Exhibit 10.11
AMERICAN MEDICAL SYSTEMS, INC.
EXECUTIVE VARIABLE INCENTIVE PLAN
For 2006
I. PURPOSE
American Medical Systems, Inc. (AMS) is dedicated to excellence in performance
and in creating a strong link between performance and compensation. This plan is
designed to reward senior management team members of AMS with performance-based
compensation for achieving and surpassing specified company financial goals of
long-term company growth and business improvement. The Plan aligns with
shareholder value drivers of sales growth and operating profit and supports wise
use of and decisions regarding capital investments.
II. PERFORMANCE MEASURES – 100% OF THE VARIABLE INCENTIVE
The quarterly performance will be calculated at the end of each fiscal quarter
using the following formula: 10 percent of (A) the product of (x) each fiscal
quarter’s year-over-year sales growth rate (percent) less 4.0 percent and
(y) each quarter’s year-over-year increase in sales dollars; plus
(B) 1.9 percent of operating income in excess of a capital charge (15 percent
annually of net non-cash assets employed in the business).
Each quarter, the actual results for four trailing quarters will be weighted to
calculate the actual bonus performance for payout. The quarters are weighted 40%
for the most recent and 20% for each of the three previous quarters and compared
versus plan level to calculate the percentage of Plan achievement. This percent
will be applied to each participant’s target bonus for the quarter.
III. BONUS PAYOUT
Target bonus amounts are established for each individual in the plan based upon
his/her position. The target for each quarter is 25% of the total year target
and each quarter’s actual payout is equal to the plan achievement percentage
previously described multiplied by the quarter’s target for the individual. The
bonus is paid quarterly throughout the year.
IV. PARTICIPATION
Participants in this Plan effective January 1, 2006 will be members of the
Operating Team of the Company. Participation by new operating team members
during the year will require the approval of the President and CEO, who will
determine if they will be added during the year on a pro-rated basis or at the
beginning of the next year. Participation by new operating team members who were
not anticipated at the time of plan approval will also be subject to approval of
the Compensation Committee. Participation by new operating team members who are
also officers will also be subject to approval of the Compensation Committee and
the Board of Directors.
If employment of a participant is terminated due to his/her performance or the
individual voluntarily leaves the Company, the quarterly incentive award will be
forfeited.
IV. APPROVAL, AUTHORIZATION, AND TERMS
The Executive Variable Incentive Plan, its terms, policies, revisions and
measures are under the approval of the Compensation Committee of the Board of
Directors. Any modifications or adjustments to the Plan and performance measures
or consideration of unusual transactions must be approved by the Compensation
Committee of the Board of Directors.
Participation in the Plan is not an employment contract or any implied assurance
of continued employment.
V. INCENTIVE PAYMENT
Bonus payment will be issued as soon as feasible after the filing of the
quarter’s financial statements. Payment will be in lump sum.
If a Plan participant’s position changes during the year, the individual’s
target bonus may be changed, if so approved by the President and CEO and the
Compensation Committee.