GATX CORPORATION 2004 EQUITY INCENTIVE COMPENSATION PLAN PERFORMANCE SHARE AGREEMENT
Exhibit 10.3
THIS AGREEMENT, entered into as of , by and between the Participant and GATX
Corporation (the “Company”);
WHEREAS, the Company maintains the GATX Corporation 2004 Equity Incentive Compensation Plan
(the “Plan”), which is incorporated into and forms a part of this Agreement, and the
Participant has been selected by the Compensation Committee of the Board of Directors of the
Company which has been charged with the responsibility of administering the Plan (the
“Committee”) to receive Performance Shares under the Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the Participant, as follows:
| 1. | Terms of Award. The following terms used in this Agreement shall have the meanings set forth in this paragraph 1: |
The “Participant” is .
The “Grant Date” is .
The “Performance Period” is January 1, 20___to December 31, 20___.
The number of Performance Shares granted under this Agreement is . Such number of
Performance Shares is sometimes referred to in this Agreement as the “Target Grant.”
Other terms used in this Agreement are defined in paragraph 13 or elsewhere in this
Agreement or in the Plan.
| 2. | Grant. The Participant is hereby granted the number of Performance Shares set forth in paragraph 1, subject to the terms of the Plan and this Agreement. |
| 3. | Vesting, Transfer and Forfeiture |
| (a) | Subject to the terms hereof, if, for each of the three years during the Performance Period, the Company’s Total Gross Income Less Total Ownership Costs (as reported on the Company’s audited income statement for each year during the Performance Period) is greater than $ (the “Threshold Goal”), then, following the Committee’s certification that the Threshold Goal has been achieved, the Participant shall be entitled to the number of shares set forth in the 2009 resolution of the Committee providing for the grant of this award (the “Unadjusted |
| Award Amount”). However, if the Threshold Goal is not achieved for the Performance Period, the Unadjusted Award Amount shall be zero. | |||
| (b) | After the end of the Performance Period, the Committee shall determine the number of the Participant’s Performance Shares that have been earned for the Performance Period in accordance with the schedule in Exhibit 1, weighted by the percentages set forth in the column captioned “Weight” on Exhibit 2, and calculated in the manner set forth on Exhibit 2 (provided that the determination under this paragraph (b) shall be subject to paragraph 8). The Unadjusted Award Amount shall be reduced to the number of Performance Shares determined to be earned in accordance with the foregoing provisions of this paragraph (b), and any unearned portion of the Unadjusted Award Amount or Performance Shares shall be forfeited. In no event shall the shares earned by the Participant exceed the Unadjusted Award Amount. | ||
| (c) | As soon as practicable after the Committee has made the determination of the number of the earned shares under paragraph (a) and (b) above, that number of shares of common stock of the company (“Shares”) shall be transferred to the Participant. | ||
| (d) | Notwithstanding the foregoing provisions of this paragraph 3, the Participant’s Performance Shares shall be determined and exchanged for Shares and the Participant shall be vested therein, and become owner thereof free and clear of all restrictions otherwise imposed by this Agreement, as follows: |
| (i) | If the Participant’s employment is involuntarily terminated by the Company other than for Cause, not less than eighteen (18) months following the beginning of the Performance Period but on or prior to the end of the Performance Period, he or she will be entitled to a pro rata portion of his or her Performance Shares hereunder equal in number to the product of the number of Performance Shares to which the Participant would otherwise be entitled in accordance with the foregoing provisions of this paragraph 3, multiplied by a fraction (not greater than one), the numerator of which is the number of full and fractional months the Participant is employed by the Company or its Subsidiaries during the period beginning on the date of commencement of the Performance Period, and ending on the Date of Termination and the denominator of which is 36, the number of months in the Performance Period. The Performance Shares to which the Participant is entitled pursuant to this subparagraph (i) shall be distributed to the Participant free and clear of all restrictions as soon as practical following the determinations described in paragraphs (a) and (b) above. |
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| (ii) | If the Participant’s Date of Termination occurs by reason of the Participant’s death, Retirement or Disability prior to the end of the Performance Period, the Participant will be entitled to distribution of a pro rata portion of his or her Performance Shares free and clear of all restrictions promptly following the end of the Performance Period, equal in number to the product of the number of Performance Shares to which the Participant would otherwise be entitled in accordance with the foregoing provisions of this paragraph 3, multiplied by a fraction (not greater than one), the numerator of which is the number of full and fractional months during the period beginning on the date of commencement of the Performance Period and ending on the date of the Participant’s death, Retirement or Disability and the denominator of which is 36, the number of months in the Performance Period. If a Participant’s Date of Termination occurs by reason of the Participant’s death, Retirement or Disability, as described in the first sentence of this subparagraph (ii), the Committee may, in its sole discretion, increase the number of Performance Shares to which the Participant is entitled, but in no event will the Participant be entitled to a distribution that is greater than what would have been distributable if no Date of Termination had occurred. | ||
| (iii) | Subject to the provisions of paragraph 4.2(f) of the Plan (relating to the adjustment of shares), if a Change in Control occurs prior to a Participant’s Date of Termination and before the end of the Performance Period, and within two years after the occurrence of the Change in Control the Participant’s Date of Termination occurs by reason of discharge by the Participant’s employer without Cause or the Participant resigns from employment with the employer for Good Reason, the Participant shall become vested in all Performance Shares granted under this Agreement prior to the Change in Control that are held by the Participant as of the Date of Termination, in accordance with subparagraph (iv) or (v), as applicable. | ||
| (iv) | With respect to any Performance Shares that become vested in connection with a Change in Control described in paragraphs 5(a), (b), (c) or (d) of the Plan, the number of shares of common stock to which the Participant is entitled upon vesting shall be calculated as if the Company had achieved 100% performance against goals, and shall be distributed to the Participant free and clear of all restrictions as soon as practicable following the Date of Termination, and the Participant shall have no further rights under this Agreement. |
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| (v) | With respect to any Performance Shares that become vested in connection with a Change in Control described in paragraph 5(e) of the Plan, with respect to a Participant as described therein relating to certain transactions involving a Subsidiary or business segment, as soon as practicable following the Date of Termination, the Participant shall receive a distribution, free and clear of all restrictions, of the following number of shares of common stock, determined on the assumption that the Company achieved both one hundred percent (100%) performance against goal as follows: |
| (A) | If the Date of Termination occurs during the first year of the Performance Period, the Participant shall be entitled to receive Shares equal in number to one-third (1/3) of his or her Performance Shares. | ||
| (B) | If the Date of Termination occurs during the second year of the Performance Period, the Participant shall be entitled to receive Shares equal in number to two-thirds (2/3) of his or her Performance Shares. | ||
| (C) | If a Date of Termination occurs during the third year of the Performance Period, such Participant shall be entitled to receive Shares equal in number to the total of all of his or her Performance Shares. |
| Following a distribution in accordance with this subparagraph (v), the Participant shall have no further rights under this Agreement. | |||
| (vi) | For purposes of subparagraphs (iii) and (v), if, as a result of a Change in Control described in paragraph 5(e) of the Plan, the Participant’s employer ceases to be a Subsidiary (and the Participant’s employer is or becomes an entity that is separate from the Company), and the Participant is not, immediately following the Change in Control, employed by the Company or an entity that is then a Subsidiary, then the occurrence of the Change in Control shall be treated as the Participant’s Date of Termination caused by the Participant being discharged by the employer without Cause. |
| (e) | Subject to paragraph (d) above, if the Participant’s Date of Termination occurs prior to the end of the Performance Period, the Participant shall forfeit all shares and rights under this Agreement. | ||
| (f) | The Performance Shares may not be sold, assigned, transferred, pledged or otherwise encumbered until the shares have been distributed to the Participant free and clear of all restrictions. |
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| 4. | Voting Rights and Dividends. Notwithstanding anything to the contrary, the Participant shall not be entitled to vote his or her Performance Shares until such shares have been distributed. | |
| Unless a Participant’s Date of Termination shall have previously occurred, on each dividend payment date during the Performance Period, the Participant’s account shall be credited with dividend equivalents equal to the product of (x) the number of the Participant’s Performance Shares and (y) the dividend declared on a single Share with respect to the immediately preceding dividend record date. A Participant shall be entitled to a distribution of an amount equal to the dividend equivalents credited to his or her account if and when he or she is entitled to distribution of such shares. The dividend equivalents attributable to forfeited Performance Shares shall likewise be forfeited. |
| 5. | Withholding. The grant, vesting and distribution of benefits under this Agreement are subject to withholding of all applicable taxes. Subject to such rules and limitations as may be established by the Committee from time to time, the Participant may satisfy his or her withholding obligations through the surrender of shares of common stock which the Participant already owns, or to which the Participant is otherwise entitled under the Plan; provided, however, that, except as otherwise provided by the Committee, such shares may be used to satisfy not more than the Company’s minimum statutory withholding obligation (based on minimum statutory withholding rates for Federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). |
| 6. | Heirs and Successors. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business. If any rights of the Participant or benefits distributable to the Participant under this Agreement have not been exercised or distributed, respectively, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be distributed to the Designated Beneficiary, in accordance with the provisions of this Agreement and the Plan. If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be exercised by or distributed to the legal representative of the estate of the Participant. If the Designated Beneficiary survives the Participant but dies before the exercise of all rights or the complete distribution of benefits under this Agreement, then any remaining rights and any remaining benefit distribution shall be exercisable by or distributed to the legal representative of the estate of the Designated Beneficiary. |
| 7. | Administration. The authority to manage and control the operation and administration of this Agreement shall be vested in the Committee, and the Committee shall have all powers with respect to this Agreement as it has with |
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| respect to the Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement shall be final and binding on all persons. |
| 8. | Modification of Goals. In determining the extent to which the Performance Goals (but not the Threshold Goal) have been achieved, the Committee may include or exclude items or events that impact the final results, positively or negatively, as it deems appropriate. |
| 9. | Plan Governs. Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the Director, Compensation of the Company; and this Agreement is subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan. |
| 10. | Not An Employment Contract. The grant of Performance Shares hereunder will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time. |
| 11. | Notices. Any written notices provided for in this Agreement or the Plan shall be provided in accordance with paragraph 11(a) or 11(b), as applicable and, if provided to the Company, shall be addressed as follows: |
| (a) | Any notice required by the Participant pursuant to the definition of Good Reason, as described below, shall be in writing given by hand delivery or by registered or certified mail, return receipt requested, postage prepaid, addressed to the Senior Vice President, Human Resources and shall be effective when actually received. | ||
| (b) | All other notices shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Any such notice sent by mail shall be deemed received three business days after mailing, but in no event later than the date of actual receipt and shall be directed, if to the Participant, at the Participant’s address indicated by the Company’s records, or if to the Company, to the attention of the Director, Compensation. |
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| 12. | Amendment. This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the parties. |
| 13. | Definitions. For purposes of this Agreement, the terms used in this Agreement shall be subject to the following: |
| 3-Year Average Return on Equity. The term “3-Year Average Return on Equity” shall mean the sum of net income divided by average equity for each year in the Performance Period divided by three (3). Accumulated other comprehensive income is excluded from equity. | ||
| 3-Year Cumulative Investment Volume. The term “3-Year Cumulative Investment Volume” shall mean the sum of consolidated cumulative GAAP basis portfolio investments and capital additions as reported on the company’s audited balance sheet for each year in the Performance Period. Purchases of leased in assets are excluded. | ||
| Cause. The term “Cause” shall mean (i) the willful and continued failure of the Participant to perform the Participant’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), or (ii) the willful engaging by the Participant in illegal conduct or gross misconduct in the course of his or her discharge of duties for the Company. For purposes of this provision, no act or failure to act, on the part of the Participant, shall be considered “willful” unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief, that the Participant’s action or omission was in the best interests of the Company. | ||
| Change in Control. The term “Change in Control” shall have the meaning ascribed to it in Section 5 of the Plan. | ||
| Date of Termination. The term “Date of Termination” means the first day occurring on or after the Grant Date on which the Participant is not employed by the Company or any Subsidiary, regardless of the reason for the termination of employment; provided that a termination of employment shall not be deemed to occur by reason of a transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries; and further provided that the Participant’s employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant’s employer. | ||
| Designated Beneficiary. The beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form and at such time as the Committee shall require. |
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| Disability. Except as otherwise provided by the Committee, the Participant shall be considered to have a “Disability” during the period in which the Participant is considered to be “disabled” as that term is defined in the Company’s long term disability plan. | ||
| Good Reason. The term “Good Reason” shall mean the occurrence of one or more of the following conditions without the consent of the Participant: |
| (a) | A material diminution in the Participant’s base compensation, compared with the Participant’s base compensation in effect immediately prior to the consummation of a Change in Control. | ||
| (b) | A material diminution in the Participant’s authority, duties, or responsibilities, compared with the authority, duties, and responsibilities of the Participant immediately prior to the consummation of a Change in Control. | ||
| (c) | The Participant is required to report to a supervisor with materially less authority, duties, or responsibilities than the authority, duties, and responsibilities of the supervisor who had the greatest such authority, duties, and responsibilities at the time the Participant was required to report to such supervisor during the 120-day period immediately preceding the consummation of a Change in Control. | ||
| (d) | A material diminution in the budget over which the Participant retains authority, compared with the most significant budget, if any, over which the Participant had authority at any time during the 120-day period immediately preceding the consummation of a Change in Control. | ||
| (e) | A material change in the geographic location at which the Participant must perform services. | ||
| (f) | Any other action or inaction by the Company that constitutes a material breach of any change of control agreement between the Company and the Participant that is in effect when a Change in Control occurs. |
| If (I) the Participant provides written notice to the Company of the occurrence of Good Reason within a reasonable time (not more than 90 days) after the Participant has knowledge of the circumstances constituting Good Reason, which notice specifically identifies the circumstances which the Participant believes constitute Good Reason; (II) the Company fails to notify the Participant of the Company’s intended method of correction within a reasonable period of time (not less than 30 days) after the Company receives the notice, or the Company fails to correct the circumstances within a reasonable period of time after such notice (except that no such opportunity to correct shall be applicable if the circumstances constituting Good Reason are those described in paragraph |
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(e) above, relating to relocation); and (III) the Participant resigns within a reasonable
time after receiving the Company’s response, if such notice does not indicate an intention
to correct such circumstances, or within a reasonable time after the Company fails to
correct such circumstances (provided that in no event may such termination occur more than
two years after the initial existence of the condition constituting Good Reason); then the
Participant shall be considered to have terminated for Good Reason.
| Performance Goals. The term “Performance Goals” shall mean 3-Year Average Return On Equity and 3-Year Cumulative Investment Volume established by the Committee for the Performance Period as set forth in Exhibit 1. | ||
| Retirement. “Retirement” of the Participant means retirement on a “Retirement Date,” as that term is defined in the GATX Corporation Non-Contributory Pension Plan for Salaried Employees (the “Pension Plan”). |
IN WITNESS WHEREOF, the Participant has executed this Agreement, and the Company has caused
these presents to be executed in its name and on its behalf, all as of the Grant Date.
Participant:
| GATX Corporation | ||
By:
|
 |
|
Its:
|
Chairman, President and CEO | |
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Exhibit 1
Performance Goals, Weights and % of Target Earned
[YEAR] — [YEAR] Performance Period
[YEAR] — [YEAR] Performance Period
| 3-Year Average XXX (1) | ||||
| (50% weight) | % of Target Grant Earned | |||
< _____% |
0.0 | % | ||
_____ % |
25.0 | % | ||
_____ % |
50.0 | % | ||
_____ % |
75.0 | % | ||
_____ % |
100.0 | % | ||
_____ % |
125.0 | % | ||
_____ % |
150.0 | % | ||
_____ % or more |
200.0 | % | ||
Interpolated for actual performance between levels shown
| (1) | 3-Year Average Return on Equity is defined as the sum of net income divided by average equity for each year in the Performance Period divided by three (3); excludes accumulated other comprehensive income from equity. |
| 3-Year Cumulative | ||||
| Investment Volume (2) | ||||
| (50% weight) | % of Target Grant Earned | |||
< $______ billion |
0 | % | ||
$______ billion |
25 | % | ||
$______ billion |
50 | % | ||
$______ billion |
75 | % | ||
$______ billion |
100 | % | ||
$______ billion |
125 | % | ||
$______ billion |
150 | % | ||
>= $______ billion |
200 | % | ||
| (2) | 3-Year Cumulative Investment Volume is defined as the sum of consolidated cumulative GAAP basis portfolio investments and capital additions as externally reported for each year in the Performance Period; excludes purchases of leased in assets. |
In determining the extent to which the Performance Goals (but not the Threshold Goal) have been
achieved, the Compensation Committee, in its sole discretion, may include or exclude items or
events that impact the final results, positively or negatively. However, in no event will the
award exceed the Unadjusted Award Amount.
Exhibit 2
Sample Calculation of Performance Shares Earned
Number of Performance Shares Granted: 1,000
| Weighted | ||||||||||||||||||||
| Performance | Target | Assumed | Payout | Payout | ||||||||||||||||
| Goal | Weight | Goal | Actual | Percentage | Percentage | |||||||||||||||
3-Year Average XXX |
50 | % | _____ | % | _____ | % | 150 | % | 75.0 | % | ||||||||||
3-Year Cumulative
Investment Volume |
50 | % | $_____ billion | $_____ billion | 75 | % | 37.5 | % | ||||||||||||
Total Weighted Payout |
112.5 | % | ||||||||||||||||||
Performance Shares Earned
| Total | ||||||||
| Weighted | Performance | |||||||
| Shares Granted | Payout | Shares Earned | ||||||
1,000 x |
112.5 | % | = 1,125 | |||||
