UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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Preliminary
Proxy Statement
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Confidential,
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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
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PDI,
INC.
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(Name
of Registrant as Specified in Its Charter)
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Name
of Person(s) Filing Proxy Statement, if other than the
registrant)
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Michael J. Marquard
Chief Executive Officer
April 28,
2008
Dear
Stockholder:
You are
invited to attend the Annual Meeting of Stockholders of PDI, Inc. (“PDI” or the
“Company”) to be held on June 4, 2008, at 9:00 a.m., Eastern time, at the
Sheraton Mahwah Hotel, One International Boulevard, Mahwah, New Jersey
07495.
At this
meeting, you will be asked to elect three directors, to ratify the selection of
the Company’s independent registered public accounting firm for fiscal 2008 and
to transact such other business as may properly come before the meeting. The
accompanying Notice of Meeting and Proxy Statement describe these proposals. We
urge you to read this information carefully.
Your
Board of Directors unanimously recommends a vote FOR the election of the
nominees for director and FOR the ratification of the appointment of Ernst &
Young LLP as the Company’s independent registered public accounting firm for the
fiscal year ending December 31, 2008.
Whether
or not you plan to attend the Annual Meeting in person, it is important that
your shares are represented. Therefore, please promptly complete, sign, date and
return the enclosed proxy card in the accompanying envelope, which requires no
postage if mailed in the United States. You are, of course, welcome to attend
the Annual Meeting and vote in person even if you previously returned your proxy
card.
Thank
you.
Sincerely,
Michael
J. Marquard
Chief
Executive Officer
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 4, 2008
________________________
To the
Stockholders of PDI, Inc.:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Stockholders of PDI, Inc. (the
“Company”) will be held at the Sheraton Mahwah Hotel, One International
Boulevard, Mahwah, New Jersey 07495 on June 4, 2008 at 9:00 a.m., Eastern time,
for the following purposes:
1. To
elect three Class III directors of the Company, each to serve for a term of
three years.
2. To
ratify the appointment of Ernst & Young LLP as the Company’s independent
registered public accounting firm for the fiscal year ending December 31,
2008.
3. To
transact such other business as may properly come before the meeting or any
adjournments thereof.
Only the
stockholders of record at the close of business on April 23, 2008 are entitled
to notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof.
All
stockholders are cordially invited to attend the meeting. Whether or
not you expect to attend, you are requested to sign, date and return the
enclosed proxy promptly. Stockholders who execute proxies retain the
right to revoke them at any time prior to the voting thereof. A
return envelope, which requires no postage if mailed in the United States, is
enclosed for your convenience.
By order
of the Board of Directors,
Kerry
Skolkin
Vice
President,
Associate
General Counsel and Corporate Secretary
Dated: April
28, 2008
PROXY
STATEMENT
_______________________
This
Proxy Statement is furnished in connection with the solicitation by the Board of
Directors of PDI, Inc., a Delaware corporation (the “Company” or “PDI”, “we”,
“us” or “our”), of proxies in the form enclosed for the Annual Meeting of
Stockholders to be held at the Sheraton Mahwah Hotel, One International
Boulevard, Mahwah, New Jersey 07495 on June 4, 2008 at 9:00 a.m., Eastern time,
and for any adjournments or postponements thereof (the “Annual Meeting”), for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Board of Directors knows of no other business which
will come before the meeting. This Proxy Statement will be mailed to
stockholders on or about April 30, 2008.
Record Date and
Quorum
Stockholders
of record at the close of business on April 23, 2008 are entitled to notice of
and to vote at the Annual Meeting. As of the record date, there were 14,179,812
shares of common stock of the Company outstanding. Each share of
common stock outstanding on the record date is entitled to one vote on each
matter presented for action at the meeting. Shares of common stock were the only
voting securities of the Company outstanding on the record date. A quorum will
be present at the Annual Meeting if a majority of the shares of common stock
outstanding on the record date are present at the meeting in person or by
proxy.
Voting of
Proxies
The
persons acting as proxies pursuant to the enclosed proxy will vote the shares
represented as directed in the signed proxy. Unless otherwise directed in the
proxy, the proxyholders will vote the shares represented by the proxy: (i) for
election of the three Class III director nominees named in this Proxy Statement;
(ii) for ratification of the appointment of Ernst & Young LLP (“E&Y”) as
independent registered public accounting firm to audit the financial statements
of the Company for the fiscal year ending December 31, 2008; and (iii) in the
proxyholders’ discretion, on any other business that may come properly before
the meeting and any adjournments or postponements of the meeting.
All votes
will be tabulated by the inspector of elections appointed for the Annual
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Under the Company’s bylaws and Delaware law:
(1) shares represented by proxies that reflect abstentions or “broker non-votes”
(i.e., shares held by a broker or nominee that are represented at the meeting,
but with respect to which such broker or nominee is not empowered to vote on a
particular proposal) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum; (2) there is no
cumulative voting, and the director nominees receiving the highest number of
votes, up to the number of directors to be elected, are elected and,
accordingly, abstentions, broker non-votes and withholding of authority to vote
will not affect the election of directors; and (3) proxies that reflect
abstentions or broker non-votes will be treated as unvoted for purposes of
determining approval of that proposal and will not be counted as votes for or
against that proposal.
Voting
Requirements
Election of
Directors. The
election of directors requires a plurality of the votes cast for the election of
directors; accordingly, the directorships to be filled at the Annual Meeting
will be filled by the nominees receiving the highest number of votes. In the
election of directors, votes may be cast in favor of or withheld with respect to
any or all nominees; votes that are withheld and broker non-votes will be
excluded entirely from the vote and will have no effect on the outcome of the
vote.
Ratification of the
Appointment of Independent Registered Public Accounting
Firm. The affirmative vote of a majority of the votes cast for
or against the matter by stockholders entitled to vote at the Annual Meeting is
required to ratify the appointment of our independent registered public
accounting firm. An abstention
from voting on this matter and broker non-votes will be treated as “present” for
quorum purposes. However, since neither an
1
abstention
nor a broker non-vote is treated as a “vote” for or against the matter, it will
have no effect on the outcome of the vote.
Revocability of
Proxy
A
stockholder who has signed and returned the enclosed proxy may revoke it at any
time before it is voted by (i) submitting to the Company a properly executed
proxy bearing a later date, (ii) submitting to the Company a written revocation
of the proxy or (iii) voting in person at the Annual Meeting.
Expenses of
Solicitation
We will
pay the expenses of the preparation of proxy materials and the solicitation of
proxies for the Annual Meeting. In addition to the solicitation of proxies by
mail, solicitation may be made by certain directors, officers or employees of
PDI or by an outside firm telephonically, electronically or by other means of
communication. We will reimburse brokers and other nominees for costs incurred
by them in mailing proxy materials to beneficial owners in accordance with
applicable rules.
PROPOSAL NO. 1 - ELECTION OF
DIRECTORS
The Board
of Directors currently consists of ten members and is divided into three
classes, with three directors in each of Classes II and III and four directors
in Class I. Directors serve for three-year terms with one class of
directors being elected by the Company’s stockholders at each annual
meeting.
At the
Annual Meeting, three Class III directors will be elected to serve until the
annual meeting of stockholders in 2011 and until each director’s successor is
elected and qualified. John Federspiel, Jack E. Stover and Jan
Martens Vecsi are the nominees for re-election as the Class III
directors. All of the nominees have been approved, recommended and
nominated for re-election to the Board of Directors by the Nominating and
Corporate Governance Committee (the “Nominating Committee”) and by the Board of
Directors. The accompanying proxy will be voted for the election of
John Federspiel, Jack E. Stover and Jan Martens Vecsi as directors, unless the
proxy contains instructions otherwise. Management has no reason to believe that
Mr. Federspiel, Mr. Stover or Ms. Vecsi will not be a candidate or will be
unable to serve. However, in the event that any of the nominees
should become unable or unwilling to serve as a director, the proxy will be
voted for the election of such person or persons as shall be designated by the
Board of Directors.
The
Board of Directors Recommends a
Vote
FOR the Election of the Foregoing Nominees and
Proxies
That Are Returned Will Be So Voted
Unless
Otherwise Instructed.
Set forth
below is information regarding the nominees for election as Class III directors
and all other members of the Board of Directors who will continue in
office.
NOMINEES FOR ELECTION AS
CLASS III DIRECTORS
TERM EXPIRING
2011
John Federspiel, age
54. Mr. Federspiel has been a director since October 2001. Mr.
Federspiel is president of Hudson Valley Hospital Center, a 128 bed, short-term,
acute care, not-for-profit hospital in Westchester County, New York. Prior to
joining Hudson Valley Hospital in 1987, Mr. Federspiel spent an additional 10
years in health administration, during which he held a variety of executive
leadership positions. Mr. Federspiel has served as an appointed Member of the
State Hospital Review and Planning Council, and has served as chairman of the
Northern Metropolitan Hospital Association, as well as other
affiliations. Mr. Federspiel received a B.S. degree from Ohio
State University in 1975 and an M.B.A. from Temple University in
1977.
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Jack E.
Stover, age
55. Mr. Stover has been a director since August 2005. Mr.
Stover joined Antares Pharma, Inc., a publicly held company listed on the
American Stock Exchange, in July 2004 as president and chief operating officer,
and in August 2004 he was named chief executive officer, president and director.
Mr. Stover is also a member of the board of directors of Arbios Systems Inc., a
publicly held company. Mr. Stover was previously executive vice
president and chief financial officer of Sicor, Inc., a publicly held injectable
pharmaceutical company, which was acquired by Teva Pharmaceutical Industries.
Prior to that, Mr. Stover was executive vice president and director of a
proprietary women’s pharmaceutical company, Gynetics, Inc., and before Gynetics,
he was senior vice president and director of B. Braun Medical, Inc., a private
global medical device and pharmaceutical company. For more than five years prior
to that, Mr. Stover was a partner with PricewaterhouseCoopers (then Coopers and
Lybrand), working in their bioscience industry division in New Jersey. Mr.
Stover received his B.A. in Accounting from Lehigh University and is a Certified
Public Accountant.
Jan Martens Vecsi, age
64. Ms. Vecsi has been a director since May 1998. Ms. Vecsi is the
sister-in-law of John P. Dugan, our chairman. Ms. Vecsi was employed by
Citibank, N.A. from 1967 to 1996 when she retired. Starting in 1984, she served
as the senior human resources officer and vice president of the Citibank Private
Bank. Ms. Vecsi received a B.A. in Psychology and Elementary Education from
Immaculata College in 1965.
INCUMBENT CLASS II
DIRECTORS
TERM EXPIRING
2009
Michael J. Marquard, age
59. Mr. Marquard has been a director and our Chief Executive Officer
(“CEO”) since May 2006. Prior to joining PDI, Mr. Marquard was vice
president of Mylan Laboratories Inc. and president of Mylan's branded
subsidiary, Mylan Bertek Pharmaceuticals Inc. since July 2004. Mr. Marquard
joined Mylan from Wyeth, where he was the senior vice president of U.S. Sales
since 1996, and a member of the U.S. management team and Wyeth's Pharmaceutical
business unit’s global leadership team. From 1973 to 1995, Mr.
Marquard held a variety of positions at American Cyanamid Company, a business
that eventually merged with Wyeth. His positions at American Cyanamid included:
vice president and general manager, Lederle Pharmaceuticals; vice president and
general manager, Lederle Oncology; and vice president, sales, Lederle
Laboratories. Mr. Marquard has an M.B.A. from the University of
Indianapolis and a B.S. from Youngstown State University.
John M. Pietruski, age 75. Mr.
Pietruski has been a director since May 1998. From 1990 to April
2008, Mr. Pietruski was the chairman of the board of Encysive Pharmaceuticals,
Inc., a pharmaceutical research and development company. He is a retired
chairman of the board and chief executive officer of Sterling Drug Inc., where
he was employed from 1977 until his retirement in 1988. Mr. Pietruski is a
member of the board of directors of Xylos Corporation and TrialCard, Inc. Mr.
Pietruski graduated Phi Beta Kappa with a B.S. in business administration with
honors from Rutgers University in 1954.
Frank Ryan, age
68. Mr. Ryan has been a director since November 2002. Mr.
Ryan was a director of Digene Corporation from June 2005 until its acquisition
by Qiagen N.V. in July 2007. Mr. Ryan’s career includes a 38-year
tenure with Johnson & Johnson. Mr. Ryan retired in 2001 as
Johnson & Johnson’s company group chairman with responsibility for worldwide
Ethicon franchises and Johnson & Johnson Canada. In addition, Mr.
Ryan was a member of the Medical Devices and Diagnostics Operating Group and
Leader for the Group in Process Excellence (Six Sigma) and
IT. Throughout his years at Johnson & Johnson, Mr. Ryan held
positions of increasing responsibility, including worldwide president of
Chicopee, president of Johnson and Johnson Hospital Services Co. and president
of Ethicon, Inc. Mr. Ryan received a B.S. degree in mechanical
engineering from the Illinois Institute of Technology in 1965 and an M.B.A. from
the University of Chicago Graduate School of Business in 1969.
INCUMBENT
CLASS I DIRECTORS
TERM EXPIRING
2010
John P. Dugan, age
72. Mr. Dugan is our founder, Chairman of the Board of Directors and
Director of Strategic Planning. He served as our president from inception until
January 1995 and as our chief executive officer from inception until November
1997. In 1972, Mr. Dugan founded Dugan Communications, a medical advertising
agency
3
that
later became known as Dugan Farley Communications Associates Inc. and served as
its president until 1990. We were a wholly-owned subsidiary of Dugan Farley in
1990 when Mr. Dugan became our sole stockholder. Mr. Dugan was a founder and
served as the president of the Medical Advertising Agency Association from 1983
to 1984. Mr. Dugan also served on the board of directors of the Pharmaceutical
Advertising Council (now known as the Healthcare Marketing Communications
Council, Inc.) and was its president from 1985 to 1986. Mr. Dugan received an
M.B.A. from Boston University in 1964.
Joseph T. Curti, M.D., age 70.
Dr. Curti became a director in August 2003. Dr. Curti was president
and chief executive officer of Ferring Pharmaceuticals in Tarrytown, New York
from 1995 to 1998. He previously held the position of president and
chief executive officer of Neurochem, Inc. in Kingston, Ontario and president of
North American Operations of Searle in Skokie, Illinois. He spent 19
years at Pfizer in a number of senior positions, both domestically and
internationally, directing clinical drug development, drug regulatory, licensing
and marketing activities. Dr. Curti received a B.S. from St. Joseph’s
University in Philadelphia in 1959 and an M.D. from Thomas Jefferson University
in Philadelphia in 1963.
Stephen J. Sullivan, age
61. Mr. Sullivan became a director in September 2004. Mr.
Sullivan is president and chief executive officer of Harlan Sprague Dawley,
Inc., a privately held global provider of preclinical research tools and
services. Prior to joining Harlan in 2006, Mr. Sullivan was a senior
vice president of Covance, Inc. and the president of Covance Central
Laboratories, Inc., a major division of Covance. Prior to joining
Covance, Mr. Sullivan was chairman and chief executive officer of Xenometrix,
Inc., a biotechnology company with proprietary gene expression
technology. He successfully merged Xenometrix with Discovery Partners
International. Prior to his work with Xenometrix, Mr. Sullivan was
vice president and general manager of a global diagnostic sector of Abbott
Laboratories. Mr. Sullivan graduated from the University of Dayton,
was a commissioned officer in the Marine Corps, and completed his M.B.A. in
Marketing and Finance at Rutgers University.
Gerald P. Belle, age
62. Mr. Belle has been a director since April 2008. From
2004 until his retirement in November 2007, Mr. Belle served as Executive
Chairman of Merial Ltd., a global animal health company that is a joint venture
between sanofi-aventis and Merck & Co. Prior to that, Mr. Belle
served as President and Chief Executive Officer, North America Pharmaceuticals
for Aventis, Inc. from 2000 to 2004, where he successfully managed the North
American merger of Rhone-Poulenc S.A. and Hoechst AG. Mr. Belle is a
member of the board of directors of Myriad Genetics, Inc., a publicly held
biopharmaceutical company. Mr. Belle earned a B.S.B.A. in Marketing
from Xavier University in 1968 and an M.B.A. from Northwestern University in
1969.
Director Independence
Our Board
of Directors has determined that Messrs. Pietruski, Ryan, Sullivan, Federspiel,
Stover and Belle and Dr. Curti are independent within the meaning of the
applicable rules of the Nasdaq Stock Market, Inc. (“Nasdaq”).
Corporate
Governance
Our
Guidelines on Corporate Governance, Code of Business Conduct and the charters
for each committee of the Board of Directors can be accessed from the “Investor
Relations” section of our website at www.pdi-inc.com.
Board
of Directors Meetings and Committees
During
the year ended December 31, 2007, the Board of Directors held seven meetings,
the Audit Committee held ten meetings, the Compensation and Management
Development Committee (the “Compensation Committee”) held nine meetings, and the
Nominating Committee held four meetings. Each committee member is a non-employee
director of the Company who meets the independence requirements of Nasdaq and
applicable law. Each of our incumbent directors attended at least 90%
of the total number of Board of Directors meetings and committee meetings on
which he or she served during 2007.
4
We have
adopted a policy encouraging our directors to attend annual meetings of
stockholders and believe that attendance at annual meetings is just as important
as attendance at meetings of the Board of Directors. All of our
directors attended our annual stockholders’ meeting held on June 5,
2007.
Our Board
of Directors has three standing committees, each of which is described
below.
Audit
Committee
The Audit
Committee is currently comprised of Mr. Stover (chairperson), Mr. Sullivan and
Dr. Curti. The primary purposes of our Audit Committee are:
(a) to assist the Board of Directors in its oversight of (i) the
integrity of our financial statements, (ii) our compliance with legal and
regulatory requirements, (iii) the qualifications and independence of our
independent registered public accounting firm and (iv) the performance of
our internal audit function and independent registered public accounting firm;
and (b) to prepare any report of the Audit Committee required by the rules
and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for
inclusion in our annual proxy statement.
Our Board
of Directors has determined that each member of our Audit Committee is
independent within the meaning of the rules of both Nasdaq and the
SEC. Our Board of Directors has determined that the chairperson of
the Audit Committee, Mr. Stover, is an “audit committee financial expert,” as
that term is defined in Item 407(d) of Regulation S-K under the Securities
Exchange Act of 1934 (the “Exchange Act”).
The Audit
Committee and our Board of Directors have established a procedure whereby
complaints or concerns with respect to accounting, internal controls and
auditing matters may be submitted to the Audit Committee, which is described in
the section of this Proxy Statement entitled “Policies on Communicating with our
Board of Directors and Reporting of Concerns Regarding Accounting or Auditing
Matters.”
Our Audit
Committee Charter is posted and can be viewed in the “Investor Relations”
section of our website at www.pdi-inc.com.
Compensation and Management
Development Committee
The
Compensation Committee is currently comprised of Messrs. Ryan (chairperson),
Pietruski and Federspiel. Each member of our Compensation Committee
is “independent” within the meaning of the rules of Nasdaq and as required by
the Compensation Committee Charter. The primary purposes of our Compensation
Committee are: (a) to establish and maintain executive compensation
policies for the Company consistent with corporate objectives and stockholder
interests, and (b) to oversee the competency and qualifications of our senior
management personnel and the provisions of senior management succession
planning. In addition, the Compensation Committee is responsible for
preparing any report of the Compensation Committee required by the rules and
regulations of the SEC for inclusion in our annual proxy statement. The
Compensation Committee also administers our equity compensation
plans. Additional information on the Compensation Committee’s
processes and procedures for the consideration and determination of executive
compensation can be found in the section of this Proxy Statement entitled
“Compensation Discussion and Analysis.”
Our
Compensation Committee Charter is posted and can be viewed in the “Investor
Relations” section of our website at www.pdi-inc.com.
Nominating and Corporate
Governance Committee
The
Nominating Committee is currently comprised of Messrs. Pietruski (chairperson),
Federspiel and Sullivan and Dr. Curti. Each member of our Nominating
Committee is “independent” within the meaning of the rules of Nasdaq and as
required by the Nominating Committee charter. The primary purposes of
the Nominating Committee are: (a) to select individuals qualified to serve as
directors of the Company and on committees of the Board of Directors; (b) to
advise the Board of Directors with respect to board composition, procedures and
committees; (c) to advise the Board of Directors with respect to the corporate
governance principles applicable to the Company; (d) to advise the Board of
Directors with respect to director compensation issues; and (e) to oversee the
evaluation of the Board of Directors. In identifying and recommending nominees
for positions on the Board of
5
Directors,
the Nominating Committee places primary emphasis on (i) a candidate’s
judgment, character, expertise, skills and knowledge useful to the oversight of
our business; (ii) a candidate’s business or other relevant experience; and
(iii) the extent to which the interplay of the candidate’s expertise,
skills, knowledge and experience with that of other members of the Board of
Directors will build a Board of Directors that is effective,
collegial and responsive to our needs. The Nominating Committee does not set
specific, minimum qualifications that nominees must meet in order for the
committee to recommend them to the Board of Directors, but rather believes that
each nominee should be evaluated based on his or her individual merits, taking
into account our needs and the composition of the Board of Directors. Members of
the Nominating Committee discuss and evaluate possible candidates in detail, and
suggest individuals to explore in more depth. Outside consultants have also been
employed to help in identifying candidates. Once a candidate is identified whom
the committee wants to seriously consider and move toward nomination, the
chairperson of the Nominating Committee enters into a discussion with that
nominee candidate. Subsequently, the chairperson will discuss the qualifications
of the candidate with the other members of the committee, and the Nominating
Committee will then make a final recommendation with respect to that candidate
to the Board of Directors. The Nominating Committee will consider
nominees recommended by stockholders, provided such nominations comply with the
applicable provisions of our bylaws and the procedures to be followed in
submitting proposals. Stockholders who wish to submit nominees for director for
consideration by the Nominating Committee may do so by submitting in writing
such nominees’ names and qualifications to Kerry Skolkin, Vice President,
Associate General Counsel and Corporate Secretary at PDI, Inc., Saddle River
Executive Centre, 1 Route 17 South, Saddle River, NJ 07458. See
“Stockholder Proposals for the 2009 Annual Meeting” for the procedures to be
followed by stockholders in submitting proposals, including recommendations for
director nominees, to be included in our proxy statement relating to the 2009
annual meeting of stockholders.
The
Company’s Nomination Committee Charter is posted and can be viewed in the
“Investor Relations” section of our website at www.pdi-inc.com.
Policies on Communicating
with our Board of Directors and Reporting of Concerns Regarding Accounting or
Auditing Matters
Stockholders
may contact an individual director, a committee of our Board of Directors or our
Board of Directors as a group. The name of any specific intended
director recipient (or recipients) should be noted in the
communication. Communications may be sent to PDI, Inc., Attn:
Corporate Secretary, Saddle River Executive Centre, 1 Route 17 South, Saddle
River, NJ 07458. Our Corporate Secretary will forward such
correspondence only to the intended recipients. Prior to forwarding
any correspondence, however, the Corporate Secretary will review the
correspondence and will not forward any communications deemed to be of a
commercial or frivolous nature or otherwise inappropriate for our Board of
Directors’ consideration. In such cases, that correspondence may be
forwarded elsewhere in the Company for review and possible
response.
Any
person who has a concern regarding accounting, internal accounting controls or
auditing matters may, in a confidential or anonymous manner, communicate that
concern in either of the following manners: (1) by reporting such concerns via a
confidential and secure Internet and telephone based reporting system
administered by an external vendor, which may be accessed via the Internet at
www.guideline.lrn.com
or toll-free by telephone at 1-888-577-9483, or (2) by setting forth such
concerns in writing and forwarding them in a sealed envelope to the chairperson
of the Audit Committee, in care of our Corporate Secretary at PDI, Inc. Attn:
Corporate Secretary, Saddle River Executive Centre, 1 Route 17 South, Saddle
River, NJ 07458, such envelope to be labeled with a legend such
as: “Anonymous Submission of Complaint or Concern.” All
communications received regarding concerns about accounting or auditing matters
will be relayed to the chairperson of our Audit Committee. Additional
information on how to access our whistleblower hotline is posted and can be
viewed in the “Investor Relations” section of our website at www.pdi-inc.com.
Compensation of
Directors
Each of
our non-employee directors receives an annual director's fee of $40,000, payable
quarterly in arrears. In addition, the Chairperson of each of the
Audit Committee, Compensation Committee and Nominating
6
Committee
receives an additional annual fee of $25,000, $15,000 and $5,000,
respectively. Members of our Board of Directors may defer receipt of
board and committee fees through
participation in our Executive Deferred Compensation Plan. In
addition, our directors are entitled to reimbursement for travel and related
expenses incurred in connection with attendance at Board and committee
meetings.
Prior to
2006, we provided non-employee directors with stock options on an annual
basis. Our current practice with respect to equity awards to our
non-employee directors is as follows: Upon initial appointment to the
Board of Directors, each non-employee director receives approximately $60,000 in
restricted stock which vests ratably over a three-year period. In
addition, each non-employee director receives approximately $45,000 in
restricted stock on the date of our annual meeting each year which vests ratably
over a three-year period.
The
following table presents information relating to total compensation for our
non-employee directors for the year ended December 31, 2007. The
value of equity awards is based on Financial Accounting Standards Board
Statements of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payments” (“FAS
123R”), as required by the SEC. As a result, this value may include
amounts from awards granted in and prior to 2007, and not the amount actually
paid to the director in 2007.
|
Name
|
Fees
earned or paid in cash ($)
|
Stock
awards ($)(1)
(3)
|
Option
awards ($)(2)
|
Nonqualified
Compensation Earnings ($)
|
Total
($)
|
||||||||||||||
|
Gerald
P. Belle (4)
|
$ | - | $ | - | $ | - | $ | - | $ | - | |||||||||
|
Joseph
T. Curti
|
40,000 | 23,750 | 9,100 | - | 72,850 | ||||||||||||||
|
John
C. Federspiel
|
40,000 | 53,122 | 9,100 | - | 102,222 | ||||||||||||||
|
John
M. Pietruski
|
45,000 | 81,244 | 9,100 | - | 135,344 | ||||||||||||||
|
Frank
J. Ryan
|
55,000 | 28,124 | 9,100 | - | 92,224 | ||||||||||||||
|
Stephen
Sullivan
|
40,000 | 23,750 | 9,100 | - | 72,850 | ||||||||||||||
|
Jack
Stover
|
65,000 | 23,750 | 21,371 | 792 | 110,912 | ||||||||||||||
|
Jan
Vecsi
|
40,000 | 81,244 | 9,100 | - | 130,344 | ||||||||||||||
| (1) | Reports the amount recognized in accordance with FAS 123R in our consolidated financial statements for the year ended December 31, 2007 for restricted stock granted to each listed director in 2006 and 2007. A discussion of the assumptions used in calculating these values are set forth in Note 11 to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2007. | |
|
|
(2)
|
Reports
the amount recognized in accordance with FAS 123R in our consolidated
financial statements for the year ended December 31, 2007 for options
granted to each listed director in 2005. A discussion of the
assumptions used in calculating these values are set forth in Note 11 to
our consolidated financial statements contained in our Annual Report on
Form 10-K for the year ended December 31,
2007.
|
|
|
(3)
|
For
awards granted to retirement-eligible directors where no additional
service is required for the director to retain the award, FAS 123R
requires the immediate recognition of compensation cost at the grant date
because the director is able to retain the award without continuing to
provide services. Mr. Federspiel, Mr. Pietruski and Ms. Vecsi
are retirement eligible. For directors near retirement
eligibility, attribution of compensation cost is allocated over the period
from the grant date to the retirement eligibility date. Mr.
Ryan is near retirement eligible. Under our currently policy, a
director is eligible to retire after serving two three-year
terms. Upon retirement, all restricted stock would be
immediately vested.
|
|
|
(4)
|
Mr.
Belle was appointed to the Board of Directors in April
2008.
|
Mr.
Marquard and Mr. Dugan are both employed by the Company as our CEO and Director
of Strategic Planning, respectively, and are therefore not eligible to receive
the director fees described above. In January 1998, the Company
entered into an agreement with Mr. Dugan providing for his appointment as
Chairman of the Board of Directors and Director of Strategic
Planning. The agreement provides for an annual salary of
$150,000. Information regarding Mr. Marquard’s compensation can be
found elsewhere in this Proxy Statement under the caption “Executive
Compensation”.
7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows, as of April 1, 2008, the number of shares of our common
stock beneficially owned by (i) each stockholder who is known by us to own
beneficially in excess of 5% of our outstanding common stock, (ii) each
director, (iii) each executive officer included in the section of this Proxy
Statement entitled “Summary Compensation Table” (each, a “named executive
officer”) who is currently employed with us and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated,
the persons listed below have sole voting and investment power with respect to
all shares of common stock owned by them and all information with respect to
beneficial ownership has been furnished to us by the respective
stockholder.
|
Name
of Beneficial Owner
|
Number
of Shares Beneficially Owned (1)
|
Percent
of Shares Outstanding
|
|
|
Executive
officers and directors:
|
|||
|
John
P. Dugan
|
4,869,878
|
34.1%
|
|
|
Michael
J. Marquard
|
69,847
|
*
|
|
|
Jeffrey
E. Smith
|
32,178
|
*
|
|
|
Kevin
Connolly
|
32,415
|
*
|
|
|
Nancy
McCarthy
|
30,523
|
(2)
|
*
|
|
Gerald
P. Belle
|
-
|
0.0%
|
|
|
Joseph
T. Curti
|
32,658
|
(3)
|
*
|
|
John
C. Federspiel
|
47,658
|
(4)
|
*
|
|
John
M. Pietruski
|
65,908
|
(5)
|
*
|
|
Frank
J. Ryan
|
40,158
|
(6)
|
*
|
|
Jack
Stover
|
17,658
|
(2)
|
*
|
|
Stephen
Sullivan
|
25,608
|
(7)
|
*
|
|
Jan
Martens Vecsi
|
64,508
|
(5)
(8)
|
*
|
|
All
executive officers and directors as a group (12 persons)
|
5,328,997
|
(9)
|
37.3%
|
|
5%
stockholders:
|
|||
|
Heartland
Advisors, Inc. (10)
|
1,957,850
|
13.7%
|
|
|
789
North Water Street
|
|||
|
Milwaukee,
WI 53202
|
|||
|
Dimensional
Fund Advisors LP
(10)
|
1,203,893
|
8.4%
|
|
|
1299
Ocean Avenue
|
|||
|
Santa
Monica, CA 90401
|
|||
|
Rutabaga
Capital Management (10)
|
1,004,179
|
7.0%
|
|
|
64
Broad Street, 3rd Floor
|
|||
|
Boston,
MA 02109
|
|||
|
* Less
than 1%.
|
|||
|
|
(1)
|
Beneficial
ownership is determined in accordance with the rules of the SEC. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
options and warrants held by that person that are currently exercisable or
exercisable within 60 days of April 1, 2008 are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other
person.
|
|
|
(2)
|
Includes
options to purchase 10,000 shares of common
stock.
|
|
|
(3)
|
Includes
options to purchase 25,000 shares of common
stock.
|
8
|
|
(4)
|
Includes
options to purchase 40,000 shares of common
stock.
|
|
|
(5)
|
Includes
options to purchase 56,250 shares of common
stock.
|
|
|
(6)
|
Includes
options to purchase 32,500 shares of common
stock.
|
|
|
(7)
|
Includes
options to purchase 17,500 shares of common
stock.
|
|
|
(8)
|
Includes
400 shares held in an irrevocable Trust Account for her son, John S.
Vecsi, Jr. of which Ms. Vecsi is the
trustee.
|
|
|
(9)
|
Includes
options to purchase 247,500 shares of common stock.
|
| (10) | This information was derived from the Schedule 13G filed by the reporting person. |
|
Section
16(a) Beneficial Ownership Reporting
Compliance
|
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who own more than ten percent (10%) of a registered class
of our equity securities to file reports of ownership and changes in ownership
with the SEC. Executive officers, directors and greater than ten
percent (10%) stockholders are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file.
To the
best of our knowledge, based solely on review of the copies of such forms
furnished to us, or written representations that no other forms were required,
we believe that all Section 16(a) filing requirements applicable to our
executive officers, directors and greater than ten percent (10%) stockholders
were complied with during the fiscal year ended December 31, 2007 with the
following exception: a Change in Beneficial Ownership on Form 4 was not timely
filed for Mr. Smith relating to the shares of restricted stock and the
stock-settled stock appreciation rights (“SARs”) granted to him in March
2007.
EXECUTIVE
OFFICERS
The
following table sets forth the names, ages and principal position of the
executive officers of the Company as of the date of this Proxy
Statement:
|
Name
|
Age
|
Position
|
|
Michael
J. Marquard
|
59
|
Chief
Executive Officer
|
|
Jeffrey
E. Smith
|
61
|
Executive
Vice President, Chief Financial Officer and Treasurer
|
|
Kevin
Connolly
|
54
|
Executive
Vice President and President of Diversified Marketing
Services
|
|
Nancy
McCarthy
|
51
|
Executive
Vice President, Human Resources
|
The
principal occupation and business experience for at least the last five years
for each executive officer is set forth below (except for Mr. Marquard, whose
business experience is discussed above).
Jeffrey E. Smith joined us as
Executive Vice President, Chief Financial Officer (“CFO”) and Treasurer in May
2006. Immediately prior to joining PDI, Mr. Smith was senior vice president,
finance and chief financial officer of Pliva, Inc., a specialty generic
pharmaceutical company. From 1985 to 2002, Mr. Smith served in various executive
positions with Alpharma, Inc., a global specialty pharmaceutical company. While
with Alpharma, Inc., Mr. Smith was executive vice president, finance and chief
financial officer and, for a three-year period, was responsible for worldwide
operations while serving as acting president and member of the office of the
chief executive. Mr. Smith is a Certified Public Accountant who began his career
with Coopers & Lybrand, now PricewaterhouseCoopers. Mr. Smith
received his B.S. from Fairleigh Dickinson University.
Kevin Connolly joined us in
June 2005, and is our Executive Vice President and President of Diversified
Marketing Services. He brings over 25 years of pharmaceutical sales and
marketing experience to PDI. Prior to joining PDI, he was senior vice president,
group general manager in Cardinal Health's Medical Communications Group. Prior
to Cardinal, Mr. Connolly was executive vice president, Americas for Wolters
Kluwer Health. He
9
Nancy McCarthy joined us as
Executive Vice President, Human Resources in June 2004. Prior to
joining PDI, Ms. McCarthy was senior director, organization development at Avaya
Inc., a telecommunications company, where she led an enterprise-wide initiative
to create the architecture for a global learning platform to support the
company’s business strategy. Before joining Avaya, Ms. McCarthy
worked for Datascope Corp., a medical devices company, where she established
their leadership development platform, creating a fully integrated human
resources system for recruitment, training, executive coaching and performance
management. Ms. McCarthy received her B.A. from the University of New
Hampshire and an M.B.A. from Fairleigh Dickinson University.
PROPOSAL NO. 2 -
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit
Committee of our Board of Directors has appointed E&Y as our independent
registered public accounting firm for the fiscal year ending December 31,
2008. Although stockholder approval is not required, we desire to
obtain from the stockholders an indication of their approval or disapproval of
the Audit Committee’s action in appointing E&Y as the independent registered
public accounting firm of the Company and its subsidiaries. The
accompanying proxy will be voted for the ratification of the appointment of
E&Y unless the proxy contains instructions otherwise. If the
stockholders do not ratify this appointment, such appointment will be
reconsidered by the Audit Committee.
A
representative of E&Y will be present at the Annual Meeting and will be
afforded an opportunity to make a statement and to respond to
questions.
The
Board of Directors Recommends a Vote FOR the Ratification of the
Appointment
of Ernst & Young LLP for Fiscal Year 2008 and Proxies That Are
Returned
Will Be So Voted Unless Otherwise Instructed.
AUDIT COMMITTEE
REPORT
The Audit
Committee has reviewed and discussed with management and E&Y, the
independent registered public accounting firm, our audited financial statements
for fiscal 2007, management’s assessment of the effectiveness of our internal
control over financial reporting and E&Y’s evaluation of management’s
assessment of the effectiveness of internal control over financial reporting and
the effectiveness of our internal control over financial
reporting. The Audit Committee has also discussed with E&Y the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit
Committees, as currently in effect. The Audit Committee has
received the written disclosures and the letter from E&Y required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as currently in effect, and has discussed with E&Y, such
independent registered public accounting firm’s independence.
Management
is responsible for the preparation, presentation and integrity of our financial
statements, accounting and financial reporting principles and internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations, including the effectiveness of internal control
over financial reporting. E&Y is responsible for performing an
independent audit of our financial statements, expressing an opinion as to their
conformity with generally accepted accounting principles, on management’s
assessment of the effectiveness of internal control over financial reporting,
and on the effectiveness of internal control over financial
reporting. E&Y has free access to the Audit Committee to discuss
any matters they deem appropriate.
10
Based on
the reports and discussions described in this report, the Audit Committee
recommended to the Board of Directors that our audited financial statements for
fiscal 2007 be included in our Annual Report on Form 10-K for such fiscal
year.
Submitted
by the Audit Committee
Jack E.
Stover, Chairperson
Joseph T.
Curti, M.D.
Stephen
J. Sullivan
Audit Committee Matters and
Fees Paid to Independent Registered Public Accounting Firm
Under its
charter, the Audit Committee must pre-approve all engagements of our independent
registered public accounting firm unless an exception to such pre-approval
exists under the Exchange Act or the rules of the SEC. Each year, the
independent registered public accounting firm’s retention to audit our financial
statements and permissible non-audit services, including the associated fees, is
approved by the Audit Committee. At the beginning of the fiscal year,
the Audit Committee evaluates other known potential engagements of the
independent registered public accounting firm, in light of the scope of the work
proposed to be performed and the proposed fees, and approves or rejects each
service, taking into account whether the services are permissible under
applicable law and the possible impact of each non-audit service on the
independent registered public accounting firm’s independence. At
subsequent Audit Committee meetings, the Audit Committee receives updates on the
services actually provided by the independent registered public accounting firm,
and management may present additional services for
approval. Typically, these would be services, such as due diligence
for an acquisition, that were not known at the beginning of the
year. The Audit Committee has delegated to the Chairperson of the
Audit Committee the authority to evaluate and approve engagements on behalf of
the Audit Committee in the event that a need arises for pre-approval between
committee meetings. If the Chairperson so approves any such
engagements, he will report that approval to the full Audit Committee at the
next Audit Committee meeting.
E&Y,
an independent registered public accounting firm, has served as our independent
accountants continuously since 2005. The Audit Committee believes
that the knowledge of our business E&Y has gained through this period of
service is valuable. Fees for services provided by E&Y for the
past two completed years ended December 31 were as follows:
|
2007
|
2006
|
|
|
Audit
Fees
|
$ 865,000
|
$
1,124,000
|
|
Audit-Related
Fees
|
28,000
|
-
|
|
Tax
Fees
|
-
|
-
|
|
All
Other Fees
|
-
|
-
|
|
Total
Fees
|
$ 893,000
|
$
1,124,000
|
Fees for
audit services included the audit of our consolidated financial statements and
the audit of the effectiveness of internal control over financial
reporting. Fees for audit-related services for 2007 consist of an
audit of our 401(k) plan for the year ended December 31, 2006 by an affiliate of
E&Y.
11
COMPENSATION DISCUSSION AND
ANALYSIS
The
following discussion and analysis of executive compensation arrangements should
be read together with the compensation tables and related disclosures set forth
elsewhere in this Proxy Statement under the caption “Executive
Compensation”. This discussion contains forward looking statements
that are based on our current plans, considerations, expectations and
determinations regarding executive compensation. These statements
involve known and unknown risks, uncertainties and other factors that may cause
our future compensation programs to differ materially from currently planned
programs.
Compensation Philosophy and
Objectives
We
believe that executive compensation should be commensurate and aligned with the
performance and growth objectives of the Company and long-term stockholder
value. The primary objectives of our executive compensation plans are
to:
|
|
·
|
provide
overall levels of compensation that are competitive in order to attract,
retain and motivate highly qualified, experienced
executives;
|
|
|
·
|
provide
annual and long-term incentives that emphasize performance-based
compensation and correlate directly with achievement of company financial
targets and individual performance
goals;
|
|
|
·
|
align
the interests of our executives with those of our stockholders by having a
meaningful portion of executive compensation comprised of equity-based
incentives coupled with stock ownership guidelines;
and
|
|
|
·
|
reward
our executives for their individual contributions to the near and
long-term success of the Company.
|
In order
to achieve these objectives, we utilize both quantitative and qualitative
measures of performance. Our compensation plans are designed to
provide our executive officers with compensation awards based in part upon our
attainment of certain financial targets. In addition, certain
qualitative measures are also applied to assess the individual performance of
each of our executives, such as an individual’s achievement of his or her annual
goals, progress toward the Company’s strategic objectives, leadership and
decision-making abilities, innovation and industry knowledge.
Our
compensation philosophy and objectives during 2007 were influenced by
significant events that impacted our business during the year, including the
expiration and termination of a number of significant sales force agreements
during 2006 and early 2007 and the implementation of the Company’s long-term
strategic plan. In recognition of the unique business challenges
presented during 2007, our 2007 executive compensation plans were specifically
designed to foster retention and reward our executives for their efforts to
rebuild our business and to begin to successfully implement the Company’s
long-term strategic plan. As described in more detail below, in
accordance with this objective, the 2007 annual cash incentive program was
designed to provide full funding upon achievement of the Company’s forecast with
respect to operating income/loss in 2007. However, despite our
attainment of this forecast in 2007, the level of funding and actual payments to
our executive officers under this program were reduced based in part on the
Company’s overall financial results in 2007. In addition, the
long-term incentive awards granted to executives under the 2007 long-term equity
incentive program were at the lowest end of the established range.
In light
of the fact that the Company was successful during 2007 in beginning the process
of rebuilding our core sales support services business by entering into new
sales force contracts to offset in part the loss of significant sales force
contracts during 2006 and early 2007, the compensation philosophy and objectives
for 2008 have shifted to focus more on revenue growth beyond that generated by
our current arrangements. In addition, the threshold for achieving a
full funding level for the 2008 annual cash incentive program has been increased
significantly from the threshold established for 2007 in accordance with this
focus on achieving additional revenue growth as well as exceeding forecasted net
income during fiscal 2008.
12
Role of the Compensation Committee and the Board of
Directors
The
Compensation Committee provides overall guidance for our executive compensation
policies and determines the value and elements of compensation for our executive
officers, except for our CEO, whose compensation is approved by our full Board
of Directors. In making its determinations with respect to executive
compensation, the Compensation Committee has retained since 2002 the services of
a compensation consultant, Pearl Meyer & Partners, to assist with the design
of our executive compensation programs. We believe that the use of an
independent compensation consultant provides additional assurance that our
executive compensation arrangements are reasonable and consistent with our
objectives, general survey data we use for benchmarking purposes and external
market trends. Our compensation consultant regularly participates in
Compensation Committee meetings and advises the Compensation Committee on such
matters as compensation trends and best practices, plan design and appropriate
benchmarking. In addition, our CEO and Executive Vice President,
Human Resources attend Compensation Committee meetings by invitation in order to
provide, as appropriate, additional insight, suggestions or recommendations
regarding executive compensation.
With
respect to our CEO, decisions regarding the CEO’s compensation package are made
by the Board of Directors based primarily upon the following considerations: (1)
the achievement of the Company’s stated financial goals and the Board of
Director’s evaluation of the CEO’s performance in achieving his annual goals;
(2) the Compensation Committee’s and compensation consultant’s input to the
Board of Directors and (3) any relevant benchmarking data provided by the
compensation consultant. With respect to our other executive
officers, the Compensation Committee determines the compensation package of each
of these executive officers based on the recommendation of the CEO as well as
the achievement of our financial targets and any relevant benchmarking data
provided by the compensation consultant.
Benchmarking
Compensation
levels for executives are determined based on a number of factors, including
among other things, the compensation levels in the marketplace for similar
positions. Benchmarking compensation is a challenge for the Company,
however, as we provide a unique mix of services in the
marketplace. There are very few public companies, if any, that are of
similar size and scope which provide the types of sales and marketing support
and medical education services that we provide to our customers in the
marketplace, thereby making it difficult to develop a true comparison group with
a meaningful number of companies. As a result, the Compensation
Committee benchmarks our executive compensation against data for numerous
companies of similar size from general industry surveys that provide
position-based compensation levels and other related compensation
information. The Compensation Committee relies on its compensation
consultant to conduct the benchmarking analysis of general survey data and does
not consider any particular survey participant to be a material factor in its
compensation determinations.
Relative
to the general survey data, the Compensation Committee’s objective is for each
executive officer’s total compensation to generally remain within the median
range if our financial targets and the executive’s annual goals are achieved
during the year. However, actual total compensation for each
executive during any given year may vary above or below the median range of the
general survey data based on a number of factors, including our overall
financial results and prospects and the performance of the Company’s stock as
well as the individual’s performance during the year.
Elements and Mix of
Executive Compensation
Overview
We currently
utilize the following three main components of executive
compensation:
|
|
·
|
Base
Salary;
|
|
|
·
|
Annual
Cash Incentives; and
|
|
|
·
|
Long-Term
Equity Incentives.
|
13
We
utilize these particular elements of executive compensation because we believe
they provide a well-balanced mix of rewards designed to achieve our compensation
objectives in accordance with our compensation philosophy. We provide
our executives a measure of security in the minimum level of compensation he or
she is eligible to receive in the form of a base salary. In addition,
we also provide incentives for our executives to focus their efforts on
achieving strong financial results on an annual basis through annual cash
incentive rewards. Finally, we seek to achieve our executive
retention goals and long-term growth objectives by providing our executives with
long-term wealth creation opportunities through equity awards.
The mix
of executive compensation is generally leveraged in favor of at-risk
compensation (in the form of annual cash incentives and long-term equity
incentives), which results in a pay-for-performance orientation for our
executives. Approximately 60% of our executive officers’ total target
compensation each year is typically comprised of incentive compensation, with
the remaining 40% comprised of base salary (except with respect to our CEO’s
total target compensation, which is more highly leveraged in favor of incentive
compensation at approximately 70%). The incentive-based portion of
our executive officers’ target compensation is divided evenly among annual cash
incentives and long-term equity incentives. We believe that this mix
of incentive compensation provides an appropriate balance between our short- and
long-term financial and stock performance goals. In furtherance of
our philosophy of rewarding executives for future superior performance, prior
stock compensation gains are not considered in setting future compensation
levels.
Base
Salary
Base
salaries are set with regard to the level of the executive officer’s position
within the Company and the individual’s current and historical performance
results, as well as general survey data. The base salary levels and
any changes to those levels for each executive are reviewed each year by the
Compensation Committee, and adjustments may be based on factors such as new
roles and/or responsibilities assumed by the executive and the executive’s
impact on achieving our strategic and financial goals. While our
executives’ base salaries are generally targeted to be consistent with median
base salaries for similar positions based on the general survey data described
above, there is no specific weighting applied to any one factor in setting the
level of salary, and the process ultimately relies on the Compensation
Committee’s evaluation of the factors discussed above with respect to each
executive officer. The Compensation Committee also takes
into account additional factors such as historical compensation and the
individual’s potential to be a key contributor as well as special recruiting
situations. During 2007, the base salary of our CEO was increased by
4% which reflected the Compensation Committee’s acknowledgement that our CEO’s
base salary was significantly below the median based upon a review of the
general survey data. Based on a similar analysis, the base salaries
of our (i) CFO and (ii) Executive Vice President and President of Diversified
Marketing Services were each increased by 3%.
Annual
Cash Incentives
The
annual cash incentive program provides our executive officers with an
opportunity to receive a cash award based on our financial performance and the
individual performance of each executive during the year. Annual cash
incentive targets are determined by the Compensation Committee during the first
quarter of each fiscal year and are expressed as a percentage of such
individual’s base salary. In March 2007, the following annual cash
incentive targets for 2007 were established for each named executive
officer:
|
Named
Executive Officer
|
Annual
Cash Incentive Target
(%
of Base Salary)
|
|
M.
Marquard
|
80%
|
|
J.
Smith
|
70%
|
|
S.
Budd *
|
75%
|
|
K.
Connolly
|
70%
|
|
N.
McCarthy
|
65%
|
* Mr. Budd resigned from
the Company, effective April 6, 2007 and therefore was not eligible to receive
an annual cash incentive award relating to fiscal 2007.
14
These annual
cash incentive targets were determined by the Compensation Committee in
accordance with input from our compensation consultant and were based upon
general survey data and the Compensation Committee’s desire to link a
significant portion of our executive’s overall compensation to the achievement
of specific financial and performance goals.
In order
to determine the level of funding that will be available to make annual cash
incentive awards to our executive officers, certain financial targets are
established during the first quarter of each fiscal year. For certain
executives, these financial targets are based entirely on our consolidated
financial results; however, for those executives who are evaluated with respect
to the performance of a particular business segment of the Company, there are
two financial targets, one of which is based upon our overall financial results
while the other is tied to the financial performance of that particular business
segment. The level of funding for the annual cash incentive targets
is based on a sliding scale that correlates directly with the attainment of our
financial targets. For those executives with two financial targets,
the financial performance of their respective business segment is weighted much
more heavily than our consolidated results. As a general matter, in
order for the annual cash incentive targets to be funded at 100%, the applicable
financial target(s) must be fully achieved. Once the level of funding
has been determined, the actual amount of the annual cash incentive award
granted to each executive officer may then be adjusted by the Compensation
Committee (or in the case of the CEO’s annual cash incentive, the Board of
Directors) depending on a variety of factors, including any extraordinary
circumstances that affected our financial performance during the fiscal year as
well as the executive’s performance during the fiscal year, including the extent
to which he or she achieved his or her annual goals and our strategic
objectives.
The
financial target established for 2007 for our executive officers was the
attainment of our forecasted 2007 consolidated operating loss of approximately
$15.77 million. In addition, Mr. Budd’s annual cash incentive target
was tied to an additional financial target of achieving our operating income
forecast of approximately $4.06 million (before corporate allocations) in our
Sales Services business segment, and Mr. Connolly’s annual cash incentive target
was tied to an additional financial target of achieving our operating income
forecast of approximately $6.55 million (before corporate allocations) in our
Marketing Services business segment. These financial targets were
determined by the Compensation Committee taking into consideration the unique
challenges facing the Company during 2007, including the expiration and
termination of significant sales force agreements during 2006 and the first
quarter of 2007, which accounted for approximately $150.9 million of our revenue
in 2006 and $15.9 million of our revenue during 2007. In addition,
the Compensation Committee considered the anticipated costs associated with
implementing our long-term strategic plan during 2007, which is expected to
provide the Company with additional avenues for revenue growth in the
future. Based on these considerations, as well as a focus on
retaining key executives to rebuild our core business and expand our service
offerings, the Compensation Committee determined that establishing these
financial targets would best achieve the Company’s compensation objectives for
2007.
The
financial target based on our forecasted consolidated operating loss was
exceeded during fiscal 2007. However, our CEO, based on an evaluation
of our overall financial results for 2007 (which included a comparison of
forecasted revenue with actual revenue during 2007) as well as a review of the
status of certain other strategic initiatives established for 2007, recommended
to the Compensation Committee that the overall level of funding for the annual
incentive targets for our executive officers be reduced from 100% to
85%. With respect to Mr. Connolly, the financial target established
for our Marketing Services business segment was not achieved and therefore the
level of funding his annual incentive target was reduced to 40% in accordance
with sliding scale previously adopted by the Compensation
Committee. In determining the actual amount of annual cash incentive
awards to be made to our executive officers, the Compensation Committee (and
with respect to the CEO, the Board of Directors) considered, in addition to the
level of funding established for each executive, the executive’s performance and
contributions during the year as well as other factors such as the existing
pipeline for new business and any extraordinary circumstances that affected
financial performance during 2007 and may affect
financial performance going forward. Based on these criteria, the
Compensation Committee approved annual cash incentive awards to each named
executive officer in accordance with the funding levels discussed immediately
above, except for Mr. Smith whose actual award was increased from 85% to 90% of
his annual cash incentive target based on the recommendation of the CEO in
recognition of Mr. Smith’s superior performance during the year. In
February 2008,
15
|
Named
Executive Officer
|
Actual
Annual Cash
Incentive
Award
(%
of Base Salary)
|
Actual
Annual Cash
Incentive
Award
(%
of Target)
|
|
M.
Marquard
|
68%
|
85%
|
|
J.
Smith
|
63%
|
90%
|
|
K.
Connolly
|
28%
|
40%
|
|
N.
McCarthy
|
55%
|
85%
|
Long-Term
Equity Incentives
Our
executives are also eligible to participate in a long-term equity incentive
program each year, which is administered under our 2004 Stock Award and
Incentive Plan (the “2004 Plan”). The long-term equity incentive
component of our compensation program is used to balance the short-term focus of
the annual cash incentive component by tying the ultimate value of these equity
rewards to our long-term performance. The Compensation Committee
believes that long-term stock-based incentive compensation enhances our ability
to attract and retain high quality talent and provides the motivation to improve
our long-term financial performance and increase stockholder value.
Historically,
we had a practice of granting stock options to our executive officers and other
employees. However, in connection with our adoption of FAS 123R, we
have shifted our focus to stock-settled stock appreciation rights (“SARs”) and
restricted stock. Restricted stock grants generally cliff vest at the
end of a three-year period, with shares delivered to our executives upon
vesting. Unless provided otherwise in an agreement, unvested
restricted stock is forfeited when an executive’s service with the Company is
terminated. We believe that restricted stock provides our executives
with a significant link to our share price and also assists with retention of
executive talent in critical positions. SARs are granted with an
exercise price equal to the market value of the common stock on the date of
grant and generally vest ratably over a three-year period. We believe
that tying a significant portion of our executives’ compensation to stock price
appreciation furthers the goal of aligning executive and stockholder
interests.
The
Compensation Committee typically approves a dollar range for the long-term
equity component of compensation for each executive officer during the first
quarter of each fiscal year. The ranges are established in accordance
with a tier system which is based on each executive’s position and
responsibilities within the organization. The CEO is in the first
tier and therefore has the highest established dollar range. The CFO,
the President of our Sales Services segment and the President of our Marketing
Services segment are included within the second tier and the Executive Vice
President of Human Resources is included within the third
tier. The primary goal of the Compensation Committee in
establishing these dollar ranges for long-term equity incentive awards is to
position our executives at median levels of long-term incentive compensation
compared with general survey data, assuming that our financial targets are
attained and taking into consideration certain qualitative factors such as the
executive’s strategic impact, experience and expertise. For all of
our executive officers except the CEO, the long-term equity incentive awards are
approved by the Compensation Committee in the first quarter of the following
year. The Board of Directors approves the long-term equity incentive
award granted to the CEO. In determining the actual amount of the
award within the established range, the Compensation Committee (and in the case
of the CEO’s award, the Board of Directors) considers various factors,
including our overall financial, operating and stock performance, the
executive's strategic impact, alignment with stockholder interests based on
equity
ownership of the executive management team, total stockholder dilution and
annual share utilization rates, competitive market practices and the balance
with other elements of the executive’s compensation package.
16
In March
2007, the following dollar ranges for 2007 long-term equity incentive awards
were established for each named executive officer:
|
Named
Executive Officer
|
Long-term
Equity Incentive Award Range
($
Value)
|
|
M.
Marquard
|
$500,000-$800,000
|
|
J.
Smith
|
$200,000-$300,000
|
|
S.
Budd *
|
$200,000-$300,000
|
|
K.
Connolly
|
$200,000-$300,000
|
|
N.
McCarthy
|
$80,000-$150,000
|
* Mr.
Budd resigned from the Company, effective April 6, 2007 and therefore was not
eligible to receive a long-term equity incentive award relating to fiscal
2007.
In
February 2008, the following long-term equity incentive awards were granted to
each named executive officer in the form of shares of restricted stock and
SARs:
|
Named
Executive Officer
|
Approximate
Amount
($
Value)
|
Amount
(%
of Base Salary)
|
|
M.
Marquard
|
$500,000
|
120%
|
|
J.
Smith
|
$200,000
|
65%
|
|
K.
Connolly
|
$200,000
|
72%
|
|
N.
McCarthy
|
$80,000
|
37%
|
The
dollar value of these long-term equity incentives was split evenly in the form
of shares of restricted stock and SARs for each named executive
officer. The dollar value of the long-term equity incentives that
were awarded reflect the lowest end of the dollar range that was established by
the Compensation Committee in 2007 for each named executive
officer. This is due primarily to our overall financial performance
in 2007 and the status of certain other strategic initiatives established for
2007. Although these amounts were paid with respect to 2007
performance, they are not reported in the section of this Proxy Statement
entitled “Summary Compensation Table” as the FAS 123R value will correspond to
their date of grant in 2008 and therefore will be reported in the summary
compensation table that will be included in our 2009 proxy
statement.
Performance Contingent Share
Program
In the
past, the Compensation Committee administered a Performance Contingent Share
Program under the 2004 Plan, which provided for a certain number of shares of
our common stock to be awarded to executive officers and other members of our
management team upon the completion of a three-year performance period (from
2005 through 2007). Any awards of shares under this program were
generally contingent on achievement of varying levels of compound annual revenue
growth rates within each of our business units and total stockholder returns
over the three year period as compared with other companies from which we had
historically gathered compensation marketplace data. Based on our
financial results during the relevant period, no shares were awarded to any of
our executive officers under this program. As a result of the
uncertainties and difficulties associated with establishing long-term
performance objectives that remain relevant over multi-year periods for the
Company during this period of transition in implementing our long-term strategic
plan, we discontinued the use of the Performance Contingent Share Program in
2006.
17
In 2007,
the Compensation Committee approved and adopted a formal process relating to the
granting of equity awards. In accordance with this process, long-term
equity incentive awards for all executive officers (other than the CEO) are
approved by the Compensation Committee during the first quarter of each year,
and the grant date for such awards is the date on which such awards are approved
by the Compensation Committee. With respect to a long-term equity
incentive award to the CEO, the Board of Directors approves this award during
the first quarter of each year and the grant date is the date of approval by the
Board of Directors. For the portion of the equity award that is
granted in the form of restricted stock, the determination of the number of
shares to be granted is calculated by dividing the dollar value of the
restricted stock portion of the award by the closing price of our stock on the
date of the grant. For the portion of the equity award that is
granted in the form of SARs, the number of SARs to be granted is calculated by
dividing the dollar value of the SARs portion of the award by the fair market
value of our common stock based on a Black-Scholes calculation.
For newly
hired employees, if the Compensation Committee approves an equity award prior to
the individual’s date of hire, the grant date for the equity award is the date
of hire with reference (either for purposes of determining the value of the
restricted stock or exercise price of the SAR) to the closing price on the grant
date. If the Compensation Committee approves the equity award after
the date of hire, then the grant date of the award is the date on which the
Compensation Committee approves the equity award, and the value of the
restricted stock or the exercise price of the SAR, as appropriate, is computed
with reference to the closing price on the grant date.
Perquisites and Retirement
Benefits
As a
matter of practice, we provide only limited special perquisites to our executive
officers. Executives are eligible for the standard benefits and
programs generally available to all of our employees, plus additional financial
planning and executive physical examination services as well as automobile
benefits.
We do not
maintain any defined benefit or supplemental executive retirement programs for
our executives. We do, however, maintain a 401(k) retirement plan for
all of our employees. This plan is intended to qualify under sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”)
and is a defined contribution plan. The plan provides all eligible
participants with company matching contributions in accordance with the
following formula:
|
|
·
|
Employee
contributions of up to 3% of base salary will be matched
100%.
|
|
|
·
|
Employee
contributions which exceed 3% but do not exceed 5% of base salary will be
matched 50%.
|
Employees
must meet all eligibility requirements outlined in the 401(k) plan in order to
receive matching contributions. Employees' account balances derived
from our matching contributions are immediately fully vested. In
addition, we can make discretionary contributions to the 401(k)
plan. We did not make any discretionary contributions to the 401(k)
plan in 2007. Under the 401(k) plan, there is no option for employees
to invest any of their 401(k) funds in our common stock. Our
contribution expense related to the 401(k) plan for 2007 was approximately
$725,000.
In
addition, we also provide certain life insurance benefits to our employees,
including our executive officers.
These
perquisites and retirement and life insurance benefits are quantified for our
named executive officers in footnote 7 to the table contained in the section of
this Proxy Statement entitled “Summary Compensation Table.”
18
Deferred Compensation
Plan
We also
allow our executives to elect to defer receipt of cash compensation through
participation in the Executive Deferred Compensation Plan. The
purpose of the plan is to allow participants to defer receipt of current cash
compensation (base salary and annual cash incentives) in order to maximize
deferrals that could not otherwise be put into other qualified benefit plans,
such as the 401(k) plan. The plan also allows members of our Board of
Directors to defer board and committee fees.
Employment Agreements and
Post-Termination Payments
We have
employment separation agreements with certain key executives in order to attract
and retain a highly qualified management team. The Compensation
Committee considers the terms of these agreements to be consistent with standard
market practice. Additional information regarding the employment
separation agreements and the potential value of post-termination benefits of
our currently employed named executive officers can be found in the section of
this Proxy Statement entitled “Potential Payments upon
Termination.”
Stock Ownership
Guidelines
We
adopted stock ownership guidelines effective January 1, 2007 that are intended
to require our executive officers and non-employee directors to own our common
stock. Such individuals must retain at least 50% of net shares
delivered through our executive and director compensation plans. Net
shares refer to those that remain after shares are sold or forfeited to pay the
exercise price of stock options and withholding taxes for stock options, SARs
and restricted stock. These shares must be retained until the
earliest of (1) three years from the date of exercise or vesting; (2)
retirement; or (3) termination of employment. Failure to comply with
these ownership guidelines may result in reduced levels of annual and/or
long-term incentive compensation despite meeting financial targets and other
performance goals.
Impact of Tax and
Accounting
As a
general matter, the Compensation Committee takes into the account the various
tax and accounting implications of the various compensation vehicles utilized by
the Company. When determining amounts of long-term equity incentive
awards to executives, the Compensation Committee examines the accounting costs
associated with awarding such equity compensation in accordance with FAS
123R.
Section
162(m) of the Code generally disallows a tax deduction to publicly held
companies for compensation over $1 million paid to the chief executive officer
and the four other most highly compensated executive officers (excluding the
chief financial officer). To the extent that compensation is based
upon the attainment of performance goals set by the Compensation Committee
pursuant to plans approved by the stockholders, the compensation is not included
in the computation of the limit. The Compensation Committee intends,
to the extent feasible and where it believes it is in the best interests of the
Company and its stockholders, to qualify executive compensation as tax
deductible where it does not adversely affect the Compensation Committee’s
development and execution of effective compensation plans. The
Compensation Committee intends, however, to maintain at all times the
flexibility to take actions it considers to be in the best interests of the
Company and its stockholders.
19
COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE REPORT
The
Compensation and Management Development Committee has reviewed and discussed the
foregoing “Compensation Discussion and Analysis” section of this Proxy Statement
with management and, based on such review and discussion, the Compensation and
Management Development Committee recommends that it be included in this Proxy
Statement.
Submitted
by the Compensation and
Management
Development Committee
Frank J.
Ryan, Chairperson
John
Federspiel
John M.
Pietruski
Compensation Committee
Interlocks and Insider Participation in Compensation
Decisions
During
2007, the Compensation Committee consisted of Messrs. Ryan, Pietruski and
Federspiel, all of whom are non-employee directors. No member of the
Compensation Committee has a relationship that would constitute an interlocking
relationship with executive officers or directors of another
entity.
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The
following table sets forth certain information concerning compensation paid to
our CEO and CFO and our three other most highly compensated executive officers
who served in such capacities during 2007 (collectively referred to as the
“named executive officers”).
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)(4)
|
Options
and SARs Awards ($)(5)
|
Non-Equity
Incentive Plan Compensation
|
All
Other Compen-sation
(6)
|
Total
|
|
Michael
Marquard -
|
||||||||
|
CEO
(1)
|
2007
|
$ 411,333
|
$ -
|
$ 158,422
|
$ 94,418
|
$ 280,000
|
$ 28,031
|
$ 972,204
|
|
2006
|
254,615
|
-
|
31,249
|
32,710
|
160,000
|
140,833
|
619,408
|
|
|
Jeffrey
Smith -
|
||||||||
|
EVP,
CFO and
|
2007
|
306,375
|
-
|
119,667
|
53,994
|
191,000
|
27,456
|
698,492
|
|
Treasurer
(2)
|
2006
|
188,654
|
-
|
20,834
|
21,910
|
133,665
|
7,707
|
372,769
|
|
Kevin
Connolly -
|
||||||||
|
EVP
and
|
2007
|
274,818
|
-
|
80,433
|
27,855
|
77,000
|
25,762
|
485,868
|
|
President,
DMS
|
2006
|
267,279
|
-
|
66,774
|
11,022
|
168,386
|
18,163
|
531,624
|
|
Nancy
McCarthy -
|
||||||||
|
EVP,
Human
|
2007
|
198,220
|
-
|
63,981
|
17,755
|
113,000
|
25,756
|
418,712
|
|
Resources
|
2006
|
212,670
|
50,000
|
57,361
|
11,022
|
143,552
|
18,293
|
492,898
|
|
Steven
Budd -
|
||||||||
|
Former
|
2007
|
87,450
|
-
|
(40,645)
|
29,391
|
-
|
575,966
|
652,162
|
|
President
(3)
|
2006
|
322,056
|
-
|
270,411
|
22,043
|
181,157
|
21,063
|
816,730
|
| (1) | Became CEO effective May 11, 2006. | |
|
|
(2)
|
Became
CFO effective May 15, 2006.
|
|
|
(3)
|
Resigned
effective April 6, 2007.
|
|
|
(4)
|
The
amounts in this column do not necessarily represent the value of the award
granted, nor are they a prediction of what will be paid to the
employee. The amounts in this column represent the expense
taken by the Company in accordance FAS 123R in 2007 and 2006 for portions
of awards granted in 2004, 2005, 2006 and 2007 that vest in 2006 or
later. The assumptions used in determining the fair value of
the stock awards are set forth in Note 11 to our consolidated financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2007. We generally recognize expense ratably over
the requisite vesting period.
|
20
|
|
(5)
|
Reports
the amount recognized in accordance with FAS 123R in our financial
statement for the year ended December 31, 2007 and 2006 for options and
SARs granted in 2004, 2005, 2006 and 2007 that vest in 2006 or
later. The assumptions used in determining the fair value of
the SARs awards are set forth in Note 11 to our consolidated financial
statements contained in our Annual Report on Form 10-K for the year ended
December 31, 2007. We generally recognize expense ratably over
the requisite vesting period.
|
|
|
(6)
|
For
the named executive officers, this column includes the following amounts
in 2007 and 2006:
|
|
Name
|
Year
|
401(k)
Company Match ($)
|
Term
Life Insurance Payment ($)
|
Auto
Benefit ($)
|
Financial
Planning Services ($)
|
Accrued
Vacation Days ($)
|
Payment
for Termination of Employment Agreement ($)
|
Executive
Physical ($)
|
Relocation
($)
|
Totals
($)
|
|
Michael
Marquard
|
2007
|
$ 2,773
|
$ 258
|
$ 12,000
|
$ 13,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$ 28,031
|
|
2006
|
-
|
161
|
7,336
|
-
|
-
|
-
|
-
|
133,336
|
140,833
|
|
|
Jeffrey
Smith
|
2007
|
2,060
|
396
|
12,000
|
13,000
|
-
|
-
|
-
|
-
|
27,456
|
|
2006
|
-
|
161
|
7,545
|
-
|
-
|
-
|
-
|
-
|
7,706
|
|
|
Kevin
Connolly
|
2007
|
5,424
|
138
|
10,200
|
10,000
|
-
|
-
|
-
|
-
|
25,762
|
|
2006
|
-
|
138
|
10,200
|
7,825
|
-
|
-
|
-
|
-
|
18,163
|
|
|
Nancy
McCarthy
|
2007
|
7,929
|
138
|
7,689
|
10,000
|
-
|
-
|
-
|
-
|
25,756
|
|
2006
|
8,507
|
138
|
4,698
|
4,950
|
-
|
-
|
-
|
-
|
18,293
|
|
|
Steven
Budd
|
2007
|
3,983
|
46
|
1,042
|
5,000
|
12,118
|
553,777
|
-
|
-
|
575,966
|
|
2006
|
8,587
|
138
|
6,064
|
4,950
|
-
|
-
|
1,325
|
-
|
21,064
|
Grants of Plan-Based
Awards
The
following table sets forth certain information regarding grants of plan based
awards to the named executive officers during the fiscal year ended December 31,
2007.
|
Name
|
Grant
Date
|
All
Other Stock Awards: Number of Shares of Stock or Units (#)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($)
|
Grant
Date Fair Value of Stock and Option Awards ($)
|
|
|
Michael
Marquard
|
3/30/2007
|
(1)
|
26,261
|
-
|
$ -
|
$ 250,005
|
|
3/30/2007
|
(2)
|
-
|
42,400
|
9.52
|
168,328
|
|
|
Jeffrey
Smith
|
3/30/2007
|
(1)
|
11,817
|
-
|
-
|
112,498
|
|
3/30/2007
|
(2)
|
-
|
19,080
|
9.52
|
75,748
|
|
|
Kevin
Connolly
|
3/30/2007
|
(1)
|
10,504
|
-
|
-
|
99,998
|
|
3/30/2007
|
(2)
|
-
|
16,960
|
9.52
|
67,331
|
|
|
Nancy
McCarthy
|
3/30/2007
|
(1)
|
4,202
|
-
|
-
|
40,003
|
|
3/30/2007
|
(2)
|
-
|
6,784
|
9.52
|
26,932
|
|
|
|
(1)
|
Restricted
stock grant which cliff vests March 30,
2010.
|
|
|
(2)
|
SARs
which step vest in one-third increments on each anniversary of the date of
grant.
|
21
Outstanding Equity
Awards
The
following table provides information concerning the number and value of
unexercised options, SARs and restricted stock awards for the named executive
officers outstanding as of the fiscal year ended December 31,
2007.
|
Option
Awards
|
Stock
Awards
|
|||||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares that have not Vested (#)
|
Market
Value of Shares that have not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares or Other Rights that have
not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Vlaue of Unearned Shares or Other
Rights that have not Vested ($)
|
||||
|
Michael
Marquard
|
-
|
-
|
$ -
|
-
|
11,244
|
(1)
|
$
105,356
|
-
|
$ -
|
|||
|
7,867
|
(2)
|
15,736
|
(2)
|
13.34
|
5/11/2011
|
-
|
-
|
-
|
-
|
|||
|
-
|
-
|
-
|
26,261
|
(3)
|
246,066
|
-
|
-
|
|||||
|
-
|
42,400
|
(4)
|
9.52
|
3/30/2012
|
-
|
-
|
-
|
-
|
||||
|
Jeffrey
Smith
|
-
|
-
|
-
|
-
|
7,424
|
(5)
|
69,563
|
-
|
-
|
|||
|
5,220
|
(6)
|
10,442
|
(6)
|
13.47
|
5/15/2011
|
-
|
-
|
-
|
-
|
|||
|
-
|
-
|
-
|
-
|
11,827
|
(3)
|
110,725
|
-
|
-
|
||||
|
-
|
19,080
|
(4)
|
9.52
|
3/30/2012
|
-
|
-
|
-
|
-
|
||||
|
Kevin
Connolly
|
-
|
-
|
-
|
-
|
4,146
|
(7)
|
42,082
|
-
|
-
|
|||
|
10,000
|
-
|
11.27
|
6/8/2010
|
-
|
-
|
-
|
-
|
|||||
|
2,377
|
(8)
|
4,756
|
(8)
|
12.06
|
3/23/2011
|
-
|
-
|
-
|
-
|
|||
|
-
|
-
|
-
|
10,504
|
(3)
|
98,422
|
-
|
-
|
|||||
|
-
|
16,960
|
(4)
|
9.52
|
3/30/2012
|
-
|
-
|
-
|
-
|
||||
|
Nancy
McCarthy
|
-
|
-
|
-
|
-
|
4,146
|
(7)
|
42,082
|
-
|
-
|
|||
|
-
|
-
|
-
|
-
|
-
|
-
|
1,987
|
(9)
|
18,618
|
||||
|
10,000
|
-
|
27.68
|
7/21/2014
|
-
|
-
|
-
|
-
|
|||||
|
3,384
|
-
|
20.15
|
3/29/2010
|
-
|
-
|
-
|
-
|
|||||
|
2,377
|
(8)
|
4,756
|
(8)
|
12.06
|
3/23/2011
|
-
|
-
|
-
|
-
|
|||
|
-
|
-
|
-
|
4,202
|
(3)
|
39,373
|
-
|
-
|
|||||
|
-
|
6,784
|
(4)
|
9.52
|
3/30/2012
|
-
|
-
|
-
|
-
|
||||
|
|
(1)
|
Restricted
shares of common stock that cliff vest on May 11,
2009.
|
|
|
(2)
|
One-third
of the SARs is currently exercisable, one-third will become exercisable on
each of May 11, 2008, and May 11,
2009.
|
|
|
(3)
|
Restricted
shares of common stock that cliff vest on March 30,
2010.
|
|
|
(4)
|
One-third
of the SARs will become exercisable on each of March 30, 2008, March 30,
2009, and March 30, 2010.
|
|
|
(5)
|
Restricted
shares of common stock that cliff vest on May 15,
2009.
|
|
|
(6)
|
One-third
of the SARs is currently exercisable, one-third will become exercisable on
each of May 15, 2008, and May 15,
2009.
|
|
|
(7)
|
Restricted
shares of common stock that vest on March 23,
2009.
|
|
|
(8)
|
One-third
of the SARs is currently exercisable, one-third will become exercisable on
each of March 23, 2008, and March 23,
2009.
|
|
|
(9)
|
Performance
contingent shares granted on March 29,
2005.
|
22
Option Exercises and Stock
Vested
The
following table presents information concerning the vesting of shares of
restricted stock for the named executive officers during the fiscal year ended
December 31, 2007. None of our named executive officers exercised any
stock options during fiscal 2007.
|
Name
|
Number
of Shares Acquired on Vesting (#)
|
Value
Realized on Vesting ($)
|
||||
|
Kevin
Connolly
|
8,000
|
$ 80,960
|
||||
|
Nancy
McCarthy
|
7,700
|
77,924
|
||||
|
Steven
Budd
|
18,750
|
186,188
|
||||
Nonqualified Deferred
Compensation
The
following table presents information on the non-qualified deferred compensation
of our named executive officers in and as of the end of 2007.
|
Name
|
Executive
Contributions in 2007 ($)
|
Registrants
Contributions in 2007 ($)
|
Aggregate
Earnings in 2007 ($)
|
Aggregate
Withdrawals/ Distributions ($)
|
Aggregate
Balance at 12/31/2007 ($)
|
|
Michael
Marquard
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
|
Jeffrey
Smith
|
-
|
-
|
-
|
-
|
-
|
|
Kevin
Connolly
|
-
|
-
|
-
|
-
|
-
|
|
Nancy
McCarthy
|
-
|
-
|
-
|
-
|
-
|
|
Steven
Budd
|
-
|
-
|
23,044
|
153,733
|
-
|
Potential Payments upon
Termination
The
following table reflects the estimated amount of compensation that would be
payable to each of our currently employed named executive officers upon
termination of such executive’s employment in accordance with their respective
employment separation agreements and restricted stock grant
agreements. The amounts shown assume that such termination was
effective as of December 31, 2007, and thus includes amounts earned through such
time and are estimates of the amounts which would be paid out to the executives
upon their termination. The actual amounts to be paid out can only be
determined at the time of such executive’s separation from the
Company.
23
|
Name
|
Cash
Payment ($)
|
Continuation
of Medical/ Welfare Benefits (Present Value) ($)
|
Acceleration
of Equity Awards ($) (1)
|
Total
Termination Benefits ($)
|
|
Voluntary
Resignation:
|
||||
|
Michael
Marquard
|
$ -
|
$ -
|
$ -
|
$ -
|
|
Jeffrey
Smith
|
-
|
-
|
69,563
|
-
|
|
Kevin
Connolly
|
-
|
-
|
-
|
-
|
|
Nancy
McCarthy
|
-
|
-
|
-
|
-
|
|
Termination
Without Cause or Resignation for Good Reason:
|
||||
|
Michael
Marquard
|
844,000
|
22,500
|
-
|
866,500
|
|
Jeffrey
Smith
|
625,833
|
15,000
|
69,563
|
710,396
|
|
Kevin
Connolly
|
399,866
|
15,000
|
-
|
414,866
|
|
Nancy
McCarthy
|
-
|
-
|
-
|
-
|
|
Termination
Without Cause or Resignation for Good Reason Upon a Change of
Control:
|
||||
|
Michael
Marquard
|
844,000
|
22,500
|
351,422
|
1,217,922
|
|
Jeffrey
Smith
|
625,833
|
15,000
|
180,288
|
821,121
|
|
Kevin
Connolly
|
399,866
|
15,000
|
137,271
|
552,137
|
|
Nancy
McCarthy
|
-
|
-
|
78,221
|
78,221
|
|
(1)
|
These
amounts are based on the value of restricted shares of common stock held
at December 31, 2007 that would become immediately vested upon retirement
or a change of control pursuant to the applicable restricted stock grant
agreement.
|
The
amounts shown in the table above do not include payments and benefits to the
extent they are provided on a non-discriminatory basis to salaried employees
generally upon termination, including accrued vacation pay, distributions of
plan balances under the 401(k) Plan and payments of amounts under disability
insurance policies.
Below is
a summary of all employment separation agreements that were in effect during all
or a portion of 2007 for any individual who served as a named executive officer
during 2007.
Current
Executives
Michael
J. Marquard
Under Mr.
Marquard’s employment separation agreement, in consideration of certain
covenants not to compete and not to solicit our employees or clients for a
period of up to 18 months after termination of employment, as well as a general
release of claims against the Company, Mr. Marquard is entitled to receive the
following benefits if he is terminated without Cause or if he resigns with Good
Reason:
|
|
·
|
A
payment equal to the product of 18 times his then current monthly base
salary;
|
|
|
·
|
A
payment equal to the average cash incentive compensation paid to him based
on the three most recent years (or such shorter period of employment);
and
|
|
|
·
|
Continued
participation in our health and welfare programs, at our expense, for up
to 18 months.
|
For
purposes of Mr. Marquard’s agreement:
“Cause”
generally means: (1) Mr. Marquard’s failure to comply with reasonable
instructions of our Board of Directors that remains unremedied after written
notice thereof; (2) a material breach of the agreement by Mr. Marquard that
remains unremedied after written notice thereof; (3) Mr. Marquard’s failure to
adhere to our
24
documented
policies and procedures that remains unremedied after written notice thereof;
(4) Mr. Marquard’s failure to adhere to moral and ethical business principles
consistent with our Code of Conduct; or (5) Mr. Marquard’s conviction of a crime
or other documented act of material dishonesty in the commission of his
duties.
“Good
Reason” generally means: (1) material reduction of Mr. Marquard’s duties or
assignment of duties materially inconsistent with his responsibilities as our
CEO that remains unremedied after written notice thereof; (2) a material breach
of the agreement by the Company that remains unremedied after written notice
thereof; (3) a reduction in Mr. Marquard’s current base salary or failure to pay
him any material amount when due that remains unremedied after written notice
thereof; or (4) adverse change in Mr. Marquard’s titles, responsibilities or
base salary or relocation of the Company’s office more than 50 miles, in each
case within two years of a change in control.
Jeffrey
E. Smith
Under Mr.
Smith’s employment separation agreement, in consideration of certain covenants
not to compete and not to solicit employees or clients for a period of up to 18
months after termination of employment, as well as a general release of claims
against the Company, Mr. Smith is entitled to receive the following benefits if
he is terminated without Cause or if he resigns with Good Reason:
|
|
·
|
A
payment equal to the product of 18 times his then current monthly base
salary;
|
|
|
·
|
A
payment equal to the average cash incentive compensation paid to him based
on the three most recent years (or such shorter period of employment);
and
|
|
|
·
|
Continued
participation in our health and welfare programs, at our expense, for 12
months.
|
For
purposes of Mr. Smith’s agreement:
“Cause”
generally means: (1) Mr. Smith’s failure to satisfactorily perform duties
despite adequate warnings; (2) Mr. Smith’s failure to adhere to (a) generally
accepted standards of conduct in the workplace, (b) our policies and procedures
or (c) moral and ethical business principles; or (3) Mr. Smith’s
conviction of a crime or any other act of dishonesty in commission of his
duties.
“Good
Reason” generally means: (1) a substantial adverse change in Mr. Smith’s title
or responsibilities; (2) a reduction in Mr. Smith’s base salary; (3)
modification of Mr. Smith’s overall compensation plan resulting in the material
reduction of his earning potential; or (4) a relocation of our principal place
of business more than 50 miles from Mr. Smith’s residence.
Kevin
Connolly
Under Mr.
Connolly’s employment separation agreement, in consideration of certain
covenants not to compete and not to solicit employees or clients for a period of
12 months after termination of employment, as well as a general release of
claims against the Company, Mr. Connolly is entitled to receive the following
benefits if he is terminated without Cause or if he resigns with Good
Reason:
|
|
·
|
A
payment equal to the product of 12 times his then current monthly base
salary;
|
|
|
·
|
A
payment equal to the average cash incentive compensation paid to him
during the three most recent years (or such shorter period of employment);
and
|
|
|
·
|
Continued
participation in our health and welfare programs, at our expense, for 12
months.
|
For
purposes of Mr. Connolly’s agreement:
“Cause”
generally means: (1) Mr. Connolly’s material failure to use his best efforts to
achieve his goals that remains unremedied after written notice thereof; (2) Mr.
Connolly’s material failure to comply with the reasonable instructions of the
CEO; (3) Mr. Connolly’s failure to adhere to our documents policies and
procedures that remains unremedied after written notice thereof; (4) Mr.
Connolly’s material failure to adhere to moral and ethical business principles
that continues unremedied after written notice thereof; (5) Mr. Connolly’s
conviction of a criminal offense; (6) any documented act of material dishonesty
or fraud by Mr. Connolly that continues unremedied upon written notice thereof;
or (7) misconduct by Mr. Connolly resulting in a misstatement of our financial
statements due to material non-compliance with financial requirement under
Section 304 of the Sarbanes-Oxley Act.
25
“Good
Reason” generally means: (1) the failure to pay Mr. Connolly any material amount
of compensation that is due within 30 days upon written demand; (2) a material
reduction in Mr. Connolly’s annual base salary or (3) the relocation of Mr.
Connolly’s principal place of employment to a location more than 50 miles from
Mr. Connolly’s current principal place of employment. In addition,
during the two year period following any change in control of the Company, “Good
Reason” shall also include (1) a material adverse alteration of Mr. Connolly’s
duties and responsibilities; (2) an intentional, material reduction of Mr.
Connolly’s aggregate target incentive awards or (3) the Company’s failure to
maintain Mr. Connolly’s relative level of coverage under its employee benefit
plans.
Former
Executives
Steven
K. Budd
Under Mr.
Budd’s employment separation agreement, in exchange for waiving certain payments
that Mr. Budd was entitled to upon expiration or termination of his former
employment agreement, Mr. Budd became entitled to a payment of
$553,777, half of which was to be paid to Mr. Budd in eight quarterly
installments, beginning in February 2007. The remaining amount was to
be paid to Mr. Budd following termination of his employment with the
Company. Further, the amended agreement provided, among other things,
that, if Mr. Budd's employment was terminated without cause or if he terminated
his employment for good reason (each as defined in the employment agreement), we
would pay him an amount equal to six times the sum of his then current monthly
base salary plus one-half of the average cash incentive compensation paid to him
during the three most recent years and provide him with continued participation
in our healthcare and welfare programs at our cost for a period of 12
months. Mr. Budd resigned from the Company, effective April 6,
2007. Pursuant to his amended employment agreement, Mr. Budd received
cash payments totaling approximately $553,777, of which $34,611 was paid in
March 2007 while the remaining $519,166 was paid in October 2007.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Our Audit
Committee Charter provides that the Audit Committee must review and approve or
disapprove all proposed related party transactions, including all transactions
required to be disclosed by applicable SEC disclosure rules. When
reviewing and evaluating a related party transaction, the Audit Committee may
consider, among other things, any effect a transaction may have upon a
director’s independence, whether the transaction involves terms and conditions
that are no less favorable to us than those that could be obtained in an arm’s
length transaction with an unrelated third party, the commercial reasonableness
of the transaction, the transaction’s benefit to the Company and any other
matters the Audit Committee deems appropriate. Our management will
notify the Audit Committee of new proposed related party transactions of which
they become aware and any material changes to any previously approved or
ratified related party transactions.
Peter
Dugan, the son of John P. Dugan, the chairman of our Board of Directors, is
employed by us as Executive Director, Business Development. In 2007,
compensation paid or accrued to Peter Dugan
was $137,269.
OTHER
MATTERS
The
Company knows of no other matters to be submitted to the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote the shares they represent as the
Board of Directors may recommend.
ADDITIONAL
INFORMATION
Householding
The SEC’s
rules permit companies and intermediaries such as brokers to satisfy delivery
requirements for proxy statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy statement and
annual report addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially provides extra convenience
for stockholders and cost savings for companies. Some brokers
household proxy materials and annual reports, delivering a single proxy
statement and annual report to multiple stockholders sharing an address,
although each stockholder will receive a separate proxy
26
Stockholder Proposals for
the 2009 Annual Meeting
Stockholders
interested in presenting a proposal for consideration at the annual meeting of
stockholders in 2009 must follow the notice procedures set forth in our
bylaws. To be eligible for inclusion in our proxy materials relating
to our 2009 annual meeting of stockholders, all qualified proposals must be
received by our Corporate Secretary no later than December 31,
2008. Stockholder proposals submitted more than thirty but less than
sixty days before the scheduled date of our 2009 annual meeting may be presented
at the annual meeting if such proposal complies with our bylaws, but will not be
included in our proxy materials. A stockholder’s notice must set
forth, as to each proposed matter: (i) as to each person whom the stockholder
proposes to nominate for election to the Board of Directors, all information
relating to such person that is required to be disclosed in solicitation of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Exchange Act and
Rule 14a-11 thereunder; (ii) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting and, if such business includes a proposal to amend our
bylaws, the language of the proposed amendment; (iii) the name and address, as
they appear on our books, of the stockholder proposing such business; (iv) the
number of shares of Company common stock which are beneficially owned by such
stockholder; (v) a representation that the stockholder is a holder of record of
shares of the Company’s common stock entitled to vote at such annual meeting and
intends to appear in person or by proxy at the annual meeting to propose such
business; and (vi) any financial interest of the stockholder in such proposal or
nomination.
Important Notice Regarding
the Availability of Proxy Materials for the Annual Meeting of
Stockholders to be Held on June 4, 2008
This
Proxy Statement and our Annual Report on Form 10-K for the year ended December
31, 2007 are available in the “Investor Relations” section of our website at
www.pdi-inc.com.
Availability of Annual
Report on Form 10-K
We will
provide without charge to each person being solicited by this Proxy Statement,
on the written request of any such person, a copy of our Annual Report on Form
10-K for the year ended December 31, 2007, including the financial statements
and financial statement schedules included therein. All such requests
should be directed to Jeffrey Smith, Executive Vice President, Chief Financial
Officer and Treasurer, PDI, Inc., Saddle River Executive Centre, 1 Route 17
South, Saddle River, New Jersey 07458.
By order
of the Board of Directors,
Kerry
Skolkin,
Vice
President,
Associate
General Counsel and
Corporate
Secretary
April 28,
2008
27
