SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Filed by the Registrantþ | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
o Preliminary Proxy Statement | o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ Definitive Proxy Statement | ||
o Definitive Additional Materials | ||
o Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 |
PORTFOLIO RECOVERY ASSOCIATES, INC.
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
o | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. |
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
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(4) Date filed:
130 Corporate Blvd.
Norfolk, VA 23502
Notice of Sixth Annual Meeting of Stockholders
to be held on May 16, 2008
• | Elect two directors to serve for three year terms, | |
• | Ratify the selection of KPMG LLP as the Company’s accountants and independent auditors for the fiscal year ending December 31, 2008, and | |
• | Transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
Executive Vice President, General Counsel and Secretary
April 18, 2008
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT NOON ON MAY 16, 2008
Norfolk, Virginia
1. | The election of two Directors for a term of three years, | ||
2. | The ratification of the appointment of the Company’s independent auditors for the fiscal year ending December 31, 2008, and | ||
3. | Such other matters as may properly come before the Annual Meeting. |
Riverside Commerce Center
130 Corporate Boulevard
Norfolk, Virginia 23502
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1. | FORall the persons nominated by the Board as directors; | ||
2. | FORthe ratification of the appointment of KPMG LLP as the Company’s independent auditors for the fiscal year ending December 31, 2008; and | ||
3. | In the best judgment of the persons named in the proxies, with respect to such other matters that may properly come before the meeting. |
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• | Send a written notice of revocation of your proxy so that it is received before the taking of the vote at the Annual Meeting to: |
Executive Vice President, General Counsel and Secretary
Portfolio Recovery Associates, Inc.
Riverside Commerce Center
120 Corporate Blvd, Suite 100
Norfolk, VA 23502
jsscott@portfoliorecovery.com
Fax: 757-321-2518
• | Attend the Annual Meeting and vote in person. Your attendance at the Annual Meeting will not in and of itself revoke your proxy. In order to revoke your proxy, you must also notify the Corporate Secretary of your intent to vote in person, and vote your shares at the Annual Meeting. |
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Shares Beneficially | Shares Beneficially | |||||||
Owned(1) | Owned(2) | |||||||
Name | (#) | (%) | ||||||
Waddell & Reed Financial, Inc.(3) 6300 Lamar Avenue Overland Park, KS 66202 | 1,073,000 | 7.1 | ||||||
TimesSquare Capital Management, LLC(4) 1177 Avenue of the Americas, 39th Floor New York, NY 10036 | 969,350 | 6.4 | ||||||
Zevenbergen Capital Investments, LLC(5) 601 Union Street, Suite 4600 Seattle, Washington 98101 | 877,800 | 5.8 | ||||||
Barclay’s Global Investors, N.A.(6) 45 Fremont Street San Francisco, CA 94105 | 820,605 | 5.4 |
(1) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (the “SEC”) and includes voting and investment power with respect to shares. | |
(2) | Ownership percentage is based on 15,183,226 shares of common shares outstanding as of the Record Date. | |
(3) | Based on information filed in a Schedule 13G with the SEC on February 1, 2008 (dated as of December 31, 2007) in which Waddell & Reed Investment Management Company is reported as the beneficial owner of 655,300 shares of the Company’s common stock with sole power to dispose or to direct the disposition of 655,300 shares, and Ivy Investment Management Company is reported as the beneficial owner of 417,700 shares of the Company’s common stock with sole power to dispose or direct the disposition of 417,700 shares. | |
(4) | Based on information filed in a Schedule 13G with the SEC on January 31, 2008 (dated as of December 31, 2007) in which TimesSquare Capital Management, LLC is reported as the beneficial owner of 969,350 shares of the Company’s common stock with sole power to dispose or to direct the disposition of 969,350 shares. | |
(5) | Based on information filed in a Schedule 13G filed with the SEC on February 13, 2008 (dated as of December 31, 2007), in which Zevenbergen Capital Investments, LLC is identified as the beneficial owner of 877,800 shares of the Company’s common stock with shared power to dispose or to direct the disposition of 877,800 shares. | |
(6) | Based on information filed in a Schedule 13G with the SEC on February 6, 2008 (dated as of December 31, 2007), in which Barclays Global Investors, N.A. is reported as the beneficial owner of 377,044 shares of the Company’s common stock with sole power to dispose or to direct the disposition of 377,044 shares, Barclays Global Fund Advisors is reported as the beneficial owner of 428,061 shares of the Company’s common stock with sole power to dispose or to direct the disposition of 428,061 shares, and Barclays Global Investors, Ltd. is reported as the beneficial owner of 15,500 shares of the Company’s common stock with sole power to dispose or to direct the disposition of 15,500 shares. |
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Amount and Nature of Beneficial Ownership | ||||||||||||||||||||||||
Shares | ||||||||||||||||||||||||
Shares | Vesting | Total Shares | ||||||||||||||||||||||
Shares | Options | Not | Within 60 Days of | Beneficially | Percentage of | |||||||||||||||||||
Owned | Vested | Vested | 3/19/2008 | Owned | Shares Owned | |||||||||||||||||||
(#) | (#) | (#) | (#) | (#) | (%) | |||||||||||||||||||
Management | ||||||||||||||||||||||||
Steve Fredrickson, CEO(1) | 194,385 | 18,000 | 33,000 | 1,000 | 213,385 | 1.4 | ||||||||||||||||||
Kevin Stevenson, CFO(1) | 57,860 | 45,000 | 22,000 | 1,000 | 103,860 | 0.7 | ||||||||||||||||||
Craig Grube, EVP(1) | 42,525 | 11,000 | 17,100 | 1,000 | 54,525 | 0.4 | ||||||||||||||||||
Judith Scott, EVP(1) | 11,553 | 3,000 | 7,050 | 300 | 14,853 | 0.1 | ||||||||||||||||||
Michael J. Petit, SVP(2) | 3,690 | 15,000 | 21,690 | 1,000 | 19,690 | 0.1 | ||||||||||||||||||
Kent McCammon, SVP(2) | 0 | 0 | 14,000 | 0 | 0 | 0.0 | ||||||||||||||||||
Non- Employee Directors | ||||||||||||||||||||||||
William Brophey | 2,700 | 6,500 | 2,800 | 0 | 9,200 | 0.1 | ||||||||||||||||||
Penelope Kyle | 1,000 | 0 | 2,600 | 0 | 1,000 | 0.0 | ||||||||||||||||||
David Roberts | 92,432 | 9,000 | 2,800 | 0 | 101,432 | 0.7 | ||||||||||||||||||
Scott Tabakin | 1,800 | 0 | 3,200 | 0 | 1,800 | 0.0 | ||||||||||||||||||
James Voss | 2,200 | 9,000 | 2,800 | 0 | 11,200 | 0.1 | ||||||||||||||||||
All Executives & Directors | 410,145 | 116,500 | 129,040 | 4,300 | 530,945 | 3.6 |
(1) | Executive Officer | |
(2) | Compensation data for Mr. Petit and Mr. McCammon is included herein due to their level of compensation. They are not named executive officers of the Company. |
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• | Except for Steven D. Fredrickson, the Company’s President, Chairman and CEO, no Director is, or has ever been, an executive officer of the Company or employed by the Company or its subsidiaries; | |
• | No Director has an immediate family member who is an employee or officer of the Company or its subsidiaries, has accepted any compensation or payments from the Company or has any current or past material relationship with the Company; | |
• | No Director, other than Mr. Fredrickson, has ever received any compensation from, worked for, been retained by, or received anything of substantial value from the Company aside from director compensation; | |
• | No Director or any member of any Director’s immediate family is, or ever was, employed by the independent auditors for the Company, or ever worked on the Company’s audit at any time; | |
• | No executive officer of the Company serves on the board of directors of any company that employs a director or any member of the immediate family of a director, and no director or any member of the immediate family of a director has been an executive officer of any entity having a compensation committee on which one or more of the Company’s executive officers has concurrently served; and | |
• | No Director and no family member of any Director is a partner or controlling stockholder, director or executive officer of any entity from which the Company purchases goods or services, or to which the Company makes charitable contributions, in excess of 2% of the entity’s consolidated gross revenues for that year, or $200,000. |
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1. | The complete details of any proposed transaction must be presented to the Company’s General Counsel by the party intending to enter into the transaction. | ||
2. | The Company’s General Counsel will prepare a written analysis and recommendation to the Nominating and Corporate Governance Committee, based on: (a) the nature of the proposed transaction; (b) the related person’s interest in the transaction; (c) the dollar value of the transaction; (d) the importance of the transaction to the business of the Company; (e) the material terms of the transaction and (f) the overall fairness of the transaction to the Company. | ||
3. | Based on the foregoing factors, the Nominating and Corporate Governance Committee will decide whether or not to recommend that the proposed transaction be brought before the full Board for consideration. | ||
4. | If the matter is presented to the Board for a vote, and a related party is involved in the transaction, he or she will not be allowed to participate in any discussions and decisions concerning the transaction. | ||
5. | If the Board approves the transaction, the Company’s General Counsel will ensure that the written contract between the parties is appropriately executed by all parties. |
Director | Age | Title | Appointed | Class | ||||||
Steve Fredrickson | 48 | President, CEO and Chairman of the Board | March 1996(1)(2) | 1st | ||||||
William Brophey | 70 | Director | November 2002(3) | 2nd | ||||||
Penelope Kyle | 60 | Director | October 2005(2) | 1st | ||||||
David Roberts | 46 | Director | March 1996(1)(3) | 2nd | ||||||
Scott Tabakin | 49 | Director | October 2004(4) | 3rd | ||||||
James Voss | 65 | Director | November 2002(4) | 3rd |
(1) | Mr. Fredrickson and Mr. Roberts were appointed as directors of the Company upon its creation in August 2002. In March 1996, they were named as managers of Portfolio Recovery Associates, L.L.C., the Company’s predecessor. | |
(2) | The terms of Mr. Fredrickson and Ms. Kyle will expire at the 2009 Annual Meeting. | |
(3) | The terms of Mr. Brophey and Mr. Roberts will expire at the 2010 Annual Meeting. | |
(4) | The terms of Mr. Voss and Mr. Tabakin will expire at the 2008 Annual Meeting. |
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Summary: Board of Directors Information | 2007 | |
Size of Board | 6 | |
Average Age of Directors | 56 | |
Number of Independent Directors | 5 | |
Lead Independent Director | Yes | |
Independent Audit Committee | Yes | |
Independent Compensation Committee | Yes | |
Independent Corporate Governance Committee | Yes | |
Number of Board Meetings Held | 12 | |
Corporate Governance Guidelines Approved by the Board | Yes | |
Outside Directors Hold Meetings Without Management Present | Yes | |
Annual Board Self-Evaluation | Yes | |
Annual Review of Independence of Board | Yes | |
Annual Committee Self Evaluations | Yes | |
Charters for Audit, Compensation and Corporate Governance Committees | Yes | |
Annual Equity Grants to Non-Employee Directors | Yes | |
Corporate Compliance Program | Yes | |
Code of Ethics | Yes |
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Nominating and Corporate | Compensation | |||
Audit Committee | Governance Committee | Committee | ||
James Voss* | William Brophey* | David Roberts* | ||
William Brophey | Scott Tabakin | Penelope Kyle | ||
Scott Tabakin | Penelope Kyle | Scott Tabakin | ||
James Voss | William Brophey | |||
David Roberts | James Voss | |||
COMMITTEE MEETINGS | ||||
7 | 2 | 5 |
* | Committee Chairman |
auditors and pre-approve all audit and permitted non-audit services.
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Fees Earned | ||||||||||||||||
or | Stock | Option | ||||||||||||||
Paid in Cash | Awards (1) | Awards(2) | Total Compensation | |||||||||||||
Director | ($) | ($) | ($) | ($) | ||||||||||||
William Brophey | $ | 30,000 | $ | 24,988 | $ | 5,909 | $ | 60,897 | ||||||||
Penelope Kyle | $ | 30,000 | $ | 26,756 | 0 | $ | 56,756 | |||||||||
David Roberts | $ | 35,000 | $ | 24,400 | $ | 4,927 | $ | 64,327 | ||||||||
Scott Tabakin | $ | 30,000 | $ | 31,525 | �� | 0 | $ | 61,525 | ||||||||
James Voss | $ | 35,000 | $ | 24,988 | $ | 5,909 | $ | 65,897 |
(1) | The amounts reported in the Stock Awards column represent the expense recognized for financial statement reporting purposes in fiscal year 2007 under FAS 123R for nonvested share awards made to the non-employee directors in 2007 and prior years. The grant date fair value of the 2007 nonvested share awards was $39,810 for Messrs. Brophey and Voss; $45,600 for Ms. Kyle; $38,790 for Mr. Roberts and $50,000 for Mr. Tabakin. The grant date fair value for the nonvested share awards was obtained by multiplying the number of nonvested shares granted by the closing stock price of the Company’s common stock on the grant date. The actual amount of compensation that will be realized by a Director at the time an award vests will depend upon the market price of the Company’s common stock at the vesting date. The nonvested share awards vest in five equal annual installments beginning on the first anniversary of the date of grant. | |
(2) | The amounts reported in the Option Awards column represent the expense recognized for financial statement reporting purposes under FAS 123R for stock option awards made to the non-employee directors in prior years. No stock options were granted in 2007. |
OUTSTANDING | ||||
DIRECTORS | OPTIONS (#) | |||
William Brophey | 7,500 | |||
Penelope Kyle | 0 | |||
David Roberts | 10,000 | |||
Scott Tabakin | 0 | |||
James Voss | 10,000 |
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(a) | Be linked, directly and materially, to each executive’s individual performance and the Company’s overall performance, via annual bonuses and long-term equity awards, | ||
(b) | Link executive pay opportunities to shareholder returns, | ||
(c) | Assist the Company in attracting and retaining high quality talent, | ||
(d) | Reward past performance and motivate future performance, and | ||
(e) | Be reasonable in comparison to like positions in like companies. |
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• | A review and analysis of the components of compensation (including a comparison of each element of executive compensation to external market rates), in order to determine the competitiveness of its executive compensation relative to that of its peers (the “Compensation Peer Group”), | ||
• | Recommendations for changes in the Company’s compensation structure, to assist the Company in attracting, motivating and retaining key senior level executives, and | ||
• | Advice concerning the implementation and design of the Company’s Long Term Incentive Program (“LTI Program”). |
Advanta Asset Acceptance Capital Corp Asta Funding, Inc Dealer Track Holdings Encore Capital Group, Inc. EPIQ Systems EZCORP | Financial Federal FTI Consulting Huron Consulting Group Marlin Business Services Ocwen Financial QC Holdings World Acceptance Corp. |
* | The Compensation Peer Group differs from the peer group in the stock performance graph which is included in the Company’s Annual Report, as it includes additional peer companies for salary comparison purposes. |
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Principal Objectives | Features | |||||
• | To attract executive talent in the markets in which the Company competes | • | Initially established based on employees’ prior experience, the scope of their responsibilities and the applicable market compensation paid by other | |||
• | Recognizes and rewards the experience and skills that | companies for similar positions | ||||
employees bring to the Company | • | Reviewed annually after employment | ||||
• | Provides motivation for career development and enhancement. | • | Not dependent upon the Company’s achievement of its performance goals | |||
• | Ensures that all employees receive a basic level of compensation |
Principal Objectives | Features | |||||
• | Provides pay differentiation based on performance | • | Financial and non-financial goals are approved annually by the Board | |||
• | Rewards superior performance | • | Threshold, target and maximum bonus amounts are established annually | |||
• | Provides incentives to executives to meet or exceed profitability targets | • | Minimum management bonuses for executive officers range from 50% to 100% of base salary* | |||
• | Rewards those most accountable for long-term financial performance | • | Bonuses are paid in January for the prior year’s performance |
Principal Objectives | Features | |||||
• • | Attracts and retains talented employees Aligns executives’ interests with those of the Company’s | • | Consists of nonvested shares of the Company’s stock, including performance-based shares | |||
• | shareholders Promotes long-term accountability | • | Performance-based shares vest upon the Company’s achievement of specified three year targets; all others vest 20% per year over five years | |||
•• | Motivates outstanding performance Rewards employment longevity | • | Award decisions reflect consideration of each executive’s performance and expected contributions to overall financial results | |||
• | Provides significant equity to those most accountable for long-term financial performance |
* | A minimum management bonus, as set forth in each executive’s employment agreement, will be paid if the results of operations for the year achieve the net profitability goals and the executive’s performance is determined to have met expectations. If the results of operations for the year exceed net profitability goals and the executive’s performance is determined to have exceeded expectations, the amount of the management bonus may be increased in recognition of the degree to which results exceeded such goals, and the degree to which the executive contributed to the Company’s superior performance. If the results of operations fail to achieve net profitability goals or the executive’s performance is determined not to have met expectations, then the amount, if any of the management bonus will be within the discretion of the Compensation Committee, giving reasonable consideration to any intervening or extraordinary events or circumstances that might have given rise to such shortfall. |
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Name | Base Pay (%) | Cash Bonus (%) | Equity Awards(3)(%) | Other (%) | ||||||||||||
Steve Fredrickson, CEO(1) | 28 | 42 | 28 | 2 | ||||||||||||
Kevin Stevenson, CFO(1) | 28 | 43 | 28 | 1 | ||||||||||||
Craig Grube, EVP(1) | 26 | 45 | 27 | 2 | ||||||||||||
Judith Scott, EVP(1) | 43 | 35 | 20 | 2 | ||||||||||||
Michael J. Petit, SVP | 20 | 45 | 34 | 1 | ||||||||||||
Kent McCammon, SVP(4) | 36 | (2) | 36 | 27 | 1 |
(1) | Executive Officer | |
(2) | Mr. McCammon was employed by the Company for 5.5 months in 2007 with an annual base pay of $200,000. | |
(3) | Equity awards are valued as indicated in the Summary Compensation Table herein. The actual amount of compensation that will be realized at the time an award vests will depend upon the market price of the Company’s common stock on the vesting date. | |
(4) | For purposes of comparison, “Other” in the case of Mr. McCammon, excludes one-time compensation elements: his signing bonus of $50,000, non-qualified relocation expenses of $131,415 and qualified relocation expenses of $22,573 paid by the Company in 2007. |
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3 Year Aggregated Diluted EPS ($) | Percentage of LTI Shares to be Awarded | |||||
2007 LTI Program | 2008 LTI Program | |||||
$10.09 - $10.36 | $11.34 - $11.92 | 0% - 49 | % | |||
$10.37 - $10.85 | $11.93 - $12.52 | 50% - 99 | % | |||
$10.86 - $11.25 | $12.53 - $13.05 | 100% - 149 | % | |||
$11.26 - $12.09 | $13.06 - $13.60 | 150% - 199 | % | |||
> $12.09 | > $13.60 | 200 | % |
Targeted Multiple of Base | Minimum Targeted | |||||||||||
Name | Compensation | Stockholdings | Actual Stockholdings | |||||||||
Steve Fredrickson, CEO* | 13 times | 115,000 | 194,385 | |||||||||
Kevin Stevenson, CFO* | 8 times | 50,000 | 57,860 | |||||||||
Craig Grube, EVP* | 5 times | 28,500 | 42,525 | |||||||||
Judith Scott, EVP* | 2.5 times | 10,000 | 11,553 | |||||||||
Michael Petit, SVP | 3 times | 12,000 | 3,690 | |||||||||
Kent McCammon, SVP | 3 times | 12,000 | 0 |
* | Executive Officer |
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Salary, Bonus | Options | |||||||||||||||||||||
Constructive | and Accrued | and | ||||||||||||||||||||
Termination | Termination | Severance | Vacation(2)(3)(4) | Benefits | Shares(5)(6) | Total | ||||||||||||||||
Name | Provisions | Conditions(1) | Payment | ($) | ($) | ($) | ($) | |||||||||||||||
Steve Fredrickson | Yes | Constructive | Two years’ salary, | $ | 2,132,931 | $ | 79,875 | $ | 818,330 | $ | 3,031,136 | |||||||||||
discharge(7), | two times target | |||||||||||||||||||||
non-renewal of employment | bonus in | |||||||||||||||||||||
agreement or reasons other | termination year, | |||||||||||||||||||||
than Cause,(8) | accrued vacation | |||||||||||||||||||||
death or disability | and benefits for | |||||||||||||||||||||
one year | ||||||||||||||||||||||
Kevin Stevenson | Yes | Constructive discharge, | Two years’ salary, | $ | 1,426,780 | $ | 49,676 | �� | $ | 1,981,220 | $ | 3,457,676 | ||||||||||
non-renewal of employment | two times target | |||||||||||||||||||||
agreement or reasons other | bonus in | |||||||||||||||||||||
than Cause, death or | termination year, | |||||||||||||||||||||
disability | accrued vacation | |||||||||||||||||||||
and benefits for | ||||||||||||||||||||||
one year | ||||||||||||||||||||||
Craig Grube | Yes | Constructive discharge, | Two years’ salary, | $ | 1,384,027 | $ | 59,103 | $ | 516,840 | $ | 1,959,970 | |||||||||||
non-renewal of employment | two times target | |||||||||||||||||||||
agreement or reasons other | bonus in | |||||||||||||||||||||
than Cause, death or | termination year, | |||||||||||||||||||||
disability | accrued vacation | |||||||||||||||||||||
and benefits for | ||||||||||||||||||||||
one year | ||||||||||||||||||||||
Judith Scott | Yes | Constructive discharge, | One year’s salary, | $ | 369,466 | $ | 35,355 | $ | 142,131 | $ | 546,952 | |||||||||||
non-renewal of employment | one times target | |||||||||||||||||||||
agreement or reasons other | bonus in | |||||||||||||||||||||
than Cause, death or | termination year | |||||||||||||||||||||
disability | and accrued | |||||||||||||||||||||
vacation and | ||||||||||||||||||||||
benefits for one | ||||||||||||||||||||||
year | ||||||||||||||||||||||
Michael Petit(9) | No | Non-renewal of employment | One year’s salary, | $ | 606,643 | $ | 50,646 | $ | 689,120 | $ | 1,346,409 | |||||||||||
agreement or reasons other | one times target | |||||||||||||||||||||
than Cause, death or | bonus in | |||||||||||||||||||||
disability | termination year, | |||||||||||||||||||||
accrued vacation | ||||||||||||||||||||||
and benefits for | ||||||||||||||||||||||
one year | ||||||||||||||||||||||
Kent McCammon | No | Non-renewal of employment | One year’s salary, | $ | 463,699 | $ | 60,674 | $ | 0 | $ | 524,373 | |||||||||||
agreement or reasons other | one times target | |||||||||||||||||||||
than Cause, death or | bonus in | |||||||||||||||||||||
disability | termination year, | |||||||||||||||||||||
accrued vacation | ||||||||||||||||||||||
and benefits for | ||||||||||||||||||||||
three months |
(1) | In the event of their death or disability, executives or their estates will receive their base salary earned through the month of the date of their death or disability, plus a pro-rata portion of their target bonus for that year. | |
(2) | Based on 2007 compensation. | |
(3) | Assumes payment of maximum accrued vacation and bonus. |
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(4) | Bonus calculation is based on the greater of the target bonus in the year of Termination or the actual bonus paid for the year prior. | |
(5) | Options cease to be exercisable 90 days after the date of termination for reasons other than Cause. No options may be exercised and no nonvested shares may be granted upon termination for Cause. | |
(6) | Represents total equity compensation that would be realized upon termination, including all vested options and all options and nonvested shares vesting within 60 days of the Record Date, based upon NASDAQ’s closing price of the Company’s common stock on the Record Date. | |
(7) | “Constructive Discharge” is defined as the election of the employee to terminate his or her employment due to the removal of employee from, or a failure of employee to continue in his or her current position, any material diminution in the nature or scope of the authorities, powers, functions, duties or responsibilities attached to such position, the relocation of the Company’s principal executive offices to a location more than 50 miles from Norfolk, Virginia, and Employee does not agree to such changes, or the material breach by the Company of the employee’s employment agreement. | |
(8) | “Cause” is defined as: (A) conviction, or plea of guilty ornolo contendereto, a felony; (B) engaging in willful misconduct that is economically injurious to the Company or its subsidiaries, or the embezzlement of funds or misappropriation of other property of the Company or any subsidiary); (C) material violation of the Company’s written policies and procedures (including gross and continued failure to satisfy written directives or performance material), insubordination; or (D) fraudulent conduct as regards the Company, which results either in personal enrichment to employee or material injury to the Company or its subsidiaries. | |
(9) | The Company may extend Mr. Petit’s non-competition/non-solicitation period for an additional year by paying additional severance compensation equal to one year’s salary. In this scenario, Mr. Petit’s total severance payment would be $1,516,409. |
Benefit Plan | Executive Officers | All Full Time Employees | ||||||
401(k) Plan | X | X | ||||||
Medical/Dental/Vision Plans | X | X | ||||||
Life and Disability Insurance | X | X | ||||||
Legal Resources Assistance | X | X | ||||||
Employee Assistance Plan | X | X | ||||||
Defined Benefit Pension Plan | Not Offered | Not Offered | ||||||
Deferred Compensation Plan | Not Offered | Not Offered |
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David Roberts, Chairman | William Brophey | ||||
Scott Tabakin | Penelope Kyle | ||||
James Voss |
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STOCK | OPTION | ALL OTHER | ||||||||||||||||||||||||||
BASE SALARY | BONUS(1) | AWARDS(2) | AWARDS(3) | COMP(4) | TOTAL | |||||||||||||||||||||||
NAME AND POSITION | YEAR | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
2007 | $ | 364,000 | $ | 550,000 | $ | 284,914 | $ | 87,851 | $ | 11,600 | $ | 1,298,365 | ||||||||||||||||
Steve Fredrickson, CEO | 2006 | $ | 350,000 | $ | 690,000 | $ | 32,163 | $ | 89,398 | $ | 8,800 | $ | 1,170,361 | |||||||||||||||
2007 | $ | 245,000 | $ | 375,000 | $ | 195,703 | $ | 48,549 | $ | 9,600 | $ | 873,852 | ||||||||||||||||
Kevin Stevenson, CFO | 2006 | $ | 235,000 | $ | 460,000 | $ | 32,163 | $ | 49,404 | $ | 8,800 | $ | 785,367 | |||||||||||||||
2007 | $ | 234,000 | $ | 400,000 | $ | 189,765 | $ | 48,549 | $ | 11,600 | $ | 883,914 | ||||||||||||||||
Craig Grube, EVP | 2006 | $ | 225,000 | $ | 450,000 | $ | 32,163 | $ | 49,404 | $ | 8,800 | $ | 765,367 | |||||||||||||||
2007 | $ | 182,000 | $ | 148,000 | $ | 71,175 | $ | 11,559 | $ | 10,070 | $ | 422,804 | ||||||||||||||||
Judith Scott, EVP | 2006 | $ | 169,615 | $ | 175,000 | $ | 28,598 | $ | 11,765 | $ | 8,800 | $ | 393,778 | |||||||||||||||
2007 | $ | 170,000 | $ | 390,000 | $ | 231,075 | $ | 57,953 | $ | 10,100 | $ | 859,128 | ||||||||||||||||
Michael Petit, SVP(5) | 2006 | $ | 155,000 | $ | 425,000 | $ | 111,161 | $ | 58,023 | $ | 8,800 | $ | 757,984 | |||||||||||||||
2007 | $ | 92,308 | (7) | $ | 200,000 | $ | 148,685 | 0 | $ | 205,118 | $ | 646,111 | ||||||||||||||||
Kent McCammon, SVP(5)(6) | 2006 | N/A | N/A | N/A | N/A | N/A |
(1) | This table reflects for a given year all bonuses earned by the above executives in 2006 and 2007. The Company typically pays bonuses in January of the year following the year in which the bonus was earned. | |
(2) | The amounts included in the “Stock Awards” column represent the expense recognized for financial reporting purposes in 2006 and 2007 under FAS 123R for grants of nonvested shares in 2007, as well as prior years. For a discussion of valuation assumptions, see the Company’s 2006 and 2007 Consolidated Financial Statements included in its Annual Reports on Form 10-K and 10-K/A filed with the SEC on March 1, 2007 and March 12, 2008, respectively. The shares awarded vest either (a) ratably over a five year period, beginning on the first anniversary of the award date or (b) after three years if, pursuant to the Company’s Long Term Incentive Plan, certain Company performance goals are met (see page 22 for a more complete description of the Long Term Incentive Plan). The actual amount of compensation that will be realized at the time an award vests will depend upon the market price of the Company’s common stock at the vesting date. | |
(3) | The amounts included in the “Option Awards” column represent the expense recognized for financial reporting purposes in both 2006 and 2007 under FAS 123R for grants of stock options in prior years. There were no stock options granted in either 2006 or 2007. | |
(4) | Except for Mr. McCammon, these amounts represent company matching contributions to the recipient’s 401(k) plan up to limits for such plans under federal income tax rules. In 2007, except with respect to Mr. Stevenson, these amounts also include matches of charitable contributions pursuant to the Company’s Matching Gift Program, pursuant to which the Company matches up to a maximum of $2,000 of charitable contributions to eligible recipients under Section 501(c)(3) of the Internal Revenue Code. | |
(5) | Although Mr. Petit and Mr. McCammon are not executive officers of the Company, their compensation details are included in this table due to their level of compensation. | |
(6) | Amounts included in “All Other Comp”, in addition to items referenced in footnote 4, also include: (a) signing bonus of $50,000; (b) non-qualified relocation expenses paid for by the Company of $131,495; and (c) qualified relocation expenses of $22,573 paid by the Company to Mr. McCammon in 2007. | |
(7) | Consists of base pay for 5.5 months. Mr. McCammon was employed by the Company as of July 16, 2007, at an annual base salary of $200,000. |
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Number of Securities | ||||||||||||||||
Number of | Number of Securities to be | Remaining Available | ||||||||||||||
Securities | Issued Upon Exercise of | Weighted-average | for Future Issuance | |||||||||||||
Authorized for | Outstanding Options, | Exercise Price of | Under Equity | |||||||||||||
Plan | Issuance Under | Warrants, and Rights or Upon | Outstanding Options, | Compensation | ||||||||||||
Category | the Plan | Vesting of Nonvested Shares | Warrants and Rights(1) | Plans(2) | ||||||||||||
Equity compensation plans approved by security holders | 2,000,000 | 380,344 | $ | 7.28 | 916,255 | |||||||||||
Equity compensation plans not approved by security holders | None | None | N/A | None | ||||||||||||
Total | 2,000,000 | 380,344 | $ | 7.28 | 916,255 |
(1) | Includes grants of nonvested shares, for which there is no exercise price, but with respect to which shares are awarded without cost when the restrictions have been realized. Excluding the impact of the nonvested shares, the weighted average exercise price of outstanding options is $16.97. | |
(2) | Excludes 703,401 exercised options and vested shares, which are not available for re-issuance. |
Estimated Payout Under Equity Incentive Plan | Grant Date Fair | |||||||||||||||||||||||
Date | Threshold | Value of Stock | ||||||||||||||||||||||
Name | Grant Date | Approved | (#) | Target (#) | Maximum (#) | Awards ($) | ||||||||||||||||||
Steve Fredrickson | 3/30/2007 | 3/30/2007 | 0 | 16,000 | 32,000 | $ | 714,400 | |||||||||||||||||
Kevin Stevenson | 3/30/2007 | 3/30/2007 | 0 | 10,000 | 20,000 | $ | 446,500 | |||||||||||||||||
Craig Grube | 3/30/2007 | 3/30/2007 | 0 | 9,600 | 19,200 | $ | 428,640 | |||||||||||||||||
Judith Scott | 3/30/2007 | 3/30/2007 | 0 | 2,500 | 5,000 | $ | 111,625 | |||||||||||||||||
Michael Petit | 3/30/2007 | 3/30/2007 | 0 | 7,000 | 14,000 | $ | 312,550 | |||||||||||||||||
Kent McCammon | 3/30/2007 | 3/30/2007 | 0 | 10,000 | 20,000 | $ | 446,500 |
* | The amounts reported above relate to the nonvested LTI Shares granted to the above executives in 2007. The value of the LTI Share awards was determined by multiplying the closing price ($44.65) of the Company’s common stock as of the grant date times the target number of LTI Shares granted. If the performance criteria set forth herein on page 22 are met, the LTI Shares will vest on December 31, 2009. |
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OPTION | STOCK | |||||||||||||||
AWARDS | AWARDS | |||||||||||||||
Number of Shares | Value Realized on | Number of Shares | Value Realized on | |||||||||||||
Acquired on | Exercise | Acquired on Vesting | Vesting | |||||||||||||
Name | Exercise (#) | ($) | (#) | ($) | ||||||||||||
Steve Fredrickson | 48,000 | $ | 1,630,868 | 1,000 | $ | 47,970 | ||||||||||
Kevin Stevenson | 0 | 0 | 1,000 | $ | 47,970 | |||||||||||
Craig Grube | 18,400 | $ | 678,354 | 1,000 | $ | 47,970 | ||||||||||
Judith Scott | 2,000 | $ | 55,060 | 850 | $ | 45,309 | ||||||||||
Michael J. Petit | 25,000 | $ | 722,700 | 3,690 | $ | 192,382 | ||||||||||
Kent McCammon | 0 | 0 | 0 | 0 |
Option Awards | Stock Awards(1) | |||||||||||||||||||||||||||
Number of | Number of | Number of | Market Value of | |||||||||||||||||||||||||
Securities | Securities | Shares or Units | Shares of | |||||||||||||||||||||||||
Underlying | Underlying | Option | of Stock That | Stock that | ||||||||||||||||||||||||
Unexercised | Unexercised | Exercise | Option | Have Not | Have Not | |||||||||||||||||||||||
Grant | Options (#) | Options (#) | Price | Expiration | Vested(3) | vested as of | ||||||||||||||||||||||
Name | Date | Exercisable | Unexercisable(2) | ($) | Date | (#) | 12/31/07($)(4) | |||||||||||||||||||||
Steve Fredrickson | 11/07/02 | 28,000 | — | $ | 13.00 | 11/07/09 | — | — | ||||||||||||||||||||
04/19/06 | — | — | — | — | 4,000 | $ | 158,680 | |||||||||||||||||||||
03/30/07 | — | — | — | — | 16,000 | (5) | $ | 634,720 | ||||||||||||||||||||
Kevin Stevenson | 11/07/02 | 45,000 | — | $ | 13.00 | 11/07/09 | — | — | ||||||||||||||||||||
04/19/06 | — | — | — | — | 4,000 | $ | 158,680 | |||||||||||||||||||||
03/30/07 | — | — | — | — | 10,000 | (5) | $ | 396,700 | ||||||||||||||||||||
Craig Grube | 11/07/02 | 21,000 | — | $ | 13.00 | 11/07/09 | — | — | ||||||||||||||||||||
04/19/06 | — | — | — | — | 4,000 | $ | 158,680 | |||||||||||||||||||||
03/30/07 | — | — | — | — | 9,600 | (5) | $ | 380,832 | ||||||||||||||||||||
Judith Scott | 11/07/02 | 3,000 | — | $ | 13.00 | 11/07/09 | — | — | ||||||||||||||||||||
07/20/04 | — | — | — | — | 400 | $ | 15,868 | |||||||||||||||||||||
07/28/05 | — | — | — | — | 1,050 | $ | 41,654 | |||||||||||||||||||||
04/19/06 | — | — | — | — | 1,200 | $ | 47,604 | |||||||||||||||||||||
03/30/07 | — | — | — | — | 2,500 | (5) | $ | 99,175 | ||||||||||||||||||||
Michael J. Petit | 07/31/03 | 15,000 | 10,000 | $ | 27.77 | 07/31/10 | 2,090 | $ | 82,910 | |||||||||||||||||||
07/20/04 | — | — | — | — | 400 | $ | 15,868 | |||||||||||||||||||||
07/28/05 | — | — | — | — | 1,200 | $ | 47,604 | |||||||||||||||||||||
04/19/06 | — | — | — | — | 4,000 | $ | 158,680 | |||||||||||||||||||||
03/30/07 | — | — | — | — | 7,000 | (5) | $ | 277,690 | ||||||||||||||||||||
Kent McCammon | 03/30/07 | — | — | — | — | 10,000 | (5) | $ | 396,700 |
(1) | The 2007 LTI Shares will not vest or be awarded if the Company does not achieve both the Target ROIC and Target EPS, as described more fully on page 22 above. If the targets are met, the number of shares to be received by each executive will increase or decrease depending on the actual EPS, and can range from 0% to 200% of Target. | |
(2) | Option awards vest in five equal, annual installments beginning on the first anniversary of the date of grant. | |
(3) | The shares awarded vest either (a) ratably over a five year period, beginning on the first anniversary of the award date or (b) in the case of the LTI Shares awarded in 2007, after three years if, pursuant to the Company’s Long Term Incentive Plan, certain Company performance goals are met (see page 22 for a more complete description of the Long Term Incentive Plan). |
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(4) | Value is calculated based on the closing price ($39.67) of the Company’s common stock on the NASDAQ Global Stock Market as of 12/31/2007. | |
(5) | LTI Shares granted, but not vested or awarded. |
• | The Audit Committee reviewed and discussed with management, the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2007, including a discussion of the acceptability and appropriateness of significant accounting policies and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee discussed with the Company’s independent auditors matters related to the conduct of the audits of the Company’s consolidated financial statements and internal control over financial reporting. The Audit Committee also reviewed with management and the independent auditors the reasonableness of significant estimates and judgments made by management in preparing the consolidated financial statements, as well as the clarity of the disclosures in the consolidated financial statements. | |
• | The Audit Committee has discussed with the Company’s independent auditors, the matters required to be communicated by Statement on Auditing Standards No. 61, “Communications with Audit Committees,” as amended. | |
• | The Audit Committee has received the written disclosures from KPMG LLP (“KPMG”), as required by Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees,” as amended or supplemented, and has discussed with KPMG their independence. The |
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William Brophey
Scott Tabakin
32
2007 | 2006 | |||||||
Audit Fees | ||||||||
Annual Audit(1) | $ | 483,000 | $ | 522,799 | ||||
Tax Fees | 10,900 | — | ||||||
All Other Fees | ||||||||
Investigation Review Fees(3) | — | 58,004 | ||||||
Subscription Fees(2) | 1,500 | 1,500 | ||||||
1,500 | 59,504 | |||||||
Total Accountant Fees | $ | 495,400 | $ | 582,303 | ||||
(1) | On March 8, 2007, the Audit Committee dismissed PricewaterhouseCoopers LLP as its independent registered public accounting firm, effectively immediately, and subsequently appointed KPMG to serve as its independent registered public accounting firm. | |
(2) | Subscription fees represent fees paid to KPMG and PricewaterhouseCoopers LLP for an annual subscription to their proprietary research tool during 2007 and 2006, respectively. | |
(3) | Investigation review fees relate to the work performed by PricewaterhouseCoopers LLP to review and assess the adequacy and results of the internal control deficiency investigation initiated by our Audit Committee. See Item 9A of our Quarterly Report on Form 10-Q for the period ended June 30, 2006, filed on August 3, 2006, for more information. |
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34
Norfolk, Virginia
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Please mark your votes like this | x |
The Board of Directors recommends a vote FOR the election of the directors listed below. | ||||||
1. | Election of Directors | FORall Nominees listed to the left | WITHHOLD AUTHORITY to vote for the nominees listed | |||
NOMINEES: (01) Scott Tabakin (02) James Voss | ||||||
(Instruction: To withhold authority to vote for any individual nominee, strike a line through that nominee’s name in the list above) |
The Board of Directors recommends a vote FOR the ratification of the selection of the Independent Auditors below. | ||||||
2. | Ratification of Appointment of Independent Auditors | FOR | AGAINST ABSTAIN | |||
Independent Auditors: KPMG, LLP | ||||||
When this Proxy is properly executed, the shares to which it relates will be voted in the manner directed herein. | ||||||
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING | ||||||
I plan to attend the Annual Meeting in person | ||||||
COMPANY ID: | ||||||
PROXY NUMBER: | ||||||
ACCOUNT NUMBER: |
Signature | Signature | Date | 2008 | |||||||||||
For Holders of Record as of March 19, 2008
LICENSE OR EMPLOYEE IDENTIFICATION BADGE, IN ADDITION TO THIS ADMISSION TICKET.
For Annual Meeting of Stockholders to be held May 16, 2008
For Holders of Record as of March 19, 2008