DESCRIPTION OF ANNUAL INCENTIVE GOALS ESTABLISHED FOR FISCAL YEAR 2009 UNDER THE
INCENTIVE COMPENSATION PLAN

 

The Compensation and Management Development Committee of the Board of Directors
of ArvinMeritor, Inc., established annual incentive goals for fiscal year 2009
under the Incentive Compensation Plan, as amended. These annual incentive goals
are based on the levels of EBITDA and free cash flow from continuing operations
that are achieved for the year, measured against target levels specified in the
Company’s annual operating plan (“AOP”). EBITDA is defined as earnings before
interest, taxes, depreciation and amortization, and free cash flow is defined as
net cash provided by operating activities minus capital expenditures. The
Compensation Committee also established target awards, stated as a percentage of
base salary, for participants.

 

Potential annual incentive bonuses are comprised of two components: one-half of
potential payments is dependent on each of (a) the level of achievement of the
EBITDA targets in the AOP and (b) the level of achievement of free cash flow
targets in the AOP. In addition, the final award calculation is subject to a
modifier that is based on an employee’s annual performance rating. The
calculated award may be adjusted up to +50% or -100%. The adjustment process
maintains the original budget.

 

To determine the amounts that are paid as bonuses, performance is measured
against AOP goals for each of the applicable components of the award
calculation. No payouts are made with respect to any part of the calculation in
which performance is less than 70% of AOP goals. For each part of the
calculation for which performance exceeds that threshold, the portion of an
individual’s target award that is paid out is dependent on, and increases with,
the percentage of the AOP goal that is achieved. The calculated payout, before
any adjustments, for an individual cannot exceed 200% of his target award. The
following chart summarizes payout calculations for each portion of the incentive
payment:

 

 

Performance as a Percentage

of Annual Operating Plan

Payout as a Percentage

of Target

Threshold for Payment

   70%

   25%

 

80

50

 

90

75

Target Payment

100

100

 

110

150

Maximum Payment

120 or higher

200