CYBE » Topics » Annual Incentive.

This excerpt taken from the CYBE DEF 14A filed Apr 3, 2008.
Annual Incentive. Our Compensation Committee annually establishes a cash incentive plan, or “bonus” for all of our employees, including our executive officers. We have not, during the past three years, established individual performance objectives, but instead base all of our cash incentives upon

annual financial performance.

 

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The Compensation Committee establishes a targeted level of payout under this program which varies based on the seniority and position of each executive. We establish the target amount so that pay at the targeted level, when combined with salary, equals or slightly exceeds the aggregate cash compensation of survey companies at the median point. For 2007, Ms. Iverson’s targeted bonus was set at $100,000 which, when combined with salary at the targeted level, would have equaled the average of the median total compensation from the AEA and Radford surveys.

 

The executive, and our other employees, is paid this targeted amount, or less than or more than the targeted amount, based upon a matrix of the ratio of (i) revenue growth in the year in question over revenue averaged over the prior three years, to (ii) net income before interest and taxes that we generate for the calendar year. No incentive accrues under this matrix if this revenue growth in less than 9% over the three year average, or if net income before interest and taxes is less than 6% of revenue. The maximum payout under the matrix is two times the executive’s target, which is achieved only if revenue grows by 19% or more over the three year average and net income before interest and taxes is 16% or more of revenue. The targeted bonus is paid, and the objective of the plan is to encourage payment, if sales grow by 13% over the three year average and the level of net income before interest and taxes is at least 12% of revenue.

 

Our average revenue for the three years prior to 2007 was approximately $52.5 million. Our revenue for 2007 was $58.8 million, representing roughly 12% growth over the three year average. Our net income before interest and taxes was $5.54 million or roughly 9.4% of revenue. Based on these numbers, the matrix requires a payment of, and we paid executives and other participants in the incentive plan, 64% of targeted incentive, or $64,000 for Ms. Iverson, $48,000 for Dr. Case, $24,320 for Mr. Bertelsen, $20,160 for Mr. Proulx and $32,000 for Mr. DiMarco. For 2008, we have set slightly increased target payouts for our executives but are considering changes to the operation of the matrix.

 

This excerpt taken from the CYBE DEF 14A filed Apr 2, 2007.
Annual Incentive. Our Compensation Committee annually establishes a cash incentive plan, or “bonus” for all of our employees, including our executive officers. We have not, during the past three years, established individual performance objectives, but instead base all of our cash incentives upon

annual financial performance.

 

The Compensation Committee establishes a targeted level of payout under this program which varies based on the seniority and position of each executive. We establish the target amount so that pay at the targeted level, when combined with salary, equals or slightly exceeds the aggregate cash compensation of survey companies at the median point. For 2006, Ms. Iverson’s targeted bonus was set at $100,000 which, when combined with salary at the targeted level, would have equaled the average of the median total compensation from the AEA and Radford surveys.

 

The executive, and our other employees, is paid this targeted amount, or less than or more than the targeted amount, based upon a matrix of the ratio of (i) revenue growth to (ii) net income before interest, taxes and stock compensation expense, that we generate for the calendar year. If our revenue declines, or we are not profitable, no bonus is paid. Our traditional bonus matrix, and the matrix employed for 2006 and for several years prior to 2006, provided that the targeted bonus would be paid if sales grew by 25% over the previous year’s (2005) sales, and we generated net income before interest, taxes and stock compensation expense of 16% of this sales amount. Our sales growth was roughly 35% from 2005 to 2006 and our net income before interest, taxes and stock compensation expense was roughly 14%. Accordingly, the incentive compensation payable in accordance with the matrix was 1.1 times the targeted incentive compensation and we paid Ms. Iverson a bonus of $110,000.

 

Our payments under the matrix of incentive compensation have been highly variable, with very high payouts in years of cyclical growth and no payouts in years of decline. On average, over the past 5 years, we have paid roughly 63% of the targeted amount. To avoid issues relating to the cyclical nature of the incentive compensation and continue to provide adequate incentive for the 2007 fiscal year, we have changed the matrix for fiscal 2007. Rather than year to year revenue growth, our Compensation Committee instead determined to change the matrix to measure growth in revenue over an average of three years. Further, based on our review of the average payout under the matrix, we determined to decrease the level of revenue growth at which targeted incentives are paid to 13% over the three year average and the level of net income before interest and taxes to 12%. In 2007, stock compensation expense will now be included for purposes of calculating net income before interest and taxes. This expense was excluded for purposes of the 2006 matrix calculation. If we had used this form of matrix during the past five years, we would have paid 74% of the targeted bonus, on average. We set Ms. Iverson’s targeted bonus based on the matrix at the same level in 2007 as it was in 2006 ($100,000), but provided small increases to other executives.

 

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