EXHIBIT 10.8
SUMMARY OF
2005 INCENTIVE COMPENSATION
The Incentive Compensation Program (ICP) is a compensation and reward mechanism
that shares with certain Balchem Corporation personnel, gains realized by the
corporation as a result of successful effort, individually or as a member of the
corporate team, beyond the basic tasks of their job responsibilities. These
achievements are critical to the company's attainment of its corporate goals.
The ICP also assists in communication and professional growth. To derive optimum
benefits from the efforts, the person must be fully acquainted with corporate
goals and the value system under which they have been created. Achievements that
require the individual to exceed minimum, acceptable performance will result in
sharpened job skills, enhanced creative thinking and a greater level of
professional satisfaction.
The ICP is, as its name implies, an incentive for certain employees to meet
successfully specific objectives beneficial to the corporation. A safeguard
requires that before an employee receives any bonus payments, the basic
responsibilities of the job description must have been carried out
satisfactorily. This ensures that normal operations will not be sacrificed, but
maintained at desired levels. In order for any and all participants to be
eligible to receive any portion of the ICP payout, the defined minimum Corporate
NIBIT (Net Income Before Interest and Taxes) objective must be met. Failure of
the Company to reach the NIBIT objective will result in no payout of ICP's for
that year under this program.
BONUSABLE GOALS
The process of establishing bonusable goals requires a well-defined annual
business plan from which most goals can be measured. The annual business plan,
approved by the Board of Directors, evolves from the Corporate Strategic Plan
that can also be the basis for some goals.
o Identification with corporate goals
o Identification of key objectives
o A minimum NIBIT will be established annually which must be achieved in
order for any portion of bonus to be paid.
The Board of Directors reserves the right to approve a bonus payment, even when
the Corporate NIBIT objective is not met, for individuals that achieved
extraordinary performance in any given year.
DETERMINE RELATIVE VALUE OF GOALS
A. The goal must be a stretch, beyond job responsibilities and the person's
overall job performance must be rated at least as "meets expectations"
level.
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B. Placing value on specific goal will be arrived at by:
o To what degree will the objective help Balchem meet its stated goal
for the year?
o What is the relative degree of difficulty required to achieve the
goal, i.e., creativity, involvement or negotiation with others,
problem solving and other indices?
o The intrinsic value of the goal: magnitude of income enhancement or
cost savings?
C. Typical number of ICP goals: Each employee will normally have from 4 to 6
bonusable goals.
BONUSABLE RANGE:
ICP may be implemented in a range of 10-50% of an eligible employee's current
salary.
A 10% of salary bonus target will be established as a minimum for those
employees entering the ICP for the first time.
Lower acceptable level and upper attainable levels are to be established for
each goal wherever possible:
The lower limit is to be the level that would be the equivalent of excellent
effort to achieve the goal in its entirety, but not total achievement.
o Achieving the lower limit results in receiving 70% of the 100% bonus
for that goal.
The upper level is the maximum that can be reasonably expected.
o Attainment of the upper level or more will result in receiving 130% of
the 100% bonus for that goal.
Attainment of a goal between the lower limit and upper level may result in a
bonus in proportion to the deviation from the 100% level for that goal.
In determining the extent of fulfillment, judgment may have to be used when
deciding the appropriate award level when hard accounting numbers are not
available. When there is unclear distinction between levels of fulfillment, the
following questions can be used to help make the final determination:
o Were there advantages/benefits to the company above and beyond that
which the business plan projected?
o Were there extenuating or unanticipated circumstances or events that
either benefited or hindered the accomplishment of results?
ICP Eligible Personnel and levels of compensation are reviewed and approved
annually by the Corporation Compensation Committee of the Board of Directors.
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Weighting Guidelines:
A. Approximately 20-30% of the bonus will be tied to corporate goals.
B. Approximately 40% of the bonus will be based upon how successfully the
division or group contributes to corporate performance; i.e., sales & profits,
new customers, new products, cost reductions, efficiencies, etc.
C. Approximately 30-40% will be based upon individual objectives.
A minimum NIBIT objective will be established annually. This minimum NIBIT
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objective must be achieved in order for any portion of bonus to be paid. The
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Compensation Committee of the Board of Directors will redefine this goal
annually based on prior year's performance and new annual plan.
All participating personnel will receive annual merit performance evaluations
that measure both job performance per the job description and accomplishment
toward ICP goals that are directly linked to corporate plans. Thus, total
compensation for eligible participants will be determined based upon both merit
and ICP program goal achievement.
Employees must receive an overall annual evaluation of at least "Meets
Expectations" to be eligible to participate in or receive any portion of a
bonus.
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