EXHIBIT 10.14
1997 FORM 10-K
B.O.D. APPROVED: February 5, 1997
BY: /s/W. R. Hildebrand for BOD
COMPENSATION COMMITTEE
BUCYRUS INTERNATIONAL, INC.
ANNUAL MANAGEMENT INCENTIVE PLAN SUMMARY
FISCAL 1997
I. OBJECTIVES:
The objectives of the Annual Incentive Plan (the "Plan") are to:
1) attract, retain and motivate senior executives and
other key management personnel of Bucyrus
International, Inc. (the "Company");
2) provide direct incentives for participants in the
planning process to achieve the Company's strategic
and financial goals, and thereby enhance shareholder
value;
3) emphasize "Pay-For-Performance" by having a meaningful
portion of participants' total compensation at risk;
4) inspire participants to pursue innovatively and
aggressively individual, team, Subsidiary,
Departmental and Company goals, and
5) target all Company management and key professional
employees (domestic and international, regardless of
position to be eligible to share in a portion of the
Management Incentive Program but not preclude the
possibility of rewarding all salaried personnel as
total Company results improve.
II. ADMINISTRATION:
The Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors.
The Committee may issue such rules and guidelines as it deems
necessary for administration of the Plan. All actions of the
Committee will be subject to the approval of the Board of
Directors.
III. ELIGIBILITY:
The following employees are potentially eligible to participate in
the Plan;
o Employees reporting directly to a Subsidiary or
Division General Manager or equivalent.
o All Corporate Managers/Supervisors or staff personnel
who are participants in the Business Plan Process and
have completed Standards of Performance (SOP's) -
Form - C.
o All salaried employees, exempt or non-exempt.
IV. PARTICIPATION:
As part of the Business Plan and Budgeting Process, the Corporate
Operating Committee (C.O.C.) will select and submit for approval,
those who will participate in the Business Plan Process. Final
approval will be by the Chief Executive Officer (C.E.O.)
V. TARGET INCENTIVE AWARDS:
As part of the Business Plan, the C.E.O. will establish for each
individual a "Target Incentive Award" by determining a multiplier
to be used in conjunction with the individual's base salary. The
multipliers (and therefore the "Target Incentive Award") will vary
according to the nature and extent of the participant's ability to
affect the attainment of the Company's strategy, goals and
objectives. For non-participants in the Business Plan Process (as
defined), a bonus pool based upon a percentage of base salaries
will be established for various levels of performance and
categories of personnel.
VI. PERFORMANCE OBJECTIVES:
As part of the Business Plan Process, "Performance Objectives"
will be established by the Committee for the following areas:
o Overall Corporate performance.
o Subsidiary and/or individual performance objectives.
Coincident with the establishment of Performance Objectives, the
Committee will establish for each participant an apportionment from
these two areas based upon an appraisal of the relative impact of the
participant's position on the Corporate, Subsidiary and/or Individual
Performance Objectives. In addition, the apportionment may be
influenced by the Committee's desire to emphasize particular Company
objectives. These Performance Objectives will be subject to final
approval of both the C.E.O. and B.O.D.
VI. PERFORMANCE OBJECTIVES:
FISCAL 1997 PERFORMANCE OBJECTIVES:
For Fiscal Year 1997, the C.O.C. has established and the Board of
Directors has approved the following Performance Objectives.
Corporate:
o Corporate-wide earnings before depreciation,
amortization, interest and taxes; (EBITDA) and,
o Operating Cash Flow before Cap Expenditure (EBITDA +/-
changes in Working Capital, before CapEx).
Subsidiary:
o Subsidiary E.B.I.T. less Corporate charges and
allocations plus subsidiary contribution to South
Milwaukee plant margins.
o Subsidiary Operating Cash Flow (before Corporate
allocations and before interest and taxes before
CapEx).
Individual:
o Standard of Performance Objectives (S.O.P) as approved
by the C.E.O. and documented in the Form C's.
For Fiscal 1997, the Plan Weighting Table below represents the minimum
percentage allocations for O.C.F. performance for participants in the
Business Plan Process.
CORPORATE INDIVIDUAL
PARTICIPANTS PLAN (% OR LESS)
President
& C.E.O. 90% 10%
Corporate
Vice Presidents/Staff Directors 60% 40%
Other Managers & Directors 40% 60%
Subsidiary Managers & Staff 40% 60%
VII. TARGET AWARD MULTIPLIER:
The Target Award for all Plan Participants will be increased or
decreased based upon EBITDA and OPERATING CASH FLOW performance as
compared to the 1997 BUSINESS PLAN and a resultant multiplier. Seventy-
five(75%) of the multiplier will be impacted by EBITDA and twenty-
five(25%) of the multiplier will be impacted by OPERATING CASH FLOW.
The TARGET AWARD MULTIPLIER will be calculated as follows:
DEGREE OF
ACHIEVEMENT OF AWARD
PERFORMANCE PERFORMANCE PAYMENT
OBJECTIVE MEASUREMENT MULTIPLIER
130% Maximum 2.00
100% Target (goal) 1.00
80% Threshold .33
< 80% Unacceptable 0
_________
IMPORTANT
_________
Below 80% achievement level for EBITDA, the Compensation Committee has
the discretion to not pay any individual performance incentives under
either the Corporate or Subsidiary Plan, if in its judgement such
payment would have an adverse impact on the Corporation.
NOTE: For levels of achievement which are below Maximum and above
Threshold and which fall between the levels listed above,
the multiplier will be prorated accordingly.
Example: A level of achievement of 115% of the Corporate EBITDA
objective and 95% of the OPERATING CASH FLOW objective would
yield a multiplier of 1.33 (1.0 +15/30(0.75) - 5/20(0.17)).
A level of achievement of 105% of the EBITDA objective and
110% of the OPERATING CASH FLOW objective would yield a
multiplier of 1.21 (1.0 +5/30(0.75) +10/30(0.25)).
VIII. SUBSIDIARY MULTIPLIER:
A similar multiplier will be calculated for all subsidiaries to be
applied to the individual portion of the target award but
utilizing the following factors:
DEGREE OF PERFORMANCE LIMITS MULTIPLIER
150% Maximum 2.00
100% Target 1.00
90% Threshold 0.33
< 90% Unacceptable 0
The measure of performance will be actual Subsidiary Operating
Income plus South Milwaukee parts margin contribution from the
Subsidiary with an adjustment for non-planned and non-controllable
Corporate charges for corporate purposes all in comparison to the
1997 BUSINESS PLAN. The C.E.O. is authorized to make adjustments
to this multiplier including to the zero level base upon
individual performance considerations and in consideration of
OPERATING CASH FLOW considerations.
This multiplier will be applied to the individual portion of the
TARGET AWARD(60% for 1997)
IX. INDIVIDUAL MULTIPLIER:
Multipliers to be applied to the Individual Performance Goals
(FORM A) will be determined on a subjective basis by the employees
immediate Manager and approved by the C.E.O. Individual
Multipliers will generally vary from 80% to 120% but could be more
at the discretion of the immediate Manager & C.E.O.
X. PAYMENT OF AWARDS EARNED:
Payment of each participant s award will be made in cash as soon
as possible following the determination of the amount of the award
earned (but no later than March 15, 1998), less any amounts
required to be withheld for taxes. The Compensation Committee has
the discretion to authorize quarterly payouts (in arrears) of
bonuses earned.
XI. TERMINATION OF EMPLOYMENT:
If a participant ceases to be employed by the Company before
payment of his/her award with respect to a fiscal year by reason
of death, disability or retirement, his/her award will be reduced
pro-rata for the number of weeks before the end of the fiscal
year, if any, in which the participant's employment terminates.
If the participant's employment with the Company ceases for any
other reason prior to payment of the award, no award will be paid.
Also, an employee must be employed not less than six months as of
12/31/97 to be eligible to participate on a pro-rata basis.
XII. MISCELLANEOUS:
All Target Award Multipliers and Personal Objectives are based
upon the financial objectives as the Company is structured on
January 1. The Company reserves the right to change these
financial objectives should any divestitures or acquisitions occur
during the year.
The Plan will be unfunded, and all awards will be paid from the
general assets of the Company.
By adopting this Plan, the Company is not precluded from adopting
other forms of incentive compensation.
The establishment of the Plan or participation by an employee in
the Plan will not entitle an employee to continue in the employ of
the Company or affect the Company's right to terminate at will the
employment of an employee.
Amounts payable under the Plan are not subject to alienation, in
any manner whatsoever, by participants.
This plan does not supersede any contractual obligations
previously made between the Company and any of its key employees.
A participant's performance must be satisfactory, regardless of
Company performance, before he or she may be granted an incentive
award.
XIII. AMENDMENT:
The Compensation Committee may amend or terminate the Plan at any
time. No amendment or termination will affect the right of a
participant to payment of amounts which are determined prior to
such amendment or termination.
XIV. EFFECTIVE DATE:
The Plan will be effective as of January 1, 1997, and will
continue in effect until terminated by the Compensation Committee
of the Board of Directors.
XV. OTHER AWARDS:
The Plan includes a formalized program to reward outstanding
achievements and contributions to the success of the Company by
individual employees who are not eligible participants of the
Management Incentive Compensation Plan.
All non-union exempt and non-exempt employees are eligible to be
candidates for these special awards.
At the conclusion of each fiscal year, a General Manager,
Subsidiary/Division Manager or Corporate Supervisor/Manager can
recommend an employee for special recognition to the Compensation
Committee. Awards of one to four weeks salary can be granted
depending on the Committee's evaluation. This program is designed
to reward special performance or efforts for 1%-2% of the eligible
workforce outside of the Management Incentive Compensation Plan.
The Plan also includes the possibility of other awards to all
salaried employees. In all cases the OTHER AWARDS category will
be an allocation from the award pool. The Corporate Award Pool
will be calculated utilizing the 1997 Business Plan Incentive
award budget and the multiplier as calculated in paragraph VII.
XVI. AWARD CALCULATION:
The following is the manner in which incentive awards will be
calculated.
STEP 1 -- Employee's 1997 basic salary.
STEP 2 -- Determine the individual's assigned Target Award
Incentive multiplier (refer to paragraph V).
STEP 3 -- Multiply (resultants of Step 1 and Step 2).
STEP 4 -- Determine the TARGET AWARD MULTIPLIER (Refer to
Paragraph VII).
STEP 5 -- Multiply (resultants of Step 3 and Step 4). This
is the individual's Target Award for 1997.
STEP 6 -- Multiply the Target Award(Step 5) by the
appropriate factor from the 1997 Performance
objectives Table(Paragraph VI). This is the
portion of the award due to total Corporate
performance.
STEP 7 -- Multiply the Target Award by the Subsidiary
and/or Individual plan factor also from the
table in Paragraph VI to determine that portion
of the award measured on personal or subsidiary
performance factors.
STEP 8 -- Multiply the individual performance amount by
the Subsidiary Multiplier (Paragraph VIII) or
the Individual Multiplier (Paragraph IX). This
determines that portion of the award based upon
individual performance.
STEP 9 -- Determine the final award by adding the results
from Step 6 and Step 8. This amount may be
adjusted by Management with the authority of the
C.E.O. with justification due to such things as
non controllable events, absenteeism for
extended periods, reassignments, portion of the
year in eligible positions, to force the total
incentive cost to allocate within approved
amounts, or any other reason deemed appropriate.
AWARD CALCULATION EXAMPLE:
J. Smith has a salary of $50,000. He/she has been assigned a
Target Incentive Award multiplier of 10% by the Committee.
J. Smith's Target Incentive is to be calculated based upon 40% due
to Corporate Results and 60% due to individual results. At the
end of the year, Company results were at Maximum or 130% of target
for both EBITDA and OPERATING CASH FLOW.
ON-TARGET INCENTIVE AWARD
Individual's Salary X Individual's Personal Multiplier = Incentive
if all areas "on-target".
$50,000 X 0.10 = $5,000 (NOTE: This is used as the base in all
incentive calculations.)
INDIVIDUAL AWARD PORTION
$5,000 X 2.0 (award payment multiplier) = $10,000
$10,000 X 0.4(Corporate portion) or $4,000 plus $10,000 x
0.6(Individual portion) or $6,000 x 1.0(Individual Multiplier as
on target) or $6,000.
TOTAL INCENTIVE AWARD $10,000
GRAPH - DESCRIPTION:
Graph showing relationship between INCENTIVE BONUS POOL ($MM) (shown on X-axis
with range of values $0 to $3.2MM) and E.B.I.T.D.A. ($MM) (shown on Y-axis
with range of values $19.1MM to $31.1MM).
Three plotted points are as follows: Point A -- Incentive Bonus Pool of
$0.528MM corresponds to $19.1MM E.B.I.T.D.A., Point B -- Incentive Bonus Pool
of $1.6MM corresponds to $23.9MM BUDGET E.B.I.T.D.A.; Point C -- Incentive
Bonus Pool of $3.2MM corresponds to $31.1MM E.B.I.T.D.A. Straight lines drawn
from Point A to Point B, and from Point B to Point C.
Narrative on table is as follows:
"FISCAL 1997
PRELIMINARY MANAGEMENT INCENTIVE PLAN
1997 WEIGHT = 75%
GROSS PLAN OF $25.5MM E.B.I.T.D.A. ACCRUES $1.6MM OF INCENTIVE FOR $23.9MM
E.B.I.T.D.A. NET
FORM - C PARTICIPANTS PAID ON BASE SALARY ONLY"