COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy and Objectives
Our executive compensation program, which is established by the compensation committee of our board of directors, is intended to attract, motivate, and retain executives and key employees and reward the creation of stockholder value. We seek to provide executive compensation packages that are competitive with other similarly situated companies in our industry and reward the achievement of short-term and long-term performance goals.
Prior to 2007, our general objective was to target total compensation (base salary plus annual cash bonus plus the value of long-term incentive awards), taken as a whole, at approximately the 50th percentile of comparable companies, with somewhat below market median levels of salary and somewhat above market median levels of bonus opportunity and long-term incentives. However, the implementation of this philosophy generally resulted in total compensation over time that was below market levels of pay. In addition, in October 2006 we acquired a substantial number of employees through the acquisition of Tyco Printed Circuit Group, or TPCG, which had a compensation philosophy that was different from us. As a result, our compensation committee and our board of directors reassessed and revised our compensation philosophy to enhance the effectiveness of our compensation programs and to assist in the integration of employees acquired through the TPCG acquisition.
Our revised compensation philosophy generally targets base salary, total cash compensation (base paysalary plus annual cash bonus), and total compensation each at the 50th percentile of comparable companies. However, our compensation committee’s decisions on target compensation for specific individuals are also influenced by a variety of additional factors, including company and individual performance.
For 2009, our
Our compensation committee has decided not to increase the target 2009 total compensation for any of our executive officers in light of the current economic downturn and the cost containment initiatives we have implemented in 2009, including wide spreadwidespread salary freezes, and the previously announced closure of certain of our Redmond, Washington facilityfacilities, and reductions in force. TheOur compensation committee has frozenfroze the 2009 base salaries and target cash bonus awards and reduced stock-based compensation for all of our executive officers.
For 2010, our compensation committee engaged a new outside compensation consultant. That consultant developed a new peer group for benchmarking purposes, a peer group that was selected to take into account that our revenues will almost double as a result of the PCB Combination. As discussed more fully below, for 2010 our compensation committee determined to:
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| • | increase the base salaries of our officers after our 2009 company-wide salary freeze, as part of the committee’s overall plan to adjust compensation levels over time to approximate the 50th percentile of the new peer group; |
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| • | increase the annual incentive bonus target levels (expressed as a percentage of base salary) for each of our named executive officers, bonuses that will continue to be based 100% on our company-wide operating income performance; |
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| • | suspend the grant of stock options to our named executive officers; |
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| • | add performance-based RSUs to our long-term incentive program in order to strengthenpay-for-performance, directly incorporate revenue and earnings before interest, tax, depreciation and amortization expense (“EBITDA”) objectives and, through the use of a modifier tied to our total stockholder return, provide balance between retention and linkage to stockholder value creation; and |
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| • | calculate the number of shares of our common stock subject to time-vest and performance RSUs by using the6-month trailing average closing sale price as of the date of grant, thereby mitigating the effects of our stock price volatility. |
An important principle driving our compensation programs is our belief that it benefits all of our constituencies for management’s compensation to be tied to our company’s current and long-term performance. As a result, at-risk pay is expected to comprise an increasingly significant portion of our executive compensation, particularly for our most senior officers. Our compensation committee is also sensitive to the need to balance the interests of our executives with those of our stockholders, especially when compensation decisions might increase our cost structure or stockholder dilution.
Role of the Compensation Committee
GeneralGeneral..The Our compensation committee, which is comprised of three independent members of our board of directors, as discussed in greater detail under “Information Relating to Corporate Governance and the Board of Directors” is responsible for, among other things,
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| • | | the review and approval of our compensation philosophy; |
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focusing solely on short-term or solely on long-term goals, and offers retention value as the compensation is received over an extended term.
Total compensation for specific individuals varies based on a number of factors in addition to company and individual performance, including scope of duties, tenure, institutional knowledge, horizontal equity,and/or level of difficulty in recruiting a replacement executive.
Compensation Levels and BenchmarkingBenchmarking..Overall compensation levels for executive officers are determined based on one or more of the following factors: the individual’s duties and responsibilities within our company, the individual’s experience and expertise, the compensation levels for the individual’s peers within our company, compensation levels for similar positions in the PCB industry or in the technology industry more generally, performance of the individual and our company as a whole, and the levels of compensation necessary to recruit new executive officers.
In order to determine competitive compensation practices, Each year our compensation committee relies onreviews the compensation data provided by Pearl Meyer & Partners. The dataof our officers and compares it with that of our peer group companies. This process starts with the selection of an appropriate group of peer companies for comparison purposes. Such peer group is derived principally from surveys of compensation practices of comparable companies, including general survey data and data developed from public filings by selected companies that our compensation committee considers appropriate comparablesnot used for the purposes of developing executive compensation benchmarks. The selection ofperformance graph included in our Annual Report onForm 10-K for the comparable companies is reviewed by our compensation committee.year ended December 31, 2009.
In computing salary changes, cash bonus opportunities, and long-term incentive awards for 2008,2009, our compensation committee worked with its then compensation consultant (Pearl Meyer & Partners), with input from management, to develop a list of comparable companies for the purpose of benchmarking executive compensation. Numerous factors went into the selection of the comparable companies, including targeting businesses with operations in the electronic components industry with comparable financial measures, such as revenues (generally between $300 million and $900 million) and market capitalization (generally between $150 million and $1.5 billion). The following 1917 companies, along with survey data, were used for benchmarking purposes:purposes for 2009:
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§ | | Adaptec, Inc. |
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§ | | • Advanced Energy Industries |
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§ | | Black Box Corporation |
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§ | | Ceradyne, Inc. |
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§ | | CTS Corporation |
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§ | | EMS Technologies, Inc. |
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§ | | Hutchinson Tech |
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§ | | Merix Corporation |
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§ | | Methode Electronics, Inc. |
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§ | | Multi-Fineline Electronix, Inc. |
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§ | | • Netgear, Inc. |
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§• Black Box Corporation | | • OSI Systems, Inc. |
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§• Ceradyne, Inc. | | • Newport Corporation |
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§• CTS Corporation | | • Plexus |
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§• EMS Technologies, Inc. | | • Powerwave Technologies |
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§• Hutchinson Tech | | • RF Micro Devices, Inc. |
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§• Merix Corporation | | • SMART Modular Technologies |
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§• Methode Electronics, Inc. | | STEC, Inc. |
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§ | | • Stone Ridge, Inc. |
• Multi-Fineline Electronix, Inc. | | |
After consideration of the data collected on external competitive levels of compensation and each executive’s role within the executive team, our compensation committee makes decisions regarding each individual executive’s target total compensation opportunities based on company and individual performance and the need to attract, motivate, and retain an experienced and effective executive team. The compensation committee examines the relationship of each executive officer’s base salary, target annual incentive opportunity, and long-term equity incentives to the comparable market data at the 50th and 75th percentiles. Total compensation for specific individuals will vary based on a number of factors in addition to company and individual performance, including scope of duties, tenure, institutional knowledge, and/or level of difficulty in recruiting a replacement executive.
In making compensation decisions for 2008 for our executive officers, our compensation committee’s general objective was to set target salary, target total cash compensation (base pay plus annual cash bonus), and target total compensation (which includes the value of long-term equity awards) for these officers each at approximately the 50th percentile of the comparable market data. Actual compensation decisions for our executive officers were, however, influenced by a variety of additional factors, including considerations of each individual’s experience and expertise, our performance, and horizontal equity among our executive officers.
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Our compensation committee similarly reviewed the chief executive officer compensation market data as well as performance evaluations for Mr. Alder from his direct reports and members of our board of directors. The compensation committee ultimately recommended, and our board of directors approved, increasing the base salary for Mr. Alder in 2008 to approximately the 50th percentile for the peer group.2010. The increases in base pay for the executive officers, including Mr. Alder, approved in February 2008, became effective for the pay period ending April 8, 2008.March 22, 2010. A summary of base salary increases made for fiscal year 20082010 is outlined below for each of our chief executive officer, chief financial officer and threeour two other most highly compensated executive officers, who were serving as executive officers during 2008, which we refer to collectively as our named executive officers.
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| | Base Salary |
Name | | 2009 | | 2010 |
|
Kenton K. Alder | | $ | 586,000 | | | $ | 605,000 | |
Steven W. Richards | | $ | 280,000 | | | $ | 310,000 | |
Shane S. Whiteside | | $ | 345,000 | | | $ | 355,000 | |
Douglas L. Soder | | $ | 345,000 | | | $ | 355,000 | |
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| | Base Salary |
Name | | 2007 | | 2008 |
Kenton K. Alder | | $ | 520,000 | | | $ | 586,000 | |
Steven W. Richards | | $ | 270,000 | | | $ | 280,000 | |
Shane S. Whiteside | | $ | 320,000 | | | $ | 345,000 | |
Douglas L. Soder | | $ | 330,000 | | | $ | 345,000 | |
O. Clay Swain | | $ | 195,000 | | | $ | 200,000 | |
Base Salary for Fiscal Year 2009:Base pay deliberations during the 2009 fiscal year were conducted from November 2008 to February 2009 and followed a similar process as for fiscal year 2008. However, our compensation committee ultimately decided to freeze the base salaries for each of our executive officers (which in 2009 does not include Mr. Swain, who was classified as a named executive officer for purposes of this proxy statement but, because of his current role, is no longer classified as an executive officer).
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| | Base Salary |
Name | | 2008 | | 2009 |
Kenton K. Alder | | $ | 586,000 | | | $ | 586,000 | |
Steven W. Richards | | $ | 280,000 | | | $ | 280,000 | |
Shane S. Whiteside | | $ | 345,000 | | | $ | 345,000 | |
Douglas L. Soder | | $ | 345,000 | | | $ | 345,000 | |
Annual CashIncentive Bonus ProgramProgram.:In addition to base salaries, our compensation committee believes that annual performance-based cash bonuses play an important role in providing incentives to our executive officers to achieve near-term performance goals. Each year,For 2009 and 2010, to support collaboration within the senior management group, our compensation committee determinesdetermined to reward all of our named executive officers for company-wide performance by tying bonus awards solely to our operating income. Each named executive officer has a target annual incentive bonus amount foropportunity, expressed as a percentage of base salary, with the ability to earn above or below that target based on our management, including ourcompany’s actual performance.
Because such a large percentage of executive officers. The target percentages are set at levels that, upon achievement of 100% of corporate and individual performance goals, are likely to result in bonus payments thatofficer compensation is performance-based, our compensation committee believes to be atspends significant time determining the medianfinancial targets for targetour annual cash bonus amountsprogram. In general, management makes the initial recommendation for comparable executives at peer companies.the financial targets, and these recommendations are reviewed and discussed by the committee and its advisors. The major factors used in setting targets for a particular year are the results for the most recently-completed year; other factors taken into account may include general economic and market conditions. Our compensation committee then reviews a detailed set of overall corporate and individual performance goals prepared by management for each executive officer (other than our chief executive officer). The compensation committee then sets the final corporate performance goals during our first quarter, typically at a level our compensation committee believes are challenging, but reasonable, for management to achieve. Each year, the board of directors, upon recommendation of our compensation committee, establishes a target bonus amount for our chief executive officer as well as corporate performance goals. The bonus amount for our chief executive officer is similarly targeted at approximately the 50th percentile for the peer group.
At the end of each year, our compensation committee determines the level of achievement for eachthe specified financial goal (after making any appropriate adjustments to such goal for the effects of corporate and individualevents that were not anticipated in establishing the performance goalmeasure) and awards credit for the achievement of goalsthe goal as a percentage of the target bonus. Final determinations as to bonus levels are then based on the achievement of applicable corporate and individual goals, as well as a subjective evaluation of each executive as determined by our compensation committee.that percentage. Actual bonuses are generally paid to the executives in the first quarter of the subsequent fiscal year.
As it has done in the past, in the future our compensation committee may choose to measure the named executive officers’ achievement against specific business unit or individual performance targets as well as corporate goals.
20082009 Annual Cash Bonus ProgramIncentive Bonuses.:For 2008,2009, the target percentages were set at levels that, upon achievement of 100% of the established corporate performance goal, were likely to result in bonus payments that our compensation committee believed to be at the median for target bonus amounts for comparable executives at our then peer companies. More specifically, for 2009, our compensation committee established target bonus awards (as a percentage of base salary) of 55% (with a maximum of 120%) for Messrs. Richards, Soder, and Whiteside and a target bonus award (as a percentage of base salary) of 45% (with a maximum of 75%) for Mr. Swain.Whiteside. Our board of directors, upon recommendation by our compensation committee, established a target bonus award for Mr. Alder of 70% (with a maximum of 170%) of his base salary.
In 2008, the corporate goals identified by2009, our compensation committee determined that, in light of the economic downturn and our boardthen current stock price, the potential bonus payments for 2009 for our executive officers should be based solely on our company’s financial performance as measured by operating income. As a result, 100% of directors includedthe 2009 annual incentive bonus for Messrs. Richards, Soder, and Whiteside was determined based on achieving budgeted operating income of $66.8$50 million, after excluding any non-recurring extraordinary charges.building and other significant asset impairments, plant closure and related layoff costs, and acquisition costs. The compensation committee believes operating income is a good indicator in
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capturing our success given the market in which we compete and is a measure that management can easily track and communicate to employees throughout the performance period.
The compensation committee uses annual cash incentive compensation to reward our executives for company-wide performance by tying bonus awards to financial performance as well as specific personal and operational goals within the functional areas under their management. For Messrs. Richards, Soder, and Whiteside, 80% of their 2008 bonus was determined based on our 2008 budgeted operating income, 10% was based on individual performance goals and 10% was subject to our compensation committee’s discretion. For Mr. Swain, 70% of his 2008 bonus was determined based on our 2008 budgeted operating income, 20% was based on individual performance goals and 10% was subject to our compensation committee’s discretion. Our board of directors basesalso based our chief executive officer’s cash2009 annual incentive bonus awardsaward exclusively on our company-wide performance. Accordingly, 100% of Mr. Alder’s bonus was determined based on our 2008 budgeted operating income.income performance. A summary of the 2009 performance opportunity and relative payout for each of our named executive officers is outlined below:
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| | 2008 | | Bonus Levels as % of Base Salary | | 2009
| | Annual Incentive Bonus Levels as % of Base Salary |
| | Base | | 50% | | 80% | | 100% | | 120% | | Base
| | 50%
| | 80%
| | 100%
| | 120%
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Name | | Salary | | of Target (1) | | of Target | | of Target | | of Target (2) | | Salary | | of Target(1) | | of Target | | of Target | | of Target(2) |
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Kenton K. Alder | | $ | 586,000 | | | 10 | % | | | 35.0 | % | | | 70 | % | | | 170 | % | | $ | 586,000 | | | | 10 | % | | | 35.0 | % | | | 70 | % | | | 170 | % |
Steven W. Richards | | $ | 280,000 | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % | | $ | 280,000 | | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % |
Shane Whiteside | | $ | 345,000 | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % | |
Shane S. Whiteside | | | $ | 345,000 | | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % |
Douglas L. Soder | | $ | 345,000 | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % | | $ | 345,000 | | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % |
O. Clay Swain | | $ | 200,000 | | | 10 | % | | | 22.5 | % | | | 45 | % | | | 75 | % | |
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(1) | | Represents the percentage of 20082009 base salary that the executive was eligible to receive (assuming applicable individual performance goals are met and discretionary portion is paid in full) if we achieveachieved 50% of the operating income target established by our board of directors. Bonuses would not have been earned if operating income had been less than 50% of target. |
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(2) | | Represents maximum potential bonus payout for 2008.2009. |
The individual performance component of the bonus is based on our compensation committee’s subjective evaluation of the overall performance of each executive. The compensation committee reviews the executive’s individual contributions and efforts during the year as well as recommendations of our chief executive officer.
For fiscal year 2008,2009, we earned operating income of $73.5$45.8 million (after excluding one-time, non-recurring goodwillbuilding and long-livedother significant asset impairment charges)impairments, plant closure and related layoff costs, and acquisition costs), or 110%91.6% of the target, resulting in a payout of 70%approximately 43% of base salary for each of our named executive officers (other than Mr. Alder, who received a payout of 120% of his base salary and Mr. Swain who received 42%55% of his base salary). The
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Name | | 2009 Actual Bonus |
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Kenton K. Alder | | $ | 324,058 | |
Steven W. Richards | | $ | 121,660 | |
Shane S. Whiteside | | $ | 149,903 | |
Douglas L. Soder | | $ | 149,903 | |
2010 Annual Incentive Bonuses. For 2010, our compensation committee determined that between 80% and 100%to again base the annual bonuses of the individual performance goals were achieved in 2008 for Messrs. Richards, Soder, Swain, and Whiteside as determined by our chief executive officer and our compensation committee. The compensation committee awarded 100% of the discretionary component of bonus to these named executive officers. Combined, bonus payments varied between 60% to 120% of their 2008 base salary for our named executive officers (other than Mr. Alder, whose entire bonus payment is tiedsolely on our company-wide operating income, after excluding the results of the acquired Meadville PCB operations, compensation expense attributable to our corporate performance).
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| | 2008 Actual |
Name | | Bonus |
Kenton K. Alder | | $ | 703,200 | |
Steven W. Richards | | $ | 240,198 | |
Shane S. Whiteside | | $ | 301,875 | |
Douglas L. Soder | | $ | 301,513 | |
O. Clay Swain | | $ | 120,000 | |
2009 Annual Cash Bonus Program.Thenew PRU program described below, goodwill impairment, building and other significant asset sales, asset write-downs, plant closure and related layoff costs, and residual acquisition costs. Our compensation committee determined that it would not increasealso increased the minimum annual incentive bonus threshold to 60% of the target bonuses for our executive officers for 2009, as described above. Accordingly, our compensation committee maintained the2010 operating income and increased target bonus awards (as a percentage of base salary) offrom 55% to 65% for each of Messrs. Richards, Whiteside and Soder, and Whiteside.with the maximum increased from 120% to 140%. Our board of directors, upon recommendation by our compensation committee, similarly maintainedincreased the 2010 target bonus award of 70% of base salary for Mr. Alder. The compensation committee also maintained theAlder from 70% to 95%, with his maximum amounts payable, as a percentage of base salary, for each of our executive officers at the 2008 levels.award increased from 170% to 230%. Actual incentive bonus payouts for 20092010 performance will be determined by our compensation committee and our board orof directors and paid in early 2010,2011, and may be above or below target bonus levels.
In addition, our compensation committee believes that in light of the current economic downturn and our current stock price that the potential bonus payments for 2009 for our executive officers should be based solely on our company’s financial performance, as measured by operating income. As a result, 100% of the 2009 bonus for Messrs. Richards, Soder, and Whiteside will be determined based on our operating income for 2009. The board of directors bases our chief executive officer’s cash incentive bonus award exclusively on company-wide performance. Accordingly, 100% of Mr. Alder’s bonus will be determined based on operating income.
The table below lists the 20092010 base salaries and bonus levels for each of our named executive officers.
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| | 2009 | | Bonus Levels as % of Base Salary | | 2010
| | Annual Incentive Bonus Levels as % of Base Salary |
| | Base | | 50% | | 80% | | 100% | | 120% | | Base
| | 60%
| | 80%
| | 100%
| | 120%
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Name | | Salary | | of Target (1) | | of Target | | of Target | | of Target (2) | | Salary | | of Target(1) | | of Target | | of Target | | of Target(2) |
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Kenton K. Alder | | $ | 586,000 | | | 10 | % | | | 35.0 | % | | | 70 | % | | | 170 | % | | $ | 605,000 | | | | 10 | % | | | 47.5 | % | | | 95 | % | | | 230 | % |
Steven W. Richards | | $ | 280,000 | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % | | $ | 310,000 | | | | 10 | % | | | 32.5 | % | | | 65 | % | | | 140 | % |
Shane S. Whiteside | | $ | 345,000 | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % | | $ | 355,000 | | | | 10 | % | | | 32.5 | % | | | 65 | % | | | 140 | % |
Douglas L. Soder | | $ | 345,000 | | | 10 | % | | | 27.5 | % | | | 55 | % | | | 120 | % | | $ | 355,000 | | | | 10 | % | | | 32.5 | % | | | 65 | % | | | 140 | % |
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(1) | | Represents the percentage of 20092010 base salary that the executive will receive (assuming applicable individual performance goals are met and discretionary portion is paid in full) if we achieve 50%60% of the operating income |
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| | target established by our board of directors. Bonuses will not be earned if operating income is less than 50%60% of the target. |
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(2) | | Represents maximum potential bonus payout. |
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Equity AwardsAwards..We believe that providing a significant portion of our executive officers’ total compensation package in equity awards aligns the incentives of our executives with the interests of our stockholders and with our long-term success. TheBy compensating our executives with our equity, our executives hold a stake in our company’s financial future, and the gains realized in the long term depend on the executives’ ability to drive our financial performance. Equity incentive awards are also a useful vehicle for attracting and retaining executive talent in a competitive market.
Our compensation committee and our board of directors develop their equity award determinations based on their judgments as to whether the total compensation packages provided to our executive officers, including prior equity awards and the level of vested and unvested equity awards then held by each participating officer, are sufficient to retain, motivate, and adequately reward the executive officers. This judgment is based in part on information provided by benchmarking studies. The compensation committee generally targetshas historically targeted the value of the equity awards at or near the 50th percentile of theour peer group. In addition, our compensation committee considers the accounting costs that will be reflected in our financial statements when establishing the forms of equity to be granted and the size of the grants as well as the potential dilution associated with the equity awards.
We grant equity awards through our 2006 Equity Incentive Plan, which was adopted by our board of directors and approved by our stockholders and permits the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares, and other stock-based awards to our officers, directors, employees, and consultants. The material terms of the 2006 Equity Incentive Plan are described below under “Executive Compensation—Compensation — 2006 Equity Incentive Plan.”
Historically we have used two forms of equity for long-term equity incentive compensation: stock options and restricted stock units (“RSUs”):
Stock Options. Options provide an incentive for executives to drive long-term share price appreciation through the development and execution of effective long-term strategies. Stock option value is only realized if the trading price of our common stock increases. Stock options are issued with exercise prices at 100% of the grant-date fair market value to assure that executives will receive a benefit only when the trading price increases. Option awards generally have value for the executive only if the executive remains employed for the period required for the shares to vest. Starting in 2008, our options have vested as to one-third of the covered shares on each of the first three anniversaries of the grant date, and, if not exercised, expire in a maximum of 10 years (or earlier in the case of termination of employment). In 2009, we granted options to purchase 110,000 shares to our named executive officers.
Restricted Stock Units (RSUs). RSUs represent the right to receive one share of our common stock for each RSU upon the settlement date, which is the date on which certain conditions, such as continued employment with us for a pre-determined length of time, are satisfied. Starting in 2007, we elected to substitute a percentage of the named executive officers’ equity incentive award value, which had historically been provided with only stock options, with RSUs. This change was made to enhance the retention of named executive officers and balance the more volatile rewards associated with stock options. Our compensation committee believes that RSUs align the interests of the named executive officers with the interests of the stockholders because the value of these awards appreciate if the trading price of our common stock appreciates, and also have retention value even during periods in which our trading price does not appreciate, which supports continuity in the senior management team. Shares of our stock are issued to RSU holders as the awards vest. Historically, the vesting schedule for RSUs granted to our named executive officers provided that each award vests in three equal annual installments. In 2009, we granted RSUs for an aggregate of 645,337 shares of our common stock to a total of 145 employees, of which RSUs for 196,266 shares were issued to our named executive officers.
In recent periods our compensation committee has weighted equity awards more towards RSUs than stock options because these awards reflect both increases and decreases in stock prices from the grant-date market prices and thus tie compensation more closely to changes in stockholder value at all levels compared to options, whose
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intrinsic value changes only when the market price of shares is above the exercise price. In addition, RSUs allow our compensation committee to deliver equivalent value with use of fewer authorized shares. Changes in the accounting treatment for stock options also made them less attractive relative to RSUs, and stock options now represent a smaller percentage of long-term compensation than they did in prior years. For 2009, approximately 61% of the named executive officers’ equity incentive award value was granted in the form of RSUs and approximately 39% in the form of stock options. Our compensation committee determined to grant only RSUs, and no stock options, to named executive officers in 2010. The compensation committee replaced the stock options with performance-based RSUs, which it believes provide a more effective means to align stockholders interests with those of management.
Our compensation committee may in the future adjust the mix of equity award types or approve different awards, such as restricted stock, as part of the overall long-term incentive award. Awards made in connection with a new, extended or expanded employment relationship may involve a different mix of RSUs and options depending on our compensation committee’s assessment of the total compensation package being offered.
2009 Equity AwardsAwards..The For 2009, our compensation committee reviewed market trends regarding the magnitude and mix of equity compensation issued to employees and executives among comparable companies, and reassessed the relative advantages and disadvantages of issuing various forms of equity compensation in connection with establishing the executive compensation packages for 2008.packages. The compensation committee concluded that the issuance of restricted stock units during fiscal year 20082009 would continue to be a more motivating form of incentive compensation for our employees and would permit us to issue fewer shares, thereby reducing the potential dilutive impact on our stockholders. However, our compensation committee also believesbelieved that the executive officers should also receive a portion of their equity compensation in the form of stock options to strengthen the linkage between executive compensation and increased stockholder value. As a result,For 2009, our compensation committee approved the issuance of equity that resulted in targeted total compensation for the executive officers at approximately the 50th50th percentile of the then benchmark data. TheOur chief executive officer received the highest proportion of option value to the total equity value. The following table sets forth
Noting the estimated value of our 2008 equity awards and the number of restricted stock units and stock options awarded to our named executive officers in 2008.
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| | Dollar Value | | Number of | | Number of Stock |
Name | | of RSUs (1) | | RSUs (2) | | Options (3) |
Kenton K. Alder | | $ | 555,000 | | | | 50,000 | | | | 50,000 | |
Steven W. Richards | | $ | 266,400 | | | | 24,000 | | | | 20,000 | |
Shane S. Whiteside | | $ | 266,400 | | | | 24,000 | | | | 20,000 | |
Douglas L. Soder | | $ | 266,440 | | | | 24,000 | | | | 20,000 | |
O. Clay Swain | | $ | 193,460 | | | | 17,000 | | | | — | |
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(1) | | The number of RSUs awarded were based on a dollar value calculated using the closing sale price ($11.10) on February 13, 2008, the date of grant, except for Mr. Swain’s, which were calculated using the closing sale price ($11.38) on March 26, 2008, the date of grant. |
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(2) | | One-third of the restricted stock units vest on each of the first three anniversaries of the grant date. |
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(3) | | Stock options were issued on February 13, 2008 at an exercise price of $11.10, the closing sale price on the date of grant. One-third of the stock options vest on each of the first three anniversaries of the grant date. |
2009 Equity Awards.As described above, our compensation committee determined that it would not increase any element of compensation for our executive officers for 2009. Noting thethen current trading price of our stock, our compensation committee decided to decrease the dollar value of RSUs awarded in 2009 and awardfrom 2008, but increased the same number of stock options in 2009 as our executive officers received in 2008. In addition, our compensation committee decidedshares subject to calculatethe RSUs, calculating the amount of RSUs to be
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awarded in 2009 based on the6-month trailing average closing price ($6.47) of our common stock as of March 5, 2009, the date of grant. Our compensation committee also decided to award the same number of stock options in 2009 as our executive officers received in 2008
The following table sets forth the estimated value of our 2009 equity awards and the number of restricted stock units and stock options awarded to our named executive officers through March 5,in 2009.
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| | Dollar Value | | Number of | | Number of Stock | | Dollar Value
| | Number of
| | Number of Stock
|
Name | | of RSUs (1) | | RSUs (2) | | Options (3) | | of RSUs(1) | | RSUs(1)(2) | | Options(3) |
| |
Kenton K. Alder | | $ | 510,600 | | 78,918 | | 50,000 | | | $ | 510,600 | | | | 78,918 | | | | 50,000 | |
Steven W. Richards | | $ | 253,080 | | 39,116 | | 20,000 | | | $ | 253,080 | | | | 39,116 | | | | 20,000 | |
Shane S. Whiteside | | $ | 253,080 | | 39,116 | | 20,000 | | | $ | 253,080 | | | | 39,116 | | | | 20,000 | |
Douglas L. Soder | | $ | 253,080 | | 39,116 | | 20,000 | | | $ | 253,080 | | | | 39,116 | | | | 20,000 | |
| | |
(1) | | The number of RSUs awarded were based onwas calculated using a dollar value calculated usingper share of $6.47, which was the six-month trailing average closing price as of March 5, 2009, the grant date ($6.47).date. On March 5, 2009, the closing sales price for our stock was $4.34. |
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(2) | | One-third of the restricted stock units vest on each of the first three anniversaries of the grant date. |
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(3) | | One quarter of the stock options listed will bewere issued on the date of each of theour regularly scheduled quarterly board of directors meetings.meetings (February 12, May 7, August 5 and November 5, 2009). The exercise price for the stock options will bewas equal to the closing sale price on the date of grant. The options granted to our four named executive officers in 2009 have an average per share exercise price of $8.99. One-third of the stock options granted will vest on each of the first three anniversaries of the grant date. |
2010 Equity Awards. For 2010, our compensation committee determined to replace stock options with a performance-based element to our long term incentive program in order to strengthenpay-for-performance.
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Accordingly, in March 2010, our compensation committee approved a new long-term incentive program (the “PRU Program”) for our executive officers. Under this program, performance-based RSUs, referred to as “performance-based restricted units” (“PRUs”), are awarded to eligible employees. PRU awards are intended to reward employees to the extent we achieve specific pre-established financial performance goals and provide a long-term return to our stockholders relative to a broader market index. Implementation of this program represented an important step taken by our compensation committee to drive apay-for-performance culture with a component explicitly linked to total stockholder return. It was also consistent with the direction being taken by several of our new peer group companies.
Under the PRU Program, a target number of PRUs is awarded at the beginning of each three-year performance period. The number of shares of our common stock released at the end of the performance period will range from zero to 2.4 times the target number depending on performance during the period. The performance metrics of the PRU Program are (a) annual financial targets, which for 2010 are based on revenues and EBITDA, each of which performance metrics is equally weighted, and (b) an overall “modifier” based on our company’s total stockholder return (“TSR”) relative to the S&P SmallCap 600, which we refer to as the “S&P 600,” over the three-year performance period. The calculation of EBITDA will exclude compensation expense attributable to the PRU program, goodwill impairment, building and other significant asset sales, asset write-downs, plant closure and related layoff costs, and residual acquisition costs. Payouts under the PRU Program are based on rolling three-year performance periods, and the annual financial metrics for future years may be different from those selected for 2010.
Each PRU will be equal in value to one share of our common stock. Recipients of PRU awards generally must remain employed by us on a continuous basis through the end of the relevant performance period in order to receive any amount of the PRUs covered by that award, except that recipients may be entitled to a pro-rata amount of PRUs in the case of the recipient’s death, disability or approved retirement.
The key 2010 financial metrics of revenue and EBITDA are equally weighted under our PRU Program. The metric of EBITDA is generally intended to focus our executives on tangible growth and cost reduction opportunities. Our compensation committee believes that it is a key metric that both drives and demonstrates improved financial performance within our company. It is also a complementary metric to the revenue metric used under the PRU Program for 2010. The combination of the two performance metrics limits the ability of an executive to be rewarded for taking excessive risk on behalf of our company by, for example, seeking revenue-enhancing opportunities at the expense of EBITDA, since performance is required on both metrics to maximize payout under the PRU Program. The performance targets established by our compensation committee are used solely for compensation purposes and should not be understood to be management’s expectations or guidance relating to future financial performance.
The TSR modifier is intended to ensure that there are no payouts or limited payouts under the PRU Program if our stock performance is below the median TSR of S&P 600 companies for the three-year performance period. Where the annual financial goals (revenue and EBITDA for 2010) have been met and where there has been strong relative TSR performance over the three-year performance period, the PRU Program may provide substantial rewards to participants with respect to that performance period. However, even if revenue and EBITDA goals are achieved in each of the three years, there may be no or limited payouts if our stock performance is below that of the median TSR of S&P 600 companies.
Under the PRU Program, financial goals are set at the beginning of each fiscal year, and performance is reviewed at the end of that year. For 2010, the annual financial goals are revenue and EBITDA. The percentage to be applied to each participant’s target award ranges from zero to 160%, based upon the extent to which the two annual performance goals are achieved. If we do not achieve a 60% threshold level of revenue or EBITDA performance for the year, the amount earned for that performance element of one-third of the award is zero. If we achieve the 60% threshold for both the targeted levels of revenue and EBITDA performance for the year, a percentage (ranging on a sliding scale from 40% to 160%) will be applied to one-third of the participant’s PRU award to determine the number of units earned during that year. If we achieve 120% or more of the target level of revenue or EBITDA, the amount earned for that performance element of the award will be 160% of one-third of the initial PRU award. For example, if a named executive officer receives an award of 234,000 PRUs, we continue to use revenue and EBITDA
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as our annual financial goals for 2011 and 2012 and we achieve (i) 130% of the revenue target and 60% of the EBITDA target in the first year, (ii) 100% of each of the revenue and EBITDA targets the second year, and (iii) 120% of the revenue target and 55% of the EBITDA target the third year, the participant will earn (and “bank,” pending application of the TSR modifier) 218,400 PRUs ((160% x 39,000) + (40% x 39,000) + (100% x 39,000) + (100% x 39,000) + (160% x 39,000) + (0 x 39,000)).
At the end of the three-year performance period, the total units earned, if any, are adjusted by applying a modifier based on our company’s TSR based on stock price changes (using for the 2010 awards the 6 month trailing average closing price at January 1, 2010 compared to the 6 month trailing average closing price at December 31, 2012), assuming reinvestment of dividends, relative to the TSR of S&P 600 companies for the three-year period. If our TSR is in the bottom 20th percentile of the S&P 600, the modifier will be zero, and no shares will be released with respect to that three-year performance period. If our TSR is at or above the 80th percentile of S&P 600 companies for the period, the maximum modifier of 150% will apply, and the number of shares released will equal 150% of the number of units earned during the period with respect to annual financial metric performance. If our TSR is between the 20th and 50th percentile of the S&P 600, the modifier will range on a sliding scale between .70 and 1.0. If our TSR is between the 50th and 80th percentile of the S&P 600, the modifier will range on a sliding scale between 1.0 and 1.5. For example, if a participant was credited with 218,400 PRUs at the end of the performance period and our TSR for that three-year period was at the 80th percentile of the S&P 600, a total of 327,600 shares of our common stock would be released to the participant for that period (218,400 x 150% = 327,600).
To achieve the maximum payout (240% of the initial PRU award), we must achieve the maximum annual financial goals for each of the three years in the relevant performance period and our TSR must meet or exceed the 80th percentile of the TSRs of S&P 600 companies for that period. Award values will reflect changes in stock price (both increases and decreases) over the three-year period because awards are denominated in stock units payable in shares.
At its March 2010 meeting, our compensation committee set the PRU revenue and EBITDA goals for fiscal 2010. The revenue and EBITDA goals were based on our board-approved 2010 budget for our company, as well as the projected performance of Meadville during the second, third and fourth fiscal quarters of 2010, as provided to our board by Meadville and used in connection with the preparation of the fairness opinion rendered to our board in connection with its approval of the Meadville transaction. The target levels associated with Meadville’s revenue and EBITDA for the second quarter of 2010 will be pro-rated to reflect that the PCB Combination was not consummated until April 8, 2010. The annual financial performance goal or goals for 2011 and 2012 will be established in the first quarter of each of those subsequent years, and may or may not be based on our revenueand/or EBITDA in those years. Whether these or any units earned in subsequent years will be paid out in shares at the end of any three-year performance period will depend on our TSR during that period, which is not determinable until the end of the three-year period.
Primarily because of the potential dilutive impact of options and its desire to strengthenpay-for-performance, our compensation committee determined to not make option grants to named executive officers in 2010.
Our compensation committee established a total long-term incentive target amount for each named executive officer in fiscal 2010, and awarded 55% of that amount in the form of PRUs, with the remaining amount awarded in the form of RSUs with time-based vesting. This mix of performance-based and time-based awards reflects our compensation committee’s increasing emphasis onpay-for-performance, with both types of awards also providing a measure of retention value, which is also an important component of the committee’s overall executive compensation philosophy. The following table sets forth the estimated value of our 2010 equity awards and the number of time vest RSUs and PRUs awarded to our executive officers for 2010.
| | | | | | | | | | | | | | | | |
| | Dollar Value of RSUs(1) | | Number of RSUs(1) |
Name | | Time Vest(2) | | Performance | | Time Vest(2) | | Performance |
|
Kenton K. Alder | | $ | 405,000 | | | $ | 495,000 | | | | 38,389 | | | | 46,919 | |
Steven W. Richards | | $ | 200,000 | | | $ | 250,000 | | | | 18,957 | | | | 23,697 | |
Shane S. Whiteside | | $ | 250,000 | | | $ | 300,000 | | | | 23,697 | | | | 28,436 | |
Douglas L. Soder | | $ | 250,000 | | | $ | 300,000 | | | | 23,697 | | | | 28,436 | |
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| | |
(1) | | The number of RSUs awarded was calculated using a dollar value per share of $10.55, which was the six-month trailing average closing price of our common stock as of March 25, 2010, the grant date. On March 25, 2010, the closing sales price for our common stock was $9.14. |
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(2) | | One-third of the restricted stock units vest on each of the first three anniversaries of the grant date. |
Pension BenefitsBenefits..None of our executive officers participate in or have account balances in qualified or non-qualified defined benefit plans sponsored by us. The compensation committee may elect to adopt qualified or non-qualified defined benefit plans in the future if the Committee determines that doing so is in our best interests.
Nonqualified Deferred CompensationCompensation..None of our executive officers participate in or have account balances in nonqualified defined contribution plans or other nonqualified deferred compensation plans maintained by us. The compensation committee may elect to provide our executive officers and other employees with nonqualified defined contribution or other nonqualified deferred compensation benefits in the future if the Committee determines that doing so is in our best interests.
Other CompensationCompensation..All of our executive officers are eligible to participate in our employee benefit plans, including medical, dental, life insurance, and 401(k) plans. These plans are available to all salaried employees and do not discriminate in favor of executive officers. It is generally our policy to not extend significant perquisites to executives that are not broadly available to our other employees. In designing these elements, we seek to provide an overall level of benefits that are competitive with those offered by similarly situated companies in the markets in which we operate based upon our general understanding of industry practice.
Employment AgreementsAgreements..We maintain an employment agreementsagreement with Mr. Alder and Mr. Soderthat is described under “Employment Agreements with Named Executive Officers.” The compensation committee determined that the compensation packagespackage provided under these agreements werethis agreement was fair and reasonable on the basis of its assessment of comparable compensation opportunities available to the individuals, including the compensation arrangements of each namedour chief executive officer at his prior place of employment.officer.
Severance Payments due Upon Terminationand/or a Change in ControlControl..We currently provide for the accelerated vesting of stock options orand restricted stock units that otherwise would have vested during the one year period beginning on the date of the consummation of theany “change in control.” In addition, we provide for accelerated vesting of all stock options and restricted stock units in the event of a “change in control” and subsequent termination of employment without “cause” within twelve months thereof.
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The compensation committee believes that for senior executives, including our named executive officers, accelerated vesting of stock options and restricted stock units in the event of a change in control is generally appropriate because in some change in control situations, equity of the target company is cancelled making immediate acceleration necessary in order to preserve the value of the award. In addition, as previously discussed, we rely primarily on incentive awards to provide our named executive officers with the opportunity to accumulate substantial resources to fund their retirement income, and our compensation committee believes that a change in control event is an appropriate liquidation point for awards designed for such purpose. We also believe that it is appropriate to require a termination of employment within one year following a change in control before full vesting is accelerated. We presume that such a termination would likely be due to the change in control and not the employee’s performance and therefore the award should be earned. For executives not terminated within one year of a change in control, the executives would continue to vest in their awards as they contribute to the success of the surviving company.
In addition, certain executives, including each of our named executive officers, receive cash severance in certain circumstances that result in termination of employment. These payments are intended to provide a level of transition assistance in the event of an involuntary termination of employment and to keep executives focused on our business rather than their personal circumstances. In March 2010, our board of directors approved an amendment to Mr. Alder’s employment agreement to increase the severance payment payable to him in connection with change in control-related involuntary terminations of employment from 18 months of continued base salary payments to a lump sum payment equal to three (3) times the sum of Mr. Alder’s then base salary plus his “Target Bonus” (the bonus an executive would have received with respect to the year in which he was terminated assuming achievement of 100% of the performance target level(s) associated with such bonus). Mr. Alder’s severance
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payment for other involuntary terminations was increased from 18 months of continued base salary payments to a lump sum payment equal to two (2) times the sum of Mr. Alder’s then base salary and Target Bonus. Our board also approved a new executive change in control severance agreement that we will enter into with each of our named executive officers, except Mr. Alder, increasing each officer’s change in control lump sum severance payment to two (2) times the executive’s then base salary and Target Bonus. The compensation committee believes these provisions are fair and reasonable based on its understanding of market practices among industry competitors noted above and within the broader environment of technology companies and similarly sized businesses.
Calculations of the payments due to our named executive officers upon certain terminations of employmentand/or in connection with a change in control are set forth under “Executive Compensation—Potential“Potential Payments upon Termination or Change in Control at Fiscal Year-End 2008.Control.” We believe these severance benefits are an essential element of our compensation package for executive officers and assist us in recruiting and retaining talented individuals. In addition, we believe that it is more equitable to offer severance benefits based on a standard formula determined as a multiple of base pay and incentive bonus opportunity because severance often serves as a bridge when employment is involuntarily terminated, and should therefore not be affected by other, longer-term compensation arrangements. As a result, and consistent with the practice of most of our peer companies, other compensation decisions are not generally based on the existence of this severance protection.
Timing ofApproval Process for Equity Grants
Executives receive long-term equity awards pursuant to the terms of the 2006 Incentive Compensation Plan, or the 2006 Plan. Awards may also be granted outside of the 2006 Plan to the extent those grants are permitted by the Nasdaq rules. The compensation committee administers the 2006 Plan and establishes the rules for all awards granted thereunder, including grant guidelines, vesting schedules, and other provisions. The compensation committee reviews these rules from time to time and considers, among other things, the interests of the stockholders, market conditions, information provided by independent advisors, performance objectives, and recommendations made by our chief executive officer.
The board of directors or our compensation committee reviews awards for all employees. The compensation committee has established a process in which our compensation committee reviews the recommendations of our chief executive officer for executives (other than himself) and other employees, modifies the proposed grants in certain circumstances, and approves the awards effective as of the date of its approval.
The exercise price of stock option grants are set at 100% of the closing market price of a share of company common stock on the date the board of directors or compensation committee approves the grants. For new hire awards, our compensation committee or the board of directors generally reviews the recommendation of management at the board or committee meeting after the participant’s hire date and modifies and approves the awards effective as of the date of the Committee’s or board’s approval.
We have no practice of timing grants of stock options or RSUs to coordinate with the release of material non-public information, and we have not timed the release of material non-public information for the purpose of affecting the value of named executive officer compensation.
Impact of Tax and Accounting
As a general matter, our compensation committee takes into account the various tax and accounting implications of the compensation vehicles employed by us.
When determining amounts In this regard, the fact that the accounting treatment aligns more closely with the payouts was among the factors considered in adopting the PRU Program and in eliminating the grant of long-term incentive grantsstock options to executivesnamed executive officers in 2010. However, while structuring compensation programs that result in more favorable tax and employees,financial reporting treatment is a general principle, our compensation committee examinesbalances these goals with other business needs that may be inconsistent with obtaining the most favorable tax and accounting cost associated with the grants. Under FAS 123(R),
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grantstreatment for each component of stock options and restricted stock units result in an accounting charge for us equal to the grant date fair value of those securities. For restricted stock units, the accounting cost is generally equal to the fair market value of the underlying shares of common stock on the date of the award. The cost is then amortized over the requisite service period. With respect to stock options, we calculate the grant date fair value based on the Black-Scholes formula with an adjustment for possible forfeitures and amortize that value as compensation expense over the vesting period.compensation.
Deductibility. Section 162(m) of the Code does not permit publicly traded companies to take income tax deductions for compensation paid to our chief executive officer and certain other executive officers to the extent that compensation exceeds $1 million per officer in any taxable year and does not otherwise qualify as performance-basedperformance-
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based compensation. The 2006 Plan is structured so that the compensation deemed paid to an executive officer in connection with PRUs and the exercise of stock options granted under the 2006 Plan should qualify as performance-based compensation not subject to the $1 million limitation. In addition, awards of restricted stock units madeOur time-vest RSUs are not considered performance-based under the 2006 Plan may orSection 162(m) rules. Accordingly, amounts of compensation related to those time-vest RSUs held by our executive officers may not qualify as performance-based compensation.be fully deductible (depending on the value of our stock and the amount of other nonperformance-based compensation an officer has during the year in which any portion of the RSU vests).
The compensation committee will continue to consider steps that might be in our best interests to comply with Section 162(m) of the Code. However, in establishing the cash and equity incentive compensation programs for our executive officers, our compensation committee believes that the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration, and not the sole or primary factor. The compensation committee believes that cash and equity incentive compensation must be maintained at the requisite level to attract and retain the executive officers essential to our financial success, even if all or part of that compensation may not be deductible by reason of the limitations of Section 162(m) of the Code.
Tax Implications for Officers. Section 409A of the Internal Revenue Code imposes additional income taxes on executive officers for certain types of deferred compensation that do not comply with Section 409A. We attempt in good faith to structure compensation so that it either conforms with the requirements of or qualifies for an exception under Code Section 409A. Section 280G of the Internal Revenue Code imposes an excise tax on payments to executives of severance or change of control compensation that exceed the levels specified in the Section 280G rules. Our named executive officers could receive the amounts shown in the section entitled “Potential Payments Upon Termination or Change in Control” (beginning on page 38 below) as severance or change of control payments that could implicate this excise tax. We do not offer our officers as part of their change of control benefits any gross ups related to this excise tax under Code Section 4999.
Accounting Considerations. When determining amounts of long-term incentive grants to executives and employees, our compensation committee examines the accounting cost associated with the grants. Under Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718,Compensation — Stock Compensation, grants of stock options and restricted stock units result in an accounting charge for us equal to the grant date fair value of those securities. For restricted stock units, the accounting cost is generally equal to the fair market value of the underlying shares of common stock on the date of the award. The cost is then amortized over the requisite service period. With respect to stock options, we calculate the grant date fair value based on the Black-Scholes formula with an adjustment for possible forfeitures and amortize that value as compensation expense over the vesting period. Our compensation committee believes that the many advantages of equity compensation, as discussed above, more than compensate for the non-cash accounting expense associated with them.
Financial Restatements. Our compensation committee does not have an established practice regarding the adjustment or recovery of awards or payments if the relevant performance measures upon which they are based are restated or otherwise adjusted in a manner that would reduce the size of an award or payment. The committee will determine whether to seek recovery of incentive compensation in the event of a financial restatement or similar event based on the facts and circumstances surrounding a financial restatement or similar event, should one occur. Among the key factors that the committee will consider is whether the executive officer engaged in fraud or willful misconduct that resulted in need for a restatement.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORSREPORT
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Our compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on such review and discussion, the compensation committee
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recommended to our board of directors, and our board of directors approved, that the Compensation Discussion and Analysis be included in this proxy statement.
Thomas T. Edman, Chairman
Robert E. Klatell
John G. Mayer
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2008,2009, our compensation committee consisted of Messrs. Edman, Klatell, and Mayer. None of these individuals had any contractual or other relationships with us during such fiscal year except as directors. No interlocking relationship exists between any member of our compensation committee and any member of any other company’s board of directors or compensation committee.
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EXECUTIVE COMPENSATION
Fiscal Year 20082009 Summary Compensation Table
The following table sets forth compensation information for our named executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Non-Equity | | | | |
| | | | | | | | | | | | | | | | | | | | | | Incentive | | | | |
Name and | | | | | | | | | | | | | | Stock | | Option | | Plan | | All Other | | |
Principal Position | | Year | | Salary | | Bonus | | Awards(1) | | Awards(2) | | Compensation(3) | | Compensation(4) | | Total |
Kenton K. Alder | | | 2008 | | | $ | 590,769 | | | | — | | | $ | 309,843 | | | $ | 344,340 | | | $ | 703,200 | | | $ | 9,200 | | | $ | 1,957,352 | |
Chief Executive Officer, | | | 2007 | | | $ | 487,692 | | | | — | | | $ | 122,702 | | | $ | 281,196 | | | $ | 416,952 | | | $ | 9,000 | | | $ | 1,317,542 | |
President, and Director | | | 2006 | | | $ | 386,539 | | | | — | | | | — | | | $ | 180,378 | | | $ | 596,000 | | | $ | 2,200 | | | $ | 1,165,117 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Steven W. Richards | | | 2008 | | | $ | 288,077 | | | | — | | | $ | 166,322 | | | $ | 162,734 | | | $ | 240,198 | | | $ | 9,200 | | | $ | 866,531 | |
Chief Financial Officer, Executive | | | 2007 | | | $ | 251,154 | | | | — | | | $ | 72,441 | | | $ | 142,672 | | | $ | 180,092 | | | $ | 9,000 | | | $ | 655,359 | |
Vice President, and Secretary | | | 2006 | | | $ | 200,769 | | | | — | | | | — | | | $ | 85,283 | | | $ | 232,000 | | | $ | 2,008 | | | $ | 520,060 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shane S. Whiteside | | | 2008 | | | $ | 351,539 | | | | — | | | $ | 166,322 | | | $ | 179,492 | | | $ | 301,875 | | | $ | 8,431 | | | $ | 1,007,658 | |
Executive Vice President and | | | 2007 | | | $ | 298,462 | | | | — | | | $ | 72,441 | | | $ | 161,782 | | | $ | 211,541 | | | $ | 9,000 | | | $ | 753,226 | |
Chief Operating Officer | | | 2006 | | | $ | 235,827 | | | | — | | | | — | | | $ | 103,914 | | | $ | 260,420 | | | $ | 1,897 | | | $ | 602,058 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Douglas L. Soder | | | 2008 | | | $ | 354,231 | | | $ | 150,000 | | | $ | 149,758 | | | $ | 133,157 | | | $ | 301,513 | | | $ | 9,200 | | | $ | 1,097,859 | |
Executive Vice President(5) | | | 2007 | | | $ | 337,896 | | | $ | 200,000 | | | $ | 59,730 | | | $ | 96,560 | | | $ | 164,543 | | | $ | 9,000 | | | $ | 867,729 | |
| | | 2006 | | | $ | 51,269 | | | $ | 50,000 | | | | — | | | $ | 14,762 | | | | — | | | $ | 13,192 | | | $ | 129,223 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
O. Clay Swain | | | 2008 | | | $ | 206,346 | | | | — | | | $ | 118,742 | | | $ | 124,578 | | | $ | 120,000 | | | $ | 9,200 | | | $ | 578,866 | |
Senior Vice President — Sales | | | 2007 | | | $ | 193,354 | | | | — | | | $ | 56,165 | | | $ | 136,639 | | | $ | 127,463 | | | $ | 9,000 | | | $ | 522,621 | |
| | | 2006 | | | $ | 187,168 | | | | — | | | | — | | | $ | 89,388 | | | $ | 211,700 | | | $ | 1,466 | | | $ | 489,722 | |
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| | | | | | | | | | | | Non-Equity
| | | | |
| | | | | | | | Stock
| | Option
| | Incentive Plan
| | All Other
| | |
Name and Principal Position | | Year | | Salary | | Bonus | | Awards(1) | | Awards(2) | | Compensation(3) | | Compensation(4) | | Total |
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Kenton K. Alder | | | 2009 | | | $ | 586,000 | | | | — | | | $ | 342,504 | | | $ | 247,669 | | | $ | 324,058 | | | $ | 9,800 | | | $ | 1,510,031 | |
Chief Executive Officer, | | | 2008 | | | $ | 590,769 | | | | — | | | $ | 555,000 | | | $ | 340,540 | | | $ | 703,200 | | | $ | 9,200 | | | $ | 2,198,709 | |
President, and Director | | | 2007 | | | $ | 487,692 | | | | — | | | $ | 482,914 | | | | — | | | $ | 416,952 | | | $ | 9,000 | | | $ | 1,396,558 | |
Steven W. Richards | | | 2009 | | | $ | 280,000 | | | | — | | | $ | 169,763 | | | $ | 99,068 | | | $ | 121,660 | | | $ | 9,382 | | | $ | 679,873 | |
Chief Financial Officer, | | | 2008 | | | $ | 288,077 | | | | — | | | $ | 266,400 | | | $ | 136,216 | | | $ | 240,198 | | | $ | 9,200 | | | $ | 940,091 | |
Executive Vice President and Secretary | | | 2007 | | | $ | 251,154 | | | | — | | | $ | 285,089 | | | | — | | | $ | 180,092 | | | $ | 9,000 | | | $ | 725,335 | |
Shane S. Whiteside | | | 2009 | | | $ | 345,000 | | | | — | | | $ | 169,763 | | | $ | 99,068 | | | $ | 149,903 | | | $ | 8,449 | | | $ | 772,183 | |
Executive Vice President | | | 2008 | | | $ | 351,539 | | | | — | | | $ | 266,400 | | | $ | 136,216 | | | $ | 301,875 | | | $ | 8,431 | | | $ | 1,064,460 | |
and Chief Operating Officer | | | 2007 | | | $ | 298,462 | | | | — | | | $ | 285,089 | | | | — | | | $ | 211,541 | | | $ | 9,000 | | | $ | 804,092 | |
Douglas L. Soder | | | 2009 | | | $ | 345,000 | | | | — | | | $ | 169,763 | | | $ | 99,068 | | | $ | 149,903 | | | $ | 9,200 | | | $ | 772,934 | |
Executive Vice | | | 2008 | | | $ | 354,231 | | | $ | 150,000 | | | $ | 266,400 | | | $ | 136,216 | | | $ | 301,513 | | | $ | 9,200 | | | $ | 1,217,560 | |
President(5) | | | 2007 | | | $ | 337,896 | | | $ | 200,000 | | | $ | 235,088 | | | | — | | | $ | 164,543 | | | $ | 9,000 | | | $ | 946,527 | |
| | |
(1) | | Amounts shown do not reflect compensation actually received by our named executive officers. Instead, these amounts reflect the compensation expense we recognizedfair value at the date of grant. The value is calculated in the year shown related toaccordance with ASC Topic 718,Compensation — Stock Compensation. The fair value of a restricted stock units awarded inunit is based on the closing market price of our common stock on the date of grant. The 2008 and prior years2007 stock award amounts were restated from previous proxy disclosures to our named executive officers, as determined pursuant to SFAS 123R.reflect changes in SEC rules. For a discussion of valuation assumptions used in determining the grant date fair value of the awards, see Note 13 to our 20082009 consolidated financial statements, included in our annual report onForm 10-K filed with the SEC. |
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(2) | | Amounts shown do not reflect compensation actually received by our named executive officers. Instead, these amounts reflect the compensation expense we recognizedfair value at the date of grant. The value is calculated in the year shown related to stock options awarded inaccordance with ASC Topic 718,Compensation — Stock Compensation. The 2008 and prior years2007 option award amounts were restated from previous proxy disclosures to our named executive officers, as determined pursuant to SFAS 123R.reflect changes in SEC rules. For a discussion of valuation assumptions used in determining the grant date fair value of the awards, see Note 13 to our 20082009 consolidated financial statements, included in our annual report onForm 10-K filed with the SEC. |
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(3) | | Amounts represent bonuses paid based on achievement of individual and company performance criteria for each year shown, which bonuses were earned in such fiscal year, but not paid until the next fiscal year. Additionally, amounts for 2007 include an integration bonus paid in 2007. |
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(4) | | Amounts represent matching contributions by us to our 401(k) plan. |
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(5) | | Mr. Soder received a signing bonus of $50,000 in 2006 and additional retention bonuses of $200,000 and $150,000 in 20072008 and 2008, respectively.$200,000 in 2007. |
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Fiscal Year 20082009 Grants of Plan-Based Awards
The following table sets forth information concerning awards of stock options and restricted stock made to each of our named executive officers during fiscal year 2008.2009.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | All Other | | All Other | | | | |
| | | | | | | | | | | | | | | | | | Stock | | Option | | Exercise | | Grant Date |
| | | | | | | | | | | | | | | | | | Awards: | | Awards: | | or Base | | Fair Value |
| | | | | | | | | | | | | | | | | | Number of | | Number of | | Price of | | of Stock |
| | | | | | Estimated Possible Payouts Under | | Shares of | | Securities | | Option | | and Option |
| | Grant | | Non-Equity Incentive Plan | | Stock or | | Underlying | | Awards | | Awards |
Name | | Date | | Awards($)(1 | | Units | | Options | | ($/Sh) | | (2)(3) |
| | | | | | Threshold | | Target | | Maximum | | | | | | | | | | | | | | | | |
Kenton K. Alder | | | — | | | $ | 58,600 | | | $ | 410,200 | | | $ | 996,200 | | | | — | | | | — | | | | — | | | | — | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | 50,000 | | | | — | | | $ | 11.10 | | | $ | 555,000 | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | — | | | | 50,000 | | | $ | 11.10 | | | $ | 340,540 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Steven W. Richards | | | — | | | $ | 28,000 | | | $ | 154,000 | | | $ | 336,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | 24,000 | | | | — | | | $ | 11.10 | | | $ | 266,400 | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | — | | | | 20,000 | | | $ | 11.10 | | | $ | 136,216 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Shane S. Whiteside | | | — | | | $ | 34,500 | | | $ | 189,750 | | | $ | 414,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | 24,000 | | | | — | | | $ | 11.10 | | | $ | 266,400 | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | — | | | | 20,000 | | | $ | 11.10 | | | $ | 136,216 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Douglas L. Soder | | | — | | | $ | 34,500 | | | $ | 189,750 | | | $ | 414,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | 24,000 | | | | — | | | $ | 11.10 | | | $ | 266,400 | |
| | | 2/13/2008 | | | | — | | | | — | | | | — | | | | — | | | | 20,000 | | | $ | 11.10 | | | $ | 136,216 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
O. Clay Swain | | | — | | | $ | 20,000 | | | $ | 90,000 | | | $ | 150,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/26/2008 | | | | — | | | | — | | | | — | | | | 17,000 | | | | — | | | $ | 11.38 | | | $ | 193,460 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | All Other
| | All Other
| | | | |
| | | | | | | | | | Stock
| | Option
| | | | Grant Date
|
| | | | | | | | | | Awards:
| | Awards:
| | Exercise or
| | Fair Value
|
| | | | Estimated Possible Payouts Under
| | Number of
| | Number of
| | Base Price
| | of Stock
|
| | | | Non-Equity Incentive Plan
| | Shares of
| | Securities
| | of Option
| | and Option
|
| | Grant
| | Awards ($)(1) | | Stock or
| | Underlying
| | Awards
| | Awards
|
Name | | Date | | Threshold | | Target | | Maximum | | Units | | Options | | ($/Sh) | | (2)(3) |
|
Kenton K. Alder | | | — | | | $ | 58,600 | | | $ | 410,200 | | | $ | 996,200 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/5/2009 | | | | — | | | | — | | | | — | | | | 78,918 | | | | — | | | $ | 4.34 | | | $ | 342,504 | |
| | | 11/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 12,500 | | | $ | 11.35 | | | $ | 78,054 | |
| | | 8/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 12,500 | | | $ | 10.97 | | | $ | 76,445 | |
| | | 5/7/2009 | | | | — | | | | — | | | | — | | | | — | | | | 12,500 | | | $ | 7.85 | | | $ | 54,254 | |
| | | 2/12/2009 | | | | — | | | | — | | | | — | | | | — | | | | 12,500 | | | $ | 5.78 | | | $ | 38,916 | |
Steven W. Richards | | | — | | | $ | 28,000 | | | $ | 154,000 | | | $ | 336,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/5/2009 | | | | — | | | | — | | | | — | | | | 39,116 | | | | — | | | $ | 4.34 | | | $ | 169,763 | |
| | | 11/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 11.35 | | | $ | 31,222 | |
| | | 8/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 10.97 | | | $ | 30,578 | |
| | | 5/7/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 7.85 | | | $ | 21,702 | |
| | | 2/12/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 5.78 | | | $ | 15,567 | |
Shane S. Whiteside | | | — | | | $ | 34,500 | | | $ | 189,750 | | | $ | 414,000 | | | | — | | | | — | | | | — | | | | — | |
| | | 3/5/2009 | | | | — | | | | — | | | | — | | | | 39,116 | | | | — | | | $ | 4.34 | | | $ | 169,763 | |
| | | 11/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 11.35 | | | $ | 31,222 | |
| | | 8/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 10.97 | | | $ | 30,578 | |
| | | 5/7/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 7.85 | | | $ | 21,702 | |
| | | 2/12/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 5.78 | | | $ | 15,567 | |
Douglas L. Soder | | | — | | | $ | 34,500 | | | $ | 189,750 | | | $ | 414,000 | | | | — | | | | — | | | | — | | | | ��� | |
| | | 3/5/2009 | | | | — | | | | — | | | | — | | | | 39,116 | | | | — | | | $ | 4.34 | | | $ | 169,763 | |
| | | 11/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 11.35 | | | $ | 31,222 | |
| | | 8/5/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 10.97 | | | $ | 30,578 | |
| | | 5/7/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 7.85 | | | $ | 21,702 | |
| | | 2/12/2009 | | | | — | | | | — | | | | — | | | | — | | | | 5,000 | | | $ | 5.78 | | | $ | 15,567 | |
| | |
(1) | | Represents threshold, target and maximum opportunity under our annual cashincentive bonus program for fiscal year 2008.2009. Our annual cashincentive bonus program is discussed above under the caption “2008“2009 Annual Cash Bonus Program”Incentive Bonuses” in the Compensation Discussion and Analysis. |
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(2) | | The fair value of a restricted stock unit is based on the closing market price on the date of grant, as determined pursuant to SFAS 123R.ASC Topic 718,Compensation — Stock Compensation. The value for all restricted stock units granted to our named executive officers is equal to 100% of the fair market value of the underlying shares on the grant date. For a discussion of valuation assumptions, see Note 13 to our 2009 consolidated financial statements included in our annual report onForm 10-K filed with the SEC. |
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(3) | | The value of a stock option is based on the fair value on the date of grant, as determined pursuant to SFAS 123R.ASC Topic 718,Compensation — Stock Compensation. For a discussion of valuation assumptions, see Note 13 to our 2009 consolidated financial statements included in our annual report onForm 10-K filed with the SEC. |
Employment Agreements with Named Executive Officers
Effective December 1, 2005, we entered into an employment agreement with Mr. Alder.Alder, which we refer to as the 2005 Employment Agreement. Pursuant to the agreement,2005 Employment Agreement, Mr. Alder will continue to serveserved as our presidentPresident and chief executive officerChief Executive Officer for a term expiring December 1, 2009, which term shall be automatically renewed for additional one-year terms, unless we or Mr. Alder givesgave timely notice of non-renewal. Mr. Alder receivesreceived a base salary currentlyduring 2009 of $586,000 which may be increased from time to time atunder the discretion of the2005 Employment Agreement. Effective March 19, 2010, our board of directors. In addition, if Mr. Alder’s employment is terminated by (1) us without “cause,” or (2) bydirectors approved a Restated Employment Agreement with Mr. Alder, for “good reason,” other than in connection with a “change of control,”which we refer to as the Restated Employment Agreement, which supersedes the 2005 Employment Agreement. Pursuant to the Restated Employment Agreement, Mr. Alder would be entitledwill continue to receiveserve as our President and Chief Executive Officer for an amount in cash equal to 18 months of his base salary, payable in equal installments on the same payment dates as such base salary payments would have otherwise been paid for the 18 months following such termination. In the event of a change in control, the vesting of any stock options or restricted stock units held by Mr. Alder that are assumed by the acquirer would be immediatelyinitial term
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accelerated ifexpiring on the three year anniversary of the date of the Restated Employment Agreement, which initial term will be automatically renewed for additional one-year terms unless timely notice of non-renewal is given by either us or Mr. Alder’s employment is terminated by the acquirer without cause or byAlder. The Restated Employment Agreement provides that Mr. Alder for good reason within 12 months after the change in control.
Pursuant to the terms of Mr. Soder’s October 2006 offer letter, he will receive a base salary of $330,000,$605,000, which may be increased from time to time at the discretion of our board of directors. In addition, Mr. Soder was granted 60,000 stock options and a $50,000 signing bonus. The offer letterthe Restated Employment Agreement provides that, Mr. Soder will receive a retention bonus of $200,000 on October 28, 2007 and $150,000 on October 28, 2008 provided that Mr. Soder remains employed with us through such respective dates. Inin the event we terminate Mr. Soder’sAlder’s employment without cause (1)or Mr. Alder terminates his employment for good reason, we must provide to Mr. Alder certain severance benefits. These severance benefits are discussed in more detail below under “Potential Payments upon Termination or Change in Control.” The Restated Employment Agreement further imposes certain non-competition and non-solicitation obligations on Mr. Alder in the event his employment with our company is terminated prior to the expiration of the term of the Restated Employment Agreement. Such non-competition and non-solicitation obligations will remain in effect for the longer of (1) a period of 12 months following termination or (2) the period during which we are required to pay severance to Mr. Alder under the Restated Employment Agreement.
Effective March 19, 2010, our board of directors approved a Executive Change in Control Severance Agreement, which we refer to as the Severance Agreement, with each of Steven W. Richards, Shane S. Whiteside, and Douglas L. Soder. The terms of the Severance Agreement are described below under “Potential Payments upon Termination or Change in Control.” The Severance Agreements supersede the previous change in control severance agreements executed on December 1, 2005 between our company and each of Mr. Richards and Mr. Whiteside, and in the case of Mr. Soder, the Severance Agreement supersedes the severance provisions set forth in his October 28, 2007, he will be entitled to receive two years salary ($660,000) and accelerated payment of any unpaid bonus; (2) after October 28, 2007 and prior to October 28, 2008, he will be entitled to receive one year’s salary ($345,000) and accelerated payment of any unpaid bonus; and (3) after October 28, 2008 he will be entitled to receive six months’ salary ($172,500) and accelerated payment of any unpaid bonus. In the event Mr. Soder’s employment is terminated following a change of control, the vesting of any stock options and restricted stock units held by him and the payment of any unpaid bonus will be accelerated.2006 offer letter.
2006 Incentive Compensation Plan
The material features of the 2006 Incentive Compensation Plan, referred to as the 2006 Plan, are outlined below.
Awards
The terms of the 2006 Plan provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock related awards, and performance awards that may be settled in cash, stock, or other property.
Shares available for awardsAwards
The total number of shares of our common stock that may be subject to awards under the 2006 Plan is equal to 3,000,000 shares, plus (i) any shares available for issuance and not subject to an award under theour 2000 Equity Compensation Plan (2000 Plan) or theour Management Stock Option Plan (Management Plan), (ii) the number of shares with respect to which awards granted under the 2006 Plan, 2000 Plan, and the Management Plan terminate without the issuance of the shares or where the shares are forfeited or repurchased; (iii) with respect to awards granted under the 2006 Plan, 2000 Plan, and the Management Plan, the number of shares which are not issued as a result of the award being settled for cash or otherwise not issued in connection with the exercise or payment of the award; and (iv) the number of shares that are surrendered or withheld in payment of the exercise price of any award or any tax withholding requirements in connection with any award granted under the 2006 Plan, 2000 Plan, and the Management Plan.
Limitations on awardsAwards
The 2006 Plan imposes individual limitations on certain awards, in part to comply with Section 162(m) of the Internal Revenue Code of 1986. Under these limitations, no more than 1,000,000 shares of our common stock reserved for issuance under the 2006 Plan may be granted to an individual during any fiscal year pursuant to any stock options or stock appreciation rights granted under the 2006 Plan, and no more than 1,000,000 shares of our common stock reserved for issuance under the 2006 Plan may be granted to an individual during any fiscal year pursuant to all awards other than stock options or stock appreciation rights granted under the 2006 Plan. The maximum amount that may be earned by any one participant as a performance award (payable in cash) or other cash award is $5,000,000 per calendar year. No outstanding options may be repriced without stockholder approval (that
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is, we cannot amend an outstanding option to lower the exercise price or exchange an outstanding option for a new option with a lower exercise price without stockholder approval). In addition, the 2006 Plan prohibits us from exchanging an outstanding option with an exercise price above the then current fair market value of our common stock for cash, other awards, or other property.
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Capitalization adjustmentsAdjustments
In the event that a dividend or other distribution (whether in cash, shares of common stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution, or other similar corporate transaction or event affects our common stock or our other securities or the securities of any other issuer, so that an adjustment, substitution, or exchange is determined to be appropriate by the plan administrator, then the plan administrator will adjust any or all of the following as the plan administrator deems appropriate: (1) the kind and number of shares available under the 2006 Plan, (2) the kind and number of shares subject to limitations on awards described in the preceding paragraph, (3) the kind and number of shares subject to all outstanding awards, (4) the exercise price, grant price, or purchase price relating to any award, and (5) other affected terms of awards.
Eligibility
The persons eligible to receive awards under the 2006 Plan consist of officers, directors, employees, and independent contractors. However, incentive stock options may be granted under the 2006 Plan only to our employees, including our officers who are employees.
Administration
Our board of directors will administer the 2006 Plan unless it delegates administration of the 2006 Plan to one or more committees of our board of directors. Together, our board of directors and any committee(s) delegated to administer the 2006 Plan are referred to as the plan administrator. If a committee is delegated to administer the 2006 Plan, then the committee members may be “non-employee directors” as defined byRule 16b-3 of the Securities Exchange Act, “outside directors” for purposes of Section 162(m), and independent as defined by Nasdaq or any other national securities exchange on which any of our securities may be listed for trading in the future. Subject to the terms of the 2006 Plan, the plan administrator is authorized to select eligible persons to receive awards, determine the type and number of awards to be granted and the number of shares of our common stock to which awards will relate, specify times at which awards will be exercisable or may be settled (including performance conditions that may be required as a condition thereof), set other terms and conditions of awards, prescribe forms of award agreements, interpret and specify rules and regulations relating to the 2006 Plan, and make all other determinations that may be necessary or advisable for the administration of the 2006 Plan. The plan administrator may amend the terms of outstanding awards, in its discretion. Any amendment that adversely affects the rights of the award recipient, however, must receive the approval of such recipient.
Stock optionsOptions and stock appreciation rightsStock Appreciation Rights
The plan administrator is authorized to grant stock options, including both incentive stock options and non-qualified stock options. In addition, the plan administrator is authorized to grant stock appreciation rights, which entitle the participant to receive the appreciation in our common stock between the grant date and the exercise date of the stock appreciation right. The plan administrator determines the exercise price per share subject to an option and the grant price of a stock appreciation right. The per share exercise price of an incentive stock option, however, must not be less than the fair market value of a share of common stock on the grant date. The plan administrator generally will fix the maximum term of each option or stock appreciation right, the times at which each stock option or stock appreciation right will be exercisable, and provisions requiring forfeiture of unexercised stock options or stock appreciation rights at or following termination of employment or service, except that no incentive stock option may have a term exceeding ten years. Stock options may be exercised by payment of the exercise price in any form of legal consideration specified by the plan administrator, including cash, shares (including cancellation of a portion of the shares subject to the award), outstanding awards or other property having a fair market value equal to the exercise price. Options may also be exercisable in connection with a broker-assisted sales transaction (a “cashless
33
exercise”) as determined by the plan administrator. The
24
plan administrator determines methods of exercise and settlement and other terms of the stock appreciation rights.
Restricted Stock and Stock Units
The plan administrator is authorized to grant restricted stock and stock units. Restricted stock is a grant of shares of common stock, which may not be sold or disposed of and which may be forfeited in the event of certain terminations of employment or service, prior to the end of a restricted period specified by the plan administrator. Restricted stock may also be subject to forfeiture if established performance targets are not met. A participant granted restricted stock generally has all of the rights of one of our stockholders, unless otherwise determined by the plan administrator. An award of a stock unit confers upon a participant the right to receive shares of common stock at the end of a specified period, and may be subject to possible forfeiture of the award in the event of certain terminations of employment prior to the end of a specified period. Prior to settlement, an award of a stock unit carries no voting or dividend rights or other rights associated with share ownership, although dividend equivalents may be granted, as discussed below.
Dividend Equivalents
The plan administrator is authorized to grant dividend equivalents conferring on participants the right to receive, currently or on a deferred basis, cash, shares of common stock, other awards, or other property equal in value to dividends paid on a specific number of shares of common stock or other periodic payments. Dividend equivalents may be granted alone or in connection with another award, may be paid currently or on a deferred basis and, if deferred, may be deemed to have been reinvested in additional shares of common stock, awards or otherwise as specified by the plan administrator. Currently, there are no outstanding dividend equivalent awards, either with other outstanding awards under any of our incentive compensation plans or as stand-alone awards.
Bonus Stock and Awards in Lieu of Cash Obligations
The plan administrator is authorized to grant shares of common stock as a bonus free of restrictions for services performed for us or to grant shares of common stock or other awards in lieu of our obligations to pay cash under the 2006 Plan or other plans or compensatory arrangements, subject to such terms as the plan administrator may specify.
Other Stock Based Awards
The plan administrator is authorized to grant awards under the 2006 Plan that are denominated or payable in, valued by reference to, or otherwise based on or related to shares of common stock. Such awards might include convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of common stock, purchase rights for shares of common stock, awards with value and payment contingent upon our performance or any other factors designated by the plan administrator, and awards valued by reference to the book value of shares of our common stock or the value of securities of or the performance of specified subsidiaries or business units. The plan administrator determines the terms and conditions of such awards.
Performance Awards
The right of a participant to exercise or receive a grant or settlement of an award, and the timing thereof, may be subject to such performance conditions, including subjective individual goals, as may be specified by the plan administrator. In addition, the 2006 Plan authorizes specific performance awards, which represent a conditional right to receive cash, shares of our common stock, or other awards upon achievement of certain pre-established performance goals and subjective individual goals during a specified fiscal year. Performance awards granted to persons whom the plan administrator expects will, for the year in which a deduction arises, be “covered employees” (as defined below) may, if and to the extent intended by the plan administrator, be subject to provisions that should qualify such awards as “performance based” compensation not subject to the limitation on tax deductibility by us under Section
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162(m). For purposes of Section 162(m), the term “covered employee” means our chief executive officer and our four highest compensated officers as of the end of a taxable year as disclosed in our SEC filings. If
34
and to the extent required under Section 162(m), any power or authority relating to a performance award intended to qualify under Section 162(m) is to be exercised by a committee that qualifies under Section 162(m), rather than our board of directors.
Subject to the requirements of the 2006 Plan, the plan administrator will determine performance award terms, including the required levels of performance with respect to specified business criteria, the corresponding amounts payable upon achievement of such levels of performance, termination and forfeiture provisions, and the form of settlement. One or more of the following business criteria based on our consolidated financial statements,and/or those of its affiliates, or for its business units (except with respect to the total stockholder return and earnings per share criteria), will be used by the plan administrator in establishing performance goals for performance awards designed to comply with the performance-based compensation exception to Section 162(m): (1) earnings per share; (2) revenues or gross margins; (3) cash flow; (4) operating margin; (5) return on net assets, investment, capital, or equity; (6) economic value added; (7) direct contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings after interest expense and before extraordinary or special items; operating income; income before interest income or expense, unusual items and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any of our ongoing bonus plans; (9) working capital; (10) management of fixed costs or variable costs; (11) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (12) total stockholder return; and (13) debt reduction. For covered employees, the performance goals and the determination of their achievement shall be made in accordance with Section 162(m). The plan administrator is authorized to adjust performance conditions and other terms of awards in response to unusual or nonrecurring events, or in response to changes in applicable laws, regulations, or accounting principles.
Other Terms of Awards
Awards may be settled in the form of cash, shares of our common stock, other awards, or other property at the discretion of the plan administrator. Awards under the 2006 Plan are generally granted without a requirement that the participant pay consideration in the form of cash or property for the grant (as distinguished from the exercise), except to the extent required by law. The plan administrator may require or permit participants to defer the settlement of all or part of an award in accordance with such terms and conditions as the plan administrator may establish, including payment or crediting of interest or dividend equivalents on deferred amounts, and the crediting of earnings, gains, and losses based on deemed investment of deferred amounts in specified investment vehicles. The plan administrator is authorized to place cash, shares of our common stock, or other property in trusts or make other arrangements to provide for payment of our obligations under the 2006 plan.Plan. The plan administrator may condition any payment relating to an award on the withholding of taxes and may provide that a portion of any shares of our common stock or other property to be distributed will be withheld (or previously acquired shares of our common stock or other property be surrendered by the participant) to satisfy withholding and other tax obligations. Awards granted under the 2006 planPlan generally may not be pledged or otherwise encumbered and are not transferable except by will or by the laws of descent and distribution, or to a designated beneficiary upon the participant’s death, except that the plan administrator may, in its discretion, permit transfers of awards subject to any applicable legal restrictions.
Acceleration of Vesting; Change in Control
The plan administrator, in its discretion, may accelerate the vesting, exercisability, lapsing of restrictions,or expiration of deferral of any award, including if we undergo a “change in control,” as defined in the 2006 Plan. In addition, the plan administrator may provide that the performance goals relating to any performance-based award will be deemed to have been met upon the occurrence of any “change in control.” The award agreement may provide for the vesting of an award upon a change of
26
control, including vesting if a participant is terminated by us or our successor without “cause” or terminates his or her employment for “good reason.”
To the extent we undergo a corporate transaction (as defined in the 2006 Plan), the 2006 Plan provides that outstanding awards may be assumed, substituted for, or continued in accordance with their terms. If the awards are not assumed, substituted for, or continued, to the extent applicable, such awards will terminate immediately prior to
35
the close of the corporate transaction. The plan administrator may, in its discretion, either cancel the outstanding awards in exchange for a cash payment or vest all or part of the award contingent on the corporate transaction. With respect to a corporate transaction after which our stockholders immediately prior to the corporate transaction own 90% or more of the successor company after the corporate transaction, awards under the 2006 Plan must be assumed, continued, or substituted for.
Amendment and Termination
Our board of directors may amend, alter, suspend, discontinue, or terminate the 2006 Plan or the plan administrator’s authority to grant awards without further stockholder approval, except stockholder approval will be obtained for any amendment or alteration if such approval is deemed necessary and advisable by our board of directors. Unless earlier terminated by our board of directors, the 2006 Plan will terminate on the earlier of (1) ten years after the later of (x) the adoption by our board of directors of the 2006 Plan and (y) the approval of an increase in the number of shares reserved under the 2006 Plan by our board of directors (contingent upon such increase being approved by our stockholders), and (2) such time as no shares of our common stock remain available for issuance under the 2006 Plan and no further rights or obligations with respect to outstanding awards are outstanding under the 2006 Plan. Amendments to the 2006 Plan or any award require the consent of the affected participant if the amendment has a material adverse effect on the participant.
Outstanding Equity Awards at Fiscal Year-End 20082009
The following table sets forth the outstanding equity awards held by our named executive officers as of December 31, 2008.2009.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| | | | | | | | | | | | | Market
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Number of
| | Value of
|
| | Option Awards | | Stock Awards | | | | | | | | | | Shares or
| | Shares or
|
| | Number of | | Market Value of | | Number of Securities
| | | | | | Units of
| | Units of
|
| | Number of Securities | | Option | | Option | | Shares or Units | | Shares or Units of | | Underlying Unexercised
| | Option
| | Option
| | Stock That
| | Stock That
|
| | Underlying Unexercised | | Exercise | | Expiration | | of Stock That | | Stock That Have | | Options | | Exercise
| | Expiration
| | Have Not
| | Have Not
|
Name | | Options | | Price | | Date | | Have Not Vested | | Not Vested(1) | | Exercisable | | Unexercisable | | Price | | Date | | Vested | | Vested(1) |
| | Exercisable | | Unexercisable | |
Kenton K. Alder | | 100,000 | | — | | $ | 16.00 | | 9/20/2010 | | | | 100,000 | | | | — | | | $ | 16.00 | | | | 9/20/2010 | | | | | | | |
| | 25,000 | | — | | $ | 10.15 | | 3/11/2012 | | | | 25,000 | | | | — | | | $ | 10.15 | | | | 3/11/2012 | | | | | | | |
| | 28,354 | | — | | $ | 2.76 | | 12/30/2012 | | | | 28,354 | | | | — | | | $ | 2.76 | | | | 12/30/2012 | | | | | | | |
| | 210,000 | | — | | $ | 13.68 | | 12/17/2013 | | | | 210,000 | | | | — | | | $ | 13.68 | | | | 12/17/2013 | | | | | | | |
| | 17,375 | | — | | $ | 8.98 | | 1/27/2015 | | | | 17,375 | | | | — | | | $ | 8.98 | | | | 1/27/2015 | | | | | | | |
| | 13,032 | | | 4,343 | (2) | | $ | 7.77 | | 5/5/2015 | | | | 17,375 | | | | — | | | $ | 7.77 | | | | 5/5/2015 | | | | | | | |
| | 13,032 | | | 4,343 | (3) | | $ | 6.86 | | 8/3/2015 | | | | 17,375 | | | | — | | | $ | 6.86 | | | | 8/3/2015 | | | | | | | |
| | 13,032 | | | 4,343 | (4) | | $ | 8.67 | | 11/3/2015 | | | | 17,375 | | | | — | | | $ | 8.67 | | | | 11/3/2015 | | | | | | | |
| | 8,688 | | | 8,687 | (5) | | $ | 12.97 | | 2/14/2016 | | | | 13,032 | | | | 4,343 | (2) | | $ | 12.97 | | | | 2/14/2016 | | | | | | | |
| | 14,604 | | | 14,604 | (6) | | $ | 16.82 | | 5/4/2016 | | | | 21,906 | | | | 7,302 | (3) | | $ | 16.82 | | | | 5/4/2016 | | | | | | | |
| | 14,604 | | | 14,604 | (7) | | $ | 10.58 | | 8/1/2016 | | | | 21,906 | | | | 7,302 | (4) | | $ | 10.58 | | | | 8/1/2016 | | | | | | | |
| | 14,605 | | | 14,604 | (8) | | $ | 11.71 | | 11/1/2016 | | | | 21,907 | | | | 7,302 | (5) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | |
| | — | | | 50,000 | (9) | | $ | 11.10 | | 2/13/2018 | | | | 16,667 | | | | 33,333 | (6) | | $ | 11.10 | | | | 2/13/2018 | | | | | | | |
| | — | | — | | — | | — | | | 30,429 | (10) | | $ | 158,535 | | | | — | | | | 12,500 | (7) | | $ | 5.78 | | | | 2/12/2019 | | | | | | | |
| | — | | — | | — | | — | | | 50,000 | (11) | | $ | 260,500 | | | | — | | | | 12,500 | (8) | | $ | 7.85 | | | | 5/7/2019 | | | | | | | |
| | | | — | | | | 12,500 | (9) | | $ | 10.97 | | | | 8/5/2019 | | | | | | | |
| | | | — | | | | 12,500 | (10) | | $ | 11.35 | | | | 11/5/2019 | | | | | | | |
| | | | — | | | | — | | | | — | | | | — | | | | 15,214 | (11) | | $ | 175,417 | |
| | | | — | | | | — | | | | — | | | | — | | | | 33,333 | (12) | | $ | 384,329 | |
| | | | — | | | | — | | | | — | | | | — | | | | 78,918 | (13) | | $ | 909,925 | |
27
36
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | | | | | | | | | | | Market
|
| | | | | | | | | | Number of
| | Value of
|
| | | | | | | | | | Shares or
| | Shares or
|
| | Number of Securities
| | | | | | Units of
| | Units of
|
| | Underlying Unexercised
| | Option
| | Option
| | Stock That
| | Stock That
|
| | Options | | Exercise
| | Expiration
| | Have Not
| | Have Not
|
Name | | Exercisable | | Unexercisable | | Price | | Date | | Vested | | Vested(1) |
|
Steven W. Richards | | | 4,000 | | | | — | | | $ | 16.00 | | | | 9/20/2010 | | | | | | | | | |
| | | 4,800 | | | | — | | | $ | 10.15 | | | | 3/11/2012 | | | | | | | | | |
| | | 40,000 | | | | — | | | $ | 13.68 | | | | 12/17/2013 | | | | | | | | | |
| | | 3,562 | | | | — | | | $ | 7.77 | | | | 5/5/2015 | | | | | | | | | |
| | | 3,562 | | | | — | | | $ | 6.86 | | | | 8/3/2015 | | | | | | | | | |
| | | 4,750 | | | | — | | | $ | 8.67 | | | | 11/3/2015 | | | | | | | | | |
| | | 7,125 | | | | 2,375 | (2) | | $ | 12.97 | | | | 2/14/2016 | | | | | | | | | |
| | | 12,625 | | | | 4,208 | (3) | | $ | 16.82 | | | | 5/4/2016 | | | | | | | | | |
| | | 12,625 | | | | 4,208 | (4) | | $ | 10.58 | | | | 8/1/2016 | | | | | | | | | |
| | | 12,626 | | | | 4,208 | (5) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | | | |
| | | 6,667 | | | | 13,333 | (6) | | $ | 11.10 | | | | 2/13/2018 | | | | | | | | | |
| | | — | | | | 5,000 | (7) | | $ | 5.78 | | | | 2/12/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (8) | | $ | 7.85 | | | | 5/7/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (9) | | $ | 10.97 | | | | 8/5/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (10) | | $ | 11.35 | | | | 11/5/2019 | | | | | | | | | |
| | | — | | | | — | | | | | | | | — | | | | 8,982 | (11) | | $ | 103,562 | |
| | | — | | | | — | | | | | | | | — | | | | 16,000 | (12) | | $ | 184,480 | |
| | | — | | | | — | | | | | | | | — | | | | 39,116 | (13) | | $ | 451,007 | |
Shane S. Whiteside | | | 35,626 | | | | — | | | $ | 16.00 | | | | 9/20/2010 | | | | | | | | | |
| | | 110,000 | | | | — | | | $ | 13.68 | | | | 12/17/2013 | | | | | | | | | |
| | | 4,750 | | | | — | | | $ | 7.77 | | | | 5/5/2015 | | | | | | | | | |
| | | 4,750 | | | | — | | | $ | 6.86 | | | | 8/3/2015 | | | | | | | | | |
| | | 7,125 | | | | — | | | $ | 8.67 | | | | 11/3/2015 | | | | | | | | | |
| | | 7,125 | | | | 2,375 | (2) | | $ | 12.97 | | | | 2/14/2016 | | | | | | | | | |
| | | 12,625 | | | | 4,208 | (3) | | $ | 16.82 | | | | 5/4/2016 | | | | | | | | | |
| | | 8,416 | | | | 4,208 | (4) | | $ | 10.58 | | | | 8/1/2016 | | | | | | | | | |
| | | 12,626 | | | | 4,208 | (5) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | | | |
| | | 6,667 | | | | 13,333 | (6) | | $ | 11.10 | | | | 2/13/2018 | | | | | | | | | |
| | | — | | | | 5,000 | (7) | | $ | 5.78 | | | | 2/12/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (8) | | $ | 7.85 | | | | 5/7/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (9) | | $ | 10.97 | | | | 8/5/2019 | | | | | | | | | |
| | | | | | | 5,000 | (10) | | $ | 11.35 | | | | 11/5/2019 | | | | | | | | | |
| | | | | | | — | | | | — | | | | | | | | 8,982 | (11) | | $ | 103,562 | |
| | | | | | | — | | | | — | | | | | | | | 16,000 | (12) | | $ | 184,480 | |
| | | | | | | — | | | | — | | | | | | | | 39,116 | (13) | | $ | 451,007 | |
Douglas L. Soder | | | 45,000 | | | | 15,000 | (5) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | | | |
| | | 6,667 | | | | 13,333 | (6) | | $ | 11.10 | | | | 2/13/2018 | | | | | | | | | |
| | | — | | | | 5,000 | (7) | | $ | 5.78 | | | | 2/12/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (8) | | $ | 7.85 | | | | 5/7/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (9) | | $ | 10.97 | | | | 8/5/2019 | | | | | | | | | |
| | | — | | | | 5,000 | (10) | | $ | 11.35 | | | | 11/5/2019 | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | 7,406 | (11) | | $ | 85,391 | |
| | | — | | | | — | | | | — | | | | — | | | | 16,000 | (12) | | $ | 184,480 | |
| | | — | | | | — | | | | — | | | | — | | | | 39,116 | (13) | | $ | 451,007 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | | | | | | | | | | | | | | | | | Number of | | Market Value of |
| | Number of Securities | | Option | | Option | | Shares or Units | | Shares or Units of |
| | Underlying Unexercised | | Exercise | | Expiration | | of Stock That | | Stock That Have |
Name | | Options | | Price | | Date | | Have Not Vested | | Not Vested(1) |
| | Exercisable | | Unexercisable | | | | | | | | | | | | | | | | |
Steven W. Richards | | | 4,000 | | | | — | | | $ | 16.00 | | | | 9/20/2010 | | | | | | | | | |
| | | 4,800 | | | | — | | | $ | 10.15 | | | | 3/11/2012 | | | | | | | | | |
| | | 7,200 | | | | — | | | $ | 2.76 | | | | 12/30/2012 | | | | | | | | | |
| | | 40,000 | | | | — | | �� | $ | 13.68 | | | | 12/17/2013 | | | | | | | | | |
| | | 2,375 | | | | 1,187 | (2) | | $ | 7.77 | | | | 5/5/2015 | | | | | | | | | |
| | | 2,375 | | | | 1,187 | (3) | | $ | 6.86 | | | | 8/3/2015 | | | | | | | | | |
| | | 3,563 | | | | 1,187 | (4) | | $ | 8.67 | | | | 11/3/2015 | | | | | | | | | |
| | | 4,750 | | | | 4,750 | (5) | | $ | 12.97 | | | | 2/14/2016 | | | | | | | | | |
| | | 8,417 | | | | 8,416 | (6) | | $ | 16.82 | | | | 5/4/2016 | | | | | | | | | |
| | | 8,417 | | | | 8,416 | (7) | | $ | 10.58 | | | | 8/1/2016 | | | | | | | | | |
| | | 8,418 | | | | 8,416 | (8) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | | | |
| | | — | | | | 20,000 | (9) | | $ | 11.10 | | | | 2/13/2018 | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | 17,964 | (10) | | $ | 93,592 | |
| | | — | | | | — | | | | — | | | | — | | | | 24,000 | (11) | | $ | 125,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Shane S. Whiteside | | | 35,626 | | | | — | | | $ | 16.00 | | | | 9/20/2010 | | | | | | | | | |
| | | 110,000 | | | | — | | | $ | 13.68 | | | | 12/17/2013 | | | | | | | | | |
| | | 2,375 | | | | 2,375 | (2) | | $ | 7.77 | | | | 5/5/2015 | | | | | | | | | |
| | | 2,375 | | | | 2,375 | (3) | | $ | 6.86 | | | | 8/3/2015 | | | | | | | | | |
| | | 4,750 | | | | 2,375 | (4) | | $ | 8.67 | | | | 11/3/2015 | | | | | | | | | |
| | | 4,750 | | | | 4,750 | (5) | | $ | 12.97 | | | | 2/14/2016 | | | | | | | | | |
| | | 8,417 | | | | 8,416 | (6) | | $ | 16.82 | | | | 5/4/2016 | | | | | | | | | |
| | | 4,208 | | | | 8,416 | (7) | | $ | 10.58 | | | | 8/1/2016 | | | | | | | | | |
| | | 8,418 | | | | 8,416 | (8) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | | | |
| | | — | | | | 20,000 | (9) | | $ | 11.10 | | | | 2/13/2018 | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | 17,964 | (10) | | $ | 93,592 | |
| | | — | | | | — | | | | — | | | | — | | | | 24,000 | (11) | | $ | 125,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Douglas L. Soder | | | 30,000 | | | | 30,000 | (8) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | | | |
| | | — | | | | 20,000 | (9) | | $ | 11.10 | | | | 2/13/2018 | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | 14,813 | (10) | | $ | 77,176 | |
| | | — | | | | — | | | | — | | | | — | | | | 24,000 | (11) | | $ | 125,040 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
O. Clay Swain | | | 64,126 | | | | — | | | $ | 16.00 | | | | 9/20/2010 | | | | | | | | | |
| | | 110,000 | | | | — | | | $ | 13.68 | | | | 12/17/2013 | | | | | | | | | |
| | | — | | | | 2,375 | (2) | | $ | 7.77 | | | | 5/5/2015 | | | | | | | | | |
| | | 375 | | | | 2,375 | (3) | | $ | 6.86 | | | | 8/3/2015 | | | | | | | | | |
| | | 2,375 | | | | 2,375 | (4) | | $ | 8.67 | | | | 11/3/2015 | | | | | | | | | |
| | | 4,750 | | | | 4,750 | (5) | | $ | 12.97 | | | | 2/14/2016 | | | | | | | | | |
| | | 6,750 | | | | 6,750 | (6) | | $ | 16.82 | | | | 5/4/2016 | | | | | | | | | |
| | | 3,375 | | | | 6,750 | (7) | | $ | 10.58 | | | | 8/1/2016 | | | | | | | | | |
| | | 6,750 | | | | 6,750 | (8) | | $ | 11.71 | | | | 11/1/2016 | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | 13,928 | (10) | | $ | 72,565 | |
| | | — | | | | — | | | | — | | | | — | | | | 17,000 | (12) | | $ | 88,570 | |
| | |
(1) | | Based on the closing price of our common stock on December 31, 2008. |
28
| | |
(2) | | Such options vest on May 5, 2009. |
|
(3)(2) | | Such options vest on August 3, 2009. |
|
(4) | | Such options vest on November 3, 2009. |
|
(5) | | Such options vest 50% on February 14, 2009 and 50% on February 14, 2010. |
|
(6)(3) | | Such options vest 50% on May 4, 2009 and 50% on May 4, 2010. |
|
(7)(4) | | Such options vest 50% on August 1, 2009 and 50% on August 1, 20102010. |
|
(8)(5) | | Such options vest 50% on November 1, 2009 and 50% on November 1, 2010. |
|
(9)(6) | | Such options vest 50% on February 13, 2010 and 50% on February 13, 2011. |
|
(7) | | Such option vest one-third on February 13, 2009,12, 2010, 2011, and 2011.2012. |
37
| | |
(8) | | Such option vest one-third on May 7, 2010, 2011, and 2012. |
|
(9) | | Such option vest one-third on August 5, 2010, 2011, and 2012. |
|
(10) | | Such option vest one-third on November 5, 2010, 2011, and 2012. |
|
(11) | | Such restricted stock units vest on March 6, 2010. |
|
(12) | | Such restricted stock units vest 50% on March 6, 2009February 13, 2010 and March 6, 2010. |
|
(11) | | Such restricted stock units vest one-third50% on February 13, 2009, 2010, and 2011. |
|
(12)(13) | | Such restricted stock units vest one-third on March 26, 2009,5, 2010, 2011, and 2011.2012. |
Option Exercises and Stock Vested in Fiscal Year 20082009
The following table sets forth information concerning the value realized by each of our named executive officers upon the exercise of stock options and the vesting of stock awards during fiscal year 2008.2009.
| | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | Number of | | | | | | Number of | | |
| | Shares | | | | | | Shares | | |
| | Acquired on | | Value Realized | | Acquired on | | Value Realized |
Name | | Exercise | | on Exercise (1) | | Vesting | | on Vesting (2) |
Kenton K. Alder | | | — | | | | — | | | | 15,215 | | | $ | 165,996 | |
Steven W. Richards | | | 2,000 | | | $ | 18,680 | | | | 8,982 | | | $ | 97,994 | |
Shane S. Whiteside | | | 12,209 | | | $ | 84,052 | | | | 8,982 | | | $ | 97,994 | |
Douglas L. Soder | | | — | | | | — | | | | 7,407 | | | $ | 80,810 | |
O. Clay Swain | | | 44,899 | | | $ | 242,166 | | | | 6,964 | | | $ | 75,977 | |
| | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
| | Number of Shares
| | | | Number of Shares
| | |
| | Acquired on
| | Value Realized on
| | Acquired on
| | Value Realized on
|
Name | | Exercise | | Exercise(1) | | Vesting | | Vesting(2) |
|
Kenton K. Alder | | | — | | | $ | — | | | | 31,882 | | | $ | 160,774 | |
Steven W. Richards | | | 7,200 | | | $ | 61,848 | | | | 16,982 | | | $ | 84,373 | |
Shane S. Whiteside | | | — | | | $ | — | | | | 16,982 | | | $ | 84,373 | |
Douglas L. Soder | | | — | | | $ | — | | | | 15,407 | | | $ | 77,616 | |
| | |
(1) | | The value realized equals the difference between the fair market value of our common stock on the date of exercise and the option exercise price, multiplied by the number of shares issued upon exercise of the options. |
|
(2) | | The value realized equals the fair market value of our common stock on the date of vesting multiplied by the number of shares released on the vest date. |
Potential Payments uponUpon Termination or Change in Control at Fiscal Year-End 2008
Effective December 1, 2005, we entered into changeseverance arrangements with two of controlour named executive officers, Steven W. Richards and Shane S. Whiteside, and in October 2006 we executed an offer letter with Douglas L. Soder that entitled him to various severance agreementsbenefits. Effective March 19, 2010, our board of directors approved the Severance Agreements with each of Steven W. Richards, our chief financial officer; O. Clay Swain, our senior vice president - marketing; and Shane S. Whiteside, and Douglas L. Soder, which supersede the previous change in control severance agreements executed on December 1, 2005 between our chief operating officer. Undercompany and Mr. Richards and Mr. Whiteside and, in the termscase of Mr. Soder, the agreements, ifSeverance Agreement supersedes the severance provisions set forth in his October 2006 offer letter. The Severance Agreements provide that, in the event the executive’s employment is terminated by (1) usour company without “cause”cause during a “pendingpending change in control”control or within 12 months following a “changechange in control”,control, or (2) by the executive for “good reason”good reason within 12 months following a change in control, the executive would be entitled to receive (i) an amount in cash equal to 12 monthstwo times the sum of (a) the executive’s annual base salary and (ii) accrued compensation owed to(b) the executive andamount of the executive’s pro rata portion of anyannual target bonus the executive is eligible to receive for the year induring which the termination occurs, payable in a lump-sum payment within 15 days afterexecutive was terminated assuming the dateachievement of termination. In addition,100% of the performance target levels associated with such annual target bonus; together with the acceleration of vesting of any stock options, or restricted stock, and restricted stock units assumed by the acquirer would be accelerated. Pursuant toacquirer.
In addition, the terms of hisRestated Employment Agreement with Mr. Alder provides that, in the event Mr. Alder’s employment agreement,is terminated by (1) our company without cause or (2) by Mr. Alder for good reason, Mr. Alder would be entitled to receive an amount in cash equal to 18 monthstwo times the sum of (a) Mr. Alder’s base salary and (b) the amount of his annual target bonus for the year during which the executive was terminated assuming the achievement of 100% of the performance target levels associated with such annual target bonus. In the event Mr. Alder’s employment is terminated by (1) our company without cause or (2) by Mr. Alder for good reason, within 60 days prior to, or within one year after, the occurrence of a change in control, Mr. Alder would be entitled to receive an amount in cash equal to three times the sum of (a) Mr. Alder’s base salary upon termination in certain circumstances, payable in accordanceand (b) the amount of his annual target bonus for the year during which he was terminated assuming the achievement of 100% of the performance target levels associated with our normal payroll practices.such annual target bonus; together with the acceleration of vesting of any stock options held
29
38
by Mr. Alder that are assumed by the acquirer; and the vesting of any restricted stock or restricted stock units held by Mr. Alder that are assumed by the acquirer would be immediately accelerated.
The following tables set forth certain information regarding potential payments and other benefits that would have been providedbe payable to each of our named executive officers upon a change in control of our companyand/or upon a termination of our named executive officer’s employment at fiscal year-end 2008.employment. The tables below assume that the termination or change in control event took place on the last business day of 2009, but show the amount payable under the new severance arrangements that are currently in effect.
| | | | | | | | | | | | |
Kenton K. Alder: | | | | | | | | |
| | Termination | | | | | | |
| | Without Cause | | | | | | Termination by |
| | during a | | | | | | Executive for |
| | Pending | | | | | | Good Reason |
| | Change in | | Change in | | Post Change in |
Executive Benefits (1) | | Control | | Control | | Control |
Annual Cash Bonus Program | | | — | | | | — | | | $ | 703,200 | |
Accelerated Stock Options | | | — | | | | — | | | | — | |
Accelerated Restricted Stock Units | | $ | 131,813 | | | $ | 166,105 | | | $ | 419,035 | |
Severance | | $ | 879,000 | | | | — | | | $ | 879,000 | |
| | | | | | | | | | | | |
Steven W. Richards: | | | | | | | | |
| | Termination | | | | | | |
| | Without Cause | | | | | | Termination by |
| | during a | | | | | | Executive for |
| | Pending | | | | | | Good Reason |
| | Change in | | Change in | | Post Change in |
Executive Benefits (1) | | Control | | Control | | Control |
Annual Cash Bonus Program | | $ | 240,198 | | | | — | | | $ | 240,198 | |
Accelerated Stock Options | | | — | | | | — | | | | — | |
Accelerated Restricted Stock Units | | $ | 69,824 | | | $ | 88,476 | | | $ | 218,632 | |
Severance | | $ | 280,000 | | | | — | | | $ | 280,000 | |
Kenton K. Alder: | | | | | | | | | | | | |
Shane S. Whiteside: | | | | | | | | |
| | Termination | | | | | | |
| | Without Cause | | | | | | Termination by |
| | during a | | | | | | Executive for |
| | Pending | | | | | | Good Reason |
| | Change in | | Change in | | Post Change in |
Executive Benefits (1) | | Control | | Control | | Control |
Annual Cash Bonus Program | | $ | 301,875 | | | | — | | | $ | 301,875 | |
Accelerated Stock Options | | | — | | | | — | | | | — | |
Accelerated Restricted Stock Units | | $ | 69,824 | | | $ | 88,476 | | | $ | 218,632 | |
Severance | | $ | 345,000 | | | | — | | | $ | 345,000 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | Termination
|
| | | | | | | | Without Cause
|
| | | | | | | | or by Executive
|
| | | | | | | | for Good Reason
|
| | Termination
| | Termination by
| | | | During a Pending
|
| | Without Cause
| | Executive for Good
| | Change in
| | Change in Control
|
| | (Not in
| | Reason (Not in
| | Control (Without
| | or Within
|
| | Connection with a
| | Connection with a
| | Termination of
| | 12 Months
|
Executive Benefits - Change in Control(1) | | Change in Control) | | Change in Control) | | Executive)(4) | | Thereafter(4) |
|
Accelerated Stock Options(3) | | $ | 38,031 | | | $ | — | | | $ | 56,482 | | | $ | 148,395 | |
Accelerated Restricted Stock Units(3) | | $ | 519,173 | | | $ | — | | | $ | 670,896 | | | $ | 1,469,671 | |
Severance(2) | | $ | 2,359,500 | | | $ | 2,359,500 | | | $ | — | | | $ | 3,539,250 | |
| | | | | | | | | | | | |
O. Clay Swain: | | | | | | | | |
| | Termination | | | | | | |
| | Without Cause | | | | | | Termination by |
| | during a | | | | | | Executive for |
| | Pending | | | | | | Good Reason |
| | Change in | | Change in | | Post Change in |
Executive Benefits (1) | | Control | | Control | | Control |
Annual Cash Bonus Program | | $ | 120,000 | | | | — | | | $ | 120,000 | |
Accelerated Stock Options | | | — | | | | — | | | | — | |
Accelerated Restricted Stock Units | | $ | 49,354 | | | $ | 65,808 | | | $ | 161,135 | |
Severance | | $ | 200,000 | | | | — | | | $ | 200,000 | |
Steven W. Richards:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Termination
|
| | | | | | | | | | Without
|
| | | | | | | | | | Cause or by
|
| | | | | | Termination
| | Termination
| | Executive for
|
| | | | | | Without Cause
| | Without Cause
| | Good Reason
|
| | | | | | During a Pending
| | During a Pending
| | Within 12
|
| | | | Change in
| | Change in
| | Change in
| | Months
|
| | | | Control (Without
| | Control - Change
| | Control - Change
| | Following a
|
| | Termination
| | Termination of
| | in Control Not
| | in Control Was
| | Change in
|
Executive Benefits(1) | | Without Cause | | Executive) | | Effected(5) | | Effected(4) | | Control(4) |
|
Accelerated Stock Options(3) | | $ | 15,620 | | | $ | 23,818 | | | $ | 21,571 | | | $ | 60,581 | | | $ | 60,581 | |
Accelerated Restricted Stock Units(3) | | $ | 267,277 | | | $ | 346,142 | | | $ | 353,821 | | | $ | 739,050 | | | $ | 739,050 | |
Severance(2) | | $ | — | | | $ | — | | | $ | 1,023,000 | | | $ | 1,023,000 | | | $ | 1,023,000 | |
Shane S. Whiteside:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Termination
|
| | | | | | | | | | Without
|
| | | | | | | | | | Cause or by
|
| | | | | | Termination
| | Termination
| | Executive for
|
| | | | | | Without Cause
| | Without Cause
| | Good Reason
|
| | | | | | During a Pending
| | During a Pending
| | Within 12
|
| | | | Change in
| | Change in
| | Change in
| | Months
|
| | | | Control (Without
| | Control - Change
| | Control - Change
| | Following a
|
| | Termination
| | Termination of
| | in Control Not
| | in Control Was
| | Change in
|
Executive Benefits(1) | | Without Cause | | Executive) | | Effected(5) | | Effected(4) | | Control(4) |
|
Accelerated Stock Options(3) | | $ | 15,620 | | | $ | 23,818 | | | $ | 21,571 | | | $ | 60,581 | | | $ | 60,581 | |
Accelerated Restricted Stock Units(3) | | $ | 267,277 | | | $ | 346,142 | | | $ | 353,821 | | | $ | 739,050 | | | $ | 739,050 | |
Severance(2) | | $ | — | | | $ | — | | | $ | 1,171,500 | | | $ | 1,171,500 | | | $ | 1,171,500 | |
30
39
| | | | | | | | | | | | |
Douglas L. Soder: | | | | | | |
| | Termination | | | | |
| | Other Than for | | Change in | | Termination Post |
Executive Benefits (1) | | Cause | | Control | | Change in Control |
Annual Cash Bonus Program | | $ | 301,513 | | | | — | | | $ | 301,513 | |
Accelerated Stock Options | | | — | | | | — | | | | — | |
Accelerated Restricted Stock Units | | $ | 63,671 | | | $ | 80,270 | | | $ | 202,216 | |
Severance | | $ | 172,500 | | | | — | | | $ | 172,500 | |
Douglas L. Soder: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Termination
|
| | | | | | | | | | Without
|
| | | | | | | | | | Cause or by
|
| | | | | | Termination
| | Termination
| | Executive for
|
| | | | | | Without Cause
| | Without Cause
| | Good Reason
|
| | | | | | During a Pending
| | During a Pending
| | Within 12
|
| | | | Change in
| | Change in
| | Change in
| | Months
|
| | | | Control (Without
| | Control - Change
| | Control - Change
| | Following a
|
| | Termination
| | Termination of
| | in Control
| | in Control Was
| | Change in
|
Executive Benefits(1) | | Without Cause | | Executive) | | Not Effected(5) | | Effected(4) | | Control(4) |
|
Accelerated Stock Options(3) | | $ | 14,288 | | | $ | 19,820 | | | $ | 19,240 | | | $ | 56,583 | | | $ | 56,583 | |
Accelerated Restricted Stock Units(3) | | $ | 253,648 | | | $ | 327,971 | | | $ | 335,650 | | | $ | 720,879 | | | $ | 720,879 | |
Severance(2) | | $ | — | | | $ | — | | | $ | 1,171,500 | | | $ | 1,171,500 | | | $ | 1,171,500 | |
| | |
(1) | | Amounts represented in the table do not include stock option awards or restricted stock units that are fully vested, earned salary, and accrued vacation, as those items are earned and due to the named executive officer regardless of such termination or change in control events. It also does not include amounts payable under life insurance coverage, our accidental death and dismemberment coverage, or our business travel accident coverage, which are programs available to all of our full-time employees. While the amounts listed assume that the termination or change in control event took place on the last business day of 2009, the amounts payable are pursuant to the new severance arrangements that are currently in effect rather than those in effect on the last business day of 2009, as all severance arrangements that were in effect on the last business day of 2009 were superseded in March 2010 by the Restated Employment Agreement and Severance Agreements. |
|
(2) | | The amount listed is calculated with the formula described above using an annual target bonus of 95% of base salary for Mr. Alder and 65% of base salary for each of Messrs. Richards, Whiteside, and Soder, for fiscal year 2010, which represents the percentage of base salary payable as a bonus upon achievement of 100% of the performance target levels associated with such annual target bonus, as set forth in Mr. Alder’s Restated Employment Agreement and in the Severance Agreements. |
|
(3) | | The amount listed for accelerated stock options and restricted stock units is based on the closing price of our common stock on December 31, 2009. |
|
(4) | | Assumes that the stock options and restricted stock units are assumed by the acquiring entity in connection with the change in control. |
|
(5) | | The Severance Agreements provide that if the executive’s employment is terminated without cause during a pending change in control, and the change in control is not effected within three months following the date of termination of the executive, then the stock options and restricted stock held by the executive as of the date of termination will be treated as if the executive’s employment had been terminated as of the three-month anniversary of the date of termination of employment. |
40
Director CompensationEQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information with respect to our common stock that may be issued upon the exercise of stock options, warrants, and rights under our 2006 Plan as of December 31, 2009.
| | | | | | | | | | | | |
| | | | | | | | (c)
| |
| | | | | | | | Number of Securities
| |
| | | | | | | | Remaining Available
| |
| | (a)
| | | | | | for Future Issuance
| |
| | Number of
| | | | | | Under Equity
| |
| | Securities to be
| | | (b)
| | | Compensation Plans
| |
| | Issued Upon
| | | Weighted Average
| | | (Excluding
| |
| | Exercise of
| | | Exercise Price of
| | | Securities
| |
| | Outstanding
| | | Outstanding
| | | Reflected in
| |
| | Options, Warrants,
| | | Options, Warrants,
| | | Column
| |
Plan Category | | and Rights(1) | | | and Rights(2) | | | (a)) | |
|
Equity Compensation Plans Approved by Stockholders | | | 3,302,289 | | | $ | 12.32 | | | | 4,875,138 | |
Equity Compensation Plans Not Approved by Stockholders | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total | | | 3,302,289 | | | $ | 12.32 | | | | 4,875,138 | |
| | | | | | | | | | | | |
| | |
(1) | | Includes 1,168,595 restricted stock units. |
|
(2) | | The weighted average exercise prices does not take into account the 1,168,595 restricted stock units. |
DIRECTOR COMPENSATION
2009 Director Compensation
Members of our board of directors who are also employees are not separately compensated for their services as directors. Mr. Alder, the only director who is also an employee, did not receive separate compensation for his services as a director during fiscal year 2008.2009.
Our non-employee directors receive the following compensation: an annual cash retainer of $24,000, a $1,500 payment per board meeting attended, a $750 payment for each committee meeting, and reimbursement of expenses relating to the board meetings. In addition, the chairman of the board receives an annual cash retainer of $30,000, and the chairmen of our various board committees receive annual cash retainers as follows: $10,000 to our audit committee chairman, $7,500 to our compensation committee chairman, and $5,000 to theour nominating and corporate governance committee chairman.
Upon initial election, each non-employee director receives an option to purchase 20,000 shares of our common stock. The options provided to the non-employee directors expire on the grant date’s tenth anniversary and vest over a four year period. At each annual meeting of stockholders, each non-employee director who has served as a director for the previous six months receives restricted stock units having a fair value on the award date of $60,000. The restricted stock units awarded to the non-employee directors vest over one year and delivery of the underlying shares of common stock is deferred until one year after retirement from the board of directors.
The following table sets forth the compensation earned by our directors in respect of their services as such during fiscal year 2009.
| | | | | | | | | | | | |
| | Fees Earned or
| | Stock
| | |
Name(1) | | Paid in Cash | | Awards(2) | | Total |
|
Robert E. Klatell | | $ | 83,000 | | | $ | 59,998 | | | $ | 142,998 | |
James K. Bass | | $ | 48,750 | | | $ | 59,998 | | | $ | 108,748 | |
Richard P. Beck | | $ | 58,750 | | | $ | 59,998 | | | $ | 118,748 | |
Thomas T. Edman | | $ | 51,750 | | | $ | 59,998 | | | $ | 111,748 | |
John G. Mayer | | $ | 48,750 | | | $ | 59,998 | | | $ | 108,748 | |
41
| | |
(1) | | As of December 31, 2009, Mr. Klatell had 28,000 options outstanding and 28,000 options exercisable; Mr. Bass had 44,000 options outstanding and 44,000 options exercisable; Mr. Beck had 40,000 options outstanding and 40,000 options exercisable; Mr. Edman had 28,000 options outstanding and 28,000 options exercisable; Mr. Mayer had 44,000 options outstanding and 44,000 options exercisable. As of December 31, 2009, each of our non-employee directors had 16,435 restricted stock units outstanding, 8,792 of which were vested. |
|
(2) | | Amounts shown reflect the fair value at the date of grant. The value is calculated in accordance with ASC Topic 718,Compensation — Stock Compensation. The fair value of a restricted stock unit is based on the closing market price of our common stock on the date of grant. For a discussion of valuation assumptions, see Note 13 to our 2009 consolidated financial statements, included in our annual report onForm 10-K filed with the SEC. |
Director Stock Ownership Guidelines
Our board of directors recognizes that stock ownership by directors may strengthen their commitment to the long-term future of our company and further align their interests with those of our stockholders. Accordingly, our Corporate Governance Guidelinescorporate governance guidelines require our independent directors to beneficially own shares of our common stock (including shares owned outright, unvested shares, restricted stock units, and stock options) having a value of at least three times their annual retainer.
31
2008 Director Compensation
The following table sets forth the compensation earned by our directors in respect of their services as such during fiscal year 2008.
| | | | | | | | | | | | | | | | |
| | Fees Earned or | | | | | | |
Name | | Paid in Cash | | Stock Awards(1) | | Option Awards(2)(3) | | Total |
Robert E. Klatell | | $ | 75,500 | | | $ | 67,631 | | | $ | 15,648 | | | $ | 158,779 | |
James K. Bass | | $ | 42,750 | | | $ | 67,631 | | | $ | 17,549 | | | $ | 127,930 | |
Richard P. Beck | | $ | 52,750 | | | $ | 67,631 | | | $ | 17,549 | | | $ | 137,930 | |
Thomas T. Edman | | $ | 44,250 | | | $ | 67,631 | | | $ | 15,648 | | | $ | 127,529 | |
John G. Mayer | | $ | 42,750 | | | $ | 67,631 | | | $ | 17,549 | | | $ | 127,930 | |
| | |
(1) | | Amounts do not reflect compensation actually received by the non-employee directors. Instead, these amounts reflect the compensation expense we recognized in 2008 related to restricted stock units awarded to our non-employee directors, as determined pursuant to SFAS 123R. For a discussion of valuation assumptions, see Note 13 to our 2008 consolidated financial statements, included in our annual report on Form 10-K filed with the SEC. The fair value of the stock awards granted to each of our non-employee directors in 2008 was $60,000. |
|
(2) | | Amounts do not reflect compensation actually received by the non-employee directors. Instead, these amounts reflect the compensation expense recognized in 2008 related to stock options awarded in prior years to our non-employee directors, as determined pursuant to SFAS 123R. For a discussion of valuation assumptions, see Note 13 to our 2008 consolidated financial statements. |
|
(3) | | As of December 31, 2008, Mr. Klatell had 28,000 options outstanding and 26,667 options exercisable; Mr. Bass had 44,000 options outstanding and 42,667 options exercisable; Mr. Beck had 40,000 options outstanding and 38,667 options exercisable; Mr. Edman had 28,000 options outstanding and 26,667 options exercisable; Mr. Mayer had 44,000 options outstanding and 42,667 options exercisable. As of December 31, 2008, each of our non-employee directors had 8,792 restricted stock units outstanding, 4,567 of which were vested. |
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Our board of directors has appointed an audit committee consisting of three independent directors. All members of our audit committee are able to read and understand fundamental financial statements, including our balance sheet, income statement, and cash flow statement. At least one member of our audit committee has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer, or other senior officer with financial oversight responsibility. Our board of directors has determined that Messrs. Bass, Beck, and Mayer are independent directors, as defined by Nasdaq Market PlaceMarketplace Rule 4200(a)(15)5605(a)(2) and that Mr. Beck, chairman, qualifies as an “audit committee financial expert.”
The primary responsibility of our audit committee is to assist our board of directors in fulfilling its responsibility to oversee management’s conduct of our financial reporting process, including overseeing the financial reports and other financial information provided by us to governmental or regulatory bodies (such as the SEC), the public, and other users thereof; our systems of internal accounting and financial controls; and the annual independent audit of our consolidated financial statements.
Management has the responsibility for our consolidated financial statements and the reporting process, including the systems of internal controls. Our independent registered public accounting firm, KPMG LLP, is responsible for auditing our consolidated financial statements and expressing an opinion on the conformity of those audited consolidated financial statements with generally accepted accounting principles.
32
In fulfilling its oversight responsibilities, our audit committee reviewed our consolidated audited financial statements with management and the independent registered public accounting firm. Our audit committee discussed with the independent registered public accounting firm the matters required to be discussed by Statement of Auditing Standards No. 61,Communication with Audit Committees.Committees. This included a discussion of the independent registered public accounting firm’s judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with our audit committee under generally accepted auditing standards. In addition, our audit committee received from the independent registered public accounting firm written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s independence. Our audit committee also discussed with the independent registered public accounting firm their independence from management and our company, including the matters covered by the written disclosures and letter provided by the independent registered public accounting firm. Our audit committee has concluded that KPMG LLP is independent from our company and management.
42
Our audit committee discussed with the independent registered public accounting firm the overall scope and plans for their audits. Our audit committee met with the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of our company, the internal controls, and the overall quality of our financial reporting. Our audit committee held eightfive meetings during the fiscal year ended December 31, 2008.2009.
Based on the reviews and discussions referred to above, our audit committee recommended to our board of directors, and our board of directors approved, that our audited consolidated financial statements be included in the Annual Report onForm 10-K for the year ended December 31, 20082009 for filing with the SEC.
Our board of directors has adopted a written charter for our audit committee that reflects, among other things, requirements of the Sarbanes-Oxley Act of 2002, rules adopted by the SEC, and rules of theThe Nasdaq Stock Market.
This report has been furnished by our audit committee to our board of directors.
James K. Bass
Richard P. Beck, Chairman
John G. Mayer
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 2008, there were no transactions or series of similar transactions to which we were or are a party that involved an amount exceeding $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.
33
PROPOSAL TWO — RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
KPMG LLP was our independent registered public accountantsaccountant for the years ended December 31, 2007, 2008, and 2008.2009. We have appointed KPMG LLP to serve as our independent registered public accountantsaccountant for the fiscal year ending December 31, 20092010 and recommend that stockholders vote in favor of the ratification of such appointment. In the event of a negative vote on such ratification, our board of directors will reconsider its selection. We anticipate that representatives of KPMG LLP will attend the annual meeting, will have the opportunity to make a statement if they desire, and will be available to respond to appropriate questions.
Audit Fees
The following is a summary of fees, all of which were approved by our audit committee, for audit and other professional services during the fiscal years ended December 31, 20072008 and 2008:
| | | | | | | | |
| | 2007 | | | 2008 | |
Audit fees | | $ | 2,651,323 | | | $ | 1,949,344 | |
Audit-related fees | | | 64,200 | | | | 352,863 | |
Tax fees | | | — | | | | — | |
All other fees | | | — | | | | — | |
| | | | | | |
Total | | $ | 2,715,523 | | | $ | 2,302,207 | |
| | | | | | |
2009: “Audit
| | | | | | | | |
| | 2008 | | | 2009 | |
|
Audit fees | | $ | 1,949,344 | | | $ | 2,146,548 | |
Audit-related fees | | | 352,863 | | | | 551,655 | |
Tax fees | | | — | | | | — | |
All other fees | | | — | | | | — | |
| | | | | | | | |
Total | | $ | 2,302,207 | | | $ | 2,698,203 | |
| | | | | | | | |
“Audit fees” are fees that we paid to KPMG for the audits of our annual financial statements and of internal control over financial reporting included in theForm 10-K, and reviews of financial statements included inForms 10-Q.10-Q, and foreign regulatory filings related to the PCB Combination. “Audit-related fees” consist of fees we paid to KPMG for accounting consultations and services performed related to our convertible debt offering.offering during the year ended December 31, 2008 and accounting consultations and services performed related to the PCB Combination (due diligence and consultations) during the year ended December 31, 2009.
Pre-Approval Policy for Independent Registered Public Accountants’ Fees
In 2003, our audit committee adopted a formal policy concerning pre-approval of all services to be provided by our independent registered public accountants. The policy requires that all proposed services to be provided by KPMG LLP must be pre-approved by our audit committee before any services are performed. This policy includes all audit, audit-related, tax, and other services that KPMG LLP may provide to our company. In evaluating whether
43
to engage KPMG LLP for non-audit services, our audit committee considers whether the performance of services other than audit services is compatible with maintaining the independence of KPMG LLP. All of the services provided by KPMG LLP described in the table above were approved by our audit committee pursuant to our audit committee’s pre-approval policies.
Our board of directors recommends a vote “FOR” the ratification of KPMG LLP as our independent registered public accountants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 2009, there were no transactions or series of similar transactions to which we were or are a party that involved an amount exceeding $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.
On April 8, 2010, we completed the PCB Combination, which involved our acquisition of the PCB Subsidiaries from Meadville. Certain affiliates of Meadville engage in transactions with our company, as described below.
Supply Agreements with Affiliates of Related Parties
In 2007, Shanghai Meadville Electronics Co., Ltd. (“SME”), a subsidiary of one of the PCB Subsidiaries, entered into two supply agreements with Suzhou Shengyi Sci Tech Co., Ltd. (“SSST”) and Guangdong Shengyi Sci Tech Co., Ltd. (“GSST”), pursuant to which SME and certain other subsidiaries of the PCB Subsidiaries purchased laminate and prepreg from SSST and GSST. GSST is owned indirectly by Top Mix Investments Limited, a company controlled by Tang Hsiang Chien, a family member of Tom Tang. SSST is 75% owned by GSST and 25% owned indirectly by Top Mix Investments Limited. In the years ended December 31, 2007, 2008, and 2009, total purchases under the two supply agreements amount to $58.4 million, $55.4 million, and $47.0 million, respectively. These two supply agreements expired on December 31, 2009. Accordingly, SME, on behalf of itself and other subsidiaries of the PCB Subsidiaries, entered into a new supply agreement with GSST and SSST on December 11, 2009 with similar terms as the existing supply agreements. The new supply agreement became effective on January 1, 2010 for a term of three years.
Certain of the PCB Subsidiaries also purchase from time to time laminate and prepreg from Mica-Ava (Far East) Industrial Limited (“MAF”) and Mica-AVA (Guangzhou) Material Company Ltd. (“MAG”), former subsidiaries of Meadville engaged in the laminate business, both of which are owned by Top Mix Investments Limited. These purchases are made on a spot basis from time to time. Total sales from MAF and MAG to the PCB Subsidiaries and their subsidiaries amounted to $36.1 million, $44.3 million, and $50.2 million for the years ended December 31, 2007, 2008, and 2009, respectively.
Real Property Leasing Arrangements with Affiliates of Related Parties
OPC, one of the PCB Subsidiaries, is currently leasing from MAF on amonth-to-month basis a portion of real property located at Nos. 6-8 Dai Wang Street, Tai Po Industrial Estate, New Territories, Hong Kong, for warehouse purposes. The total amount of rent payable to MAF under the lease for the year ended December 31, 2009 was approximately $64,800.
GME, one of the PCB Subsidiaries, leases a portion of its employee dormitory spaces to MAG from
time to time for the use of the employees of MAG. The dormitory spaces are rented to MAG pursuant
to prior written request by MAG for its employees on an individual basis, with the monthly rent to
be determined in accordance with the space area used by the individual employees and the rate as
notified by GME from time to time. Such rental arrangement between GME and MAG is effective until
either party terminates the arrangement upon three months prior written notice to the other party.
The total amount of rent payable under the lease for the year ended December 31, 2009 was approximately $85,900.
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ELECTRONIC AVAILABILITY OF PROXY STATEMENT AND ANNUAL REPORT
As permitted by SEC rules, we are making this proxy statement and our annual report onForm 10-K for fiscal 20082009 available to stockholders electronically via the Internet on our website atwww.ttmtech.com/annualstockholdermeetingstockholdersmeeting. On March 27, 2009,or about April 16, 2010, we began mailing to our stockholders a notice containing instructions on how to access this proxy statement and our annual report and how to vote online. If you received that notice, you will not receive a printed copy of the proxy materials unless you request it by following the instructions for requesting such materials contained on the notice or set forth in the following paragraph.
If you received a paper copy of this proxy statement by mail and you wish to receive a notice of availability of next year’s proxy statement either in paper form or electronically viae-mail, you can elect to receive a paper notice of availability by mail or an
e-mail that will provide a link to these documents on our website. By opting to receive the notice of availability and accessing your proxy materials online, you will save our company the cost of printing and mailing documents to you, reduce the amount of mail you receive, speed your ability to access the proxy materials and our annual report, and help preserve environmental resources. We encourage you to sign up for electronic proxy and annual report access or a paper notice of availability for future annual meetings. Stockholders may elect to receive electronic access or a paper notice by registering electronically on our website at
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www.ttmtech.com/annualstockholdermeetingstockholdersmeeting. If you received electronic or paper notice of availability of these proxy materials and wish to receive paper delivery of a full set of future proxy materials, you may do so at the same location.
Our annual report onForm 10-K for fiscal 2008,2009, available on our website atwww.ttmtech.com/annualstockholdermeetingwww.ttmtech.com, contains financial and other information about our company, but is not incorporated into this proxy statement and is not to be considered a part of these proxy soliciting materials or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. The information contained in the “Report of the Compensation“Compensation Committee of the Board of Directors”Report” and “Report of the Audit Committee of the Board of Directors” shall not be deemed “filed” with the SEC or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Securities Exchange Act. If a stockholder received a paper copy of our annual report and does not wish to access our annual report through our website but rather requires an additional paper copy of our annual report, we will provide one, without charge, on the written request of any such stockholder addressed to our corporate secretary at 2630 South Harbor Blvd.,Boulevard, Santa Ana, California 92704.
STOCKHOLDER PROPOSALS FOR OUR 20102011 ANNUAL MEETING
We must receive
If any stockholder proposals that are intendedintends to present a proposal to be presented atconsidered for inclusion in our proxy material for the 2011 annual meeting of stockholders, the proposal must comply with the requirements ofRule 14a-8 of Regulation 14A of the Exchange Act and must be submitted in writing by notice delivered to our corporate secretary at 2630 South Harbor Boulevard, Santa Ana, California 92704. Any such proposal must be received at least 120 days before the anniversary of the mailing of the prior year’s proxy material (by December 17, 2010), unless the date of our 2011 annual meeting is changed by more than 30 days from May 26, 2011, in which case, the proposal must be received a reasonable time before we begin to print and mail our proxy materials.
In addition, our bylaws establish certain requirements for proposals a stockholder wishes to make from the floor of the 2011 annual meeting of stockholders. If the proposal is for a matter other than the nomination of a director for election at the meeting, the proposal must be written and delivered to our corporate secretary at the address set forth above not less than 90 days (by February 25, 2011) nor more than 120 days (January 26, 2011) prior to the first anniversary of the preceding year’s annual meeting;provided, however, that in the event that the date of the annual meeting is more than 30 days before or after such anniversary date, notice by the stockholder must be so delivered not earlier than 120 days prior to such annual meeting and not later than the close of business on the later of (a) 90 days prior to such annual meeting or (b) 5 days following the day on which public announcement of the date of such meeting is first made by our company. Our bylaws provide that a stockholder’s notice of a proposal of business must set forth certain information relating to the proposed business desired to be held during calendar year 2010 nobrought before the meeting and the proposal itself, and information relating to the stockholder making the proposal.
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If the proposal is for the nomination of a director for election at the meeting, the nomination must be delivered to our corporate secretary at the address listed above not less than 90 days (by February 25, 2011) and not more than 120 days (January 26, 2011) prior to the first anniversary of the preceding year’s annual meeting;provided, however, that in the event that the date of the 2011 annual meeting is more than 30 days before or after such anniversary date, notice by the stockholder must be so delivered not earlier than 120 days prior to such current annual meeting and not later than November 27, 2009,the later of (a) 90 days prior to such annual meeting or (b) 5 days following the day on which we make the first public announcement of the date of such meeting. However, in orderthe event that the number of directors to be included inelected to our board of directors at an annual meeting of stockholders is increased and there is no public announcement by us naming the proxy statement and formnominees for the additional directorships at least 100 days prior to the first anniversary of proxy relating to such meeting. Pursuant to Rule 14a-4 under the Securities Exchange Actdate of 1934, we intend to retain discretionary authority to vote proxiesthe preceding year’s annual meeting, the stockholder’s notice will also be considered timely, but only with respect to stockholder proposals for which the proponent does not seek to have us include the proposed matter in the proxy statementnominees for the annual meetingadditional directorships, if it is delivered to be held during calendar year 2010, except in circumstances where (a) we receive notice ofour secretary at the proposed matter noaddress above not later than November 27, 2009, and (b)5 days following the proponent compliesday on which we first make a public announcement of additional directorships. Our bylaws set forth specific information that must be provided to our corporate secretary in connection with the requirements set forth in Rule 14a-4.nomination of a director for election at the annual meeting.
OTHER MATTERS
As of the date of this proxy statement, we know of no matter that will be presented for consideration at the annual meeting other than the election of directors and the ratification of our independent registered public accountants. If, however, any other matter should properly come before the annual meeting for action by stockholders, the persons named as proxy holders will vote in accordance with the recommendation of the board of directors or, in the absence of such a recommendation, in accordance with the best judgment of the proxy holder.
| | |
| | By Order of the Board of Directors
Steven W. Richards, Secretary Santa Ana, California April 12, 2010 46
ELECTRONIC ACCESS TO FUTURE DOCUMENTS If you would like to receive future shareholder communications over the Internet exclusively, and no longer receive any material by mail please visit http://www.amstock.com. Click on Shareholder Account Access to enroll. Please enter your account number and tax identification number to log in, then selectReceive Company Mailings via E-Mailand provide your e-mail address. g TTM TECHNOLOGIES, INC. 2630 South Harbor Boulevard Santa Ana, CA 92704 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS As an alternative to completing this form, you may enter your vote instruction by Internet at WWW.VOTEPROXY.COM and follow the simple instructions. Use the Company Number and Account Number shown on your proxy card. The undersigned hereby appoints Kenton K. Alder and Steven W. Richards as proxies, each with full power of substitution, to represent and vote as designated on the reverse side, all the shares of Common Stock of TTM Technologies, Inc. held of record by the undersigned on March 29, 2010, at the Annual Meeting of Stockholders to be held at the Company’s headquarters located at 2630 South Harbor Boulevard, Santa Ana, CA 92704 at 10:00 a.m., local time on May 26, 2010, or any adjournment or postponement thereof. (Continued and to be signed on the reverse side) | | | | | | | | | | | | | | Steven W. Richards, Secretary |
Santa Ana, California
March 27, 2009g
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ANNUAL MEETING OF STOCKHOLDERS OF TTM TECHNOLOGIES, INC. May 26, 2010 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Please mark | | x | | | | | | | | | | | | | | | | | your votes as | | | | | | | | | | | | | | | | | | indicated in | | | | | | | | | | | | | | | | | | this example | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | FOR the nominees | | WITHHOLDAUTHORITY | | | | | | | | | | | | | | | | | listed to the left | | to vote for the nominee(s) | | | | | | | | | | | | |
| | | | (except as marked to | | listed below | | | | | | | | | | | | | 1. Election of Directors: | | the contrary below) | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | Nominees: | | | | | | | | | | | | | | | | | | | 01 Robert E. Klatell
02 John G. Mayer | | o | | o | | | 2. | Ratification of the appointment of KPMG LLP as independent registered public accountants for the fiscal year ending December 31, 2009:
| | o | | o | | o | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Instruction:
| To withhold authority to vote for any individual nominee, strike a line through that nominee’s name in the list above)
| | | This Proxy will be voted as directed or, if no contrary direction is indicated, will be voted FOR the election of the directors and FOR the ratification of the appointment of KPMG LLP as independent registered public accountants; and as said proxies deem advisable on such other matters as may come before the meeting. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Mark Here for Address
Change or Comments
SEE REVERSE | o | | | | | | | | | | | | | | | | | | | | | PROXY VOTING INSTRUCTIONS | | |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
5FOLD AND DETACH HERE5
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to the shareholder meeting day.
The Proxy Statement, Annual Report and other proxy materials are available at:
http://www.ttmtech.com/annualstockholdermeeting
44747
INTERNET http://www.proxyvoting.com/ttmi-
Use Access “www.voteproxy.com” and follow the Internet to vote your proxy. on-screen instructions. Have your proxy card in handavailable when you access the web site. page, and use the Company Number and Account Number shown on your proxy card.ORVote online until 11:59 PM EDT the day before the meeting date.
TELEPHONEMAIL
1-866-540-5760-
Use any touch-tone telephone to vote your proxy. Have Sign, date and mail your proxy card in hand when you call. the envelope provided as soon as possible.If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
Your Internet or telephone vote authorizes the named proxies toIN PERSON- You may vote your shares in the same manner as if you marked, signed and returned your proxy card.
PROXY
TTM TECHNOLOGIES, INC.
Annual Meeting of Stockholders - May 7, 2009
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby appoints Kenton K. Alder and Steven W. Richards, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of TTM Technologies, Inc. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come beforeperson by attending the Annual Meeting of Stockholders of the Company to be held May 7, 2009, or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at such meeting.Meeting.
(Continued and to be marked, dated and signed, on the other side)
PLEASE DATE, SIGN, AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
| | | | | | | | | BNY MELLON SHAREOWNER SERVICES | | | | | | |
Address Change/CommentsCOMPANY NUMBER
| | | P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250 | | | (Mark the corresponding box on the reverse side) ACCOUNT NUMBER
| | | | | |
| | | | | |
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement, and Annual Report are available at http://www.ttmtech.com/stockholdersmeeting ¯ Please detach along perforated line and mail in the envelope providedIF you are not voting the Internet. ¯ | | | | | | | | | | | | | | | | | | | | | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREý
| 1.
| To elect James K. Bass, Thomas T. Edman, and Tang Chung Yen, Tom as class I directors
| | | | | | | | | | | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | | | | 2. | | The ratification of the appointment of KPMG LLP, as independent registered public accountants for the fiscal year ending December 31, 2010 | | o | | o | | o | | | | | NOMINEES: | | | | | o | FOR ALL NOMINEES | | ¡ James K. Bass ¡ Thomas T. Edman ¡ Tang Chung Yen, Tom | | | | | | | | | | o | WITHHOLD AUTHORITY FOR ALL NOMINEES | | | | THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE ELECTION OF THE DIRECTOR NOMINEES AND “FOR” PROPOSAL 2. | o | FOR ALL EXCEPT (See instructions below) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | INSTRUCTIONS: 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, as shown here:= | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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. | o | | | | | | |
5FOLD AND DETACH HERE5 | | | | | | | | | | | | | | | Signature of Stockholder | | Date: | | Signature of Stockholder | | Date: | |
44747 | | | 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. |
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