SON » Topics » Performance-Contingent Restricted Stock Units

This excerpt taken from the SON DEF 14A filed Mar 13, 2009.
Performance-Contingent Restricted Stock Units
 
On February 5, 2008, the Committee also approved PCSU grants to 223 key employees, including the NEOs. The SFAS 123R grant date fair values of PCSUs and the number of shares available at threshold, target, and maximum are shown in the “Grants of Plan-Based Awards” table on page 47. The number of PCSUs granted to each individual was based on their target awards as described under the caption “Determining Competitive Benchmarks — Total Direct Compensation” on page 29, and adjusted upward or downward from target based on the Committee’s judgment of the individual’s performance. In this regard, the Committee increased the award of PCSUs to Mr. DeLoach by 8,000 shares above his target for a total of 75,000 shares, which reflects our exceeding 2007 budgeted earnings and working capital targets, as well as Mr. DeLoach’s strong leadership in defining strategy and achieving significant progress in long term growth


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objectives. The awards for the other NEOs ranged from no increase in shares above the competitive benchmark to 8,500 shares above the competitive benchmark.
 
The number of these PCSUs that will vest after three years is dependent on our achieving the specified performance levels set forth in the table below of cumulative increases in base earnings per share of $2.30, net of year to year changes in pension expense (“BEPS”), and average return on net assets employed (“RONAE”) for the three-year performance period. The Committee feels that both elements are critical drivers of long-term shareholder returns and has weighted them equally in the plan.
 
             
    Threshold Vesting   Target Vesting   Maximum Vesting
 
Three-Year Compound Growth in BEPS
  12.5%   19.1%   33.1%
Average Three-Year RONAE*
  10.25% – 11.25%   10.75% – 11.75%   11.25% – 12.25%
 
 
Actual performance level required within the range depends on capital invested in acquisitions over the three-year period. There are three ranges of acquisition investment for each performance level, which are established in advance and are not subsequently adjusted. The three ranges of new capital invested in acquisitions are (a) less than $500 million, (b) between $500 million and $1 billion and (c) more than $1 billion. The highest range of acquisition investment corresponds to the lowest range of RONAE above and vice-versa.
 
To encourage continued employment, the plan provides that if less than the number of threshold shares vest at the end of the three-year performance period, the remainder of the threshold shares will time vest in equal amounts in the fourth and fifth years of the plan, subject to the participant’s continued employment for that period. Except for death, disability, or retirement, termination of a participant’s employment prior to vesting will result in forfeiture of any unvested award. If officers elect to accept shares in settlement of PCSUs when they vest, they must hold those PCSUs, net of taxes, for one year from the vesting date. However, officers who do not meet our stock ownership guidelines for their positions may not dispose of any shares received upon settlement of PCSUs that vest until such guidelines are met.
 
The plan does not permit the use of discretion if performance targets are not met. Performance goals will not be adjusted for sales, divestitures, or acquisitions of businesses.
 
This excerpt taken from the SON DEF 14A filed Mar 14, 2008.
Performance-Contingent Restricted Stock Units
 
On February 6, 2007, the Committee also approved PCSU grants to 215 key employees, including the NEOs. The FAS 123R grant date fair values of PCSUs and the number of shares available at threshold, target, and maximum are shown in the “Grants of Plan-Based Awards” table on page 49. The number of PCSUs granted to each individual was based on their target awards as described under the caption “Determining Competitive Benchmarks — Total Direct Compensation” on page 30, and adjusted upward or downward from target based on the Committee’s judgment of the individual’s performance. The actual PCSU award to Mr. DeLoach was 11,500 shares above his target, and the awards for the other NEOs ranged from 2,000 shares above the competitive benchmark to 3,000 shares below the competitive benchmark.
 
The number of these PCSUs that will vest after three years is dependent on our achieving the specified performance levels set forth in the table below of cumulative base earnings per share, net of year to year changes in pension expense (“BEPS”), and average return on net assets employed (“RONAE”) for the three-year performance period. The Committee feels that both elements are critical drivers of long-term shareholder returns and has weighted them equally in the plan.
 
             
    Threshold Vesting   Target Vesting   Maximum Vesting
 
Three-Year Compound Growth in BEPS
  12.5%   19.1%   33.1%
Average Three-Year RONAE*
  10.0% – 11.0%   10.5% – 11.5%   11.0% – 12.0%
 
 
Actual performance level required within the range depends on capital invested in acquisitions over the three-year period. There are three ranges of acquisition investment for each performance level, which are established in advance and are not subsequently adjusted. The three ranges of new capital invested in acquisitions are (a) less than $500 million, (b) between $500 million and $1 billion and (c) more than $1 billion. The highest range of acquisition investment corresponds to the lowest range of RONAE above and vice-versa.
 
To encourage continued employment, the plan provides that if less than 50% of a participant’s PCSUs vest at the end of the three-year performance period, the remainder of that 50% of PCSUs will time vest in equal amounts in the fourth and fifth years of the plan, subject to the participant’s continued employment for that period. Except for death, disability, or retirement other than for cause, termination of a participant’s employment prior to vesting will result in forfeiture of any unvested award. Officers who do not meet our


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stock ownership guidelines for their positions may not dispose of any shares that vest under this plan until such guidelines are met and maintained.
 
The plan does not permit the use of discretion if performance targets are not met. Performance goals will not be adjusted for sales, divestitures, or acquisitions of businesses.
 
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