This excerpt taken from the SMG DEF 14A filed Dec 19, 2008.
Amendment to Compensation Package of James Hagedorn
Effective October 1, 2008, the Compensation Committee approved a revised compensation structure for Mr. Hagedorn. The new structure, which increased Mr. Hagedorns base salary to $1.0 million, is designed, among other things, to incorporate the approximate value of the personal aircraft usage and commuting perquisites that Mr. Hagedorn had received in the past as part of his overall compensation package directly into his base salary. Accordingly, future Company-paid aircraft perquisites have been discontinued. However, the Board of Directors maintains travel protocols which encourage Mr. Hagedorn to fly on Company-owned aircraft for reasons of security. Therefore, in order to permit Mr. Hagedorn to continue to retain the option of using Company-owned aircraft for commuting and other personal use, the Compensation Committee granted Mr. Hagedorn an option to purchase, with his own funds, up to 100 flight hours per year for personal use (including ferry hours incurred as a result of Mr. Hagedorns use of the aircraft) at the Companys incremental direct operating cost per flight hour. In order to implement this arrangement, Mr. Hagedorn and the Company have entered into an arms-length aircraft time sharing agreement which is more fully described in the section captioned CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In addition to establishing a new base salary rate, the Compensation Committee approved an increase in Mr. Hagedorns incentive target from 90% to 100% of his base salary and maintained the target value of his annual equity-based compensation at approximately $3.0 million, which value is established annually as of the date of grant. Based on the revised compensation structure, Mr. Hagedorns total direct compensation will be slightly below the 50th percentile of his peers, as reflected in the Primary Compensation Peer Group. In addition, the Compensation Committee adjusted the mix of Mr. Hagedorns equity-based compensation for the 2009 fiscal year to reflect a higher proportion of option awards versus stock awards to optimize the amount of Mr. Hagedorns compensation that the Company can deduct for income tax purposes as performance-based compensation under IRC § 162(m).