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HIGHLY CONFIDENTIAL
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▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
Management Team
2001 Performance Incentive Plan
Plan Summary
1. Introduction
The Performance Incentive Plan ("PIP," or the "Plan") is ▇▇▇▇▇ ▇▇▇▇▇▇'▇
incentive-based cash compensation program for its management team. The Plan,
formerly limited to senior executives, has been expanded in its coverage to now
include the entire management team of directors and above. It has also been
redesigned and enhanced to bind all participants together in a concerted effort
to drive our business toward achieving common objectives that benefit the
Company as a whole, the management team and each participant. The Plan is
specifically designed to:
Provide each participating management team member ("Participant") with
an annual cash bonus opportunity;
▇▇▇▇▇▇ achievement of specific corporate, business unit and individual
performance goals ("Goals");
Recognize and reward Participants for individual and management team
achievements; and
Reward each Participant with a cash Super Bonus, if measurable Company
profitability Goals are exceeded.
The PIP cash bonus award, in conjunction with a Participant's base compensation,
is intended to provide Participants with competitive total annual cash
compensation that is at or above the median for comparable positions at
companies in our industry and at other organizations of our size.
2. Eligibility
The Chief Executive Officer ("CEO") annually determines eligibility for
participation in the Plan. Participation is intended to be ongoing. However,
changes in assignments may result in a Participant's being ineligible to
participate in the Plan. Team Schein Members will be notified at the beginning
of each year regarding their eligibility to participate in the Plan.
3. PIP Awards
PIP awards are based on:
The Company's quarterly and annual profitability, specifically measured
against earnings per share ("EPS"), net income or other predetermined
profitability Goals;
The Company's achievement of other quarterly and annual corporate
financial and operating Goals;
The level of achievement of the Participant's business unit or
functional area of its financial and other performance Goals; and
Each Participant's achievement of his or her individual Goals.
4. Individual Performance Goals
A Participant's individual performance Goals are classified into three
categories:
Company financial performance,
Functional area financial performance, and
MBO performance.
The Company Financial Performance Goals are determined for each quarter and for
the year as a whole, with each quarterly Goal and the total annual Goal
representing, on a stand alone basis, 20% of each Participant's target for the
Company Financial Performance component of his or her program. The Functional
Financial Performance Goal and the MBO Performance Goal evaluation and analysis
will be on an annual basis. The PIP award payouts and the Super Bonus award
payouts corresponding to levels of achievement of Company Financial Performance
Goals are set forth on Exhibits A1 - A5. The PIP award payouts for meeting or
exceeding Functional Area Financial Goals and each Participant's individualized
MBO Performance Goals are set forth on Exhibits B and C, respectively.
The CEO and the person to whom the Participant reports ("Manager") will
determine the Participant's Goals at the start of each year. A review of these
Goals will be an ongoing process. Any changes during the year must be approved
by the Manager and, if appropriate, by the CEO. Each Participant and his or her
Manager are encouraged to have performance evaluations during the year to
monitor progress and, if necessary, to modify Goals (with the approval of the
CEO, if appropriate) for the balance of the year.
The following table illustrates performance Goals for different types of
management positions:
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Performance Goals Based on
Position and Role
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Range of Performance Goal Categories
Management Segment
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Functional Company
Financial Financial MBO Performance
Performance Performance
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Corporate 20% - 40% 15% - 60% 20% - 40%
Management Participants
(e.g. Finance, Supply Chain TSM's,
etc)
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Major Business 50% - 60% 15% - 30% 20% - 30%
Unit Participants
(e.g. Dental Group, Medical Group, Veterinary
Group TSM's, etc.)
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Supporting Corporate Function Participants (e.g. 20% - 30% 15% - 30% 40% - 50%
Legal Department, Human Resources Department
TSM's, etc.)
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Note: This schedule is intended to provide guidelines for development of a
specific performance plan for each Participant. Final weighting of
performance Goals for each Participant will be determined by the
Participant's Manager and, if appropriate, approved by the CEO.
5. Company Financial Performance Goals
Company net income goals will be set for the entire Management Team on a
quarterly and annual EPS basis. These are internally developed EPS base Goals as
determined by the executive management team. Other metrics to be used as part of
the Company's financial performance Goals formula may include pre-tax profits,
gross profit improvement from previous periods, etc.
See Exhibits A1 - A5 for PIP award payouts for achieving Company Financial
Performance Goals.
6. Functional Area Financial Performance Goals
For Participants managing areas that impact a P&L, these Goals are based on the
business unit's financial performance measured against annual financial budgets,
in the following areas:
Group/Divisional contribution dollars.
Group/Divisional Pre-Tax income after "service charges."
Group/Divisional net income Goals.
Pre-Tax Income of operating subsidiaries -- sales, gross profit and
operating income Goals.
For Participants with infrastructure or supporting responsibilities, these Goals
are based on expense performance relative to the budget (after adjustment for
volume of business, if appropriate).
See Exhibit B for PIP award payouts for achieving and exceeding Functional Area
Financial Goals.
7. MBO Performance Goals
Specific, measurable MBO Performance Goals will be developed for each
Participant. These MBO Performance Goals should drive toward and support four
enterprise-wide initiatives: Profitability; Process Excellence; Customer
Orientation and Strategic Planning.
|_| Profitability - e.g., reduce expenses as a percent of sales; increase
business unit sales; reduce inventory.
|_| Process Excellence - e.g., implement a new policy; reduce dockside
receiving-to-shelf time; reduce DSO's; increase inventory turns.
|_| Customer Orientation - e.g., increase frequency of salesperson to
customer contacts; implement project to develop TSR screen to aid in
positive customer interactions; support internal customer by completing
all recruits within a reasonable, predetermined time period; develop
detailed script and training to improve phone contacts with customers.
|_| Strategic Planning - e.g., design and implement a professional
self-development plan; benchmark Participant's unit against similar
companies' functions.
See Exhibit C for PIP award payouts for achieving and exceeding MBO Performance
Goals.
8. Acquisitions, New Business Ventures
Goals will be adjusted for acquisitions and new business ventures that are not
initially considered in developing the original Company target, unless otherwise
determined by the CEO and the Chief Financial Officer ("CFO"). If this occurs,
it will be timely communicated to the Participant and his or her Manager.
9. The Super Bonus
HSI's enhanced PIP program also includes a Super Bonus opportunity.
If the Company as a whole exceeds its quarterly and annual internal EPS base
Goals, each Participant has the opportunity to earn a Super Bonus of up to 200%
of the Company Financial Performance component of his or her PIP award. See
Exhibits A1 - A5 for Super Bonus award payouts for exceeding Company Financial
Performance Goals.
10. Plan Awards
During the first fiscal quarter of each year, individual performance for the
previous year is evaluated by quarter and annually (as appropriate) relative to
Goals, and PIP and Super Bonus awards are determined for each performance
category, as applicable. A Participant's total Plan award will equal the sum of
the awards earned in each category for the previous year's performance.
In order to receive any PIP or Super Bonus award, Participants must be actively
employed on March 15 of the year the Plan award is to be paid out. A prorated
Plan award may be available, at the discretion of the CEO, if a Participant in
the Plan dies, becomes permanently disabled, retires at the normal retirement
age during the Plan year, or in other special circumstances.
PIP and Super Bonus awards, less applicable withholdings, will generally be made
by the end of the first fiscal quarter of each year.
11. The PIP Fund
The annual PIP Fund consists of the total monies earned each year for
Participants' PIP and Super Bonus awards for Goal achievement in the three
performance categories.
This summary is a general description of the ▇▇▇▇▇ ▇▇▇▇▇▇, Inc. Performance
Incentive Plan for the Management Team as of January 1, 2001. This summary is
not intended to, nor does it constitute, a contract or guarantee of continued
employment. The Company reserves the right to change or terminate the Plan at
any time without notice
EXHIBIT A1
▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
Performance Incentive Plan
2001 Award Levels for Achievement of Company Financial Goals
A Participant's PIP award and Super Bonus award for achieving and exceeding
Company Financial Performance Goals is based on HSI's actually achieved Earnings
Per Share (EPS) measured against the internal EPS Base Goals determined by the
executive management team.
The 2001 base annual EPS target is $1.93. The quarterly EPS targets are as
follows: Q1 - $.31; Q2 - $.46; Q3 - $.55 and Q4 - $.61. These targets will be
adjusted for acquisitions and new business ventures that are not initially
considered in developing the original Company target unless otherwise determined
by the CEO and CFO.
------------------------------- ---------------------------- ---------------------------- ----------------------------
2001 Company Financial Goals
and Resulting PIP Awards
Q1 EPS GOALS PIP AWARD PAYOUT SUPER BONUS AWARD PAYOUT TOTAL COMPOUNDED PAYOUT
------------------------------- ---------------------------- ---------------------------- ----------------------------
$.41 and above 160% 200% 480.0%
$.40 154% 180% 431.2%
$.39 148% 160% 384.8%
$.38 142% 140% 340.8%
$.37 136% 120% 299.2%
$.36 130% 100% 260.0%
$.35 124% 80% 223.2%
$.34 118% 60% 188.8%
$.33 112% 40% 156.8%
$.32 106% 20% 127.2%
$.31 100% 0% 100%
$.30 75% 0% 75%
$.29 73% 0% 73%
$.28 71% 0% 71%
$.27 70% 0% 70%
$.26 68% 0% 68%
$.25 66% 0% 66%
$.24 65% 0% 65%
$.23 60% 0% 60%
$.22 52% 0% 52%
$.21 50% 0% 50%
Below $.21 0% 0% 0%
------------------------------- ---------------------------- ---------------------------- ----------------------------
Achievement of lack of achievement of Goals beyond the ranges stated is
discretionary.
The above quarterly Goals comprise 20% of each Participant's target for the
Company Financial Performance Goal category.
EXHIBIT A2
▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
Performance Incentive Plan
2001 Award Levels for Achievement of Company Financial Goals
A Participant's PIP award and Super Bonus award for achieving and exceeding
Company Financial Performance Goals is based on HSI's actually achieved Earnings
Per Share (EPS) measured against the internal EPS Base Goals determined by the
executive management team.
The 2001 base annual EPS target is $1.93. The quarterly EPS targets are as
follows: Q1 - $.31; Q2 - $.46; Q3 - $.55 and Q4 - $.61. These targets will be
adjusted for acquisitions and new business ventures that are not initially
considered in developing the original Company target unless otherwise determined
by the CEO and CFO.
------------------------------- ---------------------------- ---------------------------- ----------------------------
2001 Company Financial Goals
and Resulting PIP Awards
Q2 EPS GOALS PIP AWARD PAYOUT SUPER BONUS AWARD PAYOUT TOTAL COMPOUNDED PAYOUT
------------------------------- ---------------------------- ---------------------------- ----------------------------
$.56 and above 160% 200% 480.0%
$.55 154% 180% 431.2%
$.54 148% 160% 384.8%
$.53 142% 140% 340.8%
$.52 136% 120% 299.2%
$.51 130% 100% 260.0%
$.50 124% 80% 223.2%
$.49 118% 60% 188.8%
$.48 112% 40% 156.8%
$.47 106% 20% 127.2%
$.46 100% 0% 100%
$.45 75% 0% 75%
$.44 73% 0% 73%
$.43 71% 0% 71%
$.42 70% 0% 70%
$.41 68% 0% 68%
$.40 66% 0% 66%
$.39 65% 0% 65%
$.38 60% 0% 60%
$.37 52% 0% 52%
$.36 50% 0% 50%
Below $.36 0% 0% 0%
------------------------------- ---------------------------- ---------------------------- ----------------------------
Achievement of lack of achievement of Goals beyond the ranges stated is
discretionary.
The above quarterly Goals comprise 20% of each Participant's target for the
Company Financial Performance Goal category.
EXHIBIT A3
▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
Performance Incentive Plan
2001 Award Levels for Achievement of Company Financial Goals
A Participant's PIP award and Super Bonus award for achieving and exceeding
Company Financial Performance Goals is based on HSI's actually achieved Earnings
Per Share (EPS) measured against the internal EPS Base Goals determined by the
executive management team.
The 2001 base annual EPS target is $1.93. The quarterly EPS targets are as
follows: Q1 - $.31; Q2 - $.46; Q3 - $.55 and Q4 - $.61. These targets will be
adjusted for acquisitions and new business ventures that are not initially
considered in developing the original Company target unless otherwise determined
by the CEO and CFO.
------------------------------- ---------------------------- ---------------------------- ----------------------------
2001 Company Financial Goals
and Resulting PIP Awards
Q3 EPS GOALS PIP AWARD PAYOUT SUPER BONUS AWARD PAYOUT TOTAL COMPOUNDED PAYOUT
------------------------------- ---------------------------- ---------------------------- ----------------------------
$.65 and above 160% 200% 480.0%
$.64 154% 180% 431.2%
$.63 148% 160% 384.8%
$.62 142% 140% 340.8%
$.61 136% 120% 299.2%
$.60 130% 100% 260.0%
$.59 124% 80% 223.2%
$.58 118% 60% 188.8%
$.57 112% 40% 156.8%
$.56 106% 20% 127.2%
$.55 100% 0% 100%
$.54 75% 0% 75%
$.53 73% 0% 73%
$.52 71% 0% 71%
$.51 70% 0% 70%
$.50 68% 0% 68%
$.49 66% 0% 66%
$.48 65% 0% 65%
$.47 60% 0% 60%
$.46 52% 0% 52%
$.45 50% 0% 50%
Below $.45 0% 0% 0%
------------------------------- ---------------------------- ---------------------------- ----------------------------
Achievement of lack of achievement of Goals beyond the ranges stated is
discretionary.
The above quarterly Goals comprise 20% of each Participant's target for the
Company Financial Performance Goal category.
EXHIBIT A4
▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
Performance Incentive Plan
2001 Award Levels for Achievement of Company Financial Goals
A Participant's PIP award and Super Bonus award for achieving and exceeding
Company Financial Performance Goals is based on HSI's actually achieved Earnings
Per Share (EPS) measured against the internal EPS Base Goals determined by the
executive management team.
The 2001 base annual EPS target is $x.xx. The quarterly EPS targets are as
follows: Q1 - $.31; Q2 - $.46; Q3 - $.55 and Q4 - $.61. These targets will be
adjusted for acquisitions and new business ventures that are not initially
considered in developing the original Company target unless otherwise determined
by the CEO and CFO.
------------------------------- ---------------------------- ---------------------------- ----------------------------
2001 Company Financial Goals
and Resulting PIP Awards
Q4 EPS GOALS PIP AWARD PAYOUT SUPER BONUS AWARD PAYOUT TOTAL COMPOUNDED PAYOUT
------------------------------- ---------------------------- ---------------------------- ----------------------------
$.71 and above 160% 200% 480.0%
$.70 154% 180% 431.2%
$.69 148% 160% 384.8%
$.68 142% 140% 340.8%
$.67 136% 120% 299.2%
$.66 130% 100% 260.0%
$.65 124% 80% 223.2%
$.64 118% 60% 188.8%
$.63 112% 40% 156.8%
$.62 106% 20% 127.2%
$.61 100% 0% 100%
$.60 75% 0% 75%
$.59 73% 0% 73%
$.58 71% 0% 71%
$.57 70% 0% 70%
$.56 68% 0% 68%
$.55 66% 0% 66%
$.54 65% 0% 65%
$.53 60% 0% 60%
$.52 52% 0% 52%
$.51 50% 0% 50%
Below $.51 0% 0% 0%
------------------------------- ---------------------------- ---------------------------- ----------------------------
Achievement of lack of achievement of Goals beyond the ranges stated is
discretionary.
The above quarterly Goals comprise 20% of each Participant's target for the
Company Financial Performance Goal category.
EXHIBIT A5
▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
Performance Incentive Plan
2001 Award Levels for Achievement of Company Financial Goals
A Participant's PIP award and Super Bonus award for achieving and exceeding
Company Financial Performance Goals is based on HSI's actually achieved Earnings
Per Share (EPS) measured against the internal EPS Base Goals determined by the
executive management team.
The 2001 base annual EPS target is $1.93. The quarterly EPS targets are as
follows: Q1 - $.31; Q2 - $.46; Q3 - $.55 and Q4 - $.61. These targets will be
adjusted for acquisitions and new business ventures that are not initially
considered in developing the original Company target unless otherwise determined
by the CEO and CFO.
------------------------------- ---------------------------- ---------------------------- ----------------------------
2001 Company Financial Goals
and Resulting PIP Awards
Annual EPS Goals PIP AWARD PAYOUT SUPER BONUS AWARD PAYOUT TOTAL COMPOUNDED PAYOUT
------------------------------- ---------------------------- ---------------------------- ----------------------------
$2.03 and above 160% 200% 480.0%
$2.02 154% 180% 431.2%
$2.01 148% 160% 384.8%
$2.00 142% 140% 340.8%
$1.99 136% 120% 299.2%
$1.98 130% 100% 260.0%
$1.97 124% 80% 223.2%
$1.96 118% 60% 188.8%
$1.95 112% 40% 156.8%
$1.94 106% 20% 127.2%
$1.93 100% 0% 100%
$1.92 75% 0% 75%
$1.91 73% 0% 73%
$1.90 71% 0% 71%
$1.89 70% 0% 70%
$1.88 68% 0% 68%
$1.87 66% 0% 66%
$1.86 65% 0% 65%
$1.85 60% 0% 60%
$1.84 52% 0% 52%
$1.83 50% 0% 50%
Below $1.83 0% 0% 0%
------------------------------- ---------------------------- ---------------------------- ----------------------------
Achievement of lack of achievement of Goals beyond the ranges stated is
discretionary.
The above quarterly Goals comprise 20% of each Participant's target for the
Company Financial Performance Goal category.
EXHIBIT B
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
Performance Incentive Plan
2001 PIP Award Levels for Achievement of
Functional Financial Goals
SALES & CONTRIBUTIONS Less Less 100%
Than Than @ 95% Incentive Out- Extra-
Size of Functional Financial Goal Plan Plan of Plan Award Expected Standing Ordinary
------------------------------------------------- --------- -------- ----------- ----------- ----------- ------------- -------------
>$500mm sales
Performance Achievement 75% 90% 95% 99% 100% 110% 120%
Incentive Award Payout 25% 50% 75% 100% 110% 135% 165%
$250mm - $500mm sales
Performance Achievement 75% 90% 95% 99% 100% 115% 130%
Incentive Award Payout 25% 50% 75% 100% 110% 135% 165%
$75mm - $250mm sales
Performance Achievement 75% 90% 95% 99% 100% 140% 170%
Incentive Award Payout 25% 50% 75% 100% 110% 135% 165%
$0 - $75mm sales
Performance Achievement 70% 85% 95% 99% 100% 170% 200%
Incentive Award Payout 25% 50% 75% 100% 110% 135% 165%
PRE-TAX PROFIT &
AFTER-TAX GOALS Less Less 100%
Than Than @ 95% Incentive Above Out- Extra-
Size of Functional Financial Goal Plan Plan of Plan Award Expected Avg Standing Ordinary
----------------------------------------- ------- --------- --------- ------------- ------------ --------- ------------ ------------
>$20mm pre-tax profit
Performance Achievement 50% 90% 95% 99% 100% 110% 125% 135%
Incentive Award Payout 20% 50% 75% 100% 110% 150% 175% 200%
$10mm - $20mm pre-tax profit
Performance Achievement 50% 90% 95% 99% 100% 115% 130% 150%
Incentive Award Payout 20% 50% 75% 100% 110% 150% 175% 200%
$2mm - $10mm pre-tax profit
Performance Achievement 50% 90% 95% 99% 100% 120% 140% 175%
Incentive Award Payout 20% 50% 75% 100% 110% 150% 175% 200%
$0 - $2mm pre-tax profit
Performance Achievement 50% 85% 95% 99% 100% 125% 150% 200%
Incentive Award Payout 20% 50% 75% 100% 110% 150% 175% 200%
EXPENSE BUDGETS
Less than @ 95-98% Over Over
Size of Overhead Expense Budget Plan of Plan Expected Budget Budget
------------------------------------------------- ------------ --------------- ------------ ---------- ----------
>$50mm expense budget
Performance Achievement 95% 98% 100% 101% 102.5%
Incentive Award Payout 135% 120% 110% 80% 50%
$25mm - $50mm expense budget
Performance Achievement 95% 98% 100% 102% 105%
Incentive Award Payout 135% 120% 110% 85% 50%
$500m - $25mm expense budget
Performance Achievement 90% 95% 100% 103% 110%
Incentive Award Payout 135% 120% 110% 90% 50%
$0 - $500m expense budget
Performance Achievement 90% 95% 100% 105% 115%
Incentive Award Payout 125% 115% 110% 95% 50%
Achievement or lack of achievement of Goals beyond the ranges stated are
discretionary
There will be a proration of awards that fall between the levels listed.
EXHIBIT C
▇▇▇▇▇ ▇▇▇▇▇▇, Inc.
Performance Incentive Plan
2001 Award Levels for Achievement of
MBO Performance Goals
------------------------------- -----------------------------------------
MBO Goals % of MBO
Achievement Level Award Earned by Participant
70% 50%
80% 75%
90% 95%
92.5% 100%
95% 105%
100% Up to 120%
------------------------------- -----------------------------------------
Achievement or lack of achievement of Goals (measured quantitatively and/or
qualitatively) beyond the ranges stated are discretionary. In order to obtain an
award of 120% of the original MBO target amount, the participant must have
successfully achieved quantitative and qualitative elements of the MBO goal such
that the MBO goal could not have been materially improved upon, subject to the
discretion of the evaluating Manager.
* There will be a proration of awards that fall between the levels listed.
2001 RECEIPT AND ACKNOWLEDGMENT OF ▇▇▇▇▇ ▇▇▇▇▇▇, INC.
PERFORMANCE INCENTIVE PLAN
This Performance Incentive Plan document is highly confidential. It serves as a
guide to the administration of the PIP program. Because the general business
environment in which HSI operates is always changing, the Plan may be changed at
any time at the discretion of HSI's executive management.
By signing below, you acknowledge that you have received a copy of this PIP
document, understand that the Plan is subject to change at the discretion of the
Company's executive management, acknowledge that the contents of the Plan are
highly confidential and understand that the content and the impact of the Plan
on the management of HSI is critical to the success of the Company. Accordingly,
the details and content of the PIP program must not be disseminated or used
outside of the Company or discussed with anyone other than your immediate
family.
Your signature below indicates that you have read, understand and agree to the
above.
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Participant's Printed Name Participant's Signature Date
