EXHIBIT 10 (c)
PURITAN-BENNETT CORPORATION
MANAGEMENT INCENTIVE COMPENSATION PLAN A
(REVISED APRIL 4, 1995)
Puritan-Bennett's Incentive Compensation Plan A has been established to
provide an incentive to key managers (other than quality and regulatory affairs
professionals, who are covered by Plan B) to attain the highest financial
performance possible each year. This Plan recognizes that other vehicles exist
to encourage building shareholder value over longer periods of time. The Plan
provides key managers with an opportunity to add to their total cash
compensation if prescribed levels of return on assets are attained but only to
the extent that FY 1996 Earnings Per Share still equals at least $2.00 per share
after incentive compensation accruals but before any additional charges from
Thermo Electron's unsolicited tender offer or similar matters. The Plan is
designed to retain and reward capable managers and to align their interests with
the interests of shareholders by recognizing financial performance by
groups/divisions and on a corporate basis. Details of the Plan follow:
I. Management Incentive Compensation Calculation.
----------------------------------------------
Incentive compensation targets for each participant in the Plan will be
established upon entrance of the participants into the Plan using the
percentage of salary guidelines prescribed in Attachment A and reviewed
periodically. To achieve target, both the corporation and, in case of the
group/divisional personnel, the individual group/division must attain a
prescribed Return on Assets (ROA) as defined in Tables I and II. For FY
1996, the 1987 Corporate ROA schedule and factors continue to apply except
that the
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ROA schedule has been converted to an after-tax schedule at a 35%
tax rate. This change was 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 1996, 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
any additional charges from Thermo Electron's unsolicited tender offer or
similar matters. Table II applies to the Bennett Group, the Puritan Group,
and Aero Systems, and is intended to exclude Medicomp and 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-incentive 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-incentive 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 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 and P-B Mexico assets will be allocated
directly to the groups/divisions where such assets are so identifiable;
unidentifiable Ireland and Mexico assets will be allocated based upon the
mix of Ireland
2
and Mexico inter-company sales. Corporate unallocated expenses are prorated
among the groups/divisions based on their ratios of group/division assets
to total corporate assets.
For FY 1996, the ROA formula calculation determines 100% of a participant's
cash incentive compensation. In the formula calculation, incentive
compensation payouts for all group/division participants will be weighted
40% based on Corporate ROA and 60% on group/divisional ROA. For all
others, the incentive computation will be based 100% on Corporate ROA.
An example of an incentive calculation is set forth in Appendix I.
The maximum cash incentive payment to each participant in the plan is
limited to 100% of the current year's earned salary (excluding incentive).
II. Administration
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a) Selection of Participants and Incentive Compensation Levels
-----------------------------------------------------------
Selection of participants and incentive target levels will be
established by the CEO and/or COO, subject to Board Compensation
Committee and full Board approval for certain individuals.
b) Determination of Incentive Award
--------------------------------
Following the completion of the year-end audit, the actual cash
incentive compensation amount for each participant will be calculated
according to the ROA formula.
c) Approval by Compensation Committee
----------------------------------
The Compensation Committee of the Board of Directors will approve
proposed incentive compensation payments for the Chairman and CEO, all
Corporate Officers and all managers reporting to the CEO, whether or
not they are Corporate
3
Officers. The CEO and/or COO will approve all other proposed incentive
payments. The CEO/COO and the Compensation Committee reserve the right
to withhold some or all of the cash incentive amounts otherwise earned
under the financial/ROA formula in cases of significant shortcomings
with respect to quality and regulatory compliance systems and
procedures. In the event that (because of the FY 1996 $2.00 EPS floor)
incentive compensation amounts calculated under the ROA formula can be
paid partially but not fully, then such amounts will be reduced by the
same percentage for all Plan A participants.
d) Communication
Participants will be informed of their incentive targets during April
of the February-January fiscal year.
e) Other Considerations
--------------------
1. Incentive awards will be paid only to participants who are
actively
employed as of the incentive calculation date (January 31).
2. Profit for incentive 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. For FY 1996, any additional charges
from Thermo Electron's unsolicited tender offer or similar matters
are to be excluded. 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 target levels of these individuals,
must be approved initially by the CEO and/or COO and in selected
cases (officers
4
and non-officer direct reports to the CEO) by the Compensation
Committee. Any changes for participants, regardless of the reason,
(promotion, change of responsibility, upgrading of salary in the
same position) must be similarly approved. 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
Compensation Plan will be the sole cash 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 fiscal year, the amount of incentive award will be based on
the number of months worked as a percent of the full year and
will reflect results of the full year.
6. The Board of Directors and its Compensation Committee reserve
the right to modify this Plan retroactively to the beginning of
the year.
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ATTACHMENT A
PURITAN-BENNETT CORPORATION
Management Incentive
Incentive Target Level
Category: (% of Salary)
A. Chairman, President 35 - 65%
B. Senior Corporate Officers 25 - 50%
C. Heads of substantial 15 - 30%
business units and other
officers
D. Other key managers Up to 25%
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TABLE I
RETURN ON ASSETS INCENTIVE SCHEDULE
Corporate 1987
Pre-Incentive Pre Tax Pre-Incentive After-Tax Corporate and Beyond
- ----------------------------- ---------------------------- -----------------------
At Least Not More Than At Least Not More Than 1985 1986
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
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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 2.050 2.000 2.357
-------
20.5 21.0 13.3 13.6 2.050 2.100 2.429
21.0 21.5 13.6 14.0 2.050 2.200 2.500
21.5 22.0 14.0 14.3 2.050 2.300 2.572
22.0 22.5 14.3 14.6 2.050 2.400 2.643
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22.5 23.0 14.6 15.0 2.050 2.500 2.715
-------
23.0 23.5 15.0 15.3 2.050 2.500 2.786
23.5 24.0 15.3 15.6 2.050 2.500 2.858
24.0 24.5 15.6 15.9 2.050 2.500 2.929
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24.5 25.0 15.9 16.2 2.050 2.500 3.000
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====================================================================================================================
25.0 or higher 16.2 or higher 2.050 2.500 3.000
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TABLE II
RETURN ON ASSETS INCENTIVE SCHEDULE
Business Unit Results (Puritan
Group, Bennett Group and Aero
Pre-Incentive Pre Tax Pre-Incentive After-Tax Puritan Group Systems) for 1990 and Beyond
- ----------------------------- ---------------------------- ------------------------- -------------------------------
At Least Not More Than At Least Not More Than 1986 1987-1989
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 2.050 2.005 1.938
------- -------
23.0 23.5 15.0 15.3 2.050 2.072 2.000
-------
23.5 24.0 15.3 15.6 2.050 2.139 2.063
24.0 24.5 15.6 15.9 2.050 2.206 2.125
24.5 25.0 15.9 16.2 2.050 2.273 2.188
====================================================================================================================
25.0 25.5 16.2 16.6 2.050 2.340 2.250
25.5 26.0 16.6 16.9 2.050 2.407 2.313
-------
26.0 26.5 16.9 17.2 2.050 2.474 2.375
26.5 27.0 17.2 17.6 2.050 2.541 2.438
------- -------
27.0 27.5 17.6 17.9 2.050 2.608 2.500
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27.5 28.0 17.9 18.2 2.050 2.675 2.563
28.0 28.5 18.2 18.5 2.050 2.742 2.625
28.5 29.0 18.5 18.8 2.050 2.809 2.688
29.0 29.5 18.8 19.2 2.050 2.876 2.750
29.5 30.0 19.2 19.5 2.050 2.943 2.813
====================================================================================================================
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30.0 30.5 19.5 19.8 2.050 3.000 2.875
-------
30.5 to 31.0 19.8 20.2 2.050 3.000 2.938
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31.0 or higher 20.2 or higher 2.050 3.000 3.000
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APPENDIX I
ILLUSTRATIVE EXAMPLE
PARTICIPANT - - A
BUSINESS UNIT - - PURITAN GROUP, BENNETT GROUP
and AERO SYSTEMS
Incentive ROA Incentive Incentive
Allocation X Schedule = Percent Earned
After-Tax
ROA Formula - -
Business Unit 9.9% 60% 1.00 60.0%
----
Corporate 8.3% 40% 1.00 40.0%
--- ---- ----
100% 100.0%
TARGET % OF SALARY 15.0%
----
PAYOUT % OF SALARY 15.0%
----
EARNED SALARY - - FY 1996 $70,000
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INCENTIVE EARNED $10,500
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