Exhibit 10-A
 | FY__ Annual Incentive Plan (AIP, SIP, MIP, OAC, DCS) |
PURPOSE
It is Donaldson’s philosophy to provide a total compensation package that attracts, retains and motivates key employees. The FY__ Annual Incentive Plan (“Plan”) emphasizes pay-for-performance by linking eligible employees’ compensation to key financial performance and provides the participants the opportunity to share in Donaldson’s financial success.
PLAN YEAR
The Plan Year coincides with Donaldson’s fiscal year of August 1st through July 31st.
PLAN ELIGIBILITY
Regular full-time and part-time employees in specific job grades/levels are eligible. Temporary staff and contractors are excluded.
TARGET INCENTIVE OPPORTUNITY
Target incentive opportunity varies by job grade and position and is expressed as a percentage of the participant’s base salary effective as of the last working day in July or last working day in an eligible position.
| • | Threshold is the level of performance at which the incentive starts to be earned. |
| • | Target opportunity is the point in which 100% incentive is earned. |
| • | Maximum is the level of performance of which no additional incentive is earned. |
PERFORMANCE MEASUREMENT GOALS
“Performance Goal” shall mean one or more of the following performance goals, either individually, alternatively or in any combination, applied on a corporate, subsidiary, division, business unit or line of business basis: earnings per share; return on investment; revenues, including net sales growth; earnings, including net operating profit after taxes; return on equity; profit margins; cost reductions; inventory levels; delivery performance; safety performance; quality performance; core operating earnings; total stockholder return; cash flow, including operating cash flows, free cash flow, discounted cash flow return on investment, and cash flow in excess of cost of capital; economic value added; stockholder value added; market share; price to earnings ratio; expense ratios; workforce
goals; total expenditures; completion of key projects and any other financial, operational or strategic measure.
Refer to your applicable fiscal year’s individual goal sheet for the target incentive opportunity for your position. Your goal sheet will specify the performance objectives and target incentive opportunities based on your Performance Goal(s) for the Plan Year, specify in terms of a formula or standard the method for calculating the amount payable to a participant if the Performance Goal(s) are achieved, and determine the degree to which the grant, vesting, exercisability, lapse of restrictions and/or settlement of such award has been earned, including the degree to which applicable Performance Goal(s) have been achieved.
Each such Performance Goal may be based (i) solely by reference to absolute results of individual performance or organizational performance at various levels or (ii) upon organizational performance relative to the comparable performance of other companies. The Performance Goal may also exclude charges related to an event or occurrence, including (X) restructurings, acquisitions, divestitures, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (Y) an event either not directly related to the operations of Donaldson or not within the reasonable control of Donaldson’s management, or (Z) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles, as set forth on your individual goal sheet.
Goals are financial and are weighted based on importance and relevance. Appropriate goals and goal weightings for each participant will vary based on the organizational goals and position responsibilities.
| • | Minimum weighting for any goal is 10% or greater, in increments of 5% |
| • | Maximum of four goals |
INCENTIVE PAYOUT ELIGIBILITY
In order to be eligible for an incentive payout, a participant must:
| • | Perform at an acceptable level as solely determined by Donaldson management. Participants with a Missed performance rating may not be eligible for a payout. |
| • | Be actively employed by Donaldson on the last working day of the fiscal year. |
EMPLOYEE STATUS CHANGES
If a participant has one of the following employment status changes during the Plan Year, the incentive payout will be prorated based on the number of days in an incentive eligible position during the Plan Year:
| • | New Hire or Rehire on or before July 1 of the Plan Year |
| • | Job or position change from non-incentive eligible position to an incentive eligible position or vice versa |
| • | Retirement (age 55 with 5 years of service) |
| • | Long Term Disability |
| • | Unpaid leave of absence |
| • | Death |
If a participant terminates employment prior to the last working day of the Plan Year for any reason other than retirement, death or long-term disability, no incentive will be paid.
If a participant terminates on or after the last working day of the Plan Year, the Plan Year incentive will be earned, and payout will be based on the participant’s goal achievement.
INCENTIVE RESULTS
Incentive payouts will be calculated by applying a payout multiplier to the target incentive opportunity. The payout multiplier is based upon the Plan Year-end financial results. Any proration calculations due to employee status changes will also be applied.
INCENTIVE PAYOUT TIMING
Incentive payouts will be paid no later than October 15th following the end of the Plan Year. Payouts are subject to all applicable taxes and will be paid net of any required withholdings
PLAN MODIFICATIONS
Donaldson reserves the right to modify, amend or cancel the Plan at any time in response to changing business conditions or unforeseen circumstances. They also retain the right to make adjustments for any unusual item that has an unplanned impact on the incentive payout. Adjustments, if any, may have either a negative or positive effect on the incentive payout earned by a participant.
RIGHT TO CONTINUED EMPLOYMENT
Nothing contained in the Plan shall be construed to confer upon any participant the right to continued employment or alter the company’s right to terminate his/her employment at any time.