EXHIBIT B
EVA INCENTIVE COMPENSATION
PLAN FOR EXECUTIVE OFFICERS
1. Purpose.
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The Company has adopted an annual incentive compensation program based on
the principles of Economic Value Added ("EVA") throughout the Company. The
purpose of the EVA approach is to maximize shareholder value by aligning
management's interests with those of shareholders and rewarding management for
sustainable and continuous improvement in the business being managed.
Recent changes in the Internal Revenue Code have placed limits on the
deductibility of the compensation paid to the executive officers who may be
named in the compensation table of the Company's proxy statement ("Named
Executive Officers") to the extent such compensation exceeds $1 million dollars
for an individual unless it meets requirements set forth in Section 162(m) of
the Internal Revenue Code and the regulations issued thereunder. This limit on
deductibility does not apply to compensation paid to any other executive
officer, business unit president, key business unit executive or other
participant in the Company's incentive compensation programs.
In order to preserve the deductibility of incentive compensation paid to
Named Executive Officers in the future, the Company has created this EVA
Incentive Compensation Plan for Executive Officers and for any other employees
who may become Named Executive Officers by reason of the executive compensation
disclosure rules under the Securities Act of 1934. The Plan is intended to
satisfy the specific requirements of Section 162(m) of the Code, as outlined by
the Internal Revenue Services in recently issued proposed regulations.
2. Administration.
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The Plan will be administered by the Organization and Compensation
Committee of the Board of Directors (the "Committee"). The Committee's
decisions in the administration of the Plan shall be final and binding on all
parties.
3. Definition of EVA and Description of Formulae.
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EVA is defined as the difference between the return on total capital
invested in the business and the cost of capital, multiplied by total capital
employed ("EVA Calculation"). The Plan will be formula driven. Particular EVA
formulas will be tailored to the size and unique characteristics of the business
unit or units for which a specific executive is responsible. The key elements of
the EVA formula applicable to any executive
officer will be the Cost of Capital (generally the cost of capital to the
corporation), the Return on Capital, the Amount of Capital employed in the
business unit, the net operating profit of the unit after tax, and the prior
year's EVA. Awards will be calculated on the basis of year-end results.
Formulas for individual business units may utilize both a percentage of the
change in the EVA of a business unit from the prior year, whether positive or
negative, plus a percentage of the positive EVA, if any, in the current year;
the EVA award may be calculated for an entire business unit and an executive
officer may receive a percentage of a unit's EVA award. When executive officers
or business units are responsible for more than one business unit, a formula may
be based on a percentage of the aggregate EVA, positive or negative, of the
units reporting to the executive or unit. The Committee has the discretion and
authority to develop other EVA based formulae or goals for utilization pursuant
to this Plan in future years. In any instance in which an executive officer
participates in a unit EVA award in which a group of employees participates, the
executive officer's percentage of the unit's EVA award will be specified.
4. Procedure.
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Before the beginning of each fiscal year, the Committee will establish and
set forth in writing the EVA formula applicable to each executive officer and
each potential Named Executive Officer of the Company for that year (including
the percentage of any business unit EVA award in which he may participate). The
Committee will retain discretion to revise formulas or an executive's percentage
participation in any unit EVA award if the Committee deems it appropriate as
circumstances develop during the year; provided, however, in the case of a Named
Executive Officer, such revision may only have a negative effect on the amount
of the Named Executive Officer's award for the year. As soon as is reasonably
practicable after the year ends the Committee will review the EVA Calculation,
calculate the EVA award for each executive officer pursuant to the formula
established at the beginning of the year (revised downward if the Committee so
determines), and certify the EVA incentive compensation award for each executive
officer to the Board of Directors.
5. Bank Account and Payout.
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After the EVA award for a particular executive has been determined, it will
be credited whether positive or negative to the executive's account. The
executive will then be paid, if the account remains positive, a specified
percentage of the account balance in cash. The remainder of the account balance
will represent that individual's "equity" in the account for future
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years. If EVA awards are or have been negative, an account balance may be
negative. In such case, the executive officer will receive no incentive
compensation until the aggregate of subsequent EVA awards results in a positive
account balance. Each year, the Company will add interest to a positive balance
or charge interest on a negative balance at an appropriate money market rate.
The account will be subject to forfeiture in the event an executive officer
leaves the Company by reason of termination or resignation.
The entire account balance will become payable upon normal retirement (age
65), death, or disability, or a change-in-control. (The Committee will retain
the discretion to pay the entire account balance upon early retirement.) For
purposes of the Plan, the term "change in control" means (i) the first purchase
of shares pursuant to a tender offer or exchange offer (other than a tender
offer or exchange offer by the Company) for all or part of the Company's Common
Stock or any securities convertible into such Common Stock, (ii) the receipt by
the Company of a Schedule 13D or other advice indicating that a person is the
"beneficial owner" (as that term is defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Exchange Act") of 20% or more of the Company's Common
Stock calculated as provided in paragraph (d) of said Rule 13d-3, (iii) the date
of approval by stockholders of the Company of an agreement providing for any
consolidation or merger of the Company in which the Company will not be the
continuing or surviving corporation or pursuant to which shares of Common Stock
of the Company would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of Common Stock of the Company
immediately prior to the merger would have the same proportion of ownership of
Common Stock of the surviving corporation immediately after the merger, (iv) the
date of the approval by stockholders of the Company of any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of
all or substantially all the assets of the Company or (v) the adoption of any
plan or proposal for the liquidation (but not a partial liquidation) or
dissolution of the Company or (vi) individuals who, as of March 28, 1994,
constituted the Board of Directors of the Company (the "Board") generally and as
of the date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election of the Directors
of Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Plan, considered as
though such person were a
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member of the Incumbent Board. If it is determined that any payment of an
account by the Company to an executive officer or Named Executive Officer by
reason of a change-in-control is subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), the Company shall make
additional cash payments to the employee such that after payment of all taxes
including any excise tax imposed on such payments, the employee will retain an
amount equal to the excise tax on all the payments.
6. Plan Termination.
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The Board of Directors may modify, suspend or terminate the Plan at any
time.
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