Exhibit 99.1
Variable Compensation Plan
The Variable Compensation Plan (“VC Plan”) provides a variable compensation payment to the Company’s executive officers and certain eligible senior employees each January based on individual business group (Divisional) performance during the prior year, as determined by the Compensation Committee of the Board of Directors (“Compensation Committee) or the Board of Directors. The amount of Variable Compensation each executive officer and senior employee receives is a function of three factors:
| (A) | The executive officer’s and employee’s base annual salary as of the end of the year; |
| (B) | Performance of the individual business group (“Division”) versus goals. For the G&A corporate group, the payout is based 50% on the individual performance of the G&A corporate group and 50% on a weighted aggregation of the individual Divisional performances. For the CEO, CFO and certain other executive officers, the payout is based on a weighted aggregation of the individual Divisional performances; and |
| (C) | The executive officer’s and employee’s “variable compensation factor” which is determined by the Compensation Committee on the basis of the individual’s responsibility and experience level. The CEO’s variable compensation factor is determined by the full Board of Directors. |
Each executive officer’s and employee’s “variable compensation factor” is a percentage of his or her base annual salary, starting at 10% for new participants. At greater levels of responsibility and experience, the variable compensation factor may increase to or exceed 180% of base annual salary. Variable compensation factors are reviewed each year. A newly hired executive officer or employee, who is approved for eligibility under the VC Plan, will be eligible to receive a VC Plan payment for their first year of employment, pro-rated from the date of hire.
At year end, the Compensation Committee evaluates each individual Division’s performance versus goals, with emphasis on the vital goals. Given the dynamics of the business, the Company’s VC Plan relies heavily on the Compensation Committee’s or Board of Director’s evaluation and assessment of performance. Based on this evaluation, the Compensation Committee determines whether any variable compensation should be paid and, if so, the amount for distribution, except that the full Board of Directors determines whether any variable compensation should be paid to the CEO and, if so, the amount. The payments under the VC Plan will be made only after approval by the Compensation Committee and/or Board of Directors.
The following factors are considered in evaluating individual Divisional performance: (1) the extent to which quantitative and qualitative plans were met for the
year, with an emphasis on profitability, return on net assets and market share; (2) the extent to which process improvement results were achieved; (3) the extent to which yearly results verified each Division’s strategy and improved its strategic position; and (4) the extent to which each Division’s yearly mid-term plan and strategy was credible and contributed to the Company’s ability to adapt to changes in the marketplace or environment.
Administrative rules and procedures for the VC Plan are maintained, monitored and implemented by the Company’s Human Resources department.
The Compensation Committee has the sole discretion to interpret and apply the terms of this VC Plan, including the determination of whether any particular employee will receive a payment, and the amount of any such payment. The Board of Directors and the Compensation Committee reserve the right to adjust, modify or terminate the VC Plan, in full or in part, at any time, in its sole discretion. Subject to an amendment to or termination of this VC Plan by the Compensation Committee or the Board of Directors, this VC Plan shall commence in 2006 and renew annually each year thereafter.