Document:

Form of 2007 Target Incentive Bonus Award Letter

 Exhibit 10.4 
 

 
 TO:    [Name] 
 August 16, 2006 
 FISCAL YEAR 2007 
 TARGET INCENTIVE BONUS AWARD 
 Dear
                : 
 On August 16, 2006, the Human Resources and
Compensation Committee of the Board of Directors (the “Committee”) authorized an executive compensation award (the “EC Award”) to you in the target amount of
$            (the “Target Amount”). The EC Award is subject to the following terms and conditions: 
 1. The payout under the EC Award (the “Payout”) will be based upon the Corporation’s actual operating cash flow less capital expenditures
(free cash flow) expressed as a percent of the Corporation’s sales (“FCF Margin”) for fiscal year 2007 (the “Performance Period”). Discretionary pension contributions by the Corporation shall not be included in the
calculation of FCF Margin. You will receive a Payout of 100% of your Target Amount if a FCF Margin of 6.1% is achieved by the Corporation for the Performance Period. FCF Margin above or below 6.1% for the Performance Period will result in a lesser
or greater Payout than the Target Amount on a pro rata basis (see Table 1 below). The minimum threshold for any Payout under the EC Award is 3.1% FCF Margin during the Performance Period. 
  

																		
	 	 	 	 	 	 	 	 	 
	 FY07 FCF
Margin:
	  	<3.1%	  	3.1%	  	4.1%	  	5.1%	  	6.1%	  	7.1%	  	8.1%	  	3	9.1%
	 	 	 	 	 	 	 	 	 
	 Payout
%:
	  	0%	  	25%	  	50%	  	75%	  	100%	  	133%	  	167%	  	 	200%

 2. The Payout earned under the EC Award will be paid at the end of the Performance Period. Your
payout will be reduced on a pro rata basis to reflect the actual amount of time you serve in an eligible position during the Performance Period. 
 3. If you retire (at or after age 60, or earlier with the consent of the Committee), die or become disabled during the Performance Period, you will be entitled to receive a pro rata share of the Payout
ultimately earned during the Performance Period based upon the number of full months worked during the Performance Period. Termination of employment for any other reason during the Performance Period will result in forfeiture of your EC Award.

 4. You will receive the Payout in either cash or a credit to your Executive Deferral Plan account (based on your election made in
accordance with rules established by the Corporation). 
 5. The Committee may, at its sole discretion, adjust the level of the Payout earned
hereunder based upon its assessment of the overall financial results of the Corporation for the Performance Period. 

 Please acknowledge receipt of the EC Award and indicate your agreement with the terms hereof by signing and returning a
copy to me as soon as possible. 
 Thomas A. Piraino, Jr. 
 Vice President, General Counsel 
   And Secretary 
 Receipt Acknowledged and Agreed: 
  

							
	  
	 	 	 	Date:	 	  

	                [Name]Form of 2007 Target Incentive Bonus Award Letter

 Exhibit 10.5 
 

 
 TO:    [Name] 
 August     , 2006 
 FISCAL YEAR 2007 
 TARGET INCENTIVE BONUS AWARD 
 UNDER PERFORMANCE BONUS PLAN 
 Dear                 : 
 On August 16, 2006, the Human
Resources and Compensation Committee of the Board of Directors (the “Committee”) authorized a target incentive bonus award (the “Award”) to you under the Corporation’s Performance Bonus Plan (“Bonus Plan”). This
award is made subject to the Corporation’s Performance Bonus Plan, which was approved by the shareholders of the Corporation on October 26, 2005, so that payments made hereunder will be qualified as “performance-based
compensation” for purposes of Section 162(m) of the Internal Revenue Code of 1986 and Section 1.162-27 of the Treasury Regulations promulgated thereunder. Your Award is in the target amount of
$                 (the “Target Amount”). The Award is subject to the following terms and conditions: 
 1. The payout under the Award (the “Payout”) will be based upon the Corporation’s actual operating cash flow less capital expenditures
(free cash flow) expressed as a percent of the Corporation’s sales (“FCF Margin”) for fiscal year 2007 (the “Performance Period”). Discretionary pension contributions by the Corporation shall not be included in the
calculation of FCF Margin. You will receive a Payout of 100% of your Target Amount if a 6.1% FCF Margin for the Performance Period is achieved. FCF Margin above or below 6.1% for the Performance Period will result in a lesser or greater Payout than
the Target Amount on a pro rata basis (see Table 1 below). The minimum threshold for any Payout under the Award is 3.1% FCF Margin during the Performance Period. 
  

																		
	 	 	 	 	 	 	 	 	 
	 FY07 FCF
Margin:
	  	<3.1%	  	3.1%	  	4.1%	  	5.1%	  	6.1%	  	7.1%	  	8.1%	  	3	9.1%
	 	 	 	 	 	 	 	 	 
	 Payout
%:
	  	0%	  	25%	  	50%	  	75%	  	100%	  	133%	  	167%	  	 	200%

 2. The Payout earned under the Award will be paid at the end of the Performance Period. Your
Payout will be reduced on a pro rata basis to reflect the actual amount of time you serve in an eligible position during the Performance Period. 
 3. If you retire (at or after age 60, or earlier with the consent of the Committee), die or become disabled during the Performance Period, you will be entitled to receive a pro rata share of the Payout
ultimately earned during the Performance Period based upon the number of full months worked during the Performance Period. Termination of employment for any other reason during the Performance Period will result in forfeiture of your Award.

 4. You will receive the Payout in either cash or a credit to your Executive Deferral Plan account (based
on your election made in accordance with rules established by the Corporation) following certification of the calculation of the FCF Margin by the Committee at the end of the Performance Period. The Committee retains the ability to reduce the Payout
at its sole discretion. The amount of the Payout is also subject to the payout limitations set forth in Section 5(c) of the Bonus Plan. 
 5. The Award is subject to all terms, conditions and provisions of the Bonus Plan to the extent not specifically addressed herein. In the event of any conflict between the terms of the Bonus Plan and the Award, the Bonus Plan shall prevail.

 Please acknowledge receipt of the Award and indicate your agreement with the terms hereof by signing and returning a copy to me as soon as possible.

 Thomas A. Piraino, Jr. 
 Vice President, General Counsel 
   And Secretary 
 Receipt Acknowledged and Agreed: 
  

							
	  
	 	 	 	Date:	 	  

	                [Name]Form of 2007-08-09 Long Term Incentive Award Letter

 Exhibit 10.6 
 

 
 TO:    [Name] 
 August     , 2006 
 2007-08-09 
 LONG TERM INCENTIVE (LTI) AWARD 
 UNDER PERFORMANCE BONUS PLAN 
 Dear                 : 
 On
August 16, 2006, the Human Resources and Compensation Committee of the Board of Directors (the “Committee”) authorized an LTI award (the “Award”) to you under the Corporation’s Performance Bonus Plan, which was approved
by the shareholders of the Corporation on October 26, 2005, so that payments made hereunder may be qualified as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code of 1986 and
Section 1.162-27 of the Treasury Regulations promulgated thereunder. Your Award is in the target amount of                  restricted shares of the Common
Stock of the Corporation (the “Target Amount”). The Award is subject to the following terms and conditions: 
 1. The payout under
the Award will be determined by comparing the Corporation’s results to the performance of the Corporation’s peer group listed on attached Exhibit A (“Peers”) for the measurements indicated below (the “Performance
Measures”) for fiscal years 2007, 2008 and 2009 (the “Performance Period”). The Target Amount will be weighted as follows for each Performance Measure (each a “Weighted Target”): 
  

				
	 Performance Measure
	  	Weight	 
	 Revenue Growth
	  	20	%
	 Earnings Per Share (EPS) Growth
	  	40	%
	 Return on Capital (ROC)
	  	40	%

 Revenue growth, EPS and ROC for the Corporation and the Peers shall be calculated by reference to sales and income
from continuing operations. 
 You will receive a payout of 100% of the Weighted Target for each Performance Measure if the Corporation ranks in the
55th percentile among the Peers in the applicable Performance Measure. Percentile rankings above or below the
55th percentile for the Performance Period among the Peers for any Performance Measure will result in a lesser or
greater payout for each Weighted Target in accordance with the following table: 
  

													
	 Percentile Ranking:
	  	£	35th    	 	45th    	 	55th    	 	65th    	 	3	75th    
	 Payout
%:
	  	 	0    	 	50    	 	100    	 	150    	 	 	200    

 For each Performance Measure, the Corporation’s ranking must be above the 35th percentile among the Peers for the Performance Period in order to receive a payout for the applicable Weighted Target. The
total payout under the Award (“Payout”) will be determined by adding together the payouts for each of the Performance Measures. 

 In light of the impact of the adoption of FAS 123R by the Corporation on July 1, 2005 (which requires the expensing
of equity-based compensation), in order to make a valid Peer comparison when the date of adoption for the Corporation and any of its Peers is not the same, the calculation of each Performance Measure for each Peer who has not adopted FAS 123R will
be adjusted to include the pro forma expense for equity-based compensation reported by such Peers in the footnotes to their published financial statements; provided, however, that if such pro forma expense is not readily available for all such
Peers, then the calculation of each Performance Measure for the Corporation and each Peer which has adopted FAS 123R will be adjusted to remove the effect of the expense for equity-based compensation. 
 Peers which do not publish stand-alone financial results for the entire Performance Period as a result of going private, acquisition, or any similar transaction will be
removed from the list of Peers. Peers which merge during the Performance Period will remain as Peers only if they are the surviving entity of the merger. Any Peer which has publicly announced the need to restate its financial statements for any
portion of the Performance Period, but has not yet published such restatement, will be excluded from the Peer comparisons for any Performance Metric in which its result is better than the Corporation’s result. Any Peer which has not published
financial statements for the entire Performance Period due to the publicly announced need to restate its financial statements will be removed from the list of Peers. 
 2. The Payout earned under the Award will be paid after the end of the Performance Period. 
 3. If you
retire (at or after age 60, or earlier with the consent of the Committee), die or become disabled during the Performance Period, you will be entitled to receive a pro rata share of the Payout ultimately earned during the Performance Period
based upon the number of full calendar quarters worked during the Performance Period. Termination of employment for any other reason during the Performance Period will result in forfeiture of your Award. 
 4. Except as otherwise provided herein, if you are actively employed by the Corporation at the time of the Payout, you will receive the Payout in the
form of restricted shares of the Common Stock of the Corporation (the “Restricted Shares”). The Restricted Shares will be subject to the terms and conditions imposed by the Committee at the time of issuance. 
 5. You may elect, in accordance with rules established by the Corporation, to receive your Payout in the form of a credit to your Executive Deferral Plan
(“EDP”) account. If such an election is timely made, you will receive your Payout in the form of a credit to your EDP account as of July 1, 2009 in an amount equal to the number of Restricted Shares earned under the Award multiplied
by the closing price of the Corporation’s Common Shares on the New York Stock Exchange on June 30, 2009 (the “Cash Equivalent”) 
 6. If you are not an active employee of the Corporation at the time of the Payout pursuant to the Award, your Payout will be in the form of cash equal to the Cash Equivalent, unless you have made the EDP election specified in
Section 5. 
 7. In the event of a “Change in Control of the Company” (as defined in the Corporation’s Change in Control
Severance Agreements), you will receive an amount in cash under the Award within fifteen (15) days following the date of the Change in Control equal to the greater of (a) the amount equal to (i) the Target Amount of Restricted Shares
multiplied by (ii) the Stock Price (as hereinafter defined); or (b) the amount equal to (i) what your Payout in Restricted Shares would have been had the Corporation’s percentile ranking against the Peers for each of the
Performance Measures during the Performance Period through the end of the fiscal quarter immediately preceding the date of the Change in Control continued throughout the Performance Period at the same level, multiplied by (ii) the Stock Price.
As used herein, the “Stock Price” shall mean the closing price for the Corporation’s shares on the New York Stock Exchange on July 1, 2006, or on the date of the Change in Control, whichever is higher. 

 8. You will receive the Payout in the form described above following certification of the calculation of
the Performance Measures and the Payout by the Committee at the end of the Performance Period. The Committee retains the ability to reduce the Payout at its sole discretion. The amount of the Payout is also subject to the payout limitations set
forth in Section 5(c) of the Bonus Plan. 
 9. The Award is subject to all terms, conditions and provisions of the Bonus Plan to the
extent not specifically addressed herein. In the event of any conflict between the terms of the Bonus Plan and the Award, the Bonus Plan shall prevail. 
 Please acknowledge receipt of the Award and indicate your agreement with the terms hereof by signing and returning a copy to me as soon as possible. 
 Thomas A. Piraino, Jr. 
 Vice President, General Counsel 
     And Secretary 
 Receipt Acknowledged and Agreed: 
  

							
	  
	 	 	 	Date:	 	  

	                [Name]	 		 		 	

 Exhibit A 
 to 
 2007-08-09 LONG TERM INCENTIVE (LTI) AWARD 
 UNDER PERFORMANCE BONUS PLAN 
 Peers

  

	
	Caterpillar Inc.
	
	Cooper Industries, Ltd.
	
	Cummins Inc.
	
	Danaher Corporation
	
	Deere & Company
	
	Dover Corporation
	
	Eaton Corporation
	
	Emerson Electric Co.
	
	Flowserve Corporation
	
	Goodrich Corporation
	
	Honeywell International Inc.
	
	Illinois Tool Works Inc.
	
	Ingersoll-Rand Company Limited
	
	ITT Industries, Inc.
	
	Johnson Controls, Inc.
	
	Pall Corporation
	
	Rockwell Automation, Inc.
	
	SPX Corporation
	
	Textron Inc.

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