SAFETY-KLEEN
CORPORATE
INCENTIVE PLAN
Fiscal Year: 1999
Rev: August 31st, 1998
TABLE OF CONTENTS
Page No.
I. Overview ......................................................... 1
II. PLAN OBJECTIVES .................................................. 1
III. ATTAINING GOALS .................................................. 2
IV. ELIGIBILITY FOR PLAN PARTICIPATION .............................. 3
V. PLAN STRUCTURE ................................................... 3
A. PERFORMANCE MEASURES AND TARGET BONUSES ...................... 3
1. EPS ................................................... 3
2. Individual Performance ............................... 4
Table 1: Performance Rating Qualitative Categories ... 4
B. PERFORMANCE AND AWARD CRITERIA ............................... 4
1. Target Bonus Levels ................................... 4
2. Units of Measure ...................................... 5
Table 2: Units of Measure and Payout as Percent
of Base Pay by Position ............................... 5
3. Payout Schedule ....................................... 5
Table 3: Payout Schedule as Percentage of Target
Percent for Annual Goals Achieved Against
Committed Targets ...................................... 6
VI. PAYMENT OF AWARDS ................................................ 7
VII. PLAN ADMINISTRATION .............................................. 7
VIII. SUMMARY AND CONCLUSION ........................................... 7
I. OVERVIEW
The Corporate Incentive Plan (MIP) is a short-term cash incentive bonus plan
covering officers, Corporate Vice Presidents, Corporate Directors, key Corporate
managers, and other key Corporate staff. The plan allows selected employees to
share directly in the success of the Company through the payment of annual
incentive awards which are in turn based on the attainment of business unit
goals and individual performance objectives.
This Plan Document provides the Company with a mechanism to communicate its
expectations for Company performance while at the same time allowing the
management team the opportunity to earn a total compensation package that is
competitive for the industry.
II. PLAN OBJECTIVES
The purpose of a bonus compensation plan is to motivate key management
performance and to reward those individuals considered responsible for the
success of the business. Safety-Kleen Corporation has developed the Corporate
Incentive Plan for key managerial personnel which will provide a significant
economic opportunity based on their contribution to the Corporation and on their
own individual performance.
The following must occur for the Company to be successful:
o Waste streams must be kept within the SK structure.
o Inter-company competition must cease.
o Site-by-site parochialism must
be eliminated.
o Business managers must be free to spend more time on finding and
working on business synergies than detailed budges.
To accomplish these objectives, a certain percentage of a key manager's total
compensation package will be at risk. Therefore, plan participants must direct
their efforts and set goals which will maximize the success of the Company
through the individual success of their own department.
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III. ATTAINING GOALS
The success of the Corporate Incentive Plan will be measured by attaining preset
goals, and by showing a significant level of commitment and personal
contribution to the Company throughout the year. This can only be accomplished
by the combined support of the Company's management team.
Each participant should understand that their earnings opportunities are
dependent upon the attainment of these goals. To enhance this understanding,
each participant will be given an explanation of the Plan along with their
individual goals and bonus potentials. This will allow each participant to
clearly understand that effort that increases results will produce higher
rewards.
In implementing and maintaining this Plan, the following factors are of critical
importance:
o Measures of achievement will be quantitative and qualitative in nature.
The quantitative measures of achievement will be financial goals that
are tied to the Company's annual financial budget. The use of such
goals will help generate and reinforce a commitment to the overall
budgeting process. The qualitative measure of achievement will be based
on the participant's level of commitment to the Company and their
overall contribution to the Company's success.
o Incentive awards will be based upon the achievement of aggressive
objectives. These aggressive objectives will help assure that the Plan
pays for itself out of incremental additional profits; and that
stockholders receive an appropriate return of investment in the
incentive payments.
o The threshold of incentive awards will only be at a "competent" level
of performance but appreciable more award will result from extra
efforts and results achieved due to higher levels of performance.
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IV. ELIGIBILITY FOR PLAN PARTICIPATION
For fiscal year 1999, participation in the Corporate Incentive Plan will be
limited to:
Executive officers Key Corporate Managers
Corporate Vice Presidents Key Corporate Staff
Corporate Directors
A comprehensive list of participants is maintained by Corporate Human Resources.
These positions are targeted because of their direct accountability for the
operating results of a major business unit(s) and their accountability for
structuring a function under them.
To receive an annual incentive award, participants must occupy a bonus eligible
position in the Management Incentive Plan as of April 1, 1999, and be employed
by Safety-Kleen Corporation at the time incentive awards are paid. Participants
who have not occupied an incentive eligible position for the full fiscal year
will be prorated based on the number of full months of participation. Pre merger
Safety-Kleen employees who were part of the Safety-Kleen MIP FY1998 Plan and who
are eligible for the FY1999 Plan will become eligible for the FY1999 Plan from
1/1/99. These eligibility criteria apply to current employees promoted to
eligible positions, new hires hired into eligible positions, or employees in
positions subsequently selected to participate in the Plan.
V. PLAN STRUCTURE
A. PERFORMANCE MEASURES AND TARGET BONUSES
Participants will be judged against achieving a combination of various criteria
which will be set at the beginning of the year. These are Earnings Per Share
(EPS) (quantitative), and individual performance ("qualitative"). Each
participant should read this document carefully to attain a proper understanding
of the Plan and its dynamics.
1. EPS
Earnings per share is defined as fully diluted earnings per share as disclosed
on the income statement after adding back the after tax impact of the non-sales
incentive expense.
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2. Individual Performance
Individual performance will be judged against personal objectives set at the
beginning of the year. While the appropriate performance rating in this category
of payout is subjective, the definitions listed below and the rating schedule in
Table 1 have been established to facilitate the process of setting and
evaluating individual performance per the Qualitative Goals worksheet.
Definition:
Fully Met Objectives: Completed all tasks with distinguished results.
Met Most Objectives: Marked improvement and met nearly all objectives.
Met Over Half Objectives: Displayed good effort, achieving over half of all
objectives.
Met Under Half Objectives: Met fewer than half of all objectives set.
Unacceptable: Little attempt made, disappointing results.
TABLE 1
Performance Rating
------------------
Qualitative Categories
----------------------
Step Achievement Payout
5. Fully Met Objectives 100% of points assigned
4. Met Most Objectives 80% of points assigned
3. Met Over Half Objectives 40% of points assigned
2. Met Under Half Objectives 15% of points assigned
1. Unacceptable 0% of points assigned
B. Performance and Award Criteria
1. Target Bonus Levels
The target bonus payout is the monetary award that will be paid if all
quantitative and qualitative goals are achieved exactly as set. This will be
calculated as a percentage of base pay called the target bonus percent. For
example, a participant whose base pay is $50,000 and whose target bonus percent
is 30% will receive a $15,000 award if all the performance goals are met
exactly. This award can fluctuate if separate goals are missed or exceeded. The
base pay level used to calculate bonus awards will be the base annualized salary
paid as of August 31, 1999. Target bonus percents can be found in Table 2.
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2. Units of Measure
The performance criteria for each plan participant should focus upon the
appropriate areas in which the position has opportunity to impact. The
performance criteria is based upon a combination of quantitative and qualitative
goals. It should be noted that any unit of measure is not permanently fixed and
could vary from year to year.
The units of measure used and their associated contribution to the overall
payout are presented in Table 2:
TABLE 2
UNIT OF MEASURE AND PAYOUT AS
-----------------------------
PERCENT OF BASE PAY BY POSITION
-------------------------------
---------------------------------------------
Target Co
Position Payout EPS Qual.
=============================================
CEO 60% 70% 30%
COO 50% 70% 30%
Senior VP 40% 70% 30%
Vice President 35% 70% 30%
Director 25% 70% 30%
Director 20% 70% 30%
Key Manager 15% 70% 30%
Key Staff 10% 70% 30%
---------------------------------------------
3. Payout Schedule
The achievement level attained against each goal will determine how much
incentive award arising from each goal will be paid. The schedule in Table 3
presents the payout percentages for various achievement levels of the
quantitative measures. The qualitative column represents the total award
available depending upon the level of achievement obtained against personal
objectives. In order to be paid an award for any measure, the threshold level
must first be met.
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TABLE 3
Payout Schedule as Percentage of Target Percent
for Annual Goals Achieved Against Committed Targets
Potential
EPS Achieved Quantitative Qualitative
Incentive Against Committed Payout Payout
Step Targets Levels Levels
31 110% + 135.0% 100%
30 109% 131.5% 100%
29 108% 128.0% 100%
28 107% 124.5% 100%
27 106% 121.0% 100%
26 105% 117.5% 100%
25 104% 114.0% 100%
24 103% 110.5% 100%
23 102% 107.0% 100%
22 101% 103.5% 100%
21 100% 100.0% 100%
20 99% 99.0% 100%
19 98% 98.0% 100%
18 97% 97.0% 100%
17 96% 96.0% 100%
16 95% 95.0% 100%
15 94% 94.0% 100%
14 93% 93.0% 100%
13 92% 92.0% 100%
12 91% 91.0% 100%
11 90%* 90.0% 100%
10 89% 0.0% 100%
9 88% 0.0% 100%
8 87% 0.0% 100%
7 86% 0.0% 100%
6 85% 0.0% 100%
5 84% 0.0% 100%
4 83% 0.0% 100%
3 82% 0.0% 100%
2 81% 0.0% 100%
1 80% 0.0% 100%
0 <80% 0.0% 0%
* Equivalent of 95% EBITDA achievement at operations level
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An example of a bonus calculation follows:
Director
Annual Salary: $75,000
Target Bonus Percent: 20%
- --------------------------------------------------------------------------------------------------
Unit Target Annual Goal
Goal Achievement Payout of Percent Salary Payout
Measure
==================================================================================================
Corp. EPS ................... 102% 107% x 70% x 20% x $75,000 = $10,500
Qualitative Goals ........... 80% 80% x 30% x 20% x $75,000 = $ 4,500
======================================================================
Total: $15,000
- --------------------------------------------------------------------------------------------------
VI. PAYMENT OF AWARDS
Each incentive award will be reviewed and approved by the appropriate Senior
Vice President, the Chief Operating Officer, the Vice President -
Administration, and the Chief Executive Officer. Payments will be made no later
than November 15, 1999. PARTICIPANTS WHO VOLUNTARILY TERMINATE THEIR EMPLOYMENT
WITH SAFETY-KLEEN CORP. PRIOR TO AWARDS BEING ISSUED WILL FORFEIT THEIR RIGHT TO
RECEIVE ANY AWARD.
Any adjustment of bonus amounts or any consideration of special circumstances
must be approved by the Vice President - Administration, and the Chief Executive
Officer.
VII. PLAN ADMINISTRATION
The Chief Executive Officer of Safety-Kleen Corporation is the sole interpreter
and arbitrator of these provisions and has the right to amend, withdraw or
revoke the Plan or any of its provisions at any time.
VIII. SUMMARY AND CONCLUSION
The conceptual framework and guidelines covered in this Plan represent those
elements that necessarily must be examined to assure the value to the Company of
the short-term cash incentive compensation plan. Several steps must be taken to
ensure that those objectives which the plan is designed to meet can be
accomplished. These steps are described as follows:
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COMMUNICATION OF THE PLAN
It is important that the Plan be effectively communicated to all
participants. This would include individual discussions with each
participant. These discussions should include a review of the measures and
standards that should be developed to assess personal and/or business unit
performance, as well as a clarification of the details of the plan and
individual opportunities.
DEVELOPMENT OF PERFORMANCE MEASURES
Business unit(s) and any individual goals should be established and
communicated at the beginning of the fiscal year. Accepted standards are
those that are reasonable and realistic reflections of current opportunity,
as well as striving for improvement. Measurements of performance should use
relevant quantitative criteria.
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