EXHIBIT 10.1
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ALLTRISTA CORPORATION 1999
ECONOMIC VALUE ADDED AND GROWTH INCENTIVE
COMPENSATION PLAN FOR KEY MEMBERS OF MANAGEMENT
ALLTRISTA CORPORATION 1999
ECONOMIC VALUE ADDED AND GROWTH INCENTIVE
COMPENSATION PLAN FOR KEY MEMBERS OF MANAGEMENT
1. Statement of Purpose
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The purpose of the Alltrista Corporation ("Company") 1999 Economic
Value Added Incentive Compensation Plan For Key Members Of Management
(the "Plan") is to encourage sustained value creation by the Company
by establishing a direct link between Economic Value Added ("EVA")
creation, sales growth and incentive compensation payments to
management. This will improve the link between shareholder value and
incentive compensation payments.
The Participants will continue to contribute to the success of the
Company through their ability and commitment to the Company. The
Company desires to receive the benefits derived from the services of
the Participants, to identify the continued interests of the
Participants with the future success of the Company, and to provide an
incentive compensation plan to encourage sustained achievement of the
Company's objective to maximize shareholder wealth.
2. Definitions
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2.1. Actual Excess Return -- "Actual Excess Return" means that
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percent return, whether positive, negative or zero (0),
obtained by dividing actual Economic Value Added (EVA) for the
Year by Base Invested Capital.
2.2. Award -- "Award" means the dollar amount which results from the
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multiplication of the Participant's Target Incentive Amount for
the Year, by the Performance Factor for the same Year.
2.3. Bank -- "Bank" means the statistical accrual account maintained
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by the Company for each Participant, for each respective
Participation Basis, into which either (i) the excess, for any
Year, of any Award above twice the Participant's Target
Incentive Amount is credited; or (ii) the deficiency, for any
Year, of any Award below zero (0) is debited; and/or (iii) the
Bank Distribution, for any Year, as calculated in accordance
with Section 6.3 is debited or credited. The Company does not
and will not transfer cash into such accounts and the accounts
exist only as bookkeeping records to evidence the Company's
obligation to pay these amounts according to the Plan. No
interest is charged or credited on amounts in the Bank.
Participants are never vested in amounts in the Bank, and such
amounts are not earned until the respective Distribution Date.
2.4. Base Invested Capital -- "Base Invested Capital" means that
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invested capital for the Company, or for a Participating Unit,
as established by management. Base Invested Capital means the
dollar amount determined by multiplying (i) the sum of the
Target Incentive Amount for each Participant in a Participating
Unit or for all Participants in the case of the Company as of
January 1 of the Year by (ii)75.
2
Base Invested Capital is divided into actual Economic Value
Added for any Year to determine Actual Excess Return for such
Year.
2.5. Base Salary -- "Base Salary" means the Participant's actual
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base salary compensation earned during the Year; or partial
Year, in the event of death, Disability or Retirement during
the year; excluding incentive compensation payments, salary
continuation, pay as a part-time employee, and other payments
which are not, in the sole determination of the Committee,
actual base salary.
2.6. Beneficiary -- "Beneficiary" means the person or persons
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designated as such in accordance with Section 7.
2.7. c* -- "c*," also referred to as the "Weighted Average Cost of
--
Capital," means the Corporation's weighted average cost of debt
and equity expressed as a percent. It represents the
Corporation's minimum required rate of return on capital, as
established by management. It shall be a rate rounded to the
nearest whole percent.
2.8. Committee -- "Committee" means the Executive Compensation
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Committee of the Board of Directors of Alltrista Corporation.
2.9. Component -- "Component" means the Performance Factor for each
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of EVA performance and Net Sales Growth Rate performance.
2.10. Component Weight -- "Component Weight" means the weight
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assigned to each Component expressed in whole percentages and
the sum of which equals one hundred (100) percent.
2.11. Disability -- "Disability" means a bodily injury or disease, as
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determined by the Committee, that totally and continuously
prevents the Participant, for at least six (6) consecutive
months, from engaging in an "occupation" for pay or profit.
During the first twenty-four (24) months of total disability,
"occupation" means the Participant's regular occupation. After
that period, "occupation" means any occupation for which the
Participant is reasonably fitted, based upon the Participant's
education, training or experience as determined by the
Committee.
2.12. Distribution -- "Distribution" means the cash payment and/or
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deferral amount resulting from an Award or from a Bank balance
or from a combination thereof.
2.13. Distribution Date -- "Distribution Date" means the date on
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which the Employer makes Distributions of Participant Awards
and/or Distributions from the Participants' Banks. The
Distribution Date shall be once each Year and no later than
March 1 of the Year following the Year for which an Award was
calculated.
2.14. Economic Value Added -- "Economic Value Added," also referred
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to as "EVA," for the Company or Participating Unit, means the
amount obtained by subtracting
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(i) a capital charge computed by multiplying Invested Capital
for such year by c*, from (ii) Net Operating Profit After Tax
for such Year, or as follows:
EVA = Net Operating Profit After Tax - (Invested Capital x
c*)
2.15. Effective Date -- "Effective Date" means January 1, 1999, the
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date on which the Plan commences.
2.16. Eligible Employee -- "Eligible Employee" means a regular,
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exempt, salaried employee of the Company who may be selected by
management and recommended to the Executive Compensation
Committee for Participation.
2.17. Employer -- "Employer" (also referred to as the "Company")
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means Alltrista Corporation and its wholly owned subsidiaries.
2.18. Executive Compensation Committee -- "Executive Compensation
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Committee" (also referred to as the "Committee") means the
Executive Compensation Committee of the Board of Directors of
Alltrista Corporation, which administers the Plan.
2.19. Invested Capital -- "Invested Capital" means total assets less
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non-interest bearing current liabilities, and for the Year
represents the average of each of twelve (12) month-end
amounts. Invested Capital may be adjusted to include or exclude
certain items as determined by management.
2.20. Maximum Net Sales Growth Rate -- "Maximum Net Sales Growth
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Rate" means that Net Sales Growth Rate which is considered
extraordinary and at which, or above, would result in a
Performance Factor for sales growth equal to three (3).
2.21. Minimum Net Sales Growth Rate -- "Minimum Net Sales Growth
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Rate" means that Net Sales Growth Rate which, or below, growth
performance is deemed unacceptable and for which no incentive
compensation attributable to sales growth is earned and which
would result in a Performance Factor for sales growth equal to
zero (0).
2.22. Net Sales -- "Net Sales" means the net sales reported in any
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fiscal year for a Participating Unit based on generally
accepted accounting principles consistently applied. The Net
Sales for any Participating Unit may be adjusted to remove the
effect of commodity price fluctuations which would otherwise
distort the nominal growth in Net Sales.
2.23. Net Sales Growth Rate -- "Net Sales Growth Rate" means the
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annual percent growth rate in Net Sales for a Participating
Unit computed to the nearest one hundredth (0.01) of one
percent.
2.24. Net Operating Profit After Tax -- "Net Operating Profit After
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Tax" (also referred to as "NOPAT") means operating income
before financing costs and income taxes
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reduced by income taxes which are computed by applying a
statistical tax rate appropriate to the jurisdiction(s) in
which the Company or Participating Unit operates. The total
Awards for this Plan charged to operating income of the Company
or Participating Unit, as appropriate, are eliminated prior to
the computation of NOPAT. NOPAT may be adjusted to include or
exclude certain items as determined by management.
2.25. Participant -- "Participant" means an Eligible Employee who has
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been recommended for participation in the Plan by management
and approved by the Executive Compensation Committee.
Designation as a Participant must be renewed annually.
2.26. Participating Unit -- "Participating Unit" means an
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organization within the Company or a wholly owned subsidiary
for which Target Excess Returns and Sales Growth Rate Targets
are established.
2.27. Participation Basis -- "Participation Basis" means the Company
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or Participating Unit or combination of Participating Units
and/or Company upon whose performance the Performance Factor
for the Year is calculated for a Participant.
2.28. Performance Factor -- "Performance Factor" means that number
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described in Section 5.2 and which is multiplied by a
Participant's Target Incentive Amount to arrive at such
Participant's Award and credits or debits to the Participant's
Bank.
2.29. Plan -- "Plan" means this 1999 Economic Value Added and Growth
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Incentive Compensation Plan for Key Members of Management.
2.30. Retirement -- "Retirement" means termination of employment by a
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Participant for whatever reason other than for cause, death or
Disability after attainment of age fifty-five (55) and having
ten (10) or more years of service with the Company, or, if
prior to having attained age fifty-five (55) and/or ten (10)
years of service with the Company, only after having obtained
prior permission of the Committee. A Participant who has
experienced a Retirement as defined herein shall be termed a
"Retiree."
2.31. Table -- "Table" means that information contained in Appendix A
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and which is entitled "Excess Return and the Associated
Performance Factor." The "Table" is incorporated by reference
herein and forms a part of the Plan.
2.32. Target Excess Return -- "Target Excess Return" means that
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percent return, whether positive, negative or zero (0), which,
if attained, produces a Performance Factor of one (1.000). For
any one Year, Target Excess Return shall equal the sum of (i)
the prior Year's Target Excess Return, (ii) one-half (1/2) the
first four (4) percentage point difference between the prior
Year's Target Excess Return and the prior Year's Actual Excess
Return, and (iii) one-fifth (1/5) of the difference between the
prior Year's Target Excess Return and the prior Year's Actual
Excess Return in excess of four (4) percentage points.
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2.33. Target Incentive Amount -- "Target Incentive Amount" means that
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dollar amount determined by multiplying (i) the Participant's
Base Salary by (ii) such Participant's Target Incentive
Percent.
2.34. Target Incentive Percent -- "Target Incentive Percent" means
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that percent of Base Salary which is established by management,
consistent with the guidelines approved by the Committee, as
being the percent of Base Salary to be earned by the
Participant if Target Excess Return is achieved.
2.35. Target Net Sales Growth Rate -- "Target Net Sales Growth Rate"
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means that Net Sales Growth Rate which is expected and which
would result in a Performance Factor for sales growth equal to
one (1).
2.36. Year -- "Year" means the calendar year in respect of which
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performance is measured under the Plan.
3. Administration of the Plan
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The Executive Compensation Committee shall be the sole administrator
of the Plan. The Committee shall have full power to formulate
additional details and regulations and make interpretations for
carrying out the Plan. The Committee shall also be empowered to make
any and all of the determinations not herein specifically authorized
which may be necessary or desirable for the effective administration
of the Plan. Any decision or interpretation of any provision of this
Plan adopted by the Committee shall be final and conclusive.
4. Targets
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4.1. Establishment of Target Incentive Percent
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At the time a Participant commences participation in the Plan, there
shall be established for such Participant a Target Incentive Percent.
The Target Incentive Percent for such Participant for any future
Year(s) may be increased, decreased or left unchanged from the prior
Year. Following the end of each Year, the Target Incentive Percent for
that Year will be multiplied by the Base Salary of such Participant
for that Year to arrive at the Target Incentive Amount for such
Participant. The Target Incentive Amount will then be multiplied by
the Performance Factor for that Year to arrive at the amount of the
Award, if any, and the amount of the credit or debit to the
Participant's Bank, if any.
5. Calculation of the Performance Factors, Awards, Banks and Distributions
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5.1. Timing of the Calculation
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The calculations necessary to obtain the Performance Factor for the
Year most recently ended shall be made no later than February 21st of
the subsequent calendar year. Such calculation shall be carried out in
accordance with this Section.
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5.2. Calculation of the Performance Factor
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The Performance Factor for the Year is calculated using two
Components.
The first component of the Performance Factor is calculated using the
Table contained in Appendix A. The Table, which corresponds to the
difference between the Actual Excess Return and Target Excess Return,
where such difference is calculated by subtracting (i) the Target
Excess Return, from (ii), the Actual Excess Return achieved for the
Year. The second Component of the Performance Factor is calculated by
comparing the actual Net Sales Growth Rate to Minimum Net Sales Growth
Rate, Target Sales Growth Rate and Maximum Net Sales Growth Rate. If
the actual Net Sales Growth Rate is equal to the Target Net Sales
Growth Rate then the Performance factor for this Component will equal
one (1). Performance factors for an actual Net Sales Growth Rate
greater than the Target Net Sales Growth Rate but less than or equal
to the Maximum Net Sales Growth Rate shall be computed by
interpolation between one (1) and up to and including three (3).
Performance Factors for an actual Net Sales Growth Rate less than the
Target Net Sales Growth rate but greater than or equal to the Minimum
Net Sales Growth Rate shall be computed by interpolation between one
(1) and down to and including zero (0).
The Performance Factor is then calculated as the weighted average of
each Component using the Component Weights for the Plan Year.
5.3. Calculation of Distributions and Bank Debits and Credits
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Distributions shall be determined in accordance with the provisions
contained in Appendix B, Determination of Distributions and Bank
Balances.
Example calculations are shown in Appendix C and are incorporated by
reference herein and form a part of the Plan.
5.4. De Minimus Bank Balances
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If after determination of the Distribution for the Year, the Bank
balance is positive but less than One Thousand Dollars ($1,000.00),
then such balance will be added to the Distribution for the Year and
the Bank balance will thereby be brought to zero.
5.5. Calculation of Award Distributions and Credits and Debits to
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Participants' Banks When a Participant has Multiple
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Participation Bases
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In the event a Participant has been assigned multiple Participation
Bases for a Year, then Awards, Banks, Performance Factors and Target
Incentive Amounts shall be calculated separately and independently for
each Participation Basis of such Participant.
Banks shall be maintained separately for debits and credits from each
Participation Basis. Debits or credits from one Participation Basis
may not be charged or credited against a Bank of another Participation
Basis.
7
Example calculations are shown in Appendix C and are incorporated by
reference herein and form a part of the Plan.
5.6. Changes in Participation Basis During the Year
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In the event a Participant experiences a change in Participation Basis
during a Year, then Awards, Banks, Performance Factors and Target
Incentive Amounts shall be calculated separately and independently for
each Participation Basis of such Participant using those portions of
the Participant's Base Salary actually paid for service while included
in each separate Participation Basis.
Banks shall be maintained separately for debits and credits from each
Participation Basis. Debits or credits from one Participation Basis
may not be charged or credited against a Bank of another Participation
Basis.
Distribution(s) from the Bank for an individual who experiences a
change in Participation Basis, including a reduction in Target
Incentive Percent to zero (0), will be the same as such
Distribution(s) would have been had there been no change in Base
Salary, Target Incentive Amount or Participation Basis, and such
Distribution(s) from more than one Participation Basis shall be made
by applying Sections 5.3 and 5.4 separately and independently to each
such Participation Basis.
5.7. Changes in Target Incentive Percent During the Year
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In the event a Participant experiences a change in Target Incentive
Percent without experiencing a change in Participation Basis during a
Year, then Award calculations and Bank adjustments will be made
separately using those portions of the Participant's Base Salary
actually paid for service while participating at each separate Target
Incentive Percent.
Separate Bank accounts shall not be maintained because of changes in a
Participant's Target Incentive Percent.
5.8. Qualification of Distributions for Other Plans
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Award Distributions and Bank Distributions from the Plan to active
Participants shall qualify as incentive payments for the purpose of
any deferred compensation plan(s) maintained by the Company, and as
such, may be deferred by Participants eligible to defer under the
terms and conditions of such plan(s). Such eligibility for deferral is
not automatic and shall only be as authorized for eligible employees
under the rules of such plan(s). Notwithstanding anything to the
contrary in such plan(s), no portion of any Award or any Bank, prior
to actual Distribution, shall qualify for the purposes of deferral
under the terms and conditions of such plan(s).
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5.9. Taxes; Withholding
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To the extent required by law, the Company shall withhold from all
cash Distributions made hereunder any amount required to be withheld
by the federal and any state, provincial or local government.
6. Distributions Following Termination
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6.1. Eligibility
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A Participant who terminates prior to December 31 of a Year shall not
be eligible for any Distribution for such Year or any future
Distributions, unless such termination is by reason of Retirement,
death or Disability.
6.2. Distributions for the Year of Retirement, Death or Disability
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Distributions for a Participant for the Year of such Participant's
Retirement, death or Disability shall be on the same basis as for all
other Participants.
6.3. Bank Distributions the Year Following the Year of Retirement,
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Death or Disability
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Bank Distributions to a Participant in the year immediately following
the Year of such Participant's Retirement, death or Disability shall
be calculated in the same way as for all other Participants, except
that no adjustments for performance achieved beyond the Year of death
or Disability shall be allowed in the case of Participants who have
experienced a termination by reason of death or Disability.
Adjustments to the Banks for individuals who have experienced a
Retirement will be the same as for all other Participants for the Year
of Retirement. Bank adjustments, if any, for the year immediately
subsequent to the Year of Retirement for such Participant may only be
negative. Such calculations will be based upon the Participant's
Target Incentive Amount for the twelve months immediately preceding
retirement.
Complete Distribution of Banks of Participants who have experienced a
termination by reason of Retirement, death or Disability shall be
accomplished no later than the Distribution Date for the Year
following the Year of Retirement, death or Disability.
6.4. Obligation for Negative Bank Balances
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If, after the Distribution made for the Year of Retirement, death or
Disability, the Participant's Bank balance is negative, then such Bank
balance will be eliminated without further obligation of the
Participant to the Company. Participants who terminate for reasons
other than Retirement, death or Disability and at the time of
termination have a negative Bank balance will have no obligation to
the Company related to the negative Bank balance.
7. Beneficiary Designation
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The Participant shall have the right, at any time and from time to
time, to designate and/or change or cancel any person/persons or
entity as to his Beneficiary (both principal and contingent) to whom
Distribution of Award(s) and/or Bank(s) under this Plan shall be made
in the event of such Participant's death prior to a Distribution. Any
Beneficiary change or cancellation shall become effective only when
filed in writing with the Committee during the Participant's lifetime
on a form provided by or otherwise acceptable to the Company.
The filing of a new Beneficiary designation form will cancel all
Beneficiary designations previously filed. Any finalized divorce of a
Participant subsequent to the date of filing of a Beneficiary
designation form shall revoke any prior designation of the divorced
spouse as a Beneficiary. The spouse of a Participant domiciled in a
community property jurisdiction shall be required to join in any
designation of Beneficiary other than the spouse in order for the
Beneficiary designation to be effective.
If a Participant fails to designate a Beneficiary as provided above,
or, if such Beneficiary designation is revoked by divorce, or
otherwise, without execution of a new designation, or if all
designated Beneficiaries predecease the Participant, then the
Distribution shall be made to the Participant's estate.
8. Miscellaneous
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8.1. Unsecured General Creditor
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Participants and their beneficiaries, heirs, successors and assigns
shall have no legal or equitable rights, interests, or other claim in
any property or assets of the Employer. Any and all assets shall
remain general, unpledged, unrestricted assets of the Employer. The
Company's obligation under the Plan shall be that of an unfunded and
unsecured promise to pay money in the future, and there shall be no
obligation to establish any fund, any security or any otherwise
restricted asset, in order to provide for the payment of amounts under
the Plan.
8.2. Obligations To The Employer
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If a Participant becomes entitled to a Distribution under the Plan,
and, if, at the time of the Distribution, such Participant has
outstanding any debt, obligation or other liability representing an
amount owed to the Employer, then the Employer may offset such amounts
owing to it or any affiliate against the amount of any Distribution.
Such determination shall be made by the Committee. Any election by the
Committee not to reduce any Distribution shall not constitute a waiver
of any claim for any outstanding debt, obligation, or other liability
representing an amount owed to the Employer.
8.3. Nonassignability
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Neither a Participant nor any other person shall have any right to
commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part
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thereof, which are, and all rights to which are, expressly declared to
be unassignable and nontransferable. No part of an Award and/or Bank,
prior to actual Distribution, shall be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor
shall it be transferable by operation of law in the event of the
Participant's or any other persons bankruptcy or insolvency.
8.4. Employment or Future Eligibility to Participate - Not Guaranteed
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Nothing contained in this Plan nor any action taken hereunder shall be
construed as a contract of employment or as giving any Eligible
Employee or any Participant or any former Participant any right to be
retained in the employ of the Employer. Designation as an Eligible
Employee or as a Participant is on a year-by-year basis and may or may
not be renewed for any employment years not yet commenced.
8.5. Gender, Singular and Plural
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All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, or neuter, as the identity of the person or
persons may require. As the context may require, the singular may be
read as the plural and the plural as the singular.
8.6. Captions
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The captions to the articles, sections, and paragraphs of this Plan
are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
8.7. Applicable Law
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This Plan shall be governed and construed in accordance with the laws
of the State of Indiana.
8.8. Validity
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In the event any provision of the Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of the Plan.
8.9. Notice
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Any notice or filing required or permitted to be given to the
Committee shall be sufficient if in writing and hand delivered, or
sent by registered or certified mail, to the principal office of the
Company, directed to the attention of the President and CEO of the
Company. Such notice shall be deemed given as of the date of delivery
or, if delivery is made by mail, as of the date shown on the postmark
on the receipt for registration or certification.
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9. Amendment and Termination of the Plan
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9.1. Amendment
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The Committee may at any time amend the Plan in whole or in part
provided, however, that no amendment shall be effective to affect the
Participant's right to designate a beneficiary.
9.2. Termination of the Plan
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a. Employer's Right to Terminate. The Committee may at any time
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terminate the Plan as to prospective earning of Awards, if it
determines in good faith that the continuation of the Plan is not
in the best interest of the Company and its shareholders. No such
termination of the Plan shall reduce any Distribution already
made.
b. Payments Upon Termination of the Plan. Upon any termination
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of the Plan under this Section, Awards for future years shall not
be made. With respect to the Year in which such termination takes
place, the employer will pay to each Participant the
Participant's Award for such Year or partial Year, less any
applicable taxes on the first day of March in the calendar year
following the year of termination of the Plan. Bank Distributions
shall be made in their entirety to the Participants on the first
day of March in the calendar year following the year of
termination of the Plan.
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APPENDIX A
Actual Minus Target Excess Return and Associated Performance Factor
Tenths
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Percents 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 0.7% 0.8% 0.9%
- -------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
25% 3.833
24% 3.792 3.796 3.800 3.804 3.808 3.812 3.816 3.821 3.825 3.829
23% 3.749 3.754 3.758 3.762 3.766 3.771 3.775 3.779 3.783 3.788
22% 3.705 3.709 3.714 3.718 3.723 3.727 3.732 3.736 3.740 3.745
21% 3.658 3.663 3.668 3.672 3.677 3.682 3.686 3.691 3.696 3.700
20% 3.609 3.614 3.619 3.624 3.629 3.634 3.639 3.644 3.649 3.653
19% 3.558 3.563 3.569 3.574 3.579 3.584 3.589 3.594 3.599 3.604
18% 3.504 3.510 3.515 3.521 3.526 3.531 3.537 3.542 3.548 3.553
17% 3.447 3.453 3.459 3.464 3.470 3.476 3.482 3.487 3.493 3.499
16% 3.386 3.393 3.399 3.405 3.411 3.417 3.423 3.429 3.435 3.441
15% 3.322 3.328 3.335 3.342 3.348 3.355 3.361 3.367 3.374 3.380
14% 3.253 3.260 3.267 3.274 3.281 3.288 3.295 3.302 3.308 3.315
13% 3.179 3.186 3.194 3.201 3.209 3.216 3.224 3.231 3.238 3.246
12% 3.099 3.107 3.115 3.123 3.131 3.139 3.147 3.155 3.163 3.171
11% 3.012 3.021 3.030 3.039 3.047 3.056 3.065 3.073 3.082 3.090
10% 2.916 2.926 2.936 2.946 2.956 2.965 2.975 2.984 2.993 3.002
9% 2.811 2.822 2.833 2.844 2.854 2.865 2.875 2.886 2.896 2.906
8% 2.693 2.706 2.718 2.730 2.742 2.754 2.765 2.777 2.788 2.800
7% 2.560 2.574 2.588 2.602 2.615 2.629 2.642 2.655 2.668 2.681
6% 2.405 2.422 2.438 2.454 2.470 2.486 2.501 2.516 2.531 2.545
5% 2.223 2.243 2.262 2.281 2.300 2.318 2.336 2.354 2.372 2.389
4% 2.000 2.025 2.049 2.072 2.095 2.118 2.140 2.161 2.182 2.203
3% 1.750 1.775 1.800 1.825 1.850 1.875 1.900 1.925 1.950 1.975
2% 1.500 1.525 1.550 1.575 1.600 1.625 1.650 1.675 1.700 1.725
1% 1.250 1.275 1.300 1.325 1.350 1.375 1.400 1.425 1.450 1.475
0% 1.000 1.025 1.050 1.075 1.100 1.125 1.150 1.175 1.200 1.225
- -0% 1.000 0.975 0.950 0.925 0.900 0.875 0.850 0.825 0.800 0.775
- -1% 0.750 0.725 0.700 0.675 0.650 0.625 0.600 0.575 0.550 0.525
- -2% 0.500 0.475 0.450 0.425 0.400 0.375 0.350 0.325 0.300 0.275
- -3% 0.250 0.225 0.200 0.175 0.150 0.125 0.100 0.075 0.050 0.025
- -4% 0.000 -0.025 -0.049 -0.072 -0.095 -0.118 -0.140 -0.161 -0.182 -0.203
- -5% -0.223 -0.243 -0.262 -0.281 -0.300 -0.318 -0.336 -0.354 -0.372 -0.389
- -6% -0.405 -0.422 -0.438 -0.454 -0.470 -0.486 -0.501 -0.516 -0.531 -0.545
- -7% -0.560 -0.574 -0.588 -0.602 -0.615 -0.629 -0.642 -0.655 -0.668 -0.681
- -8. -0.693 -0.706 -0.718 -0.730 -0.742 -0.754 -0.765 -0.777 -0.788 -0.800
- -9% -0.811 -0.822 -0.833 -0.844 -0.854 -0.865 -0.875 -0.886 -0.896 -0.906
- -10% -0.916 -0.926 -0.936 -0.946 -0.956 -0.965 -0.975 -0.984 -0.993 -1.002
- -11% -1.012 -1.021 -1.030 -1.039 -1.047 -1.056 -1.065 -1.073 -1.082 -1.090
- -12% -1.099 -1.107 -1.115 -1.123 -1.131 -1.139 -1.147 -1.155 -1.163 -1.171
- -13% -1.179 -1.186 -1.194 -1.201 -1.209 -1.216 -1.224 -1.231 -1.238 -1.246
- -14% -1.253 -1.260 -1.267 -1.274 -1.281 -1.288 -1.295 -1.302 -1.308 -1.315
- -15% -1.322 -1.328 -1.335 -1.342 -1.348 -1.355 -1.361 -1.367 -1.374 -1.380
- -16% -1.386 -1.393 -1.399 -1.405 -1.411 -1.417 -1.423 -1.429 -1.435 -1.441
- -17% -1.447 -1.453 -1.459 -1.464 -1.470 -1.476 -1.482 -1.487 -1.493 -1.499
- -18% -1.504 -1.510 -1.515 -1.521 -1.526 -1.531 -1.537 -1.542 -1.548 -1.553
- -19% -1.558 -1.563 -1.569 -1.574 -1.579 -1.584 -1.589 -1.594 -1.599 -1.604
- -20% -1.609 -1.614 -1.619 -1.624 -1.629 -1.634 -1.639 -1.644 -1.649 -1.653
- -21% -1.658 -1.663 -1.668 -1.672 -1.677 -1.682 -1.686 -1.691 -1.696 -1.700
- -22% -1.705 -1.709 -1.714 -1.718 -1.723 -1.727 -1.732 -1.736 -1.740 -1.745
- -23% -1.749 -1.754 -1.758 -1.762 -1.766 -1.771 -1.775 -1.779 -1.783 -1.788
- -24% -1.792 -1.796 -1.800 -1.804 -1.808 -1.812 -1.816 -1.821 -1.825 -1.829
- -25% -1.833
Example: Actual Excess Return(AER) 13.4%
Target Excess Return(TER) 10.0%
-----
Difference 3.4%
Performance Factor (intersection of 3.0% and 0.4%) 1.850
If the remainder of (i) Actual Excess Return less (ii) Target Excess Return is
greater than plus or minus twenty-five percent (+/-25%), then corporate
management shall calculate the Performance Factor using the appropriate formula
from the following:
Less than -25%, then the Performance Factor for the year in question shall equal -In(1OO x abs(AER-TER)+In(1OO x .O4)
More than 25%, then the performance factor for the year in question shall equal In(100 x (AER - TER) - In(100 x .04) + 2
13
Appendix B
Determination of Distributions and Bank Balances
- ------------------------------------------------------------------------------------------------------------------------------------
Magnitude of
Performance Change in
Beginning Bank (BB) Factor (PF) Distribution Beginning Bank (BB)
for the Year for the Year for the Year
- ------------------------------------------------------------------------------------------------------------------------------------
Zero Greater than zero PF or 2.00 whichever is less Increased by the excess of the PF
over 2.00, if any
- ------------------------------------------------------------------------------------------------------------------------------------
Zero Less than or equal Zero Reduced by the PF, if negative
to zero
- ------------------------------------------------------------------------------------------------------------------------------------
Positive Greater than 2 2.00 plus one-third of the BB Reduced by one-third of the BB,
then increased by the PF in excess
of 2.00
- ------------------------------------------------------------------------------------------------------------------------------------
Positive Greater than zero PF plus one-third of the BB Reduced by one-third of the BB
but less than or equal
to 2.00
- ------------------------------------------------------------------------------------------------------------------------------------
Positive Less than or equal to One-third of the BB less the Reduced by one-third of the BB and
zero absolute value of the PF, so long as further reduced by the negative
the difference is positive; if such difference calculated in
difference is negative, then zero determining the Distribution, if
any
- ------------------------------------------------------------------------------------------------------------------------------------
Negative Greater than 2 PF less bank reduction (one-third PF Reduced by one-third of PF but not
but not greater than negative BB), greater than the negative BB; if
subject to a maximum Distribution Distribution after reduction of
of 2; if the PF after bank reduction one-third PF exceeeds 2.00,
exceeds 2.00, then the excess over then the excess over 2.00 is
2.00 is applied to the Bank applied to the Bank
- ------------------------------------------------------------------------------------------------------------------------------------
Negative Greater than zero but PF less bank reduction Reduced by one-third of the PF
less than or equal to provided the PF is greater than or
2.00 equal to 1.50, otherwise reduced
by the excess of the PF over 1.00,
if any, but in any case not
greater than the negative BB
- ------------------------------------------------------------------------------------------------------------------------------------
Negative Less than or equal to Zero PF is added to BB
zero
- ------------------------------------------------------------------------------------------------------------------------------------
14
NOTE: Reference to the Performance Factor (PF) means that amount obtained by
multiplying the Target Incentive Amount by the Performance Factor
(PF) for the year
15
Example 1-A
Beginning Bank is Zero
Performance Factor is Greater than Zero
but Less Than 2.0
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = 1.25
Bank Balance = $0.00
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
1.25 * 20% * $50,000 = $12,500
Step 2: 2 * Target Incentive Percent * Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: Compare Award to Twice Target Incentive Amount. If Award is greater
than Twice Target Incentive Amount, then the Award Distribution is 2 * Target
Incentive Amount and the excess of twice the Target Incentive Amount is a
credit to the Bank.
THEREFORE: Distribution = $12,500
Bank Balance = $0.00
- --------------------------------------------------------------------------------
Example 1-B
Beginning Bank is Zero
Performance Factor is Greater than 2.0
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = 3.00
Bank Balance = $0.00
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
3.00 * 20% * $50,000 = $30,000
Step 2: 2 * Target Incentive Percent * Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: Compare Award to Twice Target Incentive Amount. If Award is greater
than Twice Target Incentive Amount, then the Award Distribution is 2 * Target
Incentive Amount and the excess of twice the Target Incentive Amount is a
credit to the Bank.
THEREFORE: Distribution = $20,000
Bank Balance = $10,000
16
Example 2
Beginning Bank is Zero
Performance Factor is Less Than or Equal to Zero
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = <.75>
Bank Balance = $0.00
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
<.75> * 20% * $50,000 = <$7,500>
Negative Awards are applied only to the Bank
Step 2: 2 * Target Incentive Percent * Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: The negative Award is applied to the Bank which results in a negative
Bank Balance.
THEREFORE: Distribution = $0.00
Bank Balance = <$7,500>
17
Example 3
Beginning Bank is Positive
Performance Factor is Greater Than 2.0
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = 3.00
Bank Balance = $9,000
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
3.00* 20% * $50,000 = $30,000
Step 2: 2 * Target Incentive Percent * Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: If Award is greater than Twice Target Incentive Amount, then the Award
Distribution is 2 * Target Incentive Amount plus one-third of the Beginning
Bank. The excess of Twice Target Incentive Amount is credited to the Bank.
THEREFORE: Distribution = $20,000 + $3,000 = $23,000
Bank Balance = $9,000 - 3,000 + $10,000 = $16,000
18
Example 4
Beginning Bank is Positive
Performance Factor is Greater Than Zero
but Less Than or Equal to 2.0
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = 1.25
Bank Balance = $9,000
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
1.25* 20% * $50,000 = $12,500
Step 2: 2 * Target Incentive Percent * Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: One third of the Beginning Bank is distributed to the individual and the
Bank is reduced by this amount. Distribution is the Award plus Bank
distribution.
THEREFORE: Distribution = $12,500 + $3,000 = $15,500
Bank Balance = $9,000 - $3,000 = $6,000
19
Example 5
Beginning Bank is Positive
Performance Factor is Less Than or Equal Zero
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000 * 20%)
Performance Factor = <.75>
Bank Balance = $9,000
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
<.75>* 20% * $50,000 = <$7,500>
Step 2: 2 * Target Incentive Percent * Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: Distribution equals one-third of Beginning Bank less the absolute value
of the award, so long as the difference is positive; if the difference is
negative, then zero. Beginning Bank is reduced by one-third plus any negative
difference in determining the Distribution.
THEREFORE: Distribution = $3,000 - <$7,500> = <$4,500>
Therefore DISTRIBUTION = $0.00
Bank Balance = $9,000 - $3,000 + <4,500> = $1,500
20
Example 6-A
Beginning Bank is Negative
Performance Factor is Greater Than 2
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = 2.50
Bank Balance = <$12,000>
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
2.50* 20% * $50,000 = $25,000
Step 2: 2 * Target Incentive Percent * Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: Distribution equals Award less one-third Award but not greater than
negative Beginning Bank, subject to a maximum Distribution of 2; if the Award
after reduction of bank distribution and maximum payout of 2 is positive, then
it is applied to the Bank. Beginning Bank is reduced by one-third of Award but
not greater than the negative Beginning Bank, if Distribution after reduction of
one-third Award and maximum of 2 is payout is positive, then it is applied to
the Bank.
THEREFORE: Distribution = $25,000 - $8,333 = $16,667
Maximum Distribution is $20,000
Therefore DISTRIBUTION = $16,667
Bank Balance = <$12,000> - <$8,333> = <$3,667>
21
Example 7-A
Beginning Bank is Negative
Performance Factor is Greater Than Zero
but Less Than or Equal to 2.0
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = 1.75
Bank Balance = <$12,000>
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
1.75 * 20% * $50,000 = $17,500
Step 2: One-third of Award = Bank Distribution
1/3 * $17,500 = $5,833.33
Step 3: Distribution equals Award less bank distribution. Reduced by one-third
of the Award provided the Performance Factor is greater than or equal to 1.50.
Otherwise, reduced by the excess of the Award over a 1.0 Performance Factor, if
any.
THEREFORE: Distribution = $12,500 - $0 = $12,500
Bank Balance = <$12,000>
22
Example 7-B
Beginning Bank is Negative
Performance Factor is Greater Than Zero
but Less Than or Equal to 2.0
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = 1.25
Bank Balance = ($12,000)
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
1.25 * 20% * $50,000 = $12,500
Step 2: (Performance Factor - 1.0) * Target Incentive Amount = Bank Distribution
(1.25 - 1.0) * $10,000 = $2,500
Step 3: Distribution equals Award less bank distribution. Reduced by one-third
of the Award provided the Performance Factor is greater than or equal to 1.50.
Otherwise, reduced by the excess of the Award over a 1.0 Performance Factor, if
any.
THEREFORE: Distribution = $12,500 - $2,500 = $10,000 (Target Incentive
Amount)
Bank Balance = ($12,000) + $2,500 = ($9,500)
23
Example 7-C
Beginning Bank is Negative
Performance Factor is Greater Than Zero
but Less Than or Equal to 2.0
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = .75
Bank Balance = <$12,000>
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
.75 * 20% * $50,000 = $7,500
Step 2: Distribution equals Award less bank distribution. Reduced by one-third
of the Award provided the Performance Factor is greater than or equal to 1.50.
Otherwise, reduced by the excess of the Award over a 1.0 Performance Factor, if
any. If Performance Factor is less than or equal to 1.0, then Award equals
Performance Factor times Target Incentive Amount.
THEREFORE: Distribution = $7,500 - $0 = $7500
Bank Balance = <$12,000> + $0 = <$12,000>
24
Example 8
Beginning Bank is Negative
Performance Factor is Less than or Equal to Zero
Participant's Base Salary = $50,000
Participant's Target Incentive Percent = 20%
Participant's Target Incentive Amount = $10,000 ($50,000* 20%)
Performance Factor = <1.25>
Bank Balance = <$12,000>
Step 1: Performance Factor * Target Incentive Percent * Base Salary = Award
<1.25> * 20% * $50,000 = <$12,500>
Step 2: 2 * Target Incentive Percent *Base Salary = Twice Target Incentive
Amount
2 * 20% * $50,000 = $20,000
Step 3: Distribution equals Award less one-third of Beginning Bank so long as
the difference is positive, or zero if difference is negative. Beginning Bank is
reduced by the lesser of the absolute value of the award or one-third of the
negative Beginning Bank.
THEREFORE: Distribution = $0.00
Bank Balance = <$12,000> + <$12,500> = <$24,500>
25