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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Filed
by the Registrant
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the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-12
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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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of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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Aggregate
number of securities to which transaction applies:
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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maximum aggregate value of transaction:
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box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
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Nancy
Lurker
Chief Executive
Officer
April 24,
2009
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, 2009, at 9:00 a.m., Eastern time, at PDI, Inc.,
Saddle River Executive Centre, 1 State Route 17 South, Saddle River, New Jersey
07458.
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 2009 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, 2009.
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,
Nancy
Lurker
Chief
Executive Officer
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 4, 2009
________________________
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 PDI, Inc., Saddle River Executive Centre, 1 State
Route 17 South, Saddle River, New Jersey 07458 on June 4, 2009 at 9:00 a.m.,
Eastern time, for the following purposes:
1. To
elect three Class II 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,
2009.
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 15, 2009 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,
James N.
Pepin
Corporate
Secretary
Dated: April
24, 2009
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 4, 2009
The
Company’s Proxy Statement for the 2009 Annual Meeting of Stockholders
and
Annual
Report on Form 10-K are available on the Internet at
http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=07087
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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”, “PDI”, “we”, “us”
or “our”), of proxies in the form enclosed for the Annual Meeting of
Stockholders to be held at PDI, Inc., Saddle River Executive Centre, 1 State
Route 17 South, Saddle River, New Jersey 07458 on June 4, 2009 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 24, 2009.
Record Date and
Quorum
Stockholders
of record at the close of business on April 15, 2009 are entitled to notice of
and to vote at the Annual Meeting. As of the record date, there were 14,228,311
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 II 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, 2009; 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
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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 who will not receive additional compensation for those services, 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 11 members and is divided into three classes,
with four directors in each of Classes I and III and three directors in Class
II. 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 II directors will be elected to serve until the
annual meeting of stockholders in 2012 and until each director’s successor is
elected and qualified. Nancy Lurker, John M. Pietruski and Frank Ryan
are the nominees for election or re-election as the Class II
directors. All of the nominees have been approved, recommended and
nominated for election or 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 Nancy Lurker, John M. Pietruski and Frank Ryan as directors,
unless the proxy contains instructions otherwise. Management has no reason to
believe that Ms. Lurker, Mr. Pietruski or Mr. Ryan 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 II directors
and all other members of the Board of Directors who will continue in
office.
NOMINEES FOR ELECTION AS
CLASS II DIRECTORS
TERM EXPIRING
2012
Nancy Lurker, age 51. Ms.
Lurker joined us as Chief Executive Officer and a director in November
2008. Prior to joining PDI, Ms. Lurker was senior vice-president and
chief marketing officer for Novartis Pharmaceuticals Corporation, the U.S.
subsidiary of Novartis AG, where she oversaw a product portfolio in multiple
therapeutic areas from 2006 to 2007. Prior to that, she was president
and chief executive officer of ImpactRx, Inc. since 2003, a privately owned
company offering among its services the evaluation of the impact of
pharmaceutical promotion on the prescribing behavior of the nation's highest
prescribing physicians. From 2000 to 2003, Ms. Lurker served as group
vice president-global primary care products for Pharmacia Corporation, where she
led a business unit that commercialized drugs for urology, cardiovascular,
central nervous system, respiratory and women’s health. She was also
a member of Pharmacia’s U.S. executive management committee, the group
responsible for managing all U.S.-
2
based
profits as well as all U.S. management policies. Earlier in her
career, she was vice president for business development at National Physicians
Corporation, an IPA risk management and practice management
group. During her 14 years at Bristol-Myers Squibb, Ms. Lurker rose
from senior sales representative at Mead Johnson to various product management
and business development positions, ultimately becoming senior
director-worldwide cardiovascular franchise management. Ms. Lurker
received a B.S. in Biology with high honors from Seattle Pacific University and
an M.B.A. from the University of Evansville in Evansville, Indiana.
John M. Pietruski, age 76. 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
69. 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
73. Mr. Dugan is our founder, Chairman of the Board of Directors and
Director of Strategic Planning. He served as our president from inception until
January 1995 and as our chief executive officer from inception until November
1997. In 1972, Mr. Dugan founded Dugan Communications, a medical advertising
agency that later became known as Dugan Farley Communications Associates Inc.
and served as its president until 1990. We were a wholly-owned subsidiary of
Dugan Farley in 1990 when Mr. Dugan became our sole stockholder. Mr. Dugan was a
founder and served as the president of the Medical Advertising Agency
Association from 1983 to 1984. Mr. Dugan also served on the board of directors
of the Pharmaceutical 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 71.
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
62. Mr. Sullivan became a director in September 2004. Mr.
Sullivan is president and chief executive officer of Harlan Laboratories, 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.
3
Gerald P. Belle, age
63. 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. He retired after 35 years of service at Aventis and
its predecessor companies. 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.
INCUMBENT CLASS III
DIRECTORS
TERM EXPIRING
2011
John Federspiel, age
55. Mr. Federspiel has been a director since October 2001. Mr.
Federspiel is president of Hudson Valley Hospital Center, a 128 bed, short-term,
acute care, not-for-profit hospital in Westchester County, New York. Prior to
joining Hudson Valley Hospital in 1987, Mr. Federspiel spent an additional 10
years in health administration, during which he held a variety of executive
leadership positions. Mr. Federspiel has served as an appointed Member of the
State Hospital Review and Planning Council, and has served as chairman of the
Northern Metropolitan Hospital Association, as well as other
affiliations. Mr. Federspiel received a B.S. degree from Ohio State
University in 1975 and an M.B.A. from Temple University in 1977.
Jack E.
Stover, age
56. Mr. Stover has been a director since August 2005. Mr.
Stover is also a member of the board of directors of Arbios Systems Inc., a
publicly held company. From 2004 to 2008, he served as chief
executive officer, president and director of Antares Pharma, Inc., a publicly
held company listed on the American Stock Exchange. Prior to that, Mr. Stover
was 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
65. 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.
Veronica Lubatkin, age
46. Ms. Lubatkin has been a director since November
2008. From 2007 to March 2009, Ms. Lubatkin was executive vice
president and chief financial officer of Par Pharmaceutical Companies, Inc. and
previously served as Par Pharmaceutical Companies’ vice president and
controller. Prior to joining Par Pharmaceutical Companies in April
2006, Ms. Lubatkin served in various positions at Schering-Plough Corporation
from 1997 through 2006, most recently as executive director of strategic
alliances for the cholesterol joint venture between Schering-Plough and Merck
and prior to that as senior director of finance for Schering-Plough’s global
animal health business. Prior to joining Schering-Plough, Ms.
Lubatkin was finance director for Neuman Distributors, Inc., formerly a U.S.
pharmaceutical wholesaler. She began her career with Arthur Anderson in
1985. Ms. Lubatkin earned a B.A. degree in Accounting from
Pace University in 1985 and is a Certified Public Account.
Director
Independence
Our Board
of Directors has determined that Messrs. Pietruski, Ryan, Sullivan, Federspiel,
Stover and Belle, Dr. Curti and Ms. Lubatkin are independent within the meaning
of the applicable rules of the Nasdaq Stock Market, Inc.
(“Nasdaq”).
4
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, 2008, the Board of Directors held 11 meetings, the
Audit Committee held 11 meetings, the Compensation and Management Development
Committee (the “Compensation Committee”) held 11 meetings, and the Nominating
Committee held six 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 2008.
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 4,
2008.
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. Belle, Ms.
Lubatkin and Mr. Sullivan. 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 and Dr. Curti. 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.”
5
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. Federspiel (chairperson)
and Sullivan and Dr. Curti. Each member of our Nominating Committee
is “independent” within the meaning of the rules of Nasdaq and as required by
the Nominating Committee charter. The primary purposes of the
Nominating Committee are: (a) to select individuals qualified to serve as
directors of the Company and on committees of the Board of Directors; (b) to
advise the Board of Directors with respect to board composition, procedures and
committees; (c) to advise the Board of Directors with respect to the corporate
governance principles applicable to the Company; (d) to advise the Board of
Directors with respect to director compensation issues; and (e) to oversee the
evaluation of the Board of Directors. In identifying and recommending nominees
for positions on the Board of Directors, the Nominating Committee places primary
emphasis on (i) a candidate’s judgment, character, expertise, skills and
knowledge useful to the oversight of our business; (ii) a candidate’s
business or other relevant experience; and (iii) the extent to which the
interplay of the candidate’s expertise, skills, knowledge and experience with
that of other members of the Board of Directors will build a Board
of Directors that is effective, collegial and responsive to our
needs.
The
Nominating Committee does not set specific, minimum qualifications that nominees
must meet in order for the committee to recommend them to the Board of
Directors, but rather believes that each nominee should be evaluated based on
his or her individual merits, taking into account our needs and the composition
of the Board of Directors. Members of the Nominating Committee discuss and
evaluate possible candidates in detail, and suggest individuals to explore in
more depth. Outside consultants have also been employed to help in identifying
candidates. Once a candidate is identified whom the committee wants to seriously
consider and move toward nomination, the chairperson of the Nominating Committee
enters into a discussion with that nominee candidate. Subsequently, the
chairperson will discuss the qualifications of the candidate with the other
members of the committee, and the Nominating Committee will then make a final
recommendation with respect to that candidate to the Board of
Directors.
The
Nominating Committee will consider nominees recommended by stockholders,
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
PDI, Inc., Attn: Corporate Secretary, Saddle River Executive Centre, 1 State
Route 17 South, Saddle River, NJ 07458. See “Stockholder Proposals
for the 2010 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 2010 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 State 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
6
Compensation of
Directors
Each of
our non-employee directors receives an annual director's fee of $40,000, payable
quarterly in arrears. In addition, the Chairperson of each of the
Audit Committee, Compensation Committee and Nominating Committee receives an
additional annual fee of $25,000, $15,000 and $5,000,
respectively. Members of our Board of Directors may defer receipt of
board and committee fees through participation in our 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. Subsequently, equity awards were provided in the form of
shares of restricted stock. In June 2008, however, the Nominating
Committee approved a change in the form of equity award from restricted stock to
restricted stock units (“RSUs”). 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 RSUs which vest in equal annual installments
over a three-year period. In addition, each non-employee director
receives approximately $45,000 in RSUs on the date of our annual meeting each
year which vest in equal annual installments over a three-year
period. Our non-employee directors are subject to certain stock
ownership guidelines, which are described in the section of this Proxy Statement
entitled “Compensation Discussion and Analysis – Stock Ownership
Guidelines.”
The
following table presents information relating to total compensation for our
non-employee directors for the year ended December 31, 2008. The
value of equity awards is based on Financial Accounting Standards Board
Statements of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payments” (“FAS
123R”), as required by the SEC. As a result, this value may include
amounts from awards granted in and prior to 2008, and not the amount actually
paid to the director in 2008.
|
DIRECTOR
COMPENSATION
|
|||||||||||||||||||
|
Name
|
Fees
earned or paid in cash ($)
|
Stock
awards ($)(1)
(2)
|
Option
awards ($)
|
Nonqualified
Compensation Earnings ($)
|
Total
($)
|
||||||||||||||
|
Gerald
Belle
|
$ | 27,582 | $ | 22,082 | $ | - | $ | - | $ | 49,664 | |||||||||
|
Joseph
T. Curti
|
40,000 | 58,265 | - | - | 98,265 | ||||||||||||||
|
John
C. Federspiel
|
42,857 | 66,868 | - | - | 109,725 | ||||||||||||||
|
Veronica
Lubatkin
|
4,783 | 2,500 | - | - | 7,283 | ||||||||||||||
|
John
M. Pietruski
|
42,157 | 39,995 | - | - | 82,152 | ||||||||||||||
|
Frank
J. Ryan
|
55,000 | 84,492 | - | - | 139,492 | ||||||||||||||
|
Stephen
Sullivan
|
40,000 | 41,247 | - | - | 81,247 | ||||||||||||||
|
Jack
Stover
|
65,000 | 38,747 | - | (9,344 | ) | 94,403 | |||||||||||||
|
Jan
Vecsi
|
40,000 | 39,995 | - | - | 79,995 | ||||||||||||||
7
|
|
(1)
|
Reports
the amount recognized in accordance with FAS 123R in our consolidated
financial statements for the year ended December 31, 2008 for restricted
stock and RSUs granted to each listed director in 2006, 2007 and
2008. A discussion of the assumptions used in calculating these
values are set forth in Note 13 to our consolidated financial statements
contained in our Annual Report on Form 10-K for the year ended December
31, 2008.
|
|
|
(2)
|
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, Ms. Vecsi and
Mr. Ryan 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. Dr.
Curti is near retirement eligibility. Under our currently
policy, a director is eligible to retire after serving two three-year
terms. Upon retirement, all unvested restricted stock and RSUs
would be immediately vested.
|
Ms.
Lurker 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. This
agreement originally provided for an annual salary of $125,000 which was
subsequently increased to $150,000. In addition to his salary, Mr.
Dugan receives automobile-related and healthcare benefits, with a total value of
approximately $39,000 during 2008. Information regarding Ms. Lurker’s
compensation can be found elsewhere in this Proxy Statement under the caption
“Executive Compensation”.
8
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows, as of April 1, 2009, 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.
|
PRINCIPAL
STOCKHOLDERS
|
||||||||||
|
Name
of Beneficial Owner
|
Number
of Shares Beneficially Owned (1)
|
Percent
of Shares Outstanding
|
||||||||
|
Executive
officers and directors:
|
||||||||||
|
John
P. Dugan
|
4,869,878 | 34.1% | ||||||||
|
Nancy
Lurker
|
28,000 | * | ||||||||
|
Jeffrey
E. Smith
|
95,094 | * | ||||||||
|
Howard
Drazner
|
15,509 | * | ||||||||
|
Richard
Micali
|
- | - | ||||||||
|
Peter
Tilles
|
5,175 | * | ||||||||
|
Gerald
Belle
|
7,001 | * | ||||||||
|
Joseph
T. Curti
|
29,717 | (2) | * | |||||||
|
John
C. Federspiel
|
50,658 | (3) | * | |||||||
|
Veronica
Lubatkin
|
- | - | ||||||||
|
John
M. Pietruski
|
58,408 | (4) | * | |||||||
|
Frank
J. Ryan
|
46,158 | (5) | * | |||||||
|
Jack
Stover
|
17,658 | (6) | * | |||||||
|
Stephen
Sullivan
|
25,608 | (7) | * | |||||||
|
Jan
Martens Vecsi
|
67,008 | (4) | (8) | * | ||||||
|
All
executive officers and directors as a group (15 persons)
|
5,315,872 | (9) | 37.4% | |||||||
|
5%
stockholders:
|
||||||||||
|
Heartland
Advisors, Inc. (10)
|
1,994,546 | 14.0% | ||||||||
|
789
North Water Street
|
||||||||||
|
Milwaukee,
WI 53202
|
||||||||||
|
Rutabaga
Capital Management (10)
|
1,395,308 | 9.8% | ||||||||
|
64
Broad Street, 3rd Floor
|
||||||||||
|
Boston,
MA 02109
|
||||||||||
|
Dimensional
Fund Advisors LP
(10)
|
1,196,990 | 8.4% | ||||||||
|
6300
Bee Cave Road
|
||||||||||
|
Austin,
TX 78746
|
||||||||||
* Represents less than 1% of shares of common stock outstanding.
|
(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, 2009 are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other
person.
|
9
|
(2)
|
Includes
options to purchase 25,000 shares of common
stock.
|
|
(3)
|
Includes
options to purchase 40,000 shares of common
stock.
|
|
(4)
|
Includes
options to purchase 48,750 shares of common
stock.
|
|
(5)
|
Includes
options to purchase 32,500 shares of common
stock.
|
|
(6)
|
Includes
options to purchase 10,000 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 222,500 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 Exchange Act requires our executive officers and directors, and
persons who own more than ten percent (10%) of a registered class of our common
stock 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, 2008 with the
following exception: a Change in Beneficial Ownership on Form 4 was not timely
filed for Mr. Farrell relating to shares of common stock granted to him in July
2008.
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
|
|
Nancy
Lurker
|
51
|
Chief
Executive Officer
|
|
Jeffrey
E. Smith
|
62
|
Executive
Vice President, Chief Financial Officer and Treasurer
|
|
David
Kerr
|
51
|
Senior
Vice President, Business Development
|
|
Richard
Micali
|
52
|
Senior
Vice President, Sales Services
|
|
Howard
Drazner
|
49
|
President,
Pharmakon
|
|
Peter
Tilles
|
48
|
President,
TVG Marketing Research &
Consulting
|
The
principal occupation and business experience for at least the last five years
for each executive officer is set forth below (except for Ms. Lurker, 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
10
David Kerr, age
51. Mr. Kerr joined us as Senior Vice President of Business
Development in April 2009. Prior to joining PDI, Mr. Kerr was senior
vice president of commercial business at Endo Pharmaceuticals, Inc., where he
was responsible for branded and generic pharmaceutical product sales, marketing,
managed markets, portfolio and strategic planning and analytics since
2006. From 2001 to 2006, Mr. Kerr served as vice president of
business development at Endo Pharmaceuticals, responsible for leading product
licensing and acquisition activities. Prior to that, Mr. Kerr spent
six years at Knoll Pharmaceuticals, which was at that time a division of BASF
Corporation, where he was senior director of the pain management business unit
with responsibility for sales, marketing and business development
activity. Also while at Knoll, Kerr served as director of sales
operations and strategic planning. Prior to that, Mr. Kerr worked
with American Cyanamid in international agricultural chemicals
marketing. Mr. Kerr also spent 15 years with the DuPont Company in
roles of increasing responsibility within the commercial side of DuPont’s life
science business. Mr. Kerr received a B.S. in Accounting from
Pennsylvania State University and an M.B.A. from the University of
Delaware.
Richard P. Micali joined us as
Senior Vice President of Sales Services in February 2009. Prior to
joining PDI, Mr. Micali spent 25 years at Bristol-Myers Squibb where he held
positions of increasing responsibility in sales, marketing and managed markets.
He began his career as a sales representative and most recently was vice
president, oncology sales. Mr. Micali has broad sales leadership experience
across several therapeutic areas and customer channels. He has extensive
experience building and leading sales organizations while developing and
retaining people. Throughout his career, he has successfully launched a variety
of new products and indications. Mr. Micali is a member of the Board
of Trustees for Mercer Street Friends, a non-profit organization. He received
his B.S. from Bowling Green State University and an M.B.A. from John Carroll
University.
Howard Drazner joined us in
2004 upon our acquisition of Pharmakon and has served as the President of our
Pharmakon business unit since September 2007. Prior to that, Mr.
Drazner spent 10 years as senior vice president of Pharmakon (formerly known as
C. Beck) where he was responsible for sales and marketing of interactive peer
programs. Mr. Drazner began his career in the pharmaceutical industry
with Stuart Pharmaceuticals, a division of ICI Americas, now known as
AstraZeneca. In addition, he has worked in a number of sales,
marketing and management positions, including advertising space sales for the
American College of Surgeons and direct marketing sales, management and
marketing for Buckley Dement, an American Medical Association
franchisee. Mr. Drazner received a B.S. in Life Sciences from the
University of Wisconsin.
Peter Tilles joined us in
February 2008 as President of our TVG Marketing Research & Consulting
business unit. Prior to that, Mr. Tilles was a senior consultant to
The Bancorp Bank’s Private Client Group during 2007 where he was responsible for
strategic planning and product development. From 2002 to 2007, Mr. Tilles
co-founded and financed the startup and expansion of three entrepreneurial
ventures: Medavante, Inc. a pharmaceutical research and development services
company conducting centralized assessments for mood disorder clinical trials,
Fountain Mobile, Inc. a wireless health & wellness business focused on
delivering personalized nutrition and fitness content to cellular phones and
RecordMyCalls.com, a hardware/software independent call recording software as a
service. Prior to 2002, Mr. Tilles spent 16 years in the financial services
industry with Citigroup and with UBS/PaineWebber. Mr. Tilles served
as a member of the board of directors of Medavante from 2004 to 2008, and also
served as board president of the Susan G. Komen Breast Cancer Foundation in
Central & South New Jersey from 2004 to January 2009. Mr. Tilles
received a B.S. in Accounting from Syracuse 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,
2009. 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
11
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 2009 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 2008, 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 amended (AICPA, Professional Standards, Vol.1
AU section 380) as adopted by the Public Company Accounting Oversight
Board. The Audit Committee has received the written disclosures and
the letter from E&Y required by the applicable requirements of the Public
Company Accounting Oversight Board regarding E&Y’s communications with the
Audit Committee concerning independence, 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.
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 2008 be included in our Annual Report on Form 10-K for such fiscal
year.
Submitted
by the Audit Committee
Jack E.
Stover, Chairperson
Gerald P.
Belle
Veronica
Lubatkin
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
12
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:
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
||
|
2008
|
2007
|
|
|
Audit
Fees
|
$ 849,467
|
$ 865,000
|
|
Audit-Related
Fees
|
29,860
|
28,000
|
|
Tax
Fees
|
20,000
|
-
|
|
All
Other Fees
|
-
|
-
|
|
Total
Fees
|
$ 899,327
|
$ 893,000
|
Fees for
audit services include the audit of our consolidated financial statements, the
audit of the effectiveness of internal control over financial reporting and fees
related to the review of our initial product commercialization
contract. Fees for audit-related services for 2008 consist of an
audit of our 401(k) plan for the year ended December 31, 2007 by an affiliate of
E&Y. Fees for tax services include tax advisory services related
to state and local tax matters.
13
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.
Our
current named executive officers who received compensation from the Company
during 2008 are as follows: (i) Nancy Lurker, our current CEO who
joined the Company in November 2008; (ii) Jeffrey Smith, our CFO; (iii) Howard
Drazner, the President of our Pharmakon business unit; and (iv) Peter Tilles,
the President of our TVG Marketing Research & Consulting business unit who
joined the Company in February 2008. The discussion below also
includes the following executive officers whose employment terminated during
2008: (i) Michael Marquard, our former CEO; (ii) Kevin Connolly, our
former President of Diversified Marketing Services; and (iii) James Farrell, our
former Controller who joined the Company in April 2008 and is included in the
discussion below due to his transitional role as interim CFO during a portion of
2008.
Compensation Philosophy and
Objectives
We
believe that executive compensation should be 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.
In
accordance with our executive compensation objectives, there was an increased
focus during 2008 on utilizing revenue growth as well as operating income
results as a measurement tool for executive compensation, which culminated in
significant changes to the structure of our annual cash incentive program in
2008, as described in more detail below. Based on the financial
performance of the Company and the level of achievement of our executives’
annual goals in 2008 and in light of current economic conditions, the annual
cash incentives and long-term equity awards provided to our executives in
February 2009 were at or near the minimum thresholds established during the
first quarter of 2008. In addition, the Compensation Committee has
approved additional changes to our executive compensation plans for 2009,
including the freezing of base salaries for 2009 and the removal of a minimum
threshold funding level for the 2009 annual cash incentive plan.
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, since 2002 the Compensation Committee has retained the services of
a compensation consultant,
14
In
addition, our CEO and Senior Vice President, Human Resources participate in the
process of determining the compensation for our senior executives and regularly
participate in Compensation Committee meetings when requested by the
Compensation Committee. During the first quarter of each year, a
summary of current year goals for each senior executive is presented to the
Compensation Committee for review, input and approval. The CEO and
the Senior Vice President, Human Resources work closely with each of our senior
executives to develop and refine these goals. In addition, the Compensation
Committee approves the financial targets and related level of funding for
achievement of these targets under the annual cash incentive plan for these
individuals. During the first quarter of the following year, the CEO,
with the assistance of the Senior Vice President, Human Resources, undertakes a
performance evaluation of each senior executive based upon the goals established
for each executive during the prior year. The Compensation Committee
then meets with the CEO to discuss and review each senior executive’s
performance during the last fiscal year and the level of achievement of each
senior executive’s goals. The CEO provides the Compensation Committee
with recommendations regarding base salary, the annual cash incentives as well
as the long-term equity incentive awards to be made to each senior
executive. The Compensation Committee then makes a final
determination, in its sole discretion, regarding the compensation package of
each senior executive. This determination is based on the
recommendation of the CEO as well as a review of the Company’s financial results
and any relevant position-based executive compensation benchmarking data
provided by the Compensation Committee’s independent compensation
consultant.
The
process for determination of CEO compensation differs as follows. On
an annual basis, the CEO completes a self-assessment of his or her performance
for review by the Compensation Committee and the Board of Directors, and then
the CEO meets with the Board of Directors to discuss his or her performance
during the year. The Board of Directors then meets in executive
session without the CEO present to discuss and evaluate his or her performance
and compensation package. Ultimately, decisions regarding the CEO’s
compensation package are made by the Board of Directors (excluding the CEO)
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 or her 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.
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
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 to target
the total compensation of the Company’s executives generally within the median
range of the survey data if the Company’s financial targets and the executive’s
annual goals are achieved during the year. Generally speaking, each
element of
15
During
2008, the base salaries of the Company’s named executive officers were generally
within the median range of the survey data (excluding the transitional roles of
interim CEO and interim CFO) and therefore the increases in base salary in 2008,
which ranged between one and four percent, were based on industry trends and
individual performance. With respect to the 2008 annual cash
incentive program, payments made to our executive officers, which ranged from
20% to 26% of the full funding target levels, were below the median range of the
survey data. With respect to the 2008 long-term equity incentive
program, the equity awards granted to these executives were at the lowest end of
the established ranges and were therefore below the median range of the survey
data.
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.
|
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 incentive opportunities through equity
awards that vest over a period of time.
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). The incentive-based portion of our executive officers’
target compensation is divided relatively 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 and losses are not considered when 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 in the case of the CEO, by the full Board of
Directors), 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
16
|
Named
Executive Officer
|
Increase
in Base Salary (%)
|
|
M.
Marquard
|
3.9%
|
|
J.
Smith
|
3.9%
|
|
K.
Connolly
|
1.0%
|
|
H.
Drazner
|
2.9%
|
Peter
Tilles, the President of our TVG business unit, and James Farrell, the former
interim Chief Financial Officer of the Corporation, both joined the Company
during 2008 and therefore were not eligible for any adjustments to their
respective base salaries during 2008. In addition, in November 2008,
the Compensation Committee, under the direction and with the approval of the
full Board of Directors, developed a compensation package for our newly
appointed CEO, Nancy Lurker. In determining the base salary of
$550,000, the Compensation Committee and the Board of Directors, in consultation
with our compensation consultant, considered a variety of factors, including
position-based market survey data, Ms. Lurker’s qualifications and experience,
including prior experience as a chief executive officer, as well as the specific
business goals and objectives of the Company.
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 February 2008, the following annual cash
incentive targets for 2008 were established for each named executive
officer:
|
Named
Executive Officer
|
Annual
Cash Incentive Target
(%
of Base Salary)
|
|
M.
Marquard *
|
80%
|
|
J.
Smith
|
70%
|
|
J.
Farrell *
|
40%
|
|
K.
Connolly *
|
70%
|
|
H.
Drazner
|
65%
|
|
P.
Tilles
|
60%
|
|
|
*
Mr. Marquard, Mr. Farrell and Mr. Connolly each terminated employment with
the Company during 2008 and therefore did not receive an annual cash
incentive award relating to fiscal
2008.
|
These annual cash incentive
targets were determined by the Compensation Committee, which took into
consideration information provided by our compensation consultant regarding
general survey data as well as the Compensation Committee’s desire to link a
significant portion of our executive’s overall compensation to the achievement
of specific financial and individual 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. In the
first quarter of 2008, the Compensation Committee revised the structure of the
funding mechanism for our annual cash incentive program in order to include a
revenue component among our financial targets in addition to operating income
targets. Furthermore, the financial targets established in order to
achieve full funding under the 2008 plan were considered to be aggressive and,
in the case of our consolidated operating income target, was significantly in
17
For all
named executive officers except for Mr. Drazner and Mr. Tilles, the financial
targets consisted of a blended mix of revenue and operating income targets for
our sales services and marketing services business segments as well as a
consolidated operating income target. For Mr. Drazner and Mr. Tilles,
the financial targets consisted of revenue and operating income targets for
their particular business units as well as a consolidated operating income
target. The level of funding for the annual cash incentive targets is
calculated based on a sliding scale that correlates directly with the level of
attainment of the various financial targets. As a general matter, in
order for the annual cash incentive targets to be funded at 100%, the applicable
financial targets must be fully achieved. The maximum level of
funding under the 2008 plan was 120% and the minimum threshold funding level was
25%. Once the level of funding has been calculated based on our
financial results, the actual amount of the individual 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 2008 annual cash incentive plan provided for full
funding only to the extent that the Company achieved at least break even
consolidated operating income (excluding the impact of the financial results of
our new product commercialization business segment) and the budgeted revenue and
operating income results for our various business units were fully
achieved. This mix of targets was established by the Compensation
Committee taking into consideration a variety of factors, including forecasted
results and the existing pipeline for new business as well as market conditions
and factors expected to affect the pharmaceutical industry and outsourced
service providers to this industry during 2008.
In fiscal
2008, the Company’s consolidated operating income and business unit revenue and
operating income results were at the lowest end of the established sliding scale
set forth in the 2008 annual cash incentive plan, and therefore the 2008 plan
was funded at the 25% minimum threshold. In determining the actual
amount of annual cash incentive awards to be made to our executive officers, the
Compensation Committee 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, including any extraordinary
circumstances that affected financial performance of the Company or a particular
business unit during 2008 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 minimum threshold funding level of 25%, except for Mr. Tilles, whose actual
award was reduced slightly from the minimum funding level due to the financial
performance of his business unit during 2008. Mr. Smith’s actual
award was slightly above the 25% funding level due to his performance during
2008, which included his assumption of the role of interim CEO during a portion
of 2008. In February 2009, the following annual cash incentive awards were
approved for the named executive officers (expressed as a percentage of (i) base
salary and (ii) annual cash incentive target):
|
Named
Executive Officer
|
Actual
Annual Cash
Incentive
Award
(%
of Base Salary)
|
Actual
Annual Cash
Incentive
Award
(%
of Target)
|
|
|
J.
Smith
|
18%
|
26%
|
|
|
H.
Drazner
|
16%
|
25%
|
|
|
P.
Tilles
|
12%
|
20%
|
|
With
respect to our current CEO, Ms. Lurker was appointed in November 2008 and
therefore was not eligible to receive an annual cash incentive award in February
2009 since this award is based on performance during 2008. Under the
2009 annual cash incentive plan, Ms. Lurker’s annual cash incentive target for
full funding of the plan was set at 100% of her base salary.
18
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.
Since
2006, equity awards under this plan have typically consisted of stock-settled
stock appreciation rights (“SARs”) and restricted stock. In May 2008,
the Compensation Committee approved a transition from restricted stock to
restricted stock units (“RSUs”) in order to improve the tax efficiency of the
awards for the Company and the participants receiving these
awards. RSU 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 RSUs are forfeited when an
executive’s service with the Company is terminated. We believe that
RSUs provide our executives with a significant link to our share price and also
assist 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 grant guideline range in dollar
values 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, which is
also consistent with survey data benchmarks. The CFO is included
within the second tier, and the respective presidents of our business units are
included within the third tier. The primary goal of the
Compensation Committee in establishing these grant guideline ranges for
long-term equity incentive grant values is to position our executives at median
levels of long-term incentive compensation compared with general survey data,
assuming that our financial results are in line with targeted levels of
performance 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 March
2008, the following grant guideline ranges for 2008 long-term equity incentive
grant values 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
|
|
J.
Farrell *
|
$30,000-$80,000
|
|
K.
Connolly*
|
$200,000-$300,000
|
|
H.
Drazner
|
$80,000-$150,000
|
|
P.
Tilles
|
$80,000-$150,000
|
|
|
*
Each of Mr. Marquard, Mr. Farrell and Mr. Connolly terminated employment
with the Company during 2008 and therefore did not receive a long-term
equity incentive award relating to fiscal
2008.
|
In
determining the actual amount of the award within the established range, the
Compensation Committee (and in the case of the CEO’s award, the Board of
Directors) considers various factors, including our overall financial, operating
and stock performance, the executive's strategic impact, alignment with
stockholder interests based on equity ownership of the executive management
team, total stockholder dilution and annual share
19
In
February 2009, the following long-term equity incentive awards were granted to
each named executive officer in the form of RSUs and SARs:
|
Named
Executive Officer
|
Approximate
Amount
($
Value)
|
Amount
(%
of Base Salary)
|
|
J.
Smith
|
$210,000
|
65%
|
|
H.
Drazner
|
$80,000
|
34%
|
|
P.
Tilles
|
$80,000
|
39%
|
The
dollar value of these long-term equity incentives was split evenly in the form
of RSUs 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 grant guideline range that was established by the Compensation Committee in
2008 for each named executive officer. This is due primarily to our
overall financial performance in 2008 and the status of certain other strategic
initiatives established for 2008. Although these amounts were granted
with respect to 2008 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 2009 and therefore will be reported in the
summary compensation table that will be included in our 2010 proxy
statement.
With
respect to our current CEO, Ms. Lurker was appointed in November 2008 and
therefore was not eligible to receive a long term equity incentive award in
February 2009 since this award is based on performance during
2008. Under the 2009 long-term equity incentive plan, Ms. Lurker’s
target was established at a maximum of 100% of base salary. In
addition, in connection with her appointment in November 2008, Ms. Lurker
received 140,000 RSUs and 280,000 performance contingent SARs. The
RSUs vest and become payable in shares of our common stock in five equal annual
installments, with the initial 20% of the units vesting immediately on the grant
date and an additional 20% of the units vesting annually on each anniversary of
the grant date over a four-year period. The SARs are subject to the
same vesting schedule as the RSUs but are only exercisable in connection with a
considerable increase in the current price of our common stock as
follows:
|
|
·
|
with
respect to the initial 94,000 SARs, the closing price of our common stock
has been at least $10.00 per share for 60 consecutive trading days anytime
within five years from the grant
date;
|
|
|
·
|
with
respect to the next 93,000 SARs, the closing price of our common stock has
been at least $15.00 per share for 60 consecutive trading days anytime
within five years from the grant date;
and
|
|
|
·
|
with
respect to the final 93,000 SARs, the closing price of our common stock
has been at least $20.00 per share for 60 consecutive trading days anytime
within five years from the grant
date.
|
In
connection with the departure of Michael Marquard, our former CEO, in June 2008,
Jeffrey Smith, our current CFO, was appointed as interim CEO and James Farrell,
our former Controller, was appointed as interim CFO. In recognition
of the increased responsibilities associated with these interim appointments,
Mr. Smith was provided with an award of approximately $150,000 worth of shares
of our common stock, with $50,000 worth of shares provided to Mr. Smith upon
assumption of his duties as interim CEO and the remaining $100,000 worth of
shares to be provided to him upon the successful appointment of a new permanent
CEO. Similarly, Mr. Farrell was provided with an award of
approximately $30,000 worth of shares of our common stock, with shares equal to
half of the total value provided to Mr. Farrell in July 2008 and the remaining
$15,000 worth of shares to be provided to him upon the successful appointment of
a new permanent CEO.
Equity Grant Approval
Process
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
20
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 RSU
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 RSU or
the exercise price of the SAR, as appropriate, is computed with reference to the
closing price on the grant date.
Perquisites
As a
matter of practice, we provide only limited special perquisites to our executive
officers that are not generally provided to all employees. 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. The value of
these special perquisites, as well as additional benefits that are available
generally to all of our employees, that were provided to each named executive
officer in 2008 are set forth in footnote 9 to the table contained in the
section of this Proxy Statement entitled “Summary Compensation
Table.”
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 our 401(k) plan, due to federally-imposed limits. 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 and periodically reviews all such agreements in the context of
the Company’s specific needs and emerging best practices. 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,
restricted stock and RSUs. 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. All of our executive officers and non-employee
directors were in compliance with these guidelines during 2008.
21
Impact of Tax and
Accounting
As a
general matter, the Compensation Committee takes into 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 for executives, the Compensation Committee examines the accounting costs
associated with awarding such equity compensation in accordance with FAS
123R.
Section
162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a
tax deduction to publicly held companies for compensation over $1 million paid
to the chief executive officer and the three 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.
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
Joseph T.
Curti, M.D.
John
Federspiel
John M.
Pietruski
Compensation Committee
Interlocks and Insider Participation in Compensation
Decisions
During
2008, the Compensation Committee consisted of Messrs. Ryan, Pietruski and
Federspiel and Dr. Curti, 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.
22
EXECUTIVE
COMPENSATION
Summary Compensation
Table
The
following table sets forth certain information concerning compensation paid to
all persons who served as our CEO and CFO and our three other most highly
compensated executive officers who served in such capacities during 2008
(collectively referred to as the “named executive officers”).
|
SUMMARY
COMPENSATION TABLE FOR 2008, 2007 and 2006
|
||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)(7)
|
Options
and SARs Awards ($)(8)
|
Non-Equity
Incentive Plan Compen-sation
|
All
Other Compen-sation
(9)
|
Total
|
|
Nancy
Lurker
|
||||||||
|
CEO
(1)
|
2008
|
$
66,635
|
$
-
|
$
134,820
|
$
9,323
|
$
-
|
$
1,517
|
$
212,295
|
|
Michael
Marquard -
|
||||||||
|
Former
CEO (2)
|
2008
|
201,760
|
-
|
80,049
|
33,653
|
-
|
911,939
|
1,227,401
|
|
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
|
2008
|
317,865
|
283,520
|
76,359
|
57,851
|
27,848
|
763,440
|
|
|
Treasurer
and
|
2007
|
306,375
|
-
|
119,667
|
53,994
|
191,000
|
27,456
|
698,492
|
|
Interim
CEO
|
2006
|
188,654
|
-
|
20,834
|
21,910
|
133,665
|
7,707
|
372,769
|
|
James
Farrell
|
||||||||
|
Former
|
||||||||
|
Interim
CFO (4)
|
2008
|
135,779
|
15,000
|
30,004
|
-
|
-
|
3,654
|
184,437
|
|
Howard
Drazner -
|
||||||||
|
SVP,
President -
|
2008
|
233,866
|
-
|
45,452
|
20,155
|
38,003
|
18,051
|
355,528
|
|
Pharmakon
|
2007
|
219,271
|
-
|
16,756
|
14,911
|
68,580
|
16,614
|
336,132
|
|
2006
|
210,000
|
2,000
|
4,999
|
4,409
|
107,100
|
16,890
|
345,398
|
|
|
Peter
Tilles -
|
||||||||
|
SVP,
President -
|
||||||||
|
TVG
(5)
|
2008
|
187,917
|
-
|
11,112
|
6,421
|
22,550
|
7,782
|
235,782
|
|
Kevin
Connolly -
|
||||||||
|
Former
EVP and
|
2008
|
179,563
|
-
|
(4,166)
|
9,285
|
-
|
425,268
|
609,950
|
|
President,
DMS (6)
|
2007
|
274,818
|
-
|
80,433
|
27,855
|
77,000
|
25,762
|
485,868
|
|
2006
|
267,279
|
-
|
66,774
|
11,022
|
168,386
|
18,163
|
531,624
|
|
|
|
(1)
|
Became
CEO effective November 18, 2008.
|
|
|
(2)
|
Resigned
effective June 20, 2008.
|
|
|
(3)
|
Mr.
Smith was awarded shares with a fair value at the date of grant of
approximately $150,000 in recognition of his service as our interim CEO
from June – November 2008.
|
|
|
(4)
|
Resigned
effective December 11, 2008.
|
|
|
(5)
|
Became
President of TVG effective February 6,
2008.
|
|
|
(6)
|
Resigned
effective August 22, 2008.
|
|
|
(7)
|
The
amounts in this column do not necessarily represent the value of the award
granted, nor are they a prediction of what will be paid to the
employee. The amounts in this column represent the expense
taken by the Company in accordance with FAS 123R in 2008, 2007 and 2006
for portions of awards granted in 2006, 2007 and 2008. The
assumptions used in determining the fair value of the stock awards are set
forth in Note 13 to our consolidated financial statements contained in our
Annual Report on Form 10-K for the year ended December 31,
2008. We generally recognize expense ratably over the requisite
vesting period.
|
|
|
(8)
|
Reports
the amount recognized in accordance with FAS 123R in our financial
statement for the year ended December 31, 2008, 2007 and 2006 for SARs
granted in 2006, 2007 and 2008. The assumptions used in
determining the fair value of the SARs awards are set forth in Note 13 to
our consolidated financial statements contained in our Annual Report on
Form 10-K for the year ended December 31, 2008. We generally
recognize expense ratably over the requisite vesting
period.
|
|
|
(9)
|
For
the named executive officers, this column includes the following amounts
in 2008, 2007 and 2006:
|
23
|
Name
|
Year
|
401(k) Company Match ($)
|
Term
Life Insurance Payment ($)
|
Automobile
Benefit ($)
|
Financial
Planning Services ($)
|
Accrued
Vacation Days ($)
|
Termination
Payments ($)
|
Relocation
($)
|
Totals
($)
|
|||||||||||||||||||||||
|
Nancy
Lurker
|
2008
|
$ | - | $ | 17 | $ | 1,500 | $ | - | $ | - | $ | - | $ | - | $ | 1,517 | |||||||||||||||
|
Michael
Marquard
|
2008
|
7,444 | 197 | 5,731 | 5,390 | 1,664 | 891,514 | - | 911,939 | |||||||||||||||||||||||
|
2007
|
2,773 | 258 | 12,000 | 13,000 | - | - | - | 28,031 | ||||||||||||||||||||||||
|
2006
|
- | 161 | 7,336 | - | - | - | 133,336 | 140,833 | ||||||||||||||||||||||||
|
Jeffrey
Smith
|
2008
|
9,200 | 396 | 12,000 | 6,252 | - | - | - | 27,848 | |||||||||||||||||||||||
|
2007
|
2,060 | 396 | 12,000 | 13,000 | - | - | - | 27,456 | ||||||||||||||||||||||||
|
2006
|
- | 161 | 7,545 | - | - | - | - | 7,706 | ||||||||||||||||||||||||
|
James
Farrell
|
2008
|
- | 40 | - | - | 3,614 | - | - | 3,654 | |||||||||||||||||||||||
|
Howard
Drazner
|
2008
|
8,962 | 90 | 9,000 | - | - | - | - | 18,051 | |||||||||||||||||||||||
|
2007
|
7,874 | 90 | 8,650 | - | - | - | - | 16,614 | ||||||||||||||||||||||||
|
2006
|
8,400 | 90 | 8,400 | - | - | - | - | 16,890 | ||||||||||||||||||||||||
|
Peter
Tilles
|
2008
|
- | 82 | 7,700 | - | - | - | - | 7,782 | |||||||||||||||||||||||
|
Kevin
Connolly
|
2008
|
6,459 | 172 | 6,571 | 10,000 | 4,997 | 397,069 | - | 425,268 | |||||||||||||||||||||||
|
2007
|
5,424 | 138 | 10,200 | 10,000 | - | - | - | 25,762 | ||||||||||||||||||||||||
|
2006
|
- | 138 | 10,200 | 7,825 | - | - | - | 18,163 | ||||||||||||||||||||||||
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,
2008.
[Missing
|
GRANTS
OF PLAN-BASED AWARDS DURING 2008
|
|||||||||||
|
Estimated
Possible Payouts Under Non-Equity Incentive Plan Awards (1)
|
Estimated
Possible Payouts Under Equity Incentive Plan Awards
(2)
|
Stock
Awards: Number of Shares of Stock or
|
Option
Awards: Number of Securities Underlying
|
Exercise
or Base Price of SARs
|
Grant
Date Fair Value of Stock and
SARs
|
||||||
|
Name
|
Grant
Date
|
Threshold
|
Target
|
Maximum
|
Threshold
|
Maximum
|
Units
|
SARs
|
Awards
|
Awards
|
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
($)
|
($)
|
|||
|
Nancy
Lurker
|
11/18/2008
|
(3)
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
140,000
|
280,000
|
$ -
|
$ 840,400
|
|
Michael
Marquard
|
2/27/2008
|
(4)
|
-
|
-
|
-
|
-
|
-
|
32,342
|
56,883
|
7.73
|
394,487
|
|
Jeffrey
Smith
|
2/27/2008
|
(4)
|
-
|
-
|
-
|
-
|
-
|
12,937
|
22,753
|
7.73
|
157,796
|
|
55,626
|
222,506
|
267,007
|
200,000
|
300,000
|
-
|
-
|
-
|
-
|
|||
|
6/26/2008
|
(5)
|
-
|
-
|
-
|
-
|
-
|
6,054
|
-
|
-
|
50,006
|
|
|
11/18/2008
|
(5)
|
-
|
-
|
-
|
-
|
-
|
23,365
|
-
|
-
|
100,002
|
|
|
James
Farrell
|
4/29/2008
|
(6)
|
-
|
-
|
-
|
-
|
-
|
3,468
|
-
|
-
|
29,998
|
|
7/20/2008
|
(7)
|
-
|
-
|
-
|
-
|
-
|
1,701
|
-
|
-
|
15,003
|
|
|
11/18/2008
|
(7)
|
-
|
-
|
-
|
-
|
-
|
3,505
|
-
|
-
|
15,001
|
|
|
Howard
Drazner
|
2/27/2008
|
(4)
|
-
|
-
|
-
|
-
|
-
|
5,175
|
9,101
|
7.73
|
63,120
|
|
38,003
|
152,013
|
182,415
|
80,000
|
150,000
|
-
|
-
|
-
|
-
|
|||
|
Peter
Tilles
|
2/27/2008
|
(4)
|
-
|
-
|
-
|
-
|
-
|
5,175
|
9,101
|
7.73
|
63,120
|
|
28,188
|
112,750
|
135,300
|
80,000
|
150,000
|
-
|
-
|
-
|
-
|
|||
|
Kevin
Connolly
|
2/27/2008
|
(4)
|
-
|
-
|
-
|
-
|
-
|
12,937
|
22,753
|
7.73
|
157,796
|
|
(1)
|
The
amounts in these columns represent potential payouts under the 2008 annual
cash incentive plan and were based on performance in 2008, which has now
occurred. The amounts actually paid are reflected in the
“Non-Equity Incentive Plan Compensation” column of the Summary
Compensation Table.
|
|
(2)
|
These
columns show the threshold and maximum grant values that were established
under the 2008 long-term equity incentive plan and were based on
performance in 2008, which has now occurred. The grant value of
the equity incentives actually granted in February 2009 under the 2008
long-term equity incentive plan are disclosed in the section of this Proxy
Statement entitled “Compensation Discussion and Analysis – Long-Term
Equity Incentives”.
|
|
(3)
|
In
connection with her appointment as our CEO in November 2008, Ms. Lurker
received 140,000 RSUs and 280,000 performance contingent
SARs. The RSUs vest and become payable in shares of our common
stock in five equal annual installments, with the
|
24
| initial 20% of the units vesting immediately on the grant date and an additional 20% of the units vesting annual on each anniversary of the grant date over a four year period. The SARs are subject to the same vesting schedule as the RSUs but are only exercisable in connection with certain increases in the price of our common stock as described under “Compensation Discussion and Analysis – Long-Term Equity Incentives.” | |
|
(4)
|
These
amounts include restricted stock and SARs that were awarded in March 2008
under the 2007 long-term equity incentive plan. The restricted
stock and the SARs vest in three equal annual installments over a three
year period.
|
|
(5)
|
In
recognition of Mr. Smith’s increased responsibilities as our interim CEO
from June 2008 through November 2008, he was awarded $150,000 worth of
shares of our common stock, with $50,000 worth of shares provided to Mr.
Smith upon assumption of his duties as interim CEO in June 2008 and the
remaining $100,000 worth of shares provided to him upon the successful
appointment of a new permanent CEO in November
2008.
|
|
(6)
|
Represents
an initial grant of shares of restricted stock awarded to Mr. Farrell in
connection with the commencement of his employment as our Vice President
and Controller in April 2008.
|
|
(7)
|
In
recognition of Mr. Farrell’s increased responsibilities as our interim
CFO, he was awarded $30,000 worth of shares of our common stock, with half
of the dollar value of the shares provided to Mr. Farrell in July 2008 and
the remaining half of the dollar value of the shares provided to him upon
the successful appointment of a new permanent CEO in November
2008.
|
25
Outstanding Equity
Awards
The
following table provides information concerning the number and value of
unexercised SARs, restricted stock awards and RSUs for the named executive
officers outstanding as of the fiscal year ended December 31, 2008.
|
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2008
|
||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
Number
of Shares that have not Vested (#)
|
Market
Value of Shares that have not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares or Other Rights that have
not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Vlaue of Unearned Shares or Other
Rights that have not Vested ($)
|
||||||||||||||||
|
Nancy
Lurker
|
-
|
-
|
$ -
|
-
|
112,000
|
(1)
|
$
449,120
|
-
|
$ -
|
|||||||||||||||
|
-
|
280,000
|
(2)
|
4.28
|
11/18/2015
|
-
|
-
|
-
|
-
|
||||||||||||||||
|
Jeffrey
Smith
|
10,441
|
(3)
|
5,221
|
(3)
|
13.47
|
5/15/2011
|
-
|
-
|
||||||||||||||||
|
-
|
-
|
-
|
-
|
11,817
|
(4)
|
47,386
|
-
|
-
|
||||||||||||||||
|
6,360
|
(5)
|
12,720
|
(5)
|
9.52
|
3/30/2012
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
-
|
-
|
-
|
-
|
12,937
|
(6)
|
51,877
|
-
|
-
|
||||||||||||||||
|
-
|
22,753
|
(7)
|
7.73
|
2/27/2013
|
-
|
-
|
-
|
-
|
||||||||||||||||
|
Howard
Drazner
|
-
|
-
|
-
|
-
|
1,658
|
(8)
|
6,649
|
-
|
-
|
|||||||||||||||
|
1,902
|
(9)
|
951
|
(9)
|
12.06
|
3/23/2011
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
-
|
-
|
-
|
-
|
3,676
|
(10)
|
14,741
|
-
|
-
|
||||||||||||||||
|
1,978
|
(5)
|
3,958
|
(5)
|
9.52
|
3/30/2012
|
-
|
-
|
-
|
-
|
|||||||||||||||
|
-
|
-
|
-
|
-
|
3,334
|
(11)
|
13,369
|
-
|
-
|
||||||||||||||||
|
-
|
-
|
-
|
-
|
5,175
|
(12)
|
20,752
|
-
|
-
|
||||||||||||||||
|
-
|
9,101
|
(7)
|
7.73
|
2/27/2013
|
-
|
-
|
-
|
-
|
||||||||||||||||
|
Peter
Tilles
|
-
|
-
|
-
|
-
|
5,175
|
(12)
|
20,752
|
-
|
-
|
|||||||||||||||
|
-
|
9,101
|
(7)
|
7.73
|
2/27/2013
|
-
|
-
|
-
|
-
|
||||||||||||||||
|
|
(1)
|
RSUs
that vest one-fourth on each of November 18, 2009, November 18, 2010,
November 18, 2011 and November 18,
2012.
|
|
|
(2)
|
Performance
contingent SARs where 56,000 are currently vested and the remaining SARs
vest one-fourth on each of November 18, 2009, November 18, 2010, November
18, 2011 and November 18, 2012 but are only exercisable upon the
performance conditions being met.
|
|
|
(3)
|
Two-thirds
of the SARs are currently exercisable, one-third on May 11,
2009.
|
|
|
(4)
|
Two-thirds
of the RSUs will become exercisable on March 30, 2009, one-third on March
30, 2010.
|
|
|
(5)
|
One-third
of the SARs are currently exercisable, one-third on each of March 30, 2009
and March 30, 2010.
|
|
|
(6)
|
One-third
of the RSUs that vest on each of February 27, 2009, February 27, 2010 and
February 27, 2011.
|
|
|
(7)
|
One-third
of the SARs will become exercisable on each of February 27, 2009, February
27, 2010 and February 27, 2011.
|
|
|
(8)
|
Restricted
shares of common stock that vest on March 23,
2009.
|
|
|
(9)
|
Two-thirds
of the SARs are currently exercisable, one-third will become exercisable
on March 23, 2009.
|
|
|
(10)
|
Two-thirds
of the restricted shares of common stock will become exercisable on March
30, 2009, one-third on March 30,
2010.
|
|
|
(11)
|
Restricted
shares of common stock that vest one-half on each of November 27, 2009 and
November 27, 2010.
|
|
|
(12)
|
Restricted
shares of common stock that vest one-third on each of February 27, 2009,
February 27, 2010 and February 27,
2011.
|
26
Option Exercises and Stock
Vested
The
following table presents information concerning the vesting of shares of
restricted stock or the receipt of shares of common stock for the named
executive officers during the fiscal year ended December 31,
2008. None of our named executive officers exercised any SARs during
fiscal 2008.
|
STOCK
VESTED IN 2008
|
||||
|
Name
|
Number
of Shares Acquired on Vesting (#)
|
Value
Realized on Vesting ($)
|
||
|
Nancy
Lurker
|
28,000
|
$ |
119,840
|
|
|
Michael
Marquard
|
25,273
|
208,222
|
||
|
Jeffrey
Smith
|
36,843
|
211,256
|
||
|
James
Farrell
|
5,206
|
30,004
|
||
|
Howard
Drazner
|
1,666
|
6,647
|
||
|
Kevin
Connolly
|
4,146
|
24,296
|
||
Nonqualified Deferred
Compensation
None of the named executives for 2008
have participated in our deferred compensation plan.
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, 2008, and thus includes amounts earned through such
time and are estimates of the amounts which would be paid out to the executives
upon their termination. The actual amounts to be paid out can only be
determined at the time of such executive’s separation from the
Company.
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
|||||||||||||||
|
Name
|
Cash
Payment
($)
|
Continuation
of Medical/ Welfare Benefits (Present Value) ($)
|
Acceleration
of Equity Awards ($)
(1)
|
Total
Termination Benefits ($)
|
|||||||||||
|
Voluntary
Resignation:
|
|||||||||||||||
|
Nancy
Lurker
|
$ | - | $ | - | $ | - | $ | - | |||||||
|
Jeffrey
Smith
|
- | - | - | - | |||||||||||
|
Howard
Drazner
|
- | - | - | - | |||||||||||
|
Peter
Tilles
|
- | - | - | - | |||||||||||
|
Termination
Without Cause or Resignation for Good Reason:
|
|||||||||||||||
|
Nancy
Lurker
|
825,000 | 22,500 | - | 847,500 | |||||||||||
|
Jeffrey
Smith
|
662,605 | 15,000 | - | 677,605 | |||||||||||
|
Howard
Drazner
|
336,897 | 15,000 | - | 351,897 | |||||||||||
|
Peter
Tilles
|
213,400 | 15,000 | - | 228,400 | |||||||||||
|
Termination
Without Cause or Resignation for Good Reason Upon a Change of
Control:
|
|||||||||||||||
|
Nancy
Lurker
|
825,000 | 22,500 | 449,120 | 1,296,620 | |||||||||||
|
Jeffrey
Smith
|
662,605 | 15,000 | 99,264 | 776,869 | |||||||||||
|
Howard
Drazner
|
336,897 | 15,000 | 55,510 | 407,408 | |||||||||||
|
Peter
Tilles
|
213,400 | 15,000 | 20,752 | 249,152 | |||||||||||
|
(1)
|
These
amounts are based on the value of restricted shares of common stock and
RSUs held at December 31, 2008 that would become immediately vested upon
retirement or a change of control pursuant to the applicable restricted
stock grant agreement.
|
27
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 2008 for our named executive officers.
Current
Executives
Nancy
Lurker
Under Ms.
Lurker’s employment separation agreement, in consideration for her employment
with the Company and certain covenants not to compete and not to solicit the
Company’s employees or clients for a period of up to 18 or 24 months after
termination of employment (depending on the date of her termination), and
subject to a general release of claims against the Company, Ms. Lurker is
entitled to receive the following benefits if she is terminated without Cause
(as defined below) or if she resigns for Good Reason (as defined below) or if
her employment is terminated in connection with a change of control on or before
November 18, 2010:
|
|
·
|
A
payment equal to the product of eighteen (18) times her then current
monthly base salary;
|
|
|
·
|
A
payment equal to the actual amount paid to her under any cash-based
incentive or bonus plan in which she participates with respect to the last
full fiscal year of her participation in such plan prior to the date of
her termination of employment with the Company;
and
|
|
|
·
|
Reimbursement
for the cost of the premiums for COBRA group health continuation coverage
for up to 18 months.
|
Ms.
Lurker is entitled to receive the following benefits if she is terminated
without Cause or if she resigns for Good Reason or if her employment is
terminated in connection with a change of control after November 18,
2010:
|
|
·
|
A
payment equal to the product of twenty-four (24) times her then current
monthly base salary;
|
|
|
·
|
A
payment equal to the average of the annual amounts paid to her under any
cash-based incentive or bonus plan in which she participates with respect
to the last three (3) full fiscal years of her participation in such plan
prior to the date of her termination (or, if her participation in such
plan is less than three full fiscal years, such shorter number of full
fiscal years of participation at the date of termination);
and
|
|
|
·
|
Reimbursement
for the cost of the premiums for COBRA group health continuation coverage
for up to 24 months.
|
“Cause”
generally means: (1) Ms. Lurker’s failure to use her best efforts to achieve her
goals; (2) Ms. Lurker’s failure to comply with the reasonable instructions of
our Board of Directors; (3) a material breach by Ms. Lurker of the terms of her
confidentiality, non-solicitation and covenant not to compete agreement; (4) Ms.
Lurker’s failure to adhere to our documented policies and procedures; (5) Ms.
Lurker’s failure to adhere to moral and ethical business principles; (6) Ms.
Lurker’s conviction of a criminal offense; (7) any documented act of material
dishonesty or fraud by Ms. Lurker in the commission of her duties; (8)
misconduct by Ms. Lurker that results in a misstatement of our financial
statements due to material non-compliance with financial reporting requirements
under Section 304 of the Sarbanes-Oxley Act of 2002.
“Good
Reason” generally means: (1) the failure to pay Ms. Lurker any material amount
of compensation that is due and payable; (2) a material reduction in Ms.
Lurker’s annual base salary; (3) the relocation of Ms. Lurker’s principal place
of employment to a location more than 50 miles from Ms. Lurker’s current
principal place of employment; (4) a material adverse alteration of Ms. Lurker’s
duties and responsibilities; (5) an intentional, material reduction of Ms.
Lurker’s aggregate target incentive awards under any incentive plans; or (6) in
connection with a change in control, the material failure to maintain Ms.
Lurker’s relative level of coverage under its employee benefit
plans.
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
28
|
|
·
|
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.
Howard
Drazner
Under Mr.
Drazner’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. Drazner is entitled to receive the following benefits if he is
terminated without Cause (as defined below) or if he resigns with Good Reason
(as defined below) or if his employment is terminated due to a change of
control:
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A
payment equal to the product of 12 times his then current monthly base
salary;
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A
payment equal to the average cash incentive compensation paid to him
during the three most recent years;
and
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Reimbursement
for the cost of the premiums for COBRA group health continuation coverage
for up to 12 months.
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For
purposes of Mr. Drazner’s agreement:
“Cause”
generally means: (1) Mr. Drazner’s failure to use his best efforts to achieve
his goals; (2) Mr. Drazner’s failure to comply with the reasonable instructions
of our CEO; (3) Mr. Drazner’s failure to adhere to our documents policies and
procedures; (4) Mr. Drazner’s failure to adhere to moral and ethical business
principles; (5) Mr. Drazner’s conviction of any felony or criminal offense
involving fraud, deceit, dishonest or unethical behavior; or (6) any documented
act of material dishonesty or fraud by Mr. Drazner.
“Good
Reason” generally means: (1) the failure to pay Mr. Drazner any material amount
of compensation that is due; (2) a reduction in Mr. Drazner’s annual base salary
in excess of 15 percent (unless all similarly situated executives receive this
reduction); (3) the relocation of Mr. Drazner’s principal place of employment to
a location more than 50 miles from his current principal place of employment; or
(4) a material adverse change in Mr. Drazner’s duties and
responsibilities.
Peter
Tilles
Under Mr.
Tilles’ 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. Tilles is entitled to receive the following benefits if he is
terminated without Cause (as defined below) or if he resigns with Good Reason
(as defined below):
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A
payment equal to the product of 12 times his then current monthly base
salary;
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A
payment equal to the average cash incentive compensation paid to him
during the three most recent years (or such shorter time period of
employment); and
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Reimbursement
for the cost of the premiums for COBRA group health continuation coverage
for up to 12 months.
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For
purposes of Mr. Tilles’ agreement:
“Cause”
generally means: (1) Mr. Tilles’ failure to use his best efforts to achieve his
goals; (2) Mr. Tilles’ failure to comply with the reasonable instructions of our
CEO; (3) Mr. Tilles’ failure to adhere to our documents policies and procedures;
(4) Mr. Tilles’ failure to adhere to moral and ethical business principles; (5)
Mr. Tilles’ conviction of a criminal offense; or (6) any documented act of
material dishonesty or fraud by Mr. Tilles; or (7) misconduct by Mr. Tilles
resulting in a misstatement of our financial statements due to material
non-compliance with financial requirement under Section 304 of the
Sarbanes-Oxley Act.
“Good
Reason” generally means: (1) the failure to pay Mr. Tilles any material amount
of compensation that is due; (2) a material reduction in Mr. Tilles’ annual base
salary or (3) the relocation of Mr. Tilles’ principal place of employment to a
location more than 50 miles from Mr. Tilles’ 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. Tilles’ duties and responsibilities; (2) an
intentional, material reduction of Mr. Tilles’ aggregate target incentive awards
under any incentive plans or (3) the Company’s failure to maintain Mr. Tilles’
relative level of coverage under its employee benefit plans.
Former
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 was entitled to receive the
following benefits if he was terminated without Cause (as defined below) or if
he resigned with Good Reason (as defined below):
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A
payment equal to the product of 18 times his then current monthly base
salary;
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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
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Continued
participation in our health and welfare programs, at our expense, for up
to 18 months.
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For
purposes of Mr. Marquard’s agreement:
“Cause”
generally means: (1) Mr. Marquard’s failure to comply with reasonable
instructions of our Board of Directors; (2) a material breach of the employment
separation agreement by Mr. Marquard; (3) Mr. Marquard’s failure to adhere to
our documented policies and procedures; (4) Mr. Marquard’s failure to adhere to
moral and ethical business principles; 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) a material reduction of Mr. Marquard’s duties or
assignment of duties materially inconsistent with his responsibilities as CEO;
(2) a material breach of the agreement by the Company; (3) a reduction in Mr.
Marquard’s base salary or failure to pay him any material amount when due; 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.
Mr.
Marquard retired from the Company, effective June 20, 2008. In
connection with Mr. Marquard’s departure, Mr. Marquard received cash payments
totaling approximately $892,000 in December 2008. In addition, the
Company agreed to accelerate the vesting of 14,029 shares of restricted stock
previously granted to Mr. Marquard
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
30
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A
payment equal to the product of 12 times his then current monthly base
salary;
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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
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Continued
participation in our health and welfare programs, at our expense, for 12
months.
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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; (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; (4) Mr. Connolly’s material failure to adhere
to moral and ethical business principles; (5) Mr. Connolly’s conviction of a
criminal offense; (6) any documented act of material dishonesty or fraud by Mr.
Connolly 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.
“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.
In August
2008, the Company eliminated the position of President of Diversified Marketing
Services and Mr. Connolly terminated his employment with the
Company. Pursuant to his employment separation agreement, Mr.
Connelly received cash payments totaling approximately $397,000 in February
2009. In addition, the Company agreed to accelerate the vesting of
4,146 shares of restricted stock previously granted to Mr.
Connolly.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Our Audit
Committee Charter provides that the Audit Committee must review and approve or
disapprove all proposed related person transactions, including all transactions
required to be disclosed by applicable SEC disclosure rules. When
reviewing and evaluating a related person 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 2008,
compensation paid or accrued to Peter Dugan was approximately
$142,000.
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.
31
ADDITIONAL
INFORMATION
Householding
The SEC’s
rules permit companies and intermediaries such as brokers to satisfy delivery
requirements for proxy statements and annual reports with respect to two or more
stockholders sharing the same address by delivering a single proxy statement and
annual report addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially provides extra convenience
for stockholders and cost savings for companies. Some brokers
household proxy materials and annual reports, delivering a single proxy
statement and annual report to multiple stockholders sharing an address,
although each stockholder will receive a separate proxy card. Once
you have received notice from your broker that they will be householding
materials to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If at any time you no
longer wish to participate in householding and would prefer to receive a
separate proxy statement and annual report, please notify your
broker. If you would like to receive a separate copy of this year’s
Proxy Statement or Annual Report, please contact us by writing to Jeffrey Smith,
Executive Vice President, Chief Financial Officer and Treasurer, PDI, Inc.,
Saddle River Executive Centre, 1 State Route 17 South, Saddle River, New Jersey
07458, or calling him at 1-800-242-7494.
Stockholder Proposals for
the 2010 Annual Meeting
Stockholders
interested in presenting a proposal for consideration at the annual meeting of
stockholders in 2010 must follow the notice procedures set forth in our
bylaws. To be eligible for inclusion in our proxy materials relating
to our 2010 annual meeting of stockholders, all qualified proposals must be
received by our Corporate Secretary no later than December 31,
2009. Stockholder proposals submitted more than 30 but less than 60
days before the scheduled date of our 2010 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
This Proxy Statement and our Annual Report on Form 10-K for the year ended
December 31, 2008 are available on the Internet at
http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=07087.
Incorporation by
Reference
To the
extent that this Proxy Statement is incorporated by reference into any other
filing under the Securities Act of 1933, as amended, or the Exchange Act, then
the sections of this Proxy Statement entitled “Compensation and Management
Development Committee Report” and “Audit Committee Report” will not be deemed
incorporated unless specifically provided otherwise in such
filing. Information contained on or connected to our website is not
incorporated by reference into this Proxy Statement or any other filing that we
make with the SEC.
32
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, 2008, 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 State Route
17 South, Saddle River, New Jersey 07458.
By order
of the Board of Directors,
James N.
Pepin
Corporate
Secretary
April 24,
2009
33
