MEMO RE ACQUISITION-RELATED, SPECIAL INCENTIVE PLAN
Published on August 9, 2006
Exhibit
10
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Memorandum
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May 2,
2006
TO:
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FROM:
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R.
David Hoover
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SUBJECT:
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Acquisition-Related,
Special Incentive Plan - Combined Metal Food & Household Products
Packaging Division and Plastics Packaging
Division
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I
am
pleased to advise you that you have been selected to participate in the
Acquisition-Related, Special Incentive Plan (“Plan”). This program is available
only to selected executives and senior managers who are in a position to impact
significantly the successful integration of U.S. Can and Alcan Plastics into
our
business or to enhance and sustain the success of our other business units
while
the integration efforts proceed.
The
terms
of the Plan are as follows:
1. (a) Payment
Contingent.
Except
as provided otherwise by paragraph 4 below, this Plan will pay you an
amount of money determined in accordance with the provisions of paragraph 2
below, if (and only if) (i) the combination of the Company’s Metal Food
& Household Products Packaging Division and Plastics Packaging Division
(“Combined Divisions”) exceeds the Threshold EBIT Goal or the Threshold Cash
Flow Goal for a Performance Period (as such terms are defined in
paragraphs 1(b) and 1(c) below), and (ii) you are continuously
employed full time by the Company from the effective date of this Plan, January
1, 2006, until the close of such Performance Period in your current position
or
another position eligible for inclusion in this Plan. If the Combined Divisions
exceeds the Threshold EBIT Goal and the Threshold Cash Flow Goal for none of
the
Performance Periods, or if you are not continuously employed full time by the
Company as provided above from January 1, 2006, until the close of a Performance
Period for which the Combined Divisions exceeds the Threshold EBIT Goal or
the
Threshold Cash Flow Goal, you will not be paid any amount of money pursuant
to
this Plan, unless paragraph 4 below expressly provides
otherwise.
(b) Performance
Periods Defined.
(i) The
term
“Performance Period” means the Twelve-Month Performance Period, the Twenty-Four
Month Performance Period, or the Thirty-Six Month Performance Period as
hereafter defined;
(ii) The
term
“Twelve-Month Performance Period” means the period that begins on January 1,
2006, and that ends on December 31, 2006;
May
2,
2006
Page
2
(iii) The
term
“Twenty-Four Month Performance Period” means the period that begins on January
1, 2006, and that ends on December 31, 2007; and
(iv) The
term
“Thirty-Six Month Performance Period” means the period that begins on
January 1, 2006, and that ends on December 31, 2008.
(c) Cumulative
EBIT and Cash Flow Defined.
(i) “Cumulative
EBIT” means, with respect to any Performance Period, the cumulative earnings
before interest and taxes of the Combined Divisions for such Performance Period
(including, without limitation, expenses for this Plan and any other similar
or
dissimilar compensation arrangement). Such amount will exclude all interest
and
provisions for taxes based on income and without giving effect to any
extraordinary gains or losses, or gains or losses from sales of assets other
than inventory sold in the ordinary course of business, all as determined in
accordance with generally accepted accounting principles and as included in
the
audited financial statements of the Company and its consolidated subsidiaries
for such Performance Period; and
(ii) “Cumulative
Cash Flow” means, with respect to any Performance Period, Cumulative EBIT for
such Performance Period as defined in paragraph 1(c)(i) above with the
following additions and deductions: (a) add an amount equal to the
cumulative charges for depreciation and amortization of the Combined Divisions
for such Performance Period, (b) add an amount equal to the cumulative
decreases in working capital of the Combined Divisions in such Performance
Period, (c) deduct an amount equal to the cumulative capital expenditures
(including cash rationalization costs, net of any cash tax benefits) of the
Combined Divisions for such Performance Period, and (d) deduct an amount
equal to the cumulative increases in working capital of the Combined Divisions
in such Performance Period, all as determined in accordance with generally
accepted accounting principles and as included in the audited financial
statements of the Company and its consolidated subsidiaries for such Performance
Period.
(iii) For
purposes of (i) and (ii) above, Cumulative EBIT and Cumulative Cash Flow shall
be based on the results of the Combined Divisions measured from January 1,
2006,
to the end of the Performance Period. These results include only the results
as
consolidated into Ball Corporation for Financial Reporting, which generally
would include approximately 9 months of Aerosol & Specialty Packaging and
Alcan Plastics performance, and 12 months of the legacy Ball Metal Food
Packaging and Ball Plastics performance during 2006. Additionally (ii)(b) and
(ii)(d) above, any increase or decrease in working capital shall be also
measured from January 1, 2006, to the end of the Performance Period as
described above. The Ball Corporation Chief Financial Officer shall make all
determinations related to the final EBIT and Cash Flow calculations under this
Plan.
2.
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Special
Incentive Plan Award Opportunity and Performance
Goals
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(a) For
the
Thirty-Six Month Performance Period your award opportunity (“Special Incentive
Factor”) is 60 percent
of your average
annual
base
salary earned in calendar years 2006, 2007 and 2008. Actual awards (including
interim awards) under this Plan may range from zero to 150 percent of your
Special Incentive Factor and are based on achievement of performance goals
for
the combination of the Combined Divisions as outlined below:
May
2,
2006
Page
3
Cumulative
Performance Goals
($
millions)
12-Month
Performance
Period
Ending
December 31,
2006
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24-Month
Performance
Period
Ending
December 31,
2007
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36-Month
Performance
Period
Ending
December 31,
2008
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Performance
Measure
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Threshold
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Target
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Maximum
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Threshold
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Target
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Maximum
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Threshold
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Target
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Maximum
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Confidential
Information1
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Confidential
Information
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Confidential
Information
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||||||||||||||||||||||||||
Cumulative
EBIT
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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|||||
Cumulative
Cash Flow
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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*****
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The
cumulative Performance Goals are based on the Combined Divisions measured from
January 1, 2006, to the end of the Performance Period, which would include
approximately 9 months of Aerosol & Specialty Packaging and Alcan
Bottles projected performance and 12 months of the legacy Ball Metal Food
Packaging and Ball Plastics projected performance during 2006.
Depending
upon actual cumulative performance for each of the Performance Periods above,
interim awards may be made at the end of each Performance Period as
follows:
1
Portions of the exhibit have been omitted pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. The omissions
have
been indicated by asterisks (“*****”)
and the omitted text has been filed separately with the Securities and Exchange
Commission.
Percentage
of Special Incentive Factor Awarded Based on
Actual
Cumulative Performance During Performance Periods
12-Month
Performance
Period
Ending
December 31,
2006
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24-Month
Performance
Period
Ending
December 31,
2007
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36-Month
Performance
Period
Ending
December 31,
2008
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Percent
of Special Incentive Factor Awarded
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Threshold
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Target
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Maximum
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Threshold
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Target
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Maximum
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Threshold
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Target
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Maximum
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Confidential
Information3
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Confidential
Information3
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Confidential
Information3
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Based
upon Cumulative EBIT
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*****3
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*****3
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*****1
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*****
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*****2
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*****1
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*****
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*****2
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*****2
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Based
upon Cumulative Cash Flow
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*****
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*****
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*****1
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*****
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*****2
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*****1
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*****
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*****2
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*****2
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1
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Payments
at the end of the 12-Month and 24-Month Performance Periods will
be
limited to no more than target payments. Amounts which are payable
for
performance in excess of target performance are calculated and payable
only on the basis of cumulative performance over the 36-Month Performance
Period.
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2
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Minus
awards, if any, previously made under this Special Incentive
Plan.
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3 | Portions of the exhibit have been omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. The omissions have been indicated by (“*****”) and the omitted text has been filed separately with the Securities and Exchange Commission. |
May
2,
2006
Page
4
For
each
Performance Period, if actual performance under each measure is greater than
Threshold Performance, but is less than Target Performance, awards shall be
calculated pursuant to the table above, determined on a straight line
interpolation between Threshold Performance and Target Performance levels.
For
the Thirty-Six Month Performance Period only, if actual performance under each
measure is greater than Target Performance, but is less than Maximum
Performance, awards shall be calculated pursuant to the table above, determined
on a straight line interpolation between Target Performance and Maximum
Performance levels.
Payment
of amounts earned under this Plan with respect to any Performance Period shall
take place on or before March 15 of the calendar year next following the
close of such Performance Period.
3. Payment
Contingent on Continued Service with the Company.
Except
to the extent otherwise expressly provided by paragraph 4, in order to be
eligible to receive an award under this Plan, you must be employed full time
by
the Company from the date you begin participating in the Plan, until the close
of the Performance Period in respect of which the payment is to be made. If
your
full-time employment by the Company terminates for any reason before the close
of the Performance Period in respect of which a payment is to be made pursuant
to any of the preceding paragraph, then, except to the extent otherwise
expressly provided by paragraph 4 below, upon such termination of
employment you shall relinquish any right to be paid any money that would
otherwise thereafter be paid to you pursuant to this Plan in respect of such
Performance Period.
4. Exception
for Certain Terms of Service during Performance Period.
If,
before the close of the Thirty-Six Month Performance Period, you cease to be
continuously employed full time by the Company by reason of early or normal
retirement, as defined in the Company’s Pension Plan for Salaried Employees, or
other Company-sponsored pension plan, or for any other reason (including, but
not limited to, by reason of your being transferred to a position not eligible
for inclusion in this Plan) except (a) cause, or (b) your voluntary
termination of employment, then, the Company will pay you (or your Beneficiary,
in the case of your death) the amount of money which would have been paid to
you
pursuant to paragraph 2 if your full-time employment and participation in
the Plan had continued until the close of the Thirty-Six Month Performance
Period, multiplied by a fraction the numerator of which shall be the number
of
full months of continuous full-time employment that you actually served during
the Thirty-Six Month Performance Period, and the denominator of which shall
be
Thirty-Six months. Any money payable pursuant to the preceding sentence shall
be
paid at the same time, on the same terms, and subject to the same conditions
that would have applied if your full-time employment and participation in the
Plan had continued until the close of the Thirty-Six Month Performance
Period.
5. Withholding.
All
amounts of money that are payable pursuant to this Plan shall be subject to
the
withholding of such amounts as the Company may, in its sole discretion,
determine are required to be withheld or collected under the laws or regulations
of any governmental authority, whether federal, state, or local and whether
domestic or foreign.
6. Administration,
Interpretation, and Construction.
The
terms and conditions of the Plan shall be administered, interpreted, and
construed by the Human Resources Committee of the Board of Directors of the
Company (“Human Resources Committee”), whose decisions shall be final, binding,
and conclusive. Without limiting the generality of the foregoing, any
determination as to whether or not your employment has been terminated for
cause, or has
May
2,
2006
Page
5
been
terminated voluntarily by you, or whether you have transferred to a position
not
eligible for participation, shall be made in the good faith but otherwise
absolute discretion of the Human Resources Committee.
7. No
Employment Rights.
No
provision of the Plan shall confer upon you any right to continue in the employ
of the Company or any subsidiary of the Company, or shall in any way affect
the
right and power of the Company or any subsidiary of the Company to terminate
your employment at any time for any reason or no reason, or shall impose upon
the Company or any subsidiary of the Company, any liability not expressly
provided for in the Plan if your employment is so terminated.
8. Rights
Not Transferable.
No
rights under this Plan, contingent or otherwise, shall be assignable or
transferable other than to a “Beneficiary” (as hereafter defined) upon your
death, either voluntarily, or, to the full extent permitted by law,
involuntarily, by way of encumbrance, pledge, attachment, levy, or charge of
any
nature. Any attempt to transfer, assign, encumber, pledge, attach, levy upon,
or
charge any rights under the Plan, other than to a Beneficiary in the event
of
your death, shall be null, void, and of no force or effect and, in the event
of
any such attempt, the Human Resources Committee may terminate your participation
in the Plan. For this purpose, a “Beneficiary” shall mean a person or entity
(including a trust or estate), designated in writing by you on the attached
form
or similar document to whom amounts that would have otherwise been made to
you
shall pass in the event of your death. If no such person or entity has been
so
designated, or if no person or entity so designated is alive or in existence
at
the time any amount becomes payable pursuant to this Plan, your “Beneficiary”
shall mean the legal representative of your estate.
9. Successors
and Mergers, Consolidation or Change in Control.
The
terms and conditions of this Plan shall enure to the benefit of and bind you
and
the Company, its successors assignees and personal representatives. If a change
in control should occur then the rights and obligations created hereunder shall
be the rights and obligations of the acquirer or successor
corporation.
10. Employment
or Failure Eligibility to Participate Not Guaranteed.
Nothing
contained in this Plan nor any action taken hereunder shall be construed as
a
contract of employment or as giving you any right to be retained in the employ
of the Company. Designation as a Participant may be revoked at any
time.
Finally,
this Plan provides you the opportunity to earn special incentive compensation
on
the terms and conditions set forth above. I am very pleased that you have been
chosen to participate in this Special Incentive Plan and am confident that
you
will have a significant impact on our Company’s success.