Exhibit 10.1

 

CF INDUSTRIES HOLDINGS, INC.

2005 EQUITY AND INCENTIVE PLAN

Annual Incentive Program

Effective January 1, 2007

 

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TABLE OF CONTENTS

Purpose

 

3

 

 

 

 

 

Participation Eligibility

 

3

 

 

 

 

 

Award Opportunities

 

3

 

 

 

 

 

Company Performance Metric & Award Pool

 

4

 

 

 

 

 

Determination of Individual Awards

 

5

 

 

 

 

 

Payment of Awards

 

5

 

 

 

 

 

AIP Awards and Employee Benefits

 

6

 

 

 

 

 

Other Provisions

 

6

 

 

 

 

 

Exhibit I

 

8

 

 

2

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CF INDUSTRIES HOLDINGS, INC.

2005 EQUITY AND INCENTIVE PLAN

Annual Incentive Program

PURPOSE

The purpose of the Annual Incentive Program (“AIP”), established under the
Company’s 2005 Equity and Incentive Plan, is to support the accomplishment of
the Company’s financial objectives. In doing so the AIP is designed to:

·                  Closely align the compensation of AIP participants with the
financial interests and expectations of the Company’s stockholders.

·                  Provide opportunities, when combined with base salaries, for
participants to earn competitive levels of direct cash compensation in order to
attract and retain high-performing management employees.

·                  Define an appropriate portion of management compensation as
being “at risk”, thereby providing enhanced opportunities for pay for
performance.

PARTICIPATION ELIGIBILITY

Participation in the AIP is limited to corporate officers and other management
positions that have the ability to contribute meaningfully to the Company’s
business results.

Participation in the AIP by non-officers must be approved by the Chairman &
Chief Executive Officer of the Company.  Participation by proxy-named officers
and other officers reporting directly to the Chairman & Chief Executive Officer
must be approved by the Compensation Committee of the Board of Directors.

AWARD OPPORTUNITIES

Each approved participant is assigned to a specific Target Award Group. A
participant’s assigned Group reflects a combination of his/her position’s
relative responsibility level and competitive compensation level. Each Group has
a target award level stated as a percent of base earnings as defined as payroll
earnings received during the plan year.  Each year all participants will receive
award agreements that reflect the award opportunity for that specific plan year.

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The Target Award level as of January 1, 2007 for each Group is as follows:

 

 

Target Award

Group

 

 

 

% of Base
Earnings

 

 

 

 

 

1.

 

Chairman & CEO

 

90%

2.

 

Selected Sr. Vice Presidents

 

55%

3.

 

Selected Sr. Vice Presidents

 

50%

4.

 

Selected Vice Presidents

 

45%

5.

 

Selected Vice Presidents

 

40%

6.

 

Selected Vice Presidents

 

35%

7.

 

Gen. Mgrs. & Selected Dirs.

 

30%

8.

 

Selected Directors & Mgrs.

 

24%

9.

 

Selected Directors & Mgrs.

 

20%

10.

 

Selected Directors & Mgrs.

 

16%

 

COMPANY PERFORMANCE METRIC & AWARD POOL

The performance metric used to determine the aggregate award pool is Cash Flow
Return on Average Gross Capital Employed (CFROC).  The Company’s performance
standard at the Target level is a CFROC of 13%.  The attached Exhibit I presents
the definition of CFROC.

The determination of the aggregate award pool is based upon the following
Company performance schedule:

Cash Flow Return on
Average Gross Capital
Employed

 

Aggregate
Award Pool

 

21% (Maximum)

 

200% of Target

 

13% (Target)

 

100% of Target

 

  5% (Threshold)

 

50% of Target

 

 

The aggregate award pool for performance levels between Threshold and Target and
between Target and Maximum are determined proportionately.  In addition, if the
Company’s performance is below Threshold, an award pool equal to 15% of the
target awards at the 100% of target level of all program participants in
aggregate (excluding proxy-named officers) will be available for distribution
based on management discretion.  In such circumstances, it is possible that
none, some or all of the award pool will be paid to participants.

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DETERMINATION OF INDIVIDUAL AWARDS

The determination of actual individual awards from the pool is based on the
following provisions:

·                  The Company’s CFROC performance (rounded to one decimal
point) will be used to determine the percent of target (rounded to the nearest
whole percent) available to participants.

·                  The awards for the Chairman & CEO and all other proxy-named
officers are equal to their respective target awards multiplied by the percent
of target attained by applying the Company’s CFROC against the performance
schedule.  No awards are granted to these executives if Company performance is
below the Threshold level.

·                  The pool of award dollars available for distribution to all
other participants is equal to these participants’ target awards in aggregate
multiplied by the percent of target attained based on Company performance.  The
award for an individual participant is equal to 85% of the amount determined by
multiplying his/her target award by the percent of target attained based on
Company performance.  The remaining 15% of the pool is distributed based on
management discretion.

·                  When Company performance does not meet the CFROC threshold
level, an award pool equal to 15% of the target awards of all participants,
other than the proxy-named officers, may be distributed on a discretionary
basis.

PAYMENT OF AWARDS

Payment of approved awards is made no later than March 15 of the calendar year
following completion of the Program Year.

Participants, if eligible, may elect to defer all or a portion of their AIP
awards under the provisions of the Company’s non-qualified deferred compensation
plans if such elections are in place prior to January 1 of the Program year or
within 30 days of participation date if participation starts after the first of
the year.  Deferrals are subject to applicable taxes.

Payment of awards to participants whose employment with the Company terminates
is as follows:

·                  Due to Retirement, Disability, Death or Job Elimination (As
defined below)

Awards are pro-rated based on the participant’s base earnings through the date
of termination or disability and are determined and paid out after the close of
the Program Year if applicable performance is achieved.

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·                  For Cause (As defined below)

Awards for the current Program Year (the year of termination) and awards not yet
paid out for the previous Program Year are forfeited.

·                  For Any Other Reason

Awards for the current Program Year (the year of termination) are forfeited. 
Awards for a completed Program Year not yet paid are paid out after the close of
the Program Year if applicable performance is achieved.

“Retirement” shall mean the Participant’s termination of employment, other than
for Cause, death or Disability, following the attainment by the Participant of
at least age fifty-five.

“Disability” shall have the meaning ascribed to such term in the Participant’s
individual employment, severance or other agreement with the Company or, if the
Participant is not party to such an agreement, “Disability” shall mean
Participant’s inability because of ill health, physical or mental disability, to
perform Participant’s duties for a period of 180 days in any twelve month
period.

“Job Elimination” shall mean the Participant’s termination of employment
resulting from the Company’s determination that the job held by the participant
is obsolete.

“Cause” shall have the meaning ascribed to such term in the Participant’s
individual employment, severance or other agreement with the Company or, if the
Participant is not party to such an agreement, “Cause” shall mean (i) dishonesty
in the performance of the Participant’s duties and (ii) the Participant’s
malfeasance or misconduct in connection with the Participant’s duties or any act
or omission which is injurious to the Company or its Subsidiaries or affiliates,
monetarily or otherwise.

Awards forfeited under the AIP will not be distributed to other participants.

AIP AWARDS AND EMPLOYEE BENEFITS

Participants’ AIP awards, whether paid out or deferred, are included in the
definition of Compensation for the purpose of calculating pension benefits for
eligible participants in the CF Industries, Inc. Retirement Income Plan and the
CF Industries, Inc. Supplemental Benefit and Deferral Plan.  AIP awards are not
used in the calculation of any other employee benefits.

OTHER PROVISIONS

Benefits paid to Plan participants in the form of salary continuation under CF’s
Short-Term Disability Plan are included in base earnings for the purpose of
determining awards under the AIP.

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Any conflict between the AIP provisions stated in this document and the
provisions stated in the 2005 Equity and Incentive Plan will be governed by the
2005 Equity and Incentive Plan.

The AIP is administered by the Compensation Committee of the Company’s Board of
Directors, or by such person or persons as the Compensation Committee may
delegate to administer the Program.  Such administrator has the authority to
make all necessary or desirable interpretations under the AIP, which are final
and binding on all AIP participants.

The Company may modify or terminate the AIP at any time. In the event of plan
termination, the performance results will be determined from the beginning of
the current plan year to the effective date of plan termination. Based on these
results, any awards earned will be paid in cash to participants on a pro-rata
basis within 45 days after the date of the plan termination.

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EXHIBIT I

Definition of Cash Flow Return on Average Gross Capital Employed

The Company Performance Metric for the Annual Incentive Program is Cash Flow
Return on Average Gross Capital Employed (CFROC) defined as follows:

 

CFROC

=

Cash Flow

 

Average Gross Capital Employed

 

 

Where:

Cash Flow =

Cash Flow from Operating Activities

Less:

Additions to Property, Plant & Equipment (excluding major capital expenditures)

Less:

Minority Interest in CFL

Less:

Changes in Net Operating Working Capital*

Less:

Increase (Decrease) in Customer Advances

Plus:

Interest Expense

 

Gross Capital Employed =

Total Stockholders’ Equity (Book Equity) + Interest Bearing Debt (Gross Debt)

Average Gross Capital Employed =

Gross Capital Employed as of 12/31 for current Program Year, plus Gross Capital
Employed as of 12/31 of previous Program Year divided by 2.

*Net Operating Working Capital =

Inventories

Plus:

Accounts Receivable

Plus:

Positive Exchange Positions

Plus:

Margin Deposits

Plus:

Prepaid Expenses

Less:

Accounts Payable & Accrued Expenses excluding Accruals related to Asset
Retirement Obligations

Less:

Negative Exchange Positions

 

Company performance will be calculated to two decimal points.

8

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