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EXHIBIT 10.41
SYBRON LABORATORY PRODUCTS CORPORATION
SENIOR SALARIED EXECUTIVE
FINANCIAL PERFORMANCE
INCENTIVE COMPENSATION PLAN
POLICY STATEMENT
AND
ADMINISTRATIVE GUIDELINES
EFFECTIVE AS OF OCTOBER 1, 1999
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SYBRON LABORATORY PRODUCTS CORPORATION
SENIOR SALARIED EXECUTIVE FINANCIAL PERFORMANCE INCENTIVE COMPENSATION PLAN
POLICY STATEMENT
1. Objectives
The Sybron Laboratory Products Corporation ("SLPC") Senior Salaried
Executive Financial Performance Incentive Compensation Plan, including this
Policy Statement and the associated Administrative Guidelines (the "Plan"),
is designed to:
o Focus the efforts of the SLPC organization on improving shareholder
value.
o Effectively motivate and reward key employees according to their
contributions to organizational success.
o Serve as a management tool in directing energies of key employees
towards the achievement of agreed upon operating goals for each unit
and for SLPC, in aggregate.
o Equate personal financial success with organizational financial
success.
o Assist in retaining and attracting qualified managerial employees by
providing a total compensation opportunity competitive with the
marketplace.
2. Administration
The Plan shall be administered by the Compensation/Stock Option Committee
of the Board of Directors of Sybron International Corporation (the
"Committee"). No member of the Committee shall be eligible for awards under
the Plan. The Committee will be assisted in its administration by the
President and the Chief Financial Officer of SLPC (the "SLPC Officers"),
who will also be ineligible for participation in the Plan. Awards under the
Plan will be paid in cash after the financial audit has been completed for
the plan year and the awards have been approved by the Committee.
Mechanically, SLPC will transfer the award accrual to each subsidiary and
payments will be made directly by the subsidiary Payroll Department.
3. Eligibility
Key executives who directly influence the financial performance of SLPC or
its subsidiaries. An individual's eligibility to participate under the Plan
shall be determined annually by the Committee taking into account the
recommendations of the President and Chief Financial Officer of SLPC, which
will be based in part on the joint recommendation of the SLPC subsidiary
Presidents and Line of Business Executives.
Participation in the Plan during a fiscal year shall not imply the right of
participation in any following year.
4. Amendment, Suspension or Termination of the Plan
The Committee may, at any time, amend, suspend or terminate the Plan.
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5. Committee Discretion
In the event of special circumstances of unusual or significant nature
outside the course of normal business operations, the Committee may adjust
previously approved financial objectives of SLPC or any of its
subsidiaries, or the amount of awards earned, when it believes the
integrity, purpose and fairness of the Plan will be better served.
ADMINISTRATIVE GUIDELINES
These Administrative Guidelines have been established by the Committee.
These Guidelines, combined with the associated Policy Statement (together, the
"Plan") shall govern the amounts and terms of incentive awards payable to
eligible participants.
1. Target Awards
a. Subject to approval by the Committee and the SLPC Officers, bonus
target awards will be determined for each participant in the Plan by
the President or Vice President of the subsidiary, as applicable, in
consultation with the Vice President of Human Resources for SLPC. The
award will be determined by the employee's job grade and/or job
responsibilities and expressed in the form of a percent of base
salary.
b. The amount of the award will be calculated based on the participant's
salary and bonus target as of January 1st of the plan year.
c. All changes to an individual's bonus target must be approved by the
SLPC Human Resource Office, subject to Committee and SLPC Officer
review .
d. Any employee entering the plan after the beginning of the fiscal year
will have his or her bonus prorated based on the number of months of
participation in the plan.
e. An employee's bonus may be prorated for a leave of absence without
pay.
f. Eligible employees who terminate employment, or whose employment is
terminated (except for retirement, disability or death) prior to
completion of a bonus period, are not entitled to receive any awards
under this Plan.
g. End-of-the-year bonus payments must be approved by the Committee and
the SLPC Board of Directors before they are paid. Awards under the
Plan will be paid in cash after such approval. Mechanically, SLPC will
transfer the award accrual to each subsidiary and payments will be
made directly by the subsidiary Payroll Department.
2. Awards
A participant's award will be determined by multiplying the total Target
Award by a Success Factor.
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3. Success Factor (Elements) - Existing Businesses
The Success Factor is determined by aggregating actual performance for each
of the three contributing elements:
a. Adjusted Operating Income vs. Budget Operating Income
b. Current Year vs. Prior Year Working Capital Ratio
c. Growth in Operating Income vs. Prior Year
4. Success Factor (Basis)
The Success Factor for operating subsidiary employees will be based on the
financial performance of their subsidiary.
The Success Factor for senior executives responsible for a Line of Business
will be based on the consolidated financial performance, after
eliminations, of their Line of Business.
The Success Factor for SLPC corporate employees will be based on the SLPC
consolidated financial performance.
5. Success Factor - Calculations - Existing Businesses
Participants will be rewarded according to performance in each of the
following areas:
a. Adjusted Operating Income vs. Budget Operating Income
Award will be zero until 100% of current year budget is achieved.
Award for 100% or greater of budget achievement will be 80%.
Actual operating income will be adjusted as follows:
Reported Operating Income (at current year budget FX rate)
o Cost of Capital at 8% of Purchase Price for Mid-Year
Acquisitions
o Amortization Expense for Mid-Year Acquisitions
o Capital Spending in Excess of Budget
+/- Extraordinary Items as they may occur
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= Adjusted Operating Income
b. Current Year vs. Prior Year Working Capital Ratio
Achievement of a one point or greater improvement in Net Working
Capital as measured between September 30th prior fiscal year end and
September 30th current fiscal year end on a 13 point average. Award
will be zero until bonus component `a' is achieved. Once bonus
component `a' is achieved and a one point or greater improvement in
Net Working Capital is achieved, this award will be 20%.
Net Working Capital is defined as: Gross Trade Receivables + Gross
Inventory - Trade Payables = Net Working Capital.
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Net Working Capital Percentage is defined as:
Net Working Capital (13 point average)
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Annual Trade Sales
c. Growth in Operating Income vs. Prior Year
Award will be zero until bonus component `a' is achieved and until 5%
growth in operating earnings over prior year is achieved. At a growth
level of 5%, the award will be equal to 50%.
At 10% growth, the award will be equal to 100%. At 20% growth, the
award will be 200%. Continuing on a linear basis, at 30% growth, the
growth award will cap at 300%.
Earnings from acquired businesses will also be included, subject to
adjustment as described below.
Operating income will be adjusted as follows:
Reported Operating Income (at prior year FX rates)
o Imputed Cost of Capital (see #6)
o Amortization Expense
o Capital Spending in Excess of Budget (Current Year Only)
o Subsidiary Bonuses (where applicable)
o Bonus Amounts Paid or To Be Paid
+/- Extraordinary items as they may occur
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= Adjusted Operating Income
6. Imputed Cost of Capital
Will be equal to 8% of the purchase price of acquired businesses for the
first twelve months following acquisition. Thereafter, this charge will be
decreased by 1% each year to reflect the anticipated positive cash flow
from the earnings of the acquired entities. From time to time, this
percentage may change if commercial interest rates change.
7. Mid-Year Stand Alone Acquisitions
The Line of Business (LOB) Executive will be asked to submit the names,
base salaries and bonus targets for the proposed participants in this plan.
For the stub year and the first full fiscal year under SLPC ownership, the
following bonus program will be in effect, comprised of two elements: 1)
Achieving budgeted operating income expectations, and 2) Growth in
operating income versus budgeted expectations. The calculations will be as
follows:
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a. Achieving Budgeted Operating Income Expectations
Award will be zero until 100% of the budgeted operating income
expectation is achieved. Once achieved, the plan participants can earn
up to 100% of their pro rata bonus target, subject to the company
having operating income above the budgeted expectation sufficient to
cover the amount of bonus money to be paid. Conceptually, the company
must earn their bonus to be able to pay it.
Actual operating income will be adjusted as follows:
Reported Operating Income (at current year budget FX rate)
o Capital Spending in Excess of Budget
o Bonus Amount to be paid for this element
+/- Extraordinary Items as they may occur
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= Adjusted Operating Income
Note that adjusted operating income must be greater than or equal
to the budgeted operating income expectation to earn this bonus
element.
b. Growth in Operating Income vs. Budgeted Expectations
Award will be zero until 100% of bonus component `a' is achieved
and until 5% growth in adjusted operating income over budgeted
expectations is achieved. If these conditions are met, the plan
participants can earn up to 300% of their pro rata bonus target. For
each percentage of growth in operating income, 10% bonus will be
achieved. For example, growth of 5% would earn an award of 50%; growth
of 30% would earn the maximum award of 300%.
Actual operating income will be adjusted as follows:
Reported Operating Income (at current year budget FX rate)
o Capital Spending in Excess of Budget
o Bonus Amount to be paid in total (both elements)
+/- Extraordinary Items as they may occur
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= Adjusted Operating Income
Note that adjusted operating income must be greater than or equal
to 105% of the budgeted operating income expectation to earn this
bonus element.
This section of the plan will be effective for all stand-alone acquisitions
that did not participate in this plan in fiscal year 1999.
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8. Example of Determination of Actual Awards - Existing Businesses
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<S> <C> <C>
A) Assumptions
Individual base salary as of Jan. 1st 100,000
Individual bonus target 15%
Purchase price for an acquisition closed on Feb. 1st of
current year 10,000,000
Purchase price for an acquisition closed on Oct. 1st of
previous year 5,000,000
Base interest rate for imputed cost of capital 8%
B) Actual vs. Budget Operating Income
Actual operating income at current year budget FX rates 5,100,000
Amortization expense for current mid-year acquisitions 80,000
Actual capital spending 550,000
Budget operating income 4,200,000
Budget capital spending 500,000
Adjusted operating income equals:
1) Actual operating income at current year budget
FX rates 5,100,000
2) Less cost of capital for mid year acquisitions:
Purchase Price 10,000,000
x Interest Rate 8.0%
x # of months since acq. 8
divided by 12 12 (533,333)
3) Less amortization expense for current mid year
acquisition (80,000)
4) Less capital spending in excess of budget:
Actual capital spending 550,000
Minus budget capital spending (500,000)
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Excess capital spending 50,000 (50,000)
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Adjusted operating income 4,436,667
Because the budgeted operating income was achieved, the bonus
Award achieved is: 80%
C) Current Year vs. Prior Year Working Capital Ratio:
Prior year net working capital percentage:
Prior year gross trade receivables 13 point average 2,300,000 [A]
Prior year gross inventory 13 point average 1,900,000 [B]
Prior year trade payables 13 point average 400,000 [C]
Prior year trade sales 16,000,000 [D]
Net Working Capital Percentage equals {[A] + [B] + [C]}/[D] = 23.7%
Current year net working capital percentage:
Current year gross trade receivables 13 point average 2,850,000 [A]
Current year gross inventory 13 point average 2,100,000 [B]
Current year trade payables 13 point average 450,000 [C]
Current year trade sales 20,000,000 [D]
Net Working Capital Percentage equals {[A] + [B] - [C]}/[D] = 22.5%
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<TABLE>
<S> <C> <C>
Improvement in net working capital ratio (prior year minus current year) 1.25%
Because the actual vs. budget operating income bonus was achieved
And the improvement is 1% of greater, the bonus award achieved is: 20%
D) Growth in Operating Income vs. Prior Year
Actual operating income at prior year FX rates 5,200,000
Prior year operating income 4,000,000
Amortization expense - current year 220,000
Amortization expense - prior year 140,000
Current year adjusted operating income equals:
1) Actual operating income at prior year FX rates 5,200,000
2) Less Cost of Capital for mid year acquisitions:
Purchase Price 10,000,000
x Interest Rate 8.0%
x # of months since acq 8
divided by 12 12 (533,333)
3) Less cost of capital for prior acquisitions:
Purchase Price 5,000,000
x Interest rate 7.0% (350,000)
4) Less amortization expense for current year (220,000)
5) Less capital spending in excess of budget (50,000)
6) Less bonus for current year vs. prior year working
capital ratio (3,000)
7) Less bonus for actual vs. budget operating income (12,000)
8) Less bonus for growth in operating income vs.
prior year (23,700)
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Current year adjusted operating income 4,007,967
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Prior year adjusted operating income equals:
1) Prior year operating income 4,000,000
2) Less cost of capital for prior acquisitions:
Purchase Price 5,000,000
x Interest rate 8.0% (400,000)
3) Less amortization expense for prior year (140,000)
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Prior year adjusted operating income 3,460,000
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Growth in operating income equals:
Adjusted operating income 4,007,967
Minus prior year adjusted
operating income (3,460,000)
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Incremental operating income 547,967 15.8%
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Because the actual vs. budget operating income bonus was
achieved and the 5% growth in operating income threshold
was achieved, the bonus award achieved is: 158%
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<TABLE>
<S> <C>
E) Calculation of individual bonus award
Individual base salary as of Jan. 1st 100,000
Individual bonus target 15%
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Individual bonus amount at 100% 15,000
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Actual bonus percent achieved:
Actual vs. budget operating income 80%
Current year vs. prior year working capital ratio 20%
Growth in operating income vs. prior year 158%
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Total bonus percent achieved 258%
Total bonus amount achieved 38,700
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9. Example of Determination of Actual Awards - Stand Alone Acquisitions
<TABLE>
<S> <C>
A) Assumptions:
Individual base salary at time of acquisition 100,000
Individual bonus target percentage 15%
Pro rata factor (company acquired on 1/1/XX) 75%
Individual bonus target amount 11,250
Target amount for other participants 25,000
Actual operating income at current year budget FX rates 4,600,000
Actual capital spending 550,000
Budget operating income 4,200,000
Budget capital spending 500,000
B) Achieving Budgeting Operating Income Expectations
Adjusted operating income equals:
1) Actual operating income at current year budget FX rates 4,600,000
2) Less capital spending in excess of budget:
Actual capital spending 550,000
minus budget capital spending (500,000)
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excess capital spending 50,000 (50,000)
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3) Less bonus amount to be paid for this element (36,250)
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Adjusted operating income
-
Because the adjusted operating income is greater than the
budgeted operating income expectation, this bonus
element is achieved at: 100%
C) Growth in Operating Income vs. Budgeted Expectations
Adjusted operating income equals:
1) Actual operating income at current year budget FX rates 4,600,000
2) Less capital spending in excess of budget (50,000)
3) Less bonus amount to be paid for achieving budget (36,250)
4) Less bonus for growth in operating income vs. budget (25,013)
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Adjusted operating income 4,488,738
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<TABLE>
<S> <C> <C>
Growth in operating income equals:
Adjusted operating income 4,488,738
minus budget operating income (4,200,000)
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incremental operating income 6.9%
Because the budgeted operating income bonus was achieved and
the 5% growth in operating income threshold was achieved,
the bonus award achieved is: 69%
D) Calculation of individual bonus award
Individual bonus target amount 11,250
Actual bonus percent achieved:
Achieving budgeted operating income expectations 100%
Growth in operating income vs. budgeted expectations 69%
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Total bonus percent achieved 169%
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Total bonus amount achieved 19,013
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