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EXHIBIT 10(f)
[LAIDLAW
ENVIRONMENTAL
SERVICES
LOGO]
================================================================================
MANAGEMENT
INCENTIVE PLAN
FISCAL YEAR: 1998
Rev: December 10th, 1997
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TABLE OF CONTENTS
PAGE NO.
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I. OVERVIEW 1
II. PLAN OBJECTIVES 1
III. ATTAINING GOALS 2
IV. ELIGIBILITY FOR PLAN PARTICIPATION 3
V. PLAN STRUCTURE
A. PERFORMANCE MEASURES AND TARGET BONUSES
1. EBIT 3
2. Revenue 3
3. Earnings Per Share 4
4. Individual Performance 4
Table 1: Performance Rating Qualitative Categories 4
B. PERFORMANCE AND AWARD CRITERIA
1. Target Bonus Levels 5
2. Units of Measure 5
Table 2: Units of Measure and Payout as Percent
of Base Pay by Position 5
3. Payout Schedule 5
4. Bonus Cap 5
Table 3: Payout Schedule as Percentage of Target
Percent for Annual EBIT/Revenue/EPS Achieved Against
Committed Targets 6
VI. PAYMENT OF AWARDS 7
VII. PLAN ADMINISTRATION 7
VIII. SUMMARY AND CONCLUSION 8
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I. OVERVIEW
The Management Incentive Compensation Plan is a short-term cash incentive bonus
plan covering the executive staff, Facility Managers, Operations Managers, and
other selected managers. The plan allows selected management employees to share
directly in the success of the Company through the payment of annual incentive
awards which are in turn based on the attainment of business unit goals and
individual performance objectives.
The plan will provide the Company with a mechanism to communicate its
expectations for Company performance while at the same time allowing the
management team the opportunity to earn a total compensation package that is
competitive for the industry.
II. PLAN OBJECTIVES
The purpose of a bonus compensation plan is to motivate key management
performance and to reward those individuals considered responsible for the
success of the business. Laidlaw Environmental Services has developed a
Management Incentive Plan for key managerial personnel which will provide a
significant economic opportunity based on their business unit contribution to
the Corporation and on their own individual performance.
The objectives of the Plan are:
-- Effectively maintain cost control measures.
-- Ensure optimum revenue mix.
-- Ensure effective waste stream pricing.
In order to accomplish these objectives, a certain percentage of a key manager's
total compensation package will be at risk. Therefore, plan participants must
direct their efforts and set goals which will maximize the success of their
business unit as defined by the Plan.
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III. ATTAINING GOALS
The success of the Management Incentive Plan will be measured by attaining
preset goals for earnings before interest and taxes, revenue, earnings per
share, and by showing a significant level of commitment and personal
contribution to the Company throughout the year. This can only be accomplished
by the combined support of the Company's management team.
Each participant should understand that their earnings opportunities are
dependent upon the attainment of these goals. To enhance this understanding,
each participant will be given an explanation of the Plan along with their
individual goals and bonus potentials. This will allow each participant to
clearly understand that effort that increases results will produce higher
rewards.
In implementing and maintaining this Plan, the following factors are of critical
importance:
-- Measures of achievement will be quantitative and qualitative in
nature. The quantitative measures of achievement will be financial
goals that are tied to the Company's annual financial budget. The
use of such goals will help generate and reinforce a commitment to
the budgeting process. The qualitative measure of achievement will
be based on the participant's level of commitment to the Company
and their overall contribution to the Company's success.
-- Incentive awards will be based upon the achievement of aggressive
objectives. These aggressive objectives will help assure that the
Plan pays for itself out of incremental additional profits; and
that stockholders receive an appropriate return of investment in
the incentive payments.
-- The threshold of incentive awards will only be at a "competent"
level of performance but appreciable more award will result from
extra efforts and results achieved due to higher levels of
performance.
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IV. ELIGIBILITY FOR PLAN PARTICIPATION
For fiscal year 1998, participation in the Management Incentive Plan will be
limited to:
Executive Staff Operations Managers
Directors Key Managers
Facility Managers
These positions are targeted because of their direct accountability for the
operating results of a major business unit(s) and their accountability for
structuring a function under them.
To receive an annual incentive award, participants must occupy a bonus eligible
position in the Management Incentive Plan as of April 1, 1998, and be employed
by Laidlaw Environmental Services at the time incentive awards are paid.
Participants who have not occupied an incentive eligible position for the full
fiscal year will be prorated based on the number of full months of
participation. These eligibility criteria apply to current employees promoted to
eligible positions, new hires hired into eligible positions, or employees in
positions subsequently selected to participate in the Plan.
V. PLAN STRUCTURE
A. PERFORMANCE MEASURES AND TARGET BONUSES
Participants will be judged against achieving separate criteria which will be
set at the beginning of the year. These are EBIT, revenue, earnings per share
("quantitative"), and individual performance ("qualitative"). Each participant
should read the Plan carefully to attain a proper understanding of the Plan and
its dynamics.
1. EBIT
EBIT is defined as earnings before interest, taxes, and non-sales incentive
expense. EBIT will be derived from the final monthly Financial Results Report of
the fiscal year after appropriate adjustments. For FY1998, the EBIT goal will be
budgeted EBIT.
2. REVENUE
Revenue includes outside and inter-company revenue and will be derived from the
final monthly Financial Results Report of the fiscal year after appropriate
adjustments. For FY98, the revenue goal will be budgeted revenue. However, for
Operations Sr. Vice Presidents and Regional Vice Presidents the revenue goal
will be rolled up billed revenue of the Directors of Sales under their
direction. Proposals Group participants will also be measured on billed revenue.
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V. PLAN STRUCTURE
(CONTINUED)
3. EARNINGS PER SHARE
Earnings per share is defined as basic earnings per share as disclosed on the
income statement after adding back the after tax impact of the non-sales
incentive expense.
4. INDIVIDUAL PERFORMANCE
OPERATIONS
The Qualitative Assessment Summary Sheet (see attachments) is used to identify
specific goals and measures for performance of personal objectives. The overall
achievement level will determine the bonus earned for Qualitative Goals.
Specific goals are set in five different areas: Health and Safety, Employee
Turnover, Regulatory Training, Customer Service, and Financial Improvement. Each
goal has a weight and a rating. The ratings earned and goal weight are combined
to determine the appropriate bonus payment percentage. This method provides a
more objective measure and a more goals driven means to focus individual
performance.
STAFF
Individual performance will be judged against measurable personal objectives set
at the beginning of the year. Participants and their supervisors will discuss
and agree to specific personal objectives and measures for the year. At end of
the year each participant's performance will be evaluated against the pre-set
measures to determine the bonus achievement level.
B. PERFORMANCE AND AWARD CRITERIA
1. TARGET BONUS LEVELS
The target bonus payout is the monetary award that will be paid if all
quantitative and qualitative goals are achieved exactly as set. This will be
calculated as a percentage of base pay called the target bonus percent. For
example, a participant whose base pay is $50,000 and whose target bonus percent
is 30% will receive a $15,000 award if all the performance goals are met
exactly. This award can fluctuate if separate goals are missed or exceeded. The
base pay level used to calculate bonus awards will be the base annualized salary
paid as of August 31, 1998. Target bonus percents can be found in Table 2.
2. UNITS OF MEASURE
The performance criteria for each plan participant should focus upon the
appropriate areas in which the position has opportunity to impact. The
performance criteria is based upon specific operating center(s) under which each
participant has influence or
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V. PLAN STRUCTURE
(CONTINUED)
control. It should be noted that any unit of measure is not permanently fixed
and could vary from year to year.
The units of measure used and their associated contribution to the overall
payout are based upon the position's level of control within the organization.
These are presented in Table 2:
TABLE 2
UNIT OF MEASURE AND PAYOUT AS
PERCENT OF BASE PAY BY POSITION
- --------------------------------------------------------------------------------------------------------------------
TARGET CORP. CORP. DIV. DIV. REG. REG. FAC. FAC.
POSITION PAYOUT EPS EBIT EBIT REV EBIT REV EBIT REV. QUAL.
====================================================================================================================
CEO 60% 70% 30%
COO 50% 70% 30%
Senior VP 40% 20% 30% 30% 20%
Regional VP 35% 20% 30% 30% 20%
Staff VP 35% 70% 30%
Staff Dir - Corp. 20% 70% 30%
Staff Dir - Div 20% 20% 60% 20%
Staff Dir - Reg. 20% 20% 60% 20%
Facility Manager 30% 20% 30% 30% 20%
Operations Mgr. 15% 20% 60% 20%
Key Manager 15% 70% 30%
Key Staff 10% 20% 60% 20%
- --------------------------------------------------------------------------------------------------------------------
Note that Facility Managers and Operations Managers must first achieve the
threshold of their facility EBIT goal to be eligible to receive a qualitative
award.
3. PAYOUT SCHEDULE
The achievement level attained against each goal will determine how much
incentive award arising from each goal will be paid. The schedule in Table 3
presents the payout percentages for various achievement levels of the
quantitative measures. In order to be paid an award for EBIT, revenue, or EPS,
the threshold level must first be met
4. BONUS CAP
Facility Managers, Operations Managers and others whose bonus is judged
primarily on facility measures will be paid from a pool of funds limited to 5%
of actual EBIT for that facility. Facility Managers and/or Operations Managers
who are responsible for more than one facility will be paid from a combined
pool.
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V. PLAN STRUCTURE
(CONTINUED)
TABLE 3
PAYOUT SCHEDULE AS PERCENTAGE OF TARGET PERCENT
FOR ANNUAL EBIT/REVENUE/EPS ACHIEVED AGAINST COMMITTED TARGETS
- --------------------------------------------------------------------------------
EBIT/REVENUE/EPS
ACHIEVED AGAINST COMMITTED
INCENTIVE STEP TARGETS PAYOUT LEVEL
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30 110% + 135%
29 109% 131%
28 108% 127%
27 107% 123%
26 106% 119%
25 105% 115%
24 104% 112%
23 102% 106%
22 101% 103%
21 100% 100%
20 99% 99%
19 98% 98%
18 97% 97%
17 96% 96%
16 95% 95%
15 94% 94%
14 93% 93%
13 92% 92%
12 91% 91%
11 90% 90%
10 89% 86%
9 88% 82%
8 87% 78%
7 86% 74%
6 85% 70%
5 84% 66%
4 83% 62%
3 82% 58%
2 81% 54%
1 80% 50%
0 less than 80% 0%
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V. PLAN STRUCTURE
(CONTINUED)
An example of a bonus calculation follows:
Facility Manager
Annual Salary: $50,000
Target Bonus Percent: 30%
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UNIT OF TARGET ANNUAL GOAL
GOAL ACHIEVEMENT PAYOUT MEASURE PERCENT SALARY PAYOUT
==============================================================================================================================
REGION EBIT 95.6% 96% x 20% x 30% x $50,000 = $2,880
FACILITY EBIT 101.2% 103% x 30% x 30% x $50,000 = $4,635
FACILITY REV. 105.0% 115% x 30% x 30% x $50,000 = $5,175
QUALITATIVE GOALS 450 Pts. 80% x 20% x 30% x $50,000 = $2,400
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Total: $15,090
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VI. PAYMENT OF AWARDS
Each incentive award will be reviewed and approved by the appropriate senior
Vice President, the Chief Operating Officer, the Vice President -
Administration, and the Chief Executive Officer. Payments will be made no later
than November 15, 1998. Participants who voluntarily terminate their employment
with Laidlaw Environmental Services prior to awards being issued will forfeit
their right to receive any award.
Any adjustment of bonus amounts or any consideration of special circumstances
must be approved by the Vice President - Administration, and the Chief Executive
Officer.
VII. PLAN ADMINISTRATION
The Chief Executive Officer of Laidlaw Environmental Services is the sole
interpreter and arbitrator of these provisions and has the right to amend,
withdraw or revoke the Plan or any of its provisions at any time.
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VIII. SUMMARY AND CONCLUSION
The conceptual framework and guidelines covered in this Plan represent those
elements that necessarily must be examined to assure the value to the Company of
the short-term cash incentive compensation plan. Several steps must be taken to
ensure that those objectives which the plan is designed to meet can be
accomplished. These steps are described as follows:
COMMUNICATION OF THE PLAN
It is important that the Plan be effectively communicated to all
participants. This would include individual discussions with each
participant. These discussions should include a review of the measures
and standards that should be developed to assess personal and/or
business unit performance, as well as a clarification of the details of
the plan and individual opportunities.
DEVELOPMENT OF PERFORMANCE MEASURES
Business unit(s) and any individual goals should be established and
communicated at the beginning of the fiscal year. Accepted standards
are those that are reasonable and realistic reflections of current
opportunity, as well as striving for improvement. Measurements of
performance should use relevant quantitative criteria.
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