Exhibit 4
ALUMAX INC.
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Executive Separation Policy
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As Amended and Restated 3/5/98
ALUMAX INC.
EXECUTIVE SEPARATION POLICY
1. Purpose. The purpose of the Alumax Inc. Executive Separation Policy (the
"Policy") is to provide certain severance payments and benefits to designated
corporate officers, designated Executive Group members and other key executives
(each, an "Employee") in the event of termination of employment (other than by
reason of retirement, death or disability of the Employee) (i) within two years
after a Change in Control (as hereinafter defined) if the termination is by the
Company other than for Cause (as hereinafter defined) or by the Employee for
Good Reason (as hereinafter defined) or (ii) by the Company other than for Cause
(as hereinafter defined). This Policy shall not affect the right of the Company
to terminate an Employee's employment with or without Cause.
2. Definitions. The following definitions are applicable for purposes of
this Policy:
(a) "Annual Compensation" means the sum of (i) the Employee's annual
salary with the Company (before reduction pursuant to any deferred
compensation plan or agreement with the Company) immediately prior to the
date of termination of employment or, if greater, immediately prior to the
date of the Change of Control and (ii) the Employee's total annual
incentive award for the year of termination, assuming employment for the
full calendar year and that all applicable targets have been met, under the
Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified,
replaced or added to by the Company from time to time.
(b) "Beneficial Owner" is defined in Section 8 of the Company's 1993
Long Term Incentive Plan.
(c) "Beneficiary" is defined in Section 2 of the Company's 1993 Long
Term Incentive Plan.
(d) "Cause" means (i) the willful and continued failure by the Employee
to perform substantially his duties with the Company (other than any such
failure resulting from the Employee's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
the Employee by the Chairman of the Board of Directors or the President of
the Company which specifically identifies the manner in which the Employee
has not substantially performed his duties, (ii) the willful engagement by
the Employee in conduct which is not authorized by the Board of Directors
of the Company or
within the normal course of the Employee's business decisions and is known
by the Employee to be materially detrimental to the best interests of the
Company or any of its subsidiaries, or (iii) the willful engagement by the
Employee in illegal conduct or any act of serious dishonesty which
adversely affects, or, in the reason able estimation of the Board of
Directors of the Company, could in the future adversely affect, the value,
reliability or performance of the Employee to the Company in a material
manner. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board of Directors of the Company or
based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Employee in good faith
and in the best interests of the Company. Notwithstanding the foregoing, an
Employee shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee a copy of the
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board of Directors after
reasonable notice to the Employee and an opportunity for him, together with
his counsel, to be heard before the Board of Directors, finding that, in
the good faith opinion of the Board of Directors, the Employee was guilty
of the conduct set forth above in (i), (ii) or (iii) of this subparagraph
and specifying the particulars thereof in detail.
(e) "Change in Control" means as defined in Section 8 of the Company's
1993 Long Term Incentive Plan.
(f) "Company" means Alumax Inc., a Delaware corporation, or any
successor corporation.
(g) "Compensation Rate" means the result obtained by dividing the
Employee's Annual Compensation by 12.
(h) "Designated Participant" means (i) any corporate officer, (ii) any
Executive Group member, or (iii) any key executive of the Company or its
subsidiaries, who, in each case shall have been designated in writing by
the Chairman of the Board of the Company as eligible for severance payments
and benefits under this Policy; provided, however, that in no event shall a
Designated Participant be entitled to receive severance payments and
benefits under the Policy to the extent such severance payments and
benefits duplicate benefits actually received under an effective employment
agreement or any other separation policy, compensation or employee benefit
plan of the Company or its subsidiaries.
(i) "Executive Group" means as defined in Section 2 of the Company's
1983 Long Term Incentive Plan.
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(j) "Excess Benefit Plan" means the Alumax Inc. 1993 Excess Benefit
Plan as amended on August 3, 1995 and as the same may be modified, replaced
or added to by the Company from time to time.
(k) "Good Reason" means:
(i) a reduction by the Company in the Employee's base salary as in
effect immediately prior to the Change in Control;
(ii) the failure by the Company to continue in effect any Plan (as
hereinafter defined) in which the Employee was participating at the time of
the Change in Control, unless such Plan (x) is replaced by a successor Plan
providing to Employee substantially similar compensation and benefits
(which replacement Plan shall continue to be subject to this provision) or
(y) terminates as a result of the normal expiration of such Plan in
accordance with its terms, as in effect immediately prior to the Change in
Control; or the taking of any other action, or the failure to act, by the
Company which would materially adversely affect the Employee's continued
participation in any of such Plans as compared to the terms of such
participation on the date of the Change in Control, including by materially
reducing the Employee's benefits in the future under any such Plans; or
(iii) the failure by the Company to provide and credit the Employee
with the number of paid vacation days to which he or she is entitled in
accordance with the Company's normal vacation policy as such policy was in
effect immediately prior to the Change in Control;
(iv) effecting a change in the position of the Employee which does
not represent a position commensurate in level, authority and
responsibilities with or a promotion from Employee's position with the
Company or any of its subsidiaries immediately prior to the date of the
Change in Control, or assigning the Employee responsibilities which are
materially inconsistent with such prior position; or
(v) the Company's requiring the Employee to be based anywhere more
than 45 miles from the location of Employee's office or the location of the
Company's executive offices immediately prior to the Change in Control,
except that the Company may require Employee to be based more than 45 miles
from such location if the relocation is to a principal executive office of
the Company or principal office of a major division or subsidiary of the
Company, provided that the Employee is reimbursed, on an after-tax basis,
for all reasonable expenses incurred and losses experienced in respect of
such relocation in accordance with Company's relocation policy prior to the
date of the Change in
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Control, and except for required travel on the Company's business to an
extent substantially consistent with the business travel obligations which
the Employee undertook on behalf of the Company prior to the Change in
Control;
in each case after notice in writing from the Employee to the Company and a
period of 30 days after such notice during which the Company fails to
correct such conduct.
(l) "Plan" means any compensation plan of the Company such as an
incentive, stock option or restricted stock plan or any employee benefit
plan of the Company such as a pension, profit sharing, medical, dental or
life insurance plan.
(m) "Retirement Plan" means the 1993 Retirement Plan for Salaried
Employees of Alumax Inc. and its subsidiaries as amended and restated
through September 4, 1997 and as the same may be modified, replaced or
added to by the Company from time to time.
(n) "Years of Service" means the number of years (including partial
credit for partial years) that the Employee has been employed by the
Company and any of its subsidiaries and predecessors including AMAX Inc.
3. Eligibility. Each Designated Participant who was employed by the
Company or one of its subsidiaries immediately prior to termination shall be
eligible for the severance payments and benefits provided by Section 4 hereof.
4. Severance Payments and Benefits.
(a) An Employee who is eligible for termination payments and
benefits under this Policy pursuant to Section 3 shall be entitled to the
following upon termination of employment within two years following a
Change in Control (other than by reason of retirement, death or disability
entitling the Employee to long-term disability benefits under the Company's
long-term disability policy), if such termination is by the Company other
than for Cause or by the Employee for Good Reason:
(i) such Employee's annual salary otherwise payable through the
date of termination of employment, together with salary, incentive compen-
sation or benefits which have been earned or become payable as of the date
of termination but which have not yet been paid to the Employee;
(ii) a prorated portion of the award to the Employee for the
year of termination, assuming all applicable targets had been met, under
the
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Alumax Inc. 1993 Annual Incentive Plan, as the same may be modified,
replaced or added to by the Company from time to time, with such award
prorated based on the number of days during the year of termination which
precede the Employee's termination;
(iii) a lump-sum severance payment equal to the product of the
Employee's Annual Compensation, multiplied by 3;
(iv) for a period of 36 months after the date of termination of
employment, benefits equivalent on an after-tax basis to the additional
benefits the Employee would have received under the Plans (excluding
incentive compensation, stock option and performance share plans) in which
the Employee was participating immediately prior to termination, as if the
Employee had received credit under such Plans for service and age with the
Company during such period following the Employee's termination, with such
benefits payable by the Company at the same times and in the same manner as
such benefits would have been received by the Employee under such Plans;
and
(v) for a period terminating on the earlier of 36 months follow-
ing the date of termination of employment and the commencement of
equivalent benefits from a new employer, maintenance in effect for the
continued benefit of the Employee and his or her dependents of:
(A) all insured and self-insured medical and dental benefit
plans of the Company in which the Employee was participating immediately
prior to termination, provided that the Employee's continued participation
is possible under the general terms and conditions of such plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to the Employee's regular contribution for such participation; and
(B) the group life insurance and group disability insurance
policies of the Company then in effect for Employee;
provided, however, that if the Company so elects, or if such continued
participation is not possible under the general terms and conditions of
such plans or under such policies, the Company, in lieu of the foregoing,
shall arrange to have issued for the benefit of the Employee and the
Employee's dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those described in this
paragraph (v), or, if such insurance is not available at a reasonable cost
to the Company, shall otherwise provide the Employee and the Employee's
dependents equivalent benefits (on an after-tax basis); provided further
that, in no event shall the Employee be required to pay
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any premiums or other charges in an amount greater than that which the
Employee would have paid in order to participate in the Company's plans and
policies.
(b) An Employee who is eligible for severance payments and benefits
under this Policy pursuant to Section 3 shall be entitled to the following
upon termination of employment at any time prior to a Change in Control, if
such termination is by the Company or its subsidiaries other than for Cause
(but not if such termination is for retirement, death or disability
entitling the Employee to long-term disability benefits under the Company's
long-term disability policy, or by the Employee for any reason;
(i) the amount determined in accordance with clause (i) of
paragraph (a) of Section 4;
(ii) the amount determined in accordance with clause (ii) of
paragraph (a) of Section 4;
(iii) severance payments, at the date annual salary payments
would otherwise have been made, equal to the Employee's Compensation Rate
multiplied by the Employee's Years of Service; provided, however, that in
no event shall the amount payable to an Employee pursuant to this clause
(iii) be less than 0.5 times the Employee's Annual Compensation or greater
than 1.0 times the Employee's Annual Compensation with respect to
Designated Participants transferred from AMAX Inc., and 1.5 times the
Employee's Annual Compensation with respect to all other Designated
Participants; and
(iv) for a period terminating on the earlier of (a) the
expiration of a number of months and partial months following the date of
termination equal to the Employee's Years of Service, but in no event less
than six or more than 18, and (b) the commencement of equivalent benefits
from a new employer, maintenance in effect for the continued benefit of
the Employee and his or her dependents of:
(A) all insured and self-insured medical and dental benefit
plans of the Company in which the Employee was participating immediately
prior to termination, provided that the Employee's continued participation
is possible under the general terms and conditions of such plans (and any
applicable funding media) and the Employee continues to pay an amount equal
to the Employee's regular contribution for such participation; and
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(B) the group life insurance and group disability insurance
policies of the Company then in effect for Employee;
provided, however, that if the Company so elects, or if such continued
participation is not possible under the general terms and conditions of
such plans or under such policies, the Company, in lieu of the foregoing,
shall arrange to have issued for the benefit of the Employee and the
Employee's dependents individual policies of insurance providing benefits
substantially similar (on an after-tax basis) to those described in this
paragraph (iv), or, if such insurance is not available at a reasonable cost
to the Company, shall otherwise provide to the Employee and the Employee's
dependents equivalent benefits (on a after-tax basis); provided, further
that, in no event shall the Employee be required to pay any premiums or
other charges in an amount greater than that which the Employee would have
paid in order to participate in the Company's plans and policies if still
employed during such period.
(c) All payments required by clauses (i), (ii) and (iii) of
paragraph (a) of this Section 4 and by clauses (i) and (ii) of paragraph
(b) of this Section 4 shall be paid not later than the fifteenth (15th) day
following the date of termination of employment.
(d) In the event of the death of an Employee, all payments hereunder
due to such Employee shall be paid to his or her Beneficiary.
(e) Notwithstanding anything in this Policy to the contrary, an
Employee shall not be entitled to any payments or benefits under Section
4(b) of this Policy, unless the Human Resources and Compensation Committee
of Board of Directors of the Company in its sole discretion provides
otherwise, in the event termination of employment results from the sale or
spin-off of a subsidiary, the sale of a division, other business unit or
facility in which the Employee was employed immediately prior to such sale,
and the Employee has been offered employment with the purchaser of such
subsidiary, division, other business unit or facility on substantially the
same terms and conditions under which the Employee worked prior to the
sale. Such terms and conditions must include an agreement or plan binding
on such purchaser or spun-off entity or business, providing that upon any
termination of employment with the purchaser of the kinds described in
Section 4(b) hereof within two years following such sale, the purchaser
shall:
(i) pay to such Employee an amount equal to the severance
payments that such Employee would have received under Section 4(b)(iii)
hereof if termination of employment had resulted in amounts being owed
thereunder at the time of such sale; and
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(ii) pay or provide for the Employee or his or her dependents
the benefits described in Section 4(b)(iv) hereof for a period beginning
upon the Employee's termination of employment with the purchaser or
spun-off entity or business and terminating on the earlier of (a) the
expiration of a number of months and partial months following the date of
termination of employment with the purchaser equal to the Employee's Years
of Service to the date of such sale, but in no event less than six or more
than 18, and (b) the commencement of equivalent benefits from a new
employer following termination of employment with the purchaser or spun-off
entity or business.
(f) Notwithstanding anything in this Policy to the contrary, a
transfer of employment from the Company to a subsidiary or vice versa shall
not be considered a termination of employment for purposes of this Policy.
(g) Benefits paid to an Employee from the Excess Benefit Plan shall
include an amount equivalent to the additional benefit the Employee would
have received under The Retirement Plan if, for purposes of that Plan, the
definition of compensation included amounts for any payments made pursuant
to Section 4 of this Policy and if, for purposes of the Retirement Plan,
there was no limitation on the amount of compensation that could be taken
into account.
5. Excise Tax Gross-up. In the event that an Employee becomes entitled to
one or more payments (with a "payment" including, without limitation, the
vesting of an option or other non-cash benefit or property, whether pursuant to
the terms of this Agreement or any other Plan (the "Total Payments"), which are
or become subject to the tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), (or any similar tax that may hereafter be
imposed) (the "Excise Tax"), the Company shall pay to the Employee at the time
specified below an additional amount (the "Gross-up Payment") (which shall
include, without limitation, reimbursement for any penalties and interest that
may accrue in respect of such Excise Tax) such that the net amount retained by
the Employee, after reduction for any Excise Tax (including any penalties or
interest thereon) on the Total Payments and any federal, state and local income
or employment tax and Excise Tax on the Gross-up Payment provided for by this
Section 5, but before reduction for any federal, state or local income or
employment tax on the Total Payments, shall be equal to the product of any
deductions disallowed for federal, state or local income tax purposes because of
the inclusion of the Gross-up Payment in Employee's adjusted gross income
multiplied by the highest applicable marginal rate of federal, state or local
income taxation, respectively, for the calendar year in which the Gross-up
Payment is to be made.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax,
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(i) the Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, unless, and except to
the extent that, in the written opinion of independent compensation
consultants or auditors of nationally recognized standing selected by the
Company and reasonably acceptable to the Employee ("Independent Auditors"),
the Total Payments (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning
of Section 280G(b)(4) of the code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code or are otherwise not subject to
the Excise Tax,
(ii) the amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (A) the total
amount of the Total Payments or (B) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) of the Code (after applying clause
(i) above), and
(iii) the value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Company's Independent Auditors
appointed pursuant to clause (a) above in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment, the
Employee shall be deemed (A) to pay federal income taxes at the highest marginal
rate of federal income taxation for the calendar year in which the Gross-up
Payment is to be made; (B) to pay any applicable state and local income taxes at
the highest marginal rate of taxation for the calendar in which the Gross-up
Payment is to be made, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes if paid in
such year (determined without regard to limitations on deductions based upon the
amount of the Employee's adjusted gross income); and (C) to have otherwise
allowable deductions for federal, state and local income tax purposes at least
equal to those disallowed because of the inclusion of the Gross-up Payment in
the Employee's adjusted gross income. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time the Gross-up Payment is made, the Employee shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to the Employee or otherwise
realized as a benefit by the Employee) the portion of the Gross-up Payment that
would not have been paid if such Excise Tax had been applied in initially
calculating the Gross-up Payment, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise
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Tax is determined to exceed the amount taken into account hereunder at the time
the Gross-up Payment is made (including by reason of any payment the existence
or amount of which cannot be determined at the time of the Gross-up Payment),
the Company shall make an additional Gross-up Payment in respect of such excess
(plus any interest and penalties payable with respect to such excess) at the
time that the amount of such excess is finally determined.
The Gross-up Payment provided for above shall be paid on the thirtieth
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to the Employee on such day an
estimate, as determined by the Company's Independent Auditors appointed pursuant
to clause (i) above, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 127(b)(2)(B) of the Code), as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Employee, payable on the fifth day after demand by
the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the code). If more than one Gross-up Payment is made, the
amount of each Gross-up Payment shall be computed as not to duplicate any prior
Gross-up Payment. The Company shall have the right to control all proceedings
with the Internal Revenue Service that may arise in connection with the
determination and assessment of the Excise Tax and, at its sole option, the
Company may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with any taxing authority in respect of such Excise Tax
(including any interest or penalties thereon); provided, however, that the
Company's control over any such proceedings shall be limited to issues with
respect to which a Gross-up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest any other issue raised by the Internal
Revenue Service or any other taxing authority. The Employee shall cooperate with
the Company in any proceedings relating to the determination and assessment of
the Excise Tax and shall not take any position or action that would materially
increase the amount of any Gross-up Payment hereunder.
6. Withholding. The Company shall have the right to deduct from all
payments hereunder any taxes required by law to be withheld therefrom.
7. No Right To Employment. Nothing in this Policy shall be construed as
giving any person the right to be retained in the employment of the Company or
any subsidiary, nor shall it affect the right of the Company or any subsidiary
to dismiss an Employee without any liability except as provided in this Policy.
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8. Legal Fees. The Company shall pay all legal fees and related expenses
incurred by an Employee in seeking to obtain or enforce any payment, benefit or
right provided by this Policy; provided; however, that the Employee shall be
required to repay any such amounts to the Company to the extent that an
arbitrator or a court of competent jurisdiction issues a final, unappealable
order setting forth a determination that the position taken by the Employee was
frivolous or advanced in bad faith.
9. Amendment and Termination. The Board of Directors of the Company may
amend or terminate this Policy at any time prior to a Change in Control. This
Policy may not be amended or terminated at any time after a Change in Control in
any manner adverse to an Employee without the prior consent of such Employee.
10. Governing Law; Arbitration. The validity, construction, and effect of
this Policy and any rules and regulations relating to this Policy shall be
determined in accordance with Delaware General Corporation Law, to the extent
applicable, other laws (including those governing contracts) of the State of
Delaware, without giving effect to principles of conflicts of laws, and
applicable federal law. If any provision hereof shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions hall continue to be fully effective. Any dispute or controversy
arising under or in connection with this Policy shall be settled exclusively by
arbitration in Atlanta, Georgia by three arbitrators in accordance with the
rules of the American Arbitration Association in effect at the time of
submission to arbitration. Judgment may be entered on the arbitrators' award in
any court having jurisdiction. For purposes of settling any dispute or
controversy arising hereunder or for the purpose of entering any judgment upon
an award rendered by the arbitrators, the Company and the Employee hereby
consent to the jurisdiction of any or all of the following courts: (i) the
United States District Court for the Northern District of Georgia, (ii) any of
the courts of the State of Georgia, or (iii) any other court having
jurisdiction. The Company and the Employee hereby waive, to the fullest extent
permitted by applicable law, any objection which it may now or hereafter have to
such jurisdiction and any defense of inconvenient forum. The Company and the
Employee hereby agree that a judgment upon an award rendered by the arbitrators
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
11. Nonassignability. Compensation and benefits under the Policy may not be
assigned by the Employee. The terms and conditions of this Policy shall be
binding on the successors and assigns of the Company.
12. No Duty to Mitigate. No employee shall be required to mitigate, by
seeking employment or otherwise, the amount of any payment that the Company
becomes obligated to make under this Policy, and, except as expressly provided
in this Policy, amounts or other benefits to be paid or provided to an Employee
pursuant to this
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Policy shall not be reduced by reason of the Employee's obtaining other
employment or receiving similar payments or benefits from another employer.
13. Duplicate Payments or Benefits.
(a) Except to the extent that the terms of this Policy confer compensa-
tion or benefits that are more favorable to Employee than are available
under any other employee (including executive) benefit of executive
compensation plan of the company in which Employee is a participant,
Employee's rights under any such employee (including executive) benefit
plan or executive compensation plan shall be determined in accordance with
the terms of such plan (as it may be modified or added to by the Company
from time to time).
(b) This Policy constitutes the entire understanding between the
Company and Employee relating to employment of Employee by the Company and
its subsidiaries and supersedes and cancels all prior agreements and
understandings with respect to the subject matter of this Policy. Employee
shall not be entitled to any payment or benefit under this Policy which
duplicates a payment or benefit received or receivable by Employee under
such prior agreements and understandings or under any employee (including
executive) benefit plan or executive compensation plan of the Company.
14. Effective Date. This Policy is effective as of November 15, 1993.
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