Business Context and Reporting Period
This Form 8-K filing by Open Text Corporation, dated September 10, 2007, reports the adoption of the Open Text Corporation Long Term Incentive Plan (LTIP) by the Board of Directors. The plan is effective as of July 1, 2007, and is designed to provide medium-term incentives linked to the company's business strategy, operating performance, and market performance.
Key Financial Metrics
The filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. The document focuses exclusively on the structure of the new compensation plan and the specific bonus awards granted to executive officers.
Material Changes and Executive Compensation
The primary material change is the implementation of the LTIP and the granting of target bonuses to six named executive officers for the performance period of July 1, 2007, through June 30, 2010. The bonuses are contingent on achieving specific performance measures, including cumulative total shareholder return relative to the S&P Midcap 400 Software and Services Index, share price over a 22-day trading period, and earnings per share for the final two fiscal years of the period.
| Executive Officer | Target Bonus ($) | Maximum Target Bonus ($) |
|---|---|---|
| P. Thomas Jenkins (Executive Chairman and CSO) | 1,960,000 | 2,940,000 |
| John Shackleton (CEO and President) | 2,000,000 | 3,000,000 |
| John Wilkerson (EVP, Worldwide Sales) | 975,000 | 1,462,500 |
| Paul McFeeters (CFO) | 638,000 | 957,000 |
| Kirk Roberts (EVP, Livelink ECM) | 580,000 | 870,000 |
| Bill Forquer (EVP, Defined Markets) | 420,000 | 630,000 |
Guidance, Risks, and Unusual Items
- Performance Targets: Management states that the target and maximum performance measures significantly exceed the financial results and market performance the company reasonably expects for the current fiscal year, designed to motivate extraordinary returns.
- Vesting Conditions: Vesting is pro-rated for disability or involuntary termination. Voluntary termination or termination for cause results in no vesting. Change of control provisions vary based on the timing within the performance period (0% vesting if within 6 months, 50% if between 7-18 months, 100% if after 19 months).
- Tax Considerations: The company intends for the plan to comply with Section 409A. However, because the LTIP has not been presented to stockholders for approval, payments may not be fully deductible under Section 162(m) of the Internal Revenue Code if they exceed the $1,000,000 annual limit for certain executives.
- Board Discretion: The Board retains the power to amend or terminate the plan and may adjust performance measures if they determine the measures do not properly reflect the plan's purposes due to unforeseen factors or corporate transactions.
Investor Verification Checklist
- Verify the specific numerical targets for Total Shareholder Return, Share Price, and Earnings Per Share established by the Board for the 2007-2010 period, as these are not detailed in the summary text.
- Review the full text of the LTIP (Exhibit 10.1) to understand the precise definitions of "just cause," "disability," and "change of control."
- Assess the potential impact of the non-deductibility of executive compensation under Section 162(m) on the company's effective tax rate.
- Monitor future filings for any amendments to the performance measures or the plan itself, given the Board's reserved right to modify terms.