Exhibit 10.1    Employment Agreement dated 14 March 2006 with Richard B. Evans.

 

ALCAN INC.

Alcan Inc.

[logo.gif]

1188, rue Sherbrooke Ouest

Montréal (Québec)  

H3A 3G2

Canada

Adresse postale :

Tél. :

(514) 848-8000

C.P. 6090

Fax :

(514) 848-8115

Montréal (Québec)  

H3C 3A7

Canada

www.alcan.com

 

 

 

CONFIDENTIAL PERSONAL INFORMATION

10 March 2006

PERSONAL & CONFIDENTIAL

Mr. Richard B. Evans

Dear Dick:

On behalf of the Board of Alcan, I am very pleased to be able to confirm your
appointment as President and Chief Executive Officer of Alcan Inc., effective 12
March 2006.  You will report to me on behalf of the Board and you will be
located in Montreal. This offer letter cancels and replaces all previous
employment terms and conditions between you and Alcan.

BASE SALARY

Your initial base salary will be US$1,100,000 (one million, one hundred
thousand) per annum, effective 12 March 2006.  The Board's intention is to bring
your salary into line with the US market within the next two years and will be
reviewed and adjusted annually on the 1st of January in each year on the basis
of performance and competitive data.

ANNUAL INCENTIVE

You will participate in Alcan's Executive Performance Award Plan (EPA) with a
target incentive of 125% of base salary. Based on your current salary, the
foregoing represents US $1,375,000 (one million, three hundred and seventy-five
thousand).  For 2006 your EPA target will be prorated for the periods that you
were Chief Operating Officer and President and Chief Executive Officer.  The
actual award payment will be related to the global performance of Alcan Inc. as
well as achievement of your performance objectives that will be agreed upon and
reviewed annually with the Board.  The target will be reviewed and adjusted
annually in each year on the basis of performance and competitive data.

LONG TERM INCENTIVE (STOCK OPTION AND RELATIVE TSR PROGRAM)

You will participate in Alcan's Long Term Incentive Program currently comprising
two Plans (the Alcan Executive Stock Option Plan and the Alcan Total Shareholder
Return Plan).  Your combined target long term incentive compensation value for
2006 under these two Plans will total 5 times your current annual base salary
rate.  Based on your current salary for 2006, the foregoing represents US
$5,500,000 (five million, five hundred thousand).  

 

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One-half of the foregoing value will be provided in stock options and the other
half will be provided under the TSR Performance Plan, subject to possible
modification as described in the next paragraph. Your 2006 grant will be made in
September 2006.

As you are aware, Alcan's compensation programs are currently the subject of a
comprehensive review by the Board of Alcan and it is anticipated that this
review will result in changes to the long term incentive plan that will involve
full or partial replacement of the Stock Option and/or TSR Plans with an
alternative equity based plan and in alternative vesting arrangements.  It is
agreed that your long term incentive award, while maintaining a similarly
calculated target compensation value, will likely be delivered in an alternative
form, subject to your reasonable approval.  The target long term compensation
value will be reviewed annually against competitive US compensation data and
will be adjusted on the basis of performance and competitive data.  The awards
under both Plans are subject to approval by the Board.

Notwithstanding anything to the contrary in the relevant Plans or elsewhere, in
the event Alcan terminates your employment at any time without cause, in the
event you are constructively dismissed or in the event that you exercise your
right to terminate your employment pursuant to your Change of Control Agreement
as same may be amended or replaced from time to time, all unvested stock options
and other long-term incentive awards shall immediately vest and be exercisable.

Initial Long Term Incentive Grant

To reflect the time between your appointment and Alcan's normal award date, the
Board has approved a one time stock option grant of 167,250 Alcan shares,
representing 50% or US $2,750,000 (two million, seven hundred and fifty
thousand) of your combined target long-term incentive compensation value.

TAX EQUALIZATION

While resident in Canada, in accordance with Alcan policy, you will be provided
with a tax equalization payment to compensate for the tax differential on your
base salary, EPA and long-term incentive between the taxes you are required to
pay in Canada and the hypothetical federal and state taxes payable in the United
States.  Hypothetical state taxes will be calculated on the basis of a US-wide
state average.  

You will continue to receive an annual fixed net payment (i.e. grossed up for
tax) of US$25,000 as a contribution towards administrative costs and any adverse
tax impact that you may incur on your investment income while located in Canada.

You will continue to be eligible for tax equalization on the 85,530 SPAUs
granted to you in September 2001 while located in Canada, computed in accordance
with the foregoing current Alcan policy.

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You or your beneficiary will be reimbursed for any deemed departure tax
(commonly referred to as the "exit" tax) upon leaving Canada in the event of
your termination by Alcan for any reason other than cause, including termination
resulting from retirement, disability or death.

Should you recover, as a result of Alcan employment income, taxes previously
reimbursed to you under Alcan's equalization policy, you agree to reimburse to
Alcan the amounts so recovered.

Preparation of income tax returns

You will be provided with the services of Ernst & Young to prepare your tax
returns in Canada and in the USA.  The fees for this service will be for Alcan's
account.  Any additional expenses related to tax or financial planning in the US
or Canada may be charged to your Flexperk program.

Flexperk Program

As CEO your annual Flexperk allowance will increase to US $37,000 (thirty-seven
thousand) per annum.

The estimated usage is shown below; however, as you are aware, actual usage is
flexible and subject to your personal preferences with any unused amount to be
paid in cash and any overuse to be reimbursed to Alcan.

 

  Automobile US $20,000   Financial Planning US $10,000   Club Membership US $ 
7,000

 

This amount will be reviewed periodically and may be subject to increase based
upon US practice.

Annual Medical Examination

You will continue to be eligible for an annual physical, at the cost of Alcan,
to be undertaken by Medysis in Montreal.

RETIREMENT AND PENSION PLAN PARTICIPATION

It is agreed that your retirement from Alcan will be at age 65 or earlier (as
outlined in the pension plan rules), as notified in advance to the Board.

You will continue to participate in the Alcan Pension Plan for Officers.

The Board is currently reviewing the pension coverage for senior executives
provided by the above mentioned Plan as part of the comprehensive review
mentioned above. However, your personal pension entitlement will be calculated
to reflect your pensionable earnings (as increased throughout the term) as
defined by the Plan and will be paid monthly or as mutually agreed, as if the
earnings cap were removed.

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This upward adjustment may be payable, as elected by you and subject to further
review of the tax considerations, in the form of stock units with an equivalent
actuarial value, or pension. The adjustment will be effective March 12, 2006,
the date of your appointment as Chief Executive Officer.  The delivery of this
benefit will be discussed with you and finalized at or around the time of
completion of the compensation review.

You will continue to participate in the Alcancorp Pension Plan (ACPP) and US
Social Security Programs.  The employee paid contributions to these programs, if
any, will be for your account.  Should you be required to contribute to the
Quebec Pension Plan (Social Security), Alcan will reimburse you the annual
contributions to this plan on a net after tax basis.

Further, should Alcan adopt a defined contribution pension plan, it is agreed
that your defined benefit pension entitlement and any pension equivalency
payment or grant will be continued and not adversely affected.

Employee Benefits and Vacation

You will continue to be covered by Alcan's Quebec Medical Program and Alcan's
Medical Plan for Expatriate employees.  This will enable you and your wife to
choose to receive medical treatment in the United States, which will be covered
under the terms of Alcan's Expatriate Plan.

Your participation in other benefit programs will remain unchanged and in
accordance with Alcan policy.

You will continue to be entitled to vacation in accordance with Alcan policy of
no less than six (6) weeks per year. Under this policy unused vacation is
forfeited at the end of March each year.

Immigration Requirements

You will be required to maintain the appropriate work permit with the Canadian
authorities.

TERMINATION OF EMPLOYMENT

Should your employment be terminated by Alcan without cause (including
constructive dismissal by Alcan) at any time prior to your reaching age 63,
Alcan will pay to you a severance amount equal to the aggregate of 24 months
base salary and EPA target, calculated at the date of termination, and
tax-equalized to the United States in accordance with Alcan policy. In the event
of termination without cause (including constructive dismissal) at any time
after you reach age 63, the severance amount payable to you will be reduced on a
proportionate basis for each full month to age 65.  In the event of your
termination of employment prior to you reaching age 65, your pension entitlement
will be calculated on the basis of termination on the earlier of two years
following your actual date of termination and the date on which you reach age
65.

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The foregoing severance amount will be paid as a lump sum or as salary
continuance, at your choice. In the event you elect salary continuance, you will
continue to participate in the benefit programs including pension plan for the
period of salary continuance except that the long-term disability plan and the
accrual of vacation cease on termination date.  No long term incentive or
Flexperk awards are made during the salary continuance period.

In the event that you choose a lump sum severance amount, the lump sum will be
enhanced by the actuarial value of the difference between the pension that would
have been payable on the date at the end of the period determined by your
severance payment (e.g. up to two years following termination date) and the
pension that you will actually receive from the plans. 

All long term incentives will vest at the date of termination.  You will also be
entitled to a pro-rata (to the date of termination) EPA payment for the current
year.

In the event of termination for cause, no pro-rata EPA bonus will be paid in the
year of termination and all unvested long-term incentive awards will be
forfeited.

DEATH OR DISABILITY

In the event that you become disabled and unable to fulfill your duties for an
uninterrupted period of six (6) months, or die while employed by Alcan prior to
retirement, you or your beneficiary will be paid a pro-rata (to the date of
termination) EPA payment for the current year and all long term incentive grants
will vest on the date of death or confirmation of disability.

REPATRIATION TO CALIFORNIA

Alcan will repatriate you and your wife as well as personal effects to
California, United States in accordance with the Alcan international relocation
policy upon your termination from Alcan for any reason other than cause,
including termination due to retirement, disability or death. You will be
covered for deemed departure tax (as described above under tax equalization) and
you will be provided with international housing protection.

OFFICER UNDERTAKINGS

You will be required to update your acceptance of Alcan's Non-Competition
Undertaking and Confidentiality Agreement, copies of which are attached for your
signature to this letter.  The amounts payable under the Change of Control
Agreement, as same may be amended or replaced from time to time, will be tax
equalized to the United States in accordance with Alcan policy as described
above.

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SPOUSAL TRAVEL EXPENSES

From time to time it will be beneficial for Alcan that your wife travel with you
to attend business events and functions.  Reasonable expenses consistent with
Alcan's policy for expense reimbursement to Alcan executives will be reimbursed
for such occasions.

BOARD MEMBERSHIPS

It is the intention of the Board that you will continue to remain a Director of
Alcan during the period of employment.  You may also sit on other corporate
boards with the prior approval of the Alcan Board.  Your existing Board
appointment at Bowater is of course already approved and supported by the Board.

LEGAL REVIEW

Alcan will reimburse the cost of reasonable legal fees to enable you to review
this agreement from time to time with an external professional.  You will also
be covered by insurance under Alcan's officer and director liability insurance
policy.

ACCEPTANCE

Dick, on behalf of the Board let me say how much we are looking forward to
working with you in this new capacity and embarking on a successful chapter in
the evolution of Alcan. Please do not hesitate to contact me with any concerns
or questions to enable you to sign and return a copy of this letter and the
attachments indicating your acceptance of the terms and conditions included.

This letter is written in English at the express request of the Parties.  Cette
lettre est rédigée en anglais à la demande expresse des parties.

The terms and conditions outlined in this letter replace any previous
contractual arrangements and constitute the full terms and conditions of
employment.

                                                                       
           

  /s/ Yves Fortier     Yves Fortier     Chairman of the Board, Alcan Inc.  

 

I accept the terms and conditions described above.

  /s/ Richard B. Evans  

14 March 2006

   

Richard B. Evans

 

date

 

                                                                                   
                                                                        

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