OMEX » Topics » Annual Incentive Awards and Targets

This excerpt taken from the OMEX DEF 14A filed Apr 15, 2008.

Annual Incentive Awards and Targets

Annual incentive awards are intended to provide a component of total cash compensation that represents an award for meeting corporate key objectives or for achievement of strategic objectives. Annual incentive awards are expressed as target amounts that can be earned as a percentage of base salary. The amount of these targets are based on the individual’s qualifications and experience with the Company, past performance of duties, value to the Company, and the Company’s ability to pay. For all named executive officers, the annual incentive targets are weighted 75% toward the ability to meet key performance indicators of the Company and 25% toward attainment of individual strategic objectives. An executive’s individual strategic objectives are defined based upon the contribution such executive’s role and expertise can bring on achieving the Company’s overall strategic objectives.

 

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Attainment of Company key performance indicators, which comprise 75% of the annual incentive awards, are based upon four separate categories that include revenue, recovered cargo, earnings per share and overall cash flow. Within each category several performance threshold targets were established whereby relative ranges of target incentives could be achieved. Relative levels of target incentive for revenue and recovered cargo key performance indicators ranged from 0% to 60% for each category. Relative levels of target incentives for earnings per share and cash flow ranged from 0% to 40% for each category. In order to achieve the upper range percentages of target incentives, significant stretch performance levels would need to be achieved. For example, to achieve 60% of target incentive, revenue would need to be greater than $20 million or recovered cargo would need to greater than $50 million; to achieve 40% of target incentive, earnings per share would need to be positive or cash flow from operations would need to be greater than budget. While the sum of the various key performance indicator categories could be over 100%, the intent was that named executive officers could achieve at or near target incentives by achieving stretch performance levels in only several categories, or above average levels for all four categories.

While it is intended that the Compensation Committee will follow the incentive award guidelines, the Committee has the discretion to increase or decrease the amounts based upon extenuating or unforeseen circumstances, or to deny annual incentive awards whether or not performance targets are achieved, as it deems appropriate. The attainment of individual strategic objectives is evaluated by the Compensation Committee based upon a report by the Chief Executive Officer. The overall annual incentive award is determined following a review of the performance of each named executive officer relative to the strategic objectives and the attainment of the Company’s key performance indicators. There is no maximum amount established and the incentive awards are at the discretion of the Compensation Committee.

The Chief Executive Officer evaluates the Company’s performance with the assistance of the Chief Financial Officer and evaluates the individual performance for all officers other than him. Based upon review of these factors, he provides the Compensation Committee with his recommendations. The Compensation Committee reviews the performance and assessment of the Company and each executive officer and then evaluates the Chief Executive Officer’s performance.

Incentive Awards for 2007. Based upon the Company’s evaluation of the four categories of key performance indicators for 2007 (i.e., revenue, recovered cargo, earnings per share and cash flow), the eligible amount of target award for all categories was 100 percent. Because of the Company’s success in 2007 with the “Black Swan” project, the recovered cargo category recorded the highest threshold eligibility of target award at 60 %. Each of the other three categories resulted in eligibility of 40% of target award in aggregate primarily due to overall cash flow, which was $18 million more than plan. Also, the Chief Executive Officer recommended to the Compensation Committee that each named executive officer had met or exceeded their individual performance objectives. The following table identifies the target award as a percentage of base salary for each named executive in accordance with the executive compensation plan, the weighting between Company and individual performance, and the actual incentive awarded based upon the recommendation of the Compensation Committee. The amounts for 2007 were paid in cash in January 2008 and are summarized in the Summary Compensation Table on page 14.

 

Name

  

Position

   Target
Award as
% Salary
    Company
Performance
Weighting
    Individual
Performance
Weighting
    Incentive
Awarded as
% Salary
 

John C. Morris

  

Chief Executive Officer

   80 %   75 %   25 %   80 %

Gregory P. Stemm

  

EVP and Co-Founder

   80 %   75 %   25 %   80 %

Michael J. Holmes

  

Chief Financial Officer

   60 %   75 %   25 %   60 %

Mark D. Gordon

  

EVP Sales

   60 %   75 %   25 %   60 %

David A. Morris

  

Secretary/Treasurer

   60 %   75 %   25 %   60 %

 

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