HENRY SCHEIN, INC.
SENIOR EXECUTIVE GROUP
1998 PERFORMANCE INCENTIVE PLAN
PLAN SUMMARY
1. Introduction
The Performance Incentive Plan (PIP) is Henry Schein's incentive-based annual
cash compensation program for the Senior Executive Group (SEG). The Plan is
designed to:
o Provide each participating SEG member ("Executive") with an annual cash
bonus opportunity so as to
o Foster achievement of specific corporate, business unit and individual
performance ("Goals"), and
o Recognize and reward Executives for individual and SEG Team
achievements.
The PIP, in conjunction with executive base compensation, is intended to provide
Executives 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 an Executive being ineligible to
participate in the Plan. Executives currently participating in the Plan are set
forth on Exhibit A. Executives will be notified at the beginning of each year
regarding their eligibility in the Plan.
3. PIP Awards
PIP awards are based on:
o The Company's annual profitability,
o The Company's achievement of other annual corporate financial and
operating Goals, and
o Each Executive's achievement of his or her individual Goals.
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Individual Performance Goals
An Executive's individual performance goals are classified into three
categories:
o Functional area Financial performance,
o Company Financial Performance, and
o MBO performance.
The CEO and the person to whom the Executive reports ("Manager") will determine
the Executive's Goals at the start of each year. A review of these goals will be
an ongoing process. Any changes must be approved by the CEO. Each Executive will
have a mid-year performance evaluation to monitor progress and, if necessary, to
modify Goals for the second half of the year.
The following table illustrates performance Goals for different types of
executive positions:
- --------------------------------------------------------------------------------
Performance Goals Based on Position and Role
- --------------------------------------------------------------------------------
| Range of Performance Goal Categories
----------------------------------------------------
Executive Segment |
| Functional Company
| Financial Financial MBO Performance
| Performance Performance (See Exhibit D)
|(See Exhibit B) (See Exhibit C)
|
- --------------------------------------------------------------------------------
Corporate | 10 - 40% 10 - 30% 20 - 40%
Management Executives |
- --------------------------------------------------------------------------------
Major Business | 60 - 70% 10 - 20% 10 - 20%
Unit Executives |
- --------------------------------------------------------------------------------
Supporting Corporate | 10 - 20% 10 - 20% 40 - 60%
Function Executives |
- --------------------------------------------------------------------------------
Note: This schedule is intended to provide guidelines for development of a
specific performance plan for each Executive. Final weighting of performance
Goals for each Executive will be determined by the CEO.
Functional Area Financial Performance Goals
For Executives with P&L responsibilities, these Goals are based on the business
unit's financial performance measured against each year's financial budgets, in
the following areas:
o Divisional contribution dollars.
o Group/Divisional Pre-Tax income after "service charges".
o Pre-Tax Income of operating subsidiaries -- sales, gross profit and
operating income Goals.
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For Executives with infrastructure or supporting responsibilities, these Goals
are based on expense performance relative to the budget (after adjustment for
volume of business, if appropriate).
Company Financial Performance Goals
Company net income goals will be set for the entire SEG Team.
MBO Performance Goals
Specific MBO Performance Goals will be developed encompassing:
o Customer service commitment goals that support the Company's three-year
Strategic Plan, and
o Team Schein Goals, focused on the professional growth and development
of Team Schein Members, and supporting and promoting the Company's
cultural cornerstone values.
Acquisitions, New Business Ventures
Goals will be adjusted for acquisitions and new business ventures that are not
initially included in the original Company budget. 1998 Financial Performance
goals will be subsequently adjusted where appropriate.
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5. Plan Awards
At the end of each year, individual performance is evaluated relative to Goals,
and PIP awards are determined for each performance category. An Executive's PIP
award will equal the sum of the awards earned in each category (See Exhibits B,
C and D).
In order to receive any PIP award, Executives must be actively employed on March
15 of the year the PIP award is to be paid out. A prorated PIP award may be
available, at the discretion of the CEO, if an Executive in the Plan dies,
becomes permanently disabled, or retires at the normal retirement age during the
Plan year.
PIP awards, less applicable withholdings, will be generally made by March 15 of
each year.
6. The PIP Fund
The annual PIP Fund, consists of the total monies earned each year for
Executive's awards for Goal achievement in the three (3) performance categories.
This summary is a general description of the Henry Schein, Inc. Performance
Incentive Plan for the Senior Executive Group as of January 1, 1998. 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.
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1998 PERFORMANCE CATEGORY WEIGHTING
SENIOR EXECUTIVE GROUP
Functional Company
1998 PIP Plan Financial Financial MBO
Participants Performance Performance Performance
- --------------- ----------- ----------- -----------
G. Benjamin 15 40 45
J. Breslawski 45 40 15
D. Forrest 20 30 50
S. LaHood 40 30 30
S. Paladino 10 60 30
J. Stahly 65 20 15
M. Zack 65 20 15
L. David 15 20 65
M. Mlotek 20 30 50
L. Gibson 70 20 10
B. Haber 70 20 10
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EXHIBIT A
Henry Schein Inc.
Senior Executive Group
Performance Incentive Plan
Plan Participants - 1998
I Corporate Management Executives
"General Managers" of the G. Benjamin
Corporation and Senior Executives for J. Breslawski
Major Support Units. D. Forrest
S. LaHood
S. Paladino
II Major Business Unit Executives
Senior Executives of HSI Product L. Gibson
Line/Marketplace Business Units B. Haber
J. Stahly
M. Zack
III Supporting Corporate Function
Executives
Leaders of Key Corporate-Wide L. David
Support Functions M. Mlotek
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EXHIBIT B
Henry Schein Inc.
Senior Executive Group
Performance Incentive Plan
1998 Award Levels for Achievement of
Functional Financial Goals and Overhead Expense
for Infrastructure Groups
Less 100%
Size of Than @95% Incentive Extra-
Functional Financial Goal Plan of Plan Award Expected Outstanding ordinary
- --------------------------------------- -------------------------------------------- --------------- ------------------------------
(>250mm)
Performance Achievement 90% 95% 98% 100% 115% 130%
Incentive Award Payout* 50% 75% 100.0% 120% 135% 165%
(75mm-250mm)
Performance Achievement 90% 95% 98% 100% 140% 170%
Incentive Award Payout* 50% 75% 100.0% 120% 135% 165%
(<75mm)
Performance Achievement 85% 95% 98% 100% 170% 200%
Incentive Award Payout* 50% 75% 100.0% 120% 135% 165%
Less 100%
Size of Overhead Budget Than @95 - 98% Incentive Over
Plan of Plan Expected Award Budget
- --------------------------------------- -------------------------------------------- --------------- ------------------------------
Large Overhead Budget (>30mm)
Performance Achievement 95% 98% 100% 102% 105%
Incentive Award Payout* 120% 115% 110% 100.0% 50%
Small / Medium Overhead Budget
(0-30mm)
Performance Achievement 90% 95% 100% 102% 108%
Incentive Award Payout* 120% 115% 110% 100.0% 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.
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EXHIBIT C
Henry Schein Inc.
Senior Executive Group
Performance Incentive Plan
1998 Award Levels for Achievement of Company Financial Goals
An Executive's PIP Fund Account award for achievement of Company Performance
Financial Goals is based on HSI's actual Earnings Per Share (EPS) measured
against the targeted level.
The 1998 EPS target is $1.48 as of March 16, 1998. This target will be adjusted
for acquisitions and new business ventures that are not initially included in
the original company budget.
1998 Company Financial Goals and Resulting PIP Awards
-----------------------------------------------------
% of Incentive Award Payout
EPS Achieved by Executive
$1.58 and above 180%
$1.57 170%
$1.56 160%
$1.55 150%
$1.54 140%
$1.53 130%
$1.52 124%
$1.51 118%
$1.50 112%
$1.49 106%
$1.48 100%
$1.47 75%
$1.46 73%
$1.45 71%
$1.44 70%
$1.43 68%
$1.42 66%
$1.41 65%
$1.40 60%
$1.39 52%
$1.38 50%
Below $1.38 0%
Achievement or lack of achievement of goals beyond the ranges stated are
discretionary.
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EXHIBIT D
Henry Schein Inc.
Senior Executive Group
Performance Incentive Plan
1998 Award Levels for Achievement of
MBO Performance Goals and Team Performance Goals
MBO Goals % of MBO
Achievement Level Award Earned by Executive*
70% 50%
80% 75%
90% 95%
95% 100%
100% 115%
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.
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