AG » Topics » Annual Cash Incentives

This excerpt taken from the AG DEF 14A filed Mar 28, 2007.
Annual Cash Incentives
We believe the annual incentive bonus portion of an executive officer’s total cash compensation should be a substantial portion of the annual compensation and must be based on the performance of the Company, as well as the individual contribution of each executive officer. As a result, an executive officer’s annual incentive bonus compensation is determined based on performance compared to established corporate and, in some cases, individual performance goals. All executive officers participate in the Management Incentive Compensation Plan (the “IC Plan”), which provides a direct financial incentive in the form of an annual cash bonus for the achievement of corporate and personal objectives. Incentive compensation bonus opportunities are expressed as a percentage of


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the executive officer’s base salary. The award opportunity for Mr. Richenhagen and the other named executive officers are shown in the chart below:
  Measured as a
  Target Award
  Award (as a
  percentage of
    (as a percentage
  (as a percentage
  percentage of
Name   of base salary)   of base salary)   base salary)   Goals   Goals
Mr. Beck
    41.0 %     100 %     130 %     100 %     0 %
Mr. Collar
    20.5 %     50 %     65 %     60 %     40 %
Mr. Lupton
    20.5 %     50 %     65 %     60 %     40 %
Mr. Muehlhaeuser
    20.5 %     50 %     65 %     60 %     40 %
Mr. Richenhagen
    53.0 %     130 %     195 %     100 %     0 %
Mr. Richenhagen’s target award opportunity was increased from 100% to 130% during 2006. The increase was a result of the October 2006 compensation review completed by the Compensation Committee subsequent to Mr. Richenhagen’s appointment to Chairman. The Watson Wyatt study concluded that the median target bonus for a combined Chairman and CEO position was 130% and consequently the target award level was increased. Mr. Richenhagen’s annual incentive compensation for 2006 is deductible under Section 162(m) of the Internal Revenue Code.
The payouts under the IC Plan are based on achievements compared to corporate or individual objectives. Under the IC Plan, graduated award payments are made if a minimum of 80% of the goal is met increasing to the maximum payout when 120% of the goal is met. If minimum targets are not reached, no payouts are provided under the plan. The corporate objectives are set at the beginning of each year and approved by the Compensation Committee. For the year ended December 31, 2006, the corporate objectives were based on targets for adjusted earnings per share, free cash flow and a customer satisfaction and quality rating. When compared to the actual results for 2006, bonuses were earned for the free cash flow and quality rating goals and no bonus payouts were made in connection with the earnings per share goal. For Mr. Richenhagen’s and Mr. Beck’s 2006 bonuses, the Compensation Committee elected to limit the payout to not exceed the target award percentage for any performance element earned under the IC plan. For executive officer’s with a personal goal component of their bonus award, the goals were established primarily for operational performance and other objectives based on the executive officer’s specific responsibilities. For 2006, the Compensation Committee determined that we achieved approximately 61.7% of the corporate target under the IC Plan.
We consider specific goals under the IC Plan to be confidential. However, we believe if the Company performs as projected, and if the executive officer achieves what we consider reasonable personal goals, each executive officer should earn his target bonus.
In addition, special incentive awards can be made based on extraordinary and unusual achievement as determined by the Compensation Committee. Such awards are subject to approval by the Board of Directors. No such awards were granted by the Compensation Committee in 2006.
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