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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. Hagedorn’s 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. Hagedorn’s use of the aircraft) at the
Company’s incremental direct operating cost per flight
hour. In order to implement this arrangement, Mr. Hagedorn
and the Company have entered into an arm’s-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. Hagedorn’s 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. Hagedorn’s 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. Hagedorn’s 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. Hagedorn’s compensation that the Company can
deduct for income tax purposes as performance-based compensation
under IRC § 162(m).
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