EXHIBIT 10.20
ACUITY BRANDS, INC.
MANAGEMENT COMPENSATION AND INCENTIVE PLAN
EFFECTIVE AS OF NOVEMBER 30, 2001
1. ESTABLISHMENT AND EFFECTIVE DATE OF PLAN
Acuity Brands, Inc. (the "Corporation") hereby adopts the
Acuity Brands, Inc. Management Compensation and Incentive Plan (the
"Plan") for its executive officers and certain other executives of the
Corporation, its Subsidiaries and Business Units who are in management
positions designated as eligible for participation by the Compensation
Committee of the Board of Directors of the Corporation or such other
committee appointed by the Board (the "Committee") or its designee. The
Plan shall be effective on November 30, 2001 and shall remain in
effect, subject to the rights of amendment and termination in Section
13, until the Incentive Awards are paid for the Corporation's fiscal
year ending in 2007. Payments under the Plan shall only be made to
Named Executive Officers after the Plan is approved by the
stockholder(s) of the Corporation.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to further the growth and financial
success of the Corporation by offering performance incentives to
designated executives who have significant responsibility for such
success.
3. DEFINITIONS
(a) "Base Annual Salary" means the actual salary paid to a
Participant during the applicable Plan Year, increased by the
amount of any pre-tax deferrals or other pre-tax payments made
by the Participant to the Corporation's deferred compensation
or welfare plans (whether qualified or non-qualified).
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Business Unit" means a separate business operating unit of
the Corporation with respect to which separate performance
goals are established hereunder.
(d) "Change in Control" means any of the following events:
(i) The acquisition (other than from the
Corporation) by any "Person" [as the term person is used for
purposes of Sections 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "1934 Act")] of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty percent (20%) or more of the combined
voting power of the Corporation's then outstanding voting
securities; or
(ii) The individuals who, as of December 1, 2001,
are members of the Board of Directors (the "Incumbent Board"),
cease for any reason to constitute at least two-thirds of the
Board of Directors; provided, however, that if the election,
or nomination for election by the Corporation's stockholders,
of any new director was approved by a vote of at, least
two-thirds of the Incumbent Board, such new director shall,
for purposes of this Plan, be considered as a member of the
Incumbent Board; or
(iii) a merger or consolidation involving the
Corporation if the stockholders of the Corporation,
immediately before such merger or consolidation do not, as a
result of such merger or consolidation, own, directly or
indirectly, more than seventy percent (70%) of the combined
voting power of the then outstanding voting securities of the
corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the
combined voting power of the voting securities of the
Corporation outstanding immediately before such merger or
consolidation; or
(iv) a complete liquidation or dissolution of the
Corporation or an agreement for the sale or other disposition
of all or substantially all of the assets of the Corporation.
Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur pursuant to subsection (i) above,
solely because twenty percent (20%) or more of the combined
voting power of the Corporation's then outstanding securities
is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained
by the Corporation or any of its Subsidiaries, or (ii) any
corporation which, immediately prior to such acquisition, is
owned directly or indirectly by the stockholders of the
Corporation in the same proportion as their ownership of stock
in the Corporation immediately prior to such acquisition.
(e) "Chief Executive Officer" means the chief executive officer of
the Corporation, unless otherwise specified.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Compensation Committee of the Board of
Directors or any other committee designated by the Board of
Directors which is responsible for administering the Plan.
(h) "Corporation" means Acuity Brands, Inc., a Delaware
corporation, and its successors.
(i) "Incentive Award" or "Award" means the bonus awarded to a
Participant under the terms of the Plan.
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(j) "Maximum Award" means the maximum percentage of Base Annual
Salary which may be paid based upon the Relative Performance
during the Plan Year.
(k) "Named Executive Officer" means a Participant who as of the
date of payment of an Incentive Award is one of the group of
"covered employees" under Code Section 162(m) and the
regulations thereunder.
(l) "Participant" means an employee of the Corporation, a
Subsidiary or a Business Unit who is designated by the
Committee to participate in the Plan.
(m) "Personal Performance Goals" means the goals that may be
established for each Participant each year to improve the
effectiveness of the Participant's area of responsibility as
well as the Corporation as a whole.
(n) "Plan Rules" means the guidelines established annually by the
Committee pursuant to Section 4, subject, where applicable, to
ratification by the Board of Directors.
(o) "Plan Year" means the twelve month period which is the same as
the Corporation's fiscal year, The initial Plan Year shall be
December 1, 2001 through August 31, 2002. Thereafter, the Plan
Year shall be September 1 through the next following August
31.
(p) "Relative Performance" means the extent to which the
Corporation, designated Business Unit or Subsidiary, as
applicable, achieves the performance measurement criteria set
forth in the Plan Rules.
(q) "Subsidiary" means any corporation in an unbroken chain of
corporations, beginning with the Corporation, if each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain.
(r) "Target Award" means the percentage (which may vary among
Participants and from Plan Year to Plan Year) of Base Annual
Salary which will be paid to a Participant as an Incentive
Award if the performance measurement criteria applicable to
the Participant for the Plan Year is achieved, as reflected in
the Plan Rules for such Plan Year.
(s) "Threshold Award" means the percentage of Base Annual Salary
which may be paid based on the minimum acceptable Relative
Performance during the Plan Year.
4. ADMINISTRATION OF THE PLAN
The Plan will be administered by the Committee, subject to its right to
delegate responsibility for administration of the Plan as it applies to
Participants other than Named Executive Officers pursuant to Section 7. The
Committee will have authority to establish
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Plan Rules with respect to the following matters, subject to the right of the
Board of Directors to ratify such Plan Rules as provided in this Section 4:
(a) the employees who are to become Participants in the Plan;
(b) the Target Award, Maximum Award and Threshold Award that can be granted
to each Participant and the method for determining such award, which
the Committee may amend from time to time,
(c) the performance targets and the measurement criteria to be used in
determining the Corporation's or a Business Unit's or a Subsidiary's
Relative Performance, which will include one or more of the performance
measures listed on Appendix A attached hereto, as determined by the
Committee each year; and
(d) the time or times and the conditions subject to which any Incentive
Award may become payable.
The Plan Rules will be adopted by the Committee prior to, or as soon
as practical after, the commencement of each Plan Year. Subject to the
provisions of the Plan and the Committee's right to delegate its
responsibilities, the Committee will also have the discretionary authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, and to make all other determinations deemed necessary or
advisable in administering the Plan. The determinations of the Committee on the
matters referred to in paragraphs (a) through (d) of this Section 4 with
respect to Named Executive Officers (and such other Participants as the
Committee may determine) shall be submitted at least annually to the Board of
Directors for its consideration and ratification. For Participants who are not
Named Executive Officers, the Committee may in its discretion establish
performance measures not listed on Appendix A without obtaining shareholder
approval.
5. PARTICIPATION
Eligibility for participation in the Plan is limited to executive
officers of the Corporation and certain other executives of the Corporation,
Business Units or Subsidiaries who hold key management and staff positions.
From among those eligible and based upon the recommendations of the Chief
Executive Officer and other designees, the Committee will designate by name or
position the Participants each Plan Year. Any employee who is a Participant in
one Plan Year may be excluded from participation in any other Plan Year. If,
during the Plan Year, a Participant other than a Named Executive Officer
changes employment positions to a new position which corresponds to a different
award level, the Committee may, in its discretion, adjust the Participant's
award level for such Plan Year. The Committee may, in its discretion, designate
employees who are hired after the beginning of the Plan Year as Participants
for such Plan Year and as eligible to receive full or partial Incentive Awards
for such year.
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6. INCENTIVE AWARDS
6.1 DETERMINATION OF THE AMOUNT OF INCENTIVE AWARDS
At the end of each Plan Year, the Committee shall certify the
extent to which the performance targets and measurement criteria
established pursuant to Section 4 have been achieved for such Plan Year
based upon financial information prepared by the Corporation. Subject
to the right to decrease an award as described in the next paragraph,
the Participant's Incentive Award shall be computed by the Committee
based upon the achievement of the established performance targets,
measurement criteria and the requirements of the Plan. In addition to
any adjustments provided for in the Incentive Award, the Committee may
in determining whether performance targets have been met adjust the
Corporation's financial results to exclude the effect of unusual
charges or income items, changes in accounting, or other events (such
as acquisitions, divestitures and equity and other restructurings),
which are distortive of results year over year (either on a segment or
consolidated basis); provided, that for purposes of determining the
Incentive Awards of Named Executive Officers, the Committee shall
exclude unusual items whose exclusion has the effect of increasing
Relative Performance if such items constitute "extraordinary" or
"unusual" events or items under generally accepted accounting
principles and all such events or items shall be excluded. In addition,
the Committee will adjust its calculations to exclude the unanticipated
effect on financial results of changes in the Code or other tax laws,
or the regulations relating thereto.
The Committee may, in its discretion, decrease the amount of a
Participant's Incentive Award for a Plan Year based upon such factors
as it may determine, including the failure of the Corporation, Business
Unit or Subsidiary to meet certain performance goals or of a
Participant to meet his Personal Performance Goals. The factors to be
used in reducing an Incentive Award may be established at the beginning
of a Plan Year and may vary among Participants.
In the event that the Corporation's, Business Unit's or
Subsidiary's performance is below the performance thresholds for the
Plan Year and the Incentive Awards are reduced or cancelled, the
Committee may in its discretion grant Incentive Awards (or increase the
otherwise earned Incentive Awards) to deserving Participants, except
for Participants who are Named Executive Officers.
The Plan Rules and Incentive Awards under the Plan shall be
administered in a manner to qualify payments under the Plan to the
Named Executive Officers for the performance-based exception under Code
Section 162(m) and the regulations thereunder, except where the Board
of Directors determines such compliance is not necessary. The maximum
Incentive Award that may be paid to an individual Participant for a
Plan Year shall be $1.5 million.
6.2 ELIGIBILITY FOR PAYMENT OF INCENTIVE AWARD
No Participant will have any vested right to receive any
Incentive Award until such date as the Board of Directors has ratified
the Committee's determination with respect to
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the payment of individual Incentive Awards, except where the Committee
determines such ratification is not necessary. No Incentive Award will
be paid to any Participant who is not an active employee of the
Corporation, a Business Unit or a Subsidiary at the end of the Plan
Year to which the Incentive Award relates; provided, however, at the
discretion of the Committee or its designee (subject to ratification by
the Board of Directors, where required), partial Incentive Awards may
be authorized by the Committee to be paid to Participants (or their
beneficiaries) who are terminated without cause (as determined by the
Committee or its designee) or who retire, die or become permanently and
totally disabled during the Plan Year. No Participant entitled to
receive an Incentive Award shall have any interest in any specific
asset of the Corporation, and such Participant's rights shall be
equivalent to that of a general unsecured creditor of the Corporation.
6.3 PAYMENT OF AWARDS
Payment of the Incentive Awards will be made as soon as
practicable after their determination pursuant to Sections 6.1 and 6.2,
subject to a Participant's right to defer payment pursuant to any
applicable deferred compensation plans of the Corporation. Payment will
generally be made in a lump sum in cash, unless the Committee otherwise
determines at the beginning of the Plan Year.
7. DELEGATION OF AUTHORITY BY COMMITTEE
Notwithstanding the responsibilities of the Committee set
forth herein, the Committee may delegate to the Chief Executive Officer
or others all or any portion of its responsibility for administration
of the Plan as it relates to Participants other than Named Executive
Officers. Such delegation may include, without limitation, the
authority to designate employees who can participate in the Plan, to
establish Plan Rules, to interpret the Plan, to determine the extent to
which performance criteria have been achieved, and to adjust any
Incentive Awards that are payable. In the case of each such delegation,
the administrative actions of the delegate shall be subject to the
approval of the person within the Corporation to whom the delegate
reports (or, in the case of a delegation to the Chief Executive
Officer, to the approval of the Committee).
8. CHANGE IN CONTROL
Upon the occurrence of a Change in Control, unless the
Participant otherwise elects in writing, the Participant's Incentive
Award for the Plan Year, determined at the Target Award level (without
any reductions under Section 6.1) shall be deemed to have been fully
earned for the Plan Year, provided that the Participant shall only be
entitled to payment of a pro rata portion of the Incentive Award based
upon the number of days within the Plan Year that had elapsed as of the
effective date of the Change in Control. The Incentive Award amount
shall be paid in cash within thirty (30) days of the effective date of
the Change in Control. The Incentive Award payable upon a Change in
Control to a Participant for a Plan Year during which a Change in
Control occurs shall be the greater of the amount provided for under
this Section 8 or the amount of the Incentive Award payable
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to such Participant for the Plan Year under the terms of any employment
agreement or severance agreement with the Corporation, its Business
Units or its Subsidiaries.
9. BENEFICIARY
The Committee may provide for each Participant to designate a
person or persons to receive, in the event of death, any Incentive
Award to which the Participant would then be entitled under Section
6.2. Such designation will be made in the manner determined by the
Committee and may be revoked by the Participant in writing. If the
Committee does not provide for such designation or if a Participant
fails effectively to designate a beneficiary, then the estate of the
Participant will be deemed to be the beneficiary.
10. WITHHOLDING OF TAXES
The Corporation shall deduct from each Incentive Award the
amount of any taxes required to be withheld by any governmental
authority.
11. EMPLOYMENT
Nothing in the Plan or in any Incentive Award shall confer (or
be deemed to confer) upon any Participant the right to continue in the
employ of the Corporation, a Business Unit or a Subsidiary, or
interfere with or restrict in any way the rights of the Corporation, a
Business Unit or a Subsidiary to discharge any Participant at any time
for any reason whatsoever, with or without cause.
12. SUCCESSORS
All obligations of the Corporation under the Plan with respect
to Incentive Awards granted hereunder shall be binding upon any
successor to the Corporation, whether such successor is the result of
an acquisition of stock or assets of the Corporation, a merger, a
consolidation or otherwise.
13. TERMINATION AND AMENDMENT OF THE PLAN
The Committee, subject to the ratification rights of the Board
of Directors, has the right to suspend or terminate the Plan at any
time, or to amend the Plan in any respect, provided that no such action
will, without the consent of an affected Participant, adversely affect
the Participant's rights under an Incentive Award approved under
Section 6.2.
14. GOVERNING LAW
The Plan shall be interpreted and construed under the laws of
the State of Georgia.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Plan has been executed by the Corporation on
this 28th day of November, 2001, to be effective on the Effective Date.
ACUITY BRANDS, INC.
By: /s/ James S. Balloun
-------------------------------------
James S. Balloun
Chairman, President and
Chief Executive Officer
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APPENDIX A
to
ACUITY BRANDS, INC.
MANAGEMENT COMPENSATION AND INCENTIVE PLAN
PERFORMANCE MEASURE GENERAL DEFINITION
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AATP Margin .................................AATP divided by Sales
Adjusted After-Tax Profit (AATP) ............APTP minus book income taxes
(reported tax rate applied to APTP)
Adjusted Pre-Tax Profit (APTP) ..............Income before provision for income
taxes plus interest expense plus
implied interest on capitalized
operating leases. The measure may
include or exclude income from
discontinued operations,
extraordinary items, changes in
accounting principles, and
restructuring expense.
Capitalized Economic Profit .................Economic Profit divided by a
predetermined rate reflecting the
cost of capital
Capitalized Entity Value ....................Sum of average invested capital in
the business and the Capitalized
Economic Profit
Capitalized Equity Value ....................Capitalized Entity Value minus
total debt
Cashflow ....................................Net cash provided by operating
activities
Cashflow Return on Capital ..................Cash flow divided by average
invested capital
Cashflow Return on Capitalized
Entity/Equity Value..........................Cashflow divided by Capitalized
Value
Cashflow Return on Investment ...............
Change in Price of Shares ...................
Earnings Per Share ..........................Primary or fully diluted earnings
per share
Economic Profit .............................AATP minus a charge for capital
Net Income ..................................Net income as reported in NSI's
annual financial statements or the
books and records of its segments.
The measure may include or exclude
income from discontinued
operations, extraordinary items,
changes in accounting principles,
and restructuring expense.
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Net Income Return on Capital ................Net Income divided by average
invested capital
Return on Assets (ROA) ......................Net Income divided by average total
assets
Return on Equity (ROE) ......................Net Income divided by average
stockholders' equity
Return on Gross Investment ..................Sum of Net Income plus depreciation
divided by sum of average invested
capital plus accumulated
depreciation
Return on Invested Capital ..................Net Income or AATP divided by
average
Return on Net Assets (RONA) .................Net Income, APTP, or income before
taxes, divided by average net
assets
Sales .......................................Net sales of products and service
revenues
Sales Growth ................................Percentage change in Sales from
year to year
Total Return to Stockholders ................Percentage change in stockholder
value (stock price plus reinvested
dividends)
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