Common use of Illustrative Example Clause in Contracts

Illustrative Example. If actual performance is between performance levels, the Applicable Percentage will be prorated between such performance levels. The following example illustrates the method of such proration. Assume that in the year 2007 the actual Operating Ratio was 79.6%, actual EBITDA was $551 million and actual ROCE was 8.8%. The difference between the 2007 Target Operating Ratio and the actual 2007 Operating Ratio is .2, representing 15.4% of the difference between the 2007 Target Operating Ratio and the 2007 Maximum Operating Ratio (i.e., .2/(79.8-78.5)). Thus, the Operating Ratio earned percentage before weighting would be 115%. The difference between the 2007 Target EBITDA and the actual 2007 EBITDA would be $2 million, representing 2% of the difference between the 2007 Target EBITDA and the 2007 Maximum EBITDA (i.e., 2/(649-549)). Thus, the EBITDA earned percentage before weighting would be 102%. The difference between the 2007 Target ROCE and the actual 2007 ROCE would be .2, representing 13% of the difference between the 2007 Target ROCE and the 2007 Maximum ROCE (i.e., .2/(10.1-8.6)). Thus, the ROCE earned percentage before weighting would be 113%. Finally, each metric would be multiplied by the appropriate weighting factor and the weighted earned percentages would be added together to determine the earned percentage. In this example the weighted earned percentage would be 111.25%, as demonstrated in the table below: A. 2007 Actual 78.6% $551 million 8.8%