UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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| o | Soliciting Material under §240.14a-12 |
MILLER INDUSTRIES, INC. | |||
| (Name of Registrant as Specified In Its Charter) | |||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | |||
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8503 Hilltop Drive
Ooltewah, Tennessee 37363
(423) 238-4171
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY |
The annual meeting of shareholders of Miller Industries, Inc. will be held at 9:00 a.m. (Eastern time), on Friday, May 22, 2009,28, 2010, at 1100 Peachtree Street, Suite 2800, Atlanta,879 College Drive, Dalton, Georgia 30720, for the following purposes:
| 1. | to elect | |
| 2. | to transact such other business as may properly come before the meeting or any adjournment thereof. |
Only shareholders of record at the close of business on April 7, 20096, 2010 are entitled to notice of and to vote at the annual meeting. Your attention is directed to the proxy statement accompanying this notice for a complete statement regarding matters to be acted upon at the annual meeting.
| By order of the Board of Directors, | |||
| /s/ Frank Madonia | |||
| Frank Madonia | |||
| Secretary | |||
Ooltewah, Tennessee
April 15, 200914, 2010
We urge you to attend the annual meeting. Whether or not you plan to attend, please complete, date and sign the enclosed proxy card and return it in the enclosed postage-paid envelope, or submit your proxy by Internet or telephone as described on the enclosed proxy card. You may revoke your proxy at any time before it is voted. |
TABLE OF CONTENTS
| Page | |||
| GENERAL | 1 | ||
| VOTING PROCEDURES | 1 | ||
| NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS | 2 | ||
| PROPOSAL 1 — ELECTION OF DIRECTORS | 2 | ||
| Introduction | 2 | ||
| Information Regarding Nominees | 3 | ||
| CORPORATE GOVERNANCE | 5 | ||
| Independence, Board Meetings and Related Information | 5 | ||
| Committees of the Board of Directors | |||
| 5 | |||
| Board Leadership Structure | 6 | ||
| Risk Management | 7 | ||
| Director Nominations | 7 | ||
| Related Transactions and Business Relationships | 7 | ||
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 8 | ||
| COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS | 9 | ||
| Compensation Discussion and Analysis | 9 | ||
| Report of the Compensation Committee | 12 | ||
| Compensation Committee Interlocks and Insider Participation | 12 | ||
| Summary Compensation Table | 12 | ||
| Additional Discussion of Material Items in Summary Compensation Table | 13 | ||
| Outstanding Equity Awards at Fiscal Year-End | 14 | ||
| Option Exercises and Stock Vested in | 14 | ||
| Potential Payments Upon Termination or Change in Control | 14 | ||
| Non-Employee Director Compensation for | 17 | ||
| ACCOUNTING MATTERS | 18 | ||
| Audit Committee Report | 18 | ||
| Independent Public Accountants | 19 | ||
| CODE OF BUSINESS CONDUCT AND ETHICS | 20 | ||
| EQUITY COMPENSATION PLAN INFORMATION | 20 | ||
| COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
| OTHER MATTERS | 20 | ||
| Deadline for Shareholder Proposals for | 20 | ||
| Expenses of Solicitation | 21 | ||
MILLER INDUSTRIES, INC.
8503 Hilltop Drive
Ooltewah, Tennessee 37363
(423) 238-4171
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2009
28, 2010
GENERAL
This proxy statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Miller Industries, Inc. (the “Company” or “Miller Industries”) for use at the Company’s 20092010 annual meeting of shareholders (the “Annual”Annual Meeting”) to be held at 1100 Peachtree Street, Suite 2800, Atlanta,879 College Drive, Dalton, Georgia 30720, on Friday, May 22, 2009,28, 2010, at 9:00 a.m. (Eastern time), and any adjournments or postponements thereof. It is anticipated that this proxy statement and the accompanying proxy card will first be mailed to shareholders on or about April 17, 2009.23, 2010.
Only holders of the Company’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on April 7, 20096, 2010 are entitled to notice of and to vote at the Annual Meeting. On such date, the Company had issued and outstanding 11,608,36011,637,775 shares of Common Stock. A list of all shareholders entitled to vote will be available for inspection at the Annual Meeting.
VOTING PROCEDURES
A majority of shares entitled to vote and represented in person or by proxy at the Annual Meeting will constitute a quorum. Abstentions and broker non-votes will be counted for the purpose of determining a quorum. Each outstanding share of Common Stock is entitled to one vote.
The election of a nominee to the Board of Directors requires a plurality of the votes cast by holders of shares of Common Stock present in person or represented by proxy at the Annual Meeting. Therefore, those nominees receiving the greatest number of votes at the Annual Meeting shall be elected, even though such nominees may not receive a majority of the votes cast.
Abstentions and broker non-votes will not be considered in the election of nominees to the Board of Directors, but will be treated as votes against any other proposals presented to the shareholders. A broker non-vote occurs when a proxy received from a broker or other nominee holding shares on behalf of a client does not contain voting instructions on a “non-routine” matter because the broker or nominee has not received specific voting instructions from the client with respect to such non-routine matter. Typically,The proposals in this proxy statement are non-routine matters and accordingly the election of directors is considered a routine matter by brokers and other nominees allowing them to have discretionary voting power tobrokerage firm cannot vote your shares they hold on behalf of their clients.those proposals without your instructions.
If you hold shares of Common Stock in your own name as holder of record, you may give a proxy to be voted at the Annual Meeting in any of the following ways: (i) over the telephone by calling a toll-free number; (ii) electronically, using the Internet; or (iii) by completing, signing and mailing the enclosed printed proxy card. If you are a shareholder of record and would like to submit your proxy vote by telephone or Internet, you should refer to the specific instructions provided on the enclosed proxy card. If you are a shareholder of record and wish to submit your proxy by mail, you should sign and return the proxy card in accordance with the instructions thereon prior to the Annual Meeting. Additionally, a holder of record may vote in person by completing a ballot at the Annual Meeting.Mee ting. Even if you currently plan to attend the Annual Meeting, the Company recommends that you also submit your proxy as described above so that your vote will be counted if you later decide not to attend the Annual Meeting.
If you hold shares of Common Stock through a broker or other nominee (i.e., in “street name”), the broker or nominee should provide instructions on how you may instruct the broker or other nominee to vote those shares on your behalf.
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A shareholder of record who votes over the Internet or by telephone may revoke the proxy by: (i) attending the Annual Meeting, notifying the Secretary of the Company (or his delegate), and voting in person; or (ii) voting again over the Internet or by telephone by no later than 1:00 a.m. (Central time) on May 22, 2009.28, 2010. A shareholder of record who signs and returns a proxy may revoke such shareholder’s proxy at any time before it has been exercised by: (i) attending the Annual Meeting, notifying the Secretary of the Company (or his delegate), and voting in person; (ii) filing with the Secretary of the Company a written revocation; or (iii) executing and delivering a timely and valid proxy bearing a later date. Unless revoked, where a choice is specified on the proxy, the shares represented thereby will be voted in accordance with such choice. If no choice is specified, such shares will be voted FOR the election of each of the fivesix director nominees, and in the discretion of the proxy holders on any other matter that may properly come before the meeting. If you hold shares of Common Stock in street name you must follow the instructions given by your broker or nominee to change your voting instructions.
The Board of Directors has designated William G. Miller and Frank Madonia, and each or either of them, to vote on its behalf the proxies being solicited hereby. The Board of Directors knows of no matters which are to be brought to a vote at the Annual Meeting other than those set forth in the accompanying Notice of Annual Meeting. However, if any other matter properly does come before the Annual Meeting, the persons appointed in the proxy, or their substitutes, will vote in accordance with their best judgment on such matters.
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
The Company posted materials related to the Annual Meeting on the Internet. The following materials are available on the Internet at www.shareholdermaterial.com/MillerIndustries:
| ● | this proxy statement for the Annual Meeting; and |
| ● | the Company’s 2009 Annual Report to Shareholders (which includes the Company’s Annual Report on Form 10-K for the year ended December 31, |
PROPOSAL 1
ELECTION OF DIRECTORS
Introduction
Pursuant to the Company’s Charter and Bylaws, the Board of Directors has fixed the number of directors at five.six. The members of the Board of Directors comprise a single class, and at each annual meeting of shareholders all directors are elected. The directors elected at the Annual Meeting will serve until the annual meeting of shareholders in 2010,2011, or until their successors are duly elected and qualified. The Board of Directors may fill directorships resulting from vacancies, and may increase or decrease the number of directors to as many as fifteen or as few as three. In March 2010, the Board of Directors increased the size of the Board from five to six members and appointed Theodore H. Ashford, III, effective April 1, 2010, to serve on the Board of Directors until the Annual Meeting. Executive officers are appointed annually and serve at the discretion of the Board of Directors.
Upon the recommendation of the Nominating Committee, the Board of Directors has nominated Theodore H. Ashford, III, Jeffrey I. Badgley, A. Russell Chandler, III, Paul E. Drack, William G. Miller and Richard H. Roberts, the current members of the Board, for re-election as directors. Each such nominee has consented to be named herein and to serve as a director, if elected.
Unless contrary instructions are received, shares of Common Stock represented by duly executed proxies will be voted in favor of the election of each of the fivesix nominees named above to constitute the entire Board of Directors. The Board of Directors has no reason to expect that any nominee will be unable to serve and, therefore, at this time it does not have any substitute nominees under consideration.
Directors are elected by a plurality of the votes cast by holders of the shares of Common Stock entitled to vote at the Annual Meeting. Shareholders have no right to vote cumulatively for directors. Each shareholder shall have one vote for each director for each share of Common Stock held by such shareholder.
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Information concerning the nominees for election, based on data furnished by them, is set forth below. Currently, they are all directors of the Company. The Board of Directors has determined that Messrs. Ashford, Chandler, Drack and Roberts are independent directors under the listing standards of the New York Stock Exchange (“NYSE”).
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE FIVESIX DIRECTOR NOMINEES.
Information Regarding Nominees
Name of Director | Background Information | |
| Theodore H. Ashford, III | Mr. Ashford, 46, has served as a director of the Company since April 2010. Mr. Ashford has served as President and Chief Investment Officer of Ashford Capital Management, Inc. since October 2003. From 1993 to 2003, Mr. Ashford served as an investment analyst for Ashford Capital Management, Inc. Prior to 1993, Mr. Ashford worked for International Management Group. Mr. Ashford’s management experience brings valuable operations and leadership expertise to the Board of Directors. Additionally, Mr. Ashford has experience analyzing companies for investment purposes, including extensive international travel evaluating companies and markets around the world. Such investment advisory experience and financial analysis skills bring beneficial financial experience and a broad global perspective to the Board of Directors. | |
| Jeffrey I. Badgley | Mr. Badgley, With over twenty years of experience at the Company and over twenty-five years of experience in the towing and recovery equipment industry, Mr. Badgley provides essential insight and guidance to the Board of Directors from an inside perspective of the day-to-day operations of the Company and extensive experience and comprehensive knowledge of the towing industry. |
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| Name of Director | Background Information | |
| A. Russell Chandler, III | Mr. Chandler, | |
Mr. Chandler has founded and successfully managed several companies. He also has extensive experience in analyzing businesses for the purpose of making investments. Mr. Chandler’s more than thirty-five years of experience as a Chairman and/or Chief Executive Officer at various companies, including, among others, a private investment firm which he founded, brings key leadership, financial and operational experience to the Board of Directors. | ||
| Paul E. Drack | Mr. Drack, |
Mr. Drack’s extensive leadership experience in the manufacturing industry demonstrates his management capability and business insight. His experience with complex financial and operational issues in the manufacturing industry brings valuable financial, operational and strategic expertise to the Board of Directors.
| William G. Miller | Mr. Miller, As Chairman and Co-Chief Executive Officer, as well as the founder, of the Company and with over twenty years of experience at the Company, Mr. Miller has a deep knowledge and understanding of the Company, its operating companies and its line of business and brings that knowledge and understanding to the Board of Directors. Additionally, Mr. Miller’s experience in leadership positions at various companies prior to founding the Company brings valuable leadership expertise to the Board of Directors. |
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| Name of Director | Background Information | |
| Richard H. Roberts | Mr. Roberts, Mr. Roberts’ experience as a corporate attorney and an executive officer and general counsel of two public companies brings extensive legal, operational and public company finance experience to the Board of Directors. Additionally Mr. Roberts’ experience on the Board of Directors of companies in other industries demonstrates his leadership capability and broad knowledge of financial and operational issues that companies face. |
CORPORATE GOVERNANCE
Independence, Board Meetings and Related Information
Independence
The Board of Directors has determined that a majority of the members of the Board of Directors are “independent,” as “independent” is defined under applicable federal securities laws and the listing standards of the NYSE. The independent directors are Messrs. Ashford, Chandler, Drack and Roberts.
Meetings
The Board of Directors held sixfive meetings during 2008.2009. All incumbent directors attended more than 75% of the meetings of the Board of Directors and the respective committees of which they are members.members, excluding Mr. Ashford who was not a member of the Board of Directors during 2009. The non-management directors meet in executive session as a part of the meetings of the Audit Committee. The presiding director at those sessions is selected by the non-management directors on a meeting-by-meeting basis. The Company does not require its directors to attend its annual meeting of shareholders. In 2008,2009, two of the Company’s directors attended the annual meeting of shareholders in person, and the remaining three directors participated in the annual meeting by telephone.
Communication with Directors
Interested parties may communicate with any non-management director by mailing a communication to the attention of that director at 8503 Hilltop Drive, Ooltewah, Tennessee 37363.
Committees of the Board of Directors
The Board of Directors has standing Audit, Compensation and Nominating Committees. Generally, members of these committees are elected annually by the Board of Directors, but changes to the committees may be made at the Board of Directors’ discretion at any time. These committees operate pursuant to separate written charters adopted by the Board of Directors. These charters, along with the Company’s Corporate Governance Guidelines, are available on the Company’s website at www.millerind.com through the “Investor Relations” link. In addition, copies of these charters and guidelines can be obtained upon request from the Company’s Corporate Secretary.
Audit Committee
The Audit Committee is comprised of Messrs. Chandler, Drack and Roberts. The Board of Directors has determined that each of the members of the audit committee is “financially literate” within the meaning of the listing standards of the NYSE, and qualifies as an “audit committee financial expert” as defined by applicable SEC rules.
The Audit Committee, among other things, recommends the appointment of the Company’s independent public accountants, reviews the scope of audits proposed by the Company’s independent public accountants, reviews audit reports on various aspects of corporate operations, and periodically consults with the Company’s independent public accountants on matters relating to internal financial controls and procedures. The Audit Committee held four meetings during 2008.2009. The report of the Audit Committee is included in this proxy statement beginning on page 16.18.
Compensation Committee
The Compensation Committee is comprised of Messrs. Chandler, Drack and Roberts. The Compensation Committee establishes, among other things, salaries, bonuses and other compensation for the Company’s officers, and administers the Company’s stock option and other employee benefit plans. The Compensation Committee held threeone meetings during 2008.2009. The report of the Compensation Committee is included in this proxy statement beginning on page 10.12.
Nominating Committee
The Nominating Committee is comprised of Messrs. Chandler, Drack and Roberts. The Nominating Committee was established to evaluate candidates for service as directors of the Company and to conduct the Board’s annual self-assessment process. The Nominating Committee will consider candidates recommended by shareholders. Shareholder recommendations must comply with the procedures for director nominations set forth in Article I, Section 1.2, of the Company’s Bylaws and applicable law. The Nominating Committee held two meetings during 2008.2009.
Board Leadership Structure
The Board of Directors has determined that the Company is benefited by having Co-Chief Executive Officers one of whom also serves as Chairman of the Board. The Company currently has Co-Chief Executive Officers, Jeffrey I. Badgley and William G. Miller, both of whom have executive decision making power for the Company. Mr. Badgley focuses principally on the management of the day-to-day operations of the Company. Mr. Miller also serves as a Co-Chief Executive Officer and Chairman of the Board and focuses primarily on strategic issues the Company faces on an ongoing basis. Each of the standing committees of the Board of Directors, the Audit, Compensation and Nominating Committees, is chaired by an independent director and is comprised entirely of independent directors.
The Board of Directors believes that combining the position of Co-Chief Executive Officer and Chairman of the Board allows the Co-Chief Executive Officer to serve as a bridge between management and the Board, ensuring that both groups act with a common purpose. Mr. Miller, as Co-Chief Executive Officer, is one of the two individuals selected by the Board of Directors to manage the Company, and his direct involvement in the Company’s operations makes him well positioned to lead productive Board strategic planning sessions and determine the time allocated to each agenda item in discussions of the Company’s short- and long-term objectives.
Additionally, the Board has not appointed a lead independent director. Currently, the Board consists of six directors, four of whom are independent. Due to the small size of the Board, all of the independent directors are able to closely monitor the activities of the Company and meet regularly in executive sessions without management to discuss the development and strategy of the Company. These executive sessions allow the independent directors to review key decisions and discuss matters in a manner that is independent of our Co-Chief Executive Officers. Therefore, the Board has determined that a lead independent director is not necessary at this time. As the composition of the Board changes and/or grows in the future, the Board of Directors intends to reevaluate the need for a lead independent director.
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Risk Management
Management is responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. The Board believes that full and open communication between management and the Board of Directors is essential for effective risk management and oversight. The Board receives regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, strategic, competitive and reputational risks. Additionally, senior management is available to address any questions or concerns raised by the Board on risk management-related and any other matters.
While the Board is ultimately responsible for risk oversight at the Company, our three Board committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements, and, in accordance with the NYSE rules, discusses policies with respect to risk assessment and risk management. The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The Nominating and Governance Committee assists the Board in fulfilling its oversight responsibilit ies with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance.
Director Nominations
The Nominating Committee considers qualifications and characteristics that it, from time to time, deems appropriate when it selects individuals to be nominated for election to the Board of Directors. These qualifications and characteristics may include, without limitation, independence, integrity, business experience, education, accounting and financial expertise, age, diversity (including diversity of skills, background and experience), reputation, civic and community relationships and industry knowledge and experience. In addition, prior to nominating an existing director for re-election to the Board of Directors, the Nominating Committee will consider and review the existing director’s Board and committee attendance, performance and length of Board service. The composition of the current Boa rd of Directors reflects diversity in business and professional experience and skills.
Related Transactions and Business Relationships
Policy on Related Party Transactions
The Company recognizes that transactions between the Company or its subsidiaries and any of its directors or executive officers can present potential or actual conflicts of interest. Accordingly, as a general matter it is the Company’s preference to avoid such transactions. Nevertheless, the Company recognizes that there are circumstances where such transactions may be in, or not inconsistent with, the best interests of the Company. Therefore, the Company has adopted a formal policy that requires the Company’s Audit Committee to review and, if appropriate, approve or ratify any such transactions. Pursuant to the policy, the Committee will review any transaction in which the Company is or will be a participant and the amount involved exceeds $120,000, and in which any of the Company’sCom pany’s directors, executive officers or 5% shareholders had, has or will have a direct or indirect material interest. After its review, the Committee will only approve or ratify those transactions that are in, or are not inconsistent with, the best interests of the Company and its shareholders.
Certain Related Transactions and Business Relationships
In 2008,2009, the son of William G. Miller, the Company’s Chairman and Co-Chief Executive Officer and holder of approximately 4.13%4.12% of the Company’s Common Stock, was employed by a subsidiary of the Company as Vice President of Strategic Planning and Business DevelopmentSales – Southeast Region and received salary and bonus payments of $128,150.$159,208.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2009,2010, certain information with respect to the Common Stock beneficially owned by (i) each director or nominee for director, (ii) the executive officers named in the Summary Compensation Table, (iii) all executive officers and directors of the Company as a group, and (iv) all shareholders known to be beneficial owners (as that term is defined under SEC rules) of more than 5% of the Common Stock. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the Common Stock owned by them.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | |||||
| Directors and Executive Officers | |||||||
| A. Russell Chandler, III | 123,916 | (3) | 1.07% | ||||
| Paul E. Drack | 21,709 | * | |||||
| Richard H. Roberts | 17,776 | * | |||||
| William G. Miller | 479,619 | (4) | 4.13% | ||||
| Jeffrey I. Badgley | 25,000 | (5) | * | ||||
| Frank Madonia | 7,501 | (6) | * | ||||
| J. Vincent Mish | 21,101 | (7) | * | ||||
| All Directors and Executive Officers as a Group (7 persons) | 696,622 | (8) | 6.00% | ||||
| Beneficial Owners of More than 5% of the Common Stock | |||||||
Hotchkis and Wiley Capital Management, LLC 725 Figueroa Street, 39th Floor Los Angeles, CA 90017 | 2,088,598 | (9) | 17.99% | ||||
Amica Mutual Insurance Company 100 Amica Way Lincoln, RI 02865 | 1,064,194 | (10) | 9.17% | ||||
Morehead Opportunity Fund, LP 5151 Glenwood Avenue, Suite 300 Raleigh, NC 27612 | 595,053 | (11) | 5.13% | ||||
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership (1) | Percent of Class (2) | ||||||
Directors and Executive Officers | ||||||||
| Theodore H. Ashford, III | 0 | (3) | * | |||||
| A. Russell Chandler, III | 104,413 | (4) | * | |||||
| Paul E. Drack | 23,806 | * | ||||||
| Richard H. Roberts | 19,873 | * | ||||||
| William G. Miller | 479,619 | (5) | 4.12 | % | ||||
| Jeffrey I. Badgley | 55,000 | (6) | * | |||||
| Frank Madonia | 17,501 | (7) | * | |||||
| J. Vincent Mish | 31,101 | (8) | * | |||||
| All Directors and Executive Officers as a Group (8 persons) | 731,313 | (9) | 5.40 | % | ||||
Beneficial Owners of More than 5% of the Common Stock | ||||||||
Hotchkis and Wiley Capital Management, LLC 725 Figueroa Street, 39th Floor Los Angeles, CA 90017 | 1,497,298 | (10) | 12.87 | % | ||||
Amica Mutual Insurance Company 100 Amica Way Lincoln, RI 02865 | 733,590 | (11) | 6.30 | % | ||||
Rutabaga Capital Management 64 Broad Street, 3rd Floor Boston, MA 02109 | 710,878 | (12) | 6.11 | % | ||||
Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746 | 691,959 | (13) | 5.95 | % | ||||
| * | Less than one percent. |
| (1) | Includes shares of Common Stock that the named person or entity has the right to acquire beneficial ownership within 60 days of March 31, |
| (2) | The percentage of beneficial ownership is based on |
| (3) | Does not include 1,544 shares awarded to Mr. Ashford pursuant to the Company’s Non-Employee Director Stock Plan upon his election to the Board of Directors on April 1, 2010. |
| (4) | Includes |
| As reported in an amendment to Schedule 13D filed with the SEC on January 6, 2009. Does not include 900,000 shares owned by Mr. Miller’s adult children, |
| Includes 55,000 shares issuable pursuant to options that are exercisable within 60 days of March 31, 2010. |
| (7) | Includes 17,500 shares issuable pursuant to options that are exercisable within 60 days of March 31, 2010. |
| (8) | Includes 25,000 shares issuable pursuant to options that are exercisable within 60 days of March 31, |
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| Includes | |
| As reported in an amendment to Schedule 13G filed with the SEC on February |
| As reported in a Schedule 13G filed with the SEC on January 15, 2010, by Amica Mutual Insurance Company. |
| (12) | As reported in a Schedule 13G filed with the SEC on February |
| As reported in a Schedule |
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation Discussion and Analysis
Overview
This discussion and analysis addresses the material elements of the Company’s compensation program for named executive officers, including the Company’s compensation objectives and overall compensation philosophy, the compensation process and the administration of the compensation program. It is intended to complement and enhance an understanding of the compensation information presented in the “Summary Compensation Table” and other accompanying tables in this proxy statement.
As used in this proxy statement, the term “named executive officers” means the Company’s Chairman and Co-Chief Executive Officer; President and Co-Chief Executive Officer; Executive Vice President and Chief Financial Officer; and Executive Vice President, Secretary and General Counsel. In this “Compensation Discussion and Analysis” section, the terms “we,” “our,” “us” and the “Committee” refer to the Compensation Committee of the Company’s Board of Directors.
Compensation Objectives and Overall Compensation Philosophy
The Company’s executive compensation program is designed to enhance Company profitability, and thus shareholder value, by aligning executive compensation with the Company’s expectations and performance, and by establishing a system that can retain and reward executive officers who contribute to the long-term success of the Company. More specifically, the overall goals of the executive compensation program include:
| ● | offering competitive total compensation opportunities to retain talented executives; |
| ● | providing strong links between Company performance and total compensation earned – i.e., paying for performance; |
| ● | emphasizing the long-term performance of the Company, thus enhancing shareholder value; and |
| ● | promoting and facilitating stock ownership by executive officers. |
We believe that it is in the best interests of the Company’s shareholders and its named executive officers that the Company’s executive compensation program, and each of its elements, remain simple and straightforward. This approach should reduce the time and cost involved in setting the Company’s executive compensation policies and calculating the payments under such policies, and should enhance the transparency of, and the ability to comprehend, these policies.
Administration
The Committee has overall responsibility with respect to approving and monitoring the Company’s executive compensation program, and operates under a Charter that was approved by the Company’s Board of Directors in 2004. None of the members of the Committee has been an officer or employee of the Company, and the Board of Directors has considered and determined that all of the members are “independent,” as that term is defined under NYSE rules, and otherwise meet the criteria set forth in the Committee’s Charter.
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In fulfilling its responsibilities, the Committee, among other things, establishes and approves the compensation level of each of the named executive officers, reviews and approves corporate goals and objectives relevant to the compensation of the named executive officers, evaluates the performance of the named executive officers in light of these goals and objectives, determines and approves compensation based on these objectives and its evaluations, establishes criteria for granting stock options to the named executive officers and the Company’s other employees, considering the recommendations of senior management, and approves such stock option grants.
We regularly review and discuss the compensation of the named executive officers with William G. Miller, the Company’s Chairman and Co-Chief Executive Officer, and consult with Mr. Miller in evaluating the performance of the named executive officers. In addition, Mr. Miller may make recommendations to us regarding compensation for all of the named executive officers, other than for himself.
As discussed in greater detail below, the levels of each element of compensation for the named executive officers are determined based on several factors, which may include the Company’s historical performance and relative shareholder return, our informal assessment of compensation paid to executives in comparable industries, the amount and the elements of compensation provided in previous years, the terms of each named executive officer’s employment agreement with the Company, our expectations for the Company’s future financial performance and other matters that we deem relevant. In addition, we consider the level of experience and the responsibilities of each named executive officer, his performance and the personal contributions he makes to the success of the Company. Leadership skills, analyticalana lytical skills, organization development, public affairs and civic involvement have been and will continue to be deemed to be important qualitative factors to take into account in considering elements and levels of compensation. We have not adopted any formal or informal policy for allocating compensation between long-term and short-term elements, between cash and non-cash or among the different possible forms of non-cash compensation.
The continued deterioration of the U.S. and global economy, and the uncertainty that this creates for business planning purposes, impacted executive compensation decisions for 2009. In 2008,2009, the Company’s executive compensation program consisted primarily of three primary elements: base salary,salary. In addition, while the Company did not pay any annual discretionary cash performance bonuses (which are disclosedor grant any stock option awards in 2009, annual discretionary cash performance bonuses and stock options have historically been elements of the Company’s executive compensation program, and may again be elements of the Company’s executive compensation program in the “Summary Compensation Table” under the “Bonus” column) and stock option awards.future. In addition to these primary elements,base salary, the Company has provided, and will continue to provide, its named executive officers with certain benefits, such as healthcare plans, that are available to all employees.
Elements of Compensation
Base Salary. We determine the base salary for each of the named executive officers annually based on, among other things, his experience and the scope of his responsibilities, his performance and the performance of the Company, our expectations for the Company’s future financial performance and our informal assessment of salaries paid to executives in comparable industries. The minimum levels of some of these base salaries are mandated by employment agreements with the named executive officers (which are described in more detail below under the heading “Additional Discussion of Material Items in Summary Compensation Table―Table―Employment Agreements with Named Executive Officers”Officers”). We believe that base salaries are an important part of the Company’s executive compensation program because they provide the named executive officers with a steady income stream that is not contingentcontingent upon the Company’s overall performance.
For 2008 and continuing in 2009, the named executive officers voluntarily reduced their salaries as part of a broader set of company-wide cost-reduction measures undertaken at their direction. We considered this voluntary reduction,For 2009, taking into account the economic conditions and the Board’s expectations for the Company’s financial performance in addition to the other factors discussed above, in determininga difficult economic environment, the base salary for each named executive officer was increased only 1.5%, which is the same rate at which compensation for 2008. For 2008, Mr. Badgley’sall other domestic employees was increased in 2009. Beginning in November 2009, based on the improvement in economic conditions and our expectations for the Company’s financial performance for the remainder of 2009 and 2010 and in connection with the increase in base salaries for domestic salaried employees, the base salary fo r each named executive officer was reduced $27,333, Mr. Mish’srestored to the level of base salary that such named executive officer was reduced $17,333, and Mr. Madonia’s basepaid prior to the voluntary salary was reduced $19,417.reductions implemented in 2008 plus 1.5%. Under Mr. Miller’s employment agreement with the Company, Mr. Miller is entitled to receive a base salary that is substantially the same as the Company’s other Co-Chief Executive Officer; however, from 1999 through 2006 he declined increases to which he was entitled under his agreement. Effective July 2007, the Compensation Committee increased Mr. Miller’s salary to match the salary of the other Co-Chief Executive Officer in accordance with his employment agreement. For 2008,2009, Mr. Miller’s base salary was adjusted accordingly to match the 20082009 base salary for Mr. Badgley.
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Annual Discretionary Cash Bonuses. We utilize annual discretionary cash bonuses to provide additional compensation to the named executive officers, and to reward them for their performance. We have not adopted any formal or informal performance or other objectives for the calculation or payment of these discretionary bonuses. Instead, in determining an annual discretionary bonus, we consider, among other things, the Company’s performance for the previous year and relative shareholder value, discretionary bonuses awarded in previous years, the performance of the named executive officer and his personal contributions to the success of the Company.
Annual discretionary cash bonuses, as opposed to grants of stock options or other equity-based awards, are designed to provide additional compensation to the named executive officers, and to more immediately reward them for their performance. The immediacy of these bonuses provides an incentive to the named executive officers to raise their level of performance, and thus the Company’s overall level of performance. Thus, we believe that discretionary cash bonuses are an important motivating factor for the named executive officers.
Equity Awards. Although we did not award stock options to the named executive officers from 2005 through 2007 or in 2009, we consider equity-based awards to be an important part of the Company’s overall executive compensation philosophy. Historically, Mr. Miller has declined grants of equity awards from the Company.
Stock options and other equity-based awards provide the named executive officers with a strong link to the Company’s long-term performance, promote an ownership culture and more closely align the interest of the named executive officers and the Company’s shareholders. Equity incentive awards are granted under the Company’s 2005 Equity Incentive Plan. This plan provides us with broad discretion to fashion the terms of awards to provide eligible participants with such stock-based incentives as we deem appropriate. It permits the issuance of awards in a variety of forms, including non-qualified stock options and incentive stock options, stock appreciation rights, restricted stock awards and performance shares.
In general, options for the purchase of 500 or more shares vest in four equal annual installments, and all options for the purchase of fewer than 500 shares vest in two equal annual installments. All stock options are exercisable until the tenth anniversary of the grant date unless otherwise earlier terminated pursuant to the terms of the individual option agreement.
Severance and Change of Control Arrangements. As discussed in more detail in the “Additional“Additional Discussion of Material Items in Summary Compensation Table―Table―Employment Agreements with Named Executive Officers”Officers” and “Potential Payments Upon Termination or Change in Control” sections below, the named executive officers may bebe entitled to certain benefits upon the termination of their respective employment or change in control agreements.
Other Compensation. The named executive officers currently are entitled to participate in the Company’s health, life and disability insurance plans and in our 401(k) plan to the same extent that the Company’s employees are entitled to participate.
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained under that heading in this proxy statement. On the basis of its reviews and discussions, the Committee has recommended that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008,2009, and this proxy statement.
Compensation Committee
| Paul E. Drack A. Russell Chandler, III Richard H. Roberts |
Compensation Committee Interlocks and Insider Participation
During 2008,2009, the Compensation Committee was comprised of Messrs. Chandler, Drack and Roberts, all of whom were non-employee, independent directors. During 2008,2009, no executive officer of the Company served as a member of the board of directors or compensation committee of any other entity whose executive officer(s) served on the Company’s Board of Directors or Compensation Committee.
Summary Compensation Table
The following table sets forth the compensation awarded to, earned by, or paid by the Company during the years ended December 31, 2009, 2008 2007 and 2006,2007, respectively, to the Company’s Co-Chief Executive Officers, Chief Financial Officer and the Company’s other most highly compensated executive officer (who are referred to together as the Company’s named executive officers).
Name and Principal Position | Year | Salary (1) | Bonus (2) | Option Awards (3) | All Other Compensation | Total | ||||||||||||||||
| William G. Miller | 2009 | $ | 293,086 | (4) | $ | – | $ | – | $ | – | $ | 293,086 | ||||||||||
| Chairman and Co-Chief Executive Officer | 2008 | $ | 283,500 | (4) | $ | – | $ | – | $ | – | $ | 283,500 | ||||||||||
| 2007 | $ | 258,753 | (4) | $ | – | $ | – | $ | – | $ | 258,753 | |||||||||||
| Jeffrey I. Badgley | 2009 | $ | 294,286 | $ | 150 | $ | – | $ | 5,972 | (5) | $ | 300,408 | ||||||||||
| President and Co-Chief Executive Officer | 2008 | $ | 283,500 | $ | 47,150 | $ | 239,040 | $ | 7,138 | (5) | $ | 576,828 | ||||||||||
| 2007 | $ | 310,833 | $ | 69,250 | $ | – | $ | 7,484 | (5) | $ | 387,567 | |||||||||||
| Frank Madonia | 2009 | $ | 201,238 | $ | 150 | $ | – | $ | 5,972 | (5) | $ | 207,360 | ||||||||||
| Executive Vice President, Secretary and General Counsel | 2008 | $ | 193,500 | $ | 33,150 | $ | 79,680 | $ | 5,570 | (5) | $ | 311,900 | ||||||||||
| 2007 | $ | 212,917 | $ | 46,250 | $ | – | $ | 5,642 | (5) | $ | 264,809 | |||||||||||
| J. Vincent Mish | 2009 | $ | 201,238 | $ | 150 | $ | – | $ | 5,005 | (5) | $ | 206,393 | ||||||||||
| Executive Vice President, Treasurer and Chief Financial Officer | 2008 | $ | 193,500 | $ | 33,150 | $ | 79,680 | $ | 5,122 | (5) | $ | 311,452 | ||||||||||
| 2007 | $ | 210,833 | $ | 46,250 | $ | – | $ | 4,683 | (5) | $ | 261,766 | |||||||||||
Name and Principal Position | Year | Salary (1) | Bonus (2) | Option Awards (3) | All Other Compensation | Total | ||||||||||||||||
| William G. Miller | 2008 | $ | 283,500 | (4) | $ | – | $ | – | $ | – | $ | 283,500 | ||||||||||
| Chairman and Co-Chief Executive Officer | 2007 | $ | 258,753 | (4) | $ | – | $ | – | $ | – | $ | 258,753 | ||||||||||
| 2006 | $ | 180,007 | $ | – | $ | – | $ | – | $ | 180,007 | ||||||||||||
| Jeffrey I. Badgley | 2008 | $ | 283,500 | $ | 47,150 | $ | 32,592 | $ | 7,138 | (5) | $ | 370,380 | ||||||||||
| President and Co-Chief Executive Officer | 2007 | $ | 310,833 | $ | 69,250 | $ | 90,529 | $ | 7,484 | (5) | $ | 478,096 | ||||||||||
| 2006 | $ | 290,003 | $ | 60,600 | $ | 90,529 | $ | 5,629 | (5) | $ | 446,761 | |||||||||||
| Frank Madonia | 2008 | $ | 193,500 | $ | 33,150 | $ | 10,109 | $ | 5,570 | (5) | $ | 242,329 | ||||||||||
| Executive Vice President, Secretary and | 2007 | $ | 212,917 | $ | 46,250 | $ | 27,159 | $ | 5,642 | (5) | $ | 291,968 | ||||||||||
| General Counsel | 2006 | $ | 202,502 | $ | 40,600 | $ | 27,159 | $ | 4,564 | (5) | $ | 274,825 | ||||||||||
| J. Vincent Mish | 2008 | $ | 193,500 | $ | 33,150 | $ | 10,109 | $ | 5,122 | (5) | $ | 241,881 | ||||||||||
| Executive Vice President, Treasurer and | 2007 | $ | 210,833 | $ | 46,250 | $ | 27,159 | $ | 4,683 | (5) | $ | 288,925 | ||||||||||
| Chief Financial Officer | 2006 | $ | 190,002 | $ | 40,600 | $ | 27,159 | $ | 3,739 | (5) | $ | 261,500 | ||||||||||
| (1) | Base salary paid to the named executive officer. |
| (2) | Discretionary cash bonus awarded to the named executive officer based on, among other factors, the Company’s performance in the previous year. For 2009, the named executive officers received a nominal annual “holiday bonus” paid to all employees of the Company and no other discretionary cash bonus. |
| (3) | Amounts represent |
| (4) | Beginning in July 2007, the Compensation Committee determined to adjust Mr. Miller’s salary on a going-forward basis to match the salary of the other Co-Chief Executive Officer in accordance with Mr. |
| (5) | Amount represents the Company’s contribution to the named executive officer’s 401(k) plan under the plan’s matching program. No other amounts are indicated for perquisites and personal benefits as the value provided did not exceed $10,000. |
Name | Grant Date | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Option Awards | ||||||||||||
| William G. Miller | – | – | – | – | ||||||||||||
| Jeffrey I. Badgley | 11/07/2008 | 120,000 | $ | 5.49 | $ | 238,800 | ||||||||||
| Frank Madonia | 11/07/2008 | 40,000 | $ | 5.49 | $ | 79,600 | ||||||||||
| J. Vincent Mish | 11/07/2008 | 40,000 | $ | 5.49 | $ | 79,600 | ||||||||||
Additional Discussion of Material Items in Summary Compensation Table
The Company’s executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table was paid or awarded, are described above under “Compensation Discussion and Analysis.” A summary of certain material terms of the Company’s compensation plans and arrangements is set forth below.
Employment Agreements with Named Executive Officers
William G. Miller. In July 1997, the Company entered into an employment agreement with Mr. Miller which was amended and restated in December 2008. The employment agreement provides for a base salary as agreed to by the Company and Mr. Miller from time to time, but which shall in any event be substantially the same as the base salary of the Chief Executive Officer of the Company. Mr. Miller also receives certain insurance and other benefits as are generally provided by the Company to its executive employees. Mr. Miller’s employment agreement is for an indeterminate term and allows Mr. Miller to pursue other business related interests as long as they do not interfere with his duties for the Company. Employment may be terminated by either party upon three years’ written notice or for “cause,” as defined in the employment agreement.
Jeffrey I. Badgley and Frank Madonia. In September 1998, the Company entered into employment agreements with Messrs. Badgley and Madonia which were amended and restated in December 2008. Each employment agreement provides for a rolling three-year term, extended automatically each day for an additional day such that the remaining term of each employment agreement is three years. However, on each individual’s 62nd birthday, the employment agreement ceases to extend automatically, and instead terminates three years from that date. The employment agreementsag reements provide for base salaries that are subject to annual review and adjustment by the Board of Directors. Additionally, each individual may participate in any bonus plans or other benefits generally available to executive officers of the Company. The Company may terminate Messrs. Badgley or Madonia pursuant to their respective employment agreements for any reason upon written notice. However, if termination is for other than “just cause” (as defined in the employment agreements), the individual is entitled to certain benefits described under the heading “Potential Payments Upon Termination or Change in Control” below.
J. Vincent Mish. In December 2002, the Company entered into an employment agreement with Mr. Mish which was amended and restated in December 2008. The employment agreement provides for a rolling three-year term, extended automatically as of each annual shareholders’ meeting such that the remaining term of the employment agreement is three years as of that date. Notwithstanding the foregoing, the term of the agreement ends on Mr. Mish’s 65th birthday. The employment agreement provides for base salary that is subject to annual review and adjustmentadj ustment by the Board of Directors. Additionally, Mr. Mish may participate in any bonus plans or other benefits generally available to executive officers of the Company. The Company may terminate Mr. Mish pursuant to this employment agreement for any reason upon written notice. However, if termination is for other than “just cause” (as defined in the employment agreement), Mr. Mish is entitled to certain benefits described under the heading “Potential Payments Upon Termination or Change in Control” below.
2005 Equity Incentive Plan
The Company’s shareholder-approved 2005 Equity Incentive Plan is a flexible plan that provides the Compensation Committee with broad discretion to fashion the terms of awards to provide eligible participants with such equity-based incentives as the Committee deems appropriate. It permits the issuance of awards in a variety of forms, including non-qualified stock options and incentive stock options, stock appreciation rights, restricted stock awards and performance shares. During 2008, options to purchase an aggregate of 200,000 shares of Common Stock2009, no awards were granted to the Company’s named executive officers under the 2005 Equity Incentive Plan.
Contributory Retirement Plan
The Company maintains a contributory retirement plan for all full-time employees with at least 90 days of service. The plan is designed to provide tax-deferred income to the Company’s employees in accordance with the provisions of Section 401(k) of the Internal Revenue Code. The plan provides that each participant may contribute up to 15% of his or her salary. For 2008,2009, the Company matched 50% of the first 5% of participant contributions. Matching contributions vest over the first five years of employment.
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Outstanding Equity Awards at Fiscal Year-End 20082009
The following table provides information on the holdings of stock options by the named executive officers, including both unexercised and unvested awards, at December 31, 2008.
| Option Grant | Number of Shares Underlying Unexercised Options | Option | Option Expiration | |||||||||||||||||
| Name | Date (1) | Exercisable | Unexercisable | Exercise Price | Date | |||||||||||||||
| William G. Miller | – | – | – | $ | – | – | ||||||||||||||
| Jeffrey I. Badgley | 3/26/2004 | 25,000 | – | $ | 8.31 | 3/26/2014 | ||||||||||||||
| 11/07/2008 | – | 120,000 | 5.49 | 11/06/2018 | ||||||||||||||||
| Frank Madonia | 3/26/2004 | 7,500 | – | $ | 8.31 | 3/26/2014 | ||||||||||||||
| 11/07/2008 | – | 40,000 | 5.49 | 11/06/2018 | ||||||||||||||||
| J. Vincent Mish | 3/26/2004 | 15,000 | – | $ | 8.31 | 3/26/2014 | ||||||||||||||
| 11/07/2008 | – | 40,000 | 5.49 | 11/06/2018 | ||||||||||||||||
| Number of Shares Underlying | Option | |||||||||||||||||
| Option Grant | Unexercised Options | Option | Expiration | |||||||||||||||
| Name | Date (1) | Exercisable | Unexercisable | Exercise Price | Date | |||||||||||||
| William G. Miller | – | – | – | $ | – | – | ||||||||||||
| Jeffrey I. Badgley | 3/26/2004 | 25,000 | – | $ | 8.31 | 3/26/2014 | ||||||||||||
| 11/07/2008 | 30,000 | 90,000 | 5.49 | 11/06/2018 | ||||||||||||||
| Frank Madonia | 3/26/2004 | 7,500 | – | $ | 8.31 | 3/26/2014 | ||||||||||||
| 11/07/2008 | 10,000 | 30,000 | 5.49 | 11/06/2018 | ||||||||||||||
| J. Vincent Mish | 3/26/2004 | 15,000 | – | $ | 8.31 | 3/26/2014 | ||||||||||||
| 11/07/2008 | 10,000 | 30,000 | 5.49 | 11/06/2018 | ||||||||||||||
| (1) | Vesting for each listed stock option grant occurs in 25% increments on each yearly anniversary of the date of grant. |
Option Exercises and Stock Vested in 20082009
There were no stock options exercised by any of the named executive officers during 2008.2009.
Potential Payments Upon Termination or Change in Control
The Company is party to employment agreements with each of its named executive officers, and has also entered into change in control agreements with three of its named executive officers. Each of these employment and change in control agreements address, among other things, compensation and benefits that would be paid to the applicable named executive officer in the event that his employment is terminated for different reasons, including termination for cause or without cause, and termination in connection with a change in control.
Employment Agreements
William G. Miller. The Company’s employment agreement with Mr. Miller provides that either the Company or Mr. Miller may terminate the agreement for any reason upon three years’ prior notice, that Mr. Miller may terminate the agreement upon 60 days’ notice in the event of a change in control of the Company, and that the Company may terminate the agreement at any time for “cause,” or if Mr. Miller dies or becomes disabled. Under the employment agreement:
| ● | Upon any termination of Mr. Miller’s employment for “cause,” Mr. Miller will be entitled to receive all compensation due to him through his last day of employment. |
| ● | If Mr. Miller’s employment is terminated due to death or disability, the Company will have no further liability under the employment agreement. |
| ● | If Mr. Miller’s employment is terminated by the Company without “cause” without the required three |
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Under the employment agreements, “cause” means: (i) willful malfeasance or gross negligence; or (ii) knowingly engaging in wrongful conduct resulting in detriment to the goodwill of the Company or damage to the Company’s relationships with its customers, suppliers or employees. The employment agreement also provides for confidentiality during employment, and for non-competition during employment and for a three-year period from termination if the Company terminates the agreement for cause or Mr. Miller terminates his employment in breach of the agreement.
Jeffrey I. Badgley, Frank Madonia and J. Vincent Mish. The Company’s employment agreements with Messrs. Badgley, Madonia and Mish address the rights and obligations of the Company in connection with the termination of the executive’s employment in different situations including in connection with a change in control of the Company. Under each agreement:
| ● | Upon any termination of the executive’s employment, including if the executive terminates his employment voluntarily, or if the Company terminates the executive’s employment for “just cause,” the executive will be entitled to receive all compensation due to him through his last day of employment. |
| ● | If the executive’s employment is terminated due to death, the executive’s beneficiary will be entitled to receive, in one lump sum, an amount equal to: (i) 12 months of his then-current base salary; (ii) 12 months of the average monthly bonus earned by him for the three calendar years immediately preceding the year in which his employment is terminated; and (iii) a pro-rated bonus, based on the average monthly bonus earned by him for the three calendar years immediately preceding the year in which his employment is terminated, for the number of days he worked during the year in which his employment is terminated. |
| ● | If the executive’s employment is terminated due to disability, all of the executive’s outstanding stock options will vest and become exercisable, the executive (or his beneficiary) will be entitled to receive a lump sum pro-rated bonus (based on the average monthly bonus earned by him for the three calendar years immediately preceding the year in which his employment is terminated) for the number of days he worked during the year in which his employment is terminated, and the executive (or his beneficiary) will be entitled to receive, monthly over a period of 24 months from the last day of employment: (i) his then-current base salary; (ii) the average monthly bonus earned by him for the three calendar years immediately preceding the year in which his employment is terminated; and (iii) continued health and life insurance coverage. |
| ● | If the executive’s employment is terminated by the Company without “just cause,” or if the executive’s employment is terminated under circumstances that would entitle him to receive benefits under his change in control agreement (i.e., in connection with a change in control of the Company) with the Company, if any, all of the executive’s outstanding stock options will vest and become exercisable, the executive will be entitled to receive a lump sum pro-rated bonus (based on the average monthly bonus earned by him for the three calendar years immediately preceding the year in which his employment is terminated) for the number of days he worked during the year in which his employment is terminated, and the executive will be entitled to receive, monthly over the shorter of a 36-month period or the remaining term of the |
Under the employment agreements, “just cause” means: (i) executive’s material fraud, malfeasance, gross negligence or willful misconduct with respect to the business affairs of the Company which is directly or materially harmful to the business or reputation of the Company or its subsidiaries, and which is incapable of being remedied or not remedied within 30 days of notice from the Company; (ii) executive’s conviction of or failure to contest prosecution for a felony or a crime involving moral turpitude; or (iii) executive’s material breach of the employment agreement which is incapable of being remedied or not remedied within 30 days of notice from the Company.
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Each employment agreement also provides for non-competition and confidentiality during employment and for a period ending two years from termination or expiration of the employment agreement (or one year if termination occurs pursuant to a change in control).
Change in Control Agreements
In September 1998, the Company entered into change in control agreements with Messrs. Badgley and Madonia, and in December 2002, the Company entered into a change in control agreement with Mr. Mish. The change in control agreements with Messrs. Badgley, Madonia and Mish were amended and restated in December 2008. Under each agreement, if the executive’s employment is terminated within six months before, or 24 months after, a “change in control” of the Company, and the termination was either involuntary onby the part of the executiveCompany (other than for cause, disability or death), or “voluntary” on the part of the executive, then all of the executive’s outstanding stock options will vest and become exercisable, and the executive will be entitled to receive:
| ● | a lump sum payment equal to the present value of 36 months of: |
| his then-current base salary; and | |||
| the average monthly bonus earned by him for the three calendar years immediately preceding the year in which his employment is terminated; |
| ● | a lump sum pro-rated bonus, based on the average monthly bonus earned by him for the three calendar years immediately preceding the year in which his employment is terminated, for the number of days he worked during the year in which his employment is terminated, discounted to present value; and |
| ● | health and life insurance benefits over the shorter of a 36-month period or the remaining term of the employment agreement. | ||
However, any amounts paid under the change in control agreements will be reduced to the extent that the executive receives or is entitled to receive payments in respect of the change in control under the executive’s employment agreement. If the executive does not actually receive payments under the employment agreement, or the employment agreement is breached by the Company, payments will be made under the change in control agreement. Additionally, under the change in control agreements, the Company has agreed to provide the executive with a gross-up payment for federal and state income taxes and federal excise taxes imposed on any “excess parachute payment.”
Under the change in control agreements, “voluntary” termination by the executive means termination of employment that is voluntary on the part of the executive, and, in the judgment of the executive, is due to: (i) a reduction of the executive’s responsibilities, title or status resulting from a formal change in title or status, or from the assignment to the executive of any duties inconsistent with his title, duties or responsibilities in effect within the year prior to the change in control, (ii) a reduction in the executive’s compensation or benefits, or (iii) a Company-required involuntary relocation or the executive’s place of residence or a significant increase in the executive’s travel requirements.
Potential Payments
Assuming that a termination event or change in control occurred on December 31, 2008,2009, the value of potential payments and benefits payable to each named executive officer who was employed by the Company on such date is summarized in the following table. The price per share of Common Stock used for purposes of the following calculation is the closing market price on the NYSE as of December 31, 2008,2009, the last trading day in 2008,2009, which was $5.30.$11.35. The table excludes (i) amounts accrued through December 31, 20082009 that would be paid in the normal course of continued employment, such as accrued but unpaid salary, (ii) vested account balances in the Company’s contributory retirement plan that are generally available to all of the Company’s U.S. salaried employees, and (iii) any amounts to be provided under any arrangement that does not discriminate in scope, terms or operation in favor of named executive officers and that is available generally to all salaried employees. Actual amounts to be paid can only be determined at the time of such executive’s termination.
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Name and payment or benefit | Termination by Company without just cause | Involuntary termination by Company or “voluntary” termination by executive after change in control | Disability | Death | ||||||||||||
| William G. Miller | ||||||||||||||||
| Salary and bonus | $ | 850,500 | (1) | �� | $ | 850,000 | (1) | $ | – | $ | – | |||||
| Healthcare and life insurance coverage | 14,465 | (2) | 14,465 | (2) | – | – | ||||||||||
| Tax gross-up | – | 334,633 | (3) | – | – | |||||||||||
| Market value of stock options vesting on termination | – | – | – | – | ||||||||||||
| Jeffrey I. Badgley | ||||||||||||||||
| Salary and bonus | $ | 1,086,500 | (1) | $ | 1,086,500 | (1) | $ | 744,000 | (4) | $ | 401,500 | (5) | ||||
| Healthcare and life insurance coverage | 40,750 | (2) | 40,750 | (2) | 27,167 | (6) | – | |||||||||
| Tax gross-up | – | – | – | – | ||||||||||||
| Market value of stock options vesting on termination | 636,000 | 636,000 | 636,000 | 636,000 | ||||||||||||
| Frank Madonia | ||||||||||||||||
| Salary and bonus | $ | 740,500 | (1) | $ | 740,500 | (1) | $ | 507,000 | (4) | $ | 273,500 | (5) | ||||
| Healthcare and life insurance coverage | 28,507 | (2) | 28,507 | (2) | 19,005 | (6) | – | |||||||||
| Tax gross-up | – | – | – | – | ||||||||||||
| Market value of stock options vesting on termination | 212,000 | 212,000 | 212,000 | 212,000 | ||||||||||||
| J. Vincent Mish | ||||||||||||||||
| Salary and bonus | $ | 740,500 | (1) | $ | 740,500 | (1) | $ | 507,000 | (4) | $ | 273,500 | (5) | ||||
| Healthcare and life insurance coverage | 39,166 | (2) | 39,166 | (2) | 26,111 | (6) | – | |||||||||
| Tax gross-up | – | 269,435 | (3) | – | – | |||||||||||
| Market value of stock options vesting on termination | 212,000 | 212,000 | 212,000 | 212,000 | ||||||||||||
Name and payment or benefit | Termination by Company without just cause | Involuntary termination by Company or “voluntary” termination by executive after change in control | Disability | Death | ||||||||||||
| William G. Miller | ||||||||||||||||
| Salary and bonus | $ | 879,258 | (1) | $ | 879,258 | (1) | $ | – | $ | – | ||||||
| Healthcare and life insurance coverage | 15,782 | (2) | 15,782 | (2) | – | – | ||||||||||
| Market value of stock options vesting on termination | – | – | – | – | ||||||||||||
| Jeffrey I. Badgley | ||||||||||||||||
| Salary and bonus | $ | 1,038,258 | (1) | $ | 1,038,258 | (1) | $ | 705,122 | (3) | $ | 371,986 | (4) | ||||
| Healthcare and life insurance coverage | 42,068 | (2) | 42,068 | (2) | 28,045 | (5) | – | |||||||||
| Tax gross-up | – | – | – | – | ||||||||||||
| Market value of stock options vesting on termination | 1,021,500 | 1,021,500 | 1,021,500 | 1,021,500 | ||||||||||||
| Frank Madonia | ||||||||||||||||
| Salary and bonus | $ | 709,781 | (1) | $ | 709,781 | (1) | $ | 482,026 | (3) | $ | 254,271 | (4) | ||||
| Healthcare and life insurance coverage | 29,341 | (2) | 29,341 | (2) | 19,560 | (5) | – | |||||||||
| Tax gross-up | – | – | – | – | ||||||||||||
| Market value of stock options vesting on termination | 340,500 | 340,500 | 340,500 | 340,500 | ||||||||||||
| J. Vincent Mish | ||||||||||||||||
| Salary and bonus | $ | 709,781 | (1) | $ | 709,781 | (1) | $ | 482,026 | (3) | $ | 254,271 | (4) | ||||
| Healthcare and life insurance coverage | 40,158 | (2) | 40,158 | (2) | 26,772 | (5) | – | |||||||||
| Tax gross-up | – | – | – | – | ||||||||||||
| Market value of stock options vesting on termination | 340,500 | 340,500 | 340,500 | 340,500 | ||||||||||||
| (1) | Reflects the value of (i) monthly payments over the shorter of 36 months or the remaining term of the executive’s employment agreement of salary and average monthly bonus and (ii) a lump sum pro-rated bonus, based on average monthly bonus, for the number of days worked by the executive during the year in which his employment is terminated. |
| (2) | Reflects the employer share of premiums for continued healthcare and life insurance coverage for 36 months. |
| (3) | |
| Reflects the value of (i) monthly payments over 24 months of salary and average monthly bonus and (ii) a lump sum pro-rated bonus, based on average monthly bonus, for the number of days worked by the executive during the year in which his employment is terminated. |
| Reflects the value of a lump sum payment of (i) 12 months of salary and average monthly bonus and (ii) pro-rated bonus, based on average monthly bonus, for the number of days worked by the executive during the year in which his employment is terminated. |
| Reflects the employer share of premiums for continued healthcare and life insurance coverage for 24 months. |
