PRG-SCHULTZ INTERNATIONAL, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
PRG-SCHULTZ INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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PRG-SCHULTZ INTERNATIONAL, INC.
600 GALLERIA PARKWAY
SUITE 100
ATLANTA, GA 30339
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, JUNE 15, 2007
TO THE SHAREHOLDERS OF
PRG-SCHULTZ INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of PRG-SCHULTZ INTERNATIONAL,
INC. (PRG-Schultz or the Company) will be held at the Companys offices, 600 Galleria Parkway,
Atlanta, Georgia 30339, on Friday, June 15, 2007 at 9:00 a.m., for the following purposes:
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To elect two Class II directors to serve until the Annual Meeting of
Shareholders to be held in 2010 and until their successors are elected and qualified;
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To transact such other business as may properly come before the meeting or any
adjournments thereof. |
The proxy statement is attached. Only record holders of the Companys common stock and 9%
Senior Series A Convertible Participating Preferred Stock (the Series A Preferred) at the close
of business on April 23, 2007 will be eligible to vote at the meeting.
If you are not able to attend the meeting in person, please complete, sign, date and return
your completed proxy in the enclosed envelope. Holders of common stock and Series A Preferred will
vote together as a single group, and holders of both classes of shares must complete two proxy cards a common stock proxy
card and a Series A Preferred proxy card. If you attend the meeting, you may revoke your proxy and
vote in person. However, if you are not the registered holder of your shares you will need to get a
proxy from the registered holder (for example, your broker or bank) in order to attend and vote at
the meeting.
By Order of the Board of Directors:
/s/ James B. McCurry
James B. McCurry
Chairman, President and Chief Executive Officer
May 9, 2007
A copy of the Companys Annual Report on Form 10-K for the year ended December 31, 2006 is enclosed
with this notice and proxy statement.
PRG-SCHULTZ INTERNATIONAL, INC.
600 GALLERIA PARKWAY
SUITE 100
ATLANTA, GA 30339
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
The Board of Directors of PRG-Schultz International, Inc. (PRG-Schultz or the Company) is
furnishing you this proxy statement to solicit proxies on its behalf to be voted at the 2007 Annual
Meeting of Shareholders. The Annual Meeting will be held on Friday, June 15, 2007, at 9:00 a.m.,
at the Companys offices, 600 Galleria Parkway, Atlanta, Georgia 30339. The proxies may also be
voted at any adjournments or postponements of the meeting.
This proxy statement and the accompanying form of proxy are first being mailed to shareholders
on or about May 9, 2007. If you own both common stock and Series A Preferred Stock (Series A Preferred), you will receive a
separate mailing and proxy card for each class of securities. You must complete and return both
proxies in order for your shares of common stock and/or Series A Preferred to be voted.
Any shareholder who has given a proxy may revoke it at any time before it is exercised at the
meeting by:
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delivering to the Secretary of the Company a written notice of revocation dated
later than the date of the proxy; |
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executing and delivering to the Secretary a subsequent proxy relating to the
same shares; or |
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attending the meeting and voting in person, unless you are a street name holder
without a legal proxy, as explained below. Attending the meeting will not in and of
itself constitute revocation of a proxy. |
Shareholders who hold shares in street name (e.g., in a bank or brokerage account) must obtain a
legal proxy form from their bank or broker in order to attend and vote at the meeting. You will
need to bring the legal proxy with you to the meeting, or you will not be able to attend or vote at
the meeting.
All communications to the Secretary should be addressed to the Secretary at the Companys
offices, 600 Galleria Parkway, Suite 100, Atlanta, Georgia 30339. Any proxy which is not revoked
will be voted at the annual meeting in accordance with the shareholders instructions. If a
shareholder returns a properly signed and dated proxy card but does not mark any choices on one or
more items, his or her shares will be voted in accordance with the recommendations of the Board of
Directors as to such items.
1
The proxy card gives authority to the proxy holders to vote shares in their discretion on any
other matter properly presented at the annual meeting.
The Company will pay all expenses in connection with the solicitation of proxies, including
postage, printing and handling and the expenses incurred by brokers, custodians, nominees and
fiduciaries in forwarding proxy material to beneficial owners. In addition to solicitation by
mail, solicitation of proxies may be made personally or by telephone, facsimile or other means by
directors, officers and employees of the Company and its subsidiaries. Directors, officers and
employees of the Company will receive no additional compensation for any such further solicitation.
The Company has retained Innisfree M&A Incorporated to assist in the solicitation. The fee to be
paid such firm is estimated at approximately $12,000, plus reasonable out-of-pocket costs and
expenses.
Voting Requirements
Only holders of record of each of the Companys common stock and Series A Preferred at the
close of business on April 23, 2007 (the Record Date) are entitled to notice of, and to vote at,
the annual meeting. Holders on the Record Date are referred to as the Record Holders in this
discussion. On the Record Date, the Company had outstanding a total of 8,767,345 shares of common
stock, and 67,815 shares of Series A Preferred. Each share of common stock will have one vote, and
each share of Series A Preferred will have 46.111706 votes per share held, rounded down to the
nearest whole share.
In order to constitute a quorum with respect to each matter to be presented at the Annual
Meeting, there must be present, in person or by proxy, a majority of the total votes entitled to be
cast by Record Holders of each voting group of shareholders.
With respect to Proposal 1 regarding the election of Class II directors, the common stock and
the Series A Preferred will vote together as a single group. Assuming a quorum, the two candidates
receiving a plurality of the votes cast by the Record Holders of the common stock and the Series A
Preferred, voting as a single group, will be elected Class II directors. Under plurality voting,
assuming a quorum is present, the two candidates receiving the most votes will be elected,
regardless of whether they receive a majority of the votes cast. Abstentions and broker nonvotes
will have no effect on the outcome.
Votes cast by proxy or in person at the annual meeting will be counted by the person or
persons appointed by the Company to act as inspector(s) of election for the meeting. Prior to the
meeting, the inspector(s) will sign an oath to perform their duties in an impartial manner and to
the best of their abilities. The inspector(s) will ascertain the number of shares outstanding and
the voting power of each of such shares, determine the shares represented at the meeting and the
validity of proxies and ballots, count all votes and ballots and perform certain other duties as
required by law.
It is expected that shares beneficially owned by current executive officers and directors of
the Company will be voted in favor of the nominees for director that have been recommended by the
Board. As of April 23, 2007, shares beneficially owned by executive officers and directors of the
Company represented in the aggregate: approximately 40.52% of the outstanding shares of common
stock (which includes common stock issuable upon exercise of vested stock options and conversion of the Companys Series A Preferred
and its 10% Senior Convertible Notes); 10.55% of the outstanding shares of common stock
excluding shares issuable upon exercise of vested stock options and conversion of the Companys Series A Preferred and 10% Senior
Convertible Notes; and 51.47% of the outstanding shares of the Series A Preferred. At our
2006 Annual Meeting, which was held on August 11, 2006, the shareholders approved a 1-for-10
reverse stock split of our common stock (the Reverse Split). Except as otherwise indicated, the
share totals in this proxy statement have been adjusted to reflect the Reverse Split which became
effective on August 14, 2006.
2
Any other proposal not addressed herein but properly presented at the meeting will be approved
if a proper quorum is present and the votes cast in favor of it meet the threshold specified by the
Companys Articles, Bylaws and by Georgia law with respect to the type of matter presented. No
shareholders have submitted notice of intent to present any proposals at the annual meeting as
required by the Companys Bylaws.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company currently has seven directors. The Board is divided into three classes of
directors, designated as Class I, Class II and Class III. The directors in each class serve
staggered three-year terms. Shareholders annually elect directors to serve for the three-year term
applicable to the class for which such directors are nominated or until their successors are
elected and qualified. At the annual meeting, shareholders will be voting to elect two directors
to serve as Class II directors. The terms of Patrick G. Dills and N. Colin Lind, currently serving
as Class II directors, will expire at the annual meeting unless they are re-elected.
The persons named in the proxy intend to vote FOR election of all the nominees named below as
directors of the Company, unless otherwise specified in the proxy. Those directors of the Company
elected at the annual meeting to be held on June 15, 2007 to serve as Class II directors will each
serve a three-year term and until their successors are elected and qualified. Each of the nominees
has consented to serve on the Board of Directors if elected. Should any nominee become unable to
accept nomination or election, which is not anticipated, it is the intention of the persons named
in the proxy, unless otherwise specifically instructed in the proxy, to vote for the election of
such other person as the Board of Directors may nominate.
Set forth below are the name, age and director class of each director nominee and director
continuing in office following the annual meeting and the period during which each has served as a
director.
The Boards Nominees for Class II Directors are:
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Nominee |
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Service as Director |
Patrick G. Dills (1,2)
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53 |
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Since March 2006 |
N. Colin Lind (3)
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51 |
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Since March 2006* |
The Board of Directors of the Company recommends a vote FOR the election of each of the
nominees named above for election as director.
3
Directors Continuing in Office
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Term |
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Continuing Director |
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Age |
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Class |
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Expires |
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Service as Director |
David A. Cole (2,3)
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64 |
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Class III
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2008
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Since February 2003 |
Eugene I. Davis (1,2)
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52 |
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Class I
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2009
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Since March 2006 |
Philip J. Mazzilli, Jr. (1)
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66 |
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Class III
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2008
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Since March 2006 |
James B. McCurry
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58 |
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Class I
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2009
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Since July 2005 |
Steven P. Rosenberg (3)
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48 |
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Class I
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2009
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Since March 2006 |
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Member of the Audit Committee. |
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Member of the Compensation Committee. |
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Member of the Nominating and Corporate Governance Committee. |
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Mr. Lind previously served as director from May 2002 to October 2005. |
Information about Nominees for Election as Class II Directors
whose Terms will Expire at the 2010 Annual Meeting of Shareholders
Patrick G. Dills is Executive Chairman of the Board of Medical Services Company, a nationwide
leader in the delivery of medical products and pharmacy services to the workers compensation and
healthcare industries. Prior to joining Medical Services Company in February 2006, Mr. Dills
served from 1988 to 2005 in several executive roles at First Health Group Corp. with his last
position being Executive Vice President. He was also President of CCN and Health Net Plus, which
were wholly owned subsidiaries of First Health Group Corp., from 2001 to 2005 and 2003 to 2005,
respectively. First Health Group is a full service managed health care company providing cost
management services to large multi-state payors.
N. Colin Lind has been with Blum Capital Partners L.P. (and its predecessor Richard C. Blum &
Associates, Inc.) (Blum L.P.), a strategic equity investment firm, since 1986. He is the
Managing Partner for Blum L.P., which is responsible for managing approximately $3.7 billion in
assets. Mr. Lind is on the Board of Kinetic Concepts, Inc., a leading manufacturer and marketer of
therapeutic products and related medical devices.
Information about the Class I Directors
whose Terms will Expire at the 2009 Annual Meeting of Shareholders
Eugene I. Davis has served as Chairman and Chief Executive Officer of Pirinate Consulting
Group (PGG) from its founding in 1999. PGG specializes in crisis and turn-around management,
liquidation and sales management and merger and acquisition consulting. Since May 2005, Mr. Davis
has served as Chief Executive Officer of Golden Northwest Aluminum, Inc., which is an aluminum
manufacturing company. From 1998 to 1999, Mr. Davis was the Chief Operating Officer of Total-Tel
USA Communications, Inc., an integrated telecommunications provider to small and medium-sized
businesses. Prior to joining Total-Tel Communications, for six years Mr. Davis served as a
director and in several executive roles, including President and Vice Chairman for Emerson Radio
Corp., an international distributor of consumer electronics.
Mr. Davis is a member of the
board of directors of Delta Air Lines, Inc. and also serves on the board of directors of Knology, Inc., Atlas Air Worldwide Holdings, Inc.,
American Commercial Lines, Inc., Footstar, Inc., Silicon Graphics, Inc., Ion Media Networks, Inc.,
Foamex International, Inc., McLeodUSA Incorporated, Haights Cross Communications and Viskase
Companies, Inc. From 2001 to 2004, Mr. Davis served in various executive positions including
Chairman, Chief Executive Officer and President of RBX Industries, Inc., a manufacturer and
distributor of foam products. RBX Industries, Inc. filed a voluntary petition for reorganization
under Chapter 11 in March 2004.
4
James B. McCurry was elected President and Chief Executive Officer of the Company in July 2005
and Chairman of the Board of Directors in March 2006. Prior to joining the Company in 2005, Mr.
McCurry was with FedEx Kinkos, a wholly-owned subsidiary of FedEx, from March of 2003 to July of
2005, where he was President of the Printing Division. From May 2001 until March 2003, Mr. McCurry
was an independent management consultant. From May 2000 until May 2001, Mr. McCurry was Chief
Executive Officer of an e-commerce subsidiary of Fleming Companies, Inc., a retail distribution
company. For three years prior to joining Fleming, Mr. McCurry was a partner with Bain & Company,
an international management consulting firm. Mr. McCurry is a member of the Board of Directors of
Interstate Hotels and Resorts, Inc., the nations largest independent hotel management company.
Steven P. Rosenberg is President of SPR Ventures, Inc., a private investment company he
founded in 2000. From 1992 to 1997 he was President of the Arrow subsidiary of ConAgra Foods Inc.,
a packaged food company. He has been a director of Texas Capital Bancshares, Inc., a bank holding
company, since 2001.
Information about the Class III Directors
whose Terms will Expire at the 2008 Annual Meeting of Shareholders
David A. Cole is Chairman Emeritus of the Board of Kurt Salmon Associates, Inc. (KSA), an
international management consulting firm serving the retail, consumer products and health care
industries and has served in that position since 2001. He was appointed president of KSA in 1983,
served as its chief executive officer from 1988 through 1998 and served as its chairman from 1988
to 2001. Mr. Cole currently serves as a director of AMB Property Corporation, a global owner and
operator of industrial real estate. Mr. Cole also currently serves on the Deans Advisory Council
of Goizueta Business School at Emory University.
Philip J. Mazzilli, Jr. is a financial and general business consultant. From 2001 to 2003 he
was Executive Vice President and Chief Financial Officer of Equifax Corporation, an international
provider of consumer credit information and information database management. From 1999 to 2000 he
was Executive Vice President and Chief Financial Officer of Nova Corporation, a payment services
company. Since 2004, Mr. Mazzilli has served as a director of Delta Apparel, an apparel
manufacturer.
Messrs. Eugene I. Davis, Patrick G. Dills, N. Colin Lind, Phillip J. Mazzilli, Jr., and Steven
P. Rosenberg were initially selected for appointment to the Board by the previous Board in
consultation with the Ad Hoc Bondholders Committee pursuant to a restructuring support agreement
which was entered into with the Ad Hoc Bondholders Committee in furtherance of the Companys
restructuring and exchange offer which closed on March 17, 2006 (the Restructuring Support
Agreement). As a result of the completion of the restructuring and exchange offer, the terms of
the Restructuring Support Agreement are no longer in effect.
Blum L.P., pursuant to its Investor Rights Agreement with the Company, as amended (the
Investor Rights Agreement), has the right to name one nominee for election to the Board. This
right is currently satisfied by the nomination for election at the annual meeting of Mr. Lind to a
three-year term as a Class II director. Also pursuant to the Investor Rights Agreement, Blum L.P
has the right to designate an observer to attend the Companys Board meetings. See Certain Transactions.
5
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD DIRECTOR
Independence
The Board of Directors has evaluated the independence of each Board member and has determined
that the following directors, which constitute a majority of the Board, are independent in
accordance with the Nasdaq and SEC rules governing director independence: Messrs. Cole, Davis,
Dills, Lind, Mazzilli and Rosenberg.
Meetings of the Board of Directors
and Attendance at the Annual Meeting of Shareholders
During 2006, there were 10 meetings of the Board of Directors. Each incumbent director
attended more than 75 percent of the aggregate of all meetings of the Board of Directors held while
he was a director and any committees on which that director served.
The Board of Directors does not have a policy requiring director attendance at the annual
shareholders meeting. However, directors are encouraged to attend. Three directors attended the
2006 Annual Meeting of Shareholders.
Director Compensation
The following table presents information relating to total compensation of the directors for
the fiscal year ended December 31, 2006. Information with respect to the compensation of Mr.
McCurry is included below under Executive Compensation.
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Change in |
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Pension Value |
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and |
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Nonqualified |
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Deferred |
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or Paid |
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All Other |
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Awards(1) |
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Earnings |
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Compensation |
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Total |
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($) |
David A. Cole |
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$ |
94,500 |
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253,730 |
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348,230 |
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Gerald E. Daniels(2) |
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42,000 |
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42,000 |
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Eugene I. Davis |
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33,500 |
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31,789 |
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65,289 |
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Patrick G. Dills |
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29,500 |
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31,789 |
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61,289 |
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Garth H. Greimann(2) |
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39,500 |
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39,500 |
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N. Colin Lind |
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24,500 |
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31,789 |
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56,289 |
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Philip J. Mazzilli, Jr. |
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37,000 |
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31,789 |
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68,789 |
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Thomas S. Robertson(2) |
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30,000 |
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30,000 |
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Steven P. Rosenberg |
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24,500 |
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31,789 |
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56,289 |
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Jimmy W. Woodward(2) |
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44,500 |
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44,500 |
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(1) |
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Represents the compensation expense recorded in 2006 computed in accordance with
Statements of Financial Accounting Standards No. 123R (FAS 123R), Share-Based Payment.
Additional information about assumptions used in these calculations is available in Note
1(o) to the Companys Consolidated Financial Statements in the Companys Form 10-K for the
year ended December 31, 2006. |
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Resigned as a director effective March 30, 2006. |
6
Each nonemployee member of the Board is paid a $30,000 annual retainer for their service
on the Board and any of its committees. Chairs of each of the Compensation Committee and the
Nominating and Corporate Governance Committee are paid a supplemental retainer of $6,000 per year.
The Chair of the Audit Committee is paid a supplemental retainer of $12,000 per year. Non-employee
Directors also receive an additional $1,500 attendance fee for attendance at Board meetings and the
annual meeting of shareholders, and an additional $1,000 attendance fee for attendance at committee
meetings of which they are a member. Directors are reimbursed for all out-of-pocket expenses, if
any, incurred in attending Board and committee meetings.
In 2005, the Company entered into a Retainer Agreement with Mr. Cole in connection with his
service as non-executive Chairman of the Board. Under the terms of the Retainer Agreement, Mr.
Cole received a non-qualified option to purchase 45,000 shares of the common stock of the Company
at an exercise price of $31.60 per share, equal to the closing price of the Companys common stock
on the Nasdaq National Market on July 29, 2005, as adjusted to give effect to the reverse stock
split effected in August 2006. The terms of Mr. Coles option grant are as follows: the
time-vesting tranche of his option, representing the right to purchase 15,000 shares was initially
scheduled to become exercisable on the earlier of the 2006 annual meeting of shareholders and June
30, 2006, but was accelerated with all of the other out-of-the-money options on December 15, 2005,
in order avoid adverse accounting consequences; and the performance-vesting tranche, representing
the balance of his option, will be exercisable as follows: (a) Tier 1, representing the right to
purchase 10,000 shares will become exercisable at any time after June 30, 2006 (the 2006 Vesting
Date), if the Company attains a specified target common stock trading price for 45 consecutive
trading days after the 2006 Vesting Date; (b) Tier 2, representing the right to purchase an
additional 10,000 shares will become exercisable at any time after the 2006 Vesting Date, if the
Company attains a specified target common stock trading price for 45 consecutive trading days after
the 2006 Vesting Date; and (c) Tier 3, representing the right to purchase an additional 10,000
shares, will become exercisable at any time after the earlier of the 2007 annual meeting of
shareholders and June 30, 2007 (the 2007 Vesting Date), if the Company attains a specified target
common stock trading price for 45 consecutive trading days after the 2007 Vesting Date. Unless
sooner terminated, the option will expire on July 29, 2012. As of the date hereof, none of the
target trading prices have been attained and therefore, none of the performance-vesting options
have vested. Prior to March 30, 2006, Mr. Cole was also entitled to a supplemental monthly
retainer, in addition to the regular retainer paid to the non-employee directors, of $5,000.
However, upon the election of Mr. McCurry as Chairman of the Board, payment of the supplementary
retainer was ceased. Mr. Cole remains eligible for the annual retainer and attendance fees
applicable to the Board and board committees generally.
In September 2006, the Board established the position of Presiding Director to oversee
meetings of the independent members of the Board. The Presiding Director is elected by the
independent members of the Board for a one year term. Currently, Patrick G. Dills serves as
Presiding Director.
In addition to cash compensation, the Board may grant nonqualified stock option grants to the
nonemployee directors from time to time. On September 21, 2006, options to purchase 29,000 shares
of the Companys common stock were granted to each of the Companys non-employee directors. All of
these options have an exercise price of $6.29, the fair market value of the Companys common stock
on the date of grant, and vest in three equal installments on March 30, 2007, 2008 and 2009. These
options expire in 2013.
7
Audit Committee
The Companys Audit Committee consists of three independent directors: Messrs. Davis, Dills
and Mazzilli. Mr. Mazzilli currently serves as Chairman of the Audit Committee, and the Board has
determined that Mr. Mazzilli is an audit committee financial expert, as such term is defined in
Item 407(d) of SEC Regulation S-K. The Board of Directors has determined that the current Audit
Committee members satisfy the independence criteria included in the current listing standards
established by the NASD for companies listed on the Nasdaq Global Market and by the SEC for audit
committee membership. The Audit Committee met seven times in 2006. The Audit Committee has sole
authority to retain the Companys independent auditors and reviews the scope of the Companys
annual audit and the services to be performed for the Company in connection therewith. The Audit
Committee also formulates and reviews various Company policies, including those relating to
accounting practices and the internal control structure of the Company, and the Companys
procedures for receiving and investigating reports of alleged violations of the Companys policies
and applicable regulations by the Companys directors, officers and employees. The Audit Committee
also reviews and approves any related party transactions. The Board has adopted a written Audit
Committee Charter which is available at the Companys website address: www.prgx.com or upon
written request to the Secretary of the Company at 600 Galleria Parkway, Suite 100, Atlanta, GA
30339. See Report of the Audit Committee.
Audit Committee Pre-Approval Policies and Procedures. Each engagement of the Companys
principal accountants for audit and non-audit related services and its associated projected fees is
approved by the Audit Committee in advance of such engagement.
Compensation Committee
The Companys Compensation Committee consists of three independent directors: Messrs. Cole,
Davis and Dills. Mr. Davis is Chairman of the Compensation Committee. The Board of Directors has
determined that each of the Compensation Committee members is independent based on the current
listing standards established by the NASD for companies listed on the Nasdaq Global Market. The
Compensation Committee held six meetings in 2006. The Compensation Committee determines the
compensation of the executive officers of the Company. The Compensation Committee also administers
the Companys benefit plans, including the Stock Incentive Plan, the Performance Bonus Plan, and
the 2006 Management Incentive Plan and makes recommendations to the Nominating and
Corporate Governance Committee regarding director compensation. All rights to determine awards of
stock-based compensation to individuals who file reports pursuant to Section 16 of the Securities
Exchange Act of 1934 (the Exchange Act) are determined by the Compensation Committee, each member
of which is a nonemployee director, as such term is defined in Rule 16b-3 promulgated pursuant to
the Exchange Act and is an outside director, as such term is defined in the regulations
promulgated pursuant to Section 162(m) of the Internal Revenue Code of 1986 (the Code). The
Compensation Committees charter requires that all members of the Committee shall be independent
from the Company and that at least two members shall satisfy the definition of nonemployee
director described above. The Compensation Committee Charter is available at the Companys website
address: www.prgx.com and upon written request to the Secretary at 600 Galleria Parkway, Suite
100, Atlanta, GA 30339. For information regarding determination of the Companys 2006 executive
compensation, see Compensation Discussion and Analysis.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee (NCG Committee) consists of three
independent directors: Messrs. Cole, Lind and Rosenberg. The Board of Directors has determined
that
8
each of the NCG Committee members is independent based on the listing standards established by
the NASD for companies listed on the Nasdaq Global Market. Mr. Cole serves as Chairman of the
NCG Committee. The NCG Committee
met one time in 2006. The Nominating and Corporate Governance Committee has the responsibility to
consider and recommend nominees for the Board of Directors and its committees, to oversee review
and assessment of the performance of the Board, set Board compensation, and monitor and recommend
governance principles and guidelines for adoption by the Board.
Since February 2003, the NCG Committee has been delegated the responsibility for evaluating
current Board members at the time they are considered for re-nomination. After considering the
appropriate skills, expertise and experience needed on the Board, the independence, expertise,
experience, skills and performance of the current membership of the Board, and the willingness of
Board members whose terms are expiring to be re-nominated, the NCG Committee recommends to the
Board whether those directors should be re-nominated.
In preparation for the Annual Meeting, the NCG Committee considers whether the Board would
benefit from adding a new member, and if so, the skills, expertise and experience to be sought with
the new member. If the Board determines that a new member would be beneficial, the NCG Committee
sets the qualifications for the position and conducts a search to identify qualified candidates.
Such search may utilize the services of an executive search firm that would receive a fee for its
services. The NCG Committee (or its Chairman) screens the available information about the
potential candidates. Based on the results of the initial screening, interviews with the viable
candidates are scheduled with NCG Committee members, other members of the Board and senior members
of management. Upon completion of these interviews and other due diligence, the NCG Committee may
recommend to the Board the election or nomination of a candidate. All potential candidates,
regardless of whether they are developed through the executive search firm or otherwise, are
reviewed and evaluated under the same process.
When an executive search firm is engaged, using the desired qualifications identified by the
NCG Committee, the search firm performs research to identify and qualify potential candidates,
contacts such qualified candidates to ascertain their interest in serving on the Companys board,
collects resumes and other data about the interested candidates and recommends candidates for
further consideration by the NCG Committee.
The NCG Committee has no set minimum criteria for selecting Board nominees, although its
preference is that a substantial majority of all non-executive directors possess the qualifications
of independence that satisfy the listing standards established by the NASD for companies listed on
the Nasdaq Global Market; significant leadership experience at the corporate level in substantial
and successful organizations; relevant, but non-competitive, business experience; the ability and
commitment to devote the time required to fully participate in Board and committee activities;
strong communication and analytical skills; and a personality that indicates an ability to work
effectively with the other members of the Board and management. In any given search, the NCG
Committee may also define particular characteristics for candidates to balance the overall skills
and characteristics of the Board with the perceived needs of the Company. The NCG Committee
believes that it is necessary for at least one independent Board member to possess significant
operational experience, and at least one with financial expertise. However, during any search the
NCG Committee reserves the right to modify its stated search criteria for exceptional candidates.
The NCG Committee will also consider nominating candidates recommended by shareholders. Such
recommendations will only be considered by the NCG Committee if they are submitted to the NCG
Committee in accordance with the requirements of the Companys Bylaws and accompanied by all the
information that is required to be disclosed in connection with the solicitation of proxies for
election of
9
director nominees pursuant to Regulation 14A under the Exchange Act, including the candidates
written consent to serve as director, if nominated and elected. To be considered by the NCG
Committee, shareholder recommendations for director nominees to be elected at the 2008 Annual
Meeting of Shareholders, together with the requisite consent to serve and proxy disclosure
information in written form, must be received by Victor A. Allums, Secretary, at the offices of the
Company at 600 Galleria Parkway, Suite 100, Atlanta, Georgia 30339, no earlier than January 10,
2008 and no later than February 9, 2008.
As of April 30, 2007, the Company had not received any shareholder recommendations of director
candidates for election at the 2007 Annual Meeting.
The NCG Committee is a standing committee of the Board and its charter is available at the
Companys website address: www.prgx.com or upon written request to the Secretary of the Company at
600 Galleria Parkway, Suite 100, Atlanta, GA 30339.
Shareholder Communications to the Board of Directors
In addition to recommendations for director nominees, the Board of Directors welcomes hearing
from shareholders regarding the management, performance and prospects for the Company. To
facilitate complete and accurate transmittal of shareholder communications to the directors, it is
requested that all shareholder communication to the Board or any of its members be made in writing
and addressed to the Companys Secretary, Victor A. Allums, at PRG-Schultz International, Inc., 600
Galleria Parkway, Suite 100, Atlanta, Georgia 30339. It is also helpful if the communication
specifies whether it is directed to one or more individual directors, all the members of a Board
committee, the independent members of the Board, or all members of the Board and the address to
which any reply should be addressed. On receipt, Mr. Allums will forward the communication to the
director(s) to whom it is addressed as specified by the shareholder. If the shareholder does not
specify which directors should receive the communication, Mr. Allums will distribute the
communication to all directors.
10
REPORT OF THE AUDIT COMMITTEE
The purpose of the Audit Committee is to assist the Board in its general oversight of the
Companys financial reporting, internal controls and audit functions. The Board has adopted a
written Audit Committee Charter that sets out the organization, purpose, duties and
responsibilities of the Audit Committee.
Management is responsible for the preparation, presentation and integrity of the Companys
financial statements; accounting and financial reporting principles; establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and
maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f));
evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of
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. The Companys independent accountants are responsible
for performing an independent audit of the consolidated financial statements and expressing an
opinion on the conformity of those financial statements with U.S. generally accepted accounting
principles, as well as expressing an opinion on managements assessment of the effectiveness of
internal control over financial reporting and the effectiveness of internal control over financial
reporting.
In fulfilling its oversight responsibilities with respect to the year ended December 31, 2006,
the Audit Committee:
|
|
|
reviewed and discussed the consolidated financial statements of the Company set
forth in the Companys Annual Report on Form 10-K for the year ended December 31, 2006
with management of the Company and BDO Seidman, LLP, independent public accountants for
the Company; |
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|
discussed with BDO Seidman, LLP the matters required to be discussed by
Statement on Auditing Standards No. 61, Communications with Audit Committees, as
modified and supplemented to date; |
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|
received the written disclosures and the letter from BDO Seidman, LLP required
by Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as modified and supplemented to date, and discussed with BDO Seidman, LLP
its independence from the Company; and |
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|
based on the review and discussions with management of the Company and BDO
Seidman, LLP referred to above, recommended to the Board of Directors that the audited
financial statements be included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2006. |
AUDIT COMMITTEE
Philip
J. Mazzilli, Jr., Chairman
Eugene I. Davis
Patrick G. Dills
Notwithstanding anything to the contrary which is or may be set forth in any of the Companys
filings under the Securities Act of 1933 or the Exchange Act that might incorporate Company
filings, including this proxy statement, in whole or in part, the preceding Report of the Audit
Committee shall not be incorporated by reference into any such filings.
11
COMPENSATION DISCUSSION AND ANALYSIS
As discussed above under Information About the Board of Directors and Committees of the
Board of Directors, the Compensation Committee of the Board of Directors has the overall
responsibility for approving and evaluating the director and officer compensation plans, policies
and programs of the Company. The Compensation Committee approves the compensation of each of the
Companys named executive officers as well as other key officers of the Company (which is defined
in the Compensation Committees charter to include those officers that directly report to the Chief
Executive Officer) and recommends the compensation of directors for approval by the Nominating and
Corporate Governance Committee of the Board of Directors. The Compensation Committee consists of
three members who are independent directors under the Companys corporate governance guidelines
and the rules of The Nasdaq Stock Market LLC.
Compensation Philosophy
The Company strives to establish compensation practices which attract, retain and reward its
key officers, and strengthen the mutuality of interests between its key officers and the Companys
shareholders. The Company believes that the most effective executive compensation program is one
that is conservative, but competitive, and which aligns long-term compensation to the creation of
shareholder value.
In the latter half of 2005 and into 2006, following the arrival of the Companys new Chief
Executive Officer in July 2005, the Company undertook a significant financial and operational
restructuring with the objective of improving the Companys operating results and strengthening the
Companys financial condition. During this same time period, there was significant turnover among
the members of the Companys senior management team, resulting in the hiring of a new Chief
Financial Officer and several other executive officers. In addition, several members of the Board
of Directors were replaced at the conclusion of the financial restructuring, including all of the
members of the Compensation Committee. The primary compensation initiatives that resulted from the
Companys financial restructuring were the creation of the Management Incentive Plan (an
equity-based incentive plan) (the MIP) and the Performance Bonus Plan (a cash incentive bonus plan) to create
incentives for the Companys key officers, including the named executive officers, to improve the
Companys operating results in 2006 and beyond. The terms of the Restructuring Support Agreement
entered into with certain of the Companys bondholders contemplated that the Company would adopt a
new Management Incentive Plan as part of the financial restructuring. The Management Incentive
Plan was approved by the Companys shareholders at the 2006 Annual Meeting of Shareholders which
was held in August 2006. Both of these plans are discussed in more detail below.
Elements of the Companys Compensation Program
The Companys compensation program for its key officers is designed to provide the Companys
key officers with a combination of cash (guaranteed and incentive-based) and equity-based
compensation to align the officers interests with the Companys shareholders. During 2006, the
Companys executive compensation program primarily consisted of the following elements:
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base salary; |
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cash bonuses; and |
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grants of performance units. |
The Compensation Committee has not established a policy for allocating between the different
12
forms of compensation. Instead, the Compensation Committee strives to achieve an appropriate
mix between the different forms of compensation in order to (i) motivate the named executive
officers to deliver superior performance in the short-term by providing competitive base salaries
and annual incentive cash bonuses, (ii) align the interests of the named executive officers with
the long-term interests of the shareholders through the grant of equity-based compensation, which
took the form of MIP performance units in 2006, and (iii) provide an overall compensation package that
promotes executive recruitment and retention.
Process for Establishing Executive Compensation
The Company has entered into employment agreements with all of the named executive officers
which form the primary basis for each of these officers compensation. While each of these
officers employment agreements contains substantially the same elements of compensation, the
individual terms of the agreements were established through arms length negotiations.
In 2005, the compensation package of James B. McCurry, the Companys President and Chief
Executive Officer, was established through arms length negotiation in a process that was led by
the specially appointed Search Committee of the Board of Directors, with input from members of both
the Nominating and Corporate Governance Committee and the Compensation Committee. The independent
directors participating in this process considered a number of factors in negotiating Mr. McCurrys
compensation package, including the level of compensation he was then receiving from his former
employer, the unique challenges facing the Company at that time, including those inherent in any
CEO succession, and Mr. McCurrys unique skills and qualifications to lead the Company through a
critical time. In addition, the Compensation Committee engaged Mercer Human Resource Consultants,
an outside compensation consultant, to provide advice regarding the appropriate level of
compensation for Mr. McCurry in 2005. Based upon the information supplied by the compensation
consultant, Mr. McCurrys 2005 base salary was set at slightly above the 50th percentile
of base salaries of CEOs in companies of comparable size, and his bonus amount was set at the
70th percentile of bonuses for CEOs in companies of comparable size. Mr. McCurrys
bonus was pegged to a higher percentile in order to overweight the performance-based portion of Mr.
McCurrys cash compensation. In connection with the negotiation of Mr. McCurrys employment
agreement, the Compensation Committee decided to eliminate the practice of providing the Chief
Executive Officer and other executive officers with certain perquisites that had historically been
provided to the Companys executive officers prior to Mr. McCurrys arrival.
Given the significant amount of attention that was devoted to the financial and operational
restructuring in the first half of 2006 and the fact that Mr. McCurry was hired in the middle of
2005, no review of Mr. McCurrys performance was conducted during 2006.
The Chief Executive Officer annually reviews the performance of each of the other named
executive officers and makes recommendations to the Compensation Committee regarding compensation
for the other named executive officers. Based upon the recommendations made by the Chief Executive
Officer, the Compensation Committee then determines the amount of compensation for the other named
executive officers for the upcoming year. With respect to these other officers, the Compensation
Committee and Mr. McCurry consider multiple factors in establishing the terms of their executive
compensation packages including survey data regarding the compensation of other comparable
executive officers at comparable companies, the level of compensation each executive had most
recently earned and the skills and previous relevant experience of each executive.
At the time of the hiring of Mr. McCurry, the Search Committee was also searching for a Chief
Financial Officer candidate. Accordingly, in connection with the negotiation of Mr. Limeris
employment agreement in late 2005, the Compensation Committee utilized similar data provided by the
13
compensation consultant used in Mr. McCurrys hiring. In connection with the hiring of Mr.
White in June 2006, in order to ensure that his compensation was properly benchmarked, the
Compensation Committee reviewed survey data from the Economic Research Institute which provides
geographic-specific survey data derived from 14,000 U.S. publicly-traded corporations proxy
statements, annual and other reports filed with the SEC (1994 to present), loan and employment
applicant earnings verifications and digitized public records. The Compensation Committee
established parameters for Mr. Whites compensation based upon benchmarks for the business services
industry by surveying companies with $250-$500 million in revenue and targeting the 60th
percentile of the survey data. With respect to the other named executive officers, Messrs. Roos
and Robinson, their compensation packages were primarily established prior to the arrival of Mr.
McCurry; however, annual adjustments to their compensation packages are established as set forth in
the preceding paragraph.
Base Salary
The annual base salary component of the Companys executive compensation program provides each
named executive officer with a fixed minimum amount of annual cash compensation. Salaries for the
Companys named executive officers are generally determined through their employment agreements,
subject to annual review and adjustment by the Compensation Committee. Since the Company was
conducting a financial restructuring in late 2005, the Compensation Committee decided not to award
to any named executive officer that was employed at the end of 2005 with any increase in base
salary for 2006.
The following table sets forth the 2006 base salaries paid by the Company to each of our named
executive officers:
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James B. McCurry |
|
$ |
500,000 |
|
Peter Limeri |
|
$ |
220,000 |
|
Bradley T. Roos |
|
$ |
323,000 |
|
Larry Robinson |
|
$ |
371,561 |
|
N. Lee White |
|
$ |
168,750 |
* |
James E. Moylan, Jr. (former CFO) |
|
$ |
60,189 |
** |
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|
|
* |
|
Mr. White joined the Company in June 2006. |
|
** |
|
Mr. Moylan resigned from the Company in February 2006. |
Cash Bonus
2006 Performance Bonus Plan
The Company provided cash bonus awards to certain of its senior employees, including all of
the named executive officers, through the 2006 Performance Bonus Plan. The 2006 Performance Bonus
Plan was an annual cash incentive program designed to recognize and reward employees who make
significant contributions towards achieving the Companys annual business plan.
Cash bonuses awarded under the 2006 Performance Bonus Plan were contingent upon the Companys
operating results and the achievement of certain financial performance objectives. Under the terms
of the 2006 Performance Bonus Plan, no bonuses were to be earned under the plan until the Companys
consolidated 2006 EBITDA before certain restructuring and other charges (adjusted EBITDA) reached
a specified target level. If the threshold level of adjusted EBITDA was achieved, then all
adjusted EBITDA above the threshold was to be allocated to a target bonus pool not to exceed the
amount equal to the aggregate target bonuses for all participants. If consolidated 2006 adjusted
EBITDA
14
exceeded the specified minimum level, plus the aggregate target bonuses for all participants, then
50% of such excess was to be allocated to another bonus pool up to a specified maximum amount, and
such additional bonus pool was to be paid out to plan participants in amounts not to exceed the
difference between such participants maximum bonus and target bonus amounts. Each of the
named executive officers was eligible to participate in the 2006 Performance Bonus Plan. The bonus
amounts payable upon the achievement of the annual target adjusted EBITDA goal and the annual
maximum adjusted EBITDA goal in 2006 are set forth as percentage of base salary in each named
executive officers employment agreement.
The annual target and maximum adjusted EBITDA goals under the 2006 Performance Bonus Plan
were established by the Compensation Committee in January 2006. Since it is the primary measure
used by the Company to measure and manage its operating performance, the Compensation Committee and
the Chief Executive Officer believed that adjusted EBITDA was the most appropriate Company
financial measure to which bonus payments under the plan should be linked. The Compensation
Committee developed the target adjusted EBITDA and the maximum adjusted EBITDA goals based upon
estimates of the Companys future financial performance if the Company executed on the strategies
instituted during its financial restructuring and produced material improvements in operating
results. In setting these targets, the improvement in operating results required to reach the
maximum adjusted EBITDA goal in 2006 was significantly in excess of 2005 operating results and
was dependent upon the successful implementation of the financial restructuring. The target and
maximum adjusted EBITDA goals contained in the 2006 Performance Bonus Plan were established by
the Compensation Committee after the Company has undertaken its annual financial planning and
budgeting process. In 2007, the Compensation Committee has again used adjusted EBITDA as the
financial performance measure for the 2007 Performance Bonus Plan. In order to meet the target
adjusted EBITDA goal in 2007, the Company will need to achieve the adjusted EBITDA reflected in the
Companys operating budget as approved by the Board of Directors, which budget calls for adjusted
EBITDA results substantially greater than the 2006 operating budget and also greater than actual
2006 adjusted EBITDA results. Achievement of the maximum adjusted EBITDA goal will require that
the Companys financial results for 2007 significantly exceed the Companys 2007 operating budget
as approved by the Board of Directors.
Mr. McCurry was eligible under his employment agreement to earn an annual performance bonus
under the 2006 Performance Bonus Plan as follows: (i) upon the achievement of the annual target
adjusted EBITDA goal, a bonus equal to 70% of his base salary and (ii) upon the achievement of the
annual maximum adjusted EBITDA goal, a bonus equal to 140% of his base salary. If the Companys
performance fell between the target and maximum adjusted EBITDA goals, Mr. McCurry was to
receive an amount between 70% and 140% of his base salary, according to a formula established by
the Compensation Committee.
Mr. Robinson was eligible under his employment agreement to earn an annual performance bonus
under the 2006 Performance Bonus Plan as follows: (i) upon the achievement of the annual target
adjusted EBITDA goal, a bonus equal to 45% of his base salary and (ii) upon the achievement of the annual
maximum adjusted EBITDA goal, a bonus equal to 85% of his base salary. If the Companys performance fell
between the target and maximum adjusted EBITDA goals, Mr. Robinson was to receive an amount between 45%
and 85% of his salary, according to a formula established by the Compensation Committee.
Mr. Limeri and Mr. Roos were eligible under their employment agreements to earn an annual
performance bonus under the 2006 Performance Bonus Plan as follows: (i) upon the achievement of the
annual target adjusted EBITDA goal, a bonus equal to 40% of their respective base salaries and (ii) upon
the achievement of the annual maximum adjusted EBITDA goal, a bonus equal to 80% of their respective base
salaries. If the Companys performance fell between the
target and maximum adjusted EBITDA goals, each
of
15
them was to receive an amount between 40% and 80% of their respective base salaries, according to a
formula established by the Compensation Committee.
Since
the Company achieved its annual maximum adjusted EBITDA performance goal for 2006, each of the
following named executive officers earned the following maximum bonus amounts which were paid in
the first quarter of 2007:
|
|
|
|
|
James B. McCurry |
|
$ |
700,000 |
|
Peter Limeri |
|
$ |
176,000 |
|
Bradley T. Roos |
|
$ |
258,400 |
|
Larry Robinson |
|
$ |
300,501 |
|
Since Mr. White joined the Company in June 2006, his employment agreement was structured so
that he was entitled under to receive a bonus equal to 40% of his base salary prorated based upon
the number of days actually employed during fiscal year 2006. In order to bring the bonus paid to
Mr. White for 2006 in line with the other named executive officers for 2006, the Compensation
Committee elected in February 2007 to award Mr. White with an additional bonus of $69,808 which
resulted in Mr. White receiving a bonus equal to 80% of his base salary prorated based upon the
number of days Mr. White was actually employed during fiscal year 2006, or a total bonus of
$139,616.
In addition to the named executive officers, approximately 110 current U.S. and international
employees were eligible for participation in the 2006 Performance Bonus Plan. The Company paid
approximately $6,819,276 in cash bonuses to a total of 95 employees for the Companys achievement
of the annual maximum adjusted EBITDA performance goal.
Long-Term Incentive Compensation
Issuance of Stock Options and Restricted Stock
In order to align the interests of the Companys named executive officers and other key
management personnel responsible for the growth of the Company with the interests of the Companys
shareholders, the Company has established the Stock Incentive Plan, which provides for equity-based
awards. Because the Company does not maintain any qualified defined benefit retirement program,
the Stock Incentive Plan also provides grantees with the opportunity to accumulate additional
wealth to be used for retirement needs. In 2006, the Company did not issue any stock options or
restricted stock to the named executive officers or other employees under the Stock Incentive Plan.
It is the Companys practice to grant options with an exercise price equal to the closing price of
the Companys common stock on the date of grant. Although the Compensation Committee is
considering the adoption of a long term incentive program whereby equity (for instance, options or
restricted stock) will be granted annually to designated personnel, no formal action to adopt such
a program has yet been taken.
On September 29, 2006, the Company entered into an Option Termination Agreement with Mr.
McCurry. Under this agreement, Mr. McCurry voluntarily surrendered for cancellation his option to
purchase 200,000 shares of Company common stock, after giving effect to the Companys 1-for-10
reverse stock split effected on August 14, 2006, which option was granted on July 29, 2005, as part
of his initial employment package. The cancellation of such option accelerated the share-based
compensation expense that otherwise would have been recorded in future periods under Statement of
Financial Accounting Standards No. 123R, resulting in the aggregate acceleration of approximately
$1.7 million in the Companys share-based compensation expense. Mr. McCurry did not request or receive any
payment or compensation from the Company in connection with the cancellation. The cancelled option
had an exercise price of
16
$31.60 per share, but the remaining unvested portion of the option (150,000 shares) would have
vested only upon the achievement (and maintenance for 45 consecutive trading days) of closing
market prices of the Companys common stock ranging from $45 to $80 per share.
Issuance of Performance Units under Management Incentive Plan
In 2006, as contemplated by its financial restructuring, the Company modified its long-term
incentive program for key employees to include a performance share component to complement stock
option and restricted stock awards. This new component of the Companys long term incentive
program, the MIP, contains the material terms that were
delineated for such plan in the Restructuring Support Agreement that the Company entered into with
certain of its bondholders as part of the financial restructuring. The MIP was approved by the
independent members of the Board of Directors and the Compensation Committee, subject to the
approval of the Companys shareholders. In August 2006, the Companys shareholders approved the
adoption of the MIP. Under the MIP, the Compensation Committee may award performance units. All
key employees are eligible for participation in the MIP. The Compensation Committee has sole
discretion to designate which employees are key employees for this purpose. In September 2006,
the Compensation Committee granted performance units to the Chief Executive Officer and his direct
reports, all of whom are executive officers.
Each performance unit entitles the holder after the vesting of such performance unit to
receive on the payment date the fair market value of one share of the Companys common stock on
the payment date, subject to applicable tax withholding. The payment dates are established by
each participants performance unit agreement. Fair market value is generally defined as the
average closing price of the Companys common stock for a 30-day trading period prior to the
payment date, unless the Compensation Committee determines otherwise. Payments for vested
performance units on the payment date are to be made 40% in cash and 60% in shares of common stock
of the Company, except that all payments will be made in cash to the extent that there is not
sufficient authorized common stock available for issuance.
At the time of the adoption of the MIP in 2006, 40% of the Performance Units available for
issuance were reserved for issuance to the Chief Executive Officer. Under the terms of Mr. Whites
employment agreement, the Company agreed to use its best efforts to ensure that Mr. White
participated in the MIP at a level no less than the participation level of the members of the
Companys executive committee, and the agreement contemplated that Mr. White would receive grants
under the MIP of 12.5% of the common stock reserved for issuance under the plan. With respect to
the other named executive officers listed below, the Compensation Committee determined the amount
of performance units to be awarded based upon the recommendation of the Chief Executive Officer.
On September 29, 2006, the Compensation Committee approved the following awards of performance
units to the following named executive officers:
|
|
|
|
|
James B. McCurry |
|
295,048 performance units |
Peter Limeri |
|
73,762 performance units |
Bradley T. Roos |
|
55,322 performance units |
Larry Robinson |
|
55,322 performance units |
N. Lee White |
|
92,203 performance units |
One half of the total number of performance units vested upon the grant of such performance
units on September 29, 2006, and one half will vest in installments, equaling 1/36th of
the total number of
17
performance units granted beginning October 17, 2006 and continuing on the 17th day of
each succeeding month such that the performance units will be fully vested in March 2008. In
addition, performance units will automatically vest upon a change of control as defined under the
MIP. Performance units for each named executive officer other than Mr. White are held in a
deferred compensation account which is initially payable on April 30, 2011, subject to further
deferral under the terms of the MIP to a date no later than April 30, 2016. Mr. Whites
performance units are held in a deferred compensation account which is initially payable 25% on
April 30, 2008 and 75% on April 30, 2011.
Until payout, the performance units are subject to anti-dilution adjustment for certain
corporate events and conversions of the Companys Series A Preferred and 10% Senior
Convertible Notes up to a certain amount. As of December 31,
2006, the maximum number of
performance units issuable under the MIP was 2,285,159, which is equal to 10% of the sum of (i) the
number of shares of common stock outstanding on March 17, 2006, (ii) the number of shares of common
stock issued or issuable upon conversions of the Companys Series A Preferred and 10% Senior
Convertible Notes, (iii) the number of performance shares outstanding under the plan, and (iv) the
number of performance units that have been paid out.
401(k) Plan
The Company currently sponsors a 401(k) plan for all of its eligible employees. This plan
(the 401(k) Plan) is a tax-qualified retirement plan designed to meet the requirements of
Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. Under the 401(k) Plan,
participants may elect to make pre-tax savings deferrals of from 1 percent to 25 percent of their
compensation each year, subject to annual limits on such deferrals (e.g., $15,000 in 2006) imposed
by the Code. The Company may also in its discretion, on an annual basis, make a matching
contribution with respect to a participants elective deferrals and/or may make additional Company
contributions. The only form of benefit payment under the 401(k) Plan is a single lump-sum payment
equal to the vested balance in the participants account. Under the 401(k) Plan, the vested portion
of a participants accrued benefit is payable upon such employees termination of employment,
attainment of age 59 1/2, retirement, total and permanent disability or death. Participants may
also make in-service withdrawals from their pre-tax contributions under the plan for certain
specified instances of hardship.
Perquisites
The Company provides its named executive officers with perquisites and other personal benefits
that the Company and the Compensation Committee believe are reasonable and consistent with its
overall compensation program. The Company currently only provides perquisites to Mr. Roos and Mr.
Robinson, who are working outside of the United States. The perquisites made available to Mr. Roos
and Mr. Robinson include an auto allowance, life insurance, disability insurance, education
assistance, housing assistance, home leave travel, storage of household goods and tax preparation
expenses. In addition, Mr. Robinson receives a tax gross-up to reimburse him for certain tax
liabilities as a result of the receipt of these perquisites. Prior to Mr. Moylans resignation in
February 2006, the Company provided Mr. Moylan with an auto allowance and paid for a club
membership.
Income Deduction Limitations
Section 162(m) of the Code generally sets a limit of $1 million on the amount of compensation
that the Company may deduct for federal income tax purposes in any given year with respect to the
compensation of each of the named executive officers. However, certain performance-based
compensation that complies with the requirements of Section 162(m) is not included in the
calculation of the $1 million cap. The Compensation Committee has historically had a general policy
of structuring
18
performance-based compensation arrangements for its executive officers whose compensation might
exceed the $1 million cap in a way that will satisfy Section 162(m)s conditions for deductibility,
to the extent feasible and after taking into account all relevant considerations. However, it is
also true that the Company needs flexibility to pursue its incentive and retention objectives, even
if this means that a portion of executive compensation may not be deductible by the Company.
Accordingly, the Compensation Committee has from time to time approved elements of compensation for
certain officers that are not fully deductible, and may do so in the future under appropriate
circumstances.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and
Analysis section of this Proxy Statement with management and, based on such review and discussion,
the Compensation Committee recommends to the Board of Directors that it be included in this Proxy
Statement.
COMPENSATION COMMITTEE
Eugene I. Davis, Chairman
David A. Cole
Patrick G. Dills
Notwithstanding anything to the contrary which is or may be set forth in any of the Companys
filings under the Securities Act of 1933 or the Exchange Act that might incorporate Company
filings, including this proxy statement, in whole or in part, the preceding Compensation Committee
Report shall not be incorporated by reference into any such filings.
19
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the Company to the Chief
Executive Officer, the Chief Financial Officer and the other three most highly paid executive
officers of the Company in 2006, as well as James E. Moylan, Jr., the Companys former Chief
Financial Officer (collectively, the named executive officers).
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
Non-Equity Incentive |
|
All Other |
|
|
Name and |
|
Year |
|
Salary |
|
Bonus |
|
Awards |
|
Awards |
|
Plan Compensation |
|
Compensation |
|
Total |
Principal Position |
|
|
|
($) |
|
($) |
|
($) (2) |
|
($)(3) |
|
($) (4) |
|
($) |
|
($) |
James B. McCurry
Chairman, President and
Chief Executive
Officer (1) |
|
2006 |
|
$ |
500,000 |
|
|
|
|
|
|
$ |
1,489,067 |
|
|
$ |
2,567,623 |
(1) |
|
$ |
700,000 |
|
|
|
|
|
|
$ |
5,256,690 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Limeri
Chief Financial Officer (5) |
|
2006 |
|
|
220,000 |
|
|
|
|
|
|
|
372,267 |
|
|
|
28,332 |
|
|
|
176,000 |
|
|
|
|
|
|
|
796,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley T. Roos
Executive Vice President
and President
Europe (6) |
|
2006 |
|
|
323,000 |
|
|
|
|
|
|
|
320,455 |
|
|
|
|
|
|
|
258,400 |
|
|
|
368,655 |
|
|
|
1,179,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry Robinson
Senior Vice President
Asia Pacific, Latin
America and Canada (7) |
|
2006 |
|
|
371,561 |
|
|
|
|
|
|
|
279,203 |
|
|
|
|
|
|
|
300,501 |
|
|
|
38,880 |
|
|
|
990,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N. Lee White
Executive Vice President
U.S.(8) |
|
2006 |
|
|
168,750 |
|
|
|
69,808 |
|
|
|
465,336 |
|
|
|
|
|
|
|
69,808 |
|
|
|
4,981 |
|
|
|
778,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E. Moylan, Jr.
Former Executive
Vice President Finance,
Chief Financial Officer and Treasurer
(9) |
|
2006 |
|
|
60,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363,910 |
|
|
|
424,099 |
|
|
|
|
(1) |
|
Mr. McCurrys reported Option Awards compensation relates entirely to an inducement option award granted in
connection with his joining the Company in 2005. During 2006, Mr. McCurry voluntarily surrendered for cancellation his option
to purchase all shares under the grant, thus causing an acceleration of the related compensation expense.
This compensation expense was based on a Black-Scholes calculation of the expected value of the option at the time of its grant.
Because of the cancellation of the option, Mr. McCurry has not and will not realize any actual value from the option grant. |
|
(2) |
|
Stock Awards compensation reported for all named executive officers except for Mr. Roos
relates entirely to awards of Performance Units granted pursuant to the Companys 2006
Management Incentive Plan. See Compensation Discussion and Analysis Long-Term Incentive
Compensation Issuance of Performance Units under Management Incentive Plan for a
description of such plan. Mr. Roos Stock Awards compensation also includes $41,252 related
to a restricted stock award granted in 2005. Represents the compensation expense recorded
in 2006 computed in accordance with Statements of Financial Accounting Standards No. 123R
(FAS 123R), Share-Based Payment. Additional information about assumptions used in
these calculations is available in Note 1(o) to the Companys Consolidated Financial
Statements in the Companys Form 10-K for the year ended December 31, 2006. |
20
|
|
|
(3) |
|
Represents the compensation expense recorded in 2006 computed in accordance with
Statements of Financial Accounting Standards No. 123R (FAS
123R), Share-Based Payment.
Additional information about assumptions used in these calculations is available in Note
1(o) to the Companys Consolidated Financial Statements in the Companys Form 10-K for the
year ended December 31, 2006. |
|
(4) |
|
Non-Equity Incentive Plan Compensation reported for all named executive officers consists
of compensation earned pursuant to the Companys January 2006 Performance Bonus Plan; all of
which was paid in March 2007. See Compensation Discussion and Analysis Cash Bonus for a
description of the bonus plan. |
|
(5) |
|
Mr. Limeris reported Option Awards compensation relates entirely to an inducement option
award granted in connection with his joining the Company in 2005. |
|
(6) |
|
Mr. Roos reported Other Compensation includes education assistance and housing
assistance of $69,030 and $297,875, respectively. It also includes a $1,750 matching
contribution under the Companys 401(k) Plan. Amounts paid for education assistance and
housing assistance are paid in the British Pound. For purposes of this Proxy Statement,
such amounts have been converted to the U.S. Dollar using the average of all daily exchange
rates for the British Pound to the U.S. Dollar for 2006 (approximately US$1.84 per British Pound). |
|
(7) |
|
Mr. Robinsons reported Other Compensation includes life and health insurance related
supplements of $22,941 and an auto allowance of $15,939. Mr. Robinsons salary and bonus are paid in the
Canadian Dollar. For purposes of this Proxy Statement, such amounts have been converted to the
U.S. Dollar using the average of all daily exchange rates for the Canadian Dollar to the U.S.
Dollar for 2006 (approximately US$0.858 per Candian Dollar). |
|
(8) |
|
Mr. Whites reported Bonus represents a discretionary bonus which was paid in March 2007.
His reported Other Compensation relates to a reimbursement for professional services
incurred in connection with his employment. |
|
(9) |
|
Mr. Moylan left the Company in February 2006. Mr. Moylans reported Other Compensation
represents $360,577 of severance due to him pursuant to his separation agreement which is
being paid in 25 equal bi-weekly installments, which commenced in March 2006 and an auto
allowance of $3,333 paid for the period of 2006 in which Mr. Moylan was employed by the
Company. See Moylan Separation Agreement below for more information on Mr. Moylans
severance arrangement. |
Employment Agreements
The Company has entered into employment agreements with all of its current named
executive officers with the terms and conditions described below.
James B. McCurry. The Company and Mr. McCurry entered into an employment agreement with
an effective date of July 25, 2005, as amended on December 8, 2005. Under the terms of the
agreement, Mr. McCurry will serve as President and Chief Executive Officer of the Company. The
Companys Board of Directors is obligated to nominate him to the Board. Subject to shareholder
elections, he will serve on the Board through the term of his employment, with no additional
compensation for services as a director. Mr. McCurrys annual salary is $500,000 per year. The
Compensation Committee may increase his salary, but may not decrease his salary unless the Company
institutes a salary reduction generally applicable to senior executives of the Company. For fiscal
year 2006 and thereafter, Mr. McCurry will be eligible to earn an annual performance bonus as
follows: upon the achievement of annual target performance goals, established by the
Compensation Committee, a bonus equal to 70% of his salary, upon the achievement of annual
maximum performance goals, established by the Compensation Committee, a bonus equal to 140% of
base salary. If the Companys performance falls between the target and maximum performance
goals, he will receive an amount between 70% and 140% of his salary, according to a formula
established by the Compensation Committee. Mr. McCurry is eligible to participate in the Companys
standard benefits package, on the same basis as other senior executives of the Company. Mr.
McCurry will be entitled to four weeks of paid vacation per year. The agreement expires on July
25, 2008, subject to automatic renewal for a one-year term unless either party has given the other
30 days written notice.
Peter Limeri. The Company and Mr. Limeri entered into an employment agreement with an
effective date of November 7, 2005. The employment agreement with Mr. Limeri provides for him to
21
serve as Chief Restructuring Officer of the Company at an annual salary of $220,000. The
Compensation Committee may increase his salary, but may not decrease his salary unless the Company
institutes a salary reduction generally applicable to senior executives of the Company. Under the
terms of the agreement, Mr. Limeri has also been appointed Executive Vice PresidentFinance, Chief
Financial Officer and Treasurer of the Company. For fiscal year 2006 and thereafter, Mr. Limeri
will be eligible to earn an annual performance bonus as follows: upon the achievement of annual
target performance goals, established by the Compensation Committee, a bonus equal to 40% of his
salary, upon the achievement of annual maximum performance goals, established by the Compensation
Committee, a bonus equal to 80% of base salary. If the Companys performance falls between the
target and maximum performance goals, he will receive an amount between 40% and 80% of his
salary, according to a formula established by the Compensation Committee. Also under the
employment agreement, Mr. Limeri was also awarded options to purchase 50,000 shares of the
Companys common stock. Mr. Limeri is eligible to participate in the Companys standard benefits
package, on the same basis as other senior executives of the Company. Mr. Limeri will be entitled
to four weeks of paid vacation per year. The agreement expires on November 7, 2007, subject to two additional one-year extensions on each
of November 7, 2007 and November 7, 2008.
N. Lee White. The Company and Mr. White entered into an employment agreement with an
effective date of June 19, 2006. The employment agreement with Mr. White provides for him to serve
as Executive Vice President, U.S. of the Company at an annual salary of $325,000. The Compensation
Committee may increase his salary, but may not decrease his salary unless the Company institutes a
salary reduction generally applicable to senior executives of the Company. For fiscal year 2007
and thereafter, Mr. White will be eligible to earn an annual performance bonus as follows: upon
the achievement of annual target performance goals, established by the Compensation Committee in
advance of each fiscal year, a bonus equal to 40% of his salary, upon the achievement of annual
maximum performance goals, established by the Compensation Committee, a bonus equal to 80% of
base salary. If the Companys performance falls between the target and maximum performance
goals, he will receive an amount between 40% and 80% of his salary, according to a formula
established by the Compensation Committee. Also under the employment agreement, Mr. White is
entitled to participate in the Companys Management Incentive Plan. Mr. White is eligible to
participate in the Companys standard benefits package, on the same basis as other senior
executives of the Company. Mr. White will be entitled to four weeks of paid vacation per year.
The agreement expires on June 19, 2009, subject to a one-year extension if the agreement is not
terminated by either party upon 30 days notice.
Larry Robinson. The employment agreement with Mr. Robinson provides for him to serve as
President Canada, Latin America and Asia Pacific at an annual salary of $371,561. Mr. Robinson is
eligible for an annual performance bonus of between 45% and 85% of his base salary under the
Companys Performance Bonus Plan. Mr. Robinson is eligible to participate in the Companys
standard benefits package, on the same basis as other senior executives of the Company, and is
entitled to an annual automobile allowance of $15,939. Mr. Robinsons agreement is terminable
without cause by the Company or Mr. Robinson upon written notice to the other. Under Mr.
Robinsons agreement, all amounts to be paid are paid in the Canadian dollar. The amounts
reflected above represent the U.S. Dollar equivalent of the actual amounts paid in the Canadian
Dollar based on the average of all daily exchange rates for the Canadian Dollar to the U.S. Dollar
for 2006 (approximately US$0.858 per Candian Dollar).
Bradley T. Roos. The employment agreement with Mr. Roos provides for him to serve as
President Europe at an annual salary of $323,000, subject to periodic review and increase. Mr.
Roos is eligible for an annual performance bonus of between 40% and 80% of his base salary under
the Companys Performance Bonus Plan as more particularly described above under Compensation
Disclosure and Analysis Cash Bonus. Mr. Roos is eligible to participate in the Companys
standard benefits package, on the same basis as other senior executives of the Company. During the
period of Mr.
22
Roos expatriate assignment in the United Kingdom, he is entitled to the following
additional benefits and compensation: (a) housing assistance of
up to approximately $4,610 per week plus
utilities and a one-time furnishing allowance of $5,000, (b) certain relocation and temporary
living expenses, including payment for a one week house-hunting/orientation trip for Mr. Roos and
his spouse, reimbursement of temporary living expenses during the move period (not to exceed 30
days), reimbursement (in accordance with the Companys International Relocation Policy) for
expenses incurred in connection with the shipment of personal effects and shipment and storage of
certain household goods, and payment of a $5,000 relocation allowance and $2,000 per automobile if
sold as part of his relocation to the United Kingdom, (c) reimbursement (in accordance with the
Company relocation and travel policy) of the cost of two home leaves per year for Mr. Roos and his
family, (d) tax consultation and preparation assistance, (e) an education allowance of approximately $28,000 per child per year,
plus the cost of bus transportation to school, (f) a $6,000 annual allowance for local club dues,
and (g) an annual tax equalization benefit designed to ensure that Mr. Roos bears a total tax
liability approximately equivalent to the tax liabilities he would have incurred
if working for the Company in the United States. Upon completion of his assignment in the
United Kingdom, the Company will seek to provide a comparable position for Mr. Roos in the United
States and will pay the costs associated with the relocation of Mr. Roos and his family back to the
United States (including return transportation, temporary housing and tax counseling services). In
the event of Mr. Roos voluntary resignation from the Company, the Company is not responsible for
the costs associated with Mr. Roos return to the United States or relocation elsewhere. Mr. Roos
agreement is terminable by the Company for cause upon written notice, and upon 30 days written
notice without cause. Certain portions of the consideration payable
to Mr. Roos under his agreement are paid in the British Pound.
Such amounts have been converted to the U.S. Dollar equivalent
based on the average of all daily exchange rates for the British
Pound to the U.S. Dollar for 2006 (approximately U.S.$1.84 per British Pound).
23
Severance Arrangements
Under the terms of the employment agreements and other arrangements with its named executive
officers, the Company has agreed to make severance payments to the named executive officers upon
the termination of their employment. The following table shows the estimated payments and benefits
for each named executive officer under the various employment termination scenarios discussed above
assuming the triggering event took place on December 31, 2006. In accordance with SEC regulations,
we do not report any amount to be provided to a named executive officer under any arrangement which
does not discriminate in scope, terms, or operation in favor of our executive officers and which is
available generally to all salaried employees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death, |
|
|
|
|
|
|
Termination without |
|
|
|
|
|
|
|
|
|
Disability |
|
|
|
|
|
|
Cause or Resignation |
|
Termination |
|
Voluntary |
|
or |
|
Name |
|
Benefit |
|
|
with Good Reason |
|
with Cause |
|
Termination |
|
Retirement |
|
|
|
|
|
|
($) |
|
($) |
|
($) |
|
($) |
|
James B. McCurry |
|
Contractual Severance Payment(1) |
|
|
$ |
2,400,000 |
|
|
$ |
700,000 |
|
|
$ |
700,000 |
|
|
$ |
700,000 |
|
|
|
|
Continued participation in medical and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dental plans until he is eligible under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
another employers plan or for two years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
following termination(2) |
|
|
$ |
30,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Limeri |
|
Contractual Severance Payment(3) |
|
|
$ |
396,000 |
|
|
$ |
176,000 |
|
|
$ |
176,000 |
|
|
$ |
176,000 |
|
|
|
|
Amount equal to the Companys subsidy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
payments for Mr. Limeris health benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
until he is eligible under another |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
employers plan or for one year following |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
termination(4) |
|
|
$ |
3,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley T. Roos |
|
Contractual Severance Payment(5) |
|
|
$ |
581,400 |
(6) |
|
|
|
|
|
|
|
|
|
$ |
258,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry Robinson |
|
Contractual Severance Payment(7) |
|
|
$ |
371,561 |
|
|
|
|
|
|
|
|
|
|
$ |
300,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N. Lee White |
|
Contractual Severance Payment(8) |
|
|
$ |
394,808 |
|
|
$ |
69,808 |
|
|
$ |
69,808 |
|
|
$ |
69,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued participation in medical and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dental plans until he is eligible under |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
another employers plan or for one year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
following termination(9) |
|
|
$ |
16,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Upon termination without cause or resignation for good reason, Mr. McCurry is entitled to
a payment equal to two times his average compensation, including bonus. In all other
circumstances, Mr. McCurry is entitled to his prorated bonus for the year in which termination
occurs. Upon a change in control (as defined in the Performance Unit Agreement), all of Mr.
McCurrys Performance Units will vest in full. Therefore, if Mr. McCurrys employment with
the Company is terminated for any of the reasons above following a change of control, in
addition to the amounts set forth above, Mr. McCurry would also be entitled to the market
value of these additional Performance Units, which as of December 31, 2006 was $1,159,464. |
|
(2) |
|
Represents the Companys estimated costs for continuation of insurance as follows: COBRA
medical insurance $1,224.73 per month; and dental insurance $50.87 per month. |
|
(3) |
|
Upon termination without cause or resignation for good reason, Mr. Limeri is entitled to a
payment equal to his prorated bonus for the year in which the termination occurs plus 100% of
his base salary. In all other circumstances, Mr. Limeri is entitled to his prorated bonus for
the year in which termination occurs. Upon a change in control (as defined in the Performance
Unit Agreement), all of Mr. Limeris Performance Units will vest in full. Therefore, if Mr.
Limeris employment with the Company is terminated for any of the reasons above following a
change of control, in addition to the amounts set forth above, Mr. Limeri would also be
entitled to the market value of these additional Performance Units, which as of December 31,
2006 was $279,864. Mr. Limeris stock options will also vest upon a change in control,
resulting in additional value to Mr. Limeri of $48,000. |
|
(4) |
|
Represents a sum equal to the Companys portion of the premium costs for Mr. Limeris health
benefits for 12 |
24
|
|
|
|
|
months. |
|
(5) |
|
Upon termination without cause or resignation for good reason, Mr. Roos is entitled to a
payment equal to his prorated bonus for the year in which the termination occurs plus 100% of
his base salary. In the event of termination as a result of Mr. Roos death or upon his
retirement, Mr. Roos is entitled to his prorated bonus for the year in which his death or
retirement occurs. Upon a change in control (as defined in the Performance Unit Agreement),
all of Mr. Roos Performance Units will vest in full. Therefore, if Mr. Roos employment with
the Company is terminated for any of the reasons above following a change of control, in
addition to the amounts set forth above, Mr. Roos would also be entitled to the market value
of these additional Performance Units, which as of December 31, 2006 was $217,400. Mr. Roos
restricted shares are also subject to acceleration upon a change of control, which will result
in an amount equal to $20,000. |
|
(6) |
|
In addition to his severance payment, upon termination of Mr. Roos without cause, the Company
is required to reimburse Mr. Roos for the costs of his relocation to the United States. |
|
(7) |
|
Upon termination without cause or resignation for good reason, Mr. Robinson is entitled to a
payment equal to 100% of his base salary. In the event of termination as a result of Mr.
Robinsons death or upon his retirement, Mr. Robinson is entitled to his prorated bonus for
the year in which his death or retirement occurs. Upon a change in control (as defined in the
Performance Unit Agreement), all of Mr. Robinsons Performance Units will vest in full.
Therefore, if Mr. Robinsons employment with the Company is terminated for any of the reasons
above following a change of control, in addition to the amounts set forth above, Mr. Robinson
would also be entitled to the market value of these additional Performance Units, which as of
December 31, 2006 was $217,400. |
|
(8) |
|
Upon termination without cause or resignation for good reason, Mr. White is entitled to a
payment equal to his prorated bonus for the year in which the termination occurs plus 100% of
his base salary. In all other circumstances, Mr. White is entitled to his prorated bonus for
the year in which termination occurs. Upon a change in control (as defined in the Performance
Unit Agreement), all of Mr. Whites Performance Units will vest in full. Therefore, if Mr.
Whites employment with the Company is terminated for any of the reasons above following a
change of control, in addition to the amounts set forth above, Mr. White would also be
entitled to the market value of these additional Performance Units, which as of December 31,
2006 was $362,344. |
|
(9) |
|
Represents the Companys estimated costs for continuation of insurance as follows: COBRA
medical insurance $1,224.73 per month; vision insurance $19.96 per month; and dental
insurance $134.03 per month. |
Moylan Separation Agreement
In connection with his separation from the Company in February 2006, Mr. Moylan and the
Company entered into a Release Agreement and Covenant Not to Sue. The Release Agreement and
Covenant Not to Sue provide for the payment to Mr. Moylan of $360,577 in 25 equal installments
beginning on March 3, 2006. These payments under the Release Agreement are comparable in all
material respects to the payments which Mr. Moylan was entitled to receive under his employment
agreement and his change of control agreement with the Company. The Release Agreement also provides
for Mr. Moylan to receive certain outplacement services from a third party outplacement firm and
contains provisions pertaining to return of Company proprietary information and other property and
a mutual release of certain claims. The Company estimates that the total value of the
consideration to be paid to Mr. Moylan under the Release Agreement, including payments already
made, is approximately $360,577.
25
Plan-Based Awards
The following tables sets forth certain information regarding awards made under the Companys
various incentive plans. For additional information regarding these incentive plans and awards,
please see Compensation Discussion and Analysis above.
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2006
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Date Fair |
|
|
|
|
Estimated Possible Payouts |
|
Number |
|
Value of |
|
|
|
|
Under Non-Equity |
|
of Shares |
|
Stock and |
|
|
Grant |
|
Incentive Plan Awards |
|
of Stock |
|
Option |
Name |
|
Date (1) |
|
Threshold |
|
Target |
|
Maximum |
|
or Units |
|
Awards |
|
|
|
|
($) |
|
($)(1) |
|
($)(1) |
|
(#) (2) |
|
($)(3) |
James B. McCurry |
|
|
|
|
|
$ |
350,000 |
|
|
$ |
700,000 |
|
|
|
|
|
|
|
|
|
|
|
09/29/06 |
|
|
|
|
|
|
|
|
|
|
|
|
347,836 |
|
|
$ |
2,399,349 |
|
Peter Limeri |
|
|
|
|
|
|
88,000 |
|
|
|
176,000 |
|
|
|
|
|
|
|
|
|
|
|
09/29/06 |
|
|
|
|
|
|
|
|
|
|
|
|
86,959 |
|
|
|
599,837 |
|
Bradley T. Roos |
|
|
|
|
|
|
129,200 |
|
|
|
258,400 |
|
|
|
|
|
|
|
|
|
|
|
09/29/06 |
|
|
|
|
|
|
|
|
|
|
|
|
65,220 |
|
|
|
449,882 |
|
Larry Robinson |
|
|
|
|
|
|
150,250 |
|
|
|
300,501 |
|
|
|
|
|
|
|
|
|
|
|
09/29/06 |
|
|
|
|
|
|
|
|
|
|
|
|
65,220 |
|
|
|
449,882 |
|
N. Lee White |
|
|
|
|
|
|
|
|
|
|
69,808 |
(4) |
|
|
|
|
|
|
|
|
|
|
09/29/06 |
|
|
|
|
|
|
|
|
|
|
|
|
108,699 |
|
|
|
749,801 |
|
James E. Moylan, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Target and Maximum Payouts reported for all named executive officers were based upon the
Companys attainment of specified adjusted EBITDA levels as defined in the Companys 2006
Performance Bonus Plan. The Company attained the specified maximum levels and the Maximum
Payouts as reported for each of the named executive officers were paid in March 2007. The
2006 Performance Bonus Plan does not provide for a separate threshold amount. See
Compensation Discussion and Analysis Cash Bonus for a description of the bonus plan. |
|
(2) |
|
Other Stock Awards reported for each of the named executive officers represent
Performance Units granted pursuant to the Companys 2006 Management Incentive Plan and
include incremental Performance Units from automatic adjustments resulting from
conversions of convertible debt and preferred equity instruments into common stock during
2006 (see below). At settlement, holders of Performance Units will receive a number of shares of Company
common stock equal to 60% of the number of Performance Units being paid out, plus a cash
payment equal to 40% of the fair market value of that number of shares of common stock equal
to the number of Performance Units being paid out. The number of Performance Units awarded
is automatically adjusted on a pro-rata basis upon the conversion into common stock of any
of the Companys senior convertible notes or Series A Preferred. See Compensation
Discussion and Analysis Long-Term Incentive Compensation Issuance of Performance Units
under Management Incentive Plan for a description of the plan. |
|
(3) |
|
Includes fair value of original grants and incremental
Performance Units resulting from automatic
adjustments (see footnote (2) above). |
|
(4) |
|
Since Mr. White joined the Company in June 2006, under the terms of his employment
agreement and in lieu of target and maximum bonus percentages, Mr. White was entitled to receive a
bonus equal to 40% of his base salary prorated based upon the number of days Mr. White was
actually employed during 2006. |
26
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2006
|
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|
|
|
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|
|
|
|
|
Option Awards |
|
Stock Awards |
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
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|
|
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|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Incentive |
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Plan |
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|
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|
|
|
|
|
Equity |
|
Awards: |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Market or |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
Plan Awards: |
|
Payout |
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
Number of |
|
Value of |
|
|
Number of |
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
Number |
|
Value of |
|
Unearned |
|
Unearned |
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
of Shares |
|
Shares or |
|
Shares, Units |
|
Shares, Units |
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
or Units |
|
Units of |
|
or Other |
|
or Other |
|
|
Unexercised |
|
Unexercised |
|
Unexercised |
|
Option |
|
Option |
|
of Stock |
|
Stock that |
|
Rights that |
|
Rights that |
|
|
Options: |
|
Options: |
|
Unearned |
|
Exercise |
|
Expiration |
|
that Have |
|
Have Not |
|
Have Not |
|
Have Not |
Name |
|
Exercisable |
|
Unexercisable |
|
Options |
|
Price |
|
Date |
|
Not Vested |
|
Vested |
|
Vested |
|
Vested |
|
|
(#) |
|
(#) |
|
(#) |
|
($) |
|
|
|
|
|
(#) |
|
($) (1) |
|
(#) |
|
($) |
James B. McCurry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,933 |
(2) |
|
$ |
1,159,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Limeri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,233 |
(2) |
|
|
289,864 |
|
|
|
|
|
|
|
|
|
|
|
|
3,125 |
(3) |
|
|
46,875 |
(3) |
|
|
|
|
|
$ |
2.80 |
|
|
|
11/11/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley T. Roos |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,175 |
(2) |
|
|
217,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
(4) |
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
184.69 |
|
|
|
3/1/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
130.00 |
|
|
|
8/15/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
74.10 |
|
|
|
3/4/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
41.60 |
|
|
|
2/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500 |
|
|
|
|
|
|
|
|
|
|
|
49.50 |
|
|
|
3/5/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry Robinson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,175 |
(2) |
|
|
217,400 |
|
|
|
|
|
|
|
|
|
|
|
|
4,500 |
|
|
|
|
|
|
|
|
|
|
|
98.33 |
|
|
|
1/4/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
105.00 |
|
|
|
1/28/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,125 |
|
|
|
|
|
|
|
|
|
|
|
221.67 |
|
|
|
1/20/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 |
|
|
|
|
|
|
|
|
|
|
|
257.50 |
|
|
|
1/5/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
|
|
|
|
|
|
|
|
92.80 |
|
|
|
1/25/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
74.10 |
|
|
|
3/4/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
41.60 |
|
|
|
2/25/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
750 |
|
|
|
|
|
|
|
|
|
|
|
49.50 |
|
|
|
3/5/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N. Lee White |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,293 |
(2) |
|
|
362,344 |
|
|
|
|
|
|
|
|
|
James E. Moylan, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Based on $8.00 per share; the closing market price of the Companys common
stock on December 29, 2006. |
|
(2) |
|
Reported amount represents the unvested portion of Performance Units granted pursuant to
the Companys 2006 Management Incentive Plan. See the Grants of Plan Based Awards for
Fiscal Year 2006 table above. |
|
(3) |
|
Mr. Limeris options were granted in two tranches, the first of which, pertaining to 12,500
shares vests over four years. The second tranche is subject to specific performance criteria
and will become exercisable in three tiers of 12,500 shares each, as follows: Tier 1 will
become exercisable at any time after July 29, 2006, if the closing market price per share of
the Companys common stock is $45.00 or higher for 45 consecutive trading days after July 29,
2006. Tier 2 will become exercisable at any time after July 29, 2007, if the closing market
price per share of the Companys common stock is $65.00 or higher for 45 consecutive trading
days after July 29, 2007. Tier 3 will become exercisable at any time after July 29, 2008, if
the closing market price per share of the Companys common stock is $80.00 or higher for 45
consecutive trading days after July 29, 2008. |
|
(4) |
|
Reported amount represents restricted shares which cliff vest on March 4, 2008. |
27
STOCK VESTED
FOR FISCAL YEAR 2006
|
|
|
|
|
|
|
|
|
|
|
Stock Awards |
|
|
Number of Shares |
|
Value Realized |
Name |
|
Acquired on Vesting |
|
on Vesting |
|
|
(#)(1) |
|
($)(2) |
James B. McCurry |
|
|
202,903 |
|
|
$ |
1,623,224 |
|
|
|
|
|
|
|
|
|
|
Peter Limeri |
|
|
50,726 |
|
|
|
405,808 |
|
|
|
|
|
|
|
|
|
|
Bradley T. Roos |
|
|
38,045 |
|
|
|
304,360 |
|
|
|
|
|
|
|
|
|
|
Larry Robinson |
|
|
38,045 |
|
|
|
304,360 |
|
|
|
|
|
|
|
|
|
|
N. Lee White |
|
|
63,406 |
|
|
|
507,248 |
|
|
|
|
|
|
|
|
|
|
James E. Moylan, Jr. |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reported amount represents the portion of Performance Units granted pursuant to the
Companys 2006 Management Incentive Plan that vested during
2006, including automatic anti-dilution adjustments made thereon. See the Grants of Plan
Based Awards for Fiscal Year 2006 table above. |
|
(2) |
|
Based on $8.00 per share; the closing market price of the Companys common stock on December
29, 2006. The actual amounts to be realized by the named executive officers upon settlement of the
vested Performance Units is dependent upon the amount of future conversions of convertible
securities into common stock and the fair value of the common stock at the future settlement
dates. |
28
CERTAIN TRANSACTIONS
On March 17, 2006, Blum Capital Partners, L.P. and its affiliates exchanged $36,006,000 of the
Companys convertible notes due November 2006 for (1) $14,929,734 of 11% senior notes due March
2011, (2) $17,282,880 of 10% senior convertible notes due March 2011 and (3) 36,006 shares of
Series A Senior Convertible Participating Preferred Stock (aggregate liquidation preference of
$4,320,720), in connection with the Companys exchange offer for its 4-3/4% convertible notes due
2006. Mr. N. Colin Lind is the managing partner of Blum Capital Partners, L.P. (together with its
affiliates, Blum). Mr. Lind was a director of the Company from May 2002 to October 2005, and was
re-elected to the Board in March 2006 pursuant to an agreement with the Ad Hoc Bondholders
Committee formed to negotiate the Companys exchange offer and financial restructuring. Mr. Lind
represented Blum affiliates on the Ad Hoc Bondholders Committee. Blum affiliates are also lenders
under the Companys current senior secured credit facility. Their participation in the loan is
approximately $7 million. Blum affiliates were also lenders under the Companys prior $10 million
bridge loan that was entered into on December 23, 2005 and repaid on March 17, 2006. Their
participation in the bridge loan was approximately $6 million. In connection with the foregoing,
Blum received interest and commitment and origination fees of approximately $236,000 in 2005,
approximately $152,000 in interest related to the bridge loan in 2006 and approximately $755,000 in
interest under the senior secured credit facility in 2006. In addition, the Ad Hoc Bondholders
Committee, of which Blum was a member, was reimbursed for legal and financial advisory fees of
approximately $2,043,083 in 2006.
On March 17, 2006, Parkcentral Global Hub Limited and Petrus Securities, L.P. exchanged
$23,945,000 of the Companys convertible notes due November 2006 for (1) $9,578,000 of 11% senior
notes due March 2011, (2) $11,493,600 of 10% senior convertible notes due March 2011 and (3) 23,945
shares of Series A Preferred Stock (aggregate liquidation preference of $2,873,400), in connection
with the Companys exchange offer for its 4-3/4% convertible notes due 2006. Parkcentral Global Hub
Limited and Petrus Securities, L.P. were also represented on the Ad Hoc Bondholders Committee, are
lenders under the Companys current senior credit facility and were lenders under the Companys
prior $10 million bridge loan. Their participation in the senior credit facility is approximately
$5 million and their participation in the bridge loan was approximately $4 million. In connection
with the foregoing, they received interest and commitment and origination fees of approximately
$174,000 in 2005, approximately $101,000 in interest related to the bridge loan in 2006 and
approximately $550,000 in interest under the senior secured credit facility in 2006.
As required by Nasdaq Listing Standards Rule 4350(h) and the Companys Audit Committee
Charter, all related party transactions are reviewed and approved by the Audit Committee. For
purposes of this review and approval, the term related party transaction is generally defined as
any transaction (or series of related transactions) in which the Company is a participant and the
amount involved exceeds $120,000, and in which any director, director nominee, or executive officer
of the Company, any holder of more than 5% of the outstanding voting securities of the Company, or
any immediate family member of the foregoing persons will have a direct or indirect interest. As
required by this policy, each of the transactions set forth above have been approved by the Audit
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Davis, Cole and Dills currently comprise the Compensation Committee. None of the
members of the Compensation Committee had any interlocks within the meaning of Item 407(e)(4) of
the SEC Regulation S-K during fiscal 2006.
29
OWNERSHIP OF DIRECTORS, PRINCIPAL SHAREHOLDERS
AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth certain information regarding the beneficial ownership of the
Companys Series A Preferred and common stock as of April 1, 2007, by (i) each person (or group of
affiliated persons) known by the Company to be the beneficial owner of more than 5 percent of the
outstanding common stock of the Company; (ii) each director and director nominee of the Company;
(iii) the current Named Executive Officers; and (iv) all of the Companys executive officers and
directors as a group. Except as otherwise indicated in the footnotes to this table, the Company
believes that the persons named in this table have sole investment and voting power with respect to
all the shares of common stock indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Five Percent Holders: |
|
|
|
|
|
|
|
|
|
|
|
Beneficial |
|
|
Certain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|
Holdings |
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
Series A |
|
|
Series A |
|
|
(Excluding |
|
|
Subject to |
|
|
|
|
|
|
Percent of |
|
|
|
Preferred |
|
|
Preferred |
|
|
Options and |
|
|
Options and |
|
|
Total |
|
|
Shares |
|
|
|
Shares |
|
|
Shares |
|
|
Convertible |
|
|
Conversion |
|
|
Beneficial |
|
|
Beneficially |
|
Beneficial Owner |
|
Owned |
|
|
Outstanding |
|
|
Rights) |
|
|
Rights(2) |
|
|
Ownership |
|
|
Owned (1) |
|
Aristeia Capital, LLC(3)
136 Madison Avenue, 3rd Floor
New York, New York 10016 |
|
|
|
|
|
|
|
|
|
|
626,809 |
|
|
|
|
|
|
|
626,809 |
|
|
|
7.15 |
% |
Blum Capital Partners, L.P.(4)
909 Montgomery Street, Suite 400
San Francisco, California 94133 |
|
|
34,901 |
|
|
|
51.47 |
% |
|
|
919,601 |
|
|
|
4,314,096 |
|
|
|
5,233,697 |
|
|
|
40.01 |
% |
JANA Partners, LLC(5)
200 Park Avenue, Suite 3300
New York,
New York 10166 |
|
|
|
|
|
|
|
|
|
|
582,299 |
|
|
|
|
|
|
|
582,299 |
|
|
|
6.64 |
% |
Morgan Stanley & Co.
Incorporated(6)
1585 Broadway
New York, New York 10036 |
|
|
|
|
|
|
|
|
|
|
797,140 |
|
|
|
|
|
|
|
797,140 |
|
|
|
9.09 |
% |
Parkcentral Global Hub Limited(7)
2300 West Plano Parkway
Plano, Texas 75075 |
|
|
|
|
|
|
|
|
|
|
3,561 |
|
|
|
805,522 |
|
|
|
809,083 |
|
|
|
8.45 |
% |
Sandelman Partners, LP(8)
500 Park Avenue, 3rd Floor
New York, New York 10022 |
|
|
5,390 |
|
|
|
7.95 |
% |
|
|
80,238 |
|
|
|
538,640 |
|
|
|
618,878 |
|
|
|
6.65 |
% |
Weintraub Capital Management, L.P.(9)
44 Montgomery Street,
Suite 4100
San Francisco, California 94104-4602 |
|
|
|
|
|
|
|
|
|
|
447,400 |
|
|
|
|
|
|
|
447,400 |
|
|
|
5.10 |
% |
Wellington Capital Management
Company, LLP(10)
75 State Street
Boston, Massachusetts 02109 |
|
|
|
|
|
|
|
|
|
|
446,298 |
|
|
|
|
|
|
|
446,298 |
|
|
|
5.09 |
% |
Zazove Associates LLC(11)
1033 Skokie Boulevard Suite 310
Northbrook, Illinois 60062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,228,334 |
|
|
|
1,228,334 |
|
|
|
12.29 |
% |
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors, Named Executive Officers and Directors and Officers as a Group: |
|
|
|
|
|
|
|
|
|
|
|
Beneficial |
|
|
Certain |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of |
|
|
Holdings |
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
Series A |
|
|
Series A |
|
|
(Excluding |
|
|
Subject to |
|
|
|
|
|
|
Percent of |
|
|
|
Preferred |
|
|
Preferred |
|
|
Options and |
|
|
Options and |
|
|
Total |
|
|
Shares |
|
|
|
Shares |
|
|
Shares |
|
|
Convertible |
|
|
Conversion |
|
|
Beneficial |
|
|
Beneficially |
|
Beneficial Owner |
|
Owned |
|
|
Outstanding |
|
|
Rights) |
|
|
Rights(2) |
|
|
Ownership |
|
|
Owned (1) |
|
David A. Cole |
|
|
|
|
|
|
|
|
|
|
500 |
|
|
|
28,667 |
|
|
|
29,167 |
|
|
|
* |
|
Eugene I. Davis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,667 |
|
|
|
9,667 |
|
|
|
* |
|
Patrick G. Dills |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,667 |
|
|
|
9,667 |
|
|
|
* |
|
Peter Limeri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,125 |
|
|
|
3,125 |
|
|
|
* |
|
N. Colin Lind(12) |
|
|
34,901 |
|
|
|
51.47 |
% |
|
|
919,601 |
|
|
|
4,326,763 |
|
|
|
5,246,364 |
|
|
|
40.07 |
% |
Phillip J. Mazzilli, Jr. |
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
9,667 |
|
|
|
11,667 |
|
|
|
* |
|
James B. McCurry |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry Robinson |
|
|
|
|
|
|
|
|
|
|
476 |
|
|
|
5,300 |
|
|
|
5,776 |
|
|
|
* |
|
Bradley T. Roos |
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
11,000 |
|
|
|
13,500 |
|
|
|
* |
|
Steven P. Rosenberg |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,667 |
|
|
|
9,667 |
|
|
|
* |
|
N. Lee White |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All current directors
and executive officers
as a group (13 persons) |
|
|
34,901 |
|
|
|
51.47 |
% |
|
|
925,077 |
|
|
|
4,416,652 |
|
|
|
5,341,729 |
|
|
|
40.52 |
% |
|
|
|
* |
|
Represents holdings of less than one percent. |
|
(1) |
|
Represents shares that may be acquired currently or within 60 days after the date of this
Proxy Statement through the exercise of stock options or upon conversion of Series A Preferred
Stock or the Companys 10% Senior Convertible Notes. |
|
(2) |
|
Applicable percentage ownership at April 1, 2007 is based upon 8,767,345 shares of common
stock outstanding, adjusted in the case of certain options and other conversion rights. Shares
of common stock subject to options and rights that are currently exercisable or convertible,
or will become exercisable or convertible within 60 days of the date of this Proxy Statement
are deemed outstanding for computing the percentage ownership of the person holding such
options or rights, but are not deemed outstanding for computing the percentage ownership of
any other persons. Beneficial ownership is determined in accordance with the rules of the SEC
under which shares are beneficially owned by the person or entity that holds investment and/or
voting power. |
|
(3) |
|
Information is based on publicly reported holdings as of the date of the Schedule 13G filed
on February 14, 2007. |
|
(4) |
|
Certain Shares Subject to Options and Conversion Rights includes an aggregate of 1,609,345
shares the Blum Reporting Persons, as defined below, have the right to acquire upon conversion
of Series A Preferred Stock and 2,704,752 shares upon conversion of the 10% Senior Convertible
Notes, both of which were issued in March 2006. Blum Capital Partners, L.P., a California
limited partnership (Blum L.P.); Richard C. Blum & Associates, Inc., a California
corporation (RCBA Inc.); Blum Strategic GP II, L.L.C., a Delaware limited liability company
(Blum GP II); Blum Strategic Partners II, L.P., a Delaware limited partnership; Blum
Strategic Partners II GmbH & Co. KG, a German limited partnership; Stinson Capital Partners,
L.P., a California limited partnership (Stinson); Stinson Capital Partners II, L.P., a
California limited partnership (Stinson II); Stinson Capital Partners (QP), L.P., a Delaware
limited partnership (Stinson QP); and Stinson Dominion, L.P., a Delaware limited partnership
(Stinson Dominion); are referred to herein as the Blum Reporting Persons. Blum L.P.s
principal business is acting as a general partner for investment partnerships and providing
investment advisory services. Blum L.P. is an investment advisor registered with the
Securities and Exchange Commission. The sole general partner of Blum L.P. is RCBA Inc. Blum
L.P. is the general partner of Stinson, Stinson II, Stinson QP and Stinson S. Each of the Blum
Reporting Persons reports that it has shared voting and investment discretion over the shares
reported above. Information is based on publicly reported holdings as of the date of the most
recently filed amendment to Schedule 13D, as filed on October 4, 2006. Pursuant to an Amended
and Restated Standstill Agreement dated as of November 14, 2005, the Blum Reporting Persons
have agreed that they shall vote any and all shares of Company common stock owned by them
(whether of record, in street name, through a nominee or otherwise) as follows: (a) any and
all shares so |
31
|
|
|
|
|
owned by the Blum Reporting Persons in the aggregate that exceed 15% of the
outstanding shares of common stock of the Company on the record date for such vote shall be
voted consistently with the recommendations of the Companys Board of Directors on all matters
placed before the Companys shareholders, whether at a special or annual meeting, by written
consent, or otherwise, and (b) all other shares so owned by the Blum Reporting Persons may be
voted in their discretion. |
|
(5) |
|
Information is based on publicly reported holdings as of the date of the most recently filed
amendment to Schedule 13G, as filed on March 15, 2007. |
|
(6) |
|
Information is based on publicly reported holdings as of the date of the most recently filed
amendment to Schedule 13G, as filed on February 15, 2007. |
|
(7) |
|
Certain Shares Subject to Options and Conversion Rights includes an aggregate of 805,522
shares the Parkcentral Reporting Persons, as defined below, have the right to acquire upon
conversion of the Companys 10% Senior Convertible Notes. Parkcentral Global Hub Limited, a
Bermuda limited liability exempted mutual fund company (Parkcentral Global), Parkcentral
Capital Management, L.P., a Texas limited partnership (Parkcentral Capital), Steven Blasnik,
Petrus Securities, L.P., a Texas limited partnership (Petrus), and Hill Air Company I, LLC,
a Delaware limited liability company (Hill Air) are referred to herein as the Parkcentral
Reporting Persons. Parkcentral Capital, a registered investment adviser, acts as an
investment adviser to various entities, including Parkcentral Global. Pursuant to a investment
advisory agreement between Parkcentral Capital and Parkcentral Global, Parkcentral Capital has
voting and investment (including dispositive) power with respect to the shares owned by
Parkcentral Global. Steven Blasnik is the President of Parkcentral Capital. Hill Air is
denominated as a general partner of Petrus and has voting and investment (including
dispositive) power with respect to the shares owned by Petrus pursuant to the partnership
agreement of Petrus. Steven Blasnik is the President of Hill Air. |
|
(8) |
|
Includes 80,238 shares of common stock, 248,540 shares issuable upon conversion of the
Companys Series A Preferred Stock and 290,100 shares issuable upon conversion of the
Companys 10% Senior Convertible Notes. Sandelman Partners GP, LLC is the general partner of
Sandelman Partners, LP, and Jonathan Sandelman is the managing member of the general partner.
The securities reported are held by Sandelman Partners Multi-Strategy Masterfund, Ltd., over
which Sandelman Partners, LP has discretionary authority. Information is
based on publicly reported holdings as of the date of the most recently filed amendment to
Schedule 13G, as filed on April 10, 2007. |
|
(9) |
|
Weintraub Capital Management, L.P. is a registered investment adviser. Weintraub Capital
Management GP, LLC is the general partner of Weintraub Capital Management, L.P. and Jerald M.
Weintraub is the manager of Weintraub Capital Management, GP, LLC. Information is based on
publicly reported holdings as of the date of the most recently filed amendment to Schedule
13G, as filed on February 14, 2007. |
|
(10) |
|
Information is based on publicly reported holdings as of the date of the most recently filed
amendment to Schedule 13G, as filed on February 14, 2007. |
|
(11) |
|
Certain Shares Subject to Options and Conversion Rights includes an aggregate of 1,228,334
shares Zazove Associates, LLC has the right to acquire upon conversion of the 10% Senior
Convertible Notes. Zazove Associates, LLC is an employee-owned investment management firm that
has been dedicated to the management of convertible securities since 1971. The firm is
registered with the Securities and Exchange Commission as an investment advisor. Information
is based on publicly reported holdings as of the date of the Schedule 13G filed on April 20,
2007. |
|
(12) |
|
Mr. Lind is a Managing Partner of Blum L.P. Mr. Lind has informed the Company that he
disclaims beneficial ownership of the shares beneficially owned by Blum L.P. Certain Shares
Subject to Options and Conversion Rights includes an aggregate of 1,609,345 shares the Blum
Reporting Persons have the right to acquire upon conversion of Series A Preferred Stock and
2,704,752 shares upon conversion of the 10% Senior Convertible Notes, both of which were
issued in March 2006. See note (4) above. |
32
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Companys executive officers and directors and
persons who beneficially own more than 10% of the Companys stock to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% beneficial owners are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of forms received by it pursuant to Section 16(a) of the
Exchange Act, and written representations from certain reporting persons, the Company believes that
with respect to 2006, all Section 16(a) filing requirements applicable to its executive officers,
directors and greater than 10 percent beneficial owners were timely satisfied, except with respect
to the Form 3 filings by Victor A. Allums and Morgan Stanley.
33
EXECUTIVE OFFICERS
Each of the executive officers of the Company was appointed by the Board of Directors to serve
at the pleasure of the Board of Directors and until their successors
are elected or until their earlier resignation, removal or death. The following table
lists the current executive officers of the Company and their ages and offices with the Company.
|
|
|
|
|
|
|
NAME |
|
AGE |
|
PERIOD EMPLOYED IN CURRENT POSITION |
James B. McCurry, Chairman of the Board,
President and Chief Executive Officer
|
|
|
58 |
|
|
President and CEO
Since July 2005;
Chairman Since
March 2006 |
N. Lee White, Executive Vice President, U.S.
|
|
|
51 |
|
|
Since June 2006 |
Peter Limeri, Chief Financial Officer and
Treasurer
|
|
|
41 |
|
|
Since February 2006 |
Victor A. Allums, Senior Vice President,
General Counsel and Secretary
|
|
|
48 |
|
|
Since May 2006 |
Jennifer Moore, Senior Vice President
Human Resources
|
|
|
36 |
|
|
Since September 2005 |
Larry M. Robinson, Senior Vice President -
Canada, Latin America, Asia Pacific
|
|
|
51 |
|
|
Since October 2005 |
Bradley T. Roos, Executive Vice President
and President Europe
|
|
|
44 |
|
|
Since June 2005 |
P. David Schroeder, Senior Vice President
and Chief Information Officer
|
|
|
52 |
|
|
Since January 2007 |
For biographical information regarding Mr. McCurry, please see Information About The
Class I Directors Whose Terms Will Expire At The 2009 Annual Meeting Of Shareholders above.
N. Lee White, Executive Vice President U.S., joined the Company in June 2006 and is
responsible for all U.S. operations and sales activities. Prior to joining the Company, Mr. White
served as Chief Operating Officer and a member of the Board of Managers of Zyman Group, a strategic
growth strategies consulting company, from December 2004 until March 2006. From March 2002 until
November 2004, Mr. White was President, Chief Operating Officer and a Board member of
CommerceQuest, a business process management company. In June 1997, Mr. White co-founded
AnswerThink, a technology-based business transformation solutions provider, and served as Managing
Director-CRM Solutions and a member of that companys leadership team through February 2002. Prior
to AnswerThink, Mr. White held significant positions with KPMG and IBM.
Peter Limeri, Chief Financial Officer and Treasurer, served as Chief Restructuring Officer
from November 2005 to February 2006. Prior to joining the Company, Mr. Limeri served as Chief
Financial Officer and Chief Operating Officer of Nationwide Furniture Inc., a portfolio company of
Sun Capital Partners, a private equity firm, from May 2004 to November 2005. Prior to that he
served as the Chief Financial Officer at Anderson Press, Inc., a publishing and consumer packaged
goods company, from December 1999 to April 2004. Before joining Anderson Press, Inc., he served as
Vice President-Finance of Cluett American, where he was part of the team that led that companys
financial restructuring and business turnaround.
Victor A. Allums, Senior Vice President, General Counsel and Secretary, joined the Company in
February 2006 and was Senior Vice President and Assistant Secretary prior to his appointment to his
current position in May 2006. For nine years prior to joining the Company, Mr. Allums was Senior
Vice President and General Counsel of GE Business Productivity Solutions, a subsidiary of General
Electric Capital Corporation. Prior to his tenure with GE, he served as Assistant General Counsel
of ALLTEL
34
Information Services Healthcare Division. Mr. Allums began his career with the Atlanta law
firm of Troutman Sanders.
Jennifer Moore, Senior Vice President Human Resources, is responsible for the Companys
domestic and international human resource activities. Before joining the Company, Ms. Moore was
Vice President of Human Resources with Howard Schultz & Associates from May 1999 until the
Companys acquisition of it in 2002. Ms. Moore joined the Company as Vice President of Human
Resources in January 2002. In April 2004, she became Senior Vice President Human Resources, US
Operations. Prior to that, she worked in human resources management in the telecommunications,
semi-conductor and mortgage industries.
Larry M. Robinson, Senior Vice President Canada, Latin America, Asia Pacific, is responsible
for operations and sales in Canada, Latin America and Asia Pacific. Prior to joining the Company,
Mr. Robinson held various senior accounting and audit assignments for Sears Canada Inc., one of
Canadas largest retailers. He joined the company in 1992 as General Manager of the Canadian
division, and later assumed additional responsibility for the Asia Pacific and Latin America
regions.
Bradley T. Roos, Executive Vice President and President Europe, is responsible for
operations and sales activities throughout Europe. Mr. Roos was elected as the Companys Executive
Vice President Worldwide Sales and Marketing in February 2003. He joined the Company in February
2000 as Vice President Business Planning and has held a number of executive offices. Before
joining the Company, he spent 15 years with The Coca-Cola Company in both the USA and Southeast
Asia, holding a number of management positions in business planning, trade promotion development
and general management, most recently as vice president and general manager for Indochina.
P. David Schroeder, Senior Vice President and Chief Information Officer, is responsible for
the Companys information technology worldwide. Prior to joining the Company in January 2007, Mr.
Schroeder served as an independent CIO-level consultant advising companies on acquisitions and
technology strategy from April 2005 to December 2006. From November 2002 to March 2005, Mr.
Schroeder served as Chief Technology Officer for the Hobart West Group, the parent company of
Esquire Deposition Services, one of the largest court reporting firms
in the U.S. From April 2000
to July 2002, he served as Chief Technology Officer for Law.com, a major website targeting lawyers
and legal professionals. Prior to his position at Law.com, Mr. Schroeder held senior technology
management roles at innovative consulting organizations such as iXL, Inc. and IBMs Interactive
Media division.
35
INDEPENDENT AUDITORS
The Accounting Firm of BDO Seidman, LLP has been selected by the Audit Committee of the
Companys Board of Directors to serve as the Companys independent auditors for fiscal year 2007.
BDO Seidman, LLP previously served as the Companys independent auditors for fiscal year 2006. The
accounting firm of KPMG LLP (KPMG) served as the independent auditors of the Company with respect
to fiscal years 2005, 2004 and 2003.
On May 18, 2006, the Chairman of the Audit Committee of the Board of Directors of the Company
received a letter from KPMG stating that the client-auditor relationship between KPMG and the
Company had ceased. This letter followed an earlier verbal notice received that day by the
Chairman of the Audit Committee of the Company to the effect that KPMG declined to stand for
reelection in response to the Companys request for proposals from several independent accounting
firms to serve a three year engagement as the Companys independent auditor.
The audit reports of KPMG LLP on the consolidated financial statements of the Company as of
and for the years ended December 31, 2005 and 2004 did not contain an adverse opinion or disclaimer
of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting
principles, except that KPMG LLPs audit report on the consolidated financial statements of the
Company as of and for the year ended December 31, 2005 contained a separate paragraph stating that
the accompanying consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Notes 1 and 8 to the consolidated financial
statements, the Company has substantial debt obligations and, during 2005, it was required to enter
into a forbearance agreement to obtain covenant relief. The Company incurred significant losses in
each of the years in the three-year period ended December 31, 2005 and had a shareholders deficit
of $102.4 million at December 31, 2005. Realization of assets and the satisfaction of liabilities
in the normal course of business are dependent on, among other things, the Companys ability to
return to profitability, to complete planned restructuring activities and to generate positive cash
flows from operations, as well as maintaining credit facilities adequate to conduct its business.
These matters raised substantial doubt about the Companys ability to continue as a going concern.
The audit report of KPMG LLP on managements assessment of the effectiveness of internal
control over financial reporting and the effectiveness of internal control over financial reporting
as of December 31, 2005 did not contain an adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting principles, except that KPMG
LLPs report indicates that the Company did not maintain effective internal control over financial
reporting as of December 31, 2005 because of the effect of material weaknesses on the achievement
of the objectives of the control criteria and contains an explanatory paragraph that states that
the Company identified material weaknesses relating to company level controls and internal controls
over revenue recognition.
The audit report of KPMG LLP on managements assessment of the effectiveness of internal
control over financial reporting and the effectiveness of internal control over financial reporting
as of December 31, 2004 did not contain an adverse opinion or disclaimer of opinion, and was not
qualified or modified as to uncertainty, audit scope or accounting principles, except that KPMG
LLPs report indicates that the Company did not maintain effective internal control over financial
reporting as of December 31, 2004 because of the effect of material weaknesses on the achievement
of the objectives of the control criteria and contains an explanatory paragraph that states that
the Company identified material weaknesses relating to internal controls over accounting for
revenue and the reserve for estimated refunds and internal controls over the Companys income tax
accounting practices.
During the fiscal years ended December 31, 2004 and December 31, 2005 and the subsequent
36
interim period through May 18, 2006, the Company had no disagreements with KPMG on any matter
of accounting principles or practice, financial statement disclosure, or auditing scope or
procedure, which, if not resolved to the satisfaction of KPMG, would have caused them to make
reference to the subject matter of such disagreements in connection with its reports.
Except for the material weaknesses described above, during the Companys fiscal years ended
December 31, 2004 and 2005, and in the subsequent interim period through May 18, 2006, there were
no reportable events as defined in Regulation S-K Item 304(a)(1)(v).
On June 27, 2006, the Audit Committee selected BDO Seidman, LLP as the Companys independent
registered public accountants for fiscal 2006. During the years ended December 31, 2005 and 2004
and the subsequent interim period through June 27, 2006, the Company did not consult with BDO
Seidman regarding either (1) the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be rendered on the Companys
consolidated financial statements or (2) the subject matter of a disagreement or reportable event
as those terms are defined in Items 304(a)(1)(iv) and (v), respectively, of Regulation S-K.
Representatives of BDO Seidman are expected to attend the Annual Meeting, will have the opportunity
to make a statement if they desire to do so, and will be available to answer appropriate questions.
37
PRINCIPAL ACCOUNTANTS FEES AND SERVICES
The Company incurred the following fees for services performed by its independent public
accountants for 2006. As discussed in more detail above under Independent Auditors, KPMG LLP
served as the Companys independent public accountants for 2005 and until May 18, 2006. BDO
Seidman, LLP was appointed as the Companys independent public accountants on June 27, 2006. All
of the services described below were approved by the Audit Committee.
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2006 |
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2005 |
Audit Fees (1) |
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$ |
1,146,990 |
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$ |
2,934,524 |
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Aggregate fees for professional services for
the audit of the Companys annual financial
statements and reviews of financial statements
included in the Companys Forms 10-Q |
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Audit-Related Fees (2) |
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12,000 |
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11,000 |
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Aggregate fees billed for assurance and related
services that are reasonably related to the
performance of the audit or review of the
Companys financial statements and are not
reported above |
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Tax Fees (3) |
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613,319 |
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332,105 |
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Aggregate fees billed for professional services
for tax compliance, tax consulting and tax
planning |
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All Other Fees |
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Aggregate fees billed for products and services
provided other than the services reported above |
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(1) |
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Audit Fees consist of fees for professional services rendered in connection with the
audits of (i) annual financial statements of the Company and its subsidiaries, (ii)
managements assessment of the effectiveness of internal control over financial reporting and
(iii) the effectiveness of internal control over financial reporting. This category also
includes reviews of financial statements included in Form 10-Q filings of the Company and its
subsidiaries and services normally provided in connection with statutory and regulatory
filings or engagements. For 2006 and 2005, also includes services related to various
statutory audits required in certain international jurisdictions. |
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(2) Audit-Related Fees consist of fees for professional services that are reasonably
related to the performance of the audit or review of the Companys financial statements and
are not reported under Audit Fees. These services primarily include consultations regarding
implementation of accounting standards. For 2006 and 2005 includes an employee benefit plan
audit. |
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(3) |
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Non-Audit Tax Fees consist of fees for professional services rendered with respect
to federal, state and international tax compliance, tax advice and tax planning. This includes
preparation of tax returns, claims for refunds, payment planning and tax law interpretation. |
38
SHAREHOLDER PROPOSALS
Shareholders who, in accordance with Securities and Exchange Commission Rule 14a-8, wish to
present proposals for inclusion in the Companys proxy materials to be distributed in connection
with next years Annual Meeting of Shareholders must submit their proposals so that they are
received at the Companys principal executive offices no later than the close of business on
January 10, 2008. As the rules of the SEC make clear, simply submitting a proposal does not
guarantee that it will be included.
In accordance with the Companys Bylaws, in order to be properly brought before the 2008
Annual Meeting, a shareholders notice of the matter the shareholder wishes to present, or the
person or persons the shareholder wishes to nominate as a director, must be delivered to the
Secretary of the Company at its principal executive offices no less than 90 days, and no more than
120 days before the first anniversary of the date the Company mailed the preceding years proxy
statement. As a result, any notice given by a shareholder pursuant to these provisions of the
Companys Bylaws (and not pursuant to the SECs Rule 14a-8) must be received no earlier than
January 10, 2008, and no later than February 9, 2008, unless the Companys Annual Meeting date in
2008 is more than 30 days before or after June 15, 2008. SEC rules permit management to vote
proxies in its discretion with respect to such matters if we advise shareholders how management
intends to vote. If the Companys 2008 Annual Meeting date is advanced or delayed by more than 30
days from June 15, 2008, then proposals must be received no later than the close of business on the
later of the 90th day before the 2008 Annual Meeting or the 10th day following the date on which
the meeting date is first publicly announced.
To be in proper form, a shareholders notice must include the specified information concerning
the proposal or nominee as described in the Companys Bylaws. A shareholder who wishes to submit a
proposal or nomination is encouraged to seek independent counsel about the requirements imposed by
the Companys Bylaws and SEC regulations. The Company will not consider any proposal or nomination
that does not meet the Bylaw requirements and the SECs requirements for submitting a proposal or
nomination.
NOTICES OF INTENTION TO PRESENT PROPOSALS AT THE 2008 ANNUAL MEETING SHOULD BE ADDRESSED TO
SECRETARY, PRG-SCHULTZ INTERNATIONAL, INC., 600 GALLERIA PARKWAY, SUITE 100, ATLANTA, GA 30339.
THE COMPANY RESERVES THE RIGHT TO REJECT, RULE OUT OF ORDER, OR TAKE OTHER APPROPRIATE ACTION WITH
RESPECT TO ANY PROPOSAL THAT DOES NOT COMPLY WITH THESE AND OTHER APPLICABLE REQUIREMENTS.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
Only one copy of this proxy statement and the documents accompanying it is being delivered to
multiple beneficial shareholders who share an address, unless the Company or its authorized agents
have received contrary instructions from any such shareholder. These documents are available on
the Companys web site, www.prgx.com. In addition, the Company will deliver promptly, upon written
or oral request, a separate copy of this proxy statement and all other enclosed documents to any
shareholder to which a single copy was delivered at a shared address. Any instructions to receive
a separate copy of such mailings in the future, or request to receive a copy of this proxy
statement or enclosed documents, may be made in writing or by telephone to the Companys Secretary,
Victor A. Allums, at PRG-Schultz International, Inc., 600 Galleria Parkway, Suite 100, Atlanta,
Georgia 30339, (770) 779-3900. If you are a beneficial holder and have previously provided a
broker with permission to receive only one copy of these materials at a shared address, you must
provide any revocation of such permission to that broker.
39
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND
THE MEETING IN PERSON ARE URGED TO SIGN, COMPLETE, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED
ENVELOPE, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
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By Order of the Board of Directors: |
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/s/ James B. McCurry |
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James B. McCurry |
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Chairman, President and Chief Executive Officer |
Dated: May 9, 2007
40
ANNUAL MEETING OF SHAREHOLDERS OF
PRG-SCHULTZ INTERNATIONAL, INC.
COMMON STOCK PROXY CARD
JUNE 15, 2007
Please date, sign and mail your proxy card in the envelope provided as soon as possible.
Please detach along perforated line and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS. PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK AS SHOWN HERE |X|
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Election of Directors: |
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FOR ALL NOMINEES
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WITHHOLD AUTHORITY FOR ALL
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FOR ALL EXCEPT (see NOMINEES |
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instructions below) |
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NOMINEES: CLASS II DIRECTORS:
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Patrick G. Dills
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N. Colin Lind |
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), mark FOR ALL
EXCEPT and fill in the circle next to each nominee you wish to withhold.
2. |
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In the discretion of the proxies, upon such other matters as may properly come before the
meeting or any adjournment thereof. |
THE PROXIES SHALL VOTE AS SPECIFIED ABOVE OR IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE LISTED NOMINEES.
PRG-SCHULTZ-INTERNATIONAL, INC. PROXY CARD
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To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
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Signature of Shareholder
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Signature of Shareholder
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Note: Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
PRG-SCHULTZ INTERNATIONAL, INC.
COMMON STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS ON JUNE 15, 2007
The undersigned shareholder hereby appoints James B. McCurry, Peter Limeri and Victor A.
Allums, or any of them, with full power of substitution, to act as proxy for, and to vote the
stock of, the undersigned at the Annual Meeting of Shareholders of PRG-Schultz International, Inc.
(the Company) to be held on June 15, 2007, and any adjournments thereof. The undersigned
acknowledges receipt of the Notice of Annual Meeting of Shareholders and the accompanying Proxy
Statement, and grants authority to said proxies, or their substitutes, and ratifies and confirms
all that said proxies may lawfully do in the undersigneds name, place and stead. The undersigned
instructs said proxies to vote as indicated hereon.
THE PROXIES SHALL VOTE AS SPECIFIED ON THE REVERSE, OR IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR EACH OF THE LISTED NOMINEES.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
PRG-SCHULTZ INTERNATIONAL, INC.
SERIES A PREFERRED PROXY CARD
JUNE 15, 2007
Please date, sign and mail your proxy card in the envelope provided as soon as possible.
Please detach along perforated line and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS. PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK AS SHOWN HERE |X|
1. |
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Election of Directors: |
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FOR ALL NOMINEES
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WITHHOLD AUTHORITY FOR ALL
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FOR ALL EXCEPT (see NOMINEES |
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instructions below) |
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NOMINEES: CLASS II DIRECTORS:
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INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S), mark FOR ALL
EXCEPT and fill in the circle next to each nominee you wish to withhold.
2. |
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In the discretion of the proxies, upon such other matters as may properly come before the
meeting or any adjournment thereof. |
THE PROXIES SHALL VOTE AS SPECIFIED ABOVE OR IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE LISTED NOMINEES.
PRG-SCHULTZ-INTERNATIONAL, INC. SERIES A PREFERRED PROXY CARD
To change the address on your account, please check the box at right and indicate your new address
in the address space above. Please note that changes to the registered name(s) on the |_| account
may not be submitted via this method.
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Signature of Shareholder
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Date
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Signature of Shareholder
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Date |
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
PRG-SCHULTZ INTERNATIONAL, INC.
SERIES A PREFERRED
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS ON JUNE 15, 2007
The undersigned shareholder hereby appoints James B. McCurry, Peter Limeri and Victor A.
Allums, or any of them, with full power of substitution, to act as proxy for, and to vote the stock
of, the undersigned at the Annual Meeting of Shareholders of PRG-Schultz International, Inc. (the
Company) to be held on June 15, 2007, and any adjournments thereof. The undersigned acknowledges
receipt of the Notice of Annual Meeting of Shareholders and the accompanying Proxy Statement, and
grants authority to said proxies, or their substitutes, and ratifies and confirms all that said
proxies may lawfully do in the undersigneds name, place and stead. The undersigned instructs said
proxies to vote as indicated hereon.
THE PROXIES SHALL VOTE AS SPECIFIED ON THE REVERSE, OR IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE LISTED NOMINEES.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)