def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
BEARINGPOINT, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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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
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing. |
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1676 INTERNATIONAL DRIVE
MCLEAN, VIRGINIA 22102
September 28, 2007
Dear Stockholder:
On behalf of the Board of Directors, you are cordially invited
to attend BearingPoints 2007 Annual Meeting of
Stockholders, which will be held on Monday, November 5,
2007, at 10:00 a.m. EST, at the Hyatt Regency
Greenwich, 1800 East Putnam Avenue, Old Greenwich, Connecticut,
06870 (the Annual Meeting).
At the Annual Meeting, stockholders will be asked to vote on a
number of matters, including: the election of our Class I
directors and the ratification of the appointment of
Ernst & Young LLP as the companys independent
registered public accounting firm for 2007.
Included herein is a copy of BearingPoints Annual Report
on
Form 10-K
for fiscal year 2006. I encourage you to read this report as it
contains important information on the companys services
and operations, as well as audited financial statements. Its
completion marked another important step for BearingPoint as we
continue to make progress in becoming timely with our Securities
and Exchange Commission periodic report filings.
We encourage you to submit a proxy to ensure that your shares
are represented at the meeting, whether or not you plan to
attend the meeting in Connecticut. You can submit your proxy by
mail (please complete, sign, date and return the enclosed proxy
card in the return envelope) or you can vote by Internet or
telephone (following the instructions in the accompanying proxy
statement or proxy card).
We look forward to seeing you at the Annual Meeting.
Sincerely,
HARRY L. YOU
Chief Executive Officer
1676 INTERNATIONAL DRIVE
MCLEAN, VIRGINIA 22102
NOTICE OF THE 2007 ANNUAL
MEETING OF STOCKHOLDERS
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To Our Stockholders:
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Date and Time:
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Monday, November 5, 2007,
10:00 a.m. Eastern Time
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Place:
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Hyatt Regency Greenwich
1800 East Putnam Avenue
Old Greenwich, Connecticut 06870
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Items of Business:
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(1) Elect three directors to
hold office until the 2010 annual meeting of stockholders and
until their respective successors have been duly elected and
qualified;
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(2) Ratify the appointment of
Ernst & Young, LLP as independent registered public
accounting firm for our 2007 fiscal year; and
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(3) Conduct such other
business as may properly be brought before the meeting.
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Record Date:
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Stockholders of record as of the
close of business on September 7, 2007 will be entitled to
notice of, and to vote at, the meeting or any adjournment or
postponement of the meeting.
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Voting:
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Your vote is very important.
We encourage you to
read the proxy statement and vote your shares. Whether or not
you plan to attend the meeting, please submit a proxy so that
your shares can be represented at the meeting. You can submit
your proxy by mail (please complete, sign, date and return the
accompanying proxy card in the enclosed return envelope) or you
can vote by Internet or by telephone (following the instructions
included in this proxy statement and on the proxy card).
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By Order of the Board of Directors
LAURENT C. LUTZ
General Counsel and Secretary
September 28, 2007
TABLE OF
CONTENTS
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BearingPoint,
Inc.
1676 International
Drive
McLean, Virginia
22102
PROXY STATEMENT
2007 Annual Meeting of
Stockholders
This proxy statement is furnished in connection with the
solicitation of proxies by BearingPoint, Inc. (the
Company, we or us) on behalf
of its Board of Directors. The proxies are to be voted at the
2007 Annual Meeting of Stockholders to be held on
November 5, 2007, and at any adjournment or postponement
thereof (the Annual Meeting). This proxy statement
and accompanying proxy card (proxy statement) are
being mailed to stockholders on or about September 28, 2007.
If you are a stockholder of record, you can have your shares
voted at the Annual Meeting by submitting your voting
instructions by Internet or by telephone, or by completing,
signing, dating and returning the enclosed proxy card in the
enclosed return envelope. Whether or not you submit your voting
instructions or your proxy, you will have the right to attend
the Annual Meeting and to vote your shares at the meeting, if
you wish. You may change your proxy or voting instructions, or
revoke your proxy or voting instructions, at any time before it
is exercised by voting in person at the Annual Meeting, by
delivering a subsequent proxy or by notifying the inspectors of
election in writing of your revocation. For additional
information regarding the Annual Meeting, see Additional
Information in this proxy statement.
1
PROPOSAL NO. 1ELECTION
OF DIRECTORS
The Board of Directors of the Company (the Board)
currently consists of nine directors. Under our certificate of
incorporation, the Board is divided into three classes, with
each class being as nearly equal in number as possible.
Generally, the directors of each class serve for a term of three
years and until their respective successors have been duly
elected and qualified, and the terms for the three classes are
staggered so that the term of only one class expires each year.
At the Annual Meeting, we are proposing the election of three
Class I directors to hold office until the annual meeting
of stockholders to be held in 2010 and until their respective
successors have been duly elected and qualified. Our
Class I director nominees are Douglas C. Allred, Betsy J.
Bernard and Spencer C. Fleischer.
Each of the director nominees has consented to be named in this
proxy statement and to serve if elected. If any director nominee
is unable to serve for any reason or if a vacancy otherwise
exists on the Board, the persons you authorize to vote your
shares (i.e., the holders of your proxy) will have the right to
vote your shares, in their discretion, for any other person or
persons as the Board may nominate.
THE BOARD
RECOMMENDS THAT YOU VOTE
FOR THE ELECTION OF EACH NOMINEE TO THE BOARD OF
DIRECTORS.
2
BOARD
OF DIRECTORS; CORPORATE GOVERNANCE; AND OTHER MATTERS
Board of
Directors
Set forth below is certain information regarding each of our
directors and director nominees, as of September 1, 2007:
Nominees
for Class I Directors with Terms Expiring in 2010
Douglas C. Allred, age 56, has been a member
of our Board of Directors since January 2000. Mr. Allred is
a private investor. Mr. Allred retired from his position as
Senior Vice President, Office of the President, of Cisco
Systems, Inc. in 2003. Mr. Allred was Senior Vice
President, Customer Advocacy, Worldwide Consulting and Technical
Services, Customer Services, and Cisco Information Technology of
Cisco Systems, Inc. from 1991 to 2002. Mr. Allred is a
Governor on the Washington State University Foundation Board of
Governors.
Betsy J. Bernard, age 52, has been a member
of our Board of Directors since March 2004. Ms. Bernard is
a private investor. Ms. Bernard was President of AT&T
Corporation from 2002 to 2003. From 2001 to 2002,
Ms. Bernard was President and Chief Executive Officer of
AT&T Consumer. Ms. Bernard is a director of The
Principal Financial Group, a global financial institution,
Telular Corporation, a provider of fixed cellular solutions and
wireless security systems and monitoring solutions, and
URS Corporation, an engineering design firm serving the
engineering, constructions services and defense markets.
Spencer C. Fleischer, age 53, has been a
member of our Board of Directors since July 2005.
Mr. Fleischer is a senior managing member and Vice Chairman
of Friedman Fleischer & Lowe GP II, LLC, a company
sponsoring and managing several investment funds that make
investments in private and public companies, and has served in
such capacity since 1998. Mr. Fleischer was appointed to
the Board of Directors in accordance with the terms of the
securities purchase agreement, dated July 15, 2005,
relating to the July 2005 Senior Debentures among the Company
and certain affiliates of Friedman Fleischer & Lowe,
LLC. If Mr. Fleischer ceases to be affiliated with the
purchasers or ceases to serve on our Board of Directors, so long
as the purchasers collectively hold at least 40% of the original
principal amount of the July 2005 Senior Debentures, the
purchasers or their designee have the right to designate a
replacement director to the Board of Directors.
Class II
Directors Whose Terms Expire in 2008
Wolfgang Kemna, age 49, has been a member of
our Board of Directors since April 2001. Mr. Kemna is Chief
Executive Officer of living-e AG, a German-based software
provider of publishing and productivity software, and has served
in such capacity since July 2007. From 2004 to 2007,
Mr. Kemna was a Managing Director of Steeb
Anwendungssysteme GmbH, a wholly owned subsidiary of SAP AG
(SAP). Mr. Kemna was Executive Vice President
of Global Initiatives of SAP from 2002 to 2004 and a member of
SAPs extended executive board from 2000 to 2004.
Albert L. Lord, age 61, has been a member of
our Board of Directors since February 2003. Mr. Lord is
Chairman of the board of directors of SLM Corporation, commonly
known as Sallie Mae, and has served in this capacity
since 2005. Mr. Lord was Vice Chairman and Chief Executive
Officer of Sallie Mae from 1997 to 2005.
J. Terry Strange, age 63, has been a
member of our Board of Directors since April 2003.
Mr. Strange retired from KPMG where he served as Vice Chair
and Managing Partner of the U.S. Audit Practice from 1996
to 2002. During this period, Mr. Strange also served as the
Global Managing Partner of the Audit Practice of KPMG
International and was a member of its International Executive
3
Committee. Mr. Strange is a director of Compass BancShares,
Inc., a financial services company, New Jersey Resources Corp.,
an energy services holding company, Group 1 Automotive, Inc., a
holding company operating in the automotive retailing industry,
and Newfield Exploration Company, an independent crude oil and
natural gas exploration and production company.
Class III
Directors Whose Terms Expire in 2009
Jill S. Kanin-Lovers, age 55, has been a
member of our Board of Directors since May 2007.
Ms. Kanin-Lovers served as Senior Vice President of Human
Resources & Workplace Management at Avon Products,
Inc. from 1998 to 2004. Ms. Kanin-Lovers is a member of the
Board of Directors of Dot Foods, Inc., one of the nations
largest food redistributors, Heidrick & Struggles, a
leading global search firm, and First Advantage Corporation, a
leading provider of risk mitigation and business solutions.
Ms. Kanin-Lovers also teaches Corporate Governance for the
Rutgers University Mini-MBA program.
Roderick C. McGeary, age 57, has been a
member of our Board of Directors since August 1999 and Chairman
of the Board of Directors since November 2004. Since March 2005,
Mr. McGeary has served the Company in a full-time capacity,
focusing on clients, employees and business partners. From 2004
until 2005, Mr. McGeary served as our Chief Executive
Officer. From 2000 to 2002, Mr. McGeary was the Chief
Executive Officer of Brience, Inc., a wireless and broadband
company. Mr. McGeary is a director of Cisco Systems, Inc.,
a worldwide leader in networking for the Internet, and Dionex
Corporation, a manufacturer and marketer of chromatography
systems for chemical analysis.
Harry L. You, age 48, has been a member of
our Board of Directors since March 2005. Mr. You has served
as Chief Executive Officer of the Company since March 2005.
Mr. You also served as the Companys Interim Chief
Financial Officer from July 2005 until October 2006. From 2004
to 2005, Mr. You was Executive Vice President and Chief
Financial Officer of Oracle Corporation, a large enterprise
software company. From 2001 to 2004, Mr. You was the Chief
Financial Officer of Accenture Ltd, a global management
consulting, technology services and outsourcing company.
Mr. You is a director of Korn Ferry International, a
leading provider of recruitment and leadership development
services.
No family relationships exist between any of the directors or
between any director and any executive officer of the Company.
Meetings
of the Board of Directors and Attendance; Annual Stockholder
Meeting
During 2006, the Board held 20 meetings. For 2006, each director
of the Company attended 75% or more of the aggregate of all
Board meetings and meetings of Board committees of which he or
she was a member as of such year. In addition, all of our
directors who were directors at the time of our 2006 annual
meeting of stockholders attended the stockholder meeting.
Director
Independence
The Board has reviewed each directors independence. As a
result of this review, the Board affirmatively determined that
each of Messrs. Allred, Fleischer, Kemna, Lord and Strange,
and Mses. Bernard and Kanin-Lovers has no material relationship
with the Company (either directly or as a partner, shareholder
or officer of an organization that has a relationship with the
Company). Furthermore, each of these directors is independent of
the Company and its management under the listing standards of
the NYSE currently in effect and, with respect to members of the
Audit Committee, the applicable regulations of the Securities
and Exchange Commission (the SEC).
Messrs. McGeary and You are employees of the Company.
4
In connection with the Boards determination of
Mr. Fleischers independence, the Board examined
Mr. Fleischers status as a senior managing member of
certain holders of the Companys convertible debt. After
considering all relevant facts and circumstances, the Board
determined Mr. Fleischers relationship was not
material and does not impair the independence of
Mr. Fleischer. Although Mr. Fleischer attends
committee meetings from time to time, he is not a member of our
Audit Committee, Compensation Committee or Nominating and
Corporate Governance Committee. For more information about
Mr. Fleischers appointment to the Board and his
relationship to one of our convertible debt holders, please see
Certain Relationships and Related Transactions, and
Director IndependenceFriedman Fleischer & Lowe,
LLC /Spencer C. Fleischer.
Executive
Sessions of Non-Management Directors
Our non-management directors meet in executive sessions at least
four times each year, generally during each regularly scheduled
Board meeting. If any of the non-management directors are not
independent, as required by the NYSE listing
standards, then at least one annual meeting of only independent
directors is held. Currently, all non-management directors are
independent. The Board has designated Douglas C. Allred as
Presiding Director for all meetings of the executive sessions of
the non-management directors.
Committees
of the Board of Directors
The Board has established an Audit Committee, a Compensation
Committee, and a Nominating and Corporate Governance Committee.
Audit
Committee
The Audit Committee is currently composed of
Messrs. Strange (Chair), Kemna and Lord. The Board has
affirmatively determined that each member of the Audit Committee
has no material relationship with the Company (either directly
or as a partner, shareholder or officer of an organization that
has a material relationship with the company) and is independent
of the Company and its management under the listing standards of
the NYSE and the applicable regulations of the SEC. The Board
has determined that Mr. Strange is an audit committee
financial expert as defined in Item 401(h) of
Regulation S-K.
Mr. Strange serves on the audit committee of four other
publicly registered companies. The Board has determined that
such simultaneous service does not impair
Mr. Stranges ability to serve on our Audit Committee.
The Audit Committee held 14 meetings during 2006.
The Audit Committee assists the Board in fulfilling its
oversight responsibilities with respect to financial reports and
other financial information. In this regard, the Audit
Committee, among other purposes and responsibilities required by
applicable law and the NYSE listing standards:
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serves as an independent and objective body to monitor the
Companys financial reporting process and internal control
systems;
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serves as the sole authority to which the independent registered
public accountant (the Independent Registered Public
Accountant) is accountable, and has the sole authority and
responsibility to appoint, compensate and retain the Independent
Registered Public Accountant;
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serves as the ultimate authority to which the internal auditing
function (Internal Audit) is accountable;
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monitors the qualification, independence and performance of the
Independent Registered Public Accountant and Internal Audit,
including reviewing their audit efforts;
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provides an open avenue of communication among the Independent
Registered Public Accountant, financial and senior management,
Internal Audit and the Board;
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assists in the Boards oversight of the Companys
compliance with legal and regulatory requirements; and
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prepares a report for inclusion in the Companys annual
proxy statement.
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Compensation
Committee
The Compensation Committee is currently composed of
Mr. Allred (Chair) and Mses. Bernard and Kanin-Lovers, each
of whom is independent as required by the NYSE listing
standards. Ms. Kanin-Lovers was appointed as a member of
the Compensation Committee on May 10, 2007, and on
June 18, 2007, Mr. Strange stepped down as a member of
the Compensation Committee. The Compensation Committee held 9
meetings during 2006.
The Compensation Committee assists the Board in the development
and implementation of the Companys compensation policies
for its executive officers and the Companys incentive
compensation and other stock-based plans and reviews such other
matters as may be delegated to the Compensation Committee by the
Board from time to time. In that regard, the Compensation
Committee, among other responsibilities required by applicable
law and the NYSE listing standards:
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approves the compensation structure for the Companys
executive officers;
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approves the annual compensation for the Companys
executive officers;
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reviews and approves the evaluation process for the
Companys directors and executive officers;
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evaluates the chief executive officers performance in
light of the established goals and objectives;
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sets the chief executive officers annual compensation;
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recommends to the Board the annual compensation for the
Companys directors;
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reviews the Companys incentive compensation and other
stock-based plans and recommends changes in such plans to the
Board; and
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prepares an annual executive compensation report and
compensation discussion and analysis for inclusion in the
Companys proxy statement.
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Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee is currently
composed of Mr. Lord (Chair) and Ms. Bernard, each of
whom is independent as required by the NYSE listing standards.
The Nominating and Corporate Governance Committee held one
meeting during 2006.
The Nominating and Corporate Governance Committee provides
assistance to the Board in identifying, screening and
recommending qualified candidates to serve as directors of the
Company and in recommending to the Board the director nominees
for the next annual meeting of stockholders. The Nominating and
Corporate Governance Committee considers all nominees
recommended by stockholders. For information on recommending a
director nominee or submitting a notice of a nomination of a
director at the next annual meeting of stockholders, see below
under Stockholder Proposals for 2007 Annual
MeetingStockholders Submitting Director Recommendations
and Nominations. In addition, the Nominating and Corporate
Governance Committee also develops and recommends to the Board
the Companys Corporate Governance Guidelines and oversees
the annual evaluation of the Board and management of the Company.
6
Compensation
Committee Interlocks and Insider Participation
The members of our Compensation Committee for 2006 were
Messrs. Allred (Chair) and Strange, and Ms. Bernard.
In 2007, Ms. Kanin-Lovers joined the committee, and
Mr. Strange departed the committee. No member of the
Compensation Committee is a former or current officer or
employee of the Company or any of the Companys
subsidiaries. To the Companys knowledge, there were no
other relationships involving members of the Compensation
Committee requiring disclosure in this section of this Proxy
Statement.
Corporate
Governance Guidelines and Committee Charters
The Board has adopted the BearingPoint, Inc. Corporate
Governance Guidelines, and the Audit Committee, the Compensation
Committee and the Nominating and Corporate Governance Committee
each operates in accordance with a charter that has been adopted
by the Board. The Corporate Governance Guidelines, together with
these charters, provide the framework for the governance of the
Company. You may view our Corporate Governance Guidelines and
the charters on our corporate website at
www.bearingpoint.com in the Corporate Governance section
of our Investors webpage. A copy of the charter of the Audit
Committee is included as Appendix A to this proxy statement.
The Corporate Governance Guidelines address a variety of
governance issues, including:
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Board composition and selection;
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Board meetings and agenda, and committee matters;
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Director responsibilities, director compensation, director
orientation and continuing education, including attendance at
director education programs at the Companys expense;
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Access to management, employees and independent advisors, and
management succession;
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Executive sessions, and annual performance evaluations of the
Board; and
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Reporting of concerns.
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Standards
of Business Conduct
On May 10, 2007, the Board approved our Standards of
Business Conduct (the SBC), which superseded our
prior Code of Business Conduct and Ethics. The SBC became
effective as of May 31, 2007. The SBC was developed as part
of our commitment to enhancing our culture of integrity and our
corporate governance policies. The SBC reflects changes in law
and regulation, best practices and updates to the Companys
policies. In addition, the SBC contains new or enhanced policies
and/or
procedures relating to violations of the SBC, conflicts of
interest (including those related to the giving and receiving of
gifts and entertainment), financial disclosures, the importance
of maintaining the confidentiality of Company, client and
competitor information, data privacy and protection, Company
property, investor and media relations, records management, and
lobbying/political activities. The SBC applies to all of our
directors and employees, including our principal executive
officer, principal financial officer and principal accounting
officer. The SBC is posted on our corporate website at
www.bearingpoint.com in the Corporate Governance section
of our Investor webpage. We intend to satisfy the disclosure
requirement regarding any amendment to, or waiver of, a
provision of the SBC for our Chief Executive Officer, Chief
Financial Officer, Corporate Controller or persons performing
similar functions, by posting such amendment or waiver on our
website within the applicable deadline that may be imposed by
government regulation following the amendment or waiver.
7
Nomination
of Director Candidates
The Nominating and Corporate Governance Committee is responsible
for identifying, screening and recommending candidates to the
entire Board for Board membership. The committee considers all
qualified candidates identified by members of the committee, by
other members of the Board, by senior management and by
stockholders. The committee follows the same process and uses
the same criteria for evaluating all candidates.
When evaluating a candidate, the committee reviews the
candidates experience, skills and personal qualities. In
particular, the committee will consider whether candidates for
director possess the following attributes:
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the highest standards of moral and ethical character and
personal integrity;
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aptitude or experience to understand fully the legal
responsibilities of a director and the governance processes of a
public company;
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personal qualities to be able to make a substantial, active
contribution to Board deliberations;
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substantial business experience relevant to our business;
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demonstrated leadership ability, with broad experience, diverse
perspectives, and ability to exercise sound business judgment;
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qualification to serve on specialized Board committees, such as
the Audit Committee or Compensation Committee; and
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willingness and ability to commit sufficient time to fulfill the
responsibilities of a member of the Board.
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In addition to the above considerations, the committee will
consider the current composition of the Board; the attributes
and qualifications of the current members of the Board;
additional attributes and qualifications that should be
represented on the Board; and whether the candidate could
provide those additional attributes and qualifications, such as
diversity of experience and background and financial, business,
academic, public or other expertise on the Board and its
committees. In addition, the committee will take into account
the nature of and time involved in a directors service on
other boards in evaluating a candidate.
The committee will not recommend any candidate unless that
candidate has indicated a willingness to serve as a director and
has agreed to comply, if elected, with the requirements of Board
service.
Stockholders who wish to recommend director nominees to the
Board or nominate a person for election as a director at our
next annual meeting of stockholders must follow the procedures
set forth below under Stockholder Proposals for 2007
Annual MeetingStockholders Submitting Director
Recommendations and Nominations.
To date, the Boards non-management directors have been
identified with the assistance of a professional search firm
specializing in the identification and recruitment of director
candidates or have been known to Board members through business
or other relationships.
Communications
with Directors
The Board welcomes your questions and comments. If you would
like to communicate directly with our Board, our non-management
directors of the Board as a group or Mr. Allred, as the
Presiding
8
Director, then you may submit your communication to our General
Counsel and Corporate Secretary by writing to them at the
following address:
BearingPoint, Inc.
c/o General
Counsel and Corporate Secretary
8725 W. Higgins Road
Chicago, IL 60631
All communications and concerns will be forwarded to our Board,
our non-management directors as a group or our Presiding
Director, as applicable. We also have established a dedicated
telephone number for communicating concerns or comments
regarding compliance matters to the Company. The phone number is
1-800-206-4081
and is available 24 hours a day, seven days a week. Our
Standards of Business Conduct prohibits any retaliation or other
adverse action against any person for raising a concern. If you
wish to raise your concern in an anonymous manner, then you may
do so.
9
PROPOSAL NO. 2RATIFICATION
OF APPOINTMENT OF
ERNST & YOUNG LLP
The Audit Committee has selected Ernst & Young LLP
(E&Y) as our independent registered public
accounting firm for 2007. The selection of E&Y as
independent registered public accounting firm is submitted for
ratification by the stockholders at the Annual Meeting.
PricewaterhouseCoopers LLP (PwC) served as our
independent registered public accounting firm for 2006.
Representatives of E&Y are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if
they so desire, and will be available to respond to appropriate
questions.
Stockholder ratification of the selection of E&Y as our
independent registered public accountants is not required by our
Bylaws or otherwise. If the stockholders fail to ratify the
selection of E&Y, the Audit Committee and the Board will
reconsider whether or not to further retain that firm. Even if
the selection is ratified, the Audit Committee and the Board in
their discretion may direct the appointment of different
independent registered public accountants at any time during the
year if they determine that such a change would be in the best
interests of the Company and its stockholders.
THE BOARD
RECOMMENDS THAT YOU VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST &
YOUNG LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR 2007.
Changes
In and Disagreements with Accountants on Accounting and
Financial Disclosure
As previously reported, on February 5, 2007, the Chairman
of the Audit Committee was notified by PwC, our independent
registered public accounting firm for 2006, that PwC was
declining to stand for re-election for 2007 and that the
client-auditor relationship between the Company and PwC would
cease upon PwCs completion of services related to the
audit of our annual financial statements for fiscal 2006 and
related 2006 quarterly reviews.
During the Companys years ended December 31, 2005 and
December 31, 2006, and through June 28, 2007 (the date
of the filing of the Annual Report on
Form 10-K
for the year ended December 31, 2006 with the SEC), there
were no disagreements between the Company and PwC on any matter
of accounting principle or practice, financial statement
disclosure, or auditing scope or procedure that, if not resolved
to PwCs satisfaction, would have caused it to make
reference to the matter in connection with its report on the
Companys consolidated financial statements for the
relevant year, and there were no reportable events as defined in
Item 304(a)(1)(v) of
Regulation S-K,
except that the Company disclosed that material weaknesses
existed in its internal control over financial reporting for
2006 and 2005. The material weaknesses identified are discussed
in Item 9A of the Companys Annual Reports on
Form 10-K
for the year ended December 31, 2006 and for the year ended
December 31, 2005. The Company has authorized PwC to
respond fully to any inquiries of its successor concerning the
material weaknesses. PwCs audit reports on the
Companys consolidated financial statements for the years
ended December 31, 2006 and December 31, 2005 did not
contain an adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or
accounting principles.
On February 9, 2007, the Audit Committee, as part of its
periodic review and corporate governance practices, determined
to engage E&Y as the Companys independent registered
public accounting firm commencing with the audit for the year
ending December 31, 2007. E&Y also has been engaged as
the independent registered public accounting firm for the
BearingPoint, Inc. 401(k) Plan (the 401(k) Plan),
commencing with the audit for the 401(k) Plans year ending
December 31, 2007. During the Companys years ended
December 31, 2005 and December 31, 2006, and through
February 9, 2007, neither the Company, nor anyone on its
behalf, consulted with Ernst & Young with respect to
either (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type
of audit opinion
10
that might be rendered on the Companys consolidated
financial statements for 2006 or 2005, and no written report or
oral advice was provided by E&Y to the Company that
E&Y concluded was an important factor considered by the
Company in reaching a decision as to the accounting, auditing,
or financial reporting issue for 2006 or 2005 or (ii) any
matter that was the subject of either a disagreement as defined
in Item 304(a)(1)(iv) of
Regulation S-K
or a reportable event as described in Item 304(a)(1)(v) of
Regulation S-K.
Audit
Committee Pre-Approval Policies
The Audit Committee has adopted policies and procedures for
approving all audit and permissible non-audit services performed
by our independent auditors. Consistent with these policies, all
engagements of the independent auditor to perform any audit
services and non-audit services have been pre-approved by the
Audit Committee. No services provided by our independent auditor
were approved by the Audit Committee pursuant to the de
minimis exception to the pre-approval requirement set
forth in paragraph (c)(7)(i)(C) of
Rule 2-01
of
Regulation S-X.
Independent
Registered Public Accountants Fees
During fiscal years 2006 and 2005, our independent registered
public accountants, PricewaterhouseCoopers LLP, billed us the
fees set forth below in connection with services rendered:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended,
|
|
Type of Fee
|
|
December 31, 2006
|
|
|
December 31, 2005
|
|
|
Audit Fees (1)
|
|
$
|
30,979,000
|
|
|
$
|
33,900,000
|
|
Audit Related Fees (2)
|
|
|
275,000
|
|
|
|
159,300
|
|
Tax Fees (3)
|
|
|
960,000
|
|
|
|
1,956,800
|
|
All Other Fees (4)
|
|
|
15,000
|
|
|
|
33,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
32,229,000
|
|
|
$
|
36,049,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Audit fees include audits of
consolidated financial statements, reviews of unaudited
quarterly financial statements and services that are normally
provided by independent auditors in connection with statutory
and regulatory filings.
|
|
(2)
|
|
Audit related fees include
assurance and related services provided by our independent
auditors that are reasonably related to the performance of the
audit or review of our consolidated financial statements and are
not included above under Audit Fees. These services
principally include audits of employee benefit plans, accounting
consultations, and other services in connection with regulatory
reporting requirements.
|
|
(3)
|
|
Tax services principally include
consultation in connection with tax compliance, tax
consultations and tax planning.
|
|
(4)
|
|
All other fees include licenses to
technical accounting research software.
|
11
REPORT
OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
MEMBERSHIP
AND ROLE OF THE AUDIT COMMITTEE
Currently, the Audit Committee (the Committee)
consists of Messrs. J. Terry Strange (Chair), Wolfgang
Kemna and Albert L. Lord. The Board of Directors has determined
that Mr. Strange is an audit committee financial expert.
The Committee operates under a written charter adopted by the
Board of Directors.
The Committee assists the Board of Directors in fulfilling its
oversight responsibilities with respect to financial reports and
other financial information. In this regard, the Audit
Committee, among other purposes and responsibilities required by
applicable law and the NYSE listing standards, serves as an
independent and objective body to monitor the Companys
financial reporting process and internal control systems; serves
as the sole authority to which the independent registered public
accounting firm is accountable, and has the sole authority and
responsibility to appoint, compensate and retain the independent
registered public accounting firm; serves as the ultimate
authority to which the internal auditing function
(Internal Audit) is accountable; monitors the
qualification, independence and performance of the independent
registered public accounting firm and Internal Audit, including
reviewing their audit efforts; provides an open avenue of
communication among the independent registered public accounting
firm, financial and senior management, Internal Audit, and the
Board; assists in the Boards oversight of the
Companys compliance with legal and regulatory requirements
and prepares a report for inclusion in the Companys annual
proxy statement.
REVIEW OF
THE COMPANYS AUDITED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 2006
The Committee reviewed the audited financial statements of the
Company for the year ended December 31, 2006 and discussed
the audited financial statements with the Companys
management and PricewaterhouseCoopers LLP, the Companys
independent registered public accounting firm for 2006. The
Committee also has discussed with PricewaterhouseCoopers LLP the
matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
The Committee has reviewed the written disclosures and the
letter from PricewaterhouseCoopers LLP required by Independence
Standards Board Standard No. 1 (Independence Discussion
with Audit Committees) with respect to the independence of
PricewaterhouseCoopers LLP. The Committee has discussed the
independence of PricewaterhouseCoopers LLP with
PricewaterhouseCoopers LLP.
Based on the Committees review and discussions noted
above, the Committee recommended to the Board of Directors that
the Companys audited financial statements referred to
above be included in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2006 for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
J. Terry Strange, Chair
Wolfgang Kemna
Albert L. Lord
12
COMPENSATION
DISCUSSION AND ANALYSIS
The success of our business largely depends on our ability to
attract, retain and motivate qualified employees, particularly
professionals with the advanced information technology skills
necessary to perform the services we offer. Our management and
the Compensation Committee of our Board of Directors devote a
significant amount of time and attention to addressing the
compensation of our professionals. Our Compensation Committee
has the authority to determine the compensation for our
executive officers, including making individual compensation
decisions, and reviewing and structuring the compensation
programs applicable to our executive officers. Our executive
officers are our Chairman of the Board, Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer and General
Counsel and Secretary. This compensation discussion and analysis
provides perspective on our compensation objectives and policies
for our Chief Executive Officer, our Chief Financial Officer and
our other executive officers. We believe that an understanding
of our approach to managing director compensation generally is
useful to an understanding of our business model and our
particular compensation practices as it relates to our executive
officers. For additional information, see Item 1,
BusinessEmployees, Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of OperationsPrincipal
BusinessPriorities for 2007 and Beyond of our Annual
Report on
Form 10-K
for our fiscal year ended December 31, 2006 (the
Form 10-K)
and our Quarterly Report on
Form 10-Q
for the three months ended March 31, 2007, and
Managing Director Compensation Plan.
Overall
Compensation Philosophy and Objectives
Overall, our compensation philosophy is to enhance corporate
performance and stockholder value by aligning the financial
interests of our managing directors, including our executive
officers, with those of our stockholders. We strive to implement
this philosophy by tying a significant portion of our managing
directors compensation to our financial performance.
We design our compensation programs to:
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attract and retain the best possible talent;
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|
|
|
motivate our peoples efforts to achieve long-term positive
returns for our stockholders;
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|
|
|
increase the use of performance and equity-based awards;
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|
|
|
communicate metrics to influence employee performance and
accountability;
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|
|
provide for cash and long-term incentive compensation at levels
that are competitive with companies within our industry
(targeting to remain around the 50th percentile); and
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|
recognize outstanding individual performance.
|
How
Compensation is Determined
Mix of Total Compensation. Our Compensation
Committee and management collaborate to determine the mix of
compensation for our employees, both among short and long-term
compensation and cash and non-cash compensation. Our management
team establishes and recommends cash compensation for all of our
employees, including our executive officers. Our Compensation
Committee reviews managements recommendations of
guidelines for salary and cash bonus increases for our
employees, determines cash compensation for our executive
officers, and establishes guidelines and structures for the
issuance of equity-based compensation so as to establish the mix
of total compensation for our employees.
13
In the past, our business model rewarded revenue growth and
utilization; however, in 2006, management and our Compensation
Committee changed this approach, to emphasize profitability and
individual performance in establishing the mix of total
compensation to be paid to our executive officers.
Market Benchmarking. The Compensation
Committee reviews and considers peer benchmarking information in
determining the mix or relationship of compensation elements for
our executive officers.
We target total compensation for our executive officers to be
consistent with peer companies performing at comparable levels.
To evaluate the reasonableness and competitiveness of our
compensation, we obtain information on market pay levels from
various sources, including nationally recognized compensation
surveys, SEC filings of selected, publicly-traded benchmark
companies and first-hand experience obtained from the
marketplace in hiring employees. In addition, we typically
engage a consultant to gather information on pay levels and
practices for a group of comparable management and technology
consulting companies based in the United States. For each
comparable company, the Compensation Committees consultant
collects information regarding total compensation levels for
executive officers (including base salary, annual bonus,
long-term incentives and other compensation) and other related
items. The Compensation Committees consultant summarizes
and reviews this information, as well as information from
leading published compensation surveys, with the Compensation
Committee.
Role of Compensation Committee and Management in Executive
Officer Compensation Decisions. The Compensation
Committee evaluates the performance of our executive officers
and approves their annual compensation, including salary, bonus,
incentive and equity compensation. The Compensation Committee
takes into consideration managements recommendations for
the total compensation of our executive officers. For our
executive officers, the Compensation Committee generally
considers the Companys performance within our industry,
the challenges we continue to face in improving our business
operations, as well as each individuals current
contribution and expected future contribution to our
performance. The Chief Executive Officer meets with the
Compensation Committee to discuss the performance review for
each executive officer (other than himself) and to make
compensation recommendations. The Chairman of the Board
participates in the review and discussion of the Chief Executive
Officers compensation. The Compensation Committee
considers these views when making its compensation
determinations, as well as an analysis of short-term and
long-term compensation prepared by its outside consultant that
compares the individuals compensation for the prior two
years, evaluates the compensation recommendations made by
management and provides a market analysis comparing these
compensation amounts to a group of peer companies. In making
compensation decisions, the Compensation Committee also
considers the results of the 360 degree performance
review process we have implemented, which is intended to broaden
the scope of our review process for managing directors and
allows peers and direct and indirect reports to review and
assess the performance of our managing directors, including our
executive officers.
Management Team Employment Agreements. Since
November 2004, there have been significant changes to our
executive management team as a result of the issues related to
our North American financial reporting systems, internal
controls, various ongoing investigations and related litigation.
During the past two years, the Compensation Committee and
management have devoted a significant amount of time to attract
highly motivated and experienced individuals to comprise our new
executive management team and to provide leadership to the
Company. In 2005 and 2006, the Board of Directors appointed a
new Chief Executive Officer, Chief Financial Officer and General
Counsel, and, in 2007, the Board appointed a new Chief Operating
Officer. We entered into written employment agreements with
Mr. You, our Chief Executive Officer, Ms. Ethell, our
Chief Financial Officer, Mr. Lutz, our General Counsel and
Secretary and Mr. Harbach, our Chief Operating Officer.
Prior to agreeing
14
upon the compensation terms of these employment agreements, the
Compensation Committee took into consideration competitive
market compensation information based upon peer group data and
the data of companies with a similar market capitalization.
Furthermore, it was necessary to compensate Mr. You,
Ms. Ethell and Mr. Lutz with additional equity grants
and other signing bonus payments to offset compensation that
would have been earned or benefits that would have been received
by such individuals had they remained with their previous
employers.
Equity
Compensation Programs
In connection with our 2006 Annual Meeting of Stockholders, our
Board of Directors included a proposal to amend the LTIP to,
among other things, provide for a 25 million share increase
in the number of shares authorized for equity awards made under
the LTIP. In soliciting proxies from our largest stockholders,
we informed our stockholders that the increased share capacity
would be used to implement a new equity-based retention strategy
for 2007, under which awards would vest over several years and
be subject to performance-based vesting criteria. Our management
and the Compensation Committee made this recommendation because
they realized that (1) approximately 70% of the RSUs we
issued in 2005 would vest by January 1, 2007 and
(2) the number of shares available under our LTIP would not
allow us to issue substantial amounts of equity in the near
future. Furthermore, because most of our outstanding stock
option awards were granted before 2005, we believed those stock
options had limited retentive value since they were granted with
exercise prices that were still above our common stocks
current stock price. We believe that performance-based equity is
viewed more favorably than RSUs by our stockholders because
vesting is conditioned upon performance criteria that can be
objectively measured rather than mere continuation of
employment. Our stockholders approved the LTIP amendments on
December 14, 2006.
Generally, we do not expect the Compensation Committee to make
any additional grants of RSUs or PSUs to our executive officers
through the end of 2009. Until that time, we expect that any
bonus compensation earned by our executive officers will be paid
in cash.
PSU Program. In February 2007, the
Compensation Committee adopted a performance share unit
(PSU) program for the Companys
highest-performing managing directors and senior managers,
including our executive officers. The PSU program was
implemented recognizing that: (i) we had achieved some
important milestones in our efforts to become timely in our SEC
periodic filings; (ii) we were beginning to achieve a level
of operational stability under the direction and guidance of our
new executive management team; and (iii) our managing
directors had demonstrated their ability to maintain our core
business under adverse conditions. As a result, management and
the Compensation Committee determined that the PSUs should be
structured with a view to promoting longer-term retention. The
Compensation Committee concluded that the greatest retentive
potential would be achieved if the PSUs were initially granted
as large, three-year cliff vesting awards rather than in smaller
increments with shorter vesting periods. To ensure that vesting
of the PSUs was sufficiently tied to Company performance, the
vesting of the PSUs was tied to achievement of performance
targets of both minimum growth in consolidated business unit
contribution (CBUC), defined as
(i) consolidated net revenue less (ii) professional
compensation, other costs of service and sales, general and
administrative expense (excluding stock compensation expense,
bonus expense, interest expense and infrastructure expense) and
total shareholder return. CBUC was selected as a performance
metric that we believe demonstrates the core growth of each of
our industry groups. In addition, total shareholder return was
selected as a best practice performance metric that
we believe is a measure important to our stockholders. In
determining the thresholds for these performance targets, the
Compensation Committee selected target levels that, in its
estimation, would require Company growth, yet also be reasonably
achievable to encourage and incent our employees to perform. For
additional information on the PSU Program, see Item 7,
Managements Discussion and Analysis of Financial
15
Condition and Results of OperationsPrincipal Business
Priorities for 2007 and Beyond to the
Form 10-K.
Restricted Stock Units (RSUs). We
will continue to grant RSUs for various purposes, including as
awards granted in connection with promotions and, when we have
become current in our SEC periodic reports, as part of
developing attractive employment offers for new recruits. The
vesting of these RSUs continues to be time-based, either with a
three-year cliff vesting provision or vesting ratably over four
years. By comparison, we expect that future RSUs granted to our
executive officers, if any, will include performance-based
vesting requirements. While we may incrementally increase the
relative proportion of variable compensation of our executive
officers through RSU grants, we currently expect that through
2009, the predominant source of equity awards held by our
executive officers will be derived from PSUs.
While we have maintained parity with our major competitors on
base cash compensation for our executive officers, relevant
market data indicates that we continue to lag behind our
competitors in the categories of cash incentive and long-term,
equity incentive compensation. We believe the issuance of PSU
awards help to balance the mix of fixed and variable
compensation of our executive officers, aligning us more closely
with the compensation structures offered by our competitors.
Principal
Components of Executive Officer Compensation
The principal elements of our executive officer compensation
program consist of base salary, annual incentive cash bonuses
and, at appropriate intervals, long-term incentive compensation
in the form of grants of stock-based awards. We also provide
deferred compensation plans, health and welfare (including
medical), retirement and other perquisites and benefits to our
executive officers generally available to our other employees.
In determining 2006 compensation, we did not engage an outside
consultant to assist the Compensation Committee. Compensation
determinations, however, were based in part upon compensation
information about executive officers at other systems
integration and consulting firms gathered by Watson Wyatt
Worldwide. In 2006 and 2007, we engaged Towers Perrin as our
compensation consultant to prepare compensation analyses of our
executive officers, provide market data information used to
determine the payment of 2006 bonuses and 2007 compensation and
provide guidance on our long-term compensation strategies,
including the structuring of our PSU program.
Fixed
Compensation
Base Salaries. Base salaries for our executive
officers are determined by evaluating the responsibilities of
the position held, the experience and performance of the
individual and market information comparing such salaries to the
competitive marketplace for executive talent, with emphasis on
our primary competitors in the management and technology
consulting industry. The Compensation Committee considers salary
adjustments based upon the recommendation of the Chief Executive
Officer (other than with respect to his salary), the
Compensation Committees evaluation of Company performance
and the performance of the executive officer, taking into
account any additional or new responsibilities assumed by the
individual executive officer in connection with promotions or
organizational changes. Salary represents a smaller percentage
of total compensation for our executive officers than for our
less senior managing directors, with a greater percentage of the
executive officers compensation being tied to performance
and our share price.
Determination of 2006 Base Salaries. The
employment agreements that we entered into with Mr. You,
Ms. Ethell and Mr. Lutz provided for their respective
base annual salaries during 2006, as reflected in the
Summary Compensation Table on page 23. Pursuant
to their employment agreements
16
(entered into in 2005), base salary for each of Mr. You and
Ms. Ethell was unchanged from 2005 to 2006.
Mr. McGeary and Mr. Roberts do not have specific
employment agreements with the Company.
For 2006, the Compensation Committee approved a base salary for
Mr. McGeary in the range of $650,000 to $750,000, and
delegated its authority to the Chief Executive Officer to make
the final determination of his base salary. Our Chief Executive
Officer determined that Mr. McGearys base salary for
2006 should be $650,000, based on Mr. McGearys active
involvement with the Board, his contributions as Chief Executive
Officer of the Company in 2005, which included the hiring of the
new executive management team and his participation in employee
roadshows and other communications intended to maintain employee
morale and address employee attrition.
In determining Mr. Roberts base salary for 2006, the
Compensation Committee considered various factors, such as
Mr. Roberts willingness to assume the role of Chief
Operating Officer in 2005, the time and effort he spent
assisting Mr. You in his new role as Chief Executive
Officer, his efforts in addressing morale within the Finance
team and helping to abate attrition and his contributions to our
Managing Director Compensation Committee.
Variable
Compensation
Annual Incentive Bonus. Generally, our
executive officers would be eligible to receive annual incentive
bonuses pursuant to our MD Compensation Plan, under the same
terms and conditions applicable to the Companys managing
directors. However, currently, the Compensation Committee
determines the target bonus amounts for Mr. You,
Ms. Ethell and Mr. Lutz generally in accordance with
the terms of their employment agreements. Any such bonuses paid
to our executive officers are paid in lieu of MD Compensation
Plan amounts. During 2006, we paid the annual bonuses set forth
in the Summary Compensation Table on page 23.
Bonuses earned for performance during one year are paid in the
following year.
Determination of 2006 Annual Incentive
Bonuses. In 2006, the Compensation Committee
determined to award Mr. You, Mr. McGeary and
Mr. Roberts cash bonuses equal to 7.8% of their base
salaries, which was the percentage applied to determine cash
bonuses for each managing director who achieved a meets
expectations rating for 2006 performance. Although
Mr. You was eligible to receive up to 100% of his bonus
salary as set forth in his employment agreement, Mr. You
and the Compensation Committee agreed that it was appropriate to
alter the basis for determining his bonus compensation for 2006.
In addition to the cash bonus, the Compensation Committee made
conditional RSU awards to Mr. You and Mr. McGeary that
would vest based on their achievement of certain performance
targets. The stipulated performance targets were not achieved
and these awards were not granted. However, for a discussion of
a smaller, subsequent award that was made to Mr. You, see
2006 Long-Term Incentive Compensation below.
For 2006, the Compensation Committee determined to award
Mr. Lutz a cash bonus equal to 100% of his base salary
(although he was paid a pro rated amount, since his employment
with the Company started in March 2006). With regards to
Ms. Ethell, the Compensation Committee initially determined
to award her a cash bonus equal to 60% of her base salary. In
August 2007, the Compensation Committee reconsidered
Ms. Ethells 2006 compensation in light of additional
information received regarding her 2006 performance and
determined to pay Ms. Ethell an additional $200,000 for
2006.
17
The Compensation Committees determinations of cash bonuses
awarded to our executive officers in 2006, as well as
determinations of 2007 compensation, were based in part on the
following considerations:
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Harry L. You
|
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|
outstanding feedback in the
360 degree peer review process
|
|
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|
successful motivation of the
Companys managing directors to drive Company performance
|
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|
progress made and left to be
achieved with respect to the Companys SEC filing status
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evaluations by Board members
|
Roderick C. McGeary
|
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|
|
time dedicated to Board of the
Directors and effectiveness in fulfilling Chairman role; liaison
role between management and the Board
|
|
|
|
|
management roles and
responsibilities, in addition to Board role
|
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|
executive sponsor of the
Companys transition to new financial reporting systems
|
|
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|
executive management role in
addressing contractual or engagement relationship issues
|
Judy A. Ethell
|
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|
development of Finance leadership
team
|
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|
responsibilities related to
development of financial reporting systems
|
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|
oversight of internal audit,
internal controls and Sarbanes-Oxley efforts
|
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|
progress achieved and remaining to
be achieved with respect to the filing of the Companys SEC
periodic reports
|
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expanded responsibilities as Chief
Financial Officer
|
Laurent C. Lutz
|
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|
restructuring of the Legal
department
|
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|
stewardship of key external
constituenciese.g., SEC, New York Stock Exchange, insurers
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creation and implementation of
compliance function
|
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success in managing and resolving
various disputes and lawsuits
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level of contribution in Board of
Directors and committee meetings
|
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implementation and oversight of
improved disclosure controls
|
Richard J. Roberts
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individual performance rating
among managing directors
|
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leadership role within the Public
Services business unit
|
Long-Term
Incentive Compensation
2006 Long-Term Incentive Compensation. In
addition to their annual cash incentive bonuses, Mr. You
and McGeary received grants of RSUs in connection with their
2006 performance. When the Compensation Committee determined
Mr. Yous 2006 base compensation, the Compensation
Committee also decided that to incent Mr. Yous
performance, it would make a conditional grant of RSUs to
Mr. You at the end of 2006 if Mr. You achieved certain
performance milestones. Mr. You was eligible to receive a
grant of 187,500 RSUs, to vest 25% on the grant date and 25%
annually over the next three years, subject to the achievement
of Company performance milestones for 2006. In early 2007, the
Compensation Committee determined that these milestones had not
been achieved, and as a result, these RSUs were not granted. The
Compensation Committee did acknowledge, however, that
Mr. You had made substantial contributions to the Company
in 2006 (as set forth above) and, as a result, the Compensation
Committee decided to make a smaller award of 72,992 RSUs to
Mr. You, as bonus compensation for his performance.
18
In evaluating Mr. McGearys compensation for 2006, the
Compensation Committee considered market data indicating that
while Mr. McGearys cash compensation was commensurate
for his position and responsibilities, his long-term incentive
compensation was lower than market. Based on the factors set
forth above, as well as an analysis of the mix of
Mr. McGearys fixed and variable compensation, the
Compensation Committee determined that it would increase
Mr. McGearys long-term compensation. As a result,
Mr. McGeary was granted 29,197 RSUs on February 12,
2007.
None of our executive officers received equity grants in 2006 as
part of their compensation for 2006. Several of our executive
officers, however, received equity grants for reasons other than
as part of their 2006 compensation. For an explanation of these
grants, please see the Summary Compensation Table on
page 23.
On April 20, 2005, pursuant to Regulation BTR, the
Company announced there would be a blackout period under the
Companys 401(k) Plan. Because of the blackout period, the
Company was unable to issue equity awards to its executive
officers prior to September 14, 2006. The Companys
401(k) Plan was subsequently amended to permanently prohibit
participant purchases and Company contributions of its common
stock under the 401(k) Plan and as a result of this action, the
blackout period under the 401(k) Plan ended, effective as of
September 14, 2006 and the Company was again able to make
equity-based awards to its executive officers.
To date, we have not instituted any equity ownership
requirements for our executive officers. We did not consider any
such policy in 2006 due to the Regulation BTR blackout mentioned
above, as well as the complexities and risks associated with
open-market purchases of our common stock by our executive
officers while we are not current in our SEC periodic filings.
We expect to consider an equity ownership policy once we have
become current in our SEC periodic filings.
2007
Compensation
Base Salary. In determining 2007 compensation,
management and the Compensation Committee agreed that the
executive officers would receive the standard 4% increase in
base compensation provided to all the Companys other
managing directors in 2007. The Compensation Committee approved
the following 2007 salaries for our executive officers:
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Base Salary
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Name
|
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for 2007
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Harry L. You
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$
|
780,000
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|
Roderick C. McGeary
|
|
|
676,000
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Judy A. Ethell
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|
520,000
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Laurent C. Lutz
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|
|
520,000
|
|
In January 2007, Mr. Harbach was appointed as our Chief
Operating Officer, replacing Mr. Roberts as an executive
officer of the Company. Mr. Harbachs base salary for
2007, set forth in his employment agreement with the Company, is
$700,000.
Bonus
Compensation.
On August 2, 2007, the Compensation Committee approved 2007
performance goals and target bonus compensation for
Messrs. You and McGeary. Mr. Yous target bonus
compensation was set at $780,000 (in accordance with the terms
of his employment agreement), and Mr. McGearys target
bonus compensation was set at $405,600. The percentage of each
target bonus amount to be earned will depend upon the
achievement of Company-based performance goals, which were
agreed to by each of Messrs. You and McGeary.
19
No target bonus compensation will be earned unless the Company
achieves both of the following milestones: (1) the Company
must be current in its SEC periodic reports at December 31,
2007; and (2) the Company must achieve a minimum of 90% of
the average of (a) an established gross profit target and
(b) an established earnings before interest and taxes
(EBIT) target.
If the two threshold milestones are achieved, then the
percentage of the bonus earned by each of Messrs. You and
McGeary will be 50% of such executive officers target
bonus compensation. In addition, for each percentage point by
which the average of the Companys actual gross profit and
EBIT exceeds the 90% minimum target amount, an additional 5% of
such executive officers target bonus compensation will be
earned.
In addition, if 100% of target bonus compensation is achieved,
Messrs. You and McGeary will be entitled to receive an
additional bonus based solely on the Companys EBIT
performance. For each $1 million by which the
Companys actual EBIT for 2007 exceeds 100% of the
established EBIT target, an additional 1% of target bonus
compensation will be earned. Any additional bonus earned may be
paid in cash, restricted stock units or such other form of
equity that the Compensation Committee determines is appropriate.
Bonus compensation for Ms. Ethell and Messrs. Harbach
and Lutz for 2007 is governed by the terms of each executive
officers employment agreement. For each of these executive
officers, target bonus compensation in any given year is equal
to 100% of the executive officers base compensation for
that year. Ms. Ethell and Messrs. Harbach and Lutz
have been informed that the performance milestones to be
determined under their employment agreements for 2007 bonus
compensation will be based upon and allocated between the
achievement of both Company-based and individual-based
performance milestones. The Company-based milestones are
identical to the milestones that apply to Messrs. You and
McGeary, as set forth above, and constitute 75% of the
individuals target bonus amount. Individual milestones
will be established between the individual and the Chief
Executive Officer, and will constitute 25% of the
individuals target bonus amount.
In setting the Company-based milestones described above, the
Compensation Committee had two objectives. The first objective
was to link bonus compensation to Company-based financial
targets prepared by management and communicated to the Board of
Directors as reasonably achievable for 2007. The second
objective was to incent its executive management team to drive
Company performance to achieve these Company-based targets.
PSU Awards. As part of our 2007 compensation
program, the Compensation Committee approved in March 2007 the
issuance of PSU awards to our executive officers. The
Compensation Committee determined the amount of each PSU award
granted to our executive officers by reviewing each executive
officers individual performance and responsibilities and
roles within the Company and by assessing and comparing the
executive officers total compensation, including
previously granted incentive awards and the balance of fixed and
variable compensation, with competitive market data provided by
Towers Perrin. PSU awards were granted to the following
individuals:
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Total Number
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of
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Name
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PSUs Granted (1)
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Harry L. You
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959,079
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Roderick C. McGeary
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255,754
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Judy A. Ethell
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306,905
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Laurent C. Lutz
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383,632
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(1)
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|
The PSUs will vest on
December 31, 2009 if two performance-based metrics are
achieved for the performance period beginning on
February 2, 2007 and ending on December 31, 2009. The
Company must
|
20
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|
|
first achieve a compounded average
annual growth target in consolidated business unit contribution.
Then, depending on the Companys total shareholder return
relative to those companies that comprise the S&P 500, the
percentage of PSU awards that vest will vary from 0% to 250%.
The Total Number of PSUs Granted assumes that 100%
of the PSU awards vest.
|
Mr. Harbach did not receive a PSU award since he received a
grant of 888,325 RSUs on January 8, 2007 as part of his
employment arrangement with the Company.
Other
Compensation
Deferred Compensation Plans. We have a
Deferred Compensation Plan and a Managing
Directors Deferred Compensation Plan. The two plans are
substantially identical and permit a select group of management
and highly compensated employees to accumulate additional income
for retirement and other personal financial goals by making
elective deferrals of compensation to which they will become
entitled to in the future. Our deferred compensation plans are
nonqualified and unfunded, and participants are unsecured
general creditors of the Company as to their accounts. Managing
directors, including our executive officers, and other highly
compensated executives selected by the plans
administrative committee are eligible to participate in the
plans. None of our executive officers have participated in our
deferred compensation plans.
Other Benefits. We offer a variety of health
and welfare and retirement programs to all eligible employees.
Our executive officers are generally eligible for the same
health and welfare programs on the same basis as our other
employees. Our retirement program for U.S. employees
consists of a 401(k) program, in which executive officers
participate on the same terms and conditions as other eligible
employees. We match the individual employees contribution
to the program of 25% of the first 6% of pre-tax eligible
compensation contributed to the plan, and, at our discretion,
may make additional discretionary contributions of up to 25% of
the first 6% of pre-tax eligible compensation contributed to the
plan. Employee contributions to the 401(k) program for our
executive officers, as well as other more highly compensated
employees, are limited by federal law. We have not made up for
the impact of these statutory limitations on named executives
through any type of nonqualified deferred compensation or other
program.
Perquisites and Other Compensation. In
general, we have historically avoided the use of perquisites and
other types of non-cash benefits for executive officers and
expect this policy to continue. Certain of our executive
officers have received perquisites such as reimbursements of
moving expenses and legal fees and
gross-up
payments in connection with the same as set forth in their
respective employment agreements.
Regulatory
Considerations
The Internal Revenue Code contains a provision that limits the
tax deductibility of certain compensation paid to our executive
officers to the extent it is not considered performance-based
compensation under the Internal Revenue Code. We have adopted
policies and practices to facilitate compliance with
Section 162(m) of the Internal Revenue Code. It is intended
that awards granted under the LTIP to such persons will qualify
as performance-based compensation within the meaning of
Section 162(m) and regulations under that section.
In making decisions about executive compensation, we also
consider the impact of other regulatory provisions, including
the provisions of Section 409A of the Internal Revenue Code
regarding non-qualified deferred compensation and the
change-in-control
provisions of Section 280G of the Internal Revenue Code. In
accordance with recent IRS guidance interpreting
Section 409A, the LTIP will be administered in a manner
that is in good faith compliance with Section 409A. The
Board intends that any awards under the LTIP satisfy the
applicable requirements of Section 409A.
21
Generally, Section 409A is inapplicable to incentive stock
options and restricted stock and also to nonqualified stock
options so long as the exercise price for the nonqualified
option may never be less than the fair market value of the
common stock on the date of grant.
In making decisions about executive compensation, we also
consider how various elements of compensation will impact our
financial results including the impact of SFAS 123(R) which
requires us to recognize the cost of employee services received
in exchange for awards of equity instruments based upon the
grant date fair value of those awards. SFAS 123(R) was a
consideration in adopting restricted stock units as a long-term
equity incentive.
REPORT
OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has
reviewed and discussed the Compensation Discussion and Analysis
section of this Proxy Statement with the Companys
management and, based on such review and discussion, recommended
to the Board of Directors that the Compensation Discussion and
Analysis be included in this Proxy Statement.
COMPENSATION COMMITTEE
Douglas C. Allred (Chair)
Betsy J. Bernard
Jill S. Kanin-Lovers*
J. Terry Strange**
*Member of the Compensation Committee
since May 10, 2007
**Member of the Compensation Committee
during 2006 and through June 18, 2007
22
Summary
of Cash and Certain Other Compensation
The Summary Compensation Table below sets forth information
concerning all compensation for services in all capacities to
the Company for 2006 of those persons who were the Chief
Executive Officer, Chief Financial Officer and the three other
most highly compensated executive officers of the Company for
2006 (named executive officers).
Summary
Compensation Table
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Non-Equity
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Incentive
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Stock
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Option
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Plan
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All Other
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Name and
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Salary
|
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Bonus
|
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Awards
|
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Awards
|
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Compensation
|
|
Compensation
|
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Total
|
Principal Position
|
|
Year
|
|
($) (1)
|
|
($) (1)
|
|
($) (2)
|
|
($) (2)
|
|
($)
|
|
($)
|
|
($)
|
|
Harry L. You (3)
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|
|
2006
|
|
|
|
750,000
|
|
|
|
58,500
|
|
|
|
938,900
|
|
|
|
2,519,300
|
|
|
|
|
|
|
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331,828
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|
|
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4,598,528
|
|
Chief Executive Officer
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Roderick C. McGeary
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|
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2006
|
|
|
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662,640
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50,712
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|
|
|
250,000
|
|
|
|
263,732
|
|
|
|
|
|
|
|
|
|
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1,227,084
|
|
Chairman of the Board
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|
Judy A. Ethell (4)
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|
|
2006
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|
|
|
500,000
|
|
|
|
500,000
|
|
|
|
690,700
|
|
|
|
1,131,000
|
|
|
|
|
|
|
|
3,797
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|
|
|
2,825,497
|
|
Chief Financial Officer
|
|
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|
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Laurent C. Lutz (5)
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|
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2006
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|
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411,059
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|
|
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1,311,059
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|
|
|
|
|
|
|
|
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525,000
|
|
|
|
78,431
|
|
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|
2,325,549
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|
General Counsel and Secretary
|
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Richard J. Roberts (6)
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2006
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650,000
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50,700
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|
|
|
855,400
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|
|
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332,160
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|
|
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3,977
|
|
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1,892,237
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Chief Operating Officer
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(1)
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|
Unless otherwise noted,
Bonus amounts consist of performance-based cash
bonuses accrued in the fiscal year for which the bonus has been
earned. We have entered into employment agreements with
Mr. You, Ms. Ethell and Mr. Lutz that set forth
the terms of their compensation.
|
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(2)
|
|
Unless otherwise noted, stock
awards, which consist of RSUs, and stock options were granted in
accordance with our LTIP. If dividends are declared on our
common stock while any RSUs are outstanding, the number of
shares to be granted upon settlement of the RSUs will be
adjusted to reflect the payment of such dividends. Amounts
reflected in the table as 2006 compensation reflect the dollar
amount recognized for financial statement reporting purposes in
2006 in accordance with SFAS 123(R) for equity award
expense. For additional information about 2006 awards of RSUs,
stock options, and other non-equity incentive plan compensation,
see Grants of Plan-Based Awards.
|
|
(3)
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|
Mr. Yous All Other
Compensation includes reimbursements of $259,568 for costs
related to the sale of his residences, $17,117 in commuting
expenses, $51,532 in tax equalization payments with respect to
the reimbursement of moving expenses and certain state taxes
paid by Mr. You, $2,361 in personal travel expenses and
$1,250 in Company matching contributions under our 401(k) Plan.
|
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(4)
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|
On October 3, 2006, we entered
into a letter agreement with Ms. Ethell relating to the
rescission and replacement of certain grants of nonqualified
stock options and RSUs made to her in July 2005 in connection
with her employment with the Company. On July 1, 2005,
Ms. Ethell received a grant for 292,000 RSUs and a stock
option grant to purchase 600,000 shares of common stock
(collectively, the 2005 Awards). The 2005 Awards
were intended to be of effect only after the Company had become
current in its SEC periodic filings; however, we reconsidered
the rationale behind this approach and as a result, we canceled
the 2005 Awards and made subsequent replacement grants to
Ms. Ethell, effective as of September 19, 2006 (the
2006 Awards). The 2006 Awards consist of:
(a) stock options to purchase up to 600,000 shares of
our common stock, of which 25% vested upon grant, and, subject
to achievement of certain performance criteria, 25% will vest on
July 1 in each of 2007 through 2009, (b) 292,000 RSUs, of
which 204,400 vested on date of grant, and, subject, to
achievement of certain performance criteria, an additional
29,200 will vest on July 1 in each of 2007 through 2009, and
(c) 94,000 RSUs, of which 25% vested on date of grant, and
subject to achievement of certain performance criteria, 25% will
vest on July 1 in each of 2007 through 2009. With respect to
Ms. Ethells 2006 bonus compensation, the Compensation
Committee initially determined to award her a cash bonus equal
to 60% of her base salary. In August 2007, the Compensation
Committee reconsidered Ms. Ethells 2006 compensation
in light of additional information received regarding her 2006
performance and determined to pay Ms. Ethell an additional
$200,000 for 2006.
|
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(5)
|
|
Mr. Lutzs annual base
salary for 2006 was $500,000. The amount reported as
Mr. Lutzs salary is the amount actually paid in 2006.
Mr. Lutzs 2006 bonus compensation consists of a
$900,000 signing bonus and $411,059 of bonus compensation (pro
rated, based on an annual performance bonus of $500,000).
Mr. Lutzs 2006 non-equity incentive plan compensation
is more fully described under Grants of Plan-Based
Awards. Mr. Lutzs All Other
Compensation consists of $41,587 in legal fees paid on
Mr. Lutzs behalf in connection with the negotiation
of his employment arrangements with the Company, reimbursement
of $36,844 in tax equalization payments with respect to the
reimbursement of legal fees and certain state taxes paid by
Mr. Lutz.
|
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(6)
|
|
Effective as of January 8,
2007, Mr. Roberts no longer serves as our Chief Operating
Officer in connection with the appointment of F. Edwin Harbach
as our President and Chief Operating Officer.
|
23
Grants of
Plan-Based Awards
The following table provides information relating to equity
awards made in 2006 to our named executive officers. All of the
following awards that relate to our common stock were made
pursuant to our LTIP.
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Grant
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Exercise
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Date Fair
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Price of
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Value of
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Estimated Future Payouts Under
|
|
|
Estimated Future Payouts Under
|
|
|
Option
|
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Stock and
|
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|
Grant
|
|
|
Non-Equity Incentive Plan Awards
|
|
|
Equity Incentive Plan Awards
|
|
|
Awards
|
|
|
Option
|
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Name
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Date
|
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
Threshold (#)
|
|
|
Target (#)
|
|
|
Maximum (#)
|
|
|
($/Sh)
|
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Awards
|
|
|
Harry L. You
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|
Roderick C. McGeary (1)
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|
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9/25/2006
|
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29,411
|
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$
|
249,994
|
|
Judy A. Ethell (2)
|
|
|
9/19/2006
|
|
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|
|
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|
|
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|
600,000
|
|
|
$
|
8.70
|
|
|
|
2,883,600
|
|
|
|
|
9/19/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
292,000
|
|
|
|
|
|
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|
2,540,400
|
|
|
|
|
9/19/2006
|
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94,000
|
|
|
|
|
|
|
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817,800
|
|
Laurent C. Lutz (3)
|
|
|
2/27/2006
|
|
|
|
|
|
|
|
|
|
|
$
|
1,750,000
|
(3)
|
|
|
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|
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|
|
(3)
|
|
|
|
|
|
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|
|
Richard J. Roberts (4)
|
|
|
9/25/2006
|
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|
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77,343
|
|
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|
|
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|
657,416
|
|
|
|
|
9/25/2006
|
|
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|
|
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
93,177
|
|
|
|
|
|
|
|
792,005
|
|
|
|
|
(1)
|
|
Mr. McGeary was granted 29,411
RSUs that vest 25% on January 1 in each of 2007 through 2010.
|
|
(2)
|
|
Ms. Ethell was granted the
following awards: (a) stock options to purchase up to
600,000 shares of our common stock, of which 25% vested
upon grant, and, subject to achievement of certain performance
criteria, 25% will vest on July 1 in each of 2007 through 2009,
(b) 292,000 RSUs, of which 204,400 vested on date of grant,
and, subject, to achievement of certain performance criteria, an
additional 29,200 will vest on July 1 in each of 2007 through
2009, and (c) 94,000 RSUs, of which 25% vested on date of
grant, and subject to achievement of certain performance
criteria, 25% will vest on July 1 in each of 2007 through 2009.
These grants were made pursuant to a letter agreement between
the Company and Ms. Ethell, effective as of October 3,
2006, and replaced grants made to Ms. Ethell in 2005 in
connection with her employment with the Company. The 2005 Awards
were intended to be modified to be of effect only after the
Company had become current on its SEC periodic filings, however,
the rationale behind this approach was reconsidered by the
Company. As a result, the 2005 Awards were canceled and the
Compensation Committee approved these subsequent grants to
Ms. Ethell, effective as of September 19, 2006.
|
|
(3)
|
|
Mr. Lutz was granted the
following: on the earlier of (i) the date an effective
registration statement on
Form S-8
is filed or is on file and (ii) the date, if any, we cease
to be a reporting company under the Exchange Act, a grant of
RSUs having an aggregate value of $1.75 million; provided,
however, if RSUs have not yet been granted, subject to certain
conditions, Mr. Lutz will receive cash payments (which will
reduce the value of any RSUs to be granted) of $525,000 on
July 1, 2006, $525,000 on June 30, 2007 and $175,000
on December 31 in each of 2007 through 2010.
|
|
(4)
|
|
Mr. Roberts was granted the
following awards: (a) 77,343 RSUs, all of which vested on
September 25, 2006, and (b) 93,177 RSUs that vest 25%
on January 1 in each of 2007 through 2010.
|
24
Outstanding
Equity Awards at Fiscal Year-End (December 31,
2006)
The following table provides information regarding the value of
all unexercised options and unvested restricted stock units
previously awarded to our named executives as of
December 31, 2006.
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Option Awards
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Stock Awards
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Equity
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Incentive
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Plan Awards:
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Equity
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Equity
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Market
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Incentive
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Incentive
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or Payout
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Plan Awards:
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Market
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Plan Awards:
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Value of
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Number of
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Number of
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Number of
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Number of
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Value of
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Number of
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Unearned
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Securities
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Securities
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Securities
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Shares or
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Shares or
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Unearned Shares,
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Shares,
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Underlying
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Underlying
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Underlying
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Units of
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Units of
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Units or
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Units or
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Unexercised
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Unexercised
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Unexercised
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Option
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Option
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Stock That
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Stock That
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Other Rights
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Other Rights
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Options (#)
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Options (#)
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Unearned
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Exercise
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Expiration
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Have not
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Have not
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That Have
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That Have
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Name
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Exercisable
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Unexercisable
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Options (#)
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Price ($)
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Date
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Vested (#)
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Vested ($)
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not Vested (#)
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not Vested (#)
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Harry L. You
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500,000
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(1)
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1,500,000
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(1)
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$
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7.55
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3/18/2015
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750,000
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(2)
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$
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5,902,500
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Roderick C. McGeary
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7,928
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55.50
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6/30/2010
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29,411
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(3)
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231,465
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15,000
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16.38
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4/24/2011
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450,000
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9.00
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11/19/2014
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Judy A. Ethell
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150,000
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(4)
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450,000
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(4)
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8.70
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9/19/2016
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87,600
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(4)
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689,412
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70,500
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(4)
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554,835
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Laurent C. Lutz (5)
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Richard J. Roberts
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11,892
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18.00
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7/31/2010
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93,177
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(6)
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733,303
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53,205
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18.00
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2/8/2011
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50,000
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13.30
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7/24/2011
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11,611
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11.01
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9/3/2012
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70,000
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10.01
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9/3/2012
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125,000
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8.19
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8/28/2013
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40,000
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(7)
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20,000
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(7)
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9.15
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10/4/2014
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(1)
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Mr. You was granted stock
options to purchase up to 2,000,000 shares of our common
stock, which options vest 25% on March 18 in each of 2006
through 2009.
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(2)
|
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Mr. You was granted 750,000
RSUs, of which 62,500 RSUs vested on March 21, 2007,
125,000 RSUs vest on March 21, 2008, 187,500 RSUs vest on
March 21 in each of 2009 and 2010, 125,000 RSUs vest on
March 21, 2011 and 62,500 RSUs vest on March 21, 2012.
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(3)
|
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Mr. McGeary was granted 29,411
RSUs that vest 25% on January 1 in each of 2007 through 2010.
|
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(4)
|
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Ms. Ethell was granted stock
options to purchase up to 600,000 shares of our common
stock, of which 25% vested upon grant (September 19, 2006),
and, subject to achievement of certain performance criteria, 25%
will vest on July 1 in each of 2007 through 2009. In addition,
Ms. Ethell was granted (i) 292,000 RSUs, of which
204,400 vested on date of grant (September 19, 2006), and,
subject to achievement of certain performance criteria, an
additional 29,200 will vest on July 1 in each of 2007 through
2009; and (ii) 94,000 RSUs, of which 25% vested on date of
grant (September 19, 2006), and subject to achievement of
certain performance criteria, 25% will vest on July 1 in each of
2007 through 2009. These grants were made in connection with the
rescission and replacement of the 2005 Awards. For additional
information, see footnote 4 of the Summary Compensation
Table on page 23.
|
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(5)
|
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From April 20, 2005 through
September 14, 2006, pursuant to Regulation BTR, we
announced there would be a blackout period under our 401(k)
plan. Due to existence of the blackout period, we were unable to
make issuances of equity awards to its executive officers. In
connection with his employment, Mr. Lutz was granted the
following: on the earlier of (i) the date an effective
registration statement on
Form S-8
is filed or is on file and (ii) the date, if any, we cease
to be a reporting company under the Exchange Act, a grant of
RSUs having an aggregate value of $1.75 million; provided,
however, if RSUs have not yet been granted, subject to certain
conditions, Mr. Lutz will receive cash payments (which will
reduce the value of any RSUs to be granted) of $525,000 on
July 1, 2006, $525,000 on June 30, 2007 and $175,000
on December 31 in each of 2007 through 2010.
|
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(6)
|
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Mr. Roberts was granted 93,177
RSUs that vest 25% on January 1 in each of 2007 through 2010.
|
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(7)
|
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Mr. Roberts was granted stock
options to purchase up to 60,000 shares of our common
stock. The stock options vest as follows: 1/3 on October 4 in
each of 2005, 2006, and 2007.
|
25
Option
Exercises and Stock Vested
The following table provides information with respect to
restricted stock units and restricted stock that vested during
2006 with respect to our named executive officers. No options
were exercised in 2006.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
Name
|
|
Exercise (#)
|
|
|
Exercise ($)
|
|
|
Vesting (#)
|
|
|
Vesting ($)
|
|
|
Harry L. You
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roderick C. McGeary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judy A. Ethell
|
|
|
|
|
|
|
|
|
|
|
227,900
|
|
|
$
|
1,982,730
|
|
Laurent C. Lutz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard J. Roberts
|
|
|
|
|
|
|
|
|
|
|
149,782
|
|
|
|
1,226,787
|
|
Pension
Benefits
Our only retirement plan for our
U.S.-based
associates, including our named executive officers, is our
401(k) plan. We do not have a pension plan in which our named
executive officers are eligible to participate.
Nonqualified
Deferred Compensation Plans
We have a Deferred Compensation Plan and a
Managing Directors Deferred Compensation Plan, which
are designed to permit a select group of management and highly
compensated employees who contribute materially to our continued
growth, development and future business success to accumulate
additional income for retirement and other personal financial
goals through plans that enable the participants to make
elective deferrals of compensation to which they will become
entitled to in the future. Our deferred compensation plans are
nonqualified and unfunded, and participants are unsecured
general creditors of the Company as to their accounts. Our
managing directors, including our Named Executive Officers, and
other highly compensated executives selected by the plans
administrative committee are eligible to participate in the
plans. To date, none of our Named Executive Officers have
participated in any of our deferred compensation plans.
Employment
Agreements
Managing Director Agreements. We have entered
into a Managing Director Agreement (a Managing Director
Agreement) with each of our approximately 650 managing
directors, including our named executive officers. Pursuant to
the Managing Director Agreement, we provide up to six
months pay for certain terminations of employment by us.
In addition, the Managing Director Agreement contains
non-competition and non-solicitation provisions for a period of
up to two years after such executives termination of
employment or resignation.
Effective as of January 31, 2005, we and certain executive
officers of the Company, including Richard J. Roberts, entered
into an amendment to their Managing Director Agreements (the
Amendment). Each Amendment provides that if within
18 months after the date of the Amendment we hire a new
Chief Executive Officer other than Roderick C. McGeary and
terminate, or constructively terminate, such Officers
employment under certain circumstances (the Triggering
Event), we will pay to such Officer a lump sum cash amount
equal to the sum of such Officers current annual salary,
earned and unused personal days and target incentive
compensation pursuant to the terms of the incentive compensation
plan then in effect. In addition, any unvested stock options
that would have vested from the date of such Triggering Event
through the next following anniversary
26
date of the grant of such options will automatically vest. As of
July 31, 2006, each of the Amendments had expired.
Employment Agreement for Harry L.
You. Effective March 21, 2005, we entered
into the following arrangements with Harry L. You, our Chief
Executive Officer:
|
|
|
|
|
Compensation. Information regarding
Mr. Yous annual base and bonus compensation can be
found in the Summary Compensation Table above.
Information regarding equity awards issued to Mr. You
pursuant to his employment arrangements are included under
Outstanding Equity Awards at Fiscal Year-End
(December 31, 2006), above.
|
|
|
|
Benefits/Long-Term Incentives. Mr. You is
entitled to participate in all employee benefit (including
long-term incentives), fringe and perquisite plans, practices,
programs, policies and arrangements generally provided to senior
executives of the Company at a level commensurate with his
position.
|
|
|
|
Relocation. Mr. You was reimbursed for
reasonable relocation and transitional housing and travel
expenses, including a tax
gross-up
payment to cover all applicable taxes, and the Company provided
assistance in connection with the sale of his residences.
|
|
|
|
Indemnification. We agreed to indemnify
Mr. You with respect to his activities on behalf of the
Company, for any failure of the Company to comply with
Section 409A of the Internal Revenue Code of 1986, as
amended, and for certain other matters.
|
|
|
|
Termination Payments. Mr. You is entitled
to certain termination payments under his employment agreement,
which are described below under Potential Payments
upon Termination or Change of Control.
|
Employment Agreement for Judy A.
Ethell. Effective as of July 1, 2005, we
entered into the following arrangements with Judy A. Ethell, our
Chief Financial OfficerFinance:
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|
|
Compensation. Information regarding
Ms. Ethells annual base and bonus compensation can be
found in the Summary Compensation Table above.
Information regarding equity awards issued to Ms. Ethell
pursuant to her employment arrangements are included under
Outstanding Equity Awards at Fiscal Year-End
(December 31, 2006), above.
|
|
|
|
Benefits/Long-Term Incentives. Ms. Ethell
is entitled to participate in all employee benefit (including
long-term incentives), fringe and perquisite plans, practices,
programs, policies and arrangements generally provided to senior
executives of the Company at a level commensurate with her
position.
|
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|
Relocation. Ms. Ethell was reimbursed for
reasonable relocation and transitional housing and travel
expenses, including a tax
gross-up
payment to cover all applicable taxes, and the Company provided
assistance in connection with the sale of her principal
residence.
|
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|
|
Indemnification. We agreed to indemnify
Ms. Ethell with respect to her activities on behalf of the
Company, for any failure of the Company to comply with
Section 409A of the Internal Revenue Code of 1986, as
amended, and for certain other matters.
|
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|
|
Termination Payments. Ms. Ethell is
entitled to certain termination payments under her employment
agreement, which are described below under Potential
Payments upon Termination or Change of Control.
|
Employment Agreement for Laurent C.
Lutz. Effective as of October 17, 2006, the
Board determined that Laurent C. Lutz, our General Counsel and
Secretary, was an executive officer of the
27
Company. Effective as of February 27, 2006, we had entered
into the following arrangements with Mr. Lutz:
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|
|
|
Compensation. Information regarding
Mr. Lutzs annual base and bonus compensation can be
found in the Summary Compensation Table above.
Information regarding non-equity incentive plan compensation
awarded to Mr. Lutz are included under Grants of
Plan-Based Awards, above.
|
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|
|
Benefits/Long-Term Incentives. Mr. Lutz
is entitled to participate in all employee benefit (including
long-term incentives), fringe and perquisite plans, practices,
programs, policies and arrangements generally provided to senior
executives of the Company at a level commensurate with his
position.
|
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|
|
Legal Fees. Mr. Lutz was reimbursed for
reasonable legal fees in connection with the negotiation and
drafting of his employment arrangements.
|
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|
|
Indemnification. We agreed to indemnify
Mr. Lutz in the event that any activity he undertakes on
behalf of the Company is challenged as being in violation of any
agreement he may have with a prior employer and for certain
other matters. In addition, Mr. Lutz is entitled to receive
a gross-up
for any payment to him under any of his agreements that would be
subject to a surtax imposed by Section 409A of the Internal
Revenue Code or for any interest or penalties thereon.
|
|
|
|
Termination Payments. Mr. Lutz is
entitled to certain termination payments under his employment
agreement, which are described below under Potential
Payments upon Termination or Change of Control.
|
Potential
Payments upon Termination or Change of Control
Severance Payments under Managing Director
Agreements. Under our Managing Director
Agreements, we provide up to six months pay for
terminations of employment by us other than for
cause, as defined in the agreements. In addition,
these agreements contain non-competition and non-solicitation
provisions for a period of up to two years after such
executives termination of employment or resignation.
Severance Payments under Employment
Agreements. Under our employment agreements with
Mr. You, Ms. Ethell and Mr. Lutz, we have that
upon termination of the individuals employment by us
without cause or by the individual for good
reason, (as defined in the agreements), within
30 days after our receipt of a fully executed release, we
will make a severance payment to the individual.
Termination Payments under Special Termination
Agreements. We have entered into special
termination agreements (each, a Special Termination
Agreement) with certain key personnel, including each of
our Named Executive Officers (with the exception of
Mr. McGeary), as set forth below. The purpose of the
Special Termination Agreement is to ensure that these executives
are properly protected in the event of a change in control of
the Company, thereby enhancing our ability to hire and retain
them. The terms of the Special Termination Agreements vary up to
a maximum of three years, which terms automatically renew for
additional one-year terms unless we give notice that the
agreement will not be renewed, or, if later, two years after a
change in control. The protective provisions of the Special
Termination Agreement become operative only upon a change in
control, as defined in the agreement.
All Special Termination Agreements signed on or after
August 1, 2006 specify that if, after a change in control
and during the term of the agreement, we terminate the
executives employment other than for cause (as
defined in the agreements) or the executive terminates his
employment
28
because his salary was reduced by at least 20%, the executive is
entitled to certain benefits. Generally, Special Termination
Agreements signed before August 1, 2006 specify that if,
after a change of control and during the term of the agreement,
we terminate the executives employment other than for
cause or if the executive terminates his employment
for specified reasons (including if his responsibilities have
been materially reduced or adversely modified or his
compensation has been reduced), the executive is entitled to
certain benefits. Under the Special Termination Agreements,
these benefits generally include the payment of approximately
one years compensation, based on salary plus bonus as
specified in the agreement, continued coverage under our welfare
benefit plans (e.g., medical, life insurance and disability
insurance) for up to two years at no cost, and outplacement
counseling.
Potential
Payments
Upon Termination of Employment or
Change-in-Control
as of December 31, 2006*
The table below sets forth the potential payments that generally
would have been payable to each of our named executive officers
as of December 31, 2006 if:
|
|
|
|
|
the named executive officers employment were terminated by
us without Cause (as defined in such named executive
officers employment agreement) or by the named executive
officer for Good Reason (as defined in such named
executive officers employment agreement); and
|
|
|
|
the named executive officers employment (a) were
terminated by us within two years after a Change in Control (as
defined in such named executive officers Special
Termination Agreement) for any reason other than
Cause (as defined in such named executive
officers Special Termination Agreement) or if the
executive became permanently disabled or was unable to work for
a period of 180 consecutive days, (b) (i) were
involuntarily terminated by us (other than for Cause) or
(ii) were terminated by the named executive officer
following a reduction or adverse change in the named executive
officers duties or compensation, in each case within six
months prior to a Change in Control and in anticipation of a
Change in Control or (c) were terminated by the named
executive officer during the term of the Special Termination
Agreement but after a Change in Control if one of the events
specified in such named executive officers Special
Termination Agreement has occurred.
|
|
|
|
|
|
|
|
|
|
|
|
Termination of
|
|
|
Change in
|
|
Name
|
|
Employment (1) (2)
|
|
|
Control (3)
|
|
|
Harry L. You
|
|
$
|
3,724,531
|
(4)
|
|
$
|
29,496,496
|
(5)
|
Roderick C. McGeary
|
|
|
162,500
|
(6)
|
|
|
|
|
Judy A. Ethell
|
|
|
1,488,731
|
(7)
|
|
|
11,635,285
|
(8)
|
Laurent C. Lutz
|
|
|
4,633,709
|
(9)
|
|
|
13,221,320
|
(10)
|
Richard J. Roberts
|
|
|
325,000
|
(11)
|
|
|
4,178,077
|
(12)
|
|
|
|
*
|
|
Based on current information
available to the Company, this table has been updated from the
information contained in the
Form 10-K.
|
|
(1)
|
|
Amounts set forth in the table for
Mr. You, Ms. Ethell and Mr. Lutz reflect the
severance payments payable under their respective employment
agreements. If Mr. You, Ms. Ethell or
Mr. Lutzs employment is not terminated (i) by us
without Cause (as defined in such named executive
officers employment agreement) or (ii) by the named
executive officer for Good Reason (as defined in
such named executive officers employment agreement), then
such named executive officer may still be eligible to receive
payments representing earned but unpaid salary and bonuses
amounts, any unpaid accrued personal days or unreimbursed
business expenses and any other amounts due under the
Companys benefit plans. If Mr. You,
|
29
|
|
|
|
|
Ms. Ethell or Mr. Lutz
does not qualify for payment under any of the provisions of
their respective employment agreements, they may be eligible to
receive severance payments under their respective Managing
Director Agreements if their employment is terminated for Cause
(as defined in the respective Managing Director Agreement) or
for no reason. Such payments would generally consist of all
earned and unpaid base salary plus a payment equal to three
months pay at such named executive officers current
base salary. Amounts payable under the Managing Director
Agreements for Mr. You, Ms. Ethell and Mr. Lutz
as of December 31, 2006 would have been $187,500, $125,000
and $125,000, respectively. Amounts set forth in the table for
Messrs. McGeary and Roberts reflect the severance payments
payable under their respective Managing Director Agreements.
|
|
(2)
|
|
The values of accelerated stock
options and RSUs assume a $7.87 per share price for our common
stock (the closing price on December 29, 2006).
|
|
(3)
|
|
Amounts set forth in the table for
Mr. You, Ms. Ethell, Mr. Lutz and
Mr. Roberts reflect the termination payments payable
governed under their respective Special Termination Agreements
upon a Change of Control (as defined in such agreements).
Mr. McGeary is not a party to a Special Termination
Agreement. Even if Mr. You, Ms. Ethell or
Mr. Lutz is not eligible to receive the payments set forth
in the table above upon a change in control (as defined in the
Special Termination Agreements), all unvested options and
restricted stock held will immediately vest upon the occurrence
of a Change of Control (as defined under the LTIP) pursuant to
such named executive officers employment agreement. In
addition, the Change of Control provisions under the LTIP
generally provide that any unvested portion of stock option
grants and RSUs will vest upon the occurrence of a Change of
Control (as defined in the LTIP). See Change of Control
Provisions Under the LTIP below. Furthermore, if such
named executive officer is not eligible to receive the payments
and other benefits specified in his or her Special Termination
Agreement upon a change in control, such named executive officer
may be eligible to receive the payments payable upon termination
of employment under such individuals employment agreement,
as specified in this table and the related footnotes.
|
|
(4)
|
|
Under Mr. Yous
employment agreement, Mr. You would have been entitled to
the following: (i) payment equal to two times the sum of
his (A) annual base salary ($750,000) and (B) target
bonus ($750,000), (ii) payment of accrued and unused
personal days ($51,469), (iii) payment of premiums under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended for a period of 18 months after termination
($21,187), and (iv) the vesting of an additional 500,000
options and 62,500 RSUs that would have vested within the first
anniversary of the termination date ($651,875).
|
|
(5)
|
|
Under Mr. Yous Special
Termination Agreement, Mr. You would have been entitled to
the following: (i) payment equal to 299% of the sum of his
(A) annual base salary in 2006 ($750,000) and
(B) target bonus ($750,000), (ii) for a period of
2 years after his termination, continuation of medical,
dental, life insurance, disability, accidental death and
dismemberment benefits and other welfare benefits, subject to
certain exceptions ($25,088), (iii) if Mr. Yous
employment is involuntarily terminated by us (other than for
Cause) or there is a reduction or adverse change in
Mr. Yous duties or compensation and Mr. You
terminates his employment within six months prior to a Change of
Control and in anticipation of a Change of Control, the vesting
of all unvested options and RSUs (an additional 1,500,000
options and 750,000 RSUs valued at $6,382,500),
(iv) reimbursement for outplacement services,
(v) payment of any earned but unpaid salary, bonus or
incentive compensation and (vi) an additional tax
gross-up
payment of $18,603,908.
|
|
(6)
|
|
Under Mr. McGearys
Managing Director Agreement, Mr. McGeary would have been
entitled to payment equal to three months of his base salary
($650,000).
|
|
(7)
|
|
Under Ms. Ethells
employment agreement, Ms. Ethell would have been entitled
to (i) payment equal to the sum of her (A) annual base
salary ($500,000) and (B) target bonus ($500,000),
(ii) payment of accrued and unused personal days ($59,389),
(iii) payment of premiums under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended for a period of
18 months after termination ($14,593), and (iv) the
vesting of an additional 150,000 options and 52,700 RSUs that
would have vested within the first anniversary of the
termination date ($414,749).
|
30
|
|
|
(8)
|
|
Under Ms. Ethells
Special Termination Agreement, Ms. Ethell would have been
entitled to the following: (i) payment equal to 299% of the
sum of her (A) annual base salary in 2006 ($500,000) and
(B) target bonus for 2006 ($500,000), (ii) for a
period of 2 years after her termination, continuation of
medical, dental, life insurance, disability, accidental death
and dismemberment benefits and other welfare benefits, subject
to certain exceptions ($15,900), (iii) if
Ms. Ethells employment is involuntarily terminated by
us (other than for Cause) or there is a reduction or adverse
change in Ms. Ethells duties or compensation and
Ms. Ethell terminates her employment within six months
prior to a Change of Control and in anticipation of a Change of
Control, the vesting of all unvested options and RSUs (an
additional 450,000 options and 158,100 RSUs valued at
$1,244,247), (iv) reimbursement for outplacement services,
(v) payment of any earned but unpaid salary, bonus or
incentive compensation and (vi) an additional tax
gross-up
payment of $7,385,138.
|
|
(9)
|
|
Under Mr. Lutzs
employment agreement, Mr. Lutz would have been entitled to
(i) payment equal to the sum of his (A) annual base
salary ($500,000) (or, in the event of termination by Good
Reason (as defined in his employment agreement), 1
1/2
times annual base salary) and (B) target bonus ($500,000),
(ii) payment of accrued and unused personal days ($26,375),
(iii) payment of premiums under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended for a period of
18 months after termination ($21,187), (iv) vesting of
the portion of his RSUs (or corresponding cash award payment)
scheduled to vest on the next vesting date following the
termination date (or, in the case of a cash award payment
related to a termination occurring prior to July 1, 2007,
the next 2 vesting dates) ($700,000) and (v) an additional
tax gross-up
payment of $2,886,147.
|
|
(10)
|
|
Under Mr. Lutzs Special
Termination Agreement, Mr. Lutz would have been entitled to
the following: (i) payment equal to 299% of the sum of his
(A) annual base salary in 2006 ($500,000) and
(B) target bonus for 2006 ($500,000), (ii) for a
period of 2 years after his termination, continuation of
medical, dental, life insurance, disability, accidental death
and dismemberment benefits and other welfare benefits, subject
to certain exceptions ($21,303), (iii) if
Mr. Lutzs employment is involuntarily terminated by
us (other than for Cause) or there is a reduction or adverse
change in Mr. Lutzs duties or compensation and
Mr. Lutz terminates his employment within six months prior
to a Change of Control and in anticipation of a Change of
Control, the vesting of all unvested RSUs (or corresponding cash
award payment, in the amount of $1,225,000),
(iv) reimbursement for outplacement services,
(v) payment of any earned but unpaid salary, bonus or
incentive compensation and (vi) an additional tax
gross-up
payment of $8,235,017. In addition, pursuant to his employment
agreement, Mr. Lutz would have been entitled to
acceleration of his unpaid retention bonus ($750,000) upon a
Change in Control (as defined in his Special Termination
Agreement).
|
|
(11)
|
|
Under Mr. Roberts
Managing Director Agreement, Mr. Roberts would have been
entitled to payment equal to six months of his base salary
($650,000).
|
|
(12)
|
|
Under Mr. Roberts
Special Termination Agreement, Mr. Roberts would have been
entitled to the following: (i) payment equal to the sum of
his (A) annual base salary in 2006 ($650,000) and
(B) potential bonus or incentive compensation (20% of base
salary or $130,000), (ii) for a period of 2 years
after his termination, continuation of medical, dental, life
insurance, disability, accidental death and dismemberment
benefits and other welfare benefits, subject to certain
exceptions ($17,070), (iii) if Mr. Roberts
employment is involuntarily terminated by us (other than for
Cause) or (ii) there is a reduction or adverse change in
Mr. Roberts duties or compensation and
Mr. Roberts terminates his employment within six months
prior to a Change of Control and in anticipation of a Change of
Control, the vesting of all unvested options and RSUs (an
additional 20,000 options and 93,177 RSUs valued at $733,303),
(iv) reimbursement for outplacement services,
(v) payment of any earned but unpaid salary, bonus or
incentive compensation and (vi) an additional
gross-up
payment of $2,647,704.
|
Change of Control Provisions Under the
LTIP. In addition to the provisions in the
agreements referred to above, in the event of certain
Changes of Control of the Company, any non-vested
portion of stock option grants and RSUs, and other awards made
under the LTIP will generally vest, and any contractual transfer
restrictions on restricted stock or other shares issued upon the
settlement of RSUs will be released except under the PSU awards.
If such a Change of Control were to occur, all stock options not
yet exercisable, including those of our Named Executive Officers
set forth in the table
31
captioned Outstanding Equity Awards at Fiscal Year-End
(December 31, 2006) would vest. In addition, all cash
retention awards, including those granted to Mr. Lutz and
set forth in the table captioned Grants of Plan-Based
Awards would accelerate. Upon a change of control, for PSU
awards, the growth target in consolidated business unit
contribution will be waived and the acquiring company may
(i) substitute the PSUs for the right to receive the
acquiring companys stock with the same vesting and
settlement schedule, (ii) accelerate and settle in cash the
ratable number of PSUs that would vest through the date of
change in control and replace the remaining PSUs with a cash
incentive bonus program that provides for an opportunity to earn
up to the value of the remaining PSUs, or (iii) if neither
of the above options is selected, then the PSUs will vest and
settle and be payable within 10 days of the change of
control.
Managing
Director Compensation Plan
In January 2006, the Compensation Committee of the Board
approved and authorized the development of our MD Compensation
Plan. The MD Compensation Plan was designed to be a
comprehensive cash and equity-based compensation program for the
managing directors of the Company and was intended to replace
the previous cash-based compensation program for such
individuals. Generally, all managing directors, including our
Named Executive Officers, are eligible to participate in the MD
Compensation Plan. The primary goal of the MD Compensation Plan
is to align the compensation of our managing directors with
those of our stockholders, and the plan is designed to offer
transparency into the Companys executive compensation
program, align company performance and individual performance,
provide a fair and objective basis for assessing performance,
link managing director roles and responsibilities to the
Companys business objectives, and enhance the
accountability of the Companys executives. Under the MD
Compensation Plan, a managing directors compensation may
include the following components: (i) RSUs;
(ii) target compensation (which may be cash or equity);
(iii) performance compensation; and (iv) additional
breakthrough awards.
To date, we have been unable to activate the MD Compensation
Plan because we are not current with respect to our SEC periodic
reports. We were unable to provide for bonuses under the MD
Compensation Plan since the plan has not yet been fully
activated and the target levels of profitability set forth under
the MD Compensation Plan were not achieved due to our ongoing
issues related to our financial accounting systems and internal
controls and their related impact on our ability to become
current in our SEC periodic reports and deliver shares of common
stock under equity-based awards.
Non-employee directors, those who are not employed by us on a
full-time or other basis, receive compensation for their service
on our Board of Directors. The goals for non-employee director
compensation are to fairly pay directors for their service, to
align directors interests with the long-term interests of
our stockholders and to have a structure that is transparent. An
employee director receives no additional compensation for their
service on the Board.
In 2006, non-employee director compensation included the
following elements:
|
|
|
|
|
an annual fee of $40,000;
|
|
|
|
a meeting fee of $2,000 for attendance in person at any meeting
of the Board or a committee of the Board and $1,000 for
attendance by telephone (members of the Audit Committee are paid
$2,000 for attendance at any Audit Committee meeting, whether
they attended in person or by telephone);
|
|
|
|
a grant of stock options to purchase up to 15,000 shares of
common stock upon initial election to the Board;
|
32
|
|
|
|
|
a grant of stock options to purchase up to 5,000 shares of
common stock upon initial election as the Chair of the Audit
Committee; and
|
|
|
|
a grant of 8,000 shares of restricted common stock
immediately following each annual meeting of stockholders.
|
2006 Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
|
|
|
|
|
|
|
|
|
|
in Cash
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($) (2)
|
|
|
($) (3) (4)
|
|
|
($)
|
|
|
Douglas C. Allred
|
|
|
70,000
|
|
|
|
65,760
|
|
|
|
|
|
|
|
135,760
|
|
Betsy J. Bernard
|
|
|
66,000
|
|
|
|
65,760
|
|
|
|
|
|
|
|
131,760
|
|
Spencer C. Fleischer
|
|
|
75,000
|
|
|
|
65,760
|
|
|
|
32,376
|
|
|
|
173,136
|
|
Wolfgang Kemna
|
|
|
73,000
|
|
|
|
65,760
|
|
|
|
|
|
|
|
138,760
|
|
Albert L. Lord
|
|
|
98,000
|
|
|
|
65,760
|
|
|
|
|
|
|
|
163,760
|
|
Alice M. Rivlin (1)
|
|
|
47,000
|
|
|
|
65,760
|
|
|
|
|
|
|
|
112,760
|
|
J. Terry Strange
|
|
|
113,000
|
|
|
|
65,760
|
|
|
|
5,482
|
|
|
|
184,242
|
|
|
|
|
(1)
|
|
Ms. Rivlin did not stand for
re-election at our annual meeting of stockholders held on
December 14, 2006.
|
|
(2)
|
|
Reflects the dollar amount
recognized for financial statement reporting purposes for the
year ended December 31, 2006, in accordance with
SFAS 123(R) with respect to grants of restricted stock in
2006. During 2006, each director was granted 8,000 shares
of restricted common stock, each with a fair value of $65,760.
In accordance with SFAS 123(R), fair value is calculated
using the closing price of our common stock on the date of grant.
|
|
(3)
|
|
Reflects the dollar amount
recognized for financial statement reporting purposes for the
year ended December 31, 2006, in accordance with
SFAS 123(R) with respect to stock option awards granted
prior to 2006. No stock options were awarded to these
individuals in 2006. In accordance with SFAS 123(R), fair
value was estimated using the Black-Scholes option-pricing model.
|
|
(4)
|
|
Outstanding equity awards for each
non-employee director is as follows (for a description of the
beneficial ownership by our directors, see Item 12,
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters):
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
|
Stock Awards at
|
|
|
Option Awards at
|
|
|
|
December 31,
|
|
|
December 31,
|
|
Name
|
|
2006
|
|
|
2006
|
|
|
Douglas C. Allred
|
|
|
28,000
|
|
|
|
15,000
|
|
Betsy J. Bernard
|
|
|
16,000
|
|
|
|
15,000
|
|
Spencer C. Fleischer
|
|
|
8,000
|
|
|
|
15,000
|
|
Wolfgang Kemna
|
|
|
28,000
|
|
|
|
15,000
|
|
Albert L. Lord
|
|
|
24,000
|
|
|
|
15,000
|
|
Alice M. Rivlin (1)
|
|
|
28,000
|
|
|
|
20,000
|
|
J. Terry Strange
|
|
|
24,000
|
|
|
|
20,000
|
|
|
|
|
(1)
|
|
Ms. Rivlin did not stand for
re-election at our annual meeting of stockholders held on
December 14, 2006.
|
We also reimburse directors for reasonable travel expenses
related to attending a Board, Committee or other Company related
business meetings, and provide liability insurance for our
directors and officers.
33
Beneficial
Ownership of More Than Five Percent
The following table sets forth the only persons known by us, as
of September 1, 2007, to be beneficial owners or more than
five percent of our common stock.
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Percentage of
|
|
Name and Address of 5% Holders of Common Stock
|
|
Number of Shares
|
|
|
Shares Outstanding
|
|
|
Ariel Capital Management, LLC (1)
|
|
|
30,201,218
|
|
|
|
14.9
|
%
|
200 E. Randolph Drive,
Suite 2900
|
|
|
|
|
|
|
|
|
Chicago, IL 60601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenview Capital Management, LLC
(2)
|
|
|
20,599,345
|
|
|
|
10.0
|
|
767 Fifth Avenue,
44th Floor
|
|
|
|
|
|
|
|
|
New York, NY 10153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goldman Sachs Asset Management,
L.P. (3)
|
|
|
13,914,809
|
|
|
|
6.9
|
|
32 Old Slip
|
|
|
|
|
|
|
|
|
New York, NY 10005
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents shares beneficially
held by Ariel Capital Management, LLC (Ariel), as
reported on a Schedule 13G filed on February 14, 2007.
Ariel has sole voting power with respect to
26,112,088 shares and sole dispositive power with respect
to 30,181,188 shares. These shares are beneficially owned
by investment advisory clients of Ariel.
|
|
(2)
|
|
Represents shares beneficially
held by Glenview Capital Management, LLC (Glenview),
Glenview Capital GP, LLC (Glenview GP) and Lawrence
M. Robbins, as reported on a Schedule 13G filed on
February 14, 2007, including 4,924,245 shares issuable
upon conversion of certain convertible notes. Glenview serves as
investment manager to various entities and as such may be deemed
to have voting and dispositive power of such shares. Glenview GP
is a general partner of, and serves as the sponsor of, various
funds and as such, may be deemed to have voting and dispositive
power over such shares. Mr. Robbins is the Chief Executive
Officer of Glenview and Glenview GP.
|
|
(3)
|
|
Represents shares beneficially
held by Goldman Sachs Asset Management, L.P. (Goldman
Sachs), as reported on a Schedule 13G filed on
February 12, 2007. Goldman Sachs has sole voting power with
respect to 13,766,568 shares and sole dispositive power
with respect to 13,914,809 shares.
|
Security
Ownership of Directors and Executive Officers
The following table sets forth, as of September 1, 2007,
information regarding the beneficial ownership of our common
stock held by (i) each of our directors and Named Executive
Officers and (2) all of our directors and executive
officers as a group. To our knowledge, except as otherwise
indicated, each of the persons or entities listed below has sole
voting and investment power with respect to the shares
beneficially owned by him or her. Beneficial
ownership is determined in accordance with
Rule 13d-3
under the Exchange Act, pursuant to which a person or group of
persons is deemed to have beneficial ownership of
any shares that he or she has the right to acquire within
34
60 days of September 1, 2007. Any shares that a person
has the right to acquire within 60 days of
September 1, 2007 are deemed to be outstanding but are not
deemed to be outstanding for the purpose of computing the
percentage ownership of any other person.
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Percentage of
|
|
Name and Address (1)
|
|
Number of Shares
|
|
|
Shares Outstanding
|
|
|
Harry L. You (2)
|
|
|
1,072,500
|
|
|
|
*
|
|
Roderick C. McGeary (3)
|
|
|
621,828
|
|
|
|
*
|
|
Douglas C. Allred (4)
|
|
|
51,000
|
|
|
|
*
|
|
Betsy J. Bernard (5)
|
|
|
39,000
|
|
|
|
*
|
|
Judy A. Ethell (6)
|
|
|
820,600
|
|
|
|
*
|
|
Spencer C. Fleischer (7)
|
|
|
31,000
|
|
|
|
*
|
|
Jill S. Kanin-Lovers
|
|
|
|
|
|
|
*
|
|
Wolfgang Kemna (8)
|
|
|
51,000
|
|
|
|
*
|
|
Albert L. Lord (9)
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|
|
58,600
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|
|
|
*
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|
Laurent C. Lutz
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|
|
|
|
|
|
*
|
|
Richard J. Roberts (10) (11)
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|
|
620,468
|
|
|
|
*
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|
J. Terry Strange (12)
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|
|
57,000
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|
|
|
*
|
|
All executive officers and
directors as a group (12 persons)
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|
|
3,422,996
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1.7
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%
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|
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|
*
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|
Less than 1% of our common stock
outstanding.
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(1)
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The address for all persons listed
is
c/o BearingPoint,
Inc., 1676 International Drive, McLean, Virginia 22102 USA.
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(2)
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Includes 62,500 vested RSUs and
1,000,000 shares of common stock that may be acquired
through the exercise of stock options within 60 days of
September 1, 2007. All 62,500 vested RSUs were scheduled
for settlement but have not yet settled.
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(3)
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|
Includes 7,352 vested RSUs and
472,928 shares of common stock that may be acquired through
the exercise of stock options within 60 days of
September 1, 2007. All 7,352 vested RSUs were scheduled for
settlement but have not yet settled.
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|
(4)
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|
Includes 15,000 shares of
common stock that may be acquired through the exercise of stock
options within 60 days of September 1, 2007.
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|
(5)
|
|
Includes 15,000 shares of
common stock that may be acquired through the exercise of stock
options within 60 days of September 1, 2007.
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|
(6)
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|
Consists of 280,600 vested RSUs,
300,000 shares of common stock that may be acquired through
the exercise of stock options within 60 days of
September 1, 2007 and 240,000 vested RSUs held by Robert R.
Glatz, Ms. Ethells spouse. All 520,600 vested RSUs
were scheduled for settlement but have not yet settled.
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(7)
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Includes 15,000 shares of
common stock that may be acquired through the exercise of stock
options within 60 days of September 1, 2007.
Mr. Fleischer is a senior managing member of Friedman
Fleischer & Lowe GP II, LLC, a Delaware limited
liability company (FFL GP). FFL GP is the general
partner of Friedman Fleischer & Lowe GP II, L.P.,
which is the general partner of each of Friedman
Fleischer & Lowe Capital Partners II, L.P. (FFL
Capital Partners), FFL Parallel Fund II, L.P.
(FFL Parallel Fund) and FFL Executive Partners II,
L.P. (FFL Executive Partners, and together with FFL
Capital Partners and FFL Parallel Fund, the FFL
Funds). The FFL Funds are the owners of record of
$40 million of initial principal amount of
0.50% Convertible Senior Subordinated Debentures due July
2010 and warrants to purchase up to 3.5 million shares of
common stock. Mr. Fleischer disclaims any beneficial
ownership of the securities owned by the FFL Funds, except to
the extent of his pecuniary interest therein, if any.
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35
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|
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(8)
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|
Includes 15,000 shares of
common stock that may be acquired through the exercise of stock
options within 60 days of September 1, 2007.
|
|
(9)
|
|
Includes 15,000 shares of
common stock that may be acquired through the exercise of stock
options within 60 days of September 1, 2007.
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|
(10)
|
|
Includes 4,301 shares held
through a family trust, 173,076 vested RSUs and
381,708 shares of common stock that may be acquired through
the exercise of stock options within 60 days of
September 1, 2007. Of the 173,076 vested RSUs, 111,110 RSUs
were scheduled for settlement but have not yet settled.
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|
(11)
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|
Effective as of January 8,
2007, Mr. Roberts no longer serves as our Chief Operating
Officer in connection with the appointment of F. Edwin Harbach
as our President and Chief Operating Officer.
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(12)
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|
Includes 20,000 shares of
common stock that may be acquired through the exercise of stock
options within 60 days of September 1, 2007.
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SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the U.S. Federal securities laws, directors and
executive officers, as well as persons who beneficially own more
than ten percent of our outstanding common stock, must report
their initial ownership of the common stock and any changes in
that ownership to the SEC. The SEC has designated specific due
dates for these reports, and we must identify in this Proxy
Statement those persons who did not file these reports when due.
Based solely on a review of copies of Forms 3, 4 or 5 filed
by us on behalf of our directors and executive officers or
otherwise provided to us and copies of Schedule 13Gs, we
believe that all of our directors, executive officers and
greater than ten percent stockholders complied with their
applicable filing requirements for 2006. In 2005, however,
Judy A. Ethell, our Chief Financial Officer, due to an
administrative error, failed to report a Form 4 to report
the issuance of RSUs to Robert Glatz, her spouse, in connection
with his employment in August 2005. The issuance of RSUs to
Mr. Glatz, which was previously described in our Annual
Reports on
Form 10-K
for fiscal years 2004 and 2005 (filed with the SEC on
January 31, 2006 and November 22, 2006, respectively),
was reported on a Form 4 on June 28, 2007.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Friedman
Fleischer & Lowe, LLC / Spencer C. Fleischer
On July 15, 2005, we issued $40,000,000 aggregate principal
amount of our July 2005 Senior Debentures and common stock
warrants to purchase up to 3,500,000 shares of our common
stock pursuant to a securities purchase agreement, dated
July 15, 2005 (the FF&L Purchase
Agreement), among the Company and certain affiliates of
Friedman Fleischer & Lowe, LLC (the FF&L
Purchasers). In accordance with the terms of the FF&L
Purchase Agreement, Mr. Spencer C. Fleischer was appointed
to our Board as a Class I Director, effective July 15,
2005. Mr. Fleischer is a senior managing member and Vice
Chairman of Friedman Fleischer & Lowe GP II, LLC, the
general partner of Friedman Fleischer & Lowe GP II,
LP, which is the general partner of several investment funds
that make investments in private and public companies in the
United States and Bermuda; he has served in this capacity since
1998. If Mr. Fleischer ceases to be affiliated with the
FF&L Purchasers or ceases to serve on the Board, so long as
the FF&L Purchasers together hold at least 40% of the
original principal amount of the July 2005 Senior Debentures,
the FF&L Purchasers or their designees have the right to
designate a replacement director to our Board.
Judy A.
Ethell / Robert Glatz
Effective as of August 22, 2005, Robert Glatz was appointed
Executive Vice PresidentCorporate Development, a managing
director and a member of our executive team. Robert
36
Glatz is the spouse of Judy A. Ethell, our Chief Financial
Officer. In connection with his employment, Mr. Glatz is
entitled to the following: (a) base salary of $500,000;
(b) 300,000 RSUs, with vesting as follows: 180,000 RSUs on
December 31, 2005 and 30,000 RSUs on each of
August 22, 2006, 2007, 2008 and 2009; (c) eligible to
receive an annual bonus with a target amount equal to 100% of
his base salary; and (d) sign-on bonus of $500,000. In
addition, we have provided or will provide to Mr. Glatz
relocation assistance, indemnification to the fullest extent
permitted by law with respect to his activities on behalf of the
Company and for other tax related issues, and employee benefit
plans generally provided to senior executives of the Company. In
addition, as a managing director, Mr. Glatz is a party to
the Managing Director Agreement (with certain changes to the
defined terms Good Reason and Change of
Control) and the Special Termination Agreement. Pursuant
to these agreements, upon termination of Mr. Glatzs
employment, we will pay to Mr. Glatz: (i) any earned
but unpaid base salary through the date of termination;
(ii) any earned but unpaid annual bonus for the preceding
year, provided that his employment terminates after the payment
date for the annual bonus; (iii) any unpaid accrued
personal days; (iv) if we terminate his employment without
Cause or he terminates for Good Reason, we will pay to him a
lump sum cash amount equal to his annual base salary within
30 days after receipt of an executed release and pay his
premiums under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, for up to 18 months; and
(v) any other amounts due under any of our benefit plans.
Only stockholders of record on the close of business on
September 7, 2007, the record date, may vote at the Annual
Meeting. On the record date, we had 202,205,473 shares of
our common stock outstanding and entitled to vote at the Annual
Meeting. For each share of common stock you hold on the record
date, you will be entitled to one vote on each matter submitted
to a vote of stockholders. There is no cumulative voting.
You may vote all shares owned by you as of the close of business
on the record date. These shares include:
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Shares held directly in your name as the stockholder of
record; and
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Shares of which you are the beneficial owner but not the
stockholder of record. These are shares that are held for you
through a broker, trustee or other nominee such as a bank, and
shares purchased through the BearingPoint, Inc. 401(k) Plan and
the BearingPoint Employee Stock Purchase Plan.
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Before the Annual Meeting, you have three options for voting and
submitting your proxy:
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through the Internet, at the Internet address shown on your
proxy card;
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by telephone, by calling the number shown on your proxy
card; or
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by mail, by completing, signing and returning the enclosed proxy
card.
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If you hold your shares through an account with a bank or a
broker, your ability to vote over the Internet or by telephone
depends on the voting procedures of the bank or broker. Please
follow the directions that your bank or broker provides.
37
You may vote your shares at the Annual Meeting if you attend in
person. If you hold your shares through an account with a bank
or broker, you must obtain a legal proxy from the bank or broker
in order to vote at the meeting. Even if you plan to attend the
Annual Meeting, we encourage you to vote your shares by proxy.
How
will proxies be voted?
Each properly executed proxy will be voted in accordance with
the instructions on the proxy.
If you do not provide specific instructions on how your shares
should be voted in your proxy, your shares will be voted:
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FOR the election of the nominees for Class I
director who are named in this proxy statement;
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FOR the ratification of the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for 2007; and
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In accordance with the judgment of the individuals named as
proxies on the proxy card on any other matter properly brought
before the Annual Meeting. We currently know of no other matter
to be presented at the Annual Meeting.
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If you hold your shares through an account with a bank or a
broker and do not vote, the bank or broker will determine if it
has the discretionary authority to vote on the particular
matter. Under applicable rules, banks and brokers have the
discretion to vote on routine matters, such as the uncontested
election of directors and the ratification of the selection of
accounting firms, but do not have discretion to vote on
non-routine matters.
In order for us to conduct our Annual Meeting, a majority of our
outstanding shares of common stock as of the record date must be
present in person or by proxy at the Annual Meeting. This is
referred to as a quorum. Your shares are counted as present at
the Annual Meeting if you attend the Annual Meeting and vote in
person or if you properly return a proxy by Internet, telephone
or mail. Abstentions and broker non-votes will be counted as
present for purposes of establishing a quorum at the Annual
Meeting. Broker non-vote occurs on a matter when a bank or
broker is not permitted under applicable rules and regulations
to vote on that matter without instructions from the beneficial
owner of the underlying shares and no instructions has been
provided.
Nominees for director will be elected by a plurality of the
votes cast. The affirmative vote of a majority of the votes cast
by the stockholders present in person or by proxy at the Annual
Meeting is required for the ratification of the appointment of
Ernst & Young LLP. Abstentions and broker non-votes
will not be counted as votes cast; and, therefore, will have no
effect on the outcome on the matters to be voted on at the
Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by
the stockholder at any time prior to exercise of the proxy.
You can revoke your proxy at any time prior to the Annual
Meeting by:
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signing another proxy card with a later date and returning it to
us prior to the meeting,
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voting again by telephone or over the Internet prior to
6:00 a.m., Eastern Time, on November 5, 2007, or
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by attending the Annual Meeting in person, if you are the
stockholder of record, and casting a ballot.
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38
Soliciting
proxies and expenses
The solicitation of proxies generally will be by mail and by our
directors, officers and regular employees. In some instances,
solicitation may be made by telephone, facsimile or other means.
All costs incurred in connection with the solicitation of
proxies will be borne by us. Arrangements may be made with
brokers and other custodians, nominees and fiduciaries to send
proxies and proxy material to their principals, and we may
reimburse them for reasonable out-of-pocket and clerical
expenses. We have retained Innisfree M&A Incorporated to
assist in the solicitation of proxies from stockholders for a
fee of approximately $15,000 plus a charge for contacting
specific stockholders and reasonable out-of-pocket expenses and
disbursements.
STOCKHOLDER
PROPOSALS FOR 2008 ANNUAL MEETING
We may set the date for our 2008 Annual Meeting at a date
earlier in the year than the date of our 2007 Annual Meeting. If
we advance the annual meeting by more than thirty days from the
anniversary date of the 2007 Annual Meeting, the deadlines for
shareholder proposals and director recommendations and
nominations will change, in accordance with
Rule 14a-8
of the Securities Exchange Act of 1934, as amended (the
Exchange Act), and our Bylaws. If the deadlines for
shareholder proposals and director recommendations and
nominations change, we will disclose these new deadlines on our
Form 10-Q,
Form 8-K
or by other permitted means.
We provide all stockholders with the opportunity, under certain
circumstances and consistent with Exchange Act
Rule 14a-8,
to participate in the governance of the Company by submitting
proposals they believe merit consideration at our next Annual
Meeting of Stockholders. To enable management to adequately
analyze and respond to proposals and to prepare appropriate
proposals for presentation in the Companys Proxy Statement
for the 2008 Annual Meeting, any stockholder who intends to
present a proposal at the Annual Meeting of Stockholders to be
held in 2008 must deliver the proposal, addressed to the
attention of the Companys Secretary:
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Not later than June 2, 2008 if the proposal is submitted
for inclusion in our proxy materials for that meeting pursuant
to Rule
14a-8 under
the Securities Exchange Act of 1934.
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Not earlier than July 8, 2008 and not later than
August 7, 2008, if the proposal is submitted pursuant to
the Companys Bylaws.
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If the proposal is not submitted within the time limits set
forth above, we are not required to include the proposal in our
proxy materials.
Stockholders
Submitting Director Recommendations and Nominations
Submitting
Director Recommendations to the Nominating and Corporate
Governance Committee or Submitting Director Nominations to
Stockholders
If you wish (1) for the Nominating and Corporate Governance
Committee to consider an individual as a candidate for election
to the Board of Directors, or (2) to nominate a person for
election as a director at the annual meeting of stockholders,
you must submit a proper and timely request as follows:
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You must deliver the recommendation or notice of a nomination of
a person for the position of director at the annual meeting (a
notice) to the Secretary of the Company with
delivery by hand, or by certified or registered mail, return
receipt requested, no earlier than July 8, 2008 and no
later than August 7, 2008.
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39
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Your recommendation or notice must contain the following:
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As to the proposed nominee:
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his or her name, age, business address and residence address,
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his or her principal occupation or employment,
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the class and number of shares of stock of the Company which he
or she beneficially owns (as defined under Sections 13 and
14 of the Exchange Act),
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any other information relating to such person that would be
required to be disclosed in solicitations of proxies for the
election of such person as a director of the Company pursuant to
Regulation 14A under the Exchange Act, had the nominee been
nominated by the Board of Directors, and
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the nominees written consent to being named in any proxy
statement as a nominee and to serving as a director if elected.
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In addition, you, as the shareholder making the recommendation
or notice, must provide:
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your name and address, as it appears on the Companys
records,
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the class and number of shares of stock of the Company that you
beneficially own (as defined under Sections 13 and 14 of
the Exchange Act),
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in the case of a notice, a representation that you are a holder
of record of stock of the Company entitled to vote on the
election of directors at such meeting and that you intend to
appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice, and
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in the case of a notice, a description of all agreements,
arrangements or understandings between you and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made
by you
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IMPORTANT
NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS
Under the SECs rules, delivery of one proxy statement and
annual report to two or more investors sharing the same mailing
address is now permitted, under certain conditions. This
procedure, called householding, is available to you
if all of the following criteria are met:
(1) You have the same address as other securityholders
registered on our books;
(2) You have the same last name as the other
securityholders; and
(3) Your address is a residential address or post office
box.
If you meet this criteria, you are eligible for householding and
the following terms apply. If you are not eligible, please
disregard this notice.
For
Registered Shareholders
Only one proxy statement and annual report will be delivered to
the shared mailing address. You will, however, still receive
separate mailings of important and personal information, as well
as a separate proxy card.
40
What do I
need to do to receive just one set of annual disclosure
materials?
You do not have to do anything. Unless you notify us within
60 days of the mailing of this notice, your consent is
implied and only one set of materials will be sent to your
household. This consent is considered perpetual, which means you
will continue to receive a single proxy statement/annual report
in the future unless you tell us otherwise.
What if I
want to continue to receive multiple sets of
materials?
If you would like to continue to receive a separate set of
materials for yourself, call or write us. A separate set of
materials will be sent to you promptly.
What if I
consent to have one set of materials mailed now, but change my
mind later?
Call or write us to turn off the householding instructions for
yourself. You will then be sent a separate proxy statement and
annual report within 30 days of receipt of your instruction.
The
reason I receive multiple sets of materials is because some of
the stock belongs to my children. What happens when they move
out and no longer live in my household?
When there is an address change for one of the members of the
household, materials will be sent directly to the shareholder at
his or her new address.
ANNUAL
REPORT ON
FORM 10-K
We will provide without charge to each person solicited by this
proxy statement, on the written request of such person, a copy
of our Annual Report on
Form 10-K,
as filed with the SEC, and copies of our Corporate Governance
Guidelines and the charters of our Audit Committee, Compensation
Committee and the Nominating and Corporate Governance Committee.
Such written requests should be directed to Investor
Relations at:
BearingPoint, Inc.
25 Independence Blvd.,
4th
Floor
Warren, NJ 07059
Telephone: 908.607.2100
INCORPORATION
BY REFERENCE
To the extent that any of the Companys previous or future
filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate this Proxy Statement
or future filings with the SEC, in whole or in part, the
Compensation Committee Report on Executive Officer Compensation,
the Report of the Audit Committee of the Board of Directors and
the Report of the Compensation Committee of the Board of
Directors shall not be deemed to be incorporated by reference
into any such filing.
41
Appendix A
CHARTER
OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
BearingPoint, Inc.
(amended
and restated as of January 22, 2004)
I. PURPOSES;
AUTHORITY.
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A. |
The primary purpose of the Audit Committee (the
Committee) is to assist the Board of Directors (the
Board) of BearingPoint, Inc. (the
Company) in fulfilling its oversight
responsibilities with respect to financial reports and other
financial information. In this regard, the Committee is to:
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1.
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Serve as an independent and objective body to monitor the
Companys financial reporting process and internal control
systems, and the integrity of the Companys financial
statements;
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2.
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Serve as the sole authority to which the independent auditor
(the Independent Auditor) is accountable, and have
the sole authority and responsibility for the appointment,
compensation, retention and oversight of the work of the
Independent Auditor, including any significant non-audit
relationship with the Independent Auditor;
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3.
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Serve as the ultimate authority to which the internal auditing
function (Internal Audit) is accountable;
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4.
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Monitor the qualification, independence and performance of the
Independent Auditor and Internal Audit, including reviewing
their audit efforts;
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5.
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Provide an open avenue of communication among the Independent
Auditor, financial and senior management, Internal Audit, and
the Board;
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6.
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Assist in the Boards oversight of the Companys
compliance with legal and regulatory requirements; and
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7.
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Prepare a report to stockholders to be included in the
Companys annual proxy statement.
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B.
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The Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it shall
have direct access to the Independent Auditor, Internal Audit
and anyone else in the Company. The Committee may retain, at the
Companys expense, such special legal, accounting, or other
consultants or experts as it deems necessary in the performance
of its duties. Alternately, to the extent consistent with the
rules of the New York Stock Exchange (NYSE) and the
rules promulgated by the Securities and Exchange Commission
(SEC), the Committee may refer any matter to the
Board to determine whether an investigation of a particular
matter is appropriate and, if so, how it shall be conducted.
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C.
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The Company shall provide for appropriate funding, as determined
by the Committee in its capacity as a committee of the Board,
for payment of:
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1.
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Compensation to any registered public accounting firm,
including, without limitation, the Independent Auditor, engaged
for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the
Company;
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2.
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Compensation to any special legal, accounting, or other
consultants or experts employed by the Committee pursuant to
Section I.B.; and
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A-1
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3.
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Ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties.
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II. COMPOSITION
AND EXPERTISE; MEETINGS.
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A.
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The Committee shall be comprised of three or more directors as
determined by the Board.
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B.
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All members of the Committee shall be independent directors,
free from any relationship to the Company that may interfere
with the exercise of their independence from management and the
Company, and each member of the Committee shall have been
determined by the Board to be independent or subject
to exception under the rules of the NYSE.
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C.
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All members of the Committee shall be financially literate. To
be financially literate, a person shall be able to read and
understand fundamental financial statements, including a balance
sheet, income statement and cash flow statement, or shall become
able to do so within a reasonable period of time after his or
her appointment to the Committee.
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D.
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At least one member of the Committee shall have, and continue to
have, past employment experience in finance or accounting,
requisite professional certification in accounting, or any other
comparable experience or background which results in the
individuals financial sophistication, including being or
having been a chief executive officer, chief financial officer
or other senior officer with financial oversight
responsibilities.
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E.
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Committee members shall be appointed by, and serve at the
pleasure of, the Board. Committee members shall have the
qualifications specified in this Charter and shall meet any
other requirements of the NYSE and the SEC. Determinations as to
whether a particular director satisfies the requirements for
membership on the Committee shall be made by the Board.
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F. |
The Board shall appoint a Chairman who will preside at Committee
meetings and report on behalf of the Committee to the Board. If
the Chairman is not present at a meeting, the members of the
Committee shall, by majority vote, elect a member to serve as
the Chairman for that meeting.
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G. |
The Committee generally will meet eight times annually, but may
meet more or less frequently as circumstances dictate. In
addition to regularly scheduled meetings, the Committee shall
meet at the request of any member. The Committee shall meet
privately in executive session at least annually with each of
management, the Director of Internal Audit and the Independent
Auditor in separate sessions. In addition, the Committee shall
meet privately in executive session at any time upon the request
of management, the Director of Internal Audit or the Independent
Auditor.
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H. |
A majority of the entire Committee shall constitute a quorum for
the transaction of business. The action of a majority of the
members present at a meeting at which a quorum is present shall
be the action of the Committee. Any action required or permitted
to be taken at a meeting of the Committee may be taken without a
meeting if the unanimous written consent that sets forth the
action is signed by each member of the Committee and filed with
the minutes of the proceedings of the Committee. The Committee
may establish such other rules of procedure for its business as
it deems desirable.
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III. DUTIES
AND RESPONSIBILITIES.
In addition to other duties and responsibilities set forth in
this Charter, the Committees specific responsibilities and
duties shall include the following:
A-2
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1.
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Review and reassess the adequacy of this Charter at least
annually and recommend to the Board any appropriate extensions
or changes in the duties of the Committee. Submit the Charter to
the Board of Directors for approval and have the document
published at least every three years in accordance with SEC
regulations;
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2.
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Review the Companys annual audited and quarterly unaudited
financial statements in draft and substantially final form prior
to filing or distribution. Review should include
(a) discussion with management and the Independent Auditor
of significant issues regarding accounting principles, practices
and judgments, including the Companys disclosures under
Managements Discussion and Analysis of Financial
Condition and Results of Operations, and
(b) discussion with the Independent Auditor about the
quality of the accounting principles as applied in the
preparation of the Companys financial statements. If
significant issues are identified prior to filing or
distribution of the annual audited or quarterly unaudited
financial statements, the Committee shall be informed of these
issues and shall either meet to review them or discuss them by
telephone conference call;
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3.
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With respect to the Companys annual and quarterly
financial statements, discuss any items required to be
communicated by the Independent Auditor in accordance with
Statement of Auditing Standards Number 61. The Chairman of the
Committee may represent the entire Committee for purposes of
this discussion;
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4.
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Discuss earnings press releases, as well as financial
information and earnings guidance provided to analysts and
rating agencies;
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5.
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In consultation with management, the Independent Auditor and
Internal Audit, consider the integrity of the Companys
financial reporting processes and controls. Review
recommendations presented by the Independent Auditor in their
management letter, including the status of previous
recommendations, together with managements responses, and
discuss the adequacy of staffing, including the quality of the
Companys financial and accounting personnel;
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6.
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Review the Independent Auditors audit plan and discuss the
general audit approach, scope, staffing and reliance upon
management and Internal Audit;
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7.
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Following completion of the annual audit, review separately with
each of management, the Independent Auditor and Internal Audit
any significant difficulties encountered during the course of
the audit, including any restrictions on the scope of work or
access to required information, as well as managements
response to such difficulties; and
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8.
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Review any significant disagreements, disputes or difficulties
among management and the Independent Auditor or Internal Audit
in connection with the preparation of the financial statements
and other matters related to the conduct of the audit which are
to be communicated to the Committee under generally accepted
auditing standards.
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B.
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Internal Audit Function and Legal Compliance.
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1.
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Review an annual report from Internal Audit regarding its
activities, audit plan, budget and staffing. Review any
significant reports prepared for management by Internal Audit
and managements response and
follow-up to
these reports;
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2.
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On at least an annual basis, review with the Companys
counsel any legal matters that could have a significant impact
on the Companys financial statements, the Companys
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A-3
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compliance with applicable laws and regulations, and inquiries
received from regulators or governmental agencies; and
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3.
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Review managements monitoring of compliance with the
Companys Code of Business Conduct, including particularly
whether management has the proper review system to ensure that
the Companys financial statements, reports and other
financial information disseminated to governmental organizations
and the public satisfy legal requirements.
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C.
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Other Audit Committee Responsibilities.
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1.
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Prepare a report to stockholders to be included in the
Companys annual proxy statement as required by SEC
regulations;
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2.
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Annually report to the Board on the Committees activities,
including an evaluation of the Committees performance over
the past year, and provide the Board with such additional
reports as are appropriate;
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3.
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Establish clear hiring policies for employees or former
employees of the Independent Auditor;
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4.
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Establish procedures for:
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a.
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the receipt, retention, and treatment of complaints received by
the Company regarding accounting, internal accounting controls,
or auditing matters; and
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b.
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the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or
auditing matters;
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5.
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As appropriate, obtain advice and assistance from outside legal,
accounting or other advisors;
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6.
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Review policies with respect to risk assessment and risk
management; and
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7.
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Perform any other activities consistent with this Charter, the
Companys Bylaws and governing law as the Committee or the
Board deems necessary or appropriate.
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IV. RELATIONSHIP
WITH INDEPENDENT AUDITOR.
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A.
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The Independent Auditor is solely accountable to the Committee.
The Committee shall review the independence and performance of
the Independent Auditor. The Committee has the sole authority to
retain, compensate, oversee and discharge the Independent
Auditor, and to approve any significant non-audit relationship
with the Independent Auditor. The Committee shall annually
appoint the Independent Auditor or discharge the Independent
Auditor when circumstances warrant.
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B.
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On at least an annual basis, the Committee shall review a formal
written report from the Independent Auditor describing:
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1.
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The Independent Auditors internal quality-control
procedures;
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2.
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Any material issues raised by the most recent internal
quality-control review, or peer review, of the Independent
Auditor, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
Independent Auditor, and any steps taken to deal with any such
issues; and
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3.
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All relationships between the Independent Auditor and the
Company, consistent with Independence Standards Board Standard 1.
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The Committee shall discuss with the Independent Auditor any
disclosed material quality-control issues and relationships or
services that may impact the qualifications, performance,
objectivity and independence of the Independent Auditor and, if
appropriate, take action to oversee the independence of the
Independent Auditor.
V. LIMITATION
ON COMMITTEE RESPONSIBILIITES.
While the Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Committee to
plan or conduct audits or to determine that the Companys
financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. This
is the responsibility of management and the Independent Auditor.
Nor is it the duty of the Committee to conduct investigations,
to resolve disagreements, if any, among management, the
Independent Auditor or Internal Audit or to assure compliance
with laws and regulations.
A-5
V O T E B Y T E L E P H O N E c/o Corporate Election Services P. O. Box 1150 Have your proxy
card available when you call Pittsburgh, PA 15230 Toll-Free 1-888-693-8683 using a touch-tone
phone and follow the simple instructions to record your vote. V O T E B Y I N T E R N E T Have
your proxy card available when you access the website www.cesvote.com and follow the simple
instructions to record your vote. V O T E B Y M A I L Please mark, sign and date your proxy card
and return it in the postage-paid envelope provided or return it to: Corporate Election Services,
P.O. Box 1150, Pittsburgh, PA 15230-1150. Vote by Telephone Vote by Internet Vote by Mail Call
Toll-Free using a Access the Website and Return your proxy touch-tone telephone: cast your vote:
in the postage-paid 1-888-693-8683 www.cesvote.com envelope provided Vote 24 hours a day, 7
days a week! Your telephone or Internet vote must be received by 6:00 a.m. Eastern Standard Time
on November 5, 2007 in order to be counted in the final tabulation. If you vote by telephone or
Internet, please do not send your proxy by mail. I Proxy card must be signed and dated below. D
To vote by mail, please fold and detach card at perforation before mailing. D THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
NOVEMBER 5, 2007. undersigned hereby appoints Harry L. You, Judy A. Ethell and Laurent C. Lutz,
or each of them, each with full power of substitution, the lawful attorneys and proxies of the
undersigned to attend the Annual Meeting of Stockholders of BearingPoint, Inc. to be held on
November 5, 2007 and any adjournments or postponements thereof, to vote the number of shares the
undersigned would be entitled to if personally present, and to vote in their discretion upon any
other business that may properly come before the meeting. Dated: , 2007 Signature Signature
Please date and sign exactly as name(s) appear(s) hereon. If shares are held jointly, each holder
should sign. Please give full title and capacity in which signing if not signing as an individual
stockholder. |
Y O U R V O T E I S I M P O R T A N T If you do not vote by Internet or telephone, please sign and
date this proxy card and return it promptly in the enclosed postage-paid envelope, or otherwise to
Corporate Election Services, P.O. Box 1150, Pittsburgh PA 15230, so your shares may be represented
at the meeting. If you vote by Internet or telephone, please do not mail this proxy card. Proxy
card must be signed and dated on the reverse side. D To vote by mail, please fold and detach
card at perforation before mailing. D BEARINGPOINT, INC. PROXY THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR-NOMINEES LISTED BELOW AND
FOR THE RATIFICATION OF ERNST & YOUNG LLP AS ITS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED BY ANY MEANS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
ELECTION OF THE DIRECTOR-NOMINEES LISTED BELOW AND FOR THE RATIFICATION OF ERNST & YOUNG LLP AS
ITS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. 1. Election of Directors Nominees for Class
I: (1) Douglas C. Allred (2) Betsy J. Bernard (3) Spencer C. Fleischer FOR ALL NOMINEES
WITHHELD FROM ALL NOMINEES FOR ALL NOMINEES EXCEPT FOR: 2. To ratify Ernst & Young LLP as its
independent registered public accounting firm for its 2007 fiscal year. FOR AGAINST
ABSTAIN CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE. |