UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Kaiser Aluminum Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Date Filed:
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Kaiser Aluminum Corporation
27422 Portola Parkway, Suite 200
Foothill Ranch, CA 92610-2831
April 27, 2011
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Kaiser Aluminum
Corporation to be held at the companys corporate office, located at 27422 Portola Parkway, Suite
200, Foothill Ranch, California 92610 on Thursday, June 9, 2011, at 9:00 a.m., local time.
During the Annual Meeting, stockholders will consider and vote upon (i) the election of four
members to the board of directors, (ii) the approval, on a non-binding, advisory basis, of the
compensation of our named executive officers, (iii) the recommendation, on a non-binding, advisory
basis, as to the frequency of future advisory votes on the compensation of our named executive
officers, and (iv) the ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm. The attached Notice of Annual Meeting of Stockholders and Proxy
Statement describe fully the formal business to be transacted at the Annual Meeting.
While the company does not expect to make a separate presentation, certain directors and
officers will be present at the Annual Meeting and will be available to respond to any questions
you may have.
Whether or not you plan to attend the Annual Meeting, we urge you to review carefully the
accompanying material and to vote by proxy without delay. To do so, please submit your voting
instructions over the Internet or by telephone as indicated on the enclosed proxy card or by
completing, signing and dating the enclosed proxy card and returning it by mail in the accompanying
envelope. If you attend the Annual Meeting, you may vote in person even if you have previously
submitted your voting instructions over the Internet, by telephone or by mail.
Sincerely,
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Jack A. Hockema
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President, Chief Executive Officer and
Chairman of the Board
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Kaiser Aluminum Corporation
27422 Portola Parkway, Suite 200
Foothill Ranch, CA 92610-2831
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 2011
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Kaiser Aluminum Corporation
will be held at the companys corporate office, located at 27422 Portola Parkway, Suite 200,
Foothill Ranch, California 92610 on Thursday, June 9, 2011, at 9:00 a.m., local time, for the
following purposes:
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(1)
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To elect four members to our board of directors for three-year terms to expire at our
2014 annual meeting of stockholders;
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(2)
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To approve, on an advisory, non-binding basis, the compensation of our named
executives officers as disclosed in this Proxy Statement;
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(3)
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To make a recommendation, on an advisory, non-binding basis, as to the frequency of
future advisory votes on the compensation of our named executive officers;
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(4)
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To ratify the selection of Deloitte & Touche LLP as our independent registered public
accounting firm for 2011; and
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(5)
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To consider such other business as may properly come before the Annual Meeting or any
adjournments thereof.
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Information concerning the matters to be acted upon at the Annual Meeting is set forth in the
accompanying Proxy Statement.
The close of business on April 20, 2011 has been fixed as the record date for determining the
stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournments thereof.
We urge stockholders to vote by proxy by submitting voting instructions over the Internet or
by telephone as indicated on the enclosed proxy card or by completing, signing and dating the
enclosed proxy card and returning it by mail in the accompanying envelope, which does not require
postage if mailed in the United States.
By Order of the Board of Directors,
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John M. Donnan
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Senior Vice President, Secretary and
General Counsel
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Foothill Ranch, California
April 27, 2011
Kaiser Aluminum Corporation
27422 Portola Parkway, Suite 200
Foothill Ranch, CA 92610-2831
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 9, 2011
TABLE OF CONTENTS
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Page
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GENERAL QUESTIONS AND ANSWERS
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2
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PROPOSALS REQUIRING YOUR VOTE
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6
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Proposal for Election of Directors
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Proposal for Advisory Vote on Executive Compensation
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Proposal for Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation
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Proposal for Ratification of the Selection of our Independent Registered Public Accounting Firm
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12
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CORPORATE GOVERNANCE
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Stockholder Communications with the Board of Directors
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Board and Committee Meetings and Consents in 2010
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Annual Meetings of Stockholders
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14
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Director Independence
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15
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Annual Performance Reviews
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Stock Ownership Guidelines
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Director Designation Agreement
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Board Leadership Structure and Risk Oversight
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Risks Arising from Compensation Policies and Practices
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Board Committees
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EXECUTIVE OFFICERS
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EXECUTIVE COMPENSATION
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Compensation Committee Report
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Compensation Discussion and Analysis
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Summary Compensation Table
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36
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All Other Compensation
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Grants of Plan-Based Awards in 2010
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Employment-Related Agreements and Certain Employee Benefit Plans
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Outstanding Equity Awards at December 31, 2010
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46
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Option Exercises and Stock Vested in 2010
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48
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Pension Benefits as of December 31, 2010
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Nonqualified Deferred Compensation for 2010
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Potential Payments and Benefits Upon Termination of Employment
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DIRECTOR COMPENSATION
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Director Compensation for 2010
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Director Compensation Arrangements
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EQUITY COMPENSATION PLAN INFORMATION
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PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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Director Designation Agreement
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Stock Transfer Restriction Agreement
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Registration Rights Agreement
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Union VEBA Annual Variable Cash Contribution
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Review, Approval of or Ratification of Transactions with Related Persons
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AUDIT COMMITTEE REPORT
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INDEPENDENT PUBLIC ACCOUNTANTS
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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78
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OTHER MATTERS
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FORM 10-K
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78
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STOCKHOLDER PROPOSALS
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78
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Stockholders to Be Held on June 9, 2011: The Proxy Statement and our Annual Report to Stockholders
are available at http://bnymellon.mobular.net/bnymellon/kalu.
GENERAL QUESTIONS AND ANSWERS
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When is the Proxy Statement being sent to stockholders and what is its purpose?
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This Proxy Statement is first being sent to our stockholders on or about May
6, 2011 at the direction of our board of directors in order to solicit proxies
for our use at the Annual Meeting.
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When is the Annual Meeting and where will it be held?
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The Annual Meeting will be held on Thursday, June 9, 2011, at 9:00 a.m., local
time, at our corporate office, located at 27422 Portola Parkway, Suite 200,
Foothill Ranch, California 92610.
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Who may attend the Annual Meeting?
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All of our stockholders may attend the Annual Meeting.
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Who is entitled to vote?
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Stockholders as of the close of business on April 20, 2011 are entitled to
vote at the Annual Meeting. Each share of our common stock is entitled to one
vote.
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On what am I voting?
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A:
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You will be voting on:
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The election of four members to our board of directors to serve until our 2014 annual
meeting of stockholders;
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The approval, on a non-binding, advisory basis, of the compensation of our named
executive officers as disclosed in this Proxy Statement;
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The recommendation, on a non-binding, advisory basis, as to the frequency of future
advisory votes on the compensation of our named executive officers;
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The ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for 2011; and
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Such other business as may properly come before the Annual Meeting or any
adjournments.
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Q:
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How does the board of directors recommend that I vote?
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A:
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The board of directors recommends that you vote your shares:
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FOR ALL the director nominees identified in Proposals Requiring Your Vote
Proposal for Election of Directors below;
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FOR the approval of the compensation of our named executive officers as disclosed
in this Proxy Statement;
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For the option of EVERY 1 YEAR as the frequency for future advisory votes on the
compensation of our named executive officers; and
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FOR the ratification of the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for 2011.
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Q:
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How can I vote?
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You can vote in person at the Annual Meeting or you can vote prior to the Annual Meeting by proxy. Whether or not you plan
to attend the Annual Meeting, we urge you to vote by proxy without delay.
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Q:
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How do I vote by proxy?
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If you choose to vote your shares by proxy, you have the following options:
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Over the Internet:
You can vote over the Internet at the website shown on your proxy
card. Internet voting will be available 24 hours a day, seven days a week, until 11:59
p.m., Eastern Time, on Wednesday, June 8, 2011.
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By telephone:
You can vote by telephone by calling the toll-free number shown on your
proxy card. Telephone voting will be available 24 hours a day, seven days a week, until
11:59 p.m., Eastern Time, on Wednesday, June 8, 2011.
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By mail:
You can vote by mail by completing, signing and dating your proxy card and
returning it in the enclosed prepaid envelope.
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Q:
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I want to attend the Annual Meeting and vote in person. How do I obtain directions to the Annual Meeting?
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You may obtain directions to the Annual Meeting by calling us at (949) 614-1740.
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What constitutes a quorum?
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As of April 20, 2011, the record date, 19,268,791 shares of our common stock were issued and outstanding. A majority of
these shares present or represented by proxy will constitute a quorum for the transaction of business at the Annual
Meeting. If you properly vote by proxy by submitting your voting instructions over the Internet, by telephone or by mail,
then your shares will be counted as part of the quorum. Abstentions or votes that are withheld on any matter will be
counted towards a quorum but will be excluded from the vote relating to the particular matter under consideration. Broker
non-votes are counted towards a quorum but are excluded from the vote with respect to the matters for which they are
applicable. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular
proposal because the broker does not have discretionary voting power with respect to that proposal and has not received
instructions with respect to that proposal from the beneficial owner. Among our proposals, brokers will have discretionary
voting power only with respect to the proposal to ratify the selection of Deloitte & Touche LLC as our independent
registered public accounting firm for 2011.
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What are the voting requirements for the proposals?
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A:
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There are different voting requirements for the proposals.
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Directors will be elected by a plurality vote of all votes cast for the election of
directors at the Annual Meeting. Accordingly, the four nominees receiving the highest
number of votes will be elected. If you withhold authority to vote for any particular
director nominee, your shares will not be counted in the vote for that nominee and will
have no effect on the outcome of the vote.
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The approval of the holders of a majority of the total number of outstanding shares
of our common stock present in person or represented by proxy at the Annual Meeting and
actually voted on the proposal is necessary (1) to approve, on an advisory, non-binding
basis, the compensation of our named executive officers, as disclosed in this Proxy
Statement, (2) to ratify the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for 2011. If you abstain from voting on the proposal to
approve the compensation of our named executive officers as disclosed in this Proxy
Statement, the proposal to ratify the selection of Deloitte & Touche LLP as our
independent registered public accounting firm for 2011, or both proposals, your shares
will not be counted in the vote for such proposal(s) and will have no effect on the
outcome of the vote.
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The recommendation, on an advisory, non-binding basis, as to the frequency of future
advisory votes on the compensation of our named executive officers will be determined
based on the option EVERY 1 YEAR, EVERY 2 YEARS or EVERY 3 YEARS that receives the
highest number of votes. If you abstain from voting on the proposal to recommend the
frequency of future advisory votes on the compensation of our named executive officers,
your shares will not be counted in the vote for such proposal and will have no effect on
the outcome of the vote.
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Q:
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If my shares are held in street name by my broker, will my broker vote my shares for me?
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As discussed above, among our proposals, brokers will have discretionary voting power only with respect to the proposal to
ratify the selection of Deloitte & Touche LLC as our independent registered public accounting firm for 2011. To be sure
your shares are voted, you should instruct your broker to vote your shares using the instructions provided by your broker.
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Q:
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What will happen if the compensation of the companys named executive officers is not approved by the stockholders?
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Because this is an advisory vote, our board of directors and compensation committee will not be bound by the approval of,
or the failure to approve, the executive compensation of our named executive officers as disclosed in this Proxy Statement.
The board of directors and the compensation committee, however, value the opinions that our stockholders express in their
votes and will consider the outcome of the vote when determining future executive compensation programs.
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Q:
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Will the vote to recommend the frequency of future advisory votes on the compensation of the companys named executive
officers determine the actual frequency of future votes?
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A:
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Because this is an advisory vote, our board of directors and compensation committee will not be bound by the outcome of the
vote. The board of directors and the compensation committee, however, value the opinions that our stockholders express in
their votes and will consider the outcome of the vote when determining the frequency of future advisory votes on the
compensation of our named executive officers.
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Q:
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What will happen if the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2011 is
not ratified by stockholders?
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A:
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Pursuant to the audit committee charter, the audit committee of our board of directors has sole authority to appoint our
independent registered public accounting firm, and the audit committee will not be bound by the ratification of, or failure
to ratify, the selection of Deloitte & Touche LLP. The audit committee will, however, consider any failure to ratify the
selection of Deloitte & Touche LLP in connection with the appointment of our independent registered public accounting firm
the following year.
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Q:
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Can I change my vote after I give my proxy?
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A:
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Yes. If you vote by proxy, you can revoke that proxy at any time before voting takes place at the Annual Meeting. You may
revoke your proxy by:
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voting again over the Internet or by telephone no later than 11:59 p.m., Eastern
Time, on Wednesday, June 8, 2011;
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submitting a properly signed proxy card with a later date;
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delivering, no later than 5:00 p.m., Eastern Time, on Wednesday, June 8, 2011,
written notice of revocation to our Secretary, c/o BNY Mellon Shareowner Services, P.O.
Box 3550, South Hackensack, New Jersey 07606-9250; or
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attending the Annual Meeting and voting in person.
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Your attendance alone will not revoke your proxy. To change your vote, you must also vote in
person at the Annual Meeting. If you instruct a broker to vote your shares, you must follow
your brokers directions for changing those instructions.
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Q:
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What does it mean if I receive more than one proxy card?
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If you receive more than one proxy card, it is because your shares are
held in more than one account. You must vote each proxy card to ensure
that all of your shares are voted at the Annual Meeting.
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Q:
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Who will count the votes?
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Representatives of BNY Mellon Shareowner Services, our transfer agent,
will tabulate the votes and act as inspectors of election.
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Q:
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How much will this proxy solicitation cost?
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We have hired MacKenzie Partners, Inc. to assist us in the
distribution of proxy materials and solicitation of votes at a cost
not to exceed $4,500, plus out-of-pocket expenses. We will reimburse
brokerage firms and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to the owners of our common stock. Our officers
and regular employees may also solicit proxies, but they will not be
specifically compensated for these services. In addition to the use of
the mail, proxies may be solicited personally or by telephone by our
employees or by MacKenzie Partners.
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5
PROPOSALS REQUIRING YOUR VOTE
Proposal for Election of Directors
General
Our board of directors currently has 10 members, consisting of our President and Chief
Executive Officer and nine independent directors. Our current directors are:
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Carolyn Bartholomew
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William F. Murdy
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David Foster
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Alfred E. Osborne, Jr., Ph.D.
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Jack A. Hockema
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Jack Quinn
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Teresa A. Hopp
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Thomas M. Van Leeuwen
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Lauralee E. Martin
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Brett E. Wilcox
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Mr. Hockema, our President and Chief Executive Officer, serves as our Chairman of the Board, and
Dr. Osborne serves as our Lead Independent Director.
Our certificate of incorporation and bylaws provide for a classified board of directors
consisting of three classes. The term of the Class II directors will expire at the 2011 annual
meeting of stockholders; the term of the Class III directors will expire at the 2012 annual meeting
of stockholders; and the term of the Class I directors will expire at the 2013 annual meeting of
stockholders.
The nominating and corporate governance committee of our board of directors has recommended,
and our board of directors has approved, the nomination of the four nominees listed below. The
nominees have indicated their willingness to serve as members of the board of directors if elected;
however, in case any nominee becomes unavailable for election to the board of directors for any
reason not presently known or contemplated, the proxy holders have discretionary authority to vote
proxies for a substitute nominee. Proxies cannot be voted for more than four nominees.
The board of directors recommends a vote FOR each of the persons nominated by the board of
directors.
Nominees for Election as Class II Directors
Set forth below is information as to the nominees for election as Class II directors at the
Annual Meeting, including their ages, present principal occupations, other business experiences,
directorships in other public companies, membership on committees of our board of directors, and
reasons why each individual nominees specific experience, qualifications, attributes or skills led
our board of directors to conclude that the nominee should serve as a director of the company.
Carolyn Bartholomew
, 53, has served as a director of Kaiser since June 2007. Ms. Bartholomew
has served as Commissioner of U.S.-China Economic and Security Review Commission since April 2003.
She also served as its Vice Chairman from January 2006 to December 2006, January 2008 to December
2008 and January 2010 to December 2010 and its Chairman from January 2007 to December 2007 and
January 2009 to December 2009. Ms. Bartholomew has also served as Director of Government Relations
of Education Development Center, a non-profit organization focused on implementation of education
and health programs and research, since February 2009. She was also the Executive Director of the
Basic Education Coalition, a non-profit organization that works to raise public and private support
for basic education for children in the United States and abroad, from July 2004 to August 2008.
From August 1987 to April 2003, Ms. Bartholomew served as Legislative Director, District Director
and Chief of Staff to Congresswoman Nancy Pelosi. Ms. Bartholomew graduated cum laude with a
Bachelor of Arts degree in anthropology from the University of Minnesota. She also holds a Master
of Arts degree in anthropology from Duke University and a Juris Doctorate from Georgetown
University. Ms. Bartholomew serves on the audit and nominating and corporate governance committees
of our board of directors. Pursuant to the terms of the Director
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Designation Agreement between our company and the United Steel, Paper and Foresting, Rubber,
Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL CIO, CLC
(referred to herein as the USW) described more fully below, Ms. Bartholomew was designated by the
USW to fill a vacancy on our board of directors in 2007, and Ms. Bartholomew was designated by the
USW as a director candidate in connection with our 2008 annual meeting of stockholders and again in
2011 in connection with the upcoming Annual Meeting. Ms. Bartholomews experience in Washington,
D.C. and with the U.S.-China Economic and Security Review Commission allow her to provide guidance
and insight to our board of directors and management regarding government relations, policy and
appropriations for defense and other government funded programs that utilize our products and our
efforts to expand into Chinese markets and effectively compete with Chinese manufacturers.
Jack A. Hockema
, our President and Chief Executive Officer, serves as Chairman of the Board
and serves on the executive committee of our board of directors. For information as to Mr. Hockema,
see Executive Officers below. Mr. Hockemas substantial experience with our company and in the
metals industry allows him to provide a unique perspective to our board of directors regarding our
business and strategic direction for our company.
Lauralee E. Martin
, 60, has served as a director of Kaiser since September 2010. Ms. Martin
has served as Executive Vice President and Chief Operating and Financial Officer of Jones Lang
LaSalle since October 2005. Prior to being appointed the additional position of Chief Operating
Officer of Jones Lang LaSalle, Ms. Martin served as its Executive Vice President and Chief
Financial Officer from January 2002 to October 2005. She served as Executive Vice President and
Chief Financial Officer of Heller Financial, Inc., a commercial finance company, from May 1996 to
November 2001. Ms. Martin had previously held the positions of Senior Group President, responsible
for Heller Financials Real Estate, Equipment Financing, and Small Business Lending groups, and
President of its Real Estate group. Prior to joining Heller Financial in 1986, Ms. Martin held
certain senior management positions with General Electric Credit Corporation. Ms. Martin is a
member of the board of directors and the Global Executive Committee of Jones Lang LaSalle and
chairs its Global Operating Committee. She is also a member of the board of directors and the audit
committee of HCP, Inc., a real estate investment trust focusing on properties serving the
healthcare industry. She was a member of the board of directors of each of Key Corp, a bank holding
company, from December 2003 to November 2010, Gables Residential Trust, a real estate investment
trust, from 1994 to 2005 and Heller Financial from May 1991 to July 1998. She received a Bachelors
degree from Oregon State University and holds a Masters degree in Business Administration from the
University of Connecticut. Ms. Martin serves on the audit and compensation committees of our board
of directors. Having served as both the chief financial officer and the head of the real estate
lending group at Heller Financial, a commercial finance company with international operations, as
well as having now been the chief operating and financial officer for Jones Lang LaSalle for nine
years, Ms. Martin has significant experience in all aspects of corporate financial and operational
matters, including the oversight of complex financial, accounting and corporate infrastructure
functions. Her service as a member of the boards of directors of two real estate investment trusts
and a major bank holding company have reinforced those qualifications and also have deepened her
expertise in corporate governance and matters relating to the Sarbanes-Oxley Act of 2002. Ms.
Martin also has a deep foundation in evaluating acquisition opportunities, managing banking
relationships and investor relations. Ms. Martins experience and background, qualification as an
audit committee financial expert, and understanding of our companys financial statements allow her
to provide guidance and insight to our board of directors and management regarding business,
strategic, accounting and financial issues.
Brett E. Wilcox
, 57, has served as a director of Kaiser since July 2006. Mr. Wilcox is
currently Chief Executive Officer of Summit Power Alternative Resources where he manages the
development of wind generation and new energy technologies. Mr. Wilcox has been an active investor
in, on the board of directors of, or an executive consultant for, a number of metals and energy
companies since 2005. From 1986 to 2005, Mr. Wilcox served as Chief Executive Officer of Golden
Northwest Aluminum Company and its predecessors. Golden Northwestern Aluminum Company and certain
of its subsidiaries filed for bankruptcy in December 2003, while Mr. Wilcox served as its Chief
Executive Officer. Mr. Wilcox has also served as: Executive Director of Direct Services Industries,
Inc., a trade association of large aluminum and other energy-intensive companies; an attorney with
Preston, Ellis & Gates in Seattle, Washington; Vice Chairman of the Oregon Progress Board; Chairman
of the Oregon Economic and Community Development Commission; a member of the Oregon Governors
Comprehensive Review of the Northwest Regional Power System; and a member of the Oregon Governors
Task Forces on structure and efficiency of state government, employee benefits and compensation,
and government performance and accountability. Mr. Wilcox received a Bachelors degree from the
Woodrow Wilson School of Public and International Affairs at Princeton University and a Juris
Doctorate from Stanford Law School. Mr. Wilcox serves on the executive and audit committees of our
board of directors. Mr. Wilcox was one of the original directors selected
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by a search committee consisting our creditors (referred to herein as the search committee)
to serve as an initial director of our company upon our emergence from chapter 11 bankruptcy, was
selected because of his business and financial background and experience, including his experience
as the Chief Executive Officer of Golden Northwest Aluminum Company and its predecessors, his
experience working successfully with the USW and his experience in the power industries, and
because of his qualification as an audit committee financial expert. Mr. Wilcox was designated by
the USW as a director candidate in connection with the search process, and, pursuant to the terms
of the Director Designation Agreement, Mr. Wilcox was designated by the USW as a director candidate
in connection with our 2008 annual meeting of stockholders and again in 2011 in connection with the
upcoming Annual Meeting. Mr. Wilcoxs experience as a former and current chief executive officer,
his financial expertise and his working relationship with the USW allow him to offer guidance and
insight to our board of directors and management on business, finance, strategic and labor issues.
Continuing Directors
Set forth below is information as to the continuing directors, including their ages, present
principal occupations, other business experiences, directorships in other public companies,
membership on committees of our board of directors, and reasons why each individual directors
specific experience, qualifications, attributes or skills led our board of directors to conclude
that the director should serve on our board of directors.
Class III Directors
David Foster
, 63, has served as a director of Kaiser since June 2009. Mr. Foster has been the
executive director of Blue Green Alliance, a strategic national partnership between labor unions
and environmental organizations to expand the job-creating potential of the green economy and
improve the rights of workers at home and around the world, since June 2006. Prior to joining Blue
Green Alliance, he was a director of the USW for District #11 from March 1990 to February 2006. Mr.
Foster has been an adjunct faculty member of the University of Minnesota since January 2003. Mr.
Foster has also been a member of the board of directors of Evraz North America, d/b/a Oregon Steel
Manufacturing, a subsidiary of Evraz, a global steel company, since June 2006. Mr. Foster holds a
Bachelor of Arts degree in English from Reed College. Pursuant to the terms of the Director
Designation Agreement, Mr. Foster was designated by the USW as a director candidate in connection
with our 2009 annual meeting of stockholders. Although Mr. Foster has been a director for only one
year, his experience with our company exceeds 15 years and includes his role as the primary USW
negotiator of our master labor agreement with the USW. Mr. Foster was also extensively involved in
our chapter 11 bankruptcy representing the USW and hourly employees in negotiations with our
creditors. Mr. Fosters extensive labor experience representing the USW and, more recently, his
experience with the Blue Green Alliance allow him to provide guidance and insight to our board and
management regarding labor relations, including with the USW, relations with our hourly workforce
and the impact of environmental and regulatory initiatives on US based manufacturers.
Teresa A. Hopp
, 51, has served as a director of Kaiser and chair of the audit committee since
July 2006. Prior to Ms. Hopps retirement, she was the Chief Financial Officer for Western Digital
Corporation, a hard disk drive manufacturer, from January 2000 to October 2001 and its Vice
President, Finance from September 1998 to December 1999. Prior to her employment with Western
Digital Corporation, Ms. Hopp was with Ernst & Young LLP from 1981 where she served as an audit
partner for four years. During her tenure at Ernst & Young LLP, she managed audit department
resource planning and scheduling and served as internal education director and information systems
audit and security director. Ms. Hopp also served on the board of directors of On Assignment, Inc.
from June 2003 to December 2007 and as its audit committee chair. She graduated summa cum laude
from California State University, Fullerton, with a Bachelors degree in Business Administration.
Ms. Hopp serves on the executive and audit committees of our board of directors. Ms. Hopp was
selected by the search committee to serve as an initial director of our company upon our emergence
from chapter 11 bankruptcy because of her accounting and finance experience and background,
including her prior experience with Ernst & Young, and because of her prior experience as a board
member and audit committee chair. Ms. Hopps experience and background, qualification as an audit
committee financial expert, experience as a director of our company and chair of the audit
committee of our board of directors since our emergence from chapter 11 bankruptcy, and
understanding of our companys financial statements allow her to provide guidance and insight to
our board of directors and management regarding accounting and financial issues.
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William F. Murdy
, 69, has served as a director of Kaiser since July 2006. Mr. Murdy has been
the Chairman and Chief Executive Officer of Comfort Systems USA, a commercial heating, ventilation
and air conditioning construction and service company, since June 2000. Mr. Murdy previously served
as President and Chief Executive Officer of Club Quarters, and Chairman, President and Chief
Executive Officer of Landcare USA, Inc. Mr. Murdy has also served as President and Chief Executive
Officer of General Investment & Development, and as President and Managing General Partner with
Morgan Stanley Venture Capital, Inc. He previously served as Senior Vice President and Chief
Operating Officer of Pacific Resources, Inc. Mr. Murdy has served on the board of directors of
Comfort Systems USA since 2000 and UIL Holdings Corp. since 2003. He holds a Bachelor of Science
degree in Engineering from the U.S. Military Academy, West Point, and a Masters degree in Business
Administration from the Harvard Business School. Mr. Murdy serves on the compensation and
nominating and corporate governance committees of our board of directors. Mr. Murdy was selected by
the search committee to serve as an initial director of our company upon our emergence from chapter
11 bankruptcy because of his business experience and background, including his experience as a
chief executive officer, board member and compensation committee member. Mr. Murdys background and
experience, including his experience as a director of our company and chair of the compensation
committee of our board of directors since our emergence from chapter 11 bankruptcy, and his
understanding of our compensation programs and their history allow him to provide guidance and
insight to our board of directors and management on financial, strategic and compensation issues.
Class I Directors
Alfred E. Osborne, Jr., Ph.D.
, 66, has served as a director of Kaiser since July 2006. Dr.
Osborne has been the Senior Associate Dean at the UCLA Anderson School of Management since July
2003 and a Professor of Global Economics and Management since July 2008. Dr. Osborne was an
Associate Professor of Global Economics and Management from July 1978 to June 2008. From July 1987
to June 2003, Dr. Osborne served as the Director of the Harold and Pauline Price Center for
Entrepreneurial Studies at the UCLA Anderson School of Management. Dr. Osborne has served on the
board of directors of Heckmann Corporation since August 2007, of First Pacific Advisors New Income
Fund, Capital Fund and Crescent Fund since December 1999, and of Wedbush, Inc., a financial
services and investment firm, since January 1998. Dr. Osborne also served on the board of directors
of EMAK Worldwide, Inc. from December 2000 to June 2008, of K2, Inc. from February 1999 to August
2007 and of Nordstrom, Inc. from August 1987 to May 2006. He holds a Doctorate degree in Business
Economics, a Masters degree in Business Administration, a Master of Arts degree in Economics and a
Bachelors degree in Electrical Engineering from Stanford University. Dr. Osborne serves on the
audit and nominating and corporate governance committees of our board of directors and is our Lead
Independent Director. Dr. Osborne has served on many boards and board committees of public
companies and investment funds over a more than 20-year period. During that time, Dr. Osborne
worked extensively on the development of board and director best practices, as well as director
training and governance programs sponsored by the UCLA Anderson School of Management. Dr. Osborne
was selected by the search committee to serve as an initial director of our company upon our
emergence from chapter 11 bankruptcy because of his public company experience and governance
background. During his service on our board of directors, Dr. Osborne has gained an understanding
of our company and the environment in which we operate. Dr. Osbornes experience as a director of
public companies, as a member of various board committees of public companies, and as an educator
in the fields of business management and corporate governance allow him to draw on his experience
and offer guidance to our board of directors and management on issues that affect our company,
including governance and board best practices.
Jack Quinn
, 60, has served as a director of Kaiser since July 2006. Mr. Quinn has been the
president of Erie Community College in Buffalo, New York since April 2008. Mr. Quinn was the
President of Cassidy & Associates, a government relations firm which assists clients promoting
policy and appropriations objectives in Washington, D.C. with a focus on transportation, aviation,
railroad, highway, infrastructure, corporate and industry clients, from January 2005 to March 2008.
From January 1993 to January 2005, Mr. Quinn served as a United States Congressman for the state of
New York. While in Congress, Mr. Quinn was Chairman of the Transportation and Infrastructure
Subcommittee on Railroads. He was also a senior member of the Transportation Subcommittees on
Aviation, Highways and Mass Transit. In addition, Mr. Quinn was Chairman of the Executive Committee
in the Congressional Steel Caucus. Prior to his election to Congress, Mr. Quinn served as
supervisor of the town of Hamburg, New York. Mr. Quinn has served as a trustee of the AFL-CIO
Housing Investment Trust since 2005. Mr. Quinn received a Bachelors degree from Siena College in
Loudonville, New York, and a Masters degree from the State University of New York, Buffalo. Mr.
Quinn received honorary Doctorate of Law degrees from Medaille College and Siena College. Mr. Quinn
is also a certified school district superintendent through the New York State
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Education Department. Mr. Quinn serves on the compensation and nominating and corporate
governance committees of our board of directors. Mr. Quinn, another director selected by the search
committee to serve as an initial director of our company upon our emergence from chapter 11
bankruptcy, was selected because of his background and experience in Washington, D.C. Mr. Quinn was
designated by the USW as a director candidate in connection with the search process, and pursuant
to the terms of the Director Designation Agreement, Mr. Quinn was designated by the USW as a
director candidate in connection with our 2007 annual meeting of stockholders and again in
connection with our 2010 annual meeting of stockholders. During his service on our board of
directors, Mr. Quinn has gained an understanding of our company and the environment in which we
operate. Mr. Quinns experience in Washington, D.C., including as a U.S. Congressman, and his
working relationship with the USW allow him to offer guidance and insight to our board of directors
and management regarding government relations, policy and appropriations for defense and other
government funded programs that utilize our products and labor relations.
Thomas M. Van Leeuwen
, 54, has served as a director of Kaiser since July 2006. Mr. Van Leeuwen
served as a Director Senior Equity Research Analyst for Deutsche Bank Securities Inc. from March
2001 until his retirement in May 2002. Prior to that, Mr. Van Leeuwen served as a Director
Senior Equity Research Analyst for Credit Suisse First Boston from May 1993 to November 2000. Prior
to that time, Mr. Van Leeuwen was First Vice President of Equity Research with Lehman Brothers, and
Mr. Van Leeuwen held the positions of research analyst with Sanford C. Bernstein & Co., Inc. and
systems analyst with The Procter & Gamble Company. Mr. Van Leeuwen holds a Masters degree in
Business Administration from the Harvard Business School and a Bachelor of Science degree in
Operations Research and Industrial Engineering from Cornell University. Mr. Van Leeuwen is also a
Chartered Financial Analyst. Mr. Van Leeuwen serves on the audit, compensation and nominating and
corporate governance committees of our board of directors. Mr. Van Leeuwen was selected by the
search committee to serve as an initial director of our company upon our emergence from chapter 11
bankruptcy because of his experience working with investment banks, including as an analyst in the
aluminum industry. Mr. Van Leeuwens experience as an equity research analyst and service as a
director of our company since our emergence from chapter 11 bankruptcy allow him to provide
guidance and insight to our board of directors and management with respect to financial analyses of
our company, whether generated internally or externally, as well as other financial issues, and
with respect to the investment communitys understanding of our company.
Proposal for Advisory Vote on Executive Compensation
In accordance with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010, or the Dodd-Frank Act, we are asking stockholders to vote on an advisory, non-binding
basis resolution regarding executive compensation. The vote is not intended to address any
specific component of our executive compensation program, but rather the overall compensation of
our named executive officers as described in this Proxy Statement. The text of the resolution is as
follows:
RESOLVED, that the compensation paid to the named executive officers of Kaiser
Aluminum Corporation, as described in the proxy statement for the companys 2011
annual meeting of stockholders pursuant to Item 402 of SEC Regulation S-K (which
disclosure includes the Executive Compensation Compensation Disclosure and
Analysis section and the Summary Compensation Table and other compensation tables
and related narrative discussion within the Executive Compensation section), is
hereby APPROVED.
As described in detail in the Executive Compensation Compensation Discussion and Analysis
section of this Proxy Statement, or CD&A, our compensation structure was developed and designed to:
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attract, motivate and retain highly experienced executives vital to our short-term and
long-term success, profitability and growth;
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deliver a mix of fixed and at-risk compensation with the portion of compensation at risk
increasing with seniority;
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align the interest of our senior management and stockholders by tying a significant
portion of compensation to enhancing stockholder value; and
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tie our executive compensation to our safety performance and ability to pay.
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The compensation of our named executive officers is targeted at the 50
th
to
65
th
percentile of our compensation peer group and consists primarily of the following
components:
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a base salary targeted at the 50
th
percentile of our compensation peer group
providing a fixed amount of cash compensation upon which our named executive officers can
rely;
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a short-term annual cash incentive targeted at the 50
th
percentile of our
compensation peer group (i) payable only if the company achieves a threshold performance
level measured by economic value added, or EVA, as more fully described below, and (ii)
adjusted up or down based on our safety performance using our total case incident rate, or
TCIR; and
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a long-term incentive targeted at between the 50
th
and 65
th
percentile of our compensation peer group consisting of (1) restricted stock with
three-year cliff vesting and (2) performance shares that vest, if at all, based on the
average annual EVA achieved during a three-year performance period.
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We no longer maintain a defined benefit pension plan or retiree medical program that covers
members of senior management. Retirement benefits to our senior management, including our named
executive officers, are provided through a defined contribution retirement program consisting of a
401(k) plan (which we refer to as our Savings Plan) and a nonqualified and unsecured deferred
compensation plan intended to restore benefits that would be payable to designated participants but
for the limitations on benefit accruals and payments imposed by the Internal Revenue Code of 1986
(which we refer to as our Restoration Plan).
We do not view perquisites as a significant element of our compensation structure and our use
of perquisites as an element of compensation is very limited and largely based on business-related
needs.
For 2010, approximately 70% of our chief executive officers target total compensation, and
approximately 60% to 70% of the target total compensation of our other named executive officers,
consisted of at risk compensation, which we define as compensation that either (1) will be
realized, if at all, only if certain financial performance levels are achieved as in the case of
our annual short-term incentive and the portion of our long-term incentive consisting of
performance shares or (2) is substantially impacted by the
overall performance of the company as in
the case of the portion of our long-term incentive compensation consisting of restricted stock.
We use EVA as the performance measure to determine our annual short-term incentive and the
number of performance shares, if any, vesting at the end of the three-year performance period under
our long-term incentive compensation program. We calculate EVA using the pre-tax adjusted
operating income of our core Fabricated Products business, including corporate expenses, less a
capital charge calculated as a percentage of adjusted net assets. The calculation of EVA for
purposes of our annual short-term incentive and the determination of the number of performance
shares, if any, vesting under our long-term incentive compensation program is the same with the
exception of (1) the use of a higher capital charge in connection with the long-term incentive to
reflect the higher level of performance we believe should be required after considering the use of
time based restricted shares and (2) the use of the average annual EVA over a three-year
performance period in connection with the long-term incentive. As calculated, we believe EVA
measures the return on net assets employed in our business and is an appropriate measure of the
creation of short and long term shareholder value under our incentive programs.
Our compensation structure further aligns the interest of our senior management and
stockholders by the use of:
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stock ownership guidelines that require our chief executive officer to own company
stock equal in value to at least five times his annual base salary and each of the
direct reports to the chief executive officer, including each of our
other named executed
officers, and other members of senior
management, to hold company stock equal in value to at least three times their annual
base salary;
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three-year vesting and performance periods for our restricted stock and performance
shares granted to our named executive officers and other members of senior management,
to ensure that three years of unvested grants are outstanding at any time, increase
retention and encourage decisions that create long term value; and
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clawback provisions that can result in the loss of equity-based awards and
resulting benefits if we determine that a recipient, including any of
our named
executive officers, has engaged in activities detrimental to us.
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In November 2010, we successfully extended the term of the employment agreement with Mr.
Hockema, our Chief Executive Officer, and amended his agreement to, among other things, (1)
eliminate the automatic renewal, or evergreen, provision, (2) eliminate our obligation to make
federal excise tax gross-up payments and (3) increase the at risk portion of his annual long term
incentive compensation by increasing the portion of his annual equity awards in the form of
performance shares from 50% to 64% of the target economic value and reduce the portion of his
annual equity awards in the form of restricted stock from 50% to 36% of the target economic value.
We urge our stockholders to review our CD&A which describes our compensation philosophy and
programs in detail and to approve the compensation of our named executive officers. While this
vote on executive compensation is non-binding and solely advisory in nature, our board of directors
and the compensation committee value the opinions that our stockholders express in their votes and
will consider the outcome of the vote when determining future executive compensation programs.
The board of directors recommends a vote FOR approval of the compensation of our named
executive officers as disclosed in this Proxy Statement.
Proposal for Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation
In accordance with the Dodd-Frank Act, we are asking stockholders to vote on an advisory,
non-binding resolution regarding the frequency of future advisory votes on executive compensation.
The vote is intended to obtain the recommendation of stockholders as to whether an advisory vote on
the compensation of our named executive officers should occur every one, two, or three years.
RESOLVED, that a non-binding, advisory vote of the companys stockholders to approve
the compensation of the companys named executive officers, as disclosed in the
companys proxy statement pursuant to Item 402 of SEC Regulation S-K, be held at the
annual meeting of stockholders with the frequency (
i.e.
, every 1 year, every 2 years
or every 3 years) for which the highest number of votes are cast at the companys
2011 annual meeting of stockholders.
After careful consideration of this proposal, our board of directors has determined that an
annual advisory vote on the compensation of our named executive officers is the most appropriate
alternative for our company. We believe that an annual advisory vote on executive compensation
will (1) allow us to obtain information on stockholders views on executive compensation on a more
consistent basis, (2) provide our board of directors and compensation committee with frequent input
from stockholders on executive compensation, and (3) advance our policy of seeking input from, and
engaging in discussions with, our stockholders on corporate governance matters and our executive
compensation philosophy, policies and practices. Accordingly, our board of directors recommends
the submission to our stockholders of an advisory vote on executive compensation on an annual
basis.
While this vote on the frequency of future advisory votes on executive compensation is
non-binding and solely advisory in nature, our board of directors and the compensation committee
value the opinions that our stockholders express in their votes and will consider the outcome of
the vote when determining the frequency of future advisory votes on the compensation of our named
executive officers.
The board of directors recommends a vote for the option of EVERY ONE YEAR as the frequency
of future advisory votes on the compensation of our named executive officers.
Proposal for Ratification of the Selection of our Independent Registered Public Accounting Firm
Pursuant to the audit committee charter, the audit committee has the sole authority to retain
an independent registered public accounting firm for our company. The board of directors requests
that the stockholders ratify the audit committees selection of Deloitte & Touche LLP as our
independent registered public accounting firm for 2011.
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The audit committee will not be bound by the ratification of, or failure to ratify, the
selection of Deloitte & Touche LLP, but the audit committee will consider any failure to ratify the
selection of Deloitte & Touche LLP in connection with the appointment of our independent registered
public accounting firm for 2012.
The board of directors recommends a vote FOR ratification of the audit committees selection
of Deloitte & Touche LLP as our independent registered public accounting firm for 2011.
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CORPORATE GOVERNANCE
Our board of directors is responsible for providing effective governance over the affairs of
our company. Our corporate governance practices are designed to align the interests of the board of
directors and management with those of our stockholders and to promote honesty and integrity
throughout the company. Highlights of our corporate governance practices are described below.
A copy of the current charter, as approved by our board of directors, for each of the
executive committee, audit committee, compensation committee and nominating and corporate
governance committee and a copy of our corporate governance guidelines and code of business conduct
and ethics, which applies to all of our employees, including our executive officers, are available
on our Internet website at
www.kaiseraluminum.com
under Investor Relations Corporate
Governance. Copies are also available to stockholders upon request from our Corporate
Communications Department, Kaiser Aluminum Corporation, 27422 Portola Parkway, Suite 200, Foothill
Ranch, CA 92610-2831. Furthermore, we will post any amendments to our Code of Business Conduct and
Ethics, or waivers of the Code for our directors or executive officers, on our Internet website at
www.kaiseraluminum.com
under Investor Relations Corporate Governance.
Stockholder Communications with the Board of Directors
Stockholders may communicate with our board of directors as a group or with the chair of the
executive committee, audit committee, compensation committee or nominating and corporate governance
committee by sending an email to boardofdirectors@kaiseraluminum.com, execchair@kaiseraluminum.com,
auditchair@kaiseraluminum.com, compchair@kaiseraluminum.com, or nominatingchair@kaiseraluminum.com,
respectively, or by writing to such group or person at Kaiser Aluminum Corporation, Attn: Corporate
Secretary (Board of Directors), 27422 Portola Parkway, Suite 200, Foothill Ranch, California
92610-2831. Communications that are intended specifically for any other group of directors or for
any individual director, such as the independent directors as a group or the Lead Independent
Director, should be sent to the attention of our corporate secretary at the address above or via
email to corpsecretary@kaiseraluminum.com and should clearly state the individual director or group
of directors that is the intended recipient of the communication.
Our corporate secretary will review each communication and determine whether or not the
communication is appropriate for delivery. Communications that, in the judgment of our corporate
secretary, are clearly of a marketing nature, that advocate that our company engage in illegal
activity, that do not reasonably relate to our company or our business or that are similarly
inappropriate will not be furnished to the intended recipient. If, in the judgment of the corporate
secretary, any communication pertains to an accounting matter, it will be forwarded to our
compliance officer.
Communications that, in the judgment of our corporate secretary, are appropriate for delivery
will, unless requiring immediate attention, be assembled and delivered to the intended recipients
on a periodic basis, generally at or in advance of each regularly scheduled meeting of our board of
directors. Any communication that, in the judgment of our corporate secretary, requires immediate
attention will be promptly delivered. In no case will the corporate secretary provide anyone but a
member of our board of directors with access to any such communication.
Board and Committee Meetings and Consents in 2010
During 2010, our board of directors held five meetings and acted by unanimous written consent
four times. In addition to meetings of the full board of directors, directors attended meetings of
board of directors committees. Each incumbent director attended at least 75% of the aggregate
number of meetings of the full board of directors held during the period he or she was a director
in 2010 and each committee on which he or she served held during the period he or she served on
such committee in 2010.
Annual Meetings of Stockholders
Members of our board of directors are expected to make reasonable efforts to attend our annual
meetings of stockholders. All directors then serving attended our 2010 annual meeting of
stockholders.
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Director Independence
Our corporate governance guidelines require that a majority of the members of our board of
directors satisfy the independence requirements set forth in the Nasdaq Marketplace Rules and other
applicable criteria of the Financial Industry Regulatory Authority, or FINRA. We refer to these
requirements as the general independence criteria. Additionally, the audit committee charter,
compensation committee charter and nominating and corporate governance committee charter require
that all respective committee members satisfy the general independence criteria. There are no
family relationships among our officers or directors.
Based upon information requested from and provided by each director concerning his or her
background, employment and affiliations, including family relationships, our board of directors has
determined that each of Mmes. Bartholomew, Hopp and Martin and Messrs. Foster, Murdy, Osborne,
Quinn, Van Leeuwen and Wilcox, representing nine of our 10 directors, satisfies the general
independence criteria and is independent within the meaning of such term under our corporate
governance guidelines. The tenth director, Mr. Hockema, cannot meet the independence requirement as
our President and Chief Executive Officer. In making such determination, the board of directors
considered the relationships that each of the directors had with our company and all other facts
and circumstances the board of directors deemed relevant in determining the independence of each of
the directors in accordance with the general independence criteria.
Annual Performance Reviews
Under our corporate governance guidelines, our board of directors is required to conduct an
annual self-evaluation to determine whether the board of directors and its committees are
functioning effectively. Additionally, the charter for each committee of the board of directors
requires each committee to annually evaluate its performance. In addition to the evaluation
performed by the nominating and corporate governance committee with respect to whether an incumbent
director should be nominated for re-election to the board of directors upon expiration of such
directors term, the chair of the nominating and corporate governance committee conducts
performance reviews of individual directors.
Stock Ownership Guidelines
Our stock ownership guidelines require our non-employee directors to own company stock equal
to five times their annual base retainer within five years of becoming a member of our board of
directors. For purposes of measuring our non-employee directors compliance with our stock
ownership guidelines, restricted stock is valued at the closing price of our common stock on the
grant date and all other shares of common stock purchased or acquired are valued at the purchase
price of such shares. Currently, each of our non-employee directors, except for Mr. Foster, who
was elected to our board of directors in June 2009, and Ms. Martin, who was appointed to our board
of directors in September 2010, satisfies the applicable stock ownership requirements under the
stock ownership guidelines. We expect Mr. Foster and Ms. Martin to meet the stock ownership
requirements under the stock ownership guidelines within the applicable five-year periods.
Director Designation Agreement
On July 6, 2006, we entered into a Director Designation Agreement with the USW under which the
USW has certain rights to designate for nomination individuals to serve on our board of directors
and committees. In January 2010, in connection with the renewal and ratification of a labor
agreement with the members of the USW at our Newark, Ohio and Spokane, Washington facilities, we
agreed with the USW to extend its rights under the Director Designation Agreement until September
30, 2015. Under the Director Designation Agreement, the USW has the right to designate for
nomination the minimum number of director candidates necessary to ensure that, assuming the
nominated candidates are elected by our stockholders, at least 40% of the members of our board of
directors immediately following the election are directors who have been nominated by the USW in
accordance with the Director Designation Agreement. The Director Designation Agreement contains
requirements as to the timeliness, form and substance of the notice the USW must give to the
nominating and corporate governance committee in order to nominate candidates. The nominating and
corporate governance committee is required to determine in good faith whether each properly
submitted candidate satisfies the qualifications set forth in the Director Designation Agreement.
If the nominating and corporate governance committee determines that a nominated candidate
satisfies the qualifications, the committee will, unless otherwise required by its fiduciary
duties, recommend the candidate to our board of directors for inclusion in the slate of directors
to be recommended by the board of directors in our proxy statement. The board of directors will,
unless otherwise required by its fiduciary duties, accept the recommendation and include the
candidate in the slate of directors that the board of directors recommends.
15
The Director Designation Agreement also provides that the USW will have the right to nominate
an individual to fill a vacancy on the board of directors resulting from the death, resignation,
disqualification or removal of a director nominated by the USW. The Director Designation Agreement
further provides that, in the event of newly created directorships resulting from an increase in
the number of our directors, the USW will have the right to nominate the minimum number of
individuals to fill the newly created directorships necessary to ensure that at least 40% of the
members of the board of directors immediately following the filling of the newly created
directorships are directors who have been nominated by the USW. In each case, the USW, the
nominating and corporate governance committee and the board of directors will be required to follow
the nomination and approval procedures described above.
A candidate nominated by the USW may not be an officer, employee, director or member of the
USW or any of its local or affiliated organizations as of the date of his or her designation as a
candidate or election as a director. Each candidate nominated by the USW must also satisfy:
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the general independence criteria;
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the qualifications to serve as a director as set forth in any applicable corporate
governance guidelines adopted by the board of directors and policies adopted by the
nominating and corporate governance committee establishing criteria to be utilized by it
in assessing whether a director candidate has appropriate skills and experience; and
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any other qualifications to serve as director imposed by applicable law.
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Finally, the Director Designation Agreement provides that, so long as our board of directors
maintains an audit committee, executive committee or nominating and corporate governance committee,
each of these committees will, unless otherwise required by the fiduciary duties of the board of
directors, include at least one director nominated by the USW (provided at least one director
nominated by the USW is qualified to serve on the applicable committee as determined in good faith
by the board of directors). Current members of our board of directors that have been nominated by
the USW are Ms. Bartholomew and Messrs. Foster, Quinn and Wilcox.
Board Leadership Structure and Risk Oversight
Mr. Hockema, our President and Chief Executive Officer, serves as the Chairman of the Board,
and Dr. Osborne serves as our Lead Independent Director. We believe that Mr. Hockemas experience
with our company and in the metals industries, the independence of the other directors, our
governance structure and the interaction between and among Mr. Hockema, our Lead Independent
Director and the other directors make our board leadership structure the most appropriate for our
company and our stockholders. As a result of his substantial experience with our company and in the
metals industries, Mr. Hockema is uniquely qualified to provide clear leadership for our company
and a single point of accountability. Our corporate governance guidelines and governance structure
require an Independent Lead Director selected by a majority of the independent directors, thereby
ensuring that there is independent leadership within our board of directors and allowing our
independent directors to function as a body distinct from management and to evaluate the
performance of Mr. Hockema and our management independently and objectively. In addition, each of
the audit, compensation and nominating and corporate governance committees consist solely of
independent directors.
Under our corporate governance guidelines, each member of our board of directors may submit
items to be included on the agenda for any meeting of our board of directors and raise subjects
that are not on the agenda at any meeting of our board of directors, and our independent directors
are required to meet at least quarterly in executive sessions at which only independent directors
are present. Our Lead Independent Director establishes the agenda for executive sessions, may call
a meeting of independent directors upon the request of a majority of independent directors and
serves as a liaison between our independent directors and our chief executive officer. Our Lead
Independent Director has other responsibilities that the independent directors designate, presides
at meetings of our independent directors, solicits advice and input from our independent board
members, and routinely meets and confers with our chief executive officer to address comments,
issues and areas of interest expressed or identified by our independent directors, to assess the
governance of our board of directors and our company, and to review board responsibilities, meeting
schedules, meeting agenda and information requested or otherwise provided to our directors
routinely or in connection with meetings of our board of directors.
16
Our directors also have full access to our officers, employees and advisors. The nominating
and corporate governance committee of our board of directors is specifically charged with
responsibility for, among other things, identifying new director candidates, evaluating incumbent
directors, evaluating our chief executive officer, evaluating stockholder recommendations,
recommending nominees for election at annual stockholder meetings, reviewing our corporate
governance guidelines and assisting in management succession. We also encourage direct
communication among our directors and with our chief executive officer before, during and after
formal board and committee meetings and facilitate those communications around our scheduled
meetings. The chair of each committee of our board of directors serves as a liaison to keep the
full board of directors and our chief executive officer apprised of the work performed by such
committee at each of our regularly scheduled board meetings and as otherwise required. Finally,
under our Bylaws, special meetings of our board of directors may be called by a majority of the
board members, nine of 10 of whom are currently independent.
We believe that our board of directors provides effective oversight of the risk management
function. Under its charter, the audit committee of our board of directors is responsible for
discussing our guidelines and policies with respect to risk assessment and risk management,
including, without limitation, the steps taken or to be taken by management to monitor and control
our major financial risk exposures. In addition, our board of directors is actively engaged in the
review and assessment of our risk identification, assessment and management practices, conducts a
comprehensive review at least annually during a regularly scheduled board meeting and routinely
requests specific risk-related items to be included on board and committee meeting agendas. We
formally review enterprise risk management with our board of directors not less than annually and
have programs in place to identify, assess and evaluate potential risks and review policies and
procedures designed to mitigate such risks. In 2009, we began an enterprise risk management project
to formally identify, categorize and assess our risks and risk mitigation strategies and routinely
report the status of the project to the audit committee and the full board of directors. This
process is continuing.
Risks Arising from Compensation Policies and Practices
Our compensation policies and practices, discussed more fully below, are designed to create
and maintain alignment between our employees and stockholders by rewarding employees, including our
senior management, for achieving strategic goals that successfully drive our operations and enhance
stockholder value and to preclude the taking of unreasonable risk through the use of incentive
compensation that rewards decisions that result in strong performance in both the short- and
long-term. We do not believe that our compensation policies and practices for our employees are
likely to have a material adverse effect on our company. Our determination is based on, among
other factors, the following:
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Potential payouts under our incentive plans are capped, and overall variable
compensation does not materially impact our financial results;
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Our overall compensation is comprised of a mix of long- and short-term compensation
which discourages short-term decisions that could be at the expense of long-term results;
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A significant portion of the variable compensation is in the form of restricted stock
and performance shares with three-year vesting and performance periods, which ensure that
three years of unvested grants are outstanding at any time and encourage decisions that
create long-term value;
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The grant documents used in connection with our long-term incentive program contain
clawback provisions, described in more detail in the Executive Compensation
Employment-Related Agreements and Certain Employee Benefit Plans Equity Incentive Plan
section of this Proxy Statement, which provide for the forfeiture of outstanding unvested
awards, the return of vested awards the participant has not disposed of and, with respect
to disposed awards, the return of the market value of those shares on the date they were
acquired, if we determine that the participant has engaged in certain activities
detrimental to us;
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Our short-term incentive plan requires the attainment of a threshold company
performance level before any payments are earned, thereby tying
performance to our ability to pay;
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Our stock ownership guidelines require our board of directors and senior management
to retain significant equity interests in our company to ensure the ongoing alignment of
senior management and our stockholders; and
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Policies that prohibit our senior management from engaging in any
speculative transactions involving our securities.
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Board Committees
Currently, we have four standing committees of the board of directors: an executive committee;
an audit committee; a compensation committee; and a nominating and corporate governance committee.
Executive Committee
The executive committee of our board of directors manages our business and affairs requiring
attention prior to the next regular meeting of our board of directors. However, the executive
committee does not have the power to (1) approve or adopt, or recommend to our stockholders, any
action or matter expressly required by law to be submitted to our stockholders for approval, (2)
adopt, amend or repeal any bylaw of our company, or (3) take any other action reserved for action
by the board of directors pursuant to a resolution of the board of directors or otherwise
prohibited to be taken by the executive committee by law or pursuant to our certificate of
incorporation or bylaws.
The executive committee charter requires that a majority of the members of the executive
committee satisfy the general independence criteria. In addition, the members of the executive
committee must include the Chairman of the Board and at least one of the directors nominated by the
USW.
The executive committee currently consists of Messrs. Hockema and Wilcox and Ms. Hopp. Mr.
Hockema currently serves as the chair. During 2010, the executive committee held two meetings and
acted six times by unanimous written consent.
Audit Committee
The audit committee of our board of directors oversees our accounting and financial reporting
practices and processes and the audits of our financial statements on behalf of our board of
directors. The audit committee is responsible for appointing, compensating, retaining and
overseeing the work of our independent auditors. Other duties and responsibilities of the audit
committee include:
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establishing hiring policies for employees or former employees of the independent
auditors;
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reviewing our systems of internal accounting controls;
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discussing risk management policies;
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approving related-party transactions;
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establishing procedures for complaints regarding financial statements or accounting
policies; and
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performing other duties delegated to the audit committee by our board of directors
from time to time.
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The audit committee charter requires that all members of the audit committee satisfy the
general independence criteria. The charter also requires that no audit committee member may have
participated in the preparation of our financial statements during the three years prior to his or
her appointment as a member and that each audit committee member be able to read and understand
fundamental financial statements, including a balance sheet, an income statement and a cash flow
statement. Additionally, at least one member of the audit committee must have had past employment
experience in finance or accounting, requisite professional certification in accounting, or any
other comparable experience which results in that individuals financial sophistication, including
being or having been a chief executive officer, chief financial officer or other senior officer
with financial oversight responsibilities and that member or another member must have sufficient
education or experience to have acquired the attributes necessary to meet the criteria of an audit
committee financial expert, as that term is defined in the rules promulgated by the Securities and
Exchange Commission, or the SEC. In addition, the members of the audit committee must include at
least one of the directors nominated by the USW.
18
The audit committee consists of Mmes. Hopp, Bartholomew and Martin and Messrs. Osborne, Van
Leeuwen and Wilcox. Ms. Hopp currently serves as the chair. Our board of directors has determined
that all six members of the audit committee (1) meet the general independence criteria, as well as
the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of
1934, and (2) are able to read and understand fundamental financial statements. Our board of
directors also determined that no member of the audit committee participated in the preparation of
our financial statements during the three years prior to their appointment as members of the
committee. Finally, our board of directors has determined that Mmes. Hopp and Martin and Mr. Wilcox
satisfy the financial sophistication criteria described above and satisfy the criteria necessary to
serve as the audit committee financial expert, in each case based on his or her experience
described in Proposals Requiring Your Votes Proposal for Election of Directors above.
During 2010, the audit committee held eight meetings.
Compensation Committee
General
The compensation committee of our board of directors establishes and administers our policies,
programs and procedures for compensating our senior management, including determining and approving
the compensation of our executive officers. Other duties and responsibilities of the compensation
committee include:
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administering plans adopted by our board of directors that contemplate administration
by the compensation committee, including our Amended and Restated 2006 Equity and
Performance Incentive Plan (referred to herein as our Equity Incentive Plan);
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overseeing regulatory compliance with respect to compensation matters;
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reviewing director compensation; and
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performing other duties delegated to the compensation committee by our board of
directors from time to time.
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The compensation committee solicits the views of our chief executive officer on compensation
matters, including as they relate to our compensation of the other members of senior management
reporting to the chief executive officer. The compensation committee has retained Meridian
Compensation Partners, LLC, a spin-off of Hewitt Associates, LLC, our compensation consultant prior
to 2010 (both referred to herein as Meridian) to advise the compensation committee on all matters
related to compensation of our chief executive officer and other members of senior management.
Meridians services in this regard include (1) providing competitive market data and related
assessments of executive compensation as background against which the compensation committee
considers executive compensation, (2) preparing and reviewing tally and compensation summary sheets
for our named executive officers, (3) apprising the compensation committee of trends and best
practices associated with executive and director compensation, (4) providing support with respect
to legal, regulatory and accounting considerations impacting compensation and benefit programs, and
(5) attending meetings of the compensation committee and our board of directors when requested.
These services are typically directed by the compensation committee and coordinated with our human
resources department.
The compensation committee charter requires that all members of the compensation committee
satisfy the general independence criteria, as well as qualify as non-employee directors within
the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934.
The compensation committee currently consists of Messrs. Murdy, Quinn and Van Leeuwen and Ms.
Martin. Mr. Murdy currently serves as the chair. During 2010, the compensation committee held seven
meetings and acted once by unanimous written consent.
Compensation Committee Interlocks and Insider Participation
During 2010, Messrs. Murdy, Quinn and Van Leeuwen and Ms. Martin (who joined our board of
directors in September 2010) served as members of the compensation committee. None of the members
of the compensation
19
committee (1) was an officer or employee of our company during the year, (2) was formerly an
officer of our company, or (3) had any relationships requiring disclosure by us under the SECs
rules with respect to certain relationships and related-party transactions.
Furthermore, none of our executive officers serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers serving on our board
of directors or compensation committee.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee of our board of directors identifies
individuals qualified to become members of our board of directors, recommends candidates to fill
vacancies and newly-created positions on our board of directors, recommends director nominees for
election by stockholders at the annual meetings of stockholders and develops and recommends to our
board of directors our corporate governance principles.
We believe that the nominating and corporate governance committee considers an appropriate
range of criteria in assessing candidates for a position on the board of directors. Our corporate
governance guidelines require that the criteria utilized by the corporate governance committee in
assessing such candidates include factors such as judgment, diversity, integrity, experience with
businesses and other organizations of comparable size, the interplay of a candidates experience
with the experience of other members of the board of directors and anything else that may bear upon
the extent to which a candidate would be a desirable addition to our board of directors and any
committees of our board of directors. The policies relating to the recommendation of director
candidates adopted by the nominating and corporate governance committee are designed to ensure
flexibility with respect to the process of evaluating candidates and do not establish specific
minimum qualifications that an individual must meet to become a member of our board of directors.
The nominating and corporate governance committee believes that our company is best served when it
can draw from a variety of experiences and backgrounds provided by members of our board of
directors. However, the nominating and corporate governance committee also believes that our
company is best served when each member of the board of directors:
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exhibits strong leadership in his or her particular field or area of expertise;
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possesses the ability to exercise sound business judgment;
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has a strong educational background or equivalent life experiences;
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has substantial experience both in the business community and outside the business
community;
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contributes positively to the existing collaborative culture among members of the
board of directors;
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represents the best interests of all of our stockholders and not just one particular
constituency;
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has experience as a senior executive of a company of significant size or prominence
or another business or organization comparable to our company;
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possesses skills and experience which make him or her a desirable addition to a
standing committee of the board of directors;
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consistently demonstrates integrity and ethics in his or her professional and
personal life; and
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has the time and ability to participate fully in activities of the board of
directors, including attendance at, and active participation in, meetings of our board of
directors and the committee or committees of which he or she is a member.
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Other duties and responsibilities of the nominating and corporate governance committee
include:
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assisting in succession planning;
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considering possible conflicts of interest of members of our board of directors and
management and making recommendations to prevent, minimize or eliminate such conflicts of
interests;
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evaluating whether an incumbent director should be nominated for re-election to our
board of directors upon expiration of the incumbents term;
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making recommendations to our board of directors regarding the appropriate size of
our board of directors; and
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performing other duties delegated to the nominating and corporate governance
committee by our board of directors from time to time.
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The nominating and corporate governance committee has adopted policies and procedures by which
our stockholders may submit director candidates to the nominating and corporate governance
committee for consideration. If the nominating and corporate governance committee receives, by a
date not less than 120, nor more than 150, calendar days before the anniversary of the date that
the proxy statement was mailed to stockholders in connection with our previous years annual
meeting, a recommendation for a director nominee from a stockholder or group of stockholders that
beneficially owned more than 5% of our outstanding common stock for at least one year as of the
date of the recommendation, then such director candidate will be considered and evaluated by the
nominating and corporate governance committee for the annual meeting immediately succeeding the
date that proper written notice was timely delivered to and received by the nominating and
corporate governance committee. When the date of our annual meeting of stockholders changes by more
than 30 calendar days from the previous years annual meeting, the written notice of the
recommendation for the director candidate will be considered timely if, and only if, it is received
by the nominating and corporate governance committee no later than the close of business on the
tenth calendar day following the first day on which notice of the date of the upcoming annual
meeting is publicly disclosed by us.
Written notice from an eligible stockholder or group of eligible stockholders to the
nominating and corporate governance committee recommending a director candidate must contain or be
accompanied by:
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proof that the stockholder or group of stockholders submitting the recommendation has
beneficially owned, for the required one-year holding period, more than 5% of our
outstanding common stock;
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a written statement that the stockholder or group of stockholders intends to continue
to beneficially own more than 5% of our outstanding common stock through the date of the
next annual meeting of stockholders;
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the name and record address of each stockholder submitting a recommendation for the
director candidate, the written consent of each such stockholder and the director
candidate to be publicly identified (including, in the case of the director candidate, to
be named in the companys proxy materials) and the written consent of the director
candidate to serve as a member of our board of directors (and any committee of our board
of directors to which the director candidate is assigned to serve by our board of
directors) if elected;
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a description of all arrangements or understandings between or among any of the
stockholders or group of stockholders submitting the recommendation, the director
candidate and any other person or persons (naming such person or persons) pursuant to
which the submission of the recommendation is to be made by such stockholder or group of
stockholders;
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with respect to the director candidate, (1) his or her name, age, business and
residential address and principal occupation or employment, (2) the number of shares of
our common stock beneficially owned by him or her, (3) a resume or similar document
detailing his or her personal and professional experiences and accomplishments, and (4)
all other information relating to the candidate that would be required to be disclosed in
a proxy statement or other filing made in connection with the solicitation of proxies for
the election of directors pursuant to the Securities Exchange Act of 1934, the rules of
the SEC, the Nasdaq Marketplace Rules or other applicable criteria of FINRA; and
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a written statement that each submitting stockholder and the director candidate shall
make available to the nominating and corporate governance committee all information
reasonably requested in connection with the committees evaluation of the candidate.
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The notice must be signed by each stockholder submitting the proposal and the director candidate.
The notice must be sent to the following address by registered or certified mail: Kaiser Aluminum
Corporation, Attn: Corporate Secretary (Nominating and Corporate Governance Committee), 27422
Portola Parkway, Suite 200, Foothill Ranch, California 92610-2831.
The nominating and corporate governance committee charter requires that all members of the
nominating and governance committee satisfy the general independence criteria. In addition, the
members of the nominating and corporate governance committee must include at least one of the
directors nominated by the USW so long as at least one such director is appropriately qualified.
The nominating and corporate governance committee currently consists of Ms. Bartholomew and
Messrs. Foster, Murdy, Osborne, Quinn and Van Leeuwen. Dr. Osborne currently serves as the chair.
During 2010, the nominating and corporate governance committee held four meetings.
EXECUTIVE OFFICERS
The following table sets forth the names and ages of each of our current executive officers
and the positions they hold.
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Name
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Age
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Position(s)
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Jack A. Hockema
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64
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President, Chief Executive Officer and Chairman of
the Board; Director
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Daniel J. Rinkenberger
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52
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Senior Vice President and Chief Financial Officer
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John Barneson
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60
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Senior Vice President Corporate Development
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John M. Donnan
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50
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Senior Vice President, Secretary and General Counsel
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James E. McAuliffe, Jr.
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65
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Senior Vice President Human Resources
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Melinda C. Ellsworth
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52
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Vice President and Treasurer
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Neal E. West
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52
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Vice President and Chief Accounting Officer
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Set forth below are brief descriptions of the business experience of each of our executive
officers.
Jack A. Hockema
has served as our President and Chief Executive Officer and a director since
October 2001 and as Chairman of the Board since July 2006. He previously served as Executive Vice
President of Kaiser Aluminum Corporation (referred to herein as Kaiser) and President of the Kaiser
Fabricated Products division from January 2000 to October 2001, and Executive Vice President of
Kaiser from May 2000 to October 2001. He served as Vice President of Kaiser from May 1997 to May
2000. Mr. Hockema was President of Kaiser Engineered Products from March 1997 to January 2000. He
served as President of Kaiser Extruded Products and Engineered Components from September 1996 to
March 1997. Mr. Hockema served as a consultant to Kaiser and acting President of Kaiser Engineered
Components from September 1995 to September 1996. Mr. Hockema was an employee of Kaiser from 1977
to 1982, working at our Trentwood facility, and serving as plant manager of our former Union City,
California can plant and as operations manager for Kaiser Extruded Products. In 1982, Mr. Hockema
left Kaiser to become Vice President and General Manager of Bohn Extruded Products, a division of
Gulf+Western, and later served as Group Vice President of American Brass Specialty Products until
June 1992. From June 1992 to September 1996, Mr. Hockema provided consulting and investment
advisory services to individuals and companies in the metals industry. We and certain of our
subsidiaries filed for chapter 11 bankruptcy in 2002, while Mr. Hockema served as our President and
Chief Executive Officer. Mr. Hockema served on the board of directors of Clearwater Paper Corp.
from December 2008 to June 2009. He holds a Master of Science degree in Industrial Management and a
Bachelor of Science degree in Civil Engineering, both from Purdue University. Mr. Hockema has more
than 20 years of experience with Kaiser and another 19 years in the metals industries, and, as a
result, has a depth of experience in the aluminum and metals industries. As the only management
representative on the board of directors, Mr. Hockema provides an insiders perspective in board of
directors discussions about our business and strategic direction for our company.
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Daniel J. Rinkenberger
has served as our Senior Vice President and Chief Financial Officer
since April 2008. Mr. Rinkenberger served as our Vice President from January 2005 to April 2008 and
as our Treasurer from January 2005 to July 2008. Prior to January 2005, he served as our Vice
President of Economic Analysis and Planning from February 2002. He served as Vice President,
Planning and Business Development of the Kaiser Fabricated Products division from June 2000 through
February 2002. Prior to that, he served as Vice President, Finance and Business Planning of the
Kaiser Flat-Rolled Products division from February 1998 to February 2000, and as our Assistant
Treasurer from January 1995 through February 1998. Before joining Kaiser, he held a series of
positions of increasing responsibility in the Treasury Department at Pennzoil Corporation. He holds
a Master of Business Administration degree in finance from the University of Chicago and a Bachelor
of Education degree from Illinois State University. He is a Chartered Financial Analyst.
John Barneson
has served as our Senior Vice President Corporate Development since December
2007. He previously served as our Senior Vice President and Chief Administrative Officer from
August 2001 to December 2007 and as our Vice President and Chief Administrative Officer from
December 1999 through August 2001. He served as Engineered Products Vice President of Business
Development and Planning from September 1997 to December 1999. Mr. Barneson served as Flat-Rolled
Products Vice President of Business Development and Planning from April 1996 to September 1997. Mr.
Barneson has been an employee of Kaiser since September 1975 and has held a number of staff and
operation management positions within the Flat-Rolled and Engineered Products business units. He
holds a Master of Science degree and a Bachelor of Science degree in Industrial Engineering from
Oregon State University.
John M. Donnan
has served as our Senior Vice President, Secretary and General Counsel since
December 2007. He previously served as our Vice President, Secretary and General Counsel from
January 2005 to December 2007. Mr. Donnan joined the legal staff of Kaiser in 1993 and was named
Deputy General Counsel of Kaiser in 2000. Prior to joining Kaiser, Mr. Donnan was an associate in
the Houston, Texas office of the law firm of Chamberlain, Hrdlicka, White, Williams & Martin. He
holds a Juris Doctorate degree from the University of Arkansas School of Law and Bachelor of
Business Administration degrees in finance and accounting from Texas Tech University. He is a
member of the Texas and California bars.
James E. McAuliffe, Jr.
has served as our Senior Vice President Human Resources since
December 2007. He previously served as our Vice President Human Resources from January 2002 to
December 2007. Mr. McAuliffe joined Kaiser in 1998 as Vice President Human Resources for our
fabricating business. Prior to joining Kaiser, Mr. McAuliffe served as Vice President of Human
Resources for Rexam, Inc., a manufacturer of industrial coatings for graphics, photographic and
computer industries and J.P Industries, a manufacturer of automotive engine and transmission
components. He holds a Bachelor of Arts degree in Labor Relations and Industrial Psychology from
Michigan State University and attended graduate school at Central Michigan University.
Melinda C. Ellsworth
has served as our Vice President and Treasurer since July 2008. Prior to
joining Kaiser, Ms. Ellsworth was Vice President, Treasurer and Investor Relations at HNI
Corporation, a leading provider of office furniture and hearth products, from February 2002 to May
2007. From May 1998 to January 2002, she served in several roles with Sunbeam Corporation, ending
her tenure as Vice President, International Finance and Treasury. She additionally has over a
decade of experience in commercial banking. She holds a Bachelor of Business Administration degree
in accounting from St. Bonaventure University and is a Certified Public Accountant (inactive).
Neal E. West
has served as our Vice President and Chief Accounting Officer since June 2008.
Prior to joining Kaiser, Mr. West served as the Principal Accounting Officer of Gateway, Inc. from
June 2005 to May 2008. Mr. West was also the Vice President and Corporate Controller of Gateway,
Inc. from April 2005 to May 2008. Prior to joining Gateway, Inc., Mr. West was the Vice President
and Controller for APL Logistic, Ltd. from April 2000 to April 2005. In addition, Mr. West has held
a number of finance, service and support positions at APL Ltd. Mr. West also previously worked for
Standard Pacific and West-Tronics, Inc. as Division Controller and Financial Manager. Mr. West is a
Certified Public Accountant and a Certified Management Accountant and holds a Master of Science
degree in information systems from Roosevelt University and a Bachelor of Science degree in
accounting and business administration from Illinois State University.
23
EXECUTIVE COMPENSATION
Compensation Committee Report
The compensation committee has reviewed and discussed with management the compensation
discussion and analysis section included below. Based on its review and discussions with
management, the compensation committee recommended to the board of directors that such compensation
discussion and analysis be included in this Proxy Statement.
This report is submitted by the members of the compensation committee of the board of
directors:
|
|
|
|
|
Compensation Committee
|
|
|
William F. Murdy (Chair)
|
|
|
Lauralee E. Martin
|
|
|
Jack Quinn
|
|
|
Thomas M. Van Leeuwen
|
Compensation Discussion and Analysis
Introduction
This section provides (1) an overview of the compensation committee, (2) a discussion of the
objectives of our comprehensive compensation structure and the design of our overall 2010
compensation program for senior management, and (3) a discussion of all material elements of 2010
compensation for each of our named executive officers whose names and titles are set forth in the
following table:
|
|
|
Name
|
|
Title
|
Jack A. Hockema
|
|
President and Chief Executive Officer (principal executive officer)
|
Daniel J. Rinkenberger
|
|
Senior Vice President and Chief Financial Officer (principal financial officer)
|
John Barneson
|
|
Senior Vice President Corporate Development
|
John M. Donnan
|
|
Senior Vice President, Secretary and General Counsel
|
James E. McAuliffe, Jr.
|
|
Senior Vice President Human Resources
|
In addition to base salary, the key components of our 2010 compensation program were:
|
|
|
A cash-based, short-term incentive plan designed to reward participants for economic
value added, or EVA, versus cost of capital of our core Fabricated Products business; and
|
|
|
|
An equity-based, long-term incentive program designed to align compensation with the
interests of our stockholders and to enhance retention of senior management through grants
of (1) shares of restricted stock that vest over time and (2) performance shares that
vest, if at all, based on the average annual EVA of our core Fabricated Products business
for 2010, 2011 and 2012.
|
Two of our key objectives have been, and in 2010 continued to be, (1) ensuring that we align the
interests of our senior management and stockholders by rewarding senior management for achieving
strategic goals that successfully drive our operations and enhance stockholder value and (2)
attracting, motivating and retaining executives vital to our short-term and long-term success,
profitability and growth.
Overview of the Compensation Committee
The compensation committee of our board of directors is comprised entirely of independent
directors. By design, members of the compensation committee also serve on other board committees,
including the audit committee and the nominating and corporate governance committee. We believe
this structure helps coordinate the efforts of the respective committees. The compensation
committees primary duties and responsibilities are to establish and implement our compensation
policies and programs for senior management. While the nominating and corporate governance
committee has the responsibility to evaluate the overall performance of the chief executive
officer, the compensation committee coordinates with and assists the nominating and corporate
governance committee in that evaluation.
24
The compensation committee has the authority under its charter to engage the services of
outside advisors, experts and others to assist it. Pursuant to that authority, the compensation
committee engaged Meridian to advise it on all matters related to compensation of our chief
executive officer and other members of senior management, including the other named executive
officers.
The compensation committee meets formally and informally throughout the year. Informal
meetings frequently occur when our directors are together for meetings of our full board of
directors and telephonically at the request of one or more committee members. Our chief executive
officer, other members of our management and outside advisors may be invited to attend all or a
portion of a compensation committee meeting depending on the nature of the agenda items; however,
neither our chief executive officer nor any other member of management votes on items before the
compensation committee.
The compensation committee works with our senior management and Meridian to determine the
agenda for its formal meetings and to prepare meeting materials. The compensation committee and
board of directors also solicit the views of our chief executive officer on compensation matters,
including, among others:
|
|
|
Objectives for our compensation programs;
|
|
|
|
|
The structure of our compensation programs;
|
|
|
|
|
Succession planning; and
|
|
|
|
|
Compensation of other members of senior management, including our other named
executive officers.
|
Objectives of our Compensation Structure
Our compensation structure was developed to achieve the following objectives, which we believe
are critical for enhancing stockholder value and our long-terms success:
|
|
|
Creating alignment between senior management and our stockholders by rewarding senior
management for achieving strategic goals that successfully drive our operations and
enhance stockholder value;
|
|
|
|
|
Attracting, motivating and retaining highly experienced executives vital to our
short-term and long-term success, profitability and growth;
|
|
|
|
|
Correlating senior management compensation with actual performance; and
|
|
|
|
|
Providing targeted compensation levels that are benchmarked to our compensation peer
group discussed below as follows:
|
|
|
|
for base salary, the 50th percentile;
|
|
|
|
|
for annual cash incentives at target-level performance, the 50th percentile;
and
|
|
|
|
|
for annualized economic equity grant value of long-term incentives, between the
50th and the 65th percentiles.
|
25
Design of our 2010 Compensation Program
Our 2010 compensation program for senior management, including the named executive officers,
was designed to reinforce performance and accountability at both the corporate and individual
levels. In addition to focusing on pay for performance, our compensation program:
|
|
|
Balanced short-term and long-term goals, with:
|
|
|
|
approximately 50% of the chief executive officers target total compensation
being delivered through long-term incentives; and
|
|
|
|
|
approximately 40% to 45% of the target total compensation for the other named
executive officers being delivered through long-term incentives;
|
|
|
|
Delivered a mix of fixed and at-risk compensation directly related to our overall
performance and the creation of stockholder value, with:
|
|
|
|
approximately 70% of the chief executive officers target total compensation
being at-risk compensation; and
|
|
|
|
|
approximately 60% to 70% of the target total compensation for the other named
executive officers being at-risk compensation;
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Provided compensation that is competitive with our compensation peer group;
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|
|
|
|
Utilized equity-based awards, stock ownership guidelines and annual incentives linked
to stockholder value and achievement of corporate, segment and individual performance;
|
|
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Emphasized the importance of safety performance; and
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|
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|
|
Utilized forfeiture provisions that can result in the loss of equity-based awards and
resulting benefits if we determine a recipient, including any of the named executive
officers, has engaged in certain activities detrimental to us.
|
Periodically, but not less than annually, each element of compensation is reviewed and
considered by the compensation committee and our board of directors both individually and
collectively with the other elements of compensation to ensure that each element is consistent with
the objectives of both our comprehensive compensation structure and that particular element of
compensation. Any suggestions or concerns identified in the course of that review and consideration
are shared with senior management and Meridian and addressed in a manner that is satisfactory to
the compensation committee and our board of directors. This process occurs over a series of
meetings of the compensation committee, the board of directors and the independent directors
meeting in executive sessions without members of management present.
In designing the overall compensation program and each individual element of compensation for
senior management, including the named executive officers, the compensation committee considers the
following factors, among others:
|
|
|
The external challenges to our near- and long-term ability to attract and retain
strong senior management;
|
|
|
|
|
Each individuals contributions to our overall results;
|
|
|
|
|
Our historical and anticipated operating and financial performance compared with
targeted goals; and
|
|
|
|
|
Our size and complexity compared with companies in our compensation peer group.
|
The compensation committee uses tally and other summary sheets that provide a summary of the
compensation history of our chief executive officer and those members of senior management
reporting to the chief executive
26
officer. These tally and other information sheets, which are prepared by our senior management
and reviewed by Meridian, include a historical summary of base salary, annual bonus and equity
awards.
In reviewing and deliberating over our 2010 compensation program, the compensation committee
considered, among other things:
|
|
|
Economic conditions in the United States and abroad;
|
|
|
|
|
The goal of maintaining alignment between senior management and our stockholders
through the use of short- and long-term performance based compensation;
|
|
|
|
|
The companys business plan and underlying assumptions;
|
|
|
|
|
The benefits of maintaining a consistent approach to compensation and the structure
of our programs through business cycles; and
|
|
|
|
|
The anticipated performance of the companys compensation programs based on the
companys business plan and current financial position.
|
The review included discussions with Meridian and management regarding existing and
contemplated market practices, as well as the structure and objectives of each component of our
compensation program.
The compensation committee also reviews the compensation and benefit practices, as well as
levels of pay, of a compensation peer group of companies. In 2006, working with our compensation
consultant, our management selected for inclusion in the compensation peer group companies that
were determined to: (1) be of a similar size; (2) have positions of similar complexity and scope of
responsibility; and/or (3) compete with us for talent. The compensation committee, working with our
compensation consultant, reviews, evaluates and updates the compensation peer group, which includes
companies in both similar and different industries, at least annually. For 2010, our compensation
committee approved the following 34-company peer group:
|
|
|
Ameron International Corporation
|
|
Mueller Water Products, Inc.
|
Applied Industrial Tech, Inc.
|
|
Neenah Paper, Inc.
|
Ash Grove Cement Company
|
|
Olin Corporation
|
Brady Corporation
|
|
OMNOVA Solutions Inc.
|
Briggs & Stratton Corporation
|
|
Pella Corporation
|
Cameron International Corporation
|
|
Polaris Industries Inc.
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Crane Company
|
|
Rayonier Inc.
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Donaldson Company, Inc.
|
|
Sauer-Danfoss Inc.
|
ESCO Technologies Inc.
|
|
Steelcase Inc.
|
Fellowes, Inc.
|
|
Texas Industries, Inc.
|
Gardner Denver, Inc.
|
|
The Timken Company
|
Graco Inc.
|
|
Valmont Industries, Inc.
|
Joy Global Inc.
|
|
Vulcan Materials Company
|
Kaman Corporation
|
|
Walter Energies, Inc.
|
Kennametal Inc.
|
|
Waters Corporation
|
Martin Marietta Materials, Inc.
|
|
Watts Water Technologies, Inc.
|
Milacron Inc.
|
|
Woodward Governor Company
|
Due to the differences in
size among the companies in our peer group, Meridian uses a form of regression analysis to adjust
survey data results based on our revenue as compared to the revenue of other companies in our peer
group.
Importantly, the compensation committee recognizes that we compete for talent with companies
much larger than those included in our compensation peer group. These larger companies aggressively
recruit for the best qualified talent in particularly critical functions. As a result, to attract and retain talent, the compensation committee may from time to time
determine that it is in the best interests of our company and stockholders to provide compensation
packages that deviate from targeted pay levels.
27
Elements of 2010 Compensation
Elements of compensation for 2010 included base salary, annual cash incentives, long-term
incentives, retirement benefits and certain perquisites.
Base salary
The compensation committee annually reviews base salaries for our chief executive officer and
those members of senior management reporting to the chief executive officer, including our other
named executive officers, and determines if a change is appropriate. In reviewing base salaries,
the compensation committee considers factors, including, among others:
|
|
|
Level of responsibility;
|
|
|
|
|
Prior experience;
|
|
|
|
|
Base salaries paid for comparable positions by our compensation peer group; and
|
|
|
|
|
The relationship among base salaries paid within our company.
|
The intent is to fix base salaries at levels consistent with the design of our overall compensation
program for the particular year. During 2010, the compensation committee increased the base
salaries of our named executive officers by 2.3% to 7.7%, principally to align base salaries with
targeted levels based on a review of our compensation peer group. Base salaries for our named executive
officers in 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Amount of Base Salary
|
|
|
Name
|
|
Increase for 2010
|
|
2010 Base Salary
|
Jack A. Hockema
|
|
$
|
20,000
|
|
|
$
|
807,000
|
|
Daniel J. Rinkenberger
|
|
$
|
25,000
|
|
|
$
|
325,000
|
|
John Barneson
|
|
$
|
8,000
|
|
|
$
|
310,000
|
|
John M. Donnan
|
|
$
|
7,000
|
|
|
$
|
302,000
|
|
James E. McAuliffe, Jr.
|
|
$
|
6,000
|
|
|
$
|
241,000
|
|
Annual cash incentives
Like our 2009 Short-Term Incentive Plan, our 2010 Short-Term Incentive Plan, which we refer to
as our 2010 STI Plan, was designed to reward participants for EVA of our core Fabricated Products
business, including corporate expenses, with modifiers for safety performance (as measured by
TCIR), segment performance and individual performance. We believe EVA measures the return on net
assets employed in our business and is an appropriate measure of the creation of shareholder value
under our incentive programs. The structure, term and objectives of our 2010 STI Plan were
generally consistent with the structure, terms and objectives of our 2009 Short-Term Incentive
Plan. Under our 2010 STI Plan, which the compensation committee approved on March 5, 2010, EVA was
calculated using our pre-tax operating income (subject to certain adjustments) less a capital
charge, calculated as a percentage of our net assets (subject to certain adjustments). The
adjustments to EVA included, among others:
|
|
|
Removing results of our Secondary Aluminum and Hedging business units;
|
|
|
|
|
Removing discontinued or former operations;
|
|
|
|
|
Eliminating fresh start accounting adjustments to the value of property, plant and
intangible assets, including the approximately $49 million write-down of our total assets
(and the resulting higher payouts those adjustments might otherwise create);
|
|
|
|
|
Eliminating voluntary employees beneficiary association, or VEBA, assets and
liabilities;
|
|
|
|
|
Excluding financing items;
|
28
|
|
|
Excluding capital expenditures in progress;
|
|
|
|
|
Adding the capitalized value of long-term leases;
|
|
|
|
|
Adding the prorated value of capital projects and acquisitions larger than 1% of net
assets;
|
|
|
|
|
Excluding deferred tax assets and liabilities from the calculation of net assets to
be consistent with our use of pre-tax operating income; and
|
|
|
|
|
Excluding mark-to-market assets or liabilities associated with our core Fabricated
Products business.
|
Our 2010 STI Plan provided a threshold performance level below which no payout would be made,
a target performance level at which the target payout was available and a maximum performance level
at or above which the maximum payout would be available. Consistent with our objective of aligning
senior management and our stockholders by rewarding senior management for achieving strategic goals
that successfully drive our operations and enhance stockholder value, our 2010 STI Plan provided
that performance in excess of the threshold performance level would result in an increase in the
overall incentive pool by 6% of adjusted pre-tax operating income in excess of the threshold
performance level up to the maximum payout opportunity.
The threshold, target and maximum performance levels were established at specified returns of
adjusted pre-tax operating income for the Companys core Fabricated Products business on adjusted
net assets. Under the 2010 STI Plan the threshold level required a return of 7.5%, the target
level required a return of 15%, and the maximum level required a return of 35%.
The return on net assets required to achieve payouts, ranging from one-half to three times
target, were determined by the terms of the 2010 STI Plan taking into account the calculation of
the Companys adjusted net assets, the threshold performance required and the 2010 target payout.
The 2010 STI Plan provided that performance below the threshold would result in no payout and that
potential payouts would increase on a straight line basis from the threshold up to the maximum
payout as the Companys adjusted pre-tax operating income for its core Fabricated Products business
exceeded the threshold. As more fully described below, the Companys adjusted 2010 pre-tax
operating income for its core Fabricated Products business exceeded the threshold by approximately
$18 million.
Our 2010 STI Plan tied pay to performance and only increased the incentive pool for returns in
excess of the threshold performance level (subject to the payout maximum). Under the 2010 STI
Plan, the Company could not dilute the performance required to achieve payouts by merely acquiring
other profitable companies because the return on net assets required took into account the value of
any acquired assets as well as the adjusted pre-tax operating income generated by such acquired
assets.
At the beginning of 2010, a cash target was established under the 2010 STI Plan for each
participant based on a percentage of base salary. The percentage was generally determined based on,
among other things:
|
|
|
A targeted level benchmarked to the 50th percentile of our compensation peer group;
|
|
|
|
|
Internal compensation balance; and
|
|
|
|
|
Position responsibilities.
|
When establishing the performance levels for our 2010 STI Plan, the compensation committee
reviewed and discussed with our senior management and our board of directors:
|
|
|
Our business plan and its key underlying assumptions;
|
|
|
|
|
The expectations under then-existing and anticipated market conditions; and
|
|
|
|
|
The opportunity to generate stockholder value.
|
29
In addition to being designed to reward participants for EVA, our 2010 STI Plan recognized
that our business is cyclical and, consistent with prior years, required a return and economic
conditions that would facilitate our ability to pay. The EVA (return on net assets) target for 2010
was set at a level reflecting a 15% return of adjusted pretax operating income to adjusted net
assets. The 2010 STI Plan provided that participants would not receive any payout if the
threshold-level performance was not achieved, and, at the same time, that participants would have
the potential to receive three times the target-level payout if a certain performance level was
achieved.
Our key strategic initiatives for 2010 were established at the beginning of 2010 through a
series of board and committee meetings. These initiatives were consistent with the business and
strategic plan previously approved by our board and included specific actions expected to:
|
|
|
Enhance our position as the supplier of choice for our customers;
|
|
|
|
|
Facilitate our being a low cost producer by controlling costs beyond inflation;
|
|
|
|
|
Achieve profitable sales growth through organic and external growth;
|
|
|
|
|
Expand and enhance the deployment of our Kaiser Production System;
|
|
|
|
|
Sustain financial strength to provide strategic flexibility in all phases of the
business cycle; and
|
|
|
|
|
Continue to improve our standing as a valued corporate citizen.
|
Our chief executive officer established individual performance goals for other members of our
senior management, including our other named executive officers, consistent with our 2010 key
strategic initiatives. We believe these key strategic initiatives drive our core Fabricated
Products business and EVA results.
Under our 2010 STI Plan, based on our Fabricated Products business results and safety
performance, as well as segment and individual performance, a participants base award could be
modified, in the aggregate, up to plus or minus 100% of the incentive target or base award, subject
to an overall cap on the aggregate award of three times the incentive target. A cash pool was
established based upon the award multiple multiplied by the sum of individual monetary incentive
targets for all plan participants. Although individual monetary awards could be adjusted up or down
under the 2010 STI Plan, an amount equal to the entire cash pool was paid to participants.
Safety performance, as measured by TCIR, was applied to the calculation of the multiplier used
to determine the pool available for distribution under the 2010 STI Plan. The 2010 STI Plan
provided that safety performance above or below a threshold could increase or decrease the payout
pool available for distribution by 10%; provided, however, that no increase could increase the pool
beyond the maximum payout opportunity. Segment performance goals typically applied to members of
senior management with responsibility primarily relating to a particular business segment or
operation within the Company. Except as noted below, performance goals for members of senior
management, including our named executive officers, were tailored to each individual taking into
account areas of responsibility, were consistent with the key strategic initiatives and impact the
calculation of the multiplier
30
applicable to each individual. Performance of our chief executive officer was measured
against the overall performance of the Company and our key strategic initiatives.
As described below, the performance of our chief executive officer was reviewed by our
compensation committee, nominating and corporate governance committee and board of directors.
Performance of other members of senior management was evaluated by our chief executive officer.
Our chief executive officers evaluation of our other named executive officers was reviewed by our
board of directors and submitted to our compensation committee for review and approval. The 2010
STI Plan provides that individuals not meeting individual performance goals could receive a
reduced, or even no, payout and that individuals meeting or exceeding individual performance goals
could receive increased payouts; provided, however, that no increase could exceed the maximum
payout opportunity. As more fully described below, each of our named executive officers was
determined to have substantially met or exceeded their 2010 individual performance goals.
In early 2011, our actual results for 2010, EVA based on those results and the resulting award
multiple were determined. Each participants base award under the 2010 STI Plan was determined by
multiplying his or her monetary incentive target by the award multiple. The compensation committee,
the nominating and corporate governance committee and our board of directors also reviewed the
actual performance of our company and our chief executive officer for 2010 as compared to our 2010
key strategic initiatives and performance goals.
For 2010, the EVA for our core Fabricated Products business was calculated as follows:
|
|
|
Our adjusted 2010 pre-tax operating income for our core Fabricated Products business
of approximately $62 million was determined by adjusting our reported 2010 pre-tax
operating income of $44 million pursuant to the terms of the 2010 STI Plan to, among other
things, exclude the results of our Secondary Aluminum and Hedging business units,
including the unrealized mark-to-market gains and losses on metal derivative positions,
and lower of cost or market adjustments on inventory;
|
|
|
|
|
Our adjusted net assets of approximately $583 million as of December 31, 2009 was
determined by adjusting our reported net assets as of December 31, 2009 of $901 million
pursuant to the terms of the 2010 STI Plan to, among other things, exclude deferred income
taxes and liabilities, capital expenses in progress, net VEBA assets, net assets of the
Secondary Aluminum business unit and the Hedging business unit, and financing liabilities;
|
|
|
|
|
The $44 million threshold of adjusted 2010 pre-tax operating income for our core
Fabricated Products business required before the minimum payout under the 2010 STI Plan
(50% of the target payout) was available was determined by multiplying our adjusted net
assets of approximately $583 million as of December 31, 2009 by 7.5%;
|
|
|
|
|
The 2010 STI Plan pool of approximately $2.5 million was determined by adding (i)
approximately $1.6 million (one half of the target payout under the 2010 STI Plan for
equaling or exceeding the threshold) and (ii) approximately $1.1 million, representing 6%
of the approximately $18 million excess of adjusted 2010 pre-tax operating income for our
core Fabricated Products business of approximately $62 million over the $44 million
threshold, and then subtracting approximately $0.2 million for 2010 safety results; and
|
|
|
|
|
The final 2010 STI Plan multiplier of 0.76 was determined by dividing the
approximately $2.5 million 2010 STI Plan pool by the approximately $3.2 million target
payout under the 2010 STI Plan.
|
The 2010 STI Plan multiple based on our 2010 EVA results was approximately 0.84. After
applying the safety modifier based on the final 2010 TCIR, the multiple was decreased to the final
award multiple of approximately 0.76. Each of our named executive officers was determined to have
substantially met or exceeded their 2010 individual performance goals. We permitted each
participant to elect to receive payout under the 2010 STI Plan in cash, non-restricted shares of
common stock or a combination thereof, at his or her election. All payouts made to our named
executive officers in connection with the 2010 STI Plan were made in cash.
The table below sets forth for our 2010 STI Plan the possible payouts that could have been
earned by our named executive officers at each performance level and the actual amounts earned by
them.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Below Threshold
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Actual
|
Jack A. Hockema
|
|
$
|
0
|
|
|
$
|
276,000
|
|
|
$
|
552,000
|
|
|
$
|
1,656,000
|
|
|
$
|
421,322
|
|
Daniel J. Rinkenberger
|
|
$
|
0
|
|
|
$
|
100,000
|
|
|
$
|
200,000
|
|
|
$
|
600,000
|
|
|
$
|
152,653
|
|
John Barneson
|
|
$
|
0
|
|
|
$
|
69,000
|
|
|
$
|
139,000
|
|
|
$
|
417,000
|
|
|
$
|
106,094
|
|
John M. Donnan
|
|
$
|
0
|
|
|
$
|
77,000
|
|
|
$
|
154,000
|
|
|
$
|
462,000
|
|
|
$
|
117,543
|
|
James E. McAuliffe, Jr.
|
|
$
|
0
|
|
|
$
|
54,000
|
|
|
$
|
108,000
|
|
|
$
|
324,000
|
|
|
$
|
82,432
|
|
The table below sets forth for our 2010 STI Plan, the target, EVA multiplier before the safety
modifier, EVA multiplier after the safety modifier, the unadjusted award determined by multiplying
the target for each named executive officer by the EVA multiplier after safety and the actual award
received for each of our named executive officers:
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EVA
|
|
EVA Multiplier After
|
|
Unadjusted
|
|
|
|
|
|
Final
|
Name
|
|
Target
|
|
Multiplier
|
|
Safety Modifier
|
|
Award
|
|
Actual Payout
|
|
Multiplier
|
Jack A. Hockema
|
|
$
|
552,000
|
|
|
|
0.843
|
|
|
|
0.763
|
|
|
$
|
421,176
|
|
|
$
|
421,322
|
|
|
|
0.763
|
|
Daniel J. Rinkenberger
|
|
$
|
200,000
|
|
|
|
0.843
|
|
|
|
0.763
|
|
|
$
|
152,600
|
|
|
$
|
152,653
|
|
|
|
0.763
|
|
John Barneson
|
|
$
|
139,000
|
|
|
|
0.843
|
|
|
|
0.763
|
|
|
$
|
106,057
|
|
|
$
|
106,094
|
|
|
|
0.763
|
|
John M. Donnan
|
|
$
|
154,000
|
|
|
|
0.843
|
|
|
|
0.763
|
|
|
$
|
117,502
|
|
|
$
|
117,543
|
|
|
|
0.763
|
|
James E. McAuliffe, Jr.
|
|
$
|
108,000
|
|
|
|
0.843
|
|
|
|
0.763
|
|
|
$
|
82,404
|
|
|
$
|
82,432
|
|
|
|
0.763
|
|
Long-term incentives
On March 5, 2010, the compensation committee approved a long-term incentive program for 2010
through 2012, which we refer to as our 2010 2012 LTI Program, for key employees, including our
named executive officers. The compensation committee established a target monetary value for each
named executive officer and determined that each named executive officer should receive time-based
restricted stock having an economic value equal to 50% of his target monetary value and a target
number of performance shares having an economic value equal to 50% of his target monetary value.
Consistent with our 2009 2011 long-term incentive program, our 2010 2012 LTI Program was
designed to pay-for-performance and to include retention features by rewarding participants with
(1) shares of restricted stock that will cliff vest in 2013 and (2) performance shares that vest,
if at all, based on the average annual EVA of our core Fabricated Products business for 2010, 2011
and 2012.
EVA under our 2010 2012 LTI Program will be calculated using our pre-tax operating income
(subject to certain adjustments) less a capital charge, calculated as a percentage of our net
assets (subject to certain adjustments). Our 2010 2012 LTI Program provides, with respect to the
performance shares, for (1) a threshold performance level at which no performance shares will vest,
a target performance level at which the target number of performance shares will vest, a
performance level at or above which the maximum number of performance shares (equal to two times
the target number of performance shares) will vest, and pro rata vesting between the threshold and
maximum performance levels, and (2) minimum and maximum vesting opportunities ranging from zero up
to two times the target number. Each performance share that becomes vested entitles the participant
to receive one share of our common stock.
The table below sets forth the target monetary value for each named executive officer under
our 2010 2012 LTI Program:
|
|
|
|
|
Name
|
|
Target Monetary Value
|
Jack A. Hockema
|
|
$
|
1,330,000
|
|
Daniel J. Rinkenberger
|
|
$
|
465,000
|
|
John Barneson
|
|
$
|
387,000
|
|
John M. Donnan
|
|
$
|
364,000
|
|
James E. McAuliffe, Jr.
|
|
$
|
215,000
|
|
The target monetary value for each named executive officer was determined in accordance with the
following objectives of our compensation structure which we believe are critical for enhancing
stockholder value and our long-term success:
|
|
|
An annualized economic equity grant value of long-term incentives between the 50th
and the 65th percentiles of our compensation peer group;
|
|
|
|
|
Balanced short-term and long-term goals, with:
|
|
-
|
|
Approximately 50% of the chief executive officers target total
compensation being delivered through long-term incentives; and
|
|
|
-
|
|
Approximately 40% to 45% of the target total compensation for the
other named executive officers being delivered through long-term incentives.
|
32
|
|
|
Internal compensation balance; and
|
|
|
|
|
Recognition of differing position responsibilities.
|
In addition, Mr. Hockemas then existing employment agreement, consistent with the foregoing
objectives, provided that Mr. Hockema was entitled to receive annual equity awards with a target
economic value of 165% of his base salary.
The table below sets forth the number of shares of restricted stock and performance shares
granted to our named executive officers during 2010:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of
|
|
Number of
|
Name
|
|
Restricted Stock(1)
|
|
Performance Shares(2)
|
Jack A. Hockema
|
|
|
20,348
|
|
|
|
48,611
|
|
Daniel J. Rinkenberger
|
|
|
7,114
|
|
|
|
16,995
|
|
John Barneson
|
|
|
5,921
|
|
|
|
14,144
|
|
John M. Donnan
|
|
|
5,569
|
|
|
|
13,304
|
|
James E. McAuliffe, Jr.
|
|
|
3,289
|
|
|
|
7,858
|
|
|
|
|
(1)
|
|
The restrictions on 100% of the shares of restricted stock granted will lapse on March 5,
2013 or earlier if the named executive officers employment terminates as a result of death or
disability, the named executive officers employment is terminated by us without cause, the
named executive officers employment is voluntarily terminated by him for good reason or in
the event of a change in control. If the named executive officers employment terminates
before March 5, 2013 as a result of his retirement at or after age 65, the shares of
restricted stock granted to him will remain outstanding and the restrictions on 100% of such
shares will lapse on March 5, 2013. The number of shares of restricted stock was calculated by dividing
50% of the target monetary value set forth in the table above by the sum of (i) the closing
price of our companys common stock on March 5, 2010, which was $36.94, reduced by (ii)
11.53%, the discount factor provided by Meridian to reflect the design characteristics,
including the vesting period, of the restricted stock.
|
|
(2)
|
|
The table below sets forth the number of performance shares that will vest for each of
Messrs. Hockema, Rinkenberger, Barneson, Donnan and McAuliffe under our 2010 2012 LTI
Program at the threshold, target and maximum performance levels:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Threshold
|
|
Target
|
|
Maximum
|
Jack A. Hockema
|
|
|
0
|
|
|
|
24,305
|
|
|
|
48,611
|
|
Daniel J. Rinkenberger
|
|
|
0
|
|
|
|
8,497
|
|
|
|
16,995
|
|
John Barneson
|
|
|
0
|
|
|
|
7,072
|
|
|
|
14,144
|
|
John M. Donnan
|
|
|
0
|
|
|
|
6,652
|
|
|
|
13,304
|
|
James E. McAuliffe, Jr.
|
|
|
0
|
|
|
|
3,929
|
|
|
|
7,858
|
|
The number of performance shares, if any, that vest based on the level of performance achieved
during the three-year performance period will vest on the later to occur of March 5, 2013 and
the date on which the compensation committee certifies the performance level achieved during
the three-year performance period, which shall be no later than March 15, 2013. If, prior to
December 31, 2012, the named executive officers employment terminates as a result of death or
disability, the named executive officers employment is terminated by us without cause, the
named executive officers employment is voluntarily terminated by him for good reason or in the
event of a change in control, the target number of performance shares will vest. If the named
executive officers employment terminates on or after December 31, 2012 but prior to the
vesting date, his performance shares will remain outstanding and the number of performance
shares, if any, that will vest on the vesting date will be determined based on the performance
level achieved during the three-year performance period, except that the performance shares
will be forfeited if the executive officers employment is terminated by us for cause or is
voluntarily terminated by him without good reason. If, prior to the vesting date, the named
executive officers employment terminates as a result of his retirement at or after age 65, the
performance shares granted to him will remain outstanding and the number of performance shares,
if any, that will vest upon the vesting date will be determined based on the performance level
achieved during the three-year performance period.
33
The threshold, target and maximum number of performance shares that may vest, if at all, in
2013 under our 2010-2012 LTI Program are determined as follows:
|
|
|
the threshold number of performance shares reflects that no performance shares will
vest in 2013 under our 2010-2012 LTI Program unless the Companys performance exceeds the
threshold performance required over the 2010 through 2012 performance period;
|
|
|
|
|
the target number of performance shares was calculated by dividing 50% of the target
monetary value set forth in the table above by the sum of (i) the closing price of our
companys common stock on March 5, 2010, which was $36.94, reduced by (ii) 25.93%, the
discount factor provided by Meridian in connection with the calculation of the economic
value of the performance shares for purposes of determining the number of performance
shares to be granted on the grant date; and
|
|
|
|
|
the maximum number of performance shares was calculated by dividing 100% of the
target monetary value set forth in the table above by the economic value of each
performance share on the grant date.
|
On March 3, 2011, the three-year vesting period applicable to the grant of restricted stock
under our long-term incentive program for 2008 through 2010, which we refer to as our 2008-2010 LTI
Program, ended and those shares vested in accordance with the terms of the underlying grant. In
addition, in early 2011 our compensation committee determined that approximately 27% of the target
performance shares (approximately 13.5% of the total performance shares) granted under our
2008-2010 LTI Program had been earned based on our annual average EVA for 2008, 2009 and 2010. The
remaining performance shares granted under our 2008-2010 LTI Program were forfeited.
Retirement benefits
We no longer maintain a defined benefit pension plan or retiree medical program that covers
members of senior management. Retirement benefits to our senior management, including our named
executive officers, are currently provided through a defined contribution retirement program
consisting of the following two principal plans:
|
|
|
the Kaiser Aluminum Savings and Investment Plan, a tax-qualified profit-sharing and
401(k) plan (which we refer to as our Savings Plan); and
|
|
|
|
|
a nonqualified and unsecured deferred compensation plan intended to restore benefits
that would be payable to designated participants in the Savings Plan but for the
limitations on benefit accruals and payments imposed by the Internal Revenue Code of 1986
(which we refer to as our Restoration Plan).
|
The defined contribution retirement program has the following three primary components, which
are discussed more fully below:
|
|
|
A company match of the employees pre-tax deferrals under our Savings Plan;
|
|
|
|
|
A company contribution to the employees account under our Savings Plan; and
|
|
|
|
|
A company contribution to the employees account under our Restoration Plan.
|
Under the terms of our Restoration Plan, cash balances are maintained in a rabbi trust where they
remain subject to the claims of our creditors and are otherwise invested in funds designated by
each individual from a menu of possible investments. In addition, the cash balances maintained in
the rabbi trust are forfeited if the individual is terminated for cause.
The compensation committee believes the Savings Plan and the Restoration Plan support the
objectives of our comprehensive compensation structure, including the ability to attract and retain
senior and experienced mid- to late-career executives for critical positions within our
organization. Each of these plans is discussed more fully below.
Perquisites
During 2010, all of our named executive officers received a vehicle allowance and Messrs.
Barneson, and Rinkenberger were reimbursed for admission to, and the dues for, a club membership.
34
Our use of perquisites as an element of compensation is very limited and largely based on
business-related entertainment needs. We do not view perquisites as a significant element of our
comprehensive compensation structure but do believe that they can be used in conjunction with base
salary to attract, motivate and retain individuals in a competitive environment.
Stock
Ownership Guidelines and Prohibition of Speculative Transactions
In order to further align the interests of senior management, including our named executive
officers, with those of our stockholders, we have stock ownership guidelines. Under those
guidelines, members of our senior management are expected to hold common stock having a value equal
to a multiple of their base salary as determined by their position. The guidelines provide for a
target multiple of five times base salary for our chief executive officer and three times base
salary for the other named executive officers. Each member of senior management covered by our
stock ownership guidelines is expected to retain at least 75% of the net shares resulting from
equity compensation awards until he or she achieves the applicable ownership level required by the
stock ownership guidelines. For purposes of these guidelines, stock ownership includes shares over
which the holder has direct or indirect ownership or control,
including restricted stock, performance shares and
restricted stock units, but does not include unexercised stock options. For purposes of measuring
compliance with our stock ownership guidelines (1) restricted shares are valued at the closing
price of the companys common stock on the grant date, (2) performance shares are valued using the
target number of performance shares and the closing price of our common stock on the grant date,
and (3) all other shares of common stock purchased or acquired by non-employee directors and
members of our senior management are valued at the purchase price of the shares. The ownership
guidelines are expected to be met within five years. Each of our named executive officers has
satisfied the applicable stock ownership requirements under the stock ownership guidelines.
In addition, senior management, including our named executive officers, are prohibited form
engaging in any speculative transactions involving our securities, including (1) buying or selling
puts or calls, (2) short sales and (3) buying on margin.
Employment Contracts, Termination of Employment Arrangements and Change-in-Control Arrangements
As discussed more fully below, in November 2010 we entered into an amended and restated
employment agreement with Mr. Hockema. The compensation committee, working with Meridian,
determined that the negotiated terms of the agreement were consistent with market practice. The
compensation committee also determined that extending the term of the employment agreement with Mr.
Hockema was important to, among other things:
|
|
|
Provide an economic incentive for Mr. Hockema to delay his retirement until at least
July 2015;
|
|
|
|
|
Improve our ability to retain other key members of senior management; and
|
|
|
|
|
Provide assurance to our customers and other stakeholders of the continuity of senior
management for an extended period.
|
The compensation committee determined that the agreement and the terms of the agreement were in the
best interests of our company and stockholders.
Also, as discussed more fully below, we provide certain members of senior management,
including each of our named executive officers, with benefits related to terminations of employment
in specified circumstances, including in connection with a change in control, by us without cause
and by the named executive officer with good reason. These protections limit our ability to
downwardly adjust certain aspects of compensation, including base salaries and target incentive
compensation, without triggering the ability of the affected named executive officer to receive
termination benefits. The compensation committee views these termination protection benefits as an
important component of the total compensation package for each of our senior executive officers. In
the view of the compensation committee, these protections help to maintain the senior executive
officers objectivity in decision-making and provide another mechanism to align the interests of
the senior executive officer with the interests of our stockholders.
35
Tax Deductibility
Section 162(m) of the Internal Revenue Code (Section 162(m)) generally limits the
deductibility of compensation in excess of $1 million paid to our principal executive officer and
our next three highest paid executive officers, other than the principal financial officer unless
certain criteria are satisfied. The compensation committee considers the anticipated tax treatment
to our company and our executive officers in the review and establishment of compensation programs
and payments. Although our short- and long-term incentive plans may not currently meet all the
requirements necessary for payments to be considered performance-based for purposes of Section
162(m), the compensation committee routinely evaluates steps that can be taken to increase or
otherwise preserve deductibility in the future. While the compensation committee has determined
that we will not limit compensation to the compensation deductible under Section 162(m) at this
time, particularly in light of the limited impact of Section 162(m)
on our company and our substantial tax
attributes, including net operating loss carry-forwards, available to us to offset taxable income,
it has also determined that it will continue to explore potential modifications to our short- and
long-term incentive plans that may increase the deductibility of our incentive compensation.
Actions With Respect to 2011 Compensation
The compensation committee has reviewed and determined our compensation program for 2011. The
review included discussions with Meridian and management regarding existing and contemplated market
practices, as well as the structure and objectives of each component of our compensation program.
Upon completion of the review, in March 2011, the compensation committee approved increases in the
base salaries of our named executive officers for 2011, with such increases generally within the
range of 2.8% to 2.9% of 2010 base salaries, except in the case of Mr. Rinkenberger, who received
an increase of 8.5% reflecting an adjustment to bring Mr. Rinkenbergers base salary more in line
with base salaries reflected in the market analysis and work performed by Meridian. In addition,
our compensation committee concluded that our short- and long-term incentives appeared to be
performing through the business cycle as designed, determined that no material modifications to the
design of such incentives were necessary, and, accordingly, approved (1) a short-term incentive
plan for 2011 with a structure, terms and objectives generally consistent with the structure, terms
and objectives of our 2010 STI Plan, and (2) a long-term incentive program for 2011 through 2013
with a structure, terms and objectives generally consistent with the structure, terms and
objectives of our 2010-2012 LTI Program. For more information regarding the 2011 compensation of
our named executive officers, see our Current Report on Form 8-K filed with the SEC on March 7,
2011.
Summary Compensation Table
The table below sets forth information regarding compensation for our named executive
officers: (1) Jack A. Hockema, our President, Chief Executive Officer and Chairman of the Board;
(2) Daniel J. Rinkenberger, our Senior Vice President and Chief Financial Officer; and (3) each of
John Barneson, John M. Donnan and James E. McAuliffe, Jr., our three other most highly compensated
executive officers (based on total compensation for 2010).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
and Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
Deferred
|
|
All Other
|
|
|
Name and Principal
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Compensation
|
|
Compensation
|
|
Compensation
|
|
|
Position
|
|
Year
|
|
Salary
|
|
Awards (1)
|
|
(2)
|
|
Earnings (3)
|
|
(4)(5)(6)
|
|
Total
|
Jack A. Hockema,
|
|
|
2010
|
|
|
$
|
802,000
|
|
|
$
|
1,507,433
|
|
|
$
|
421,322
|
|
|
$
|
13,342
|
|
|
$
|
295,839
|
(7)
|
|
$
|
3,039,936
|
|
President, Chief
|
|
|
2009
|
|
|
$
|
787,000
|
|
|
$
|
906,186
|
|
|
$
|
338,700
|
|
|
$
|
9,624
|
|
|
$
|
236,570
|
(7)
|
|
$
|
2,278,080
|
|
Executive Officer
|
|
|
2008
|
|
|
$
|
779,750
|
|
|
$
|
2,485,595
|
|
|
$
|
480,900
|
|
|
$
|
41,297
|
|
|
$
|
243,404
|
(7)
|
|
$
|
4,030,947
|
|
and Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Rinkenberger,
|
|
|
2010
|
|
|
$
|
318,750
|
|
|
$
|
527,020
|
|
|
$
|
152,653
|
|
|
$
|
47,226
|
|
|
$
|
106,329
|
(8)
|
|
$
|
1,151,978
|
|
Senior Vice President
|
|
|
2009
|
|
|
$
|
300,000
|
|
|
$
|
314,160
|
|
|
$
|
121,400
|
|
|
$
|
36,878
|
|
|
$
|
91,375
|
(8)
|
|
$
|
863,813
|
|
and Chief Financial Officer
|
|
|
2008
|
|
|
$
|
276,250
|
|
|
$
|
683,106
|
|
|
$
|
191,200
|
|
|
$
|
25,663
|
|
|
$
|
59,023
|
(8)
|
|
$
|
1,235,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Barneson,
|
|
|
2010
|
|
|
$
|
308,000
|
|
|
$
|
438,624
|
|
|
$
|
106,094
|
|
|
$
|
51,070
|
|
|
$
|
111,602
|
(9)
|
|
$
|
1,015,390
|
|
Senior Vice
|
|
|
2009
|
|
|
$
|
302,000
|
|
|
$
|
263,188
|
|
|
$
|
91,700
|
|
|
$
|
43,351
|
|
|
$
|
108,292
|
(9)
|
|
$
|
808,531
|
|
President
|
|
|
2008
|
|
|
$
|
299,250
|
|
|
$
|
721,863
|
|
|
$
|
190,700
|
|
|
$
|
41,707
|
|
|
$
|
100,382
|
(9)
|
|
$
|
1,353,902
|
|
Corporate Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Donnan,
|
|
|
2010
|
|
|
$
|
300,250
|
|
|
$
|
412,562
|
|
|
$
|
117,543
|
|
|
$
|
39,317
|
|
|
$
|
87,130
|
(10)
|
|
$
|
956,802
|
|
Senior Vice
|
|
|
2009
|
|
|
$
|
295,000
|
|
|
$
|
247,840
|
|
|
$
|
101,500
|
|
|
$
|
30,145
|
|
|
$
|
80,408
|
(10)
|
|
$
|
754,893
|
|
President, General
|
|
|
2008
|
|
|
$
|
288,750
|
|
|
$
|
679,740
|
|
|
$
|
191,200
|
|
|
$
|
19,570
|
|
|
$
|
66,326
|
(10)
|
|
$
|
1,245,586
|
|
Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. McAuliffe, Jr.
|
|
|
2010
|
|
|
$
|
239,500
|
|
|
$
|
243,668
|
|
|
$
|
82,432
|
|
|
$
|
4,668
|
|
|
$
|
68,888
|
(11)
|
|
$
|
639,156
|
|
Senior Vice President
|
|
|
2009
|
|
|
$
|
235,000
|
|
|
$
|
146,600
|
|
|
$
|
75,600
|
|
|
$
|
3,320
|
|
|
$
|
66,367
|
(11)
|
|
$
|
526,887
|
|
Human Resources
|
|
|
2008
|
|
|
$
|
228,250
|
|
|
$
|
402,083
|
|
|
$
|
133,800
|
|
|
$
|
7,943
|
|
|
$
|
59,659
|
(11)
|
|
$
|
831,735
|
|
36
|
|
|
(1)
|
|
Reflects the aggregate grant date fair value of restricted stock and performance share awards
to our named executive officers determined in accordance with Financial Accounting Standards
Board Accounting Standard Code Topic 718 (referred to herein as ASC Topic 718), without regard
to potential forfeiture. The aggregate grant date fair value of the performance share awards
reflected in this table has been determined assuming the most probable outcome of the
performance condition on the date of the grant and without adjustment for actual performance
during the period. The aggregate grant date fair value of the performance share awards
determined assuming the most probable outcome of the performance condition and assuming an
outcome of the performance condition at the maximum level are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Grant Date Fair Value
|
|
|
|
|
|
|
At Probable
|
|
At Maximum
|
Name
|
|
Year
|
|
Performance
|
|
Performance
|
Jack A. Hockema
|
|
|
2010
|
|
|
$
|
812,956
|
|
|
$
|
1,330,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Rinkenberger
|
|
|
2010
|
|
|
$
|
284,219
|
|
|
$
|
465,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Barneson
|
|
|
2010
|
|
|
$
|
236,540
|
|
|
$
|
387,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Donnan
|
|
|
2010
|
|
|
$
|
222,492
|
|
|
$
|
364,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. McAuliffe, Jr.
|
|
|
2010
|
|
|
$
|
131,415
|
|
|
$
|
215,000
|
|
|
|
|
|
|
The value of restricted stock and performance share awards for 2008 is restated from previous
proxy disclosures to reflect changes in SEC rules. For information regarding the compensation
cost of restricted stock and performance share awards with respect to our 2008, 2009 and 2010
fiscal years, see Note 11, Note 10 and Note 12 of the Notes to Consolidated Financial
Statements included in our Annual Reports on Form 10-K for the fiscal years ended December 31,
2008, December 31, 2009 and December 31, 2010, respectively.
|
|
(2)
|
|
Reflects payments earned under our short-term incentive plans.
|
|
(3)
|
|
Reflects the aggregate change in actuarial present value of the named executive officers
accumulated benefit under a defined pension benefit plan previously maintained by us for our
salaried employees, which we refer to as our Old Pension Plan, during the applicable fiscal
year, calculated by (a) assuming mortality according to the RP 2000 Combined Health
mortality table published by the Society of Actuaries and (b) applying a discount rate of
5.75%, 5.75%, and 4.70% per annum, respectively, to determine the actuarial present value of
the accumulated benefit at December 31 of the preceding year and a discount rate of 6.00%,
6.00%, and 5.40% per annum, respectively, to determine the actuarial present value of the
accumulated benefit at December 31 of the applicable year. Effective December 17, 2003, the
Pension Benefit Guaranty Corporation, or PBGC, terminated and effectively assumed
responsibility for making benefit payments in respect of our Old Pension Plan, whereupon all
benefit accruals under the Old Pension Plan ceased and benefits available thereunder to
certain salaried employees, including Messrs. Hockema and Barneson, were significantly reduced
due to the limitations on benefits payable by the PBGC. Above-market or preferential earnings
are not available under our Restoration Plan, which is our only plan or arrangement pursuant
to which compensation may be deferred on a basis that is not tax-qualified, or any of our
other benefit plans.
|
|
(4)
|
|
Includes contributions made or to be made by us under our Savings Plan. For 2010, includes
contributions as follows: Mr. Hockema, $26,262; Mr. Rinkenberger, $23,201; Mr. Barneson,
$32,500; Mr. Donnan, $24,227; and Mr. McAuliffe, $26,232. For 2009, includes contributions as
follows: Mr. Hockema, $26,262; Mr. Rinkenberger, $24,500; Mr. Barneson, $34,300; Mr. Donnan,
$24,500; and Mr. McAuliffe, $28,394. For 2008, includes contributions as follows: Mr. Hockema,
$24,717; Mr. Rinkenberger, $22,866; Mr. Barneson, $30,500; Mr. Donnan, $23,000; and Mr.
McAuliffe, $28,730.
|
37
|
|
|
(5)
|
|
Includes contributions made or to be made by us under our Restoration Plan (which is intended
to restore the benefit of contributions that we would have otherwise paid to participants
under our Savings Plan but for limitations imposed by the Internal Revenue Code of 1986). For
2010, includes contributions as follows: Mr. Hockema, $110,622; Mr. Rinkenberger, $20,814; Mr.
Barneson, $23,458; Mr. Donnan, $15,948; and Mr. McAuliffe, $11,581. For 2009, includes
contributions as follows: Mr. Hockema, $125,886; Mr. Rinkenberger, $24,620; Mr. Barneson,
$34,678; Mr. Donnan, $24,120; and Mr. McAuliffe, $15,862. For 2008, includes contributions as
follows: Mr. Hockema, $204,117; Mr. Rinkenberger, $22,549; Mr. Barneson, $51,225; Mr. Donnan,
$32,155; and Mr. McAuliffe, $20,118.
|
|
(6)
|
|
Includes dividend and dividend equivalent payments which were not factored into the reported
grant date fair value of the 2009 and 2010 restricted stock and performance share awards. For
2010, includes such payments as follows: Mr. Hockema, $125,286; Mr. Rinkenberger, $43,529; Mr.
Barneson, $36,405; Mr. Donnan, $34,272; and Mr. McAuliffe, $20,264. For 2009, includes such
payments as follows: Mr. Hockema, $69,852; Mr. Rinkenberger, $24,216; Mr. Barneson, $20,287;
Mr. Donnan, $19,104; and Mr. McAuliffe, $11,300.
|
|
(7)
|
|
Includes the cost to us of perquisites and other personal benefits for Mr. Hockema. Such
costs include a vehicle allowance of $14,570 for each of 2010, 2009 and 2008, and, for 2010,
legal fees and expenses in the amount of $19,098, incurred by Mr. Hockema in connection with the negotiation and
consummation of his amended and restated employment agreement with us.
|
|
(8)
|
|
Includes the cost to us of perquisites and other benefits for Mr. Rinkenberger. For 2010,
includes such costs as follows: club membership dues, $8,497; and vehicle allowance, $10,288.
For 2009, includes such costs as follows: club membership dues, $7,751; and vehicle allowance,
$10,288. For 2008, includes such costs as follows: club membership dues, $3,320; and vehicle
allowance, $10,288.
|
|
(9)
|
|
Includes the cost to us of perquisites and other personal benefits for Mr. Barneson. For
2010, includes such costs as follows: club membership dues, $8,780; and vehicle allowance,
$10,459. For 2009, includes such costs as follows: club membership dues, $8,568; and vehicle
allowance, $10,459. For 2008, includes such costs as follows: club membership dues, $8,198;
and vehicle allowance, $10,459.
|
|
(10)
|
|
Includes the cost to us of perquisites and other personal benefits for Mr. Donnan. For 2010,
2009 and 2008, includes vehicle allowance of $12,684, $12,684, and $11,171, respectively.
|
|
(11)
|
|
Includes the cost to us of perquisites and other personal benefits for Mr. McAuliffe. Such
costs include vehicle allowance of $10,811 for each of 2010, 2009 and 2008.
|
As reflected in the table above, the base salary received by each of our named executive officers
as a percentage of their respective total compensation was as follows:
|
|
For 2010, Mr. Hockema, 26.4%; Mr. Rinkenberger, 27.7%; Mr. Barneson, 30.3%; Mr. Donnan,
31.4%; and Mr. McAuliffe, 37.5%;
|
|
|
|
For 2009, Mr. Hockema, 34.5%; Mr. Rinkenberger, 34.7%; Mr. Barneson, 37.4%; Mr. Donnan,
39.1%; and Mr. McAuliffe, 44.6%; and
|
|
|
|
For 2008, Mr. Hockema, 19.3%; Mr. Rinkenberger, 22.4%; Mr. Barneson, 22.1%; Mr. Donnan,
23.2%; and Mr. McAuliffe, 27.4%.
|
38
All Other Compensation
The table below sets forth information regarding each component of compensation included in
the All Other Compensation column of the Summary Compensation Table above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
|
|
|
Restoration
|
|
Club
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
|
|
|
|
|
|
Savings Plan
|
|
Plan
|
|
Membership
|
|
Vehicle
|
|
|
|
|
|
Equivalent
|
|
|
Name
|
|
Year
|
|
Contributions
|
|
Contributions
|
|
Dues
|
|
Allowance
|
|
Other
|
|
Payments
|
|
Total
|
Jack A. Hockema
|
|
|
2010
|
|
|
$
|
26,262
|
|
|
$
|
110,622
|
|
|
|
|
|
|
$
|
14,570
|
|
|
$
|
19,098
|
(1)
|
|
$
|
125,286
|
|
|
$
|
295,839
|
|
|
|
|
2009
|
|
|
$
|
26,262
|
|
|
$
|
125,886
|
|
|
|
|
|
|
$
|
14,570
|
|
|
|
|
|
|
$
|
69,852
|
|
|
$
|
236,570
|
|
|
|
|
2008
|
|
|
$
|
24,717
|
|
|
$
|
204,117
|
|
|
|
|
|
|
$
|
14,570
|
|
|
|
|
|
|
|
|
|
|
$
|
243,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Rinkenberger
|
|
|
2010
|
|
|
$
|
23,201
|
|
|
$
|
20,814
|
|
|
$
|
8,497
|
|
|
$
|
10,288
|
|
|
|
|
|
|
$
|
43,529
|
|
|
$
|
106,329
|
|
|
|
|
2009
|
|
|
$
|
24,500
|
|
|
$
|
24,620
|
|
|
$
|
7,751
|
|
|
$
|
10,288
|
|
|
|
|
|
|
$
|
24,216
|
|
|
$
|
91,375
|
|
|
|
|
2008
|
|
|
$
|
22,866
|
|
|
$
|
22,549
|
|
|
$
|
3,320
|
|
|
$
|
10,288
|
|
|
|
|
|
|
|
|
|
|
$
|
59,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Barneson
|
|
|
2010
|
|
|
$
|
32,500
|
|
|
$
|
23,458
|
|
|
$
|
8,780
|
|
|
$
|
10,459
|
|
|
|
|
|
|
$
|
36,405
|
|
|
$
|
111,602
|
|
|
|
|
2009
|
|
|
$
|
34,300
|
|
|
$
|
34,678
|
|
|
$
|
8,568
|
|
|
$
|
10,459
|
|
|
|
|
|
|
$
|
20,287
|
|
|
$
|
108,292
|
|
|
|
|
2008
|
|
|
$
|
30,500
|
|
|
$
|
51,225
|
|
|
$
|
8,198
|
|
|
$
|
10,459
|
|
|
|
|
|
|
|
|
|
|
$
|
100,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Donnan
|
|
|
2010
|
|
|
$
|
24,277
|
|
|
$
|
15,948
|
|
|
|
|
|
|
$
|
12,684
|
|
|
|
|
|
|
$
|
34,272
|
|
|
$
|
87,130
|
|
|
|
|
2009
|
|
|
$
|
24,500
|
|
|
$
|
24,120
|
|
|
|
|
|
|
$
|
12,684
|
|
|
|
|
|
|
$
|
19,104
|
|
|
$
|
80,408
|
|
|
|
|
2008
|
|
|
$
|
23,000
|
|
|
$
|
32,155
|
|
|
|
|
|
|
$
|
11,171
|
|
|
|
|
|
|
|
|
|
|
$
|
66,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. McAuliffe, Jr.
|
|
|
2010
|
|
|
$
|
26,232
|
|
|
$
|
11,581
|
|
|
|
|
|
|
$
|
10,811
|
|
|
|
|
|
|
$
|
20,264
|
|
|
$
|
68,888
|
|
|
|
|
2009
|
|
|
$
|
28,394
|
|
|
$
|
15,862
|
|
|
|
|
|
|
$
|
10,811
|
|
|
|
|
|
|
$
|
11,300
|
|
|
$
|
66,367
|
|
|
|
|
2008
|
|
|
$
|
28,730
|
|
|
$
|
20,118
|
|
|
|
|
|
|
$
|
10,811
|
|
|
|
|
|
|
|
|
|
|
$
|
59,659
|
|
|
|
|
(1)
|
|
Represents reimbursement of legal fees and expenses incurred by Mr. Hockema in connection
with the negotiation and consummation of his amended and restated employment agreement with
us.
|
Grants of Plan-Based Awards in 2010
The table below sets forth information regarding grants of plan-based awards made to our named
executive officers during 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under Non-
|
|
Shares of
|
|
of Stock and
|
|
|
|
|
|
|
Award
|
|
Equity Incentive Plan Awards (2)
|
|
Stock or
|
|
Option
|
|
|
Grant
|
|
Approval
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Awards (3)
|
Name
|
|
Date
|
|
Date (1)
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
($)
|
Jack A. Hockema
|
|
|
|
|
|
|
|
|
|
$
|
276,000
|
|
|
$
|
552,000
|
|
|
$
|
1,656,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,348
|
(4)
|
|
$
|
694,477
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,611
|
(5)
|
|
$
|
812,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Rinkenberger
|
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
|
$
|
200,000
|
|
|
$
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,114
|
(4)
|
|
$
|
242,801
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,995
|
(5)
|
|
$
|
284,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Barneson
|
|
|
|
|
|
|
|
|
|
$
|
69,000
|
|
|
$
|
139,000
|
|
|
$
|
417,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,921
|
(4)
|
|
$
|
202,084
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,144
|
(5)
|
|
$
|
236,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John M. Donnan
|
|
|
|
|
|
|
|
|
|
$
|
77,000
|
|
|
$
|
154,000
|
|
|
$
|
462,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,569
|
(4)
|
|
$
|
190,070
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,304
|
(5)
|
|
$
|
222,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. McAuliffe, Jr.
|
|
|
|
|
|
|
|
|
|
$
|
54,000
|
|
|
$
|
108,000
|
|
|
$
|
324,000
|
|
|
|
|
|
|
|
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,289
|
(4)
|
|
$
|
112,254
|
|
|
|
|
3/5/10
|
|
|
|
3/5/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,858
|
(5)
|
|
$
|
131,415
|
|
|
|
|
(1)
|
|
On March 5, 2010, the compensation committee of our board of directors approved grants of
restricted stock and performance shares, with such grants to be effective on the same day.
|
39
|
|
|
(2)
|
|
Reflects the threshold, target and maximum award amounts under our 2010 STI Plan for our
named executive officers. No awards are payable when performance does not reach the threshold
performance level. Under our 2010 STI Plan, if the threshold performance level was reached,
participants were eligible to receive a cash incentive award between one-half and three times
the participants target award amount. Individual monetary awards paid to the named executive
officers, under the 2010 STI Plan, which were paid in March 2011, were as follows: Mr.
Hockema, $421,322; Mr. Rinkenberger, $152,653; Mr. Barneson, $106,094; Mr. Donnan, $117,543;
and Mr. McAuliffe, $82,432.
|
|
(3)
|
|
Reflects the aggregate grant date fair value of restricted stock and performance share awards
to our named executive officers determined in accordance with ASC Topic 718, without regard to
potential forfeiture. The aggregate grant date fair value of the performance share awards
reflected in this table has been determined assuming the most probable outcome of the
performance condition on the date of the grant and without adjustment for actual performance
during the period. For information regarding the compensation cost of restricted stock and
performance share awards with respect to our 2010 fiscal year, see Note 12 of the Notes to
Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2010.
|
|
(4)
|
|
Reflects the number of shares of restricted stock received by the named executive officer
pursuant to awards granted effective March 5, 2010. The restrictions on 100% of the shares of
restricted stock granted will lapse on March 5, 2013 or earlier if the named executive
officers employment terminates as a result of death or disability, the named executive
officers employment is terminated by us without cause, the named executive officers
employment is voluntarily terminated by him for good reason or in the event of a change in
control. If the named executive officers employment terminates prior to March 5, 2013 as a
result of his retirement at or after age 65, the shares of restricted stock granted to him
will remain outstanding and the restrictions on 100% of such shares will lapse on March 5,
2013. The named executive officer will receive all dividends and other distributions paid with
respect to the shares of restricted stock he holds, but if any of such dividends or
distributions are paid in shares of our capital stock, such shares will be subject to the same
restrictions on transferability as are the shares of restricted stock with respect to which
they were paid.
|
|
(5)
|
|
Reflects the total number of performance shares granted to the named executive officer
effective March 5, 2010. The number of performance shares, if any, that vest based on the
level of performance achieved during the three-year performance period will vest on the later
to occur of March 5, 2013 and the date on which the compensation committee certifies the
performance level achieved during the three-year performance period, which shall be no later
than March 15, 2013. If, prior to December 31, 2012, the named executive officers employment
terminates as a result of death or disability, the named executive officers employment is
terminated by us without cause, the named executive officers employment is voluntarily
terminated by him for good reason or in the event of a change in control, the target number of
performance shares will vest. If the named executive officers employment terminates on or
after December 31, 2012 but prior to the vesting date, his performance shares will remain
outstanding and the number of performance shares, if any, that will vest on the vesting date
will be determined based on the performance level achieved during the three-year performance
period, except that the performance shares will be forfeited if the executive officers
employment is terminated by us for cause or is voluntarily terminated by him without good
reason. If, prior to the vesting date, the employment of the named executive officer
terminates as a result of retirement at or after age 65, the performance shares granted to him
will remain outstanding, and the number of performance shares, if any, that will vest upon the
vesting date will be determined based on the performance level achieved during the three-year
performance period.
|
Employment-Related Agreements and Certain Employee Benefit Plans
Employment Agreement with Jack A. Hockema
On July 6, 2006, in connection with our emergence from chapter 11 bankruptcy, we entered into
an employment agreement with Jack A. Hockema, pursuant to which Mr. Hockema continued his duties as
our President and Chief Executive Officer. On November 9, 2010, we entered into an amended and
restated employment agreement with Mr. Hockema to extend the term of the existing employment
agreement from July 5, 2012 through July 6, 2015, eliminate
the automatic renewal or evergreen provision,
eliminate our obligation to make excise tax gross-up payments to Mr. Hockema, and modify his
long-term incentive compensation to increase the portion of such compensation in the form of
performance shares, as more fully described below.
The terms of Mr. Hockemas amended and restated employment agreement provide for an initial
base salary of $807,000, subject to annual increases, if any, agreed by us and Mr. Hockema and for
an annual short-term incentive target equal to 68.5% of his base salary. The short-term incentive
may be paid in cash, shares of the companys common stock, or a combination of cash and shares of
the companys common stock, but is subject to both our meeting the applicable underlying
performance thresholds and an annual cap of three times the target. If Mr.
40
Hockemas employment terminates other than on a date which is the last day of a fiscal year,
then his annual short-term incentive target with respect to the fiscal year in which his employment
terminates will be prorated for the actual number of days of employment during such fiscal year,
and such amount will be paid to Mr. Hockema or his estate unless his employment was terminated by
us for cause or was voluntarily terminated by him without good reason prior to age 65. The amended
and restated employment agreement provides that Mr. Hockema is entitled to receive annual equity
awards (such as restricted stock, stock options or performance shares) with a certain target
economic value and modified Mr. Hockemas long-term incentive compensation by increasing the target
economic value of his annual equity awards from 165% to 227% of his base salary, decreasing the
portion of his annual equity awards in the form of restricted stock from 50% to 36% of the target
economic value, and increasing the portion of his annual equity awards in the form of performance
shares from 50% to 64% of the target economic value.
Under Mr. Hockemas amended and restated employment agreement, following any termination of
his employment, we must pay or provide to Mr. Hockema or his estate:
|
|
|
base salary earned through the date of such termination;
|
|
|
|
|
except in the case of a termination by us for cause or by him other than for good
reason prior to age 65, earned but unpaid incentive awards;
|
|
|
|
|
accrued but unpaid vacation;
|
|
|
|
|
benefits under our employment benefit plans to the extent vested and not forfeited on
the date of such termination; and
|
|
|
|
|
benefit continuation and conversion rights to the extent provided under our
employment benefit plans.
|
In addition, if Mr. Hockemas employment is terminated as a result of his death or disability,
all of his outstanding equity awards will vest in accordance with their terms, subject to the
provisions described above, and all of his vested but unexercised grants will remain exercisable
through the second anniversary of such termination. If Mr. Hockemas employment is terminated by us
for cause or is voluntarily terminated by him without good reason prior to age 65, all of his
unvested equity grants will be forfeited and all of his vested but unexercised equity grants will
be forfeited on the date that is 90 days following such termination. If Mr. Hockemas employment is
terminated by us without cause or is voluntarily terminated by him with good reason, in addition to
the payment of his accrued benefits as described above, (1) we will make a lump-sum payment to Mr.
Hockema in an amount equal to two times the sum of his base salary and annual short-term incentive
target, (2) his medical, dental, vision, life insurance and disability benefits, which we refer to
as welfare benefits, will continue for two years commencing on the date of such termination, and
(3) all of his outstanding equity awards will vest in accordance with their terms, subject to the
provisions described above, and all of his vested but unexercised grants will remain exercisable
through the second anniversary of such termination.
If there is a change in control of our company, all of Mr. Hockemas equity awards outstanding
as of the date of such change in control will vest. If Mr. Hockemas employment is terminated by us
without cause or is voluntarily terminated by him with good reason within two years following a
change in control, in addition to the payments of his accrued benefits as described above, (1) we
will make a lump-sum payment to Mr. Hockema in an amount equal to three times the sum of his base
salary and annual short-term incentive target, (2) his welfare benefits will continue for three
years commencing on the date of such termination, and (3) all previously unvested equity grants
will become exercisable and vested but unexercisable grants will remain exercisable through the
second anniversary of such termination. If any payments to Mr. Hockema would be subject to a
federal excise tax by reason of being considered contingent on a change in control, then such
payments will be reduced to the minimum extent necessary so that no portion of such payments, as so
reduced, is subject to such tax, except that such a reduction will be made only if and to the
extent such reduction would result in an increase in the aggregate payment on an after-tax basis.
Mr. Hockema will be subject to noncompetition, nonsolicitation and confidentiality
restrictions following his termination of employment.
For quantitative disclosure regarding estimated payments and other benefits that would have
been received by Mr. Hockema or his estate if his employment had terminated on December 31, 2010,
the last business day of 2010, under various circumstances, see Potential Payments and Benefits
upon Termination of Employment below.
41
Salaried Severance Plan
Mr. Hockemas employment agreement discussed above describes the benefits available to Mr.
Hockema upon the severance of his employment with the company. Messrs. Rinkenberger, Barneson,
Donnan, and McAuliffe are subject to our severance plan for salaried employees, which we refer to
as our Salaried Severance Plan. Our Salaried Severance Plan provides for payment of a termination
allowance and continuation of welfare benefits upon an involuntary separation of employment that is
intended to be permanent and that is due to our convenience. The termination allowance and
continuation of welfare benefits are not available under our Salaried Severance Plan if:
|
|
|
the employee received severance compensation or welfare benefit continuation pursuant
to a Change in Control Agreement (described below) or any other agreement;
|
|
|
|
|
the employees employment is terminated other than by us without cause; or
|
|
|
|
|
the employee declined to sign, or subsequently revokes, a designated form of release.
|
The termination allowance payable to covered employees under our Salaried Severance Plan
consists of a lump-sum cash payment equal to the employees weekly base salary multiplied by a
number of weeks (not to exceed 26), which we refer to as the continuation period, determined based
on the employees number of years of full employment. Under our Salaried Severance Plan, welfare
benefits are continued following the termination of employment for the shorter of the continuation
period and the period commencing on the termination of employment and ending on the date that the
employee is no longer eligible for coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985, or COBRA. As of December 31, 2010, the continuation periods for Messrs. Rinkenberger,
Barneson, Donnan, and McAuliffe were 16, 26, 16 and 10 weeks, respectively.
For quantitative disclosure regarding estimated payments and other benefits that would have
been received by each of Messrs. Hockema, Rinkenberger, Barneson, Donnan and McAuliffe or his
estate if his employment had terminated on December 31, 2010, the last business day of 2010 under
various circumstances, see Potential Payments and Benefits upon Termination of Employment
below.
Change in Control Agreements
In 2002, in connection with the commencement of our chapter 11 bankruptcy and the
implementation of our court-approved Chapter 11 Key Employee Retention Plan, we also entered into
Change in Control Agreements with certain key executives, including Messrs. Hockema, Rinkenberger,
Barneson, Donnan and McAuliffe, in order to provide them with appropriate protection in the event
of a termination of employment in connection with a change in control or, except as otherwise
provided, a significant restructuring. Mr. Hockemas employment agreement discussed above
supersedes his Change in Control Agreement. The Change in Control Agreements terminate on the
second anniversary of a change in control.
The Change in Control Agreements provide for severance payments and continuation of welfare
benefits upon termination of employment in certain circumstances. The participants are eligible for
severance benefits if their employment is terminated by us without cause or by the participant with
good reason during a period that commences 90 days prior to the change in control and ends on the
second anniversary of the change in control. Participants (including Messrs. Rinkenberger, Donnan
and McAuliffe but excluding Mr. Barneson) also are eligible for severance benefits if their
employment is terminated by us due to a significant restructuring even when there has been no
change in control. These benefits are not available if:
|
|
|
the participants employment is terminated other than by us without cause or by the
participant for good reason; or
|
|
|
|
|
the participant declines to sign, or subsequently revokes, a designated form of
release.
|
In consideration for the severance payment and continuation of benefits, a participant will be
subject to noncompetition, nonsolicitation and confidentiality restrictions following his or her
termination of employment with us.
42
Upon a qualifying termination of employment, each of Messrs. Rinkenberger, Barneson, Donnan
and McAuliffe are entitled to receive the following:
|
|
|
three times (for Mr. Barneson) or two times (for Messrs. Rinkenberger, Donnan and
McAuliffe) the sum of his base pay and most recent short-term incentive target;
|
|
|
|
|
a pro-rated portion of his short-term incentive target for the year of termination;
and
|
|
|
|
|
a pro-rated portion of his long-term incentive target in effect for the year of his
termination, provided that such target was achieved.
|
In addition, welfare benefits and perquisites are continued for a period of three years (for Mr.
Barneson) or two years (for Messrs. Rinkenberger, Donnan and McAuliffe) after termination of
employment with us.
In general, if any payments would be subject to federal excise tax or any similar state or
local tax by reason of being considered contingent on a change in control, the participant will be
entitled to receive an additional amount such that, after satisfaction of all tax obligations
imposed on such payments, the participant retains an amount equal to the federal excise tax or
similar state or local tax imposed on such payments. However, if no such federal excise tax or
similar state or local tax would apply if the aggregate payments were reduced by 5%, then the
aggregate payments to the participant will be reduced by the amount necessary to avoid application
of such federal excise tax or similar state or local tax.
For quantitative disclosure regarding estimated payments and other benefits that would have
been received by each of Messrs. Hockema, Rinkenberger, Barneson, Donnan and McAuliffe or his
estate if his employment had terminated on December 31, 2010, the last business day of 2010, under
various circumstances, see Potential Payments and Benefits Upon Termination of Employment
below.
Equity Incentive Plan
Our Equity Incentive Plan is an omnibus plan that facilitates the issuance of future long-term
incentive awards as part of our comprehensive compensation structure and is administered by a
committee of non-employee directors of our board of directors, currently, the compensation
committee.
Officers and other key employees (and persons who have agreed to commence serving in any of
those capacities within 90 days) who are selected by the compensation committee, as well as our
non-employee directors, are eligible to participate in the Equity Incentive Plan. Any director
emeritus and any person who provides services to us or any of our subsidiaries that are equivalent
to those typically provided by employees and who are selected by the compensation committee are
also eligible to participate in the Equity Incentive Plan. As December 31, 2010, approximately 42
members of management, including our named executive officers, and other key employees had been
selected by the compensation committee to receive awards under the Equity Incentive Plan.
Subject to certain adjustments that may be required from time to time to prevent dilution or
enlargement of the rights of participants under the Existing Equity Incentive Plan, a maximum of
2,722,222 shares of common stock may be issued under the Equity Incentive Plan. As of December 31,
2010, approximately 1,034,823 shares of common stock were available for additional awards under the
Equity Incentive Plan.
The Equity Incentive Plan authorizes the issuance of option rights, appreciation rights,
restricted stock, restricted stock units, performance shares, performance units, awards to
non-employee directors and directors emeritus, and other awards, including awards in the forms of
cash, shares of common stock, notes or other property. The Equity Incentive Plan will expire on
July 6, 2016. No grants will be made under the plan after that date, but all grants made on or
prior to such date will continue in effect thereafter subject to the terms thereof and of the
Equity Incentive Plan.
Under the Equity Incentive Plan, any award agreement may provide that, if the compensation
committee determines that a participant has engaged in any detrimental activity, either during
employment by us, or within a specified period after termination of employment, the participant is
required to, among other things:
43
|
|
|
forfeit any award under the Equity Incentive Plan held by the participant,
|
|
|
|
|
return to us (in exchange for our payment to the participant of any cash amount that
the participant paid to us for such an award) all shares of our common stock acquired
under the Equity Incentive Plan that the participant has not disposed of, and
|
|
|
|
|
with respect to any shares acquired under the Equity Incentive Plan that the
participant has disposed of, pay to us the difference between the market value of those
shares on the date they were acquired and any amount that the participant paid for such
shares.
|
Under the Equity Incentive Plan, detrimental activity is generally defined to include (1)
conduct resulting in an accounting restatement due to material noncompliance with any financial
reporting requirements under U.S. federal securities laws, (2) competing with us, (3) soliciting
any of our employees to terminate his or her employment with us, (4) disclosing our confidential
business information, (5) failing or refusing to promptly disclose and assign to us rights in
certain intellectual property that the participant conceived during his or her employment with us,
and (6) activity that results in the termination of the participants employment by us for cause,
which we typically define to include violations of our code of business conduct and ethics. Since
our Equity Incentive Plan was originally implemented in 2006, each award agreement thereunder,
other than award agreements with non-employee directors and a director emeritus, has contained such
provisions that are applicable if the compensation committee determines the participant has engaged
in detrimental activity, either during employment by us or generally within one year after
termination of employment.
The Equity Incentive Plan also permits non-employee directors to elect to receive shares of
our common stock in lieu of any or all of the annual cash retainers paid to non-employee directors,
including retainers for serving as a committee chair or Lead Independent Director.
Our board of directors may, in its discretion, terminate the Equity Incentive Plan at any
time. The termination of the Equity Incentive Plan would not affect the rights of participants or
their successors under any awards outstanding and not exercised in full on the date of termination.
Our board of directors may at any time and from time to time amend the Equity Incentive Plan
in whole or in part. Any amendment which must be approved by our stockholders in order to comply
with applicable law or the rules of the principal securities exchange, association or quotation
system on which our common stock is then traded or quoted will not be effective unless and until
such approval has been obtained. The compensation committee will not, without the further approval
of the stockholders, authorize the amendment of any outstanding option or appreciation right to
reduce the exercise price or base price. Furthermore, no option will be cancelled and replaced with
awards having a lower exercise price without further approval of the stockholders.
Savings Plan
We sponsor a tax-qualified profit sharing and 401(k) plan, our Savings Plan, in which eligible
salaried employees may participate. Pursuant to the Savings Plan, employees may elect to reduce
their current annual compensation up to the lesser of 75% or the statutorily prescribed limit of
$16,500 in calendar year 2011 (plus up to an additional $5,500 in the form of catch-up
contributions for participants near retirement age), and have the amount of any reduction
contributed to the Savings Plan. Our Savings Plan is intended to qualify under sections 401(a) and
401(k) of the Internal Revenue Code of 1986, so that contributions by us or our employees to the
Savings Plan and income earned on contributions are not taxable to employees until withdrawn from
the Savings Plan and so that contributions will be deductible by us when made. We match 100% of the
amount an employee contributes to the Savings Plan, subject to a 4% maximum based on the employees
compensation as defined in the Savings Plan.
Employees are immediately vested 100% in our matching contributions to our Savings Plan. We
also make annual fixed-rate contributions on behalf of our employees in the following amounts:
|
|
|
For our employees who were employed with us on or before January 1, 2004, we
contribute in a range from 2% to 10% of the employees compensation, based upon the sum of
the employees age and years of continuous service as of January 1, 2004; and
|
44
|
|
|
For our employees who were first employed with us after January 1, 2004, we
contribute 2% of the employees compensation.
|
An employee is required to be employed on the last day of the year in order to receive the
fixed-rate contribution. Employees are vested 100% in our fixed-rate contributions to the Savings
Plan after three years of service. The total amount of elective, matching and fixed-rate
contributions in any year cannot exceed the lesser of 100% of an employees compensation or $49,000
in 2010 (adjusted annually). We may amend or terminate these matching and fixed-rate contributions
at any time by an appropriate amendment to our Savings Plan. Upon termination of employment,
employees are eligible to receive a distribution of their vested plan balances under our Savings
Plan. The independent trustee of the Savings Plan invests the assets of the Savings Plan as
directed by participants.
Restoration Plan
We sponsor a nonqualified, deferred compensation plan, our Restoration Plan, in which a select
group of our management and highly compensated employees may participate. Eligibility to
participate in our Restoration Plan is determined by the compensation committee. The purpose of our
Restoration Plan is to restore the benefit of matching and fixed-rate contributions that we would
have otherwise paid to participants under our Savings Plan but for the limitations on benefit
accruals and payments imposed by the Internal Revenue Code of 1986. We maintain an account on
behalf of each participant in the Restoration Plan and make contributions to a participants
Restoration Plan account to restore benefits under the Savings Plan are made generally in the
manner described below:
|
|
|
If our matching contributions to a participant under the Savings Plan are limited in
any year, we will make an annual contribution to that participants account under the
Restoration Plan equal to the difference between:
|
|
|
|
the matching contributions that we could have made to that participants
account under the Savings Plan if the Internal Revenue Code of 1986 did not impose any
limitations; and
|
|
|
|
|
the maximum contribution we could in fact make to that participants account
under the Savings Plan in light of the limitations imposed by the Internal Revenue Code
of 1986.
|
|
|
|
Annual fixed-rate contributions to the participants account under the Restoration
Plan are made in an amount equal to between 2% and 10% of the participants excess
compensation, as defined in Section 401(a)(17) of the Internal Revenue Code of 1986.
|
Participants are immediately vested 100% in our matching contributions to the Restoration Plan
and are vested 100% in our fixed-rate contributions to our Restoration Plan after three years of
service or upon retirement, death, disability or a change of control. Participants do not make
contributions to their respective Restoration Plan accounts. A participant is entitled to
distributions six months following his or her termination of service, except that any participant
who is terminated for cause will forfeit the entire amount of matching and fixed-rate contributions
made by us to that participants account under the Restoration Plan.
We may amend or terminate these matching and fixed-rate contributions at any time by an
appropriate amendment to our Restoration Plan. The value of each participants account under our
Restoration Plan changes based upon the performance of the funds designated by the participant from
a menu of various money market and investment funds.
45
Outstanding Equity Awards at December 31, 2010
The table below sets forth the information regarding equity awards held by our named executive
officers as of December 31, 2010.
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Option Awards
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Stock Awards
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Equity
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Incentive
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Plan
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Awards:
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Equity
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Market or
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Incentive
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Payout
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Plan Awards:
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Value
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Number
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of
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Of
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Unearned
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Market
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Unearned
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Shares,
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Number of
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Number of
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Number of
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Value of
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Shares,
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Units or
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Securities
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Securities
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Shares or
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Shares or
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Units or
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Other
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Underlying
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Underlying
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Units of
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Units of
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Other Rights
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Rights
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Unexercised
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Unexercised
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Option
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Stock That
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Stock That
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That Have
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That Have
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Options
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Options
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Exercise
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Option
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Have Not
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Have Not
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Not
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Not
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(#)
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(#)
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Price
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Expiration
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Vested
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Vested (1)
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Vested
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Vested (1)
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Name
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Exercisable
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Unexercisable
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($)
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Date
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(#)
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($)
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(#)
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($)
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Jack A. Hockema
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8,037
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(2)
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0
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$
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80.01
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4/3/17
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9,805
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(3)
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$
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491,132
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11,708
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(6)
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$
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586,454
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43,821
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(4)
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$
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2,194,994
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53,196
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(7)
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$
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2,664,588
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20,348
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(5)
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$
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1,019,231
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24,305
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(8)
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$
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1,217,437
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Daniel J. Rinkenberger
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803
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(2)
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0
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$
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80.01
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4/3/17
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982
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(3)
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$
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49,188
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1,172
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(6)
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$
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58,705
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1,939
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(9)
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$
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97,125
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2,316
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(10)
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$
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116,008
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15,192
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(4)
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$
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760,967
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18,442
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(7)
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$
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923,760
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7,114
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(5)
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$
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356,340
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8,497
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(8)
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$
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425,615
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John Barneson
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2,334
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(2)
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0
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$
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80.01
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4/3/17
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2,847
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(3)
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$
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142,606
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3,400
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(6)
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$
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170,306
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12,727
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(4)
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$
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637,495
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15,450
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(7)
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$
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773,891
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5,921
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(5)
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$
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296,583
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7,072
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(8)
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$
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354,236
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John M. Donnan
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2,083
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(2)
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0
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$
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80.01
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4/3/17
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2,681
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(3)
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$
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134,291
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3,202
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(6)
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$
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160,388
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|
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|
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11,985
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(4)
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$
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600,329
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|
|
|
14,549
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(7)
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$
|
728,759
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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5,569
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(5)
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$
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278,951
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6,652
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(8)
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$
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333,199
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James E. McAuliffe, Jr.
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1,067
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(2)
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0
|
|
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$
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80.01
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|
|
|
4/3/17
|
|
|
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1,586
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(3)
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$
|
79,443
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|
|
|
1,894
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(6)
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|
$
|
94,870
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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3,964
|
(4)
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|
$
|
198,557
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|
|
|
8,606
|
(7)
|
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$
|
431,075
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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1,839
|
(5)
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$
|
92,116
|
|
|
|
3,929
|
(8)
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$
|
196,804
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|
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(1)
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Reflects the aggregate market value determined based on a per share price of $50.09, the
closing price per share of our common stock as reported on the Nasdaq Global Select Market on
December 31, 2010.
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(2)
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Reflects option rights granted to the named executive officer effective April 3, 2007. The
option rights became exercisable as to one-third of the total number of shares of common stock
for which they are exercisable on each of April 3, 2008, April 3, 2009 and April 3, 2010. The
option rights expire on April 3, 2017, unless terminated earlier in accordance with their
terms.
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(3)
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Reflects the number of shares of restricted stock received by the named executive officer
pursuant to awards granted effective March 3, 2008. The restrictions on all such shares lapsed
on March 3, 2011.
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(4)
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For named executive officers other than Mr. McAuliffe, reflects the number of shares of
restricted stock received by the named executive officer pursuant to awards granted effective
March 5, 2009; for Mr. McAuliffe, reflects the number of shares of restricted stock received
by Mr. McAuliffe effective March 5, 2009 less the number of shares withheld to satisfy the
withholding tax obligations resulting from the recognition of income when Mr. McAuliffe
reached age 65 on June 7, 2010. The restrictions on all such shares will lapse on March 5,
2012 or earlier if the named executive officers employment terminates as a result of death or
disability, the named executive officers employment is terminated by us without cause, the
named executive officers employment is voluntarily terminated by him for good reason or in
the event of a change of control, each such event being referred to below as an accelerated
vesting event. If, prior to March 5, 2012, the named executive officers employment terminates
as a result of his retirement at or after age 65, the shares of restricted stock granted to
him will remain outstanding and the restrictions on 100% of such shares will lapse on March 5,
2012.
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(5)
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For named executive officers other than Mr. McAuliffe, reflects the number of shares of
restricted stock received by the named executive officer pursuant to awards granted effective
March 5, 2010; for Mr. McAuliffe, reflects the number of shares of restricted stock received
by Mr. McAuliffe effective March 5, 2010 less the number of shares withheld to satisfy the
withholding tax obligations resulting from the recognition of income when Mr. McAuliffe
reached age 65 on June 7, 2010. The restrictions on all such shares will lapse on March 5,
2013 or earlier upon an accelerated vesting event referred to in Note 4 above. If,
prior to March 5, 2013, the named executive officers employment terminates as a result of his
retirement at or after age 65, the shares of restricted stock granted to him will remain
outstanding and the restrictions on 100% of such shares will lapse on March 5, 2013.
|
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(6)
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|
Reflects the target number of performance shares received by the named executive officer
pursuant to awards granted effective March 3, 2008. Such target number is approximately
one-half of the performance shares received
|
46
|
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|
by the named executive officer pursuant to awards granted effective March 3, 2008. On March 4,
2011, the compensation committee certified the performance level achieved during the applicable
three-year performance period and a portion of the performance shares vested based on the level
of performance achieved during such three-year period, resulting in the issuance of common
stock to our named executive officers as follows: Mr. Hockema, 3,126 shares; Mr. Rinkenberger,
931 shares; Mr. Barneson, 907 shares; Mr. Donnan, 854 shares; and Mr. McAuliffe, 505 shares.
Performance shares not vested were forfeited.
|
|
(7)
|
|
Reflects the target number of performance shares received by the named executive officer
pursuant to awards granted effective March 5, 2009. Such target number is approximately
one-half of the performance shares received by the named executive officer pursuant to awards
granted effective March 5, 2009. The number of performance shares, if any, that vest based on
the level of performance achieved during the three-year performance period will vest on the
later to occur of March 5, 2012 and the date on which the compensation committee certifies the
performance level achieved during the three-year performance period. If, prior to December 31,
2011, an accelerated vesting event occurs with respect to the named executive officer, the
target number of performance shares will vest. If an accelerated vesting event occurs with
respect to a named executive officer, on or after December 31, 2011 and prior to the vesting
date, the performance shares will remain outstanding and the number of performance shares, if
any, that will vest on the vesting date will be determined based on the performance level
achieved during the applicable three-year performance period, except that the performance
shares will be forfeited if the executive officers employment is terminated by us for cause
or is voluntarily terminated by him without good reason prior to age 65. If, prior to the
vesting date, the employment of the named executive terminates as a result of his retirement
at or after age 65, the performance shares granted to him will remain outstanding and the
number of performance shares, if any, that will vest on the vesting date will be determined
based on the performance level achieved during the applicable three-year performance period.
Each performance share that becomes vested entitles the participant to receive one share of
our common stock.
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(8)
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|
Reflects the target number of performance shares received by the named executive officer
pursuant to awards granted effective March 5, 2010. Such target number is approximately
one-half of the performance shares received by the named executive officer pursuant to awards
granted effective March 5, 2010. The number of performance shares, if any, that vest based on
the level of performance achieved during the three-year performance period will vest on the
later to occur of March 5, 2013 and the date on which the compensation committee certifies the
performance level achieved during the three-year performance period. If, prior to December 31,
2012, an accelerated vesting event occurs with respect to the named executive officer, the
target number of performance shares will vest. If an accelerated vesting event occurs with
respect to a named executive officer, on or after December 31, 2012 and prior to the vesting
date, the performance shares will remain outstanding and the number of performance shares, if
any, that will vest on the vesting date will be determined based on the performance level
achieved during the applicable three-year performance period, except that the performance
shares will be forfeited if the executive officers employment is terminated by us for cause
or is voluntarily terminated by him without good reason prior to age 65. If, prior to the
vesting date, the employment of the named executive officer terminates as a result of his
retirement at or after age 65, the performance shares granted to him will remain outstanding
and the number of performance shares, if any, that will vest on the vesting date will be
determined based on the performance level achieved during the applicable three-year
performance period. Each performance share that becomes vested entitles the participant to
receive one share of our common stock.
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(9)
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|
Reflects the number of shares of restricted stock received by Mr. Rinkenberger pursuant to
awards granted effective April 14, 2008, in connection with his appointment as our Senior Vice
President and Chief Financial Officer. The restrictions on all such shares will lapse on March
3, 2011 or earlier upon an accelerated vesting event referred to in Note 4 above.
|
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(10)
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Reflects the target number of performance shares received by Mr. Rinkenberger pursuant to
awards granted effective April 14, 2008 in connection with his appointment as our Senior Vice
President and Chief Financial Officer. The performance shares granted to Mr. Rinkenberger vest
on the same terms as the performance shares described in Note 6 above. Each performance share
that becomes vested entitles the participant to receive one share of our common stock.
|
47
Option Exercises and Stock Vested in 2010
The table below sets forth information regarding vesting of shares of restricted stock to our
named executive officers during 2010. These shares were issued on April 3, 2007 and were subject to
three-year cliff vesting.
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|
Stock Awards
|
|
|
Number of Shares
|
|
Value Realized
|
|
|
Acquired on Vesting
|
|
on Vesting
|
Name
|
|
(#)
|
|
($)(1)
|
Jack A. Hockema
|
|
|
13,239
|
|
|
$
|
525,721
|
|
Daniel J. Rinkenberger
|
|
|
1,323
|
|
|
$
|
52,536
|
|
John Barneson
|
|
|
3,844
|
|
|
$
|
152,645
|
|
John M. Donnan
|
|
|
3,431
|
|
|
$
|
136,245
|
|
James E. McAuliffe, Jr.
|
|
|
1,758
|
|
|
$
|
69,810
|
|
|
|
|
(1)
|
|
Reflects the aggregate market value determined based on a per share price of $39.71, the
closing price per share of our common stock as reported on the Nasdaq Global Select Market on
April 2, 2010, which was the last business day before the date of vesting.
|
Pension Benefits as of December 31, 2010
The table below sets forth information regarding the present value as of December 31, 2010 of
the accumulated benefits of our named executive officers under our old defined benefit pension
plan, our Old Pension Plan. As discussed further below, our Old Pension Plan was terminated on
December 17, 2003, at which time the number of years of credited service for participants was
frozen.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of
|
|
|
|
|
Number of Years
|
|
Accumulated
|
|
|
|
|
Credited Service
|
|
Benefit (1)
|
Name
|
|
Plan Name
|
|
(#)
|
|
($)
|
Jack A. Hockema
|
|
Kaiser Aluminum Salaried Employees
Retirement Plan
|
|
|
11.92
|
|
|
$
|
367,702
|
|
Daniel J. Rinkenberger
|
|
Kaiser Aluminum Salaried Employees
Retirement Plan
|
|
|
12.67
|
|
|
$
|
279,524
|
|
John Barneson
|
|
Kaiser Aluminum Salaried Employees
Retirement Plan
|
|
|
28.83
|
|
|
$
|
412,011
|
|
John M. Donnan
|
|
Kaiser Aluminum Salaried Employees
Retirement Plan
|
|
|
10.25
|
|
|
$
|
218,483
|
|
James E. McAuliffe, Jr.
|
|
Kaiser Aluminum Salaried Employees
Retirement Plan
|
|
|
5.75
|
|
|
$
|
142,265
|
|
|
|
|
(1)
|
|
Determined (a) assuming mortality according to the RP-2000WC mortality table projected 10
years with Scale AA and (b) applying a discount rate of 4.70% per annum.
|
The Old Pension Plan previously maintained by us was a qualified, defined-benefit retirement
plan for our salaried employees who met certain eligibility requirements. Effective December 17,
2003, the PBGC terminated and effectively assumed responsibility for making benefit payments in
respect of the Old Pension Plan. As a result of the termination, all benefit accruals under the Old
Pension Plan were terminated and benefits available to certain executive officers, including
Messrs. Hockema and Barneson, were significantly reduced due to the limitation on benefits payable
by the PBGC. Benefits payable to participants will be reduced to a maximum of $34,742 annually for
retirement at age 62, a lower amount for retirement prior to age 62, and a higher amount for
retirements after age 62, up to $43,977 at age 65, and participants will not accrue additional
benefits. In addition, the PBGC will not make lump-sum payments to participants.
48
Nonqualified Deferred Compensation for 2010
The table below sets forth, for each of our named executive officers, information regarding
his participation in our Restoration Plan during 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registrant
|
|
Aggregate
|
|
Aggregate
|
|
|
Contributions
|
|
Earnings in
|
|
Balance at
|
Name
|
|
in Last FY (1)
|
|
Last FY (2)(3)
|
|
Last FYE
|
|
|
(a)
|
|
(b)
|
|
(c)
|
Jack A. Hockema
|
|
$
|
110,622
|
|
|
$
|
180,417
|
|
|
$
|
2,458,964
|
|
Daniel J. Rinkenberger
|
|
$
|
20,814
|
|
|
$
|
12,309
|
|
|
$
|
114,011
|
|
John Barneson
|
|
$
|
23,458
|
|
|
$
|
142,655
|
|
|
$
|
1,269,389
|
|
John M. Donnan
|
|
$
|
15,948
|
|
|
$
|
15,943
|
|
|
$
|
213,413
|
|
James E. McAuliffe, Jr.
|
|
$
|
11,581
|
|
|
$
|
14,326
|
|
|
$
|
134,201
|
|
|
|
|
(1)
|
|
In each case, 100% of such amount is included in the amounts for 2010 reflected in the All
Other Compensation column of the Summary Compensation Table above.
|
|
(2)
|
|
Amounts included in this column do not include amounts reflected in column (a).
|
|
(3)
|
|
Amounts included in this column do not include above-market or preferential earnings (of
which there were none) and, accordingly, such amount is not included in the Change in Pension
Value and Nonqualified Deferred Compensation Earnings column of the Summary Compensation
Table above.
|
Potential Payments and Benefits Upon Termination of Employment
The tables below set forth for each named executive officer quantitative disclosure regarding
estimated payments and other benefits that would have been received by the named executive officer
or his estate if his employment had terminated on December 31, 2010, the last business day of 2010,
under the following circumstances:
|
|
|
voluntary termination by the named executive officer prior to age 65;
|
|
|
|
|
termination by us for cause;
|
|
|
|
|
termination by us without cause or by the named executive officer with good reason;
|
|
|
|
|
termination by us without cause or by the named executive officer with good reason
following a change in control;
|
|
|
|
|
termination at retirement at or after age 65;
|
|
|
|
|
termination as a result of disability; or
|
|
|
|
|
termination as a result of death.
|
Information regarding estimated payments and other benefits upon termination of employment of
Messrs. Hockema, Rinkenberger, Barneson and Donnan at retirement is provided for illustrative
purposes notwithstanding the fact that none of such named executive officers had reached age 65 as
of December 31, 2010. Mr. McAuliffe reached age 65 during 2010.
49
JACK A. HOCKEMA
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Circumstances of Termination
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|
|
|
|
|
|
|
|
|
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|
|
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|
|
Termination by
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
us without Cause
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|
|
|
|
|
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|
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|
|
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|
|
Termination by
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or by the Named
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Voluntary
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us without
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Executive
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Termination by
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Cause or by the
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Officer with
|
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Named
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Named
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Good Reason
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|
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|
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|
|
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Executive
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Executive
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Following a
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Retirement
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Payments and
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Officer Prior to
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Termination
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Officer with
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Change in
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At or After
|
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|
|
|
|
|
Benefits
|
|
Age 65
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|
by us for Cause
|
|
|
Good Reason
|
|
|
Control
|
|
|
Age 65
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|
|
Disability
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|
|
Death
|
|
Payment of earned but unpaid:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Base salary (1)
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|
|
|
|
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|
|
|
|
|
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|
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|
|
|
|
|
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Short-term incentive (2)
|
|
|
|
|
|
|
|
|
|
$
|
421,322
|
|
|
$
|
421,322
|
|
|
$
|
421,322
|
|
|
$
|
421,322
|
|
|
$
|
421,322
|
|
Vacation (3)
|
|
$
|
62,077
|
|
|
$
|
62,077
|
|
|
$
|
62,077
|
|
|
$
|
62,077
|
|
|
$
|
62,077
|
|
|
$
|
62,077
|
|
|
$
|
62,077
|
|
Other Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump sum payment
|
|
|
|
|
|
|
|
|
|
$
|
2,718,000
|
(4)
|
|
$
|
4,077,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare benefits
|
|
|
|
|
|
|
|
|
|
$
|
42,203
|
(6)
|
|
$
|
63,305
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability benefits
|
|
|
|
|
|
|
|
|
|
$
|
12,023
|
(7)
|
|
$
|
16,316
|
(7)
|
|
|
|
|
|
$
|
420,328
|
(8)
|
|
|
|
|
Life insurance
|
|
|
|
|
|
|
|
|
|
$
|
10,127
|
(9)
|
|
$
|
15,851
|
(9)
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
(10)
|
Perquisites and other personal
benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Tax gross-up (11)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of stock vesting on
termination (12)
|
|
|
|
|
|
|
|
|
|
$
|
7,743,964
|
|
|
$
|
7,743,964
|
|
|
$
|
7,096,250
|
|
|
$
|
7,743,964
|
|
|
$
|
7,743,964
|
|
Spread for options vesting on
termination (13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of Restoration Plan
Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Distribution (14)
|
|
$
|
2,458,964
|
|
|
|
|
|
|
$
|
2,458,964
|
|
|
$
|
2,458,964
|
|
|
$
|
2,458,964
|
|
|
$
|
2,458,964
|
|
|
$
|
2,458,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,521,041
|
|
|
$
|
62,077
|
|
|
$
|
13,468,680
|
|
|
$
|
14,858,799
|
|
|
$
|
10,038,613
|
|
|
$
|
11,106,655
|
|
|
$
|
10,836,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Assumes that there is no earned but unpaid base salary at the time of termination.
|
|
(2)
|
|
Under our 2010 STI Plan, Mr. Hockemas target award for 2010 was $552,000, but his award
could have ranged from a threshold of $276,000 to a maximum of $1,656,000, or could have been
zero if the threshold performance was not achieved. Mr. Hockemas award under our 2010 STI
Plan was determined in March 2011 to be $421,322. Pursuant to Mr. Hockemas employment
agreement, we must pay Mr. Hockema or his estate any earned but unpaid short-term incentive
unless his employment is terminated by us for cause or is voluntarily terminated by him other
than for good reason prior to age 65. Under Mr. Hockemas employment agreement, if his
employment had been terminated during 2010 but prior to December 31, 2010, Mr. Hockemas
target award for 2010 under our 2010 STI Plan would have been prorated for the actual number
of days of Mr. Hockemas employment in 2009 and Mr. Hockema would have been entitled to
payment of such amount, without any increase or reduction that would normally be considered
with his award, unless his employment had been terminated by us for cause or had been
voluntarily terminated by him other than for good reason. Under Mr. Hockemas employment
agreement, if his employment had been terminated on December 31, 2010, the last day of our
2010 fiscal year, Mr. Hockema would have been entitled to full payment of his award ($421,322)
under the 2010 STI Plan unless his employment had been terminated by us for cause or had been
voluntarily terminated by him other than for good reason.
|
|
(3)
|
|
Assumes that Mr. Hockema used all of his 2010 vacation and that he has four weeks of accrued
vacation for 2011.
|
|
(4)
|
|
Under Mr. Hockemas employment agreement, if Mr. Hockemas employment is terminated by us
without cause or is voluntarily terminated by him for good reason, we must make a lump-sum
payment to Mr. Hockema in an amount equal to two times the sum of his base salary and target
annual bonus opportunity for the fiscal year in which such termination occurs.
|
|
(5)
|
|
Under Mr. Hockemas employment agreement, if Mr. Hockemas employment is terminated by us
without cause or is voluntarily terminated by him for good reason within two years following a
change in control, we must make a lump-sum payment to Mr. Hockema in an amount equal to three
times the sum of his base salary and target annual bonus.
|
|
(6)
|
|
Under Mr. Hockemas employment agreement, if Mr. Hockemas employment is terminated by us
without cause or is voluntarily terminated by him for good reason, we must continue his
medical and dental benefits for two years, or, if such termination occurs within two years
following a change in control, three years, commencing on the date of such termination. The
table reflects the present value of such medical and dental
|
50
|
|
benefits at December 31, 2010 determined (a) assuming family coverage in a point of service
medical plan and a premium dental plan throughout the applicable benefit continuation period,
and (b) based on current COBRA coverage rates for 2011.
|
|
(7)
|
|
Under Mr. Hockemas employment agreement, if Mr. Hockemas employment is terminated by us
without cause or is voluntarily terminated by him for good reason, we must continue his
disability benefits for two years, or, if such termination occurs within two years following a
change in control, three years, commencing on the date of such termination. The table reflects
the present value of such disability benefits at December 31, 2010 determined (a) based on our
current costs of providing such benefits and assuming such costs do not increase during the
applicable benefit continuation period, (b) assuming we pay such costs throughout the
applicable benefit continuation period in the same manner as we currently pay such costs, (c)
assuming mortality according to the RP-2000 Combined Health mortality table published by the
Society of Actuaries, and (d) applying a discount rate of 4.70% per annum.
|
|
(8)
|
|
Reflects the actuarial present value of Mr. Hockemas disability benefits at December 31,
2010 determined (a) assuming full disability at December 31, 2010, (b) assuming mortality
according to the RP-2000 Disabled Retiree mortality table published by the Society of
Actuaries, and (c) applying a discount rate of 4.70% per annum. Such disability benefits would
be paid by a third-party insurer and not by us.
|
|
(9)
|
|
Under Mr. Hockemas employment agreement, if Mr. Hockemas employment is terminated by us
without cause or is voluntarily terminated by him for good reason, we must continue his life
insurance benefits for two years, or, if such termination occurs within two years following a
change in control, three years, commencing on the date of such termination. The table reflects
the present value of such life insurance benefits at December 31, 2010 determined (a) assuming
coverage throughout the applicable benefit continuation period at Mr. Hockemas current
election of the maximum available coverage, (b) based on our current costs of providing such
benefits and assuming such costs do not increase during the applicable benefit continuation
period, (c) assuming we pay such costs throughout the applicable benefit continuation period
in the same manner as we currently pay such costs, (d) assuming mortality according to the
RP-2000 Combined Health mortality table published by the Society of Actuaries, and (e)
applying a discount rate of 4.70% per annum.
|
|
(10)
|
|
Reflects the life insurance benefit payable assuming Mr. Hockemas death had occurred on
December 31, 2010 other than while traveling on company-related business. Such life insurance
benefit would have been paid by a third-party insurer and not by us. We maintain a travel and
accidental death policy for certain employees, including Mr. Hockema, that would provide a
$1,000,000 death benefit payable to Mr. Hockemas estate if his death occurs during
company-related travel. Such death benefit would be paid by a third-party insurer and not by
us.
|
|
(11)
|
|
In November 2010, our obligation to make excise tax gross-up payments to Mr. Hockema was
eliminated in connection with the amendment and restatement of his employment agreement. Mr.
Hockemas employment agreement, as amended and restated, instead provides that, if any
payments to Mr. Hockema would be subject to a federal excise tax by reason of being considered
contingent on a change in control, then such payments will be reduced to the minimum extent
necessary so that no portion of such payments, as so reduced, is subject to such tax, except
that such a reduction will be made only if and to the extent such reduction would result in an
increase in the aggregate payment on an after-tax basis. It is estimated that, if Mr.
Hockemas employment had been terminated on December 31, 2010 by us without cause or by him
for good reason following a change in control on such date, no payments owing to Mr. Hockema
would have been subject to a federal excise tax by reason of being considered contingent on a
change in control and, accordingly, no such payments would have been reduced.
|
|
(12)
|
|
If Mr. Hockemas employment had been terminated as a result of his death or disability, his
employment had been terminated by us without cause or his employment had been voluntarily
terminated by him for good reason, or if there had been a change in control, then (a) the
restrictions on all shares of restricted stock that were held by Mr. Hockema on December 31,
2010 would have lapsed, (b) the performance shares granted to Mr. Hockema effective March 3,
2008 would have remained outstanding, with the number of shares of common stock to be received
by him determined based on the actual level of performance achieved in 2008, 2009 and 2010,
and (c) the target number of performance shares granted to him effective March 5, 2009 and
March 5, 2010 would have vested; in such circumstances, the table reflects the aggregate
market value, determined based on a per share price of $50.09, the closing price per share of
our common stock as reported on the Nasdaq Global Select Market on December 31, 2010, which
was the last trading day of 2010, of a number of shares equal to the sum of (i) all shares of
restricted stock held by Mr. Hockema on December 31, 2010, (ii) the number of shares of common
stock received by Mr. Hockema in respect of the performance shares granted
|
51
|
|
to him effective March 3, 2008 based on the actual level of performance achieved in 2008, 2009
and 2010, and (iii) the target number of shares of common stock that could be received by Mr.
Hockema in respect of the performance shares granted to him effective March 5, 2009 and March
5, 2010. If Mr. Hockema had qualified for retirement on December 31, 2010 and he had retired on
such date, then all shares of restricted stock and performance shares that were held by Mr.
Hockema on December 31, 2010 would have remained outstanding, with the restrictions on such
shares of restricted stock to lapse in each case on the third anniversary of the date of grant
and with the number of shares of common stock, if any, to be received by Mr. Hockema in respect
of such performance shares to be determined based on the performance level achieved during the
applicable three-year performance periods; in such instances, the table reflects the aggregate
market value, determined based on a per share price of $50.09, the closing price per share of
our common stock as reported on the Nasdaq Global Select Market on December 31, 2010, which was
the last trading day of 2010, of a number of shares equal to the sum of (a) all shares of
restricted stock held by Mr. Hockema at December 31, 2010, (b) the number of shares of common
stock received by Mr. Hockema in respect of the performance shares granted to him effective
March 3, 2008, based on the actual level of performance achieved in 2008, 2009 and 2010, and
(c) the target number of shares of common stock that could be received by Mr. Hockema in
respect of the performance shares granted to him effective March 5, 2009 and March 5, 2010.
|
|
(13)
|
|
Reflects the spread, if any, of (a) the aggregate market value of the shares of common stock
purchasable upon exercise of the option rights which would have vested early due to Mr.
Hockemas termination, determined based on a per share price of $50.09, the closing price per
share of common stock as reported on the Nasdaq Global Select Market on December 31, 2010,
which was the last trading day of 2010, over (b) the aggregate exercise price required to
purchase such shares upon exercise of such option rights. All option rights held by Mr.
Hockema on December 31, 2010 had previously vested. Accordingly, no spread is reported in the
table.
|
|
(14)
|
|
Under our Restoration Plan, Mr. Hockema is entitled to a distribution of his account balance
six months following his termination, except that he will forfeit the entire amount of
matching and fixed rate contributions made by us to his account if his employment is
terminated for cause. In addition, under our Savings Plan, upon termination of employment, Mr.
Hockema is eligible to receive a distribution of his vested balance under the plan; however,
such balance is not reflected in this table.
|
52
DANIEL J. RINKENBERGER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Circumstances of Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by us without
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
the Named
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
by us without
|
|
|
Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
Cause or by
|
|
|
Officer with
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
|
|
|
|
|
|
|
the Named
|
|
|
Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
Executive
|
|
|
Following a
|
|
|
Retirement At
|
|
|
|
|
|
|
|
Payments and
|
|
Officer Prior to
|
|
|
Termination
|
|
|
Officer with
|
|
|
Change in
|
|
|
or After Age
|
|
|
|
|
|
|
|
Benefits
|
|
Age 65
|
|
|
by us for Cause
|
|
|
Good Reason
|
|
|
Control
|
|
|
65
|
|
|
Disability
|
|
|
Death
|
|
Payment of
earned but unpaid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
incentive (2)
|
|
|
|
|
|
|
|
|
|
$
|
152,653
|
|
|
$
|
152,653
|
|
|
$
|
152,653
|
|
|
$
|
152,653
|
|
|
$
|
152,653
|
|
Vacation (3)
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Other Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump sum payment
|
|
|
|
|
|
|
|
|
|
$
|
100,000
|
(4)
|
|
$
|
1,050,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare benefits
|
|
|
|
|
|
|
|
|
|
$
|
6,493
|
(6)
|
|
$
|
44,313
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability benefits
|
|
|
|
|
|
|
|
|
|
$
|
2,330
|
(8)
|
|
$
|
15,330
|
(9)
|
|
|
|
|
|
$
|
1,684,517
|
(10)
|
|
|
|
|
Life insurance
|
|
|
|
|
|
|
|
|
|
$
|
31
|
(11)
|
|
$
|
199
|
(12)
|
|
|
|
|
|
|
|
|
|
$
|
50,000
|
(13)
|
Perquisites and
other personal
benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
37,570
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax gross-up (15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,237,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of
Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of
stock vesting on
termination (16)
|
|
|
|
|
|
|
|
|
|
$
|
2,659,629
|
|
|
$
|
2,659,629
|
|
|
$
|
2,466,682
|
|
|
$
|
2,659,629
|
|
|
$
|
2,659,629
|
|
Spread for options
vesting on
termination (17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of
Restoration Plan
Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of
Distribution (18)
|
|
$
|
114,011
|
|
|
|
|
|
|
$
|
114,011
|
|
|
$
|
114,011
|
|
|
$
|
114,011
|
|
|
$
|
114,011
|
|
|
$
|
114,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
139,011
|
|
|
$
|
25,000
|
|
|
$
|
3,060,147
|
|
|
$
|
5,336,232
|
|
|
$
|
2,758,346
|
|
|
$
|
4,635,810
|
|
|
$
|
3,001,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Assumes that there is no earned but unpaid base salary at the time of termination.
|
|
(2)
|
|
Under our 2010 STI Plan, Mr. Rinkenbergers target award for 2010 was $200,000, but his award
could have ranged from a threshold of $100,000 to a maximum of $600,000, or could have been
zero if the threshold performance was not achieved. Mr. Rinkenbergers award under our 2010
STI Plan was determined in March 2011 to be $152,653. Under the 2010 STI Plan, Mr.
Rinkenberger would have been entitled to a pro rata award under the 2010 STI Plan if his
employment had been terminated during 2010 but prior to December 31, 2010 and his employment
had been terminated as a result of death, disability, normal retirement or full early
retirement (position elimination), had been terminated by us without cause or had been
voluntarily terminated by him for good reason. Under Mr. Rinkenbergers Change in Control
Agreement, if his employment had been terminated by us without cause or by him for good reason
within the period commencing 90 days prior to a change in control and ending two years
following a change in control and such termination had occurred during 2010 other than on
December 31, 2010, Mr. Rinkenbergers target award for 2010 under our 2010 STI Plan would have
been prorated for the actual number of days of Mr. Rinkenbergers employment in 2010 and Mr.
Rinkenberger would have been entitled to payment of such amount. If Mr. Rinkenbergers
employment had been terminated on December 31, 2010, the last day of our 2010 fiscal year, Mr.
Rinkenberger would have been entitled to full payment of his award ($152,653) under the 2010
STI Plan unless his employment had been terminated by us for cause or voluntarily terminated
by him other than for good reason.
|
|
(3)
|
|
Assumes that Mr. Rinkenberger used all of his 2010 vacation and that he has four weeks of
accrued vacation for 2011.
|
|
(4)
|
|
Under our Salaried Severance Plan, if Mr. Rinkenbergers employment is terminated by us
without cause, Mr. Rinkenberger is entitled to a lump-sum payment equal to his weekly base
salary multiplied by a number of weeks (not to exceed 26), which we refer to as the
continuation period, determined based on his number of years of full employment. As of
December 31, 2010, Mr. Rinkenbergers continuation period was 16 weeks.
|
53
(5)
|
|
Under Mr. Rinkenbergers Change in Control Agreement, if Mr. Rinkenbergers employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period beginning 90 days prior to a change in control and ending two years following a change
in control, Mr. Rinkenberger is entitled to a lump-sum payment equal to two times the sum of
his base salary and most recent short-term incentive target.
|
|
(6)
|
|
Under our Salaried Severance Plan, if Mr. Rinkenbergers employment is terminated by us
without cause, Mr. Rinkenberger is entitled to continuation of his medical and dental benefits
following the termination of employment for a period not to exceed the shorter of his
continuation period (as described above in Note 4) and the period commencing on the
termination of employment and ending on the date he is no longer eligible for coverage under
COBRA. The table reflects the present value of such medical and dental benefits at December
31, 2010 determined (a) assuming family coverage in a point of service medical plan and a
premium dental plan throughout Mr. Rinkenbergers continuation period and (b) based on current
COBRA coverage rates for 2011.
|
|
(7)
|
|
Under Mr. Rinkenbergers Change in Control Agreement, if Mr. Rinkenbergers employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his medical and dental benefits for two years commencing on the
date of such termination. The table reflects the present value of such medical and dental
benefits at December 31, 2010 determined (a) assuming family coverage in a point of service
medical plan and a premium dental plan throughout the benefit continuation period and (b)
based on current COBRA coverage rates for 2011 and assuming a 10% increase in the cost of
medical and dental coverage for 2012 as compared to 2011.
|
|
(8)
|
|
Under our Salaried Severance Plan, if Mr. Rinkenbergers employment is terminated by us
without cause, Mr. Rinkenberger is entitled to continuation of his disability benefits
following the termination of employment for a period not to exceed the shorter of his
continuation period (as described above in Note 4) and the period commencing on the
termination of employment and ending on the date he is no longer eligible for coverage under
COBRA. The table reflects the present value of such disability benefits at December 31, 2010
determined (a) assuming coverage throughout Mr. Rinkenbergers continuation period, (b) based
on our current costs of providing such benefits and assuming such costs do not increase during
Mr. Rinkenbergers continuation period, (c) assuming we pay such costs throughout Mr.
Rinkenbergers continuation period in the same manner as we currently pay such costs, (d)
assuming mortality according to the RP-2000 Combined Health mortality table published by the
Society of Actuaries, and (e) applying a discount rate of 4.70% per annum.
|
|
(9)
|
|
Under Mr. Rinkenbergers Change in Control Agreement, if Mr. Rinkenbergers employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his disability benefits for two years commencing on the date of
such termination. The table reflects the present value of such disability benefits at December
31, 2010 determined (a) assuming coverage throughout the benefit continuation period, (b)
based on our current costs of providing such benefits and assuming such costs do not increase
during the applicable benefit continuation period, (c) assuming we pay such costs throughout
the applicable benefit continuation period in the same manner as we currently pay such costs,
(d) assuming mortality according to the RP-2000 Combined Health mortality table published by
the Society of Actuaries, and (e) applying a discount rate of 4.70% per annum.
|
|
(10)
|
|
Reflects the actuarial present value of Mr. Rinkenbergers disability benefits at December
31, 2010 determined (a) assuming full disability at December 31, 2010, (b) assuming mortality
according to the RP-2000 Disabled Retiree mortality table published by the Society of
Actuaries, and (c) applying a discount rate of 4.70% per annum. Such disability benefits would
be paid by a third-party insurer and not by us.
|
|
(11)
|
|
Under our Salaried Severance Plan, if Mr. Rinkenbergers employment is terminated by us
without cause, Mr. Rinkenberger is entitled to continuation of his life insurance benefits
following the termination of employment for a period not to exceed the shorter of his
continuation period (as described above in Note 4) and the period commencing on the
termination of employment and ending on the date he is no longer eligible for coverage under
COBRA. The table reflects the present value of such life insurance benefits at December 31,
2010 determined (a) assuming coverage throughout Mr. Rinkenbergers continuation period at his
current election of the maximum available coverage, (b) based on our current costs of
providing such benefits and assuming such costs do not increase during Mr. Rinkenbergers
continuation period, (c) assuming we pay such costs throughout Mr. Rinkenbergers continuation
period in the same manner as we currently pay such costs, (d)
|
54
|
|
assuming mortality according to the RP-2000 Combined Health mortality table published by the
Society of Actuaries, and (e) applying a discount rate of 4.70% per annum.
|
|
(12)
|
|
Under Mr. Rinkenbergers Change in Control Agreement, if Mr. Rinkenbergers employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his life insurance benefits for two years commencing on the date
of such termination. The table reflects the present value of such life insurance benefits at
December 31, 2010 determined (a) assuming coverage throughout the benefit continuation period
at his current election of the maximum available coverage, (b) based on our current costs of
providing such benefits and assuming such costs do not increase during the applicable benefit
continuation period, (c) assuming we pay such costs throughout the applicable benefit
continuation period in the same manner as we currently pay such costs, (d) assuming mortality
according to the RP-2000 Combined Health mortality table published by the Society of
Actuaries, and (e) applying a discount rate of 4.70% per annum.
|
|
(13)
|
|
Reflects the life insurance benefit payable assuming Mr. Rinkenbergers death had occurred on
December 31, 2010 other than while traveling on company-related business. Such life insurance
benefit would have been paid by a third-party insurer and not by us. We maintain a travel and
accidental death policy for certain employees, including Mr. Rinkenberger, that would provide
an additional $1,000,000 death benefit payable to Mr. Rinkenbergers estate if his death
occurs during company-related travel. Such death benefit would be paid by a third-party
insurer and not by us.
|
|
(14)
|
|
Under Mr. Rinkenbergers Change in Control Agreement, if Mr. Rinkenbergers employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his perquisites for two years commencing on the date of such
termination. The table reflects the estimated cost to us of continuing Mr. Rinkenbergers
perquisites for such two-year period as follows: club membership dues, $16,994, and vehicle
allowance, $20,576. Such amount has been estimated by multiplying the cost of Mr.
Rinkenbergers perquisites for 2010 by two.
|
|
(15)
|
|
Under Mr. Rinkenbergers Change in Control Agreement, in general, if any payments to Mr.
Rinkenberger would be subject to federal excise tax or any similar state or local tax by
reason of being considered contingent on a change in control, we must pay to Mr. Rinkenberger
an additional amount such that, after satisfaction of all tax obligations imposed on such
payments, Mr. Rinkenberger retains an amount equal to the federal excise tax or similar state
or local tax imposed on such payments. The table reflects an estimate of such additional
amount that we would have been obligated to pay Mr. Rinkenberger if his employment had been
terminated on December 31, 2010 by us without cause or by him for good reason following a
change in control on such date.
|
|
(16)
|
|
If Mr. Rinkenbergers employment had been terminated as a result of his death or disability,
his employment had been terminated by us without cause or his employment had been voluntarily
terminated by him for good reason, or if there had been a change in control, then (a) the
restrictions on all shares of restricted stock that were held by Mr. Rinkenberger on December
31, 2010 would have lapsed, (b) the performance shares granted to him effective March 3, 2008
and April 14, 2008 would have remained outstanding, with the number of shares of common stock
to be received by Mr. Rinkenberger determined based on the actual level of performance
achieved in 2008, 2009 and 2010, and (c) the target number of performance shares granted to
him effective March 5, 2009 and March 5, 2010 would have vested; in such circumstances, the
table reflects the aggregate market value, determined based on a per share price of $50.09,
the closing price per share of our common stock as reported on the Nasdaq Global Select Market
on December 31,2010, which was the last trading day of 2010, of a number of shares equal to
(i) all shares of restricted stock held by Mr. Rinkenberger on December 31, 2010, (ii) the
number of shares of common stock received by Mr. Rinkenberger in respect of the performance
shares granted to him effective March 3, 2008 based on the actual level of performance
achieved in 2008, 2009 and 2010, and (iii) the target number of shares of common stock that
could be received by Mr. Rinkenberger in respect of the performance shares granted to him
effective March 5, 2009 and March 5, 2010. If Mr. Rinkenberger had qualified for retirement on
December 31, 2010 and he had retired on such date, then (a) the shares of restricted stock
granted to Mr. Rinkenberger effective March 3, 2008 and April 14, 2008 would have been
forfeited, (b) the shares of restricted stock granted to Mr. Rinkenberger effective March 5,
2009 and March 5, 2010 would have remained outstanding and the restrictions on such shares
would lapse on March 5, 2012 and March 5, 2013, respectively, (c) the performance shares
granted to Mr. Rinkenberger effective March 3, 2008 and April 14, 2008 would have been
forfeited, and (d) the performance shares granted to Mr. Rinkenberger effective
March 5, 2009 and March 5, 2010 would have remained outstanding with the number of shares of
common stock, if any, to be received by Mr. Rinkenberger
|
55
|
|
in respect to such performance
shares to be determined based on the performance level achieved during the applicable
three-year performance periods; in such circumstances, the table reflects the aggregate market
value, determined based on a per share price of $50.09, the closing price per share of our
common stock as reported on the Nasdaq Global Select Market on December 31, 2010, which was the
last trading day of 2010, of a number of shares equal to the sum of (i) all shares of
restricted stock granted to Mr. Rinkenberger effective March 5, 2009 and March 5, 2010, and
(ii) the target number of shares of common stock that could be received by Mr. Rinkenberger in
respect of the performance shares granted to him effective March 5, 2009 and March 5, 2010.
|
|
(17)
|
|
Reflects the spread, if any, of (a) the aggregate market value of the shares of common stock
purchasable upon exercise of the option rights which would have vested early due to Mr.
Rinkenbergers termination, determined based on a per share price of $50.09, the closing price
per share of our common stock as reported on the Nasdaq Global Select Market on December 31,
2010, which was the last trading day of 2010, over (b) the aggregate exercise price required
to purchase such shares upon exercise of such option rights. All option rights that were held
by Mr. Rinkenberger on December 31, 2010 had previously vested. Accordingly, no spread is
reflected in the table because the $80.01 per share exercise price of such option rights
exceeded the $50.09 closing price per share of our common stock as reported on the Nasdaq
Global Select Market on December 31, 2010.
|
|
(18)
|
|
Under our Restoration Plan, Mr. Rinkenberger is entitled to a distribution of his account
balance six months following his termination, except that he will forfeit the entire amount of
matching and fixed rate contributions made by us to his account if he is terminated for cause.
In addition, under our Savings Plan, upon termination of employment, Mr. Rinkenberger is
eligible to receive a distribution of his vested balance under the plan; however, such balance
is not reflected in this table.
|
56
JOHN BARNESON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Circumstances of Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
us without
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or by the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Named
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
by us without
|
|
|
Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
Cause or by
|
|
|
Officer with
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
|
|
|
|
|
|
|
the Named
|
|
|
Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
Executive
|
|
|
Following a
|
|
|
Retirement
|
|
|
|
|
|
|
|
Payments and
|
|
Officer Prior to
|
|
|
Termination
|
|
|
Officer with
|
|
|
Change in
|
|
|
At or After
|
|
|
|
|
|
|
|
Benefits
|
|
Age 65
|
|
|
by us for Cause
|
|
|
Good Reason
|
|
|
Control
|
|
|
Age 65
|
|
|
Disability
|
|
|
Death
|
|
Payment of earned but
unpaid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term incentive (2)
|
|
|
|
|
|
|
|
|
|
$
|
106,094
|
|
|
$
|
106,094
|
|
|
$
|
106,094
|
|
|
$
|
106,094
|
|
|
$
|
106,094
|
|
Vacation (3)
|
|
$
|
29,808
|
|
|
$
|
29,808
|
|
|
$
|
29,808
|
|
|
$
|
29,808
|
|
|
$
|
29,808
|
|
|
$
|
29,808
|
|
|
$
|
29,808
|
|
Other Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump sum payment
|
|
|
|
|
|
|
|
|
|
$
|
155,000
|
(4)
|
|
$
|
1,347,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare benefits
|
|
|
|
|
|
|
|
|
|
$
|
10,551
|
(6)
|
|
$
|
69,846
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability benefits
|
|
|
|
|
|
|
|
|
|
$
|
4,455
|
(8)
|
|
$
|
21,372
|
(9)
|
|
|
|
|
|
$
|
792,723
|
(10)
|
|
|
|
|
Life insurance
|
|
|
|
|
|
|
|
|
|
$
|
1,386
|
(11)
|
|
$
|
9,020
|
(12)
|
|
|
|
|
|
|
|
|
|
$
|
300,000
|
(13)
|
Perquisites and other
personal benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
57,717
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax gross-up (15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of Equity
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of stock
vesting on termination
(16)
|
|
|
|
|
|
|
|
|
|
$
|
2,250,243
|
|
|
$
|
2,250,243
|
|
|
$
|
2,062,205
|
|
|
$
|
2,250,243
|
|
|
$
|
2,250,243
|
|
Spread for options
vesting on termination
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of
Restoration Plan Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Distribution
(18)
|
|
$
|
1,269,389
|
|
|
|
|
|
|
$
|
1,269,389
|
|
|
$
|
1,269,389
|
|
|
$
|
1,269,389
|
|
|
$
|
1,269,389
|
|
|
$
|
1,269,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,299,197
|
|
|
$
|
29,808
|
|
|
$
|
3,826,926
|
|
|
$
|
5,160,489
|
|
|
$
|
3,467,496
|
|
|
$
|
4,448,257
|
|
|
$
|
3,955,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Assumes that there is no earned but unpaid base salary at the time of termination.
|
|
(2)
|
|
Under our 2010 STI Plan, Mr. Barnesons target award for 2010 was $139,000, but his award
could have ranged from a threshold of $69,000 to a maximum of $417,000, or could have been
zero if the threshold performance was not achieved. Mr. Barnesons award under our 2010 STI
Plan was determined in March 2011 to be $106,094. Under the 2010 STI Plan, Mr. Barneson would
have been entitled to a pro rata award under the 2010 STI Plan if his employment had been
terminated during 2010 but prior to December 31, 2010 and his employment had been terminated
as a result of death, disability, normal retirement or full early retirement (position
elimination), had been terminated by us without cause or had been voluntarily terminated by
him for good reason. Under Mr. Barnesons Change in Control Agreement, if his employment had
been terminated by us without cause or by him for good reason within the period commencing 90
days prior to a change in control and ending two years following a change in control and such
termination had occurred during 2010 other than on December 31, 2010, Mr. Barnesons target
award for 2010 under our 2010 STI Plan would have been prorated for the actual number of days
of Mr. Barnesons employment in 2010 and Mr. Barneson would have been entitled to payment of
such amount. If Mr. Barnesons employment had been terminated on December 31, 2010, the last
day of our 2010 fiscal year, Mr. Barneson would have been entitled to full payment of his
award ($106,094) under the 2010 STI Plan unless his employment had been terminated by us for
cause or voluntarily terminated by him other than for good reason.
|
|
(3)
|
|
Assumes that Mr. Barneson used all of his 2010 vacation and that he has five weeks of accrued
vacation for 2011.
|
|
(4)
|
|
Under our Salaried Severance Plan, if Mr. Barnesons employment is terminated by us without
cause, Mr. Barneson is entitled to a lump-sum payment equal to his weekly base salary
multiplied by a number of weeks (not to exceed 26), which we refer to as the continuation
period, determined based on his number of years of full employment. As of December 31, 2010,
Mr. Barnesons continuation period was 26 weeks.
|
|
(5)
|
|
Under Mr. Barnesons Change in Control Agreement, if Mr. Barnesons employment is terminated
by us without cause or is voluntarily terminated by him for good reason within the period
beginning 90 days prior to a change in control and ending two years following a change in
control, Mr. Barneson is entitled to a lump-sum payment equal to three times the sum of his
base salary and most recent short-term incentive target.
|
|
(6)
|
|
Under our Salaried Severance Plan, if Mr. Barnesons employment is terminated by us without
cause, Mr. Barneson is entitled to continuation of his medical and dental benefits following
the termination of employment for a period not to exceed the shorter of his continuation
period (as described above in Note 4) and the period
|
57
|
|
commencing on the termination of employment and ending on the date he is no longer eligible for
coverage under COBRA. The table reflects the present value of such medical and dental benefits
at December 31, 2010 determined (a) assuming family coverage in a point of service medical plan
and a premium dental plan throughout Mr. Barnesons continuation period and (b) based on
current COBRA coverage rates for 2011.
|
|
(7)
|
|
Under Mr. Barnesons Change in Control Agreement, if Mr. Barnesons employment is terminated
by us without cause or is voluntarily terminated by him for good reason and if such
termination occurs within the period commencing 90 days prior to a change in control and
ending two years following a change in control, we must continue his medical and dental
benefits for three years commencing on the date of such termination. The table reflects the
present value of such medical and dental benefits at December 31, 2010 determined (a) assuming
family coverage in a point of service medical plan and a premium dental plan throughout the
benefit continuation period and (b) based on current COBRA coverage rates for 2011 and
assuming a 10% increase in the cost of medical and dental coverage for 2012 as compared to
2011 and a 10% increase in the cost of medical and dental coverage for 2013 as compared to
2012.
|
|
(8)
|
|
Under our Salaried Severance Plan, if Mr. Barnesons employment is terminated by us without
cause, Mr. Barneson is entitled to continuation of his disability benefits following the
termination of employment for a period not to exceed the shorter of his continuation period
(as described above in Note 4) and the period commencing on the termination of employment and
ending on the date he is no longer eligible for coverage under COBRA. The table reflects the
present value of such disability benefits at December 31, 2010 determined (a) assuming
coverage throughout Mr. Barnesons continuation period, (b) based on our current costs of
providing such benefits and assuming such costs do not increase during Mr. Barnesons
continuation period, (c) assuming we pay such costs throughout Mr. Barnesons continuation
period in the same manner as we currently pay such costs, (d) assuming mortality according to
the RP-2000 Combined Health mortality table published by the Society of Actuaries, and (e)
applying a discount rate of 4.70% per annum.
|
|
(9)
|
|
Under Mr. Barnesons Change in Control Agreement, if Mr. Barnesons employment is terminated
by us without cause or is voluntarily terminated by him for good reason within the period
commencing 90 days prior to a change in control and ending two years following a change in
control, we must continue his disability benefits for three years commencing on the date of
such termination. The table reflects the present value of such disability benefits at December
31, 2010 determined (a) assuming coverage throughout the benefit continuation period, (b)
based on our current costs of providing such benefits and assuming such costs do not increase
during the applicable benefit continuation period, (c) assuming we pay such costs throughout
the applicable benefit continuation period in the same manner as we currently pay such costs,
(d) assuming mortality according to the RP-2000 Combined Health mortality table published by
the Society of Actuaries, and (d) applying a discount rate of 4.70% per annum.
|
|
(10)
|
|
Reflects the actuarial present value of Mr. Barnesons disability benefits at December 31,
2010 determined (a) assuming full disability at December 31, 2010, (b) assuming mortality
according to the RP-2000 Disabled Retiree mortality table published by the Society of
Actuaries, and (c) applying a discount rate of 4.70% per annum. Such disability benefits would
be paid by a third-party insurer and not by us.
|
|
(11)
|
|
Under our Salaried Severance Plan, if Mr. Barnesons employment is terminated by us without
cause, Mr. Barneson is entitled to continuation of his life insurance benefits following the
termination of employment for a period not to exceed the shorter of his continuation period
(as described above in Note 4) and the period commencing on the termination of employment and
ending on the date he is no longer eligible for coverage under COBRA. The table reflects the
present value of such life insurance benefits at December 31, 2010 determined (a) assuming
coverage throughout Mr. Barnesons continuation period at his current election of the maximum
available coverage, (b) based on our current costs of providing such benefits and assuming
such costs do not increase during Mr. Barnesons continuation period, (c) assuming we pay such
costs throughout Mr. Barnesons continuation period in the same manner as we currently pay
such costs, (d) assuming mortality according to the RP-2000 Combined Health mortality table
published by the Society of Actuaries, and (e) applying a discount rate of 4.70% per annum.
|
|
(12)
|
|
Under Mr. Barnesons Change in Control Agreement, if Mr. Barnesons employment is terminated
by us without cause or is voluntarily terminated by him for good reason within the period
commencing 90 days prior to a change in control and ending two years following a change in
control, we must continue his life insurance benefits for three years commencing on the date
of such termination. The table reflects the present value of such life insurance benefits at
December 31, 2010 determined (a) assuming coverage throughout the benefit continuation period
at his current election of the maximum available coverage, (b) based on our current costs of
providing such benefits and assuming such costs do not increase during the applicable benefit
continuation period, (c) assuming we pay such costs throughout the applicable benefit
continuation period in the same manner as we currently pay such costs, (d) assuming mortality
according to the RP-2000 Combined Health mortality table published by the Society of
Actuaries, and (e) applying a discount rate of 4.70% per annum.
|
58
(13)
|
|
Reflects the life insurance benefit payable assuming Mr. Barnesons death had occurred on
December 31, 2010 other than while traveling on company-related business. Such life insurance
benefit would have been paid by a third-party insurer and not by us. We maintain a travel and
accidental death policy for certain employees, including Mr. Barneson, that would provide an
additional $1,000,000 death benefit payable to Mr. Barnesons estate if his death occurs
during company-related travel. Such death benefit would be paid by a third-party insurer and
not by us.
|
|
(14)
|
|
Under Mr. Barnesons Change in Control Agreement, if Mr. Barnesons employment is terminated
by us without cause or is voluntarily terminated by him for good reason within the period
commencing 90 days prior to a change in control and ending two years following a change in
control, we must continue his perquisites for three years commencing on the date of such
termination. The table reflects the estimated cost to us of continuing Mr. Barnesons
perquisites for such three-year period as follows: club membership dues, $26,340; and vehicle
allowance, $31,377. Such amounts have been estimated by multiplying the cost of Mr. Barnesons
perquisites for 2010 by three.
|
|
(15)
|
|
Under Mr. Barnesons Change in Control Agreement, in general, if any payments to Mr. Barneson
would be subject to federal excise tax or any similar state or local tax by reason of being
considered contingent on a change in control, we must pay to Mr. Barneson an additional amount
such that, after satisfaction of all tax obligations imposed on such payments, Mr. Barneson
retains an amount equal to the federal excise tax or similar state or local tax imposed on
such payments. The table reflects an estimate of such additional amount that we would have
been obligated to pay Mr. Barneson if his employment had been terminated on December 31, 2010
by us without cause or by him for good reason following a change in control on such date.
|
|
(16)
|
|
If Mr. Barnesons employment had been terminated as a result of his death or disability, his
employment had been terminated by us without cause or his employment had been voluntarily
terminated by him for good reason, or if there had been a change in control, then (a) the
restrictions on all shares of restricted stock that were held by Mr. Barneson on December 31,
2010 would have lapsed, (b) the performance shares granted to him effective March 3, 2008
would have remained outstanding, with the number of shares of common stock to be received by
Mr. Barneson determined based on the actual level of performance achieved in 2008, 2009 and
2010, and (c) the target number of performance shares granted to him effective March 5, 2009
and March 5, 2010 would have vested; in such circumstances, the table reflects the aggregate
market value, determined based on a per share price of $50.09, the closing price per share of
our common stock as reported on the Nasdaq Global Select Market on December 31,2010, which was
the last trading day of 2010, of a number of shares equal to the sum of (i) all shares of
restricted stock held by Mr. Barneson on December 31, 2010, (ii) the number of shares of
common stock received by Mr. Barneson in respect of the performance shares granted to him
effective March 3, 2008 based on the actual level of performance achieved in 2008, 2009 and
2010, and (iii) the target number of shares of common stock that could be received by Mr.
Barneson in respect of the performance shares granted to him effective March 5, 2009 and March
5, 2010. If Mr. Barneson had qualified for retirement on December 31, 2010 and he had retired
on such date, then (a) the shares of restricted stock granted to Mr. Barneson effective March
3, 2008 would have been forfeited, (b) the shares of restricted stock granted to Mr. Barneson
effective March 5, 2009 and March 5, 2010 would have remained outstanding and the restrictions
on such shares would lapse on March 5, 2012 and March 5, 2013, respectively, (c) the
performance shares granted to Mr. Barneson effective March 3, 2008 would have been
forfeited, and (d) the performance shares granted to Mr. Barneson effective March 5,
2009 and March 5, 2010 would have remained outstanding with the number of shares of common
stock, if any, to be received by Mr. Barneson in respect to such performance shares to be
determined based on the performance level achieved during the applicable three-year
performance periods; in such circumstances, the table reflects the aggregate market value,
determined based on a per share price of $50.09, the closing price per share of our common
stock as reported on the Nasdaq Global Select Market on December 31, 2010, which was the last
trading day of 2010, of a number of shares equal to the sum of (i) all shares of restricted
stock granted to Mr. Barneson effective March 5, 2009 and March 5, 2010, and (ii) the target
number of shares of common stock that could be received by Mr. Barneson in respect of the
performance shares granted to him effective March 5, 2009 and March 5, 2010.
|
|
(17)
|
|
Reflects the spread, if any, of (a) the aggregate market value of the shares of common stock
purchasable upon exercise of the option rights which would have vested early due to Mr.
Barnesons termination, determined based on a per share price of $50.09, the closing price per
share of our common stock as reported on the Nasdaq Global Select Market on December 31, 2010,
which was the last trading day of 2010, over (b) the aggregate exercise price required to
purchase such shares upon exercise of such option rights. All option rights that were held by
Mr. Barneson on December 31, 2010 had previously vested. Accordingly, no spread is reflected
in the table because the $80.01 per share exercise price of such option rights exceeded the
$50.09
|
59
|
|
closing price per share of our common stock as reported on the Nasdaq Global Select Market on
December 31, 2010.
|
|
(18)
|
|
Under our Restoration Plan, Mr. Barneson is entitled to a distribution of his account balance
six months following his termination, except that he will forfeit the entire amount of
matching and fixed rate contributions made by us to his account if he is terminated for cause.
In addition, under our Savings Plan, upon termination of employment, Mr. Barneson is eligible
to receive a distribution of his vested balance under the plan; however, such balance is not
reflected in this table.
|
60
JOHN M. DONNAN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Circumstances of Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
by us without
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cause or by
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
the Named
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
by us without
|
|
|
Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by
|
|
|
|
|
|
|
Cause or by
|
|
|
Officer with
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
|
|
|
|
|
|
|
the Named
|
|
|
Good Reason
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
|
|
|
|
Executive
|
|
|
Following a
|
|
|
Retirement At
|
|
|
|
|
|
|
|
Payments and
|
|
Officer Prior to
|
|
|
Termination
|
|
|
Officer with
|
|
|
Change in
|
|
|
or After Age
|
|
|
|
|
|
|
|
Benefits
|
|
Age 65
|
|
|
by us for Cause
|
|
|
Good Reason
|
|
|
Control
|
|
|
65
|
|
|
Disability
|
|
|
Death
|
|
Payment of
earned but unpaid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
incentive (2)
|
|
|
|
|
|
|
|
|
|
$
|
117,543
|
|
|
$
|
117,543
|
|
|
$
|
117,543
|
|
|
$
|
117,543
|
|
|
$
|
117,543
|
|
Vacation (3)
|
|
$
|
23,231
|
|
|
$
|
23,231
|
|
|
$
|
23,231
|
|
|
$
|
23,231
|
|
|
$
|
23,231
|
|
|
$
|
23,231
|
|
|
$
|
23,231
|
|
Other Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump sum payment
|
|
|
|
|
|
|
|
|
|
$
|
92,923
|
(4)
|
|
$
|
912,000
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare benefits
|
|
|
|
|
|
|
|
|
|
$
|
6,493
|
(6)
|
|
$
|
44,313
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability benefits
|
|
|
|
|
|
|
|
|
|
$
|
1,861
|
(8)
|
|
$
|
12,492
|
(9)
|
|
|
|
|
|
$
|
1,875,145
|
(10)
|
|
|
|
|
Life insurance
|
|
|
|
|
|
|
|
|
|
$
|
297
|
(11)
|
|
$
|
1,993
|
(12)
|
|
|
|
|
|
|
|
|
|
$
|
600,000
|
(13)
|
Perquisites and
other personal
benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,368
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax gross-up (15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of
Equity Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value of
stock vesting on
termination (16)
|
|
|
|
|
|
|
|
|
|
$
|
2,118,306
|
|
|
$
|
2,118,306
|
|
|
$
|
1,941,238
|
|
|
$
|
2,118,306
|
|
|
$
|
2,118,306
|
|
Spread for options
vesting on
termination (17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of
Restoration Plan
Balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of
Distribution (18)
|
|
$
|
213,413
|
|
|
|
|
|
|
$
|
213,413
|
|
|
$
|
213,413
|
|
|
$
|
213,413
|
|
|
$
|
213,413
|
|
|
$
|
213,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
236,644
|
|
|
$
|
23,231
|
|
|
$
|
2,574,067
|
|
|
$
|
3,468,659
|
|
|
$
|
2,295,425
|
|
|
$
|
4,347,638
|
|
|
$
|
3,072,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Assumes that there is no earned but unpaid base salary at the time of termination.
|
|
(2)
|
|
Under our 2010 STI Plan, Mr. Donnans target award for 2010 was $154,000, but his award could
have ranged from a threshold of $77,000 to a maximum of $462,000, or could have been zero if
the threshold performance was not achieved. Mr. Donnans award under our 2010 STI Plan was
determined in March 2011 to be $117,543. Under the 2010 STI Plan, Mr. Donnan would have been
entitled to a pro rata award under the 2010 STI Plan if his employment had been terminated
during 2010 but prior to December 31, 2010 and his employment had been terminated as a result
of death, disability, normal retirement or full early retirement (position elimination), had
been terminated by us without cause or had been voluntarily terminated by him for good reason.
Under Mr. Donnans Change in Control Agreement, if his employment had been terminated by us
without cause or by him for good reason within the period commencing 90 days prior to a change
in control and ending two years following a change in control and such termination had
occurred during 2010 other than on December 31, 2010, Mr. Donnans target award for 2010 under
our 2010 STI Plan would have been prorated for the actual number of days of Mr. Donnans
employment in 2010 and Mr. Donnan would have been entitled to payment of such amount. If Mr.
Donnans employment had been terminated on December 31, 2010, the last day of our 2010 fiscal
year, Mr. Donnan would have been entitled to full payment of his award ($117,543) under the
2010 STI Plan unless his employment had been terminated by us for cause or voluntarily
terminated by him other than for good reason.
|
|
(3)
|
|
Assumes that Mr. Donnan used all of his 2010 vacation and that he has four weeks of accrued
vacation for 2011.
|
|
(4)
|
|
Under our Salaried Severance Plan, if Mr. Donnans employment is terminated by us without
cause, Mr. Donnan is entitled to a lump-sum payment equal to his weekly base salary multiplied
by a number of weeks (not to exceed 26), which we refer to as the continuation period,
determined based on his number of years of full employment. As of December 31, 2010, Mr.
Donnans continuation period was 16 weeks.
|
61
|
|
|
(5)
|
|
Under Mr. Donnans Change in Control Agreement, if Mr. Donnans employment is terminated by
us without cause or is voluntarily terminated by him for good reason within the period
beginning 90 days prior to a change in control and ending two years following a change in
control, Mr. Donnan is entitled to a lump-sum payment equal to two times the sum of his base
salary and most recent short-term incentive target.
|
|
(6)
|
|
Under our Salaried Severance Plan, if Mr. Donnans employment is terminated by us without
cause, Mr. Donnan is entitled to continuation of his medical and dental benefits following the
termination of employment for a period not to exceed the shorter of his continuation period
(as described above in Note 4) and the period commencing on the termination of employment and
ending on the date he is no longer eligible for coverage under COBRA. The table reflects the
present value of such medical and dental benefits at December 31, 2010 determined (a) assuming
family coverage in a point of service medical plan and a premium dental plan through out Mr.
Donnans continuation period and (b) based on current COBRA coverage rates for 2011.
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(7)
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Under Mr. Donnans Change in Control Agreement, if Mr. Donnans employment is terminated by
us without cause or is voluntarily terminated by him for good reason within the period
commencing 90 days prior to a change in control and ending two years following a change in
control, we must continue his medical and dental benefits for two years commencing on the date
of such termination. The table reflects the present value of such medical and dental benefits
at December 31, 2010 determined (a) assuming family coverage in a point of service medical
plan and a premium dental plan through out the benefit continuation period and (b) based on
current COBRA coverage rates for 2011 and assuming a 10% increase in the cost of medical and
dental coverage for 2012 as compared to 2011.
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(8)
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Under our Salaried Severance Plan, if Mr. Donnans employment is terminated by us without
cause, Mr. Donnan is entitled to continuation of his disability benefits following the
termination of employment for a period not to exceed the shorter of his continuation period
(as described above in Note 4) and the period commencing on the termination of employment and
ending on the date he is no longer eligible for coverage under COBRA. The table reflects the
present value of such disability benefits at December 31, 2010 determined (a) assuming
coverage throughout Mr. Donnans continuation period, (b) based on our current costs of
providing such benefits and assuming such costs do not increase during Mr. Donnans
continuation period, (c) assuming we pay such costs throughout Mr. Donnans continuation
period in the same manner as we currently pay such costs, (d) assuming mortality according to
the RP-2000 Combined Health mortality table published by the Society of Actuaries, and (e)
applying a discount rate of 4.70% per annum.
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(9)
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Under Mr. Donnans Change in Control Agreement, if Mr. Donnans employment is terminated by
us without cause or is voluntarily terminated by him for good reason within the period
commencing 90 days prior to a change in control and ending two years following a change in
control, we must continue his disability benefits for two years commencing on the date of such
termination. The table reflects the present value of such disability benefits at December 31,
2010 determined (a) assuming coverage through out the benefit continuation period, (b) based
on our current costs of providing such benefits and assuming such costs do not increase during
the applicable benefit continuation period, (c) assuming we pay such costs throughout the
applicable benefit continuation period in the same manner as we currently pay such costs, (d)
assuming mortality according to the RP-2000 Combined Health mortality table published by the
Society of Actuaries, and (d) applying a discount rate of 4.70% per annum.
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(10)
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Reflects the actuarial present value of Mr. Donnans disability benefits at December 31, 2010
determined (a) assuming full disability at December 31, 2010, (b) assuming mortality according
to the RP-2000 Disabled Retiree mortality table published by the Society of Actuaries, and (c)
applying a discount rate of 4.70% per annum. Such disability benefits would be paid by a
third-party insurer and not by us.
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(11)
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Under our Salaried Severance Plan, if Mr. Donnans employment is terminated by us without
cause, Mr. Donnan is entitled to continuation of his life insurance benefits following the
termination of employment for a period not to exceed the shorter of his continuation period
(as described above in Note 4) and the period commencing on the termination of employment and
ending on the date he is no longer eligible for coverage under COBRA. The table reflects the
present value of such life insurance benefits at December 31, 2010 determined (a) assuming
coverage throughout Mr. Donnans continuation period at his current election of the maximum
available coverage, (b) based on our current costs of providing such benefits and assuming
such costs do not increase during Mr. Donnans continuation period, (c) assuming we pay such
costs throughout Mr. Donnans continuation period in the same manner as we currently pay such
costs, (d) assuming mortality according to the RP-2000 Combined Health mortality table
published by the Society of Actuaries, and (e) applying a discount rate of 4.70% per annum.
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62
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(12)
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Under Mr. Donnans Change in Control Agreement, if Mr. Donnans employment is terminated by
us without cause or is voluntarily terminated by him for good reason within the period
commencing 90 days prior to a change in control and ending two years following a change in
control, we must continue his life insurance benefits for two years commencing on the date of
such termination. The table reflects the present value of such life insurance benefits at
December 31, 2010 determined (a) assuming coverage through out the benefit continuation period
at his current election of the maximum available coverage, (b) based on our current costs of
providing such benefits and assuming such costs do not increase during the applicable benefit
continuation period, (c) assuming we pay such costs throughout the applicable benefit
continuation period in the same manner as we currently pay such costs, (d) assuming mortality
according to the RP-2000 Combined Health mortality table published by the Society of
Actuaries, and (e) applying a discount rate of 4.70% per annum.
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(13)
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Reflects the life insurance benefit payable assuming Mr. Donnans death had occurred on
December 31, 2010 other than while traveling on company-related business. Such life insurance
benefit would have been paid by a third-party insurer and not by us. We maintain a travel and
accidental death policy for certain employees, including Mr. Donnan, that would provide an
additional $1,000,000 death benefit payable to Mr. Donnans estate if his death occurs during
company-related travel. Such death benefit would be paid by a third-party insurer and not by
us.
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(14)
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Under Mr. Donnans Change in Control Agreement, if Mr. Donnans employment is terminated by
us without cause or is voluntarily terminated by him for good reason within the period
commencing 90 days prior to a change in control and ending two years following a change in
control, we must continue his perquisites for two years commencing on the date of such
termination. The table reflects the estimated cost to us of continuing Mr. Donnans
perquisites for such two-year period as follows: vehicle allowance, $25,368. Such amount has
been estimated by multiplying the cost of Mr. Donnans vehicle allowance for 2010 by two.
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(15)
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Under Mr. Donnans Change in Control Agreement, in general, if any payments to Mr. Donnan
would be subject to federal excise tax or any similar state or local tax by reason of being
considered contingent on a change in control, we must pay to Mr. Donnan an additional amount
such that, after satisfaction of all tax obligations imposed on such payments, Mr. Donnan
retains an amount equal to the federal excise tax or similar state or local tax imposed on
such payments. The table reflects an estimate of such additional amount that we would have
been obligated to pay Mr. Donnan if his employment had been terminated on December 31, 2010 by
us without cause or by him for good reason following a change in control on such date.
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(16)
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If Mr. Donnans employment had been terminated as a result of his death or disability, his
employment had been terminated by us without cause or his employment had been voluntarily
terminated by him for good reason, or if there had been a change in control, then (a) the
restrictions on all shares of restricted stock that were held by Mr. Donnan on December 31,
2010 would have lapsed, (b) the performance shares granted to him effective March 3, 2008
would have remained outstanding, with the number of shares of common stock to be received by
Mr. Donnan determined based on the actual level of performance achieved in 2008, 2009 and
2010, and (c) the target number of performance shares granted to him effective March 5, 2009
and March 5, 2010 would have vested; in such circumstances, the table reflects the aggregate
market value, determined based on a per share price of $50.09, the closing price per share of
our common stock as reported on the Nasdaq Global Select Market on December 31,2010, which was
the last trading day of 2010, of a number of shares equal to(i) all shares of restricted stock
held by Mr. Donnan on December 31, 2010, (ii) the number of shares of common stock received by
Mr. Donnan in respect of the performance shares granted to him effective March 3, 2008 based
on the actual level of performance achieved in 2008, 2009 and 2010, and (iii) the target
number of shares of common stock that could be received by Mr. Donnan in respect of the
performance shares granted to him effective March 5, 2009 and March 5, 2010. If Mr. Donnan had
qualified for retirement on December 31, 2010 and he had retired on such date, then (a) the
shares of restricted stock granted to Mr. Donnan effective March 3, 2008 would have been
forfeited, (b) the shares of restricted stock granted to Mr. Donnan effective March 5, 2009
and March 5, 2010 would have remained outstanding and the restrictions on such shares would
lapse on March 5, 2012 and March 5, 2013, respectively, (c) the performance shares granted to
Mr. Donnan effective March 3, 2008 would have been forfeited, and (d) the
performance shares granted to Mr. Donnan effective March 5, 2009 and March 5, 2010 would have
remained outstanding with the number of shares of common stock, if any, to be received by Mr.
Donnan in respect of such performance shares to be determined based on the performance level
achieved during the applicable three-year performance periods; in such circumstances, the
table reflects the aggregate market value, determined based on a per share price of $50.09,
the closing price per share of our common stock as reported on the Nasdaq Global Select Market
on December 31, 2010, which was the last trading day of 2010, of a number of shares
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63
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equal to the sum of (i) all shares of restricted stock granted to Mr. Donnan effective March 5,
2009 and March 5, 2010, and (ii) the target number of shares of common stock that could be
received by Mr. Donnan in respect of the performance shares granted to him effective March 5,
2009 and March 5, 2010.
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(17)
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Reflects the spread, if any, of (a) the aggregate market value of the shares of common stock
purchasable upon exercise of the option rights which would have vested early due to Mr.
Donnans termination, determined based on a per share price of $50.09, the closing price per
share of our common stock as reported on the Nasdaq Global Select Market on December 31, 2010,
which was the last trading day of 2010, over (b) the aggregate exercise price required to
purchase such shares upon exercise of such option rights. All option rights that were held by
Mr. Donnan on December 31, 2010 had previously vested. Accordingly, no spread is reflected in
the table because the $80.01 per share exercise price of such option rights exceeded the
$50.09 closing price per share of our common stock as reported on the Nasdaq Global Select
Market on December 31, 2010.
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(18)
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Under our Restoration Plan, Mr. Donnan is entitled to a distribution of his account balance
six months following his termination, except that he will forfeit the entire amount of
matching and fixed rate contributions made by us to his account if he is terminated for cause.
In addition, under our Savings Plan, upon termination of employment, Mr. Donnan is eligible to
receive a distribution of his vested balance under the plan; however, such balance is not
reflected in this table.
|
64
JAMES E. MCAULIFFE, JR.
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Circumstances of Termination
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Termination
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by us without
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Cause or by
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Termination
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the Named
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Voluntary
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by us without
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Executive
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Termination by
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Cause or by
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Officer with
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Named
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the Named
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Good Reason
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Executive
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Executive
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Following a
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Retirement
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Payments and
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Officer Prior to
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Termination
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Officer with
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Change in
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At or After
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Benefits
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Age 65
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by us for Cause
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Good Reason
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Control
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Age 65
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Disability
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Death
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Payment of earned but unpaid:
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Base salary (1)
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Short-term incentive (2)
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$
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82,432
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$
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82,432
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$
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82,432
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$
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82,432
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$
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82,432
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Vacation (3)
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$
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18,538
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$
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18,538
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$
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18,538
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$
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18,538
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$
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18,538
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$
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18,538
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$
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18,538
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Other Benefits:
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Lump sum payment
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$
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46,346
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(4)
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$
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698,000
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(5)
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Healthcare benefits
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$
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4,058
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(6)
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$
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44,313
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(7)
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Disability benefits
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$
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819
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(8)
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$
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7,834
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(9)
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$
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239,717
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(10)
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Life insurance
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$
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1,005
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(11)
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$
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10,541
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(12)
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$
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300,000
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(13)
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Perquisites and other personal
benefits
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$
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21,622
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(14)
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Tax gross-up (15)
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Acceleration of Equity Awards:
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Market value of stock vesting
on termination (16)
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$
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1,023,289
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$
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1,023,289
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$
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918,550
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$
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1,023,289
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$
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1,023,289
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Spread for options vesting on
termination (17)
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Distribution of Restoration Plan
Balance:
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Amount of Distribution (18)
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$
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134,201
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$
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134,201
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$
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134,201
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$
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134,201
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$
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134,201
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$
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134,201
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Total
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$
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152,739
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$
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18,538
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$
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1,310,688
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$
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2,040,770
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$
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1,153,722
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$
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1,498,177
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$
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1,558,460
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(1)
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Assumes that there is no earned but unpaid base salary at the time of termination.
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(2)
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Under our 2010 STI Plan, Mr. McAuliffes target award for 2010 was $108,000, but his award
could have ranged from a threshold of $54,000 to a maximum of $324,000, or could have been
zero if the threshold performance was not achieved. Mr. McAuliffes award under our 2010 STI
Plan was determined in March 2011 to be $82,432. Under the 2010 STI Plan, Mr. McAuliffe would
have been entitled to a pro rata award under the 2010 STI Plan if his employment had been
terminated during 2010 but prior to December 31, 2010 and his employment had been terminated
as a result of death, disability, normal retirement or full early retirement (position
elimination), had been terminated by us without cause or had been voluntarily terminated by
him for good reason. Under Mr. McAuliffes Change in Control Agreement, if his employment had
been terminated by us without cause or by him for good reason within the period commencing 90
days prior to a change in control and ending two years following a change in control and such
termination had occurred during 2010 other than on December 31, 2010, Mr. McAuliffes target
award for 2010 under our 2010 STI Plan would have been prorated for the actual number of days
of Mr. McAuliffes employment in 2010 and Mr. McAuliffe would have been entitled to payment of
such amount. If Mr. McAuliffes employment had been terminated on December 31, 2010, the last
day of our 2010 fiscal year, Mr. McAuliffe would have been entitled to full payment of his
award ($82,432) under the 2010 STI Plan unless his employment had been terminated by us for
cause or voluntarily terminated by him other than for good reason.
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(3)
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Assumes that Mr. McAuliffe used all of his 2010 vacation and that he has four weeks of
accrued vacation for 2011.
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(4)
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Under our Salaried Severance Plan, if Mr. McAuliffes employment is terminated by us without
cause, Mr. McAuliffe is entitled to a lump-sum payment equal to his weekly base salary
multiplied by a number of weeks (not to exceed 26), which we refer to as the continuation
period, determined based on his number of years of full employment. As of December 31, 2010,
Mr. McAuliffes continuation period was 10 weeks.
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(5)
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Under Mr. McAuliffes Change in Control Agreement, if Mr. McAuliffes employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period beginning 90 days prior to a change in control and ending two years following a change
in control, Mr. McAuliffe is entitled to a lump-sum payment equal to two times the sum of his
base salary and most recent short-term incentive target.
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65
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(6)
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Under our Salaried Severance Plan, if Mr. McAuliffes employment is terminated by us without
cause, Mr. McAuliffe is entitled to continuation of his medical and dental benefits following
the termination of employment for a period not to exceed the shorter of his continuation
period (as described above in Note 4) and the period commencing on the termination of
employment and ending on the date he is no longer eligible for coverage under COBRA. The table
reflects the present value of such medical and dental benefits at December 31, 2010 determined
(a) assuming family coverage in a point of service medical plan and a premium dental plan
throughout Mr. McAuliffes continuation period and (b) based on current COBRA coverage rates
for 2011.
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|
(7)
|
|
Under Mr. McAuliffes Change in Control Agreement, if Mr. McAuliffes employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his medical and dental benefits for two years commencing on the
date of such termination. The table reflects the present value of such medical and dental
benefits at December 31, 2010 determined (a) assuming family coverage in a point of service
medical plan and a premium dental plan throughout the benefit continuation period and (b)
based on current COBRA coverage rates for 2011 and assuming a 10% increase in the cost of
medical and dental coverage for 2012 as compared to 2011.
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(8)
|
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Under our Salaried Severance Plan, if Mr. McAuliffes employment is terminated by us without
cause, Mr. McAuliffe is entitled to continuation of his disability benefits following the
termination of employment for a period not to exceed the shorter of his continuation period
(as described above in Note 4) and the period commencing on the termination of employment and
ending on the date he is no longer eligible for coverage under COBRA. The table reflects the
present value of such disability benefits at December 31, 2010 determined (a) assuming
coverage throughout Mr. McAuliffes continuation period, (b) based on our current costs of
providing such benefits and assuming such costs do not increase during Mr. McAuliffes
continuation period, (c) assuming we pay such costs throughout Mr. McAuliffes continuation
period in the same manner as we currently pay such costs, (d) assuming mortality according to
the RP-2000 Combined Health mortality table published by the Society of Actuaries, and (e)
applying a discount rate of 4.70% per annum.
|
|
(9)
|
|
Under Mr. McAuliffes Change in Control Agreement, if Mr. McAuliffes employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his disability benefits for two years commencing on the date of
such termination. The table reflects the present value of such disability benefits at December
31, 2010 determined (a) assuming coverage throughout the benefit continuation period, (b)
based on our current costs of providing such benefits and assuming such costs do not increase
during the applicable benefit continuation period, (c) assuming we pay such costs throughout
the applicable benefit continuation period in the same manner as we currently pay such costs,
(d) assuming mortality according to the RP-2000 Combined Health mortality table published by
the Society of Actuaries, and (d) applying a discount rate of 4.70% per annum.
|
|
(10)
|
|
Reflects the actuarial present value of Mr. McAuliffes disability benefits at December 31,
2010 determined (a) assuming full disability at December 31, 2010, (b) assuming mortality
according to the RP-2000 Disabled Retiree mortality table published by the Society of
Actuaries, and (c) applying a discount rate of 4.70% per annum. Such disability benefits would
be paid by a third-party insurer and not by us.
|
|
(11)
|
|
Under our Salaried Severance Plan, if Mr. McAuliffes employment is terminated by us without
cause, Mr. McAuliffe is entitled to continuation of his life insurance benefits following the
termination of employment for a period not to exceed the shorter of his continuation period
(as described above in Note 4) and the period commencing on the termination of employment and
ending on the date he is no longer eligible for coverage under COBRA. The table reflects the
present value of such life insurance benefits at December 31, 2010 determined (a) assuming
coverage throughout Mr. McAuliffes continuation period at his current election of the maximum
available coverage, (b) based on our current costs of providing such benefits and assuming
such costs do not increase during Mr. McAuliffes continuation period, (c) assuming we pay
such costs throughout Mr. McAuliffes continuation period in the same manner as we currently
pay such costs, (d) assuming mortality according to the RP-2000 Combined Health mortality
table published by the Society of Actuaries, and (e) applying a discount rate of 4.70% per
annum.
|
|
(12)
|
|
Under Mr. McAuliffes Change in Control Agreement, if Mr. McAuliffes employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his life insurance benefits for two years commencing on the date
of such termination. The table reflects the present value of such
|
66
|
|
|
|
|
life insurance benefits at December 31, 2010 determined (a) assuming coverage throughout the
benefit continuation period at his current election of the maximum available coverage, (b)
based on our current costs of providing such benefits and assuming such costs do not increase
during the applicable benefit continuation period, (c) assuming we pay such costs throughout
the applicable benefit continuation period in the same manner as we currently pay such costs,
(d) assuming mortality according to the RP-2000 Combined Health mortality table published by
the Society of Actuaries, and (e) applying a discount rate of 4.70% per annum.
|
|
(13)
|
|
Reflects the life insurance benefit payable assuming Mr. McAuliffes death had occurred on
December 31, 2010 other than while traveling on company-related business. Such life insurance
benefit would have been paid by a third-party insurer and not by us. We maintain a travel and
accidental death policy for certain employees, including Mr. McAuliffe, that would provide an
additional $1,000,000 death benefit payable to Mr. McAuliffes estate if his death occurs
during company-related travel. Such death benefit would be paid by a third-party insurer and
not by us.
|
|
(14)
|
|
Under Mr. McAuliffes Change in Control Agreement, if Mr. McAuliffes employment is
terminated by us without cause or is voluntarily terminated by him for good reason within the
period commencing 90 days prior to a change in control and ending two years following a change
in control, we must continue his perquisites for two years commencing on the date of such
termination. The table reflects the estimated cost to us of continuing Mr. McAuliffes
perquisites for such two-year period as follows: vehicle allowance, $21,622. Such amount has
been estimated by multiplying the cost of Mr. McAuliffes vehicle allowance for 2010 by two.
|
|
(15)
|
|
Under Mr. McAuliffes Change in Control Agreement, in general, if any payments to Mr.
McAuliffe would be subject to federal excise tax or any similar state or local tax by reason
of being considered contingent on a change in control, we must pay to Mr. McAuliffe an
additional amount such that, after satisfaction of all tax obligations imposed on such
payments, Mr. McAuliffe retains an amount equal to the federal excise tax or similar state or
local tax imposed on such payments. The table reflects an estimate of such additional amount
that we would have been obligated to pay Mr. McAuliffe if his employment had been terminated
on December 31, 2010 by us without cause or by him for good reason following a change in
control on such date.
|
|
(16)
|
|
If Mr. McAuliffes employment had been terminated as a result of his death or disability, his
employment had been terminated by us without cause or his employment had been voluntarily
terminated by him for good reason, or if there had been a change in control, then (a) the
restrictions on all shares of restricted stock that were held by Mr. McAuliffe on December 31,
2010 would have lapsed, (b) the performance shares granted to him effective March 3, 2008
would have remained outstanding, with the number of shares of common stock to be received by
Mr. McAuliffe determined based on the actual level of performance achieved in 2008, 2009 and
2010, and (c) the target number of performance shares granted to him effective March 5, 2009
and March 5, 2010 would have vested; in such circumstances, the table reflects the aggregate
market value, determined based on a per share price of $50.09, the closing price per share of
our common stock as reported on the Nasdaq Global Select Market on December 31,2010, which was
the last trading day of 2010, of a number of shares equal to the sum of (i) all shares of
restricted stock held by Mr. McAuliffe on December 31, 2010, (ii) the number of shares of
common stock received by Mr. McAuliffe in respect of the performance shares granted to him
effective March 3, 2008 based on the actual level of performance achieved in 2008, 2009 and
2010, and (iii) the target number of shares of common stock that could be received by Mr.
McAuliffe in respect of the performance shares granted to him effective March 5, 2009 and
March 5, 2010. Mr. McAuliffe had qualified for retirement on December 31, 2010 and if he had
retired on such date, then (a) the shares of restricted stock granted to Mr. McAuliffe
effective March 3, 2008 would have been forfeited, (b) the shares of restricted stock granted
to Mr. McAuliffe effective March 5, 2009 and March 5, 2010 would have remained outstanding and
the restrictions on such shares would lapse on March 5, 2012 and March 5, 2013, respectively
(c) the performance shares granted to Mr. McAuliffe effective March 3, 2008 would have been
forfeited and (d) the performance shares granted to Mr. McAuliffe effective March 5,
2009 and March 5, 2010 would have remained outstanding with the number of shares of common
stock, if any, to be received by Mr. McAuliffe in respect of such performance shares to be
determined based on the performance level achieved during the three-year performance periods;
in such circumstances, the table reflects the aggregate market value, determined based on a
per share price of $50.09, the closing price per share of our common stock as reported on the
Nasdaq Global Select Market on December 31, 2010, which was the last trading day of 2010, of a
number of shares equal to the sum of (i) all shares of restricted stock granted to
Mr. McAuliffe effective March 5, 2009 and March 5, 2010, and (ii) the target number of shares
of common stock that could be received by Mr. McAuliffe in respect of the performance shares
granted to him effective March 5, 2009 and March 5, 2010.
|
67
|
|
|
(17)
|
|
Reflects the spread, if any, of (a) the aggregate market value of the shares of common stock
purchasable upon exercise of the option rights which would have vested early due to Mr.
McAuliffes termination, determined based on a per share price of $50.09, the closing price
per share of our common stock as reported on the Nasdaq Global Select Market on December 31,
2010, which was the last trading day of 2010, over (b) the aggregate exercise price required
to purchase such shares upon exercise of such option rights. All option rights that were held
by Mr. McAuliffe on December 31, 2010 had previously vested. Accordingly, no spread is
reflected in the table because the $80.01 per share exercise price of such option rights
exceeded the $50.09 closing price per share of our common stock as reported on the Nasdaq
Global Select Market on December 31, 2010.
|
|
(18)
|
|
Under our Restoration Plan, Mr. McAuliffe is entitled to a distribution of his account
balance six months following his termination, except that he will forfeit the entire amount of
matching and fixed rate contributions made by us to his account if he is terminated for cause.
In addition, under our Savings Plan, upon termination of employment, Mr. McAuliffe is eligible
to receive a distribution of his vested balance under the plan; however, such balance is not
reflected in this table.
|
68
DIRECTOR COMPENSATION
The table below sets forth certain information concerning compensation of our non-employee
directors who served in 2010.
Director Compensation for 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
Name
|
|
Paid in Cash
|
|
Stock Awards (1)
|
|
Total (2)
|
Carolyn Bartholomew
|
|
$
|
62,750
|
(3)
|
|
$
|
60,000
|
|
|
$
|
122,750
|
|
David Foster
|
|
$
|
55,750
|
(3)
|
|
$
|
60,000
|
|
|
$
|
115,750
|
|
Teresa A. Hopp
|
|
$
|
77,250
|
(3)
|
|
$
|
60,000
|
|
|
$
|
137,250
|
|
Lauralee E. Martin(4)
|
|
$
|
41,750
|
(5)
|
|
$
|
45,000
|
(6)
|
|
$
|
86,750
|
|
William F. Murdy
|
|
$
|
63,000
|
(3)
|
|
$
|
60,000
|
|
|
$
|
123,000
|
|
Alfred E. Osborne, Jr., Ph.D.
|
|
$
|
80,250
|
(3)
|
|
$
|
60,000
|
|
|
$
|
140,250
|
|
Jack Quinn
|
|
$
|
59,500
|
(3)
|
|
$
|
60,000
|
|
|
$
|
119,500
|
|
Thomas M. Van Leeuwen
|
|
$
|
67,500
|
(3)
|
|
$
|
60,000
|
|
|
$
|
127,500
|
|
Brett E. Wilcox
|
|
$
|
63,750
|
(3)
|
|
$
|
60,000
|
|
|
$
|
123,750
|
|
|
|
|
(1)
|
|
Reflects the aggregate grant date fair value of restricted stock awards to non-employee
directors determined in accordance with ASC Topic 718, without regard to potential forfeiture.
On June 8, 2010, in accordance with our director compensation policy described below, each
non-employee director, except Ms. Martin, received a grant of restricted stock having a value
of $60,000; the closing price per share of our common stock as reported by the Nasdaq Global
Select Market on June 8, 2010 was $35.39, resulting in the issuance of 1,695 shares of
restricted stock to each non-employee director. For additional information regarding the
compensation cost of restricted stock awards with respect to our 2010 fiscal year, see Note 12
of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2010. As of December 31, 2010, each non-employee
director held 1,695 shares of restricted stock, except for Ms. Martin, who held 1,081 shares
of restricted stock. The restrictions on 100% of the shares of restricted stock granted to
non-employee directors will lapse on June 8, 2011 or earlier if the directors services to our
company terminate as a result of death or disability, or in the event of a change in control.
The non-employee director will receive all dividends and other distributions paid with respect
to the shares of restricted stock he or she holds, but if any of such dividends or
distributions are paid in shares of our capital stock, such shares will be subject to the same
restrictions on transferability as are the shares of restricted stock with respect to which
they were paid.
|
|
(2)
|
|
Excludes perquisites and other personal benefits where the aggregate amount of such
compensation to the director is less than $10,000.
|
|
(3)
|
|
Reflects (a) annual retainer of $40,000, (b) any additional annual retainer for serving as
Lead Independent Director or chair of a committee of the board of directors, and (c) fees for
attendance of board or board committee meetings. Each non-employee director had the right to
elect to receive shares of our common stock in lieu of any or all of his or her annual cash
retainer, including retainers for serving as a committee chair or Lead Independent Director.
In 2010: Ms. Bartholomew elected to receive 113 shares of common stock in lieu of
approximately $3,999 of her annual retainer; Mr. Murdy elected to receive 953 shares of common
stock in lieu of approximately $33,727 of his annual retainer; Dr. Osborne elected to receive
1,554 shares of common stock in lieu of approximately $54,996 of his annual retainer; and Mr.
Wilcox elected to receive 1,130 shares of common stock in lieu of approximately $39,991 of his
annual retainer. In each case, the number of shares received was determined based on a per
share price of $35.39, the closing price per share of our common stock as reported by the
Nasdaq Global Select Market on June 8, 2010, the award date of the annual retainers.
|
|
(4)
|
|
Ms. Martin was appointed to our board of directors in September 2010.
|
|
(5)
|
|
Reflects (a) annual retainer of $30,000, which was prorated to reflect service on the board
of directors of less than one full year prior to the 2011 meeting of the stockholders and (b)
fees for attendance of board or board committee meetings. As described in Note 3 above, Ms.
Martin had the right to elect to receive shares of our common stock in lieu of any or all of
her annual cash retainer and elected to receive 721 shares of common stock in lieu of
approximately $29,994 of her annual retainer. The number of shares received was determined
based on a per share price of $41.60, the closing price per share of our common stock as
reported by the
|
69
|
|
|
|
|
Nasdaq Global Select Market on September 15, 2010, the date Ms. Martin was appointed to our
board of directors and the award date of her annual retainer.
|
|
(6)
|
|
On September 15, 2010, the date Ms. Martin was appointed to our board of directors, Ms.
Martin received a grant of restricted stock having a value of $45,000, which was prorated to
reflect service on the board of directors of less than one full year prior to the 2011 meeting
of the stockholders; the closing price per share of our common stock as reported by the Nasdaq
Global Select Market on September 15, 2010 was $41.60, resulting in the issuance of 1,081
shares of restricted stock.
|
Director Compensation Arrangements
We periodically review director compensation in relation to other comparable companies and in
light of other factors that the compensation committee deems appropriate and discuss director
compensation with the full board of directors. In February 2010, the board of directors approved
increases to audit committee meeting fees and to the audit committee chair annual retainer.
Pursuant to the director compensation policy, each non-employee director receives the
following compensation:
|
|
|
an annual retainer of $40,000 per year;
|
|
|
|
|
an annual grant of restricted stock having a value equal to $60,000;
|
|
|
|
|
a fee of $1,500 per day for each meeting of the board of directors attended in person
and $750 per day for each such meeting attended by phone; and
|
|
|
|
|
a fee of $1,500 per day for each committee meeting of the board of directors attended
in person on a date other than a date on which a meeting of the board of directors is held
($2,000 per day for each such audit committee meeting) and $750 per day for each such
meeting attended by phone ($1,000 per day for each such audit committee meeting).
|
In addition, pursuant to our director compensation policy, our Lead Independent Director
receives an additional annual retainer of $10,000, the chair of the audit committee receives an
additional annual retainer of $15,000, the chair of the compensation committee receives an
additional annual retainer of $5,000 and the chair of the nominating and corporate governance
committee receives an additional annual retainer of $5,000, with all such amounts payable at the
same time as the annual retainer. Each non-employee director may elect to receive shares of common
stock in lieu of any or all of his or her annual retainer, including any additional annual retainer
for service as the Lead Independent Director or the chair of a committee of the board of directors.
Our stock ownership guidelines require our non-employee directors to own company stock equal in
value to five times their annual base retainer.
The payment of annual retainers, including any additional annual retainer for service as Lead
Independent Director or the chair of a committee of the board of directors, and the annual grant of
restricted stock is made each year on the date on which we hold our annual meeting of stockholders,
unless the board of directors determines such payment and grant should occur on another date. The
number of shares of common stock to be received in the grant of restricted stock, as well as the
number of shares of common stock to be received by any non-employee director electing to receive
common stock in lieu of any or all of his or her payment of annual retainer, including any
additional annual retainer, will be based on the closing price per share of common stock on the
date such grant and payments are made.
We reimburse all directors for reasonable and customary travel and other disbursements
relating to meetings of the board of directors and committees thereof, and non-employee directors
are provided accident insurance with respect to company-related business travel.
70
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2010 with respect to shares of our
common stock that may be issued under equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of Common Stock
|
|
|
|
Number of Shares
|
|
|
Weighted-Average
|
|
|
Remaining Available for Future
|
|
|
|
of Common Stock to
|
|
|
Exercise Price of
|
|
|
Issuance
|
|
|
|
be Issued Upon Exercise of
|
|
|
Outstanding
|
|
|
under Equity Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
(Excluding Shares of Common Stock
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation
plans approved by
stockholders (1)
|
|
|
716,844
|
(2)
|
|
$
|
80.01
|
(3)
|
|
|
1,034,832
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved by
stockholders 2006
Equity and
Performance Incentive
Plan, as amended
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Total
|
|
|
716,844
|
(2)
|
|
$
|
80.01
|
(3)
|
|
|
1,034,832
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Our Equity Incentive Plan initially became effective on July 6, 2006. thereafter, the Equity
Incentive Plan was amended and restated by our board of directors effective as of February 6,
2008, again effective as of June 2, 2009 and again effective as of March 1, 2010; the
amendments in connection therewith were not material and did not affect the number of shares
available for issuance under the Equity Incentive Plan. Subsequently, the Equity Incentive
Plan was amended and restated by our board of directors and approved by our stockholders
effective June 8, 2010; in this instance, the amendments increased the number of shares
available for issuance under the Equity Incentive Plan by 500,000 shares. The Equity Incentive
Plan is our only equity compensation plan. A copy of the Equity Incentive Plan is attached as
Exhibit 10.1 to our Current Report on Form 8-K dated and filed with the SEC on June 1, 2010.
|
|
(2)
|
|
Reflects options to purchase 22,077 shares of common stock, restricted stock units covering
7,872 shares of common stock and performance shares covering 686,895 shares of common stock,
in each case outstanding as of December 31, 2010, and does not include unvested restricted
shares outstanding on December 31, 2010.
|
|
(3)
|
|
Reflects the exercise price per share of common stock purchasable upon exercise of options
outstanding as of December 31, 2010. The exercise price is the same for all such options. No
exercise price is payable in connection with the issuance of shares covered by the restricted
stock units or performance shares outstanding as of December 31, 2010.
|
|
(4)
|
|
Subject to certain adjustments that may be required from time to time to prevent dilution or
enlargement of the rights of participants, a maximum of 2,722,222 shares of common stock may
be issued under the Equity Incentive Plan, taking into account all shares issued under the
Equity Incentive Plan. As of December 31, 2010, 970,555 shares of common stock had been issued
thereunder. Of such 970,555 shares, 274,667 were shares of restricted stock that remained
subject to forfeiture as of such date. In the event of forfeiture, such shares again become
available for issuance.
|
71
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table presents information regarding the number of shares of the companys
common stock beneficially owned as of April 20, 2011 by:
|
|
|
each named executive officer;
|
|
|
|
|
each of our current directors;
|
|
|
|
|
all our current directors and executive officers as a group; and
|
|
|
|
|
each person or entity known to us to beneficially own 5% or more of our common stock
as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934.
|
Unless otherwise indicated by footnote, the beneficial owner exercises sole voting and investment
power over the shares noted below. The percentage of beneficial ownership for our directors and
executive officers, both individually and as a group, is calculated based on 19,268,791 shares of
our common stock outstanding as of April 20, 2011.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
Percent
|
Name of Beneficial Owner
|
|
Beneficial Ownership
|
|
of Class
|
Directors and Named Executive Officers
|
|
|
|
|
|
|
|
|
Jack A. Hockema
|
|
|
224,706
|
(1)(2)
|
|
|
1.2
|
%
|
Daniel J. Rinkenberger
|
|
|
50,773
|
(1)(2)
|
|
|
|
*
|
John Barneson
|
|
|
54,310
|
(1)(2)
|
|
|
|
*
|
John M. Donnan
|
|
|
56,700
|
(1)(2)
|
|
|
|
*
|
James E. McAuliffe, Jr.
|
|
|
22,419
|
(1)(2)
|
|
|
|
*
|
Carolyn Bartholomew
|
|
|
5,861
|
(2)
|
|
|
|
*
|
David Foster
|
|
|
3,435
|
(2)
|
|
|
|
*
|
Teresa A. Hopp
|
|
|
6,288
|
(2)
|
|
|
|
*
|
Lauralee E. Martin
|
|
|
1,802
|
(2)
|
|
|
|
*
|
William F. Murdy
|
|
|
10,367
|
(2)
|
|
|
|
*
|
Alfred E. Osborne, Jr., PhD
|
|
|
14,852
|
(2)(3)
|
|
|
|
*
|
Jack Quinn
|
|
|
7,463
|
(2)
|
|
|
|
*
|
Thomas M. Van Leeuwen
|
|
|
10,719
|
(2)
|
|
|
|
*
|
Brett E. Wilcox
|
|
|
12,045
|
(2)
|
|
|
|
*
|
All current directors and executive officers as a group (16 persons)
|
|
|
498,976
|
(1)(2)(3)
|
|
|
2.6
|
%
|
5% Stockholders
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
|
|
|
1,199,640
|
(4)
|
|
|
6.2
|
%
|
Dimensional Fund Advisors LP
|
|
|
1,398,255
|
(5)
|
|
|
7.3
|
%
|
Goldman Sachs Asset Management
|
|
|
874,543
|
(6)
|
|
|
4.5
|
%
|
Keeley Asset Management Corp
|
|
|
1,202,005
|
(7)
|
|
|
6.2
|
%
|
Piper Jaffray Companies
|
|
|
2,690,821
|
(8)
|
|
|
14.0
|
%
|
Union VEBA Trust
|
|
|
2,980,059
|
(9)
|
|
|
15.5
|
%
|
|
|
|
*
|
|
Less than one percent.
|
|
(1)
|
|
Includes shares of our common stock that as of April 20, 2011 were issuable upon exercise of
options within 60 days after April 20, 2011, as follows: Hockema (8,037 shares); Rinkenberger
(803 shares); Barneson (2,334 shares); Donnan (2,083 shares); McAuliffe (1,067 shares) and all
current directors and executive officers as a group (14,324 shares).
|
|
(2)
|
|
Includes shares of restricted stock that remained subject to forfeiture as of April 20, 2011,
as follows: Hockema (79,702 shares); Rinkenberger (27,796 shares); Barneson (23,200 shares);
Donnan (21,834 shares); McAuliffe (7,229 shares); Bartholomew (1,695 shares); Foster (1,695
shares); Hopp (1,695 shares); Martin (1,081 shares); Murdy (1,695 shares); Osborne (1,695
shares); Quinn (1,695 shares); Van Leeuwen (1,695 shares); Wilcox (1,695 shares); and all
current directors and executive officers as a group (190,346 shares).
|
72
|
|
|
(3)
|
|
Includes 3,500 shares of our common stock held by a Keough plan of which Dr. Osborne is the
beneficiary, 200 shares of our common stock held by Dr. Osbornes son and 500 shares held by
the Rahnasto/Osborne Revocable Trust U/A DTD 11/07/1999 of which Dr. Osborne is a
co-beneficiary and a co-trustee.
|
|
(4)
|
|
Shares beneficially owned by BlackRock, Inc. are as reported on Schedule 13G filed by
BlackRock, Inc. on February 7, 2011. BlackRock, Inc. has sole voting power and sole
dispositive power with respect to all 1,199,640 shares. The principal address of BlackRock,
Inc. is 40 East 52
nd
Street, New York, New York 10022.
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(5)
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Shares beneficially owned by Dimensional Fund Advisors, LP are as reported on Amendment No. 1
to Schedule 13G filed by the Dimensional Fund Advisors LP on February 11, 2011. Dimensional
Fund Advisors, LP has sole voting power with respect to 1,366,142 shares and sole dispositive
power with respect to 1,398,255 shares. The principal address of Dimensional Fund Advisors, LP
is Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas, 78746.
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(6)
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Shares beneficially owned by Goldman Sachs Asset Management are as reported on Amendment No.
1 to Schedule 13G filed by Goldman Sachs Asset Management on February 14, 2011. Goldman Sachs
Asset Management has shared voting power with respect to 794,896 shares and shared dispositive
power with respect to 874,543 shares. The principal address of Goldman Sachs Asset Management
is 200 West Street, New York, New York 10282.
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(7)
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Shares beneficially owned by Keeley Asset Management Corp. are as reported on Amendment No. 2
to Schedule 13G filed by the Keeley Asset Management Corp. on February 7, 2011. Keeley Asset
Management Corp. has sole voting power with respect to 1,165,565 shares and sole dispositive
power with respect to 1,202,005 shares. The principal address of Keeley Asset Management Corp.
is 401 South LaSalle Street, Chicago, Illinois 60605.
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(8)
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Shares beneficially owned by Piper Jaffray Companies are as reported on Schedule 13G filed by
the Piper Jaffray Companies on February 10, 2011. Such Schedule 13G reports that Piper Jaffray
Companies has sole voting power and sole dispositive power with respect to all 2,690,821
shares. However, such Schedule 13G notes that such shares are beneficially owned by Advisory
Research, Inc., a wholly owned subsidiary of Piper Jaffray Companies, that Piper Jaffray
Companies may be deemed to beneficially own such shares as a result of its control of Advisory
Research, Inc. and that Piper Jaffray Companies disclaims beneficial ownership of such shares.
The principal address of Piper Jaffray Companies is 800 Nicollet Mall Suite 800, Minneapolis,
Minnesota 55402, and the principal address of Advisory Research, Inc. is 180 N. Stetson,
Chicago, IL 60601.
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(9)
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Shares beneficially owned by the VEBA trust that provides benefits for certain eligible
retirees represented by certain unions and their spouses and eligible dependents, or the Union
VEBA Trust, are as reported on the Form 4 filed by the Union VEBA Trust on April 21, 2011. The
information in this footnote regarding the voting and investment power of the Union VEBA Trust
is based on the information reported on the Amendment No. 2 to Schedule 13G filed by the Union
VEBA Trust on February 16, 2010 and other information provided by the Union VEBA Trust.
Pursuant to a Prohibited Transaction Exemption, or the PTE, that has been granted by the U.S.
Department of Labor, the trustees of the Union VEBA Trust are required to have an independent
fiduciary in place to act with respect to the shares of our common stock. Independent
Fiduciary Services, Inc., or IFS, is an independent fiduciary of the Union VEBA Trust pursuant
to the Employee Retirement Income Security Act. Pursuant to the trust agreement governing the
Union VEBA Trust, a separate engagement letter and the PTE, IFS has discretionary authority
with respect to the disposition and voting of the shares of our common stock. Although IFS is
granted exclusive voting and dispositive power over the shares of our common stock pursuant to
the trust agreement, engagement letter and the PTE, the Union VEBA Trust is deemed to share
voting and dispositive power with IFS due to the Union VEBA Trusts right to replace IFS as
its independent fiduciary under such agreements. The principal address of the Union VEBA Trust
is c/o The Bank of New York Mellon Corporation, as Trustee for the VEBA for Retirees of Kaiser
Aluminum, One Mellon Center, Room 151-1935, Pittsburg, PA 15258.
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73
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director Designation Agreement
For a description of the Director Designation Agreement with the USW, see Corporate
Governance Director Designation Agreement above.
Stock Transfer Restriction Agreement
On July 6, 2006, in connection with our emergence from chapter 11 bankruptcy, we entered into
a Stock Transfer Restriction Agreement with the trustee of the Union VEBA Trust, which is our
largest stockholder. The Stock Transfer Restriction Agreement provides, in general, that, until the
earliest of (1) July 6, 2016, (2) the repeal, amendment or modification of Section 382 of the
Internal Revenue Code of 1986 in such a way as to render us no longer subject to the restrictions
imposed by Section 382, (3) the beginning of a taxable year in which none of the income tax
benefits in existence on July 6, 2006 are currently available or will be available, (4) the
determination by our board of directors that the restrictions will no longer apply, (5) a
determination by the board of directors or the Internal Revenue Service that we are ineligible to
use Section 382(l)(5) of the Internal Revenue Code of 1986 permitting full use of the income tax
benefits existing on July 6, 2006, and (6) an election by us for Section 382(l)(5) of the Internal
Revenue Code of 1986 not to apply, except as described below the trustee of the Union VEBA Trust
will be prohibited from transferring or otherwise disposing of more than 15% of the total number of
shares of common stock deemed to be issued pursuant to our chapter 11 plan of reorganization to the
Union VEBA Trust in any 12-month period without the prior written approval of our board of
directors in accordance with our certificate of incorporation. The number of shares of our common
stock that generally may be sold by the Union VEBA Trust under the Stock Transfer Restriction
Agreement without approval of our board of directors during any 12-month period is 1,321,485.
Pursuant to the Stock Transfer Restriction Agreement, the trustee of the Union VEBA Trust also
expressly acknowledged and agreed to comply with the restrictions on the transfer of our securities
contained in our certificate of incorporation.
Registration Rights Agreement
On July 6, 2006, we entered into the Registration Rights Agreement with the trustee of the
Union VEBA Trust and certain parties. The Registration Rights Agreement provides the Union VEBA
Trust with certain rights to require that we register the resale of the shares of common stock
issued to the Union VEBA Trust pursuant to our plan of reorganization unless such securities (1)
are disposed of pursuant to an effective registration statement under the Securities Act of 1933,
or the Securities Act, (2) are distributed to the public pursuant to Rule 144 under the Securities
Act, (3) may be freely sold publicly without either registration under the Securities Act or
compliance with any restrictions under Rule 144 under the Securities Act, (4) have been transferred
to any person, or (5) have ceased to be outstanding (prior to the occurrence of any such event,
such securities (together with any shares of common stock issued as a dividend or other
distribution with respect to, or in exchange for or in replacement of, such securities are referred
to below as registrable securities).
Pursuant to Section 3.1 of the Registration Rights Agreement, the Union VEBA Trust may (and,
if so directed by its independent fiduciary, will) demand that we prepare and file with the SEC a
shelf registration statement covering the resale of all registrable securities held by the Union
VEBA Trust on a continuous basis under and in accordance with Rule 415 under the Securities Act.
The Registration Rights Agreement provides that, following receipt of such a request, we will
prepare and file the shelf registration covering all registrable securities held by the Union VEBA
Trust and will use commercially reasonable efforts to cause the shelf registration to be declared
effective under the Securities Act as soon as practicable after such filing.
On April 2, 2010, in response to a demand by the Union VEBA Trust, we filed a registration
statement on Form S-3 for the resale of up to 4,392,265 shares of our common stock then owned by
the Union VEBA Trust. The registration statement became effective on July 9, 2010. While all
shares of our common stock owned by the Union VEBA Trust are registered under the registration
statement, pursuant to the Stock Transfer Restriction Agreement referred to above, the Union VEBA
Trust generally may not sell more than 1,321,485 shares of our common stock in any 12-month period
without the prior approval of our board of directors.
Subject to provisions for reimbursement in limited circumstances, we bore all of our
out-of-pocket expenses and legal fees of the Union VEBA Trust up to $50,000 in connection with the
registration under the Registration Rights
74
Agreement. All underwriting fees, discounts, selling commissions and stock transfer taxes
applicable to the sale of registrable securities were borne by the Union VEBA Trust.
The Registration Rights Agreement also provides that we will file all required SEC reports,
and cooperate with the Union VEBA Trust, to the extent required to permit the Union VEBA Trust to
sell, subject to the terms of the Stock Transfer Restriction Agreement, its registrable securities
without registration under Rule 144.
Union VEBA Annual Variable Cash Contribution
We make annual variable cash contributions to the Union VEBA Trust pursuant to agreements
reached during our chapter 11 bankruptcy. Under these agreements, the aggregate amount to be
contributed to the Union VEBA Trust is 8.5% of the first $20 million of annual cash flow (as
defined; but generally, earnings before interest, taxes and depreciation and amortization less cash
payments for, among other things, interest, income taxes and capital expenditures), plus 17% of
annual cash flow, as defined, in excess of $20 million. The aggregate annual payment to the Union
VEBA Trust may not exceed $17 million and is also limited (with no carryover to future years) to
the extent that the payment would cause our liquidity to be less than $50 million. The amount of
the variable cash contribution is determined on an annual basis and payable within 120 days
following the end of fiscal year, or within 15 days following the date on which we file our Annual
Report on Form 10-K with the SEC (or, if no such report is required to be filed, within 15 days of
the delivery of the independent auditors opinion of our annual financial statements), whichever is
earlier. In March 2010 and 2011, we made cash contributions of $2.4 million and $1.9 million,
respectively, to the Union VEBA Trust. In addition, we are obligated to pay one-half of the
administrative expenses of the Union VEBA Trust, up to $250,000, in each calendar year. The
administrative expenses of the Union VEBA Trust for 2010 were paid in March 2011. In connection
with the renewal and ratification of a labor agreement with the members of the USW at our Newark,
Ohio and Spokane, Washington facilities on January 20, 2010, we agreed to extend our obligation to
make an annual variable cash contribution to the Union VEBA Trust, which was originally set to
expire on December 31, 2012, to September 30, 2017. The Union VEBA Trust is managed by four
trustees (two appointed by us and two appointed by the USW), and its assets are managed by an
independent fiduciary.
Review, Approval of or Ratification of Transactions with Related Persons
Our corporate governance guidelines require that our board of directors conduct an appropriate
review of all related-party transactions. The charter for the audit committee of our board of
directors requires that any related-party transaction required to be disclosed under Item 404 of
SEC Regulation S-K must be approved by the audit committee. Neither the board of directors nor the
audit committee has adopted specific policies or procedures for review or approval of related-party
transactions.
The Director Designation Agreement, the Stock Transfer Restriction Agreement, the Registration
Rights Agreement and the Union VEBA Trust annual variable contribution were authorized in
connection with our plan of reorganization and, accordingly, our corporate governance guidelines
and audit committee charter, which were also adopted upon emergence, were not applicable. The
extension of the terms of the Director Designation Agreement and the obligation to make annual
variable cash contributions to the Union VEBA Trust were reviewed with our board of directors and
audit committee before being ratified by the audit committee.
75
AUDIT COMMITTEE REPORT
The audit committee charter requires the audit committee to undertake a variety of activities
designed to assist our board of directors in fulfilling its oversight role regarding our
independent registered public accounting firms independence, our financial reporting process, our
systems of internal controls and our compliance with applicable laws, rules and regulations. These
requirements are briefly summarized under Corporate Governance Board Committees Audit
Committee above. The audit committee charter also makes it clear that the independent registered
public accounting firm is ultimately accountable to the board of directors and the audit committee,
not management.
Our internal accountants prepare our consolidated financial statements and our independent
registered public accounting firm is responsible for auditing those financial statements. The audit
committee oversees the financial reporting processes implemented by management but does not conduct
any auditing or accounting reviews. The members of the audit committee are not company employees.
Instead, the audit committee relies, without independent verification, on managements
representation that the financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America and on the representations of our
independent registered public accounting firm included in its report on our financial statements.
The audit committees oversight does not provide them with an independent basis for determining
whether management has maintained appropriate accounting and financial reporting principles or
policies or appropriate internal controls and procedures designed to assure compliance with
accounting standards and applicable laws and regulations. Furthermore, the audit committees
discussions with management and its accountants do not ensure that the financial statements are
presented in accordance with accounting principles generally accepted in the United States of
America or that the audit of the financial statements has been carried out in accordance with
auditing standards of the Public Company Accounting Oversight Board or that our independent
registered public accounting firm is in fact independent.
We have engaged Deloitte & Touche LLP as our independent registered public accounting firm to
audit and report to our stockholders on our financial statements for 2011 and the effectiveness of
our internal controls over financial reporting. The audit committee has discussed with management
and Deloitte & Touche LLP significant accounting policies applied by us in our financial statements
as well as alternative treatments and significant judgments, including (1) the valuation of our
commitments and contingencies, (2) estimates in respect of defined benefit plans, including the two
defined benefit postretirement medical plans maintained by the Union VEBA Trust and another VEBA
trust that provides benefits for certain other eligible retirees and their surviving spouses and
eligible dependents, (3) estimates in regard to environmental commitments and contingencies, (4)
estimates in respect to conditional asset retirement obligations, (5) long lived assets, (6) our
tax attributes, (7) tax contingencies, and (8) inventory valuation. For a more detailed discussion
of these accounting items, see Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2010.
During the year ended December 31, 2010, there were no disagreements with Deloitte & Touche LLP on
any matter of accounting principle or practice, financial statement disclosure or auditing scope or
procedure, which, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused
them to make a reference to the subject matter of the disagreement in connection with its reports.
The audit committee has reviewed and discussed the companys audited financial statements
contained in our Annual Report on Form 10-K for the year ended December 31, 2010 with our
management. The audit committee has also discussed with our independent registered public
accounting firm the matters required to be discussed pursuant to applicable requirements of the
Public Company Accounting Oversight Board regarding the independent accountants communications
with the audit committee concerning independence.
The audit committee has also received and reviewed the written disclosures and the letter from
Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountants communications with the audit committee
concerning independence, and has discussed with Deloitte & Touche LLP its independence.
The audit committee discussed with our internal accountants and Deloitte & Touche LLP the
overall scope and plans for their respective audits. The audit committee meets with management, our
internal auditors and our independent auditors periodically in separate private sessions to discuss
any matter that the committee, management, the independent auditors or such other persons believe
should be discussed privately.
76
Based on the review and discussions referred to above, the audit committee recommended to the
board of directors that the audited financial statements be included in our Annual Report on Form
10-K for the year ended December 31, 2010, as filed with the SEC.
The audit committee considered whether, and concluded that, the provision by Deloitte & Touche
LLP of the services for which we paid the amounts set forth under Tax Fees and All Other Fees
below is compatible with maintaining the independence of Deloitte & Touche LLP.
This report is submitted by the members of the audit committee of the board of directors:
Audit Committee
Teresa A. Hopp (Chair)
Carolyn Bartholomew
Lauralee E. Martin
Alfred E. Osborne, Jr., Ph.D.
Thomas M. Van Leeuwen
Brett E. Wilcox
This Audit Committee Report does not constitute soliciting material and shall not be deemed
filed or incorporated by reference into any other filing made by us under the Securities Act or the
Securities Exchange Act of 1934, except to the extent that we specifically incorporate this Audit
Committee Report by reference therein.
INDEPENDENT PUBLIC ACCOUNTANTS
The following table presents fees for professional audit services rendered by Deloitte &
Touche LLP for the audit of our annual financial statements for each of 2009 and 2010, and fees
billed for other services rendered by Deloitte & Touche LLP.
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2009
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2010
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Audit Fees(1)
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$
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1,696,323
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$
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1,731,130
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Audit-Related Fees (2)
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$
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28,355
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$
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46,286
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Tax Fees (3)
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$
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46,255
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$
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3,100
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All Other Fees (4)
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$
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1,500
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$
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106,577
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(1)
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Audit fees consist principally of fees for the audit of our annual financial statements and
review of our financial statements included in our Quarterly Reports on Form 10-Q for those
years, and for audit services provided in connection with compliance with the requirements of
the Sarbanes-Oxley Act of 2002.
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(2)
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Audit related fees consist principally of fees from statutory audits.
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(3)
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Tax fees consist principally of fees for tax advisory services.
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(4)
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All other fees for 2009 consist of a subscription fee to the Deloitte & Touche LLP Research
Tool Library. All other fees for 2010 consist of fees relating to our cash convertible notes
offering in March 2010, a subscription fee to the Deloitte & Touche LLP Research Tool Library,
and fees relating to the review of agreed-upon procedures relating to certain environmental
matters.
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The audit committee charter requires that the audit committee pre-approve all audit and
non-audit engagements, fees, terms and services in a manner consistent with Sarbanes-Oxley Act of
2002 and all rules and applicable listing standards promulgated by the SEC and the Nasdaq
Marketplace Rules and other applicable criteria of FINRA. The audit committee may delegate the
authority to grant any pre-approvals of non-audit engagements to one or more members of the audit
committee, provided that such member (or members) reports any pre-approvals to the audit committee
at its next scheduled meeting. The audit committee has delegated pre-approval authority to its
chair. All of the audit-related fees, tax fees and other fees for 2010 were pre-approved by the
audit committee.
Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting and
will have the opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
77
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors and
persons who own more than 10% of a registered class of our equity securities to file initial
reports of ownership and reports of changes in ownership with the SEC. Such persons are required by
regulation of the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely
on our review of the copies of such forms or written representations from certain reporting persons
received by us with respect to 2010, we believe that our officers and directors and persons who own
more than 10% of a registered class of our equity securities have complied with all applicable
filing requirements.
OTHER MATTERS
We do not know of any other matters to be presented or acted upon at the Annual Meeting. If
any other matter is presented at the Annual Meeting on which a vote may properly be taken, the
shares represented by proxies will be voted in accordance with the judgment of the proxy holders.
FORM 10-K
Copies of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010
(excluding exhibits) filed with the SEC are available, without charge, upon written request to
Kaiser Aluminum Corporation, 27422 Portola Parkway, Suite 200, Foothill Ranch, California
92610-2831, Attention: Investor Relations Department.
Exhibits to the Annual Report on Form 10-K
will be furnished upon payment of a fee of $0.25 per page to cover our expenses in furnishing the
exhibits.
STOCKHOLDER PROPOSALS
To be considered for inclusion in our proxy statement for our 2012 annual meeting of
stockholders, proposals of stockholders must be in writing and received by us no later than January
7, 2012. To be presented at the 2012 annual meeting of stockholders without inclusion in our proxy
statement for such meeting, proposals of stockholders must be in writing and received by us no
later than March 7, 2012 and no earlier than February 6, 2012, in accordance with procedures set
forth in our bylaws. Such proposals should be mailed to Kaiser Aluminum Corporation, 27422 Portola
Parkway, Suite 200, Foothill Ranch, California 92610-2831 and directed to the corporate secretary.
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By Order of the Board of Directors,
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John
M. Donnan
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Senior Vice President, Secretary and
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General Counsel
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Foothill Ranch, California
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April 27, 2011
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78
You can now access your Kaiser Aluminum Corporation account online.
Access your Kaiser Aluminum Corporation account online via Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for Kaiser Aluminum Corporation, now makes
it easy and convenient to get current information on your shareholder account.
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View account status
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View payment history for dividends
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View certificate history
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Make address changes
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View book-entry information
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Obtain a duplicate 1099 tax form
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Visit us on the web at http://www.bnymellon.com/shareowner/equityaccess
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose
MLink
SM
for fast, easy and secure 24/7 online access to your
future proxy materials, investment plan statements, tax documents and more.
Simply log on to
Investor ServiceDirect
®
at
www.bnymellon.com/shareowner/equityaccess
where step-by-step instructions will
prompt you through enrollment.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting
of
shareholders.
The Proxy Statement and the 2011 Annual Report to Stockholders are available at:
http://bnymellon.mobular.net/bnymellon/kalu
▼ FOLD AND DETACH HERE ▼
PROXY
KAISER ALUMINUM CORPORATION
27422 Portola Parkway, Suite 200
Foothill Ranch, California 92610
This proxy is solicited by the Board of Directors of Kaiser Aluminum Corporation
for the annual meeting of stockholders to be held on June 9, 2011.
The undersigned hereby appoints Jack A. Hockema, Daniel J. Rinkenberger and John M. Donnan,
and each of them, with power to act without the other and with power of substitution, as proxies
and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other
side, all the shares of Kaiser Aluminum Corporation common stock which the undersigned is entitled
to vote, and, in their discretion, to vote upon such other business as may properly come before the
annual meeting of stockholders to be held 9:00 a.m. Pacific Time on Thursday, June 9, 2011, at the
corporate office of Kaiser Aluminum Corporation, located at 27422 Portola Parkway, Suite 200,
Foothill Ranch, California 92610, or at any adjournment or postponement thereof, with all powers
which the undersigned would possess if present at the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ALL THE NOMINEES LISTED IN
PROPOSAL 1 ON THE REVERSE SIDE, FOR PROPOSALS 2 AND 4, IN FAVOR OF EVERY 1 YEAR ON PROPOSAL 3,
AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSON VOTING THE PROXY WITH RESPECT TO ANY OTHER
BUSINESS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.
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Address Change/Comments
(Mark the corresponding box on the reverse side)
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BNY MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
(Continued and to be marked, dated and signed, on the other side)
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WO#
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Fulfillment#
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00000
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YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting.
Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to the
stockholder meeting date.
KAISER ALUMINUM
CORPORATION
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WO#
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Fulfillment#
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00000
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00000
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INTERNET
http://www.proxyvoting.com/kalu
Use the Internet to vote your shares. Have your proxy card in hand when you
access the web site.
OR
TELEPHONE
1-866-540-5760
Use any touch-tone telephone to vote your shares. Have your proxy card in
hand when you call.
If you vote your shares by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
▼ FOLD AND DETACH HERE ▼
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YOUR SHARES WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR ALL THE
NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSALS 2 AND 4, AND IN FAVOR OF EVERY 1 YEAR ON PROPOSAL 3.
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Please mark your
votes as
indicated
in this example
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x
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The Board of Directors recommends you vote FOR ALL the nominees listed in the following proposal.
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FOR
ALL
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WITHHOLD FOR
ALL
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EXCEPTIONS*
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1. ELECTION OF DIRECTORS
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Nominees:
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01 Carolyn Bartholomew
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02 Jack A. Hockema
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03 Lauralee E. Martin
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04 Brett E. Wilcox
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(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the Exceptions box above and write that
nominees name(s) in the space provided below.)
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*
Exceptions:
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The Board of Directors recommends you vote FOR the following proposal:
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FOR
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AGAINST
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ABSTAIN
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2. ADVISORY VOTE TO
APPROVE
COMPENSATION OF THE
COMPANYS NAMED
EXECUTIVE OFFICERS
AS DISCLOSED IN THE
PROXY STATEMENT
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o
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o
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o
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The Board of Directors recommends you vote for EVERY 1 YEAR on the following proposal:
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EVERY
1 YEAR
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EVERY
2 YEARS
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EVERY
3 YEARS
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ABSTAIN
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3. ADVISORY VOTE ON THE
FREQUENCY OF FUTURE
ADVISORY VOTES ON EXECUTIVE
COMPENSATION
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The Board of Directors recommends you vote FOR the following proposal:
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FOR
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AGAINST
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ABSTAIN
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4. RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP
AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR 2011
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You may revoke this proxy prior to the time this proxy is voted by (i) voting again over the Internet or by telephone no later than 11:59 p.m.
Eastern Time, on Wednesday, June 8, 2011, (ii) submitting a properly signed proxy card with a later date, (iii) delivery, no later than 5:00
p.m., Eastern Time, on Wednesday, June 8, 2011, written notice of revocation to the Secretary of Kaiser Aluminum Corporation c/o BNY Mellon
Shareowner Services, P.O. Box 3550, South Hackensack, New Jersey 07606-9250 or (iv) attending the Annual Meeting and voting in person. Your
attendance at the Annual Meeting alone will not revoke your proxy. To change your vote, you must also vote in person at the Annual Meeting.
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Mark Here for
Address Change
or Comments
SEE REVERSE
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NOTE: Please sign as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
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