2005-2007 LONG-TERM CASH AWARD
Granted to: [First name] [Last name]
Effective Date of Grant:
Targeted Award: [Target]
Performance Period: January 1, 2005 - December 31, 2007
Under the long-term incentive program of W.R. Grace & Co (the
"Company"), the Compensation Committee (the "Committee") of the Board of
Directors of the Company has granted you a Long-Term Cash Award under which you
may earn a cash payout in an amount equal to (or, in certain circumstances,
greater or less than) the Targeted Award set forth above, over the Performance
Period.
You will earn this Targeted Award if the performance objectives
described in Annex B for the Performance Period are met. If the performance
objectives are only partially achieved or are over-achieved, the amount you
actually earn under this Award will be decreased (or eliminated) or increased as
set forth in Annex B.
The award will be calculated and paid to you, net of the applicable
taxes.
The consequences of a change in or termination of your employment
status during the Performance Period are described in the attached
Administrative Practices (Annex C).
In all matters regarding the administration of the Long-Term Cash
Award, the Committee has full and sole jurisdiction, subject to the provisions
of Annex C.
Long-Term Cash Awards are being granted only to a limited number of key
employees of the Company and its subsidiaries. This Award should, consequently,
be treated confidentially.
W.R. Grace & Co.
By:
Alfred Festa
CEO, President
Acceptance of the foregoing is acknowledged this
____________ day of _______________, 2005.
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(Signature of Participant)
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(Please print full name)
Annex B
CALCULATION OF 2005-2007 LTIP
Your 2005-2007 LTIP award payout will be based on the 3-year compound annual
growth rate (CAGR) in total Grace core earnings before interest and taxes (core
EBIT). Payouts are contingent upon achievement of target CAGR for the 3-year
performance period. The target CAGR is 6%, using 2004 results as the base year.
The core earnings before interest and taxes (core EBIT) in 2004 was $179.3
million. The chart below details six scenarios at different assumed growth
rates. The target growth is highlighted.
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PERFORMANCE PERIOD
GROWTH TARGETS
ASSUMED BASE TOTAL LTIP CUMULATIVE
GROWTH PERIOD 2005 2006 2007 GROWTH POOL REPORTED
RATES 2004 05-07(1) EARNINGS(2)
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1.50% 179.3 182.0 184.7 187.5 554.2 2.9 551.3
3.00% 179.3 184.7 190.2 195.9 570.8 5.9 564.9
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6.00% 179.3 190.1 201.5 213.5 605.1 11.8 593.3
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10.00% 179.3 197.2 217.0 238.6 652.8 14.3 641.0
15.00% 179.3 206.2 237.1 272.7 716.0 17.3 704.2
25.00% 179.3 224.1 280.2 350.2 854.5 23.6 842.7
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(1) All results include full recognition/accrual of Annual Incentive
Compensation Program and, for achievement levels above 6% (i.e., 10%, 15%, and
25%), all totals include accruals for Long-Term Incentive Program Payments
(2) Cumulative Reported Earnings represent the 3 year core EBIT earnings
required at the respective assumed growth rates. Up to the first $11.8 million
(target CAGR 6%) is deducted from reported results. Payouts over target ($11.8
million) must be accrued as part of reported earnings.
The Long-Term Cash Award payout will vary with actual results as shown in the
chart below:
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CAGR LEVEL ACHIEVED PAYOUT
(ROUNDED TO THE NEAREST WHOLE PERCENTAGE)
--------------------- -------------------------------------------
25% 200%
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15% 147%
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10% 121%
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6% 100%
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3% 50%
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3%< Prorated
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For the 2005-2007 LTIP, cash payments will be made in two installments - 50% of
what is earned based on current performance at the end of 2006, but no more than
50% of target for the first two years, will be paid in March 2007, and the
balance will be paid in March 2008.
Example:
A sample calculation of the Long-Term Cash Award Earned is provided below.
Assume that your Targeted Award is $20,400. $13,600 would be earned after Year 2
assuming a 6% growth per year. Therefore the payment in March 2007 would be
$6,800, 50% of what is earned.
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CAGR LEVEL PAYOUT IN PAYOUT IN
ACHIEVED MARCH 2007 MARCH 2008 TOTAL PAYOUT
- ------------------ ----------------- ----------------- -----------------------
25% $6,800 $34,000 $40,800
- ------------------ ----------------- ----------------- -----------------------
15% $6,800 $23,188 $29,988
- ------------------ ----------------- ----------------- -----------------------
10% $6,800 $17,885 $24,685
- ------------------ ----------------- ----------------- -----------------------
6% $6,800 $13,600 $20,400
- ------------------ ----------------- ----------------- -----------------------
3% $3,400 $6,800 $10,200
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Annex C
W. R. GRACE & CO.
Administrative Practices - Long-Term Cash Award Program
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2005-2007 Performance Period
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Definitions
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"Award Payment": An Interim Long-Term Cash Award Payment or Remaining Long-Term
Award Payment, as applicable.
"Board of Directors": The Board of Directors of the Company
"Committee": The Compensation Committee of the Board of Directors.
"Company": W. R. Grace & Co., a Delaware Corporation and/or, if applicable in
the context, one or more of its Subsidiaries.
"Incomplete Long-Term Cash Awards": A Long-Term Cash Award for which the
Performance Period has not been completed as of the date referenced.
"Interim Long-Term Cash Award Payment": As defined on page 4, provided that such
payment will not exceed 50% of the Participant's Targeted Award for the first
two years, regardless of Company performance at the time of payment.
"Key Employee": An officer or other senior, full-time employee of the Company,
who, in the opinion of the Company, can contribute significantly to the growth
and successful operations of the Company.
"Long-Term Cash Award Program": An undertaking by the Company to financially
reward a Key Employee at the end of a Performance Period, which undertaking is
contingent upon or measured by the attainment over the Performance Period of
specified performance objectives determined (on a consolidated or unconsolidated
basis) by changes in the 3-year compound annual growth rate (CAGR) in Total
Grace's core earnings before interest and taxes (core EBIT).
"Long-Term Cash Award": A cash award, to be paid in the future, which is granted
to Key Employees under the Company's long-term incentive program.
"Long-Term Cash Award Earned": The amount of cash earned by a Participant
pursuant to the terms of a Long-Term Cash Award.
"Participant": A Key Employee who is, or who is proposed to be, a recipient of a
Long-Term Cash Award.
"Performance Period": Except as provided herein, a period of three calendar
years over which a Long-Term Cash Award may be earned, as approved by the
Committee. The first Performance Period under this Plan will commence effective
January 1, 2005 and
will end on December 31, 2007. Performance Periods with respect to different
Long-Term Cash Awards to the same individual may overlap.
"Total Grace Core EBIT": The core earnings before interest and taxes (core
EBIT)" of the Company as reported on (and calculated in accordance with) the
statement of W. R. Grace & Co. Continuing Operations- Segment Basis.
"Remaining Long-Term Cash Award Payment": As defined on Page 4, the second
installment of the Long-Term Cash Award that may be paid after the end of the
Performance Period, based on Company performance for the entire Performance
Period.
"Subsidiary": A corporation, partnership, limited liability company or other
form of business association of which shares of common stock or other ownership
interests (i) having more than 50% of the voting power regularly entitled to
vote for directors (or equivalent management rights) or (ii) regularly entitled
to receive more than 50% of the dividends (or their equivalents) paid on the
common stock (or other ownership interests), are owned, directly or indirectly,
by the Company.
"Targeted Award": The amount of cash award specified in writing for a
Participant as his or her "Targeted Award" for a Performance Period and which is
subject to and covered by the terms and conditions of a Long-Term Cash Award.
This amount may be different from the Long-Term Cash Award Earned by an
individual.
Plan Administration
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The Plan shall be administered by the Committee, provided that no member of the
Committee shall be eligible to receive a Long-Term Cash Award while serving on
the Committee.
The Committee shall approve (i) the performance measurements and objectives for
each Long-Term Cash Award and (ii) the Performance Period over which a Long-Term
Cash Award is to be earned.
The Committee shall approve (i) the Key Employees who are to be granted
Long-Term Cash Awards and (ii) the Targeted Award subject to each Long-Term Cash
Award.
Long-Term Cash Awards
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The Committee may, at any time or from time to time, grant Long-Term Cash Awards
to Key Employees.
Each Long-Term Cash Award shall be evidenced by a written instrument containing
such terms and conditions as the Committee shall approve, provided the
instrument is consistent with these practices.
(2)
No Long-Term Cash Award, nor any payment or right thereunder, shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, encumbrance or
charge, except by will or the laws of descent and distribution, or by the terms
of a Participant's Designation of Beneficiary, if any, on file with the Company.
In the case of a Key Employee who becomes a Participant after the beginning of a
Performance Period, the Committee may ratably reduce the amount of the Targeted
Award covered by such Employee's Long-Term Cash Award or otherwise appropriately
adjust the terms of the Long-Term Cash Award to reflect the fact that the Key
Employee is to be a Participant for only part of the Performance Period.
It is the intention of the Committee that Long-Term Cash Awards be related to
the results of the core operations affected by the management actions taken by
the Participants. Subject to the administrative practices that apply to
termination or change in employment status and to the amendment or
discontinuance of Long-Term Cash Awards, the performance objectives applicable
to Long-Term Cash Awards will remain unchanged during the Performance Period
except as follows:
o In the event of the divestment of a Business prior to completion of the
Performance Period, both the performance objectives and results pertaining
to that Business shall be eliminated for the full year in which the
divestment occurs and for any subsequent years.
o In general, acquisitions will be included in the performance results.
Termination or Change in Employment Status
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A Participant shall forfeit all rights to any Award Payment, if, prior to the
date of payment of such Award Payment, the Participant (1) resigns without the
consent of the Committee, (2) retires under a retirement plan of the Company or
Subsidiary before age 62 without the consent of the Committee, or (3) is
terminated for cause.
If a Participant retires under a retirement plan of the Company or Subsidiary at
or after age 62, or ceases employment as a result of death or disability, or
ceases employment as a result of an involuntary termination after a Change in
Control of the Company (as defined herein), during a Performance Period, then
his rights in any Incomplete Long-Term Cash Award related to that Performance
Period shall thereupon vest, and he shall be entitled to receive any Award
Payment of any Long-Term Cash Award Earned he would otherwise have received (at
the time he would have otherwise received the Award Payment), except that the
amount of any Long-Term Cash Award Earned shall be reduced ratably in proportion
to the portion of the Performance Period during which the Participant was not an
employee. If a Participant ceases employment with the Company for any of the
reasons specified in this paragraph, after the completion of any Performance
Period (but before the payment of the Remaining Long-Term Cash Award Payment
related to the completed Performance Period), then his rights to any Long-Term
Cash Award Earned and to such Award Payment related to the completed Performance
Period shall thereupon vest, and he shall be entitled to receive such Award
Payment at the time he would have otherwise received the Payment.
(3)
If a Participant ceases employment with the Company for any reason other than
those indicated in the previous two paragraphs (including by reason of
involuntary termination not for cause, except as provided above with respect to
involuntary termination after a Change in Control of the Company, or transfer of
employment to a buyer of any business unit of the Company), then his rights in
any Incomplete Long-Term Cash Award, and any Award Payment that is unpaid as of
the date the Participant ceases such employment, shall be determined by the
Committee (or the designee of the Committee, which may include the Chief
Executive Officer of the Company) as soon as practicable after the Participant
ceases such employment. All such determinations shall be final and binding on
all parties.
Except as modified by the provisions of the second and third paragraphs of this
section, payments due to Participants pursuant to the applicable preceding
paragraphs, above, shall be calculated and made in accordance with the
provisions described under the section entitled "Calculation of Long-Term Cash
Awards Earned: Form of Payment".
A leave of absence, if approved by the Committee, shall not be deemed a
termination or change of employment status for the purposes of this section,
but, unless the Committee otherwise directs, any Long-Term Cash Award Earned
that a Participant would otherwise have received under a Long-Term Cash Award
Program shall be reduced ratably in proportion to the portion of the Performance
Period during which the Participant was on such leave of absence.
Any consent, approval or direction which the Committee may give under this
section in respect of an event or transaction may be given before or after the
event or transaction.
Calculation of Long-Term Cash Awards Earned: Form of Payment
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Long-Term Cash Awards Earned will be paid to a Participant in two installments
(1) the first installment shall be paid in March of the third and final year of
the Performance Period and shall be equal to 50% of what is earned based on the
Company's performance for the first two calendar years of the applicable
Performance Period, but no more than 50% of the Participant's Targeted Award for
the first two years (the "Interim Long-Term Cash Award Payment"), and (2) the
balance, if any, of the Long-Term Cash Award Earned will be paid in March after
the end of the third and final year of the Performance Period (the "Remaining
Long-Term Cash Award Payment").
The Committee shall determine the extent to which the performance objectives of
a Long-Term Cash Award have been achieved during the Performance Period and the
amount of any Long-Term Cash Awards Earned (and the amount of any Award
Payment). All calculations in this regard shall be made in accordance with the
generally accepted accounting principles customarily applied by the Company and
shall be submitted to the Committee for its review and approval. The
determination of the Committee shall be final and binding.
(4)
General
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Nothing in this document nor in any instrument executed pursuant hereto shall
confer upon a Participant any right to continue in the employ of the Company or
a Subsidiary, or shall affect the right of the Company or a Subsidiary to
terminate his or her employment with or without cause.
The Company or a Subsidiary may make such provisions as it may deem appropriate
for the withholding or any taxes that the Company or a Subsidiary determines it
is required to withhold in connection with any Long-Term Cash Award Earned.
Nothing in a Long-Term Cash Award is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other plan,
practice, or arrangement for the payment of compensation or benefits to
employees generally, or to any class or group of employees, which the Company or
a Subsidiary now has or may hereafter lawfully put into effect, including,
without limitation, any retirement, pension, group insurance, annual bonus,
stock purchase, stock bonus or stock option plan; provided, however, that no
amounts awarded or paid pursuant to any Long-Term Cash Award shall be included
or counted as compensation for the purposes of any employee benefit plan of the
Company or a Subsidiary where contributions to the plan, or the benefits
received from the plan, are measured or determined in whole or in part, by the
amount of the employee's compensation.
The grant of a Long-Term Cash Award to an employee of a Subsidiary shall be
contingent on the approval of the Long-Term Cash Award by the Subsidiary and the
Subsidiary's agreement that (i) the Company may administer such Award on its
behalf and (ii) the Subsidiary will make, or reimburse the Company for, the
payments called for by the Long-Term Cash Award. The provisions of this
paragraph and the obligations of the Subsidiary so undertaken may be waived, in
whole or in the part, from time to time by the Company.
Amendments and Discontinuance
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In the event acquisitions, divestments, substantial changes in tax or other laws
or in accounting principles or practices, natural disasters or other
extraordinary events render fulfillment of the performance objectives of a
Long-Term Cash Award impossible or impracticable, or result in the achievement
of the performance objectives without appreciable effort by the Participant, the
Committee may, but shall not be obligated to, amend any such Long-Term Cash
Award in any appropriate manner so that the Participant may earn Long-Term Cash
Awards comparable to those that might have been earned if the extraordinary
event had not occurred.
The Chief Executive Officer of the Company may approve such technical changes
and clarifications to the Long-Term Cash Award Program as necessary, provided
such
(5)
changes or clarifications do not vary substantially from the terms and
conditions outlined in this description.
In the event a Change in Control of the Company (as defined herein) shall occur
or the Board of Directors has reason to believe that a Change of Control may
occur, the Committee may, with respect to any one or more Long-Term Cash Awards,
(i) reduce the length of a Performance Period to not less than one year, (ii)
make ratable adjustments to performance objectives and Targeted Awards, (iii)
change the methods of measuring the performance objectives, (iv) accelerate the
payment of any Long-Term Cash Awards Earned or any Award Payment, and (v) take
other action deemed by it to be appropriate and in the best interests of the
Company under the circumstances. For the purposes of this paragraph:
(A) "Change in Control of the Company" means and shall be deemed to have
occurred if (a) the Company determines that any "person" (as such term is
used in Section 13(d) and 14 (d) of the Securities Exchange Act of 1934),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, has become the
"beneficial owner" (as defined in Rule 13d-3 under such Act), directly or
indirectly, of 20% or more of the outstanding common stock of the Company
(provided, however, that a Change in Control shall not be deemed to have
occurred if such person has become the beneficial owner of 20% or more of
the outstanding Common Stock as the results of a sale of Common Stock by
the Company that has been approved by the Board of Directors); or pursuant
to a plan of reorganization which has been confirmed by the U.S. District
Court or Bankruptcy Court having jurisdiction of the Company's Chapter 11
case, Case No. 01-01139 (JJF), pursuant to an order of such Court which is
final and nonappealable, and becomes effective); (ii) individuals who are
Continuing Directors cease to constitute a majority of any class of
directors of the Board; (iii) there occurs a reorganization, merger,
consolidation or other corporate transaction involving the Company (a
"Corporate Transaction"), in each case, with respect to which the
stockholders of the Company immediately prior to such Corporate Transaction
do not, immediately after the Corporate Transaction, own 50% or more of the
combined voting power of the corporation resulting from such Corporate
Transaction, provided that this clause (iii) shall not apply to a Corporate
Transaction which is pursuant to section 363 of the Bankruptcy Code, or is
pursuant to a plan of reorganization which has been confirmed by the U.S.
District Court or Bankruptcy Court having jurisdiction of the Company's
chapter 11 case, Case No. 01-01139 (JJF), pursuant to an order of such
Court which is final and nonappealable, and becomes effective, or (iv) the
shareholders of the Company approve a complete liquidation or dissolution
of the Company.
(B) "Continuing Director" means any member of the Board of Directors who was
such a member on the date on which this Program was approved by the Board
of Directors, and any successor to a Continuing Director who is approved as
a nominee or elected
(6)
to succeed to a Continuing Director by a majority of Continuing Directors
who are then members of the Board of Directors.
The granting of Long-Term Cash Awards may be amended or discontinued by the
Committee at any time.
No amendment or discontinuance of Long-Term Cash Awards shall, without a
Participant's consent, adversely affect his rights in any Long-Term Cash Awards
theretofore granted to him, except that, if the Committee so directs, all
Incomplete Long-Term Cash Awards may be terminated prospectively with the same
effect as a termination of employment under the second paragraph of the section
entitled "Termination or Change in Employment Status".
(7)
