1997 Management Incentive Compensation Plan - Cooper Cameron Corp.
COOPER CAMERON CORPORATION
1997 MANAGEMENT INCENTIVE COMPENSATION PLAN
I. PURPOSE
The Cooper Cameron Management Incentive Compensation Plan (the "Plan"),
has been designed to motivate and reward key management employees whose
efforts impact the performance of Cooper Cameron Corporation (the
"Company") and its subsidiaries through the achievement of
pre-established financial and individual objectives.
Performance under the Plan is measured on the fiscal (calendar) year and
payments under the Plan are made annually.
II. ELIGIBILITY
Officers and key management employees may be eligible to participate in
the plan, upon the recommendation of their manager and approval by the
Chief Executive Officer of the Company. An employee who is eligible to
participate in any other cash incentive plan of the company is not
eligible to participate in this Plan.
III. AWARD CRITERIA
The Compensation Committee of the Board of Directors is responsible for
approving the Company performance objectives that are used to determine
awards paid for Company objectives under this plan. Performance
objectives for operating units below the corporate level will be
established by the appropriate manager subject to overall approval of the
Chief Executive Officer. For 1997, performance under the Plan will be
determined based on:
Earnings Before Interest, Taxes and Depreciation (EBITDA)
Return on Equity (ROE)
The basic measure of financial performance under this Plan will be
EBITDA. In addition, ROE will be used as an attainment hurdle, which
must be reached before bonuses are paid in full. For 1997, the Board has
established a 7% ROE hurdle. If this ROE target is not achieved for the
year, bonuses, to the extent earned, will be reduced by 50%.
In addition, up to 25% of an individual's award may, at the discretion of
the individual's immediate manager, be based on individual objectives
established at the beginning of the calendar year.
IV. TARGET AWARDS
A target award percentage is established for each position eligible to
participate in the Plan. Target awards (TA's) may range from 10% to 75%,
depending on position, of each participant's January 1 base pay (or pay
at the time of becoming a participant, if later).
Generally, the participating employee receives the Target Award when
performance under the plan meets, but does not exceed, the
pre-established performance objectives.
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V. AWARD CATEGORIES
A participant may have Company Objectives, Division Objectives, Operating
Unit Objectives and/or Individual Objectives, each of which is assigned
by the immediate manager and provided a weighting in determining the
Target Award.
VI. PERFORMANCE MEASUREMENT
Minimum This is the lowest level of performance at which an award will be generated for this
particular objective of the plan. The award paid for performance at the minimum level
is 50% of Target Award. There will be no payment for performance below the minimum
level.
Target Performance This is the expected level of performance based on the current year's financial plan.
Maximum This is the performance level for which the maximum award under the plan will be paid.
The maximum award under the plan is limited to 200% of the Target Award.
VII. AWARD CALCULATION
Attainment on the financial objectives of the Plan is measured based on
actual results versus Plan targets, with performance above or below Plan
targets prorated up/down to the maximum/minimum levels established for
each financial objective.
For example, assume the following hypothetical objectives:
Minimum Level $180 million
Company EBITDA Target $200 million
Maximum Level $230 million
At EBITDA performance of $220 million, attainment = 166.6% (Prorated
between $200 million objective and $230 million maximum).
At EBITDA performance of $185 million, attainment = 62.5% (Prorated
between $200 million objective and $180 million minimum objective).
Following are examples of how payouts are determined under the Plan once
attainment has been calculated:
A. Corporate Participant:
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EBITDA ATTAINMENT ROE HURDLE ACHIEVED PARTICIPANT AWARD
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110% YES 110.0%
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110% NO 55.0%
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85% YES 85.0%
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85% NO 42.5%
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180% YES 180.0%
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B. Division Operating Unit Participant without Individual Objectives:
Assume ROE hurdle is achieved
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ATTAINMENT WEIGHT PERFORMANCE LEVEL
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Division EBITDA 110% 30% 33.0%
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Operating Unit EBITDA 85% 50% 42.5%
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Individual Objective 100% 20% 20.0%
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PARTICIPANT AWARD 95.5%
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C. Division Operating Unit Participant with Individual Objectives:
Assume ROE hurdle is achieved
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EBITDA ATTAINMENT WEIGHT PERFORMANCE LEVEL
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Division 110% 40% 44.0%
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Operating Unit 85% 40% 34.0%
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INDIVIDUAL OBJECTIVE ATTAINMENT
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Working Capital 40% 10% 4.0%
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Bookings 100% 10% 10.0%
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PARTICIPANT AWARD 92.0%
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For example, if the participant's salary is $80,000, target award is 20%
($16,000) = payout of $16,000 x 92% = $14,720.
VIII. DISCRETIONARY AWARDS
There may be unusual situations where a manager feels that the reward
generated under this plan does not properly reflect the contribution of
the participant. In this situation, the participant's immediate manager
has the right to recommend an adjustment, either up or down, of up to 25%
of the participant's Target Award.
IX. INDIVIDUAL OBJECTIVES
A participant's immediate manager has the discretion to set individual
objectives as part of the employee's performance criteria under the
incentive plan. The use of individual objectives is subject to the
following requirements:
The manager must specify the weighting of the individual objectives in
the overall Target Award, not to exceed 25% of the total award
Individual objectives must be specifically identified at the beginning of
the plan year and must be quantifiable in terms of both the targeted
achievement and the time frame in which the objective is to be completed.
The portion of the award payment generated from individual objectives may
be adjusted up or down based on the manager's assessment of the
individual's results on the established objectives.
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X. ALTERNATIVE CALCULATIONS
There may be circumstances under which the financial performance of the
Company does not generate an award under this program. The nature and
scope of the Company's operations are such that at times unanticipated
economic and market conditions may render pre-established financial
objectives unattainable in any given plan year. If, in the opinion of
the Committee, such circumstances should arise, an alternative bonus
calculation may be performed. Such calculation will rank the Company's
EBITDA against a pre-established peer group of companies. If the
Company's performance is at or above 60th percentile, then a bonus
payment equal to 50% of target award may be paid.
XI. MODIFICATIONS
If, during a Plan Year, there has occurred or should occur, in the
opinion of the Company, a significant beneficial or adverse change in
economic conditions, the indicators of growth or recession in the
Company's business segments, the nature of the operations of the Company,
or applicable laws, regulations or accounting practices, or other matters
which were not anticipated by the Company when it approved Company and
Division Objectives for the Plan Year and which, in the Company's
judgment, had, have, or are expected to have a substantial positive or
negative effect on the performance of the Company as a whole, the
Compensation Committee, subject to ratification by the Board, may modify
or revise the Performance Objectives for the Plan Year in such manner as
it may deem appropriate in its sole judgment. By way of illustration,
and not limitation, such significant changes might result from sales of
assets, or mergers, acquisitions, divestitures, or spin-offs.
XII. PAYMENT
Any awards generated under the 1997 MICP must be approved by the
Compensation Committee of the Board of Directors. It is anticipated that
any MICP awards generated in 1997 will be paid during February 1998.
Employees terminating prior to the end of the fiscal year are not
eligible for payment of any award under this plan unless termination is
due to retirement or economic reduction in force. In such cases, any
bonus payments will be prorated to the date of termination and
determined on the basis of bonuses actually paid to similarly situated
employees.