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This excerpt taken from the DY DEF 14A filed Oct 26, 2006. Executive
Officer Compensation Guidelines
Base Salary
Adjustments
The Committee reviews, on an annual basis, salary
recommendations for the Company’s senior officers. In
making these decisions, the Committee reviews each
executive’s performance, market compensation levels for
comparable positions, the Company’s performance goals and
objectives and other relevant information. The recommendations
are submitted by the Chief Executive Officer and are based on
the individual’s performance and general market conditions.
Salary levels are intended to recognize the challenge of
different positions taking into consideration the type of
activity of the position, the responsibility associated with the
job and the relative size of the operation.
Performance-Based
Annual Incentive Bonus Awards
In addition to paying a base salary, the Company provides for
cash incentive compensation as a component of overall
compensation for the Company’s senior officers. Incentive
compensation as a component of overall compensation is tied to
individual performance and the Company’s financial
performance, usually with a heavy emphasis on the profitability
of the Company. For the 2006 fiscal year, the target incentive
compensation pool was established by formula based upon the
Company’s consolidated financial performance. The fiscal
year 2006 key financial performance measures were total revenue
and income before income taxes. Individual incentive
compensation awards are recommended by the Chief Executive
Officer for consideration and approval by the Committee.
Equity-Based
Compensation
The Committee’s policy is that a portion of each senior
officer’s compensation should be “at risk” based
on the performance of the Company, its subsidiaries and the
respective officer so as to align the financial interests of the
Company’s senior officers with those of the Company’s
shareholders and the performance of the Company’s common
stock. The Committee believes that providing senior officers
with an opportunity to acquire a financial interest in the
Company’s performance (through grants of restricted stock,
stock options and other equity-based compensation) will incent
and reward senior officers for job performance which enhances
shareholder returns. The Company adopted its 2003 Plan at its
2003 Annual Shareholders Meeting on November 25, 2003 and
amended such plan on August 30, 2004. Under the 2003 Plan,
the Committee may award equity-based compensation to senior
officers and key employees. Participants are selected based on
their significant contributions or anticipated
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contributions to the Company. Awards under the 2003 Plan may be
in the form of either statutory or non-statutory stock options,
restricted stock (or restricted stock units), performance shares
(or performance share units), or other awards that are based on
the value of the Company’s common shares. The Company
grants stock options with an exercise price per share equal to
the fair market value per share on the date of grant. The
employee is rewarded only to the extent that the Company’s
share price increases following the date of grant. Subject to a
requirement of continued employment, the options become
exercisable in equal installments over a period of four years
after the date of grant.
For fiscal year 2006, the Committee granted the senior officers
and other key employees restricted stock awards consisting of
(i) shares of performance vesting restricted stock subject
to the Company achieving annual pre-tax income goals and annual
operating cash flow ratio goals (the “Annual Goals”)
established by the Committee (the “Target Award”) and
(ii) time vesting restricted stock awards which vest at the
rate of 25% on each of December 14, 2006, 2007, 2008 and
2009. With respect to the performance vesting restricted stock,
each Target Award will vest in three installments subject to the
Company achieving the Annual Goals in each of fiscal year 2006,
2007 and 2008. In the event the Company achieves the Annual
Goals with respect to a relevant fiscal year and the Company
also achieves pre-tax income goals and operating cash flow ratio
goals established by the Committee for the trailing three fiscal
year period ending in such fiscal year (in the case of
Mr. Nielsen and Mr. Estes, in respect of the twelve
month performance, period ending on October 28, 2006, the
twelve month period ending on October 28, 2006; in respect
of fiscal year 2007, the trailing two fiscal year period ending
in fiscal year 2007; and in respect of fiscal year 2008, the
trailing three fiscal year period ending in fiscal year 2008),
each senior officer will vest in up to an additional 100% of the
amount of his Target Award that vested in such fiscal year. The
performance periods for the Company’s other senior officers
differ from Mr. Nielsen’s and Mr. Estes’
because of the Committee’s intention that
Mr. Nielsen’s and Mr. Estes’ Target Award be
deductible under Section 162(m) of the Code. The terms of
the restricted stock awards entitle the holder to all of the
rights of a shareholder of the Company, including the right to
receive any cash dividends that are declared with respect to the
restricted stock.
Other
Considerations with Respect to the Chief Executive
Officer’s Compensation
In establishing Mr. Nielsen’s compensation for fiscal
2006, the Committee applied the principles outlined above in a
similar manner to those applied to the other senior officers.
The annual total compensation for Mr. Nielsen is set by the
Committee with the goal of providing him with a competitive base
salary amount and an annual cash incentive award which is
consistent with individual and Company performance.
The base salary amount is set forth in the Nielsen Employment
Agreement (as described herein) and is based upon a comparison
with other peer group companies with which the Company competes
for executive talent pursuant to information provided to the
Committee by the compensation consultants. In accordance with
this criteria and in connection with Nielsen Employment
Agreement, the Committee increased Mr. Nielsen’s base
salary from the $624,000 per annum a level which had been in
effect since July 31, 2005 to $680,000 per annum,
effective as of July 30, 2006, which represents an increase
of approximately 9%.
The annual incentive award is based upon a pre-established
combination of the Company’s overall financial performance
and Mr. Nielsen’s individual performance. The fiscal
year 2006 pre-established financial performance measures were
total revenue, operating cash flow, profit before income taxes
and net income, both of the latter two measures being adjusted
for asset impairments. Mr. Nielsen’s annual incentive
award was calculated as a specified percentage (the “Annual
Incentive Payout Ratio”) of the amount by which income
before taxes, adjusted for asset impairments, exceeds a preset
threshold of contract revenues. This threshold is set at or
above the level of long-term performance of the Company’s
peer companies. The Annual Incentive Payout Ratio was determined
by assessing operating cash flow relative to net income,
adjusted for asset impairments, with a lower payout associated
with
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lower ratios. Mr. Nielsen receives an annual incentive
award only if the award as calculated according to the foregoing
guidelines equals or exceeds 10% of his fiscal 2006 base salary.
In the event the award as calculated is less than 10% of
Mr. Nielsen’s 2006 base salary, he will not receive an
annual incentive award. The maximum annual incentive award
payable to Mr. Nielsen for fiscal year 2006 is 125% of his
base salary. The Compensation Committee may, in its discretion,
reduce the amount of any incentive compensation award determined
by the above calculation. Based on the performance criteria
outlined above, Mr. Nielsen received no annual incentive
award for fiscal year 2006.
As described above, the Committee believes that a portion of the
compensation for the Chief Executive Officer, like the
compensation of other senior officers of the Company, should be
in the form of annual performance-based incentives that align
investors’ and the Chief Executive Officer’s interests
through common share ownership in the Company. For fiscal year
2006, the Committee granted Mr. Nielsen 23,079 shares
of performance vesting restricted stock under the 2003 Plan. As
discussed above, these shares will vest in three installments
subject to the Company achieving specified levels of performance
for the 12-month period ending on October 28, 2006 and in
each of fiscal year 2007 and 2008. In the event the Company
achieves the goals established by the Committee for the 12-month
period ending on October 28, 2006, (in respect of the
12-month period ending October 28, 2006); for the trailing
two fiscal year period ending in fiscal year 2007 (in respect of
the fiscal year 2007); and for the trailing three fiscal year
period ending in fiscal year 2008 (in respect of fiscal year
2008), Mr. Nielsen will vest in up to an additional 100% of
the amount of his Target Award that vested in such fiscal year.
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