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

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VCA ANTECH, INC.

 

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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VCA Antech, Inc.

12401 West Olympic Boulevard

Los Angeles, California 90064-1022

www.vcaantech.com

 

 

April 27, 2011

 

Dear Fellow Stockholder:

 

Our 2011 Annual Meeting of Stockholders will be held on Monday, June 6, 2011, at our corporate offices located at 12401 West Olympic Boulevard, Los Angeles, California 90064-1022. Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of Internet Availability of Proxy Materials and Proxy Statement.

 

Your vote is important. Whether or not you plan to attend the meeting, I urge you to vote your shares as soon as possible. Instructions on the proxy card will tell you how to cast your vote. The Proxy Statement explains more about proxy voting. Please read it carefully.

 

Thank you for your continued support of our company.

 

Sincerely,

 

Robert L. Antin

Chairman of the Board, Chief Executive

Officer and President

 

VCA ANTECH, INC.

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 6, 2011

 

The Notice of Internet Availability of Proxy Materials, the Proxy Statement and our 2010 Annual Report are available at www.proxyvote.com.

 

April 27, 2011

 

 

TABLE OF CONTENTS

 

 

VCA ANTECH, INC.

12401 West Olympic Boulevard

Los Angeles, California 90064-1022

 

PROXY STATEMENT

 

 

Our Board of Directors is soliciting proxies to be voted at the 2011 Annual Meeting of Stockholders, which we refer to as the “Annual Meeting,” to be held on June 6, 2011. Your vote is very important. For this reason, our Board of Directors is requesting that you permit your common stock to be represented at the Annual Meeting by the proxies named on the proxy card. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully. In this Proxy Statement, VCA Antech, Inc. is referred to as the “Company,” “VCA,” “we,” “us” and “our.”

 

In accordance with rules and regulations of the Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of our proxy materials to each stockholder of record or beneficial owner, we are now furnishing proxy materials, which include the Proxy Statement, proxy card and the Annual Report on Form 10-K for the fiscal year ended December 31, 2010, which we refer to as the “2010 Annual Report,” to our stockholders over the Internet. On April 27, 2011, we mailed the Notice of Internet Availability of Proxy Materials to our stockholders and made available the proxy materials to our stockholders at www.proxyvote.com.

 

Because you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you have previously made a permanent election to receive these materials in hard copy. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your proxy. If you received the Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.

 

 

 

 

 

 

Item 1 — Election of directors		The two nominees receiving the highest number of “FOR” votes at the Annual Meeting will be elected. Abstentions and broker non-votes will not be counted as a “FOR” vote for any nominee.
Item 2 — Ratification of appointment of independent registered public accounting firm		To be approved by the stockholders, this item must receive the “FOR” vote of a majority of the votes cast on this proposal at the Annual Meeting. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal.
Item 3 — Re-approval of the material terms of the performance goals under the VCA Antech, Inc. 2006 Equity Incentive Plan.		To be approved by the stockholders, this item must receive the “FOR” vote of a majority of the votes cast on this proposal at the Annual Meeting. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal.
Item 4 — Re-approval of the material terms of the performance goals under the VCA Antech, Inc. 2007 Cash Incentive Plan.		To be approved by the stockholders, this item must receive the “FOR” vote of a majority of the votes cast on this proposal at the Annual Meeting. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal.
Item 5 — Advisory vote on the compensation of the Company’s named executive officers		To be approved by the stockholders, this item must receive the “FOR” vote of a majority of the votes cast on this proposal at the Annual Meeting. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal.
Item 6 — Advisory vote on the FREQUENCY of advisory votes on the compensation of the Company’s named executive officers		The frequency (every one, two, or three years) that receives the highest number of votes will be considered by us to be the preference of the stockholders. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal.

 

 

 

Our business is managed by our employees under the direction and oversight of the Board of Directors. Except for Robert L. Antin, none of the members of our Board of Directors is an employee of VCA. We keep the members of our Board of Directors informed of our business through discussions with management, materials we provide to them, visits to our offices and their participation in Board of Directors and committee meetings.

 

We believe transparent, effective, and accountable corporate governance practices are key elements of our relationship with our stockholders. To help our stockholders understand our commitment to this relationship and our governance practices, several of our key governance initiatives are summarized below.

 

Our Board of Directors has adopted Corporate Governance Guidelines which govern, among other things, criteria for membership on the Board of Directors, vacancies on the Board of Directors, director responsibilities, director education, and committee composition and charters. You can access these Corporate Governance Guidelines, along with other materials such as committee charters, on our website at http://investor.vcaantech.com.

 

We have adopted a Code of Ethics and Business Conduct applicable to all of our employees as well as our directors and executive officers. Our Code of Ethics and Business Conduct is designed to set the standards of business conduct and ethics and to help directors and employees resolve ethical issues. Our Code of Ethics and Business Conduct applies to our Chief Executive Officer, Chief Financial Officer, all other senior financial executives, our directors when acting in their capacity as directors and to all of our employees. The purpose of our Code of Ethics and Business Conduct is to ensure to the greatest possible extent that our business is conducted in a consistently legal and ethical manner. Employees may submit concerns or complaints regarding audit, accounting, internal controls or other ethical issues on a confidential basis by means of an anonymous toll-free telephone call or email. We investigate all concerns and complaints. Our Code of Ethics and Business Conduct is posted on our website at http://investor.vcaantech.com.

 

We intend to disclose on our website amendments to, or waivers from, any provision of our Code of Ethics and Business Conduct which applies to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer/Controller and persons performing similar functions and amendments to, or waivers from, any provision of our Code of Ethics and Business Conduct described in Item 406(b) of Regulation S-K.

 

VCA has three committees of the Board of Directors: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee meets regularly and has a written charter approved by the Board of Directors. See “Further Information Regarding Board of Directors — Meetings and Committees” contained elsewhere in this Proxy Statement.

 

NASDAQ rules require listed companies to have a board of directors with at least a majority of independent directors. Our Board of Directors has determined that four of our five current directors are independent under the NASDAQ Global Select Market listing standards. Our independent directors are: John M. Baumer, John B. Chickering, Jr., John Heil and Frank Reddick. In addition, all of the directors currently serving on the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are independent under the NASDAQ Global Select Market listing standards.

In determining Mr. Reddick’s independence, the Board of Directors considered Mr. Reddick’s position as a partner at Akin Gump Strauss Hauer & Feld LLP, which provides legal services to us. Mr. Reddick currently serves on the Compensation Committee of our Board of Directors, but does not serve on the 162(m) subcommittee, which determines annual performance based compensation and equity awards for our executive officers. Mr. Reddick has resigned from the Compensation Committee effective May 31, 2011.

 

Stockholders may communicate with the Board of Directors by sending a letter to the Board of Directors of VCA Antech, Inc., c/o Office of the Secretary, 12401 West Olympic Boulevard, Los Angeles, California 90064. Each communication must contain a clear notation indicating that it is a “Stockholder — Board Communication” or “Stockholder — Director Communication,” and each communication must identify the author as a stockholder. The Office of the Secretary will receive the correspondence and forward it to the Chairman of the Board or to any individual director or directors to whom the communication is directed, unless the communication is unduly hostile, threatening, illegal, does not reasonably relate to us or our business, or is similarly inappropriate. The Office of the Secretary has authority to discard any inappropriate communications or to take other appropriate actions with respect to any inappropriate communications.

 

All directors are encouraged to attend VCA’s Annual Meetings of stockholders. Two of our directors attended our 2010 Annual Meeting of Stockholders.

 

VCA’s independent directors regularly meet in executive session without management present.

 

VCA is led by its founder, Robert L. Antin, who has served as Chairman of the Board, Chief Executive Officer and President since our inception in 1986. We believe that combining the role of Chairman of the Board and Chief Executive Officer promotes unified leadership and direction for VCA and provides for a single, clear focus for management to execute the Company’s strategy and business plan. Mr. Antin’s industry expertise and intimate knowledge of VCA’s operations and strategy make him uniquely positioned and qualified to serve in these capacities, and we believe Mr. Antin is seen by our customers, business partners, investors and other stakeholders as providing strong leadership for the Company and the industry.

 

VCA does not have a lead director and does not believe that appointing a lead director would materially impact the performance of the Board of Directors, as it currently employs a variety of structural and operational controls that serve the same purpose. For example, our independent directors meet regularly in executive sessions. This allows independent directors to speak candidly on any matter of interest, without the Chief Executive Officer or other managers present. Moreover, each committee chair acts as “presiding director” for Board of Directors’ discussions on topics within the sphere of his committee. All members of the Board of Directors are free to suggest the inclusion of items on Board of Directors and committee meeting agendas, and, to the fullest extent possible, all meeting materials and presentations are distributed to the Board of Directors in advance, allowing efficient use of time during meetings for questions and comprehensive deliberations. All members of the Board of Directors have direct and complete access to the Company’s management at all times, subject to reasonable time constraints and their judgment. Additionally, the Chief Executive Officer’s performance and compensation are evaluated and determined by the Compensation Committee, which is comprised solely of independent directors. Finally, each committee of the Board of Directors, all of which are comprised solely of independent directors, has the right at any time to retain independent outside financial, legal or other advisors.

 

The Board of Directors oversees an enterprise-wide approach to risk management, designed to support the achievement of the Company’s objectives and to maintain stockholder value. The fully independent Audit Committee is primarily responsible for overseeing the Company’s exposure to financial risk and reviewing the steps the Company’s management has taken to monitor and control such exposure. The Audit Committee meets at least six times per year, in addition to periodic meetings with management and internal and independent auditors to accomplish its purpose. Additionally, each of the committees of the Board of Directors considers the risks within its area of responsibilities. We believe that the leadership structure of our Board of Directors supports its effective oversight of the Company’s risk management.

 

The Board of Directors, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee may each retain outside advisors and consultants of their choosing at VCA’s expense.

 

The Compensation Committee engaged Mercer in 2009 to serve as consultant to the Committee in establishing a relevant group of peer companies against which to assess executive and director compensation and in the design of Supplemental Executive Retirement Programs for our four most senior Named Executive Officers (defined below). The Compensation Committee renewed Mercer’s engagement in 2011.

 

 

 

We have five members on our Board of Directors. Four of the five members of our Board of Directors have been determined by our Board of Directors to meet the independence requirements of the NASDAQ Global Select Market listing standards.

 

As provided in our Amended and Restated Certificate of Incorporation, the Board of Directors has been grouped into three classes, as nearly equal in number as possible, which are elected for staggered terms. Our Class III directors will be elected at this Annual Meeting and will hold office for three years until the 2014 annual meeting and thereafter until his successor is duly elected and qualified. The terms of our Class I directors expire at our 2012 annual meeting. The term of our Class II director expires at our 2013 annual meeting. In accordance with our Corporate Governance Guidelines, any director appointed to fill a vacant seat in a class other than the class of directors whose terms expire at the next annual meeting of stockholders will stand for re-election at the next annual meeting of stockholders.

 

Although we know of no reason why the nominees would not be able to serve, if either nominee is unavailable for election, the proxies will vote your common stock to approve the election of any substitute nominee proposed by our Nominating and Corporate Governance Committee. The Board of Directors may choose to reduce the size of the Board, as permitted by our bylaws, provided we maintain the number of independent directors required by the listing standards of the NASDAQ Global Select Market. The Board of Directors has no reason to believe that VCA’s nominees will be unwilling or unable to serve if elected as directors.

 

Nominees

 

Our nominees for election as Class III directors, John B. Chickering, Jr. and John Heil, are currently members of our Board of Directors, who meet the independence requirements of the NASDAQ Global Select Market listing standards, and have agreed to be named in this Proxy Statement and to serve if elected.

 

The Board of Directors proposes the following candidates for election as Class III directors:

 

Class III Director Nominees

 

John B. Chickering, Jr.

John Heil

 

The principal occupation and certain other information about the nominees, our other directors and our executive officers are set forth on the following pages.

 

The two nominees receiving a plurality of the votes cast at the Annual Meeting will be elected as Class III directors. All proxies will be voted to approve the election of the nominees listed above unless a contrary vote is indicated on the proxy card or voting instruction card. Abstentions, withheld votes and broker non-votes will not be treated as a vote for any particular director and will not affect the outcome of the election of directors.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEES IDENTIFIED ABOVE.

 

 

The following persons serve as our directors:

 

 

The following persons serve as our executive officers:

 

 

Our executive officers are appointed by and serve at the discretion of our Board of Directors. Robert L. Antin and Arthur J. Antin are brothers. There are no other family relationships between any director and/or any executive officer.

 

Robert L. Antin, one of our founders, has served as our Chairman of the Board, Chief Executive Officer and President since our inception in 1986. From September 1983 to 1985, Mr. Antin was President, Chief Executive Officer, a director and co-founder of AlternaCare Corp., a publicly held company that owned, operated and developed freestanding out-patient surgical centers. From July 1978 until September 1983, Mr. Antin was an officer of American Medical International, Inc., an owner and operator of health care facilities. Mr. Antin received his MBA with a certification in hospital and health administration from Cornell University. Mr. Antin’s background as one our founders and his service as our Chief Executive Officer and President since our inception enables him to bring to the Board of Directors valuable insights and perspectives about the Company, its business, operations and prospects, as well as the animal healthcare industry generally.

 

John M. Baumer has served as our director since September 2000. Mr. Baumer is a partner of Leonard Green & Partners, LP, where he has been employed since May 1999. Prior to joining Leonard Green & Partners, LP, he served as a Vice President in the Corporate Finance Division of Donaldson, Lufkin & Jenrette Securities Corporation, or DLJ, in Los Angeles. Prior to joining DLJ in 1995, Mr. Baumer worked at Fidelity Investments and Arthur Andersen LLP. Mr. Baumer currently serves on the board of directors of Leslie’s Poolmart, Inc. and Prospect Medical Holdings, Inc. Mr. Baumer is a 1990 graduate of the University of Notre Dame. He received his MBA from the Wharton School at the University of Pennsylvania. Mr. Baumer’s experience in private equity investment makes him a valuable part of the Board of Directors, particularly as it relates to financings, operations, market developments, and strategic relationships, as well as enabling him to provide keen insight in the area of stockholder relations.

John B. Chickering, Jr. has served as one of our directors since April 2004 and previously served as a director from 1988 to 2000. Mr. Chickering is a certified public accountant (inactive). Mr. Chickering is currently a private investor and independent consultant. Mr. Chickering served in a variety of executive positions within Time Warner, Inc. and Warner Bros., Inc., most recently as the Vice President — Financial Administration for Warner Bros. International Television Distribution until February 1996. Prior to his employment at Warner Bros., Mr. Chickering served as a staff accountant at KPMG Peat Marwick from August 1975 to June 1977. In October 2010, Mr. Chickering filed for personal bankruptcy under Chapter 11 of the United States Bankruptcy Code. Mr. Chickering holds an MBA degree with emphasis in accounting and finance from Cornell University. Mr. Chickering’s extensive corporate finance experience, his accounting experience and his knowledge of accounting principles and financial reporting rules and regulations enables Mr. Chickering to provide valuable service to the Board of Directors as chairman of the Audit Committee. Additionally, Mr. Chickering’s many years of experience as an executive of a public company enables him to make significant contributions to the deliberations of the Board of Directors, especially in connection with evaluating the financial performance of the Company.

 

John Heil has served as one of our directors since February 2002 and previously served as a director from 1995 to 2000. Mr. Heil currently serves a member of Temper-Pedic International’s Board of Directors and compensation committee, a position he has held since March 2008. Mr. Heil currently serves as President of United Pet Group, Inc., a global manufacturer and marketer of pet supplies and subsidiary of Spectrum Brands, Inc. Mr. Heil also serves on Spectrum Brands’ Executive Committee. Prior to joining United Pet Group, Mr. Heil spent twenty-five years with the H. J. Heinz Company in various executive and general management positions including President and Managing Director of Heinz Pet Products and President of Heinz Specialty Pet Foods. Mr. Heil holds a BA degree in economics from Lycoming College. On February 3, 2009, Spectrum Brands, Inc. and its United States subsidiaries (the “Spectrum Debtors”) filed voluntary petitions in the United States Bankruptcy Court for the Western District of Texas (the “Bankruptcy Court”) seeking reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Bankruptcy Code. On July 15, 2009, the Bankruptcy Court entered a written order confirming the Spectrum Debtors’ plan of reorganization. On August 28, 2009, the plan of reorganization became effective and the Spectrum Debtors emerged from reorganization proceedings under the United States Bankruptcy Code. Mr. Heil’s experience in the pet care industry is of particular value to the Board of Directors as it provides a breadth and depth of understanding and insight that directly relates to the business of the Company. Additionally, Mr. Heil’s significant executive experience positions him to provide operational, financial and strategic planning insights with respect to the growth of the Company’s business and brand.

 

Frank Reddick has served as one of our directors since February 2002. For more than the past five years, Mr. Reddick has been a partner in Akin Gump Strauss Hauer & Feld LLP, a global, full service law firm. Mr. Reddick co-chairs Akin Gump’s firm-wide corporate practice group. Mr. Reddick is principally engaged in the practice of corporate and securities law, with a concentration on corporate finance, mergers and acquisitions, joint ventures and other strategic alliances. Mr. Reddick holds a JD from the University of California, Hastings College of the Law. Mr. Reddick’s formal legal training and his experience as a partner of a major international law firm provides a background and perspective that complements the skill sets of the other members of the Board of Directors.

 

Arthur J. Antin, one of our founders, has served as our Chief Operating Officer and Senior Vice President since our inception. From 1986 until June 2004, Mr. Antin also served as our Secretary and as a director. From October 1983 to September 1986, Mr. Antin served as Director of Marketing/Investor Relations of AlternaCare Corp. At AlternaCare Corp., Mr. Antin developed and implemented marketing strategies for a network of outpatient surgical centers. Mr. Antin received an MA in Community Health from New York University.

 

Neil Tauber, one of our founders, has served as our Senior Vice President of Development since our inception. From 1984 to 1986, Mr. Tauber served as the Director of Corporate Development at AlternaCare Corp. At AlternaCare Corp., Mr. Tauber was responsible for the acquisition of new businesses and syndication to hospitals and physician groups. From 1981 to 1984, Mr. Tauber served as Chief Operating Officer of MDM

Services, a wholly owned subsidiary of Mediq, a publicly held health care company, where he was responsible for operating and developing a network of retail dental centers and industrial medical clinics. Mr. Tauber holds an MBA from Wagner College.

 

Tomas W. Fuller joined us in January 1988 and served as Vice President and Controller until November 1990 when he became Chief Financial Officer. In June 2004, Mr. Fuller became Secretary. From 1980 to 1987, Mr. Fuller worked at Arthur Andersen LLP, the last two years of which he served as audit manager. Mr. Fuller received his BA in economics from the University of California at Los Angeles.

 

Dawn R. Olsen joined us in January 1997 as Vice President, Controller. In March 2004, Ms. Olsen became Principal Accounting Officer. From 1993 to 1996, Ms. Olsen served as Senior Vice President, Controller of Optel, Inc., a privately held telecommunications company. From 1987 to 1993, Ms. Olsen served as Assistant Controller and later as Vice President, Controller of Qintex Entertainment, Inc., a publicly held television film distribution and production company. From 1981 to 1987, Ms. Olsen worked at Arthur Andersen LLP, the last year of which she served as audit manager. Ms. Olsen currently serves on the board of the Women’s Leadership Council in Los Angeles. Ms. Olsen is a certified public accountant (inactive) and received her BS in business/accounting from California State University, Northridge.

 

Josh Drake joined us in 1992.  In February 2008, Mr. Drake became President of Antech Diagnostics, our laboratory division. Over the past five years, Josh Drake has held various positions at VCA Antech, including, Group Vice President of our animal hospital division, Group Vice President of Antech Diagnostics and Senior Vice President of Antech Diagnostics. Mr. Drake received his BS in economics from the University of California at Santa Barbara.

 

 

Four of the five members of our Board of Directors have been determined by our Board of Directors to meet the independence requirements of the NASDAQ Global Select Market listing standards. We refer to each of these directors as an “independent director.”

 

During fiscal 2010, the Board of Directors held four meetings and acted once by unanimous written consent. VCA’s independent directors regularly meet in executive session without management present.

 

The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, all of which are constituted solely of independent directors. During fiscal 2010, our Committees met an aggregate of 16 times and acted by written consent two times.

 

The Audit Committee consists of John M. Baumer, John B. Chickering, Jr. (Chairman) and John Heil, each an independent director and each financially literate as required by the NASDAQ Global Select Market listing standards. Our Board of Directors has determined that Messrs. Baumer, Chickering and Heil qualify as “audit committee financial expert[s]” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act. During fiscal 2010, the Audit Committee held ten meetings.

 

Among other matters, the Audit Committee:

 

 

Our Audit Committee charter is posted on our website at http://investor.vcaantech.com.

 

During 2010, the Compensation Committee consisted of John M. Baumer, John B. Chickering, Jr. and Frank Reddick (Chairman), each an independent director. Mr. Reddick does not serve on the 162(m) subcommittee, which determines annual performance based compensation and equity awards for our executive officers. Mr. Reddick has resigned from the Compensation Committee effective May 31, 2011. During fiscal 2010, the Compensation Committee held five meetings and acted twice by unanimous written consent. The Compensation Committee:

 

 

 

The Compensation Committee is responsible for overseeing the determination, implementation and administration of remuneration, including compensation, benefits and perquisites, of all executive officers and other members of senior management whose remuneration is the responsibility of the Board of Directors. The Compensation Committee seeks the views of our Chief Executive Officer with respect to establishing appropriate compensation packages for the executive officers (other than the Chief Executive Officer). The Compensation Committee also has the authority to delegate its responsibilities to subcommittees of the Compensation Committee if it determines such delegation would be in the best interest of the Company.

 

On October 23, 2007, the Compensation Committee established the 162(m) subcommittee, which consists of the two “outside directors” (as such term is defined in Treasury Regulation 1.162-27(e)(3)) of the Compensation Committee, John M. Baumer and John B. Chickering, Jr. The 162(m) subcommittee has the power and authority, to the same extent as would the Compensation Committee, to act, in the name of and on behalf of the Company, with respect to the administration of the Plans, including (i) granting equity awards to the Company’s executive officers pursuant to the terms of the VCA Antech, Inc. 2006 Equity Incentive Plan, (ii) granting performance awards consisting of equity and/or cash to the Company’s executive officers under the Plans and (iii) establishing the performance goals underlying the performance awards and determining whether these performance goals have been met. Mr. Reddick, who does not meet the definition of an outside director for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), is not a member of the 162(m) subcommittee.

 

The Chairman of the Compensation Committee develops the meeting calendar for the year based on member availability and other relevant events within our corporate calendar. The Compensation Committee meeting agendas are generally developed by our Compensation Committee Chairman. The Compensation Committee generally meets in executive session, with no member of management being present at the meetings. In addition, the Compensation Committee may request that any of our directors, officers or employees, or other persons attend its meetings to provide advice, counsel or pertinent information as the Compensation Committee requests.

 

The Compensation Committee has the sole authority to retain independent counsel or other advisors, as it deems necessary in connection with its responsibilities at the Company’s expense. The Compensation Committee also has the sole authority to retain and terminate compensation consultants.

 

Our Compensation Committee charter is posted on our website at http://investor.vcaantech.com.

 

The Nominating and Corporate Governance Committee consists of John M. Baumer and John B. Chickering, Jr., each an independent director. During fiscal 2010, the Nominating and Corporate Governance Committee held one meeting. The principal responsibilities of the Nominating and Corporate Governance Committee are to propose to the Board of Directors a slate of nominees for election by the stockholders at our Annual Meetings and to review and reassess the adequacy of the Corporate Governance Guidelines and recommend any proposed changes to the Board of Directors.

 

In considering director candidates, the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials and does not have any specific minimum qualifications that must be met in order to be recommended as a nominee. The Nominating and Corporate Governance Committee does believe, however, that all members of the Board of Directors should have high personal and professional ethics, integrity, practical wisdom and mature judgment, no conflict of interest that would interfere with their performance as a director of a public corporation, a commitment to serve on the Board of Directors over a period of several years, a willingness to represent the best interests of all stockholders and objectively appraise management performance and sufficient time to devote to matters of the Board of Directors.

The Board of Directors and the Nominating and Corporate Governance Committee believe that diversity with respect to viewpoint, skills and experience is an important factor in Board composition. Additionally, in April 2011, the Board of Directors amended the Corporate Governance Guidelines to clarify that gender, age and ethnic diversity are considered by the Nominating and Corporate Governance Committee when seeking and evaluating director candidates. The Board of Directors and the Nominating and Corporate Governance Committee also consider a variety of other factors, attributes and criteria, including each candidate’s (i) general understanding of marketing, finance and other disciplines relevant to the success of publicly traded companies, (ii) understanding of the Company’s business, (iii) education and professional background, personal and professional integrity, (iv) knowledge, skills and expertise and (v) personal accomplishments to assure appropriate Board composition, taking into account the current Board members and the specific needs of the Company and the Board of Directors.

 

Our Nominating and Corporate Governance Committee may employ a variety of methods for identifying and evaluating nominees for director, including stockholder recommendations. The Nominating and Corporate Governance Committee will consider candidates recommended by our stockholders, provided that the recommendations are made in accordance with the procedures required under our Bylaws, as summarized in the “Questions and Answers” section of this Proxy Statement. The Nominating and Corporate Governance Committee will not evaluate candidates differently based on who made the recommendation for consideration. Our Nominating and Corporate Governance Committee charter is posted on our website at http://investor.vcaantech.com.

 

In fiscal 2010, all directors attended 75% or more of the aggregate of (i) the total number of meetings held by the Board of Directors and (ii) the total number of meetings held by all committees on which they served. The Company encourages, but does not require, all directors and director nominees to attend our Annual Meetings of stockholders. Two of our directors attended our 2010 Annual Meeting of Stockholders.

 

In 2010, certain members of the Company’s senior management and the Compensation Committee, in consultation with outside counsel, assessed whether the Company’s compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. This assessment included reviewing various elements of the Company’s compensation policies and practices. Among other things, the Compensation Committee considered that (a) the compensation program for the executive officers and other key personnel adequately balances the components of total compensation (i.e., annual base salary, annual cash performance awards and/or cash bonuses and long-term equity awards), (b) the annual base salary for all employees, including executive officers, provides a level of assured cash compensation that reduces incentive for risk-taking, (c) the annual cash bonus component of non-executive employees’ total compensation is small compared to the annual base salary component and, as a result, unlikely to give rise to excessive risk-taking by non-executive employees, (d) the annual cash performance awards to executive officers are typically based on the Company’s Adjusted EBITDA or other similar performance metrics that correlate such awards to the Company’s overall financial performance, and (e) the Company’s performance-based equity awards typically have a three-year vesting period that ensures that the employees’ interests align with the Company’s stockholders’ interests and reduces incentive for short-term risk taking behavior. Based on this review, the Compensation Committee determined that risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

During fiscal 2010, the Compensation Committee of our Board of Directors consisted of John B. Chickering, Jr., John M. Baumer and Frank Reddick. None of these individuals was one of our officers or employees at any time during fiscal 2010. Mr. Reddick is a partner at Akin Gump Strauss Hauer & Feld LLP, which provided legal services to us during fiscal 2010 and is providing legal services to us in fiscal 2011. In

2010, the Company paid Akin Gump Strauss Hauer & Feld LLP $2.3 million for legal services. Nevertheless, Mr. Reddick is not disqualified from serving as an independent director on our Board of Directors under the NASDAQ Global Select Market listing standards because of the relatively small amount of fees we paid to Akin Gump Strauss Hauer & Feld LLP in fiscal years 2010, 2009 and 2008 in relation to our total revenues and the total revenues of Akin Gump Strauss Hauer & Feld LLP for those same periods. Mr. Reddick has resigned from our Compensation Committee effective as of May 31, 2011.

 

None of our executive officers served as a member of the board of directors or compensation committee of any entity that has or has had one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

 

 

The Audit Committee has engaged the firm of KPMG LLP to continue to serve as our independent registered public accounting firm for the current fiscal year ending December 31, 2011. KPMG LLP has served as VCA’s principal independent registered public accounting firm since June 14, 2002.

 

We are asking the stockholders to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011. The ratification of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011, will require the affirmative vote of a majority of the votes cast at the Annual Meeting. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal. All proxies will be voted to approve the appointment unless a contrary vote is indicated on the proxy card.

 

We anticipate that representatives of KPMG LLP will attend the Annual Meeting for the purpose of responding to appropriate questions. The representatives of KPMG LLP will be afforded an opportunity to make a statement if they so desire at the Annual Meeting.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

The following table sets forth the aggregate fees billed to us by KPMG LLP, our independent registered public accounting firm, for professional services rendered during the fiscal years ended December 31, 2010 and 2009.

 

 

 

 

The Audit Committee has established a policy with respect to the pre-approval of audit and permissible non-audit services and fees provided by the independent registered public accounting firm. The Audit Committee’s pre-approval policy requires that all audit and permissible non-audit services and fees be pre-approved by the Audit Committee. Specific pre-approval is not required for permissible non-audit services provided that they:

 

 

Pursuant to the pre-approval policy, the Audit Committee’s Chairman is delegated the authority to pre-approve audit services and fees, provided he reports those approvals at the next meeting of the Audit Committee. The term of any pre-approval granted by the Audit Committee with respect to a given service is twelve months. All fees in excess of pre-approved levels require specific pre-approval by the Audit Committee. All audit and permissible non-audit services provided to us in connection to fiscal 2010 were approved by the Audit Committee.

 

 

The Audit Committee Report does not constitute “soliciting material,” and shall not be deemed “filed” with the Securities and Exchange Commission or to be subject to Regulation 14A or 14C as promulgated by the Securities and Exchange Commission, or to the liabilities of Section 18 of the Securities Exchange Act of 1934.

 

The Committee is responsible for overseeing, on behalf of the Board of Directors, the Company’s accounting and financial reporting process and the audits of VCA’s financial statements. The Committee acts only in an oversight capacity and relies on the work and assurances of management, which has the primary responsibility for the financial reporting process, including the system of internal controls, and the financial statements.

 

The Committee has:

 

 

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, for filing with the Securities and Exchange Commission.

 

Audit Committee

 

John M. Baumer

John B. Chickering, Jr.

John Heil

 

 

We are asking our stockholders to re-approve the material terms of the performance goals under the VCA Antech, Inc. 2006 Equity Incentive Plan (as amended, the “2006 Plan”), in accordance with Section 162(m) of the Code (“Section 162(m)”). Re-approval of the material terms of the performance goals under the 2006 Plan will allow certain awards made under the 2006 Plan to qualify as tax-deductible performance-based compensation under Section 162(m). The 2006 Plan has not been amended, modified or altered in any way. Accordingly, stockholders are not being asked to approve any amendment to the 2006 Plan.

 

Section 162(m) places a limit of $1,000,000 on the amount the Company may deduct in any one year for compensation paid to a “covered employee,” which means any person who is the principal executive officer or one of the three other officers (other than the principal executive officer and the principal financial officer) whose compensation is disclosed in the Company’s proxy statement as a result of their total compensation. There is, however, an exception to this limit on deductibility for compensation that satisfies certain conditions for “qualified performance-based compensation” set forth under Section 162(m). One of the conditions is that the stockholders must approve the material terms of the performance goals no later than the first stockholder meeting that occurs in the fifth year following the year in which the stockholders previously approved those terms, if the compensation committee has the authority to change the targets under the performance goals, which is the case at VCA. While the Company’s stockholders previously approved the 2006 Plan and its material terms at the Company’s 2006 annual meeting, in order for the awards made to covered employees pursuant to the 2006 Plan after this Annual Meeting to continue to meet the exception to the deduction limit, the material terms of the performance goals must be re-approved at this Annual Meeting.

 

For purposes of Section 162(m), the material terms of the performance goals under the 2006 Plan include (i) the employees eligible to receive compensation under the 2006 Plan, (ii) a description of the business criteria on which the performance goals are based and (iii) the maximum amount of compensation that can be paid to an employee if the performance goals are attained. Each of these aspects of the 2006 Plan is described below. The description below is qualified in its entirety by the full text of the 2006 Plan, which is attached as Appendix A to this Proxy Statement.

 

Purpose of the 2006 Plan

 

The 2006 Plan is intended to enable the Company, and its affiliates, to obtain and retain the services of the types of employees, consultants and directors who will contribute to the Company’s long range success and to provide incentives that are linked directly to increases in share value which will inure to the benefit of all of our stockholders.

 

Eligibility

 

Under the 2006 Plan, awards in the form of incentive stock options may be granted to the Company’s and its subsidiaries’ employees, and awards in the form of nonstatutory stock options, stock appreciation rights, restricted awards and performance awards may be granted to the Company’s and its affiliates’ employees, consultants and directors.

 

Business Criteria

 

The performance goals for the performance awards under the 2006 Plan are determined by the plan administrator, in its sole discretion, prior to the time 25% of the performance period has elapsed and may be

based on any one or more of the following business criteria as applied to a participant, a business unit or the Company and its affiliates:

 

 

The 162(m) subcommittee is currently the plan administrator for the 2006 Plan.

 

Available Shares and Maximum Awards under the 2006 Plan

 

As of December 31, 2010, there were 4,351,931 shares of common stock available for future issuance under the 2006 Plan. The number of shares available for issuance under the 2006 Plan may increase by any shares of common stock underlying prior outstanding options that expire or prior outstanding awards that are forfeited, cancelled or terminated for any reason without having been exercised in full.

 

The plan administrator has the authority in its sole discretion to determine the type or types of awards made under the 2006 Plan. These awards may include, but are not limited to, stock options and awards made or denominated in shares of common stock. Awards may be granted singly or in combination. The maximum number of shares with respect to which awards can be granted to any employee in any fiscal year is limited to 500,000 shares. The foregoing share limitations will be proportionately adjusted by the plan administrator in the event that a stock dividend, stock split, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, change in the Company’s corporate structure or other transaction not involving the receipt of consideration by the Company. No award may be made under the 2006 Plan after March 6, 2016.

New Plan Benefits

 

The future awards that will be received by the participants under the 2006 Plan cannot be determined at this time, as the actual awards will depend on the 162(m) subcommittee’s discretion to grant awards and determine the size of such awards and actual performance. The stock awards granted to the Named Executive Officers under the 2006 Plan and outstanding as of December 31, 2010 are set forth in the Outstanding Equity Awards at Fiscal Year-End Table on page 41 of this Proxy Statement. As of March 31, 2011, (i) the Company’s executive officers as a group (5 officers) held outstanding options for 1,315,000 shares of our common stock, restricted stock awards for 62,032 shares and restricted stock units for 82,888 shares, (ii) the Company’s non-employee directors as a group (four directors) held outstanding options for 118,432 shares and restricted stock awards for 16,375 shares and (iii) all of our employees, other than executive officers, held outstanding options for 1,814,287 shares and restricted stock awards for 352,862 shares. Nothing in this proposal precludes the Company or any committee or subcommittee thereof from making any payment or granting awards that do not qualify for tax deductibility under Section 162(m).

 

Awards

 

Awards under the 2006 Plan may consist of stock options, stock appreciation rights, restricted stock and restricted stock unit awards or performance awards. The 2006 Plan also provides a safe-harbor mechanism (409A awards) that conforms the payment timing provisions of any award that is deferred compensation subject to the requirements of Section 409A of the Code.

 

Stock Options.  The plan administrator may grant options to purchase shares of our common stock that are either “incentive stock options,” meaning they are intended to satisfy the requirements of Section 422 of the Code, or “nonstatutory stock options,” which are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the 2006 Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as the plan administrator may determine, as specified in the applicable award agreement. The exercise price of an option under the 2006 Plan will not be less than the fair market value per share of our common stock on the date of grant. However, in the case of an incentive stock option granted to any employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company and its affiliates, the exercise price will not be less than 110% of the fair market value per share of our common stock on the date of grant. The maximum term of an option granted under the 2006 Plan will be ten years from the date of grant (or five years in the case of an incentive stock option granted to any employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company and its affiliates). Payment in respect of the exercise of an option may be made in cash or by check, or the plan administrator may, in its discretion and to the extent permitted by law, allow such payment to be made with previously acquired shares of our common stock, through a broker-assisted cashless exercise mechanism, or by such other method as the plan administrator may determine to be appropriate.

 

Stock Appreciation Rights.  A stock appreciation right entitles a participant, upon settlement, to receive a payment based on the excess of the fair market value of a share of our common stock on the date of settlement over the base price of the right, multiplied by the applicable number of shares of common stock. Stock appreciation rights may be granted on a stand-alone basis or in tandem with a related stock option. The base price may not be less than the fair market value of a share of our common stock on the date of grant. The plan administrator determines the vesting requirements and the payment and other terms of a stock appreciation right, including the effect of termination of service of a participant. Vesting may be based on the continued service of the participant for specified periods or on the attainment of specified business performance goals established by the plan administrator or both. The plan administrator may accelerate the vesting of stock appreciation rights at any time. Generally, any stock appreciation right, if granted, would terminate ten years after the date of the grant. Stock appreciation rights may be payable in cash or in shares of our common stock or in a combination of both as determined by the plan administrator.

 

Restricted Stock Awards.  An award of restricted stock consists of shares of our common stock that generally is non-transferable and is subject to other restrictions determined by the plan administrator for a specified

period. The plan administrator determines the terms of the restricted stock awards. Restrictions on restricted stock lapse at such times determined by the plan administrator and specified in the applicable award agreement. If a participant terminates employment or services during the restricted period, then any unvested restricted stock is forfeited. A participant who receives an award of restricted stock will have all of the rights of a stockholder with respect to the shares subject to the award, including the right to receive dividends and to vote the shares.

 

Restricted Stock Unit Awards.  A restricted stock unit award is a notional account representing one share of our common stock. The plan administrator determines the terms of the restricted stock units, including the vesting schedule, as specified in the applicable award agreement. Vesting may be based on the continued service of the participant for specified periods or on the attainment of specified business performance goals established by the plan administrator or both. If a participant terminates employment or services during the period over which all or a portion of the units are to be earned, then any unvested units will be forfeited. At the election of the plan administrator the participant will receive a number of shares of common stock equal to the number of units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned. A restricted stock unit also may be granted on a fully vested basis with a deferred payment date, or may specify a payment settlement date that is later than the vesting date.

 

Performance Awards.  The plan administrator may grant performance awards, either alone or in addition to other awards under the 2006 Plan, which entitle the participant to acquire shares of common stock or common stock units upon the satisfaction of specified performance goals. Performance awards are intended to qualify as “performance-based compensation” under Section 162(m) by conditioning the vesting of the award on the satisfaction of pre-established performance goals. The plan administrator may establish these performance goals with reference to one or more of the business criteria listed above under “Business Criteria.” To the extent permitted by law, the plan administrator may, in its sole discretion, change the business criterion or criteria selected for purposes of establishing the performance goals for any specific performance period to any other of the business criteria listed above without obtaining stockholder approval or modify the calculation of a performance goal under certain circumstances. A participant who receives a performance award will have the rights of a stockholder only as to shares of our common stock actually received by the participant under the award, and not with respect to shares subject to the award but not actually received by the participant.

 

Transferability.  Each option may be exercised during the participant’s lifetime only by the participant or, if permissible under applicable law, by the participant’s guardian or legal representative and may not be otherwise transferred or encumbered by a participant other than by will or by the laws of descent and distribution. The plan administrator, however, may permit nonstatutory stock options to be transferred to family members, a trust for the benefit of such family members, a partnership or limited liability company whose partners or stockholders are the participant and his or her family members or anyone else approved by the plan administrator. All other awards may be transferable only as determined by the plan administrator, as set forth in the applicable award agreement.

 

Effect of a Change in Control.  The plan administrator may provide in the terms of an award agreement that, in the event of a change in control (as defined in the 2006 Plan), any option or stock appreciation right that is not then exercisable and vested will become fully exercisable and vested, and any restricted award or performance award will be deemed earned and payable in full in cash or in shares of our common stock.

 

Termination of Employment.  Unless specifically provided otherwise in an award agreement or an employment agreement, generally, upon a termination of employment or services (other than for cause) unvested stock options terminate and vested stock options may be exercised following the termination of a participant’s employment for a period of one year in the event of the participant’s death or disability or three months in the event of a termination other than due to the participant’s death or disability. However, stock options may not be exercised after the expiration date set forth in an option agreement. In addition, unless specifically provided otherwise in an award agreement or employment agreement, unvested restricted stock and restricted stock units will be forfeited and terminate, and the entitlement to receive any payment pursuant to unvested performance awards will terminate.

Term and Amendment

 

The 2006 Plan has a term of ten years ending on March 6, 2016, and no further awards may be granted under the 2006 Plan after that date. Our Board of Directors may amend, suspend or terminate the 2006 Plan at any time; however, stockholder approval to amend the 2006 Plan may be necessary if the law or the applicable NASDAQ rules so require. No amendment, suspension or termination will materially and adversely affect the rights of any participant of any award without the consent of the participant.

 

U.S. Federal Income Tax Consequences

 

The following is a general summary of the material U.S. federal income tax consequences of the grant, exercise and vesting of awards under the 2006 Plan and is intended to reflect the current provisions of the Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local or payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant. It is intended that the 2006 Plan and any awards granted under the 2006 Plan will comply with the provisions of Section 409A of the Code, so that participants will not be subject to adverse tax consequences under that Section.

 

Nonstatutory Stock Options.  No income will be realized by a participant upon grant of a nonstatutory stock option. Upon the exercise of a nonstatutory stock option, the participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise. In general, VCA should be able to deduct the amount treated as taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain individuals.

 

Incentive Stock Options.  An individual granted an incentive stock option generally should not recognize taxable income at the time of grant or at the time of exercise of the option. However, the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise will be an “item of tax preference” that may give rise to “alternative minimum tax” liability for the year in which the option is exercised. If the holder does not dispose of the acquired shares before the later of (1) two years following the date of grant and (2) one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will be long-term capital gain or loss, as the case may be. Assuming both of these holding periods are satisfied, VCA will not be entitled to a deduction for federal income tax purposes in connection with the grant or exercise of the incentive stock option. If the shares acquired upon exercise of the incentive stock option are disposed of less than two years from the date of grant or one year from the date of exercise (a “disqualifying disposition”), the participant will generally recognize ordinary compensation income in the year of disposition in an amount equal to the excess of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on disposition), over the exercise price. In the event of a disqualifying disposition, VCA should be able to deduct the amount treated as taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain individuals.

 

Stock Appreciation Rights.  No income will be realized by a participant upon grant of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant will realize ordinary compensation income in an amount equal to the fair market value of the payment received in respect of the stock appreciation right. VCA should be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain individuals.

 

Restricted Stock Awards.  A participant will not be subject to tax upon the grant of a restricted stock award, including a performance award, unless the participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an award of restricted stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the participant will have taxable compensation equal to the

difference between the fair market value of the shares on that date over the amount the participant paid for such shares, if any, unless the participant made an election under Section 83(b) of Code to be taxed at the time of grant. If the participant made an election under Section 83(b), the participant will have taxable compensation at the time of grant equal to the difference between the fair market value of the shares on the date of grant over the amount the participant paid for such shares, if any. VCA should be able to deduct the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain individuals.

 

Restricted Stock Units.  A participant should not be subject to tax upon the grant of a restricted stock unit award, including a performance award. Rather, upon the delivery of shares or cash pursuant to a restricted stock unit award, the participant will have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) the participant actually receives with respect to the award. VCA should be able to deduct the amount of taxable compensation to the participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain individuals.

 

Section 162(m).  In general, Section 162(m) denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation exceeding $1 million per year per person to its principal executive officer and the three other officers (other than the principal executive officer and principal financial officer) whose compensation is disclosed in its proxy statement as a result of their total compensation, subject to certain exceptions. The 2006 Plan is intended to satisfy an exception to the tax deductibility limitation with respect to grants of options and stock appreciation rights to covered employees. In addition, the 2006 Plan is designed to permit granting certain awards of restricted stock and restricted stock units as performance awards intended to qualify under the “performance-based compensation” exception to Section 162(m). However, we have not requested a ruling from the Internal Revenue Service or an opinion of counsel regarding this issue.

 

Section 280G.  Under certain circumstances, the granting or enhancement of awards, the accelerated vesting or exercise of stock options or the accelerated lapse of restrictions with respect to other awards in connection with a change in control might be deemed an “excess parachute payment” for purposes of the golden parachute tax provisions of section 280G of the Code. To the extent it is so considered, the participant may be subject to a 20% excise tax and VCA may be denied a federal income tax deduction.

 

Inapplicability of ERISA.  Based upon current law and published interpretations, VCA does not believe that the 2006 Plan is subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended.

 

Required Vote and Recommendation of the Board

 

The affirmative vote of a majority of the votes cast on the matter at the Annual Meeting, in person or by proxy, is required to re-approve the material terms of the performance goals under the 2006 Plan. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal.

 

The Board of Directors believes that it is in the best interests of the Company and its stockholders to enable the Company to implement compensation arrangements under the 2006 Plan that qualify as fully tax deductible performance-based compensation.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RE-APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER THE VCA ANTECH, INC. 2006 EQUITY INCENTIVE PLAN PURSUANT TO SECTION 162(m).

 

 

 

We are asking our stockholders to re-approve the material terms of the performance goals under the VCA Antech, Inc. 2007 Cash Incentive Plan (the “2007 Plan”) in accordance with Section 162(m). Re-approval of the material terms of the performance goals under the 2007 Plan will allow certain awards made under the 2007 Plan to qualify as tax-deductible performance-based compensation under Section 162(m). The 2007 Plan has not been amended, modified or altered in any way. Accordingly, stockholders are not being asked to approve any amendment to the 2007 Plan.

 

As more fully discussed under “Item 3 — Re-Approval of the Material Terms of the Performance Goals under the VCA Antech, Inc. 2006 Equity Incentive Plan pursuant to Section 162(m) of the Internal Revenue Code”, above, one of the conditions of Section 162(m) is that the stockholders must approve the material terms of the performance goals no later than the first stockholder meeting that occurs in the fifth year following the year in which the stockholders previously approved those terms. While the Company’s stockholders previously approved the 2007 Plan and its material terms at the Company’s 2007 Annual Meeting, in order for the awards made pursuant to the 2007 Plan after the Company’s 2012 annual meeting to continue to meet the exception to the deduction limit, the material terms of the performance goals must be re-approved at or prior to the Company’s 2012 annual meeting of stockholders.

 

For purposes of Section 162(m), the material terms of the performance goals under the 2007 Plan include (i) the employees eligible to receive compensation under the 2007 Plan, (ii) a description of the business criteria on which the performance goals are based and (iii) the maximum amount of compensation that can be paid to an employee if the performance goals are attained. Each of these aspects of the 2007 Plan is described below. This description is qualified in its entirety by the full text of the 2007 Plan, which is attached as Appendix B to this Proxy Statement.

 

Purpose of the 2007 Plan

 

The 2007 Plan allows the Company to provide an incentive to executive officers and other selected key executives of the Company and its subsidiaries to contribute to the growth, profitability and increased stockholder value of the Company, to obtain and retain these executives, and to endeavor to maintain the tax-deductible status of these incentive payments to our principal executive officer, and the three other most-highly paid executive officers (other than the principal executive officer and the principal financial officer) at year end who are named in our proxy statement by reason of their total compensation for the year in which such amounts are claimed as a deduction by the Company.

 

Eligibility

 

Awards may be granted under the 2007 Plan to the executive officers of the Company and its subsidiaries and other key executives of the Company and its subsidiaries selected by the 162(m) subcommittee.

 

Business Criteria

 

The performance goals for cash performance awards under the 2007 Plan will be determined by the 162(m) subcommittee, in its sole discretion, prior to the earlier of 90 days after the commencement of the performance period or the date prior to the date on which 25% of the performance period has elapsed and can be based upon any one or more of the following business criteria:

 

 

 

Such objective performance criteria are not required to be based on increases in specific business criteria, but may be based on maintaining the status quo or limiting economic losses.

 

Maximum Awards under the 2007 Plan

 

A participant may be granted one or more cash performance awards for performance periods commencing during the same calendar year, so long as the cash payments that may be earned under such performance awards, in the aggregate, do not exceed the lesser of five times such participant’s base salary or $7,000,000.

 

The future awards that will be received by the participants under the 2007 Plan cannot be determined at this time, as the actual awards will depend on the 162(m) subcommittee’s discretion to grant awards and determine the amount of such awards, actual performance and the 162(m) subcommittee’s discretion, if applied, to reduce the amount of such awards. The cash performance awards granted to the Named Executive Officers under the 2007 Plan are set forth under the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table on page 39 of this Proxy Statement.

 

Required Vote and Recommendation of the Board

 

The affirmative vote of a majority of the votes cast on the matter at the Annual Meeting, in person or by proxy, is required to re-approve the material terms of the performance goals under the 2007 Plan. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of this proposal.

 

The Board of Directors believes that it is in the best interests of the Company and its stockholders to enable the Company to implement compensation arrangements under the 2007 Plan that qualify as fully tax deductible performance-based compensation.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RE-APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER THE VCA ANTECH, INC. 2007 CASH INCENTIVE PLAN PURSUANT TO SECTION 162(m).

 

 

 

Item 5 is an advisory vote on the compensation of our Named Executive Officers. The Compensation Discussion and Analysis beginning on page 32 of this Proxy Statement describes the Company’s compensation program and the compensation decisions made by the Board of Directors, Compensation Committee and the 162(m) subcommittee with respect to our Named Executive Officers. The Board of Directors is asking our stockholders to cast a non-binding advisory vote on the following resolution:

 

“RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the executive officers of the Company named in the Summary Compensation Table, as disclosed in the Company’s Proxy Statement for the Company’s 2011 Annual Meeting of Stockholders (which disclosure includes the Compensation Discussion and Analysis, the executive compensation tables and the related footnotes and narrative accompanying the tables).”

 

While the advisory vote the Board of Directors is asking you to cast is non-binding, the Board of Directors, the Compensation Committee and the 162(m) subcommittee value the view of the Company’s stockholders and will review and consider the voting results when making future decisions regarding our executive compensation program. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of the proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT (WHICH DISCLOSURE INCLUDES THE COMPENSATION DISCUSSION AND ANALYSIS, THE EXECUTIVE COMPENSATION TABLES AND THE RELATED FOOTNOTES AND NARRATIVE ACCOMPANYING THE TABLES).

 

 

Item 6 is an advisory vote on the frequency of advisory votes on the compensation of our Named Executive Officers. In Item 5, the Company’s stockholders are being asked to cast a non-binding advisory vote with respect to the compensation of our Named Executive Officers. This advisory vote is typically referred to as a “say-on-pay” vote. In this Item 6, the Board of Directors is also asking the Company’s stockholders to cast a non-binding advisory vote on how frequently the Company should hold say-on-pay votes in the future. Stockholders will be able to cast their votes on whether to hold say-on-pay votes every one, two or three years. Alternatively, you may abstain from casting a vote.

 

Our Board of Directors believes that stockholders should have the opportunity to vote on the compensation of our Named Executive Officers once every three years, consistent with our long-term approach to executive compensation. While the Compensation Committee regularly reviews our compensation program and compensation of our Named Executive Officers with an in-depth review on an annual basis, our programs and policies are designed to enhance long-term growth and performance, and incentivize our employees on a long-term basis. The Board of Directors believes that a triennial vote fosters a more long-term view of compensation and provides members of the Compensation Committee and the Board of Directors a reasonable opportunity to consider the results of the advisory vote, engage with our stockholders to better understand their views about our compensation program, and respond in a more effective manner.

 

Our stockholders are able to provide input to the Board of Directors on an annual or more frequent basis using tools other than a say-on-pay vote. Our stockholders may communicate directly with the Board of Directors or individual directors by sending letters or by speaking with directors at the annual meeting of stockholders. While more frequent votes on executive compensation will indicate whether our stockholders have concerns about our compensation programs and policies, it will not provide specific information about the views of our stockholders. The Board of Directors believes the available tools will provide more meaningful mechanisms for stockholders to share their views about our compensation programs and policies than the advisory vote.

 

Additionally, the Board of Directors believes that more frequent say-on-pay votes would not allow our stockholders sufficient time to either evaluate the effectiveness of our short- and long-term compensation strategies and the related performance of our business, or to evaluate any changes to the implementation of our compensation programs following prior non-binding advisory votes. The Compensation Committee generally reviews and makes adjustments to the compensation program for our Named Executive Officers during the first quarter of each year, while we typically hold the our annual meeting during the second quarter of the year. As a result, if a say-on-pay vote is held on an annual basis, any changes made as a result of the previous vote would most likely have been in place for a maximum of three months at the time of the next advisory vote, which would not provide sufficient time for stockholders to properly evaluate any changes made to our compensation program.

 

The Board of Directors is asking our stockholders to cast a non-binding advisory vote on the following resolution:

 

“RESOLVED, that the stockholders of the Company approve, on an advisory basis, whether the stockholder non-binding advisory vote on the compensation of the Company’s named executive officers listed in the annual proxy statement should occur every [one year] [two years] [three years].”

 

Generally, the affirmative vote of a majority of the votes cast at the Annual Meeting, in person or by proxy, is required to approve matters presented to the stockholders. However, because the vote is advisory and non-binding, if none of the frequency options receive a majority of the votes cast, the option receiving the greatest number of votes will be considered the frequency recommended by the stockholders. Abstentions and broker non-votes are not counted as votes cast and will have no effect on the outcome of the proposal. Although your advisory vote on the frequency of the stockholder vote on the compensation of our Named Executive Officers

is not binding on the Company, the Board of Directors values the views of stockholders. The Board of Directors and the Compensation Committee will take into account the outcome of the vote when considering the frequency of future advisory votes on executive compensation. The Board of Directors may decide it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the frequency receiving the most votes cast by our stockholders.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” AN ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS ONCE EVERY THREE YEARS.

 

 

The following discussion and analysis is intended to provide you with an explanation of our current compensation program, focused on the compensation of our Chairman and Chief Executive Officer and our four other most highly compensated executive officers (whose compensation exceeded $100,000 during the last fiscal year). Throughout this discussion, these executives are referred to as the “Named Executive Officers”. This discussion should be read in conjunction with the other compensation information and information regarding our Compensation Committee contained elsewhere in this Proxy Statement.

 

Executive Summary

 

The following are the key compensation decisions we made in 2010:

 

 

Compensation Philosophy and Program Objectives

 

We believe that compensation of our executive and other officers should be directly and materially linked to our operating performance. We believe that the performance of individual officers is best viewed through the impact of their performance on our performance as reflected by achievement of annual performance targets that we consider to be drivers of long-term stockholder value. As a result, for Named Executive Officers, our compensation programs focus on the performance of the Company, rather than individual performance. Our executives with the most senior leadership positions within our organization have the greatest ability to influence our performance. Both the annual and long-term incentive awards as a percentage of total compensation for these executives are greater than that of our other employees.

The fundamental objectives of our compensation program are to attract, retain and motivate top quality executive and other officers through compensation and incentives which are competitive with the market and industry in which we compete for talent and which align the interests of our officers and senior management with the interests of our stockholders. We seek to promote service longevity and to provide our executives with long-term wealth accumulation opportunities, assuming that we are able to maintain a high-level of financial and stock performance. We strive to deliver a market-competitive level of fixed compensation, with the opportunity for above market compensation when the Company exceeds our performance objectives.

 

Overall, we have designed our compensation program to:

 

 

Overview of Executive Compensation Determinations

 

In setting compensation for our Named Executive Officers, the Compensation Committee reviews our performance over the prior three years, focusing in particular on our revenue and EBITDA growth in relation to performance targets established for the year, each Named Executive Officer’s individual circumstances, including cash and equity-based compensation paid to each Named Executive Officer in the past three years and prior periods, as well as the accumulated value of all cash and equity-based compensation awarded to each Named Executive Officer. The Compensation Committee also conducts discussions with our Chief Executive Officer regarding the performance of our other Named Executive Officers, and meets in executive sessions to discuss the performance of the Chief Executive Officer. Those discussions, together with the Compensation Committee’s review of each Named Executive Officer’s historical compensation and accumulated long-term incentive pay, allow the Compensation Committee to make compensation decisions in light of each Named Executive Officer’s achievement and other circumstances.

 

Compensation Decision Making Process

 

The Compensation Committee oversees our executive compensation and benefit plans and practices, while establishing management compensation policies and procedures to be reflected in the compensation program offered to our executive officers. The Compensation Committee operates under the written charter approved by the entire Board of Directors, a copy of which is available at http://www.vcaantech.com. When necessary, the Compensation Committee recommends amendments to its charter to the Board of Directors for approval.

 

In addition, the Compensation Committee has established a Section 162(m) subcommittee, consisting of Messrs. Baumer and Chickering, each of whom meet the definition of outside director for purposes of Section 162(m) of the Code. The Section 162(m) subcommittee (i) grants equity awards to the Named Executive Officers pursuant to the terms of the VCA Antech, Inc. 2006 Equity Incentive Plan, (ii) grants performance awards consisting of equity and/or cash to the Named Executive Officers under the Plans, (iii) establishes the performance goals underlying the performance awards and (iv) determines whether these performance goals have been met. Mr. Reddick, who does not meet the definition of an outside director for purposes of Section 162(m) of the Code, is not a member of the 162(m) subcommittee.

 

The Compensation Committee has the authority to retain independent counsel or other consultants, as it deems necessary, in connection with its responsibilities at the Company’s expense. The Compensation Committee

retained Mercer in 2009 to assist the Committee in establishing a relevant group of peer companies against which to assess executive and director compensation and in the design of Supplemental Executive Retirement Programs for four of our Named Executive Officers. The Compensation Committee renewed Mercer’s engagement in 2011. The Compensation Committee may request that any of our directors, officers or employees, or other persons attend its meetings to provide advice, counsel or pertinent information as the Committee requests.

 

Our Chief Executive Officer is involved in the design and implementation of our executive compensation programs. He typically provides his input through consultation with the Chairman of the Compensation Committee and typically is not present at Compensation Committee meetings. Our Chief Executive Officer annually reviews the performance of each executive officer (other than the Chief Executive Officer whose performance is reviewed by the Compensation Committee) and presents his conclusions and recommendations regarding base salary and incentive award amounts for each executive officer (other than the Chief Executive Officer) to the Compensation Committee for its consideration. The Compensation Committee can exercise its discretion in accepting, rejecting and/or modifying any such executive compensation recommendations.

 

Compensation Program Elements

 

Our compensation program consists of the following principal elements:

 

 

Base Salary

 

Our employees are paid a fixed base salary based on the responsibilities of their positions, the skills and experience required for the job, business performance, labor market conditions and by reference to market median salary levels. Our Named Executive Officers’ salaries are reviewed annually and salary increases typically take effect in July of each year, unless business circumstances require otherwise.

 

Annual Cash Bonuses

 

Our annual cash performance awards and bonuses are intended to reward our Named Executive Officers for performance over our fiscal year. They also align our Named Executive Officers’ interests with those of our stockholders and help us attract, motivate and retain executives. Historically, annual cash performance awards have been tied to achieving pre-established objective performance goals established pursuant to the VCA Antech, Inc. 2007 Cash Incentive Plan. Under this plan, each participant is eligible to receive a predetermined maximum annual award if the maximum objective performance levels have been satisfied. Lower awards are set for target performance and minimum threshold performance. Furthermore, under this plan, the 162(m) subcommittee may reduce the amount of awards in its sole discretion.

 

The performance measure we have generally used is Adjusted EBITDA, which is the principal financial metric used by management in managing our business. Each year we set our financial measures, targets and bonus payout schedules with reference to achieving pre-set levels of desired financial performance, and with consideration given to our annual and long-term financial plan, macroeconomic conditions and our goal to provide to our Named Executive Officers a competitive compensation package. Actual payments are typically made in cash to all participants within three months after the end of our fiscal year, based on the degree to

which the objectives have been achieved, as certified and approved by the 162(m) subcommittee of our Compensation Committee.

 

Equity Compensation

 

The Company’s equity compensation is an important element of our overall compensation program, and is designed to reward participants the way stockholders are rewarded: through growth in the value of our common stock. At the end of fiscal 2010, approximately 166 employees held equity awards under the Company’s equity plans. The purpose of the grants is to align employees’ interests with the interests of our stockholders, reward employees for enhancing stockholder value, encourage retention and provide a means to increase ownership of our common stock. We also grant equity awards on a selective basis as part of new hire agreements, to encourage retention or to reward extraordinary results.

 

The level of long-term incentive compensation is determined based on an evaluation of competitive factors in conjunction with total compensation provided to Named Executive Officers and the overall goals of the compensation program described herein. We do not have, nor do we intend to have, a program, plan or practice to select the grant dates of equity awards for Named Executive Officers in coordination with the release of material non-public information. Although there is no specified grant date for equity awards, the Compensation Committee has adopted a policy pursuant to which it will, at a regularly scheduled Compensation Committee meeting, set in advance of the meeting date, consider the grant of equity awards to the Named Executive Officers. The Compensation Committee adopted this policy to mitigate against the perception that grant dates are set to achieve benefits for the Named Executive Officers.

 

Our 162(m) subcommittee last granted equity performance awards to our Named Executive Officers in fiscal year 2008. Equity performance awards granted to Named Executive Officers are tied to achieving pre-established objective performance goals established pursuant to the VCA Antech, Inc. 2006 Equity Incentive Plan. Under this plan, each participant is eligible to receive a predetermined maximum annual award if the maximum objective performance levels have been satisfied. Lower awards are set for target performance and minimum threshold performance.

 

The purpose of the equity performance awards is to reward our Named Executive Officers for performance over our fiscal year, align our Named Executive Officers’ interests with those of our stockholders and help us attract, motivate and retain executives by ensuring that our compensation programs are competitive with our peer companies. Therefore, although our 162(m) subcommittee has not adopted a practice of annual grants, its goal is that, on average over any three year period, the equity performance awards granted to our Named Executive Officers be reasonably comparable to the aggregate equity performance awards granted by our peer companies to their named executive officers over the same period.

 

Perquisites and Other Executive Benefits

 

In order to better enable us to attract and retain highly skilled executive and other officers and to round out a competitive compensation package for our executive and other officers, we provide our executive and other officers with perquisites and other personal benefits that we believe are reasonable and consistent with our overall compensation philosophy and objectives. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to our Named Executive Officers.

 

The Named Executive Officers, among other things, are provided use of automobiles and are reimbursed for their out-of-pocket medical expenses.

 

Supplemental Executive Retirement Programs

 

In 2010, we entered into SERPs with our four most senior Named Executive Officers in recognition of their more than 20 years of service to the Company and to provide continued incentives to retain their services. Previously, the Company had not provided any deferred compensation or other retirement benefit for the

applicable Named Executive Officers, other than continuation of medical coverage. The SERPs are structured so that full payment benefits vest over periods ranging from 3-5 years, which provide an additional retention incentive for our four most senior Named Executive Officers. Details of the SERP benefits and the amounts accrued by each applicable Named Executive Officer are found under the heading “Pension Benefits” on page 42 of this Proxy Statement.

 

Post-Termination Consulting Agreements

 

In 2010, we entered into agreements with our Chief Executive Officer and Chief Operating Officer for the provision of consulting services following the termination of their service to the Company. Each of the Chief Executive Officer and the Chief Operating Officer have been employed by the Company since it was founded. These agreements are intended to effect a smooth and orderly transition of the duties and leadership to their successors, to allow the Company to take advantage of their special knowledge of the industry, the Company and our customers and to protect trade secret information obtained by the officers during the course of their employment during the term of their consulting agreements and thereafter. Each agreement was reviewed and approved by the Compensation Committee and subsequently by the full Board of Directors. Details of the consulting agreements are described under “Potential Payments Upon Termination or Change in Control — Post-Termination Consulting Agreement” on page 43 of this Proxy Statement.

 

Termination and Change in Control Payments

 

We have entered into employment agreements with three of our Named Executive Officers and into a severance agreement with another Named Executive Officer. These employment agreements and the severance agreement, which are designed to promote stability and continuity of senior management, provide for termination and Change in Control payments. We also have entered into post-retirement medical benefits coverage agreements with our four senior Named Executive Officers as recognition of each officer’s extended service to the Company. A summary of these severance payments and post-termination benefits is set forth under the heading “Employment Agreements; Post-Retirement Medical Benefits Coverage Agreements; Payment Upon Termination and Change in Control” on page 43 of this Proxy Statement.

 

Determination of Fiscal Year 2010 Compensation

 

Base Salaries

 

In 2010, the Compensation Committee adjusted the Base Salaries for the Named Executive Officers for the first time since 2008.

 

We typically review and adjust Base Salaries effective on July 1 of each year. Base Salaries for fiscal 2010 for the Named Executive Officers were as follows:

 

 

Increases in base salary for each of the Named Executive Officers in 2010 were limited to 4%, the targeted increase in base salary for the Company’s employee base as a whole for 2010.

Annual Cash Bonuses

 

The 162(m) subcommittee of the Compensation Committee selected Consolidated Adjusted EBITDA (as defined in that certain Credit and Guaranty Agreement, by and among Vicar Operating, Inc., the Company, certain subsidiaries of Vicar Operating, Inc., as guarantors, various lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent, collateral agent, issuing bank and swing line lender, Bank of America, N.A., as syndication agent, and JP Morgan Chase Bank, N.A., U.S. Bank, N.A., and Union Bank, N.A., as co-documentation agents) as the performance goal against which 2010 bonuses would be earned by our Named Executive Officers. The 162(m) subcommittee used Consolidated Adjusted EBITDA because it excludes the effect of significant items that we believe are not representative of our core operations for the period presented.

 

The performance awards (expressed as a percentage of Base Salary) attainable upon achievement of the performance goals were as follows:

 

 

The performance goals established resulted in Consolidated Adjusted EBITDA targets for fiscal 2010 as follows: Basic Performance Goal — $244.9 million; Low Performance Goal — $259.9 million; Target Performance Goal — $269.9 million; and High Performance Goal — $279.9 million.

 

In March 2011, the 162(m) subcommittee certified that the Company had satisfied the “Low Performance Goal”. As a result, each Named Executive Officers earned the following cash performance award:

 

 

The 162(m) subcommittee believed that the performance required to earn an award at the “Low Performance Goal” level was reasonably attainable, but that the performance required to earn an award at the “Target Performance Goal” and “High Performance Goal” levels was more challenging.

 

In addition to the annual cash performance awards discussed above, in March 2011, the Compensation Committee awarded Josh Drake a discretionary cash bonus for services rendered in fiscal 2010, resulting in an aggregate bonus of $135,000 for the year. The principal factors we took into account in making this award were the Company’s performance, the total compensation earned by Mr. Drake for fiscal 2010 and his performance in the discharge of his duties.

2010 Long-Term Incentives

 

On September 17, 2010, the Compensation Committee made a restricted stock award to Josh Drake under the VCA Antech, Inc. 2006 Equity Incentive Plan. This restricted stock award is reflected in “Executive Compensation — Grants of Plan-Based Awards in Fiscal 2010” on page 40 of this Proxy Statement. We did not make any equity awards to the other Named Executive Officers in fiscal 2010.

 

Additional Compensation Matters

 

Market Analysis

 

In establishing annual compensation for our Named Executive Officers, we take into account compensation levels at similarly situated companies for similar positions, referred to as benchmarking, in establishing base salaries, annual cash performance awards and/or cash bonuses and equity awards for our Named Executive Officers. We use benchmarking as a point of reference for measurement, and the Compensation Committee has discretion in determining how much weight to place on the benchmarking analysis. Benchmarking helps the Compensation Committee assess whether the individual pay components and total compensation of our Named Executive Officers are appropriate when compared to industry standards. However, the Compensation Committee does not target or set the individual pay components or total compensation of our Named Executive Officers to specific benchmark percentiles. Consequently, Named Executive Officer’s individual pay components and total compensation may be below, at or above the median of the compensation levels at similarly situated companies for similar situated positions.

 

In 2009, the Compensation Committee engaged Mercer as its compensation consultant. Among other things, Mercer assisted the Compensation Committee in updating the Company’s comparison group of companies. For 2010, the Company’s comparison group of companies, which we refer to as the “Comparison Group ,” consisted of: (i) Beckman Coulter, Inc., (ii) C. R. Bard, Inc., (iii) Chipotle Mexican Grill, Inc., (iv) Guess?, Inc., (v) HealthSouth Corporation, (vi) Hologic, Inc., (vii) Idexx Laboratories, Inc., (viii) Lincare Holdings Inc., (ix) Magellan Health Services, Inc., (x) Mednax, Inc., (xi) PetSmart, Inc., and (xii) Tiffany & Co. The comparison group for 2010 is unchanged from the 2009 comparison group. We believe that this Comparison Group is representative of companies within our industry, companies of similar size and complexity to us or companies within our geographic proximity with whom we compete for talented employees. The information gathered from this Comparison Group included base salary, annual cash performance awards and/or cash bonuses and equity awards.

 

We do not intend to engage a compensation consultant each year, and did not do so in 2010. We recently have engaged Mercer to advise us with respect to compensation matters for 2011.

 

In addition to benchmarking, the Compensation Committee reviews the Named Executive Officer’s historical compensation, the Named Executive Officer’s compensation in relation to other officers and corporate performance. The Compensation Committee also takes into account internal equity considerations in making its executive compensation decisions.

 

Adjustment or Recovery of Awards

 

We have not created a policy to recover any incentive payments if the relevant performance measures and financial targets on which they were based are restated or otherwise adjusted in a manner that would reduce the size of a payment already made. We would review such a situation, if and when it arose.

 

However, under Section 304 of the Sarbanes-Oxley Act, if we were required to restate our financial results due to material noncompliance with any financial reporting requirements as a result of misconduct, the Chief Executive Officer and Chief Financial Officer could be required to reimburse the Company for (1) any bonus or other incentive-based or equity-based compensation received during the twelve months following the first public issuance or filing with the SEC of the non-complying document and (2) any profits realized from the sale of securities of the Company during those twelve months.

Stock Ownership

 

Although the Company has not formally adopted stock ownership guidelines, each Named Executive Officer holds a substantial amount of shares of our common stock, including shares of restricted stock, and vested in-the-money options. See Outstanding Equity Awards at Fiscal Year-End Table and the Principal Stockholders Table on pages 41 and 62 of this Proxy Statement, respectively.

 

Tax Implications

 

The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Code, which provides that the Company may not deduct non-performance based compensation of more than $1,000,000 that is paid to certain executive officers. However, in order to maintain flexibility in compensating our Named Executive Officers in a manner designed to promote varying corporate goals, we have not adopted a policy that all compensation must be deductible. All compensation paid to the Named Executive Officers for fiscal year 2010 will be fully deductible.

 

The following table sets forth all compensation paid or earned by Named Executive Officers for services rendered to us for the years ended December 31, 2010, 2009, and 2008.

 

 

 

 

 

 

All equity grants to Named Executive Officers were made under the VCA Antech, Inc. 2006 Equity Incentive Plan. The following table sets forth certain information regarding the grant of plan-based equity awards made during the fiscal year ended December 31, 2010.

 

 

 

The following table sets forth the number of securities underlying outstanding plan awards for each Named Executive Officer as of December 31, 2010.

 

 

 

The following table sets forth information regarding the stock option awards that were exercised by each of our Named Executive Officers and restricted stock awards that vested during the fiscal year ended December 31, 2010.

 

 

 

The following table sets forth information concerning all equity compensation plans and individual compensation arrangements in effect during the fiscal year ended December 31, 2010.

 

 

The table below reflects benefits accrued under the SERP for each of Robert L. Antin, Arthur J. Antin, Neil Tauber and Tomas W. Fuller as of December 31, 2010.

 

 

 

On June 30, 2010, the Company executed a SERP agreement with each of the following Named Executive Officers of the Company: Robert L. Antin, Arthur J. Antin, Neil Tauber and Tomas W. Fuller (each, a “SERP Beneficiary”). Pursuant to each SERP agreement, each SERP Beneficiary will be entitled to monthly benefit payments when he reaches a specified age identified in the chart below (the “Benefit Commencement Date”). The annual amount of the benefit payments to each SERP Beneficiary will be equal to the vested percentage, up to a maximum of 50%, of Final Salary as of the date his employment terminates. “Final Salary” is equal to the greater of (i) annual base compensation paid in cash pursuant to the SERP Beneficiary’s employment agreement or other employment arrangement with the Company immediately prior to the Benefit Commencement Date, or (ii) the average annual base compensation paid in cash pursuant to the SERP Beneficiary’s employment agreement for the three highest years during the ten year period ending on

December 31st immediately preceding the Benefit Commencement Date. The vested percentage on the date each SERP Beneficiary’s employment terminates is as follows:

 

 

 

The payments to which each SERP Beneficiary is entitled will extend for 12 years following the Benefit Commencement Date. None of the SERP Beneficiaries are eligible for early retirement under the SERP, because none of the SERP Beneficiaries have reached the age that would trigger the Benefit Commencement Date. For further discussion regarding each SERP agreement, see “Employment Agreements; Post-Retirement Medical Benefits Coverage Agreements; Post-Termination Consulting Agreements; SERP Agreements; Payments Upon Termination and Change in Control” on page 43 of this Proxy Statement.

 

We have employment agreements with Robert L. Antin, Arthur J. Antin and Tomas W. Fuller, and a severance agreement with Neil Tauber. Each of these agreements provide for certain payments upon termination or Change in Control. For purposes of this Proxy Statement, a “Change in Control” shall be deemed to have occurred if (a) there shall be consummated (x) any consolidation or merger of the Company into or with another “person” (as such term is used in Sections 13(d)(3) and 14(d)(2) of Exchange Act) pursuant to which shares of the Company’s common stock would be converted into cash, securities or other property, other than any consolidation or merger of the Company in which the persons who were stockholders of the Company immediately prior to the consummation of such consolidation or merger are the beneficial owners (within the meaning of Rule 13d-3 under the Exchange Act), immediately following the consummation of such consolidation or merger, of 62.5% or more of the combined voting power of the then outstanding voting securities of the person surviving or resulting from such consolidation or merger, or (y) any sale, lease or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (b) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (c) any person shall become the beneficial owner of 25% or more of the Company’s outstanding common stock, or (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company’s stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period.

 

In addition, we have post-retirement medical benefits coverage agreements, post-termination consulting agreements and SERP agreements with certain of our Named Executive Officers, as follows:

 

Robert L. Antin

 

Employment Agreement

 

Mr. R. Antin’s employment agreement, dated as of November 27, 2001, as amended, provides for Mr. R. Antin to serve as our Chairman of the Board, Chief Executive Officer and President for a term of five years from any given date, such that there shall always be a minimum of at least five years remaining under his employment agreement.

The employment agreement provides for Mr. R. Antin to receive an annual base salary of $520,000, subject to annual increase based on comparable compensation packages provided to executives in similarly situated companies, and to participate in a bonus plan based on annual performance standards to be established by the Compensation Committee. Mr. R. Antin also is entitled to specified perquisites.

 

If Mr. R. Antin’s employment is terminated due to his death, the employment agreement provides that we will pay Mr. R. Antin’s estate his accrued and unpaid salary, his accrued and unused vacation and sick pay, his base salary during the scheduled term of the employment agreement, accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination (other than performance-based equity awards) and continue to provide family medical benefits. If Mr. R. Antin’s employment is terminated due to his disability, the employment agreement provides that we will pay Mr. R. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement (reduced by any amounts paid under long-term disability insurance policy maintained by us for the benefit of Mr. R. Antin), accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination (other than performance-based equity awards) and continue to provide specified benefits and perquisites. In the case of termination due to death or disability, any options that accelerate on the date of termination will remain exercisable for the full term.

 

If Mr. R. Antin terminates the employment agreement for “good reason,” if we terminate the employment agreement without cause or in the event of a Change in Control, in which event the employment of Mr. R. Antin terminates automatically, we will pay Mr. R. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement and an amount equal to five times the greater of Mr. R. Antin’s last annual bonus or the average of all bonuses paid to Mr. R. Antin under the employment agreement. In addition, we will accelerate the vesting of his equity awards and continue to provide specified benefits and perquisites. In these circumstances, Mr. R. Antin may exercise his options, which are accelerated on the date of termination, immediately upon termination and thereafter during the term of the option. For purposes hereof, “good reason” means as the result of (x) a willful breach of any of the material obligations of the Company to Mr. R. Antin under his employment agreement, consulting agreement or SERP agreement, as applicable, or (y) the office where Mr. R. Antin is required to perform his duties to the Company is relocated to a location outside of Los Angeles County, California; provided, however, that in either case Mr. R. Antin delivered written notice to the Company within 90 days of the condition’s initial existence and the Company failed to cure the condition within 30 days.

 

If Mr. R. Antin terminates the employment agreement without good reason or we terminate the employment agreement for “cause,” Mr. R. Antin is entitled to receive all accrued and unpaid salary and other compensation and all accrued and unused vacation and sick pay. For purposes of this paragraph, for “cause” means for a conviction (including any plea of guilty or no contest) of (x) any felony involving the embezzlement, theft or misappropriation of monies or other property, of the Company or otherwise, or (y) any crime of moral turpitude.

 

If any of the payments due Mr. R. Antin upon termination qualify as “excess parachute payments” under the Code, Mr. R. Antin also is entitled to an additional payment to cover the tax consequences associated with excess parachute payments.

 

In the event of a Change in Control and at our request, Mr. R. Antin is obligated to continue to serve under the same terms and conditions of his employment agreement for a period of up to 180 days following the termination date at his then-current base salary.

 

Post-Retirement Medical Benefits Coverage Agreement

 

Mr. R. Antin’s post-retirement medical benefits coverage agreement, effective as of December 27, 2007, provides that Mr. R. Antin and his family will continue to receive medical benefits coverage from the date employment is terminated until the last to occur of Mr. R. Antin’s death, the death of Mr. R. Antin’s spouse,

or the end of the year in which each of Mr. R. Antin’s children has a 25th birthday. The medical benefits coverage afforded to Mr. R. Antin and his family after the termination of his employment will be at least as favorable as the most favorable level, type and basis of medical coverage provided to Mr. R. Antin and his family at any time during the five years prior to termination. Upon Mr. R. Antin’s eligibility for Medicare or a similar program, Mr. R. Antin will have the option to enroll in Medicare or such similar program. If Mr. R. Antin or any eligible family member elects to enroll in such program, the Company’s obligation under the post-retirement medical benefits coverage agreement will be limited to providing Medicare supplementary coverage and Executive Medical Excess Claims Insurance or a substantially similar policy. If the continuation of medical benefits coverage is subject to taxation under Section 409A(a)(1) of the Code as a result of the failure of the post-retirement medical benefits coverage agreement to comply with Section 409A, the Company will make a payment to Mr. R. Antin equal to all federal, state and local taxes incurred by Mr. R. Antin as a result thereof.

 

Post-Termination Consulting Agreement

 

Mr. R. Antin’s consulting agreement, dated as of June 28, 2010, provides that Mr. R. Antin will provide business consulting and advice to the Company following his full-time employment with the Company. The term of Mr. R. Antin’s consulting agreement commences on the date of Mr. R. Antin’s voluntary termination, i.e., resignation as Chief Executive Officer of the Company other than for good reason, following a Change in Control or resulting from Mr. R. Antin’s disability, and continues for the next five years. Mr. R. Antin will receive annual compensation equal to 100% of his Final Compensation for the first and second years of the term of his consulting agreement, and 75% of his Final Compensation during the third, fourth and fifth years of the term of his consulting agreement. “Final Compensation” is the greater of (i) Mr. R. Antin’s annual base compensation paid in cash immediately prior to Mr. R. Antin’s voluntary termination, plus the highest bonus earned by Mr. R. Antin with respect to services rendered during the four preceding full calendar years before Mr. R. Antin’s voluntary termination, or (ii) the average of Mr. R. Antin’s annual base compensation paid in cash plus any bonus earned with respect to services rendered during the two highest compensation years during the five-year period ending on December 31st immediately preceding Mr. R. Antin’s voluntary termination. During the term of his consulting agreement, Mr. R. Antin also will be entitled to insurance and welfare benefits and certain other perquisites detailed in his consulting agreement.

 

If the consulting agreement is terminated as a result of his death or disability, or by the Company without cause, by Mr. R. Antin for good reason, or upon a Change in Control, Mr. R. Antin will be entitled to the amount he would have earned over the remaining term of his consulting agreement. In addition, in such event, vesting will accelerate on all outstanding stock options and other equity awards held by Mr. R. Antin (except that in the case of Mr. R. Antin’s death or disability only those awards that would otherwise have vested and become exercisable during the 24 months immediately following the date of his death or disability, respectively, will accelerate). If any of the payments or benefits due Mr. R. Antin under his consulting agreement or any other plan, agreement or arrangement qualify as “excess parachute payments” under the Code, Mr. R. Antin also is entitled to an additional payment to cover the tax consequences associated with excess parachute payments.

 

If Mr. R. Antin terminates his consulting agreement without “good reason” or the Company terminates his consulting agreement with “cause”, Mr. R. Antin would not be entitled to any payments under his consulting agreement.

 

SERP Agreement

 

Mr. R. Antin’s SERP agreement, dated as of June 28, 2010, provides that Mr. R. Antin will be entitled to monthly benefit payments when he reaches the age of 66 (i.e., the Benefit Commencement Date). Commencing on the Benefit Commencement Date, Mr. R. Antin is entitled to 144 monthly payments in an amount equal to 1/12th of the applicable vested percentage of his Final Salary. However, if before or coincident with his “separation from service” (as defined Section 1.409A-1(h)(1) of the Treasury Regulations) there occurs a Change in Control, an involuntary termination by the Company without cause, a voluntary

termination by Mr. R. Antin for good reason, or Mr. R. Antin’s death or disability, the applicable percentage will be fully vested at 50%. If before the Benefit Commencement Date, there is a Change in Control that qualifies as a “change in control event” within the meaning of Treasury Regulation section 1.409A-3(i)(5) or Mr. R. Antin dies or becomes disabled, then the actuarial equivalent of the monthly benefits owing to Mr. R. Antin must be paid in a lump sum on the date of such event. In addition, if a Change in Control that is also a “change in control event” occurs after the Benefit Commencement Date, then the SERP agreement terminates and the actuarial equivalent of any remaining monthly benefits owing to Mr. R. Antin must be paid in a lump sum on the date of such change in control event. For further discussion regarding Mr. R. Antin’s SERP agreement, see “Executive Compensation — Pension Benefits” on page 42 of this Proxy Statement.

 

The following table describes the potential payments to Mr. Robert L. Antin upon termination or Change in Control.

 

 

 

Arthur J. Antin

 

Employment Agreement

 

Mr. A. Antin’s employment agreement, dated as of November 27, 2001, as amended, provides for Mr. A. Antin to serve as our Chief Operating Officer, Senior Vice President and Secretary for a term equal to three years from any given date, such that there shall always be a minimum of at least three years remaining under his employment agreement. (Mr. A. Antin no longer serves as the Company’s Secretary.) The employment agreement provides for Mr. A. Antin to receive an annual base salary of $416,000, subject to annual increase based on comparable compensation packages provided to executives in similarly situated companies, and to participate in a bonus plan based on annual performance standards to be established by the compensation committee. Mr. A. Antin also is entitled to specified perquisites.

 

If Mr. A. Antin’s employment is terminated due to his death, the employment agreement provides that we will pay Mr. A. Antin’s estate his accrued and unpaid salary, his accrued and unused vacation and sick pay, his base salary during the scheduled term of the employment agreement, accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination (other than performance-based equity awards) and continue to provide family medical benefits. If Mr. A. Antin’s employment is terminated due to his disability, the employment agreement provides that we will pay Mr. A. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement (reduced by any amounts paid under long-term disability insurance policy maintained by us for the benefit of Mr. A. Antin), accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination (other than performance-based equity awards) and continue to provide specified benefits and perquisites. In the case of termination due to death or disability, any option that is accelerated on the date of termination will remain exercisable for the full term.

 

If Mr. A. Antin terminates the employment agreement for “good reason,” if we terminate the employment agreement without “cause” or in the event of a Change in Control, in which event the employment of Mr. A. Antin terminates automatically, we will pay Mr. A. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement and an amount equal to three times the greater of Mr. A. Antin’s last annual bonus or the average of all bonuses paid to Mr. A. Antin under the employment agreement. In addition, we will accelerate the vesting of his equity awards and continue to provide specified benefits and perquisites. In these circumstances, Mr. A. Antin may exercise his options that are accelerated on the date of termination during the full term of the option. For purposes hereof, “good reason” means as the result of (x) a willful breach of any of the material obligations of the Company to Mr. A. Antin under his employment agreement, consulting agreement or SERP agreement, as applicable, or (y) the office where Mr. A. Antin is required to perform his duties to the Company is relocated to a location outside of Los Angeles County, California; provided,

however, that in either case Mr. A. Antin delivered written notice to the Company within 90 days of the condition’s initial existence and the Company failed to cure the condition within 30 days.

 

If Mr. A. Antin terminates the employment agreement without good reason or we terminate the employment agreement for cause, Mr. A. Antin is entitled to receive all accrued and unpaid salary and other compensation and all accrued and unused vacation and sick pay. For purposes of this paragraph, for “cause” means for a conviction (including any plea of guilty or no contest) of (x) any felony involving the embezzlement, theft or misappropriation of monies or other property, of the Company or otherwise, or (y) any crime of moral turpitude.

 

If any of the payments due Mr. A. Antin upon termination qualify as “excess parachute payments” under the Code, Mr. A. Antin also is entitled to an additional payment to cover the tax consequences associated with excess parachute payments.

 

In the event of a Change in Control and at our request, Mr. A. Antin is obligated to continue to serve under the same terms and conditions of his employment agreement for a period of up to 180 days following the termination date at his then-current base salary.

 

Post-Retirement Medical Benefits Coverage Agreement

 

Mr. A. Antin’s post-retirement medical benefits coverage agreement, effective as of December 27, 2007, provides that Mr. A. Antin and his family will continue to receive medical benefits coverage commencing on or after the date that Mr. A. Antin attains age 60 until the last to occur of Mr. A. Antin’s death, the death of Mr. A. Antin’s spouse, or the end of the year in which each of Mr. A. Antin’s children has a 25th birthday. The medical benefits coverage afforded to Mr. A. Antin and his family after the termination of his employment will be at least as favorable as the most favorable level, type and basis of medical coverage provided to Mr. A. Antin and his family at any time during the five years prior to termination. Upon Mr. A. Antin’s eligibility for Medicare or a similar program, Mr. A. Antin will have the option to enroll in Medicare or such similar program. If Mr. A. Antin or any eligible family member elects to enroll in such program, the Company’s obligation under the post-retirement medical benefits coverage agreement will be limited to providing Medicare supplementary coverage and Executive Medical Excess Claims Insurance or a substantially similar policy. The coverage provided by the Company is secondary to any employer’s group medical plan in which Mr. A. Antin or an eligible family member participates as an active employee, any employer’s group medical plan in which Mr. A. Antin is covered as the spouse or dependent or an active employee, any individual medical benefits coverage under which Mr. A. Antin or an eligible family member is covered, or Medicare coverage. If the continuation of medical benefits coverage is subject to taxation under Section 409A(a)(1) of the Code as a result of the failure of the post-retirement medical benefits coverage agreement to comply with Section 409A, the Company will make a payment to Mr. A. Antin equal to all federal, state and local taxes incurred by Mr. A. Antin as a result thereof. Furthermore, the Company’s obligation to provide post-retirement medical benefits coverage to Mr. A. Antin will cease if he causes any person or entity controlled by him to induce or attempt to induce (a) any employee of the Company or any of its affiliates to leave the Company or any of its affiliates or (b) any customer, supplier, vendor, licensee, distributor, contractor or other business relation of the Company or any of its affiliates to cease doing business with, or knowingly adversely alter its business relationship with, the Company or any of its affiliates.

 

Post-Termination Consulting Agreement

 

Mr. A. Antin’s consulting agreement, dated as of June 28, 2010, provides that Mr. A. Antin will provide business consulting and advice to the Company following his full-time employment with the Company. The term of the Mr. A. Antin’s consulting agreement commences on the date of Mr. A. Antin’s voluntary termination, i.e., his resignation as Chief Operating Officer and Senior Vice President of the Company other than for good reason, following a Change in Control or resulting from Mr. A. Antin’s disability, and continues for the next four years. Mr. A. Antin will receive annual compensation equal to 100% of his Final Compensation for the first year of the term of his consulting agreement, 75% of his Final Compensation

during the second year of the term, 50% of his Final Compensation during the third year of the term and 25% of his Final Compensation during the fourth year of the term. “Final Compensation” is the greater of (i) Mr. A. Antin’s annual base compensation paid in cash immediately prior to Mr. A. Antin’s voluntary termination, plus the highest bonus earned by Mr. A. Antin with respect to services rendered during the four preceding full calendar years before Mr. A. Antin’s voluntary termination or (ii) the average of Mr. A. Antin’s annual base compensation paid in cash plus any bonus earned with respect to services rendered during the two highest compensation years during the five-year period ending on December 31st immediately preceding Mr. A. Antin’s voluntary termination. During the term of his consulting agreement, Mr. A. Antin also will be entitled to insurance and welfare benefits and certain other perquisites detailed in his consulting agreement.

 

If the consulting agreement is terminated as a result of his death or disability, or by the Company without cause, by Mr. A. Antin for good reason, or upon a Change in Control, Mr. A. Antin will be entitled to the amount he would have earned over the remaining term of the consulting agreement. In addition, in such event, vesting will accelerate on all outstanding stock options and other equity awards held by Mr. A. Antin (except that in the case of Mr. A. Antin’s death or disability only those awards that would otherwise have vested and become exercisable during the 24 months immediately following the date of his death or disability, respectively, will accelerate). If any of the payments or benefits due Mr. A. Antin under his consulting agreement or any other plan, agreement or arrangement qualify as “excess parachute payments” under the Code, Mr. A. Antin also is entitled to an additional payment to cover the tax consequences associated with excess parachute payments.

 

If Mr. A. Antin terminates his consulting agreement without “good reason” or the Company terminates his consulting agreement with “cause”, Mr. A. Antin would not be entitled to any payments under his consulting agreement.

 

SERP Agreement

 

Mr. A. Antin’s SERP agreement, dated as of June 28, 2010, provides that Mr. A. Antin will be entitled to monthly benefit payments when he reaches the age of 67 (i.e., the Benefit Commencement Date). Commencing on the Benefit Commencement Date, Mr. A. Antin is entitled to 144 monthly payments in an amount equal to 1/12th of the applicable vested percentage of his Final Salary. However, if before or coincident with his “separation from service” (as defined Section 1.409A-1(h)(1) of the Treasury Regulations) there occurs a Change in Control, an involuntary termination by the Company without cause, a voluntary termination by Mr. A. Antin for good reason, or Mr. A. Antin’s death or disability, the applicable percentage will be fully vested at 50%. If before the Benefit Commencement Date, there is a Change in Control that qualifies as a “change in control event” within the meaning of Treasury Regulation section 1.409A-3(i)(5) or Mr. A. Antin dies or becomes disabled, then the actuarial equivalent of the monthly benefits owing to Mr. A. Antin must be paid in a lump sum on the date of such event. In addition, if a Change in Control that is also a “change in control event” occurs after the Benefit Commencement Date, then the SERP agreement terminates and the actuarial equivalent of any remaining monthly benefits owing to Mr. A. Antin must be paid in a lump sum on the date of such change in control event. For further discussion regarding Mr. A. Antin’s SERP agreement, see “Executive Compensation — Pension Benefits” on page 42 of this Proxy Statement.

The following table describes the potential payments to Mr. Arthur J. Antin upon termination or Change in Control.