THE DIAL CORP
PERFORMANCE UNIT INCENTIVE PLAN
1. PURPOSE
The purpose of the Plan is to promote the long-term interests of
the Corporation and its shareholders by providing a means for
attracting and retaining designated key executives of the
Corporation and its Affiliates through a system of cash rewards
for the accomplishment of long-term predefined objectives.
2. DEFINITIONS
The following definitions are applicable to the Plan:
"Affiliate" - Any "Parent Corporation" or "Subsidiary
Corporation" of the Corporation as such terms are defined in
Section 425(e) and (f), or the successor provisions, if any,
respectively, of the Code (as defined herein).
"Award" - The grant by the Committee of a Performance Unit
or Units as provided in the Plan.
"Board" - The Board of Directors of The Dial Corp.
"Code" - The Internal Revenue Code of 1986, as amended, or
its successor general income tax law of the United States.
"Committee" - The Executive Compensation Committee of the
Board.
"Corporation" - The Dial Corp.
"Participant" - Any executive of the Corporation or any of
its Affiliates who is selected by the Committee to receive
an Award.
"Performance Period" - The period of time selected by the
Committee for the purpose of determining performance goals
and measuring the degree of accomplishment. Generally, the
Performance Period will be a period of three successive
fiscal years of the Corporation.
"Performance Unit Award" - An Award.
"Plan" - The Performance Unit Incentive Plan of the
Corporation.
"Unit" - The basis for any Award under the Plan.
3. ADMINISTRATION
The Plan shall be administered by the Committee. Except as
limited by the express provisions of the Plan, the Committee
shall have sole and complete authority and discretion to (i)
select Participants and grant Awards; (ii) determine the number
of Units to be subject to Awards generally, as well as to
individual Awards granted under the Plan; (iii) determine the
targets that must be achieved in order for the Awards to be
payable and the other terms and conditions upon which Awards
shall be granted under the Plan; (iv) prescribe the form and
terms of instruments evidencing such grants; and (v) establish
from time to time regulations for the administration of the Plan,
interpret the Plan, and make all determinations deemed necessary
or advisable for the administration of the Plan.
4. PERFORMANCE GOALS
The Performance Unit Incentive Plan is intended to provide
Participants with a substantial incentive to achieve or surpass
two pre-defined long-range financial goals which have been
selected because they are key factors (goals) in increasing
shareholder value. One of the key goals for CORPORATE and
SUBSIDIARY Participants is Average Three-Year Return on Equity,
utilizing a pro forma return on equity calculation for
subsidiaries (other than Travelers Express) which effectively
adjusts each to the overall financial objective of a capital
structure of 35% debt and 65% equity.
The second goal for each SUBSIDIARY Participant principally
emphasizes Average Three-Year Real Earnings Growth. The targets
for this goal will take several different forms in recognition of
the need to tailor the target to the most important factors for
the unit (as well as to overall corporate objectives). For
example, while operating income is normally the best indicator of
earnings growth, the target will be based on net income when
tax-exempt income (Travelers Express) or income from equity in
joint ventures (Dobbs International, GLSI) come into play, as
operating income would not give the full picture in such
circumstances. Goals for subsidiaries should be meaningful,
easily understood and consistent with the overall objectives.
The second goal for CORPORATE Participants also emphasizes
Average Three-Year Real Earnings Growth but the target will be
based on earnings per share from continuing operations, the most
appropriate measure in increasing shareholder value.
5. DETERMINATION OF TARGETS
A. Average Three-Year Subsidiary Pro Forma Return On Equity
(Except Travelers Express Company, Inc., group)
Return on Equity calculations for each Subsidiary Company except
Travelers Express will be made by dividing each year's net
earnings after tax by the average quarterly (beginning of year
and each quarter-end, including year-end) pro forma equity. For
purposes of this calculation, pro forma equity shall be deemed to
be 65% of the sum of each Subsidiary Company's actual equity plus
its debt, including intercompany accounts payable less
intercompany accounts receivable (net capital employed). Net
income shall be adjusted (1) to exclude the after-tax effect of
intercompany interest expense and the after-tax effect of
intercompany interest income and (2) to deduct the after-tax
effect of the pro forma interest, calculated at 8% per annum, on
the excess of 35% of the average beginning and ending balance of
net capital employed over the average beginning and ending
balance of outstanding debt (pro forma debt), so that each
company's Return on Equity is based on a pro forma 65% equity and
35% debt structure for the net capital employed by it. In all
cases, the after-tax calculations are to be made using the
statutory federal income tax rate applicable to such year. In
establishing a realistic weighted average annual Return on Equity
target for the Performance Period, consideration will be given to
industry averages whenever known as well as the Performance
Period Financial Plan year-by-year Return on Equity (on the same
basis as previously described), overall Corporate objectives and,
where appropriate, other circumstances. An appropriate range of
values above and below such target will then be selected to
measure achievement above or below the target.
B. Average Three-Year Return on Equity (Travelers Express)
Return on Equity calculations for Travelers Express will be made
by dividing each year's net income after taxes by the average
quarterly (beginning of year and each quarter-end, including
year-end) equity. Consideration will then be given to any known
or anticipated changes in equity structure and available industry
averages, and a realistic weighted average annual Return on
Equity target for the three-year Performance Period will be
established, taking into account all factors mentioned as well as
the three-year Performance Period Financial Plan year-by-year
Return on Equity (on the same basis as previously described),
overall Corporate objectives and, where appropriate, other
circumstances. An appropriate range of values above and below
such target will then be selected to measure achievement above or
below the target.
C. Average Three-Year Dial Return on Common Stockholders'
Equity
Return on common stockholders' equity calculations will be made
for The Dial Corp by dividing each year's net income after taxes
less preferred dividend requirements by the year's monthly
average of common stockholders' equity (return on common equity).
Consideration will then be given to any known or anticipated
changes in equity structure and to appropriate industry averages,
and a realistic weighted average annual Return on Equity target
for the three-year Performance Period will be established taking
into account all factors mentioned as well as the three-year
Performance Period Financial Plan year-by-year return on equity
(on the same basis as previously described), overall Corporate
objectives and, where appropriate, other circumstances. An
appropriate range of values above and below such target will then
be selected to measure achievement above or below the target.
D. Average Three-Year Subsidiary Earnings Growth
A realistic average three-year earnings target for the
Performance Period for each Subsidiary Company will be
established taking into account historical income, financial plan
income for the Performance Period, overall Corporate objectives,
and if appropriate, other circumstances. An appropriate range of
values above and below such target will then be selected to
measure achievement above or below the target.
E. Average Three-Year Dial Earnings Per Share Growth
A realistic "Earnings Per Share" from continuing operations
target for The Dial Corp will be established after considering
historical earnings per share from continuing operations,
financial plan income for the Performance Period, overall
Corporate objectives and, if appropriate, other circumstances.
An appropriate range of values above and below such target will
then be selected to measure achievement above or below the
target.
F. Establishing Targets
The appropriate targets, range of values above and below such
targets and the Performance Period to be used as a basis for the
measurement of performance for Awards under the Plan will be
determined by the Committee no later than 90 days after the
beginning of each new Performance Period during the life of the
Plan, after giving consideration to the recommendations of the
Chief Executive Officer of The Dial Corp. Performance Units will
be earned based upon the degree of achievement of the pre-defined
targets over the Performance Period following the date of grant.
Earned Units can range, based on operating company performance
using an award matrix, from 0% to 200% of the target Units.
6. OTHER PLAN PROVISIONS
Special treatment of any significant unusual or non-recurring
items (for purposes of earnings and/or Return on Equity
calculation) arising after targets are set may be recommended by
the Chief Executive Officer of The Dial Corp to the Committee for
approval including revision to either or both targets in the
event of any significant acquisition or divestiture made during
the Performance Period to give effect, as appropriate, to planned
effects of such acquisition or divestiture during the Performance
Period. Other examples include extraordinary items, gains or
losses arising from discontinued operations, effects of a change
in accounting principles or a change in federal income tax rates.
Reclassification of a major business unit to discontinued
operations status after targets have been set would also require
adjustment because of effect on continuing operations results.
For subsidiaries, in certain extreme cases, unplanned effects of
major litigation, remediation of environmental matters,
significant uninsured losses, a significant restructuring or the
bankruptcy of a major vendor or customer are further examples of
the types of items which could be (but are not required to be)
considered by the Chief Executive Officer of The Dial Corp for
recommendation to the Committee for possible special treatment.
Conversely, the general rule for Corporate measurements is that
restructuring charges affecting years after 1992, gain or loss on
sale of a smaller subsidiary or other one-time income or loss
items mentioned above regarding subsidiaries would not be
considered for special treatment as the Corporate mission is to
achieve the targets notwithstanding the effects of such items.
Incentives to be paid under this Plan must be deducted from the
corporation's earnings during the Performance Period (generally
in the third year, when the amounts to be paid can be reasonably
estimated). Goals must be achieved after deducting from actual
results all incentive compensation applicable to such performance
periods, including those incentives earned under this Plan.
7. AWARD MATRIX
The range of values for the Corporation's or a Subsidiary
Company's performance is set at a minimum of 80% of target for
threshold and capped at 120% of the target. Notwithstanding the
foregoing, targets may be established for threshold within the
range of above 80% up to and including 95% and for maximum within
the range of below 120% down to 105%, as may be designated by the
Committee; however, the Committee may, when appropriate, adjust
such ranges upward or downward. The Return on Equity target and
range of values will be entered on the vertical axis of the
appropriate Performance Unit Award Matrix. The weighted average
annual Return on Equity target for the Performance Period will
represent a meaningful improvement over average historical
returns except in extremely unusual circumstances. Actual
weighted average annual Return on Equity performance for each
Participant will be determined at the end of the three-year
Performance Period based on the appropriate definition set forth
above. Similarly, the average three-year Real Earnings Growth
target and range of values will be entered on the horizontal axis
of the Performance Unit Award Matrix, and actual results will be
determined at the end of the three-year Performance Period based
on the appropriate definition.
Performance Units will be earned based upon the degree of
achievement of the pre-defined goals using the Performance Unit
Award Matrix.
PERFORMANCE UNIT AWARD MATRIX:
Percent of Award Earned
________________________________________
|
| 100% 125% 150% 175% 200%
Return | 75% 100% 125% 150% 175%
on | 50% 75% 100% 125% 150%
Equity | 25% 50% 75% 100% 125%
| 0% 25% 50% 75% 100%
|
________________________________________
Improvement in Real Earnings
8. PARTICIPANT ELIGIBILITY
Personnel will be eligible for participation as recommended by
The Dial Corp Chief Executive Officer for approval by the
Committee no later than 90 days after the beginning of each new
Performance Period during the life of the Plan, limited only to
those key executives who contribute in a substantial measure to
the successful performance of the Corporation or its Affiliates.
The Chief Executive Officer will recommend for approval by the
Committee which Affiliates among its Affiliates should be
included in the Plan.
9. AWARD DETERMINATION
The number of Units to be awarded will be determined, generally,
by multiplying a factor times the Participant's annual base
salary in effect at the time the Award is granted and dividing
the result by the average of the high and low of the
Corporation's Common Stock on the date of approval of the grant
by the Committee. The Award factor will be recommended by the
Chief Executive Officer of The Dial Corp for approval by the
Committee annually no later than 90 days after the beginning of
each new performance period. The Committee may adjust the number
of Units awarded in its discretion.
10. GENERAL TERMS AND CONDITIONS
The Committee shall have full and complete authority and
discretion, except as expressly limited by the Plan, to grant
Units and to provide the terms and conditions (which need not be
identical among Participants) thereof. Without limiting the
generality of the foregoing, the Committee may specify a
Performance Period of not less than two years or not more than
five years, rather than the three-year Performance Period
provided for above, and such time period will be substituted as
appropriate to properly effect the specified Performance Period.
No Participant or any person claiming under or through such
person shall have any right or interest, whether vested or
otherwise, in the Plan or in any Award thereunder, contingent or
otherwise, unless and until all the terms, conditions, and
provisions of the Plan and its approved administrative
requirements that affect such Participant or such other person
shall have been complied with. Nothing contained in the Plan or
its Administrative Guidelines shall (i) require the Corporation
to segregate cash or other property on behalf of any Participant
or (ii) affect the rights and power of the Corporation or its
Affiliates to dismiss and/or discharge any Participant at any
time.
Any recapitalization, reclassification, stock split, stock
dividend sale of assets, combination or merger not otherwise
provided for herein which affects the outstanding shares of
Common Stock of the Corporation or any other change in the
capitaliztion of the Corporation affecting the Common Stock shall
be appropriately adjusted for by the Committee or the Board, and
any such adjustments shall be final, conclusive and binding.
11. PAYMENT OF AWARDS
(a) Performance Unit Awards which may become payable under
this Plan shall be calculated as determined by the Committee
but any resulting Performance Unit Award payable shall be
subject to the following calculation: each Unit payable
shall be multiplied by the average of the daily means of the
market prices of the Corporation's Common Stock during the
month following the Performance Period. Performance Unit
Awards earned will be determined as of the third Thursday of
February following the close of the Performance Period and
distribution of the Award will be made within ninety (90)
days following the close of the Performance Period. Awards
will be subject to discretionary downward adjustment, for
those executive officers affected by Section 162(m) of the
Internal Revenue Code, by the Committee.
(b) Performance Unit Awards granted under this Plan shall
be payable during the lifetime of the Participant to whom
such Award was granted only to such Participant; and, except
as provided in (d) and (e) of this Section 7, no such Award
will be payable unless at the time of payment such
Participant is an employee of and has continuously since the
grant thereof been an employee of, the Corporation or an
Affiliate. Neither absence on leave, if approved by the
Corporation, nor any transfer of employment between
Affiliates or between an Affiliate and the Corporation shall
be considered an interruption or termination of employment
for purposes of this Plan.
(c) Prior to the expiration of the Performance Period, all
Participants will be provided an irrevocable option to defer
all or a portion of any earned Performance Unit Award, if
there be one but not less than $1,000, in written form as
prescribed by the Board under the provisions of a deferred
compensation plan for executives of the Corporation and its
Affiliates, if one be adopted.
(d) If a Participant to whom a Performance Unit Award was
granted shall cease to be employed by the Corporation or its
Affiliate for any reason (other than death, disability, or
retirement) prior to the completion of any applicable
Performance Period, said Performance Unit Award will be
withdrawn and subsequent payment in any form at any time
will not be made.
(e) If a Participant to whom a Performance Unit Award was
granted shall cease to be employed by the Corporation or its
Affiliate due to early, normal, or deferred retirement, or
in the event of the death or disability of the Participant,
during the Performance Period stipulated in the Performance
Unit Award, such Award shall be prorated for the period of
time from date of grant to date of retirement, disability or
death, as applicable, and become payable within ninety (90)
days following the close of the Performance Period to the
Participant or the person to whom interest therein is
transferred by will or by the laws of descent and
distribution. Performance Unit Awards shall be determined
at the same time and in the same manner (except for
applicable proration) as described in Section 11 (a).
(f) There shall be deducted from all payment of Awards any
taxes required to be withheld by any Federal, State, or
local government and paid over to any such government in
respect to any such payment.
12. ASSIGNMENTS AND TRANSFERS
No Award to any Participant under the provisions of the Plan may
be assigned, transferred, or otherwise encumbered except, in the
event of death of a Participant, by will or the laws of descent
and distribution.
13. AMENDMENT OR TERMINATION
The Board may amend, suspend, or terminate the Plan or any
portion thereof at any time provided, however, that no such
amendment, suspension, or termination shall invalidate the Awards
already made to any Participant pursuant to the Plan, without his
consent.
14. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall be effective January 1, 1994, provided however,
that any Award made under this Plan is subject to the approval of
this Plan by the stockholders of The Dial Corp.