HUFFY
CORPORATION Exhibit 10.k
SECTION: HUMAN RESOURCES
POLICY NO.: 128 (RESTRICTED)
ISSUE DATE: 01/02/02
SUPERSEDES: 01/03/01
- -------------------------------------------------------------------------------
SUBJECT: PERFORMANCE INCENTIVE PLAN - 2002 - REVISED
POLICY
PERFORMANCE INCENTIVE PLANS ARE DEVELOPED AND ADMINISTERED TO PROVIDE
APPROPRIATE LEVELS OF INCENTIVE AND REWARD FOR IDENTIFIED PARTICIPANTS TO MEET
OR EXCEED ANNUAL PROFIT PLANS. PERFORMANCE INCENTIVES ARE A KEY ELEMENT IN
HUFFY'S TOTAL COMPENSATION PROGRAMS WHICH ARE ESSENTIAL TO ATTRACTING,
DEVELOPING AND RETAINING THE RIGHT TALENT FOR THE SUCCESS OF THE CORPORATION.
PAYMENTS WILL GENERALLY BE CONSIDERED ON THE BASIS OF CORPORATE AND HUFFY
COMPANY FINANCIAL RESULTS AND, FOR SOME POSITIONS, PERFORMANCE MEASURED AGAINST
INDIVIDUAL OBJECTIVES.
SUBJECT TO THE AUTHORITY OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
AS TO DISCRETIONARY AWARDS AS MAY BE RECOMMENDED BY THE HUFFY CORPORATION
CHAIRMAN, PRESIDENT AND C.E.O., NO INCENTIVE PAYMENTS WILL BE MADE TO ANY PLAN
PARTICIPANTS UNLESS THE CORPORATION AS A WHOLE IS PROFITABLE.
THE SCHEDULES SET FORTH BELOW ARE GUIDELINES ONLY AND PAYMENTS MAY BE MODIFIED
OR OMITTED BY MANAGEMENT, OR BY THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS, IN THEIR SOLE DISCRETION.
I. BASIS AND LEVEL OF FINANCIAL AWARDS
FINANCIAL INCENTIVE OPPORTUNITY
AS A % OF ACTUAL BASE SALARY
-----------------------------------
THRESH TARGET MAX
------ ------ ---
A. CHAIRMAN
Corporate E.P.S. vs. PP 8.13% 32.50% 65.00%
Corporate RONA vs. PP 4.06% 16.25% 32.50%
Cash Flow vs. PP 4.06% 16.25% 32.50%
----- ------ ------
16.25% 65.00% 130.00%
B. OTHER CORPORATE OFFICERS
Corporate E.P.S. vs. PP 3.00% 12.00% 24.00%
Corporate RONA vs. PP 1.50% 6.00% 12.00%
Cash Flow vs. PP 1.50% 6.00% 12.00%
----- ----- ------
6.00% 24.00% 48.00%
C. HUFFY COMPANY PRESIDENTS
Huffy Company EBIT vs. PP 6.00% 12.00% 24.00%
Huffy Company RONA vs. PP 3.00% 6.00% 12.00%
Huffy Company Cash Flow vs. PP 3.00% 6.00% 12.00%
----- ----- ------
12.00% 24.00% 48.00%
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THRESH TARGET MAX
------ ------ ---
D. HUFFY COMPANY STAFFS
1. HBC, HSC, HSF
Huffy Company RONA vs. PP 2.50% 5.00% 10.00%
Huffy Company EBIT vs. PP 5.00% 10.00% 20.00%
Huffy Company Cash Flow vs. PP 2.50% 5.00% 10.00%
----- ----- ------
10.00% 20.00% 40.00%
E. CORPORATE
1. Staff Positions
Corporate E.P.S. vs. PP 2.50% 10.00% 20.00%
Corporate RONA vs. PP 1.25% 5.00% 10.00%
Corporate Cash Flow vs. PP 1.25% 5.00% 10.00%
----- ----- ------
5.00% 20.00% 40.00%
2. Other Corporate Salaried
EXEMPT POSITIONS
Corporate E.P.S. vs. PP 1.00% 4.00% 8.00%
Corporate RONA vs. PP .50% 2.00% 4.00%
Cash Flow vs. PP .50% 2.00% 4.00%
---- ----- -----
2.00% 8.00% 16.00%
NON-EXEMPT POSITIONS
Corporate E.P.S. vs. PP .63% 2.50% 5.00%
Corporate RONA vs. PP .31% 1.25% 2.50%
Cash Flow vs. PP .31% 1.25% 2.50%
---- ----- -----
1.25% 5.00% 10.00%
F. HUFFY RESOURCE CENTER (HRC)
1. Staff Positions
Corporate E.P.S. vs. PP 2.50% 10.00% 20.00%
Corporate RONA vs. PP 1.25% 5.00% 10.00%
Corporate Cash Flow vs. PP 1.25% 5.00% 10.00%
----- ----- ------
5.00% 20.00% 40.00%
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THRESH TARGET MAX
------ ------ ---
2. Other Staff Positions
Consolidated EBIT vs. PP 3.00% 12.00% 24.00%
Consolidated RONA vs. PP 1.50% 6.00% 12.00%
Consolidated Cash Flow vs. PP 1.50% 6.00% 12.00%
----- ----- ------
6.00% 24.00% 48.00%
3. Company Specific Exempt
Huffy Company EBIT vs. PP 2.50% 5.00% 10.00%
Huffy Company RONA vs. PP 1.25% 2.50% 5.00%
Huffy Company Cash Flow vs. PP 1.25% 2.50% 5.00%
----- ----- -----
5.00% 10.00% 20.00%
4. Other HRC Exempt
Consolidated EBIT vs. PP 1.25% 5.00% 10.00%
Consolidated RONA vs. PP .63% 2.50% 5.00%
Consolidated Cash Flow vs. PP .62% 2.50% 5.00%
---- ----- -----
2.50% 10.00% 20.00%
5. HRC Non-Exempt (Still pending for 2002)
Consolidated EBIT vs. PP .63% 2.50% 5.00%
Consolidated RONA vs. PP .31% 1.25% 2.50%
Consolidated Cash Flow vs. PP .31% 1.25% 2.50%
---- ----- -----
1.25% 5.00% 10.00%
G. OTHER SALARIED
NOTE: RELATED INCENTIVE PLANS EXIST FOR CERTAIN ADDITIONAL
PERSONNEL. THE MOST CURRENT VERSION OF WHICH ARE ON
FILE WITH VP HUMAN RESOURCES, VP GENERAL COUNSEL &
SECRETARY AND VP FINANCE, CFO & TREASURER, AND
COMPANY PRESIDENTS.
THRESH TARGET MAX
------ ------ ---
1. Huffy Company Exempt
Huffy Company EBIT vs. PP 2.50% 5.00% 10.00%
Huffy Company RONA vs. PP 1.25% 2.50% 5.00%
Huffy Company Cash Flow vs. PP 1.25% 2.50% 5.00%
----- ----- -----
5.00% 10.00% 20.00%
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THRESH TARGET MAX
------ ------ ---
2. ASD
EXEMPT (EXCLUDING PRESIDENT)
ASD EBIT vs. PP 5.00% 10.00% 20.00%
----- ----- ------
5.00% 10.00% 20.00%
NON-EXENOT
ASD EBIT vs. PP 2.50% 5.00% 10.00%
----- ----- ------
2.50% 5.00% 10.00%
3. Huffy Company Non-Exempt
HBC
Huffy Company EBIT vs. PP .84% 1.67% 3.34%
Huffy Company RONA vs. PP .83% 1.67% 3.33%
HBC Cash Flow vs. PP .83% 1.66% 3.33%
---- ----- -----
2.50% 5.00% 10.00%
HSC
Huffy Company EBIT vs. PP .67% 1.34% 2.67%
Huffy Company RONA vs. PP .67% 1.33% 2.67%
HSC Cash Flow vs. PP .66% 1.33% 2.66%
---- ----- -----
2.00% 4.00% 8.00%
II. Huffy Company Presidents, in lieu of financial bonus criteria otherwise
specified for bonus eligible personnel in this Policy 128 and related
supplements, may specify not more than two other pre-approved documented
bonus measures totaling a maximum of 50% of any individual's financial
bonus opportunity. Such measures must be specific and quantifiable criteria
and be explicitly part of the Huffy Company's profit plan. They must be
documented, including award scales, and approved by Company President and
the Vice President Human Resources prior to the beginning of the award year
for which they are applicable.
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III. AWARD SCALES(1)
FOR HUFFY COMPANY PARTICIPANTS,
COMPANY SPECIFIC HRC PARTICIPANTS
HUFFY COMPANY RONA, EBIT % of Targeted
AND CASH FLOW VS. PLAN Award Earned(2)
---------------------- ---------------
Under 90% -0-
90% Threshold 50
95% 75
100% Target 100
105% 133 1/3
110% 166 2/3
115% Maximum 200
FOR CORPORATE OFFICE PARTICIPANTS,
CORPORATE NON-EXEMPT PARTICIPANTS
AND HRC STAFF POSITIONS
CORPORATE RONA, EPS AND % of Targeted
CASH FLOW VS. PLAN Award Earned(2)
------------------ ---------------
Under 85% -0-
85% Threshold 25
90% 50
95% 75
100% Target 100
110% 150
120% Maximum 200
FOR OTHER HRC EXEMPT PARTICIPANTS,
HRC NON-EXEMPT PARTICIPANTS
AND OTHER HRC STAFF PARTICIPANTS
CONSOLIDATED RONA, EBIT AND % of Targeted
CASH FLOW VS. PLAN Award Earned(2)
------------------ ---------------
Under 85% -0-
85% Threshold 25
90% 50
95% 75
100% Target 100
110% 150
120% Maximum 200
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(1) The scales are sliding. When actual performance falls between the points
on the scale, it will be interpolated to the nearest 1/10th of 1% to
determine the award level.
(2) Percent of targeted award earned is used as a multiple of incentive
target which varies by employee group. Refer to Section I.
IV. POSITIONS COVERED
A. CORPORATE OFFICERS
Chairman, President and CEO
Vice President - Finance, CFO and Treasurer
Vice President - Controller
Vice President - General Counsel and Secretary
B. HUFFY COMPANY PRESIDENTS
President and General Manager - HBC
President and General Manager - HSC
President and General Manager - HSF
C. HUFFY COMPANY STAFFS
o HBC
V.P. Asset Management
V.P. Operations
V.P. Sales & Marketing
o HSC
V.P. Worldwide Sourcing
V.P. Operations
V.P. Sales & Marketing
V.P. Product Engineering & Quality Assurance
o HSF
V.P. Operations
V.P. Sales
V.P. Strategic Planning & New Business Development
D. HRC STAFF POSITIONS
Corporate Director Finance
Corporate Manager Credit
Vice President Group Controller
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E. OTHER HRC STAFF POSITIONS
Vice President Human Resources
F. HRC COMPANY SPECIFIC EXEMPT
Director Finance at HBC, HSF, HSC
Director Human Resources at HBC, HSF, HSC (TBD)
Others as Approved by Company Presidents, V.P. Human Resources
G. EXEMPT SALARIED EMPLOYEES
Corporate
HBC
HSC
HSF
HRC
H. NON-EXEMPT SALARIED EMPLOYEES
Corporate
HBC
HSC
HRC
V. INDIVIDUAL PERSONAL OBJECTIVES
*See E.6 below.
Incentive Opportunity as a % of
Actual Base Salary
------------------
Position Maximum Bonus
-------- -------------
A. CHAIRMAN, PRESIDENT & CEO N/A
B. CORPORATE OFFICERS, HUFFY
COMPANY PRESIDENTS, VICE
PRESIDENT HR 12.0%
C. HUFFY COMPANY STAFF, HRC STAFF,
VICE PRESIDENT GROUP CONTROLLER 10.0%
D. CORPORATE SALARIED
1. Staff Level 10.0%
2. Other Exempt 4.0%
3. Non-Exempt NA
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E. For those individuals who have a portion of their incentive measured
on achievement of individual personal objectives, the following
implementation procedure will be used:
1. Each individual will develop calendar year objectives
supporting the business and supervisor's objectives.
2. These objectives should have the following characteristics:
a) Not be equivalent to financial goals. (Objectives related
to cost reduction or similar projects are appropriate.)
b) Objectives should be specific, measurable, meaningful,
agreed to, realistic and time planned. (A project need not
be completed in the calendar year if the objective defines
a specific status in the project by calendar year end.)
c) Process
1) The Chairman shall develop no more than 7 to 10
objectives.
2) Other Corporate Officers, Huffy Company Presidents,
Vice President Group Controller and Vice President
Human Resources, shall each develop no more than 8
objectives.
3) Huffy Company Corporate Staff Level and Corporate
Exempt colleagues shall each develop no more than
4 to 6 objectives.
d) A "degree of difficulty" is to be assigned to each
objective, in total equaling 100.
3. The personal objectives and degrees of difficulty shall be
jointly reviewed by the individual and his/her supervisor and
agreement reached on the parameters outlined above. It is the
supervisor's responsibility to ensure that there is
consistency in the objectives and "degree of difficulty" among
all his/her subordinates. (A MINIMUM one over one approval is
required.)
4. The personal objectives for each year will be developed by
December 31 of the previous year and the results will be
evaluated by January 15 of the following year. The participant
shall evaluate his/her own results and then submit the
evaluation to his/her supervisor who shall review and approve
the evaluation. Final approval of
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results shall be made by the appropriate Huffy Company
President or Corporate Officer. (A MINIMUM one over one
approval is required.)
a) Objectives and results for all staff level employees will
be submitted by Company Presidents and Corporate Officers
to Chairman, Chief Executive Officer and President by the
dates indicated, for approval.
5. Each individual shall be informed by his/her supervisor of
his/her final results after all above approvals have been
secured.
6. Payments for personal objectives results are conditioned
upon the following criteria:
Payment for Results of Personal
Criteria Objectives
-------- -------------------------------
a. CORPORATE, HRC STAFF
Corporate E.P.S. less than 75% of Target None
E.P.S. for Corporate bonus purposes
Corporate E.P.S. at least 75%, but less Up to 50% of calculated maximum bonus
than 90%, of Target E.P.S. for Corporate
bonus purposes
Corporate E.P.S. 90% or greater of Up to 100% of calculated maximum
Target for Corporate bonus purposes bonus
b. HUFFY COMPANIES
Huffy Company EBIT less than 75% of approved Huffy None
Company Profit Plan
Huffy Company EBIT at least 75%, but Up to 50% of calculated maximum bonus
less than 90%, of approved Huffy
Company Profit Plan
Huffy Company EBIT 90% or greater of Up to 100% of calculated maximum
approved Huffy Company Profit Plan bonus
c. HUFFY RESOURCE CENTER
Consolidated EBIT less than 75% of None
approved Huffy Profit Plan
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Consolidated EBIT at least 75%, but Up to 50% of calculated maximum bonus
less than 90%, of approved Huffy
Profit Plan
Consolidated EBIT 90% or greater of Up to 100% of calculated maximum
approved Huffy Profit Plan bonus
VI. IMPLEMENTATION
A. ELIGIBILITY
All covered salaried employees on the payroll on or before the
first business day of the calendar year shall be eligible for
consideration for full year incentive opportunity.
1. New Hires: Employees starting AFTER the first business
day of the calendar year shall be eligible for
the percentage of annual incentive opportunity
shown below:
Percentage of Annual
Hire Date Incentive Opportunity *
--------- -----------------------
During 1st Quarter 75%
During 2nd Quarter 50%
During 3rd Quarter 25%
During 4th Quarter 0%
* For eligible non-exempt salaried employees, incentive
opportunity will be based on actual base salary plus
earned overtime during their full quarter(s) of
employment.
2. Transfers, Promotions or Demotions: Individuals
transferred, promoted or demoted during the calendar year
shall have incentive opportunity as follows:
Calculation Based on Actual Base Salary
---------------------------------------
Old Opp. Level New Opp. Level
-------------- -------------
Transferred, Promoted or Demoted
During 1st Quarter 25% 75%
During 2nd Quarter 50% 50%
During 3rd Quarter 75% 25%
During 4th Quarter 100% 0%
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Note: An employee promoted from a position not eligible for
incentive opportunity to a position eligible for incentive
opportunity will be eligible only for those quarters in which
they held incentive eligible positions.
3. Terminations: To be eligible to receive the Performance
Incentive Plan payment for a calendar year, an employee must
be on the active payroll at the time payment for that
calendar year is made (i.e., the date the checks are issued).
4. Death or Retirement: Employees who retired or died during or
after the calendar year for which incentive is being
calculated and who met the requirement of being on the active
payroll during the year will be given consideration for an
incentive payment on basis of the following percentage of
full incentive opportunity: retired or died during the
calendar year in 1st Qtr - 25%; 2nd Qtr - 50%; 3rd Qtr - 75%;
during or after 4th Qtr - 100%.
Payment for deceased employees shall be made to the
beneficiary designated under the Salaried Employees Group Term
Life Insurance Plan.
Exception to the eligibility requirements must be approved by
the Chairman, Chief Executive Officer and President.
In the event of a major restructuring, Profit Plan goals will
be modified to reflect the impact of the restructure
adjustments; Performance Incentive Plan goals will not be
modified, but will be measured on the pre-restructure Profit
Plan.
B. PAYMENT Except as otherwise specifically provided
by this Policy 128 or its Supplement, payment for
Performance Incentive shall generally be annual,
and shall generally occur in the first quarter of
each year for the prior calendar year's results. NO
payment under this Policy 128 may be made prior to
the Board Compensation Committee's approval of
awards.
C. CALCULATIONS All incentive calculations will be rounded up to
the nearest $1.00 increment, provided employee is
eligible for incentive and such incentive is
approved.
D. DEFINITIONS
ACTIVE PAYROLL is defined as receiving salary (excluding severance
payments), as recorded on the Federal W-2 form, from the Corporation
or one of the Huffy Companies. Except for those terminated or
retiring or deceased employees described above, employees absent
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for any reason and not receiving salary (excluding severance payments),
as defined above, are not considered on the active payroll.
CONSOLIDATED RONA - Profit after tax after cost of plan plus tax
affected interest expense divided by the twelve (12) month rolling
average of total assets less current liabilities excluding all interest
bearing debt.
E.P.S. - Earnings per common share.
HUFFY COMPANY RONA - EBIT, tax affected at the current profit plan tax
rate, divided by the twelve (12) month rolling average of total assets
other than cash less current liabilities excluding all interest bearing
debt.
EBIT - Earnings before interest and taxes.
CASH FLOW - Cash Flow from operations, less capital expenditures, as
approved by the Board of Directors in their review of the annual Profit
Plan. The approved Profit Plan Cash Flow is to be adjusted after the
beginning of the new year to reflect the actual prior year ending
balance sheet.
ACTUAL BASE SALARY - Employee's actual base salary as of December 31 of
the calendar year for which incentive is calculated. For non-exempt
salaried participants, earned overtime will also be included.
PROMOTION - An increase of one or more salary grades from current salary
grade.
DEMOTION - A decrease of one or more salary grades from current salary
grade.
TRANSFER - A change in position with substantially different duties and
responsibilities which may not constitute a promotion or demotion.
DISTRIBUTION OF THIS POLICY 128
Corporate Officers, Huffy Company Presidents, and Staff Level positions.
INTERPRETATION AND EXCEPTIONS
Interpretation and exceptions to this policy will be the responsibility of the
Vice President Human Resources.
- ------------------------------------ -----------------------------------
Vice President - General Counsel and Chairman, President and Chief Executive
Secretary Officer
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