Background

Section 162(m) of the Internal Revenue Code (the “Code”) denies a tax deduction to a public company if compensation paid to certain individuals (known as “covered employees”) exceeds one million dollars for the taxable year. However, compensation that is “performance-based” within the meaning of Code Section 162(m) is deductable by the public company for tax purposes. A “covered employee” is defined as a public company’s Chief Executive Officer and its three other most highly compensated officers (excluding the CFO) whose compensation is required by the SEC to be disclosed for a given year.