FY11Officer Annual Cash (OAC) Incentive Plan
Exhibit 10-A
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FY11 Officer
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FY11 OFFICER ANNUAL CASH INCENTIVE PLAN
PURPOSE
It is Donaldson Company’s philosophy to provide a total compensation package that attracts, retains and motivates the best employees. The Incentive Plan provides variable incentive compensation for eligible positions and is designed to reward participating employees for their contributions toward Donaldson’s achievement of specific financial goals.
PLAN YEAR
The Plan Year coincides with Donaldson Company’s fiscal year of August 1st through July 31st.
PLAN ELIGIBILITY
All officers are eligible for the Officer Annual Cash Incentive Plan. Participants must work a regular full-time or regular part-time schedule during the Plan Year.
INCENTIVE OPPORTUNITY
Target incentive opportunity varies by level 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.
Target incentive opportunity is as follows:
| • | VP’s | 40% |
| • | SVP’s/CFO | 60% |
| • | CEO | 80% |
PERFORMANCE MEASUREMENT GOALS (Metrics)
Goals are financial and are weighted based on importance and relevance. Appropriate goals and goal weightings for each participant will vary based on the organization’s goals and the position’s job responsibilities. The minimum weighting for any goal is 10%. Each year the Human Resource Committee (HR Committee) of the Board of Directors establishes and approves the performance measurement goals for the officers eligible for this plan.
FY11 OFFICER ANNUAL CASH INCENTIVE PLAN
The following are the specific performance metrics for Officers with Corporate responsibility:
| CORPORATE PERFORMANCE METRICS | ||||
| 0% Threshold | 100% Target | 150% Target | 200% Target | |
| EPS | Record ($2.12) | Plan ($2.38) | +18% over Record ($2.50) | +24% over Record ($2.63) |
| OI% | Plan - 2.0% | Plan | Plan + 2.0% | N/A |
| NI% | Plan – 1.5% | Plan | Plan +1.5% | N/A |
| ROI | Cost of Capital | 15.0% | 20.0% | 21.5% |
| Sales | 90% of Plan | Plan | 110% of Plan | N/A |
The following are the performance metrics for Officers with Business Segment or Regional responsibility:
| BUSINESS SEGMENT AND REGIONAL PERFORMANCE METRICS | ||||
| 0% Threshold | 100% Target | 150% Target | 200% Target | |
| EPS | Record ($2.12) | Plan ($2.38) | +18% over Record ($2.50) | +24% over Record ($2.63) |
| OI% | Plan -2.0% | Plan | Plan + 2.0% | N/A |
| ROI | 67% of Plan or the cost of capital, whichever is higher | Plan or straight-line interpolation if plan < cost of capital | Straight interpolation | Plan +43% or the record of past 4 years, whichever is higher |
| Sales | 90% of Plan | Plan | 110% of Plan | NA |
The following are the performance targets:
| CEO | CFO | Section 16 Officers | Non Section 16 Officers | |
| EPS | 50% | 40% | 40% | 30% |
| OI% | 10% | 0% | 20% | 25% |
| NI% | 0% | 20% | 0% | 0% |
| Sales | 20% | 20% | 20% | 20% |
| ROI | 20% | 20% | 20% | 25% |
PAYOUT ELIGIBILITY
In order to be eligible for a payout, participants must be:
| • | Performing at an acceptable level as determined by management and/or the HR Committee. Participants with a Requires Improvement (RI) performance rating are not eligible under any circumstance. | |
| • | Actively employed by Donaldson on the last working day of the fiscal year. |
FY11 OFFICER ANNUAL CASH INCENTIVE PLAN
INCENTIVE PAYOUTS
Incentive payouts will be available no later than October 15th following the end of the fiscal year. Payouts are subject to all applicable taxes and will be paid net of any required withholdings. Active participants must complete all annual performance management process requirements and acknowledge their new fiscal year goals before receiving their prior fiscal year Incentive Plan payout.
Officers are eligible to defer all or a portion of their incentive payout to the Donaldson Company, Inc. Deferred Compensation 401(k) Excess Plan. This deferral election must be made at least six months prior to the end of the performance period.
PAYOUT MODIFICATION
For the following situations, incentive payouts will be modified or prorated based on the month of change as listed in the following table:
| Month of Change | New Hire/ Rehire / Newly Eligible | Job Change – Eligible Position to Another Eligible Position | Job Change –Eligible Position to Non- Eligible Position | Retirement, LTD, Death | |
| Job 1 | Job 2 | ||||
| August | 12/12 | 0 | 12/12 | 0 | 0 |
| September | 11/12 | 0 | 12/12 | 0 | 0 |
| October | 10/12 | 0 | 12/12 | 0 | 0 |
| November | 9/12 | 3/12 | 9/12 | 4/12 | 4/12 |
| December | 8/12 | 4/12 | 8/12 | 5/12 | 5/12 |
| January | 7/12 | 5/12 | 7/12 | 6/12 | 6/12 |
| February | 6/12 | 6/12 | 6/12 | 7/12 | 7/12 |
| March | 5/12 | 7/12 | 5/12 | 8/12 | 8/12 |
| April | 4/12 | 8/12 | 4/12 | 9/12 | 9/12 |
| May | 3/12 | 12/12 | 0 | 10/12 | 10/12 |
| June | 2/12 | 12/12 | 0 | 11/12 | 11/12 |
| July | 0 | 12/12 | 0 | 12/12 | 12/12 |
| • | Job changes – incentive payout will be prorated by month of job change based on incentive opportunity and performance measurement goals defined for jobs 1 and 2. | |
| • | Terminations (for any reason other than retirement, death, or LTD) – If an employee terminates employment prior to the end of the fiscal year, no incentive is earned. If an employee terminates after July 31st, the fiscal year’s incentive will be earned to the extent of the participant’s goal achievement. | |
| • | Other – In the case of an unusual circumstance impacting a plan participant, management and the HR Committee reserves the right to withhold or adjust an incentive payout. |
FY11 OFFICER ANNUAL CASH INCENTIVE PLAN
PLAN MODIFICATIONS
Donaldson Board of Directors and/or HR Committee reserves the right to modify, amend or cancel this 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 Incentive Plan shall be construed to confer upon any employee the right to continued employment, or alter the company’s right to terminate his/her employment at any time.
