UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
PROXY
STATEMENT PURSUANT TO SECTION 14(A) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Filed
by the Registrant
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by a Party other than the Registrant
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Preliminary
Proxy Statement
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for Use of the Commission Only (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
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and 0-11.
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calculated and state how it was determined):
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BE
AEROSPACE, INC.
1400
CORPORATE CENTER WAY
WELLINGTON,
FLORIDA 33414
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JULY 31, 2008
Notice is
hereby given that the Annual Meeting of Stockholders of BE Aerospace, Inc.
will be held in the Conference Center, 36
th
Floor,
Ropes & Gray LLP, One International Place, Boston, Massachusetts at
10:30 a.m. on Thursday, July 31, 2008 for the following
purposes:
1.
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To
elect two Class II directors;
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2.
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To
consider and act upon a stockholder proposal;
and
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3.
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To
transact any other business that may properly come before the meeting, or
any adjournment thereof.
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Stockholders
of record at the close of business on May 30, 2008 are entitled to notice of and
to vote at the meeting.
Whether or
not you plan to attend the meeting in person, please sign and date the enclosed
proxy and return it promptly in the enclosed envelope.
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By
Order of the Board of Directors,
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EDMUND
J. MORIARTY
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Secretary
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Wellington,
Florida
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June
13, 2008
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TABLE
OF CONTENTS
ANNUAL
MEETING OF STOCKHOLDERS
THIS PROXY
STATEMENT AND THE ENCLOSED PROXY ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT
JUNE 13, 2008.
The
enclosed form of proxy is solicited on behalf of BE Aerospace, Inc. to be
voted at the 2008 Annual Meeting of Stockholders to be held in the Conference
Center, 36
th
Floor,
Ropes & Gray LLP, One International Place, Boston, Massachusetts
at 10:30 a.m. on Thursday, July 31, 2008 or at any adjournment
thereof.
If you are
a stockholder of record, you may vote in person at the annual meeting, vote by
proxy using the enclosed proxy card, vote by proxy over the telephone, or vote
by proxy on the Internet. Whether or not you plan to attend the meeting, we urge
you to vote by proxy to ensure your vote is counted. You may still attend the
meeting and vote in person even if you have already voted by proxy.
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To
vote in person, come to the annual meeting and we will give you a ballot
when you arrive.
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To
vote using the proxy card, simply complete, sign and date the enclosed
proxy card and return it promptly in the envelope provided. If you return
your signed proxy card to us before the annual meeting, we will vote your
shares as you direct.
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To
vote over the telephone, dial toll-free 1-800-652-VOTE (1-800-652-8683)
using a touch-tone phone and follow the recorded instructions. You will be
asked to provide the company number and control number from the enclosed
proxy card. Your vote must be received by 1:00 a.m. Central Time, on July
31, 2008 to be counted.
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To
vote on the Internet, go to http://www.investorvote.com to complete an
electronic proxy card. You will be asked to provide the company number and
control number from the enclosed proxy card. Your vote must be received by
1:00 a.m. Central Time, on July 31, 2008 to be
counted.
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A proxy
may be revoked by a stockholder at any time before it is voted (i) by
returning to the Company another properly signed proxy bearing a later date;
(ii) by delivering a written revocation to the Secretary of the Company; or
(iii) by attending the meeting and voting the shares represented by the
proxy in person. Shares represented by the enclosed form of proxy properly
executed and returned or submitted over the telephone or on the Internet, and
not revoked, will be voted at the meeting by the persons named as proxies,
Thomas P. McCaffrey and Edmund J. Moriarty.
The
expense of soliciting proxies will be borne by the Company. In addition to the
solicitation of proxies by mail, the Company may use the services of its
officers and other employees to solicit proxies personally and by mail,
telephone and telegram from brokerage houses and other stockholders. Officers
and other employees of the Company will receive no compensation in addition to
their regular salaries for soliciting proxies. The Company has retained
Georgeson Shareholder Communications, Inc. to assist in solicitation of
proxies for a fee of $7,000 plus expenses. The Company will reimburse brokers
and other persons for their reasonable charges and expenses in forwarding
soliciting materials to the beneficial owners of the common stock.
In the
absence of contrary instructions, the persons named as proxies will vote in
accordance with the intentions stated below. The holders of record of shares of
the Company’s common stock, $0.01 par value, at the close of business on May
30, 2008 are entitled to receive notice of and to vote at the meeting. As
of April 21, 2008 the Company had 93,075,108 shares of common stock issued and
outstanding. Each share of common stock is entitled to one vote on each matter
to come before the meeting.
Consistent
with Delaware state law and the Company’s by-laws, a majority of the votes
entitled to be cast on a particular matter, present in person or represented by
proxy, constitutes a quorum as to such matter. Votes cast by proxy or in person
at the meeting will be counted by the person appointed by the Company to act as
inspector of election for the meeting. The two nominees for election as
directors at the meeting who receive the greatest number of votes properly cast
for the election of directors shall be elected directors. The affirmative vote
of a majority of the votes in attendance at the meeting (at which a quorum is
present), present in person or represented by proxy, that are properly cast is
necessary to approve the actions described in Proposal No. 2.
The
inspector of election will count the total number of votes cast “for” approval
of Proposal No. 2 for purposes of determining whether sufficient
affirmative votes have been cast. The inspector of election will count shares
(i) represented by proxies that withhold authority to vote either for the
nominees for election as a director or for Proposal No. 2; or
(ii) that reflect abstentions and “broker non-votes” as shares that are
present and entitled to vote on the matter for purposes of determining the
presence of a quorum, but abstentions and broker non-votes will not have any
effect on the outcome of voting on the election of directors or Proposal
No. 2. “Broker non-votes” are shares represented at the meeting held by
brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote; and (ii) the broker
or nominee does not have the discretionary voting power on a particular
matter.
The Annual
Report to Stockholders for the Company’s fiscal year ended December 31,
2007 accompanies this proxy statement.
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
The
persons named in the enclosed proxy intend to vote each share as to which a
proxy has been properly executed and returned or submitted over the telephone or
on the Internet and not revoked in favor of the election as directors of the two
nominees named below, each of whom is now a director of the Company, unless
authority to vote for the election of any or all of such nominees is withheld by
marking the proxy to that effect.
Pursuant
to the Company’s Restated Certificate of Incorporation, the Board of Directors
is divided into three classes, each as nearly equal in number as possible, so
that each director (in certain circumstances after a transitional period) will
serve for three years, with one class of directors being elected each
year.
The
nominees are Messrs. Robert J. Khoury and Jonathan M. Schofield, two of our
directors currently designated as Class II Directors, whose terms expire at
the meeting, and until their respective successors are elected and shall qualify
to serve. The enclosed proxy cannot be voted for a greater number of persons
than two.
If
elected, Messrs. Robert J. Khoury and Jonathan M. Schofield will serve as
Class II Directors for a term of three years, expiring at the 2011 Annual
Meeting of Stockholders, and until their respective successors are elected and
shall qualify to serve.
The
Company expects that Messrs. Robert J. Khoury and Jonathan M. Schofield
will be able to serve, but if they are unable to serve, the proxies reserve
discretion to vote, or refrain from voting, for a substitute nominee or nominees
or to fix the number of directors at a lesser number.
Set forth
below is the business experience of, and certain other information regarding,
the two director nominees and the other current directors of the
Company.
Name,
Age, Business Experience and Current
Directorships
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Director
Since
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ROBERT
J. KHOURY, 66
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1987
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Robert
J. Khoury has been a Director since July 1987, when he co-founded the
Company. On December 31, 2005, Mr. Khoury retired from service
as the Company’s President and Chief Executive Officer, a position he held
since August 2000. From April 1996 through August 2000, he
served as Vice Chairman of the Company. Mr. Khoury is the brother of
Amin J. Khoury.
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JONATHAN
M. SCHOFIELD, 67
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2001
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Jonathan
M. Schofield has been a Director since April 2001. From
December 1992 through February 2000, Mr. Schofield served
as Chairman of the Board and CEO of Airbus North America Holdings, a
subsidiary of Airbus Industrie, a manufacturer of large civil aircraft,
and served as Chairman from February 2000 until his retirement in
March 2001. From 1989 until he joined Airbus, Mr. Schofield was
President of United Technologies International Corporation.
Mr. Schofield is currently a member of the board of directors of Aero
Sat, Inc., Nordam Group, and TurboCombustor Technology, Inc. and
is a trustee of LIFT Trust.
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Current Directors
Name,
Age, Business Experience and Current
Directorships
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Director
Since
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Term
Expires
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CHARLES
L. CHADWELL, 67
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2007
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2009
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Charles
L. Chadwell has been a Director since January 2007. Until his
retirement in 2002, he was the Vice President and General Manager of
Commercial Engine Operations for GE Aircraft Engines. After joining
General Electric in 1965, he held a variety of management positions,
including: Program Manager, CF6-80C program; Plant Manager, GE Aircraft
Engines’ Wilmington, North Carolina plant; General Manager, GE Aircraft
Engines Sourcing Operations; General Manager, Production Operations, GE
Aircraft Engines’ Lynn, Massachusetts plant; Vice President, GE Aircraft
Engines Human Resources; and Vice President and General Manager,
Production and Procurement, GE Aircraft Engines.
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RICHARD
G. HAMERMESH, 60
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1987
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2009
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Richard
G. Hamermesh has been a Director since July 1987. Dr. Hamermesh
has been a Professor of Management Practice at Harvard Business School
since July 1, 2002. From 1987 to 2001, he was a co-founder and a Managing
Partner of The Center for Executive Development, an executive education
and development consulting firm. From 1976 to 1987, Dr. Hamermesh was
a member of the faculty of Harvard Business School. He is also an active
investor and entrepreneur, having participated as a principal, director
and investor in the founding and early stages of more than 15
organizations.
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AMIN
J. KHOURY, 69
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1987
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2009
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Amin
J. Khoury has been the Chairman of the Board since July 1987 when he
co-founded the Company. Effective December 31, 2005, with
Mr. Robert J. Khoury’s retirement, Mr. Amin J. Khoury was
appointed Chief Executive Officer. Mr. Amin J. Khoury also served as
the Company’s Chief Executive Officer from September, 1987 until
April 1, 1996. Since 1986, Mr. Khoury has been a director of
Synthes, Inc., the world’s leading manufacturer and marketer of
orthopedic trauma implants and a leading global manufacturer and marketer
of cranial maxillofacial and spine implants. Mr. Khoury is a member of the
Board of Directors of the Aerospace Industries
Association. Mr. Khoury is the brother of Robert J.
Khoury.
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Name,
Age, Business Experience and Current
Directorships
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Director
Since
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Term
Expires
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JIM
C. COWART, 56
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1989
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2010
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Jim
C. Cowart has been a Director since November 1989. Since
September 2005, Mr. Cowart has been a Director of EAG Limited, a
company listed on the London Stock Exchange, which is a provider of
microanalytic laboratory services, including surface analysis and
materials characterization. Since September 2004, Mr. Cowart has
been Chairman and Chief Executive Officer of Auriga Medical Products GmbH,
a distributor of medical devices. He is a Principal of Cowart & Co.
LLC and private capital firms that provide strategic planning, competitive
analysis, financial relations and other services. From August 1999 to
May 2001, he was Chairman of QualPro Corporation, an aerospace
components manufacturing company. From January 1993 to
November 1997, he was the Chairman and CEO of Aurora Electronics Inc.
Previously, Mr. Cowart was a founding general partner of Capital
Resource Partners, a private investment capital manager, and he held
various positions in investment banking and venture capital with Lehman
Brothers, Shearson Venture Capital and Kidder,
Peabody & Co.
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ARTHUR
E. WEGNER, 70
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2007
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2010
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Arthur
E. Wegner has been a Director since January 2007. Mr.
Wegner retired in 2000 as Executive Vice President of Raytheon Company and
Chairman of Raytheon Aircraft. He joined Raytheon Company in
July 1993 as a Senior Vice President and was appointed Chairman and
CEO of Raytheon’s Beech Aircraft Corporation. In September 1994, he
was appointed Chairman and CEO of Raytheon Aircraft, which was formed by
the merger of Raytheon subsidiaries Beech Aircraft and Raytheon Corporate
Jets. He became Chairman of Raytheon Aircraft in 2000. He was elected an
Executive Vice President of Raytheon Company in March 1995.
Mr. Wegner came to Raytheon Company after 20 years with United
Technologies Corporation (UTC), where he was Executive Vice President and
President of UTC’s Aerospace and Defense Sector. Prior to that he was
President of UTC’s Pratt and Whitney Division. Mr. Wegner is past
Chairman of the Board of Directors of the General Aviation Manufacturers
Association and the Aerospace Industries Association.
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Meetings of the Board of Directors and
Committees
The Board
of Directors held five meetings during 2007. All of the current directors
attended all of the meetings. The Board of Directors currently has three
standing committees: the Audit Committee, the Compensation Committee and the
Nominating and Corporate Governance Committee. Each current director attended
all of the meetings of the committees of the Board of Directors on which they
served during 2007, other than Mr. Cowart who was unable to attend one Audit
Committee meeting. We do not have a specific policy for director
attendance at Annual Meetings of Stockholders, but we encourage all directors to
use reasonable efforts to attend our annual meeting. All members of
our Board of Directors attended the 2007 Annual Meeting of Stockholders. The
Board of Directors has determined that Messrs. Chadwell, Cowart, Hamermesh,
Schofield and Wegner are independent under NASDAQ rules.
The Audit
Committee is currently composed of Messrs. Cowart, Hamermesh and Wegner
with Mr. Cowart acting as Chairman. The Audit Committee held six meetings
during 2007. The Audit Committee is responsible for the appointment,
compensation and oversight of our independent auditors, overseeing the quality
and integrity of our financial statements and related disclosures, our
compliance with legal and regulatory requirements, assessing our independent
auditors’ qualifications, independence and performance, and monitoring the
performance of our internal audit and control functions. All members of the
Audit Committee are independent under NASDAQ and SEC rules. The Audit Committee
operates under a written charter adopted by and approved by our Board of
Directors.
The
Compensation Committee is currently composed of Messrs. Chadwell and
Schofield. The Compensation Committee held four meetings and acted pursuant to a
unanimous written consent on two other occasions during 2007. The Compensation
Committee provides recommendations to the Board of Directors regarding
compensation matters and administers the Company’s incentive and compensation
plans. All of the members of the Compensation Committee are independent as
defined by NASDAQ rules. The Compensation Committee operates under a written
charter adopted and approved by our Board of Directors.
The
Compensation Committee is not authorized to delegate any of its authority
described herein to any other persons (other than a subcommittee). Our CEO, COO
and CFO attended portions of some or all of the Compensation Committee meetings
during 2007 at the invitation of the Compensation Committee. Management input
was taken into consideration in assessing the performance and pay levels of our
key management employees as well as the establishment of bonus measures and
targets. Our Vice President-Law & General Counsel and our
Vice President-Human Resources also attended selected meetings during 2007 to
provide the Compensation Committee with information to consider in respect to
various areas in which they have special expertise. Our Vice
President-Law & General Counsel also serves as secretary to the
Compensation Committee. On no occasion were any of our named executive officers
involved in any discussion specifically relating to their own compensation,
other than our CEO, who discussed both his performance and his compensation
directly with our Compensation Committee.
The
Nominating and Corporate Governance Committee is currently composed of
Messrs. Chadwell, Cowart, Hamermesh, Schofield and Wegner. The Nominating
and Corporate Governance Committee held one meeting during 2007. The Nominating
and Corporate Governance Committee is responsible for among other things,
assisting the Board of Directors by actively identifying individuals qualified
to become Board members and recommending to the Board the director nominees for
election at the next Annual Meeting of Stockholders and making recommendations
with respect to corporate governance matters. All of the members of the
Nominating and Corporate Governance Committee are independent as defined by
current NASDAQ rules. The Nominating and Corporate Governance Committee operates
under a written charter adopted and approved by our Board of
Directors.
To gain a
perspective on external pay levels, emerging practices and regulatory changes,
our Compensation Committee engages an outside executive compensation consultant
to provide benchmark and survey information and advise the Compensation
Committee as it conducts its review of our compensation process. The
Compensation Committee selected Mercer Human Resource Consulting (“Mercer”), as
its consultant for 2007 and tasked them with gathering market competitive data,
reviewing compensation plan design alternatives and instructing the Compensation
Committee on compensation trends and best practices. As a result, Mercer
periodically participated in Compensation Committee meetings, and they also
provided the Compensation Committee with specialized advice to consider in
establishing and evaluating our compensation practices. No member of management
has engaged Mercer to advise them on executive compensation
matters. Further, Mercer has not been engaged to advise the Company
or its management on any other matters. Mercer reports directly to
the Compensation Committee. Greater detail regarding our compensation process is
set forth below in our Compensation Discussion and Analysis.
Copies of
the charters for the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee are available at www.beaerospace.com in the
Investor Relations section.
Stockholder Communications with Our Board of
Directors
To
facilitate the ability of stockholders to communicate with our Board of
Directors, we have established an electronic mailing address and a physical
mailing address to which communications may be sent: directors@beaerospace.com,
or The Board of Directors, c/o The Corporate Secretary,
BE Aerospace, Inc., 1400 Corporate Center Way, Wellington, Florida
33414.
Our
Corporate Secretary reviews all correspondence addressed to the Board of
Directors and regularly presents to the Board a summary of all such
correspondence and forwards to the Board or individual directors, as the case
may be, copies of all correspondence that, in the opinion of the Corporate
Secretary, deals with the functions of the Board or committees thereof or that
he otherwise determines requires their attention. Examples of communications
that would be logged, but not automatically forwarded, include solicitations for
products and services or items of a personal nature not relevant to us or our
stockholders. Directors may at any time review the log of all correspondence
received by our Company that is addressed to members of the Board and request
copies of any such correspondence. Concerns relating to accounting, internal
controls or auditing matters are brought to the attention of the Audit
Committee, other than potential ethical or conflict of interest situations,
which are directed to the Nominating and Corporate Governance
Committee.
As
provided in its charter, the Nominating and Corporate Governance Committee
identifies and recommends to the Board nominees for election and reelection to
the Board and will consider nominations submitted by stockholders. The Committee
evaluates candidates proposed by stockholders using the same criteria as for
other candidates.
The
Nominating and Corporate Governance Committee seeks to create a Board of
Directors that is strong in its collective diversity of skills and experience
with respect to finance, leadership, business operations and industry knowledge.
The Nominating and Corporate Governance Committee reviews with the Board of
Directors, on an annual basis, the current composition of the Board of Directors
in light of characteristics of independence, skills, experience, competency and
availability of service to the Company of its members and of the Company’s
anticipated needs. When the Nominating and Corporate Governance Committee
reviews a potential new candidate, the Committee looks specifically at the
candidate’s qualifications in light of the size of the Board of Directors and
the needs of the Board of Directors at a given point in time.
Generally,
in nominating director candidates, the Nominating and Corporate Governance
Committee strives to nominate directors that exhibit high standards of ethics,
integrity, commitment and accountability. In addition, all nominations attempt
to ensure that the Board of Directors shall encompass a range of talent, skills
and expertise sufficient to provide sound guidance with respect to our
operations and activities.
Under our
Nominating and Corporate Governance Committee charter, directors must inform the
Chairman of the Board and the Chair of the Nominating and Corporate Governance
Committee in advance of accepting an invitation to serve on another public
company board. In addition, no director may sit on the Board of Directors, or
beneficially own more than 1% of the outstanding equity securities, of any of
our competitors in our principal lines of business. We also discourage our
directors from serving on the board of directors of more than three public
companies.
To
recommend a nominee, a stockholder shall give notice to our Corporate Secretary
at our registered address in Wellington, Florida. This notice should include the
candidate’s brief biographical description, a statement of the qualifications of
the candidate, taking into account the qualification requirements set forth
above, and the candidate’s signed consent to be named in the proxy statement and
to serve as a director if elected. The notice must be given not later than the
earlier of (i) 50 days before the first anniversary of the last Annual Meeting
of Stockholders or (ii) if less than 60 days’ notice of the date of the
Annual Meeting of Stockholders at which directors are to be elected is given,
ten days after such notice. Once we receive the recommendation, we will deliver
a questionnaire to the candidate that requests additional information about the
candidate’s independence, qualifications and other information that would assist
the Nominating and Corporate Governance Committee in evaluating the candidate,
as well as certain information that must be disclosed about the candidate in our
proxy statement, if nominated. Candidates must complete and return the
questionnaire within the time frame provided to be considered for nomination by
the Nominating and Corporate Governance Committee.
The
Nominating and Corporate Governance Committee has not received any nominations
for director from stockholders for the 2008 Annual Meeting of
Stockholders.
Compensation Committee Interlocks and Insider
Participation
No person
who is or has been an officer or other employee of the Company served as a
member of the Company’s Compensation Committee. No executive officer of the
Company served as a member of the Compensation Committee on the board (or as a
director) of any company where an executive officer of such company is a member
of the Compensation Committee or a director of the Company. No member of the
Compensation Committee was a party to any transaction required to be disclosed
as a related person transaction.
Compensation of Directors
Directors
who are employees of the Company receive no additional compensation for serving
on the Company’s Board of Directors. Directors who are not employees of the
Company currently receive an annual retainer of $80,000. In addition, the chairs
of our Audit Committee, Compensation Committee, and Nominating and Corporate
Governance Committee also receive additional annual retainers of $10,000,
$10,000 and $5,000, respectively. $50,000 of the $80,000 annual board retainer
is paid in cash and the remaining $30,000 of the annual board retainer is paid
in shares of our common stock. Up to 100% of the directors' cash and/or stock
retainers may be deferred pursuant to our Non-Employee Directors Deferred Stock
Plan (“Directors Plan”), as amended. During 2007 our directors
amended the Directors Plan to allow the deferral of up to 100% of their board
retainers. Previously 50% of board retainers and 50% of committee
fees were deferred. In connection with the implementation of this
amendment, in March 2008 distributions of previously earned and deferred shares
totaling 25,726, 25,435, and 24,818 shares were made to Messrs. Cowart,
Hamermesh and Schofield, respectively. The deferred cash compensation
or shares of common stock are held in an account under the Directors Plan until
the termination of the director’s service and are paid in a lump-sum or in up to
five annual installments, as elected by the director. The directors are fully
vested in the deferred shares at all times but have no rights as stockholders
until distribution. In the event of a change of control (as defined in the
plan), the share accounts under the plan will be distributed to the directors in
a lump-sum.
In
addition, each non-employee director receives $2,000 in cash for each committee
meeting attended.
Non-employee
directors receive an annual grant of restricted stock with a fair market value
of $40,000. The grants are made pursuant to our 2005 Long-Term Incentive Plan
and vest on each of the first, second, third and fourth anniversaries of the
date of grant, provided the director remains in continuous service through the
applicable vesting period.
We
reimburse our non-employee directors for reasonable business and travel expenses
incurred in connection with their service on the Board of Directors. In
addition, non-employee directors are eligible to participate in our health and
business travel accident insurance program. We do not provide our directors with
any other perquisites or special benefits for their service on our
Board.
Director
compensation is determined by the Compensation Committee and approved by the
entire Board of Directors. In 2007, we engaged an independent third-party
consultant to review our non-employee directors’ compensation program to ensure
that our program is competitive with current market practices and trends, is
consistent with the principles of good governance and is aligned with the
interests of our shareholders. We used the same compensation comparison group
for both our executive officers’ market pay analysis and our non-employee
directors’ review, as described below in our Compensation Discussion and
Analysis. The review indicated that our non-employee directors’ total
compensation was somewhat below that of our peer group. As a result of that
review, and based on the Compensation Committee’s recommendation, the Board
increased the retainer by $20,000 to the current $80,000 retainer.
Consulting
Arrangement with Robert J. Khoury.
Effective January 1, 2006,
upon his retirement as our President and Chief Executive Officer, Mr. Khoury
entered into a consulting agreement with us pursuant to which he agreed to
provide certain specified services to us during a six-year consulting period,
including sales and marketing services, assistance in developing and
implementing key customer strategies, advice and consultation regarding
operational matters of the Company and maintenance of key customer relationships
through periodic customer visits. In consideration for the consulting
services, Mr. Khoury receives a consulting fee of $263,300 per calendar
year. He is also entitled to an office, secretarial support and air
travel in accordance with past practices under our travel policy. The
consulting agreement may not be amended, modified or terminated without the
prior written consent of both parties. If Mr. Khoury ceases to
provide the consulting services as a result of his death or disability, he or
his estate will be entitled to a lump-sum payment equal to the consulting fees
payable through the remainder of the consulting period. As a member
of the Board, Mr. Khoury is also entitled to receive all compensation paid to
our non-employee directors.
The
following table summarizes the compensation paid to our non-employee directors
in 2007.
Director Compensation Table
Name
|
|
Fees Earned or
Paid in
Cash
($)(1)
|
Stock
Awards
($)
(2)(3)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
(a)
|
|
(b)
|
(c)
|
|
(g)
|
|
(h)
|
Charles
L. Chadwell
|
|
|
43,000
|
|
7,527
|
|
—
|
|
50,527
|
Jim
C. Cowart
|
|
|
48,000
|
|
17,311
|
|
—
|
|
65,311
|
Richard
G. Hamermesh
|
|
|
43,000
|
|
17,311
|
|
—
|
|
60,311
|
David
C. Hurley(5)
|
|
|
18,000
|
|
17,509
|
|
—
|
|
35,509
|
Robert
J. Khoury
|
|
|
35,000
|
|
35,214(4)
|
|
361,291(4)
|
|
431,505
|
Jonathan
M. Schofield
|
|
|
50,125
|
|
17,311
|
|
—
|
|
67,436
|
Arthur
E. Wegner
|
|
|
43,000
|
|
7,527
|
|
—
|
|
50,527
|
(1)
|
Includes
all cash retainers and meeting fees paid to our non-employee directors as
described above.
|
|
|
(2)
|
The
amounts reported in the “Stock Awards” column reflect the dollar amount,
without reduction for risk of forfeiture, recognized for financial
reporting purposes for the fiscal year ended December 31, 2007 of
awards of restricted stock, calculated in accordance with the provisions
of Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 123R “Share Based Payment,” or SFAS 123R. The amount
set forth may include expenses attributable to equity awards granted
during and before 2007. Assumptions made in the calculation of these
amounts are included in Note 12 to our audited financial statements for
the fiscal year ended December 31, 2007 included in our annual report
on Form 10-K filed with the Securities and Exchange Commission on
February 20, 2008.
|
|
|
(3)
|
Each
member of our Board of Directors as of March 31, 2007 received
(i) an aggregate of 1,262 shares of restricted stock during 2007
which had a fair market value on the date of grant of $40,000, plus (ii)
an aggregate number of shares of our common stock with a fair market value
on the date of grant equal to ($30,000), plus (iii) as further
discussed above, up to 100% of any retainers arising from their
participation as a member of our Audit, Compensation or Nominating and
Corporate Governance Committees.
|
|
|
|
As
of December 31, 2007, the aggregate number of deferred shares,
unvested restricted stock awards and unexercised stock options pursuant to
our Non-Employee Director Deferred Stock Plan held by each non-employee
director was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Shares
|
|
|
Stock
Awards
(#)
|
|
|
Stock
Options
(#)
|
|
|
Charles
L. Chadwell
|
|
|
745
|
|
|
|
1,261
|
|
|
|
-0-
|
|
|
Jim
C. Cowart
|
|
|
25,726
|
|
|
|
2,456
|
|
|
|
-0-
|
|
|
Richard
G. Hamermesh
|
|
|
25,435
|
|
|
|
2,456
|
|
|
|
-0-
|
|
|
Robert
J. Khoury
|
|
|
2,045
|
|
|
|
2,455
|
|
|
|
-0-
|
|
|
Jonathan
M. Schofield
|
|
|
24,818
|
|
|
|
2,456
|
|
|
|
-0-
|
|
|
Arthur
E. Wegner
|
|
|
745
|
|
|
|
1,261
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
The
amount reported for Mr. Robert J. Khoury for 2007 includes payments
under a consulting agreement he entered into upon his retirement of
$263,300; personal use of the Company aircraft of $75,246; and executive
medical coverage of $22,745. During 2007 Mr. Robert J. Khoury
also received 1,592 shares of our common stock as compensation for his
service as a director during 2006. However, because the shares
were not issued until 2007, no compensation expense was recorded in 2006
and instead compensation expense was recorded at the closing price on the
date the shares were issued of $50.53 per share. The aggregate
incremental cost for the use of the Company aircraft for personal travel
is calculated by multiplying the hourly variable cost rate for the
aircraft by the hours used. The hourly variable cost rate
includes costs such as fuel, oil, parking/landing fees, crew expenses
and catering. The terms of our executive medical plan are set forth below
in our Compensation Discussion and Analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Mr.
Hurley resigned from the Board of Directors effective April 27,
2007.
|
The Audit
Committee is responsible for the appointment, compensation and oversight of our
independent auditors, overseeing the quality and integrity of our financial
statements and related disclosures, our compliance with legal and regulatory
requirements, assessing our independent auditors’ qualifications, independence
and performance, and monitoring the performance of our internal audit and
control functions. The committee is currently composed of three directors:
Messrs. Cowart, Hamermesh and Wegner, and operates under a written charter
adopted and approved by the Board of Directors, which is available on our
website at www.beaerospace.com in the Investors Relations section.
Mr. Cowart currently chairs the Audit Committee.
Our Audit
Committee is 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). All three current directors
serving on the Audit Committee are independent committee members as defined by
NASDAQ and SEC rules. Our Board of Directors has determined that Mr. Cowart
is an “audit committee financial expert” in accordance with SEC
rules.
Report of the Audit Committee of the Board of
Directors
Management
is responsible for the financial reporting process, including the system of
internal control, and for the preparation of consolidated financial statements
in accordance with accounting principles generally accepted in the United States
of America. The Company’s independent auditors are responsible for auditing
those financial statements. The Audit Committee’s responsibility is to monitor
and review these processes. We rely, without independent verification, on the
information provided to us and on the representations made by management and the
independent auditors.
We have
reviewed and discussed the audited consolidated financial statements for 2007
with management and Deloitte & Touche LLP, the Company’s independent
registered public accounting firm.
We also
discussed with the independent auditors matters required to be discussed with
Audit Committees under generally accepted auditing standards, including, among
other things, matters related to the conduct of the audit of the Company’s
consolidated financial statements and the matters required to be discussed by
the Public Company Accounting Oversight Board (PCAOB) standards and related
rules.
The
Company’s independent auditors also provided to us the written disclosures and
the letter required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and we discussed with the
independent auditors their independence from the Company. When considering
Deloitte & Touche LLP’s independence, we considered whether their
provision of services to the Company beyond those rendered in connection with
their audit and review of the Company’s consolidated financial statements was
consistent with maintaining their independence. We also reviewed, among other
things, the amount of fees paid to Deloitte & Touche LLP for audit and
non-audit services.
Based on
our review and these meetings, discussions and reports, and subject to the
limitations on our role and responsibilities referred to above and in the Audit
Committee Charter, we have recommended to the Board of Directors that the
Company’s audited consolidated financial statements for 2007 be included in the
Company’s Annual Report on Form 10-K.
With
respect to the above matters, the Audit Committee submits this
report.
|
Audit
Committee:
|
|
Jim
C. Cowart
|
|
Richard
G. Hamermesh
|
|
Arthur
E. Wegner
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table and notes thereto set forth certain information with respect to
the beneficial ownership of the Company’s common stock as of April 21, 2008,
except as otherwise noted, by (i) each person who is known to us to
beneficially own more than 5% of the outstanding shares of common stock of the
Company; (ii) each of the Company’s Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and the three other most highly paid
executive officers in 2007; (iii) each of the Company’s directors; and
(iv) all of the Company’s executive officers and directors as a group.
Except as otherwise indicated, each of the stockholders named below has sole
voting and investment power with respect to the shares of common stock
beneficially owned:
|
|
Common Stock
Beneficially Owned
|
|
|
|
Number of Shares
|
|
Percent of
Outstanding
Shares(1)
|
|
American
Century Investment Management
4500
Main Street, 9th Floor
Kansas
City, MO 64111
|
|
|
8,747,423
|
(2)
|
|
|
9.4
|
%
|
|
Amin
J. Khoury+*
|
|
|
382,063
|
|
|
|
**
|
|
|
Thomas
P. McCaffrey+
|
|
|
132,779
|
(3)
|
|
|
**
|
|
|
Jim
C. Cowart*
|
|
|
121,944
|
(4)
|
|
|
**
|
|
|
Michael
B. Baughan+
|
|
|
42,630
|
(5)
|
|
|
**
|
|
|
Jonathan
M. Schofield*
|
|
|
55,021
|
(6)
|
|
|
**
|
|
|
Richard
G. Hamermesh*
|
|
|
9,407
|
(7)
|
|
|
**
|
|
|
Werner
Lieberherr+
|
|
|
36,444
|
|
|
|
**
|
|
|
Wayne
Exton+
|
|
|
23,718
|
|
|
|
**
|
|
|
Robert
A. Marchetti+
|
|
|
16,293
|
(8)
|
|
|
**
|
|
|
Robert
J. Khoury*
|
|
|
11,265
|
(9)
|
|
|
**
|
|
|
Arthur
E. Wegner*
|
|
|
7,375
|
(10)
|
|
|
**
|
|
|
Charles
L. Chadwell*
|
|
|
3,467
|
(11)
|
|
|
|
|
|
All
Directors and Executive Officers as a group (14 Persons)
|
|
|
899,925
|
|
|
|
1
|
%
|
|
+
|
Named
executive officer
|
*
|
Director
of the Company
|
(1)
|
The
number of shares of our common stock deemed outstanding includes:
(i) 93,075,108 shares of common stock outstanding as of April 21,
2008 and (ii) 2,000 shares of common stock subject to outstanding
stock options which are currently exercisable by the named individual or
group.
|
(2)
|
Based
on information in the Schedule 13G, as of December 31, 2007, filed on
February 12, 2008 by American Century Investment Management reported
sole voting and sole dispositive power over shares. The Company has not
attempted to independently verify any of the foregoing information, which
is based solely upon the information contained in the Schedule 13G. The
percent of outstanding shares set forth above is based on the number of
our shares outstanding as of that
date.
|
(3)
|
Includes
7,611 shares owned pursuant to the Company’s
401(k) Plan.
|
(4)
|
Includes
446 shares owned pursuant to the Company’s Non-Employee Directors Deferred
Stock Plan.
|
(5)
|
Includes
108 shares owned pursuant to the Company’s
401(k) Plan.
|
(6)
|
Includes
223 shares owned pursuant to the Company’s Non-Employee Directors Deferred
Stock Plan.
|
(7)
|
Includes
409 shares owned pursuant to the Company’s Non-Employee Directors Deferred
Stock Plan.
|
(8)
|
Includes
312 shares owned pursuant to the Company’s
401(k) Plan.
|
(9)
|
Includes
2,268 shares owned pursuant to the Company’s Non-Employee Directors
Deferred Stock Plan and 5,000 shares indirectly
owned.
|
(10)
|
Includes
969 shares owned pursuant to the Company’s Non-Employee Directors Deferred
Stock Plan.
|
(11)
|
Includes
1,062 shares owned pursuant to the Company’s Non-Employee Directors
Deferred Stock Plan.
|
COMPENSATION DISCUSSION &
ANALYSIS
The Objectives of our Named Executive Officer Compensation
Program
The
following Compensation Discussion and Analysis addresses the objectives and
elements of our executive compensation program, how our Compensation Committee
uses external information to assist their oversight of our executive
compensation and how we measure individual and Company performance.
The
objectives of our 2007 executive compensation program were as
follows:
|
|
Provide
a total compensation opportunity that is competitive with the market for
executive talent, thereby enabling us to attract, retain and motivate our
executives;
|
|
|
|
|
●
|
Ensure
a strong relationship between pay and performance, including both rewards
for results that meet or exceed performance targets and consequences for
results that are below performance targets; and
|
|
|
|
|
|
Align
executive and shareholder interests through the provision of long-term
incentives that link executive compensation to shareholder value
creation.
|
Our Named Executive Officers
Our named
executive officers include our six most highly compensated executives during
2007, consisting of: Amin J. Khoury, Chairman & Chief Executive
Officer; Michael B. Baughan, President & Chief Operating Officer;
Thomas P. McCaffrey, Senior Vice President, Chief Financial Officer &
Treasurer; Werner Lieberherr, Vice President & General
Manager—Commercial Aircraft Products Group; Robert Marchetti, Vice
President & General Manager—Distribution Segment; and Wayne Exton, Vice
President & General Manager—Business Jet Segment.
What our Compensation is Intended to
Reward
Company Performance
.
Through
the provision of short and long-term incentives, our executive compensation
program is designed to reward: (i) the achievement of short-term financial
goals measuring revenue, operating margins, cash flow and bookings and
(ii) the execution of our long-term strategic goals and objectives. We
believe that revenue growth, operating margin expansion, cash flow growth and
bookings expansion are the key short-term drivers of shareholder value. On a
longer term basis we believe shareholder value is created through the successful
execution of a sound business strategy.
Our
business strategy is to maintain a leadership position and best serve our
customers by:
|
|
offering
the broadest and most innovative products and services in the
industry;
|
|
|
|
|
|
offering
a broad range of engineering services, including design, integration,
installation and certification services, and aircraft reconfiguration,
along with passenger-to-freighter conversion services;
|
|
|
|
|
|
pursuing
the highest level of quality in every facet of our operations, from the
factory floor to customer support;
|
|
|
|
|
|
aggressively
pursuing continuous improvement initiatives in all facets of our
businesses, and in particular our manufacturing operations, to reduce
cycle time, lower cost, improve quality and expand our margins;
and
|
|
|
|
|
|
pursuing
a worldwide marketing and product support approach focused by airline and
general aviation airframe manufacturers and encompassing our entire
product line.
|
Our
Compensation Committee performs annual reviews of our performance and the
contributions of each of our named executive officers to ensure that our
executive compensation program rewards the achievement of our financial
objectives and the execution of our business strategy.
Individual Performance
.
In
addition to overall Company performance, our compensation program rewards
individual performance toward the attainment of our goals and objectives. In
setting the targeted pay level of the individual named executive officers, a
variety of factors are considered, including: competencies, skills, prior
experience, scope of responsibility and accountability within the
organization.
On an
annual basis, each named executive officer’s attainment of goals and
demonstration of defined leadership competencies is assessed by our Chairman and
Chief Executive Officer through our leadership performance and development
assessment process. Our CEO recommends to the Compensation Committee the base
salaries of each of our named executive officers as of July 1 of each year and
incentive compensation awards for the preceding year to the Compensation
Committee. The Compensation Committee performs a similar assessment of our CEO
after the conclusion of the fiscal year and approves his base salary and
incentive compensation.
During
2007 the Compensation Committee changed the date for adjusting base salaries
from January 1 to July 1 of each year in order to provide ongoing discussions
regarding performance and compensation throughout the year. As a result of this
change, we now adjust base salaries for all of our employees as of July 1 of
each year, we award long term incentives on November 15 of each year and we
award annual cash incentives in the first quarter of the following
year.
The Elements of our Compensation Program
At the
beginning of each year the Compensation Committee determines the targeted range
of compensation levels which may be earned by each named executive officer. For
2007, aggregate compensation amounts for named executive officers (depending on
their title and position) were established in the following forms and
percentages: base salary (approximately 27% - 36% of total targeted
compensation); annual cash incentive (approximately 27% - 33% of total targeted
compensation); and long term equity incentives (approximately 33%-47% of total
targeted compensation). Long term equity incentives in 2007 consisted of
restricted stock awards which generally vest ratably over a four year
period.
The
aggregate total targeted maximum compensation, expressed as a percentage of
annual base salary, for each named executive officer (depending on title and
position) was as follows for 2007: base salary (100%), performance-based cash
incentives (100% - 120%) and long term equity incentives (100% -
175%).
Base Salary
.
We
provide each of our named executive officers with a competitive fixed annual
base salary. The base salaries for our named executive officers are reviewed
annually by the Compensation Committee, taking into account the results achieved
by the executive, the executive’s future potential, scope of responsibilities
and experience, and competitive salary practices. We believe that it is
important to pay a base salary that is consistent with similarly sized industry
peers with similar continuous performance characteristics. In 2007, base salary
increases, exclusive of increases associated with promotions and changes in
responsibilities for our named executive officers, ranged from 6.0% to 7.0% of
their 2006 base salaries. As more fully described under the heading “External
Benchmarking” below, these increases generally positioned our named executive
officers’ base salary levels between the 50
th
and
75
th
percentile of the base salaries of executives in comparable positions as
reflected in peer company and general industry compensation survey
data.
Annual Cash Incentives
.
In 2007
our named executive officers were eligible to receive annual cash incentives
pursuant to our Management Incentive Plan, or MIP, based on the attainment of
both Company and individual performance goals. We believe that directly linking
a significant portion of our named executive officers’ cash compensation to an
individual segment or aggregate corporate performance (as applicable) is an
important factor in achieving our corporate objectives.
In
January 2007 the Compensation Committee approved the financial metrics
against which cash incentives are awarded and established an annual cash
incentive opportunity for each named executive officer under the
MIP. 2007 financial metrics and weighting with respect to each goal
are as follows:
|
|
30%—operating
cash flow (generally defined as earnings before interest, taxes,
depreciation and/or amortization, or EBITDA, plus or minus changes in
working capital (and other current and non-current assets and
liabilities), less capital expenditures)
|
|
|
|
|
|
20%—operating
margin; and
|
|
|
|
|
|
20%—bookings.
|
These
performance metrics are evaluated on an annual basis to ensure we measure what
we believe are the most relevant business measures of total business
performance. The performance goals are established as part of our annual
financial planning process and are the measure against which all MIP
participants’ performance is measured. We do not disclose the specific corporate
or business segment targets since they contain competitively sensitive
information and the specific targets are not material to an understanding of
incentive compensation awards to the named executive officers. However, we
believe each of the targets is appropriate and obtainable.
A targeted
level of performance was established for each financial metric set forth
above.
The
aggregate total amount of MIP funds available to be awarded is determined on a
site, segment and corporate level based on the achievement of the goals approved
by our Compensation Committee. The amounts deemed to be earned by a site,
segment or our Company overall are then awarded to each participant, including
our named executive officers, with each participant’s award allocated on the
basis of their actual individual performance for the year. MIP awards are based
on both the financial performance of their segment or our Company, as
applicable, and an individual’s relative contribution to the success of their
segment or our Company, as applicable, during the year. Some awards are equal to
100% of the maximum amount that may be awarded and others are closer to 50% of
the total award. Over the past several years the average award for all our MIP
participants has ranged from 70%-75% of the maximum award.
During
2007, payment of the portion of a cash incentive attributable to each metric is
based on achieving a minimum of 90% of the targeted performance level
established by the Compensation Committee for the metric. During 2007, if actual
performance of any metric was below 90%, no cash incentive payment was earned
with respect to this metric. Achieving between 90% and 100% of the target
resulted in an allocation between 0% and 100% of the target cash incentive
attributable to that metric. During 2007, if we achieved more than 100% of the
target for a metric, a named executive officer could potentially receive an
additional 5% of his target bonus attributable to that metric as a “kicker”, as
determined by the Compensation Committee in its sole discretion. As a result,
depending on our financial performance, it was possible for an executive to be
awarded an aggregate cash incentive ranging from 0%-120% of his base salary. The
Compensation Committee may approve adjustments to performance goals to recognize
corporate or segment contributions, particularly in situations where such
contributions may have been in conflict with the shorter term financial metrics
measured by our MIP. The Compensation Committee may also use their judgment to
exclude the impact of non-recurring gains, charges or unusual items as facts and
circumstances dictate.
Under the
MIP, the actual cash incentive payments made to each participant (other than our
CEO) are determined by our Compensation Committee based on our CEO’s assessment
of each participant’s contribution toward the attainment of specific
Company-wide or segment specific goals, as appropriate, individual goals and the
demonstration of defined leadership competencies. Following the review of the
CEO’s recommendations, the Compensation Committee approves the final MIP awards,
which may be higher or lower than the amount determined as a result of the
attainment of the financial goals described above. The Compensation Committee
performs a similar performance assessment of our CEO and approves his MIP award
based on this assessment.
On
February 15, 2008, our Compensation Committee unanimously approved amendments to
the MIP to provide that bonuses will be based upon the achievement of two
components: performance objectives (weighted at 80%) and individual strategic
initiatives (weighted at 20%). The performance objectives for 2008
are operating earnings (weighted at 30%), operating cash flow (as defined)
(weighted at 30%), bookings (weighted at 20%) and operating margin (weighted at
20%). The 2008 targets for each performance measure were established
by our Compensation Committee. The MIP now provides that, in general,
no payments will be made under the MIP with respect to a particular performance
objective unless the Company or the participant’s business unit exceeds 80% of
the targets for the applicable performance objective. However, bonus payments
for performance between 80% and 90% of target are less than 10% of targeted
bonus. Beginning in 2008, named executive officers will be eligible
to receive a target bonus of 68%-85% of their base salaries and a targeted
maximum bonus of 80%-100% of base salaries, depending on their title and
position. If the Company or a named executive officer’s business unit
(as appropriate) exceeds the target performance objectives by 100% or more, and
the named executive officer’s individual performance is at a superior level, the
named executive officer will be eligible to receive up to an additional 10% or
20% of his or her base salary (depending on their title and
position), resulting in a maximum bonus of up to 100%-120% of
their base salary, depending on their title and
position.
Attainment of 2007 Performance Measures
.
2007 was
an outstanding year for our Company. Our consolidated revenues were $1.68
billion, a 48.7% increase over 2006. Operating earnings of $247.0 million for
2007 were $98.7 million, or 66.6%, greater than 2006, due to both the 48.7%
increase in revenue and a 160 basis point expansion in our operating margin to
14.7% of sales in 2007, reflecting the high in quality backlog and operating
leverage at the higher revenue level, offset by acquisition and integration
costs and learning curve costs in the seating, business jet and engineering
services segments. Bookings for 2007 were approximately $2.2 billion, a record
for any year, and drove our backlog to over $2.2 billion, also a
record. In addition, our common stock appreciated by 106% during 2007
and was cited by the Wall Street Journal as the best performing aerospace stock
over the past one, three and five year periods ended December 31,
2007.
The
following is a summary of our financial performance during 2007 against the
measures set by the Compensation Committee under the MIP:
|
|
Operating
earnings of approximately $247.0 million, increased by 66.6% as compared
to 2006 and was above our 2007 target;
|
|
|
|
|
|
Operating
cash flow of approximately $22.0 million, decreased by $19.0 million as
compared to 2006 as a result of the 48.7% increase in revenues and a
$215.4 million increase in inventories associated with the product line
expansion at our distribution segment and to support our record
backlog. Operating cash flow was approximately equal to our
2007 target, as adjusted for the substantially higher than targeted
revenue and backlog levels;
|
|
|
|
|
|
Operating
margin of 14.7%, increased by 160 basis points as compared to 2006 and was
below our 2007 target principally due to start up and learning curve costs
for new major programs in the seating, business jet and engineering
services segments; and
|
|
|
|
|
|
Bookings
of $2.2 billion, increased by approximately 30% as compared to 2006 and
was above our 2007 target.
|
On
February 5, 2008, the Compensation Committee concluded that in aggregate,
we exceeded our 2007 MIP performance target. Considering these results, as well
as certain qualitative factors which the Compensation Committee considers an
important part of its assessment (such as expanding our market shares,
demonstrating market share leadership, advances in new product development,
achievement of key strategic initiatives such as the integration of key
strategic acquisitions, and strengthening our balance sheet), and taking into
account each named executive officer’s individual performance against their
goals, and the success of their respective segment or our Company, as
applicable, the Compensation Committee determined an aggregate cash incentive
award for our named executive officers equal to approximately 93% of the total
aggregate targeted annual cash incentive opportunity (as a group).
The
Compensation Committee believes our CEO had an exceptionally successful year as
evidenced by our very strong financial performance, substantially completing the
integration of two strategically important acquisitions of Draeger Aerospace
GmbH and New York Fasteners Corp., his leadership in the development,
communication and execution of our strategy and his role in the strengthening of
our balance sheet. As a result, the Compensation Committee awarded our CEO cash
incentive compensation equal to 100% of his base salary. The actual amount of
cash incentive awards paid to each named executive officer is shown in the
“Non-Equity Incentive Plan Compensation” column of the Summary Compensation
Table that follows this Compensation Discussion and Analysis.
2007 Long-term Equity Incentives
.
Approximately
33%-47% of the total targeted compensation opportunity provided to our named
executive officers in 2007 was equity-based. This emphasis on equity-based
compensation reflects our view that there should be a close alignment between
long-term shareholder value creation and named executive officer
compensation.
We believe
the use of long-term equity incentive awards accomplishes important objectives
of our executive compensation program by linking shareholder value creation to
long-term incentives. The level of benefit received by our named executive
officers is dependent, to a large degree, on the successful execution of our
strategy and delivering significant, sustained growth on a consistent
basis.
2007 Restricted Stock Grants
.
On
October 31, 2007, the Compensation Committee approved grants of restricted
stock effective as of November 15, 2007 to approximately 245 of our
managers, including each of our named executive officers, pursuant to our 2005
Long-Term Incentive Plan. The Compensation Committee anticipates that these
awards will serve as a long-term incentive to the employees.
The amount
of the awards ranged from approximately 100%-175% of each named executive
officer’s base salary. In determining the amounts of the equity compensation
awarded to our named executive officers, the Compensation Committee considered a
variety of factors, including individual performance, competencies, skills,
prior experiences, scope of responsibility and accountability within the
organization. The actual number of shares granted to each named executive
officer was determined by dividing the dollar value of each award by the closing
price of our common stock on the date of grant. The number of shares of stock
granted and the SFAS 123R grant date fair value is shown in our Grants of
Plan-Based Awards Table following this Compensation Discussion and
Analysis. The restricted stock awards generally vest 25% on the
first, second, third and fourth anniversary of the date of grant.
On April
28, 2008 our Compensation Committee established a performance-based component to
our restricted stock program for our managers. The award guidelines
for each named executive officer provide for a minimum annual award equal to
75%-130% of his base salary, a targeted annual award equal to 100%-175% of his
base salary and a maximum annual award equal to 125%-220% of his base
salary. Seventy-five percent of the annual award to each named
executive officer will be subject to time-based vesting and 25% of the annual
award will be subject to performance-based vesting. The time-based
award will vest ratably over a period of four years. The vesting of
the performance-based award is subject to the Company achieving the annual
operating earnings target established by the Compensation Committee in the
12-month period ending on September 30
th
each
year, and will vest over a four-year period subject to the following conditions:
(i) if we achieve 100% of our performance target in an applicable year, 25% of
the total performance-based award will vest in the applicable year; (ii) if we
achieve 90% of our performance target in an applicable year, 10% of the total
performance-based award will vest in the applicable year; (iii) if we achieve
between 90% and 100% of our performance target in an applicable year, between
10% and 25% of the total performance-based award will vest in the applicable
year (as determined on the basis of linear interpolation); and (iv) if we
achieve less than 90% of our performance target in an applicable year, the named
executive officer forfeits the award that would have vested in the applicable
year.
Severance and Change of Control Benefits
.
We have
entered into employment agreements with each of our named executive officers,
which are described below in detail under the heading “Employment, Severance and
Change of Control Agreements.” Our employment agreements with Messrs. Khoury and
McCaffrey do not contain change of control provisions. Our employment
agreements with our named executive officers, other than Messrs. Khoury and
McCaffrey, contain change of control provisions that provide benefits in the
event that the executive is terminated in connection with a change of control of
our Company. These change of control provisions generally provide for
continuation of the executive’s base salary for the remaining term of their
employment agreements and a severance payment ranging from one to three years of
base salary.
We also
provide each of our named executive officers with severance benefits if their
employment is terminated for any reason other than cause or in some instances,
due to their resignation for good reason (as each term is defined in the
applicable agreements). In such cases, the employment agreements require that we
pay the executive his salary for the remaining term of the applicable employment
agreement and provide a severance payment ranging from one to two times the
executive’s base salary. Our severance and change of control benefits were
determined on the basis of market practices in order to provide a competitive
overall compensation package to our named executive officers.
Retirement Compensation
.
We have
agreed with Mr. Khoury to make an annual retirement contribution equal to
1.5 times his base salary to a grantor trust established on his behalf. We fund
this amount, less applicable personal income taxes, into a grantor trust on a
quarterly basis in arrears. Changes in Mr. Khoury’s base salary are
reflected on a cumulative basis in the quarterly contributions following a
change in his base salary.
We have
agreed with Mr. Baughan to make an annual retirement contribution of 50% of
his average annual salary for the preceding three-year period to a rabbi trust
established on his behalf. The retirement contributions will vest in full on
April 26, 2012. Vesting of the accrued retirement contributions will
accelerate upon the termination of Mr. Baughan’s employment due to his
death, disability or by us without cause (as defined in his employment
agreement). We fund this amount, less applicable personal income taxes, into
this rabbi trust on a quarterly basis in arrears. Changes in Mr. Baughan’s
base salary are reflected in the quarterly contributions following a change in
his base salary.
We also
have agreed with Mr. McCaffrey to make an annual retirement contribution of
50% of his average annual salary for the preceding three-year period to a
grantor trust established on his behalf. We fund this amount, less applicable
personal income taxes, into this grantor trust on a quarterly basis in arrears.
Changes in Mr. McCaffrey’s base salary are reflected in the quarterly
contributions following a change in his base salary.
Other than
participation in our qualified 401(k) Plan under the same terms as all
other employees, we do not offer retirement benefits to any of our other named
executive officers.
A detailed
description of the retirement benefits for our CEO, COO and CFO is set forth
below under the heading “Employment, Severance and Change of Control
Agreements.”
In
addition to the benefits that are generally available to all of our employees,
we provide some or all of our named executive officers with the following
additional benefits and perquisites.
|
|
Under
the Medical Care Reimbursement Plan for Executives, which has been in
effect since January 1, 1998, each of our named executive officers is
reimbursed for medical care expenses that are not otherwise reimbursed by
any plan or arrangement up to a maximum benefit of 10% of their base
salary per year.
|
|
|
|
|
|
We
reimburse each of our named executive officers for reasonable costs of
financial and estate planning.
|
|
|
|
|
|
Certain
named executive officers receive a monthly automobile allowance, as
described below under the heading “Employment, Severance and Change of
Control Agreements."
|
|
|
|
|
|
Messrs. Khoury,
Baughan and McCaffrey are party to death benefit agreements under which
their designated beneficiaries will receive death benefits of $3,000,000,
$1,500,000 and $1,000,000, respectively, upon their death, whether during
or following their termination from employment. With respect to Messrs.
Khoury, Baughan and McCaffrey, we have funded these death benefit
agreements with fully paid-up whole-term life insurance
policies.
|
|
|
|
|
|
Under
our travel policy, we provide use of a Company-owned aircraft to our CEO
and limited use to our former CEO to ensure their personal security. As
set forth in the “All Other Compensation” column of the Director
Compensation Table above and the Summary Compensation Table below, our CEO
and former CEO are taxed on the incremental cost relating to their
personal use of the aircraft.
|
To the
extent applicable, these amounts are included in the Summary Compensation Table
as part of the “All Other Compensation” column.
We
benchmark targeted pay levels for essentially every position throughout our
organization through the use of one or more compensation advisory services. Our
Compensation Committee also engages an independent compensation consultant to
assist our Compensation Committee to oversee our executive compensation program.
Market data provides a reference and framework for decisions about the base
salary, targeted annual cash incentives, and the appropriate level of long-term
incentives to be provided to each named executive officer. However, due to
year-over-year variability and the inexact science of matching and pricing
executive jobs, we believe that market data should be interpreted within the
context of other important factors and should not solely be used to dictate a
specific pay level for an executive. As a result, in setting the target pay
level of our named executive officers, market data is reviewed along with a
variety of other factors, including individual performance, competencies,
skills, future potential, prior experience, scope of responsibility and
accountability within the organization.
Mercer
Human Resources Consulting has reviewed both the individual components and
aggregate composition of our compensation packages for our named executive
officers and has advised our Compensation Committee that for each of our named
executive officers, the target total cash compensation (including base salary
and targeted annual cash incentives) is near the 75
th
percentile, target total direct compensation (including base salary, annual cash
and long-term incentives) approximates the median, and total direct compensation
(including base salary, annual cash and long-term incentives) plus retirement
contributions, as applicable, is near the median of the peer group described
below.
Compensation
Comparison Group
.
The
compensation comparison group we used in 2007 was comprised of the following 12
companies in the aerospace and defense industries:
|
|
Goodrich
Corporation
|
|
|
|
|
|
Precision
Castparts Corporation
|
|
|
|
|
|
Teleflex
Inc.
|
|
|
|
|
|
Crane
Co.
|
|
|
|
|
|
DRS
Technologies, Inc.
|
|
|
|
|
|
Teledyne
Technologies, Inc.
|
|
|
|
|
|
Moog
Inc.
|
|
|
|
|
|
Hexcel
Corporation
|
|
|
|
|
|
Curtiss-Wright
Corporation
|
|
|
|
|
|
Esterline
Technologies Corporation
|
|
|
|
|
|
AAR
Corp.
|
|
|
|
|
|
Triumph
Group Inc.
|
In
consultation with the Compensation Committee, these companies were selected for
our peer group on the basis that (i) as compared to our Company, they were
within a reasonable range for revenue size and equity market capitalization;
(ii) they had executive positions comparable to those at our Company which
required a similar set of management skills and experience; and (iii) they
were representative of organizations that compete with us for business and
executive talent. The median 2006 revenues and equity market capitalization of
our peer group were $1.4 billion and $2.0 billion, respectively; our revenues
for the year ended December 31, 2007 were $1.68 billion and as of
December 31, 2007 our equity market capitalization was $4.9
billion.
Benchmarking
Objectives
.
We
believe our executives should possess above average competencies, skills, prior
experience, and display above-average leadership skills as they discharge their
responsibilities. Our objective is to establish total targeted compensation
(defined as base salary, targeted annual cash incentive, long-term incentives,
and, where applicable, retirement contributions) for our named executive
officers near the 75
th
percentile of our peer group. We believe the weighting of each component of our
compensation program is appropriate given the historically cyclical nature of
our industry which has resulted and may result in several year periods during
which substantially lower cash incentives are awarded.
Benchmarking
Process
.
Each
year, the Compensation Committee directs senior management to engage an
independent third-party consulting organization to advise the Compensation
Committee as it conducts its review of our compensation program and our
financial performance versus our peer group. Compensation and other financial
data for the peer group are compiled from publicly available information as well
as from the consultant’s proprietary database for similar sized industrial
companies. Because the information is based on publicly available data, the
comparisons are always against the data for the immediately preceding year
(i.e., the 2007 study was based on data included in the 2006 annual reports and
2006 proxy statements of our peer group).
Several
components of pay were analyzed by our independent consultant including: actual
and targeted base salary; cash incentives; total cash compensation (i.e., base
salary plus cash incentives); actual and targeted long-term incentives; total
direct compensation (i.e., total cash plus long-term incentives); and, to the
extent applicable, total direct compensation plus retirement contributions. The
Compensation Committee’s review of our financial performance versus our peer
group focused on revenue growth, operating earnings growth, EBITDA, as well as
total shareholder return and return on average equity.
The
Compensation Committee’s review led them to conclude that when compared to our
peer group, our financial performance as compared to the key financial metrics
described above approximated the 75
th
percentile of our peer group. The 2007 total direct compensation (including,
where applicable, retirement contributions) for our named executive officers and
the 2007 total actual cash compensation for our named executive officers
approximated the median of our peer group.
We have
not established specific stock ownership guidelines for our executive officers
or directors. As of April 21, 2008, the market value of BE Aerospace stock
owned by our named executive officers as a multiple of each of their base
salaries ranged from approximately two times to fourteen times base salary. The
details of share ownership for each named executive officer are set forth above
under the heading “Security Ownership of Certain Beneficial Owners and
Management.”
To the
extent that it is practicable and consistent with our executive compensation
philosophy, we intend to comply with Section 162(m) of the Internal
Revenue Code of 1986, as amended, which limits the deductibility of certain
compensation payments to our executive officers in excess of $1 million. If
compliance with Section 162(m) conflicts with the compensation
philosophy or is determined not to be in the best interest of stockholders, the
Compensation Committee will abide by its compensation philosophy.
Report of the Compensation Committee on Executive
Compensation
The
Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis for the year ended December 31, 2007 with
management. Based on the review and discussion, the Compensation Committee has
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement.
|
Respectfully
submitted,
|
|
|
|
The
Compensation Committee
|
|
|
|
Charles
L. Chadwell
|
|
Jonathan
M. Schofield
|
Summary Compensation Table
The
following table sets forth the compensation paid to our named executive officers
in 2007 and 2006.(1)
Name and Principal Position
|
Year
|
|
|
Salary ($)
|
|
|
Stock
Awards
($)(2)
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)(3)
|
|
|
All
Other
Compensation ($)
|
|
|
Total ($)
|
|
(a)
|
(b)
|
|
|
(c)
|
|
|
(e)
|
|
(f)
|
|
|
(g)
|
|
|
(i)
|
|
|
(j)
|
|
Amin
J. Khoury
|
2007
|
|
$
|
1,001,200
|
|
$
|
2,905,634
|
(4)
|
—
|
|
$
|
1,001,200
|
|
$
|
4,656,784
|
(5)
|
$
|
9,564,818
|
(5)
|
Chairman
and Chief Executive Officer
|
2006
|
|
|
904,000
|
|
|
1,019,504
|
(4)
|
—
|
|
|
994,400
|
|
|
2,648,301
|
(5)
|
|
5,566,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Baughan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
and Chief
|
2007
|
|
|
514,000
|
|
|
236,173
|
|
—
|
|
|
400,000
|
|
|
112,087
|
(6)
|
|
1,262,260
|
|
Operating
Officer
|
2006
|
|
|
440,000
|
|
|
26,593
|
(6)
|
—
|
|
|
330,000
|
|
|
23,723
|
(6)
|
|
820,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. McCaffrey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior
Vice President and Chief
|
2007
|
|
|
471,500
|
|
|
874,456
|
(4)
|
—
|
|
|
430,000
|
|
|
420,957
|
(7)
|
|
2,196,913
|
|
Financial
Officer
|
2006
|
|
|
430,000
|
|
|
285,300
|
(4)
|
—
|
|
|
430,000
|
|
|
391,706
|
(7)
|
|
1,537,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne
Exton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice
President and General
|
2007
|
|
|
275,000
|
|
|
133,636
|
|
—
|
|
|
175,000
|
|
|
31,599
|
(8)
|
|
615,235
|
|
Manager
- Business Jet Segment
|
2006
|
|
|
265,036
|
|
|
14,198
|
|
—
|
|
|
110,000
|
|
|
70,105
|
(8)
|
|
459,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Werner
Lieberherr
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice
President and General
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manager—Commercial
Aircraft
|
2007
|
|
|
400,000
|
|
|
181,919
|
|
—
|
|
|
250,000
|
|
|
22,714
|
(9)
|
|
854,633
|
|
Products
Group
|
2006
|
|
|
178,291
|
|
|
56,032
|
|
—
|
|
|
140,000
|
|
|
44,546
|
(9)
|
|
418,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Marchetti
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice
President and General
|
2007
|
|
|
327,500
|
|
|
235,370
|
|
—
|
|
|
327,500
|
|
|
28,819
|
(10)
|
|
919,189
|
|
Manager—Distribution
Segment
|
2006
|
|
|
291,497
|
|
|
27,196
|
|
—
|
|
|
300,000
|
|
|
28,097
|
(10)
|
|
646,790
|
|
(1)
|
All
annual cash bonuses paid to our named executive officers are reflected in
the “Non-Equity Incentive Plan Compensation” column of this
table.
|
(2)
|
The
amounts reported in the “Stock Awards” column reflect the dollar amount,
without reduction for risk of forfeiture, recognized for financial
reporting purposes for the fiscal years ended December 31, 2007 and
2006 of awards of restricted stock, calculated in accordance with the
provisions of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123R “Share Based Payment”, or SFAS 123R.
The amount set forth may include expenses attributable to equity awards
granted during and before 2007 or 2006. Assumptions made in the
calculation of these amounts are included in Note 12 to our audited
financial statements for the fiscal years ended December 31, 2007 and
2006 included in our annual report on Form 10-K filed with the
Securities and Exchange Commission on February 20,
2008.
|
(3)
|
The
amounts shown represent the annual cash incentive payments received by our
named executive officers under our MIP. These cash awards were earned in
2007 and 2006 and were paid on March 7, 2008 and March 6, 2007,
respectively. The MIP is described in detail above in our Compensation
Discussion and Analysis.
|
(4)
|
In
order to assist in the retention of and to further incentivize our CEO and
CFO and in lieu of the change of control benefits which were eliminated
from their contracts with us, on July 31, 2006, we granted our CEO an
award of 387,900 shares of restricted stock, and we granted our CFO
104,200 shares of restricted stock. The expenses included in the “Stock
Awards” column with respect to these special awards for 2007 and 2006
were $2,398,635 and $1,004,654, respectively, for
Mr. Khoury and $644,641 and $270,004, respectively, for
Mr. McCaffrey.
|
(5)
|
With
respect to Mr. Khoury, the amount reported for 2007 and
2006 as “All Other Compensation” includes $1,501,800 and
$1,356,000, respectively, for our annual retirement
contributions to his grantor trust; $2,794,500 and $828,750, respectively,
for contributions to his grantor trust for catch up adjustments
related to prior periods; $180,795 and $284,376, respectively,
representing the aggregate incremental cost to us for his personal use of
the Company aircraft; $125,983 and $126,185, respectively, for estate
planning; $9,000 and $7,500, respectively for Company contributions to our
401(k) Plan; $3,116 and $5,113, respectively, representing payments
under our executive medical plan; and an additional amount relating to an
automobile and insurance allowance. The aggregate incremental cost for the
use of the Company aircraft for personal travel is calculated by
multiplying the hourly variable cost rate for the aircraft by the hours
used. The hourly variable cost rate includes costs such as fuel, oil,
parking/landing fees, crew expenses and
catering.
|
(6)
|
With
respect to Mr. Baughan, the amount reported for 2007 and 2006 as “All
Other Compensation” includes $83,576 and $0, respectively, for our annual
retirement contributions to his grantor trust, $9,000 and $7,500
respectively for contributions to the Company’s 401(k) Plan; $2,880
and $3,115, respectively, representing payments under executive medical
coverage; and an additional amount relating to an automobile allowance and
estate planning.
|
(7)
|
With
respect to Mr. McCaffrey, the amount reported for 2007 and
2006 as “All Other Compensation” includes $341,967 and
$355,278, respectively, for our annual retirement contributions to his
grantor trust; $9,000 and $7,500, respectively, for contributions to the
Company’s 401(k) Plan; $53,251 and $11,289, respectively,
representing payments under our executive medical plan; and an additional
amount relating to an automobile allowance and estate
planning.
|
(8)
|
With
respect to Mr. Exton, the amount reported for 2007 and 2006 as “All
Other Compensation” includes $9,399 and $55,474, respectively,
for reimbursement of relocation expenses; $9,000 and $6,000, respectively,
for contributions to the Company’s 401(k) Plan; and an additional
amount relating to an automobile
allowance.
|
(9)
|
With
respect to Mr. Lieberherr, the amount reported for 2007 and
2006 as “All Other Compensation” includes $0 and $32,747,
respectively, for reimbursement of relocation expenses, $9,000
and $1,539, respectively, for contributions to the Company’s
401(k) Plan; $514 and $3,660, respectively, representing payments
under our executive medical plan in 2007 and COBRA in 2006, and
an additional amount relating to an automobile
allowance.
|
(10)
|
With
respect to Mr. Marchetti, the amount reported for 2007 and 2006 as
“All Other Compensation” includes $9,000 and $7,500, respectively, for
contributions to the Company’s 401(k) Plan; $6,619 and $7,489,
respectively, representing payments under our executive medical plan; and
an additional amount relating to an automobile
allowance.
|
Grants of Plan-Based Awards Table
The
following table sets forth information concerning stock based awards made to our
named executive officers in 2007 and 2006.
|
Estimated Future Payouts Under Non-Equity
Incentive Plan (MIP
or bonus) Awards(1)
|
|
|
|
|
|
|
Name
|
|
|
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
All Other Stock
Awards: Number of Shares of Stock or
Units (#)(3)
|
|
|
Grant Date Fair
Value of Stock
and Option
Awards ($)(4)
|
|
(a)
|
(b)
|
|
|
(c)
|
|
(d)
|
|
|
(e)
|
|
(i)
|
|
|
(k)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amin
J. Khoury
|
1/1/07
|
|
$
|
0
|
|
$1,001,200
|
|
$
|
1,201,440
|
|
—
|
|
|
—
|
|
|
11/15/07
|
|
|
—
|
|
—
|
|
|
—
|
|
40,914
|
(5)
|
$
|
1,752,756
|
|
|
11/15/06
|
|
|
—
|
|
—
|
|
|
—
|
|
66,988
|
(5)
|
|
1,808,006
|
|
|
7/31/06
|
|
|
—
|
|
—
|
|
|
—
|
|
387,878
|
(5)(6)
|
|
9,599,981
|
|
Michael
B. Baughan
|
1/1/07
|
|
$
|
0
|
|
$514,000
|
|
$
|
616,800
|
|
—
|
|
|
—
|
|
|
11/15/07
|
|
|
—
|
|
—
|
|
|
—
|
|
12,027
|
(9)
|
|
515,237
|
|
|
11/15/06
|
|
|
—
|
|
—
|
|
|
—
|
|
32,605
|
(9)
|
|
880,009
|
(7)
|
Thomas
P. McCaffrey
|
1/1/07
|
|
$
|
0
|
|
$471,500
|
|
$
|
565,800
|
|
—
|
|
|
—
|
|
|
11/15/07
|
|
|
—
|
|
—
|
|
|
—
|
|
11,029
|
(8)
|
|
472,482
|
|
|
11/15/06
|
|
|
—
|
|
—
|
|
|
—
|
|
31,864
|
(8)
|
|
860,009
|
|
|
7/31/06
|
|
|
—
|
|
—
|
|
|
—
|
|
104,242
|
(6)(8)
|
|
2,579,990
|
|
Werner
Lieberherr
|
1/1/07
|
|
$
|
0
|
|
$320,000
|
|
$
|
400,000
|
|
—
|
|
|
—
|
|
|
11/15/07
|
|
|
—
|
|
—
|
|
|
—
|
|
16,340
|
(9)
|
|
700,006
|
|
|
11/15/06
|
|
|
—
|
|
—
|
|
|
—
|
|
8,151
|
(9)
|
|
219,995
|
|
|
7/5/06
|
|
|
—
|
|
—
|
|
|
—
|
|
18,340
|
(9)
|
|
419,986
|
|
Robert
A. Marchetti
|
1/1/07
|
|
$
|
0
|
|
$262,000
|
|
$
|
327,500
|
|
—
|
|
|
—
|
|
|
11/15/07
|
|
|
—
|
|
—
|
|
|
—
|
|
7,645
|
(10)
|
|
327,512
|
|
|
11/15/06
|
|
|
—
|
|
—
|
|
|
—
|
|
16,673
|
(10)
|
|
450,004
|
|
Wayne
Exton
|
1/1/07
|
|
$
|
0
|
|
$220,000
|
|
$
|
275,000
|
|
—
|
|
|
—
|
|
|
11/15/07
|
|
|
—
|
|
—
|
|
|
—
|
|
6,419
|
(9)
|
|
274,990
|
|
|
11/15/06
|
|
|
—
|
|
—
|
|
|
—
|
|
18,525
|
(9)
|
|
499,990
|
|
(1)
|
The
amounts shown represent the range of annual cash incentive opportunities
for each named executive officer under our 2007 MIP. The MIP is described
in detail above in our Compensation Discussion and
Analysis.
|
(2)
|
Since
the amount of Non-Equity Incentive Plan awards are determined on the basis
of a named executive officer’s contributions to the success of a segment
or the Company, as applicable, no specific threshold can be
determined.
|
(3)
|
The
restricted stock awards made on November 15, 2007 were approved by
our Compensation Committee at its meeting on October 31, 2007. This
process is consistent with our policy of having the dollar value of annual
grants of restricted stock to our employees reviewed and approved by our
Compensation Committee at a meeting in the third or fourth quarter and
having the grants made effective as of November 15
th
of each year (or if November 15
th
is not a business day, the first business day thereafter). The number of
shares of restricted stock granted is equal to the dollar value approved
by our Compensation Committee divided by the closing price of our common
stock on the date of grant. All grants of restricted stock are made
pursuant to our 2005 Long-Term Incentive
Plan.
|
(4)
|
The
amounts shown represent the SFAS 123R fair value determined as of the date
of grant. For more information about our adoption of SFAS 123R and how we
value stock-based awards (including assumptions made in such valuation),
refer to Note 12 to our audited financial statements for the fiscal year
ended December 31, 2007 included in our annual report on
Form 10-K filed with the Securities and Exchange Commission on
February 20, 2008.
|
(5)
|
Twenty-five
percent of the shares of restricted stock vests on each of the first,
second, third and fourth anniversaries of the date of grant provided that
Mr. Khoury is employed on the applicable vesting date. Upon
Mr. Khoury’s termination due to death or disability or a termination
by us for any reason, all unvested shares of restricted stock will vest
immediately. In addition, upon a change of control of our Company prior to
vesting, all unvested shares of restricted stock will immediately vest in
full.
|
(6)
|
As
more fully described above in our Compensation Discussion and Analysis, in
order to assist in the retention of and to further incentivize our CEO and
CFO and in lieu of the change of control benefits which were eliminated
from their contracts with us, on July 31, 2006, we granted our CEO an
award of 387,900 shares of restricted stock, and we granted our CFO
104,200 shares of restricted stock.
|
(7)
|
On
December 27, 2005, Mr. Baughan was granted 75,000 stock options
in connection with his promotion to President and Chief Operating Officer
effective as of December 31, 2005. The value of these stock options,
determined in accordance with the provisions of SFAS 123R was $625,050. As
more fully described above in our Compensation Discussion and Analysis,
the vesting of these and other outstanding stock options was accelerated
on December 31, 2005.
|
(8)
|
Twenty-five
percent of the shares of restricted stock vests on each of the first,
second, third and fourth anniversaries of the date of grant provided that
Mr. McCaffrey is employed on the applicable vesting date. Upon
Mr. McCaffrey’s termination due to death or disability, a termination
by us without cause or Mr. McCaffrey’s resignation for good reason
(each as described below under the heading “Employment, Severance and
Change of Control Agreements”) all unvested shares of restricted stock
will vest immediately. In addition, upon a change of control of our
Company prior to vesting, all unvested shares of restricted stock will
immediately vest in full.
|
(9)
|
Twenty-five
percent of the shares of restricted stock vests on each of the first,
second, third and fourth anniversaries of the date of grant. If the named
executive officer’s employment terminates for any reason other than death
or disability prior to the applicable vesting date, all unvested shares
will be immediately cancelled. Upon a named executive officer’s
termination due to death or disability, all unvested shares of restricted
stock will immediately vest. In addition, upon a change of control of our
Company prior to vesting, all unvested shares of restricted stock will
immediately vest in full.
|
(10)
|
Twenty-five
percent of the shares of restricted stock granted in 2007 vest on the
first, second, third and fourth anniversary of the date of
grant. Fifty percent of the shares of restricted stock granted
in 2006 vest on each of the first and second anniversaries of the date of
grant. If Mr. Marchetti’s employment terminates for any reason other
than death or disability prior to the applicable vesting date, all
unvested shares will be cancelled immediately. Upon Mr. Marchetti’s
termination due to death or disability, all unvested shares of restricted
stock will immediately vest. In addition, upon a change of control of our
Company prior to vesting, all unvested shares of restricted stock will
immediately vest in full.
|
Outstanding Equity Awards at Fiscal Year-End
Table
The
following table provides information concerning outstanding equity awards held
by each named executive officer at December 31, 2007.
|
Option
Awards
|
|
Stock
Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Option Exercise
Price
($)
|
|
Number of
Shares or Units
of Stock That
Have Not Vested
(#)(1)
|
|
Market Value of
Shares or Units
of Stock That
Have Not Vested
($)(2)
|
(a)
|
|
(b)
|
|
(e)
|
|
(g)
|
|
(h)
|
Amin
J. Khoury
|
|
|
—
|
|
|
|
--
|
|
|
|
382,063
|
|
|
$
|
20,211,133
|
|
Michael
B. Baughan
|
|
|
—
|
|
|
|
--
|
|
|
|
36,480
|
|
|
|
1,929,792
|
|
Thomas
P. McCaffrey
|
|
|
—
|
|
|
|
--
|
|
|
|
113,108
|
|
|
|
5,983,413
|
|
Wayne
Exton
|
|
|
—
|
|
|
|
--
|
|
|
|
20,312
|
|
|
|
1,074,505
|
|
Werner
Lieberherr
|
|
|
—
|
|
|
|
--
|
|
|
|
36,208
|
|
|
|
1,915,403
|
|
Robert
A. Marchetti
|
|
|
—
|
|
|
|
--
|
|
|
|
15,981
|
|
|
|
845,395
|
|
(1)
|
For
Messrs. Khoury, Baughan, McCaffrey, Exton and Lieberherr, 25% of the
shares of restricted stock will vest on each of the first, second, third
and fourth anniversaries of the date of grant provided that the executive
is employed on the applicable vesting date. For Mr. Marchetti, 8,336
shares of restricted stock vest on November 15, 2008 provided that he is
employed on that date and the balance of 7,645 shares vest ratably over a
four year period. The vesting provisions upon a termination of
employment or a change of control are set forth in footnotes 5, 8, 9 and
10 to the Grants of Plan-Based Awards Table
above.
|
(2)
|
The
market value of unvested shares is based on the closing share price of
$52.90 at December 31, 2007. The market value of unvested
shares based on the closing share price of $34.95 at March 31, 2008 for
Messrs. Khoury, Baughan, McCaffrey, Exton, Lieberherr and Marchetti was
$13,353,102, $1,274,976, $3,953,125, $709,904, $1,265,470 and $558,536,
respectively.
|
Option Exercises and Stock Vested Table
The
following table provides information concerning the exercise of stock options
and vesting of stock awards held by each named executive officer during the
years ended December 31, 2007 and 2006.
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Shares
Acquired
on Exercise
|
|
Value Realized
on Exercise
|
|
Number of
Shares
Acquired
on Vesting
|
|
Value Realized
on Vesting
|
(a)
|
|
(b)(#)
|
|
(c)($)
|
|
(d)(#)
|
|
(e)($)
|
Amin
J. Khoury
|
2007
|
—
|
|
|
—
|
|
|
113,717
|
|
$
|
4,650,544
|
|
2006
|
518,333
|
|
$
|
9,630,789
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Baughan
|
2007
|
75,000
|
|
|
1,470,000
|
|
|
8,152
|
|
$
|
349,232
|
|
2006
|
213,750
|
|
|
3,999,289
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. McCaffrey
|
2007
|
—
|
|
|
—
|
|
|
34,027
|
|
$
|
1,398,297
|
|
2006
|
258,333
|
|
|
4,600,859
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne
Exton
|
2007
|
20,000
|
|
|
260,400
|
|
|
4,632
|
|
$
|
198,435
|
|
2006
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Werner
Lieberherr
|
2007
|
—
|
|
|
—
|
|
|
6,623
|
|
$
|
279,420
|
|
2006
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Marchetti
|
2007
|
22,612
|
|
|
475,124
|
|
|
8,337
|
|
$
|
357,157
|
|
2006
|
26,554
|
|
|
560,253
|
|
|
—
|
|
|
—
|
Nonqualified Deferred Compensation
All of our
employees, including our named executive officers, participate in our qualified
401(k) defined contribution plan. Pursuant to this plan, we match 100% of
the first 3% and 50% of the next 2% of employee contributions up to $9,000. We
do not provide any non qualified deferred compensation benefits to any of our
employees.
Employment, Severance and Change of Control
Agreements
We have
entered into employment agreements with each of our named executive officers as
described below.
Amin J.
Khoury.
Mr. Khoury is party to an employment agreement with us,
amended as of April 27, 2007, pursuant to which he serves as our Chairman
and Chief Executive Officer, or CEO. The agreement has a rolling three-year term
so that the term of the agreement extends through three years from any date as
of which the term is being determined unless terminated earlier. The agreement
provides that Mr. Khoury will receive a base salary of $1,001,200 per year
(as of July 1, 2007), subject to cost of living and other increases as
determined from time to time by our Board of Directors. Mr. Khoury is also
entitled to participate in our MIP and to receive an annual cash incentive as
determined by the Compensation Committee. During the period from January 1, 2007
through June 30, 2007, our CEO’s annual base salary was $936,000. On
July 1, 2007 his base salary was adjusted to $1,001,200. Mr. Khoury
received a bonus of $1,001,200 for 2007. Mr. Khoury is also eligible to
participate in all benefit plans (other than retirement plans) generally
available to our executives and we provide him with an automobile and insurance
at a cost of approximately $40,000 per year.
Our
agreement with Mr. Khoury provides that we will make an annual retirement
contribution to a grantor trust established for his benefit in an amount equal
to 1.5 times his annual base salary. These contributions are taxed currently to
our CEO and reported in the “All Other Compensation” column of the Summary
Compensation Table above. We fund these contributions, less applicable personal
income taxes, into this grantor trust on a quarterly basis in arrears. Changes
in base salary are reflected in the quarterly contributions on a cumulative
basis in the quarter following a change in base salary. Previously taxed
contributions held in the trust will be distributed in a lump-sum to our CEO or
his beneficiary, as the case may be, as a result of a change of control or any
termination of his employment, or as otherwise provided pursuant to the terms of
this grantor trust. Our CEO’s employment agreement provides that he and his
spouse will receive medical, dental and health benefits (including benefits
under our executive medical reimbursement plan) for the remainder of their lives
notwithstanding any termination of his employment for any reason.
Pursuant
to the agreement, if our CEO’s employment with us terminates for any reason
other than death or incapacity, we will enter into a consulting arrangement with
him under which he has agreed to provide strategic planning, financial planning,
merger and acquisition advice and consultation to us, as well as periodic advice
and consultation regarding key staffing and recruitment issues and such other
services as we may mutually agree upon. The consulting arrangement will extend
for a period of five years following our CEO’s termination of employment. During
the duration of his consulting agreement, our CEO will be entitled to a
consulting fee equal to 15% of his salary in effect on the day of his
termination of employment and will also be entitled to an office, an assistant,
travel benefits under our travel policy described above in our Compensation
Discussion and Analysis, automobile benefits and reimbursement for reasonable
out-of-pocket business expenses. Unvested restricted stock awards will continue
to vest in accordance with the award agreement for so long as Mr. Khoury is
providing consulting services under this agreement. During the five-year term,
the consulting arrangement may not be amended or terminated without the prior
written consent of us and Mr. Khoury. In the event of our CEO’s death or
disability during the consulting period, he will receive a lump-sum payment
equal to the fees for the then remaining term of the consulting
period.
In the
event that any payments or other benefits made to our CEO are subject to excise
tax as an “excess parachute payment” under the Internal Revenue Code, he will
receive an excise tax “gross-up” payment. Similarly, the agreement provides him
with a tax “gross-up” payment with respect to tax obligations under
Section 409A of the Internal Revenue Code. Incidental costs and expenses
incurred in respect of certain accounting tasks and procedures associated with
these tax matters will be paid by us.
During the
term of his employment agreement and consulting agreement (if applicable) and
for a period of two years thereafter, our CEO may not compete with us or solicit
our employees. In addition, our CEO is subject to a confidentiality provision
that lasts indefinitely.
During
2005, we entered into a death benefit agreement with our CEO that provides for
the payment of a $3 million death benefit to his named beneficiary upon his
death during or after his employment. We have fully funded this death benefit
with a single payment whole life insurance policy.
Specific
Termination and Change of Control Provisions
In
addition to the benefits described above, our CEO will be entitled to receive
the following benefits and payments upon the occurrence of the following
specified events:
Voluntary Termination.
If our
CEO terminates his employment with us at any time and for any reason, he is
entitled to a lump-sum severance payment amount equal to one times his annual
base salary.
Involuntary Termination.
If
our CEO’s employment with us is terminated by us for any reason other than
death, incapacity or in connection with the closing of a Change of Control
transaction, he is entitled to a lump-sum payment equal to the salary he would
have received had he remained employed through the remainder of the
then-existing term, the distribution of the funds in his grantor trust
(including a final contribution determined as if he remained employed for three
years following the termination of his employment), accelerated vesting of all
outstanding equity awards, with stock options remaining exercisable for the
remainder of their applicable terms, and a lump-sum severance amount equal to
one times his annual base salary.
Change of Control.
If a
change of control occurs, our CEO will be entitled to the immediate vesting of
all equity awards with any stock options remaining exercisable for the remainder
of their applicable terms. In addition, if his employment terminates in
connection with the closing of a Change of Control transaction, our CEO will be
entitled to a lump-sum severance amount equal to one times his annual base
salary. If our CEO’s employment is not terminated in connection with the closing
of a Change of Control transaction, his employment agreement will remain in
effect and upon a subsequent termination of employment he will be entitled to
the payments and benefits set forth in his employment agreement. In the event of
a dispute regarding the benefits payable to our CEO upon a change of control, we
will pay or reimburse him for all related legal expenses.
Death.
In the event of our
CEO’s death, his designee will receive an amount equal to the salary that would
have been due to him if he remained employed through the third anniversary of
his death. In addition, our CEO’s designee will be entitled to the immediate
vesting of all equity awards with any stock options remaining exercisable for
the remainder of their applicable terms.
Incapacity.
In the event of
our CEO’s termination of employment due to his incapacity, he will receive an
annual amount equal to two times the base salary that he would have received had
he remained employed through the third anniversary of his termination of
employment, payable in equal bi-monthly installments. In addition, our CEO will
be entitled to the immediate vesting of all equity awards with any stock options
remaining exercisable for the remainder of their applicable terms.
Michael B.
Baughan.
Mr. Michael B. Baughan, our President and Chief Operating
Officer, or COO, is party to an employment agreement with us that was amended as
of April 27, 2007. The agreement has a rolling three-year term so that the
term extends through three years from any date as of which the term is being
determined unless terminated earlier. Under the terms of the agreement, our COO
will receive an annual salary of $514,000 per year (as of July 1, 2007),
subject to adjustment from time to time by our Board of Directors, and he may
receive an annual incentive bonus under our MIP at the discretion of our Board
of Directors, which may not (except under special circumstances at the
discretion of the Board of Directors) exceed 120% of his then current salary.
Our COO is also entitled to an automobile allowance of $1,100 per month and may
participate in all benefit plans, programs and arrangements generally made
available to our executives. During the period from January 1, 2007 through June
30, 2007, Mr. Baughan’s annual base salary was $485,000. Mr.
Baughan’s base salary was adjusted to $514,000 on July 1, 2007, and he received
a bonus of $400,000 for fiscal 2007.
Our
agreement with Mr. Baughan provides that, beginning on April 27, 2007,
we will make an annual retirement contribution to a rabbi trust established for
his benefit in an amount equal to 50% of his average annual salary for the
preceding three-year period. The retirement contributions will vest in full on
April 26, 2012 provided that Mr. Baughan remains employed through this
date. Vesting of the accrued retirement contributions will accelerate upon the
termination of Mr. Baughan’s employment due to his death, incapacity or by
us without cause. We fund these contributions into this rabbi trust on a
quarterly basis in arrears. Changes in base salary are reflected in the
quarterly contributions in the quarter following a change in base salary. Vested
funds held in the trust will be distributed in a lump-sum to our COO or his
beneficiary, as the case may be, as a result of a change of control (as defined
under Section 409A of the Internal Revenue Code) or any other termination
of his employment, as otherwise provided pursuant to the terms of the rabbi
trust.
In the
event that any payments or other benefits made to our COO are subject to excise
tax as an “excess parachute payment” under the Internal Revenue Code, our COO
will receive an excise tax “gross-up” payment. Similarly, the agreement provides
our COO with a tax “gross-up” payment with respect to tax obligations under
Section 409A of the Internal Revenue Code. Incidental costs and expenses
incurred in respect of certain accounting tasks and procedures associated with
these tax matters will be paid by us.
On
April 27, 2007, we entered into a death benefit agreement with our COO that
provides for the payment of a $1.5 million death benefit to his named
beneficiary upon his death during or after his employment. We have fully funded
this death benefit with a single payment whole life insurance
policy.
Our COO is
also party to the Company’s standard proprietary information and confidentiality
agreement.
Specific
Termination and Change of Control Provisions
Involuntary Termination.
In
the event our COO’s employment is terminated by us without cause (as defined in
the employment agreement), he will receive a lump-sum severance amount equal to
the salary he would have received had he remained employed through the remainder
of his then-existing term. He will also be entitled to the immediate vesting
of his accrued retirement benefits as described above. In addition, all
outstanding equity awards will immediately vest with any stock options remaining
exercisable for the remainder of their applicable terms.
Change of Control.
If a
change of control occurs (as defined under Section 409A of the Code), our
COO will be entitled to the immediate vesting of all equity awards with any
stock options remaining exercisable for the remainder of their applicable term.
In addition, if, in connection with the change of control his employment is
terminated by us without cause, our COO will be entitled to a lump-sum amount
equal to three times his salary, accelerated vesting of his accrued retirement
benefits as described above and two year’s continuation of his medical, dental
and health benefits to the extent permitted under Section 409A of the
Internal Revenue Code.
Death.
In the event of our
COO’s termination due to his death, his designee will receive a lump-sum payment
equal to the salary that would have been due to him had he remained employed
through the third anniversary of his death. Our COO’s designee will also receive
accelerated vesting of his accrued retirement benefits as described above and
accelerated vesting of all outstanding equity awards with any stock options
remaining exercisable for the remainder of their applicable terms. In addition,
our COO’s eligible dependents will receive two year’s continuation of his
medical, dental and health benefits to the extent permitted under
Section 409A of the Internal Revenue Code.
Incapacity.
In the event of
our COO’s termination due to his incapacity, he will receive the salary and
automobile allowance that he would have received had he remained employed
through the third anniversary of his termination. In addition, our COO and his
eligible dependants will be entitled to receive, for two years following his
termination due to his incapacity, continuation of medical, dental and health
benefits to the extent permitted under Section 409A of the Internal Revenue
Code. As a result of such a termination, our COO will also be entitled to
accelerated vesting of his accrued retirement benefits as described above and
accelerated vesting of all outstanding equity awards with any stock options
remaining exercisable for the remainder of their applicable terms.
Resignation; Termination for
Cause.
If, at any time, our COO resigns his employment with us or his
employment is terminated by us for cause he will not be entitled to any further
compensation or benefits other than as set forth in any applicable plans,
programs and arrangements.
Thomas
P. McCaffrey
.
Mr. Thomas P. McCaffrey is party to an employment agreement with us,
amended and restated as of April 27, 2007, pursuant to which he serves as
our Senior Vice President and Chief Financial Officer, or CFO. The agreement has
a rolling three-year term so that the term extends through three years from any
date as of which the term is being determined unless terminated earlier. The
agreement provides that our CFO will receive a base salary of $471,500 per year
(as of July 1, 2007), subject to cost of living and other increases as
determined from time to time by our Board of Directors. Our CFO is also entitled
to participate in our MIP and to receive a discretionary annual cash incentive.
Our CFO is also eligible to participate in all benefit plans (other than
retirement plans) available to our executives and to receive an automobile
allowance of $1,100 per month. During the period from January 1, 2007 through
June 30, 2007, our CFO’s annual base salary was $445,000. Mr.
McCaffrey’s base salary was adjusted to $471,500 on July 1, 2007 and he received
a bonus of $430,000 for fiscal 2007.
Our
agreement with Mr. McCaffrey provides that we will make an annual
retirement contribution to a grantor trust established for his benefit in an
amount equal to one-half of his average annual salary for the preceding three
year period. These contributions are taxed currently to our CFO and reported in
the “All Other Compensation” column” of the Summary Compensation Table above. We
fund these contributions less applicable personal income taxes, into this
grantor trust on a quarterly basis in arrears. Changes in base salary are
reflected in the quarterly contributions in the quarter following a change in
base salary. Previously taxed and undistributed funds held in the trust will be
distributed in a lump-sum to the executive or his beneficiary, as the case may
be, as a result of a change of control (as defined in his employment agreement)
or any other termination of his employment, as otherwise provided pursuant to
the terms of this grantor trust.
In the
event that any payments or other benefits made to him are subject to excise tax
as an “excess parachute payment” under the Internal Revenue Code, our CFO will
receive an excise tax “gross-up” payment. Similarly, the agreement provides him
with a tax “gross-up” payment with respect to tax obligations under
Section 409A of the Internal Revenue Code. Incidental costs and expenses
incurred in respect of certain accounting tasks and procedures associated with
these tax matters will be paid by us.
During
2005, we entered into a death benefit agreement with our CFO that provides for
the payment of a $1 million death benefit to his named beneficiary upon his
death during or after his employment. We have fully funded this death benefit
with a single payment whole life insurance policy.
Specific
Termination and Change of Control Provisions
In
addition to the benefits described above, our CFO will be entitled to receive
the following benefits and payments upon the occurrence of the following
specified events:
Involuntary Termination.
In
the event our CFO’s employment is terminated by us without cause or by our CFO
for good reason (as each term is defined in the employment agreement), other
than in connection with the closing of a change of control transaction, he will
receive a lump-sum severance amount equal to two times his annual salary, plus
the salary he would have received had he remained employed through the then
existing term of the agreement. He will also receive distribution of funds in
his retirement trust (including a final contribution determined as if he
continued employment for three years following the termination). As a result of
such a termination, he will also be entitled to the immediate vesting of all
equity awards with any stock options remaining exercisable for the remainder of
their applicable terms.
Change of Control.
If a
change of control occurs, our CFO will be entitled to the immediate vesting of
all equity awards with any stock options remaining exercisable for the remainder
of their applicable term. In addition, if, in connection with the closing of a
Change of Control transaction, our CFO’s employment is terminated by us without
cause or by our CFO for good reason, our CFO will be entitled to a lump-sum
amount equal to two times his annual base salary. If our CFO’s employment is not
terminated in connection with the closing of a Change of Control transaction,
his employment agreement will remain in effect and upon a subsequent termination
of employment he will be entitled to the payments and benefits set forth in the
agreement. In the event of a dispute regarding the benefits payable to our CFO
upon a change of control, we will pay or reimburse him for all related legal
expenses.
Death.
In the event of our
CFO’s termination due to his death, his designee will receive a lump-sum payment
equal to the salary that would have been due to him had he remained employed
through the third anniversary of his death. Our CFO’s eligible dependants will
also be entitled to receive, for two years following his death, continuation of
medical, dental and health benefits to the extent permitted under
Section 409A of the Internal Revenue Code. In addition, our CFO will be
entitled to the immediate vesting of all equity awards with any stock options
remaining exercisable for the remainder of their applicable terms.
Incapacity.
In the event of
our CFO’s termination due to his incapacity, he will receive the salary and
automobile allowance that he would have received had he remained employed
through the third anniversary of his termination of employment, payable in equal
bi-monthly installments. In addition, our CFO will be entitled to the immediate
vesting of all equity awards with any stock options remaining exercisable for
the remainder of their applicable terms. Our CFO and his eligible dependants
will also be entitled to receive, for two years following his termination due to
his incapacity, continuation of medical, dental and health benefits to the
extent permitted under Section 409A of the Internal Revenue
Code.
Retirement; Resignation Without Good
Reason.
If our CFO retires or resigns without good reason at any time he
is entitled to a lump-sum severance payment equal to one times his annual base
salary.
Termination for Cause.
If, at
any time, our CFO is terminated by us for cause, he will not be entitled to any
further compensation and benefits other than as set forth in any applicable
plans, programs or arrangements.
Wayne
Exton.
Mr. Exton is party to an employment agreement dated
May 1, 2006 that is automatically renewed for additional one-year terms
unless either we or Mr. Exton gives the other party at least 30 days’
written notice prior to the then-applicable expiration date. Under the terms of
his employment agreement Mr. Exton receives an annual salary of $258,000
per year (as of January 1, 2007), subject to adjustment from time to time.
He is also eligible to receive a discretionary incentive bonus under our MIP.
Mr. Exton is entitled to an automobile allowance of $1,100 per month and
may participate in all benefits plans, programs and arrangements generally made
available to our executive officers. During the period from January 1, 2007
through June 30, 2007, Mr. Exton’s annual base salary was
$258,000. Mr. Exton’s base salary was adjusted to $275,000 on July 1,
2007 and he received a bonus of $175,000 for fiscal 2007.
Upon his
death, Mr. Exton is entitled to an amount equal to the salary that he would
have received had he remained employed through the remainder of the
then-application term. In the event of the termination of Mr. Exton’s
employment due to his incapacity, he will continue to receive his then current
salary and benefits through the expiration date of the then-applicable term of
the agreement, subject to mitigation from alternative employment. In addition,
upon a termination of his employment due to death or disability, Mr. Exton
will be entitled to the immediate vesting of all outstanding shares of
restricted stock.
If we fail
to extend the term of Mr. Exton’s employment for at least one year beyond
the then-applicable expiration date at his then-current salary and otherwise at
the same terms and conditions (other than a termination for cause), we must
continue to pay Mr. Exton his salary and medical and dental benefits for a
period equal to the lesser of 12 months and the date on which he accepts
alternative employment. Upon a termination of Mr. Exton’s employment by us
for cause or Mr. Exton’s resignation for any reason, he will not be
entitled to any further compensation or benefits.
In the
event that following a change of control, Mr. Exton resigns for good reason
or we terminate his employment without cause, he will be entitled to receive a
lump-sum payment equal to one times his base salary and continuation of his base
salary and benefits for the then-remaining term of the agreement. In addition,
upon a change of control, Mr. Exton will be entitled to the immediate
vesting of all outstanding shares of restricted stock.
Werner
Lieberherr.
Mr. Lieberherr is party
to an employment agreement dated July 5, 2006 that is automatically renewed
for additional one-year terms unless either we or Mr. Lieberherr gives the
other party at least 90 days’ written notice prior to the then-applicable
expiration date. Under the terms of his employment agreement,
Mr. Lieberherr receives an annual salary of $332,000 per year (as of
January 1, 2007), subject to adjustment from time to time. He is also
eligible to receive an annual discretionary incentive bonus under our MIP.
Mr. Lieberherr is entitled to an automobile allowance of $1,100 per month
and may participate in all benefits plans, programs and arrangements generally
made available to our executive officers. During the period from January 1, 2007
through June 30, 2007, Mr. Lieberherr’s annual base salary was $332,000.
Mr. Lieberherr’s base salary was adjusted to $400,000 on July 1, 2007 and he
received a bonus of $250,000 for fiscal 2007. In all other respects the terms
and conditions of Mr. Lieberherr’s employment agreement are substantially
similar to those of Mr. Exton’s agreement.
Robert A.
Marchetti.
Mr. Marchetti is party
to an employment agreement dated February 26, 2001 that is automatically
renewed for additional one-year terms unless either we or Mr. Marchetti
gives the other party at least 90 days’ written notice prior to the
then-applicable expiration date. Under the terms of his employment agreement,
Mr. Marchetti receives an annual salary of $309,000 per year (as of
January 1, 2007), subject to adjustment from time to time.
Mr. Marchetti is also eligible to receive a discretionary annual incentive
bonus of up to 100% of his salary under our MIP. Mr. Marchetti is also
entitled to an automobile allowance of $1,100 per month and may participate in
all benefits plans, programs and arrangements generally made available to our
executive officers. During the period from January 1, 2007 through June 30,
2007, Mr. Marchetti’s annual base salary was $309,000. Mr.
Marchetti’s base salary was adjusted to $327,500 on July 1, 2007 and he received
a bonus of $327,500 for fiscal 2007. In all other respects the terms and
conditions of Mr. Marchetti’s employment agreement are substantially
similar to those of Mr. Exton’s agreement.
Potential Payments upon a Termination or Change of
Control
The tables
that follow summarize the potential compensation that would have been payable to
each of our named executive officers as a result of a termination of the named
executive officer’s employment or a change of control. The tables below assume
that the named executive officer’s employment terminated on December 31,
2007 and, if applicable, that the change of control occurred during 2007. In
addition, for purposes of the calculations, we assume that the fair market value
of our common stock was $52.90 which was the closing price of our common stock
as quoted on the NASDAQ National Market on December 31, 2007.
The tables
below do not include the value of any vested and non-forfeitable payments or
other benefits that the named executive officers would have been entitled to
receive on December 31, 2007, regardless of whether a termination event
occurred on such date (e.g., benefits the executive would have received even if
he or she voluntarily resigned on December 31, 2007), including the
following:
|
|
Defined
Contribution Plans
.
Each of the named
executive officer’s account balances under the 401(k) Plan, including
any Company contributions, were fully vested as of December 31,
2007.
|
|
|
|
|
|
Vested
Equity Awards
.
Once vested, options
and restricted stock are not forfeitable. The number and fair market value
of all options and shares of restricted stock that were vested as of
December 31, 2007 are set forth above in the Outstanding Equity
Awards at Fiscal Year End Table and the Option Exercises and Stock Vested
Table.
|
|
|
|
|
|
Life
Insurance
.
Each of the named
executive officers is entitled to receive Company paid group term life
insurance of one times his or her base salary. This plan is applicable to
all of our employees on a nondiscriminatory basis.
|
|
|
|
|
|
Death
Benefit Agreements
.
We have entered into
death benefit agreements with each of Messrs. Khoury, Baughan and
McCaffrey pursuant to which their designated beneficiary will receive a
death benefit of $3,000,000, $1,500,000 and $1,000,000, respectively, upon
their death at any time during employment or following the termination of
their employment. We have funded these amounts with a single
payment whole life insurance policy.
|
|
|
|
|
|
Executive
Medical Benefits
.
Pursuant to his
employment agreement, Mr. Khoury and his spouse are entitled to
receive medical benefits for the remainder of their lives regardless of
the reason for termination of employment.
|
|
|
|
|
|
Consulting
Arrangement
.
Pursuant to his
employment agreement, Mr. Khoury has agreed to provide consulting
services to us for a period of five years following his termination
of employment for any reason. In consideration of these consulting
services, we have agreed to pay Mr. Khoury certain fees and benefits,
including continued vesting of all outstanding equity awards as detailed
above under the heading “Employment, Severance and Change of Control
Agreements."
|
The
amounts shown in the table below represent summary estimates of the payments to
be made upon each specified termination event and do not reflect any actual
payments to be received by the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control
|
Name
|
|
Compensation
Element
|
|
Voluntary
Resignation
|
|
Incapicity
|
|
Death
|
|
Involuntary
Termination
|
|
Involuntary
Termination
Upon the
Closing
Date
|
|
|
Involuntary
Termination
(Assuming
Payments
are Subject
to
Section 280G)
|
|
|
Remain
Employed
Beyond
280G
Period
|
Amin J.
Khoury
|
|
Severance
Payment
|
|
$
|
1,001,200
|
|
$
|
0
|
|
$
|
0
|
|
$
|
1,001,200
|
|
$
|
1,001,200
|
|
|
$
|
1,001,200
|
|
|
$
|
0
|
|
|
Lump-sum
of
Salary
for Contract Term
|
|
|
0
|
|
|
6,007,200
|
|
|
3,003,600
|
|
|
3,003,600
|
|
|
0
|
|
|
|
3,003,600
|
|
|
|
0
|
|
|
Accrued
Cash In
centive
Compensation
|
|
|
0
|
|
|
1,001,200
|
|
|
1,001,200
|
|
|
1,001,200
|
|
|
1,001,200
|
|
|
|
1,001,200
|
|
|
|
0
|
|
|
Retirement
Contribution
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
4,505,000
|
|
|
0
|
|
|
|
4,505,400
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Payments
|
|
$
|
1,001,200
|
|
$
|
7,008,400
|
|
$
|
4,004,800
|
|
$
|
9,511,400
|
|
$
|
2,002,400
|
|
|
$
|
9,511,400
|
|
|
$
|
0
|
|
|
Acceleration
of Unvested Equity
Awards(a)
|
|
|
0
|
|
|
20,211,133
|
|
|
20,211,133
|
|
|
20,211,133
|
|
|
20,211,133
|
|
|
|
20,211,133
|
|
|
|
20,211,133
|
|
|
Tax
Gross-up
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
TOTAL
|
|
$
|
1,001,200
|
|
$
|
27,219,533
|
|
$
|
24,215,933
|
|
$
|
29,722,533
|
|
$
|
22,213,533
|
|
|
$
|
29,722,533
|
|
|
$
|
20,211,133
|
(a)
The value of
the Awards based on a March 31, 2008 closing price of $34.95 was
$13,353,102.
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control
|
Name
|
|
Compensation
Element
|
|
Voluntary
Resignation/
Termination
for
Cause
|
|
Incapacity
|
|
Death
|
|
Termination
Without
Cause
|
|
Resignation/
Remain
Employed
|
|
Termination
Without
Cause
|
Michael B.
Baughan
|
|
Lump-sum
of
Salary for
Contract
Term
|
|
$
|
0
|
|
$
|
1,542,000
|
|
$
|
1,542,000
|
|
$
|
1,542,000
|
|
$
|
0
|
|
$
|
1,542,000
|
|
|
Accrued
Cash
Incentive
Compensation
|
|
|
0
|
|
|
400,000
|
|
|
400,000
|
|
|
400,000
|
|
|
0
|
|
|
400,000
|
|
|
Benefit
Continuation
|
|
|
0
|
|
|
45,360
|
|
|
5,760
|
|
|
5,760
|
|
|
0
|
|
|
5,760
|
|
|
Retirement
Contribution
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Total
Cash Payments
|
|
$
|
0
|
|
$
|
1,987,360
|
|
$
|
1,947,760
|
|
$
|
1,947,760
|
|
$
|
0
|
|
$
|
1,947,760
|
|
|
Acceleration
of
Unvested
Equity
Awards(b)
|
|
|
0
|
|
|
1,929,792
|
|
|
1,929,792
|
|
|
1,929,792
|
|
|
1,929,792
|
|
|
1,929,792
|
|
|
Tax
Gross-up
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
TOTAL
|
|
$
|
0
|
|
$
|
3,917,152
|
|
$
|
3,877,552
|
|
$
|
3,877,552
|
|
$
|
1,929,792
|
|
$
|
3,877,552
|
(b)
The value of
the Awards based on a March 31, 2008 closing price of $34.95 was
$1,274,976.
|
|
|
|
|
|
|
|
|
|
|
|
Change
of Control
|
Name
|
|
Compensation
Element
|
|
Death
or Incapacity
|
|
Resignation
Without Good Reason/Retirement
|
|
Resignation
With Good
Reason/
Termination
Without Cause
|
|
Termination
for
Cause
|
|
Involuntary
Termination
Upon the
Closing
Date
|
|
Involuntary
Termination
(Assuming
Payments
are Subject
to Section 280G)
|
|
Remain
Employed
Beyond
280G
Period
|
Thomas
P. McCaffrey
|
|
Severance
Payment
|
|
$
|
0
|
|
$
|
471,500
|
|
$
|
943,000
|
|
$
|
0
|
|
$
|
943,000
|
|
$
|
943,000
|
|
$
|
0
|
|
|
Lump
Sum of Salary for Contract Term
|
|
|
1,414,500
|
|
|
0
|
|
|
1,414,500
|
|
|
0
|
|
|
0
|
|
|
1,414,500
|
|
|
0
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
471,500
|
|
|
0
|
|
|
471,500
|
|
|
0
|
|
|
471,500
|
|
|
471,500
|
|
|
0
|
|
|
Benefit
Continuation
|
|
|
146,102
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Retirement
Contribution
|
|
|
0
|
|
|
0
|
|
|
707,250
|
|
|
0
|
|
|
0
|
|
|
707,250
|
|
|
0
|
|
|
Total
Cash Payments
|
|
$
|
2,032,102
|
|
$
|
471,500
|
|
$
|
3,536,250
|
|
$
|
0
|
|
$
|
1,414,500
|
|
$
|
3,536,250
|
|
$
|
0
|
|
|
Acceleration
of Unvested Equity
Awards(c)
|
|
|
5,983,413
|
|
|
0
|
|
|
5,983,413
|
|
|
0
|
|
|
5,983,413
|
|
|
5,983,413
|
|
|
5,983,413
|
|
|
Tax
Gross-up
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
TOTAL
|
|
$
|
8,015,515
|
|
$
|
471,500
|
|
$
|
9,519,663
|
|
$
|
0
|
|
$
|
7,397,913
|
|
$
|
9,519,663
|
|
$
|
5,983,413
|
(c)
The value of
the Awards based on a March 31, 2008 closing price of $34.95 was
$3,953,125.
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control
|
Name
|
|
Compensation
Element
|
|
Voluntary
Resignation/
Termination for
Cause
|
|
Incapacity
|
|
Death
|
|
Failure to
Renew
Agreement
for at
Least One
Year
|
|
Termination
Without
Cause
|
|
|
Remain
Employed
|
Wayne
Exton
|
|
Severance
Payment
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
275,000
|
|
$
|
275,000
|
|
|
$
|
0
|
|
|
Lump
Sum of Salary for Contract Term
|
|
|
0
|
|
|
90,411
|
|
|
90,411
|
|
|
0
|
|
|
90,411
|
|
|
|
0
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
0
|
|
|
175,000
|
|
|
175,000
|
|
|
175,000
|
|
|
175,000
|
|
|
|
0
|
|
|
Benefits
for Contract Term
|
|
|
0
|
|
|
2,959
|
|
|
0
|
|
|
7,299
|
|
|
7,299
|
|
|
|
0
|
|
|
Total
Cash Payments
|
|
$
|
0
|
|
$
|
268,370
|
|
$
|
265,411
|
|
$
|
457,299
|
|
$
|
547,710
|
|
|
$
|
0
|
|
|
Accelerated
of Unvested Equity
Awards(d)
|
|
|
0
|
|
|
1,074,505
|
|
|
1,074,505
|
|
|
0
|
|
|
1,074,505
|
|
|
|
1,074,505
|
|
|
TOTAL
|
|
$
|
0
|
|
$
|
1,342,875
|
|
$
|
1,339,916
|
|
$
|
457,299
|
|
$
|
1,622,215
|
|
|
$
|
1,074,505
|
(d) The
value of the Awards based on a March 31, 2008 closing price of $34.95 was
$709,904.
|
|
|
|
|
|
|
|
|
|
|
Change of Control
|
Name
|
|
Compensation
Element
|
|
Voluntary
Resignation/
Termination for
Cause
|
|
Incapacity
|
Death
|
|
Failure to
Renew
Agreement
for at
Least One
Year
|
|
Termination
Without
Cause
|
Remain
Employed
|
Werner
Lieberherr
|
|
Severance
Payment
|
|
$
|
0
|
|
|
$
|
0
|
|
$0
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
$0
|
|
|
Lump
Sum of Salary for Contract Term
|
|
|
0
|
|
|
|
202,740
|
|
202,740
|
|
|
0
|
|
|
|
202,740
|
|
0
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
0
|
|
|
|
250,000
|
|
250,000
|
|
|
250,000
|
|
|
|
250,000
|
|
0
|
|
|
Benefits
for Contract Term
|
|
|
0
|
|
|
|
11,513
|
|
0
|
|
|
514
|
|
|
|
11,513
|
|
0
|
|
|
Total
Cash Payments
|
|
$
|
0
|
|
|
$
|
464,253
|
|
$452,740
|
|
$
|
650,514
|
|
|
$
|
864,253
|
|
$0
|
|
|
Acceleration
of Unvested Equity
Awards(e)
|
|
|
0
|
|
|
|
1,915,403
|
|
1,915,403
|
|
|
0
|
|
|
|
1,915,403
|
|
1,915,403
|
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
2,379,656
|
|
$2,368,143
|
|
$
|
650,514
|
|
|
$
|
2,779,656
|
|
$1,915,403
|
(e) The
value of the Awards based on a March 31, 2008 closing price of $34.95 was
$1,265,470.
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control
|
Name
|
|
Compensation
Element
|
|
Voluntary
Resignation/
Termination for
Cause
|
|
Incapacity
|
|
Death
|
|
Failure to
Renew
Agreement
for at
Least One
Year
|
|
Termination
Without
Cause
|
|
Remain
Employed
|
Robert
Marchetti
|
|
Severance
Payment
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
327,500
|
|
$
|
327,500
|
|
$
|
0
|
|
|
Lump
Sum of Salary for Contract Term
|
|
|
0
|
|
|
51,144
|
|
|
51,144
|
|
|
0
|
|
|
51,144
|
|
|
0
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
0
|
|
|
327,500
|
|
|
327,500
|
|
|
327,500
|
|
|
327,500
|
|
|
0
|
|
|
Benefits
for Contract Term
|
|
|
0
|
|
|
2,439
|
|
|
0
|
|
|
15,619
|
|
|
4,501
|
|
|
0
|
|
|
Total
Cash Payments
|
|
$
|
0
|
|
$
|
381,083
|
|
$
|
378,644
|
|
$
|
670,619
|
|
$
|
710,645
|
|
$
|
0
|
|
|
Acceleration
of Unvested
Equity
Awards(f)
|
|
|
0
|
|
|
845,395
|
|
|
845,395
|
|
|
0
|
|
|
845,395
|
|
|
845,395
|
|
|
TOTAL
|
|
$
|
0
|
|
$
|
1,226,478
|
|
$
|
1,224,039
|
|
$
|
670,619
|
|
$
|
1,556,040
|
|
$
|
845,395
|
(f) The
value of the Awards based on a March 31, 2008 closing price of $34.95 was
$558,536.
Equity
Compensation Plan Information
The
Company maintains the following equity compensation plans under which the
Company's common stock is authorized for issuance to employees and directors in
exchange for services: 2005 Long-Term Incentive Plan, Amended and Restated 1989
Stock Option Plan, 1991 Directors' Stock Option Plan, United Kingdom 1992
Employee Share Option Scheme, 1996 Stock Option Plan, 2001 Stock Option Plan,
2001 Directors' Stock Option Plan, 1994 Employee Stock Purchase Plan and
Non-Employee Directors Deferred Stock Plan. The United Kingdom 1992 Employee
Share Option Scheme and the 1996 Stock Option Plan have not been approved by the
Company's stockholders; the other plans have received the approval of the
Company's stockholders. As of April 12, 2006, the 2005 Long-Term Incentive Plan
is the only plan that is available for the issuance of future equity
awards.
The
following table provides aggregate information regarding the shares of common
stock that may be issued upon the exercise of options, warrants and rights under
all of the Company's equity compensation plans as of December 31,
2007.
Plan Category
|
|
(a)
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants
and
Rights
|
|
(b)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
(c)
Number of Securities
Available for Future
Issuance Under Equity
Compensation Plans
(Excluding Securities
Reflected in
Column (a)(1))
|
Equity
Compensation Plans approved by security holders(2):
|
|
|
58,250
|
|
|
$
|
15.39
|
|
|
|
1,722,319
|
|
Equity
Compensation Plans not approved by security holders(3):
|
|
|
186,407
|
|
|
$
|
9.84
|
|
|
|
0
|
|
Total
|
|
|
244,657
|
|
|
$
|
11.16
|
|
|
|
1,722,319
|
|
(1)
|
Numbers
in this column also include rights granted pursuant to the 1994 Employee
Stock Purchase Plan and rights under the Non-Employee Directors Deferred
Stock Plan.
|
(2)
|
Options
were granted pursuant to the following plans: the 2005 Long-Term Incentive
Plan, the Amended and Restated 1989 Stock Option Plan, the 1991 Directors’
Stock Option Plan, the 2001 Stock Option Plan and the 2001 Directors’
Stock Option Plan. The Company will not make any further awards under the
2001 Stock Option Plan, the 2001 Directors’ Stock Option Plan, the Amended
and Restated 1989 Stock Option Plan or the 1991 Directors’ Stock Option
Plan.
|
(3)
|
Options
were granted pursuant to the following plans: United Kingdom 1992 Employee
Share Option Scheme and the 1996 Stock Option Plan. The Company will not
make any further awards under these
plans.
|
Non-Stockholder Approved
Plans.
The material terms of the Company’s non-stockholder approved
equity compensation plans are summarized below.
United Kingdom 1992 Employee Share
Option Scheme.
The Board of Directors adopted the United Kingdom
1992 Employee Share Option Scheme on July 15, 1992. The UK plan is a United
Kingdom Inland Revenue approved plan that provides for the grant of share
options to key employees of the Company and its subsidiaries in the United
Kingdom.
The
exercise price of the share options granted under the UK plan were determined by
the Board of Directors and are equal to 100% of the fair market value of the
Company’s common stock on the date of grant. Unless otherwise determined by the
Board of Directors, share options vest as to 25% of the underlying shares on the
date of grant and on each of the first, second and third anniversaries of the
date of grant and expire on the tenth anniversary of the date of grant. Upon an
optionee’s termination of employment with the Company or its subsidiaries for
any reason other than death, sick leave, or an approved leave of absence, share
options will lapse immediately. In addition, upon a change of control of the
Company, share options will generally either (i) vest in full and remain
exercisable for a period of fourteen days or (ii) be canceled and replaced
with an option to purchase shares of the acquiring corporation with
substantially the same terms. No further option grants will be made under the UK
plan.
1996 Stock Option Plan.
The
Board of Directors adopted the 1996 Stock Option Plan on August 16, 1996.
The plan provides for the grant of nonstatutory stock options to employees,
consultants and advisers of the Company and its subsidiaries other than
directors and executive officers. No further option grants will be made under
the plan.
The
exercise price of the options is determined by the Board of Directors but will
not be less than 100% of the fair market value of the Company’s common stock on
the date of grant. Unless otherwise determined by the Board of Directors,
options vest as to 25% of the underlying shares on the date of grant and on each
of the first, second and third anniversaries of the date of grant and expire on
the tenth anniversary of the date of grant.
Upon an
optionee’s termination of employment for any reason other than death or for
cause, vested options will generally remain exercisable for three months and
unvested options will be immediately forfeited. However, if the optionee has
been an employee of the Company for at least 10 years at the time of
termination, vested options will generally remain exercisable until the original
expiration date. In addition, upon a change of control of the Company either
(i) all outstanding options will become immediately exercisable at least 20
days prior to the change of control and will terminate upon the effective date
of the change of control or (ii) the Board of Directors will provide for
the assumption or replacement of the outstanding options by the surviving
corporation resulting from the change of control. No further option grants may
be made under the plan.
Policy and Procedures for the Review and Approval of Related
Person Transactions
We have
adopted a written policy pursuant to which our Audit Committee will be presented
with a description of any related person transactions for them to consider for
approval. The policy is designed to operate in conjunction with and as a
supplement to the provisions of our Code of Business Conduct.
Under the
policy, our Law Department will review all proposed transactions presented to or
identified by it involving a related person and in which the Company is a
participant and in which the amount exceeded $120,000. The Law Department will
present to the Audit Committee for approval any transaction at or above this
dollar amount in which the related person may have a direct or indirect material
interest. In determining whether to approve or ratify a related person
transaction, the Audit Committee will consider the following: (1) whether
the transaction was the product of fair dealing, which factors include the
timing, initiation, structure and negotiations of the transaction, and whether
the related person’s interest in such transaction was disclosed to the Company,
(2) the terms of the transaction and whether similar terms would have been
obtained from an arm’s length transaction with a third party and (3) the
availability of other sources for comparable products or services. The policy
also identifies certain types of transactions that our Board has identified as
not involving a direct or indirect material interest and are therefore, not
considered related person transactions for purposes of the policy.
The policy
requires that our Law Department implement certain procedures for the purpose of
obtaining information with respect to related person transactions. These
procedures include, among other things, (1) informing, on a periodic basis,
our directors, nominees for director and executive officers of the requirement
for presenting possible related party transactions to the Law Department for
review and (2) reviewing questionnaires completed by directors, nominees
for director and executive officers designed to elicit information about
possible related person transactions.
Certain Relationships and Related
Transactions
There are
no reportable transactions pursuant to this requirement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of
the Exchange Act requires the Company’s directors and executive officers, and
persons who own more than 10 percent of a registered class of the Company’s
equity securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of common stock and
other equity securities of the Company. Officers, directors and
greater-than-10-percent stockholders are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Due to an
administrative error, Forms 4 for reporting exempt transactions by Messrs.
Cowart, Hamermesh, Khoury, Chadwell, Schofield and Wegner with respect to
quarterly allocations of deferred shares under the Directors Plan since 2001
were filed after the relevant due dates. To the Company’s knowledge,
during 2007, all other Section 16(a) filing requirements applicable to
its officers, directors and greater-than-10-percent beneficial owners were
complied with. In making the above statements, the Company has relied on the
written representations of its directors and officers and a review of the copies
of the Section 16(a) reports that have been filed with the Securities
and Exchange Commission.
PROPOSAL NO. 2
CONSIDERATION
OF THE STOCKHOLDER PROPOSAL
MACBRIDE
PRINCIPLES
The
following resolution (referred to as the “MacBride Principles”) is submitted by
the New York City Assistant Comptroller, Kenneth B. Sylvester, 1 Centre Street,
New York, New York 10007 (or the Office of the Comptroller), on behalf of the
New York City Employees’ Retirement System, the New York City Teachers’
Retirement System, the New York City Police Pension Fund, and the New York City
Fire Department Pension Fund, and custodian of the New York City Board of
Education Retirement System. The proposal has been cosponsored by the
Minnesota State Board of Investment.
Letters
from the Bank of New York and State Street Institutional Investor Services dated
January 7, 2008 and January 4, 2008, respectively, indicate that these funds own
an aggregate of 407,741 shares of the common stock of the Company (less than
1%).
These
parties have requested that the Company offer the following resolution with the
accompanying supporting statement for stockholders to consider at the
meeting:
Resolution
WHEREAS,
BE Aerospace, Inc., has a subsidiary in Northern Ireland;
WHEREAS,
the securing of a lasting peace in Northern Ireland encourages us to promote
means for establishing justice and equality;
WHEREAS,
employment discrimination in Northern Ireland was cited by the International
Commission of Jurists as being one of the major causes of sectarian
strife;
WHEREAS,
Dr. Sean MacBride, founder of Amnesty International and Nobel Peace
laureate, has proposed several equal opportunity employment principles to serve
as guidelines for corporations in Northern Ireland. These include:
1.Increasing
the representation of individuals from underrepresented religious groups in the
workforce, including managerial, supervisory, administrative, clerical and
technical jobs.
2.Adequate
security for the protection of minority employees both at the workplace and
while traveling to and from work.
3.The
banning of provocative religious or political emblems from the
workplace.
4.All job
openings should be publicly advertised and special recruitment efforts should be
made to attract applicants from underrepresented religious groups.
5.Layoff,
recall, and termination procedures should not, in practice, favor particular
religious groupings.
6.The
abolition of job reservations, apprenticeship restrictions, and differential
employment criteria, which discriminate on the basis of religion or ethnic
origin.
7.The
development of training programs that will prepare substantial numbers of
current minority employees for skilled jobs, including the expansion of existing
programs and the creation of new programs to train, upgrade, and improve the
skills of minority employees.
8.The
establishment of procedures to assess, identify and actively recruit minority
employees with potential for further advancement.
9.The
appointment of a senior management staff member to oversee the Company’s
affirmative action efforts and the setting up of timetables to carry out
affirmative action principles.
RESOLVED:
Shareholders request the Board of Directors to:
Make all
possible lawful efforts to implement and/or increase activity on each of the
nine MacBride Principles.
Supporting
Statement
We believe
that our Company benefits by hiring from the widest available talent pool. An
employee’s ability to do the job should be the primary consideration in hiring
and promotion decisions.
Implementation
of the MacBride Principles by BE Aerospace, Inc., will demonstrate its
concern for human rights and equality of opportunity in its international
operations.
Please
vote your proxy
FOR
these
concerns.
Board
of Directors Recommendation
This
represents the eighth time that a virtually identical proposal has been
submitted by these or a subset of these stockholders for consideration at the
Company’s Annual Meetings of Stockholders. The proposal was submitted in 1996,
1998, 1999, 2000, 2001, 2002, and 2006, and each time was soundly defeated. In
2006, it received the affirmative vote of only approximately 10.5% of the shares
voted on the proposal, and only approximately 8.2% of all outstanding shares.
The proposal was submitted for the 2003 Annual Meeting of Stockholders, but the
Company informed the stockholder that, under the rules of the Securities
and Exchange Commission, due to the low vote the proposal received in 2002, the
Company was not required to resubmit this proposal for three years, and the
stockholder withdrew the proposal. A similar proposal was submitted for
consideration at the Company’s Annual Meeting of Stockholders by the Minnesota
State Board of Investment, which has indicated its intention to cosponsor this
proposal.
The
Company has requested that the stockholders withdraw this proposal in light of
its past lack of support, and because it causes an unnecessary diversion of
management’s attention and the Company’s resources, but the stockholders refused
to do so.
To avoid
further waste of corporate assets and diversion of management’s attention from
the Company’s business, management is submitting this proposal to the Company’s
stockholders, rather than seeking to omit this proposal from the
proxy.
The Board
of Directors believes that adoption of this proposal is not in the best
interests of stockholders and unanimously recommends that stockholders vote
against it. The Company already has taken the steps necessary to provide equal
employment opportunity in Northern Ireland, regardless of religious affiliation.
The Company adheres to both the letter and the spirit of the Fair Employment
(Northern Ireland) Act of 1989 as well as the “Code of Practice” promulgated by
the Fair Employment (Northern Ireland) Act of 1989. The Company is also
registered with the Fair Employment Commission.
The
Company’s policy and practice worldwide is to provide equal opportunity
employment in all locations without regard to race, color, religious belief,
gender, age, national origin, citizenship status, marital status, sexual
orientation or disability. Northern Ireland is no exception. Through its
established equal employment opportunity program, the Northern Ireland operation
substantively complies with the practices outlined in the MacBride Principles.
The Company is an equal opportunity employer in all job advertisements, and
hiring procedures are based on the experience and qualifications needed to
satisfy individual job requirements. Equal opportunity is observed for all
employees in training, advancement, layoff and recall procedures. The display of
potentially offensive or intimidating religious emblems at the Company’s
facilities is not permitted. The Company provides security for all employees at
work.
The
Company believes the adoption and implementation of the MacBride Principles is
unnecessary and burdensome, and, as a result, not in the best interests of the
Company or its employees in Northern Ireland.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST
THIS PROPOSAL.
The
affirmative vote of a majority of the votes present, in person or by proxy, and
properly cast at the meeting (at which a quorum is present) is required to
approve the Proposal.
AUDIT MATTERS
Deloitte &
Touche LLP has audited the financial statements of the Company for the
fiscal year ending December 31, 2007.
A
representative of Deloitte & Touche LLP is expected to be present at
the meeting and will be afforded the opportunity to make a statement if he or
she desires to do so and to respond to appropriate questions from
stockholders.
When
considering Deloitte & Touche LLP’s independence, the Audit Committee
of the Company’s Board of Directors considered whether its provision of services
to the Company beyond those rendered in connection with its audit and review of
the Company’s consolidated financial statements was compatible with maintaining
its independence and has determined that such services do not interfere with
that firm’s independence in the conduct of its auditing function. The Audit
Committee of the Company’s Board of Directors also reviewed, among other things,
the amount of fees paid to Deloitte & Touche LLP for audit and
non-audit services.
Principal Accountant Fees and
Services
The
following table sets forth by category of service the total fees for services
performed by Deloitte & Touche LLP during the fiscal years ended
December 31, 2007 and December 31, 2006.
|
|
2007
|
|
|
2006
|
|
Audit
Fees
|
|
$
|
2,798,868
|
|
|
$
|
2,487,390
|
|
Audit
Related Fees
|
|
|
13,500
|
|
|
|
327,419
|
|
Tax
Fees
|
|
|
1,285,636
|
|
|
|
553,416
|
|
All
Other Fees
|
|
|
3,577
|
|
|
|
—
|
|
Total
|
|
$
|
4,101,581
|
|
|
$
|
3,368,225
|
|
Audit
Fees
Audit fees
in 2007 and 2006 include aggregate fees, including expenses, billed by
Deloitte & Touche LLP in connection with the annual audit and the
audit of internal controls over financial reporting (Sarbanes Oxley Act
Section 404), the reviews of the Company’s quarterly reports on
Form 10-Q, statutory audits required for the Company’s subsidiaries and
services provided in connection with filing registration statements with the
Securities and Exchange Commission.
Audit
related fees in 2007 and 2006 consist of the aggregate fees, including expenses,
billed by Deloitte & Touche LLP in connection with employee benefit
plan audits and due diligence services in connection with an
acquisition.
Tax fees
in 2007 and 2006 consist of the aggregate fees, including expenses, billed by
Deloitte & Touche LLP in connection with services for tax compliance,
tax planning, tax advice and tax audit assistance.
All other
fees in 2007 consist of fees related to work to support the Company’s grant
application in Ireland. We did not pay any fees to
Deloitte & Touche LLP in 2006 other than those described
above.
Pre-Approval Policies and Procedures
The
Compensation Committee approves all audit, audit related services, tax services
and other services provided by Deloitte & Touche LLP. Any services
provided by Deloitte & Touche LLP that are not specifically included
within the scope of the audit must be pre-approved by the Compensation Committee
in advance of any engagement. Under the Sarbanes Oxley Act of 2002, Compensation
Committees are permitted to approve certain fees for audit related services, tax
services and other services pursuant to a
de
minimis
exception prior to
the completion of an audit engagement. In 2007, none of the fees paid to
Deloitte & Touche LLP were approved pursuant to the
de
minimis
exception.
In making
its recommendation to appoint Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the fiscal year ending
December 31, 2007, the Audit Committee has considered whether the services
provided by Deloitte & Touche LLP are compatible with maintaining the
independence of Deloitte & Touche LLP and has determined that such
services do not interfere with that firm’s independence in the conduct of its
auditing function.
STOCKHOLDER PROPOSALS
Proposals
of stockholders intended to be presented at the Annual Meeting of Stockholders
to be held in 2009 pursuant to Rule 14a-8 under the Exchange Act must be
received by the Secretary of the Company at its executive offices no later than
February 13, 2009 to be considered for inclusion in the Company’s proxy
materials for that meeting. In accordance with Section 2.11 of the
Company’s By-laws, for notice of a stockholder proposal to be considered timely,
but not included in the proxy materials, a stockholder’s proposal must be
delivered to, or mailed and received by, the Secretary of the Company no later
than June 11, 2009.
OTHER MATTERS
The Board
of Directors is not aware of any matters that will be brought before the meeting
other than as described in this Proxy Statement. However, if any matters
properly come before the meeting that are not specifically set forth on the
proxy card and in this Proxy Statement, the persons designated as proxies will
have authority to vote thereon in accordance with their best
judgment.
FORM 10-K
A copy of
the Company’s annual report on Form 10-K filed with the Securities and
Exchange Commission is available without charge by writing to:
|
BE
Aerospace, Inc.
|
|
1400
Corporate Center Way
|
|
Wellington,
Florida 33414
|
|
Attention:
Investor Relations
|
Important
notice regarding the availability of Proxy Materials for the Annual Meeting of
Stockholders to be held on July 31, 2008. Our proxy statement and our
annual report on Form 10-K are available on our website at
www.beaerospace.com.
Electronic
Voting Instructions
You
can vote by Internet or telephone!
Available
24 hours a day, 7 days a week!
Instead
of mailing your proxy, you may choose one of the two voting methods outlined
below to vote your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR
Proxies
submitted by the Internet or telephone must be received by 1:00 a.m., Central
Time, on July 31, 2008.
Vote
by Internet
·
|
Log
on to the Internet and go to
www.investorvote.com
|
·
|
Follow
the steps outlined on the secured
website
|
Vote
by telephone
·
|
Call
toll free 1-800-652-VOTE (8683) within the United States, Canada &
Puerto Rico any time on a touch tone telephone. There is
NO CHARGE
to you for the
call
|
·
|
Follow
the instructions provided by the recorded
message
|
Using
a
black
ink
pen, mark your votes with an X as shown
in
this example. Please do not write outside the designated
areas.
|
|
Annual
Meeting Proxy Card
|
|
__________
|
|
‚
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
‚
A
|
Proposals
– The Board of Directors unanimously recommends a vote
FOR
the listed
nominees.
|
1.
Election of Two Class II Directors:
|
For
|
Withhold
|
|
For
|
Withhold
|
|
|
|
|
|
|
01 –
Robert J. Khoury
|
o
|
o
|
02 –
Jonathan M. Schofield
|
o
|
o
|
B
|
Issues
– The Board of Di
rect
ors recommends a vote
AGAINST
Proposal 2.
|
|
|
For
|
Against
|
Abstain
|
2.
|
Proposal
to adopt the stockholder proposal
|
o
|
o
|
o
|
|
(the
MacBride Principles).
|
|
|
3.
|
To
transact any other business that may properly come
before
the meeting or any adjournment thereof.
|
|
|
C
|
Non
– Voting Items
|
Change of Address
—
Please print new address below.
|
Comments
— Please print
your comments below.
|
D
|
Authorized
Signatures – This section must be completed for your vote to be counted. —
Date and Sign Below.
|
Please
sign this proxy card and return it promptly whether or not you expect to
attend the meeting. You may nevertheless vote in person if you attend.
Please sign as your name appears herein. Give full title if an Attorney,
Executor, Administrator, Trustee, Guardian, etc. For an account in the
name of two or more persons, each should sign, or if one signs, he should
attach evidence of his authority.
|
Date
(mm/dd/yyyy) - Please print date below.
|
Signature
1 - Please keep signature within the box.
|
Signature
2 - Please keep signature within the box.
|
/
/
|
|
|
‚
IF YOU HAVE NOT VOTED
VIA THE INTERNET
OR
TELEPHONE, FOLD
ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED
ENVELOPE
‚
Proxy
– BE Aerospace, Inc.
|
ANNUAL
MEETING
JULY
31, 2008
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
.
The
undersigned hereby constitutes and appoints Messrs. Thomas P. McCaffrey and
Edmund J. Moriarty, or either of them, with full power of substitution to each,
proxies to vote and act at the Annual Meeting of Stockholders of BE Aerospace,
Inc. (the “Company”) to be held on July 31, 2008 in the Conference Center, 36th
Floor, Ropes & Gray, One International Place, Boston, Massachusetts at 10:30
a.m., and at any adjournment thereof (the “Meeting”), upon and with respect to
the number of shares of Common Stock, par value $0.01 per share that the
undersigned would be entitled to vote if personally present. The undersigned
hereby instructs such proxies, or their substitutes to vote on those matters
appearing on the reverse side hereof as specified by the undersigned and in such
manner as they may determine on any other matter which may come before the
Meeting, all as indicated in the accompanying Notice of Meeting and Proxy
Statement, receipt of which is hereby acknowledged. All proxies heretofore given
by the undersigned in respect of the Meeting are hereby revoked.
Unless
otherwise specified in the boxes provided on the reverse side hereof, this Proxy
will be voted FOR the nominees for Director, and a vote AGAINST Proposal 2 and
in the discretion of the named proxies as to any other matter that may properly
come up before the Meeting.
CONTINUED
AND TO BE VOTED ON REVERSE SIDE
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