Document:

EX-10.4

Exhibit 10.4

The Annual Incentive Plan

For Year 2009

 

 

	 	 	 	 	 
	Contents	 	Page
	 
	 	 	 	 
	At a Glance
	 	 	1	 
	What is the Annual Incentive Plan?
	 	 	1	 
	Who is Eligible for This Plan?
	 	 	1	 
	How Does the Annual Incentive Plan Work?
	 	 	1	 
	 
	 	 	 	 
	Calculation of the Annual Incentive Plan Award
	 	 	2	 
	Target Bonus Percentage
	 	 	2	 
	Performance Goals and the Target Bonus Percentage
	 	 	2	 
	2009 Performance Goals
	 	 	3	 
	 
	 	 	 	 
	How the AIP Incentive Award is Calculated When All Goals
Are 100% Achieved
	 	 	4	 
	 
	 	 	 	 
	How the AIP Incentive Award is Calculated for Other Achievement Levels
	 	 	5	 
	Maximums and Minimums
	 	 	5	 
	 
	 	 	 	 
	Additional Guidelines for the Annual Incentive Plan
	 	 	6	 
	Discretionary Adjustments
	 	 	6	 
	Some Special Circumstances
	 	 	6	 
	Making Payments
	 	 	6	 
	 
	 	 	 	 
	Administration Details
	 	 	7	 

 

 

At a Glance

What is the Annual Incentive Plan?

The Annual Incentive Plan (the “AIP” or the “Plan”) provides participants of Allegheny Technologies
Incorporated (“Allegheny Technologies” or the “Company”) and its operating companies with the
opportunity to earn an incentive award when certain pre-established goals are met at the corporate
and operating company levels.

Who is Eligible for This Plan?

Generally, participants who have a significant impact on the Company’s operations will be eligible
to participate in the Plan. Individuals eligible for participation are determined annually, based
on recommendations of the operating company presidents, if applicable, and the Company’s chief
executive officer and the Company’s executive vice president-human resources, with the approval of
the Personnel and Compensation Committee of the Company’s Board of Directors.

How Does the Annual Incentive Plan Work?

Under the Plan, participants may earn an incentive award based on a percentage of their base
salary, depending on the extent to which pre-established operating company and/or corporate
performance goals have been achieved.

	•	 	For purposes of the Plan, base salary is generally the participant’s annual base salary
rate as of the end of the year, excluding any commission or other incentive pay. For some
special circumstances affecting the amount of base salary used in the Plan, see page 6.
	 
	•	 	A target bonus percentage for each participant is used in calculating the incentive award
and is explained on the next page.
	 
	•	 	The target bonus percentage will be adjusted (upward or downward) based on the extent to
which various performance goals are achieved.

Incentive award payments will be distributed in cash after the year-end audit is complete and the
awards have been approved by the Personnel and Compensation Committee.

 Page 1

 

Calculation of the Annual Incentive Plan Award

Target Bonus Percentage

The Plan establishes an incentive opportunity for each Plan participant, calculated as a percentage
of the participant’s base salary. Each participant will be provided with an initial percentage,
referred to as a “target bonus percentage.”

Generally, the target bonus percentage is the percentage of base salary that can be earned as an
award under the Plan if 100% of the various performance goals are achieved. For 2009, if 100% of
the performance goals are achieved, 100% of the target bonus percentage can be earned.

Generally, if there is a change in a participant’s target bonus percentage during the year, the
newly adjusted target bonus percentage will be used to calculate the individual’s award for the
full year. If an individual becomes a participant in AIP during the year, the individual’s award
for the year will be based on a pro rata calculation.

Performance Goals and the Target Bonus Percentage

For 2009, AIP awards will be based on the extent to which the participant’s company, division or
area of responsibility achieves specified levels of achievement as to:

	•	 	Operating Earnings

	•	 	Operating Cash Flow

	•	 	Manufacturing Improvements

	•	 	Safety and Environmental Compliance

	•	 	Customer Responsiveness

For operating company presidents, 65% of the goals’ overall weight will be based on the performance
of the president’s operating company, and 35% of the goals’ overall weight will be based on
corporate-wide performance.

For executive officers and certain other senior employees, performance will be measured completely
on a corporate-wide basis.

 Page 2

 

At the end of the year, the Company will measure actual performance against each of the
pre-established objectives.

The achievements attributable to each performance goal as noted above, then will be added together,
and that sum will be multiplied by: (1) the individual’s target bonus percentage, times (2) the
individual’s annual base salary, to produce the amount, if any, of the incentive award for 2009.

Note that potential adjustments are described on page 6.

2009 Performance Goals

	 	 	 	 	 
	The performance goals for 2009 generally consist of:
	 	 	 	 
	 
	•    Operating Earnings
	 	 	40	%
	•    Operating Cash Flow
	 	 	30	%
	•    Manufacturing Improvements
	 	 	10	%
	•    Safety and Environmental Compliance
	 	 	10	%
	•    Customer Responsiveness
	 	 	10	%

Targeted achievements as to each performance goal above have been established for each operating
company and for corporate participants. Together the above goals comprise 100% of the target bonus
percentage.

No annual incentive will be paid if the achievement of Operating Earnings is less than the
established applicable minimum of Operating Earnings, notwithstanding the achievements as to the
other applicable performance goals for 2009.

The AIP program allows the Personnel and Compensation Committee of the Board of Directors to
exercise negative discretion to reduce payments if actual performance does not exceed performance
targets.

A prerequisite to any AIP award is compliance with Allegheny Technologies’ Corporate Guidelines for
Business Conduct and Ethics.

 Page 3

 

How the AIP Incentive Award is Calculated When All Goals are 100% Achieved

For the Year 2009, if 100% of the performance goals are achieved, then 100% of the target bonus
percentage will be credited to the participant:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Goal %	 	Goal %	 	Earned % of
	Goals	 	Target	 	Achieved	 	Target *
	Operating Earnings
	 	 	40	%	 	 	100	%	 	 	40	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Operating Cash Flow
	 	 	30	%	 	 	100	%	 	 	30	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Manufacturing Improvements
	 	 	10	%	 	 	100	%	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Safety and Environmental
Compliance
	 	 	10	%	 	 	100	%	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Customer Responsiveness
	 	 	10	%	 	 	100	%	 	 	10	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Total
	 	 	100	%	 	 	 	 	 	 	100	%

 

			
	*	 	Earned % of Target = Goal % of Target X Goal Achieved %

In this example, assume that the participant’s target bonus percentage is 15%.

The target bonus percentage of 15% is then multiplied by 100% to produce a bonus award equal to 15%
of base salary:

	 	 	 	 	 
	Earned Percentage of Target
	 	 	100	%
	 
	 	 	 	 
	X Target Bonus Percent
	 	 	15	%
	 
	 	 	 	 
	 
	 	 	 	 
	Equals Percentage of
Salary for Incentive Award
	 	 	15	%

The sections below discuss the impact of achieving more or less than 100% of various goals, and
they also discuss the impact of other potential adjustments.

 Page 4

 

How the AIP Incentive Award is Calculated for Other Achievement Levels

The percentage of a goal achieved will determine the earned percentage of target for that
particular goal. The earned percentage of target will be extrapolated for achievement between the
established minimum level and the established target level for a particular goal. Similarly, the
earned percentage of target will be extrapolated for achievement between the established target
level and the established maximum level for a particular goal.

Maximums and Minimums

	•	 	Generally, the maximum percentage calculated as an earned percentage of target for any goal
is 200%, and the overall maximum incentive award that a participant can earn under the
weighting formula is 200% of the participant’s target bonus percentage.

	•	 	Where the established minimum of a performance goal is achieved, only 50% of that goal’s
share will be allocated to the participant’s target bonus percentage.

	•	 	Where less than the established minimum of a performance goal is achieved, no amount of
that goal will be allocated to the participant’s target bonus percentage.

No annual incentive will be paid if the achievement of Operating Earnings is less than the
established applicable minimum of Operating Earnings, notwithstanding the achievements as to the
other applicable performance goals for 2009.

 Page 5

 

Additional Guidelines for the Annual Incentive Plan

Discretionary Adjustments

The Plan allows for discretionary adjustments of up to +20% or –20% of an individual’s calculated
award. However, generally, the sum of discretionary adjustments for all eligible participants
cannot exceed +5% of the aggregate calculated awards.

Some Special Circumstances

The above formulas generally determine the amount of the incentive award for the year. Other
factors that may affect the actual award follow:

	•	 	If a participant leaves the Company due to retirement, death, or disability, an award will
be calculated based on the actual base salary earned during the year in which the manager
left—so long as the participant worked at least six months of that year.

	•	 	If a participant leaves the Company before the end of the plan year for any other reason,
the manager will not receive a bonus award for that year.

	•	 	If a participant voluntarily leaves the Company after the end of the year but before the
award is paid, the participant would receive any bonus due unless the employment is terminated
for cause. If employment is terminated for cause, the participant would not be entitled to
receive an award under the Plan.

	•	 	Participant’s who are hired mid-year may earn a pro-rated award for that year, based on the
salary earned during that year. However, managers with less than two months service in a plan
year (i.e. hired after October 31) would not be eligible for an award for that year.

	•	 	A prerequisite to any AIP award is compliance with Allegheny Technologies’ Corporate
Guidelines for Business Conduct and Ethics.

Making Payments

All incentive award payments will be paid in cash, less applicable withholding taxes, after the
year-end audit is complete and payment has been considered and approved by the Personnel and
Compensation Committee.

 Page 6

 

Administration Details

This summary relates to the Annual Incentive Plan (AIP) of Allegheny Technologies Incorporated and
its subsidiaries. The Plan is administered by the Personnel and Compensation Committee, which has
full authority to:

	•	 	Interpret the Plan;

	•	 	Designate eligible participants and categories of eligible participants;

	•	 	Set the terms and conditions of incentive awards; and

	•	 	Establish and modify administrative rules for the Plan.

Plan participants may obtain additional information about the plan and the Committee from:

Jon D. Walton

Executive Vice President,

Human Resources, Chief Legal and Compliance Officer,

General Counsel and Secretary

Allegheny Technologies Incorporated

1000 Six PPG Place

Pittsburgh PA 15222 5479

Phone: 412-394-2836                         Fax: 412-394-2837

The Plan will remain in effect until terminated by the Personnel and Compensation Committee. The
Personnel and Compensation Committee may also amend the Plan at its sole discretion.

The Plan is not subject to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA) and is not “qualified” under Section 401(a) of the Internal Revenue Code.

 Page 7exv10w1

Exhibit 10

AMENDMENT NO. 2

TO

THE OPERATING AGREEMENT

OF IKM JV, LLC

     THIS AMENDMENT NO. 2 (this “Amendment”) to the Operating Agreement of IKM JV, LLC, a
Nevada limited liability company (the “Company”), dated as of April 29, 2009 (the
“Second Amendment Effective Date”), is entered into by and between IKM MGM, LLC, a Nevada
limited liability company (“MGM JV”), and KERZNER ISTITHMAR LAS VEGAS LLC, a Delaware
limited liability company (“KERZNER JV”) (each herein a “Party”, and collectively,
the “Parties”).

RECITALS

     WHEREAS, the Parties, as members, and IKM MGM MANAGEMENT, LLC, a Nevada limited liability
company, and KERZNER CONCEPTS LIMITED, a Bahamian company, as managers, entered into that certain
Operating Agreement of IKM JV, LLC, dated as of September 10, 2007, as amended by that certain
Amendment No. 1 to the Operating Agreement of IKM JV, LLC, dated as of September 30, 2008
(collectively, the “Agreement”), with respect to the subject matters set forth therein;

     WHEREAS, pursuant to Section 6.8 of the Agreement, the Agreement may be amended by a written
agreement signed by each of the Members; and

     WHEREAS, the Parties desire to further amend the Agreement as set forth in this Amendment.

     NOW, THEREFORE, in consideration of the above premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:

AGREEMENT

1. Defined Terms. Each capitalized term used and not defined herein shall have the meaning
assigned to it in the Agreement.

2. Pre-Development Expenses. The Parties acknowledge and agree that, as of the Second
Amendment Effective Date, the Company has incurred Pre-Development Expenses totaling twenty-five
million eight hundred sixty-two thousand dollars ($25,862,000), including aggregate Pre-Development
Expenses incurred but not yet paid by the Company is one million eight hundred and three thousand
dollars ($1,803,000) (“Current Expenses”). Notwithstanding the Parties’ respective obligations to
make contributions pursuant to Section 3.2 of the Agreement, MGM JV shall, simultaneously with the
mutual execution of this Amendment, contribute to the
Company one-half (1/2) of the total Pre-Development Expenses incurred to date, being twelve

1

 

million
nine-hundred thirty-one thousand dollars ($12,931,000) (“MGM JV’s Pre-Development
Contribution”).

3. Distributions. Notwithstanding anything to the contrary in the Agreement, upon the
Company’s receipt of MGM JV’s Pre-Development Contribution, the Managers shall cause the Company to
immediately distribute to Kerzner JV, as a partial return of Kerzner JV’s Capital Contributions to
the Company, the sum of twelve million sixty-nine thousand dollars ($12,069,000) (the “Kerzner JV
Distribution”).

4. Payment of Expenses. After the Company distributes the Kerzner JV Distribution, all
remaining cash on hand shall (i) first, be used to pay the Current Expenses, and (ii) thereafter,
to the extent any funds remain, be distributed to the Parties in equal one-half shares. MGM JV
acknowledges that a substantial portion of the Current Expenses relates to employee severance
obligations incurred by Kerzner JV (but not yet paid) on behalf of the Company. To the extent that
Kerzner JV actually pays such Current Expenses on behalf of the Company from time to time, the
Managers shall cause the Company to immediately reimburse Kerzner JV for the amount so paid.

5. Rights to the Property. Kerzner JV hereby (i) consents to the immediate granting,
creation and/or allowance of Encumbrances upon the Property, and (ii) waives and relinquishes any
and all rights that it may have in and to the Property and the MGM Property Owners. MGM JV shall
have no further obligation under the Agreement to contribute to the Company the Property or any
interest in the MGM Property Owners. Consequently, MGM MIRAGE and its subsidiaries, including
without limitation the MGM Property Owners, shall have the right to sell, transfer and/or encumber
the Property, in whole or in part, at any time and from time to time without the consent and
approval of Kerzner JV.

6. Suspension of Company Business. The Parties acknowledge and agree that all business
operations of the Company are suspended and neither Party shall incur any further expenses for or
on behalf of the Company without the express written consent of the other Party, which consent may
be withheld in the sole and absolute discretion of such other Party. Subject to such consent, the
Parties further acknowledge and agree that notwithstanding the Parties’ respective obligations to
make contributions pursuant to Section 3.2 of the Agreement, the Parties shall fund such costs on
an equal (50/50) basis.

7. Dissolution. Notwithstanding anything to the contrary in the Agreement, including
without limitation in Section 10.1 thereof, either Party shall have the right to dissolve the
Company upon delivery of written notice to the other Party.

8. Effect of Amendment. This Amendment (including the Recitals hereto) constitutes the
complete and exclusive statement of the agreement among the Parties with regard to the subject
matter of this Amendment. Except as modified hereby, the Agreement shall remain in full force and
effect. On and after the Second Amendment Effective Date, each reference in the Agreement to “this
Agreement,” “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the
Agreement in any other agreements, documents or instruments executed

2

 

and delivered pursuant to the Agreement, shall mean and be a reference to the Agreement, as amended
by this Amendment.

9. Governing Law. This Amendment shall be governed by the laws of the State of Nevada,
without regard to conflict of laws principles.

10. Counterparts. This Amendment may be executed in two or more counterparts (including by
facsimile or similar means of electronic communication), each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 2 to the Operating
Agreement of IKM JV, LLC as of the date first above written.

	 	 	 	 	 
	 	IKM MGM, LLC,

a Nevada limited liability company

 	 
	 	/s/ John M. McManus
 	 
	 	Name:  	John M. McManus 	 
	 	Title:  	Assistant Secretary 	 
	 
	 	KERZNER ISTITHMAR LAS VEGAS LLC,

a Delaware limited liability company

 	 
	 	/s/ Richard M. Levine
 	 
	 	Name:  	Richard M. Levine 	 
	 	Title:  	Authorized Signatory 	 
	 

3

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