The Compensation Committee (the "Committee") shall discharge the Board's responsibilities in determining the compensation of the Company's executive officers and directors. The Committee shall have overall responsibility for approving and evaluating the compensation plans, policies and programs of the Company. To that end, the Committee shall have the responsibility, power and authority to set the compensation and benefits for the chief executive officer ("CEO") and the Company's other executive officers, determine distributions and grant awards under, and administer the Company's various stock option and other incentive plans, and assume responsibility for all matters related to all of the foregoing. The Committee is also responsible for producing an annual report on executive compensation for inclusion in the Company's proxy statement.
Nothing contained in this Charter is intended to, or should be construed as, creating any responsibility or liability of the members of the Committee except to the extent otherwise provided under Delaware law which shall continue to set the legal standard for the conduct of the members of the Committee.
The Committee shall consist of no fewer than three (3) directors, each of whom shall meet the independence requirements of the Nasdaq Stock Market. The members of the Committee shall be appointed by the Board and may be replaced by the Board. Members of the Committee shall also qualify as "non-employee directors" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. The Board shall appoint one member of the Committee to act as its Chair. The members of the Committee will be appointed by the Board, upon recommendation by the Nominating and Governance Committee. The members of the Committee will serve at the discretion of the Board. The members of the Committee shall serve terms of one year, and shall be eligible for re-appointment. In fulfilling its duties and responsibilities, as set forth below, the Committee shall have authority to delegate its authority, as it deems appropriate, to act upon specific matters within defined parameters to subcommittees, including subcommittees consisting solely of one or more Company officers, in each case to the extent permitted by applicable law. Any such subcommittee shall report any action taken to the full Committee at its next meeting.
The Board of Directors believes that compensation of employees should be fair to both employees and shareholders, externally competitive, and designed to align very closely the interests of employees with those of the shareholders. The Company's executive compensation program is designed to attract, motivate, reward and retain superior management talent. The Committee places heavy emphasis on pay for performance. Increases in compensation should be based upon the performance level of an individual.
Duties and Responsibilities
In carrying out its duties and responsibilities, the Committee's policies and procedures shall remain flexible, so that it may be in the best position to react and respond to changing circumstances or conditions. The following offers guidelines regarding the Committee's duties and responsibilities.
The Committee shall:
1. At least annually, review the Company's overall compensation strategy, including base, incentive compensation and option grants, to assure that it promotes shareholder interests and supports the Company's strategic and tactical objectives, and that it provides for appropriate rewards and incentives for the Company's management and employees.
2. Annually review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO's performance in light of those goals and objectives, and approve the CEO's compensation level based on this evaluation, subject to any employment contract that may be in effect. In determining the long-term incentive component of CEO compensation, the Committee should consider the Company's performance and relative shareholder return, the value of similar incentive awards to CEO's at comparable companies, the awards given to the CEO in past years, and such other factors as the Committee may consider relevant. The CEO may not be present during deliberations in connection with his own compensation.
3. Annually review and approve the following with respect to the executive officers of the Company: (a) the annual base salary, (b) the annual incentive bonus, (c) the long-term incentive award, (d) employment agreements, severance arrangements, and change in control agreements or provisions, and (e) any supplemental or special benefits, in each case as, when and if appropriate. The structure of management compensation should link the interests of management, both individually and as a team, to the interests of shareholders. Management compensation packages should be designed to create a commensurate level of risk and opportunity based on business and individual performance. The CEO may be present during deliberations in connection with the compensation of executive officers.
4. Periodically review and make recommendations to the Board with respect to the compensation of directors, including Board and committee retainers, meeting fees, equity- based compensation, and such other forms of compensation as the Committee may consider appropriate.
5. Annually prepare a description, to be included in the Company's annual report to shareholders, of the Company's compensation policies and the reasoning behind those policies, as well as the factors and criteria on which the CEO's compensation is based, including its relationship to the Company's performance.
6. Review and approve the structure and overall size of the Company's bonus or other cash incentive plans used to compensate employees. In doing so, the Committee should bear in mind that incentives are industry dependent and are different for different categories of employees. The Committee shall make recommendations to the Board concerning incentive compensation plans and equity-compensation plans, as well as material revisions to the terms of such plans, whenever a shareholder vote is required under the listing standards of the Nasdaq Stock Market.
7. Serve as the committee that administers the Company's stock option plans; and in that capacity:
o Advise on the establishment of option guidelines and general size of overall grants;
o Establish parameters for routine grants under delegated authority of options issued in connection with new hires and promotions;
o Approve all option grants to and other discretionary awards under the Company's stock option and other incentive plans to all persons who are Board members or executive officers within the meaning of Rule 16b-3 of the Exchange Act;
o Grant option grants and other discretionary awards under the Company's stock option or other incentive plans to all other eligible individuals in the Company's service. The Committee may delegate to one or more officers designated by the Committee the authority to make grants to eligible individuals (other than any such officer) who are not executive officers, provided that the Committee shall have fixed the price (or a formula for determining the price) and the vesting schedule for such grants, approved the form of documentation evidencing such grants, and determined the appropriate number of shares or the basis for determining such number of shares by position, compensation level or category of personnel. Any officer(s) to whom such authority is delegated shall regularly report to the Committee the grants so made. Any such delegation may be revoked at any time by the Committee.
o Amend the plans (subject to shareholder approval when required) as may be necessary or appropriate to carry out the Company's compensation strategy; and interpret the plans as may be required from time to time; and
o When appropriate, modify existing grants (with the consent of the grantees) and approve authorized exceptions to provisions of the plans.
8. Approve, subject to shareholder approval when required, all new equity-related incentive plans.
9. Make regular reports to the Board on the findings, recommendations, and decisions of the Committee.
10. Oversee the Company's compliance with regulatory requirements associated with compensation of its officers and employees.
11. Annually, review and assess the performance of the Committee and recommend to the Board such changes in its composition, Charter, or manner of operation as may be necessary to assure that it carries out its responsibilities effectively.
The Committee shall meet at such times as it determines to be necessary or appropriate, but not less than four times per year. A majority of the members of the Committee shall constitute a quorum for the transaction of business. The Committee shall keep minutes of its proceedings that shall be signed the person whom the Chair designates to act as secretary of the meeting. The minutes of a meeting shall be approved by the Committee at its next meeting, shall be available for review by the entire Board, and shall be filed as permanent records with the Secretary of the Company. The Committee shall be governed by the same rules regarding meetings (including meetings by conference telephone, remote communication or similar communications equipment), action without meetings, notice, waiver of notice, and quorum and voting requirements as are applicable to the Board. The Committee shall be authorized to adopt its own rules of procedure not inconsistent with (a) any provision of this Charter, (b) any provision of the Bylaws of the Company, or (c) applicable law. Members of the Committee are expected to use all reasonable efforts to attend each meeting.
The Committee shall prepare and, through its Chair, submit periodic reports of the Committee's work and findings to the Board of Directors; the Committee shall include recommendations for Board action when appropriate.
The Committee shall have the authority to retain and terminate special compensation, legal, accounting or other consultants to advise it. The Committee may request any officer or employee of the Company or any outside counsel or consultants to meet with any members of the Committee.
The Company shall make this Charter freely available to shareholders on request and shall publish it on the Company's website.
This Charter is intended to provide a set of guidelines for the effective functioning of the Compensation Committee. Subject to Board approval, the Committee may at any time modify or amend (i) this Charter, and (ii) the authority and responsibilities of the Committee set forth herein.