Exhibit 10.2

 

STERIS CORPORATION

 

Management Incentive Compensation Plan

 

(As amended July 28, 2005, effective as of April 1, 2005)

 

1. Objective. The objective of the Management Incentive Compensation Plan (the
“Plan”) is to encourage greater initiative, resourcefulness, teamwork,
efficiency, and achievement of objectives on the part of key employees whose
performance and responsibilities directly affect the profits of STERIS
Corporation (“STERIS”) and its subsidiaries (collectively, together with STERIS,
the “Company”).

 

2. Eligibility. Participation in the Plan will be limited to those key employees
that are selected for participation on an annual basis and will normally include
employees at or above the rank of Manager. Key employees selected for
participation each year will be notified of their participation and given the
parameters for bonus calculations early in the fiscal year.

 

A participant will be eligible to receive a bonus earned under the Plan for a
particular fiscal year if and only if he or she remains in the employ of the
Company through the end of that fiscal year and thereafter through the date on
which bonuses are paid for the fiscal year.

 

3. Target Bonus. Each participant will be assigned a percentage target bonus
based upon his or her position and level within the Company. The target bonus
will range from 5% to 100% of the participant’s base salary.

 

4. Financial Goals. Each year the Compensation and Corporate Governance
Committee of the Board of Directors of STERIS (“Committee”) will select a
threshold performance target for the Company, the attainment of which will be a
prerequisite to the payment of any bonuses under the Plan. In addition, the
Committee will select one or more measures of current year financial performance
for the Company as a whole, such as revenue growth, free cash flow, earnings
before interest and taxes (EBIT), margins, and net income, to be used as goals
for determining the payment of bonuses under the Plan. Each year the Committee
(or its delegatee) may also select one or more measures of financial performance
for Company business segments or business units to be used for determining the
payment of bonuses under the Plan for participants who are associated with such
segments or units. The Committee (or its delegatee) may also determine that a
participant’s bonus eligibility will depend in part on goals for the Company as
a whole and in part on goals for one or more business segments or business
units. For each financial goal, the Committee will designate numerical
“threshold,” “target,” and “maximum” levels of achievement. The Committee may
adjust the threshold, target and maximum levels of achievement if, during the
course of a fiscal year, the Company records a special charge or other
conditions occur that the Committee determines should be disregarded, either
partially or in their entirety, when calculating the amounts of bonuses to be
paid under the Plan.

 

5. Weighting of Goals. Each year during which the Committee selects more than
one goal to be applicable to any participant or group of participants, the
Committee will also specify the weight to be given to each such goal. For
example, the Committee might determine to give 75% weight to revenue and 25%
weight to EBIT.

 

6. Achievement Percentages. For each goal, a participant will be eligible to
receive a bonus (with respect to that goal) based on Company performance as
follows:

 

a. If performance is at the threshold level, the bonus will be at 50% of target
or, in the case of key employees selected by the Committee, 25% of target.

 

b. If performance is at the target level, the bonus will be at 100% of target.

 

c. If performance is at or above the maximum level, the bonus will be at 150% of
target or, in the case of key employees selected by the Committee, 175% of
target.

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For performance at any level between these set points, the bonus amount will be
interpolated. For example, if performance is exactly half way between the 100%
target and the normal 150% maximum level, the bonus will be at 125% of target.
In the case of key employees selected by the Committee, if performance is
exactly half way between the 100% target and the175% maximum level, the bonus
will be at 137.5% of target.

 

7. Individual Performance. Upon determination of a participant’s bonus based on
Company performance, the participant’s personal performance is considered when
determining the final bonus amount.

 

8. Calculation of Bonuses. No bonuses will be paid for a fiscal year unless the
performance of the Company is at least equal to the threshold performance target
level selected by the Committee for the year. Assuming that the criterion is
met, a participant’s bonus will be determined by multiplying his or her target
bonus by the achievement percentages attained during the year, taking into
account the weighting of goals, as appropriate. If the threshold level is not
attained for any goal, no bonus will be earned with respect to that goal. The
bonus earned by any participant during a fiscal year based on Company and / or
business segment or unit performance may range from zero (if performance is
below threshold on all goals or in other circumstances) to 150% of target bonus
or, in the case of key employees selected by the Committee, 175% of the target
bonus (if performance is at or above maximum on all goals). A participant’s
bonus amount may be decreased or eliminated or increased by up to an additional
30% based on personal performance.

 

9. Payment of Earned Bonuses. Unless the Committee determines to pay all or any
part of bonuses under the Plan earlier or either of Sections 10 and 11 applies,
bonuses earned under the Plan will be paid to participants not later than 90
days after the end of the fiscal year in which they are earned.

 

10. Midyear Additions and Adjustments. An individual assuming a key position
during a fiscal year may be included in the Plan and be eligible for a pro rata
portion of a full year bonus. A participant whose position or level within the
Company changes during a fiscal year may be assigned an increased or decreased
target bonus for the year taking into account, on a pro rata basis, the
participant’s new position and compensation.

 

11. Effect of Changes in Operations. If, during any fiscal year, the operations
of the Company are materially altered, whether by an acquisition of substantial
additional assets or one or more lines of business, disposition of substantial
existing assets or one or more existing lines of business, merger,
consolidation, or similar event, the Committee may, in its sole discretion,
adjust the parameters of the Plan for that fiscal year in such a manner as to
preserve to the participants the same relative prospects for earning a bonus
under the Plan as would have been the case if the material alteration had not
occurred. If the Company disposes of an entire operating division or line of
business during a fiscal year, the Company shall make to each participant, if
any, who ceases to be employed by the Company as a result of that disposition,
an “Interim Payment” in the same amount, at the same time, and with the same
effect, as if the disposition constituted a Change of Control as defined in
Section 11 below.

 

12. Effect of a Change of Control. Within five days after the occurrence of the
first Change of Control (as defined below) to occur in any fiscal year, the
Company shall pay to each participant an interim lump-sum cash payment (the
“Interim Payment”) with respect to his or her participation in the plan. The
amount of the Interim Payment shall be equal to the dollar amount of the
participant’s target bonus for the entire fiscal year multiplied by a fraction,
the numerator of which is the number of months between the beginning of the
fiscal year and the end of the month in which the Change of Control occurs and
the denominator of which is 12. The making of the Interim Payment will not
reduce the obligation of the Company to make a final payment under the terms of
the Plan, but the amount of any Interim Payment shall be offset against any
later payment due under the Plan for the fiscal year in which the Change of
Control occurs. Except as an offset against a final payment as provided in the
immediately preceding sentence, the amount of the Interim Payment will not be
offset against any amount due to the participant from or on behalf of the
Company and a participant will not in any circumstances be required to refund
any portion of the Interim Payment to the Company.

 

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For purposes of the Plan, a “Change of Control” shall be deemed to have occurred
if at any time or from time to time while this Agreement is in effect:

 

(a) Any person (other than STERIS, any of its subsidiaries, any employee benefit
plan or employee stock ownership plan of STERIS, or any person organized,
appointed, or established by STERIS for or pursuant to the terms of any such
plan), alone or together with any of its affiliates, becomes the beneficial
owner of 15% or more (but less than 50%) of the Common Shares then outstanding;

 

(b) Any person (other than STERIS, any of its subsidiaries, any employee benefit
plan or employee stock ownership plan of STERIS, or any person organized,
appointed, or established by STERIS for or pursuant to the terms of any such
plan), alone or together with any of its affiliates, becomes the beneficial
owner of 50% or more of the Common Shares then outstanding;

 

(c) Any person commences or publicly announces an intention to commence a tender
offer or exchange offer the consummation of which would result in the person
becoming the beneficial owner of 15% or more of the Common Shares then
outstanding;

 

(d) At any time during any period of 24 consecutive months, individuals who were
directors at the beginning of the 24-month period no longer constitute a
majority of the members of the Board of Directors of STERIS, unless the
election, or the nomination for election by STERIS’s shareholders, of each
director who was not a director at the beginning of the period is approved by at
least a majority of the directors who (i) are in office at the time of the
election or nomination and (ii) were directors at the beginning of the period;

 

(e) A record date is established for determining shareholders entitled to vote
upon (i) a merger or consolidation of STERIS with another corporation in which
those persons who are shareholders of STERIS immediately before the merger or
consolidation are to receive or retain less than 60% of the stock of the
surviving or continuing corporation, (ii) a sale or other disposition of all or
substantially all of the assets of STERIS, or (iii) the dissolution of STERIS;

 

(f) (i) STERIS is merged or consolidated with another corporation and those
persons who were shareholders of STERIS immediately before the merger or
consolidation receive or retain less than 60% of the stock of the surviving or
continuing corporation, (ii) there occurs a sale or other disposition of all or
substantially all of the assets of STERIS, or (iii) STERIS is dissolved; or

 

(g) Any person who proposes to make a “control share acquisition” of STERIS,
within the meaning of Section 1701.01(Z) of the Ohio General Corporation Law,
submits or is required to submit an acquiring person statement to STERIS.

 

Notwithstanding anything herein to the contrary, if an event described in clause
(b), clause (d), or clause (f) above occurs, the occurrence of that event will
constitute an irrevocable Change of Control. Furthermore, notwithstanding
anything herein to the contrary, if an event described in clause (c) occurs, and
the Board of Directors either approves such offer or takes no action with
respect to such offer, then the occurrence of that event will constitute an
irrevocable Change of Control. On the other hand, notwithstanding anything
herein to the contrary, if an event described in clause (a), clause (e), or
clause (g) above occurs, or if an event described in clause (c) occurs and the
Board of Directors does not either approve such offer or take no action with
respect to such offer as described in the preceding sentence, and a majority of
those members of the Board of Directors who were Directors prior to such event
determine, within the 90-day period beginning on the date such event occurs,
that the event should not be treated as a Change of Control, then, from and
after the date that determination is made, that event will be treated as not
having occurred. If no such determination is made, a Change of Control resulting
from any of the events described in the immediately preceding sentence will
constitute an irrevocable Change of Control on the 91st day after the occurrence
of the event.

 

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