Exhibit 10.7
POBS -
Incentive System for the Management of METTLER TOLEDO
Regulations, valid as of Nov. 5, 1998
1. Objectives and Participants
With this incentive plan, our aim is to pursue two main objectives:
. To emphasize the responsibility of each manager for the top-ranking
interest of the Group and to promote the attainment of the overall
corporate goals; orientation to overall success of the corporation.
. To orient the remuneration of each manager directly to his / her
performance by setting clearly defined targets that can be met by the
manager, and subsequent measurement of target achievement.
Participation in the POBS must be agreed in writing. Participation must be
commensurate with the function, appropriate goals must be definable and
assessable in a realistic manner.
2. Mechanics
2.1 Participants are assigned to one of two categories in agreement with POBS.
Category Minimum Maximum
Annual Salary Annual Salary
---------- ------------- -------------------------------
Category 1 90 % 120 % (of actual Target Salary)
Category 2 95 % 110 %
2.2 For each manager, targets are agreed for each calendar year with his / her
supervisor. Each individual target is given a weighting. The sum of the
weightings must equal 100 %.
2.3 Criteria for the assessment of the attainment of each individual target
are specified:
Target
Achievement
-----------
90 % Target not reached - result unsatisfactory
100 % Target reached, corresponding to the requirements - good result
110 % Clearly more than target achieved, requirements clearly exceeded,
in terms of value, time limits, quality, additional related success
- very good result
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Exhibit 10.7
120 % Target achievement outstanding, additional major benefits / success
for the company reached - excellent result
2.4 The annual target salary is determined for the period January 1 to
December 31 (Switzerland: April 1st to March 31) of the upcoming year. It
should be commensurate with the requirements of the function and, hence,
conform to the market. It is reached when each of the set targets has been
achieved well and completely.
2.5 At the end of the calendar year, target achievement is assessed by the
superior manager. The degree of achievement of each individual target (90
to 120 %), see above) is multiplied by the weighting of the individual
target to give a points award for each individual target. The total score
for all targets lies between 90 and 120 points. The effective annual
salary (in % of target salary) is the result of target salary multiplied
by the total score and divided by 100 (Category 1). For Category 2, the
conversion has to be made to the total number of points:
Annual Salary in % of Annual Target Salary
with different Degree of Target Achievement
Total Point achieved Category 1 Category 2
90 points 90 % minimum 95 %
100 points 100 % 100 %
110 points 110 % 105 %
120 points 120 % maximum 110 %
The intermediate steps are linear:
. 1 point counts 1 % of target salary in Category 1
. 1 point counts 0.5 % of target salary in Category 2
3. Target Setting
3.1 The requirements for complete and proper target achievement (100 %) should
be challenging and ambitious, on the other hand, they have to be realistic
and attainable. For each participant, they should be set in such a way
that they can be fulfilled clearly and to the full extent so that payment
of the target salary can be realized on the yearly average.
3.2 Each POBS sheet includes the following target categories
A Group targets - as a rule 1 - 2 targets
B Targets of operative unit - as a rule 1 - 4 targets
C Personal targets - as a rule 1 - 2 targets.
The GMC establishes the basic weighing of the targets annually.
In case of the change of important conditions by internal reasons (e.g.
changes in the mission, the assignment, the scope, the available means),
the targets will be adjusted in a fair way by dialogue with the superior
manager.
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Exhibit 10.7
4. Yardsticks for Target Achievement
A correct determination of target achievement is of prime importance. It
is decisive that the activities of the participants are really oriented to
the desired targets. Specification of the correct yardsticks helps
visualize the intended direction. In particular, it must be ensured that
quantitative targets are set in the right context and do not lead to wrong
decision processes and behavior, e.g. local optimization regardless of
negative effects in other units. It is advisable to specify relative
numbers and not absolute values (e.g. % of budget). Targets should not
overlap with nor be in contradiction to each other.
A Group Targets
As a basis target, values referring to the profit and / or liquidity
of the METTLER TOLEDO Group are determined annually by the GMC
together with the weighting. They have to be approved by our Board of
Directors.
B Targets of Operative Unit
Emphasis is placed on the operative performance of the business unit.
The targets must be agreed between the employee and his superior
manager in a target dialogue and authorized by their responsible
supervisor. As a rule, they result from the budget, in proportion to
the task.
Possible Target Parameters
General Managers MOs Sales, operational,
cash flow (OCF), return on
assets (ROA), country
contribution, costs, ratios of
assets
General Managers POs OCF, OPBIT, ROA, contribution
Business Unit Managers Sales, OCF, OPBIT, cost,
contribution, assets and
Managers Administration
Division and SBU Managers Consolidated OPBIT etc.
C Personal Targets
The personal targets are established in an intensive dialogue between
the employee and his / her superior manager within the set framework
and must be authorized by their responsible supervisor.
They can be quantitative and / or qualitative, job-oriented
objectives which must be agreed individually in the target dialogue.
An intermediate assessment should be recorded in brief by the
participant every quarter.
Possible Yardsticks
Progress of project and action programs; leadership behavior, trainee
promotion, orientation to our Corporate Mission Statement, TQM
progress, broadening of competence.
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Exhibit 10.7
5. Payment
During the salary year, 90 % of the target salary (minimum annual salary)
will be paid, normally divided in 12 equal monthly installments. The
distribution of this basic amount, however, can vary in certain countries.
The Company represented by the Group Management Committee can elect to
make a payment on account toward the expected effective annual salary in
December of the relevant business year which is calculated on a
provisional basis using projected results. The amount of such payment on
account can not exceed 50 % of the presumable total incentive payment.
The annual salary effectively attained is calculated as soon as the
results of the business year and the assessment of the target achievement
are known. The difference to the payments already made is usually paid (or
deducted) until April following the end of the business year.
6. Termination of Employ during the Calendar Year
In case of termination in the first half-year of the calendar year, the
target salary is paid (100 %) pro rata. In case of termination of employ
in the second half-year, target achievement is measured at the end of the
year (usual procedure) and the remaining balance will be paid pro rata.
7. Effective Date
These regulations are valid as of 1993 and replace all previous
regulations.
For the Group Management Committee:
Peter Burker
Head Human Resources
Enclosure Example of Settlement
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Exhibit 10.7
Example of POBS Settlement
The calculation is performed for both POBS categories (category 1 = 90 / 120 %;
category 2 = 95 / 110 %.
1. Fundamentals
Target with weighting specified (see under point 3).
POBS Category Category 1 Category 2
(90 / 120 %) (95 / 110 %)
------------- ------------
Annual target salary (local currency) 110'000.00 or 110'000.00
Maximum income / year 132'000.00 or 121'000.00
Minimum income / year 99'000.00 or 104'500.00
2. Assessment of the Target Achievement and Calculations
Group Target Specified Assessment Result
Weighting Target Achievement Points
(Agreement) on completion
(a) (b) (a) x (b)
----------- ------------------ ---------
A Group Targets
A1 Target 1 10 % 120 % 12.00
A2 Target 2 20 % 105 % 21.00
B Operative Unit
B1 Target 1 30 % 116 % 34.80
B2 Target 2 15 % 95 % 14.25
B3 Target 3 15 % 111.35 % 16.70
C Personal
C1 Target 1 5 % 90 % 4.50
C2 Target 2 5 % 120 % 6.00
Total assessment 100 % 109.25
3. Settlement
Category 1 Category 2
(90 / 120 %) (95 / 110 %)
------------- ------------
Annual target salary 110'000 110'000
Annual salary attained with 109.25
points in % of annual target salary 109.25 % 104.63 %
In local currency (LC) 120'175 115'093
Already paid during year (minimum) (99'000) (104'500)
------- --------
Balance of payment in April of following year 21'175 10'593
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