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Exhibit 10.A
INLAND STEEL INDUSTRIES, INC.
ANNUAL INCENTIVE PLAN
1. PURPOSE
The purpose of the Annual Incentive Plan (the "Plan") of Inland Steel
Industries, Inc. (the "Company") is to promote the interests of the Company and
its stockholders by (i) attracting and retaining salaried employees of
outstanding ability; (ii) strengthening the Company's capability to develop,
maintain and direct a competent employee population; (iii) motivating salaried
employees, by means of performance-related incentives, to achieve financial
rewards; (iv) providing annual incentive compensation opportunities which are
competitive with those of other major corporations; and (v) enabling salaried
employees to participate in the growth and financial success of the Company.
2. DEFINITIONS
"Affiliate" -- means any corporation or other entity which is not a
Subsidiary but as to which the Company possesses a direct or indirect ownership
interest and has power to exercise management control.
"Award" -- means an amount for an Award Period determined to be payable to
a Participant under the Plan.
"Award Period" -- means a calendar quarter or a calendar year, as the
Committee may establish from time to time with respect to any Hay point class
or resulting salary grade designations, to any Corporate Unit, or to a
combination of these factors.
"Award Schedule" -- means the schedule to be used for determining Awards
as established by the Committee and set forth in the Addendum to the Plan
applicable to the Corporate Unit covered thereby.
"Committee" -- means the Compensation Committee of the Board of Directors
of the Company.
"Consolidated Earnings" -- means the net income for the relevant Award
Period, on a consolidated basis, of the Company and all Subsidiaries, adjusted
as follows: (i) by adding back any amounts credited to the fund or funds under
the Plan for the Award Period in question; (ii) by adding back any provisions
of federal, state or municipal taxes which are based on or determined by
earnings or net income and imposed on the Company or any Subsidiary; (iii) by
eliminating gains or losses from sales or other dispositions of assets arising
other than in the ordinary course of business or arising from discontinued
operations (after adjusting for taxes in
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the manner provided in (ii) above); and (iv) by deducting or adding back any
other earnings or charges (after adjusting for taxes in the manner provided in
(ii) above) that have been designated by the Committee for exclusion or
inclusion under the Plan.
"Corporate Unit" -- means the Company, Inland Steel Company, Inland
Materials Distribution Group, Inc., Joseph T. Ryerson & Son, Inc./East, Joseph
T. Ryerson & Son/Central, Joseph T. Ryerson & Son/West, Ryerson Coil
Processing, J. M. Tull Metals Company, Inc., and any Affiliate, other
Subsidiary or any division or group of the Company or any Subsidiary designated
as a Corporate Unit from time to time by the Board of Directors of the Company.
"Employee" -- means an employee eligible to be designated a Participant in
the Plan.
"Operating Assets" -- means the average for an Award Period of the sum
(computed on a month-end basis) of (i) working capital (with inventory adjusted
to current value and excluding cash, marketable securities, interest-bearing
receivables, notes payable and long-term debt due in one year); (ii) property,
plant and equipment, net of accumulated depreciation; and (iii) any other
operating assets.
"Operating Profit" -- means the operating profit set forth in the
Company's Quarterly Report on Form 10-Q or Annual Report to Stockholders for a
Corporate Unit for the applicable Award Period, or if not separately stated, as
determined in accordance with generally accepted accounting principles based on
the financial results presented in such Quarterly Report on Form 10-Q or Annual
Report, in each case as adjusted by the Committee to reflect such items as the
Committee determines appropriate.
"Participant" -- means an Employee who is selected by the Committee to
receive an Award under the Plan.
"Return on Equity" -- means Consolidated Earnings divided by Stockholders'
Equity.
"Return on Operating Assets" -- means Operating Profit divided by
Operating Assets (expressed as a percentage), provided that Operating Profit
shall be computed for this purpose without giving effect to any payments to
Participants for the Award Period in question.
"Stockholders' Equity" -- means the average of the amounts so designated
on a consolidated basis in the Company's Quarterly Report on Form 10-Q or
Annual Report to Stockholders as of the close of the applicable Award Period
for which Awards under the Plan are being made and with respect to annual Award
Periods, as of the close of the preceding fiscal year, and with respect to
quarterly Award Periods, as of the close of the preceding fiscal
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quarter, less the aggregate amount of any equity financings from external
sources during the applicable Award Period for which Awards are being made.
"Subsidiary" -- means any corporation in which the Company possesses
directly or indirectly more than fifty percent (50%) of the total combined
voting power of all classes of its stock.
"Target Award" -- means the percentage of a Participant's base salary
earnings for an Award Period as established by the Committee pursuant to
paragraph 6 of the Plan and set forth in the Addendum to the Plan applicable to
the Corporate Unit in which such Participant is employed.
"Threshold" -- means the minimum financial performance (established by the
Committee and set forth in the Addendum to the Plan applicable to such
Corporate Unit) required by a Corporate Unit before an Award may be paid to a
Participant employed in such Corporate Unit.
3. ADMINISTRATION
The Plan shall be administered by the Committee. No member of the
Committee shall be eligible to receive an Award while serving on the Committee.
The Committee shall have authority to interpret the Plan and to establish,
amend and rescind rules and regulations for the administration of the Plan, and
all such interpretations, rules and regulations shall be conclusive and binding
on all persons. In addition, the Committee may delegate to one or more senior
executive officers of the Company the right to administer the Plan as it
pertains to employees who are not officers of the Company or any other
Corporate Unit. Notwithstanding any other provision of the Plan to the
contrary, the Committee may impose such conditions on participation in and
Awards under the Plan as it deems appropriate. Such conditions may include
conditions applicable to one or more Participants which are intended to cause
Awards payable to such Participants to be disregarded for purposes of Section
162(m) of the Internal Revenue Code of 1986, as amended, including but not
limited to conditions which subject payment of Awards to stockholder approval
of the Plan and conditions which preclude the Committee from exercising any
discretion otherwise provided by the Plan to adjust Consolidated Earnings or
Operating Profits or to adjust individual Awards in accordance with paragraph
7, if the effect of any such adjustment would be to increase the amount of any
Award otherwise payable to such Participants.
4. ELIGIBILITY
Except as otherwise provided by the Committee, all full-time salaried
employees of a Corporate Unit as of (a) the first day and the last day of a
quarterly Award Period, or (b) June 30 and December 31 of an annual Award
Period, as applicable, are eligible
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to be designated Participants in the Plan for such Award Period, provided,
however, that the Committee may adopt criteria restricting the number of
full-time salaried employees of a Corporate Unit eligible to be so designated,
which criteria shall be set forth in the Addendum to the Plan applicable to
such Corporate Unit.
5. DESIGNATION OF PARTICIPANTS
The Committee shall determine and designate from time to time those
Employees who shall be Participants. The designation of an Employee as a
Participant in the Plan for any Award Period shall not bestow upon such
Employee any right to receive an Award for such Award Period or the right to be
designated a Participant for any subsequent Award Period.
6. INDIVIDUAL AWARD OPPORTUNITY
For each Award Period, the Committee shall establish for each Participant
a Target Award, expressed as a percentage of his or her base salary earnings
for such Award Period, on the basis of his or her Hay point classification or
resulting salary grade designation.
7. DETERMINATION OF AWARDS
Awards for each Award Period for Participants in each Corporate Unit shall
be determined in accordance with the Award Schedule established by the
Committee for such Corporate Unit, provided, however, that no Award shall be
paid to any Participant in a Corporate Unit for any Award Period in which the
performance of such Corporate Unit did not equal or exceed the Threshold
applicable to such Corporate Unit. The Award for each Participant in a
Corporate Unit shall be the percentage of his or her Target Award determined in
accordance with the applicable Award Schedule, provided, however, that subject
to Paragraph 3 hereof, the Committee may adjust such Award for individual
performance on the basis of such quantitative and qualitative performance
measures and evaluations as it deems appropriate, and provided, further, that
the Committee may also make such adjustments as it deems appropriate in the
case of Participants whose Hay point classifications or resulting salary grade
designations have changed during the applicable Award Period or who have been
employed in more than one Corporate Unit during an Award Period. In no event
may a participant be paid an Award in any calendar year in excess of
$2,000,000. No segregation of any moneys or the creation of any trusts or the
making of any special deposits shall be required in connection with any Awards
made or to be made under the Plan.
8. PAYMENT OF AWARDS
Awards shall be paid in cash as soon as practicable after the end of the
Award Period for which the Award is made. If a
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Participant to whom an Award has been made dies prior to the payment of the
Award, such Award shall be delivered to his or her legal representative or to
such other person or persons as shall be determined by the Chief Executive
Officer of the Company. The Company or other applicable Corporate Unit shall
have the right to deduct from all Awards payable under the Plan any taxes
required by law to be withheld by the Company or other Corporate Unit with
respect thereto, provided however, that to the extent provided by the
Committee, any payment under the Plan may be deferred and to the extent
deferred, may be credited with an interest or earnings factor as determined by
the Committee.
9. TERMINATION OF EMPLOYMENT
Except in the case of death, disability or retirement or except as
provided in paragraph 10, a Participant must be an employee as of the end of
the Award Period in order to be eligible for an Award.
10. CHANGE OF CONTROL
In the event of a Change of Control of the Company (as hereinafter
defined), the Plan shall remain in full force and effect for the remainder of
the calendar year in which such Change of Control occurs, and each Participant
shall receive an Award for all Award Periods occurring in such calendar year,
at least equal to his or her Target Award, regardless of whether or not Awards
would otherwise have been payable under the Plan for such Award Periods and
regardless of whether or not such Participant was an Employee at the end of any
Award Period occurring in such calendar year. A "Change of Control of the
Company" shall be deemed to have occurred if there shall have been a change in
the composition of the Board of Directors of the Company such that a majority
of the Board of Directors shall have been members of the Board of Directors for
less than twenty-four months, unless the election of each new director who was
not a director at the beginning of the twenty-four month period was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
11. TRANSFERABILITY
Any payment to which a Participant may be entitled under the Plan shall be
free from the control or interference of any creditor of such Participant and
shall not be subject to attachment or susceptible of anticipation or
alienation. The interests of a Participant shall not be transferable except by
will or the laws of descent and distribution.
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12. NO RIGHT TO PARTICIPATION; EMPLOYMENT
Neither the adoption of the Plan nor any action of the Committee shall be
deemed to give any Employee any right to be designated as a Participant under
the Plan. Further, nothing contained in the Plan, nor any action by the
Committee or any other person hereunder, shall be deemed to confer upon any
Employee any right of continued employment with any Corporate Unit or to limit
or diminish in any way the right of any Corporate Unit to terminate his or her
employment any time with or without cause.
13. NONEXCLUSIVITY OF THE PLAN
This Plan is not intended to and shall not preclude the Board of Directors
of the Company from adopting or continuing such additional compensation
arrangements as it deems desirable for Participants under this Plan, including
any thrift, savings, investment, stock purchase, stock option, profit sharing,
pension, retirement, insurance or other incentive plan.
14. AMENDMENT
Except as provided in paragraph 10 hereof, the Board of Directors of the
Company may amend, suspend or terminate the Plan at any time.
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