Exhibit 10.4
TIME-BASED STOCK OPTION GRANT
PURSUANT TO THE KAISER
1997 OMNIBUS STOCK INCENTIVE PLAN
1. GRANT OF STOCK OPTION. Kaiser Aluminum Corporation
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("KAC") and Kaiser Aluminum & Chemical Corporation ("KACC"), both
Delaware corporations (collectively, the "Company"), hereby
evidence that the Company has granted to RAYMOND J. MILCHOVICH
("Optionee") the right, privilege and option as herein set forth
(the "Stock Option") to purchase 750,000 shares of common stock,
$.01 par value per share, of KAC (as more fully described in
Optionee's Employment Agreement (the "Employment Agreement") with
KACC attached herewith as Attachment I, which is incorporated
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herein and made a part hereof, the "Option Shares") in accordance
with the terms of this document (this "Stock Option Grant").
The Stock Option is granted pursuant to the Kaiser 1997
Omnibus Stock Incentive Plan (the "Plan") and is subject to the
provisions of the Plan, a copy of which has been furnished to
Optionee and which is hereby incorporated in and made a part of
this Stock Option Grant, as well as to the provisions of this
Stock Option Grant. By acceptance of the Stock Option, Optionee
agrees to be bound by all of the terms, provisions, conditions
and limitations of the Plan and this Stock Option Grant.
All capitalized terms used herein shall have the meanings
provided in the Plan document unless otherwise specifically
provided in this Stock Option Grant or the Employment Agreement,
including Attachment II attached herewith, which is incorporated
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herein and made a part hereof. The Stock Option is a
Nonqualified Stock Option under the Plan and is not intended to
qualify as an "incentive stock option" within the meaning of
Section 422 of the Code.
All Option Shares, when issued to Optionee upon the exercise
of this Stock Option, shall be fully paid and nonassessable.
2. OPTION TERM. Subject to earlier termination as
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provided herein, or in the Plan, the Stock Option shall expire on
June 1, 2009. The period during which the Stock Option is in
effect shall be referred to as the "Option Period".
3. OPTION EXERCISE PRICE. The exercise price per Option
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Share (including any Attributable Securities, as defined in
Attachment II) (the "Option Price") at which Optionee may
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purchase Option Shares subject to the Stock Option shall be equal
to the remainder of (i) the Base Exercise Price (as defined in
Attachment II) minus (ii) the Distributed Cash Value (as defined
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in Attachment II) determined as of the date of exercise. The
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Option Price shall also be subject to adjustment as provided in
the Plan and this Stock Option Grant. The Company shall notify
Optionee within thirty (30) days of each change in the Option
Price.
4. VESTING. The Stock Option may be exercised during the
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Option Period only to the extent it has become a "Vested Option".
Provided Optionee's Qualified Service Period (as defined in
Attachment II) has not previously terminated, the Stock Option
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shall become a "Vested Option" as to 20% of the Option Shares at
each Base Exercise Price as of 12:01 a.m. Houston time on January
1, 2001, and an additional 20% of the Option Shares at each Base
Exercise Price as of 12:01 a.m. Houston time on January 1, 2002,
2 0 03, 2004, and 2005, respectively. Notwithstanding the
preceding sentence, the Stock Option shall become a "Vested
Option" to the extent that Sections 2, 3, 4 or 5 of the
Employment Agreement provide that the Stock Option shall vest and
become exercisable.
5. METHOD OF EXERCISE. To exercise the Stock Option,
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Optionee shall deliver written notice to the Company stating the
Base Exercise Price and number of Option Shares with respect to
which the Stock Option is being exercised together with payment
for such Option Shares. Payment shall be made (i) in cash or its
equivalent, (ii) by tendering previously acquired Shares (as
defined in Attachment II) having an aggregate Fair Market Value
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(as defined in the Plan) at the time of exercise equal to the
total Option Price for such Option Shares (provided that the
Shares which are tendered must have been held by Optionee for at
least six months prior to their tender to satisfy the Option
Price), or (iii) by a combination of (i) and (ii).
6. TERMINATION OF OPTIONEE'S EMPLOYMENT. Termination of
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Optionee's employment as a regular full-time salaried employee of
KAC, a Subsidiary (as defined in Attachment II), or any branch,
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unit or division of KAC or any Subsidiary ("Employment") shall
affect Optionee's rights under the Stock Option as follows:
(a) T e rmination by the Company for Cause. If
Optionee's Employment is terminated by the Company at any
time for Cause (as defined in the Employment Agreement),
then (i) the Option Period shall terminate and (ii)
O p tionee's right to exercise the Stock Option shall
terminate, in each case immediately upon Optionee's becoming
subject to termination of Employment for Cause.
(b) Termination by the Company Other than for Cause.
If Optionee's Employment is terminated by the Company prior
to January 2, 2005, other than as a result of termination of
O p t ionee's Employment for Cause (as defined in the
Employment Agreement), then (i) the Stock Option and the
Option Period shall not terminate and (ii) the Stock Option
shall thereafter be exercisable as to all Option Shares from
and including the date of such termination through and
including the end of the Option Period.
(c) O t her Termination. If Optionee's Qualified
Service Period terminates prior to January 2, 2005, other
than as a result of termination of Optionee's Employment by
the Company, then (i) the Stock Option and the Option Period
shall not terminate but the Stock Option shall thereafter be
exercisable in accordance with the provisions of Sections 2,
3, 4 or 5 of the Employment Agreement.
The Stock Option may be exercised by Optionee or, in the
case of death, by the executor or administrator of Optionee's
estate, or the person or persons to whom Optionee's rights under
the Stock Option shall pass by will or by the applicable laws of
descent and distribution, or in the case of Disability (as
defined in the Employment Agreement), by Optionee's personal
representative consistent with the provisions of the Employment
Agreement.
7. REORGANIZATIONS; REPURCHASE OF STOCK OPTION.
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(a) F r e edom to Reorganize the Company and
Subsidiaries. The existence of the Stock Option shall not
affect in any way the right or power of the Company and its
Subsidiaries or the issuers of Attributable Securities or
its or their stockholders to make or authorize any and all
Distribution Events (as defined in Attachment II) and any
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a n d all other adjustments, recapitalizations,
reorganizations or other changes in the capital structure or
business of the Company or its Subsidiaries or the issuers
of Attributable Securities, any and all issuances of bonds,
debentures, common stock, preferred or prior preference
stock, warrants, rights or other securities, whether or not
affecting the Option Shares or the rights thereof, any
dissolution or liquidation of the Company or any Subsidiary,
any sale or other divestiture or transfer of all or any part
of the assets or business of the Company or any Subsidiary
or any issuer of Attributable Securities and any and all
other corporate acts or proceedings, whether of a similar
c h a r acter or otherwise (collectively, including any
Distribution Events, "Reorganizations").
(b) Spin-Offs. If the Board of Directors authorizes
any Distribution Event or other Reorganization as a result
of which holders of Shares (as defined in Attachment II)
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become entitled, in their capacities as holders, to receive
Marketable Securities, the Board of Directors shall, to the
extent reasonably practicable, cause the Company to provide
for or require: (i) that the issuer(s) of such Marketable
Securities shall undertake to issue and deliver to Optionee,
upon any subsequent exercise of the Stock Option, such
Marketable Securities as Optionee would have received if
Optionee had so exercised the Stock Option prior to such
D i s t ribution Event or other Reorganization and had
p a rticipated therein (and in any and all subsequent
Distribution Events or other Reorganizations) to the maximum
e x t ent allowed to holders of Shares (including any
Attributable Securities) outstanding at the time of such
Distribution Event or other Reorganization; (ii) that such
Marketable Securities shall be so issued and delivered to
Optionee pursuant to an effective registration statement
under the Securities Act of 1933, as amended, or otherwise
free of any restriction on resale thereof by Optionee, other
than any restriction on resale arising from Optionee's being
an Affiliate or Insider (as such terms are defined in the
Plan) of such issuer; (iii) that such Marketable Securities
shall be so issued and delivered without any agreement,
condition, payment or other consideration being required of
Optionee or the Company; (iv) that such issuer(s) shall at
all times reserve for issuance a sufficient amount of such
M a rketable Securities to fulfill all obligations
c o ntemplated hereunder; and (v) that upon each such
i s s u ance, such Marketable Securities shall be duly
authorized, validly issued, fully paid and nonassessable.
The Company shall also provide for or require that: (x) in
the event any such issuer shall fail or be unable to issue
and deliver to Optionee any Marketable Securities as
provided in the preceding sentence, such issuer shall be
obligated, in lieu of issuing and delivering such Marketable
Securities, to pay to Optionee in cash, immediately upon
exercise of the Stock Option, the Market Value of such
Marketable Securities determined as of the date of exercise
of the Stock Option; and (y) in the event the Company is
obligated to make a cash payment to Optionee pursuant to
Paragraph 8(b), such issuer shall be obligated to reimburse
the Company for a part of such payment proportionate to the
D i s t ributed Cash Value attributable to Attributable
Securities of such issuer compared to the total amount of
Distributed Cash Value.
(c) Right to Repurchase Stock Option. Upon receipt of
a notice of exercise, the Company shall have the right but
not the obligation to repurchase, and thereby to satisfy all
of the Company's obligations under, the Stock Option as to
the number of Option Shares as to which the Stock Option is
exercised by paying Optionee in cash an amount, net of any
taxes required to be withheld, equal to the sum of (A) the
product of (i) the number of Option Shares as to which the
Stock Option is exercised multiplied by (ii) the amount,
determined as of such date of exercise, equal to the
remainder of (x) the Market Value of one Option Share minus
(y) the Option Price plus (B) the amount of cash, if any,
payable to Optionee pursuant to Paragraph 8(b). If the
Option Shares for which the Stock Option is being exercised
a r e subject to different Option Prices, a separate
calculation shall be made with respect to each Option Price
and such totals aggregated.
8. ADJUSTMENTS.
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(a) In the event of any one or more Distribution
Events or other Reorganizations affecting the Stock Option
and not already adjusted for under Paragraph 7, the Option
Price and the number of Option Shares subject to the Stock
Option shall be appropriately adjusted by the Board of
Directors. In addition, the Board of Directors shall, as
permitted by Section 3.2, Section 16.2 and other provisions
of the Plan, construe and interpret the Plan and this Stock
Option Grant and make all appropriate adjustments in order
to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available to Optionee
under this Stock Option Grant and the Plan.
(b) Without limitation to the foregoing, in the event
that the amount of Distributed Cash Value as of any date of
exercise of the Stock Option is equal to or greater than the
Base Exercise Price for the Option Shares with respect to
which this Stock Option is being exercised, the Option Price
for each such Option Share shall be deemed to be $.01, and
the Company, in addition to issuing such Option Shares to
Optionee, shall pay to Optionee in respect of each such
Option Share an amount of cash equal to the remainder of (i)
the amount of the Distributed Cash Value minus (ii) such
Base Exercise Price.
9. NO RIGHTS IN OPTION SHARES. Optionee shall have no
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rights as a stockholder in respect of Option Shares until such
Optionee becomes the holder of record of such Option Shares.
10. OPTION SHARES RESERVED. The Company shall at all times
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during the Option Period reserve and keep available such number
of Shares as will be sufficient to satisfy the requirements of
this Stock Option.
11. NONTRANSFERABILITY OF STOCK OPTION. The Stock Option
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granted pursuant to this Stock Option Grant is not transferable
other than by will, the laws of descent and distribution or by
qualified domestic relations order. The Stock Option will be
exercisable during Optionee's lifetime only by Optionee or by
Optionee's guardian or legal representative. No right or benefit
hereunder shall in any manner be liable for or subject to any
debts, contracts, liabilities, or torts of Optionee.
12. AMENDMENT AND TERMINATION. No amendment or termination
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of the Stock Option shall be made by the Board of Directors or
the Committee (as defined in the Plan) at any time without the
written consent of Optionee. No amendment of the Plan will
adversely affect the rights, privileges and options of Optionee
under the Stock Option without the written consent of Optionee.
13. NO GUARANTEE OF EMPLOYMENT. The Stock Option shall not
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confer upon Optionee any right with respect to continuance of
Employment or other service with the Company or any Subsidiary or
Affiliate, nor shall it interfere in any way with any right the
Company or any Subsidiary or Affiliate would otherwise have to
terminate such Optionee's Employment or other service at any
time.
14. WITHHOLDING OF TAXES. The Company shall have the right
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to deduct or withhold, or require Optionee to remit to the
Company, an amount sufficient to satisfy all federal, state and
local taxes, domestic or foreign, required by law or regulation
to be withheld with respect to any taxable event arising under
this Stock Option Grant or any exercise or other action or event
hereunder.
15. NO GUARANTEE OF TAX CONSEQUENCES. Neither the Company
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nor any Subsidiary or Affiliate, nor the Board of Directors or
any Committee, makes any commitment or guarantee that any federal
or state tax treatment will apply or be available to any person
eligible for benefits under the Stock Option.
16. SEVERABILITY. In the event that any provision of the
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Stock Option shall be held illegal, invalid, or unenforceable for
any reason, such provision shall be fully severable, but shall
not affect the remaining provisions of the Stock Option, and the
Stock Option shall be construed and enforced as if the illegal,
invalid, or unenforceable provision had never been included
herein.
17. GOVERNING LAW. The Stock Option shall be construed in
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accordance with the laws of the State of Texas to the extent
federal law does not supersede and preempt Texas law.
Executed effective as of the 1st day of June, 1999.
"COMPANY"
KAISER ALUMINUM CORPORATION
By: /S/ John Barneson
Printed Name: John Barneson
T i tle: Vice President and Chief
Administrative Officer
KAISER ALUMINUM & CHEMICAL CORPORATION
By: /S/ John Barneson
Printed Name: John Barneson
T i tle: Vice President and Chief
Administrative Officer
Accepted effective as of the 1st day of June, 1999.
"OPTIONEE"
/S/ Raymond J. Milchovich
Printed Name: Raymond J. Milchovich
ATTACHMENT I
Attachment I is the Employment Agreement, dated as of June
1, 1999, between KACC and Raymond J. Milchovich, which was filed
as Exhibit 10.1 to the Report on Form 10-Q for the quarterly
period ended June 30, 1999, filed by KAC, File No. 1-9477.
ATTACHMENT II
TIME-BASED STOCK OPTION GRANT
DEFINITIONS APPLICABLE TO CERTAIN TERMS
"AFFILIATE" -- see Section 2.1 of the Plan.
"ATTRIBUTABLE SECURITIES" - see the definition of "Option Share".
"BASE EXERCISE PRICE" means $9.50 per Option Share with respect
to 150,000 Option Shares; $12.35 per Option Share with respect to
300,000 Option Shares; and $14.25 per Option Share with respect
to 300,000 Option Shares.
"DISTRIBUTED CASH VALUE" means, as of any determination date, the
aggregate amount of cash (other than regular quarterly cash
dividends, if any) plus the aggregate value, as determined by the
Board of Directors as of the date of distribution, of all
p r o p e rty (other than cash and Attributable Securities)
distributed or set aside for distribution to the holder of one
Original Share and all Attributable Securities, if any, during
t h e period commencing June 1, 1999, and ending on the
determination date.
"DISTRIBUTION EVENTS" means any and all distributions, dividends,
recapitalizations, forward or reverse splits, reorganizations,
mergers, consolidations, spin-offs, combinations, repurchases,
share exchanges, or other similar or substantially equivalent
corporate transactions or events in which the holder of a
security becomes, as such, entitled to receive cash, securities
or other property in addition to or in exchange for or upon
conversion of such security.
"EMPLOYMENT" -- see Paragraph 6 of this Stock Option Grant.
"INSIDER" -- see Section 2.19 of the Plan.
"KAC" -- see Paragraph 1 of this Stock Option Grant.
"KACC" -- see Paragraph 1 of this Stock Option Grant.
"MARKET VALUE" means, as of any Trading Day, the average of the
highest and lowest sales prices as reported by the consolidated
tape (or, if such prices are not quoted, the average of the
quoted closing bid and asked prices) on such Trading Day for one
Option Share (including, as applicable, the Market Values of any
Attributable Securities). In the event that sales prices or
closing bid and asked prices are not quoted on a particular
Trading Day, the Market Value for that Trading Day shall be
deemed to be the Market Value for the immediately preceding
Trading Day. In the event that any Attributable Security shall
cease to be a Marketable Security, it shall thereupon be deemed
to have no further Market Value and shall be deemed instead to
have, as of the date it ceases to be a Marketable Security, such
Distributed Cash Value as shall be determined by the Board of
Directors.
"MARKETABLE SECURITIES" means securities (a) of a class that is
registered under the Securities Exchange Act of 1934, as amended,
(b) for which sales prices or bid and asked prices are regularly
quoted and (c) that, if issued and delivered to Optionee upon
exercise of the Stock Option, would not be subject to any
restriction on resale, other than any restriction arising from
Optionee's being an Affiliate or Insider (as such terms are
defined in the Plan) of the issuer of such Marketable Securities.
"OPTION PERIOD" -- see Paragraph 2 of this Stock Option Grant.
"OPTION PRICE" -- see Paragraph 3 of this Stock Option Grant.
"OPTION SHARE" means (a) one Share as constituted on June 1,
1999, (an "Original Share") and (b) in the event of any one or
more successive Distribution Events, all Marketable Securities
("Attributable Securities") into which or for which an Original
Share or any Attributable Securities may be converted or
exchanged or that a stockholder may have the right to receive in
respect of such Original Share or Attributable Securities.
"OPTIONEE" -- see Paragraph 1 of this Stock Option Grant.
"ORIGINAL SHARE" -- see the definition of "Option Share".
"PLAN" -- see Paragraph 1 of this Stock Option Grant.
"QUALIFIED SERVICE PERIOD" means the period from and including
January 1, 2000, through and including the earlier of (a)
December 31, 2004, or (b) the date immediately preceding the date
of termination of Optionee's Employment; provided , however, that
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if Optionee's Employment has not terminated prior to the date
that a proposed transaction is announced by KAC or KACC that
would cause KAC or KACC, respectively, to experience a Change in
Control (as defined in the Employment Agreement with respect to
KACC) and such transaction is subsequently consummated so that
KAC or KACC experiences a Change in Control, then Optionee's
Qualified Service Period shall be deemed to continue through the
date of consummation of such transaction and Change in Control
unless Optionee's Employment is terminated by the Company for
Cause or by Optionee.
"REORGANIZATION" -- see Paragraph 7(a) of this Stock Option
Grant.
"SHARE" means one share of common stock, par value $.01 per
share, of KAC.
"STOCK OPTION" -- see Paragraph 1 of this Stock Option Grant.
"SUBSIDIARY" -- see Section 2.32 of the Plan. For avoidance of
doubt, KACC shall be considered a Subsidiary of KAC so long as
KAC has a majority voting interest in KACC, and KAC shall be
considered to have a majority voting interest whether it holds
such interest directly or indirectly through one or more
Subsidiaries.
"TRADING DAY" means as to an Option Share (including any
Attributable Securities) a day when the New York Stock Exchange
(or other principal securities exchange, including Nasdaq, on
which such securities are traded) is open.