This excerpt taken from the MHP DEF 14A filed Mar 20, 2007.
Grants of Plan-Based Awards Table
The following disclosures supplement the information provided in the Summary Compensation Table found on page 32 of this Proxy Statement and the above Grants of Plan-Based Awards Table.
Bonus Column. The amounts shown in the Bonus Column of the Summary Compensation Table represent the cash awards paid under the Companys Key Executive Short-Term Incentive Compensation Plan. Under this Plan, annual incentives are payable for the achievement of annual financial performance goals established by the Compensation Committee and for individual performance and contribution. The corporate performance goal is based on double-digit diluted earnings per share growth. The earned incentive pool amounts are based on actual performance versus the performance goals established for minimum, target and maximum pool achievement. Under these goals, target achievement results in 100% pool funding, the maximum pool funding is 200% of the target incentive pool, and below target achievement may range down to zero pool funding. Based on the Companys 2006 diluted earnings per share growth exceeding the 15% growth target established by the Compensation Committee at the beginning of the year, the corporate pool funded at 200%.
Stock Awards Column. The amounts shown in the Stock Awards Column of the Summary Compensation Table represent the amount
of the grant date fair value of the performance-based Long-Term Incentive Restricted Performance Shares granted under the 2002 Stock Incentive Plan at $57.81, the average of the high
and low prices on the grant date of April 3, 2006 that is recognized for financial reporting purposes for 2006. Under this Plan, Restricted Performance Share awards vest at the end of a three-year award cycle, with payment ranging up to a maximum of 200% of the shares awarded based on the achievement of cumulative compound diluted earnings per share growth goals established by the Compensation Committee of the Board of Directors at the beginning of each award cycle. The Restricted Performance Share awards are subject to forfeiture if the minimum performance goal is not attained or if a named executive officers employment is terminated for certain reasons before the shares become vested. During the award cycle, the named executive officers receive dividends on and have the right to vote the awarded shares. Based on the cumulative compound earnings per share growth for the 2004-2006 award cycle exceeding the 15% growth target established by the Compensation Committee at the beginning of the cycle, the 2004 Award paid out at 200%. A new grant on the same terms was made in 2006 covering the 2006-2008 performance. In the event of a change-in-control of the Company, as discussed on pages 43 through 47 of this Proxy Statement, all of the financial goals are deemed to have been satisfied and the named executive officers would receive the target amount no later than the normal maturity date of the award. In addition, dividend equivalent payments equal to the dividend paid on the Companys common stock were paid in cash in 2006 on the Restricted Performance Shares.
Option Awards Column. The amounts shown in the Option Awards Column of the Summary Compensation Table represent the amount of the grant date fair value of stock options granted pursuant to the Companys 2002 Stock Incentive Plan that is recognized for financial reporting purposes for 2006. Under this Plan, these grants were for nonqualified stock options, one-half of which vest on the first anniversary of the grant and the remaining one-half on the second anniversary of the grant. In the event of a change-in-control of the Company, as discussed on pages 43 through 47 of this Proxy Statement, the options become fully vested. Stock options provide the named executive officers with the right to purchase shares of the Companys common stock at its market value on the date of the grant. Each stock option grant has a ten-year maximum term. This column also includes RSO grants as further described below. The following breakdown indicates the value of the annual awards and any RSO awards for each named executive officer:
For 2006, the Compensation Committee utilized a pool concept for the option grants to introduce a greater flexibility into the program to differentiate and recognize individual performance and future potential. Effective in 2006, the Compensation Committee has revised the stock-based incentive award program to downweight the role stock options play in the total long-term incentive mix and to upweight the role of Restricted Performance Shares.
Restoration Stock Option (RSO) Grants. The Compensation Committee approved a stock option enhancement in 1997 called a Restoration Stock Option (RSO). If shares of the Companys common stock were delivered in payment of the exercise price of a stock option, as opposed to the use of cash or cashless exercises, an RSO was granted equal to the number of shares used to exercise the stock option. The expiration date of these RSO grants (which were made pursuant to the 2002 Stock Incentive Plan) remains the last day the underlying grant was exercisable. Additionally, if shares were withheld to satisfy the tax obligation on the realized gain, the RSO will include shares equal to the number of shares withheld for taxes. RSO grants were nonqualified, and were first exercisable six months after the date of grant at the market value on the date of grant of the RSO. Only one RSO was granted for each original stock option granted. In the event of a change-in-control of the Company, as discussed on pages 43 through 47 of this Proxy Statement, all options would become fully vested. The Compensation Committee voted to terminate this RSO feature effective as of March 30, 2006.
RSO grants were approved under a standing resolution at the time the original underlying stock option award was granted.
Fair Market Value of Common Stock. As previously discussed, effective January 1, 2007, the fair market value of the Companys common stock for determining the exercise price of stock options will be set at the closing price of the Companys common stock on the New York Stock Exchange on the date of grant. Prior to January 1, 2007, fair market value was determined as the average of the high and low trading prices of the Companys common stock on the New York Stock Exchange on the date of grant. The Compensation Committee approved this change in order to comply with SEC rules which require additional disclosure of any grant price other than the closing price. The Company believes this change minimizes the administrative expense of this program and thereby reduces the cost to the Company and its shareholders.
All Other Compensation Column. The amounts shown in the All Other Compensation Column of the Summary Compensation Table include the items described below.