Zep Inc Management Compensation and Incentive Plan



 Exhibit 10.11 
 ZEP INC. 
 MANAGEMENT COMPENSATION AND INCENTIVE PLAN 
 Effective as of September __, 2007 
 1.
Establishment and Effective Date of Plan 
 Zep Inc. (the “Corporation”) hereby adopts the Zep Inc. Management Compensation and
Incentive Plan (the “Plan”) for its executive officers and certain other executives of the Corporation, its Subsidiaries and Business Units who are in management positions designated as eligible for participation by the Compensation
Committee of the Board of Directors of the Corporation or such other committee appointed by the Board (the “Committee”) or its designee. The Plan shall be effective on ____________, 2007 and shall remain in effect, subject to the rights of
amendment and termination in Section 13, until the Incentive Awards are paid for the Corporation’s fiscal year ending in 2013. Payments under the Plan shall only be made to Named Executive Officers after the Plan is approved by the
stockholder(s) of the Corporation. 
 2. Purpose of the Plan 
 The purpose of the Plan is to further the growth and financial success of the Corporation by offering performance incentives to designated executives who have significant responsibility for such success. 

3. Definitions 
 (a) “Base Annual
Salary” means the actual base salary paid to a Participant during the applicable Plan Year, increased by the amount of any pre-tax deferrals or other pre-tax payments made by the Participant to the Corporation’s deferred compensation
or welfare plans (whether qualified or non-qualified). 
 (b) “Board of Directors” means the Board of Directors of the
Corporation. 
 (c) “Business Unit” means a separate business operating unit of the Corporation with respect to which
separate performance goals are established hereunder. 
 (d) “Change in Control” means any of the following events:

 (i) The acquisition (other than from the Corporation) by any “Person” [as the term person is used for purposes of
Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)] of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more of the
combined voting power of the Corporation’s then outstanding voting securities; or 
 (ii) The individuals who, as of
__________, 2007, are members of the Board of Directors (the “Incumbent Board”), cease for any reason to constitute at least two-thirds of the Board of Directors; provided, however, that if the election, or nomination for 








 
election by the Corporation’s stockholders, of any new director was approved by a vote of at, least two-thirds of the Incumbent Board, such new director
shall, for purposes of this Plan, be considered as a member of the Incumbent Board; or 
 (iii) Consummation of a merger or
consolidation involving the Corporation if the stockholders of the Corporation, immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than sixty percent (60%) of
the combined voting power of the then outstanding voting securities of the corporation resulting from such merger or consolidation in substantially the same proportion as their ownership of the combined voting power of the voting securities of the
Corporation outstanding immediately before such merger or consolidation; or 
 (iv) Consummation of a complete liquidation or
dissolution of the Corporation or an agreement for the sale or other disposition of all or substantially all of the assets of the Corporation. 
 Notwithstanding the foregoing, a Change in Control shall not be deemed to occur pursuant to subsection (i) above, solely because twenty percent (20%) or more of the combined voting power of the Corporation’s then outstanding
securities is acquired by (i) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Corporation or any of its Subsidiaries, or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the stockholders of the Corporation in the same proportion as their ownership of stock in the Corporation immediately prior to such acquisition. 
 (e) “Chief Executive Officer” means the chief executive officer of the Corporation, unless otherwise specified. 
 (f) “Code” means the Internal Revenue Code of 1986, as amended. 
 (g) “Committee” means the Compensation Committee of the Board of Directors or any other committee designated by the Board of Directors
which is responsible for administering the Plan. 
 (h) “Corporation” means Zep Inc. and its successors. 
 (i) “Incentive Award” or “Award” means the bonus awarded to a Participant under the terms of the Plan. 
 (j) “Maximum Award” means the maximum percentage of Base Annual Salary which may be paid based upon the Relative Performance during the
Plan Year. 
 (k) “Named Executive Officer” means a Participant who as of the date of payment of an Incentive Award is one
of the group of “covered employees” under Code Section 162(m) and the regulations and rulings thereunder. 
 (l)
“Participant” means an employee of the Corporation, a Subsidiary or a Business Unit who is designated by the Committee to participate in the Plan. 
  

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 (m) “Performance Measure” means the performance measures described on Appendix A
attached hereto, as they may be amended from time to time. 
 (n) “Personal Performance Goals” means the goals established
for each Participant each year to improve the effectiveness of the Participant’s area of responsibility as well as the Corporation as a whole. 
 (o) “Plan Rules” means the guidelines established annually by the Committee pursuant to Section 4, subject to ratification by the Board of Directors. 
 (p) “Plan Year” means the twelve month period which is the same as the Corporation’s fiscal year. The initial Plan Year shall be
September __, 2007 through August 31, 2008. Thereafter, the Plan Year shall be September 1 through the next following August 31. 
 (q) “Relative Performance” means the extent to which the Corporation, designated Business Unit or Subsidiary, as applicable, achieves the performance measurement criteria set forth in the Plan Rules. 
 (r) “Subsidiary” means any corporation in an unbroken chain of corporations, beginning with the Corporation, if each of the corporations
other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 
 (s) “Target Award” means the percentage (which may vary among Participants and from Plan Year to Plan Year) of Base Annual Salary which
will be paid to a Participant as an Incentive Award if the performance measurement criteria applicable to the Participant for the Plan Year is achieved, as reflected in the Plan Rules for such Plan Year. 
 (t) “Threshold Award” means the percentage of Base Annual Salary which may be paid based on the minimum acceptable Relative Performance
during the Plan Year. 
 4. Administration of the Plan 
 The Plan will be administered by the Committee, subject to its right to delegate responsibility for administration of the Plan as it applies to Participants other than Named Executive Officers pursuant to
Section 7. The Committee will have authority to establish Plan Rules with respect to the following matters, subject to the right of the Board of Directors to ratify such Plan Rules: 
 (a) the employees who are to become Participants in the Plan; 
 (b) the Target Award, Maximum Award and Threshold Award that can be granted to each Participant and the method for determining such award, which the Committee may amend from time to time; 
 (c) the performance targets and the measurement criteria to be used in determining the Corporation’s or a Business Unit’s or a
Subsidiary’s Relative Performance, which will 

  

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include one or more of the Performance Measures listed on Appendix A attached hereto, as determined by the Committee each year; and 
 (d) the time or times and the conditions subject to which any Incentive Award may become payable. 
 The Plan Rules will be adopted by the Committee prior to, or as soon as practical after, the commencement of each Plan Year. Subject to the provisions of
the Plan and the Committee’s right to delegate its responsibilities, the Committee will also have the discretionary authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other
determinations deemed necessary or advisable in administering the Plan. The determinations of the Committee on the matters referred to in paragraphs (a) through (d) of this Section 4 shall be submitted at least annually to the Board
of Directors for its consideration and ratification. For Participants who are not Named Executive Officers, the Committee may in its discretion (i) establish performance measures and criteria not listed on Appendix A without obtaining
shareholder approval; and (ii) during a Plan Year revise the performance targets and measurement criteria to the extent the Committee deems necessary to achieve the purposes of the Plan to reflect any changed or unexpected or unusual
circumstances. 
 5. Participation 
 Eligibility for participation in the Plan is limited to executive officers of the Corporation and certain other executives of the Corporation, Business Units or Subsidiaries who hold key management and staff positions. From among those
eligible and based upon the recommendations of the Chief Executive Officer and other designees, the Committee will designate by name or position the Participants each Plan Year. Any employee who is a Participant in one Plan Year may be excluded from
participation in any other Plan Year. If, during the Plan Year, a Participant other than a Named Executive Officer changes employment positions to a new position which corresponds to a different award level, the Committee may, in its discretion,
adjust the Participant’s award level for such Plan Year. The Committee may, in its discretion, designate employees who are hired after the beginning of the Plan Year as Participants for such Plan Year and as eligible to receive full or partial
Incentive Awards for such year. 
 6. Incentive Awards 
 (a) Determination of the Amount of Incentive Awards 
 At the end of each Plan Year, the Committee
shall certify the extent to which the performance targets and measurement criteria established pursuant to Section 4 have been achieved for such Plan Year based upon financial and other information provided by the Corporation. Subject to the
right to decrease an award as described in the next paragraph, the Participant’s Incentive Award shall be computed by the Committee based upon the achievement of the established performance targets, measurement criteria and the requirements of
the Plan. In addition to any adjustments provided for in the Incentive Award, the Committee may in determining whether performance targets have been met adjust the Corporation’s financial results to exclude the effect of unusual charges or
income items, changes in accounting, or other 

  

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events (such as acquisitions, divestitures, equity and other restructurings, reductions in force and currency fluctuations), which are distortive of results
year over year (either on a segment or consolidated basis); provided, that for purposes of determining the Incentive Awards of Named Executive Officers that are intended to qualify as performance-based compensation under Code Section 162(m),
the Committee shall exclude unusual items whose exclusion has the effect of increasing Relative Performance if such items constitute “extraordinary” or “unusual” events or items under generally accepted accounting principles or
are unusual events or items. In addition, the Committee will adjust its calculations to exclude the unanticipated effect on financial results of changes in the Code or other tax laws, or the regulations relating thereto. 
 The Committee may, in its discretion, decrease the amount of a Participant’s Incentive Award for a Plan Year based upon such factors as it may
determine, including the failure of the Corporation, Business Unit or Subsidiary to meet certain performance goals or of a Participant to meet his Personal Performance Goals. The factors to be used in reducing an Incentive Award may be established
at the beginning of a Plan Year and may vary among Participants. 
 In the event that the Corporation’s, Business Unit’s or
Subsidiary’s performance is below the performance thresholds for the Plan Year and the Incentive Awards are reduced or cancelled, the Committee may in its discretion grant Incentive Awards to deserving Participants, except for Participants who
are Named Executive Officers. 
 The Plan Rules and Incentive Awards under the Plan shall be administered in a manner to qualify payments
under the Plan to the Named Executive Officers for the performance-based exception under Code Section 162(m) and the regulations thereunder, except where the Board of Directors determines such compliance is not necessary or not in the best
interests of the Company or its stockholders. The maximum Incentive Award that may be paid to an individual Participant for a Plan Year shall be $4 million. 
 (b) Eligibility for Payment of Incentive Award 
 No Participant will have any vested right to receive
any Incentive Award until such date as the Board of Directors has ratified the Committee’s determination with respect to the payment of individual Incentive Awards, except where the Committee determines such ratification is not necessary. No
Incentive Award will be paid to any Participant who is not an active employee of the Corporation, a Business Unit or a Subsidiary at the end of the Plan Year to which the Incentive Award relates; provided, however, at the discretion of the Committee
or its designee (subject to ratification by the Board of Directors, where required), partial Incentive Awards may be authorized by the Committee to be paid to Participants (or their beneficiaries) who are terminated without cause or who retire, die
or become permanently and totally disabled during the Plan Year. No Participant entitled to receive an Incentive Award shall have any interest in any specific asset of the Corporation, and such Participant’s rights shall be equivalent to that
of a general unsecured creditor of the Corporation. 
 (c) Payment of Awards 
 Payment of the Incentive Awards will be made as soon as practicable after their determination pursuant to Sections 6.1 and 6.2, subject to the
Corporation’s right to allow a 

  

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Participant to defer payment pursuant to an applicable deferred compensation plan of the Corporation. Payment will generally be made in a lump sum in cash,
unless the Committee otherwise determines at the beginning of the Plan Year. 
 7. Delegation of Authority by Committee 
 Notwithstanding the responsibilities of the Committee set forth herein, the Committee may delegate to the Chief Executive Officer or others all or any
portion of its responsibility for administration of the Plan as it relates to Participants other than Named Executive Officers. Such delegation may include, without limitation, the authority to designate employees who can participate in the Plan, to
establish Plan Rules, to interpret the Plan, to determine the extent to which performance criteria have been achieved, and to adjust Incentive Awards payable. In the case of each such delegation, the administrative actions of the delegate shall be
subject to the approval of the person within the Corporation to whom the delegate reports (or, in the case of a delegation to the Chief Executive Officer, to the approval of the Committee). 
 8. Change in Control 
 Upon the occurrence of a Change
in Control, unless the Participant otherwise elects in writing in accordance with such rules as the Committee may establish, the Participant’s Incentive Award for the Plan Year shall be determined as if the Target Award level of performance has
been achieved (without any reductions under Section 6.1) and shall be deemed to have been fully earned for the Plan Year, provided that the Participant shall only be entitled to a pro rata portion of the Incentive Award based upon the number of
days within the Plan Year that had elapsed as of the effective date of the Change in Control. The Incentive Award amount shall be paid only in cash within thirty (30) days of the effective date of the Change in Control. The Incentive Award
payable upon a Change in Control to a Participant for the Plan Year during which a Change in Control occurs shall be the greater of the amount provided for under this Section 8 or the amount of the Incentive Award payable to such Participant
for the Plan Year under the terms of any employment agreement or severance agreement with the Corporation, its Business Units or Subsidiaries, provided that the Participant shall not receive a duplicate Incentive Award for the same Plan Year (or
portion of a Plan Year). Notwithstanding the above, the Committee may provide in the Plan Rules for alternative consequences upon a Change in Control, which may apply to some or all Participants and which may vary among Participants. 
 9. Beneficiary 
 The Committee may provide for each
Participant to designate a person or persons to receive, in the event of death, any Incentive Award to which the Participant would then be entitled under Section 6.2. Such designation will be made in the manner determined by the Committee and
may be revoked by the Participant in writing. If the Committee does not provide for such designation or if a Participant fails effectively to designate a beneficiary, then the estate of the Participant will be deemed to be the beneficiary.

  

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 10. Withholding Taxes 
 The Corporation shall deduct from each Incentive Award the amount of any taxes required to be withheld by any governmental authority. 
 11. Employment 
 Nothing in the Plan or in any Incentive Award shall confer (or be deemed to confer)
upon any Participant the right to continue in the employ of the Corporation, a Business Unit or a Subsidiary, or interfere with or restrict in any way the rights of the Corporation, a Business Unit or a Subsidiary to discharge any Participant at any
time for any reason whatsoever, with or without cause. 
 12. Successors 
 All obligations of the Corporation under the Plan with respect to Incentive Awards granted hereunder shall be binding upon any successor to the Corporation, whether such successor is the result of an acquisition of
stock or assets of the Corporation, a merger, a consolidation or otherwise. 
 13. Termination and Amendment of the Plan 
 The Committee, subject to the ratification rights of the Board of Directors, has the right to suspend or terminate the Plan at any time, or to amend the
Plan in any respect provided that no such action will, without the consent of an affected Participant, adversely affect the Participant’s rights under an Incentive Award approved under Section 6.2. 
 14. Governing Law 
 The Plan shall be interpreted and
construed under the laws of the State of Georgia. 
  

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 APPENDIX A 
 to 
 ZEP INC. 
 MANAGEMENT COMPENSATION AND INCENTIVE PLAN 
  

			
	 Performance Measure
	  	 General Definition

		
	 AATP Margin
	  	AATP divided by Sales
		
	 Adjusted After-Tax Profit (AATP)
	  	APTP minus book income taxes (reported tax rate applied to APTP)
		
	 Adjusted EBIT
	  	EBIT excluding gain on asset sales
		
	 Adjusted Pre-Tax Profit (APTP)
	  	Income before provision for income taxes plus interest expense plus implied interest on capitalized operating leases. The measure may include or exclude income from discontinued operations,
extraordinary items, changes in accounting principles, and restructuring expense.
		
	 Capitalized Economic Profit
	  	Economic Profit divided by a predetermined rate reflecting the cost of capital
		
	 Capitalized Entity Value
	  	Sum of average invested capital in the business and the Capitalized Economic Profit
		
	 Capitalized Equity Value
	  	Capitalized Entity Value minus total debt
		
	 Cashflow
	  	Net cash provided by operating activities
		
	 Cashflow Return on Capital
	  	Cash flow divided by average invested capital
		
	 Cashflow Return on Capitalized Entity/ Equity Value
	  	Cash flow divided by Capitalized Value
		
	 Cashflow Return on Investment
	  	The amount comprised of net income plus depreciation and amortization minus working capital expenditures, divided by the amount comprised of gross fixed assets plus net working capital excluding
cash and debt
		
	 Change in Price of Shares
	  	Percentage increase in per-share price, adjusted for change in capitalization
		
	 Debt
	  	Third party debt recorded on the balance sheet
		
	 Debt Reduction
	  	Decrease in total debt from one period to another
		
	 Earnings Before Interest and Taxes (EBIT)
	  	Earnings minus interest and taxes
		
	 Earnings Per Share
	  	Basic or diluted earnings per share
		
	 Economic Profit
	  	AATP minus a charge for capital
		
	 Net Income
	  	Net income as reported in Zep Inc.’s annual financial statements or the books and records of its segments. The measure may include or exclude income from discontinued operations,
extraordinary items, changes in accounting principles, and restructuring expense.
		
	 Net Income Return on Capital
	  	Net Income divided by average invested capital

  

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	 Operating Working Capital
	  	Net accounts receivable plus inventory minus accounts payable
		
	 Return on Assets (ROA)
	  	Net Income divided by average total assets
		
	 Return on Equity (ROE)
	  	Net Income divided by average stockholders’ equity
		
	 Return on Gross Investment
	  	Sum of Net Income plus depreciation divided by sum of average invested capital plus accumulated depreciation
		
	 Return on Invested Capital
	  	Net Income or AATP divided by average invested capital
		
	 Return on Net Assets (RONA)
	  	Net Income, APTP, or income before taxes, divided by average net assets
		
	 Sales
	  	Net sales of products
		
	 Sales Growth
	  	Percentage change in Sales from year to year
		
	 Total Return to Stockholders
	  	Percentage change in stockholder value (stock price plus reinvested dividends)

  

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