Exhibit 10.3


 


Proposal 4. Amendment and Reapproval of the Annual Incentive
Plan


 


General


 


On November 19, 1997,
the board unanimously approved the adoption of the company’s short-term
incentive cash compensation program, which it has designated the Annual Incentive
Plan, for selected officers and other key employees of the company and its
subsidiaries, including the named executive officers. On May 17, 2000 and May 18,
2005, the Annual Incentive Plan was approved by the company’s stockholders with
respect to its material terms which enabled the compensation paid to each of
the named executive officers under the Annual Incentive Plan to qualify as “qualified
performance-based compensation” eligible for exclusion from the deduction
limits under Section 162(m) of the Internal Revenue Code (“Section 162(m)”).
On March 17, 2010, the Compensation Committee, authorized and adopted,
subject to stockholder approval, amendments to the Annual Incentive Plan and
the Board of Directors approved the submission of the Annual Incentive Plan for
approval by you. We are asking you to approve the Annual Incentive Plan
including those Amendments.


 


The most significant of the
proposed amendments to the Annual Incentive Plan is to increase the maximum
bonus payment to any participant for any performance period to $5 million
from $2.5 million.


 


The Plan has been designed
to meet the requirements of Section 162(m) of the Internal Revenue
Code regarding deductibility of certain executive compensation. Section 162(m) generally
limits to $1 million the amount that a publicly held corporation is
allowed to deduct each year for the compensation paid to each of the company’s
Chief Executive Officer or any of the company’s three other executive officers,
other than the Chief Executive Officer, whose compensation is required to be
disclosed in this proxy statement by reason of their being among the most
highly compensated officers for the taxable year and who are employed by us as
of the end of the year. However, “qualified performance-based compensation” is
not subject to the $1 million deduction limit. To qualify as qualified
performance-based compensation, certain criteria must be satisfied and the
material terms under which the compensation is to be paid, including the
performance goals, must be disclosed to, and approved by a separate majority
vote of, stockholders before the compensation is paid. If approved by the
company’s stockholders, the Annual Incentive Plan will enable the Compensation
Committee to continue to grant awards under the Annual Incentive Plan that will
be exempt from the deduction limits of Section 162(m) of the Internal
Revenue Code.


 


The material features of the
Annual Incentive Plan are summarized below. The following summary of the Annual
Incentive Plan is qualified in its entirety by reference to the full text of
the Annual Incentive Plan, which is included as Appendix C to this Proxy
Statement.


 


68

















 


Description
of the Annual Incentive Plan


 


Administration.  The Annual Incentive Plan will be
administered by the Compensation Committee which currently consists of four
directors, each of whom is (i) a “Non-Employee Director” within the
meaning of Rule 16b-3 under the Exchange Act, (ii) an “outside
director” within the meaning of Section 162(m) and an independent
director, as “independent” is defined under the rules of the New York
Stock Exchange.


 


Subject to the express
provisions of the Annual Incentive Plan, the Compensation Committee has the
authority to select officers and other key employees of the company, and its
subsidiaries, who will receive annual incentive awards and to determine all of
the terms and conditions of each award. All annual incentive awards are subject
to such provisions not inconsistent with the Annual Incentive Plan, as the
Compensation Committee shall approve. The Compensation Committee also has
authority to prescribe rules and regulations for administering the Annual
Incentive Plan and to decide questions of interpretation or application of any
provision of the Annual Incentive Plan. Except to the extent prohibited by law,
the Compensation Committee may delegate in writing some or all of its power and
authority to administer the Annual Incentive Plan to any person or persons.


 


Amendment.  The Compensation Committee may amend the
Annual Incentive Plan at any time, subject to any requirement of stockholder
approval required by applicable law, rule or regulation.


 


Annual
Incentive Awards.  The Annual
Incentive Plan provides for the grant of annual incentive awards. Each annual
incentive award is a right, contingent upon the attainment of performance
measures within a specified performance period, to receive payment in cash of a
specified amount. The maximum amount that may be paid to any individual under
any annual incentive award for any performance period shall not exceed
$5 million. The terms relating to the satisfaction of performance measures
in connection with an annual incentive award shall be determined by the
Compensation Committee and communicated to the recipient of an annual incentive
award at the time the award is granted. In order to be eligible to receive a
bonus payment for a performance period, a participant must (i) be an
employee of the company on the last day of the performance period, or have
terminated employment during the performance period due to retirement,
disability or death and (ii) have been employed by the company during at
least six months of the performance period. A participant who is eligible to
receive a bonus payment for a performance period, but who was not actively
employed during the entire performance period, shall receive a prorated bonus
payment determined in accordance with rules established by the
Compensation Committee. An annual incentive award for a performance period is
to be paid within two and one-half months after the end of the performance
period.


 


Performance
Goals.  Under the Annual Incentive
Plan, the payment of annual incentive awards will be subject to the
satisfaction of performance objectives established by the Compensation
Committee. If the Compensation Committee desires that compensation payable
pursuant to any award be “qualified performance-based compensation” within the
meaning of Section 162(m), the applicable performance measures (i) will
be established by the Committee no later than 90 days after the beginning
of the performance period (or such other time designated by the Internal
Revenue Service), (ii) will satisfy all other applicable requirements
imposed under Treasury Regulations promulgated under Section 162(m),
including the requirement that such performance measures be stated in terms of
an objective formula or standard and (iii) will be based on one or more of
the following business criteria, determined with respect to the performance of
the company as a whole, or, where determined to be appropriate by the
Committee, with respect to the performance of one or more divisions or groups
within the company, or with respect to the performance of individual
participants: net sales; pretax income before allocation of corporate overhead
and bonus; budget; earnings per share; net income; return on stockholders’
equity; return on assets; return on capital employed; attainment of strategic
and operational initiatives; appreciation in and/or maintenance of the price of
the common 


 


69

















 


stock or any other publicly traded securities
of the company; market share; gross profits; earnings before interest and
taxes; earnings before interest, taxes, depreciation and amortization; economic
value-added models; comparisons with various stock market indices; increase in
number of customers and/or reductions in costs; total stockholder return (based
on the change in the price of a share of the company’s common stock and
dividends paid); operating income; and cash flows (including, but not limited
to, operating cash flow, free cash flow, cash flow return on equity and cash
flow return on investment) for the applicable performance period.


 


Performance
Periods.  A performance
period consists of one fiscal year of the company.


 


70