July 27, 1998
Mr. John H. Walker
17908 N. Saddlehill
Colbert, WA 99005
Dear John:
I am pleased to inform you that you have been selected for
coverage under the Enhanced Severance Protection and Change of
Control Benefits Program ("Plan") for selected corporate
officers.
As you know, Kaiser Aluminum is pursuing a strategy that could
lead to various forms of corporate restructuring. In that
connection, the Plan was developed and is being made available to
selected key officers. The purposes of the Plan include all of
the following:
o Retention of top-performers and those with critical
skills both pre and post restructuring;
o Provision of appropriate protection to business unit
management in the event of job loss and/or a change of
control,1 and
o Maintenance of focus by management on key goals and
maintenance of overall energy level through a potentially
distracting period.
This letter sets forth the basic provisions of the Plan which,
subject to the limits explained below, is being offered to you in
conjunction with other benefits that otherwise may be payable to
you under the Kaiser Aluminum Termination Payment and Benefits
Plan Continuation Policy ("Policy"). For example, if you become
eligible for 6 months under the enhanced severance part of the
Plan and you already have earned 3 months severance under the
Policy, you would receive 3 months severance from the Policy and
3 months severance from the Plan.
The Plan will be in effect through the end of the 2000 calendar
year, unless earlier amended or terminated by the Compensation
Committees or Boards of Directors of Kaiser Aluminum Corporation
and Kaiser Aluminum & Chemical Corporation. No amendment or
termination of the Plan will adversely affect your right to
receive benefits provided under the Plan without your written
consent. After the year 2000, management will determine the need
for any other protection or enhanced severance programs.
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1 See page 3 for definition of "change of control".
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Enhanced Severance Protection
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Under the enhanced severance protection features of the Plan, you
will qualify for such severance benefits if you are terminated
for any reason except for the following exclusions:
1. You voluntarily resign or retire.
2. You are discharged for serious cause or other reason
prejudicial to Kaiser Aluminum.
3. You are eligible for sick leave, LTD or KRP full early
disability benefits. Or, you were eligible for sick
leave or LTD benefits and (i) you did not report back to
work immediately after your eligibility for such
benefits ceased, or (ii) you were not medically released
to work at the time such benefits ceased.
4. You refuse to accept another suitable position with
Kaiser Aluminum. Suitability is determined in
accordance with guidelines established from time to time
by the personnel policy committee.
5. You terminate employment on account of death.
In the event that your employment terminates and you qualify for
enhanced severance protection under the Plan, such benefits will
be as follows:
o 12 months base salary,
o Prorated incentive awards (prorated incentive target for
all short and long term incentive programs in progress
at termination).
o Continuation of your coverage under medical, dental,
life and AD&D coverage by Kaiser Aluminum2 as if your
employment had continued uninterrupted for up to 12
months. You must continue to pay your monthly medical
and life insurance contributions (if any) for this
coverage to remain in effect.
o Continued use of your company car for the number of the
severance months. However, Kaiser Aluminum reserves the
right to offer you a reasonable cash buyout for any time
remaining, should the company decide to eliminate the
leased car program.
Change of Control
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In the event that your employment terminates or constructively
terminates (described below), due to a change of control or
significant restructuring, during a period which commences ninety
(90) days prior to a change of control or significant
restructuring and ends on the first anniversary of
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2 As you will not actually be an active employee, your
coverage under the cafeteria plan, spending accounts for medical
and dependent care expense reimbursement and the LTD Plan will
cease. Your eligibility for COBRA coverage will commence after
the medical continuation benefits cease, and the medical
continuation period is subtracted from your COBRA eligibility
period.
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such change of control or significant restructuring, in lieu of
the enhanced severance protection benefits described above, you
will qualify for change of control benefits.
Change of control or significant restructuring is defined as: The
transfer of all or part of the assets of, or the merger,
consolidation or reorganization of, Kaiser Aluminum to or with
another organization or the transfer of all or part of the stock
of Kaiser Aluminum to another organization.
These benefits are payable as described below, if you are
terminated or constructively terminated due to a change of
control or significant restructuring, except for the following
exclusions:
1. The purchaser or new controlling entity or Kaiser
Aluminum offers you suitable employment in substantially
the same capacity and at your current level of
compensation. This exception will apply regardless of
whether you accept or reject the suitable position.
2. You voluntarily resign or retire.
3. You are discharged for serious cause or other reason
prejudicial to Kaiser Aluminum.
4. You are eligible, within the 90 days prior to a change
of control, for sick leave, LTD or KRP full early
disability benefits. Or, you were eligible for sick
leave or LTD benefits and (i) you did not report back to
work immediately after your eligibility for such
benefits ceased, or (ii) you were not medically released
to work at the time such benefits ceased.
5. You terminate employment on account of death.
The change of control benefits under the Plan will be as follows:
o 24 months base salary,
o Prorated incentive awards (prorated incentive target for
all short and long term incentive programs in progress at
termination).
o Continuation of your coverage under medical, dental, life
and AD&D coverage by Kaiser Aluminum3 as if your
employment had continued uninterrupted for up to 24
months. You must continue to pay your monthly medical
and life insurance contributions (if any) for this
coverage to remain in effect.
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3 As you will not actually be an active employee, your
coverage under the cafeteria plan, spending accounts for medical
and dependent care expense reimbursement and the LTD Plan will
cease. Your eligibility for COBRA coverage will commence after
the medical continuation benefits cease, and the medical
continuation period is subtracted from your COBRA eligibility
period.
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o Continued use of your company car for the number of the
severance months. However, Kaiser Aluminum reserves the
right to offer you a reasonable cash buyout for any time
remaining, should the company decide to eliminate the
leased car program.
For purposes of the Plan, you will be deemed to be constructively
terminated if:
o You are demoted, suffer a substantial reduction of
position responsibilities or a substantial change in
reporting responsibilities or reporting level;
o You are relocated more than fifty (50) miles from your
present office location, except for a promotion and / or
mutually agreed transfer; or
o You suffer a reduction of your base salary and / or
total incentive opportunity.
Payments of base salary and prorated incentive awards under the
Plan shall be made (net of withholding for federal, state and
local taxes) in a single sum in cash within thirty (30) days
following your termination or constructive termination of
employment. You will be responsible for timely payment of any
additional taxes that may be due on the benefits received under
the Plan. Should you feel that you have reason to contest any
settlement under the Plan, you may do so by following the same
procedures as apply to the Company's other severance pay plans,
as such claims procedures are incorporated in the Plan by this
reference.
Kaiser Aluminum shall have the sole discretion to determine which
employees shall participate in the Plan and their level of
participation. Kaiser Aluminum also has the authority to
construe, interpret and implement the Plan (including the right
to make factual determinations) and to make rules and otherwise
administer the Plan, and its determination on any matter relating
to the Plan shall be conclusive and binding on all interested
persons. To the extent not preempted by federal law, the Plan
shall be construed in accordance with and governed by the laws of
the State of Texas.
As part of your enhanced severance and benefit eligibility under
the Plan for the one year period following the termination of
your employment, you shall not, without prior written consent of
Kaiser Aluminum, directly or indirectly engage in the business of
developing products competitive with Kaiser Aluminum within the
United States of America or any other geographical area served by
Kaiser Aluminum. Nor will you engage, within this geographical
area, in the design, development, distribution, manufacture,
assembly or sale of a product or service in competition with any
product or service currently marketed or planned by Kaiser
Aluminum to the extent such activity would reveal the plans,
designs or specifications disclosed to you by Kaiser Aluminum.
This paragraph does not restrict your ownership of securities in
any enterprise or participation in the management of any non-
Kaiser competitive aspect of any enterprise. By signing this
letter in the space provided, you acknowledge that these
prohibitions are both reasonable as to time, geographical area
and scope of activity and do not impose a restriction greater
than is necessary to protect Kaiser Aluminum's good will,
proprietary information and business interests. Additionally,
your signature below acknowledges your continued commitment to
abide by the terms of paragraphs 2, 3, 4, 5, 6 and 7 of your
Employment Agreement as well as the Corporate Code of Business
conduct and Accompanying Compliance Manuals. If you have any
questions concerning your obligations under either of these
documents, please let me know.
Participation in the Plan will not give rise to any right to
continued employment, shall not in any way prohibit changes in
the terms of your employment and shall not in any way limit the
right of Kaiser Aluminum to terminate your employment at any time
for any reason with or without stating a reason.
Kaiser Aluminum may assign its rights and obligations hereunder.
In such event, such rights and obligations shall inure to the
benefit of and shall be binding upon the successors and assigns
of Kaiser Aluminum. Your rights and obligations hereunder are
personal, and such rights and obligations shall not be subject to
voluntary or involuntary assignment or other transfer by you and
any attempted alienation, assignment or other transfer of your
rights or obligations hereunder shall be void and without effect.
I congratulate you on your selection to participate in the Plan.
It indicates your importance to the performance of Kaiser
Aluminum. I would also like to thank you for your dedicated
service and contribution to the past success of Kaiser Aluminum,
and look forward to your continued contribution.
If you have any questions regarding the Plan, please feel free to
discuss them with me, or call Bill Edgley, Director, Corporate
Human Resources. If the foregoing is acceptable, please indicate
your acceptance by signing the duplicate copy of this letter and
returning the signed copy to the attention of Bill Edgley at
Kaiser Aluminum, 6177 Sunol Blvd., Pleasanton, CA 94566.
Sincerely,
/s/Ray Milchovich
Ray Milchovich
President and Chief Operating Officer
AGREED TO AND ACCEPTED BY:
/s/ John H. Walker
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Printed Name:John H. Walker
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Title: President, FRP
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Dated: 9/30/98
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