This excerpt taken from the QCCO DEF 14A filed Apr 30, 2007.
2006 Executive Compensation
Since our initial public offering, our compensation committee has reviewed executive compensation annually in either December or January of the succeeding year, in conjunction with the review of our year-end financial results. All stock option and restricted stock awards for executive officers, as well as base salary adjustments and bonus determinations, have been made at these year-end financial and compensation review meetings. Stock option and restricted stock awards have been made at those meetings without regard to the timing of the release of fourth quarter and year-end financial results. We anticipate that our compensation committee will continue this practice of year-end review of financial results and executive compensation.
Our compensation committee consults with our chief executive officer, our vice chairman and our president regarding all compensation matters, including specifically recommendations for compensation of other executive officers. Our compensation committee also confers with our chief executive officer concerning the evaluation of the performance of our president. Our chief executive officer does not make any recommendations to the compensation committee regarding any component of his compensation or the compensation of the vice chairman. Due to family relationships, our vice chairman does not participate in those deliberations. While our compensation committee receives input from these three executives concerning executive compensation matters, all deliberations regarding final compensation decisions occur in executive sessions of the compensation committee.
The objective of base salary is to reflect job responsibility, value to the company and individual performance. The compensation committee reviews base salary of executives annually, and since the initial public offering has normally adjusted base salaries on a bi-annual basis. The compensation committee evaluates base salary based primarily upon an assessment of market requirements for similarly positioned executives. While the compensation committee has reviewed executive compensation data from a number of industry competitors and other retail companies, for calendar year end 2006 and prior years, the compensation committee has not identified a specific set of peer companies against which to benchmark executive compensation, including base salaries. The base salaries for our chief executive officer and our vice chairman have not changed since our initial public offering in July 2004. Base salaries did not change for other executive officers during 2006, other than for adjustments resulting from promotion of two officers of the company to executive officer positions.
In December 2006, the compensation committee reviewed the executive officer groups base salaries for 2007. For the chief executive officer and vice chairman, no changes were made to their base salaries of $500,000 and $400,000, respectively. Annual base salaries were increased to $450,000 for Mr. Andersen, $300,000 for Mr. Nickerson and $200,000 for each of Mr. Walrod and Mr. Wood. Increases for these executive officers were designed to bring their base salaries in line with executives at competitor companies (including primarily Advance America, Cash Advance Centers, Inc., Cash America International, Inc., First Cash Financial Services, Inc., EZ CORP, Inc., Dollar Financial Corp. and CompuCredit Corp.) and other retail companies.
The compensation committee has recently retained Hay Group, a global compensation consulting firm, primarily to assist the compensation committee in designing annual and long-term incentive compensation. In the course of its review, the compensation consultant will be providing the compensation committee with certain information regarding all components of executive compensation, including base salary levels. The compensation committee anticipates that it will use the information from the compensation consultant in evaluating base salary levels for all executive officers in December 2007.
Historically, our compensation committee has paid year-end discretionary bonuses based primarily upon our financial results and the satisfaction of certain strategic objectives of the company established for the preceding fiscal year. For each of the years 2004, 2005 and 2006, the committee considered and weighed the progress in growing the companys branch base, the reduced level of earnings based on that significant growth strategy, the higher loan loss experience in 2005, the lower loan loss experience in 2006, work on other strategic initiatives, individual performance during the year and company operational improvements. Our compensation committee considered these factors in the context of the overall financial results in 2005 and 2006 versus prior year results and internal and external expectations. From this evaluation, discretionary bonuses were awarded in 2005 and 2006 to each officer at a level intended to compensate for the varying levels of success in these various factors.
Our compensation committee has taken initial steps at the end of 2006 and early 2007 to introduce meaningful elements of performance-based compensation into the mix of overall executive compensation. We
anticipate that bonuses for 2007 will be significantly dependent upon the achievement of certain performance measures, but we anticipate that the compensation committee will retain the ability to grant discretionary bonuses in the future for one or more executive officers.
Our compensation committee continues to believe that it is important for the committee to retain the ability to grant discretionary bonuses to executive officers, either in lieu of or as a supplement to performance-based compensation. There may arise a wide range of circumstances in which the committee may consider it important to grant discretionary bonuses in the future to one or more executive officers, including achievement of specified strategic goals by that officer or the company as a whole (irrespective of impact on performance measures), outstanding individual efforts beyond normal expectations for executive officers at a similar level, specific or unique projects and other similar situations.
Performance-based Incentive Compensation.
At its December 2006 compensation review meeting, our compensation committee granted restricted stock awards to four executive officers. Mr. Andersen received a grant of 40,000 shares, Mr. Nickerson received a grant of 20,000 shares, and each of Messrs. Walrod and Wood received a grant of 12,000 shares, with one half of the awards vesting over four years, 25% per year on each anniversary of the date of grant, and one half vesting if and when the compensation committee certifies that the equity-adjusted EBITDA of the company for calendar year 2007 equals or exceeds a designated target for the year. Equity-adjusted EBITDA is defined as our net income before interest expense, taxes, depreciation and amortization and before any equity-based compensation expense under Financial Accounting Standards Board 123(R). The equity-adjusted EBITDA measure for 2007 is our target for that performance measure for the year, which, while attainable, is a significant increase over the 2006 actual results, using that performance measure.
While the 2006 executive officer bonuses were entirely discretionary as discussed above, our compensation committee has expressed a strong desire to have a significant element of executive compensation for 2007 and future years be incentive-based and tied to achieving certain specific performance measures. As noted above, the compensation committee has retained Hay Group to assist it in establishing a performance-based incentive plan for 2007. As part of our work with the compensation consultant, we are also considering a long-term performance-based incentive compensation plan for certain executive officers.
We have always considered equity-based compensation to be an important part of overall compensation of all executive officers and other key employees. We have historically granted stock options to all area managers and regional managers, other officers and executive officers and certain corporate office employees as a way to provide equity-based compensation to these key employees and to increase their identification of personal financial success with overall corporate financial success. We have granted stock options to our executive officers based on a general evaluation of stock option grant levels for executive officers at various competitors and retail companies, as well as the overall total direct compensation for the officer. While we have not attempted to target a specific dollar value of compensation with each option grant, we have generally considered the value of stock options to the executives in making annual awards.
In accordance with the terms of our 2004 Equity Incentive Plan (the 2004 Plan), all stock option grants are made with an option exercise price equal to fair market value, which is the closing price of our common stock on the Nasdaq Global Market on the date of the grant. Awards of stock options to executive officers have been made by the compensation committee at regular or special meetings of that committee, in conjunction with year-end review of financial results and executive performance, normally in December of that year or in January of the following year. Our compensation committee does not delegate the authority to grant options to any other committee or person, but for all employees other than executive officers (and their family members), has followed the recommendation of the president regarding option grants to those non-executive employees.
All options granted by the compensation committee to executive officers vest at a rate of 25% per year over the first four years of the ten-year option term. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents.
Under the 2004 Plan, the compensation committee may award stock options, stock appreciation rights, restricted stock awards, performance share awards, cash bonuses or other incentive awards permitted by the plan. The committee determines (i) the times when option, restricted stock and other awards will be granted, (ii) the number of shares of our common stock subject to each award granted to the non-employee directors, officers and other employees of the company, and (iii) all terms, conditions (including performance requirements) and limitations of any award, including the exercise price and vesting for each award granted under the plan.
In January 2006, we made our first grants of restricted stock awards, all of which were made to employees other than executive officers. In December 2006, at the compensation committees annual year-end financial and performance review, we granted restricted stock awards to certain executive officers. Our restricted stock grants provide the holder thereof with dividend and voting rights, even if the restricted stock has not yet vested. See the discussion under Performance-based Incentive Compensation above for a further discussion of these 2006 executive awards.
The 2004 Plan specifies certain change in control events, including (i) a person acquiring a majority of our voting securities, (ii) our merger or consolidation with another company, (iii) the sale of all or substantially all of our assets, or (iv) any other kind of a corporate reorganization or takeover where we are not the surviving company or where we are the surviving company and the members of the board immediately prior to the reorganization do not constitute a majority of the board of directors of the surviving company.
Awards granted under the 2004 Plan may, in the discretion of the compensation committee, provide that (a) the award is immediately vested, fully earned, exercisable, and, in the case of options, converted into SARs, as appropriate, upon a change in control event, and (b) we will make full payment to each such participant with respect to any performance share award, cash bonus or other incentive award, and permit the exercise of options or SARs, respectively, granted under the 2004 Plan to the participant.
To date, all stock options granted by the compensation committee under the 2004 Plan have included a provision that in connection with a change in control event, the option may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on the optionee, or the successor corporation may substitute equivalent options. If the successor corporation (if any) does not assume or substitute options, the option will become exercisable in full immediately prior to the consummation of the change in control event, (provided, however, that no acceleration will occur if the optionee is part of the group that is attempting to initiate the change in control event), and if the option is not exercised at or prior to the consummation of the change in control event, the option will terminate immediately upon the consummation of that event.
To date, all time vesting restricted stock awards granted by the compensation committee under the 2004 Plan have provided that if there is a change in control, all restrictions on the unvested shares will lapse and thereafter the remaining unvested shares will vest, free of all restrictions.
Performance-based restricted stock awards will vest upon a change in control if the compensation committee determines in its discretion that the company was, as of the date of determination, on target to meet the performance conditions for that award.
This excerpt taken from the QCCO 10-K filed Mar 14, 2006.
This excerpt taken from the QCCO 10-K filed Mar 31, 2005.