def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
NCI, 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):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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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
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NCI, Inc.
11730 Plaza America Drive, Suite 700
Reston, Virginia 20190
April 29, 2011
Dear Fellow Stockholder:
You are invited to attend the NCI, Inc. Annual Meeting of Stockholders to be held on Wednesday,
June 8, 2011 at 10:00 a.m., local time, at the Westin Reston Heights, 11750 Sunrise Valley Drive,
Reston, Virginia 20191.
We have provided details of the business to be conducted at the meeting in the accompanying Notice
of Annual Meeting of Stockholders, proxy statement, and form of proxy. We encourage you to read
these materials, so you may be informed about the business to come before the meeting.
Your participation is important, regardless of the number of shares you own. In order for us to
have an efficient meeting, please sign, date, and return the enclosed proxy card promptly in the
accompanying reply envelope. You can find additional information concerning our voting procedures
in the accompanying materials.
We look forward to seeing you at the meeting.
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Sincerely, |
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![-s- Charles K. Narang](c15583c1558301.gif) |
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Charles K. Narang |
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Chairman and Chief Executive Officer |
Page 2
NCI, INC.
11730 Plaza America Drive, Suite 700
Reston, Virginia 20190
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2011
You are invited to attend the NCI, Inc. Annual Meeting of Stockholders to be held on Wednesday,
June 8, 2011 at 10:00 a.m., local time, at the Westin Reston Heights, 11750 Sunrise Valley Drive,
Reston, Virginia 20191.
The matters proposed for consideration at the meeting are:
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To elect nine persons as directors of the Company, each to serve for a term of one year
or until their respective successors shall have been duly elected and qualified. |
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To hold an advisory vote on executive compensation. |
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To hold an advisory vote on the frequency of holding an advisory vote on executive
compensation. |
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To ratify of the appointment of Ernst & Young LLP as the independent registered public
accounting firm of NCI, Inc. for the current year. |
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To transact such other business as may properly come before the meeting or any
adjournment or postponement thereof. |
Our Board of Directors has set April 11, 2011 as the record date for determining stockholders
entitled to notice of and to vote at the Annual Meeting. A complete list of stockholders eligible
to vote at the Annual Meeting will be made available for examination by our stockholders, for any
purpose germane to the Annual Meeting, during the 10 days before the Annual Meeting during ordinary
business hours at the principal executive office of the Company at the previously indicated
address. We will also produce the stockholder list at the Annual Meeting, and you may inspect it
at any time during the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in person. Regardless of
whether you expect to attend the Annual Meeting, your vote is important. To ensure your
representation at the Annual Meeting, please sign and date the enclosed proxy card and return it
promptly in the accompanying reply envelope, which requires no additional postage. Should you
receive more than one proxy because your shares are registered in different names and addresses,
each proxy should be signed and returned to ensure all your shares are voted. The accompanying
proxy statement and form of proxy are first being sent or given to our stockholders on or about
April 29, 2011.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING TO BE HELD ON JUNE 8, 2011
The proxy statement and our 2010 annual report are also available at
http://materials.proxyvote.com/62886K.
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By Order of the Board of Directors, |
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![-s- Michele R. Cappello](c15583c1558302.gif) |
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Michele R. Cappello |
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General Counsel and Corporate Secretary |
Reston, Virginia
April 29, 2011
IT IS IMPORTANT THAT YOU COMPLETE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY
Page 3
TABLE OF CONTENTS
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Page 4
NCI, INC.
11730 Plaza America Drive, Suite 700
Reston, Virginia 20190
PROXY STATEMENT FOR
2011 ANNUAL MEETING OF STOCKHOLDERS
The Board of Directors of NCI, Inc. (the Board) solicits the accompanying proxy to be voted at the
2011 Annual Meeting of Stockholders (the Annual Meeting) to be held on Wednesday, June 8, 2011 at
10 a.m., local time, at the Westin Reston Heights, 11750 Sunrise Valley Drive, Reston, Virginia
20191, and at any adjournments or postponements thereof. In this proxy statement, unless the
context requires otherwise, when we refer to we, us, our, the Company or NCI, we are
describing NCI, Inc.
This proxy statement, the accompanying Notice of Annual Meeting of Stockholders and the enclosed
proxy card are first being sent or given to our stockholders on or about April 29, 2011. This
proxy statement and our 2010 annual report are also available at
http://materials.proxyvote.com/62886K.
PURPOSES OF THE MEETING
At the Annual Meeting, we will ask you to consider and act upon the following matters:
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1. |
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To elect nine persons as directors of the Company, each to serve for a term of one
year, or until their respective successors shall have been duly elected and qualified. |
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2. |
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To hold an advisory vote on executive compensation. |
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3. |
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To hold an advisory vote on the frequency of holding an advisory vote on executive
compensation. |
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4. |
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To ratify of the appointment of Ernst & Young LLP as the independent registered public
accounting firm of NCI, Inc. for the current year. |
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To transact such other business as may properly come before the Annual Meeting or any
adjournment or postponement thereof. |
GENERAL INFORMATION
Record Date and Stockholders Entitled to Vote
Record Date. Our Board has fixed the close of business on April 11, 2011 as the record date (the
Record Date) for purposes of determining stockholders entitled to receive notice of and to vote at
the Annual Meeting. Only stockholders of record as of the Record Date will be entitled to vote at
the Annual Meeting.
Our Common Stock. We have two classes of outstanding stock: our Class A Common Stock and Class B
Common Stock. As of April 11, 2011 a total of 13,675,781 shares were outstanding: 8,475,781 shares
of Class A Common Stock and 5,200,000 shares of Class B Common Stock. Holders of Class A Common
Stock are entitled to one vote for each share of Class A Common Stock they hold on the Record Date.
Holders of Class B Common Stock are entitled to 10 votes for each share of Class B Common Stock
they hold on the Record Date.
Stockholder List. We will make a complete list of stockholders eligible to vote at the Annual
Meeting available for examination during the 10 days before the Annual Meeting. During such time,
you may visit us at our principal executive office at the previously indicated address during
ordinary business hours to examine the stockholder list for any purpose germane to the Annual
Meeting.
Page 5
Voting Requirements and Other Matters
Quorum. The holders of a majority in voting power of the common stock entitled to vote at the
Annual Meeting must be present, either in person or by proxy, to constitute a quorum for the
transaction of business at the Annual Meeting. In accordance with Delaware law, we will count
abstentions and broker non-votes for the purpose of
establishing a quorum.
Broker Non-Votes. A broker non-vote occurs when a stockholder that owns shares in street name
through a nominee (usually a bank or a broker) fails to provide the nominee with voting
instructions, and the nominee does not have discretionary authority to vote the shares with respect
to the matter to be voted on, or when the nominee otherwise fails to vote the shares.
How to Vote Your Shares. Your shares cannot be voted at the Annual Meeting unless you are present
either in person or by proxy. If you vote by mail and return a completed, signed, and dated proxy
card, your shares will be voted in accordance with your instructions. You may specify your choices
by marking the appropriate box and following the other instructions on the proxy card. With
respect to the election of directors, you may (i) vote For all the nominees or (ii) Withhold
Authority with respect to some or all nominees. With respect to the advisory vote on executive
compensation, you may (i) vote For the proposal, (ii) vote Against the proposal, or (iii)
Abstain from voting on the proposal. With respect to the vote on the frequency of holding an
advisory vote on executive compensation, you may (i) vote to hold the vote every 1 year, (ii)
vote to hold the vote every 2 years, (iii) vote to hold the vote every 3 years, or (iv)
Abstain from voting on the proposal. With respect to ratification of the appointment of Ernst &
Young LLP to serve as the Companys Independent Registered Public Accounting Firm for the year
ended December 31, 2011, you may (i) vote For the proposal, (ii) vote Against the proposal, or
(iii) Abstain from voting on the proposal. If you vote by mail and you return a proxy card that
is unsigned, then your vote cannot be counted. If the returned proxy card is signed and dated, but
you do not specify voting instructions, your shares will be voted in accordance with the Boards
recommendations.
Vote Required Election of Directors. If a quorum is present, the nine nominees for director who
receive the most votes cast at the Annual Meeting, either in person or by proxy, will be elected.
As a result, abstentions and broker non-votes will not affect the outcome of the vote on this
matter they are treated as neither votes for nor votes against the election of directors.
Vote Required Advisory Vote on Executive Compensation. If a quorum is present, the advisory
vote on executive compensation will be held and will require at least a majority of the votes cast
at the Annual Meeting, either in person or by proxy. You may (i) vote For the proposal, (ii)
vote Against the proposal, or (iii) Abstain from voting on the proposal. Abstentions will have
the same effect as a vote against this proposal, because abstentions on this proposal, although
treated as present and entitled to vote for purposes of determining the total pool of votable
shares, do not contribute to the affirmative votes that are needed to approve the proposal. Broker
non-votes will not affect the outcome of the vote on this matter they are treated as neither
votes for nor votes against the proposal. While the Board of Directors intends to carefully
consider the shareholders vote resulting from the advisory vote on executive compensation, the
final vote will not be binding on us and is advisory in nature.
Vote Required Advisory Vote on the Frequency of Holding an Advisory Vote on Executive
Compensation. If a quorum is present, the advisory vote on the frequency of holding an advisory
vote on executive compensation will be held and will require at least a majority of the votes cast
at the Annual Meeting, either in person or by proxy. You may (i) vote to hold the vote every 1
year, (ii) vote to hold the vote every 2 years, (iii) vote to hold the vote every 3 years, or
(iv) Abstain from voting on the proposal. Abstentions and broker non-votes will not affect the
outcome of the vote on this matter. While the Board of Directors intends to carefully consider the
shareholders vote resulting from the advisory vote on the frequency of holding a vote on executive
compensation, the final vote will not be binding on us and is advisory in nature.
Vote Required Ratification of Independent Registered Public Accounting Firm. If a quorum is
present, the ratification of the appointment of Ernst & Young LLP to serve as our independent
registered public accounting firm for the year ending December 31, 2011 will be voted on and will
require at least a majority of the votes cast at the Annual Meeting, either in person or by proxy.
Abstentions will have the same effect as a vote against this proposal, because abstentions on this
proposal, although treated as present and entitled to vote for purposes of determining the total
pool of votable shares, do not contribute to the affirmative votes that are needed to approve the
proposal. Broker non-votes, however, are excluded from the pool of votable shares, and because
they will be treated as unvoted for purposes of this proposal, will have the effect of neither a
vote for nor a vote against the ratification of Ernst & Young LLP to serve as our independent
registered public accounting firm.
Page 6
Other Business at the Meeting. We are not aware of (and have not received any notice with respect
to) any business to be transacted at the Annual Meeting other than as described in this proxy
statement. If any other matters properly come before the Annual Meeting, Messrs. Charles K. Narang
and Terry W. Glasgow, the named proxies, will vote
the shares represented by proxies on such matters in accordance with their discretion and best
judgment.
Ownership by Insiders. As of April 11, 2011 our directors and executive officers beneficially
owned an aggregate of 6,017,843 shares of Class A Common Stock and Class B Common Stock (such
number includes shares of common stock that may be issued upon exercise of outstanding options that
are currently exercisable or that may be exercised within 60 days after April 11, 2011), which
constitutes approximately 43% of our outstanding common stock and 87% of the voting control of
common stock entitled to vote at the Annual Meeting.
Tabulation of Votes. Ms. Maureen Crystal, our Vice President of Investor Relations, has been
appointed Inspector of Elections for the Annual Meeting. Ms. Crystal will separately tabulate the
affirmative votes, negative votes, abstentions, and broker non-votes with respect to each of the
proposals.
Announcement of Voting Results. We will announce preliminary voting results at the Annual Meeting
and within four business days of the Annual Meeting in a current report on Form 8-K that we will
file with the Securities and Exchange Commission (SEC). To the extent the final results are not
known and disclosed within four business days of the Annual Meeting, we will disclose the final
results in an amended current report on Form 8-K that we will file with the SEC within four
business days after such final results are known.
Revoking Your Proxy. If you execute a proxy pursuant to this solicitation, you may revoke it at
any time before its exercise by doing any one of the following:
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Delivering written notice to our Corporate Secretary, Ms. Michele R. Cappello, at our
principal executive office. |
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Executing and delivering a proxy bearing a later date to our Corporate Secretary at our
principal executive office. |
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Voting in person at the Annual Meeting. |
To be effective, our Corporate Secretary must actually receive your notice or later-dated proxy
before the Annual Meeting, or the Inspector of Elections must receive it at the Annual Meeting
before the vote. Please note, however, that your attendance at the Annual Meeting without further
action on your part will not automatically revoke your proxy.
Solicitation. The Board is making this solicitation of proxies on our behalf. In addition to the
solicitation of proxies by use of the mail, our officers and employees may solicit the return of
proxies by personal interview, telephone, email, or facsimile. We will not pay additional
compensation to our officers and employees for their solicitation efforts, but we will reimburse
them for any out-of-pocket expenses they incur in their solicitation efforts.
We will request that brokerage houses and other custodians, nominees, and fiduciaries forward our
solicitation materials to beneficial owners of our common stock that is registered in their names.
We will bear all costs associated with preparing, assembling, printing, and mailing this proxy
statement and the accompanying materials, the cost of forwarding our solicitation materials to the
beneficial owners of our common stock, and all other costs of solicitation.
Page 7
Householding of Proxy Materials. Some banks, brokers, and other nominee record holders may
participate in the practice of householding proxy statements and annual reports. This means that
only one copy of this proxy statement or the Companys annual report may have been sent to multiple
stockholders in your household. The Company will promptly deliver a separate copy of either
document to you if you call or write the Company at the following address or phone number: NCI,
Inc., 11730 Plaza America Drive, Suite 700, Reston, Virginia 20190, phone: (703) 707-6900,
Attention: Ms. Maureen Crystal, Vice President of Investor Relations. If you want to receive
separate copies of the Companys annual report and proxy statement in the future, or if you are
receiving multiple copies and would like to receive only one copy for your household, you should
contact your bank, broker, or other nominee record holder, or you may contact the Company at the
preceding address and phone number.
Notice of Internet Availability
This proxy statement and our 2010 annual report are available at
http://materials.proxyvote.com/62886K.
Page 8
BENEFICIAL OWNERSHIP
The following table sets forth certain information regarding the beneficial ownership of the
Companys common stock as of April 11, 2011 by (i) each person or entity who is known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of Class A Common
Stock or Class B Common Stock, (ii) each director, (iii) each of the executive officers named in
the Summary Compensation Table set forth under the caption Executive Compensation below, or the
named executive officers, and (iv) all directors and executive officers as a group. Unless
otherwise indicated, each person or entity named in the table has sole voting power and investment
power (or shares such power with his spouse) with respect to all shares of common stock listed as
owned by such person or entity.
Unless otherwise indicated, the address of each person is c/o NCI, Inc., 11730 Plaza America Drive,
Reston, Virginia 20190.
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Number of Shares |
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Percentage of Class |
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Beneficially Owned (1) |
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Owned (%) |
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Percentage |
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Class A |
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Class B |
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Class A |
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Class B |
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of Total |
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Common |
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Common |
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Common |
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Common |
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Voting |
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Name of Beneficial Owner |
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Stock |
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Stock |
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Stock |
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Stock |
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Power |
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Charles K. Narang (2) |
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378,946 |
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5,200,000 |
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4.5 |
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100.0 |
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86.6 |
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Terry W. Glasgow (3) |
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166,591 |
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1.9 |
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Michele R. Cappello (4) |
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77,573 |
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* |
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James P. Allen (5)(6) |
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43,119 |
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* |
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John E. Lawler (5) |
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30,860 |
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* |
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Paul V. Lombardi (5) |
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25,860 |
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* |
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J. Patrick McMahon (5) |
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30,700 |
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* |
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Philip O. Nolan |
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* |
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Stephen L. Waechter (7) |
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22,334 |
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* |
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Daniel R. Young (5) |
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41,860 |
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* |
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All executive officers and directors as a
group (10 persons) |
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817,843 |
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5,200,000 |
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9.2 |
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100.0 |
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86.8 |
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Royce & Associates, LLC (8) |
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1,054,875 |
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12.4 |
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1.7 |
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Narang Family Trust and affiliates (9) |
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1,000,000 |
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11.8 |
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1.7 |
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Neuberger Berman, Inc. (10) |
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842,355 |
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9.9 |
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1.4 |
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Blackrock, Inc. (11) |
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621,222 |
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7.3 |
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1.0 |
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Investment Counselors of Maryland, LLC (12) |
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574,900 |
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6.8 |
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1.0 |
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Ameriprise Financial, Inc. (13) |
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543,113 |
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6.4 |
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* |
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SunTrust Banks, Inc. (14) |
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478,946 |
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5.7 |
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* |
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Less than 1%. |
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(1) |
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The number of shares beneficially owned by each stockholder is
determined under rules promulgated by the SEC and the information is
not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power
or investment power and any shares as to which the individual or
entity has the right to acquire beneficial ownership within 60 days
after April 19, 2011 through the exercise of any stock option,
warrant, or other right. The inclusion herein of such shares,
however, does not constitute an admission that the named stockholder
is a direct or indirect beneficial owner of such shares. |
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Includes 378,946 shares of Class A Common Stock held in two Grantor
Retained Annuity Trusts (GRAT), for which SunTrust Banks, Inc. is the
trustee. Mr. Narang has shared investment power, but no voting
power, over these shares. One-half of the total shares reported,
189,473 Class A shares are owned directly by the Chander K. Narang
2004 GRAT for the benefit of Charles K. Narang. One-half of the
total shares reported, 189,473 Class A shares are owned directly by
the Shashi K. Narang 2004 GRAT for the benefit of Shashi K. Narang,
wife of Charles K. Narang. |
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|
Includes 155,591 shares of Class A Common Stock issuable upon
exercise of options that are currently exercisable or exercisable
within 60 days of April 11, 2011. |
|
(4) |
|
Includes 77,473 shares of Class A Common Stock issuable upon exercise
of options that are currently exercisable or exercisable within 60
days of April 11, 2011. |
|
(5) |
|
Includes 23,860 shares of Class A Common Stock issuable upon exercise
of options that are currently exercisable or exercisable within 60
days of April 11, 2011. |
|
(6) |
|
Includes 3,000 shares held in a margin account. |
|
(7) |
|
Includes 17,334 shares of Class A Common Stock issuable upon exercise
of options that are currently exercisable or exercisable within 60
days of April 11, 2011. |
|
(8) |
|
Information based solely on a Schedule 13G/A dated January 18, 2011
and filed with the SEC. Royce & Associates, LLC (Royce) is deemed to
be the beneficial owner of the shares of our Class A Common Stock in
the accounts for which it serves as an investment advisor and has
sole power to vote and dispose of 1,054,875 shares of our Class A
Common Stock. The address of Royce is 745 Fifth Avenue, New York, NY
10151. |
Page 9
|
|
|
(9) |
|
Information based solely on a Schedule 13G/A dated February 17, 2009
and filed with the SEC. Includes 1,000,000 shares of Class A Common
Stock owned of record by Narang Family Limited Partnership (NFLP).
The general partner of NFLP is Narang Holdings LLC (NHLLC), the
manager of which is Dinesh Bhugra. NHLLC and Mr. Bhugra have the
power to direct the vote and to direct the disposition of investments
owned by NFLP, including the Class A Common Stock, and thus may also
be deemed to beneficially own the Class A Common Stock. Narang
Family Trust (NFT) is the sole owner of NHLLC and, as such, NFT and
its business trustee, Thomas C. Gaspard, have the power to remove Mr.
Bhugra as manager and appoint any new manager of NHLLC, and thus may
also be deemed to beneficially own the Class A Common Stock. The
address of each of NFT, NHLLC and NFLP is c/o GenSpring Family
Offices, 4445 Willard Avenue, Suite 1010, Chevy Chase, MD 20815. The
address of Mr. Bhugra is 37 Baytree Road London SW25RR, United
Kingdom. The address of Mr. Gaspard is 10305 Cutters Lane, Potomac,
Maryland 20854. Mr. Narang does not have any beneficial ownership
interest in these shares. |
|
(10) |
|
Information based solely on a Schedule 13G/A dated February 14, 2011
and filed with the SEC. Neuberger Berman Inc. (Neuberger) is deemed
to be the beneficial owner of the shares of our Class A Common Stock
in the accounts for which it serves as an investment advisor and has
shared power to vote 536,286 and shared power to dispose of 842,355
shares of our Class A Common Stock. The address of Neuberger is 605
Third Avenue, New York, NY 10158. |
|
(11) |
|
Information based solely on a Schedule 13G/A dated February 7, 2011
and filed with the SEC. Blackrock Inc. (Blackrock) is deemed to be
the beneficial owner of the shares of our Class A Common Stock in the
accounts for which it serves as a parent holding company and has sole
power to vote and dispose of 621,222 shares of our Class A Common
Stock. The address of Blackrock is 40 East 52nd Street,
New York, NY 10022. |
|
(12) |
|
Information based solely on a Schedule 13G dated January 27, 2011 and
filed with the SEC. Investment Counselors of Maryland, LLC
(Investment Counselors) is deemed to be the beneficial owner of the
shares of our Class A Common Stock in the accounts for which it
serves as a registered investment advisor and has sole power to vote
442,000 shares, shared power to vote 132,900 shares, and sole power
to dispose of 574,900 shares of our Class A Common Stock. The
address of Investment Counselors is 803 Cathedral Avenue, Baltimore,
MD 21201. |
|
(13) |
|
Information based solely on a Schedule 13G dated January 27, 2011 and
filed with the SEC. Ameriprise Financial Inc. (AFI) is the parent
holding company of Columbia Management Investment Advisors, LLC
(Columbia), and its investment advisor subsidiary. AFI and Columbia
are deemed to be the beneficial owners of the shares of our Class A
Common Stock in the accounts for which they serve as parent holding
company and investment advisor, respectively,and have shared power
to vote 338,566 shares and shared power to dispose of 543,113 shares
of our Class A Common Stock. The address of AFI is 145 Ameriprise
Financial Center, Minneapolis, MN 55474. The address of Columbia is
100 Federal St., Boston, MA 02110. |
|
(14) |
|
Information based solely on a Schedule 13G/A dated January 28, 2011
and filed with the SEC. SunTrust Banks, Inc. (SunTrust) is the
parent holding company of GenSpring Holdings, Inc. (GenSpring).
Suntrust and GenSpring are deemed to be the beneficial owners of the
478,946 shares of our Class A Common Stock in the accounts of one or
more of SunTrusts subsidiaries and have sole power to vote 378,946
shares and sole power to dispose 478,946 shares of Class A Common
Stock. SunTrust and its subsidiaries disclaim any beneficial
interest in the shares reported. The address of SunTrust is 303
Peachtree Street, Suite 1500, Atlanta, GA 30308. |
EQUITY COMPENSATION PLAN INFORMATION
The following table provides additional information as of December 31, 2010 regarding shares of our
Class A Common Stock authorized for issuance under its equity compensation plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Securities to be |
|
|
|
|
|
|
Number of Securities |
|
|
|
Issued Upon |
|
|
Weighted |
|
|
Remaining Available For |
|
|
|
Exercise of |
|
|
Average Exercise |
|
|
Future Issuance Under |
|
|
|
Outstanding |
|
|
Price of |
|
|
Equity Compensation Plans |
|
|
|
Options |
|
|
Outstanding |
|
|
(Excluding Securities |
|
Plan Category |
|
(a) |
|
|
Options |
|
|
Reflected in Column (a)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation
Plans Approved by
Stockholders (1) |
|
|
1,098,446 |
|
|
$ |
18.18 |
|
|
|
1,283,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation
Plans Not Approved
by Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,098,446 |
|
|
$ |
18.18 |
|
|
|
1,283,758 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Our only equity compensation plan is The Amended and Restated 2005 Performance Incentive Plan.
Page 10
ELECTION OF DIRECTORS
(PROPOSAL 1)
General Information
During 2010, the Board held nine meetings. Our Board is currently composed of nine members. Each
current members term expires at the Annual Meeting (subject to the election and qualification of
his successor, or his earlier death, resignation, or removal).
Upon the unanimous recommendation of the Nominating/Governance Committee, the Board has nominated
each of the nine persons named below to serve as a director until the 2012 Annual Meeting of
Stockholders (or until his successor has been duly elected and qualified, or until his earlier
death, resignation, or removal). Each nominee is a current member of the Board, has agreed to
stand for election and serve if elected, and has consented to be named in this proxy statement.
Substitute Nominees
If, at the time of or before the Annual Meeting, any nominee is unable to be a candidate when the
election occurs, or otherwise declines to serve, the persons named as proxies may use the
discretionary authority provided to them in the proxy to vote for a substitute nominee designated
by the Board. At this time, we do not anticipate any nominee will be unable to be a candidate for
election or will otherwise decline to serve.
Vacancies
Under our Amended and Restated Bylaws, the Board has the authority to fill any vacancies that
arise, including vacancies created by an increase in the number of directors or vacancies created
by the resignation of a director. Any nominee so elected and appointed by the Board would hold
office for the remainder of the term of office of all directors, which term expires annually at our
annual meeting of stockholders.
Information Regarding the Nominees for Election as Directors
The name of each nominee for election as director, age as of April 29, 2011 and certain additional
information with respect to each nominee concerning his principal occupation, other affiliations,
and business experience during the last five years, are set forth below.
Nominees for Election as Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director |
|
|
Name |
|
Age |
|
Since |
|
Committees |
Charles K. Narang
|
|
|
69 |
|
|
|
1989 |
|
|
|
Terry W. Glasgow
|
|
|
67 |
|
|
|
2007 |
|
|
|
James P. Allen
|
|
|
62 |
|
|
|
2004 |
|
|
Audit (Chair) and Compensation |
John E. Lawler
|
|
|
61 |
|
|
|
2004 |
|
|
Nominating/Governance (Chair) and Audit |
Paul V. Lombardi
|
|
|
69 |
|
|
|
2004 |
|
|
Compensation (Chair) and Audit |
J. Patrick McMahon
|
|
|
69 |
|
|
|
2005 |
|
|
Nominating/Governance and Mergers and Acquisition |
Philip O. Nolan
|
|
|
52 |
|
|
|
2011 |
|
|
Compensation and Mergers and Acquisition |
Stephen L. Waechter
|
|
|
61 |
|
|
|
2007 |
|
|
Mergers and Acquisition (Chair) |
Daniel R. Young
|
|
|
77 |
|
|
|
2005 |
|
|
Compensation and Nominating/Governance |
Charles K. Narang founded our predecessor and wholly owned subsidiary, NCI Information Systems,
Inc., during 1989 and has served as our Chairman and Chief Executive Officer since that time. Mr.
Narang has more than 30 years of experience in corporate management and the analysis of large
financial and information management systems for the Federal Government and Fortune 100 clients.
Mr. Narang holds a Masters degree in Industrial Engineering, a Master of Business Administration
degree, and is a Certified Public Accountant licensed in the Commonwealth of Virginia.
Mr. Narang possesses particular knowledge and experience in providing information technology and
professional services to the Federal Government that strengthen the Boards collective
qualifications, skills, and experience. His demonstrated capabilities in leading and guiding our
Company through 20 years of substantial growth provide the Board with a key understanding of the
Company, its culture, its personnel, and its strengths and weaknesses. These
capabilities combined with his prior business, financial and managerial experience strengthen the
Boards collective qualifications, skills, and experience and make him ideally qualified to lead
NCIs Board.
Page 11
Terry W. Glasgow joined us during 2004. He has served as a director and our President since
February 2007. From February 2007 until July 2008, he served as our President and Chief Operating
Officer. From May 2004 until February 2007, he served as our Chief Operating Officer. He served
as our Executive Vice President of Federal Programs from January 2004 until May 2004. From 1991
through 2003, Mr. Glasgow was the Vice President/General Manager of Computer Sciences Corporations
Army Programs business area. Before 1991, Mr. Glasgow was Vice President of Ford Aerospace and
Communications Army Programs in Colorado Springs. While at Ford Aerospace, Mr. Glasgow held
numerous executive positions, including Controller of its Satellite Division and Vice President and
Controller of its Command, Control, and Communications Division.
Mr. Glasgow possesses significant knowledge and experience in providing information technology and
professional services to Federal Government customers. His experience spans all aspects of our
Companys business activities, including: financial management; business development; and
operations management. His knowledge and experience provides the Board with balanced understanding
of federal procurement activities and market trends. His relevant and detailed understanding of
the Companys market area provides the Board with unique insight into contemporary business issues
and corporate strategy and strengthens the Boards collective qualifications, skills, and
experience.
James P. Allen has served on our Board of Directors since October 2004. Mr. Allen previously
served as Executive Vice President and Chief Financial Officer of Global Defense Technology &
Systems, Inc. (now known as Sotera Defense Solutions, Inc.), a provider of mission-critical
systems and services to the national security agencies of the Federal Government, from May 2009
until September 2010. Previously, Mr. Allen served as the Senior Vice President and Chief
Financial Officer of Veridian Corporation, a publicly traded Federal IT services contractor, from
May 2000 until its sale to General Dynamics Corporation during August 2003. Before Veridian, he
served as CFO for both GRC International, Inc. and CACI International Inc., both publicly traded
companies in the Federal IT services sector.
Mr. Allen possesses particular knowledge and experience in providing financial leadership to
companies of the size and in this industry that provide information technology and professional
services to the Federal Government. Mr. Allens background brings an important capability to the
Board, as well as the Audit Committee, and strengthens the Boards collective qualifications,
skills, and experience.
John E. Lawler has served on our Board of Directors since October 2004. Mr. Lawler is currently
the CEO and Chairman of the Board of Sterling Wealth Management, Inc., a registered investment
advisory firm and President of East West Financial Services, Inc., a diversified financial
management, tax, and consulting firm. Before forming these companies, Mr. Lawler served in
executive positions of two major Washington, D.C. public affairs and governmental relations firms,
including Gray and Company, which he assisted in its IPO and served as its Chief Financial Officer.
Mr. Lawler also served in top administrative positions of the U.S. House of Representatives,
including Chief of the Office of Finance. Mr. Lawler currently serves on the Board of Trustees of
two non-profit endowments and the board of L-1 Identity Solutions (ID), an identity solutions and
biometrics company traded on the New York Stock Exchange where he is that companys designated
financial expert and is chairman of that companys audit committee.
Mr. Lawlers experience has provided him with in-depth knowledge of Federal Government
appropriations and legislative procedures that are key to our business. He also brings an
understanding of investor relations, analyst reporting, and the perspective of the investment
community. As President of East West Financial Services, Inc., he remains abreast of important
governance matters for directors of public companies as well as a financial background that
qualifies him as a designated financial expert. As a result of these and other professional
experiences, Mr. Lawler possesses particular knowledge and experience that strengthen the Boards
collective qualifications, skills, and experience.
Paul V. Lombardi has served on our Board of Directors since October 2004. Mr. Lombardi served as
President and Chief Executive Officer of DynCorp from 1997 until its sale to Computer Sciences
Corporation (CSC) during 2003. Before his association with DynCorp, Mr. Lombardi was employed at
PRC Inc. where he held a variety of executive-level positions, including Senior Vice President and
General Manager of PRCs Applied Management Group, which provided information technology and
systems integration in the Federal IT services sector. Before entering the private sector, Mr.
Lombardi had 17 years of public service in increasing higher executive positions in
the Defense and Energy Departments. Mr. Lombardi currently serves on the Board of Directors of
Vangent, Inc. a managed service company that has publicly traded debt.
Page 12
Mr. Lombardis experiences as a CEO and senior executive at several government information
technology and professional services companies which do business with the Federal Government
provides relevant insight and a breadth of knowledge and experience that strengthen the Boards
collective qualifications, skills, and experience.
J. Patrick McMahon has served on our Board of Directors since January 2005. Mr. McMahon is an
attorney at the firm of General Counsel, P.C. in Mclean, Virginia where he practices corporate law
with a primary focus on companies that offer information technology products and services to the
Federal Government. Before this position, Mr. McMahon served as a legislative attorney for the
Secretary of Defense where he worked with the staffs of all the Uniformed Services and the staffs
of the House and Senate Armed Services Committees. Mr. McMahons other Government service
positions included: legislative attorney for the Secretary of the Navy; Navy Judge Advocate
Generals Office; Administrative Law Division; and U.S. Marine Corps officer. Mr. McMahon serves
as the President and Director of Info4Sure, Inc., a privately held, federal information technology
services company.
Mr. McMahon brings industry expertise in the legal field having advised many businesses throughout
his career. In addition, he offers particular knowledge and experience in providing information
technology and professional services to the Federal Government that strengthen the Boards
collective qualifications, skills, and experience.
Mr. Philip O. Nolan has served on our board since February 2011. Previously, Mr. Nolan was the
Chairman and Chief Executive Officer of Stanley, Inc. (Stanley) a provider of information
technology services and solutions to U.S. defense, intelligence, and federal civilian government
agencies. Prior to joining Stanley in 1989, Mr. Nolan served on active duty in the U.S. Navy from
1981 to 1988, most recently as Deputy Program Manager for Weapons Integration for the Submarine
Launched Cruise Missile Project. Mr. Nolan remained an active member of the U.S. Navy Reserve
following his release from active duty until his retirement in December 2005. Mr. Nolan received a
B.S. degree in physics from the U.S. Naval Academy, an M.S.E. degree in engineering management from
the Catholic University of America and a J.D. degree from George Washington University. Mr. Nolan
serves on the Board of Directors of Camber Corporation and as an outside director for Stratos
Government Services, Inc. In addition, he is on the advisory boards of Pragmatics, Inc. and Blue
Delta Management, LLC.
Mr. Nolans 21 years of service as a senior executive officer and 14-year tenure as President of
Stanley, as well as his prior experience in the armed services, provides the Board of Directors a
deep understanding and appreciation of our business and the customers we serve. His service to
Stanley, together with the leadership positions he has maintained in our industry, provide him with
valuable perspective on leadership and management challenges that face our company.
Stephen L. Waechter has served on our Board of Directors since June 2007. Mr. Waechter currently
serves as Chief Financial Officer and Vice President Business Operations for ARINC, Inc. a provider
of communications, engineering, and integrated solutions for the Aviation/Aerospace/Defense
industries since June 2008. Mr. Waechter served as the Executive Vice President, Chief Financial
Officer, and Treasurer for CACI International Inc. (CACI) from 1999 until his retirement during
January 2007. Before CACI, Mr. Waechter held Chief Financial Officer positions at GTSI Corp.,
Vincam Group, Inc., and Applied Bioscience International, Inc. He began his career at General
Electric during 1974, and progressed through its financial organization, where he became the Vice
President of Finance for GE Information Services from 1989 to 1993. Mr. Waechter serves as a
director for Strategic Diagnostics, Inc. and Social and Scientific Systems, Inc.
Mr. Waechter possesses significant financial and business experience in our market sector. His
experience in financial controllership and management, as well as with mergers and acquisitions
provide important knowledge and information to the Company and the Board. Mr. Waechters prior
experiences with other companies in our market area provide valuable insight to the Board in such
matters and strengthen the Boards collective qualifications, skills, and experience.
Daniel R. Young has served on our Board of Directors since January 2005. Mr. Young is currently
Managing Partner of the Turnberry Group, an advisory practice to CEOs and other senior executives.
He was the Vice Chairman and Chief Executive Officer of Federal Data Corporation (FDC) before
retiring after having served the company in various executive capacities for 25 years. Before
joining FDC, Mr. Young was an executive with Data Transmission Company and before that, he held
various engineering, sales, and management positions at Texas Instruments, Inc. Mr. Young also
served as an officer in the U.S. Navy. He is also a director of GTSI Corp.
Page 13
Mr. Young brings to the Board extensive experience within our market sector spanning 25 years of
managing and directing companies of similar and larger size. In addition, Mr. Young continues to
be active in our market area and has significant insight into market activities and issues. Mr.
Youngs senior executive background provides NCI with a broad range of expertise to include
business strategy, execution and compensation industry practices. His background and experience
strengthen the Boards collective qualifications, skills, and experience.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES
PREVIOUSLY NAMED.
Independence and Composition
The NASDAQ listing standards require that a majority of our Board be independent directors, as
defined in the NASDAQ listing standards. The Board, upon the unanimous recommendation of the
Nominating/Governance Committee, has determined that Messrs. Allen, Lawler, Lombardi, McMahon,
Nolan, Waechter, and Young, representing a majority of our Board, are independent as defined in
the NASDAQ listing standards. The Board made its determination based on information furnished by
all directors regarding their relationships with the Company and third parties as well as research
conducted by management. In addition, the Nominating/Governance Committee consulted with our
General Counsel to ensure that the Boards determination would be consistent with all relevant
securities laws and regulations, as well as the NASDAQ listing standards.
Stockholder Communication with the Board
We believe that it is important for our stockholders to be able to communicate their concerns to
our Board. Stockholders may correspond with any director, committee member, or the Board of
Directors generally by writing to the following address: NCI, Inc., 11730 Plaza America Drive,
Suite 700, Reston, Virginia 20190, Attention: Ms. Michele R. Cappello, Corporate Secretary.
Please specify to whom your correspondence should be directed. Our Corporate Secretary has been
instructed to promptly forward all correspondences to the relevant director, committee member, or
the full Board of Directors, as indicated in your correspondence.
Director Attendance at Annual Meeting of Stockholders
We invite all our directors to attend our annual meeting of stockholders, and we strongly encourage
them all to do so. All our directors serving at the time of the 2010 Annual Meeting of
Stockholders were in attendance.
Code of Ethics
During January 2008, we updated our Code of Ethics, which sets forth the policies composing our
code of conduct. Our policies satisfy the SECs requirements for a code of ethics applicable to
our principal executive officer, principal financial officer, principal accounting officer,
controller, and persons performing similar functions, as well as NASDAQs requirements for a code
of conduct applicable to all directors, officers, and employees. Among other principles, our Code
of Ethics includes guidelines relating to the ethical handling of actual or potential conflicts of
interest, compliance with laws, accurate financial reporting, and procedures for promoting
compliance with (and reporting violations of) such standards. A copy of our Code of Ethics is
available on the About Us page on our website: www.nciinc.com and in print to any stockholder
who requests it. We are required to disclose any amendment to, or waiver from, a provision of our
code of ethics applicable to our principal executive officer, principal financial officer,
principal accounting officer, controller, or persons performing similar functions. We intend to
use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules.
The Boards Role in Risk Oversight
The Board of Directors has oversight responsibility of the processes established by management to
report and monitor systems for material risks applicable to the Company. In addition, the Board
considers the risks inherent in NCIs corporate strategy and offers insight to management relating
to enterprise risk. At Board meetings, the Board considers strategic risks and opportunities as
well as risks to the Companys reputation and reviews risks related to the sustainability of its
operations. The Board regularly receives reports from its committees which include risk oversight
in their areas of responsibility. Presentations from the CFO, as well as operational mangers, are
reviewed and areas of risk are discussed. It is managements responsibility to manage risk and
bring to the Board of Directors attention the most material risks to the Company. The Audit
Committee also regularly reviews risks
associated with treasury (insurance, credit, and debt), financial reporting and accounting, legal,
compliance, information technology security, and other risk areas. The Compensation Committee
considers risks related to the attraction and retention of employees and risks relating to the
design of compensation programs and arrangements. The Compensation Committee also reviews
compensation and benefits plans affecting employees in addition to those applicable to executive
officers. The Nominating/Governance Committee, as part of its regular meeting, reviews ethics
compliance and contract terms and conditions as a means of monitoring enterprise risk associated
with those areas.
Page 14
Board Leadership Structure
Mr. Narang is our Chairman and Chief Executive Officer. Mr. Narang founded the Company over 20
years ago and has grown the Company to over $500 million in revenue. Mr. Narang has approximately
41% economic ownership of the Company and approximately 87% voting ownership of Company. The Board
continues to believe that Mr. Narang is the best person to continue leading the Company for the
foreseeable future. During Board meetings when Mr. Narang is present, he leads the Board.
The lead independent director position is determined by the issues to be discussed by the
independent members of the Board and is lead by the relevant Committee Chairman. Independent
members of the Board met in executive session three times during 2010. Mr. Lawler, as Chairman of
the Nominating /Governance Committee, was the lead director during these executive sessions.
Attendance at Board and Committee Meetings
It is the Companys policy to encourage all directors to attend in person or, if not possible, via
teleconference where feasible, all Board of Directors and Committee meetings. Nevertheless, the
Company recognizes that this may not always be possible due to conflicting personal or professional
commitments. The Board held nine meetings during 2010.
Committees of the Board of Directors
Our Board of Directors has established an Audit Committee, a Compensation Committee, a
Nominating/Governance Committee, and a Mergers and Acquisition Committee. Upon the unanimous
recommendation of the Nominating/Governance Committee, the Board has determined that each member of
all our Committees are independent as director independence is specifically defined with respect to
such members under the NASDAQ listing standards and applicable SEC rules and regulations. A copy
of the charters for the Audit Committee, Compensation Committee, and Nominating/Governance
Committee is available both at the Investors section of the Companys website located at
www.nciinc.com under Governance and in print to any stockholder who requests it.
Audit Committee. The Audit Committee, which consists of Messrs. Allen (chairman), Lombardi, and
Lawler, reviews the professional services provided by our independent registered public accounting
firm, the independence of our independent registered public accounting firm from our management,
our annual and quarterly financial statements, and our system of internal control over financial
reporting. The Audit Committee also reviews other matters with respect to our accounting,
auditing, and financial reporting practices and procedures as it may find appropriate or may be
brought to its attention. Upon the unanimous recommendation of the Nominating/Governance
Committee, our Board has determined Mr. Allen qualifies as an audit committee financial expert as
defined in applicable SEC rules and regulations. The Audit Committee held six meetings during
2010.
Nominating/Governance Committee. The Nominating/Governance Committee, which consists of Messrs.
Lawler (chairman), McMahon, and Young, oversees all aspects of our corporate governance functions;
makes recommendations to the Board regarding corporate governance issues; identifies, reviews, and
evaluates candidates to serve as directors; and makes such other recommendations to the board
regarding affairs relating to our directors. The Nominating/Governance Committee held two meeting
during 2010.
Page 15
Our Nominating/Governance Committee endeavors to identify individuals to serve on the Board who
have expertise that is useful to us and complementary to the background, skills, and experience of
other Board members. The Nominating/Governance Committees consideration of candidates for
membership on the Board may include such factors as (a) the skills of each member of the Board,
including each directors business and management experience, accounting experience, and
understanding of corporate governance regulations and public policy
matters; (b) the characteristics of each member of the Board, which may include leadership
abilities, sound business judgment, and independence; and (c) the general composition of the Board,
which may include public company experience of the directors. The principal qualification for a
director is the ability to act in the best interests of the Company and its stockholders. Each of
the candidates for director named in this proxy statement have been recommended by the
Nominating/Governance Committee and approved by the Board of Directors for inclusion on the
attached proxy card.
Board Diversity. The Company does not have a specific policy on diversity relating to the
selection of nominees for the Board, but the Board believes that while diversity and a variety of
experiences and viewpoints represented on the Board should always be considered, a director nominee
should not be chosen nor excluded solely or largely because of race, color, gender, national
origin, sexual orientation, or identity. In selecting a director nominee, the
Nominating/Governance Committee focuses on diversity in the broadest sense, considering, among
other things, skills, expertise, or background that would complement the existing board,
recognizing that the Companys businesses and operations are unique and focused on the information
technology and professional services to the Federal Government.
The Nominating/Governance Committee also considers director nominees recommended by stockholders.
See the section of this proxy statement titled, Deadline for Stockholder Proposals, for a
description of how stockholders desiring to make nominations for directors and/or to bring a proper
subject before a meeting should do so. The Nominating/Governance Committee evaluates director
candidates recommended by stockholders in the same manner as it evaluates director candidates
recommended by our directors, management, or employees.
Compensation Committee
General. The Compensation Committee presently consists of Messrs. Lombardi (chairman), Allen,
Nolan, and Young. Mr. Nolan joined our Board of Directors and the Compensation Committee in
February 2011. Mr. Nolan did not participate in any meetings prior to his joining the Board of
Directors. The Compensation Committee held three meetings during 2010. The Compensation Committee
typically meets with the Chief Executive Officer and, where appropriate, the General Counsel and
other members of management. The Compensation Committee also regularly meets in executive session
without management. When determining executive compensation, the Compensation Committee typically
reviews the following materials, among others:
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Financial reports on year-to-date performance versus budget and compared to prior year
performance. |
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Calculations and reports on levels of achievement of individual and corporate
performance objectives. |
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Reports on NCIs strategic objectives and budget for future periods. |
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Information on the executive officers stock ownership and option holdings. |
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Peer companies information regarding compensation programs and compensation levels. |
These materials may also be reviewed during regular Board of Directors meetings.
Role of the Compensation Committee. The Compensation Committee is responsible for (i) overseeing
the determination, implementation, and administration of the remuneration (including compensation,
benefits, bonuses, and perquisites) of all directors and executive officers of the Company, (ii)
reviewing and approving equity compensation to be paid to other Company employees, and (iii)
administering the Companys stock-based compensation plans. Our compensation program and policies
are designed to help us attract, motivate, and retain executives of outstanding ability to maximize
return to stockholders.
Page 16
Managements Role in the Compensation-Setting Process. Management plays a significant role in the
compensation-setting process. The most significant aspects of managements role are:
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Evaluating employee performance; |
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Establishing business performance targets and objectives; and |
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Recommending salary levels and option awards. |
The Chief Executive Officer works with the Compensation Committee Chair in establishing the agenda
for Compensation Committee meetings. Management also prepares meeting information for each
Compensation Committee meeting. The Chief Executive Officer also participates in Compensation
Committee meetings at the Compensation Committees request to provide:
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Background information regarding NCIs strategic objectives; |
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His evaluation of the performance of the senior executive officers; and |
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Compensation recommendations as to senior executive officers (other than himself). |
Delegation of Authority. Although our Chief Executive Officer may recommend to the Compensation
Committee awards to our executive officers, the Compensation Committee approves the grant of all
awards to executive officers under the Companys Amended and Restated 2005 Performance Incentive
Plan (the Plan). However, annually, the Compensation Committee allocates a pool of stock options
and delegates to management the right to grant stock options from the pool to non-executive
employees based on specific guidelines for recruitment, performance incentive, and retention
purposes (the Stock Option Allocation Guidelines for non-executives). Any option grants that
fall outside the Stock Option Allocation Guidelines must be approved by the Compensation Committee.
Compensation Committee Interlocks and Insider Participation. No members of our Compensation
Committee during fiscal year 2010 were officers or employees of the Company or former officers of
the Company and no members of our Compensation Committee had any relationship with the Company
during fiscal year 2010 requiring disclosure as a related party transaction under the SECs rules.
None of our executive officers in fiscal year 2010 served as a director or member of the
compensation committee (or other board committee performing equivalent functions) of any other
entity which had an executive officer serving as one of our directors or a member of our
Compensation Committee.
Page 17
EXECUTIVE OFFICERS
Charles K. Narang, 69, founded our predecessor and wholly owned subsidiary, NCI Information
Systems, Inc., during 1989 and has served as our Chairman and Chief Executive Officer since that
time. Mr. Narang is our Principal Executive Officer. Mr. Narang has more than 30 years of
experience in corporate management and the analysis of large financial and information management
systems for the Federal Government and Fortune 100 clients. He holds a Masters degree in
Industrial Engineering, a Master of Business Administration degree, and is a Certified Public
Accountant licensed in the Commonwealth of Virginia.
Terry W. Glasgow, 67, joined us during 2004. He has served as a director and our President since
February 2007. From February 2007 until July 2008, he served as our President and Chief Operating
Officer. From May 2004 until February 2007, he served as our Chief Operating Officer. He served
as our Executive Vice President of Federal Programs from January 2004 until May 2004. From 1991
through 2003, Mr. Glasgow was the Vice President/General Manager of Computer Sciences Corporations
Army Programs business area. Before 1991, Mr. Glasgow was Vice President of Ford Aerospace and
Communications Army Programs in Colorado Springs. While at Ford Aerospace, Mr. Glasgow held
numerous executive positions, including Controller of its Satellite Division and Vice President and
Controller of its Command, Control, and Communications Division.
Michele R. Cappello, 60, joined NCI during August 1997. Since February 2009, she has served as our
Senior Vice President and General Counsel. From August 1997 until February 2009, she served as
General Counsel and Vice President of Contracts and Purchasing. In addition, she is the corporate
secretary. Ms. Cappello has more than 25 years of experience in Government contract procurement
and is responsible for all legal, contractual, and purchasing matters for the corporation. Before
joining NCI, Ms. Cappello spent 10 years as in-house Counsel to Network Solutions, Inc. and its
spin-off company, Netcom Solutions International, as well as positions with Boeing Computer Systems
and Computer Data Systems, Inc. Ms. Cappello received her JD from George Mason University School
of Law.
Page 18
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee of the Companys Board of Directors is composed of Messrs. Allen, Lawler, and
Lombardi. Upon the unanimous recommendation of the Nominating/Governance Committee, the Board has
determined that each member of our Audit Committee is independent as defined under the NASDAQ
listing standards and applicable SEC rules and regulations. Upon the unanimous recommendation of
the Nominating/Governance Committee, our Board has also determined that each director meets the
audit committee composition requirements in the NASDAQ listing standards and that Mr. Allen
qualifies as an audit committee financial expert as defined in applicable SEC rules and
regulations.
In accordance with a written charter adopted by the Board, the Audit Committee assists the Board in
fulfilling its responsibility for overseeing the quality and integrity of the NCI, Inc. financial
reporting processes. The Audit Committee reviews and reassesses the adequacy of the charter on a
regular basis, and at least annually. The Audit Committee Charter is available both at the
Investors section of the Companys website located at www.nciinc.com and in print to any
stockholder who requests it.
Management is responsible for the Companys internal control over financial reporting and the
financial reporting process. The Companys independent registered public accounting firm is
responsible for performing an independent audit of the Companys consolidated financial statements
in accordance with U.S. generally accepted accounting principles and issuing a report on those
consolidated financial statements and issuing a report on internal controls over financial
reporting. The Audit Committee is responsible for monitoring and overseeing these processes. In
fulfilling its responsibilities set forth in the Audit Committee Charter, the Committee has
accomplished, among other things, the following:
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It has reviewed and discussed the audited financial statements for 2010 with management. |
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|
It has discussed with its independent registered public accounting firm, Ernst & Young
LLP, the matters required to be discussed by Statements on Auditing Standards No. 61,
Communications with Audit Committees (SAS 61), as amended and adopted by the Public Company
Accounting Oversight Board (PCAOB) in Rule 3200T. |
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|
It has received from Ernst & Young LLP, written disclosures and the letter required by
applicable PCAOB rules regarding the independent registered public accounting firms
communications with the Audit Committee concerning independence. |
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|
It has discussed with Ernst & Young LLP its independence from us. |
Based on its discussions with management and the independent registered public accounting firm, and
its review of the representations and information provided by management and the independent
registered public accounting firm, the Audit Committee recommended to the Companys Board of
Directors that the audited consolidated financial statements be included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2010 for filing with the SEC.
Dated as of April 29, 2011
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
James P. Allen, Chairman
John E. Lawler
Paul V. Lombardi
Page 19
COMPENSATION DISCUSSION AND ANALYSIS
Our Compensation Discussion and Analysis addresses the following topics:
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Our compensation objectives and elements of executive compensation; |
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Our compensation-setting process; |
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Components of our executive compensation program; and |
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Our compensation decisions for 2010 and base compensation for 2011. |
In this Compensation Discussion and Analysis section, the term Committee refers to the
Compensation Committee of NCIs Board of Directors.
Compensation Objectives and Elements of Executive Compensation
The primary objectives of our executive compensation program are to:
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Provide total compensation opportunities that are competitive with opportunities
provided to executives of comparable companies at comparable levels of performance; |
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Ensure that our executives total compensation levels vary based on both our short-term
financial performance and growth in stockholder value over time; |
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Focus and motivate executives on the achievement of defined objectives; and |
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Reward executives in accordance with their relative contributions to achieving strategic
milestones and upholding key mission-related objectives. |
In designing and administering our executive compensation program, we attempt to strike an
appropriate balance among these objectives. At present, the Board of Directors does not prescribe
any stock ownership guidelines for our executive officers.
The Board, through the Compensation Committee, annually revisits the manner in which it implements
our compensation policies in connection with executive staff. Our policies will continue to be
designed to align the interests of our executives and senior staff with the long-term interests of
the stockholders. Our executive compensation programs consist of three principal elements:
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Base compensation (consisting of salary); |
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Short-term incentive compensation (consisting of cash bonuses); and |
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Long-term incentive compensation (consisting of equity-based awards under the Incentive
Compensation Plan). |
Executive officers also receive certain benefits and other perquisites.
The Compensation Committee Process
Annual Evaluation
The Committee meets in executive session each year to evaluate the performance of the named
executive officers, determine their annual bonuses for the prior year, establish their annual
performance objectives for the current year, set their base salaries for the current year
(effective February 1), and consider and approve any grants to them of equity incentive
compensation.
Although many compensation decisions are made in the first quarter of the year, our
compensation-planning process neither begins nor ends with any particular Committee meeting.
Compensation decisions are designed to promote our fundamental business objectives and strategy.
Business and succession planning, evaluating management performance, and considering the business
environment are year-round processes.
The Compensation Committee reviewed a peer group analysis, as well as information on the current
economic environment on executive compensation. The Committee felt the Company was in line with
peer trends as far as compensation type and amounts, and that the current economic environment was
considered and the committee acted accordingly.
Page 20
Performance Objectives
Our process begins with establishing individual and corporate performance objectives for senior
executive officers in the first quarter of each year. We engage in an active dialog with the Chief
Executive Officer concerning strategic objectives and performance targets. We review the
appropriateness of the financial measures used in incentive plans and the degree of difficulty in
achieving specific performance targets. Quarterly during the year, we review company performance
against the metrics set during the first quarter.
Certain members of senior management, including the named executive officers, are incentivized to
reach certain financial milestones such as revenue, net income, days sales outstanding, and other
financial measures. Presently, we do not have a claw back policy for financial bonuses other
than that imposed by Section 304 of the Sarbanes-Oxley Act. The claw back feature of Section 304
of the Sarbanes-Oxley Act is limited to the chief executive and chief financial officers and is
based on misconduct that results in material noncompliance with the issuer of the financial
reporting requirements of the federal securities laws. We believe we have sufficient financial
policies and procedures in place to prevent situations where a claw back policy would be necessary.
We have determined that it is not reasonably likely that our compensation and benefit plans would
have a material adverse effect on the Company. The Company has reached its conclusion using
benchmarking against peer companies executives to ensure the Companys compensation policies and
practices are in line with those peer companies. The Company also does not base executive
compensation solely on one financial criterion, such as earnings per share, but on several critical
success factors so as to not place all of managements focus on achieving a single financial
objective. The financial targets are all Company-wide objectives which limit the ability of a
single person to influence individual or corporate wide incentive payouts. Thus the Company
mitigates potential short-term excessive risk taking and aligns executives compensation with
increasing long-term shareholder value.
Benchmarking
While we recognize that our compensation practices must be competitive in the marketplace, and that
benchmarking is one of many factors that we consider in assessing the reasonableness of
compensation, we do not believe that it is appropriate to establish compensation levels based
entirely on benchmarking. For purposes of reviewing pay practices, we generally consider the
following companies to be our peer group: CACI International, Inc., Dynamics Research Corporation,
Global Defense Technology & Systems, Inc. (now known as Sotera Defense Solutions, Inc.), ICF
International, Inc., ManTech International Corporation, and SRA International, Inc. We gather this
information from the most recent public documents and filings. We also evaluate our pay practices
against various salary surveys.
During 2009, the Compensation Committee engaged Mercer, LLC (Mercer, a contracted Human Resources
Consultant) to review the executive (Section 16 and below) and director compensation paid by the
Company, as compared with peer companies of a similar size. During December 2010, Mercer briefed
the Compensation Committee on the current conditions of the market and changes since the 2009
review. However, Mercer did not provide specific market ranges for the different elements of
compensation and therefore we did not use benchmark when setting the different elements of
compensation for 2010. Mercer provided information to the Committee and did not participate in the
decision making process.
In addition, Mercer also provides other services related to our various healthcare plans and
related benefits. Mercer was paid approximately $5,000 for all services during 2010.
Committee Effectiveness
The Committee reviews, on an annual basis, its performance, the committee charter, and the
effectiveness of our compensation programs in obtaining desired results. During 2010, there were
no significant changes to the Compensation Committees processes and the Committee judged its
performance effective.
Page 21
Tax and Accounting Considerations
We select and implement the elements of compensation for their ability to help us achieve the
objectives of our compensation program and not based on any unique or preferential financial
accounting or tax treatment. However, when awarding compensation, the Committee is mindful of the
level of earnings per share dilution and accounting impact that will be caused as a result of the
compensation expense related to the Committees actions. In addition,
Section 162(m) of the Internal Revenue Code provides that public companies cannot deduct
non-performance-based compensation paid during any taxable year to the Chief Executive Officer,
Chief Financial Officer, and any of the three other most highly compensated executive officers, in
excess of $1 million per year. This provision excludes certain forms of performance-based
compensation from the compensation taken into account for purposes of the limit. We have not
adopted a policy requiring that all compensation be deductible and expect that we may pay
compensation that is not deductible when necessary to achieve our compensation objectives. For
example, awards under the discretionary individual performance metric of our Short-Term Incentive
Compensation Plan would not be eligible for deduction if the $1 million limit for any affected
executive were to be exceeded, which we do not currently believe to be the case. We consider the
consequences of Section 162(m) when determining executive compensation and believe that we have
structured our current compensation programs in a manner to allow us to fully deduct executive
compensation under Section 162(m) of the Internal Revenue Code, although this result cannot be
assured. The Board will continue to assess the impact of Section 162(m) of the Internal Revenue
Code on its compensation practices and determine what further action, if any, is appropriate.
Components of our Executive Compensation
Base Compensation
Our base compensation, which consists of salary, is a market-based plan referencing our peer group
to ensure competitive pay levels. Base compensation is reviewed no less than annually. We
consider the year-to-year rate increases to be in line with industry standards and the broad
economic conditions of the country.
Short-Term Incentive Compensation
Our compensation philosophy emphasizes incentive pay to leverage both individual and organizational
performance. Our short-term incentive compensation program, which consists of cash bonuses,
rewards achievement of primarily annual organizational, business unit, and individual objectives.
In addition, we may also use discretionary cash bonuses as part of our executive compensation
program. These discretionary awards are usually tied to extraordinary performance during the
period.
Long-Term Incentive Compensation
Our long-term incentive compensation program, which consists of awards under the Plan, is designed
to reward executives and other employees for long-term growth consistent with Company performance
and stockholder return and is not specifically tied to a particular period of performance. The
ultimate value of the long-term incentive compensation awards is dependent upon the actual
performance of our stock price over time. The Compensation Committee must review and approve all
award grants to the executive officers. When making grants under the Plan, the Committee takes
into account the potential dilution to which our stockholders are exposed by reviewing our option
overhang. Option overhang, which is represented in percentage form, is calculated as stock options
granted plus the remaining options that have yet to be granted under the Plan divided by our total
shares outstanding.
Our Compensation Decisions for 2010 and Base Compensation for 2011
This section describes the compensation decisions that we made with respect to the named executive
officers for 2010 and during the first quarter of 2011.
Executive Summary
During 2010, we applied the compensation principles described above in determining the compensation
of our named executive officers.
In summary, the compensation decisions made during 2010 and the first quarter of 2011 for the named
executive officers were as follows:
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We increased base salaries for the named executive officers on a weighted-average basis
by 4.8%. |
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Short-term incentive compensation represented approximately 40% of the cash compensation
paid to the named executive officers for 2010 (this excludes Mr. Parker and Ms. Bjornaas
who resigned during 2010). |
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There were no long-term incentive compensation awards granted for 2010. |
Page 22
We believe that these decisions:
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Are consistent with our core compensation principles, |
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Reinforce our pay for performance culture, |
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Promote the interests of long-term stockholders, and |
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Are reasonable and responsible, and within the average of the industry peer group. |
Base Compensation
The Chief Executive Officer presents to the Committee recommendations for base salary adjustments
for the executive officers (other than himself) and those officers reporting directly to the Chief
Executive Officer. Individual adjustments are reviewed and approved by the Compensation Committee
based upon individual achievement and contribution. In addition, the Compensation Committee
reviews peer company data for executive compensation, which it uses in determining the appropriate
cash and total executive compensation. Base salaries for our named executive officers are adjusted
annually as of February 1.
The following table sets forth recent base salary information for our named executive officers:
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2011 |
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2010 |
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|
Base Salary |
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Base Salary |
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(Feb. 1, 2011 to |
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|
(Feb. 1, 2010 to |
|
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Percentage |
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Name |
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Jan. 31, 2012) |
|
|
Jan. 31, 2011) |
|
|
Increase |
|
Charles K. Narang |
|
$ |
550,213 |
|
|
$ |
525,013 |
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4.8 |
% |
Terry W. Glasgow |
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440,175 |
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420,014 |
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4.8 |
|
Michele R. Cappello |
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270,117 |
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257,254 |
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5.0 |
|
In setting these base salaries, we considered:
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The compensation philosophy and guiding principles described above; |
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Experience and industry knowledge of the named executive officers and the quality and
effectiveness of their leadership at the Company; |
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All the components of executive compensation, including base salary, bonus, stock
options, and benefits and perquisites; |
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Mix of performance pay to total compensation; |
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Internal pay equity among named and other NCI senior executives; and |
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Base salary paid to the officers in comparable positions at peer group companies. |
Short-Term Incentive Compensation
Incentive Compensation Plan
The Compensation Committee is responsible for approving bonus awards recommended to it for the
Chief Executive Officer, the other named executive officers and for approving the total actual
bonus pool. Bonus awards for 2010 were reviewed and approved by the Compensation Committee at its
meeting during February 2011, and bonus payments were made during March 2011. The payouts under
the Short-Term Incentive Compensation Plan (the ICP) are determined by the Companys performance
related to the following factors: revenue, net income, and days sales outstanding, as well as a
discretionary individual performance factor.
The table below illustrates the potential cash incentive award payable, which we refer to as the
ICP award potential, at each performance level (i.e., threshold, target or maximum) as a percentage
of 2010 base salary for each named executive officer:
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Threshold |
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Maximum |
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Name |
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Performance |
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Target Performance |
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Performance |
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Charles K. Narang |
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|
62.5 |
% |
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125.0 |
% |
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162.5 |
% |
Terry W. Glasgow |
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37.5 |
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75.0 |
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97.5 |
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Michele R. Cappello |
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25.0 |
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50.0 |
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65.0 |
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ICP award potential is a reflection of the achievement, at threshold, target, or maximum
performance levels, within each of the Company performance measures, as well as the discretionary
performance measure. The discretionary component takes into account individual performance and
factors, such as achievement toward corporate strategic
objectives, leadership, executive development, and succession planning.
Page 23
Generally, the bonus payments will be scaled linearly by the Committee if the performance level
falls between the threshold and target or target and maximum performance levels.
The table below illustrates the performance levels the Compensation Committee set for 2010.
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Threshold |
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Target |
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Maximum |
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Revenue (in millions) |
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$ |
530.0 |
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$ |
550.0 |
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$ |
577.5 |
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Net Income (in millions) |
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$ |
24.3 |
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$ |
25.4 |
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$ |
26.7 |
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Days Sales Outstanding |
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76 |
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74 |
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72 |
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The Compensation Committee determined:
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The Company exceeded maximum revenue performance. |
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The Company did not meet threshold net income performance, |
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The Company exceeded maximum days sales outstanding performance, and |
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Mr. Glasgow and Ms. Cappello achieved target for their personal performance. |
The performance measures for each named executive officer were weighed according to the following
schedule as a percentage of 2010 base salaries:
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Days Sales |
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Personal |
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Revenue |
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Net Income |
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Outstanding |
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Performance |
|
Charles K. Narang |
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40 |
% |
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50 |
% |
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10 |
% |
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Terry W. Glasgow |
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40 |
% |
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40 |
% |
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10 |
% |
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10 |
% |
Michele R. Cappello |
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40 |
% |
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40 |
% |
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10 |
% |
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10 |
% |
Cash bonuses awarded under the ICP excluding the individual discretionary portion are reflected in
the Non-Equity Incentive Plan Compensation column of our Summary Compensation Table below. The
individual discretionary portion of the ICP is reflected in the Bonus column of our Summary
Compensation Table below. The Compensation Committee determined that Mr. Glasgow and Ms. Cappello
exceeded individual performance levels for 2010 and were awarded the maximum amount available to
each. There were no set individual performance factors used in determining this individual
performance. Rather, the determination is based on a subjective evaluation of the individuals
overall performance during the year, as set forth more fully in the footnotes to the following
table. Mr. Narang was not eligible for a personal performance portion under the ICP for 2010. Mr.
Glasgow was eligible for an additional amount of up to 25% of base pay based on establishing a
succession plan for the executive management team.
Based on the achievements outlined above, the Compensation Committee approved the following
management performance incentive payments based on 2010 results:
|
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Name |
|
Percentage of Base Salary |
|
Charles K. Narang |
|
|
81 |
% |
Terry W. Glasgow (1) |
|
|
75 |
% |
Michele R. Cappello (2) |
|
|
38 |
% |
|
|
|
(1) |
|
The Compensation Committee awarded Mr. Glasgow $31,501 in regards to
the personal performance portion of the ICP which is included in the
Bonus column of the Summary Compensation Table. The Compensation
Committee awarded Mr. Glasgow $78,753 for his efforts regarding
corporate succession planning which is included in the Bonus column of
the Summary Compensation Table. |
|
(2) |
|
The Compensation Committee awarded Ms. Cappello $12,863 in regards to
the personal performance portion of the ICP which is included in the
Bonus column of the Summary Compensation Table. |
Other Short-Term Compensation
Acquisition Bonus Plan
The Compensation Committee approved the Acquisition Incentive Bonus Plan (ABP) during 2007. The
ABP is designed to provide cash incentive awards to the named executive officers and other
employees involved with the Mergers and Acquisition (M&A) process. The Chief Executive Officer is
responsible for recommending to the Committee any cash incentives under the ABP to the named
executive officers other than himself.
Page 24
Recommendations are based on the level of involvement in the M&A process, the amount of time and
effort expended in addition to day-to-day duties, and the size and complexity of the transaction.
A bonus pool is created for all completed transactions and will be paid out in two installments.
The initial bonus pool will be calculated as 0.25% of the acquisition targets trailing 12-month
revenue (TTM) at the time of acquisition. Initial bonus pool payments will typically be paid
within 60 days of closing. A profit-based bonus pool will be calculated six months after the
acquisition closing as 2.5% of the acquisition targets adjusted earnings before interest, taxes,
depreciation, and amortization (EBITDA) for the six months following the close. Adjustments to
EBITDA will be for unusual or non-recurring expenses related to the transaction, which occur during
the six months following the transaction. Profit-based bonus pool payments will typically be paid
within 60 days after the date that is six months following closing of the acquisition.
Profit-based bonus pool payments will not be made if the targets adjusted EBITDA margin during the
six-month period following the closing of the acquisition is less than 8%. Adjusted EBITDA margin
is calculated as the targets adjusted EBITDA over the six-month period following the closing of
the acquisition divided by the targets revenue over the same period. The Chief Executive Officer
can recommend increases to the pools or that no amounts are paid out under the plan.
During 2010, we did not acquire any companies and there were no awards made under the ABP.
Long-Term Incentive Compensation
Our long-term incentive-compensation plan is not necessarily tied to specific periods of
performance. There have been no long-term incentive-compensation awards granted to any named
executive officer through March 2011. The amounts listed in Summary Compensation Table and the
Grants of Plan-Based Awards Table as Option Awards for 2010 are stock option grants were granted
during March 2010.
Benefits and Other Perquisites
Our executive officers are eligible to participate in the employee benefit and welfare plans that
the Company maintains on similar terms as employees who meet applicable eligibility criteria,
subject to any legal limitations on the amounts that may be contributed or the benefits that may be
payable under such plans. In addition, the Company leases an automobile for the use of our Chief
Executive Officer.
We do not consider perquisites to be a principal component of our executive officers compensation.
We believe that our executive officer benefit and perquisite programs provided are reasonable and
competitive with benefits and perquisites provided to executive officers of our peer group
companies, and are necessary to sustain a fully competitive executive compensation program.
Page 25
Summary Compensation Table
The following table summarizes the compensation paid to or earned by our named executive officers
serving as such during 2010, 2009, and 2008.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Incentive Plan |
|
|
Other |
|
|
Total |
|
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
Compensation |
|
|
|
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) * |
|
|
($) ** |
|
|
($) |
|
|
($) |
|
|
Notes |
|
Charles K. Narang |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
521,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
426,573 |
|
|
|
24,982 |
|
|
|
973,439 |
|
|
|
(1 |
) |
2009 |
|
|
497,493 |
|
|
|
153,609 |
|
|
|
|
|
|
|
|
|
|
|
586,391 |
|
|
|
25,275 |
|
|
|
1,262,768 |
|
|
|
|
|
2008 |
|
|
466,266 |
|
|
|
116,930 |
|
|
|
|
|
|
|
|
|
|
|
330,070 |
|
|
|
21,532 |
|
|
|
934,798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry W. Glasgow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
417,513 |
|
|
|
110,254 |
|
|
|
|
|
|
|
445,440 |
|
|
|
204,757 |
|
|
|
6,038 |
|
|
|
1,184,002 |
|
|
|
(2 |
) |
2009 |
|
|
397,921 |
|
|
|
80,032 |
|
|
|
|
|
|
|
301,000 |
|
|
|
281,468 |
|
|
|
5,902 |
|
|
|
1,066,323 |
|
|
|
|
|
2008 |
|
|
371,878 |
|
|
|
123,463 |
|
|
|
|
|
|
|
182,000 |
|
|
|
197,515 |
|
|
|
6,317 |
|
|
|
881,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele R. Cappello |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
255,723 |
|
|
|
12,863 |
|
|
|
|
|
|
|
226,157 |
|
|
|
83,608 |
|
|
|
7,347 |
|
|
|
585,698 |
|
|
|
(3 |
) |
2009 |
|
|
243,587 |
|
|
|
28,660 |
|
|
|
|
|
|
|
120,400 |
|
|
|
116,340 |
|
|
|
7,329 |
|
|
|
516,316 |
|
|
|
|
|
2008 |
|
|
226,385 |
|
|
|
77,297 |
|
|
|
|
|
|
|
72,800 |
|
|
|
80,060 |
|
|
|
5,756 |
|
|
|
462,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William M. Parker |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
2010 |
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,511 |
|
|
|
77,511 |
|
|
|
|
|
2009 |
|
|
334,254 |
|
|
|
4,000 |
|
|
|
|
|
|
|
240,800 |
|
|
|
|
|
|
|
854,284 |
|
|
|
1,433,338 |
|
|
|
|
|
2008 |
|
|
289,174 |
|
|
|
192,928 |
|
|
|
|
|
|
|
332,600 |
|
|
|
108,072 |
|
|
|
27,488 |
|
|
|
950,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judith L. Bjornaas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
293,571 |
|
|
|
|
|
|
|
|
|
|
|
356,357 |
|
|
|
|
|
|
|
20,677 |
|
|
|
670,605 |
|
|
|
(5 |
) |
2009 |
|
|
298,083 |
|
|
|
63,899 |
|
|
|
|
|
|
|
180,600 |
|
|
|
211,101 |
|
|
|
7,779 |
|
|
|
761,462 |
|
|
|
|
|
2008 |
|
|
274,888 |
|
|
|
100,459 |
|
|
|
|
|
|
|
109,200 |
|
|
|
145,898 |
|
|
|
7,814 |
|
|
|
638,259 |
|
|
|
|
|
|
|
|
* |
|
The amounts represent the value of the awards granted during the year
in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification Topic 718, CompensationStock
Compensation. For a discussion of the valuation of these awards,
please refer to Note 13 in the notes to our consolidated financial
statements in our Annual Report on Form 10-K for the year ended
December 31, 2010. |
|
** |
|
The amounts represent the cash bonuses awarded to the named executive
officers, which are discussed under Compensation Discussion and
AnalysisOur Compensation Decisions for 2010 and Base Compensation
for 2011 Short-Term Incentive Compensation. |
|
(1) |
|
Mr. Narang |
|
|
|
For 2010: |
|
|
|
The amount for Other Compensation represents payments on an automobile
lease ($16,075), 401(k) matching ($6,469), and excess group life
insurance payments ($2,438). |
|
|
|
For 2009: |
|
|
|
The amount relating to the personal performance portion of the ICP was
$153,609. The amount for Other Compensation represents payments on an
automobile lease ($16,075), 401(k) matching ($6,762), and excess group
life insurance payments ($2,438). |
|
|
|
For 2008: |
|
|
|
The amount relating to the personal performance portion of the ICP was
$116,930. The amount for Other Compensation represents payments on an
automobile lease ($14,250), 401(k) matching ($4,844), and excess group
life insurance payments ($2,438). |
|
(2) |
|
Mr. Glasgow |
|
|
|
For 2010: |
|
|
|
The amount relating to the personal performance portion of the ICP was
$31,501. Mr. Glasgow was awarded $78,753 for developing a succession
plan. The amount for Other Compensation represents payments of 401(k)
matching and excess group life insurance payments. |
|
|
|
For 2009: |
|
|
|
The amount relating to the personal performance portion of the ICP was
$73,532. The amounts relating to the ABP was $6,500. The amount for
Other Compensation represents payments of 401(k) matching and excess
group life insurance payments. |
|
|
|
For 2008: |
|
|
|
The amount relating to the personal performance portion of the ICP was
$70,485. The amounts relating to the ABP was $52,978. The amount for
Other Compensation represents payments of 401(k) matching and excess
group life insurance payments. |
Page 26
|
|
|
(3) |
|
Ms. Cappello |
|
|
|
For 2010: |
|
|
|
The amount relating to the personal performance portion of the ICP was $12,863. The amount for Other Compensation
represents payments of 401(k) matching and excess group life insurance payments. |
|
|
|
For 2009: |
|
|
|
The amount relating to the personal performance portion of the ICP was $23,660. The amounts relating to the ABP was
$5,000. The amount for Other Compensation represents payments of 401(k) matching and excess group life insurance
payments. |
|
|
|
For 2008: |
|
|
|
The amount relating to the personal performance portion of the ICP was $28,940. The amounts relating to the ABP was
$48,357. The amount for Other Compensation represents payments of 401(k) matching and excess group life insurance
payments. |
|
(4) |
|
Mr. Parker |
|
|
|
Mr. Parker was named our Chief Operating Officer effective July 1, 2008. Mr. Parker resigned effective January 11, 2010. |
|
|
|
For 2010: |
|
|
|
The amount for Other Compensation represents payments for accrued vacation ($47,600), 401(k) matching (700), and excess
group life insurance payments ($1,211). |
|
|
|
For 2009: |
|
|
|
The amounts relating to the ABP was $4,000. The amount for Other Compensation represents payments for severance
($420,000), 401(k) matching ($4,512), excess group life insurance payments ($1,211), and the amounts represent the value
of the awards accelerated in conjunction with Mr. Parkers resignation in accordance with U.S. Generally Accepted
Accounting Principles ($428,561). |
|
|
|
For 2008: |
|
|
|
The amount relating to the personal performance portion of the ICP was $67,928. Mr. Parker received a retention bonus
of $125,000. The amount for Other Compensation represents payments for a housing allowance ($21,250), 401(k) matching
($5,625), and excess group life insurance payments ($613). |
|
(5) |
|
Ms. Bjornaas |
|
|
|
Ms. Bjornaas resigned effective December 7, 2010. |
|
|
|
For 2010: |
|
|
|
The amount for Other Compensation represents payments for accrued vacation ($11,639), 401(k) matching ($8,607), and
excess group life insurance payments ($431). |
|
|
|
For 2009: |
|
|
|
The amount relating to the personal performance portion of the ICP was $58,899. The amounts relating to the ABP was
$5,000. The amount for Other Compensation represents payments of 401(k) matching and excess group life insurance
payments. |
|
|
|
For 2008: |
|
|
|
The amount relating to the personal performance portion of the ICP was $52,102. The amounts relating to the ABP was
$48,357. The amount for Other Compensation represents payments of 401(k) matching and excess group life insurance
payments. |
Grants of Plan-Based Awards
This following table includes awards under our ICP for and options granted during 2010. Payments
under the ICP were paid to the participant during March 2011 and are reflected in the Non-Equity
Incentive Plan Compensation column of our Summary Compensation Table above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards; |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under |
|
|
Securities |
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards |
|
|
Underlying |
|
|
|
|
|
|
Fair Value of |
|
|
|
Grant |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Options |
|
|
Exercise |
|
|
Option |
|
Name |
|
Date |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
(1) |
|
|
Price |
|
|
Awards |
|
Charles K. Narang |
|
|
(2 |
) |
|
|
328,133 |
|
|
|
656,266 |
|
|
|
853,146 |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Terry W. Glasgow |
|
|
(2 |
) |
|
|
157,505 |
|
|
|
315,010 |
|
|
|
409,514 |
|
|
|
34,212 |
|
|
|
29.04 |
|
|
|
445,440 |
|
Michele R. Cappello |
|
|
(2 |
) |
|
|
64,314 |
|
|
|
128,627 |
|
|
|
167,215 |
|
|
|
17,370 |
|
|
|
29.04 |
|
|
|
226,157 |
|
William M. Parker
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judith L. Bjornaas
(3) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,370 |
|
|
|
29.04 |
|
|
|
356,357 |
|
|
|
|
(1) |
|
These options vest in four equal annual installments beginning March 1, 2011. |
|
(2) |
|
All non-equity incentive awards were paid during March 15, 2011 and all stock options were granted on March 1, 2010. |
|
(3) |
|
Mr. Parker resigned effective January 11, 2010. Ms. Bjornaas resigned effective December 7, 2010. |
Page 27
Outstanding Equity Awards as of December 31, 2010
The following table sets forth certain information with respect to option awards outstanding as of
December 31, 2010 for each of the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
|
|
|
|
|
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
|
|
Securities |
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
|
|
Underlying |
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
|
Options |
|
|
Options |
|
|
Unearned |
|
|
Exercise |
|
|
Expiration |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
Options |
|
|
Price |
|
|
Date |
|
Charles K. Narang |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry W. Glasgow |
|
|
39,473 |
|
|
|
|
|
|
|
|
|
|
|
10.00 |
|
|
|
4/21/2014 |
|
|
|
|
26,315 |
|
|
|
|
|
|
|
|
|
|
|
10.00 |
|
|
|
9/13/2014 |
|
|
|
|
37,500 |
|
|
|
12,500 |
(a) |
|
|
|
|
|
|
15.37 |
|
|
|
2/26/2014 |
|
|
|
|
12,500 |
|
|
|
12,500 |
(b) |
|
|
|
|
|
|
18.55 |
|
|
|
3/13/2015 |
|
|
|
|
6,250 |
|
|
|
18,750 |
(c) |
|
|
|
|
|
|
26.97 |
|
|
|
2/23/2016 |
|
|
|
|
|
|
|
|
34,212 |
(d) |
|
|
|
|
|
|
29.04 |
|
|
|
3/1/2017 |
|
Michele R. Cappello |
|
|
37,473 |
|
|
|
|
|
|
|
|
|
|
|
6.65 |
|
|
|
2/2/2013 |
|
|
|
|
13,157 |
|
|
|
|
|
|
|
|
|
|
|
10.00 |
|
|
|
11/09/2014 |
|
|
|
|
7,500 |
|
|
|
2,500 |
(a) |
|
|
|
|
|
|
15.37 |
|
|
|
2/26/2014 |
|
|
|
|
5,000 |
|
|
|
5,000 |
(b) |
|
|
|
|
|
|
18.55 |
|
|
|
3/13/2015 |
|
|
|
|
2,500 |
|
|
|
7,500 |
(c) |
|
|
|
|
|
|
26.97 |
|
|
|
2/23/2016 |
|
|
|
|
|
|
|
|
17,370 |
(d) |
|
|
|
|
|
|
29.04 |
|
|
|
3/1/2017 |
|
William M. Parker (f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judith L. Bjornaas (f) |
|
|
39,473 |
|
|
|
|
|
|
|
|
|
|
|
6.65 |
|
|
|
2/2/2013 |
|
|
|
|
3,750 |
(e) |
|
|
|
|
|
|
|
|
|
|
26.97 |
|
|
|
3/7/2011 |
|
|
|
|
(a) |
|
These options were granted on February 26, 2007 and vest equally over four years on the anniversary of the grant date. |
|
(b) |
|
These options were granted on March 14, 2008 and vest equally over four years on the anniversary of the grant date. |
|
(c) |
|
These options were granted on February 23, 2009 and vest equally over four years on the anniversary of the grant date. |
|
(d) |
|
These options were granted on March 1, 2010 and vest equally over four years on the anniversary of the grant date. |
|
(e) |
|
There options were forfeited March 7, 2011. |
|
(f) |
|
Mr. Parker resigned effective January 11, 2010. Ms. Bjornaas resigned effective December 7, 2010. |
Option Exercises and Stock Vested Table
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
|
Number of |
|
|
|
|
|
|
Shares |
|
|
Value |
|
|
|
Acquired on |
|
|
Realized on |
|
Name |
|
Exercise |
|
|
Exercise |
|
William M. Parker |
|
|
110,000 |
|
|
|
1,152,788 |
|
Judith L. Bjornaas |
|
|
18,750 |
|
|
$ |
117,940 |
|
Executive Employment Agreements and Potential Payments upon Change in Control and Termination
Mr. Glasgow and Ms. Cappello have agreements which provide for payments upon a change in control
and termination. The agreements were signed during March 2010. The initial term of each agreement
was through December 31, 2010. The term is automatically renewed for successive one year periods
unless, not later than September 30 of each year, NCI or the Executive party to such agreement has
given notice to the other that the agreement shall not be extended; provided, however, that if a
Change in Control or Potential Change in Control (each as defined in the agreement) has
occurred during the term of the agreement, the agreement shall continue in effect until the later
of 36 months beyond the month in which the latest Change in Control occurred or the next December
31 that is at least 18 months after the latest occurrence of a Potential Change in Control unless
earlier terminated as described below.
Page 28
Upon a Change in Control, any outstanding unvested equity awards shall automatically vest and all
restrictions on such awards shall automatically lapse. All other severance and benefits have been structured as
double trigger events. The severance benefits are paid only if, during the term and either
within 36 months after a Change in Control or within a Potential Change in Control Period (as
defined in the agreement), (i) the Executives employment is terminated by the Company or any
successor to the Company for any reason other than Cause (as defined in the agreement), or (ii)
the Executive terminates his or her employment due to Good Reason (as defined in the agreement)
(a Qualifying Termination).
Upon a Qualifying Termination, the Company will pay Executive the following:
(i) |
|
any accrued and unpaid salary, bonus, expense reimbursements, and vacation pay; and |
(ii) |
|
a cash amount equal to the sum of the following amounts: (a) two times the higher of
Executives annual base salary in effect immediately prior to the occurrence of the event or
circumstance upon which the termination is based or Executives annual base salary in effect
immediately prior to the Change in Control; and (b) a pro-rated amount of the aggregate amount
of the Executives annual bonus opportunity at the target level for the year in which the
termination is made under the annual incentive plan applicable to Executive as in effect
immediately prior to the occurrence of the event or circumstances giving rise to the
termination, determined by multiplying your target level bonus amount by a fraction, the
numerator of which is the number of days in the annual performance measurement period through
the date of termination and the denominator of which is 365. |
In addition, upon a Qualifying Termination, the Executive will also receive continuation under the
terms provided to similarly situated active employees, at no cost to Executive, of life, medical
and dental insurance coverage in which Executive (or your dependents) was participating as of the
date of termination (subject to such modifications as shall be established for all employees of the
Company) until the earliest of: (a) the 18-month anniversary of Executives date of termination;
(b) the date Executive first breaches the release agreement or any restrictive covenant hereunder
or in any employment or other agreement with the Company which survives termination of Executives
employment; or (c) the date Executive becomes eligible for comparable benefits under a similar
welfare benefit plan of a successor employer.
Each agreement also provides that the Company will gross-up any severance payments to the extent
the payments would be subject to an excise tax imposed under Section 4999 of the Internal Revenue
Code or any similar federal, state or local tax that may be imposed.
To receive the various benefits described above, the Executive must sign and not revoke a one-year
non-competition agreement and a general release of claims.
The values in the tables below are estimates as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
Value of |
|
|
|
|
|
|
|
|
|
|
Value of |
|
|
Unvested |
|
|
Tax Gross- |
|
|
|
|
|
|
Cash |
|
|
Continuation |
|
|
Equity |
|
|
up |
|
|
|
|
Name |
|
Severance (1) |
|
|
of Benefits (2) |
|
|
Awards (3) |
|
|
Payments |
|
|
Total |
|
Terry W. Glasgow |
|
$ |
1,321,000 |
|
|
$ |
30,000 |
|
|
$ |
102,000 |
|
|
$ |
|
|
|
|
1,453,000 |
|
Michele R. Cappello |
|
|
675,000 |
|
|
|
35,000 |
|
|
|
47,000 |
|
|
|
|
|
|
|
757,000 |
|
|
|
|
(1) |
|
These amounts are based upon each named executives base salary as of December 31, 2010 and target bonus for 2011. |
|
(2) |
|
These amounts include the estimated value of continuation of health benefits, short and long term disability
benefits, and life insurance benefits for 18 months. |
|
(3) |
|
Based on the difference between the closing price per share of the Companys Class A Common Stock as of December
31, 2010 ($22.99) and the applicable exercise price of unvested stock options which vest upon a Change in
Control. All equity awards vest upon a Change in Control. |
Page 29
DIRECTOR COMPENSATION
The Compensation Committee periodically evaluates the types, mix, and total compensation of the
Companys outside directors. The Committee considers the amount of time devoted to Company
activities as well as peer and similarly sized and situated companies director compensation. The
Committee has solicited and received feedback from the CEO, Chairman of the NCI Governance
Committee, and others in making their determinations.
Cash Compensation
For 2010, we paid each non-employee director fees according to the following schedule. The annual
director and committee chair fees are paid quarterly.
|
|
|
|
|
|
|
Fees |
|
Annual Fee* |
|
$ |
30,000 |
|
Audit Committee Chair |
|
|
10,000 |
|
Compensation Committee Chair |
|
|
4,000 |
|
Nominating/Governance Committee Chair |
|
|
2,500 |
|
Mergers and Acquisitions Chair |
|
|
2,500 |
|
Board of Directors Meetings |
|
|
1,500 |
|
Committee Meetings |
|
|
1,500 |
|
|
|
|
* |
|
The Board of Directors annual fee
includes four meetings.
Additional Board meetings are
compensated at the committee
meeting rate of $1,500 per
meeting. |
The Board of Directors increased the Audit Committee Chairmans annual retainer from $6,000 to
$10,000 at our 2010 annual meeting. For 2011, the Board of Directors increased the annual fee paid
to non-employee directors to $42,000.
Stock Compensation
During June 2010, the Compensation Committee authorized a grant of 6,000 shares of non-qualified
stock options of Class A common stock to each non-employee director. Mr. Nolan was granted 10,000
shares of non-qualified stock options of Class A common stock during February 2011. The options
vest equally over three years on the anniversary of the grant date. The fair value of Mr. Nolans
options will be included in our Directors Compensation table for 2011 which will be included with
our 2012 proxy statement.
Prior to our 2010 annual meeting, Mr. Gurvinder Pal Singh declined to stand for reelection to the
Board of Directors. In appreciation of Mr. Singhs service, the Board of Directors vested all of
Mr. Singhs unvested options. The value of Mr. Singhs previously unvested options are included in
the Directors Compensation table below.
Other Compensation
No member of the Board was paid any compensation for his service as a director other than the
standard compensation arrangements for directors described above. However, non-employee directors
are reimbursed out-of-pocket expenses related to Board of Director functions.
Directors Compensation Table
The table below lists payments made to our directors for calendar year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees |
|
|
Option |
|
|
Total |
|
|
|
Earned |
|
|
Awards * |
|
|
Compensation |
|
Name |
|
($) |
|
|
($) |
|
|
($) |
|
James P. Allen |
|
$ |
53,000 |
|
|
$ |
57,780 |
|
|
$ |
110,780 |
|
John E. Lawler |
|
|
46,000 |
|
|
|
57,780 |
|
|
|
103,780 |
|
Paul V. Lombardi |
|
|
49,000 |
|
|
|
57,780 |
|
|
|
106,780 |
|
J. Patrick McMahon |
|
|
36,000 |
|
|
|
57,780 |
|
|
|
93,780 |
|
Philip O. Nolan (1) |
|
|
|
|
|
|
|
|
|
|
|
|
Gurvinder P. Singh |
|
|
16,500 |
|
|
|
48,681 |
|
|
|
65,181 |
|
Stephen L. Waechter |
|
|
37,000 |
|
|
|
57,780 |
|
|
|
94,780 |
|
Daniel R. Young |
|
|
39,000 |
|
|
|
57,780 |
|
|
|
96,780 |
|
Page 30
|
|
|
* |
|
The amounts represent the value of the awards granted during the year
ended December 31, 2010 in accordance with FASB ASC 718. For a
discussion of the valuation of these awards, please refer to Note 13
in the notes to our consolidated financial statements in our Annual
Report on Form 10-K for the year ended December 31, 2010. |
|
(1) |
|
Mr. Nolan joined our Board of Directors during February 2011 |
As of December 31, 2010, each of our directors held options to purchase the following number of
shares of our Class A common stock:
|
|
|
|
|
|
|
Aggregate Shares Subject |
|
Name |
|
To Outstanding Options |
|
Charles K. Narang |
|
|
|
|
Terry W. Glasgow |
|
|
200,000 |
|
James P. Allen |
|
|
30,526 |
|
John E. Lawler |
|
|
30,526 |
|
Paul V. Lombardi |
|
|
30,526 |
|
J. Patrick McMahon |
|
|
30,526 |
|
Philip O. Nolan (1) |
|
|
|
|
Stephen L. Waechter |
|
|
24,000 |
|
Daniel R. Young |
|
|
30,526 |
|
|
|
|
(1) |
|
Mr. Nolan joined our Board of Directors during February 2011. |
Page 31
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
section with management. Based on our review and discussion with management, we have recommended
to the Board of Directors that the Compensation Discussion and Analysis section be included in this
proxy statement and the Companys Annual Report on Form 10-K for the year ended December 31, 2010
for filing with the Securities and Exchange Commission.
Dated as of April 29, 2011
THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Paul V. Lombardi, Jr., Chairman
James P. Allen
Daniel R. Young
Page 32
ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL 2
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) added
Section 14A to the Securities Exchange Act of 1934, as amended (the Exchange Act), which enables
our stockholders to vote, on a non-binding advisory basis, to approve the compensation of our named
executive officers as disclosed in this proxy statement.
As described in detail under the heading Compensation Discussion and Analysis, our executive
compensation programs are designed to attract and retain our named executive officers, motivate
them to perform to their fullest potential, and align their interests with the interests of our
stockholders. Under these programs, our named executive officers are rewarded for the achievement
of specific annual, long-term and strategic and corporate goals. Please read the Compensation
Discussion and Analysis for additional details about our executive compensation programs and
policies, including information about the fiscal 2010 compensation of our named executive officers.
The Compensation Committee continually reviews the compensation programs for our named executive
officers to ensure they achieve the desired goals of aligning our executive compensation structure
with our stockholders interests and current market practices. We are asking our stockholders to
indicate their support for our named executive officer compensation as described in this proxy
statement. This proposal, commonly known as a say-on-pay proposal, gives our stockholders the
opportunity to express their views on our named executive officers compensation. This vote is not
intended to address any specific item of compensation, but rather the overall compensation of our
named executive officers and the philosophy, policies and practices described in this proxy
statement. Accordingly, we will ask our stockholders to vote for the following resolution at the
annual meeting:
RESOLVED, that the Companys stockholders approve, on an advisory basis, the compensation of
the named executive officers, as disclosed in the Companys Proxy Statement for the 2011
Annual Meeting of Stockholders pursuant to the rules and regulations of the Securities and
Exchange Commission, including the Compensation Discussion and Analysis, the Summary
Compensation Table and the related tables and disclosure.
While this vote is advisory, and therefore not binding on the Company, the Compensation Committee
or our Board of Directors, we value the opinions of our stockholders and will consider those
opinions and the outcome when making future compensation decisions for our named executive
officers.
The Board of Directors unanimously recommends a vote FOR the approval of the compensation of our
named executive officers, as disclosed in this proxy statement.
Page 33
ADVISORY VOTE ON THE FREQUENCY OF HOLDING AN ADVISORY VOTE ON
EXECUTIVE COMPENSATION
PROPOSAL 3
ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act (by adding Section 14A to the Exchange Act) also enables our stockholders, on a
non-binding advisory basis, to indicate how frequently we should seek an advisory vote on the
compensation of our named executive officers, such as Proposal 2 above. By voting on this
proposal, stockholders may indicate whether they would prefer an advisory vote on named executive
officer compensation once every three years, two years or one year.
The Board has determined that an advisory vote on executive compensation every three years is the
best approach for the Company based on various considerations, including the following:
|
|
|
Our compensation program is designed to support long-term value creation incentives and
reward performance over multi-year periods, therefore a three-year vote will allow
stockholders to better judge the effectiveness of our compensation program; |
|
|
|
Both the Board and our stockholders will have sufficient time to judge the effectiveness
of short-term and long-term compensation policies and practices and how our performance
relates to such policies and practices; |
|
|
|
It will improve the ability of our institutional stockholders to exercise their voting
rights in a more deliberate, thoughtful and informed manner; |
|
|
|
Shareholders are currently able to communicate with us on a consistent and frequent
basis in order to express any concerns with our executive compensation policies and
practices; and |
|
|
|
It will allow the Board and our management sufficient time to thoughtfully consider and
evaluate stockholder input and implement any appropriate changes to our compensation
program. |
While this vote is advisory, and therefore not binding on the Company, the Compensation Committee
or our Board of Directors, we value the opinions of our stockholders and will consider those
opinions and the outcome when determining how frequently to hold an advisory vote on executive
compensation. The Board may decide that it is in the best interests of our stockholders and the
Company to hold an advisory vote on executive compensation more or less frequently than the option
approved by our stockholders. An option three years, two years or one year must receive a
majority of the votes cast in person or by proxy in order to be deemed advised by our stockholders.
The Board of Directors unanimously recommends a vote FOR EVERY THREE YEARS for the frequency of
presenting an advisory vote on executive compensation.
Page 34
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL 4)
Independent Registered Public Accounting Firm For 2011
The Audit Committee has selected the firm of Ernst & Young LLP as the NCI, Inc. independent
registered public accounting firm for 2011. Ernst & Young LLP has served as the NCI, Inc.
independent registered public accounting firm since the 2000 year-end audit. Stockholder
ratification of the selection of Ernst & Young LLP as the Companys independent registered public
accounting firm is not required by law, by the Companys bylaws, or otherwise. However, the Board
of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification
as a matter of good corporate practice. If the stockholders do not ratify the selection, the Audit
Committee will reconsider whether to retain Ernst & Young LLP. In such event, the Audit Committee
may retain Ernst & Young LLP, notwithstanding the fact that the stockholders did not ratify the
selection, or select another nationally recognized independent registered public accounting firm
without re-submitting the matter to the stockholders. Even if the selection is ratified, the Audit
Committee reserves the right in its discretion to select a different nationally recognized
independent registered public accounting firm at any time during the year if it determines that
such a change would be in the best interests of the Company and its stockholders.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and will have
the opportunity to make a statement if they desire to do so and will also be available to respond
to appropriate questions from stockholders.
Fees Paid to Independent Registered Public Accounting Firm
The following table presents fees for audit services rendered by Ernst & Young LLP for the audit of
the Companys annual consolidated financial statements for 2010 and 2009 and fees billed for other
services rendered by Ernst & Young LLP during those periods.
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Audit Fees (1) |
|
$ |
747,000 |
|
|
$ |
751,000 |
|
Audit-Related Fees (2) |
|
|
5,000 |
|
|
|
|
|
Tax Fees |
|
|
|
|
|
|
|
|
All Other Fees (3) |
|
|
133,000 |
|
|
|
40,000 |
|
|
|
|
(1) |
|
Audit fees principally include those for services related to the annual
audit of the consolidated financial statements, the audit of internal control
over financial reporting under Section 404 of the Sarbanes-Oxley Act, and
services that are normally provided in connection with regulatory filings or
engagements. |
|
(2) |
|
Audit-related fees include those services related to consultation on
accounting matters and due diligence in connection with acquisitions and
divestitures. |
|
(3) |
|
Other fees include those services related to a pre-implementation
review of our Enterprise Resource Planning system and its impact on related
internal control environment. |
Audit, Audit-Related, Tax, and Other services provided by our independent registered public
accounting firm, Ernst & Young LLP, are subject to a policy of the Company regarding the
Pre-Approval of Audit, Audit-Related, Tax, and Other Services. The Audit Committee monitors audit
services engagements; reviews such engagements at least quarterly; and approves any changes in the
terms, conditions, fees, or scope of such engagements. The Audit Committee has pre-approved
certain services, including the following:
|
|
|
Services associated with periodic reports and other documents filed with the SEC; |
|
|
|
Consultations and assistance related to accounting, financial reporting or disclosure
matters, and the actual or potential impact of final or proposed rules, standards of
interpretation by the SEC, FASB, or other regulatory or standard-setting bodies; and |
|
|
|
Audit-related services. |
The following services require specific pre-approval of the Audit Committee: annual audit services
engagement, terms and fees, including required quarterly reviews, and report on internal controls
over financial reporting.
Page 35
In accordance with SEC rules and regulations, the following services will not be provided by the
independent registered public accounting firm:
|
|
|
Bookkeeping or other services related to the accounting records or financial statements
of the Company; |
|
|
|
Financial information systems design and implementation; |
|
|
|
Appraisal or valuation services, fairness opinions, or contribution-in-kind reports; |
|
|
|
Internal audit outsourcing; |
|
|
|
Broker-dealer, investment adviser, or investment banking services; |
|
|
|
Expert services unrelated to the audit. |
All fees paid for 2010 were pre-approved by the Audit Committee.
Each year, the independent registered public accounting firms retention to audit the Companys
financial statements, including the associated fee, is approved by the Audit Committee and the
appointment of the independent registered public accounting firm is presented to the stockholders
for ratification. The Audit Committee of the Board of Directors believes that the provision of
services by Ernst & Young LLP is compatible with maintaining such auditors independence.
During the course of the year and in accordance with this policy, the Audit Committee will evaluate
known potential engagements of the independent registered public accounting firm, including the
scope of work proposed to be performed and the proposed fees, and approve or reject 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 firms
independence from management.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
Page 36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Relationships and Related Transactions
During 2010, we purchased services from Net Commerce Corporation, a government contractor, which is
wholly owned by Mr. Rajiv Narang, the son of Mr. Charles K. Narang, our founder, Chairman, and
Chief Executive Officer. During 2010, approximately $922,000 was paid to Net Commerce under this
agreement. As of December 31, 2010, there was approximately $140,000 due related for this
contract.
The Company rents office space from Gur Parsaad Properties, Ltd., which is controlled by Dr.
Gurvinder Pal Singh. Dr. Singh was a member of the NCI Board of Directors until June 9, 2010. The
lease is for approximately 41,000 square feet at approximately $15.00 per square foot with annual
escalation and shared common area operating expenses. The lease expires on June 30, 2015. For the
year ended December 31, 2010, NCI paid approximately $1.0 million in lease payments under the
office lease. As of December 31, 2010, there were no outstanding accounts payable.
During June 2007, the Company entered into a Stock Purchase Agreement to purchase 100% of the
outstanding shares of Karta Technologies, Inc. This agreement included certain indemnifications
from the selling stockholders. Dr. Singh was one of the selling stockholders of Karta. At the
time of the purchase, an escrow account was established to pay for indemnification claims. As of
December 31, 2010, there were no amounts owed.
Employee Relationships
NCI employs Mr. Christopher C. Glasgow, son of Mr. Terry W. Glasgow, our President and a director,
as a Senior Program Manager. Mr. Christopher C. Glasgow earned approximately $166,000 in salary
and bonus for 2010.
NCI employs Mr. Richard O. Bjornaas, spouse of Ms. Judith L. Bjornaas, our former Executive Vice
President and Chief Financial Officer, as a Director of Management Information Systems. Mr.
Richard O. Bjornaas earned approximately $153,000 in salary and bonus for 2010.
In addition, certain of our other executive officers have relatives who work for us. In all these
cases, the amount of annual compensation paid to each such family member for 2010 was less than
$120,000.
Related Transaction Approval Policy
The Audit Committee is charged with monitoring and reviewing related party transactions. The Audit
Committee has adopted a written policy and procedures for reviewing the material facts of any
transactions with related parties and either approving or disapproving the entry into such
transactions. In determining whether to approve or ratify a transaction with a related party, the
Audit Committee will take into account, among other factors it deems appropriate, whether the
transaction is on terms no less favorable than terms generally available to an unaffiliated third
party under the same or similar circumstances and the extent of the related partys interest in the
transaction.
Page 37
DEADLINE FOR STOCKHOLDER PROPOSALS
Pursuant to Rules 14a-8(e) promulgated under the Exchange Act, in order to be included in our 2012
proxy materials, proposals of stockholders intended to be presented at the 2012 Annual Meeting of
Stockholders must be received by the Secretary of the Company at our principal executive office at
11730 Plaza American Drive, Suite 700, Reston, Virginia 20190, not later than December 30, 2011.
If the stockholder proposal is not intended to be included in our 2012 proxy materials but is still
intended to be brought before the 2012 Annual Meeting of Stockholders, under our Bylaws a
stockholder must comply with certain procedures. These procedures provide that stockholders
desiring to make nominations for Directors and/or to bring a proper subject before a meeting must
do so by notice timely delivered to the Secretary of the Company not less than 45 days or more than
75 days before the first anniversary of the date on which the Company first mailed its proxy
materials for the preceding years Annual Meeting of Stockholders. In the case of proposals for
the 2012 Annual Meeting of Stockholders, the Secretary of the Company must receive notice at our
principal executive office in Reston, Virginia not earlier than February 13, 2012, and not later
than March 16, 2012 (other than proposals intended to be included in the proxy statement and form
of proxy, which, as noted above, the Company must receive by December 30, 2011). If the 2012
Annual Meeting of Stockholders is not held within 30 days of the anniversary of the 2011 Annual
Meeting of Stockholders, the Secretary of the Company must receive notice of any proposal at our
principal executive office in Reston, Virginia no later than the later of the 90th day
before the 2012 Annual Meeting of Stockholders or the 10th day following the day on
which the public announcement of the 2012 Annual Meeting of Stockholders was made.
Generally, any such stockholder proposal must comply with all the requirements of Rule 14a-8. In
addition, any such proposal must set forth (i) as to each nominee for Director, all information
relating to such person as would be required to be disclosed in solicitations of proxies for the
election of such nominees as Directors under the proxy rules of the SEC; (ii) as to any other
business, a brief description of such business, the reasons for conducting such business at the
meeting and any material interest in such business of the stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made, (a) the name and
address of the stockholder (as they appear in the Companys books) and beneficial owner, (b) the
class and number of shares of the Company that are owned beneficially and of record by the
stockholder and the beneficial owner, and (c) whether either the stockholder or the beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a
proposal, at least the percentage of the Companys voting stock required under applicable law to
carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders
of the Companys voting stock to elect the nominee or nominees.
Management proxies will be authorized to exercise discretionary authority with respect to any
stockholder proposal not included in our proxy materials unless (a) assuming the meeting is held
within 30 days of the anniversary of the 2011 Annual Meeting of Stockholders, we receive notice of
such proposal by the later of the 45th day before such Annual Meeting and (b) the conditions set
forth in Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act are met.
ADDITIONAL INFORMATION
Management knows of no matters that are to be presented for action at the Annual Meeting other than
those set forth above. If any other matters properly come before the Annual Meeting, the persons
named in the enclosed form of proxy will vote the shares represented by proxies in accordance with
their best judgment on such matters.
Page 38
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our Directors, officers, and certain persons who own
more than 10% of our common stock to file with the Securities and Exchange Commission reports
concerning their beneficial ownership of our equity securities. These persons are required to
furnish us with copies of all Section 16(a) forms that they file. To our knowledge, based solely
on our review of the copies of such forms received by us from our Directors, officers, and greater
than 10% beneficial owners, all these reports were filed on a timely basis.
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By Order of the Board,
![(-s- Charles K. Narang)](c15583c1558301.gif)
Charles K. Narang
Chairman and Chief Executive Officer |
Reston, Virginia
April 29, 2011
Page 39
NCI, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS JUNE 8, 2011
(This Proxy is solicited by the Board of Directors of the Company)
The undersigned stockholder of NCI, Inc. hereby appoints Messrs. Charles K. Narang and Terry W.
Glasgow, or either of them, his/her true and lawful agents and proxies, each with full power of
substitution, to represent and to vote as specified in this proxy all Common Stock of the Company
that the undersigned stockholder would be entitled to vote if present in person at the Annual
Meeting of Stockholders of NCI, Inc. to be held at the Westin Reston Heights, 11750 Sunrise Valley
Drive, Reston, Virginia 20191, on Wednesday, June 8, 2011 at 10 a.m. local time.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY RELATES WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES TO WHICH THIS PROXY RELATES WILL BE VOTED FOR
ALL NOMINEES WITH RESPECT TO THE ELECTION OF DIRECTORS IN PROPOSAL 1; FOR THE ADVIOSRY VOTE ON
EXECUTIVE PAY IN PROPOSAL 2; 3 YEAR FOR THE ADVIOSRY VOTE ON THE FREQUENCY OF HOLDING AN ADVISORY
VOTE ON EXECUTIVE PAY IN PROPOSAL 3; AND FOR THE RATIFICATION OF ERNST & YOUNG LLP IN PROPOSAL 4,
AND THIS PROXY AUTHORIZES THE ABOVE DESIGNATED PROXIES TO VOTE IN THEIR DISCRETION ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF TO
THE EXTENT AUTHORIZED BY RULE 14a-4(c) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
These proxy materials and our annual report are available at http://materials.proxyvote.com/62886K.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
NCI, INC.
The Board of Directors recommends a vote
FOR ALL NOMINEES for directors in proposal 1,
FOR proposal 2,
3 YEAR for proposal 3, and
FOR proposal 4.
Please sign, date, and return promptly in the enclosed envelope.
Please mark your vote in blue or black ink as shown here þ
1) |
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PROPOSAL 1ELECTION OF DIRECTORS |
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FOR all nominees |
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WITHHOLD AUTHORITY for all nominees. |
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FOR ALL EXCEPT (See instructions below). |
NOMINEES:
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o Charles K. Narang
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o J. Patrick McMahon |
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o Terry W. Glasgow
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o Philip O. Nolan |
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o James P. Allen
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o Stephen L. Waechter |
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o John E. Lawler
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o Daniel R. Young |
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o Paul V. Lombardi |
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INSTRUCTION: |
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To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the square next to each
nominee you wish to withhold as shown here þ |
2) |
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PROPOSAL 2ADVISORY VOTE ON EXECUTIVE COMPENSATION FOR THE YEAR ENDING DECEMBER 31, 2010. |
o FOR o AGAINST o ABSTAIN
3) |
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PROPOSAL 3ADVISORY VOTE ON THE FREQUENCY OF HOLDING AN ADVISORY VOTE ON EXECUTIVE
COMPENSATION. |
o 1 YEAR
o 2 YEAR
o 3 YEAR o ABSTAIN
4) |
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PROPOSAL 4RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP TO SERVE AS THE COMPANYS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2011. |
o FOR
oAGAINST o ABSTAIN
5) |
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In their discretion, the proxies are authorized to vote upon such other business as may
properly come before the Annual Meeting or any adjournment or postponement thereof. |
The undersigned acknowledges receipt of the accompanying Notice of Annual Meeting of Stockholders
and Proxy Statement, in which Proposals 1, 2, 3, and 4 are fully explained.
PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED RETURN ENVELOPE.
Signature:
Signature (if held jointly):
Date:
Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each
holder should sign. When signing as an executor, administrator, attorney, trustee, or guardian,
please give full title as such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.