EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into as of the 1st day of September, 1996, by and between KAISER
ALUMINUM & CHEMICAL CORPORATION ("Kaiser") and Jack A. Hockema
("Hockema").
1. Term. Kaiser agrees to employ and Hockema agrees to
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perform services (as described below) for a period, commencing
September 1, 1996 and ending on December 31, 1998, unless this
Agreement is terminated earlier as provided herein. At the end
of 1998 this agreement may be extended by mutual agreement on a
year by year basis.
2. Services. Hockema shall perform all duties or acts
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necessary and proper to fulfill the responsibilities of President
of Kaiser Extruded Products and Engineered Components, subject at
all times to the direction and control of George T. Haymaker and
the policies of Kaiser.
3. Compensation.
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PRINCIPLES
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A. Pay Hockema at the market in Total Compensation with
similar opportunity for upside or downside as the other BU
Presidents.
B. His incentive opportunity should be tied (a) one half
to the longer term objectives of EBIT target of $85 mm and 20%
EVA target by the year 2000 and (b) to Corporate results against
Plan for the other half.
C. The Total Compensation System (TCS) philosophy will be
used as the basic method of delivering the incentives, but with
additional incentive to provide full opportunity toward achieving
the objectives by the end of the year 2000.
BASE COMPENSATION. For services performed by Hockema under this
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Agreement, Kaiser agrees to pay Hockema and Hockema agrees to
accept $225,000. per year as a starting base salary for each
twelve month period during the term of this agreement. Payment of
the base salary will be made on the same terms and in the same
manner as Kaiser's general payroll less withholdings for Federal,
State and local income taxes, Social Security taxes (FICA), and
other withholdings required by law or directed by Hockema
pursuant to Kaiser's policies. The base salary may be changed by
mutual agreement of the parties at anytime.
SIGNING BONUS The Company will pay Hockema a $100,000 signing
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bonus in consideration of the past year's performance which
includes the work performed on the Kaiser Aluminum/Acuride Joint
Venture.
INCENTIVE COMPENSATION Hockema will not participate in the
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Total Compensation System incentive program, however the
principles will guide the calculation of his Total Compensation
Package. Hockema's initial 1996 annual incentive target is
established at $75,000, which is prorated from an annual
incentive of $300,000.
The EVA standard of 20% for Business Units and 15% for Corporate
will apply to Hockema like all other B. U. Presidents for both
the Business Unit results as well as the Corporate results.
In addition to the EVA incentive, there is a "growing the
business bonus" for increasing EBIT significantly from 1996
estimated $26 million to $85 - $120 million by the year 2000 with
increasing progressive targets each year. Hockema will continue
to have a target in 1999 and 2000 even if he isn't employed by
Kaiser. His incentive target will be $600,000 for the two year
period and will be based on the average multiplier for 1999 and
2000 as determined in the incentive tables below.
Performance Measurement
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The performance measurement for payment of the incentive will be
set as: 50% based on KAC consolidated, plan and actual EVA and
50% based on Engineered Components and Extruded Products
composite EVA and EBIT results. All Business Unit Presidents'
measurements now include 50% KAC consolidated EVA to reflect
their involvement in the overall Corporate strategy. EVA is
calculated as EBIT divided by net assets. The Engineered
Components and Extruded Products EVA and EBIT will be combined
and will be weighted 25% EVA and 25% EBIT results. The measures
are EVA target at 20% and EBIT target on a progressive scale
leading to the year 2000 target of $85 million, as follows:
EVA Target
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B. U. Incentive Corp. Incentive
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Percentage Multiplier Percentage Multiplier
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5% .5 5% .24
10% .75 10% .65
20% 1.0 15% 1.0
25% 1.5 20% 1.75
29% 2.0 25% 2.25
32% 2.5 30% 3.0
35% 3.0
EBIT Target (millions)
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Multiplier .5 1.0 2.0 3.0
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1996 $20 $25 $30 $35
1997 $26 $32 $43 $50
1998 $30 $44 $60 $70
1999 $35 $65 $75 $85
2000 $40 $85 $100 $120
Minimum guarantee
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For 1997, a minimum incentive of $125,000 will be payable
provided Hockema does not receive that incentive level as a
result of 1997 performance. There will be no minimum for 1998.
The minimum for "growing the business" bonus (years 1999 and
2000) will be $325,000, payable in first quarter of 2001. The
minimum bonus will be paid only to the extent the earned bonus is
less.
Attached is a worksheet showing what the payout will be given a
estimated performance for years 1996 through 2000 and what will
be earned under that estimated performance.
Reimbursement of Expenses. All travel expenses will be
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reimbursed according to the then current Kaiser policy.
5. Vacation. Hockema will be entitled to four (4) weeks
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of paid vacation in 1997 and each year of full-time employment
thereafter. The time for taking vacations shall be mutually
agreed upon by Hockema and Kaiser.
6. Benefits. Kaiser agrees to provide Hockema with the
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following benefits:
a. Medical Coverage. Kaiser will provide Hockema and
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Hockema's eligible dependents with medical coverage pursuant to
Kaiser policies as amended from time to time.
b. Dental Coverage. Kaiser will provide Hockema and
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Hockema's eligible dependents with dental coverage pursuant to
Kaiser policies as amended from time to time.
c. Life Insurance. Kaiser will provide Hockema with
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life insurance and accidental death and dismemberment insurance
pursuant to Kaiser policies as amended from time to time.
d. Salary Continuation and Long-Term Disability.
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Kaiser will provide Hockema Sick Leave with Salary Continuation
and long-term disability pursuant to Kaiser policies as amended
from time to time.
7. Pension and Profit Sharing. Kaiser shall include
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Hockema in Kaiser pension and 401k plans pursuant to Kaiser
policies as amended from time to time. Hockema's prior service as
an employee with Kaiser will be credited to Hockema for
eligibility and participation purposes in the pension and profit
sharing plans. Additionally, the amount of Hockema's employee
contribution that was previously refunded to him will be deducted
from his future pension payment(s).
8. Company Car. During the term of this agreement Kaiser
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will provide Hockema with a motor vehicle allowance of $835.00
per month.
9. Full-time Service. Hockema agrees that during the term
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of this Agreement, Hockema will not, without Kaiser's prior
written consent, directly or indirectly engage in any employment,
consulting, or other activity which could conflict with Hockema's
obligations to Kaiser during the term of this Agreement. It is
recognized that Hockema intends to maintain his investment
advisory business.
10. Agreement Not to Disclose or Use Proprietary
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Information.
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Reports, Intellectual Property Rights and Confidential
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Information
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a. All writings, documents, reports and developments
(patentable or otherwise) made or developed by Hockema pursuant
to this Agreement shall be the sole and exclusive property of
Kaiser and shall be delivered to Kaiser upon request. Hockema
shall maintain all proprietary information of Kaiser or its
customers in confidence and shall not disclose such proprietary
information to any unauthorized person.
b. Hockema shall, when so requested by Kaiser,
execute all papers which Kaiser deems to be reasonably necessary
in order to assign to and confirm in Kaiser all right, title and
interest in the property referred to in Paragraph 10 hereof.
c. All of the property rights referred to in
Paragraph 10. as well as any information disclosed to Hockema by
or on behalf of Kaiser or its affiliates, shall be kept
confidential by Hockema and shall not be used by Hockema for any
purpose other than for performing this Agreement.
11. Arbitration. Any controversy or claim arising out of
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or relating to this Agreement or the breach thereof, or arising
out of or relating to Hockema's service or termination of service
which cannot be resolved among the parties themselves, shall on
the written request of the complaining party served on the other
within thirty (30)
calendar days of the event which forms the basis of the
controversy or claim, be submitted and resolved by final and
binding arbitration in a manner consistent with the rules of the
American Arbitration Association. Service of the written demand
for arbitration shall be made by certified mail, with a return
receipt requested. Time is of the essence. If the request is not
served within said thirty (30) days of the date a cause of action
arises, the complaining party's claim(s) shall be forever waived
and barred before any and all forums, including, without
limitation, arbitration or judicial forums. The Arbitrator shall
have no authority to alter, amend, modify or change any of the
terms of the Agreement. The decision of the Arbitrator shall be
final and binding and judgment thereon may be entered in any
court having jurisdiction thereof. The parties shall equally
divide all costs of the arbitration, but the parties shall bear
their own expenses for attorney's fees and witness costs.
The parties intend that this arbitration procedure is
mandatory and shall be the exclusive means of resolving all
disputes, between Hockema and Kaiser and/or Kaiser's employees,
directors, officers, officers or managers involving or arising
out of this Agreement, the parties' employment relationship
and/or the termination of that relationship including, but not
limited to any controversies or claims pertaining to wrongful
discharge and alleged violations of the covenant of good faith
and fair dealing and/or public policies or anti-discrimination
statutes.
12. Termination of Employment. The parties agree that this
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Agreement may be terminated at any time without cause at the
option of either Hockema or Kaiser upon 30 days written notice to
the other party. Advance notice is not required where Hockema's
service is terminated by Kaiser for cause. Any incentive
compensation due in the case where Kaiser terminates Hockema will
be on a prorated basis, including the minimum guarantee of
$550,000. For example, if Hockema were terminated by the Company
at the end of 1997 he would be eligible for a minimum payment of
$89,286 ( 16/28 of $550,000, less the amount he had already
received $225,000 ). If Hockema initiates the termination then
he will not be eligible for the minimums or the incentives in the
year in which he terminates.
13. General Provisions. The waiver by Kaiser of a breach
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of any provision of this Agreement shall not operate or be
construed as a waiver by Kaiser of any subsequent breach nor
shall any delay by Kaiser is asserting any of its remedies
hereunder be construed as a waiver. If any provision or term of
this Agreement should be invalid or unenforceable, the remaining
provisions and terms shall continue to be fully effective. This
Agreement supersedes any and all prior Agreements which the
Company and Hockema may have entered into and executed. This
Agreement shall not be changed, modified or amended in any
respect except by a written instrument signed by both parties.
This Agreement constitutes the entire agreement between the
parties and no representations or promises other than those set
forth in this Agreement may be relied upon. Unless otherwise
authorized in writing, Hockema shall have no authority to act
for, legally represent, or otherwise bind or legally commit
Kaiser in any way.
14. Notices. Any notice, communication or statement
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required or permitted to be given hereunder shall be in writing
and deemed to have been sufficiently given when delivered in
person or by registered or certified mail, postage prepaid,
return receipt requested, to the address of the respective party
below.
HOCKEMA:
Name: Jack A. Hockema
Address: 30041 Saddleridge Drive
San Juan Capistrano, CA 92675
KAISER:
KAISER ALUMINUM & CHEMICAL CORPORATION
Attn: George T. Haymaker, Jr.
Chairman and CEO
Address: 6177 Sunol Blvd.
Pleasanton, CA. 94566
Either party may, by notice to the other, change the
addresses and names given above.
In witness whereof, the parties have executed this Agreement
as of the date first shown above.
HOCKEMA KAISER ALUMINUM
& CHEMICAL CORPORATION
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Jack A. Hockema George T. Haymaker, Jr.
Chairman and CEO