Rayovac 2008 Annual Report Download - page 86

Table of Contents
Index to Financial Statements
Additionally, based on Fiscal 2007 performance, LTIP participants earned only 90% of the restricted shares awarded under the Fiscal 2007 LTIP.
However, they retained the opportunity to earn the remainder of such shares based on Fiscal 2008 performance, if the Company achieved 102.5% of the Fiscal
2008 LTIP performance goal established by the Compensation Committee. If such level of performance was achieved, then the restrictions on 25% of the award
would lapse annually on each of December 1, 2008, December 1, 2009, December 1, 2010 and December 1, 2011; provided, that the executive’s employment
with the Company has not been terminated with cause by the Company or voluntarily by the executive prior to such vesting date. However, as the Company did
not achieve 102.5% of the Fiscal 2008 LTIP performance goal established by the Compensation Committee, all remaining unearned restricted shares under the
Fiscal 2007 LTIP were forfeited to the Company.
For Fiscal 2009, as of the date of this report, the Compensation Committee has not finalized certain aspects of the 2009 LTIP, including the performance
targets that will result in target payout or full earning of shares and the thresholds for and levels of minimum and maximum payouts under the cash-based portion
of the 2009 LTIP and thresholds for earning shares under the equity-based portion of the 2009 LTIP. Those aspects of the 2009 LTIP that have been finalized and
approved are described below.
For Fiscal 2009, the Compensation Committee, taking into account the remaining number of shares authorized to be issued under the 2004 Rayovac
Incentive Plan and the current market value of the Company’s stock, has modified its LTIP program applicable to those named executive officers who continue
to be employed by the Company such that (i) for Mr. Hussey, approximately 8.6% of such award is an equity-based award (resulting from a grant of 187,500
shares on November 17, 2008) and the remainder of such award is a cash-based award and (ii) for all other current named executive officers, 100% of such award
is a cash-based award. As in Fiscal 2008, for each named executive officer who continues as an employee of the Company, the target value of such award is
established pursuant to the employment agreement for such named executive officer, which in each case provides for a target LTIP award equal in value to a
defined percentage of such executive’s annual base salary. As of the date of this report, the target LTIP award levels for each named executive officer eligible to
receive an LTIP award for Fiscal 2009 is:
Named Executive LTIP Target Level as % of Annual Base
Kent J. Hussey 175%
Anthony L. Genito 100%
David R. Lumley 150%
John A. Heil 150%
For Fiscal 2009, the lapsing of the restrictions on the equity-based portion of such LTIP award, being made only to Mr. Hussey, is based on continued
employment and the achievement of the Company-wide performance goals for Fiscal 2009, which are based on the achievement of adjusted EBITDA and cash
flow targets to be set by the Compensation Committee and tied to the annual operating plan. Adjusted EBITDA and cash flow will be measured in the same
manner as with the 2009 MIP. The Compensation Committee believes that adjusted EBITDA and cash flow are appropriate measures for a long term award in
light of the cash requirements imposed by the interest due with respect to the Company’s outstanding indebtedness, the financial condition of the Company and
ongoing exploration of potential strategies which may be available to us to reduce or restructure our significant outstanding indebtedness and the common usage
of multiples of EBITDA as a valuation tool in a sale of business context. In light of these considerations, the Compensation Committee has also elected to
continue the practice of setting the period over which, once the performance goals are met, the restrictions for continued employment will lapse at two years.
Mr. Hussey’s award agreement for Fiscal 2009 provides that if 100% of the established performance goals for Fiscal 2009 are met, then 100% of the restricted
shares awarded would be eligible for the two-year continued employment vesting. If the Company achieves less than 80% of the Fiscal 2009 LTIP performance
goal, then the entire award amount would be forfeited to the Company. If the Company achieves at least 80%, but less than 90% of the Fiscal 2009 LTIP
performance goal, then the entire award would not be forfeited, but instead the award would be rolled into the ability to earn such shares, as described below,
based on Fiscal 2010 performance. If the Company achieves at least 90%, but less than 100% of
81
Source: Spectrum Brands, Inc, 10-K, December 10, 2008