Annual
Base Salaries and Performance Bonuses
The
annual base salaries beginning January 1, 2008 for the Named Executive Officers
are as follows: Dr. Brown, $350,000; Mr. Head, $235,000; Mr. Blough, $210,000;
Ms. Hynes: $185,000; and Mr. Staples, $220,000.
Dr.
Brown, Messrs. Head and Staples and Ms. Hynes are eligible for a Company
Performance Bonus, which is dependent on the Company achieving targeted levels
of operating income, excluding stock option expense, on a quarterly and/or
annual basis. The annual operating income target for fiscal 2008 is $13.2
million. If the Company’s operating income performance targets are
met, Dr. Brown will earn an annual payment in the amount of $185,000, Mr. Head
will earn $10,000 per quarter, Mr. Staples will earn $10,000 per quarter and an
annual payment in the amount of $15,000 and Ms. Hynes will earn an annual
payment in the amount of $5,000. Mr. Head will earn an additional annual payment
in the amount of $20,000 if the 2008 annual operating income target is achieved
and if the Company successfully completes its Sarbanes-Oxley Act annual
compliance audit without any material weakness identified in the Company’s
internal control over financial reporting.
Dr.
Brown, Messrs. Head, Blough and Staples and Ms. Hynes are also eligible for a
Superior Achievement Bonus based on the Company exceeding its annual operating
income target, as discussed in the immediately preceding paragraph. This bonus
will be awarded as a percentage of the Company’s operating income, excluding
stock option expense, achieved in excess of 100% of the annual operating income
target described above. If the Company exceeds the 2008 annual operating
income target, Dr. Brown, Messrs. Head, Blough and Staples and Ms. Hynes are
eligible to receive 2.4%, 0.9%, 0.9%, 0.7% and 0.7%, respectively, of the excess
amount.
Mr.
Head is eligible for an operating margin performance bonus, payable in the
amount of $10,000 per quarter, based upon the Company achieving specified
quarterly percentage targets for operating income (excluding stock option
expense) divided by total revenues. Mr. Blough is eligible to earn
commissions based upon worldwide contracted order gross profit and services. Mr.
Staples is eligible for an orders performance bonus with a maximum potential of
$40,000, payable in the amount of $10,000 per quarter, based upon achieving
specified dollar amounts of gross profit on customer orders for each quarter or
on a year-to-date basis. Ms. Hynes is eligible for a services revenue
bonus, payable in the amount of $15,000 per quarter, based upon achieving
specified quarterly services revenue and services gross margin
targets.
Stock
Options
On
February 1, 2008, the Compensation Committee of the Board of Directors of the
Company approved stock option grants to Dr. Brown, Messrs. Head, Blough and
Staples and Ms. Hynes to purchase 50,000, 30,000, 35,000, 25,000 and 25,000
shares, respectively. The exercise price of each of these options granted is
equal to the closing price per share of the Company’s common stock as reported
by The NASDAQ® Global Market as of January 31, 2008, the business day
immediately preceding the date of grant, as provided in the Company’s 2006
Equity Incentive Plan (the “2006 Plan”).
These
option grants are subject to cancellation in the event that the Company does not
achieve the annual operating income target for fiscal 2008, as described above
for the Company Performance Bonus. With respect to all of these option grants,
if the Company achieves the 2008 annual operating income target, then vesting
commences in four equal annual installments beginning on January 1, 2009 with
the first 25% vesting on January 1, 2010. These stock options will expire on
January 1, 2015, unless terminated earlier in accordance with the terms of the
2006 Plan.