EXHIBIT 10.7
JPE, INC.
2002 INCENTIVE COMPENSATION PLAN FOR KEY EMPLOYEES
1. PURPOSE
The purpose of the JPE, Inc. 2002 Incentive Compensation Plan for Key
Employees (the "Plan") is to provide incentive compensation award
opportunities for 2002 to certain eligible employees of JPE, Inc. or an
affiliate thereof (collectively, the "Company"). Such award opportunities
shall be based on the achievement of pre-established, specific goals (as
defined below) relating to Company- and (where applicable) plant-specific
"EBITDA" (as defined in Section 3(a)(i) below), and shall be awarded in
the discretion of JPE, Inc.
2. ELIGIBLE EMPLOYEES
A. ELIGIBILITY TO PARTICIPATE
The Plan shall only apply to those employees of the Company who are
designated as participants in writing by the "Board Committee" (as
defined in Section 9(a) below) ("Participants") and who:
i. Are employed by the Company on a regular full-time salaried
basis as of December 31, 2002, including any such employee who
is absent from work due to an authorized paid or unpaid leave of
absence; and
ii. Are still employed by the Company on a regular full-time
salaried basis as of the date in 2003 on which the incentive
compensation awards under the Plan are paid out, including any
such employee who is absent from work due to an authorized paid
or unpaid leave of absence.
B. EMPLOYEES HIRED AFTER JANUARY 1, 2002
A Participant who is hired after January 1, 2002 who satisfies both
of the eligibility requirements set forth in subsection (a) above
shall be eligible to receive an incentive compensation award for 2002
under the Plan. Any such award shall, however, be prorated to reflect
the number of full weeks in 2002 actually worked by such individual
as a regular full-time salaried employee of the Company through
December 31, 2002, as a fraction of 52 weeks.
C. DEATH OR DISABILITY
A Participant who is employed by the Company as a regular full-time
salaried employee during any part of 2002, but whose employment with
the Company terminates in 2002 or 2003 due to death or "Disability"
(as defined for purposes of the Company's group health plan) prior to
the date in 2003 on which the incentive compensation awards under the
Plan are paid out shall be eligible to receive an incentive
compensation award under the Plan. Any such award shall be prorated
to reflect the number of full weeks in 2002 actually worked by such
individual as a regular full-time salaried employee of the Company
through
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December 31, 2002, as a fraction of 52 weeks. Payments of an
incentive compensation award under this subsection (c) shall be
payable to a Participant's estate, in the case of death.
D. OTHER TERMINATIONS
An otherwise eligible Participant whose employment with the Company
terminates for any reason other than death or Disability prior to the
2003 payment date for incentive compensation awards under the Plan
shall not receive any incentive compensation award payout under the
Plan.
E. LEAVES OF ABSENCE
A Participant who is employed by the Company as a regular full-time
salaried employee during any part of 2002, but whose employment with
the Company is interrupted in 2002 due to an authorized paid or
unpaid leave of absence shall be eligible to receive an incentive
compensation award under the Plan. Any such award shall be prorated
to reflect the number of full weeks in 2002 actually worked by such
individual as a regular full-time salaried employee of the Company
through December 31, 2002, as a fraction of 52 weeks.
3. PERFORMANCE GOALS
A. COMPANY PERFORMANCE GOALS
i. For 2002, the "Company Target EBITDA" shall be $5,381,000 of
Company Adjusted EBITDA. "Company Adjusted EBITDA" is the
Company's audited earnings before interest, taxes, depreciation
and amortization ("EBITDA") for 2002 determined in accordance
with generally accepted accounting principles ("GAAP"), but
excluding any accrual for incentive compensation awards to be
paid for 2002 under this Plan.
ii. The "Company Threshold EBITDA" shall be $4,304,800, 80% of the
Company Target EBITDA.
B. PLANT PERFORMANCE GOALS
i. For 2002, the "Plant Target EBITDA" shall be $4,239,000 (for the
East Tawas Plant), $681,000 (for the Beavercreek Plant), and
$5,236,000 (for the Dayton Parts Plant) of applicable Plant
Adjusted EBITDA. "Plant Adjusted EBITDA" is, for each respective
plant, the plant's audited EBITDA for 2002 determined in
accordance with GAAP, but excluding any accrual for incentive
compensation awards to be paid for 2002 under this Plan.
ii. The "Plant Threshold EBITDA" shall be $3,391,200 (for the East
Tawas Plant), $544,800 (for the Beavercreek Plant), and
$4,188,800 (for the Dayton Parts Plant), 80% of the respective
Plant Target EBITDA.
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4. INCENTIVE COMPENSATION
For 2002, each Participant may earn incentive compensation, expressed as a
percentage of the Participant's base salary, if Company (and/or Plant, if
applicable) Adjusted EBITDA equals or exceeds Company (and/or Plant, if
applicable) Threshold EBITDA. The incentive compensation that may be paid
to a Participant if Company (and/or Plant, if applicable) Adjusted EBITDA
equals Company (and/or Plant, if applicable) Target EBITDA ("Target
Incentive Compensation") shall be specified by the Board Committee in
writing. Such Target Incentive Compensation shall be allocated as follows:
A. For Participants who are not employed at the East Tawas, Beavercreek,
or Dayton Parts Plant, 100% of the incentive compensation that may be
earned shall be based on the Company Adjusted EBITDA as a percentage
of the Company Target EBITDA (the "Corporate Performance Portion").
B. For Participants who are employed at the East Tawas, Beavercreek, or
Dayton Parts Plant:
i. Forty percent of the incentive compensation that may be earned
shall be based on the Company Adjusted EBITDA as a percentage of
the Company Target EBITDA (the "Corporate Performance Portion");
and
ii. Sixty percent of the incentive compensation that may be earned
shall be based on the applicable Plant Adjusted EBITDA as a
percentage of the applicable Plant Target EBITDA (the "Plant
Performance Portion").
5. CALCULATION OF CORPORATE PERFORMANCE PORTION OF TARGET INCENTIVE
COMPENSATION
A. COMPANY ADJUSTED EBITDA EQUAL TO COMPANY TARGET EBITDA
If Company Adjusted EBITDA equals Company Target EBITDA for 2002,
100% of the Corporate Performance Portion of the Participant's
Target Incentive Compensation shall be earned.
B. COMPANY ADJUSTED EBITDA BELOW COMPANY TARGET EBITDA
i. If Company Adjusted EBITDA is less than Company Threshold EBITDA
for 2002, none of the Corporate Performance Portion of the
Participant's Target Incentive Compensation shall be earned.
ii. If Company Adjusted EBITDA is equal to or greater than Company
Threshold EBITDA, but less than 90% of Company Target EBITDA for
2002, 10% of the Corporate Performance Portion of the
Participant's Target Incentive Compensation shall be earned.
For Example:
Company Target EBITDA = $5,381,000
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Company Adjusted EBITDA = $4,573,850 (85% of Company
Target EBITDA)
Participant's Base Salary = $100,000
Target Incentive Compensation = 25%
Because 85% of Company Target EBITDA was reached in 2002, the
Participant, if he or she is not employed at the East Tawas,
Beavercreek or Dayton Parts Plant, would receive $2,500, 10%
of his or her Target Incentive Compensation (10% x 25% x
$100,000 = $2,500). The Participant, if he or she is employed
at one of the aforementioned plants, would receive as his or
her Corporate Performance Portion $1,000, 10% of 40% of his or
her Target Incentive Compensation (10% x 40% x 25% x $100,000
= $1,000).
iii. If Company Adjusted EBITDA is equal to or greater than 90% of
Company Target EBITDA, but less than Company Target EBITDA for
2002, 20% of the Corporate Performance Portion of the
Participant's Target Incentive Compensation shall be earned.
For Example:
Company Target EBITDA = $5,381,000
Company Adjusted EBITDA = $5,111,950 (95% of Company
Target EBITDA)
Participant's Base Salary = $100,000
Target Incentive Compensation = 25%
Because 95% of the Company Target EBITDA was reached in 2002,
the Participant, if he or she is not employed at the East
Tawas, Beavercreek or Dayton Parts Plant, would receive
$5,000, 20% of his or her Target Incentive Compensation (20% x
25% x $100,000 = $5,000). The Participant, if he or she is
employed at one of the aforementioned plants, would receive
$2,000, 20% of 40% of his or her Target Incentive Compensation
as his or her Corporate Performance Portion (20% x 40% x 25% x
$100,000 = $2,000).
C. COMPANY ADJUSTED EBITDA ABOVE COMPANY TARGET EBITDA
i. If Company Adjusted EBITDA is greater than Company Target EBITDA
for 2002, 100% of the Corporate Performance Portion of the
Participant's Target Incentive Compensation shall be earned plus
an additional 2% for each percentage point that Company Adjusted
EBITDA exceeds Company Target EBITDA, up to 150% of Company
Target EBITDA.
For Example:
Company Target EBITDA = $5,381,000
Company Adjusted EBITDA = $6,457,200 (120% of
Company Target EBITDA)
Participant's Base Salary = $100,000
Target Incentive Compensation = 25%
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Because 120% of Company Target EBITDA was reached in 2002, the
Participant, if he or she is not employed at the East Tawas,
Beavercreek or Dayton Parts Plant, would receive $35,000, 140%
of his or her Target Incentive Compensation (140% x 25% x
$100,000 = $35,000). (120% is 20 percentage points in excess
of 100% of Company Target EBITDA, and so the Participant's
incentive compensation is increased to 140% of his or her
Target Incentive Compensation.) The Participant, if he or she
is employed at one of the aforementioned plants, would receive
$14,000 as his or her Corporate Performance Portion, 140% of
40% of his or her Target Incentive Compensation (140% x 40% x
25% x $100,000 = $14,000).
* * * * *
Company Target EBITDA = $5,381,000
Company Adjusted EBITDA = $8,609,600 (160% of
Company Target EBITDA)
Participant's Base Salary = $100,000
Target Incentive Compensation = 25%
Because 160% of Company Target EBITDA was reached in 2002 but
the excess is capped at 150% for purposes of the Plan, the
Participant, if he or she is not employed at the East Tawas,
Beavercreek or Dayton Parts Plant, would receive $50,000, 200%
of his or her Target Incentive Compensation (200% x 25% x
$100,000 = $50,000). (150% is 50 percentage points in excess
of 100% of Company Target EBITDA, and so the Participant's
incentive compensation is increased to 200% of his or her
Target Incentive Compensation.) The Participant, if he or she
is employed at one of the aforementioned plants, would receive
$20,000 as his or her Corporate Performance Portion, 200% of
40% of his or her Target Incentive Compensation (200% x 40% x
25% x $100,000 = $20,000).
6. CALCULATION OF PLANT PERFORMANCE PORTION OF TARGET INCENTIVE COMPENSATION
a. PLANT ADJUSTED EBITDA EQUAL TO PLANT TARGET EBITDA
If Plant Adjusted EBITDA equals Plant Target EBITDA for 2002, 100% of the
Plant Performance Portion of the Participant's Target Incentive
Compensation shall be earned for that year.
b. PLANT ADJUSTED EBITDA BELOW PLANT TARGET EBITDA
i. If Plant Adjusted EBITDA is less than Plant Threshold EBITDA
for 2002, none of the Plant Performance Portion of the
Participant's Target Incentive Compensation shall be earned.
ii. If Plant Adjusted EBITDA is equal to or greater than Plant
Threshold EBITDA, but less than 90% of Plant Target EBITDA, 10%
of
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the Plant Performance Portion of the Participant's
Target Incentive Compensation shall be earned.
For Example:
East Tawas Plant Target EBITDA = $4,239,000
Actual Adjusted EBITDA = $3,603,150 (85% of
Plant Target EBITDA)
Participant's Base Salary = $100,000
Target Incentive Compensation = 25%
Because 85% of Plant Target EBITDA was reached in 2002, the
Participant would receive as his or her Plant Performance
Portion $1,500, 10% of 60% of his or her Target Incentive
Compensation (10% x 60% x 25% x $100,000 = $1,500).
iii. If Plant Adjusted EBITDA is equal to or greater than 90% of
Plant Target EBITDA, but less than Plant Target EBITDA, 20% of
the Plant Performance Portion of the Participant's Target
Incentive Compensation shall be earned.
c. PLANT ADJUSTED EBITDA ABOVE PLANT TARGET EBITDA
If Plant Adjusted EBITDA is greater than Plant Target EBITDA for
2002, 100% of the Plant Performance Portion of the Participant's
Target Incentive Compensation will be earned plus an additional 2%
for each percentage point that Plant Adjusted EBITDA exceeds Plant
Target EBITDA, up to 150% of Plant Target EBITDA.
7. TIMING OF AWARDS
a. All incentive compensation award determinations under the Plan shall
be made based on Company and (if applicable) Plant Adjusted EBITDA,
as determined by the Board Committee, in its sole discretion.
b. Subject to subsection (c) below, all payments of incentive
compensation awards made under the Plan shall be made by the Company
only after:
i. JPE, Inc. has determined the Company and Plant Adjusted EBITDA
for 2002;
ii. JPE, Inc.'s independent auditors have completed the financial
audit; and
iii. The Board Committee has approved any incentive compensation
award payouts based on such results and any other applicable
determinations it makes (not more than 30 days after the audited
financial results are certified and delivered to the Board
Committee).
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c. DISCRETION BY JPE, INC. TO MAKE INCENTIVE COMPENSATION AWARDS
Notwithstanding any other provision of the Plan to the contrary,
JPE, Inc. (acting through its Board of Directors) has the sole
discretion whether or not to pay an incentive compensation award to
any or all Participants under the Plan. Further, JPE, Inc. (acting
through its Board of Directors) may terminate the Plan at any time,
with or without notice to the Participants and without regard to the
effect any such termination has on any incentive compensation
award(s) under the Plan.
8. SALE OF THE EMPLOYER
a. BUYER'S ASSUMPTION OF OBLIGATION
If the Participant's "Employer" (as defined in subsection (d) below)
undergoes a "Change in Control" (as defined in subsection (c) below)
and the buyer of the Employer assumes the Employer's obligations
under the Plan, then Participants may receive incentive compensation
as calculated in accordance with Sections 5 and/or 6.
b. PRO-RATA INCENTIVE COMPENSATION
Subject to Section 7(c), if the Employer undergoes a Change in
Control and the buyer of the Employer does not assume the Employer's
obligations under the Plan, then each Participant may receive
incentive compensation under the Plan based on the Company (and
Plant, if applicable) Adjusted EBITDA through the last day of the
month before the month that contains the closing date of the Change
in Control as a percentage of the Company (and Plant, if applicable)
Target EBITDA, as budgeted through such last day of the month. Any
such incentive compensation shall be prorated by the number of
calendar days in 2002 prior to the closing date of the Change in
Control, divided by 365.
c. "CHANGE IN CONTROL"
For purposes of this Section, the term "Change in Control" shall
mean:
i. that any person or entity, including a "group" (within the
meaning of Rule 13d-1 under the Securities Exchange Act of 1934,
as amended ("Exchange Act")), but excluding any private equity
fund managed by Questor Management Company, LLC ("Questor"), any
affiliate of any such fund and any group of which any such fund
or affiliate may be a member, becomes (in one transaction or in
a series of related transactions) the beneficial owner of all or
substantially all of the shares of the Employer held by QP
Acquisition #2, Inc. or JPE, Inc, as applicable; or.
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ii. that any one or more persons or entities, including a "group"
(within the meaning of Rule 13d-1 under the Exchange Act), but
excluding any private equity fund managed by Questor, any
affiliate of any such fund and any group of which any such fund
or affiliate may be a member, becomes the owner of all or
substantially all of the assets of the Employer (in one
transaction or in a series of transactions).
d. "EMPLOYER"
For purposes of this Section, the term "Employer" shall mean:
i. for a Participant employed by the Company and not by the East
Tawas, Beavercreek or Dayton Parts Plant - JPE, Inc.;
ii. for a Participant employed at the East Tawas Plant - Starboard
Industries, Inc.;
iii. for a Participant employed at the Beavercreek Plant - Plastic
Trim, Inc.; and
iv. for a Participant employed at the Dayton Parts Plant - Dayton
Parts, Inc.
9. GENERAL PROVISIONS
a. ADMINISTRATION
The Plan shall be administered by a committee of directors (the
"Board Committee") designated by JPE, Inc.'s Board of Directors. The
Board Committee shall have the power and authority to delegate
various functions to one or more officers of JPE, Inc., subject to
the Board Committee's oversight and approval, and to such guidelines
and parameters as the Board Committee may set from time to time, in
its sole discretion.
Subject to such limitations as the Board of Directors may set forth
from time to time, and subject to the limitations of Section 7(c),
the Board Committee shall have the authority, in its sole
discretion, to make all determinations and interpretations regarding
any issues arising under the terms of the Plan as set forth herein,
including, but not limited to, issues regarding Participant status
or the size of any incentive compensation award. All determinations
made by the Board Committee shall be final and binding on all
parties.
b. AMENDMENT OF PLAN
The Board of Directors may at any time amend the Plan, with or
without notice to the Participants.
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c. APPLICABLE LAW
Any issue arising under, or otherwise relating to rights under, the
Plan shall be governed by, and construed in accordance with, the laws
of the State of Michigan, applied without regard to conflict of law
principles.
d. TAX WITHHOLDING
The Company shall have the right to make such provision(s) and take
such action(s) as it may deem necessary or appropriate for the
withholding of any and all Federal, state or local taxes that the
Company may be required to withhold with respect to any incentive
compensation awards paid under the Plan.
e. NO EMPLOYMENT RIGHTS CREATED
Neither the existence of the Plan nor the participation of a
Participant in the Plan shall give any individual the right to be, or
continue to be, employed by the Company, and the Company specifically
reserves the right to terminate any employee's employment with the
Company at any time for any reason with or without notice or cause.
f. IMPACT OF INCENTIVE COMPENSATION AWARDS ON OTHER PLANS, PROGRAMS AND
ARRANGEMENTS
Awards under the Plan shall not be treated as covered compensation
for purposes of any other compensation or benefit plan, program or
arrangement of the Company, provided, however, that incentive
compensation awards under the Plan shall be counted as covered
compensation for purposes of The JPE, Inc. 401(k) Savings Plan if and
to the extent such plan otherwise so provides subject, however, to
any applicable limitations on covered compensation under the Employee
Retirement Income Security Act of 1974, as amended, or the Internal
Revenue Code of 1986, as amended.
g. INAPPLICABILITY TO YEARS OTHER THAN 2002
The Plan shall only apply to 2002, based on actual 2002 performance
compared to the performance targets for that year, and shall not
apply to any other year.
h. NON-ASSIGNABILITY AND GENERAL CREDITOR STATUS
An award under the Plan shall not be transferable or otherwise
assignable except in the event of the Participant's death (in which
case any earned incentive compensation shall be payable to the
Participant's estate, subject to Section 2(c)), and any attempt to
transfer or assign such opportunity other than due to the
Participant's death shall render the award voidable in the sole
discretion of JPE, Inc.
Nothing contained in the Plan shall provide any Participant with any
rights with respect to any specific assets of the Company, and
eligible Participants shall only have the rights of a general
creditor with respect to any incentive compensation awards actually
earned for 2002.
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i. HEADINGS
The headings used in this document are for convenience only and are
not intended to impact the meaning or interpretation of the Plan.
10. EFFECTIVE DATE
This Plan was adopted by JPE, Inc. and certain of its affiliates on July
19, 2002, effective as of January 1, 2002.
JPE, Inc.
By: /s/ Scott K. Koepke
-----------------------
Starboard Industries, Inc.
By: /s/ Scott K. Koepke
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Plastic Trim, Inc.
By: /s/ Scott K. Koepke
-----------------------
Dayton Parts, Inc.
By: /s/ Scott K. Koepke
-----------------------
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