This excerpt taken from the EYE DEF 14A filed Apr 25, 2008.
Analysis of 2007 Named Executive Officer Compensation
Our compensation committee considered the factors described below in making its compensation decisions for each of our named executive officers.
Mr. Lambert joined AMO late in 2007. Mr. Lamberts base salary was negotiated. Factors considered by our compensation committee in approving the salary were Mr. Lamberts then current base salary (which was higher than the amount offered by AMO), and internal equity and market median analyses which supported the agreed level.
In February 2008, the compensation committee determined that the performance criteria were not satisfied, due to a product recall in May 2007, which had a materially negative impact on our revenue and adjusted operating income. The committee determined that discretionary bonus payments to the named executive officers were appropriate and in the best interests of our stockholders, to recognize performance in light of the unexpected product recall. The compensation committee considered, as one factor in making the discretionary bonus awards, the funding level for non-named executive officers under our bonus plan. This was considered in order to maintain internal equity with other AMO management. The plan applicable to non-named executive officers was funded at approximately 67%. Another factor considered was individual performance in 2007. All of the named executive officers met or exceeded the expectations for individual performance. Individual performance favorably impacted the bonus awards for all named executive officers. In particular, Messrs. Mazzo, Meier and Post received positive adjustments to the 67% metric to reflect their levels of accomplishment.
As discussed above, the 162(m) targets established for each officer are maximum amounts payable in the event of over-achievement of corporate objectives. In applying negative discretion, we also utilize for each officer a reference target for annual incentive payments designed to pay total cash compensation at the market median, assuming performance expectations are met. The bonus awarded for 2007 performance were awarded as follows, expressed as a percentage of these reference targets; Mr. Mazzo (74%), Mr. Meier (73%), Dr. Heidrich (67%), Mr. Trenary (67%), and Mr. Post (72%). Mr. Lamberts bonus was guaranteed as part of his terms of new employment.
At Mr. Mazzos request, the compensation committee paid approximately $200,000 of Mr. Mazzos 2007 bonus to him in the form of AMO common stock, valued on the same date that cash bonuses were paid, under our 2005 Incentive Compensation Plan. The remainder of Mr. Mazzos bonus was paid in cash.
According to Mr. Lamberts terms of employment, he received a sign on bonus, payable in February 2008, in lieu of participation in the management incentive program for 2007. The compensation committee approved the guaranteed bonus as part of the negotiated compensation package in order to attract Mr. Lambert in light of the bonus and cash retention payments foregone with his then current employer.
In February 2007, the compensation committee granted performance-vested restricted stock units to the named executive officers other than Mr. Lambert. The number of units granted to each executive was determined based on the difference between the maximum payout of the award at the 75 th percentile long-term incentive benchmark and the market median long-term incentive benchmark. This difference was then divided by the fair market value of the common stock on the date of the grant. These units will vest in 2010 only to the extent that AMOs total stockholder return is positive and exceeds the 50th percentile of the peer group over the calendar years 2007-2009. The amount of units that vest, if any, will be determined on a sliding scale, based on the level of total stockholder performance achieved between the 50th and 75th percentiles. For example, if an executive received 1,000 performance vested restricted stock units, and our total stockholder performance was at the 60th percentile, 400 of the units would vest in early 2010.
In May 2007, Mr. Post received a grant of 2,000 performance vested restricted stock units. Performance conditions included key metrics associated with the integration and performance of the acquired IntraLase business. These metrics included laser placements, procedure sales, upgrades, selling prices, new product launches and employee turnover. In February 2008, the compensation committee determined that 89.7% of the metrics were attained and approved the vesting of 1,794 of Mr. Posts units, subject to his continued employment through May 2010.
The compensation committee granted 50,000 stock options and 5,000 restricted stock units to Mr. Lambert in connection with his employment. In its analysis, the committee considered the potential value of equity incentives foregone with his prior employer, market data indicators for appropriate total direct compensation, motivation and retention.
In 2007, our compensation committee reviewed an inventory of all elements of executive compensation, including perquisites, retirement plans, benefits, employment agreements and severance arrangements, and their costs to AMO. The compensation committee concluded that AMOs compensation program is currently reasonable and in the best interests of AMOs stockholders.