Viad Corp
1850 North Central Avenue, Suite 800
Phoenix, Arizona 85004-4545

 

April 6, 2010

 

Dear Fellow Viad Corp Shareholder:

 

The 2010 Annual Meeting of Shareholders of Viad Corp will be held on Tuesday, May 18, at 9:00 a.m., at The Ritz-Carlton, 2401 East Camelback Road, Phoenix, Arizona 85016, in the Pavilion Room. The meeting will begin promptly at 9:00 a.m., Mountain Standard Time, so please plan to arrive early.

 

The formal notice of the meeting is on the next page. No admission tickets or other credentials will be required for attendance at the meeting. You may use the hotel’s free valet parking.

 

Directors and officers will be available at the meeting to speak with you. There will be an opportunity during the meeting for your questions regarding the affairs of the Corporation and for a discussion of the business to be considered at the meeting as explained in the notice and proxy statement.

 

Your vote is important. Whether you plan to attend or not, please sign, date, and return the enclosed proxy card in the envelope provided, or you may vote your shares by telephone or the Internet as described on your proxy card. If you plan to attend the meeting, you may vote in person.

 

Sincerely,

 

Paul B. Dykstra

Chairman, President and Chief Executive Officer

 

Viad Corp
1850 North Central Avenue, Suite 800
Phoenix, Arizona 85004-4545

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

AND AVAILABILITY OF PROXY MATERIALS

 

 

April 6, 2010

 

To Viad Corp Shareholders:

 

We will hold the Annual Meeting of Shareholders of Viad Corp, a Delaware corporation, at The Ritz-Carlton, 2401 East Camelback Road, Phoenix, Arizona 85016 in the Pavilion Room, on Tuesday, May 18, 2010, at 9:00 a.m., Mountain Standard Time. The purpose of the meeting is to:

 

 

The foregoing items of business are more fully described in the proxy statement accompanying this notice. Our 2009 Annual Report, including financial statements, is included with your proxy materials.

 

Only shareholders of record of common stock at the close of business on March 25, 2010, are entitled to receive this notice and to vote at the meeting. A list of shareholders entitled to vote will be available at the meeting for examination by any shareholder for any proper purpose. The list will also be available on the same basis for ten days prior to the meeting at Viad’s principal executive offices at the address listed above.

 

To assure your representation at the meeting, please vote your shares by telephone, the Internet or by signing, dating and returning the enclosed proxy card at your earliest convenience. The Internet and automated telephone voting features are described on the proxy card. We have enclosed a return envelope, which requires no postage if mailed in the United States, if you choose to mail your proxy. Your proxy is being solicited by the Board of Directors.

 

By Order of the Board of Directors

 

SCOTT E. SAYRE

Vice President-General Counsel and Secretary

 

Important Notice Regarding the Availability of Proxy Materials for Shareholder Meeting:

 

The 2010 Proxy Statement and 2009 Annual Report are available at www.viad.com/proxy10.html
(or go to www.viad.com and then click onto the link “2010 Annual Meeting–Proxy Materials”).

 

TABLE OF CONTENTS

 

VIAD CORP

1850 North Central Avenue, Suite 800

Phoenix, Arizona 85004-4545

 

PROXY STATEMENT

 

 

 

 

Prompt return of your proxy will help reduce the costs of resolicitation.

 

The Board of Directors of Viad Corp (“Viad” or the “Company”) consists of nine persons divided into three classes or groups. The term of one class of directors expires at each annual meeting, and nominees are elected to that class for a term of three years. Three directors are to be elected at this year’s annual meeting.

 

For uncontested elections of directors, Viad’s Bylaws provide that the vote standard is a majority of votes cast, which means that the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that director nominee. The Bylaws further provide that if a nominee who already serves as a director is not elected by a majority vote, then the director will be obligated to tender his or her resignation to the Board. The Corporate Governance and Nominating Committee of the Board will make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken. The Board will be required to publicly disclose its decision and the rationale behind it within 90 days of the certification of the election results. The director who tenders his or her resignation will not participate in the Board’s decision. In contested elections where the number of nominees exceeds the number of directors to be elected, the Bylaws provide for a plurality vote standard.

 

If a nominee, who was not already serving as a director, is not elected at the annual meeting, the Bylaws provide that the nominee would not become a director. All director nominees listed below are currently serving on the Board.

 

While Viad’s directors have many individual qualifications, the Board believes that certain specific qualifications are common to all of Viad’s directors, and these qualifications (as well as others) led the Board to conclude that each director listed below under the “Director Nominees” and “Directors Continuing in Office” sections should serve on the Board. These qualifications include:

 

 

The Board of Directors has nominated Isabella Cunningham, Jess Hay and Albert M. Teplin for election at the annual meeting. These nominees are currently members of the Board of Directors and, if elected, have agreed to serve another term, which will expire in 2013. Information about the director nominees is presented below.

 

 

The Board of Directors recommends that you vote “FOR” these director nominees.

 

Information about the six directors continuing in office until expiration of their designated terms is presented below.

 

For Terms Expiring at the 2011 Annual Meeting:

 

 

For Terms Expiring at the 2012 Annual Meeting:

 

 

In accordance with applicable laws and the Bylaws of Viad, the business and affairs of Viad are governed under the direction of our Board of Directors. The system of governance practices followed by Viad is set forth in the Corporate Governance Guidelines and the charters of each of the committees of the Board of Directors. The Corporate Governance Guidelines set forth the practices the Board will follow with respect to the duties of the Board, its operations and committee matters, director qualifications and selection process, director compensation, director independence, director orientation and continuing education, chief executive officer evaluation, management succession, and annual Board evaluation.

 

The Corporate Governance Guidelines and committee charters, as well as the Code of Ethics applicable to Viad’s directors, officers and employees, may be viewed on the Internet at www.viad.com/investors/corp_governance.html, and are available in print upon request to the Corporate Secretary of Viad at the address listed on the first page of this proxy statement. The Corporate Governance Guidelines and committee charters are reviewed periodically to ensure the effective and efficient governance of Viad and to comply in a timely manner with all laws and the listing standards of the New York Stock Exchange (“NYSE”) that are applicable to corporate governance.

 

The Board maintains three standing committees to assist in fulfilling its responsibilities: Audit Committee, Corporate Governance and Nominating Committee, and Human Resources Committee. Each committee meets periodically during the year, reports regularly to the full Board and annually evaluates its performance. The table below provides current membership and meeting information for each committee. In addition, the table identifies the independent directors, as determined by the Board in February 2010, within the meaning of the NYSE listing standards, applicable Securities and Exchange Commission (“SEC”) regulations and Viad’s Corporate Governance Guidelines. The Corporate Governance Guidelines include categorical standards for independence that meet or exceed the NYSE listing standards.

 

 

The particular areas of responsibility of each Board committee and other related information are described below. Each committee may form and delegate authority to a subcommittee of one or more members of the committee.

 

Audit Committee.  The Audit Committee appoints Viad’s independent registered public accountants and assists the Board in monitoring the quality and integrity of the financial statements of Viad, the compliance by Viad with legal and regulatory requirements, and the independence and performance of Viad’s internal auditors and external independent registered public accountants. The Committee conducts regularly scheduled executive sessions with individual members of Viad’s management and with Viad’s independent registered public accountants. The Committee has sole authority to appoint or replace Viad’s independent registered public accountants. The independent registered public accountants report directly to the Committee. The Board has determined that all members of the Audit Committee are financially literate, as defined by the NYSE listing standards, and that Mr. Munzenrider qualifies as an “audit committee financial expert,” as defined by SEC regulations.

 

Corporate Governance and Nominating Committee.  The Corporate Governance and Nominating Committee is responsible for proposing a slate of directors for election by the shareholders at each annual meeting and for

proposing candidates to fill any vacancies on the Board. The Committee is also responsible for an assessment of the Board’s performance to be discussed with the full Board annually, and for review of, and from time to time for proposal of changes to, Viad’s Corporate Governance Guidelines and the compensation and benefits of non-employee directors. In connection with these responsibilities, the Committee has sole authority to retain and/or terminate any search firm or compensation consultant to identify director candidates or to assist in the evaluation of director compensation.

 

Human Resources Committee.  The Human Resources Committee oversees development and implementation of a compensation strategy designed to enhance profitability and shareholder value. The Committee also reviews and approves, subject to ratification by independent members of the Board, the salary and equity and incentive compensation of the Chief Executive Officer, approves salaries and compensation of executive officers, and approves incentive compensation targets and awards under various compensation plans and programs of Viad. In addition, the Committee has sole authority to retain and/or terminate any compensation consultant to be used to assist in the evaluation of the Chief Executive Officer or senior executive compensation. The Committee also has authority to obtain advice and assistance from internal or external legal, accounting or other advisors. While the Corporate Governance and Nominating Committee has responsibility to review and make recommendations to the Board regarding non-employee director compensation and benefits, the Human Resources Committee has sole authority to approve grants of equity compensation to non-employee directors under the 2007 Viad Corp Omnibus Incentive Plan.

 

Hewitt Associates (“Hewitt”), a nationally-known independent consulting firm, has been retained by the Committee and Viad’s Human Resources Department to provide services and advice and counsel on executive compensation and to serve as a technical resource for market data on executive and director compensation. Viad’s Human Resources and Law Departments, and its Corporate Secretary, support the Committee in its work and in some cases act pursuant to delegated authority to fulfill various functions in administering Viad’s compensation programs. Viad’s Chief Executive Officer makes a recommendation to the Committee on the compensation of other executive officers of Viad; however, the Committee has sole authority to approve, for Viad’s Chief Executive Officer and other executive officers, (a) the annual base salary level, (b) the annual incentive opportunity level and granting of incentive awards, (c) the long-term incentive opportunity level, and (d) any special or supplemental benefits, with the salary, equity and incentive compensation of the Chief Executive Officer being subject to ratification by independent members of the Board.

 

Under Viad’s Corporate Governance Guidelines, each director is expected to attend the Annual Meeting of Shareholders, Board meetings and meetings of committees on which they serve. The Board of Directors held four regular meetings and two special meetings during 2009. Each director who held office in 2009 attended 100% of his or her Board and committee meetings in 2009. All directors who held office in 2009 were in attendance at the 2009 Annual Meeting of Shareholders.

 

The Board held four executive sessions of the independent, non-management directors in 2009 and regular executive sessions of the non-management directors have been scheduled for 2010. Mr. Hay has served as Presiding Director of Viad since May 17, 2005, and was designated by the Board to continue as Presiding Director for the period beginning January 1, 2009, and ending December 31, 2010, or until such other time as his successor is chosen by action of the non-management directors of Viad.

 

The Board combines the role of chairman of the board with the role of chief executive officer (“CEO”). The Board also has a presiding director, who is an experienced and long-tenured independent director. The Board believes this governance structure provides efficient and effective leadership for Viad. Having a single person lead both the Board and management fosters effective decision-making, enabling the definition of corporate strategies to be driven by a unified vision and supported by a clear path of accountability. Furthermore, Mr. Dykstra, Viad’s Chairman and CEO, is receptive to input from the Board, and fosters frequent communication with members of the Board, as appropriate.

The Board also believes that Viad has appropriate governance practices to ensure that the full Board maintains independent oversight, including:

 

 

Viad is not aware of any interlocking relationships between any member of Viad’s Human Resources Committee or Corporate Governance and Nominating Committee and any of Viad’s executive officers that would require disclosure under the applicable rules promulgated under the U.S. federal securities laws.

 

In February 2007, the Board adopted a policy and procedures for review, approval and monitoring of transactions involving the Company and “related persons” (directors and executive officers or their immediate family members, or shareholders and their immediate family members owning 5% or greater of the Company’s outstanding stock). The policy applies to any transaction in which Viad or an operating company is a participant and any related person has a direct or indirect interest, excluding de minimus transactions of a commercial or other nature between a related person and Viad or one of its operating companies and any compensation arrangements with executive officers or directors of Viad that have been approved or authorized by the Board or the Human Resources Committee.

 

The Corporate Governance and Nominating Committee is responsible for reviewing, approving and/or ratifying any transaction involving a related person. Management will bring the matter to the attention of the Corporate Governance and Nominating Committee and provide it with all material information with respect to related person transactions. A related person transaction must be approved in advance whenever practicable, otherwise it must be ratified as promptly as practicable; provided that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. A related person transaction will be submitted to the Committee for consideration at its next meeting or, in those instances in which the President and Chief Executive Officer determines that it is not practicable or desirable for Viad to wait until the next Committee meeting, to the Chairman of the Committee (who has the delegated authority to act between Committee meetings with respect to this policy). The Chairman of the Committee will report to the Committee at the next Committee meeting any approval under this policy pursuant to delegated authority. The Committee will annually review with management existing related person transactions, if any, and report annually to the Board, to ensure that such transactions are being pursued in accordance with understandings and commitments made at the time they were approved, that payments are being made appropriately, and that such transactions continue to serve the interests of Viad.

 

As provided in its charter, the Corporate Governance and Nominating Committee has established procedures for consideration of candidates for Board membership suggested by its members and other sources, including shareholders. The Committee has authority under its charter to employ a third-party search firm to assist it in identifying candidates for director. A shareholder who wishes to recommend a prospective nominee for the Board should notify

Viad’s Corporate Secretary in writing at the address listed on page 1 of this proxy statement. Any such recommendation should include:

 

 

The Committee will review the qualifications of any person properly nominated by a shareholder in accordance with Viad’s Bylaws relating to shareholder proposals as described in the “Submission of Shareholder Proposals and Director Nominations” section of this proxy statement.

 

When the Committee reviews a potential nominee, the Committee looks specifically at the candidate’s qualifications in light of the needs of the Board and Viad at that time given the then current mix of director attributes. The Committee, in accordance with Viad’s Corporate Governance Guidelines, assesses director nominees based on their qualification as independent, as well as consideration of diversity, skills, and experience in the context of the current needs of the Board. The Committee does not have a specific policy on diversity. Director nominees also must have common qualities expected of all Viad directors, including high personal and professional ethics, integrity and values and a commitment to representing the long-term interests of shareholders. The Committee also ensures that the members of the Board, as a group, maintain the requisite qualifications under the listing standards of the NYSE for populating the Audit, Human Resources, and Corporate Governance and Nominating Committees.

 

Viad will deliver a questionnaire to a director candidate properly nominated by a shareholder addressing the candidate’s independence, qualifications and other information that would assist the Corporate Governance and Nominating Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in Viad’s proxy statement, if nominated by the Committee. While it has been Viad’s standard practice to obtain responses to a director candidate questionnaire, in August 2008, the Board of Directors amended Article II of Viad’s Bylaws to formalize this standard practice and require a director candidate to provide responses to Viad’s director candidate questionnaire related to background, qualification, conflicts of interest and director independence. In addition, the director candidate questionnaire will include a representation and agreement to be signed by the director candidate as to his or her independence and the lack of conflicts of interest.

 

Interested parties may communicate directly with non-management directors, including the Presiding Director, and/or with the Board by writing to the following address: Viad Corp, 1850 North Central Avenue, Suite 800, Phoenix, Arizona 85004-4545, Attention: Corporate Secretary. All communications will be delivered to the non-management directors or the Board, as the case may be, no later than the Board’s next regularly scheduled meeting.

 

Management is responsible for assessing and managing the Company’s various exposures to risk, including the adoption of risk management controls, policies and procedures. The Board oversees the management of the Company’s risk exposures by the Company’s management. The Board has delegated to the Audit Committee, as reflected in its charter, responsibility for discussing with Viad’s management the major financial risk exposures of Viad and the steps Management has taken to monitor and control such exposures, including Viad’s risk assessment and risk management policies. Annually, Viad conducts a business risk assessment to identify, evaluate and prioritize business risks that could impact Viad. Within this risk assessment, a financial statement risk assessment and materiality analysis is conducted, including evaluating potential fraud schemes and scenarios that might affect Viad. The risk assessment includes an evaluation of the significance of the risks, the likelihood of occurrence, the risk remaining after application of management controls, and actions necessary to mitigate risk exposure. Management presents a report of the results of the annual risk assessment during the meeting of the Audit Committee that occurs annually in May. Prior to the meeting, a written report of the results of the assessment is provided to all members of the Board. All members of the Board are invited to attend the Audit Committee meeting, and eight out of the nine members of the Board were present at the May 2009 meeting when the results of the 2009 assessment were discussed. Thereafter, at the meeting of the Board, the Chairman of the Audit Committee provides a summary report to the Board regarding the results of the assessment and the Audit Committee’s discussions concerning the results. Management

continuously monitors the Company’s risks throughout the year, and major risk factors are reviewed quarterly with the Audit Committee in connection with Viad’s preparation and filing of its quarterly report on Form 10-Q.

 

Each non-employee director receives compensation for service on the Board and any of its committees. Directors who are also officers or employees of Viad do not receive any special or additional remuneration for service on the Board and do not serve on any of its committees. Mr. Dykstra is the only officer-director serving on the Board.

 

The following table provides the compensation paid to the directors in 2009, other than Mr. Dykstra, whose compensation is disclosed in the Summary Compensation Table provided in this proxy statement. The dollar figures presented below in the Stock Awards column (c) of the Table represent the grant date fair value of awards granted to the non-employee directors, which may not reflect the actual value to be realized by the director as economic and market risks associated with stock awards can affect the actual value realized. The actual value realized by the director for the stock will not be determined until time of vesting, or in the case of option awards, until option exercise.

 

 

 

 

We believe it is important to align the financial interests of our directors and executive officers with those of our shareholders. Guidelines have been adopted which specify the minimum amount of Viad stock that directors and officers are expected to own on a direct basis, meaning stock which is subject to market risk, not simply held under option. The guidelines call for each officer to own stock which has a value within a range of one and one-half to five times that individual’s annual salary, depending on salary level. The guidelines also call for each non-employee director to own stock which has a value equal to five times the annual retainer payable to a director, and all non-employee directors have met their goals. The executive officers named in the Summary Compensation Table of this proxy statement have met or exceeded their goals, except Mr. Hannan, who joined Viad in December 2008, and is working toward achieving his goal.

 

The table below provides information concerning the beneficial ownership of our common stock by directors and executive officers of Viad, individually and as a group as of March 25, 2010.

 

 

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Viad’s executive officers, directors, and beneficial owners of more than 10% of Viad’s common stock, to file initial reports of ownership and reports of changes in ownership of Viad’s common stock with the SEC and the NYSE. Such executive officers, directors and beneficial owners are required by U.S. federal securities regulations to furnish Viad with copies of all Section 16(a) forms they file. As a matter of practice, Viad’s administrative staff assists its executive officers and directors in preparing initial reports of ownership and reports of changes in ownership, and files such reports on their behalf with the SEC and the NYSE. Based solely on a review of the copies of such forms furnished to Viad and written representations from its executive officers and directors, Viad believes that all executive officers, directors and beneficial owners timely complied with the Section 16(a) reporting requirements in 2009, except Mr. Jastrem, who filed a Form 4 on January 5, 2010 to report that he did not timely file a Form 4 for 2,645 shares surrendered for taxes in connection with the 2009 vesting of restricted stock granted October 23, 2006.

 

The table below provides certain information regarding those persons known by Viad to be the beneficial owners of more than 5% of Viad’s outstanding common stock.

 

 

 

 

 

The Audit Committee Report and the Report of the Human Resources Committee contained in this proxy statement will not be incorporated by reference into any present or future filings we make with the SEC, even if those reports incorporate all or any part of this proxy statement.

 

 

 

The Committee

 

The Audit Committee of the Board is comprised solely of independent directors and was appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of Viad, (2) the independent auditors’ qualifications and independence, (3) the performance of Viad’s internal audit function and independent auditors, and (4) the compliance by Viad with legal and regulatory requirements, including oversight of Viad’s Always Honest^sm compliance and ethics program.

 

Meetings and Responsibilities

 

The Committee met eleven times in 2009. Committee members are also available to consult with management and with the Company’s independent auditors throughout the year. The Committee regularly meets in general and private sessions with management of Viad and with Viad’s internal auditors and external independent auditors. The

Committee receives and discusses their reports and encourages open and detailed discussion of all matters related to responsibilities of the Committee.

 

Financial Statements Recommendation

 

The Committee recommended that the audited financial statements of Viad for 2009 be included in Viad’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2010. A copy of that report is included with your proxy materials. In connection with its recommendation, the Committee did the following:

 

 

It is not the duty of the Committee to plan or conduct audits or to determine that Viad’s financial statements are complete or accurate and in accordance with generally accepted accounting principles. Those are the responsibilities of management and Viad’s independent auditors. In giving its recommendation to the Board of Directors that the audited financial statements of Viad for 2009 be included in Viad’s Annual Report on Form 10-K, the Committee relied on management’s representations and the report of Viad’s independent auditors with respect to the financial statements. A report of Viad’s management concerning management’s responsibility for financial reporting, and the report and opinion of Deloitte & Touche LLP, Viad’s independent auditors, are included in Viad’s Annual Report on Form 10-K and should be read in conjunction with the audited financial statements of Viad.

 

Disclosure Controls and Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)), evaluating the effectiveness of disclosure controls and procedures and internal control over financial reporting, and evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Deloitte & Touche LLP is responsible for expressing an opinion on the effectiveness of Viad’s internal control over financial reporting.

 

During 2009 and through the filing of Viad’s 2009 Annual Report on Form 10-K, management completed the documentation, testing and evaluation of Viad’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Committee was kept informed of the progress of the evaluation during the process. The Committee received periodic updates provided by management and Deloitte & Touche LLP at Committee meetings. The Committee has discussed with Deloitte & Touche LLP the matters required under Auditing Standard No. 5 (“An Audit of Internal Control Over Financial Reporting That is Integrated With An Audit of Financial Statements”) of the Public Company Accounting Oversight Board. That standard requires Viad’s independent auditors to report on their audit of Viad’s internal control over financial reporting performed in conjunction with their audit of Viad’s consolidated financial statements. At the conclusion of the process, management provided the Committee with, and the Committee reviewed, a report on the effectiveness of Viad’s internal control over financial reporting. The Committee also reviewed the report of Deloitte & Touche LLP relating to its audit of the effectiveness of Viad’s internal control over financial reporting.

 

AUDIT COMMITTEE
Albert M. Teplin, Chairman
Wayne G. Allcott
Richard H. Dozer
Jess Hay
Robert E. Munzenrider

 

The Human Resources Committee of the Board is comprised solely of independent directors. The Committee oversees design and implementation of an executive compensation strategy intended to enhance the fundamental value of Viad by increasing its earnings, cash flows, market position and financial condition, thereby providing a logical predicate for increases in shareholder value. The Committee has reviewed and discussed with Viad’s management the Compensation Discussion and Analysis provided in this proxy statement, and based on such review and discussions, the Committee recommended to Viad’s Board of Directors that such Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in Viad’s 2009 Annual Report on Form 10-K, filed March 8, 2010.

 

HUMAN RESOURCES COMMITTEE
Jess Hay, Chairman
Daniel Boggan Jr.
Isabella Cunningham
Richard H. Dozer
Albert M. Teplin

 

Compensation Program Overview

 

Each year, the Human Resources Committee (the “HR Committee”) of the Board reviews and approves Viad’s executive compensation program and the compensation levels for its executive officers. The HR Committee, comprised solely of independent directors, has sole responsibility with respect to Viad’s Chief Executive Officer (“CEO”) and other executive officers, to approve (a) the annual base salary level, (b) the annual incentive opportunity level, achievement of performance measures and payment of incentive awards, (c) the long-term incentive opportunity level, grant of awards, and achievement of performance measures, and (d) any special or supplemental benefits and perquisites. The salary, equity and incentive compensation of Viad’s CEO is approved by the HR Committee and is subject to ratification by independent members of the Board. The HR Committee also has sole authority to retain and terminate any compensation consultant used to assist in the evaluation of the compensation of the CEO and other executive officers.

 

Executive Total Compensation Philosophy

 

Viad’s Board employs a pay-for-performance philosophy through its compensation programs by aligning the financial interests of its executive officers and key management with the long-term financial well being of Viad and its shareholders. This philosophy was adopted more than a decade ago. Viad’s plans and programs are reviewed annually by the HR Committee and no changes to the philosophy are planned for the 2010 executive compensation programs, as the philosophy continues to support the strategy and vision for the Company.

 

Viad’s compensation philosophy is designed to:

 

 

Benchmarking and Resources

 

Hewitt Associates (“Hewitt”), a nationally-known independent consulting firm, has been retained by the HR Committee and Viad’s Human Resources Department to provide services and advice and counsel on executive compensation and to serve as a technical resource for market data on executive compensation. As a participant in Hewitt’s executive compensation database, in addition to other market surveys described below, Viad obtains competitive market data for executive positions, including base salary, target and actual annual incentives, long-term incentives, and total compensation values to assist the HR Committee in its decisions on executive compensation.

 

Viad’s Human Resources and Law Departments, and its Corporate Secretary, support the HR Committee in its work and in some cases act pursuant to delegated authority to fulfill various functions in administering Viad’s compensation programs. The Human Resources Department also provides the HR Committee with competitive compensation benchmarks using general market surveys. Viad does not use a set of identified comparator or peer companies in connection with the decision-making process for executive compensation. Viad’s unique and diverse mix of businesses – from marketing and event services to travel and recreation services – makes it difficult to identify a peer group that has similar characteristics. In addition, Viad is the only publicly-held company in the United States operating with this mix of businesses. As a result, Viad’s Human Resources Department conducts an annual review of compensation using competitive market data obtained from a variety of market surveys, including Hewitt Total Compensation Measurement, Towers Perrin, Watson Wyatt and Mercer. Market data is collected for companies that have annual revenues roughly similar to Viad’s annual revenues (companies with annual revenues in the range of $500 million to $1 billion were used for the 2009 benchmarking), without regard to specific companies or the specific industry in which the companies compete. Benchmark valuations are derived from these general market surveys in consultation with Hewitt. Such competitive data provides reference points for the HR Committee.

 

Elements of compensation generally are targeted at the 50th percentile of such competitive market data (as discussed under the “Components of Compensation” subsection below). This analysis and a number of other factors, including an assessment of individual performance, Viad’s operating and financial results, and internal equity considerations, serve to guide the HR Committee in its determination of appropriate levels of compensation for each named executive officer in the Summary Compensation Table of this proxy statement. The HR Committee makes the determination on the total compensation of executive officers at the HR Committee’s regularly scheduled meeting in February of each year. The HR Committee’s decisions on CEO compensation are based on market data, individual performance and the extent to which Viad’s financial and operating goals were achieved in the prior year. The HR Committee’s decision regarding the CEO’s compensation must be ratified by the independent members of the Board.

 

The CEO’s performance is assessed annually through a performance review process which gathers input from superiors, peers and subordinates. These reviews are returned to the Chairman of the HR Committee for review and discussion with the Committee. At the regularly-scheduled meeting in February, the HR Committee discusses the performance of the CEO and each of the other executive officers and determines individual executive compensation levels for the year. For the other named executive officers, the CEO annually gathers input regarding their performance from superiors, peers and subordinates.

 

Components of Compensation

 

Compensation components for the named executive officers in the Summary Compensation Table include:

 

 

Timing of Pay Decisions and Actions

 

Total compensation is reviewed by the HR Committee at its regularly scheduled meeting in February. Merit adjustments, if any, to annual base salary are effective April 1 of each year. Awards under the short-term incentive plan (for the prior year) and long-term performance plans are approved at the February meeting once achievement of

financial targets has been determined, and payment of awards is not made until the Company’s books have been officially closed for the prior fiscal year and the Company’s Annual Report on Form 10-K is filed with the SEC. Long-term incentive compensation awards (as discussed in more detail below) are granted at the February meeting, and targets for the incentive plans are determined at the March meeting of the HR Committee.

 

Mix of Pay

 

The HR Committee and management create what they believe is the best mix of compensation components, consistent with Viad’s compensation philosophy, in delivering the executives’ targeted total compensation. The table below shows the 2009 mix of compensation components for the five 2009 executive officers named in the Summary Compensation Table on page 23 of this proxy statement, who are referred to as the “named executive officers” in this proxy statement.

 

Components of 2009 Compensation
As a Percentage (%) of Targeted Total Compensation

 

 

 

 

Viad’s total compensation package for executives is designed to enhance shareholder value, as well as to mitigate the potential for excessive risk-taking by executives in managing Viad’s businesses. The HR Committee believes that certain design features of Viad’s executive compensation program aid in discouraging excessive risk-taking. In particular, the mix of pay for executives is not overly weighted toward either annual incentives or equity compensation. The performance goals for both annual and long-term incentives are approved by the HR Committee to ensure against unreasonable performance goals and targets. The awards of long-term incentives create and maintain shareholder value over a multi-year period because the ultimate value of each executive’s grant will depend upon the value of Viad’s stock at the time of vesting. This ensures that executives consider the inherent risk of short-term decisions that may impact the future performance of Viad, as does the retention feature built into restricted stock and performance-based restricted stock awards. Viad’s stock ownership guidelines are an additional feature of Viad’s executive compensation program. These guidelines align the financial interests of our directors and officers with those of our shareholders (see “Stock Ownership Guidelines” subsection below and the “Ownership Guidelines for Directors and Executive Officers” section of this proxy statement). As an additional feature of Viad’s executive compensation program designed to protect shareholder value, annual and long-term incentive compensation is subject to forfeiture and reimbursement provisions (see “Forfeiture and Reimbursement Provisions for Detrimental Conduct” subsection below).

 

Each element of the total compensation package for the named executive officers in the Summary Compensation Table is discussed below.

 

Annual Base Salary

 

The base salary program for Viad’s executives helps achieve the objectives outlined above by attracting and retaining strong talent. Base salaries represent the fixed portion of the executive compensation package. Salary levels are determined using a combination of factors including competitive benchmark levels, the executive’s experience and tenure, Viad’s annual merit budget and the executive’s individual performance. Merit increase guidelines for all employees, including the named executive officers, are determined using published survey sources, and have ranged from 0% to 5%, averaging approximately 3% over the past several years, although in light of economic conditions, the base salaries for all employees were frozen in 2009, except in limited circumstances.

Base salaries for Viad’s named executive officers are targeted between the 50th and 75th percentiles of the general market survey data. Base salaries generally fall between the minimum and maximum of the targeted range, depending upon time in position, individual performance and qualifications for the role. This range allows Viad to respond to changing business conditions and manage salaries more evenly over an executive’s career. For the named executive officers, actual base salaries approved by the HR Committee for 2009 were within the 50th and 75th percentile range of the survey data, except for the base salary of Mr. Dykstra, which was slightly below the minimum of the range largely due to the fact that salaries of the named executive officers were frozen for 2009.

 

For 2009, the base salaries of the named executive officers were frozen with no year-over-year increases in light of economic conditions. All employees at the Viad corporate level, including Messrs. Dykstra and Sayre and Ms. Ingersoll, also took a mandatory, week-long work furlough (leave without pay) as one of Viad’s expense-reduction measures for 2009.

 

Mid-year 2009, the base salaries of Messrs. Hannan and Jastrem were increased to reflect their increased responsibilities as President of Viad’s Travel & Recreation Group and President of Viad’s Marketing & Events Group, respectively. Mr. Hannan’s salary was increased from $280,000 to $300,000 (Canadian dollars). Mr. Jastrem’s salary was increased from $435,000 to $490,000. For 2010, the base salaries of the named executive officers have again been frozen as a cost-saving measure due to the slow economic recovery of the industries in which Viad competes.

 

Annual Incentives

 

Viad’s Management Incentive Plan (the “Plan”) is an annual, cash-based, pay-for-performance incentive program for executive officers and other key executives. The Plan is designed to motivate and reward these individuals for their contributions to Viad’s performance during the year by making a large portion of their cash compensation variable and dependent upon achievement of Viad’s annual financial targets. Incentive cash payments are further designed to emphasize results and contributions through achievement of corporate and operating company performance targets established by the HR Committee at the beginning of each year. When determining the performance targets, the HR Committee considers past financial performance of Viad and its operating companies and the internal estimates of their current-year planned financial performance. Incentive cash payments reflect the extent to which targets for performance goals are met or exceeded.

 

Financial targets are set such that achievement will result in enhancement to the fundamental value of Viad, which in turn is ultimately reflected in enhanced shareholder value. Established growth trends, which are based on economic and business conditions specific to Viad and each of the operating companies, are the gauge by which meaningful targets are set and executive performance is measured. For the past five years, the HR Committee has not awarded a discretionary cash bonus to any named executive officer in circumstances where performance goals under the annual incentive plan were not met.

 

For 2009, the performance goals and targets, the weighting of each performance goal as a percentage of the total award, and the achievement levels for each performance goal are provided in the table below.

 

2009 Annual Incentive Performance Goals, Weighting and Targets

 

 

 

 

 

The 2009 performance goals of Income Per Share for corporate level executives and Operating Income for operating company level executives are stand-alone goals and awards are paid based on achievement of the goal. The performance goals of Operating Cash Flow and Revenue are also stand-alone goals and awards are paid based on achievement of the target, provided that the Income Per Share measure or the Operating Income measure is met at the threshold amount.

 

The formula for determining the annual bonus award is: annual base salary earnings times individual target bonus percentage times the company achievement factor. As shown in the “Target” column in the table below, the 2009 target bonus percentages for the named executive officers in 2009 ranged from 50% to 80% of the executive’s annual base earnings. The “Threshold” and “Maximum” columns in the table below reflect the executive’s target level times the company achievement factor at the threshold level of 21% for corporate level executives and 19.5% for operating company level executives and maximum level of 175%, respectively. Individual target bonus percentages are established for each executive officer based upon competitive target bonus levels for comparable positions and are targeted at the 50th percentile of the market. The HR Committee has discretion to increase or decrease the actual awards based on company and individual performance, except in the case of executive officers, whose awards may only be decreased.

 

2009 Target Bonus Payout Levels

 

 

 

 

In 2008, Mr. Jastrem was granted a special, one-time turn-around incentive award to incentivize improvements in the 2008 performance of Viad’s operating company, Exhibitgroup/Giltspur, above and beyond the performance goals established under Viad’s 2008 Management Incentive Plan. There was no equivalent award for any executive officer in 2009. Achievement was determined and approved by the HR Committee at its meeting in February 2009. The award payout is in Viad’s common stock, payable annually in thirds, with the first two payments being made in February 2009 and January 2010, respectively, and the remaining payment to be made in January 2011. This award is subject to the same forfeiture, reimbursement and non-competition provisions that are contained in all equity award agreements for executives. For Mr. Jastrem’s 2008 award, achievement of operating income above the maximum operating income target approved for Exhibitgroup/Giltspur under the 2008 Management Incentive Plan was weighted at 50% with a target of $2 million. Achievement of the strategic goals component of the award was weighted at 50%. The strategic goals component included three performance measures: revenue growth with a target of $189 million; client retention; and employee retention. The revenue growth was weighted at 60%; client retention at 25%; and employee retention at 15%. The aggregate weight of these three performance measures was equal to the overall weight of the strategic goal component of the award (50%). Achievement of client retention was based on the level of retention of 27 specific, key clients. Similarly, achievement of employee retention was based on the level of

retaining 11 identified, key employees. None of the employees was an executive officer of Viad. Each performance measure within the strategic goals component, as well as operating income component, was assigned a goal that corresponded to five possible performance levels. The weighted performance level rating for each component (operating income and strategic goals) was combined to determine the overall performance level, which was then used to determine the payout level. No payout for the strategic goals component could occur unless the operating income goal was met at the threshold level.

 

Long-Term Incentives

 

Long-term incentives for the named executive officers in 2009 were granted using restricted stock and performance-based restricted stock, except Mr. Hannan, who was granted restricted stock units and performance-based restricted stock units rather than shares of Viad common stock due to Canadian tax considerations. Of the total long-term award value granted to the executive officers, 58% was made up of performance-based restricted stock (or units) and 42% from restricted stock (or units), making more than half of the total long-term award subject to a potential zero payout should performance goals not be achieved. This mix places heavy emphasis on performance and attainment of financial targets that are designed to provide for long-term value to Viad’s shareholders, as well as providing a retention incentive for key executives. Long-term incentive grants are targeted between the 50th and 75th percentile range of the competitive market, as reflected in general market surveys. In 2009, long-term incentive grants were made within the targeted percentile range, or slightly lower than the minimum of the range due to the decrease in the price of Viad’s common stock as of the time of the grant. Each of the long-term incentive plans is described below.

 

Performance-Based Restricted Stock (or Units).  Key executives who have a significant impact on Viad’s operational and financial goals, including the named executive officers in the Summary Compensation Table, were awarded performance-based restricted stock in 2009, except performance-based restricted stock units were awarded to Mr. Hannan due to Canadian tax considerations. These awards were designed to focus management’s attention on financial performance in 2009, and to retain the management team with a three-year vesting schedule of one-third of the earned shares (or units) per year starting one year after the grant date. The HR Committee believes that vesting the shares over a three-year period has served as an effective retention tool. Until achievement of targets has been determined, dividends are paid and the executive may vote the shares granted. Once achievement is determined, dividends and voting apply only to earned shares (unearned shares are forfeited). Mr. Hannan’s performance-based restricted stock units have the same vesting schedule and are paid in cash, but have no voting rights. Dividend equivalents are paid to him.

 

In 2009, the grants of performance-based restricted stock to named executive officers were not earned because targets for the incentive performance measures established for the 2009 grant were not achieved. Mr. Hannan earned the 2009 grant of performance-based restricted stock units because targets were met at 48.125%. The 2009 performance measures and targets for performance-based restricted stock and units were the same as the measures established for the 2009 annual incentive plan and were weighted the same for achievement purposes (see “Annual Incentives” subsection above). Executives may earn from 0% to 100% of the shares (or units) granted, dependent upon the performance of the operating company or overall corporate results. For Mr. Hannan and other executives in Viad’s operating companies, 50% of the award is earned based on the achievement of the operating company’s performance targets and the other 50% is based on the achievement of the corporate level performance targets (see the “Annual Incentives” subsection above). For corporate level executives, 100% of the award is based on the achievement of the corporate level performance targets under the Management Incentive Plan. For 2010, performance-based restricted stock (or units) will not be awarded (as discussed under the “Changes to Executive Compensation in 2010” subsection below).

 

Time Vested Restricted Stock (or Units).  In addition to performance-based restricted stock (or performance-based restricted stock units in the case of Mr. Hannan) awarded in 2009, restricted stock (or restricted stock units in the case of Mr. Hannan) was also awarded in 2009 to a limited number of key executives, including the named executive officers in the Summary Compensation Table. The restricted stock and restricted stock units will vest in full three years from the grant date. For the executives receiving restricted stock, the executive may vote the shares and will receive dividends during the restriction period. Mr. Hannan, who received restricted stock units, will receive dividend equivalents. Receipt of dividends (or dividend equivalents) and the executive’s right to vote shares are important links in aligning management’s interests with those of Viad’s shareholders. The HR Committee believes that due to the three-year cliff vesting feature of the shares and units, this compensation element has been highly effective

in retaining executives and in motivating executives to make long-term decisions that will be beneficial to shareholders and Viad.

 

Performance Units.  The Performance Unit Plan (“PUP”), which was established under the 2007 Viad Corp Omnibus Incentive Plan, is intended to focus participants on the long-term interests of our shareholders by tying the value of units to both stock price appreciation during the three-year performance period and to achievement of financial measures that are key factors in increasing shareholder value. Performance targets are set during the first quarter of the three-year performance period, typically at the March meeting of the HR Committee. Targets are set such that achievement will result in enhancement to the fundamental value of Viad, which in turn is ultimately reflected in enhanced shareholder value. Established growth trends, which are based on economic and business conditions specific to Viad and each of the operating companies, are the gauge by which meaningful targets are set and executive performance is measured.

 

PUP awards are paid in cash and are earned based on the degree of achievement of the targets during the performance period and are calculated using the average price of Viad’s common stock during the ten-day trading period beginning on the day following public announcement of Viad’s year-end financial results for the final year of the performance period. The formula for determining the payout of a PUP award is the number of units originally granted to the executive multiplied by the ten-day average stock price described above, multiplied by the achievement factor for the Company. The achievement factor can range from 0% to 200%.

 

In 2009, performance units were not granted due to the difficulties in setting three-year targets with the uncertainties in the marketplace and general economy. None of the named executives received PUP payouts for the 2007 – 2009 performance period as the performance goals were not met.

 

Payouts for PUP earned during the 2006 – 2008 performance period were made in 2009 to the corporate executives of Viad, including Messrs. Dykstra and Sayre and Ms. Ingersoll with the achievement level of performance targets being at the maximum (200%). Exhibitgroup/Giltspur participants in PUP, including Mr. Jastrem, did not receive a payout because targets at Exhibitgroup/Giltspur were not met for the plan period. Mr. Hannan did not receive a PUP award for this performance period as the award was granted in February 2006 and he did not join the Company until 2008. The table provided below shows the performance goals and targets, the weighting of each performance goal as a percentage of the total award, and the achievement levels for each performance goal under the 2006 – 2008 PUP award for the corporate executives who received payouts in 2009.

 

2006 – 2008 PUP Performance Goals, Weighting and Targets for Corporate Executives

 

 

 

 

Vesting of Long-Term Incentives.  The vesting of restricted stock, restricted stock units, performance-based restricted stock and performance-based restricted stock units is subject generally to continued employment with Viad or its operating companies, except certain termination events will trigger post-termination benefits as discussed below under the “Post-Termination Compensation and Benefits” subsection below, as well as the “Potential Payment Upon Employment Termination or Change of Control” section of this proxy statement.

Perquisites and Other Personal Benefits

 

Perquisites and other personal benefits are part of the executive’s total compensation package and are reviewed periodically to ensure external competitiveness. The perquisites currently offered by the Company to the executive officers include financial counseling and tax preparation, annual executive physical examination, accidental death and dismemberment insurance, executive medical insurance, club memberships and Company-paid parking. Mr. Dykstra is also eligible for executive life insurance, a home Internet and security system and an automobile, plus related expenses. Operating company presidents are also eligible for an automobile allowance. Expense incurred for spousal travel is reimbursed to the executive officers if spouses are invited to attend one of the regularly scheduled Board meetings. Additional information on perquisites and other personal benefits provided to the named executive officers in 2009 is discussed in the “Summary Compensation Table” of this proxy statement.

 

Retirement Income and Savings Plans

 

All eligible employees, including the named executive officers, may participate in the Viad Corp Capital Accumulation Plan (the “401(k) Plan”). In addition, the named executive officers are eligible to participate in the Supplemental 401(k) Plan, which provides for additional employee contributions over the annual limits set by the Internal Revenue Code for the 401(k) Plan, plus matching contributions by Viad based on the same percentage as the 401(k) Plan. In lieu of participation in Viad’s 401(k) Plan and Supplemental 401(k) Plan, Mr. Hannan is a participant in the Retirement Plan for Management Employees of Brewster.

 

Annual retirement benefits will be paid under applicable schedules of the Viad Corp Supplemental Pension Plan (“SERP”) and under the MoneyGram Pension Plan (formerly the Viad Corp Retirement Income Plan) to Messrs. Dykstra and Sayre and Ms. Ingersoll, although accruals under the MoneyGram Pension Plan were frozen as of December 31, 2003. In connection with the spin-off of MoneyGram International, Inc. (“MoneyGram”) on June 30, 2004, the sponsorship and administration of the MoneyGram Pension Plan, as well as all liabilities of the MoneyGram Pension Plan and the SERP, were assumed by MoneyGram. In general, the compensation covered by the MoneyGram Pension Plan is annual salary and one-half of annual bonus. Actual benefits will be calculated primarily on the basis of the average of a participant’s last five years of annual salary prior to retirement and on the basis of the average of one-half of a participant’s highest five years of annual incentive compensation. Like all other forms of compensation, the level of retirement benefit is determined by individual performance assessments throughout a career, since individual performance determines the level of compensation, which is an integral component of savings and pension benefit formulas.

 

Under the Retirement Plan for Management Employees of Brewster Inc., the annual pension payable to Mr. Hannan, assuming a normal retirement date, is equal to 2% of his highest average earnings for each year of credited service. “Highest average earnings” are defined as the average of the highest annual earnings in any three calendar years of credited service. The maximum pension payable to Mr. Hannan cannot exceed the dollar limits permitted under Income Tax Act of Canada.

 

The change in the value of the pension plans during 2009 is included in the Summary Compensation Table. Please refer to the “Pension Benefit Table” and the “Potential Payment Upon Employment Termination or Change of Control” sections of this proxy statement for further discussion of retirement benefits.

 

Post-Termination Compensation and Benefits

 

Certain termination events will trigger post-termination payments and benefits for the named executive officers in the Summary Compensation Table, including retirement, change of control severance, termination for cause, involuntary termination not for cause, death or disability. These are discussed below and also under the “Potential Payment Upon Employment Termination or Change of Control” section of this proxy statement. Post-termination compensation provides for either short-term (termination or change in control) or long-term (retirement) security to the Company’s executive officers in the event their employment with the Company ends. In the event of involuntary termination, post-termination compensation is intended to provide an interim financial resource to the executive during the transition from employment with Viad.

 

Retirement.  Eligibility for normal retirement is age 65 and for early retirement is age 55. The retirement income received by the executives is discussed under the “Retirement Income and Savings Plans” section and in the “Pension Benefits Table” of this proxy statement. Upon normal or early retirement, executives would receive ownership of the restricted stock and restricted stock units awarded to them upon the lapse of the vesting period on a pro-rata basis (percentage of time from the grant date to the retirement date), except that executives who have reached the age of 60

at the time of retirement and retire at least 2 years from the date of the grant would receive full ownership (not pro-rated) upon lapse of the vesting period. Executives would receive ownership of earned performance-based restricted stock, earned performance-based restricted stock units, and earned performance units, on a pro-rata basis, upon lapse of the performance period, except that executives who have reached the age of 60 at the time of retirement and retire at least 18 months from the date of the grant would receive full ownership (not pro-rated) upon lapse of the performance period. Stock options not yet exercisable would fully vest upon retirement (or six months and one day thereafter in the event the termination date occurs within six months of the grant date) and the executive may exercise the option rights within a five-year period following the retirement date. Executives would receive an accrued annual incentive bonus, if earned, on a pro-rata basis. Mr. Dykstra is entitled to the same benefits upon retirement pursuant to the terms of his employment contract. In addition, he will be provided with an office and secretarial support for five years following retirement. Mr. Sayre is the only named executive officer eligible for retirement, as discussed below in the “Potential Payment Upon Employment Termination or Change of Control” section of this proxy statement.

 

Change of Control Severance.  Viad’s Executive Severance Plan (Tier I) provides each of the named executives with severance benefits if the executive’s employment is terminated by Viad without cause or by the executive for good reason (as those terms are defined in the Executive Severance Plan) within 36 months after a change of control of Viad, or by the executive for any reason (other than for good reason, death, disability or retirement) during a 30 day window period beginning on the first anniversary of the change of control of Viad. The purpose of the Executive Severance Plan is to ensure, in the event of a possible change of control of Viad, that executives will be available (without concern for their personal financial situations) to perform their regular duties and to advise management and the Board as to whether the change of control proposal would be in the best interests of Viad and its shareholders, to assist in the change of control implementation and transition, and to perform other appropriate actions. Severance benefits also provide an economic means for executives to transition from Viad employment. Participants in the plan are designated by the CEO and approved by the HR Committee. Viad’s annual and long-term incentive plans also provide for accelerated vesting of equity awards and immediate payment of earned performance incentives upon a change of control of Viad.

 

For purposes of these benefits, a change of control is deemed to occur, in general, if (a) a shareholder or group of shareholders acquires 20% or more of Viad’s common stock, (b) the current directors in office cease to constitute at least a majority of the Board, (c) a reorganization, merger or consolidation, or the sale of all or substantially all of the corporate assets occurred, or (d) there is a complete liquidation and dissolution of Viad.

 

Involuntary Termination Not For Cause.  Mr. Dykstra’s employment agreement provides that he will receive post-termination payments and benefits upon Viad’s termination of his employment without cause. The relevant material terms of Mr. Dykstra’s employment agreement with Viad are discussed in the “Potential Payment Upon Employment Termination or Change of Control” section of this proxy statement. For the other named executive officers, Viad has an arrangement providing payments and benefits to them for Viad’s termination of their employment without cause, as discussed in the “Potential Payment Upon Employment Termination or Change of Control” section of this proxy statement.

 

Death or Disability.  Mr. Dykstra’s employment agreement does not provide for any post-termination payments upon his employment termination due to death or disability; however, he and the other named executive officers will be eligible to receive benefits or rights otherwise due in the event of their death or disability pursuant to compensation and benefit plans and related agreements, as discussed in the “Potential Payment Upon Employment Termination or Change of Control” section of this proxy statement.

 

Forfeiture and Reimbursement Provisions for Detrimental Conduct

 

In order to protect Viad and its operating companies and to help insure the long-term success of the business, annual incentive compensation and long-term incentive compensation (including awards of performance-based restricted stock, restricted stock units, performance-based restricted stock, performance-based restricted stock units, and performance units) are subject to forfeiture and reimbursement provisions (i.e., a “clawback” provision) relating to the following conduct:

 

 

 

The forfeiture and reimbursement provisions also relate to violations of certain restrictions on competitive activities following employment termination. In addition, the annual incentive compensation and long-term incentive compensation awards in 2009 (including awards of restricted stock, restricted stock units, performance-based restricted stock and performance-based restricted stock units) also provide Viad with the right to stop the executive, through a court-ordered injunction, from working for competitors and soliciting customers and employees following employment termination. Viad also may seek monetary damages for such activities.

 

Limit on Deductibility of Certain Compensation

 

Section 162(m) of the Internal Revenue Code disallows a corporate income tax deduction on compensation paid to an executive officer named in the Summary Compensation Table that exceeds $1.0 million during the tax year, subject to certain permitted exceptions. To the extent compensation is based upon attaining performance measures set by the HR Committee and meets the other requirements of Section 162(m), the compensation is not included in computation of the limit. The HR Committee intends, to the extent possible and where it believes it is in the best interest of Viad and its shareholders, to qualify such compensation as tax deductible. However, it does not intend to permit the provisions of Section 162(m) to erode the effectiveness of Viad’s overall system of compensation policies and practices. The Board submitted performance measures and certain other terms under the 1997 Viad Corp Omnibus Incentive Plan and the 2007 Viad Corp Omnibus Incentive Plan for approval at the 1997, 2002 and 2007 Annual Meeting of Shareholders, as required to allow certain of the compensation payable under such plans to be eligible for deduction. For purposes of meeting the requirements of Section 162(m), under the 2007 Viad Corp Omnibus Incentive Plan, the maximum aggregate amount awarded or credited with respect to cash-based awards, including annual incentive awards and performance units, to any one participant in any one plan year may not exceed $5.0 million.

 

Stock Ownership Guidelines

 

Stock ownership guidelines were adopted in 1993 requiring executives to own a minimum amount of stock on a direct basis, meaning stock of Viad which is subject to market risk and not simply held under option. The minimum required amount is based on multiples of salary ranging from one and one-half to five times an individual’s annual salary, depending on salary level.

 

Viad believes it is important to align the financial interests of our executives with those of our shareholders. Mr. Dykstra has ownership guidelines of five times his annual base salary. Ms. Ingersoll and Messrs. Hannan, Jastrem and Sayre have ownership guidelines of three times their base salaries. As of the end of 2009, all of the named executive officers had met or exceeded their goals, except Mr. Hannan, who was named President of Brewster Inc. in December 2008, and is working toward achieving his goal.

 

Changes to Executive Compensation in 2010

 

In 2010, the value of the overall mix of long-term incentive grants will change to 50% restricted stock (or units) and 50% stock options. This mix of restricted stock (or units) and stock options will continue to provide incentives for executives to create and maintain shareholder value over a multi-year period because the ultimate value of each executive’s grant will depend upon the value of Viad’s stock at the time of vesting, in the case of restricted stock (or units), and upon exercise in the case of vested stock options. This mix also continues to provide an effective retention tool for executives. The 2010 awards of restricted stock (or units) will have the same features as the 2009 awards, including a three-year vesting period, receipt of dividends, and, in the case of restricted stock, voting rights (see “Long-Term Incentives” subsection above). Stock options will have a three-year graded vesting period, one-third each year starting in the first year after the grant. The options will expire ten years from the date of grant. Awards of restricted stock and options will be subject to the forfeiture and reimbursement provisions discussed in the “Forfeiture and Reimbursement Provisions for Detrimental Conduct” subsection above.

 

The following table summarizes the compensation paid in 2007, 2008 and 2009 to the Chairman, President and Chief Executive Officer, the Chief Financial Officer and each of the three other most highly compensated executive officers of Viad.

 

The amounts presented below in the Stock Awards column (e) and Option Awards column (f) of the Table represent the grant date fair value of awards granted to the named executive officers and may not reflect the actual value to be realized by the executive officer. Variables that can affect the actual value realized by the named executive officer include achievement levels of performance targets, economic and market risks associated with stock and option awards, and basing performance unit values on the market price of Viad’s stock. The actual value realized by the named executive officer will not be determined until the time of vesting in the case of restricted stock, restricted stock units, performance-based restricted stock and performance-based restricted stock units, or until option exercise in the case of option awards.

 

 

 

 

 

As discussed in the “Compensation Discussion and Analysis” section of this proxy statement, in 2009 Hewitt provided services and advice related to executive compensation. Hewitt also provided market data related to director compensation. In addition to compensation advice, in 2009 Hewitt also provided to Viad at the request of Viad management the following advice and services: actuarial services on qualified and non-qualified retirement programs; federal payroll tax calculations; and advice related to management positions in connection with Viad’s

centralization of the human resources function at the corporate level for all of Viad’s operations. For these 2009 services and advice, Viad paid Hewitt in the aggregate $207,442. Viad paid Hewitt $38,229 in the aggregate for its 2009 services and advice related to executive and director compensation.

 

The table below supplements the disclosure in the Summary Compensation Table on plan-based awards. The table provides, by grant date, the estimated future payouts for awards granted in 2009 under equity incentive and non-equity incentive plans, and the number of shares or units underlying awards granted in 2009 that have been paid out. All awards in 2009 were granted pursuant to the 2007 Viad Corp Omnibus Incentive Plan.

 

 

 

 

Mr. Dykstra is employed pursuant to an employment agreement dated May 15, 2007. He is the only named executive officer with an employment agreement. Mr. Dykstra’s agreement provides for an initial two-year employment term and thereafter on each anniversary date of the agreement the remaining one-year term is increased by an additional one-year period, unless the Human Resources Committee of the Board provides notice of its intent not to extend the employment period. The agreement provides for an initial annual base salary of $600,000. Mr. Dykstra’s annual base salary is reviewed at least annually by the Human Resources Committee of the Board, which may in its sole discretion recommend an increase to the annual base salary, subject to approval by the Board. Effective April 1, 2008, his annual base salary was $625,000, and he did not receive an increase in salary in 2009 as the base salaries of the named executive officers were frozen in light of economic conditions. The agreement also provides that Mr. Dykstra is entitled to participate in all bonus and long-term incentive compensation plans and programs and other fringe benefit programs offered to other senior executives of Viad in accordance with the terms of such plans and programs. Further, he is entitled to participate in all savings, retirement, medical and other welfare benefit plans to the same extent as other senior executives of Viad. His perquisites and other personal benefits include executive medical coverage; executive life insurance; accidental death and dismemberment insurance coverage; office parking; tax planning and financial counseling services; annual executive physical examination; dues for health club, country club, airline club and social club; Company-provided vehicle and auto-related expenses, and home security system. Additional information regarding the terms of Mr. Dykstra’s employment agreement is provided in the “Post-Termination Compensation and Benefits” subsection of the “Compensation Discussion and Analysis” section and in the “Potential Payment Upon Employment Termination or Change of Control” section of this proxy statement.

 

The table below includes all outstanding options and unvested stock awards of the named executive officers in the Summary Compensation Table as of December 31, 2009, including awards subject to performance conditions.