UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. __)
Filed by
the Registrant
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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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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §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)(1) and
0-11.
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of each class of securities to which transaction applies:
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number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to
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calculated and state how it was determined):
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Proposed
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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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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Amount
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Form,
Schedule or Registration Statement No.:
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Filing
Party:
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AMBASSADORS
GROUP, INC.
Dwight
D. Eisenhower Building
2001
South Flint Road
Spokane,
Washington 99224
April 13,
2010
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
9:00 a.m., local time, on May 13, 2010, 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 29, 2010, 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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Kristi
J. Gravelle
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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 13, 2010
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
9:00 a.m., local time, on May 13, 2010, at 2001 South Flint Road, Spokane,
Washington 99224, for the following purposes:
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1.
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To
elect two (2) Class I directors to hold office for a three-year
term and until their respective successors are elected and
qualified.
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2.
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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,
2010.
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3.
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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 29, 2010, 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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Kristi
J. Gravelle
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Secretary
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Dated:
April 13, 2010
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 13, 2010: 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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Page
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PRO
XY
STATEMENT
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GENERAL
INFORMATION
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1
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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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6
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Meetings
of the Board of Directors and Committees of the Board of
Directors
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7
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Director
Nomination Process
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8
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Board
Leadership Structure and Role in Risk Oversight
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9
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Compensation
Committee Interlocks, Insider Participation in Compensation Decisions and
Certain Transactions
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9
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10
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INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
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11
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Independent
Registered Public Accounting Firm Fees
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11
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Audit
Committee’s Pre-Approval Policy
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Independence
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12
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12
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Compensation
Discussion and Analysis
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12
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Compensation
Policies and Practices As They Relate to the Company’s Risk
Management
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19
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Executive
Officers
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19
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Summary
Compensation Table
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20
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Company
Plans
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21
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Equity
Compensation Plan Information
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22
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Grants
of Plan-Based Awards Table
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23
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Outstanding
Equity Awards at Fiscal Year-End Table
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24
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Option
Exercises and Stock Vested Table
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26
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Pension
Benefits
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26
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Nonqualified
Deferred Compensation
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26
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Employment
Contracts, Termination of Employment and Change in Control
Arrangements
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26
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Director
Compensation Table
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31
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32
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COMPENSATION
COMMITTEE REPORT
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32
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33
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35
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REPORT
OF AUDIT COMMITTEE
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36
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CODE
OF ETHICS AND CONDUCT
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38
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ANNUAL
MEETING ATTENDANCE
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38
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STOCKHOLDER
COMMUNICATIONS
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38
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AVAILABILITY
OF ANNUAL REPORT ON FORM 10-K
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38
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38
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Stockholder
Proposals for Inclusion in Next Year’s Proxy Statement
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38
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Other
Stockholder Proposals and Director Nominations
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38
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OTHER
BUSINESS
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39
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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 9:00 a.m., local time, on
May 13, 2010, 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 29, 2010, the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting, the
Company had issued and outstanding 19,307,138 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 29, 2010,
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. Abstentions and broker non-votes
represented by submitted proxies will be included in the calculation of the
number of the shares present at the Annual Meeting for the purposes of
determining a quorum. “Broker non-votes” means shares held of record
by a broker that are not voted because the broker has not received voting
instructions from the beneficial owner of the shares and either lacks or
declines to exercise the authority to vote the shares in its
discretion.
Proposal
One.
Directors are elected by a plurality and the nominees who
receive the most votes will be elected. Beginning with stockholder
meetings held on or after January 1, 2010, Proposal One will be considered a
“non routine” matter under Nasdaq Stock Market (“Nasdaq”) rules and,
accordingly, brokerage firms and nominees will not have the authority to vote
their customers’ unvoted shares on Proposal One or to vote their customers’
shares if the customers have not furnished voting instructions within a
specified period of time prior to the Annual Meeting. Abstentions and broker
non-votes will decrease the number of votes cast in director
elections.
Proposal Two.
To
be approved, the ratification of BDO Seidman, LLP, as the Company’s independent
registered public accounting firm for the year ending December 31, 2010 must
receive the affirmative vote of the majority of the shares of Common Stock
present in person or by proxy at the Annual Meeting and entitled to
vote. Proposal Two is considered a “routine” matter under Nasdaq
rules and, accordingly, brokerage firms and nominees have the authority to vote
their customers’ unvoted shares on Proposal Two as well as to vote their
customers’ shares where the customers have not furnished voting instructions
within a specified period of time prior to the Annual
Meeting. Abstentions and broker non-votes will not affect the outcome
of the vote on Proposal Two.
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 therefor. It is anticipated that this Proxy
Statement and accompanying Proxy will be mailed on or about April 13, 2010, 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
(Proposal 1
of the Proxy Card)
Nominees
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 I Directors, Jeffrey D. Thomas, Richard D. C. Whilden
and Ricardo Lopez Valencia, will expire at this year’s Annual Meeting. 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. The term
of the three Class II Directors, James M. Kalustian, John A. Ueberroth and
Joseph J. Ueberroth, will expire at the Annual Meeting to be held in
2012.
At this
year’s Annual Meeting, two Class I Directors are to be elected. Richard D.
C. Whilden will not stand for re-election and by resolution of the Board of
Directors, pursuant to the Company’s bylaws, the number of Class I Directors has
been reduced from three to two effective May 13, 2010. The nominees for election
at the Annual Meeting as Class I Directors are the incumbent directors,
Jeffrey D. Thomas and Ricardo Lopez Valencia. The enclosed Proxy will
be voted in favor of these individuals unless other instructions are given.
Directors are elected by a plurality and the nominees who receive the most votes
will be elected. If elected, the nominees will serve as directors
until the Company’s Annual Meeting in the year 2013, 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.
The table
below sets forth for the current directors, including the Class I 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 I
Directors, currently standing for election:
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Jeffrey
D. Thomas
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Director,
Chief Executive Officer and President
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43
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2001
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Ricardo
Lopez Valencia (2)(3)
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Director
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44
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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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44
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2001
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Daniel
G. Byrne (1)
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Director
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55
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2005
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Rafer
L. Johnson (1)
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Director
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75
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2001
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Class II
Directors, whose term expires at the Annual Meeting to be held in
2012:
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James
M. Kalustian (2)(3)
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Director
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49
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2006
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John
A. Ueberroth
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Chairman
of the Board
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66
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1997
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Joseph
J. Ueberroth (1)
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Director
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40
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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 I
Directors
Jeffrey D. Thomas
has served
as chief executive officer, president and director of the Company since
November 2001. Mr. Thomas also serves on the board of directors of the
Company’s wholly owned subsidiaries, Ambassador Programs, Inc., World Adventures
Unlimited, Inc., and BookRags, Inc. He served as president of Ambassador
Programs, Inc. 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 (NASDAQ: SCIL). He also serves on the board of trustees of
Greater Spokane Incorporated. Mr. Thomas previously served on the
boards of SATO Travel, a travel agency that specializes in arranging travel
tours and transportation for government and military members, and Off the Beaten
Path LLC, an adventure travel company specializing in distinctive travel
experiences for independent and small group travelers. Mr. Thomas was selected
to serve as a member of our Board of Directors because he has extensive
experience in executive level management and serves as a board member for
several other companies. In addition, he has served as chief
financial officer for six years and has fourteen years of tenure in the travel
industry, which gives him a vast array of experiences to draw from and uniquely
qualifies him to lead the Company and serve on the Board of Directors. As chief
executive officer and president, Mr. Thomas has consistently demonstrated an
ability to exercise sound judgment and prudent management skills.
Ricardo Lopez Valencia
has
served as director of the Company since May of 2007. In July 2007,
Mr. Valencia started ZAMAS Holdings, LLC, a privately owned company which
includes a consulting business and a business incubator for entrepreneurial
ventures and early stage companies. From 2001 to July 2007, Mr.
Valencia was a senior executive for ING. He served as the vice
president of Hispanic markets for ING Group. In 2003, he became senior vice
president. He had strategic, fiscal and operational responsibility for the
development of wealth accumulations strategies focused on diversity markets with
specific focus in the African American, Asian American, Hispanic, women, LGBT
and capabilities markets. Since returning to Arizona in 2007, Mr.
Valencia was appointed by Arizona Governor Jan Brewer as Corporate Chair of the
2010 Border Governors Conference and to serve a term on the Arizona Mexico
Commission to chair the strategic development committee. In 2008, Mr.
Valencia was also appointed by Governor Janet Napolitano to serve on the Arizona
State Charter School Board. Mr. Valencia also serves on the board of
West Ed, a national nonprofit education research, development, and service
agency. He serves on the board of the Children’s Action Alliance, an
Arizona based advocacy movement. 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. Additionally he has served on
the boards of the National 4-H, the National Future Farmers of America
Foundation and the New York Hispanic Ballet. Prior to his role with
ING, Mr. Valencia 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 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. He
also served as the Director of Professional Development for Career and Technical
Education for the State of Arizona. Mr. Valencia was selected to
serve as a member of our Board of Directors because of his attributes, skills
and qualifications he has developed through 7 years as senior executive with a
national investment and financial management company and 20 years as a senior
executive with P and L responsibilities in a number of high profile corporations
and organizations. This experience allows him to provide unique
customer, sales and marketing, and community perspective to the
Company. In addition, Mr. Valencia’s senior executive experience
provides leadership and business operations expertise to the
Company. Mr. Valencia also serves on a number of company boards and
government agencies focused on education, agriculture, arts, and non-profit
initiatives, which compliment the Company’s products and services. His strong
and first hand knowledge of the student education market is a valuable asset to
the Company. Furthermore, his active involvement in community and
civic affairs represent an ethical character that we seek in our leaders and
Company culture.
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. Ms. Bren was selected to serve as a member
of our Board of Directors because of her comprehensive knowledge and
understanding of international operations gained through advising U.S. companies
on international expansion. She provides a distinctive international perspective
to the products and services offered by the Company. In addition, Ms.
Bren’s broad expertise in law, business management, and international marketing
and sales lends much support to overseeing the Company’s business functions and
objectives.
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
of Golf Savings Bank. 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 also president 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. Mr. Byrne was selected to serve as a member of our Board
of Directors because of his vast experience in the banking industry, his
professional background and experience in business administration, accounting,
operational management, and risk management.This experience lends much
support to his leadership and oversight of the products and services offered by
the Company. In addition, Mr. Byrne’s guidance and expertise on accounting,
financial and investment matters qualifies him well to perform the audit
committee’s oversight role and provides valuable insight to the Company’s
various business functions.
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 intellectually and physically disabled 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. In the
early 1960s, Mr. Johnson became affiliated with the international peace movement
of “People to People” and was instrumental in establishing chapters on college
campuses nationwide. Mr. Johnson has spent many years before and after his
Olympic triumph spreading the message of peace as an international ambassador of
goodwill and in 1984 he received the distinctive honor of lighting the Olympic
flame at the games in Los Angeles, California. Mr. Johnson was selected to serve
as a member of our Board of Directors because he brings to the board over 40
years of diverse experience in the Special Olympics and athletic industry. His
extensive understanding of these challenging aspects of this industry, together
with his demonstrated leadership and management ability at senior levels,
provides the Company with valuable industry-specific awareness and experience.
In addition, Mr. Johnson’s early leadership and development with the
international peace movement of People to People provides him with an important
perspective and oversight to the Company’s core brand, foundations, youth and
education development for the products and services offered by the Company. Mr.
Johnson’s service on other special boards and committees in the worlds of sports
and community service adds a depth of knowledge and essential insight and his
subsequent civic capacities are a valuable asset to the Company.
Class II
Directors
James M. Kalustian
has served
as a director of the Company since May 2006. Mr. Kalustian also served as a
director of Conance, Inc. from June 2007 to February 2009. Mr. Kalustian is
co-founder and senior vice president of HRInet, Inc., a healthcare technology
and services company, where he manages network development, sales and marketing,
and technology systems. 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. 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, account management discipline, and served
as chief operating officer and a member of the board of directors of Braun
Consulting, Inc., a professional services firm delivering customer-focused
business solutions to Fortune 1000 and middle market companies and offers
business intelligence and CRM/ECRM technologies. Mr. Kalustian was a
member of the executive management team that took Braun Consulting, Inc. public
in 1999. 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. Mr. Kalustian was selected to serve as a member of our Board of
Directors because of his leadership experience and accomplishments as a senior
executive, his extensive business experience spanning 15 years in the
healthcare, pharmaceutical, retail and consumer products industries. This
experience makes him exceptionally qualified in overseeing the Company’s
business functions, objectives and short and long-term business strategies. In
addition, Mr. Kalustian’s business expertise, his board service, and leadership
in several industry-leading companies provides meaningful perceptions to the
products and services offered by the Company.
John A. Ueberroth
has served
as chairman of the board of the Company since November 2001. Mr. Ueberroth
also serves on the board of directors of the Company’s wholly owned
subsidiaries, Ambassador Programs, Inc., World Adventures Unlimited, Inc., and
BookRags, Inc. 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. Mr. Ueberroth was selected to serve as a member of our Board of
Directors because as a former chairman and chief executive officer of a major
airline together with his senior executive positions with national travel and
accommodations companies, he brings outstanding travel industry expertise,
operational expertise and international expertise to the Company. We also
believe that Mr. Ueberroth’s substantial investment and management industry
experience gained in part while serving as a former senior executive in the
travel industry, as well as his affiliation with national travel associations,
are important assets to the Company.
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 chairman of Bellingham Marine, the world’s most
comprehensive marina builder, founder and 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 International, S.A. de C.V, Apache
Produce Company and TerraNova Partners, LP. Mr. Ueberroth was selected to serve
as a member of our Board of Directors because as a former executive in the
travel industry during his tenure at Ambassadors International, Inc., Mr.
Ueberroth gained significant knowledge of and insight into that
industry. Coupled with his venture capital experience with high
growth companies, his operational experience gives him an understanding of
business and cultural practices which are important assets to the Company. In
addition, as a current executive in the international marina industry and a
managing member of a venture capital fund, Mr. Ueberroth has expertise that
gives the Company a unique insight into mergers, acquisitions and disposition
transactions.
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
2009, the Board of Directors met five times and acted by written consent one
time. 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 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, 2009. See
Report of Audit Committee.
The charter of the Audit Committee is attached as Appendix A to the
Proxy Statement.
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 2009 Equity Participation Plan (the
“Incentive Plan”). The Compensation Committee from time to time engages and
consults with independent compensation consultant Watson Wyatt Worldwide
(“Watson Wyatt”) in the performance of its duties. Watson Wyatt provides market
data, historical compensation information, and advice regarding best practices
in executive compensation and compensation trends for executive officers and
directors. Watson Wyatt and Towers Perrin merged effective January 1, 2010 to
become Towers Watson.
The
Compensation Committee consists of Richard D. C. Whilden, chairman, James M.
Kalustian
and
Ricardo Lopez Valencia.
In 2009,
the Compensation Committee met five times and acted by written consent five
times. 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. Although diversity may
be a consideration in the nomination process, the Nominating Committee does not
have a formal policy with regard to the consideration of diversity in
identifying director nominees.
The
Nominating Committee consists of Richard D. C. Whilden, chairman, James M.
Kalustian, and Ricardo Lopez Valencia.
There
were two meetings of the Nominating Committee during the fiscal year ended
December 31, 2009. 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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•
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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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•
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The
name and contact information for the candidate;
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|
|
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•
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A
statement of the candidate’s occupation and background, including
education and business experience;
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|
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•
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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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|
|
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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.
|
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 I
Directors are the incumbent directors, Jeffrey D. Thomas and Ricardo Lopez
Valencia. 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.”
Board
Leadership Structure and Role in Risk Oversight
The Board
of Directors is responsible for risk oversight of the Company. Risks facing the
Company include competitive, economic, operational, financial, accounting,
liquidity, tax, regulatory, foreign dependencies, safety, work force,
environmental, political and other risks. Risks are reported to the Board of
Directors through the Company’s executive officers, who are responsible for the
identification, assessment and management of the Company’s risks. The Board of
Directors regularly discusses the risks reported by the Company’s executive
officers and reviews with management strategies and actions to mitigate the
risks and the status and effectiveness of such strategies and
actions.
The Board
of Directors is structured, in part, to optimize its risk oversight
capabilities, which is achieved primarily by separating the positions of
principal executive officer and chairman of the board and delegating certain
risk oversight functions to its committees. Although the Board of Directors does
not have a formal policy with respect to its leadership structure, the Company
believes that currently having a separate principal executive officer and
chairman of the board achieves an appropriate balance with regard to Company
performance and risk management. As a non-employee of the Company, the chairman
of the board provides the Board of Directors with outside expertise and insight,
which the Company views as important in overseeing the management of the
Company’s risks by its executive officers, including its principal executive
officer.
Additionally,
the committees of the Board of Directors are delegated with oversight
responsibility for particular areas of risk. Specifically, the Audit
Committee oversees management of risks related to accounting, auditing and
financial reporting, and maintaining effective internal controls for financial
reporting. The Nominating Committee oversees risks related to
the effectiveness of the Board of Directors. The Compensation
Committee oversees risks related to the Company’s
comprehensive compensation policies and practices.
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 2009 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 2009, 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
Jeffrey D. Thomas and Ricardo Lopez
Valencia
as
Class I 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.
RA
TIFICATION OF SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(
Proposal 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, 2010, 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.
IN
DEPENDENT 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, 2009 and 2008, and fees billed by BDO for other services
during those years.
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2009
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2008
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Audit
Fees
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$
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335,000
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$
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351,000
|
|
Audit
- Related Fees
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15,000
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|
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17,000
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Tax
Fees
|
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|
—
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|
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—
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|
All
Other Fees
|
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|
—
|
|
|
—
|
|
Total
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$
|
350,000
|
|
$
|
368,000
|
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.”
Audit
Committee’s Pre-Approval Policy
During
2009, 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.
COMP
ENSATION 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 and employees. 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. Compensation elements
generally consist of a base salary, an annual cash award and for key employees
and executives, 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”).
For the
past several years, the Compensation Committee has engaged Watson Wyatt to act
as the executive compensation consultant for the Company. 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, operational excellence, 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:
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·
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The
Company’s executive compensation philosophy and
practices
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·
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The
Company’s performance relative to peers and industry
standards
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Success
in attaining annual and long-term goals and
objectives
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·
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Alignment
of executive interests with stockholder interests through equity-based
awards and performance-based
compensation
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·
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Individual
and team contributions, performance and
experience
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·
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Total
compensation and the mix of compensation elements for each Named Executive
Officer
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·
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Competitive
market practices
|
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.
In 2008,
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. This data was considered
in the 2009 compensation decision-making process. Published survey
data selection for comparable executive positions was based primarily on annual
revenues. The surveys used included:
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·
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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.
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·
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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 in
2008 of 20 peer companies. The Compensation Committee and management determined
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:
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·
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annual
incentive award,
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·
|
total
cash compensation,
|
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·
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long-term
incentives, and
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·
|
retirement
and capital accumulation,
|
|
·
|
benefits
and perquisites, and
|
In 2009,
Watson Wyatt provided assistance in drafting the compensation, discussion and
analysis section of the 2009 Proxy and limited advice associated with total
compensation packages for the current executive team and new key positions hired
during the year. The total associated fees paid for these services
were approximately $39,000.
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. Watson Wyatt performed an
executive compensation survey for 2009, which found salaries in 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,
based upon Watson Wyatt research and their recommendations, which were built
around the position, responsibilities, experience and performance of the Named
Executive Officers, the Compensation Committee approved increases in base salary
to $525,000, $341,000, and $210,000 for Mr. Thomas, Mrs. Thomas, and Mr. Byrd,
respectively. 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 salary increase, the Named Executive
Officers agreed to reduce their maximum annual incentive award for 2009 by
approximately 50-65% from 2008 levels. The Compensation Committee established
targets for annual incentive awards and equity based compensation based on a
percentage of base salary for 2009. 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. On November 1, 2009, Chadwick J. Byrd resigned as
chief financial officer of the Company, and effective that same date, Kristi J.
Gravelle was appointed to serve as the interim chief financial officer. Chadwick
Byrd’s salary had not changed since 2008.
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 2009, the maximum award for Named Executive Officers
ranged from 12.5% to 75% of base annual salary, depending on the executive
officer’s position. For 2009, Mr. Thomas received an award of $164,510 (41%) ,
Mrs. Thomas received an award of $65,784 (30%), Mr. Byrd received no
award, and Mrs. Gravelle received an award of $8,242 (6%).
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 2009 for each
Named Executive Officer were approved by the Compensation Committee in August
2008. In February 2010, the Compensation Committee reviewed actual performance
during 2009 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 $300,000. The
Compensation Committee awarded Mr. Thomas an incentive award of $164,510 based
upon an evaluation of the following performance milestones: 1) Earnings per
Share; 2) Enrolled Revenue; 3) Gross Margin; and 4) Operational Excellence. The
Compensation Committee assessed performance relative to each component as
follows:
Earnings
per Share: $5,250 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. The Company’s earnings
per share for 2009 was $1.05. The Compensation Committee determined that Mr.
Thomas exceeded outstanding expectations in achieving this milestone and awarded
him $105,000.
Enrolled
Revenue: $1,500 will be payable for every $1.0 million that the Company’s gross
enrolled revenue for 2010 programs on October 15, 2009 exceeded $150.0 million,
up to $200.0 million. The Compensation Committee determined that no payment
would be made toward Mr. Thomas’s annual incentive award with regard to this
milestone.
Gross
Margin: $2,500 will be payable for every $1.0 million that the Company’s gross
margin exceeds $60.0 million, up to $90.0 million. The Compensation Committee
determined that Mr. Thomas exceeded expectations in achieving this milestone and
awarded him $59,510.
Operational
Excellence: $563 will be payable for every one day that the Company’s
operational excellence exceeds 100 days, up to 180 days. 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. The Compensation Committee determined that
no payment would be made toward Mr. Thomas’s annual incentive award with regard
to this milestone.
Margaret M. Thomas
.
Mrs. Thomas was eligible for a maximum incentive award of $132,000. The
Compensation Committee awarded Mrs. Thomas an incentive award of $65,784 based
upon an evaluation of the following performance milestones: 1) Earnings per
Share; 2) Enrolled Revenue; 3) Gross Margin; and 4) Operational Excellence. The
Compensation Committee assessed performance relative to each component as
follows:
Earnings
per Share: $1,980 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. The Company’s earnings
per share for 2009 was $1.05. The Compensation Committee determined that Mrs.
Thomas exceeded outstanding expectations in achieving this milestone and awarded
her $39,600.
Enrolled
Revenue: $660 will be payable for every $1.0 million that the Company’s gross
enrolled revenue for 2010 programs on October 15, 2009 exceeds $150.0 million,
up to $200.0 million. The Compensation Committee determined that no payment
would be made toward Mrs. Thomas’s annual incentive award with regard to this
milestone.
Gross
Margin: $1,100 will be payable for every $1.0 million that the Company’s gross
margin exceeds $60.0 million, up to $90.0 million. The Compensation Committee
determined that Mrs. Thomas exceeded expectations in achieving this milestone
and awarded her $26,184.
Operational
Excellence: $330 will be payable for every one day that the Company’s
operational excellence exceeds 100 days, up to 180 days. 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. The Compensation Committee determined that
no payment would be made toward Mrs. Thomas’s annual incentive award with regard
to this milestone.
Chadwick J. Byrd
. Mr.
Byrd was eligible for a maximum incentive award of $84,000. Since Chadwick
Byrd’s employment terminated with the Company on November 1, 2009, he was not
eligible to receive any incentive award for 2009.
Kristi J. Gravelle
.
Mrs. Gravelle was eligible for a maximum incentive award of $15,750. The
Compensation Committee awarded Mrs. Gravelle an incentive award of $8,242 based
upon an evaluation of the following performance milestones: 1) Delegates
Traveled; 2) New Net Income Opportunities; 3) Operational Excellence; and 4)
Collections Improvement. The Compensation Committee assessed performance
relative to each component as follows:
Delegates
Traveled: $1,182 will be payable for every 1,000 delegates that the Company
travels in excess of 34,000 travelers. The Company traveled 34,248
delegates in 2009. The Compensation Committee determined that Mrs. Gravelle met
expectations in achieving this milestone and awarded her $426.
New Net
Income Opportunities: $2,127 will be payable for every $100,000 that the Company
contributes to new net income opportunities in 2009 in excess of $750,000, up to
$1.2 million. New net income opportunities include new tax, cash
flow, and payment strategies. The Compensation Committee determined that no
payment would be made toward Mrs. Gravelle’s annual incentive award with regard
to this milestone.
Operational
Excellence: $84 will be payable for every one day that the Company’s operational
excellence exceeds 30 days, up to 75 days, measured on a quarterly basis. 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. The Compensation Committee
determined that Mrs. Gravelle met expectations for one quarter in achieving this
milestone and awarded her $4,270.
Collection
Improvement: $1,266 will be payable for every one percent improvement to
outstanding receivables collected 60 days prior to travel in excess of sixty-six
percent. The Company collected at a rate of seventy-two percent for
outstanding receivables collected 60 days prior to travel. The Compensation
Committee determined that Mrs. Gravelle exceeded expectations in achieving this
milestone and awarded her $3,546.
Information
regarding the annual incentive compensation for 2009 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”.
The
pre-established targets and individual performance milestones for 2010 for each
Named Executive Officer were approved by the Compensation Committee in February
2010. A summary of the results of the Compensation Committee’s review is set
forth below:
2010 Incentive Plan
.
Mr. Thomas will be eligible for a target incentive award of $300,000 and a
maximum incentive award of $600,000. Mrs. Thomas will be eligible for a target
incentive award of $180,000 and a maximum incentive award of $360,000. Mrs.
Gravelle will be eligible for a target incentive award of $84,000 and a maximum
incentive award of $168,000. The Compensation Committee will determine the
amount of the incentive based award upon an evaluation of the following three
performance milestones: 1) Earnings per Share 2) Combined Achievement of 2010
Net Income before tax and 2011 Enrolled Revenue, and 3) Operational
Excellence. The Compensation Committee will assess performance relative to each
component for 2010 as follows:
Earnings
per Share: $6,000, and $1,680 will be payable for every $0.01 that the Company’s
earnings per share exceeds $0.60 per share, up to $0.80 per share, for Mr.
Thomas, and Mrs. Gravelle, respectively.
Combined
Achievement of 2010 Net Income before tax and 2011 Enrolled Revenue: $32,000,
$19,200, and $8,960 will be payable for every one percent of enrolled revenue
growth that the Company achieves in excess of $159.5 million, up to $196.5
million and every $0.3 million in income before tax in excess of $21.8 million,
up to $26.0 million for Mr. Thomas, Mrs. Thomas, and Mrs. Gravelle,
respectively. This incentive award is contingent upon the Company achieving a
minimum income before tax of $21.8 million.
Operational
Excellence: $720 will be payable for every one day that the Company’s
operational excellence exceeds 125 days, up to 225 days for Mrs. Thomas. Days of
operational excellence measure safety, customer operations, and customer
communication across 14 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-based restricted stock were granted to the
Named Executive Officers in 2009 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 2009, stock options and time-based restricted stock were granted to the
Named Executive Officers. The Compensation Committee approves each executive’s
grant based on a target value for stock awards expressed as a multiple of base
salary. 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, 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.
Jeffrey D.
Thomas.
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.
Chadwick J.
Byrd.
On November 1, 2009, Mr. Byrd resigned as the Company’s
chief financial officer. Upon resignation, Mr. Byrd was entitled to
certain severance benefits. In connection with Mr. Byrd’s departure
from the Company and in addition to the payments provided, Mr. Byrd’s
outstanding equity awards immediately vested. He was eligible to
exercise these awards under the terms of the Company’s standard
policy.
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 generally accepted accounting principles (“GAAP”) 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 2007,
2008 and 2009, 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.
Compensation
Policies and Practices As They Relate to the Company’s Risk
Management
The
Company believes that its compensation policies and practices for all employees,
including executive officers, do not create risks that are reasonably likely to
have a material adverse effect on the Company.
Executive
Officers
Jeffrey D. Thomas
, age 43,
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 43,
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,
served as chief financial officer and secretary of the Company from July 2005
through October 2009. 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.
Kristi J. Gravelle
, age 42,
has served as interim chief financial officer and secretary of the Company since
November 2009. Mrs. Gravelle most recently served as controller for the Company
beginning in September 2007. Prior to this time, Mrs. Gravelle was an
independent financial consultant in Denver, Colorado to publicly held and
private companies from January 2003 through August 2007. From May
2001 to January 2003, Mrs. Gravelle held a controllership position at AIMCO, a
real-estate investment trust in Denver, Colorado. Previously, Mrs.
Gravelle held controllership positions specializing in supply chain management
at retail companies, including Bi-Lo Stores, a division of AHOLD, Inc,
Babies-R-Us, a division of Toys-R-Us, Inc. and One Price Clothing Stores, Inc.
in Greenville, South Carolina between 1992 and April 2001.
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, 2009 whose individual remuneration exceeded $100,000 for
the fiscal year ended December 31, 2009, 2008 and 2007 (the “Named
Executive Officers”):
Name
and Principal
Position
|
|
Year
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Stock
Awards
1
($)
|
|
|
Option
Awards
2
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All
Other
Compensation
3,4,
5
($)
|
|
Total
($)
|
|
|
Jeffrey
D. Thomas,
Chief
Executive
|
|
2009
|
|
|
400,000
|
|
|
|
—
|
|
|
|
553,840
|
|
|
|
597,740
|
|
|
|
164,510
|
|
|
|
—
|
|
|
9,647
|
|
|
1,725,737
|
|
|
Officer
and President
|
|
2008
|
|
|
400,000
|
|
|
|
—
|
|
|
|
265,591
|
|
|
|
268,125
|
|
|
|
—
|
|
|
|
—
|
|
|
17,409
|
|
|
951,125
|
|
|
|
|
2007
|
|
|
400,000
|
|
|
|
—
|
|
|
|
667,290
|
|
|
|
754,460
|
|
|
|
880,000
|
|
|
|
—
|
|
|
16,691
|
|
|
2,718,441
|
|
|
Margaret
M. Thomas,
|
|
2009
|
|
|
220,000
|
|
|
|
—
|
|
|
|
170,498
|
|
|
|
184,094
|
|
|
|
65,784
|
|
|
|
—
|
|
|
7,369
|
|
|
647,745
|
|
|
Executive
Vice President
|
|
2008
|
|
|
220,000
|
|
|
|
—
|
|
|
|
109,361
|
|
|
|
110,825
|
|
|
|
—
|
|
|
|
—
|
|
|
13,351
|
|
|
453,537
|
|
|
|
|
2007
|
|
|
220,000
|
|
|
|
—
|
|
|
|
71,862
|
|
|
|
79,884
|
|
|
|
394,400
|
|
|
|
—
|
|
|
12,944
|
|
|
779,090
|
|
|
Chadwick
J. Byrd,
Chief
Financial
|
|
2009
|
|
|
127,934
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
285,802
|
|
|
413,736
|
|
|
Officer
and Secretary
|
|
2008
|
|
|
168,000
|
|
|
|
—
|
|
|
|
40,436
|
|
|
|
40,950
|
|
|
|
91,000
|
|
|
|
—
|
|
|
9,732
|
|
|
350,118
|
|
|
|
|
2007
|
|
|
155,000
|
|
|
|
—
|
|
|
|
80,912
|
|
|
|
29,798
|
|
|
|
118,000
|
|
|
|
—
|
|
|
10,361
|
|
|
394,071
|
|
|
Kristi
J. Gravelle,
|
|
2009
|
|
|
133,544
|
|
|
|
—
|
|
|
|
15,748
|
|
|
|
17,004
|
|
|
|
8,242
|
|
|
|
—
|
|
|
5,088
|
|
|
179,626
|
|
|
Chief
Financial Officer and Secretary
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
amounts in the “Stock Awards” column reflect the aggregate grant date fair
value of awards granted under our 2009 Equity Participation Plan
determined in accordance with FASB ASC Topic 718. See Note 11 of the
consolidated financial statements in our Annual Report on Form 10-K for
the year ended December 31, 2009 regarding assumptions underlying the
valuation of these equity awards.
|
|
|
|
|
|
|
|
|
|
|
|
The
amounts in the “Option Awards” column reflect the aggregate grant date
fair value of awards granted under our 2009 Equity Participation Plan
determined in accordance with FASB ASC Topic 718. See Note 11 of the
consolidated financial statements in our Annual Report on Form 10-K for
the year ended December 31, 2009 regarding assumptions underlying the
valuation of these equity awards.
|
|
|
|
|
|
Individual
breakdowns of amounts set forth in “All Other Compensation” with respect
to the fiscal year ended December 31, 2009
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
|
|
—
|
|
4,133
|
|
4,528
|
|
986
|
|
|
|
9,647
|
|
Margaret
M. Thomas
|
|
—
|
|
1,620
|
|
5,177
|
|
572
|
|
|
|
7,369
|
|
Chadwick
J. Byrd
|
|
—
|
|
—
|
|
5,414
|
|
388
|
|
|
|
5,802
1
|
|
Kristi
J. Gravelle
|
|
105
|
|
—
|
|
4,570
|
|
413
|
|
|
|
5,088
|
|
|
1
In addition to the amount set forth above, Mr. Byrd also received $280,000
in connection with severance payments made by the Company under a
separation agreement, dated November 1,
2009.
|
|
4
|
Individual
breakdowns of amounts set forth in “All Other Compensation” with respect
to the fiscal year ended December 31, 2008
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
|
|
5
|
Individual
breakdowns of amounts set forth in “All Other Compensation” with respect
to the fiscal year ended December 31, 2007
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
|
|
3,540
|
|
4,381
|
|
1,020
|
|
|
|
16,691
|
|
Margaret
M. Thomas
|
|
6,567
|
|
1,408
|
|
4,381
|
|
588
|
|
|
|
12,944
|
|
Chadwick
J. Byrd
|
|
4,650
|
|
----
|
|
5,279
|
|
432
|
|
|
|
10,361
|
|
6
|
Kristi
Gravelle began serving as the Company’s interim chief financial officer on
November 1, 2009. Prior to that time, Mrs. Gravelle served as the
Company's controller. The information set forth in the Summary
Compensation Table above consists of Mrs.
Gravelle's compensation information for the full fiscal year,
both in her capacity as controller and interim chief financial
officer.
|
Company Plans
2009
Equity Participation Plan
The Company’s officers,
directors and employees are eligible to receive restricted stock awards 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, 2009, options to purchase 309,081 shares
of the Company’s Common Stock were granted under the Incentive Plan. In
addition, during the Company’s 2009 fiscal year, 111,696 shares of restricted
stock were granted under the Incentive Plan. During the fiscal year ended
December 31, 2009, 28,529 options to purchase and 9,374 restricted shares of
Common Stock were forfeited under the Incentive Plan. Options to purchase shares
of Common Stock and restricted stock grants totaling 2,018,896 shares of Common
Stock were outstanding and held by 12 officers, directors and employees at
December 31, 2009. As of December 31, 2009, the weighted-average
exercise price of the outstanding options and stock grants was
$11.17.
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 did not have any
matching contribution subsequent to January 2009. Employees are 100% vested in
their contributions and vest in Company matching contributions equally over four
years. During the year ended December 31, 2009, the Company contributed
approximately $17,000 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
|
|
|
2,018,896
|
|
$
|
11.17
|
|
|
|
1,077,675
|
|
Equity
compensation plans not approved by security holders
|
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,018,896
|
|
$
|
11.17
|
|
|
|
1,077,675
|
Grants
of Plan-Based Awards Table
The
following table sets forth the plan-based grants made during the fiscal year
ended December 31, 2009
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
($/Sh)
|
|
Grant
Date Fair
Value
of
Stock
and Options Awards
6
($)
|
|
Jeffrey
D. Thomas
|
|
11/12/09
|
|
|
|
|
|
46,000
|
|
121,000
|
|
12.04
|
|
1,151,580
|
|
Chief Executive Officer
and
|
|
02/26/09
|
|
150,000
|
|
300,000
|
|
|
|
|
|
|
|
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
M. Thomas
|
|
11/12/09
|
|
|
|
|
|
14,161
|
|
37,266
|
|
12.04
|
|
354,592
|
|
Executive Vice
President
|
|
02/26/09
|
|
66,000
|
|
132,000
|
|
|
|
|
|
|
|
|
|
Chadwick
J. Byrd
|
|
11/12/09
|
|
|
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Chief Financial Officer and
Secretary
|
|
02/26/09
|
|
42,000
|
|
84,000
|
|
|
|
|
|
|
|
|
|
Kristi
J. Gravelle
|
|
11/12/09
|
|
|
|
|
|
1,308
|
|
3,442
|
|
12.04
|
|
32,752
|
|
Chief
Financial Officer and Secretary
|
|
02/26/09
|
|
11,800
|
|
15,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The
Company does not maintain an equity plan that provides for payments based
upon achievement of threshold, target and/or maximum goals for Named
Executive Officers.
|
|
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 February 26, 2009 for the
fiscal year ended December 31, 2009. 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 GAAP and
represents the total projected expense to the Company of grants made in
2009. For a description of the accounting policies 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 2, 2010.
|
|
|
|
|
|
7
|
Please
refer to ‘Long-Term Incentive Compensation/Equity-Based Awards’ on page
[17] for the methodology and rationale behind granting stock awards and
options awards during 2009.
|
Outstanding
Equity Awards at Fiscal Year-End Table
The
following table sets forth the outstanding equity awards as of December 31,
2009.
|
|
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
|
|
250,000
|
|
—
|
|
—
|
|
$6.00
|
|
3/01/12
|
|
|
|
|
|
|
|
|
|
Chief
Executive
|
|
60,236
|
|
—
|
|
—
|
|
$9.75
|
|
11/07/13
|
|
|
|
|
|
|
|
|
|
Officer
and
|
|
101,504
|
|
—
|
|
—
|
|
$16.74
|
|
11/18/14
|
|
|
|
|
|
|
|
|
|
President
|
|
85,646
|
|
—
|
|
—
|
|
$26.80
|
|
11/11/15
|
|
|
|
|
|
|
|
|
|
|
|
48,750
|
|
16,250
|
|
—
|
|
$27.46
|
|
11/09/16
|
|
|
|
|
|
|
|
|
|
|
|
59,500
|
|
59,500
|
|
—
|
|
$17.11
|
|
11/08/17
|
|
|
|
|
|
|
|
|
|
|
|
20,625
|
|
61,875
|
|
—
|
|
$9.19
|
|
11/13/18
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
121,000
|
|
—
|
|
$12.04
|
|
11/12/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138,900
|
5
|
$1,841,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Margaret
M. Thomas
|
|
3,418
|
|
—
|
|
—
|
|
$4.96
|
|
11/03/10
|
|
|
|
|
|
|
|
|
|
Executive
Vice
|
|
90,000
|
|
—
|
|
—
|
|
$6.00
|
|
3/01/12
|
|
|
|
|
|
|
|
|
|
President
|
|
19,592
|
|
—
|
|
—
|
|
$9.75
|
|
11/07/13
|
|
|
|
|
|
|
|
|
|
|
|
11,278
|
|
—
|
|
—
|
|
$16.74
|
|
11/18/14
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
—
|
|
—
|
|
$26.80
|
|
11/11/15
|
|
|
|
|
|
|
|
|
|
|
|
4,500
|
|
1,500
|
|
—
|
|
$27.46
|
|
11/09/16
|
|
|
|
|
|
|
|
|
|
|
|
6,300
|
|
6,300
|
|
—
|
|
$17.11
|
|
11/08/17
|
|
|
|
|
|
|
|
|
|
|
|
8,525
|
|
25,575
|
|
—
|
|
$9.19
|
|
11/13/18
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
37,266
|
|
—
|
|
$12.04
|
|
11/12/19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,261
|
6
|
$441,041
|
|
|
|
|
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Awards:
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Plan
|
|
Market
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
or
Payout
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
Value
of
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
|
|
Number
of
|
|
Number
of
|
|
Number
of
|
|
|
|
|
|
Number
|
|
Value
of
|
|
Shares,
|
|
Shares,
|
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
of
Shares
|
|
Shares
or
|
|
Units
or
|
|
Units
or
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
or
Units of
|
|
Units
of
|
|
Other
|
|
Other
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Stock
That
|
|
Stock
That
|
|
Rights
|
|
Rights
|
|
|
Name
and Principal
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
Have
Not
|
|
Have
Not
|
|
That
Have
|
|
That
Have
|
|
|
Position
|
|
Exercisable(#)
|
|
Unexercisable
1
(#)
|
|
Options(#)
|
|
Price
2
($)
|
|
Date
|
|
Vested
3
(#)
|
|
Vested
4
($)
|
|
Not
Vested
|
|
Not
Vested
|
|
|
Chadwick
J. Byrd
|
|
30,000
|
|
—
|
|
—
|
|
$21.09
|
|
8/12/15
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial
|
|
2,000
|
|
—
|
|
—
|
|
$27.46
|
|
11/09/16
|
|
|
|
|
|
|
|
|
|
|
Officer
and
|
|
4,700
|
|
—
|
|
—
|
|
$17.11
|
|
11/08/17
|
|
|
|
|
|
|
|
|
|
|
Secretary
|
|
12,600
|
|
—
|
|
—
|
|
$9.19
|
|
11/13/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
___
|
|
___
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kristi
J. Gravelle
|
|
2,500
|
|
2,500
|
|
—
|
|
$17.11
|
|
11/08/17
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial
|
|
225
|
|
675
|
|
—
|
|
$9.19
|
|
11/13/18
|
|
|
|
|
|
|
|
|
|
|
Officer
and
|
|
—
|
|
3,442
|
|
—
|
|
$12.04
|
|
11/12/19
|
|
|
|
|
|
|
|
|
|
|
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
1,608
7
|
|
$21,322
|
|
|
|
|
|
|
|
|
|
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, 2009, $13.26 per share.
|
|
|
5
|
Consists
of: (i) 25,000 shares granted on November 9, 2006; (ii) 39,000 shares
granted on November 8, 2007; (iii) 28,900 shares granted on November 13,
2008; and (iv) 46,000 shares granted on November 12, 2009.
|
|
|
6
|
Consists
of: (i) 3,000 shares granted on November 9, 2006; (ii) 4,200 shares
granted on November 8, 2007; (iii) 11,900 shares granted on November 13,
2008; and (iv) 14,161 shares granted on November 12, 2009.
|
|
|
7
|
Consists
of: (i) 300 shares granted on November 13, 2008; and (ii) 1,308 shares
granted on November 12, 2009.
|
|
Option
Exercises and Stock Vested Table
The
following table sets forth certain information with respect to exercised options
and vested stock awards for the fiscal year ended December 31,
2009.
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
Number
of
|
|
|
|
Number
of
|
|
|
|
|
|
Shares
|
|
|
|
Shares
|
|
|
|
|
|
Acquired
|
|
Value
Realized
|
|
Acquired
|
|
Value
Realized
|
|
Name
and Principal Position
|
|
on
Exercise
|
|
on
Exercise
($)
|
|
on
Vesting
|
|
on
Vesting
($)
|
|
Jeffrey
D. Thomas
|
|
85,724
|
|
$653,006
|
|
32,545
|
|
$398,676
|
|
Chief
Executive Officer and President
|
|
|
|
|
|
|
|
|
|
Margaret
M. Thomas
|
|
—
|
|
—
|
|
5,000
|
|
$61,250
|
|
Executive
Vice President
|
|
|
|
|
|
|
|
|
|
Chadwick
J. Byrd
|
|
—
|
|
—
|
|
8,400
|
|
$104,076
|
|
Chief
Financial Officer and Secretary
|
|
|
|
|
|
|
|
|
|
Kristi
J. Gravelle
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Chief
Financial Officer and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
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
November 1, 2009, Chadwick J. Byrd resigned as the Company’s chief financial
officer. Upon resignation, Mr. Byrd received a separation payment of
$275,000, assistance to transition health care costs of $5,000, and accrued
vacation. In connection with Mr. Byrd’s departure from the Company
and in addition to the payments provided by the separation agreement, Mr. Byrd’s
outstanding equity awards immediately vested. He was eligible to
exercise these awards under the terms of the Company’s standard
policy.
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, 2009, 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
|
|
1,324,903
|
|
Total
3
|
$
|
1,371,055
|
|
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, 2009 without “Cause” or Mr. Thomas
resigned with “Good Reason” on December 31, 2009, 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
|
|
7,453
|
|
Accelerated
Vesting of Stock Options and Restricted Stock
2
|
|
2,241,265
|
|
Noncompete/Nonsolicitation
Payment
3
|
|
1,324,903
|
|
Total
4
|
$
|
3,619,773
|
|
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, 2009 ($13.26). The value of restricted stock is
calculated by multiplying the number of unvested shares by the closing
stock price on December 31, 2009.
|
|
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, 2009 without “Cause” or Mr. Thomas
resigned with “Good Reason” on December 31, 2009 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
|
|
7,453
|
|
Accelerated
Vesting of Stock Options and Restricted Stock
2
|
|
2,241,265
|
|
Noncompete/Nonsolicitation
Payment
3
|
|
1,324,903
|
|
Amount
Due upon Change in Control
4
|
|
1,324,903
|
|
Total
5
|
$
|
4,994,676
|
|
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, 2009 ($13.26). The value of restricted stock is
calculated by multiplying the number of unvested shares by the closing
stock price on December 31,
2009.
|
|
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, 2009 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
|
|
2,241,265
|
|
Total
3
|
$
|
2,337,417
|
|
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, 2009 ($13.26). The value of restricted stock is
calculated by multiplying the number of unvested shares by the closing
stock price on December 31, 2009.
|
|
3
|
Any
payments or other consideration to be received are subject to the
deduction limitations and tax imposed by Sections 280G and 4999 of the
Code, or to any Excise Tax. Any such payments and value of the other
consideration will be reduced, or refunded, as the case may be, by the
minimum amount necessary so as to avoid the application of any Excise
Tax.
|
Director
Compensation Table
The
following table provides compensation information for the fiscal year ended
December 31, 2009 for each member of the Company’s Board of
Directors.
|
Name
1
|
|
Fees Earned or
Paid in Cash ($)
|
|
|
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
|
|
|
|
19,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,888
|
|
John A. Ueberroth
|
|
|
100,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
Joseph J. Ueberroth
|
|
|
24,000
|
|
|
|
12,500
|
|
|
|
19,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,888
|
|
Ricardo Lopez
Valencia
|
|
|
24,000
|
|
|
|
12,500
|
|
|
|
19,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,888
|
|
Jeffrey D. Thomas
4
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Richard D. C. Whilden
|
|
|
31,000
|
|
|
|
12,500
|
|
|
|
19,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62,888
|
|
Brigitte M.
Bren
|
|
|
24,000
|
|
|
|
12,500
|
|
|
|
19,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,888
|
|
Daniel G. Byrne
|
|
|
31,000
|
|
|
|
12,500
|
|
|
|
19,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
62,888
|
|
Rafer
L. Johnson
|
|
|
24,000
|
|
|
|
12,500
|
|
|
|
19,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
55,888
|
____________________
|
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 $56,000 per year, paid
$24,000 in cash and approximately $32,000 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 stock-based compensation accounting
principles
.
For a
description of accounting policies 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 2, 2010.
|
|
|
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.
|
INT
ERESTS 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
2009.
COMPENSATION
COMMITTEE REPORT
We have
reviewed and discussed with management certain Compensation Discussion and
Analysis provisions to be included in the Company’s 2010 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
|
SEC
URITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth the amount of stock of the Company beneficially owned
as of March 29, 2010, 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
|
|
Morgan
Stanley Investment Management Inc. (2)
|
|
|
1,770,724
|
|
|
|
9.17
|
%
|
|
Schroder
Investment Management North American Inc. (3)
|
|
|
1,699,739
|
|
|
|
8.80
|
%
|
|
Norbert
H. Lou (4)
|
|
|
1,453,337
|
|
|
|
7.53
|
%
|
|
BlackRock,
Inc. (5)
|
|
|
1,258,416
|
|
|
|
6.52
|
%
|
|
(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 29, 2010, 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 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 12, 2010 by Morgan Stanley Investment
Management Inc., disclosing that it and its affiliate have sole voting
power as to 1,681,283 shares and sole dispositive power as to 1,770,724
shares.
|
|
(3)
|
|
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 16, 2010
with the Securities and Exchange Commission by Schroder Investment
Management North America Inc., disclosing that it has sole voting power as
to 1,669,000 shares, sole dispositive power as to 1,699,739 shares, and
shared voting power as to 30,739 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 16, 2010. 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 1,324,240 shares, and share dispositive power as
to 1,383,228 shares. Mr. Lou has sole voting and dispositive power as to
70,109 shares.
|
|
|
|
|
|
(5)
|
|
The
address of BlackRock, Inc. is 40 East 52
nd
Street, New York NY 10022. The Company is reporting this stock ownership
based upon a Schedule 13G report filed on January 29, 2010 with the
Securities and Exchange Commission by BlackRock, Inc., disclosing that it
has sole voting power as to 1,258,416 shares, and sole dispositive power
as to 1,258,416 shares.
|
The
following table sets forth the amount of Common Stock of the Company
beneficially owned as of March 29, 2010, 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)
|
|
|
1,049,633
|
|
|
|
5.22
|
%
|
|
Margaret
M. Thomas (3)
|
|
|
1,049,633
|
|
|
|
5.22
|
%
|
|
John
A. Ueberroth (4)
|
|
|
702,900
|
|
|
|
3.64
|
%
|
|
Joseph
J. Ueberroth (5)
|
|
|
116,111
|
|
|
|
*
|
|
|
Richard
D. C. Whilden (6)
|
|
|
38,111
|
|
|
|
*
|
|
|
Rafer
L. Johnson (7)
|
|
|
28,871
|
|
|
|
*
|
|
|
Brigitte
M. Bren (8)
|
|
|
18,871
|
|
|
|
*
|
|
|
Daniel
G. Byrne (9)
|
|
|
10,089
|
|
|
|
*
|
|
|
Chadwick
J. Byrd (10)
|
|
|
8,400
|
|
|
|
*
|
|
|
James
M. Kalustian (11)
|
|
|
5,901
|
|
|
|
*
|
|
|
Ricardo
Lopez Valencia (12)
|
|
|
4,474
|
|
|
|
*
|
|
|
Kristi
J. Gravelle (13)
|
|
|
4,333
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
All
directors and executive officers as a group (12 people)
(14)
|
|
|
1,987,694
|
|
|
|
9.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
*
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 29, 2010, 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 221,062 shares of
Common Stock and options to purchase 626,261 shares of Common Stock issued
under the Incentive Plan. Also includes 46,697 shares of Common Stock and
155,613 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 46,697 shares of Common
Stock and options to purchase 155,613 shares of Common Stock issued under
the Incentive Plan. Also includes 221,062 shares of Common Stock and
626,261 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)
|
|
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
9266
|
|
|
|
|
|
(5)
|
|
Director.
Includes options to purchase 12,451 shares of Common Stock issued under
the Incentive Plan. Mr. Joseph Ueberroth’s address is 201 Shipyard
Way, Suite D, Newport Beach, CA 92663.
|
|
(6)
|
|
Director.
Includes options to purchase 25,451 shares of Common Stock issued under
the Incentive Plan. Mr. Whilden’s address is 106 S. Poinsettia
Avenue, Manhattan Beach, CA 90266.
|
|
(7)
|
|
Director.
Includes options to purchase 25,451 shares of Common Stock issued under
the Incentive Plan. Mr. Johnson’s address is 6730 East Carson Street,
Long Beach, CA 90808.
|
|
|
|
|
|
(8)
|
|
Director.
Includes options to purchase 15,451 shares of Common Stock issued under
the Incentive Plan. Ms. Bren’s address is P.O. Box 2648, Beverly
Hills, CA 90213.
|
|
|
|
|
|
(9)
|
|
Director.
Includes options to purchase 5,451 shares of Common Stock issued under the
Incentive Plan. Mr. Byrne’s address is 111 N. Wall Street, Spokane,
WA 99201.
|
|
(10)
|
|
Former
chief financial officer and secretary of the Company. Does not include any
options to purchase shares of Common Stock issued under the Incentive
Plan. Mr. Byrd’s address is 701 Fifth Avenue, 70
th
Floor, Seattle, WA 98104-7044.
|
|
|
|
|
|
(11)
|
|
Director.
Includes options to purchase 3,263 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 2,284 shares of Common Stock issued under the
Incentive Plan. Mr. Valencia’s address is 12641 S. 35
th
Place, Phoenix, AZ, 85044.
|
|
(13)
|
|
Chief
financial officer and secretary of the Company. Includes options to
purchase 2,725 shares of Common Stock issues under the Incentive Plan.
Mrs. Gravelle’s address is 2001 South Flint Road, Spokane, WA
99224.
|
|
|
|
|
|
(14)
|
|
Includes
874,401 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, 2009, 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, 2009.
RE
PORT 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
2009.
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 2009 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, 2009, 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 2009 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, Kristi J. Gravelle, 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.
ST
OCKHOLDER 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 14, 2010, 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 require that notice be received by the
secretary not less than 45 days or more than 75 days prior to the
Company’s first anniversary of the date on which the Company first mailed its
proxy materials for the preceding year’s annual meeting of stockholders. 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.
OT
HER 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.
|
|
|
|
|
|
|
By
Order of the Board of Directors
|
|
|
|
|
|
|
|
|
Kristi
J. Gravelle
|
|
|
|
Secretary
|
Spokane,
Washington
April 13,
2010
AP
PENDIX
A
AUDIT
COMMITTEE CHARTER
The Audit
Committee (“the Committee”) of the Board of Directors (“the Board”) of
Ambassadors Group, Inc., a Delaware corporation (“the Company”), will have the
oversight responsibility, authority and specific duties as described
below.
COMPOSITION
The
Committee will be comprised of three (3) or more directors as determined by the
Board. The members of the Committee must fulfill the independence and
experience requirements of the rules and regulations of The Nasdaq Stock Market,
Inc. (“Nasdaq”) and the Securities and Exchange Commission
(“SEC”). The Members of the Committee will be elected annually at the
organizational meeting of the Board and will be listed in the annual report to
the Company’s shareholders. One of the members of the Committee shall
possess such additional financial experience as required by the rules and
regulations of Nasdaq and will be elected Committee Chairman by the
Board.
RESPONSIBILITY
The
Committee will assist the Board in fulfilling its oversight responsibilities
with respect to (i) the annual financial information to be provided to
shareholders and the SEC; (ii) the system of internal controls that management
has established; and (iii) the internal and external audit
process. In addition, the Committee provides an avenue for
communication between internal auditors, the independent auditors, financial
management and the Board. The Committee should have a clear
understanding with the independent auditors that they must maintain an open and
transparent relationship with the Committee, and that the ultimate
accountability of the independent auditors is to the Board and the
Committee. The Committee will make regular reports to the Board
concerning its activities.
While the
Committee has the responsibilities and powers set forth in this Charter, it is
not the duty of the Committee to plan or conduct audits or to determine that the
Company’s financial statements are complete and accurate or are in accordance
with generally accepted accounting principles. It is not the duty of the
Committee to conduct investigations, to resolve disagreements, if any, between
management and the independent auditors or to assure compliance with laws and
regulations and the Company’s business conduct guidelines.
AUTHORITY
The
Committee is directly responsible for the appointment, compensation, retention,
oversight and termination of engagement of any independent auditor employed by
the Company. Each independent auditor shall report directly to the
Committee. The Committee is granted the authority to investigate any
matter or activity involving financial accounting and financial reporting, as
well as the internal control of the Company. In that regard, the
Committee will have the authority to approve the retention of external
professionals to render advice and counsel in such matters. The cost
of the independent auditors and such professionals, as well as the Committee’s
ordinary administrative expenses incurred in carrying out its duties, shall be
borne by the Company. All employees will be directed to cooperate
with respect thereto as requested by members of the Committee.
MEETINGS
The
Committee is to meet at least four (4) times annually and as many additional
times as the Committee deems necessary. Content of the agenda for
each meeting should be cleared by the Committee Chairman. The
Committee is to meet in separate executive sessions with the Company’s chief
financial officer, independent auditors and internal auditors at least once each
year and at other times when considered appropriate. For purposes of
a quorum, a majority of the members must be present.
ATTENDANCE
Committee
members will strive to be present at all meetings. As necessary or
desirable, the Committee Chairman may request that members of management and
representatives of the independent auditors and internal auditors be present at
Committee meetings.
SPECIFIC
DUTIES
In
carrying out its oversight responsibilities, the Committee will:
1.
Review
and reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval. This should be done in compliance
with applicable Nasdaq Audit Committee Requirements.
2.
Review
with the Company’s management, internal auditors and independent auditors the
Company’s accounting and financial reporting controls. Obtain
annually in writing from the independent auditors their letter as to the
adequacy of such controls.
3.
Review
with the Company’s management, internal auditors and independent auditors
significant accounting and reporting principles, practices and procedures
applied by the Company and management’s judgments and estimates in preparing its
financial statements. Discuss with the independent auditors their
judgments about the quality, not just the acceptability, of the Company’s
accounting principles used in financial reporting.
4.
Review
the scope of internal auditors’ work plan for the year and receive a summary
report of major findings by internal auditors and how management is addressing
the conditions reported.
5.
Review
the scope and general extent of the independent auditors’ annual
audit. The Committee’s review should include an explanation from the
independent auditors of the factors considered by the auditors in determining
the audit scope, including the major risk factors. The independent
auditors should confirm to the Committee that no limitations have been placed on
the scope or nature of their audit procedures. The Committee will
review annually with management the fee arrangement with the independent
auditors.
6.
Inquire
as to the independence of the independent auditors and obtain from the
independent auditors, at least annually, a formal written statement delineating
all relationships between the independent auditors and the Company as
contemplated by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees.
7.
Have a
predetermined arrangement with the independent auditors that they will advise
the Committee, through its Chairman, and management of the Company of any
matters identified through procedures followed for interim quarterly financial
statements, and that such notification is to be made prior to the related press
release or, if not practicable, prior to filing the Company’s Form
10-Q. The Committee shall also receive a confirmation provided by the
independent auditors at the end of each of the first three quarters of the year
that they have nothing to report to the Committee, if that is the case, or the
written enumeration of required reporting issues.
8.
At the
completion of the annual audit, review with management, internal auditors and
the independent auditors the following:
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The
annual financial statements and related footnotes and financial
information to be included in the Company’s annual report to shareholders
and on Form 10-K.
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Results
of the audit of the financial statements and the related report thereon
and, if applicable, a report on changes during the year in accounting
principles and their application.
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Significant
changes to the audit plan, if any, and any serious disputes or
difficulties with management encountered during the
audit. Inquire about the cooperation received by the
independent auditors during their audit, including access to all requested
records, data and information. Inquire of the independent
auditors whether there have been any disagreements with management which,
if not satisfactorily resolved, would have caused them to issue a
nonstandard report on the Company’s financial
statements.
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Other
communications as required to be communicated by the independent auditors
by Statement of Auditing Standards (SAS) 61 as amended by SAS 90 relating
to the conduct of the audit. Further, receive a communication
provided by the independent auditors concerning their judgment about the
quality of the Company’s accounting principles, as outlined in SAS 61 as
amended by SAS 90, and that they concur with management’s representation
concerning audit adjustments.
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If deemed
appropriate after such review and discussion, recommend to the Board that the
financial statements be included in the Company’s annual report on Form
10-K.
9.
After
preparation by management and review by internal auditors and independent
auditors, approve the report required under SEC rules to be included in the
Company’s annual proxy statement. The Charter is to be published as
an appendix to the proxy statement at least every three (3)
years.
10.
Discuss
with the independent auditors the quality of the Company’s financial and
accounting personnel. Also, elicit the comments of management
regarding the responsiveness of the independent auditors to the Company’s
needs.
11.
Meet with
management, internal auditors and the independent auditors to discuss any
relevant significant recommendations that the independent auditors may have,
particularly those characterized as “material” or
“serious.” Typically, such recommendations will be presented by the
independent auditors in the form of a Letter of Comments and Recommendations to
the Committee. The Committee should review responses of management to
the Letter of Comments and Recommendations from the independent auditors and
receive follow-up reports on action taken concerning the aforementioned
recommendations.
12.
Approve
in advance the engagement of the independent auditors for all audit services and
non-audit services and approve the fees and terms of any such
engagement.
13.
Review
the appointment and replacement of the senior internal audit
executive.
14.
Review
with management, internal auditors and the independent auditors the methods used
to establish and monitor the Company’s policies with respect to unethical or
illegal activities by Company employees that may have a material impact on the
financial statements.
15.
Generally
as part of the review of the annual financial statements, receive an oral
report(s), at least annually, from the Company’s general counsel concerning
legal and regulatory matters that may have a material impact on the financial
statements.
16.
As the
Committee may deem appropriate, obtain, weigh and consider expert advice as to
Audit Committee related rules of Nasdaq, Statements on Auditing Standards and
other accounting, legal and regulatory provisions.
17.
Review
and approve all related-party transactions after reviewing each such transaction
for potential conflicts of interest and improprieties.
18.
Adopt and
monitor a code of ethics for senior financial and other officers and provide for
and review prompt disclosure to the public of any change in, or waiver of such
code of ethics.
19.
Establish
procedures for the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls and auditing
matters, and the confidential, anonymous submission by employees of the Company
of concerns regarding questionable accounting or auditing
matters.
YOUR
VOTE IS IMPORTANT. PLEASE VOTE TODAY.
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 are available for the return of proxies 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.
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To
vote by mail, mark, sign and date your proxy card and return it in
the
enclosed postage-paid envelope.
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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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q
FOLD AND DETACH HERE
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Please
mark your votes as indicated in this example
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x
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FOR
ALL
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WITHHOLD
FOR
ALL
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*EXCEPTIONS
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FOR
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AGAINST
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ABSTAIN
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1.
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To
elect the following Class I directors to hold office for a three-year term
and until their
respective
successors are elected
and
qualified:
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o
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o
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o
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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, 2010.
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o
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o
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o
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01
Jeffrey D. Thomas, and
02
Ricardo Lopez Valencia
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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 ANY ADJOURNMENT OR POSTPONEMENT THEREOF. IN THE
ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED “FOR” ITEMS 1 AND
2 AND IN THE DISCRETION OF THE PROXY AGENTS AS TO ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE ANNUALMEETING OF STOCKHOLDERS OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
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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.)
*
Exceptions
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THE
UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT FOR THE 2010 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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o
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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.
You
can now access your Ambassadors Group, Inc. account online.
Access
your Ambassadors Group, Inc. account online via Investor ServiceDirect®
(ISD).
BNY
Mellon Shareowner Services, the transfer agent for Ambassadors Group, Inc., now
makes it easy and convenient to get current information on your shareholder
account.
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•
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View
account status
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•
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View
payment history for dividends
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•
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View
certificate history
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•
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Make
address changes
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•
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View
book-entry information
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•
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Obtain
a duplicate 1099 tax form
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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
Investor
ServiceDirect®
Available
24 hours per day, 7 days per week
TOLL
FREE NUMBER: 1-800-370-1163
|
|
Choose
MLinkSM
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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Important
notice regarding the Internet availability of proxy materials for the Annual
Meeting of Stockholders.
The
Annual Report and Proxy Statement are available at:
http://bnymellon.mobular.net/bnymellon/epax
q
FOLD AND DETACH HERE
q
PROXY
AMBASSADORS
GROUP, INC.
Dwight
D. Eisenhower Building
2001
South Flint Road
Spokane,
Washington 99224
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 29, 2010, 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 13, 2010, 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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Address
Change/Comments
(Mark
the corresponding box on the reverse side)
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BNY
MELLON SHAREOWNER SERVICES
P.O.
BOX 3550
SOUTH
HACKENSACK, NJ 07606-9250
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(Continued
and to be marked, dated and signed, on the other side)
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70884
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