UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. __)
Filed by
a Party other than the Registrant
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Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only
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(as
Permitted by Rule 14a-6(e)(2))
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þ
Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-11(c) or §240.14a-12
Ambassadors Group,
Inc.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
þ
No fee
required.
o
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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AMBASSADORS
GROUP, INC.
Dwight
D. Eisenhower Building
2001
South Flint Road
Spokane,
Washington 99224
April
6, 2009
To
Our Stockholders:
You
are cordially invited to attend the Annual Meeting of Stockholders (the “Annual
Meeting”) of Ambassadors Group, Inc. (the “Company”), which will be held at
10:00 a.m., local time, on May 7, 2009, at 2001 South Flint Road, Spokane,
Washington 99224. All holders of the Company’s outstanding common stock as of
the close of business on March 23, 2009, are entitled to vote at the Annual
Meeting. Enclosed is a copy of the Notice of Annual Meeting of Stockholders,
Proxy Statement and Proxy.
Your
vote is very important. Whether or not you plan to attend the Annual Meeting,
please vote as soon as possible. In order to facilitate your voting, you may
vote in person at the meeting by sending in your written proxy, by telephone or
by using the internet. Your vote by telephone, over the internet or by written
proxy will ensure your representation at the Annual Meeting if you cannot attend
in person. Please review the instructions on the proxy card regarding each of
these voting options.
Thank
you for your ongoing support and continued interest in Ambassadors Group,
Inc.
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Sincerely,
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Chadwick
J. Byrd
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Secretary
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AMBASSADORS
GROUP, INC.
Dwight
D. Eisenhower Building
2001
South Flint Road
Spokane,
Washington 99224
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held May 7, 2009
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”)
of Ambassadors Group, Inc., a Delaware corporation (the “Company”), will be held
at 10:00 a.m., local time, on May 7, 2009, at 2001 South Flint Road,
Spokane, Washington 99224, for the following purposes:
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1.
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To
elect three (3) Class II directors to hold office for a
three-year term and until their respective successors are elected and
qualified.
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2.
3.
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To
ratify the selection of BDO Seidman, LLP as the Company’s independent
registered public accounting firm for the year ending December 31,
2009.
To
approve the Company’s 2009 Equity Participation Plan (the “2009
Plan”).
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4.
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To
transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
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The
Board of Directors has fixed the close of business on March 23, 2009, as the
record date for the determination of stockholders entitled to notice of and to
vote at the Annual Meeting and all adjourned meetings thereof.
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By
Order of the Board of Directors
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Chadwick
J. Byrd
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Secretary
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Dated:
April 6, 2009
IMPORTANT:
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE, OR
YOU MAY VOTE BY TELEPHONE OR VIA THE INTERNET BY FOLLOWING THE DIRECTIONS ON THE
PROXY CARD. ANY ONE OF THESE METHODS WILL ENSURE REPRESENTATION OF YOUR SHARES
AT THE ANNUAL MEETING.
IMPORTANT
NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD
ON MAY 7, 2009: THIS NOTICE AND PROXY STATEMENT AND OUR 2008 ANNUAL
REPORT ARE AVAILABLE AT http://
bnymellon.mobular.net/bnymellon/epax.
T
ABLE OF CONTENTS
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PROXY
STATEMENT
...................................................................................................................................................................................................................
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1
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GENERAL
INFORMATION
....................................................................................................................................................................................................................................................................
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1
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ELECTION OF DIRECTORS
.................................................................................................................................................................................................................................................................................
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2
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Nominees
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2
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Business
Experience
..................................................................................................................................................................................................................................................................................
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3
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Relationships Among
Directors or Executive Officers
.....................................................................................................................................................................................................................
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5
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5
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Director
Nomination Process
...............................................................................................................................................................................................................................................................
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7
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Transactions
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7
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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC
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ACCOUNTING FIRM
.........................................................................................................................................................................................................................................................................................
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9
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APPROVAL OF THE COMANY'S 2009 EQUITY PARTICIPATION
PAN
.................................................................................................................................................................................................
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INDEPENDENT REGISTERED PUBLIC
ACCOUNTING
FIRM
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17
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Independent Registered Public Accounting
Firm Fees
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Audit
Committee’s Pre-Approval Policy
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Independence
.................................................................................................................................................................................................................................
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COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS
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Compensation Discussion and Analysis
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18
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Executive Officers
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25
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Summary Compensation Table
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Company Plans
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Equity Compensation Plan
Information
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Grants of Plan-Based Awards Table
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Option Exercises and Stock Vested
Table
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Pension
Benefits
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Nonqualified Deferred Compensation
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Director Compensation
Table
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36
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INTERESTS OF DIRECTORS, OFFICERS AND OTHERS IN CERTAIN
TRANSACTIONS
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COMPENSATION COMMITTEE REPORT
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REPORT OF AUDIT COMMITTEE
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CODE OF
ETHICS AND CONDUCT
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ANNUAL
MEETING ATTENDANCE
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STOCKHOLDER
COMMUNICATIONS
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AVAILABILITY OF ANNUAL
REPORT ON FORM
10-K
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STOCKHOLDER
PROPOSALS
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OTHER BUSINESS
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APPENDIX A
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A
-
1
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AMBASSADORS
GROUP, INC.
Dwight
D. Eisenhower Building
2001
South Flint Road
Spokane,
Washington 99224
PROXY STATEMENT
GENERAL INFORMATION
This
Proxy Statement is being furnished in connection with the solicitation of
proxies by the Board of Directors of Ambassadors Group, Inc. (the “Company”) for
use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held at
10:00 a.m., local time, on May 7, 2009, at 2001 South Flint Road, Spokane,
Washington 99224, and at any adjournment thereof. If you plan to attend the
Annual Meeting and vote in person and need directions, please call Julie Strugar
at (509) 568-7800. You may direct your vote without attending the Annual Meeting
by telephone, over the internet or by completing and mailing your proxy card or
voting instruction card in the enclosed, postage pre-paid envelope. Please refer
to the proxy card for instructions.
When such
proxy is properly executed and returned, the shares it represents will be voted
in accordance with any directions noted thereon. Any stockholder giving a proxy
has the power to revoke it at any time before it is voted by written notice to
the Secretary of the Company, by issuance of a subsequent proxy, by telephone,
or by the internet as more fully described on your proxy card. In addition, a
stockholder attending the Annual Meeting may revoke his or her proxy and vote in
person if he or she desires to do so, but attendance at the Annual Meeting will
not of itself revoke the proxy.
At the
close of business on March 23, 2009, the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting, the
Company had issued and outstanding 19,036,440 shares of common stock, $0.01 par
value per share (the “Common Stock”). Each share of Common Stock entitles the
holder of record thereof to one vote on any matter coming before the Annual
Meeting. Only stockholders of record at the close of business on March 23, 2009,
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
The
enclosed Proxy, when properly executed and returned, also confers discretionary
authority with respect to amendments or variations to the matters identified in
the Notice of Annual Meeting and with respect to other matters that may be
properly brought before the Annual Meeting. At the time of printing this Proxy
Statement, management of the Company is not aware of any other matters to be
presented for action at the Annual Meeting. If, however, other matters which are
not now known to management should properly come before the Annual Meeting, the
proxies hereby solicited will be exercised on such matters in accordance with
the best judgment of the proxy holders. Neither abstentions nor broker non-votes
will be counted for the purposes of determining whether any of the proposals
have been approved by the stockholders of the Company, although they will be
counted for purposes of determining the presence of a quorum.
The
election of directors requires a plurality of the votes cast by the holders of
the Common Stock. A “plurality” means that the individuals who receive the
largest number of affirmative votes cast are elected as directors, up to the
maximum number of directors to be chosen at the Annual Meeting.
The
ratification of the selection of the independent registered public accounting
firm and the approval of the Company’s 2009 Plan requires the affirmative vote
of the holders of a majority of the shares of Common Stock present and voting at
the Annual Meeting.
The
Company will pay the expenses of soliciting proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the proxy solicitation
materials. Proxies may be solicited personally, by mail, by telephone or via the
internet, by directors, officers and regular employees of the Company who will
not be additionally compensated therefore. It is anticipated that this Proxy
Statement and accompanying Proxy will be mailed on or about April 6, 2009, to
all stockholders entitled to vote at the Annual Meeting.
The
matters to be considered and acted upon at the Annual Meeting are referred to in
the preceding notice and are more fully discussed below.
ELECTION
OF DIRECTORS
(Item 1
of the Proxy Card)
Nom
inees
The
Company has a classified Board of Directors which is divided into three classes,
consisting of three Class I Directors, three Class II Directors and
three Class III Directors. At each annual meeting of stockholders,
directors are elected for a term of three years to succeed those directors whose
terms expire on that annual meeting date. The term of the three Class II
Directors, James M. Kalustian, John A. Ueberroth and Joseph J. Ueberroth, will
expire at this year’s Annual Meeting. The term of the three Class I
Directors, Jeffrey D. Thomas, Richard D. C. Whilden and Ricardo Lopez Valencia,
will expire at the Annual Meeting to be held in 2010. The term of the three
Class III Directors, Brigitte M. Bren, Daniel G. Byrne and Rafer L.
Johnson, will expire at the Annual Meeting to be held in 2011.
At this
year’s Annual Meeting, three Class II Directors are to be elected. The
nominees for election at the Annual Meeting as Class II Directors are the
incumbent directors, James M. Kalustian, John A. Ueberroth and Joseph J.
Ueberroth. The enclosed Proxy will be voted in favor of these individuals unless
other instructions are given. If elected, the nominees will serve as directors
until the Company’s Annual Meeting in the year 2012, and until their successors
are elected and qualified. If any nominee declines to serve or becomes
unavailable for any reason, or if a vacancy occurs before the election (although
management knows of no reason to anticipate that this will occur), the proxies
may be voted for such substitute nominees as the Board of Directors may
designate.
If a
quorum is present and voting, the three nominees for Class II Directors
receiving the highest number of votes will be elected as Class II
Directors. Abstentions and shares held by brokers that are present, but not
voted because the brokers are prohibited from exercising discretionary
authority, i.e., “broker non-votes,” will be counted as present for purposes of
determining if a quorum is present.
The table
below sets forth for the current directors, including the Class II nominees
to be elected at this meeting, certain information with respect to age and
background.
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NAME
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POSITION
WITH COMPANY
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AGE
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DIRECTOR
SINCE
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Class II
Directors, currently standing for election:
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James
M. Kalustian (2)(3)
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Director
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48
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2006
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John
A. Ueberroth
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Chairman
of the Board
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65
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1997
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Joseph
J. Ueberroth (1)
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Director
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2001
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Class I
Directors, whose term expires at the Annual Meeting to be held in
2010:
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Jeffrey
D. Thomas
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Director,
Chief Executive Officer and President
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2001
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Richard
D. C. Whilden (2)(3)
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Director
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75
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2001
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Ricardo
Lopez Valencia (2)(3)
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Director
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2007
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Class III
Directors, whose term expires at the Annual Meeting to be held in
2011:
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Brigitte
M. Bren (1)
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Director
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2001
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Daniel
G. Byrne (1)
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Director
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54
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2005
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Rafer
L. Johnson (1)
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Director
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2001
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(1)
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Member
of Audit Committee
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(2)
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Member
of Compensation Committee
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(3)
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Member
of Nominating Committee
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Business Experience
Class II
Directors
James M. Kalustian
has served
as a director of the Company since May 2006 and as a director of Conance, Inc.
since June 2007. Currently, he serves as an independent consultant for
healthcare, retail and consumer products. Mr. Kalustian served as the vice
president and general manager of Emerging Industries Business Unit of Fair Isaac
Corporation (“Fair Isaac”) from April 2007 to January 2009. He has also served
as vice president of Government Insurance Products Business Unit of Fair Isaac
from March 2006 to March 2007. From November 2004 to February 2007, Mr.
Kalustian served as vice president of the Pharmaceutical and Healthcare Business
Unit of Fair Isaac. He also has managed Fair Isaac’s business strategy
consulting practice. From May 1999 to October 2004, Mr. Kalustian led the
healthcare practice and account management discipline and served as chief
operating officer and a member of the board of directors of Braun Consulting,
Inc. From 1994 to 1999, he was also a co-founder of Vertex Partners, a
customer-focused strategic consulting firm that joined Braun in 1999. Prior to
founding Vertex Partners, Mr. Kalustian served as a manager at the consulting
firm of Corporate Decisions, Inc. (a division of Mercer Management Consulting),
and in marketing positions for Raytheon Company, W.R. Grace & Company and
Canada Dry.
John A. Ueberroth
has served
as chairman of the board of the Company since November 2001.
Mr. Ueberroth has also served as chairman and chief executive officer of
Preferred Hotel Group, Inc., a company in which he is the principal shareholder,
since 2004. He served as co-chairman, director, chief executive officer and
president of Ambassadors International, Inc. from 1995 to June 2004. He has
also been a member of the board of directors of Navigant International from
October 2003 to September 2006. Since 1989, Mr. Ueberroth has been a
principal of Contrarian Group, Inc., an investment and management company. From
1990 to 1993, he served as chairman and chief executive officer of Hawaiian
Airlines. From 1980 to 1989, Mr. Ueberroth served as president of Carlson
Travel Group. In addition, Mr. Ueberroth has served as chairman of the
Travel Industry Association of America during 1986 and 1987, and president of
the United States Tour Operators Association during 1987 and 1988.
Joseph J. Ueberroth
has
served as a director of the Company since May 2004. He currently serves as
president of Bellwether Financial Group, Inc., a position he has held since
1997. He also served as president, chief executive officer and director of
Ambassadors International, Inc. from August 2001 to April 2009.
His other involvements include founder and co-chairman of BellPort Group, Inc.,
an international marina company, and as a general partner and managing member of
CGI Opportunity Fund I and II, a venture capital operating company focused on
early stage, high growth companies. Mr. Ueberroth also serves on the board
of directors of Enwisen, Melones Internacional, S.A. de C.V, Apache
Produce Company and TerraNova Partners, LP.
Class I
Directors
Jeffrey D. Thomas
has served
as chief executive officer, president and director of the Company since
November 2001. He served as president of Ambassador Programs, Inc., a
wholly owned subsidiary of the Company, from August 1996 through
July 2002, and has served as chief executive officer since
January 2000. For Ambassadors International, Inc., he served as a director
from August 2001 through February 2002 and as chief financial officer
between January 1996 and February 2002. From 1989 to 1995,
Mr. Thomas held a variety of strategy and business development positions
with Adia Personnel Services (now Adecco), Contrarian Group, Inc., and Corporate
Decisions, Inc. Mr. Thomas currently serves on the board of directors of Inland
Northwest Council for Boy Scouts of America and Scientific Learning. He also
serves on the board of trustees of Greater Spokane Incorporated.
Richard D. C. Whilden
has
served as a director of the Company since November 2001. Since November
2006, Mr. Whilden has served as the chairman of the board of Climos, Inc., a
company primarily involved in climate sciences. Since 1990, Mr. Whilden has
been a principal of Contrarian Group, Inc., an investment and management
company. He served as a director of Ambassadors International, Inc. from
November 1995 to November 2008. From March 1996 to March 2000, he
served as president and chief executive officer of GetThere, Inc and from June
1996 to July 2000, he also served as chairman of the board. In 1993 and 1994, he
was chairman of the board of directors of Caliber Bank in Phoenix, Arizona, and
was the chief executive officer, president and chairman of the board of
directors of the bank’s holding company, Independent Bankcorp of Arizona, Inc.
From 1959 to 1989, Mr. Whilden was employed by TRW, Inc., during which time
he served as an executive vice president and general manager of the information
businesses segment from 1984 to 1989.
Ricardo Lopez Valencia
has
served as director of the Company since May of 2007. In July 2007,
Mr. Valencia joined Zamas Holdings, LLC, a venture capital and private
equity firm, as principal. From 2001 to June 2007, he served as the vice
president of Hispanic markets for ING Group. Since 2003, he has served as senior
vice president, primarily responsible for the company’s diversity marketing
initiatives and financial wealth development programs. Mr. Valencia currently
serves on the boards of Children’s Action Alliance, National 4-H, the National
Future Farmers of America Foundation, the Children’s Hospital Corporate
Advisory, the New York Hispanic Ballet and the West Ed, a national nonprofit
education research, development and service agency. Mr. Valencia has served on
the boards of the National PTA, International Association of Marketing Students
(DECA), the White House Millennium Youth Initiative and the U.S. Department of
Education’s Partnership for Family Involvement. He previously served as the
executive director of the National Future Farmers of America Alumni Association.
In 1983, he became the first Hispanic president of Arizona’s Future Farmers of
America. Mr. Valencia has also served as the director of education for USA
Today, where he helped make K-12 outreach a major initiative for the nation’s
newspaper. He also served as the director of professional development for career
and technical education for the State of Arizona.
Class III
Directors
Brigitte M. Bren
has served
as a director of the Company since November 2001. Since 1991, Ms. Bren
has served as co-founder, president and chief executive officer of International
Strategic Planning, Inc., an international business consulting firm specializing
in advising U.S. companies expanding internationally. Ms. Bren served as a
director of Ambassadors International, Inc., from February 2001 to November
2008. From 1999 to 2003, she served as of counsel to Arter & Hadden, LLP, in
its Los Angeles office. From 1993 to 1995, Ms. Bren served as vice
president of international marketing/sales and vice president of governmental
affairs for Mark Goodson Productions.
Daniel G. Byrne
has served as
a director of the Company since May 2005. Since 1983, Mr. Byrne has served as
executive vice president–finance, chief financial officer and assistant
secretary of Sterling Financial Corporation. He is also the assistant secretary
and treasurer of INTERVEST Mortgage Investment Company and Action Mortgage
Company, and the secretary and treasurer of Harbor Financial. Before joining
Sterling, Mr. Byrne was employed by the accounting firm of Coopers &
Lybrand in Spokane, Washington. He is a past lieutenant governor of Kiwanis
International. Mr. Byrne is a past member of the Board of Trustees, its
Executive Committee and the Finance Committee for Gonzaga Preparatory School. He
is a member of the Board of Directors of Spokane Community Mental Health. He
serves as a member of the American Institute of Certified Public Accountants,
the Washington Society of Certified Public Accountants, the Financial Manager’s
Society and the American Community Bankers Association and its Accounting
Committee. Mr. Byrne is a certified public accountant and graduated from
Gonzaga University in 1977 with a bachelor’s degree in Accounting.
Rafer L. Johnson
has served
as a director of the Company since November 2001 and as a director of
Ambassadors International, Inc. since 1995. Mr. Johnson is a world and
Olympic record holder in the decathlon. Mr. Johnson devotes a substantial
amount of his time to mentally and physically handicapped children and adults.
He has been associated with California Special Olympics since its inception in
1969, served as the president of its board of directors for 11 years, and
currently is chairman of its board of governors. He has been appointed to
national and international foundations and presidential commissions, with a
concentration on youth development. Mr. Johnson also is national head coach
for Special Olympics International and a member of its board of directors. In
addition, Mr. Johnson serves on a variety of special boards and committees
in the worlds of sports and community services.
Relationships
Among Directors or Executive
Officers
Joseph J.
Ueberroth, a member of the Company’s Board of Directors, is a nephew to John A.
Ueberroth, the Company’s chairman of the board. Jeffrey D. Thomas, the Company’s
chief executive officer, president and a member of the Company’s Board of
Directors, is married to Margaret M. Thomas, the Company’s executive vice
president, and president and chief operating officer of the Company’s wholly
owned subsidiary, Ambassador Programs, Inc. Other than these relationships,
there are no family relationships among the directors or executive officers of
the Company.
Meetings
of the Board of Directors and Committees of the Board
of Directors
During
2008, there were four meetings of the Board of Directors. The Board of Directors
has an Audit Committee, a Compensation Committee and a Nominating Committee. The
members of each committee are selected by the majority vote of the Board of
Directors. No director attended fewer than 75% of the aggregate number of
meetings held by the Board of Directors and all committees on which such
director served.
The Board
of Directors has determined that each of the directors, except Jeffrey D. Thomas
and John A. Ueberroth, is independent within the meaning of the rules and
regulations of the Securities and Exchange Commission and the Nasdaq Stock
Market, Inc. (“Nasdaq”) director independence standards (“Listing Standards”),
as currently in effect. Furthermore, the Board of Directors has determined that
each of the members of each of the committees of the Board of Directors is
“independent” within the meaning of the rules and regulations of the Securities
and Exchange Commission and the Nasdaq Listing Standards, as currently in
effect.
Audit
Committee
The
Company has a separately designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). The Audit Committee makes recommendations for
selection of the Company’s independent registered public accounting firm,
reviews with the independent registered public accounting firm the plans and
results of the audit engagement, approves professional services provided by the
independent registered public accounting firm, reviews the independence of the
independent registered public accounting firm, considers the range of audit and
any non-audit fees, and reviews the financial statements of the Company and the
adequacy of the Company’s internal accounting controls and financial management
practices.
The Audit
Committee consists of Daniel G. Byrne, chairman, Brigitte M. Bren, Rafer L.
Johnson, and Joseph J. Ueberroth. The Board of Directors has determined that,
based upon his prior work experience and his tenure and experience on the
Company’s Audit Committee, Mr. Byrne qualifies as an “Audit Committee
Financial Expert” as this term has been defined under the rules and regulations
of the Securities and Exchange Commission.
There
were eight meetings of the Audit Committee during the fiscal year ended
December 31, 2008. See
Report of Audit Committee.
The charter of the Audit Committee is attached as Appendix A to the
Company’s 2007 Proxy Statement filed with the Securities and Exchange Commission
on April 2, 2007.
Compensation
Committee
The
Compensation Committee is responsible for determining compensation for the
Company’s executive officers, reviewing and approving executive compensation
policies and practices, and providing advice and input to the Board of Directors
in the administration of the Company’s 2001 Equity Participation Plan (the
“Incentive Plan”). The Compensation Committee from time to time engages and
consults with independent compensation consultants Milliman USA, Inc.
(“Milliman”) and Watson Wyatt Worldwide (“Watson Wyatt”) in the performance of
its duties. Milliman and Watson Wyatt provide market data, historical
compensation information, and advice regarding best practices in executive
compensation and compensation trends for executive officers and
directors.
The
Compensation Committee consists of Richard D. C. Whilden, chairman, James M.
Kalustian
and
Ricardo Lopez Valencia.
There
were seven meetings of the Compensation Committee during the fiscal year ended
December 31, 2008. See
Compensation Committee
Report.
Nominating
Committee
The
Nominating Committee evaluates nominations for new members of the Board of
Directors. The Nominating Committee considers candidates based upon their
business and financial experience, personal characteristics, expertise that is
complementary to the background and experience of other Board of Directors
members, willingness to devote the required amount of time to carrying out the
duties and responsibilities of membership on the Board of Directors, willingness
to objectively appraise management performance, and any such other
qualifications the Nominating Committee deems necessary to ascertain the
candidates’ ability to serve on the Board of Directors.
The
Nominating Committee consists of Richard D. C. Whilden, chairman, James M.
Kalustian, and Ricardo Lopez Valencia.
There was
one meeting of the Nominating Committee during the fiscal year ended
December 31, 2008. The charter of the Nominating Committee is attached as
Appendix A to the Company’s 2008 Proxy Statement filed with the Securities
and Exchange Commission on April 8, 2008.
Director
Nomination
Process
The
Nominating Committee will consider director candidates recommended by
stockholders. Stockholders who wish to submit names of candidates for election
to the Board of Directors must do so in writing. The recommendation should be
sent to the following address: c/o Secretary, Ambassadors Group, Inc., Dwight D.
Eisenhower Building, 2001 South Flint Road, Spokane, Washington 99224. The
Company’s secretary will, in turn, forward the recommendation to the Nominating
Committee. The recommendation should include the following
information:
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A
statement that the writer is a stockholder and is proposing a candidate
for consideration by the Nominating Committee;
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The
name and contact information for the candidate;
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A
statement of the candidate’s occupation and background, including
education and business experience;
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Information
regarding each of the factors considered by the Nominating Committee, as
listed above, sufficient to enable the committee to evaluate the
candidate;
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A
statement detailing (i) any relationship or understanding between the
candidate and the Company, or any customer, supplier, competitor, or
affiliate of the Company, and (ii) any relationship or understanding
between the candidate and the stockholder proposing the candidate for
consideration, or any affiliate of such stockholder;
and
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A
statement that the candidate is willing to be considered for nomination by
the committee and willing to serve as a director if nominated and
elected.
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Stockholders
must also comply with all requirements of the Company’s bylaws, a copy of which
is available from the Company’s secretary upon written request, with respect to
nomination of persons for election to the Board of Directors. The Company may
also require any proposed nominee to furnish such other information as the
Company or the committee may reasonably require to determine the eligibility of
the nominee to serve as a director. In performing its evaluation and review, the
committee generally does not differentiate between candidates proposed by
stockholders and other proposed nominees, except that the committee may
consider, as one of the factors in its evaluation of stockholder recommended
candidates, the size and duration of the interest of the recommending
stockholder or stockholder group in the equity of the Company.
The
Nominating Committee did not receive any stockholder recommendations for
nomination to the Board of Directors in connection with this year’s Annual
Meeting. The nominees for election at the Annual Meeting as Class II
Directors are the incumbent directors, James M. Kalustian, John A. Ueberroth,
and Joseph J. Ueberroth. Stockholders wishing to submit nominations for next
year’s annual meeting of stockholders must notify the Company of their intent to
do so on or before the date specified under “Stockholder Proposals–Other
Stockholder Proposals and Director Nominations.”
Compensation
Committee
Interlocks
, Insider Participation in
Compensation Decisions and Certain Transactions
The
Compensation Committee is composed of three non-employee directors, Richard D.
C. Whilden, chairman, James M. Kalustian and Ricardo Lopez Valencia. No
executive officer of the Company has served during 2008 or subsequently as a
member of the board of directors or compensation committee of any entity which
has one or more executive officers who serve on the Company’s Board of Directors
or the Compensation Committee. During fiscal 2008, no member of the Company’s
Compensation Committee had any relationship or transaction with the Company
required to be disclosed pursuant to Item 404 of Regulation S-K under the
Exchange Act.
The Board of Directors unanimously
recommends that you vote FOR the election of each o
f
James M. Kalustian, John A.
Ueberroth, and Joseph J. Ueberroth
as Class II Directors of the
Company. Holders of proxies solicited by this Proxy Statement will vote the
proxies received by them as directed on the Proxy or,
if no direction is made, for each of
the above-named nominees. The election of directors requires a plurality of the
votes cast by the holders of the Company’s Common Stock present and voting at
the Annual Meeting.
RATIFI
CATION OF SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(
Item 2 of the Proxy
Card
)
The Audit
Committee of the Board of Directors has selected BDO Seidman, LLP (“BDO”) to
serve as the Company’s independent registered public accounting firm for the
year ending December 31, 2009, and the Board of Directors recommends that the
stockholders ratify such appointment at the Annual Meeting.
BDO has
no financial interest in the Company and neither it nor any member or employee
of the firm has had any connection with the Company in the capacity of promoter,
underwriter, voting trustee, director, officer or employee. The Delaware General
Corporation Law does not require the ratification of the selection of registered
public accounting firm by the Company’s stockholders, but in view of the
importance of the financial statements to the stockholders, the Board of
Directors deems it advisable that the stockholders pass upon such selection. A
representative of BDO will be present at this year’s Annual Meeting of
Stockholders. The representative will have the opportunity to make a statement
if he or she desires to do so and will be available to respond to appropriate
questions.
In the
event the stockholders fail to ratify the selection of BDO, the Audit Committee
will reconsider whether or not to retain the firm. Even if the selection is
ratified, the Audit Committee and the Board of Directors in their discretion may
direct the appointment of a different independent registered public accounting
firm at any time during the year if they determine that such a change would be
in the best interests of the Company and its stockholders.
The
Board of Directors unanimously recommends that you vote FOR this proposal
(Proposal 2 on the Proxy) to ratify the selection of the independent registered
public accounting firm. Holders of proxies solicited by this Proxy Statement
will vote the proxies received by them as directed on the Proxy or, if no
direction is made, in favor of this proposal. In order to be adopted, this
proposal must be approved by the affirmative vote of the holders of a majority
of the shares of Common Stock present and voting at the Annual
Meeting.
APPR
OVAL OF THE COMPANY’S 2009 EQUITY PARTICIPATION
PLAN
(
Item 3 of the Proxy
Card
)
The Board
of Directors has determined that it is advisable and in the best interest of the
Company’s stockholders to adopt the 2009 Plan. The Board of Directors
unanimously approved and adopted the 2009 Plan. The Board of Directors is
seeking approval of the 2009 Plan by the Company’s stockholders. The 2009 Plan
will become effective on May 7, 2009, provided that the 2009 Plan is approved by
the stockholders of the Company at the Annual Meeting.
The
principal features of the 2009 Plan are summarized below, but the summary is
qualified in its entirety by reference to the text of the 2009 Plan which is
attached hereto as Appendix A. The Company encourages you to read the 2009 Plan
carefully.
Purpose
of the 2009 Plan
The
purpose of the 2009 Plan is to provide additional incentive for directors,
employees and consultants to further the Company’s growth, development and
financial success by personally benefiting through the ownership of the
Company’s Common Stock, or other rights which recognize such growth, development
and financial success. The Board of Directors also believes that the 2009 Plan
will enable the Company to obtain and retain the services of directors,
employees and consultants that are considered essential to the Company’s
long-term success by offering them an opportunity to own stock and other rights
that reflect the Company’s financial success.
Administration
of the 2009 Plan
The 2009
Plan will be administered by a committee (the “Committee”) of three (3) or more
directors appointed by the Board of Directors. Each of the Committee
members must be (i) an “outside director” within the meaning of Section 162(m)
of the Code (ii) a “non-employee director” within the meaning of Rule 16b-3 of
the Exchange Act and (iii) “independent” for purposes of any applicable listing
requirements.
Subject
to the provisions of the 2009 Plan, the Committee has sole authority to make all
determinations under the 2009 Plan. The Committee also has such additional
powers as are delegated to it under the 2009 Plan. Absent specific rules to the
contrary, action by the Committee requires the consent of a majority of the
members of the Committee.
Securities
Subject to the 2009 Plan
Pursuant
to the 2009 Plan, the maximum aggregate number of shares of Common Stock that
may be issued is 1,200,000 shares, plus any shares of Common Stock which as of
May 7, 2009 are available for issuance under the Company’s 2001 Equity
Participation Plan, that the Company estimates to be approximately 200,000
shares. In addition to the extent that an award (or an award made previously
under the Company’s 2001 Equity Participation Plan) lapses, expires, is
canceled, is terminated unexercised or ceases to be exercisable for any reason,
or the rights of its holder (or holder for purposes of prior plan awards)
terminate, any shares of Common Stock subject to such award or prior plan award
will be available for the grant of a new award under the 2009 Plan, and the
1,200,000 maximum share amount that may be issued under the 2009 Plan will be
increased by such number of shares. The maximum number of shares of
Common Stock subject to option awards and stock appreciation rights (“SARs”)
granted to any one (1) employee during any calendar year under the 2009 Plan is
200,000 shares.
In the
event that changes are made to the Company’s outstanding Common Stock by reason
of an extraordinary cash dividend, reorganization, merger, consolidation,
combination, split-up, spin-off or exchange occurring after the date of grant,
any outstanding awards and any award agreements evidencing such awards will be
adjusted by the Board of Directors in its discretion as to the number and price
or other consideration subject to such awards. In addition, in the event of
certain adjustments to the Company’s Common Stock, the aggregate number of
shares available under the 2009 Plan and Section 162(m) deduction limits
will be appropriately adjusted by the Board of Directors.
Subject
to certain conditions, for purposes of the 2009 Plan, the fair market value of a
share of Common Stock as of any given date will be the closing price of a share
of Common Stock as reported on Nasdaq or any other exchange on which the Common
Stock of the Company may be listed on such date.
Eligibility
The
Company’s employees, consultants and directors are eligible to receive awards
under the 2009 Plan. As of March 1, 2009, the Company had approximately 232
employees. The Company currently has nine (9) directors, seven (7) of
which are independent directors. Subject to the provisions of the 2009 Plan, the
Committee determines which employee, consultant or director will be granted
awards. No employee, director or consultant is entitled to participate in the
2009 Plan as a matter of right, nor does any such participation constitute
assurance of continued employment or board service. Only those employees,
directors and consultants who are selected to receive grants by the Committee
may participate in the 2009 Plan.
Awards
Under the 2009 Plan
The 2009
Plan provides that the Committee may grant or issue stock options, restricted
stock awards, unrestricted stock awards, restricted stock units, performance
unit awards, performance share awards, distribution equivalent rights, stock
appreciation rights, or any combination thereof. In the past, the Committee has
only awarded stock options and restricted stock awards.
Non-Qualified Stock Options
.
Non-Qualified stock options (“NQSOs”) provide for the right to purchase shares
of Common Stock at a price determined by the Committee which may not be less
than fair market value on the date of grant, subject to certain adjustments, and
usually will become exercisable (in the discretion of the Committee) in one or
more installments after the grant date, subject to the completion of the
applicable vesting period. NQSOs may be granted for any term specified by the
Committee, but may not exceed ten (10) years.
Incentive Stock Options
.
Incentive stock options (“ISOs”) are designed to comply with the applicable
provisions of the Code, and will be subject to certain restrictions contained in
the Code. Among such restrictions, ISOs must have an exercise price not less
than the fair market value of a share of Common Stock on the date of grant, may
only be granted to employees, and must not be exercisable after a period of ten
(10) years measured from the date of grant. ISOs, however, may be subsequently
modified to disqualify them from treatment as ISOs. The total fair market value
of shares (determined as of the respective date or dates of grant) for which one
or more options granted to any employee by the Company (including all options
granted under the 2009 Plan and all other option plans of the Company) that may
for the first time become exercisable as ISOs during any one calendar year shall
not exceed the sum of $100,000. To the extent this limit is exceeded, the
options granted will be NQSOs. In the case of an ISO granted to an individual
who owns (or is deemed to own) more than 10% of the total combined voting power
of the Company (a “10% Owner”), the 2009 Plan provides that the exercise price
must be at least 110% of the fair market value of a share of Common Stock
subject to the ISO and the ISO must not be exercisable after a period of five
(5) years measured from the date of grant.
Restricted and Unrestricted
Stock
. Restricted stock may be issued at such price, if any, and may be
made subject to such restrictions (including time vesting or satisfaction of
performance milestones), as may be determined by the Committee. Restricted
stock, typically, is subject to forfeiture if certain conditions or restrictions
are not met. In general, restricted stock may not be sold, or otherwise
hypothecated or transferred, until the vesting restrictions applicable to such
shares are removed or expire. Recipients of restricted stock, unlike recipients
of options, generally will have voting rights and will receive dividends prior
to the time when the restrictions lapse. The Committee is also permitted to
award or sell up to 100,000 shares of unrestricted stock which are not subject
to restrictions under the 2009 Plan.
Restricted Stock Unit Awards.
The holder of a restricted stock unit will be entitled to receive payment in
cash or shares of Common Stock, based upon the number of restricted stock units
awarded to the holder, if the holder satisfies individual service-based vesting
requirements. The payment will be made no later than the fifteenth (15
th
) day of
the third (3
rd
)
calendar month following the end of the calendar year in which the restricted
stock unit first becomes vested. The payment will be subject to a “substantial
risk of forfeiture” under Section 409A of the Code. At the time of the award,
the Committee may, in its sole discretion, prescribe additional terms and
conditions or restrictions relating to the restricted stock
units,
including rules pertaining to the effect of termination of employment, director
status or consultant status prior to expiration of the applicable vesting
period. The terms and conditions of the award agreements need not be
identical.
Performance Unit Awards
.
Performance unit awards may be granted by the Committee based upon, among other
things, the contributions, responsibilities and other compensation of the
particular recipient. Generally, these awards will be based on specific
performance criteria. The holder of a performance unit will be entitled to
receive a cash payment equal to the dollar value assigned to such unit if the
holder and/or the Company satisfy the performance goals.
Performance Share Awards
.
Performance share awards entitle the holder to receive shares of Common Stock
upon the satisfaction of certain performance goals and objectives determined by
the Committee. At the time of such award, the Committee may prescribe additional
terms and conditions or restrictions relating to the awards, including, but not
limited to, rules pertaining to the effect of termination of the holder’s
employment, director status or consultant status prior to the expiration of the
applicable period. The holder of a performance share award will have no rights
as a stockholder of the Company until such time, if any, as the holder actually
receives shares pursuant to the award.
Distribution Equivalent
Rights
. Distribution equivalent rights entitle a holder to receive
bookkeeping credits, cash payments and/or Common Stock distributions equal in
amount to the distributions that would have been made to the holder if such
holder held a specified number of shares of Common Stock during the period the
holder held the right.
Stock Appreciation Rights
.
SARs provide for the payment of an amount to the holder based upon increases in
the price of the Company’s Common Stock over a set base price. The base price of
any SAR granted under the 2009 Plan must be at least 100% of the fair market
value of a share of Common Stock on the date of grant. Under the 2009 Plan, SARs
will be settled in cash or shares of Common Stock, or a combination of
both.
Termination
of Employment, Director Status or Consultant Status
Termination of Employment or
Director Status.
The following terms will apply with respect to the
termination of a holder’s employment with, or status as a director of, the
Company for any reason, except to the extent such terms are inconsistent with
the terms of the applicable award agreement (in which case the terms of the
applicable award agreement will control) or the terms of the holder’s employment
agreement with the Company (in which case the terms of the applicable employment
agreement will control). A holder’s rights to exercise NQSOs and SARs will
terminate:
(1)
Ninety (90) days after the date of termination of employment or after the date
of termination as a director, if such termination is for a reason other than the
holder’s total and permanent disability or death;
(2) One
(1) year after the date of termination of employment or director status, if such
termination is on account of the holder’s total and permanent disability;
or
(3) One
(1) year after the date of the holder’s death, if such termination is on account
of the holder’s death.
A
holder’s rights to exercise ISOs will terminate:
(1) Three
(3) months after the date of termination of employment, if such termination is
for a reason other than the holder’s total and permanent disability or
death;
(2) One
(1) year after the date of termination of employment, if such termination is on
account of the holder’s total and permanent disability; or
(3) One
(1) year after the date of the holder’s death, if termination is on account of
the holder’s death.
Subject
to the discretion of the Committee, if a holder’s employment with, or status as
a director of, the Company terminates for any reason prior to the satisfaction
or lapse of the restrictions, vesting requirements, or terms and conditions
applicable to an award of restricted stock or restricted stock unit, the
restricted stock or restricted stock unit, as the case may be, will immediately
be canceled, and the holder will forfeit any rights or interests in and with
respect to any such restricted stock or restricted stock unit.
Termination of Consultant Status.
The following terms will apply with respect to the termination of a
holder’s status as a consultant, except to the extent such terms are
inconsistent with the terms of the applicable award agreement (in which case the
terms of the applicable award agreement will control). A holder’s rights to
exercise NQSOs or SARs will terminate:
(1)
Ninety (90) days after the date of termination, if such termination is for a
reason other than the holder’s death; or
(2) One
(1) year after the date of the holder’s death, if such termination is on account
of the holder’s death.
Subject
to the discretion of the Committee, if the status of a holder as a consultant
terminates for any reason prior to the satisfaction or lapse of the
restrictions, vesting requirements, or terms and conditions applicable to an
award of restricted stock, or restricted stock unit, as the case may
be, the restricted stock or restricted stock unit will immediately be
canceled, and the holder will forfeit any rights or interests in and with
respect to any such restricted stock or restricted stock unit.
Special Termination Rule.
If
a holder’s employment with, or status as a director of, the Company is
terminated, and if, within ninety (90) days of such termination, such holder
becomes a consultant, the holder’s rights with respect to any award granted
prior to the date of termination may be preserved. Similarly, if a holder’s
status as a consultant is terminated, and if, within ninety (90) days of such
termination, the holder becomes an employee or a director, such holder’s rights
with respect to any award granted prior to the date of termination may be
preserved.
Termination for “Cause.”
If a
holder’s employment, director status or engagement as a consultant with the
Company is terminated by the Company for “Cause” (as defined in the 2009 Plan),
all of the holder’s then outstanding awards will expire immediately and be
forfeited in their entirety upon termination.
Terms
of Option Awards
Term of Options.
The term of
an option will be set by the Committee, but will not be more than 10 years from
the date the option is granted (five years in the case of an ISO granted to a
10% stockholder).
Vesting of Options.
Each
option agreement will contain the period during which the right to exercise the
option in whole or in part vests in the optionee.
Exercise of Options.
An
option may be exercised for any vested portion of the shares subject to the
option until the option expires. An option or a portion of an option may be
exercised by delivery of an irrevocable notice of exercise to the Company. The
exercise price must be paid in full in the manner prescribed by the Committee as
set forth in the 2009 Plan and the applicable option agreement. Separate stock
certificates will be issued by the Company for those shares of Common Stock
acquired pursuant to the exercise of the option.
“Change
of Control”
Upon a
“Change of Control,” options granted under the 2009 Plan will automatically
become fully vested and exercisable and shares of restricted stock granted under
the 2009 Plan will automatically become fully vested, no longer subject to
restrictions.
For a
holder who is a party to an employment or consulting agreement with the Company
that defines “Change of Control,” “Change of Control” will have the same meaning
as provided for in the agreement. For a holder who is not a party to such an
agreement, “Change of Control” will mean the satisfaction of any one or more of
the following conditions:
(1) Any
person, other than the Company or an affiliate or an employee benefit plan of
the Company, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding
securities;
(2) The
closing of a merger, consolidation or other business combination (a “Business
Combination”) other than a Business Combination in which holders of the Common
Stock immediately prior to the Business Combination have substantially the same
proportionate ownership of common stock of the surviving corporation immediately
after the Business Combination as immediately before;
(3) The
closing of an agreement for the sale or disposition of all or substantially all
of the Company’s assets to any entity that is not an affiliate;
(4) The
approval by the holders of shares of Common Stock of a plan of complete
liquidation of the Company other than a liquidation of the Company into any
subsidiary or a liquidation a result of which persons who were stockholders of
the Company immediately prior to such liquidation have substantially the same
proportionate ownership of shares of common stock of the surviving corporation
immediately after such liquidation as immediately before; or
(5)
Within any twenty-four (24) month period, the Company’s incumbent directors
cease to constitute at least a majority of the board of directors.
A “Change
of Control” will not occur if the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
Prohibition
Against Repricing
The
Committee is not permitted to reduce the exercise price of any outstanding
option or SAR, or grant any new award or make any payment of cash in
substitution for or upon the cancellation of options or SARs previously granted,
unless such action is approved by the holders of a majority of the shares of the
Company Common Stock or results from a “Change of Control” or adjustment as
provided in the 2009 Plan.
Transferability
of Awards
Awards
generally may not be assigned, transferred, sold, exchanged, encumbered, pledged
or otherwise hypothecated or disposed of in any manner except (i) by will or by
the laws of descent and distribution or (ii) except for an ISO, by gift to
certain family members of the holder. Awards may be exercised, during the
lifetime of the holder, only by the holder or by the holder’s guardian or legal
representative unless it has been transferred by gift to a permitted family
member of the holder, in which case it may only be exercised by such transferee.
Except for awards which are ISOs, awards may be transferred pursuant to the
terms of any valid separation agreement or divorce decree.
Amendment
and Termination of the 2009 Plan
The 2009
Plan will continue in effect until the tenth (10
th
)
anniversary of the date on which it is adopted by the Board of
Directors. The Board of Directors in its discretion may terminate the
2009 Plan at any time with respect to any shares for which awards have not been
granted; provided, however, that the 2009 Plan’s termination must not materially
and adversely impair the rights of a holder with respect to any outstanding
award without the consent of the holder. The Board of Directors has the right to
alter or amend the 2009 Plan from time to time; provided, however, that without
stockholder approval, no amendment or modification of the 2009 Plan may (i)
materially increase the benefits accruing to holders, (ii) except as
otherwise expressly provided in the 2009 Plan, materially increase the number of
shares of Common Stock subject to the 2009 Plan or certain individual award
agreements, (iii) materially modify the requirements for participation in
the 2009 Plan, or (iv) amend, modify or suspend the provisions of the 2009
Plan relating to repricing prohibitions or amendment and termination of the 2009
Plan. In addition, no change in any outstanding award may be made
which would materially and adversely impair the rights of a holder with respect
to such award without the consent of the holder (unless such change is required
in order to cause the benefits under the 2009 Plan to qualify as
“performance-based” compensation within the meaning of Section 162(m) of the
Code) or to exempt the 2009 Plan or any award from Section 409A of the
Code.
Federal
Income Tax Consequences Associated with the 2009 Plan
The
following is a general summary under current law of the material federal income
tax consequences to participants in the 2009 Plan. This summary deals with the
general tax principles that apply and is provided only for general information.
Some kinds of taxes, such as state and local income taxes, are not discussed.
Tax laws are complex and subject to change and may vary depending on individual
circumstances and from locality to locality. The summary does not discuss all
aspects of income taxation that may be relevant in light of a holder’s personal
circumstances. This summarized tax information is not tax advice.
NQSOs.
If an optionee is
granted a NQSO under the 2009 Plan, the optionee will not have taxable income on
the grant of the option. Generally, the optionee will recognize ordinary income
at the time of exercise in an amount equal to the difference between the option
exercise price and the fair market value of a share of Common Stock at such
time. The optionee’s basis in the stock for purposes of determining gain or loss
on subsequent disposition of such shares generally will be the fair market value
of the Common Stock on the date the optionee exercises such option. Any
subsequent gain or loss generally will be taxable as capital gains or
losses.
ISOs.
No taxable income is
recognized by the optionee at the time of the grant of an ISO, and no taxable
income is recognized for regular tax purposes at the time the option is
exercised; however, the excess of the fair market value of the Common Stock
received over the option price is an “item of adjustment” for alternative
minimum tax purposes. The optionee will recognize taxable income in the year in
which the purchased shares are sold or otherwise made the subject of a taxable
disposition. For federal tax purposes, dispositions are divided into two
categories: qualifying and disqualifying. A qualifying disposition occurs if the
sale or other disposition is made more than two years after the date the option
for the shares involved in such sale or disposition is granted and more than one
year after the date the shares are transferred upon exercise. If the sale or
disposition occurs before these two periods are satisfied, then a disqualifying
disposition will result.
Upon a
qualifying disposition, the optionee will recognize long-term capital gain in an
amount equal to the excess of the amount realized upon the sale or other
disposition of the purchased shares over the exercise price paid for the shares.
If there is a disqualifying disposition of the shares, then the excess of the
fair market value of those shares on the exercise date over the exercise price
paid for the shares will be taxable as ordinary income to the optionee. Any
additional gain or loss recognized upon the disposition will be recognized as a
capital gain or loss by the optionee.
If the
optionee makes a disqualifying disposition of the purchased shares, then the
Company will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of the fair market value of
such shares on the option exercise date over the exercise price paid for the
shares. The Company will not be entitled to any income tax deduction if the
optionee makes a qualifying disposition of the shares.
Restricted Stock.
In general,
a participant will not be taxed upon the grant or purchase of restricted stock
that is subject to a “substantial risk of forfeiture,” within the meaning of
Section 83 of the Code. However, at the time the restricted stock is no
longer subject to the substantial risk of forfeiture, the participant will be
taxed on the difference, if any, between the fair market value of the Common
Stock on the date the restrictions lapsed and the amount the participant paid,
if any, for such restricted stock. Recipients of restricted stock under the 2009
Plan may, however, make an election under Section 83(b) of the Code to be
taxed at the time of the grant or purchase on an amount equal to the difference,
if any, between the fair market value of the Common Stock on the date of
transfer and the amount the participant paid, if any, for such restricted stock.
If the Section 83(b) election is made, the participant will not recognize
any additional income as and when the restrictions applicable to the restricted
stock lapses.
Restricted Stock
Units
. A participant generally will not have ordinary income
upon grant of restricted stock units. When cash or shares of Common Stock are
delivered under the terms of the award, the participant will recognize ordinary
income equal to the cash payment or the fair market value of the shares
delivered, as the case may be, less any amount paid by the participant for such
shares.
Performance Unit Awards.
A
participant who has been granted a performance unit award generally will not
recognize taxable income at the time of grant. When an award is paid the
participant generally will recognize ordinary income.
Performance Share
Awards
.
A participant
generally will not have ordinary income upon grant of performance share awards.
When the shares of Common Stock are delivered under the terms of the award, the
participant will recognize ordinary income equal to the fair market value of the
shares delivered, less any amount paid by the participant for such
shares.
Distribution
Equivalent Rights
.
A
recipient of a distribution equivalent right generally will not recognize
taxable income at the time of grant, and the Company will not be entitled to a
deduction at that time. At the time a distribution equivalent is paid, however,
the participant will recognize ordinary income.
SARs.
No taxable income is
generally recognized upon the receipt of a SAR, but upon exercise of the SAR the
fair market value of any shares received will be taxable as ordinary income to
the recipient in the year of such exercise.
Stock Payments.
A participant
who receives a stock payment in lieu of a cash payment generally will be taxed
as ordinary income in the amount as if he or she received the cash
payment.
Tax Deductions and
Section 162(m) of the Code.
In general, the Company will be entitled
to a compensation deduction when and for the same amount that an award recipient
recognizes ordinary income. Under Section 162(m), income tax deductions of
publicly-held corporations may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits paid) for specified executive officers exceeds $1 million in any one
year. This Section 162(m) deduction limit, however, does not apply to
certain “performance-based compensation” as provided for by the Code and
established by an independent compensation committee. In particular, stock
options and SARs will satisfy the “performance-based compensation” exception if
the awards are made by a qualifying compensation committee, the underlying 2009
Plan sets the maximum number of shares that can be granted to any person within
a specified period and the compensation is based solely on an increase in the
stock price after the grant date (
i.e.
, the exercise price or
base price is greater than or equal to the fair market value of the stock
subject to the award on the grant date). Performance or incentive awards granted
under the 2009 Plan may qualify as “qualified performance-based compensation”
for purposes of Section 162(m), if such awards are granted or vest upon the
pre-established objective performance goals described above.
Section 409A of the Code.
Certain awards under the 2009 Plan may be considered “nonqualified
deferred compensation” for purposes of Section 409A of the Code, which
imposes certain additional requirements regarding the payment of deferred
compensation. Generally, if at any time during a taxable year a nonqualified
deferred compensation 2009 Plan fails to meet the requirements of
Section 409A, or is not operated in accordance with those requirements, all
amounts deferred under the 2009 Plan for the taxable year and all preceding
taxable years, by any participant with respect to whom the failure relates, are
includible in gross income for the taxable year to the extent not subject to a
substantial risk of forfeiture and not previously included in gross income. If a
deferred amount is required to be included in income under Section 409A,
the amount also is subject to interest and an additional income tax. The
interest imposed is equal to the interest at the underpayment rate plus one
percentage point, imposed on the underpayments that would have occurred had the
compensation been includible in income for the taxable year when first deferred,
or if later, when not subject to a substantial risk of forfeiture. The
additional income tax is equal to 20% of the compensation required to be
included in gross income.
2009
Plan Benefits
Because
grants under the 2009 Plan are subject to the discretion of the Committee,
awards under the 2009 Plan that will be made for the upcoming year are
undeterminable. Future option exercise prices under the 2009 Plan are also
indeterminable because they will be based upon the fair market value of the
Company’s Common Stock on the date of grant.
The Board of
Directors unanimously recommends that you vote FOR this proposal (Proposal 3 on
the Proxy) to approve the Company’s 2009 Plan. Holders of proxies solicited by
this Proxy Statement will vote the proxies received by them as directed on the
Proxy or, if no direction is made, in favor of this proposal. In order to be
adopted, this proposal must be approved by the affirmative vote of the holders
of a majority of the shares of Common Stock present and voting at the Annual
Meeting.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Independent
Registered Public Accounting Firm
Fees
The
following table represents fees charged for professional audit services rendered
by BDO for the audit of the Company’s financial statements for the years ended
December 31, 2008 and 2007, and fees billed by BDO for other services
during those years.
|
|
|
2008
|
|
2007
|
|
|
Audit
Fees
|
|
$
|
351,000
|
|
$
|
309,000
|
|
|
Audit
- Related Fees
|
|
|
17,000
|
|
|
10,000
|
|
|
Tax
Fees
|
|
|
—
|
|
|
—
|
|
|
All
Other Fees
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
368,000
|
|
$
|
319,000
|
|
Audit
Fees consist of fees billed for professional services rendered for the
integrated audit of the Company’s consolidated financial statements and the
review of the Company’s interim consolidated financial statements included in
quarterly reports and services that are normally provided by BDO in connection
with statutory and regulatory filings or engagements.
Audit-Related
Fees consist of fees billed for assurance and related services, primarily
related to the audit of the Company’s employee benefit plan financial
statements, and are not reported under “Audit Fees.”
All Other
Fees consist of fees for products and services other than the services described
above.
Audit Committee’s Pre-Approval Policy
During
2008, the Audit Committee of the Board of Directors operated under policies and
procedures pre-approving all audit and non-audit services provided by the
independent registered public accounting firm and prohibiting certain services
from being provided by the independent registered public accounting firm. The
Company may not engage its independent registered public accounting firm to
render any audit or non-audit service unless the service is approved in advance
by the Audit Committee or the engagement to render the service is entered into
pursuant to the Audit Committee’s pre-approval policies and
procedures.
On an
annual basis, the Audit Committee may pre-approve services that are expected to
be provided to the Company by the independent registered public accounting firm
during the fiscal year. At the time such pre-approval is granted, the Audit
Committee specifies the pre-approved services and establishes a monetary limit
with respect to each particular pre-approved service, which limit may not be
exceeded without obtaining further pre-approval under the policy. For any
pre-approval, the Audit Committee considers whether such services are consistent
with the rules of the Securities and Exchange Commission on auditor
independence.
If the
cost of any service exceeds the pre-approved monetary limit, such service must
be approved by the Audit Committee. The Audit Committee has delegated authority
to the chairman of the Audit Committee to pre-approve any audit or non-audit
services to be provided to the Company by the independent registered public
accounting firm for which the cost is less than $20,000 per quarter. The
chairman must report any pre-approval pursuant to the delegation of authority to
the Audit Committee at its next scheduled meeting.
Independence
The Audit
Committee has considered whether BDO’s provision of services other than its
audit of the Company’s annual financial statement and its review of the
Company’s quarterly financial statements is compatible with maintaining such
independent registered public accounting firm’s independence and has determined
that it is compatible.
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation
Discussion and Analysis
Overview
This
Compensation Discussion and Analysis describes the Company’s compensation
philosophy, objectives, and processes, including the methodology for determining
executive compensation for the “Named Executive Officers,” as defined under the
section entitled “Compensation of Executive Officers and Directors–Summary
Compensation Table.” Please also refer to the more detailed compensation
disclosures beginning with and following the “Summary Compensation Table”
contained in this Proxy Statement.
Overview
of Compensation Philosophy and Guiding Principles
The
Company recognizes and values the critical role that executive leadership plays
in its performance. The Company’s executive compensation philosophy is intended
to ensure that executive compensation is aligned with its business strategy,
objectives and stockholder interests, and is designed to attract, motivate and
retain highly qualified and key executives. The Company’s executive compensation
philosophy is designed to pay conservatively competitive total compensation
based on continuous improvements in corporate performance, and individual and
team contributions that are aligned with stated business strategies and
objectives. To implement its philosophy, the Company sets base compensation at
competitive levels relative to executives holding positions with similar
responsibilities at comparable companies and focuses heavily on performance
based incentives to motivate and encourage employees to achieve superior results
for the Company and its stockholders. Executive compensation elements generally
consist of a base salary, an annual cash award and long-term equity
compensation.
Role
of the Compensation Committee
The
Company’s Board of Directors appoints members to the Compensation Committee to
assist in recommending, managing and reviewing executive compensation for the
Named Executive Officers. The Compensation Committee reviews and approves
salaries, annual awards, long-term incentive compensation, benefits, and other
compensation in order to ensure that the Company’s executive compensation
strategy and principles are aligned with its business strategy, objectives and
stockholder interests. The Compensation Committee meets quarterly prior to the
quarterly meeting of the Board of Directors. Each member of the Compensation
Committee is independent within the meaning of the rules and regulations of the
Securities and Exchange Commission and the Nasdaq Listing Standards, as
currently in effect. Further, the Board of Directors has determined that each
member of the Compensation Committee is an “outside director” within the meaning
of Section 162(m) of the Internal Revenue Code (the “Code”).
The
Compensation Committee engaged Watson Wyatt to act as the executive compensation
consultant for the Company during 2008. The Compensation Committee
maintains the sole authority to enter or terminate the relationship with an
independent compensation consultant such as Watson Wyatt. The
Compensation Committee engaged Watson Wyatt to assist in the executive
compensation process by providing competitive compensation information from
peer-group companies and from published surveys for a company with comparable
revenues.
Executive
Compensation Methodology
The
Compensation Committee takes into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level and
composition of compensation to be paid to the Named Executive Officers. The
Compensation Committee considers such corporate performance measures as net
income, earnings per share, cash flow, growth and enrollments, and may vary its
quantitative measurements from employee to employee, and from year to year. The
Compensation Committee also appreciates the importance of achievements that may
be difficult to quantify, and accordingly recognizes qualitative factors such as
superior individual performance, new responsibilities or positions within the
Company, leadership ability and overall management contributions to the Company.
The Company’s Chief Executive Officer consults with the Compensation Committee
and provides recommendations with respect to the compensation of other Named
Executive Officers. The Compensation Committee determines the compensation of
the Chief Executive Officer in its executive sessions. Watson Wyatt assists the
Compensation Committee in aligning the Company’s practices with the marketplace
for talent, internal equity and performance requirements unique to the
Company.
In
general, the process by which the Compensation Committee makes decisions
relating to executive compensation includes, but is not limited to,
consideration of the following factors:
|
·
|
The
Company’s executive compensation philosophy and
practices
|
|
·
|
The
Company’s performance relative to peers and industry
standards
|
|
·
|
Success
in attaining annual and long-term goals and
objectives
|
|
·
|
Alignment
of executive interests with stockholder interests through equity-based
awards and performance-based
compensation
|
|
·
|
Individual
and team contributions, performance and
experience
|
|
·
|
Total
compensation and the mix of compensation elements for each Named Executive
Officer
|
|
·
|
Competitive
market practices
|
|
·
|
Individual
and team contributions, performance and
experience
|
|
·
|
Total
compensation and the mix of compensation elements for each Named Executive
Officer
|
|
·
|
Competitive
market practices
|
Watson
Wyatt assisted the Compensation Committee in identifying executives holding
comparable positions found in published surveys and proxy data sources
reflecting industry practices of similar organizations. Published survey data
selection for comparable executive positions was based primarily on annual
revenues. The surveys used for the 2008 compensation decision process
included:
|
·
|
2007/08
Watson Wyatt Top Management Compensation Report
. This
survey consists of executive compensation data from 1,375 organizations in
77 industries across the United
States.
|
|
·
|
2007/08
Mercer Executive Benchmark Database.
This survey covers
173 positions as reported by 2,450 organizations located in the United
States.
|
In
addition to considering survey data, Watson Wyatt performed a proxy analysis of
20 peer companies. The Compensation Committee and management determine the
criteria for peer company selection that included non-financial, profitable,
companies with non-founder chief executive officers with sales between $200
million and $450 million, market capitalizations between $300 million and $1
billion, and chief executive officers with over one year of tenure. The
following companies were included in the peer group comparison:
|
·
B&G
Foods Inc
|
·
Inter
Parfums Inc
|
·
Synaptics
Inc
|
|
·
Medical
Action Industries
|
·
Skillsoft
Plc
|
·
Cognex
Corp
|
|
·
Foster
(Lb) Co
|
·
Raven
Industries Inc
|
·
National
Presto Inds Inc
|
|
·
Argon
St Inc
|
·
Park
Electrochemical Corp
|
·
Wd-40
Co
|
|
·
Lindsay
Corp
|
·
Prepaid
Legal Services Inc
|
·
Martek
Biosciences Corp
|
|
·
K-Sea
Transportation
|
·
Medicines
Co
|
·
Epiq
Systems Inc
|
|
·
Blue
Nile Inc
|
·
K-Swiss
Inc
|
|
The
survey data and proxy data utilized by the Compensation Committee generally
includes:
|
·
|
annual
incentive award,
|
|
·
|
total
cash compensation,
|
|
·
|
long-term
incentives, and
|
|
·
|
retirement
and capital accumulation,
|
|
·
|
benefits
and perquisites, and
|
The
Compensation Committee assesses the competitive market of each component of the
executives’ compensation and in the aggregate. Based upon these competitive
reference points the Compensation Committee establishes base salary ranges and
target short-term and long-term incentive amounts. The Compensation Committee
then considers each individuals experience and performance in determining base
salary levels and determines the required performance for short and long-term
target incentives.
In
implementing the Company’s compensation program, the Compensation Committee
seeks to achieve a balance between compensation and the Company’s annual and
long-term budgets and business objectives, encourage executive performance in
furtherance of stated Company goals, provide variable compensation based on the
performance of the Company, create a stake in the executive officer’s efforts by
encouraging stock ownership in the Company, and align executive remuneration
with the long-term interests of the Company’s stockholders.
Executive
Compensation Program Elements
The
Compensation Committee annually reviews the Company’s compensation program to
ensure that pay levels and incentive opportunities are competitive with the
market and reflect the performance of the Company. For 2008, the Compensation
Committee established targets for annual incentive awards and equity based
compensation based on a percentage of base salary. The particular elements of
the compensation program for the Named Executive Officers consist of the
following:
Base Salary
. Base salary is
set to attract and retain executive talent taking into consideration competitive
market conditions with respect to comparable companies. Base salaries for the
Named Executive Officers are established at levels considered appropriate in
light of the duties and scope of responsibilities of each executive officer’s
position, and the experience the individual brings to the position. Salaries are
reviewed periodically and adjusted as warranted. Factors that are considered in
this review of executive officers base salary include, but are not limited to,
sustained individual performance and long-term business growth and development.
Base salaries are managed within a competitive range for each position,
reflecting both job performance and market forces. Jeffrey D. Thomas’ salary has
not changed since 2004 and Margaret M. Thomas’ salary has not changed since
2007. In 2008, Chadwick Byrd’s salary increased approximately 8% to $168,000, as
compared to $155,000.
Annual Incentive Awards
.
Annual incentive awards are designed to focus the Company’s Named Executive
Officers on annual operating achievement by compensating individuals based on
achievement of specific goals related to Company performance and long-term
stockholder value. Named Executive Officers are eligible for an annual incentive
award, calculated by the Compensation Committee as a percentage of the executive
officer’s base salary. For 2008, the maximum award for Named Executive Officers
ranged from 100% to 220% of base annual salary, depending on the executive
officer’s position. Although amounts would have been payable to both Mr. Thomas
and Mrs. Thomas in 2008, they voluntarily declined their annual
incentive awards due to decreased earnings and the current economic downturn.
The Compensation Committee appreciated this proactive action during these
unusual times. Mr. Byrd received an award of $91,000, a 23% decrease from the
prior year, which is also due to decreased earnings and the current state of the
economy. The Compensation Committee engaged Watson Wyatt to review executive
compensation for 2008 and beyond, and to improve the correlation between the
Company’s annual incentive awards and long-term stockholder value.
The
Company
pays
annual incentive awards to its Named Executive Officers based upon the
achievement of pre-established targets that are indicative of the Company’s
performance, as well as individual performance milestones to the extent they are
met by the executive officer.
The
pre-established targets and individual performance milestones for 2008 for each
Named Executive Officer were approved by the Compensation Committee in August
2007. In February 2009, the Compensation Committee reviewed actual performance
during 2008 against the pre-established targets and individual milestones. A
summary of the results of the Compensation Committee’s review is set forth
below:
Jeffrey D. Thomas
.
Mr. Thomas was eligible for a maximum incentive award of $880,000. Mr. Thomas
voluntarily declined his incentive award for 2008. Therefore, the Compensation
Committee did not evaluate the following performance milestones: 1) Earnings per
Share; 2) Non-Traditional Enrollment; 3) Business Expansion; 4) Delegates
Traveled; and 5) Leadership Development. Mr. Thomas also declined participation
in two special incentive opportunities based on: 1) Earnings per Share and 2)
2009 Enrollments.
Margaret M. Thomas
.
Mrs. Thomas was eligible for a maximum incentive award of $400,000. Mrs. Thomas
voluntarily declined her incentive award for 2008. Therefore, the Compensation
Committee did not evaluate the following performance milestones: 1) Earnings per
Share; 2) Delegate Count; 3) Delegates Traveled; and 4) Value of the Brand. Mrs.
Thomas also declined her two special incentive opportunities based
on: 1) Earnings per Share and 2) 2009 Enrollments.
Chadwick J. Byrd
. Mr.
Byrd was eligible for a maximum incentive award of $175,000. The Compensation
Committee awarded Mr. Byrd an incentive award of $91,000 based upon an
evaluation of the following six performance milestones: 1) Earnings per Share;
2) COGS, OpEX, and Tax Efficiencies; 3) Development of Green Managers; and 4)
Delegates Traveled. In addition, there are two special incentive opportunities
based on: 1) Earnings per Share and 2) Enrollments. The Compensation Committee
assessed Mr. Byrd's performance relative to each component for 2008 as
follows:
Earnings
per Share: A maximum of $3,500 was payable for every $0.01 that the Company’s
earnings per share exceeded $1.57 per share. The Company’s earnings per share
for 2008 was $0.97. The Compensation Committee determined that no payment would
be made to Mr. Byrd’s annual incentive award with regard to this
milestone.
Cost of
Goods Sold (“COGS”), Operating Expenses (“OpEx”), and Tax efficiencies: A
maximum of $3,000 was payable for every $100,000 COGS, OpEx and/or Tax
efficiencies that were realized. The Compensation Committee determined that Mr.
Byrd exceeded outstanding expectations in achieving this milestone and awarded
him $81,000.
Development
of Management Successors: A maximum of $10,000 was payable for every Manager (up
to two) who was immediately capable of promotion to their immediate supervisors
position by December 31, 2008. A maximum of $30,000 was payable for every
Manager who was immediately capable of promotion to the CFO position (limited to
two) by December 31, 2008. The Compensation Committee determined that Mr. Byrd
met basic expectations in achieving developed successor managers and awarded him
13% of the potential payment, increasing his annual incentive award by
$10,000.
Delegates
Traveled: A maximum of $10,000 was payable based upon delegates traveled in 2008
exceeding those traveled in 2007. The Compensation Committee determined that no
payment would be made to Mr. Byrd’s annual incentive award with regard to this
milestone.
Earnings
per Share: A maximum of $3,500 was payable for every $0.01 that the Company’s
earnings per share exceeded $1.15 per share. The Company’s earnings per share
for 2008 was $0.97. The Compensation Committee determined that no payment would
be made to Mr. Byrd’s annual incentive award with regard to this
milestone.
Enrollments:
A maximum of $1,670 was payable for every 1,000 enrollments over 25,000 at
October 15, 2008 (limited to a total payout of $25,050). The Compensation
Committee determined that no payment would be made to Mr. Byrd’s annual
incentive award with regard to this milestone.
Information
regarding the annual incentive compensation for 2008 awarded to each of the
Named Executive Officers is shown in the “Non-Equity Incentive Plan Information”
column of the “Summary Compensation Table” and the “Estimated Future Payouts
Under Non-Equity Incentive Plan Awards” column of the “Grants of Plan-Based
Awards Table”.
Watson
Wyatt performed an executive compensation survey for 2009, which found salaries
in the aggregate to be 38% below median competitive values and annual incentive
value to be 10% above median competitive values for the Named Executive
Officers. In August 2008, the Compensation Committee approved increases in base
salary for the Named Executive Officers, based upon Watson Wyatt research and
their recommendations, which were built around the position, responsibilities,
experience and performance of the Named Executive Officers. However, based upon
economic conditions and the outlook for 2009, management and the Compensation
Committee determined that it was not the appropriate time to implement the
Watson Wyatt market and performance based recommendations. In addition to
foregoing a 20-35% base salary increase, the Named Executive Officers agreed to
reduce their maximum annual incentive awards for 2009 by approximately 50-65%
from 2008 levels.
The
pre-established targets and individual performance milestones for 2009 for each
Named Executive Officer were approved by the Compensation Committee in February
2009. A summary of the results of the Compensation Committee’s review is set
forth below:
2009 Incentive Plan
.
Mr. Thomas will be eligible for a target incentive award of $150,000 and a
maximum incentive award of $300,000. Mrs. Thomas will be eligible for a target
incentive award of $66,000 and a maximum incentive award of $132,000. Mr. Byrd
will be eligible for a target incentive award of $42,000 and a maximum incentive
award of $84,000. The Compensation Committee will determine the amount of the
incentive based upon an evaluation of the following four performance milestones:
1) Earnings per Share; 2) Gross Revenue; 3) Net Revenue; and 4) Operational
Excellence. The Compensation Committee will assess performance relative to each
component for 2009 as follows:
Earnings
per Share: $5,250, $1,980, and $1,260 will be payable for every $0.01 that the
Company’s earnings per share exceeds $0.80 per share, up to $1.00 per share, for
Mr. Thomas, Mrs. Thomas, and Mr. Byrd, respectively.
Enrolled
Revenue: $1,500, $660, and $420 will be payable for every $1.0 million that the
Company’s gross enrolled revenue for 2010 programs on October 16, 2009 exceeds
$150.0 million, up to $200.0 million, for Mr. Thomas, Mrs. Thomas, and Mr. Byrd,
respectively.
Gross
Margin: $2,500, $1,100, and $700 will be payable for every $1.0 million that the
Company’s gross margin exceeds $60.0 million, up to $90.0 million, for Mr.
Thomas, Mrs. Thomas, and Mr. Byrd, respectively.
Operational
Excellence: $563, $330, and $210 will be payable for every one day that the
Company’s operational excellence exceeds 100 days, up to 180 days, for Mr.
Thomas, Mrs. Thomas, and Mr. Byrd, respectively. Days of operational excellence
measure safety, customer operations, and customer communication across 18
measurements, all of which must be met at an excellent level to count as one day
of operational excellence.
Long-Term Incentive
Compensation/Equity-Based Awards
. The Company’s long-term incentive
program is designed to retain the Named Executive Officers and to align the
interests of the Named Executive Officers with the interests of the Company’s
stockholders. The Company’s long-term incentive program consists of periodic
grants of stock options and restricted stock, which are made at the discretion
of the Compensation Committee under the Incentive Plan. Decisions made by the
Compensation Committee regarding the amount of the grant and other discretionary
aspects of the grant take into consideration Company performance, individual
performance and experience, contributions to the Company’s development,
competitive forces to attract and retain senior management, and the nature and
terms of grants made in prior years. The Compensation Committee considers the
compensation data provided by Watson Wyatt, which sets forth median annualized
long-term incentive values, the objectives of the long-term incentives, the
availability of shares and the perceived value of the available instruments. A
combination of stock options and time-base restricted stock were granted to the
Named Executive Officers in 2008 to achieve the objectives of the Company’s
long-term incentive program. Stock options create incentive for
increasing the Company’s stock price by aligning executives’ interests with the
shareholders’ interests. Time based restricted stock that have cliff
vesting and pay dividends provide significant retention value even with
fluctuations in the equity market.
Under the
Incentive Plan, in addition to options and restricted stock, the Compensation
Committee may also grant, in its discretion, stock appreciation rights and may
make other awards.
The
Compensation Committee typically grants awards to the Named Executive Officers
under the Incentive Plan at its fourth-quarter meeting held each year. Except in
very limited circumstances, the Compensation Committee does not grant equity
awards to Named Executive Officers at other times during the year. All equity
awards are made at fair market value on the date of grant, which is the date on
which the Compensation Committee authorizes the grant. Under the Incentive Plan,
fair market value is determined by the closing price of the Company’s Common
Stock on the date of grant.
In
November of 2008, stock options and time-based restricted stock were granted to
the Named Executive Officers. The Compensation Committee approves each
executive’s a target value for stock awards expressed as a multiple of base
salary. The approved
value of stock awards granted in 2008 was reduced by 50 percent from the normal
multiple of base salary due to the current economic conditions and the outlook
for 2009. Approximately half of this value is allocated to stock options and
half to restricted stock. The target dollar value associated with stock options
is divided by the estimated present value per share to determine the number of
option shares to be awarded. The target dollar value associated with
restricted stock is divided by the estimated fair market value per share
at the time of grant to determine the number of shares of restricted stock to be
awarded.
Benefits and Perquisites
. Benefits and
perquisites are designed to attract and retain key employees in light of
competitive market conditions. Currently, the Named Executive Officers are
eligible to participate in benefit plans available to all employees including
our 401(k) Plan and the Incentive Plan. Other benefits and perquisites are
limited and are provided at the discretion of the Compensation Committee. These
benefits include medical and dental health insurance plans and life and
long-term disability insurance plan benefits. The 401(k) Plan and the medical
and dental plans require each participant to pay a contributory amount. The
Company provides a matching contribution to its 401(k) Plan, that is
discretionary, for participating employees, including the Named Executive
Officers. Employee individual plan contributions are subject to the maximum
contribution allowed by the Internal Revenue Service. Under the Company’s
long-term disability insurance plan, the Company pays insurance premiums of up
to $50,000. The Company also supports and encourages Named Executive Officers to
hold memberships at local country clubs, for which the Company pays
business-related expenses. These memberships are deemed to provide business
value to the Company because they provide a place for executives to continue to
interact with other business associates in order to develop strategic alliances
and/or business opportunities during non-business hours. The Company requires
that any personal use of country club facilities for exercise or food be paid
directly by the Named Executive Officer. Although the benefits and perquisites
are considered when determining the overall compensation of the Named Executive
Officers, the amounts involved are not deemed to be so material as to
significantly impact the other types of compensation provided to
them.
Severance
Benefits
.
On September 27, 2006,
the Company entered into an employment agreement with Jeffrey D. Thomas,
which provides for certain severance benefits upon: (i) a termination of his
employment by the Company for cause or by Mr. Thomas without good reason; (ii)
termination of his employment by the Company without cause or by Mr. Thomas with
good reason; (iii) termination of his employment by the Company without cause or
by Mr. Thomas with good reason in connection with a change in control; and (iv)
his death or permanent disability. The Company designed Mr. Thomas’ severance
package to be commensurate with the marketplace and set payout amounts at levels
it deemed appropriate to retain the services of Mr. Thomas in light of his
significant personal knowledge, significant business experience, established
track record in this business sector, and his contacts in the travel industry.
The terms of Mr. Thomas’ severance benefits are summarized below under the
heading “Employment Contracts, Termination of Employment and Change in Control
Arrangements.” The Company has not entered into employment agreements with any
other Named Executive Officer.
Total
Compensation Mix
The
Compensation Committee believes that the elements described above provide a
well-proportioned mix of security-oriented compensation, at-risk or
performance-based compensation, and retention-based compensation that produces
short-term and long-term incentives and rewards. The Company believes this
compensation mix provides the Named Executive Officers a measure of security as
to the minimum levels of compensation they are eligible to receive, while
motivating the Named Executive Officers to focus on the business measures that
will produce a high level of performance for the Company, as well as reducing
the risk of recruitment of highly qualified executive talent by our competitors.
The mix of annual incentives and equity-based awards likewise provides an
appropriate balance between short-term financial performance and long-term
financial and stock performance. The Company believes that its compensation mix
results in a pay-for-performance orientation that is aligned with its
compensation philosophy to pay median pay for median performance and
above-market pay for superior performance.
Impact
of Accounting and Tax on the Form of Compensation
The
Compensation Committee considers applicable tax, securities laws and accounting
regulation in structuring and modifying its compensation arrangements and
employee benefit plans. The Compensation Committee has considered the impact of
the Statement of Financial Accounting Standard No. 123, “Share-Based Payment”
(“SFAS 123R”), which the Company adopted in 2006, on the Company’s use of
equity-based awards. This consideration factored heavily in the Company’s
decision with respect to restricted stock and stock options grants made in 2006,
2007 and 2008,limiting the total equity-based awards granted to non-executives.
The Compensation Committee also considers the limits on deductibility of
compensation imposed by Section 162(m) of the Code with respect to annual
compensation exceeding $1.0 million and Section 280(b) of the Code with respect
to change in control payments exceeding specified limits.
Execu
tive Officers
Jeffrey D. Thomas
, age 42,
has served as chief executive officer and president of the Company since
November 2001. He has served as president of Ambassador Programs, Inc., a
wholly owned subsidiary of the Company, from August 1996 through
July 2002, and chief executive officer since January 2000. For
Ambassadors International, Inc., he served as chief financial officer between
January 1996 and February 2002. From 1989 to 1995, Mr. Thomas
held a variety of strategy and business development positions with Adia
Personnel Services (now Adecco), Contrarian Group, Inc., and Corporate
Decisions, Inc.
Margaret M. Thomas
, age 42,
has served as executive vice president of the Company since November 2001.
She served as chief financial officer and secretary of the Company from
November 2001 through October 2003. She has also served as president
of Ambassador Programs, Inc., since August 2002, chief operating officer of
Ambassador Programs, Inc., since January 2002, and chief financial officer
of Ambassador Programs, Inc., from November 1997 through April 2003. Mrs.
Thomas served as treasurer of Ambassadors International, Inc., from
February 1999 through February 2002. From 1988 to 1995, Mrs. Thomas
was in public accounting and employed by Ernst & Young LLP and
PricewaterhouseCoopers LLP, and also was the financial reporting officer for
Physio-Control Corporation.
Chadwick J. Byrd
, age 37, has
served as chief financial officer and secretary of the Company since July 2005.
Mr. Byrd served as chief group controller of Fred Olsen Energy ASA (“Fred
Olsen”) in Oslo, Norway beginning in 2004. He also served as corporate
controller and financial controller of Fred Olsen between 1999 and 2003.
Headquartered in Oslo, Norway, Fred Olsen provides international exploration and
production services to the offshore oil and gas industry. Before joining Fred
Olsen, Mr. Byrd was in public accounting employed by KPMG between 1995 and
1999.
Summary
Compensation Table
The
following table sets forth the compensation for the principal executive officer,
the principal financial officer, and the Company’s only other executive officer
serving on December 31, 2008 whose individual remuneration exceeded $100,000 for
the fiscal year ended December 31, 2008 and 2007 (the “Named Executive
Officers”):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Principal
Position
|
|
Year
|
|
Salary ($)
|
|
Bonus ($)
|
|
Stock Awards
1
($)
|
|
Option
Awards
2
($)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All
Other
Compensation
3
($)
|
|
Total
($)
|
|
Jeffrey
D. Thomas,
Chief
Executive
|
|
2008
|
|
400,000
|
|
—
|
|
265,591
|
|
268,125
|
|
—
|
|
—
|
|
17,409
|
|
951,125
|
|
Officer
and President
|
|
2007
|
|
400,000
|
|
—
|
|
667,290
|
|
754,460
|
|
880,000
|
|
—
|
|
16,691
|
|
2,718,441
|
|
Margaret
M. Thomas,
|
|
2008
|
|
220,000
|
|
—
|
|
109,361
|
|
110,825
|
|
—
|
|
—
|
|
13,351
|
|
453,537
|
|
Executive
Vice President
|
|
2007
|
|
220,000
|
|
—
|
|
71,862
|
|
79,884
|
|
394,400
|
|
—
|
|
12,944
|
|
779,090
|
|
Chadwick
J. Byrd,
Chief
Financial
|
|
2008
|
|
168,000
|
|
—
|
|
40,436
|
|
40,950
|
|
91,000
|
|
—
|
|
9,732
|
|
350,118
|
|
Officer
and Secretary
|
|
2007
|
|
155,000
|
|
—
|
|
80,912
|
|
29,798
|
|
118,000
|
|
—
|
|
10,361
|
|
394,071
|
|
1
|
The
amounts in the “Stock Awards” column are calculated using the provisions
of SFAS 123R. For a description of SFAS 123R and the assumptions used in
determining the value of the stock awards, see the notes to the financial
statements included in our Annual Report on Form 10-K filed on March 9,
2009.
|
|
2
|
The
amounts in the “Option Awards” column are calculated using the provisions
of SFAS 123R. For a description of SFAS 123R and the assumptions used in
determining the value of the option awards, see the notes to the financial
statements included in our Annual Report on Form 10-K filed on March 9,
2009.
|
|
3
|
Individual
breakdowns of amounts set forth in “All Other Compensation” are as
follows:
|
|
|
|
|
Matching
401(k)
Contri-
butions
$
|
|
Membership
Dues
$
|
|
Medical
and Dental
Health
Insurance
Payments
$
|
|
Life
and L-T
Disability
Insur-
ance
Payments $
|
|
Total
All Other
Compensation
$
|
|
|
Jeffrey
D. Thomas
|
|
7,750
|
|
4,084
|
|
4,577
|
|
998
|
|
17,409
|
|
|
Margaret
M. Thomas
|
|
6,600
|
|
1,602
|
|
4,577
|
|
572
|
|
13,351
|
|
|
Chadwick
J. Byrd
|
|
4,650
|
|
—
|
|
4,630
|
|
452
|
|
9,732
|
Company
Plans
2001
Equity Participation Plan
The
Company’s officers, directors and employees are eligible to receive restricted
stock and options to purchase shares of the Company’s Common Stock under the
Company’s Incentive Plan. Stock options have an exercise price equal to 100% of
the fair market value of the Company’s Common Stock on the date of grant. Stock
options expire ten years after the date of grant and vest over four years, at
25% per year. Restricted stock vests 100% after four years from the date of
grant for employees, and vests 100% after one year from the date of grant for
directors.
During
the fiscal year ended December 31, 2008, options to purchase 215,709 shares
of the Company’s Common Stock were granted under the Incentive Plan. In
addition, during the Company’s 2008 fiscal year, 75,870 shares of restricted
stock were granted under the Incentive Plan. During the fiscal year ended
December 31, 2008, 8,025 options to purchase and restricted shares of Common
Stock were forfeited under the Incentive Plan. Options to purchase shares of
Common Stock and restricted stock grants totaling 1,845,459 shares of Common
Stock were outstanding and held by 36 officers, directors and employees at
December 31, 2008. As of December 31, 2008, the weighted-average
exercise price of the outstanding options and stock grants was
$10.96.
Profit
Sharing Plan
In
March 2002, the Company established a 401(k) Profit-Sharing Plan (the
“401(k) Plan”). Employees are eligible to participate in the 401(k) Plan upon
six months of service and 18 years of age. Employees may contribute up to
92% of their salary, subject to the maximum contribution allowed by the Internal
Revenue Service. The Company’s matching contribution is discretionary based upon
approval by management. Target levels are established by management to be
competitive in the market place. The Company’s matching contribution
for 2008 was up to 3% of the employee’s base salary but not to exceed $7,750.
Employees are 100% vested in their contributions and vest in Company matching
contributions equally over four years. During the year ended December 31,
2008, the Company contributed approximately $225,000 to the 401(k)
Plan.
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation plans
(excluding
securities
reflected
in column (a))
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
|
|
|
|
Number
of securities to
be
issued upon exercise
of
outstanding options,
warrants
and rights
|
|
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
category
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
1,845,459
|
|
|
$
|
10.96
|
|
|
|
260,399
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
Total
|
|
|
1,845,459
|
|
|
$
|
10.96
|
|
|
|
260,399
|
|
Grants
of Plan-Based Awards Table
The
following table sets forth the plan-based grants made during the fiscal year
ended December 31, 2008
to each of our Named
Executive Officers.
|
|
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
and Principal Position
1
|
Grant
Date
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
3,
7
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
4,
7
(#)
|
|
|
Exercise or
Base Price
of
Option
Awards
5
($/Sh)
|
|
|
Grant
Date Fair
Value
of
Options
and
Awards
6
($)
|
|
|
Jeffrey
D. Thomas
|
11/13/08
|
|
|
|
|
|
|
|
|
28,900
|
|
|
|
82,500
|
|
|
|
9.19
|
|
|
|
533,716
|
|
|
Chief Executive Officer
and
|
8/10/07
|
|
|
450,000
|
|
|
|
880,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
M. Thomas
|
11/13/08
|
|
|
|
|
|
|
|
|
|
|
11,900
|
|
|
|
34,100
|
|
|
|
9.19
|
|
|
|
220,186
|
|
|
Executive Vice
President
|
8/10/07
|
|
|
220,000
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chadwick
J. Byrd
|
11/13/08
|
|
|
|
|
|
|
|
|
|
|
4,400
|
|
|
|
12,600
|
|
|
|
9.19
|
|
|
|
81,386
|
|
|
Chief Financial
Officer
|
8/10/07
|
|
|
100,000
|
|
|
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The
Company does not maintain an equity plan that provides for payments based
upon achievement of threshold, target and/or maximum
goals.
|
|
2
|
The
amounts in these columns include the target and maximum amounts for each
Named Executive Officer under individual non-incentive compensation plans
as approved by the Compensation Committee on August 10, 2007 for fiscal
2008. The plans do not have a threshold or minimum payout
amount.
|
|
3
|
Restricted
stock vests 100% after four years from the date of
grant.
|
|
4
|
The
option grants vest over four years at 25% per year, and expire after ten
years.
|
|
5
|
The
exercise price for grants of stock options is determined using the closing
price of the Company’s Common Stock on the date of
grant.
|
|
6
|
The
grant date fair value of the stock options and restricted stock awards
shown in the table above was computed in accordance with SFAS 123R and
represents the total projected expense to the Company of grants made in
2008. For a description of SFAS 123R and the assumptions used in
determining the value of the stock options and restricted stock awards,
see the notes to the financial statements included in our Annual Report on
Form 10-K filed on March 12, 2009.
|
|
7
|
Please
refer to ‘Long-Term Incentive Compensation/Equity-Based Awards’ on page 23
for the methodology and rationale behind granting stock awards and options
awards during 2008.
|
|
|
|
Outstanding
Equity Awards Value at Fiscal Year-End
Table
The
following table sets forth the outstanding equity awards as of December 31,
2008.
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
or
Payout
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
Value
of
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
|
Number
of
|
|
Number
of
|
|
Number
of
|
|
|
|
|
|
Number
|
|
Value
of
|
|
Shares,
|
|
Shares,
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of
Shares
|
|
Shares
or
|
|
Units
or
|
|
Units
or
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
or
Units of
|
|
Units
of
|
|
Other
|
|
Other
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock
That
|
|
Stock
That
|
|
Rights
|
|
Rights
|
|
Name
and Principal
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have
Not
|
|
Have
Not
|
|
That
Have
|
|
That
Have
|
|
Position
|
|
Exercisable(#)
|
|
Unexercisable
1
(#)
|
|
Options(#)
|
|
Price
2
($)
|
|
Date
|
|
Vested
3
(#)
|
|
Vested
4
($)
|
|
Not
Vested
|
|
Not
Vested
|
|
Jeffrey
D. Thomas
|
|
306
|
|
—
|
|
—
|
|
$3.48
|
|
2/11/10
|
|
|
|
|
|
|
|
|
|
Chief
Executive
|
|
85,418
|
|
—
|
|
—
|
|
$3.99
|
|
5/31/10
|
|
|
|
|
|
|
|
|
|
Officer
and
|
|
250,000
|
|
—
|
|
—
|
|
$6.00
|
|
3/01/12
|
|
|
|
|
|
|
|
|
|
President
|
|
60,236
|
|
—
|
|
—
|
|
$9.75
|
|
11/07/13
|
|
|
|
|
|
|
|
|
|
|
|
101,504
|
|
—
|
|
—
|
|
$16.74
|
|
11/18/14
|
|
|
|
|
|
|
|
|
|
|
|
64,234
|
|
21,412
|
|
—
|
|
$26.80
|
|
11/11/15
|
|
|
|
|
|
|
|
|
|
|
|
32,500
|
|
32,500
|
|
—
|
|
$27.46
|
|
11/09/16
|
|
|
|
|
|
|
|
|
|
|
|
29,750
|
|
89,250
|
|
—
|
|
$17.11
|
|
11/08/17
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
82,500
|
|
—
|
|
$9.19
|
|
11/13/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,445
|
5
|
$1,154,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
M. Thomas
|
|
17,084
|
|
—
|
|
—
|
|
$3.99
|
|
5/31/10
|
|
|
|
|
|
|
|
|
|
Executive
Vice
|
|
3,418
|
|
—
|
|
—
|
|
$4.96
|
|
11/03/10
|
|
|
|
|
|
|
|
|
|
President
|
|
90,000
|
|
—
|
|
—
|
|
$6.00
|
|
3/01/12
|
|
|
|
|
|
|
|
|
|
|
|
19,592
|
|
—
|
|
—
|
|
$9.75
|
|
11/07/13
|
|
|
|
|
|
|
|
|
|
|
|
11,278
|
|
—
|
|
—
|
|
$16.74
|
|
11/18/14
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
3,000
|
|
—
|
|
$26.80
|
|
11/11/15
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
3,000
|
|
—
|
|
$27.46
|
|
11/09/16
|
|
|
|
|
|
|
|
|
|
|
|
3,150
|
|
9,450
|
|
—
|
|
$17.11
|
|
11/08/17
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
34,100
|
|
—
|
|
$9.19
|
|
11/13/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,100
|
6
|
$221,720
|
|
|
|
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
or
Payout
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
Value
of
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
|
Number
of
|
|
Number
of
|
|
Number
of
|
|
|
|
|
|
Number
|
|
Value
of
|
|
Shares,
|
|
Shares,
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of
Shares
|
|
Shares
or
|
|
Units
or
|
|
Units
or
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
or
Units of
|
|
Units
of
|
|
Other
|
|
Other
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock
That
|
|
Stock
That
|
|
Rights
|
|
Rights
|
|
Name
and Principal
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have
Not
|
|
Have
Not
|
|
That
Have
|
|
That
Have
|
|
Position
|
|
Exercisable(#)
|
|
Unexercisable
1
(#)
|
|
Options(#)
|
|
Price
2
($)
|
|
Date
|
|
Vested
3
(#)
|
|
Vested
4
($)
|
|
Not
Vested
|
|
Not
Vested
|
|
Chadwick
J. Byrd
|
|
22,500
|
|
7,500
|
|
—
|
|
$21.09
|
|
8/12/15
|
|
|
|
|
|
|
|
|
|
Chief
Financial
|
|
1,000
|
|
1,000
|
|
—
|
|
$27.46
|
|
11/09/16
|
|
|
|
|
|
|
|
|
|
Officer
|
|
1,175
|
|
3,525
|
|
—
|
|
$17.11
|
|
11/08/17
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
12,600
|
|
—
|
|
$9.19
|
|
11/13/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,400
7
|
|
$77,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Each
option grant has a ten-year term and vests pro rata over four years
beginning on the first anniversary of the grant date.
|
|
2
|
The
exercise price for grants of stock options is determined using the closing
price of the Company’s Common Stock on the date of
grant.
|
|
3
|
Restricted
stock vests 100% after four years from the date of
grant.
|
|
4
|
The
market value of shares of restricted stock that has not vested was
determined using the closing date market price of the Company’s Common
Stock on December 31, 2008, $9.20 per share.
|
|
5
|
Consists
of: (i) 32,545 shares granted on November 11, 2005; (ii) 25,000 shares
granted on November 9, 2006; (iii) 39,000 shares granted on November 8,
2007; and (iv) 28,900 shares granted on November 13,
2008.
|
|
6
|
Consists
of: (i) 5,000 shares granted on November 11, 2005; (ii) 3,000 shares
granted on November 9, 2006; (iii) 4,200 shares granted on November 8,
2007; and (iv) 11,900 shares granted on November 13,
2008.
|
|
7
|
Consists
of: (i) 1,000 shares granted on November 9, 2006; (ii) 1,400 shares
granted on August 10, 2007; and (iii) 1,600 shares granted on November 8,
2007; and (iv) 4,400 shares granted on November 13,
2008.
|
Option
Exercises and Stock Vested Table
The
following table sets forth certain information with respect to exercised options
and vested stock awards for the fiscal year ended December 31,
2008.
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
Number
of
|
|
|
|
Number
of
|
|
|
|
|
|
Shares
|
|
|
|
Shares
|
|
|
|
|
|
Acquired
|
|
Value
Realized
|
|
Acquired
|
|
Value
Realized
|
|
Name
and Principal Position
|
|
on
Exercise
|
|
on
Exercise
($)
|
|
on
Vesting
|
|
on
Vesting
($)
|
|
Jeffrey
D. Thomas
|
|
—
|
|
—
|
|
78,572
|
|
$652,933
|
|
Chief
Executive Officer and President
|
|
|
|
|
|
|
|
|
|
Margaret
M. Thomas
|
|
—
|
|
—
|
|
4,286
|
|
$35,617
|
|
Executive
Vice President
|
|
|
|
|
|
|
|
|
|
Chadwick
J. Byrd
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Benefits
The
Company does not sponsor any qualified or non-qualified defined benefit
plans.
Nonqualified
Deferred Compensation
The
Company does not maintain any non-qualified defined contribution or deferred
compensation plans.
Employment
Contracts, Termination of Employment and Change in Control
Arrangements
On
September 27, 2006, the Company entered into an Employment Agreement with its
president and chief executive officer, Jeffrey D. Thomas. The description of the
Employment Agreement set forth below does not purport to be complete and is
qualified in its entirety by reference to the text of the Employment Agreement,
which was attached as exhibit to the Company’s Form 8-K filed on October 3, 2006
with the Securities and Exchange Commission and is incorporated by reference
herein.
Termination of Employment
under Specific Circumstances Triggering Payment
In the
event the Employment Agreement is terminated for any of the reasons set forth
below, Mr. Thomas will be entitled to receive certain compensation as more fully
described herein. The severance benefits set forth below are designed to
maintain a productive, long-term relationship between the Company and Mr. Thomas
and are consistent with severance benefits offered to officers in similar
industries or sized companies.
Termination
for “Cause” or without “Good Reason”
The
Company may terminate the Employment Agreement for “Cause” or Mr. Thomas may
terminate the Employment Agreement without “Good Reason”. The term
“Cause” means any of the following events: (a) Mr. Thomas is convicted, or
pleads guilty or nolo contendre to, a felony or a crime involving moral
turpitude; (b) Mr. Thomas engages in gross negligence or gross or willful
misconduct in connection with the performance of his responsibilities under the
Employment Agreement; (c) after written notice to Mr. Thomas, he repeatedly
fails to comply materially with any material Company policy; or (d) Mr. Thomas
materially breaches any material term or provision of the Employment Agreement
and fails to cure such breach within thirty (30) days after he receives written
notice from the Company.
The term “Good Reason” means any of the
following events:
(a)
withdrawal by the Company from Mr. Thomas of any substantial part of his duties
then being performed, or responsibility or authority then being carried by him,
or a material change in Executive’s reporting lines;
(b) assignment by the Company to Mr.
Thomas of substantial additional duties or responsibilities which are
inconsistent with the duties or responsibilities then being carried out by Mr.
Thomas;
(c) material
reduction in the level of Mr. Thomas’s responsibility, authority, autonomy,
title, compensation, executive perquisites, or other employee benefits; (d)
failure to keep Mr. Thomas in office as President and Chief Executive Officer of
the Company;
(e) the
Company materially breaches any material term or provision of the Employment
Agreement and fails to cure such breach within thirty (30) days after the
Company receives written notice thereof from Mr. Thomas;
(f) fraud on the part of the Company;
or (g) discontinuance of the active operation of the business of the
Company.
If Mr.
Thomas is terminated by the Company for “Cause” or Mr. Thomas terminates his
employment without “Good Reason,” then Mr. Thomas will be entitled to receive
any unpaid salary, unpaid expenses, unpaid vacation days, and any other benefits
provided to him under the Company’s Benefit Programs through the date of his
termination. The Employment Agreement also contains certain restrictive
covenants and other prohibitions that preclude Mr. Thomas from competing with
the Company or soliciting its employees or customers for two (2) years from the
effective date of termination of his employment. In consideration for these
obligations and covenants to be performed by Mr. Thomas following termination by
the Company for “Cause” or termination by Mr. Thomas without “Good Reason,” Mr.
Thomas will be entitled to receive (1) $100,000 on the effective date of
termination of his employment, plus (2) an amount equal to the average annual
base salary plus the average annual bonus paid to Mr. Thomas for the two full
fiscal years immediately preceding his termination less $100,000, one year
following the date of his termination, provided that Margaret Thomas is employed
by the Company during the entire one-year period.
If Mr.
Thomas were terminated by the Company for “Cause” or Mr. Thomas terminated his
employment without “Good Reason” on December 31, 2008, the maximum severance
payments owed to Mr. Thomas would have been as follows:
|
|
|
Termination
for
“Cause”
or
resignation without
“Good
Reason”
|
|
Unpaid
Salary
|
$
|
—
|
|
Unpaid
Expenses
|
|
—
|
|
Unpaid
Vacation Days
|
|
46,152
|
|
Amounts
Due under Benefit Programs
1
|
|
—
|
|
Noncompete/Nonsolicitation
Payment
2
|
|
1,817,733
|
|
Total
3
|
$
|
1,863,885
|
|
1
|
Consists
of life and disability insurance benefits.
|
|
2
|
In
determining the annual bonuses to be paid to Mr. Thomas as a portion of
the Noncompete/Nonsolicitation Payment, the Company included the cash
amounts owed to Mr. Thomas as well as the value ascribed for financial
accounting purposes on the date of grants of any stock options and/or
restricted stock issued to Mr. Thomas.
|
|
3
|
Any
payments or other consideration to be received are subject to the
deduction limitations and tax imposed by Sections 280G and 4999 of the
Code, or to any similar tax imposed by state or local law, or to any
interest or penalties with respect to such taxes (collectively “Excise
Tax”). Any such payments and value of the other consideration will be
reduced, or refunded, as the case may be, by the minimum amount necessary
so as to avoid the application of any Excise
Tax.
|
Termination
without “Cause” or with “Good Reason”
Under the
terms of the Employment Agreement, the Company may terminate Mr. Thomas’
employment without “Cause” by delivering written notice to him. In this case,
termination will be effective on the date that notice is received by Mr. Thomas
or such later date, not to exceed three (3) months, as may be specified in the
notice. In addition, under the terms of the Employment Agreement, Mr. Thomas may
terminate his employment with “Good Reason” by delivering written notice to the
Company. In this case, termination will be effective thirty (30) days after the
date notice is received by the Company or such later date, not to exceed three
(3) months, as may be selected by the Board of Directors. In the event the
Company terminates Mr. Thomas’ employment without “Cause” or Mr. Thomas
terminates his employment with “Good Reason,” then on the effective date of
termination, the Company will pay Mr. Thomas any unpaid salary, unpaid expenses,
unpaid vacation days, a prorated bonus and any benefits provided to him under
the Company’s Benefit Programs. In addition, the Company will be required to pay
Mr. Thomas an amount equal to the projected costs of his medical insurance for
eighteen (18) months immediately following termination. Furthermore, all of Mr.
Thomas’ unvested stock options and stock grants will fully vest upon the date
his termination becomes effective. The Employment Agreement also contains
certain restrictive covenants and other prohibitions that preclude Mr. Thomas
from competing with the Company or soliciting its employees or customers for two
(2) years from the effective date of termination of his employment. In
consideration for these obligations and covenants to be performed by Mr. Thomas
following termination by the Company without “Cause” or termination by Mr.
Thomas with “Good Reason,” Mr. Thomas will be entitled to receive an amount
equal to the average annual base salary plus the average annual bonus paid to
Mr. Thomas for the two (2) full fiscal years immediately preceding his
termination.
If Mr.
Thomas had been terminated on December 31, 2008 without “Cause” or Mr. Thomas
resigned with “Good Reason” on December 31, 2008, the maximum severance payments
owed to Mr. Thomas would have been as follows:
|
|
|
Termination
without
“Cause”
or
resignation for
“Good
Reason”
|
|
Unpaid
Salary
|
$
|
—
|
|
|
Unpaid
Expenses
|
|
—
|
|
|
Unpaid
Vacation Days
|
|
46,152
|
|
|
Prorated
Bonus
|
|
—
|
|
|
Amounts
Due under Benefit Programs
1
|
|
—
|
|
|
Medical
Insurance
|
|
9,423
|
|
|
Accelerated
Vesting of Stock Options and Restricted Stock
2
|
|
1,154,094
|
|
|
Noncompete/Nonsolicitation
Payment
3
|
|
1,817,733
|
|
|
Total
4
|
$
|
3,027,402
|
|
|
1
|
Consists
of life and disability insurance benefits.
|
|
2
|
The
stock option value is calculated by multiplying the number of unvested
shares by the difference between the grant price and the closing stock
price on December 31, 2008 ($9.20). The value of restricted stock is
calculated by multiplying the number of unvested shares by the closing
stock price on December 31, 2008.
|
|
3
|
In
determining the annual bonuses to be paid to Mr. Thomas as a portion of
the Noncompete/Nonsolicitation Payment, the Company included the cash
amounts owed to Mr. Thomas as well as the value ascribed for financial
accounting purposes on the date of grants of any stock options and/or
restricted stock issued to Mr. Thomas.
|
|
4
|
Any
payments or other consideration to be received are subject to the
deduction limitations and tax imposed by Sections 280G and 4999 of the
Code, or to any Excise Tax. Any such payments and value of the other
consideration will be reduced, or refunded, as the case may be, by the
minimum amount necessary so as to avoid the application of any Excise
Tax.
|
Termination
without “Cause” or with “Good Reason” in Connection with a “Change in
Control”
In the
event the Company terminates Mr. Thomas’ employment without “Cause” or Mr.
Thomas terminates his employment with “Good Reason,” and the notice of
termination is given in anticipation of, or within the two (2) year period
immediately following a “Change in Control,” Mr. Thomas will be entitled to
receive, in addition to the amounts provided for in the section entitled
“Termination without ‘Cause’ or with
‘Good Reason’”
set forth previously, an amount equal to the average of
his annual base salary and average annual bonus for the two (2) full fiscal
years immediately preceding termination. For purposes of the Employment
Agreement, “Change in Control” means the occurrence of any of the following
events: (i) any sale, lease, license, exchange or other transfer to a party not
affiliated with the Company (in one transaction or a series of related
transactions) of all, or substantially all, of the business and/or assets of
Company; (ii) a merger or consolidation of the Company and the Company is not
the surviving entity; (iii) a reorganization or liquidation of the Company; or
(iv) a merger, consolidation, tender offer or any other transaction involving
the Company, if the equity holders of the Company immediately before such
merger, consolidation, tender offer or other transaction do not own, directly or
indirectly, immediately following such merger, consolidation, tender offer or
other transaction, more than fifty percent (50%) of the combined voting power of
the outstanding voting securities of the entity resulting from such merger,
consolidation, tender offer or other transaction.
If Mr.
Thomas had been terminated on December 31, 2008 without “Cause” or Mr. Thomas
resigned with “Good Reason” on December 31, 2008 in connection with a “Change in
Control,” the maximum severance payments owed to Mr. Thomas would have been as
follows:
|
|
|
Termination
without
“Cause”
or
for
“Good
Reason”
in
connection with a
“Change
in Control”
|
|
Unpaid
Salary
|
$
|
—
|
|
|
Unpaid
Expenses
|
|
—
|
|
|
Unpaid
Vacation Days
|
|
46,152
|
|
|
Prorated
Bonus
|
|
—
|
|
|
Amounts
Due under Benefit Programs
1
|
|
—
|
|
|
Medical
Insurance
|
|
9,423
|
|
|
Accelerated
Vesting of Stock Options and Restricted Stock
2
|
|
1,154,094
|
|
|
Noncompete/Nonsolicitation
Payment
3
|
|
1,817,733
|
|
|
Amount
Due upon Change in Control
4
|
|
1,817,733
|
|
|
Total
5
|
$
|
4,845,135
|
|
|
1
|
Consists
of life and disability insurance benefits.
|
|
2
|
The
stock option value is calculated by multiplying the number of unvested
shares by the difference between the grant price and the closing stock
price on December 31, 2008 ($9.20). The value of restricted stock is
calculated by multiplying the number of unvested shares by the closing
stock price on December 31, 2008.
|
|
3
|
In
determining the annual bonuses to be paid to Mr. Thomas as a portion of
the Noncompete/Nonsolicitation Payment, the Company included the cash
amounts owed to Mr. Thomas as well as the value ascribed for financial
accounting purposes on the date of grants of any stock options and/or
restricted stock issued to Mr. Thomas.
|
|
4
|
In
determining the annual bonuses to be paid to Mr. Thomas as a portion of
the payment owed to him upon a “Change in Control,” the Company included
the cash amounts owed to Mr. Thomas as well as the value ascribed for
financial accounting purposes on the date of grants of any stock options
and/or restricted stock issued to Mr. Thomas.
|
|
5
|
Any
payments or other consideration to be received are subject to the
deduction limitations and tax imposed by Sections 280G and 4999 of the
Code, or to any Excise Tax. Any such payments and value of the other
consideration will be reduced, or refunded, as the case may be, by the
minimum amount necessary so as to avoid the application of any Excise
Tax.
|
Death
or Permanent Disability
Pursuant
to the terms of the Employment Agreement, Mr. Thomas’ employment will terminate
immediately upon the date of his death. In the event that Mr. Thomas becomes
physically or mentally disabled so as to become unable for more than one hundred
eighty (180) days in the aggregate in any twelve (12) month period to perform
his duties on a full-time basis with reasonable accommodations, the Company may,
at its sole discretion, terminate Mr. Thomas’ employment. Upon the date of Mr.
Thomas’ death, if during the term of his employment, or upon the Company’s
termination of his employment due to a disability, then Mr. Thomas will be
entitled to all unpaid salary, unpaid expenses, unpaid vacation days, a prorated
bonus and any benefits provided to him under the Company’s Benefit Programs
through the date of his death or termination for disability. In addition, all of
Mr. Thomas’ unvested stock options and stock grants in Company will fully vest
on the date of his termination of employment with the Company.
If Mr.
Thomas died or the term of his employment was terminated on December 31, 2008
due to a disability, the maximum severance payments owed to Mr. Thomas would
have been as follows:
|
|
|
Death
or
Disability
|
|
|
Unpaid
Salary
|
$
|
—
|
|
|
|
Unpaid
Expenses
|
|
—
|
|
|
|
Unpaid
Vacation Days
|
|
46,152
|
|
|
|
Prorated
Bonus
|
|
—
|
|
|
|
Amounts
Due under Benefit Programs
1
|
|
50,000
|
|
|
|
Accelerated
Vesting of Stock Options and Restricted Stock
2
|
|
1,154,094
|
|
|
|
Total
3
|
$
|
1,250,246
|
|
|
|
1
|
Consists
of life and disability insurance benefits.
|
|
2
|
The
stock option value is calculated by multiplying the number of unvested
shares by the difference between the grant price and the closing stock
price on December 31, 2008 ($9.20). The value of restricted stock is
calculated by multiplying the number of unvested shares by the closing
stock price on December 31, 2008.
|
|
3
|
Any
payments or other consideration to be received are subject to the
deduction limitations and tax imposed by Sections 280G and 4999 of the
Code, or to any Excise Tax. Any such payments and value of the other
consideration will be reduced, or refunded, as the case may be, by the
minimum amount necessary so as to avoid the application of any Excise
Tax.
|
Director
Compensation Table
The
following table provides compensation information for the fiscal year ended
December 31, 2008 for each member of the Company’s Board of
Directors.
|
Name
1
|
|
Fees Earned or
Paid in Cash ($)
|
|
Stock
Awards
2
($)
|
|
Option
Awards
2
($)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Change
in Pension
Value
and Nonqualified Deferred Compensation Earnings
|
|
All Other
Compensation
3
($)
|
|
Total
($)
|
|
James M. Kalustian
|
|
24,000
|
|
12,500
|
|
11,706
|
|
—
|
|
—
|
|
—
|
|
48,206
|
|
John A. Ueberroth
|
|
100,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
100,000
|
|
Joseph J. Ueberroth
|
|
24,000
|
|
12,500
|
|
11,706
|
|
—
|
|
—
|
|
—
|
|
48,206
|
|
Ricardo Lopez
Valencia
|
|
24,000
|
|
12,500
|
|
11,706
|
|
—
|
|
—
|
|
—
|
|
48,206
|
|
Jeffrey D. Thomas
4
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Richard D. C. Whilden
|
|
30,000
|
|
12,500
|
|
11,706
|
|
—
|
|
—
|
|
—
|
|
54,206
|
|
Brigitte M.
Bren
|
|
23,000
|
|
12,500
|
|
11,706
|
|
—
|
|
—
|
|
—
|
|
47,206
|
|
Daniel G. Byrne
|
|
31,000
|
|
12,500
|
|
11,706
|
|
—
|
|
—
|
|
—
|
|
55,206
|
|
Rafer
L. Johnson
|
|
24,000
|
|
12,500
|
|
11,706
|
|
—
|
|
—
|
|
—
|
|
48,206
|
____________________
|
1
|
|
As
the Company’s Chairman of the Board, John A. Ueberroth receives an annual
$100,000 fee paid in cash. Each of the Company’s other, non-employee
directors receive an annual fee of approximately $48,000 per year, paid
$24,000 in cash and approximately $24,000 in equity. Moreover, each of the
Company’s non-employee directors receive $1,000 per Board meeting
attended. Equity compensation is split between options and restricted
stock grants. Pursuant to the Incentive Plan, each grant of non-qualified
stock options is granted at the fair market value of the Common Stock on
the date of grant, and vests in four equal annual installments commencing
one year from the date of grant. Each grant of restricted stock is granted
at the fair market value of the Common Stock on the date of grant and
vests one year from the date of grant. Committee chairpersons receive
$7,000 annually. Committee members also receive up to $1,000 per committee
meeting attended, when the committee meeting takes place on a day other
than a Board meeting. These amounts are payable in cash. Additionally,
each director is reimbursed for certain out-of-pocket expenses incurred in
connection with attendance at Board and committee
meetings.
|
|
2
|
|
Amounts
calculated utilizing the provisions of SFAS 123R
.
For a
description of SFAS 123R and the assumptions used in determining the value
of the stock options and restricted stock awards, see the notes to the
financial statements included in our Annual Report on Form 10-K filed on
March 12, 2009.
|
|
3
|
|
Pursuant
to the rules of the Securities and Exchange Commission, all other
compensation is not required to be disclosed unless the aggregate value of
such compensation is $10,000 or more.
|
|
4
|
|
See
“Summary Compensation Table” for disclosure related to Jeffrey D. Thomas
who is a Named Executive Officer.
|
INTERESTS
OF DIRECTORS, OFFICERS AND OTHERS IN CERTAIN
TRANSACTIONS
The
Company recognizes that transactions between the Company and related persons
present a potential for actual or perceived conflicts of interest. Pursuant to
the rules of the Securities and Exchange Commission, the Company deems a related
party transaction to be any transaction or series of related transactions in
excess of $120,000 in which the Company is a party and in which a Related Party
has a material interest (each a “Related Party Transaction”). For this purpose,
a Related Party is defined to include directors, director nominees, executive
officers, 5% beneficial owners and members of their immediate
families.
The
Company does not have a written policy regarding the review and approval of
Related Party Transactions, but collects information about potential Related
Party Transactions in its annual questionnaires completed by directors and
executive officers of the Company. Potential related party transactions are
first reviewed and assessed by the Company's executive management to consider
the materiality of the transaction. A material related party transaction is
approved or ratified only if the disinterested members of the Board of Directors
determine that it is in, or is not inconsistent with, the best interests of the
Company and its stockholders and in compliance with the rules of the Securities
and Exchange Commission.
There
were no transactions between the Company and related persons during
2008.
COMPENSATION
COMMITTEE REPORT
We have
reviewed and discussed with management certain Compensation Discussion and
Analysis provisions to be included in the Company’s 2009 Proxy Statement. Based
on the reviews and discussions referred to above, we recommend to the Board of
Directors that the Compensation Discussion and Analysis referred to above be
included in the Company’s Proxy Statement and incorporated by reference into our
Annual Report on form 10-K.
|
|
|
COMPENSATION
COMMITTEE
|
|
|
|
|
|
|
|
Richard
D. C. Whilden, Chairman
|
|
|
|
James
M. Kalustian
|
|
|
|
Ricardo
Lopez Valencia
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth the amount of stock of the Company beneficially owned
as of March 23, 2009, by each person (other than Named Executive Officers) known
by the Company to own beneficially more than 5% of the outstanding shares of the
Company’s outstanding Common Stock.
|
Name
of Beneficial Owner
|
|
Amount
and
Nature
of
Beneficial
Ownership
of
Common
Stock (1)
|
|
Percent
of
Class
of
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
Schroder
Investment Management North American Inc. (2)
|
|
|
1,812,694
|
|
|
9.52
|
%
|
|
Morgan
Stanley Investment Management Inc. (3)
|
|
|
1,795,207
|
|
|
9.43
|
%
|
|
Norbert
H. Lou (4)
|
|
|
1,534,343
|
|
|
8.06
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock, which are purchasable under
options which are currently exercisable, or which will become exercisable
no later than 60 days after March 23, 2009, are deemed outstanding
for computing the percentage of the person holding such options, but are
not deemed outstanding for computing the percentage of any other person.
Except as indicated by footnote and subject to community property laws,
where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
|
|
|
|
|
|
(2)
|
|
The
address of Schroder Investment Management North America Inc. is 875 Third
Avenue, 21
st
Floor, New York, New York, 10022. The Company is reporting this stock
ownership based upon a Schedule 13G report filed on February 13, 2009
with the Securities and Exchange Commission by Schroder Investment
Management North America Inc., disclosing that it has sole voting power as
to 1,271,655 shares, sole dispositive power as to 1,812,694 shares, and
shared voting power as to 541,039 shares.
|
|
|
|
|
|
(3)
|
|
The
address of Morgan Stanley Investment Management Inc. is 522 Fifth Avenue,
New York, New York, 10036. The Company is reporting this stock ownership
based upon a Schedule 13G/A report filed with the Securities and
Exchange Commission on February 17, 2009 by Morgan Stanley Investment
Management Inc., disclosing that it and its affiliate have sole voting
power as to 1,651,742 shares and sole dispositive power as to 1,795,207
shares.
|
|
|
|
|
|
(4)
|
|
Based
on a Schedule 13G/A filed by Punch Card Capital, L.P., Punch Card Capital,
LLC and Norbert H. Lou filed with the Securities and Exchange Commission
on February 11, 2009. The address of each of the reporting persons is 7065
Westpointe Blvd., Suite 204, Orlando, FL 32835. The reporting persons
share voting power as to 1,403,245 shares, and share dispositive power as
to 1,462,233 shares. Mr. Lou has sole voting and dispositive power as to
72,110 shares.
|
|
|
|
|
The
following table sets forth the amount of Common Stock of the Company
beneficially owned as of March 23, 2009, by each director of the Company, each
Named Executive Officer, and all directors and executive officers as a
group:
|
Name
of Beneficial Owner
|
|
|
|
Amount
and
Nature
of
Beneficial
Ownership
of
Common
Stock (1)
|
|
Percent
of
Class
of
Common
Stock
|
|
Jeffrey
D. Thomas (2)
|
|
|
1,003,631
|
|
5.06%
|
|
Margaret
M. Thomas (3)
|
|
|
1,003,631
|
|
5.06%
|
|
John
A. Ueberroth (4)
|
|
|
733,000
|
|
3.85%
|
|
Joseph
J. Ueberroth (5)
|
|
|
180,258
|
|
*
|
|
Richard
D. C. Whilden (6)
|
|
|
35,258
|
|
*
|
|
Chadwick
J. Byrd (7)
|
|
|
33,075
|
|
*
|
|
Rafer
L. Johnson (8)
|
|
|
26,018
|
|
*
|
|
Brigitte
M. Bren (9)
|
|
|
16,018
|
|
*
|
|
Daniel
G. Byrne (10)
|
|
|
7,236
|
|
*
|
|
James
M. Kalustian (11)
|
|
|
3,048
|
|
*
|
|
Ricardo
Lopez Valencia (12)
|
|
|
1,866
|
|
*
|
|
All
directors and executive officers as a group (11 people)
(13)
|
|
|
2,039,408
|
|
10.24%
|
|
*
|
|
Less
than 1%
|
|
|
|
|
|
(1)
|
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock, which are purchasable under
options which are currently exercisable, or which will become exercisable
no later than 60 days after March 23, 2009, are deemed outstanding
for computing the percentage of the person holding such options, but are
not deemed outstanding for computing the percentage of any other person.
Except as indicated by footnote and subject to community property laws,
where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
|
|
|
|
|
|
(2)
|
|
Chief
executive officer and president of the Company. Includes 223,161 shares of
Common Stock and options to purchase 780,470 shares of Common Stock issued
under the Incentive Plan. Also includes 34,609 shares of Common Stock and
156,522 options to purchase Common Stock beneficially owned by his spouse
Margaret M. Thomas. Mr. Thomas’ address is 2001 South Flint Road,
Spokane, WA 99224.
|
|
|
|
|
|
(3)
|
|
Executive
vice president of the Company. Includes 223,161 shares of
Common Stock and options to purchase 780,470 shares of Common Stock issued
under the Incentive Plan. Also includes 188,552 shares of Common Stock and
623,948 options to purchase Common Stock beneficially owned by her spouse
Jeffrey D. Thomas. Mrs. Thomas’ address is 2001 South Flint Road,
Spokane, WA 99224.
|
|
|
|
|
|
(4)
(5)
|
|
Chairman
of the Board of Directors of the Company. Does not include 51,000 shares
owned by John and Gail Ueberroth Family Foundation for which
Mr. Ueberroth has shared voting power. Mr. John Ueberroth’s
address is 26 Corporate Plaza, Suite 150, Newport Beach, CA
92660.
Director.
Includes options to purchase 10,748 shares of Common Stock issued under
the Incentive Plan. Mr. Joseph Ueberroth’s address is 1071 Camelback
Street, Newport Beach, CA 92660.
|
|
|
|
|
|
(6)
|
|
Director.
Includes options to purchase 23,748 shares of Common Stock issued under
the Incentive Plan. Mr. Whilden’s address is 106 S. Poinsettia
Avenue, Manhattan Beach, CA 90266.
|
|
(7)
|
|
Chief
financial officer and secretary of the Company. Includes options to
purchase 24,675 shares of Common Stock issued under the Incentive Plan.
Mr. Byrd’s address is 2001 South Flint Road, Spokane, WA
99224.
|
|
(8)
|
|
Director.
Includes options to purchase 23,748 shares of Common Stock issued under
the Incentive Plan. Mr. Johnson’s address is 5875 Green Valley
Circle, Suite 200, Culver City, CA 90230-6901.
|
|
|
|
|
|
(9)
|
|
Director.
Includes options to purchase 13,748 shares of Common Stock issued under
the Incentive Plan. Ms. Bren’s address is P.O. Box 2648, Beverly
Hills, CA 90213.
|
|
|
|
|
|
(10)
|
|
Director.
Includes options to purchase 3,748 shares of Common Stock issued under the
Incentive Plan. Mr. Byrne’s address is 111 N. Wall Street, Spokane,
WA 99201.
|
|
|
|
|
|
(11)
|
|
Director.
Includes options to purchase 1,560 shares of Common Stock issued under the
Incentive Plan. Mr. Kalustian’s address is 215 Wachusett Ave.,
Arlington, MA 02476.
|
|
|
|
|
|
(12)
|
|
Director.
Includes options to purchase 826 shares of Common Stock issued under the
Incentive Plan. Mr. Valencia’s address is 12641 S. 35
th
Place, Phoenix, AZ, 85044.
|
|
|
|
|
|
(13)
|
|
Includes
883,271 shares of Common Stock issuable upon exercise of stock
options.
|
Section 16
(a) Beneficial Ownership Reporting
Compliance
Section 16(a)
of the Exchange Act requires the executive officers and directors and persons
who beneficially own more than 10% of a class of securities registered under
Section 12(b) the Exchange Act to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission. Such
officers, directors and stockholders are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all such reports
that they file. Based solely upon the Company’s review of such forms furnished
to the Company during the fiscal year ended December 31, 2008, and written
representations from certain reporting persons, the Company believes that all
filing requirements applicable to the Company’s executive officers, directors
and more than 10% stockholders have been complied with during the year ended
December 31, 2008.
REPORT
OF AUDIT COMMITTEE
The Audit
Committee is composed of four non-employee directors, Daniel G. Byrne, chairman
and financial expert, Brigitte M. Bren, Rafer L. Johnson and Joseph J.
Ueberroth, all of whom meet the independence and experience requirements of the
Securities and Exchange Commission and the Nasdaq Listing Standards, as
currently in effect. The Audit Committee met eight times during
2008.
At each
of its meetings, the Committee met with the senior members of the Company’s
financial management team and representatives from the independent registered
public accounting firm. The Committee’s agenda is established by the Committee’s
chairman and the Company’s chief financial officer. During the year, the
Committee had private sessions with the Company’s independent registered public
accounting firm at which candid discussions of financial management, accounting
and internal control issues took place.
The
Committee recommended to the Board of Directors the engagement of BDO Seidman,
LLP as the Company’s independent registered public accounting firm. The
Committee reviewed with the Company’s financial managers and the independent
registered public accountants overall audit scopes and plans, the results of
internal and external audit examinations, evaluations by the auditors of the
Company’s internal controls, and the quality of the Company’s financial
reporting.
The
Committee has reviewed with management the audited financial statements in the
Annual Report, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements. In
addressing the quality of management’s accounting judgments, members of the
Audit Committee asked for management’s representations that the audited
consolidated financial statements of the Company have been prepared in
conformity with generally accepted accounting principles and have expressed to
both management and the independent registered public accountants their general
preference for conservative policies when a range of accounting options is
available.
In its
meetings with representatives of the independent registered public accounting
firm, the Committee asks them to address and discuss their responses to several
questions that the Committee believes are particularly relevant to its
oversight. These questions include:
|
|
•
|
Are
there any significant accounting judgments made by management in preparing
the financial statements that would have been made differently had the
independent registered public accounting firm themselves prepared and been
responsible for the financial statements?
|
|
|
|
|
•
|
Based
on the independent registered public accounting firm’s experience and
their knowledge of the Company, do the Company’s financial statements
fairly present to investors, with clarity and completeness, the Company’s
financial position and performance for the reporting period in accordance
with generally accepted accounting principles and Securities and Exchange
Commission disclosure requirements?
|
|
|
|
|
•
|
Based
on the independent registered public accounting firm’s experience and
their knowledge of the Company, has the Company implemented internal
controls and internal audit procedures that are appropriate for the
Company?
|
The
Committee believes that by thus focusing its discussions with the independent
registered public accounting firm, it can promote a meaningful dialogue that
provides a basis for its oversight judgments.
The Committee also discussed with the
independent registered public accounting firm all other matters required to be
discussed by the auditors with the Committee under Statement on Auditing
Standards No. 61 (“Communication with Audit Committees”). The Committee
received and discussed with the independent registered public accounting firm
their annual written report on their independence from the Company and its
management, which is made under requirements of the Public Company Accounting
Oversight Board and considered with the independent registered public accounting
firm whether the provision of
financial information systems design
and implementation and other non-audit services provided by them to the Company
during 2008 was compatible with the independent registered public accountants’
independence.
In
performing all of these functions, the Audit Committee acts only in an oversight
capacity. The Committee reviews the Company’s Securities and Exchange Commission
reports prior to filing and all quarterly earnings announcements in advance of
their issuance with management and representatives of the independent registered
public accounting firm. In its oversight role, the Committee relies on the work
and assurances of the Company’s management, which has the primary responsibility
for financial statements and reports, and of the independent registered public
accounting firm, who, in their report, express an opinion on the conformity of
the Company’s annual financial statements to generally accepted accounting
principles.
In
reliance on these reviews and discussions, and the report of the independent
registered public accounting firm, the Audit Committee has recommended to the
Board of Directors, and the Board has approved, that the audited financial
statements be included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008, for filing with the Securities and Exchange
Commission.
|
|
|
AUDIT
COMMITTEE
|
|
|
|
|
|
|
|
Daniel
G. Byrne, Chairman
|
|
|
|
Brigitte
M. Bren
|
|
|
|
Rafer
L. Johnson
|
|
|
|
Joseph
J. Ueberroth
|
CODE
OF ETHICS AND CONDUCT
The
Company has adopted a Code of Ethics and Conduct, which is a code of conduct and
ethics that applies to all of its directors, officers and employees. A copy of
the Code of Ethics and Conduct may be obtained, without charge, upon written
request addressed to the attention of the secretary, Dwight D. Eisenhower
Building, 2001 South Flint Road, Spokane, Washington 99224.
ANNUAL
MEETING ATTENDANCE
The
Company has adopted a formal policy with regard to directors’ attendance at
annual meetings of stockholders. All members of the Board of Directors of the
Company are strongly encouraged to prepare for, attend and participate in all
annual meetings of stockholders. All of the Company’s directors attended the
2008 annual meeting of stockholders in person.
STOCKHOLDER
COMMUNICATIONS
Stockholders
interested in communicating directly with the Board of Directors, or specified
individual directors, may do so by writing the secretary of the Company,
Chadwick J. Byrd, Ambassadors Group, Inc., Dwight D. Eisenhower Building, 2001
South Flint Road, Spokane, Washington 99224. The secretary will review all such
correspondence and will regularly forward to the Board copies of all such
correspondence that, in the opinion of the secretary, deals with the functions
of the Board or committees thereof or that he otherwise determines requires
their attention. Directors may at any time review a log of all correspondence
received that is addressed to members of the Board of Directors and request
copies of such correspondence. Concerns relating to accounting, internal
controls or auditing matters will immediately be brought to the attention of the
Audit Committee and handled in accordance with procedures established by the
Audit Committee with respect to such matters.
AVAILABILITY
OF ANNUAL REPORT ON FORM 10-K
A copy of
the Company’s Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available upon written request and without charge to
stockholders by writing to Investor Relations, Ambassadors Group, Inc., 2001
South Flint Road, Spokane, Washington 99224.
STOCKHOLDER
PROPOSALS
Stockholder
Proposals for Inclusion in Next Year’s Proxy Statement
Any
proposals of stockholders that are intended to be presented at next year’s
annual meeting must be received by the Company at its principal executive
offices on or before December 7, 2009, in order to be considered for inclusion
in the Company’s proxy materials relating to that meeting.
Other
Stockholder Proposals and Director Nominations
If a
stockholder wishes to present a stockholder proposal at the Company’s next
annual meeting that is not intended to be included in the proxy statement or to
nominate a person for election to the Company’s Board of Directors at the next
annual meeting, the stockholder must provide the information required by the
Company’s bylaws and give timely notice to the secretary of the Company in
accordance with the bylaws, which, in general, require that notice be received
by the secretary not less than 45 days or more than 75 days prior to
the Company’s next annual meeting. If the date of the stockholder meeting is
changed by more than 30 days from the anniversary of the Company’s annual
meeting for the prior year, then notice of a stockholder proposal that is not
intended to be included on the Company’s proxy statement under Rule 14a-8
or of a nomination for election to the Company’s Board of Directors must be
received no later than the close of business on the later of 90 days prior
to the meeting and 10 days after public pronouncement of the meeting date.
Notices of intention to present proposals or to nominate persons for election to
the Company’s Board of Directors at the next annual meeting should be addressed
to the secretary, Ambassadors Group, Inc., Dwight D. Eisenhower Building, 2001
South Flint Road, Spokane, Washington 99224. You may also contact the secretary
at the Company’s principal executive offices for a copy of the relevant bylaw
provisions regarding the requirements for making stockholder
proposals.
OTHER
BUSINESS
The
Company does not know of any other business to be presented at the Annual
Meeting and does not intend to bring any other matters before such meeting. If
any other matters properly do come before the Annual Meeting, however, the
persons named in the accompanying Proxy are empowered, in the absence of
contrary instructions, to vote according to their best judgment.
It is
important that your stock be represented at the Annual Meeting, regardless of
the number of shares you hold. You are, therefore, urged to execute and return
the accompanying Proxy in the envelope provided or to vote by telephone or over
the internet at your earliest convenience.
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By
Order of the Board of Directors
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Chadwick
J. Byrd
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Secretary
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Spokane,
Washington
April 6,
2009
APPENDIX
A
AMBASSADORS
GROUP, INC.
2009
EQUITY PARTICIPATION PLAN
ARTICLE
1
PURPOSE
The
purpose of this Ambassadors Group, Inc. 2009 Equity Participation Plan (the
“
Plan
”) is to
benefit the stockholders of Ambassadors Group, Inc., a Delaware corporation (the
“
Company
”), by
assisting the Company to attract, retain and provide incentives to key
management employees and nonemployee directors of, and non-employee consultants
to, the Company and its Affiliates, and to align the interests of such
employees, nonemployee directors and nonemployee consultants with those of the
Company’s stockholders. Accordingly, the Plan provides for the granting of
Distribution Equivalent Rights, Incentive Stock Options, Non-Qualified Stock
Options, Performance Share Awards, Performance Unit Awards, Restricted Stock
Awards, Restricted Stock Units Awards, Stock Appreciation Rights, Tandem Stock
Appreciation Rights, Unrestricted Stock Awards or any combination of the
foregoing, as may be best suited to the circumstances of the particular
Employee, Director or Consultant, as provided herein.
ARTICLE
II
DEFINITIONS
The
following definitions shall be applicable throughout the Plan unless the context
otherwise requires:
“
Affiliate
” shall mean
any corporation which, with respect to the Company, is a “subsidiary
corporation” within the meaning of Section 424(f) of the Code.
“
Award
” shall mean,
individually or collectively, any Distribution Equivalent Right, Option,
Performance Share Award, Performance Unit Award, Restricted Stock Award,
Restricted Stock Unit Award, Stock Appreciation Right or Unrestricted Stock
Award.
“
Award Agreement
”
shall mean a written agreement between the Company and the Holder with respect
to an Award, each of which shall constitute a part of the Plan.
“
Board
” shall mean the
Board of Directors of the Company.
“
Cause
” shall mean (i)
if the Holder is a party to an employment or similar agreement with the Company
or an Affiliate which agreement defines “Cause” (or a similar term) therein,
“
Cause
” shall
have the same meaning as provided for in such agreement, or (ii) for a Holder
who is not a party to such an agreement, “
Cause
” shall mean
termination by the Company or an Affiliate of the employment (or other service
relationship) of the Holder by reason of the Holder’s (A) intentional failure to
perform reasonably assigned duties, (B) dishonesty or willful misconduct in the
performance of the Holder’s duties, (C) involvement in a transaction which is
materially adverse to the Company or an Affiliate, (D) breach of fiduciary duty
involving personal profit, (E) willful violation of any law, rule, regulation or
court order (other than misdemeanor traffic violations and misdemeanors not
involving misuse or misappropriation of money or property), (F) commission of an
act of fraud or intentional misappropriation or conversion of any asset or
opportunity of the Company or an Affiliate, or (G) material breach of any
provision of the Plan or the Holder’s Award Agreement or any other written
agreement between the Holder and the Company or an Affiliate, in each case as
determined in good faith by the Board, the determination of which shall be
final, conclusive and binding on all parties.
“
Change of Control
”
shall mean (i) for a Holder who is a party to an employment or consulting
agreement with the Company or an Affiliate which agreement defines “Change of
Control” (or a similar term) therein, “
Change of Control
”
shall have the same meaning as provided for in such agreement, or (ii) for a
Holder who is not a party to such an agreement, “
Change of Control
”
shall mean the satisfaction of any one or more of the following conditions (and
the “Change of Control” shall be deemed to have occurred as of the first day
that any one or more of the following conditions have been
satisfied):
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(a)
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Any
person (as such term is used in paragraphs 13(d) and 14(d)(2) of the
Exchange Act, hereinafter in this definition, “
Person
”), other
than the Company or an Affiliate or an employee benefit plan of the
Company or an Affiliate, becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the combined
voting power of the Company’s then outstanding
securities;
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(b)
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The
closing of a merger, consolidation or other business combination (a “
Business
Combination
”) other than a Business Combination in which holders of
the Common Stock immediately prior to the Business Combination have
substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the Business Combination as
immediately before;
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(c)
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The
closing of an agreement for the sale or disposition of all or
substantially all of the Company’s assets to any entity that is not an
Affiliate;
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(d)
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The
approval by the holders of shares of Common Stock of a plan of complete
liquidation of the Company other than a liquidation of the Company into
any subsidiary or a liquidation a result of which persons who were
stockholders of the Company immediately prior to such liquidation have
substantially the same proportionate ownership of shares of common stock
of the surviving corporation immediately after such liquidation as
immediately before; or
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(e)
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Within
any twenty-four (24) month period, the Incumbent Directors shall cease to
constitute at least a majority of the Board or the board of directors of
any successor to the Company;
provided
,
however
, that
any director elected to the Board, or nominated for election, by a
majority of the Incumbent Directors then still in office, shall be deemed
to be an Incumbent Director for purposes of this paragraph (e), but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf
of an individual, entity or “group” other than the Board (including, but
not limited to, any such assumption that results from paragraphs (a), (b),
(c), or (d) of this definition).
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Notwithstanding
the foregoing, a “Change of Control” shall not be deemed to occur if the Company
files for bankruptcy, liquidation or reorganization under the United States
Bankruptcy Code.
“
Code
” shall mean the
Internal Revenue Code of 1986, as amended. Reference in the Plan to any section
of the Code shall be deemed to include any amendments or successor provisions to
any section and any regulation under such section.
“
Committee
” shall mean
a committee comprised of not less than three (3) members of the Board who are
selected by the Board as provided in Section 4.1.
“
Common Stock
” shall
mean the common stock, par value $0.01 per share, of the Company.
“
Company
” shall mean
Ambassadors Group, Inc., a Delaware corporation, and any successor
thereto.
“
Consultant
” shall
mean any non-Employee (individual or entity) advisor to the Company or an
Affiliate who or which has contracted directly with the Company or an Affiliate
to render bona fide consulting or advisory services thereto.
“
Director
” shall mean
a member of the Board or a member of the board of directors of an Affiliate, in
either case, who is not an Employee.
“
Distribution Equivalent
Right
” shall mean an Award granted under Article XIII of the Plan which
entitles the Holder to receive bookkeeping credits, cash payments and/or Common
Stock distributions equal in amount to the distributions that would have been
made to the Holder had the Holder held a specified number of shares of Common
Stock during the period the Holder held the Distribution Equivalent
Right.
“
Distribution Equivalent
Right Award Agreement
” shall mean a written agreement between the Company
and a Holder with respect to a Distribution Equivalent Right Award.
“
Effective Date
” shall
mean May 7, 2009.
“
Employee
” shall mean
any employee, including officers, of the Company or an Affiliate.
“
Exchange Act
” shall
mean the Securities Exchange Act of 1934, as amended.
“
Fair Market Value
”
shall mean, as determined consistent with the applicable requirements of
Sections 409A and 422 of the Code, as of any specified date, the closing sales
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date)
on the Nasdaq Stock
Market or a domestic or foreign national securities exchange (including London’s
Alternative Investment Market) on which the Common Stock may be listed, as
reported in The Wall Street Journal or The Financial Times. If the
Common Stock is not listed on the Nasdaq Stock Market or on a national
securities exchange, but is quoted on the OTC Bulletin Board or by the National
Quotation Bureau, the Fair Market Value of the Common Stock shall be the mean of
the bid and asked prices per share of the Common Stock for such
date. If the Common Stock is not quoted or listed as set forth above,
Fair Market Value shall be determined by the Board in good faith by any fair and
reasonable means (which means, with respect to a particular Award grant, may be
set forth with greater specificity in the applicable Award
Agreement). The Fair Market Value of property other than Common Stock
shall be determined by the Board in good faith by any fair and reasonable means,
and consistent with the applicable requirements of Sections 409A and 422 of the
Code.
“
Family Member
” shall
mean any child, stepchild, grandchild, parent, stepparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships, any person sharing the Holder’s household (other than a tenant or
employee of the Holder), a trust in which such persons have more than fifty
percent (50%) of the beneficial interest, a foundation in which such persons (or
the Holder) control the management of assets, and any other entity in which such
persons (or the Holder) own more than fifty percent (50%) of the voting
interests.
“
Holder
” shall mean an
Employee, Director or Consultant who has been granted an Award or any such
individual’s beneficiary, estate or representative, to the extent
applicable.
“
Incentive Stock
Option
” shall mean an Option which is intended by the Committee to
constitute an “incentive stock option” under Section 422 of the
Code.
“
Incumbent Director
”
shall mean, with respect to any period of time specified under the Plan for
purposes of determining whether or not a Change of Control has occurred, the
individuals who were members of the Board at the beginning of such
period.
“
Non-Qualified Stock
Option
” shall mean an Option which is not an Incentive Stock
Option.
“
Option
” shall mean an
Award granted under Article VII of the Plan of an option to purchase shares of
Common Stock, and includes both Incentive Stock Options and Non-Qualified Stock
Options.
“
Option Agreement
”
shall mean a written agreement between the Company and a Holder with respect to
an Option.
“
Performance Share
Award
” shall mean an Award granted under Article XII of the Plan under
which, upon the satisfaction of predetermined individual and/or Company (and/or
Affiliate) performance goals and/or objectives, shares of Common Stock are paid
to the Holder.
“
Performance Share Award
Agreement
” shall mean a written agreement between the Company and a
Holder with respect to a Performance Share Award.
“
Performance Unit
”
shall mean a Unit awarded to a Holder pursuant to a Performance Unit
Award.
“
Performance Unit
Award
” shall mean an Award granted under Article XI of the Plan under
which, upon the satisfaction of predetermined individual and/or Company (and/or
Affiliate) performance goals and/or objectives, a cash payment shall be made to
the Holder, based on the number of Units awarded to the Holder.
“
Performance Unit Award
Agreement
” shall mean a written agreement between the Company and a
Holder with respect to a Performance Unit Award.
“
Plan
” shall mean this
Ambassadors Group, Inc. 2009 Equity Participation Plan, as amended from time to
time, together with each of the Award Agreements utilized
hereunder.
“
Restricted Stock
Award
” shall mean an Award granted under Article VIII of the Plan of
shares of Common Stock, the transferability of which by the Holder shall be
subject to Restrictions.
“
Restricted Stock Award
Agreement
” shall mean a written agreement between the Company and a
Holder with respect to a Restricted Stock Award.
“
Restricted Stock
Unit
” shall mean a Unit awarded to a Holder pursuant to a
Restricted Stock Unit Award.
“
Restricted Stock Unit
Award
” shall mean an Award granted under Article X of the Plan under
which, upon the satisfaction of predetermined individual service-related vesting
requirements, a payment in cash or shares of Common Stock shall be made to the
Holder, based on the number of Units awarded to the Holder.
“
Restricted Stock Unit Award
Agreement
” shall mean a written agreement between the Company and a
Holder with respect to a Restricted Stock Unit Award.
“
Restriction Period
”
shall mean the period of time for which shares of Common Stock subject to a
Restricted Stock Award shall be subject to Restrictions, as set forth in the
applicable Restricted Stock Award Agreement.
“
Restrictions
” shall
mean forfeiture, transfer and/or other restrictions applicable to shares of
Common Stock awarded to an Employee, Director or Consultant under the Plan
pursuant to a Restricted Stock Award and set forth in a Restricted Stock Award
Agreement.
“
Rule 16b-3
” shall
mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the
Exchange Act, as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a substantially similar
function.
“
Stock Appreciation
Right
” shall mean an Award granted under Article XIV of the Plan of a
right, granted alone or in connection with a related Option, to receive a
payment on the date of exercise.
“
Stock Appreciation Right
Award Agreement
” shall mean a written agreement between the Company and a
Holder with respect to a Stock Appreciation Right.
“
Tandem Stock Appreciation
Right
” shall mean a Stock Appreciation Right granted in connection with a
related Option, the exercise of which shall result in termination of the
otherwise entitlement to purchase some or all of the shares of Common Stock
under the related Option, all as set forth in Section 14.2.
“
Ten Percent
Stockholder
” shall mean an Employee who, at the time an Incentive Stock
Option is granted to him or her, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any parent corporation or subsidiary corporation thereof (both as defined
in Section 424 of the Code), within the meaning of Section 422(b)(6) of the
Code.
“
Total and Permanent
Disability
” shall mean the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months, all as
described in Section 22(e)(3) of the Code.
“
Units
” shall mean
bookkeeping units, each of which represents such monetary amount as shall be
designated by the Committee in each Performance Unit Award Agreement, or
represents one (1) share of Common Stock for purposes of each Restricted Stock
Unit Award.
“
Unrestricted Stock
Award
” shall mean an Award granted under Article IX of the Plan of shares
of Common Stock which are not subject to Restrictions.
“
Unrestricted Stock Award
Agreement
” shall mean a written agreement between the Company and a
Holder with respect to an Unrestricted Stock Award.
ARTICLE
III
EFFECTIVE
DATE OF PLAN
The
Plan shall be effective as of the Effective Date, provided that the Plan is
approved by the stockholders of the Company within twelve (12) months of such
date.
ARTICLE
IV
ADMINISTRATION
Section
4.1
Composition of
Committee
. The Plan shall be administered by the Committee,
which shall be appointed by the Board. The Committee shall consist
solely of three (3) or more Directors who are each (i) “outside directors”
within the meaning of Section 162(m) of the Code (“
Outside Directors
”),
(ii) “non-employee directors” within the meaning of Rule 16b-3 and (iii)
“independent” for purposes of any applicable listing requirements (“
Non-Employee
Directors
”);
provided
,
however
, that the
Board or the Committee may delegate to a committee of one or more members of the
Board who are not (x) Outside Directors, the authority to grant Awards to
eligible persons who are not (A) then “covered employees” within the meaning of
Section 162(m) of the Code and are not expected to be “covered employees” at the
time of recognition of income resulting from such Award, or (B) persons with
respect to whom the Company wishes to comply with the requirements of Section
162(m) of the Code, and/or (y) Non-Employee Directors, the authority to grant
Awards to eligible persons who are not then subject to the requirements of
Section 16 of the Exchange Act. If a member of the Committee shall be eligible
to receive an Award under the Plan, such Committee member shall have no
authority hereunder with respect to his or her own Award.
Section
4.2
Powers
. Subject to
the provisions of the Plan, the Committee shall have the sole authority, in its
discretion, to make all determinations under the Plan, including but not limited
to determining which Employees, Directors or Consultants shall receive an Award,
the time or times when an Award shall be made (the date of grant of an Award
shall be the date on which the Award is awarded by the Committee), what type of
Award shall be granted, the term of an Award, the date or dates on which an
Award vests (including acceleration of vesting), the form of any payment to be
made pursuant to an Award, the terms and conditions of an Award (including the
forfeiture of the Award (and/or any financial gain) if the Holder of the Award
violates any applicable restrictive covenant thereof), the Restrictions under a
Restricted Stock Award and the number of shares of Common Stock which may be
issued under an Award, all as applicable. In making such determinations the
Committee may take into account the nature of the services rendered by the
respective Employees, Directors and Consultants, their present and potential
contribution to the Company’s (or the Affiliate’s) success and such other
factors as the Committee in its discretion shall deem relevant.
Section
4.3
Additional
Powers
. The Committee shall have such additional powers as are
delegated to it under the other provisions of the Plan. Subject to the express
provisions of the Plan, the Committee is authorized to construe the Plan and the
respective Award Agreements executed hereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the
intent of the Plan, and to determine the terms, restrictions and provisions of
each Award, including such terms, restrictions and provisions as shall be
requisite in the judgment of the Committee to cause designated Options to
qualify as Incentive Stock Options, and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in any Award
Agreement in the manner and to the extent it shall deem expedient to carry it
into effect. The determinations of the Committee on the matters referred to in
this Article IV shall be conclusive and binding on the Company and all
Holders.
Section
4.4
Committee
Action
. In the absence of specific rules to the contrary,
action by the Committee shall require the consent of a majority of the members
of the Committee, expressed either orally at a meeting of the Committee or in
writing in the absence of a meeting. No member of the Committee shall
have any liability for any good faith action, inaction or determination in
connection with the Plan.
ARTICLE
V
STOCK
SUBJECT TO PLAN AND LIMITATIONS THEREON
Section
5.1
Stock Grant and Award
Limits
. The Committee may from time to time grant Awards to
one or more Employees, Directors and/or Consultants determined by it to be
eligible for participation in the Plan in accordance with the provisions of
Article VI. Subject to Article XV, the aggregate number of shares of Common
Stock that may be issued under the Plan shall not exceed the sum of (a) One
Million Two Hundred Thousand (1,200,000) shares, and (b) any shares of Common
Stock which as of the Effective Date are available for issuance under the
Company’s 2001 Equity Participation Plan (the “
Prior
Plan
”). In order that the applicable regulations under the
Code relating to Incentive Stock Options be satisfied, the maximum number of
shares of Common Stock that may be delivered upon exercise of Awards which are
Incentive Stock Options shall be the number specified in clause (a) of the
immediately preceding sentence, and, if necessary to satisfy such regulations,
such maximum limit shall apply to the number of shares of Common Stock that may
be delivered in connection with each other type of Award under the Plan
(applicable separately to each type of Award). Shares shall be deemed
to have been issued under the Plan solely to the extent actually issued and
delivered pursuant to an Award. To the extent that an Award (or an award made
previously under the Prior Plan, a “
Prior Plan Award
”)
lapses, expires, is canceled, is terminated unexercised or ceases to be
exercisable for any reason, or the rights of its Holder (or holder for purposes
of Prior Plan Awards) terminate, any shares of Common Stock subject to such
Award or Prior Plan Award shall again be available for the grant of a new Award
and the above One Million Two Hundred Thousand (1,200,000) shares amount shall
be increased by such number of shares. Notwithstanding any provision in the Plan
to the contrary, the maximum number of shares of Common Stock that may be
subject to Awards of Options under Article VII and/or Stock Appreciation Rights
under Article XIV, in either or both cases granted to any one Employee during
any calendar year, shall be Two Hundred Thousand (200,000) shares (subject to
adjustment in the same manner as provided in Article XV with respect to shares
of Common Stock subject to Awards then outstanding). The limitation set forth in
the preceding sentence shall be applied in a manner which shall permit
compensation generated in connection with the exercise of Options or Stock
Appreciation Rights to constitute “performance-based” compensation for purposes
of Section 162(m) of the Code, including, but not limited to, counting against
such maximum number of shares, to the extent required under Section 162(m) of
the Code, any shares subject to Options or Stock Appreciation Rights that are
canceled or repriced.
Section
5.2
Stock
Offered
. The stock to be offered pursuant to the grant of an
Award may be authorized but unissued Common Stock, Common Stock purchased on the
open market or Common Stock previously issued and outstanding and reacquired by
the Company.
ARTICLE
VI
ELIGIBILITY
FOR AWARDS; TERMINATION OF
EMPLOYMENT,
DIRECTOR STATUS OR CONSULTANT STATUS
Section
6.1
Eligibility
. Awards
made under the Plan may be granted solely to persons or entities who, at the
time of grant, are Employees, Directors or Consultants. An Award may be granted
on more than one occasion to the same Employee, Director or Consultant, and,
subject to the limitations set forth in the Plan, such Award may include, a
Non-Qualified Stock Option, a Restricted Stock Award, an Unrestricted Stock
Award, a Restricted Stock Unit Award, a Distribution Equivalent Right Award, a
Performance Stock Award, a Performance Unit Award, a Stock Appreciation Right, a
Tandem Stock Appreciation Right, any combination thereof or, solely for
Employees, an Incentive Stock Option.
Section
6.2
Termination of Employment or
Director Status
. Except to the extent inconsistent with the
terms of the applicable Award Agreement (in which case the terms of the
applicable Award Agreement shall control), the terms of the Holder’s employment
agreement with the Company or an Affiliate (in which case the terms of the
applicable employment agreement shall control) and/or the provisions of Section
6.4, the following terms and conditions shall apply with respect to the
termination of a Holder’s employment with, or status as a Director of, the
Company or an Affiliate, as applicable, for any reason, including, without
limitation, Total and Permanent Disability or death:
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(a)
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The
Holder’s rights, if any, to exercise any then exercisable Non-Qualified
Stock Options and/or Stock Appreciation Rights shall
terminate:
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(1)
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If
such termination is for a reason other than the Holder’s Total and
Permanent Disability or death, ninety (90) days after the date of such
termination of employment or after the date of such termination of
Director status;
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(2)
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If
such termination is on account of the Holder’s Total and Permanent
Disability, one (1) year after the date of such termination of employment
or Director status; or
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(3)
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If
such termination is on account of the Holder’s death, one (1) year after
the date of the Holder’s death.
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Upon such
applicable date the Holder (and such Holder’s estate, designated beneficiary or
other legal representative) shall forfeit any rights or interests in or with
respect to any such Non-Qualified Stock Options and Stock Appreciation
Rights.
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(b)
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The
Holder’s rights, if any, to exercise any then exercisable Incentive Stock
Option shall terminate:
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(1)
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If
such termination is for a reason other than the Holder’s Total and
Permanent Disability or death, three (3) months after the date of such
termination of employment;
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(2)
|
If
such termination is on account of the Holder’s Total and Permanent
Disability, one (1) year after the date of such termination of employment;
or
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(3)
|
If
such termination is on account of the Holder’s death, one (1) year after
the date of the Holder’s death.
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Upon such
applicable date the Holder (and such Holder’s estate, designated beneficiary or
other legal representative) shall forfeit any rights or interests in or with
respect to any such Incentive Stock Options.
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(c)
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If
a Holder’s employment with, or status as a Director of, the Company or an
Affiliate, as applicable, terminates for any reason prior to the actual or
deemed satisfaction and/or lapse of the Restrictions, vesting
requirements, terms and conditions applicable to a Restricted Stock Award
and/or Restricted Stock Unit Award, such Restricted Stock and/or
Restricted Stock Units shall immediately be canceled, and the Holder (and
such Holder’s estate, designated beneficiary or other legal
representative) shall forfeit any rights or interests in and with respect
to any such Restricted Stock and/or Restricted Stock Units. The
immediately preceding sentence to the contrary notwithstanding, the
Committee, in its sole discretion, may determine, prior to or within
thirty (30) days after the date of such termination of employment or
Director status, that all or a portion of any such Holder’s Restricted
Stock and/or Restricted Stock Units shall not be so canceled and
forfeited.
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Section
6.3
Termination of Consultant
Status
. Except to the extent inconsistent with the terms of the
applicable Award Agreement and/or the provisions of Section 6.4, the following
terms and conditions shall apply with respect to the termination of a Holder’s
status as a Consultant, for any reason:
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(a)
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The
Holder’s rights, if any, to exercise any then exercisable Non-Qualified
Stock Options and/or Stock Appreciation Rights shall
terminate:
|
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(1)
|
If
such termination is for a reason other than the Holder’s death, ninety
(90) days after the date of such termination;
or
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(2)
|
If
such termination is on account of the Holder’s death, one (1) year after
the date of the Holder’s death.
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(b)
|
If
the status of a Holder as a Consultant terminates for any reason prior to
the actual or deemed satisfaction and/or lapse of the Restrictions,
vesting requirements, terms and conditions applicable to a Restricted
Stock Award and/or a Restricted Stock Unit Award, such Restricted Stock
and/or Restricted Stock Units shall immediately be canceled, and the
Holder (and such Holder’s estate, designated beneficiary or other legal
representative) shall forfeit any rights or interests in and with respect
to any such Restricted Stock and/or Restricted Stock Units. The
immediately preceding sentence to the contrary notwithstanding, the
Committee, in its sole discretion, may determine, prior to or within
thirty (30) days after the date of such termination of such a Holder’s
status as a Consultant, that all or a portion of any such Holder’s
Restricted Stock and/or Restricted Stock Units shall not be so canceled
and forfeited.
|
Section
6.4
Special Termination
Rule
. Except to the extent inconsistent with the terms of the applicable
Award Agreement, and notwithstanding anything to the contrary contained in this
Article VI, if a Holder’s employment with, or status as a Director of, the
Company or an Affiliate shall terminate, and if, within ninety (90) days of such
termination, such Holder shall become a Consultant, such Holder’s rights with
respect to any Award or portion thereof granted thereto prior to the date of
such termination may be preserved, if and to the extent determined by the
Committee in its sole discretion, as if such Holder had been a Consultant for
the entire period during which such Award or portion thereof had been
outstanding. Should the Committee effect such determination with respect to such
Holder, for all purposes of the Plan, such Holder shall not be treated as if his
or her employment or Director status had terminated until such time as his or
her Consultant status shall terminate, in which case his or her Award, as it may
have been reduced in connection with the Holder’s becoming a Consultant, shall
be treated pursuant to the provisions of Section 6.3;
provided
,
however
, that any
such Award which is intended to be an Incentive Stock Option shall, upon the
Holder’s no longer being an Employee, automatically convert to a Non-Qualified
Stock Option. Should a Holder’s status as a Consultant terminate, and
if, within ninety (90) days of such termination, such Holder shall become an
Employee or a Director, such Holder’s rights with respect to any Award or
portion thereof granted thereto prior to the date of such termination may be
preserved, if and to the extent determined by the Committee in its sole
discretion, as if such Holder had been an Employee or a Director, as applicable,
for the entire period during which such Award or portion thereof had been
outstanding, and, should the Committee effect such determination with respect to
such Holder, for all purposes of the Plan, such Holder shall not be treated as
if his or her Consultant status had terminated until such time as his or her
employment with the Company or an Affiliate, or his or her Director status, as
applicable, shall terminate, in which case his or her Award shall be treated
pursuant to the provisions of Section 6.2.
Section
6.5
Termination for
Cause
. Notwithstanding anything in this Article VI or
elsewhere in the Plan to the contrary, and unless a Holder’s Award Agreement
specifically provides otherwise, should a Holder’s employment, Director status
or engagement as a Consultant with or for the Company or an Affiliate be
terminated by the Company or Affiliate for Cause, all of such Holder’s then
outstanding Awards shall expire immediately and be forfeited in their entirety
upon such termination.
ARTICLE
VII
OPTIONS
Section
7.1
Option
Period
. The term of each Option shall be as specified in the
Option Agreement;
provided
,
however
, that except
as set forth in Section 7.3, no Option shall be exercisable after the expiration
of ten (10) years from the date of its grant.
Section
7.2
Limitations on Exercise of
Option
. An Option shall be exercisable in whole or in such
installments and at such times as specified in the Option
Agreement.
Section
7.3
Special Limitations on
Incentive Stock Options
. To the extent that the aggregate Fair
Market Value (determined at the time the respective Incentive Stock Option is
granted) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an individual during any calendar year under
all plans of the Company and any parent corporation or subsidiary corporation
thereof (both as defined in Section 424 of the Code) which provide for the grant
of Incentive Stock Options exceeds One Hundred Thousand Dollars ($100,000) (or
such other individual limit as may be in effect under the Code on the date of
grant), the portion of such Incentive Stock Options that exceeds such threshold
shall be treated as Non-Qualified Stock Options. The Committee shall determine,
in accordance with applicable provisions of the Code, Treasury Regulations and
other administrative pronouncements, which of a Holder’s Options, which were
intended by the Committee to be Incentive Stock Options when granted to the
Holder, will not constitute Incentive Stock Options because of such limitation,
and shall notify the Holder of such determination as soon as practicable after
such determination. No Incentive Stock Option shall be granted to an Employee
if, at the time the Option is granted, such Employee is a Ten Percent
Stockholder, unless (i) at the time such Incentive Stock Option is granted the
Option price is at least one hundred ten percent (110 %) of the Fair Market
Value of the Common Stock subject to the Option, and (ii) such Incentive Stock
Option by its terms is not exercisable after the expiration of five (5) years
from the date of grant. No Incentive Stock Option shall be granted
more than ten (10) years from the date on which the Plan is approved by the
Company’s stockholders. The designation by the Committee of an Option
as an Incentive Stock Option shall not guarantee the Holder that the Option will
satisfy the applicable requirements for “incentive stock option” status under
Section 422 of the Code.
Section
7.4
Option Agreement
.
Each Option shall be evidenced by an Option Agreement in such form and
containing such provisions not inconsistent with the provisions of the Plan as
the Committee from time to time shall approve, including, but not limited to,
provisions intended to qualify an Option as an Incentive Stock Option. An Option
Agreement may provide for the payment of the Option price, in whole or in part,
by the delivery of a number of shares of Common Stock (plus cash if necessary)
that have been owned by the Holder for at least six (6) months and having a Fair
Market Value equal to such Option price, or such other forms or methods as the
Committee may determine from time to time, in each case, subject to such rules
and regulations as may be adopted by the Committee. Each Option Agreement shall,
solely to the extent inconsistent with the provisions of Sections 6.2, 6.3 and
6.4, as applicable, specify the effect of termination of employment, Director
status or Consultant status on the exercisability of the Option. Moreover,
without limited the generality of the foregoing, an Option Agreement may provide
for a “cashless exercise” of the Option by establishing procedures whereby the
Holder, by a properly-executed written notice, directs (i) an immediate market
sale or margin loan respecting all or a part of the shares of Common Stock to
which he is entitled upon exercise pursuant to an extension of credit by the
Company to the Holder of the Option price, (ii) the delivery of the shares of
Common Stock from the Company directly to a brokerage firm and (iii) the
delivery of the Option price from sale or margin loan proceeds from the
brokerage firm directly to the Company. Each Option Agreement shall, solely to
the extent inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as
applicable, specify the effect of the termination of the Holder’s employment,
Director status or Consultant status on the exercisability of the Option. An
Option Agreement may also include provisions relating to (i) subject to the
provisions hereof, accelerated vesting of Options, including but not limited to
upon the occurrence of a Change of Control, (ii) tax matters (including
provisions covering any applicable Employee wage withholding requirements and
requiring additional “gross-up” payments to Holders to meet any excise taxes or
other additional income tax liability imposed as a result of a payment made upon
a Change of Control resulting from the operation of the Plan or of such Option
Agreement) and (iii) any other matters not inconsistent with the terms and
provisions of the Plan that the Committee shall in its sole discretion
determine. The terms and conditions of the respective Option Agreements need not
be identical.
Section
7.5
Option Price and
Payment
. The price at which a share of Common Stock may be
purchased upon exercise of an Option shall be determined by the Committee;
provided
,
however
, that such
Option price (i) shall not be less than the Fair Market Value of a share of
Common Stock on the date such Option is granted, and (ii) shall be subject to
adjustment as provided in Article XV. The Option or portion thereof may be
exercised by delivery of an irrevocable notice of exercise to the Company. The
Option price for the Option or portion thereof shall be paid in full in the
manner prescribed by the Committee as set forth in the Plan and the applicable
Option Agreement. Separate stock certificates shall be issued by the Company for
those shares of Common Stock acquired pursuant to the exercise of an Incentive
Stock Option and for those shares of Common Stock acquired pursuant to the
exercise of a Non-Qualified Stock Option.
Section
7.6
Stockholder Rights and
Privileges
. The Holder of an Option shall be entitled to all the
privileges and rights of a stockholder of the Company solely with respect to
such shares of Common Stock as have been purchased under the Option and for
which certificates of stock have been registered in the Holder’s
name.
Section
7.7
Options and Rights in
Substitution for Stock Options Granted by Other
Corporations
. Options may be granted under the Plan from time
to time in substitution for stock options held by individuals employed by
entities who become Employees as a result of a merger or consolidation of the
employing entity with the Company or any Affiliate, or the acquisition by the
Company or an Affiliate of the assets of the employing entity, or the
acquisition by the Company or an Affiliate of stock of the employing entity with
the result that such employing entity becomes an Affiliate.
Section
7.8
Prohibition Against
Repricing
. Except to the extent (i) approved in advance by
holders of a majority of the shares of the Company entitled to vote generally in
the election of directors, or (ii) as a result of any Change of Control or any
adjustment as provided in Article XV, the Committee shall not have the
power or authority to reduce, whether through amendment or otherwise, the
exercise price of any outstanding Option or Stock Appreciation right, or to
grant any new Award or make any payment of cash in substitution for or upon the
cancellation of Options and/or Stock Appreciation Rights previously
granted.
ARTICLE
VIII
RESTRICTED
STOCK AWARDS
Section
8.1
Restriction Period to be
Established by Committee
. At the time a Restricted Stock Award
is made, the Committee shall establish the Restriction Period applicable to such
Award. Each Restricted Stock Award may have a different Restriction Period, in
the discretion of the Committee. The Restriction Period applicable to a
particular Restricted Stock Award shall not be changed except as permitted by
Section 8.2.
Section
8.2
Other Terms and
Conditions
. Common Stock awarded pursuant to a Restricted
Stock Award shall, unless otherwise determined by the Committee, be issued in
book entry form on the books and records as kept by the Company’s transfer agent
and registered in the name of the Holder of such Restricted Stock Award. If
provided for under the Restricted Stock Award Agreement, the Holder shall have
the right to vote Common Stock subject thereto and to enjoy all other
stockholder rights, including the entitlement to receive dividends on the Common
Stock during the Restriction Period, except that (i) the Holder shall not be
entitled to delivery of a stock certificate until the Restriction Period shall
have expired, (ii) if a stock certificate is prepared before the expiration of
the Restriction Period, the Company shall retain custody of the stock
certificate during the Restriction Period (with a stock power endorsed by the
Holder in blank), (iii) the Holder may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the Common Stock during the Restriction
Period and (iv) a breach of the terms and conditions established by the
Committee pursuant to the Restricted Stock Award Agreement shall cause a
forfeiture of the Restricted Stock Award. At the time of such Award, the
Committee may, in its sole discretion, prescribe additional terms and conditions
or restrictions relating to Restricted Stock Awards, including, but not limited
to, rules pertaining to the effect of termination of employment, Director status
or Consultant status prior to expiration of the Restriction Period. Such
additional terms, conditions or restrictions shall, to the extent inconsistent
with the provisions of Sections 6.2, 6.3 and 6.4, as applicable, be set forth in
a Restricted Stock Award Agreement made in conjunction with the Award. Such
Restricted Stock Award Agreement may also include provisions relating to (i)
subject to the provisions hereof, accelerated vesting of Awards, including but
not limited to accelerated vesting upon the occurrence of a Change of Control,
(ii) tax matters (including provisions covering any applicable Employee wage
withholding requirements and requiring additional “gross-up” payments to Holders
to meet any excise taxes or other additional income tax liability imposed as a
result of a payment made in connection with a Change of Control resulting from
the operation of the Plan or of such Restricted Stock Award Agreement) and (iii)
any other matters not inconsistent with the terms and provisions of the Plan
that the Committee shall in its sole discretion determine. The terms and
conditions of the respective Restricted Stock Agreements need not be
identical. All shares of Common Stock delivered to a Holder as part
of a Restricted Stock Award shall be delivered and reported by the Company or
the Affiliate, as applicable, to the Holder by no later than by the fifteenth
(15
th
) day of
the third (3
rd
)
calendar month next following the end of the Company’s fiscal year in which the
Holder’s entitlement to such shares becomes vested.
Section
8.3
Payment for Restricted
Stock
. The Committee shall determine the amount and form of
any payment from a Holder for Common Stock received pursuant to a Restricted
Stock Award, if any, provided that in the absence of such a determination, a
Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required by
law.
Section
8.4
Restricted Stock Award
Agreements
. At the time any Award is made under this Article VIII, the
Company and the Holder shall enter into a Restricted Stock Award Agreement
setting forth each of the matters contemplated hereby and such other matters as
the Committee may determine to be appropriate.
ARTICLE
IX
UNRESTRICTED
STOCK AWARDS
Pursuant
to the terms of the applicable Unrestricted Stock Award Agreement, a Holder may
be awarded (or sold) shares of Common Stock which are not subject to
Restrictions, in consideration for past services rendered thereby to the Company
or an Affiliate or for other valid consideration;
provided
,
however
, that no more
than One Hundred Thousand (100,000) shares of Common Stock may be subject to
Unrestricted Stock Awards in the aggregate.
ARTICLE
X
RESTRICTED
STOCK UNIT AWARDS
Section
10.1
Terms and
Conditions
. The
Committee shall set forth in the applicable Restricted Stock Unit Award
Agreement the individual service-based vesting requirement which the Holder
would be required to satisfy before the Holder would become entitled to payment
pursuant to Section 10.2 the number of Units awarded to the
Holder. Such payment shall be subject to a “substantial risk of
forfeiture” under Section 409A of the Code. At the time of such
Award, the Committee may, in its sole discretion, prescribe additional terms and
conditions or restrictions relating to Performance Unit Awards, including, but
not limited to, rules pertaining to the effect of termination of employment,
director status or Consultant status prior to expiration of the applicable
vesting period. The terms and conditions of the respective Restricted
Stock Award Agreements need not be identical.
Section
10.2
Payments
. The
Holder of a Restricted Stock Unit shall be entitled to receive a cash payment
equal to the Fair Market Value of a share of Common Stock, or one (1) share of
Common Stock, as determined in the sole discretion of the Committee and as set
forth in the Restricted Stock Unit Award Agreement, for each Restricted Stock
Unit subject to such Restricted Stock Unit Award, if the Holder satisfies the
applicable vesting requirement. Such payment shall be made no later
than by the fifteenth (15
th
) day of
the third (3
rd
)
calendar month next following the end of the calendar year in which the
Restricted Stock Unit first becomes vested.
ARTICLE
XI
PERFORMANCE
UNIT AWARDS
Section
11.1
Terms and
Conditions
. The Committee shall set forth in the applicable
Performance Unit Award Agreement the performance goals and objectives (and the
period of time to which such goals and objectives shall apply) which the Holder
and/or the Company would be required to satisfy before the Holder would become
entitled to payment pursuant to Section 11.2, the number of Units awarded to the
Holder and the dollar value assigned to each such Unit. Such payment
shall be subject to a “substantial risk of forfeiture” under Section 409A of the
Code. At the time of such Award, the Committee may, in its sole
discretion, prescribe additional terms and conditions or restrictions,
including, but not limited to, rules pertaining to the effect of termination of
employment, Director status or Consultant status prior to expiration of the
applicable performance period. The terms and conditions of the
respective Performance Unit Award Agreements need not be identical.
Section
11.2
Payments
. The
Holder of a Performance Unit shall be entitled to receive a cash payment equal
to the dollar value assigned to such Unit under the applicable Performance Unit
Award Agreement if the Holder and/or the Company satisfy (or partially satisfy,
if applicable under the applicable Performance Unit Award Agreement) the
performance goals and objectives set forth in such Performance Unit Award
Agreement. If achieved, such payment shall be made no later than by
the fifteenth (15
th
) day of
the third (3
rd
)
calendar month next following the end of the Company’s fiscal year to which such
performance goals and objectives relate.
ARTICLE
XII
PERFORMANCE
SHARE AWARDS
Section
12.1
Terms and
Conditions
. The Committee shall set forth in the applicable
Performance Share Award Agreement the performance goals and objectives (and the
period of time to which such goals and objectives shall apply) which the Holder
and/or the Company would be required to satisfy before the Holder would become
entitled to the receipt of shares of Common Stock pursuant to such Holder’s
Performance Share Award and the number of shares of Common Stock subject to such
Performance Share Award. Such payment shall be subject to a
“substantial risk of forfeiture” under Section 409A of the Code and, if such
goals and objectives are achieved, the distribution of such Common Shares shall
be made no later than by the fifteenth (15
th
) day of
the third (3
rd
)
calendar month next following the end of the Company’s fiscal year to which such
goals and objectives relate. At the time of such Award, the Committee
may, in its sole discretion, prescribe additional terms and conditions or
restrictions relating to Performance Share Awards, including, but not limited
to, rules pertaining to the effect of termination of the Holder’s employment,
Director status or Consultant status prior to the expiration of the applicable
performance period. The terms and conditions of the respective
Performance Share Award Agreements need not be identical.
Section
12.2
Stockholder Rights and
Privileges
. The Holder of a Performance Share Award shall have
no rights as a stockholder of the Company until such time, if any, as the Holder
actually receives shares of Common Stock pursuant to the Performance Share
Award.
ARTICLE
XIII
DISTRIBUTION
EQUIVALENT RIGHTS
Section
13.1
Terms and
Conditions
. The Committee shall set forth in the applicable
Distribution Equivalent Rights Award Agreement the terms and conditions, if any,
including whether the Holder is to receive credits currently in cash, is to have
such credits reinvested (at Fair Market Value determined as of the date of
reinvestment) in additional shares of Common Stock or is to be entitled to
choose among such alternatives. Such receipt shall be subject to a “substantial
risk of forfeiture” under Section 409A of the Code and, if such Award becomes
vested, the distribution of such cash or shares of Common Stock shall be made no
later than by the fifteenth (15
th
) day of
the third (3
rd
)
calendar month next following the end of the Company’s fiscal year in which the
Holder’s interest in the Award vests. Distribution Equivalent Rights Awards may
be settled in cash or in shares of Common Stock, as set forth in the applicable
Distribution Equivalent Rights Award Agreement. A Distribution Equivalent Rights
Award may, but need not be, awarded in tandem with another Award, whereby, if so
awarded, such Distribution Equivalent Rights Award shall expire, terminate or be
forfeited by the Holder, as applicable, under the same conditions as under such
other Award.
Section
13.2
Interest
Equivalents
. The Distribution Equivalent Rights Award
Agreement for a Distribution Equivalent Rights Award may provide for the
crediting of interest on a Distribution Rights Award to be settled in cash at a
future date (but in no event later than by the fifteenth (15
th
) day of
the third (3
rd
)
calendar month next following the end of the Company’s fiscal year in which such
interest was credited), at a rate set forth in the applicable Distribution
Equivalent Rights Award Agreement, on the amount of cash payable
thereunder.
ARTICLE
XIV
STOCK
APPRECIATION RIGHTS
Section
14.1
Terms and
Conditions
. The Committee shall set forth in the applicable
Stock Appreciation Right Award Agreement the terms and conditions of the Stock
Appreciation Right, including (i) the base value (the “
Base Value
”) for the
Stock Appreciation Right, which for purposes of a Stock Appreciation which is
not a Tandem Stock Appreciation Right, shall be not less than the Fair Market
Value of a share of the Common Stock on the date of grant of the Stock
Appreciation Right, (ii) the number of shares of Common Stock subject to the
Stock Appreciation Right, (iii) the period during which the Stock Appreciation
Right may be exercised;
provided
,
however
, that no
Stock Appreciation Right shall be exercisable after the expiration of ten (10)
years from the date of its grant, and (iv) any other special rules and/or
requirements which the Committee imposes upon the Stock Appreciation Right. Upon
the exercise of some or all of a Stock Appreciation Right, the Holder shall
receive a payment from the Company, in cash or in the form of shares of Common
Stock having an equivalent Fair Market Value or in a combination of both, as
determined in the sole discretion of the Committee, equal to the product
of:
|
(a)
|
The
excess of (i) the Fair Market Value of a share of the Common Stock on the
date of exercise, over (ii) the Base Value, multiplied
by;
|
|
(b)
|
The
number of shares of Common Stock with respect to which the Stock
Appreciation Right is exercised.
|
Section
14.2
Tandem Stock Appreciation
Rights
. If the Committee grants a Stock Appreciation Right which is
intended to be a Tandem Stock Appreciation Right, the Tandem Stock Appreciation
Right must be granted at the same time as the related Option, and the following
special rules shall apply:
|
(a)
|
The
Base Value shall be equal to or greater than the per share exercise price
under the related Option;
|
|
(b)
|
The
Tandem Stock Appreciation Right may be exercised for all or part of the
shares of Common Stock which are subject to the related Option, but solely
upon the surrender by the Holder of the Holder’s right to exercise the
equivalent portion of the related Option (and when a share of Common Stock
is purchased under the related Option, an equivalent portion of the
related Tandem Stock Appreciation Right shall be
cancelled);
|
|
(c)
|
The
Tandem Stock Appreciation Right shall expire no later than the date of the
expiration of the related Option;
|
|
(d)
|
The
value of the payment with respect to the Tandem Stock Appreciation Right
may be no more than one hundred percent (100%) of the difference between
the per share exercise price under the related Option and the Fair Market
Value of the shares of Common Stock subject to the related Option at the
time the Tandem Stock Appreciation Right is exercised, multiplied by the
number of shares of Common Stock with respect to which the Tandem Stock
Appreciation Right is exercised;
and
|
|
(e)
|
The
Tandem Stock Appreciation Right may be exercised solely when the Fair
Market Value of a share of Common Stock subject to the related Option
exceeds the per share the exercise price under the related
Option.
|
ARTICLE
XV
RECAPITALIZATION
OR REORGANIZATION
Section
15.1
Adjustments to Common
Stock
. The shares with respect to which Awards may be granted
under the Plan are shares of Common Stock as presently constituted;
provided
,
however
, that if, and
whenever, prior to the expiration or distribution to the Holder of shares of
Common Stock underlying an Award theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a stock
dividend on Common Stock without receipt of consideration by the Company, the
number of shares of Common Stock with respect to which such Award may thereafter
be exercised or satisfied, as applicable, (i) in the event of an increase in the
number of outstanding shares, shall be proportionately increased, and the
purchase price per share of the Common Stock shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares, shall
be proportionately reduced, and the purchase price per share of the Common Stock
shall be proportionately increased. Notwithstanding the foregoing or any other
provision of this Article XV, any adjustment made with respect to an Award (x)
which is an Incentive Stock Option, shall comply with the requirements of
Section 424(a) of the Code, and in no event shall any adjustment be made which
would render any Incentive Stock Option granted under the Plan to be other than
an “incentive stock option” for purposes of Section 422 of the Code, and (y)
which is a Non-Qualified Stock Option, shall comply with the requirements of
Section 409A of the Code, and in no event shall any adjustment be made which
would render any Non-Qualified Stock Option granted under the Plan to become
subject to Section 409A of the Code.
Section
15.2
Recapitalization
. If
the Company recapitalizes or otherwise changes its capital structure, thereafter
upon any exercise or satisfaction, as applicable, of a previously granted Award,
the Holder shall be entitled to receive (or entitled to purchase, if applicable)
under such Award, in lieu of the number of shares of Common Stock then covered
by such Award, the number and class of shares of stock and securities to which
the Holder would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the Holder had
been the holder of record of the number of shares of Common Stock then covered
by such Award.
Section
15.3
Other
Events
. In the event of changes to the outstanding Common
Stock by reason of extraordinary cash dividend, reorganization, mergers,
consolidations, combinations, split-ups, spin-offs, exchanges or other relevant
changes in capitalization occurring after the date of the grant of any Award and
not otherwise provided for under this Article XV, any outstanding Awards and any
Award Agreements evidencing such Awards shall be adjusted by the Board in its
discretion as to the number and price of shares of Common Stock or other
consideration subject to such Awards. In the event of any adjustment pursuant to
Sections 15.1, 15.2 or this Section 15.3, the aggregate number of shares
available under the Plan under Section 5.1 (and the 162(m) limit set forth
therein) shall be appropriately adjusted by the Board, the determination of
which shall be conclusive. In addition, the Committee may make
provision for a cash payment to a Participant or a person who has an outstanding
Award. The number of shares of Common Stock subject to any Award
shall be rounded to the nearest whole number.
Section
15.4
Powers Not
Affected
. The existence of the Plan and the Awards granted
hereunder shall not affect in any way the right or power of the Board or of the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change of the Company’s capital
structure or business, any merger or consolidation of the Company, any issue of
debt or equity securities ahead of or affecting Common Stock or the rights
thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
Section
15.5
No Adjustment for Certain
Awards
. Except as hereinabove expressly provided, the issuance
by the Company of shares of stock of any class or securities convertible into
shares of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect previously granted Awards, and no adjustment by reason thereof shall be
made with respect to the number of shares of Common Stock subject to Awards
theretofore granted or the purchase price per share, if applicable.
ARTICLE
XVI
AMENDMENT
AND TERMINATION OF PLAN
The Plan
shall continue in effect, unless sooner terminated pursuant to this Article XVI,
until the tenth (10
th
)
anniversary of the date on which it is adopted by the Board (except as to Awards
outstanding on that date). The Board in its discretion may terminate
the Plan at any time with respect to any shares for which Awards have not
theretofore been granted;
provided
,
however
, that the
Plan’s termination shall not materially and adversely impair the rights of a
Holder with respect to any Award theretofore granted without the consent of the
Holder. The Board shall have the right to alter or amend the Plan or any part
hereof from time to time;
provided
,
however
, that without
the approval by a majority of the votes cast at a meeting of shareholders at
which a quorum representing a majority of the shares of the Company entitled to
vote generally in the election of directors is present in person or by proxy, no
amendment or modification of the Plan may (i) materially increase the benefits
accruing to Holders, (ii) except as otherwise expressly provided in Article
XV, materially increase the number of shares of Common Stock subject to the Plan
or the individual Award Agreements specified in Article V, (iii) materially
modify the requirements for participation in the Plan, or (iv) amend,
modify or suspend Section 7.8 (repricing prohibitions) or this Article
XVI. In addition, no change in any Award theretofore granted may be
made which would materially and adversely impair the rights of a Holder with
respect to such Award without the consent of the Holder (unless such change is
required in order to cause the benefits under the Plan to qualify as
“performance-based” compensation within the meaning of Section 162(m) of the
Code) or to exempt the Plan or any Award from Section 409A of the
Code.
ARTICLE
XVII
MISCELLANEOUS
Section
17.1
No Right to
Award
. Neither the adoption of the Plan by the Company nor any
action of the Board or the Committee shall be deemed to give an Employee,
Director or Consultant any right to an Award except as may be evidenced by an
Award Agreement duly executed on behalf of the Company, and then solely to the
extent and on the terms and conditions expressly set forth therein.
Section
17.2
No Rights
Conferred
. Nothing contained in the Plan shall (i) confer upon
any Employee any right with respect to continuation of employment with the
Company or any Affiliate, (ii) interfere in any way with any right of the
Company or any Affiliate to terminate the employment of an Employee at any time,
(iii) confer upon any Director any right with respect to continuation of such
Director’s membership on the Board, (iv) interfere in any way with any right of
the Company or an Affiliate to terminate a Director’s membership on the Board at
any time, (v) confer upon any Consultant any right with respect to continuation
of his or her consulting engagement with the Company or any Affiliate, or (vi)
interfere in any way with any right of the Company or an Affiliate to terminate
a Consultant’s consulting engagement with the Company or an Affiliate at any
time.
Section
17.3
Other Laws; No Fractional
Shares; Withholding
. The Company shall not be obligated by
virtue of any provision of the Plan to recognize the exercise of any Award or to
otherwise sell or issue shares of Common Stock in violation of any laws, rules
or regulations, and any postponement of the exercise or settlement of any Award
under this provision shall not extend the term of such Award. Neither
the Company nor its directors or officers shall have any obligation or liability
to a Holder with respect to any Award (or shares of Common Stock issuable
thereunder) (i) that shall lapse because of such postponement, or
(ii) for any failure to comply with the requirements of any applicable law,
rules or regulations, including but not limited to any failure to comply with
the requirements of Section 409A of this Code. No fractional shares
of Common Stock shall be delivered, nor shall any cash in lieu of fractional
shares be paid. The Company shall have the right to deduct in cash (whether
under this Plan or otherwise) in connection with all Awards any taxes required
by law to be withheld and to require any payments required to enable it to
satisfy its withholding obligations. In the case of any Award satisfied in the
form of shares of Common Stock, no shares shall be issued unless and until
arrangements satisfactory to the Company shall have been made to satisfy any tax
withholding obligations applicable with respect to such Award. Subject to such
terms and conditions as the Committee may impose, the Company shall have the
right to retain, or the Committee may, subject to such terms and conditions as
it may establish from time to time, permit Holders to elect to tender, Common
Stock (including Common Stock issuable in respect of an Award) to satisfy, in
whole or in part, the amount required to be withheld.
Section
17.4
No Restriction on Corporate
Action
. Nothing contained in the Plan shall be construed to
prevent the Company or any Affiliate from taking any corporate action which is
deemed by the Company or such Affiliate to be appropriate or in its best
interest, whether or not such action would have an adverse effect on the Plan or
any Award made under the Plan. No Employee, Director, Consultant, beneficiary or
other person shall have any claim against the Company or any Affiliate as a
result of any such action.
Section
17.5
Restrictions on
Transfer
. No Award under the Plan or any Award Agreement and no rights or
interests herein or therein, shall or may be assigned, transferred, sold,
exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a
Holder except (i) by will or by the laws of descent and distribution, or (ii)
except for an Incentive Stock Option, by gift to any Family Member of the
Holder. An Award may be exercisable during the lifetime of the Holder only by
such Holder or by the Holder’s guardian or legal representative unless it has
been transferred by gift to a Family Member of the Holder, in which case it
shall be exercisable solely by such transferee. Notwithstanding any such
transfer, the Holder shall continue to be subject to the withholding
requirements provided for under Section 17.3 hereof. Notwithstanding
the foregoing, except for Awards which are Incentive Stock Options, Awards may
be transferred pursuant to the terms of any valid separation agreement or
divorce decree.
Section
17.6
Beneficiary
Designations
. Each Holder may, from time to time, name a
beneficiary or beneficiaries (who may be contingent or successive beneficiaries)
for purposes of receiving any amount which is payable in connection with an
Award under the Plan upon or subsequent to the Holder’s death. Each such
beneficiary designation shall serve to revoke all prior beneficiary
designations, be in a form prescribed by the Company and be effective solely
when filed by the Holder in writing with the Company during the Holder’s
lifetime. In the absence of any such written beneficiary designation, for
purposes of the Plan, a Holder’s beneficiary shall be the Holder’s
estate.
Section
17.7
Rule
16b-3
. It is intended that the Plan and any Award made to a
person subject to Section 16 of the Exchange Act shall meet all of the
requirements of Rule 16b-3. If any provision of the Plan or of any such Award
would disqualify the Plan or such Award under, or would otherwise not comply
with the requirements of, Rule 16b-3, such provision or Award shall be construed
or deemed to have been amended as necessary to conform to the requirements of
Rule 16b-3.
Section
17.8
Section
162(m)
. It is intended that the Plan shall comply fully with
and meet all the requirements of Section 162(m) of the Code so that Awards
hereunder which are made to Holders who are “covered employees” (as defined in
Section 162(m) of the Code) shall constitute “performance-based” compensation
within the meaning of Section 162(m) of the Code. The performance criteria to be
utilized under the Plan for such purposes shall consist of objective tests based
on one or more of the following: earnings or earnings per share, cash flow or
cash flow per share, operating cash flow or operating cash flow per share
revenue growth, financial return ratios (such as return on equity and/or return
on assets), share price performance, stockholder return and/or value, operating
income, earnings before interest, taxes, depreciation and amortization,
earnings, pre- or post-tax income, economic value added (or an equivalent
metric), profit returns and margins, credit quality, sales growth, net
enrollments, enrolled revenue, market share and/or working
capital. Performance criteria may be established on a Company-wide
basis or with respect to one or more Company business units or divisions or
subsidiaries; and either in absolute terms, relative to the performance of one
or more similarly situated companies, or relative to the performance of an index
covering a peer group of companies. When establishing performance
objectives for the applicable performance period, the Committee may exclude any
or all “extraordinary items” as determined under U.S. generally acceptable
accounting principles including, without limitation, the charges or costs
associated with restructurings of the Company, discontinued operations, other
unusual or non-recurring items, and the cumulative effects of accounting
changes, and as identified in the Company’s financial statements, notes to the
Company’s financial statements or management’s discussion and analysis of
financial condition and results of operations contained in the Company’s most
recent annual report filed with the U.S. Securities and Exchange Commission
pursuant to the Exchange Act. In addition, notwithstanding anything
in the Plan to the contrary, the Committee shall be entitled to make such rules,
determinations and adjustments as it deems appropriate with respect to any
Employee, Director or Consultant who becomes eligible to receive a Performance
Unit Award or Performance Share Award after the commencement of a performance
period. If any provision of the Plan would disqualify the Plan or
would not otherwise permit the Plan to comply with Section 162(m) of the Code as
so intended, such provision shall be construed or deemed amended to conform to
the requirements or provisions of Section 162(m) of the Code. The
Committee may postpone the exercising of Awards, the issuance or delivery of
Common Stock under any Award or any action permitted under the Plan to prevent
the Company or any subsidiary from being denied a federal income tax deduction
with respect to any Award other than an Incentive Stock Option, provided that
such deferral satisfies the requirements of Section 409A of the
Code.
Section
17.9
Section
409A
. Notwithstanding any other provision of the Plan, the
Committee shall have no authority to issue an Award under the Plan with terms
and/or conditions which would cause such Award to constitute non-qualified
“deferred compensation” under Section 409A of the Code. Accordingly,
by way of example but not limitation, no Option shall be granted under the Plan
with a per share Option exercise price which is less than the Fair Market Value
of a share of Common Stock on the date of grant of the
Option. Notwithstanding anything herein to the contrary, no Award
Agreement shall provide for any deferral feature with respect to an Award which
constitutes a deferral of compensation under Section 409A of the
Code. The Plan and all Award Agreements are intended to comply with
the requirements of Section 409A of the Code (so as to be exempt therefrom) and
shall be so interpreted and construed.
Section
17.10
Indemnification
. Each
person who is or shall have been a member of the Committee or of the Board shall
be indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred thereby in
connection with or resulting from any claim, action, suit, or proceeding to
which such person may be made a party or may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid thereby in settlement thereof, with the Company’s approval, or paid thereby
in satisfaction of any judgment in any such action, suit, or proceeding against
such person;
provided
,
however
, that such
person shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be
exclusive and shall be independent of any other rights of indemnification to
which such persons may be entitled under the Company’s Articles of Incorporation
or By-laws, by contract, as a matter of law, or otherwise.
Section
17.11
Other
Plans
. No Award, payment or amount received hereunder shall be
taken into account in computing an Employee’s salary or compensation for the
purposes of determining any benefits under any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate, unless such
other plan specifically provides for the inclusion of such Award, payment or
amount received. Nothing in the Plan shall be construed to limit the
right of the Company to establish other plans or to pay compensation to its
employees, in cash or property, in a manner which is not expressly authorized
under the Plan.
Section
17.12
Limits of
Liability
. Any liability of the Company with respect to an
Award shall be based solely upon the contractual obligations created under the
Plan and the Award Agreement. None of the Company, any member of the Board nor
any member of the Committee shall have any liability to any party for any action
taken or not taken, in good faith, in connection with or under the
Plan.
Section
17.13
Governing
Law
. Except as otherwise provided herein, the Plan shall be
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law.
Section
17.14
Severability of
Provisions
. If any provision of the Plan is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of the Plan, and the Plan shall be construed and enforced as if such
invalid or unenforceable provision had not been included in the
Plan.
Section
17.15
No
Funding
. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of funds or assets to ensure the payment of any Award.
Section
17.16
Headings
. Headings
used throughout the Plan are for convenience only and shall not be given legal
significance.
Section
17.17
Terms of Award
Agreements
. Each Award shall be evidenced by an Award Agreement, which
Award Agreement, if it provides for the issuance of Common Stock, shall require
the Holder to enter into and be bound by the terms of the Company’s
Stockholders’ Agreement, if any. The terms of the Award Agreements
utilized under the Plan need not be the same.
Section
17.18
California Information
Requirements
. To the extent applicable, the Company shall
comply with the information requirements applicable to the Plan pursuant to
Section 260.140.46 of the California Code of Regulations.
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Please
mark
your votes as
indicated in
this example
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FOR
ALL
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WITHHOLD
FOR
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*EXCEPTIONS
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1.
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To elect
the following Class II directors to hold office for a three-year term and
until their respective successors are elected and
qualified:
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FOR
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AGAINST
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ABSTAIN
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2.
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To
ratify the selection of BDO Seidman, LLP to serve as the Company’s
independent registered public accounting firm for the fiscal year ending
December 31, 2009.
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01 James
M. Kalustian,
02 John A. Ueberroth, and
03 Joseph J.
Ueberroth
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3.
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To
approve the Company’s 2009 Equity Participation Plan.
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(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, mark the “Exceptions” box above and write that nominee’s name in
the space provided below.)
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SHARES
REPRESENTED BY A PROPERLY EXECUTED PROXY WILL BE VOTED IN ACCORDANCE WITH
INSTRUCTIONS APPEARING ON THE PROXY AND IN THE DISCRETION OF THE PROXY
AGENT AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OF STOCKHOLDERS OR ANYADJOURNMENT OR POSTPONEMENT THEREOF. IN THE
ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED “FOR” ITEMS 1, 2
AND 3 AND IN THE DISCRETION OF THE PROXY AGENTS AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF STOCKHOLDERS OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
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*Exceptions
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THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT FOR THE 2009 ANNUAL MEETING.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
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Mark
Here for Address
Change or Comments
SEE REVERSE
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Signature
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Signature
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Date
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NOTE: Please sign as name
appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such.
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WE ENCOURAGE
YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24
HOURS A DAY, 7 DAYS A WEEK.
Internet and
telephone voting is available through 11:59 PM Eastern Time
the day prior to
the annual meeting day.
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AMBASSADORS GROUP,
INC.
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INTERNET
http://www.proxyvoting.com/epax
Use the
Internet to vote your proxy. Have your proxy card in hand when you access
the web site.
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OR
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TELEPHONE
1-866-540-5760
Use any
touch-tone telephone to vote your proxy. Have your proxy card in hand when
you call.
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If you
vote your proxy by Internet or by telephone, you do NOT need to mail back
your proxy card.
To vote by mail, mark, sign and date your proxy
card and return it in the enclosed postage-paid envelope.
Your Internet or telephone vote
authorizes the named proxies to vote your shares in the same manner as if
you marked, signed and returned your proxy card.
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You can
view the Annual Report and Proxy Statement on the internet at:
http://bnymellon.mobular.net/bnymellon/epax
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PROXY
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AMBASSADORS GROUP,
INC.
Dwight D. Eisenhower
Building
2001 South Flint Road
Spokane, Washington
99224
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This Proxy is Solicited on Behalf of
the Board of Directors
The
undersigned revokes all previous proxies, acknowledges receipt of the Notice of
the Annual Meeting of Stockholders and the Proxy Statement, and appoints John A.
Ueberroth and Jeffrey D. Thomas, and each of them, the Proxy of the undersigned,
with full power of substitution, to vote all shares of Common Stock of
Ambassadors Group, Inc. (the “Company”) held of record by the undersigned as of
the close of business on March 23, 2009, either on his or her own behalf or on
behalf of any entity or entities, at the Annual Meeting of Stockholders of the
Company to be held on May 7, 2009, and at any adjournment or postponement
thereof, with the same force and effect as the undersigned might or could do if
personally present thereat. The shares represented by this Proxy shall be voted
in the manner set forth.
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BNY
MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ
07606-9250
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Address
Change/Comments
(Mark the corresponding box on the reverse
side)
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(Continued and to
be marked, dated and signed, on the other
side)
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You can now access your Ambassadors
Group, Inc. account online.
Access your Ambassadors Group, Inc. stockholder account online via
Investor ServiceDirect
®
(ISD).
The transfer
agent for Ambassadors Group, Inc., now makes it easy and convenient to get
current information on your stockholder account.
• View
account status
• View certificate history
• View book-entry
information
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View payment history for dividends
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Make address changes
•
Obtain a duplicate 1099 tax form
•
Establish/change your PIN
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Visit us on the web at
http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call
1-877-978-7778 between 9am-7pm
Monday-Friday Eastern
Time
www.bnymellon.com/shareowner/isd
Investor ServiceDirect
®
Available 24 hours per day, 7
days per week
TOLL FREE NUMBER: 1-800-370-1163
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Choose
MLink
SM
for fast, easy and secure 24/7 online access to
your future proxy materials, investment plan statements, tax documents and
more. Simply log on to
Investor ServiceDirect
®
at
www.bnymellon.com/shareowner/isd
where step-by-step instructions will prompt you through
enrollment.
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