Form of
Kaiser 1995 Executive Incentive Compensation Program
TABLE OF CONTENTS
Section 1. Purpose of Program and Its Parts . . . . . . . . . . . . . . . 4
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 Part of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Eligibility for Long-Term Awards . . . . . . . . . . . . . . . . . . 8
3.2 Eligibility for Annual Awards. . . . . . . . . . . . . . . . . . . . 9
3.3 No Right to Participate . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Administration . . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Stock Subject to Program; Type and Nature of Awards . . . . . 9
5.1 Stock Subject to the Long-Term Component . . . . . . . . . . . . . . 9
5.2 Type and Nature of Awards . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Effective Date and Long-Term Component Life . . . . . . . . 10
6.1 Effective Date and Long-Term Component Life. . . . . . . . . . . . 10
Section 7. Determination and Payment of Awards . . . . . . . . . . . . 10
7.1 General Principles . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Determining Target Incentives and Granting Performance Units . . . 10
7.3 Performance Goals and Valuation . . . . . . . . . . . . . . . . . 11
7.4 Payment of Actual Awards . . . . . . . . . . . . . . . . . . . . 12
7.5 Form and Timing of Payment . . . . . . . . . . . . . . . . . . . . 12
7.6 Termination of Employment Due to Death, Disability, or Retirement 12
7.7 Termination of Employment for Other Reasons . . . . . . . . . . . 13
7.8 Nontransferability . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. Beneficiary Designation . . . . . . . . . . . . . . . . . . 13
8.1 Beneficiary Designation . . . . . . . . . . . . . . . . . . . . . 13
Section 9. Rights of Participants . . . . . . . . . . . . . . . . . . 13
9.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 10. Amendment, Modification, and Termination of Program. . . . 13
10.1 Amendment, Modification, and Termination of Program . . . . . . . 13
Section 11. Tax Withholding . . . . . . . . . . . . . . . . . . . . . 14
11.1 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . 14
12.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 13. Requirements of Law; Consents . . . . . . . . . . . . . . 14
13.1 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . 14
13.2 Consents to Program Actions . . . . . . . . . . . . . . . . . . . 14
13.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Appendix A
Section 1. Purpose of Program and Its Parts
1.1 Purpose. The Kaiser 1995 Executive Incentive Compensation
Program (the "Program") is intended to increase the value of the
shareholder's investment in Kaiser Aluminum Corporation by providing the
Chief Executive Officer, the Chief Financial Officer and the Chief
Administrative Officer (collectively, the "Participants") with incentives
to achieve positive Economic Value Added, as defined in Section 2 below,
with emphasis in those areas of the business that Participants can
influence.
The Program is designed to provide the opportunity to earn levels of
total annual compensation that, at levels of profitability equal to the
cost of capital, are competitive with the compensation provided by other
employers with whom the Company competes for management, at similar
profitability levels, and to allow the Participants to earn higher total
compensation if economic value (profit above that required to return the
cost of capital) is added. These opportunities are provided through a
combination of Annual and Long-Term (as both terms are defined in Section 2
below) incentives.
1.2 Part of the Plan. The long-term incentive compensation part of
the Program (the "Long-Term Component") is consequently intended to further
the purposes of the Kaiser 1993 Omnibus Stock Incentive Plan (the "Plan")
by supplementing and implementing the provisions of Section 9 of the Plan
and is made a part of the Plan effective as of January 1, 1994. It
includes provisions for the payment of incentives in part in Kaiser
Aluminum Corporation ("KAC") common stock and is included in the Program
along with Annual incentives so as to coordinate the payment of base salary
with annual and long- term incentive compensation. The provisions of the
Long-Term Component as they relate to KAC common stock grants and awards
are subject to and limited by those of the Plan, and they shall be
interpreted and administered so that they are consistent with the
provisions of the Plan.
The description of provisions for determination and payment of Annual
incentives are included in this Program for information and disclosure, but
these provisions are not subject to the provisions of the Plan. Thus, this
Program repeats or summarizes various Plan definitions and other provisions
insofar as they are applicable to the Long-Term Component. In the event of
any conflict or ambiguity, the definitions and rules of the Plan are
overriding and controlling when interpreting provisions of the Long-Term
Component. Because the Long-Term Component supplements and implements a
portion of the Plan without changing any basic rules of the Plan, the
Program does not constitute an amendment of the Plan.
Section 2. Definitions
2.1 Definitions. Subject to Section 1, any capitalized term that is
defined in this document shall have the meaning set forth in the
appropriate definition in this Section or elsewhere herein when such term
is used in connection with the Program. Moreover, any term that describes
an accounting measure shall be determined for each Long-Term Performance
Period in accordance with the definition of such term, applied on a
consistent basis, using the amounts recorded in the Company's books of
accounts and generally accepted accounting principles as in effect at the
beginning of the applicable Performance Period, with such modifications and
such computational methodology as the Committee may deem appropriate and
approve in order to carry out the purpose of the Program. Definitions
relating to the Annual incentive part of the Program shall also be
determined in accordance with the rules and terminology of this Section 2.1
except as they may be modified as the Committee may deem appropriate in
order to carry out the purpose of the Program.
(a) "Actual Award" means the amount, if any, of a Participant's
Target Incentive that, assuming continued participation for the full
Performance Period for which the Target Incentive was granted, has been
earned and will become payable at the times and in the manner determined
under the Program, provided payment shall be contingent upon meeting or
exceeding the threshold level of performance (minimum Company-wide EVA of 5
percent). Pursuant to Section 7.3(l), 7.6, or 10.1, a Participant's Actual
Award may be prorated in the case of participation for less than the full
Performance Period.
(b) "Annual" means of or pertaining to the short-term part of the
Program, which provides for the possibility of Awards which may be made
each year and for results to be measured for the one-year Performance
Period for which the Award was made.
(c) "Award" means
(1) with respect to the Long-Term Component, the Performance
Units granted to a Participant at the beginning of the Long-Term
Performance Period, and
(2) with respect to the Annual incentive part of the Program,
the total cash incentive under the Annual incentive part of the Program,
where (1) and (2) collectively constitute the Participant's total Target
Incentive under the Program when granted and either (1) or (2) or both may
result in payment of an Actual Award after the end of the applicable
Performance Period.
(d) "Board" unless otherwise specified means the Board of Directors
of KACC. The term "Boards" shall refer collectively to the Boards of
Directors of KAC and KACC.
(e) "Business Plan" for any fiscal year beginning on or after January
1, 1995, means the Business Units and KACC consolidated business plan for
such fiscal year, as approved by the Board. For 1994, the second quarter,
updated business plan will be used.
(f) "Capital Employed" means the net assets of the Company or
Business Unit, as applicable. Net assets are determined as total assets
minus liabilities adjusted for the following exclusions. Total assets
shall exclude deferred financing recorded in the other assets category, and
total liabilities shall exclude debt, accrued and deferred income taxes,
and accrued interest, all net of minority interests in these items.
(g) "Capital Spending" means KAC's or the Business Unit's share of
expenditures constituting capital spending as defined by Policy 160 in the
KAC Controller's Policy Manual, including 100 percent of such spending for
consolidated entities and KAC's proportionate share of such spending for
non-consolidated entities whose results are reflected in KAC's financial
reporting.
(h) "CAO" or "Chief Administrative Officer" means the chief
administrative officer, by title or function, of the Company.
(i) "CEO" or "Chief Executive Officer" means the chief executive
officer, by title or function, of the Company.
(j) "CFO" or "Chief Financial Officer" means the chief financial
officer, by title or function, of the Company.
(k) "Committee" means the Compensation Committees of the Boards,
acting jointly, as provided in Section 2.1(d) of the Plan.
(l) "Company" means KAC and KACC collectively.
(m) "Cost of Capital" means for the Company on a consolidated basis,
15 percent, which is deemed to be the actual cost for the Company based on
a 50 percent debt and 50 percent equity ratio and assuming that the cost of
debt is 10 percent and the cost of equity is 20 percent.
(n) "Disability" means disability as defined in the Kaiser Aluminum
Self-Insured Welfare Plan for Employees.
(o) "EBDIT" or "Earnings Before Depreciation, Interest, and Taxes"
means EBIT plus depreciation, where depreciation includes purchase
accounting investment amortization and depreciation recorded in the cost of
goods sold, and does not include depreciation in minority interest.
(p) "EBIT" or "Earnings Before Interest and Taxes" means net income
plus interest expense (including interest recorded in the cost of goods
sold), amortization of deferred financing, capital charges, income taxes,
and extraordinary items.
(q) "EVA" or "Economic Value Added" means the return on Company or
Business Unit assets, expressed as a percent and determined for the
applicable Performance Period with respect to either Annual EVA or
Long-Term EVA, as described below.
(1) Annual EVA is determined for the Annual Performance Period
as the EBIT divided by the average Capital Employed. For purposes of the
foregoing, the average Capital Employed shall be the simple average of
quarterly or monthly figures, as available.
(2) Long-Term EVA is determined as follows: First, for each
year in the Long-Term Performance Period, determine (c) as the EBDIT minus
the Capital Spending, and (d) as the average Capital Employed. Second,
divide (c) by (d). Third, determine the EVA for the Long-Term Performance
Period as the simple average of the three annual percentages determined in
the second step above. For purposes of the foregoing, the average
Capital Employed shall be the simple average of quarterly or monthly
figures, as available.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time.
(s) "KAC" means Kaiser Aluminum Corporation, a Delaware corporation.
(t) "KACC" means Kaiser Aluminum & Chemical Corporation, a Delaware
corporation.
(u) "Long-Term" means of or pertaining to the Long-Term Component,
which provides for Awards to be made each year near the beginning of a new
three-year Performance Period and for results to be measured for such
three-year Performance Period.
(v) "Long-Term Component" means the long-term incentive compensation
part of the Program described in this document that is part of the Program
and is governed by the Plan, as described in Section 1 hereof.
(w) "Participant" means each of the CEO, CFO and CAO.
(x) "Performance Goal" means, as applicable,
(1) the Annual EVA planned for achievement on average over the
Annual Performance Period, or
(2) the Long-Term EVA planned for achievement on average over
the Long-Term Performance Period.
(y) "Performance Period" means a period commencing on the date that
this Program is first effective or on any subsequent anniversary of such
date for which an Award has been made and will be measured in accordance
with the rules of the Program as follows:
(1) with respect to the Annual part of the Program, the period
shall be the calendar year, and each calendar year shall constitute a
Performance Period, and
(2) with respect to the Long-Term Component, the period shall
consist of three consecutive calendar years, and a new Long-Term
Performance Period shall begin each year and shall partially overlap the
two immediately preceding Long-Term Performance Periods, if any.
(z) "Performance Unit" means a unit with an initial value of $1.00
that is granted to a Participant as part of a Target Incentive and applies
only to the Long-Term Component.
(aa) "Plan" means the Kaiser 1993 Omnibus Stock Incentive Plan, as
amended and in effect from time to time.
(bb) "Program" means the Kaiser 1995 Executive Incentive Compensation
Program that includes Annual incentive, and Long-Term incentive amounts
which, when combined with base salary, comprise the total compensation for
a Participant.
(cc) "Retirement" means termination of employment on or after
attaining eligibility for a full early or normal retirement benefit under
the Kaiser Aluminum Salaried Employees Retirement Plan.
(dd) "Section 16 Reporting Persons" means each of the Participants
who are KAC officers, directors, or 10 percent beneficial owners for
purposes of required reporting and potential liability under Section 16 of
the Exchange Act, as to whom the Committee shall have sole discretion in
making determinations hereunder.
(ee) "Stock" means the common stock, par value $0.01 per share, of
KAC.
(ff) "Stock Closing Price" means the average of the closing prices of
Stock on trading dates in the final month of the Performance Period, as
listed in the New York Stock Exchange Composite Transactions of the Wall
Street Journal or such other generally available, published listing as may
be designated by the Committee for this purpose.
(gg) "Target Incentive" means
(1) with respect to the Long-Term Component, the sum of
Performance Units awarded to a Participant for the Long-Term Performance
Period, and
(2) with respect to the Annual incentive part of the Program,
the initial targeted cash amount for the Actual Award.
The Target Incentives in both (1) and (2) plus the Participant's base
salary at the beginning of the Performance Period are designed to provide
the desired total compensation target for the Participant.
(hh) "Tentative Award" means the amount of the Actual Award before
any adjustment to reflect other accomplishments and before any other
adjustments permitted on a discretionary basis under rules set forth in
Section 7 below.
Section 3. Eligibility
3.1 Eligibility for Long-Term Awards. The CEO , the CFO and the CAO
are the only persons eligible to participate in the Program.
For a new hire or a promoted Participant who was not eligible to
participate at the beginning of an applicable Long-Term Performance Period,
or in other appropriate circumstances, the Committee may approve the
selection of a Participant to commence participation as of an appropriate
date during the Long-Term Performance Period, subject to the rules in
Section 7.3(l) regarding the proration of any resulting Actual Award to
reflect the shortened period of participation during the remainder of such
Performance Period.
3.2 Eligibility for Annual Awards. Eligibility for Annual Awards
under the Program shall follow analogous rules to those in Section 3.1
above.
3.3 No Right to Participate. As provided in Section 3.2 of the Plan,
no Participant, regardless of position or responsibility, shall have any
entitlement or right to cause any Award to be made under the Long-Term
Component without the approval of the Committee. Except as otherwise
required by the Plan or determined by the Committee pursuant to the Plan,
the making of a Long-Term Award shall not entitle a Participant to any
subsequent or additional Award.
Section 4. Administration
4.1 Administration. Consistent with Section 4 of the Plan, the
Committee shall have broad administrative responsibility for the Program.
As required by Sections 2.1(d) and 4.1 of the Plan, each Committee member
shall be a "disinterested person" for purposes of Rule 16b-3 under the
Exchange Act with respect to the right to acquire Stock or any other
interest in equity securities of KAC pursuant to the Long-Term Component.
In administering the Program, the Committee shall have all the powers and
responsibilities assigned to it in Section 4 and other provisions of the
Plan that are applicable to the Long-Term Component and the type of Awards
it describes, including, without limitation, the power to interpret the
Program, to prescribe, amend, and rescind rules and regulations relating to
it, to provide for conditions and assurances deemed necessary or advisable
to protect the interests of the Company, and to make all other
determinations necessary or advisable for the administration of the
Program, but only to the extent not contrary to express provisions of the
Plan except that the Committee may correct any defect, supply any omission
and reconcile any inconsistency in the Plan). Committee actions with
respect to the Long-Term Component shall be taken in accordance with
procedures described in Section 4 of the Plan, and the Committee shall have
the authority to make non-uniform determinations and to issue Stock with
respect to the Long-Term Component, as provided in Sections 4.2 and 4.3 of
the Plan. The Committee shall retain final approval authority for all such
determinations as well as any other determinations that it has the
responsibility and authority to make with respect to the Program hereunder
and the Plan.
Section 5. Stock Subject to Program; Type and Nature of Awards
5.1 Stock Subject to the Long-Term Component. Stock that is issued to
Participants in payment of Actual Awards under the Long-Term Component is
provided from the authorized shares of Stock described in Section 5 of the
Plan and is subject to all applicable rules of the Plan relating to the
issuance of Stock with respect to such Awards, including the rules in
Sections 5 and 9 of the Plan.
5.2 Type and Nature of Awards.
(a) Annual Awards that become payable shall be paid entirely in cash as
provided herein.
(b) Long-Term Awards under the Program shall consist of Performance
Units that may become payable in Stock and cash as permitted in Sections
5.5 and 9 of the Plan and as described more specifically herein. Each
Long-Term Award shall be evidenced in writing in the form of an appropriate
agreement or Notice of Award approved by the Committee in accordance with
Section 5.6 of the Plan and the provisions of the Long-Term Component.
Section 6. Effective Date and Long-Term Component Life
6.1 Effective Date and Long-Term Component Life. As provided in
Section 1.1 herein, the Long-Term Component is effective as of January 1,
1994. Thereafter, subject to the rules set forth in this Program and in
the Plan, including the rules of Section 6.2 of the Plan and the continuing
availability of Stock under Section 5 of the Plan, the Long-Term Component
as may be amended from time to time shall continue during such time as the
Plan remains in effect.
Section 7. Determination and Payment of Awards
7.1 General Principles. All of the following principles in this
Section 7 are applicable to Participants in the Long-Term Component.
7.2 Determining Target Incentives and Granting Performance Units.
Subject to Sections 3, 4, and 5 of the Plan and this Program, Performance
Units for the Long-Term Component may be granted to Participants at any
time and from time to time as shall be determined by the Committee. In
practice, except as otherwise determined by the Committee, consideration
shall be given to the following general principles in granting Performance
Units for the Long-Term Component. Performance Units shall be granted as
of the beginning of each Long-Term Performance Period in amounts that the
Committee deems necessary to provide the desired Long-Term Target Incentive
for the Participants. In determining a Participant's Target Incentive, the
Committee shall focus on a total compensation concept with the following
elements:
(a) Using an agreed list of comparator companies approved by the
Committee and such supplemental third-party compensation surveys as deemed
appropriate, the position of a Participant will be matched with similar
positions in the comparator group and the supplemental survey data (taking
into account differences in the KAC structure of responsibilities from the
comparator group and differences in the performance of the comparator group
in comparator periods) to determine the total market value of the position
and the market breakdown of such value into base salary and incentive
compensation.
(b) Then, considering the objective of setting base salary at the 45th
percentile level and incentive compensation (the sum of both Annual and
Long-Term incentives) at the 55th percentile level, the Committee shall
determine an appropriate target level for the Participants' Target
Incentive in light of these factors and individual circumstances.
(c) Of the total amount of targeted incentive compensation, the
Long-Term Target Incentive as a general rule shall represent 75 percent.
The Annual Target Incentive shall represent the remainder of the targeted
incentive compensation that is not provided as a Long-Term Target
Incentive. When deemed appropriate, there may be some variation from these
ratios.
7.3 Performance Goals and Valuation. For each Performance Period the
Committee shall approve Performance Goals that, depending on the actual
results achieved, will allow Annual and Long-Term Target Incentives to be
valued at from zero to three times their initial value for purposes of
determining and paying Actual Awards. To accomplish this, a planned EVA
shall be determined for the Company for the applicable Performance Period.
This step shall be part of a normal process of developing the Business Plan
at the time the determination is made, and it shall be completed before
March 31 of the beginning of each year. This process shall also be subject
to the final review and approval of the Committee. After the completion of
this planning step and as soon as practicable after the end of the
Performance Period, the actual EVA results for the Company shall be
determined and compared to the planned results for the purpose of
calculating Actual Awards. Except as otherwise determined by the
Committee, Performance Goals shall be determined and used to value Target
Incentives as follows:
(a) A matrix with multipliers from zero to three shall be established
for the entire Company to measure the effect of achieving different levels
of actual Company EVA results relative to different planned Company EVA
levels. The Company-wide matrix, as approved by the Committee, shall be
identified as Appendix A and attached hereto so that it can be recognized
as part of this document. The initial version of Appendix A shall set the
1.00 multiplier level at the point where both planned and actual EVA equal
15 percent, which is deemed to be the Company's cost of capital. The
initial version of Appendix A shall be effective at the same time as this
document and shall continue in effect indefinitely unless it is superseded
by a revised Appendix A. Any revised Appendix A that may be approved by
the Committee shall indicate the Performance Periods for which it is
effective.
(b) At the end of the Performance Period, the actual EVA shall be
determined for the Company, and these EVA results shall be used to
determine Actual Awards as described in the steps below.
(c) The Tentative Award in a Performance Period for the Participants
shall be determined solely on the basis of Company-wide results by applying
the applicable multiplier in Appendix A to each Participant's Target
Incentive.
(d) In computing the Actual Award amount, the Tentative Award for the
Participants is increased by 30% of the Target Incentive for achievement of
goals or financial accomplishments not reflected in the Company-wide EVA.
The Committee, in its sole discretion, may decrease the Actual Award (but
not below zero) by an amount equal to 1 percent to 60 percent of the
Participant's Target Incentive. This subtraction will be based on such
factors as failure to achieve agreed objectives or other accomplishments
which are not reflected in the results of the Business Plan but are
important to the longer term success of the business.
(e) In the event of a major change during the Performance Period, such
as the sale of a Business Unit or some other significant, unforeseen or
extraordinary transaction or circumstance that, in the judgment of the
Committee, would make it inappropriate to measure actual financial results
against the performance criteria on which Target Incentives were based or
use them to determine Actual Awards, the Committee shall approve
appropriate adjustments for the purpose of making determinations for the
Performance Period as uniform and as near as possible to what they would
have been, absent such transaction or circumstance.
(f) If a Participant commences participation in the Long-Term Program
as of a date after the beginning of a Performance Period, such
Participant's Actual Award, if any, for the Performance Period shall be
prorated by multiplying it by a fraction equal to (i) the number of months
in the Performance Period in which the Participant was eligible, divided by
(ii) the total number of months in the Performance Period.
7.4 Payment of Actual Awards. After the Performance Period has ended,
if a Participant's Actual Award has been determined to be greater than
zero, payment of the amount earned shall be made in accordance with and
subject to the rules and limitations in Sections 7.5 through 7.8 below. No
payment shall be made in the case of any amount that is forfeited due to a
termination of employment during the Performance Period that results in a
failure to earn all or part of the Actual Award amount pursuant to Section
7.6 or 7.7 below.
7.5 Form and Timing of Payment. The amount, if any, of the Annual
Actual Award determined under Section 7.3 above that is not forfeited
pursuant to Section 7.6 or 7.7 below (determined after applying the
proration rule of such Section 7.6, if applicable) shall be paid in full in
cash during the first calendar quarter immediately following the end of the
Annual Performance Period to which such Actual Award relates.
The amount, if any, of the Long-Term Actual Award determined under
Section 7.3 above that is not forfeited pursuant to Section 7.6 or 7.7
below (determined after applying the proration rule of such Section 7.6, if
applicable) shall be divided into two equal installments. The first
installment shall be paid during the first calendar quarter immediately
following the end of the Long-Term Performance Period. The second
installment shall be paid during the first calendar quarter of the next
year following the first installment.
Each installment payment that is due shall automatically consist of the
number of whole shares of Stock that most nearly equals, without exceeding,
57 percent (or such other percentage as may be specified by the Committee
in the future due to changing tax rates) of the total value of the
installment payment. For this purpose, the Stock Closing Price shall be
used to determine the number of shares of Stock and their total value. The
remaining portion of the installment payment, determined after subtracting
such Stock value, shall be paid in cash. Notwithstanding the foregoing,
however, if the Stock is not publicly traded at the time any payment is
due, the payment will be made entirely in cash.
7.6 Termination of Employment Due to Death, Disability, or Retirement.
Except to the extent otherwise determined by the Committee, in the event
that a Participant terminates employment with the Company during a
Performance Period due to death, Disability, or Retirement, the Participant
(or the Participant's beneficiary) shall receive pro rata payment of the
Participant's Actual Award, if any, for such Performance Period, and any
remaining amount of the Actual Award shall be forfeited. The portion of the
Actual Award to be paid in this case is the amount of the Participant's
Actual Award, if any, for the Performance Period that results from
multiplying the total Actual Award by a fraction equal to (i) the number of
months in the Performance Period in which the individual was a Participant,
divided by (ii) the total number of months in the Performance Period.
Payment shall be made at the times and in the manner prescribed by Section
7.5 above for Participants who did not terminate their employment during
the Performance Period.
7.7 Termination of Employment for Other Reasons. Except to the extent
otherwise determined by the Committee, in the event that a Participant
voluntarily terminates employment with the Company during the Performance
Period for any reason other than death, Disability, or Retirement, all
rights of the Participant with respect to Performance Units granted to
him/her for the Performance Period shall be forfeited, and no amount of the
Participant's Actual Award, if any, for such Performance Period shall be
paid. In the event that the termination is by mutual agreement, there may
be a partial payment in accordance with Section 7.6 above .
7.8 Nontransferability. As provided in Plan Section 9.7 of the Plan,
no Performance Units granted may be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated, other than by will or by the laws
of descent and distribution until the termination of the applicable
Performance Period. All rights with respect to Performance Units granted
to a Participant shall be exercisable during his/her lifetime only by such
Participant. These rules apply to Target Incentives and Actual Awards that
have become vested and are in the process of being paid in accordance with
the terms hereof.
Section 8. Beneficiary Designation
8.1 Beneficiary Designation. As provided in Section 13 of the Plan,
each Participant may designate a beneficiary or beneficiaries to receive
any payments that may be due under the Program (for either the Annual
incentive or the Long-Term Component thereof) in the event of his/her
death. Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Committee or its
designated administrator, and will be effective only when filed by the
Participant in writing with the Committee or its designated administrator
during his/her lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to his/her
estate.
Section 9. Rights of Participants
9.1 Employment. Nothing in the Program shall interfere with or limit
in any way the right of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to
continue in the employ of the Company.
Section 10. Amendment, Modification, and Termination of Program
10.1 Amendment, Modification, and Termination of Program. The
continuation of the Program as set forth herein is subject to any
amendment, modification, suspension, or termination of the that Plan may
occur pursuant to Section 15 of the Plan, and is further subject to any
similar action that may be taken by the Committee, consistent with Sections
4, 9, and 15 of the Plan and the provisions herein, with respect to the
Long-Term Component. If the Long-Term Component is terminated during any
Performance Period for which Awards have been made, the Actual Awards will
be determined as usual at the end of the Performance Period and will then
be prorated by multiplying them by a fraction equal to (i) the number of
months in the Performance Period prior to the termination, divided by (ii)
the total number of months in a full Performance Period. As provided in
Section 15 of the Plan, no amendment, revision, modification, suspension,
discontinuance or termination of the Plan shall in any manner adversely
affect any Award theretofore granted without the consent of the Grantee.
Similar rules shall apply to the Annual incentive part of the Program,
subject to the appropriate approval level.
Section 11. Tax Withholding
11.1 Tax Withholding. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local withholding tax requirements on or with
respect to any Award under the Program.
Section 12. Indemnification
12.1 Indemnification. The Long-Term Component is subject to Section
18.1 of the Plan, which provides that each person who is or shall have been
a member of the Committee or of the Boards shall be indemnified and held
harmless by KACC against and from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him/her in connection
with or resulting from any claim, action, suit, or proceeding to which
he/she may be a party or in which he/she may be involved by reason of any
action taken or failure to act under the Plan and against and from any and
all amounts paid by him/her in settlement thereof, with KACC's approval, or
paid by him/her in satisfaction of any judgment in any such action, suit,
or proceeding against him/her, provided he/she shall give the Company an
opportunity, at its own expense, to handle and defend the same before
he/she undertakes to handle and defend it on his/her own behalf. The
foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
Section 13. Requirements of Law; Consents
13.1 Requirements of Law. The granting of Awards and the issuance of
Stock under the Long-Term Component shall be subject to all applicable
laws, rules, regulations, and such approvals by any governmental agencies
or national securities exchanges as may be required.
13.2 Consents to Program Actions. As determined by the Committee in
accordance with Sections 19.2 and 19.3 of the Plan, no action under the
Long-Term Component shall be taken unless and until any "Consent" deemed
necessary or desirable in connection therewith shall have been effected or
obtained to the full satisfaction of the Committee. For this purpose,
"Consent" is defined in Section 19.3 of the Plan and includes any listings,
registrations or qualifications in respect of the Plan upon any securities
exchange or under any Federal, state or local law, rule or regulation, and
any written agreements and representations by a Participant with respect to
the disposition of shares of Stock or any other matter which the Committee
shall deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption therefrom.
13.3 Governing Law. As provided in Section 19.4 of the Plan, the
Long-Term Component, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Texas.