UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No.)
Filed by the
Registrant
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Filed by a
Party other than the Registrant
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Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-12
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IntriCon Corporation
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(Name of Registrant as Specified In Its Charter)
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Not Applicable
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of
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required.
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Fee computed
on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of
each class of securities to which transaction applies:
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price or other underlying value of transaction computed pursuant to Exchange
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state how it was determined):
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Check box if
any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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Schedule or Registration Statement No.:
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(a)
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(b)
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INTRICON CORPORATION
1260 Red Fox Road
Arden Hills, Minnesota 55112
March [24], 2008
Dear
Shareholder:
It
is my great pleasure to invite you to attend the 2008 Annual Meeting of
Shareholders (the Annual Meeting). The Annual Meeting will be held on
Wednesday, April 23, 2008 at 11:30 a.m., local time, at our offices located at
1260 Red Fox Road, Arden Hills, Minnesota 55112.
At
this years Annual Meeting our shareholders will vote on the election of one
director to hold office for a term of three years and until his successor is
duly elected and qualified, on the approval of an amendment to our Amended and
Restated Articles of Incorporation, as amended, to increase the number of
authorized shares of common stock from 10,000,000 shares to 20,000,000 shares
and on the ratification of the appointment of Virchow, Krause & Company,
LLP as IntriCon Corporations independent auditor for fiscal year 2008. The
official notice of the Annual Meeting, together with the proxy statement and
proxy card, are enclosed.
The
vote of every shareholder is important. Therefore, whether or not you expect to
attend the meeting in person, I urge you to sign and date the enclosed proxy
card and return it promptly in the envelope provided for that purpose. You also
have the option of voting by telephone. If you choose to vote by telephone you
may call toll-free in the U.S. or Canada, 1-866-626-4508 on a touch-tone
telephone. You also have the option of voting over the Internet. To do so, log
on to www.votestock.com and follow the web site instructions. Once you have
cast your vote, be sure to click on Accept Vote. If you vote by telephone or
electronically over the Internet, you do not need to return your proxy card.
Thank
you for your continued interest in IntriCon Corporation. I look forward to
seeing you at the Annual Meeting.
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Sincerely,
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Mark S.
Gorder
President and Chief Executive Officer
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INTRICON CORPORATION
1260 Red Fox Road
Arden Hills, Minnesota 55112
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 23, 2008
The
2008 Annual Meeting of Shareholders (the Annual Meeting) of IntriCon
Corporation (the Corporation) will be held on Wednesday, April 23, 2008 at
the Corporations offices located at 1260 Red Fox Road, Arden Hills, Minnesota,
55112 at 11:30 a.m., local time, for the following purposes:
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(1)
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to elect one
director to hold office for a term of three years and until his successor is
duly elected and qualified;
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(2)
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to approve
an amendment to the Corporations Amended and Restated Articles of
Incorporation, as amended, to increase the number of authorized shares of
common stock from 10,000,000 to 20,000,000;
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(3)
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to ratify
the appointment of Virchow, Krause & Company, LLP as the Corporations
independent auditor for fiscal year 2008; and
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(4)
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to transact
such other business as may properly come before the Annual Meeting or any of
its adjournments or postponements.
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The
Board of Directors has fixed the close of business on March [19], 2008 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting or any adjournment or postponement thereof. If the
Annual Meeting is adjourned because of the absence of a quorum, those
shareholders entitled to vote who attend the adjourned Annual Meeting, although
constituting less than a quorum as provided herein, shall nevertheless
constitute a quorum for the purpose of electing directors. If the Annual
Meeting is adjourned for one or more periods aggregating at least 15 days
because of the absence of a quorum, those shareholders entitled to vote who
attend the reconvened Annual Meeting, if less than a quorum as determined under
applicable law, shall nevertheless constitute a quorum for the purpose of
acting upon any other matter set forth in this Notice of Annual Meeting.
All
shareholders are cordially invited to attend the meeting, but whether or not
you expect to attend the meeting in person, please mark, sign and date the
enclosed proxy card and return it promptly in the envelope provided in order
that your shares may be voted.
You
also have the option of voting by telephone. If you choose to vote by telephone
you may call toll-free in the U.S. or Canada, 1-866-626-4508 on a touch-tone
telephone. You also have the option of voting over the Internet. To do so, log
on to www.votestock.com and follow the web site instructions. Once you have
cast your vote, be sure to click on Accept Vote. If you attend the meeting,
you may revoke your proxy and vote in person. The deadline to vote
telephonically or over the Internet is Tuesday, April 22, 2008, 11:59 p.m.,
eastern daylight time. If you vote by telephone or electronically over the
Internet, you do not need to return your proxy card.
If
your shares are held in street name (that is, if your stock is registered in
the name of your broker, bank, or other nominee), please contact your broker,
bank or nominee to determine whether you will be able to vote by telephone or
electronically through the Internet.
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By Order of
the Board of Directors
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Michael J.
McKenna
Chairman of the Board
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March [24],
2008
Arden Hills, Minnesota
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INTRICON CORPORATION
1260 Red Fox Road
Arden Hills, Minnesota 55112
PROXY STATEMENT
This
proxy statement and the enclosed proxy are being furnished to shareholders of
IntriCon Corporation (the Corporation) in conjunction with the solicitation
of proxies by the Board of Directors of the Corporation for use at the 2008
Annual Meeting of Shareholders (the Annual Meeting) to be held on Wednesday,
April 23, 2008 at the Corporations offices located at 1260 Red Fox Road, Arden
Hills, Minnesota 55112, at 11:30 a.m., local time, and any adjournment or
postponement of the Annual Meeting. This Proxy Statement and accompanying form
of proxy are first being sent or given to shareholders on or about March [24],
2008.
The
Board of Directors has fixed the close of business on March [19], 2008 as the
record date for determination of the shareholders entitled to notice of and to
vote at the Annual Meeting. As of March [19], 2008, there were [________]
shares of common stock, par value $1.00 per share (the Common Shares) of the
Corporation outstanding, each of which is entitled to one vote on all matters
to be presented at the Annual Meeting.
Proxies
in the form enclosed, if properly executed and received in time for voting, and
not revoked, will be voted as directed on the proxies. If no directions to the
contrary are indicated, the persons named in the proxy will vote all of your
Common Shares for the election of the nominee for director, for the
approval of the amendment to the Amended and Restated Articles of
Incorporation, as amended, to increase the number of authorized Common Shares
from 10,000,000 to 20,000,000 and for the ratification of the appointment of
Virchow, Krause & Company, LLP as the Corporations independent auditor for
fiscal year 2008. With respect to any other matter that properly comes before
the meeting, the proxy holders will vote the proxies in their discretion in
accordance with their best judgment. Because the proxy is revocable, sending in
a signed proxy will not affect a shareholders right to attend the Annual
Meeting and vote in person. You also have the option of voting by telephone. If
you choose to vote by telephone you may call toll-free in the U.S. or Canada,
1-866-626-4508 on a touch-tone telephone. You also have the option of voting
over the Internet. To do so, log on to www.votestock.com and follow the web
site instructions. Once you have cast your vote, be sure to click on Accept
Vote. The deadline to vote telephonically or over the Internet is Tuesday,
April 22, 2008, 11:59 p.m., eastern daylight time.
Any
shareholder who submits a proxy may revoke it at any time before the proxy is
voted at the Annual Meeting by delivering a later dated proxy or by giving written
notice to the Secretary of the Corporation or attending the Annual Meeting in
person and so requesting. If you vote by telephone or over the Internet, you
may change your vote telephonically or over the Internet by following the
procedures used to submit your initial vote. The last vote received
chronologically will supersede any prior votes. Attendance at the Annual
Meeting will not by itself revoke a previously granted proxy.
3
The
presence, in person or represented by proxy, of the holders of a majority of
the outstanding Common Shares will constitute a quorum for the transaction of
business at the Annual Meeting. All Common Shares present in person or
represented by proxy (including broker non-votes) and entitled to vote at the
Annual Meeting, no matter how they are voted or whether they abstain from
voting, will be counted in determining the presence of a quorum. If the Annual Meeting is adjourned
because of the absence of a quorum, those shareholders entitled to vote who
attend the adjourned Annual Meeting, although constituting less than a quorum
as provided herein, shall nevertheless constitute a quorum for the purpose of
electing directors. If the Annual Meeting is adjourned for one or more periods
aggregating at least 15 days because of the absence of a quorum, those
shareholders entitled to vote who attend the reconvened Annual Meeting, if less
than a quorum as determined under applicable law, shall nevertheless constitute
a quorum for the purpose of acting upon any other matter set forth in the
Notice of Annual Meeting.
Each
Common Share is entitled to one vote on each matter that may be brought before
the Annual Meeting. The election of the director will be determined by a
plurality vote and the nominee receiving the highest number of for votes will
be elected. Approval of any other proposal, including approval of the amendment
to the Amended and Restated Articles of Incorporation, as amended, to increase
the number of authorized Common Shares from 10,000,000 to 20,000,000, and
ratification of the appointment of Virchow, Krause & Company, LLP as the
Corporations independent auditor for fiscal year 2008, will require the
affirmative vote of a majority of the votes cast on the proposal. Under the
Pennsylvania Business Corporation Law, an abstention, withholding of authority
to vote or broker non-vote will not have the same legal effect as an
against vote and will not be counted in determining whether the proposals
have received the required shareholder vote.
The
cost of this solicitation will be borne by the Corporation. In addition to
solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or teletype by officers, directors or employees of the Corporation,
without additional compensation. Upon request, the Corporation will pay the
reasonable expenses incurred by record holders of the Corporations Common
Shares who are brokers, dealers, banks or voting trustees, or their nominees,
for mailing proxy materials to the beneficial owners of the shares they hold of
record.
4
PROPOSAL 1
ELECTION OF DIRECTORS
The
Board of Directors currently consists of five members divided into three
classes.
The
Board of Directors, based upon the recommendation of the Nominating and
Corporate Governance Committee, has nominated Robert N. Masucci for election as
a director at the Annual Meeting to serve until the 2011 annual meeting of
shareholders and until his successor has been duly elected and qualified. Mr.
Masucci is a current director of the Corporation and previously has been
elected as a director by the Corporations shareholders. Mr. Masucci has
indicated his willingness to continue serving as a director. The Board of
Directors knows of no reason why Mr. Masucci would be unable to serve as a
director. If Mr. Masucci is for any reason be unable to serve, then the proxies
will be voted for the election of such substitute nominee as the Board of
Directors may designate, unless the Board of Directors reduces the number of
directors on the board.
Assuming
a quorum is present, the nominee receiving the highest number of for votes
will be elected. For such purposes, an abstention, the withholding of authority
to vote or broker non-vote will not be counted in determining whether the
proposal has received the required shareholder vote. The Board of Directors
recommends that the shareholders vote for the election of Mr. Masucci as a
director for the ensuing term.
The
following table sets forth certain information concerning the nominees and the
persons whose terms as directors will continue after the Annual Meeting,
including their ages and principal occupations during the past five years:
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Name, Age and Occupation
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Director
Since
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Term
Expires
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Nominee for Election
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Robert N. Masucci (70)
became a director in February 2002. Mr. Masucci has served as the Chairman of
the Board of Montgomery Capital Advisors, Inc., a consulting company, since
1990 and, Chairman of the Board of Barclay Brand Ferdon, Inc., a distribution
company, since 1996. Prior to 1990, Mr. Masucci was President and Chief
Executive Officer of Drexel Industries, Inc., a forklift manufacturer.
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2002
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2008
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Continuing Directors
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Nicholas A. Giordano (65)
became a director in December 2000. Mr. Giordano has been a business
consultant and investor since 1997. Mr. Giordano was Interim President of
LaSalle University from July 1998 to June 1999. From 1981 to 1997, Mr.
Giordano was President and Chief Executive Officer of the Philadelphia Stock
Exchange. Mr. Giordano serves as a trustee of W.T. Trust and Kalmar Pooled
Investment Trust, mutual funds, and as a director of Independence Blue Cross
of Philadelphia, a health insurance company, The RBB Fund, Inc., a mutual
funds company and Commerce Bancorp, Inc., a national bank holding company.
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2000
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2009
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5
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Name, Age and Occupation
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Director
Since
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Term
Expires
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Mark S. Gorder (61) became
a director in January 1996. Mr. Gorder has served as the President and Chief
Executive Officer of the Corporation since April 2001; President and Chief
Operating Officer of the Corporation from December 2000 to April 2001; and
Vice President of the Corporation from 1996 to December 2000. Mr. Gorder has
been President and Chief Executive Officer of Resistance Technology, Inc., a
subsidiary of the Corporation, since 1983.
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1996
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2010
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Michael J. McKenna (73)
became a director in June 1998 and has served as Chairman of the Board of
Directors of the Corporation since April 2001. In March 2001, Mr. McKenna
retired as the Vice Chairman and a Director of Crown Cork & Seal Company,
Inc., a manufacturing company. From 1995 to 1998, Mr. McKenna was the
President and Chief Operating Officer and, prior to 1995, was the Executive
Vice President and President of the North American Division of Crown Cork
& Seal Company, Inc.
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1998
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2010
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Philip N. Seamon (60)
became a director in September 2006. Currently, Mr. Seamon is President of
Philip N. Seamon, Inc., a consulting firm specializing in operational and financial
business restructuring services. Until his retirement in August 2006, Mr.
Seamon was a senior managing director in the corporate finance practice of
FTI Consulting, Inc., a provider of a wide range of business and financial
advisory and consulting services. Previously, Mr. Seamon was a partner and
the service line leader of PricewaterhouseCoopers Business Recovery Services
practice in their Philadelphia office. FTI Consulting acquired this practice
in September 2002. Prior to joining PricewaterhouseCoopers, Mr. Seamon held
management and partnership positions in both commercial and investment
banking organizations.
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2006
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2009
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Messrs.
Giordano and Masucci are first cousins.
Independence of the Board of Directors
Under
our corporate governance guidelines, the Board, with the assistance of legal
counsel and the Nominating and Corporate Governance Committee, uses the current
standards for independence established by The Nasdaq Stock Market, LLC,
referred to in the remainder of this proxy statement as Nasdaq, to determine
director independence. The Board of Directors has determined that the following
directors, constituting a majority of the members of the Board, are independent
as defined in the corporate governance rules of the Nasdaq Stock Market, LLC:
Messrs. Giordano, Masucci, McKenna and Seamon.
The
independence standards of Nasdaq are composed of objective standards and
subjective standards. Under the objective standards, a director will not be
deemed independent if he directly or indirectly receives payments for services
(other than as a director) in excess of certain thresholds or if certain
described relationships exist. Under the subjective independence standard, a
director will not be deemed independent if he has a material relationship with
the Corporation that, in the view of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director. Under the Nasdaq
rules, an independent director must satisfy both the objective and the
subjective standards.
6
In
evaluating the independence of Mr. Seamon, the Board considered that Mr. Seamon
was a senior managing director in the corporate finance practice of FTI
Consulting, Inc., which provided consulting services to the Corporation in
2005, but did not provide any services in 2006 and 2007. The Board determined
that Mr. Seamon was independent under the objective Nasdaq standards because:
(i) no payments were made to Mr. Seamon directly in exchange for the services
provided to the Corporation by FTI Consulting, Inc. and (ii) the amounts paid
to FTI Consulting, Inc. did not exceed the thresholds contained in the Nasdaq
standards. The Board also determined that Mr. Seamon was independent under the
subjective Nasdaq standard for the reasons discussed above and because: (i) the
last payment made by the Corporation to FTI Consulting, Inc. was in 2005 and
the Corporation did not use FTI Consulting in 2006 and 2007, and (ii) Mr.
Seamon was no longer an employee of FTI Consulting.
In
evaluating the independence of Mr. McKenna, the Board considered that a partner
of the law firm retained by the Corporation since 2002 is the son-in-law of Mr.
McKenna. See Certain Relationships and Related Party Transactions. The Board
determined that Mr. McKenna was independent under the objective Nasdaq
standards because: (i) no payments were made to Mr. McKenna or his son-in-law
directly in exchange for the services provided to the Corporation by the law
firm and (ii) the amounts paid to the law firm did not exceed the thresholds
contained in the Nasdaq standards. The Board also determined that Mr. McKenna
was independent under the subjective Nasdaq standard for the reasons discussed
above and because Mr. McKennas son-in-law was not personally involved in the
law firms legal representation of the Corporation.
Communication with the Board
Shareholders
may communicate with the Board of Directors, including any individual director,
by sending a letter to the Board of Directors, c/o Corporate Secretary,
IntriCon Corporation, 1260 Red Fox Road, Arden Hills, Minnesota 55112. The
Corporate Secretary has the authority to disregard any inappropriate
communications or to take other appropriate actions with respect to any such
inappropriate communications. If deemed an appropriate communication, the
Corporate Secretary will submit your correspondence to the Chairman of the
Board or to any specific director to whom the correspondence is directed.
Meetings of the Board and Committees
The
Corporations Board of Directors held eleven meetings in 2007. During 2007, all
directors of the Corporation attended at least 75% of the total number of
meetings of the Board of Directors of the Corporation and all committees of
which they were members.
Attendance at Annual Meeting of Shareholders
The
Board of Directors has adopted a policy that all of the directors should attend
the annual meeting of shareholders, absent exceptional cause. All of the
directors attended the 2007 annual meeting of shareholders.
Code of Ethics
The
Corporation has adopted a code of ethics that applies to its directors,
officers and employees, including its chief executive officer, chief financial
officer, controller and persons performing similar functions. Copies of the
Corporations code of ethics are available without charge upon written request
7
directed to Cari Sather,
Director of Human Resources, IntriCon Corporation, 1260 Red Fox Road, Arden Hills,
MN 55112. A copy of the code of ethics is also available on the Corporations
website: www.intricon.com. The Corporation intends to satisfy the disclosure
requirement under Item 5.05 of SEC Form 8-K regarding any future amendments to
a provision of its code of ethics by posting such information on the
Corporations website: www.intricon.com.
Director Compensation for 2007
The
following table sets forth information concerning the compensation earned
during the year ended December 31, 2007 by each of our directors that was not
also an employee.
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Name
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Fees Earned
or
Paid in Cash
($)
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Stock
Awards (1)
($)
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Option
Awards (2)
($)
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All Other
Compensation
($)
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Total
($)
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Nicholas A. Giordano
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$
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47,500
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$
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20,591
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$
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68,091
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Robert N. Masucci
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$
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39,500
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$
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20,591
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$
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60,091
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Michael J. McKenna
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$
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61,500
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(3)
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$
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20,591
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$
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82,091
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Philip N. Seamon
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$
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34,000
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$
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10,470
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$
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44,470
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(1)
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We have not granted any
stock awards to our directors.
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(2)
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The amounts included in
the Option Awards column represent the compensation cost we recognized in
2007 related to option awards granted in 2007 and prior years, in accordance
with Statement of Financial Accounting Standards No. 123(R). For a discussion
of valuation assumptions, see Note 12 to our consolidated financial
statements included in our annual report on Form 10-K for the fiscal year
ended December 31, 2007. However, as required by SEC regulations, the amounts
shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. The grant date fair value of each stock option award made
in 2007 to each of Messrs. Giordano, Masucci, McKenna and Seamon was $15,228.
As of December 31, 2007, the number of stock option awards held by our
non-employee directors was: Mr. Giordano 65,000; Mr. Masucci 65,000; Mr.
McKenna 72,500; and Mr. Seamon 15,000.
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(3)
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Pursuant to the
Non-Employee Directors Stock Fee Election Program, Mr. McKenna elected to
have a total of $6,120 of his director fees paid in Common Shares and
received 991 Common Shares. See Non-Employee Directors Stock Fee Election
Program.
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For
2007, the Chairman of the Board received an annual retainer of $49,000. The
Chairman of the Audit Committee received an annual retainer of $34,000. Each
non-employee member of the Board, other than the Chairman of the Board and the
Chairman of the Audit Committee, received an annual retainer of $24,000. Each
of the annual retainers was paid on a quarterly basis. In addition, each
non-employee member of the Board received $1,000 for each Board meeting
attended in person and $500 for each telephonic meeting of the Board attended,
and $1,000 for each committee meeting attended in person and $500 for each telephonic
meeting of the committee attended of which such non-employee member of the
Board is a member; however, no fee was payable for telephonic board and
committee meetings that last less than 30 minutes.
Directors
are eligible to receive awards under the 2006 Equity Incentive Plan, referred
to as the Plan. Following the approval of the Plan by our shareholders at our
annual meeting in April 2006, the Compensation Committee approved the automatic
grant of options to purchase 5,000 Common Shares under the Plan at the fair
market value of the Common Shares on the date of the grant to each person who
was re-elected or continued as a non-employee director at the annual meeting
and each subsequent annual meeting of shareholders thereafter. Accordingly,
following the 2007 annual meeting, each of Messrs. Giordano, Masucci, McKenna
and Seamon was granted an option to purchase 5,000 Common Shares at an exercise
price of $6.59 per share, the fair market value on the date of the grant.
Effective for the 2008
8
Annual
Meeting, assuming that they are re-elected or continue as a director, as the
case may be, Mr. McKenna, in his capacity as chairman of the board, will
receive an option to purchase 12,000 Common Shares, and each of the other
non-employee directors will receive an option to purchase 10,000 Common Shares,
in each case at an exercise price equal to the fair market value of the Common
Shares on the date of the 2008 Annual Meeting. All director options vest in
three equal, annual installments beginning one year after the date of grant,
except that the options will become immediately exercisable upon a change in
control as defined in the Plan or the death or disability of the recipient,
and expire ten years after the date of grant, unless terminated earlier by the
terms of the option.
Non-Employee Directors Stock Fee Election Program
In
December 2006, the Board of Directors approved the Non-Employee Directors Stock
Fee Election Program, referred to as the Program, as an award under the 2006
Equity Incentive Plan. The Program gives each non-employee director the right
under the 2006 Equity Incentive Plan to elect to have some or all of his
quarterly director fees paid in Common Shares rather than cash. The minimum
amount that can be the subject of such election by a director is 25% of his
quarterly director fees. The shares to be issued will be valued based on the
last reported sale price of the Common Shares as reported on Nasdaq on the
first business day of each calendar quarter when quarterly director fees are
paid. The number of shares that will be issued for any such quarterly director
fees with respect to which an election is in effect will be equal to the amount
of the election divided by the applicable last sale price. No fractional shares
will be issued and a director will receive cash in lieu of any fractional
shares. That portion of the quarterly director fees for which no election is in
effect will continue to be paid in cash. The shares so purchased will be deemed
fully vested as of the quarterly payment date. In 2007, Mr. McKenna elected to
have a total of $6,120 of his director fees paid in Common Shares and received
991 Common Shares.
Director Share Ownership Requirements
In
April 2006, the Nominating and Corporate Governance Committee adopted a policy
that all directors must purchase and own Common Shares with a purchase price
equal to at least one-years annual director fees. Each director has a period
of five years to comply with this policy.
Committees of the Board
The
Board of Directors of the Corporation has established an Audit Committee, a
Compensation Committee and a Nominating and Corporate Governance Committee.
Audit Committee.
The Board of Directors of
the Corporation has
appointed a standing Audit Committee consisting of Messrs. Giordano (Chairman),
Masucci, and McKenna. The Board of Directors has determined that each member of
the Audit Committee is independent, as defined in applicable Nasdaq corporate
governance rules and SEC regulations. In addition, the Board of Directors has
determined that Mr. Giordano qualifies as an audit committee financial expert,
as defined in applicable SEC rules. The Audit Committee held ten meetings in
2007.
The
Audit Committee is governed by a written charter approved by the Board of
Directors, a copy of which is available on our website at www.intricon.com. The
principal duties of the Audit Committee are to monitor the integrity of the
financial statements of the Corporation, the compliance by the Corporation with
legal and regulatory requirements and the independence and performance of the
Corporations independent auditors. The Audit Committee also approves all
related party transactions and establishes procedures for (i) the receipt,
retention and treatment of complaints received by the Corporation regarding
accounting, internal accounting controls or auditing matters, and (ii) the
9
confidential,
anonymous submissions by the Corporations employees of concerns regarding
questionable accounting or auditing matters. In addition, the Committee selects
the firm to be engaged as the Corporations independent public accountants, and
approves the engagement of the independent public accountants for all non-audit
activities permitted under the Sarbanes-Oxley Act of 2002. The report of the
Audit Committee appears on page [36].
Compensation
Committee.
The Board of Directors of the Corporation
has appointed a standing Compensation Committee currently consisting of Messrs.
McKenna (Chairman), Seamon, and Masucci. The Board of Directors has determined
that each member of the Compensation Committee is independent, as defined in
applicable Nasdaq corporate governance rules. The Compensation Committee
reviews and makes recommendations to the Board of Directors concerning officer
compensation and officer and employee bonus programs and administers the 2006
Equity Incentive Plan, Corporations 2001 Stock Option Plan, Amended and
Restated 1994 Stock Option Plan, Non-Employee Directors Stock Option Plan and
Employee Stock Purchase Plan. The Compensation Committee met two times in 2007.
The
Compensation Committee is governed by a written charter approved by the Board
of Directors, a copy of which is available on our website at www.intricon.com.
The principal duties of the Compensation Committee are to formulate, evaluate
and approve the compensation of the Corporations executive officers, oversee
all compensation programs involving the issuance of the Corporations stock and
other equity securities of the Corporation, and review and discuss with the
Corporations management the Compensation Discussion and Analysis and preparing
the Committees report thereon for inclusion in the Corporations annual proxy
statement in accordance with applicable rules and regulations. The report of
the Compensation Committee appears on page [20].
A
discussion of the Compensation Committees processes and procedures for the
consideration and determination of executive and director compensation is
included in Compensation Discussion and Analysis.
Nominating
and Corporate Governance Committee.
The Board of
Directors of the Corporation has appointed a standing Nominating and Corporate
Governance Committee currently consisting of Messrs. McKenna (Chairman),
Giordano, Masucci and Seamon. The Board of Directors has determined that each
member of the Nominating and Corporate Governance Committee is independent, as
defined in applicable Nasdaq corporate governance rules. The Nominating and
Corporate Governance Committee met three times in 2007.
The
Nominating and Corporate Governance Committee is governed by a written charter
approved by the Board of Directors, a copy of which is available on our website
at www.intricon.com. The principal duties of the Nominating and Corporate
Governance Committee are to identify individuals qualified to become members of
the Board consistent with the criteria approved by the Committee, consider
nominees made by shareholders in accordance with the Corporations bylaws,
select, or recommend to the Board, the director nominees for each annual
shareholders meeting, recommend to the Board directors to be appointed to each
Committee of the Board, recommend to the Board whether to increase or decrease
the size of the Board, develop and recommend to the Board corporate governance
principles and oversee the evaluations of the Board and senior management.
Director Nomination Process
Consideration
of Director Candidates Recommended by Shareholders
.
The Nominating and Corporate Governance Committee will consider properly
submitted shareholder recommendations for director candidates. A shareholder
who wishes to recommend a prospective director nominee should send a signed and
dated letter to the Chairman of the Nominating and Corporate Governance
Committee, c/o
10
Corporate
Secretary, IntriCon Corporation, 1260 Red Fox Road, Arden Hills, Minnesota
55112 with the following information:
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the name and
address of the shareholder making the recommendation and of each recommended
nominee;
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a
representation that the shareholder is a holder of record, and/or a
beneficial owner, of voting stock of the Corporation entitled to vote at the
meeting and intends to appear in person or by proxy at the meeting to vote
for the person(s) recommended if nominated;
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a
description of all arrangements and understandings between the shareholder
and each recommended nominee and any other person(s), naming such person(s),
pursuant to which the recommendation was submitted by the shareholder;
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such other
information regarding each recommended nominee as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the SEC
had the nominee been nominated by the Nominating and Corporate Governance
Committee, including the principal occupation of each recommended nominee;
and
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the consent
of each recommended nominee to serve as a director if so nominated and
elected.
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The
deadline for submitting the letter recommending a prospective director nominee
for the 2009 annual meeting of shareholders is November 24, 2008. All late or
non-conforming recommendations will be rejected.
In
addition, under the Corporations bylaws, shareholders are permitted to
nominate directors to be elected at a meeting of shareholders by providing
notice and the other required information specified in the bylaws. Although
shareholders may nominate directors, such nominees will not appear in the
Corporations proxy statement or in the proxy solicited by the Board of
Directors. The Corporations amended and restated bylaws are available, at no
cost, at the SECs website, www.sec.gov, as Exhibit 3.1 to the Corporations
Current Report on Form 8-K filed October 12, 2007 or upon the shareholders
written request directed to the Corporate Secretary at the address given above.
Director
Qualifications
. The Nominating and Corporate
Governance Committee has the sole authority to select, or to recommend to the
Board of Directors, the Board of Director nominees to be considered for
election as a director. Nominees for director must be at least 21 years old.
Nominees for director will be selected on the basis of outstanding achievement
in their careers; broad experience; education; independence under applicable
Nasdaq and SEC rules; financial expertise; integrity; financial integrity;
ability to make independent, analytical inquiries; understanding of the
business environment; and willingness to devote adequate time to Board and
committee duties. The proposed nominee should have sufficient time to devote
their energy and attention to the diligent performance of the directors
duties, including attendance at Board and committee meetings and review of the
Corporations financial statements and reports, SEC filings and other
materials. Finally, the proposed nominee should be free of conflicts of
interest that could prevent such nominee from acting in the best interest of
shareholders.
Additional
special criteria apply to directors being considered to serve on a particular
committee of the Board. For example, members of the Audit Committee must meet
additional standards of independence and have the ability to read and
understand the Corporations financial statements.
Identifying
and Evaluating Nominees for Director
. The
Nominating and Corporate Governance Committee assesses the appropriate size of
the Board in accordance with the limits fixed by the
11
Corporations
charter and bylaws, whether any vacancies on the Board are expected and what
incumbent directors will stand for re-election at the next meeting of
shareholders. If vacancies are anticipated, or otherwise arise, the Nominating and
Corporate Governance Committee considers candidates for director suggested by
members of the Nominating and Corporate Governance Committee and other Board
members as well as management, shareholders and other parties. The Nominating
and Corporate Governance Committee also has the sole authority to retain a
search firm to identify and evaluate director candidates. Except for incumbent
directors standing for re-election as described below, there are no differences
in the manner in which the Nominating and Corporate Governance Committee
evaluates nominees for director, based on whether the nominee is recommended by
a shareholder or any other party.
In
the case of an incumbent director whose term of office expires, the Nominating
and Corporate Governance Committee reviews such directors service to the
Corporation during the past term, including, but not limited to, the number of
Board and committee meetings attended, as applicable, quality of participation
and whether the candidate continues to meet the general qualifications for a
director outlined above, including the directors independence, as well as any
special qualifications required for membership on any committees on which such
director serves. When a member of the Nominating and Corporate Governance
Committee is an incumbent director eligible to stand for re-election, such
director will not participate in that portion of the Nominating and Corporate
Governance Committee meeting at which such directors potential nomination for
election as a director is discussed by the Nominating and Corporate Governance
Committee.
In
the case of a new director candidate, the Nominating and Corporate Governance
Committee will evaluate whether the nominee is independent, as independence is
defined under applicable Nasdaq corporate governance rules, and whether the
nominee meets the qualifications for director outlined above as well as any
special qualifications applicable to membership on any committee on which the
nominee may be appointed to serve if elected. In connection with such
evaluation, the Nominating and Corporate Governance Committee determines
whether the committee should interview the nominee, and if warranted, one or
more members of the Nominating and Corporate Governance Committee interviews
the nominee in person or by telephone.
Upon
completing the evaluation, and the interview in case of a new candidate, the
Nominating and Corporate Governance Committee makes a decision as to whether to
nominate the director candidate for election at the shareholders meeting.
12
SHARE OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS, DIRECTORS AND CERTAIN OFFICERS
The
following table sets forth certain information as of March [19], 2008,
concerning beneficial ownership of the Common Shares by (i) persons or groups
of persons shown by SEC records to own beneficially more than 5% of the Common
Shares, (ii) directors and nominees, (iii) the executive officers named in the
Summary Compensation Table included herein and (iv) all directors and executive
officers as a group.
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Name
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Number of
Shares
Beneficially
Owned
(1)
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Percent
of Class
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Amivest Capital Management.
(2)
275 Broadhollow Road
Melville, NY 11747
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448,700
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[__]%
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Dimensional Fund Advisors
LP
(3)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
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314,639
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[__]%
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Estate of Siggi B. Wilzig
(4)
c/o Herrick, Feinstein LLP
2 Penn Plaza
Newark, NJ 07105
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336,575
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[__]%
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The Trust Company of New
Jersey
(5)
35 Journal Square
Jersey City, NJ 07306
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463,700
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[__]%
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Mark S. Gorder
Director, President and Chief Executive Officer
(6)
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481,183
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[__]%
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Michael J. McKenna
Chairman of the Board of Directors
(7)
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114,959
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[__]%
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Robert N. Masucci
Director
(8)
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134,868
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[__]%
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Nicholas A. Giordano
Director
(9)
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81,868
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[__]%
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Philip N. Seamon
Director
(10)
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15,000
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*
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Steven M. Binnix
Vice President and General Manager of RTI Electronics
(11)
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19,499
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*
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Christopher D. Conger
Vice President, Engineering
(12)
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37,099
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*
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Michael P. Geraci
Vice President, Sales
(13)
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30,000
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*
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Dennis L. Gonsior
Vice President, Global Operations
(14)
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26,000
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*
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Scott Longval
Chief Financial Officer, Secretary, and Treasurer
(15)
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12,336
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*
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All Directors and Executive
Officers as a Group (11 persons)
(16)
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890,178
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[__]%
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13
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(1)
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Unless
otherwise indicated, each person has sole voting and investment power with
respect to all such shares. The securities beneficially owned by a person
are determined in accordance with the definition of beneficial ownership
set forth in the regulations of the Securities and Exchange Commission. The
information does not necessarily indicate beneficial ownership for any other
purpose. The same Common Shares may be beneficially owned by more than one
person. Beneficial ownership, as set forth in the regulations of the
Securities and Exchange Commission, includes securities as to which the
person has or shares voting or investment power. Common Shares issuable upon
the exercise or conversion of securities currently exercisable or convertible
or exercisable or convertible within 60 days of March [19], 2008 are deemed
outstanding for computing the share ownership and percentage ownership of the
person holding such securities, but are not deemed outstanding for computing
the percentage of any other person. Beneficial ownership may be disclaimed as
to certain of the securities.
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(2)
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Based upon a
Schedule 13G filed with the SEC on January 22, 2007. According to the
Schedule 13G, Amivest Capital Management is an investment adviser and has
sole power to vote the shares reported.
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(3)
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Based upon a
Schedule 13G/A filed with the SEC on February 6, 2008. According to the
Schedule 13G/A, Dimensional Fund Advisors LP (Dimensional), is an
investment advisor that furnishes investment advice to four investment
companies, and serves as investment manager to certain other commingled group
trusts and separate accounts. These investment companies, trusts and accounts
are the Dimensional Funds. In its role as investment advisor or manager,
Dimensional possesses investment and/or voting power over the Common Shares
that are owned by the Dimensional Funds, and may be deemed to be the
beneficial owner of the Common Shares held by the Dimensional Funds. The
Schedule 13G/A states that to Dimensionals knowledge, no one Dimensional
Fund beneficially owns five percent or more of the Common Shares. Dimensional
disclaims beneficial ownership of all of the Common Shares.
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(4)
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Based upon a
Schedule 13D filed with the SEC on October 2, 2003.
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(5)
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Based upon a
Schedule 13D/A filed with the SEC on February 9, 2004.
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(6)
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Includes
123,333 shares which Mr. Gorder has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options. Also includes 5,000
Common Shares owned by his spouse and 14,000 Common Shares owned by his
daughters. Mr. Gorder, whose business address is 1260 Red Fox Road, Arden
Hills, MN 55112, is also President and Chief Executive Officer of Resistance
Technology, Inc., a wholly owned subsidiary of the corporation.
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(7)
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Includes
64,168 shares which Mr. McKenna has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options.
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(8)
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Includes
56,668 shares which Mr. Masucci has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options.
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(9)
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Includes
56,668 shares which Mr. Giordano has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options.
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(10)
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Includes
5,000 shares which Mr. Seamon has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options.
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(11)
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Includes
12,499 shares which Mr. Binnix has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options.
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(12)
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Includes
31,499 shares which Mr. Conger has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options. Also includes 1,400
shares held by his wife through a retirement account.
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(13)
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Includes
27,000 shares which Mr. Geraci has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options.
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(14)
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Includes
25,000 shares which Mr. Gonsior has the right to acquire within 60 days of
March 14, 2008 through the exercise of stock options.
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(15)
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Includes
10,000 shares which Mr. Longval has the right to acquire within 60 days of
March 19, 2008 through the exercise of stock options.
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(16)
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Includes
355,501 shares which directors and executive offices have the right to
acquire within 60 days of March 19, 2008 through the exercise of stock
options.
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15
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Background
The
Compensation Committee of our Board of Directors administers our compensation
program for executive officers. The objectives of our compensation program are
to attract and retain talented and dedicated executive officers and to align a
significant portion of their compensation with our business objectives and
performance.
Elements of Executive Compensation
Our
compensation program for executive officers consists of the following elements:
Base
Salary
. Base salary is designed to reward the
performance of our executive officers in their daily fulfillment of their
responsibilities to us. The Compensation Committee determines the base salary
of each of our executive officers by evaluating their scope of responsibilities
and experience, years of service with us, our performance and the performance
of each of the executive officers during the past year, the executives future
potential and competitive salary practices. We believe that our base salaries
are competitive with other companies of our size.
Annual
Cash Incentive Compensation
. The Compensation
Committees philosophy is that a significant portion of the total potential
compensation of our executive officers should depend upon the degree of our
financial and strategic success in a particular year. The Compensation
Committee approved the 2007 Bonus Plan, which is not set forth in a written
agreement. The 2007 Bonus Plan was designed to reward the achievement of annual
financial goals that are aligned with shareholder interests. Under the 2007
Bonus Plan, each of the executive officers was eligible to receive a cash bonus
based on our exceeding certain earnings per share target amounts for the fiscal
year 2007, calculated after giving effect to any bonuses accrued under the 2007
Bonus Plan. Depending upon the earnings per share target amount, Mr. Gorder was
eligible to receive a bonus up to 150% of his base salary and each of the other
executive officers was eligible to receive a bonus up to 75% of their
respective base salary.
In
February 2008, the Compensation Committee adopted the 2008 Bonus Plan. For
further information, see 2008 Bonus Plan.
Long-Term
Incentive Compensation in the Form of Stock Awards
.
In 2006, our Board of Directors and shareholders approved the 2006 Equity
Incentive Plan. The 2006 Equity Incentive Plan is designed to:
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promote the
long-term retention of our employees, directors and other persons who are in
a position to make significant contributions to our success;
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further
reward these employees, directors and other persons for their contributions
to our growth and expansion;
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provide
additional incentive to these employees, directors and other persons to
continue to make similar contributions in the future; and
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further
align the interests of these employees, directors and other persons with
those of our shareholders.
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To
achieve these purposes, the 2006 Equity Incentive Plan permits the Compensation
Committee to make awards of stock options, stock appreciation rights,
restricted stock or unrestricted stock, deferred stock, restricted stock units
or performance awards for our Common Shares. For more information concerning
the 2006 Equity Incentive Plan, see 2006 Equity Incentive Plan.
Stock
options are granted at the fair market value of our Common Shares on the date
of grant. Stock options are granted based on various factors, including the
executives ability to contribute to our long-term growth and profitability.
Employee
Stock Purchase Plan
. All of our fulltime
employees, including our executive officers (other than Mr. Gorder), are
entitled to participate in our Employee Stock Purchase Plan. Under this Plan,
employees may purchase our Common Shares at a discount of up to 10% through
payroll deductions.
Other
Benefits
.
All of our fulltime employees, including
our executive officers, are entitled to participate in our health insurance,
life insurance and 401(k) plans. We also maintain a disability insurance policy
on behalf of certain of the members of our senior management, including Messrs.
Gorder, Binnix, Geraci and Gonsior, that is in addition to the disability
benefits that we maintain for our salaried employees.
Additional
Benefits Payable to the Chief Executive Officer
.
Mr. Gorder, our Chief Executive Officer, receives additional benefits under our
employment agreement with him. Under this agreement, we maintain disability
insurance for Mr. Gorders benefit. Additionally, under the employment
agreement, we are required to reimburse Mr. Gorder for his country club
membership fees. We are also required to provide Mr. Gorder with an automobile
for use in connection with the performance of his duties under the employment
agreement and reimburse him for all expenses reasonably incurred by him for the
maintenance and operation, including fuel, of the automobile.
Processes and Procedures for the
Determination of Executive Officer and Director Compensation
Scope
of Authority of the Compensation Committee
. The
scope of the Compensation Committees authority and responsibilities is set
forth in its charter, a copy of which is available on our website at www.intricon.com.
The Compensation Committees authority includes the authority to:
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determine
the following with respect to our executive officers: (i) the annual base
salary level, (ii) the annual incentive opportunity level, (iii) the
long-term incentive opportunity level, (iv) employment agreements, severance
agreements, change in control agreements/provisions and other compensatory
arrangements, in each case as, when and if appropriate, and (v) any special
or supplemental benefits, in each case subject to the terms of any existing
applicable employment agreement terms; and
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determine
the compensation payable to directors and members of committees of the board,
including the Chairman of the Board and the Chairman of each committee, other
than directors who are our salaried employees.
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Delegation
of Authority
. As provided under the Compensation
Committees charter, the Compensation Committee may delegate its authority to
special subcommittees of the Compensation Committee as the Compensation
Committee deems appropriate, consistent with applicable law and Nasdaq listing
standards. Additionally, the 2006 Equity Incentive Plan permits the
Compensation Committee, subject to criteria, limitations and instructions as
the Compensation Committee determines, to delegate to an appropriate officer of
the Corporation the authority to determine the individual participants under
that Plan and amount and nature of the award to be issued to such participants;
provided, that no
17
awards may be
made pursuant to such delegation to a participant who is subject to Section
16(b) of the Securities Exchange Act of 1934, as amended. To date, the
Compensation Committee has not delegated its responsibilities except that in
January 2008, the Compensation Committee delegated to the Chief Executive
Officer and Chief Financial Officer the authority to grant up to 5,000 stock
options under the 2006 Equity Incentive Plan to employees working in our
Singapore facility.
Role
of Management in Determining or Recommending Executive Compensation
.
Traditionally, the Compensation Committee reviews our executive compensation
program in December and/or January of each year, although decisions in
connection with new hires and promotions are made on an as-needed basis. Mr. Gorder,
our President and Chief Executive Officer, makes recommendations concerning the
amount of compensation to be awarded to our executive officers, including
himself, but does not participate in the Compensation Committees deliberations
or decisions. The Compensation Committee reviews the recommendations together
with a tally sheet showing all items of executive compensation. After a
presentation by Mr. Gorder, the Committee meets in executive session to discuss
and consider the recommendations and makes a final determination.
Role
of Compensation Consultants in Determining or Recommending Executive
Compensation
. Under its charter, the Compensation
Committee has authority to retain, at the Corporations expense, such counsel,
consultants, experts and other professionals as it deems necessary. To date,
the Compensation Committee has not relied on consultants. Instead, from time to
time, the Compensation Committee conducts an informal survey of area companies
and review the compensation practices of the surveyed companies.
The
Compensation Committee intends to retain a compensation consultant to review
the Corporations compensation structure on a company-wide basis in 2008.
Determination of Executive Compensation
Base
Salary
. Typically, the Compensation Committee
reviews and adjusts base salaries on an annual basis. In December 2006, the
Compensation Committee increased the 2007 base salary of Mr. Gorder, our
President and Chief Executive Officer, and each of the other executive officers
by 4%. In December 2007, the Compensation Committee increased the 2008 base
salary of each of our executive officers ranging from approximately 12% to 28%.
Additionally, the Compensation Committee may increase base salary as a result
of promotions. The following table shows the base salaries of our current
executive officers as in effect at the end of each of 2006, 2007 and 2008. Mr.
Gruenhagen, our Vice President of Corporate Quality and Regulatory Affairs, was
named an executive officer in December, 2007 and therefore is not included in
this discussion.
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Name and
Principal Position
|
|
2006
Annual
Base Salary
|
|
2007
Annual
Base Salary
|
|
2008
Annual
Base Salary
|
|
|
|
|
|
|
|
|
|
Mark S.
Gorder,
President and Chief Executive Officer
|
|
$
|
300,000
|
|
$
|
312,000
|
|
$
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Longval,
Chief Financial Officer and Treasurer
|
|
$
|
125,000
|
|
$
|
130,000
|
|
$
|
165,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M.
Binnix,
Vice President and General Manager of RTI Electronics
|
|
$
|
150,000
|
|
$
|
156,000
|
|
$
|
175,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
D. Conger,
Vice President, Research and Development
|
|
$
|
140,000
|
|
$
|
145,600
|
|
$
|
185,000
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Name and
Principal Position
|
|
2006
Annual
Base Salary
|
|
2007
Annual
Base Salary
|
|
2008
Annual
Base Salary
|
|
|
|
|
|
|
|
|
|
Michael P.
Geraci,
Vice President, Sales and Marketing
|
|
$
|
150,000
|
|
$
|
156,000
|
|
$
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis L.
Gonsior,
Vice President, Global Operations
|
|
$
|
140,000
|
|
$
|
145,600
|
|
$
|
185,000
|
|
Annual
Cash Incentive Compensation
. In December 2007, the
Compensation Committee determined that because the minimum target under the
2007 Bonus Plan had been met, Mr. Gorder, our President and Chief Executive
Officer would be entitled to a bonus equal to 20% of his base compensation and
the other executive officers, other than Mr. Gruenhagen, would be entitled to a
bonus equal to 10% of their 2007 base compensation.
Long-Term
Incentive Compensation in the Form of Stock Awards.
The
Compensation Committee generally makes awards on an annual basis but also makes
awards in connection with new hires and promotions.
In
December, 2007, the Compensation Committee awarded stock options to the
Corporations executive officers under the 2006 Equity Incentive Plan to
purchase Common Shares at an exercise price of $14.70 per share, the fair
market value of the Common Shares on the date of grant. In January, 2008, the
Compensation Committee awarded stock options to certain of the Corporations
other key employees under the 2006 Equity Incentive Plan to purchase Common
Shares at exercise prices of $11.33 per share and $10.60 per share.
Generally,
the options will become exercisable in three equal, annual installments
beginning one year from the date of grant or earlier upon the death, disability
or retirement of the recipient or our change of control (as defined in the 2006
Equity Incentive Plan).
For
information concerning stock options granted to our executive officers for
2007, see Grants of Plan Based Awards in 2007.
Employment Agreements and Change in Control
Arrangements
In
October, 2007, we entered into employment agreements with Mark S. Gorder, our
President and Chief Executive Officer, and the executive officers named in our
Summary Compensation Table.
The
employment agreement with Mr. Gorder was based on his prior employment
agreement and incorporated the provisions of the change in control agreement
that was then in effect. The employment agreements with the other executive
officers also contain a similar change in control provision. Among other
things, each employment agreement provides for a fixed employment term, subject
to annual renewals, the executives base salary and the executives right to
participate in our bonus plans, equity plans and other employee benefits. In
addition, in the event that (i) there occurs a change in control (as defined
in the agreements) or sale of our assets accounting for 90% of more of our
sales and (ii) the executives employment is involuntarily terminated within
one year afterwards, the executive will be entitled to payment of his base
salary for one year (two years for Mr. Gorder) in a lump sum and continuation
of his medical benefits for a period of one year.
The
change in control provisions that we use contain a double trigger
requirement, meaning that for an executive to receive a payment under the
change of control provision, there must be both a
19
change of
control, as defined in the applicable agreement, and an involuntary termination
of the executives employment. The double trigger requirement was chosen to
prevent us from having to pay substantial payments in connection with a change
in control where an executive had not suffered any adverse employment
consequences. However, all stock options will vest and become immediately
exercisable upon a change of control, regardless of whether the executive is
involuntarily terminated.
We
believe that employment agreements and change in control protections are
important to attract and retain talented executive officers and to protect our
executive officers from a termination or significant change in responsibilities
arising after a change in control. For more information, see Employment
Agreements and Potential Payments Upon Termination of Employment or Change in
Control.
Accounting and Tax Considerations
Under
our prior stock options plans, the Compensation Committee was limited to issuing
stock options. The Compensation Committee is evaluating making awards using the
other types of awards permitted under the 2006 Equity Incentive Plan in light
of Statement of Financial Accounting Standards No. 123, Share-Based Payment
(revised 2004), commonly referred to as FAS 123(R). This accounting standard,
which we adopted as of January 1, 2006, requires us to record as compensation
expense the grant date fair value of a stock option over the life of the
option. Prior to the adoption of FAS 123(R), no compensation expense was
required to be recorded in connection with stock options granted at fair market
value. The Compensation Committee intends to consider the compensation expense
of option and other equity grants when making future awards; however, given
that, traditionally, the Compensation Committee has not made large grants of
option awards to our executive officers and employees, we do not expect that
the compensation expense associated with option grants will have a material
effect on our reported earnings.
Generally,
Section 162(m) of the Internal Revenue Code of 1986, referred to as the
Internal Revenue Code, and the Internal Revenue Service, referred to as the
IRS, regulations adopted under that section, which are referred to collectively
as Section 162(m), deny a deduction to any publicly held corporation, such as
the Corporation, for certain compensation exceeding $1,000,000 paid during each
calendar year to each of the chief executive officer and the four other highest
paid executive officers, excluding, among other things, certain qualified
performance-based compensation. Our policy is to maximize the tax deductibility
of compensation paid to our most highly compensated executives under Section
162(m). For example, our 2006 Equity Incentive Plan is intended to satisfy
certain of the requirements for an exemption for qualified performance-based
compensation under Section 162(m). We do not believe that Section 162(m) will
have a material adverse effect on us in 2008.
Compensation Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis section appearing above with our management. Based on this review
and these discussions, the Compensation Committee recommended to our Board of
Directors that the Compensation Discussion and Analysis be included in our
annual report on Form 10-K for the fiscal year ended December 31, 2007 and in
this proxy statement.
|
|
|
The
Compensation Committee
|
|
|
|
Michael J.
McKenna (Chairman)
|
|
Robert M.
Masucci
|
|
Philip N.
Seamon
|
20
The information contained in this
Compensation Committee Report is not soliciting material and has not been
filed with the Securities and Exchange Commission. This Compensation
Committee Report will not be incorporated by reference into any of our future
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934
.
21
Summary Compensation Table
The
following table summarizes compensation earned during 2006 and 2007 by our chief
executive officer, chief financial officer and each of our executive officers,
other than Mr. Gruenhagen who did not become an executive officer until
December, 2007. We refer to these individuals throughout this proxy statement
as the Named Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus(1)
($)
|
|
Stock
Awards
(2)
($)
|
|
Option
Awards
(3)
($)
|
|
Non-Equity
Incentive Plan
Compensation
(4)
($)
|
|
All Other
Compensation
(5)
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S. Gorder,
|
|
2007
|
|
312,000
|
|
¾
|
|
¾
|
|
39,035
|
|
64,200
|
|
25,547
|
|
440,782
|
|
President and Chief
Executive
Officer (principal executive officer)
|
|
2006
|
|
299,052
|
|
20,000
|
|
¾
|
|
21,780
|
|
¾
|
|
30,456
|
|
371,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Longval,
|
|
2007
|
|
130,000
|
|
¾
|
|
¾
|
|
25,774
|
|
13,000
|
|
3,501
|
|
172,275
|
|
Chief Financial Officer and
Treasurer (principal financial officer)
|
|
2006
|
|
106,573
|
|
5,000
|
|
¾
|
|
10,468
|
|
¾
|
|
157
|
|
122,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M. Binnix,
|
|
2007
|
|
156,000
|
|
¾
|
|
¾
|
|
24,533
|
|
15,600
|
|
7,773
|
|
203,906
|
|
Vice President and General Manager
of RTI Electronics
|
|
2006
|
|
150,000
|
|
7,500
|
|
¾
|
|
14,431
|
|
¾
|
|
7,759
|
|
179,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher D. Conger,
|
|
2007
|
|
145,600
|
|
¾
|
|
¾
|
|
33,322
|
|
14,560
|
|
5,019
|
|
198,501
|
|
Vice President, Research and
Development
|
|
2006
|
|
139,625
|
|
7,500
|
|
¾
|
|
20,434
|
|
¾
|
|
4,992
|
|
172,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Geraci,
|
|
2007
|
|
156,000
|
|
¾
|
|
¾
|
|
18,762
|
|
15,600
|
|
7,695
|
|
198,057
|
|
Vice President, Sales and
Marketing
|
|
2006
|
|
149,427
|
|
7,500
|
|
¾
|
|
10,708
|
|
¾
|
|
7,661
|
|
175,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis L. Gonsior,
|
|
2007
|
|
145,000
|
|
¾
|
|
¾
|
|
18,762
|
|
14,560
|
|
6,766
|
|
185,088
|
|
Vice President, Global
Operations
|
|
2006
|
|
138,939
|
|
7,500
|
|
¾
|
|
10,708
|
|
¾
|
|
6,661
|
|
163,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts
represent discretionary bonuses paid under the 2006 Bonus Plan.
|
|
|
(2)
|
We did not
grant any stock awards in 2007.
|
|
|
(3)
|
The amounts
included in the Option Awards column represent the compensation cost we
recognized in 2007 related to option awards granted in 2007 and prior years,
in accordance with Statement of Financial Accounting Standards No. 123(R).
For a discussion of valuation assumptions, see Note 12 to our consolidated
financial statements included in our annual report on Form 10-K for the
fiscal year ended December 31, 2007. However, as required by SEC regulations,
the amounts shown exclude the impact of estimated forfeitures related to
service-based vesting conditions. See Grants of Plan Based Awards in 2007
for more information regarding the option awards we granted in 2007.
|
|
|
(4)
|
Amounts
represent bonuses paid under the 2007 Bonus Plan.
|
|
|
(5)
|
Consists of
our contributions to each eligible executives account under our 401(k) plan
and payment of premiums for group term life insurance maintained for such
executives and disability policies maintained for certain executives. In the
case of Mr. Gorder, such amount also includes payment of country club
membership dues and payment for his automobile lease and related expenses.
|
Grants of Plan-Based Awards In 2007
The
following table summarizes non-equity incentive plan awards and option awards
that we made in 2007 to our Named Officers. For information concerning awards
made under the 2008 Bonus Plan, see 2008 Bonus Plan.
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options(2)
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
|
Grant Date
Fair Value of
Stock and
Option
Awards(3)
|
|
|
|
|
|
Estimated
Possible Payouts Under
Non-Equity Incentive Plan
Awards(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S. Gorder,
|
|
1/29/07
|
|
¾
|
|
$
|
64,200
|
|
$
|
468,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
12/10/07
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
14.70
|
|
|
|
$
|
135,250
|
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Longval,
|
|
1/29/07
|
|
¾
|
|
$
|
13,000
|
|
$
|
97,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer and Treasurer
|
|
12/10/07
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
$
|
14.70
|
|
|
|
$
|
81,150
|
|
|
(principal financial officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M. Binnix,
|
|
1/29/07
|
|
¾
|
|
$
|
15,600
|
|
$
|
117,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President and General Manager of RTI
Electronics
|
|
12/10/07
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
$
|
14.70
|
|
|
|
$
|
54,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher D. Conger,
|
|
1/29/07
|
|
¾
|
|
$
|
14,560
|
|
$
|
109,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, Research and Development
|
|
12/10/07
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
$
|
14.70
|
|
|
|
$
|
108,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Geraci,
|
|
1/29/07
|
|
¾
|
|
$
|
15,600
|
|
$
|
117,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, Sales and Marketing
|
|
12/10/07
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
$
|
14.70
|
|
|
|
$
|
108,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis L. Gonsior,
|
|
1/29/07
|
|
¾
|
|
$
|
14,560
|
|
$
|
109,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vice President, Global Operations
|
|
12/10/07
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
$
|
14.70
|
|
|
|
$
|
108,200
|
|
|
|
|
|
(1)
|
Represents bonuses payable under our 2007 Bonus
Plan. The amount shown in the Target column represents the bonus payable
assuming that the target under that plan was achieved. The amount shown in
the Maximum column represents the bonus payable assuming that the maximum
under that plan was achieved. In December, 2007, the Compensation Committee
determined that the target under that plan had been achieved and the awards
were paid in 2008. See 2007 Bonus Plan.
|
|
|
(2)
|
The options will become exercisable in three equal,
annual installments beginning one year from the date of grant or earlier upon
the death, disability or retirement of the recipient or a change of control
of the Corporation, (as defined in the 2006 Equity Incentive Plan).
|
|
|
(3)
|
We did not grant any stock awards in 2007. The amounts included in this column
represent the total grant date fair value of option awards granted in 2007 in
accordance with Statement of Financial Accounting Standards No. 123(R). However,
as required by SEC regulations, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting conditions. For a discussion of valuation assumptions,
see Note 12 to our consolidated financial statements included in our annual
report on Form 10-K for the fiscal year ended December 31, 2007.
|
23
Employment Agreements
In
October, 2007, we entered into employment agreements with Mark S. Gorder, our
President and Chief Executive Officer, and the following executive officers of
the Corporation: Scott Longval, our Chief Financial Officer; Steven M. Binnix,
our Vice President and General Manager of RTI Electronics; Christopher D.
Conger, our Vice President, Research and Development; Michael P. Geraci, our
Vice President, Sales and Marketing; and Dennis L. Gonsior, our Vice President,
Global Operations.
The
employment agreements contain the following material terms:
|
|
|
|
|
a current employment term expiring on April 30,
2009, subject to automatic renewal for additional one year terms unless
either party gives notice of non-renewal at least sixty (60) days prior to
the end of the then current employment term;
|
|
|
|
|
|
a base salary as determined by the Board of
Directors or the Compensation Committee, but in no event less than their base
salaries for 2007; and
|
For
a discussion of the provisions relating to the termination of the employment of
the executive officer under certain circumstances, see Potential Payments Upon
Termination of Employment or Change in Control.
2008
Bonus Plan
In
February 2008, the Compensation Committee adopted the 2008 Bonus Plan, which is
not set forth in a written agreement. Pursuant to the 2008 Bonus Plan, each of
the executive officers is eligible to receive a cash bonus based on (i) our
exceeding certain earnings per share target amounts for the fiscal year 2008
and (ii) our achievement of certain strategic objectives. Each component of the
2008 Bonus Plan accounts for one-half of the target bonus payable. Depending
upon the earnings per share target amount and the achievement of the strategic
objectives, Mr. Gorder is eligible to receive a bonus of up to 110% of his 2008
base salary and each of the other executive officers are eligible to receive a
bonus of up to 55% of their respective 2008 base salary.
Earnings
per share amounts will be based on the Corporations reported earnings per
share and, accordingly, will be net of any bonuses payable. In the event that
the Corporations earnings per share amounts are between the thresholds
indicated, the bonus percentage would be calculated based on a mathematical
interpolation. The Compensation Committee retains the right to adjust the
earnings per share target amounts as a result of extraordinary corporate events
such as an acquisition, equity or debt financing or similar event.
The
following table shows the potential amounts payable to the current Named Officers
under the 2008 Bonus Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential
Performance Bonus payable
under the 2008 Bonus Plan
at the following levels of target
earnings per share:
|
|
Maximum
Strategic
Bonus payable
under the 2008
Bonus Plan (1):
|
|
Maximum
Total
Bonus payable
under the 2008
Bonus Plan (2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
100%
|
|
107%
|
|
124%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S. Gorder
|
|
$
|
87,500
|
|
$
|
175,000
|
|
$
|
210,000
|
|
|
$
|
175,000
|
|
|
|
$
|
385,000
|
|
|
Scott Longval
|
|
$
|
20,625
|
|
$
|
41,250
|
|
$
|
49,500
|
|
|
$
|
41,250
|
|
|
|
$
|
90,750
|
|
|
Steven M. Binnix
|
|
$
|
21,875
|
|
$
|
43,750
|
|
$
|
52,500
|
|
|
$
|
43,750
|
|
|
|
$
|
96,250
|
|
|
Christopher D. Conger
|
|
$
|
23,125
|
|
$
|
46,250
|
|
$
|
55,500
|
|
|
$
|
46,250
|
|
|
|
$
|
101,750
|
|
|
Michael P. Geraci
|
|
$
|
25,000
|
|
$
|
50,000
|
|
$
|
60,000
|
|
|
$
|
50,000
|
|
|
|
$
|
110,000
|
|
|
Dennis L. Gonsior
|
|
$
|
23,125
|
|
$
|
46,250
|
|
$
|
55,500
|
|
|
$
|
46,250
|
|
|
|
$
|
101,750
|
|
|
|
24
|
|
|
(1)
|
The strategic bonus is
based on the achievement of six strategic objectives. Each strategic
objective accounts for one-sixth of the strategic bonus component. This
column represents the maximum potential strategic bonus payable, which
assumes all six of the objectives are achieved. The strategic bonus will be
adjusted pro-rata if any objectives are not achieved. The Compensation
Committee will ultimately determine whether the objectives have been achieved
and the amount of the strategic bonus payable.
|
|
|
(2)
|
This column represents the
maximum potential bonus payable under the 2008 Bonus Plan, which assumes
achievement of the maximum earnings per share target and each strategic
objective.
|
Equity
Plans
The
following descriptions summarize our equity plans pursuant to which eligible
employees, including the Named Officers, and directors receive equity based
awards. Our 2006 Equity Incentive Plan, which was adopted by our shareholders
at the 2006 annual meeting of shareholders, replaced our 2001 Stock Option Plan
(described below) and the Amended and Restated Non-Employee Director Stock
Option Plan, referred to collectively as the Old Plans. No additional grants
may be made under the Old Plans. Outstanding grants under the Old Plans
continue to be governed by their terms and the terms of the Old Plans.
2006 Equity Incentive Plan
At
the 2006 annual meeting of shareholders of the Corporation, shareholders
approved the 2006 Equity Incentive Plan.
The
2006 Equity Incentive Plan permits grants of incentive stock options, options
not intended to qualify as incentive stock options, stock appreciation rights,
restricted and unrestricted stock awards, restricted stock units, deferred
stock units, performance awards, supplemental cash awards and combinations of
the foregoing.
The
2006 Equity Incentive Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee determines the type of awards to
be granted under the 2006 Equity Incentive Plan; selects award recipients and
determines the extent of their participation; determines the method or formula
for establishing the fair market value of the Common Shares for various
purposes under the 2006 Equity Incentive Plan; and establishes all other terms,
conditions, restrictions and limitations applicable to awards and the Common
Shares issued pursuant to awards, including, but not limited to, those relating
to a participants retirement, death, disability, leave of absence or
termination of employment. The Compensation Committee may accelerate or defer
the vesting or payment of awards, cancel or modify outstanding awards, waive
any conditions or restrictions imposed with respect to awards or the Common
Shares issued pursuant to awards and make any and all other interpretations and
determinations which it deems necessary with respect to the administration of
the 2006 Equity Incentive Plan, other than a reduction of the exercise price of
an option after the grant date and subject to the provisions of Section 162(m)
of the Internal Revenue Code with respect to covered employees, as defined in
Section 162(m) of the Internal Revenue Code, except that the Committee may not,
without the consent of the holder of an award or unless specifically authorized
by the terms of the plan or an award, take any action with respect to such
award if such action would adversely affect the rights of such holder.
The maximum
total number of shares for which awards may be granted under the 2006 Equity
Incentive Plan is 698,500 Common Shares, subject to appropriate adjustment in a
manner determined by the Board of Directors to reflect changes in the
Corporations capitalization; however, that such authorized share reserve will
be increased from time to time by a number of shares equal to the number of
Common Shares that are issuable pursuant to option grants outstanding under the
Old Plans as of April
25
26, 2006 that,
but for the termination and/or suspension of the Old Plans, would otherwise
have reverted to the share reserve of the Old Plans pursuant to the terms
thereof as a result of the expiration, termination, cancellation or forfeiture
of such options.
As
of March [19], 2008:
|
|
|
|
|
options to
purchase [______] Common Shares were outstanding under the 2006 Equity
Incentive Plan;
|
|
|
|
|
|
the total
number of shares available for new awards under the 2006 Equity Incentive
Plan was [______] Common Shares; and
|
|
|
|
|
|
options to
purchase [______] Common Shares were outstanding under the Old Plans, which
shares will become available for new awards under the 2006 Equity Incentive
Plan in the event of the cancellation, expiration, forfeiture or repurchase
of such awards.
|
2001 Stock Option
Plan
The
2001 Stock Option Plan provided for the grant of incentive stock options (as
defined in Section 422 of the Internal Revenue Code) and non-qualified stock
options for officers and other key employees of the Corporation.
The
Compensation Committee administers the 2001 Stock Option Plan. Stock options
are generally subject to vesting, which means the optionee earns the right to
exercise an increasing number of the shares underlying the option over a
specific period of time only if he or she continues to provide services to the
Corporation over that period. Non-qualified stock options granted under the
2001 Stock Option Plan must have a per share exercise price of at least the fair
market value of the Common Shares on the date of grant. Incentive stock options
granted under the 2001 Stock Option Plan must have a per share exercise price
of at least 100% of the fair market value of the Common Shares on the date of
grant, and not less than 110% of the fair market value in the case of incentive
stock options granted to an employee who holds more than 10% of the total
voting power of all classes of the Corporations stock or any parent or
subsidiarys stock. Payment of the exercise price or purchase price with
respect to any award may be made in cash or other consideration as determined
by the Compensation Committee. The term of an option cannot be longer than 10
years from the date of grant or five years from the date of grant of an incentive
stock option in the case of a greater than 10% shareholder.
26
Outstanding Equity Awards At Fiscal Year-End
The
following table summarizes stock option awards held by our Named Officers at
the end of 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options(1)
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark S. Gorder,
|
|
10,000
|
|
|
|
|
|
|
|
|
9.4375
|
|
|
4/21/2008
|
|
President and Chief Executive
Officer
|
|
50,000
|
|
|
|
|
|
|
|
|
3.125
|
|
|
12/19/2010
|
|
(principal executive
officer)
|
|
25,000
|
|
|
|
|
|
|
|
|
3.70
|
|
|
5/11/2011
|
|
|
|
33,333
|
|
|
16,667
|
(2)
|
|
|
|
|
2.45
|
|
|
7/27/2015
|
|
|
|
5,000
|
|
|
10,000
|
(3)
|
|
|
|
|
5.35
|
|
|
12/11/2016
|
|
|
|
|
|
|
25,000
|
(6)
|
|
|
|
|
14.70
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Longval,
|
|
8,333
|
|
|
16,667
|
(4)
|
|
|
|
|
5.30
|
|
|
7/18/2016
|
|
Chief Financial Officer and
Treasurer
|
|
1,667
|
|
|
3,333
|
(3)
|
|
|
|
|
5.35
|
|
|
12/11/2016
|
|
(principal financial
officer)
|
|
|
|
|
15,000
|
(6)
|
|
|
|
|
14.70
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M. Binnix,
|
|
|
|
|
5,000
|
(2)
|
|
|
|
|
2.45
|
|
|
7/27/2015
|
|
Vice President and General
Manager of RTI
|
|
3,333
|
|
|
6,667
|
(5)
|
|
|
|
|
6.75
|
|
|
4/26/2016
|
|
Electronics
|
|
3,333
|
|
|
6,667
|
(3)
|
|
|
|
|
5.35
|
|
|
12/11/2016
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
14.70
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher D. Conger,
|
|
4,000
|
|
|
|
|
|
|
|
|
3.125
|
|
|
12/19/2010
|
|
Vice President, Research and
Development
|
|
7,500
|
|
|
|
|
|
|
|
|
2.35
|
|
|
12/14/2014
|
|
|
|
5,000
|
|
|
2,500
|
(2)
|
|
|
|
|
2.45
|
|
|
7/27/2015
|
|
|
|
5,833
|
|
|
11,667
|
(5)
|
|
|
|
|
6.75
|
|
|
4/26/2016
|
|
|
|
3,333
|
|
|
6,667
|
(3)
|
|
|
|
|
5.35
|
|
|
12/11/2016
|
|
|
|
|
|
|
20,000
|
(6)
|
|
|
|
|
14.70
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Geraci,
|
|
7,000
|
|
|
|
|
|
|
|
|
3.125
|
|
|
12/19/2010
|
|
Vice President, Sales and
Marketing
|
|
16,667
|
|
|
8,333
|
(2)
|
|
|
|
|
2.45
|
|
|
7/27/2015
|
|
|
|
3,333
|
|
|
6,667
|
(3)
|
|
|
|
|
5.35
|
|
|
12/11/2016
|
|
|
|
|
|
|
20,000
|
(6)
|
|
|
|
|
14.70
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis L. Gonsior,
|
|
5,000
|
|
|
|
|
|
|
|
|
3.125
|
|
|
12/19/2010
|
|
Vice President, Global
Operations
|
|
16,667
|
|
|
8,333
|
(2)
|
|
|
|
|
2.45
|
|
|
7/27/2015
|
|
|
|
3,333
|
|
|
6,667
|
(3)
|
|
|
|
|
5.35
|
|
|
12/11/2016
|
|
|
|
|
|
|
20,000
|
(6)
|
|
|
|
|
14.70
|
|
|
12/10/2017
|
|
|
|
|
(1)
|
We had no
equity incentive option awards outstanding at the end of 2007.
|
|
|
(2)
|
This portion
of the option vests on July 27, 2008.
|
|
|
(3)
|
This portion
of the option vests in two equal installments on each of December 11, 2008
and December 11, 2009.
|
|
|
(4)
|
This portion
of the option vests in two equal installments on each of July 18, 2008 and
July 18, 2009.
|
|
|
(5)
|
This portion
of the option vests in two equal installments on each of April 26, 2008 and
April 26, 2009.
|
|
|
(6)
|
This option
vests in three equal installments on each of December 11, 2008, December 11,
2009 and December 11, 2010.
|
27
Option Exercises and Stock Vested During 2007
The
following table sets forth information regarding the exercise of options by our
Named Officers during 2007. There were no stock awards outstanding during 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
Value
Realized on
Exercise (1)
($)
|
|
Number of
Shares
Acquired
on Vesting
(#)
|
|
Value
Realized
on
Vesting
($)
|
|
|
|
|
|
|
|
|
|
|
|
Mark S. Gorder,
|
|
¾
|
|
|
|
|
¾
|
|
|
¾
|
|
|
¾
|
|
|
President and Chief Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(principal executive
officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Longval,
|
|
¾
|
|
|
|
|
¾
|
|
|
¾
|
|
|
¾
|
|
|
Chief Financial Officer and
Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(principal financial
officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M. Binnix,
|
|
5,000
|
|
|
|
$
|
36,000
|
|
|
¾
|
|
|
¾
|
|
|
Vice President and General
Manager of RTI Electronics
|
|
7,000
|
|
|
|
$
|
30,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher D. Conger,
|
|
¾
|
|
|
|
|
¾
|
|
|
¾
|
|
|
¾
|
|
|
Vice President, Research
and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Geraci,
|
|
2,500
|
|
|
|
$
|
10,781
|
|
|
¾
|
|
|
¾
|
|
|
Vice President, Sales and
Marketing
|
|
4,500
|
|
|
|
$
|
22,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dennis L. Gonsior,
|
|
1,500
|
|
|
|
$
|
6,469
|
|
|
¾
|
|
|
¾
|
|
|
Vice President, Global
Operations
|
|
4,500
|
|
|
|
$
|
22,691
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the excess of
the closing price per share of our Common Shares on the date of exercise over
the exercise price of the option, multiplied by the number of shares
represented by the option.
|
Potential Payments Upon Termination of
Employment or Change in Control
Our
employment agreements with the executive officers named in the Summary
Compensation Table provide the following material terms in the event of the
termination of the employment of the executive under certain circumstances:
|
|
|
|
|
|
|
in the event
of the termination of the executives employment without cause, we are
required to pay the executives base salary and medical benefits for a
severance period equal to one year (two years in the case of Mr. Gorder with
respect to salary); provided that for any executive that has less than 12
years of continuous service with us, the severance period will be equal to 30
days for each year of continuous full-time employment, but in no event less
than 90 days or more than one year. We are required to pay the present value
of the base salary in a lump sum, using a discount rate of 6%;
|
|
|
|
|
|
|
|
in the event
that (i) there occurs a change in control or sale of our assets accounting
for 90% of more of our sales and (ii) the executives employment is involuntarily
terminated within one year afterwards, we are required to pay the executives
base salary for one year (two years for Mr. Gorder) in a lump sum and to
continue medical benefits for a period of one year;
|
28
|
|
|
|
|
|
|
in the sole
and absolute discretion of the Board of Directors, in the event that the
executive is terminated without cause or there occurs a change of control
followed by the executives involuntary termination, we may elect to pay
executive a prorated amount of the bonus that executive would have been
entitled to receive for the year in which he was terminated;
|
|
|
|
|
|
|
|
the
immediate vesting of all stock options and equity awards held by the
executive in the event of a change in control or in the event that the
executives employment is terminated (i) by us for any reason other than
cause or (ii) by the executive under circumstances that constitute an
involuntary termination; and
|
|
|
|
|
|
|
|
a one year
non-competition covenant (or, if longer, for so long as the period with
respect to which executive is entitled to receive, or has received, payment
of severance following a termination by us without cause or change of
control) and covenants concerning confidentiality and inventions.
|
In
the event that we give a notice of non-renewal of the term of the agreement to
the executive and, within 12 months after the date of the non-renewal notice,
the executives employment is terminated by us for any reason other than cause
or the death or disability of executive, then the executive will be entitled to
the severance benefits described above with respect to a termination without
cause except that the severance period shall be reduced by the number of days
between the date of the non-renewal notice and the termination of executives
employment.
As
defined in the employment agreements:
Asset
Sale means the sale of our assets (including the stock or assets of our
subsidiaries) to which 90% or more of our consolidated sales volume is
attributable.
Cause
means the following, provided that, in the case of circumstances described in
the fourth through sixth clauses below, we must have first given written notice
to executive, and executive must have failed to remedy the circumstances as
determined in the sole discretion of the Board of Directors within 30 days
after such notice:
|
|
|
|
|
|
|
fraud or
dishonesty in connection with executives employment or theft,
misappropriation or embezzlement of our funds;
|
|
|
|
|
|
|
|
conviction
of any felony, crime involving fraud or knowing misrepresentation, or of any
other crime (whether or not such felony or crime is connected with his
employment) the effect of which in the judgment of the Board of Directors is
likely to adversely affect us or our affiliates;
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material
breach of executives obligations under the employment agreement;
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repeated and
consistent failure of executive to be present at work during normal business
hours unless the absence is because of a disability as defined in the
agreement;
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willful
violation of any express direction or requirement established by the Board of
Directors, as determined by a majority of Board of Directors;
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insubordination,
gross incompetence or misconduct in the performance of, or gross neglect of,
executives duties under the employment agreement, as determined by a
majority of the Board of Directors; or
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use of
alcohol or other drugs which interfere with the performance by executive of
his duties, or use of any illegal drugs or narcotics.
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29
Change
of control of means an asset sale or a change in majority stock
ownership.
Change
in majority stock ownership means the acquisition by any person (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, referred to as the Exchange Act), including any affiliate or associate
as defined in Rule 12b-2 under the Exchange Act of such person, or any group of
persons acting in concert, other than us, any trustee or other fiduciary holding
securities under an employee benefit plan of ours, or any corporation or other
entity owned, directly or indirectly, by our shareholders in substantially the
same proportion as their ownership of capital stock of us, of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% or more of the combined voting power of our then outstanding
securities.
Involuntarily
terminated means:
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any
termination of the employment of executive by us other than for cause, death
or disability; or
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any
termination of employment of the executive by executive following:
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a material
diminution in the executives base compensation;
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a material
diminution in the executives authority, duties, or responsibilities;
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a material
diminution in the authority, duties, or responsibilities of the supervisor to
whom the executive is required to report, including a requirement that a
executive report to a corporate officer or employee instead of reporting
directly to the board of directors;
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a material
diminution in the budget over which the executive retains authority;
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a material
change in the geographic location at which the executive must perform the
services; or
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any other
action or inaction that constitutes a material breach by us under the
agreement.
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Provided,
however, that with respect to any termination by executive pursuant to the
foregoing, executive shall have first provided notice to us of the existence of
the condition proposed to be relied upon within 90 days of the initial
existence of the condition, and shall have given us a period of 30 days during
which we may remedy the condition and we shall have failed to do so during such
period.
The
change in control provisions that we use contain a double trigger
requirement, meaning that for an executive to receive a payment under the
change of control provision, there must be both a change of control, as defined
in the applicable agreement, and an involuntary termination of the executives
employment. The double trigger requirement was chosen to prevent us from having
to pay substantial payments in connection with a change in control where an
executive had not suffered any adverse employment consequences. However, all
stock options will vest and become immediately exercisable upon a change of
control, regardless of whether the executive is involuntarily terminated.
Disability
Benefits for Certain Named Officers
. We provide all of
our full-time salaried employees with short-term disability benefits for six
months. We also maintain a disability insurance policy on behalf of certain
members of our senior management, including Messrs. Gorder, Binnix, Geraci and
Gonsior, that is in addition to the disability benefits that we maintain for
our salaried employees. In the event that any of these executives became
disabled, as provided in their respective policies, was unable to return to the
performance of their duties after six months and was terminated as an employee
30
effective as
of December 31, 2007, they would be paid monthly benefits until age 65 as
follows: Mr. Gorder - $8,370 per month; Mr. Binnix - $4,480 per month; Mr.
Geraci - $6,450 per month; and Mr. Gonsior - $5,860 per month.
Equity
Plans.
Our Named Officers hold unvested stock options under our 2001
Stock Option Plan and our 2006 Equity Incentive Plan. Under the 2001 Stock
Option Plan, upon the death, disability, retirement or change of control of us,
the holder of an option generally can exercise only options that have vested as
of the date of such event. In addition, that plan gives the Compensation
Committee the authority to accelerate the vesting of any unvested options.
Under
our 2006 Equity Incentive Plan, all unvested options will automatically
accelerate and become vested upon the death, disability, retirement of the
holder or upon a change of control of us, as defined in that Plan.
Under
both the 2001 Stock Option Plan and 2006 Equity Incentive Plan, options held by
an employee whose employment is terminated for cause, as defined in those
plans, will terminate immediately. In addition, under both such plans, the
voluntary resignation of employment by an employee will not result in the
acceleration of unvested options.
The
following table shows the estimated amount of payments and benefits that would
be provided by the Company (or its successor) to our Named Officers under the
plans and agreements described above assuming that their employment was
terminated as of December 31, 2007 for various reasons as described below:
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Reason for
Termination of Employment
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Named
Officer and Nature of Payment
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Voluntary by
executive
$ (1)
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Cause
$ (1)
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Death
$ (2)
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Disability
$ (2)
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Termination by
us without cause
$ (2)
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Involuntary
termination
following a
change of control
$ (2)
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Mark S. Gorder
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Lump sum payment
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¾
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¾
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¾
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¾
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555,358
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(3)
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624,000
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(4)
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Bonus
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¾
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¾
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64,200
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(5)
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64,200
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(5)
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64,200
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(5)
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64,200
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(5)
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Cost of continuation of
benefits
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¾
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¾
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4,503
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(6)
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4,503
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(7)
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13,508
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(8)
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13,508
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(9)
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Value of accelerated stock
option awards
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¾
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¾
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238,470
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(10)
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238,470
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(10)
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238,470
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(10)
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238,470
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(10)
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Scott Longval
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Lump sum payment
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¾
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¾
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¾
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¾
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32,026
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(3)
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130,000
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(4)
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Bonus
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¾
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¾
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13,000
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(5)
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13,000
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(5)
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13,000
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(5)
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13,000
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(5)
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Cost of continuation of
benefits
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¾
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¾
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¾
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1,476
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(7)
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1,107
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(8)
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4,429
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(9)
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Value of accelerated stock
option awards
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¾
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¾
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143,333
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(10)
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143,333
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(10)
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143,333
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(10)
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143,333
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(10)
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Steven M. Binnix
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Lump sum payment
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¾
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¾
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¾
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¾
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147,170
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(3)
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156,000
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(4)
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Bonus
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¾
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¾
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15,600
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(5)
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15,600
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(5)
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15,600
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(5)
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15,600
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(5)
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Cost of continuation of
benefits
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¾
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¾
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1,574
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(6)
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1,574
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(7)
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4,723
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(8)
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4,723
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(9)
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Value of accelerated stock
option awards
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¾
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¾
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110,813
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(10)
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110,813
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(10)
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110,813
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(10)
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110,813
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(10)
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Christopher D.
Conger
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Lump sum payment
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¾
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¾
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¾
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¾
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115,631
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(3)
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145,600
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(4)
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Bonus
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¾
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¾
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14,560
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(5)
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14,560
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(5)
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14,560
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(5)
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14,560
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(5)
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Cost of continuation of
benefits
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¾
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¾
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4,436
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(6)
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4,436
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(7)
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11,090
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(8)
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13,307
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(9)
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Value of accelerated stock
option awards
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¾
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¾
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139,463
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(10)
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139,463
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(10)
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139,463
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(10)
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139,463
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(10)
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Michael P.
Geraci
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Lump sum payment
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¾
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¾
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¾
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¾
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147,170
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(3)
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156,000
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(4)
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Bonus
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¾
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¾
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15,600
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(5)
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15,600
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(5)
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15,600
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(5)
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15,600
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(5)
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Cost of continuation of
benefits
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¾
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¾
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4,436
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(6)
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4,436
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(7)
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13,307
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(8)
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13,307
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(9)
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Value of accelerated stock
option awards
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¾
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¾
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131,116
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(10)
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131,116
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(10)
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131,116
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(10)
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131,116
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(10)
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Dennis L.
Gonsior
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Lump sum payment
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¾
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¾
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¾
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¾
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137,358
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(3)
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145,600
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(4)
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31
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Reason for
Termination of Employment
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Named
Officer and Nature of Payment
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Voluntary by
executive
$ (1)
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Cause
$ (1)
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Death
$ (2)
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Disability
$ (2)
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Termination by
us without cause
$ (2)
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Involuntary
termination
following a
change of control
$ (2)
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|
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Bonus
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¾
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¾
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14,560
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(5)
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14,560
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(5)
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14,560
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(5)
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14,560
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(5)
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Cost of continuation of
benefits
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¾
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¾
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4,436
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(6)
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4,436
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(7)
|
13,307
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|
(8)
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13,307
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(9)
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Value of accelerated stock
option awards
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¾
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¾
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131,116
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(10)
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131,116
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(10)
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131,116
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|
(10)
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131,116
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(10)
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(1)
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Upon
termination, the Company must pay all amounts due and payable to the
executive as of the date of termination, including salary, expense
reimbursement, etc., but excluding bonuses. In the event of voluntary
termination by the executive, the executive is entitled to have transferred
to him any Company paid life and disability insurance policies on the
executive and the executive will assume payment of premiums on such policies.
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(2)
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Upon
termination, the Company must pay all amounts due and payable to the
executive as of the date of termination, including salary, bonuses, expense
reimbursement, etc. In the event of termination by the Company without cause
or involuntary termination following a change of control, the executive is
entitled to have transferred to him any Company paid life and disability
insurance policies on the executive and the executive will assume payment of
premiums on such policies.
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(3)
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Amount
represents the present value of the executives base salary, at the rate in
effect on December 31, 2007, for the severance period, as defined in the
executives employment agreement, using a discount rate of 6% per year. This
amount is payable within two weeks of the executives termination.
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(4)
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Amount
represents one years base salary (two years in the case of Mr. Gorder) at
the rate in effect on December 31, 2007. This amount is payable within two
weeks of the executives termination. This amount need not be paid by the
Company if the change of control is an asset sale and the purchaser offers to
employ the executive at not less than the same rate of compensation and level
of benefits the executive was receiving prior to the asset sale and agrees to
employ the executive for at least a one year period after consummation of the
asset sale.
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(5)
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Amount
represents the bonus payable under the 2007 Bonus Plan, which amount was
earned but unpaid as of December 31, 2007.
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(6)
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Amount
represents the cost of continuation of medical benefits coverage for the
executives spouse for the remainder of the term of the executives
Employment Agreement, assuming no increase in premiums.
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(7)
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Amount
represents the cost of continuation of medical benefits coverage for the
executive and the executives spouse (if any) for the remainder of the term
of the executives Employment Agreement, assuming no increase in premiums. In
addition to these amounts, pursuant to the disability insurance policy we
maintain for Messrs. Gorder, Binnix, Geraci and Gonsior, if any of these
executives were terminated as a result of a disability on December 31, 2007,
such executive would receive the following monthly benefits until age 65: Mr.
Gorder - $8,370 per month; Mr. Binnix - $4,480 per month; Mr. Geraci - $6,450
per month; and Mr. Gonsior - $5,860 per month.
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(8)
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Amount
represents the cost of continuation of medical benefits coverage for the
executive for the severance period, as defined in the executives employment
agreement (12 months in the case of Mr. Gorder), assuming no increase in
premiums.
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(9)
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Amount
represents the cost of continuation of medical benefits coverage for the
executive for a period of one year after the involuntary termination,
assuming no increase in premiums.
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(10)
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Amount
represents the value of unvested stock options that would accelerate and
become exercisable as a result of the termination of employment, calculated
based on the difference between the closing price of our Common Shares on
December 31, 2007 of $12.48 per share and the exercise price of unvested
stock options as of such date, multiplied by the number of unvested options.
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32
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The
members of the Compensation Committee during 2007 were: Messrs. McKenna
(Chairman), Seamon, and Masucci. No person who served as a member of the
Compensation Committee during 2007 was a current or former officer or employee
of the Corporation or any subsidiary or engaged in certain transactions with
Corporation or any subsidiary required to be disclosed by regulations of the
SEC except as described below under Certain Relationships and Related Party
Transactions with respect to Mr. McKenna. Additionally, there were no
compensation committee interlocks during 2007, which generally means that no
executive officer of the Corporation served as a director or member of the
compensation committee of another entity, which had an executive officer
serving as a director or member of the Compensation Committee of the
Corporation.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Mr.
Gorder, our president, chief executive officer and a director, is a general
partner (with a one-third interest) of Arden Partners I, L.L.P., a
Minnesota limited liability partnership, referred to as Arden, that owns and
leases to our subsidiary, Resistance Technology, Inc., referred to as RTI, property
under a lease entered into November 31, 1991, and amended and restated on
November 1, 1996. The leased property is one of RTIs two manufacturing
facilities. In 2002, the lease was renewed with a term of October 31, 2011.
Under the lease, RTI pays Arden a base monthly rent of approximately $30,667.
In 2007, we paid Arden approximately $481,000 for rent, taxes and other
charges. Mr. Gorders interest in such payment was approximately $160,000.
We
use the law firm of Blank Rome LLP for legal services. A partner of that firm,
David A. Dorey, is the son-in-law of the Chairman of our Board of Directors,
Mr. McKenna; however, the legal services are provided by other attorneys
at that firm and not by Mr. Dorey. In 2007, we paid that firm approximately $466,000
for legal services and costs. The interest of Mr. Dorey in such amount is not
determinable.
In
March 2007, the Board of Directors adopted written policies and procedures
regarding approval of transactions between the Corporation and any employee,
officer, director and certain of their family members and other related persons
required to be reported under Item 404 of SEC Regulation S-K. Under these
policies, a majority of the disinterested members of the Audit Committee must
approve any transaction between the Corporation and any related party that
involve more than $25,000. If a majority of the members of the Audit Committee
are interested in the proposed transaction, then the transaction must be
approved by a majority of the disinterested members of the Board (excluding
directors who are employees of the Company). The Chair of the Audit Committee
has the delegated authority to pre-approve or ratify (as applicable) any
related party transaction in which the aggregate amount involved is expected to
be less than $120,000. In determining whether to approve or ratify a related
party transaction, the Audit Committee will take into account, among other
factors it deems appropriate, whether the related party transaction is on terms
no less favorable to the Corporation than terms generally available to an
unaffiliated third-party under the same or similar circumstances and the extent
of the related partys interest in the transaction.
33
PROPOSAL
2
APPROVAL
OF AN AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS
AMENDED, TO AUTHORIZE ADDITIONAL COMMON SHARES
Our
Board of Directors has adopted, subject to shareholder approval, an amendment
to our Amended and Restated Articles of Incorporation, as amended, to increase
our authorized Common Shares from 10,000,000 to 20,000,000. If the shareholders
do not approve the amendment, then the number of authorized Common Stock will
remain at 10,000,000 shares.
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The resolutions to be considered by the shareholders
at the Annual Meeting are as follows:
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RESOLVED, that the Directors of the Corporation have
determined that it is in the best interest of the Corporation and its
shareholders that the Corporations Amended and Restated Articles of
Incorporation, as amended, be amended to increase the number of shares of
Common Stock authorized for issuance thereunder to 20,000,000 shares;
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FURTHER RESOLVED, that the first paragraph of
Article FIFTH of the Amended and Restated Articles of Incorporation, as
amended, of the Corporation be amended and restated to read in its entirety
as follows:
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FIFTH. The aggregate number of shares that the
Corporation shall have the authority to issue is 21,000,000 shares, divided
into two classes, one class consisting of 1,000,000 Preferred Shares, each of
which shall have the par value of $1, and the other class consisting of
20,000,000 Common Shares, each of which shall have the par value of $1.
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FURTHER RESOLVED, that the foregoing amendment is
adopted and approved and the proper officers of the Corporation are
authorized and directed to submit such amendment to the shareholders for
their approval at the 2008 Annual Meeting of Shareholders;
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FURTHER RESOLVED, that the proper officers of the
Corporation are hereby authorized and directed, after shareholder approval of
the proposed amendment, to execute, under its corporate seal, Articles of
Amendment to the Amended and Restated Articles of Incorporation, as amended,
and to file such Articles of Amendment with the Pennsylvania Department of
State; and
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FURTHER RESOLVED, that the Board of Directors of the
Corporation may, notwithstanding approval by the shareholders of the
Corporation, at any time prior to the filing of the Articles of Amendment
with the Pennsylvania Department of State, terminate the proposed amendment
and all transactions contemplated by or incident thereto.
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Reasons for the Amendment
Under
the Corporations current Amended and Restated Articles of Incorporation, as
amended, the Corporation is authorized to issue up to 1,000,000 Preferred
Shares and up to 10,000,000 Common Shares.
The
purpose of the proposed amendment is to provide sufficient shares for future
financings, acquisitions, stock dividends, stock splits, benefit plans,
recapitalizations and other corporate purposes. Although the Corporation
evaluates such uses from time to time, the Corporation does not have any
commitments or understandings that would require the issuance of these
additional shares. Once
34
authorized, the additional Common Shares may be issued
by the Board of Directors without further approval by the shareholders, unless
such approval is required by law or applicable Nasdaq requirements.
Accordingly, the vote on this proposal may be the only opportunity for the shareholders
to take action in connection with such financings, acquisitions, benefit plans,
recapitalizations and other corporate actions.
As
of March [19], 2008:
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no Preferred
Shares were outstanding;
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[_______] Common Shares were outstanding; and
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[_______] Common Shares were reserved for issuance
under the Corporations stock option and equity plans.
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Therefore, of the 10,000,000 Common Shares authorized
for issuance, only about [_______] Common Shares are currently unissued,
unreserved and available for issuance.
Under
Pennsylvania law, shareholders of the Corporation do not have preemptive rights
with respect to the issuance of any shares of capital stock of the Corporation.
Shareholder approval of this proposal is required under our Bylaws and
Pennsylvania law. Assuming that Proposal 2 is approved by the shareholders at
the Annual Meeting, the Corporation will be authorized to issue an additional
10,000,000 Common Shares. The amendment will have no immediate effect on the
rights of existing shareholders.
These
additional Common Shares will provide the Companys Board of Directors with as
much flexibility as possible to issue additional shares, without further
shareholder approval, for proper corporate purposes, including financings,
acquisitions, stock dividends, stock splits, benefit plans, recapitalizations
and other similar purposes. However, these additional shares may also be deemed
to be anti-takeover or anti-greenmail in nature in that such shares may be
used by the Board of Directors, if consistent with its fiduciary
responsibilities, to deter, discourage or make more difficult the assumption of
control of the Corporation by another company or person through a tender offer,
merger, proxy contest or similar transaction or series of transactions.
In
general, a shareholder may view a future takeover offer to be in his best
interests if any such offer includes a premium over the market price of the
Common Shares at that time. However, the overall effects of the foregoing
provisions may be to discourage, make more costly or more difficult, or prevent
a future takeover offer, prevent shareholders from receiving a premium for
their securities in a takeover offer, and/or enhance the possibility that a
future bidder for control of the Corporation will be required to act through
arms-length negotiation with the Corporations Board of Directors. In addition,
these provisions may have the effect of assisting the Corporations management to
retain its position and place it in a better position to resist changes that
the shareholders may want to make if dissatisfied with the conduct of the
Corporations business.
The
Board of Directors recommends that stockholders vote for the amendment to the
Amended and Restated Articles of Incorporation, as amended, to increase the
authorized Common Shares.
PROPOSAL
3
RATIFICATION
OF APPOINTMENT OF AUDITOR
The
Corporations independent registered public accounting firm for the fiscal year
ended December 31, 2007 was the firm of Virchow, Krause & Corporation, LLP,
referred to as Virchow Krause. Services provided to the Corporation and its
subsidiaries by Virchow Krause in 2007 are
35
described below under Independent Registered Public
Accounting Firm. The Audit Committee of the Board of Directors has appointed
Virchow Krause to serve as the independent registered public accounting firm
for the year ending December 31, 2008. Shareholders will be asked to ratify
this appointment. Although action by the shareholders on this matter is not
required, the Audit Committee believes it is appropriate to seek shareholder
ratification of the appointment of the independent registered public accounting
firm to provide a forum for shareholders to express their views with regard to
the Audit Committees appointment. If the shareholders do not ratify the
appointment of Virchow Krause, the selection of independent registered public
accounting firm may be reconsidered by the Audit Committee; provided however,
the Audit Committee retains the right to continue to engage Virchow Krause.
Notwithstanding the ratification of Virchow Krause as the Corporations
independent registered public accounting firm for the year ending December 31,
2008, the Audit Committee retains the right to replace Virchow Krause at any
time without shareholder approval. A representative of Virchow Krause is
expected to be present at the annual meeting and to be available to respond to
appropriate questions. The representative will have the opportunity to make a
statement if he or she so desires.
Independent Registered Public Accounting Fee
Information
Fees
for professional services provided by Virchow Krause, the Corporations
independent auditor, for the fiscal years ended December 31, 2007 and 2006 in
each of the following categories were:
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Services
Rendered (1)
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2007
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2006
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Audit Fees
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$
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257,529
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$
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171,825
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Audit-Related Fees
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15,400
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Tax Fees
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45,270
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43,100
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All Other Fees
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Total
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$
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318,199
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$
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214,925
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(1)
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The aggregate fees
included in Audit Fees are fees billed
for
the fiscal years. The aggregate fees included in each of the other categories
are fees billed
in
the fiscal
years. Virchow Krause was engaged as independent auditor beginning in August
2005. Does not include: audit fees of $18,011 and $16,312 billed for 2007 and
2006, respectively, by Baker Tilly International, an affiliate of Virchow
Krause, for audits of the Corporations foreign subsidiaries.
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Audit
Fees
. The audit fees for 2007 and 2006 include fees for
professional services rendered for the audit of the Corporations annual
financial statements and the review of the financial statements included in the
Corporations Form 10-K Reports and the review of the financial statements
included in the Corporations Form 10-Q Reports.
Audit-Related
Fees
. The audit-related fees for 2007 include fees for
professional services rendered for audits of the Corporations employee
benefit plan.
Tax
Fees
. The tax fees for 2007 and 2006 include fees for
professional services rendered for tax compliance, tax advice and tax planning.
Auditor
Independence
The
Audit Committee has considered the nature of the above-listed services provided
by Virchow, Krause & Company, LLP and determined that the provision of the
services are compatible with maintaining its independence.
36
Pre-Approval
Policy
The
Audit Committee has established pre-approval policies and procedures pursuant
to which the Audit Committee pre-approved the foregoing audit and permissible
non-audit services provided by Virchow, Krause & Company, LLP in 2007.
37
Audit Committee Report
The
Audit Committee has prepared the following report on its activities with
respect to the Corporations audited consolidated financial statements for the
year ended December 31, 2007, which is referred to herein as the Corporations
audited consolidated financial statements:
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The Audit Committee has reviewed and discussed the
audited consolidated financial statements with management.
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The Audit Committee has discussed with Virchow,
Krause & Company, LLP, the Corporations independent auditors, the
matters required to be discussed by Statements on Auditing Standards No. 61,
which include, among other items, matters related to the conduct of the audit
of the Corporations consolidated financial statements.
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The Audit Committee has received the written
disclosures and the letter from Virchow, Krause & Company, LLP required
by Independence Standards Board Standard No. 1, and has discussed with
Virchow, Krause & Company, LLP its independence from the Corporation.
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Based on the review and discussions referred to
above, the Audit Committee has recommended to the Board of Directors that the
audited consolidated financial statements be included in the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007, for filing
with the Securities and Exchange Commission.
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The
Audit Committee
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Nicholas
A. Giordano, Chairman
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Robert
N. Masucci
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Michael
J. McKenna
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The
Board of Directors recommends that stockholders vote for ratification of the
appointment of Virchow Krause as
the Corporations independent auditor for
2008.
38
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)
of the Securities Exchange Act of 1934 requires the Corporations executive
officers and directors and persons who own more than ten percent of a registered
class of the Corporations equity securities (collectively, the reporting
persons) to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and to furnish the Corporation with copies
of these reports.
Based
on the Corporations review of the copies of these reports received by it and
written representations, if any, received from reporting persons with respect
to the filing of reports of Forms 3, 4 and 5, the Corporation believes
that all filings required to be made by the reporting persons for fiscal year
2007 (unless otherwise noted) were made on a timely basis except: Mr. McKenna
reported late on two Forms 4 the acquisition of Common Shares; Mr. Masucci
reported late on a Form 4 the purchase of Common Shares; and Messrs. Seamon,
Masucci, Giordano and McKenna reported late on a Form 4 the grant of options to
purchase Common Shares.
SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
Under
the Corporations bylaws, shareholder proposals with respect to the 2009 Annual
Meeting of Shareholders, including nominations for directors, which have not
been previously approved by the Board of Directors, must be submitted to the
Secretary of the Corporation no later than November 24, 2008. Any such
proposals must be in writing and sent either by personal delivery, nationally
recognized express mail or United States mail, postage prepaid to Corporate
Secretary, IntriCon Corporation, 1260 Red Fox Road, Arden Hills, Minnesota
55112. Each nomination or proposal must include the information required by the
bylaws. All late or nonconforming nominations and proposals may be rejected by
the officer presiding at the meeting.
Shareholder
proposals for the 2009 Annual Meeting of Shareholders must be submitted to the
Corporation by November 24, 2008 to receive consideration for inclusion in the
Corporations Proxy Statement relating to the 2009 annual meeting of
shareholders. Any such proposal must also comply with SEC proxy rules,
including SEC Rule 14a-8, and any applicable requirements set forth in the
bylaws.
In
addition, shareholders are notified that the deadline for providing the
Corporation timely notice of any shareholder proposal to be submitted outside
of the Rule 14a-8 process for consideration at the Corporations 2009 Annual
Meeting of Shareholders is November 24, 2008. As to all such matters which the
Corporation does not have notice on or prior to November 24, 2008,
discretionary authority shall be granted to the persons designated in the
Corporations Proxy related to the 2009 annual meeting of shareholders to vote
on such proposal.
ANNUAL
REPORT TO SHAREHOLDERS
A
copy of the Corporations 2007 Annual Report on Form 10-K for the year ended
December 31, 2007 as filed with the SEC is being mailed to each shareholder
with this Proxy Statement.
The
Corporation files reports and other information with the Securities and
Exchange Commission, referred to as the SEC. Copies of these documents may be
obtained at the SECs public reference room in Washington, D.C. The Corporations
SEC filings are also available on the SECs web site at http://www.sec.gov.
EACH
SHAREHOLDER CAN OBTAIN A COPY OF THE CORPORATIONS ANNUAL REPORT ON FORM 10-K,
INCLUDING FINANCIAL STATEMENTS AND FINANCIAL
39
SCHEDULES FOR THE YEAR ENDED DECEMBER
31, 2007 AS FILED WITH THE SEC, WITHOUT CHARGE EXCEPT FOR EXHIBITS TO THE
REPORT, BY SENDING A WRITTEN REQUEST TO: INTRICON CORPORATION, 1260 RED FOX
ROAD, ARDEN HILLS, MINNESOTA 55112 ATTN: SCOTT LONGVAL.
OTHER
MATTERS
The
Corporation is not presently aware of any matters (other than procedural
matters) that will be brought before the Meeting which are not reflected in the
attached Notice of the Meeting. The enclosed proxy confers discretionary
authority to vote with respect to any and all of the following matters that may
come before the Meeting: (i) matters which the Corporation did not receive
notice by November 26, 2007 were to be presented at the Meeting; (ii) approval
of the minutes of a prior meeting of shareholders, if such approval does not amount
to ratification of the action taken at the meeting; (iii) the election of any
person to any office for which a bona fide nominee named in this Proxy
Statement is unable to serve or for good cause will not serve; (iv) any
proposal omitted from this Proxy Statement and the form of proxy pursuant to
Rules 14a-8 or 14a-9 under the Securities Exchange Act of 1934; and (v) matters
incident to the conduct of the Meeting. In connection with such matters, the
persons named in the enclosed proxy will vote in accordance with their best
judgment.
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Scott Longval
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Chief Financial Officer, Secretary,
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and Treasurer
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40
INTRICON CORPORATION
ARDEN HILLS, MINNESOTA 55112
This Proxy is Solicited on Behalf of the
Board of Directors
The
undersigned, revoking all prior proxies, hereby appoints SCOTT LONGVAL and
WARREN M. BECKER with full power of substitution, as proxies and hereby
authorizes them to represent and to vote all the Common Shares of IntriCon
Corporation held of record by the undersigned on March [19], 2008, at the
annual meeting of shareholders to be held on April 23, 2008, or any
postponement or adjournment thereof.
All
proxy agents present and acting in person or by their substitutes (or, if only
one is present and acting, then that one) may exercise all of the powers
conferred by this proxy.
Discretionary
authority is conferred by this proxy with respect to certain matters, as
described in IntriCon Corporations proxy statement.
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x
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Please mark your votes as in this example.
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1.
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To elect the
following director nominee to hold office for three years until his
respective successor has been duly elected and qualified, as more fully
described in the accompanying proxy statement.
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Robert N.
Masucci
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o
FOR NOMINEE
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o
WITHHOLD AUTHORITY
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2.
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To approve
the amendment to the Amended and Restated Articles of Incorporation, as
amended, of IntriCon Corporation to increase the number of authorized shares
from 10,000,000 to 20,000,000.
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o
FOR
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o
AGAINST
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o
ABSTAIN
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3.
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To ratify
the appointment of Virchow, Krause & Company, LLP as the Corporations
independent auditor for fiscal year 2008.
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o
FOR
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o
AGAINST
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o
ABSTAIN
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4.
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In their
discretion, the Proxies are authorized to vote upon such other business as
may properly come before the annual meeting.
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PLEASE SEE REVERSE FOR PROXY VOTING IN
INSTRUCTIONS
THE SHARES
REPRESENTED BY THIS PROXY, DULY EXECUTED, WILL BE VOTED AS INSTRUCTED
ABOVE. IF INSTRUCTIONS ARE NOT GIVEN,
THEY WILL BE VOTED FOR THE ELECTION OF EACH OF THE DIRECTOR NOMINEES, FOR THE
APPROVAL OF THE AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION, AS AMENDED, OF INTRICON CORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED COMMON SHARES AND FOR THE
RATIFICATION OF THE APPOINTMENT OF VIRCHOW, KRAUSE & COMPANY, LLP AS THE
CORPORATIONS INDEPENDENT AUDITOR FOR FISCAL YEAR 2008. WITH RESPECT TO SUCH OTHER BUSINESS THAT MAY
PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF, SAID PROXY IS AUTHORIZED TO VOTE IN ACCORDANCE WITH ITS BEST
JUDGMENT.
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By signing this proxy, you hereby acknowledge receipt of the Notice
of the Corporations 2008 Annual Meeting of Shareholders and the
Corporations Proxy Statement
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____________________________
Date ________, 2008
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Signature
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____________________________
Date ________, 2008
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Signature
(if joint account)
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NOTE: Please
sign and date and return in the pre-paid envelope provided. Your signature
should appear exactly as your name appears in the space to the left.
For
joint accounts, any co-owner may sign.
When signing as attorney, executor, administrator, or fiduciary,
please give your full title as such.
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YOUR VOTE IS IMPORTANT
VOTE TODAY IN ONE OF THREE WAYS:
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1.
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VOTE BY TELEPHONE:
After you call
the phone number below, you will be asked to enter the control number at the
bottom of the page. You will need to
respond to only a few simple prompts.
Your vote will be confirmed and cast as directed.
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Call
toll-free in the U.S. or Canada at
1-866-626-4508
on a touch-tone telephone
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OR
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2.
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VOTE BY INTERNET:
Log-on to
www.votestock.com
Enter your control number printed below
Vote your proxy by checking the appropriate boxes
Click on Accept Vote
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OR
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3.
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VOTE BY MAIL:
If you do not wish to vote by
telephone or over the Internet, please complete, sign, date and return the
above proxy card in the prepaid envelope provided.
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YOUR CONTROL NUMBER IS:
You may vote by telephone or Internet 24 hours a day, 7 days a week.
Your telephone or Internet vote authorizes the named proxies to vote in the
same manner
as if you marked, signed and returned your proxy card.
The deadline to vote telephonically or over
Internet is Tuesday, April 22, 2008,
11:59 p.m., eastern daylight time. If you vote by telephone or electronically
over the
Internet, you do not need to return your proxy card.
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