This excerpt taken from the MXGL DEF 14A filed Mar 21, 2007.
Incentive Plan Awards. The Incentive Plan was approved by our shareholders at the annual meeting in 2000 and amendments to the Incentive Plan were approved by our shareholders at each of the annual meetings in 2002 and 2005. In general, at employment inception we have historically granted our employees, including our named executive officers, equity awards under our Incentive Plan in the form of stock options that vest ratably over specified periods. Certain option awards incorporate a reload feature whereby if a named executive officer pays the exercise price of the option by tendering common shares rather than cash, the named executive officer is automatically granted new stock options to purchase common shares in the amount that was used to pay the exercise price of the original reload award and all successive reload awards. We selected stock option awards principally because we recognize that many of our new employees leave behind stock options at their former employers and seek to be made whole by us. After commencement of the employment relationship and going forward, our Compensation Committee anticipates expanded use of restricted share awards as opposed to stock options. Recent changes in the accounting treatment for stock options as a result of Statement of Financial Accounting Standards No. 123(R) have made granting of stock options less attractive. Furthermore, our Compensation Committee believes that restricted shares provide an equally motivating form of incentive compensation while serving to better align the interests of our shareholders and management.
The initial equity grants to Messrs. Hynes, Minton and Cooney consisted of warrants instead of stock options. The warrants were issued as an incentive to the named executive officers to join us while we were a development stage company and were granted on terms similar to those applicable to our initial investors.
Subject to mandatory provisions in the Incentive Plan, the terms and conditions of a stock option award, including the expiration, purchase price, vesting schedule and treatment of unvested options at employment termination, are determined by the Compensation Committee at the time the award is made and such provisions are incorporated into the award agreement. Likewise for restricted shares, the award agreement delineates material terms such as the restricted period, vesting schedule and treatment of unvested restricted shares at employment termination. We have in some circumstances granted restricted share awards that are partially vested on the date of grant or shortly thereafter as an added inducement for highly qualified individuals. Upon a change in control, all options granted under the Incentive Plan become vested and exercisable in full and all restrictions on restricted share awards granted under the Incentive Plan automatically lapse.
The Incentive Plan also permits for grants of share purchase awards and share awards. A share purchase award permits the eligible individual to purchase our common shares at a price above, equal to or below the fair market value of the shares at the time of grant. Subject to such performance and employment conditions as our Compensation Committee may determine, awards of our common shares or awards based on the value of our common shares may be granted either alone or in addition to other awards granted under the Incentive Plan.
Compensation Mix and Other Compensation
We allocate compensation between long-term and currently paid compensation to ensure adequate base compensation to attract and retain qualified personnel, while providing incentives to maximize long-term value for our company and our shareholders. We provide cash compensation in the form of base salary to meet competitive salary norms and reward good performance on an annual basis and in the form of bonus compensation to reward superior performance against specific short-term goals. We provide non-cash compensation to reward superior performance against specific objectives and long-term strategic goals and to align the long-term interests of management with those of our shareholders.
Messrs. Becker, Hynes, Minton, Guagliano and Roberts are currently parties to employment agreements (and in the case of Mr. Cooney, both a separation agreement and an employment agreement). Mr. Hynes is also party to a retirement and separation agreement effective March 31, 2007. The employment agreements and separation agreements, as applicable, establish the parameters for the mix of short-term, long-term, cash and non-cash compensation for our named executive officers.
In addition, we provide our named executive officers with an automobile allowance, reimbursement for country club dues, housing allowance and participation in life insurance, health, disability and major medical insurance plans, and such other employee benefit plans and programs and perquisites as we may from time to time maintain for the benefit of our employees. While we currently intend to maintain our current benefits and perquisites for our named executive officers, our Compensation Committee may revise, amend or add to these benefit programs at its discretion.
Section 162(m) Disclosure
We are not a U.S. taxpayer. Therefore, our Compensation Committee does not consider Section 162(m) of the Internal Revenue Code of 1986, as amended, hereafter referred to as the Code (which generally disallows a tax deduction to public companies for annual compensation over $1 million paid to the chief executive officer or any of the four other most highly compensated executive officers) in determining how our named executive officers are compensated.
Common Share Ownership Guidelines
We believe that broad-based share ownership by our employees, including our named executive officers, is the most effective method to deliver superior shareholder returns by increasing the alignment between the interests of our employees and our shareholders. We do not, however, have a formal requirement for share ownership by any group of employees.
Change in Control and Severance
Upon termination of employment or a change in control, the named executive officers may receive (i) accelerated vesting of awards granted under the Incentive Plan and/or (ii) severance payments under the circumstances described below.
Under the Incentive Plan, upon a change in control, all options automatically vest and become exercisable in full and all restrictions on any share awards, restricted shares, or restricted share units automatically lapse. These change in control provisions reflect our belief that our executive officers and other employees who have built us into a successful enterprise should be protected in the event of a change in control. Further, we believe that the interests of shareholders will be best served if the interests of our executive officers are aligned with shareholders, and providing change in control benefits should eliminate, or at least reduce, any potential reluctance of our executive officers to pursue potential change in control transactions that may be in the best interests of shareholders. For more details on these provisions, please see Potential Payments upon Termination or Change in Control.
Upon termination of employment, certain of our named executive officers are eligible to receive severance payments which, depending upon the circumstances surrounding termination and the terms of the applicable employment agreement, may include:
Our severance obligations are designed to be competitive with the amounts payable to executives in similar positions at similar companies. Termination payments to a named executive officer with an employment agreement are made within the time period specified in the respective employment agreement and may be contingent upon the named executive officers continued compliance with the restrictive covenants contained within the agreement and the execution of a release of claims.