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Radford Surveys + Consulting Preparing for An IPO – A Total Compensation Approach N.A.C.D. September 27, 2005 Ed Speidel 508-460-2038.

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Presentation on theme: "Radford Surveys + Consulting Preparing for An IPO – A Total Compensation Approach N.A.C.D. September 27, 2005 Ed Speidel 508-460-2038."— Presentation transcript:

1 Radford Surveys + Consulting Preparing for An IPO – A Total Compensation Approach N.A.C.D. September 27, 2005 Ed Speidel

2 CONFIDENTIAL 2 Radford Surveys + Consulting There are seven primary areas of preparation… Kitchen Table IPO 1. Governance 2. Executive Comp 3. Employee Comp 4. Equity Strategy 5. H&W Benefits 6. Sales Comp 7. Communication/ Implementation

3 CONFIDENTIAL 3 Radford Surveys + Consulting … each with required outcomes 1. Governance 2. Executive Comp Compensation Committee charter based on NASDAQ/NYSE requirements Compensation Committee “decision rights matrix” based on charter and governance best practices Compensation Committee calendar that identifies meetings to be held during year and agenda/action items for each meeting Assessment of outside Director compensation practices and implement pay framework to facilitate recruiting of new Board members Updated annual bonus and equity plans to ensure compliance with public company regulatory requirements S-1 filing requirements satisfied as it relates to executive compensation Confirmation/update of compensation strategy – pay program objectives, market comparables, target pay position, mix of base, bonus, and equity compensation Competitive total compensation market analysis (base salary, total cash, and long- term incentives) and recommended 2004 pay structure Base salary Target annual bonus Target annual equity grant Design annual bonus program that: 1) complies with IRS executive compensation deductibility requirements; 2) includes threshold, target, and maximum performance/payout levels; and 3) provides decision rules for accruing payments through the year Understanding of market practices related to supplemental retirement arrangements and perquisites

4 CONFIDENTIAL 4 Radford Surveys + Consulting … each with required outcomes (continued) Confirmation/update of compensation strategy – pay program objectives, market comparables, target pay position, mix of base, bonus, and equity compensation Competitive total compensation assessment Job/career leveling process and tool Salary structure with short-term incentive targets tied to job/career levels Short-term cash incentive redesign Cost estimate to implement recommendation and transition strategy Market assessment of equity program trends/practices and summary of regulatory developments Equity strategy for 2004 and beyond that supports business objectives and compensation philosophy Delivery vehicle(s) – stock options, time-based restricted stock, performance shares, etc. Participation Criteria for determining participation and grant level Target award levels Aggregate share requirements for three years Financial accounting and dilution impact analysis 3. Employee Comp 4. Equity Strategy

5 CONFIDENTIAL 5 Radford Surveys + Consulting … each with required outcomes (continued) Develop strategy to deliver a competitive health and welfare plan Benchmark data for health and welfare plan designs Market and financial assessment of health and welfare plans Coordination/implementation of plans Competitive total compensation analyses for sales positions Recommended cash compensation framework Cash incentive/commission structure redesign 5. H&W Benefits 6. Sales Comp 7. Communication/ Implementation Facilitate the establishment of a cashless exercise arrangement for non-officer employees Work with Company to implement tracking/reporting process for officer stock option exercises Communication and administration support to be determined

6 CONFIDENTIAL 6 Radford Surveys + Consulting With low pre-IPO share prices, stock options and restricted stock deliver similar value ParameterAssumption/Result Stock Option Award1,000 at $0.20 per share IPO Offering Price$15 Paper Gain at IPO $14,800 [($15-$0.20)x1,000] $5 $10 $20 Grant Date Per Share Value Appreciation IPO $30 ParameterAssumption/Result Restricted stock Award1,000 IPO Offering Price$15 Paper Gain at IPO $15,000 [($15x1,000] $5 $10 $20 Grant Date Per Share Value Appreciation IPO $30 Stock Option Restricted Stock

7 CONFIDENTIAL 7 Radford Surveys + Consulting Restricted stock can vest based on performance instead of time… - OR – By Timing… - OR – By Timing… At least $5M within… Performance Shares Earned < 6 mos10,000 > 6 mos5,000 > 9 mos2,000 > One Year0 Performance Performance Shares Earned Achieved 3 Milestones 10,000 Achieved 2 Milestones 5,000 Achieved 1 Milestone 2,000 Not Achieved0 By Amount Obtained… Within one year… Performance Shares Earned $10M10,000 $5M5,000 $3M2,000 No Funding0 Achievement of R&D MilestonesSuccessful Funding


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