Set forth
below is a brief description of the material terms and conditions of the 2010
Program. The summary set forth below is not intended to be complete
and is qualified in its entirety by reference to the full text of the 2010
Program attached hereto as Exhibit 10.1.
Elements
of Compensation.
Base Salary: Base
salary ranges will be determined for a program participant based on the
participant’s position and responsibility and will generally be set at or near
the 50th percentile of base salary paid to similarly situated executives of
general industrial companies that have similar total revenue and market
capitalization and/or compete with the Company for management talent (“Peer
Companies”). However, the Compensation Committee has the
authority to deviate from such percentile target.
For fiscal
2010, the Committee determined that the 2009 base salary of $675,000 per year
for Randall C. Stuewe, the Company’s CEO, was still in line with the stated
percentile target. Accordingly, no changes were made to Mr. Stuewe’s
fiscal 2010 base salary and it will remain at $675,000 per year. Each
of the other named executive officers received a two percent (2.0%) cost of
living adjustment to base salary, which is consistent with the salary increase
given to other members of the Company’s management. The following
table shows the new 2010 base salary for each of the Company’s other named
executive officers:
Name
and Title
|
2009
Base Salary
|
2010
Base Salary
|
|
|
|
John
O. Muse
Executive
Vice President –
Finance
and Administration
|
$336,000
|
$342,700
|
|
|
|
Neil
Katchen
Executive
Vice President –
Chief
Operations Officer
|
$269,000
|
$274,400
|
|
|
|
John
F. Sterling
Executive
Vice President –
General
Counsel and Secretary
|
$258,000
|
$263,200
|
Annual
Incentives: Each program participant has the opportunity to
receive an annual cash incentive award, which will be awarded upon the program
participant’s achievement of both of two separate components: the
Company’s realization of certain financial measures (which will comprise 75% of
the annual cash incentive award) and the achievement of specific strategic,
operational and personal goals (“SOPs”) designed for
each plan participant (which will comprise 25% of the annual cash incentive
award).
The
financial measures component of the annual cash incentive award will be based on
the Company’s yearly return on gross investment (“ROGI”), which is defined as
earnings before interest, taxes, depreciation and amortization divided by the
sum of total assets plus accumulated depreciation minus other liabilities (other
than those incurred to financing institutions), including, but not limited to,
accounts payable, accrued expenses, pension liabilities, other non-current
liabilities and deferred income taxes. The Compensation Committee has
the ability to adjust annual ROGI based on extraordinary events. A
program participant may receive between 25% and 400% of his/her target payout
depending on the Company’s annual ROGI as compared to the ROGI of its Peer
Companies during the same period.
The SOPs
component of the annual cash incentive award is based on both the Company’s
achievement of a minimum ROGI target and a program participant’s achievement of
individual SOPs. A program participant may receive between 0% and
100% of his/her target payout with respect to the SOPs component depending on
such participant’s performance for the fiscal year. Each program
participant must achieve a minimum of 75% of his/her SOPs to receive any payout
for the SOPs component of the annual cash incentive award.
Long Term
Incentives: The long term incentive element of compensation
will be awarded to program participants in the form of a yearly equity grant,
which will be composed of 75% restricted stock and 25% stock options; however,
the Company will only award such yearly equity grants if the Company meets
certain defined financial objective(s) for the relevant prior fiscal year as
determined by the Compensation Committee. A program participant’s
target dollar value of his/her grant will be set at an amount equal to 125% of
base salary for the CEO and an amount between 20% and 70% of his/her base salary
for all other program participants, and the program participant can receive a
grant equal to between 50% and 150% of such target dollar value depending on the
Company’s trailing five-year ROGI as compared to the trailing five-year ROGI of
Peer Companies.
Restricted
stock grants will have no exercise price and will vest over a period of three
years, with 25% vesting immediately upon issuance and 25% vesting on each of the
next three anniversaries of the grant date. Stock options will have
an exercise price equal to the fair market value of the Company’s common stock
on the third business day after the Company releases its annual financial
results and will vest over a period of three years with 25% vesting immediately
upon issuance and 25% on each of the next three anniversaries of the grant
date.
Non-Employee
Director Grants.
Non-employee
directors will automatically be granted stock options for 4,000 shares of the
Company’s common stock on the date of their initial election to the Board by the
stockholders. The stock options will have an exercise price equal to
the grant date fair market value and will vest in 25% increments on the sixth
month anniversary of the grant and on each of the first, second and third annual
anniversaries of the date of the grant.
Each non-employee director will
automatically be granted stock options for 4,000 shares of the Company’s common
stock if the Company achieves 90% of the 50th percentile for the Peer Group ROGI
for the most recently completed fiscal year. The stock options will
have an exercise price equal to the fair market value of the Company’s common
stock on the third business day after the Company releases its annual financial
results and will vest in 25% increments on the sixth month anniversary of the
grant date and on each of the first, second and third annual anniversaries of
the grant date.
In accordance with its written
charter, the Nominating and Corporate Governance Committee (the “Governance
Committee”) of the Board of Directors of the Company is charged with evaluating
annually the status of the Board’s compensation in relation to comparable U.S.
companies and reporting its findings to the Board. In December 2009,
the Governance Committee retained Hewitt Associates (“Hewitt”), an outside
global human resources consulting firm, to review the Company’s compensation
program for its outside directors. Based on Hewitt’s findings and
recommendations, the Governance Committee recommended to the Board certain
changes to the Company’s compensation program for its outside
directors. Consistent with these recommendations, the Board approved
the following changes to the Company’s compensation program for its outside
directors effective as of January 1, 2010:
·
|
An
increase in the annual retainers paid to the chairman of each of the
audit, compensation and nominating and corporate governance committees to
$12,000, $7,500 and $5,000,
respectively.
|
·
|
An
increase in the additional annual retainer paid to the lead director from
$10,000 to $15,000.
|
·
|
The
payment of meeting attendance fees to non-committee Board members who
attend committee meetings at the invitation of the committee
chairman.
|