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Columbus McKinnon Corporation
MANAGEMENT VARIABLE COMPENSATION PLAN
APRIL 1, 2004
COLUMBUS MCKINNON CORPORATION
MANAGEMENT VARIABLE COMPENSATION PLAN
APRIL 1, 2004
This Management Variable Compensation Plan (the "Plan") will address the
variable compensation component for the management of Columbus McKinnon
Corporation (the Company) and will focus on Drivers (as defined below) that will
create the most value for the Company.
At the beginning of each fiscal year the Company's Board of Directors
("Board") will establish the Drivers of the Plan ("Drivers") and determine the
Targets with appropriate Multipliers for variable compensation payments. The
Drivers, Targets and Multipliers will be based on the Board's judgment about the
needs and current financial condition of the Company, the outlook, current and
expected economic conditions and other pertinent factors. Further, the Board
reserves the right to cap, amend, change participants, or terminate the Plan at
any time with appropriate notice to the Participants.
A. DRIVERS
The Board will determine annually the Drivers of the Plan. Generally, the
Drivers will be those items that are important to the success of the Company and
also those items that are generally within the control of the Participants.
B. TARGETS
The Board will establish annually the Targets for the Drivers. Targets will
generally be established for the Company as a whole and, if appropriate, Targets
will be established for the individual operating divisions or business units of
the Company. The actual results compared to the Targets will be based on the
audited year-end results and payments to the Participants according to the Plan
will be made no later than two and one-half months after the end of the fiscal
year.
C. MULTIPLIERS
The Board will determine annually the Multipliers that will correspond with
Targets for the Drivers. Multipliers establish the resulting payout level
relative to a Participant's Variable Compensation Percentage.
D. PLAN MAXIMUM (CAP)
The Board reserves the right to annually place a maximum payout that can be
earned under the Plan.
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E. MINIMUM ACHIEVEMENTS
Minimum achievements ("Floor") for Consolidated and/or Divisional Drivers
will be set or approved by the Board and the appropriate details will be
reflected in the Plan. All payments are subject to final approval by the Board,
based solely on their judgment of economic conditions, financial condition of
the Company or other reasons that, in their judgment, indicate whether payments
should or should not be made.
F. PARTICIPANTS
Participants are those employees who occupy the management positions in the
Company. The positions that participate in the Plan will generally be the
management positions of the Company whose job duties provide significant
opportunity to impact the accomplishment of the Targets and generally those who
have a variable compensation component to their salary. For the purpose of the
Plan, the following positions may be considered as Participants: CEO, Officers
of the Company, Operating Group Leaders, Business Unit Leaders, Corporate
Directors, General Managers and certain Direct Reports to the aforementioned
positions providing they have appropriate job duties to significantly impact the
Target(s).
G. VARIABLE COMPENSATION PERCENTAGES
Variable Compensation Percentages ("Percentages") are determined based on
the responsibility of the management positions, the position's ability to
influence the Drivers and the market needs and characteristics for those
positions. Each position that will be eligible for participation in the Plan
will have a Percentage of Base Pay assigned to it. This Percentage will be based
on two important criteria: 1) the span of control and scope of the position and
its ability to influence or affect the Drivers; and 2) the need to provide
variable compensation to meet the marketplace requirements to staff these key
positions. These Percentages may be divided between Consolidated and Divisional
results and are summarized as follows:
MEASUREMENT BASIS
-----------------
VAR. COMP. BUSINESS UNIT
POSITION PERCENTAGE OR DIVISION CONSOLIDATED
-------- ---------- ----------- ------------
Chief Executive Officer (CEO) 75% -- 100%
Executive Committee Members 45% -- 100%
Other Officers 35% -- 100%
Operating Group Leaders (OGLs) and
Business Unit Leaders (BULs) 45% 75% 25%
Corporate Directors 35% -- 100%
General Managers 35% 75% 25%
Direct Reports--Divisional 10% 100% --
Direct Reports--Corporate 10% -- 100%
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H. BASE PAY
Base Pay used for the fiscal year Variable Compensation calculations is
defined as the annual salary rate as of April 1 of that year.
I. ELIGIBILITY AND VESTING
In general, the Plan is intended to cover associates who are active in the
identified positions during the fiscal year. Associates entering or leaving the
positions will be handled as exceptions, but consistent with other provisions in
the Plan.
I. Eligibility and Vesting Guidelines
1. The plan covers the period April 1 through March 31 of the
respective fiscal year.
2. The Associate must be an employee of the Company or its
subsidiaries or operating divisions on May 1, following close of
the respective fiscal year, subject to the following:
a. Participants who have been terminated without cause
prior to May 1, will be considered on a case-by-case
basis.
b. Deceased or retired Participants (formally retired
having reached age 55 with at least 5 years service),
or Participants receiving short-term disability
benefits or workers' compensation benefits as of May 1
will be eligible for a payment under the Plan.
II. Transfers and New Entrants
Participants who enter the Plan or transfer in or out or within
Percentages during the Plan year will be prorated based on time in a
position.
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FY05 DRIVERS, TARGETS AND MULTIPLIERS
A. CONSOLIDATED DRIVERS:
Maximum Multiplier per Driver or total for both Drivers is 3 times the
respective percentage.
Due to the fact that the F/Y 05 consolidated operating income budget
reflects a reduction of the mathematical sum of the operating income budgeted by
each business unit, the Compensation Committee (made up of independent Board
Members) will review the final F/Y results, and recommend adjustments, if
needed, to ensure all participants are rewarded fairly. The Board will have
final approval.
I. EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(EBITDA)
Plan is self-funding. The following describes calculation
methodology for this Driver:
1. Pre-management variable compensation payout.
2. Pre-restructuring charges.
3. Pre-asset write-downs as a result of divestitures.
Payment
EBITDA Level Multiplier
----------------------------------------
$43.0 million (FLOOR) 0.250x
$46.7 million (BUDGET) 0.375x
$48.0 million 0.572x
$49.0 million 0.724x
$50.0 million 0.876x
$51.0 million 1.028x
$52.0 million 1.104x
$53.0 million 1.180x
$54.0 million 1.256x
$55.0 million 1.332x
$56.0 million 1.408x
$57.0 million 1.484x
$58.0 million 1.560x
$59.0 million 1.636x
$60.0 million 1.712x
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II. DEBT REDUCTION, NET OF CASH
Provision of payment from this Driver results in an EBITDA charge that
does not impact the calculation of the EBITDA Driver. The following
describes calculation methodology for this Driver:
1. Actual results will include proceeds from business divestitures
and property liquidations.
2. Must achieve a minimum EBITDA of $43 million to have a payout
under this Driver.
Payment
Net Debt Reduction Level Multiplier
---------------------------------------------
$14.8 million (FLOOR) 0.250x
$19.8 million (BUDGET) 0.375x
$24.8 million 0.755x
$25.8 million 0.831x
$26.8 million 0.907x
$27.8 million 0.983x
$28.8 million 1.059x
$29.8 million 1.135x
$30.8 million 1.211x
$31.8 million 1.287x
$32.8 million 1.362x
$33.8 million 1.438x
$34.8 million 1.514x
$35.8 million 1.590x
$36.8 million 1.666x
$37.8 million 1.742x
$38.8 million 1.818x
$39.8 million 1.894x
$40.8 million 1.970x
$41.8 million 2.046x
$42.8 million 2.122x
$43.8 million 2.198x
$44.8 million 2.274x
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B. DIVISIONAL OR BUSINESS UNIT DRIVERS:
Maximum Multiplier per Driver or total for both Drivers is 3 times the
respective percentage.
I. FACILITY OR BUSINESS UNIT OPERATING INCOME
1. Pre-management variable compensation cost.
2. Pre-restructuring charges.
3. Pre-asset write-downs as a result of divestitures.
4. Payment Multipliers have been set using same slope as
Consolidated Driver # 1. EBITDA.
5. Must achieve minimum consolidated EBITDA of $43M to have a
payout under divisional or Business Unit Drivers.
II. NET CHANGE IN INTER-COMPANY ACCOUNT, LESS CASH AND/OR DEBT (IF
RELEVANT)
1. Actual results will include proceeds from business
divestitures and property liquidations.
2. Must achieve the floor Operating Income level to have a
payout under this Driver.
3. Payment Multipliers have been set using the same slope as
Consolidated Driver # 2. Debt Reduction, net of cash.
4. Must achieve minimum consolidated EBITDA of $43M to have a
payout under divisional or Business Unit Drivers.
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