Exhibit 10.7
SAFETY-KLEEN MANAGEMENT INCENTIVE PLAN
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February 2, 1996
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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Each year the Board of Directors will review the Profit Plan ("Plan") for
the year and create an incentive fund, consisting of both a formula and
discretionary fund, based on performance relative to the Plan as follows:
A. Determination of Qualifying Net Earnings Level for Generation of
Incentive Fund
In order to qualify for the minimum percentage of earnings allocable to
the formula portion of the incentive fund, Safety-Kleen must attain
Consolidated Net Earnings equal to 80% of Plan Consolidated Net
Earnings.
B. Determination of Net Earnings Level Required for Maximum Incentive Fund
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 Consolidated Net Earnings equal to 120% of Plan
Consolidated Net Earnings.
C. Determination of Formula Incentive Fund Factor
At the minimum Net Earnings level (I.A.), 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.B.) 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.
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D. Calculation of the Discretionary Element of the Plan
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
Determination of who will participate in the Plan will be developed
each year by the Chief Executive Officer (President) and 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
The percentage share of the formula incentive fund for each officer
participant will be recommended by the President and the Chairman and
submitted to the Compensation Committee for its approval at the
beginning of each calendar year. Non-officer participant percent shares
will be developed by the President and the Chairman in consultation
with other officers.
C. Payment of Annual Incentive
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 Committee
for its final approval during the first quarter of the year following
the fiscal year involved.
The President and the Chairman will recommend the discretionary amount
for each officer based on his analysis of each individual's performance
during the year. A non-officer participant's discretionary share will
be recommended by the participant's immediate supervisor for approval
by the President and the Chairman.
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III. Incentive Plan Participation and Communications
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The President and 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
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
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
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 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. The Board of Directors may elect to exclude
other income or expense items deemed not in the ordinary course of
business.
D. Definition of Consolidated Net Earnings
Consolidated Net Earnings 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.
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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.
b/inctpl96
February 9, 1996
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