SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT made as of the 15th day of April, 1998, by and between HOSOKAWA MICRON
INTERNATIONAL INC., a Delaware corporation with its corporate offices at 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter called the "Company"), and
Xxxxxxx X. Xxxxxxx, residing at 00 Xxxxxxx Xxxx, Xxxxxx, Xxxxxxxxxxx 00000
(hereinafter called the "Executive").
WITNESSETH:
WHEREAS, the Executive has served the Company as its Executive Vice President
and Chief Financial Officer (CFO);
WHEREAS, the Company desires to continue to employ the Executive in such
capacity and the Executive is willing to continue to serve the Company in such
capacity;
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions of such employment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements herein contained, the Company and the Executive agree as follows:
1. Employment. The Company hereby agrees to continue to employ the Executive,
and the Executive agrees to be employed by the Company, on the terms and
conditions herein contained.
2. Term. Except as otherwise provided in this Agreement, the Executive shall
be employed under this Agreement for an initial four-year term commencing
on the date hereof. The period during which the Executive is employed
hereunder is referred to as the "Employment Term." The Employment Term
shall be automatically renewed for successive two-year terms unless the
Company shall give the Executive written notice of non-renewal at least
six months prior to the end of the then current term. The Executive may,
at any time, terminate the Employment Term by giving the Company 120 days
prior written notice of the effective date of such termination. Upon the
effective date of a termination of the Employment Term per the preceding
sentence, the Company shall have no obligation to the Executive hereunder
other than to pay or provide the Entitlements.
3. Duties. The Executive shall serve as the Company's Executive Vice
President and CFO, and as such, will be responsible for the financial
plans, policies and controls, including audit and accounting operations,
for the Company and certain other
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Corporate staff functions which may include human resources, corporate
marketing, information systems and communications and investor and public
relations. The Executive shall perform his duties hereunder at the Company's
facilities located at 000 Xxxxx Xxxxxx, Xxx Xxxx, XX XXX (the "Employment Site")
and shall be available to travel, as may be required in connection with the
performance of his duties hereunder. In no event will the Executive be required
to undertake any duties or perform any tasks which are inconsistent with his
status in the Company. During the Employment Term, the Executive shall devote
substantially all of his business time, attention, skill and efforts to the
performance of his duties hereunder; provided, however, that the Executive may
serve as director of other corporations, if such service does not conflict in
any material respect with his duties hereunder or his fiduciary duty to the
Company, and provided the Executive has prior written approval from the Company.
Nothing herein shall prevent the Executive from managing his personal
investments and participating in charitable and civic endeavors, so long as such
activities do not materially interfere with the Executive's performance of his
duties hereunder.
4. Base Sala[y. During the Employment Term, the Company shall pay the
Executive, in accordance with its normal payroll practices and subject to
required withholding, a base salary which, shall be at the annual rate of
$265,000. The base salary may be increased annually, commencing on October
1, 1998, by an amount to be determined by the Company, in its sole
discretion. Once increased, the base salary hereunder may not be
decreased. The base salary, as increased from time to time, is hereinafter
referred to as the "Base Salary."
5. Incentive Compensation. During the Employment Term, the Executive shall be
entitled to incentive compensation ("Incentive Compensation") pursuant to
the terms of the Company's incentive compensation plan, a copy of which is
attached hereto as Exhibit A and any other annual programs or plans
hereafter adopted by the Company.
6. Certain Other Compensation and Benefits. During the Employment Term, the
Executive shall be entitled to:
(a) participation in all benefit, pension, retirement, savings, welfare and
other employee benefit plans and policies in which members of the
Company's senior management generally are entitled to participate
(collectively, the "Benefit Plans"), in accordance with their respective
terms as in effect from time to time and as listed in Exhibit B.
(b) vacation each year in accordance with the Company's policies for members
of senior management in effect from time to time, but in no event less
than twenty days paid vacation for each calendar year (twenty-five days
after fifteen years of employment with the Company and/or any of its
Affiliates) (for purposes of this Agreement, the term "Affiliate" means
an entity controlled by, in control of, or
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under common control with, the Company);
(c) use of an automobile and the costs of fuel, maintenance, repairs and
insurance associated with such automobile pursuant to the terms of the
Company's policy concerning senior executives' automobiles, as such
policy is in effect from time to time, and in the absence of any such
policy, as such policy was last in effect.
(d) life insurance, in addition to any provided to employees of the Company
generally, on the life of the Executive for the benefit of the
Executive's designated beneficiaries as detailed in Exhibit C.
(e) long-term disability coverage for the Executive under the plan or policy
per Exhibit D.
(f) medical and dental insurance for the Executive, his spouse, and his
dependents as detailed in Exhibit E.
(g) such other benefits as the Executive is currently provided and noted in
Exhibit F.
7. Death Prior to Termination of Employment. If the Executive shall die
during the Employment Term, the Company shall have no liability or further
obligation except as follows:
(a) The Company shall pay the Executive's estate, when otherwise due, any
unpaid Base Salary for the period prior to the Executive's death, any
declared or awarded but unpaid Incentive Compensation and any other
unpaid amounts due the Executive under any other Benefit Plans
(collectively, the "Entitlements").
(b) The Executive's estate shall have such rights, if any, under employee
benefit, fringe benefit or incentive plans as may be provided in such
plans and any grants thereunder in accordance with their respective
terms.
8. Common Stock Ownership. No later than five (5) years after the date the
Company's Common Stock is listed on a United States stock exchange and at
all times thereafter during the Executive's employment by the Company, the
Executive must own, directly or beneficially, Common Stock of the Company
with an aggregate fair market value equal to (i) one times his Base
Salary; or (ii) such greater amount as is required under the current
ownership guidelines, if any, as may be established by the Board of
Directors of the Company, provided, however, that in no event shall the
Executive be required to own Common Stock having a value equal to more
than three (3) times his Base Salary. To the extent permitted under
applicable law and subject to agreement between the Executive and the
Company, the Company may assist the Executive in obtaining financing to
effectuate the purchases of Common Stock necessary to meet
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the requirements of this section which may include Company guarantees and
adjustment of incentive and bonus programs to provide that up to fifty
percent (50%) of any awards may be paid in Common Stock to an Executive
who does not meet the requirements of this section.
9. Disability. If the Executive shall be physically or mentally incapable of
performing his material duties as provided in Section 3 of this Agreement
during a period of not less than one hundred eighty (180) consecutive
days, the Company may, at its election at any time thereafter while the
Executive remains incapable of performing his material duties hereunder,
terminate the Executive's employment hereunder, effective immediately, by
giving the Executive written notice of such termination. In such event,
the Company shall have no other obligation to the Executive or his
dependents hereunder other than the obligation to pay or provide the
Entitlements.
10. Cause. The Company may terminate the Executive's employment hereunder for
Cause by giving the Executive written notice of immediate termination. For
purposes of this Agreement, "Cause" shall mean (a) the Executive's
dishonesty, misappropriation, willful breach of fiduciary duty or fraud
with regard to the Company or any of its assets or businesses which has a
material adverse effect on the Company; (b) the Executive's conviction of
or pleading of nolo contendere with regard to a felony (other than traffic
violations) or any other crime involving moral turpitude; or (c) any other
breach by the Executive of a material provision of this Agreement that
remains uncured for thirty (30) days after written notice thereof is given
to the Executive. If the Executive's employment hereunder is terminated by
the Company for Cause, the Company shall have no other obligation to the
Executive hereunder other than the obligation to pay or provide the
Entitlements.
11. Good Reason. The Executive may terminate his employment hereunder for Good
Reason provided that there has first occurred a Change in Control of the
Company as defined in Section 9.2 of the Company's 1997 Stock Option Plan
and provided that the Executive provides written notice to the Company.
For purposes of this Agreement, "Good Reason" shall mean the occurrence or
failure to cause the occurrence of any of the following events without the
Executives express prior written consent after a Change in Control: (a)
any material demotion of the Executive, any material reduction of the
Executive's authority or responsibility or any other change in the terms
of the Executive's authority or responsibility or any other change in the
terms of the Executive's employment which is inconsistent with Section 3
hereof; (b) the Company requiring the Executive to perform services
hereunder at any location outside a 60-mile radius from the Employment
Site or the Company requiring the Executive to work in an office of
substantially inferior characteristics or without the personnel assistance
and support currently provided the Executive; or (c) any breach by the
Company of any provision of this Agreement which is not cured by the
Company within 30 days after notice thereof from the Executive. If the
Executive's
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employment hereunder is terminated by the Executive without Good Reason,
the Company shall have no other obligation to the Executive hereunder
other than the obligation to pay or provide the Entitlements.
12. Termination of Employment by the Executive for Good Reason after a Change
in Control or by the COMDanv Without Cause: Non-renewal of Agreement. In
the event; (i) the Executive terminates his employment for Good Reason
pursuant to Section 11 hereof; or, (ii) the Company terminates the
Executive's employment other than for Cause or due to a disability
pursuant to Section 9 hereof; or, (iii) the Executive's employment
hereunder terminates due to the non-renewal hereof following notice of
such non-renewal given by the Company, then, in any such event, the
Company shall be deemed to have breached this Agreement, and the Executive
shall be entitled to the following:
(a) in a lump sum (to the extent such obligations are capable of being paid
in a lump sum under the terms of the plan with respect to which such
obligation arose) in cash within thirty business days after the date of
termination, and, otherwise, in accordance with the terms of the
applicable plan or applicable law, any and all Entitlements as of the
date of termination of employment; and
(b) as severance pay, within thirty business days after the date of
termination, a lump sum in an amount equal to the greater of (A) the
Executive's Ending Compensation, hereinafter defined, multiplied by the
number of years (including any fraction of a year) in the period from the
date of termination of employment to the date the Employment Term would
have otherwise expired pursuant to Section 2 hereof (the "Remaining
Term"); or (B) the Executive's Ending Compensation multiplied by two. For
purposes of this Agreement, the Executive's Ending Compensation means the
sum of (A) one year's Base Salary at the annual rate in effect
immediately prior to such termination of employment; and (B) the average
of the Incentive Compensation paid or payable to the Executive in respect
of the three full years preceding the date of termination of employment.
13. Non-Competition: Confidential Information.
(a) The Executive agrees that, if he terminates his employment hereunder
other than for Good Reason pursuant to Section 11 hereof, or if his
employment hereunder is terminated for Cause, he will not for a
period of two years after such termination of employment with the
Company, in any manner, directly or indirectly (or have a
substantial ownership in, manage, operate, or control any entity
which shall directly or indirectly) (i) perform, or cause to be
performed, or solicit or aid, in any manner, solicitation of, any
work of a type performed by the Company for any firm, corporation,
or other entity ("Customer") with which, at any time during
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the twelve (12) month period prior to termination of the Employment Term,
the Company or any subsidiary conducted any business; or (ii) induce any
personnel to leave the service of the Company or of any subsidiary of the
Company. Within two weeks of a written request of the Executive following
termination of the Employment Term, the Company shall deliver to the
Executive a list of Customers and the Executive shall within two weeks
after such delivery on reasonable prior notice have the right during
normal business hours to examine such books and records of the Company as
shall be reasonably necessary to confirm that only the names of Customers
are set forth on the list.
(b) The Executive shall hold in a fiduciary capacity for the benefit of
the Company all secret or confidential information, knowledge or
data relating to the Company and its subsidiaries, and their
respective businesses, (i) obtained by the Executive during his
employment by the Company or any of its subsidiaries; and (ii) not
otherwise public knowledge or known within the Company's industry.
After termination of the Executive's employment with the Company,
the Executive shall not, without prior written consent of the
Company, unless compelled pursuant to a court order, communicate or
divulge any such information, knowledge or data to anyone other than
the Company and those designated by it.
(c) After termination of the Executive's employment with the Company,
the Executive shall refrain from disparaging, whether orally, in
writing or in other media, the Company, its subsidiaries and
Affiliates, the officers, directors and employees of each of them,
and the products and services of each of them.
(d) The Executive agrees that the remedy at law for any breach by him of
the foregoing shall be inadequate and that the Company shall be
entitled to injunctive relief. This Section constitutes an
independent and separable covenant that shall be enforceable
notwithstanding any right or remedy that the Company may have under
any other provision of this Agreement or otherwise.
14. No Mitigation; No Set-Off. The Company agrees that if the Executive's
employment with the Company is terminated for any reason whatsoever, the
Executive is not required to seek other employment or to attempt in any
way to reduce any amounts payable to the Executive by the Company pursuant
to this Agreement. Further, the amount of any payment or benefit provided
for in this Agreement shall not be reduced by any compensation earned by
the Executive or benefit provided to the Executive as the result of
employment by another employer or otherwise. Notwithstanding anything to
the contrary contained herein, the Company's obligation, if any, following
termination of the Executive's employment hereunder, to provide any
ongoing benefits of a type provided for in Sections 6(a), (d), (f), and
(g) hereof, shall be excused for so long as, and to the extent that, such
benefits are provided by a subsequent employer of the Executive.
Page 6 of 8
15. Garnishment. The benefits payable under this Agreement shall not be
subject to garnishment, execution or levy of any kind, and any attempt to
cause any benefits to be so subjected shall not be recognized.
16. Notice. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, or sent by
certified mail, return receipt requested, by overnight delivery or courier
service, or by telecopy. Notice to the Executive shall be delivered to his
address set forth at the beginning of this Agreement, and notice to the
Company shall be sent to the address set forth at the beginning of the
Agreement to the Attention: General Counsel
Any notice given by certified mail shall be deemed given five days after
the time of certification thereof. Any notice given by other means
permitted by this Section 16 will be deemed given at the time of receipt
thereof.
Either party may, by notice given in accordance with this Section 18 to
the other party, designate another address or person for receipt of
notices hereunder.
17. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without
reference to its conflicts of law provisions.
18. Binding Agreement. Notwithstanding anything herein to the contrary, this
Agreement may not be assigned by the Company without the prior written
consent of the Executive. This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. This Agreement is personal to the Executive and neither this
Agreement nor any rights hereunder may be assigned by the Executive.
19. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer of the Company as may
be specifically designated. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any
condition or provision shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
This Agreement constitutes the entire Agreement between the parties hereto
pertaining to the subject matter hereof. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement.
20. Counterparts. This Agreement may be executed in several counterparts, each
of
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which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
21. Separability. If any provisions of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provision hereof which
shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed
and the Executive has hereunto set his hand as of the date first set forth
above.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ Xxxx Xxxx
-------------
Name: XXXX XXXX
Title: President C.E.O.
XXXXXXX X. XXXXXXX
/s/ Xxxxxxx X. Xxxxxxx
-------------------
Name:
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EXHIBIT A TO THE SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
dated April 15, 1998
between
HOSOKAWA MICRON INTERNATIONAL INC. ("Company") and
Xxxxxxx X. Xxxxxxx
("Executive")
Hosokawa Micron International Inc.
Management Incentive Plan
0bjectives
The purpose of a Management Incentive Plan (the "Plan") is to provide cash
rewards to key employees who contribute to the achievement of corporate-wide
goals established for the company overall and its business units.
Eligibility
Individuals with Corporate or Business Segment responsibilities at the Vice,
President level and above are eligible for participation in the Plan. In
addition, the President or Executive Vice President and General Manager of each
Operating Unit and salaried employees, at the Director level and above,
reporting directly to the President or Executive Vice President and General
Manager of each Operating Unit are eligible to be nominated for participation.
Participation below this level may be provided for on an exception basis. All
participants participation requires the annual approval of the Chief Executive
Officer.
Note: Participation in this Management Incentive Plan is restricted to those
Units that have a planned (budgeted) Pretax income which exceeds US $500,000.
Awards to individuals hired or promoted into eligible positions during the year
will be determined on a pro rata basis. Individuals hired or promoted on or
after July 1 will not be eligible for an award for that year.
Awards
Each participant will be assigned a target award, expressed as a percentage of
base salary in effect at the beginning of the year. The target award will be
paid if business unit financial performance objectives at the target level
(e.g., 100% of Business Plan) and individual goals are achieved in full. If
financial performance objectives and individual goals are exceeded, awards will
increase up to pre-established maximum amounts. Target and maximum incentive
awards are shown below:
Position Target Award Maximum Award
Corporate SVP's/Business 40% 80%
Segment Presidents and above
Corporate/Business Segment 30% 60%
VP's/BU President or GM
Unit VP or Directors 20% 40%
Each business unit will establish an accrual equal to the sum of the Target
Awards of approved participants. The accrual is to be adjusted periodically
during the year based on the business unit's financial results. All financial
results (e.g., Pre-Tax Income and Cash Flow) will be measured after the full
cost of incentive awards are accrued.
Performance Weightings
As described, awards will be based on a combination of business unit financial
performance and individual performance. The performance factor weightings used
will vary by position to reflect each participants responsibilities and impact.
If a participant's employment terminates for any reason other than death,
disability or retirement, before the end of the fiscal year, no award will be
made. If a participant's employment terminates because of death, disability or
retirement during the fiscal year, a pro rata award will be made.
Financial Objectives and Performance Measures
At the beginning of each year, financial objectives will be established for each
business unit, subject to the approval of the Chief Executive Officer, and
communicated to participants. The financial objectives will specify three levels
of achievement:
1. A Target performance that represents expected results for the business
unit for the year, i.e. Fiscal Year Plan;
2. A Maximum performance objective that represents outstanding performance
and is substantially greater than the target level; and,
3. A Threshold performance objective that is less than the target and
represents the minimum level of performance for which bonus will be paid.
Financial performance objectives will be measured against the Business Plan
(Budget) approved for the year. If actual financial performance for a business
unit is below 85% of the Business Plan, no award is earned.
Two performance measures will be used to establish business unit financial
performance objectives as compared to the approved Business Plan:
The performance weightings are shown below:
Performance Factor Weightings
-----------------------------
Business Business
Position Corporate Segment Unit Individual
-------- --------- ------- ---- ----------
Corp. Staff 80% 20%
Bus. Segment 40% 40% 20%
Staff
Unit President/
General Manager 20% 20% 40% 20%
Other Unit Staff 20% 50% 30%
For example, 80% of the award for participants with Corporate responsibilities
will be based on achievement of Corporate financial performance objectives and
20% of the award will be based on individual performance. For a business unit
President or General Manager, 20% of the award will be based on the achievement
of the Corporate financial performance objectives, 40% on achievement of
business unit financial performance objectives, 20% on Business Segment
financial performance objectives, and 20% on individual performance objectives.
Weightings may be adjusted by the Chief Executive Officer at the beginning of
the year. Any change in the performance factor will be communicated promptly to
participants.
Financial Performance Objectives
The performance scale shown below identifies threshold, target and maximum
financial performance objectives that will apply to business unit (Corporate,
Business Segment and Business Unit) financial performance. The performance scale
also identifies the corresponding award payout levels, expressed as a percentage
of the target awards assigned to participants with business unit (Corporate,
Business Segment, and Business unit) responsibilities.
Financial Performance Objectives
Percent of Award
Business Plan Payout
Performance Level Achieved Percentage
Maximum 200% 200%
150% 150%
Target 100% 100%
Threshold 85% 70%
Below Minimum Less than 85% 0%
If actual results fall in between the Performance Levels specifically identified
on the scale, straight-line interpolation will be used to determine the
corresponding Award Payout Percentage. As the performance scale indicates, for
each 1% over the Business Plan for business unit Pre-Tax Income and Cash Flow,
the award Payout Percentage increases by 1%. Conversely, for each 1% decrease
below the Business Plan, the Award Payout Percentage decreases by 2%.
At the end of the year, actual Pre-tax Income and Cash Flow of each business
unit will be compared to the performance objectives scale. Comparisons will be
made in local currency. The Award Payout Percentage will be determined
separately for each of these two performance measures. Each Award Payout
Percentage will be multiplied by the assigned weighting (70% weighting for
Pre-tax Income and 30% weighting for Cash Flow) with the result added together
to develop an overall Award Payout Percentage for the business unit.
When determining the overall Award Payout Percentage for a business unit, the
maximum Award Payout Percentage applied to a single performance measure is 200%.
If actual results on a single measure are less than 85% of Plan, zero credit
will be applied towards the overall Award Payout Percentage. If the overall
Award Payout Percentage for a business unit is less than 70%, no bonus payments
will be made to any participants in the business unit.
The Company reserves the right to adjust the business unit performance scales
in the beginning of each year on a case by case basis to reflect special
situations. Participants affected by any such adjustments will be notified
promptly. The Company reserves the right to change the performance scales in
future years.
Award Determination and Payment
The Chief Financial Officer will determine Award Payout Percentages for each
business unit within 15 days after final financial results are known for the
year. Award Payout Percentages will be communicated to each business unit
President or General Manager who will develop award recommendations for
Pre-Tax Income 70%
Operating Cash Flow 30%
----
Financial Performance 100%
----
Individual Performance
Each participant will establish individual goals that contribute to the
achievement of the business unit's financial objectives. Individual goals are to
be submitted in writing for approval, as described below, by October 15 of each
year.
a) Individual goals prepared by Business Segments Presidents will be approved
by the Chief Executive Officer.
b) Individual goals prepared by business unit Presidents or Executive Vice
Presidents and General Managers and business segment participants will be
approved by the Business Segment President.
c) Individual goals of other business unit participants will be approved by
the business unit President or Executive Vice President and General
Manager.
d) Individual goals of Corporate participants will be approved by the Chief
Executive Officer or his designee.
Note: All individual objectives are to be specific and measurable.
each participant in the business unit based on the Award Payout Percentage and
individual performance ratings.
Individual performance ratings of participants may range from 0% to 200%.
The following guidelines should be used to establish individual ratings:
Outstanding 150% to 200% Substantially exceeds all goals
Above Expectations 120% to 150% Substantially exceeds most
goals; meets all goals
Meets Expectations 80% to 120% Meets essentially all goals
in a fully satisfactory manner
Below Expectations 40% to 80% Does not meet majority of
goals in a satisfactory manner
Unsatisfactory 0% to 40% Substantially fails to achieve
individual goals
Award recommendations for business unit participants are to be submitted to the
Chief Financial Officer, via the Business Segment Office. Award recommendations
for Corporate and Business Segment participants are to be submitted to the Chief
Financial Officer. The Chief Financial Officer will summarize all
recommendations and submit the recommendations to the Chief Executive Officer
for approval. Cash payments will be made as soon as is practical after financial
results for the year have been established. Payments will be reduced by all
withholding amounts required by federal, state or other taxing authorities.
Examples
Here are several examples of how the Plan will work in an business unit:
Example 1
Assume a business unit has budgeted Pre-tax income of $2,000,000 and Cash Flow
of $2,600,000. Actual results for the year indicate Pre-tax income of $3,000,000
and Cash Flow of $3,250,000. The Award Payout Percentage for the business unit
is calculated as follows:
Actual PTI/Budgeted PTI $3,000,000/$2,000,000 = 150% x 70% = 105 %
Actual CF/Budgeted CF $3,250,000/$2,600,000 = 125% x 30% = 37.5%
Business Unit Award Payout Percentage=142.5%
Since actual results are greater than 100% of budget, actual/budget equals the
Award Payout Percentage, no interpolation is required.
The business unit Award Payout Percentage will be used to determine 40% of the
business unit President's bonus. Corporate and Business Segment financial
performance and individual performance will each count for 20%. In this example,
assume that Business Segment and Corporate performance and individual
performance are each rated at 100%.
Operating Unit President
Salary $120,000
Target Award 30% or $36,000
Percent of
Award Target
Performance Factor Payout Award
Weightings Percentage Earned
Corporate 20% 100% 20%
Business Segment 20% 100% 20%
Business Unit 40% 142.5% 57%
Individual 20% 100% 20%
----
Total 117%
The business unit President will receive a bonus of $42,120 (117% of the target
award).
Bonus awards to unit VP's will depend on business segment, business unit and
individual performance. Assume a unit VP earns a salary of $70,000. The bonus
award to the unit VP who fully meets his/her individual goals will equal $16,982
(121.3% of the target award).
Unit VP
Salary $70,000
Target Award 20% or S 14,000
Percent of
Award Target
Performance Factor Payout Award
Weightings x Percentage Earned
Bus Segment 20% 100% 20%
Business Unit 50% 142.5% 71.3%
Individual 30% 100% 30%
----
Total 121.3%
However, since the Award Payout Percentage for the individual component can vary
from 0% to 200%, the bonuses will normally vary. In this example, the Total
Award Payout Percentage could range from a minimum of 91.3% to a maximum of
151.3% of the target award. Actual bonuses could range from $12,782 to $21,182
depending on individual achievement.
Example 2
Assume again that a business unit budgeted Pre-tax Income of $2,000,000 and Cash
Flow of $2,600,000. Actual results for the year indicate Pre-tax Income of
$1,800,000 and Cash Flow of $2,340,000. The Award Payout for the business unit
is calculated as follows:
Actual PTI/Budgeted PTI $1,800,000/$2,000,000 = 90%
PTI Award Payout Percentage=80% x 70% = 56%
Actual CF/Budgeted CF $2,340,000/$2,600,000 = 90%
CF Award Payout Percentage 30% x 30% = 24%
--
Business Unit Award Payout Percentage 80%
Since actual results on both performance measures is less than 100% of Budget,
interpolation using the 1:2 factor, explained in the Performance Factor
Weightings section above, is used to determine the Award Payout Percentage. For
example, Since PTI is 10% below budget, the Award Payout Percentage is reduced
by 20% points and equals 80%.
The business unit Award Payout Perceritacre will be used to determine 40% of the
business unit President's bonus. Corporate, Business Segment financial
performance and Individual performance will each account for 20%. In this
example, assume that both Business Segment and Individual performance are rated
at 100%.
Business Unit President
Salary $120,000
Target Award 30% or S36,000
Percent of
Award Target
Performance Factor Payout Award
Weightings x Percentage = Earned
Corporate 20% 100% 20%
Bus Segment 20% 100% 20%
Business Unit 40% 80% 32%
Individual 20% 100% 20%
----
Total 92%
The business unit President will receive a bonus of $33,205 (92% of the Target
Award).
Bonus awards to other unit staff will depend on business unit and individual
performance. Assume a unit VP earns a salary of $70,000. The bonus award to the
unit VP who fully meets his individual goals will equal $12,600 (90% of the
Target Award).
Unit VP
Salary $70,000
Target Award 20% or $14,000
Percent of
Award Target
Performance Factor Payout Award
Weightings x Percentage = Earned
Bus Segment 20% 100% 20%
Business Unit 50% 80% 40%
Individual 30% 100% 30%
----
Total 90%
However, since the Award Payout Percentage for the Individual component can vary
from 0% to 200%, the bonuses will normally vary. In this example, the Total
Award Payout Percentage could range from a minimum of 60% to a maximum of 120%
of the Target Award. Actual bonuses could range from $8,400 for an individual
who achieves none of his/her individual goals to $16,800 for an individual who
makes an outstanding contribution.
Example 3
Assume again that a business unit has budgeted Pre-tax Income of $2,000,000 and
Cash Flow of $2,600,000. Actual results for the year indicate Pre-tax Income of
$1,600,000 and Cash Flow of $2,300,000. The Award Payout Percentage is
calculated as follows:
Actual PTI/Budgeted PTI $1,600,000/$2,000,000 = 80% = 0%
Actual CF/Budgeted CF $2,300,000/$2,600,000 = 88.5
Cash Flow Award Payout Percentage 77.0% x 30% = 23.1%
-----
Business Unit Award Payout Percentage = 23.1%
Since 80% is below the threshold level of performance set for Pre-tax Income
(85% of the Budget), the business unit receives no Pre-tax credit. Since the
overall Award Payout Percentage is below the 70% threshold, no bonus payments
are made to the business unit President or his staff.
Example 4
Assume again that a business unit has budgeted Pre-tax Income of $2,000,000 and
Cash Flow of $2,600,000. Actual results for the year indicate Pre-tax Income of
$3,800,000 and Cash Flow of $5,450,000. The Award Payout Percentage for the
business unit is calculated as follows:
Actual PTI/Budgeted PTI $3,800,000/$2,000,000 = 190% x 70% = 133%
Actual CF/Budgeted CF $5,450,000/$2,600,000 = 210%
200% x 30% = 60%
----
Business Unit Award Payout Percentage 193%
Since the maximum Award Payout Percentage is 200%, 200% rather 210% is used to
calculate the Award Payout Percentage for Cash Flow.
The business unit Award Payout Percentage will be used to determine 40% of the
business unit President's bonus. Corporate and Business Segment financial
performance and Individual
performance will each count for 20%. In this example, assume that both Business
Segment performance and Individual performance are rated at 100%.
Business Unit President
Salary $120,000
Target Award 30% or $36,000
Percent of
Award Target
Performance Factor Payout Award
Weightings x Percentage = Earned
Corporate 20% 100% 20%
Bus Segment 20% 100% 20%
Business Unit 40% 193% 77.2%
Individual 20% 100% 20%
----
Total 137.2%
The business unit President will receive a bonus of $49,392 (137.2% of the
Target Award).
Bonus awards to unit VP's will depend on business unit and individual
performance. Assume a unit VP earns a salary of $70,000. The bonus award to the
unit VP who fully meets his/her individual goals will equal $20,510 (146.5% of
the Target Award).
Unit VP
Percent of
Award Target
Performance Factor Payout Award
Weightings x Percentage = Earned
Bus Segment 20% 100% 20%
Business Unit 50% 193% 96.5%
Individual 30% 100% 30%
----
Total 146.5%
However, since the Award payout Percentage for the Individual component can vary
from 0% to 200%, the bonuses will normally vary. In this example, the Total
Award Payout Percentage could range from a minimum of 116.5% to a maximum of
176.5% of the Target Award. Actual Bonuses could range from $16,310 to $24,710.
General
Nothing contained in this Plan nor participation in or any action taken under
the Plan shall be construed or deemed an employment contract or give any
employee any right to be retained as an employee or guarantee of employment. In
addition, nothing contained in this Plan nor any action taken hereunder shall
be construed, deemed or implied to be a contract or agreement that any award
granted in one year will be granted in a subsequent year.
Although the Company intends to continue the HMII Management Incentive Plan, the
Company reserves the right to amend or discontinue the Plan at any time for any
reason or no reason..
The Chief Executive Officer is responsible for the administration of the Plan
and shall interpret and administer the Plan and any rules and regulations
relating to it. The Chief Executive Officer may delegate the authority to
administer the Plan in whole or in part. However, any changes to the size of the
awards provided under the Plan or business unit financial performance objectives
require the approval of the Chief Executive Officer.
EXHIBIT B TO THE SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
dated April 15,1998
between
HOSOKAWA MICRON INTERNATIONAL INC. ("Company") and
Xxxxxxx X. Xxxxxxx
("Executive")
1. Pensions, Retirement, Savings-type Plans
Hosokawa Micron Investment Retirement Plan (401k)
General
The Plan is a defined contribution plan of the Company, subject to US
governmental rules, regulations and restrictions.
Contributions and Vesting
The Executive may contribute up to 16% of annual compensation subject to
annual governmental limits which, for 1998, is $10,000, and may invest in
any one or a combination of 10 mutual funds. The Executive is immediately
vested in his contributions and the earnings thereon.
The Company contributes an amount equal to 100% of the first 3% of total pay
contributed by the Executive. In addition, the Company contributes an amount
equal to 2% of the Executive's total pay for each plan year, provided that
the Executive was employed on the last day of that plan year. The 2% Company
contribution is made regardless of whether or not the Executive contributes
to the Plan. Total pay for which the Company can make the 2% contribution
and on which the Company can match contributions is limited by governmental
rules which, for 1998, limits contributions to the first $160,000 of total
compensation. Benefits from Company contributions made under the Plan vest
at 40% after two years of vesting service, and 20% per year thereafter, and
are fully vested after an Executive completes five years of vesting service.
Participant Accounts
Individual account balances are maintained for each participant whereby
contributions are allocated to any one or combination of 10 funds.
Participants may change their investment allocations on a daily basis.
Contributions are credited to participant accounts at the current market
value within each fund allocation on a daily basis.
2. Welfare-type Plans
Business Travel Accident
Company-paid coverage provides insurance for loss of life or catastrophic
disability resulting while traveling on Company business. The coverage
equals five times Base Salary up to a maximum of $500,000.
EXHIBIT C TO THE SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
dated April 15, 1998
between
HOSOKAWA MICRON INTERNATIONAL INC. ("Company") and
Xxxxxxx X. Xxxxxxx
("Executive")
Executive Life Insurance
Life insurance benefit equal to 2-1/2 times Base Salary to a maximum of
$300,000.
EXHIBIT D TO THE SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
dated April 15,1998
between
HOSOKAWA MICRON INTERNATIONAL INC. ("Company") and
Xxxxxxx X. Xxxxxxx
("Executive")
Salary Continuation and Long-Term Disability
Company-paid salary continuation for the first 90 days of a medical disability
absence due to sickness or accident. After 90 days, Executive must have elected
Optional Long-Term Disability Insurance which is paid for in total by the
Executive. Under this Company-sponsored program, the Executive will receive
monthly benefits equal to 60% of Base Salary to a maximum of $10,000 per month
for the period of eligible disability, as defined under terms of the plan
document. The premiums for this coverage are adjusted after negotiation with the
insurance carrier and is currently $.54 per $100 of Base Salary.
EXHIBIT E TO THE SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
dated April 15,1998
between
HOSOKAWA MICRON INTERNATIONAL INC. ("Company") and
Xxxxxxx X. Xxxxxxx
("Executive")
Medical Insurance
Comprehensive Medical Plan for Executives and eligible dependents (spouse and
children to the age of 18 or age of 23, if a full-time student in an accredited
school). Executive must satisfy a deductible of $250 for Executive and each
dependent or a maximum overall deductible of $500 per year. After deductibles
are satisfied, the Plan pays 100% of all eligible medical expenses thereafter
except for certain employee co-payments noted below.
Physician services are paid as follows: Inpatient, 100% after deductible; office
visits, 100% after $15 employee co-pay with no deductible. Preventive Care
Services are paid 100% after $15 employee co-pay up to $500/yr. with no
deductible.
Prescription drugs are paid as follows: 100% after $15 employee co-pay,
non-generic pharmaceuticals; $10 employee co-pay, generic and $10 employee
co-pay, mail order.
Pre-certification before all hospitalization is required in order to obtain
maximum benefits, otherwise reduced benefits will be paid.
Premiums for this coverage are paid 80% by the Company and 20% by the Executive.
Dental Insurance
The Dental Plan for Executive and their eligible dependents as defined above.
The Dental Plan provides scheduled reimbursements for covered services such as
preventive treatment, basic and major services. A deductible of $50 per
individual (maximum 3 per family) must be satisfied each year. No deductible is
required for preventive services.
For any calendar year, the Plan pays up to $1,000 maximum for covered expenses
incurred by a covered person after the deductible. Orthodontic services are
covered only for dependent children and are reimbursed at 50% of eligible
charges up to a lifetime maximum of $1,500 per dependent child.
Premiums for this coverage are paid 80% by the Company and 20% by the Executive.
EXHIBIT F TO THE SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
dated April 15,1998
between
HOSOKAWA MICRON INTERNATIONAL INC. ("Company") and
Xxxxxxx X. Xxxxxxx
("Executive")
-- None -
