INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Filed by the Registrant x
Filed by a Party other than the Registrant o
Check the appropriate box:
o | Rule 14a-6(e)(2)) | |||
x Definitive Proxy Statement | ||||
o Definitive Additional Materials | ||||
o Soliciting Material under Rule 14a-12 |
Commonwealth Industries, Inc.
Payment of Filing Fee (Check the appropriate box):
x | No fee required. |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
o | Fee paid previously with preliminary materials. |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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March 17, 200326, 2004
Dear Fellow Stockholder:
You are cordially invited to the annual meeting of stockholders of Commonwealth Industries, Inc. to be held at Kentucky International Convention Center, Room 112, 221 Fourth Street, Louisville, Kentucky on Friday, April 25, 200323, 2004 commencing at 10:00 a.m. Eastern Daylight Savings Time. The Board of Directors and management look forward to greeting those of you who are able to attend in person.
At the meeting you will be asked to: (i)(1) elect two directors to serve until the annual meeting of stockholders in 2006; (ii) approve an amendment of the 1997 Stock Incentive Plan;2007 and (iii)(2) ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for 2003.2004. Information concerning those matters, as well as other important information, is contained in the accompanying proxy statement, which you are urged to read carefully. In addition to voting, there will also be a report on major developments in 20022003 and answers to your questions.
Whether or not you plan to attend in person and regardless of the number of shares you own, it is important that your shares be represented and voted at the annual meeting. Stockholders who do not attend the meeting have a choice of voting over the Internet, by telephone or by using a proxy card. Please refer to your proxy card or the information forwarded to you by your bank, broker or other holder of record to see which options are available to you. Your vote is important and you are requested to vote your shares at your earliest convenience. Your shares will then be represented at the annual meeting and the Company will be able to avoid the expense of further solicitation.
On behalf of the Board of Directors, thank you for your cooperation and continued support.
Sincerely,
Mark V. Kaminski
COMMONWEALTH INDUSTRIES, INC.
NOTICE OF 20032004 ANNUAL MEETING OF STOCKHOLDERS
The 20032004 annual meeting of stockholders of Commonwealth Industries, Inc. (the “Company”) will be held at Kentucky International Convention Center, Room 112, 221 Fourth Street, Louisville, Kentucky at 10:00 a.m. Eastern Daylight Savings Time on Friday, April 25, 200323, 2004 to consider and take action with respect to the following matters:
1. | Election of two directors, each for a term of three years; | |||
2. | ||||
Ratification of the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for | ||||
Such other business as may properly be brought before the meeting or any adjournment thereof; |
all as set forth in the proxy statement accompanying this notice.
The close of business on March 7, 20035, 2004 has been fixedset as the record date for the determination of stockholders entitled to notice of and to vote at the meeting or any adjournment thereof. This proxy statement is being mailed to those stockholders on or about March 17, 2003.26, 2004.
Stockholders who do not expect to attend the meeting are requested to vote their shares over the Internet, by telephone or by proxy card.
By order of the Board of Directors,
Lenna Ruth Macdonald
March 17, 2003
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COMMONWEALTH INDUSTRIES, INC.
PROXY STATEMENT
This proxy statement is furnished to you in connection with the solicitation of proxies by the Board of Directors of Commonwealth Industries, Inc. (the “Company”) to be used at the 20032004 annual meeting of stockholders to be held in Louisville, Kentucky at 10:00 a.m. Eastern Daylight Savings Time on Friday, April 25, 2003.23, 2004.
Who can vote at the meeting?
Stockholders who were owners of record of common stock of the Company at the close of business on March 7, 20035, 2004 are entitled to receive notice of and may attend and vote at the meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held at the meeting or any postponement or adjournment of the meeting.meeting all of the shares that you held on the record date. Each share is entitled to one vote.
When is this proxy statement first being sent to stockholders?
This proxy statement is first being mailed to stockholders on or about March 17, 2003.26, 2004.
What is in this proxy statement?
You are being asked to: (1) elect two members of the Board of Directors;Directors and (2) approve an amendment of the 1997 Stock Incentive Plan to increase the number of shares authorized for awards of options and stock to key employees and options and unrestricted stock to non-employee directors; and (3) ratify the Audit Committee’s appointment of independent auditors for 2003.2004. This proxy statement gives you information on the proposals, as well as other information, so you can make an informed decision.
How do I vote?
Your vote is important. Because many stockholders cannot attend the meeting in person, it is necessary that stockholders be represented by proxy. Most stockholders have a choice of voting over the Internet, throughusing a toll-free telephone number or completing a proxy card and mailing in the postage-paid envelope provided.provided or attending the meeting and voting in person. Please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available.available to you.
You may vote over the Internet or by telephone.
The Internet and telephone voting procedures are designed to authenticate each stockholder by use of a control number and to allow you to confirm that your instructions have been properly recorded. Please be aware that if you vote over the Internet, you might incur costs such as telephone and Internet access charges for which you will be responsible.
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You may vote by mail.
You may vote in person at the meeting.
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What does it mean if I receive more than one proxy card?
It means that you have multiple accounts at the transfer agent or with stockbrokers.
How do I vote if I participate in one of the employee savings or 401(k) plans?
The plans’ independent trustee will vote your Company employee savings plan shares according to your voting instructions. The trustee will vote plan shares not voted by proxy as the Board of Directors recommends.
Can I change my vote?
Yes. You may revoke your proxy and change your vote at any time before the meeting by: (1) mailing a revised proxy card dated later than the prior proxy card (including an Internet or telephone vote) and returning it before the polls close at the meeting, or (2) voting in person at the meeting.
If you do not indicate how your shares should be voted on a matter, the shares represented by your properly completed proxy will be voted as the Board of Directors recommends. If any other matters are properly presented for consideration at the annual meeting, including consideration of a motion to adjourn the meeting to another time or place, the persons named as proxies and acting thereunder will have discretion to vote on those matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. On the date thisthe proxy statement went to press, the Company did not anticipate that any other matters would be raised at the annual meeting.
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts listed with the transfer agent or with stockbrokers.
How do I vote if I participate in one of the Company employee savings or 401(k) plans?
The plans’ independent trustee will vote your employee plan shares according to your voting instructions. The trustee will vote plan shares not voted by proxy as the Board of Directors recommends.
Can I change my vote?
Yes. You may revoke your proxy and change your vote at any time before the meeting by: (1) mailing a revised properly executed, later-dated proxy card (including an Internet or telephone vote) and returning it before the polls close at the meeting or (2) voting in person at the meeting.
If you do not indicate how your shares should be voted on a matter, the shares represented by your properly completed proxy will be voted as the Board of Directors recommends: (1) for the named nominees for directors and (2) for ratification of the Audit Committee’s appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for 2004.
What constitutes a quorum for the meeting?
A majority of the outstanding shares entitled to vote, present or represented by proxy, constitutes a quorum. Abstentions or broker “non-votes” are counted as present and entitled to vote for purposes of determining whether a quorum exists. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner. A quorum is necessary to conduct business at the meeting. You are part of the quorum if you have voted by proxy. As of the record date for the meeting, there were 16,010,97116,020,397 shares of common stock of the Company outstanding and entitled to vote.
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What is the appropriate conduct for the meeting?
In order to ensure that the annual meeting is conducted in an orderly fashion and that stockholders wishing to speak at the meeting have a fair opportunity to speak, the Company will have certain guidelines and rules for the conduct of the meeting.
What vote is required to approve each item?
Election of Directors.directors.
Approval of an amendment of the 1997 Stock Incentive Plan.
Ratification of appointment of independent auditors.
How are the votes counted?
Voting results are tabulated and certified by National City Bank. In addition, the Company’s Inspectors of Election will tabulate the votes cast at the meeting, together with the votes cast by proxy.
Are the proxy materials and annual report available electronically?
This proxy statement and the 20022003 annual report are available on ourthe Company’s website on the Investor Relations — Financial Reports page at www.ciionline.com/Investor Relations/Financial Reports. Mostwww.ciionline.com. Registered stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies in the mail.
If you are a registered stockholder of record, you can choose this option and save the Company the cost of producing and mailing these documents by completing the portion of your proxy card or by following the instructions provided if you votewhen voting over the Internet.Internet or by telephone. You
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If you choose to view future proxy statements and annual reports over the Internet, you will receive a proxy card in the mail next year with instructions containing the Internet address of those materials. Your choice will remain in effect until you call the Commonwealth ShareownerShareholder Services toll-free number 800-622-6757, write to National City Bank, Corporate Trust Operations, Department 5352, Post Office Box 92301, Cleveland, Ohio 44193-0900 or contact the Company.
Who pays for the solicitation of proxies?
The Company is paying for the preparation, distribution and solicitation of proxies. The Company expects fees and expenses for this process to be approximately $25,000.$15,000. The Company is not using an outside proxy solicitation firm this year, but employees of the Company or its subsidiaries may solicit proxies through mail, telephone or other means. Employees do not receive additional compensation for soliciting proxies. As part of this process, the Company reimburses brokers, nominees, fiduciaries and other custodians for reasonable fees and expenses in forwarding proxy materials to stockholders.
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GOVERNANCE OF THE COMPANY
BOARD OF DIRECTORSOur Board of Directors believes that the purpose of corporate governance is to ensure that the Company maximizes stockholder value in a manner consistent with legal requirements and the highest standards of integrity. The board has adopted and adheres to Corporate Governance Guidelines which the board and management believe promote this purpose, are sound and represent best practices. The Company continually monitors and reviews these guidelines, the laws of Delaware (the Company’s state of incorporation), the rules and listing standards of the Nasdaq Stock Market, Inc. (“Nasdaq”) and the regulations of the Securities and Exchange Commission (“SEC”), as well as best practices suggested by recognized governance authorities. The board-adopted Corporate Governance Guidelines document was attached as an exhibit to the 2003 proxy statement and can be viewed on the Company’s website on the Investor Relations — Corporate Governance page at www.ciionline.com.
The Board of Directors, in accordance with the provisions of the Company’s Restated Certificate of Incorporation and By-laws,by-laws, is comprised of seven directors. The Boardboard has determined that each of its members, other than Mark V. Kaminski, the Company’s President and Chief Executive Officer, meets independence standards under Nasdaq rules.
The board is divided into three classes and members of each class hold office for a term of three years. The term of one class expires each year. MeetingsDirectors are encouraged to attend the Company’s annual meetings of stockholders and all six of the Board are held on a regular basis and special meetings are held when necessary. The organizational meeting follows immediately afterdirectors attended the annual meeting of stockholders.in 2003.
The Board of Directors has responsibility for establishing broad corporate policies and for the overall strategic direction of the Company, although it is not involved in day-to-day operations. Members of the Boardboard are kept informed of the Company’s business by reviewing materials and various documents, by participating in meetings of the Board of Directors and its committees, and through discussions regarding operatingoperations and financial reports made at Boardboard and committee meetings by the Chief Executive Officer, the Chief Financial Officer and other members of management.
Stockholders may communicate with any of the Company’s directors, the board as a group or any board committee as a group by: (1) sending an e-mail to the board, a particular director or committee at Directors@ciionline.com or (2) mailing correspondence c/o Corporate Secretary, Commonwealth Industries, Inc., PNC Plaza — 19th Floor, 500 West Jefferson Street, Louisville, Kentucky 40202 or (3) calling and leaving a voicemail message on the Company’s compliance information line toll-free number 866-912-4357. The board has delegated to the Corporate Secretary, or her designee, responsibility for determining in her discretion whether the communication is appropriate for director, committee or board consideration. According to the policy adopted by the board, the Corporate Secretary is required to direct all communications regarding personal grievances, administrative matters, the conduct of the Company’s ordinary course of business operations, billing issues, product or service related inquiries, order requests and similar issues to the appropriate individual within the Company. All other communications are to be submitted to the board as a group, to the particular director or committee to whom it is addressed or, if appropriate, to the director or committee the Corporate Secretary believes to be the most appropriate recipient, as the case may be. If you send an e-mail or letter or leave a voicemail message to the board, a committee or a director, you will receive a written acknowledgement from the Corporate Secretary’s office confirming receipt of your communication.
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COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors met eleven times in 2003 and the number of meetings each committee held are reflected in the following table. Attendance by directors at board and committee meetings averaged over 95%. All directors attended at least 91% of the board and committee meetings. The Board of Directors has reviewed its corporate governance policiesthe following standing committees: Audit Committee, Management Development and practices in the context of the adoption of the Sarbanes-Oxley Act of 2002Compensation Committee and effectiveNominating and proposed rule changes made by the Securities and Exchange Commission (“SEC”) and NASDAQ. The Board of Directors will continue to monitor rule changes and developing standards to incorporate final rule changes and best practices in this area. In October 2002, the Board of Directors adopted Corporate Governance Guidelines, which document can be viewedCommittee. Only independent directors serve on these committees, meeting Nasdaq standards for independence. The following table describes the Company’s website at www.ciionline.com/Investor Relations/Corporate Governance and which document is attached as Exhibit A to this proxy statement.board’s standing committees:
COMMITTEE | MEETINGS | |||||||
NAME | MEMBERS | FUNCTIONS OF THE COMMITTEE | IN 2003 | |||||
Audit | C. Frederick Fetterolf, | • Appoints and terminates the independent auditors | ||||||
Committee | Chair | • Reviews with independent auditors the plans for and results of the audit engagement | 15 | |||||
Steven J. Demetriou Larry E. Kittelberger | • Approves professional services and fees to be rendered by the independent auditors and fees associated therewith | |||||||
Paul E. Lego | • Reviews the independence and performance of independent auditors | |||||||
• Reviews the adequacy of internal controls of the Company and its subsidiaries, including systems for monitoring risk, financial control and compliance with law | ||||||||
• Monitors potential conflicts of interest of directors and management | ||||||||
• Oversees the process of disclosure and communications | ||||||||
• Reviews with independent auditors and management critical accounting policies and practices | ||||||||
• Reviews with independent auditors and management major issues regarding accounting principles and financial statement presentations | ||||||||
• Reviews the Company’s compliance program and procedures for receipt, retention and treatment of confidential complaints received by the Company | ||||||||
• Performs such other duties as may be assigned from time to time by the board |
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COMMITTEE | MEETINGS | |||||||
NAME | MEMBERS | FUNCTIONS OF THE COMMITTEE | IN 2003 | |||||
Management Development | Catherine G. Burke, Chair | • Provides oversight of management development and compensation and of human resources policies of the Company | ||||||
and Compensation | Steven J. Demetriou C. Frederick Fetterolf | • Reviews and determines compensation and other benefits for the Chief Executive Officer and all other executive officers | 6 | |||||
Committee | Paul E. Lego | • Determines or administers the Company’s incentive plans | ||||||
• Determines whether to engage advisors or experts, as it deems appropriate, to discharge its duties and responsibilities | ||||||||
• Performs such other duties as may be assigned from time to time by the board | ||||||||
COMMITTEE | MEETINGS | |||||||
NAME | MEMBERS | FUNCTIONS OF THE COMMITTEE | IN 2003 | |||||
Nominating and | John E. Merow, Chair | • Makes recommendations to the board regarding the appropriate size and composition of the board | ||||||
Corporate Governance | Catherine G. Burke Larry E. Kittelberger | • Recommends to the board candidates for election as directors or nominees to fill vacancies occurring between annual meetings | 5 | |||||
Committee | Paul E. Lego | • Considers all nominees for director recommended by stockholders if submitted in compliance with the Company’s by-laws | ||||||
• Recommends to the board candidates for appointment as chair and members of other board committees | ||||||||
• Establishes procedures for the committee to exercise oversight of evaluation of the board and management | ||||||||
• Monitors the corporate governance principles and makes recommendations to the board for changes when appropriate | ||||||||
• Administers the board’s self-evaluation and shares the results thereof with the board for discussion and deliberation | ||||||||
• Determines whether to engage special counsel or other experts or consultants, as it deems appropriate, to discharge its duties and responsibilities | ||||||||
• Performs such other duties as may be assigned from time to time by the board |
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ITEMPROPOSAL 1: ELECTION OF DIRECTORS
At the annual meeting, two directors are to be elected. The terms of Catherine G. BurkePaul E. Lego and LarryJohn E. KittelbergerMerow expire at the meeting. Nominees for election this year are Dr. BurkeMessrs. Lego and Mr. Kittelberger.Merow. Each nominee has consented to serve, if elected, for a three-year term that will expire in 2006.2007. If a director should unexpectedly become unable or unwilling to serve, the proxy holders maycan vote for such other person as the Nominating and Corporate Governance Committee may recommend in place of such director. Additionally, in lieu of designating a substitute, the Boardboard may amend the By-lawsby-laws to reduce the number of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE“FOR” “FOR” THE NOMINEES.
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THE NOMINEES
THE NOMINEES | ||||
![]() ![]() | Paul E. Lego Chairman of the Board; President, Intelligent Enterprises; Retired Chairman of the Board and Chief Executive Officer, Westinghouse Electric Corporation Director since 1995 Committees – Audit; Management Development and Compensation; Nominating and Corporate Governance Age: 73 | Expiration of term, if elected, 2007. From 1990 until his retirement in 1993, Mr. Lego was Chairman of the Board of Directors and Chief Executive Officer of Westinghouse Electric Corporation. He is a Director, Chairman of the Finance Committee and member of the Compensation Committee of Lincoln Electric Holdings, Inc. Mr. Lego is an Emeritus Trustee of the University of Pittsburgh and a member of the American Society of Corporate Executives. | ||
![]() | John E. Merow Retired Chairman and Senior Counsel, Sullivan & Cromwell LLP Director since 1995 Committee – Nominating and Corporate Governance, Chair Age: 74 | Expiration of term, if elected, 2007. Mr. Merow was a Partner in the law firm of Sullivan & Cromwell LLP from 1965 through 1996, and Chairman and Senior Partner from 1987-1994. Mr. Merow is a Director of each of the investment companies (23) in the Seligman Group Investment Companies and a member of their Audit Committees and the Board Operations Committees. He is also an Executive Committee member and Secretary of the United States Council for International Business, a Trustee of New York-Presbyterian Hospital and Vice Chairman of New York-Presbyterian Healthcare System, Inc. |
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CONTINUING DIRECTORS | ||||
![]() | Catherine G. Burke Associate Professor, School of Policy, Planning and Development, University of Southern California Director since 1995 Committees – Management Development and Compensation, Chair; Nominating and Corporate Governance Committee Age: | Expiration of term, | ||
![]() ![]() | Steven J. Demetriou President and Chief Executive Officer, Noveon, Inc. Director since 2002 Committees – Audit; Management Development and Compensation Age: 45 | Expiration of term, 2005. Mr. Demetriou has been President, Chief Executive Officer and Director of Noveon, Inc. since 2001. He served as Executive Vice President of IMC Global Inc. and President of IMC Crop Nutrients from 1999 to 2001. Mr. Demetriou served in a number of leadership positions with Cytec Industries Inc. from 1997 to 1999. From 1981 to 1997, Mr. Demetriou held various positions with Exxon Corporation. | ||
![]() | C. Frederick Fetterolf Retired President and Chief Operating Officer, Aluminum Company of America (Alcoa) Director since 1997 Committees – Audit, Chair; Management Development and Compensation Age: 75 | Expiration of term, 2005. Mr. Fetterolf was President and Chief Operating Officer of Aluminum Company of America, Inc. (Alcoa) from 1985 to 1991, and served as President of Alcoa from 1983 to 1985. He is a Director of Allegheny Technologies, Inc. and member of its Compensation Committee and Technology Committee. He formerly served as Chair of the Audit Committee for Mellon Bank, NA, Chair of the Audit Committee of Praxair, Inc. and member of the Audit Committee of Union Carbide Corp. | ||
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![]() | Mark V. Kaminski President and Chief Executive Officer, Commonwealth Industries, Inc. Director since 1990 Age: 48 | Expiration of term, 2005. Mr. Kaminski joined the Company in 1987 as Marketing Manager. In 1989 he was promoted to Vice President Operations, and in 1991 he became President and Chief Executive Officer. Mr. Kaminski is a Director of Secat, Inc. (a research company affiliated with the University of Kentucky). | ||
![]() | Larry E. Kittelberger Senior Vice President, Administration and Chief Information Officer, Honeywell International Inc. Director since 2000 Committees – Audit; Nominating and Corporate Governance Age: | Expiration of term, | ||
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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORT
CONTINUING DIRECTORS
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COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors is comprised of four directors and met 11five times in 2002 and the number of meetings for each committee is reflected below. Attendance by directors at Board and committee meetings averaged over 91%. All directors attended at least 83% of the Board and committee meetings.2003. The Board of Directors has determined that committee members have no financial ties to the following standing committees: Audit Committee, Management DevelopmentCompany (other than director compensation and Compensation Committeeequity ownership as described in this proxy statement) and, as required by the committee’s charter, meet Nasdaq standards for independence. The Nominating and Corporate Governance Committee. Committee operates under a written charter setting out the functions and responsibilities of this committee. A copy of the amended and restated charter is attached hereto as Exhibit A and can also be viewed on the Company’s website on the Investor Relations — Corporate Governance page at www.ciionline.com.
PROCESS FOR NOMINATING DIRECTORS
The tableNominating and Corporate Governance Committee identifies director nominees from various sources such as officers, directors, stockholders and third party consultants. In 2003, the committee did not retain the services of any third party consultants to assist in identifying and evaluating potential nominees. The committee will consider and evaluate a director candidate recommended by a stockholder in the same manner as other nominees. The committee will assess all director nominees taking into account several factors, including, but not limited to, issues such as the current needs of the board and the nominee’s: (i) integrity, honesty and accountability, (ii) experience and expertise relevant to the Company’s business, (iii) ability and willingness to commit adequate time to board and committee matters, (iv) fit of personality and skills in harmony with those of other directors and potential directors in building a board that is effective, collegial and responsive to the needs of the Company and (v) independence and absence of conflicts of interest. The committee does not set specific minimum qualifications for nominees. The committee’s review of a director nominee typically is based on any written materials provided with respect to the candidate. Additional information or an interview may be sought if the committee determines that would be appropriate.
STOCKHOLDER NOMINATIONS
Under the Company’s by-laws, nominations for director may be made only to the board or a board committee or by a stockholder of record entitled to vote. In order for a stockholder to make a nomination, the stockholder must provide advance notice to the Company, along with the additional information and materials required by the by-laws, to the Company’s Corporate Secretary at the below describesaddress not less than sixty days nor more than ninety days prior to the Board’s standing committees:
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notice on or after January 21, 2005 and before February 21, 2005. You can obtain a copy of the full text of the by-laws provision by writing to the Corporate Secretary, PNC Plaza — 19th Floor, 500 West Jefferson Street, Louisville, Kentucky 40202. The by-laws can also be viewed at the Company’s website on the Investor Relations — Corporate Governance page at www.ciionline.com. The Company received no stockholder proposals or nominations during the year.
Nominating and Corporate Governance Committee
John E. Merow, Chair
Catherine G. Burke
Larry E. Kittelberger
Paul E. Lego
COMPENSATION AND OTHER TRANSACTIONS WITH DIRECTORS
The Company does not pay directors who are also officers of the Company additional compensation for their service as directors. DirectorsIn 2003, directors who arewere not employees of the Company arewere paid the following:
• | ||||
An annual retainer of $15,000 ($30,000 for the Chairman of the | ||||
An additional annual retainer of $5,000 for the | ||||
An attendance fee of $1,000 for each day on which a meeting of the | ||||
An attendance fee of $500 for each | ||||
Expenses incurred when attending |
Under the 1997 Stock Incentive Plan, as amended, non-employee directors are entitled to an annual automatic grant of:
• | ||||
A non-qualified ten-year option to purchase 10,000 shares of Company common stock on the date the director becomes a non-employee director and on each succeeding January 1 (exercisable commencing one year from the date issued); and | ||||
Common stock having a fair market value of $15,000 on the date the director becomes a non-employee director and on each succeeding January 1. |
The option price has been fixed as the “fair market value” of the common stock as of the date of grant, which is defined as the mean between the highest and lowest reported sales price of the common stock on the date issued or, if no common stock was traded on that day, on the nextfirst preceding day on which there was such a trade.
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The annual automatic option issued to non-employee directors for 2002 of 10,000 shares of common stock was made on January 1, 2002 at an exercise price of $4.851 per share; except for Mr. Demetriou, who was elected a director on April 26, 2002 and who was issued options for 10,000 shares of common stock on that date at an exercise price of $7.275 per share. Each director received a common stock grant of 3,092 shares as of January 1, 2002; except for Mr. Demetriou, who was elected a director on April 26, 2002 and who received a common stock grant of 2,061 shares as of that date. Further, the annual automatic option issued to non-employee directors for 2003 of 10,000 shares of common stock was made on January 1, 2003 at an exercise price of $6.755 per share, and eachshare. Each director received a common stock grant of 2,220 shares as of January 1, 2003. Further, each director received a common stock grant of 1,571 shares as of January 1, 2004 at an exercise price of $9.545.
8As of January 1, 2004, directors who were not employees of the Company were paid the following:
• | An annual retainer of $35,000 ($50,000 for the Chairman of the Board of Directors); | |||
• | An additional annual retainer of $5,000 for the Chair of a board committee; | |||
• | An attendance fee of $1,500 for each day on which an in-person meeting of the board or of a board committee occurs; | |||
• | An attendance fee of $1,000 for each telephonic meeting, including meetings that the Audit Committee holds prior to an earnings release or prior to filing the Company’s periodic report on Form 10-Q’s or Form 10-K; | |||
• | Expenses incurred when attending board and committee meetings; and | |||
• | Under the 1997 Stock Incentive Plan, as amended, an annual automatic grant of common stock having a fair market value of $15,000 on the date the director becomes a non-employee director and on each succeeding January 1. |
The provision providing for the automatic grant of an option to purchase 10,000 shares of Company common stock on the date the director becomes a non-employee director and on each succeeding January 1 has been terminated with no grants made as of January 1, 2004.
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AUDIT COMMITTEE ANNUAL REPORT
The Audit Committee of the Board of Directors is comprised of four directors and met 11fifteen times in 2002.2003. The Board of Directors in its business judgment, has determined that allthe Audit Committee members have no financial or personal ties to the Company (other than director compensation and equity ownership as described in this proxy statement) and meet Nasdaq standards for independence.
The Board of Directors has determined that C. Frederick Fetterolf meets the criteria of an “audit committee financial expert” (defined by SEC regulations) as a result of his experience in corporate executive positions, including having held the position of Chief Operating Officer of Alcoa, having served as Chair of the Audit Committees for Mellon Bank, NA and Praxair, Inc. and as a member of the Audit Committee are “independent”of Union Carbide Corp. The Board of Directors has also determined that at least one member of the Audit Committee meets Nasdaq standards regarding accounting or related financial management experience and, “financially literate,” as required by applicable listing standardsconcurrently, the Board of NASDAQ. Directors has determined that each of the members meet the “financial literacy” requirements of Nasdaq standards.
The Audit Committee operates under a written charter adopted by the Board of Directors, last revised in December 2002which is reviewed annually and amended, as required, to reflect changes incorporated as a result of the Sarbanes-Oxley Act of 2002 and rule changes adopted by the SEC and NASDAQ.Nasdaq. The Audit Committee Charter ischarter was attached as Exhibit Ban exhibit to thisthe 2003 proxy statement and is also availablecan be viewed on the Company’s website on the Investor Relations - - Corporate Governance page at www.ciionline.com/InvestorRelations/Corporate Governance.www.ciionline.com.
As set forth in the Audit Committee Charter,charter, the purpose of the Audit Committee is to assist the Boardwith board oversight of:
• | ||||
The integrity of the Company’s financial statements; | ||||
The Company’s compliance with legal and regulatory requirements; | ||||
The independent auditor’s qualifications and independence; | ||||
The performance of the independent auditors and the Company’s internal audit function; and | ||||
The Company’s compliance and conflict of interest policies and procedures. |
It is also the purpose of the Audit Committee:
• | ||||
To provide an open avenue of communication among the independent auditors, financial | ||||
• | To receive complaints related to accounting, internal accounting controls or auditing matters; and | |||
To encourage continuous improvement of and to foster adherence to the Company’s accounting, financial reporting, conflict of interest and compliance policies, procedures and practices. |
13
The Audit Committee Chartercharter provides that management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the Company’s accounting and financial reporting principles and internal controls, and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Company’s independent auditors, PricewaterhouseCoopers LLP, are responsible for performing an independent audit of the consolidated financial statements in accordance with auditing standards generally accepted in the United States and for reporting thereon.
In performing its oversight role, the Audit Committee met with management periodically during the year to consider the adequacy of the Company’s internal controls and the objectivity of its financial reporting. Reference is made to the disclosure in Item 9A of the Company’s Annual Report on Form 10-K for fiscal year 2003 regarding the Company’s internal controls. The Audit Committee has reviewed, considered and discussed these matters and the audited financial statements prior to issuance with both management and the Company’s independent auditors. The Audit Committee regularly met privately with both the independent auditors and the internal auditors, each of whom has unrestricted access to the Committee.committee. The Audit Committee also met privately with appropriate executive management.management, including the Chief Financial Officer and the General Counsel, each of whom has unrestricted access to the Audit Committee. Management advised the Audit Committee in each case that all financial statements were prepared in accordance with accounting principles generally accepted in the United States of America and reviewed significant issues with the Audit Committee. The independent auditors: (a) audited the financial statements prepared by management, (b) expressed an opinion as to whether those financial statements fairly present the financial position, results of operations and cash flows of the Company in conformity with accepted accounting principles generally accepted in the United
9
As part of these reviews, the Audit Committee has also discussed with the independent auditors the matters required to be discussed by the Statement on Auditing Standards No. 61,Communication with Audit Committees,as currently in effect (as amended by Statement on Auditing Standards No. 90) (Codification of Statements on Auditing Standards, AU Section 380). The Audit Committee implemented a procedure to monitor auditor independence, reviewed non-audit services performed by PricewaterhouseCoopers LLP and discussed with the auditors their independence. Further, the Audit Committee received from and discussed with PricewaterhouseCoopers LLP the written disclosures and the letter required by Independence Standards Board Standard No. 1,Independence Discussions with Audit CommitteesCommittees.. These items relate to that firm’s independence from the Company.
The Audit Committee reviewed with the independent auditors, executive management, internal auditors and appropriate Company financial personnel major initiatives and programs aimed at strengthening the effectiveness of the Company’s internal control structure and the objectivity of financial reporting. As part of the process, the Audit Committee continued to monitor the scope and adequacy of the Company’s internal auditing program, reviewing steps taken to implement recommended improvements in internal procedures and controls. Reference is made to the disclosure in Item 9A of the Company’s Annual Report on Form 10-K for fiscal year 2003 regarding findings related to the Company’s internal controls. The Audit Committee also discussed with the Company’s executive management, appropriate Company financial personnel, internal auditors and independent auditors the process used for certifications by the Company’s Chief Executive Officer and Chief Financial Officer, as required by the SEC and the Sarbanes-Oxley Act of 2002 for certain of the Company’s filings with the SEC.
14
The Audit Committee recommended to the Board of Directors the appointment ofappointed PricewaterhouseCoopers LLP as the independent auditors for the Company for 20022003 and appointed PricewaterhouseCoopers LLP as the independent auditors for 20032004 after reviewing the firm’s performance and independence from management.
Taking all of these reviews and discussions into account, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for fiscal year ended December 31, 20022003 for filing with the SEC.
Audit Committee
C. Frederick Fetterolf, Chair
10
EMPLOYEE CODE OF CONDUCT
The Board of Directors has approved a Code of Conduct that applies to all directors, officers and employees, ofand the Company. The Company requires that all directors, officers and employees adhere to the Code of Conduct addressing legal and ethical issues encountered in day-to-day activities.Conduct. The Code of Conduct, among other things, requires that all directors, officers and employees avoid conflicts of interest, comply with all laws and legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interests. All directors, officers, managers and certain other employees are required to annually certify as to any actual or potential conflicts of interest between the employee and the Company. Any waivers or any amendments thereto of the Code of Conduct must be approved by the Board of Directors.
The Company has implemented a Compliance Program pursuant to which training is provided to all employees regarding the Code of Conduct and other legal and employment obligations. Employees are required to report any conduct that the employee believes in good faith to be an actual or apparent violation of the Code of Conduct. The Company has established and communicated to all employees the process by which confidential anonymous submissions of any report, complaint, concern or question regarding questionable accounting, auditing matters or other conduct may be reported. Further, the Audit Committee of the Board of Directors has established procedures to receive, retain and address any complaints, issues or questions regarding internal accounting controls, audit matters or audit matters.other matters related to the compliance program.
The Company has filed a copy of the Code of Conduct with the SEC as an exhibit to its December 31, 2003 Annual Report on Form 10-K. A copy of the Code of Conduct is also posted on the Company’s website on the Investor Relations - Corporate Governance page at www.ciionline.com.
15
RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS
AUDIT AND NON-AUDIT FEESThe Audit Committee has appointed PricewaterhouseCoopers LLP as the independent public accounting firm to audit the Company’s financial statements for the fiscal year beginning January 1, 2004. In making this appointment, the Audit Committee considered whether the audit and non-audit services to be provided by PricewaterhouseCoopers LLP are compatible with maintaining the independence of the Company’s outside auditors. The Audit Committee has adopted a policy and procedures to set forth the manner in which the Audit Committee shall review and approve all services to be provided by PricewaterhouseCoopers LLP before the firm is retained. A copy of the policy and procedures is attached to this proxy statement as Exhibit B.
The following table sets forth the aggregate fees charged by PricewaterhouseCoopers LLP for professional services rendered for the years December 31, 20022003 and 2001, of which $247,189 and $288,699 had been billed as of December 31, 2002 and 2001, respectively.
Audit Fees | 2002 | 2001 | ||||||||
Audit of Financial Statements | $265,358 | $235,224 | ||||||||
Audit Related Accounting Assistance | 26,826 | 20,873 | ||||||||
Total Audit Fees | 292,184 | 256,097 | ||||||||
Audit Related Fees | ||||||||||
State Incentive Tax Credit Procedures | 3,000 | 3,000 | ||||||||
Audit of Employee Benefit Plans | 76,300 | 71,452 | ||||||||
Total Audit Related Fees | 79,300 | 74,452 | ||||||||
Tax Compliance Fees | 5,300 | 17,387 | ||||||||
TOTAL FEES | $376,784 | $347,936 | ||||||||
Services | 2003 | 2002 | ||||||
Audit Fees | ||||||||
Audit of Financial Statements | $ | 518,500 | $ | 292,184 | ||||
Total Audit Fees | $ | 518,500 | $ | 292,184 | ||||
Audit Related Fees | ||||||||
Audit of Employee Benefit Plans | $ | 83,000 | $ | 76,300 | ||||
State Incentive Tax Credit Procedures | $ | 3,000 | $ | 3,000 | ||||
Review of Controls/System 2.0 Project (Information System Redesign Project) | $ | 19,000 | $ | 0 | ||||
Review of Implementation Status of JD Edwards Systems | $ | 10,000 | $ | 0 | ||||
Internal Control Consultation/Section 404 | $ | 15,000 | $ | 0 | ||||
Due Diligence Consultation | $ | 3,500 | $ | 0 | ||||
Total Audit Related Fees | $ | 133,500 | $ | 79,300 | ||||
Tax Fees | ||||||||
Tax Compliance | $ | 0 | $ | 5,300 | ||||
Total Tax Fees | $ | 0 | $ | 5,300 | ||||
All Other Fees | ||||||||
Use of Compario Accounting Database | $ | 1,400 | $ | 0 | ||||
Total All Other Fees | $ | 1,400 | $ | 0 | ||||
TOTAL FEES FOR ALL SERVICES | $ | 653,400 | $ | 376,784 | ||||
1116
BENEFICIAL OWNERSHIP OF COMMON STOCK
OWNERSHIP BY OTHERS
The following table sets forth information with respect to each person believed by the Company to be the beneficial owner of 5% or more than 5% of the Company’s common stock on the dates noted.
PERCENT OF | ||||||||
NAME AND ADDRESS | NUMBER OF | CLASS(h) | ||||||
OF BENEFICIAL OWNER | SHARES OWNED | |||||||
IRONWOOD CAPITAL MANAGEMENT, LLC | 1,803,073 | (a) | 11.3 | % | ||||
21 CUSTOM HOUSE STREET | ||||||||
BOSTON, MASSACHUSETTS 02110 | ||||||||
JOHN R. SIMPLOT | 1,622,400 | (b) | 10.1 | % | ||||
SELF-DECLARATION OF REVOCABLE TRUST | ||||||||
999 MAIN STREET | ||||||||
BOISE, IDAHO 83702 | ||||||||
HEARTLAND ADVISORS, INC. | 1,384,797 | (c) | 8.6 | % | ||||
789 NORTH WATER STREET | ||||||||
MILWAUKEE, WISCONSIN 53202 | ||||||||
DIMENSIONAL FUND ADVISORS | 1,378,500 | (d) | 8.6 | % | ||||
1299 OCEAN AVENUE, 11TH FLOOR | ||||||||
SANTA MONICA, CALIFORNIA 90401 | ||||||||
FRANKLIN RESOURCES, INC. | 930,000 | (e) | 5.8 | % | ||||
ONE FRONTIER PARKWAY | ||||||||
SAN MATEO, CALIFORNIA 94404 | ||||||||
DONALD SMITH & CO., INC. | 824,000 | (f) | 5.1 | % | ||||
EAST 80 ROUTE 4 SUITE 360 | ||||||||
PARAMUS, NEW JERSEY 07652 | ||||||||
MERRILL LYNCH INVESTMENT MANAGER, L.P. | 815,600 | (g) | 5.1 | % | ||||
800 SCUDDER MILL ROAD | ||||||||
PLAINSBORO, NEW JERSEY 08536 | ||||||||
Name and Address | Number of | Percent of | ||||||
of Beneficial Owner | Shares Owned | Class (g) | ||||||
Ironwood Capital Management, LLC 21 Custom House Street Boston, Massachusetts 02110 | 1,401,725 | (a) | 8.75 | % | ||||
J.R. Simplot and J.R. Simplot, as trustee Self-Declaration of Revocable Trust 999 Main Street Boise, Idaho 83702 | 1,270,900 | (b) | 7.93 | % | ||||
Dimensional Fund Advisors 1299 Ocean Avenue, 11th Floor Santa Monica, California 90401 | 1,239,167 | (c) | 7.73 | % | ||||
Heartland Advisors, Inc. 789 North Water Street Milwaukee, Wisconsin 53202 | 1,097,100 | (d) | 6.85 | % | ||||
Merrill Lynch Investment Manager, L.P. World Financial Center, North Tower 250 Vesey Street New York City, New York 10381 | 815,600 | (e) | 5.03 | % | ||||
Franklin Resources, Inc. One Frontier Parkway San Mateo, California 94404 | 800,000 | (f) | 5.00 | % |
(Footnotes on following page.)
17
(a) Based solely on a Schedule 13G dated March 11, 2003February 17, 2004 filed with the SEC by Ironwood Capital Management, LLC. The Schedule 13G reports that the shares are beneficially owned by Ironwood Capital Management, LLC, Warren J. Isabelle, Richard L. Droster, Donald Collins, and that each has shared power to dispose of or direct the disposition of all of the above-noted shares.
(b) Based solely on a Form 4Amendment Number 8 to Schedule 13D dated February 28, 2003January 12, 2004 filed with the SEC by J.R. Simplot and J.R. Simplot, as Trustee, J.R. Simplot Self-Declaration of Revocable Trust (the “Trust”). Simplot and the Trust reported sole power to vote and dispose of all of the above-noted shares of common stock.
(c) Based solely on a Schedule 13G dated February 13, 20036, 2004 filed with the SEC by Dimensional Fund Advisors, Inc. Dimensional reported sole power to vote and dispose of all of the above-noted shares of common stock.
(d) Based solely on a Schedule 13G dated February 12, 2004 filed with the SEC by Heartland Advisors, Inc. and William J. Nasgovitz. The Schedule 13G reports that Heartland Advisors, Inc. and William J. Nasgovitz, jointly, have sole power to vote and dispose of all of the above-noted shares of common stock.
(d)(e) Based solely on a Schedule 13G dated February 3, 2003January 27, 2004 filed with the SEC by Dimensional Fund Advisors,Merrill Lynch & Co, Inc. Dimensionalon behalf of Merrill Lynch Investment Managers. Merrill Lynch reported soleshared voting power to vote and dispose of all of the above-noted shares of common stock.
(e)(f) Based solely on a Schedule 13G13G/A dated February 12, 20032004 filed with the SEC by Franklin Resources, Inc., Franklin Advisory Services, LLC, Charles B. Johnson and Rupert H. Johnson, Jr. The Schedule 13G13G/A reports that: (1) the shares are beneficially owned by investment companies or other managed accounts which are advised by investment advisory subsidiaries of Franklin Resources, Inc.; (2) advisory contracts grant to such advisory subsidiaries all voting and investment power over the shares; (3) Charles B. Johnson and Rupert H. Johnson, Jr. are principal stockholders of Franklin Resources, Inc.; and (4) Franklin Advisory Services, LLC has sole power to vote and dispose of all of the above-noted shares.
(f) Based solely on a Schedule 13G dated January 17, 2003 filed with the SEC. Donald Smith & Co., Inc. reported sole power to vote and dispose of all of the above-noted shares of common stock.
(g) Based solely on information obtained by the Company and a Schedule 13G dated January 30, 2002 filed with the SEC. Merrill Lynch reported shared voting power to vote and dispose of all of the above-noted shares of common stock.
(h) Calculations based on outstanding shares as of March 7, 2003.5, 2004.
1218
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of March 1, 2003,2004, the number of shares of common stock of the Company beneficially owned by each director, each executive officer named in the Summary Compensation Table appearing on page 19,later in this proxy statement, and all directors and executive officers as a group, and the percentage of the common stock such ownership represented on that date.
Each person has sole investment and voting power with respect to the shares set forth below unless otherwise noted.
COMMON STOCK | ||||||||||||||||
COMMON | BENEFICIAL OWNER HAS | |||||||||||||||
STOCK | THE RIGHT TO ACQUIRE | |||||||||||||||
BENEFICIALLY | NOT INCLUDED IN | PERCENT | ||||||||||||||
NAME OF BENEFICIAL OWNER | OWNED (1) | PREVIOUS COLUMN (2) | TOTAL | OF CLASS | ||||||||||||
CATHERINE G. BURKE | 18,034 | 31,500 | 49,534 | * | ||||||||||||
STEVEN J. DEMETRIOU | 4,281 | 0 | 4,281 | * | ||||||||||||
C. FREDERICK FETTEROLF | 16,034 | 29,500 | 45,534 | * | ||||||||||||
MARK V. KAMINSKI | 154,447 | 340,000 | 494,447 | 3.1% | ||||||||||||
LARRY E. KITTELBERGER | 10,883 | 25,000 | 35,883 | * | ||||||||||||
PAUL E. LEGO | 14,034 | 37,500 | 51,534 | * | ||||||||||||
JOHN E. MEROW | 30,034 | 31,500 | 61,534 | * | ||||||||||||
DONALD L. MARSH JR. | 37,128 | 100,000 | 137,128 | * | ||||||||||||
JOHN J. WASZ | 25,003 | 28,000 | 53,003 | * | ||||||||||||
PATRICK D. KING | 0 | 0 | 0 | * | ||||||||||||
WILLIAM R. WITHERSPOON | 2,755 | 15,000 | 17,755 | * | ||||||||||||
MICHAEL J. BOYLE | 900 | — | (3) | 900 | * | |||||||||||
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (18 PERSONS) | 343,037 | 683,500 | 1,026,537 | 6.4% | ||||||||||||
* LESS THAN 1.00% | ||||||||||||||||
Common Stock | ||||||||||||||||
Beneficial Owner has | ||||||||||||||||
Common Stock | the Right to Acquire | |||||||||||||||
Beneficially Owned | Not Included in | Percent | ||||||||||||||
Name of Beneficial Owner | (a) | Previous Column (b) | Total | of Class | ||||||||||||
Catherine G. Burke | 19,605 | 41,500 | 61,105 | * | ||||||||||||
Steven J. Demetriou | 5,825 | 20,000 | 25,852 | * | ||||||||||||
C. Frederick Fetterolf | 17,605 | 39,500 | 57,105 | * | ||||||||||||
Mark V. Kaminski | 154,727 | 440,000 | 594,727 | 3.7 | % | |||||||||||
Larry E. Kittelberger | 12,454 | 35,000 | 47,454 | * | ||||||||||||
Paul E. Lego | 15,605 | 47,500 | 63,105 | * | ||||||||||||
John E. Merow | 31,605 | 41,500 | 73,105 | * | ||||||||||||
Donald L. Marsh Jr. | 39,165 | 135,000 | 174,165 | * | ||||||||||||
John J. Wasz | 18,914 | 63,000 | 81,914 | * | ||||||||||||
Patrick D. King | 1,346 | 0 | 1,346 | * | ||||||||||||
William R. Witherspoon | 0 | 20,000 | 20,000 | * | ||||||||||||
All Directors and Executive Officers as a group (16 persons) | 346,900 | 935,000 | 1,281,900 | 8.0 | % |
(1)*Less than 1.00%
(Footnotes on following page.)
19
(a) Includes shares held in the Company’s 401(k) Plan for the accounts of individuals as follows: Mr. Kaminski – 6,7197,939 shares; Mr. Marsh – 5,7697,504 shares; Mr. Wasz – 17,362 shares;18,794; Mr. King – 01,346 shares; Mr. Witherspoon – 2,788 shares; Mr. Boyle – 0 shares; and executive officers as a group (12(10 persons) – 52,20356,633 shares. Also, includes restricted stock units held in Company stock accounts underJune 2003 the Company’s Deferred Compensation Plan for the accounts of individualswas terminated and stock was distributed as follows: Mr. Kaminski – 54,58453,644 shares; Mr. Marsh – 17,03517,179 shares; and Mr. Wasz – 141120 shares. Also includes shares held in the Company’s Dividend Reinvestment Plan by Mr. Marsh – 1,8241,982 shares.
(2)(b) Shares of common stock that the individual had the right to acquire within 60sixty days of March 1, 20032004 through the exercise of options.
(3) Mr. Boyle separated from the Company effective September 4, 2002 and all vested and unvested stock options terminated for no value on September 4, 2002.
13
COMPLIANCE WITH SECTION 16(a)16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and officers and persons who beneficially own more than 10% of its common stock (“reporting persons”) to file reports of ownership and changes in ownership with the SEC and furnish a copy thereof to the Company. Based solely upon a review of the copies of such forms furnished to the Company records and other information and written representations from certain reporting persons, the Company believes that all of the reporting persons complied with all applicable filing requirements applicable to them with respect to 2002.2003.
20
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the Company’s common stock with that of Standard & Poor’s Small Cap 600 and a peer group index. The graph assumes that the value of the investmentinvested in the Company’s common stock and each index was $100 at December 31, 19971998 and that all dividends (where applicable) were reinvested. The data is provided in table format below.
The peer group selected by the Company consists of Century Aluminum Company, IMCO Recycling, Inc., Steel Dynamics, Inc., Quanex Corporation, Steel Dynamics, Inc., Steel Technologies, Inc., Century Aluminum Company and Wolverine Tube, Inc. The self-determined peer group has not been modified from the peer group noted in the 20022003 proxy statement to remove Birmingham Steel Corporation and Kaiser Aluminum Corporation, for which no comparative information was available due to delisting by virtue of acquisition and bankruptcy filing, respectively. Century Aluminum Company and Wolverine Tube, Inc. were added to the peer group as replacements.statement.
12/31/98 | 12/31/99 | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | |||||||||||||||||||
Commonwealth Industries, Inc. | $ | 100.00 | $ | 141.19 | $ | 50.36 | $ | 54.56 | $ | 81.94 | $ | 123.19 | ||||||||||||
S&P Small Cap 600 | $ | 100.00 | $ | 112.40 | $ | 125.67 | $ | 133.88 | $ | 114.30 | $ | 158.63 | ||||||||||||
Peer Group Index | $ | 100.00 | $ | 118.95 | $ | 81.67 | $ | 97.87 | $ | 98.21 | $ | 159.92 | ||||||||||||
1421
EXECUTIVE COMPENSATION
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT
The Management Development and Compensation Committee of the Board of Directors (the “Committee”) consists entirely of “non-employee directors”independent directors under Rule 16b-3 of the Securities Exchange Act of 1934Nasdaq standards and “outside directors” under Section 162(m) of the Internal Revenue Code. The Committeecommittee operates under a written charter adopted by the Board of Directors last revised in October 2002, which isand reviewed annually. The Management Development and Compensation Committee Charter was attached as Exhibit Can as an exhibit to thisthe 2003 proxy statement and is also availablecan be viewed on the Company’s website on the Investor Relations — Corporate Governance page at www.ciionline.com/Investor Relations/Corporate Governance.www.ciionline.com.
The Committeecommittee approves the policies and practices under which compensation is paid or awarded to the Company’s executive officers. The Committeecommittee from time to time considers the advice of independent outside consultants and experts in determining the appropriateness of the level and composition of compensation.
Compensation Philosophy. The Committeecommittee believes that compensation opportunities must compare favorably with those found in comparable sectors if the Company is to attract and retain executives with the capability to meet corporate business objectives. The Company rewards differentially based upon the complexity, scope and impact of the work required in a role and the work performance of the role incumbent. Individual recognition and rewards are linked to corporate objectives. The Committeecommittee believes that executive officers should have a significant portion of their compensation “at risk” and tied to the long-term performance of the Company’s stock.
Compensation Program. The Company’s compensation program for executive officers consists of three key elements:
• | ||||
Base salary; | ||||
• | Annual incentive compensation; and | |||
• | Long-term incentive compensation. |
Executive Compensation Guiding Principles.
• | Compensation should be related to performance (individual and Company performance measured against both financial and non-financial goals and objectives); | |||
• | Incentive compensation should be a greater part of total compensation for executive positions (the proportion of an employee’s total compensation that varies with performance should increase as the scope and level of the individual’s responsibilities increase); |
22
• | Incentive compensation should balance short- and long-term performance (through the design of the Company’s compensation program, the committee looks to balance the focus of all employees on achieving strong short-term, or annual, results in a manner that will ensure the Company’s long-term viability and success); | |||
• | Compensation levels should be competitive (to achieve the stated goals, the committee has reviewed compensation survey data from independent sources to ensure that total compensation is competitive and the Company targets executive compensation to deliver pay levels between the 50th and 75th percentile of a comparison group); and | |||
• | The committee seeks to maximize the tax deductibility of compensation as appropriate. |
The Committeecommittee believes that thisthese principles best servesserve the interests of stockholders by ensuring the Company’s executive officers are compensated in a way that aligns their interests with those of stockholders. Thus, compensation for the Company’s executive officers places a substantial proportionportion of their comprehensive compensation program is placed “at risk.” Stock options are a substantial portion of the executive officers’ long-term compensation, with a value directly related to the stock price appreciation realized by the Company’s stockholders.
The Committee’scommittee’s judgments concerning executive compensation payments and awards during 20022003 were based upon the Committee’scommittee’s assessment of the Company’s executive officers performance, the continuing demand for superior executive talent, the Company’s overall performance and the Company’s future objectives and challenges.
Base Salary. The purpose of the base salary is to provide compensation that is competitive with that offered by other companies with which the Company competes for executive services. Base salaries of the Company’s executive officers, other than Chief Executive Officer (“CEO”), including any annual or other adjustments, are recommended by the CEO and approved by the Committee,committee, taking into account such factors as competitive industry salaries, a subjective assessment of the natureresponsibilities of the position, the complexity of the work and the contribution and experience of the officer and the length of the officer’s service.officer. The Committeecommittee establishes the base salary of the CEO.CEO in executive session.
15
Annual Incentive Compensation. The purpose of the annual incentive compensation program is to align officer pay with short-term (annual) performance of the Company. In 2002,2003, the annual incentive compensation program gave the CEO the opportunity to earn up to 150% of his base salary (target bonus) and each Executive Vice President the opportunity to earn an annual payment of up to 150% of his base salary. The annual incentive compensation program gave each Vice President the opportunity to earn an annual incentive award of up to 67.5%75% of his or her base salary. Each year the committee defines a minimum annual performance threshold for the Company, the achievement of which funds is an objective component of the target bonus; the remaining portion of the target bonus is tied to a subjective assessment of individual performance. The potential for the performance component of the 2003 incentive award for the year was based first ontied to the Company achieving a specified level of return on capital employed and then upon a subjective judgment of individual performance.employed. The Committeecommittee assesses the work performance of the CEO and all other executives based on histhe individual level of achievement of predetermined annual priority tasks. The incentive award for the Executive Vice Presidents and Vice Presidents is recommended to the Committeecommittee based on the achievement of specific work priorities as judged by the CEO and approved by the Committee.committee.
23
For 20022003 the Company achieveddid not achieve the predetermined rate of return on capital employed and the Committee awardedcommittee determined not to award a subjective component under the incentive compensation for the CEO, based on his achievement of predetermined priority tasks and approved incentive compensation for the Executive Vice Presidents andor Vice Presidents of the Company.
Long-Term Incentive Compensation. The purpose of the long-term incentive compensation program is to align the long-term interests of executive officers with those of the stockholders. Generally, the Committeecommittee makes grants of stock options to executive officers once a year. These options have an exercise price equal to the fair market value of the share on the day of the option grant or, if no common stock was traded that day, on the nextfirst preceding day on which there was such a trade. These options generally vest within three years and expire ten years from the date of the grant.
Chief Executive Officer Compensation. Compensation for the CEO, Mr. Kaminski, reflects the same elements and the same factors as those described above. In February 20022003 the Committeecommittee set Mr. Kaminski’s base salary at $675,000. In 20022003 the annual incentive compensation program (as described above) gave the CEO the opportunity to earn up to 150% of his base salary. Therefore, 60% of Mr. Kaminski’s compensation (base salary plus incentive compensation) was “at risk” and subject to achieving the planned financial performance of the Company and predetermined priority tasks. As the Company achieved a predetermineddid not achieve the financial target for 2002,2003, the Committee awardedcommittee did not award the CEO incentive compensation for 2002. Although the Committee determined incentive compensation based on the Company’s 2002 financial performance, it noted that additional indicators were reviewed regarding the overall performance of Mr. Kaminski: (1) achievement of the 2002 financial plan; (2) improved safety performance; (3) improvement of financial performance through the design and implementation of corporate-wide systems; and (4) execution of a top-line growth strategy through both organic and acquisition growth and refinement of the template for screening strategic investment options. The Board of Directors, under the sponsorship of the Committee, also completed a “360” CEO performance review with the confidential participation of the executive team and members of the Board of Directors. The Board has reviewed with the CEO preliminary results of the “360” review. The Committee believes that the findings of the “360” CEO performance review will assist in setting future CEO performance goals and tasks.2003.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the Internal Revenue Code limits the tax deduction for individual compensation paid to the CEO and the four other most highly paid executives to $1,000,000 paid as of the end of any fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met.
16
The Committeecommittee believes that it is generally in the Company’s best interest to attempt to structure performance-based compensation, including stock option grants and annual bonuses, to executive officers who may be subject to Section 162(m) in a mannerway that satisfies the statute’sstatute requirements. However, the Committeecommittee also recognizes the need to retain flexibility to make compensation decisions that may not meet Section 162(m) standards whenif necessary to enable the Company to meet its overall objectives, even if the Company may not be able to deduct a portion of the compensation.
Management Development and Compensation Committee
Catherine G. Burke, Chair
1724
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002:2003:
• | ||||
None of the members of the Management Development and Compensation Committee was an officer, | ||||
None of the members of the Management Development and Compensation Committee entered into | ||||
None of the Company’s executive officers served on the compensation committee | ||||
None of the Company’s executive officers was a director of another entity where one of that entity’s executive officers served on the Company’s Management Development and Compensation Committee; and | ||||
None of the Company’s executive officers served on the compensation committee |
1825
SUMMARY COMPENSATION TABLE
The following table sets forth for years 2000, 2001, 2002 and 20022003 the annual and long-term compensation paid or accrued for those years by the Company to the CEO and the four most highly compensated executives of the Company who were serving as executive officers on December 31, 2002 and one employee whose employment terminated prior to year end2003 (the “named officers”).
ANNUAL COMPENSATION (a) | LONG-TERM COMPENSATION AWARDS (e) | |||||||||||||||||||||||||||
BONUS | ||||||||||||||||||||||||||||
SPECIAL | ||||||||||||||||||||||||||||
TARGET | ||||||||||||||||||||||||||||
AWARDS AND | ||||||||||||||||||||||||||||
TERMINATION | NUMBER | |||||||||||||||||||||||||||
INCENTIVE | PAYMENTS | OF SHARES | ||||||||||||||||||||||||||
COMPEN- | UNDER THE | UNDERLYING | ALL OTHER | |||||||||||||||||||||||||
NAME AND PRINCIPAL | SATION | 1999 | STOCK | COMPEN- | ||||||||||||||||||||||||
POSITION | YEAR | SALARY | PLAN (c) | PROGRAM (d) | TOTAL | OPTIONS | SATION (f) | |||||||||||||||||||||
MARK V. KAMINSKI | 2003 | $ | 700,962 | (b) | $ | 0 | $ | 0 | $ | 0 | 100,000 | $ | 49,805 | |||||||||||||||
President and Chief | 2002 | $ | 659,856 | $ | 571,860 | $ | 1,461,182 | $ | 2,033,042 | 100,000 | $ | 47,613 | ||||||||||||||||
Executive Officer | 2001 | $ | 675,004 | $ | 0 | $ | 2,010,437 | $ | 2,010,437 | 100,000 | $ | 45,818 | ||||||||||||||||
DONALD L. MARSH JR. | 2003 | $ | 364,500 | (b) | $ | 0 | $ | 0 | $ | 0 | 35,000 | $ | 29,172 | |||||||||||||||
Executive Vice President | 2002 | $ | 343,125 | $ | 185,854 | $ | 1,239,253 | $ | 1,425,107 | 35,000 | $ | 53,513 | ||||||||||||||||
and Chief Financial Officer | 2001 | $ | 351,000 | $ | 0 | $ | 1,725,064 | $ | 1,725,064 | 35,000 | $ | 31,293 | ||||||||||||||||
JOHN J. WASZ | 2003 | $ | 307,190 | (b) | $ | 0 | $ | 0 | $ | 0 | 35,000 | $ | 14,043 | |||||||||||||||
Executive Vice President | 2002 | $ | 279,984 | $ | 214,050 | $ | 316,842 | $ | 530,892 | 35,000 | $ | 12,343 | ||||||||||||||||
and President Alflex | 2001 | $ | 275,004 | $ | 0 | $ | 444,421 | $ | 444,421 | 35,000 | $ | 16,560 | ||||||||||||||||
PATRICK D. KING | 2003 | $ | 292,558 | (b) | $ | 0 | $ | 0 | $ | 0 | 35,000 | $ | 9,217 | |||||||||||||||
Executive Vice President | 2002 | $ | 148,077 | $ | 146,777 | $ | 0 | $ | 146,777 | 35,000 | $ | 125,180 | ||||||||||||||||
and Chief Commercial Officer (g) | 2001 | — | — | — | — | — | — | |||||||||||||||||||||
WILLIAM R. WITHERSPOON | 2003 | $ | 210,218 | (b) | $ | 0 | $ | 0 | $ | 0 | 5,000 | $ | 8,958 | |||||||||||||||
Vice President Aluminum | 2002 | $ | 181,902 | $ | 100,444 | $ | 0 | $ | 100,444 | 5,000 | $ | 7,499 | ||||||||||||||||
Operations | 2001 | $ | 188,910 | $ | 0 | $ | 694,061 | $ | 694,061 | 5,000 | $ | 15,212 |
LONG-TERM | ||||||||||||||||||||||||||||
ANNUAL COMPENSATION (a) | COMPENSATION | |||||||||||||||||||||||||||
AWARDS (d) | ||||||||||||||||||||||||||||
BONUS (b) | ||||||||||||||||||||||||||||
SPECIAL TARGET | ||||||||||||||||||||||||||||
AWARDS AND | NUMBER | |||||||||||||||||||||||||||
INCENTIVE | TERMINATION PAYMENTS | OF SHARES | ||||||||||||||||||||||||||
NAME AND PRINCIPAL | COMPENSATION | UNDER THE 1999 | UNDERLYING | ALL OTHER | ||||||||||||||||||||||||
POSITION | YEAR | SALARY | PLAN (b) | PROGRAM (c) | TOTAL | STOCK OPTIONS | COMPENSATION (e) | |||||||||||||||||||||
MARK V. KAMINSKI | 2002 | $659,856 | $571,860 | $1,461,182 | $2,033,042 | 100,000 | $47,613 | |||||||||||||||||||||
President and Chief | 2001 | $675,004 | $0 | $2,010,437 | $2,010,437 | 100,000 | $45,818 | |||||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||
2000 | $650,004 | $0 | $0 | $0 | 100,000 | $49,631 | ||||||||||||||||||||||
DONALD L. MARSH JR. | 2002 | $343,125 | $185,854 | $1,239,253 | $1,425,107 | 35,000 | $53,513 | |||||||||||||||||||||
Executive Vice President | 2001 | $351,000 | $0 | $1,725,064 | $1,725,064 | 35,000 | $31,293 | |||||||||||||||||||||
and Chief Financial Officer | ||||||||||||||||||||||||||||
2000 | $340,002 | $0 | $0 | $0 | 35,000 | $23,640 | ||||||||||||||||||||||
JOHN J. WASZ | 2002 | $279,984 | $214,050 | $316,842 | $530,892 | 35,000 | $12,343 | |||||||||||||||||||||
Executive Vice President | 2001 | $275,004 | $0 | $444,421 | $444,421 | 35,000 | $16,560 | |||||||||||||||||||||
and President Alflex | ||||||||||||||||||||||||||||
2000 | $192,000 | $40,000 | $0 | $40,000 | 5,000 | $13,335 | ||||||||||||||||||||||
PATRICK D. KING | 2002 | $148,077 | $146,777 | — | $146,777 | 35,000 | $125,180 | |||||||||||||||||||||
Executive Vice President | 2001 | — | — | — | — | — | — | |||||||||||||||||||||
and Chief Commercial | ||||||||||||||||||||||||||||
Officer(f) | 2000 | — | — | — | — | — | — | |||||||||||||||||||||
WILLIAM R. WITHERSPOON | 2002 | $181,902 | $100,444 | — | $100,444 | 5,000 | $7,499 | |||||||||||||||||||||
Vice President | 2001 | $188,910 | $0 | $694,061 | $694,061 | 5,000 | $15,212 | |||||||||||||||||||||
Aluminum Operations | ||||||||||||||||||||||||||||
2000 | $161,850 | $84,971 | $0 | $84,971 | 5,000 | $13,208 | ||||||||||||||||||||||
MICHAEL J. BOYLE | 2002 | $104,033 | — | — | — | — | $178,716 | |||||||||||||||||||||
Vice President Materials | 2001 | $148,930 | $0 | $0 | $0 | — | $5,561 | |||||||||||||||||||||
(Separated September 4, | ||||||||||||||||||||||||||||
2002)(g) | 2000 | $123,539 | $28,968 | $0 | $28,968 | — | $4,184 | |||||||||||||||||||||
(Footnotes on following page)page.)
1926
SUMMARY COMPENSATION TABLE FOOTNOTES
(a) Compensation deferred at the election of the named officer is included in the category and year in which it would have otherwise been reported had it not been deferred.
(b) The annual 2003 approved base salaries were: Mr. Kaminski – $675,000, Mr. Marsh – $351,000, Mr. Wasz – $297,417, Mr. King – $281,722 and Mr. Witherspoon – $203,530. However, due to the timing of payroll periods, an additional pay period was paid during 2003 for a total of 27 pay periods.
(c) The amounts reported in this column represent payments made with respect to 2000 and 2002 under the Company’s incentive compensation plan. No payments were made with respect to 2001 or 2003 under the Company’s incentive compensation plan.
(c)(d) In December 2001 the Management Development and Compensation Committee terminated the 1999 Executive Stock Purchase Incentive Program (the “1999 Program”). The amounts reported represent payments made pursuant to the 1999 Program: (i) performance-based Special Target Award (Annual Performance Award) payments made in 2000 (no Annual Performance Award paid in 2001 or 2002 with respect to 2000 or 2001) under the 1999 Program; (ii) non-performance based Service Award payments made in April 2001 under the 1999 Program as follows: Mr. Kaminski — $535,000;– $535,000, Mr. Marsh — $473,721;– $473,721, Mr. Wasz — $124,949;– $124,949 and Mr. Witherspoon —– $110,535; and Mr. Boyle — $0; and (iii)(ii) termination payments on termination of the 1999 Executive Stock Purchase Incentive Program: Mr. Kaminski — $1,475,437 first installment payment made in 2001 and $1,461,182 second installment payment made in 2002 for a total termination payment of $2,936,619;$2,936,619, Mr. Marsh —– $1,251,343 first installment payment made in 2001 and $1,239,253 second installment payment made in 2002 for a total termination payment of $2,490,596;$2,490,596, Mr. Wasz —– $319,472 first installment payment made in 2001 and $316,386 second installment payment made in 2002 for a total termination payment of $635,858;$635,858, and Mr. Witherspoon —– $583,526 total termination payment made in 2001; and Mr. Boyle — $0 payment made.2001.
(d)(e) No amounts of restricted stock were awarded during 2000, 2001, 2002 or 2002.2003. No long-term incentive payments were made during 2000, 2001, and 2002.2002 or 2003.
(e)(f) Includes matching contributions to the Company’s 401(k) Plan for 2002:2003: Mr. Kaminski — $5,906;– $6,000, Mr. Marsh — $5,703;– $6,000, Mr. Wasz — $5,655;– $6,000, Mr. King — $0;– $7,297 and Mr. Witherspoon — $5,529; and Mr. Boyle — $3,139.– $6,000. Also includes contributions made by the Company to its Deferred Compensation Plan for 2002:2002 but paid in 2003: Mr. Kaminski — $33,739;– $33,739, Mr. Marsh — $18,423;– $18,423 and Mr. Wasz —– $6,000. In June 2003, the Company’s Deferred Compensation Plan was terminated and all assets were liquidated and distributed in accordance with the Plan. Also includes the value of life insurance premiums paid by the Company for 2002:2003: Mr. Kaminski — $1,474;– $2,640, Mr. Marsh — $3,298;– $1,853, Mr. Wasz — $345;– $1,563, Mr. King — $90;– $1,489 and Mr. Witherspoon — $1,732; and Mr. Boyle — $197.– $1,052.
Also includes the following: payment of $174,500 to Mr. Boyle in connection with the resignation of his employment effective September 4, 2002; payment of $108,090 to Mr. King for relocation expenses in 2002;2002 and payment to Mr. Marsh for vacation not taken in 2002. The Company’s vacation policy was revised as of January 1, 2003 to eliminate, among other things, the ability to receive payment for unused vacation time not taken by an employee.
(f)(g) Mr. King commenced employment with the Company in June 2002.
(g) Upon Mr. Boyle’s separation from the Company, all options terminated for no value.27
20
STOCK INCENTIVE PLANS
The tables below show, for the named officers, information regarding stock options granted during 20022003 pursuant to the Company’s Stock Incentive Plans.
OPTIONS GRANTED IN 20022003
Potential Realizable | ||||||||||||||||||||||||
Value At Assumed | ||||||||||||||||||||||||
Number of | % of Total | Annual Rates of Stock | ||||||||||||||||||||||
Securities | Options | Exercise | Price Appreciation | |||||||||||||||||||||
Underlying Options | Granted to Employees in | Price Per | Expiration | for Option Term (b) | ||||||||||||||||||||
Name | Granted (a) | Fiscal Year | Share | Date | 5% | 10% | ||||||||||||||||||
Mark V. Kaminski | 96,000 | 33.0 | % | $ | 6.755 | 01/01/13 | $ | 407,826 | $ | 1,033,510 | ||||||||||||||
4,000 | 1.4 | % | $ | 4.950 | 05/05/13 | $ | 12,452 | $ | 31 ,556 | |||||||||||||||
Donald L. Marsh Jr. | 35,000 | 12.0 | % | $ | 6.755 | 01/01/13 | $ | 148,686 | $ | 376,801 | ||||||||||||||
John J. Wasz | 35,000 | 12.0 | % | $ | 6.755 | 01/01/13 | $ | 148,686 | $ | 376,801 | ||||||||||||||
Patrick D. King | 35,000 | 12.0 | % | $ | 6.755 | 01/01/13 | $ | 148,686 | $ | 376,801 | ||||||||||||||
William R. Witherspoon | 5,000 | 1.7 | % | $ | 6.755 | 01/01/13 | $ | 21,241 | $ | 53,829 |
POTENTIAL | ||||||||||||||||||||||||
REALIZABLE VALUE AT | ||||||||||||||||||||||||
NUMBER OF | % OF TOTAL | ASSUMED ANNUAL | ||||||||||||||||||||||
SECURITIES | OPTIONS | EXERCISE | RATES OF STOCK | |||||||||||||||||||||
UNDERLYING | GRANTED TO | PRICE | PRICE APPRECIATION | |||||||||||||||||||||
OPTIONS | EMPLOYEES IN | PER | EXPIRATION | FOR OPTION TERM (b) | ||||||||||||||||||||
NAME | GRANTED (a) | FISCAL YEAR | SHARE | DATE | 5% | 10% | ||||||||||||||||||
MARK V. KAMINSKI | 100,000 | 34.6 | % | $4.851 | 01/01/12 | $305,077 | $773,124 | |||||||||||||||||
DONALD L. MARSH JR. | 35,000 | 12.1 | % | $4.851 | 01/01/12 | $106,777 | $270,594 | |||||||||||||||||
JOHN J. WASZ | 35,000 | 12.1 | % | $4.851 | 01/01/12 | $106,777 | $270,594 | |||||||||||||||||
PATRICK D. KING (c) | 35,000 | 12.1 | % | $7.190 | 06/10/12 | $158,261 | $401,065 | |||||||||||||||||
WILLIAM R. WITHERSPOON | 5,000 | 1.7 | % | $4.851 | 01/01/12 | $15,254 | $38,656 | |||||||||||||||||
MICHAEL J. BOYLE (d) | — | — | — | — | — | — | ||||||||||||||||||
(a) These options become exercisable three years from the date of grant.
(b) The amounts represent hypothetical realizable values of stock options granted in 20022003 at assumed rates of cumulative stock price appreciation over the ten-year life of the options. These assumed rates of appreciation are set by the proxy rules of the SEC and are not intended to forecast appreciation of the price of the Company’s common stock. Actual gains, if any, realized upon the exercise of stock options will depend upon the price of the Company’s common stock at the date of exercise.
(c) Mr. King was awarded 35,000 stock options as of the date of his appointment as an officer of the Company.28
(d) Upon separation, all vested and unvested options granted to Mr. Boyle terminated for no value.
YEAR-END OPTION VALUES
Number of Securities | Value of Unexercised | |||||||
Underlying Unexercised | In-the-Money Options | |||||||
at Year-End | ||||||||
$ | ||||||||
$ | ||||||||
$ | ||||||||
0/ | $0/$ | |||||||
$ | ||||||||
(a) Upon separation, all vested and unvested options granted to Mr. Boyle terminated for no value.
21
DEFERRED COMPENSATION PLAN
Key employees designated byIn June 2003 the Board of Directors may electterminated its non-qualified, unfunded Deferred Compensation Plan available to key designated employees to defer a portion of their compensation along with certain make-whole contributions by the Company. The Plan trust and all non-Company stock funds were liquidated and the proceeds were distributed to participants. Company stock fund investments held pursuant to the Company’s non-qualified unfunded deferred compensation plan. The Board of Directors has delegated to the Company’s Benefits Committee responsibility for administration of the deferred compensation plan. Deferred amounts are credited or debited with the equivalent of the investment experience of one or more investment vehicles identified pursuant to the plan and selected by the participant and are paid out upon retirement or under specified other circumstances. The Company intends, but is not obligated, to credit the accounts of participantsCompensation Plan were distributed in the plan with amounts (a) designedform of Company share certificates to make up for limitations containedemployee participants who had elected investment in the Internal Revenue Code on benefit accruals under the Company’s pension plan, and (b) based on the application of the Company’s pension plan contribution rate applied to each participant’s compensation in excess of that covered by the Company’s pension plan.Company stock. The actual amounts to be paid out will depend uponamount of distributions was determined by the amount of the deferral and the credits and debits to the employee’s account.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TheAlong with termination of the Company’s Deferred Compensation Plan described above, the Board of Directors adopted aterminated its Supplemental Executive Retirement Plan (“SERP”). The SERP, adopted to be effective as of January 1, 2003, was to provide supplemental pension benefits to certain key employees of the Company. The SERP is administered by the Board’s Management Development and Compensation Committee (“Committee”). There are currently ten participants in the SERP.
UnderNo contributions had been made to the SERP Company contributions are credited to an account established on behalf of each participant. Each account may consist of three subaccounts, each relating to a different type of Company contribution: (1) the annual contribution, (2) a prior service contribution, and (3) a start-up enhancement contribution. Unless otherwise provided by the Committee, at the end of each calendar year the annual contribution subaccount will be credited with an amount equal to 10.7% of the sum of a participant’s base salary and annual bonus less amounts matched or contributed by the Company under the Company’s 401(k) plan, cash balance plan or deferred compensation plan. The Committee has discretion to determine whether the Company should make a one-time contribution to (1) a participant’s prior service subaccount for a participant’s years of service with the Company prior to participating in the SERP, and/or (2) a participant’s start-up enhancement subaccount for participants hired in the middle of or late in their careers such that the participant’s service at age 65 would not otherwise be sufficient to secure a reasonable level of retirement income. For current participants, the Committee has determined that the Company will contribute to each participant’s prior service subaccount an amount equal to a participant’s annual service contribution multiplied by the number of years the participant has been employed by the Company. The Committee has determined that the Company will make a contribution to the start-up enhancement subaccount for Messrs. Marsh and Witherspoon and another executive.its termination.
Participants fully vest in their annual contribution subaccounts upon completing five years of service with the Company. Participants vest in the prior service and start-up enhancement subaccount balances ratably at 10% per year of service beginning on the later of January 1, 2003 or the participant’s date of hire. A participant becomes fully vested in the prior service and start-up enhancement subaccount if the participant remains employed through age 65, even if the participant has been employed by the Company for less than ten years. Each participant’s account will fully vest upon the occurrence of a participant’s death or disability. The Committee may accelerate the vesting of any or all SERP benefits at its discretion. A participant will forfeit all unvested benefits under the SERP if the participant terminates employment with the Company for any reason (other than death or disability) prior to becoming fully vested.
22
In general, a participant’s account balances are distributed in a lump sum within 30 calendar days of the participant’s employment termination date unless the participant timely elects another form of payment.
While the SERP is an unfunded deferred compensation plan, it provides that the Company may establish a revocable rabbi trust for the benefit of all participants. The rabbi trust must have an independent trustee selected by the Company. The Committee will have discretion to determine whether the Company may contribute cash, cash equivalents or property to the rabbi trust. The Board and the Committee have the right to amend, modify and/or terminate the SERP at any time, however, a participant’s consent is required for any amendment or termination that would adversely affect the rights or benefits of a participant’s previously vested contributions under the SERP.
For current eligible participants, as of January 1, 2003 the Committee has approved the following total contributions for prior service and start-up enhancement subaccounts:
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN STARTING BALANCES
START-UP | ||||||||
PRIOR SERVICE(a) | ENHANCEMENT(b) | |||||||
MARK V. KAMINSKI | $837,000 | $0 | ||||||
DONALD L. MARSH JR. | $189,540 | $332,962 | ||||||
JOHN J. WASZ | $402,331 | $0 | ||||||
PATRICK D. KING | $12,833 | $0 | ||||||
WILLIAM R. WITHERSPOON | $61,010 | $211,024 | ||||||
MICHAEL J. BOYLE(c) | $0 | $0 | ||||||
(a) As a group, contributions to all current eligible participants (including those balances for participants noted above) for prior service balances total $1,971,519.
(b) As a group, contributions to all current eligible participants (including those balances for participants noted above) for start-up enhancement balances total $906,010.
(c) Michael J. Boyle terminated employment as of September 4, 2002.
PENSION BENEFITS
The Company maintains the Commonwealth Industries, Inc. Cash Balance Plan (the “Pension Plan”), which provides benefits for eligible employees. Through December 31, 1997, the Pension Plan was structured as a traditional defined benefit plan. Effective January 1, 1998, the present value of accrued benefits under the Pension Plan was converted to a cash balance formula.
29
Under the cash balance formula, each participant has an account, for recordkeeping purposes only, to which credits are allocated annually based upon a percentage (the “Applicable Percentage”) of the participant’s base salary plus bonus paid in the prior year (“Pensionable Earnings”). The Applicable Percentage is determined by the age of the participant as of the participant’s birthday nearest to January 1 of the planPension Plan year for which benefit credit is applied.
23
Age | |||||||
39 and under | 3.5 | % | |||||
40 to 49 | 4.5 | % | |||||
50 to 54 | 6.0 | % | |||||
55 and older | |||||||
8.0 | % |
For the 20022003 plan year, the applicable ages of Messrs. Kaminski, Marsh, Wasz, King and Witherspoon were 48, 56, 41, 43 and Boyle were 47, 55, 40, 42, 56 and 37,57, respectively. Effective in 2002, benefitBenefit credits are creditedapplied to each participant’s account who accrued 1,000 or more hours of service (as defined in the Pension Plan) for a plan year; provided, if a participant experiences a Termination of Employment (as defined in the Pension Plan) for a plan year, the benefit credits would be creditedapplied to the account of such participant regardless of whether or not the participant accrues 1,000 hours or more of service during the plan year.
All balances in the accounts earn a fixed annual rate of interest, which is credited quarterly. The interest rate for a particular year is the lesser of the prior year’s average of the 3-yearthree-year U.S. Treasury securities or the rate on the 30-yearthirty-year U.S. Treasury securities on November 1. In 20022003 the interest rate was 5.16%3.22%.
At retirement or other termination of employment, an amount equal to the vested balance then credited to the account is payable to the participant in the form of an immediate or deferred lump sum or as an annuity.
The following table below sets forth the estimated annual benefit payable to each of the named officers as a single life annuity at age 65 under the Pension Plan. The projections contained in the table are based on the following assumptions:
• | ||||
Employment until age 65 at base salaries in effect at December 31, | ||||
Annual bonuses equal to the average bonus over each of the last five years | ||||
Interest credits at the actual rates for all years through | ||||
2430
Executive Officer | Total Annual Benefits | |||
Mark V. Kaminski | $ | 49,529 | ||
Donald L. Marsh Jr. | $ | 22,990 | ||
John J. Wasz | $ | 57,073 | ||
Patrick D. King | $ | 38,132 | ||
William R. Witherspoon | $ | 17,873 |
(a) Mr. Boyle received a lump sum payment of $174,500 as a result of his September 4, 2002 separation from the Company.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information concerning the Company’s equity compensation plans as of December 31, 20022003 with respect to the shares of common stock that may be issued under ourthe Company’s existing equity compensation plans, including Commonwealth’s 1997 Stock Incentive Plan, as amended (“the 1997 Plan”), and the 1995 Stock Incentive Plan (the “1995 Plan”). The table does not include information about a proposed amendment of the 1997 Plan to increase the number of shares available for awards under the 1997 Plan, which is being submitted for stockholder approval at the annual meeting.
EQUITY COMPENSATION PLAN INFORMATION
(A) | (B) | (C) | ||||||||||
NUMBER OF SECURITIES | WEIGHTED-AVERAGE | NUMBER OF SECURITIES | ||||||||||
TO BE ISSUED UPON | EXERCISE PRICE OF | REMAINING AVAILABLE FOR | ||||||||||
EXERCISE OF | OUTSTANDING OPTIONS, | ISSUANCE UNDER THE EQUITY | ||||||||||
PLAN CATEGORY | OUTSTANDING OPTIONS | WARRANTS AND RIGHTS | COMPENSATION PLANS | |||||||||
EQUITY COMPENSATION PLANS APPROVED BY SECURITY HOLDERS (1) | 1,365,500 | $8.99 | 358,853 | |||||||||
EQUITY COMPENSATION PLANS NOT APPROVED BY SECURITY HOLDERS | 0 | N/A | N/A | |||||||||
TOTAL | 1,365,500 | $8.99 | 358,853 | |||||||||
Weighted-average | Number of Securities | |||||||||||
Number of Securities to | Exercise Price of | Remaining Available for | ||||||||||
be Issued Upon Exercise | Outstanding Options, | Issuance Under the Equity | ||||||||||
Plan Category | of Outstanding Options | Warrants and Rights | Compensation Plans | |||||||||
Equity Compensation Plans Approved by Security Holders (a) | 1,663,000 | $ | 8.53 | 1,048,033 | ||||||||
Equity Compensation Plans Not Approved by Security Holders | 0 | N/A | N/A | |||||||||
TOTAL | 1,663,000 | $ | 8.53 | 1,048,033 |
(1) Consists of the 1997 Plan and the 1995 Plan.
(a) | Consists of the 1995 Plan and the 1997 Plan, as amended on May 5, 2003. |
2531
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTSTermination of Employment and Change of Control Arrangements
The Company has entered into severance agreements with Messrs. Kaminski, Marsh, Wasz, King, Witherspoon and certain other executives. The purpose of the agreements is to secure the executives’ continued service and dedication in the event of an actual or threatened change in control. The agreements provide severance pay and continuation of certain benefits if a change in control occurs and the executive’s employment is terminated (a) in anticipation of or during the two-year period following a change in control (i) by the Company without cause or (ii) by the executive for good reason, or (b) by the executive for any reason during a 30-daythirty-day window period commencing one year after the change in control.
Generally, a change in control will be deemed to occur in the case of (a) an acquisition by a person or group of 20% or more of the Company’s common stock (with certain exceptions); (b) a change in the majority of the Board of Directors without the requisite approval of the incumbent Board;Board of Directors; (c) a business combination unless Company stockholders receive 60% or more of the voting stock of the surviving company, no person acquires more than 20% of such voting stock, and the Company Boardboard members remain a majority of the continuing Board;board; or (d) stockholder approval of a liquidation of the Company.
Under the severance agreements for Messrs. Kaminski, Marsh and Wasz, each would receive a pro-rata portion of the executive’s annual incentive compensation bonus plus severance pay would equal to three times the sum of (a) the executive’s base pay, and (b) the greater of the executive’s largest bonus during the prior three years or the target bonus for the year of the change in control or year of termination, and, iftermination. If payment, pursuant to the agreement or otherwise, would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code for severance payments exceeding a certain amount, an additional tax reimbursement payment such that the executive receives a net amount equal to the amount the executive would have received if the excise tax did not apply. The additional tax reimbursement payment could be material. Medical and other insurance benefits would be continued for three years.
Under the severance agreements for Messrs. King, Witherspoon and other executives, each would receive a pro-rata portion of the executive’s annual incentive compensation bonus plus severance pay would be equal to one and one-half times the sum of (a) the executive’s base pay, and (b) the greater of the executive’s largest bonus during the prior three years or the target bonus for the year of the change in control or year of termination, and, if payment, pursuant to the agreement or otherwise, would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code for severance payments exceeding a certain amount, an additional tax reimbursement payment such that the executive receives a net amount equal to the amount the executive would have received if the excise tax did not apply. The additional tax reimbursement payment could be material. Medical and other insurance benefits would be continued for one and one-half years.
Also, upon a change of control as defined in the Company’s stock incentive plans, any stock options not then exercisable would become fully exercisable and any shares of restricted common stock not then vested would become fully vested.
2632
ITEMPROPOSAL 2: APPROVAL OF AN AMENDMENT OF THE 1997 STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to the approval of stockholders, an amendment of the Company’s 1997 Stock Incentive Plan, as amended, (the “Plan”) to increase by 1,000,000 the number of shares which will be available for the grant of awards under the Plan. The proposed amendment of the Plan (“Plan Amendment”) is attached as Appendix A and is incorporated herein by reference.
The Plan currently authorizes the award for up to 2,600,000 shares, of which no more than 1,350,000 shares may be issued pursuant to awards under which a participant in the Plan may pay less for such shares than the fair market value (as defined in the Plan) on the date of purchase and 1,250,000 shares allocated solely for awards pursuant to a certain 1999 Executive Incentive Plan (“Executive Plan”). As of December 10, 2001 the Management, Development and Compensation Committee of the Board of Directors (“Committee”) terminated the Executive Plan. The Plan Amendment would increase the number of shares from 1,350,000 to 2,350,000 shares which may be issued pursuant to awards under the Plan.
As a result of prior awards and recent terminations, as of March 7, 2003 only 15,033 shares remained available for future awards. As discussed elsewhere in this proxy statement, the long-term incentive plan of the Company relies on awards under the Plan, and accordingly it is necessary to amend the Plan to increase the number of shares available for additional awards.
The following is a brief summary of the principal features of the Plan. The Plan has been filed with the SEC and the following summary is qualified in its entirety by reference to the full text of the Plan.
The Plan authorizes the grant of incentives in the form of stock options and stock to officers and other key employees and stock options and stock to non-employee directors. The Committee administers the Plan. On March 7, 2003 there were approximately 44 employees and six non-employee directors eligible to participate in the Plan. The closing price of the common stock on NASDAQ on March 7, 2003 was $5.00.
The Committee may grant options under the Plan to eligible employees selected by the Committee. No employee may be granted in any year options to purchase more than 100,000 shares of common stock. The options may be either non-qualified options or incentive stock options qualifying under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Committee is to establish the option price at the time each option is granted, which may not be less than the fair market value of the common stock at that time. Options granted under the Plan may be exercised at such time as is determined by the Committee, but not more than ten years after the date of grant. Unless the Committee otherwise provides, in the event of retirement, disability or death of an optionee, options then exercisable generally will remain exercisable for one year but not longer than its term. Upon termination of employment for any other reason, any unexercised options generally will be canceled. Options may not be transferred except by will or the laws of descent and distribution, except that the Committee may permit an option to be transferred pursuant to a qualified domestic relations order within the meaning of Section 414(p) of the Code or to members of the holder’s immediate family or trusts, partnerships or limited liability companies established for such family members.
The Committee may also award to eligible employees selected by the Committee shares of common stock. Shares of restricted common stock may not be transferred or pledged until the satisfaction of such conditions, including the passage of time, as the Committee may determine, provided that the restricted period shall not be less than twelve months. Except as so restricted, a holder of restricted common stock has all the rights of a stockholder, including the rights to vote and receive dividends. The Committee may also award restricted common stock in the form of restricted common stock units having a value equal to an identical number of shares of
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Under the Plan non-qualified ten-year options to purchase 10,000 shares of common stock are to be granted automatically to each non-employee director of the Company on the date the director becomes a non-employee director and on each succeeding January 1. The option price is the fair market value of the common stock on the date of the grant, or if no common stock was traded that day, on the next preceding day on which there was such a trade, and each option becomes exercisable one year from the date of the grant thereof or upon earlier termination of service of that individual as a director for any reason and shall terminate ten years from the date of grant. In addition, a grant of shares of common stock having a fair market value on the date of grant of $15,000 (with cash in lieu of fractional shares) shall be made automatically to each non-employee director on the date the director becomes a non-employee director and on each succeeding January 1.
In the event of a change in control of the Company, any option or other award shall become vested, earned and exercisable in full and restrictions applicable thereto shall lapse. A change in control may be (a) a more than 50% change in the membership of the Board of Directors of the Company not approved by the then-current Board, (b) the acquisition by certain persons of 20% or more of the outstanding common stock of the Company, (c) the approval by the stockholders, or consummation, of certain mergers or other business combinations or reorganizations which will cause the current stockholders to own less than 60%, or certain persons or entities to own more than 20%, of the outstanding voting securities of the surviving entity or the current members of the Board to constitute less than a majority of the surviving entity, or (d) the approval by the stockholders of a liquidation or dissolution of the Company.
The Board of Directors may amend, suspend or terminate the Plan at any time, but upon or following the occurrence of a change in control, no amendment may adversely affect the rights of any person in connection with an award previously granted.
The Plan has a term of ten years, expiring on April 16, 2007.
The following is a general summary of the federal income tax consequences of the grant and exercise of options granted under the Plan. This summary is not intended to provide tax advice to recipients and holders of awards.
Generally, the grant of options does not result in taxable income to the recipient or a tax deduction for the Company. The exercise of non-qualified options will generally result in taxable ordinary income to the option holder and a corresponding deduction for the Company, in each case equal to the excess of the fair market value of the shares on the date the option is exercised over the exercise price of the option.
In the case of an incentive option, generally there will be no recognition of income upon the exercise of the option. If there is no disposition of the option shares until more than two years after the option is granted and more than one year after the option is exercised, the gain or loss realized by the optionee on the sale of the shares will be long-term capital gain or loss, and the Company will not be entitled to any tax deduction by reason of the grant or exercise of the option. However, if a disposition takes place before the end of such holding periods, then, generally, the optionee will realize ordinary income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on the disposition of the option shares) over the exercise price thereof, and the Company will be entitled to deduct an amount equal to such income.
Future benefits under the Plan are not determinable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE“FOR” THIS PROPOSAL.
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ITEM 3: RATIFICATION OF THE AUDIT COMMITTEE’S APPOINTMENT
The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as independent auditors to audit and report on the Company’s financial statements for the 20032004 fiscal year.
PricewaterhouseCoopers LLP has no direct or indirect financial interest in the Company or in any of its subsidiaries, nor has it had any connection with the Company or any of its subsidiaries in the capacity of promoter, underwriter, voting trustee, director, officer or employee. It is expected that representatives of PricewaterhouseCoopers LLP will be present at the meeting to respond to appropriate questions and to make a statement if they so desire.
Action by the stockholders for the appointment of independent auditors is not required by law, but the appointment is submitted in order to give stockholders the opportunity to ratify the Audit Committee’s appointment of independent auditors. This opportunity is provided because the Company believes it is a matter of good corporate practice. If the stockholders do not ratify the Audit Committee’s appointment, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP. Even if ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it so determines that such change would be in the best interest of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDSThe Board of Directors Recommends A VOTE “FOR” THIS PROPOSAL.Vote “FOR” This Proposal.
OTHER BUSINESS
The Board of Directors knows of no other business to be considered at the meeting. As required by the Company’s By-laws,by-laws, notice of any proposal or to nominate a person for election as a director must have been timely delivered to the Corporate Secretary of the Company at its principal executive office.
However, if other matters are properly presented at the meeting, or for any adjournment or postponement of the meeting, and you have properly submitted your proxy, then Messrs. Lego and Kaminski will, with your proxy, vote your shares on those matters according to their judgment.
2933
STOCKHOLDER PROPOSALS FOR THE 20042005 ANNUAL MEETING
Proposals of stockholders to be considered for inclusion in the Company’s proxy statement and proxy for the 20042005 annual meeting of stockholders, which is expected to be scheduled on or about April 23, 2004,22, 2005, must be received by the Corporate Secretary of the Company at its principal executive office, PNC Plaza — 19th Floor, 500 West Jefferson Street, Louisville, Kentucky 40202-2823, no later than November 21, 2003.40202.
NoticeAdvanced notice must be received by the Company in advance of a stockholders’ meeting in order to present any proposal to the meeting or to recommend a nomination of a person for election as a director. UnderSEC rules govern that a stockholder must submit a proposal to the Company’s By-laws,executive office at least one hundred twenty days before the anniversary of the mailing of the previous year’s proxy materials. Additionally, under the Company’s by-laws, such notice must be delivered to the Corporate Secretary of the Company at its principal executive office not less than sixty nor more than ninety days prior to the date of the meeting; provided that if the date of the meeting is first publicly announced or disclosed less than 70seventy days prior to the date of the meeting, the notice must be given not more than ten days after the date is so announced or disclosed. A stockholder filing a notice of a proposal must include certain information, including the text of the proposal, the reasons therefor and any interest the stockholder has in the proposal; anyproposal. Any notice of nomination must include certain information about the nominee; and allnominee. All such notices must include the name and address of the submitting stockholder and the number of shares held by the stockholder.
Based upon these requirements and the expected date for the 2004 annual meeting of stockholders, to be considered timely, notice of such proposal must be received by the Company between January 23, 2004 and February 23, 2004. These By-law The by-laws requirements are separate from and in addition to SEC requirements that a stockholder must fulfill to have a proposal included in the Company’s proxy statement and proxy.
Based upon these requirements and the expected date for the 2005 annual meeting of stockholders, to be considered timely, notice of such proposal must be received by the Company pursuant to SEC requirements by November 17, 2004 and, according to the Company’s by-laws, between January 21 , 2005 and February 21 , 2005. A copy of the Company’s By-lawsby-laws may be obtained, free of charge, by submitting a written request to:
By order of the Board of Directors,
Lenna Ruth Macdonald
March��17, 2003March 26, 2004
3034
EXHIBIT A
— AMENDED AND RESTATED NOMINATING AND
CORPORATE GOVERNANCE GUIDELINESCOMMITTEE CHARTER
I. INTRODUCTIONCOMMONWEALTH INDUSTRIES, INC.
The Board of Directors of Commonwealth Industries, Inc. (the “Company”), acting on the recommendation of its Nominating and Corporate Governance NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
AMENDED AND RESTATED CHARTER
Committee has developed and adopted corporate governance guidelines to promote the functioning of the Board and its Committees and to set forth expectations as to how the Board should perform its functions.Membership
The business and affairs of the Company shall be managed by or under the direction of the Board in accordance with Delaware law. The Board may delegate to its Committees authority to perform any of its functions or exercise any of its powers which may lawfully to delegated to a Board Committee. The Board selects executive management, which is charged to conduct the Company’s business.
II. BOARD COMPOSITION
A majority of the Board should consist of directors who are, in the business judgment of the Board, “independent” under the rules of the Nasdaq Stock Market. Absent special circumstances, all directors other than the chief executive officer of the Company should be non-executive directors.
The size of the Board should facilitate substantive discussions of the whole Board in which each director can participate meaningfully.
The composition of the Board should encompass a range of experience and expertise relevant to the Company’s business. It should include directors who have qualifications that will permit the Company to meet regulatory standards for audit committees.
III. CHAIRMAN OF THE BOARD
The Board shall elect from among its members a Chairman of the Board. Absent special circumstances, the Chairman of the Board should be a non-executive director.
IV. SELECTION OF DIRECTORS
Nominations. The Board, acting through its Nominating and Corporate Governance Committee, is responsible for selecting the nominees for election at annual meetings of stockholders or one or more nominees to fill vacancies occurring between annual meetings.
Criteria.The Nominating and Corporate Governance Committee should select nominees for the position of independent director in the context of the current composition of the Board and considering the following criteria:
Invitation. The invitation to join the Board should be extended by the Board through the Chairman of the Board.
Orientation and Continuing Education. Management, working with the Board, should provide an orientation process for new directors, including background material on the Company, its business plan and its risk profile, and meetings with senior management. Periodically, management should prepare additional educational sessions for directors on matters relevant to the Company, its business plan and risk profile and consistent with any applicable Nasdaq Stock Market rules.
V. DIRECTOR TENURE
The Board does not believe it should establish term limits or a mandatory retirement age for directors.
When a director who is an executive officer of the Company resigns or retires as an executive officer, that director should tender his or her resignation as a director. Whether the individual should continue as a director is a matter for the Nominating and Corporate Governance Committee.
When a director resigns or retires from his or her principal occupation, or the nature of his or her principal occupation materially changes, the individual should tender his or her resignation as a director to allow the Nominating and Corporate Governance Committee to review the continued appropriateness of membership under the changed circumstances.
VI. BOARD MEETINGS
The Board currently plans five regular meetings each year, with further meetings, including telephone meetings, to occur (or action to be taken by unanimous consent) at the discretion of the Board. The meetings usually will consist of Board Committee meetings and the Board meeting.
The agenda for each Board meeting should be prepared by management, taking into account suggestions and requests made by the Chairman of the Board or other directors. Management should seek to provide to all directors an agenda and appropriate materials in advance of meetings
Materials presented to the Board or Board Committees, while concise, should provide the information needed for the directors to make informed judgments.
VII. EXECUTIVE SESSIONS
To ensure free and open discussion and communication among the non-executive directors of the Board, the non-executive directors should meet in executive sessions at the time of each regular Board meeting, with no members of management present. The Chairman of the Board shall preside at the executive sessions.
VIII. BOARD COMMITTEES
The Committees of the Board shall be an Audit Committee, a Management Development and Compensation Committee and a Nominating and Corporate Governance Committee. Each Board Committee shall have a written charter adopted by the Board.
Each of the Board Committees shall be comprised of three or more directors, all of whom are, in the business judgment of the Board, “independent” under the rules of the Nasdaq Stock
All directors, whether members of a Board Committee or not, are invited to make suggestions to a Committee chairman for additions to the agenda of his or her Committee. Each Board Committee chairman should give periodic reports of his or her Committee’s activities to the Board.
IX. MANAGEMENT SUCCESSION
At least annually, the Board shall review and concur in a succession plan, developed by management, addressing the policies and principles for selecting a successor to the chief executive officer both in an emergency situation and in the ordinary course of business. The succession plan should include an assessment of the experience, performance, skills and planned career paths for possible successors to the chief executive officer.
X. EXECUTIVE COMPENSATION
The Board, acting through its Management Development and Compensation Committee, shall determine or approve the policies and practices under which compensation is paid or awarded to the Company’s executive officers, the compensation of the chief executive officer and other executive officer compensation.
XI. DIRECTOR COMPENSATION
The Board should determine the compensation of directors. The Nominating and Corporate Governance Committee should conduct an annual or other periodic review of the amount and components of director compensation in relation to other similarly situated companies and make a recommendation to the Board. Director compensation should be consistent with market practices but should not be set at a level that would call into question the Board’s objectivity. Directors who are officers of the Company should not receive compensation for their service as directors.
XII. EXPECTATIONS OF DIRECTORS
In performing their duties, the primary responsibility of the directors is to exercise their business judgment in the best interests of the Company. The Board has developed a number of specific expectations of directors to promote the discharge of this responsibility and the efficient conduct of the Board’s business.
1. Commitment and Attendance. All directors should make every effort to attend every meeting of the Board and every meeting of Board Committees of which they are members. Members may attend by telephone to mitigate conflicts.
2. Participation in Meetings. Each director should be sufficiently familiar with the business of the Company, including its financial statements and capital structure, and the risks and competition it faces, to facilitate active and effective participation in the deliberations of the Board and of each Board Committee on which he or she serves. Upon request, management will make appropriate personnel available to answer any questions a director may have about any aspect of the Company’s business. Directors should also review the materials provided by management and advisors in advance of the meetings of the Board and Board Committees and should arrive prepared to discuss the issues presented.
3. Ownership of Shares in the Company. Each director should own shares of the Company.
4. Loyalty and Ethics. In their roles as directors, all directors owe a duty of loyalty to the Company. This duty of loyalty mandates that the best interests of the Company take precedence over any interests possessed by a director.
The Company has adopted a Code of Conduct for the guidance of officers and other employees of the Company. In general and as appropriate non-employee directors should consider themselves subject to the same policies.
5. Other Directorships. Directors are required to abide by the provisions of Section 8 of the Clayton Act, a federal antitrust law, which provides in relevant part that “no person at the same time shall be a director in any two or more corporations... if such corporations are or shall have been theretofore, by virtue of their business and location of operation, competitors, so that elimination of competition by agreement between them would constitute a violation of any of the antitrust laws. Directors should be alert to this requirement both when accepting additional directorships and on a continuing basis as the nature of the businesses of the corporations which they serve changes.
Directors who are not employees of the Company do not require approval of the Board of Directors to accept additional unrelated board memberships, but their opportunities should be discussed with the Chairman of the Board to be sure that the multiple directorships would not be unlawful or otherwise incompatible.
6. Contact with Management. All directors are invited to contact the chief executive officer at any time to discuss any aspect of the Company’s business. Directors will also have complete access to other members of management. The Board expects that there will be frequent opportunities for directors to meet with the chief executive officer and other members of management in Board and Board Committee meetings or in other formal or informal settings.
The Board encourages management to, from time to time, bring managers into Board meetings who can provide additional insight into the items being discussed because of personal involvement and substantial knowledge in those areas or are managers with future potential that management believes should be given exposure to the Board.
7. Contact with Other Constituencies. It is important that the Company speak to stockholders, employees and outside constituencies with a single voice, and that management serve as the primary spokesperson.
8. Confidentiality. The proceedings and deliberations of the Board and Board Committees are confidential. Each director shall maintain the confidentiality of information received in connection with his or her service as a director.
XIII. EVALUATING BOARD PERFORMANCE
The Board, acting through its Nominating and Corporate Governance Committee, should conduct an annual self-assessment of the Board’s performance to determine whether it is following the procedures necessary to function effectively. The Nominating and Corporate Governance Committee should periodically consider the mix of experience and expertise that directors bring to the Board to assess whether the Board has the necessary tools to perform its oversight function effectively.
Each Board Committee should conduct an annual self-assessment and report the results to the Board. Each Board Committee’s evaluation should compare the performance of the Committee with the requirements of its charter and should set forth the goals and objectives of the Committee for the coming year.
XIV. RELIANCE ON MANAGEMENT AND OUTSIDE ADVICE
In performing its functions, the Board and each Board Committee is entitled to rely on the advice, reports and opinions of management, counsel, accountants, auditors and other expert advisors. The Board and each Board Committee shall have the authority to retain and approve the fees and retention terms of its outside advisors.
Adopted October 30, 2002
EXHIBIT B
AMENDED AND RESTATED
A. COMPOSITION
The Audit Committee (the “Committee”) shall be comprised of three or more directors who other than in their capacity as members of the Committee, the Board or any other Board committee, do not accept any consulting, advisory, or other compensatory fee from the Company or any of its subsidiaries or are not“independent directors,”i.e. those directors who neither are officers or employees or other affiliated persons of the Company or its subsidiaries who do notnor have anya relationship which, in the opinion of the Board of Directors,board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and who are able to read and understand fundamental financial statements, and who otherwise satisfy the applicable membership requirements under the rules of the Nasdaq Stock Market, as such requirements are interpreted by the Board in its business judgment. At least one member of the Committee must have past employment experience in finance or accounting, requisite professional certification in accounting or other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior executive with financial oversight responsibilities and, if practical, shall be a financial expert as that term is defined by the Securities and Exchange Commission (the “SEC”). The Company shall disclose, as required by rules of the SEC, whether or not at least one member of the Committee is such a financial expert, and if not, the reasons therefor.
B. PURPOSE OF THE AUDIT COMMITTEE
The purpose of the Committee is to assist Board oversight of:
(1) the integrity of the Company’s financial statements;
(2) the Company’s compliance with legal and regulatory requirements;
(3) the independent auditor’s qualifications and independence;
(4) the performance of the independent auditors and the Company’s internal audit function; and
(5) the Company’s compliance and conflict of interest policies and procedures.
It is also the purpose of the Committee:
(1) to provide an open avenue of communication among the independent auditors, financial and executive management, the internal auditors and the Board; and
(2) to encourage continuous improvement of, and to foster adherence to, the Company’s accounting, financial reporting, conflict of interest and compliance policies, procedures and practices.
The function of the Committee is oversight. Management is responsible for the preparation, presentation and integrity of the Company’s financial statements. Management and the internal auditing employees are responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for planning and carrying out proper audits and reviews, including reviews of the Company’s quarterly financial statements prior to the filing of each quarterly
C. CHARTER; ANNUAL EVALUATION
(1) The Committee shall review and assess the adequacy of this Charter at least annually and shall recommend any proposed changes to the Board for approval.
(2) The Committee shall prepare and review with the Board an annual performance evaluation of the Committee, comparing the performance of the Committee with the requirements of this Charter and setting forth the goals and objectives of the Committee for the coming year. The evaluation shall be conducted in such manner as the Committee deems appropriate and the report to the Board may be an oral report by the Chairman of the Committee or his or her designee.
D. INDEPENDENT AUDITORS
(1) The Committee, in its capacity as a committee of the Board of Directors, shall be directly responsible for the appointment, compensation and oversight of the work of the independent auditors employed by the Company for the purpose of preparing or issuing an audit report or related work (including resolution of disagreements between management and the auditors regarding financial reporting), and the independent auditors shall report directly to the Committee. The Committee shall have the sole authority to approve all audit engagement fees and terms, as well as all significant non-audit engagements with the independent auditors. All auditing services and non-audit services provided to the Company by the independent auditors shall be pre-approved by the Committee or by its Chairman or a member of the Committee designated by the Chairman. The decisions of the Chairman or of any member to whom authority is delegated to pre-approve an auditing or non-audit service shall be presented to the full Committee at its next scheduled meeting.
(2) In connection with its evaluation of the independent auditors’ qualifications, independence and performance, the Committee shall:
E. INTERNAL AUDITORS
The Committee shall discuss with management and the independent auditors:
(1) the quality and adequacy of the Company’s internal accounting controls;
(2) the organization of the internal audit staff, the adequacy of its resources, plan and activities and the competence of the internal audit staff, as needed;
(3) the audit risk assessment process and the proposed scope of the internal audit function for the upcoming year and the coordination of that scope with the independent auditors; and
(4) summaries of and, as appropriate, the significant reports to management prepared by the internal auditors and management’s responses thereto.
F. FINANCIAL REPORTING PRINCIPLES AND POLICIES
(1) The Committee shall consider and discuss with the independent auditors and management as appropriate all reports and communications (and management’s responses thereto) submitted to the Committee by the independent auditors required by the Securities Exchange Act of 1934, rules and regulations of the SEC, SAS 61 as amended or other accounting and auditing professional standards, rules of the Public Company Accounting Oversight Board, rules of the Nasdaq Stock Market or other applicable laws or regulations, including reports and communications relating to:
(2) The Committee shall discuss with management and the independent auditors:
G. AUDITED FINANCIAL STATEMENTS
(1) The Committee shall discuss with management and the independent auditors
(2) The Committee shall:
H. INTERIM FINANCIAL STATEMENTS
The Committee through its Chairman or his or her designee, or the Committee as a whole, shall discuss with management and independent auditors the interim quarterly financial statements reviewed by the auditors using professional standards and procedures for conducting such reviews as established by accounting standards generally accepted in the United States, as may be modified or supplemented, and the matters required to be discussed by the applicable Statement on Auditing Standards (including SAS 71 as amended) prior to the filing of the Company’s quarterly reports on Form 10-Q.
I. REAL TIME DISCLOSURES; GUIDANCE
The Committee through its Chairman or his or her designee, or the Committee as a whole, shall discuss with management and, as appropriate, the independent auditors, press releases or other public disclosures of material changes in the financial condition or operations of the Company, earnings or earnings guidance, as well as financial information and earnings guidance provided to analysts and rating agencies.
J. COMPLIANCE AND LEGAL MATTERS
(1) The Committee shall:
(2) The Committee shall review and approve all transactions between the Company and any related party as required by rules of the Nasdaq Stock Market.
(3) The Committee shall establish procedures for:
K. MEETINGS
The Committee shall meet in conjunction with each regularly scheduled Board meeting and in special meetings as circumstances dictate. Each regular meeting of the Committee shall include separate meetings with the manager of internal audit staff and the independent auditors and, at least annually, with the chief financial officer and general counsel of the Company. Members of the Committee may participate in a meeting of the Committee by means of conference call or similar communications equipment by means of which all person participating in the meeting can hear each other.
L. RESOURCES AND AUTHORITY
The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to cause an investigation to be made into any matter within the scope of its responsibility. The Committee may engage independent counsel and other advisers as it determines necessary to carry out its duties. The Company shall provide appropriate funding, as determined by the Committee, in its capacity as a committee of the Board, for payment of compensation to the independent auditors employed for the purpose of issuing an audit report and to any advisers employed by the Committee.
Adopted April 27, 2000
EXHIBIT C
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE CHARTER
A. PURPOSE OF THE COMMITTEE
The purpose of the Management Development and Compensation Committee (“Committee”) is to oversee management development and succession plans, discharge the Board’s responsibilities relating to compensation of the Company’s executives and administer the Company’s stock incentive plans.
B. COMPOSITION AND OPERATIONS
The Committee shall be comprised of three or more directors who are, in the business judgment of the Board, “independent” under the rules of the Nasdaq Stock Market, who are “non-employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and who are “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986.Inc. (Nasdaq 4350(c)(4)(A)
The ChairmanChairperson and other members of the Committee shall be appointed by the Board.board. Candidates to fill subsequent vacancies in the Committee shall be appointed by the board based on nominations by the Committee. Members shall serve at the pleasure of the Boardboard and for such term or terms as the Boardboard may determine.
Committee Purpose and Responsibilities
The Committee shall have the purpose and responsibilities to:
(1) | Make recommendations to the board from time to time as to changes that the Committee believes to be desirable in the size of the board or any board committee thereof. | |||
(2) | Identify individuals believed to be qualified to become board members, consistent with criteria approved by the board, and to select, or recommend to the board, the nominees to stand for election as directors at the annual meeting of stockholders or, if applicable, at a special meeting of stockholders. In the case of a vacancy in the office of a director (including a vacancy created by an increase in the size of the board), the Committee shall recommend to the board an individual to fill such vacancy either through appointment by the board or through election by stockholders. In selecting or recommending candidates, the Committee shall take into consideration the criteria approved by the board, which are set forth in the Company’s Corporate Governance Guidelines and such other factors as it deems appropriate. These factors may include judgment, skill, diversity, experience with businesses and other organizations of comparable size, the interplay of the candidate’s experience with the |
35
experience of other board members, and the extent to which the candidate would be a desirable addition to the board and any committees of the board. The Committee shall consider all candidates recommended by the Company’s shareholders in accordance with the procedures set forth in the Company’s annual proxy statement. The Committee may consider candidates proposed by management, but is not required to do so. | ||||
(3) | Develop and recommend to the board standards to be applied in making determinations as to the absence of material relationships between the Company and a director. | |||
(4) | In the case of a director nominee to fill a board vacancy created by an increase in the size of the board, make a recommendation to the board as to the class of directors in which the individual should serve. | |||
(5) | Identify board members qualified to fill vacancies on any committee of the board including the Committee and to recommend that the board appoint the identified member or members to the respective committee. In nominating a candidate for committee membership, the Committee shall take into consideration the criteria approved by the board, which are set forth in the Company’s Corporate Governance Guidelines, and the factors set forth in the charter of that committee, if any, as well as any other factors it deems appropriate, including without limitation the consistency of the candidate’s experience with the goals of the committee and the interplay of the candidate’s experience with the experience of other committee members. | |||
(6) | Establish procedures for the Committee to exercise oversight of the evaluation of the board and management. | |||
(7) | Develop and recommend to the board a set of corporate governance principles applicable to the Company, and to review those principles at least once a year. | |||
(8) | Prepare and issue the evaluation required under “Performance Evaluation,” below. | |||
(9) | Assist management in the preparation of the disclosure in the Company’s annual proxy statement regarding the operations of the Committee. | |||
(10) | Report to the board on a regular basis, and not less than once per year. | |||
(11) | Perform any other duties or responsibilities expressly delegated to the Committee by the board from time to time relating to the nomination of board and committee members. |
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Committee Structure and Operations
The board shall appoint one member of the Committee as its chairperson. In the event of a tie vote on any issue, the chairperson’s vote shall decide the issue. The Committee shall meet in person or telephonically at least oncetwice a year at a time and place determined by the Committee Chairman,chairperson, with further meetings to occur, or actions to be taken by unanimous written consent, when deemed necessary or desirable by the Committee or its Chairman.Chairperson.
Delegation to Subcommittee
The Committee may, invite membersin its discretion, delegate all or a portion of managementits duties and responsibilities to its meetings as it may deem appropriate, consistent with maintaininga subcommittee of the confidentiality of compensation discussions. The chief executive officer (“CEO”) should not attend meetings where his or her performance or compensation are discussed unless specifically invited by the Committee or its Chairman.Committee.
The Committee shall report to the Board on a regular basis and not less than once a year.
The Committee shall review and assess the adequacy of this Charter annually and shall recommend any proposed changes to the Board for approval.Performance Evaluation
The Committee shall prepare and review with the Boardboard an annual performance evaluation of the Committee, comparingwhich evaluation shall compare the performance of the Committee with the requirements of this Charter and setting forthcharter. The performance evaluation shall also recommend to the goals and objectives ofboard any improvements to the Committee forCommittee’s charter deemed necessary or desirable by the coming year.Committee. The performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate and theappropriate. The report to the Boardboard may betake the form of an oral report by the Chairmanchairperson of the Committee or his or her designee.any other member of the Committee designated by the Committee to make this report.
Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain, terminate, and approve the fees and other retention terms of retention of special counsel or other experts or consultants, as it deems appropriate.appropriate, without seeking approval of the board or management. With respect to compensation consultants retainedor search firms used to assist in the valuation of executive compensation,identify director candidates, this authority shall be vested solely in the Committee.
Adopted October 30, 2002
Amended and Restated March 3, 2004
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EXHIBIT B — AUDIT COMMITTEE POLICY AND PROCEDURES
C. DUTIES AND RESPONSIBILITIESCommonwealth Industries, Inc.
Audit and Non-Audit Services Pre-Approval Policy
I. Purpose of the Policy
Under the Sarbanes-Oxley Act of 2002 (the “Act”), and the rules of the Securities and Exchange Commission (the “SEC”), the Audit Committee (“Audit Committee”) of the Company’s Board of Directors is responsible for the appointment, compensation and oversight of the work of the independent auditor.
The purpose of the provisions of the Act and the SEC rules for the Audit Committee shall:role in retaining the independent auditor is twofold. First, the authority and responsibility for the appointment, compensation and oversight of the auditor should be with directors who are independent of management. Second, any non-audit work performed by the auditor should be reviewed and approved by these independent directors to ensure that any non-audit services performed by the auditor do not impair the independence of the independent auditor.
To implement the provisions of the Act, the SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client and governing the Audit Committee’s administration of the engagement of the independent auditor. As part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit services performed by the Company’s independent auditor in order to assure that they do not impair the auditor’s independence. Accordingly, the Audit Committee is adopting this Audit and Non-Audit Services Pre-Approval Policy (the “Policy”), which sets forth the procedures and the conditions pursuant to which services to be performed by the independent auditor are to be pre-approved.
II. Statement of Principles
A. | |
The Audit Committee will not approve nor will the Company’s independent auditor perform for the Company any service that constitutes Prohibited Activities as defined by the Act or by regulations promulgated by the SEC. These prohibited activities include:
• | Financial information systems design and | |||
• | Appraisal or valuation services, fairness opinions, or contributions-in-kind reports | |||
• | Actuarial services | |||
• | Internal audit outsourcing services | |||
• | Management functions or human resources | |||
• | Broker or dealer, investment advisor, or investment banking services | |||
• | Legal services and expert services unrelated to | |||
• | Any other services that the Public Company Accounting Oversight Board determines, by regulation, to be | |||
Adopted October 30, 2002
38
APPENDIX A
B. | Non-Prohibited Services |
AMENDMENT TO THE
THIS AMENDMENT TO THE COMMONWEALTH INDUSTRIES, INC. 1997 STOCK INCENTIVE PLAN (the “Plan”) is madeIII. Services Subject to General Pre-Approval
A. | Audit Services |
The annual audit services engagement scope and entered intoterms will be subject to the general pre-approval of the Audit Committee. Audit services include the annual financial statement audit (including required quarterly reviews) and other procedures required to be performed by Commonwealth Industries, Inc. (the “Company”).the independent auditor to be able to form an opinion on the Company’s consolidated financial statements. Audit services also include the attestation engagement for the independent auditor’s report on management’s assertion on internal controls for financial reporting. The Audit Committee will monitor the audit services engagement throughout the year and will also approve, if necessary, any changes in terms and conditions resulting from changes in audit scope, Company structure or other items. The Audit Committee will request that the audit engagement letter with the independent auditor be addressed to the Chair of the Audit Committee and that the Chair of the Audit Committee execute the engagement letter on behalf of the Company.
WHEREAS, pursuant
B. | Audit-Related Services |
Audit-related services are assurance and related services that are reasonably related to Section 16the performance of the audit or review of the Company’s 1997 Stock Incentive Plan,financial statements (e.g., research and consultation regarding accounting and financial reporting transactions). Because the BoardAudit Committee believes that the provision of Directorsaudit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence, the Audit Committee will grant general pre-approval to audit-related services.
C. | Tax Compliance Services |
The independent auditor can provide income tax compliance services to the Company (the “Board”)without impairing the auditor’s independence. Hence, the Audit Committee will grant general pre-approval to tax services that have been historically been provided by the auditor, that the Audit Committee has reviewed and believes would not impair the powerindependence of the auditor, and authoritythat are consistent with the SEC’s rules on auditor independence.
39
D. | Pension and Benefit Plan Consulting and Compliance Services |
The independent auditor can provide pension and benefit plan consulting and compliance services to amend the Plan,Company without impairing the auditor’s independence. Hence, the Audit Committee will grant general pre-approval to the pension and benefit plan consulting and compliance services that have been historically provided by the auditor, that the Audit Committee has reviewed and believes will not impair the independence of the auditor, and that are consistent with the SEC’s rules on auditor independence.
IV. Services Subject to Specific Pre-Approval
A. | Tax Planning Services |
The Audit Committee believes that there exists the potential for impairment of auditor independence or for an overlap with prohibited services for certain tax-planning services. Accordingly, specific pre-approval will be required for these services in order for the Audit Committee to have an opportunity to review the scope of work to be provided by the auditor in connection with these services.
B. | All Other Services |
All other services not described in III. Above are subject to specific pre-approval and engagement by the Audit Committee.
V. Procedures
The procedures the Audit Committee will employ in implementing this Policy are as follows:
A. In advance of the July Audit Committee meeting each year (or at a meeting agreed to by the Audit Committee, the Chief Financial Officer and the independent auditor shall jointly submit to the Audit Committee a schedule of audit, audit-related, tax and other non-audit services that are subject to the general pre-approval. The schedule will be in the format contained in Exhibit 1 to this Policy.
B. The Audit Committee will review and approve the types of services and review the projected fees for the next fiscal year at its regularly scheduled July meeting. The fee amounts on the schedule will be updated as necessary at any subsequent Audit Committee meeting. Additional pre-approval will be required if actual fees for a service are expected to exceed 10% of the originally pre-approved amount. The additional pre-approved amount should be obtained in the same manner as a specific pre-approval described below.
C. If, subsequent to the general pre-approval of scheduled services by the Audit Committee, the Company would like to engage the independent auditor to perform a service not included on the general pre-approval schedule, a request should be submitted to the General Counsel, Director of Internal Audit, the Chief Financial Officer. If they determine that the service can be performed without impairing the independence of the auditor, then a discussion and approval of the Company’s stockholders in respectservice will be included on the agenda for the next regularly scheduled Audit Committee meeting. If the timing for the service needs to certain amendments;
WHEREAS,commence before the Board, has determined to amendnext Audit Committee meeting, the Plan to increase the number of shares authorized for issuance thereunder, such amendment being adopted subject to approvalchairman of the Company’s stockholders.Audit Committee, or any other member of the Audit Committee, designated by the Audit Committee, can provide specific pre-approval.
NOW, THEREFORE, the Plan is amended as follows:40
IN WITNESS WHEREOF, Commonwealth Industries, Inc. has caused this Amendment to the Plan to be executed by its duly authorized officer this day of April, 2003.
D. Approval by the Audit Committee for the auditor to perform any non-audit service does not require that management engage the Company’s independent auditor to perform those services. Company’s management may engage other third parties to perform non-audit services for which the Audit Committee has given pre-approval to be performed by the independent auditor.
E. Once the Audit Committee has given pre-approval for services to be performed by the independent auditor, the appropriate Company management may engage the auditor and execute any necessary document for the performance of non-audit services within the scope of the pre-approval.
VI. Delegation
As provided in the Act and the SEC’s rules, the Audit Committee may delegate either type of pre-approval authority to its chairman or any other Audit Committee member or members. The member to whom such authority is delegated should report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next meeting. The Audit Committee will not delegate to management the Audit Committee’s responsibilities to pre-approve services performed by the independent auditor.
41
(CII LOGO)
COMMONWEALTH INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, APRIL 25, 200323, 2004
10:00 A.M. EASTERN DAYLIGHT SAVINGS TIME
KENTUCKY INTERNATIONAL CONVENTION CENTER
ROOM 112
221 FOURTH STREET
LOUISVILLE, KENTUCKY 40202
ELECTRONIC ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE
YouIf you are a registered holder of shares, you have the option to access our future shareholder communications (e.g., annual reports, proxy statements, related proxy materials) over the Internet instead of receiving those documents in print. Participation is completely voluntary. If you give your consent, in the future, when our material is available over the Internet, you will receive notification which will contain the Internet location where the material is available. Our material will be presented in PDF format. There is no cost to you for this service other than any charges you may incur from your Internet provider, telephone and/or cable company. Once you give your consent, it will remain in effect until you inform us otherwise. You may revoke your consent at any time after you give it by notifying the Company’s transfer agent, National City Bank, Post OfficeCorporate Trust Operations, Department 5352, P.O. Box 92301, Cleveland, Ohio 44193-0900, or the Company in writing.
To give your consent, follow the prompts when you vote by telephone or over the Internet or check the appropriate box located at the bottom of the attached proxy card when you vote by mail.
•lPlease fold and detach card at perforation before mailing.•l
COMMONWEALTH INDUSTRIES, INC. | PROXY / VOTING INSTRUCTION CARD |
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED. IF NO INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED IN FAVOR OF THE DIRECTOR NOMINEES IN ITEM 1, FOR APPROVALRATIFICATION OF ITEM 2, FOR RATIFICATION OF ITEM 3, AND IN THE DISCRETION OF THE PROXY ON ANY OTHER BUSINESS.
Director Nominees: (01) Paul E. Lego (02) John E. Merow
o | FORthe listed director nominees | WITHHOLD AUTHORITYto vote for |
To withhold authority to vote for any nominee(s), write the nominee’s name(s) on the line below:
2. | Proposal to ratify the appointment by the Audit Committee of PricewaterhouseCoopers LLP as the Company’s independent auditors for |
o FOR o AGAINST o ABSTAIN
3. | In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting. |
[ ]PLEASE CHECK THIS BOX IF YOU CONSENT TO ACCESS FUTURE ANNUAL REPORTS AND PROXY MATERIAL VIA THE INTERNET ONLY.
o | ||
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Vote by Telephone | Vote by Internet | |||
Vote by Mail | ||||
Call toll-free using a | Access the website and | Return your proxy | ||
touch-tone telephone: | cast your vote: | in the postage-paid | ||
1-800-542-1160 | http://www.votefast.com | envelope provided | ||
Vote by Telephone
Have your proxy card available when you call thetoll-free number 1-800-542-1160and follow the simple instructions to record your vote.
Vote by Internet
Have your proxy card available when you access the websitehttp://www.votefast.com and follow the simple instructions to record your vote.
Vote by Mail
Please mark, sign and date your proxy card and return it in thepostage-paid envelopeprovided or return it to: National City Bank, Corporate Trust Operations, Dept. 5352, P.O. Box 92301, Cleveland, Ohio 44193-0900.
Vote 24 hours a day, 7 days a week!week
Your telephone or Internet vote must be received by 11:59 p.m. Eastern Daylight Savings Time
on April 24, 200322, 2004 to be counted in the final tabulation.
If you vote by telephone or Internet, please do not send your proxy card by mail.
YOUR CONTROL NUMBER IS:
Proxy must be signed and dated below.•l Please fold and detach card at perforation before mailing. •l
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The undersigned appoints Paul E. Lego and Mark V. Kaminski, and each of them, full power of substitution as Proxy for the undersigned at the Annual Meeting of Stockholders of Commonwealth Industries, Inc. to be held at Kentucky International Convention Center, Room 112, 221 Fourth Street, Louisville, Kentucky 40202 on Friday, April 25, 200323, 2004 at 10:00 a.m. Eastern Daylight Savings Time, and at any postponements or adjournments thereof, and vote all shares the undersigned is entitled to vote upon the matters indicated and on any other business that may come before this Meeting.
This card also serves as voting instructions to CIGNA Retirement and Investment ServicesBank & Trust Company, FSB as Trustee of Commonwealth Industries, Inc. 401(k) Plan and Commonwealth Aluminum Lewisport, LLC Hourly 401(k) Plan. The Trustee will vote the shares of common stock of Commonwealth Industries, Inc. allocated to the undersigned’s account at the Annual Meeting of Stockholders as directed by the undersigned on the reverse side. If you do not return voting instructions, the Trustee will vote your shares as the Board of Directors recommends.
Signature | ||
Signature | ||
(if jointly held) | ||
Date: | ||
Sign exactly as the name appears on this proxy card. Only one signature is required for a joint account. Provide title if signing in a representative capacity.
SIGN AND RETURN THIS PROXY CARD AS SOON AS POSSIBLE.