Attached files
Exhibit 10.8
XYLEM 1997 ANNUAL INCENTIVE PLAN
EFFECTIVE AS OF 10/31/11
1. PURPOSE
The purpose of this Xylem 1997 Annual Incentive Plan is to provide incentive compensation in
the form of a bonus to eligible executives of Xylem Inc. (the Company) for achieving specific
pre-established performance objectives and to continue to motivate participating executives to
achieve their business goals, while tying a portion of their compensation to measures affecting
shareholder value; provided, however, that for purposes of grants made under the Predecessor Plan,
the term Company shall include the ITT Corporation (the Predecessor Corporation) as the
original grantor. The Incentive Plan seeks to enable the Company to continue to be competitive in
its ability to attract and retain executives of the highest caliber.
This Xylem 1997 Annual Incentive Plan (the Incentive Plan) first became effective as of
October 31, 2011 following the spin-off of Xylem Inc. from the Predecessor Corporation on October
31, 2011; provided, however, that for purposes of grants made under the Predecessor Plan, the term
Incentive Plan shall include shall include the Predecessor Plan as it existed at the time of the
grant. The Predecessor Corporation maintained a similar plan prior to the spin-off (the
Predecessor Plan), and the Incentive Plan was created to govern the awards under the Predecessor
Plan, as revised to reflect the spin-off from the Predecessor Corporation. The Plan shall remain
in effect as provided in Article IX hereof, and participants shall receive full credit for their
service and participation with the Predecessor Corporation as provided in Article IX hereof.
2. PLAN ADMINISTRATION
The Compensation and Personnel Committee (the Committee) of the Board of Directors (the
Board) of the company shall have full power and authority to administer, construe and interpret
the provisions of the Incentive Plan and to adopt and amend administrative rules and regulations,
agreements, guidelines and instruments for the administration of the Incentive Plan and for the
conduct of its business as the Committee considers appropriate.
The Committee shall have full power, to the extent permitted by law, to delegate its authority
to any officer or employee of the Company to administer and interpret the procedural aspects of the
Incentive Plan, subject to the terms of the Incentive Plan, including adopting and enforcing rules
to decide procedural and administrative issues.
The Committee may rely on opinions, reports or statements of officers or employees of the
Company and of counsel to the Company (inside or retained counsel), public accountants and other
professional or expert persons.
The Board reserves the right to amend or terminate the Incentive Plan in whole or in part at
any time; provided, however, that no amendments shall adversely affect or impair the rights of any
participant previously accrued thereby, without the written consent of the participant.
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No member of the Committee shall be liable for any action taken or omitted to be taken or for
any determination made by him or her in good faith with respect to the Incentive Plan, and the
Company shall indemnify and hold harmless each member of the Committee against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a claim with the
approval of the Committee) arising out of any act or omission in connection with the administration
or interpretation of the Incentive Plan, unless arising out of such persons own fraud or bad
faith.
3. ELIGIBLE EXECUTIVES
Executives of the Company or its affiliates in salary grade 19 and above shall be eligible to
participate in the Incentive plan; provided, however, that for purposes of grants made under the
Predecessor Plan, the term Company shall include ITT Corporation as the original grantor.
4. PLAN YEAR, PERFORMANCE PERIODS, PERFORMANCE MEASURES AND PERFORMANCE TARGETS
Each fiscal year of the Incentive Plan (the Plan Year) shall begin on January 1 and end on
December 31. The performance period (the Performance Period) with respect to which bonuses may be
payable under the Incentive Plan shall be the Plan Year unless the Committee designates one or more
different Performance Periods.
The Committee shall establish the performance measures (the Performance Measures) to be used
which may include, but shall not be limited to, net operating profit after tax, economic value
added, earnings per share, return on equity, return on total capital, or such other measures as
determined by the Committee. In addition, Performance Measures may be based upon other objectives
such as negotiating transactions or sales and developing long-term goals. The Performance Measures
shall be objectively determinable and, to the extent that they are expressed in standard accounting
terms, shall be according to generally accepted accounting principles as in existence on the date
on which the applicable Performance Period is established and without regard to any changes in such
principles after such date. For purposes of the Plan, economic value added shall mean the amount of
economic profit created in excess of the amount required to satisfy the obligations to and normal
expectations of the Companys lenders and investors.
The Committee shall establish the performance targets (the Performance Targets) to be
achieved which shall be based on one or more Performance Measures relating to the Company as a
whole or to the specific businesses of the Company, subsidiaries, operating companies, or operating
units as determined by the Committee and shall be expressed as an objective formula to be used in
calculating the amount of bonus award each executive shall be eligible to receive. There may be a
sliding scale of payment dependent upon the percentage levels of achievement of Performance
Targets.
The Performance Measures and Performance Targets, which may be different with respect to each
executive and each Performance Period, must be set forth in writing by the Committee within the
first ninety (90) days of the applicable Performance Period.
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5. CERTIFICATION OF PERFORMANCE TARGETS AND CALCULATION OF BONUS AWARDS
After the end of each Performance Period, and prior to the payment for such Performance
Period, the Committee must certify in writing the degree to which the Performance Targets for the
Performance Period were achieved, including the specific target objective or objectives and the
satisfaction of any other material terms of the bonus award. The Committee shall calculate the
amount of each executives bonus for such Performance Period based upon the Performance Measures
and Performance Targets for each executive. In establishing Performance Targets and Performance
Measures and in calculating the degree of achievement thereof, the Committee may ignore
extraordinary items, property transactions, changes in accounting standards and losses or gains
arising from discontinued operations. The Committee shall have authority and discretion to increase
or decrease the amount of any executives bonus as so determined, and may totally eliminate any
bonus award if it determines in its absolute and sole discretion that such action is appropriate in
order to reflect the executives performance or unanticipated factors during the Performance
Period.
6. PAYMENT OF AWARDS
Approved bonus awards shall be payable by the Company in cash to each executive, or to the
executives estate in the event of the executives death, as soon as practicable after the end of
each Performance Period. No bonuses may be paid under the Incentive Plan until the Committee has
certified in writing that the relevant Performance Targets were achieved.
If an executive is not an employee on the last day of the Performance Period, the Committee
shall have sole discretion to determine what portion, if any, the executive shall be entitled to
receive with respect to any award for the Performance Period. The Committee shall have the
authority to adopt appropriate rules and regulations for the administration of the Incentive Plan
in such termination cases.
The Company retains the right to deduct from any bonus awards paid under the Incentive Plan
any Federal, state, local or foreign taxes required by law to be withheld with respect to such
payment.
7. OTHER TERMS AND CONDITIONS
Any award made under this Incentive Plan shall be subject to the discretion of the Committee.
No person shall have any legal claim to be granted an award under the Incentive Plan and the
Committee shall have no obligation to treat executives uniformly. Except as may be otherwise
required by law, bonus awards under the Incentive Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment,
execution, or levy of any kind, either voluntary or involuntary. Bonuses awarded under the
Incentive Plan shall be payable from the general assets of the Company, and no executive shall have
any claim with respect to any specific assets of the Company.
Nothing contained in the Incentive Plan shall give any executive the right to continue in the
employment of the Company or affect the right of the Company to terminate an executive.
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8. ACCELERATION EVENT.
An Acceleration Event shall occur if (i) a report on Schedule 13D shall be filed with the
Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934
(the Act) disclosing that any person (within the meaning of Section 13(d) of the Act), other than
the Company or a subsidiary of the Company or any employee benefit plan sponsored by the Company or
a subsidiary of the Company, is the beneficial owner directly or indirectly of twenty percent (20%)
or more of the outstanding Common Stock $1 par value, of the Company (the Stock): (ii) any person
(within the meaning of Section 13(d) of the Act), other than the Company or a subsidiary of the
Company, or any employee benefit plan sponsored by the Company or a subsidiary of the Company,
shall purchase shares pursuant to a tender offer or exchange offer to acquire any Stock of the
Company (or securities convertible into Stock) for cash, securities or any other consideration,
provided that after consummation of the offer, the person in question is the beneficial owner (as
such term is defined in Rule 13d-3 under the Act), directly or indirectly, of twenty percent (20%)
or more of the outstanding Stock of the Company (calculated as provided in paragraph (d) of Rule
13d-3 under the Act in the case of rights to acquire Stock); (iii) the consummation of (A) any
consolidation, business combination or merger involving the Company, other than a consolidation,
business combination or merger involving the Company in which holders of Stock immediately prior to
the consolidation, business combination or merger (x) hold fifty percent (50%) or more of the
combined voting power of the Company (or the corporation resulting from the merger or consolidation
or the parent of such corporation) after the merger and (y) have the same proportionate ownership
of common stock of the Company (or the corporation resulting from the merger or consolidation or
the parent of such corporation), relative to other holders of Stock immediately prior to the
merger, business combination or consolidation, immediately after the merger as immediately before,
or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the Company, (iv) there shall have been a
change in a majority of the members of the Board of Directors of the Company within a 12-month
period unless the election or nomination for election by the Companys stockholders of each new
director during such 12-month period was approved by the vote of two-thirds of the directors then
still in office who (x) were directors at the beginning of such 12-month period or (y) whose
nomination for election or election as directors was recommended or approved by a majority of the
directors who were directors at the beginning of such 12-month period or (v) any person (within the
meaning of Section 13(d) of the Act) (other than the Company or any subsidiary of the Company or
any employee benefit plan (or related trust) sponsored by the Company or a subsidiary of the
Company) becomes the beneficial owner (as such term is defined in Rule 13d-3 under the Act) of
twenty percent (20%) or more of the Stock.
Upon the occurrence of such Acceleration Event, the Performance Measures for each Performance
Period with respect to which bonuses may be payable under the Incentive Plan shall be deemed to be
achieved at the greater of (i) the Performance Target established for such Performance Measures or
(ii) the Companys actual achievement of such Performance Measures as of the Acceleration Event.
Payment of the bonuses, for the full year, will be made to each Participating Executive, in cash,
within five (5) business days following such Acceleration Event.
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9. MISCELLANEOUS.
The Incentive Plan shall be effective October 31, 2011. The Plan shall remain in effect
unless/until terminated by the Board; provided, however, that if an Acceleration Event has occurred
no amendment or termination shall impair the rights of any executive with respect to any prior
award.
This Incentive Plan shall be construed and governed in accordance with the laws of the State
of New York.
Notwithstanding any other provision of the Incentive Plan to the contrary, all prior service
and participation by a participant with the Predecessor Corporation shall be credited in full
towards a participants service and participation with the Company.