ZBRA » Topics » Annual Cash Bonuses

This excerpt taken from the ZBRA DEF 14A filed Apr 22, 2008.
Annual Cash Bonuses. The target bonus and bonus ranges under the annual bonus plan for each Named Officer other than the CEO are recommended by the CEO to the Committee, which reviews and approves them. The target bonus under the annual bonus plan for each Named Officer approximates the median of target cash bonuses for named officers with similar responsibilities as reported in the 2007 compensation survey (based on cash bonuses paid predominantly in 2006) described above and adjusted to reflect annual market changes. In 2007, the bonus range under the annual bonus plan for each Named Officer was consistent with the Compensation Philosophy and ranged between 0% and 200% of his target bonus level. The target bonus and bonus ranges recommended by the CEO and approved by the Committee are based on the Named Officer’s position within the Company, his individual performance evaluation, his perceived potential and contributions to the Company and the Committee’s subjective understanding of competitive practices in the marketplace with respect to annual bonuses. Any adjustments by the Committee made to the target level or ranges are based on its subjective determination after its consideration of all such factors. The target bonus and bonus range for the CEO is determined by the Committee after its consideration of the same factors.

     Annual cash bonuses under the annual bonus plan are paid, if at all, based on the achievement of financial performance goals established for each Named Officer. Also, the Compensation Committee has authority to award additional discretionary bonuses based on subjective criteria. For 2007, each of the Company’s Named Officers other than Mr. Gustafsson participated in the Company’s 2007 Management Bonus Plan (the “2007 Bonus Plan”). The amount of each Named Officer’s bonus under the 2007 Bonus Plan depended upon the level of attainment of his financial performance goals for the year. Each Named Officer’s target bonus under the 2007 Bonus Plan was based upon a percentage of the Named Officer’s actual base salary earnings during the calendar year. Target bonus percentages ranged from 45% to 80% of such Named Officers’ annual base salary earnings, depending upon their respective relative position within the Company. Generally, the target bonus percentage of base salary earnings is higher for executive officers in more senior positions and who have more responsibility.

     As discussed below, Mr. Gustafsson’s annual cash bonus was determined pursuant to the Gustafsson Employment Agreement.

     Messrs. Kaplan, Whitchurch and Gerskovich were eligible for annual cash bonuses under the 2007 Bonus Plan based on the Company’s achievement of specific Company Consolidated Income from Operations levels for 2007. Messrs. Gagnier and Terzich were eligible for annual cash bonuses under the 2007 Bonus Plan with 75% based on their assigned business unit’s achievement of specific Direct Operating Profit levels for 2007 and 25% based on Company Consolidated Income from Operations levels for 2007. Their assigned business unit is Specialty Printer Group. Company Consolidated Income from Operations and Direct Operating Profit are defined in the Glossary of Terms attached to this Proxy Statement.

     The Compensation Committee has historically (and in 2007) established the financial performance targets for the Named Officers in connection with the Company’s annual budgeting process so that the performance targets at which Named Officers receive 100% of their target bonuses correspond to the Company’s budgeted goals for the fiscal year. The Committee believes that since the Named Officers’ financial performance targets are identical to the Company’s budgeted goals, the Named Officers are incentivized to cause the Company to achieve its budgeted goals.

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     The Company’s budgeted goals, and the Named Officers’ corresponding financial performance targets at which they receive 100% of their target bonuses under the annual bonus plans, have historically (including in 2007) been set at aggressive levels, which could be achieved only upon the delivery of financial results in excess of relevant anticipated industry averages. For 2007, the Company Consolidated Income from Operations target, at which bonuses would be calculated at the 100% level, was $182,634,000, and the Direct Operating Profit target for Messrs. Gagnier’s and Terzich’s assigned business unit, at which bonuses would be calculated at the 100% level, corresponded to the applicable budgeted amounts for 2007. The minimum performance level required to receive a bonus under the 2007 Plan was achievement of 86.7% of the applicable target. The maximum bonus payment (200% of target bonus) under the 2007 Plan required the achievement of 106.6% of the applicable target.

     Under the 2007 Bonus Plan, Messrs. Kaplan, Gerskovich and Whitchurch would have been entitled to annual cash bonuses at 3.62% of their targeted bonus amounts based on the actual Company Consolidated Income from Operations level for 2007, and Messrs. Gagnier and Terzich would have been entitled to annual cash bonuses at 56.65% of their targeted bonus amounts based on the actual Company Consolidated Income from Operations for 2007 and their assigned business unit’s actual Direct Operating Profit for 2007. However, discretionary bonuses were recommended by the CEO and granted by the Committee and paid to each of Messrs. Kaplan, Gerskovich and Whitchurch, such that their total annual bonuses for 2007 equaled 20% of their respective target bonuses under the 2007 Bonus Plan, and to Messrs. Gagnier and Terzich, such that their total annual bonuses for 2007 equaled 60.74% of their respective target bonuses under the 2007 Bonus Plan. In determining the discretionary bonuses, the CEO and the Committee recognized (i) management’s performance during a time of uncertainty resulting from the retirement of the Company’s co-founder and the transition to a new CEO, (ii) the completion of three acquisitions that form the business that the Company refers to as Zebra Enterprise Solutions, which positioned the Company for long-term growth, and (iii) the Company’s record sales and earnings achieved for 2007. Mr. Kaplan’s actual bonus was pro-rated based on the portion of 2007 that he served as CEO.

     Pursuant to the Gustafsson Employment Agreement, Mr. Gustafsson received a guaranteed bonus for calendar year 2007 equal to 100% of his portion of his base salary actually earned for 2007.

     Equity Awards

     Options. In 2007, the Company awarded its Named Officers options to purchase shares of its Common Stock under its stockholder-approved 2006 Zebra Technologies Corporation Incentive Compensation Plan. The Company awards stock options to provide long-term incentives related to stock appreciation and competitive compensation packages. The Committee believes it is important that all of its Named Officers have a direct incentive to create stockholder value over a long-term investment horizon. Prior to the 2007 stock option awards, the Company’s annual stock option awards usually vested over a five year period, with varying portions vesting on the first five anniversaries of the grant date. Based on equity award vesting data in the compensation survey by The Delves Group in April 2007, the Committee determined that the annual stock option awards in 2007 would vest over a four year period, with equal portions vesting on the first four anniversaries of the grant date. The Committee believes this vesting schedule is consistent with competitive market practices.

     The stock options granted to each Named Officer, other than to the CEO, are recommended to the Committee by the CEO and the Vice President, Human Resources as part of the Company’s grant of stock options to all eligible employees. For 2007, individual stock option grant recommendations were generally determined by calculating a targeted total number of shares underlying unvested stock options (“total option target level”) for the Named Officer and granting him an option for a number of shares (“annual option target level”) intended to provide the Named Officer, when combined with his existing unvested stock options, unvested options for a total number of shares that approximates the Named Officer’s total option target level. Each Named Officer’s total option target level is set by the Committee after consideration of several factors. The target level generally equals the net present value of five times the Named Officer’s base salary and is adjusted based on the Named Officer’s position within the Company, his individual performance evaluation, his perceived potential and contributions to the Company, target levels recommended by the CEO (with respect to Named Officers other than the CEO) and the Committee’s subjective understanding of competitive practices in the marketplace with respect to equity awards. Any adjustments by the Committee made to the total option target level are based on its subjective determination after its consideration of all such factors. The Committee did not use a benchmarking analysis in determining stock option awards in 2007.

     Historically, the Committee awarded stock option grants to the Named Officers during the first quarter of each year. In 2007, the Committee decided to award annual stock options in April. The Committee believed that awarding the stock options later in the year better aligns the award schedule with the Company’s internal budgeting

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and overall compensation review processes. In 2007, the Committee granted stock options to the Named Officers in April according to the revised stock option award schedule.

     For 2007, if a Named Officer was determined to have performed at a satisfactory level, he was eligible to receive a stock option award at his annual option target level. If he performed at a less than satisfactory level, he was eligible to receive a stock option award for between zero shares and his annual option target level. If he performed at a level significantly above his expected performance level, he was eligible to receive a stock option award at a level between the annual option target level and 1.67 times the annual option target level. The Committee may also take into account other factors, such as the Company’s performance, in adjusting stock option award levels. The Named Officers’ performance evaluation and other considerations used to increase or decrease a Named Officer’s annual stock option award are assessed by the Committee on a subjective basis.

     In 2007, the Committee awarded annual stock options to each Named Officer other than Mr. Kaplan (who did not receive any options) and Mr. Gustafsson (whose option awards are discussed below), based on the methodology described above. The value of the Named Officers’ (other than Mr. Gustafsson) 2007 annual stock option awards, after adjusting for individual performance and the other factors, resulted in annual stock option awards ranging from 100% to 133%, and averaging 118%, of their annual option target levels. Stock options awarded to Mr. Gustafsson in 2007 are discussed below.

     Unlike the other Named Officers, Mr. Kaplan did not receive annual stock option awards in 2007. Since Mr. Kaplan already owned a significant number of shares of the Company’s Common Stock and he had indicated his intent to retire in the near future, the Committee did not believe that stock options for additional shares were appropriate for Mr. Kaplan. The Company granted Mr. Kaplan stock options only one time, in 2005.

     Pursuant to the Gustafsson Employment Agreement, Mr. Gustafsson was granted a stock option to purchase 75,000 shares of the Company’s Common Stock that vests in equal installments on the first four anniversaries of the grant date. Also pursuant to the Gustafsson Employment Agreement, the Company granted him an additional stock option to purchase 168,750 shares of the Company’s Common Stock that will vest incrementally as long as Mr. Gustafsson is employed by the Company and based on the Company achieving various levels of “Total Shareholder Return” prior to the fifth anniversary of the Gustafsson Employment Agreement. “Total Shareholder Return” is calculated as (i) the closing per-share price of the Company’s Common Stock as reported on The NASDAQ Stock Market on any particular date, minus the closing per-share price of the Company’s Common Stock on the date of grant, plus the aggregate dividends paid on a share of the Company’s Common Stock since the date of grant, divided by (ii) the closing per-share price of the Company’s Common Stock as reported on The NASDAQ Stock Market on the date of grant. The Committee believes that the stock option grant both serves a retention purpose and aligns Mr. Gustafsson’s long-term interests with an increase in the Company’s stock price.

     Restricted Stock. To encourage the retention of executive officers after Mr. Kaplan’s announcement in September 2006 of his intention to retire from the Company, the Committee approved a special grant of restricted stock awards to the Company’s other executive officers. Mr. Gustafsson was not employed by the Company at the time. The restrictions on the restricted stock vested in October 2007. Given such 2006 restricted stock awards, the Separation Agreements discussed below under “Employment Agreements” and the September 2007 hiring of Mr. Gustafsson as CEO, the Committee did not believe that further special retention incentives were necessary to address the specific issues of the CEO transition. The 2006 restricted stock awards did not affect the other components of the Named Officers’ compensation.

     Pursuant to the Gustafsson Employment Agreement, Mr. Gustafsson was awarded 56,250 shares of restricted stock. The restricted stock will vest incrementally as long as Mr. Gustafsson is employed by the Company and based on the Company achieving various levels of Total Shareholder Return prior to the fifth anniversary of the Gustafsson Employment Agreement. The Committee believes that the restricted stock grant both serves a retention purpose and aligns Mr. Gustafsson’s long-term interests with an increase in the Company’s stock price.

     

This excerpt taken from the ZBRA DEF 14A filed Apr 24, 2007.
Annual Cash Bonuses. The Company’s annual cash bonuses are designed to incentivize and reward executive officers for achieving or exceeding predetermined financial goals that reflect positive results of the annual financial performance of the Company, and in certain situations, the annual financial performance of a particular business unit. The Committee determines a target bonus level for each Named Officer, which approximates the median of cash bonuses provided to executive officers with similar responsibilities as reported in the compensation survey described above. The Committee further determines a bonus range for all executive officers which, in 2006, ranged between 0% and 150% of their respective target bonus level.

     The annual cash bonuses are paid, if at all, based on the achievement of financial performance goals set for the individual executive officers. The amount of each executive officer’s bonus depends upon the level of attainment of financial performance goals for the year. For 2006, Mr. Kaplan and each of the Company’s other Named Officers participated in the Company’s 2006 Management Bonus Plan (the “2006 Bonus Plan”). Each Named Officer’s target bonus under the 2006 Bonus Plan was based upon a percentage of the Named Officer’s actual base salary earnings during the calendar year. Target bonus percentages ranged from 45% to 80% of a Named Officer’s annual base salary earnings, depending upon his relative position within the Company. Generally, the target bonus percentage of base salary earnings is higher for executive officers in more senior positions and who have more responsibility.

     Messrs. Kaplan, Whitchurch and Gerskovich were eligible for annual cash bonuses based on the Company’s achievement of specific consolidated operating profit growth levels for 2006. Annual cash bonuses were paid to Mr. Kaplan and Mr. Gerskovich at 56.2% of their targeted bonus amounts based on the Company’s performance and to Mr. Whitchurch at 28% of his targeted bonus amount based on the Company’s performance and other factors. Messrs. Gagnier and Anjargolian were eligible for annual cash bonuses based on their respective assigned business unit’s achievement of specific operating profit growth levels for 2006. Annual cash bonuses were paid to Messrs. Gagnier and Anjargolian, respectively, at 36.3% and 103.8% of their targeted bonus amounts based on their respective assigned business unit’s performance relative to such criteria.

     

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Silgan Holdings (SLGN)
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