EAGLE MATERIALS INC.
REPUBLIC PAPERBOARD COMPANY
SALARIED INCENTIVE COMPENSATION PROGRAM
FOR FISCAL YEAR 2006
1. Bonus Pool
To insure reasonableness and affordability the available funds for bonus payments are determined as a percent of earnings of Republic Paperboard Company. The actual percentage may vary from year to year.
Participants must be employed at fiscal year-end to be eligible for any bonus award. Awards may be adjusted for partial year participation for participants added during a year.
Eagle Materials CEO retains the final right of interpretation and administration of the plan and to amend or terminate the plan at any time.
For FY 2006 bonus pool funding will be 2.25% of Republic Paperboards operating profit.
2. Allocation of Pool
Republic Paperboards President, his/her direct reports, and safety directors will be in the plan. The President may recommend including additional exempt salaried employees to participate in the plan. Additional participation in the company beyond the subsidiary company President and their direct reports will require the approval of the Eagle Materials CEO.
The Republic Paperboard President will be eligible for 25% 35% of the pool. The American Gypsum Company President will recommend the distribution of the remainder of the company pool. The participants in the plan and their percentage of the pool will be approved by the Eagle Materials CEO at the beginning of the fiscal year for which the bonus is being earned. For example:
|Participant||% of Pool Available|
Vice President Operations
Vice President Sales
Vice President Finance
Other Participants (Directors, Superintendents)
The Republic Paperboard Presidents bonus opportunity will be 50% specific, objective goals and 50% discretionary. All participants in the plan must have the ability to significantly effect the performance of the subsidiary company by achieving measurable, quantifiable
objectives. The Republic Paperboard President will determine the objective and discretionary balance of bonus opportunities for the participants in their companies subject to approval by the Eagle Materials CEO.
Because our basic products are commodities the level of prices in a given market area are established by supply and demand over which local management has little control. Through price leadership, local management can affect prices in a small range around supply-demand equilibrium and one of the performance criteria might still be pricing but this does not indicate that an overall bad or good market is itself a performance indicator of local management.
Fixed assets is another area over which local management exercises limited control. Each manager basically has to work with the fixed assets he is assigned. Local management can exercise considerable control over current assets such as receivable and inventory but, as a heavily capitalized industry with limited transportability, local management essentially has to do the best they can with the PP&E they are assigned.
The Republic Paperboard Company President, his/her director reports and the safety director will be in the plan. Additional participants who have management responsibilities or are in a professional capacity that can measurably impact earnings may be recommended by the Republic Paperboard Company President subject to the approval of the Eagle Materials CEO. The addition of new plan participants will not affect the total pool available but will in effect dilute the potential bonuses of the original participants.
Participants must be an exempt salaried manager or professional. No hourly or non-exempt employee may participate. Participants in this plan may not participate in any other company incentive plan with monetary awards, except for Republic Paperboards Long Term Compensation Pool.
3. Objective Criteria
Objective setting is essential to an effective incentive compensation plan to cause a focus on areas that need attention. Having selected objectives, it is also important to establish a reference point for that objective which indicates expected performance.
In addition to consideration of the plan as a reference, we will consider historic performance of a facility, equipment design standards, industry standards, comparable values from other companies or like situations and any other qualified source or establishing reference points or basis for determining performance.
5. Measuring Performance
At the close of the fiscal year each subsidiary company President will review the performance of the company versus the objectives submitted at the beginning of the year and recommend to Eagle Materials CEO distribution of the pool to the participants. Distribution of the pool requires approval Eagle Materials CEO.
Any portion of the Company Operating Pool not paid out (unearned) or forfeited will be added to the SSP at Corporate.
Each subsidiary company President may also recommend to the Eagle Materials EVP and CEO an SSP award to recognize outstanding individual performances.