Employment, Severance and Change in Control Agreements
The Company has entered into employment agreements with each of the named executive officers. Each of Mr. Baurs and Mr. Cleys employment agreements, which were amended and restated as of June 30, 2008, is effective for a term ending on June 30, 2011, and, if a change in control occurs, their respective employment agreements will be effective until the later of June 30, 2011, or the first anniversary of the change in control. Mr. Benbeneks and Ms. Meades employment agreements are effective for a term ending June 30, 2009. Mr. Ellsworths employment agreement, which was amended and restated as of September 2, 2008, is
effective for a term ending September 2, 2010, and, if a change in control occurs, his employment agreement will be effective until the later of September 2, 2010, or the first anniversary of the change in control.
The current annual salaries of the executive officers pursuant to their employment agreements are as follows: Mr. Baur $750,000; Mr. Cleys $265,000; Mr. Benbenek $300,000; Ms. Meade $200,000; and Mr. Ellsworth $195,000.
The named executive officers employment may be terminated by the Company at any time for cause (as defined in their respective employment agreements) or for no reason, or by the executive with or without good reason (as defined in their respective employment agreements, which, with respect to Messrs. Baur, Cleys, Benbenek and Ellsworth and Ms. Meade, includes termination by the executive during the 60-day period beginning on the six-month anniversary of a change in control). The agreements will also terminate upon the death, disability or retirement of the executive. Depending on the reason for the termination and when
it occurs, the executive will be entitled to certain severance benefits, as described below.
If Mr. Baurs, Mr. Cleys or Mr. Ellsworths employment is terminated by the Company other than for cause, death, disability or retirement or if such officer resigns for good reason, the Company will be required to pay him his accrued salary, a pro rata annual bonus, and other accrued benefits through the date of termination. In addition, the Company will be required to pay him a severance amount equal to his highest combined base salary and annual bonus during the three full fiscal years prior to termination, multiplied by an applicable severance multiple. The severance multiple for Mr. Baur is the greater of (a) two, (b) the number
of full months then remaining until June 30, 2011, divided by 12, or (c) three, if the employment termination occurs within 12 months after or otherwise in contemplation of a change in control. The severance multiple for Mr. Cleys is the greater of (a) one, (b) the number of full months then remaining until June 30, 2011, divided by 12, or (c) two, if the employment termination occurs within 12 months after or otherwise in contemplation of a change in control. The severance multiple for Mr. Ellsworth is the greater of (a) one, or (b) two, if the employment termination occurs within 12 months after or otherwise in contemplation of a change in control. In addition, for up to 12 months following Mr. Cleys or Mr. Ellsworths termination from employment, or earlier if Mr. Cleys or Mr. Ellsworth becomes entitled to receive medical and dental insurance benefits under another group plan, the Company will be required to reimburse him on a monthly basis for payments made under COBRA
toward medical and dental insurance benefits that are in excess of the monthly rates paid by active employees of the Company for such benefits. If Mr. Baurs employment is terminated by the Company other than for cause, death, disability or retirement, or if he resigns for good reason, he and his dependents will receive continued medical, dental and prescription drug benefits until Mr. Baur reaches age 65, and then will receive MediGap coverage, to the extent available, until Mr. Baur reaches the age of 80.
With respect to Mr. Benbenek and Ms. Meade, if: (1) Mr. Benbeneks or Ms. Meades employment is terminated by the Company other than for cause, death, disability or retirement; (2) Mr. Benbenek or Ms. Meade terminates his or her employment for good reason within a period of 30 days after the occurrence of an event giving rise to good reason; (3) Mr. Benbeneks or Ms. Meades employment is terminated other than for cause, death, disability or retirement within 12 months after or in contemplation of a change in control of the Company; or (4) Mr. Benbeneks or Ms. Meades employment is terminated by the Company other than
for cause or disability within 60 days of June 30, 2009, then he or she will receive severance benefits that include, among other things, a lump sum cash payment equal to the sum of his or her salary earned through the date of termination (to the extent not already paid), unpaid incentive compensation earned to the date of termination, other accrued benefits through the date of termination, and an amount equal to the highest combined annual salary and incentive compensation earned by Mr. Benbenek or Ms. Meade from the Company, including any such amounts earned but deferred, in the three fiscal years prior to the date of termination. In such instances, the Company will also reimburse Mr. Benbenek and Ms. Meade for any COBRA
payments he or she makes in the 12 months following his or her termination date that are in excess of the monthly rates paid by active employees for medical and dental benefits, but only until such time as he or she becomes eligible to receive similar benefits under another group plan.
If Mr. Baurs, Mr. Cleys or Mr. Ellsworths employment is terminated by reason of his death, disability or retirement, he will be entitled to his accrued salary, a pro rata annual bonus and benefits through the date of termination and any death, disability or retirement benefits that may apply, but no additional severance amount. If the Company terminates Mr. Baur, Mr. Cleys or Mr. Ellsworth for cause, or if he resigns from the Company without good reason, he will be entitled to his accrued salary and benefits through the date of termination, but no additional severance amount. If Mr. Baurs employment is terminated by reason of
his disability or retirement, he and his dependents will receive continued medical, dental and prescription drug benefits until Mr. Baur reaches age 65, and then will receive MediGap coverage, to the extent available, until Mr. Baur reaches the age of 80. In addition, if Mr. Baurs employment is terminated by reason of his disability, the Company has agreed that Mr. Baur will, during the period that Mr. Baur receives benefits under the Companys short-term disability policy, if any, receive his annual salary per the Companys regular payroll cycle less any amounts he receives under the Companys short-term disability policy, and will also receive an annual payment of $60,000 until Mr. Baur is no longer considered disabled or until he attains age 65, whichever occurs earlier. If Mr. Baurs employment is terminated by reason of his death, his spouse will receive continued medical, dental and prescription drug benefits until Mr. Baur would have reached age 65, and
Mr. Baurs children who remain a tax dependent of Mr. Baurs spouse will receive the same until the earlier of their attainment of age 21, the ceasing of their tax dependent status, or their eligibility to receive medical benefits under another employer provided plan. If Mr. Baurs employment is terminated due to the normal expiration of his employment period or if his employment is terminated for other than cause, death, disability or retirement within 60 days after June 30, 2011, he will be entitled to his accrued salary and benefits through the date of termination, a pro-rata annual bonus, an amount equal to two times the highest combined annual salary and incentive compensation earned by Mr. Baur from the Company, including any such amounts earned but deferred, in the last three fiscal years prior to the date of termination, continued medical, dental and prescription drug benefits for Mr. Baur and his dependents until Mr. Baur reaches age 65, and MediGap coverage for
Mr. Baur and his dependents, to the extent available, until Mr. Baur reaches the age of 80.
If Mr. Cleys employment is terminated due to the normal expiration of his employment period or if his employment is terminated for other than cause, death, disability or retirement within 60 days after June 30, 2011, he will be entitled to accrued salary and benefits through the date of termination, a pro-rata annual bonus, and an amount equal to the highest combined annual salary and incentive compensation earned by Mr. Cleys from the Company, including any such amounts earned but deferred, in the last three fiscal years prior to the date of termination. If Mr. Ellsworths employment is terminated due to the normal expiration of his
employment period or if his employment is terminated for other than cause, death, disability or retirement within 60 days after September 2, 2010, he will be entitled to accrued salary and benefits through the date of termination, a pro-rata annual bonus, and an amount equal to the highest combined annual salary and incentive compensation earned by Mr. Ellsworth from the Company, including any such amounts earned but deferred, in the last three fiscal years prior to the date of termination.
With respect to Mr. Benbenek and Ms. Meade, if his or her employment is terminated by reason of his or her death, disability or retirement, he or she will be entitled to accrued salary, incentive compensation and benefits through the date of termination and any death, disability or retirement benefits that may apply, but no additional severance amount. If Mr. Benbeneks or Ms. Meades employment is terminated due to the normal expiration of his or her employment period or if his or her employment is terminated for other than cause or disability within 60 days after June 30, 2009, he or she will be entitled to accrued salary, incentive
compensation and benefits through the date of termination, and an amount equal to the highest combined annual salary and incentive compensation earned by Mr. Benbenek or Ms. Meade from the Company, including any such amounts earned but deferred, in the last three fiscal years prior to the date of termination.
Option Adjustments
As a result of the review by a Special Committee of independent directors of the Companys stock option granting practices, management determined that under applicable accounting principles, the appropriate measurement dates for certain stock option grants, the dates when necessary corporate action had been taken with
22
respect to such grants, differed from the dates previously recorded by the Company for financial accounting and tax purposes. In such instances the option exercise price was lower than it should have been based on the trading price on the date the grant process was completed. As a result these options were or may have been discount options potentially subject to Section 409A of the Internal Revenue Code (the Code).
Section 409A of the Code governs federal income tax treatment of deferred compensation arrangements. Among other things Section 409A established rules that may subject to tax certain options that were granted at a discount. Under Section 409A, any stock option that was granted at a discount and vested after December 31, 2004 is deemed to produce taxable income to the recipient at the time of vesting and is subject to additional tax at a 20% rate.
In September 2005, the Internal Revenue Service released guidance under Section 409A that provided transitional relief for individuals holding options. In the quarter ended December 31, 2007, the Company took advantage of this transitional relief and commenced a tender offer to cure the discounted options of unfavorable tax treatment. In connection with the tender offer, the Company offered to adjust the affected options to increase the option exercise price to the quoted market price on the revised grant date and to give option holders a cash payment for the difference in option exercise price between the amended option and the original
price.
Mr. Baur, Mr. Cleys, Mr. Benbenek and Ms. Meade named executive officers of the Company and executive officers of the Company at the time of the Companys tender offer, agreed to increase the exercise price of their options to the fair market value of the related shares on the date determined by the Company to be the appropriate measurement date to be used in accounting for the option awards in the Companys restatement of its financial statements (where the market price on such date was higher than the exercise price at which the option was awarded). All other terms of such options held by Mr. Baur and Mr. Cleys remained the same. The
following table reflects the amended options held by Mr. Baur, Mr. Cleys Mr. Benbenek, Ms. Meade and Mr. Ellsworth. Mr. Ellsworth was not an executive officer at the time of the Companys tender offer. Mr. Ellsworth participated in the tender offer by the Company in the quarter ended December 31, 2007.
23
2008 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table provides information concerning option awards that were outstanding as of June 30, 2008 for each of the Companys named executive officers. The Companys named executive officers do not hold any stock awards.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
Name
|
|
Exercisable
|
|
Unexercisable
|
Michael L. Baur
|
|
|
97,603
|
|
|
|
|
|
|
|
10.56
|
|
|
|
12/6/2009
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
9.42
|
|
|
|
12/20/2010
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
11.97
|
|
|
|
12/3/2011
|
|
|
|
|
34,224
|
|
|
|
|
|
|
|
12.68
|
|
|
|
1/2/2013
|
|
|
|
|
53,334
|
|
|
|
26,666
|
|
|
|
27.48
|
|
|
|
1/5/2016
|
|
|
|
|
33,334
|
|
|
|
66,666
|
|
|
|
32.13
|
|
|
|
6/20/2017
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
36.69
|
|
|
|
12/7/2017
|
|
Richard P. Cleys
|
|
|
26,666
|
|
|
|
|
|
|
|
15.88
|
|
|
|
11/12/2012
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
23.33
|
|
|
|
1/2/2014
|
|
|
|
|
6,668
|
|
|
|
|
|
|
|
33.92
|
|
|
|
1/5/2015
|
|
|
|
|
5,333
|
|
|
|
2,667
|
|
|
|
29.44
|
|
|
|
1/5/2016
|
|
|
|
|
2,667
|
|
|
|
5,333
|
|
|
|
32.13
|
|
|
|
6/20/2017
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
36.69
|
|
|
|
12/7/2017
|
|
R. Scott Benbenek
|
|
|
13,086
|
|
|
|
|
|
|
|
8.41
|
|
|
|
10/18/2009
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
9.31
|
|
|
|
12/20/2010
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
10.62
|
|
|
|
12/3/2011
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
12.68
|
|
|
|
1/2/2013
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
14.16
|
|
|
|
1/2/2013
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
24.73
|
|
|
|
1/2/2014
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
33.92
|
|
|
|
1/5/2015
|
|
|
|
|
5,333
|
|
|
|
2,667
|
|
|
|
29.44
|
|
|
|
1/5/2016
|
|
|
|
|
10,001
|
|
|
|
19,999
|
|
|
|
32.13
|
|
|
|
6/20/2017
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
36.69
|
|
|
|
12/7/2017
|
|
Andrea D. Meade
|
|
|
2,000
|
|
|
|
|
|
|
|
14.16
|
|
|
|
1/2/2013
|
|
|
|
|
4,400
|
|
|
|
|
|
|
|
24.73
|
|
|
|
1/2/2014
|
|
|
|
|
4,400
|
|
|
|
|
|
|
|
33.92
|
|
|
|
1/5/2015
|
|
|
|
|
2,933
|
|
|
|
1,467
|
|
|
|
29.44
|
|
|
|
1/5/2016
|
|
|
|
|
6,001
|
|
|
|
11,999
|
|
|
|
32.13
|
|
|
|
6/20/2017
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
36.69
|
|
|
|
12/7/2017
|
|
John J. Ellsworth
|
|
|
2,400
|
|
|
|
|
|
|
|
24.73
|
|
|
|
1/2/2014
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
33.92
|
|
|
|
1/5/2015
|
|
|
|
|
1,333
|
|
|
|
667
|
|
|
|
29.44
|
|
|
|
1/5/2016
|
|
|
|
|
1,334
|
|
|
|
2,666
|
|
|
|
32.13
|
|
|
|
6/20/2017
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
36.69
|
|
|
|
12/7/2017
|
|
|
(1)
|
Stock options vest in equal installments on the first three anniversaries of the grant date.
|
24
2008 OPTION EXERCISES AND STOCK VESTED TABLE
The following table provides information concerning option exercises during the year ending June 30, 2008 for each of the Companys named executive officers. The Companys named executive officers do not hold any stock awards.
|
|
|
|
|
|
|
Option Awards
|
Name
|
|
Number of
Shares
Acquired on
Exercise
(#)
|
|
Value
Realized on
Exercise
($)
|
Michael L. Baur
|
|
|
210,008
|
|
|
|
3,514,528
|
|
Richard P. Cleys
|
|
|
10,000
|
|
|
|
107,400
|
|
R. Scott Benbenek
|
|
|
32,652
|
|
|
|
1,018,625
|
|
Andrea D. Meade
|
|
|
|
|
|
|
|
|
John J. Ellsworth
|
|
|
|
|
|
|
|
|
2008 NONQUALIFIED DEFERRED COMPENSATION TABLE
The following table provides information regarding the accounts of the named executive officers under the Companys Nonqualified Deferred Compensation Plan.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
Contributions in Last Fiscal Year
($)
(1)
|
|
Registrant
Contributions in
Last Fiscal Year
($)
(2)
|
|
Aggregate
Earnings in
Last Fiscal Year
($)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance at
Last Fiscal
Year-End
($)
|
Michael L. Baur
|
|
|
400,000
|
|
|
|
200,000
|
|
|
|
(155,351
|
)
|
|
|
|
|
|
|
1,705,328
|
|
Richard P. Cleys
|
|
|
57,025
|
|
|
|
14,145
|
|
|
|
(15,860
|
)
|
|
|
|
|
|
|
176,372
|
|
R. Scott Benbenek
|
|
|
86,209
|
|
|
|
25,863
|
|
|
|
(29,556
|
)
|
|
|
|
|
|
|
298,850
|
|
Andrea D. Meade
|
|
|
49,355
|
|
|
|
14,806
|
|
|
|
(7,283
|
)
|
|
|
|
|
|
|
140,379
|
|
John J. Ellsworth
|
|
|
16,474
|
|
|
|
4,942
|
|
|
|
(720
|
)
|
|
|
|
|
|
|
20,696
|
|
|
(1)
|
Amounts represent voluntary deferrals of salary, bonus, or a combination of both salary and bonus under the Companys Nonqualified Deferred Compensation Plan. Contributions of deferred salary are reported as fiscal year 2008 income in the Salary column of the 2008 Summary Compensation Table.
|
|
(2)
|
Amounts represent Company matching contributions under the Companys Nonqualified Deferred Compensation Plan. These amounts are reported as fiscal year 2008 income in the All Other Compensation column of the 2008 Summary Compensation Table.
|
The Companys Nonqualified Deferred Compensation Plan permits the named executive officers to elect to defer a portion of their base salary and incentive bonus, and to receive company matching contributions on a portion of the deferred amounts. Mr. Baur may defer up to 50% of his base salary and bonus, and the Company will provide a matching contribution of 50% of the amount deferred, subject to a $300,000 annual limit. The other named executive officers may defer up to 25% of their base salary and bonus, and the Company will provide a matching contribution of 30% of the first 15% of salary and bonus deferred. Company matching contributions are
50% vested after three years of continued service following the contribution, 75% vested after 4 years of continued service, and 100% vested after five years of continued service.
Deferred amounts are credited to each participants account, which is indexed to one or more investment alternatives chosen by each participant from a range of mutual fund offerings and other investments available under the plan. Each participants account is adjusted to reflect the investment performance of the selected investments. Benefits under the plan are payable in cash and generally will be paid in either a lump-sum or in annual installments over a certain term upon retirement, death or other termination of employment, or upon a change in control of the Company, as elected in advance by the participant. A participant may also elect
to receive some or all of the deferred amounts and related earnings pursuant to an in-service distribution, subject to a minimum five-year deferral.
25
2008 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table summarizes the value of the termination payments and benefits that the Companys named executive officers would receive if they had terminated employment on June 30, 2008 under the circumstances shown. The amounts shown in the table exclude distributions under the Companys 401(k) retirement plan and any additional benefits that are generally available to all of the Companys salaried employees. For more information regarding the named executive officers' employment agreements, see Employment, Severance and Change in Control Agreements in this Proxy Statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before
Change in
Control
|
|
After
Change in
Control
|
|
|
|
|
|
|
Name
|
|
Benefit
|
|
Termination
w/o Cause or
for
Good Reason
($)
|
|
Termination
w/o Cause or
for
Good Reason
($)
|
|
Termination
Due to Death
or
Retirement
($)
|
|
Termination
Due to
Disability
($)
|
|
Voluntary
Termination
($)
|
Michael L. Baur
|
|
|
Severance
(1)
|
|
|
|
4,372,416
|
|
|
|
6,558,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus
(2)
|
|
|
|
1,486,208
|
|
|
|
1,486,208
|
|
|
|
1,486,208
|
|
|
|
1,486,208
|
|
|
|
|
|
|
|
|
Equity Acceleration
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
(4)
|
|
|
|
333,000
|
|
|
|
333,000
|
|
|
|
333,000
|
|
|
|
333,000
|
|
|
|
|
|
|
|
|
Deferred Compensation
(5)
|
|
|
|
|
|
|
|
1,705,328
|
|
|
|
1,705,328
|
|
|
|
1,705,328
|
|
|
|
1,705,328
|
|
|
|
|
Special Disability Benefit
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,190,000
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
6,191,624
|
|
|
|
10,083,160
|
|
|
|
3,524,536
|
|
|
|
4,714,536
|
|
|
|
1,705,328
|
|
Richard P. Cleys
|
|
|
Severance
(1)
|
|
|
|
350,376
|
|
|
|
700,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus
(2)
|
|
|
|
77,876
|
|
|
|
77,876
|
|
|
|
77,876
|
|
|
|
77,876
|
|
|
|
|
|
|
|
|
Equity Acceleration
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
(4)
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
|
|
|
|
|
Deferred Compensation
(5)
|
|
|
|
|
|
|
|
176,372
|
|
|
|
176,372
|
|
|
|
176,372
|
|
|
|
176,372
|
|
|
|
|
Total
|
|
|
|
434,707
|
|
|
|
961,455
|
|
|
|
260,703
|
|
|
|
260,703
|
|
|
|
176,372
|
|
R. Scott Benbenek
|
|
|
Severance
(1)
|
|
|
|
637,725
|
|
|
|
637,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus
(2)
|
|
|
|
334,648
|
|
|
|
334,648
|
|
|
|
334,648
|
|
|
|
334,648
|
|
|
|
|
|
|
|
|
Equity Acceleration
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
(4)
|
|
|
|
3,913
|
|
|
|
3,913
|
|
|
|
3,913
|
|
|
|
3,913
|
|
|
|
|
|
|
|
|
Deferred Compensation
(5)
|
|
|
|
|
|
|
|
298,850
|
|
|
|
298,850
|
|
|
|
298,850
|
|
|
|
298,850
|
|
|
|
|
Total
|
|
|
|
976,286
|
|
|
|
1,275,136
|
|
|
|
637,411
|
|
|
|
637,411
|
|
|
|
298,850
|
|
Andrea D. Meade
|
|
|
Severance
(1)
|
|
|
|
441,877
|
|
|
|
441,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus
(2)
|
|
|
|
239,463
|
|
|
|
239,463
|
|
|
|
239,463
|
|
|
|
239,463
|
|
|
|
|
|
|
|
|
Equity Acceleration
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
(4)
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
|
|
|
|
|
Deferred Compensation
(5)
|
|
|
|
|
|
|
|
140,379
|
|
|
|
140,379
|
|
|
|
140,379
|
|
|
|
140,379
|
|
|
|
|
Total
|
|
|
|
687,795
|
|
|
|
828,174
|
|
|
|
386,297
|
|
|
|
386,297
|
|
|
|
140,379
|
|
John J. Ellsworth
|
|
|
Severance
(1)
|
|
|
|
201,453
|
|
|
|
402,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Rata Bonus
(2)
|
|
|
|
29,126
|
|
|
|
29,126
|
|
|
|
29,126
|
|
|
|
29,126
|
|
|
|
|
|
|
|
|
Equity Acceleration
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Coverage
(4)
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
6,455
|
|
|
|
|
|
|
|
|
Deferred Compensation
(5)
|
|
|
|
|
|
|
|
20,696
|
|
|
|
20,696
|
|
|
|
20,696
|
|
|
|
20,696
|
|
|
|
|
Total
|
|
|
|
237,034
|
|
|
|
459,183
|
|
|
|
56,277
|
|
|
|
56,277
|
|
|
|
20,696
|
|
|
(1)
|
Employment agreements with the named executive officers provide that if the executives employment is terminated by the Company other than for cause, death, disability or retirement or by the executive for good reason (as defined in the employment agreements), the executive will receive a lump sum severance payment equal to a multiple of the executives highest combined base salary and annual bonus earned in the last three full fiscal years prior to the date of termination. For Mr. Baur, the severance multiple is the
|
26
|
|
higher of (a) two, (b) the number of months remaining between the date of termination and June 30, 2011, divided by 12, or (c) three, if the date of termination occurs within 12 months of a change in control of the Company. For Mr. Cleys, the severance multiple is the higher of (a) one, (b) the number of months remaining between the date of termination and June 30, 2011, divided by 12, or (c) two, if the date of termination occurs within 12 months of a change in control of the Company. For Mr. Benbenek and Ms. Meade, the severance multiple is one. For Mr. Ellsworth, the severance multiple is the higher of (a) one, or (b) two, if the date of termination occurs within 12 months of a change in control of the Company.
|
|
(2)
|
Employment agreements with Mr. Baur, Mr. Cleys and Mr. Ellsworth provide for the payment of a pro rata portion of the current fiscal year annual bonus that would otherwise be payable if Mr. Baur, Mr. Cleys, or Mr. Ellsworth had continued employment through the end of the current fiscal year, based on actual Company performance. Employment agreements with Mr. Benbenek and Ms. Meade provide for a pro rata bonus payment based on the number of days elapsed in the current fiscal year through the date of termination less any bonus payments already received for that period. Amounts shown reflect 100% of the executives annual bonus earned for fiscal year 2008, as reported in the 2008 Summary Compensation Table.
|
|
(3)
|
As of June 30, 2008, all unvested shares were in a deficit position when compared to the exercise price, therefore no value is associated with this benefit.
|
|
(4)
|
Reflects the cost of providing continued health and welfare benefits to the executive as provided in the executives employment agreement.
|
|
(5)
|
Reflects payout of the executives balance under the Companys Nonqualified Deferred Compensation Plan, which is reflected and described in the Nonqualified Deferred Compensation Table in this Proxy Statement.
|
|
(6)
|
Mr. Baurs employment agreement provides that if his employment is terminated by reason of disability, he will continue to receive his salary during the period under which he continues to receive benefits under the Companys short-term disability policy (assumed to be six months for purposes of this disclosure) and he will receive an annual payment of $60,000 until he is no longer considered to be disabled or until he reaches age 65, whichever occurs earlier.
|
2008 DIRECTOR COMPENSATION TABLE
The following table provides information regarding the compensation paid to each of the Companys non-employee directors for the fiscal year ended June 30, 2008.
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
Stock Awards
($)
(1)
|
|
Total
($)
|
James G. Foody
|
|
|
102,000
|
|
|
|
80,718
|
|
|
|
182,718
|
|
Steven R. Fischer
|
|
|
75,000
|
|
|
|
80,718
|
|
|
|
155,718
|
|
Michael J. Grainger
|
|
|
106,500
|
|
|
|
80,718
|
|
|
|
187,218
|
|
John P. Reilly
|
|
|
76,000
|
|
|
|
80,718
|
|
|
|
156,718
|
|
|
(1)
|
Reflects the grant date fair value of stock awards recognized by the Company as an expense in fiscal year 2008 for financial statement reporting purposes, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The fair values of these awards and the amounts expensed in 2008 were determined in accordance with FAS 123R. Each non-employee director held 4,900 restricted shares as of June 30, 2008. The total number of stock options held by each of the directors as of June 30, 2008 was: Mr. Foody, 25,200; Mr. Fischer, 86,600; Mr. Grainger, 13,800; and Mr. Reilly, 64,600.
|
Compensation of Directors
Directors who are not employees of the Company are paid an annual retainer of $50,000. An additional annual retainer of $30,000 is paid, as applicable, to a non-executive Chairman (or Acting Chairman) of the Board of Directors. An additional annual retainer of $25,000 is paid to the chairman of the Audit Committee. Additional annual retainers of $2,000 are paid to the chairmen of the Compensation Committee, Nominating Committee and Governance Committee. Annual service for this purpose relates to the approximate 12-month
27
periods between annual meetings of the Companys shareholders. Non-employee directors also receive meeting fees of $750 for each board meeting attended; $1,000 for each Audit Committee meeting attended; and $500 for each other stand-alone committee meeting attended.
In fiscal 2007, the Directors Equity Compensation Plan was amended and restated to provide that non-employee directors will receive annual awards of restricted stock, as opposed to stock options. Under the Amended and Restated Directors Equity Compensation Plan (the Amended and Restated Directors Plan), on the day following each annual meeting of shareholders each non-employee director will receive an award of restricted stock, with the number of shares of restricted stock determined by dividing $80,000 by the fair market value of the Common Stock on the date of grant. A person who first becomes a non-employee director
on a date other than a regularly scheduled annual meeting of shareholders will receive a restricted stock award for a prorated number of shares of Common Stock. Restricted stock may not be transferred or sold until it has vested. Restricted stock granted under the Amended and Restated Directors Plan will vest in full on the day that is six months after the date of grant, or upon the earlier occurrence of (i) the directors termination of service as a director by reason of death, disability or retirement, or (ii) a change in control of the Company. If a director terminates service for any other reason, he or she will forfeit all of his or her right, title and interest in and to the restricted stock as of the date of termination. As of June 30, 2008, there were 148,800 shares available for grant under the Amended and Restated Directors Plan.
All directors are reimbursed for their expenses incurred in connection with the performance of their services as directors.
28
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2008 and this Proxy Statement for filing with the Securities and Exchange Commission.
|
|
|
|
|
Compensation Committee:
|
|
|
Steven R. Fischer
James G. Foody
Michael J. Grainger
John P. Reilly (Chairman)
|
This report shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under such acts.
29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policy and Procedures
The Audit Committee reviews all related party transactions as defined by Item 404 of the SECs Regulation S-K in accordance with NASDAQ listing standards. In addition, the charter of the Audit Committee requires the Audit Committee to review a summary of any director's or officer's related party transactions and potential conflicts of interest on a yearly basis. The charter also requires the Audit Committee to review the Companys conflict of interest policy (which is part of the Companys Code of Conduct) and compliance with that policy on an annual basis.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of the Companys Common Stock at October 15, 2008 of: (i) each person known by the Company to beneficially own five percent or more of the Common Stock; (ii) each director of the Company, (iii) each Named Executive Officer; and (iv) all directors and executive officers of the Company, as a group.
|
|
|
|
|
|
|
Shares Beneficially
Owned
(1)
|
Name
|
|
Number
|
|
Percentage
|
Lord, Abbett & Co. LLC
(2)
|
|
|
4,539,843
|
|
|
|
17.2
|
%
|
FMR LLC
(3)
|
|
|
3,299,700
|
|
|
|
12.5
|
%
|
First Pacific Advisors, LLC
(4)
|
|
|
2,270,600
|
|
|
|
8.6
|
%
|
Kayne Anderson Rudnick Investment Management, LLC
(5)
|
|
|
2,135,575
|
|
|
|
8.1
|
%
|
Barclays Global Investors NA
(6)
|
|
|
1,304,952
|
|
|
|
4.9
|
%
|
Eaton Vance Management
(7)
|
|
|
1,290,304
|
|
|
|
4.9
|
%
|
Michael L. Baur
(8)
|
|
|
496,437
|
|
|
|
1.9
|
%
|
R. Scott Benbenek
(9)
|
|
|
104,034
|
|
|
|
*
|
|
Steven R. Fischer
(10)
|
|
|
102,867
|
|
|
|
*
|
|
James G. Foody
(11)
|
|
|
95,150
|
|
|
|
*
|
|
John P. Reilly
(12)
|
|
|
69,500
|
|
|
|
*
|
|
Richard P. Cleys
(13)
|
|
|
49,001
|
|
|
|
*
|
|
Michael J. Grainger
(14)
|
|
|
18,700
|
|
|
|
*
|
|
Andrea D. Meade
(15)
|
|
|
24,190
|
|
|
|
*
|
|
John J. Ellsworth
(16)
|
|
|
10,497
|
|
|
|
*
|
|
All directors and executive officers as a group (9 persons)
|
|
|
|
|
|
|
4.0
|
%
|
|
*
|
Amount represents less than 1.0%.
|
|
(1)
|
Applicable percentage of ownership is based upon 26,411,018 shares of Common Stock outstanding on October 15, 2008. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to shares shown as beneficially owned. Shares of Common Stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the shares and percentage ownership of the person holding such options, but are not deemed outstanding for computing the percentage ownership of any other person or entity. Except as otherwise indicated, the persons or entities listed in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them.
|
|
(2)
|
A Schedule 13G/A filed with the SEC reflects that Lord Abbett & Co. LLC is the beneficial owner of the indicated shares as of December 31, 2007, including 4,065,878 shares as to which it held sole voting power and as to all of which it held sole investment power. The business address of the named shareholder is 90 Hudson Street, Jersey City, New Jersey 07302.
|
|
(3)
|
A Schedule 13G/A filed with the SEC reflects that FMR LLC is the ultimate parent company of a variety of companies engaged in the securities business and was, along with certain related persons, the beneficial owner of the indicated shares as of December 31, 2007, including 525,000 shares as to which it held sole voting power and as to all of which it held sole investment power. The business address of the named shareholder is 82 Devonshire Street, Boston, Massachusetts 02109.
|
30
|
(4)
|
A Schedule 13G filed with the SEC reflects that First Pacific Advisors, LLC is the beneficial owner of the indicated shares as of December 31, 2007, including 89,400 shares as to which it held shared voting power and as to all of which it held shared investment power. The business address of the named shareholder is 11400 West Olympic Boulevard, Suite 1200, Los Angeles, California 90064.
|
|
(5)
|
A Schedule 13G/A filed with the SEC reflects that Kayne Anderson Rudnick Investment Management, LLC is the beneficial owner of the indicated shares as of December 31, 2007, as to all of which it held sole voting power and sole investment power. The business address of the named shareholder is 1800 Avenue of the Stars, 2nd Floor, Los Angeles, California 90067.
|
|
(6)
|
A Schedule 13G filed with the SEC reflects that Barclays Global Investors, NA (BGI) and its affiliates are the beneficial owners of the indicated shares as of December 31, 2007, including 455,504 of such shares as to which BGI held sole voting power, 545,023 of such shares as to which BGI held sole dispositive power; 517,755 of such shares as to which Barclays Global Fund Advisors held sole voting power, 733,474 as to which Barclays Global Fund Advisors held sole dispositive power; and 26,455 of such shares as to which Barclays Global Investors, LTD held sole dispositive power. The business address of BGI and Barclays Global Fund Advisors is 45 Fremont Street, San Francisco, California 94105 and the business address of Barclays Global Investors, LTD is 1 Royal Mint Court, London, EC3N 4HH.
|
|
(7)
|
A Schedule 13G/A filed with the SEC reflects that Eaton Vance Management is the beneficial owner of the indicated shares as of December 31, 2007, as to all of which it held sole voting power and sole investment power. The business address of the named shareholder is 255 State Street, Boston Massachusetts 02109.
|
|
(8)
|
Includes 361,829 shares issuable pursuant to exercisable options and options which will become exercisable by December 14, 2008 which were granted by the Company. Does not include 159,998 shares issuable pursuant to options granted by the Company which are not currently exercisable or will not become exercisable by December 14, 2008. 106,000 shares are pledged as security.
|
|
(9)
|
Includes 73,087 shares issuable pursuant to exercisable options and options which will become exercisable by December 14, 2008 granted by the Company. Does not include 35,999 shares issuable pursuant to options granted by the Company which are not currently exercisable or will not become exercisable by December 14, 2008.
|
|
(10)
|
Includes 86,600 shares issuable pursuant to exercisable options which were granted by the Company and includes 6,200 shares owned by a member of Mr. Fischers household.
|
|
(11)
|
Includes 25,200 shares issuable pursuant to exercisable options which were granted by the Company, and includes 4,850 shares owned by Mr. Foodys wife.
|
|
(12)
|
Includes 64,600 shares issuable pursuant to exercisable options which were granted by the Company. 4,900 shares are pledged as security.
|
|
(13)
|
Represents shares issuable pursuant to exercisable options and options which will become exercisable by December 14, 2008 which were granted by the Company. Does not include 13,333 shares issuable pursuant to options granted by the Company which are not currently exercisable or will not become exercisable by December 14, 2008.
|
|
(14)
|
Includes 13,800 shares issuable pursuant to exercisable options which were granted by the Company.
|
|
(15)
|
Includes 23,068 shares issuable pursuant to exercisable options and options which will become exercisable by December 14, 2008 which were granted by the Company. Does not include 20,132 shares issuable pursuant to options granted by the Company which are not currently exercisable or will not become exercisable by December 14, 2008.
|
|
(16)
|
Includes 8,401 shares issuable pursuant to exercisable options and options which will become exercisable by December 14, 2008 which were granted by the Company. Does not include 5,999 shares issuable pursuant to stock options granted by the Company which are not currently exercisable or will not become exercisable by December 14, 2008.
|
31
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Companys financial reporting process on behalf of the Board of Directors. The Audit Committee operates under a written charter, a copy of which is available on the Companys website at
www.scansourceinc.com
. This report reviews the actions taken by the Audit Committee with regard to the financial reporting process during the fiscal year ended June 30, 2008 and particularly with regard to the Companys audited consolidated financial statements as of June 30, 2008 and June 30, 2007 and for the three years ended June 30, 2008.
The Audit Committee is composed solely of independent directors. None of the committee members is or has been an officer or employee of the Company or any of its subsidiaries or has engaged in any business transaction or has any business or family relationship with the Company or any of its subsidiaries or affiliates.
The Companys management has the primary responsibility for the Companys financial statements and reporting process, including the systems of internal controls. The independent auditors are responsible for performing an independent audit of the Companys consolidated financial statements in accordance with auditing standards generally accepted in the United States and issuing a report thereon. The Audit Committees responsibility is to monitor and oversee these processes and to select annually the accountants to serve as the Companys independent auditors for the coming year.
The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to fulfill its oversight responsibilities under the Audit Committees charter. To carry out its responsibilities, the Audit Committee met six times during the fiscal year ended June 30, 2008.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited consolidated financial statements in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2008, including a discussion of the quality, rather than just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee also discussed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited consolidated financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, rather than just the acceptability, of the Companys accounting principles and such other matters as are required to be discussed with the Audit Committee by the statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards
, Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule
3600T. In addition, the Audit Committee discussed with the auditors their independence from management and the Company, including the matters in the written disclosures and the letter required of auditors by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees
, as adopted by the PCAOB in Rule 3600T, which it received from the auditors. The Audit Committee also considered whether the provision of services during the fiscal year ended June 30, 2008 by the auditors that were unrelated to their audit of the consolidated financial statements referred to above and to their reviews of the Companys interim consolidated financial statements during the fiscal year is compatible with maintaining their independence.
Additionally, the Audit Committee discussed with the independent auditors the overall scope and plan for their audit. The Audit Committee met with the independent auditors, with and without management present, to discuss the results of their examination, their evaluation of the Companys internal controls and the overall quality of its financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2008 for filing with the SEC.
|
|
|
|
|
Audit Committee
:
Michael J. Grainger (Chairman)
Steven R. Fischer
James G. Foody
John P. Reilly
|
32
ANNUAL REPORT ON FORM 10-K
A copy of the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2008, which is required to be filed with the SEC, will be made available to shareholders to whom this Proxy Statement is mailed, without charge, upon written request to Mr. Richard P. Cleys, Chief Financial Officer, Scan
Source,
Inc., 6 Logue Court, Greenville, South Carolina 29615.
|
|
|
|
|
By Order of the Board of Directors,
|
|
|
James G. Foody
Chairman of the Board
|
October 21, 2008
33