Grants. Each Eligible Board Member shall be granted 850 shares of Stock on February 1 of each year. Stock granted under this Section 5 shall be fully vested and, subject to any restrictions imposed pursuant to Section 10, freely transferable. 6. Deferral of Stock Grants. An Eligible Board Member may elect to defer the delivery of Stock scheduled to be delivered on any February 1 by filing a deferral election pursuant to this Section 6. (a) Deferral Election. To defer a Stock grant for any year, an Eligible Board Member must file a written deferral election with the Company no later than the July 31 immediately preceding the February 1 on which the Stock is otherwise scheduled to be delivered. Notwithstanding the foregoing, a person who first becomes an Eligible Board Member after July 31 may file a deferral election within 30 days after the date such person becomes an Eligible Board Member. The -4- 7 deferral election shall state the number of shares of stock that the Eligible Board Member elects to defer and the time when he or she desires distribution of his or her Deferred Stock Account. An election to defer delivery of Stock may be revoked or changed for future years if such revocation or change is made by the July 31 preceding the date of the applicable Stock grant. (b) Designation of Beneficiary. Upon forms provided by the Committee, each Participant shall designate the Beneficiary or Beneficiaries to receive the amounts distributable in the event of such Participant's death. A Participant may from time to time change the designated Beneficiary or Beneficiaries, without the consent of such Beneficiary or Beneficiaries, by filing a new designation in writing with the Committee. The Company and the Committee may rely upon the Beneficiary designation last filed in accordance with the terms of the Plan. (c) Credits to Account. Shares subject to a Participant's deferral election shall be credited as deferred shares to a Deferred Stock Account maintained by the Company for the benefit of the Participant. Whenever dividends are paid with respect to shares of Stock, each Participant's Deferred Stock Account shall be credited with additional shares of deferred stock (including fractions) equal in value to the amount of the dividend paid on a single share of Stock multiplied by the number of deferred shares (including fractions) credited to the Participant's Deferred Stock Account as of the record date for dividend purposes. For purposes of crediting dividends, the value of Stock shall be determined as of the day dividends are actually paid on Stock, using the closing market price of the Stock on the Composite Tape of the New York Stock Exchange for that date. If the Composite Tape is not operating on such date, or Stock is not traded there on such date, the value shall be computed using the closing price on the next preceding business day on which such Stock was traded thereon. The interest of a Participant in amounts credited to his Deferred Stock Account shall be fully vested and nonforfeitable at all times. (d) Time of Distribution. A Participant may elect to have the balance of his Deferred Stock Account distributed to him (i) as soon as reasonably possible after the Participant ceases to be a member of the Board, or (ii) on the January 1 over a specified number of years after the Participant ceases to be a member of the Board. Such an election shall be made on the deferral election filed pursuant to Section 6(a) and shall be irrevocable once made. However, a Participant may elect a different distribution date for Stock deferred in subsequent years by filing a change of deferral election as provided in Section 6(a). (e) Payment Upon Death. Notwithstanding any election under Section 6(d), if a Participant dies prior to distribution of his Deferred Stock Account, the balance of the credit of the Participant's Deferred Stock Account as of the date of death shall be paid, as soon as reasonably possible thereafter, to the Participant's Beneficiary. (f) Methods of Payment. All distributions under the Plan shall be in the form of shares of Stock based on the number of whole shares of deferred stock credited to the Participant's Deferred Stock Account on the date as of which the distribution occurs and a cash payment for any fraction of a share. (g) Change in Control. Notwithstanding any provision of the Plan to the contrary, in the event of a Change in Control, all shares of deferred stock credited to a Participant's Deferred Stock Account shall be converted into cash in an amount equal to the product of (i) the Change in Control -5- 8 Stock Value, multiplied by (ii) the number of shares of deferred stock that have been credited to the Participant's Deferred Stock Account as of the date of the Change in Control. The amount of cash resulting from the foregoing conversion of shares of deferred stock in a Participant's Deferred Stock Account shall, at the election of the Participant made in a manner approved by the Committee, be credited to a bookkeeping account for such Participant or paid out in a lump sum no later than fifteen (15) days after the date of the Change in Control. If cash is credited to an account under the preceding sentence, income shall be credited thereto from the date of the Change in Control to the date of distribution at the base rate of Citibank, N.A., as in effect from time to time during such period. (h) Annual Reports. The Committee shall furnish each Participant with an annual report indicating the number of shares of deferred stock credited to his Deferred Stock Account as of the end of the preceding calendar year. 7. Stock Options. Each Eligible Board Member on December 1, 1993 shall be granted a Stock Option to purchase 10,000 shares of Stock. Each person who becomes an Eligible Board Member after such date shall be granted, on the first Thursday in December after his election as an Eligible Board Member (and provided he continues to be an Eligible Board Member on such date), a Stock Option to purchase 10,000 shares of Stock. Stock Options granted under this Section 7 shall be non-qualified Stock Options and shall have the following terms and conditions: (a) Exercise Price. The exercise price per share of Stock purchasable under the Stock Option shall be the Fair Market Value of the Stock on the date the Stock Option is granted. (b) Option Term. The term of the Stock Option shall be ten years, subject to earlier termination in the event of the optionee's death or termination of service as an Eligible Board Member, as set forth below. (c) Exercisability. Each Stock Option shall become exercisable with respect to 3333 shares of Stock on the first anniversary of the date of grant, an additional 3333 shares of Stock on the second anniversary of the date of grant, and the remainder of the shares subject to the Stock Option on the third anniversary of the date of grant, provided that the optionee is a member of the Board on such date. Notwithstanding the preceding sentence, in the event of a Change in Control, each Stock Option shall become fully vested and shall be exchanged for cash in the amount equal to the excess of the Change in Control Stock Value over the per share exercise price, multiplied by the number of shares subject to the Stock Option. (d) Method of Exercise. Each exercisable Stock Option may be exercised in whole or in part at any time during the option period by giving written notice of exercise to the Company specifying the number of shares to be purchased, accompanied by payment of the purchase price. Payment of the purchase price shall be made in cash (including cash equivalents), by delivery of shares of Stock already owned by the optionee for at least six months, or any combination of the foregoing. Stock delivered upon payment of the exercise price shall be valued at the Fair Market Value of the Stock on the date of exercise. (e) Termination of Service as Board Member. If an optionee's status as a member of the Board is terminated for any reason other than death, disability or Retirement, his Stock Option may be exercised for a number of years from the date of such termination equal to the number of full and partial years served as an Eligible Board Member or the end of the option term, whichever occurs first, and only to the extent such Stock Option was exercisable on the date of such termination. (f) Death of Board Member. If an optionee's status as member of the Board is terminated by reason of the optionee's death, his Stock Option shall become fully vested and may be exercised by his legal representatives only until the end of the 12-month period following the optionee's death, or the end of the option term, whichever occurs first. (g) Disability or Retirement of Board Member. If an optionee's status as a member of the Board is terminated by reason of the optionee's disability or Retirement, his Stock Option shall become fully vested and may be exercised throughout the remainder of the option term; provided, however, in the event of the optionee's death following termination of his status as a member of -6- 9 the Board by reason of the optionee's disability or Retirement, his Stock Option may be exercised by his legal representatives only until the end of the 12-month period following the optionee's death, or the end of the option term, whichever occurs first. (h) Non-transferability. No Stock Option shall be transferable by the holder thereof other than by will or by the laws of descent and distribution. During the optionee's lifetime, his Stock Option shall be exercisable only by the optionee. (i) No Stockholder Rights. An optionee shall have neither rights to dividends nor other rights of a stockholder with respect to shares subject to a Stock Option until he has given written notice of exercise and has paid for such shares. 8. Amendment and Termination. The Board may discontinue the Plan at any time or amend it from time to time. However, the Plan shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code or the rules thereunder. Amendments may be made without shareholder approval except as required to satisfy Rule 16b-3 under the Exchange Act or other regulatory requirement. No amendment or discontinuance of the Plan shall adversely affect any Stock Option previously granted without the holder's written consent. The Company shall in no event have the power to reduce the amount already credited to a Participant's Deferred Stock Account as of the effective date of any discontinuance of the Plan nor to discontinue the crediting of earnings on such amounts subsequent to said date. In the event of a discontinuance of the Plan, the payment of a Participant's Deferred Stock Account shall continue to be made in accordance with the provisions of the Plan. 9. Adjustments for Changes in Capitalization. In the event of any merger, reorganization, consolidation, sale of all or substantially all assets, recapitalization, Stock dividend, Stock split, spin-off, split-up, extraordinary dividend, distribution of assets or other change in corporate structure affecting the Stock, a substitution or adjustment, as may be determined to be appropriate by the Committee in its sole discretion, shall be made in the number of shares subject to outstanding Stock Options, the exercise price per share of outstanding Stock Options, the number of deferred shares credited to Deferred Stock Accounts, and the amounts to be paid to or by award holders or the Company, as the case may be, with respect to outstanding awards; provided, however, that no such adjustment shall increase the aggregate value of any outstanding award or affect any outstanding award more favorably than any other outstanding award. 10. Regulatory Compliance. Each award under the Plan shall be subject to the requirement that, if at any time the Committee shall determine that (i) the listing, registration or qualification of the Stock subject or related thereto upon any securities exchange or under any state or federal law, (ii) the consent or approval of any government regulatory body or (iii) an agreement by the recipient of an award with respect to the disposition of Stock is necessary or desirable (in connection with any requirement or interpretation of any federal or state securities law, rule or regulation) as a condition of, or in connection with, the granting of such award or the issuance, purchase or delivery of Stock thereunder, such award shall not be granted or exercised, in whole or in part, unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free of any conditions not acceptable to the Committee. -7- 10 11. Miscellaneous. (a) No Interest in Assets. No Participant or any other person shall have any interest in any shares of Stock credited to his Deferred Stock Account or in any specific asset of the Company by reason of any amount credited to him hereunder, nor any rights to receive any distribution under the Plan except as and to the extent expressly provided in the Plan. There shall be no funding of any benefits which may become payable on account of a deferral election hereunder. No trust shall be created in connection with or by the execution or adoption of this Plan. Any benefits which become payable hereunder shall be paid from the general assets of the Company. Nothing in the Plan shall be deemed to give any person any right to participate in the Plan, except in accordance with the provisions of the Plan. (b) Restriction Against Assignment. The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant's Deferred Stock Account shall be liable for the debts, contracts, or engagements of any Participant, his Beneficiaries, or successors in interest, nor shall it be subject to execution by levy, attachment or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. (c) Receipt or Release. Any payment to any Participant or his Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Committee and the Company and the Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. (d) Payment on Behalf of Minor. In the event any amount becomes payable under the Plan to a minor or a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor, the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such minor or other person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Company. (e) Forfeiture. Any payment or distribution to a Participant under the Plan which is not claimed by the Participant, Beneficiary, or other person entitled thereto within three years after becoming payable shall be forfeited and cancelled and shall remain with the Company and no other person shall have any right thereto or interest therein. The Company shall not have any duty to give notice that amounts are payable under the Plan to any person other than the Participant and the designated Beneficiary or Beneficiaries. (f) Withholding. The Company may deduct from the amount of all distributions under the Plan any taxes required to be withheld by the Federal or any State or local government. (g) Governing Law; Arbitration. This Plan shall be construed, administered and enforced according to the laws of the State of Delaware, without regard to the conflict of laws principles thereof. Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of settling any dispute or controversy arising hereunder or for the purpose of entering any judgment upon an -8- 11 award rendered by the arbitrators, the Company and each Participant hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other court having jurisdiction. The Company and each Participant hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and each Participant hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (h) Reimbursement of Legal Fees. All reasonable costs and expenses (including fees and disbursements of counsel) incurred by a Participant in seeking to obtain or enforce any payment, benefit or right provided under the Plan shall be paid by the Company; provided; however, that the Participant shall be required to repay any such amounts to the Company to the extent that an arbitrator or a court of competent jurisdiction issues a final, unappealable order setting forth a determination that the position taken by the Employee was frivolous or advanced in bad faith. (i) No Right of Continued Service. No award under this Plan shall confer upon any member of the Board any right to continued service on the Board. (j) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to shareholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable. (k) Captions. Captions in this Plan are not part of the provisions hereof and shall have no force or effect. (l) Gender. The masculine gender as used herein includes the feminine gender. (m) Successors and Assigns. This Plan shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns. (n) Effective Date. The Plan shall be effective upon approval by the Company's shareholders. -9- EX-10.07 7 DIRECTORS DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.07 ALUMAX INC. - -------------------------------------------------------------------------------- NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN AS AMENDED ON OCTOBER 3, 1996 - -------------------------------------------------------------------------------- 2 ALUMAX INC. - -------------------------------------------------------------------------------- NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN AS AMENDED OCTOBER 3, 1996 - --------------------------------------------------------------------------------
Page ---- 1. Purpose................................................................ 1 2. Definitions............................................................ 1 3. Participation.......................................................... 4 a. Plan is Voluntary............................................. 4 b. Filing of Application......................................... 4 c. Designation of Beneficiary.................................... 5 4. Accrual of Benefits.................................................... 5 a. Deferred Compensation......................................... 5 b. Earnings...................................................... 5 c. Vesting....................................................... 6 5. Distribution of Benefits............................................... 6 a. Time of Distribution.......................................... 6 b. Payment Upon Death............................................ 6 c. Methods of Payment............................................ 6 6. The Administrator...................................................... 7 a. Appointment................................................... 7 b. Rights and Duties............................................. 7 c. Annual Reports................................................ 7 d. Information................................................... 7 e. Compensation, Indemnity and Liability......................... 8 7. Amendment and Discontinuance........................................... 8 a. Amendments.................................................... 8 b. Discontinuance of Plan........................................ 8
3 ALUMAX INC. - -------------------------------------------------------------------------------- NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN AS AMENDED OCTOBER 3, 1996 - --------------------------------------------------------------------------------
Page ---- 8. General Provisions..................................................... 8 a. No Interest in Assets......................................... 8 b. Restriction Against Assignment................................ 8 c. Receipt or Release............................................ 9 d. Payment on Behalf of Minor.................................... 9 e. Forfeiture.................................................... 9 f. Withholding................................................... 9 g. Governing Law; Arbitration.................................... 9 h. Captions...................................................... 10 i. Gender........................................................ 10 j. Successors and Assigns........................................ 10 k. Effective Date................................................ 10 9. Roll-Over for Former AMAX Inc. Directors................................ 10
Annex A - Alumax Inc. Deferred Compensation Plan for Former Directors of AMAX Inc. 4 NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION PLAN 1. Purpose. The purpose of this Non-Employee Directors' Deferred Compensation Plan (the "Plan") is to assist Alumax Inc. (the "Company") in recruiting qualified individuals to serve as non-employee members of the Board of Directors of the Company, and to provide an incentive to such persons to continue to serve the Company in that capacity. 2. Definitions. Whenever the following terms are used herein, with the first letter capitalized, they shall have the meanings specified below: (a) "Account" means the account maintained by the Administrator for each Participant which is to be credited, as hereinafter set forth, with Stock equal in value to the amount of the Participant's Compensation which is deferred pursuant to this Plan, together with the earnings thereon as provided for herein. (b) "Administrator" means the individual appointed by the Board of Directors to administer the Plan. (c) "Beneficial Owner", with respect to any securities, shall mean any person who, directly or indirectly, has or shares the right to vote or dispose of such securities or otherwise has "beneficial ownership" of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on the effective date of the Plan) under the Exchange Act, including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that (i) a person shall not be deemed the Beneficial Owner of any security as a result of any agreement, arrangement or understanding to vote such security (A) arising solely from a revocable proxy or consent solicited pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder or (B) made in connection with, or otherwise to participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder, in either case described in clause (A) or clause (B) above whether or not such agreement, arrangement or understanding is also then reportable by such person on Schedule 13D under the Exchange Act (or any comparable or successor report), and (ii) a person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. (d) "Beneficiary" or "Beneficiaries" means the person or persons (including, without limitation, any trustee) last designated by a Participant to receive the benefits specified hereunder, in the event of the Participant's death, or if there is no designated Beneficiary or surviving Beneficiary, the Participant's estate. 5 (e) "Board" means the Company's Board of Directors. (f) "Board Member" shall mean a member of the Board who is not an employee of the Company or its subsidiaries or affiliates. (g) "Change in Control" shall mean the occurrence of any of the following events: (i) any person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then-outstanding securities (a "20% Beneficial Owner"); provided, however, that (a) the term "20% Beneficial Owner" shall not include any Beneficial Owner who has crossed such 20 percent threshold solely as a result of an acquisition of securities directly from the Company, or solely as a result of an acquisition by the Company of Company securities, until such time thereafter as such person acquires additional voting securities other than directly from the Company and, after giving effect to such acquisition, such person would constitute a 20% Beneficial Owner; and (b) with respect to any person eligible to file a Schedule 13G pursuant to Rule 13d-1(b)(1) under the Exchange Act with respect to Company securities (an "Institutional Investor"), there shall be excluded from the number of securities deemed to be beneficially owned by such person a number of securities representing not more than 10 percent of the combined voting power of the Company's then-outstanding securities; (ii) during any period of two consecutive years beginning after the Stock first became registered under Section 12 of the Exchange Act, individuals who at the beginning of such period constitute the Board together with those individuals who first became Directors during such period (other than by reason of an agreement with the Company in settlement of a proxy contest for the election of directors) and whose election or nomination for election to the Board was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved (the "Continuing Directors"), cease for any reason to constitute a majority of the Board; (iii) the stockholders of the Company approve a merger, consolidation, recapitalization or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the Company or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together owned at least 75% of the combined voting power of the voting securities of the Company outstanding immediately prior to such transaction, with the relative voting power of each such continuing holder compared to the voting power of each other continuing holder not substantially altered as a result of the transaction; provided that, for purposes of this paragraph (iii), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 75% threshold (or to preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of the Company or such surviving entity or of any subsidiary of the Company or such surviving entity; - 2 - 6 (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition of all or substantially all the assets of the Company; or (v) any other event which the Board determines shall constitute a Change in Control for purposes of this Plan; provided, however, that a Change in Control shall not be deemed to have occurred if one of the following exceptions applies: (1) Unless a majority of the Continuing Directors of the Company determines that the exception set forth in this paragraph (1) shall not apply, none of the foregoing conditions would have been satisfied but for one or more of the following persons acquiring or otherwise becoming the Beneficial Owner of securities of the Company: (A) any person who has entered into a binding agreement with the Company, which agreement has been approved by two-thirds (2/3) of the Continuing Directors, limiting the acquisition of additional voting securities by such person, the solicitation of proxies by such person or proposals by such person concerning a business combination with the Company (a "Standstill Agreement"); (B) any employee benefit plan, or trustee or other fiduciary thereof, maintained by the Company or any subsidiary of the Company; (C) any subsidiary of the Company; or (D) the Company. (2) Unless a majority of the Continuing Directors of the Company determines that the exception set forth in this paragraph (2) shall not apply, none of the foregoing conditions would have been satisfied but for the acquisition by the Company of another entity (whether by merger or consolidation, the acquisition of stock or assets, or otherwise) in exchange, in whole or in part, for securities of the Company, provided that, immediately following such acquisition, the Continuing Directors constitute a majority of the Board, or a majority of the board of directors of any other surviving entity, and, in either case, no agreement, arrangement or understanding exists at that time which would cause such Continuing Directors to cease thereafter to constitute a majority of the Board or of such other board of directors. Notwithstanding the foregoing, unless otherwise determined by a majority of the Continuing Directors, no Change in Control shall be deemed to have occurred with respect to a particular Participant if the Change in Control results from actions or events in which such Participant is a participant in a capacity other than solely as an officer, employee or director of the Company. (h) "Change in Control Stock Value" shall mean the value of a share of Stock determined as follows: (i) if the Change in Control results from an event described in clause (iii) of the Change in Control definition, the highest per share price paid for shares of Stock of the Company in the transaction resulting in the Change in Control; - 3 - 7 (ii) if the Change in Control results from an event described in clauses (i), (ii) or (v) of the Change in Control definition and no event described in clauses (iii) or (iv) of the Change in Control definition has occurred in connection with such Change in Control, the highest sale price of a share of Stock on any trading day during the sixty (60) consecutive trading days immediately preceding and following the date of such Change in Control as reported on the New York Stock Exchange Composite Tape and published in the Wall Street Journal; or (iii) if the Change in Control results from an event described in clause (iv) of the Change in Control definition, the price per share for which shares of Stock are redeemed or exchanged by their holders in the transaction described in such clause (iv). (i) "Committee" shall mean the Human Resources and Compensation Committee of the Board of Directors of the Company or a subcommittee thereof, or such other Board committee as may be designated by the Board to administer the Plan. (j) "Company" means Alumax Inc., a Delaware corporation, or any successor corporation. (k) "Compensation" means for any Plan Year all retainer, meeting, committee and chair fees payable in cash to a Board Member for service on the Board, before any reduction pursuant to this Plan. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. References to any provision of the Exchange Act shall be deemed to include successor provisions thereto and regulations thereunder. (m) "Participant" means any Board Member who actually participates in this Plan in any Plan Year and who is entitled to a benefit hereunder. (n) "Plan Year" shall mean each year beginning on the first day of January and ending on the 31st day of December, commencing with the year beginning on January 1, 1994. (o) "Stock" means the Company's Common Stock, $.01 par value. 3. Participation. (a) Plan is Voluntary. Participation in the Plan is voluntary. (b) Filing of Application. To participate in the Plan for any Plan Year a Board Member must file a written application with the Administrator no later than the June 30 immediately preceding such Plan Year. The Administrator shall notify each Board Member of his prospective eligibility to participate in the Plan at least thirty (30) days prior to the time he must file an application for participation. - 4 - 8 Notwithstanding the foregoing, a person who first becomes a Board Member after June 30 may file an application within 30 days of the date the individual becomes a Board Member, and shall be effective to defer only Compensation earned more than six months following the date of his application. The application for participation shall signify the Board Member's acceptance of the benefits and terms of the Plan, and state the portion of his Compensation that he elects to defer and the time when the Board Member desires distribution of his benefits under the Plan. An election to defer Compensation may be revoked or changed for future Plan Years if such revocation or change is made at least six months prior to the beginning of the Plan Year to which it relates. No deferral of Compensation shall be effective and no Account shall be credited with deferred Stock, unless and until the Committee approves the Participant's deferral election. (c) Designation of Beneficiary. Upon forms provided by the Administrator, each Participant shall designate the Beneficiary or Beneficiaries to receive the amounts distributable in the event of such Participant's death. A Participant may from time to time change the designated Beneficiary or Beneficiaries, without the consent of such Beneficiary or Beneficiaries, by filing a new designation in writing with the Administrator. [The spouse of a Participant shall join in any designation of the Beneficiary or Beneficiaries other than such spouse.] The Company and the Administrator may rely upon the Beneficiary designation last filed in accordance with the terms of the Plan. 4. Accrual of Benefits. (a) Deferred Compensation. Each Board Member who elects to participate in this Plan for any Plan Year must irrevocably elect to defer the receipt of all or a specified percentage of his Compensation in accordance with the terms of Section 3(b). Said amount shall be credited to such Board Member's Account in accordance with Section 4(b) and shall be paid in accordance with Section 5. (b) Earnings. The amount of Compensation that each Participant elects to defer under this Plan shall increase or decrease in value during the period of deferral based on the market price of Stock. On the date the Plan is credited with the deferred Compensation of a Participant (which shall be the same date the Participant would have received such Compensation had a deferral election not then been in effect), the Participant's Account shall be credited with a number of shares of deferred Stock (including fractions) having a value equal to the amount of the Participant's Compensation deferred on that date. The value of Stock shall be determined using the closing market price of the Stock on the Composite Tape of the New York Stock Exchange for that date. If the Composite Tape is not operating on such date, or Stock is not traded there on such date, the value shall be computed using the closing price on the next preceding business day on which such Stock was traded thereon. Whenever dividends are paid with respect to shares of Stock, each Participant's Account shall be credited with additional shares of deferred Stock (including fractions) equal in value to the amount of the dividend paid on a single share of Stock multiplied by the number of shares of deferred Stock (including fractions) credited to a Participant's Account as of the record date for dividend purposes. For purposes of crediting dividends, the value of Stock shall be - 5 - 9 determined as of the day dividends are actually paid on Stock and in the same manner as is used for crediting deferred Compensation to Accounts. The number of shares of deferred Stock in each Participant's Account shall be appropriately adjusted and modified upon the occurrence of any stock split, reverse stock split, stock dividend, or stock consolidation. Notwithstanding any provision of the Plan to the contrary, in the event of a Change in Control, all shares of deferred Stock credited to a Participant's Account shall be converted into cash in an amount equal to the product of (i) the Change in Control Stock Value, multiplied by (ii) the number of shares of deferred Stock that have been credited to each Participant's Account as of the date of the Change in Control. The amount of cash resulting from the foregoing conversion of shares of deferred Stock in a Participant's Account shall, at the election of the Participant made in a manner approved by the Administrator, be credited to such Participant's Account or paid out in a lump sum no later than fifteen (15) days after the date of the Change in Control. If cash is credited to a Participant's Account under this paragraph, income shall be credited thereto from the date of the Change in Control to the date of distribution at the base rate of Citibank, N.A., as in effect from time to time during such period. (c) Vesting. The interest of each Participant in any benefit accrued hereunder shall be fully vested and nonforfeitable at all times. 5. Distribution of Benefits. (a) Time of Distribution. A Participant may elect to have the balance of his Account distributed to him (i) as soon as reasonably possible after the Participant ceases to be a Board Member, or (ii) on the January 1 occurring a stated number of years after the Participant ceases to be a Board Member in lump sum or up to ten (10) installments. Such an election shall be made on the application filed pursuant to Section 3(b) and shall be irrevocable once made. However, a Participant may elect a different distribution date(s) for Compensation deferred in subsequent years by filing a change of deferral election as provided in Section 3(b). (b) Payment Upon Death. Notwithstanding any election under Section 5(a), if a Participant dies prior to distribution of his Account, the balance of the credit of the Participant's Account as of the date of death shall be paid, as soon as reasonably possible thereafter, to the Participant's Beneficiary or Beneficiaries. (c) Methods of Payment. Distributions under the Plan with respect to deferral elections shall consist of shares of Stock equal to the number of whole shares of Stock credited to the Participant's Account on the date as of which the distribution(s) occurs and a cash payment for any fraction of a share. Each Participant, or Beneficiary, agrees that prior to distribution of any benefit under the Plan he will make such representations and execute such documents as are deemed by the Administrator necessary to comply with applicable securities laws. - 6 - 10 6. The Administrator. (a) Appointment. An Administrator shall be appointed by the Board of Directors to administer the Plan as provided herein. (b) Rights and Duties. The Administrator, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish those purposes, including, but not by way of limitation, the following: (i) to compute and certify the amount and kind of benefits payable to Participants and their Beneficiaries; (ii) to maintain or to designate any person or entity to maintain all the necessary records for the administration of the Plan; (iii) to make and publish such rules for the regulation of the Plan as are not inconsistent with the terms hereof; and (iv) to provide for disclosure of such information and filing or provision of such reports and statements to Participants or Beneficiaries under this Plan as the Administrator deems appropriate. All actions of the Administrator shall be conclusive on all persons interested in the Plan except to the extent otherwise specifically indicated herein. The Administrator may appoint a plan administrator and agents, and delegate thereto such powers and duties in connection with the administration of the Plan as the Administrator may from time to time prescribe. (c) Annual Reports. The Administrator shall furnish each Participant with an annual report indicating the number of shares of Stock credited to his Account as of the end of the preceding calendar year. (d) Information. To enable the Administrator to perform his functions, the Company shall supply full and timely information to the Administrator on all matters relating to the Compensation of all Participants, their status as Board Members, their contributions, and such other pertinent facts as the Administrator may require. (e) Compensation, Indemnity and Liability. The Administrator shall serve without bond, except as otherwise required by law, and without compensation for his services hereunder. All expenses of the Administrator shall be paid by the Company and the Company shall furnish the Administrator with such clerical and other assistance as is necessary in the performance of his duties. - 7 - 11 The Administrator shall not be liable for any act or omission on his part, excepting only his own willful misconduct or gross negligence. The Company shall indemnify and save harmless the Administrator against any and all expenses and liabilities arising out of his administration of the Plan, excepting only expenses and liabilities arising out of his own willful misconduct or gross negligence. 7. Amendment and Discontinuance. (a) Amendments. The Board shall have the right to amend the Plan from time to time, and to amend or cancel any amendments; provided, however, that no amendment shall reduce any amount already credited to a Participant's Account as of the effective date of such amendment. (b) Discontinuance of Plan. It is the expectation of the Company that the Plan will be continued indefinitely, but continuance of the Plan is not assumed as a contractual obligation of the Company, and the right is reserved by the Company at any time to reduce, suspend, or discontinue the Plan; provided, however, the Company shall in no event have the power to reduce the amount already credited to a Participant's Account as of the effective date of any such reduction, suspension or discontinuance nor to discontinue the crediting of earnings on such amounts subsequent to said date. In the event of a reduction, suspension or discontinuance of the Plan, the payment of benefits accrued hereunder shall continue to be made in accordance with the provisions of the Plan. 8. General Provisions. (a) No Interest in Assets. No Participant or any other person shall have any interest in any shares of Stock credited to his Account or in any specific asset of the Company by reason of any amount credited to him hereunder, nor any rights to receive any distribution under the Plan except as and to the extent expressly provided in the Plan. There shall be no funding of any benefits which may become payable hereunder. No trust shall be created in connection with or by the execution or adoption of this Plan. Any benefits which become payable hereunder shall be paid from the general assets of the Company. Nothing in the Plan shall be deemed to give any Board Member any right to participate in the Plan, except in accordance with the provisions of the Plan. (b) Restriction Against Assignment. The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant's Account shall be liable for the debts, contracts, or engagements of any Participant, his Beneficiaries, or successors in interest, nor shall it be subject to execution by levy, attachment or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. - 8 - 12 (c) Receipt or Release. Any payment to any Participant or his Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Administrator and the Company and the Administrator may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. (d) Payment on Behalf of Minor. In the event any amount becomes payable under the Plan to a minor or a person who, in the sole judgment of the Administrator, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor, the Administrator may direct that such payment be made to any person found by the Administrator, in his sole judgment, to have assumed the care of such minor or other person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Administrator and the Company. (e) Forfeiture. Any payment or distribution to a Participant under the Plan which is not claimed by the Participant, Beneficiary, or other person entitled thereto within three years after becoming payable shall be forfeited and cancelled and shall remain with the Company and no other person shall have any right thereto or interest therein. The Company shall not have any duty to give notice that amounts are payable under the Plan to any person other than the Participant and the designated Beneficiary or Beneficiaries. (f) Withholding. The Company may deduct from the amount of all distributions under the Plan any taxes required to be withheld by the Federal or any State or local government. (g) Governing Law; Arbitration. This Plan shall be construed, administered and enforced according to the laws of the State of Delaware, without regard to the conflict of laws principles thereof. Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of settling any dispute or controversy arising hereunder or for the purpose of entering any judgment upon an award rendered by the arbitrators, the Company and each Participant hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other court having jurisdiction. The Company and each Participant hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and each Participant hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. - 9 - 13 (h) Captions. Captions in this Plan are not part of the provisions hereof and shall have no force or effect. (i) Gender. The masculine gender as used herein includes the feminine gender. (j) Successors and Assigns. This Plan shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns. (k) Effective Date. This Plan shall become effective upon its approval by stockholders of the Company. 9. Roll-Over for Former AMAX Inc. Directors This Plan shall also include, as a sub-plan, the Alumax Inc. Deferred Compensation Plan for former directors of AMAX Inc., in the same form as Annex A hereto. - 10 - EX-10.09 8 FACILITY PURCHASE AGREEMENT 1 EXHIBIT 10.09 FACILITY PURCHASE AGREEMENT This Facility Purchase Agreement (the "Agreement")is entered into by and between Alumax Mill Products, Inc., a Delaware corporation, with its principal place of business at 12 Salt Creek Lane, Hinsdale, Illinois ("Alumax") Fleet National Bank (formerly known as Shawmut Bank Connecticut, National Association, formerly known as The Connecticut National Bank), with its principal place of business at 777 Main Street, Hartford, Connecticut 06115, in its individual capacity ("Fleet"), and not in its individual capacity but solely as the Owner Trustee ("Owner Trustee") for U S WEST Financial Services, Inc., a Colorado corporation ("USWFS"), with its principal place of business at 6200 South Quebec Street, Suite 350, Englewood, Colorado. WHEREAS, USWFS is the successor-in-interest to U S WEST CAPITAL CORPORATION, a New York corporation ("USWCC"); WHEREAS, Alumax, as Lessee, and Owner Trustee, as Lessor, entered into a certain Facility Lease dated as of November 25, 1986 (the "Facility Lease") concerning an aluminum container sheet plant and all additions and accessions thereto located in Bowie County, Texas as more fully described in the Facility Lease (the "Facility"); and WHEREAS, Alumax, as Ground Lessor, and Owner Trustee, as Ground Lessee, entered into a Ground Lease dated as of November 25, 1986 concerning certain land in Bowie County, Texas on which the Facility is situated; and WHEREAS, Alumax, as Site Lessee, and Owner Trustee, as Site Lessor, entered into a Site Lease dated as of November 25, 1986 (the "Site Lease") concerning certain land in Bowie County, Texas on which the Facility is situated; and WHEREAS, Alumax, as Lessee, Alumax Inc., as guarantor, USWCC (USWFS's predecessor), as Owner Participant, Owner Trustee, and The Connecticut Bank and Trust Company, National Association, as Indenture Trustee (whose interest has been succeeded to by State Street Bank and Trust Company of Connecticut, National Association), and various financial institutions (hereinafter, the "Note Holders") entered into that certain Participation Agreement dated as of November 25, 1986 relating to the leveraged lease financing of the Facility; and WHEREAS, by the First Amendment to the Participation Agreement dated as of December 31, 1990, Alumax (as Lessee), Alumax 2 Inc. (the Guarantor), AMAX Inc., USWFS (as owner Participant), Owner Trustee and in its individual capacity as "Owner Bank," certain Financial Institutions listed on Schedule 1 to the Participation Agreement (the "Financial Institutions"), and the State Street Bank and Trust Company of Connecticut, successor to The Connecticut Bank and Trust Company, National Association, (acting in its capacity as Indenture Trustee) agreed to delete Alumax Inc. as a party to the Participation Agreement and release and discharge Alumax Inc. from its Guaranty Agreement dated as of November 25, 1986 in return for the substitution of AMAX Inc. as a party to the Participation Agreement and as the guarantor of the obligations of Alumax under the Fundamental Agreements; and WHEREAS, by the First Supplemental Indenture dated as of December 31, 1990, Owner Trustee and State Street Bank and Trust Company, successor to The Connecticut Bank and Trust Company, National Association (acting solely in its capacity as Indenture Trustee) agreed to amend the Indenture, Security Agreement and the First Deed of Trust dated as of November 25, 1986 ("Indenture") to release Alumax Inc. from its obligations under the Guaranty Agreement dated as of November 25, 1986 and to substitute therefor the obligations of AMAX Inc. under its Guaranty Agreement dated as of December 31, 1990 ("AMAX Guaranty"); and WHEREAS, in connection with the spin-off of Alumax Inc. from AMAX Inc. in November, 1993, Alumax, Alumax Inc., USWFS, the Owner Trustee, the Indenture Trustee and the Financial Institutions entered into the Second Amendment to Participation Agreement dated as of July 30, 1993 and agreed to amend the Participation Agreement to release and discharge AMAX Inc. from its obligations under the AMAX Guaranty and to substitute therefor the Guaranty Agreement of Alumax Inc. dated as of July 30, 1993 ("Second Alumax Guaranty"); and WHEREAS, in connection with the spin-off of Alumax Inc. from AMAX Inc. in November, 1993, the Owner Trustee and the Indenture Trustee executed the Second Supplemental Indenture dated as of July 30, 1993 and agreed to amend the Indenture to substitute Alumax Inc. for AMAX Inc. as a party thereto and to release and discharge AMAX Inc. from its obligations under the AMAX Guaranty and to substitute in AMAX's place the obligations of Alumax Inc. under the Second Alumax Guaranty. WHEREAS, as a credit enhancement for the Second Alumax Guaranty, Alumax Inc. and USWFS executed a Letter of Credit Agreement dated as of November 11, 1993 whereby Alumax Inc. agreed to and did provide to USWFS a letter of credit for the benefit of USWFS with respect to the Second Alumax Guaranty; and 2 3 WHEREAS, as a credit enhancement for the Second Alumax Guaranty, Alumax Inc. and Stonewall Insurance Company, Dixie Insurance Company, Windsor Insurance Company and Great American Life Insurance Company, each a holder of one or more notes issued under the Indenture, entered into letter agreements dated as of November 5, 1993 whereby Alumax Inc. agreed to and did provide the foregoing Note Holders with letters of credit for their benefit with respect to the Second Alumax Guaranty; and WHEREAS, pursuant to Section 4(a) of the Second Alumax Guaranty and by further agreement of Owner Trustee, USWFS (acting as Owner Participant) dated as of February 7, 1996, Alumax Inc. caused a letter of credit to be provided to the Owner Trustee in the face amount of the outstanding Casualty Value, net of existing letters of credit and other existing security. This letter of credit was further subject to an assignment agreement between Alumax Inc. and the Owner Trustee whereunder the letter of credit would be assigned and delivered to the Indenture Trustee. This assignment was effected on March 29, 1996. WHEREAS, USWFS is the successor by merger to USWCC; and WHEREAS, USWFS, the Note Holders, the Owner Trustee and the Indenture Trustee are parties to one or more trust and indenture agreements that relate to the foregoing transactions; and WHEREAS, pursuant to Section 21.1.2(A) of the Facility Lease, Alumax has the option to purchase all, but not less than all, of the Facility and to thereby terminate the Facility Lease and with it the Ground Lease and the Site Lease and the related financing, trust, guaranty and facility support agreements; and WHEREAS, Alumax desires to exercise its option pursuant to Section 21.1.2(A) of the Facility Lease and to purchase the Facility, and Owner Trustee, at the written direction of the Owner Participant, desires to sell the Facility and to undertake all the actions required by the Fundamental Agreements to give effect to Alumax's exercise of its option to purchase the Facility and to fully pay and extinguish the rights of Fleet, the Owner Trustee, the Owner Participant, the Indenture Trustee and the Note Holders in and to the Facility and in and to the Fundamental Agreements, as amended or substituted, except such Fundamental Agreements or portions thereof which are to survive the purchase of the Facility by Alumax, as specifically set forth below. NOW, THEREFORE, the parties agree as follows: 1. Terms and Definitions and Incorporation of Fundamental Agreements. All capitalized terms not expressly defined in this Agreement shall have the meaning given to such 3 4 terms in the Facility Lease or in the Fundamental Agreement in which they are defined. The phrase "Fundamental Agreement" shall have the meaning given to such phrase in the Appendix X of the Participation Agreement. Any reference herein to a Fundamental Agreement shall be to such agreement as it has been amended or substituted. For reference purposes only, the definitions set forth in the Fundamental Agreements are hereby incorporated herein by this reference. 2.Purchase and Sale Obligations. Alumax hereby agrees to purchase the Facility and Owner Trustee agrees to bargain, transfer and sell the Facility to Alumax, free and clear of all Lessor Liens and Owner Participant Liens, and to terminate the Fundamental Agreements, except as set forth below, and to effect the full payment of the Notes. Notwithstanding any contrary provision of this Agreement, it is agreed that the Tax Indemnity Agreement shall remain in full force and effect and shall only, terminate in accordance with Section 11 thereof, the terms and provisions of Sections 7.2, 7.3, 7.4 and 7.5 of the Participation Agreement shall remain in full force and effect and shall only terminate in accordance with the provisions of Sections 7.2.8 and 11.10 thereof, and the terms and provisions in Section 3.2. of the Owner Trust Agreement shall remain in full force and effect and shall not be terminated. 3. Purchase Price. In consideration for conveying all right, title and interest in the Leased Facility as provided in paragraph 2 herein to Alumax and for terminating the Fundamental Agreements (to the extent set forth in paragraph 2 above), at Closing Alumax will pay to Owner Trustee, the following sums (collectively, the "Purchase Price"): A. The sum of Six Hundred Thirty Four Thousand Nine Hundred Forty and 87/100 Dollars ($634,940.87) (the prorated equity portion of the January 1, 1998 Lease payment). B. A sum equal to the entire outstanding principal balance of the Notes (which, as of the Closing Date, is estimated to be approximately $54,386,386.82) plus accrued interest of approximately $2,316,860.08 and all other costs and expenses (except the Premiums) of securing the cancellation of the Notes and the release and discharge of the Indenture and those Fundamental Agreements securing the Notes. C. Thirty-Five Million Nine Hundred Thousand and no/100 Dollars ($35,900,000.00) as hereinafter defined in this Agreement. 4 5 D. The Premiums required to be paid in connection with the payment and discharge of the Notes. The sums provided for in A, B and C above shall be deemed to constitute the Fair Market Sales Value of the Facility. Lessor and Lessee expressly waive the requirement to undertake and perform the Appraisal Procedure provided for in Section 22.3 of the Facility Lease. Alumax shall not be entitled to pay any portion of the Purchase Price by assuming all or any portion of the Notes but rather, payment of the Purchase Price will be effected by wire transfer to the account designated in writing to Alumax by Owner Trustee and confirmed in writing by USWFS. Notwithstanding any term, calculation or formulation to the contrary in the Facility Lease or any other Fundamental Agreement, the parties acknowledge and agree that the Purchase Price has been fully negotiated between them and accepted, and it shall supersede any other price or price determination mechanism as may be called for in the Facility. Lease or any other Fundamental Agreement. Each party acknowledges that it has made its own independent determination as to the fair market value of the Facility and the fairness and reasonableness of the Purchase Price. Further, the parties acknowledge and agree that, having exercised its purchase option pursuant to Section 21.1.2(A) of the Facility Lease, and having irrevocably covenanted and agreed herein to give the Preliminary Election Notice required pursuant to Section 21.2 of the Facility Lease and the Final Election Notice as required pursuant to Section 22.2 of the Facility Lease, the duties of Owner Trustee to close the transaction evidenced hereby and the duties of Alumax to pay the Purchase Price and close the transaction evidenced hereby are and shall be deemed mandatory, both hereunder and under the Facility Lease. Accordingly, Alumax hereby assumes and agrees to pay the Purchase Price and acknowledges and agrees that such payment is required hereunder and under the Facility Lease and that the Purchase Price constitutes Supplemental Rent required to be paid by Alumax under the Facility Lease. 4. Covenants and Conditions to Closing. A. Alumax shall perform the following covenants, each of which shall also be conditions of the Obligation of Owner Trustee to close: (1) Alumax shall pay the entire Purchase Price at Closing. (2) Alumax shall not commit an event of default not timely cured or waived prior to Closing under any of the Fundamental Agreements to which it is a party. 5 6 (3) Alumax shall execute and deliver all necessary documents and take all necessary steps required of Alumax to cause the obligations of Owner Trustee and USWFS under the Fundamental Agreements to which Alumax is a party to be terminated at Closing, except as set forth in Paragraph 2 above. B. Conditions to Alumax's Obligation to close: (1) The Owner Trustee shall have executed and delivered to Alumax a quit claim deed and bill of sale and other appropriate instruments of conveyance, transfer or assignment, conveying to Alumax, without any recourse, representation or warranty whatsoever, express or implied (except as provided below), the entire right, title and interest of the Owner Trustee in and to the Facility, the Site, the Ground Lease, and the Assigned Rights. Notwithstanding the foregoing, the instruments of conveyance shall contain a warranty against Lessor Liens and Owner Participant Liens. (2) The Owner Trustee shall have delivered documents in a form reasonably acceptable to Alumax evidencing the termination of the Site Lease, the Facility Lease and the Ground Lease and, subject to the exceptions set forth in Paragraph 2 above, any other Fundamental Agreement to which Alumax and the Owner Trustee are parties or pursuant to which Alumax has obligations and the Facility and real property related thereto are encumbered. (3) Each of the original Notes shall be delivered to the Closing marked "Paid in Full." (4) Subject to the limitations set forth in Paragraph 2 above, the Owner Trustee and the Indenture Trustee shall have delivered their confirmations in writing that each and every obligation owed and all fees payable by Alumax under the Facility Lease, the Indenture and any 6 7 other Fundamental Agreement (except as set forth in Paragraph 2 above) has been fully satisfied and discharged and that each such agreement (except as set forth in Paragraph 2 above) and all other security interests, assignments and liens in favor of or arising through Lessor have been terminated and released, such confirmations and releases to be in a form reasonably satisfactory to Alumax. (5) The July 30, 1993 guaranty of Alumax Inc. and all prior guaranties of the obligations of Alumax shall have been terminated with such termination in a form reasonably acceptable to Alumax. (6) All original letters of credit and any replacement letters of credit identified on Schedule 1 hereto, issued for the account of Alumax, shall be returned to Alumax, and all agreements under which such letters of credit were delivered shall be terminated. (7) Title to the Facility shall not be encumbered on the date of Closing by any Owner Participant Lien not then being paid and satisfied from the proceeds of this transaction, or by any Lessor Lien. 5. Pre-Closing Covenants. From the date this Agreement is executed and becomes effective to the Closing Date, the parties covenant to one another as follows: A. Alumax shall duly and timely perform all of its obligations under the Facility Lease and each of the Fundamental Agreements to which it is a party or regarding which it has assumed obligations. B. Within ten days from the date this Agreement is executed by an authorized officer of Owner Trustee and USWFS, and in all events prior to September 30, 1996, Alumax shall give the Preliminary Election Notice required pursuant to Section 22.1. of the Facility Lease, and conforming to the transaction set forth in this Agreement. Within ten days thereafter, Alumax shall give the Final Election Notice as 7 8 required pursuant to Section 22.2. of the Facility Lease, which notice shall set forth the election agreed to pursuant to this Agreement. C. Promptly upon receipt by the Owner Trustee of the Final Election Notice provided for in (B) above, and in all events within thirty days thereafter, the Owner Trustee, pursuant to Section 2.03(f) of the Indenture, shall give the Indenture Trustee the notice provided for therein, and the Owner Trustee shall undertake to timely perform all of the obligations of the Owner Trustee and Lessor as required under the Fundamental Agreements to give full force and effect to Alumax's exercise of its option to purchase the Facility. D. Neither USWFS nor Fleet nor the Owner Trustee will encumber, pledge, hypothecate, assign or otherwise impair title in and to the Facility, the Ground Lease or the Site Lease or their rights in and to the Fundamental Agreements. 6. Indemnification by Alumax. A. Indemnification. Alumax agrees to pay and indemnify Owner Trustee and USWFS for any and all costs, expenses, interest, Premiums, penalties or liability suffered by or incurred directly or indirectly in connection with and arising under the Fundamental Agreements by reason of the prepayment of the indebtedness evidenced by the Notes and secured, among other things, by the Indenture or by reason of the determination of the Purchase Price on the basis of a negotiated fair market value rather than on the basis of an appraisal. This section shall specifically survive for a period of one year following the closing contemplated herein and shall not be merged in the instruments of closing. This indemnity specifically excludes any claim for damages or loss made by USWFS or Owner Trustee based on any claim asserted by them that the Purchase Price did not represent fair market value and any loss, cost expense, interest, penalties or liability arising from or incurred directly or indirectly as a result of the tortious act of USWFS or Owner Trustee. Alumax shall be given prompt notice of any claim for indemnification made hereunder, and the exclusive right to assume the defense and/or settlement thereof with counsel of its own choosing. By entering into this indemnity, it is not the intent of the parties to expand or extend any obligation of indemnity owed by Alumax to any parties under the Fundamental Agreements except as expressly set forth herein. 8 9 B. Reference is made to Paragraph 2 above for certain terms and provisions of the Fundamental Agreements (including certain indemnification provisions) which are not to be terminated at the Closing. 7. Representations and Warranties. Fleet, Owner Trustee and Alumax represent and warrant to each other as follows: A. that it has the full power and authority to enter into this Agreement and that this Agreement constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms; B. that the person executing this Agreement has been duly authorized and empowered to execute and deliver this Agreement on behalf of such party; and C. that the execution, delivery and performance of this Agreement and action called for in furtherance of this Agreement or contemplated thereby do not and will not, to the best of such party's knowledge, violate, conflict with, or result in a breach of any of the terms of any indenture, agreement or instrument to which it is a party or by which it is bound, or constitute a default thereunder, and to the best of its knowledge do not and will not violate any law, rule, regulation, order, writ, judgement, injunction, decree, determination, or award presently in effect; and D. that no consent, approval or authorization of, or declaration, filing or registration with any (solely with respect to Fleet, Connecticut or Federal) regulatory authority is required to be made or obtained in connection with the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby; and E. that the execution, delivery and performance of this Agreement will not and do not violate any provision of any of the incorporation and other documents under which it is formed and organized; and 9 10 8. Closing. The closing ("Closing") shall be held at the offices of Alumax, 5655 Peachtree Parkway, Norcross, Georgia 30092 commencing at 9:00 a.m. on November 25, 1997 unless the parties shall otherwise agree in writing. The Closing shall be a physical closing with authorized representatives of each party present, and at the Closing all funds and documents shall be tendered and simultaneously exchanged. 9. Miscellaneous Covenants. A. Each party will bear its own costs and expenses under this Agreement, excepting that Alumax will pay the expenses of the Owner Trustee and the Indenture Trustee incurred by them in the proper execution of the obligations set forth in Sections 5C or as may otherwise be required by the transactions contemplated by this Agreement, including the reasonable fees and expenses of their counsel. B. The costs to record transfer of title, filing fees, transfer taxes, mortgage and lien release filing fees and other similar fees, if any, shall be paid by Alumax. C. The cost of obtaining any title insurance commitment or title insurance policy which Alumax may desire to obtain shall be paid by Alumax. D. Notices. Any notice required to be given hereunder shall be in writing and delivered by U.S. Postal Service, first class, postage prepaid addressed to the party as set forth herein or by any national next-day carrier . Notices shall be effective only upon receipt. If to Fleet or Owner Trustee: Fleet National Bank Corporate Trust Administration 777 Main Street Hartford, Connecticut 06115 10 11 With a copy to: U S WEST Financial Services, Inc. 6200 South Quebec Street Suite 350 Englewood, CO 80111 Attn: President And with a copy to: U S WEST, Inc. Law Department 7800 East Orchard Road Suite 480 Englewood, CO 80111 Attn: Senior Tax Counsel If to Alumax: Alumax Mill Products, Inc. c/o Alumax Inc. Law Department 5655 Peachtree Parkway Norcross, Georgia 30092-2812 10. Environmental Cooperation. Alumax covenants and agrees to reasonably cooperate with the owner Trustee and USWFS in connection with any reasonable environmental study, audit or report which the Owner Trustee or USWFS orders prior to the date of Closing with respect to the Site and/or the Facility. 11. Confidentiality. Except as required by law or as either party may reasonably determine is required to comply with regulatory or securities law or regulation disclosure requirements, Alumax, Fleet and Owner Trustee each covenant to the other that, without the other party's consent, (a) it will hold in strict confidence all documents and other information concerning the Facility and the Site, including, without limitation, the results of any inspections made by any party hereto, and the other party and the other party's business and properties, and (b) if the Closing should not occur, such confidence shall be maintained and all such documents and information (if in written form) shall, immediately after termination of this Agreement, be returned to the party originally furnishing same, and (c) neither Alumax, Fleet nor Owner Trustee, nor any of their affiliates will hold any press conference, issue any press release, record this Agreement or any other document containing any information concerning this Agreement or otherwise divulge the existence of this Agreement or the terms contained herein to any prospective purchaser, lender, investor or other third party or the public generally (except for their 11 12 respective current investors, consultants, brokers/dealers, confidential legal and accounting advisers and any prospective lenders providing financing for the Facility (provided that any and all communications with such lenders shall be private and confidential) and then only to the extent such terms are customarily disclosed to the applicable person in connection with transactions similar to the one contemplated hereby, and provided that any such investor, consultant, broker/dealer, legal and accounting advisors and lenders are informed of the confidentiality provisions of this section). Notwithstanding the foregoing, Alumax, Fleet and the Owner Trustee shall cooperate to develop a mutually acceptable joint statement to release to the press and public at or immediately after the Closing. This section shall specifically survive the Closing and shall not be merged into the instruments of closing. Notwithstanding the foregoing, the obligations of this section shall not apply to matters which are disclosed in the joint statement or are a matter of public record. 12. Disclaimer of Warranties and Representations -- "As Is -- Where Is." Except as stated in this Agreement, neither Fleet, Owner Trustee nor USWFS nor anyone acting for or on behalf of either of them has made any representation, statement, warranty or promise, either written or oral, concerning the Facility or the Site or the feasibility, desirability or adaptability thereof for any particular purpose. All matters other than those specifically addressed in this Agreement have been or shall be independently verified by Alumax, and except as otherwise provided herein, Alumax is purchasing the Facility and consummating the transaction described herein based on its own examination and inspection, in its "as is, where is" physical condition and state of repair, subject to all latent and patent defects. Alumax: hereby waives and the Owner Trustee, Fleet and USWFS hereby disclaim all warranties of any type or kind whatsoever with respect to the Facility and the Site except as expressly set forth in this Agreement. 13. Waiver and Release. Except to the extent caused by a breach of any of Fleet's or Owner Trustee's express representations set forth herein, Alumax, for Alumax and Alumax's successors and assigns, releases Fleet, the Owner Trustee, USWFS and their agents, employees, officers, directors, brokers, contractors and representatives from, and waives any and all causes of action or claims against any of such persons for (i) any and all liability attributable to any physical condition of or at the Facility or the Site, including, without limitation, the presence on, under or about the Facility or the Site of any dangerous, harmful or hazardous substances and materials; (ii) any and all liability resulting from the failure of the Facility or the Site to comply with any applicable laws, including, without limitation, any environmental law; and (iii) any liabilities, damages or injury arising from connected with or otherwise caused by statements, 12 13 opinions or information obtained from any of such persons with respect to the Facility or the Site. Further, each party hereto releases each other party hereto and waives any and all causes of action or claims based on the adequacy of the Purchase Price or, except as expressly set forth herein, on any statements or information, whether written or oral, provided by one party to the other with respect thereto. 14. ARBITRATION OF DISPUTES. ANY CLAIM, CONTROVERSY OR DISPUTE BETWEEN ALUMAX, FLEET, THE OWNER TRUSTEE, USWFS AND ALUMAX INC., OR ANY OF THEM, WHETHER SOUNDING IN CONTRACT, STATUTE, TORT, FRAUD, MISREPRESENTATION OR OTHER LEGAL THEORY, RELATED DIRECTLY TO THIS AGREEMENT, WHENEVER BROUGHT AND WHETHER BETWEEN THE PARTIES TO THIS AGREEMENT OR BETWEEN ONE OF THE PARTIES TO THIS AGREEMENT AND THE EMPLOYEES, AGENTS OR AFFILIATED BUSINESSES OF THE OTHER PARTY, SHALL BE RESOLVED BY ARBITRATION AS PRESCRIBED IN THIS SECTION UNLESS SUCH CLAIM, CONTROVERSY OR DISPUTE INVOLVES OTHER PARTIES FOR A PROPER AND COMPLETE RESOLUTION THEREOF AND ONE OR MORE SUCH OTHER PARTIES DOES NOT AGREE TO PARTICIPATE IN SUCH ARBITRATION. THE FEDERAL ARBITRATION ACT, 9 U.S.C. Sections 1-15, NOT STATE LAW, SHALL GOVERN THE ARBITRATION OF ALL SUCH CLAIMS. A SINGLE ARBITRATOR WHO IS A RETIRED FEDERAL OR NEW YORK JUDGE SHALL CONDUCT THE ARBITRATION UNDER THE THEN CURRENT RULES OF THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA"). THE ARBITRATOR SHALL BE SELECTED BY MUTUAL AGREEMENT OF THE PARTIES, OR IF THEY ARE UNABLE TO REACH AGREEMENT ON THE ARBITRATOR WITHIN THIRTY (30) DAYS OF WRITTEN NOTICE BY ONE PARTY TO THE OTHER INVOKING THIS ARBITRATION PROVISION, IN ACCORDANCE WITH AAA PROCEDURES FROM A LIST OF QUALIFIED PEOPLE MAINTAINED BY THE AAA. THE ARBITRATION SHALL BE CONDUCTED IN NEW YORK CITY, NEW YORK AND ALL EXPEDITED PROCEDURES PRESCRIBED BY THE AAA RULES SHALL APPLY. THERE SHALL BE NO DISCOVERY OTHER THAN THE EXCHANGE OF INFORMATION WHICH IS PROVIDED TO THE ARBITRATOR BY THE PARTIES. THE ARBITRATOR SHALL HAVE AUTHORITY ONLY TO GRANT SPECIFIC PERFORMANCE AND TO ORDER OTHER EQUITABLE RELIEF AND TO AWARD COMPENSATORY DAMAGES, BUT SHALL NOT HAVE THE AUTHORITY TO AWARD PUNITIVE DAMAGES OR OTHER NONCOMPENSATORY DAMAGES OR ANY OTHER FORM OF RELIEF. THE ARBITRATOR SHALL AWARD TO THE PREVAILING PARTY ITS REASONABLE ATTORNEYS' FEES AND COSTS AND OTHER EXPENSES INCURRED IN THE ARBITRATION, EXCEPT THE PARTIES SHALL SHARE EQUALLY THE FEES AND EXPENSES OF THE ARBITRATOR. THE ARBITRATOR'S DECISION AND AWARD SHALL BE FINAL AND BINDING, AND JUDGMENT ON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. IF ANY PARTY FILES A JUDICIAL OR ADMINISTRATIVE ACTION ASSERTING CLAIMS SUBJECT TO ARBITRATION AS PRESCRIBED HEREIN, AND ANOTHER PARTY SUCCESSFULLY STAYS SUCH ACTION OR COMPELS ARBITRATION 13 14 OF SAID CLAIMS, THE PARTY FILING SAID ACTION SHALL PAY THE OTHER PARTY'S COSTS AND EXPENSES INCURRED IN SEEKING SUCH STAY OR COMPELLING ARBITRATION, INCLUDING REASONABLE ATTORNEYS' FEES. 15. Miscellaneous Provisions. A. Applicable Law. This Agreement shall be construed in accordance with the laws of the State of New York. B. Business Day. If the date of the Closing is to occur on a holiday or other non-business day, or if any period of time set forth in this Agreement expires on a holiday or other non-business day, then such date of Closing or expiration date shall be on the following business day. C. Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither Alumax, Fleet nor owner Trustee shall have the right to assign their rights or obligations under this Agreement, in whole or in part, to any person or entity without the prior written consent of the other party, which consent shall not be unreasonably withheld. D. Captions and Headings. The captions and headings contained in this Agreement are for convenience only and are not a part of this Agreement. E. Construction of Agreement. The parties hereto acknowledge that they have each had the benefit of independent counsel with regard to this Agreement and that this Agreement has been prepared as a result of the joint efforts of the parties and their respective counsel. Accordingly, the parties agree that the provisions of this Agreement shall not be construed or interpreted for or against any part based upon authorship. F. Further Instruments. The parties agree to execute such further instruments as may be reasonably necessary in order to complete the transaction contemplated hereby in accordance with the terms, intent and purpose of this Agreement. G. Third Party Beneficiary. USWFS is a third party beneficiary of this Agreement and the 14 15 representations, warranties, indemnities, covenants and obligations of the parties set forth herein. H. Complete Agreement. This is the complete agreement between the parties as to the subject matter stated herein and any and all prior written and verbal negotiations and agreements are contained herein or are superseded by the terms of this Agreement. This Agreement may only be amended in a writing signed by all parties hereto. I. Trust Capacity of Fleet. This instrument is executed by Fleet, not in its individual capacity, except as specifically provided herein, but solely in its capacity as owner/trustee under an owner Trust Agreement dated November 25, 1986, for the benefit of USWFS (the successor by merger to U S WEST Capital Corporation). J. Guaranty by Alumax, Inc. This Agreement shall not be of any force or effect unless and until (a) it is fully executed by the parties hereto, and (b) the guaranty set forth below is executed by Alumax Inc. K. A material default by either party pursuant to the terms of the Facility Lease shall be deemed to constitute a default hereunder, and a material default hereunder by either of the parties shall be deemed to constitute a default under the Facility Lease. EXECUTED AND EFFECTIVE as of the 18th day of September, 1996. ALUMAX MILL PRODUCTS, INC. By: /s/ Lawrence B. Frost ---------------------------------- Name: LAWRENCE B. FROST -------------------------------- Title: Vice President ------------------------------- FLEET NATIONAL BANK not in its individual capacity, except as specifically provided herein, but solely in its capacity as Owner Trustee By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- 15 16 This instrument is executed by U S WEST Financial Services, Inc. ("USWFS") as successor by merger to U S WEST Capital Corporation, for the purpose of approving the above Facility Purchase Agreement and for the purpose of authorizing and instructing Fleet National Bank, as Owner Trustee USWFS, to execute the same in such capacity and to take any and all actions on behalf of USWFS that are required to be taken by the owner Trustee or the Lessor to give full effect to the exercise by Alumax of its option to purchase the Facility and to close said purchase. U S WEST Financial Services, Inc. By: /s/ Robert L. Hirsch ------------------------------ Name: Robert L. Hirsch ---------------------------- Title: VP --------------------------- Date: September 17, 1996 ---------------------------- FOR GOOD AND VALUABLE CONSIDERATION, the receipt, adequacy and sufficiency of which are hereby confessed and acknowledged, Alumax Inc. does hereby guarantee the prompt, full and faithful performance by Alumax Mill Products, Inc. of its obligations set forth in the above Facility Purchase Agreement. Executed as of the 19th day of September, 1996. Alumax Inc. By: /s/ Lawrence B. Frost ---------------------------------- Name: LAWRENCE B. FROST -------------------------------- Title: Senior Vice President ------------------------------- 17 SCHEDULE 1
===================================================================================================================== L/C Number Effect. Date Mat. Date Amount Beneficiary --------------------------------------------------------------------------------------------------------------------- SBY-502267 11/11/93 12/31/96 39,200,000.00 U S WEST Financial --------------------------------------------------------------------------------------------------------------------- 1269/Sl1085 11/09/93 01/20/97 3,883,109.09 Great American Life Ins. --------------------------------------------------------------------------------------------------------------------- 1269/S11086 11/09/93 01/20/97 2,329,865.45 Windsor Insurance Co. --------------------------------------------------------------------------------------------------------------------- 1269/S11088 11/09/93 01/20/97 2,329,865.45 Dixie Insurance Co. --------------------------------------------------------------------------------------------------------------------- 1269/S11113 11/09/93 01/31/97 1,718,664.08 American Life & Casualty --------------------------------------------------------------------------------------------------------------------- 1269/S11087 11/09/93 01/20/97 3,106,487.27 Stonewall-Insurance Co. --------------------------------------------------------------------------------------------------------------------- 9603061S287 3/18/96 12/30/96 47,816,683.00 State Street Bank by way of Assignment from Fleet =====================================================================================================================
EX-10.16 9 EMPLOYMENT AGREEMENT C. ALLEN BORN 1 EXHIBIT 10.16 ALUMAX INC. - -------------------------------------------------------------------------------- EMPLOYMENT AGREEMENT FOR C. ALLEN BORN - -------------------------------------------------------------------------------- As Amended and Restated as of December 5, 1996 2 ALUMAX INC. - -------------------------------------------------------------------------------- Employment Agreement for C. Allen Born - --------------------------------------------------------------------------------
Page ---- 1. Employment............................................................. 1 2. Period of Employment................................................... 1 (a) Duration Under Normal Circumstances........................... 1 (b) Termination Events............................................ 1 3. Duties During the Period of Employment................................. 2 4. Location of Employment................................................. 2 5. Current Cash Compensation.............................................. 2 6. Stock Options ......................................................... 2 (a) Grant ..................................................... 2 (b) Exercise Price................................................ 3 (c) Vesting....................................................... 3 (d) Term ..................................................... 3 (e) Exercise...................................................... 3 (f) Registration.................................................. 4 (g) Non-Transferability........................................... 4 7. Additional Stock Options............................................... 4 (a) Grant ..................................................... 4 (b) Exercise Price................................................ 4 (c) Vesting....................................................... 4 (d) Term ..................................................... 4 (e) Exercise...................................................... 5 (f) Registration.................................................. 5 (g) Non-Transferability........................................... 5 8. Stock Units ..................................................... 5 (a) Grant ..................................................... 5 (b) Vesting....................................................... 5 (c) Deferral of Payment........................................... 6 (d) Grantor Trust................................................. 6 (e) Dividends..................................................... 6 (f) Change in Control............................................. 6
3 ALUMAX INC. - -------------------------------------------------------------------------------- Employment Agreement for C. Allen Born - --------------------------------------------------------------------------------
Page ---- 9. Effect of Change in Common Stock....................................... 6 10. Employee Benefits...................................................... 7 (a) Vacation and Sick Leave....................................... 7 (b) Regular Reimbursed Business Expenses.......................... 7 (c) Employee Benefit Plans or Arrangements........................ 7 (d) Employer's Executive Compensation Plans....................... 7 (e) Financial and Tax Advice...................................... 7 11. Termination............................................................ 8 (a) Death or Retirement............................................. 8 (b) Disability...................................................... 9 (c) Voluntary Termination by Employee without Good Reason........... 10 (d) Voluntary Termination by Employee with Good Reason, or by Employer without Cause.................................... 10 (e) Termination by Employer with Cause ............................. 12 (f) Date of Payment................................................. 12 12. Definitions............................................................ 12 13. Excise Tax Gross-up.................................................... 17 14. Non-Competition and Non-Disclosure; Employee Cooperation............... 19 15. Governing Law; Disputes; Arbitration................................... 20 16. Notices................................................................ 20 17. Withholding............................................................ 21 18. Mitigation............................................................. 21 19. Successors; Binding Agreement.......................................... 21 20. Pension Credit and Additional Pension Credit........................... 21 21. Miscellaneous.......................................................... 22
4 EMPLOYMENT AGREEMENT AGREEMENT, effective as of November 15, 1993, by and between Alumax Inc., a Delaware corporation ("Employer"), and C. Allen Born, an individual ("Employee"), as amended and restated as of December 5, 1996. WHEREAS, Employer and Employee entered into an employment agreement executed and effective as of November 15, 1993 (the "Agreement"); and WHEREAS, Employer and Employee previously amended the Employment Agreement by an Agreement dated March 11, 1994; and WHEREAS, Employer and Employee wish to further amend the Employment Agreement and in connection therewith to restate the Employment Agreement in its entirety; and WHEREAS, such amendment and restatement of the Employment Agreement was approved by the Human Resources and Compensation Committee of the Board of Directors of Employer at a meeting held on December 5, 1996. IN CONSIDERATION OF the mutual covenants herein contained, and other good and valuable consideration, the parties hereto agree as follows: 1. Employment. Employer hereby agrees to employ Employee, and Employee agrees to serve, as Chairman of the Board of Directors and Chief Executive Officer of Employer, during the Period of Employment as defined in Section 2. 2. Period of Employment (a) Duration Under Normal Circumstances. The "Period of Employment" shall be the six-year period commencing November 15, 1993 (the "Commencement Date"), and ending on December 31, 1999. (b) Termination Events. Notwithstanding anything in this Section 2 to the contrary, the Period of Employment shall terminate upon the earliest to occur of the following: (i) the retirement of Employee upon or after reaching age 65; (ii) the retirement of Employee, with the consent of Employer, prior to reaching age 65; (iii) the Disability (as defined in Section 12) of Employee and the expiration of the 30-day period referred to in the definition of Disability without the actions referred to therein being taken by Employee; (iv) the death of Employee; (v) the 90th day after service of notice by Employee to Employer, in accordance with the provisions of Section 16, that Employee elects to terminate the Period of Employment (a "voluntary termination by Employee"); and 5 (vi) the 90th day after service of notice by Employer to Employee, in accordance with the provisions of Section 16, that Employer elects to terminate the Period of Employment (a "voluntary termination by Employer"), other than a termination by Employer with Cause (in which event the Period of Employment shall promptly terminate upon service of such notice). 3. Duties During the Period of Employment. Employee shall devote his full business time, attention and best efforts to the affairs of Employer and its subsidiaries during the Period of Employment and shall have such duties, responsibilities and authority as shall be consistent with the position and title of Chairman of the Board of Directors and Chief Executive Officer. Employee may engage in other activities, such as activities involving charitable, educational, religious and similar types of organizations (all of which are deemed to benefit Employer), speaking engagements, and similar type activities, and may serve on the board of directors of other corporations approved by the Board of Directors of Employer, in each case to the extent that such other activities do not materially detract from or limit the performance of his duties under this Agreement, or inhibit or conflict in any material way with the business of Employer and its subsidiaries. In addition, until November 15, 1996, Employee may serve as Co-Chairman of Cyprus AMAX Minerals Company on such terms and conditions as the Board of Directors of Cyprus AMAX Minerals Company and the Board of Directors of Employer may specify and may thereafter serve on the Board of Directors of Cyprus AMAX Minerals Company. 4. Location of Employment. (a) During the Period of Employment, Employer may only require Employee to be based in or within 45 miles of Norcross, Georgia, except that Employer may require Employee to be based more than 45 miles from Norcross, Georgia if the relocation is to a principal executive office of Employer. (b) The Employer shall pay to, or reimburse Employee for, on an after-tax basis, all reasonable expenses of relocation incurred and substantiated by Employee in connection with the Employee's relocation from his current principal residence to Georgia as well as any subsequent principal residence relocation. In addition, the Employer shall indemnify Employee, on an after-tax basis, against any loss actually realized on the sale of Employee's principal residence within twelve months of such relocation if Employee has reasonably cooperated with Employer in connection with such sale. 5. Current Cash Compensation. Employer shall pay to Employee during the Period of Employment a base annual salary of not less than $750,000 until January 1, 1996, and thereafter not less than $800,000 (or such greater amount as may have been approved by the Board of Directors or the Committee in its sole discretion), payable in substantially equal monthly installments during each calendar year, or portion thereof, of the Period of Employment; provided, however, that Employer agrees to review such base annual salary annually and in light of such review may, in the sole discretion of the Board of Directors of Employer or the Committee, increase such salary, taking into account such factors as it deems pertinent. 6. Stock Options (a) Grant. Immediately following the Commencement Date and the end of the 120-Day Period (as defined in Section 12), Employer shall grant to Employee non-qualified - 2 - 6 stock options (the "Options") to acquire shares of common stock, par value of $.01 per share, of Employer ("Common Stock"), in an aggregate amount equal to 625,000 shares multiplied by a fraction, the numerator of which is 20.125, and the denominator of which is the 120-Day Average Price (as defined in Section 12). Employer and Employee agree that the number of shares of Common Stock subject to the Options and any other options granted or to be granted by Employer to Employee under the Alumax Inc. 1993 Long Term Incentive Plan during any period of five consecutive years following the Commencement Date shall not exceed 1,500,000 shares. (b) Exercise Price. The exercise per share price of each of the Options (the "Exercise Price") shall be equal to the 120-Day Average Price. (c) Vesting. The Options shall vest at the rate of 20% per year on each of the first five anniversary dates of the Commencement Date; provided, however, that (i) Options that have not previously vested shall vest immediately, and all restrictions and risks of forfeiture shall lapse, upon (A) the death or Disability (as defined in Section 12) of Employee, (B) Employee's retirement on or after age 65, (C) Employee's retirement on or after age 62 but before age 65, if Employer's Board of Directors, in its sole discretion and without taking into account any vote of Employee, approves the immediate vesting of such Options upon such retirement, (D) termination of Employee's employment by Employer without Cause (as defined in Section 12), or by Employee with Good Reason (as defined in Section 12), or (E) a Change in Control (as defined in Section 12), and (ii) Options that have not previously vested shall not vest, and shall be immediately forfeited by Employee, upon (X) Employee's retirement before age 65 unless Employer's Board of Directors, in its sole discretion and without taking into account any vote of Employee, approves the immediate (or future) vesting of such Options upon any such retirement on or after age 62, or (Y) termination of Employee's employment by Employer with Cause or by Employee other than with Good Reason. (d) Term. Vested Options may be exercised only within the first ten years after the date of grant. (e) Exercise. Except as described below, an Option that is vested may be exercised only by: (i) written notice of intent to exercise the Option and (ii) payment or deemed payment of the Exercise Price to Employer (contemporaneously with delivery of such notice) in cash or Common Stock of equivalent Fair Market Value. In its sole discretion the Committee may permit the Exercise Price to be paid in the form of awards issued under the Employer's compensation plans, or other property (including notes or other contractual obligations of the Employee to make payment on a deferred basis, such as through "cashless exercise" arrangements, to the extent permitted by applicable law). Common Stock utilized in full or partial payment of the Exercise Price shall be valued at its Fair Market Value (as defined in Section 12) on the date of exercise. In the event of a Change in Control, the Employee shall be entitled to elect, during the 60-day period immediately following such Change in Control, in lieu of acquiring the shares of Common Stock covered by the Options, to receive, and the Employer shall be obligated to pay, the Change in Control Settlement Value (as defined in Section 8(c) of the Alumax Inc. 1993 - 3 - 7 Long Term Incentive Plan) with respect to shares of Common Stock up to the number of shares covered by the Options, which amount shall be paid in cash. (f) Registration. Employee shall sell shares of Common Stock acquired upon the exercise of Options only pursuant to an effective registration statement covering such sale or to an exemption from registration under the Securities Act of 1933, as amended. (g) Non-Transferability. The Options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution. An Option may be exercised, during the lifetime of Employee, only by Employee or his guardian or legal representative. 7. Additional Stock Options (a) Grant. In connection with the amendment and restatement of this Agreement and the related extension of the Period of Employment, Employer shall grant to Employee non-qualified stock options (the "Additional Options") to acquire shares of Common Stock in an aggregate amount equal to 687,800 shares. Employer and Employee agree that the number of shares of Common Stock subject to the Additional Options and any other options granted or to be granted by Employer to Employee under the Alumax Inc. 1993 Long Term Incentive Plan during any period of five consecutive years shall not exceed 900,000 shares. (b) Exercise Price. The exercise price per share of each of the Additional Options (the "Exercise Price") shall be (i) with respect to 229,267 shares, the closing sale price of the Common Stock reported on the Composite Tape for securities listed on the New York Stock Exchange in The Wall Street Journal for December 5, 1996, or if no Common Stock was traded on that date, on the next preceding day on which there was such a trade (the "Basic Exercise Price"); (ii) with respect to 229,267 shares, the Basic Exercise Price plus $4.00; and (iii) with respect to the remaining 229,266 shares, the Basic Exercise Price plus $8.00. (c) Vesting. The Additional Options shall vest as follows: (i) the 229,267 shares exercisable at the Basic Exercise Price on November 15, 1997; the 229,267 shares exercisable at the Basic Exercise Price plus $4.00 on November 15, 1998; and the remaining 229,266 shares on November 15, 1999; provided, however, that (i) Additional Options that have not previously vested shall vest immediately, and all restrictions and risks of forfeiture shall lapse, upon (A) the death or Disability (as defined in Section 12) of Employee, (B) termination of Employee's employment by Employer without Cause (as defined in Section 12), or by Employee with Good Reason (as defined in Section 12), or (C) a Change in Control (as defined in Section 12), and (ii) Additional Options that have not previously vested shall not vest, and shall be immediately forfeited by Employee, upon (X) Employee's retirement before December 31, 1999 unless Employer's Board of Directors, in its sole discretion and without taking into account any vote of Employee, approves the immediate (or future) vesting of such Additional Options upon any such retirement, or (Y) termination of Employee's employment by Employer with Cause or by Employee other than with Good Reason. (d) Term. Vested Additional Options may be exercised only within the first six years after the date of grant. - 4 - 8 (e) Exercise. Except as described below, an Additional Option that is vested may be exercised only by: (i) written notice of intent to exercise the Additional Option and (ii) payment or deemed payment of the Exercise Price to Employer (contemporaneously with delivery of such notice) in cash or Common Stock of equivalent Fair Market Value. In its sole discretion the Committee may permit the Exercise Price to be paid in the form of awards issued under the Employer's compensation plans, or other property (including notes or other contractual obligations of the Employee to make payment on a deferred basis, such as through "cashless exercise" arrangements, to the extent permitted by applicable law). Common Stock utilized in full or partial payment of the Exercise Price shall be valued at its Fair Market Value (as defined in Section 12) on the date of exercise. In the event of a Change in Control, the Employee shall be entitled to elect, during the 60-day period immediately following such Change in Control, in lieu of acquiring the shares of Common Stock covered by the Additional Options, to receive, and the Employer shall be obligated to pay, the Change in Control Settlement Value (as defined in Section 8(c) of the Alumax Inc. 1993 Long Term Incentive Plan) with respect to shares of Common Stock up to the number of shares covered by the Additional Options, which amount shall be paid in cash. (f) Registration. Employee shall sell shares of Common Stock acquired upon the exercise of Additional Options only pursuant to an effective registration statement covering such sale or to an exemption from registration under the Securities Act of 1933, as amended. (g) Non-Transferability. Except as permitted under the Alumax Inc. Long Term Incentive Plan, the Additional Options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution and may only be exercised, during the lifetime of Employee, only by Employee or his guardian or legal representative. 8. Stock Units (a) Grant. Immediately following the Commencement Date and the end of the 120-Day Period, Employer shall grant to Employee units of compensation (the "Units") each of which shall represent the right to receive compensation paid in the form of one share of Common Stock and the aggregate number of which shall equal $2,684,000 divided by the 120-Day Average Price. (b) Vesting. The Units shall vest at the rate of 20% per year on each of the first five anniversary dates of the Commencement Date; provided, however, that (i) Units that have not previously vested shall vest immediately, and all restrictions and risks of forfeiture shall lapse, upon: (A) the death or Disability of Employee; (B) Employee's retirement on or after age 65;(C) Employee's retirement on or after age 62 but before age 65 if Employer's Board of Directors, in its sole discretion and without taking into account any vote of Employee, approves the immediate vesting of such Units upon such retirement; (D) termination of Employee's employment by Employer without Cause or by Employee with Good Reason; or (E) a Change in Control, and (ii) Units that have not previously vested shall not vest, and shall be immediately forfeited by Employee, upon: (X) Employee's - 5 - 9 retirement before age 65 unless Employer's Board of Directors, in its sole discretion and without taking into account any vote of Employee, approves the immediate (or future) vesting of such Units upon any such retirement on or after age 62; or (Y) termination of Employee's employment by Employer with Cause or by Employee other than with Good Reason. (c) Deferral of Payment. By the end of each calendar year immediately preceding the calendar year in which any portion of the Units are scheduled to vest in accordance with Section 8(b) above, Employee shall file with Employer a written election form in which Employee shall elect the date or dates on which the vested proceeds (including shares of Common Stock) of the Grantor Trust established in accordance with Section 8(d) below shall be paid out to Employee. (d) Grantor Trust. Employer shall establish a trust (the "Trust") pursuant to a grantor trust agreement substantially in the same form as Annex A hereto (the "Trust Agreement"). The purpose of the Trust shall be to hold the shares of Common Stock to meet the Employer's obligation with respect to the grant of Units hereunder. The trustee may be authorized to dispose of trust assets (including shares of Common Stock) and reinvest proceeds in alternative investments, subject to such terms and conditions as specified in the Trust Agreement and in accordance with applicable law. Immediately following the end of the 120-Day Period, Employer shall transfer to the Trust shares of Common Stock (the "Shares") in an aggregate number equal to $2,684,000 divided by the 120-Day Average Price. Employer shall direct the trustee of the Trust to deliver Shares (and any income earned thereon held by the Trust) corresponding to Units which have vested in accordance with Section 8(b) above to Employee as soon as practicable after the date of vesting; provided, however, in the event the Employee elects to defer payment of vested proceeds (including Shares) beyond the date of vesting pursuant to Section 8(c) above, Employer shall direct the trustee to deliver proceeds on the dates elected by the Employee pursuant to Section 8(c) above, or, if earlier, on a Change in Control. (e) Dividends. Dividends payable on Shares held in the Trust shall be paid to the Trust. (f) Change in Control. In the event of a Change in Control (as defined in Section 12), the Employee shall be entitled to elect, during the 60-day period immediately following such Change in Control, to surrender Shares to the Employer and receive, in full settlement thereof, and the Employer shall be obligated to pay in cash, the Change in Control Stock Value (as defined in Section 8(b) of the Alumax Inc. 1993 Long Term Incentive Plan) with respect to the number of Shares surrendered. 9. Effect of Change in Common Stock. In the event that the outstanding shares of Common Stock shall be changed into or exchanged for a different number or kind of shares of stock of Employer or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, stock dividend, split-up, combination of shares, or otherwise), or in the event of any extraordinary cash dividend, spin-off, distribution of assets (including stock of another corporation), or any other action not in the ordinary course of business that has a material effect on the equity represented by outstanding shares of Common Stock, appropriate adjustments, if any, as determined by the Board of Directors of Employer or, at Employee's election, an investment banking firm mutually acceptable to Employer and Employee, shall be made in the number, kind, or exercise price of the Options, the Additional Options and the Shares. - 6 - 10 10. Employee Benefits (a) Vacation and Sick Leave. Employee shall be entitled to five weeks paid annual vacation, all paid Employer holidays and reasonable sick leave. (b) Regular Reimbursed Business Expenses. Employer shall reimburse Employee for all expenses and disbursements reasonably incurred and substantiated by Employee in the performance of his duties during the Period of Employment. (c) Employee Benefit Plans or Arrangements. In addition to the cash compensation provided for in Section 5 hereof, Employee, subject to meeting eligibility requirements and to the provisions of this Agreement, shall be entitled to participate without discrimination or duplication in all employee (including executive) benefit plans of Employer, as presently in effect or as they may be modified or added to by Employer from time to time, to the extent such plans are available to other similarly situated executives or employees of Employer, including, without limitation, plans providing retirement benefits, medical insurance, life insurance, disability insurance, and accidental death or dismemberment insurance. (d) Employer's Executive Compensation Plans. In addition to the cash compensation provided for in Section 5 hereof and the employee benefits of Employer provided for in paragraph (c) of this Section 10, Employee, subject to meeting eligibility requirements and to the provisions of this Agreement, shall be entitled to participate without discrimination or duplication in all executive compensation plans of Employer, as presently in effect or as they may be modified or added to by Employer from time to time, to the extent such plans are available to similarly situated executives or employees of Employer, including, without limitation, the Alumax Inc. 1993 Annual Incentive Plan and the Alumax Inc. 1993 Long Term Incentive Plan (as the same may be modified, replaced, or added to by Employer from time to time), and other stock option plans, performance share plans, management incentive plans, deferred compensation plans, and supplemental retirement plans; provided that such compensation plans and programs, in the aggregate, shall provide Employee with benefits and compensation and incentive reward opportunities substantially no less favorable than those provided by Employer for Employee under such plans and programs as in effect on the date of this Agreement; and provided further that Employer may take into account Employee's retirement in structuring his awards under the executive compensation plans. (e) Financial and Tax Advice. During (i) the Period of Employment, (ii) the 12-month period following the termination of the Period of Employment as a result of death or Disability, and (iii) the three-year period following the voluntary termination by Employee with Good Reason (as defined in Section 12) or the voluntary termination by Employer without Cause (as defined in Section 12), or such shorter period provided in Section 11, Employer shall provide Employee (or, if Employee shall have died, his estate) at Employer's expense, third-party professional financial and tax advisory services, primarily oriented to planning in light of Employee's entitlement to compensation and employee benefits and appropriate in light of the financial circumstances of Employee (or his estate). - 7 - 11 11. Termination (a) Death or Retirement. If the Period of Employment terminates pursuant to paragraph (b) of Section 2 as a result of (1) the death of Employee, (2) the retirement of Employee upon or after reaching age 65, or (3) the retirement of Employee, with the consent of Employer, prior to reaching age 65, Employee (or Employee's estate) will be entitled to receive only: (i) the base salary otherwise payable under Section 5 through the end of the month in which Employee's employment is terminated, together with salary, compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to Employee; (ii) a prorated portion of the award to Employee for the year of termination under the Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by Employer from time to time, assuming all applicable targets for the year of termination had been met, with such award prorated based on the number of days during the year of Employee's termination which precede such termination; (iii) the PARS or other Performance Awards to the Employee for the Performance Periods in progress as of the date of termination under the Alumax Inc. 1993 Long Term Incentive Plan, as the same may be modified, replaced or added to by Employer from time to time, assuming all applicable Performance Objectives for such Performance Periods had been met, with such PARS or other Performance Awards payable in shares of common stock or cash as determined by the Committee administering such Plan in its discretion and any unvested outstanding PARS not earned during completed Performance Periods will be fully vested and payable in shares of common stock or cash as determined by the Committee administering such Plan in its discretion; (iv) such other awards or bonuses as the Board of Directors may in its sole discretion determine; (v) during the 12-month period following the termination of Employee's employment as a result of the death of Employee, maintenance in effect for the continued benefit of Employee's dependents of all insured and self-insured employee medical and dental benefit plans in which Employee was participating immediately prior to termination provided that such continued participation is possible under the general terms and conditions of such plans (and any applicable funding media) and Employee's dependents continue to pay an amount equal to the Employee's regular contribution for such participation; (vi) during the 12-month period following the termination of Employee's employment as a result of the death of Employee, the financial and tax advice set forth in paragraph (e) of Section 10; and (vii) such other compensation and benefits, if any, as shall be determined to be applicable in accordance with Employer's plans and practices as in effect on the date of termination. - 8 - 12 (b) Disability. If the Period of Employment terminates pursuant to paragraph (b) of Section 2 as a result of Disability, Employee will be entitled to receive only: (i) the base salary otherwise payable under Section 5 through the end of the month in which Employee's employment is terminated, together with salary, compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to Employee; (ii) each month during the 12-month period following the month in which Employee's employment is terminated, the excess of (1) base annual salary at the rate in effect under Section 5 on the date of termination, over (2) the amount, if any, payable to Employee under Employer's disability plan(s) or other arrangements for disability compensation; (iii) a prorated portion of the award to Employee for the year of termination under the Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by Employer from time to time, assuming all applicable targets for the year of termination had been met, with such award prorated based on the number of days during the year of Employee's termination which precede such termination; (iv) the PARS or other Performance Awards to Employee for the Performance Periods in progress as of the date of termination under the Alumax Inc. 1993 Long Term Incentive Plan, as the same may be modified, replaced or added to by Employer from time to time, assuming all applicable Performance Objectives for such Performance Periods had been met, with such PARS or other Performance Awards payable in shares of common stock or cash as determined by the Committee administering such Plan in its discretion, and any unvested outstanding PARS not earned during completed Performance Periods will be fully vested and payable in shares of common stock or cash as determined by the Committee administering such Plan in its discretion; (v) term life insurance coverage at the expense of Employer for the period from the date of termination of Employee's employment to December 31, 1999 in a face amount equal to the coverage maintained for Employee under then-existing Employer benefit plans for which Employee shall have the right to designate the beneficiaries, such coverage to be maintained in the face amount which would from time to time be applicable under such plans, provided such coverage may be discontinued if at any time Employee accepts full time employment with another employer; (vi) during the 12-month period following the termination of Employee's employment (or, if shorter, during the period until the commencement of equivalent benefits from a new employer), the financial and tax advice set forth in paragraph (e) of Section 10; and (vii) such other compensation and benefits, if any, as shall be determined to be applicable in accordance with Employer's plans and practices as in effect on the date of termination. - 9 - 13 (c) Voluntary Termination by Employee without Good Reason. If the Period of Employment terminates pursuant to paragraph (b) of Section 2 as a result of a voluntary termination by Employee without Good Reason, Employee will be entitled to receive only: (i) the base salary otherwise payable under Section 5 through the day on which Employee's employment is terminated, together with salary, compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to Employee; (ii) to the extent possible, the opportunity to convert group and individual life insurance and disability insurance policies of Employer then in effect for Employee to individual policies of Employee upon the same terms as similarly situated employees of Employer may apply for such conversions; and (iii) such other compensation and benefits, if any, as shall be determined to be applicable in accordance with Employer's plans and practices in effect on the date of termination. (d) Voluntary Termination by Employee with Good Reason or by Employer without Cause. If the Period of Employment terminates pursuant to paragraph (b) of Section 2 as a result of a voluntary termination by Employee with Good Reason, or a voluntary termination by Employer without Cause, then Employee will be entitled to receive only: (i) the base salary otherwise payable under Section 5 through the end of the month in which Employee's employment is terminated, together with salary, compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to the Employee; (ii) a prorated portion of the award to Employee for the year of termination under the Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by Employer from time to time, assuming all applicable targets for the year of termination had been met, with such award prorated based on the number of days during the year of Employee's termination which precede such termination; (iii) the PARS or other Performance Awards to Employee for the Performance Periods in progress as of the date of termination under the Alumax Inc. 1993 Long Term Incentive Plan, as the same may be modified, replaced or added to by Employer from time to time, assuming all applicable Performance Objectives for such Performance Periods had been met, with such PARS or other Performance Awards payable in shares of common stock or cash as determined by the Committee administering such Plan in its discretion, and any unvested outstanding PARS not earned during completed Performance Periods will be fully vested and payable in shares of common stock or cash as determined by the Committee administering such Plan in its discretion; (iv) a lump-sum severance payment in an amount equal to the product of (A) the base annual salary at the rate in effect under Section 5 on the date of termination plus the award to Employee for the year of termination under the Alumax - 10 - 14 Inc. 1993 Annual Incentive Plan, as the same may be modified, replaced or added to by Employer from time to time, assuming all applicable targets for the year of termination had been met, multiplied by (B) a multiplier equal to the number of full and fractional years remaining between the date of termination and December 31, 1999; provided that the payment made pursuant to this paragraph (iv) shall be repaid by Employee in the event Employee violates in any material respect the provisions of Section 14 hereof; (v) maintenance in effect for the continued benefit of Employee and his dependents for a period terminating on the earlier of (A) December 31, 1999 or (B) the commencement of equivalent benefits from a new employer of: (A) all insured and self-insured medical and dental benefit plans in which Employee was participating immediately prior to termination, provided that Employee's continued participation is possible under the general terms and conditions of such plans (and any applicable funding media) and Employee continues to pay an amount equal to Employee's regular contribution for such participation; and (B) the group and individual life insurance and disability insurance policies of Employer then in effect for Employee; provided, however, that if Employer so elects, or if such continued participation is not possible under the general terms and conditions of such plans or under such policies, Employer shall, in lieu of the foregoing, arrange to have issued for the benefit of Employee and Employee's dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those described in this paragraph (v), or, if such insurance is not available at a reasonable cost to Employer, Employer shall otherwise provide Employee and Employee's dependents equivalent benefits (on an after-tax basis); provided further that, in no event shall Employee be required to pay any premiums or other charges in an amount greater than that which Employee would have paid in order to participate in Employer's plans and policies; (vi) for a period terminating on the earlier of (A) three years after the date of termination of employment or (B) the commencement of equivalent benefits from a new employer, the financial and tax advice set forth in paragraph (e) of Section 10; (vii) for a period terminating one year after the date of termination of employment, the benefits equivalent on an after-tax basis to the additional benefits Employee would have received under the employee benefit and executive compensation plans, whether or not qualified for federal income tax purposes (including, without limitation, all qualified and non-qualified retirement plans, pension plans, profit-sharing and other defined contribution plans and excess benefit plans, but specifically excluding incentive compensation, stock option and performance share plans) in which Employee was participating immediately prior to termination, as if Employee had received credit under such plans for service and age with Employer during such period following Employee's termination, with such benefits - 11 - 15 payable by Employer at the same times and in the same manner as such benefits would have been received by Employee under such plans; and (viii) such other compensation and benefits, if any, as shall be determined to be applicable in accordance with Employer's plans and practices in effect on the date of termination. (e) Termination by Employer with Cause. If the Period of Employment terminates pursuant to paragraph (b) of Section 2 as a result of a voluntary termination by Employer with Cause, Employee will be entitled to receive only: (i) the base salary otherwise payable under Section 5 through the day on which Employee's employment is terminated, together with salary, compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to Employee; (ii) maintenance in effect for the continued benefit of Employee and his dependents for a period terminating three months after the date of termination (or, if earlier, the commencement date of equivalent benefits from a new employer), of all insured and self-insured medical and dental benefit plans in which Employee was participating immediately prior to termination provided that Employee's continued participation is possible under the general terms and conditions of such plans (and any applicable funding media) and Employee continues to pay an amount equal to Employee's regular contribution for such participation; and (iii) such other compensation and benefits, if any, as shall be determined to be applicable under the circumstances in accordance with Employer's plans and practices in effect on the date of termination. (f) Date of Payment. Except as otherwise provided herein, all cash payments and lump-sum awards required to be made pursuant to the provisions of paragraphs (a) through (e) of this Section 11 shall be made no later than the fifteenth day following the date of Employee's termination. 12. Definitions. For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below: "Beneficial Owner," with respect to any securities, shall mean any person who, directly or indirectly, has or shares the right to vote or dispose of such securities or otherwise has "beneficial ownership" of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on the date of this Agreement) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that (i) a person shall not be deemed the Beneficial Owner of any security as a result of any agreement, arrangement or understanding to vote such security (x) arising solely from a revocable proxy or consent solicited pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder or (y) made in connection with, or otherwise to participate in, a proxy or consent solicitation made, or to be made, pursuant to, and in accordance with, the applicable provisions of the Exchange Act and the rules and regulations thereunder, in either case described in - 12 - 16 clause (x) or clause (y) above whether or not such agreement, arrangement or understanding is also then reportable by such person on Schedule 13D under the Exchange Act (or any comparable or successor report), and (ii) a person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of any securities acquired through such person's participation in good faith in a firm commitment underwriting until the expiration of forty days after the date of such acquisition. "Cause" shall mean (i) the willful engaging by Employee in conduct which is not authorized by the Board of Directors of Employer or within the normal course of Employee's business decisions and is known by Employee to be materially detrimental to the best interests of Employer or any of its subsidiaries, (ii) the willful engaging by Employee in conduct which Employee knows is, or has substantial reason to believe to be, illegal to the extent of a felony violation, or the equivalent seriousness under laws other than those of the United States, and which has effects on Employer or Employee materially injurious to Employer, (iii) the engaging by Employee in any willful and conscious act of serious dishonesty, in each case which the Board of Directors of Employer reasonably determines affects adversely, or could in the future affect adversely, the value, reliability or performance of Employee to Employer in a material manner, (iv) the willful and continued failure by Employee to perform substantially his duties to Employer under this Agreement (including any sustained and unexcused absence of Employee from the performance of his duties under this Agreement, which absence has not been certified in writing as due to physical or mental illness in accordance with the procedures set forth in this Section 9 under "Disability"), after a written demand for substantial performance has been delivered to Employee by the Board of Directors specifically identifying the manner in which Employee has failed to substantially perform his duties, or (v) the sustained and unexcused absence of Employee from the performance of his duties under this Agreement for a period of 180 days or more within a period of 365 consecutive days, regardless of the reason for such absence, unless Employee demonstrates that such absence is due to Disability. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors of Employer or based upon the advice of counsel for Employer shall be conclusively presumed to be done, or omitted to be done, in good faith and in the best interests of Employer, and shall not be deemed to constitute Cause under subdivisions (ii) or (iii) of this definition. Notwithstanding the foregoing, there shall not be deemed to be a voluntary termination by Employer with Cause unless and until there shall have been delivered to Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors of Employer at a meeting of such Board held after reasonable notice to Employee and at which Employee has an opportunity, together with his counsel, to be heard before such Board, finding that, in the good faith opinion of such Board, Employee was guilty of the conduct set forth above and specifying the particulars thereof in detail. "Change in Control" shall mean the satisfaction of one or more of the following conditions: (i) any person is or becomes the Beneficial Owner, directly or indirectly, of securities of Employer representing 20 percent or more of the combined voting power of Employer's then-outstanding securities (a "20% Beneficial Owner"); provided, however, that (a) the term "20% Beneficial Owner" shall not include any Beneficial Owner who has crossed such 20 percent threshold solely as a result of an acquisition of securities directly from Employer, or solely as a result of an - 13 - 17 acquisition by Employer of Employer securities, until such time thereafter as such person acquires additional voting securities other than directly from Employer and, after giving effect to such acquisition, such person would constitute a 20% Beneficial Owner; and (b) with respect to any person eligible to file a Schedule 13G pursuant to Rule 13d-l(b)(1) under the Exchange Act with respect to Employer securities (an "Institutional Investor"), there shall be excluded from the number of securities deemed to be beneficially owned by such person a number of securities representing not more than 10 percent of the combined voting power of Employer's then-outstanding securities; (ii) during any period of two consecutive years beginning after the commencement of the Period of Employment, individuals who at the beginning of such period constitute the Board of Directors of Employer together with those individuals who first become Directors during such period (other than by reason of an agreement with Employer in settlement of a proxy contest for the election of directors) and whose election or nomination for election to the Board was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved (the "Continuing Directors"), cease for any reason to constitute a majority of the Board of Directors of Employer; (iii) the stockholders of Employer approve a merger, consolidation, recapitalization or reorganization of Employer, or a reverse stock split of any class of voting securities of Employer, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of Employer or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together owned at least 75% of the combined voting power of the voting securities of Employer outstanding immediately prior to such transaction, with the relative voting power of each such continuing holder compared to the voting power of each other continuing holder not substantially altered as a result of the transaction; provided that, for purposes of this paragraph (iii), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 75% threshold (or to preserve such relative voting power) is due solely to the acquisition of voting securities by an employee benefit plan of Employer or such surviving entity or of any subsidiary of Employer or such surviving entity; (iv) the stockholders of Employer approve a plan of complete liquidation or dissolution of Employer or an agreement for the sale or disposition of all or substantially all the assets of Employer; or (v) any other event which the Board of Directors of Employer (not taking into account any vote of Employee) determines shall constitute a Change in Control for purposes of this Agreement; provided, however, that a Change in Control shall not be deemed to have occurred if any of the following conditions (each, an "exception") is satisfied: (1) Unless a majority of the Continuing Directors of Employer (not taking into account any vote of Employee) determines that for purposes - 14 - 18 of any or all of the provisions of this Agreement the exception set forth in this paragraph (1) shall not apply, none of the foregoing conditions would have been satisfied but for one or more of the following persons acquiring or otherwise becoming the Beneficial Owner of securities of Employer: (A) any person who has entered into a binding agreement with Employer, which agreement has been approved by two-thirds (2/3) of the Continuing Directors, limiting the acquisition of additional voting securities by such person, the solicitation of proxies by such person or proposals by such person concerning a business combination with Employer (a "Standstill Agreement"); (B) any employee benefit plan, or trustee or other fiduciary thereof, maintained by Employer or any subsidiary of Employer; (C) any subsidiary of Employer; or (D) Employer. (2) Unless a majority of the Continuing Directors of Employer (not taking into account any vote of Employee) determines that for purposes of any or all of the provisions of this Agreement the exception set forth in this paragraph (2) shall not apply, none of the foregoing conditions would have been satisfied but for the acquisition by Employer of another entity (whether by merger or consolidation, the acquisition of stock or assets, or otherwise) in exchange, in whole or in part, for securities of Employer, provided that, immediately following such acquisition, the Continuing Directors constitute a majority of the Board of Directors of Employer, or a majority of the board of directors of any other surviving entity, and, in either case, no agreement, arrangement or understanding exists at that time which would cause such Continuing Directors to cease thereafter to constitute a majority of the Board of Directors or of such other board of directors. (3) Unless a majority of the Continuing Directors of Employer (not taking into account any vote of Employee) determines that for purposes of any or all of the provisions of this Agreement the exception set forth in this paragraph (3) shall not apply, none of the foregoing conditions would have been satisfied but for Employee, or a person in which Employee has a one-half of one percent (0.5%) or greater equity interest, either singly or acting in concert with one or more other persons, becoming a 20% Beneficial Owner. (4) Employee determines that, for purposes of any or all of the provisions of this Agreement, none of the foregoing conditions shall be deemed to have been satisfied. (5) A majority of the Continuing Directors (not taking into account any vote of Employee) determines that a Change of Control shall not be deemed to have occurred. "Committee" shall mean the Human Resources and Compensation Committee of the Employer's Board of Directors. "Disability" shall mean the absence of Employee from his duties with Employer on a full-time basis for one hundred eighty (180) days within any period of three hundred and sixty-five (365) consecutive days as a result of Employee's incapacity due to physical or mental illness as certified - 15 - 19 in writing by a physician selected by Employee and reasonably acceptable to Employer (it being understood that such physician shall be deemed to be reasonably acceptable to Employer if, within a period of fifteen (15) days after Employee notifies Employer of the name of such physician, Employer does not object to the use of such physician), unless within thirty (30) days after written notice to Employee by Employer, in accordance with the provisions of Section 16, that Employee's employment is being terminated by reason of such absence, Employee shall have returned to the full performance of Employee's duties and shall have presented to Employer a written certificate of Employee's good health prepared by a physician selected by Employee and reasonably acceptable to Employer. "Fair Market Value" of a share of Common Stock shall mean the closing sale price of the Common Stock reported on the Composite Tape for securities listed on the New York Stock Exchange in The Wall Street Journal on the trading day immediately preceding the relevant valuation date (it being agreed that, if such a closing price for the Common Stock is not so reported on such date, the closing price on such day shall, for purposes of this paragraph, be deemed to be the market price per share of the Common Stock on such date as determined in good faith by the Board of Directors of Employer). Voluntary termination by Employee with "Good Reason" shall mean a voluntary termination by Employee resulting from the Employer (i) reducing Employee's base annual salary as in effect immediately prior to such reduction or reducing in a material respect Employee's opportunity to earn incentive compensation as provided in Section 10(d) of this Agreement, (ii) effecting a change in the position of the Employee which does not represent a promotion from Employee's position provided for herein, (iii) assigning Employee duties or responsibilities which are materially inconsistent with such position, (iv) removing Employee from or failing to reappoint or reelect Employee to such position, except in connection with a termination as a result of death, Disability, voluntary termination by Employee, retirement by Employee or Cause, (v) serving notice on Employee pursuant to Section 2(a) of this Agreement at any time prior to Employee's reaching age 65, or (vi) otherwise materially breaching its obligations under this Agreement, in each case after notice in writing from Employee to Employer and a period of 30 days after such notice during which Employer fails to correct such conduct. "120-Day Average Price" of a share of Common Stock shall mean the average of the closing sale prices of the Common Stock reported on the Composite Tape for securities listed on the New York Stock Exchange in the Wall Street Journal for the first 120 trading days on the New York Stock Exchange that the Common Stock is fully listed on the New York Stock Exchange; provided, however, that if before the end of such 120-day period (a) any person shall have acquired, or publicly disclosed an intention or proposal to acquire (whether by tender offer, exchange offer, or otherwise), Beneficial Ownership of securities of Employer that would result in such person being a 20% Beneficial Owner, (b) any person shall have proposed, or publicly announced an intention to propose, a merger, consolidation or similar transaction involving Employer or any of its subsidiaries (other than mergers, reorganizations, consolidations or dissolutions involving existing subsidiaries of employer), (c) Employer shall have publicly proposed, or publicly announced an intention to propose, the disposition, by sale, lease, exchange or otherwise, of assets of Employer or its subsidiaries representing 30% or more of the consolidated assets of Employer and its subsidiaries or (d) the Board of Directors of Employer determines, in its sole discretion, without regard to the vote of the Employee, that a third party has taken action involving a possible Change in Control or a material part of Employer's business or assets and such action is affecting the public trading price of the Common Stock, the 120-day period shall be - 16 - 20 deemed to have ended 10 calendar days prior to the date of the public announcement of any such acquisition, disclosure, proposal or the making of such determination. "120-Day Period" shall mean the period of 120 days (or shorter period) used to determine the 120-Day Average Price. 13. Excise Tax Gross-up. In the event that Employee becomes entitled to one or more payments (with a "payment" including, without limitation, the vesting of an option or other non-cash benefit or property, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with Employer or any affiliated company) (the "Total Payments"), which are or become subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), (or any similar tax that may hereafter be imposed) but not any such tax imposed as a result of or in connection with the business combination between AMAX and Cyprus Minerals Company (the "Excise Tax"), Employer shall pay to Employee at the time specified below an additional amount (the "Gross-up Payment") (which shall include, without limitation, reimbursement for any penalties and interest that may accrue in respect of such Excise Tax) such that the net amount retained by Employee, after reduction for any Excise Tax (including any penalties or interest thereon) on the Total Payments and any federal, state and local income or employment tax and Excise Tax on the Gross-up Payment provided for by this Section 13, but before reduction for any federal, state or local income or employment tax on the Total Payments, shall be equal to the sum of (a) the Total Payments, and (b) an amount equal to the product of any deductions disallowed for federal, state or local income tax purposes because of the inclusion of the Gross-up Payment in Employee's adjusted gross income multiplied by the highest applicable marginal rate of federal, state or local income taxation, respectively, for the calendar year in which the Gross-up Payment is to be made. For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) the Total Payments shall be treated as "parachute payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the written opinion of independent compensation consultants or auditors of nationally recognized standing selected by Employer and reasonably acceptable to Employee ("Independent Auditors"), the Total Payments (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code or are otherwise not subject to the Excise Tax, (ii) the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (A) the total amount of the Total Payments or (B) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying clause (i) above), and (iii) the value of any non-cash benefits or any deferred payment or benefit shall be determined by Employer's Independent Auditors appointed pursuant to clause (i) above in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. - 17 - 21 For purposes of determining the amount of the Gross-up Payment, Employee shall be deemed (A) to pay federal income taxes at the highest marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made; (B) to pay any applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of Employee's adjusted gross income); and (C) to have otherwise allowable deductions for federal, state and local income tax purposes at least equal to those disallowed because of the inclusion of the Gross-up Payment in Employee's adjusted gross income. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time the Gross-up Payment is made, Employee shall repay to Employer at the time that the amount of such reduction in Excise Tax is finally determined (but, if previously paid to the taxing authorities, not prior to the time the amount of such reduction is refunded to Employee or otherwise realized as a benefit by Employee) the portion of the Gross-up Payment that would not have been paid if such Excise Tax had been applied in initially calculating the Gross-up Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time the Gross-up Payment is made (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-up Payment), Employer shall make an additional Gross-up Payment in respect of such excess (plus any interest and penalties payable with respect to such excess) at the time that the amount of such excess is finally determined. The Gross-up Payment provided for above shall be paid on the thirtieth day (or such earlier date as the Excise Tax becomes due and payable to the taxing authorities) after it has been determined that the Total Payments (or any portion thereof) are subject to the Excise Tax; provided, however, that if the amount of such Gross-up Payment or portion thereof cannot be finally determined on or before such day, Employer shall pay to Employee on such day an estimate, as determined by Employer's Independent Auditors appointed pursuant to clause (i) above, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as the amount thereof can be determined. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by Employer to Employee, payable on the fifth day after demand by Employer (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). If more than one Gross-up Payment is made, the amount of each Gross-up Payment shall be computed so as not to duplicate any prior Gross-up Payment. Employer shall have the right to control all proceedings with the Internal Revenue Service that may arise in connection with the determination and assessment of any Excise Tax and, at its sole option, Employer may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any taxing authority in respect of such Excise Tax (including any interest or penalties thereon); provided, however, that Employer's control over any such proceedings shall be limited to issues with respect to which a Gross-up Payment would be payable hereunder and Employee shall be entitled to settle or contest any other issue raised by the Internal Revenue Service or any other taxing authority. Employee shall cooperate with Employer in any proceedings relating to the determination and assessment of any Excise Tax and shall not take any position or action that would materially increase the amount of any Gross-up Payment hereunder. - 18 - 22 14. Non-Competition and Non-Disclosure; Employee Cooperation (a) Without the consent in writing of the Board of Directors of Employer, upon termination of Employee's employment for any reason, Employee will not for a period of three years thereafter, acting alone or in conjunction with others, directly or indirectly (i) engage (either as owner, partner, stockholder, employer or employee) in any business in which he has been directly engaged, or has supervised as an executive, during the last two years prior to such termination and which is directly in competition with a business conducted by Employer or any of its subsidiaries; (ii) induce any customers of Employer or any of its subsidiaries with whom Employee has had contacts or relationships, directly or indirectly, during and within the scope of his employment with Employer or any of its subsidiaries, to curtail or cancel their business with such companies or any of them; (iii) solicit or canvass business from any person who was a customer of Employer or any of its subsidiaries at or during the two-year period immediately preceding termination of Employee's employment; or (iv) induce, or attempt to influence, any employee of Employer or any of its subsidiaries to terminate his employment; provided, however, that the limitation contained in clause (i) above shall not apply if Employee's employment is terminated as a result of a voluntary termination by Employee with Good Reason, a voluntary termination by Employer without Cause or retirement upon reaching age 65 or thereafter; and provided further, that the limitation contained in clause (i) above shall not prohibit Employee from engaging in any business directly competitive with Employer or any of its subsidiaries as a director, consultant or private investor upon retirement upon reaching age 62 or thereafter with the consent of a majority of the Board of Directors of Employer, which consent shall not be unreasonably withheld. The provisions of subparagraphs (i), (ii), (iii) and (iv) above are separate and distinct commitments independent of each of the other subparagraphs. It is agreed that the ownership of not more than 1/2 of 1% of the equity securities of any company having securities listed on an exchange or regularly traded in the over-the-counter market shall not, of itself, be deemed inconsistent with clause (i) of this paragraph (a). (b) Employee shall not, at any time during the Period of Employment or following Employee's termination of employment for any reason whatsoever, disclose, use, transfer or sell, except in the course of employment with Employer, any confidential or proprietary information of Employer and its subsidiaries so long as such information has not otherwise been disclosed or is not otherwise in the public domain, except as required by law or pursuant to legal process. (c) Employee agrees to cooperate with Employer, by making himself available to testify on behalf of Employer or any subsidiary or affiliate of Employer, in any action, suit or proceeding, whether civil, criminal, administrative or investigative, and to assist Employer, or any subsidiary or affiliate of Employer in any such action, suit or proceeding, by providing information and meeting and consulting with the Board of Directors of Employer or its representatives or counsel, or representatives or counsel of Employer, or any subsidiary or affiliate of Employer, as requested by such Board of Directors, representatives or counsel. Employer agrees to reimburse the Employee, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or assistance. - 19 - 23 15. Governing Law; Disputes; Arbitration (a) This Agreement is governed by and is to be construed, administered and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof. If under such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance or principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement; and the invalidity of any such portion shall not affect the force, effect and validity of the remaining portion hereof. (b) All reasonable costs and expenses (including fees and disbursements of counsel) incurred by Employee in seeking to enforce rights pursuant to this Agreement shall be paid or reimbursed to Employee promptly by Employer, whether or not Employee is successful in asserting such rights, except that Employee shall repay to Employer any such amounts to the extent that an arbitrator or court issues a final, unappealable order setting forth a determination that Employee's claim was frivolous or advanced by Employee in bad faith; provided, however, that with respect to any Change in Control, the Board of Directors of Employer may determine that the repayment by Employee contemplated by the immediately preceding clause of this paragraph shall not apply to any claims arising out of such Change in Control, which determination shall thereafter be irrevocable with respect to such claims. (c) Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Atlanta, Georgia by three arbitrators in accordance with the rules of the American Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators' award in any court having jurisdiction. For purposes of settling any dispute or controversy arising hereunder or for the purpose of entering any judgment upon an award rendered by the arbitrators, Employer and Employee hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia, (ii) any of the courts of the State of Georgia, or (iii) any other court having jurisdiction. Employer and Employee further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. Employer and Employee hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. Employer and Employee hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Subject to Section 15(b), Employer shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 15. Notwithstanding any provision in this Section 15, Employee shall be entitled to seek specific performance of Employee's right to be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement. (d) Any amounts that have become payable pursuant to the terms of this Agreement or any judgment by a court of law or a decision by arbitrators pursuant to this Section 15 but which are not timely paid shall bear interest at the prime rate in effect at the time such payment first becomes payable, as quoted by The Chase Manhattan Bank, New York, New York. 16. Notices. All notices under this Agreement shall be in writing and shall be deemed effective when received (in Employer's case, by its Secretary) or seventy-two (72) hours after deposit thereof in the U.S. mails, postage prepaid, for delivery as registered or certified mail, - 20 - 24 addressed, in the case of Employee, to him at his address specified below, and in the case of Employer, to its principal United States corporate headquarters, attention of the Secretary, or to such other address as Employee or Employer may by notice designate in writing at any time or from time to time to the other party. In lieu of notice by deposit in the U.S. mail, a party may give notice by prepaid cable, telegram, telex or telecopy and such notice shall be effective twenty-four (24) hours after it has been properly sent. 17. Withholding. All payments to be made to Employee under this Agreement will be subject to required withholding taxes and other deductions. 18. Mitigation. Employee shall not be required to mitigate the amount of any payment Employer becomes obligated to make to Employee in connection with this Agreement, by seeking other employment or otherwise, and except as expressly provided in this Agreement, amounts or other benefits to be paid or provided to Employee pursuant to this Agreement shall not be reduced by reason of Employee obtaining other employment or receiving similar payments or benefits from another employer. 19. Successors; Binding Agreement (a) Any Successor (as hereinafter defined) to Employer shall be bound by this Agreement. Employer will seek to have any Successor assent to the fulfillment by Employer of its obligations under this Agreement at Employee's request. Failure of Employer to obtain such assent within thirty (30) days after such request shall constitute Good Reason for termination by Employee of Employee's employment and, upon a voluntary termination by Employee pursuant to Section 2, shall entitle Employee to the benefits provided in Section 11(d). For purposes of this Agreement, "Successor" shall mean any person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), Employer's business directly, by merger or consolidation, or indirectly, by purchase of the Employer's voting securities, all or substantially all of its assets or otherwise. (b) For purposes of this Agreement, "Employer" shall include any corporation or other entity which is the surviving or continuing entity in respect of any amalgamation, merger, consolidation, dissolution, asset acquisition or other form of business combination. 20. Pension Credit and Additional Pension Credit (a) The Employee shall be entitled to a supplemental pension benefit equal to the excess, if any, of (x) over (y) where (x) and (y) are as defined below: (x) the pension benefit that would have been payable to the Employee under the Alumax Retirement Plan for Salaried Employees, as it may from time to time be amended (or any successor plan which is a defined benefit plan) (the "Plan") if the period of employment with AMAX Inc. and the period September 15, 1981 through May 31, 1985 were included in Employee's Benefit Service (as defined in the Plan). The pension benefit determined under this clause (x) shall be determined without regard to any limits imposed by the Internal Revenue Code (currently Sections 401(a)(17) and 415). - 21 - 25 (y) the pension benefit paid or payable under any defined benefit plan (whether or not qualified under the Internal Revenue Code) sponsored by AMAX Inc. or Alumax Inc. for which any of the periods of service are included in the calculation of the pension benefit calculated under clause (x) above. The supplemental pension benefit shall commence as of the same date and shall be paid in the same form as Employee's benefit under the Plan. (b) To compensate the Employee for deferring his retirement and reduced benefits resulting from such deferral as well as a loss of benefits associated with the Employee's mandatory receipt of benefits under the defined benefit plans (whether or not qualified under the Internal Revenue Code) sponsored by AMAX Inc., the Employer agrees to pay the Employee the lump sum of $1,175,876 at the time of expiration of the Period of Employment on December 31, 1999, in addition to and without offset of the pension benefits otherwise payable to the Employee (the "Additional Pension Payment"). The Additional Pension Payment shall be paid on a prorated basis (based upon the number of days during the period between December 5, 1996 and December 31, 1999 expired prior to the Employee's termination and the total number of days in such period) in the event of (A) the death or Disability (as defined in Section 12) of Employee, (B) termination of Employee's employment by Employer without Cause (as defined in Section 12), or by Employee with Good Reason (as defined in Section 12), or (C) a Change in Control (as defined in Section 12), but no Additional Pension Payment shall be payable to the Employee (X) in the event of termination of Employee's employment by Employer with Cause or by Employee other than with Good Reason, or (Y) if Employee retires prior to December 31, 1999, unless Employer's Board of Directors, in its sole discretion and not taking into account any vote of Employee, approves such retirement and a prorated payment of the Additional Pension Payment. (c) The benefit entitlements of Employee provided in this Section 20 shall survive any termination of the Period of Employment pursuant to Section 2. 21. Miscellaneous. (a) Except to the extent that the terms of this Agreement confer benefits that are more favorable to Employee than are available under any other employee benefit or executive compensation plan of Employer in which Employee is a participant, Employee's rights under any such employee (including executive) benefit plan or executive compensation plan shall be determined in accordance with the terms of such plan (as it may be modified or added to by Employer from time to time). (b) This Agreement constitutes the entire understanding between Employer and Employee relating to employment of Employee by Employer and its subsidiaries and supersedes and cancels all prior agreements and understandings with respect to the subject matter of this Agreement and such other written agreements, including the Executive Separation Policy of the Employer. Employee shall not be entitled to any payment or benefit under this Agreement which duplicates a payment or benefit received or receivable by Employee under such prior agreements and understandings or under any employee (including executive) benefit plan or executive compensation plan of the Employer. (c) This Agreement may be amended but only by a subsequent written agreement of the parties. - 22 - 26 (d) This Agreement shall be binding upon and shall inure to the benefit of Employee, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of Employer and its successors and assigns. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the year and day first above written. ALUMAX INC. By ------------------------------------- Vice President ---------------------------------------- C. Allen Born Address of Employee for Purposes of Notices: ---------------------------------------- ---------------------------------------- - 23 - EX-11.01 10 CALCULATION OF EARNINGS PER SHARE 1 EXHIBIT 11.01 ALUMAX INC. CALCULATION OF EARNINGS PER COMMON SHARE (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- ----------------- Primary earnings per common share: 1. Net earnings............................. $ 250.0 $ 237.4 $ 46.7 2. Deduct -- Series A Convertible Preferred dividends.............................. (9.3) (9.3) (9.3) ------- ------- ------- 3. Earnings applicable to common shares..... $ 240.7 $ 228.1 $ 37.4 ======= ======= ======= 4. Average primary shares outstanding (in thousands)............................. 46,409 45,200 44,757 5. Primary earnings per common share (line 3 divided by line 4)..................... $ 5.19 $ 5.05 $ 0.84 ======= ======= ======= Fully diluted earnings per common share: 6. Earnings applicable to common shares..... $ 240.7 $ 228.1 $ 37.4 7. Add -- Series A Convertible Preferred dividends.............................. 9.3 9.3 9.3 ------- ------- ------- 8. Earnings applicable to common shares..... $ 250.0 $ 237.4 $ 46.7 ======= ======= ======= 9. Average fully diluted shares outstanding (in thousands)......................... 55,251 54,846 54,440 10. Fully diluted earnings per common share (line 8 divided by line 9)............. $ 4.53 $ 4.33 $ 0.84(A) ======= ======= =======
- --------------- (A) Antidilutive, therefore the same as primary. EX-21.01 11 LIST OF SUBSIDIARIES 1 Exhibit 21.01 ALUMAX INC. -------------------------------------------- LIST OF SUBSIDIARIES
Name of Subsidiary Place of - ------------------ Incorporation ------------- Alamo Resources Corporation Delaware Alumax Inc. Nevada Alumax Aluminum Corporation Delaware Alumax Asia Limited Hong Kong Amax Asia Pacific Pty. Limited Australia Alumax Astechnology, Inc. Delaware Alumax Becancour, Inc. Delaware Alumax de Mexico, S.A. de C.V. Mexico Alumax Engineered Metal Processes, Inc. Delaware Alumax Extrusions Australia Pty. Limited Australia Alumax Extrusions B.V. Netherlands Alumax Extrusions, Inc. Pennsylvania Alumax Extrusions, Inc. New York Alumax Extrusions Limited U.K. Alumax Foil Industrial Redevelopment Corporation Missouri Alumax Foils, Inc. Delaware Alumax Holdings B.V. Netherlands Alumax Holdings de Mexico, S.A. de C.V. Mexico Alumax Holdings S.A. France Alumax International Company Nevada Alumax Japan, Inc. Delaware Alumax Materials Management, Inc. Delaware Alumax of Maryland, Inc. Delaware Alumax Mill Products, Inc. Delaware Alumax PD Holdings Pte. Limited (50% shareholder) Singapore Alumax Polska Sp. z o.o. Poland Alumax Primary Aluminum Corporation Delaware Alumax Quebec, Inc. Wyoming Alumax: Recycling B.V. Netherlands Alumax Remelt Corporation Delaware Alumax S.A. France Alumax 6100 South Broadway Redevelopment Corporation Missouri Alumax of South Carolina, Inc. Delaware Alumax Technical Center, Inc. Delaware Alumax Technical Services, Inc. Delaware Alumax Technology Corporation Delaware Alumax U.K. Limited U.K.
2 Alumax Warehouse Corporation Delaware Alumax of Washington, Inc. Delaware Alumet Corporation Delaware Aluminerie Lauralco, Inc. Delaware Amax Asia, Inc. Delaware Amax Holdings Australia Limited Western Australia Amax Resources Australia Limited Western Australia Asesoria Mexicana Empresarial, S.A. de C.V. Mexico Canalco, Inc. Delaware Comercializadora Exal, S.A. de C.V. Mexico Compania Fresnillo, S.A. de C.V. (40% Shareholder) Mexico Compania Minera La Reyna, S.A. de C.V. (40% Shareholder) Mexico Compania Minera Las Torres, S.A. de C.V. (14.1% Shareholder) Mexico Compania Minera Sabinas, S.A. de C.V. (40% Shareholder) Mexico Compania Trans-Rio, S.A. de C.V. (37% Shareholder) Mexico Eastalco Aluminum Company Delaware Exal, S.A. de C.V. Mexico Hillyard Aluminum Recovery Corporation Delaware Honduras-Rosario Mining Company Delaware I. de A., S.A. de C.V. (49% Shareholder) Mexico Intalco Aluminum Company, Ltd. Canada Intalco Aluminum Corporation Delaware Kawneer Company Canada Limited Canada Kawneer Company, Inc. Delaware Kawneer Deutschland GmbH Germany Kawneer Europe B.V. Netherlands Kawneer France, Inc. Delaware Kawneer France S.A. France Kawneer Germany, Inc. Delaware Kawneer Installations Limited U.K. Kawneer Maroc S.A. (75% Shareholder) France Kawneer Polska Sp. z o.o. Poland Kawneer U.K. Limited U.K. Lauralco, Quebec, Inc. Delaware Lauralco, Superieur, Inc. Delaware Lauralco, Trois-Rivieres, Inc. Delaware Mt. Holly Plantation, Inc. Delaware Murphy Properties, Inc. Delaware Neptune Mining Company (36. 61% Shareholder) Delaware Rosario Mining of Nicaragua, Inc. Delaware Rosario Properties, Inc. Delaware Rosario Resources Corporation New York The Durango Corporation Delaware The Fresnillo Company New York Yunnan Xinmeilu Aluminum Foil Co., Ltd. (56% Shareholder) China
EX-23.01 12 CONSENT OF COOPERS & LYBRAND 1 EXHIBIT 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Alumax Inc. on Form S-8 (File Nos. 33-83006, 33-83008, 33-83010 and 33-86338) of our report dated January 27, 1997, on our audits of the consolidated financial statements and financial statement schedule of Alumax Inc. as of December 31, 1996 and 1995, and for the years ended December 31, 1996, 1995, 1994, which report is included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Atlanta, Georgia February 10, 1997 EX-24.01 13 POWER OF ATTORNEY 1 EXHIBIT 24.01 POWER OF ATTORNEY WITH RESPECT TO ANNUAL REPORT ON FORM 10-K UNDER THE SECURITIES EXCHANGE ACT OF 1934 KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and directors, individually and collectively, hereby constitute and appoint Allen Born, Helen M. Feeney, and Lawrence B. Frost, and each of them, their true and lawful attorneys and agents to execute and deliver on behalf of any one or more of them, in any one or more of their various capacities as officer or director of the registrant, the Alumax Inc. Annual Report on Form 10-K for the fiscal year ended December 31, 1996, and any and all required amendments and supplements thereto, for filing with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the undersigned and each of them hereby ratifying and confirming all that said attorneys and agents, and each of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, each of the undersigned has signed his or her name hereto on the date set opposite his or her name. February 6, 1997 /s/ Allen Born ------------------------------------------------------------ Allen Born, as Chairman, Chief Executive Officer and Director (Principal Executive Officer) February 6, 1997 /s/ Lawrence B. Frost ------------------------------------------------------------ Lawrence B. Frost, as Senior Vice President and Chief Financial Officer (Principal Financial Officer) February 6, 1997 /s/ Michael T. Vollkommer ------------------------------------------------------------ Michael T. Vollkommer, as Vice President and Controller (Principal Accounting Officer) 2 February 6, 1997 /s/ J. Dennis Bonney ------------------------------------------------------------ J. Dennis Bonney, as Director February 6, 1997 /s/ Harold Brown ------------------------------------------------------------ Harold Brown, as Director February 6, 1997 /s/ L. Don Brown ------------------------------------------------------------ L. Don Brown, as Director February 6, 1997 /s/ Pierre Des Marais II ------------------------------------------------------------ Pierre Des Marais II, as Director February 6, 1997 /s/ James C. Huntington, Jr. ------------------------------------------------------------ James C. Huntington, Jr., as Director February 6, 1997 /s/ W. Loeber Landau ------------------------------------------------------------ W. Loeber Landau, as Director February 6, 1997 /s/ Paul W. MacAvoy ------------------------------------------------------------ Paul W. MacAvoy, as Director February 6, 1997 /s/ George P. Stoe ------------------------------------------------------------ George P. Stoe, as Director February 6, 1997 /s/ Anne Wexler ------------------------------------------------------------ Anne Wexler, as Director EX-27.01 14 FINANCIAL DATA SCHEDULE
5 EXHIBIT 27.01 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-K OF ALUMAX INC. FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-1996 DEC-31-1996 35 0 456 17 520 1,086 3,064 1,037 3,299 425 672 0 0 1 1,640 3,299 3,159 3,159 2,522 2,927 0 5 63 423 173 250 0 0 0 250 5.19 4.53
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