EXHIBIT 10.20: TOTAL SHAREHOLDER RETURN PERFORMANCE PLAN
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ALCAN INC.
ALCAN
LONG-TERM
INCENTIVE PROGRAM
o TSR Performance Plan
Approved Plan Text
MONTREAL, CANADA
DECEMBER 2001
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1. GENERAL INFORMATION
The Alcan Long-Term Incentive Program is comprised of two separate plans. The
first plan is the Alcan Total Shareholder Return Performance Plan and the second
plan is Alcan Executive Share Option Plan. The text of the latter is included in
the Circular dated April 28,1993.
Following is the description of the Alcan Total Shareholder Return Performance
Plan.
2. DEFINITIONS
In this Plan, the following definitions shall have the following meanings:
"ALCAN LTIP" means the Alcan Long-Term Incentive Program which includes the
Alcan Executive Share Option Plan and the Alcan Total Shareholder Return
Performance Plan;
"AUDITORS" means PricewaterhouseCoopers LLP or any successor company;
"AWARD" means an earned Award to a Key Employee in accordance with the
provisions of the Plan;
"AWARD AGREEMENT" means the written agreement evidencing an Award granted to a
Key Employee under the Plan and approved by the Committee;
"BOARD" means the Board of Directors of the Company;
"CLOSING PRICES" means the closing sale prices for record lots for common shares
as reported on the New York Stock Exchange - Consolidating Trading;
"COMMITTEE" means the Personnel Committee of the Board;
"COMPANY" means Alcan Inc. and any successor corporation whether by
amalgamation, merger or otherwise;
"DISABILITY" means the complete permanent inability of a Key Employee to perform
all of his duties under the terms of his employment with the Company, as
determined by the Committee upon the basis of such evidence, including
independent medical reports and data as the Committee deems appropriate or
necessary;
"KEY EMPLOYEE" means an employee of the Company or a Subsidiary whose
responsibilities and decisions, in the judgement of the Committee, directly
affect the performance of the Company and its Subsidiaries and has been
designated by the Committee as eligible to participate in the Plan;
"PARTICIPANT" means an employee of the Company who is a Key Employee and who has
received an Award under the Plan;
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"PERFORMANCE PERIOD" means the period over which performance for the purposes of
an Award shall be measured;
"PLAN" means the Alcan Total Shareholder Return Performance Plan;
"RETIREMENT" means (unless otherwise determined by the Committee):
i) retirement in accordance with the provisions of those retirement benefits
plans of the Company or any Subsidiary covering the executive, or
ii) the placing of a terminated executive a non-active payroll of the Company
or a Subsidiary in order to permit such executive to attain early
retirement age.
"SHARE" means a common share of the Company;
"SUBSIDIARY" means a company controlled, directly or indirectly, by Alcan;
"TARGET CASH AWARD" means a target cash award granted to a Key Employee in
accordance with the provisions of the Plan and approved by the Committee;
"TSR" means the Total Shareholder Return, which is a financial measure as
described in section 6.4;
3. ESTABLISHMENT AND PURPOSE
3.1. Establishment. The Company has established an incentive compensation plan
known as the Alcan TSR Performance Plan. In an effort to increase the Key
Employee's awareness of their role in improving shareholder value, the
Committee has approved an executive total compensation plan that recognizes
that long-term incentives are an integral part of the executive's
compensation.
3.2. Purpose. The purpose of the Plan is to promote the achievement of long-term
objectives of the Company i) by tying the Key Employee's long-term
incentive opportunities to pre-established goals; ii) by rewarding
performance, based on the successful achievement of the pre-established
goals; and iii) by attracting, retaining and motivating highly competent
Key Employees committed as a group to achieve results through teamwork.
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4. ADMINISTRATION
4.1. The Plan shall be administered by the Committee. The Committee shall have
full and complete authority to interpret the Plan and prescribe such rules
and regulations and make such other determinations as it deems necessary or
desirable for the administration of the Plan.
4.2. Amendment, Modification and Termination. The Committee may at any time and
from time to time amend, suspend or terminate the Plan in whole or in part.
4.3. Costs of the Plan. All expenses associated with the establishment,
maintenance and termination of the Plan shall be borne by the Company.
4.4. Tax Consequences. The Awards shall be subject to taxes as per the income
tax rules of the Key Employee's country of residence. Participants are
encouraged to inform themselves of their particular tax situation. All
taxes shall be paid by the Participant.
4.5. Successors. All obligations of the Company under the Plan shall be binding
on any successor to the Company.
5. ELIGIBILITY
5.1. Eligibility. The Plan provides for the granting of a Target Cash Award to
designated Key Employees of the Company and its Subsidiaries. The Committee
shall determine at its sole discretion, which Key Employees of the Company
shall be eligible to be granted a TSR performance Target Cash Award. It
shall also determine the conditions (amount, period) applicable to each
Award.
Eligibility to participate in the Plan does not confer a right to receive a
Target Cash Award. There is no automatic entitlement to any grant.
6. AWARDS
6.1. Target Cash Award. The target amount of the Key Employee's Target Cash
Award shall be determined through competitive market data using appropriate
peer companies. The Committee shall approve annually the target long-term
incentive compensation amount to be attributed to Key Employees. Half of
this amount shall be delivered through the Plan and the other half through
the Alcan Executive Share Option Plan. Employees eligible for participation
in the Alcan LTIP but not eligible to participate in this Plan shall
receive their long-term compensation amount entirely through the Alcan
Executive Share Option Plan.
6.2. Amount of the Award. The amount of the Award, if any, shall be based on the
Company's TSR performance at the end of the Performance Period as measured
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against the TSR performance of the S&P Industrials.
6.3. Award Frequency and Performance Period. Subject to the terms of the Plan
(including sections 4.1, 4.2 and 5.1), Target Cash Awards shall generally
be granted annually by the Committee, with each Target Cash Award having a
Performance Period of 3 years.
6.4. Total Shareholder Return and Performance Measure. TSR shall be measured as
a change in the market price of the common stock plus cumulative dividend
yield over the Performance Period.
At the end of the Performance Period, the TSR performance measurement shall
be made for all companies in the S&P Industrials Index and the Company's
performance will be ranked relative to the other industrial companies in
the Index as of the end of the Performance Period. These measurements will
be made by a third party and audited by the Company's Auditors.
6.5. Calculation of TSR Performance. The percentage change in stock price is
equal to the ratio of (A) the average of the Closing Prices over the five
trading days immediately preceding the end of the Performance Period over
(B) the average of the Closing Prices over the five trading days
immediately preceding the commencement of the Performance Period.
Only companies that have been part of the Index for the full Performance
Period shall be included in the calculation of TSR performance.
6.6. Payout Matrix. In order for any payout to be earned, the Company's TSR
performance shall be at or above the 30th percentile rank of the companies
ranked in the S&P Industrial Index. At the 30th percentile rank, a payout
of 60% of the target Award shall be earned. At the 50th percentile rank, a
payout of 100% of target Award shall be earned, and at the 75th percentile
rank, a payout of 300% of the target Award shall be earned (maximum
payout). The payout will be prorated between these rankings (see sample
calculation at Appendix A).
6.7. Individual Performance. As with other elements of compensation, an Award
shall be earned through individual performance. There shall be no
entitlement to an Award. The actual target Award may also be subject to an
upward or downward adjustment based on the individual's performance and
contribution to the Company.
6.8. Payment of Awards. Subject to applicable law, payment with respect to
earned Awards may be made in whole or in part in the form of cash and/or
Shares of the Company, at the sole discretion of the Committee.
6.9. Award Agreement. A separate Agreement shall be entered into between the
Company and the Participant to cover each Target Cash Award. This document
shall be sent in duplicate to each Participant for signature. It describes
the conditions applying to that particular Award (see Appendix B).
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7. TERMINATION OF EMPLOYMENT
7.1. Termination of Employment Due to Death, Disability or Retirement. In the
event of termination of employment due to Retirement (in accordance with
the retirement programs rules), Disability or Death, the Participant will
be entitled to a pro-rata payment of any Awards earned, payable at the time
normally due and in accordance with such rules and regulations as may be
adopted by the Committee.
7.2. Termination for Reasons Other than Death, Disability or Retirement.
Termination of employment for any other reasons, including resignation,
will result in forfeiture of any outstanding Awards under the Plan. In
specific circumstances, the Committee may adopt rules to provide for
partial payment as above.
8. BENEFICIARY DESIGNATION
8.1. Designation of Beneficiary. Each Participant shall advise the Company in a
written designation, on a prescribed form, the name of the beneficiary who
shall be entitled to receive a payout, if any, with respect to an Award
upon his death (Appendix C). The Participant shall advise the Company of
any change in any such information (see Appendix D).
In the event that there shall be no designation of beneficiary made, any
amounts to be paid to the Participant's beneficiary shall be paid to the
Participant's estate.
8.2. Death of Beneficiary. In the event that the beneficiary predeceases the
Participant, any amounts that would have been paid to the Participant or
the Participant's beneficiary under the Plan shall be paid to the
Participant's estate.
9. MISCELLANEOUS PROVISIONS
9.1. The effective date of the Plan is 1 January 2002.
9.2. The Plan shall be governed and interpreted in accordance with the laws of
the Province of Quebec and the laws of Canada applicable in Quebec.
9.3. If any provision of the Plan is determined to be void or unenforceable in
whole or in part, such determination shall not affect the validity or
enforcement of any other provision or part thereof.
9.4. Headings are for reference purposes only and do not limit or extend the
meaning of the provisions of the Plan.
9.5. References to the masculine shall include the feminine; references to the
singular shall include the plural and vice versa.
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APPENDIX A
[RATING CHART]
EXAMPLE
Target Award $100,000
Adjustment for personal performance $ 25,000
Adjusted Target Award $125,000
3-year performance rating x 200%
at 62.5 percentile
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$250,000
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Amount paid by end of April following the 3-year performance period.
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APPENDIX B
ALCAN INC.
TOTAL SHAREHOLDER RETURN (TSR) PERFORMANCE PLAN
(LONG-TERM INCENTIVE CASH AWARD)
AWARD AGREEMENT
NAME AWARD YEAR:
PERFORMANCE PERIOD: TARGET AWARD AMOUNT:
You have been granted a 2002 Target Cash Award (shown above) under the TSR
Performance Plan. This Award was approved by the Personnel Committee of the
Board, effective 15 September 2002 and is subject to a three year Performance
Period beginning 1 January 2003 and ending 31 December 2005.
The payment value of this Award, if any, will be calculated on the Total
Shareholder Return and Alcan's percentile rank relative to the Standard and Poor
(S&P) Industrials at the end of the Performance Period. Total Shareholder Return
is measured as the change in the market price of the common stock plus
cumulative dividend yield over the Performance Period. The percentage change in
stock price is equal to the ratio of (A) the average of the closing share prices
over the five trading days immediately preceding the end of the Performance
Period over (B) the average of the closing share prices over the five trading
days immediately preceding the Performance Period.
At the end of the Performance Period, TSR performance measurements will be made
for Alcan and for all companies in the S&P Industrials Index. Alcan's TSR
performance will be compared and ranked against the TSR performance of other
industrial companies in the Index. Only companies that have been part of the
Index for the full 3-year period will be included in the Index.
The payout, if any, will be calculated by adjusting the target award by a
performance factor related to Alcan's percentile rank relative to the S&P
Industrials as follows:
o At a relative rank below the 30th percentile no payout will be made
o At a relative rank of the 30th percentile a payout of 60% of the target
amount
o At a relative rank of the 50th percentile a payout of 100% of the target
amount
o At a relative rank of the 75th percentile a payout of 300% of the target
amount (300% is the maximum payout under the Schedule)
o The payout will be prorated between these rankings.
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You must be continuously and actively employed by Alcan over the performance
period to be eligible to receive any payment. The actual payment, if any, will
be made as soon as practicable following completion of the Performance Period.
If you terminate your employment during the Performance Period due to
retirement, disability or death, your actual Award will be pro-rated for the
period up to termination; the amount being paid at the prescribed time and
according to such Rules and Regulations of the Plan adopted by the Committee.
Please refer to the Plan description.
Please indicate your acceptance of the above award, the terms and conditions as
described herein and the attachments by executing both copies of this Award
Agreement and returning one copy to Linda Eggeman, Alcan Inc., Maison Alcan,
Montreal.
I hereby accept the terms and conditions of this award:
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Signature Date
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APPENDIX C
ALCAN INC.
TOTAL SHAREHOLDER RETURN
PERFORMANCE PLAN
BENEFICIARY DESIGNATION FORM
I, _______________________________, being a Participant of the Total Shareholder
Return Performance Plan (TSR Performance Plan), hereby designate the following
person as my Beneficiary for purposes of the TSR Performance Plan and
acknowledge that said person is:
NAME:
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ADDRESS:
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Under the terms of the TSR Performance Plan, I reserve the right to revoke this
designation and to designate another person as my Beneficiary.
SIGNATURE:
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EMPLOYEE
NUMBER:
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DATE:
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APPENDIX D
ALCAN INC.
TOTAL SHAREHOLDER RETURN
PERFORMANCE PLAN
CHANGE OF BENEFICIARY FORM
I, _______________________________, being a Participant of the Total Shareholder
Return Performance Plan (TSR Performance Plan), hereby revoke the designation of
______________________________ as my Beneficiary for purposes of the TSR
Performance Plan and designate instead:
NAME:
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ADDRESS:
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Under the terms of the TSR Performance Plan, I reserve the right to revoke this
designation and to designate another person as my Beneficiary.
SIGNATURE:
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EMPLOYEE
NUMBER:
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DATE:
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