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This excerpt taken from the PNSN DEF 14A filed Apr 23, 2007. Base
Salaries
We generally determine salaries for our executive officers based
on their position and experience. Our compensation committee
reviews salaries annually and may adjust the executive
officer’s salary each year in its discretion, subject to
any applicable employment contract. This adjustment is based on
prior-year company performance, contributions made by the
executive officer and other market factors. In June of
2006, as a result of our compensation committee’s annual
review based on individual performance and market factors, we
increased our chief financial officer’s salary from
$225,000 to $234,000 and our general counsel’s salary from
$425,400 to $442,416. We decreased our former chief financial
officer’s salary from $275,000 to $144,375 as result of a
change in his responsibilities.
We entered into employment agreements with our chief executive
officer and our president pursuant to which we increased their
base salary from $100,000 to $750,000 effective for the period
beginning on January 1, 2006 and ending at the time of the
initial public offering. Effective upon the initial public
offering, our chief executive officer’s and our
president’s base salaries were reduced to $500,000. We also
provided our chairman with a base salary of $250,000 starting on
January 1, 2006.
In early 2006, our president and our chief executive officer
signed new contracts that linked their bonus compensation
directly to specific revenue and income targets. Bonus
compensation for our chairman and chief financial officer was
also linked to the same specific net income and revenue targets.
Bonuses for our other senior officers were determined in our
compensation committee’s discretion but were generally
based on the revenue and earnings of the Company and the
performance of the executive. Starting in 2007, bonuses for all
executive officers will be directly based upon specific net
income and revenue targets, as well as the achievement of
certain individual performance objectives. We believe that our
performance-based bonus program provides our executive officers
with the appropriate incentives to achieve the Company’s
short-term goals. We believe that revenue and net income are the
most appropriate goals to reward because they reflect the growth
of the Company and increases in efficiency.
The target bonus payable for 2006 to our chairman, chief
executive officer, president, and chief financial officer was
$250,000, $593,750, $593,750, and $225,000, respectively. Each
of our chief executive officer’s and our president’s
target bonus was reduced from $750,000 to $500,000 at the time
of our initial public offering to reflect the reduction in their
salaries as described under the heading “Base
Salaries.” The $593,750 target number represents the
pro rata allocation of the two bonus targets. We do not expect
such additional bonus awards to continue in the future. One
hundred per cent of the target bonus was to be paid if the
target levels of revenue and net income were achieved; each of
these goals was weighted 50%. No amount was payable with respect
to a performance goal if the Company did not achieve at least
70% of the target for that performance goal; the bonus was to be
pro rated to the extent the Company achieved between 70% and
110% of the performance goal. Up to 25% of the target bonus was
payable following the end of each of the first three quarters of
2006 based on the level of achievement of cumulative quarterly
targets for revenue and net income for such quarter. Any
quarterly payments offset the bonus payable based upon
performance for the 2006 year as a whole. However, the
executive was not required to repay any amounts in the case
where the bonus based on annual performance was less than the
amounts previously paid to the executive as quarterly bonuses.
The Committee had the discretion to increase or decrease the
bonus paid to any executive officer as it deems appropriate,
based on his or her individual contribution, including but not
limited to performance of the Company that is due to the
executive officer’s contributions. For 2006, our general
counsel and our senior vice president-finance were awarded
discretionary bonuses of $237,542 and $192,210, respectively, of
which $105,000 and $41,960, respectively, were paid in 2007.
For the 2006 bonus program,
year-to-date
targets for revenue, net interest for each quarter were
$42.2 million in the first quarter, $85.8 million in
the second quarter, $131.7 million in the third quarter and
$179.4 million in the
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fourth quarter.
Year-to-date
net income targets for each quarter in 2006 were
$4.1 million in the first quarter, $9.6 million in the
second quarter, $16.6 million in the third quarter and
$24.3 million in the fourth quarter.
Based on the levels of achievement of our revenue and net income
during 2006, the compensation committee awarded bonuses of
$268,652, $671,514, $671,514 and $236,250 to our chairman, our
chief executive officer, our president and our chief financial
officer, respectively, of which $76,217, $152,435, $152,435 and
$71,340 were paid, respectively, in 2007 (the remainder paid in
2006). Additionally, the compensation committee awarded our
chief executive officer an additional $100,000 in connection
with the successful completion of our initial public offering.
See information under the caption “Summary Compensation
Table” for a discussion of the bonuses earned in 2005 and
paid in 2006. The bonuses were paid in part during the year
based on the level of achievement of cumulative quarterly
targets with the remaining amounts paid in March, 2007. The
compensation committee used its discretion to pay a bonus for
one quarter at target even though the level of performance was
slightly below target; however, that amount would have been
earned at year end based on the levels of achievement of revenue
and net income for 2006.
Our committee will set the revenue and net income goals for the
Company for each year with input from our chief executive
officer. The committee may increase or decrease the revenue and
net income objectives during the course of any fiscal year in
its discretion. Examples of events that could cause our
compensation committee to increase or decrease objectives would
be increases or decreases to our revenue or net income due to
material transactions, extraordinary general economic trends
that have a material impact on our business or changes in the
financial services industry in general.
We believe that providing a portion of our executive
officers’ compensation in the form of equity awards is
important to provide them with long-term incentives to support
and build stockholder value. Grants of equity-based compensation
for executive officers are solely at the discretion of our
committee under the Company’s 2000 Stock Incentive Plan and
may be in the form of restricted stock units or options or other
equity-based awards. The equity awards generally vest over a
period of four years of service. Our compensation committee
currently only grants options and restricted stock units. We
believe that service vesting options and restricted stock units
link the Company’s performance to the recipient’s
compensation because our executive officers would suffer losses
for restricted stock units or would not fully realize gains from
options if our stock price decreases between the relevant date
of grant and date on which the grant fully vests. The grant of
options or restricted stock units that vest over several years
will increase retention and incentivize our executive officers
to engage in long-term beneficial activities for the Company.
The allocation between options and restricted stock units is set
in our compensation committee’s discretion based in part on
the expense the Company would incur and be required to report as
a result of these grants, the anticipated tax consequences to
the executive officers, and the stated preferences of the
relevant executive officer.
We currently plan to make equity-based awards at the time we
first employ new executive officers. Our compensation committee
has determined that our current executive officers have a
sufficient equity stake in the Company, and accordingly, we do
not have plans to make additional equity grants to current
executive officers, although we may do so in the future. In
addition, we may grant equity-based awards at other times in
connection with extraordinary transactions. We do not currently
intend to reduce future grants due to the vesting of any options
that have been previously granted to any executive officer or
the executive officers’ overall ownership of our common
stock. Each grant of options following our initial public
offering had an exercise price equal to the closing price of our
common stock on the NASDAQ Global Stock Market on the date of
grant, and each grant of options prior to our initial public
offering had an exercise price equal to the fair market value of
our common stock on the option grant date.
Pursuant to employment contracts entered into in April of 2006
in contemplation of our initial public offering, our chief
executive officer and our president each received an option
grant for 100,000 shares of our common stock at an exercise
price of $17.00, which vest over four years. Also in connection
with our initial public offering, our chairman received an
option grant of 50,000 shares of our common stock, vesting
over four years, at an exercise price of $17.00. Each of our
chief financial officer, our general counsel and our former
chief financial officer
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received 16,666 restricted stock units, vesting from
January 1, 2006 over periods ranging from three and
one-half years to four years, and options for 16,666 shares
of our common stock, vesting over four years from May 16,
2006, at an exercise price of $17.00.
The Company does not have any program, plan or practice to time
option grants in coordination with the release of material
non-public information. Equity grants to new employees who do
not report directly to the chief executive officer are generally
awarded by our chief executive officer and reported to the
compensation committee at the committee’s next regular
meeting after the grant date. The exercise price of options is
set at the closing selling price of the common stock on the
NASDAQ Global Stock Market on the grant date.
Should the Board determine that an executive officer has engaged
in fraudulent or intentional misconduct, it will attempt to
remedy the misconduct by taking all appropriate action,
including but not limited to, terminating the executive officer
and initiating an action against him or her. In addition, if the
executive officer’s action requires the restatement of any
financial statements filed with the Securities and Exchange
Commission, the Board will seek recovery of performance-based or
equity based compensation from the executive officer that was
awarded as a result of such incorrect statements.
Our executive officers are eligible to participate in our
employee benefit plans, which include medical, dental, life
insurance and 401(k) plans, all of which are available to all
salaried employees and do not discriminate in favor of executive
officers. Our executive officers do not receive any other
perquisites not available to our salaried employees in excess of
$10,000.
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