UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________
FORM
10-K / A
(Mark
One)
T
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ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the fiscal year ended
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December
31, 2007
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OR
£
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TRANSITION REPORT PURSUANT TO
SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the transition period from
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to
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Commission
file number
0-16079
AIR
METHODS CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
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84-0915893
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
employer identification no.)
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7301
South Peoria, Englewood, Colorado 80112
(Address
of principal executive offices and zip code)
303-792-7400
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Not
Applicable
Securities
registered pursuant to Section 12(g) of the Act:
COMMON
STOCK, $.06 PAR VALUE PER SHARE (the "Common Stock")
(Title of
Class)
Indicate
by check mark
if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes
£
No
T
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
£
No
T
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes
T
No
£
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
£
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or smaller reporting company. See
definition of “accelerated filer,” “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large
accelerated Filer
£
|
Accelerated
Filer
T
|
Non-accelerated
Filer
£
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
£
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) Yes
£
No
T
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter: $369,880,000
The
number of outstanding shares of Common Stock as of February 29, 2008, was
12,151,879
.
TABLE OF CONTENTS
To
Form 10-K / A
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Page
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PART
III
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1
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4
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18
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21
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21
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PART
IV
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IV-1
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IV-2
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PART
III
ITEM 10
. DIRECTORS, EXECUTIVE OFFICERS, AND
CORPORATE GOVERNANCE
Summary
information concerning our directors and executive officers is set forth
below:
Name
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Age
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Position
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Class/Year
Term as Director
Expires
(1)
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George
W. Belsey
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68
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Chairman
of the Board
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I/2010
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Ralph
J. Bernstein
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50
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Director
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III/2009
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Samuel
H. Gray
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70
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Director
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II/2008
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C.
David Kikumoto
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58
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Director
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I/2010
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MG
Carl H. McNair, Jr. (Ret.)
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73
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Director
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I/2010
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Lowell
D. Miller, Ph.D.
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74
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Director
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III/2009
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Morad
Tahbaz
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52
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Director
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II/2008
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Paul
H. Tate
(2)
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56
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Director
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III/2009
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Aaron
D. Todd
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46
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Director
and Chief Executive Officer
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II/2008
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David
L. Dolstein
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59
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Senior
Vice President, Community-Based Services
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N/A
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Michael
D. Allen
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45
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Senior
Vice President, Hospital-Based Services
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N/A
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Trent
J. Carman
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47
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Chief
Financial Officer, Secretary and Treasurer
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N/A
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Sharon
J. Keck
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41
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Chief
Accounting Officer and Controller
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N/A
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__________________
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(1)
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Refers
to the calendar year in which the annual meeting of stockholders is
expected to be held and at which the term of the pertinent director class
shall expire.
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(2)
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Effective
March 31, 2008, Paul H. Tate resigned his position from the Board of
Directors and accepted an appointment to the position of Chief Operating
Officer of Air Methods Corporation. On that date, the number of
directors was reduced by one to a total of
eight.
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Mr. George W. Belsey
has
served as Chairman of the Board of Directors since April 1994, having been
appointed a director in December 1992. Mr. Belsey was appointed Chief Executive
Officer of the Company effective June 1, 1994, and served in that capacity until
July 2003. Mr. Belsey previously served in executive and administrative
positions at the American Hospital Association and at a number of hospitals. He
received his Bachelor’s Degree in Economics from DePauw University in
Greencastle, Indiana, and holds a Master’s Degree in Business Administration
from George Washington University, Washington, D.C.
Mr. Ralph J. Bernstein
became
a director in February 1994. He is a co-founder and General Partner of Americas
Partners, an investment firm. He holds a Bachelor of Arts Degree in Economics
from the University of California at Davis. Mr. Bernstein currently serves on
the board of Empire Resorts, Inc.
Mr. Samuel H. Gray
became a
director in March 1991. From 1989 to 2000, he was Chief Executive Officer of The
Morris Consulting Group, Inc., a health care industry consulting firm, and
between 2000 and 2006 served as a Vice President of the Mattson Jack Group,
Inc., also a health care consulting firm. Currently, he is an independent health
care consultant. In 1959 Mr. Gray received a Bachelor of Science Degree from the
University of Florida.
Mr. C. David Kikumoto
became a
director in June 2004. Mr. Kikumoto is the cofounder and Chief Executive Officer
of Denver Management Advisors. From 1999 to 2000, Mr. Kikumoto was President and
Vice Chairman at Anthem Blue Cross and Blue Shield, Colorado and Nevada, and
from 1987 to 1999, he served in several roles, including CEO of Blue Cross and
Blue Shield of Colorado, Nevada and New Mexico. He received his Bachelor of
Science degree in accounting from the University of Utah, pursued graduate
studies at the University of Utah, and graduated from the Executive Development
Program at the University of Chicago.
Major General Carl H. McNair, Jr.,
USA (Ret.)
was appointed to the board of directors in March 1996. In
April 1999, General McNair retired from his position as Corporate Vice President
and President, Enterprise Management, for DynCorp, a technical and professional
services company headquartered in Reston, Virginia, where he was responsible for
the company’s core businesses in facility management, marine operations, test
and evaluation, administration and security, and biotechnology and health
services. He currently serves as Special Assistant, Government Relations and
Legislative Affairs, in the corporate offices of Computer Sciences Corporation.
General McNair has a Bachelor of Science Degree in Engineering from the U.S.
Military Academy at West Point, a Bachelor’s Degree and Master’s Degree in
Aerospace Engineering from Georgia Institute of Technology, and a Master of
Science Degree in Public Administration from Shippensburg
University.
Dr. Lowell D. Miller
was named
a director in June 1990. Since 1989, Dr. Miller has been involved with various
scientific endeavors including a pharmaceutical research and development
consulting business and as a guest lecturer at the university level. In
addition, he has led or been involved with many fund-raising activities for
educational purposes. He is a long-term member of the American Chemical Society
and the American Society of Toxicology and is a registered Clinical Chemist. The
University of Missouri awarded Dr. Miller a Bachelor of Science Degree in 1957
as well as a Master’s Degree in Biochemistry in 1958 and a Biochemistry
Doctorate Degree in 1960.
Mr. Morad Tahbaz
was elected
to the board of directors in February 1994. He is a co-founder and General
Partner of Americas Partners, an investment firm. Additionally, Mr. Tahbaz is
the founder and a partner of M.T. Capital, L.L.C., an investment company for
real estate and private equity transactions. Mr. Tahbaz received his Bachelor’s
Degree in Philosophy and Fine Arts from Colgate University and attended the
Institute for Architecture and Urban Studies in New York City. He holds a
Master’s Degree in Business Administration from Columbia University Graduate
School of Business.
Mr. Paul H. Tate
was elected
to the board of directors in September 2003. On March 31, 2008, he resigned his
position on the board of directors and was appointed as the Chief Operating
Officer of Air Methods Corporation. Previously, Mr. Tate was the Executive Vice
President and Chief Financial Officer of Frontier Airlines. Prior to joining
Frontier in October 2001, he was Executive Vice President and Chief Financial
Officer for Colgan Air, Inc., a U.S. Airways Express carrier. Mr. Tate served as
Senior Vice President-Finance and Chief Financial Officer of Atlantic Coast
Airlines Holdings, Inc. from 1997 to 2000, and has served in financial officer
positions with Midway Airlines and Reno Air, Inc. Mr. Tate, a certified public
accountant, received his undergraduate degree in economics and his Master’s
Degree in Business Administration from Northwestern University in 1973 and 1975,
respectively.
Mr. Aaron D. Todd
became a
director in June 2002 and Chief Executive Officer in July 2003. He joined the
Company as Chief Financial Officer in July of 1995 and was appointed Secretary
and Treasurer during that same year. Mr. Todd holds a Bachelor of Science Degree
in Accounting from Brigham Young University.
Mr. David L. Dolstein
joined
the Company with the July 1997 acquisition of Mercy Air Service, Inc. He serves
as Senior Vice President, Community-Based Services and as President of Mercy Air
Service, a continuation of his responsibilities preceding the acquisition. Mr.
Dolstein received a Bachelor of Science degree in 1974 from Central Missouri
State University with postgraduate studies in industrial safety.
Mr. Michael D. Allen
was named
Senior Vice President of Hospital-Based Services in January 2006. Since 1992,
Mr. Allen has served the Company in several other positions including line
pilot, safety representative, aviation site manager, training captain/check
airman and operations manager. Prior to joining the Company, Mr. Allen was a
commercial pilot for two years and served as a pilot in the US Army for five
years. Mr. Allen graduated from Portland State University with a Bachelor of
Science in Mathematics.
Mr. Trent J.
Carman
joined the Company in
April 2003 and is the Chief Financial Officer, Secretary and Treasurer. Prior to
joining the Company, Mr. Carman served as Chief Financial Officer of StorNet,
Inc. from January 2000 until April 2003, and served in various capacities
including Senior Vice President and Chief Financial Officer for United Artists
Theatre Circuit, Inc., from June 1992 until January 2000. Mr. Carman received
his Bachelor of Science Degree in Accounting from Utah State University and
holds a Master’s Degree in Business Administration-Finance from Indiana
University.
Ms. Sharon J. Keck
joined the
Company as Accounting Manager in October 1993 and was named Controller in July
of 1995. She assumed the additional position of Chief Accounting Officer in
January 2002. Ms. Keck holds a Bachelor of Science Degree in Accounting from Bob
Jones University.
Audit
Committee
The Audit
Committee currently consists of Messrs. McNair (Chairman), Kikumoto and Gray.
Paul Tate served on the Audit Committee during fiscal year 2007 and until March
31, 2008, when he resigned his position on the Board of Directors. Samuel H.
Gray was then appointed to Mr. Tate’s vacated position on the Audit Committee.
The Board of Directors has determined that all members of the Audit Committee
are “independent” within the meaning of the listing standards of the NASDAQ
Stock Market, Inc. and the Securities and Exchange Commission rules governing
audit committees. In addition, the Board of Directors determined that both Mr.
Tate and Mr. Kikumoto meet the criteria of an “audit committee financial expert”
as defined under the applicable SEC rules.
Code
of Ethics
We have
adopted a Code of Ethics for directors, officers, and employees. This Code of
Ethics is intended to promote honest and ethical conduct, compliance with
applicable laws, full and accurate reporting, and prompt internal reporting of
violations of the code, as well as other matters. We will provide a copy of our
Code of Ethics to any person without charge, upon written request to: Secretary,
Air Methods Corporation, 7301 S. Peoria, Englewood, Colorado 80112. The Code of
Ethics is also available on our corporate website, which is
www.airmethods.com
.
The contents of our website are not incorporated by reference into this document
for any purpose.
Section
16(a) Beneficial Ownership Reporting Compliance
Based on
our review of the copies of reports filed and upon written representations, we
believe that during 2007, executive officers, directors and ten percent
stockholders of the Company were in compliance with their filing requirements
under Section 16(a) of the Exchange Act of 1934, as amended, except for the
following:
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1.
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Forms
4, related to option grants to non-employee directors, were filed late due
to a delay in notification of the administrative staff responsible for
preparing the forms. The filings by Messrs. Bernstein, Tahbaz, Gray,
McNair, Miller, Tate and Kikumoto reported a January 1, 2007, grant to
each director of 7,500 shares of the Company’s common
stock.
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2.
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A
Form 4 related to a sale of stock by Mr. Morad Tahbaz was filed one day
late due to a delay of notification by the broker effecting the
transaction.
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Board
Nominees
There
have been no material changes to the procedures by which stockholders may
recommend nominees to the Board of Directors.
ITEM 11
. EXECUTIVE COMPENSATION
Compensation
Discussion and Analysis
Objectives
Our
compensation programs are intended to provide a link between increasing the
long-term value of stockholder investment in the Company and the compensation
earned by our executive officers. The objectives of our compensation programs
are to:
·
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Attract
and retain executives capable of leading us to meet our business
objectives;
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·
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Adequately
compensate our executive officers for achieving important near-term
objectives;
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·
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Align
the interests of executive officers and stockholders through the use of
equity and other long-term incentives;
and
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·
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Reward
executives for achieving sustainable increases in the value of
stockholders’ investments.
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Business
Strategy
Our
business strategy is to build the long-term value of stockholder investment in
the Company by achieving the following shorter term objectives:
·
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Growth
of our community-based services
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·
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Addition
and retention of hospital-based service
contracts
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·
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Growth
of our Products Division
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·
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Securing
necessary capital and financing to fund business
expansion
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·
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Pursuit
of geographic and business line expansion, where
appropriate
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·
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Achievement
of earnings per share goals
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·
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Achievement
of divisional earnings goals
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Elements
of Executive Compensation
Our
compensation structure consists of two tiers of remuneration, as
follows:
·
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The
first tier consists of competitive base pay for executive officers, plus a
competitive suite of retirement, health, and welfare benefits. Our
executives enjoy the same retirement, health and welfare package as all
our exempt employees, except that we also provide additional disability
income protection insurance coverage to our executives. Our base pay and
benefits are designed to attract and retain world-class executives and to
be sufficiently robust to sustain them during times when incentive
compensation is low.
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·
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The
second tier consists of a short-term (annual) incentive plan, which is
linked to individual and Company performance on a year by year basis. It
also consists of the 2006 Equity Compensation Plan, which allows for
grants of incentive stock options, non-statutory stock options, shares of
restricted stock, and stock appreciation rights. This plan is designed to
reward executive officers for increasing the value of stockholders’
investment.
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Reasons
for Paying Each Element of Compensation
The
reasons for paying each element of compensation are as follows:
·
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Salary
and benefits are paid for ongoing performance throughout the
year.
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·
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The
annual bonus component of executive compensation is in place to encourage
and reward the achievement of the various components of the Business
Strategy referenced above. The annual bonus rewards the achievement of
short-term objectives which should eventually translate into a sustainable
increase in stock price.
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·
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The
long-term incentive compensation currently consists of options and
time-vested restricted stock. Our long term incentive compensation is
designed to reward executives if they are successful in increasing the
value of stockholder investment. It also helps encourage executives to
avoid behavior which results in short-term benefit at the expense of
long-term share value.
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Determination
of the Amount and Formula for Each Element of Pay
Generally,
we choose to pay various elements of compensation based on (1) the base pay
necessary to attract and retain talent, (2) internal equity, and (3) corporate
and individual performance. Specific factors considered for each element of
compensation are as follows:
·
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Base
pay is set by the Compensation Committee in an amount which is adequate to
attract and retain the talent that the Company needs. The Committee is
careful to take into account internal equity and the relative value of
individual executive officer jobs, as well as the value of the jobs
immediately below the executive officer level. The Company operates in a
relatively unique industry, and it is not possible to look at similar peer
companies to ensure that the Company is keeping pace with market practices
around base pay. However, the Committee periodically references base pay
practices at public companies of a similar size to help ensure base pay
remains broadly within a competitive range. Base pay is not utilized by
the Company to reward outstanding individual and/or corporate performance,
which is instead tied to the short-term and long-term incentive plans.
Base pay is periodically increased to take into account increased
responsibilities or increases in the cost of living. The CEO and each of
the Named Executive Officers received increases of 5% of base pay in
2008.
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·
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Target
bonus opportunity for the executive officer group ranges from 25% to 40%
of base pay. This target bonus opportunity is approximately in the
midpoint of the market range for executive officers in similar size public
companies. Amounts above the target can be granted in the case of
outstanding individual and corporate performance according to a
predetermined formula, discussed below. It is the intent of the Committee
that outstanding corporate and individual performance be rewarded through
the bonus program, rather than by permanent additions to base
salary.
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·
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The
bonus amount for each executive officer, other than the Chief Accounting
Officer, is tied to a formula which takes into account corporate
performance, divisional performance, and quantifiable individual goals.
The bonus amount for the Chief Accounting Officer is determined according
to whether annual individual goals, which are set by the Chief Financial
Officer and the Chief Executive Officer, are attained. The Chief Financial
Officer and the Chief Executive Officer make a recommendation to the
Compensation Committee and the Committee determines the bonus for the
Chief Accounting Officer, taking into account their recommendation. The
rationale for excluding the Chief Accounting Officer from the formula
bonus is to help avoid actual and apparent financial self-interest on the
part of the Chief Accounting Officer in the achievement of key financial
measures.
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·
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The
amount of actual bonus paid to executive officers, other than the Chief
Accounting Officer, depends on the extent to which the corporate
performance goals and each of the individual goals have been
met.
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·
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A
total amount of $726,000 for executive officers, other than the Chief
Accounting Officer, was available for payment with respect to the 2007
fiscal year, provided the corporate and individual targets were met. All
corporate and individual targets were in fact met, and this is the amount
that was paid with respect to the 2007 fiscal
year.
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·
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The
long-term incentives granted in 2007 consisted of stock options. The
Committee considered both individual performance and the financial impact
of the grant on the Company, when determining the size of the grants.
Since substantial numbers of stock options granted to executive officers
in prior years vest in 2009, the Committee determined it was important to
make grants in 2007 which would vest in later
years.
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·
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In
January of 2008, the CEO and the Named Executive Officers also received
grants of restricted stock, which vest over three
years.
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Policies
for Allocating Between Long-Term and Currently Paid Out
Compensation
Our
philosophy is to place the executive team in the shoes of the stockholders to
the greatest extent possible. Therefore, the largest potential component of
compensation comes from the long-term incentive. That is, when the value of
stockholders' investment is increased, executives have the greatest opportunity
for gain.
The
currently paid out compensation consists of base pay in an amount necessary to
keep executives engaged. The intention of the Committee is that rewards for
exceptional Company and individual performance be attached to incentive
compensation, rather than be built into base pay.
The
currently paid out compensation also consists of the annual incentive bonus. The
Committee acknowledges that annual bonuses are an important part of achieving
yearly goals which should over time turn into a sustained increase in share
value. While the Committee believes that the annual bonuses paid should be
sufficient to drive superior annual performance, it also believes that the bulk
of executives’ rewards should be attached to the long-term incentive, rather
than the annual incentive.
Allocation
Between Cash and Non-Cash Compensation
The most
significant form of non-cash compensation is the long-term incentive, and it is
the most significant portion of the total compensation package for the reasons
stated above. The only other sources of non-cash compensation are the 401(k)
retirement plan and the health and welfare plans, including disability income
protection coverage. While they are competitive, they are considerably less in
amount than our other forms of compensation. The reason for this is that we
prefer that the executive officers have a significant amount of pay at
risk.
Long-Term
Compensation - Basis for Reward and Downside Risk
To date,
we have primarily awarded only stock options, although in January 2008 we also
granted executives some time vested restricted stock. We will continue to
consider other equity-based incentives in the future. Options bear a
relationship to our long-term goals in that they increase in value as the stock
increases in value. Restricted stock bears a relationship to our long term goals
in that it increases in value as the stock increases in value, and vice versa.
Management bears significant exposure to downside risk through options.
Management is also exposed to downside risk both through shares of restricted
stock, and shares of common stock the executive officers own outright. We have
carefully evaluated the cost of options we grant to our executive officers. We
will continue to evaluate the cost of options and other forms of equity
compensation vehicles against the benefit those vehicles are likely to yield in
building long-term share value.
Equity
Grants and Market Timing
Our 2007
fiscal-year plan to grant options was independent of the timing of our release
of material, non-public information. We currently intend to maintain this
practice in the future. We have no program, plan, or practice of awarding
options and setting the exercise price based on any price other than the fair
market value of our stock on the grant date.
Specific
Forms of Compensation and the Role of Discretion
In the
past, the Compensation Committee has retained the authority to review executive
officer base compensation and to make increases based on change of
responsibility, cost of living, and market norms. Also, the Compensation
Committee has retained the authority to make long-term incentive grants
(historically stock options) based on executive performance and market norms.
The Committee intends to retain the discretion to make decisions about executive
officer base compensation and certain levels of stock option grants and
restricted stock with or without predetermined performance goals.
The
Committee may make future grants of options, restricted stock, or other equity
compensation, subject to objective performance goals. At this time, it has not
determined whether it would exercise discretion and reduce the size of an award
or payout even if performance goals are met. However, the Committee has no
current intention to increase the size of any objectively determined equity
compensation award, especially if performance goals are not met.
With
respect to the annual executive bonus plan, the Compensation Committee uses an
objective formula to determine payouts to executive officers, other than the
Chief Accounting Officer. The objective measures relate to corporate earnings
performance and divisional earnings performance, as compared to budgeted
objectives. The formula also includes objectively measured individual goals.
However, these individual goals do not amount to more than 25% of the total
award. With respect to the Chief Accounting Officer, at the beginning of each
year, individual goals are set by the Chief Financial Officer and the Chief
Executive Officer. At the close of the year, they inform the Compensation
Committee the extent to which the individual goals have been met. The Committee
exercises a certain amount of discretion in determining whether the individual
goals of the executive officers have been met, as well as the size of any
award.
A
predetermined target bonus is paid to executives to the extent the predetermined
goals are met. A total amount of $726,000 for executive officers, other than the
Chief Accounting Officer, was available and paid out in full for
2007.
How
Individual Forms of Compensation are Structured and Implemented to Reflect the
Executive Officers’ Individual Performance and Contribution
The
Compensation Committee considers a variety of factors, both qualitative and
quantitative, in evaluating our executive officers and making compensation
decisions. Market factors and the individual contribution of each officer of the
Company impact decisions regarding each executive officer's base pay, the size
of each executive officer's annual bonus opportunity, and the size of each
executive officer's long-term incentive opportunity.
Specific
objectives against which executive performance is gauged determine the amount
each executive receives under the annual bonus plan. These objectives include
the addition and retention of hospital-based service contracts, growth of our
community-based services, growth of the Products Division, securing of capital
to finance expansion, and meeting the growth goals of particular divisions.
Success in these areas is determined both on an individual and team
basis.
Certain
goals are corporate goals against which the executive officers' performance is
judged as a team. These include earnings per share goals and growth in the value
of stockholder investment. Rewards under the long-term incentive plans are
primarily tied to the extent these corporate goals are achieved.
Policy
Regarding Adjustment of Awards if Relevant Performance Measures are Restated or
Adjusted
The
annual bonus and other incentive compensation must be forfeited by the Chief
Executive Officer and the Chief Financial Officer if, during the 12-month period
following the issuance of financial statements, those financial statements must
be restated due to material noncompliance as a result of misconduct in the
preparation of those financial statements, as required under Section 304 of the
Sarbanes-Oxley Act of 2002.
Factors
Considered in Decisions to Increase or Decrease Compensation
Materially
The
Committee would consider clear, sustained market trends in approving a material
increase or decrease in executive compensation.
Impact
Amounts Received by Previously Earned Compensation Have on Other
Compensation
We
maintain no supplemental pension plans or other programs in which gains from
prior compensation could influence amounts earned currently. The Compensation
Committee may consider gains from prior awards when determining the appropriate
size of long-term incentive grants.
Impact
of Accounting and Tax Treatment on Various Forms of Compensation
The
accounting and tax treatments of each particular form of compensation are taken
into account when determining amounts and awards. Our incentive payments are
designed so that they are deductible under Section 162(m) of the Internal
Revenue Code, and we intend that all compensation payments be
deductible.
We
monitor the treatment of options under FAS 123R in determining the form and size
of option grants.
Nonqualified
options are deductible by the Company when they are exercised, to the extent
that the optionee recognizes ordinary income rather than capital gain on
exercise.
Ownership
Requirements and Policies Regarding Hedging Risk on Company’s Equity
Securities
We
currently have no security ownership requirements for executives, and no
policies regarding hedging economic risk and ownership.
Role
of Executive Officers in Determining Compensation
The
Compensation Committee makes all base, bonus, and equity compensation decisions
regarding executive officers, with the exception of Mr. Todd. The entire Board,
including a majority of the independent directors with Mr. Todd not present,
makes all compensation decisions regarding Mr. Todd. However, executive officers
give the Committee input in the following areas:
·
|
Financial
projections for Company and divisional performance
goals
|
·
|
Input
on the individual goals for Mr. Todd’s direct
reports
|
·
|
Input
on equity compensation grants, base pay increases, and annual bonus
incentive opportunity
|
Benchmarking
of Compensation
In the
course of determining compensation of executive officers in 2007, we looked at
publicly traded companies of a similar size. The Company is an air ambulance
company, and it is not possible to build a peer group of companies against which
to benchmark compensation. Accordingly, we looked at the compensation paid to
the executive officers of public companies of a similar size to ascertain
whether the Company is generally in keeping with current compensation levels. We
believe it is useful to engage in this exercise periodically because these other
companies may be competitors for talent.
Even if
we were able to build a peer group of companies, our compensation philosophy
does not include an effort to pay at a particular percentile of market.
Accordingly, we would not attempt to use other companies as a benchmark against
which to set our compensation.
Summary
Compensation
The
following table sets forth the total compensation earned by the Chief Executive
Officer, Chief Financial Officer, and each of the three other most highly
compensated executive officers (the “named executive officers”) for the year
ended December 31, 2007.
Name
and Principal
|
|
|
|
|
|
|
|
Option
Awards
(2)
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
Position
|
|
Salary ($)
|
|
|
Bonus
(1)
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Aaron
D. Todd
|
|
|
373,500
|
|
|
|
339,855
|
|
|
|
463,500
|
|
|
|
19,148
|
(3)
|
|
|
1,196,003
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trent
J. Carman
|
|
|
235,100
|
|
|
|
134,007
|
|
|
|
185,400
|
|
|
|
13,906
|
(4)
|
|
|
568,413
|
|
Chief
Financial Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Dolstein
|
|
|
245,100
|
|
|
|
147,060
|
|
|
|
278,100
|
|
|
|
16,595
|
(5)
|
|
|
686,855
|
|
Senior
Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community-Based Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
D. Allen
|
|
|
198,000
|
|
|
|
105,140
|
|
|
|
278,100
|
|
|
|
11,947
|
(6)
|
|
|
593,187
|
|
Senior
Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital-Based Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon
J. Keck
|
|
|
180,400
|
|
|
|
60,000
|
|
|
|
111,240
|
|
|
|
9,747
|
(7)
|
|
|
361,387
|
|
Chief
Accounting Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Controller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Bonus
amounts earned in 2007 will be paid in 2008. Does not include bonus amounts
earned by executive officers in 2006 which were paid in 2007. Those amounts
were: Aaron Todd, $220,675; Trent Carman, $89,216; David Dolstein, $196,064;
Michael Allen, $60,000; Sharon Keck, $35,000.
(2)
Valuation
assumptions are discussed in Note 8 to the consolidated financial statements
included in Item 8 of this report.
(3)
Consists
of a $10,941 match to the 401(k) plan and a disability income protection premium
of $8,207.
(4)
Consists
of $10,718 match to the 401(k) plan and a disability income protection premium
of $3,188.
(5)
Consists
of a $14,781 match to the 401(k) plan and a disability income protection premium
of $1,814.
(6)
Consists
of a $11,036 match to the 401(k) plan and a disability income protection premium
of $911.
(7)
Consists
of a $8,954 match to the 401(k) plan and a disability income protection premium
of $793.
Stock
Option Grants
Stock
option grants to the named executive officers were as follows for the year ended
December 31, 2007:
2007
GRANTS OF PLAN-BASED AWARDS
|
|
Name
|
Grant Date
|
Approval Date
|
|
Option Awards: Number of Securities Underlying
Options (#)
|
|
|
Exercise or Base Price of Option Awards ($ /
Share)
|
|
|
Grant Date Fair Value of Stock and Option Awards
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aaron
D. Todd
|
02/07/2007
|
01/26/07
|
|
|
50,000
|
|
|
|
27.06
|
|
|
|
463,500
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trent
J. Carman
|
02/07/2007
|
01/26/07
|
|
|
20,000
|
|
|
|
27.06
|
|
|
|
185,400
|
|
Chief
Financial Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Dolstein
|
02/07/2007
|
01/26/07
|
|
|
30,000
|
|
|
|
27.06
|
|
|
|
278,100
|
|
Senior
Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Community-Based Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
D. Allen
|
02/07/2007
|
01/26/07
|
|
|
30,000
|
|
|
|
27.06
|
|
|
|
278,100
|
|
Senior
Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital-Based Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon
J. Keck
|
02/07/2007
|
01/26/07
|
|
|
12,000
|
|
|
|
27.06
|
|
|
|
111,240
|
|
Chief
Accounting Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Controller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respective
to the “Option Awards” column and footnote number 2 in the above Summary
Compensation Table, named executive officers were awarded option grants during
fiscal year 2007 which are reported as a dollar figure. That amount was
calculated in accordance with the requirements of FAS 123R, as explained below.
Total compensation includes the valuation of these option grants, as required.
The options granted in 2007 vest in equal 1/3 installments. The first 1/3 of the
optioned shares were immediately vested upon issue of the grant. The remaining
shares will vest 1/3 upon each of the first and second anniversaries
of the grant date of February 7, 2007.
The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The Company uses historical option exercise
data for similar employee groups, as well as the vesting period and contractual
term, to estimate the expected term of options granted; the expected term
represents the period of time that options granted are expected to be
outstanding. Expected volatility is based on historical volatility of the
Company’s stock. The risk-free rate for periods within the contractual life of
the option is based on the U.S. Treasury yield curve in effect at the time of
the grant.
Our stock
option plans provide that the exercise price of option grants shall be set at
the closing price of the common stock upon the date of the grant. For awards
reported in the above Grants Of Plan-Based Awards Table, the exercise price was
determined in that same manner. Should options be granted on a non-business day,
the closing price of the common stock on the next business day will be the
exercise price. In the event the holder of a stock option grant terminates
employment prior to complete vesting of the grant, the optionee has 90 days
beyond the termination date to exercise vested shares. Shares subject to the
stock option grant which were not vested upon the date of termination are
canceled. Canceled shares then become subject to reissue under the particular
plan provisions.
Outstanding
Equity awards and Option Exercises
The
following table provides certain summary information concerning stock option
values as of December 31, 2007, for the named executive officers.
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2007
|
|
|
|
|
|
Option
Awards
|
Name
|
|
Number of Securities Underlying Unexercised
Options (exercisable) (#)
|
|
|
Number of Securities Underlying Unexercised
Options (unexercisable) (#)
|
|
|
Option
Exercise Price
($)
|
|
Option
Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
Aaron
D. Todd
|
|
|
|
|
|
125,000
|
|
|
|
8.98
|
|
01/01/10
(1)
|
Chief
Executive Officer
|
|
|
16,667
|
|
|
|
33,333
|
|
|
|
27.06
|
|
02/07/12
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trent
J. Carman
|
|
|
15,000
|
|
|
|
|
|
|
|
8.98
|
|
01/01/09
(5)
|
Chief
Financial Officer and
|
|
|
15,500
|
|
|
|
|
|
|
|
7.92
|
|
06/11/08
(4)
|
Secretary
and Treasurer
|
|
|
|
|
|
|
60,000
|
|
|
|
8.98
|
|
01/01/10
(1)
|
|
|
|
6,667
|
|
|
|
13,333
|
|
|
|
27.06
|
|
02/07/12
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Dolstein
|
|
|
|
|
|
|
100,000
|
|
|
|
8.98
|
|
01/01/10
(1)
|
Senior
Vice President
|
|
|
|
|
|
|
20,000
|
|
|
|
27.06
|
|
02/07/12
(2)
|
Community-Based Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
D. Allen
|
|
|
|
|
|
|
16,667
|
|
|
|
28.70
|
|
05/03/11
(3)
|
Senior
Vice President
|
|
|
|
|
|
|
20,000
|
|
|
|
27.06
|
|
02/07/12
(2)
|
Hospital-Based Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon
J. Keck
|
|
|
2,500
|
|
|
|
|
|
|
|
8.98
|
|
01/01/09
(5)
|
Chief
Accounting Officer
|
|
|
|
|
|
|
50,000
|
|
|
|
8.98
|
|
01/01/10
(1)
|
and
Controller
|
|
|
3,334
|
|
|
|
6,666
|
|
|
|
28.70
|
|
05/03/11
(3)
|
|
|
|
4,000
|
|
|
|
8,000
|
|
|
|
27.06
|
|
02/07/12
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Options granted under this award will fully vest on January 1,
2009.
(2)
1/3 of the total number of options granted under this award vested upon
issue. An additional 1/3 of the total number of optioned shares vest upon each
of the second and third anniversaries of the grant date, February 7,
2007.
(3)
1/3 of the total number of optioned shares vest upon each of the first,
second and third anniversaries of the grant date, May 3, 2006.
(4)
Options became fully vested on June 11, 2005, the second anniversary date
of grant.
(5)
Options became fully vested on January 1, 2006, the second anniversary
date of grant.
The following table summarizes information regarding option exercises by
the Executive Officers during the year ended December 31, 2007.
2007
OPTION EXERCISES
|
|
|
|
Option Awards
|
|
Name
|
|
Number of Shares Acquired on Exercise
(1)
(#)
|
|
|
Value Realized on Exercise
(2)
($)
|
|
|
|
|
|
|
|
|
Aaron
D. Todd
|
|
|
45,000
|
|
|
|
1,541,700
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trent
J. Carman
|
|
|
5,000
|
|
|
|
176,500
|
|
Chief Financial Officer, Secretary and
Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Dolstein
|
|
|
10,000
|
|
|
|
304,100
|
|
Senior Vice President, Community-Based
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
D. Allen
|
|
|
18,333
|
|
|
|
375,217
|
|
Senior Vice President, Hospital-Based
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon
J. Keck
|
|
|
7,500
|
|
|
|
354,750
|
|
Chief Accounting Officer and
Controller
|
|
|
|
|
|
|
|
|
(1)
Represents aggregate number of shares acquired upon exercise in fiscal
year 2007.
(2)
Represents aggregate net gain on shares acquired by options exercised in
fiscal year 2007. Value is based upon the closing price of our common stock on
the date of share acquisition less the exercise price of the
options.
Potential
Payments upon Termination or Change in Control
We
entered into an Employment Agreement with Mr. Todd effective July 1, 2003, for
an initial term of two years, subject to successive one-year extensions. The
agreement may be terminated by either party upon 90 days’ written notice, or
immediately by us for cause. In the event we terminate the agreement without
cause, Mr. Todd is entitled to severance payments for eighteen months following
termination at an annual rate equal to his highest cash compensation during any
12-month period of his employment.
In the
event of termination resulting from a change in control of the Company, Mr. Todd
is entitled to severance payments for 36 months following termination at an
annual rate equal to his highest cash compensation during any 12-month period of
his employment. Effective May 7, 2007, Mr. Todd’s employment contract was
amended to provide that if any payments are to be made to Mr. Todd on account of
a change of control, and if those payments result in an Excise Tax on Mr. Todd
imposed by Section 4999 of the Internal Revenue Code, then Mr. Todd will be
entitled to an additional payment. Such payment (referred to in the Employment
Agreement as a “Gross-Up Payment”) will be in an amount such that after payment
by Mr. Todd of all taxes, Mr. Todd retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed on the change of control
payments.
During
the term of employment and for eighteen months following the termination of
employment, Mr. Todd may not engage in any business which competes with us
anywhere in the United States.
We
entered into Employment Agreements with Mr. Dolstein and Ms. Keck effective
January 1, 2003; with Mr. Carman effective April 28, 2003; and with Mr. Allen
effective January 4, 2006. Each agreement was for an initial term of one year
starting on the effective date and is subject to successive one-year extensions.
Each agreement may be terminated either by us or by the executive upon 90 days’
written notice, or immediately by us for cause. In the event we terminate an
agreement without cause, the executive is entitled to severance payments for
twelve months following termination at an annual rate equal to his highest cash
compensation during any 12-month period of the executive’s
employment.
In the
event of termination resulting from a change in control of the Company, the
executive is entitled to severance payments for 24 months following termination
at an annual rate equal to his highest cash compensation during any 12-month
period of the executive’s employment. Effective May 7, 2007, the employment
contracts for Messrs. Dolstein, Carman, and Allen and Ms. Keck were amended to
provide that if any payments are to be made to them on account of a change of
control, and if those payments result in an Excise Tax imposed by Section 4999
of the Internal Revenue Code, then each of these individuals subject to the
Excise Tax shall be entitled to an additional payment. Such payment (referred to
in the Employment Agreements as a “Gross-Up Payment”) will be in an amount such
that after the payment by the executive of all taxes, the executive will retain
an amount of the Gross-Up Payment equal to the Excise Tax imposed on the change
of control payments.
During
the term of employment and for twelve months following the termination of
employment, the executive may not engage in any business which competes with us
anywhere in the United States.
In
addition to the severance payments described above, the executive is entitled to
continue to receive at our expense, coverage under our health insurance
policies, or comparable coverage, during the term of such severance payments,
but only until the executive begins other employment in connection with which he
is entitled to health insurance coverage. As a condition of the executive’s
right to receive severance compensation, the executive must sign and deliver to
the Company a release of all claims that the executive might otherwise assert
against the Company. During the term of employment and for five years following
the termination of employment, the executive may not directly or indirectly use,
disseminate, or disclose any of our confidential information or trade
secrets.
The
following table summarizes potential payments that would be made to the
Executive Officers upon termination or a change in control of the Company,
assuming the triggering event took place on December 31, 2007, and the stock
price was the closing market price as of that date.
2007 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE
IN CONTROL
|
|
|
|
|
|
|
Name
|
Benefit
|
|
Before Change in Control Termination w/o Cause or
for Good Reason ($)
|
|
|
After Change in Control Termination w/o Cause or
for Good Reason ($)
|
|
|
Death ($)
|
|
|
Disability ($)
|
|
|
Change in Control
(2)
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aaron
D. Todd
|
Severance
(1)
|
|
|
1,137,416
|
|
|
|
3,133,284
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Chief
Executive Officer
|
Death
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
32,437
|
|
|
|
--
|
|
|
|
--
|
|
|
Disability
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
194,621
|
|
|
|
--
|
|
|
Accelerated Vesting of Stock
Options
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
1,201,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trent
J. Carman
|
Severance
(1)
|
|
|
394,453
|
|
|
|
985,809
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Chief
Financial Officer
|
Death
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
20,855
|
|
|
|
--
|
|
|
|
--
|
|
Secretary
and Treasurer
|
Disability
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
125,309
|
|
|
|
--
|
|
|
Accelerated Vesting of Stock
Options
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
612,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Dolstein
|
Severance
(1)
|
|
|
460,745
|
|
|
|
1,337,678
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Senior
Vice President
|
Death
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
22,057
|
|
|
|
--
|
|
|
|
--
|
|
Community-Based
|
Disability
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
132,341
|
|
|
|
--
|
|
Services
|
Accelerated Vesting of Stock
Options
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
910,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
D. Allen
|
Severance
(1)
|
|
|
273,836
|
|
|
|
695,583
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Senior
Vice President
|
Death
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
17,820
|
|
|
|
--
|
|
|
|
--
|
|
Hospital-Based
|
Disability
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
106,918
|
|
|
|
--
|
|
Services
|
Accelerated Vesting of Stock
Options
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
235,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon
J. Keck
|
Severance
(1)
|
|
|
231,013
|
|
|
|
640,646
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
Chief
Accounting
|
Death
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
16,180
|
|
|
|
--
|
|
|
|
--
|
|
Officer
and Controller
|
Disability
(1)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
97,077
|
|
|
|
--
|
|
|
Accelerated Vesting of Stock
Options
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
485,564
|
|
(1)
Includes amounts for
health care benefits and 401(k) matching.
(2)
The
value of accelerated vesting of stock options is calculated by using the safe
harbor valuation method under Rev. Proc. 2003-68. The safe harbor valuation
method is based on the Black-Scholes model and takes into account, as of the
valuation date, the following factors; (1) the volatility of the underlying
stock, (2) the exercise price of the option, (3) the value stock as of December
31, 2007 (valuation date), and the term of the option on the valuation date. The
difference in the value of the option at time of vesting and the discounted
current value is used to calculate the portion of the payment that is contingent
on the change of control.
Change-in-Control
Arrangements
In
addition to change-in-control provisions included in the employment agreements
described above, our 2006 Equity Compensation Plan also contains a
change-in-control provision. Outstanding options or other equity compensation
grants under the plan become fully vested in connection with the disposition of
all, or substantially all, of the Company’s assets or outstanding capital stock
by means of a sale, or a merger or reorganization in which the Company is not
the surviving corporation.
Director
Compensation
The
following table summarizes all compensation earned by members of the Board of
Directors during the year ended December 31, 2007.
2007
DIRECTOR COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or Paid in Cash
($)
|
|
|
All Other Compensation ($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
George
W. Belsey
|
|
|
--
|
|
|
|
150,000
|
(1)
|
|
|
150,000
|
|
Ralph
J. Bernstein
(4)
|
|
|
30,100
|
|
|
|
--
|
|
|
|
30,100
|
|
Samuel
H. Gray
(10)
|
|
|
38,500
|
|
|
|
--
|
|
|
|
38,500
|
|
David
Kikumoto
(5)
|
|
|
30,100
|
|
|
|
7,531
|
(3)
|
|
|
37,631
|
|
MG
Carl H. McNair, Jr. (Ret.)
(6)
|
|
|
43,500
|
|
|
|
--
|
|
|
|
43,500
|
|
Lowell
D. Miller
(7)
|
|
|
40,900
|
|
|
|
--
|
|
|
|
40,900
|
|
Morad
Tahbaz
(8)
|
|
|
37,900
|
|
|
|
--
|
|
|
|
37,900
|
|
Paul
H. Tate
(9)
|
|
|
28,500
|
|
|
|
7,878
|
(3)
|
|
|
36,378
|
|
Aaron
D. Todd
(2)
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
(1)
Compensation
paid in accordance with an April 15, 2003, Post-Retirement Consulting Agreement
between Mr. Belsey and the Company. The agreement provides that Mr. Belsey will
continue to serve as Chairman of the Board and as a consultant, thereby
receiving an annual fee, paid monthly, through June 30, 2008.
(2)
Mr.
Todd is an employee director and earns no additional fees nor compensation above
his salary (and other compensation elsewhere reported herein) for duties
performed in the capacity of a director.
(3)
Tax
gross up paid to directors in fiscal year 2007. See narrative
below.
(4)
As
of December 31, 2007, Mr. Bernstein holds four stock option awards exercisable
for an aggregate 29,500 shares of the Company's common stock.
(5)
As
of December 31, 2007, Mr. Kikumoto holds two stock option awards exercisable for
an aggregate 9,500 shares of the Company's common stock.
(6)
As
of December 31, 2007, Mr. McNair holds four stock option awards exercisable for
an aggregate 29,500 shares of the Company's common stock.
(7)
As
of December 31, 2007, Dr. Miller holds two stock option awards exercisable for
an aggregate 12,500 shares of the Company's common stock.
(8)
As
of December 31, 2007, Mr. Tahbaz holds four stock option awards exercisable for
an aggregate 29,500 shares of the Company's common stock.
(9)
As
of December 31, 2007, Mr. Tate holds three stock option awards exercisable for
an aggregate 15,000 shares of the Company's common stock.
(10)
As
of December 31, 2007, Mr. Gray holds one stock option award exercisable for an
aggregate 1,500 shares of the Company’s common stock.
We
entered into an Executive Consulting Agreement with Mr. Belsey effective July 1,
2003, for an initial term of five years. Under the Agreement, Mr. Belsey agreed
to serve as Chairman of the Board of Directors, at the pleasure of the Board of
Directors, through the completion of the Annual Meeting of Stockholders in 2004.
Upon expiration of that term of service and his re-election to the Board of
Directors, Mr. Belsey was reappointed as Chairman through the Annual Meeting of
Stockholders in 2007. Upon his re-election to the Board in 2007, he was
reappointed as Chairman through the Annual Meeting of Stockholders in 2010. Mr.
Belsey also agreed to serve as a consultant with those responsibilities
designated to him by the Board of Directors, for a consulting fee of $750,000,
payable in equal monthly installments from July 1, 2003 through June 30, 2008.
This fee is payable regardless of the amount of time Mr. Belsey spends
performing his services as Chairman and consultant, and whether or not he
becomes disabled or dies during such period. During the term of this Agreement
and for a period of eighteen months following the termination of the agreement
with us, Mr. Belsey may not engage in any business which competes with us
anywhere in the United States. Effective July 1, 2008, Mr. Belsey will begin
earning director compensation consistent with other non-employee
directors.
During
fiscal year 2007, each non-employee director, except Mr. Belsey, received a
7,500 share stock option grant exercisable at $27.92, the closing price of the
stock upon the first business day (January 2, 2007) following the grant date,
January 1, 2007. The grants each vested in increments of 1/12 of the total
number of optioned shares per month over calendar year 2007. All option grants
held by non-employee directors at fiscal year-end are reflected in the footnotes
to the above table. All shares so indicated were fully vested and exercisable at
December 31, 2007. Exercise prices are determined by the closing price of the
common stock on the date the grant is issued. If the grant date is not a market
business day, grant exercise prices are determined by the closing price of the
common stock on the next business day following the grant date. Through 2004,
each non-employee director annually received a five-year option to purchase
10,000 shares, exercisable at the then-current grant date closing price of our
common stock. As of December 31, 2007, directors held stock options granted for
director-related services to purchase a total of 127,000 shares of common
stock.
Each
non-employee director may elect to receive shares of common stock in lieu of
cash payments pursuant to our Equity Compensation Plan for Non-Employee
Directors. We also reimburse our non-employee directors for their reasonable
expenses incurred in attending Board of Directors’ and committee meetings. Board
members who are also officers do not receive any separate compensation or fees
for attending Board of Directors’ or committee meetings.
We have
adopted compensation and incentive benefit plans to enhance our ability to
continue to attract, retain and motivate qualified persons to serve as our
directors. Effective January 1, 2007, the payments to our non-employee
directors, except for Mr. Belsey, were as follows:
·
|
Annual
retainer of $15,000
|
·
|
$2,000
per Board of Directors meeting
|
·
|
$600
per committee meeting for all committees except the Audit
Committee
|
·
|
$1,000
per Audit Committee meeting
|
·
|
Fee
per committee meeting for committee chairman as follows: $4,000 for Audit
Committee, $3,000 for Compensation/Stock Option Committee, $3,000 for
Nominating and Corporate Governance Committee and $2,000 for
Finance/Strategic Planning
Committee.
|
In 2003
we purchased $50,000 life insurance policies for each non-employee director who
had served longer than one year, excluding Messrs. Belsey and McNair. A life
insurance policy was purchased for Mr. Tate in 2004 and for Mr. Kikumoto in
2005. Effective December 22, 2003, an annuity policy was purchased on behalf of
Mr. McNair in the amount of $50,000 in lieu of an insurance policy similar to
those purchased for other members of the Board of Directors. All policies vested
over two years.
The terms
of the life insurance policies provide for each director to vest 50% in the cash
surrender value of the policy after the first subsequent year of service as
director and 50% after the second subsequent year of service as director. We
agreed to reimburse each Board member for the estimated federal income taxes
associated with the vesting in the life insurance policies. These reimbursements
are made in the year subsequent to the year of vesting. For all
directors except Mr. Belsey, the amounts reflected in the table above under “All
Other Compensation” represent payments we made to the directors in 2007 for
their estimated federal income taxes attributable to their vesting in the life
insurance policies for the prior year, 2006.
Compensation
Committee Interlocks and Insider Participation
Compensation/Stock
Option Committee
The
Compensation/Stock Option Committee currently consists of Dr. Miller (Chairman)
and Messrs. Bernstein and Gray. The Compensation/Stock Option Committee is
responsible for making recommendations to the Board of Directors regarding
executive compensation matters. The Board of Directors has determined that all
members of the Compensation/Stock Option Committee are “independent” in
accordance with applicable SEC rules and NASDAQ listing standards. There are no
relationships or transactions relating to the members of the Compensation/Stock
Option Committee that require disclosure under Item 407(e)(4) of Regulation
S-K.
Compensation
Committee Report
The information contained in this
report shall not be deemed to be “soliciting material” or to be “filed” with the
Securities and Exchange Commission or subject to Regulation
14A or 14C other than as set forth
in Item
407 of Regulation
S-K, or subject to the liabilities
of Section
18 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), except to the extent that we specifically
request that the information contained in this report be treated as soliciting
material, nor shall such information be incorporated by reference into any past
or future filing under the Securities Act of 1933, as amended (the “Securities
Act”), or the Exchange Act, except to the extent that we specifically
incorporate it by reference in such filing.
The
Compensation Committee, comprised of independent directors, has reviewed and
discussed the Compensation Discussion and Analysis required by Item 402(b)
of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this annual
report.
|
By
the Compensation/Stock Option Committee:
|
|
|
|
Lowell
D. Miller, Ph.D., Chairman
|
|
Ralph
J. Bernstein
|
|
Samuel
H. Gray
|
ITEM 12
. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Equity
Compensation Plans
The
following equity compensation plans have been previously approved by our
shareholders:
|
·
|
2006
Equity Compensation Plan – provides for the granting of incentive stock
options, non-statutory stock options, shares of restricted stock, stock
appreciation rights and supplemental bonuses consisting of shares of
common stock, cash or a combination thereof to employees, directors, and
consultants.
|
|
·
|
1995
Employee Stock Option Plan – provides for the granting of incentive stock
options and nonqualified stock options, stock appreciation rights, and
supplemental stock bonuses to employees as well as third party consultants
and directors.
|
|
·
|
Equity
Compensation Plan for Nonemployee Directors – provides for the issuance of
shares of common stock to nonemployee directors, at their election, in
lieu of cash as payment for their director
services.
|
Further
description of these plans is contained in Note 8 to the consolidated financial
statements included in Item 8 of this report. Information regarding the
securities under all of these plans was as follows as of December 31,
2007:
Plan
Category
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants,
and rights
|
|
|
Weighted-average
exercise price of outstanding options, warrants, and
rights
|
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
758,233
|
|
|
$
|
14.93
|
|
|
|
497,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
--
|
|
|
|
N/A
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
758,233
|
|
|
$
|
14.93
|
|
|
|
497,541
|
|
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The
following table sets forth, as of April 21, 2008, the beneficial ownership of
our outstanding Common Stock: (i) by each person who owns (or is known by us to
own beneficially) more than 5% of the Common Stock, (ii) by each of our
directors and executive officers, and (iii) by all directors and executive
officers as a group.
|
|
Number
|
|
|
Percentage of
|
|
Name and
Address
|
|
of
Shares
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Michael
D. Allen
|
|
|
21,504
|
(1)
|
|
|
*
|
|
7301
S. Peoria St.
|
|
|
|
|
|
|
|
|
Englewood,
CO. 80112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
W. Belsey
|
|
|
35,486
|
(2)
|
|
|
*
|
|
7301
South Peoria
|
|
|
|
|
|
|
|
|
Englewood,
CO 80112
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Percentage of
|
|
Name and
Address
|
|
of
Shares
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Ralph
J. Bernstein
|
|
|
1,294,277
|
(3)
|
|
|
10.6
|
%
|
57
Wilton Rd.
|
|
|
|
|
|
|
|
|
Weston,
CT 06880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trent
J. Carman
|
|
|
33,833
|
(4)
|
|
|
*
|
|
7301
South Peoria
|
|
|
|
|
|
|
|
|
Englewood,
CO 80112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
L. Dolstein
|
|
|
5,175
|
(5)
|
|
|
*
|
|
7301
South Peoria
|
|
|
|
|
|
|
|
|
Englewood,
CO 80112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel
H. Gray
|
|
|
2,400
|
(6)
|
|
|
*
|
|
136
Paint Island Spring Road
|
|
|
|
|
|
|
|
|
Millstone,
NJ 08510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sharon
J. Keck
|
|
|
19,060
|
(7)
|
|
|
*
|
|
7301
South Peoria
|
|
|
|
|
|
|
|
|
Englewood,
CO 80112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Kikumoto
|
|
|
15,900
|
(8)
|
|
|
*
|
|
6412
S. Fiddler’s Green Circle, Suite 200 East
|
|
|
|
|
|
|
|
|
Greenwood
Village, CO 80111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MG
Carl H. McNair, Jr. (Ret.)
|
|
|
69,687
|
(9)
|
|
|
*
|
|
3170
Fairview Park Drive, MC 256
|
|
|
|
|
|
|
|
|
Falls
Church, VA 22042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lowell
D. Miller, Ph.D.
|
|
|
41,900
|
(10)
|
|
|
*
|
|
16940
Stonehaven
|
|
|
|
|
|
|
|
|
Belton,
MO 64012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Morad
Tahbaz
|
|
|
108,083
|
(11)
|
|
|
*
|
|
57
Wilton Rd.
|
|
|
|
|
|
|
|
|
Weston,
CT 06880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
H. Tate
|
|
|
19,100
|
(12)
|
|
|
*
|
|
7301
South Peoria
|
|
|
|
|
|
|
|
|
Englewood,
CO 80112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aaron
D. Todd
|
|
|
61,395
|
(13)
|
|
|
*
|
|
7301
South Peoria
|
|
|
|
|
|
|
|
|
Englewood,
CO 80112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Directors and Executive Officers as a group (13 persons)
|
|
|
1,727,800
|
(14)
|
|
|
13.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
Blair & Company, LLC
|
|
|
|
|
|
|
|
|
222
W. Adams
|
|
|
|
|
|
|
|
|
Chicago,
IL 60606
|
|
|
661,788
|
(15)
|
|
|
5.4
|
%
|
|
|
|
Number
|
|
|
|
Percentage of
|
|
Name and
Address
|
|
|
of
Shares
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
FMR
LLC
|
|
|
|
|
|
|
|
|
82
Devonshire Street
|
|
|
|
|
|
|
|
|
Boston,
MA 02109
|
|
|
1,810,416
|
(16)
|
|
|
14.8
|
%
|
___________________
*
|
Less
than one percent (1%) of Common Stock outstanding on April 21,
2008.
|
(1)
|
Consists
of (i) 18,333 shares subject to stock options exercisable within 60 days,
(ii) 171 shares directly owned, and (iii) 3,000 shares restricted stock
subject to future vesting
requirements.
|
(2)
|
Consists
of 35,486 shares directly owned by George and
Phyllis Belsey.
|
(3)
|
Consists
of (i) 29,500 shares subject to stock options exercisable within 60 days,
(ii) 1,201,877 shares directly owned, (iii) 60,500 shares owned by Yasmeen
Bernstein, Mr. Bernstein’s spouse, and (iv) 2,400 shares of restricted
stock, 1,800 shares of which are subject to future vesting
requirements.
|
(4)
|
Consists
of (i) 28,333 shares subject to stock options exercisable within 60 days,
(ii) 2,500 shares directly owned, and (iii) 3,000 shares of restricted
stock subject to future vesting
requirements.
|
(5)
|
Consists
of (i) 2,175 shares directly owned by David and Kathi Dolstein, and (ii)
3,000 shares of restricted stock subject to future vesting
requirements.
|
(6)
|
Consists
of 2,400 shares of restricted stock, 1800 shares of which are subject to
future vesting requirements.
|
(7)
|
Consists
of (i) 17,166 shares subject to stock options exercisable within 60 days,
(ii) 394 shares directly owned, and (iii) 1,500 shares of restricted stock
subject to future vesting
requirements.
|
(8)
|
Consists
of (i) 9,500 shares subject to stock options exercisable within 60 days,
(ii) 4,000 shares directly owned, and (iii) 2,400 shares of restricted
stock, 1,800 shares of which are subject to future vesting
requirements.
|
(9)
|
Consists
of (i) 29,500 shares subject to stock options exercisable within 60 days,
(ii) 37,787 shares jointly owned with spouse, Jo Ann McNair; and (iii)
2,400 shares of restricted stock, 1,800 shares of which are subject to
future vesting requirements.
|
(10)
|
Consists
of (i) 5,000 shares subject to stock options exercisable within 60 days,
(ii) 34,500 shares owned directly, and (iii) 2,400 shares of restricted
stock, 1,800 shares of which are subject to future vesting
requirements.
|
(11)
|
Consists
of (i) 29,500 shares subject to stock options exercisable within 60 days,
(ii) 76,183 shares directly owned, and (iii) 2,400 shares of restricted
stock, 1,800 shares of which are subject to future vesting
requirements.
|
(12)
|
Consists
of (i) 15,000 shares subject to stock options exercisable within 60 days,
and (ii) 4,100 shares of restricted stock, 3,500 shares of which are
subject to future vesting
requirements.
|
(13)
|
Consists
of (i) 33,333 shares subject to stock options exercisable within 60 days,
(ii) 20,343 shares directly owned, (iii) 1,719 shares beneficially owned
by Mr. Todd in our 401(k) plan; and (iv) 6,000 shares of restricted stock
subject to future vesting
requirements.
|
(14)
|
Includes
(i) 215,165 shares subject to stock options exercisable within 60 days,
and (ii) 35,000 shares of restricted stock, 30,800 shares of which are
subject to future vesting
requirements.
|
(15)
|
Based
solely on Schedule 13G filed by the beneficial owner with the Securities
and Exchange Commission on January 9,
2008.
|
(16)
|
Based
solely on Schedule 13G filed by the beneficial owner with the Securities
and Exchange Commission on February 14,
2008.
|
ITEM 13
. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE
Certain
Relationships and Related Transactions
The Audit
Committee charter charges the committee with the responsibility to investigate,
review, and report to the Board the propriety and ethical implications of any
transactions between the Company and any employee, officer, or Board member, or
any affiliates of the foregoing. Applicable transactions may be reported to the
Committee by our independent auditors, employees, officers, Board members, or
other parties. The retention of a Board member as a consultant for financial
consideration in addition to regular Board retainer and meeting fees requires
the advance approval of the Compensation Committee.
We have
no transactions with related parties which are subject to disclosure under this
item.
Director
Independence
We have
adopted standards for director independence pursuant to NASDAQ listing standards
and SEC rules. The Board considered relationships, transactions and/or
arrangements with each of the directors and concluded that all of the directors,
except Mr. Todd and Mr. Belsey, meet the applicable criteria for independence.
Mr. Todd is our Chief Executive Officer and Mr. Belsey serves as a consultant to
the Company in addition to serving as Chairman of the Board of Directors. In
addition, the Board has determined that each member of our Audit Committee,
Compensation and Stock Option Committee, and Nominating and Governance Committee
is independent under applicable SEC rules and NASDAQ listing
standards.
ITEM 14
. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
KPMG LLP,
independent registered public accounting firm, audited our consolidated
financial statements for the years ended December 31, 2007 and 2006. In addition
to retaining KPMG LLP to audit the consolidated financial statements for the
year ended December 31, 2007, we retained KPMG LLP to provide other services.
The aggregate fees incurred by us for audit, audit-related, tax and other
services provided by KPMG LLP during the years ended December 31, 2007 and 2006,
were as follows:
|
|
2007
|
|
|
2006
|
|
Audit
fees
|
|
$
|
594,000
|
|
|
|
601,718
|
|
Audit-related
fees
|
|
|
38,350
|
|
|
|
3,510
|
|
Tax
fees
|
|
|
--
|
|
|
|
--
|
|
All
other fees
|
|
|
--
|
|
|
|
--
|
|
Total
|
|
$
|
632,350
|
|
|
|
605,228
|
|
Audit
fees include fees for the audit of the annual consolidated financial statements,
review of unaudited consolidated financial statements included in quarterly
reports on Form 10-Q, the audit of management’s assessment of the effectiveness
of internal control over financial reporting as of December 31, 2007 and 2006,
review of Securities and Exchange Commission filings, consents, comfort letters
and other services normally provided by the accountant in connection with
statutory and regulatory filings or engagements for those years.
Audit-related
fees include assurance and related services that are reasonably related to the
performance of the audit or review of financial statements. These services
include the review of registration statements and other services not directly
impacting the audit of the annual financial statements and related
services.
Tax fees
include tax services related to the preparation and/or review of, and
consultations with respect to, federal, state, and local tax returns. KPMG LLP
performed no such services during 2007 or 2006.
All other
fees include fees for services not considered audit or tax services. KPMG LLP
performed no such services during 2007 or 2006.
Pre-Approval
Policies and Procedures
All audit
and non-audit services performed by our independent registered public accounting
firm during the fiscal year ended December 31, 2007, were pre-approved by the
Audit Committee, which concluded that the provision of such services by KPMG,
LLP was compatible with the maintenance of that firm's independence in the
conduct of its auditing functions.
The Audit
Committee’s pre-approval policy provides for categorical pre-approval of
specified audit and permissible non-audit services. In addition, audit services
not covered by the annual engagement letter, audit-related services and tax
services require the specific pre-approval by the Audit Committee prior to
engagement. In addition, services to be provided by the independent registered
public accounting firm that are not within the category of pre-approved services
must be pre-approved by the Audit Committee prior to engagement, regardless of
the service being requested or the dollar amount involved.
The Audit
Committee may delegate pre-approval authority to one or more of its members. The
member or members to whom such authority is delegated are required to report any
pre-approval decisions to the Audit Committee at the meeting of the Audit
Committee following the decision. The Audit Committee is not permitted to
delegate to management its responsibilities to pre-approve services to be
performed by our independent registered public accounting firm.
PART
IV
ITEM 15
. EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
The
following exhibits are filed as part of this report:
Exhibit
|
|
Number
|
Description of
Exhibits
|
|
|
|
Chief
Executive Officer Certification adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
Chief
Financial Officer Certification adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
Certification
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
|
|
AIR
METHODS CORPORATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
April 29, 2008
|
|
By:
|
/s/ Aaron D. Todd
|
|
|
|
|
|
Aaron
D. Todd
|
|
|
|
|
|
Chief
Executive Officer
|
|
Pursuant
to the requirements of the Securities Act of 1934, this report has been signed
below by the following persons on behalf of the registrant in the capacities and
on the date indicated.
/s/ Aaron D. Todd
|
|
Chief
Executive Officer and Director
|
|
April
29, 2008
|
Aaron
D. Todd
|
|
|
|
|
|
|
|
|
|
/s/ Trent J. Carman
|
|
Chief
Financial Officer
|
|
April
29, 2008
|
Trent
J. Carman
|
|
Secretary
and Treasurer
|
|
|
|
|
|
|
|
/s/ Sharon J. Keck
|
|
Chief
Accounting Officer
|
|
April
29, 2008
|
Sharon
J. Keck
|
|
|
|
|
IV-2
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