8-K: Current report filing
Published on July 1, 2009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 25, 2009
NOVELIS INC.
Canada | 001-32312 | 98-0442987 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) | ||
3399 Peachtree Road NE, Suite 1500, Atlanta, GA | 30326 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code (404) 814-4200
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Novelis Long-Term Incentive Plan for Fiscal Years 2010 2013
On June 25, 2009, the Board of Directors of Novelis Inc. (the Company) approved the Novelis
Long-Term Incentive Plan for Fiscal Years 2010 2013 (the LTIP). The LTIP provides for a
long-term incentive opportunity for the Companys executive officers, other key managers, and
certain high potential employees. The LTIP has been designed to provide a clear line of sight for
participants to company performance as measured by the increase in the price of Hindalco shares.
This design will promote the retention of key management and provide them with competitive
remuneration, promote superior engagement and motivation, and align the personal financial
interests of executives with the Companys shareholders.
The LTIP will be administered by the Human Resources team at the Novelis corporate office.
Awards under the LTIP will consist of stock appreciation rights (SARs), with the value of one SAR
equivalent to the increase in value of one Hindalco share. The SARs will vest 25% each year for
four years, subject to performance criteria being fulfilled. The performance criterion will be
based on Normalized Operating Earnings Before Interest, Taxes, Depreciation and Amortization
(Normalized Operating EBITDA) performance for the Company each year. The vesting threshold will
be 75% performance versus target each year, at which point 75% of SARs due that year, would vest.
There would be a straight line vesting up to 100% of performance. After SARs have vested, the SARs
can be exercised anytime during the seven year life of the LTIP by the employee. The upside so
realized would be dependent on the stock price of Hindalco at the time of exercise; however the
upside would be restricted to a maximum of 2.5 times the proportionate target opportunity if the
SARs are exercised within one year of vesting. The maximum will be 3 times for SARs exercised
more than one year after vesting.
In the event a participant resigns, unvested SARs will lapse and vested SARs must be exercised
within 90 days. If an employee retires more than one year from the date of grant, SARs will
continue to vest and must be exercised no later than the third anniversary of retirement. In the
event of death or disability, there will be immediate vesting of all SARs with one year to
exercise. Upon a change in control, there would be immediate vesting and cash-out of SARs.
The LTIP target amounts for our principal executive officer, principal financial officer, and
our named executive officers will be determined on or before July 15, 2009. The target amounts
will be provided in an amendment to this 8-K upon being finalized. A copy of the LTIP is attached
hereto as Exhibit 10.1and is incorporated herein by reference.
Novelis Annual Incentive Plan for Fiscal Year 2010
On June 25, 2009, the Board of Directors of the Company also approved the Novelis Annual
Incentive Plan for Fiscal Year 2010 (the AIP) to provide short-term incentives for the period
from April 1, 2009 to March 31, 2010. The performance benchmarks for the year are tied to four key
components: (1) Normalized Operating EBITDA performance; (2) operating free
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cash flow performance; (3) satisfaction of certain Environment, Health and Safety (EHS)
improvement targets, and (4) individual performance. The specific weightings among these three
components are 40% for Normalized Operating EBITDA performance; 40% for operating free cash flow
performance; 10% for EHS targets, and 10% for individual performance. For Messrs. Martens and
Fisher, the incentive benchmarks are tied to company-wide performance. For the other named
executive officers who are regional presidents, Messrs. Germain and Walpole, the
incentive benchmarks are based 50% on the performance of the specific region for which they are
responsible and 50% on the company-wide results.
A threshold of 60% of the overall Normalized Operating EBITDA target is required to be met
before any payouts will occur on overall or regional Normalized Operating EBITDA, operating free
cash flow performance, or for any individual performance payouts. Only the EHS portion of AIP
could be earned if this 60% threshold is not met. The potential payout attributable to Normalized
Operating EBITDA could range from (1) 0% of target if fiscal 2010 performance does not exceed the
performance threshold, (2) 100% of target if fiscal 2010 results meet the business plan target and
(3) up to a maximum of 200% of target if fiscal 2010 results meet or exceed the high end business
plan target. The potential payout attributable to operating free cash flow could range from (1) 0%
of target if fiscal 2010 performance does not exceed the performance threshold, (2) 100% of target
if fiscal 2010 results meet the business plan target and (3) up to 200% of target if fiscal 2010
results meet or exceed the high end business plan target. The potential payout attributable to EHS
objectives also ranges from 0% to 200% of target and will be measured against continuous
improvement targets for recordable cases and lost time injuries and illness as well as the
completion of strategic EHS initiatives. The potential payout attributable to individual performance also ranges from 0% to 200% of target and will be
measured against personal performance goals.
If an executive retires during the course of the year, the executive will be eligible to
receive a payout under the plan on a pro-rata basis. Such payout, if any, will be made at the time
that it is done for all other employees. If an executive terminates as the result of a company
initiated separation that is the result of a position elimination that is not performance related
(for example, a layoff, plant closure, restructuring or sale), the employee will be eligible for
prorated incentive consideration at the time that consideration is being given to all other
employees. In the event of separation on account of resignation (initiated by the employee) or
company initiated separation during the performance year, the concerned individual will not be
entitled to any AIP for the year unless the separation occurs after the performance year, but
before the timing of payout, in which case the executive shall be entitled to consideration at the
time that consideration is being given to all other employees, subject to business and individual
performance.
The AIP target amounts for our principal executive officer, principal financial officer, and
our named executive officers will be determined on or before July 15, 2009. The target amounts
will be provided in an amendment to this 8-K upon being finalized. A copy of the AIP is attached
hereto as Exhibit 10.2 and is incorporated herein by reference.
Change in Control Agreements
On June 25, 2009, the Board of Directors of the Company also approved a form Change in Control
Agreement (CIC Agreement) for the principal financial officer and the other named
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executive officers. The CIC Agreement will terminate upon the earlier of (i) June 15, 2011, unless
a change in control event occurs on or before such date, or (ii) 24 months following the date of a
change in control event. Pursuant to the CIC Agreement, the executives will be entitled to the
following payments if the Company terminates their employment other than for cause, or if they
resign for good reason, within 24 months after a change in control event:
(a) a lump sum cash amount
equal to two times the sum of (1) their annual base salary plus
(2) their target short term incentive opportunity for the fiscal year in which the change
in control occurs; the lump sum cash amount will be reduced by the amount of severance
payments, if any, paid or payable to them other than pursuant to the CIC Agreement to avoid
duplication of payments; and
(b) other benefits described in the CIC Agreement for up to 12 months including a lump sum
payment to assist them with post-employment medical continuation coverage, life insurance
benefits, and retirement benefits.
Additionally, the executives right to receive the compensation and benefits under the CIC
Agreement shall be subject to the execution of a waiver of claims by the executive, a non-compete
agreement and a non-solicitation agreement. Such payments shall not be made if their employment
terminates because of death, disability, or retirement. A copy of the form CIC Agreement is
attached hereto as Exhibit 10.3 and is incorporated herein by reference.
Severance Agreements
On June 25, 2009, the Board of Directors of the Company also approved a form Severance
Compensation Agreement (Severance Agreement) for the principal financial officer and the other
named executive officers. Pursuant to the terms of the form Severance Agreement, the executives
will be entitled to receive eighteen months annual base salary (less any other severance payments)
as severance pay if they are terminated involuntarily except for cause, death, disability, or
retirement. Other severance benefits described in the Severance Agreement include a twelve month
lump sum payment to assist them with post-employment medical continuation coverage, as well as life
insurance benefits and retirement benefits for up to 12 months.
The Severance Agreement also contains a non-competition provision, prohibiting the executive
from competing with the Company during their employment and for a period of 18 months thereafter.
Additionally, the Severance Agreement contains a non-solicitation provision that limits the
executives from soliciting (a) the Companys customers and suppliers or (b) its employees during
their employment and for a period of 18 months after separation. The Severance Agreement also
contains a confidentiality provision whereby the executives agree not to disclose any confidential
or trade secret information, except as required by law. A copy of the form Severance Agreement is
attached hereto as Exhibit 10.4 and is incorporated herein by reference.
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Retention Program
On June 25, 2009, the Board of Directors of the Company also approved a retention program for
the principal financial officer and the other named executive officers. Pursuant to the program,
the level of retention opportunity is set at one-times the executives current base salary and will
be paid over three years on July 1, 2010; July 1, 2011; and July 1, 2012. Should the executive
terminate voluntarily or be terminated for cause prior to July 1, 2012, any amounts paid under this
program would need to be repaid.
Only half the retention opportunity will be paid in the form of annual cash payments. The
remaining half of the opportunity will be paid in the form of phantom Hindalco Restricted Shares.
On July 1, 2009, the participants will receive a grant of phantom Hindalco Restricted Shares with a
current market value of 80% of the total cash opportunity. These phantom Hindalco Restricted
Shares will vest on July 1, 2012 and the executive will have a one-time opportunity to receive cash
for the phantom shares at a time of their choice between July 1, 2012 and June 30, 2013. The value
of the shares at the time of the election would be the then current market price with an upside
limit of twice the original value. The share opportunity will be denominated in US dollars.
The following table presents the retention opportunities for our principal financial officer
and our named executive officers.
Executive | Retention Opportunity | |||
Steve Fisher |
$ | 405,000 | ||
Jean-Marc Germain |
$ | 292,500 | ||
Thomas Walpole, President Asia |
$ | 256,500 |
Agreement with Arnaud deWeert
On
June 26, 2009, the Company entered into a termination of employment agreement (the
Agreement) with the Companys former President, Novelis Europe, Arnaud deWeert, regarding the
terms of his departure from the Company.
Pursuant to the Agreement, the employment relationship will terminate on August 31, 2009. The
Company will continue to pay Mr. deWeerts base salary until the effective date of the termination.
Additionally, the Company will pay a lump sum of 435,000 Euros with the September 2009 payroll as
severance, an annual incentive plan payout for FY 2009 in the gross amount of 118,857 Euros, a lump
sum payment of CHF 320,000 in full settlement of all of the claims
that Mr. deWeert might have in connection with his employment and
its termination including and claims that Mr. deWeert might
have under any annual or long term incentive plan, and a lump
sum payment of 30,000 Euros gross in full satisfaction of the Companys obligation to pay for his
familys repatriation costs back to Belgium. The Company also agreed to release Mr. deWeert from
all claims it may have against him.
In exchange for these payments,
Mr. deWeert agreed to: provide continued cooperation during
his transition with any pending or future litigation, proceeding or hearing; not compete with the
Company until the effective date of termination; not solicit the Companys employees or customers
for two years; maintain confidential information learned during his employment; and
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release the Company from all claims he may have against the Company. A copy of the Agreement is
attached hereto as Exhibit 10.5 and is incorporated herein by reference.
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Item 9.01 Financial Statements and Exhibits.
(d) | Exhibits | |
10.1 | Novelis Long-Term Incentive Plan for Fiscal Years 2010 2013 | |
10.2 | Novelis Annual Incentive Plan for Fiscal Year 2010 | |
10.3 | Form Change in Control Agreement | |
10.4 | Form Severance Agreement | |
10.5 | Termination of Employment Agreement between Novelis AG and Arnaud deWeert, dated June 26, 2009 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NOVELIS INC. |
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Date: July 1, 2009 | By: | /s/ Christopher M. Courts | ||
Christopher M. Courts | ||||
Assistant General Counsel and Corporate Secretary |
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INDEX TO EXHIBITS
Exhibit | ||
Number | Description | |
10.1
|
Novelis Long-Term Incentive Plan for Fiscal Years 2010 2013 | |
10.2
|
Novelis Annual Incentive Plan for Fiscal Year 2010 | |
10.3
|
Form Change in Control Agreement | |
10.4
|
Form Severance Agreement | |
10.5
|
Termination of Employment Agreement between Novelis AG and Arnaud deWeert, dated June 26, 2009 |