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
|
Filed
by the Registrant x
|
||||
|
Filed
by a Party other than the Registrant
|
o | |||
|
Check
the appropriate box:
|
||||
| o |
Preliminary
Proxy Statement
|
|||
| o |
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
|
|||
| x |
Definitive
Proxy Statement
|
|||
| o |
Definitive
Additional Materials
|
|||
| o |
Soliciting
Material Pursuant to § 240.14a-12
|
|||
|
PDI,
INC.
|
||||
|
(Name
of Registrant as Specified in Its Charter)
|
||||
|
Name
of Person(s) Filing Proxy Statement, if other than the
registrant)
|
||||
|
Payment
of Filing Fee (Check the appropriate box):
|
||||
| x |
No
fee required.
|
|||
| o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
|
|||
|
1)
|
Title
of each class of securities to which transaction
applies:
|
|||
|
2)
|
Aggregate
number of securities to which transaction applies:
|
|||
|
3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
|
|||
|
4)
|
Proposed
maximum aggregate value of transaction:
|
|||
|
5)
|
Total
fee paid:
|
|||
| o |
Fee
paid previously with preliminary materials.
|
|||
| o |
Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|||
|
1)
|
Amount
Previously Paid:
|
|||
|
2)
|
Form,
Schedule or Registration Statement No.:
|
|||
|
3)
|
Filing
Party:
|
|||
|
4)
|
Date
Filed:
|
|||
Michael
J.
Marquard
Chief
Executive
Officer
April
30,
2007
Dear
Stockholder:
You
are
invited to attend the Annual Meeting of Stockholders of PDI, Inc. (“PDI” or the
“Company”) to be held on June 5, 2007, at 4:00 p.m., Eastern time, at the
Sheraton Crossroads Hotel, One International Boulevard, Mahwah, New Jersey
07495.
At
this
meeting, you will be asked to elect three directors, to ratify the selection
of
the Company’s independent registered public accounting firm for fiscal 2007 and
to transact such other business as may properly come before the meeting. The
accompanying Notice of Meeting and Proxy Statement describe these proposals.
We
urge you to read this information carefully.
Your
Board of Directors unanimously believes that the election of its nominees for
directors and the ratification of its selection of Ernst & Young LLP as the
Company’s independent registered public accounting firm are in the best
interests of PDI and its stockholders, and, accordingly, recommends a vote
FOR
the election of the nominees for director and FOR the ratification of the
appointment of Ernst & Young LLP as the Company’s independent registered
public accounting firm for the fiscal year ending December 31,
2007.
Whether
or not you plan to attend the Annual Meeting in person, it is important that
your shares are represented. Therefore, please promptly complete, sign, date
and
return the enclosed proxy card in the accompanying envelope, which requires
no
postage if mailed in the United States. You are, of course, welcome to attend
the Annual Meeting and vote in person even if you previously returned your
proxy
card.
Thank
you.
Sincerely,
Michael
J. Marquard
Chief
Executive Officer
 |
|
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 5, 2007
________________________
To
the
Stockholders of PDI, Inc.:
NOTICE
IS
HEREBY GIVEN that the Annual Meeting of Stockholders of PDI, Inc. (the
“Company”) will be held at the Sheraton Crossroads Hotel, One International
Boulevard, Mahwah, New Jersey 07495 on June 5, 2007 at 4:00 p.m., Eastern time,
for the following purposes:
1. To
elect
three Class I directors of the Company, each to serve for a term of three
years.
2. To
ratify
the appointment of Ernst & Young LLP as the Company’s independent registered
public accounting firm for the fiscal year ending December 31,
2007.
3. To
transact such other business as may properly come before the meeting or any
adjournments thereof.
Only
the
stockholders of record at the close of business on April 20, 2007 are entitled
to notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof.
All
stockholders are cordially invited to attend the meeting. Whether or not you
expect to attend, you are requested to sign, date and return the enclosed proxy
promptly. Stockholders who execute proxies retain the right to revoke them
at
any time prior to the voting thereof. A return envelope, which requires no
postage if mailed in the United States, is enclosed for your
convenience.
By
order
of the Board of Directors,
Kerry
Skolkin
Vice
President,
Associate
General Counsel and Corporate Secretary
Dated: April
30,
2007
 |
|
PROXY
STATEMENT
_______________________
This
Proxy Statement is furnished in connection with the solicitation by the Board
of
Directors of PDI, Inc., a Delaware corporation (the “Company” or “PDI”, “we”,
“us” or “our”), of proxies in the form enclosed for the Annual Meeting of
Stockholders to be held at the Sheraton Crossroads Hotel, One International
Boulevard, Mahwah, New Jersey 07495 on June 5, 2007 at 4:00 p.m., Eastern time,
and for any adjournments or postponements thereof (the “Annual Meeting”), for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Board of Directors knows of no other business which will
come
before the meeting. This Proxy Statement will be mailed to stockholders on
or
about May 2, 2007.
Record
Date and Quorum
Stockholders
of record at the close of business on April 20, 2007 are entitled to notice
of
and to vote at the Annual Meeting. As of the record date, there were 14,178,459
shares of common stock of the Company outstanding. Each share of common stock
outstanding on the record date is entitled to one vote on each matter presented
for action at the meeting. Shares of common stock were the only voting
securities of the Company outstanding on the record date. A quorum will be
present at the Annual Meeting if a majority of the shares of common stock
outstanding on the record date are present at the meeting in person or by
proxy.
Voting
of Proxies
The
persons acting as proxies pursuant to the enclosed proxy will vote the shares
represented as directed in the signed proxy. Unless otherwise directed in the
proxy, the proxyholders will vote the shares represented by the proxy: (i)
for
election of the three Class I director nominees named in this Proxy Statement;
(ii) for ratification of the appointment of Ernst & Young LLP (“E&Y”) as
independent registered public accounting firm to audit the financial statements
of the Company for the fiscal year ending December 31, 2007; and (iii) in the
proxyholders’ discretion, on any other business that may come properly before
the meeting and any adjournments or postponements of the meeting.
All
votes
will be tabulated by the inspector of elections appointed for the Annual
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Under the Company’s bylaws and Delaware law:
(1) shares represented by proxies that reflect abstentions or “broker non-votes”
(i.e., shares held by a broker or nominee that are represented at the meeting,
but with respect to which such broker or nominee is not empowered to vote on
a
particular proposal) will be counted as shares that are present and entitled
to
vote for purposes of determining the presence of a quorum; (2) there is no
cumulative voting, and the director nominees receiving the highest number of
votes, up to the number of directors to be elected, are elected and,
accordingly, abstentions, broker non-votes and withholding of authority to
vote
will not affect the election of directors; and (3) proxies that reflect
abstentions or non-votes will be treated as unvoted for purposes of determining
approval of that proposal and will not be counted as votes for or against that
proposal.
Voting
Requirements
Election
of Directors. The
election of directors requires a plurality of the votes cast for the election
of
directors; accordingly, the directorships to be filled at the Annual Meeting
will be filled by the nominees receiving the highest number of votes. In the
election of directors, votes may be cast in favor of or withheld with respect
to
any or all nominees; votes that are withheld will be excluded entirely from
the
vote and will have no effect on the outcome of the vote.
Ratification
of the Appointment of Independent Registered Public Accounting
Firm.
The
affirmative vote of a majority of the votes cast for or against the matter
by
stockholders entitled to vote at the Annual Meeting is required to ratify the
appointment of our independent registered public accounting firm.
An
2
abstention
from voting on this matter will be treated as “present” for quorum purposes.
However, since an abstention is not treated as a “vote” for or against the
matter, it will have no effect on the outcome of the vote.
Revocability
of Proxy
A
stockholder who has signed and returned the enclosed proxy may revoke it at
any
time before it is voted by (i) submitting to the Company a properly executed
proxy bearing a later date, (ii) submitting to the Company a written revocation
of the proxy or (iii) voting in person at the Annual Meeting.
Expenses
of Solicitation
We
will
pay the expenses of the preparation of proxy materials and the solicitation
of
proxies for the Annual Meeting. In addition to the solicitation of proxies
by
mail, solicitation may be made by certain directors, officers or employees
of
PDI or by an outside firm telephonically, electronically or by other means
of
communication. We will reimburse brokers and other nominees for costs incurred
by them in mailing proxy materials to beneficial owners in accordance with
applicable rules.
PROPOSAL
NO. 1 - ELECTION OF DIRECTORS
The
Board
of Directors currently consists of nine members and is divided into three
classes, with three directors in each of Classes I, II and III. Directors serve
for three-year terms with one class of directors being elected by the Company’s
stockholders at each annual meeting.
At
the
Annual Meeting, three Class I directors will be elected to serve until the
annual meeting of stockholders in 2010 and until each director’s successor is
elected and qualified. John P. Dugan, Dr. Joseph T. Curti and Stephen J.
Sullivan are the nominees for re-election as the Class I directors. All of
the
nominees have been approved, recommended and nominated for re-election to the
Board of Directors by the Nominating and Corporate Governance Committee (the
“Nominating Committee”) and by the Board of Directors. The accompanying proxy
will be voted for the election of John P. Dugan, Dr. Joseph T. Curti and Stephen
J. Sullivan as directors, unless the proxy contains instructions otherwise.
Management has no reason to believe that Mr. Dugan, Dr. Curti or Mr. Sullivan
will not be a candidate or will be unable to serve. However, in the event that
any of the nominees should become unable or unwilling to serve as a director,
the proxy will be voted for the election of such person or persons as shall
be
designated by the Board of Directors.
The
Board of Directors Recommends a
Vote
FOR the Election of the Foregoing Nominees and
Proxies
That Are Returned Will Be So Voted
Unless
Otherwise Instructed.
Set
forth
below is information regarding the nominees for election as Class I directors
and all other members of the Board of Directors who will continue in
office.
NOMINEES
FOR ELECTION AS CLASS I DIRECTORS
TERM
EXPIRING 2010
John
P. Dugan,
age 71.
Mr. Dugan is our founder, Chairman of the Board of Directors and Director of
Strategic Planning. He served as our president from inception until January
1995
and as our chief executive officer from inception until November 1997. In 1972,
Mr. Dugan founded Dugan Communications, a medical advertising agency that later
became known as Dugan Farley Communications Associates Inc. and served as its
president until 1990. We were a wholly-owned subsidiary of Dugan Farley in
1990
when Mr. Dugan became our sole stockholder. Mr. Dugan was a founder and served
as the president of the Medical Advertising Agency Association from 1983 to
1984. Mr. Dugan also served on the board of directors of the
Pharmaceutical
3
Advertising
Council (now known as the Healthcare Marketing Communications Council, Inc.)
and
was its president from 1985 to 1986. Mr. Dugan received an M.B.A. from Boston
University in 1964.
Dr.
Joseph T. Curti,
age 69.
Dr. Curti became a director in August 2003. Dr. Curti was president and chief
executive officer of Ferring Pharmaceuticals in Tarrytown, New York from 1995
to
1998. He previously held the position of president and chief executive officer
of Neurochem, Inc. in Kingston, Ontario and president of North American
Operations of Searle in Skokie, Illinois. He spent 19 years at Pfizer in a
number of senior positions, both domestically and internationally, directing
clinical drug development, drug regulatory, licensing and marketing activities.
He is currently a member of the board of trustees and executive committee of
Morehouse School of Medicine in Atlanta, Georgia. Dr. Curti received a B.S.
from
St. Joseph’s University in Philadelphia in 1959 and an M.D. from Thomas
Jefferson University in Philadelphia in 1963.
Stephen
J. Sullivan,
age 60.
Mr. Sullivan became a director in September 2004. Mr. Sullivan is president
and
chief executive officer of Harlan Sprague Dawley, Inc., a privately held global
provider of preclinical research tools and services. Prior to joining Harlan
in
2006, Mr. Sullivan was a senior vice president of Covance, Inc. and the
president of Covance Central Laboratories, Inc., a major division of Covance.
Prior to joining Covance, Mr. Sullivan was chairman and chief executive officer
of Xenometrix, Inc., a biotechnology company with proprietary gene expression
technology. He successfully merged Xenometrix with Discovery Partners
International. Prior to his work with Xenometrix, Mr. Sullivan was vice
president and general manager of a global diagnostic sector of Abbott
Laboratories. Mr. Sullivan graduated from the University of Dayton, was a
commissioned officer in the Marine Corps, and completed his M.B.A. in Marketing
and Finance at Rutgers University.
INCUMBENT
CLASS III DIRECTORS
TERM
EXPIRING 2008
John
Federspiel,
age 52.
Mr. Federspiel has been a director since October 2001. Mr. Federspiel is
president of Hudson Valley Hospital Center, a 128 bed, short-term, acute care,
not-for-profit hospital in Westchester County, New York. Prior to joining Hudson
Valley Hospital in 1987, Mr. Federspiel spent an additional 10 years in health
administration, during which he held a variety of executive leadership
positions. Mr. Federspiel has served as an appointed Member of the State
Hospital Review and Planning Council, and has served as chairman of the Northern
Metropolitan Hospital Association, as well as other affiliations. Mr. Federspiel
received a B.S. degree from Ohio State University in 1975 and an M.B.A. from
Temple University in 1977.
Jack
E. Stover,
age 54.
Mr.
Stover has been a director since August 2005. Mr. Stover joined Antares Pharma
in July 2004 as president and chief operating officer, and in August 2004 he
was
named chief executive officer, president and director. Mr. Stover is also a
member of the board of directors of Arbios Systems Inc. Mr. Stover was
previously executive vice president and chief financial officer of Sicor, Inc.,
a publicly held injectable pharmaceutical company, which was acquired by Teva
Pharmaceutical Industries. Prior to that, Mr. Stover was executive vice
president and director of a proprietary women’s pharmaceutical company,
Gynetics, Inc., and before Gynetics, he was senior vice president and director
of B. Braun Medical, Inc., a private global medical device and pharmaceutical
company. For more than five years, Mr. Stover was a partner with
PricewaterhouseCoopers, working in their bioscience industry division in New
Jersey. Mr. Stover received his B.A. in Accounting from Lehigh University and
is
a Certified Public Accountant.
Jan
Martens Vecsi,
age 63.
Ms. Vecsi has been a director since May 1998. Ms. Vecsi is the sister-in-law
of
John P. Dugan, our chairman. Ms. Vecsi was employed by Citibank, N.A. from
1967
to 1996 when she retired. Starting in 1984, she served as the senior human
resources officer and vice president of the Citibank Private Bank. Ms. Vecsi
received a B.A. in Psychology and Elementary Education from Immaculata College
in 1965.
4
INCUMBENT
CLASS II DIRECTORS
TERM
EXPIRING 2009
Michael
J. Marquard,
age 58.
Mr. Marquard has been a director and our chief executive officer since May
2006.
Prior to joining PDI, Mr. Marquard was vice president of Mylan Laboratories
Inc.
and president of Mylan's branded subsidiary, Mylan Bertek Pharmaceuticals Inc.
since July 2004. Mr. Marquard joined Mylan from Wyeth, where he was the senior
vice president of U.S. Sales since 1996, and a member of the U.S. management
team and Wyeth's Pharmaceutical business unit’s global leadership team. From
1973 to 1995, Mr. Marquard held a variety of positions at American Cyanamid
Company, a business that eventually merged with Wyeth. His positions at American
Cyanamid included: vice president and general manager, Lederle Pharmaceuticals;
vice president and general manager, Lederle Oncology; and vice president, sales,
Lederle Laboratories. Mr. Marquard has an M.B.A. from the University of
Indianapolis and a B.S. from Youngstown State University.
John
M. Pietruski,
age 74.
Mr. Pietruski has been a director since May 1998. Since 1990, Mr. Pietruski
has
been the chairman of the board of Encysive Pharmaceuticals, Inc., a
pharmaceutical research and development company. He is a retired chairman of
the
board and chief executive officer of Sterling Drug Inc., where he was employed
from 1977 until his retirement in 1988. Mr. Pietruski is a member of the board
of directors of Xylos Corporation and TrialCard Incorporated. Mr. Pietruski
graduated Phi Beta Kappa with a B.S. in business administration with honors
from
Rutgers University in 1954.
Frank
Ryan,
age 67.
Mr. Ryan has been a director since November 2002. Since June 2005, Mr. Ryan
has
also been a director of Digene Corporation. Mr. Ryan’s career includes a 38-year
tenure with Johnson & Johnson. Mr. Ryan retired in 2001 as Johnson &
Johnson’s company group chairman with responsibility for worldwide Ethicon
franchises and Johnson & Johnson Canada. In addition, Mr. Ryan was a member
of the Medical Devices and Diagnostics Operating Group and Leader for the Group
in Process Excellence (Six Sigma) and IT. Throughout his years at Johnson &
Johnson, Mr. Ryan held positions of increasing responsibility, including
worldwide president of Chicopee, president of Johnson and Johnson Hospital
Services Co. and president of Ethicon, Inc. Mr. Ryan received a B.S. degree
in
mechanical engineering from the Illinois Institute of Technology in 1965 and
an
M.B.A. from the University of Chicago Graduate School of Business in
1969.
Director
Independence
Our
Board
of Directors has determined that Messrs. Pietruski, Ryan, Sullivan, Federspiel,
Stover and Dr. Curti are independent within the meaning of the applicable rules
of the Nasdaq Stock Market, Inc. (“Nasdaq”).
Corporate
Governance
Our
Guidelines on Corporate Governance, Code of Business Conduct and the charters
for each committee of the Board of Directors can be found on our website at
www.pdi-inc.com.
We
believe that we are in compliance with the relevant provisions of the
Sarbanes-Oxley Act of 2002 and the corporate governance rules of
Nasdaq.
Board
of Directors Meetings and Committees
During
the year ended December 31, 2006, the Board of Directors held nine meetings,
the
Audit Committee held 18 meetings, the Compensation and Management Development
Committee (the “Compensation Committee”) held seven meetings, and the Nominating
Committee held five meetings. Each committee member is a non-employee director
of the Company who meets the independence requirements of Nasdaq and applicable
law. Each of our incumbent directors attended at least 90% of the total number
of Board of Directors meetings and committee meetings on which he or she served
during 2006.
5
We
adopted a policy encouraging our directors to attend annual meetings of
stockholders and believe that attendance at annual meetings is just as important
as attendance at meetings of the Board of Directors. Eight of our directors
attended our annual meeting held on June 6, 2006, either in person or
telephonically.
Our
Board
of Directors has three standing committees, each of which is described
below.
Audit
Committee
The
Audit
Committee is currently composed of Mr. Stover (chairperson), Mr. Sullivan and
Dr. Curti. The primary purposes of our Audit Committee are: (a) to assist
the Board of Directors in its oversight of (i) the integrity of our
financial statements, (ii) our compliance with legal and regulatory
requirements, (iii) the qualifications and independence of our independent
registered public accounting firm and (iv) the performance of our internal
audit function and independent registered public accounting firm; and
(b) to prepare any report of the Audit Committee required by the rules and
regulations of the U.S. Securities and Exchange Commission (the “SEC”) for
inclusion in our annual proxy statement.
Our
Board
of Directors and the Nominating Committee have determined that each of the
members of our Audit Committee is independent within the meaning of the rules
of
both Nasdaq and the SEC. No member of the Audit Committee is an officer of
the
Company or employed or affiliated with E&Y, nor has any member of the Audit
Committee been an officer of the Company within the past three years. No member
of the Audit Committee has any relationship with the Company that, in the
opinion of the Board of Directors, would interfere with his independence from
management and the Company. Each member of the Audit Committee is, in the
judgment of the Board of Directors and the Nominating Committee, financially
literate, and at least one member of the Audit Committee has accounting or
related financial management experience. The Board of Directors and the
Nominating Committee have determined that the chairperson of the Audit
Committee, Mr. Stover, is an “audit committee financial expert,” as that term is
defined in Item 407(d) of Regulation S-K, and all members of the Audit Committee
are “independent” for purposes of Nasdaq listing standards and Section 10A(m)(3)
of the Securities Exchange Act of 1934 (the “Exchange Act”).
The
Audit
Committee and our Board of Directors have established a procedure whereby
complaints or concerns with respect to accounting, internal controls and
auditing matters may be submitted to the Audit Committee, which is described
in
the section of this Proxy Statement entitled “Policies on Reporting of Concerns
Regarding Accounting and Other Matters and on Communicating with Non-Management
Directors.”
Our
Audit
Committee Charter is posted and can be viewed on our website at www.pdi-inc.com.
Compensation
and Management Development Committee
The
Compensation Committee is currently comprised of Messrs. Ryan (chairperson),
Pietruski and Federspiel. Each member of our Compensation Committee is
“independent” within the meaning of the rules of Nasdaq and as required by the
Compensation Committee Charter. The primary purposes of our Compensation
Committee are: (a) to establish and maintain executive compensation
policies for the Company consistent with corporate objectives and stockholder
interests; (b) to oversee the competency and qualifications of our senior
management personnel and the provisions of senior management succession
planning; and (c) to prepare a report required by the rules and regulations
of the SEC for inclusion in our annual proxy statement. The Compensation
Committee also administers our equity compensation plans. Additional information
on the Compensation Committee’s processes and procedures for the consideration
and determination of executive compensation can be found in the section of
this
Proxy Statement entitled “Compensation Discussion and Analysis.”
Our
Compensation Committee Charter is posted and can be viewed on our website at
www.pdi-inc.com.
6
Nominating
and Corporate Governance Committee
The
Nominating Committee is currently comprised of Messrs. Pietruski (chairperson),
Federspiel and Sullivan and Dr. Curti. Each member of our Nominating Committee
is “independent” within the meaning of the rules of Nasdaq and as required by
the Nominating Committee charter. The primary purposes of the Nominating
Committee are: (a) to select individuals qualified to serve as directors of
the
Company and on committees of the Board of Directors; (b) to advise the Board
of
Directors with respect to board composition, procedures and committees; (c)
to
advise the Board of Directors with respect to the corporate governance
principles applicable to the Company; (d) to advise the Board of Directors
with
respect to director compensation issues; and (e) to oversee the evaluation
of
the Board of Directors. In identifying and recommending nominees for positions
on the Board of Directors, the Nominating Committee places primary emphasis
on
(i) a candidate’s judgment, character, expertise, skills and knowledge
useful to the oversight of our business; (ii) a candidate’s business or
other relevant experience; and (iii) the extent to which the interplay of
the candidate’s expertise, skills, knowledge and experience with that of other
members of the Board of Directors will build a Board of Directors that is
effective, collegial and responsive to our needs. The Nominating Committee
does
not set specific, minimum qualifications that nominees must meet in order for
the committee to recommend them to the Board of Directors, but rather believes
that each nominee should be evaluated based on his or her individual merits,
taking into account our needs and the composition of the Board of Directors.
Members of the Nominating Committee discuss and evaluate possible candidates
in
detail, and suggest individuals to explore in more depth. Outside consultants
have also been employed to help in identifying candidates. Once a candidate
is
identified whom the committee wants to seriously consider and move toward
nomination, the chairperson of the Nominating Committee enters into a discussion
with that nominee candidate. Subsequently, the chairperson will discuss the
qualifications of the candidate with the other members of the committee, and
the
Nominating Committee will then make a final recommendation with respect to
that
candidate to the Board of Directors. The Nominating Committee will consider
nominees recommended by stockholders. The policy adopted by the Nominating
Committee provides that nominees recommended by stockholders are given
appropriate consideration in the same manner as other nominees. Stockholders
who
wish to submit nominees for director for consideration by the Nominating
Committee for election at our 2008 annual meeting of stockholders may do so
by
submitting in writing such nominees’ names, in compliance with the procedures
and along with the other information required by our bylaws, to Kerry Skolkin,
Vice President, Associate General Counsel and Corporate Secretary at PDI, Inc.,
Saddle River Executive Centre, 1 Route 17 South, Saddle River, NJ 07458 between
December 1, 2007 and December 21, 2007.
The
Company’s Nomination Committee Charter is posted and can be viewed on the
Company’s website at www.pdi-inc.com.
Policies
on Reporting of Concerns Regarding Accounting and Other Matters and on
Communicating with Non-Management Directors
We
have
adopted policies on reporting of concerns regarding accounting and other matters
and on communicating with our non-management directors. Any person, whether
or
not an employee, who has a concern about our conduct or the conduct of any
of
our people, including with respect to our accounting, internal accounting
controls or auditing issues, may, in a confidential or anonymous manner,
communicate that concern by forwarding it in a sealed envelope to the
chairperson of the Audit Committee, in care of our Corporate Secretary at PDI,
Inc. Attn: Corporate Secretary, Saddle River Executive Centre, 1 Route 17 South,
Saddle River, NJ 07458, such envelope to be labeled with a legend such as:
“Anonymous Submission of Complaint or Concern.” All communication received will
be relayed to the chairperson of each of our Audit Committee and Nominating
Committee. The full text of our Policy on Reporting of Concerns Regarding
Accounting and Other Matters is posted and can be viewed on our website at
www.pdi-inc.com.
In
addition, we are currently in the process of implementing a confidential and
secure Internet and telephone based system to facilitate the confidential and
anonymous reporting of concerns regarding accounting
7
and
other
related matters. Upon implementation of this system, information relating to
how
any such concerns may be reported, including a toll-free hotline telephone
number, will be posted on our website.
Compensation
of Directors
Each
of
our non-employee directors receives an annual director's fee of $40,000, payable
quarterly in arrears. In addition, the Chairperson of each of the Audit
Committee, Compensation Committee and Nominating Committee receives an
additional annual fee of $25,000, $15,000 and $5,000, respectively. Members
of
our Board of Directors may defer receipt of board and committee fees through
participation in our Officer and Director Deferred Compensation
Plan.
Prior
to
2006, we provided non-employee directors with stock options on an annual basis.
Our current practice with respect to equity awards to our non-employee directors
is as follows: Upon initial appointment to the Board of Directors, each
non-employee director receives approximately $60,000 in restricted stock which
vests ratably over a three-year period. In addition, each non-employee director
receives approximately $45,000 in restricted stock on the date of our annual
meeting each year which vests ratably over a three-year period.
The
following table presents information relating to total compensation for our
non-employee directors for the year ended December 31, 2006. This table shows
fiscal year 2006 compensation in accordance with the SEC’s compensation
disclosure requirements. The value of equity awards is based on Financial
Accounting Standards Board Statements of Financial Accounting Standards No.
123
(revised 2004), “Share-Based
Payments” (“FAS
123R”), as required by the SEC. As a result, this value may include amounts from
awards granted in and prior to 2006, and not the amount actually paid to the
director in 2006.
|
DIRECTOR
COMPENSATION
|
|||||||||||||
|
Name
|
Fees
earned or paid in cash ($)
|
Stock
awards ($)(1)
|
Option
awards ($)(2)
|
Total
($)
|
|||||||||
|
Joseph
T. Curti
|
$
40,000
|
$
8,751
|
$
21,840
|
$
70,591
|
|||||||||
|
John
C. Federspiel
|
40,000
|
8,751
|
21,840
|
70,591
|
|||||||||
|
John
M. Pietruski
|
45,000
|
8,751
|
21,840
|
75,591
|
|||||||||
|
Frank
J. Ryan
|
52,917
|
8,751
|
21,840
|
83,508
|
|||||||||
|
Stephen
Sullivan
|
42,083
|
8,751
|
21,840
|
72,674
|
|||||||||
|
Jack
Stover
|
62,917
|
8,751
|
36,635
|
108,303
|
|||||||||
|
Jan
Vecsi
|
40,000
|
8,751
|
21,840
|
70,591
|
|||||||||
(1) Reports
the amount recognized in accordance with FAS 123R in our consolidated financial
statements for the year ended December 31, 2006 for restricted stock granted
to
each listed director in 2006. A discussion of the assumptions used in
calculating these values are set forth in Note 11 to our consolidated financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2006.
(2) Reports
the amount recognized in accordance with FAS 123R in our consolidated financial
statements for the year ended December 31, 2006 for options granted to each
listed director in 2005. A discussion of the assumptions used in calculating
these values are set forth in Note 11 to our consolidated financial statements
contained in our Annual Report on Form 10-K for the year ended December 31,
2006.
8
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows, as of April 9, 2007, the number of shares of our common
stock beneficially owned by each director, each executive officer included
in
the section of this Proxy Statement entitled “Summary Compensation Table” (each,
a “named executive officer”), and by all directors and executive officers of the
Company as a group. To the best of our knowledge, as of December 31, 2006,
no
person or group beneficially owned more than 5% of our common stock except
as
set forth in the table below. Except as otherwise indicated, (a) the persons
listed below have sole voting and investment power with respect to all shares
of
common stock owned by them and (b) all information with respect to beneficial
ownership has been furnished to us by the respective stockholder.
|
PRINCIPAL
STOCKHOLDERS
|
|
|||||||||
|
Name
of Beneficial Owner
|
|
Number
of Shares Beneficially Owned (1)
|
|
Percent
of Shares Outstanding
|
|
|||||
|
Executive
officers and directors:
|
|
|
|
|
||||||
|
John
P. Dugan
|
|
4,869,878
|
|
|
34.4%
|
|
||||
|
Michael
J. Marquard
|
|
|
37,505
|
|
|
|
*
|
|
||
|
Jeffrey
E. Smith
|
|
|
19,241
|
|
|
|
*
|
|
||
|
Steven
K. Budd
|
|
|
193,857
|
|
(2)
|
|
|
1.4%
|
|
|
|
DeLisle
Callender
|
|
|
23,117
|
|
(3)
|
|
|
*
|
|
|
|
Kevin
Connolly
|
|
|
22,650
|
|
|
|
*
|
|
||
|
Stephen
P. Cotugno
|
|
|
19,312
|
|
|
|
*
|
|
||
|
Larry
Ellberger
|
|
|
37,500
|
|
(4)
|
|
|
*
|
|
|
|
Joseph
T. Curti
|
|
|
28,247
|
|
(5)
|
|
|
*
|
|
|
|
John
C. Federspiel
|
|
|
43,247
|
|
(6)
|
|
|
*
|
|
|
|
John
M. Pietruski
|
|
|
61,497
|
|
(7)
|
|
|
*
|
|
|
|
Frank
J. Ryan
|
|
|
35,747
|
|
(8)
|
|
|
*
|
|
|
|
Jack
Stover
|
|
|
9,913
|
|
(9)
|
|
|
*
|
|
|
|
Stephen
Sullivan
|
|
|
21,197
|
|
(10)
|
|
|
*
|
|
|
|
Jan
Martens Vecsi
|
|
|
60,097
|
|
(7)(11)
|
|
|
*
|
|
|
|
All
executive officers and directors as a group (12 persons)
|
|
|
5,235,267
|
|
(12)
|
|
|
36.9%
|
|
|
|
5%
stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
Heartland
Advisors, Inc. (13)
|
|
|
1,969,500
|
|
|
|
|
13.9%
|
|
|
|
789
North Water Street
|
|
|
|
|
|
|
|
|
|
|
|
Milwaukee,
WI 53202
|
|
|
|
|
|
|
||||
|
Dimensional
Fund Advisors LP
(13)
|
|
|
1,247,876
|
|
|
|
|
8.8%
|
|
|
|
1299
Ocean Avenue
|
|
|
|
|
|
|
|
|
|
|
|
Santa
Monica, CA 90401
|
|
|
|
|
|
|
||||
|
Portfolio
Logic, LLC. (13)
|
|
|
940,272
|
|
|
|
|
6.6%
|
|
|
|
600
New Hampshire Avenue NW 9th
Floor
|
|
|
|
|
|
|
||||
|
Washington,
DC 20037
|
|
|
|
|
|
|
||||
9
(1) Beneficial
ownership is determined in accordance with the rules of the SEC. In computing
the number of shares beneficially owned by a person and the percentage ownership
of that person, shares of common stock subject to options and warrants held
by
that person that are currently exercisable or exercisable within 60 days of
April 9, 2007 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person.
(2) Includes
options to purchase 144,526 shares of common stock.
(3) Includes
options to purchase 16,815 shares of common stock.
(4) Includes
options to purchase 32,500 shares of common stock.
(5) Includes
options to purchase 25,000 shares of common stock.
(6) Includes
options to purchase 40,000 shares of common stock.
(7) Includes
options to purchase 56,250 shares of common stock.
(8) Includes
options to purchase 32,500 shares of common stock.
(9) Includes
options to purchase 6,666 shares of common stock.
(10) Includes
options to purchase 17,500 shares of common stock.
(11) Includes
400 shares held in an irrevocable Trust Account for her son, John S. Vecsi,
Jr.
of which Ms. Vecsi is the trustee.
(12) Consists
of all of our directors and the executive officers employed by us as of April
9,
2007. Includes options to purchase 438,007 shares of common stock.
(13) This
information was derived from the Schedule 13G filed by the reporting
person.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who own more than ten percent (10%) of a registered
class
of our equity securities to file reports of ownership and changes in ownership
with the SEC. Officers, directors and greater than ten percent (10%)
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file.
To
the
best of our knowledge, based solely on review of the copies of such forms
furnished to us, or written representations that no other forms were required,
we believe that all Section 16(a) filing requirements applicable to ours
officers, directors and greater than ten percent (10%) stockholders were
complied with during the fiscal year ended December 31, 2006 with the following
exceptions: (i) a Change in Beneficial Ownership on Form 4 was not timely filed
for Messrs. Budd, Connolly and Cotugno and Ms. McCarthy relating to (a) the
shares of restricted stock granted to each of them in February 2006 and (b)
the
shares of restricted stock and the stock-settled stock appreciation rights
(“SARs”) granted to each of them in March 2006; and (ii) a Change in Beneficial
Ownership on Form 4 was not timely filed for Mr. Stover relating to the shares
of restricted stock granted to him in June 2006.
EXECUTIVE
OFFICERS
The
following table sets forth the names, ages and principal position of the
executive officers of the Company as of the date of this Proxy Statement:
|
Name
|
Age
|
Position
|
|
John
P. Dugan
|
71
|
Chairman
of the Board of Directors and Director of Strategic
Planning
|
|
Michael
J. Marquard
|
58
|
Chief
Executive Officer
|
|
Jeffrey
E. Smith
|
60
|
Executive
Vice President, Chief Financial Officer and Treasurer
|
|
Nancy
McCarthy
|
50
|
Executive
Vice President, Human Resources
|
|
Kevin
Connolly
|
53
|
Executive
Vice President and General Manager, Diversified Marketing Services
|
10
The
principal occupation and business experience for at least the last five years
for each executive officer is set forth below (except for Mr. Dugan and Mr.
Marquard, each of whose business experience is discussed above).
Jeffrey
E. Smith
joined
us as Executive Vice President, Chief Financial Officer and Treasurer in May
2006. Immediately prior to joining PDI, Mr. Smith was senior vice president,
finance and chief financial officer of Pliva, Inc., a specialty generic
pharmaceutical company. From 1985 to 2002, Mr. Smith served in various executive
positions with Alpharma, Inc., a global specialty pharmaceutical company. While
with Alpharma, Inc., Mr. Smith was executive vice president, finance and chief
financial officer and, for a three-year period, was responsible for worldwide
operations while serving as acting president and member of the office of the
chief executive. Mr. Smith is a Certified Public Accountant who began his career
with Coopers & Lybrand, now PricewaterhouseCoopers. Mr. Smith received his
B.S. from Fairleigh Dickinson University.
Nancy
McCarthy
joined
us as Executive Vice President, Human Resources in June 2004. Prior to joining
PDI, Ms. McCarthy was senior director, organization development at Avaya Inc.,
a
telecommunications company, where she led an enterprise-wide initiative to
create the architecture for a global learning platform to support the company’s
business strategy. Before joining Avaya, Ms. McCarthy worked for Datascope
Corp., a medical devices company, where she established their leadership
development platform, creating a fully integrated human resources system for
recruitment, training, executive coaching and performance management. Ms.
McCarthy received her B.A. from the University of New Hampshire and an M.B.A.
from Fairleigh Dickinson University.
Kevin
Connolly
joined
us in June 2005, and is the Executive Vice President and General Manager of
Diversified Marketing Services. He brings over 25 years of pharmaceutical sales
and marketing experience to PDI. Prior to joining PDI, he was senior vice
president, group general manager in Cardinal Health's Medical Communications
Group. Prior to Cardinal, Mr. Connolly was executive vice president, Americas
for Wolters Kluwer Health. He spent over 10 years with Excerpta Medica
Worldwide, a Division of Elsevier Science, with the last 2 years as worldwide
president. Mr. Connolly spent 12 years with Bristol-Myers Squibb in multiple
sales and marketing positions. Mr. Connolly received his B.S. in marketing
and
management from Rider University.
PROPOSAL
NO. 2 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit
Committee of our Board of Directors has appointed E&Y as our independent
registered public accounting firm for the fiscal year ending December 31, 2007.
Although stockholder approval is not required, we desire to obtain from the
stockholders an indication of their approval or disapproval of the Audit
Committee’s action in appointing E&Y as the independent registered public
accounting firm of the Company and its subsidiaries. If the stockholders do
not
ratify this appointment, such appointment will be reconsidered by the Audit
Committee.
A
representative of E&Y will be present at the Annual Meeting and will be
afforded an opportunity to make a statement and to respond to questions.
The
Board of Directors Recommends a Vote FOR the Ratification of
the
Appointment
of Ernst & Young LLP for Fiscal Year 2007 and Proxies That Are
Returned
Will Be So Voted Unless Otherwise Instructed.
On
April
18, 2005, the Company dismissed PricewaterhouseCoopers LLP (“PwC”) as its
independent registered public accounting firm. The decision to dismiss PwC
was authorized and approved by the Audit Committee of the Board of Directors.
PwC’s report on the Company’s financial statements for the year ended December
31, 2004 did not contain any adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principles. During the year ended December 31, 2004 and
11
through
April 18,
2005,
there were (i) no disagreements with PwC on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of PwC would have caused
PwC to make reference thereto in connection with its reports on the financial
statements for such periods and (ii) no reportable events (as defined in Item
304(a)(1)(v) of Regulation S-K under the Exchange Act).
On
April
18, 2005, with the authorization and approval of the Audit Committee, the
Company engaged E&Y as its independent registered public accounting firm to
audit the Company’s financial statements for the year ended December 31,
2005.
AUDIT
COMMITTEE REPORT
Each
member of the Audit Committee is “independent” within the meaning of the rules
of both Nasdaq and the SEC (including the SEC’s additional independence
requirements for members of audit committees), as determined by our Board of
Directors upon the recommendation of our Nominating Committee. Our Board of
Directors has also determined that each member is financially literate and
at
least one member of the Audit Committee has accounting or related financial
management expertise, as such qualifications are defined under the rules of
Nasdaq. Mr. Stover is deemed our audit committee financial expert within the
meaning of the rules of Nasdaq. The Audit Committee operates pursuant to a
written charter that is available on our website at www.pdi-inc.com.
The
Audit
Committee’s primary purposes are: (a) to assist the Board of Directors in its
oversight of: (i) the integrity of our financial statements; (ii) our compliance
with legal and regulatory requirements; (iii) the qualifications and
independence of our independent registered public accounting firm; and (iv)
the
performance of our internal audit function and the independent registered public
accounting firm; and (b) to prepare this report. During fiscal 2006, the Audit
Committee held 18 meetings, including six private sessions with the independent
registered public accounting firm.
In
performing its oversight role, the Audit Committee has considered and discussed
with management and the independent registered public accounting firm our
audited financial statements for fiscal 2006, management’s assessment of the
effectiveness of our internal control over financial reporting and the
independent registered public accounting firm’s evaluation of management’s
assessment of the effectiveness of internal control over financial reporting
and
the effectiveness of our internal control over financial reporting. The Audit
Committee has also discussed with the independent registered public accounting
firm the matters required to be discussed by Statement on Auditing Standards
No.
61, Communication
with Audit Committees,
as
currently in effect. The Audit Committee has received the written disclosures
and the letter from the independent registered public accounting firm required
by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees,
as
currently in effect, and has discussed with the independent registered public
accounting firm, such independent registered public accounting firm’s
independence. All non-audit services performed by the independent registered
public accounting firm must be specifically pre-approved by the Audit Committee
or a member thereof.
Management
is responsible for the preparation, presentation and integrity of our financial
statements, accounting and financial reporting principles and internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations, including the effectiveness of internal control
over financial reporting. The independent registered public accounting firm
is
responsible for performing an independent audit of our financial statements,
expressing an opinion as to their conformity with generally accepted accounting
principles, on management’s assessment of the effectiveness of internal control
over financial reporting, and on the effectiveness of internal control over
financial reporting. The independent registered public accounting firm has
free
access to the Audit Committee to discuss any matters they deem appropriate.
12
During
fiscal 2006, the Audit Committee performed all of its duties and
responsibilities under its charter. In addition, based on the reports and
discussions described in this report, the Audit Committee recommended to the
Board of Directors that our audited financial statements for fiscal 2006 be
included in our Annual Report on Form 10-K for such fiscal
year.
Submitted
by the Audit Committee
Jack
E.
Stover, Chairperson
Dr.
Joseph T. Curti
Stephen
J. Sullivan
The
Audit Committee Report does not constitute solicitation material and shall
not
be deemed filed or incorporated by reference into any of our other filings
under
the Securities Act of 1933, as amended, or the Exchange Act, whether made before
or after the date hereof and irrespective of any general incorporation language
in any such filings.
Audit
Committee Matters and Fees Paid to Independent Registered Public Accounting
Firm
Under
its
charter, the Audit Committee must pre-approve all engagements of our independent
registered public accounting firm unless an exception to such pre-approval
exists under the Exchange Act or the rules of the SEC. Each year, the
independent registered public accounting firm’s retention to audit our financial
statements and permissible non-audit services, including the associated fees,
is
approved by the Audit Committee. At the beginning of the fiscal year, the Audit
Committee evaluates other known potential engagements of the independent
registered public accounting firm, in light of the scope of the work proposed
to
be performed and the proposed fees, and approves or rejects each service, taking
into account whether the services are permissible under applicable law and
the
possible impact of each non-audit service on the independent registered public
accounting firm’s independence. At subsequent Audit Committee meetings, the
Audit Committee receives updates on the services actually provided by the
independent registered public accounting firm, and management may present
additional services for approval. Typically, these would be services, such
as
due diligence for an acquisition, that were not known at the beginning of the
year. The Audit Committee has delegated to the Chairperson of the Audit
Committee the authority to evaluate and approve engagements on behalf of the
Audit Committee in the event that a need arises for pre-approval between
committee meetings. This might occur, for example, if we proposed to execute
a
financing on an accelerated timetable. If the Chairperson so approves any such
engagements, he will report that approval to the full Audit Committee at the
next Audit Committee meeting.
Since
the
May 6, 2003 effective date of the SEC rules stating that an auditor is not
independent of an audit client if the services it provides to the client are
not
appropriately approved, each new engagement of the Company’s independent
registered public accounting firm
was
approved in advance by the Audit Committee, and none of those engagements made
use of the de
minimis
exception to the pre-approval requirement contained in the SEC’s rules.
In
2005
and 2006, the Company retained the services of E&Y as its independent
registered public accounting firm.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
|||||||
|
|
2006
|
2005
|
|||||
|
Audit
Fees
|
$
1,124,000
|
$
963,342
|
|||||
|
Audit-Related
Fees
|
-
|
-
|
|||||
|
Tax
Fees
|
-
|
-
|
|||||
|
All
Other Fees
|
-
|
-
|
|||||
|
Total
Fees
|
$
|
1,124,000
|
$
|
963,342
|
|||
13
COMPENSATION
DISCUSSION AND ANALYSIS
The
following discussion and analysis of compensation arrangements of our named
executive officers in 2006 should be read together with the compensation tables
and related disclosures set forth elsewhere in this Proxy Statement under the
caption “Executive Compensation”. This discussion contains forward looking
statements that are based on our current plans, considerations, expectations
and
determinations regarding future compensation programs. These statements involve
known and unknown risks, uncertainties and other factors that may cause our
actual compensation programs that we adopt to differ materially from currently
planned programs as summarized in this discussion.
Compensation
Philosophy and Objectives
We
believe that the compensation provided to our executives should be commensurate
and aligned with the performance and growth of the Company and long-term
stockholder value. In order to implement this philosophy, we utilize both
quantitative and qualitative measures of performance. Our compensation plans
are
designed to link rewards with performance against objective, quantitative
factors that we believe are important to the success and growth of the Company,
such as earnings per share (“EPS”), revenue growth, and operating income. In
addition, certain qualitative measures are also applied to assess the individual
performance of each of our executives, such as an individual’s progress toward
strategic objectives, leadership and decision-making abilities, success in
creating new service offerings, innovation and industry knowledge.
As
a
general matter, the objectives of our compensation plans are to:
|
·
|
provide
overall levels of compensation that are competitive in order to attract,
retain and motivate highly qualified, experienced
executives;
|
|
·
|
provide
annual and long-term incentives that emphasize performance-based
compensation, contingent upon achieving company and individual performance
goals;
|
|
·
|
align
the interests of our executives with those of our stockholders by
having a
meaningful portion of executive compensation comprised of equity-based
incentives coupled with stock ownership guidelines;
and
|
|
·
|
reward
our executives for their individual contributions to the short and
long-term success of the Company.
|
During
2006, the Company underwent significant changes in terms of its business
strategy and its senior management team, which had an impact on our compensation
philosophy and awards made in the past year. While the Company has traditionally
positioned itself primarily as a contract sales organization serving large
pharmaceutical companies, it is currently in the process of repositioning itself
as a broader based provider of commercialization services to the pharmaceutical
and life sciences industries. In addition, during 2006 there were significant
changes to our executive management team, and we hired a new Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”) during the year. In light of
these significant events, our compensation philosophy in 2006 focused on
attracting and retaining a highly qualified management team to lead the Company
through a challenging stage of our development.
Role
of the Compensation and Management Development
Committee
The
Compensation Committee provides overall guidance for our executive compensation
policies and determines the value and elements of compensation for our executive
officers. In making its determinations with respect to executive compensation,
the Compensation Committee has retained since 2002 the services of Pearl Meyer
& Partners to assist with its review of our executive compensation programs.
We believe that the use of an independent compensation consultant provides
additional assurance that our executive compensation arrangements are reasonable
and consistent with our objectives and external market trends. The compensation
consultant regularly participates in Compensation Committee meetings and advises
the Compensation Committee
14
on
such
matters as compensation trends and best practices, plan design and appropriate
benchmarking. In addition, our CEO and Executive Vice President, Human Resources
attend Compensation Committee meetings by invitation in order to provide, as
appropriate, additional insight, suggestions or recommendations regarding
executive compensation.
Generally,
the process for determining executive compensation is as follows. On an annual
basis, the CEO completes a self-assessment of his performance for review by
the
Compensation Committee and the Board of Directors and then the CEO meets with
the Board of Directors to discuss his performance during the year. The Board
of
Directors then meets in executive session without the CEO present to discuss
and
evaluate his performance and his compensation package. Ultimately, decisions
regarding the CEO’s compensation package are made by the Board of Directors
after such members’ consideration of: (1) the Compensation Committee’s and
compensation consultant’s input to the Board of Directors; (2) the Board of
Director’s evaluation of the CEO’s performance; and (3) Competitive Market Data
(as defined below). Decisions regarding our other executive officers (other
than
the CEO) are made by the Compensation Committee considering recommendations
from
the CEO, as well as a review of Competitive Market Data and input from the
compensation consultant.
Benchmarking
As
noted
above, compensation levels for executives are determined based on a number
of
factors, including the compensation levels in the marketplace for similar
positions. Benchmarking compensation is a challenge for the Company, as we
provide a unique mix of services in the marketplace. There are very few
stand-alone public companies that are direct competitors of the Company, thereby
making it difficult to develop a true comparison group with a meaningful number
of companies. As a result, the Compensation Committee has benchmarked
compensation against alternative sources, including the group of companies
listed below, whose profiles align with the Company’s in terms of service
offerings, revenues and/or employee functionality.
|
The
Advisory Board Company
|
Gevity
HR, Inc.
|
|
Allscripts
Healthcare Solutions, Inc.
|
inVentiv
Health Inc.
|
|
Charles
River Associates Incorporated
|
Navigant
Consulting, Inc.
|
|
CSG
Systems International, Inc.
|
NCO
Group, Inc.
|
|
Dendrite
International, Inc.
|
PAREXEL
International Corporation
|
|
DiamondCluster
International, Inc.
|
PRG-Schultz
International, Inc.
|
|
First
Consulting Group, Inc.
|
Pharmanet
Development Group, Inc.
|
These
companies have been carefully considered by the Compensation Committee for
inclusion in the market compensation data and are re-evaluated annually to
confirm whether they continue to provide valuable and reliable data for
compensation comparison purposes. As part of the market benchmarking process,
the Compensation Committee considers our financial and stock performance in
comparison with the companies in this market data group. In addition, this
compensation data is also supplemented with general industry survey data that
provides position-based compensation levels. This market data group and the
general industry survey data are collectively referred to in this proxy
statement as “Competitive Market Data”.
Relative
to the Competitive Market Data, the Compensation Committee generally intends
that all elements of compensation -- base salary, bonus and long-term incentive
opportunity -- will be in the median range if our financial performance measures
are achieved. As noted above, notwithstanding our overall compensation
positioning objectives, compensation opportunities for specific executives
vary
based on a number of factors such as scope of duties, tenure, institutional
knowledge and/or difficulty in recruiting a new executive. Actual total
compensation in a given year will vary above or below these target compensation
levels based on a number of factors, including our financial performance as
compared with the previously established financial performance measures and
the
creation of stockholder value.
15
Elements
of Compensation
We
utilize the following three main components of compensation:
|
·
|
Base
Salary;
|
|
·
|
Annual
Incentive Bonus; and
|
|
·
|
Long-Term
Equity Compensation.
|
Base
Salary
Base
salaries are set with regard to the level of the position within the Company
and
the individual’s current and sustained performance results, as well as
Competitive Market Data. The base salary levels and any changes to those levels
for each executive are reviewed each year by the Compensation Committee, and
adjustments may be based on factors such as new roles and/or responsibilities
assumed by the executive and the executive’s significant impact on strategic
goals. However, there is no specific weighting applied to any one factor in
setting the level of salary, and the process ultimately relies on the
positioning relating to the Competitive Market Data and the Compensation
Committee’s judgment. Salaries are generally targeted within median ranges of
Competitive Market Data reviewed by the Compensation Committee. The Compensation
Committee also takes into account additional factors such as historical
compensation, potential to be a key contributor as well as special recruiting
situations, such as the recruitment of our new CEO and CFO in 2006. Based on
an
analysis of these criteria, the base salary of the following named executive
officers was increased during 2006 as follows:
|
·
|
S.
Budd - 3%.
|
|
·
|
D.
Callender - 6%
|
|
·
|
K.
Connolly - 3.5%.
|
|
·
|
S.
Cotugno - 3%.
|
During
the first half of 2006, Larry Ellberger and Brian Boyle served as our interim
CEO and CFO, respectively, until their successors commenced employment. Due
to
the transitory nature of their positions, they were not awarded salary
increases, annual incentive bonuses or long-term equity compensation with
respect to 2006 performance. The level of Mr. Callender’s increase in base
salary in 2006 was due in part to his assumption of duties as CFO on an interim
basis during 2006.
During
2006, the Compensation Committee developed compensation packages for our new
CEO
and CFO. In determining the base salaries of $400,000 and $300,000,
respectively, for the new CEO and CFO, the Compensation Committee considered
a
variety of factors, including an analysis of a reasonable and competitive amount
that was necessary to attract highly qualified and talented candidates to the
Company during this time of transition.
Annual
Incentive Bonuses
The
annual incentive bonus program provides our executive officers an opportunity
to
receive cash incentive awards based on our overall financial performance, the
financial performance of our business units and the individual performance
of
each participant in the program. Annual incentive bonus targets, which are
based
on the level of the executive’s position within the Company, are approved by the
Compensation Committee at the beginning of each fiscal year and are expressed
as
a percentage of such individual’s base salary. In 2006, the annual incentive
bonus targets were as follows for each named executive officer:
16
|
Named
Executive Officer
|
Incentive
Bonus Target
(%
of Base Salary)
|
|
M.
Marquard
|
80%
|
|
J.
Smith
|
70%
|
|
S. Budd
|
75%
|
|
K.
Connolly
|
70%
|
|
D.
Callender
|
60%
|
|
S.
Cotugno
|
75%
|
In
order
to determine the level of funding that will be available to make incentive
bonus
awards, certain financial performance measures are also established at the
beginning of each fiscal year. The applicable financial performance measures
typically relate to EPS and operating income on a consolidated basis. However,
for those executives who are evaluated with respect to the performance of a
particular business unit of the Company, the applicable financial performance
measure is typically the operating income of that particular business unit.
The
level of funding for the incentive bonus targets is based on a sliding scale
that correlates directly with the attainment of our financial performance
measures. For example, in order for the incentive bonus targets to be fully
funded, the applicable financial performance measures must be fully achieved.
The actual amount of the incentive bonus awards is initially based on the level
of funding that is available and may then be adjusted up or down by the
Compensation Committee depending on a variety of factors, including any
extraordinary circumstances that affected our financial performance during
the
fiscal year as well as the executive’s performance during the fiscal
year.
The
financial performance measure applicable to fiscal 2006 for the named executive
officers was EPS of break even (EPS for 2005 was a loss of $1.37), except for
Mr. Budd and Mr. Connolly. The financial performance measure applicable to
Mr.
Budd’s incentive bonus target was operating income of approximately $15.2
million (before corporate allocations) for our Sales Services business segment,
and the financial performance measure applicable to Mr. Connolly’s incentive
bonus target was operating income of approximately $7.1 million (before
corporate allocations) for our Marketing Services business segment. Each
financial performance measure established for fiscal 2006 was exceeded in fiscal
2006 which resulted in a level of funding of 100% of the bonus incentive
targets. However, in determining the actual amount of bonus incentive awards
to
be made to our executive officers, the Compensation Committee also considered
other factors such as the existing pipeline for new business and any
extraordinary circumstances that affected financial performance during 2006
and
may affect financial performance going forward, including the termination and/or
expiration of a number of significant sales force contracts during 2006. Based
on a review of this criteria and the recommendation of the CEO, in March 2007,
the Compensation Committee approved the following annual incentive bonus awards
to the named executive officers (expressed as a percentage of base
salary):
|
Named
Executive Officer
|
Actual
Bonus Award
(%
of Base Salary)
|
|
J.
Smith
|
67%
|
|
S.
Budd
|
56%
|
|
K.
Connolly
|
63%
|
|
D.
Callender
|
60%
|
Upon
commencement of his employment with the Company in May 2006, Mr. Marquard’s
annual incentive bonus award for fiscal 2006 was guaranteed at an amount of
$160,000, which was a pro-rata share of 100% of his target bonus award for
2006.
17
Annual
incentive bonuses are typically approved and paid in the first quarter of the
year following the year in which such bonuses were earned. However, due to
the
fact that no annual incentive bonuses were paid with respect to our financial
performance in 2005, the significant turnover in senior management during 2005
and 2006, as well as other challenges we faced during this time period, the
Compensation Committee deemed it advisable to approve and pay a portion of
the
2006 annual bonus during calendar year 2006 in order to aid in the retention
of
our executives during a critical period for the Company. Specifically, in August
2006, the Compensation Committee assessed the extent to which we had achieved
our EPS and operating income performance measures for the first six months
of
the year. Determining that we were on course to achieve the financial
performance measures previously established for the year, the Compensation
Committee made a determination to guarantee payout of 40% of the 2006 incentive
bonus target during calendar year 2006. Of that amount, half was paid in August
2006, with the remaining half paid in December 2006.
The
decisions to award partial bonus amounts before year-end and the CEO’s
guaranteed annual incentive bonus award were at the heart of our critical need
to attract and retain key talent through a transition period of the
Company.
Long-Term
Equity Compensation
Our
executives are also eligible to participate in long-term incentive programs
administered pursuant to our 2004 Stock Award and Incentive Plan (the “2004
Plan”). The long-term incentive component of our compensation program is used to
balance the short-term focus of the annual incentive bonus program by tying
rewards to performance achieved over multi-year periods. The Compensation
Committee believes that long-term incentives, and especially stock-based
incentive compensation, enhance our ability to attract and retain high quality
talent and provide the motivation to improve our long-term
performance.
Historically,
we had a practice of granting stock options to our executive officers and other
employees. However, in connection with our adoption of FAS 123R, we shifted
our
focus to other types of equity-based awards for our executives. In 2006 and
2007, long-term incentive awards were comprised of stock-settled stock
appreciation rights (“SARs”) and restricted stock. Restricted stock grants
generally cliff vest at the end of a three-year period, with shares delivered
to
our executives upon vesting. Unless provided otherwise in an agreement, unvested
restricted stock is forfeited when an executive’s service with the Company is
terminated. We believe that restricted stock provides a significant link with
our share price and also assists with retention of executive talent in critical
positions. SARs are generally granted with an exercise price equal to the market
value of the common stock on the date of grant and generally vest ratably over
a
three-year period. We believe that tying a significant portion of our
executives’ compensation to stock price appreciation furthers the goal of
aligning executive and stockholder interests.
The
Compensation Committee typically approves a dollar range for the long-term
equity component of compensation for each executive officer during the first
quarter of each fiscal year with the goal of positioning our executives at
median levels of long-term incentive compensation compared with Competitive
Market Data, assuming that our financial performance measures are attained,
and
taking into consideration certain qualitative factors such as the executive’s
strategic impact, experience and expertise. For such executives, annual grants
are then approved by the Compensation Committee in the first quarter of the
following year. The fair market value of these awards is within the dollar
range
established for each executive during the previous year. In determining the
actual amount of the award within the established range, the Compensation
Committee considers various factors, including our overall performance, the
executive's strategic impact, alignment with stockholder interests based on
equity ownership of the executive management team, total stockholder dilution
and annual share utilization rates, competitive market practices and the balance
with other compensation elements.
In
2006,
the following levels of long-term incentive compensation were granted to each
named executive officer in the form of shares of restricted stock (comprising
50% of total long-term incentive compensation awarded to each executive) and
SARs (comprising 50% of total long-term incentive compensation awarded to each
executive):
18
|
Named
Executive Officer
|
Amount
($
Value)
|
Amount
(%
of Base Salary)
|
|
S.
Budd
|
$200,000
|
66%
|
|
K.
Connolly
|
$100,000
|
38%
|
|
D.
Callender
|
$30,000
|
19%
|
|
S.
Cotugno
|
$100,000
|
43%
|
The
amounts above reflect the lower end of the dollar range that was established
by
the Compensation Committee in 2005 for each executive due primarily to our
financial results for fiscal 2005. The FAS 123R values attributable to these
awards are reported in the section of this Proxy Statement entitled “Summary
Compensation Table.”
In
2007,
the following levels of long-term incentive compensation granted to each
executive in the form of shares of restricted stock (comprising 50% of total
long-term incentive compensation awarded to each executive) and SARs (comprising
50% of total long-term incentive compensation awarded to each
executive):
|
Named
Executive Officer
|
Amount
($
Value)
|
Amount
(%
of Base Salary)
|
|
M.
Marquard
|
$500,000
|
125%
|
|
J.
Smith
|
$225,000
|
75%
|
|
K.
Connolly
|
$200,000
|
74%
|
|
D.
Callender
|
$40,000
|
24%
|
The
amounts above reflect the lower end of the dollar range that was established
by
the Compensation Committee in 2006 for each executive. This is due primarily
to
the fact that while we exceeded our financial targets for 2006, we were not
as
favorably positioned for fiscal 2007 due to the expiration and termination
of
several significant sales force contracts during 2006. Although these amounts
were paid with respect to 2006 performance, they are not reported in the section
of this Proxy Statement entitled “Summary Compensation Table” as the FAS 123R
value will correspond to their date of grant in 2007 and therefore will be
reported in the summary compensation table that will be included in our 2008
proxy statement.
In
connection with Mr. Marquard’s and Mr. Smith’s commencement of employment in May
2006, they received one-time initial long-term incentive grants with values
of
$300,000 and $200,000 respectively. Each of these grants was delivered 50%
in
SARs vesting ratably over a three-year period and 50% in shares of restricted
stock with three-year cliff vesting. The Compensation Committee determined
that
these amounts were reasonable and necessary to induce these executives to
forfeit certain economic opportunities with their former companies in order
to
join the Company in a time of transition. In addition, in February 2006, we
believed it was advisable for retention purposes to award certain of our
executive officers with special restricted stock awards which cliff vest 18
months following grant in an effort to ensure their continued services during
this critical management transition phase. The number and grant date fair value
of these awards to our named executive officers are contained in the section
of
this Proxy Statement entitled “Grants of Plan Based Awards.”
In
the
past, the Compensation Committee administered a Performance Contingent Share
Program pursuant to the 2004 Plan, which provided for a certain number of shares
of our common stock to be awarded upon the completion of a three-year
performance period (from 2005 through 2007). Awards of shares under this program
are generally contingent on varying levels of achievement of compound annual
revenue growth rates within each of our business units and three-year total
stockholder returns as compared with other companies from which we gather
compensation marketplace data. Based on our financial results to date, it is
unlikely that any shares will be awarded under this program at the end of the
performance period. As a result of the uncertainties and difficulties associated
with establishing long-term performance objectives that remain relevant over
a
three-
19
year
period for the Company during this period of transition in implementing our
long-term strategic plan, we have decided to discontinue the use of the
Performance Contingent Share Program in the near term.
Regular
grants of equity-based awards such as restricted stock and/or SARs are typically
approved by the Compensation Committee at a meeting scheduled in March, and
awards are granted on the day such grants are approved. For restricted stock,
determination of the number of shares to be granted is calculated by dividing
the dollar value of the award by the closing price of our stock on the day
of
the grant. For SARs, the number of SARs granted is calculated by dividing the
dollar value of the award by the fair market value of our common stock based
on
a Black-Scholes calculation. For newly hired executives, if the Compensation
Committee approves the equity grant prior to the date of hire, equity is granted
on the date of hire with reference (either for purposes of determining the
value
of the restricted stock or exercise price of the SAR) to the closing price
on
the grant date. If the Compensation Committee approves the grant after the
date
of hire, the grant date of the award is the approval date, and the value of
shares granted of the restricted stock or the exercise price of the SAR, as
appropriate, is computed with reference to the closing price on the grant
date.
Perquisites
and Retirement Benefits
As
a
matter of practice, we provide only limited special perquisites to our executive
officers. Executives are eligible for the standard benefits and programs
generally available to all of our employees, plus additional financial planning
and executive physical services as well as automobile benefits. In addition,
in
connection with his commencement of employment in May 2006, we reimbursed Mr.
Marquard for a portion of the costs associated with his relocation to New
Jersey.
We
do not
maintain any defined benefit or supplemental executive retirement programs
for
our executives. We do, however, maintain a 401(k) retirement plan (the “401(k)
Plan”) for all of our employees. The 401(k) Plan is intended to qualify under
sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended
(the
“Code”) and is a defined contribution plan. Effective January 1, 2004, the
401(k) Plan provided all “Safe Harbor Eligible” 401(k) Plan participants with
company matching contributions in accordance with the formula described
below:
|
·
|
Employee
contributions of up to 3% of base salary will be matched 100%.
|
|
·
|
Employee
contributions which exceed 3% but do not exceed 5% of base salary
will be
matched 50%.
|
Employees
must meet all eligibility requirements outlined in the 401(k) Plan in order
to
receive matching contributions. Employees' account balances derived from our
matching contributions are immediately fully vested. In addition, we can make
discretionary contributions to the 401(k) Plan. Under the 401(k) Plan, there
is
no option for employees to invest any of their 401(k) funds in our common stock.
Our contribution expense related to the 401(k) Plan for 2006 was approximately
$1.3 million.
These
perquisites and retirement benefits are quantified for our named executive
officers in footnote 7 to the table contained in the section of this Proxy
Statement entitled “Summary Compensation Table.”
20
Deferred
Compensation Plans
We
also
enable our executives to defer receipt of cash compensation through
participation in the Officer and Director Deferred Compensation Plan and the
Senior Management Deferred Compensation Plan. The purpose of each of these
plans
is to allow participants to defer receipt of current cash compensation (base
salary and bonus), which would allow them to maximize deferrals that could
not
otherwise be put into other qualified benefit plans, such as the 401(k) Plan.
The plans also allow members of our Board of Directors to defer board and
committee fees.
Composition
of Executive Compensation
We
utilize the particular elements of compensation described above because we
believe that it provides a well-proportioned mix of base salary, retention
value
and at-risk compensation which produces short-term and long-term performance
incentives and rewards. By following this portfolio approach, we provide the
executive a measure of security in the minimum level of compensation he or
she
is eligible to receive, while motivating the executive to focus on the business
metrics that will produce a high level of performance for the Company and
long-term wealth creation for the executive, as well as reducing the risk of
recruitment of top executive talent by competitors. The mix of metrics used
for
the annual incentive plan and the long-term incentive plan likewise provides
an
appropriate balance between short- and long-term financial and stock
performance.
For
key
executives, the mix of compensation is leveraged in favor of at-risk
compensation (annual incentive bonuses and long-term equity awards), which
results primarily in a pay-for-performance orientation for our executives,
which
is aligned with our stated compensation philosophy of only exceeding median
compensation levels if superior performance is achieved. Alternatively, if
target performance is not achieved, our executives may receive total
compensation that is significantly below the median range as compared with
the
Competitive Market Data. For our executive officers, approximately 60% of their
target total compensation package is typically derived from at-risk, pay-for
performance incentive compensation, with the remaining 40% comprised of base
salary. Of the at-risk compensation component, approximately 50% is typically
in
the form of annual incentive cash bonuses while the remaining amount is in
the
form of long-term equity awards.
In
furtherance of our philosophy of rewarding executives for future superior
performance, prior stock compensation gains are not considered in setting future
compensation levels.
Employment
Agreements and Post-Termination Payments
In
2005,
we began to phase out its use of employment agreements. We generally believe
that employment agreements with a specific term do not support our pay for
performance philosophy and that executives should not be entitled to guarantees
in the absence of performance, nor should they be entitled to severance packages
absent extenuating circumstances. Since 2005, however, we have entered into
employment separation agreements with certain key executives in order to attract
and retain top talent during a time of significant transition for the Company.
The
following provides a description of all employment agreements and employment
separation agreements that were in effect during all or a portion of 2006 for
any individual who served as a named executive officer during 2006. Additional
information regarding the potential value of post-termination benefits of our
currently employed named executive officers can be found in the section of
this
Proxy Statement entitled “Potential Payments upon Termination or Change of
Control.”
Current
Executives
Michael
J. Marquard
Pursuant
to Mr. Marquard’s employment separation agreement, in consideration of covenants
not to compete and not to solicit employees or clients, as well as a general
release of claims against the Company, Mr. Marquard is entitled to receive
the
following benefits upon termination of his employment:
21
If
Mr.
Marquard is terminated without Cause (as defined below) or if he resigns with
Good Reason (as defined below) on or before May 11, 2007, he will be entitled
to:
|
·
|
A
payment equal to the product of 12 times his then current monthly
base
salary;
|
|
·
|
A
payment equal to any actual cash incentive compensation paid to him
plus
the pro-rata portion of any cash incentive compensation that was
previously guaranteed to be paid to him;
and
|
|
·
|
Continued
participation in our health and welfare programs, at our expense,
for 12
months.
|
If
Mr.
Marquard is terminated without Cause or if he resigns with Good Reason after
May
11, 2007, he will be entitled to:
|
·
|
A
payment equal to the product of 18 times his current monthly base
salary;
|
|
·
|
A
payment equal to the average cash incentive compensation paid to
him
during the three most recent years;
and
|
|
·
|
Continued
participation in our health and welfare programs, at our expense,
for 18
months.
|
For
purposes of Mr. Marquard’s agreement:
“Cause”
generally means: (1) Mr. Marquard’s failure to comply with reasonable
instructions of our Board of Directors; (2) a material breach of the separation
agreement by Mr. Marquard; (3) Mr. Marquard’s failure to adhere to our Code of
Conduct or other documented policies; and (4) Mr. Marquard’s conviction of a
crime or other documented act of material dishonestly in the commission of
his
duties.
“Good
Reason” generally means: (1) material reduction of Mr. Marquard’s duties or
assignment of duties materially inconsistent with his responsibilities as our
CEO; (2) a material breach of the agreement by the Company; (3) a reduction
in
Mr. Marquard’s current base salary or failure to pay him any material amount
when due; and (4) adverse change in Mr. Marquard’s titles, responsibilities or
base salary or relocation more than 50 miles, in each case within two years
of a
“Change in Control”.
“Change
in Control” generally means: (1) any merger resulting in current stockholders
owning less than 51% of the surviving corporation; (2) any acquisition all
or
substantially all of the assets of the Company; (3) the acquisition of
beneficial ownership by a person or group in an amount that would permit such
person or group to elect a majority of the members of our Board of Directors;
or
(4) the acquisition of beneficial ownership equal to 51% or more of the combined
voting power of the Company’s then outstanding voting securities.
Jeffrey
E. Smith
Pursuant
to Mr. Smith’s employment separation agreement, in consideration of covenants
not to compete and not to solicit employees or clients, as well as a general
release of claims against the Company, Mr. Smith is entitled to receive the
following benefits upon termination of his employment:
If
Mr.
Smith is terminated without Cause (as defined below) or if he resigns with
Good
Reason (as defined below) on or before May 15, 2007, he will be entitled
to:
|
·
|
A
payment equal to the product of 12 times his current monthly base
salary;
|
|
·
|
A
payment equal to the average annual cash incentive compensation paid
to
him preceding his termination of employment;
and
|
|
·
|
Continued
participation in our health and welfare programs, at our expense,
for 12
months.
|
If
Mr.
Smith is terminated without Cause or if he resigns with Good Reason after May
15, 2007, he will be entitled to:
|
·
|
A
payment equal to the product of 18 times his current monthly base
salary;
|
|
·
|
A
payment equal to the average cash incentive compensation paid to
him
during the three most recent years (or such shorter period of employment);
and
|
|
·
|
Continued
participation in our health and welfare programs, at our expense,
for 18
months.
|
22
For
purposes of Mr. Smith’s agreement:
“Cause”
generally means: (1) Mr. Smith’s failure to satisfactorily perform duties; (2)
Mr. Smith’s failure to adhere to our policies or moral and ethical business
principles; or (3) Mr. Smith’s conviction of a crime or any other act of
dishonestly in commission of his duties.
“Good
Reason” generally means: (1) a substantial adverse change in Mr. Smith’s title
or responsibilities; (2) a reduction in Mr. Smith’s base salary; (3)
modification of Mr. Smith’s overall compensation plan resulting in the material
reduction of his earning potential; or (4) a relocation of our principal place
of business more than 40 miles from Mr. Smith’s residence.
Kevin
Connolly
Pursuant
to Mr. Connolly’s employment separation agreement, in exchange for a covenant
not to compete and not to solicit employees or clients, as well as a general
release of claims against the Company, Mr. Connolly is entitled to receive
a
severance payment equal to the product of 12 times his current monthly base
salary in the event that his employment is terminated by the Company prior
to
May 31, 2007, without Cause (as defined below) or due to a Change in Control
(as
defined below) or change in market conditions.
For
purposes of Mr. Connolly’s agreement:
“Cause”
generally means: (1) Mr. Connolly’s failure to satisfactorily perform the duties
and responsibilities; (2) Mr. Connolly’s failure to establish or achieve the
goals and objectives established by the Chief Executive Officer, President
or
the Board of Directors; (3) failure to adhere to generally accepted standards
of
conduct in the workplace or to moral and ethical business principles; or (4)
Mr.
Connolly’s conviction of a crime or any other act of dishonesty or disloyalty in
the commission of his duties.
“Change
in Control” generally means: (1) any merger resulting in current stockholders
owning less than 55% of the surviving corporation; (2) the acquisition of
beneficial ownership by a person or group in an amount that would permit such
person or group to elect a majority of the members of our Board of Directors;
or
(4) the acquisition of beneficial ownership equal to 25% or more of the combined
voting power of the Company’s then outstanding voting securities (unless such
acquisition is approved by a majority of the Board of Directors).
Former
Executives
Steven
K. Budd
Since
May
2001, Mr. Budd had been party to an amended and restated employment agreement
with the Company. Effective as of January 1, 2007, this employment agreement
was
terminated and replaced in its entirety with an employment separation agreement.
Pursuant to Mr. Budd’s employment separation agreement, in exchange for waiving
certain payments Mr. Budd was entitled to upon expiration or termination of
his
employment agreement, Mr. Budd became entitled to a payment of $553,777, half
of
which was to be paid to Mr. Budd in eight quarterly installments, beginning
in
February 2007. The remaining half of this amount was to be paid to Mr. Budd
following termination of his employment with the Company. Further, the amended
agreement provided, among other things, that, if Mr. Budd's employment was
terminated without cause or if he terminated his employment for good reason
(each as defined in the employment agreement), we would pay him an amount equal
to six times the sum of his then current base salary and provide him with
continued participation in our healthcare and welfare programs at our cost
for a
period of 12 months. Mr. Budd resigned from the Company, effective April 6,
2007, and pursuant to his amended employment agreement, is expected to receive
a
cash payment totaling approximately $519,166 in October 2007.
Stephen
Cotugno
In
May
2001, we entered into an amended and restated employment agreement with Stephen
P. Cotugno providing for his employment as executive vice president of corporate
development and investor relations. This agreement expired on November 30,
2006.
The agreement had provided for an annual base salary of $175,000
23
(subject
to yearly increases as determined by the Compensation Committee) and for
participation in all executive benefits plans. The agreement also provided
that
Mr. Cotugno would be entitled to bonus and incentive compensation awards as
determined by the Compensation Committee. Further, the agreement provided,
among
other things, that, if Mr. Cotugno's employment was terminated without cause
or
if he terminated his employment for good reason (each as defined in the
employment agreement), we would pay him an amount equal to three times the
sum
of his then current base salary plus the average incentive compensation paid
to
him during the three years immediately preceding the termination date. The
agreement also provided that if Mr. Cotugno’s amended and restated employment
agreement was not renewed upon expiration, Mr. Cotugno would be entitled to
a
payment equal to his current annual base salary plus the average incentive
compensation paid to him during the previous three years. Mr. Cotugno resigned
from the Company, effective December 31, 2006, and received cash payments
totaling approximately $480,833 pursuant to his amended and restated employment
agreement.
Larry
Ellberger
Mr.
Ellberger served as our interim CEO until August 4, 2006, at which time he
resigned. As part of an agreement and release with Mr. Ellberger, we modified
the expiration date on 32,500 options that had been awarded to Mr. Ellberger
while he was a member of our Board of Directors. The awards were modified to
expire three years from his employee termination date. Additionally, Mr.
Ellberger could have earned up to 50,000 shares of common stock based on the
performance of our stock price during the performance period from August 15,
2005 through March 31, 2007. Mr. Ellberger was not awarded any shares based
on
this potential award. In connection with his resignation from the Company in
August 2006, Mr. Ellberger received a cash severance payment of $125,000 in
January 2007 pursuant to his release agreement.
Bernard
Boyle
In
May
2001, we entered into an amended and restated employment agreement with Bernard
C. Boyle providing for his employment as Executive Vice President and Chief
Financial Officer. The agreement provided for an annual base salary of $250,000
(subject to yearly increases as determined by the Compensation Committee),
and
for participation in all executive benefit plans. The agreement also provided
that Mr. Boyle would be entitled to bonus and incentive compensation awards
as
determined by the Compensation Committee. Further, the agreement provided,
among
other things, that, if Mr. Boyle's employment was terminated without cause
(as
defined in the agreement) or if he terminated his employment for good reason
(as
defined in the agreement), we would pay him an amount equal to three times
the
sum of his then current base salary plus the average incentive compensation
paid
to him during the three years immediately preceding the termination date. On
August 10, 2005, we announced that Mr. Boyle would resign from his position
as
Chief Financial Officer with the Company effective December 31, 2005. Effective
December 31, 2005, we entered into an amended agreement with Mr. Boyle, pursuant
to which Mr. Boyle deferred his resignation until March 31, 2006. As per the
terms of his employment agreement, Mr. Boyle received approximately $1.4 million
in January 2006, which was disclosed in our summary compensation table in our
2006 proxy statement.
Stock
Ownership Guidelines
We
have
adopted stock ownership guidelines effective January 1, 2007 that are intended
to require our executive officers and non-employee directors to own common
stock. Such individuals must retain at least 50% of net shares delivered through
our executive and director compensation plans. Net shares refer to those that
remain after shares are sold or netted to pay the exercise price of stock
options and withholding taxes for stock options, restricted stock and SARs.
These shares must be retained until the earliest of (1) three years from the
date of exercise or vesting; (2) retirement; or (3) termination of employment.
Failure to comply with these ownership guidelines may result in reduced levels
of annual and/or long-term incentive compensation despite meeting performance
level targets.
24
Impact
of Tax and Accounting
As
a
general matter, the Compensation Committee takes into the account the various
tax and accounting implications of the various compensation vehicles utilized
by
the Company. When determining amounts of long-term incentive awards to
executives, the Compensation Committee examines the accounting costs associated
with awarding such equity compensation in accordance with FAS 123R.
Section
162(m) of the Code, generally disallows a tax deduction to publicly held
companies for compensation over $1 million paid to our chief executive officer
and our four other most highly compensated executive officers. To the extent
that compensation is based upon the attainment of performance goals set by
the
Compensation Committee pursuant to plans approved by the stockholders, the
compensation is not included in the computation of the limit. The Compensation
Committee intends, to the extent feasible and where it believes it is in the
best interests of the Company and its stockholders, to qualify executive
compensation as tax deductible where it does not adversely affect the
Compensation Committee’s development and execution of effective compensation
plans. The Compensation Committee intends to maintain the flexibility to take
actions it considers to be in the best interests of the Company and its
stockholders.
COMPENSATION
AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
The
Compensation and Management Development Committee has reviewed and discussed
the
foregoing “Compensation Discussion and Analysis” section of this Proxy Statement
with management and, based on such review and discussion, the Compensation
and
Management Development Committee recommends that it be included in this Proxy
Statement.
Submitted
by the Compensation and
Management
Development Committee
Frank
J.
Ryan, Chairperson
John
Federspiel
John
M.
Pietruski
The
Compensation and Management Development Committee Report does not constitute
solicitation material and shall not be deemed filed or incorporated by reference
into any of our other filings under the Securities Act of 1933, as amended,
or
the Exchange Act, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filings.
Compensation
Committee Interlocks and Insider Participation in Compensation
Decisions
During
2006, the Compensation Committee consisted of Messrs. Ryan, Pietruski and
Federspiel, all of whom are non-employee directors. No member of the
Compensation Committee has a relationship that would constitute an interlocking
relationship with executive officers or directors of another
entity.
25
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth certain information concerning compensation paid
for
services in all capacities awarded to, earned by or paid to all persons who
served as our CEO and CFO in 2006 and our three other most highly compensated
executive officers who served in such capacities as of December 31, 2006
(collectively referred to as the “named executive officers”).
|
SUMMARY
COMPENSATION TABLE FOR 2006
|
||||||||||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Stock
Awards ($)(7)
|
Option
Awards ($)(8)
|
Non-Equity
Incentive Plan Compensation
|
All
Other Compensation
(9)
|
Total
|
|||||||||||||||
|
Michael
Marquard - Chief Executive Officer (1)
|
2006
|
$254,615
|
$
31,249
|
$
32,710
|
$
160,000
|
$
140,833
|
$
619,408
|
|||||||||||||||
|
Jeffrey
Smith - EVP,Chief Financial Officer and Treasurer (2)
|
2006
|
188,654
|
20,834
|
21,910
|
133,665
|
7,707
|
372,769
|
|||||||||||||||
|
Steven
Budd - Former President (3)
|
2006
|
322,056
|
270,411
|
22,043
|
181,157
|
21,063
|
816,729
|
|||||||||||||||
|
Kevin
Connolly - EVP, G.M. Div. Mktg
|
2006
|
267,279
|
66,774
|
11,022
|
168,386
|
18,163
|
531,624
|
|||||||||||||||
|
Stephen
Cotugno - Former EVP, Corporate Development (4)
|
2006
|
231,926
|
176,310
|
11,022
|
192,680
|
504,081
|
1,116,019
|
|||||||||||||||
|
Larry
Ellberger - Former Chief Executive Officer (5)
|
2006
|
187,500
|
-
|
133,100
|
-
|
138,501
|
459,100
|
|||||||||||||||
|
Bernard
Boyle - Former CFO, Exec VP & Treasurer (6)
|
2006
|
88,901
|
22,228
|
-
|
-
|
4,980
|
116,109
|
|||||||||||||||
|
DeLisle
Callender - Interim CFO, Current Controller
|
2006
|
186,800
|
33,989
|
4,409
|
103,082
|
18,775
|
347,056
|
|||||||||||||||
(1) Became
CEO effective May 11, 2006 and Mr. Marquard's annual salary is $400,000.
(2) Became
CFO effective May 15, 2006 and Mr. Smith's annual salary is
$300,000.
(3) Resigned
effective April 6, 2007.
(4) Resigned
effective December 31, 2006.
26
(5) Resigned
effective August 4, 2006.
(6) Resigned
effective March 31, 2006.
(7) The
amounts in this column do not necessarily represent the value of the award
granted, nor are they a prediction of what will be paid to the employee. The
amounts in this column represent the expense taken by the Company in accordance
FAS 123R in 2006 for portions of awards granted in 2004, 2005 and 2006 that
mature in 2006 or later. The assumptions used in determining the fair value
of
the stock awards are set forth in Note 11 to our consolidated financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2006. We recognize expense ratably over the requisite vesting
period.
(8) Reports
the amount recognized in accordance with FAS 123R in our financial statement
for
the year ended December 31, 2006 for options and SARs granted in 2004, 2005
and
2006 that vest in 2006 or later. The assumptions used in determining the fair
value of the SARs awards are set forth in Note 11 to our consolidated financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2006. We recognize expense ratably over the requisite vesting
period.
(9) For
the
named executive officers, this column includes the following amounts in
2006:
|
Name
|
401(k)
Company Match ($)
|
Term
Life Insurance Payment ($)
|
Auto
Benefit ($)
|
Financial
Planning Services ($)
|
Executive
Physical ($)
|
Severance
($)
|
Relocation
($)
|
Totals
($)
|
|||||||||||||||||
|
Michael
Marquard
|
$
-
|
$
161
|
$
7,336
|
$
-
|
$
-
|
$
-
|
$
133,336
|
$
140,833
|
|||||||||||||||||
|
Jeffrey
Smith
|
-
|
161
|
7,545
|
-
|
-
|
-
|
-
|
7,707
|
|||||||||||||||||
|
Steven
Budd
|
8,587
|
138
|
6,064
|
4,950
|
1,325
|
-
|
-
|
21,063
|
|||||||||||||||||
|
Kevin
Connolly
|
-
|
138
|
10,200
|
7,825
|
-
|
-
|
-
|
18,163
|
|||||||||||||||||
|
Stephen
Cotugno
|
6,158
|
90
|
12,000
|
4,950
|
-
|
480,883
|
-
|
504,081
|
|||||||||||||||||
|
Larry
Ellberger
|
-
|
161
|
5,815
|
7,525
|
-
|
125,000
|
-
|
138,501
|
|||||||||||||||||
|
Bernard
Boyle
|
3,556
|
99
|
-
|
-
|
1,325
|
-
|
-
|
4,980
|
|||||||||||||||||
|
DeLisle
Callender
|
4,645
|
258
|
6,347
|
7,525
|
-
|
-
|
-
|
18,775
|
|||||||||||||||||
27
Grants
of Plan-Based Awards
The
following table sets forth certain information regarding grants of plan based
awards to the named executive officers during the fiscal year ended December
31,
2006.
|
GRANTS
OF PLAN-BASED AWARDS DURING 2006
|
||||||
|
Name
|
Grant
Date
|
All
Other Stock Awards: Number of Shares of Stock or Units (#)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($)
|
Grant
Date Fair Value of Stock and Option Awards ($)
|
|
|
Michael
Marquard
|
5/11/2006
|
(1)
|
11,244
|
-
|
-
|
$
149,995
|
|
|
5/11/2006
|
(2)
|
-
|
23,603
|
13.34
|
157,007
|
|
Jeffrey
Smith
|
5/15/2006
|
(3)
|
7,424
|
-
|
-
|
100,001
|
|
|
5/15/2006
|
(2)
|
-
|
15,662
|
13.47
|
105,170
|
|
Steven
Budd
|
2/15/2006
|
(4)
|
15,000
|
-
|
-
|
174,450
|
|
3/23/2006
|
(5)
|
8,292
|
-
|
-
|
100,002
|
|
|
|
3/23/2006
|
(2)
|
-
|
14,265
|
12.06
|
88,172
|
|
Kevin
Connolly
|
2/15/2006
|
(4)
|
8,000
|
-
|
-
|
93,040
|
|
3/23/2006
|
(5)
|
4,146
|
-
|
-
|
50,001
|
|
|
|
3/23/2006
|
(2)
|
-
|
7,133
|
12.06
|
44,089
|
|
Stephen
Cotugno
|
2/15/2006
|
(4)
|
6,000
|
-
|
-
|
69,780
|
|
3/23/2006
|
(5)
|
4,146
|
-
|
-
|
50,001
|
|
|
|
3/23/2006
|
(2)
|
-
|
7,133
|
12.06
|
44,089
|
|
Larry
Ellberger
|
−
|
|
−
|
−
|
−
|
−
|
|
Bernard
Boyle
|
−
|
|
−
|
−
|
−
|
−
|
|
DeLisle
Callender
|
3/23/2006
|
(5)
|
1,658
|
-
|
-
|
19,995
|
|
|
3/23/2006
|
(2)
|
-
|
2,853
|
12.06
|
17,634
|
(1) Restricted
stock grant which cliff vests May 11, 2009.
(2) SARs
which step vest in one-third increments on each anniversary of the date
of
grant.
(3) Restricted
stock grant which cliff vests May 15, 2009.
(4) Restricted
stock grant which cliff vests August 20, 2007.
(5) Restricted
stock grant which cliff vests March 23, 2009.
Outstanding
Equity Awards
The
following table provides information concerning the number and value of
unexercised options, SARs and restricted stock awards for the named executive
officers outstanding as of the fiscal year ended December 31, 2006.
28
|
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2006
|
||||||||||||||||||||||||||||||||||
|
|
Option Awards
|
Stock
Awards
|
||||||||||||||||||||||||||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units that have not Vested (#)
|
Market
Value of Shares or Units of Stock that have not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares or Other Rights
that have
not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Vlaue of Unearned Shares
or Other
Rights that have not Vested ($)
|
||||||||||||||||||||||||||
|
Michael
Marquard
|
-
|
-
|
$
-
|
-
|
11,244
|
(1)
|
$
114,127
|
-
|
$
-
|
|||||||||||||||||||||||||
|
|
|
23,603
|
|
(2)
|
|
13.34
|
|
5/11/2011
|
|
-
|
|
|
|
-
|
|
-
|
|
|
|
-
|
||||||||||||||
|
Jeffrey
Smith
|
-
|
-
|
|
|
|
-
|
|
-
|
|
7,424
|
|
(3)
|
|
75,354
|
||||||||||||||||||||
|
|
|
15,662
|
|
(4)
|
|
13.47
|
|
5/15/2011
|
|
-
|
|
|
|
-
|
|
-
|
|
|
|
-
|
||||||||||||||
|
Steven
Budd
|
-
|
|
-
|
|
|
|
-
|
|
-
|
|
18,750
|
|
(5)
|
|
190,313
|
|
-
|
|
|
|
-
|
|
||||||||||||
|
|
|
-
|
-
|
|
|
|
-
|
|
-
|
|
15,000
|
|
(6)
|
|
152,250
|
|
-
|
|
|
|
-
|
|||||||||||||
|
|
-
|
-
|
-
|
8,292
|
(7)
|
|
84,164
|
-
|
-
|
|||||||||||||||||||||||||
|
25,000
|
-
|
27.19
|
10/28/2009
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
23,338
|
-
|
59.50
|
2/14/2011
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
21,188
|
-
|
15.74
|
3/7/2012
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
75,000
|
-
|
24.61
|
3/10/2014
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
10,575
|
-
|
20.15
|
3/29/2010
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
|
14,265
|
(8)
|
|
12.06
|
3/23/2011
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||
|
|
-
|
-
|
-
|
-
|
-
|
6,211
|
(9)
|
|
63,042
|
|||||||||||||||||||||||||
|
Kevin
Connolly
|
-
|
-
|
-
|
-
|
8,000
|
(6)
|
|
81,200
|
-
|
-
|
||||||||||||||||||||||||
|
|
-
|
-
|
-
|
4,146
|
(7)
|
|
42,082
|
-
|
-
|
|||||||||||||||||||||||||
|
10,000
|
-
|
11.27
|
6/8/2010
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
|
7,133
|
(8)
|
|
12.06
|
3/23/2011
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||
|
Stephen
Cotugno
|
-
|
-
|
-
|
-
|
6,250
|
(10)
|
|
63,438
|
-
|
-
|
||||||||||||||||||||||||
|
|
-
|
-
|
-
|
6,000
|
(10)
|
|
60,900
|
-
|
-
|
|||||||||||||||||||||||||
|
|
-
|
-
|
-
|
4,146
|
(10)
|
|
42,082
|
-
|
-
|
|||||||||||||||||||||||||
|
10,000
|
-
|
16.00
|
5/7/2007
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
10,000
|
-
|
27.19
|
5/7/2007
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
13,981
|
-
|
59.50
|
5/7/2007
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
14,013
|
-
|
15.74
|
5/7/2007
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
25,000
|
-
|
24.61
|
5/7/2007
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
5,288
|
-
|
20.15
|
5/7/2007
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||
|
|
7,133
|
(8)
|
|
12.06
|
5/7/2007
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||
29
|
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2006 (Continued)
|
|||||||||||
|
|
Option
Awards
|
Stock
Awards
|
|||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares or Units that have not Vested (#)
|
Market
Value of Shares or Units of Stock that have not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares or Other Rights
that have
not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Vlaue of Unearned Shares
or Other
Rights that have not Vested ($)
|
|||
|
Larry
Ellberger
|
10,000
|
-
|
|
7.70
|
8/4/2009
|
-
|
|
-
|
-
|
|
-
|
|
|
7,500
|
-
|
|
17.60
|
8/4/2009
|
-
|
|
-
|
-
|
|
-
|
|
|
7,500
|
-
|
|
31.62
|
8/4/2009
|
-
|
|
-
|
-
|
|
-
|
|
|
7,500
|
-
|
|
11.49
|
8/4/2009
|
-
|
|
-
|
-
|
|
-
|
|
Bernard
Boyle
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
-
|
|
-
|
|
DeLisle
Callender
|
-
|
-
|
|
-
|
-
|
2,500
|
(5)
|
25,375
|
-
|
|
-
|
|
|
-
|
-
|
|
-
|
-
|
1,198
|
(11)
|
12,160
|
-
|
|
-
|
|
|
-
|
-
|
|
-
|
-
|
1,658
|
(7)
|
16,829
|
-
|
|
-
|
|
|
3,938
|
-
|
|
16.00
|
5/1/2008
|
-
|
|
-
|
-
|
|
-
|
|
|
2,000
|
-
|
|
27.19
|
10/28/2009
|
-
|
|
-
|
-
|
|
-
|
|
|
5,877
|
-
|
|
15.74
|
3/7/2012
|
-
|
|
-
|
-
|
|
-
|
|
|
5,000
|
-
|
|
24.61
|
3/10/2004
|
-
|
|
-
|
-
|
|
-
|
|
|
2,115
|
-
|
|
20.15
|
3/29/2010
|
-
|
|
-
|
-
|
|
-
|
|
|
-
|
2,853
|
(8)
|
12.06
|
3/23/2011
|
-
|
|
-
|
-
|
|
-
|
|
|
-
|
-
|
|
-
|
-
|
-
|
|
-
|
1,242
|
(9)
|
12,606
|
|
(1)
|
Restricted
shares of common stock that cliff vest on May 11,
2009.
|
|
(2)
|
One-third
of the SARs will become exercisable on each of May 11, 2007, May
11, 2008,
and May 11, 2009.
|
|
(3)
|
Restricted
shares of common stock that cliff vest on May 15,
2009.
|
|
(4)
|
One-third
of the SARs will become exercisable on each of May 15, 2007, May
15, 2008,
and May 15, 2009.
|
|
(5)
|
Restricted
shares of common stock that cliff vest on March 10,
2007.
|
|
(6)
|
Restricted
shares of common stock that cliff vest on August 20,
2007.
|
|
(7)
|
Restricted
shares of common stock that cliff vest on March 23,
2009.
|
|
(8)
|
One-third
of the SARs will become exercisable on each of March 23, 2007, March
23,
2008, and March 23, 2009.
|
|
(9)
|
Performance
contingent shares granted on March 29,
2005.
|
|
(10)
|
Restricted
shares of common stock that were accelerated upon Mr. Cotugno’s
termination of employment with the
Company.
|
(11) Restricted
shares of common stock that vest on May 31, 2007.
30
Option
Exercises and Stock Vested
The
following table presents information concerning the exercise of stock options
and the vesting of shares of restricted stock for the named executive officers
during the fiscal year ended December 31, 2006.
|
STOCK
VESTED IN 2006
|
||||||
|
Name
|
Number
of Shares Acquired on Vesting (#)
|
Value
Realized on Vesting ($)
|
||||
|
Bernard
Boyle
|
|
10,000
|
|
|
$
116,700
|
|
|
DeLisle
Callender
|
|
1,184
|
|
|
16,063
|
|
Nonqualified
Deferred Compensation Plans
The
following table presents information on the non-qualified deferred compensation
of our named executive officers in and as of the end of 2006.
|
NONQUALIFIED
DEFERRED COMPENSATION IN 2006
|
||||||||||||||||
|
Name
|
Executive
Contributions in 2006 ($)
|
Registrants
Contributions in 2006 ($)
|
Aggregate
Earnings in 2006 ($)
|
Aggregate
Withdrawals/ Distributions ($)
|
Aggregate
Balance at 12/31/2006 ($)
|
|||||||||||
|
Michael
Marquard
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
||||||
|
Jeffrey
Smith
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|||||||
|
Steven
Budd
|
-
|
-
|
29,855
|
-
|
130,690
|
|||||||||||
|
Kevin
Connolly
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
|
Stephen
Cotugno
|
-
|
-
|
222
|
-
|
5,184
|
|||||||||||
|
Larry
Ellberger
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
|
Bernard
Boyle
|
-
|
-
|
10,758
|
816,605
|
-
|
|||||||||||
|
DeLisle
Callender
|
-
|
-
|
6,265
|
-
|
117,082
|
|||||||||||
31
Potential
Payments upon Termination or Change in Control
The
following table reflects the amount of compensation that would be payable to
each of our currently employed named executive officers upon termination of
such
executive’s employment in accordance with their respective employment separation
agreements and restricted stock grant agreements. The amounts shown assume
that
such termination was effective as of December 31, 2006, and thus includes
amounts earned through such time and are estimates of the amounts which would
be
paid out to the executives upon their termination. The actual amounts to be
paid
out can only be determined at the time of such executive’s separation from the
Company.
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
||||
|
Name
|
Cash
Payment ($)
|
Continuation
of Medical/ Welfare Benefits (Present Value) ($)
|
Acceleration
of Equity Awards ($)
(1)
|
Total
Termination Benefits ($)
|
|
Voluntary
Resignation:
|
||||
|
Michael
Marquard
|
$
-
|
$
-
|
$
-
|
$
-
|
|
Jeffrey
Smith
|
-
|
-
|
-
|
-
|
|
Kevin
Connolly
|
-
|
-
|
-
|
-
|
|
Termination
Without Cause or Resignation for Good Reason:
|
||||
|
Michael
Marquard
|
560,000
|
15,000
|
-
|
575,000
|
|
Jeffrey
Smith
|
405,000
|
15,000
|
-
|
420,000
|
|
Kevin
Connolly
|
267,279
|
-
|
-
|
267,279
|
|
Termination
Without Cause or Resignation for Good Reason Upon a Change of
Control:
|
|
|
|
|
|
Michael
Marquard
|
560,000
|
15,000
|
114,127
|
689,127
|
|
Jeffrey
Smith
|
405,000
|
15,000
|
75,354
|
495,354
|
|
Kevin
Connolly
|
267,279
|
-
|
123,282
|
390,561
|
|
(1)
|
These
amounts are based on the value of restricted shares of common stock
held
at December 31, 2006 that would become immediately vested upon a
change of
control pursuant to the applicable restricted stock grant
agreement.
|
The
amounts shown in the table above do not include payments and benefits to the
extent they are provided on a non-discriminatory basis to salaried employees
generally upon termination, including accrued vacation pay, distributions of
plan balances under the 401(k) Plan and payments of amounts under disability
insurance policies.
For
a
discussion of the payments made to Steven K. Budd, Stephen Cotugno, Larry
Ellberger and Bernard Boyle in connection with their respective terminations
of
employment with the Company during 2006 and 2007, see the section of this Proxy
Statement entitled “Compensation Discussion and Analysis - Employment Agreements
and Post-Termination Payments - Former Executives.”
32
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Our
Audit
Committee Charter provides that the Audit Committee must review and approve
or
disapprove all proposed related party transactions, including all transactions
required to be disclosed by applicable SEC disclosure rules. When reviewing
and
evaluating a related party transaction, the Audit Committee may consider, among
other things, any effect a transaction may have upon a director’s independence,
whether the transaction involves terms and conditions that are no less favorable
to us than those that could be obtained in an arm’s length transaction with an
unrelated third party, the commercial reasonableness of the transaction, the
transaction’s benefit to the Company and any other matters the Audit Committee
deems appropriate. Our management will notify the Audit Committee of new
proposed related party transactions of which they become aware and any material
changes to any previously approved or ratified related party
transactions.
Peter
Dugan, the son of John P. Dugan, the chairman of our Board of Directors, is
employed by us as Executive Director, Business Development. In 2006,
compensation paid or accrued to Peter Dugan was $134,342.
OTHER
MATTERS
The
Company knows of no other matters to be submitted to the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote the shares they represent as the
Board of Directors may recommend.
ADDITIONAL
INFORMATION
Householding
The
SEC’s
rules permit companies and intermediaries such as brokers to satisfy delivery
requirements for proxy statements and annual reports with respect to two or
more
stockholders sharing the same address by delivering a single proxy statement
and
annual report addressed to those stockholders. This process, which is commonly
referred to as “householding,” potentially provides extra convenience for
stockholders and cost savings for companies. Some brokers household proxy
materials and annual reports, delivering a single proxy statement and annual
report to multiple stockholders sharing an address, although each stockholder
will receive a separate proxy card. Once you have received notice from your
broker that they will be householding materials to your address, householding
will continue until you are notified otherwise or until you revoke your consent.
If at any time you no longer wish to participate in householding and would
prefer to receive a separate proxy statement and annual report, please notify
your broker. If you would like to receive a separate copy of this year’s Proxy
Statement or Annual Report, please contact us by writing to Jeffrey Smith,
Executive Vice President, Chief Financial Officer and Treasurer, PDI, Inc.,
Saddle River Executive Centre, 1 Route 17 South, Saddle River, New Jersey 07458,
or calling him at 1-800-242-7494.
Stockholder
Proposals for the 2008 Annual Meeting
Stockholders
interested in presenting a proposal for consideration at the annual meeting
of
stockholders in 2008 must follow the procedures found in Rule 14a-8 under the
Exchange Act and our bylaws. To be eligible for inclusion in our proxy materials
relating to our 2008 annual meeting of stockholders, all qualified proposals
must be received by our Corporate Secretary no later than January 2, 2008.
Stockholder proposals submitted more than thirty but less than sixty days before
the scheduled date of our 2008 annual meeting may be presented at the annual
meeting if such proposal complies with our bylaws, but will not be included
in
our proxy materials. A stockholder’s notice must set forth, as to each proposed
matter: (i) as to each person whom the stockholder proposes to nominate for
election to the Board of Directors, all information relating to such person
that
is required to be disclosed in solicitation of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act and Rule 14a-11 thereunder; (ii) a brief
description of the business desired to be brought before the annual meeting
and
the reasons for conducting such business at the annual meeting and, if such
business includes a proposal to amend our bylaws, the language of the proposed
amendment; (iii) the name and address, as they appear on our books, of the
stockholder proposing such business; (iv) the number of shares of Company common
stock which are beneficially owned by such stockholder; (v) a representation
that the stockholder is a holder of record of shares of the Company’s common
stock entitled to vote at such annual meeting and intends to appear in person
or
by proxy at the annual meeting to propose such business; and (vi) any financial
interest of the stockholder in such proposal or nomination.
33
Proxy
Materials
We
will
mail our 2006 Annual Report, this Proxy Statement and the accompanying proxy
card to stockholders beginning on or about May 2, 2007. The Annual Report and
Proxy Statement will also be available on the Internet at www.pdi-inc.com.
The
Annual Report is not part of our proxy soliciting materials.
Availability
of Report on Form 10-K
We
will
provide without charge to each person being solicited by this Proxy Statement,
on the written request of any such person, a copy of our Annual Report on Form
10-K for the year ended December 31, 2006, including the financial statements
and financial statement schedules included therein. All such requests should
be
directed to Jeffrey Smith, Executive Vice President, Chief Financial Officer
and
Treasurer, PDI, Inc., Saddle River Executive Centre, 1 Route 17 South, Saddle
River, New Jersey 07458.
By
order
of the Board of Directors,
Kerry
Skolkin,
Vice
President,
Associate
General Counsel and
Corporate
Secretary
April
30,
2007
34
