This excerpt taken from the DTV DEF 14A filed Apr 27, 2007.
Summary Description of the Amended Bonus Plan
The principal terms of the Amended Bonus Plan are summarized below. This summary is qualified in its entirety by the full text of the Amended Bonus Plan, which is attached to this proxy statement as Annex C. The full text of the Amended Bonus Plan has also been filed electronically as Annex C to this proxy statement and is available through the SEC's website at www.sec.gov. Capitalized terms not otherwise defined herein have the meanings given to them in the Amended Bonus Plan.
Eligible Persons. The persons eligible to participate in the Amended Bonus Plan are key employees (including elected officers) who are, or in the opinion of the Compensation Committee may become, executive officers subject to Section 162(m) of the Code. As of March 31, 2007, six key employees were considered eligible for participation under this Amended Bonus Plan.
Summary of Terms. The purpose of the Amended Bonus Plan is to promote the success of the Company by providing performance incentives in a manner that preserves, for tax purposes, the Company's ability to deduct that compensation. The Compensation Committee will administer the Amended Bonus Plan and is charged with responsibility for designating eligible participants and
establishing specific annual performance targets for each participant in the Amended Bonus Plan. The performance targets may be based on one or more of the business criteria in the following categories: subscribers, subscriber service and subscriber satisfaction; employees and employment activities; revenues, expenses and earnings; cash and cash flow; margins, returns and ratios; stock price and other performance measures. We provide a more detailed list of the business criteria in Exhibit A attached to the Amended Bonus Plan.
The business criteria may be applied based on the performance of the Company (including its Subsidiaries) on a consolidated, Subsidiary, segment, division, region or property basis. In addition, the Compensation Committee, in its sole discretion may modify the way in which the business criteria are used to develop performance goals. The business criteria, determined on a quantitative basis, may be: (a) determined relative to any product or service provide by the Company, (b) combined in any manner to define other performance-based business criteria, (c) determined either before or after any capital costs, interest, taxes, depreciation or amortization, (d) determined either including or excluding non-cash, extraordinary, special or non-recurring items, (e) determined on a per share (basic or diluted), per subscriber or per unit basis, (f) determined on an incremental, cumulative or average basis, on an absolute, percentage or percentage point basis, or (g) determined relative to any internal or external business criteria or relative to the performance of other companies. The Compensation Committee may use any one, all or a combination of these adjustment factors.
The Compensation Committee must establish the targets while the performance relative to the target remains substantially uncertain within the meaning of Section 162(m) of the Code and in no event after more than 25% of the performance measurement period has elapsed. Generally, the performance measurement periods under the Amended Bonus Plan are single calendar years.
The Amended Bonus Plan generally requires adjustments to certain business criteria and applicable pre-established performance targets for specific changes, such as stock splits or recapitalization, business acquisitions or dispositions, or any special charges to the Company's earnings. The Compensation Committee, however, may provide in advance that one or more of such adjustments will not be made as to a specific award. In addition, the Compensation Committee may establish in advance other circumstances requiring in its view an appropriate adjustment not inconsistent with Section 162(m). In addition, the satisfaction of performance targets is determined without regard to changes in accounting principles or practices occurring during the performance period unless the Compensation Committee provides in advance to the contrary.
Concurrently with the selection of performance targets, the Compensation Committee must establish an objective formula or standard for calculating the target bonus and maximum bonus payable to each participating executive officer. Under the Amended Bonus Plan, the maximum bonus for each calendar year for any Executive shall be the lesser of (i) $10,000,000 or (ii) five times the Base Salary of such Executive (changed from a maximum of $5,000,000 for any executive in the 2004 Bonus Plan). Notwithstanding this overall maximum, the Compensation Committee has the sole discretion to determine whether to pay any or the entire maximum permissible bonus, subject to the Amended Bonus Plan's terms and any other written commitment authorized by the Compensation Committee.
The Compensation Committee is also authorized to exercise its negative discretion by establishing additional conditions and terms of payment of bonuses, including the achievement of other financial, strategic or individual goals, which may be objective or subjective, as it deems appropriate. Although the Compensation Committee may waive these additional conditions and terms, it may not waive the basic performance target as to the business criterion or criteria chosen for any particular calendar year. No bonus may be paid under the Amended Bonus Plan unless the Compensation Committee has certified in writing that the specific performance targets have been satisfied and that the amount of each bonus has been accurately determined in accordance with the Amended Bonus Plan's terms. All bonuses are to be paid in cash or cash equivalents.
The Amended Bonus Plan may from time to time be amended, suspended or terminated, in whole or in part, by the Compensation Committee, but no amendment will be effective without Board of Directors and/or shareholder approval if such approval is required to satisfy the requirements of Section 162(m).
Awards under the Amended Bonus Plan. The amounts that will be paid under the Amended Bonus Plan for calendar year 2007 or future years are not determinable. These amounts will depend upon meeting performance targets that are substantially uncertain and that even if met would remain subject to the Compensation Committee's substantial negative discretion. Payments made to the Named Executive Officers in 2006 under the 2004 Bonus Plan are disclosed in column (e) of the 2006 Summary Compensation Table on page 34.
Other Compensation. The Amended Bonus Plan is not exclusive. The Company may pay cash and other bonuses and other compensation to certain named officers and other officers under other authority of the Board of Directors and applicable law. If the stockholders do not approve the Amended Bonus Plan, it is possible that the Company would pay cash bonuses for fiscal year 2007 for named executive officers above the limits established by the 2004 Bonus Plan. Any such amounts would be discretionary and any such bonuses then paid would not be deductible under Section 162(m) to the extent that (when combined with other non-exempt compensation paid) they exceed the $1,000,000 individual limit on non-exempt compensation paid to certain named executive officers.
The Compensation Committee and the Board of Directors each believes, in general, that it is desirable and in the best interests of the Company and its stockholders to enable the Company's annual executive officer Amended Bonus Plan to comply with the requirements of Section 162(m). The Compensation Committee and the Board each further believes that the Amended Bonus Plan provides an important incentive that complements the Company's existing policies and other long-term plans in linking significant portions of executive compensation to the Company's performance. The Amended Bonus Plan also serves the Company's interests by granting the Compensation Committee extensive discretion to evaluate the criteria and other factors by which it measures performance and to determine the actual amount of each eligible executive's bonus within the maximum limits imposed.
Mr. Carey is eligible to receive Awards under the Amended Bonus Plan and thus has a personal interest in the approval of the Amended Bonus Plan. For that reason, he has abstained in making a recommendation to stockholders regarding the approval of the Amended Bonus Plan.
The Board of Directors, with Mr. Carey abstaining, recommends that stockholders vote "FOR" approval of the Amended Bonus Plan.