Item 1.01 Entry into a Material Definitive Agreement.
In compliance with a Securities and Exchange
Commission’s Frequently Asked Questions Bulletin on Form 8-K issued on
On April 20, 2006, the Compensation Committee of the Board of Directors of the Company (the "Committee") approved the terms of the 2006 Key Employee Incentive Plan (the "Bonus Program"), which applies to officers (including Section 16(b) executive officers) and key employees of the Company. The design of the Bonus Program is similar to the Company’s bonus programs in prior years, with incentive cash payments based on the achievement at specified levels of financial performance and individual performance.
Under the terms of the Bonus Plan, the bonus pool is based on two variables reflecting corporate financial performance: revenues and non-GAAP profits before tax (PBT). No bonuses are paid if a minimum threshold for PBT is not met, and total bonus payments may not exceed the maximum threshold of 12.8% PBT. The bonus pool for officers is subject to an additional adjustment, ranging from 80% to 120%, based on the Company’s performance relative to competitors.
Under the Bonus Program, each officer and key employee is assigned a target bonus level, expressed as a percent of annual salary, based on grade level. The target bonus levels range from 90% for the CEO and 60% for other executive officers to 10% for key employees at grade level 8. The Committee intends for the target bonus levels to be competitive with target bonuses for similar positions reported in independent, third-party published surveys.
The bonus payout calculation for key employees is subject to a performance adjustment based on the attainment of individual, departmental, and corporate goals. In addition, the CEO has the discretion to reduce or reallocate the bonuses of officers, and officers have the discretion to reduce or reallocate the bonuses of key employees in their departments, based on individual performance.
The Committee’s approval of the terms of the Bonus Program shall not be deemed to create an enforceable agreement between the Company and any officer or key employee, and the Committee retains the discretion to reduce or refuse to authorize any awards under the Bonus Program despite the attainment of the specified objectives.