exv10w4



 





Exhibit 10.4




EAGLE MATERIALS INC.

AMERICAN GYPSUM COMPANY

SALARIED INCENTIVE COMPENSATION PROGRAM

FOR FISCAL YEAR 2008




1.     Bonus Pool




     To insure reasonableness and affordability the available funds for bonus payments are
determined as a percent of earnings of American Gypsum Company (the “Company”). The actual
percentage may vary from year to year.



     For Fiscal Year 2008, bonus pool funding will be 2.25% of American Gypsum Company’s operating
profit.



     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.



2.     Eligibility




     The American Gypsum Company President, Vice Presidents and Plant Mangers 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 American Gypsum 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 American Gypsum Company’s Long-Term Compensation
Program, the Eagle Materials Long-Term Compensation Program and the Eagle Materials Special
Situation Program.



3.     Allocation of Pool




     The
American Gypsum Company President will be eligible for 20% - 25% 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:



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	Participant	 	% of Pool Available	 
	Company President
	 	 	22	%
	Vice Presidents
	 	 	34	%
	Plant Managers
	 	 	20	%
	Other Participants (Directors, Superintendents)
	 	 	24	%
	 
	 	 	 
	Total
	 	 	100	%






     The American Gypsum Company President’s bonus opportunity will be 50% objective goals and 50%
discretionary as determined by Eagle Materials CEO taking into consideration overall job
performance and compliance with Eagle Materials Policies and Code of Ethics. All participants in
the plan must have the ability to significantly affect the performance of the subsidiary company by
achieving measurable, quantifiable objectives. The American Gypsum Company President will
determine the objective and discretionary balance of bonus opportunities for the other participants
in this program, subject to approval by the Eagle Materials CEO.



4.     Objective Criteria




     Objective setting is essential to an effective incentive compensation plan. Objectives should
be measurable and focus on areas that have meaningful impact on our operational performance.
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 budget 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.



     To illustrate the need for the selection of an objective, the reference point and how
performance deviation from the reference is judged, let’s look at safety as an example. Let’s
suppose a company plans 0 lost time accidents, which is reasonable to plan. If they have 1 lost
time accidents, is the performance a total failure, poor, fair or reasonable? If they have 2 lost
time accidents, is the performance unacceptable, poor, fair or reasonable? From this information
it would be difficult to assess their overall safety performance. We could give consideration to
the number of incidents requiring doctor’s treatment. We could include an evaluation of worker’s
compensation claims or dollars spent. As an alternative to these, we could use industry statistics
available from an authoritative source such as OSHA or GA which show accident frequency and
severity ratio for comparable facilities. We could establish a mean or average as our reference
point, based on accident frequency and severity, and agree to a bonus adjustment according to our
percentile ranking with comparable industry.



     Another example might be the case of a dryer system that is allowed to deteriorate. This
would tend to lower thermal efficiency and line speed, but could increase available hours because
we didn’t take the necessary down time to repair the dryer system. A plan built on this premise
might have production and BTU per MSF



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statistics lower than historical performance but up time shown as higher. Rather than using plan
as the reference point for these criteria, we might use historical performance for line speed,
BTU/msf and a combination of historical and industry average for up time. The intent would be to
cause a focus on the issue of not deferring maintenance.



     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.
Accordingly, 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. For bonus
purposes, they should neither be penalized nor rewarded for the general economic conditions.



     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.



     Typical objectives that impact earnings include:




	 	•	 	Sales






	 	•	 	Volume (total or specific product)
	 
	 	•	 	Price
	 
	 	•	 	Market share






	 	•	 	Plant Efficiencies






	 	•	 	Waste
	 
	 	•	 	Speed
	 
	 	•	 	Delay
	 
	 	•	 	Fuel usage/msf
	 
	 	•	 	Contribution/machine hour






	 	•	 	Production






	 	•	 	Volume
	 
	 	•	 	Cost (total or specific component)






	 	•	 	Quality Rating
	 
	 	•	 	Environmental Compliance
	 
	 	•	 	Managing Capital Projects
	 
	 	•	 	Overhead Reduction
	 
	 	•	 	Working Capital






	 	•	 	Inventory turns
	 
	 	•	 	Receivables






	 	•	 	Long Term Planning






	 	•	 	Gypsum reserves
	 
	 	•	 	Maintenance — protection of assets






	 	•	 	Personnel






	 	•	 	Training and development
	 
	 	•	 	Turnover rate
	 
	 	•	 	Union relations




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5.     Measuring Performance




     At the close of the fiscal year the American Gypsum Company President will review the
performance of the company versus the objectives submitted at the beginning of the year and
recommend the distribution of the pool to the participants. Distribution of the pool requires
approval of the Eagle Materials CEO.



     Any portion of the Company Operating Pool not paid out (unearned) or forfeited will be added
to the SSP at Corporate.



     At anytime during the fiscal year the American Gypsum Company President may also recommend to
the Eagle Materials CEO an SSP award to recognize outstanding individual performances that
dramatically improved the company’s profitability or long term value.




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