This excerpt taken from the HVT DEF 14A filed Mar 30, 2009.
Long-Term Equity Compensation
We utilize two equity-based, longer-term incentives: stock-settled stock appreciation rights (SARs) and performance accelerated restricted stock awards (PARs), pursuant to the 2004 Long-Term Incentive Plan.
Our practice is to estimate the approximate dollar amount of equity compensation that we want to provide and to then grant equity awards that have a fair market value comparable to that amount on the date of grant. We estimate the fair market value based upon a number of factors including the closing price of our stock on the date of determination and other factors as outlined in Note 11 of our Consolidated Financial Statements. With the exception of significant promotions and new hires, we generally make these awards at the first meeting of the Compensation Committee each year following the availability of the preliminary financial results for the prior year. Grants were made on February 6, 2008. This timing was selected because it enables us to consider prior year performance by Havertys and the potential recipients and our expectations for the current year. The awards also are made as early as practicable in the year in order to maximize the time period for the incentives associated with the awards. The Compensation Committees schedule is determined in advance, and the proximity of any awards to earnings announcements or other market events is coincidental. The Compensation Committee grants restricted stock to individuals that are not Executive Officers, generally based upon the recommendations of Management, and has delegated stock award granting authority to the chief executive officer for a small, specific number of shares to be made during the ensuing year for promotions, new hires, and other circumstances.
The Compensation Committee in February 2008, after considering the information provided by Pearl Meyer granted PARS and SARs to Havertys Executive Officers. The SARs will vest over four years from date of grant. The PARS will vest 100% in 2015 and could be subject to accelerated vesting if certain market price per share goals are met by the Company. The market price per share goals for the 2008 PARS are for Havertys common stock to attain a $15 closing price for twenty consecutive days.
Over the past several years, we have shifted away from the use of stock options to other types of equity awards. This modification in our equity compensation structure is consistent with competitive market trends. More importantly, the use of restricted stock awards or PARS and SARs make more efficient use of our equity programs share reserves and reduce overall dilution because it takes fewer shares than options to deliver the same amount of incentive compensation opportunity. The SARs granted in 2008 will provide value to the executives only if the price of Havertys common stock increases above $9.13. The timing of receipt and value of the PARS is also directly tied to the value of stock.
In establishing award levels, we generally do not consider the equity ownership levels of the recipients or prior awards that are fully vested.