EXECUTIVE COMPENSATIONSummary Compensation Table
The following table sets forth compensation information for the Company’s Chief Executive Officer and for the Company’s four other most highly compensated executive officers for 2005 (the “Named Executive Officers”).
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| | | | | | | | Long Term | | | | | |
| | | | | | | | Compensation | | | | | |
| | | | | | Securities | | | | | |
| | | | Annual Compensation | | | Underlying | | | All Other | | | |
| | Fiscal | | | | | | Equity Awards | | | Compensation ($) | | | Total | |
Name and Principal Position(s) | | Year | | | Salary ($) | | | Bonus ($)(1) | | | (#s)(2) | | | (3)(4)(5)(6)(7)(8) | | | Compensation | |
| | | | | | | | | | | | | | | | | | |
Roy W. Haley | | | 2005 | | | | 700,000 | | | | 1,600,000 | | | | 200,000 | | | | 136,632 | | | | 2,436,632 | |
| Chairman and Chief | | | 2004 | | | | 685,833 | | | | 1,470,000 | | | | 200,000 | | | | 70,678 | | | | 2,226,511 | |
| Executive Officer | | | 2003 | | | | 615,000 | | | | 300,000 | | | | 300,000 | | | | 35,072 | | | | 950,072 | |
John J. Engel | | | 2005 | | | | 450,000 | | | | 530,000 | | | | 75,000 | | | | 102,778 | | | | 1,082,778 | |
| Senior Vice President and | | | 2004 | | | | 209,711 | | | | 200,000 | | | | 200,000 | | | | 215,560 | | | | 625,271 | |
| Chief Operating Officer | | | 2003 | | | | — | | | | — | | | | — | | | | — | | | | — | |
Stephen A. Van Oss | | | 2005 | | | | 408,333 | | | | 430,000 | | | | 75,000 | | | | 65,156 | | | | 903,489 | |
| Senior Vice President and | | | 2004 | | | | 325,000 | | | | 387,000 | | | | 70,000 | | | | 38,051 | | | | 750,051 | |
| Chief Financial and | | | 2003 | | | | 300,000 | | | | 130,000 | | | | 70,000 | | | | 25,710 | | | | 455,710 | |
| Administrative Officer | | | | | | | | | | | | | | | | | | | | | | | | |
William M. Goodwin | | | 2005 | | | | 261,667 | | | | 225,000 | | | | 25,000 | | | | 59,338 | | | | 546,005 | |
| Vice President, Operations | | | 2004 | | | | 242,000 | | | | 280,500 | | | | 30,000 | | | | 38,308 | | | | 560,808 | |
| | | | 2003 | | | | 235,833 | | | | 118,000 | | | | 38,000 | | | | 23,548 | | | | 377,381 | |
Donald H. Thimjon | | | 2005 | | | | 245,333 | | | | 225,000 | | | | 25,000 | | | | 54,071 | | | | 524,404 | |
| Vice President, Operations | | | 2004 | | | | 242,000 | | | | 280,500 | | | | 35,000 | | | | 35,852 | | | | 558,352 | |
| | | | 2003 | | | | 235,833 | | | | 76,200 | | | | 38,000 | | | | 23,874 | | | | 335,907 | |
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(1) | Bonus amounts reflect compensation earned in the indicated fiscal year, but approved and paid in the following year. Bonus amounts reflect awards under documented performance objectives and plans, and are inclusive of a special one-year Value Acceleration Program payment approved by the Board for performance substantially above established goals. |
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(2) | All equity awards granted to the Named Executive Officers in 2005, 2004 and 2003 were granted under the Company’s 1999 Long-Term Incentive Plan (“LTIP”), as amended and approved by the Board and stockholders. SARs granted in 2005 have an exercise price of $31.65 per share. SARs granted in 2004 have an exercise price of $24.02 per share. Mr. Engel, after joining the Company in 2004 was granted stock options at an exercise price of $16.82 per share. Stock options granted in 2003 have an exercise price of $5.90 per share. Awards granted under the LTIP are subject to certain time and performance-based vesting requirements. |
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(3) | Includes contributions by the Company under the WESCO Distribution, Inc. Retirement Savings Plan in the amounts of (a) $2,583, $4,200, $2,800, $5,250, and $6,150 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2005 (b) $6,000, $3,938, $2,600, $4,925, and $6,000 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2004, (c) $6,000, $-0-, $2,400, $4,500, and $6,000 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2003. An award under the Company’s Retirement Savings Plan in the form of a discretionary contribution was made to all employees in 2005 for 2004 performance, specifically, in the amounts of $10,000, $5,729, $10,000, $14,000, and $14,000 for Messrs. Haley, Engel, Van Oss, Goodwin and Thimjon, respectively. |
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(4) | Includes contributions by the Company under the WESCO Distribution, Inc. Deferred Compensation Plan in the amounts of (a) $62,517 $15,300, $21,060, $11,015, and $8,775 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2005 (b) $22,700, $-0-, $10,613, $5,779, and $3,341 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2004, (c) $14,750, $-0-, $10,500, $5,036 and $2,666 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2003. An |
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| award under the Company’s Retirement Savings Plan in the form of a discretionary contribution was made in 2005 to the Deferred Compensation Plan in the amounts of $39,115, $-0-, $12,646, $11,183, and $8,257 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively. |
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(5) | Includes an annual automobile allowance paid by the Company in the amount of $12,000 for each of Messrs. Haley, Van Oss, Goodwin, and Thimjon in each of 2005, 2004, and 2003. Includes automobile allowance in the amount of $12,000 in 2005 and $5,500 in 2004, the year Mr. Engel became employed with the Company. |
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(6) | Includes the dollar value of insurance premiums paid by the Company for each executive officer’s term life insurance in the amounts of (a) $2,322, $540, $1,242, $3,713 and $3,366 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2005, (b) $2,419, $225, $1,294, $2,208, and $3,152 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2004, (c) $2,322, $-0-, $810, $2,012, and $3,208 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2003. |
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(7) | Includes non-cash awards in the amounts of (a) $8,095, $-0-; $5,408, $2,177, and $1,523 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2005, (b) $7,809, $1,675, $5,094, $2,177 and $840 for Messrs. Haley, Engel, Van Oss, Goodwin, and Thimjon, respectively, in 2004. |
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(8) | Includes relocation allowance paid by the Company for Mr. Engel in the amounts of $65,009 and $204,222 in 2005 and 2004 respectively. |
SARs Grants in Last Fiscal Year
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | % of Total | | | | | | | Potential Realizable Value | |
| | Number of | | | SARs | | | | | | | at Assumed Rates of | |
| | Securities | | | Granted to | | | | | | | Stock Price Appreciation | |
| | Underlying | | | Employees | | | | | | | for SAR Term(1) | |
| | SARs | | | In Fiscal | | | Exercise | | | Expiration | | | | |
Name | | Granted | | | Year | | | Price ($/Sh) | | | Date | | | 5% | | | 10% | |
| | | | | | | | | | | | | | | | | | |
Roy W. Haley | | | 200,000 | | | | 22.00 | % | | | 31.65 | | | | 7/1/2015 | | | | 3,980,000 | | | | 10,088,000 | |
John J. Engel | | | 75,000 | | | | 8.25 | % | | | 31.65 | | | | 7/1/2015 | | | | 1,492,500 | | | | 3,783,000 | |
Stephen A. Van Oss | | | 75,000 | | | | 8.25 | % | | | 31.65 | | | | 7/1/2015 | | | | 1,492,500 | | | | 3,783,000 | |
William M. Goodwin | | | 25,000 | | | | 2.75 | % | | | 31.65 | | | | 7/1/2015 | | | | 497,500 | | | | 1,261,000 | |
Donald H. Thimjon | | | 25,000 | | | | 2.75 | % | | | 31.65 | | | | 7/1/2015 | | | | 497,500 | | | | 1,261,000 | |
Note: During 2003, the Company adopted the measurement provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” and began expensing equity awards. The Company recognized $8.6 million of compensation expense related to all awards in the year ended December 31, 2005.
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(1) | Amounts represent hypothetical gains that could be achieved for the respective SARs if exercised at the end of the SARs term. These gains are based on assumed rates of stock price appreciation of 5% and 10% compounded annually from the date the respective SARs were granted to their expiration date. These assumptions are not intended to forecast future appreciation of our stock price. The potential realizable value computation does not take into account federal or state income tax consequences of SARs exercises or sales of appreciated stock. |
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Aggregated Option/SARs Exercises in Last Fiscal Year and Fiscal Year-End Option/SARs Values
The table below sets forth information for each Named Executive Officer with regard to the aggregate (stock options and SARs) held at December 31, 2005.
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| | | | | | Number of Securities | | | Value of Unexercised | |
| | | | | | Underlying Unexercised Option/ | | | In-the-Money Option/SARs | |
| | | | | | SARs Awards at FY-End | | | Awards at FY-End ($)(1) | |
| | | | | | | | | | |
| | Shares | | | | | | | |
| | Acquired | | | Value | | | (Exercisable — Unexercisable) | | | (Exercisable — Unexercisable) | |
| | on Exercise | | | Realized | | | | | | | |
Name | | (#) | | | (#) | | | (#) | | | (#) | | | ($) | | | ($) | |
| | | | | | | | | | | | | | | | | | |
Roy W. Haley | | | N/A | | | | N/A | | | | 808,542 | | | | 958,458 | | | | 29,942,502 | | | | 25,899,658 | |
John J. Engel | | | N/A | | | | N/A | | | | 33,334 | | | | 241,666 | | | | 863,684 | | | | 5,149,316 | |
Stephen A. Van Oss | | | 25,000 | | | | 668,250 | | | | 130,963 | | | | 271,009 | | | | 4,217,782 | | | | 6,962,181 | |
William M. Goodwin | | | 10,525 | | | | 261,651 | | | | 84,283 | | | | 175,352 | | | | 2,634,489 | | | | 4,853,667 | |
Donald H. Thimjon | | | 54,808 | | | | 1,494,674 | | | | 11,667 | | | | 178,685 | | | | 218,290 | | | | 5,193,027 | |
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(1) | Based on the closing market price per share of $42.73 as reported on the NYSE on December 31, 2005. |
During December 2003, in a privately negotiated transaction with 19 employees, including Messrs. Haley, Goodwin, and Thimjon, the Company redeemed the net equity value of stock options originally granted in 1994 and 1995, representing approximately 2.9 million shares. The options held by the employees had a weighted average price of $1.75. The options were redeemed at a price of $8.63 per share, effective for accounting purposes, as of December 31, 2003. The transaction was settled, and the aggregate cash payment of $20.1 million was made on January 6, 2004.
Employment Agreements
Employment Agreement with the Chief Executive Officer. The Company is a party to an employment agreement with Mr. Haley providing for a rolling employment term of three years. Pursuant to this agreement, Mr. Haley is entitled to an annual base salary of at least $500,000, the actual amount of which may be adjusted by the Board from time to time, and an annual incentive bonus equal to a percentage of his annual base salary ranging from 0% to 200%. The actual amount of Mr. Haley’s annual incentive bonus will be determined based upon the Company’s financial performance as compared to the annual performance objectives established for the relevant fiscal year. If Mr. Haley’s employment is terminated by the Company without “cause,” by Mr. Haley for “good reason” or as a result of Mr. Haley’s death or disability, Mr. Haley is entitled to continued payments of his average annual base salary and his average annual incentive bonus, reduced by any disability payments for the three-year period, or in the case of a termination due to Mr. Haley’s death or disability, the two-year period, following such termination, and continued welfare benefit coverage for the two-year period following such termination. In addition, in the event of any such qualifying termination, all outstanding options held by Mr. Haley will become fully vested.
The agreement further provides that, in the event of the termination of Mr. Haley’s employment by the Company without “cause” or by Mr. Haley for “good reason,” in either such case, within the two-year period following a “change in control” of the Company, in addition to the termination benefits described above, Mr. Haley is entitled to receive continued welfare benefit coverage and payments in lieu of additional contributions to the Company’s Retirement Savings Plan and Deferred Compensation Plan for the three-year period following such “change in control.” The Company has agreed to provide Mr. Haley with an excise tax gross up with respect to any excise taxes Mr. Haley may be obligated to pay pursuant to Section 4999 of the United States Internal Revenue Code of 1986 on any excess parachute payments. In addition, following a “change in control,” Mr. Haley is entitled to a minimum annual bonus equal to 50% of his base salary, and the definition of “good reason” is modified to include certain additional events. The agreement also contains customary covenants regarding nondisclosure of confidential information and non-competition and non-solicitation restrictions.
Employment Agreement with the Chief Operating Officer. The Company is a party to an employment agreement with Mr. Engel providing for an employment term of two years, subject to automatic renewals for
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an additional year as of each annual anniversary of the agreement. The agreement provides that Mr. Engel is entitled to an annual base salary of at least $450,000, subject to adjustment by the Board, and incentive compensation under the Company’s incentive compensation and other bonus plans for senior executives in amounts ranging from 0% to 100% his annual base salary, based upon the Company’s achievement of earnings, sales growth and return on investment or other performance criteria established by the Compensation Committee.
If Mr. Engel’s employment is terminated by reason of his death, the Company will pay the amount of his accrued but unpaid base salary through his date of death, any accrued but unpaid incentive compensation, any other reimbursable amounts and any payments required to be made under the Company’s employee benefit plans or programs. If Mr. Engel’s employment is terminated by reason of disability, he will continue to receive his base salary and all welfare benefits through the date of disability, offset by the amount of any disability income payments provided under the Company’s disability insurance. If Mr. Engel’s employment is terminated by the Company without “cause” or by him for “good reason,” he is entitled to his accrued but unpaid base salary through the date of termination, a cash amount equal to his pro rata incentive compensation for the fiscal year in which the termination occurs, monthly cash payments equal to 1.5 times his monthly base salary as of the date of termination for the greater of (i) the remainder of the employment agreement’s term, or (ii) eighteen months following the date of termination, and continued welfare benefit coverage for the two years. In such event, all stock options, except those that will remain unvested due to specified operational or financial performance criteria not being satisfactorily achieved, will become fully vested, and the Company will pay the full cost of his COBRA continuation coverage. If Mr. Engel’s employment is so terminated within one year following a “change in control” of the Company, the cash amount equal to 1.5 times his monthly base salary will be paid in monthly installments for 24 months. The Company has agreed to provide Mr. Engel with a partial excise tax gross up with respect to any excise taxes Mr. Engel may be obligated to pay. The agreement also contains customary covenants regarding nondisclosure of confidential information and non-competition and non-solicitation restrictions. Additionally, under the terms of the agreement, the Company paid approximately $204,222 and $65,009 in relocation expenses on behalf of Mr. Engel in 2004 and 2005, respectively.
Employment Agreement with the Chief Financial Officer. The Company is party to an employment agreement with Mr. Van Oss providing for an employment term of two years, subject to automatic renewals for an additional year as of each annual anniversary of the agreement. The agreement provides that Mr. Van Oss is entitled to an annual base salary of at least $450,000, subject to adjustment by the Board, and incentive compensation under the Company’s incentive compensation and other bonus plans for senior executives in amounts ranging from 0% to 100% his annual base salary, based upon the Company’s achievement of earnings, sales growth and return on investment or other performance criteria established by the Compensation Committee.
If Mr. Van Oss’ employment is terminated by reason of his death, the Company will pay the amount of his accrued but unpaid base salary through his date of death, any accrued but unpaid incentive compensation, any other reimbursable amounts and any payments required to be made under the Company’s employee benefit plans or programs. If Mr. Van Oss’ employment is terminated by reason of disability, he will continue to receive his base salary and all welfare benefits through the date of disability, offset by the amount of any disability income payments provided under the Company’s disability insurance. If Mr. Van Oss’ employment is terminated by the Company without “cause” or by him for “good reason,” he is entitled to his accrued but unpaid base salary through the date of termination, a cash amount equal to his pro rata incentive compensation for the fiscal year in which the termination occurs, monthly cash payments equal to 1.5 times his monthly base salary as of the date of termination for the greater of (i) the remainder of the employment agreement’s term, or (ii) eighteen months following the date of termination, and continued welfare benefit coverage for the two years. In such event, all stock options, except those that will remain unvested due to specified operational or financial performance criteria not being satisfactorily achieved, will become fully vested, and the Company will pay the full cost of his COBRA continuation coverage. If Mr. Van Oss’ employment is so terminated within one year following a “change in control” of the Company, the cash amount equal to 1.5 times his monthly base salary will be paid in monthly installments for 24 months. The
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Company has agreed to provide Mr. Van Oss with a partial excise tax gross up with respect to any excise taxes Mr. Van Oss may be obligated to pay. The agreement also contains customary covenants regarding nondisclosure of confidential information and non-competition and non-solicitation restrictions.
Report of Compensation Committee on Executive CompensationSECURITY OWNERSHIP
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| Responsibilities and Goals |
The Compensation Committee, composed of independent, non-employee Directors, has the responsibility of administering executive compensation and benefit programs, policies and practices. The Committee engages the assistance of outside consultants and uses third-party surveys in its consideration of compensation levels and incentive plan designs. On an annual basis, the Committee reviews and approves the compensation and benefit programs for the executive officers, including the Chairman and Chief Executive Officer.
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| Executive Officer Compensation |
The objective of the Company’s compensation program for executive officers, including Mr. Haley, is to attract, motivate, and reward the high caliber of executive performance required to be successful in the competitive distribution industry, and to enhance positive business results and growth in stockholder value.
The Company’s compensation program for executive officers consists of a base salary, annual incentive bonuses and long-term incentives. Executives have significant amounts of compensation at risk, based on performance. Executives also maintain a significant equity stake in the Company, aligning the interests of management with those of the Company’s stockholders. As of December 31, 2005, each of the Named Executive Officers owned Company stock valued at more than three times their annual base salary.
The Company’s Executive Compensation Programs can be described as follows:
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| • | Base salaries for the Company’s executives are targeted at or near the median of similarly sized industrial distribution companies and other large distributors or wholesalers. Salaries for each executive are reviewed annually, taking into account factors such as overall company performance in relation to competition and industry circumstances, changes in duties and responsibilities, strategic and operational accomplishments, and individual performance. From time to time (and not necessarily on an annual basis), the Committee adjusts base salaries for executive officers (including Mr. Haley) based on performance, and if appropriate to reflect competitive pay practices of peer companies. |
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| • | Annual incentives are awarded for achievement of strategic and operational objectives, improvement in operating results, and performance in relation to financial goals of the Company, which are established at the beginning of the year. Cash bonus incentive awards granted for 2005 performance reflect significant financial and operational achievements, which exceeded targeted performance levels. |
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| • | Long-term incentives generally are granted in the form of equity awards such as stock options or SARs. The Committee believes that equity awards are an effective long-term link between executive performance and stockholder value. The Committee authorized a SARs grant in July 2005, and each of the Named Executive Officers received an equity award as shown in the table reflecting SARs Grants in the Last Fiscal Year. |
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| Chief Executive Officer Compensation |
In determining the compensation level for Mr. Haley, the Company’s Chief Executive Officer, the Committee reviewed his performance against previously established 2005 objectives, the Company’s record performance in most performance categories, and the significant gain in share price benefiting all stockholders. The Committee assessed Mr. Haley’s individual performance and leadership, as reflected in the Company’s financial and operating performance, new business development initiatives, successful completion of two acquisitions, the effectiveness of the Company’s continuous improvement programs, cash flow generation and progress made in capital structure improvements, refinancing transactions, working capital performance, and overall liquidity. Mr. Haley’s base salary was established as $700,000 effective March 1, 2004, and was
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increased to $750,000 effective January 1, 2006. Mr. Haley’s cash bonus for 2005 performance was $1,600,000. He was also granted SARs for 200,000 shares of the Company’s Common Stock during 2005. This information is also shown in the Summary Compensation Table and the SARs Grants Table in this Proxy Statement.
The Committee’s goal is to maintain compensation and benefit programs that are competitive within the distribution industry and clearly linked to stockholder value. The Committee believes that the 2005 compensation levels as disclosed in this Proxy Statement are reasonable and appropriate.
The Committee intends to ensure that compensation paid to its executive officers is within the limits of, or exempt from, the deductibility limits of 162(m) of the Internal Revenue Code and expects that all compensation will be deductible. However, it reserves the right to pay compensation that is not deductible if it determines that to be in the best interests of the Company and its stockholders.
Respectfully Submitted:
Compensation Committee
Kenneth Way,Chairman
James L. Singleton
James A. Stern
Lynn M. Utter
Compensation Committee Interlocks
None of the Company’s executive officers serve as an executive officer of, or as a member of the compensation committee of any public company entity that has an executive officer, Director or other designee serving as a member of our Board.
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COMPARATIVE STOCK PERFORMANCE
The following performance graph compares the total stockholder return of an investment in the Company’s Common Stock to that of a peer group of other industrial and construction products distributors and the Russell 2000 index of small cap stocks for the period commencing December 31, 2000 and ending on December 31, 2005. The graph assumes that the value of the investment in the Company’s Common Stock was $100 on December 31, 2000. The historical information set forth below is not necessarily indicative of future performance. The Company does not make or endorse any predictions as to future stock performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG WESCO INTERNATIONAL, INC., THE RUSSELL 2000 INDEX
AND A PEER GROUP
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The following table reflects the companies that are included in the Peer Group Indexes for the years presented. Companies in italics were, at varying points, removed from the Peer Group Index as such companies ceased to be publicly-traded companies.
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2001 | | 2002/2003/2004/2005 |
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Airgas, Inc.
Applied Industrial Technologies
Barnes Group, Inc.
Building Materials Holding Corp.
Fastenal Company
Grainger (W.W.), Inc.
Hughes Supply, Inc.
Industrial Distribution Group, Inc.
Kaman Corp.
KEVCO, Inc.
Lawson Products, Inc.
Maxco, Inc.
MSC Industrial Direct Co., Inc.
NCH Company
Noland Company
Pameco Corp.
Park-Ohio Holdings Corp.
Premier Farnell PLC
SCP Pool Corp.
Strategic Distribution, Inc.
Watsco, Inc. | | Airgas, Inc.
Applied Industrial Technologies
Barnes Group, Inc.
Building Materials Holding Corp.
Fastenal Company
Grainger (W.W.), Inc.
Hughes Supply, Inc.
Industrial Distribution Group, Inc.
Kaman Corp.
Lawson Products, Inc.
Maxco, Inc.
MSC Industrial Direct Co., Inc.
Noland Company
Park-Ohio Holdings Corp.
Premier Farnell PLC
SCP Pool Corp.
Strategic Distribution, Inc. |
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SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company’s Common Stock as of April 3, 2006,9, 2007, by each person or group known by the Company to beneficially own more than five percent of the outstanding Common Stock, each Director, each of the Named Executive Officers,named executive officers, and all Directors and executive officers as a group. Unless otherwise indicated, the holders of all shares shown in the table have sole voting and investment power with respect to such shares. In determining the number and percentage of shares beneficially owned by each person, shares that may be acquired by such person pursuant to options or convertible stock exercisable or convertible within 60 days of April 3, 20069, 2007, are deemed outstanding for purposes of determining the total number of outstanding shares for such person and are not deemed outstanding for such purpose for all other stockholders.
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| | Shares | | | Percent | |
| | Beneficially | | | Owned | |
Name | | Owned(1) | | | Beneficially | |
| | | | | | |
FMR Corporation | | | 7,106,159 | (2) | | | 14.8 | % |
| 82 Devonshire Street | | | | | | | | |
| Boston, Massachusetts 02109 | | | | | | | | |
Putnam, LLC d/b/a Putnam Investments | | | 2,631,966 | (3) | | | 5.5 | % |
| One Post Office Square | | | | | | | | |
| Boston, Massachusetts 02109 | | | | | | | | |
Roy W. Haley | | | 1,569,387 | | | | 3.2 | % |
Stephen A. Van Oss | | | 246,928 | | | | * | |
William M. Goodwin | | | 84,252 | | | | * | |
John J. Engel | | | 83,334 | | | | * | |
Donald H. Thimjon | | | 69,359 | | | | * | |
James L. Stern | | | 25,000 | | | | * | |
Robert J. Tarr, Jr. | | | 15,000 | | | | * | |
James L. Singleton | | | 10,000 | | | | * | |
Kenneth L. Way | | | 5,453 | | | | * | |
George L. Miles, Jr. | | | 5,000 | | | | * | |
Sandra Beach Lin | | | 350 | | | | * | |
All 19 executive officers and Directors as a group | | | 2,180,661 | | | | 4.4 | % |
| | | | | | | | |
| | Shares
| | | Percent
| |
| | Beneficially
| | | Owned
| |
Name | | Owned(1) | | | Beneficially | |
| |
|
Barclays Global Investors, NA | | | 5,635,636(2 | ) | | | 11.95 | % |
45 Fremont Street San Francisco, CA94105-2228 | | | | | | | | |
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FMR Corporation | | | 3,423,366(3 | ) | | | 7.26 | % |
245 Summer Street, 11th Floor Boston, MA 02110 | | | | | | | | |
Glenview Capital | | | 2,747,000(4 | ) | | | 5.80 | % |
767 Fifth Avenue, 44th Floor New York, NY 10153 | | | | | | | | |
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Putnam, LLC d/b/a Putnam Investments | | | 2,544,879(5 | ) | | | 5.40 | % |
One Post Office Square Boston, Massachusetts 02109 | | | | | | | | |
Roy W. Haley | | | 1,482,845 | | | | 3.1 | % |
|
Stephen A. Van Oss | | | 324,955 | | | | * | |
John J. Engel | | | 241,667 | | | | * | |
|
Donald H. Thimjon | | | 87,834 | | | | * | |
William M. Goodwin | | | 70,252 | | | | * | |
|
Robert J. Tarr, Jr. | | | 20,000 | | | | * | |
James L. Singleton | | | 10,000 | | | | * | |
|
Kenneth L. Way | | | 5,453 | | | | * | |
William J. Vareschi | | | 5,000 | | | | * | |
|
Steven A. Raymund | | | 3,000 | | | | * | |
Sandra Beach Lin | | | 350 | | | | * | |
|
All 22 executive officers and Directors as a group | | | 2,447,284 | | | | 5.1 | % |
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* | | Indicates ownership of less than 1% of the Common Stock. |
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(1) | | The beneficial ownership of Directors set forth in the followingforegoing table does not reflect shares of common stockCommon Stock payable to any such Director following the Director’s termination of Board service with respect to portions of annual fees deferred under the Company’s Deferred Compensation Plan for Non-Employee Directors or in settlement of any options or SARsstock appreciation rights (SARs) granted to any such Director under that plan to the extent that those options or SARs may not be exercised or settled within 60 days of April 3, 2006.9, 2007. |
|
(2) | | Based on a Schedule 13G/A13G filed under the Securities Exchange Act of 1934 by Barclays Global Investors, NA and its affiliates on January 23, 2007. |
|
(3) | | Based on a Schedule 13G filed under the Securities Exchange Act of 1934 by FMR Corporation and its affiliates on February 14, 2006.2007. |
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| | |
(4) | | Based on a Schedule 13G filed under the Securities Exchange Act of 1934 by Glenview Capital and its affiliates on February 27, 2007. |
|
(3) (5) | | Based on a schedule 13G/ASchedule 13G filed under the Securities Exchange Act of 1934 by Putnam, LLC d/b/a Putnam Investments and its affiliates on February 10, 2006.13, 2007. |
Section 16(a) Beneficial Ownership Reporting Compliance
Under the federal securities laws of the United States, the Company’s Directors, its executive officers, and any persons beneficially holding more than ten percent of the Company’s Common Stock are required to report their ownership of the Company’s Common Stock and any changes in that ownership to the SEC and the NYSE. Specific due dates for these reports have been established. The Company is required to report in this Proxy Statement any failure to file by these dates. For the fiscal year ended December 31, 2005,2006, there was one late filing each for J. StanleyForm 3, for Steve Riordan, the Vice President of Operations for Communication Supply Corporation. There was one late Form 4 filing for Stephen A. Van Oss. There were also two late Form 5 filings. One was for William Goodwin, whose Form 5 was filed for a trust account, and the other was for Stan Baumgartner, Jr. (Form 4)the Company’s former Controller, due to late notification of a Common Stock purchase.
TRANSACTIONS WITH RELATED PERSONS
Review and William M. Goodwin (Form 5).Approval of Related Person Transactions
We review all relationships and transactions between our Directors, executive officers and our Company or its customers and suppliers in order to determine whether the parties have a direct or indirect material interest. Our Company has developed and implemented processes and controls in order to obtain information from our Directors and executive officers with respect to related person transactions and for then determining whether our Company or a related person has a direct or indirect material interest in the transaction, based on the facts and circumstances.
The evaluation includes: the nature of
the related person’s interest in the transaction; material terms of the transaction; amount and type of transaction; importance of the transaction to our Company; whether the transaction would impair the judgment of a Director or executive officer to act in the best interest of our Company; and any other relevant facts and circumstances. Transactions that are determined to be directly or indirectly material to our Company or a related person are disclosed in this Proxy Statement.
Related Party Transactions
During 2006, our customer, Tech Data Corporation, made purchases in the amount of approximately $550,000 of goods and services in the ordinary course of business from Communications Supply Corporation, which was acquired by our Company in November 2006. Our Company’s Director, Steven Raymund, is the current Chairman of Tech Data Corporation. Also, our Company made purchases from our supplier, Coleman Cable, in the amount of $19 million during 2006 and will make purchases estimated at $4 million during the first quarter of 2007. The business relationship between WESCO and Coleman Cable has existed for more than 30 years and, although there is no known direct material benefit to the individuals, the Group Vice President of Electrical Group for Coleman Cable is the spouse of Mr. Ronald Van, our Vice President of Operations. These transactions have been approved by our Company’s senior management.
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COMPENSATION DISCUSSION AND ANALYSIS
Overview
Our Board has delegated to the Compensation Committee, composed of independent, non-employee Directors, the responsibility of administering executive compensation and benefit programs, policies and practices. The Committee reviews and approves the compensation and benefit programs for our executive officers on an annual basis. The Committee engages the assistance of outside consultants and uses third-party surveys in its consideration of compensation and benefit levels and incentive plan designs. The surveys include companies having similar revenue, within a cross section of comparably sized, industrial distribution companies, other large distributors and wholesalers, and industrial product manufacturers which are potential competitors for executive talent. The compensation consultant’s recommended peer group for 2006 compensation comparisons included the following 34 companies:
Armstrong World Industries, Inc.
AutoZone, Inc.
Ball Corporation
BorgWarner Inc.
Brady Corporation
The Clorox Company
Cooper Cameron Corporation
Cooper Industries, Inc.
Corn Products International Inc.
Donaldson Company, Inc.
Ecolab Inc.
Engelhard Corporation
FMC Technologies
Fortune Brands, Inc.
The Hershey Company
Ingersoll-Rand Company
Maytag Corporation
Medtronic, Inc.
Milacron Inc.
Molson Coors Brewing Company
Pactiv Corporation
PPG Industries, Inc.
Rockwell Automation
Ryerson Tull, Inc.
Sauer-Danfoss Inc.
Sonoco Products Company
Temple-Inland Inc.
Teradyne, Inc.
Thomas & Betts Corporation
The Timken Company
Valmont Industries, Inc.
Vulcan Materials Company
W.W. Grainger, Inc.
Wm. Wrigley Jr. Company
In addition, the Company and the Board regularly monitor the operational performance and executive compensation for the following nine industrial distribution companies:
Applied Industrial Technologies
Anixter
Arrow
Avnet
Grainger
Kaman
Lawson Products
MSC Industrial Direct
United Stationers
The Compensation Committee reports to the Board on overall compensation and receives specific approval for compensation actions for the CEO and both Senior Vice Presidents.
The Company’s Compensation Program
The objectives of our compensation program for executive officers are to attract, motivate, and reward the high caliber of executive performance required to be successful in the competitive distribution industry. Competent and motivated executives are essential in enhancing positive business results and achieving growth in stockholder value over intermediate and long-term horizons.
The principal components of our executive compensation program for officers consist of base salary, annual incentive bonuses, long-term incentives, health and welfare benefits and a limited number of perquisites. We do not provide post-employment retirement benefits, health
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and welfare, or supplemental executive retirement benefit programs. Base salary and annual incentive bonuses are set with the goal of attracting executives and adequately compensating and rewarding them for recent performance. Our long-term incentive equity programs are established to provide incentive and reward for the achievement of long-term business objectives, continued service and key talent retention.
Executives have significant amounts of compensation at risk, with annual bonuses and long-term incentives being linked to actual performance. Executives are expected to maintain a significant equity ownership in our Company, aligning the interests of management with those of our stockholders. We believe that our compensation program is appropriate to motivate and retain our executives and to maximize their contribution to the Company over the long term.
Base Salaries
Salaries for executives are reviewed annually, taking into account factors such as overall Company performance in relation to competition and industry circumstances, changes in duties and responsibilities, strategic and operational accomplishments, and individual performance. Mr. Haley, the Chief Executive Officer, makes base salary recommendations to the Compensation Committee for all of the named executive officers, excluding himself.
The Compensation Committee reviews individual salary history for approximately the 25 highest paid executive officers and compares their base salaries to survey data from one or more current consultant studies. Compensation consultant studies provide market data which is evaluated as a means to understand external compensation practices. Compensation trends for companies in the consultant’s peer company comparisons and other companies with attributes similar to our Company are considered in the determination of overall compensation for our executives. From time to time (and not necessarily on an annual basis), the Committee adjusts base salaries for executive officers based on performance, and if appropriate, to reflect competitive pay practices of companies in our peer group based on studies by Hewitt Associates, LLC (referred to as Hewitt), a national executive compensation consulting firm retained by the Compensation Committee for input on executive compensation matters.
In determining increases to base salaries, the Compensation Committee considers the recommendation of Mr. Haley, Company performance, prevailing economic conditions, surveys of competitive companies, requirements for hiring recent additions to management, comparable salary practices of companies within our peer group, and information provided by Hewitt. The Compensation Committee has retained Hewitt in the past as a means for gathering market data, preparing compensation plan reviews, as well as, identifying general trends and practices in executive compensation programs. The Compensation Committee requests that Hewitt gather pertinent compensation data from public, private and foreign-owned peer companies. Hewitt has also made recommendations with respect to Director compensation matters.
During 2006, the Compensation Committee recommended and the Board approved an increase in Mr. Haley’s base salary of $100,000, or 14.3%, to an annualized rate of $800,000 to recognize the superior performance of the Company in 2005 and 2006. Messrs. Engel and Van Oss each received a 10% increase, and Mr. Thimjon a 6% increase, each in accordance with their salary histories, individual performances and competitive position of their respective salaries. Mr. Goodwin received a 5.5% increase in early 2007, but no increase in base salary during 2006.
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Annual Cash Incentive Bonus Awards
Annual Incentive Plans. Cash bonuses are awarded for achievement of strategic, financial, operational, and human resources objectives of our Company. Annual incentives are designed to provide compensation that approximates market median awards for achieving planned performance and to provide increased incentive awards for exceptional performance. Actual performance in excess of plan can result in cash bonus awards of50-100% of base salaries for executive officers. Mr. Haley’s award for above-plan performance can range from100-200% of base salary. For performance below plan levels, incentive bonuses for executive officers are reduced to a level of 0-50% of base salary.
Annually, the Board reviews and approves the Company’s performance criteria and financial and operational targets for the upcoming fiscal year. The Company’s incentive bonus plans are based on formulas that combine sales performance, profitability margins, improvements over prior year actual results, return on capital, and other strategic and operational goals. The structure and approach for incentive compensation have been in place for more than five years. Standards are changed periodically to reflect higher performance expectations. During 2006, the standards were increased to reflect economic activity and our Company’s plan for higher levels of financial performance for the year. The Compensation Committee has discretion and authority to increase or decrease actual incentive awards given in any year to reflect specific circumstances and performance.
For the Chief Executive Officer, Mr. Haley, the maximum annual incentive opportunity is 200% of his base salary. All other named executive officers’ maximum annual incentive opportunity is 100% of their base salary. Cash bonus incentive awards granted for 2006 performance reflect financial and operational achievements, which significantly exceeded targeted performance levels. Two significant metrics, sales and operating profit, were 20.3% and 74.4% above 2005 results, respectively. Based on this performance, the named executive officers received the following incentive for the performance period ended December 31, 2006: Mr. Haley, $1,600,000; Mr. Van Oss, $495,000; Mr. Engel, $495,000; Mr. Goodwin, $265,000; and Mr. Thimjon, $248,000.
Value Acceleration Program. In early 2006, the Compensation Committee gave final approval to a one-year Value Acceleration Program (VAP) to focus management’s attention and talent on increasing corporate-wide EBITDA (earnings before interest, tax, depreciation and amortization) and other performance criteria that are believed to contribute to driving overall stockholder value. The 2006 program had a potential maximum incentive payout of $2.8 million of which a payout of $2.2 million was made to 184 of the approximately 315 eligible participants.
Based on 2006 EBITDA performance, which was 72% over 2005 actual results, the following Value Acceleration Program cash incentives were paid: Mr. Haley, $200,000; Mr. Van Oss, $80,000; Mr. Engel, $80,000; Mr. Goodwin, $40,000; and Mr. Thimjon, $40,000.
Perquisites
During 2006, there were limited perquisites provided to the named executive officers. Perquisites provided to named executive officers in 2006 included a vehicle allowance and select club memberships. The Compensation Committee determined that it was in its best interest to continue providing these perquisites as part of a competitive pay package and for Company benefit associated with business-related meetings and entertainment. In 2006, certain named executive officers and their spouses participated in a sales force incentive trip with a key supplier, and the Company paid the cost of the trip for the spouses.
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Stock Based Awards
The Company has sponsored four stock based award plans, the 1999 Long-Term Incentive Plan (referred to as LTIP), the 1998 Stock Option Plan, the Stock Option Plan for Branch Employees, and the 1994 Stock Option Plan. The LTIP was designed to be the successor plan to all prior plans. At the Annual Stockholders’ meeting held May 21, 2003, the Stockholders voted to approve the Company’s LTIP as amended and restated. The LTIP is administered by the Compensation Committee which determines the eligibility for and amount of granted equity awards. Outstanding options under prior plans will continue to be governed by their existing terms, which are substantially similar to the LTIP. Any remaining shares reserved for future issuance under the prior plans are available for issuance under the LTIP. We have expensed stock option grants under Statement of Financial Accounting Standards 123, Share-Based Payment (SFAS 123) since 2003, and adopted SFAS 123, as revised, in 2004 (SFAS 123R) beginning in 2006.
The Compensation Committee may grant stock options, stock appreciation rights (referred to as SARs), restricted stock, restricted stock units, performance awards, and other incentive awards under the LTIP. The Compensation Committee and the Board of Directors believe that stock options and SARs are the most effective forms of equity awards for linking management performance and stockholder value creation. Since its formation in 1993, our Company has not issued to any member of management restricted stock or any form of phantom stock or performance shares.
An initial reserve of 6,936,000 shares of Common Stock was authorized for issuance under the LTIP. This reserve automatically increases by (i) the number of shares of Common Stock covered by unexercised options and SARs granted under prior plans that are cancelled or terminated after the effective date of the LTIP, and (ii) the number of shares of Common Stock surrendered by employees to pay the exercise priceand/or minimum withholding taxes in connection with the exercise of stock options or SARs granted under our prior plans.
Awards vest and become exercisable once criteria based on time or financial performance (EBITDA margin targets) are achieved. If the financial performance criteria are not met, all such performance vesting options will vest after nine years and nine months from their grant date. All awards vest immediately in the event of a change in control. Each award terminates on the tenth anniversary of its grant date unless terminated sooner under certain conditions. All awards under the Company’s stock incentive plans are issued at the closing price of our Common Stock on the grant date.
Our officers and employees, including all of the named executive officers, are eligible to receive stock-based awards under the LTIP. The LTIP is designed to align the interests of officers and employees receiving awards with those of stockholders by providing an incentive to contribute to the long-term goals of the Company. We believe that equity-based compensation assists in attracting and retaining qualified employees and provides them with additional incentive to devote their best efforts to pursue and sustain the Company’s long-term performance and enhance the value of our Company for the benefit of its stockholders.
Equity awards in 2006 consisted only of SARs. We believe that SARs encourage management to achieve long-term goals as they only have value to the recipient if there are gains in the stock price, benefiting all stockholders. SARs entitle the participant to receive, upon exercise, a payment equal to (i) the excess of the fair market value of a share of Common Stock on the exercise date over the exercise price of the SARs, times (ii) the number of shares of Common Stock with respect to which the SARs are exercised. Upon exercise of a SAR, payment is made in
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shares of Common Stock. The 2006 SARs vest ratably over three years.
Grants of SARs to the named executive officers are allocated from a pool of stock that is established by the Compensation Committee each year. For 2006, the pool was approximately equal to 1% of the outstanding stock of the Company. With respect to all of the named executive officers other than himself, the Chief Executive Officer makes grant recommendations to the Compensation Committee based on individual executive’s performance and input on competitive market data from Hewitt. The Compensation Committee then considers the Chief Executive’s recommendations and Hewitt’s analysis in making its grant determinations. With respect to the Chief Executive Officer, the Compensation Committee, in its sole discretion, determines the amount of his grant which is presented to and approved by the Board. The Committee has discretion and authority to increase or decrease actual awards given in any year to reflect specific circumstances and performance.
It has been the recent practice of the Compensation Committee to issue equity awards annually, on or about July 1st of each year. Awards are generally determined several weeks prior to grant date and do not conflict with any material events such as an earnings release that could cause the stock price to be artificially high or low. In 2006, awards to approximately 106 employees, including the named executive officers, were made at the regularly scheduled May Compensation Committee meeting, with the effective grant dates set as July 1, 2006. The SARs awarded July 1, 2006, have a grant price of $69.00, the closing price of our Common Stock on June 30, 2006. The expiration date is July 1, 2016.
Retirement Savings
The Company maintains a 401(k) Retirement Savings Plan for all eligible employees, including the named executive officers. In 2006, the Company provided two types of 401(k) plan contributions with respect to eligible employees. The Company matched employee contributions at a rate of $0.50 per $1.00 up to 6% of eligible compensation. Additionally, a discretionary Company contribution was made in 2006 based on Compensation Committee established performance criteria. The Company has made discretionary contributions in six of the past ten years. When discretionary payments are made to the 401(k) plan, the contribution amount is based on age and years of service and varies from1-7% of an employee’s annual base salary.
The Company also maintains an unfunded deferred compensation plan for a group of qualifying management or highly compensated employees, including the named executives, under certain provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Participants may defer a portion of their salary and are eligible for a Company match, at a rate of $0.50 per $1.00, up to 6% of eligible compensation deferred after surpassing the Company’s 401(k) Retirement Savings Plan qualified contribution limit. Earnings are credited to employees’ accounts based on their selection from offered investment funds. Notwithstanding any provision of the Deferred Compensation Plan or benefit election made by any participant deemed to be a key employee, benefits payable under the Deferred Compensation Plan will not commence until six months after the key employee’s separation from employment.
The Company does not have a defined benefit or supplementary retirement plan nor does it provide for post-retirement health benefits.
Health and Welfare Benefits
The Company’s health benefits are provided to all full-time permanent employees, including the named executive officers, who meet the eligibility requirements. Employees pay a portion of the cost of healthcare on an increasing
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scale correlated to higher annual incomes. The Company’s health and welfare benefits are evaluated periodically by external benefits consultants to assess plan performance and costs and to validate that benefit levels approximate the median value provided to employees of peer companies.
Employment Agreements
Employment Agreement with the Chief Executive Officer. We have an employment agreement with Mr. Haley providing for a rolling employment term of three years. Under this agreement, Mr. Haley is entitled to an annual base salary of at least $500,000, the actual amount of which may be adjusted by our Board from time to time, and an annual incentive bonus equal to a percentage of his annual base salary ranging from 0% to 200%. The actual amount of Mr. Haley’s annual incentive bonus will be determined based upon our financial performance as compared to the annual performance objectives established for the relevant fiscal year. The parameters of Mr. Haley’s employment agreement which address termination or change in control are addressed in the next section entitled “Severance or Change in Control Agreements.”
Employment Agreements with the Chief Operating Officer and the Chief Financial Officer. We have employment agreements with each of Mr. Engel and Mr. Van Oss which are substantially similar. The agreements provide for an employment term of two years, subject to automatic renewals for an additional year as of each annual anniversary of the agreement. The agreements provide that Mr. Engel and Mr. Van Oss are entitled to an annual base salary of at least $450,000, subject to adjustment by our Board, and incentive compensation under our incentive compensation and other bonus plans for senior executives in amounts ranging from 0% to 100% their annual base salary, based upon our achievement of earnings, sales growth and return on investment or other performance criteria established by our Compensation Committee. The parameters of Mr. Engel’s and Mr. Van Oss’ employment agreements which address termination or change in control are addressed in the next section entitled “Severance or Change in Control Agreements.”
Severance or Change in Control Agreements
Severance Agreement with the Chief Executive Officer. Pursuant to the employment agreement with Mr. Haley, if his employment is terminated by us without “cause,” by Mr. Haley for “good reason” or as a result of Mr. Haley’s death or disability, Mr. Haley is entitled to continued payments of his average annual base salary and his average annual incentive bonus, reduced by any disability payments, for the three-year period, or in the case of a termination due to Mr. Haley’s death or disability, the two-year period, following termination, and continued welfare benefit coverage for the two-year period following termination. In addition, in the event of any such qualifying termination, all outstanding equity held by Mr. Haley will become fully vested.
The agreement further provides that, in the event of the termination of Mr. Haley’s employment by us without “cause” or by Mr. Haley for “good reason,” in either case, within the two-year period following a “change in control” of our Company, in addition to the termination benefits described above, Mr. Haley is entitled to receive continued welfare benefit coverage and payments in lieu of additional contributions to our 401(k) Retirement Savings Plan and Deferred Compensation Plan for the three-year period following the “change in control.” We have agreed to provide Mr. Haley with an excise tax gross up totaling 100% with respect to any excise taxes Mr. Haley may be obligated to pay pursuant to Section 4999 of the United States Internal Revenue Code of 1986 on any excess parachute payments. In addition, following a “change in control,” Mr. Haley is entitled to a minimum annual bonus equal to 50% of his base salary, and
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the definition of “good reason” is modified to include certain additional events. The agreement also contains customary covenants regarding nondisclosure of confidential information and non-competition and non-solicitation restrictions. Detailed calculations for Mr. Haley’s termination benefits are included in the table entitled “Potential Payments Upon Termination or Change in Control.”
Severance Agreements with the Chief Operating Officer and the Chief Financial Officer. In accordance with the employment agreements with each of Mr. Engel and Mr. Van Oss, which are substantially similar, if either’s employment is terminated by reason of his death, we will pay the amount of his accrued but unpaid base salary through his date of death, any accrued incentive compensation, any other reimbursable amounts, and any payments required to be made under our employee benefit plans or programs. If Mr. Engel’s or Mr. Van Oss’ employment is terminated by reason of disability, he will continue to receive his base salary and all welfare benefits through the date of disability, offset by the amount of any disability income payments provided under our disability insurance. If Mr. Engel’s or Mr. Van Oss’ employment is terminated by us without “cause” or by him for “good reason,” he is entitled to his accrued but unpaid base salary through the date of termination, a cash amount equal to his pro rata incentive compensation for the fiscal year in which the termination occurs, monthly cash payments equal to 1.5 times his monthly base salary as of the date of termination for eighteen months following the date of termination, and continued welfare benefit coverage for the two years. In such event, all equity, except those that will remain unvested due to specified operational or financial performance criteria not being satisfactorily achieved, will become fully vested, and we will continue to pay the full cost of his COBRA continuation coverage. If Mr. Engel’s or Mr. Van Oss’ employment is terminated within one year following a “change in control” of our Company, a cash amount equal to 1.5 times his monthly base salary will be paid in monthly installments for 24 months. We have agreed to provide Mr. Engel and Mr. Van Oss with a partial excise tax gross up with respect to any excise taxes they may be obligated to pay. The agreement also contains customary covenants regarding nondisclosure of confidential information and non-competition and non-solicitation restrictions. Detailed calculations for Mr. Engel’s and Mr. Van Oss’s benefits are included in the table entitled “Potential Payments Upon Termination or Change in Control.”
Severance for Vice Presidents. During 2006, our Board adopted the WESCO Distribution, Inc. 2006 Severance Plan which was an update to a prior plan and provides severance benefits to all eligible employees, not limited to executives. In accordance with the WESCO Distribution, Inc. 2006 Severance Plan, an involuntary not for cause termination provides up to 52 weeks of base pay determined by completed years of service. Benefits in the amounts of $275,000 and $265,000 would be paid to Messrs. Goodwin and Thimjon, respectively, assuming a termination date of December 31, 2006. Additionally, in accordance with the agreements governing option and SAR grants for all employees who have received equity awards, in the event of a change in control, all stock options become fully vested for a compensation value of $812,359 and $836,894 for Messrs. Goodwin and Thimjon, respectively, assuming that the date of the change in control is December 31, 2006. Messrs. Haley, Van Oss and Engel do not participate in this plan because the benefits otherwise provided are superseded by their respective employment agreements.
Deductibility of Executive Compensation
The Company intends to ensure that compensation paid to its executive officers is within the limits of, or exempt from, the deductibility limits of Section 162(m) of the Internal Revenue Code and expects
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that all compensation will be deductible. However, it reserves the right to pay compensation that is not deductible if it determines that to be in the best interests of the Company and its stockholders. Section 162(m) imposes a $1 million limit on the amount that a public company may deduct for compensation paid to the Company’s named executive officers who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (i.e., compensation paid only if the individual’s performance meets pre-established objective goals based on performance criteria). For 2006, the payments for the annual incentive awards were designed to satisfy the requirements for deductible compensation.
As required under the tax rules, the Company must obtain shareowner approval every five years of the material terms of the performance goals for qualifying performance-based compensation. We last received approval in 2003 at the time the Company’s 1999 Long Term Incentive Plan, as amended and restated, was approved by stockholders.
Conclusions
The Committee’s goal is to maintain compensation and benefit programs that are competitive within the distribution industry and clearly linked to stockholder value. The Committee believes that the 2006 compensation levels as disclosed in this Proxy Statement are reasonable and appropriate.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and, based on that review and those discussions, it recommended to the Board of Directors that the foregoing Compensation Discussion and Analysis be included in our Proxy Statement, and incorporated by reference in our Annual Report onForm 10-K for the fiscal year ended December 31, 2006.
Respectfully Submitted:
The Compensation Committee
Kenneth L. Way, Chairman
James L. Singleton
Lynn M. Utter
DIRECTOR COMPENSATION
Independent members of the Board of Directors receive compensation in the form of an annual retainer and an annual equity award. Directors have the ability to defer up to 100% of the retainer. During 2006, non-employee Directors received an annual retainer of $50,000, payable in shares of our Common Stock or a combination of cash and shares of our Common Stock (of which a maximum of 50% may consist of cash) at each Director’s election. The Chair of our Audit Committee receives an additional fee of $10,000 payable annually. Board compensation levels have not changed for fiscal years 2006 and 2007. In addition to the retainer, non-employee Directors are reimbursed for travel and other reasonableout-of-pocket expenses related to attendance at Board and committee meetings. Members of our Board who are also our employees do not receive compensation for their services as Directors.
Effective January 1, 2000, we established the Deferred Compensation Plan for Non-Employee Directors under which non-employee Directors can elect to defer 25% or more of their annual retainer. Amounts deferred under this arrangement are converted into stock units which are credited to an account in the Director’s
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name. For purposes of determining the number of stock units credited to a Director for a particular year, we use the average of the high and low trading prices of our Common Stock on the first trading day in January of that year. Distribution of deferred stock units will be made in a lump sum or in installments, in the form of shares of our Common Stock, in accordance with the distribution schedule selected by the Director at the time the deferral election is made. All distributions will be made or begin as soon as practical after January 1 of the year following the Director’s termination of Board service. In addition, as of each July 1, each continuing non-employee Director receives a non-qualified stock appreciation right (SAR) to purchase shares of our Common Stock. The exercise price of these SARs are equal to the fair market value per share of our Common Stock on the date of grant. A non-employee Director’s SARs vest on the third anniversary of the date of grant. If a Director’s Board service ends as a result of a scheduled Board term expiration, then all of the Director’s equity will vest in full. If a Director’s Board service is terminated prior to a normal termination date, then unvested equity is forfeited. Prior to July 1, 2005, Directors received equity compensation in the form of stock options. It was determined at the May 17, 2006 Board meeting to award 2,500 SARs to each Director for 2006. The SARs awarded July 1, 2006, have an exercise price of $69.00, the closing price of our Common Stock on June 30, 2006, and a fair market value of $30.78 per share. The expiration date is July 1, 2016.
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DIRECTOR COMPENSATION FOR 2006
| | | | | | | | | | | | |
| | Fees Earned
| | | | | | | |
| | or Paid
| | | Option
| | | | |
Name | | In Cash(1) | | | Awards(2) | | | Total | |
| |
Beach Lin | | $ | 50,000 | | | $ | 60,251 | | | $ | 110,251 | |
Cheshire | | $ | 25,000 | | | $ | 47,424 | | | $ | 72,424 | |
Miles | | $ | 50,000 | | | $ | 60,251 | | | $ | 110,251 | |
Raymund | | $ | 50,000 | | | $ | 12,827 | | | $ | 62,827 | |
Singleton | | $ | 50,000 | | | $ | 12,827 | | | $ | 62,827 | |
Stern | | $ | 25,000 | | | $ | 0 | | | $ | 25,000 | |
Tarr | | $ | 60,000 | | | $ | 60,251 | | | $ | 120,251 | |
Utter | | $ | 50,000 | | | $ | 12,827 | | | $ | 62,827 | |
Vareschi | | $ | 50,000 | | | $ | 60,251 | | | $ | 110,251 | |
Way | | $ | 50,000 | | | $ | 60,251 | | | $ | 110,251 | |
|
| | |
(1) | | Represents the amount of the Director’s annual retainer. Messrs. Cheshire and Stern received one-half of the annual retainer as compensation for their services through May 17, 2006. |
|
(2) | | Represents equity related compensation costs recognized in our financial statements for the fiscal year ended December 31, 2006, with respect to awards granted in previous years beginning in 2003 through year 2006. All equity awards prior to 2003 had no impact on compensation expense in 2006. These SAR awards are subject to time-based vesting criteria. The assumptions used in calculating these amounts are set forth in Note 13 to our financial statements for the year ended December 31, 2006, which is located on Page 69 of our Annual Report onForm 10-K. All the equity awards were granted under our 1999 Long-Term Incentive Plan, as amended and approved by our Board and stockholders. On July 1, 2006, each Director was awarded 2,500 SARs with a grant date fair market value of $30.78 per SAR. |
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DIRECTOR OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | | | | | | | | | | | | | | | | | | | |
| | | | | Number of
| | | Number of
| | | | | | | |
| | | | | Securities
| | | Securities
| | | | | | | |
| | | | | Underlying
| | | Underlying
| | | | | | | |
| | Option
| | | Unexercised
| | | Unexercised
| | | Option
| | | Option
| |
| | Grant
| | | Options
| | | Options
| | | Exercise
| | | Expiration
| |
Name | | Date(1)(2) | | | Exercisable | | | Un-Exercisable | | | Price | | | Date | |
|
Beach Lin | | | 7/01/2003 | | | | 5,000 | | | | — | | | $ | 6.75 | | | | 7/01/2013 | |
| | | 7/01/2004 | | | | — | | | | 5,000 | | | $ | 17.90 | | | | 7/01/2014 | |
| | | 7/01/2005 | | | | — | | | | 5,000 | | | $ | 31.65 | | | | 7/01/2015 | |
| | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | 5,000 | | | | 12,500 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Miles | | | 7/01/2003 | | | | 5,000 | | | | — | | | $ | 6.75 | | | | 7/01/2013 | |
| | | 7/01/2004 | | | | — | | | | 5,000 | | | $ | 17.90 | | | | 7/01/2014 | |
| | | 7/01/2005 | | | | — | | | | 5,000 | | | $ | 31.65 | | | | 7/01/2015 | |
| | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | 5,000 | | | | 12,500 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Raymund | | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | — | | | | 2,500 | | | | | | | | | |
Singleton | | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | — | | | | 2,500 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Tarr | | | 7/01/2002 | | | | 5,000 | | | | — | | | $ | 6.40 | | | | 7/01/2012 | |
| | | 7/01/2003 | | | | 5,000 | | | | — | | | $ | 6.75 | | | | 7/01/2013 | |
| | | 7/01/2004 | | | | — | | | | 5,000 | | | $ | 17.90 | | | | 7/01/2014 | |
| | | 7/01/2005 | | | | — | | | | 5,000 | | | $ | 31.65 | | | | 7/01/2015 | |
| | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | 10,000 | | | | 12,500 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Utter | | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | — | | | | 2,500 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Vareschi | | | 7/01/2003 | | | | 5,000 | | | | — | | | $ | 6.75 | | | | 7/01/2013 | |
| | | 7/01/2004 | | | | — | | | | 5,000 | | | $ | 17.90 | | | | 7/01/2014 | |
| | | 7/01/2005 | | | | — | | | | 5,000 | | | $ | 31.65 | | | | 7/01/2015 | |
| | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | 5,000 | | | | 12,500 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Way | | | 7/01/2003 | | | | 5,000 | | | | — | | | $ | 6.75 | | | | 7/01/2013 | |
| | | 7/01/2004 | | | | — | | | | 5,000 | | | $ | 17.90 | | | | 7/01/2014 | |
| | | 7/01/2005 | | | | — | | | | 5,000 | | | $ | 31.65 | | | | 7/01/2015 | |
| | | 7/01/2006 | | | | — | | | | 2,500 | | | $ | 69.00 | | | | 7/01/2016 | |
Total: | | | | | | | 5,000 | | | | 12,500 | | | | | | | | | |
|
| | |
(1) | | Grants beginning July 1, 2005 are SARs. Grants prior to July 1, 2005 are stock options. |
|
(2) | | All SAR awards to non-employee Directors cliff vest on the third anniversary of the date of grant and expire ten years from the grant date. |
25
SUMMARY COMPENSATION TABLE
| | | | | | | | | | | | | | | | | | | | | | | | |
Name and
| | | | | | | | | | | Option
| | | All Other
| | | | |
Principal Position | | Year | | | Salary | | | Bonus(1) | | | Awards(2) | | | Compensation(3) | | | Total | |
| |
|
Haley, CEO | | | 2006 | | | $ | 775,000 | | | $ | 1,800,000 | | | $ | 2,768,825 | | | $ | 204,645 | | | $ | 5,548,470 | |
Van Oss, CFO | | | 2006 | | | $ | 472,500 | | | $ | 575,000 | | | $ | 976,135 | | | $ | 88,493 | | | $ | 2,112,128 | |
Engel, COO | | | 2006 | | | $ | 472,500 | | | $ | 575,000 | | | $ | 916,569 | | | $ | 63,050 | | | $ | 2,027,119 | |
Goodwin, VP | | | 2006 | | | $ | 275,000 | | | $ | 305,000 | | | $ | 350,553 | | | $ | 66,327 | | | $ | 996,880 | |
Thimjon, VP | | | 2006 | | | $ | 255,000 | | | $ | 288,000 | | | $ | 375,082 | | | $ | 63,188 | | | $ | 981,270 | |
|
| | |
(1) | | Represents bonus amounts which reflect compensation earned in year 2006, but approved and paid in year 2007, in the amounts of $1,600,000, $495,000, $495,000, $265,000 and $248,000 for Messrs. Haley, Van Oss, Engel, Goodwin, and Thimjon, respectively. Also includes amounts paid under our special one-year Value Acceleration Program (VAP). See page 17 for a description of our annual incentive bonus program and the VAP. |
|
(2) | | Represents compensation costs recognized in our financial statements for the fiscal year ended December 31, 2006, with respect to awards granted in previous years beginning in 2003 through year 2006. All equity awards prior to 2003 had no impact on compensation expense in 2006. These SAR awards are subject to time-based vesting criteria. The assumptions used in calculating these amounts are set forth in Note 13 to our financial statements for the year ended December 31, 2006, which is located on Page 69 of our Annual Report onForm 10-K. All the equity awards were granted under our 1999 Long-Term Incentive Plan, as amended and approved by our Board and stockholders. |
|
(3) | | See the All Other Compensation For 2006 Table for additional information. |
ALL OTHER COMPENSATION FOR 2006
The following table describes each component of the All Other Compensation in the Summary Compensation Table.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Payments
| | | | | | | |
| | | | | | | | Relating to
| | | | | | | |
| | | | | | | | Employee
| | | | | | | |
| | Other
| | | Auto
| | | Retirement
| | | Tax
| | | | |
NEO | | Benefits(1) | | | Allowance(2) | | | Savings Plan(3) | | | Payments(4) | | | Total | |
| |
Haley | | $ | 9,036 | | | $ | 12,000 | | | $ | 179,751 | | | $ | 3,858 | | | $ | 204,645 | |
Van Oss | | $ | 7,339 | | | $ | 12,000 | | | $ | 66,633 | | | $ | 2,522 | | | $ | 88,493 | |
Engel | | $ | 1,290 | | | $ | 12,000 | | | $ | 49,575 | | | $ | 185 | | | $ | 63,050 | |
Goodwin | | $ | 1,290 | | | $ | 12,000 | | | $ | 52,859 | | | $ | 179 | | | $ | 66,327 | |
Thimjon | | | — | | | $ | 12,000 | | | $ | 51,188 | | | | — | | | $ | 63,188 | |
|
| | |
(1) | | This column reports the total amount of other benefits provided, none of which exceeded $10,000 for the named executive officer. These other benefits include (a) Company-paid travel for the executive’s spouse, and (b) club dues. |
|
(2) | | Represents a $1,000 monthly automobile allowance. |
|
(3) | | Includes (a) Company matching contributions to the named executive officer’s 401(k) Retirement Savings Plan account and Deferred Compensation Plan account within limitations imposed by IRS rules, and (b) discretionary Company contributions to the named executive officer’s 401(k) Retirement Savings Plan account and Deferred Compensation Plan per program guidelines and as approved by the Board. |
|
(4) | | Represents “Gross-Up Payments” to the named executive officers for taxes on reportable income resulting from Company-paid benefits including club dues and spousal travel expenses. |
26
NONQUALIFIED DEFFERED COMPENSATION FOR 2006
The table below provides information on the non-qualified deferred compensation of the named executives in 2006.
| | | | | | | | | | | | | | | | | | | | |
| | Executive
| | | Registrant
| | | Aggregate
| | | Aggregate
| | | Aggregate
| |
| | Contribution
| | | Contributions
| | | Earnings
| | | Withdrawals/
| | | Balance
| |
Name | | in Last FY(1) | | | in Last FY(2) | | | in Last FY(3) | | | Distributions | | | at Last FYE(4) | |
| |
|
Haley | | $ | 237,500 | | | $ | 167,138 | | | $ | 179,209 | | | | 0 | | | $ | 2,077,702 | |
Van Oss | | $ | 180,500 | | | $ | 50,027 | | | $ | 89,261 | | | | 0 | | | $ | 804,756 | |
Engel | | $ | 60,150 | | | $ | 37,069 | | | $ | 13,080 | | | | 0 | | | $ | 158,418 | |
Goodwin | | $ | 60,000 | | | $ | 32,717 | | | $ | 46,178 | | | | 0 | | | $ | 459,983 | |
Thimjon | | $ | 28,800 | | | $ | 30,519 | | | $ | 38,170 | | | | 0 | | | $ | 335,704 | |
|
| | |
(1) | | Reflects participation by the named executive officers in the Deferred Compensation Plan during 2006, including deferral of portions of both base salary and incentive compensation. The named executive officers cannot withdraw any amounts from their deferred compensation balances until termination, retirement, death or disability with the exception that the Compensation Committee may approve an amount (“hardship withdrawal”) necessary to meet unforeseen needs in the event of an emergency. |
|
(2) | | Amounts in this column are reported as compensation in the “All Other Compensation” column of the Summary Compensation Table on page 26, and the All Other Compensation Table on page 26. Reflects Company contributions credited on an unfunded basis to the account of the named executive officers in 2006. Company contributions are comprised of the following two components: (1) 50% match of participant deferrals (with the match not to exceed 3% of compensation) less the Company match contribution to the 401(k) Retirement Savings Plan, and (2) Company discretionary contributions to the 401(k) Retirement Savings Plan in the absence of IRS limitations less the actual Company discretionary contribution to the 401(k) Retirement Savings Plan. |
|
(3) | | Reflects investment returns or earnings calculated by applying the investment return rate at the valuation date to the average balance of the participant’s deferral account and Company contribution account since the last valuation date for each investment vehicle selected by the participant. Investment vehicles available to participants are a subset of those offered in the Company’s 401(k) Retirement Savings Plan and notably do not include Company stock. |
|
(4) | | Based upon years of service to the Company, Mr. Haley, Mr. Van Oss, Mr. Goodwin and Mr. Thimjon are each fully vested in the aggregate balance of their respective accounts at last year end. Mr. Engel is 0% vested in the Company contribution account portion of his aggregate balance based upon completed years of service, yielding an unvested balance of $57,380. |
27
GRANTS OF PLAN-BASED AWARDS FOR 2006
| | | | | | | | | | | | | | | | |
| | | | | All Other Option
| | | Exercise or
| | | | |
| | | | | Awards: Number of
| | | Base Price of
| | | Full Grant
| |
| | Grant
| | | Securities Underlying
| | | Option Awards
| | | Date Fair
| |
Name | | Date | | | Options(1) | | | ($/SH)(2) | | | Value(3) | |
| |
Haley | | | 7/01/06 | | | | 100,000 | | | $ | 69.00 | | | $ | 3,078,000 | |
Van Oss | | | 7/01/06 | | | | 37,500 | | | $ | 69.00 | | | $ | 1,154,250 | |
Engel | | | 7/01/06 | | | | 37,500 | | | $ | 69.00 | | | $ | 1,154,250 | |
Goodwin | | | 7/01/06 | | | | 8,500 | | | $ | 69.00 | | | $ | 261,630 | |
Thimjon | | | 7/01/06 | | | | 8,500 | | | $ | 69.00 | | | $ | 261,630 | |
|
| | |
(1) | | Represents the number of SARs granted in 2006 to the named executive officers. These SARs will vest and become exercisable ratably in three equal annual installments beginning on July 1, 2007, which is one year after the grant date. |
|
(2) | | Represents the exercise price for the SARs granted, which was the closing price of our Company stock on June 30, 2006, in accordance with Compensation Committee action on May 17, 2006. |
|
(3) | | Represents the full grant date fair value of SARs under Financial Accounting Standards No. 123R (referred to as “FAS 123R”) granted to the named executive officers. The full grant date fair value is the amount that the Company would expense in its financial statements over the awards vesting schedule without adjustment for forfeitures. Fair value is calculated using the Black Scholes value on the grant date of $30.78, and is accounted for in accordance with FAS 123R. For additional information on the valuation assumptions, refer to Note 13 of the Company’s financial statements in the Annual Report onForm 10-K for the year ended December 31, 2006. These amounts reflect the Company’s accounting expense and do not necessarily correspond to the actual value that will be recognized by the named executive officers. |
28
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | | | | | | | | | | | | | | | | | | |
| | | | Number of
| | Number of
| | | | |
| | | | Securities
| | Securities
| | | | |
| | | | Underlying
| | Underlying
| | | | |
| | Option
| | Unexercised
| | Unexercised
| | Option
| | Option
|
| | Grant
| | Options
| | Options
| | Exercise
| | Expiration
|
Name | | Date | | Exercisable | | Un-Exercisable | | Price | | Date |
|
|
Haley | | | 08/06/1998 | | | 211,875 | | | | 325,125 | | | | $10.75 | | | | 08/06/2008 | |
| | | 05/11/2000 | | | 100,000 | | | | — | | | | $9.875 | | | | 05/11/2010 | |
| | | 12/21/2001 | | | 100,000 | | | | — | | | | $4.50 | | | | 12/21/2011 | |
| | | 08/22/2003 | | | 300,000 | | | | — | | | | $5.90 | | | | 08/22/2013 | |
| | | 09/29/2004 | | | 133,333 | | | | 66,667 | | | | $24.02 | | | | 09/29/2014 | |
| | | 07/01/2005 | | | 66,667 | | | | 133,333 | | | | $31.65 | | | | 07/01/2015 | |
| | | 07/01/2006 | | | — | | | | 100,000 | | | | $69.00 | | | | 07/01/2016 | |
Total: | | | | | | 911,875 | | | | 625,125 | | | | | | | | | |
|
Van Oss | | | 08/06/1998 | | | — | | | | 26,010 | | | | $10.75 | | | | 08/06/2008 | |
| | | 05/11/2000 | | | 27,500 | | | | — | | | | $9.875 | | | | 05/11/2010 | |
| | | 10/23/2000 | | | 22,500 | | | | — | | | | $9.3125 | | | | 10/23/2010 | |
| | | 12/21/2001 | | | 50,000 | | | | — | | | | $4.50 | | | | 12/21/2011 | |
| | | 08/22/2003 | | | 70,000 | | | | — | | | | $5.90 | | | | 08/22/2013 | |
| | | 09/29/2004 | | | 46,667 | | | | 23,333 | | | | $24.02 | | | | 09/29/2014 | |
| | | 07/01/2005 | | | 25,000 | | | | 50,000 | | | | $31.65 | | | | 07/01/2015 | |
| | | 07/01/2006 | | | — | | | | 37,500 | | | | $69.00 | | | | 07/01/2016 | |
Total: | | | | | | 241,667 | | | | 110,833 | | | | | | | | | |
Engel | | | 07/14/2004 | | | 66,667 | | | | 33,333 | | | | $16.82 | | | | 07/14/2014 | |
| | | 07/14/2004 | | | 100,000 | | | | — | | | | $16.82 | | | | 07/14/2014 | |
| | | 07/01/2005 | | | 25,000 | | | | 50,000 | | | | $31.65 | | | | 07/01/2015 | |
| | | 07/01/2006 | | | — | | | | 37,500 | | | | $69.00 | | | | 07/01/2016 | |
Total: | | | | | | 191,667 | | | | 120,833 | | | | | | | | | |
|
Goodwin | | | 08/06/1998 | | | — | | | | 47,685 | | | | $10.75 | | | | 08/06/2008 | |
| | | 12/21/2001 | | | 35,000 | | | | — | | | | $4.50 | | | | 12/21/2011 | |
| | | 08/22/2003 | | | 12,667 | | | | — | | | | $5.90 | | | | 08/22/2013 | |
| | | 09/29/2004 | | | 10,000 | | | | 10,000 | | | | $24.02 | | | | 09/29/2014 | |
| | | 07/01/2005 | | | 8,334 | | | | 16,666 | | | | $31.65 | | | | 07/01/2015 | |
| | | 07/01/2006 | | | — | | | | 8,500 | | | | $69.00 | | | | 07/01/2016 | |
Total: | | | | | | 66,001 | | | | 82,851 | | | | | | | | | |
|
Thimjon | | | 08/06/1998 | | | — | | | | 47,685 | | | | $10.75 | | | | 08/06/2008 | |
| | | 05/11/2000 | | | 25,000 | | | | — | | | | $9.875 | | | | 05/11/2010 | |
| | | 12/21/2001 | | | 35,000 | | | | — | | | | $4.50 | | | | 12/21/2011 | |
| | | 08/22/2003 | | | 12,667 | | | | — | | | | $5.90 | | | | 08/22/2013 | |
| | | 09/29/2004 | | | 23,333 | | | | 11,667 | | | | $24.02 | | | | 09/29/2014 | |
| | | 07/01/2005 | | | 8,334 | | | | 16,666 | | | | $31.65 | | | | 07/01/2015 | |
| | | 07/01/2006 | | | — | | | | 8,500 | | | | $69.00 | | | | 07/01/2016 | |
Total: | | | | | | 104,334 | | | | 84,698 | | | | | | | | | |
|
29
OPTION AWARDS VESTING SCHEDULE
| | |
Grant Date | | Vesting Schedule |
|
|
08/06/1998 | | Time vested in1/8 increments annually for four years beginning June 5, 1999 and ending June 5, 2002. |
| | Performance-based vesting in1/8 increments upon achieving both EBITDA margins of 4.0%, 4.3%, 4.6%, and 4.8% and EBITDA of $122.6 million, $149.6 million, $176.7 million, and $206.9 million in 1998, 1999, 2000, and 2001, respectively. Upon achieving EBITDA margin of 5.0% and EBITDA dollars of $240.2 million in 2002, any unvested performance-based options would become vested after 2002. Any unvested performance-based options will vest on January 1, 2008. |
05/11/2000 | | Performance vested on May 11, 2006 upon achievement of 4.9% EBITDA margin in 2005.* |
10/23/2000 | | Performance vested on October 23, 2006 upon achieving 4.9% EBITDA in 2005.* |
12/21/2001 | | Performance vested on December 21, 2006 upon achieving performance criteria of 5% EBITDA margin in 2005. In the absence of achieving the performance criteria, the award would have vested in full on December 21, 2011.* |
08/22/2003 | | Time-based vesting in1/3 increments annually on the anniversary of the grant date. |
07/14/2004(a) | | Time-based vesting in1/3 increments annually on the anniversary of the grant date. |
07/14/2004(b) | | Performance vested on July 14, 2006 upon achieving performance criteria of 5% EBITDA margin in 2005. In the absence of achieving the performance criteria, the award would have vested in full on July 14, 2014.* |
09/29/2004 | | Time-based vesting in1/3 increments annually on the anniversary of the grant date. |
07/01/2005 | | Time-based vesting in1/3 increments annually on the anniversary of the grant date. |
07/01/2006 | | Time-based vesting in1/3 increments annually on the anniversary of the grant date. |
|
| | |
* | | For additional information regarding this performance criteria, see “Compensation Discussion and Analysis — Stock Based Awards” on page 18. |
30
OPTION EXERCISES AND STOCK VESTED
| | | | | | | | |
| | Option Awards
| | | Option Awards
| |
| | Number of Shares
| | | Before Tax Value
| |
Name | | Acquired on Exercise | | | Realized on Exercise | |
| |
|
Haley(1) | | | 330,000 | | | $ | 11,137,500 | |
|
Van Oss(2) | | | 60,962 | | | $ | 4,113,097 | |
Engel(3) | | | 0 | | | $ | 0 | |
|
Goodwin(4) | | | 144,684 | | | $ | 7,951,218 | |
Thimjon(5) | | | 10,000 | | | $ | 502,850 | |
|
|
| | |
(1) | | Mr. Haley exercised 330,000 options on January 13, 2006, with an exercise price of $10.75 and market price of $44.50. |
|
(2) | | Mr. Van Oss exercised (i) 17,612 options on April 27, 2006 with an exercise price of $4.34 and market price of $76.30; (ii) 8,100 options on April 27, 2006 with an exercise price of $10.75 and market price of $75.50; (iii) 4,700 options on April 28, 2006 with an exercise price of $10.75 and market price of $75.50; (iv) 12,900 options on May 1, 2006 with an exercise price of $10.75 and market price of $75.95; (v) 4,300 options on May 3, 2006 with an exercise price of $10.75 and market price of $76.50; and (vi) 13,350 options May 4, 2006 with an exercise price of $10.75 and market price of $77.65. |
|
(3) | | Mr. Engel did not exercise any stock options in 2006. |
|
(4) | | Mr. Goodwin exercised (i) 10,000 options on February 21, 2006 with an exercise price of $5.90 and market price of $55.47; (ii) 4,808 options on February 23, 2006 with an exercise price of $5.90 and market price of $59.31; (iii) 10,000 options on March 1, 2006 with an exercise price of $10.75 and market price of $60.28; (iv) 20,000 options on March 27, 2006 with an exercise price of $10.75 and market price of $63.97; (v) 29,475 options on April 3, 2006 with an exercise price of $10.75 and market price of $68.51; (vi) 10,000 SARs on May 3, 2006 with an exercise price of $24.02 and market price of $76.85; (vii) 35,000 options on May 11, 2006 with an exercise price of $9.875 and market price of $76.55; (viii) 8,334 SARs on December 13, 2006 with an exercise price of $31.65 and market price of $63.73; (ix) 10,000 SARs on December 13, 2006 with an exercise price of $24.02 and market price of $63.73; and (x) 7,067 options on December 18, 2006 with an exercise price of $5.90 and market price of $63.94. |
|
(5) | | Mr. Thimjon exercised 10,000 options on August 15, 2006 with an exercise price of $9.875 and market price of $60.16. |
31
POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE IN CONTROL: HALEY
Each of the following potential scenarios represent circumstances under which the named executive could potentially terminate employment with the Company. A description of the compensation benefits due the executive in each scenario is provided. In each case, the date of the triggering event is assumed to be December 31, 2006. The amounts described in the table below will change based on the assumed termination date. The determination of compensation due to Mr. Haley upon separation from the Company is governed by his employment agreement with the Company dated June 5, 1998.
“Change in Control” means the occurrence of any of the following events: (a) the acquisition by any entity not affiliated with the Company of 50% or more of the outstanding voting securities of the Company; (b) a merger or consolidation of the Company resulting in Company shareholders having less than 50% of the combined voting power; (c) the liquidation or dissolution of the Company; (d) the sale of the assets of the Company to an entity unrelated to the Company.
“Not for Cause” means any termination other than for disability or for willful failure of the executive to perform his duties; willful serious misconduct that is materially injurious to the Company; conviction of a felony crime; or material breach of a covenant for non-disclosure, non-compete, or relating to Company stock.
“Good Reason” means the executive’s duties are significantly different than those originally assigned to him; non-extension of his employment agreement; employment agreement was not assumed by a successor; position as CEO was not continued or he was not reelected as Director to the Board; or benefits have been materially reduced.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Involuntary
| | | Involuntary
| | | | | | | |
Executive Benefits
| | | | | | | | Not For
| | | or Good
| | | | | | | |
and Payments Upon
| | Voluntary
| | | Change
| | | Cause
| | | Reason
| | | | | | | |
Termination | | Termination(1) | | | in Control(2) | | | Termination(3) | | | Termination(3) | | | Death(4) | | | Disability(4) | |
| |
|
Compensation: | | | | | | | | | | | | | | | | | | | | | | | | |
|
Prorated Annual Earned Incentive | | $ | 1,800,000 | | | $ | 1,800,000 | | | $ | 1,800,000 | | | $ | 1,800,000 | | | $ | 1,800,000 | | | $ | 1,800,000 | |
Base Salary | | | | | | $ | 2,316,667 | | | $ | 2,316,667 | | | $ | 2,316,667 | | | $ | 1,500,000 | | | $ | 1,500,000 | |
|
Incentive | | | | | | $ | 5,100,000 | | | $ | 5,100,000 | | | $ | 5,100,000 | | | $ | 3,400,000 | | | $ | 3,400,000 | |
Accelerated Options & SARS | | | | | | $ | 7,108,990 | | | $ | 7,108,990 | | | $ | 7,108,990 | | | $ | 7,108,990 | | | $ | 7,108,990 | |
|
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
Life Insurance Coverage | | | | | | $ | 10,692 | | | $ | 7,128 | | | $ | 7,128 | | | | | | | $ | 7,128 | |
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Medical Benefits | | | | | | $ | 29,646 | | | $ | 19,764 | | | $ | 19,764 | | | $ | 19,764 | | | $ | 19,764 | |
280G Tax Gross-Up | | | | | | $ | 2,997,290 | | | | | | | | | | | | | | | | | |
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Total: | | $ | 1,800,000 | | | $ | 19,363,285 | | | $ | 16,352,549 | | | $ | 16,352,549 | | | $ | 13,828,754 | | | $ | 13,835,882 | |
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(1) | | Voluntary Termination |
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| | Prorated annual incentive compensation for the portion of the fiscal year employed. |
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(2) | | Change in Control |
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| | Average base salary continuation for three years. Prorated annual incentive compensation for the portion of the fiscal year employed. Contractual incentive of average annual incentive compensation for three years. All stock options become fully vested and exercisable for 18 months. Continued participation for three years in benefits programs so long as executive makes timely payment of premiums, contributions, and co-payments. A “Gross-Up-Payment”sufficient to reimburse the executive for 100% of any excise taxes payable as a result of termination payments plus any income taxes on the reimbursement payment itself. |
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(3) | | Involuntary Not for Cause or Involuntary Executive for Good Reason Termination |
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| | Average base salary continuation for three years. Prorated annual incentive compensation for the portion of the fiscal year employed. Contractual incentive of average annual incentive compensation for three years. All stock options become fully vested and exercisable for 18 months. Continued participation for two years in benefits programs so long as executive makes timely payment of premiums, contributions, and co-payments. |
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(4) | | Death or Disability |
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| | Average base salary continuation for two years. Prorated annual incentive compensation for the portion of the fiscal year employed. Average annual incentive compensation for two years. All stock options become fully vested and exercisable for 18 months. Continued participation for two years in benefits programs so long as executive makes timely payment of premiums, contributions, and co-payments. |
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POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE IN CONTROL: VAN OSS
Each of the following potential scenarios represent circumstances under which the named executive could potentially terminate employment with the Company. A description of the compensation benefits due the executive in each scenario is provided. In each case, the date of the termination is assumed to be December 31, 2006. The amounts described in the table below will change based on the assumed termination date. The determination of compensation due to Mr. Van Oss upon separation from the Company is governed by his employment agreement with the Company dated December 15, 2006.
“Change in Control” means the occurrence of any of the following events: (a) the acquisition by any entity not affiliated with the Company of 30% or more of the outstanding voting securities of the Company; (b) a merger or consolidation of the Company resulting in Company shareholders having less than 70% of the combined voting power; (c) the liquidation or dissolution of the Company; (d) the sale of the assets of the Company to an entity unrelated to the Company; or (e) during any two year period, a majority change of duly elected Directors.
“Not for Cause” means any termination other than for a material breach of the executive’s employment agreement; the executive engaging in a felony or engaging in conduct which is injurious to the Company, its customers, employees, suppliers, or shareholders; the executive’s failure to timely and adequately perform his duties; or the executive’s material breach of any manual or written policy, code or procedure of the Company.
“Good Reason” means the executive has not consented to a reduction in the executive’s base salary; a relocation of the executive’s primary place of employment to a location more than 50 miles from Pittsburgh, Pennsylvania; or any material reduction in the executive’s offices, titles, authority, duties or responsibilities.
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| | | | | Involuntary
| | | Involuntary
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Executive Benefits
| | | | | Not For
| | | or Good
| | | | | | | |
and Payments Upon
| | Change in
| | | Cause
| | | Reason
| | | | | | | |
Termination | | Control(1) | | | Termination(2) | | | Termination | | | Death(3) | | | Disability(4) | |
| |
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Compensation: | | | | | | | | | | | | | | | | | | | | |
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Prorated Annual Earned Incentive | | $ | 575,000 | | | $ | 575,000 | | | $ | 575,000 | | | $ | 575,000 | | | | | |
Base Salary and Incentive | | $ | 1,485,000 | | | $ | 1,113,750 | | | $ | 1,113,750 | | | | | | | | | |
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Accelerated Options & SARS | | $ | 2,336,989 | | | $ | 2,336,989 | | | $ | 2,336,989 | | | | | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | |
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Medical Benefits | | $ | 17,760 | | | $ | 7,760 | | | $ | 7,760 | | | | | | | $ | 17,760 | |
280G Tax Gross-Up | | $ | 624,242 | | | | | | | | | | | | | | | | | |
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Total: | | $ | 5,038,991 | | | $ | 4,043,499 | | | $ | 4,043,499 | | | $ | 575,000 | | | $ | 17,760 | |
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(1) | | Change in Control |
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| | Monthly base salary times 1.5 continuation for 24 months. Prorated annual incentive compensation for the portion of the fiscal year employed. All stock options become fully vested and exercisable for 12 months. Company paid welfare benefits (COBRA continuation coverage) for 24 months. A “Gross-Up-Payment” sufficient to reimburse the executive for 50% of any excise taxes payable as a result of termination payments plus any income taxes on the reimbursement payment itself. |
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(2) | | Involuntary Not for Cause or Involuntary Executive for Good Reason Termination |
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| | Monthly base salary times 1.5 continuation for 18 months. Prorated annual incentive compensation for the portion of the fiscal year employed. All stock options become fully vested and exercisable for 60 days. Company paid welfare benefits (COBRA continuation coverage) for 18 months. |
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(3) | | Death |
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| | Prorated annual incentive compensation for the portion of the fiscal year employed. |
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(4) | | Disability |
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| | Welfare benefits (COBRA continuation coverage) for 18 months. |
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POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE IN CONTROL: ENGEL
Each of the following potential scenarios represent circumstances under which the named executive could potentially terminate employment with the Company. A description of the compensation benefits due the executive in each scenario is provided. In each case, the date of the termination is assumed to be December 31, 2006. The amounts described in the table below will change based on the assumed termination date. The determination of compensation due to Mr. Engel upon separation from the Company is governed by his employment agreement with the Company dated July 14, 2006.
“Change in Control” means the occurrence of any of the following events: (a) the acquisition by any entity not affiliated with the Company of 30% or more of the outstanding voting securities of the Company; (b) a merger or consolidation of the Company resulting in Company shareholders having less than 70% of the combined voting power; (c) the liquidation or dissolution of the Company; (d) the sale of the assets of the Company to an entity unrelated to the Company; or (e) during any two year period, a majority change of duly elected Directors.
“Not for Cause” means any termination other than for a material breach of the executive’s employment agreement; the executive engaging in a felony or engaging in conduct which is injurious to the Company, its customers, employees, suppliers, or shareholders; the executive’s failure to timely and adequately perform his duties; or the executive’s material breach of any manual or written policy, code or procedure of the Company.
“Good Reason” means the executive has not consented to a reduction in the executive’s base salary; a relocation of the executive’s primary place of employment to a location more than 50 miles from Pittsburgh, Pennsylvania; or any material reduction in the executive’s offices, titles, authority, duties or responsibilities.
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| | | | | | | | Involuntary
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Executive Benefits and
| | | | | Involuntary
| | | or Good
| | | | | | | |
Payments Upon
| | Change in
| | | Not for Cause
| | | Reason
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Termination | | Control(1) | | | Termination(2) | | | Termination | | | Death(3) | | | Disability(4) | |
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Compensation: | | | | | | | | | | | | | | | | | | | | |
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Prorated Annual Earned Incentive | | $ | 575,000 | | | $ | 575,000 | | | $ | 575,000 | | | $ | 575,000 | | | | | |
Base Salary and Incentive | | $ | 1,485,000 | | | $ | 1,113,750 | | | $ | 1,113,750 | | | | | | | | | |
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Accelerated Options & SARS | | $ | 2,256,893 | | | $ | 2,256,893 | | | $ | 2,256,893 | | | | | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | |
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Medical Benefits | | $ | 18,324 | | | $ | 18,324 | | | $ | 18,324 | | | | | | | $ | 18,324 | |
280G Tax Gross-Up | | $ | 624,242 | | | | | | | | | | | | | | | | | |
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Total: | | $ | 4,959,459 | | | $ | 3,963,967 | | | $ | 3,963,967 | | | $ | 575,000 | | | $ | 18,324 | |
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(1) | | Change in Control |
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| | Monthly base salary times 1.5 continuation for 24 months. Prorated annual incentive compensation for the portion of the fiscal year employed. All stock options become fully vested and exercisable for 12 months. Company paid welfare benefits (COBRA continuation coverage) for 24 months. A “Gross-Up-Payment” sufficient to reimburse the executive for 50% of any excise taxes payable as a result of termination payments plus any income taxes on the reimbursement payment itself. |
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(2) | | Involuntary Not for Cause or Involuntary Executive for Good Reason Termination |
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| | Monthly base salary times 1.5 continuation for 18 months. Prorated annual incentive compensation for the portion of the fiscal year employed. All stock options become fully vested and exercisable for 60 days. Company paid welfare benefits (COBRA continuation coverage) for 18 months. |
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(3) | | Death |
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| | Prorated annual incentive compensation for the portion of the fiscal year employed. |
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(4) | | Disability |
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| | Welfare benefits (COBRA continuation coverage) for 18 months. |
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Item 2 — | Proposal to Vote For Ratification of Independent Registered Public Accounting Firm |
Our Board unanimously recommends a vote FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2007.
The Audit Committee of our Board has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2007. We are submitting the appointment of the independent registered public accounting firm to you for ratification at the Annual Meeting. Although ratification of this appointment is not legally required, our Board believes it is appropriate for you to ratify this selection. In the event that you do not ratify the selection of PricewaterhouseCoopers as our Company’s independent registered public accounting firm, our Audit Committee may reconsider its selection.
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Appointment of Independent Registered Public Accounting Firm
Our Audit Committee has appointed PricewaterhouseCoopers as our independent registered public accounting firm to audit our 2007 financial statements.
PricewaterhouseCoopers has served as the Company’sour independent registered public accounting firm since 1994. Representatives of PricewaterhouseCoopers will be present at the Annual Meeting, and will have an opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 2007 ANNUAL MEETINGIndependent Registered Public Accounting Firm Fees and Services
No stockholder proposals
Aggregate fees for all professional services rendered to us by PricewaterhouseCoopers for the years ended December 31, 2006 and 2005 were submittedas follows:
| | | | | | | | |
| | 2006 | | | 2005 | |
|
Audit fees | | $ | 1,524,168 | | | $ | 1,645,000 | |
Audit-related fee | | $ | 43,500 | | | $ | 35,400 | |
Tax fees | | $ | 218,713 | | | $ | 461,000 | |
| | | | | | | | |
| | $ | 1,786,381 | | | $ | 2,141,400 | |
The audit fees for considerationthe years ended December 31, 2006 and 2005, were for professional services rendered for the audits of our consolidated financial statements, reviews of our quarterly consolidated financial statements and statutory audits. The fees for the year ended December 31, 2006 and 2005 include fees related to our compliance with Section 404 of the Sarbanes-Oxley Act.
The audit-related fees for the years ended December 31, 2006 and 2005, were for assurance and related services for employee benefit plan audits, accounting consultations, attest services, and software licensing fees.
Tax fees for the years ended December 31, 2006 and 2005, were for services related to tax planning and compliance.
Audit Committee Pre-Approval Policies and Procedures
Our Audit Committee has the sole authority to pre-approve, and has policies and procedures that require the pre-
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approval by them of all fees paid for services performed by, our independent registered public accounting firm. At the beginning of each year, the Audit Committee approves the proposed services for the year, including the nature, type and scope of services and the related fees. Audit Committee pre-approval is also obtained for any other engagements that arise during the course of the year. During 2006 and 2005, all of the audit and non-audit services provided by PricewaterhouseCoopers were pre-approved by the BoardAudit Committee.
Report of the Audit Committee
Management of the Company has the primary responsibility for the 2006 Annual Meeting. Rule 14a-8financial statements and the reporting process including the system of internal controls. The Audit Committee is responsible for reviewing the Company’s financial reporting process.
In this context, the Audit Committee has met and held discussions with management and the independent registered public accounting firm. Management represented to the Committee that the financial statements of the Exchange Act containsCompany were prepared in accordance with generally accepted accounting principles, and the procedures forCommittee reviewed and discussed the Company’s audited financial statements with management and the independent registered public accounting firm. The Committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards AU § 380).
In addition, the Committee has discussed with its independent registered public accounting firm, the independent registered public accounting firm’s independence from the Company and its management, including certain stockholder proposalsthe matters in the Company’s Proxy Statement and related materials. The deadline for submitting a stockholder proposalwritten disclosures pursuant to Rule 3600T of the Public Company Accounting Oversight Board, which adopts on an interim basis Independence Standards Board (ISB) Standard No. 1.
The Audit Committee discussed with the Company’s internal auditors and independent registered public accounting firm the overall scope and plan for their respective audits. The Committee meets with the internal auditors and independent registered public accounting firm, with and without management present, to discuss the results of their audits, including their audit of the Company’s internal controls and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to our Board and our Board has approved, that the audited financial statements be included in the Annual Report on14a-8Form 10-K for the 2007 Annual Meeting ofyear ended December 31, 2006, for filing with the Company is the date, which is 120 days prior to the first anniversary date of the mailing of this Proxy Statement, or December 18, 2006. With respect to any stockholder proposal outside the procedures provided in Rule 14a-8Securities and received by the Company no later than 45 days prior to the first anniversary date of the mailing of this Proxy Statement, or March 3, 2007, the Company may be required to include certain limited information concerning such proposal inExchange Commission. The Committee and our Board also appointed PricewaterhouseCoopers LLP as the Company’s Proxy Statement so that proxies solicitedindependent registered public accounting firm, for the 2007 Annual Meeting may confer discretionary authority to vote on any such matter. Any stockholder proposals should be addressed to the Corporate Secretary of the Company, 225 West Station Square Drive, Suite 700, Pittsburgh, Pennsylvania 15219.2007.
Respectfully Submitted:
The Audit Committee
Robert J. Tarr, Jr.,Chairman
Sandra Beach Lin
Steven A. Raymund
William J. Vareschi
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22
APPENDIX A
WESCO INTERNATIONAL, INC.
INDEPENDENCE POLICY
The Board of Directors of WESCO International, Inc. has adopted the following standards for determining the independent status of each its Directors for purposes of serving on the Board and its Committees and complying with the listing standards of the New York Stock Exchange and Securities and Exchange Commission rules on corporate governance. The Board of Directors will, on an annual basis, affirmatively determine the independent status of each of its Directors relative to the standards that have been adopted. Such standards and determinations will be disclosed in the Company’s proxy materials and Annual Report onForm 10-K, as required.
Independence Standards
A member of the Company’s Board is considered to be independent of management of the Company, unless:
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| Such Director is also a member of management of the Company, |
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| Such Director (or an immediate family member of such Director) received more than $100,000 in direct compensation in any one year within the past three years for services, other than Director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), |
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| Such Director (or an immediate family member of such Director) was affiliated with or employed, in a professional capacity, by a present or former internal or external auditor of the Company within the past three years, |
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| Such Director (or an immediate family member of such Director) was employed, as an executive officer, by another company where any of the Company’s present executive officers served on such company’s compensation committee within the past three years, |
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| Such Director (or an immediate family member of such Director) was an employee of a company that made payments to, or received payments from, the Company for property or services in an amount which, in any single fiscal year, exceeded $1 million or 2% of such other company’s consolidated gross revenues, whichever was greater, during the past three years, |
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| Such Director (or an immediate family member of such Director) was an employee of a company that was indebted to the Company in an amount that exceeds 5% of such company’s total assets or 5% of the Company’s total assets at the end of each respective fiscal year within the past three years, or |
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| Such Director (or immediate family member of such Director) was affiliated, either as an employee, officer or director, with a foundation, university or other non-profit organization that received a donation from the Company in excess of $100,000 or from an executive officer of the Company in excess of $10,000 in any one year during the past three years. |
Such Director is also a member of management of the Company,
Such Director (or an immediate family member of such Director) received more than $100,000 in direct compensation in any one year within the past three years for services, other than Director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service),
Such Director (or an immediate family member of such Director) was affiliated with or employed, in a professional capacity, by a present or former internal or external auditor of the Company within the past three years,
Such Director (or an immediate family member of such Director) was employed, as an executive officer, by another company where any of the Company’s present executive officers served on such company’s compensation committee within the past three years,
Such Director (or an immediate family member of such Director) was an employee of a company that made payments to, or received payments from, the Company for property or services in an amount which, in any single fiscal year, exceeded $1 million or 2% of such other company’s consolidated gross revenues, whichever was greater, during the past three years,
Such Director (or an immediate family member of such Director) was an employee of a company that was indebted to the Company in an amount that exceeds 5% of such company’s total assets or 5% of the Company’s total assets at the end of each respective fiscal year within the past three years, or
Such Director (or an immediate family member of such Director) was affiliated, either as an employee, officer or director, with a foundation, university or other non-profit organization that received a donation from the Company in excess of $100,000 or from an executive officer of the Company in excess of $10,000 in any one year during the past three years.
For purposes of participating on the Audit Committee of the Board, such Director (in addition to the above) will also meet the independence requirements set forth inRule 10A-3 of the Securities Exchange Act of 1934, as amended.
A-1
A-1
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This Proxy iss i solicited on behalf of theh t e Board of Directors. The Board of Directors recommends a vote FOR the foregoingt h e o f regoing proposals. | Please Mark Here for Address Addre ss Change or
Comments | | o |
| | SEE REVERSE Comme ntsSE E REVE RSE SIDE |
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FOR AGAIN ST ABSTAIN 1 | . ELECTION OF DIRECTORS: | | | | | | | | | | | | | | | |
| 2. Ratification of In dependent Registered Public Accounting firm for 01 Sandra Beach Lin 2007: PricewaterhouseCoopers LLP 0 2 Robert J. Tarr, Jr. 0 3 Kenneth L. Way The election of three directors, | | | | | | | | | | | | | | | |
| 01 Steven A. Raymund 02 Lynn M. Utter Jr. 03 William J Vareschi forabove to be elected o f r a three-yeartwo-year term to expire in 2009 | | | | | | 2010. In their discretion, thediscretio n, h t e Proxies are authorized to vote upon such otheroth er business as may properly come before the meeting.meeti ng. This proxy, when properly executed will wilbe voted in the manner directed herein by theFORall nominees lis t e d ab oveWT I HHOLD AUTHORIT Y undersigned stockholder.sto ckholder. If no directiondir ection is made, the proxy willt h e pro xy wil l be voted FOR thet h e foregoing proposals. |
| FOR all nominees listed above
(except (except as marked to thet o t h e contrary)
o
| | | | WITHHOLD AUTHORITY to vote for all nominees listedlist ed above
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Please Ple ase sign exactly as name appears below. When shares are held by joint tenants,e t nants, both should sign. When signing as attorney, as executor, administrator, trusteeadmnistra i tor, r t ustee or guardian, please give full titlef u ll ittle as such. If a corporation,corporati on, please sign in fulln i f u ll corporate name by President or other authorized officer. If a partnership, please(I nstruction: To wit hhold authority t o vote o f r any nominee, wri t e pe l ase sign inn i partnership name by authorized person.
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(Instruction: To withhold authority to vote for any nominee writepers on. that nominee’s name on t h e line below.) Ple ase disregard f i you have previously provided your consent decision. I PLAN TO ATTEND THE MEETINGSignature Signature Date , 2007 PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. FOLD AND DETACH HERE WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING, BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK. Internet and telephone voting is available through 11:59 PM Eastern Time the line below)
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| | | | | | | | FOR | | AGAINST | ABSTAIN | | | | | | | | | | | | | | | | |
2 | Ratification ofday prior to Annual Meetin g day. Your n I ternet or telephone vote authorizes the Independent Registered Public Accounting firm for 2006: PricewaterhouseCoopers LLP | | o | | o | | o | | | | named proxies to vote your shares in the same manner as f i you marked, signed and returned your proxy card. INTERNET TELEPHONE http:/ /www.p roxyvoting.com/wcc 1-866-540-5760Use the internet to vote your proxy.ORUse any touch-tone tele phone to Have your proxy card in hand vote your proxy. Have your proxy when you access h t e web site. card in hand when you call. If you vote your proxy by Inte rnet or by tele phone, you do NOT need to mail back your proxy card. To vote by mail , mark, sign and date your proxy card and return t i in the enclosed postage-paid envelope. ChooseMLinkSM for fast,o f r f a st, easy and secure 24/7 online access to your future proxyf u ture pro xy materials, investmentn i vestment plan statements, tax documents and more. Simply log on toInvestor Service DirectServic eDirect®at www.melloninvestor.com/www.mellonin vestor.com/isd where step-by-step instructions willinstructi ons wil l prompt you through enrollment. | Please disregard if you have previously provided your consent decision |
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| | | | | | | | | | | | | | | | | | | | enro llment.You can vie w the Annual Report and Proxy Statement on the Interneta t www.wesco.com/annualreport |
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Signature
| | | | Signature | | | | Date | | | , 2006 |
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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| Internet
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| http://www.proxyvoting.com/wcc
| | | | | | 1-866-540-5760 | | | | | | | |
| Use the internet to vote your proxy. Have your proxy card in hand when you access the web site. | | |
OR | | | Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. | | |
OR | | | Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
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If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the Internet at www.wesco.com/annualreport