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EXHIBIT 10.3
SYBRON DENTAL SPECIALTIES, INC.
SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN
POLICY STATEMENT
1. OBJECTIVES
The Sybron Dental Specialties, Inc. Senior Executive Incentive
Compensation Plan (the "Incentive Plan") is designed to:
- Focus the efforts of the organization on improving shareholder
value.
- Effectively motivate and reward key employees according to their
contributions to organizational success.
- Serve as a management tool in directing the energies of key
employees towards the achievement of agreed upon operating goals
for Sybron Dental Specialties, Inc. (the "Corporation") and
its subsidiaries.
- Equate personal financial success with organizational financial
success.
- Assist in retaining and attracting qualified, managerial employees
by providing a total compensation opportunity competitive with the
marketplace.
2. ADMINISTRATION
The Incentive Plan shall be administered by the Compensation Committee of
the board of directors (the "Committee"). No member of the Committee shall be
eligible for awards under the Incentive Plan.
The Committee shall interpret the Incentive Plan, establish rules and
regulations for the administration thereof, and make all determinations deemed
necessary or advisable for the administration of the Incentive Plan. The
Committee shall be assisted by the Corporation's Human Resources Department
staff in fulfilling its administrative responsibilities.
3. ELIGIBILITY
Key executives whom the Committee has identified as having the ability to
directly influence the financial results of the Corporation or its subsidiaries
shall constitute the employees eligible for participation in the Incentive Plan.
An individual's eligibility to participate in the Incentive Plan shall be
determined annually by the Committee. Participation in the Incentive Plan during
a fiscal year shall not imply the right of participation in any following year.
4. DETERMINATION OF INCENTIVE AWARDS
A participant's Incentive Award will be determined by multiplying the
participant's total Target Bonus Amount by a Success Factor.
5. TARGET BONUS AMOUNTS
Target Bonus Amounts for all participants shall be a percentage of the
participant's actual annual base salary as of the end of each fiscal year for
which an Incentive Award is payable. The percentage shall be determined from the
salary grade to which the participant is assigned as of the end of the fiscal
year, all as set forth in the Administrative Guidelines for the Incentive Plan
which are included by reference herein.
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6. SUCCESS FACTOR
The Success Factor is the aggregate of two different components of
financial performance; namely, net income compared with budget and growth in net
income over prior year. The budgeted net income component cannot exceed 100%.
Composition of the Success Factor is as follows:
<TABLE>
<S> <C>
Net income performance vs. budget (capped at 100%) = a
Growth in net income performance = b
-----
Success Factor = a+b
=====
</TABLE>
Section 3 of the Administrative Guidelines defines the components of the
Success Factor in detail and a rather complete example of how an individual's
Incentive Award is computed can be found in Section 6 of the Administrative
Guidelines.
Notwithstanding any other provision of this Incentive Plan, in no event
shall the Incentive Award for a fiscal year for any participant exceed
$2,000,000 (the "Maximum Dollar Amount").
7. CHANGE IN EMPLOYMENT STATUS
Participants who terminate employment (except for termination due to
retirement, disability or death) with the Corporation or a subsidiary of the
Corporation, or whose employment is terminated by the Corporation or one of its
subsidiaries, at any time during a fiscal year, or before award payments for a
fiscal year are made, shall not be entitled to receive any award under the
Incentive Plan for that fiscal year, unless an award is specifically approved by
the Committee.
Participants (or their beneficiaries or legal representatives) who
retire, become disabled or die during a fiscal year shall receive a prorated
Incentive Award that is calculated by multiplying the participant's calculated
Incentive Award by a percent equal to the percent of the fiscal year for which
the participant was actively employed.
8. METHOD OF PAYMENT
Awards under the Incentive Plan shall be paid in cash as soon as
practicable after financial results for the fiscal year have been determined and
verified.
9. COMMITTEE DISCRETION
In the event of special circumstances of an unusual or significant nature
outside the course of normal business operations, the Committee may adjust
previously approved financial objectives of the Corporation or any of its
subsidiaries or the amount of the Incentive Awards earned, when it believes the
integrity, purpose and fairness of the Incentive Plan will be better served. Any
such adjustment made after the beginning of the period in which the awards are
earned shall not, however, permit Incentive Awards, either to any person or in
the aggregate, to be greater than they otherwise would have been under the
financial objectives approved prior to the beginning of such period.
10. AMENDMENT, SUSPENSION OR TERMINATION OF THE INCENTIVE PLAN
The Committee may, at any time, amend, suspend or terminate the Incentive
Plan.
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ADMINISTRATIVE GUIDELINES
These Administrative Guidelines ("Guidelines") have been approved by the
Compensation Committee (the "Committee") of the board of directors, and shall
remain in effect until changed by the Committee. These Guidelines, combined with
the Sybron Dental Specialties, Inc. Senior Executive Compensation Incentive Plan
Policy Statement shall govern the amounts and terms of Incentive Awards payable
to eligible participants under the Incentive Plan.
1. INCENTIVE AWARDS
A participant's Incentive Award will be determined by multiplying the
participant's total Target Bonus amount by a Success Factor, provided that no
Incentive Award for any fiscal year for any participant shall exceed the
Maximum Dollar Amount.
2. TARGET BONUS AMOUNTS
Target Bonus Amounts shall be determined from a participant's salary
grade. Current salary grades and Target Bonus Amount percentages for U.S. and
non-U.S. participants are included in Section 5 below. The Target Bonus Amount
for all participants shall be the pre-determined percentage for the
participant's salary grade applied against the base salary of the participant as
of the end of each fiscal year.
3. SUCCESS FACTOR
The Success Factor is calculated by totaling the percentages determined
from a comparison of actual performance with respect to certain financial
measurement components to the goals set for such components. The financial
measurement components of the success factor are as follows:
(i) Actual net income compared with budget.*
This component will be zero until 90% of budgeted net income
is achieved. Maximum award will be equal to 100% when budgeted
net income is achieved. Performance between 90% and 100% of
budgeted net income would result in a proportional award
being earned.
NET INCOME
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Budget
Amount ($000)
Percent Achievement 90 91 92 93 94 95 96 97 98 99 100
</TABLE>
(ii) Actual rate of growth in net income over prior year.*
- This component will be zero until 6% growth in net
income over prior year is achieved. At a growth level of
6%, this component will be equal to 80%.
- At 8% growth, this component will be equal to 100%. For
each percentage point of growth beyond 8% there is an
increase in this component of 12.5 percentage points.
Thus, at 10% growth, this component will equal 125%, at 12%
growth this component will equal 150%, at 14% growth this
component will equal 175%, continuing on a linear basis, in
an unlimited fashion.
NET INCOME GROWTH
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percent Growth Achieved 6 8 10 12 14 16 18 20 22 24
----------------------------------------------------------------------------------------------
Percent Achievement 80 100 125 150 175 200 225 250 275 300
----------------------------------------------------------------------------------------------
</TABLE>
*Earnings from acquired businesses will also be included.
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4. DEFINITION OF NET INCOME
For purposes of this Incentive Plan, net income is net income as
adjusted, which means net income as reported on management accounting
statements, but prior to any restructuring charges.
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5. SALARY GRADES/TARGET BONUS AMOUNT PERCENTAGES
SALARY GRADES/
TARGET BONUS AMOUNT PERCENTAGES
<TABLE>
<CAPTION>
U.S. NON-U.S.
--------------------------------------------------------------------
Salary TARGET BONUS Salary TARGET BONUS
Grade AMOUNT % Grade AMOUNT %
--------------------------------------------------------------------
<S> <C> <C> <C>
3 16% 3 11%
4 18% 4 13%
5 20% 5 15%
6 22% 6 17%
7 24% 7 19%
8 26% 8 21%
9 28% 9 23%
10 30% 10 25%
11 33%
12 36%
13 39%
14 42%
15 45%
16 48%
17 50%
18 52%
19 53%
20 54%
21 55%
</TABLE>
6. FORMULA FOR CALCULATION OF INCENTIVE AWARD
Target Bonus Amount
Base Salary at 9/30 x Salary Grade Target = Target Bonus Amount
Bonus Amount Percent
Success Factor Components
Net Income Percent Achieved (capped at 100%)
+ Net Income Growth Percent Achieved
----------------------------------
= Success Factor
Incentive Award
Target Bonus Award x Success Factor = Incentive Award
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EXAMPLE
Assumptions:
1. U.S. executive - Grade 12
2. Base Salary - $150,000
3. Budgeted operating income - $112,000,000
4. Actual operating income - $112,000,000
5. Prior year's operating income - $100,000,000
6. Operating income growth - 12%
Determination of Success Factor
(i) Net Income Achievement
<TABLE>
<S> <C>
Actual $112,000,000
-------------------------------------
Budget $112,000,000
</TABLE>
Performance equals 100%, therefore,
component is equal to the maximum of 100%
(ii) Net Income Growth
Actual growth = 12%
Component therefore equals 150%
<TABLE>
<S> <C>
Net Income Percent Achieved = 100%
+ Net Income Growth Percent Achieved = 150%
----
Success Factor 250%
===
</TABLE>
Target Bonus Amount
Grade 12 Target Bonus Award % = 36%
0.36 x $150,000 = $54,000
Incentive Award
Success Factor x Target Bonus Amount = Incentive Award (not to
exceed Maximum Dollar
Amount.)
250% x $54,000 = $135,000
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