UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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o | Soliciting Material Pursuant to §240.14a-12 | ||
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BE Aerospace, Inc. | |||
(Name of Registrant as Specified in Its Charter) | |||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | |||
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1. | To elect two Class I directors; |
2. | To consider and act upon a stockholder proposal; and |
3. | To transact any other business that may properly come before the meeting, or any adjournment thereof. |
Page | |||||
PROPOSAL NO. 1: ELECTION OF DIRECTORS | 2 | ||||
Director Nominees | 2 | ||||
Current Directors | 3 | ||||
Meetings of the Board of Directors and Committees | 4 | ||||
Stockholder Communications with Our Board of Directors | 5 | ||||
Nomination of Directors | 5 | ||||
Compensation Committee Interlocks and Insider Participation | 6 | ||||
Compensation of Directors | 6 | ||||
Audit Committee | 8 | ||||
Report of the Audit Committee of the Board of Directors | 8 | ||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 10 | ||||
COMPENSATION DISCUSSION & ANALYSIS | 12 | ||||
The Objectives of our Named Executive Officer Compensation Program | 12 | ||||
Our Named Executive Officers | 12 | ||||
What our Compensation is Intended to Reward | 12 | ||||
Company Performance | 12 | ||||
Individual Performance | 13 | ||||
Elements of our Compensation Program | 13 | ||||
Base Salary | 13 | ||||
Annual Cash Incentives | 13 | ||||
Attainment of 2006 Performance Measures | 14 | ||||
2006 Long-Term Equity Incentives | 15 | ||||
2006 Restricted Stock Grants | 15 | ||||
Special 2006 Equity Grants | 16 | ||||
Severance and Change of Control Benefits | 16 | ||||
Retirement Compensation | 17 | ||||
Other Compensation | 17 | ||||
External Benchmarking | 17 | ||||
2007 Amendements to Employment Agreements with Messrs. Khoury, McCaffrey and Baughan | 19 | ||||
Stock Ownership | 20 | ||||
Tax Deductibility | 20 | ||||
Report of the Compensation Committee on Executive Compensation | 20 | ||||
Summary Compensation Table | 21 | ||||
Grants of Plan-Based Awards Table | 23 | ||||
Outstanding Equity Awards at Fiscal Year-End Table | 25 | ||||
Option Exercises and Stock Vested Table | 26 | ||||
Non Qualified Deferred Compensation | 26 | ||||
Employment, Severance and Change of Control Agreements | 26 | ||||
Potential Payments Upon a Termination or Change of Control | 31 | ||||
Equity Compensation Plan Information | 38 | ||||
Policy and Procedures for the Review and Approval Related Person Transaction | 39 | ||||
Certain Relationships and Related Transactions | 39 | ||||
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 40 | ||||
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AUDIT MATTERS | 42 | ||||
Principal Accountant Fees and Services | 42 | ||||
Pre-Approval Policies and Procedures | 42 | ||||
STOCKHOLDER PROPOSALS | 43 | ||||
OTHER MATTERS | 43 | ||||
FORM 10-K | 43 |
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• | To vote in person, come to the annual meeting and we will give you a ballot when you arrive. |
• | To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct. |
• | To vote over the telephone, dial toll-free 1-800-652-VOTE (1-800-652-8683) using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 1:00 a.m. Central Time, on July 11, 2007 to be counted. |
• | To vote on the Internet, go to http://www.investorvote.com to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 1:00 a.m. Central Time, on July 11, 2007 to be counted. |
Name, Age, Business Experience andCurrent Directorships | Director Since | |||
JIM C. COWART, 55 | 1989 | |||
Jim C. Cowart has been a Director since November 1989. Since September 2005, Mr. Cowart has been Founder and Vice Chairman of EAG Holdings LLC, a provider of microanalytic laboratory services, including surface analysis and materials characterization. Since September 2004, Mr. Cowart has been Chairman and Chief Executive Officer of Clinical House MedTec GmbH, a distributor of devices. He is a Principal of Auriga Partners, Inc., a private capital firm that provides strategic planning, competitive analysis, financial relations and other services. From August 1999 to May 2001, he was Chairman of QualPro Corporation, an aerospace components manufacturing company. From January 1993 to November 1997, he was the Chairman and CEO of Aurora Electronics Inc. Previously, Mr. Cowart was a founding general partner of Capital Resource Partners, a private investment capital manager, and he held various positions in investment banking and venture capital with Lehman Brothers, Shearson Venture Capital and Kidder, Peabody & Co. | ||||
ARTHUR E. WEGNER, 69 | 2007 | |||
Arthur E. Wegner has been a Director since January 2007. He retired in 2000 as Executive Vice President of Raytheon Company and Chairman of Raytheon Aircraft. He joined Raytheon Company in July 1993 as a Senior Vice President and was appointed Chairman and CEO of Raytheon’s Beech Aircraft Corporation. In September 1994, he was appointed Chairman and CEO of Raytheon Aircraft, which was formed by the merger of Raytheon subsidiaries Beech Aircraft and Raytheon Corporate Jets. He became Chairman of Raytheon Aircraft in 2000. He was elected an Executive Vice President of Raytheon Company in March 1995. Mr. Wegner came to Raytheon Company after 20 years with United Technologies Corporation (UTC), where he was Executive Vice President and President of UTC’s Aerospace and Defense Sector. Prior to that he was President of the Pratt and Whitney Division. Mr. Wegner is past Chairman of the Board ofDirectors of the General Aviation Manufacturers Association and the Aerospace Industries Association. |
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Name, Age, Business Experience andCurrent Directorships | Director Since | Term Expires | |||||
ROBERT J. KHOURY, 65 | 1987 | 2008 | |||||
Robert J. Khoury has been a Director since July 1987, when he co-founded the Company. On December 31, 2005, Mr. Khoury retired from service as the Company’s President and Chief Executive Officer, a position he held since August 2000. From April 1996 through August 2000, he served as Vice Chairman of the Company. Mr. Khoury is the brother of Amin J. Khoury. | |||||||
JONATHAN M. SCHOFIELD, 66 | 2001 | 2008 | |||||
Jonathan M. Schofield has been a Director since April 2001. From December 1992 through February 2000, Mr. Schofield served as Chairman of the Board and CEO of Airbus North America Holdings, a subsidiary of Airbus Industrie, a manufacturer of large civil aircraft, and served as Chairman from February 2000 until his retirement in March 2001. From 1989 until he joined Airbus, Mr. Schofield was President of United Technologies International Corporation. Mr. Schofield is currently a member of the board of directors of Aero Sat, Inc., Douglas Machine, Inc., TurboCombustor Technology, Inc. and is a trustee of LIFT Trust. | |||||||
CHARLES L. CHADWELL, 66 | 2007 | 2009 | |||||
Charles L. Chadwell has been a Director since January 2007. Until his retirement in 2002, he was the Vice President and General Manager of Commercial Engine Operations for GE Aircraft Engines. After joining General Electric in 1965, he held a variety of management positions, including: Program Manager, CF6-80C program; Plant Manager, GE Aircraft Engines’ Wilmington, North Carolina, plant; General Manager, GE Aircraft Engines’ Sourcing Operations; General Manager, Production Operations, GE Aircraft Engines’ Lynn, Massachusetts plant; Vice President, GE Aircraft Engines Human Resources; and Vice President and General Manager, Production and Procurement, GE Aircraft Engines. | |||||||
RICHARD G. HAMERMESH, 59 | 1987 | 2009 | |||||
Richard G. Hamermesh has been a Director since July 1987. Dr. Hamermesh is currently a Professor of Management Practice at the Harvard Business School. From 1987 to 2001, he was a co-founder and a Managing Partner of The Center for Executive Development, an executive education and development consulting firm. Prior to this, from 1976 to 1987, Dr. Hamermesh was a member of the faculty of the Harvard Business School. He is also an active investor and entrepreneur, having participated as a principal, director and investor in the founding and early stages of more than 15 organizations. | |||||||
AMIN J. KHOURY, 68 | 1987 | 2009 | |||||
Amin J. Khoury has been the Company’s Chairman of the Board since July 1987 when he co-founded the Company. Effective December 31, 2005, with Mr. Robert J. Khoury’s retirement, Mr. Amin J. Khoury was appointed Chief Executive Officer. Mr. Amin J. Khoury also served as the Company’s Chief Executive Officer until April 1, 1996. Since 1986, Mr. Khoury has been a director of Synthes, Inc., the world’s leading manufacturer and marketer of orthopedic trauma implants and a leading global manufacturer and marketer of cranial maxillofacial and spine implants. Mr. Khoury is the brother of Robert J. Khoury. |
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Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2)(3) | All Other Compensation ($) | Total ($) | |||||||||
(a) | (b) | (c) | (g) | (h) | |||||||||
Charles L. Chadwell(4) | — | — | — | — | |||||||||
Jim C. Cowart | 44,500 | 73,750 | — | 118,250 | |||||||||
Richard G. Hamermesh | 42,000 | 70,000 | — | 112,000 | |||||||||
David C. Hurley(8) | 42,000 | 70,000 | — | 112,000 | |||||||||
Robert J. Khoury | 30,000 | 30,000 | 1,150,828 | (5) | 1,210,828 | ||||||||
Wesley W. Marple, Jr.(6) | 23,500 | 16,250 | — | 39,750 | |||||||||
Brian H. Rowe(7) | 44,750 | 70,625 | — | 115,375 | |||||||||
Jonathan M. Schofield | 49,750 | 77,625 | — | 127,375 | |||||||||
Arthur E. Wegner(4) | — | — | — | — | |||||||||
(1) | Includes all cash retainers and meeting fees paid to our non-employee directors as described above. |
(2) | The amounts reported in the “Stock Awards” column reflect the dollar amount, without reduction for risk of forfeiture, recognized for financial reporting purposes for the fiscal year ended December 31, 2006 of awards of restricted stock, calculated in accordance with the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123R “Share Based Payment,” or SFAS 123R. The amount set forth may include expenses attributable to equity awards granted during and before 2006. Assumptions made in the calculation of these amounts are included in Note 11 to our audited financial statements for the fiscal year ended December 31, 2006 included in our annual report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2007. |
(3) | Each member of our Board of Directors as of March 31, 2006 received (i) an aggregate of 1,592 shares of restricted stock during 2006 which had a fair market value on the date of grant of $40,000 and (ii) an aggregate number of shares of our common stock with a fair market value on the date of grant equal to the sum of (a) 50% of the non-employee director retainer ($30,000), plus, (b) as further discussed above, 50% of any retainers arising from their participation as a member of our Audit, Compensation or Nominating and Corporate Governance Committees. |
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Non-Employee Directors | Stock Awards (#) | Stock Options (#) | |||||
Charles L. Chadwell | -0- | — | |||||
Jim C. Cowart | 26,448 | -0- | |||||
Richard G. Hamermesh | 26,281 | -0- | |||||
David C. Hurley | 11,500 | 10,000 | |||||
Robert J. Khoury | 1,299 | -0- | |||||
Wesley W. Marple, Jr. | 5,972 | -0- | |||||
Brian H. Rowe | 26,416 | -0- | |||||
Jonathan M. Schofield | 25,513 | -0- | |||||
Arthur E. Wegner | -0- | -0- | |||||
(4) | Messrs. Chadwell and Wegner were appointed as directors on January 29, 2007. They did not receive any compensation in 2006 or upon appointment to the Board. |
(5) | The amount reported for Mr. Robert J. Khoury for 2006 includes a severance payment of $792,500, paid in connection with his retirement; payments under a consulting agreement he entered into upon his retirement of $263,300; personal use of the Company aircraft of $51,273; and executive medical coverage of $43,755. The aggregate incremental cost for the use of the Company aircraft for personal travel, including travel to outside boards, is calculated by multiplying the hourly variable cost rate for the aircraft by the hours used. The hourly variable cost rate includes costs such as fuel, oil, parking/landing fees, crew expenses and catering. The terms of our executive medical plan are set forth below in our Compensation Discussion and Analysis. |
(6) | Professor Marple’s term as a member of the Company’s Board of Directors expired in July 2006. He was compensated for only a portion of calendar year 2006. |
(7) | Due to his death, Mr. Rowe’s service as a director terminated on February 22, 2007. |
(8) | Mr. Hurley resigned from the Board of Directors effective April 27, 2007. |
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Common Stock Beneficially Owned | |||||||
Number of Shares | Percent of Outstanding Shares(1) | ||||||
American Century Investment Management | 6,620,375 | (2) | 8.29 | % | |||
4500 Main Street, 9th Floor | |||||||
Kansas City, MO 64111 | |||||||
FMR Corp. | 5,322,012 | (3) | 6.66 | % | |||
82 Devonshire Street | |||||||
Boston, MA 02109 | |||||||
Amin J. Khoury+* | 454,866 | ** | |||||
Thomas P. McCaffrey+ | 204,836 | (4) | ** | ||||
Jim C. Cowart* | 145,481 | (5) | ** | ||||
Michael B. Baughan+ | 120,255 | (6) | ** | ||||
Jonathan M. Schofield* | 87,844 | (7) | ** | ||||
Richard G. Hamermesh* | 43,274 | (8) | ** | ||||
Werner Lieberherr+ | 26,491 | ** | |||||
David C. Hurley* | 22,993 | (9) | ** | ||||
Wayne Exton+ | 18,525 | ** | |||||
Robert A. Marchetti+ | 16,986 | (10) | ** | ||||
Robert J. Khoury* | 9,316 | (11) | ** | ||||
Arthur E. Wegner* | 5,491 | (12) | ** | ||||
Charles L. Chadwell* | 1,491 | (13) | |||||
All Directors and Executive Officers as a group (15 Persons) | 1,309,739 | 1.42 | % | ||||
+ | Named executive officer |
* | Director of the Company |
** | Less than 1 percent |
(1) | The number of shares of our common stock deemed outstanding includes: (i) 92,060,611shares of common stock outstanding as of April 24, 2007 and (ii) 183,500 shares of common stock subject to outstanding stock options which are currently exercisable by the named individual or group. |
(2) | Based on information in the Schedule 13G, as of February 13, 2007, filed on February 13, 2007 by American Century Investment Management reported sole voting and sole dispositive power over shares. The Company has not attempted to independently verify any of the foregoing information, which is based solely upon the information contained in the Schedule 13G. The percent of outstanding shares set forth above is based on the number of our shares outstanding as of that date. |
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(3) | Based on information in the Schedule 13G/A, as of February 14, 2007, filed on February 14, 2006 by FMR Corp., a parent holding company. FMR Corp. reported sole voting power with respect to 167,390 shares. FMR Corp. and Edward C. Johnson, Chairman of FMR Corp., reported sole dispositive power with respect to 5,107,522 shares. Fidelity Management & Research Company, referred to as Fidelity, an investment advisor and wholly owned subsidiary of FMR Corp., is the beneficial owner of 5,107,522 shares, as a result of acting as investment advisor to various investment companies. Edward C. Johnson and FMR Corp., through their control of Fidelity and the Funds, each have sole power to dispose of shares owned by the Funds. The power to vote the 5,107,522 shares resides with the Board of Trustees of the Funds. Pyramis Global Advisors Trust Company is the beneficial owner of 214,490 shares, as a result of serving as investment manager of institutional accounts. Edward C. Johnson and FMR Corp., through their control of Fidelity Management Trust Company, each has sole voting and dispositive power over the shares. The Company has not attempted to independently verify any of the foregoing information, which is based solely upon the information contained in the Schedule 13G/A. The percent of outstanding shares set forth above is based on the number of our shares outstanding as of that date. |
(4) | Includes 7,628 shares owned pursuant to the Company’s 401(k) Plan. |
(5) | Includes 25,125 shares owned pursuant to the Company’s Non-Employee Directors Deferred Stock Plan. |
(6) | Includes 75,000 shares issuable upon the exercise of stock options and 108 shares owned pursuant to the Company’s 401(k) Plan. |
(7) | Includes 24,190 shares owned pursuant to the Company’s Non-Employee Directors Deferred Stock Plan. |
(8) | Includes 24,920 shares owned pursuant to the Company’s Non-Employee Directors Deferred Stock Plan. |
(9) | Includes 10,139 shares owned pursuant to the Company’s Non-Employee Directors Deferred Stock Plan and 10,000 shares issuable upon the exercise of stock options. Mr. Hurley resigned from the Board of Directors effective April 27, 2007. |
(10) | Includes 313 shares owned pursuant to the Company’s 401(k) Plan. |
(11) | Includes 1,530 shares owned pursuant to the Company’s Non-Employee Directors Deferred Stock Plan and 1,525 shares owned pursuant to the Company’s 401(k) Plan. |
(12) | Includes 230 shares owned pursuant to the Company’s Non-Employee Directors Deferred Stock Plan. |
(13) | Includes 230 shares owned pursuant to the Company’s Non-Employee Directors Deferred Stock Plan. |
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• | Ensure a strong relationship between pay and performance, including both rewards for results that meet or exceed performance targets and consequences for results that are below performance targets; |
• | Align executive and shareholder interests through the provision of long-term incentives that link executive compensation to shareholder value creation; and |
• | Provide a total compensation opportunity that is competitive with the market for executive talent, thereby enabling us to attract, retain and motivate our executives. |
• | offering a broad line of innovative products and services in the industry; |
• | offering a broad range of engineering services, including design, integration, installation and certification services, and aircraft reconfiguration, along with passenger-to-freighter conversion services; |
• | pursuing the highest level of quality in every facet of our operations, from the factory floor to customer support; |
• | aggressively pursuing continuous improvement initiatives in all facets of our businesses, and in particular our manufacturing operations, to reduce cycle times, lower cost, improve quality and expand our margins; and |
• | pursuing a worldwide marketing and product support approach focused by airline and general aviation airframe manufacturers and encompassing our entire product line. |
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• | 30% – operating earnings; |
• | 30% – operating cash flow (generally defined as earnings before interest, taxes, depreciation and/or amortization, or EBITDA, plus or minus changes in working capital, less capital expenditures); |
• | 20% – operating margin; and |
• | 20% – bookings. |
13 |
• | Operating earnings of approximately $148 million, increased by 58% as compared to 2005 and was above our 2006 target; |
• | Operating cash flow of approximately $60 million, increased by $42 million as compared to 2005 and was above our 2006 target, adjusted for changes in foreign exchange; |
• | Operating margin of 13.1%, increased by 200 basis points as compared to 2005 and was above our 2006 target; and |
• | Bookings $1.7 billion, increased by 40% as compared to 2005 and was above our 2006 target. |
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• | Under the Medical Care Reimbursement Plan for Executives, which has been in effect since January 1, 1998, each of our named executive officers is reimbursed for medical care expenses that are not otherwise reimbursed by any plan or arrangement up to a maximum benefit of 10% of their base salary per year. |
• | We reimburse each of our named executive officers for reasonable costs of financial and estate planning. |
• | Certain named executive officers receive a monthly automobile allowance, as described below under the heading “Employment, Severance and Change of Control Agreements.” |
• | Messrs. Khoury, Baughan and McCaffrey are party to death benefit agreements under which their designated beneficiaries will receive death benefits of $3,000,000, $1,500,000 and $1,000,000, respectively, upon their death, whether during or following their termination from employment. With respect to Messrs. Khory and McCaffrey, we have funded, and with respect to Mr. Baughan, we intend to fund, these death benefit agreements with fully paid-up whole-term life insurance policies. |
• | Under our travel policy, we provide use of a Company-owned aircraft to our CEO and our former CEO to ensure their personal security. As set forth in the “All Other Compensation” column of the Director Compensation Table above and the Summary Compensation Table below, our CEO and former CEO are taxed on the incremental cost relating to their personal use of the aircraft. |
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• | Goodrich Corporation |
• | Precision Castparts Corporation |
• | Teleflex Inc. |
• | DRS Technologies, Inc. |
• | Aviall Inc. |
• | Teledyne Technologies, Inc. |
• | Moog Inc. |
• | Hexcel Corporation |
• | Curtiss-Wright Corporation |
• | Esterline Technologies Corporation |
• | AAR Corp. |
• | Triumph Group Inc. |
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• | Mr. Baughan’s contract will have a rolling three-year term so that the term extends through three years from any date as of which the term is being determined. Previously Mr. Baughan’s contract expired on December 31, 2007 and automatically renewed annually thereafter unless either we or Mr. Baughan provided 90 days’ prior written notice. |
• | Beginning in 2007, Mr. Baughan will receive an annual retirement compensation contribution to a rabbi trust established for his benefit in an amount equal to 50% of his average annual salary for the preceding three-year period. The retirement contributions will vest in full on April 26, 2012. Vesting of the accrued retirement contributions will accelerate upon the termination of Mr. Baughan’s employment due to his death, disability or by us without cause. Previously Mr. Baughan was not entitled to any retirement compensation contributions. |
• | Mr. Baughan’s named beneficiary will be entitled to receive a $1.5 million death benefit upon his death during or after his employment. We plan to fully fund this death benefit with a single payment whole life insurance policy. The terms of the death benefit agreement are substantially similar to the arrangements in place with Messrs. Khoury and McCaffrey. |
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Respectfully submitted, | |||
The Compensation Committee | |||
Charles L. Chadwell | |||
Jonathan M. Schofield |
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Name and Principal Position | Year | Salary ($) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) (3) | All Other Compensation ($) | Total ($) | |||||||||||||||
(a) | (b) | (c) | (e) | (f) | (g) | (i) | (j) | |||||||||||||||
Amin J. Khoury Chairman and Chief Executive Officer | 2006 | $ | 904,000 | $ | 1,019,504 | (4) | — | $ | 994,400 | $ | 2,648,301 | (5) | $ | 5,566,205 | (5) | |||||||
Michael B. Baughan President and Chief Operating Officer (6) | 2006 | $ | 440,000 | $ | 26,593 | — | (6) | $ | 330,000 | $ | 23,723 | (6) | $ | 820,316 | ||||||||
Thomas P. McCaffrey Senior Vice President and Chief Financial Officer | 2006 | $ | 430,000 | $ | 285,300 | (4) | — | $ | 430,000 | $ | 391,706 | (7) | $ | 1,537,006 | ||||||||
Wayne Exton Vice President and General Manager - Business Jet Segment | 2006 | $ | 265,036 | $ | 14,198 | — | $ | 110,000 | $ | 70,105 | (8) | $ | 459,339 | |||||||||
Werner Lieberherr Vice President and General Manager - Commercial Aircraft Products Group | 2006 | $ | 178,291 | $ | 56,032 | — | $ | 140,000 | $ | 44,546 | (9) | $ | 418,869 | |||||||||
Robert A. Marchetti Vice President and General Manager - Distribution Segment | 2006 | $ | 291,497 | $ | 27,196 | — | $ | 300,000 | $ | 28,097 | (10) | $ | 646,790 | |||||||||
(1) | All annual cash bonuses paid to our named executive officers are reflected in the “Non-Equity Incentive Plan Compensation” column of this table. |
(2) | The amounts reported in the “Stock Awards” column reflect the dollar amount, without reduction for risk of forfeiture, recognized for financial reporting purposes for the fiscal year ended December 31, 2006 of awards of restricted stock, calculated in accordance with the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123R “Share Based Payment”, or SFAS 123R. The amount set forth may include expenses attributable to equity awards granted during and before 2006. Assumptions made in the calculation of these amounts are included in Note 11 to our audited financial statements for the fiscal year ended December 31, 2006 included in our annual report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2007. |
(3) | The amounts shown represent the annual cash incentive payments received by our named executive officers under our MIP. These cash awards were earned in 2006 and were paid on March 6, 2007. The MIP is described in detail above in our Compensation Discussion and Analysis. |
(4) | As more fully described above in our Compensation Discussion and Analysis, in order to assist in the retention of and to further incentivize our CEO and CFO and in lieu of the change of control benefits which were eliminated from their contracts with us, on July 31, 2006, we granted our CEO an award of 387,900 shares of restricted stock, and we granted our CFO 104,200 shares of restricted stock. The expenses included in the "Stock Awards" column with respect to these special awards are $964,870 for Mr. Khoury and $259,312 for Mr. McCaffrey. |
(5) | With respect to Mr. Khoury, the amount reported for 2006 as “All Other Compensation” includes $1,356,000 for our 2006 annual retirement contribution to his grantor trust and an $828,750 contribution to his grantor trust for a catch up adjustment related to prior periods; $284,376 representing the aggregate incremental cost to us for his personal use of the Company aircraft; $126,185 for estate planning; $7,500 for Company contributions to our 401(k) Plan; $5,113 representing payments under our executive medical plan; and an additional amount relating to an automobile and insurance allowance. The aggregate incremental cost for the use of the Company aircraft for personal travel is calculated by multiplying the hourly variable cost rate for the aircraft by the hours used. The hourly variable cost rate includes costs such as fuel, oil, parking/landing fees, crew expenses and catering. |
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(6) | With respect to Mr. Baughan, the amount reported for 2006 as “All Other Compensation” includes $7,500 for contributions to the Company’s 401(k) Plan; $3,115 representing payments under executive medical coverage; and an additional amount relating to an automobile allowance. The amount reported for 2006 as “Option Awards” excludes 75,000 stock options granted on December 27, 2005 to Mr. Baughan in connection with his promotion to President and Chief Operating Officer effective as of December 31, 2005. The value of these options, determined in accordance with the provisions of SFAS 123R was $625,050. As more fully described above in our Compensation Discussion and Analysis, the vesting of these and all other outstanding stock options was accelerated on December 31, 2005. As a result, no expenses were incurred during 2006 under SFAS 123. |
(7) | With respect to Mr. McCaffrey, the amount reported for 2006 as “All Other Compensation” includes $355,278 for our annual retirement contribution to his grantor trust; $7,500 for contributions to the Company’s 401(k) Plan; $11,289 representing payments under our executive medical plan; and an additional amount relating to an automobile allowance and estate planning. |
(8) | With respect to Mr. Exton, the amount reported for 2006 as “All Other Compensation” includes $55,474 for reimbursement of relocation expenses; $6,000 for contributions to the Company’s 401(k) Plan; and an additional amount relating to an automobile allowance. |
(9) | With respect to Mr. Lieberherr, who joined the Company on July 5, 2006, the amount reported for 2006 as “All Other Compensation” includes $32,747 for reimbursement of relocation expenses; $1,539 for contributions to the Company’s 401(k) Plan; $3,660 for payment of COBRA benefits owed to his prior employer; and an additional amount relating to an automobile allowance. |
(10) | With respect to Mr. Marchetti, the amount reported for 2006 as “All Other Compensation” includes $7,500 for contributions to the Company’s 401(k) Plan; $7,489 representing payments under our executive medical plan; and an additional amount relating to an automobile allowance. |
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Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | ||||||
Name | Grant Date | Threshold ($)(2) | Target ($) | Maximum ($) | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($) (4) |
(a) | (b) | (c) | (d) | (e) | (i) | (k) |
Amin J. Khoury | 1/1/06 7/31/06 11/15/06 | $0 — — | $904,000 — — | $1,084,800 — — | — 387,878(5) 66,988(5) | — $9,599,981 $1,808,006 |
Michael B. Baughan | 1/1/06 11/15/06 | $0 — | $440,000 — | $528,000 — | — 32,605(6)(8) | — $880,009(6) |
Thomas P. McCaffrey | 1/1/06 7/31/06 11/15/06 | $0 — — | $430,000 — — | $516,000 — — | — 104,242(7) 31,864(7) | — $2,579,990 $860,009 |
Werner Lieberherr | 1/1/06 7/5/06 11/15/06 | $0 — — | $320,000 — — | $384,000 — — | — 18,340(8) 8,151(8) | — $419,986 $219,995 |
Robert A. Marchetti | 1/1/06 11/15/06 | $0 — | $291,497 — | $349,797 — | — 16,673(9) | — $450,004 |
Wayne Exton | 1/1/06 11/15/06 | $0 — | $250,000 — | $300,000 — | — 18,525(8) | — $499,990 |
(1) | The amounts shown represent the range of annual cash incentive opportunities for each named executive officer under our 2006 MIP. The MIP is described in detail above in our Compensation Discussion and Analysis. |
(2) | Since the amount of Non-Equity Incentive Plan awards are determined on the basis of a named executive officer’s contributions to the success of a segment or the Company, as applicable, no specific threshold can be determined. |
(3) | The restricted stock awards made on November 15, 2006 were approved by our Compensation Committee at its meeting on November 1, 2006. This process is consistent with our policy of having the dollar value of annual grants of restricted stock to our employees reviewed and approved by our Compensation Committee at a meeting in the third or fourth quarter and having the grants made effective as of November 15th of each year (or if November 15th is not a business day, the first business day thereafter). The number of shares of restricted stock granted is equal to the dollar value approved by our Compensation Committee divided by the closing price of our common stock on the date of grant. All grants of restricted stock are made pursuant to our 2005 Long-Term Incentive Plan. |
(4) | The amounts shown represent the SFAS 123R fair value determined as of the date of grant. For more information about our adoption of SFAS 123R and how we value stock-based awards (including assumptions made in such valuation), refer to Note 11 to our audited financial statements for the fiscal year ended December 31, 2006 included in our annual report on Form 10-K filed with the Securities and Exchange Commission on February 16, 2007. |
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(5) | Twenty-five percent of the shares of restricted stock vests on each of the first, second, third and fourth anniversaries of the date of grant provided that Mr. Khoury is employed on the applicable vesting date. Upon Mr. Khoury’s termination due to death or disability or a termination by us for any reason, all unvested shares of restricted stock will vest immediately. In addition, upon a change of control of our Company prior to vesting, all unvested shares of restricted stock will immediately vest in full. |
(6) | On December 27, 2005 Mr. Baughan was granted 75,000 stock options in connection with his promotion to President and Chief Operating Officer effective as of December 31, 2005. The value of these stock options, determined in accordance with the provisions of SFAS 123R was $625,050. As more fully described above in our Compensation Discussion and Analysis, the vesting of these and other outstanding stock options was accelerated on December 31, 2005. |
(7) | Twenty-five percent of the shares of restricted stock vests on each of the first, second, third and fourth anniversaries of the date of grant provided that Mr. McCaffrey is employed on the applicable vesting date. Upon Mr. McCaffrey’s termination due to death or disability, a termination by us without cause or Mr. McCaffrey’s resignation for good reason (each as described below under the heading “Employment, Severance and Change of Control Agreements”) all unvested shares of restricted stock will vest immediately. In addition, upon a change of control of our Company prior to vesting, all unvested shares of restricted stock will immediately vest in full. |
(8) | Twenty-five percent of the shares of restricted stock vests on each of the first, second, third and fourth anniversaries of the date of grant. If the named executive officer’s employment terminates for any reason other than death or disability prior to the applicable vesting date, all unvested shares will be cancelled immediately. Upon a named executive officer’s termination due to death or disability, all unvested shares of restricted stock will vest immediately. In addition, upon a change of control of our Company prior to vesting, all unvested shares of restricted stock will immediately vest in full. |
(9) | Fifty percent of the shares of restricted stock vests on each of the first and second anniversaries of the date of grant. If Mr. Marchetti’s employment terminates for any reason other than death or disability prior to the applicable vesting date, all unvested shares will be cancelled immediately. Upon Mr. Marchetti’s termination due to death or disability, all unvested shares of restricted stock will vest immediately. In addition, upon a change of control of our Company prior to vesting, all unvested shares of restricted stock will immediately vest in full. |
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Option Awards | Stock Awards | ||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($) |
(a) | (b) | (e) | (f) | (g) | (h) |
Amin J. Khoury | — | — | — | 454,866 | $11,680,959 |
Michael B. Baughan (2) | 75,000 | $22.18 | 12/27/15 | 32,605 | 837,296 |
Thomas P. McCaffrey | — | — | — | 136,106 | 3,495,202 |
Wayne Exton | 20,000 | 17.98 | 11/15/15 | 18,525 | 475,722 |
Werner Lieberherr | — | — | — | 26,491 | 680,289 |
Robert A. Marchetti | 2,612 20,000 | 5.59 10.42 | 2/2/14 11/24/14 | 16,673 | 428,163 |
(1) | For Messrs. Khoury, Baughan, McCaffrey, Exton and Lieberherr, 25% of the shares of restricted stock will vest on each of the first, second, third and fourth anniversaries of the date of grant provided that the executive is employed on the applicable vesting date. For Mr. Marchetti, 50% of the shares of restricted stock vest on each of the first and second anniversaries of the date of grant provided that he is employed on the applicable vesting date. The vesting provisions upon a termination of employment or a change of control are set forth in footnotes 5, 7, 8 and 9 to the Grants of Plan-Based Awards Table above. |
(2) | On December 27, 2005 Mr. Baughan was granted 75,000 stock options in connection with his promotion to President and Chief Operating Officer effective as of December 31, 2005. The value of these stock options, determined in accordance with the provisions of SFAS 123R was $625,050. As more fully described above in our Compensation Discussion and Analysis, the vesting of these and all other outstanding stock options accelerated on December 31, 2005. |
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Option Awards | Stock Awards | |||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise | Number of Shares Acquired on Vesting | Value Realized on Vesting |
(a) | (b) (#) | (c) ($) | (d) (#) | (e) ($) |
Amin J. Khoury | 518,333 | $9,630,789 | — | — |
Michael B. Baughan | 213,750 | $3,999,289 | — | — |
Thomas P. McCaffrey | 258,333 | $4,600,859 | — | — |
Wayne Exton | — | — | — | — |
Werner Lieberherr | — | — | — | — |
Robert A. Marchetti | 26,554 | $560,253 | — | — |
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• | Defined Contribution Plans. Each of the named executive officers’ (other than Messrs. Leiberherr and Exton) account balances under the 401(k) Plan, including any Company contributions, were fully vested as of December 31, 2006. |
• | Vested Equity Awards. Once vested, options and restricted stock are not forfeitable. The number and fair market value of all options and shares of restricted stock that were vested as of December 31, 2006 are set forth above in the Outstanding Equity Awards at Fiscal Year End Table. |
• | Life Insurance. Each of the named executive officers is entitled to receive Company paid group term life insurance of one times his or her base salary. This plan is applicable to all of our employees on a nondiscriminatory basis. |
• | Death Benefit Agreements. We have entered into death benefit agreements with each of Messrs. Khoury, Baughan and McCaffrey pursuant to which their designated beneficiary will receive a death benefit of $3,000,000, $1,500,000 and $1,000,000, respectively upon their death at anytime during employment or following the termination of their employment. With respect to Messrs. Khoury and McCaffrey, we have funded and with respect to Mr. Baughan, intend to fund these amounts with a single payment whole life insurance policy. |
• | Executive Medical Benefits. Pursuant to his employment agreement, Mr. Khoury and his spouse are entitled to receive medical benefits for the remainder of their lives regardless of the reason for their termination of employment. |
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• | Consulting Arrangement. Pursuant to his employment agreement, Mr. Khoury has agreed to provide consulting services to us for a period of five years following his termination of employment for any reason. In consideration of these consulting services, we have agreed to pay Mr. Khoury certain fees and benefits, including continued vesting of all outstanding equity awards as detailed above under the heading “Employment, Severance and Change of Control Agreements.” |
Name | Compensation Element | Voluntary Resignation | Incapacity | Death | Involuntary Termination | Change of Control | ||
Involuntary Termination Upon the Closing Date | Involuntary Termination (Assuming Payments are Subject to Section 280G) | Remain Employed Beyond 280G Period | ||||||
Amin J. Khoury | Severance Payment | $904,000 | $0 | $0 | $904,000 | $904,000 | $904,000 | $0 |
Lump-sum of Salary for Contract Term | $0 | $5,424,000 | $2,712,000 | $2,712,000 | $0 | $2,712,000 | $0 | |
Accrued Cash Incentive Compensation | $0 | $994,000 | $994,000 | $994,000 | $994,000 | $994,000 | $0 | |
Retirement Contribution | $0 | $0 | $0 | $5,148,680 | $0 | $5,148,680 | $0 | |
Total Cash Payments | $904,000 | $6,418,000 | $3,706,000 | $9,758,680 | $1,898,000 | $9,758,680 | $0 | |
Acceleration of Unvested Equity Awards | $0 | $11,680,959 | $11,680,959 | $11,680,959 | $11,680,959 | $11,680,959 | $11,680,959 | |
Tax Gross-up | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
TOTAL | $904,000 | $18,098,959 | $15,386,959 | $21,439,639 | $13,578,959 | $21,439,639 | $11,680,959 |
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Name | Compensation Element | Voluntary Resignation /Termination for Cause | Incapacity | Death | Termination Without Cause | Change of Control | |
Resignation/ Remain Employed | Termination Without Cause | ||||||
Michael B. Baughan | Lump-sum of Salary for Contract Term | $0 | $1,320,000 | $1,320,000 | $1,320,000 | $0 | $1,320,000 |
Accrued Cash Incentive Compensation | $0 | $330,000 | $330,000 | $330,000 | $0 | $330,000 | |
Benefit Continuation | $0 | $47,446 | $47,446 | $47,446 | $0 | $47,446 | |
Total Cash Payments | $0 | $1,697,446 | $1,697,446 | $1,697,446 | $0 | $1,697,446 | |
Acceleration of Unvested Equity Awards | $0 | $837,296 | $837,296 | $837,296 | $837,296 | $837,296 | |
Tax Gross-up | $0 | $0 | $0 | $0 | $0 | $180,815 | |
TOTAL | $0 | $2,534,742 | $2,534,742 | $2,534,742 | $837,296 | $2,715,557 |
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Name | Compensation Element | Incapacity | Death | Retirement | Involuntary Termination | Change of Control | ||||
Resignation With Good Reason | Without Cause | With Cause | Involuntary Termination Upon the Closing Date | Involuntary Termination (Assuming Payments are Subject to Section 280G) | Remain Employed Beyond 280G Period | |||||
Thomas P. McCaffrey | Severance Payment | $0 | $0 | $430,000 | $860,000 | $860,000 | $0 | $860,000 | $860,000 | $0 |
Lump Sum of Salary for Contract Term | $1,290,000 | $1,290,000 | $0 | $1,290,000 | $1,290,000 | $0 | $0 | $1,290,000 | $0 | |
Accrued Cash Incentive Compensation | $430,000 | $430,000 | $0 | $430,000 | $430,000 | $0 | $430,000 | $430,000 | $0 | |
Benefit Continuation | $46,400 | $46,400 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | |
Retirement Contribution | $0 | $0 | $0 | $873,242 | $873,242 | $0 | $0 | $873,242 | $0 | |
Total Cash Payments | $1,766,400 | $1,766,400 | $430,000 | $3,453,242 | $3,453,242 | $0 | $1,290,000 | $3,453,242 | $0 | |
Acceleration of Unvested Equity Awards | $3,495,202 | $3,495,202 | $0 | $3,495,202 | $3,495,202 | $0 | $3,495,202 | $3,495,202 | $3,495,202 | |
Tax Gross-up | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $464,206 | $0 | |
TOTAL | $5,261,602 | $5,261,602 | $430,000 | $6,948,444 | $6,948,444 | $0 | $4,785,202 | $7,412,650 | $3,495,202 |
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Name | Compensation Element | Voluntary Resignation /Termination for Cause | Incapacity | Death | Failure to Renew Agreement for at Least One Year | Change of Control | |
Termination Without Cause | Remain Employed | ||||||
Wayne Exton | Severance Payment | $0 | $0 | $0 | $250,000 | $250,000 | $0 |
Lump Sum of Salary for Contract Term | $0 | $82,192 | $82,192 | $0 | $82,192 | $0 | |
Accrued Cash Incentive Compensation | $0 | $110,000 | $110,000 | $110,000 | $110,000 | $0 | |
Benefits for Contract Term | $0 | $2,465 | $0 | $6,805 | $6,805 | $0 | |
Total Cash Payments | $0 | $194,657 | $192,192 | $366,805 | $448,997 | $0 | |
Accelerated of Unvested Equity Awards | $0 | $475,722 | $475,722 | $0 | $475,722 | $475,722 | |
TOTAL | $0 | $670,379 | $667,914 | $366,805 | $924,719 | $475,722 |
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Name | Compensation Element | Voluntary Resignation /Termination for Cause | Incapacity | Death | Failure to Renew Agreement for at Least One Year | Change of Control | |
Termination Without Cause | Remain Employed | ||||||
Werner Lieberherr | Severance Payment | $0 | $0 | $0 | $320,000 | $320,000 | $0 |
Lump Sum of Salary for Contract Term | $0 | $162,192 | $162,192 | $0 | $162,192 | $0 | |
Accrued Cash Incentive Compensation | $0 | $140,000 | $140,000 | $140,000 | $140,000 | $0 | |
Benefits for Contract Term | $0 | $12,346 | $0 | $3,660 | $12,346 | $0 | |
Total Cash Payments | $0 | $314,538 | $302,192 | $463,660 | $634,538 | $0 | |
Acceleration of Unvested Equity Awards | $0 | $680,289 | $680,289 | $0 | $680,289 | $680,289 | |
TOTAL | $0 | $994,827 | $982,481 | $463,660 | $1,314,827 | $680,289 |
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Name | Compensation Element | Voluntary Resignation /Termination for Cause | Incapacity | Death | Failure to Renew Agreement for at Least One Year | Change of Control | |
Termination Without Cause | Remain Employed | ||||||
Robert Marchetti | Severance Payment | $0 | $0 | $0 | $300,000 | $300,000 | $0 |
Lump Sum of Salary for Contract Term | $0 | $46,849 | $46,849 | $0 | $46,849 | $0 | |
Accrued Cash Incentive Compensation | $0 | $300,000 | $300,000 | $300,000 | $300,000 | $0 | |
Benefits for Contract Term | $0 | $2,291 | $0 | $14,989 | $4,338 | $0 | |
Total Cash Payments | $0 | $349,190 | $346,849 | $614,989 | $651,187 | $0 | |
Acceleration of Unvested Equity Awards | $0 | $428,163 | $428,163 | $0 | $428,163 | $428,163 | |
TOTAL | $0 | $777,353 | $775,012 | $614,989 | $1,079,350 | $428,163 |
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Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | (c) Number of Securities Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)(1)) | |||||||
Equity Compensation Plans approved by security holders(2): | 499,987 | $ | 16.22 | 2,174,723 | ||||||
Equity Compensation Plans not approved by security holders(3): | 667,334 | $ | 11.52 | 0 | ||||||
Total | 1,167,321 | $ | 13.53 | 2,174,723 | ||||||
(1) | Numbers in this column also include rights granted pursuant to the 1994 Employee Stock Purchase Plan and rights under the Non-Employee Directors Deferred Stock Plan. |
(2) | Options were granted pursuant to the following plans: the 2005 Long-Term Incentive Plan, the Amended and Restated 1989 Stock Option Plan, the 1991 Directors’ Stock Option Plan, the 2001 Stock Option Plan and the 2001 Directors’ Stock Option Plan. The Company will not make any further awards under the 2001 Stock Option Plan, the 2001 Directors’ Stock Option Plan, the Amended and Restated 1989 Stock Option Plan or the 1991 Directors’ Stock Option Plan. |
(3) | Options were granted pursuant to the following plans: United Kingdom 1992 Employee Share Option Scheme and the 1996 Stock Option Plan. The Company will not make any further awards under these plans. |
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2006 | 2005 | ||||||
Audit Fees | $ | 2,487,390 | $ | 2,248,280 | |||
Audit Related Fees | 327,419 | 35,508 | |||||
Tax Fees | 553,416 | 411,331 | |||||
All Other Fees | — | — | |||||
Total | $ | 3,368,225 | $ | 2,695,119 |
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