exv10w38



 




Exhibit 10.38


2004 16(b) Executive Officer Incentive Plan




INTRODUCTION




The Company’s 2004 16(b) Executive Officer Incentive Plan (“EOIP”) is intended to provide
short-term incentives to the 16(b) executive officers for their contributions towards achieving
overall company success.



OBJECTIVES




The EOIP has three primary objectives:




	 	•  	Reward executive performance in meeting or exceeding stated business objectives,
	 
	 	•  	Deliver competitive compensation, and
	 
	 	•  	Build shareholder value.





The EOIP is designed to focus each participant on the key business objectives of his/her position,
encourage teamwork to achieve success, and recognize and reward sustained personal contributions.



EFFECTIVE PLAN DATE AND DURATION




The effective plan date and duration is January 1, 2004 through December 31, 2004.



FUNDING




Funding for the 2004 EOIP is calculated as a percentage of operating income and a percentage of
incremental revenue. The Compensation Committee of the Board of Directors approves funding of the
plan. The percentages below reflect 2004 operating income target and may increase or decrease
depending on the actual operating income achieved.



	 	 	 	 	 	 	 
	Performance
Category
	 	Operating 
Income %
of
Plan
	 	Incremental
Revenue % of
Plan
	 	2004 EOIP
Incentive Pool
Available
	
	 	<50%
	 	<50%
	 	$0
	Threshold
	 	50%
	 	50%
	 	$1,110,775
	Target
	 	100%
	 	100%
	 	$2,221,550
	Maximum
	 	150%
	 	150%
	 	$3,332,325






If the actual operating income falls between the target and the threshold, the incentive pool will
be interpolated between the relevant two points by the plan administrators.



 









 





If planned awards exceed the incentive pool fund, the CEO and/or the Compensation Committee
will make the appropriate adjustments to ensure that actual award expenditures do not
exceed approved plan funding.



PARTICIPATION




Executive officers are nominated by the CEO and approved for participation on an annual basis by
the Compensation Committee. Participation in the EOIP in any one year does not guarantee or imply
continued participation in the EOIP in any subsequent year.



TARGET AWARD LEVEL




Targeted award levels, before the application of individual performance modifiers, are as follows:



	 	 	 	 	 
	Performance Category
	 	Operating Income % of
Plan
	 	Target Award Level
	Threshold

Target

Maximum
	 	50%

100%

150%
	 	50%

100%

150%






Notwithstanding the above stated targeted awards, the CEO has discretion to modify targeted awards
in any way that, in his sole judgment, meets the objectives of the EOIP.



INDIVIDUAL TARGET INCENTIVES




At the beginning of the EOIP year, targets for each participant are established that reflect
organizational structure and competitive pay opportunities. The target is the incentive amount
that may be granted for achievement of the operating income and incremental revenue at plan with no
performance modification. The targets may subsequently be modified in the order of corporate,
division or organizational/functional performance first and individual performance factors second.



The targets are expressed as a percentage of the participant’s base salary. Base salaries at the
beginning of the EOIP year (January 1, 2004) will be used for the calculation, except for hires or
promotions during the first half of the year, when base salary at hire or promotion will be used.
The CEO will present the executive officer targets to the Compensation Committee for approval.



PERFORMANCE MODIFIERS AND FACTORS




Targets for all participants may be modified dependent upon individual performance and
organizational contribution, subject to the discretion of the CEO.



The Compensation Committee will have final approval of all executive officer performance awards.



 









 





AWARD CALCULATION




Operating income and incremental revenue will first be determined to calculate the size of the
funding pool, and then the targets will be adjusted accordingly, as shown by the following
examples:



	 	 	 	 	 	 	 	 	 
	Employee
	 	Individual
Target
	 	Actual
Operating

Income

%/Incremental

Revenue % of
Target
	 	Calculation
for

Adjustment
	 	Adjusted
Target
	1
	 	55%
	 	125%
	 	x 1.00
	 	100%
	2
	 	45%
	 	100%
	 	x 1.00
	 	45%
	3
	 	45%
	 	75%
	 	x 0.75
	 	34%






After the adjusted targets are determined, each participant’s target may be assigned an individual
performance modifier based on individual performance. The adjusted target is then multiplied or
divided by the performance modifier to calculate the final award, as shown below:



	 	 	 	 	 	 	 	 	 
	Employee
	 	Adjusted
Target
	 	Individual
Performance

Modifier
	 	Calculation
	 	Final Award
	1
	 	100%
	 	+32%
	 	x 1.32
	 	132%
	2
	 	45%
	 	-27%
	 	 ̧1.27
	 	36%
	3
	 	34%
	 	+10%
	 	x 1.10
	 	38%






AWARD PAYMENT




Actual award payments will be distributed as soon as possible following the close of the fiscal
year and after securing all necessary approvals.



PLAN PROVISIONS




To receive an award payment, the employee must be on active status at the time of award
distribution. The CEO and/or the Compensation Committee, as appropriate, must approve any
exceptions to individual participants.



PLAN ADMINISTRATION




The Compensation Committee and the CEO will administer the 2004 EOIP. Administration shall include
but is not limited to: modification, funding, participation, target award percentages, payout
type, range and criteria, annual financial and strategic objectives as they relate to the EOIP.



 









 





In the event that there is a change in the equity or capitalization structure of the Company
through merger, consolidation, reorganization, recapitalization, significant change in strategic
direction or otherwise, the incentive payment may be adjusted by the EOIP administrators as they
deem equitable and appropriate.



The EOIP administrators may modify or discontinue the EOIP at any time.




Participation in the EOIP does not constitute a contract of employment with the Company for any
specified period of time nor is it an entitlement to participate in any other plan or any future
performance period under this EOIP. Furthermore, participation in the EOIP does not constitute any
promise of award payments even if all performance factors and funding mechanisms are achieved or
surpassed. EOIP administrators may also include or exclude participation in the EOIP at any time
and for any reason they deem appropriate. The Company may terminate a participant’s employment
with the Company at any time for any reason, with or without cause.



In the event this EOIP requires legal interpretation or becomes the subject of litigation, it shall
be governed by the laws of the State of California.