Exhibit 10.28
Paul J. Norris
Chairman & Chief Executive Officer
GRACE
W. R. Grace & Co.
7500 Grace Drive
Columbia, MD 21044
Voice: (410) 531-4406
Fax: (410) 531-4414
email: paul.j.norris@grace.com
January 21, 2004
To:
PERSONAL AND CONFIDENTIAL
Dear
In order to continue Grace's successful operating performance in the Chapter 11
environment, it is important to retain key employees by providing compensation
programs that are valued and compete with our industry peers. To that end, Grace
has proposed, and the Court has approved, a special retention program for
certain key employees. At this time, we do not have Court approval to extend
this program beyond 2004.
I am pleased to inform you that you will participate in this retention program.
The total target amount of your retention payment will be [Recommendation] of
your salary throughout 2004. These supplemental payments are subject to the
provisions specified in the attachment to this letter.
In order to build better alignment with financial objectives, fifty-percent of
the payment is at risk and will be based on Grace's 2004 core EBIT performance
against 2003, the same as the Annual Incentive Compensation Plan. This portion
will be paid in March 2005. The other fifty-percent is guaranteed and will be
paid on December 26, 2004.
I realize that cash is not the only reason why an employee should stay with an
organization. At Grace, you should expect to continue to receive opportunities
to experience personal growth, to upgrade your skills, and to engage in
challenging, satisfying work.
Your loyal, dedicated service to Grace is appreciated. Thanks.
Sincerely,
Paul J. Norris
SPECIAL RETENTION PROGRAM
FOR SELECTED KEY EMPLOYEES
COMMENCING JANUARY 1, 2004
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As specified in the letter from Mr. Norris that accompanies this attachment,
selected individuals, including you, will receive supplemental retention
payments, in accordance with a special retention program approved by the Grace
Board and the bankruptcy court (the "Program"). Fifty percent of the
supplemental payment is at-risk, based on Grace's 2004 Core EBIT performance
versus 2003, and fifty percent is guaranteed. This memo specifies some of the
provisions applicable to Program participants.
CALCULATION OF PAYMENT-AT-RISK
Fifty percent of the 2004 retention payment is at-risk and will be paid based on
Grace's Core EBIT performance as shown on the chart below.
---------------------------------------------------------------
% of Target Grace 2004 Core EBIT
Payment-at-Risk Paid Performance against Target
---------------------------------------------------------------
25% 80% of 2003 EBIT
---------------------------------------------------------------
75% 100% of 2003 EBIT
---------------------------------------------------------------
100% 110% of 2003 EBIT
---------------------------------------------------------------
The payment-at-risk will be paid in March 2005 and will be calculated based on a
percentage of the participant's base earnings (base salary payments before
income tax withholding and other deductions during the period January 1, 2004 to
December 31, 2004), and based on Grace's Core EBIT Performance in 2004 against
Target. In order to receive the payment, the participant must remain a full-time
employee of Grace through December 31, 2004. Termination of employment prior to
December 31, 2004, whether voluntary or involuntary, will result in no payment
under this program.
CALCULATION OF GUARANTEED PAYMENT
For the 2004 calendar year, each Program participant will receive a supplemental
cash payment on December 31, 2004 - provided that the participant remains a
full-time employee of Grace through that date.
The guaranteed cash payment will be calculated based on a percentage of the
participant's base earnings (base salary payments before income tax withholding
and other deductions) during the relevant period. The guaranteed cash payment
for December 31 will be equal to fifty percent of the total retention payment
amount based on base earnings during the period January 1, 2004 to December 31,
2004 (this payment will be made on December 26).
TAX AND BENEFIT TREATMENT OF ALL RETENTION PAYMENTS
The supplemental payment will, of course, be considered ordinary taxable income;
and, therefore, applicable income and other tax withholding will apply to the
payment.
The supplemental payment will not be considered for purposes of any Grace
benefit plan or program. For example, no portion of the payment will be
contributed to Grace's Savings & Investment Plan, nor will the payment be used
to determine final average compensation under the Grace Salaried Retirement Plan
or the Grace Supplemental Executive Retirement Plan (in this regard, the
payments will be considered non-pensionable "special pay"). Also, the payment
will not be used to calculate the amount of disability income or life insurance
that a participant or beneficiary may become entitled to under any Grace benefit
plan.
The Program payment will not be considered for purposes of any Grace
compensation plan or program. For example, the payment will not be considered in
determining a participant's annual incentive compensation award. Any applicable
regular or promotional base salary increase will be calculated without regard to
the payment, which means, for instance, that the payment will not be treated as
an offset to any regular or promotional base salary increase.
The terms of a Program participant's employment with Grace are not affected by
the Program (except for the guaranteed supplemental payment that a participant
will receive and the supplemental payment-at-risk under the Program for the 2004
calendar year, while continuing full time employment with Grace). This means,
for instance, that the participant's employment with Grace remains "at will"
before, during and after the implementation of the Program.
EXAMPLE
Your supplemental retention payment target is 55%. Your salary as of January 1,
2004 is $200,000 and you received a merit increase of $6,000 in May 2004. Grace
achieves its EBIT goal of 10% growth. Your total supplemental retention payment
under the 2004 program equals $112,200.
On December 26, you would receive a supplement retention payment of $56,100
($204,000 X 27.5%).
In March 2005, you would receive a supplement retention payment of $56,100
($204,000 X 27.5% X 100%).