EXHIBIT 10.1
SAFETY-KLEEN MANAGEMENT INCENTIVE PLAN
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February 11, 1994
The Directors of Safety-Kleen Corp. have heretofore decided to compensate their
officers and key management personnel under a compensation plan that will
include base salary plus incentive bonus. The purpose of the incentive plan is
to supplement by incentive bonuses the remuneration for officers and key
management personnel which is competitive externally, equitable internally, and
properly rewarding for performance in the responsibility assigned. On the
recommendation of the Compensation Committee, the following Management Incentive
Plan is hereby established for officers and key management personnel of the
Company.
I. Calculation of Management Incentive Fund
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In recognition of the fact that one of the key corporate goals is to
provide Safety-Kleen Shareholders a better-than-average return on corporate
equity, the incentive fund, consisting of both a formula and discretionary
fund, will be created as follows:
A. Utilization of the Standard & Poor's 500 as a Comparison Group
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For each Plan year, the return on beginning-of-year equity (ROE) for
each firm comprising the Standard & Poor's 500 will be calculated,
arrayed and summarized in descending ROE order for the four consecutive
calendar quarters ending with the third quarter of the previous year.
B. Determination of Qualifying ROE Level for Generation of
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Incentive Fund
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The ROE for the 300th company in the array will determine the qualifying
level for the minimum percentage of earnings allocable to the formula
portion of the incentive fund. In other words, in order for any
incentive fund to be created in a given year, Safety-Kleen must attain
an ROE for that year that would place it among the top 60% of the five
hundred publicly held companies comprising the Standard & Poor's 500.
C. Determination of ROE Level Required for Maximum Incentive Fund
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In order to qualify for the maximum percentage of earnings allocable to
the formula portion of the Incentive Fund in a given year, Safety-Kleen
must attain an ROE for that year that would place it among the top 15%
in the array.
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D. Determination of Formula Incentive Fund Factor
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At the minimum qualifying ROE level (I.B.), a formula incentive fund
consisting of 1% of consolidated pretax earnings will be created.
This factor will rise on a graduated basis to a maximum of 5.0% of
Consolidated Pretax Earnings when the maximum level (I.C.) is
attained (see Table 1). The formula fund factor calculation for each
ensuing fiscal year will be reviewed by the Compensation Committee
of the Board prior to the development of that year's incentive plan.
E. Calculation of the Discretionary Element of the Plan
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In addition to the fund created by the above calculations, an
additional fund consisting of an amount not exceeding 50% of the
formula amount will be available for discretionary incentive
allocations. The allocation of corporate pretax earnings available
for incentive purposes, therefore, will be limited to a maximum of
7.5% of pretax earnings.
II. Allocation of Funds
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A. Determination of Plan Participants
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Determination of who will participate in the Plan will be developed
each year by the Chairman of the Board (Chairman) in consultation
with other corporate officers. Such eligibility will be in accordance
with job responsibility and salary grade. The list of job
classifications to be included in the Plan will be submitted at the
beginning of each calendar year for review by the Compensation
Committee.
B. Determination of Individual Fund Shares
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The percentage share of the formula incentive fund for each officer
participant, other than the Chairman, will be determined by the
Chairman and submitted to the Compensation Committee for its approval
at the beginning of each calendar year. The Chairman's share will be
determined in accordance with his employment agreement. Non-officer
participant percent shares will be developed by the Chairman in
consultation with other officers.
C. Payment of Annual Incentive
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The calculation of the formula incentive fund will be based on final
audited year-end financial statements, utilizing the method described
previously. The individual share calculations for each officer for
the formula incentive resulting from the above calculation, together
with the recommended discretionary share, which can range from 0 to
50% of the formula amount, shall be submitted to the Compensation
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Committee for its final approval during the first quarter of the
year following the fiscal year involved.
The Chairman will recommend the discretionary amount for each
officer based on his analysis of each individual's performance
during the year. The Chairman's discretionary share will be
determined in accordance with his employment agreement. A non-
officer participant's discretionary share will be recommended by
the participant's immediate supervisor for approval by the Chairman.
III. Incentive Plan Participation and Communications
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The Chairman shall notify the Compensation Committee of the Board regarding
officers and the key management positions that will be included in the Plan
for the current year. Such a list should be determined as early as possible
in any fiscal year and no later than the end of the first quarter of each
fiscal year. Early identification of participants is desirable to provide
maximum opportunity for communicating throughout the year regarding company
performance and each individual participant's related bonus opportunity,
thereby maximizing the effectiveness of the Incentive Plan.
IV. General Provisions
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A. Plan Eligibility
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To be eligible to participate under the plan, an officer or employee
must be actively employed with the company on the last working day of
the year for which the year's compensation is payable; provided, that
in the event a participant's employment is terminated prior to year-
end by reason of death occurring after June 1, his share of the
formula incentive fund will be adjusted on the basis of his full-year
share, prorated for the period of his actual employment.
B. Less Than Full-Year's Employment
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In the event a participant's employment commences after January 1,
adjustment of his share of the formula incentive fund will be on the
basis of his full-year share, prorated for the period of the
participant's actual employment.
C. Definition of Consolidated Pretax Earnings
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For purposes of determining the dollar amount to be set aside for the
formula portion of the fund as above provided, consolidated pretax
earnings shall consist of the reported earnings before income tax,
and before deducting the amount calculated for both the formula and
the discretionary portions of the incentive fund, as reflected in
the audited statements
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of that year, subject to the following limitations: profits or losses
on the sale or other distribution of fixed or capital assets not in
the ordinary course of business shall be excluded in the
determination of profits.
D. Definition of Return on Beginning-of-Year Equity
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Return on beginning-of-year equity shall be calculated on the basis of
consolidated pretax earnings as defined in IV.C., less the expense
provision for both the formula and discretionary portions of the
incentive fund, and less the applicable income tax provision.
V. Final Responsibility for Plan Administration
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Notwithstanding the foregoing provisions, all matters pertaining to the
administration of this Incentive Compensation Plan, including but not
limited to the determination of the Fund amount, selection of participants,
amounts of awards to be paid to individual participants, and other policy
matters, shall be within the sole discretion of the Board of Directors.
This plan may be revoked, amended or revised by the Board of Directors of
the Company but no revocation, amendment or revision shall affect a
participant's granted percentage share of the Fund.
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