Exhibit 10.1
(HENRY SCHEIN LOGO) [y20559y2055900.gif]
Management Team
2006
Performance Incentive Plan Summary

 

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1. Introduction
Congratulations on being designated a participant in the Performance Incentive
Plan (“PIP,” or the “Plan”), Henry Schein’s incentive-based cash compensation
program for its management team. Plan participants include the entire management
team of directors and vice presidents. The Plan has been designed to bind all
participants together in a concerted effort to drive our business toward
achieving common objectives that benefit the Company as a whole, the management
team and each participant. The Plan is specifically designed to:

  •   Provide each participating management team member (“Participant”) with an
annual cash bonus opportunity;     •   Foster achievement of specific corporate,
business unit and individual performance goals (“Goals”);     •   Recognize and
reward Participants for individual and group team achievements;

The PIP cash bonus award, in conjunction with a Participant’s base compensation,
is intended to provide Participants with competitive total annual cash
compensation for comparable positions at companies in our industry and at other
organizations of our size.
This program was reviewed and approved by the Compensation Committee of the
Board of Directors.
The Compensation Committee or the Chief Executive Officer (the “CEO”) (solely
with respect to Participants other than executive officers) has the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the PIP and to construe and interpret the terms and provisions of the
PIP and any award issued under the PIP.
Any decision, interpretation or other action made or taken in good faith by or
at the direction of the Compensation Committee or the CEO (solely with respect
to Participants other than executive officers) will be final, binding and
conclusive on Henry Schein and all Participants and their respective heirs,
executors, administrators, successors and assigns.
The Compensation Committee may, in its sole discretion, delegate any of its
responsibilities under the PIP with respect to the implementation of the Plan
(including administrative tasks).
2. Eligibility
The CEO annually determines eligibility for participation in the Plan.
Participation is intended to be ongoing. However, changes in assignments may
result in a Participant’s being ineligible to participate in the Plan. Team
Schein Members will be notified at the beginning of each year regarding their
eligibility to participate in the Plan.
3. PIP Awards
PIP awards are based on:

  •   The Company’s annual profitability, specifically measured against earnings
per share (“EPS”), net income or other predetermined profitability Goals;     •
  The participant’s business unit or functional area’s level of achievement in
financial and other performance goals.     •   The participant’s achievement of
his or her individual goals.

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4. Individual Performance Goals
A Participant’s individual performance Goals are classified into three
categories:

  •   Company financial performance     •   Functional area financial
performance     •   MBO performance

The Company Financial Performance Goals are based on annual earnings per share
(EPS) achievement. The Functional Financial Performance Goal and the MBO
Performance Goal evaluation and analysis are conducted annually, unless
otherwise specified. The PIP award payouts corresponding to levels of
achievement of Company Financial Performance Goals are set forth on Exhibit A.
The PIP award payouts for meeting or exceeding Functional Area Financial Goals
and each Participant’s individualized MBO Performance Goals are set forth on
Exhibits B and C, respectively.
The CEO or the Compensation Committee, as applicable, and the person to whom the
Participant reports (“Manager”) will determine the Participant’s Goals at the
start of each year. There will be an ongoing review of these goals. Any changes
during the year must be approved by the Manager and, if appropriate, by the CEO.
Each Participant and his or her Manager are encouraged to have performance
evaluations during the year to monitor progress and, if necessary, to modify
Goals (with the approval of the CEO, if appropriate) for the balance of the
year.
The following table illustrates performance Goals for different types of
management positions:

                         
Performance Goals Based on
   
Position and Role
        Range of Performance Goal Categories     Functional   Company        
Financial   Financial     Management Segment   Performance   Performance   MBO
Performance
Corporate
    10% - 40 %     15% - 40 %     30% - 50 %
Management Participants
                       
(e.g. Finance, Supply Chain TSM’s,
                       
etc)
                       
 
                       
Major Business
    55% - 65 %     15% - 35 %     10% - 25 %
Unit Participants
                       
(e.g. Dental Group, Medical Group,
                       
Veterinary Group TSM’s, etc.)
                       
 
                       
Supporting Corporate Function
    10% - 20 %     15% - 35 %     40% - 60 %
Participants (e.g. Legal Department,
                       
Human Resources Department TSM’s, etc.)
                       

 

Note:   This schedule is intended to provide guidelines for development of a
specific performance plan for each Participant. Final weighting of performance
Goals for each Participant will be determined by the Participant’s Manager and,
if appropriate, approved by the CEO.

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5. Company Financial Performance Goals
The Company net income goal will be set for the entire Management Team based on
the annually set EPS target. The internally developed EPS base Goal is
determined by the Compensation Committee with input from the Executive
Management team. The Compensation Committee will make adjustments to the 2006
EPS goal for acquisitions based on information provided to them by the Executive
Management team. Changes to the goal will be provided to the participants.
See Exhibit A for PIP award payouts for achieving Company Financial Performance
Goals.
6. Functional Area Financial Performance Goals
For Participants managing areas that impact a P&L, these Goals are based on the
business unit’s financial performance measured against annual financial budgets,
in the following areas:

  •   Group/ Divisional gross profit goals.     •   Group/Divisional
contribution dollars.     •   Group/Divisional Pre-Tax income after “service
charges.”     •   Group/Divisional net income Goals.     •   Pre-Tax Income of
operating subsidiaries — sales, gross profit and operating income Goals.

For Participants with infrastructure or supporting responsibilities, these Goals
are based on expense performance relative to the budget and other quantitative
goals versus the budget.
See Exhibit B for PIP award payouts for achieving levels of the Functional Area
Financial Goals.
7. MBO Performance Goals
Specific, measurable MBO Performance Goals will be developed for each
Participant. These MBO Performance Goals should drive toward and support five
enterprise-wide initiatives: Profitability; Process Excellence; Customer
Satisfaction, Strategic Planning, and Organizational Development. To drive
performance and to focus management energy, it is recommended that the number of
MBO’s be limited to five to nine critical objectives.

§   Profitability - e.g., reduce expenses as a percent of sales; increase gross
profit percentage and gross profit dollars; increase business unit sales; reduce
inventory.   §   Process Excellence - e.g., implement a new policy; reduce
errors to customers; reduce DSO’s; increase inventory turns.   §   Customer
Satisfaction - e.g., increase frequency of salesperson to customer contacts;
implement project to develop computer screens to aid in positive customer
interactions; support internal customer by completing all recruits within a
reasonable predetermined time period; develop customer feedback program, such as
surveys and focus groups.   §   Strategic Planning - e.g., develop strategic
plan based on individual responsibilities; benchmark Participant’s unit against
similar companies’ functions.   §   Organizational Development - e.g. personal
business development, succession planning, diversity goals, staff development,
recruitment goals.

See Exhibit C for PIP award payouts for achieving and exceeding MBO Performance
Goals.

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8. Acquisitions, New Business Ventures and Other Adjustments
Functional Financial and MBO goals will be adjusted for acquisitions and new
business ventures that were not initially considered when developing the
original Company target. The Compensation Committee will adjust the Company
Financial Performance Goal for unbudgeted acquisitions by an amount equal to a
reasonable estimate of the expected accretion or dilution. In the event the
Compensation Committee adjusts the Company Financial Performance Goal for
unbudgeted acquisitions in accordance with the preceding sentence, the PIP award
payouts set forth on Exhibit A will correspond to the levels of achievement of
the adjusted Company Financial Goal.
Adjustments may also be made to the Company Financial Performance Goals in the
discretion of the Compensation Committee for items resulting from, for example,
unforeseeable events or other facts and circumstances beyond the control of the
Company. Notwithstanding anything to the contrary, all items of gain, loss or
expense as presented to the Compensation Committee for, or during, the
applicable fiscal year, that are related to the following items will not be
considered in the calculation of Company Financial Performance Goals:
(i) (a) the disposal of a business or discontinued operations; (b) capital
transactions undertaken by the Company during the fiscal year; or (c) the
Company’s repurchase of any class of its securities during the fiscal year; or
(ii) changes in accounting principles or to changes in applicable law or
regulations.
9. Plan Awards
During the first fiscal quarter of each year, individual performance for the
previous year is evaluated relative to Goals. PIP awards are determined for each
performance category, as applicable. A Participant’s total Plan award will equal
the sum of the awards earned in each category for the previous year’s
performance.
Notwithstanding anything herein to the contrary, the Compensation Committee or
the CEO (solely with respect to Participants other than executive officers) may,
at any time, provide that all or a portion of a PIP award is payable: (i) upon
the attainment of any goal (including the Goals), as determined by the
Compensation Committee or the CEO, as applicable; or (ii) regardless of whether
the applicable goals are attained, as determined by the Compensation Committee
or the CEO (solely with respect to Participants other than executive officers)
in their sole discretion.
In order to receive any PIP award, Participants must be actively employed on
March 15 of the year the Plan award is to be paid out. A prorated Plan award may
be available, at the discretion of the CEO, if a Participant in the Plan dies,
becomes permanently disabled, retires at the normal retirement age during the
Plan year, or in other special circumstances.
PIP awards, less applicable withholdings, will generally be made by the end of
the first fiscal quarter of each year.
This Plan 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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