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Annual Report 2008 - AMG Advanced Metallurgical Group NV

Annual Report 2008 - AMG Advanced Metallurgical Group NV

Each year the

Each year the Supervisory Board determines ambitious yet realistic target ranges for each performance metric with respect to the threshold, target and maximum payout. If, in the opinion of the Supervisory Board, an awarded Annual Bonus has produced an unfair result due to incorrect financial data or special circumstances in the year in which the performance criteria should have been achieved or have been achieved, the value can be adjusted. Long-term incentives The long-term incentive framework is in line with sound market practice and supports the overall Executive Remuneration Philosophy. It is comprised of two programs: a Performance Share Unit Plan and a Stock Option Plan. The initial value of those two programs will be equal. The Performance Share Unit Plan provides for a number of Performance Share Units (“PSU”) conditionally awarded to the members of the Management Board on an annual basis. The PSUs are tied to the value of ordinary shares and are credited in notional accounts for each member of the Management Board – one PSU is equal to one ordinary AMG share. Fractional PSUs are added to the notional accounts to recognize any dividend payout before vesting. The PSUs vest three years after the grant date, subject to challenging performance criteria. Depending on the performance achieved, the actual number of PSUs may vary upward and downward compared to the initial grant. At vesting, the PSU payouts are redeemed and settled in cash, based on the average fair market value of the underlying share on the last 10 trading days’ closing prices prior to the vesting date. Vesting of the PSUs is subject to two performance criteria: • A threshold level of three year average Return on Capital Employed (ROCE) • Relative Total Shareholder Return (TSR) against a relevant external market With respect to the relative TSR, the Bloomberg World Metal Fabricate/Hardware Index will be used. This global index is a capitalizationweighted index of the leading metal fabricate/ hardware shares in the world, including approximately 50 metal and mining companies. At the end of the performance cycle (i.e. three years after the grant date) the actual number of PSUs may be higher or lower than the initial grant. The payout multiplier is based on AMG’s TSR ranking against the Bloomberg World Metal Fabricate/Hardware Index as indicated in the table below. In case the threshold ROCE level is not reached the payout will be zero, irrespective of the TSR ranking. AMG TSR Ranking Percentile Ranking Payout Multiplier Top Band 80% – 100% 175% x # of initial PSUs Higher Band 60% – 79% 125% x # of initial PSUs Middle Band 40% – 59% 100% x # of initial PSUs Lower Band 30% – 39% 25% x # of initial PSUs Bottom Band Below 30% 0% x # of initial PSUs The Stock Option Plan (“SOP”) provides for an annual conditional grant of stock options to each member of the Management Board. The stock options granted under the SOP have a maximum term of ten years from the grant date. Vesting is subject to performance criteria: a threshold level of three year average Return on Capital Employed must be achieved for stock options under the SOP to vest. Half of the granted stock options can vest after the third anniversary year and the other half after the fourth anniversary year. The exercise price of the stock options under the SOP equals the fair market value of the underlying share (i.e. closing price) at the grant date. Neither the exercise price nor any other of the conditions mentioned above shall be modified during the term of the options, except insofar as prompted by structural changes relating to the shares or AMG in accordance with market practice. If, in the opinion of the Supervisory Board, conditionally awarded PSUs and/or stock options have produced unfair results due to incorrect 52 Report of the Supervisory Board

financial data or special circumstances in the year in which the performance criteria should have been achieved or have been achieved, the award can be adjusted. Pension and other benefits Each member of the Management Board will be offered pension and other benefits (i.e. company car and insurances) which are in line with market and individual country practice, taking into account the employment history of the Management Board member. No personal loans or guarantees shall be granted to the members of the Management Board. Contracts Each newly appointed member of the Management Board will have a contract of employment with AMG. The contracts provide for a maximum term of four years with severance of one year’s Base Salary. If the maximum of one year’s Base Salary would be considered unreasonable for a Management Board member who is dismissed during the first term of office, the Supervisory Board can decide to increase the severance payment to a maximum of two years Base Salary. With respect to Management Board members who are promoted from within and have a long service history with AMG or one of its predecessor companies, the maximum severance payment shall be two years’ Base Salary. With respect to the current Management Board members, all current agreements will be honored and maintained in future contracts. The main elements of the contracts of employment of the Management Board members will be published under the Corporate Governance section of the Company’s website. Management Board Remuneration for 2009 In line with the proposed Remuneration Policy for the Annual General Meeting of shareholders on May 13, 2009, the Remuneration Committee has set up the size and structure of the Management Board’s remuneration for 2009. The Remuneration Committee has analyzed the possible outcomes of the different remuneration components and how these may affect the remuneration of Management Board members. In light of the current economic crisis, the Remuneration Committee has determined to deviate from the proposed Remuneration Policy for 2009 with respect to Base Salary. Base Salary The Remuneration Committee, on the initiative of the Management Board, has recommended that the cash portion of the Base Salary levels of the members of the Management Board for 2009 be temporarily reduced in 2009 by fifty percent (50%) commencing May 1, and replaced by stock options. The table below shows the Base Salaries for 2008 and 2009: Base Salary 2008 2009 Dr. Heinz Schimmelbusch $ 1,118,250 $ 745,500 Arthur Spector $ 994,600 $ 663,067 Eric Jackson $ 647,300 $ 431,533 Dr. Reinhard Walter $ 699,675 $ 466,450 William J. Levy $ 507,300 $ 338,200 Annual Bonus The Annual Bonus for 2009 will be determined as follows: • 40% from ROCE (excluding construction in progress) • 40% from adjusted EBITDA growth • 20% from Individual Performance – discretionary by the Supervisory Board The table below shows the Annual Bonus for each member of the Management Board as a percentage of Base Salary in case threshold, target and maximum performance levels are reached. Below threshold level the payout will be 0%. Report of the Supervisory Board 53

PDF 3.89 MB - AMG Advanced Metallurgical Group NV
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