Exhibit 10-7
LEXINGTON PRECISION CORPORATE OFFICE
2001 MANAGEMENT CASH BONUS PLAN
LEXINGTON PRECISION CORPORATE OFFICE
TABLE OF CONTENTS
SECTION
NUMBER PAGE
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I. PURPOSE OF PLAN 1
II. ELIGIBILITY 1
III. PLAN YEAR 1
IV. GROUPING OF PARTICIPANTS 1
V. SETTING OF TARGET BONUS PERCENTAGES 1
VI. AUTHORIZATION FORM 2
VII. NOTIFICATION OF EMPLOYEES 2
VIII. BASIS FOR BONUS PAYMENTS 3
IX. SETTING OF GOALS 3
X. CALCULATING THE BONUS POOL 4
XI. TIMING OF BONUS PAYMENTS 5
XII. OTHER 5
LEXINGTON PRECISION CORPORATE OFFICE
2001 MANAGEMENT CASH BONUS PLAN
I. PURPOSE OF PLAN
The "2001 Management Cash Bonus Plan" (the "Plan") is designed to provide
meaningful incentives for officers and key employees of the Corporate
Office (the "Bonus Group") of Lexington Precision Corporation (the
"Company") to increase profitability while efficiently managing the
Company's assets.
II. ELIGIBILITY
A "Participant" shall mean an individual who meets both of the following
criteria:
(1) The individual has been selected to participate in the Plan by
the Compensation Committee of the Board of Directors of
Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation; and
(2) The individual is a full-time, salaried, exempt employee of
the Company on the last day of the plan year.
Participants who retire during the plan year and are aged 62 or older on
the date of retirement and estates of Participants who die during the plan
year will be paid bonuses (if and to the extent earned) at the same time
that all other Participants receive their bonuses after the end of the plan
year.
III. PLAN YEAR
The plan year shall mean the year ending December 31, 2001.
IV. GROUPING OF PARTICIPANTS
The Participants in the Bonus Group, will be designated at the beginning of
the plan year by the Compensation Committee of the Board of Directors of
Lexington Precision Corporation upon recommendation of the president of
Lexington Precision Corporation.
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V. SETTING OF TARGET BONUS PERCENTAGES
Subject to the adjustment for Personal Performance (defined in Section XI
below), the "Target Bonus" for each Participant shall mean the amount
calculated by multiplying the Participant's aggregate base-salary received
during the year by a "Target Bonus Percentage" which will be set at the
beginning of the plan year by the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation. The "Group Target Bonus"
shall mean the aggregate of the Target Bonuses of all Participants in a
Bonus Group. The Target Bonus Percentage for the president of the Company
will be set by the president of Lexington Precision Corporation.
A Participant's bonus will always be based on the aggregate base-salary
received during the year, not on the base-salary level at any particular
point during the year (i.e., when calculating bonuses for Participants who
received salary increases during the year, for Participants who are hired
during the year or for Participants who retire or die during the year).
As a general guideline, the Target Bonus Percentage levels which would
typically be assigned to various categories of employees in the Bonus Group
are set forth below:
TARGET BONUS
POSITION PERCENTAGE
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Senior Vice Presidents 20-35%
Vice Presidents 15-25%
Junior Officers 5-15%
If a Participant moves to a higher management level during the year, such
Participant's Target Bonus Percentage will be reset at an appropriate
higher level determined by the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation, as if the Target Bonus
Percentage had been at the higher level for the entire year. If a
Participant moves to a lower management level during the year, such
Participant's Target Bonus Percentage will be reset at an appropriate lower
level determined by the Compensation Committee of the Board of Directors of
Lexington Precision Corporation upon recommendation of the president of
Lexington Precision Corporation, as if the Target Bonus Percentage had been
at the lower level for the entire year.
VI. AUTHORIZATION FORM
Attached hereto as Exhibit A is the "Authorization Form" which shall be
used by the Compensation Committee of the Board of Directors of Lexington
Precision Corporation upon recommendation of the president of Lexington
Precision Corporation at the beginning of each plan year when designating
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Participants, Target Bonus Percentages and the Bonus Group's Target
Pre-Bonus Operating Profit (defined in Section IX below).
VII. NOTIFICATION OF EMPLOYEES
Attached hereto as Exhibit B is the form of memorandum which shall be used
at the beginning of each plan year to inform employees of their
participation in the Plan and their Target Bonus Percentages and Target
Bonuses.
VIII. BASIS FOR BONUS PAYMENTS
After the end of the plan year, when financial results for the year are
available, a calculation will be made to determine the bonus that will be
paid to each Participant.
The percentage of Target Bonus earned by each Participant will depend on
the following:
(1) how well the Bonus Group performed relative to its Target
Pre-Bonus Operating Profit; and
(2) the Participant's Personal Performance (discussed below).
All bonuses will be subject to the review and approval of the Board of
Directors of Lexington Precision Corporation.
IX. SETTING OF GOALS
"Operating Profit" means profit before interest, income taxes and other
non-operating expenses in accordance with the Company's standard accounting
procedures.
"Pre-Bonus Operating Profit" means operating profit before deducting any
expenses for bonuses relating to the 2001 Management Cash Bonus Plan.
The "Target Pre-Bonus Operating Profit" for the Bonus Group will be set at
the beginning of the year by the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon recommendation of the
president of Lexington Precision Corporation. The Target Pre-Bonus
Operating Profit will equal ONE of the following:
(1) the Bonus Group's "Budgeted Pre-Bonus Operating Profit" as
reflected in the annual budget for the Company;
(2) an amount higher than the Company's Budgeted Pre-Bonus Operating
Profit if the Budgeted Pre-Bonus Operating Profit is below
reasonable
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performance-standards (taking into account, among other things,
industry performance standards, historical performance standards,
and the amount of capital invested in the Company); or
(3) an amount lower than the Company's Budgeted Pre-Bonus Operating
Profit if the Budgeted Pre-Bonus Operating Profit is above
reasonable performance-standards (taking into account, among
other things, industry performance standards, historical
performance standards, and the amount of capital invested in the
Company).
The "reasonable performance standards" discussed above will be determined
in the sole discretion of the Compensation Committee of the Board of
Directors of Lexington Precision Corporation upon recommendation by the
president of Lexington Precision Corporation.
The Target Pre-Bonus Operating Profit will not be revised during the plan
year, except in cases where an acquisition or divestiture of a business
completed during the plan year materially affects reported operating
results during that plan year.
X. CALCULATING THE BONUS POOL
To calculate the bonus for each of the Participants in the Bonus Group, it
is first necessary to calculate the "Group Bonus Pool".
The Group Bonus Pool will be calculated by multiplying the Group Target
Bonus by the percentage in the column on the right below, opposite the
percentage of the Target Pre-Bonus Operating Profit which was attained by
that Bonus Group.
PERCENTAGE PERCENTAGE OF TARGET
OF TARGET BONUS EARNED
PRE-BONUS (BEFORE ADJUSTING FOR
OPERATING PROFIT ATTAINED PERSONAL PERFORMANCE)
less than 85.00% None
85.00 - 89.99% 25%
90.00 - 94.99% 50
95.00 - 99.99% 75
100.00 - 109.99% (target) 100
110.00 - 119.99% 125
120.00 - 129.99% 150
130.00 - 139.99% 175
140.00% or more 200 (maximum)
The percentage of Target Bonus earned, before giving effect to adjustments
for Personal Performance, must be in the increments shown on the above
chart. For example, if the Bonus Group attained 108% of the Target
Pre-Bonus
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Operating Profit, the percentage used for each Participant in the Bonus
Group would be 100% (not 120% or 125%). The percentages of Target Bonus
earned are "stepped," not linear. No bonuses will be earned by any
Participants in the Bonus Group if less than 85% of the Target Pre-Bonus
Operating Profit is attained. The Group Bonus Pool cannot exceed 200% of
the Group Target Bonus.
XI. TIMING OF BONUS PAYMENTS
All bonus payments will be made as soon as practicable after the end of the
plan year. Before any bonus payments can be made the following two
requirements must be met:
(1) necessary accounting and audit work must be completed so that all
bonus calculations can be made; and
(2) the bonus must be approved by a vote of the Board of Directors of
Lexington Precision Corporation.
It is anticipated that bonuses will be paid approximately 45-75 days after
the end of the plan year.
XII. OTHER
Bonuses will be subject to income and employment tax withholding to the
extent required by applicable law.
Bonuses and the right to receive bonuses cannot be pledged, assigned or
alienated, voluntarily or involuntarily, by any Participant.
THE 2001 MANAGEMENT CASH BONUS PLAN AND ANY BONUSES GRANTED UNDER THE 2001
MANAGEMENT CASH BONUS PLAN SHALL NOT CONFER UPON ANY PARTICIPANT ANY RIGHT
WITH RESPECT TO THE CONTINUANCE OF EMPLOYMENT BY THE COMPANY, NOR SHALL
THEY INTERFERE IN ANY WAY WITH THE RIGHT OF THE COMPANY TO TERMINATE A
PARTICIPANT'S EMPLOYMENT AT ANY TIME.
THE 2001 MANAGEMENT CASH BONUS PLAN MAY BE REVISED, MODIFIED OR TERMINATED
IN ANY WAY, FOR ANY REASON AND AT ANY TIME AT THE SOLE DISCRETION OF THE
BOARD OF DIRECTORS OF LEXINGTON PRECISION CORPORATION BY VOTE OF A MAJORITY
OF THE BOARD AT ANY REGULAR OR SPECIAL MEETING OF THE BOARD.
Revised and approved by the Board of Directors of Lexington Precision
Corporation on October 18, 1994
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