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EMPLOYMENT AGREEMENT
BETWEEN
XXXXXXX XXXXXX
AND
ALCAN ALUMINIUM LIMITED
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THIS EMPLOYMENT AGREEMENT entered into at Montreal, Canada, as of the 1st day
of January 1997 .
BETWEEN: Xx. Xxxxxxx Xxxxxx (hereinafter referred to as the "CEO").
AND: ALCAN ALUMINIUM LIMITED, a company incorporated under the laws of
Canada, having its head office at Xxxxxxxx, Xxxxxx, Xxxxxx (hereinafter
referred to as "ALCAN").
AND WHEREAS the Board of Directors of Alcan agrees to maintain Xx. Xxxxxxx
Xxxxxx in the position of Chief Executive Officer for the duration of this
Agreement, subject to the terms and conditions of this Agreement.
AND WHEREAS Xx. Xxxxxxx Xxxxxx agrees to serve as Chief Executive Officer for
the duration of the Agreement, subject to its terms and conditions.
THE PARTIES AGREE AS FOLLOWS:
1.0 TERM AND TERMINATION
1.1 The Term of this Agreement shall run from the 1st day of January 1997
to the 31st day of December 1999 (3 years) and therewith terminate
unless extended by mutual written Agreement.
1.2 Both parties have the intention to extend this Agreement beyond the
termination date at terms and conditions mutually acceptable to the
parties.
1.3 On or about 1 July 1999 (6 months prior to expiry date) the parties
intend to start outlining the terms and conditions of a new Agreement
with effect from 1 January 2000.
2.0 UNDERTAKING AND DECLARATIONS
2.1 For the Term of this Agreement, the CEO hereby agrees not to accept
employment offers by any other Corporations.
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3.0 COMPENSATION (All amounts are in Canadian dollars unless stated otherwise)
3.1 BASE SALARY
For the duration of the Agreement the Base Salary is set at $1,000,000
per year, effective 1 March 1997.
3.2 EXECUTIVE PERFORMANCE AWARD ("EPA")
The total guideline amount defined under the regular Plan is set at
85% of the base salary, i.e. C$850,000 and prorated as follows for
each award.
DSU
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- Profitability (%XXX) = 35% or $350,000 7,543
- Corporate (Operating Cash Flow) = 30% or $300,000 6,466
- Business Unit (Agreed Objectives) = 20% or $200,000 4,310
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- TOTAL $850,000 18,319
The annual EPA guideline awards will automatically be converted into
Deferred Share Units (DSU) for each performance period, at the share
price(1) determined under the approved plan. The actual amount
credited to the personal account will be the guideline amount of each
award adjusted by its approved performance factors. A cash payment
will be made at retirement, termination of employment or death (as
defined in the approved plan) equal to the number of DSU multiplied by
the share price of Alcan's common stock. From the date of allocation,
dividends payable on the accumulated DSU will be converted into
additional DSU (as specified in the approved plan).
3.3 MEDIUM TERM INCENTIVE PLAN ("MTIP")
Under the MTIP, a three year performance period ("cycle") is
established with a payout paid if certain minimum, target or maximum
performance thresholds are achieved at the end of the cycle. The Board
of Directors ("Board") has discretion to apply different performance
criteria for different cycles. The Board also has discretion during a
cycle to adjust performance measures set for that period to reflect
changes in accounting principles and practices, mergers, acquisitions
or divestitures or extraordinary non-recurring or unusual items.
The payout, if at all, for the first 3 year cycle (1997-1999) will be
made in February 2000 on the basis of achieving Full Business
Potential ("FBP") and having completed the full
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[FN]
1 For year 1997 the share price is C$46.40 providing a total guideline share
units of 18,319.
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3 year term of employment. The payout will be in the form of DSU,
allocated at the end of the performance cycle, however payable only at
retirement, termination of employment or death, based on the share
price of Alcan's common stock. From the date of allocation to the date
of payment dividends will accrue in the form of additional DSUs.
Performance objectives for the first cycle will relate to the
achievement of the Full Business Potential ("FBP") defined as the
generation of an additional sustainable after tax income of US$300
million per year (over and above the 1996 net income base). Schedule
"A" describes the definition of "FBP" and the adjustments to be taken
into account for its calculation.
The minimum target and maximum payouts for the performance periods are
shown in TABLE 1 below.
TABLE 1
MEDIUM TERM INCENTIVE
DEFERRED SHARE UNITS
DEGREE OF ACHIEVEMENT OF "FBP"
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LESS THAN S$300 M US$450 M MORE THAN
US$150 M US$600 M
Performance 0 1.0 x 2.0 x 3.0 x
Rating
Grants of Share2 Nil 19,400 38,800 58,200
Units
Results between US$150 Million and US$600 Million will be prorated.
3.4 ALCAN EXECUTIVE SHARE OPTION PLAN ("AESOP")
The CEO will be granted 312,800 share options at an exercise price of
C$48.913, exercisable for a period of 10 years from the date of grant
(28 May 1997). Up to 100% of the shares under option may be exercised
on or after 1 January 2000.
3.5 PENSION
3.5.1 The CEO's annual Pensionable Earnings from 1 January 1997 are
equal to 140% of Basic Pay.
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[FN]
2 For the first 3 year cycle, the number of share units have been established on
a share price of $46.40 ($300,000 p.a. x 3 yr/$46.40)
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3.5.2 The Appendix 1 of the Board Resolution dated 22 September 1993 will
be amended to provide for the following minimum guaranteed pension
from all company sources, subject to the conditions below :
AGE AT MINIMUM GUARANTEED
RETIREMENT PENSION (CDN $)
52 500,000
53 612,500
54 725,000
55 837,500
56 950,000
57 1,000,000
58 1,050,000
59 1,100,000
60 1,150,000
The minimum guarantee applies at any age from 52 if the CEO's
termination of employment is requested by the Board OR if there is a
mutual agreement between the Board and the CEO, or if the
appointment of a new Chair of the Board is not acceptable to the
CEO. In the case of the CEO's unilateral decision to retire, except
as provided above, the guaranteed level only applies from age 56.
4.0 SPECIAL CONDITIONS
4.1 In the event of a sudden drop in the value of the Canadian dollar in
relation to the US dollar caused by an event deemed by the Board to
justify making an upward correction to the compensation values
stated in paragraphs 3.1 and 3.5, such correction will be made for
the remaining period of the Agreement.
4.2 A sudden drop in the value of the Canadian dollar would translate
into a corresponding increase in the price of Alcan's shares when
quoted in Canadian dollars. Even though the value of DSUs payable
under paragraph 3.2 and 3.3 and the value of stock options payable
under paragraph 3.4 should be self correcting, the Board will
nevertheless review the impact to ensure a just and equitable
treatment.
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4.3
5.0 TERMINATION OF EMPLOYMENT
In the event of a termination of employment initiated by the Board, the
parties agree that a separate termination agreement will be negotiated to
arrive at mutually acceptable terms. Notwithstanding the Term of this
Agreement, it is understood by both parties that the employment
relationship between the CEO and Alcan is not for a fixed term but for an
indefinite term, and therefore, such separate termination agreement will be
negotiated in this context.
6.0 DISABILITY
6.1 In the event the CEO becomes disabled prior to 31 December 1999 and
cannot perform the duties of his position, Alcan shall maintain full
payment of the amounts under paragraph 3.1 for a period of 12 months
after the date deemed disabled. Regular EPA amounts will also be
payable during the period. After the period of pay continuance the
CEO will receive regular LTD benefits.
In addition to the pay continuation stated above, the Board may at
its discretion recommend that a portion of the MTIP payment
(paragraph 3.3) be made even though through no fault on the CEO's
part he was not able to complete the performance period (3 years).
7.0 DEATH
7.1 In the event of death prior to age 56, in addition to the regular
benefit payable under the life assurance program and the death
benefits payable under the Alcan Pension Plan using the minimum
guarantee described under paragraph 3.5.2, the Company will pay to
the Estate of the CEO the following amounts:
7.1.1 the EPA guideline amount prorated to the date of death;
7.1.2 the DSU amount payable under the program (paragraph 3.2);
7.1.3 a discretionary amount deemed by the Board to be a just and equitable
payment for the progress toward achieving the objectives under the
MTIP program (paragraph 3.3).
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8.0 OTHER EXECUTIVE BENEFITS AND PERQUISITES
All other benefits and perquisites currently available to the CEO will
continue unchanged for the duration of this Agreement, with the exception
of those benefits which are calculated on the basis of the definition of
pensionable earnings.
9.0 ENGLISH LANGUAGE
This contract is written in English at the express request of the Parties.
Ce contrat est redige en anglais a la demande expresse des parties.
10.0 APPLICABLE LAW
This Agreement shall be interpreted according to the laws of the Province
of Quebec. The Parties agree that the courts of the District of Montreal
shall have exclusive jurisdiction.
IN WITNESS WHEREOF the Parties have signed these presents as at the place
and date first hereinabove written.
ALCAN ALUMINIUM LIMITED
By /s/ Xxxx Xxxxx
_________________________________
Dr. Xxxx Xxxxx
Chairman of the Board
WITNESS: /s/ Xxxxxx Xxxxx
__________________________
/s/ Xxxxxxx Xxxxxx
________________________________
Xxxxxxx Xxxxxx
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SCHEDULE A
FULL BUSINESS POTENTIAL (FBP) OBJECTIVE
By end 1999 to achieve higher run-rate of annual net income.
ASSUMPTIONS:
- 1996 net income
- 1996 average metal price of $1530/t (LME - 3 months)
- C$ exchange rate of .73 cents
- Smelters operating at full capacity
- No major strategic investment, acquisition or merger
TARGET:
US$300 M
ADJUSTMENTS:
- As per the basic assumptions
- For major strategic initiatives
- For large expense portion of Capex taking place in 1999
- Alcan Aluminium Limited
