Exhibit 10e
PURITAN-BENNETT CORPORATION
MANAGEMENT INCENTIVE BONUS PLAN B
(Revised May 11, 1994)
Puritan-Bennett's Incentive Bonus Plan has been established to provide an
incentive to key management employees to attain the highest performance possible
each year. The Plan provides key managers with an opportunity to add to their
total compensation if prescribed levels of return on assets are attained and/or
if other important non-financial objectives are achieved. It is designed to
retain and reward capable managers during periods of rebuilding and investment,
as well as in times of high profitability, and to recognize extraordinary
financial performance by groups/divisions and on a corporate basis. Details of
the Plan follow:
I. Management Incentive Bonus Calculation
--------------------------------------
Bonus targets for each participant in the Plan will be established upon
entrance of the participant into the Plan using the percentage of salary
guidelines prescribed in Attachment A and reviewed periodically. Except
for Quality and Regulatory Affairs professionals, to achieve the bonus
target both the corporation and, in the case of group/divisional personnel,
the individual group/division must attain a prescribed Return On Assets
(ROA) as defined in Tables I and II. For FY 1995, the 1987 Corporate ROA
schedule and factors continue to apply except that the ROA
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schedule has been converted to an after-tax schedule at a 35% tax rate.
This change has been made at both the Corporate and group/division levels
in recognition of the fact that our decision to establish a manufacturing
operation in Ireland tends to decrease pretax profits but decrease taxes
also. For FY 1995, Table I is intended to be all inclusive (i.e., include
Medicomp, any unused land or major building program in-progress assets, and
the vacant El Segundo, California facility) except for FOxS income,
expenses and assets, if any. Table II applies to the Bennett Group, which
does not include FOxS, the Puritan Group, and Aero Systems, and is intended
to exclude any unused land (Carlsbad, Rancho Bernardo, Cedar Creek, and
Lenexa), or any major building program in-progress assets. For the
corporation, ROA has been defined as the pre-bonus after-tax annual profit,
excluding certain extraordinary gains and losses, divided by the sum of the
ending total assets for each quarter, in turn divided by four.
For the groups/divisions, ROA has been defined as the pre-bonus after-tax
profit (after Corporate unallocated expenses, primarily interest, are
allocated to the groups/divisions), excluding certain extraordinary gains
and losses, divided by the ending sum of inventory, receivables, net fixed
assets and Corporate assets (except for unused land and buildings as
discussed above) not
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directly identifiable to a particular group/division (which are allocated
to such group/division) for each quarter, in turn divided by four. Such
unidentifiable corporate assets are allocated based on the ratio of the
sales of the respective group/division to total corporate sales. P-B
Ireland assets will be allocated directly to the groups/divisions where
such assets are so identifiable; unidentifiable Ireland assets will be
allocated based upon the mix of Ireland inter-company sales. Corporate
unallocated expenses are prorated among the groups/divisions based on their
ratios of group/division assets to total corporate assets.
Except for Quality and Regulatory Affairs professionals, the ROA formula
calculation determines 50% of a participant's bonus. The remaining 50% is
to be based upon objectives related to Business Improvement and this 50% is
also subject to a multiplier that can range from 0 to 2.0 Full attainment
of objectives would normally translate into a 1.0 multiplier. Exceeding
objectives would normally translate into a multiplier higher than 1.0 and
vice versa. For those individuals in a position to exert significant
influence on FDA, FAA, and/or ISO control and compliance, FY 95 Business
Improvement Objectives are to be primarily, if not entirely, control and
compliance related. In the case of Quality and Regulatory Affairs
professionals, 100% of the
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participant's bonus is to be based upon objectives related to regulatory
control and compliance-related Business Improvement Objectives.
The ROA portion of each participant's bonus, where applicable, will be
computed in accordance with the scales on Tables I and II. In the formula
calculation, bonus payouts for all group/division participants will be
weighted 40% based on Corporate ROA and 60% on group/divisional ROA. For
all others, the bonus computation will be based 100% on Corporate ROA.
An example of a bonus calculation is set forth in
Appendix I.
The maximum bonus payment to each participant in the incentive bonus plan
is limited to 100% of the current year's earned salary (excluding bonus).
II. Administration
--------------
a) Selection of Participants and Bonus Levels
------------------------------------------
Selection of participants and bonus levels will be established by the
CEO and/or COO, subject to Board Compensation Committee and full Board
approval for certain individuals.
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b) Determination of Bonus Award
----------------------------
Following the completion of the year-end audit, the actual bonus for
each participant will be calculated according to:
(i) the ROA formula, except in the case of Quality and
Regulatory Affairs professionals;
(ii) accomplishments against predetermined objectives.
The appraisal of performance against Business Improvement Objectives
will be made for each participant by the immediate supervisor, jointly
with the Vice President, Quality and Regulatory Affairs in the case of
those participants in a position to exert significant influence on FDA
and/or ISO control and compliance, and forwarded to the CEO and/or COO
for final approval, again subject to Board Compensation Committee and
full Board approval for certain individuals.
c) Approval by Compensation Committee
----------------------------------
The Compensation Committee of the Board of Directors will approve
proposed bonuses for the Chairman, CEO, all Corporate Officers and all
managers reporting to the CEO, whether or not they are Corporate
Officers. The CEO and/or COO will approve all other proposed bonuses.
The CEO/COO and Compensation Committee reserve the right to withhold
some or all of the bonus otherwise earned under the financial/ROA
formula
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portion of the plan in cases of significant shortcomings with respect to
regulatory control and compliance objectives. Also, in the unlikely
event that Return on Assets and Earnings Per Share exhibit significantly
divergent trends, the Compensation Committee and CEO/COO reserve the
right to modify the bonus program formula based upon actual results.
d) Communication
-------------
Participants will be informed of their bonus target and performance
levels required to achieve the incentive bonus during April of the
February-January fiscal year.
e) Other Considerations
--------------------
1. Bonus awards will be paid only to participants who are actively
employed as of the bonus calculation date (January 31).
2. Profit for bonus determination will be inclusive of any changes in
reserves, but will normally exclude any capital gains or losses and
other unusual gains or losses such as proceeds of fire or casualty
insurance. In cases of uncertainty the decision of the CEO will be
final.
3. The addition of new participants, including new employees, to the
plan during the year and the bonus levels for these individuals, must
be approved by the CEO and/or COO. Any changes for participants,
regardless of the reason, (promotion, change of responsibility,
upgrading of salary in the same
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position) must also be approved by the CEO and/or COO.
In any case approval must be obtained prior to communication to the
individual concerned.
4. Unless otherwise approved by the CEO and/or COO, this Incentive
Bonus Plan will be the sole Incentive Plan under which participants
included in this Plan shall be compensated.
5. In the event of the routine retirement of a participant during the
Management Incentive Bonus Plan year, the amount of bonus award will
be based on the number of months worked as a percent of the full
year and will reflect results of the full plan year.
III. Special Award Program
---------------------
A special award program may be established to provide one-time awards to
outstanding and deserving employees not participating in the Management
Incentive Bonus Plan. The amount available for such awards shall be
limited to 10% of the maximum awards available to participants of the
Management Incentive Bonus Plan, under the formula relating to that plan.
The CEO and/or COO shall approve all special awards.
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PURITAN-BENNETT CORPORATION
Management Incentive
Bonus Target Level
Category: (% of Salary)
- - -------- -------------
A. Chairman, President 35 - 65%
B. Senior Corporate Officers 25 - 50%
C. Heads of substantial business
units and other officers 15 - 30%
D. Other key managers Up to 25%
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TABLE I
Return on Net
Assets (%) as B O N U S P O O L
Defined in Sec. I
Pre-Bonus Pre Tax Pre-Bonus After-Tax
- - ----------------- -------------------
At Least Not More At Nor More Corporate Corporate Corporate
Than Least Than 1985 1986 1987 & Beyond
5.0 5.5 3.2 3.6 .400 0 0
5.5 6.0 3.6 3.9 .475 0 0
6.0 6.5 3.9 4.2 .550 0 0
6.5 7.0 4.2 4.6 .625 0 .025
7.0 7.5 4.6 4.9 .700 .400 .100
7.5 8.0 4.9 5.2 .775 .500 .175
8.0 8.5 5.2 5.5 .850 .600 .250
8.5 9.0 5.5 5.8 .925 .700 .325
9.0 9.5 5.8 6.2 1.000 .800 .400
9.5 10.0 6.2 6.5 1.050 .900 .475
- - ----------------------------------------------------------------------------------
10.0 10.5 6.5 6.8 1.100 1.000 .550
10.5 11.0 6.8 7.2 1.150 1.050 .625
11.0 11.5 7.2 7.5 1.200 1.100 .700
11.5 12.0 7.5 7.8 1.250 1.150 .775
12.0 12.5 7.8 8.1 1.300 1.200 .850
12.5 13.0 8.1 8.4 1.350 1.250 1.000
13.0 13.5 8.4 8.8 1.400 1.300 1.100
13.5 14.0 8.8 9.1 1.450 1.350 1.200
14.0 14.5 9.1 9.4 1.500 1.400 1.300
14.5 15.0 9.4 9.8 1.550 1.450 1.400
- - ----------------------------------------------------------------------------------
15.0 15.5 9.8 10.1 1.600 1.500 1.500
15.5 16.0 10.1 10.4 1.650 1.550 1.600
16.0 16.5 10.4 10.7 1.700 1.600 1.700
16.5 17.0 10.7 11.0 1.750 1.650 1.800
17.0 17.5 11.0 11.4 1.800 1.700 1.900
17.5 18.0 11.4 11.7 1.850 1.750 2.000
18.0 18.5 11.7 12.0 1.900 1.800 2.071
18.5 19.0 12.0 12.4 1.950 1.850 2.143
19.0 19.5 12.4 12.7 2.000 1.900 2.214
19.5 20.0 12.7 13.0 2.050 1.950 2.286
- - ----------------------------------------------------------------------------------
20.0 20.5 13.0 13.3 2.000 2.357
20.5 21.0 13.3 13.6 2.100 2.429
21.0 21.5 13.6 14.0 2.200 2.500
21.5 22.0 14.0 14.3 2.300 2.572
22.0 22.5 14.3 14.6 2.400 2.643
22.5 23.0 14.6 15.0 2.500 2.715
23.0 23.5 15.0 15.3 2.786
23.5 24.0 15.3 15.6 2.858
24.0 24.5 15.6 15.9 2.929
24.5 25.0 15.9 16.2 3.000
- - ----------------------------------------------------------------------------------
25.0 or Higher 16.2 or higher 3.000
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TABLE II
Return on Net B O N U S P O O L
Assets (%) as
Defined in Sec. I
Pre-Bonus Pre Tax Pre-Bonus After-Tax BUSINESS UNIT RESULTS
- - ----------------------------- --------------------------- (PURITAN GROUP, BENNETT
At Least Not More At Not More PURITAN GROUP GROUP & AERO SYSTEMS)
Than Least Than 1986 1987-1989 FOR 1990, AND BEYOND
- - ---------------------------------------------------------------------------------------------------------------------
7.0 7.5 4.6 4.9 0 0 0
7.5 8.0 4.9 5.2 0 0 .063
8.0 8.5 5.2 5.5 0 0 .125
8.5 9.0 5.5 5.8 0 0 .188
9.0 9.5 5.8 6.2 0 0 .250
9.5 10.0 6.2 6.5 0 0 .313
- - ---------------------------------------------------------------------------------------------------------------------
10.0 10.5 6.5 6.8 0 0 .375
10.5 11.0 6.8 7.2 0 0 .438
11.0 11.5 7.2 7.5 .400 .400 .500
11.5 12.0 7.5 7.8 .475 .475 .563
12.0 12.5 7.8 8.1 .550 .550 .625
12.5 13.0 8.1 8.4 .625 .625 .688
13.0 13.5 8.4 8.8 .700 .700 .750
13.5 14.0 8.8 9.1 .775 .775 .813
14.0 14.5 9.1 9.4 .850 .850 .875
14.5 15.0 9.4 9.8 .925 .925 .938
- - ---------------------------------------------------------------------------------------------------------------------
15.0 15.5 9.8 10.1 1.000 1.000 1.000
15.5 16.0 10.1 10.4 1.075 1.067 1.063
16.0 16.5 10.4 10.7 1.150 1.134 1.125
16.5 17.0 10.7 11.0 1.225 1.201 1.188
17.0 17.5 11.0 11.4 1.300 1.268 1.250
17.5 18.0 11.4 11.7 1.375 1.335 1.313
18.0 18.5 11.7 12.0 1.450 1.402 1.375
18.5 19.0 12.0 12.4 1.525 1.469 1.438
19.0 19.5 12.4 12.7 1.600 1.536 1.500
19.5 20.0 12.7 13.0 1.675 1.603 1.563
- - ---------------------------------------------------------------------------------------------------------------------
20.0 20.5 13.0 13.3 1.750 1.670 1.625
20.5 21.0 13.3 13.6 1.825 1.737 1.688
21.0 21.5 13.6 14.0 1.900 1.804 1.750
21.5 22.0 14.0 14.3 1.975 1.871 1.813
22.0 22.5 14.3 14.6 2.050 1.938 1.875
22.5 23.0 14.6 15.0 2.005 1.938
23.0 23.5 15.0 15.3 2.072 2.000
23.5 24.0 15.3 15.6 2.139 2.063
24.0 24.5 15.6 15.9 2.206 2.125
24.5 25.0 15.9 16.2 2.273 2.188
- - ---------------------------------------------------------------------------------------------------------------------
25.0 25.5 16.2 16.6 2.340 2.250
25.5 26.0 16.6 16.9 2.407 2.313
26.0 26.5 16.9 17.2 2.474 2.375
26.5 27.0 17.2 17.6 2.541 2.438
27.0 27.5 17.6 17.9 2.608 2.500
27.5 28.0 17.9 18.2 2.675 2.563
28.0 28.5 18.2 18.5 2.742 2.625
28.5 29.0 18.5 18.8 2.809 2.688
29.0 29.5 18.8 19.2 2.876 2.750
29.5 30.0 19.2 19.5 2.943 2.813
- - ---------------------------------------------------------------------------------------------------------------------
30.0 30.5 19.5 19.8 3.000 2.875
30.5 to 31.0 19.8 20.2 2.938
31.0 or higher 20.2 or higher 3.000
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APPENDIX I
ILLUSTRATIVE EXAMPLE
PARTICIPANT - - A
BUSINESS UNIT - - PURITAN GROUP, BENNETT GROUP
(ex. FOxS) & AERO SYSTEMS
BONUS
BONUS PERCENT
ALLOCATION X MULTIPLIER = EARNED
---------- ---------- ------
AFTER-TAX
ROA FORMULA - -
BUSINESS UNIT ROA = 30% 1.75/1/ 52.5%
13.8%
CORPORATE ROA = 10.2% 20% 1.60/2/ 32.0%
---
50%
BUSINESS
IMPROVEMENT OBJECTIVES 50% 1.00 50.0%
--- -----
TOTAL 100% 134.5%
X
TARGET % OF SALARY 15%
=
PAYOUT % OF SALARY 20.175%
X
EARNED SALARY -- FY 1995 $70,000
=
BONUS EARNED $14,122.50
- - --------------------
/1/ From Table II.
/2/ From Table I.
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