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 30, 2009 for the following
purposes:
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1.
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To
elect three Class III Directors;
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2.
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Ratification
of appointment of Independent Registered Public Accounting
Firm;
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3.
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To
consider and act upon a proposal to amend the 2005 Long-Term Incentive
Plan;
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4.
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To
consider and act upon a stockholder proposal; and
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5.
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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 June 1, 2009 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
15, 2009
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TABLE
OF CONTENTS
BE
AEROSPACE, INC.
ANNUAL
MEETING OF STOCKHOLDERS
JULY
30, 2009
PROXY
STATEMENT
THIS PROXY
STATEMENT AND THE ENCLOSED PROXY ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT
JUNE 15, 2009.
The
enclosed form of proxy is solicited on behalf of BE Aerospace, Inc. (the
“Company”) to be voted at the 2009 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 30, 2009, 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
30, 2009 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 30, 2009 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,
2009 are entitled to receive notice of and to vote at the meeting. As of April
21, 2009 the Company had 101,032,567 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 three nominees for election as
directors at the meeting who receive the greatest number of votes properly cast
for the election of directors, Proposal No. 1, 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 Proposals No. 2, No. 3 and No. 4.
The
inspector of election will count the total number of votes cast “for” approval
of Proposals No. 2, No. 3 and No. 4 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 Proposals No. 2,
No. 3 and No. 4; 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
Proposals No. 2, No. 3 and No. 4. “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,
2008 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
three 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. Charles L. Chadwell, Richard G. Hamermesh and Amin J.
Khoury, three of our directors currently designated as Class III 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 three.
If
elected, Messrs. Charles L. Chadwell, Richard G. Hamermesh and Amin J.
Khoury will serve as Class III Directors for a term of three years,
expiring at the 2012 Annual Meeting of Stockholders, and until their respective
successors are elected and shall qualify to serve.
The
Company expects that Messrs. Charles L. Chadwell, Richard G. Hamermesh and
Amin J. Khoury 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 three director nominees and the other current directors of the
Company.
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Name,
Age, Business Experience and Current Directorships
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Director
Since
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CHARLES
L. CHADWELL, 68
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2007
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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. Mr.
Chadwell currently serves on the Boards of Directors of Spirit AeroSystems
Holdings Inc. and Parkway Products Inc. and serves as Chairman of the
Board of PaR Systems.
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RICHARD
G. HAMERMESH, 61
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1987
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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, 70
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1987
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Amin
J. Khoury has been the Chairman of the Board of Directors since
July 1987 when he co-founded the Company. Effective December 31,
2005, with the retirement of Mr. Robert J. Khoury, his brother,
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 has a Professional Director Certification,
earned through an extended series of director education programs sponsored
by the Corporate Directors Group, an accredited organization of
RiskMetrics Group.
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Current Directors
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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, 57
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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
privately held company, a predecessor of which was 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. Mr. Cowart has a Professional
Director Certification, earned through an extended series of director
education programs sponsored by the Corporate Directors Group, an
accredited organization of RiskMetrics Group.
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ARTHUR
E. WEGNER, 71
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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 a past Chairman of
the Board of Directors of the General Aviation Manufacturers Association
and the Aerospace Industries Association.
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ROBERT
J. KHOURY, 67
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1987
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2011
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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, 68
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2001
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2011
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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 of Directors 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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Meetings of the Board of Directors and
Committees
The Board
of Directors held six meetings during 2008. All of the current
directors attended all of the meetings, except for Mr. Robert J. Khoury, who
missed one meeting. The Board of Directors currently has three
standing committees: the Audit Committee, the Nominating and Corporate
Governance Committee and the Compensation Committee. Each current
director attended all of the meetings of the committees of the Board of
Directors on which they served during 2008. We do not have a specific
policy for director attendance at the 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 2008
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 four meetings
during 2008. The Audit Committee is responsible for: (i) the
appointment, compensation and oversight of our independent auditors; (ii)
overseeing the quality and integrity of our financial statements and related
disclosures; (iii) our compliance with legal and regulatory requirements; (iv)
assessing our independent auditors’ qualifications, independence and
performance; and (v) 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
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 2008. 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. All of the members of the Nomination and Corporate
Governance Committee support the nominations of Messrs. Chadwell, Hamermesh and
Khoury.
The
Compensation Committee is currently composed of Messrs. Chadwell and
Schofield. The Compensation Committee held three meetings and
acted pursuant to a unanimous written consent on two other occasions during
2008. 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 2008 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 2008 to
provide the Compensation Committee with information to consider in respect to
various areas in which they have 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.
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 2008 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 of Directors a summary of all such
correspondence and forwards to the Board of Directors 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 of Directors 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 of Directors 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. In connection with its most recent annual review,
the Nominating and Corporate Governance Committee recommended the nomination of
Messrs. Charles L. Chadwell, Richard G. Hamermesh and Amin J. Khoury, three of
our directors currently designated as Class III directors, whose terms expire at
the meeting, to serve as Class III Directors for a term of three years, expiring
at the 2012 Annual Meeting of Stockholders. If Messrs. Charles L. Chadwell,
Richard G. Hamermesh and Amin J. Khoury are re-elected, the Nominating and
Corporate Governance Committee believes that the Board of Directors will have an
excellent board of directors of a suitable size with the appropriate diversity
of skills and experience with respect to finance, leadership, business
operations and industry knowledge. 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 2009 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 deferred 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. 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
an immediate lump sum.
In
addition, each non-employee director receives $2,000 in cash for each committee
meeting attended.
Non-employee
directors also 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,
consistent with the principles of good governance and 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 2007 review
indicated that our current non-employee directors’ total compensation was in
line with that of our peer group.
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 $263,300 per calendar
year. He is also entitled to an office, secretarial support and air
travel in accordance with past practices under our travel policy. The
consulting agreement may not be amended, modified or terminated without the
prior written consent of both parties. If Mr. Khoury ceases to
provide the consulting services as a result of his death or disability, he or
his estate will be entitled to a lump-sum payment equal to the consulting fees
payable through the remainder of the consulting period. As a member
of the Board, Mr. Khoury is also entitled to receive all compensation paid to
our non-employee directors.
The
following table summarizes the compensation paid to our non-employee directors
in 2008.
Director Compensation Table
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Name
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Fees Earned or
Paid in
Cash
($)(1)
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Stock
Awards
($)
(2)
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All Other
Compensation
($)
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(g)
|
|
(h)
|
|
Charles
L. Chadwell
|
|
|
45,250
|
|
|
60,066
|
|
—
|
|
105,316
|
|
Jim
C. Cowart
|
|
|
47,500
|
|
|
87,791
|
|
—
|
|
135,291
|
|
Richard
G. Hamermesh
|
|
|
41,250
|
|
|
82,831
|
|
—
|
|
124,081
|
|
Robert
J. Khoury
|
|
|
50,000
|
|
|
75,248
|
|
372,700
|
(3)
|
497,948
|
|
Jonathan
M. Schofield
|
|
|
81,000
|
|
|
57,801
|
|
—
|
|
138,801
|
|
Arthur
E. Wegner
|
|
|
60,000
|
|
|
47,567
|
|
—
|
|
107,567
|
|
(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, 2008 of
awards of restricted stock and shares of our common stock, calculated in
accordance with the provisions of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 123R “Share-Based
Payment” (SFAS 123R) and includes expenses attributable to equity awards
granted during and before 2008. Assumptions made in the
calculation of these amounts are included in Note 11 to our audited
financial statements for the fiscal year ended December 31, 2008
included in our annual report on Form 10-K filed with the Securities
and Exchange Commission on February 26, 2009. During 2008,
each of our non-employee directors received (i) an aggregate of 1,144
shares of restricted stock which had a fair market value on the date of
grant of $40,000, and (ii) an aggregate of 1,946 deferred shares of our
common stock with a fair market value on the date of grant of
$30,000. In addition, as further discussed above, up to
100% of any cash retainers may be paid in deferred shares of our common
stock, and this column reflects these additional shares. The
amount of compensation expense reported for each director varies based on
the date each individual joined the
board.
|
|
(3)
|
The
amount reported for Mr. Robert J. Khoury for 2008 includes payments
under a consulting agreement he entered into upon his retirement of
$263,300; personal use of the Company aircraft of $105,330; and executive
medical coverage of $4,070. 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.
|
As of
December 31, 2008, the aggregate number of outstanding deferred shares and
restricted stock awards held by each non-employee director was as
follows:
|
Name
|
|
Deferred
Shares
(#)
|
|
|
Stock
Awards
(#)
|
|
|
Charles
L. Chadwell
|
|
|
3,502
|
|
|
|
2,089
|
|
|
Jim
C. Cowart
|
|
|
3,891
|
|
|
|
2,886
|
|
|
Richard
G. Hamermesh
|
|
|
3,104
|
|
|
|
2,886
|
|
|
Robert
J. Khoury
|
|
|
3,991
|
|
|
|
2,885
|
|
|
Jonathan
M. Schofield
|
|
|
1,946
|
|
|
|
2,886
|
|
|
Arthur
E. Wegner
|
|
|
2,691
|
|
|
|
2,089
|
|
Audit Committee
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 Investor 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 2008
with management and Deloitte & Touche LLP, the Company’s independent
registered public accounting firm.
The Audit
Committee discussed and reviewed with Deloitte & Touche LLP all
communications required by generally accepted auditing standards, including,
among other things, the matters required to be discussed by the
Public Company Accounting Oversight Board (“PCAOB”) Standard AU 380,
“Communication with Audit Committees,” and Statement on Auditing Standards
No. 114, “The Auditor’s Communication with Those Charged with Governance,”
and discussed and reviewed the results of Deloitte & Touche LLP’s
audit of the Company’s consolidated financial statements. The Audit Committee
also discussed the results of internal audit examinations.
The
Company’s independent auditors also provided to us the written disclosures and
the letter required by applicable requirements of the PCAOB regarding the
independent accountant’s communications with the Audit Committee concerning
independence, 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 2008 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, 2009,
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 2008; (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
(1)
|
|
Percent of
Outstanding
Shares
|
|
Honeywell
International Inc.
101
Columbia Road,
Morristown,
NJ 07962
|
6,000,000
|
(2)
|
|
6.06%
|
|
Rainier
Investment Management, Inc.
601
Union Street, Suite 2801
Seattle,
WA 98101
|
5,407,725
|
(3)
|
|
|
5.45%
|
|
|
Amin
J. Khoury+*
|
722,023
|
(4)
|
|
|
**
|
|
|
Thomas
P. McCaffrey+
|
251,205
|
(5)
|
|
|
**
|
|
|
Jim
C. Cowart*
|
188,188
|
(6)
|
|
|
**
|
|
|
Michael
B. Baughan+
|
169,252
|
(7)
|
|
|
**
|
|
|
Jonathan
M. Schofield*
|
99,418
|
(8)
|
|
|
**
|
|
|
Richard
G. Hamermesh*
|
29,532
|
(9)
|
|
|
**
|
|
|
Werner
Lieberherr+
|
100,700
|
|
|
|
**
|
|
|
Wayne
Exton+
|
75,316
|
|
|
|
**
|
|
|
Robert
A. Marchetti+
|
111,550
|
(10)
|
|
|
**
|
|
|
Robert
J. Khoury*
|
30,534
|
(11)
|
|
|
**
|
|
|
Arthur
E. Wegner*
|
17,442
|
(12)
|
|
|
**
|
|
|
Charles
L. Chadwell*
|
15,808
|
(13)
|
|
|
|
|
|
All
Directors and Executive Officers as a group (14 Persons)
|
1,880,157
|
|
|
|
2%
|
|
|
+
|
Named
executive officer
|
|
*
|
Director
of the Company
|
|
(1)
|
The
number of shares of our common stock deemed outstanding includes:
(i) 101,032,567 shares of common stock outstanding as of April 21,
2009 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 July 28, 2008, filed on August
4, 2008 by Honeywell International Inc., reported sole voting and
dispositive power over 750,741 shares and shared voting and dispositive
power over 6,000,000 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)
|
Based
on information in the Schedule 13G, as of December 31, 2008, filed on
February 13, 2009 by Rainier Investment Management Inc., reported sole
voting power over 5,151,550 shares and sole dispositive power over
5,407,725 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.
|
|
(4)
|
Includes
6,250 shares indirectly owned.
|
|
(5)
|
Includes
7,611 shares owned pursuant to the Company’s 401(k) Plan and 4,000
shares indirectly owned.
|
|
(6)
|
Includes
5,674 shares owned pursuant to the Company’s Non-Employee Directors
Deferred Stock Plan.
|
|
(7)
|
Includes
108 shares owned pursuant to the Company’s
401(k) Plan.
|
|
(8)
|
Includes
2,837 shares owned pursuant to the Company’s Non-Employee Directors
Deferred Stock Plan.
|
|
(9)
|
Includes
4,459 shares owned pursuant to the Company’s Non-Employee Directors
Deferred Stock Plan and 2,000 shares indirectly
owned.
|
|
(10)
|
Includes
312 shares owned pursuant to the Company’s 401(k) Plan and 312 shares
indirectly owned.
|
|
(11)
|
Includes
2,837 shares owned pursuant to the Company’s Non-Employee Directors
Deferred Stock Plan and 5,000 shares indirectly
owned.
|
|
(12)
|
Includes
2,837 shares owned pursuant to the Company’s Non-Employee Directors
Deferred Stock Plan.
|
|
(13)
|
Includes
4,020 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 2008 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 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 strategic and intrinsic
value
creation.
|
Our Named Executive
Officers
Our named
executive officers include our six most highly compensated executives during
2008, consisting of:
|
·
|
Amin
J. Khoury, Chairman and Chief Executive Officer;
|
|
|
|
|
·
|
Michael
B. Baughan, President and Chief Operating Officer;
|
|
|
|
|
·
|
Thomas
P. McCaffrey, Senior Vice President and Chief Financial
Officer;
|
|
|
|
|
·
|
Werner Lieberherr,
Vice President and General Manager—Commercial Aircraft Products
Segment;
|
|
|
|
|
·
|
Robert Marchetti,
Vice President and General Manager—Consumables Management Segment;
and
|
|
|
|
|
·
|
Wayne
Exton, Vice President and General Manager—Business Jet
Segment.
|
What Our Compensation Is Intended to
Reward
Company Performance
.
Through
the provision of short-term and long-term incentives, our 2008 executive
compensation program was 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 were the key short-term
drivers of intrinsic value during 2008. We believe that short-term
fluctuations in stock price do not necessarily reflect the underlying strength
or future prospects of the Company, and accordingly, we
do not
emphasize
year-to-year changes in stock price in our evaluation of corporate
performance. And although our share price performed poorly in 2008,
on February 25, 2008 the
Wall
Street Journal
reported that over the one -, three - and five-year
periods ending December 31, 2007, BE Aerospace, Inc. was the best performing
public aerospace stock. 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 global market 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;
|
|
·
|
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 superior 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 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. We believe our executive compensation
program is reasonable and provides appropriate incentives to our executives to
achieve our corporate objectives without encouraging them to take excessive
risks for short-term gains in their business decisions.
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 levels of the 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. Each year, our CEO recommends to the Compensation Committee
(i) proposed base salary increases and (ii) proposed cash incentive awards for
each of our named executive officers for the preceding year. The
Compensation Committee performs a similar assessment of our CEO and approves his
base salary and incentive compensation.
Any
adjustments to base salaries for all of our employees are generally made as of
July 1 of each year. We award long-term equity incentives on November 15 of each
year and we award annual cash incentives (bonuses) in the first
quarter of the following year, thereby providing an ongoing discussion regarding
performance and compensation throughout the 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
2008, aggregate compensation amounts for named executive officers (depending on
their title and position) were established in the following forms and
percentages: base salary (approximately 24% - 39% of total targeted
compensation); annual cash incentives (approximately 23% - 32% of total targeted
compensation); and long-term equity incentives (approximately 28% - 53% of total
targeted compensation). Long-term equity incentives in 2008 consisted
of restricted stock awards which generally vest ratably over a four-year
period. Twenty-five percent of the shares of restricted stock granted
in 2008 are subject to achieving performance metrics established at the time of
grant.
The
aggregate total targeted maximum incentive compensation, expressed as a
percentage of annual base salary, for each named executive officer (depending on
title and position) was as follows for 2008: performance-based cash incentives
(100% - 120%) and long-term equity incentives (125% - 280%).
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 2008, base salary increases, exclusive of
increases associated with promotions and changes in responsibilities for our
named executive officers, were approximately 4% of their 2007 base salaries,
except for Messrs. Marchetti and Exton, who received increases of approximately
27% and 22%, respectively to reflect their expanded scope of responsibilities,
their exemplary performance and to more properly align their base compensation
with peer group data. 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 2008
our named executive officers were eligible to receive annual cash incentives
(bonuses) 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 2008 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. The MIP is
based upon
the achievement of two
components: performance objectives (weighted at 80%) and individual strategic
initiatives (weighted at 20%).
The 2008 financial performance
metrics and weighting with respect to each goal were
as follows:
|
·
|
30%—operating
earnings;
|
|
|
|
|
·
|
30%—operating
cash flow (generally defined as earnings before interest, taxes,
depreciation and amortization and non-cash
compensation (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
financial 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 maximum award. The average award for all of our MIP participants
was approximately 69% of the potential maximum awards over the past three
years.
With
respect to the financial performance metrics (which govern 80% of the incentive
payments) (the “financial performance metrics”), in general, no payment 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 applicable
performance target. Incentive payments for performance between 80%
and 90% of the target cannot exceed 10% of the targeted payment. If
the Company or a named executive officer’s business unit achieved 100% or more
of the target performance 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.
The
Compensation Committee approves 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 also uses 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.
Attainment of 2008 Performance
Measures
.
2008
was an exceptionally good year for the Company. It was a year in which we
generated record sales and operating earnings of $2.1 billion and $354 million,
respectively, before a pre-tax impairment charge related to goodwill, completed
a transformational acquisition, generated a record backlog of $2.9 billion and
further buoyed our long-term outlook by accelerating the growth of our unbooked
supplier furnished equipment (SFE) backlog to approximately $2.3
billion. Our unbooked SFE backlog refers to programs awarded to the
Company directly by aircraft manufacturers. These programs position
the Company as exclusive supplier of systems and products for new commercial and
business jet aircraft platforms. Simply put, 2008 was our best year
since the Company was founded in 1987 due to record sales, record operating
earnings, record backlog, an important transformational acquisition and
extraordinary success with our SFE programs. Unfortunately the worst
annual stock market performance and the onset of the deepest recession since the
1930’s caused a dramatic reduction in our share price and resulted in a
pre-tax non-cash impairment charge related to goodwill and intangible
assets of approximately $390 million.
The global
recession has continued to worsen, capital markets remain dysfunctional and
consumer spending is very weak. All of these factors are negatively
impacting global air traffic, and demand for new commercial aircraft and
business jets. While the current outlook is not positive, the actions
we have taken over the past year, provide us with a high level of confidence
that we will be able to successfully navigate our way through the current
downturn, and emerge as a rapidly growing, stronger company.
Importantly,
during 2008 we successfully completed the strategic acquisition of Honeywell’s
Consumables Solutions (HCS) distribution business, substantially improving the
long-term quality and stability of our revenues and earnings. As a
result of the combination of our aerospace consumables business with the
acquired Honeywell aerospace consumables business, we have become the world’s
leading distributor of aerospace fasteners and consumables, supplying
virtually all major airlines, aerospace OEMs and MROs as well as the military
marketplace, and we are a vital distributor for every major fastener
manufacturer in the world. As a result of the combination of the HCS
business with our own leading global distribution business, on a proforma basis
approximately 50% of our consolidated operating earnings in 2008 were generated
by our consumables management business and commerical aircraft segment spares,
and approximately 50% of our business mix is now derived from
consumables.
In
addition, we have expanded our strategic focus on OEM direct, or SFE, for new
aircraft platforms to further support our future revenue
outlook. This is a new, important component of our revenue base that
in the past has not been a significant portion of our business
mix. These OEM direct, or SFE, awards will result in increased
content of the Company products on numerous new aircraft platforms.
Today our
backlog is well diversified from both a geographic and a customer
perspective. Our backlog as of December 31, 2008 was $2.9 billion,
and including unbooked SFE awards of $2.3 billion, was in excess of $5
billion.
From an
operational point of view we remain intensely focused on reducing costs in every
aspect of our business, from back office expenses to sourcing materials with low
cost providers around the globe. This includes an aggressive resizing
of the business that began in the second half of 2008, supply chain management
initiatives which are expected to continue to yield significant savings, and
operational excellence and lean programs focused on improving quality and
customer satisfaction, while at the same time, lowering costs.
We very
successfully refinanced our balance sheet, providing the Company with excellent
liquidity and a very solid capital structure. Our liquidity is
enhanced by our undrawn $350 million revolving credit facility and the fact that
the Company has no debt maturities until 2014.
Despite
the freezing of global credit markets, the dramatic decline in the price of
global equities and the rapid onset of the global recession, our financial
results for 2008 were very strong. In fact, all of our financial
metrics were substantially improved as compared to any prior
year. Excluding the non-cash pre-tax impairment charge related to
goodwill, of approximately $390 million our 2008 revenues, operating earnings,
EBITDA, net earnings, earnings per share (EPS), bookings and backlog (including
SFE programs) were all records for any year in the Company’s
history.
The
foregoing financial discussion is exclusive of the pre-tax impairment charge
related to goodwill of approximately $390 million.
We
generated record revenues of $2.1 billion during 2008. This was 26%
higher than our 2007 revenues. We generated $354 million of operating
earnings in 2008, which also was a record and represented an increase of 43% as
compared with 2007. The 43% increase in operating earnings was driven
primarily by the 26% increase in revenues and a 210 basis point expansion in
operating margin. Our 2008 operating margin of 16.8% reflects a 60
basis point increase in operating margin at the consumables management segment,
a 100 basis point margin expansion at the commercial aircraft segment and a 340
basis point margin expansion at the business jet segment.
Record net
earnings for 2008 of $201 million, or $2.12 per diluted share, increased 36% and
28%, respectively as compared with 2007. Net earnings for 2008
include $10 million of acquisition, integration and transition costs, $2 million
of severance costs and debt prepayment costs of $4 million. Net
earnings and net earnings per diluted share, adjusted to exclude the above
mentioned costs, were $211 million and $2.22 per diluted share,
respectively.
During
2008, we also had outstanding marketing success. We generated $2.2
billion of bookings and ended the year with a backlog of $2.9 billion, up
approximately 32% as compared to our 2007 year-end backlog. Our strategic focus
on OEM direct, or SFE, for new aircraft platforms was particularly successful
during 2008. This new, significant component of our business is
expected to substantially increase revenue content per aircraft on a number of
major new aircraft platforms.
Most
noteworthy, during the third quarter we announced our largest award ever, a $1
billion award for the A350 XWB for our next generation galley
systems. This award taken together with other awards such as the
Company’s award to equip the A350 XWB with our patented passenger oxygen system,
our oxygen/PSU award for the B787 and our new LED cabin lighting systems award
for the next generation Boeing 737, provide excellent long-term platforms for
revenue stability over the coming years for the commercial aircraft
segment.
The
longer-term revenue outlook within the business jet segment is expected to be
fortified by the introduction of several new business jet aircraft types. We
have been selected to deliver major new programs for a number of these new
aircraft types. During the year we launched our new technologically
advanced vacuum waste water management systems business securing launch awards
from Bombardier Learjet, Dassault and Embraer.
Our
unusually strong position on these new commercial and business jet aircraft
platforms bodes well for our future. While the value of our long-term
OEM direct, or SFE, awards currently totals over $2.3 billion, only a very small
portion has been included in our backlog.
We were
among the first of the aerospace companies to address the
downturn. We began early to execute on our plans to re-size our
business based on the expected reduced demand. By the end of 2008 we
had reduced our headcount by approximately 12%. These actions coupled
with an aggressive cost reduction effort in every facet of the business are
expected to continue to help mitigate the impact of lower demand for our
products.
Our
corporate supply chain initiatives generated approximately $35 million in lower
direct material costs during 2008.
Our
operational excellence and lean programs continued to drive lower cost and
margin expansion by improving operating methods and processes. This
is borne out by recent successes at a number of our plants. For
example, at our principal seating facility in Kilkeel, Northern Ireland our
employees’ productivity increased approximately 32%; at our Lenexa, KS facility,
where we manufacture beverage makers and oxygen products, productivity for one
of our key product lines increased by approximately 38%; and at our Nieuwegein
plant in the Netherlands, productivity increased by approximately
20%. These are just a few of the examples of what has been driving
margin expansion for our Company.
We are
well on our way toward integrating the HCS acquisition into our
business. In fact, we now expect that the integration will be
completed approximately one year ahead of schedule and we continue to expect to
achieve our aggressive synergies target. We will have completed the investments
in inventories to bring HCS to our stocking distributor model during the first
quarter of 2009. Notably, many former HCS customers are now very pleased with
our upgraded service quality.
The
following is a summary of our financial performance during 2008 (exclusive of
the pre-tax impairment charge related to goodwill and intangible assets of
approximately $390 million) against the measures set by the Compensation
Committee under the MIP:
|
·
|
Operating
earnings of approximately $354 million increased by 43.2% as compared to
2007, and was above our 2008 target;
|
|
|
|
|
·
|
Operating
cash flow of approximately $159 million increased by approximately $140
million as compared to 2007 as a result of the 25.8% increase in revenues
and despite a $260 million increase in inventories associated with the
product line expansion at our consumables management segment and to
support our record backlog. Operating cash flow was
approximately equal to our 2008 target, as adjusted for the HCS
acquisition and substantially higher than targeted revenue and
backlog;
|
|
|
|
|
·
|
Operating
margin of 16.8% increased by 210 basis points as compared to 2007 and was
above our 2008 target; and
|
|
|
|
|
·
|
Bookings
of $2.2 billion increased by approximately 5% as compared to 2007, and was
above our 2008
target.
|
On
February 4, 2009, the Compensation Committee concluded that in the
aggregate, we exceeded our 2008 MIP performance targets. Considering these
results, achievement of our strategic objectives 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 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 segments or
our Company, as applicable, the Compensation Committee determined an aggregate
cash incentive award for our named executive officers equal to approximately
100% of the total aggregate targeted annual cash incentive opportunity. The
Compensation Committee approved 2008 annual cash incentive payments, expressed
as a percentage of base salary to Messrs. Baughan, McCaffrey, Lieberherr,
Marchetti and Exton, all of which were at targeted levels, were approximately
100%, 100%, 80%, 80%, and 80%, respectively.
The
Compensation Committee believes our CEO had an exceptionally successful year as
evidenced by our very strong financial performance; his leadership in the
development, communication and execution of our strategy; and his role in the
strategic acquisition of HCS (which allowed us to alter our business mix such
that approximately one-half of our business is related primarily to consumables
and spares demand) and the strengthening of our balance sheet (through
financings which increased our liquidity by providing an undrawn $350 million
revolving line of credit and created a capital structure with low cost debt and
no maturities of long-term debt until 2014). As a result, the
Compensation Committee awarded our CEO cash incentive compensation equal to
approximately 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.
2008 Long-Term Equity Incentives
.
Approximately 27% - 56% of the total compensation opportunity provided to our
named executive officers in 2008 was equity-based, excluding the one-time grant
to Mr. Marchetti described below. 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.
2008 Restricted Stock Grants
.
On
November 4, 2008, the Compensation Committee approved grants of restricted stock
and restricted stock units effective as of November 15,
2008. 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 of each year
(or if November 15 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 next trading day following the date of
grant. All grants of restricted stock are made pursuant to our 2005
Long-Term Incentive Plan. Grants were made to approximately 300 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 125% - 280% of each named executive
officer’s base salary, except for Mr. Marchetti, who received 93,428 shares
including
75,000 restricted shares
as part of
a
special
one-time
award.
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 and in the case of
Mr. Marchetti, the special one-time award described in the following
paragraphs.
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. Seventy-five percent of the
annual award to each named executive officer is subject to time-based vesting
and 25% of the annual award is subject to performance-based
vesting. The time-based award vests ratably over a period of four
years. The vesting of the performance-based award is subject to the Company
achieving the annual operating earnings targets established by the Compensation
Committee in each 12-month period ending on September 30th over a four-year
period from the date of grant. Each year, 25% of the award will vest
if 90% or more of the applicable performance target is attained and no vesting
will occur if less than 81% if the applicable target is attained. For
attainment between 81% and 90% of the applicable performance target, between 10%
and 25% of the award will vest (as determined on the basis of linear
interpolation)
.
In August
2008, the Compensation Committee approved a special one-time
restricted stock award to certain key members of our Consumables Management
segment management team that are responsible for the integration of the HCS
acquisition, including Mr. Marchetti. Terms of these awards generally
provide for four year vesting with 25% of the award subject to attainment of
pre-established operating earnings targets. 75% of Mr. Marchetti’s
75,000 share award will vest on December 31, 2010, the expected date of his
retirement; the remaining shares are subject to attainment of a pre-established
operating earnings target for the period from the HCS acquisition date (August
1, 2008) through September 30, 2010.
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 our
named executive officers 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 executives’ base salary for the
remaining term of their respective 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. On December 31, 2008, we amended our employment agreement
with Mr. Marchetti, the terms of which are described in detail under the heading
“Employment, Severance and Change of Control Agreements.” This new agreement was
entered following the acquisition of HCS and to secure Mr. Marchetti’s
assistance during the integration of the two businesses through December 2010,
the expected date of his retirement. In 2008, we modified the employment
agreements with each of our named executive officers to comply with Section 409A
of the Internal Revenue Code.
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.
In the
event of a change in base salary, Mr. Khoury is entitled to supplemental
contributions equal to the difference between prior retirement
contribution payments and the amounts that would have been paid had such
payments been made based on the most recent 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.
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.
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.”
Other Compensation
.
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, we generally reimburse
each of our named executive officers 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.
|
|
|
|
|
·
|
We
provide certain named executive officers with a monthly automobile
allowance, as described below under the heading “Employment, Severance and
Change of Control Agreements.”
|
|
|
|
|
·
|
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
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: (i) the targeted total cash compensation
(including base salary and targeted annual cash incentives) is near the 75
th
percentile; (ii) the targeted total direct compensation (including base salary,
annual cash and long-term incentives) is somewhat below the median; and (iii)
total actual direct compensation (including base salary, annual cash and
long-term incentives) plus retirement contributions, as applicable, is somewhat
below the median of the peer group described below. Mercer also studied our CY
2007 financial performance (the most current data then available) and that of
our peer group, measuring revenue growth, operating income growth, EBITDA
growth, EPS growth, total shareholder return and return on average equity and
determined that we were positioned above the 91
st
percentile of our peer group.
Compensation
Comparison Group
.
T
he compensation
comparison group we used in 2008 was comprised of the following 11 companies in
the aerospace and defense industries:
|
·
|
Goodrich
Corporation
|
|
|
|
|
·
|
Precision
Castparts Corporation
|
|
|
|
|
·
|
Teleflex
Inc.
|
|
|
|
|
·
|
Crane
Co.
|
|
|
|
|
·
|
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 2007 revenues and equity market capitalization of
our peer group were $1.5 billion and $2.3 billion, respectively; our revenues
for the year ended December 31, 2007 were $1.7 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 and
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 2008 study was based on data included in the 2007 annual reports and
2007 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 91
st
percentile of our peer group. The 2008 total direct compensation (including,
where applicable, retirement contributions) for our named executive officers and
the 2008 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, 2009, the market value of Company stock owned
by our named executive officers as a multiple of each of their base salaries
ranged from approximately one and one-half times to five times base
salary. Historically, our executive officers have held ownership
positions in our stock at levels we deemed to be appropriate and accordingly we
have not adopted formal ownership guidelines. 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.”
Tax and Accounting
Considerations
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, which limits the deductibility of certain compensation
payments to our executive officers in excess of $1 million. If compliance with
Section 162(m) conflicts with the compensation philosophy or is
determined not to be in the best interest of stockholders, the Compensation
Committee will abide by its compensation philosophy.
To the
extent that any compensation paid to our named executive officers constitutes a
deferral of compensation within the meaning of Section 409A of the Internal
Revenue Code, the Compensation Committee intends to cause the award to comply
with the requirements of Section 409A and to avoid the imposition of penalty
taxes and interest upon the participant receiving the award.
The
Compensation Committee also takes accounting considerations, including the
impact of SFAS 123(R) into account in structuring compensation programs and
determining the form and amount of compensation awarded.
Report of the Compensation Committee on Executive
Compensation
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis for the year ended December 31, 2008 with management. Based on
the review and discussion, the Compensation Committee has recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in
this Proxy Statement.
|
|
Respectfully
submitted,
|
|
|
The
Compensation Committee
|
|
|
Charles
L. Chadwell
|
|
|
Jonathan
M. Schofield
|
Summary Compensation Table
The
following table sets forth information concerning the total compensation paid to
each of our named executive officers in 2008, 2007 and 2006:
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
|
Stock
Awards
($)(2)
|
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)(1)(3)
|
|
|
All
Other Compensation ($)
|
|
|
|
Total
($)
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
(e)
|
|
|
|
(g)
|
|
|
(i)
|
|
|
|
(j)
|
|
|
Amin
J. Khoury
|
|
2008
|
|
$
|
1,019,580
|
|
|
$
|
3,282,485
|
|
(4)
|
|
$
|
1,050,000
|
|
|
$
|
3,134,125
|
|
(5)
|
|
$
|
8,486,190
|
|
|
Chairman
and Chief Executive
|
|
2007
|
|
|
1,001,200
|
|
|
|
2,905,634
|
|
(4)
|
|
|
1,001,200
|
|
|
|
4,656,784
|
|
(5)
|
|
|
9,564,818
|
|
|
Officer
|
|
2006
|
|
|
904,000
|
|
|
|
1,019,504
|
|
(4)
|
|
|
994,400
|
|
|
|
2,648,301
|
|
(5)
|
|
|
5,566,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Baughan
|
|
2008
|
|
|
523,462
|
|
|
|
378,773
|
|
|
|
|
535,000
|
|
|
|
278,532
|
|
(6)
|
|
|
1,715,767
|
|
|
President
and Chief Operating
|
|
2007
|
|
|
514,000
|
|
|
|
236,173
|
|
|
|
|
400,000
|
|
|
|
112,087
|
|
(6)
|
|
|
1,262,260
|
|
|
Officer
|
|
2006
|
|
|
440,000
|
|
|
|
26,593
|
|
|
|
|
330,000
|
|
|
|
23,723
|
|
(6)
|
|
|
820,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. McCaffrey
|
|
2008
|
|
|
480,270
|
|
|
|
979,831
|
|
(4)
|
|
|
490,500
|
|
|
|
460,761
|
|
(7)
|
|
|
2,411,362
|
|
|
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
|
|
2008
|
|
|
298,928
|
|
|
|
206,474
|
|
|
|
|
270,000
|
|
|
|
25,889
|
|
(8)
|
|
|
801,291
|
|
|
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
|
|
2008
|
|
|
407,390
|
|
|
|
350,895
|
|
|
|
|
335,000
|
|
|
|
27,122
|
|
(9)
|
|
|
1,120,407
|
|
|
Vice
President and General
|
|
2007
|
|
|
400,000
|
|
|
|
181,919
|
|
|
|
|
250,000
|
|
|
|
22,714
|
|
(9)
|
|
|
854,633
|
|
|
Manager
– Commercial Aircraft
|
|
2006
|
|
|
178,291
|
|
|
|
56,032
|
|
|
|
|
140,000
|
|
|
|
44,546
|
|
(9)
|
|
|
418,869
|
|
|
Products
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Marchetti
|
|
2008
|
|
|
362,156
|
|
|
|
606,607
|
|
|
|
|
335,000
|
|
|
|
23,160
|
|
(10)
|
|
|
1,326,923
|
|
|
Vice
President and General
|
|
2007
|
|
|
327,500
|
|
|
|
235,370
|
|
|
|
|
327,500
|
|
|
|
28,819
|
|
(10)
|
|
|
919,189
|
|
|
Manager—Consumables
Management 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, 2008, 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
restricted stock awards granted during and before 2008, 2007 or
2006. Assumptions made in the calculation of these amounts are
included in Note 11 to our audited financial statements for the fiscal
years ended December 31, 2008, 2007 and 2006 included in our annual
report on Form 10-K filed with the Securities and Exchange Commission
on February 26, 2009.
|
|
|
|
|
(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
2008, 2007 and 2006 and were paid on March 13, 2009, 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 2008,
2007 and 2006 were $2,304,116, $2,398,635 and $964,870,
respectively, for Mr. Khoury and $619,232, $644,641 and $259,312,
respectively, for Mr. McCaffrey.
|
|
|
|
|
(5)
|
With
respect to Mr. Khoury, the amount reported for 2008, 2007 and 2006 as
“All Other Compensation” includes $1,561,500, $1,501,800 and
$1,356,000, respectively, for our annual retirement
contributions to his grantor trust; $1,203,950, $2,794,500 and $828,750,
respectively, for supplemental contributions to his grantor
trust; $215,303, $180,785 and $284,376, respectively, representing the
aggregate incremental cost to us for his personal use of the Company
aircraft; $99,595, $125,983 and $126,185, respectively, for estate
planning; $9,200, $9,000 and $7,500, respectively for Company
contributions to our 401(k) Plan; $3,364, $3,116 and $5,113,
respectively, representing payments under our executive medical plan; and
$41,213, $41,590 and $40,738 relating to an automobile and insurance
provided by the Company. 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 2008, 2007 and 2006
as “All Other Compensation” includes $249,075, $83,576 and $0,
respectively, for our annual retirement contributions to his grantor
trust, $9,200, $9,000 and $7,500, respectively for contributions to the
Company’s 401(k) Plan; $3,626, $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 2008, 2007 and 2006
as “All Other Compensation” includes $381,243, $341,967 and $355,278,
respectively, for our annual retirement contributions to his grantor
trust; $9,200, $9,000 and $7,500, respectively, for contributions to the
Company’s 401(k) Plan; $47,150, $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 2008, 2007 and 2006 as
“All Other Compensation” includes $0, $9,399 and $55,474, respectively,
for reimbursement of relocation expenses; $9,200, $9,000 and $6,000,
respectively, for contributions to the Company’s 401(k) Plan; $3,489,
$0 and $0, respectively, representing payments under our executive medical
plan, and an additional amount relating to an automobile
allowance.
|
|
|
|
|
(9)
|
With
respect to Mr. Lieberherr, the amount reported for 2008, 2007 and
2006 as “All Other Compensation” includes $0, $0 and $32,747,
respectively, for reimbursement of relocation expenses; $9,200, $9,000 and
$1,539, respectively, for contributions to the Company’s 401(k) Plan;
$4,722, $514 and $3,660, respectively, representing payments under our
executive medical plan and for payment of COBRA benefits owed to his prior
employer, and an additional amount relating to an automobile
allowance.
|
|
|
|
|
(10)
|
With
respect to Mr. Marchetti, the amount reported for 2008, 2007 and 2006
as “All Other Compensation” includes $9,200, $9,000 and $7,500,
respectively, for contributions to the Company’s
401(k) Plan; $760, $6,619 and $7,489, respectively,
representing payments under our executive medical plan; and an additional
amount relating to an automobile
allowance.
|
Grants of Plan-Based Awards During
2008
The
following table sets forth information concerning incentive awards made to our
named executive officers in 2008. Awards consisted of restricted
stock and cash incentive awards under our MIP as described in detail in our
Compensation Discussion and Analysis.
|
|
|
Estimated Future Payouts Under Non-Equity
Incentive Plan (MIP
or bonus) Awards(1)
|
|
All Other Stock
Awards: Number of
|
|
Grant Date Fair
Value of Stock
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)(2)
|
Target ($)
|
|
Maximum ($)
|
|
Shares of Stock or
Units (#)(3)(5)
|
|
and Option
Awards ($)(4)
|
|
(a)
|
|
(b)
|
|
(c)
|
(d)
|
|
(e)
|
|
(i)
|
|
(l)
|
|
Amin
J. Khoury
|
|
1/1/08
|
|
|
$—
|
|
$1,050,000
|
|
$
|
1,260,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
11/17/08
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
358,109
|
|
|
|
2,915,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Baughan
|
|
1/1/08
|
|
|
—
|
|
535,000
|
|
|
642,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
11/17/08
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
121,622
|
|
|
|
990,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. McCaffrey
|
|
1/1/08
|
|
|
—
|
|
490,500
|
|
|
588,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
11/17/08
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
111,426
|
|
|
|
907,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Werner
Lieberherr
|
|
1/1/08
|
|
|
—
|
|
332,800
|
|
|
416,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
11/17/08
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
63,883
|
|
|
|
520,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Marchetti
|
|
1/1/08
|
|
|
—
|
|
332,000
|
|
|
415,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
8/5/2008
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
75,000
|
(6)
|
|
|
1,931,250
|
|
|
|
|
11/17/08
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
18,428
|
|
|
|
150,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne
Exton
|
|
1/1/08
|
|
|
—
|
|
268,000
|
|
|
335,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
11/17/08
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
51,598
|
|
|
|
420,008
|
|
|
(1)
|
The
amounts shown represent the range of annual cash incentive opportunities
for each named executive officer under our 2008 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, 2008 were approved by
our Compensation Committee at its meeting on November 4,
2008. 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 of each year (or if November 15 is not a business
day, the first business day thereafter). The number of shares
of restricted stock granted is equal to the dollar value approved by our
Compensation Committee divided by the closing price of our common stock on
the date of grant. All grants of restricted stock are made
pursuant to our 2005 Long-Term Incentive Plan.
|
|
|
|
|
(4)
|
The
amounts shown represent the SFAS 123R fair value determined as of the date
of grant. For more information about our adoption of SFAS 123R and how we
value stock-based awards (including assumptions made in such valuation),
refer to Note 11 to our audited financial statements for the fiscal year
ended December 31, 2008 included in our annual report on
Form 10-K filed with the Securities and Exchange Commission on
February 26, 2009.
|
|
|
|
|
(5)
|
75%
of the 2008 annual award is subject to time-based vesting and 25% of the
2008 annual award is subject to performance-based vesting. The
time-based award vests ratably over four years provided the executive is
employed or, as to Mr. Khoury, is providing consulting services on the
applicable vesting date. 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 September 30 each year, and vests over a four-year period subject
to the following conditions: (i) if the Company achieves 100% of its
performance target in an applicable year, 25% of the total
performance-based award will vest in the applicable year; (ii) if the
Company achieves 90% of its performance target in an applicable year, 10%
of the total performance-based award will vest in the applicable year;
(iii) if the Company achieves between 90% and 100% of its performance
target in an applicable year, between 10% and 25% of the total
performance-based award will vest in the applicable year; and (iv) if the
Company achieves less than 90% of its performance target in an applicable
year, the executive forfeits the portion of the award that would have
vested in the applicable year.
|
|
|
|
|
(6)
|
Mr. Marchetti
was granted 75,000 shares of restricted stock in connection with his
efforts related to the acquisition and integration of the HCS
business. 75% of this award is subject to time-based vesting
and 25% is subject to performance-based vesting. The
time-based portion of the award vests on December 31, 2010. The vesting of
the performance-based award is subject to the consumables management
segment achieving an operating earnings target established by the
Compensation Committee over the period from July 1, 2008 through December
31, 2010, the expected date of his
retirement.
|
2008 Outstanding Equity Awards at Fiscal
Year-End
The
following table provides information concerning outstanding equity awards held
by each named executive officer as of December 31, 2008, which include
unvested shares of restricted stock.
|
|
Stock
Awards
|
|
|
Name
|
|
|
Grant
Date
|
|
|
Number of
Shares or Units
of Stock That
Have Not Vested
(#)
(1) (2)
|
|
Market Value of
Shares or Units
of Stock That
Have Not Vested
($)(3)
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
(d)
|
|
|
Amin
J. Khoury
|
|
|
|
11/17/2008
|
|
|
|
|
358,109
|
|
|
|
$2,753,858
|
|
|
|
|
|
|
|
11/15/2007
|
|
|
|
|
30,685
|
|
|
|
235,968
|
|
|
|
|
|
|
|
11/15/2006
|
|
|
|
|
33,494
|
|
|
|
257,569
|
|
|
|
|
|
|
|
7/31/2006
|
|
|
|
|
193,938
|
|
|
|
1,491,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Baughan
|
|
|
|
11/17/2008
|
|
|
|
|
121,622
|
|
|
|
935,273
|
|
|
|
|
|
|
|
11/15/2007
|
|
|
|
|
9,020
|
|
|
|
69,364
|
|
|
|
|
|
|
|
11/15/2006
|
|
|
|
|
16,302
|
|
|
|
125,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. McCaffrey
|
|
|
|
11/17/2008
|
|
|
|
|
111,426
|
|
|
|
856,866
|
|
|
|
|
|
|
|
11/15/2007
|
|
|
|
|
8,271
|
|
|
|
63,604
|
|
|
|
|
|
|
|
11/15/2006
|
|
|
|
|
15,932
|
|
|
|
122,517
|
|
|
|
|
|
|
|
7/31/2006
|
|
|
|
|
52,120
|
|
|
|
400,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne
Exton
|
|
|
|
11/17/2008
|
|
|
|
|
51,598
|
|
|
|
396,789
|
|
|
|
|
|
|
|
11/15/2007
|
|
|
|
|
4,814
|
|
|
|
37,020
|
|
|
|
|
|
|
|
11/15/2006
|
|
|
|
|
9,262
|
|
|
|
71,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Werner
Lieberherr
|
|
|
|
11/17/2008
|
|
|
|
|
63,883
|
|
|
|
491,260
|
|
|
|
|
|
|
|
11/15/2007
|
|
|
|
|
12,255
|
|
|
|
94,241
|
|
|
|
|
|
|
|
|
|
|
|
|
4,075
|
|
|
|
31,337
|
|
|
|
|
|
|
|
7/5/2006
|
|
|
|
|
9,170
|
|
|
|
70,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Marchetti
|
|
|
|
11/17/2008
|
|
|
|
|
18,428
|
|
|
|
141,711
|
|
|
|
|
|
|
|
8/5/2008
|
|
|
|
|
75,000
|
(4)
|
|
|
576,750
|
|
|
|
|
|
|
|
11/15/2007
|
|
|
|
|
5,733
|
|
|
|
44,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Commencing
in 2008, 75% of the annual restricted stock award is subject to
time-based vesting and 25% of the annual restricted stock award is subject
to performance-based vesting. The time-based award vests
ratably over four years provided the executive is employed or, as to Mr.
Khoury, is providing consulting services on the applicable vesting
date. 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 September 30th
each year, and vests over a four-year period subject to the following
conditions: (i) if the Company achieves 100% of its performance target in
an applicable year, 25% of the total performance-based award will vest in
the applicable year; (ii) if the Company achieves between 90% of its
performance target in an applicable year, 10% of the total
performance-based award will vest in the applicable year; (iii) if the
Company achieves between 90% and 100% of its performance target in an
applicable year, between 10% and 25% of the total performance-based award
will vest in the applicable year; and (iv) if the Company achieves less
than 90% of its performance target in an applicable year, the executive
forfeits the portion of the award that would have vested in the applicable
year.
|
|
|
|
|
(2)
|
With
respect to awards granted prior to 2008, 25% of the shares 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.
|
|
|
|
|
(3)
|
The
market value of unvested shares is based on the closing share price of
$7.69, which was the closing price of our common stock as quoted on the
NASDAQ National Market on December 31, 2008.
|
|
|
|
|
(4)
|
Mr. Marchetti
was granted 75,000 shares of restricted stock in connection with his
efforts related to the acquisition and integration of the HCS
business. 75% of this award is subject to time-based vesting
and 25% is subject to performance-based vesting. The time-based
portion of the award vests on December 31, 2010. The vesting of
the performance-based award is subject to the consumables management
segment achieving an operating earnings target established by the
Compensation Committee over the period from July 1, 2008 through December
31, 2010, the expected date of his
retirement.
|
Option Exercises and Stock Vested Table During
2008
The
following table provides information concerning vesting of stock awards held by
each named executive officer during 2008. No options were outstanding
in 2008.
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
|
|
Value Realized
on Exercise
|
|
Number of
Shares
Acquired
on Vesting
|
|
Value Realized
on Vesting
|
|
|
(a)
|
|
(b)(#)
|
|
(c)($)
|
|
(d)(#)(1)
|
|
(e)($)(2)
|
|
|
Amin
J. Khoury
|
|
|
—
|
|
|
|
$ —
|
|
|
|
123,946
|
|
|
|
$2,712,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Baughan
|
|
|
—
|
|
|
|
—
|
|
|
|
11,158
|
|
|
|
88,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. McCaffrey
|
|
|
—
|
|
|
|
—
|
|
|
|
36,785
|
|
|
|
756,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne
Exton
|
|
|
—
|
|
|
|
—
|
|
|
|
6,236
|
|
|
|
49,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Werner
Lieberherr
|
|
|
—
|
|
|
|
—
|
|
|
|
10,708
|
|
|
|
148,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
A. Marchetti
|
|
|
—
|
|
|
|
—
|
|
|
|
10,248
|
|
|
|
81,091
|
|
|
|
(1)
|
Represents
the shares of restricted stock that vested during 2008.
|
|
|
|
|
(2)
|
Represents
the number of shares of restricted stock that vested during 2008
multiplied by the closing price of our common stock on NASDAQ on the
applicable vesting
date.
|
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 nonqualified 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 and restated as of December 31, 2008, 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 our CEO will receive a base
salary of $1,041,000 per year (as of July 1, 2008), subject to cost of
living and other increases as determined from time to time by our Board of
Directors. Our CEO 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, 2008 through June 30, 2008, our CEO’s annual base salary
was $1,001,200. On July 1, 2008 his base salary was adjusted to
$1,041,000. Our CEO received a bonus of $1,050,000 for 2008. Our CEO
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 automobile insurance at a cost of approximately $40,000 per
year.
Our
agreement with our CEO 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. In the event of a change in base salary,
our CEO is entitled to supplement contributions equal to the difference between
all prior retirement contribution payments and the amounts that would have been
paid had such payments been made based on the most recent 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. 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 his 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 a
termination of his employment for any reason.
If our
CEO’s employment is terminated for any reason other than by him without good
reason, he will be eligible to receive any accrued but unpaid bonus for the
prior fiscal year.
Pursuant
to the agreement, if our CEO’s employment with us terminates for any reason
other than death, incapacity or his resignation without good reason, 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 our CEO 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 our CEO. 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 also 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.
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
contemporaneously with 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 contemporaneously
with 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 as described
above. However, if our CEO’s employment is terminated by him for good
reason following a change of control, he will receive a lump sum amount equal to
the sum of the annual base salary he would have received had he remained
employed through the third anniversary of the termination date, the entire
unpaid balance of his retirement compensation with contributions made as if he
had remained employed through the third anniversary of the termination date, and
a severance payment of one times his base salary in effect for that
year. 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. In the event the Company determines it likely that a change
of control will occur, it will establish a grantor trust to secure any potential
obligations to the CEO associated with the change of
control.
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
amount equal to two times the annual base salary that he would have received had
he remained employed through the third anniversary of his termination of
employment, payable in a lump sum. 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
and restated as of December 31, 2008. 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 receives an annual salary of $534,500 per
year (as of July 1, 2008), subject to cost of living increases and
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 the Compensation
Committee, 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, our COO’s annual base salary was
$514,000. Our COO’s base salary was adjusted to $534,500 on July 1,
2008, and he received a bonus of $535,000 for fiscal year 2008.
Our
agreement with our COO provides that we will make an annual retirement
contribution to an account, which may be funded by 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 in April 2012 provided that our COO remains employed through this
date. Vesting of the accrued retirement contributions will accelerate
upon the termination of our COO’s employment due to his death, incapacity, by us
without cause or upon a change of control. We fund these
contributions into a rabbi trust on a quarterly basis in
arrears. 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. Upon vesting, the Company is required to
establish an irrevocable retirement trust into which contributions will be
made.
In the
event our COO’s employment is terminated for any reason other than his voluntary
termination without good reason or a termination by the Company for cause, he
will be entitled to any accrued but unpaid bonus for the prior year and any
amounts in his retirement account.
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
In
addition to the benefits described above, our COO will be entitled to receive
the following benefits and payments upon the occurrence of the following
specified events:
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. Our COO and his eligible dependents will also be
eligible to receive medical, dental and health benefits for two years following
the termination.
Change of Control.
If a
change of control occurs (as defined under Section 409A of the Internal
Revenue 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 and his dependents’ medical, dental and health benefits to
the extent permitted under Section 409A of the Internal Revenue
Code. The Company will establish a grantor trust for any change of
control payments if it determines that a change of control is likely to
occur.
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.
Voluntary 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. He will also forfeit any unvested amounts
in his retirement account.
Thomas P.
McCaffrey
.
Mr. Thomas P. McCaffrey
is party to an employment agreement with us, amended and restated as of December
31, 2008 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 $490,500 per year (as of
July 1, 2008), 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, 2008 through June 30, 2008, our CFO’s annual base salary was
$471,500. Our CFO’s base salary was adjusted to $490,500 on July 1,
2008 and he received a bonus of $490,500 for fiscal year 2008.
Our
agreement with our CFO 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. 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, or as otherwise provided
pursuant to the terms of his grantor trust.
In the
event our CFO terminates employment for any reason other than a termination for
cause, he will be entitled to any accrued but unpaid bonus for the prior year
and any amounts in his retirement account.
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.
Our CFO is
also party to the Company’s standard proprietary information and confidentiality
agreement.
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; Resignation
with Good Reason.
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 contemporaneously with 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, contemporaneously with a
change of control transaction, our CFO’s employment is terminated for any
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
contemporaneously with 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 a
lump sum. 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 amended and
restated as of December 9, 2008, 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 $335,000 per year 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, 2008 through June 30,
2008, Mr. Exton’s annual base salary was $275,000. Mr. Exton’s
base salary was adjusted to $335,000 on August 1, 2008 and he received a bonus
of $270,000 for fiscal 2008.
Upon his
death, Mr. Exton is entitled to a lump-sum amount equal to the salary that
he would have received had he remained employed through the remainder of the
then-applicable term. In the event of the termination of
Mr. Exton’s employment due to his incapacity, Mr. Exton is entitled to
a lump-sum amount equal to the salary that he would have received had he
remained employed through the remainder of the then-applicable term of the
agreement as well as the continuation of benefits through the agreement
termination date, subject to mitigation from alternative
employment. In addition, pursuant to the terms of the applicable
equity award agreements, 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.
In the
event that we terminate Mr. Exton’s employment without cause, he will be
entitled to continue to receive medical and dental benefits, for the remainder
of the then-applicable employment term, subject to mitigation from alternative
employment and a lump-sum payment equal to the sum of his base salary for one
year and his base salary for the then-remaining term of the
agreement.
Following
a change of control, if 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 for the
then-remaining term of the agreement. He will also be entitled to
continue to receive medical and dental benefits during the remainder of his
employment term, or, if earlier, until he becomes eligible to participate in the
plans of a subsequent employer. In addition, pursuant to the terms of
the applicable equity award agreements, Mr. Exton will be entitled to the
immediate vesting of all outstanding shares of restricted stock.
If Mr.
Exton is terminated by us for cause or resigns for any reason other than good
reason upon change of control, he will not be entitled to any further
compensation and benefits other than as set forth in any applicable plans,
programs or arrangements.
Mr. Exton
is also party to the Company’s standard proprietary information and
confidentiality agreement.
Werner
Lieberherr.
Mr. Lieberherr is party to an employment
agreement amended and restated as of December 9, 2008, 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 $416,000 per year
(as of July 1, 2008), 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, 2008 through June 30,
2008, Mr. Lieberherr’s annual base salary was $400,000. Mr.
Lieberherr’s base salary was adjusted to $416,000 on July 1, 2008 and he
received a bonus of $335,000 for fiscal year 2008.
Upon his
death, Mr. Lieberherr’s designee is entitled to an amount equal to the
salary that he would have received had he remained employed through the
remainder of the then-applicable term. In the event of the
termination of Mr. Lieberherr’s employment due to his incapacity, he will
receive a lump-sum payment representing his base salary and automotive allowance
for the then-remaining term of the agreement, as well as the continuation of
benefits through the agreement termination date, subject to mitigation from
alternative employment. In addition, pursuant to the terms of the
applicable equity award agreements, upon a termination of his employment due to
death or disability, Mr. Lieberherr will be entitled to the immediate
vesting of all outstanding shares of restricted stock or other equity
awards.
In the
event that we terminate Mr. Lieberherr’s employment without cause, he will be
entitled to continue to receive medical and dental benefits for the remainder of
the then-applicable employment term, subject to mitigation from alternative
employment and a lump-sum payment equal to the sum of his base salary for one
year and his base salary for the then-remaining term of the
agreement.
In the
event that following a change of control, Mr. Lieberherr 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, in addition to medical and dental benefits for the
then-remaining term of the agreement, subject to mitigation from alternative
employment. Upon a change of control, Mr. Lieberherr will be
entitled to the immediate vesting of all outstanding shares of restricted stock
or other equity awards.
Mr.
Lieberherr is also party to the Company’s standard proprietary information and
confidentiality agreement.
Robert A.
Marchetti.
Mr. Marchetti is party to an employment
agreement dated December 30, 2008 effective for a two-year period ending
December 31, 2010. Under the terms of his employment agreement,
Mr. Marchetti receives an annual salary of $415,000 per year (as of
August 1, 2008), subject to adjustment from time to
time. Mr. Marchetti is 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, 2008 through June 30,
2008, Mr. Marchetti’s annual base salary was $327,500. Mr.
Marchetti’s base salary was adjusted to $415,000 on August 1, 2008 and he
received a bonus of $335,000 for fiscal 2008.
In
accordance with the employment agreement, if Mr. Marchetti remains employed
through the expiration date of the agreement, he will be entitled to a lump-sum
payment of $415,000 (“Service Payment”). If Mr. Marchetti is
terminated without cause prior to the expiration of the agreement, he will be
entitled to the full Service Payment. Additionally, upon the
expiration of the employment term on December 31, 2010, the Company will engage
Mr. Marchetti to provide consulting services for a period of two years for a
monthly consulting fee of $21,067. If Mr. Marchetti incurs a
separation from service for any reason prior to December 31, 2010, the Company
will not be obligated to engage him to provide the consulting
services.
Upon his
death, Mr. Marchetti’s designee is entitled to a lump-sum amount equal to
the salary that he would have received had he remained employed through the
remainder of the then-applicable term. In the event of the
termination of Mr. Marachetti’s employment due to his incapacity,
Mr. Marchetti is entitled to a lump-sum amount equal to the salary that he
would have received had he remained employed through the remainder of the
then-applicable term of the agreement as well as the continuation of benefits
through December 12, 2012, subject to mitigation from alternative
employment. Upon a termination of his employment due to death or
disability, Mr. Marchetti will be entitled to the immediate vesting of all
outstanding shares of restricted stock or other equity awards.
Following
a change of control, if Mr. Marchetti 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, continuation of his base
salary for the then-remaining term of the agreement, and his target incentive
bonus for the year in which the termination occurs. Mr. Marchetti will also be
entitled to a continuation of benefits through December 31, 2012, subject to
mitigation from alternative employment. In addition, pursuant to the
terms of the applicable equity award agreements, upon a change of control,
Mr. Marchetti will be entitled to the immediate vesting of all outstanding
shares of restricted stock.
If, at any
time, Mr. Marchetti is terminated by us for cause or resigns for any reason
other than good reason upon a change of control, he will not be entitled to any
further compensation and benefits other than described above or as set forth in
any applicable plans, programs or arrangements.
Mr.
Marchetti is also party to the Company’s standard proprietary information and
confidentiality 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
generally assume that the named executive officer’s employment terminated on
December 31, 2008 and, if applicable, that the change of control occurred
on December 31, 2008. In addition, for purposes of the calculations,
we assume that the fair market value of our common stock was $7.69, which was
the closing price of our common stock as quoted on the NASDAQ National Market on
December 31, 2008.
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, 2008, regardless of whether a termination event
occurred on such date (e.g., benefits the executive would have received even if
he voluntarily resigned on the assumed date of the change of control), 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, 2008.
|
|
|
|
|
·
|
Vested
Equity Awards
.
Once vested,
restricted stock awards are not forfeitable. The number and
fair market value of all shares of restricted stock that were vested as of
December 31, 2008 are set forth above in the Outstanding Equity
Awards at Fiscal Year End Table.
|
|
|
|
|
·
|
Life
Insurance
.
Each of the
named executive officers is entitled to receive Company paid group term
life insurance of one times his or her base salary. This plan is
applicable to all of our employees on a nondiscriminatory basis.
|
|
|
|
|
·
|
Death
Benefit Agreements
.
We have
entered into death benefit agreements with each of Messrs. Khoury,
Baughan and McCaffrey pursuant to which their designated beneficiary will
receive a death benefit of $3,000,000, $1,500,000 and $1,000,000,
respectively, upon their death at 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
Arrangements
.
|
|
|
|
|
|
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 except his resignation without
good reason or his incapacity. 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.
|
|
|
|
|
|
Pursuant
to his employment agreement, Mr. Marchetti has agreed to provide
consulting services to us for two years commencing on December 31, 2010
(the expiration of his term of employment) for a monthly consulting fee of
$27,067. If Mr. Marchetti incurs a separation from service for any reason
prior to December 31,2010, he will not be retained as a
consultant.
|
|
|
|
|
·
|
Retirement
Compensation
. Pursuant to their employment
agreements, Messrs. Khoury, Baughan and McCaffrey are entitled to receive
benefits as discussed in detail in our Compensation Discussion and
Analysis. As Messrs. Khoury and McCaffrey are fully vested in these
benefits, these amounts are not included in the tables below. Mr. Baughan
vests in his benefits on April 1, 2012. However, vesting will accelerate
upon a termination of his employment due to his death, incapacity, by us
without cause or upon a change in control. As a result, these amounts are
included in the table below.
|
The
amounts shown in the tables below represent summary estimates of the payments to
be made upon each specified termination event as if the event occurred on
December 31, 2008 and do not reflect any actual payments to be received by the
named executive officers:
Amin
J. Khoury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
of Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contempraneous
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
Contemporaneous
|
|
|
|
|
|
Compensation
|
|
Voluntary
|
|
|
|
|
|
|
|
|
Involuntary
|
|
|
Termination/
|
|
|
Resignation
With
|
|
|
Remain
|
|
|
Element
|
|
Resignation
|
|
|
Incapacity
|
|
|
Death
|
|
|
Termination
|
|
|
Resignation
|
|
|
Good
Reason
|
|
|
Employed
|
|
|
Lump-sum
of Salary for Contract Term/Severance Payment
|
|
$
|
1,041,000
|
|
|
$
|
6,246,000
|
|
|
$
|
3,123,000
|
|
|
$
|
4,164,000
|
|
|
$
|
1,041,000
|
|
|
$
|
4,164,000
|
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
--
|
|
|
|
1,050,000
|
|
|
|
1,050,000
|
|
|
|
1,050,000
|
|
|
|
1,050,000
|
|
|
|
1,050,000
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
Contribution
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
4,684,500
|
|
|
|
--
|
|
|
|
4,684,500
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Payments
|
|
|
1,041,000
|
|
|
|
7,296,000
|
|
|
|
4,173,000
|
|
|
|
9,898,500
|
|
|
|
2,091,000
|
|
|
|
9,898,500
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
of Unvested Equity Awards
|
|
|
--
|
|
|
|
4,738,778
|
|
|
|
4,738,778
|
|
|
|
4,738,778
|
|
|
|
4,738,778
|
|
|
|
4,738,778
|
|
|
|
4,738,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Gross-up
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
1,041,000
|
|
|
$
|
12,034,778
|
|
|
$
|
8,911,778
|
|
|
$
|
14,637,278
|
|
|
$
|
6,829,778
|
|
|
$
|
14,637,278
|
|
|
$
|
4,738,778
|
|
Michael
B. Baughan
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
of Control
|
|
|
|
|
Resignation/
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Resignation/
|
|
|
Termination
|
|
|
Compensation
|
|
Termination
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
Remain
|
|
|
Without
|
|
|
Element
|
|
for
Cause
|
|
|
Incapacity
|
|
|
|
Death
|
|
|
Cause
|
|
|
Employed
|
|
|
Cause
|
|
|
Lump-sum
of Salary for Contract Term/Severance Payment
|
|
$
|
--
|
|
|
$
|
1,603,500
|
|
|
|
$
|
1,603,500
|
|
|
$
|
1,603,500
|
|
|
$
|
--
|
|
|
$
|
1,603,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
--
|
|
|
|
535,000
|
|
|
|
|
535,000
|
|
|
|
535,000
|
|
|
|
--
|
|
|
|
535,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
Contribution
|
|
|
--
|
|
|
|
487,917
|
|
|
|
|
487,917
|
|
|
|
487,917
|
|
|
|
--
|
|
|
|
487,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
Continuation
|
|
|
--
|
|
|
|
65,927
|
|
(1)
|
|
|
26,327
|
|
|
|
26,327
|
|
|
|
--
|
|
|
|
26,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Payments
|
|
|
--
|
|
|
|
2,692,344
|
|
|
|
|
2,652,744
|
|
|
|
2,652,744
|
|
|
|
--
|
|
|
|
2,652,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
of Unvested Equity Awards
|
|
|
--
|
|
|
|
1,129,999
|
|
|
|
|
1,129,999
|
|
|
|
1,129,999
|
|
|
|
1,129,999
|
|
|
|
1,129,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Gross-up
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
--
|
|
|
$
|
3,822,343
|
|
|
|
$
|
3,782,743
|
|
|
$
|
3,782,743
|
|
|
$
|
1,129,999
|
|
|
$
|
3,782,743
|
|
(1)
Benefit continuation for incapacity includes $39,600 automobile
allowance.
Thomas
P. McCaffrey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
of Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contemporaneous
|
|
|
|
|
|
|
|
Resignation
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
|
Resignation/
|
|
|
Compensation
|
|
Termination
|
|
|
Without
Good
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
Remain
|
|
|
Involuntary
|
|
|
Element
|
|
For
Cause
|
|
|
Reason
|
|
|
Incapacity
|
|
|
|
Death
|
|
|
Cause
|
|
|
Employed
|
|
|
Termination
|
|
|
Lump-sum
of Salary for Contract Term/Severance Payment
|
|
$
|
--
|
|
|
$
|
490,500
|
|
|
$
|
1,471,500
|
|
|
|
$
|
1,471,500
|
|
|
$
|
2,452,500
|
|
|
$
|
--
|
|
|
$
|
981,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
--
|
|
|
|
490,500
|
|
|
|
490,500
|
|
|
|
|
490,500
|
|
|
|
490,500
|
|
|
|
--
|
|
|
|
490,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
Continuation
|
|
|
--
|
|
|
|
--
|
|
|
|
148,728
|
|
(2)
|
|
|
109,128
|
|
|
|
109,128
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
Contribution
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
735,750
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Payments
|
|
|
--
|
|
|
|
981,000
|
|
|
|
2,110,728
|
|
|
|
|
2,071,128
|
|
|
|
3,787,878
|
|
|
|
--
|
|
|
|
1,471,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
of Unvested Equity Awards
|
|
|
--
|
|
|
|
--
|
|
|
|
1,443,790
|
|
|
|
|
1,443,790
|
|
|
|
1,443,790
|
|
|
|
1,443,790
|
|
|
|
1,443,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Gross-up
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
--
|
|
|
$
|
981,000
|
|
|
$
|
3,554,518
|
|
|
|
$
|
3,514,918
|
|
|
$
|
5,231,668
|
|
|
$
|
1,443,790
|
|
|
$
|
2,915,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
Benefit continuation for incapacity includes $39,600 automobile
allowance.
Wayne
Exton
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
Change
of Control
|
|
|
|
|
Resignation/
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Resignation/
|
|
|
Termination
|
|
|
Compensation
|
|
Termination
for
|
|
|
|
|
|
|
|
|
Without
|
|
|
Remain
|
|
|
Without
|
|
|
Element
|
|
Cause
|
|
|
Incapacity
|
|
|
Death
|
|
|
Cause
|
|
|
Employed
|
|
|
Cause
|
|
|
Lump-sum
of Salary for Contract Term/Severance Payment
|
|
$
|
--
|
|
|
$
|
110,137
|
|
|
$
|
110,137
|
|
|
$
|
445,137
|
|
|
$
|
--
|
|
|
$
|
445,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
Continuation
|
|
|
--
|
|
|
|
2,260
|
|
|
|
--
|
|
|
|
2,260
|
|
|
|
--
|
|
|
|
2,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Payments
|
|
|
--
|
|
|
|
112,397
|
|
|
|
110,137
|
|
|
|
447,397
|
|
|
|
--
|
|
|
|
447,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
of Unvested Equity Awards
|
|
|
--
|
|
|
|
505,033
|
|
|
|
505,033
|
|
|
|
--
|
|
|
|
505,033
|
|
|
|
505,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
--
|
|
|
$
|
617,430
|
|
|
$
|
615,170
|
|
|
$
|
447,397
|
|
|
$
|
505,033
|
|
|
$
|
952,430
|
|
Werner
Lieberherr
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
Change
of Control
|
|
|
|
|
Resignation/
|
|
|
|
|
|
|
|
Termination
|
|
|
Resignation/
|
|
|
Termination
|
|
|
Compensation
|
|
Termination
|
|
|
|
|
|
|
|
Without
|
|
|
Remain
|
|
|
Without
|
|
|
Element
|
|
for
Cause
|
|
Incapacity
|
|
|
Death
|
|
|
Cause
|
|
|
Employed
|
|
|
Cause
|
|
|
Lump-sum
of Salary for Contract Term/Severance Payment
|
|
$
|
--
|
|
$
|
210,849
|
|
|
$
|
210,849
|
|
|
$
|
626,849
|
|
|
$
|
--
|
|
|
$
|
626,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
Continuation
|
|
|
--
|
|
|
13,918
|
(3)
|
|
|
6,690
|
|
(3)
|
|
7,228
|
|
|
|
--
|
|
|
|
7,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Payments
|
|
|
--
|
|
|
224,767
|
|
|
|
217,539
|
|
|
|
634,077
|
|
|
|
--
|
|
|
|
634,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
of Unvested Equity Awards
|
|
|
--
|
|
|
687,355
|
|
|
|
687,355
|
|
|
|
--
|
|
|
|
687,355
|
|
|
|
687,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
--
|
|
$
|
912,122
|
|
|
$
|
904,894
|
|
|
$
|
634,077
|
|
|
$
|
687,355
|
|
|
$
|
1,321,432
|
|
(3) Benefit continuation for incapacity
and death includes $6,690 automobile allowance.
Robert
A. Marchetti
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
of Control
|
|
|
|
|
Voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
|
|
Resignation/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Without
|
|
|
Compensation
Element
|
|
Termination
for
Cause
|
|
|
Incapacity
|
|
|
Death
|
|
|
|
|
|
|
|
|
Cause/Resignation
with Good Reason
|
|
|
Lump-sum
of Salary for Contract Term/Severance Payment
|
|
$
|
--
|
|
|
$
|
830,000
|
|
|
$
|
830,000
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
1,245,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full
Service Payment
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
415,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
Cash Incentive Compensation
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
335,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
Continuation
|
|
|
--
|
|
|
|
22,686
|
|
|
|
--
|
|
|
|
22,686
|
|
|
|
--
|
|
|
|
22,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Cash Payments
|
|
|
--
|
|
|
|
852,686
|
|
|
|
830,000
|
|
|
|
437,686
|
|
|
|
--
|
|
|
|
1,602,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
of Unvested Equity Awards
|
|
|
--
|
|
|
|
762,548
|
|
|
|
762,548
|
|
|
|
--
|
|
|
|
762,548
|
|
|
|
762,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
--
|
|
|
$
|
1,615,234
|
|
|
$
|
1,592,548
|
|
|
$
|
437,686
|
|
|
$
|
762,548
|
|
|
$
|
2,365,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, Robert Khoury, Chadwell, Schofield and Wegner with respect to
quarterly allocations of deferred shares under the Directors Plan from 2001 to
2006 were filed after the relevant due dates. To the Company’s
knowledge, during 2007 and 2008, 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
RATIFICATION
OF APPOINTMENT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit
Committee has appointed Deloitte & Touche LLP as independent registered
public accounting firm to audit the consolidated financial statements for the
year ending December 31, 2009 and presents this appointment to the stockholders
for ratification.
Although
stockholder approval of this appointment is not required, the Audit Committee
and the Board of Directors believe that submitting the appointment to the
stockholders for ratification is a matter of good corporate
governance. If the stockholders do not ratify the appointment, the
Audit Committee will review its future selection of independent registered
public accounting firm, but still may retain them. Even if the
appointment is ratified, the Audit Committee, at its discretion, may change the
appointment at any time during the year if it determines that such a change
would be in the best interests of the Company and its stockholders.
Deloitte
& Touche LLP acted as our independent registered public accounting firm for
the 2008 fiscal year. In addition to its audit of our consolidated
financial statements, Deloitte & Touche LLP also audited the financial
statements of our Employee Stock Purchase Plan and performed certain non-audit
services.
Representatives
of Deloitte & Touche LLP are expected to be present at the annual meeting,
will have the opportunity to make a statement if they desire to do so and will
be available to respond to questions.
For
information concerning the appointment of Deloitte & Touche LLP, see Report
of the Audit Committee of the Board of Directors on page 9. For
information concerning fees paid to Deloitte & Touche LLP, see Principal
Accountant Fees and Services on page 46.
The
affirmative vote of a majority of the votes present, in person or by proxy and
properly cast at the meeting, is required to ratify the appointment of the
independent registered public accounting firm.
THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF DELOITTE &
TOUCHE LLP.
PROPOSAL NO. 3
APPROVAL
OF AN AMENDMENT OF THE
BE
AEROSPACE, INC. 2005 LONG-TERM INCENTIVE PLAN
The Board
of Directors has unanimously approved, subject to stockholder approval, the
following amendments to the Company’s 2005 Long-Term Incentive Plan, as amended
and restated (the “2005 Plan”):
|
·
|
An increase in the
number of shares of common stock available for awards under the 2005 Plan
from 3,000,000 to 7,500,000;
|
|
|
|
|
·
|
An
increase in the number of shares of common stock that may be subject to
restricted stock, restricted stock units and other awards payable in
shares of common stock under the 2005 Plan from 3,000,000 to 7,500,000
shares;
|
|
|
|
|
·
|
An
increase in the individual annual award limit with respect to options and
stock appreciation rights payable in shares of common stock under the 2005
Plan from 100,000 to 250,000: and
|
|
|
|
|
·
|
An
increase in the individual annual award limit with respect to restricted
stock, restricted stock units and other awards payable in shares of common
stock under the 2005 Plan from 500,000 to 750,000
shares.
|
The 2005
Plan, which was originally approved by the Company’s stockholders in
July 2005 and amended in 2006, was established for two
reasons. First, the 2005 Plan promotes the long-term success of the
Company by providing eligible individuals with the opportunities to obtain a
proprietary interest in the Company through the grant of equity-based
awards. These awards will provide participants with incentives to
contribute to the Company’s long-term growth and
profitability. Second, the 2005 Plan will assist the Company in
attracting, retaining and motivating highly qualified individuals who are in a
position to make significant contributions to the Company. In 2008,
the Company granted equity awards to approximately 300 employees representing
approximately 4% of our workforce. Of the 2,674,384 shares underlying
equity awards granted in 2008, less than 30% were granted to our named executive
officers.
The Board
of Directors believes that the proposed amendments are essential to the
Company’s continued success and are vital to its ability to attract and retain
highly skilled employees. The Board of Directors believes that the
proposed amendments will provide the Company with flexibility to adopt equity
compensation practices to reflect changes in the Company’s business conditions,
the regulatory environment and the markets for labor in which the Company
competes. The use of equity as part of the Company’s compensation
program is critical to the historical and continued success of the
Company. Our equity awards foster an ownership culture among
employees by aligning the financial interests of employees with those of our
shareholders. Equity awards also help motivate employees to perform
at peak levels because the value of these awards is linked to the Company’s
long-term performance.
The terms
of our equity awards are also designed to protect stockholder
interests. The Compensation Committee determines the vesting and
cancellation provisions for annual equity awards. The awards
generally vest in four equal annual installments commencing on the first
anniversary of the date of grant with accelerated vesting upon a change of
control of the Company. In general, if an employee is terminated for
any reason other than due to death or disability, the unvested portion of the
employee’s equity award will be cancelled. In addition, commencing in
2008, vesting of a portion of the equity awards granted to certain employees was
also tied to the attainment of specified annual EBITDA (as defined)
targets.
The
proposed amendments to the 2005 Plan reflect the environment in which the
Company operates. Due to the decline in our stock price as a result
of the depressed market,
the Company does not
have a sufficient number of shares available under the 2005 Plan to maintain the
historical equity compensation grant practices. Since 2007, the
Company has utilized restricted stock as its primary form of equity compensation
award. In 2008, the Company granted restricted stock units, or RSUs,
to certain employees who are not our named executive officers. The
RSUs will settle in Company common stock or, if there are an insufficient number
of shares available under the 2005 Plan on the applicable settlement date, in
cash. If the proposed amendments are not approved, the RSUs will
likely need to be settled in cash. In addition, if the proposed
amendments are not approved, the Company will, in the future, be compelled to
either (i) grant cash-settled RSUs or other cash-settled awards or (ii) increase
the cash component of incentive compensation, thus reducing the alignment of
employee and stockholder interests and losing a critical recruiting, retention
and motivation tool. For accounting purposes, cash-settled awards are
recorded as liabilities prior to their settlement, whereas stock-settled awards
are recorded as additional paid-in-capital. Assuming we receive
shareholder approval for this proposal, and assuming the restricted stock
holders consent to do so, we intend to amend the RSUs to provide that they may
only be settled in shares of common stock.
The Board
of Directors believes that the proposed amendments to the 2005 Plan are in the
best interests of our stockholders and supports this proposal.
The affirmative
vote of a majority of the votes present, in person or by proxy and properly cast
at the Meeting, is required to approve the amendments to the 2005 Plan.
On April 15, 2009 the closing market price of the common stock on the
NASDAQ National Market was $11.11.
The
following is a summary of the principal provisions of the 2005 Plan, but is not
intended to be a complete description of all its terms and
provisions. This description is qualified by reference to the plan
document, a copy of which is attached to this proxy statement as Annex
A.
Administration.
The 2005 Plan is administered by the Compensation
Committee. The Compensation Committee has the full authority to
construe and interpret the 2005 Plan, including the authority to determine who
will be granted awards, the terms and conditions of awards and the number of
shares subject to an award. To the extent permitted by applicable
laws, rules and regulations, the Compensation Committee may delegate its
authority under the 2005 Plan to subcommittees or individuals, including the
Company’s officers.
Eligibility.
Awards
under the 2005 Plan may be granted to officers, employees, directors,
consultants, advisors and independent contractors of the Company or any of its
subsidiaries or joint ventures, partnerships or business organizations in which
the Company or its subsidiaries have an equity interest.
Number of Shares
of Common Stock Available for Issuance.
Currently, the maximum aggregate
number of shares of common stock that may be issued under the 2005 Plan is
3,000,000 plus any shares of common stock that are available, or that become
available, for issuance under the Company’s prior plans upon cancellation or
expiration of outstanding awards (as of April 15, 2009 there were no shares
available for grant under the 2005 Plan). If this Proposal No. 3 is
approved, the 3,000,000 figure referred to above will be increased to 7,500,000.
Shares of common stock covered by awards granted under the 2005 Plan that are
canceled or otherwise expire without having been exercised or settled generally
will become available for issuance pursuant to a new award. In
addition, if an award is settled through the payment of cash or other non-stock
consideration, the shares of common stock subject to the award will become
available for issuance pursuant to a new award. Shares of common
stock issued pursuant to the 2005 Plan may be authorized but unissued shares,
issued shares that have been reacquired by the Company and that are being held
in treasury, or any combination thereof. All of the shares available
for issuance may be issued pursuant to incentive stock options.
Special Limits on
Awards.
If this Proposal No. 3 is approved, the 2005 Plan will contain
the following limitations with respect to awards granted
thereunder:
|
·
|
The maximum aggregate
number of shares of common stock that may be issued pursuant to restricted
stock, restricted stock units and other awards payable in shares of common
stock is 7,500,000 shares (currently 3,000,000 shares);
|
|
|
|
|
·
|
The
maximum number of shares of common stock that may be issued pursuant to
stock options and stock appreciation rights granted to an eligible
individual in any calendar year will be 250,000 shares (currently 100,000
shares);
|
|
|
|
|
·
|
The
maximum number of shares of common stock that may be issued pursuant to
RSUs, restricted stock, or other awards that may be awarded to any
eligible individual in any calendar year is 750,000 shares measured as of
the date of grant (currently 500,000 shares); and
|
|
|
|
|
·
|
The
maximum dollar value of awards (other than stock options or stock
appreciation rights) that may be granted to any eligible individual in any
calendar year is $12,500,000 measured as of the date of
grant.
|
These
maximum individual limits are required to satisfy the “performance-based
compensation” requirements under Section 162(m) of the Internal
Revenue Code.
Awards
Under the 2005 Plan
Generally.
The 2005 Plan authorizes the following awards: stock options, stock
appreciation rights, restricted stock, restricted stock units and other forms of
equity-based or equity-related awards that the Compensation Committee determines
to be consistent with the purposes of the 2005 Plan and the best interests of
the Company. The Compensation Committee has the authority to
determine the terms and conditions of the awards at the time of grant, including
vesting, exercisability, payment and the effect, if any, that a participant’s
termination of service will have on an award. The Compensation
Committee may also determine whether any award is intended to be
“performance-based compensation” as that term is used in
Section 162(m) of the Internal Revenue Code.
Stock Options.
Stock options may be either nonqualified stock options or incentive stock
options (within the meaning of Section 422 of the Internal Revenue Code).
The exercise price of all stock options generally may not be less than 100% of
the fair market value of a share of common stock on the date of grant. Options
will have a term approved by the Compensation Committee which cannot exceed ten
years. Subject to the provisions of the related award document, the
exercise price of a stock option may be paid (i) in cash; (ii) in
shares of common stock already owned by the participant; (iii) in a
combination of cash and shares; (iv) through net share settlement; or
(v) through a “cashless exercise” procedure authorized by the Compensation
Committee.
Stock
Appreciation Rights.
A stock appreciation right generally entitles a
participant to receive, upon satisfaction of certain conditions, an amount equal
to the excess, if any, of the fair market value on the date of exercise of the
number of shares of common stock for which the stock appreciation right is
exercised over the exercise price for such stock appreciation right. The
exercise price of a stock appreciation right generally may not be less than 100%
of the fair market value of a share of common stock on the date of grant. At the
discretion of the Compensation Committee, payments to a participant upon
exercise of a stock appreciation right may be made in cash or shares of common
stock or a combination of cash and shares. The Compensation Committee
may grant stock appreciation rights alone or in tandem with stock
options.
Restricted Stock.
An award of restricted stock generally consists of one or more shares of
common stock granted or sold to a participant, subject to the terms and
conditions established by the Compensation Committee. Restricted
stock may, among other things, be subject to restrictions on transferability,
vesting requirements or other specified circumstances under which it may be
canceled.
Restricted Stock
Units.
A RSU generally represents the right of a participant to receive
one or more shares of common stock, subject to the terms, conditions and
restrictions established by the Compensation Committee. The
restricted stock units will be paid in shares of common stock, cash or a
combination of cash and shares, with an aggregate value equal to the fair market
value of the shares of common stock at the time of payment.
Other Equity
Awards.
The Compensation Committee has the authority to specify the terms
and provisions of other forms of equity-based or equity-related awards not
described above that it determines to be consistent with the purposes of the
2005 Plan and the interests of the Company. These awards may provide
for cash payments based in whole or in part on the value (or future value) of
shares of common stock, for the acquisition (or future acquisitions) of shares
of common stock, or for any combination thereof.
Performance-Based
Awards.
The Compensation Committee may determine whether any
award is a “performance-based” award for purposes of Section 162(m) of
the Internal Revenue Code. Any such award designated to be
“performance-based compensation” will be conditioned on the achievement of one
or more specified performance goals established by the Compensation Committee at
the date of grant. The performance goals will be comprised of
specified levels of one or more of the following performance criteria, as the
Compensation Committee deems appropriate: net income, net revenue, operating
cash flow, operating margin, operating revenue, revenue growth rates, pretax
income, pretax operating income, operating or gross margin, growth rates,
operating income growth, return on assets, total stockholder return, share
price, return on equity, operating earnings, diluted earnings per share or
earnings per share growth, or any combination thereof. The performance goals may
be described in terms of objectives that are related to the individual
participant or objectives that are Company-wide or related to a subsidiary,
operating division or business unit. Performance goals may be measured on an
absolute or cumulative basis or on the basis of a percentage of improvement over
time. Further, performance goals may be measured in terms of Company performance
(or performance of the applicable subsidiary, operating division or business
unit), or measured relative to selected peer companies or a market index.
The
applicable performance goals will be established by the Compensation Committee
within 90 days following the commencement of the applicable performance period
(or such earlier or later date as permitted or required by
Section 162(m)). Each participant will be assigned a target
number of shares or cash value payable if the target performance goals are
achieved. The Compensation Committee will certify the attainment of the
performance goals as of the end of the applicable performance
period. The Compensation Committee may determine, at the time of the
award grant, that if performance exceeds a participant’s target, the award may
be settled with a payment greater than the target award, but in no event may
such payment exceed the Special Limits specified above. The
Compensation Committee retains the right to reduce any award notwithstanding the
attainment of the performance targets.
Change in
Control.
Upon a change in
control of the Company (as defined in the 2005 Plan), the Board of Directors or
the Compensation Committee may (i) provide for the automatic vesting and
immediate exercisability of all outstanding awards; (ii) provide for the
assumption of, or substitution for, the outstanding awards by the surviving
corporation resulting from the change in control; (iii) permit or require
participants to surrender outstanding options in exchange for a cash payment
equal to the difference between the highest price paid in the change in control
and the exercise price; or (iv) make such other adjustments to the
outstanding awards as the Board of Directors or the Compensation Committee deems
appropriate to reflect such change in control.
Deferrals.
Subject to applicable laws, the Compensation Committee may, in its sole
discretion, permit participants to defer payment or settlement of an award to a
date selected by the participant.
Repricing of
Options and Stock Appreciation Rights.
The 2005 Plan prohibits the direct
or indirect repricing of options and stock appreciation rights.
Adjustment;
Changes in Capitalization.
In the event of a stock
split, stock dividend, extraordinary cash dividend, recapitalization,
reorganization, liquidation, merger or other corporate event affecting the
common stock, the aggregate number of shares of common stock available for
issuance under the 2005 Plan, the various limits, and the number of shares
subject to, and the exercise price of, outstanding awards may be proportionately
adjusted in the sole discretion of the Compensation Committee.
Transferability.
Awards granted under the 2005 Plan are not transferable except by will,
the laws of descent and distribution or pursuant to a domestic relations order;
however, the Compensation Committee may, subject to the terms it specifies in
its discretion, permit the transfer of an award (i) to the award-holder’s
family members; (ii) to one or more trusts established in whole or in part
for the benefit of such family members; (iii) to one or more entities that
are owned in whole or in part by such family members; or (iv) to any other
individual or entity permitted by law.
Amendment and
Termination.
Subject to applicable laws, the Board of Directors may amend
the 2005 Plan in any manner that does not require stockholder approval or
adversely affect the rights of participants under the 2005 Plan. The Board of
Directors will have broad authority to amend the 2005 Plan or an award made
thereunder without the consent of a participant to the extent that it deems
necessary or desirable to comply with, or take into account changes in, or
interpretations of, applicable tax laws, securities laws, employment laws,
accounting rules and other applicable laws, rules and regulations or
to take into account unusual or nonrecurring events or market conditions, to
take into account significant acquisitions or dispositions of assets or other
property by the Company or to avoid adverse or unintended tax consequences under
Section 409A of the Internal Revenue Code.
Term of the 2005
Plan.
The 2005 Plan will remain in effect until the tenth anniversary of
the date on which it was originally approved by the stockholders of the Company
(e.g., July 2015), unless earlier terminated by the Board of
Directors.
New Plan
Benefits.
Because awards under the 2005 Plan are determined by the
Compensation Committee in its sole discretion each year, the Company cannot
determine the benefits or amounts that will be received or allocated in the
future under the 2005 Plan. In 2008, we granted an aggregate of 2,674,384 RSU
and and restricted stock awards to approximately 300 employees (4% of our
workforce) including each of our named executive officers.
U.S.
Federal Income Tax Consequences
Nonqualified
Stock Options and Stock Appreciation Rights.
A participant will not
recognize taxable income upon the grant of a nonqualified stock option or stock
appreciation right. Upon exercise, the participant will recognize ordinary
income equal to the amount the fair market value of the shares on the exercise
date exceeds the exercise or grant price. Upon a subsequent sale of the acquired
shares of common stock, any additional gain or loss will be capital gain or
loss, long-term if the shares have been held for more than one
year.
Incentive Stock
Options.
A participant will not recognize taxable income when an
incentive stock option is granted or exercised. However, the excess of the fair
market value of the covered shares over the exercise price on the date of
exercise is an item of tax preference for alternative minimum tax purposes. If
the participant exercises the option and holds the acquired shares for more than
two years following the date of grant and more than one year after
the date of exercise, the difference between the sale price and exercise price
will be taxed as long-term capital gain or loss. If the participant sells the
acquired shares of common stock before the end of the two-year and
one-year holding periods, he or she generally will recognize ordinary income at
the time of sale equal to the fair market value of the shares on the exercise
date (or the sale price, if less) minus the exercise price of the option. Any
additional gain will be capital gain, long-term if the shares have been held for
more than one year.
Restricted Stock,
Restricted Stock Units.
A participant will not recognize taxable income
upon the grant of restricted stock or RSUs. Instead, the participant will
recognize ordinary income at the time of vesting equal to the fair market value
of the shares (or cash) received minus any amounts the participant paid. Any
subsequent gain or loss will be capital gain or loss, long-term if the shares
have been held for more than one year. For restricted stock only, the
participant may instead elect to be taxed at the time of grant. If the
participant makes such an election, the one-year long-term capital gains holding
period begins on the date of grant.
Tax Effect for
the Company.
The Company generally will receive a deduction for any
ordinary income recognized by a participant with respect to an award. However,
special rules limit the deductibility of compensation paid to named
executive officers. Under Section 162(m) of the Internal
Revenue Code, the annual compensation paid to named executive officers may not
be deductible to the extent it exceeds $1,000,000. However, the Company may
preserve the deductibility of compensation over $1,000,000 if certain conditions
are met. These conditions include stockholder approval of the 2005 Plan, setting
limits on the number of shares that may be issued pursuant to awards, and, for
awards other than options and stock appreciation rights, establishing
performance criteria that must be met before the award will be paid or vest. As
described above, the 2005 Plan has been designed to permit the Compensation
Committee to grant awards that qualify as “performance-based compensation” for
purposes of Section 162(m).
The
foregoing is not to be considered tax advice to any person who may be a
participant, and any such persons are advised to consult their own tax counsel.
The foregoing is intended to be a general discussion and does not cover all
aspects of an individual’s unique tax situation, such as the tax consequences of
deferred compensation or state and local taxes.
THE
BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDMENT OF THE 2005 PLAN
DESCRIBED ABOVE AND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THIS
PROPOSAL.
The
affirmative vote of a majority of the votes present, in person or by proxy, and
properly cast at the meeting is required to approve the amendment of the 2005
Plan.
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. Since 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,
2008:
|
Plan Category
|
|
(a)
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights(1)
|
|
(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)(2)
|
|
|
Equity
Compensation Plans approved by security holders(3):
|
|
|
28,250
|
|
|
|
$10.42
|
|
|
|
24,933
|
|
|
|
Equity
Compensation Plans not approved by security holders(4):
|
|
|
155,257
|
|
|
|
7.56
|
|
|
|
--
|
|
|
|
Total
|
|
|
183,507
|
|
|
|
8.00
|
|
|
|
24,933
|
|
|
|
(1)
|
As
of December 31, 2008, the weighted average remaining contractual life of
all oustanding stock options was 4.6 years
.
|
|
|
|
|
(2)
|
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.
|
|
|
|
|
(3)
|
Awards
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.
|
|
|
|
|
(4)
|
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.
PROPOSAL NO. 4
CONSIDERATION
OF THE STOCKHOLDER PROPOSAL
MACBRIDE
PRINCIPLES
The
following resolution (referred to as the “MacBride Principles”) is submitted by
Patrick Doherty, New York City Office of the Comptroller, 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 co-sponsored by the
Minnesota State Board of Investment.
Letters
from BNY Mellon Asset Servicing dated January 22, 2009, indicate that these
funds own an aggregate of 265,378 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 tenth 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, 2006, 2007 and 2008, and each time was soundly defeated. In
2008, it received the affirmative vote of only approximately 13.4% of the shares
voted on the proposal, and only approximately 9.5% 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 co-sponsor 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 ended December 31, 2008.
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, 2008 and December 31, 2007.
|
|
|
2008
|
|
|
2007
|
|
|
Audit
Fees
|
|
$
|
3,215,524
|
|
|
$
|
2,802,445
|
|
|
Audit-Related
Fees
|
|
|
14,350
|
|
|
|
13,500
|
|
|
Tax
Fees
|
|
|
761,141
|
|
|
|
1,285,636
|
|
|
Total
|
|
$
|
3,991,015
|
|
|
$
|
4,101,581
|
|
Audit fees
in 2008 and 2007 consist of 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 fees in 2008 and 2007 also include
$2,408 and $3,577, respectively, of fees related to work to support the
Company’s grant application in Ireland and due diligence services in connection
with an acquisition.
Audit-related
fees in 2008 and 2007 consist of the aggregate fees, including expenses, billed
by Deloitte & Touche LLP in connection with the Employee Stock
Purchase Plan audit.
Tax fees
in 2008 and 2007 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.
Pre-Approval Policies and
Procedures
The Audit
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 Audit Committee in
advance of any engagement. Under the Sarbanes Oxley Act of 2002, Audit
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 2008, 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, 2009, 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 2010 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 15, 2010 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 10, 2010.
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:
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BE
Aerospace, Inc.
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1400
Corporate Center Way
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Wellington,
Florida 33414
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Attention:
Investor Relations
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Important
notice regarding the availability of Proxy Materials for the Annual Meeting of
Stockholders to be held on July 30, 2009. Our proxy statement and our
annual report on Form 10-K are available on our website at
www.beaerospace.com.
BE AEROSPACE, INC. 2005 LONG-TERM INCENTIVE PLAN
(Amended
and Restated as
of ,
2009)
1. Purposes
of the Plan
The
purposes of the Plan are to (a) promote the long-term success of the Company and
its Subsidiaries and to increase stockholder value by providing Eligible
Individuals with incentives to contribute to the long-term growth and
profitability of the Company by offering them an opportunity to obtain a
proprietary interest in the Company through the grant of equity-based awards and
(b) assist the Company in attracting, retaining and motivating highly qualified
individuals who are in a position to make significant contributions to the
Company and its Subsidiaries.
The Plan
is intended to replace the Prior Plans (as the term is defined below) and upon
the Effective Date, no further options shall be granted under the Prior
Plans.
2. Definitions
and Rules of Construction
(a)
Definitions
.
For
purposes of the Plan, the following capitalized words shall have the meanings
set forth below:
“
Award
” means an Option,
Restricted Stock, Restricted Stock Unit, Stock Appreciation Right or Other Award
granted by the Committee pursuant to the terms of the Plan.
“
Award Document
” means an
agreement, certificate or other type or form of document or documentation
approved by the Committee that sets forth the terms and conditions of an
Award. An Award Document may be in written, electronic or other
media, may be limited to a notation on the books and records of the Company and,
unless the Committee requires otherwise, need not be signed by a representative
of the Company or a Participant.
“
Board
” means the Board of
Directors of the Company, as constituted from time to time.
“
Change in Control
” has the
meaning assigned to it for purposes of the employment agreement or consulting
agreement, as the case may be, applicable to the Participant. If
there is no employment or consulting agreement or if the employment agreement or
consulting agreement contains no such term, “Change in Control”
means:
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(i)
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The
consummation of a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case, with
respect to which persons who were the stockholders of the Company
immediately prior to the reorganization, merger or consolidation or other
transaction do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company’s
then
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(ii)
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outstanding
voting securities, in substantially the same proportions as their
ownership immediately prior to the reorganization, merger, consolidation
or other transaction; or
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(iii)
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The
consummation of a liquidation or dissolution of the Company;
or
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(iv)
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The
sale of all or substantially all of the assets of the Company;
or
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(v)
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Individuals
who, as of the Effective Date of this Plan, constitute the Board (the
“
Incumbent
Board
”) cease for any reason to constitute at least a majority of
the Board,
provided
that any
person becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of
the Company) shall be, for purposes of this Plan, considered as though
such person were a member of the Incumbent Board;
or
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(vi)
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The
acquisition (other than from the Company) by any person, entity or
“group,” within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13-d
promulgated under the Exchange Act of more than 25% of either the then
outstanding Shares of the Common Stock or the combined voting power of the
Company’s then outstanding voting securities entitled to vote generally in
the election of directors (hereinafter referred to as the ownership of a
“
Controlling
Interest
”) excluding, for this purpose, any acquisitions by (A) the
Company or any of its Subsidiaries or joint ventures, partnerships or
business organizations in which the Company or its Subsidiaries have an
equity interest, (B) any person, entity or “group” that as of the
Effective Date owns beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) or a Controlling Interest or (C) any
employee benefit plan of the Company or any of its Subsidiaries or joint
ventures, partnerships or business organizations in which the Company or
its Subsidiaries have an equity
interest.
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Notwithstanding
the foregoing, with respect to an Award that is subject to Section 409A of the
Code, the payment or settlement of which will accelerate upon a Change in
Control, no event set forth in an agreement applicable to a Participant or
clauses (i), (ii) or (iii) will constitute a Change in Control for purposes of
the Plan and any Award Document unless the event also constitutes a “change in
ownership,” “change in effective control,” or “change in the ownership of a
substantial portion of the Company’s assets” as defined under Section 409A of
the Code.
“
Code
” means the Internal
Revenue Code of 1986, as amended, and the applicable guidance, rulings and
regulations promulgated thereunder.
“
Committee
” means the Stock
Option and Compensation Committee of the Board, any successor committee thereto
or any other committee appointed from time to time by the Board to administer
the Plan. The Committee shall serve at the pleasure of the Board and
shall meet the requirements of Section 162(m) of the Code and Section 16(b) of
the Exchange Act;
provided
,
however
, that if any
Committee member is found not to have the qualification requirements of Section
162(m) and/or Section 16(b), any actions taken or Awards granted shall not be
invalidated by this failure to so qualify; and
provided
,
further
, that the Board may
perform any duties delegated to the Committee and in these instances, any
reference to the Board shall be deemed a reference to the
Committee.
“
Common Stock
” means the
common stock of the Company, par value $0.01 per Share, or such other class of
Share or other securities as may be applicable under Section 12(b) of the
Plan.
“
Company
” means BE Aerospace,
Inc, a Delaware corporation, or any successor to all or substantially all of its
business that adopts the Plan.
“
Effective Date
” means the
date on which the Plan is first approved by the stockholders of the
Company.
“
Eligible Individuals
” means
the individuals described in Section 4(a) of the Plan who are eligible for
Awards under the Plan.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“
Fair Market Value
” means,
with respect to a share of Common Stock, the fair market value of the Share as
of the relevant date of determination, as determined in accordance with the
valuation methodology approved by the Committee. In the absence of
any alternative valuation methodology approved by the Committee, the Fair Market
Value of a Share of Common Stock shall equal the closing selling price of a
Share of Common Stock on the trading day immediately preceding the date on which
the valuation is made as reported on the composite tape for securities listed on
the Nasdaq National Market (“
Nasdaq
”), or such other
national securities exchange as may be designated by the Committee, or, in the
event that the Common Stock is not listed for trading on a national securities
exchange but is quoted on an automated system, on such automated system, in any
such case on the valuation date (or, if there were no sales on such automated
system on the valuation date, the average of the highest and lowest quoted
selling prices as reported on said composite tape or automated system for the
most recent day during which a sale occurred).
“
Incentive Stock Option
” means
an Option that is intended to comply with the requirements of Section 422 of the
Code or any successor provision thereto.
“
Nonqualified Stock Option
”
means an Option that is not intended to comply with the requirements of Section
422 of the Code or any successor provision thereto.
“
Option
” means an Incentive
Stock Option or Nonqualified Stock Option granted pursuant to Section 7 of the
Plan.
“
Other Award
” means any form
of Award other than an Option, Restricted Stock, Restricted Stock Unit or Stock
Appreciation Right granted pursuant to Section 10 of the Plan.
“
Participant
” means an
Eligible Individual who has been granted an Award under the Plan.
“
Performance Period
” means the
period established by the Committee and set forth in the applicable Award
Document over which Performance Targets are measured.
“
Performance Target
” means the
performance measures established by the Committee from among the performance
criteria provided in Section 6(h) and set forth in the applicable Award
Document.
“
Plan
” means the BE Aerospace,
Inc. 2005 Long-Term Incentive Plan, as may be amended or restated from time to
time.
“
Plan Limit
” means the maximum
aggregate number of Shares that may be issued for all purposes under the Plan as
set forth in Section 5(a) of the Plan.
“
Prior Plans
” means,
collectively, the BE Aerospace, Inc. 2001 Stock Option Plan, the BE Aerospace,
Inc. 2001 Director’s Stock Option Plan, the 1996 Stock Option Plan, the United
Kingdom 1992 Employee Share Option Scheme and the BE Aerospace’s Amended and
Restated 1989 Stock Option Plan.
“
Restricted Stock
” means
Shares granted or sold to a Participant pursuant to Section 8 of the
Plan.
“
Restricted Stock Unit
”
means
a right to receive a Share (or cash, if applicable) in the future granted
pursuant to Section 8 of the Plan.
“Section 162(m) Award”
means
an Award that is intended to be “qualified performance-based compensation”
within the meaning of Section 162(m) of the Code.
“
Shares
” means shares of
Common Stock.
“
Stock Appreciation Right
”
means a right to receive all or some portion of the appreciation on Shares
granted pursuant to Section 9 of the Plan.
“
Subsidiary
” means (i) a
domestic or foreign corporation or other entity with respect to which the
Company, directly or indirectly, has the power, whether through the ownership of
voting securities, by contract or otherwise, to elect at least a majority of the
members of
the corporation’s board of directors or analogous governing body, or
(ii) any other domestic or foreign corporation or other entity in which the
Company, directly or indirectly, has an equity or similar interest and which the
Committee designates as a Subsidiary for purposes of the Plan. For
purposes of determining eligibility for the grant of Incentive Stock Options
under the Plan, the term “Subsidiary” shall be defined in the manner required by
Section 424(f) of the Code.
“
Target Number
” means the
target number of Shares or cash value established by the Committee and set forth
in the applicable Award Document.
(b)
Rules of
Construction
.
The
masculine pronoun shall be deemed to include the feminine pronoun, and the
singular form of a word shall be deemed to include the plural form, unless the
context requires otherwise. Unless the text indicates otherwise,
references to sections are to sections of the Plan.
3. Administration
(a)
Committee
.
The Plan
shall be administered by the Committee, which shall have full power and
authority, subject to the express provisions hereof, to:
(i) select
the Participants from the Eligible Individuals;
(ii) grant
Awards in accordance with the Plan;
(iii) determine
the number of Shares subject to each Award or the cash amount payable in
connection with an Award;
(iv) determine
the terms and conditions of each Award, including, without limitation, those
related to term, permissible methods of exercise, vesting, forfeiture, payment,
settlement, exercisability, Performance Periods, Performance Targets, and the
effect, if any, of a Participant’s termination of employment with the Company or
any of its Subsidiaries or a Change in Control of the Company, and including the
authority;
(v)
subject to Section 15, amend the terms and conditions of an Award after the
grant;
(vi) specify
and approve the provisions of the Award Documents delivered to Participants in
connection with their Awards;
(vii) construe
and interpret any Award Document delivered under the Plan;
(viii) make
factual determinations in connection with the administration or interpretation
of the Plan;
(ix) adopt,
prescribe, amend, waive and rescind administrative regulations, rules and
procedures relating to the Plan;
(x) employ
legal counsel, independent auditors and consultants as it deems desirable for
the administration of the Plan and rely upon any advice, opinion or computation
received therefrom;
(xi) vary
the terms of Awards to take account of tax and securities laws and other
regulatory requirements or to procure favorable tax treatment for
Participants;
(xii) correct
any defects, supply any omission or reconcile any inconsistency in any Award
Document or the Plan; and
(xiii) make
all other determinations and take any other action desirable or necessary to
interpret, construe or implement properly the provisions of the Plan or any
Award Document.
(b)
Plan Construction and
Interpretation
.
The
Committee shall have full power and authority, subject to the express provisions
hereof, to construe and interpret the Plan.
(c)
Determinations of Committee
Final and Binding
.
All
determinations by the Committee or its delegate in carrying out and
administering the Plan and in construing and interpreting the Plan shall be made
in the Committee’s sole discretion and shall be final, binding and conclusive
for all purposes and upon all interested persons.
(d)
Delegation of
Authority
.
To the
extent not prohibited by applicable laws, rules and regulations, the Committee
may, from time to time, delegate some or all of its authority under the Plan to
a subcommittee or subcommittees thereof or other persons or groups of persons it
deems necessary, appropriate or advisable under conditions or limitations as it
may set at the time of the delegation or thereafter except, that the Committee
may not delegate its authority pursuant to Section 15 to amend the
Plan. For purposes of the Plan, reference to the Committee shall be
deemed to refer to any subcommittee, subcommittees, or other persons or groups
of persons to whom the Committee delegates authority pursuant to this Section
3(d).
(e)
Liability of
Committee
.
Subject to
applicable laws, rules and regulations (i) no member of the Board or Committee
(or its delegates) shall be liable for any good faith action or determination
made in connection with the operation, administration or interpretation of the
Plan, and (ii) the members of the Board or the Committee (and its delegates)
shall be entitled to indemnification and reimbursement in the manner provided in
the Company’s Certificate of Incorporation and Bylaws as they may be amended
from time to time. In the performance of its responsibilities with
respect to the Plan, the Committee shall be entitled to rely upon information
and/or advice furnished by the Company’s officers or employees, the Company’s
accountants, the Company’s counsel and any other party the Committee deems
necessary, and no member of the Committee shall be liable for any action taken
or not taken in reliance upon any such information and/or advice.
(f)
Action by the
Board
.
Anything
in the Plan to the contrary notwithstanding, subject to applicable laws, rules
and regulations, any authority or responsibility that, under the terms of the
Plan, may be exercised by the Committee may alternatively be exercised by the
Board.
4. Eligibility
(a)
Eligible
Individuals
.
Awards may
be granted to officers, employees, directors, consultants, advisors and
independent contractors of the Company or any of its Subsidiaries or joint
ventures, partnerships or business organizations in which the Company or its
Subsidiaries have an equity interest. Only employees of the Company
or a Parent or Subsidiary may be granted Incentive Stock Options. The
Committee shall have the authority to select the persons to whom Awards may be
granted and to determine the type, number and terms of Awards to be granted to
each such Participant. Under the Plan, references to “employment” or
“employed” include the engagement of Participants who are consultants, advisors
and independent contractors of the Company or its Subsidiaries.
(b)
Grants to
Participants
.
The
Committee shall have no obligation to grant any Eligible Individual an Award or
to designate an Eligible Individual as a Participant solely by reason of the
Eligible Individual having received a prior Award or having been previously
designated as a Participant. The Committee may grant more than one
Award to a Participant and may designate an Eligible Individual as a Participant
for overlapping periods of time.
5. Shares
Subject to the Plan
(a)
Plan Limit
.
Subject to
adjustment in accordance with Section 12 of the Plan, the maximum aggregate
number of Shares that may be issued for all purposes under the Plan shall be
seven million five hundred thousand (7,500,000) plus any Shares that are
available for issuance under the Prior Plans or that become available for
issuance upon cancellation, forfeiture or expiration of awards granted under the
Prior Plans without having been exercised, settled or sold. Shares to
be issued under the Plan may be authorized and unissued Shares, issued Shares
that have been reacquired by the Company (in the open-market or in private
transactions) and that are being held in treasury, or a combination
thereof. All of the Shares subject to the Plan Limit may be issued
pursuant to Incentive Stock Options, except that in calculating the number of
Shares that remain available for Awards of Incentive Stock Options, the rules
set forth in Section 5 shall not apply to the extent not permitted under Section
422 of the Code.
(b)
Rules Applicable to
Determining Shares Available for Issuance
.
The number
of Shares remaining available for issuance shall be reduced by the number of
Shares subject to outstanding Awards and, for Awards that are not denominated by
Shares, by the number of Shares actually delivered upon settlement or payment of
the Award. For purposes of determining the number of Shares that
remain available for issuance under the Plan, (i) the number of Shares that are
tendered by a Participant or withheld by the Company to pay the exercise price
of an Award or to satisfy the Participant’s tax withholding obligations in
connection with the exercise or settlement of an Award and (ii) all of the
Shares covered by a stock-settled Stock Appreciation Right to the extent
exercised (not limited to the Shares actually issued to Participants, but also
including Shares withheld by the Company for taxes in connection with such
exercise), will not be added back to the Plan Limit. In addition, for
purposes of determining the number of Shares that remain available for issuance
under the Plan, the number of Shares corresponding to Awards under the Plan that
are forfeited or cancelled or otherwise expire for any reason without having
been exercised or settled or that are settled
through
issuance of consideration other than Shares (including, without limitation,
cash) shall be added back to the Plan Limit and again be available for the grant
of Awards;
provided
,
however
, that this
provision shall not be applicable with respect to (i) the cancellation of a
Stock Appreciation Right granted in tandem with an Option upon the exercise of
the Option or (ii) the cancellation of an Option granted in tandem with a
Stock Appreciation Right upon the exercise of the Stock Appreciation
Right.
(c)
Special Limits
.
Anything
to the contrary in Section 5(a) above notwithstanding, but subject to adjustment
under Section 12(b), the following special limits shall apply to Shares
available for Awards under the Plan:
(i) the
maximum number of Shares that may be issued pursuant to Restricted Stock,
Restricted Stock Units and Other Awards that are payable in Shares granted under
the Plan shall equal seven million five hundred thousand (7,500,000) Shares in
the aggregate;
(ii) the
maximum number of Shares that may be issued pursuant to Options and Stock
Appreciation Rights granted to any Eligible Individual in any calendar year
shall equal two hundred fifty thousand (250,000) Shares;
(iii) the
maximum number of Shares that may be issued pursuant to Restricted Stock Units,
Restricted Stock or Other Awards granted to any Eligible Individual in any
calendar year shall equal seven hundred fifty thousand (750,000) Shares
(measured as of the date of grant); and
(iv) the
maximum dollar value of Awards (other than Options or Stock Appreciation Rights)
that may be granted to any Eligible Individual in any calendar year is twelve
million five hundred thousand dollars ($12,500,000) (measured as of the date of
grant).
6. Awards
in General
(a)
Types of
Awards
.
Awards
under the Plan may consist of Options, Restricted Stock Units, Restricted Stock,
Stock Appreciation Rights and Other Awards. Any Award described in
Sections 7 through 10 of the Plan may be granted singly or in combination or
tandem with any other Awards, as the Committee may determine. Awards
under the Plan may be made in combination with, in replacement of, or as
alternatives to awards or rights under any other compensation or benefit plan of
the Company, including the plan of any acquired entity.
(b)
Terms Set Forth in Award
Document
.
The terms
and conditions of each Award shall be set forth in an Award Document in a form
approved by the Committee for the Award, which shall contain terms and
conditions not inconsistent with the Plan. Notwithstanding the
foregoing, and subject to applicable laws, rules and regulations, the Committee
may accelerate (i) the vesting or payment of any Award, (ii) the lapse of
restrictions on any Award, or (iii) the date on which any Award first becomes
exercisable. The terms of Awards may vary among Participants, and the
Plan does not impose upon the Committee any
requirement
to make Awards subject to uniform terms. Accordingly, the terms of
individual Award Documents may vary.
(c)
Vesting
. The
Committee shall specify at the time of grant the vesting provisions of an Award;
provided
,
however
, that (i) Restricted
Stock Awards that are intended to be “performance-based awards” pursuant to
Section 6(h) shall not vest earlier than the first anniversary of the date of
grant and (ii) all other Restricted Stock Awards shall not vest earlier than one
third (1/3) per year over a three year period (in each case, vesting may
accelerate upon a termination of employment pursuant to Section
6(d)).
(d)
Termination of
Employment
.
The
Committee shall specify at or after the time of grant of an Award the provisions
governing the disposition of an Award in the event of a Participant’s
termination of employment with the Company or any of its Subsidiaries or
affiliates. Subject to Section 409A of the Code and other applicable
laws, rules and regulations, in connection with a Participant’s termination of
employment, the Committee shall have the discretion to accelerate the vesting,
exercisability or settlement of, eliminate the restrictions and conditions
applicable to, or extend the post-termination exercise period of an outstanding
Award. The provisions described in this Section 6(d) may be specified
in the applicable Award Document or determined at a subsequent
time.
(e)
Change in
Control
.
The
Committee shall have full authority to determine the effect, if any, of a Change
in Control of the Company on the vesting, exercisability, settlement, payment or
lapse of restrictions applicable to an Award, which effect may be specified in
the applicable Award Document or, subject to Section 409A of the Code and other
applicable laws, rules and regulations, determined at a subsequent
time. Except as otherwise specified in an Award Document (or in a
Participant’s employment agreement) and subject to applicable laws, rules and
regulations (including Section 409A of the Code), the Board or the Committee
shall in its sole discretion, at any time prior to, coincident with or after the
effective time of a Change in Control, take such actions as it may consider
appropriate, including, without limitation: (i)
providing for the
acceleratio
n
of any vesting conditions relating to the exercise or settlement of an Award
(including the deemed attainment of Performance Targets) or that an Award shall
terminate or expire unless exercised or settled in full on or before a date
fixed by the Board or the Committee
; (ii) making other adjustments to the
Awards then outstanding as the Committee deems appropriate to reflect the Change
in Control; (iii) causing the Awards then outstanding to be assumed, or new
rights to be substituted for the Awards, by the surviving corporation in the
Change in Control; or (iv) permitting or requiring Participants to surrender
outstanding Options in exchange for a cash payment equal to the difference
between the highest price paid for a Share in the Change in Control transaction
and the Exercise Price of the Options.
(f)
Dividends and Dividend
Equivalents
.
The
Committee may provide Participants with the right to receive dividends or
payments equivalent to dividends or interest with respect to an outstanding
Award. The payments can either be paid currently or deemed to have
been reinvested in Shares, and can be made in Shares, cash or a combination
thereof, as the Committee shall determine;
provided
,
however
, that the terms of
any reinvestment of dividends must comply with all applicable laws, rules and
regulations, including, without limitation, Section 409A of the
Code. Notwithstanding the foregoing, no dividends or dividend
equivalents shall be paid with respect to Options or Stock Appreciation
Rights.
(g)
Rights of a
Stockholder
.
A
Participant shall have no rights as a stockholder with respect to Shares covered
by an Award (including voting rights) until the date the Participant or his
nominee becomes the holder of record of such Shares. No adjustment
shall be made for dividends or other rights for which the record date is prior
to such date, except as provided in Section 12(b) of the Plan.
(h)
Performance-Based
Awards
. (i)
The
Committee may determine whether any Award under the Plan is intended to be
“qualified performance-based compensation” as that term is used in Section
162(m) of the Code. Any Awards designated to be “qualified
performance-based compensation” shall be conditioned on the achievement of one
or more Performance Targets to the extent required by Section 162(m) of the Code
and shall be subject to all other conditions and requirements of Section
162(m). The Performance Targets that may be used by the Committee for
such Awards will be based on measurable and attainable financial goals for the
Company, one or more of its operating divisions, Subsidiaries or business units
or any combination of the above from the following: net income, net revenue,
operating cash flow, operating margin, operating revenue, revenue growth rates,
pretax income, pretax operating income, operating or gross margin, growth rates,
operating income growth, return on assets, total stockholder return, Share
price, return on equity, operating earnings, diluted earnings per Share or
earnings per Share growth, or a combination thereof as selected by the
Committee.
1
The Performance Targets may be
described in terms of objectives that are related to the individual Participant
or objectives that are Company-wide or related to a Subsidiary, division,
department, region, function or business unit and may be measured on an absolute
or cumulative basis or on the basis of percentage of improvement over time, and
may be measured in terms of Company performance (or performance of the
applicable Subsidiary, operating division, department, region, function or
business unit) or measured relative to selected peer companies or a market or
other index. In addition, for Awards not intended to qualify as
“performance-based compensation” under Section 162(m) of the Code, the
Committee may establish Performance Targets based on other criteria as it deems
appropriate.
(ii) The
Participants, to receive Section 162(m) Awards, shall be designated and the
applicable Performance Targets shall be established by the Committee within
ninety (90) days following the commencement of the applicable Performance Period
(or such earlier or later date permitted or required by Section 162(m) of the
Code). Each Participant shall be assigned a Target Number payable if
Performance Targets are achieved. Any payment of a Section 162(m)
Award granted with Performance Targets shall be conditioned on the written
certification of the Committee in each case that the Performance Targets and any
other material conditions were satisfied. The Committee may
determine, at the time of grant, that if performance exceeds the specified
Performance Targets, the Award may be settled with payment greater than the
Target Number, but in no event may the payment exceed the limits set forth in
Section 5(c). The Committee retains the right to reduce any Section
162(m) Award notwithstanding the attainment of the Performance
Targets. In the event that all members of the Committee are not
“outside directors” as that term is defined in Section 162(m) of the Code, the
grant and terms of Awards intended to qualify as “performance-based
compensation” will be made by a subcommittee
appointed
in accordance with Section 3(d) of the Plan consisting of two or more “outside
directors” for purposes of Section 162(m) of the Code.
(i)
Deferrals
.
In
accordance with the procedures authorized by, and subject to the approval of,
the Committee, Participants may be given the opportunity to defer the payment or
settlement of an Award to one or more dates selected by the
Participant. The terms of any deferrals must comply with all
applicable laws, rules and regulations including, without limitation, Section
409A of the Code. No deferral opportunity shall exist with respect to
an Award unless explicitly permitted by the Committee on or after the time of
grant.
(j)
Repricing of Options and
Stock Appreciation Rights
.
Notwithstanding
anything in the Plan to the contrary, an Option or Stock Appreciation Right
shall not be granted in substitution for a previously granted Option or Stock
Appreciation Right being cancelled or surrendered as a condition of receiving a
new Award, if the new Award would have a lower exercise price than the Award it
replaces, nor shall the exercise price of an Option or Stock Appreciation Right
be reduced once the Option or Stock Appreciation Right is
granted. The foregoing shall not prevent adjustments pursuant to
Section 12(b) of the Plan.
7. Terms
and Conditions of Options
(a)
General
.
The
Committee, in its discretion, may grant Options to Eligible Individuals and
shall determine whether the Options shall be Incentive Stock Options or
Nonqualified Stock Options. Each Option shall be evidenced by an
Award Document that shall expressly identify the Option as an Incentive Stock
Option or Nonqualified Stock Option, and be in such form and contain such
provisions as the Committee shall from time to time deem
appropriate. The terms of any Incentive Stock Option granted under
the Plan shall comply in all respects with the provisions of Section 422 of the
Code, or any successor provision, as amended from time to time.
(b)
Exercise Price
.
The
exercise price of an Option shall be fixed by the Committee at the time of grant
or shall be determined by a method specified by the Committee at the time of
grant but in no event shall the exercise price of an Option be less than one
hundred percent (100%) of the Fair Market Value of a Share on the date of
grant. Payment of the exercise price of an Option shall be made in
any form approved by the Committee at the time of grant.
(c)
Term
.
An Option
shall be effective for such term as shall be determined by the Committee and as
set forth in the Award Document relating to the Option, and the Committee may
extend the term of an Option after the time of grant;
provided
,
however
, that the term of an
Option may in no event extend beyond the tenth (10
th
)
anniversary of the date of grant of such Option.
(d)
Exercise; Payment of
Exercise Price
. Options shall be exercised by delivery of a
notice of exercise in a form approved by the Company.
Subject to
the provisions of the applicable Award Document, the exercise price of an Option
may be paid (i) in cash (or cash equivalents), (ii) by actual delivery or
attestation to ownership of freely transferable Shares already owned by the
person exercising the Option and equal in value to the exercise price, (iii)
by a
combination of cash and Shares equal in value to the exercise price, (iv)
through net Share settlement or similar procedure involving the withholding of
Shares subject to the Option with a value equal to the exercise price, or (v) by
other means as the Committee may authorize. In accordance with the
rules and procedures authorized by the Committee from time to time for this
purpose, the Option may also be exercised through a “cashless exercise”
procedure authorized by the Committee that permits Participants to exercise
Options by delivering a properly executed exercise notice to the Company
together with a copy of irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds necessary to pay the exercise
price and the amount of any required tax or other withholding obligations or
through other procedures determined by the Company from time to
time.
8. Terms
and Conditions of Restricted Stock Units and Restricted Stock
(a)
Restricted Stock
Units
.
The
Committee is authorized to grant Restricted Stock Units to Eligible
Individuals. A Restricted Stock Unit shall entitle a Participant to
receive, subject to the terms, conditions and restrictions set forth in the Plan
and the applicable Award Document, one or more Shares. Restricted
Stock Units may, among other things, be subject to restrictions on
transferability, vesting requirements or other specified circumstances under
which they may be cancelled. Upon settlement, the Restricted Stock
Units shall be paid in Shares, cash, or a combination of cash and Shares, with a
value equal to the Fair Market Value of the Shares at the time of
payment.
(b)
Restricted
Stock
. The Committee may grant or sell Restricted Stock to
Eligible Individuals.
An Award
of Restricted Stock shall consist of one or more Shares granted or sold to an
Eligible Individual, and shall be subject to the terms, conditions and
restrictions set forth in the Plan and established by the Committee in
connection with the Award and specified in the applicable Award
Document. Restricted Stock may, among other things, be subject to
restrictions on transferability, vesting requirements or other specified
circumstances under which it may be cancelled.
9. Stock
Appreciation Rights
(a)
General
.
The
Committee is authorized to grant Stock Appreciation Rights to Eligible
Individuals. A Stock Appreciation Right shall entitle a Participant
to receive, upon satisfaction of the conditions to payment specified in the
applicable Award Document, an amount equal to the excess, if any, of the Fair
Market Value on the exercise date of the number of Shares for which the Stock
Appreciation Right is exercised over the grant price for such Stock Appreciation
Right specified in the applicable Award Document. The grant price per
Share of Shares covered by a Stock Appreciation Right shall be fixed by the
Committee at the time of grant or, alternatively, shall be determined by a
method specified by the Committee at the time of grant, but in no event shall
the grant price of a Stock Appreciation Right be less than one hundred percent
(100%) of the Fair Market Value of a Share on the date of grant. At
the sole discretion of the Committee, payments to a Participant upon exercise of
a Stock Appreciation Right may be made in cash or Shares, or in a combination of
cash and Shares, having an aggregate Fair Market Value as of the date of
exercise equal to the cash amount.
(b)
Term
.
A Stock
Appreciation Right shall be effective for such term as shall be determined by
the Committee and as set forth in the Award Document relating to such Stock
Appreciation Right, and the Committee may extend the term of a Stock
Appreciation Right after the time of grant;
provided
,
however
, that the term of a
Stock Appreciation Right may in no event extend beyond the tenth (10
th
)
anniversary of the date of grant of such Stock Appreciation Right.
(c)
Methods of
Exercise
.
In
accordance with the rules and procedures established by the Committee for this
purpose, and subject to the provisions of the applicable Award Document and all
applicable laws, the Committee shall determine the permissible methods of
exercise for a Stock Appreciation Right.
(d)
Stock Appreciation Rights in
Tandem with Options
.
A Stock
Appreciation Right granted in tandem with an Option may be granted either at the
same time as the Option or subsequent thereto. If granted in tandem
with an Option, a Stock Appreciation Right shall cover the same number of Shares
as covered by the Option (or such lesser number of Shares as the Committee may
determine) and shall be exercisable only at the same time or times and to the
extent the related Option shall be exercisable, and shall have the same term as
the related Option. The grant price of a Stock Appreciation Right
granted in tandem with an Option shall equal the per Share exercise price of the
Option to which it relates. Upon exercise of a Stock Appreciation
Right granted in tandem with an Option, the related Option shall be cancelled
automatically to the extent of the number of Shares covered by such
exercise. Conversely, if the related Option is exercised as to some
or all of the Shares covered by the tandem grant, the tandem Stock Appreciation
Right shall be cancelled automatically to the extent of the number of Shares
covered by the Option exercise.
10. Other
Awards
The
Committee shall have the authority to specify the terms and provisions of other
forms of equity-based or equity-related Awards not described above that the
Committee determines to be consistent with the purpose of the Plan and the
interests of the Company. Other Awards may provide for cash payments
based in whole or in part on the value or future value of Shares, for the
acquisition or future acquisition of Shares, or any combination
thereof. Notwithstanding the foregoing, where the value of an Other
Award is based on a spread value, the grant or exercise price will not be less
than one hundred percent (100%) of the Fair Market Value of the Shares on the
date of the grant.
11. Certain
Restrictions
(a)
Transfers
.
No Award
shall be transferable other than by last will and testament, by the laws of
descent and distribution or pursuant to a domestic relations order, as the case
may be;
provided
,
however
, that the Committee
may, subject to terms and conditions as it shall specify, permit the transfer of
an Award for no consideration (i) to a Participant's family member, (ii) to one
or more trusts established in whole or in part for the benefit of one or more of
such family members, (iii) to one or more entities which are beneficially owned
in whole or in part by one or more such family members or (iv) to any other
individual or entity permitted under law and the rules of Nasdaq or any other
exchange that lists the Shares (collectively,
“
Permitted
Transferees
”). Any Award transferred to a Permitted Transferee
shall be further transferable only by last will and testament or the laws of
descent and distribution or, for no consideration, to another Permitted
Transferee of the Participant.
(b)
Award Exercisable Only by
Participant
.
During the
lifetime of a Participant, an Award shall be exercisable only by the Participant
or by a Permitted Transferee to whom the Award has been transferred in
accordance with Section 11(a) above. The grant of an Award shall
impose no obligation on a Participant to exercise or settle the
Award.
12. Recapitalization
or Reorganization
(a)
Authority of the Company and
Stockholders
.
The
existence of the Plan, the Award Documents and the Awards granted under the Plan
shall not affect or restrict in any way the right or power of the Company or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company’s capital
structure or business, any merger or consolidation of the Company, any issue of
stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Shares or the rights under the Shares or which are convertible into
or exchangeable for Shares, or the dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
(b)
Change in
Capitalization
.
Notwithstanding
any provision of the Plan or any Award Document, the number and kind of Shares
authorized for issuance under Section 5 of the Plan, including the maximum
number of Shares available under the special limits provided for in Section
5(c), shall be equitably adjusted in the manner deemed necessary by the
Committee in the event of a stock split, reverse stock split, stock dividend,
recapitalization, reorganization, partial or complete liquidation,
reclassification, merger, consolidation, separation, extraordinary dividend,
split-up, spin-off, combination, exchange of Shares, warrants or rights offering
to purchase Shares at a price substantially below Fair Market Value or other
similar corporate event or distribution of stock or property of the Company
affecting the Shares in order to preserve, but not increase, the benefits or
potential benefits intended to be made available under the Plan. In
addition, upon the occurrence of any of the foregoing events, the number and
kind of Shares subject to any outstanding Award and the exercise price per Share
(or the grant price per Share, as the case may be), if any, under any
outstanding Award shall be equitably adjusted (including by payment of cash to a
Participant) in order to preserve the benefits or potential benefits intended to
be made available to Participants. Such adjustments shall be made by
the Committee, in its sole discretion, whose determination as to what
adjustments shall be made, and the extent thereof, shall be
final. Unless otherwise determined by the Committee, such adjusted
Awards shall be subject to the same restrictions and vesting or settlement
schedule to which the underlying Award is subject. Notwithstanding
the forgoing, the Committee shall not be required to make any adjustments that
would cause an Award to fail to satisfy the conditions of an applicable
exemption from the requirements of Section 409A of the Code or otherwise violate
the applicable requirements thereof.
13. Term
of the Plan
Unless
earlier terminated pursuant to Section 15 of the Plan, the Plan shall terminate
on the tenth (10th) anniversary of the Effective Date, except with respect to
Awards then outstanding. No Awards may be granted under the Plan
after the tenth (10th) anniversary of the Effective Date.
14. Effective
Date
The Plan
shall become effective on the Effective Date;
provided
,
however
, that if the Plan is
not approved by the stockholders upon submission to them for approval, the Plan
shall be void
ab
initio
.
15. Amendment
and Termination
Subject to
applicable laws, rules and regulations, the Board may at any time terminate or,
from time to time amend, modify or suspend the Plan;
provided
,
however
, that no
termination, amendment, modification or suspension (i) shall be effective
without the approval of the stockholders of the Company if such approval is
required under applicable laws, rules and regulations, including the rules of
Nasdaq and (ii) shall materially and adversely alter or impair the rights of a
Participant in any Award previously made under the Plan without the consent of
the holder of the Award. Notwithstanding the foregoing, the Board
shall have broad authority to amend the Plan or any Award under the Plan without
the consent of a Participant to the extent it deems necessary or desirable
(a) to comply with, or take into account changes in, interpretations of or
guidance promulgated under, applicable tax laws, securities laws, employment
laws, accounting rules and other applicable laws, rules and regulations,
(b) to take into account unusual or nonrecurring events or market
conditions (including, without limitation, the events described in Section
12(b)), (c) to take into account significant acquisitions or dispositions of
assets or other property by the Company or (d) to ensure that an Award is not
subject to interest and penalties under Section 409A of the Code.
16. Miscellaneous
(a)
Tax
Withholding
.
The
Company or a Subsidiary, as appropriate, may require any individual entitled to
receive a payment in respect of an Award to remit to the Company, prior to
payment, an amount sufficient to satisfy any applicable tax withholding
requirements. In the case of an Award payable in Shares, the Company
or a Subsidiary, as appropriate, may permit or require a Participant to satisfy,
in whole or in part, the obligation to remit taxes by directing the Company to
withhold Shares that would otherwise be received by the Participant or to
repurchase Shares that were issued to the Participant to satisfy the minimum
statutory withholding rates for any applicable tax withholding purposes, in
accordance with all applicable laws and pursuant to such rules as the Committee
may establish from time to time. The Company or a Subsidiary, as
appropriate, shall also have the right to deduct from all cash payments made to
a Participant (whether or not the payment is made in connection with an Award)
any applicable taxes required to be withheld with respect to payments under the
Plan.
(b)
No Right to Awards or
Employment
.
No person
shall have any claim or right to receive Awards under the
Plan. Neither the Plan, the grant of Awards under the Plan nor any
action taken or omitted to be taken under the Plan shall be deemed to create or
confer on any Eligible Individual any right to be retained in the employ of the
Company or any Subsidiary or other affiliate thereof, or to interfere with or to
limit in any way the right of the Company or any Subsidiary or other affiliate
thereof to terminate the employment of the Eligible Individual at any
time. No Award shall constitute salary, recurrent compensation or
contractual compensation for the year of grant, any later year or any other
period of time. Neither the Plan nor any Award constitutes a
contractual entitlement to any bonus payment in general irrespective of whether
Awards or bonus payments were made in previous years. Payments
received by a Participant under any Award made pursuant to the Plan shall not be
included in, nor have any effect on, the determination of employment-related
rights or benefits under any other employee benefit plan or similar arrangement
provided by the Company and the Subsidiaries, unless otherwise specifically
provided for under the terms of such plan or arrangement or by the
Committee.
(c)
Securities Law
Restrictions
.
An Award
may not be exercised or settled and no Shares may be issued in connection with
an Award unless the issuance of the Shares (i) has been registered under
the Securities Act of 1933, as amended, (ii) has qualified under applicable
state “blue sky” laws (or the Company has determined that an exemption from
registration and from qualification under such state “blue sky” laws is
available) and (iii) complies with all applicable laws, rules and
regulations, including all foreign securities laws. The Committee may
require each Eligible Individual purchasing or acquiring Shares pursuant to an
Award under the Plan to represent to and agree with the Company in writing that
such Eligible Individual is acquiring the Shares for investment purposes and not
with a view to the distribution thereof. All certificates for Shares
delivered under the Plan shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any exchange upon which the Shares are then listed, and any applicable
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
(d)
Section 162(m) of the
Code
.
The Plan
is intended to comply in all respects with Section 162(m) of the Code;
provided
,
however
, that in the event
the Committee determines that compliance with Section 162(m) of the Code is
not desired with respect to a particular Award, compliance with
Section 162(m) of the Code shall not be required. In addition,
if any provision of this Plan would cause Awards that are intended to constitute
“qualified performance-based compensation” under Section 162(m) of the Code, to
fail to so qualify, that provision shall be severed from, and shall be deemed
not to be a part of, the Plan, but the other provisions of the Plan shall remain
in full force and effect.
(e)
Awards to Individuals
Subject to Laws of a Jurisdiction Outside of the United States
.
To the
extent that Awards under the Plan are awarded to Eligible Individuals who are
domiciled or resident outside of the United States or to persons who are
domiciled or resident in the United States but who are subject to the tax laws
of a jurisdiction outside of the United States, the Committee may adjust the
terms of the Awards granted hereunder to such person (i) to comply with the
laws, rules and regulations of such jurisdiction and (ii) to permit the grant of
the Award
not to be a taxable event to the Participant. The authority granted
under the previous sentence shall include the discretion for the Committee to
adopt, on behalf of the Company, one or more sub-plans applicable to separate
classes of Eligible Individuals who are subject to the laws of jurisdictions
outside of the United States.
(f)
Satisfaction of
Obligations
.
Subject to
applicable law, the Company may apply any cash, Shares, securities or other
consideration received upon exercise or settlement of an Award to any
obligations a Participant owes to the Company and the Subsidiaries in connection
with the Plan or otherwise, including, without limitation, any tax obligations
or obligations under a currency facility established in connection with the
Plan.
(g)
No Limitation on Corporate
Actions
.
Nothing
contained in the Plan shall be construed to prevent the Company or any
Subsidiary from taking any corporate action, whether or not it would have an
adverse effect on any Awards made under the Plan. No Participant,
beneficiary or other person shall have any claim against the Company or any
Subsidiary as a result of any corporate action.
(h)
Unfunded Plan
.
The Plan
is intended to constitute an unfunded plan for incentive
compensation. Prior to the issuance of Shares, cash or other form of
payment in connection with an Award, nothing contained herein shall give any
Participant any rights that are greater than those of a general unsecured
creditor of the Company. The Committee may, but is not obligated to,
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Shares with respect to Awards
hereunder.
(i)
Award Document
.
In the
event of any conflict or inconsistency between the Plan and any Award Document,
the Plan shall govern and the Award Document shall be interpreted to minimize or
eliminate the conflict or inconsistency.
(j)
Successors
and
Assigns
. All
obligations of the Company under the Plan with respect to Awards shall be
binding on any successor or assign to the Company, whether the existence of the
successor is the result of a direct or indirect purchase, merger, consolidation,
or otherwise, of all or substantially all of the business and/or assets of the
Company.
(k)
Application of
Funds
.
The
proceeds received by the Company from the sale of Shares pursuant to Awards will
be used for general corporate purposes.
(l)
Headings
.
The
headings of Sections herein are included solely for convenience of reference and
shall not affect the meaning of any of the provisions of the Plan.
(m)
Section 409A of the
Code
. Notwithstanding
any contrary provision in the Plan or an Award Document, if any provision of the
Plan or an Award Document contravenes any regulations or guidance promulgated
under Section 409A of the Code or would cause an Award to be subject to
additional taxes, accelerated taxation, interest and/or penalties under Section
409A of the Code, such provision of the Plan or Award Document may be modified
by the Committee without consent of the Participant in any manner the Committee
deems reasonable or necessary. In making such modifications the
Committee shall attempt, but shall not be obligated, to maintain, to the maximum
extent practicable, the original intent of the
applicable
provision without contravening the provisions of Section 409A of the
Code. Moreover, any discretionary authority that the Committee may
have pursuant to the Plan shall not be applicable to an Award that is subject to
Section 409A of the Code to the extent such discretionary authority would
contravene Section 409A of the Code or the guidance promulgated
thereunder.
(n)
Governing Law
.
Except as
to matters of federal law, the Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Florida
(other than its conflict of law rules).