UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
EXCHANGE ACT OF 1934
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USA MOBILITY, INC.
(Name of Registrant as Specified In Its Charter)
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TABLE OF CONTENTS
6850 Versar Center,
Suite 420
Springfield, Virginia 22151-4148
(800) 611-8488
Springfield, Virginia 22151-4148
(800) 611-8488
To the stockholders of USA Mobility, Inc.:
The 2011 Annual Meeting of Stockholders (the “Annual
Meeting”) of USA Mobility, Inc., a Delaware corporation
(the “Company”), will be held on Wednesday,
May 18, 2011, at 9:00 a.m., local time, at The Westin
Alexandria, 400 Courthouse Square, Whitney Room, Alexandria,
Virginia, 22314, for the following purposes:
| 1. | To elect six directors to hold office until the next annual meeting of stockholders and until their respective successors have been elected and qualified; | |
| 2. | To consider and vote upon the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2011; | |
| 3. | To consider and vote upon a non-binding advisory vote on the compensation of the named executive officers of the Company (“Say on Pay”); | |
| 4. | To consider and vote upon a non-binding advisory vote on the frequency of the advisory vote on Say on Pay in future years; and | |
| 5. | To transact such other business as may properly come before the Annual Meeting and at any adjournment(s) or postponement(s) thereof. |
The foregoing matters are described in more detail in the
enclosed Proxy Statement.
Your Board of Directors has fixed March 17, 2011 as the
record date for determining stockholders entitled to notice of
and to vote at the Annual Meeting. Consequently, only holders of
the Company’s common stock of record on the transfer books
of the Company at the close of trading of the Company’s
common stock on the NASDAQ National Market
System®
on March 17, 2011 will be entitled to notice of and to vote
at the Annual Meeting.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 2011
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 2011
The Company’s Proxy Statement and Annual Report to
Stockholders for the year ended December 31, 2010 (the
“Annual Report”) will be available at
http://www.envisionreports.com/usmo
on or before April 1, 2011 or upon request. Financial and
other information about the Company is contained in the Annual
Report.
You are cordially invited to attend the Annual Meeting in
person. Your participation in these matters is important,
regardless of the number of shares you own. Whether or not you
expect to attend the Annual Meeting in person, we urge you to
submit your proxy or voting instructions by telephone or over
the Internet. If you choose to attend the Annual Meeting, you
may then vote in person if you so desire, even though you may
have executed the proxy. Any stockholder who executes such a
proxy may revoke it at any time before it is exercised. Please
note that if you chose to attend the Annual Meeting and you hold
shares of our common stock through a brokerage account, you must
bring a recent account statement reflecting ownership of the
Company’s common stock to be admitted to the Annual
Meeting.
By Order of the Board of Directors,
Royce Yudkoff
Chair of the Board of Directors
March 22, 2011
Springfield, Virginia
6850 Versar Center, Suite 420
Springfield, Virginia 22151-4148
(800) 611-8488
Springfield, Virginia 22151-4148
(800) 611-8488
PROXY
STATEMENT
The Board of Directors (the “Board”) of USA Mobility,
Inc., a Delaware corporation (“USA Mobility” or the
“Company”), is soliciting your proxy. Your proxy will
be voted at the 2011 Annual Meeting of Stockholders (the
“Annual Meeting”) to be held on May 18, 2011, at
9:00 a.m., local time, at The Westin Alexandria, 400
Courthouse Square, Whitney Room, Alexandria, Virginia 22314, and
at any adjournment(s) or postponement(s) thereof. The Proxy
Statement, proxy card and the Company’s Annual Report to
Stockholders for the year ended December 31, 2010 will be
available on or before April 1, 2011, upon request, to
holders of record of the Company’s common stock, par value
$0.0001 per share (the “common stock”), as of
March 17, 2011.
VOTING
SECURITIES
Voting
Rights and Outstanding Shares
Only stockholders of record on the transfer books of the Company
at the close of trading of the Company’s common stock on
the NASDAQ National Market
System®
on March 17, 2011 (the “Record Date”), will be
entitled to vote at the Annual Meeting. At the close of business
on March 17, 2011, the outstanding voting securities of the
Company consisted of 22,097,188 shares of common stock.
Holders of the Company’s common stock are entitled to one
vote for each share held of record on all matters submitted to a
vote of the stockholders.
Methods
of Voting
You may VOTE:
| • | by marking, signing, dating and returning a proxy card; | |
| • | via the Internet by following the voting instructions on the proxy card or the voting instructions provided by your broker, bank or other holder of record of shares of common stock. Internet voting procedures are designed to authenticate your identity, allow you to vote your shares, and confirm that your instructions have been properly recorded. If you submit your vote by Internet, you may incur costs associated with electronic access, such as usage charges from Internet access providers and telephone companies; | |
| • | by telephone by following the voting instructions on the proxy card or the voting instructions provided by your broker, bank, or holder of record of shares of common stock; or | |
| • | in person by attending the Annual Meeting. We will distribute written ballots to any stockholder who wishes to vote in person at the Annual Meeting. |
If your shares are held in street name, your broker, bank, or
other holder of record will include a voting instruction form
with this Proxy Statement. We strongly encourage you to vote
your shares by following the instructions provided on such form.
Please return your voting instruction form to your broker, bank,
or other holder of record to ensure that a proxy card is voted
on your behalf.
Quorum
and Vote Required
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Company’s transfer agent who is also
serving as Inspector of Election (the “Inspector”).
The Inspector will also determine whether or not a quorum is
present. If a quorum is not present at the Annual Meeting, we
expect that the Annual Meeting will be adjourned or postponed to
solicit additional proxies. Except with respect to the election
of directors and in certain other specific circumstances, the
affirmative vote of a majority of the shares having voting power
present in person or represented by proxy at a duly held meeting
at which a quorum is present is required under the
Company’s Bylaws for approval of proposals presented to
stockholders. In general, the Company’s Bylaws also provide
that a quorum consists of a majority of the shares issued and
outstanding and entitled to vote, the holders of which are
present in person or represented by proxy. The Inspector will
treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum and
therefore, abstentions will have the effect of a negative vote
for purposes of determining the approval of any matter submitted
to the stockholders for a vote, other than the election of
directors.
Delivery
of Documents to Security Holders Sharing an Address
The rules of the U.S. Securities and Exchange Commission
(the “SEC”) permit the Company to deliver a single
Notice of Internet Availability or set of Annual Meeting
materials to one address shared by two or more of the
Company’s stockholders. The Company has delivered only one
Proxy Statement and Annual Report to multiple stockholders who
share an address, unless the Company received contrary
instructions from the impacted stockholders prior to the mailing
date. The Company will promptly deliver, upon written or oral
request, a separate copy of the Notice of Internet Availability
or Annual Meeting materials, as requested, to any stockholder at
the shared address to which a single copy of those documents was
delivered. If you prefer to receive separate copies of the Proxy
Statement or Annual Report, contact USA Mobility, Inc., Attn:
Investor Relations, 6850 Versar Center, Suite 420
Springfield, Virginia
22151-4148.
If you are currently a stockholder sharing an address with
another stockholder and wish to receive only one copy of future
Notices of Internet Availability, proxy statements and annual
reports for your household, please contact Sharon Woods Keisling
at
(800) 611-8488
or at the above address.
PROXIES
AND REVOCATION
The shares represented by the proxies received, properly dated
and executed and not revoked will be voted at the Annual
Meeting, and at any adjournments, continuations or postponements
thereof, in accordance with the instructions of the
stockholders. A proxy may be revoked at any time before it is
exercised by:
| • | Delivering written notice of revocation to the Company, Attention: Sharon Woods Keisling, Secretary and Treasurer (“Secretary”); | |
| • | Delivering a duly executed proxy bearing a later date to the Company; or | |
| • | Attending the Annual Meeting and voting in person. |
Any proxy which is returned using the form of proxy and which is
not marked as to a particular item will be voted “FOR”
the election of directors; ratification of the appointment of
the independent registered public accounting firm; the approval,
on an advisory basis, of the compensation of the named executive
officers (“NEOs”) of the Company; the approval, on an
advisory basis, of an annual advisory vote on executive
compensation and as the proxy holder deems advisable on other
matters that may come before the Annual Meeting, as the case may
be, with respect to the item not marked. The Company does not
expect that any matter other than the proposals presented in
this Proxy Statement will be brought before the Annual Meeting.
If a broker indicates on the proxy or its substitute that it
does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered
as present with respect to that matter. The Company believes
that the tabulation procedures to be followed by the Inspector
are consistent with the general statutory requirements in the
State of Delaware concerning voting of shares and determination
of a quorum.
2
PROXY
SOLICITATION
The entire cost of soliciting proxies from the Company’s
stockholders will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of the Company’s
directors, executives and regular employees, without additional
compensation, personally or by telephone. The Company has
retained Georgeson Inc. (a subsidiary of Computershare Limited)
to solicit proxies from brokerage firms, banks and institutional
holders. Total fees relating to services provided for the proxy
solicitation will be approximately $18,000.
ADJOURNMENTS
If a quorum is not present at the Annual Meeting, it may be
adjourned from time to time upon the approval of the holders of
shares representing a majority of the votes present in person or
by proxy at the Annual Meeting until a quorum shall be present.
Any business may be transacted at the adjourned meeting, which
might have been transacted at the Annual Meeting originally
noticed. If the adjournment is for more than 30 days, or,
if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the
adjourned meeting. The Company does not currently intend to seek
an adjournment of the Annual Meeting.
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
In September 2010, the Company’s former Chief Operating
Officer and Chief Financial Officer
(“COO/CFO”),
Mr. Thomas L. Schilling, voluntarily resigned from the
Company and as a director on the Board. Upon
Mr. Schilling’s resignation from the Company and in
accordance with Section 3.2 of the Company’s Bylaws,
the Board was reduced from seven members to six members. Below
are six directors to be elected at the Annual Meeting to serve
until their respective successors are elected or appointed and
qualified. Nominees for election to the Board shall be approved
by a plurality of the votes properly cast by holders of the
common stock present in person or by proxy at the Annual
Meeting, each share being entitled to one vote.
Abstentions from voting on the election of directors, including
broker non-votes, will have no effect on the outcome of the
election of directors. In the event any nominee is unable or
unwilling to serve as a nominee, the proxies may be voted for
the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to
fill such vacancy, or for the balance of those nominees named
without nomination of a substitute, or the Board may be reduced
in accordance with the Bylaws of the Company. The Board has no
reason to believe that any of the persons named will be unable
or unwilling to serve as a nominee or as a director if elected.
Set forth below is certain information, as of March 17,
2011, for each person nominated to the Board:
Royce Yudkoff, age 55, became a director and the
Chair of the Board in November 2004. He is also a member of the
Compensation Committee. Prior to the merger of Metrocall
Holdings, Inc. (“Metrocall”) and Arch Wireless, Inc.
(“Arch”) in November 2004, Mr. Yudkoff had been a
director of Metrocall since April 1997, and had served as the
Chair of its Board since February 2003. Since 1989,
Mr. Yudkoff has been a Managing Partner of ABRY Partners,
LLC, a private equity investment firm, which focuses exclusively
on the media and communications sector. Mr. Yudkoff
currently serves on the Board of ABRY Partners, LLC; Talent
Partners; Nexstar Broadcasting Group, Inc.; and Cast and Crew
Entertainment Services, LLC. Mr. Yudkoff served on the
Board of Muzak Holdings LLC from 2002 to 2009. Mr. Yudkoff
has been involved with the paging industry as a director since
1997 and a director of the Company since November 2004.
Mr. Yudkoff has an understanding of the Company’s
operations, strategies, financial outlook and ongoing
challenges. In addition, Mr. Yudkoff has experience in the
media and communication sectors that can be applied to the
Company’s operations. Mr. Yudkoff has the requisite
qualifications to continue as a director.
3
Nicholas A. Gallopo, age 78, became a director of
the Company in November 2004. He is the Chair of the Audit
Committee. Prior to the merger of Metrocall and Arch,
Mr. Gallopo had been a director of Metrocall since October
2002. Mr. Gallopo is a consultant and Certified Public
Accountant. He retired as a partner of Arthur Anderson LLP in
1995 after 31 years with the firm. He had also served as a
director of Newman Drug Company from 1995 to 1998, a director of
Wyant Corporation, formerly Hosposable Products, Inc., from 1995
to 2001 where he also served as Chair of the Audit Committee,
and a director of Bridge Information Systems, Inc. from 2000 to
2002. Mr. Gallopo has been involved with the paging
industry as a director since 2002 and a director of the Company
since November 2004. Mr. Gallopo has an understanding of
the Company’s operations, strategies, financial outlook and
ongoing challenges. In addition, Mr. Gallopo is a retired
partner of Arthur Andersen LLP and has experience in financial
accounting and auditing matters. Mr. Gallopo has the
requisite qualifications to continue as a director.
Vincent D. Kelly, age 51, became a director,
President and Chief Executive Officer (“CEO”) of the
Company in November 2004 when USA Mobility was formed through
the merger of Metrocall and Arch. Prior to the merger of
Metrocall and Arch, Mr. Kelly was President and CEO of
Metrocall since February 2003. Prior to this appointment, he had
also served at various times as the Chief Operating Officer,
Chief Financial Officer, and Executive Vice President of
Metrocall. He served as the Treasurer of Metrocall from August
1995 to February 2003, and served as a director of Metrocall
from 1990 to 1996 and from May 2003 to November 2004.
Mr. Kelly was an executive officer of Metrocall at the time
of its filing of a petition under Chapter 11 of the
Bankruptcy Code in 2002. Mr. Kelly also serves as the
President, CEO and director for all of the Company’s
subsidiaries, except for GTES, LLC, an indirect wholly- owned
subsidiary, for which Mr. Kelly is only a director.
Mr. Kelly has been involved with the paging industry for
over 20 years and a director and CEO of the Company since
November 2004. Mr. Kelly has the requisite qualifications
to continue as a director.
Brian O’Reilly, age 51, became a director of
the Company in November 2004. He is a member of the Nominating
and Governance Committee and is the Chair of the Compensation
Committee. Prior to the merger of Metrocall and Arch,
Mr. O’Reilly had been a director of Metrocall since
October 2002. He was with Toronto-Dominion Bank for
16 years, from 1986 to 2002. From 1986 to 1996,
Mr. O’Reilly served as the Managing Director of
Toronto-Dominion Bank’s Loan Syndication Group, focused on
the underwriting of media and telecommunications loans. From
1996 to 2002, he served as the Managing Director of
Toronto-Dominion Bank’s Media, Telecom and Technology Group
with primary responsibility for investment banking in the
wireless and emerging telecommunications sectors.
Mr. O’Reilly has been involved with the paging
industry as a director since 2002 and a director of the Company
since November 2004. Mr. O’Reilly has an understanding
of the Company’s operations, strategies, financial outlook
and ongoing challenges. In addition Mr. O’Reilly has
past experience in the underwriting of media and communication
financing that can be applied to the Company’s operations.
Mr. O’Reilly has the requisite qualifications to
continue as a director.
Matthew Oristano, age 54, became a director of the
Company in November 2004. He is a member of the Audit Committee
and is Chair of the Nominating and Governance Committee. Prior
to the merger of Metrocall and Arch, Mr. Oristano had been
a director of Arch since 2002. Mr. Oristano has been the
President, CEO and member of the Board of Alda Inc., an
investment management company, since 1995. He has served as
Chair of the Board and CEO of Reaction Biology Corporation, a
contract biomedical research firm since March 2004. He has also
been the Vice President, Treasurer and member of the Board of
The Oristano Foundation since 1995, and has been a member of the
Board of Crystalplex Corporation since 2004. Mr. Oristano
has been involved with the paging industry as a director since
2002 and a director of the Company since November 2004.
Mr. Oristano has an understanding of the Company’s
operations, strategies, financial outlook and ongoing
challenges. In addition, Mr. Oristano has past experience
in investment management and telecommunications company
operations. Mr. Oristano has the requisite qualifications
to continue as a director.
Samme L. Thompson, age 65, became a director of the
Company in November 2004. He is a member of the Compensation
Committee and the Audit Committee. Prior to the merger of
Metrocall and Arch, Mr. Thompson had been a director of
Arch since 2002. Mr. Thompson currently serves on the
Boards of the following non-profit organizations: the Illinois
Institute of Technology’s Knapp Entrepreneurial Center,
Sheriff Meadow Conservation Trust, and the Partnership for
Connected Illinois, Inc. Mr. Thompson is the owner and
president of Telit Associates, Inc., a financial and strategic
consulting firm. He joined Motorola, Inc. as Vice President of
Corporate Strategy in
4
July 1999 and retired from Motorola, Inc. as Senior Vice
President of Global Corporate Strategy and Corporate Business
Development in March 2002. From June 2004 until August 2005,
Mr. Thompson was a member of the Board of SpectraSite,
Inc., which was the landlord of a small percentage of
transmission tower sites used by the Company. Since August 2005,
he has been a member of the Board of American Tower Corporation
(“ATC”) (which merged with SpectraSite, Inc.), a
landlord of a substantial percentage of transmission tower sites
used by the Company. Due to his relationships with SpectraSite,
Inc. and ATC, Mr. Thompson has recused himself from any
decision by the Board on matters relating to SpectraSite, Inc.,
and has and will continue to recuse himself from any decision by
the Board on matters relating to ATC (since the merger with
SpectraSite, Inc.). Mr. Thompson has been involved with the
paging industry as a director since 2002 and a director of the
Company since November 2004. Mr. Thompson has an
understanding of the Company’s operations, strategies,
financial outlook and ongoing challenges. In addition,
Mr. Thompson has past experience in corporate strategic and
business development that can be applied to the Company’s
current operations. Mr. Thompson has the requisite
qualifications to continue as a director.
Unless marked otherwise, proxies received will be voted
“FOR” the election of each of the nominees named above.
Recommendation
of the Board:
The Board recommends a vote “FOR” the election of all
director nominees named above.
PROPOSAL NO. 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING
FIRM
The Audit Committee has appointed Grant Thornton LLP
(“Grant Thornton”) as the Company’s independent
registered public accounting firm to audit the Company’s
consolidated financial statements for the year ending
December 31, 2011. Although ratification by stockholders is
not required by law, the Board has determined that it is
desirable to request approval of the selection of Grant Thornton
by the stockholders in order to give the stockholders a voice in
the designation of the Company’s auditors. Notwithstanding
the ratification of Grant Thornton by the stockholders, the
Audit Committee, in its discretion, may appoint a new
independent registered public accounting firm at any time during
the year if the Audit Committee believes that such a change
would be in the best interests of the Company and its
stockholders.
If the stockholders do not ratify the appointment of Grant
Thornton as the Company’s independent registered public
accounting firm, the Audit Committee will consider the selection
of another independent registered public accounting firm for
2012 and future years. A representative of Grant Thornton will
be present at the Annual Meeting and will be available to
respond to appropriate questions from stockholders and to make a
statement if the representative desires to do so.
Unless marked otherwise, proxies received will be voted
“FOR” the ratification of the appointment of Grant
Thornton as the Company’s independent registered public
accounting firm for the year ending December 31, 2011.
Recommendation
of the Audit Committee and Board:
The Audit Committee and the Board recommend a vote
“FOR” the ratification of Grant Thornton as the
Company’s independent registered public accounting firm for
the year ending December 31, 2011.
PROPOSAL NO. 3
ADVISORY
VOTE ON EXECUTIVE COMPENSATION
The recently enacted Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (“Dodd-Frank Act”), enables the
Company’s stockholders to vote to approve, on an advisory
(nonbinding) basis, the compensation of the NEOs as disclosed in
this Proxy Statement in accordance with the rules of the SEC.
5
The Company’s executive compensation programs are designed
to attract, motivate, and retain the NEOs, who are critical to
success of the Company. Under these programs, the NEOs are
rewarded for the achievement of specific short-term and
long-term performance objectives, corporate strategies, business
objectives and the realization of increased stockholder value.
The Company’s Compensation Committee continually reviews
the compensation programs for the NEOs to ensure they achieve
the desired goals of aligning the executive compensation
structure with the stockholders’ interests and current
market practices. Based on this philosophy, the Compensation
Committee recently approved multi-year performance based
long-term incentive plan (“LTIP”) awards, annual
performance based short-term incentive plan (“STIP”)
awards, elimination of provision for a
gross-up
payment in the CEO’s employment agreement and expansion of
the CEO’s non-compete obligation to cover mission critical
communications software. The Company requests its stockholders
to approve, on an advisory basis, the NEO compensation as
described in this Proxy Statement pursuant to the compensation
disclosure rules of the SEC, including the Compensation
Discussion and Analysis (“CD&A”) and the
compensation tables. This proposal, commonly known as a
“say-on-pay”
proposal, gives stockholders the opportunity to express their
views on the NEOs’ compensation. This vote is not intended
to address any specific item of compensation, but rather the
overall compensation of the NEOs and the philosophy, policies
and practices described in this Proxy Statement.
The
say-on-pay
vote is advisory, and therefore not binding on the Company, the
Compensation Committee or the Board. The Board and the
Compensation Committee value the opinions of their stockholders
and to the extent there is any significant vote against the NEOs
compensation as disclosed in this Proxy Statement, they will
consider the stockholders’ concerns and the Compensation
Committee will evaluate whether any actions are necessary to
address those concerns.
Unless marked otherwise, proxies received will be voted
“FOR” the approval of compensation paid to the
Company’s NEOs.
Recommendation
of the Board:
The Compensation Committee and the Board recommend a vote
“FOR” the approval of compensation paid to the
Company’s NEOs, pursuant to the compensation disclosure
rules of the SEC, including the CD&A and the compensation
tables.
PROPOSAL NO. 4
ADVISORY
VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON
EXECUTIVE
COMPENSATION
The Dodd-Frank Act also enables the Company’s stockholders
to indicate how frequently the Company should seek an advisory
vote on the compensation of the NEOs, as disclosed pursuant to
the SEC’s compensation disclosure rules, such as
Proposal 3 in this Proxy Statement. By voting on this
Proposal 4, stockholders may indicate whether they would
prefer an advisory vote on NEO compensation once every one, two,
or three years.
After careful consideration of this Proposal, the Board has
determined that an advisory vote on executive compensation that
occurs every year is the most appropriate alternative for the
Company. Therefore, the Board recommends that stockholders vote
for a one-year interval for the advisory vote on executive
compensation.
In formulating its recommendation, the Board considered that an
annual advisory vote on executive compensation will allow
stockholders to provide the Company every year with their views
on the Company’s compensation philosophy, policies and
practices as disclosed in the Proxy Statement. Additionally, an
annual advisory vote on executive compensation is consistent
with the policy of seeking the views of, and engaging in
discussions with, the Company’s stockholders on corporate
governance matters and the Company’s executive compensation
philosophy, policies and practices. The Company understands that
its stockholders may have different views as to what is the best
approach to soliciting views on the Company’s executive
compensation programs and practices, and the Company looks
forward to hearing from its stockholders on this Proposal.
6
The option of one year, two years or three years that receives
the highest number of votes cast by stockholders will be the
frequency for the advisory vote on executive compensation that
has been selected by stockholders. However, because this vote is
advisory and not binding on the Board or the Company in any way,
the Board may decide that it is in the best interests of
stockholders and the Company to hold an advisory vote on
executive compensation more or less frequently than the option
approved by stockholders.
Unless marked otherwise, proxies received will be voted
“FOR” the approval of “one year” as the
preferred frequency for advisory votes on the NEOs compensation.
Recommendation
of the Board:
The Compensation Committee and the Board recommend a vote
“FOR” the approval of “one year” as the
preferred frequency for advisory votes on the NEOs compensation.
THE BOARD
OF DIRECTORS AND COMMITTEES
The Board met six times during 2010. All directors attended
100 percent of the total number of meetings held by the
Board as well as any standing committees of the Board on which
they serve. While the Company encourages all members of the
Board to attend the Annual Meeting, there is no formal policy as
to their attendance at the Annual Meeting. All directors
attended the 2010 Annual Meeting held on May 12, 2010.
Stockholders’
Communications
The Company has not developed a formal process by which
stockholders may communicate directly to the Board. The Company
believes that an informal process, in which stockholder
communications (or summaries thereof) are received by the
Secretary for the Board’s attention and provided to the
Board, has served the Board’s and the stockholders’
needs. In view of recently adopted SEC disclosure requirements
relating to this issue, the Board may consider developing more
specific procedures. Until other procedures are developed, any
communications to the Board should be addressed to the Board and
sent in care of the Secretary of the Company.
Director
Independence
The NASDAQ corporate governance rules require that a majority of
the Board be independent. No director qualifies as independent
unless the Board determines that the director has no direct or
indirect material relationship with the Company. In assessing
the independence of its members, the Board examined the
commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships of each member. The
Board’s inquiry extended to both direct and indirect
relationships with the Company. Based upon both detailed written
submissions by its members and discussions regarding the facts
and circumstances pertaining to each member, considered in the
context of applicable NASDAQ corporate governance rules, the
Board has determined for the year ended December 31, 2010
all directors were independent, with the exception of
Mr. Kelly who is the Company’s CEO. Mr. Kelly is
also a director of the Board.
Leadership
Structure
The Board has segregated the positions of Chair of the Board and
CEO since the Company’s inception in 2004. The position of
Chair of the Board has been filled by an independent director.
(The evaluation of director independence has been described
above.) The Board believes that segregation of these positions
has allowed the CEO to focus on managing the
day-to-day
activities of the Company within the parameters established by
the Board. The position of Chair of the Board provides
leadership to the Board in establishing the overall strategic
direction of the Company consistent with the input of other
directors of the Board and management. The Board believes this
structure has served the stockholders well by ensuring the
development and implementation of the Company’s strategies
in the wireless telecommunications industry. The Company
acquired Amcom Software, Inc. and subsidiary (“Amcom”)
in March 2011. The Board does not currently contemplate any
changes to the leadership structure of the Board in 2011 as a
result of this acquisition.
7
Risk
Oversight
The Company’s primary risks consist of managing the
Company’s operations profitably within the environment of
declining revenues and subscribers for the Company’s
wireless segment and successfully integrating the acquired
software business. In general the Board, as a whole and also at
the Committee level, oversees the Company’s risk management
activities. The Board annually reviews management’s
long-term strategic plan and the resulting annual budget that
results from that strategic planning process. Using that
information the Compensation Committee establishes both the
short-term and long-term compensation programs that include all
executives of the Company (including the NEOs). These
compensation programs are discussed and ratified by the Board.
The compensation programs are designed to focus management on
the performance metrics underlying the profitable operations of
the Company. The Board receives periodic updates from management
on the status of the Company’s operations and performance
(including updates outside of the normal Board meetings).
Finally, as noted below, the Board is assisted by the Audit
Committee in fulfilling its responsibility for oversight of the
quality and integrity of the Company’s accounting, auditing
and financial reporting practices. Thus, in performing its risk
oversight the Board establishes the performance metrics,
monitors on a timely basis the achievement of those performance
metrics, and oversees the mechanisms that report those
performance metrics.
Committees
During 2010 the Board had a standing Nominating and Governance
Committee, Compensation Committee and Audit Committee as
represented in the following table:
|
Nominating and |
||||||
|
Governance |
Compensation |
|||||
| Board of Directors | Committee | Committee | Audit Committee | |||
|
Royce Yudkoff (Chair)
|
M | M | ||||
|
Vincent D. Kelly
|
||||||
|
Nicholas A. Gallopo
|
C | |||||
|
Brian O’Reilly
|
M | C | ||||
|
Matthew Oristano
|
C | M | ||||
|
Samme L. Thompson
|
M | M | ||||
|
C = Chair
|
||||||
|
M = Member
|
||||||
Nominating
and Governance Committee
As of December 31, 2010 the members of the Nominating and
Governance Committee consisted of Messrs. Oristano,
O’Reilly and Yudkoff, each of whom was an independent
director as the term is defined in Rule 4200(a)(15) of the
NASDAQ marketplace rules. Mr. Oristano served as the Chair
of the Nominating and Governance Committee. The Nominating and
Governance Committee met once in 2010 and took no action by
unanimous written consent in lieu of a meeting. The Board has
adopted a charter governing the activities of the Nominating and
Governance Committee, which may be viewed online on the
Company’s website at
http://www.usamobility.com/about _
us/investor _ relations/. Pursuant to its charter,
the Nominating and Governance Committee’s tasks include
identifying individuals qualified to become Board members,
recommending to the Board director nominees to fill vacancies in
the membership of the Board as they occur and, prior to each
Annual Meeting of Stockholders, recommending director nominees
for election at such meeting, making recommendations to the
Board concerning the size and composition of the Board,
conducting succession planning regarding the CEO and other
senior executive positions of the Company and leading the Board
in its annual review of Board performance. The Nominating and
Governance Committee may also develop and recommend to the Board
corporate governance principles applicable to the Company.
The Nominating and Governance Committee considers Board
candidates based upon various criteria, such as skills,
knowledge, perspective, broad business judgment and leadership,
relevant specific industry or regulatory
8
affairs knowledge, business creativity and vision, experience,
and any other factors appropriate in the context of an
assessment of the Nominating and Governance Committee’s
understood needs of the Board at that time. In addition, the
Nominating and Governance Committee considers whether the
individual satisfies criteria for independence, as may be
required by applicable regulations, and personal integrity and
judgment. Accordingly, the Board seeks to attract and retain
highly qualified directors who have sufficient time to attend to
their substantial duties and responsibilities to the Company.
The Nominating and Governance Committee does not have a formal
policy with respect to diversity, but as part of its review of
Board candidates, the Committee considers diversity in the
context of age, business experience, knowledge and perspective
from other industries or business disciplines such as investment
banking, manufacturing, professional services or consulting
among others. This consideration is included as part of the
overall decision on the candidates for the Board.
The Nominating and Governance Committee has the sole authority
to retain, compensate, and terminate any search firm or firms to
be used in connection with the identification, assessment,
and/or
engagement of directors and director candidates. No such firm
has been retained by the Nominating and Governance Committee.
The Nominating and Governance Committee considers proposed
nominees whose names are submitted to it by stockholders;
however, it does not have a formal process for that
consideration. The Company has not adopted a formal process
because it believes that an informal consideration process has
served stockholders well. The Nominating and Governance
Committee intends to review periodically whether a more formal
policy should be adopted. If a stockholder wishes to suggest a
proposed name for the Nominating and Governance Committee’s
consideration, the name of that nominee and related personal
information should be forwarded to the Nominating and Governance
Committee, in care of the Secretary of the Company, at least six
months before the next Annual Meeting to assure time for
meaningful consideration by the Nominating and Governance
Committee. See also “Stockholder Proposals” for Bylaw
requirements for nominations.
All of the nominees for directors being voted upon at the Annual
Meeting are directors standing for re-election.
Compensation
Committee
As of December 31, 2010, the members of the Compensation
Committee consisted of Messrs. O’Reilly, Thompson and
Yudkoff, each of whom was an independent director as the term is
defined in Rule 4200(a)(15) of the NASDAQ marketplace
rules. Mr. O’Reilly served as the Chair of the
Compensation Committee. The Compensation Committee shall ensure
that the Company’s compensation programs are designed to
encourage high performance, promote accountability and assure
that employee interests are aligned with the interests of the
Company’s stockholders. The Compensation Committee met two
times during 2010 and took no action by unanimous written
consent in lieu of a meeting.
The Board has adopted a charter setting forth the structure,
authority and responsibilities of the Compensation Committee,
which may be viewed online on the Company’s website at
http://www.usamobility.com/about _
us/investor _ relations/. Under its charter, the
responsibilities of the Compensation Committee include, at least
annually, reviewing the compensation philosophy of the Company
and administering the USA Mobility, Inc. Equity Incentive Plan
(“Equity Plan”); approving all compensation for
executives with a base salary greater than or equal to $250,000
and making recommendations for Board approval of proposed
employment agreements
and/or
severance arrangements for such executives as recommended by the
CEO; evaluating and approving all executive compensation
programs, including adoption or amendment to incentive
compensation and equity-based awards; and evaluating the
performance of the CEO and recommending for Board approval the
compensation based on such evaluation consistent with the
CEO’s existing employment agreement. The Compensation
Committee also recommends for Board approval the total
compensation for non-executive directors. The Compensation
Committee cannot delegate responsibilities relating to executive
compensation. The Compensation Committee has the sole authority
to retain,
and/or
replace, as needed, any independent counsel, compensation and
benefits consultants and other outside experts as the
Compensation Committee believes to be necessary. In 2010, the
Compensation Committee did not retain services from any
compensation consultants.
9
Audit
Committee
As of December 31, 2010 the Audit Committee, established in
accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”),
consisted of Messrs. Gallopo, Oristano, and Thompson, each
of whom was an independent director as the term is defined in
Rule 4200(a)(15) of the NASDAQ marketplace rules. The Board
has determined that Mr. Gallopo, who is the Audit Committee
Chair, is an “audit committee financial expert,” as
that term is defined in the Exchange Act. The Audit Committee
met four times during 2010 and took no action by unanimous
written consent in lieu of a meeting. The Board has adopted a
charter setting forth the structure, powers and responsibilities
of the Audit Committee, which may be viewed online on the
Company’s website at
http://www.usamobility.com/about _
us/investor _ relations/. Under its charter, the
responsibilities of the Audit Committee include approving the
appointment, compensation, retention and oversight of the
Company’s independent registered public accounting firm;
reviewing the plans and results of the audit engagement with the
independent registered public accounting firm; reviewing the
Company’s critical accounting policies, the Annual and
Quarterly reports on
Forms 10-K
and 10-Q,
respectively, and the earnings releases; reviewing the adequacy
of the Company’s internal accounting controls; overseeing
the Company’s ethics program; and reviewing the policies
and procedures regarding executives’ expense accounts.
As described under the heading
“Proposal No. 2 — Ratification of
Appointment of Independent Registered Public Accounting
Firm,” the Audit Committee has appointed Grant Thornton as
the Company’s independent registered public accounting firm
for the year ending December 31, 2011 and is seeking
ratification of the appointment at the Annual Meeting.
FEES AND
SERVICES
Fees Paid
to the Independent Registered Public Accounting Firm
The following table summarizes fees billed through
March 17, 2011 to the Company by Grant Thornton relating to
services provided for the periods stated.
|
For the Year Ended December |
||||||||
| Grant Thorton LLP | 31, | |||||||
|
2010 |
2009 |
|||||||
| ($) | ($) | |||||||
|
Audit Fees(a)
|
1,391,620 | 1,587,173 | ||||||
|
Audit Related and Other Fees(b)
|
- | - | ||||||
|
Tax Fees(c)
|
- | - | ||||||
|
All Other Fees
|
- | - | ||||||
|
Total
|
1,391,620 | 1,587,173 | ||||||
| (a) | The audit fees (including out-of-pocket expenses) for the years ended December 31, 2010 and 2009 were for professional services rendered during the audits of the Company’s consolidated financial statements and its internal control over financial reporting, for reviews of the Company’s consolidated financial statements included in the Company’s quarterly reports on Form 10-Q and for reviews of other filings made by the Company with the SEC. | |
| (b) | No audit related or other fees were paid to the Company’s independent registered public accounting firm in 2010 or 2009. | |
| (c) | Tax fees consist of tax compliance, tax advice and tax planning services. No tax fees were paid to the Company’s independent registered public accounting firm in 2010 or 2009. |
Pre-Approval
Policies and Procedures
The Audit Committee has adopted policies and procedures relating
to the approval of all audit and non-audit services that are to
be performed by the Company’s independent registered public
accounting firm. This policy generally provides that the Company
will not engage the Company’s independent registered public
accounting firm
10
to render audit or non-audit services unless the service is
specifically approved in advance by the Audit Committee or the
engagement is entered into pursuant to one of the pre-approval
procedures described below.
From time to time, the Audit Committee may pre-approve specified
types of services that are expected to be provided to the
Company by the Company’s independent registered public
accounting firm during the next 12 months. Any such
pre-approval is detailed as to the particular service or types
of services to be provided and is also generally subject to a
maximum dollar amount.
The Audit Committee may also delegate to one or more of its
members the authority to approve any audit or non-audit services
to be provided by the independent registered public accounting
firm. Any approval of services by a member of the Audit
Committee pursuant to this delegated authority is reported at
the next Audit Committee meeting.
All audit fees in 2010 and 2009 were approved by the Audit
Committee pursuant to the Company’s pre-approval policy.
AUDIT
COMMITTEE REPORT
In accordance with its written charter adopted by the Board, the
Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the
Company’s accounting, auditing and financial reporting
practices. The Audit Committee oversees the Company’s
financial reporting process on behalf of the Board. Management
is responsible for the preparation of the Company’s
financial statements and the financial reporting process,
including the system of internal controls. Grant Thornton (the
“auditor”) is responsible for expressing an opinion on
the conformity of those audited financial statements with
generally accepted accounting principles and on the
effectiveness of the Company’s internal control over
financial reporting.
In discharging its oversight responsibility, the Audit Committee
reviewed and discussed with management and the auditor the
audited financial statements that were included in the
Company’s Annual Report on
Form 10-K
for the year ended December 31, 2010 (the “2010
Form 10-K”).
The Audit Committee discussed with the auditor the matters
required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as
amended and as adopted by the Public Company Accounting
Oversight Board (“PCAOB”). In addition, the Audit
Committee discussed with the auditor the auditor’s
independence from the Company and its management including the
matters in the written disclosures provided to the Audit
Committee as required by the applicable requirements of the
PCAOB.
Based on the foregoing, the Audit Committee recommended to the
Board and the Board approved the inclusion of the Company’s
audited financial statements in the 2010
Form 10-K
for filing with SEC.
Audit Committee:
Nicholas A. Gallopo
Matthew Oristano
Samme L. Thompson
Nicholas A. Gallopo
Matthew Oristano
Samme L. Thompson
The foregoing report shall not be deemed incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of
1933, as amended, or the Exchange Act (together, the
“Acts”), except to the extent that the Company
specifically incorporates this information by reference, and
shall not otherwise be deemed filed under the Acts.
DIRECTOR
COMPENSATION
On August 1, 2007, for periods of service beginning on
July 1, 2007, the Board approved that, in lieu of
restricted stock units (“RSUs”), each non-executive
director will be granted in arrears on the first business day
following the quarter of service, shares of restricted common
stock (“restricted stock”) under the Equity Plan for
their service on the Board and committees thereof. The
restricted stock would be granted quarterly based upon the
closing price per share of the Company’s common stock on
the last trading day at the end of each quarter, such that each
non-executive director would receive $40,000 per year of
restricted stock ($50,000 for the Chair of the Audit
11
Committee). The restricted stock will vest on the earlier of a
change in control of the Company (as defined in the Equity Plan)
or one year from the date of grant, provided, in each case, that
the non-executive director maintains continuous service on the
Board. Future cash distributions related to the restricted stock
will be set aside and paid in cash to each non-executive
director on the date the restricted stock vests. In addition to
the quarterly restricted stock grants, the non-executive
directors would be entitled to cash compensation of $40,000 per
year ($50,000 for the Chair of the Audit Committee), also
payable quarterly. These sums are payable, at the election of
the director, in the form of cash, shares of common stock, or
any combination thereof.
The following table details information on the restricted stock
awarded to the Company’s non-executive directors in or for
service in 2010. The shares of restricted stock vested one year
from the date of grant and the related cash distributions on the
vested restricted stock were paid to the Company’s
non-executive directors.
|
Restricted |
||||||||||||||||||||||||
|
Stock |
||||||||||||||||||||||||
|
For the |
Restricted |
Restricted |
Awarded |
Cash |
||||||||||||||||||||
|
Three |
Price Per |
Stock |
Stock |
and |
Distribution |
|||||||||||||||||||
|
Months |
Share |
Awarded |
Vested |
Vesting |
Outstanding |
Paid |
||||||||||||||||||
| Ended | Grant Date | ($)(a) | (#) | (#) | Date | (#) | ($)(b) | |||||||||||||||||
|
December 31, 2009
|
January 2, 2010 | 11.01 | 4,767 | (4,767) | January 3, 2011 | - | 9,534 | |||||||||||||||||
|
March 31, 2010
|
April 1, 2010 | 12.67 | 4,143 | - | April 1, 2011 | 4,143 | - | |||||||||||||||||
|
June 30, 2010
|
July 1, 2010 | 12.92 | 4,063 | - | July 1, 2011 | 4,063 | - | |||||||||||||||||
|
September 30, 2010
|
October 1, 2010 | 16.03 | 3,276 | - | October 1, 2011 | 3,276 | - | |||||||||||||||||
|
December 31, 2010
|
January 3, 2011 | 17.77 | 2,955 | - | January 2, 2012 | 2,955 | - | |||||||||||||||||
|
Total
|
19,204 | (4,767) | 14,437 | 9,534 | ||||||||||||||||||||
| (a) | The quarterly restricted stock awarded is based on the price per share of the Company’s common stock on the last trading day prior to the quarterly award date. | |
| (b) | Amount excludes interest earned and paid upon vesting of shares of restricted stock. |
These grants of shares of restricted stock will reduce the
number of shares eligible for future issuance under the Equity
Plan.
The following table details information on the cash
distributions relating to the restricted stock issued to the
Company’s non-executive directors for the year ended
December 31, 2010:
|
Per Share |
Total |
|||||||||||
|
Declaration |
Payment |
Amount |
Amount |
|||||||||
| Date | Record Date | Date | ($) | ($) | ||||||||
|
February 24, 2010
|
March 17, 2010 | March 31, 2010 | 0.25 | 4,666 | ||||||||
|
May 5, 2010
|
May 20, 2010 | June 25, 2010 | 0.25 | 4,276 | ||||||||
|
July 28, 2010
|
August 19, 2010 | September 10, 2010 | 0.25 | 4,263 | ||||||||
|
November 3, 2010
|
November 18, 2010 | December 10, 2010 | 1.25 | 20,311 | ||||||||
|
Total
|
2.00 | 33,516 | ||||||||||
Effective August 31, 2005, all directors are required to
own and hold a minimum of 1,500 shares of the
Company’s common stock for a period of 18 months.
These shares could be shares that were already owned, shares
that were acquired by the director, or restricted stock that
were paid to the director for service on the Board and
committees thereof. At March 17, 2011 all directors met the
minimum ownership requirement.
The non-executive directors are reimbursed for any reasonable
out-of-pocket
Board related expenses incurred. There are no other annual fees
paid to these non-executive directors. Directors that are
employed as executives of the Company are not separately
compensated for service as a director.
No change in director compensation has been planned for 2011.
12
The Company used the fair-value based method of accounting for
the equity awards. The restricted stock will vest on the earlier
of a change in control or one year from the date of grant and
the fair value is amortized as compensation expense over a
one-year period. The amounts shown below for restricted stock
reflect the grant date fair value of the restricted stock issued
quarterly to the non-executive directors based on the price per
share of the Company’s common stock on the last trading day
prior to the quarterly award date. The following table sets
forth the compensation earned by the non-executive directors for
the year ended December 31, 2010:
2010 Director
Compensation Table
|
Fees Earned or |
All Other |
|||||||||||||||||||
|
Paid in Cash |
Stock Awards |
Compensation |
Total |
|||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ||||||||||||||||
|
Royce Yudkoff(a)
|
40,000 | 40,000 | 4,377 | 84,377 | ||||||||||||||||
|
Nicholas A. Gallopo(b)
|
50,000 | 50,000 | 5,471 | 105,471 | ||||||||||||||||
|
Brian O’Reilly(a)
|
40,000 | 40,000 | 4,377 | 84,377 | ||||||||||||||||
|
Matthew Oristano(a)
|
40,000 | 40,000 | 4,377 | 84,377 | ||||||||||||||||
|
Samme L. Thompson(a)
|
40,000 | 40,000 | 4,377 | 84,377 | ||||||||||||||||
| (a) | Included in the column “All Other Compensation” for each of the non-executive directors is $4,377 of cash distributions and interest paid to the non-executive directors in 2010 on the vested restricted stock. On January 2, 2010, April 1, 2010, July 1, 2010 and October 1, 2010, 3,511 shares of restricted stock vested for each of the non-executive directors from the quarterly grants issued to each of the non-executive directors in 2009. As of December 31, 2010, Messrs. Yudkoff, O’Reilly, Oristano and Thompson each has 3,095 shares of restricted stock outstanding with a fair market value of $54,998 based on the closing price per share of the Company’s common stock on December 31, 2010 of $17.77. On January 3, 2011 the Company awarded Messrs. Yudkoff, O’Reilly, Oristano and Thompson each 563 shares of restricted stock for services performed during the fourth quarter of 2010 based on the closing price of the Company’s common stock on December 31, 2010 of $17.77. The restricted stock will vest on the earlier of a change in control or one year from the date of issuance and the fair value is amortized as compensation expense over a one-year period. Also on January 3, 2011, 908 shares of restricted stock vested for each of the non-executive directors from the grant issued on January 2, 2010 and the related cash distributions and interest of $1,816 on the vested restricted stock were paid to each of the non-executive directors. | |
| (b) | Included in the column “All Other Compensation” for Mr. Gallopo, the Audit Committee Chair, is $5,471 of cash distributions and interest paid in 2010 on the vested restricted stock. On January 2, 2010, April 1, 2010, July 1, 2010 and October 1, 2010, 4,388 shares of restricted stock vested from the quarterly grants issued to Mr. Gallopo in 2009. As of December 31, 2010, Mr. Gallopo has 3,869 shares of restricted stock outstanding with a fair market value of $68,752 based on the closing price per share of the Company’s common stock on December 31, 2010 of $17.77. On January 3, 2011, the Company awarded Mr. Gallopo 703 shares of restricted stock for services performed during the fourth quarter of 2010 based on the closing price of the Company’s common stock on December 31, 2010 of $17.77. The restricted stock will vest on the earlier of a change in control or one year from the date of issuance and the fair value is amortized as compensation expense over a one-year period. Also on January 3, 2011, 1,135 shares of restricted stock vested from the grant issued to Mr. Gallopo on January 2, 2010 and the related cash distributions and interest of $2,270 on the vested restricted stock were paid to Mr. Gallopo. |
EXECUTIVE
OFFICERS
Executive officers of the Company serve at the pleasure of the
Board, subject in certain cases to the provisions of their
employment agreements, if applicable. Set forth below is
biographical information for each executive officer of the
Company who is not also a director as of March 17, 2011.
Mr. Kelly is a director of the Company.
James H. Boso. Mr. Boso, 63, was
appointed Executive Vice President (“EVP”) of Sales of
the Company in October 2005 and subsequently promoted to EVP of
Sales and Marketing (“EVP, Sales &
Marketing”) in July 2007. Prior to his current position,
Mr. Boso was named Division President of the Western
Sales Division in November 2004 with the merger of Arch and
Metrocall. He was Regional Vice President for the Central Sales
Region of
13
Metrocall from July 1996 until November 2004. Mr. Boso has
over 10 years in the wireless messaging industry and over
24 years in the telecommunications, broadcast and
entertainment industries including serving as Vice President,
Broadcast Division of Bass Brothers, Senior Vice President with
Storer Communications, Inc. and the CEO of Spectravision, Inc.
Shawn E. Endsley. Mr. Endsley,
age 55, was appointed Chief Financial Officer
(“CFO”) of the Company and a director of Arch, a
wholly owned subsidiary of the Company in September 2010.
Mr. Endsley is responsible for the financial management of
the Company. Before his appointment as CFO, Mr. Endsley had
been the Controller and Chief Accounting Officer of the Company
from May 2005. Metrocall, a predecessor to the Company, hired
Mr. Endsley as corporate controller in June 2004. Prior to
joining the Company, Mr. Endsley had over 20 years of
experience in the telecommunications industry with financial or
consulting positions at several publicly traded companies. These
experiences included from 1989 to 1999 at Qwest Communications
International Inc. and a predecessor company LCI International,
Inc., both domestic telecommunications providers, as well as
from 1999 to 2001 at Global TeleSystems, Inc., an international
provider of communication services. Mr. Endsley provided
consulting and forensic accounting support at a large
telecommunications company from 2002 to 2004. Prior to his
career in the telecommunications industry, Mr. Endsley was
employed by a large international public accounting firm to
provide accounting, auditing and consulting services to utility
and communication companies in the United States.
Bonnie K. Culp-Fingerhut. Ms. Culp, 59,
was appointed EVP of Human Resources and Administration
(“EVP, HR & Administration”) in October
2007. Ms. Culp was named Senior Vice President of Human
Resources and Administration in November 2004 with the merger of
Arch and Metrocall. She was Senior Vice President of Human
Resources and Administration of Metrocall from November 1998
until November 2004. Ms. Culp has more than 25 years
in the human resources field with over 10 years in the
wireless messaging industry.
Thomas G. Saine. Mr. Saine, 48, was
promoted to Chief Information Officer (“CIO”) in July
2008, effective August 2008. Prior to his current position,
Mr. Saine was the Chief Technology Officer
(“CTO”) since October 2007. In addition, since January
2008 Mr. Saine currently serves as the President of GTES,
LLC, an indirect wholly-owned subsidiary of USA Mobility.
Mr. Saine rejoined the Company in August 2007 as Vice
President of Corporate Technical Operations. Previously,
Mr. Saine had served the Company as Vice President,
Technology and Integration from November 2003 through June 2005.
Mr. Saine was an independent consultant from July 2005
through November 2005 and was a Program Manager and Director of
Programs with Northrop Grumman Corporation from December 2005
through August 2007. Prior to Mr. Saine’s employment
with the Company in 2003, Mr. Saine had served as Vice
President, Network Services and CTO of Weblink Wireless, Inc.
from 2001 through 2003. Mr. Saine has over 20 years of
operations, engineering and technology management experience.
Mr. Saine currently serves on the Board of GTES, Inc.
The NEOs of the Company as of December 31, 2010 consisted
of Mr. Kelly, the CEO, Mr. Endsley, the CFO, and the
other three most highly compensated executive officers of the
Company, whose annual compensation equaled or exceeded $100,000
and who served as executive officers at December 31, 2010.
The other three most highly compensated executive officers of
the Company are identified as Mr. Boso, Ms. Culp and
Mr. Saine. Their titles are as follows: EVP,
Sales & Marketing, EVP, HR & Administration
and CIO, respectively. Mr. Endsley was promoted to CFO in
September 2010, as such, no information is reported for 2009 and
2008 for this NEO. The former COO/CFO, Mr. Schilling, would
have been listed as a NEO except that he resigned in September
2010 and was not a NEO at December 31, 2010.
COMPENSATION
DISCUSSION AND ANALYSIS (“CD&A”)
Executive
Summary
Despite a challenging economic environment throughout 2010, the
Company delivered solid performance with a key objective to
provide sustained, long-term increase in stockholder value. The
Company exceeded all of the pre-established performance criteria
for its STIP for the wireless segment. Highlights of the
Company’s 2010 performance year for the wireless segment
included:
| • | Ending cash balance of $129.2 million; |
14
| • | Revenues of $233.3 million; and | |
| • | EBITDA of $81.3 million. |
Based on these results, and with consideration of the
Company’s pay for performance philosophy, the Company took
the following compensation actions in 2011 with regards to the
future compensation program for its executive officers
(including NEOs):
| • | Adopted a multi-year performance LTIP award; | |
| • | Established an annual performance based STIP award; | |
| • | Eliminated a provision that provided a gross-up payment for excise tax from the CEO employment agreement; and | |
| • | Expanded the CEO’s non-compete obligation to cover mission critical communications software. |
Compensation
Objectives
For all executives of the Company, which includes the NEOs,
compensation is intended to be based on the performance of the
Company as determined by the Compensation Committee and ratified
by the Board. The Compensation Committee believes that
compensation paid to executives should be closely aligned with
the short-term and long-term performance of the Company; linked
to specific, measurable results that create value for
stockholders; and assist the Company in attracting and retaining
key executives critical to long-term success.
In establishing compensation for executives, the Compensation
Committee has the following objectives:
| • | Attract and retain individuals of superior ability and managerial talent; | |
| • | Ensure compensation is aligned with the Company’s corporate strategies, business objectives and the long-term interests of the Company’s stockholders; | |
| • | Achieve key strategic and financial performance measures by linking incentive award opportunities to attainment of performance goals in these areas; and | |
| • | Focus executive performance on increasing the Company’s stock price and maximizing stockholder value, as well as promoting retention of key staff, by providing a portion of total compensation opportunities in the form of direct ownership in the Company through RSUs that are payable in common stock of the Company. |
To meet these objectives the Compensation Committee also
considers the strategic position of the Company in the wireless
telecommunications industry and in the software industry
starting in 2011. While the Company is the largest provider in
the paging segment of this industry, the Company has experienced
significant attrition in its subscriber base and revenues as its
customers have migrated to other wireless services. These
changes require a continual focus on operational efficiency and
cost reductions to maximize operating cash flow and
profitability. The impact of subscriber and revenue attrition
has negatively impacted the price performance of the
Company’s common stock since the formation of the Company
in November 2004. The Company’s strategic position, the
requirement for continuing cost control in order to maintain
profitability and the limited number of experienced and
knowledgeable paging industry executives are considered as the
Compensation Committee evaluates the Company’s
performance-based compensation program.
In order to implement the performance-based compensation
philosophy, the Company’s compensation program for
executives consists of the following elements:
|
Non-Equity |
||||
| Elements of Compensation | (Cash Based) | Equity | ||
|
Base Salary
|
100% | - | ||
|
All Other Compensation
|
100% | - | ||
|
2010 Short-Term Incentive Program (“STIP”)(a)
|
100% | - | ||
|
2009 Long-Term Incentive Program (“LTIP”)
|
50% | 50% |
15
| (a) | The CEO’s amended and restated employment agreement dated October 30, 2008 and further amended on March 16, 2011 specifies that his STIP compensation will be paid 50 percent in cash and 50 percent in common stock of the Company. |
Both the STIP and LTIP compensation are based on the measurable
financial performance of the Company as determined by the
Compensation Committee and ratified by the Board. In designing
the STIP and LTIP compensation the Compensation Committee has
considered the strategic position of the Company as the largest
provider in the declining paging segment of the wireless
telecommunications industry. This consideration has resulted in
the STIP compensation being exclusively cash based (except for
the CEO as noted above). With respect to the 2009 LTIP
compensation the Company has designed this element to include
both cash and equity components. The balance between cash and
equity compensation is evaluated annually as discussed below. To
further tie compensation to performance, the LTIP compensation
does not automatically award any amount of compensation unless
the pre-established financial targets are achieved.
Compensation
Policies and Practices that Present Material Risks
As noted above, the Board through the Compensation Committee
applies the same compensation policies and practices to all
executives of the Company including the NEOs. Executives of the
Company are defined as employees of the Company with positions
of vice-president or higher. Currently, there are
13 employees considered to be executives in the wireless
segment. There are no materially significant incentive
compensation policies or practices applicable to all other
employees of the Company.
A key element of the Company’s compensation policies and
practices is the STIP. The STIP performance criteria of
operating cash flow (as defined), healthcare revenue, direct
subscriber units in service (“UIS”) and average
revenue per unit (“ARPU) have been established to maximize
the Company’s cash flow without unnecessarily reducing the
number of subscribers that ultimately drive revenues. While the
criteria upon which the STIP is based could incent the
Company’s executives to reduce operating expenses adversely
impacting customer retention, the other elements of the STIP
incent customer retention and revenue growth. These STIP
criteria are consistent with the criteria used in prior years
and have not resulted in a material adverse effect on the
Company. The Company believes that its compensation policies and
practices are not likely to have a material adverse impact on
the Company.
Adjustments
and/or Recovery of Award Payments
The Company does not have a policy regarding the adjustment
and/or
recovery of STIP and LTIP payments due to restatements of
previously issued financial statements.
Determination
of Compensation
The Compensation Committee determines and recommends the
compensation awards available to the Company’s CEO
consistent with the terms of the CEO’s employment
agreement. It also evaluates and takes into account the
CEO’s recommendations on all compensation levels for all
other NEOs.
To determine the appropriate range for the key elements of the
compensation program, the Compensation Committee reviews
management’s recommendations and has, from time to time,
reviewed recent historical compensation survey data such as the
Mercer Telecommunications Survey. The Compensation Committee
reviews the structure of the Company’s various executive
compensation elements and the appropriateness of the levels of
base salary, STIP compensation and LTIP compensation. Consistent
with the results of the recent historical information, the
Company’s executive compensation program includes a fixed
base salary and variable STIP and LTIP compensation, with a
significant portion weighted towards the variable components.
This ensures that total compensation reflects the overall
success or failure of the Company and motivates executives to
meet appropriate performance measures, thereby maximizing total
return to stockholders.
The CEO provides recommendations annually to the Compensation
Committee regarding the compensation of all executives,
excluding himself. The performance of all NEOs, including the
CEO, is reviewed annually by the Compensation Committee. The
Compensation Committee then evaluates and takes into account the
CEO’s
16
recommendations on compensation levels for all other NEOs.
Annually, the Compensation Committee, without the presence of
the CEO, recommends for Board approval the CEO’s incentive
compensation consistent with terms of the CEO’s employment
agreement. Also, consistent with the CEO’s current
employment agreement discussed below, the Board may increase,
but not decrease, the amounts of the CEO’s base salary.
In 2010 the Company did not benchmark its compensation levels
for its executives. The Compensation Committee believed that
recent historical information used in the prior years was
sufficient to analyze the 2010 compensation levels for its
executives. The elements of compensation for 2010 did not change
from the prior year’s elements of compensation.
Within its performance-based compensation program, the Company
aims to compensate the NEOs in a manner that is tax effective
for the Company. In practice, all of the annual compensation
paid by the Company is tax-qualified under Section 162(m)
of the Internal Revenue Code, as amended (the “Code”),
with the exception of the portion of the CEO’s STIP and
LTIP compensation in excess of $1 million.
In 2008, the Compensation Committee engaged the Hay Group to
establish a peer group, consisting of twelve companies in a
similar industry and with comparable revenue and to develop a
recommendation for severance and change in control agreements
for the NEOs (excluding the CEO). The peer group was comprised
of the following companies: ATC, Crown Castle International
Corporation, Virgin Mobile USA, Inc., Centennial Communications
Corp, Rural Cellular Corporation, iPCS, Inc., SBA Communications
Corporation, Syniverse Holdings Inc., InPhonic, Inc., Kratos
Defense & Security Solutions, Inc., Clearwire
Corporation, and LLC International, Inc. The Hay Group gathered
information for the NEOs from the most recent proxy statement
available at that time for these companies and recommended
changes to the severance and change in control agreements for
the NEOs (excluding the CEO). The Compensation Committee
accepted the consultant’s recommendation and directed the
Company to execute amended Executive Severance and Change in
Control agreements (the “Severance Agreements”) with
the NEOs effective October 2008 (excluding the CEO). No such
service was retained in 2010. On March 14, 2011, the
Compensation Committee approved an amendment to the previously
disclosed Severance Agreements, dated October 30, 2008, for
the EVP, Sales & Marketing, EVP, HR &
Administration and CIO. The amended and restated Severance
Agreement extended the term of the prior agreement from December
31, 2012 to December 31, 2014. In addition, on
March 14, 2011, the Compensation Committee approved the
same form of Severance Agreement for the CFO. Also on
March 14, 2011, the Compensation Committee approved a
similar Executive Severance and Change in Control Agreement for
certain executive officers in our recently acquired software
segment.
Given the Company’s strategic position it is very important
to retain the best talent in the senior executive management
team. Actual compensation for each executive (including the
NEOs) is ultimately driven by the performance of the executive
over time, as well as the annual performance of the Company,
based on performance goals established by the Compensation
Committee. Each year, the Company may establish STIP and LTIP
compensation for certain eligible employees, including the NEOs,
based upon criteria approved by the Compensation Committee
including value of the position to the organization, risk
related to turnover, and total cash compensation compared to
market survey data. On March 15, 2011, the Compensation
Committee adopted and the Board ratified the 2011 LTIP for
eligible employees (including the NEOs) for both our wireless
and software segments based on performance goals established by
the Compensation Committee for the combined company. The 2011
LTIP provides eligible employees the opportunity to earn
long-term incentive compensation based on the Company’s
attainment of certain financial goals determined by the
Compensation Committee and set forth in the 2011 LTIP during the
period from January 1, 2011 and December 31, 2014 (the
“performance period”). Under the terms of the 2011
LTIP, each participant is granted a target award of RSUs which
may vest at the end of the performance period should the
pre-established performance goals be achieved for both the
wireless and software segments of the Company. Such vested RSUs
will be settled in common stock of the Company. Additionally,
participants are entitled to dividend equivalent rights with
respect to the RSUs to the extent that any cash dividends or
cash distributions (regular or otherwise) are paid with respect
to the Company’s common stock during the performance period.
17
Policies
with Respect to Equity Compensation Awards
The Company evaluates the allocation of equity awards among
stock option grants, restricted stock grants, stock appreciation
rights and participation units available for grant under the
Company’s Equity Plan. However, the Company has not
historically granted stock options or stock appreciation rights.
The Company grants and records all equity incentive awards under
the fair-value method at the date of grant.
Under the Equity Plan, the Company has the ability to issue up
to a maximum 1,878,976 shares of its common stock to
eligible employees and non-executive members of its Board in the
form of stock options, restricted stock, stock grants or units.
At December 31, 2010 1,225,191 shares of common stock
were available for future grant. RSUs issued under the Equity
Plan do not entitle the holder to any rights of common stock
ownership. RSUs are generally convertible into shares of common
stock pursuant to the Restricted Stock Unit Agreement when the
appropriate vesting conditions have been satisfied. Restricted
stock awarded under the plan entitles the stockholder to all
rights of common stock ownership except that the restricted
stock may not be sold, transferred, exchanged, or otherwise
disposed of during the restriction period, which will be
determined by the Compensation Committee.
No stock options were granted in 2010 and there are no stock
options outstanding.
Relationships
With Compensation Consultants
The Company and the Board did not require support from any
compensation consultants with respect to compensation for its
NEOs for the 2010 fiscal year.
Elements
of Compensation
Base
Salary
As discussed above, the Company provides its NEOs with a base
salary. Each year the Company determines base salary increases
based upon the performance of the NEOs as assessed by the
Compensation Committee with consideration given to criteria such
as (i) the incumbents’ salary levels in comparison to
comparable positions in companies with similar characteristics
such as revenue and growth, (ii) general economic
conditions in the industry, and (iii) the declining
revenues of the Company’s wireless segment. No formulaic
base salary increases are provided to the NEOs, such as cost of
living or contractual adjustments. No salary increases were
provided to the NEOs in 2010 who are all tenured executives with
the Company except for Mr. Endsley due to his promotion to
CFO in September 2010. No salary increases are expected for the
NEOs in 2011.
All
Other Compensation
Perquisites. The Company provides car
allowances to the CEO pursuant to his employment agreement and
to the EVP, Sales & Marketing, which is a customary
practice for sales and marketing executives.
Company Contribution to Defined Contribution
Plans. The Company has a Section 401(k)
Savings & Retirement Plan (the “401(k)
Plan”) for eligible employees of the Company and any
designated affiliate. The 401(k) Plan permits eligible employees
of the Company to defer up to 100 percent of their annual
compensation, subject to certain limitations imposed by the
Code. An employee’s elective deferrals are vested
immediately and non-forfeitable upon contribution to the 401(k)
Plan. The Company currently makes matching contributions to the
401(k) Plan in an amount equal to 50 cents for each dollar of
participant contributions, up to a maximum of 4 percent of
the participant’s salary deferral amount and subject to
certain other limits to include catch up contributions. Plan
participants vest over three years in the amounts contributed by
the Company. Employees of the Company are eligible to
participate in the 401(k) Plan on the first of the month after
30 days of credited service with the Company. In 2010, 2009
and 2008, the Company incurred $28,762 (which includes the cost
for the CFO in 2010), $24,448 and $22,506, respectively, in
matching contributions for the NEOs participating in the 401(k)
Plan.
Other Employee Benefits. The Company maintains
broad-based benefits for all employees, including health and
dental insurance, life and disability insurance, paid time off
and paid holidays. Executives (including NEOs) are eligible to
participate in all of the employee benefit plans on the same
basis as other employees with the exception of accelerated
vacation accrual and eligibility for payout at time of
termination.
18
Termination Payment. The Company entered into
a non-solicitation and non-compete agreement with its former
COO/CFO upon his voluntary resignation from the Company in
September 2010. The agreement restricted Mr. Schilling from
soliciting employees of the Company for a period of four years
after the termination date and from competing against the
Company for a period of three years after the termination date.
In consideration for the non-solicitation and non-compete
agreement Mr. Schilling was entitled to receive a
termination payment equivalent to his eligible payment under the
2010 STIP. This termination payment was payable to
Mr. Schilling at the same time as payments were made to
participants in the 2010 STIP plan. The amount of the
termination payment was based upon achievement of the
pre-established performance goals set by the Compensation
Committee for the wireless segment. In 2010, the Company
exceeded the performance targets resulting in an actual payment
of 120.3 percent of each participant’s eligible 2010
STIP award. The termination payment of $416,840 was made to
Mr. Schilling in March 2011. See “Compensation
Recovery Policy” for clawback provision regarding severance
payment.
Short-Term
Incentive Program (STIP)
As discussed above, the Company structures its compensation
program to reward executives based on the Company’s
performance and the individual executive’s contribution to
that performance. This allows executives to receive STIP
compensation in the event certain specified corporate
performance measures are achieved. The Compensation Committee
believes that the payment of the annual STIP compensation
provides incentives necessary to retain executives and reward
them for short-term Company performance based on the
Company’s strategic position.
Straight-line interpolation is used to determine payouts for
STIP awards when 1) the actual performance is between the
threshold performance target and target performance level and
2) the actual performance is between the target performance
level and the maximum performance target. Payments under the
STIP are contingent upon continued employment, though pro rata
payments will be made in the event of death or disability based
on actual performance at the triggering event date relative to
targeted performance measures for each program. Further, if an
executive’s employment is involuntarily terminated (other
than for cause), the executive will be eligible to receive a pro
rata payment, subject to the execution of an appropriate release
and other applicable and customary termination procedures.
2010
STIP
The Compensation Committee approved the 2010 STIP on
February 9, 2010 for the wireless segment. The 2010 STIP
was comprised of a cash component that was a multiple of the
participant’s 2010 base salary. The pre-established
performance criteria for 2010 were based on operating cash flow
(as defined), total healthcare revenue, the number of direct
subscriber UIS and ARPU. The NEOs were eligible for the
following payments under the 2010 STIP:
|
% of Base |
Target Payout |
Actual Payout |
||||||
| NEO | Job Title | Salary | ($) | ($)(a) | ||||
|
Vincent D. Kelly(b)
|
CEO | 200% | 1,200,000 | 1,443,600 | ||||
|
Shawn E. Endsley(c)
|
CFO | 75% | 108,712 | 130,781 | ||||
|
James H. Boso
|
EVP, Sales & Marketing |
75% | 206,719 | 248,683 | ||||
|
Bonnie Culp
|
EVP, HR & Administration |
75% | 151,939 | 182,783 | ||||
|
Thomas G. Saine
|
CIO | 75% | 206,250 | 248,119 | ||||
|
Former NEO
|
||||||||
|
Thomas L. Schilling(d)
|
Former COO/CFO |
100% | 346,500 | - | ||||
|
Total
|
2,220,120 | 2,253,966 | ||||||
19
| (a) | The Company exceeded the performance targets resulting in an actual payment of 120.3 percent of each NEO’s eligible 2010 STIP award. The payments were made in March 2011. |
| (b) | Pursuant to his employment agreement, Mr. Kelly received 50 percent of his 2010 STIP in common stock of the Company. He received 47,455 shares of common stock based on the closing stock price on February 25, 2011 of $15.21 per share. Mr. Kelly sold 20,027 shares of common stock to the Company in payment of required tax withholdings based on the Company’s closing stock price on February 25, 2011 of $15.21 per share. The shares of common stock purchased by the Company were retired and will not be reissued. | |
| (c) | On September 30, 2010, Mr. Endsley received a salary increase to $200,000 due to his promotion to CFO. In this new role, Mr. Endsley is eligible for an annual STIP award of 75 percent of his base salary, which will be based on the accomplishment of predetermined goals and objectives set by the Compensation Committee for the wireless segment. The actual payout reflects the increase in targeted payout due to Mr. Endsley promotion to CFO. | |
| (d) | On September 30, 2010, Mr. Schilling voluntarily resigned as the Company’s COO/CFO and forfeited his 2010 STIP award. |
The amounts paid under the Company’s 2010 STIP program were
determined based upon the Company’s actual achievement of
the following performance criteria:
|
Performance |
|||||||||
|
($ in |
|||||||||
|
thousands |
Achievement |
||||||||
|
Relative |
except for |
Against |
Weighted |
||||||
| Performance Criteria(a) | Weight | ARPU) | Target | Payout | |||||
|
Operating Cash Flow(b)
|
50% | $72,567 | 125.0% | 62.5% | |||||
|
Healthcare Revenue
|
20% | $111,387 | 114.1% | 22.8% | |||||
|
Direct UIS
|
15% | 1,750,971 | 130.0% | 19.5% | |||||
|
ARPU
|
15% | $8.84 | 103.1% | 15.5% | |||||
| 120.3% | |||||||||
| (a) | The Compensation Committee selected the performance criteria as key measures in determining stockholder value. The relative weight assigned to each performance measure reflects the judgment of the Compensation Committee as to the importance each measure has to stockholder value. |
| (b) | Operating cash flow is calculated as operating income plus depreciation, amortization and accretion less purchases of property and equipment (all determined in accordance with U.S. generally accepted accounting principles). |
2009
Long-Term Incentive Program (LTIP)
On January 6, 2009 the Compensation Committee approved and
the Board ratified the 2009 LTIP. The 2009 LTIP provides
eligible employees in our wireless segment (including the NEOs)
the opportunity to earn long-term incentive compensation based
on the Company’s attainment of certain financial goals
determined by the Compensation Committee and set forth in the
2009 LTIP during the period from January 1, 2009 and
December 31, 2012 (the “performance period”). The
2009 LTIP may vest on December 31, 2012 should the
pre-established performance goals be achieved for the wireless
segment. The Compensation Committee may revise the performance
goals in the event of a change in control or other corporate
reorganization, merger, similar transaction or other
extraordinary event, or as the Compensation Committee determines
is in the best interests of the Company. The purpose of the 2009
LTIP is to promote the success of the Company’s wireless
business, advance the interests of the Company, attract and
retain the best available personnel for positions of substantial
responsibility, and provide additional incentives to selected
key employees for outstanding performance.
The Compensation Committee, in its sole discretion, determines
the target awards that may be earned by each 2009 LTIP
participant based on a multiple of the 2009 STIP target award
for each participant (or, with respect to
20
participants selected to participate in the 2009 LTIP after the
commencement of a performance period, the STIP target award for
the year in which the participant commenced participation in the
2009 LTIP). Under the terms of the 2009 LTIP, 50 percent of
the target award is to be paid in cash and 50 percent of
the target award is to be settled in RSUs, which may vest at the
end of the performance period, as described below. Additionally,
participants are entitled to dividend equivalent rights with
respect to the RSU component of a target award to the extent
that any cash dividends or cash distributions (regular or
otherwise) are paid with respect to the Company’s common
stock during the performance period. Payments under the 2009
LTIP are subject to the Company achieving a specified goal of
operating expenses and a target of earnings before interest,
taxes, depreciation, amortization and accretion expenses
(“EBITDA”) for the wireless segment for the 2012
calendar year (the “performance goals”), with the two
objectives accorded equal weight in determining the amount of
the final payments. Eligible participants will not receive any
payments under the 2009 LTIP until filing of the Company’s
Annual Report on
Form 10-K
for the year ended December 31, 2012 and will forfeit all
rights if terminated with cause or voluntarily separated before
the payment date. If the performance goals are achieved and the
participants are employed through the payment date, the
participants will receive a cash incentive payment, vested RSUs
settled in common stock of the Company and granted under the
Equity Plan, and dividend equivalent rights (if any) paid with
accrued interest in cash with respect to the vested RSUs. Any
participant who is involuntarily terminated without cause during
the first year of the performance period shall forfeit any right
to receive an award. After one year from the effective date of
the grant, a participant whose employment is involuntarily
terminated without cause will earn a prorated portion of
100 percent of the target award for cash and equity awards
based on the number of days the participant was continuously
employed from January 1, 2009 through the termination date
divided by the total number of days in the performance period.
The number of RSUs awarded to a participant was based on the
closing price of the Company’s common stock on
December 31, 2008. The Compensation Committee awarded a
total of 329,416 RSUs to certain eligible employees (including
the NEOs) and also approved those future cash distributions or
cash dividends related to the existing RSUs will be set aside
and paid in cash to each eligible employees when the RSUs are
converted into shares of common stock. Existing RSUs would be
converted into shares of common stock on the earlier of:
(1) a change in control of the Company (as defined in the
Equity Plan); or (2) on or after the third business day
following the day that the Company filed its 2012 Annual Report
on
Form 10-K
with the SEC. The RSUs were granted under the Equity Plan
pursuant to a Restricted Stock Unit Agreement dated
January 15, 2009. The fair value of the RSUs was calculated
at $12.01 per share, the Company’s closing stock price on
January 15, 2009, the date of grant.
Any unvested RSUs granted under the Equity Plan and the related
cash distributions are forfeited if the participant terminates
employment with the Company. During 2009, 7,571 RSUs and the
related cash distributions were forfeited. During 2010, 69,136
RSUs and the related cash distributions were forfeited (which
included 44,922 RSUs forfeited by the former COO/CFO). On
October 11, 2010 and effective for September 30, 2010,
the Compensation Committee awarded 7,731 RSUs to certain
eligible employees (to include the new CFO) based upon the
closing price per share of the Company’s common stock on
October 11, 2010 of $15.93 and also approved that future
cash distributions related to the existing RSUs will be set
aside and paid in cash to each eligible employee if and when the
RSUs are converted into shares of common stock. As of
December 31, 2010, a total of 76,707 RSUs have been
forfeited offset by new grants of 7,731 RSUs resulting in an
outstanding balance of 260,440 RSUs. During the first quarter of
2011, 3,397 RSUs and the related cash distributions were
forfeited, resulting in an outstanding balance of 257,043 RSUs
as of March 22, 2011.
Also on January 6, 2009, the Company provided for long-term
cash performance awards to the same certain eligible employees
(to include the NEOs) under the 2009 LTIP. Similar to the RSUs,
the performance period for these long-term cash performance
awards is 48 months and would be paid on the earlier of a
change in control of the Company (as defined in the Equity
Plan); or on or after the third business day following the day
that the Company files its 2012 Annual Report on
Form 10-K
with the SEC. Any unvested long-term cash performance awards are
forfeited if the participant terminates employment with the
Company.
21
The table below details components of the 2009 LTIP for the NEOs:
|
Non- |
||||||||||||||||||||||||
|
Equity |
||||||||||||||||||||||||
|
Component |
Fair Value |
|||||||||||||||||||||||
|
Total LTIP |
(Cash |
Equity |
Number of |
at Grant |
||||||||||||||||||||
|
% of 2009 |
Award |
Based) |
Component |
RSUs |
Date |
|||||||||||||||||||
| NEO | Job Title | STIP Target | ($)(a) | ($) | ($) | (#)(b) | ($)(c) | |||||||||||||||||
|
Vincent D. Kelly
|
CEO | 150% | 1,800,000 | 900,000 | 900,000 | 77,787 | 934,222 | |||||||||||||||||
|
Shawn E. Endsley
|
CFO | 300% | 377,402 | 188,708 | 188,694 | 15,201 | 194,081 | |||||||||||||||||
|
James H. Boso
|
EVP, Sales & Marketing |
300% | 620,156 | 310,078 | 310,078 | 26,800 | 321,868 | |||||||||||||||||
|
Bonnie Culp
|
EVP, HR & Administration |
300% | 455,816 | 227,908 | 227,908 | 19,698 | 236,573 | |||||||||||||||||
|
Thomas G. Saine
|
CIO | 300% | 618,750 | 309,375 | 309,375 | 26,739 | 321,135 | |||||||||||||||||
|
Former NEO
|
||||||||||||||||||||||||
|
Thomas L. Schilling(d)
|
Former COO/CFO |
300% | 1,039,500 | 519,750 | 519,750 | 44,922 | 539,513 | |||||||||||||||||
|
Total
|
4,911,624 | 2,455,819 | 2,455,805 | 211,147 | 2,547,392 | |||||||||||||||||||
| (a) | The 2009 LTIP award (consists of 50 percent to be paid in cash and 50 percent to be settled in RSUs) is amortized ratably over 48 months as compensation expense. The award may vest on December 31, 2012 should the pre-established performance goals be achieved for the wireless segment. On October 11, 2010 and effective for September 30, 2010, the Compensation Committee and the Board granted an additional award to the CFO totaling $93,618 ($46,816 to be paid in cash and $46,802 to be settled in RSUs) to be amortized ratably over the remaining 27 months as compensation expense. | |
| (b) | The number of RSUs initially awarded to the CFO was based on the Company’s closing stock price on December 31, 2008 of $11.57. On October 11, 2010 and effective for September 30, 2010, the Compensation Committee granted an additional award of 2,938 RSUs to the CFO. The number of RSUs awarded was based on the Company’s closing stock price on October 11, 2010 of $15.93. | |
| (c) | The fair value of the RSUs was calculated at $12.01 per share, the Company’s closing stock price on the date of grant on January 15, 2009. The fair value of the additional RSUs granted to the CFO was calculated at $15.93 per share, the Company’s closing stock price on the date of grant on October 11, 2010. | |
| (d) | Mr. Schilling voluntarily resigned as the Company’s COO/CFO in September 2010 and forfeited his 2009 LTIP award and related cash distributions upon termination. |
Summary
Compensation
The Summary Compensation Table includes values for contingent
compensation, such as unvested equity awards. For example,
performance equity awards under the 2009 LTIP that have been
granted to the NEOs but not paid by the Company have been valued
in the table below based on the most probable outcome as of the
date of grant. The NEOs may never realize the value of certain
items included under the column headed “Total” (as is
the
22
case in recent years), or the amounts realized may differ
materially from the amounts listed in the Summary Compensation
Table and related footnotes.
2010
Summary Compensation Table
|
Non-Equity |
||||||||||||||||||||||||||||||||||||||||||||||||
|
Stock or RSU |
Incentive |
|||||||||||||||||||||||||||||||||||||||||||||||
| Awards |
Plan Compensation |
|||||||||||||||||||||||||||||||||||||||||||||||
|
2006 |
||||||||||||||||||||||||||||||||||||||||||||||||
|
LTIP |
||||||||||||||||||||||||||||||||||||||||||||||||
|
Initial |
||||||||||||||||||||||||||||||||||||||||||||||||
|
Discretionary |
STIP |
LTIP |
Target |
All Other |
Total |
|||||||||||||||||||||||||||||||||||||||||||
|
Salary |
Bonus |
Award |
Awards |
STIP Awards |
Award |
Compensation |
Compensation |
|||||||||||||||||||||||||||||||||||||||||
| NEO | Job Title | Year | ($)(a) | ($)(b) | ($)(c) | ($)(d)(e) | ($)(f) | ($)(g) | ($)(h) | ($) | ||||||||||||||||||||||||||||||||||||||
|
Vincent D. Kelly(i)
|
CEO | 2010 | 600,000 | - | 721,791 | - | 721,809 | - | 23,127 | 2,066,727 | ||||||||||||||||||||||||||||||||||||||
| 2009 | 600,000 | 578,549 | 684,597 | 934,222 | 684,603 | - | 22,063 | 3,504,034 | ||||||||||||||||||||||||||||||||||||||||
| 2008 | 600,000 | - | - | - | 1,263,600 | 720,000 | 277,288 | 2,860,888 | ||||||||||||||||||||||||||||||||||||||||
|
Shawn E. Endsley(j)
|
CFO | 2010 | 191,559 | - | - | 46,802 | 130,781 | - | 4,262 | 373,404 | ||||||||||||||||||||||||||||||||||||||
|
James H. Boso(k)
|
EVP, Sales & Marketing |
2010 | 275,625 | - | - | - | 248,683 | - | 11,397 | 535,705 | ||||||||||||||||||||||||||||||||||||||
| 2009 | 275,625 | 151,876 | - | 321,868 | 235,866 | - | 11,397 | 996,632 | ||||||||||||||||||||||||||||||||||||||||
| 2008 | 262,500 | - | - | - | 207,441 | 189,000 | 76,553 | 735,494 | ||||||||||||||||||||||||||||||||||||||||
|
Bonnie Culp(l)
|
EVP, HR & Administration |
2010 | 202,585 | - | - | - | 182,783 | - | 4,900 | 390,268 | ||||||||||||||||||||||||||||||||||||||
| 2009 | 202,585 | 126,552 | - | 236,573 | 173,362 | - | 4,848 | 743,920 | ||||||||||||||||||||||||||||||||||||||||
| 2008 | 192,938 | - | - | - | 152,685 | 157,500 | 56,793 | 559,916 | ||||||||||||||||||||||||||||||||||||||||
|
Thomas G. Saine(m)
|
CIO | 2010 | 275,000 | - | - | - | 248,119 | - | 4,900 | 528,019 | ||||||||||||||||||||||||||||||||||||||
| 2009 | 275,000 | 42,600 | - | 321,135 | 235,331 | - | 4,900 | 878,966 | ||||||||||||||||||||||||||||||||||||||||
| 2008 | 231,250 | - | - | 41,972 | 182,630 | 126,000 | 4,106 | 585,958 | ||||||||||||||||||||||||||||||||||||||||
|
Former NEO
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Thomas L. Schilling(n)
|
Former COO/CFO | 2010 | 294,205 | - | - | - | - | - | 421,740 | 715,945 | ||||||||||||||||||||||||||||||||||||||
| 2009 | 346,500 | 289,285 | - | 539,513 | 395,357 | - | 4,900 | 1,575,555 | ||||||||||||||||||||||||||||||||||||||||
| 2008 | 330,000 | - | - | - | 347,490 | 360,000 | 125,419 | 1,162,909 | ||||||||||||||||||||||||||||||||||||||||
| (a) | Amounts represented base salaries for 2010, 2009 and 2008. Effective September 30, 2010, Mr. Endsley received a 5.7 percent increase in his annual salary due to his promotion to CFO. Also effective September 30, 2010, Mr. Schilling resigned as the Company’s COO/CFO, as such, his 2010 salary was prorated. Effective January 1, 2009, Mr. Schilling, Mr. Boso and Ms. Culp each received a 5 percent salary increase. On January 1, 2008, Mr. Saine received a 17.6 percent increase in his annual salary due to his promotion to CTO and received an additional 37.5 percent increase in his annual salary effective August 1, 2008 due to his promotion to CIO. Accordingly, his 2008 annual salary was prorated. Effective January 1, 2008, Mr. Schilling, Mr. Boso and Ms. Culp each received a 5 percent salary increase. | |
| (b) | Amounts reported in 2009 represented the Additional Target Award provided for in the 2006 LTIP which consisted of cash bonuses totaling $724,948, equity bonuses of $255,016 (based on 25,249 shares of common stock awarded at $10.10 per share on grant date) and the related cash distributions of $8.65 per share of common stock totaling $208,898. The amounts were expensed in 2009. Mr. Saine was not eligible to receive the $8.65 per share of common stock of cash distributions paid on the number of shares awarded due to the date he was employed by the Company. | |
| (c) | Pursuant to his employment agreement, Mr. Kelly received 50 percent of his STIP award in common stock of the Company. Amounts reported in 2010 and 2009 represented the common stock awarded to Mr. Kelly under the 2010 and 2009 STIP, respectively. On March 4, 2011, Mr. Kelly received 47,455 shares of common stock based on the closing stock price on February 25, 2011 of $15.21 per share. On March 4, 2010, Mr. Kelly received 60,799 shares of common stock based on the closing stock price on February 26, 2010 of $11.26 per share. | |
| (d) | On October 11, 2010 and effective September 30, 2010, the Compensation Committee and the Board granted an additional award of 2,938 RSUs to the CFO with a value of $46,802 to be amortized ratably over the remaining 27 months as compensation expense. The amount reported in 2010 represented the grant date fair value for the additional equity award to the CFO under the 2009 LTIP. The fair value of the RSUs was calculated at $15.93 per share, the Company’s closing stock price on the date of grant on October 11, 2010. Amounts reported in 2009 represented the grant date fair value for the equity portion of the 2009 LTIP. The fair value of the RSUs was calculated at $12.01 per share, the Company’s closing stock price on the date of grant on January 15, 2009. The 2009 LTIP award (excluding the additional award to the CFO in 2010) is amortized over |
23
| 48 months as compensation expense. The 2009 LTIP award may vest on December 31, 2012 should the pre-established performance goals be achieved for the wireless segment. Not reflected in the table above for 2009 was $141,892 of grant date fair value for the equity portion of the 2009 LTIP initially awarded to the new CFO in his previous position as Corporate Controller. See “2009 LTIP” for additional information. | ||
| (e) | On February 1, 2006, the Compensation Committee and the Board established the 2006 LTIP, which consisted of a cash component and an equity component in the form of restricted stock. Of the total 2006 LTIP award, 80 percent was considered the Initial Target Award and was fully amortized by December 2008. The fair value of the restricted stock was calculated at $27.94 per share, the Company’s closing price on the date of grant on February 1, 2006 (which is not reflected in the table above). On November 14, 2008, the Compensation Committee and the Board approved an equity award to Mr. Saine under the 2006 LTIP Initial Target Award. Mr. Saine received 4,395 shares of restricted stock with an aggregate grant date fair value of approximately $41,972. The grant date fair value of the restricted stock was calculated at $9.55 per share, the closing stock price on the date of grant on November 14, 2008. Also on November 14, 2008, the Compensation Committee and the Board amended the vesting date for the 2006 LTIP Initial Target Award from January 1, 2009 to December 3, 2008. On December 3, 2008, 54,153 shares of restricted stock were fully vested under the 2006 LTIP Initial Target Award for the NEOs (including Mr. Schilling but excluding Mr. Endsley) with an aggregate grant date fair value of approximately $1,432,210. The value realized on vesting for the NEOs of $616,803 was calculated based on the vesting price per share, which was the closing price per share of the Company’s common stock on December 3, 2008 of $11.39. | |
| (f) | Amounts represented the compensation expense for the 2010, 2009 and 2008 STIP awards. The STIP awards were paid to the NEOs in March 2011, 2010 and 2009, respectively. Pursuant to his employment agreement, Mr. Kelly received 50 percent of his 2010 and 2009 STIP awards in cash. Mr. Endsley received a prorated amount of the 2010 STIP targeted increase based on his respective promotion date. Mr. Schilling forfeited his 2010 STIP award upon his resignation from the Company in September 2010. | |
| (g) | Amounts represented the cash portion of the 2006 LTIP Initial Target Award. On November 14, 2008, the Compensation Committee and the Board approved a cash award to Mr. Saine under the 2006 LTIP Initial Target Award of $126,000. Also on November 14, 2008, the Compensation Committee and the Board amended the vesting date for the 2006 LTIP Initial Target Award from January 1, 2009 to December 3, 2008. The payment was made on December 11, 2008 to the NEOs. | |
| (h) | Additional information is provided in the “All Other Compensation” table below. | |
| (i) | Amount reported in 2009 represented the grant date fair value of 77,787 RSUs awarded to Mr. Kelly under the 2009 LTIP, which is the target and maximum possible payout based on attainment of the specified performance goals. The fair market value of the RSUs at December 31, 2010 was $1,382,275 based on the Company’s closing stock price on December 31, 2010 of $17.77. As of December 31, 2010 compensation expense was accrued on 38,894 RSUs with an aggregate grant date fair value of approximately $467,117. | |
| (j) | Amount reported in 2010 represented the grant date fair value of 2,938 additional RSUs awarded to Mr. Endsley under the 2009 LTIP due to his promotion to CFO in September 2010. In 2009 (and not reflected in the table above for 2009), Mr. Endsley was awarded 12,263 RSUs with a grant date fair value of $147,279. The combined grant date fair value for 15,201 RSUs of $194,081 is the target and maximum possible payout based on attainment of the specified performance goals. The fair market value of the RSUs at December 31, 2010 was $270,122 based on the Company’s closing stock price on December 31, 2010 of $17.77. As of December 31, 2010 compensation expense was accrued on 6,459 RSUs with an aggregate grant date fair value of approximately $78,854. | |
| (k) | Amount reported in 2009 represented the grant date fair value of 26,800 RSUs awarded to Mr. Boso under the 2009 LTIP, which is the target and maximum possible payout based on attainment of the specified performance goals. The fair market value of the RSUs at December 31, 2010 was $476,236 based on the Company’s closing stock price on December 31, 2010 of $17.77. As of December 31, 2010 compensation expense was accrued on 13,400 RSUs with an aggregate grant date fair value of approximately $160,934. | |
| (l) | Amount reported in 2009 represented the grant date fair value of 19,698 RSUs awarded to Ms. Culp under the 2009 LTIP, which is the target and maximum possible payout based on attainment of the specified performance goals. The fair market value of the RSUs at December 31, 2010 was $350,033 based on the Company’s closing |
24
| stock price on December 31, 2010 of $17.77. As of December 31, 2010 compensation expense was accrued on 9,850 RSUs with an aggregate grant date fair value of approximately $118,299. | ||
| (m) | Amount reported in 2009 represented the grant date fair value of 26,739 RSUs awarded to Mr. Saine under the 2009 LTIP, which is the target and maximum possible payout based on attainment of the specified performance goals. The fair market value of the RSUs at December 31, 2010 was $475,152 based on the Company’s closing stock price on December 31, 2010 of $17.77. As of December 31, 2010 compensation expense was accrued on 13,370 RSUs with an aggregate grant date fair value of approximately $160,574. | |
| (n) | Amount reported in 2009 represented the grant date fair value of 44,922 RSUs awarded to Mr. Schilling under the 2009 LTIP, which was the target and maximum possible payout based on attainment of the specified performance goals. Mr. Schilling forfeited his 2009 LTIP award upon resignation as the Company’s COO/CFO in September 2010. |
The following table summarizes all other compensation for the
NEOs for the years ended December 31, 2010, 2009 and 2008:
2010 All
Other Compensation Table
|
Company |
||||||||||||||||||||||||||||||||||||||
|
Contribution to |
||||||||||||||||||||||||||||||||||||||
|
Cash |
Defined |
|||||||||||||||||||||||||||||||||||||
|
Tax |
Distributions |
Contribution |
Termination |
|||||||||||||||||||||||||||||||||||
|
Perquisites |
Reimbursement |
Paid |
Plans |
Payment |
Total |
|||||||||||||||||||||||||||||||||
| NEO | Job Title | Year | ($) | ($) | ($)(a) | ($) | ($) | ($) | ||||||||||||||||||||||||||||||
|
Vincent D. Kelly(b)
|
CEO | 2010 | 18,227 | - | - | 4,900 | - | 23,127 | ||||||||||||||||||||||||||||||
| 2009 | 17,163 | - | - | 4,900 | - | 22,063 | ||||||||||||||||||||||||||||||||
| 2008 | 26,652 | - | 246,036 | 4,600 | - | 277,288 | ||||||||||||||||||||||||||||||||
|
Shawn E. Endsley
|
CFO | 2010 | - | - | - | 4,262 | - | 4,262 | ||||||||||||||||||||||||||||||
| EVP, Sales & | 2010 | 6,497 | - | - | 4,900 | - | 11,397 | |||||||||||||||||||||||||||||||
|
James H. Boso(c)
|
Marketing | 2009 | 6,497 | - | - | 4,900 | - | 11,397 | ||||||||||||||||||||||||||||||
| 2008 | 8,497 | 970 | 62,486 | 4,600 | - | 76,553 | ||||||||||||||||||||||||||||||||
| EVP, HR & | 2010 | - | - | - | 4,900 | - | 4,900 | |||||||||||||||||||||||||||||||
|
Bonnie Culp
|
Administration | 2009 | - | - | - | 4,848 | - | 4,848 | ||||||||||||||||||||||||||||||
| 2008 | - | - | 52,193 | 4,600 | - | 56,793 | ||||||||||||||||||||||||||||||||
|
Thomas G. Saine
|
CIO | 2010 | - | - | - | 4,900 | - | 4,900 | ||||||||||||||||||||||||||||||
| 2009 | - | - | - | 4,900 | - | 4,900 | ||||||||||||||||||||||||||||||||
| 2008 | - | - | - | 4,106 | - | 4,106 | ||||||||||||||||||||||||||||||||
|
Former NEO
|
||||||||||||||||||||||||||||||||||||||
|
Thomas L. Schilling(d)
|
Former COO/CFO | 2010 | - | - | - | 4,900 | 416,840 | 421,740 | ||||||||||||||||||||||||||||||
| 2009 | - | - | - | 4,900 | - | 4,900 | ||||||||||||||||||||||||||||||||
| 2008 | - | - | 120,819 | 4,600 | - | 125,419 | ||||||||||||||||||||||||||||||||
| (a) | Cash distributions reported in 2008 represented amounts paid upon the vesting of the restricted stock under the 2006 LTIP Initial Target Award in December 2008 totaling $452,961 (for all NEOs excluding the amount paid to the CFO which is not reflected in the table) and amounts paid upon the final vesting of the restricted stock under the 2005 LTIP in January 2008 totaling $28,573 (for all NEOs excluding the amount paid to the CFO which is not reflected in the table). | |
| (b) | Perquisite amounts in 2010, 2009 and 2008 were for a car allowance. In addition to the car allowance in 2008, Mr. Kelly received $16,576 of reimbursement for legal fees related to the renegotiation of his employment agreement. | |
| (c) | Perquisite amounts in 2010, 2009 and 2008 were for a car allowance. In addition to the car allowance in 2008, Mr. Boso received a $2,000 gift card and $970 of tax reimbursement related to this card. | |
| (d) | Termination payment in 2010 represented a three-year non-compete and a four-year non-solicitation agreement with Mr. Schilling upon his voluntary resignation as the Company’s COO/CFO in September 2010. The termination payment was equivalent to the actual payout of the Company’s 2010 STIP for the former COO/CFO. The payment of $416,840 was made to Mr. Schilling in March 2011. |
25
Grants of
Plan-Based Awards
The following table sets forth the estimated possible and future
cash and equity payouts for the additional award to the CFO
under the 2009 LTIP and the 2010 STIP awarded to the NEOs in
2010. No stock options or other equity awards were granted in
2010 to the NEOs. The former COO/CFO forfeited his 2010 STIP
award upon his resignation in September 2010.
Grants Of
Plan-Based Awards
|
Estimated Possible or |
Estimated Possible |
|||||||||||||||||||||||||||||||||||||||||||||
|
Future Payouts Under |
or Future Payouts |
|||||||||||||||||||||||||||||||||||||||||||||
|
Non-Equity Incentive |
Equity Incentive |
|||||||||||||||||||||||||||||||||||||||||||||
|
Plan Awards |
Plan Awards |
|||||||||||||||||||||||||||||||||||||||||||||
| (a) | (b) | |||||||||||||||||||||||||||||||||||||||||||||
|
Grant Date Fair |
||||||||||||||||||||||||||||||||||||||||||||||
|
Value of Common |
||||||||||||||||||||||||||||||||||||||||||||||
|
Stock or RSU |
||||||||||||||||||||||||||||||||||||||||||||||
|
Grant |
Effective |
Target |
Maximum |
Target |
Maximum |
Awards |
||||||||||||||||||||||||||||||||||||||||
|
NEO |
Job Title |
Award |
Date |
Date |
($) |
($) |
(#) |
(#) |
($)(c) | |||||||||||||||||||||||||||||||||||||
|
Vincent D. Kelly
|
CEO | 2010 STIP | 600,000 | 759,000 | $ | 600,000 | $ | 759,000 | 721,791 | |||||||||||||||||||||||||||||||||||||
| 2010 STIP | 108,712 | 137,521 | - | - | - | |||||||||||||||||||||||||||||||||||||||||
|
Shawn E. Endsley
|
CFO | 2009 LTIP | 10/11/2010 | 9/30/2010 | 46,816 | 46,816 | 2,938 | 2,938 | 46,802 | |||||||||||||||||||||||||||||||||||||
|
James H. Boso
|
EVP, Sales & Marketing |
2010 STIP | 206,719 | 261,500 | - | - | - | |||||||||||||||||||||||||||||||||||||||
|
Bonnie Culp
|
EVP, HR & Administration |
2010 STIP | 151,939 | 192,203 | - | - | - | |||||||||||||||||||||||||||||||||||||||
|
Thomas G. Saine
|
CIO | 2010 STIP | 206,250 | 260,906 | - | - | - | |||||||||||||||||||||||||||||||||||||||
| (a) | Amounts represented the cash awards under the 2010 STIP for the NEOs and the additional cash award under the 2009 LTIP for the CFO. The Company exceeded the performance targets for the wireless segment for the 2010 STIP resulting in an actual payment of 120.3 percent of each NEO’s eligible 2010 STIP award. The payments were made in March 2011 and are reflected in the Summary Compensation Table. On October 11, 2010 and effective for September 30, 2010, the Compensation Committee and the Board granted an additional cash award to the CFO of $46,816 to be amortized ratably over the remaining 27 months as compensation expense. The 2009 LTIP may vest on December 31, 2012 should the pre-established performance goals be achieved for the wireless segment. The grant does not provide for a threshold payout if the Company does not achieve the pre-established performance goals for the wireless segment and does provide for a target payout if the Company achieves the target for operating expense reduction and EBITDA for the wireless segment. The grant does not call for a maximum payout; hence, it is the same as the target payout. | |
| (b) | Amounts represented the equity portion of the 2010 STIP awarded to Mr. Kelly and the additional RSUs awarded under the 2009 LTIP to the CFO. Pursuant to his employment agreement, Mr. Kelly received 50 percent of his 2010 STIP award in common stock of the Company. On March 4, 2011, Mr. Kelly received 47,455 shares of common stock based on the closing stock price on February 25, 2011 of $15.21 per share. The additional 2,938 RSUs awarded under the 2009 LTIP to the CFO were based on the Company’s closing stock price on October 11, 2010 of $15.93. The 2009 LTIP may vest on December 31, 2012 should the pre-established performance goals be achieved for the wireless segment. The grant does not provide for a threshold payout if the Company does not achieve the pre-established performance goals for the wireless segment and does provide for a target payout if the Company achieves the target for operating expense reduction and EBITDA for the wireless segment. The grant does not call for a maximum payout; hence, it is the same as the target payout. | |
| (c) | The fair value of the common stock awarded to Mr. Kelly under the 2010 STIP was calculated at $15.21 per share, the Company’s closing stock price on February 25, 2011. The fair value of the additional RSUs awarded to the CFO under the 2009 LTIP was calculated at $15.93 per share, the Company’s closing stock price on October 11, 2010 (grant date). |
26
Outstanding
Equity Awards
At December 31, 2010, the RSUs granted and outstanding
under the 2009 LTIP and the estimated related market or payout
values of such units are shown in the following table for the
NEOs. No stock options were outstanding in 2010 for the NEOs.
The former COO/CFO forfeited his 2009 LTIP award upon his
resignation in September 2010.
Outstanding
Equity Awards at December 31, 2010
|
Equity Incentive |
||||||||||
|
Plan Awards: |
Equity Incentive |
|||||||||
|
Number of |
Plan Awards: Market |
|||||||||
|
Unearned RSUs |
or Payout Value of |
|||||||||
|
That Have Not |
Unearned RSUs That |
|||||||||
|
Vested |
Have Not Vested |
|||||||||
|
NEO |
Job Title |
(#)(a) | ($)(b) | |||||||
|
Vincent D. Kelly
|
CEO | 77,787 | 1,382,275 | |||||||
|
Shawn E. Endsley
|
CFO | 15,201 | 270,122 | |||||||
|
James H. Boso
|
EVP, Sales & Marketing |
26,800 | 476,236 | |||||||
|
Bonnie Culp
|
EVP, HR & Administration |
19,698 | 350,033 | |||||||
|
Thomas G. Saine
|
CIO | 26,739 | 475,152 | |||||||
|
Total
|
166,225 | 2,953,818 | ||||||||
| (a) | The RSUs awarded under the 2009 LTIP may vest on December 31, 2012 should the pre-established performance goals be achieved for the wireless segment. | |
| (b) | Market or payout values of the outstanding RSUs were based on the Company’s closing stock price at December 31, 2010 of $17.77 for the 2009 LTIP. |
Vested
Common Stock
No stock awards held by the NEOs vested during 2010.
Other
Discretionary Awards
The Company’s executives, along with other members of
senior management, are eligible to participate in the
Company’s discretionary award of stock options or shares of
restricted stock. Guidelines for the number of shares of
restricted stock granted to each executive are determined using
a procedure approved by the Compensation Committee based upon
several factors, including the executive’s salary, STIP
award, and the value of the shares of restricted stock at the
time of grant. Additional grants other than the discretionary
award may be made following a significant change in job
responsibility. Such awards are an important component of the
compensation necessary to attract and retain talented executives.
Tax
Deductibility of Compensation
Section 162(m) of the Code limits the Company’s
Federal income tax deduction for certain executive compensation
in excess of $1.0 million paid to the CEO and the four
other most highly compensated executives. The $1.0 million
deduction limit does not apply, however, to
“performance-based compensation” as that term is
defined in the Code and the applicable regulations. Awards
granted under the Company’s Equity Plan, subject to certain
conditions, are intended to qualify as performance-based
compensation under Section 162(m) of the Code. The
Compensation Committee recognizes the possibility that if the
amount of the base salary and other compensation of an NEO
exceeds $1.0 million, it may not be fully deductible for
Federal income tax purposes. The Compensation Committee will
make a determination at any such time whether to authorize the
payment of such amounts without
27
regard to deductibility or whether the terms of such payment
should be modified as to preserve any deduction otherwise
available.
Termination
and Change in Control Arrangements
The Company believes that providing severance to each of its
executives (including NEOs) is an important retention tool and
provides security to the executives with respect to their terms
of employment. The Company’s policies on severance are
intended to provide fair and equitable compensation in the event
of severance of employment.
Termination
Arrangements — CEO
On November 16, 2004, and as amended on October 30,
2008, the CEO entered into a four-year employment agreement with
the Company to end on December 31, 2012, if not terminated
by either party, which provides for severance benefits under
certain events. On March 16, 2011, the CEO further amended
his employment agreement to extend his employment with the
Company through December 31, 2014, if not terminated by
either party. For additional details on Termination Arrangements
for the CEO, refer to the CEO’s employment agreement
discussed below.
The Company did not pay or accrue any payments relating to
termination for the CEO for the year ended December 31,
2010.
Termination
and Change in Control Arrangements — NEOs excluding
CEO
Effective November 17, 2004, and further amended on
March 14, 2011, the Company maintains a specific Severance
Agreements for NEOs but not the CEO for the purpose of providing
severance payments and benefits upon a termination of the
executive’s employment without “cause” or,
following the occurrence of a change in control, a termination
of the executive’s employment without cause or a
resignation of the executive’s employment for “good
reason” as defined in the Severance Agreements.
Termination Without Cause. Under the terms of
the Severance Agreements, the executives (including the NEOs but
not the CEO) would be entitled to the following severance
benefits upon a termination without cause occurring prior to a
change in control, subject to their executing a release of
claims.
| (1) | Continued payment of base salary for a minimum of six months, plus an additional two weeks for each year of service, up to a combined maximum of 12 months (the “Severance Period”); | |
| (2) | Continued group health plan benefits in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Under the Severance Agreements, COBRA coverage was provided to NEOs at the discounted employee rate for a maximum period of six months; and at the end of such period, the NEOs were able to continue their COBRA coverage but they were fully responsible for the entire COBRA premium amount; and | |
| (3) | Prorated portion of the target award under the annual STIP for the calendar year in which the termination occurred based upon the length of employment in that calendar year. |
The benefits mentioned above are subject to certain
post-employment restrictions (principally execution of a release
of claims and satisfaction of non-compete obligations) and other
terms and conditions set forth in the Severance Agreements. All
severance payments are subject to the applicable Federal, state
and local taxes. In the event of death prior to the completion
of all payments, the remaining payments shall be made to the
executive’s beneficiary.
In accordance with the terms of the 2009 LTIP, the executives
(including NEOs but not the CEO), are entitled to a prorated
award beginning on January 1, 2010, one year after the
effective date of the award (January 1, 2009) as
follows:
| • | Prorated portion of 100 percent of the target award for cash and equity awards, including dividend equivalent rights (if any) paid with accrued interest in cash with respect to the vested RSUs, based on the number of days |
28
| the executive was continuously employed from January 1, 2009 through the termination date divided by the total number of days in the performance period. In the event of a participant’s death, the participant’s estate will be eligible to receive an amount not greater than 100 percent of the participant’s target award, based on the Compensation Committee’s determination of the Company’s achievement of the expense reduction and EBITDA goals for the wireless segment. Payment will be made in the year following the participant’s death. For termination without cause or due to disability, the payment will be made on or after the third business day following the day that the Company filed its 2012 Annual Report on Form 10-K with the SEC. |
Assuming that the termination without cause occurred on
December 31, 2010 and that the Company’s closing stock
price at December 31, 2010 was $17.77, the targeted
payments to the NEOs (excluding the CEO) are set forth in the
following table:
|
Accrued |
2009 LTIP- |
||||||||||||||||||||||||||||||||||||||||||
|
Vacation |
Health |
Non-Equity |
2009 LTIP- |
All Other |
|||||||||||||||||||||||||||||||||||||||
|
Salary |
Pay |
Benefits |
2010 STIP |
(Cash Based) |
Equity |
Compensation |
Total |
||||||||||||||||||||||||||||||||||||
| NEO | Job Title | ($) | ($)(a) | ($)(b) | ($)(c) | ($)(d) | ($)(e) | ($)(f) | ($) | ||||||||||||||||||||||||||||||||||
|
Shawn E. Endsley |
CFO |
146,154 | 34,260 | 3,596 | 130,781 | 76,148 | 114,776 | 24,937 | 530,652 | ||||||||||||||||||||||||||||||||||
|
James H. Boso
|
EVP, Sales & Marketing |
275,625 | 99,188 | 3,774 | 248,683 | 155,039 | 238,118 | 53,600 | 1,074,027 | ||||||||||||||||||||||||||||||||||
|
Bonnie Culp
|
EVP, HR & Administration |
202,585 | 16,533 | 4,684 | 182,783 | 113,954 | 175,035 | 39,400 | 734,974 | ||||||||||||||||||||||||||||||||||
|
Thomas G. Saine
|
CIO | 169,231 | 14,594 | 1,638 | 248,119 | 154,688 | 237,585 | 53,480 | 879,335 | ||||||||||||||||||||||||||||||||||
| (a) | These payments were based on accrued vacation hours at December 31, 2010 pursuant to the vacation policy for the NEOs. | |
| (b) | These amounts represented the cost of continuation of health benefits provided to the NEOs. | |
| (c) | The Company exceeded the performance targets for 2010 resulting in 120.3 percent STIP payment. | |
| (d) | These amounts represented 50 percent of the target cash award under the 2009 LTIP. | |
| (e) | These amounts represented the market values at December 31, 2010 for the prorated number of RSUs accrued by the NEOs as of December 31, 2010 under the 2009 LTIP based on the Company’s closing stock price at December 31, 2010 of $17.77. | |
| (f) | These amounts represented cumulative cash distributions of $4.00 per share accrued by the NEOs in 2009 and 2010 for RSUs granted under the 2009 LTIP and cash distributions of $1.25 per share accrued on the additional RSUs awarded to the CFO in 2010. The amounts do not reflect interest earned on the cash distributions. |
Change in Control. Under the Severance
Agreements, if a change in control with respect to the Company
occurs, and following such change in control, the applicable NEO
(other than the CEO) experiences a termination of employment by
the Company without cause or resigned for “good
reason” as defined in the Severance Agreements, then, in
addition to the payment in respect of the 2009 LTIP as described
above, the NEOs would be entitled to the following severance
benefits upon a termination without cause occurring after a
change in control, subject to their executing a release of
claims:
| (1) | A cash lump sum payment equal to a minimum of 1.5 times the executive’s base salary, plus an additional two weeks of base salary for each year of service up to a maximum of 2 times the executive’s base salary; | |
| (2) | Accident and health insurance benefits substantially similar to those that the executive was receiving immediately prior to termination until the earlier to occur of 18 months following termination or such time as the executive is covered by comparable programs of a subsequent employer, reduced to the extent of any comparable benefits received from another source; and | |
| (3) | An amount equal to 100 percent of the executive’s target award under the annual STIP for the calendar year in which the termination occurred based upon the length of employment in that calendar year. |
29
In addition, in accordance with the terms of the 2009 LTIP, the
executives (including NEOs but not the CEO), will be entitled to
the following accelerated vesting schedule in the event of a
change in control:
| (1) | Fifty percent (50 percent) of the participant’s target award shall vest if a change in control occurs during either of the first two years of the performance period (defined as January 1, 2009 through December 31, 2012); | |
| (2) | Seventy-five percent (75 percent) of the participant’s target award shall vest if a change in control occurs during the third year of the performance period; or | |
| (3) | One hundred percent (100 percent) of the participant’s target award shall vest if a change in control occurs during the fourth year of the performance period. |
Payment will be made on the earlier of: (1) a change in
control of the Company (as defined in the Equity Plan); or
(2) on or after the third business day following the day
that the Company filed its 2012 Annual Report on
Form 10-K
with the SEC.
If any payment or the value of any benefit received or to be
received (“Payments”) by the NEOs in connection with
their termination of employment or contingent upon a change in
control of the Company would be subject to any excise tax, the
Company shall pay to the NEO an additional amount
(“Gross-Up
Payment”) such that the net amount the NEO retains, after
deduction of the excise tax on such
Gross-Up
Payment, shall be equal to the total present value of such
Payments at the time such Payments are to be made. The intent is
that the Company shall be solely responsible for and shall pay
any excise taxes on any Payments and
Gross-Up
Payment and any income and employment taxes imposed on the
Gross-Up
Payment as well as any loss of deduction caused by the
Gross-Up
Payment. Assuming the NEOs other than the CEO were terminated on
December 31, 2010, the NEOs would not be subject to any
Federal, state or local excise tax and the Company would not be
required to make a
Gross-Up
Payment.
Assuming a change in control resulted in a termination without
cause occurring on December 31, 2010 and that the
Company’s closing stock price at December 31, 2010 was
$17.77, the targeted payments to the NEOs (excluding the CEO)
are set forth in the following table. Amounts with respect to
the 2009 LTIP would be paid or vested upon a change in control,
regardless of whether a termination occurred:
|
Accrued |
2009 LTIP- |
||||||||||||||||||||||||||||||||||||||||||
|
Vacation |
Health |
Non-Equity |
2009 LTIP- |
All Other |
|||||||||||||||||||||||||||||||||||||||
|
Salary |
Pay |
Benefits |
2010 STIP |
(Cash Based) |
Equity |
Compensation |
Total |
||||||||||||||||||||||||||||||||||||
| NEO | Job Title | ($)(a) | ($)(b) | ($)(c) | ($)(d) | ($)(e) | ($)(f) | ($)(g) | ($) | ||||||||||||||||||||||||||||||||||
|
Shawn E. Endsley
|
CFO | 346,154 | 34,260 | 7,398 | 130,781 | 94,354 | 135,061 | 24,937 | 772,945 | ||||||||||||||||||||||||||||||||||
|
James H. Boso
|
EVP, Sales & Marketing | 551,250 | 99,188 | 5,661 | 248,683 | 155,039 | 238,118 | 53,600 | 1,351,539 | ||||||||||||||||||||||||||||||||||
|
Bonnie Culp
|
EVP, HR & Administration | 405,170 | 16,533 | 7,026 | 182,783 | 113,954 | 175,035 | 39,400 | 939,901 | ||||||||||||||||||||||||||||||||||
|
Thomas G. Saine
|
CIO | 444,231 | 14,594 | 3,931 | 248,119 | 154,688 | 237,585 | 53,480 | 1,156,628 | ||||||||||||||||||||||||||||||||||
| (a) | These amounts assumed the NEOs have been paid their pro rata base salaries from January 1, 2010 through December 31, 2010. | |
| (b) | These payments were based on accrued vacation hours at December 31, 2010 pursuant to the vacation policy for executives. | |
| (c) | These amounts represented the cost of continuation of health benefits provided to the NEOs for 18 months. | |
| (d) | The Company exceeded the performance targets for 2010 resulting in 120.3 percent STIP payment. | |
| (e) | These amounts represented 50 percent of the target cash award under the 2009 LTIP. | |
| (f) | These amounts represented the market values at December 31, 2010 for 50 percent of the RSUs granted under the 2009 LTIP based on the Company’s closing stock price on December 31, 2010 of $17.77. | |
| (g) | These amounts represented cumulative cash distributions of $4.00 per share accrued by the NEOs in 2009 and 2010 for RSUs granted under the 2009 LTIP and cash distributions of $1.25 per share accrued on the additional RSUs awarded to the CFO in 2010. The amounts do not reflect interest earned on the cumulative cash distributions. |
30
The Company did not pay or accrue any payments relating to
termination and change in control for the CFO; EVP,
Sales & Marketing; EVP, HR & Administration
and CIO for the year ended December 31, 2010. The Company
paid $416,840 to the former COO/CFO for a three-year non-compete
and a four-year non-solicitation agreement upon his voluntary
resignation from the Company.
The Company maintains a policy related to the LTIP awards, both
cash and equity. Under these provisions, executives (including
NEOs) who are terminated upon failure to substantially perform
duties, failure to carry out any lawful and reasonable
directive, conviction or plea of nolo contendere to a felony or
crime of moral turpitude, material breach of their obligations
as an employee or commission of an act of fraud, embezzlement,
misappropriation or otherwise acting in a manner detrimental to
the Company’s interests as determined by the Board, will
forfeit any outstanding awards as of the date of termination.
These provisions serve to help ensure that executives act in the
best interest of the Company and its stockholders.
Compensation
Recovery Policy
The Company maintains a clawback provision regarding severance
benefits. Under the clawback provision, executives (including
NEOs) who violate non-competition, non-solicitation or
confidentiality agreements forfeit all severance amounts paid or
to be paid by the Company. Further, it is the Company’s
policy to seek the reimbursement of severance benefits paid to
executives (including NEOs) who violate non-competition,
non-solicitation or confidentiality agreements, or otherwise
breach the Separation Agreements and Release between themselves
and the Company.
The Company’s Restricted Stock Agreement under the Equity
Plan include a “Spendthrift Clause” to protect
unvested restricted stock against any interest or transfer.
EMPLOYMENT
AGREEMENT AND ARRANGEMENTS
Vincent
D. Kelly
Mr. Kelly entered into an employment agreement with the
Company on November 16, 2004, as amended on
October 30, 2008 and with a further amendment on
March 16, 2011. The initial term of the agreement ended on
November 15, 2007, but was automatically renewed for an
additional one-year period, in accordance with the terms of the
agreement. In October 2008, the Compensation Committee
renegotiated the CEO’s employment agreement and authorized
the reimbursement of the CEO’s legal expenses in this
regard. Had the employment agreement not been renegotiated it
would have automatically been renewed for another one year term.
Following the renegotiation, the CEO’s employment agreement
was amended and restated on October 30, 2008 to commence on
November 16, 2008 and end on December 31, 2012,
without a provision for automatic renewal.
On March 16, 2011, the Compensation Committee further
amended the employment agreement between the Company and
Mr. Kelly. The changes to Mr. Kelly’s previously
disclosed employment agreement, dated October 30, 2008,
were: (i) an extension of the term of the agreement from
December 31, 2012 to December 31, 2014; (ii) an
expansion of the two-year, post termination non-compete
provision to cover mission critical communications software in
connection with our recent acquisition of Amcom.; and
(iii) deletion of a provision that provided a
Gross-Up
Payment should an excise tax apply to a severance award upon
termination following a change in control of the Company. There
were no changes to the base salary and annual bonus terms.
Under the amended and restated employment agreement,
Mr. Kelly receives a stated annual base salary of $600,000
and is eligible to participate in all of the Company’s
benefit plans, including fringe benefits available to the
Company’s senior executives, as such plans or programs are
in effect from time to time, and use of an automobile. The Board
shall review Mr. Kelly’s base salary annually and may
increase, but not decrease, the amounts of his base salary. In
addition to base salary, Mr. Kelly is eligible for an
annual STIP compensation target equal to 200 percent of
base salary based on achievement of certain performance targets
set by the Board or a committee thereof; provided that
Mr. Kelly is employed by the Company on December 31 of the
applicable calendar year and he has not voluntarily terminated
his employment in the Company prior to the date such annual STIP
is payable. Provided that the Company’s stock is publicly
traded on a national securities exchange, the annual STIP
31
compensation from 2011 through 2014 shall be payable one-half in
cash and one-half in common stock of the Company, unless the
Compensation Committee and Mr. Kelly mutually agree
otherwise.
Under the amended and restated employment agreement, the Company
is no longer obligated to pay to Mr. Kelly a
Gross-Up
Payment for any Payment received or to be received by
Mr. Kelly in connection with his termination of employment
or contingent upon a change in control of the Company that is
subject to any excise tax.
The amended and restated employment agreement contains a
covenant restricting Mr. Kelly from soliciting employees of
the Company and its subsidiaries (both wireless and software
segments) and from competing against the Company and its
subsidiaries (both wireless and software segments) during
Mr. Kelly’s employment and for a period of two years
after the date of termination (as defined in the employment
agreement) for any reason.
Under amended and restated employment, the Company may terminate
such agreement with 30 days written notice at any time if
Mr. Kelly is disabled (as defined in the employment
agreement) for a period of six months or more; at any time with
“cause” (as defined in the employment agreement); and
at any time without cause upon notice from the Company.
Mr. Kelly may terminate such agreement with the Company at
any time upon 60 days notice to the Company. Furthermore,
the employment agreement may be terminated by mutual agreement
of the parties and shall automatically terminate upon
Mr. Kelly’s death.
Disability. The employment agreement provides
that in the event of disability until the termination date,
following the use of all accrued sick and personal days, the
Company shall pay Mr. Kelly:
| (1) | A disability benefit equal to 50 percent of the base salary during the disability period; | |
| (2) | All other unpaid amounts under any Company fringe benefit and incentive compensation programs, at the time such payments are due; | |
| (3) | An amount equal to the product of (i) the number of years (and/or fraction thereof) remaining in the term of the employment agreement as of the date of termination, times (ii) the full base salary then in effect payable within 45 days after the date of termination; and | |
| (4) | An amount equal to the product of (i) a fraction based on the prorated number of days earned in the calendar year as of the date of termination, times (ii) the annual STIP target amount payable within 45 days after the date of termination. |
Any payments made to Mr. Kelly during the disability period
shall be reduced by any amounts paid or payable to him under the
Company’s disability benefit plans.
Death. The employment agreement provides that
upon death, Mr. Kelly’s estate will be entitled to:
| (1) | Base salary through the date of death; | |
| (2) | All other unpaid amounts under any Company fringe benefit and incentive compensation programs, at the time such payments are due; | |
| (3) | An amount equal to the product of (i) the number of years (and/or fraction thereof) remaining in the term of the employment agreement as of the date of death, times (ii) the full base salary then in effect payable within 45 days after the date of death; and | |
| (4) | An amount equal to the product of (i) a fraction based on the prorated number of days earned in the calendar year as of the date of death, times (ii) the annual STIP target amount payable within 45 days after the date of termination. |
Termination Without Cause or For Good
Reason. The employment agreement provides that
upon a termination of employment, either by the Company without
cause or by Mr. Kelly for good reason, he will be entitled
to:
| (1) | Base salary through the date of termination payable within 10 business days; | |
| (2) | All other unpaid amounts under any Company fringe benefit and incentive compensation programs, at the time such payments are due; |
32
| (3) | An amount equal to the product of (i) the greater of (x) two years or (y) the number of years (and/or fraction thereof) remaining in the term of the employment agreement as of the date of termination, times (ii) the full base salary then in effect payable within 45 days after the date of termination; | |
| (4) | An amount equal to the annual STIP target for the calendar year in which the termination occurs, payable within 45 days after the date of termination; | |
| (5) | An amount equal to the product of (i) a fraction based on the prorated number of days earned in the calendar year as of the date of termination, times (ii) the annual STIP target amount payable within 45 days after the date of termination; | |
| (6) | Reimbursement of the cost of continued group health plan benefits in accordance with COBRA for 18 months, to the extent elected by the CEO and to the extent the CEO is eligible and subject to the terms of the plan and the law; | |
| (7) | Reimbursement for expenses reasonably incurred by Mr. Kelly in securing outplacement services through a professional person or entity of his choice, subject to the approval of the Company, at a level commensurate with Mr. Kelly’s position, for up to one year commencing on or before the one-year anniversary of the date of termination at his election, not to exceed $35,000; and | |
| (8) | Full vesting of any unvested equity awards. |
Assuming that the termination without cause or a resignation for
good reason occurring on December 31, 2010 and the
Company’s closing stock price at December 31, 2010 was
$17.77, the targeted payments to the CEO are set forth in the
following table:
|
Termination |
||||||||||||
|
without Cause |
||||||||||||
|
or For Good |
||||||||||||
|
Vincent D. Kelly |
Disability |
Death |
Reason |
|||||||||
| CEO | ($)(a) | ($) | ($)(b) | |||||||||
|
Other Income(c)
|
175,000 | - | - | |||||||||
|
Salary Benefit(d)
|
1,200,000 | 1,200,000 | 1,200,000 | |||||||||
|
Life Insurance(e)
|
N/A | 50,000 | N/A | |||||||||
|
Accrued Vacation Pay(f)
|
353,615 | 352,284 | 352,284 | |||||||||
|
Health Benefits(g)
|
- | - | 7,026 | |||||||||
|
2010 STIP - Non-Equity (Cash Based)(h)
|
721,800 | 721,800 | 2,887,236 | |||||||||
|
2009 LTIP - Non-Equity (Cash Based)(i)
|
450,000 | 450,000 | 900,000 | |||||||||
|
2009 LTIP - Equity(j)
|
691,146 | 691,146 | 1,382,275 | |||||||||
|
All Other Compensation(k)
|
155,576 | 155,576 | 190,576 | |||||||||
|
Total
|
3,747,137 | 3,620,806 | 6,919,397 | |||||||||
| (a) | For purposes of the Disability benefits, Mr. Kelly was assumed to be disabled on June 1, 2010, with a termination date of December 31, 2010. | |
| (b) | Should these payments be subject to any Federal, state or local excise tax, Mr. Kelly is entitled to a Gross-Up Payment. The intent is that the Company shall be solely responsible for and shall pay any excise taxes on any Payments and Gross-Up Payment and any income and employment taxes imposed on the Gross-Up Payment as well as any loss of deduction caused by the Gross-Up Payment. Assuming Mr. Kelly was terminated on December 31, 2010, Mr. Kelly would not be subject to any Federal, state or local excise tax. The Company would not be required to make a Gross-Up Payment assuming that the termination without cause or a resignation for good reason occurred on December 31, 2010. Under the amended and restated employment agreement dated March 16, 2011, the Company is no longer obligated to pay to Mr. Kelly a Gross-Up Payment for any Payment received or to be received by Mr. Kelly in connection with his termination of employment or contingent upon a change in control of the Company that is subject to any excise tax. |
33
| (c) | This amount assumed Mr. Kelly has been paid his pro rata base salary from January 1, 2010 through December 31, 2010 under the “Death” and “Termination without Cause or For Good Reason” scenarios. The payment to Mr. Kelly under “Disability” scenario included Mr. Kelly’s accrued sick and personal days as of May 31, 2010. | |
| (d) | These amounts represented the relevant payments of base salary through the contract date (December 31, 2012) pursuant to Mr. Kelly’s employment agreement. | |
| (e) | This represented a standard benefit available to all employees. | |
| (f) | This payment was based on accrued vacation hours at May 31, 2010 under the “Disability” scenario and at December 31, 2010 under the “Death” and “Termination without Cause or For Good Reason” scenarios. This is pursuant to Mr. Kelly’s employment agreement and the vacation policy for NEOs. | |
| (g) | This was the cost of continuation of health benefits provided to Mr. Kelly. At his expense, Mr. Kelly or his beneficiary is entitled to continuation of health coverage pursuant to COBRA under the “Disability” or “Death” scenario. The amount reflected in the table under “Termination without Cause or For Good Reason” scenario represented cost of continuation of health benefits provided to Mr. Kelly for 18 months. | |
| (h) | The Company exceeded the performance targets for 2010 resulting in 120.3 percent STIP payment. | |
| (i) | Pursuant to the terms under the 2009 LTIP, Mr. Kelly was entitled to a prorated cash award under the 2009 LTIP as of December 31, 2010 under the “Disability” and “Death” scenarios. Under the “Termination without Cause or For Good Reason” scenario, Mr. Kelly was entitled to 100 percent of the target cash award under the 2009 LTIP. | |
| (j) | Pursuant to the terms under the 2009 LTIP, Mr. Kelly was entitled to a prorated portion of his target equity award under the “Disability” and “Death” scenarios. The amount was calculated based on 38,894 RSUs accrued through December 31, 2010 multiplied by the Company’s closing stock price at December 31, 2010 of $17.77. Under the “Termination without Cause or For Good Reason” scenario, Mr. Kelly was entitled to 100 percent of the target equity award under the 2009 LTIP. The amount was calculated based on 77,787 RSUs awarded multiplied by the Company’s closing stock price at December 31, 2010 of $17.77. | |
| (k) | Amount represented the maximum reimbursement for outplacement services of $35,000 and the cumulative cash distributions accrued through December 31, 2010 (excluding interest earned) for the RSUs awarded to Mr. Kelly under the 2009 LTIP. |
Shawn E.
Endsley
The Company employed Mr. Endsley pursuant to an offer
letter dated May 17, 2004 in the role of Corporate
Controller at an annual salary of $150,000 with an annual STIP
award of 35 percent of his base salary, based on the
accomplishment of predetermined goals and objectives set by the
Board for the wireless segment. On September 30, 2010,
Mr. Endsley was promoted to CFO and received a related
salary increase to $200,000. In this new role, Mr. Endsley
was eligible for an annual STIP award of 75 percent of his
base salary, which was based on the accomplishment of
predetermined goals and objectives set by the Board for the
wireless segment. The offer letter contained a provision
restricting Mr. Endsley from competing against the Company
during the severance period. Mr. Endsley is employed at
will with no separate arrangement other than the severance
benefits outlined in the Company’s Severance Agreements.
Thomas L.
Schilling
The Company employed Mr. Schilling pursuant to an offer
letter dated November 30, 2004. The offer letter provided
for Mr. Schilling to receive an annual base salary of
$300,000, as well as an annual STIP award ranging from
50 percent to 100 percent of his base salary, which
was based on the accomplishment of predetermined goals and
objectives set by the Board for the wireless segment. In
addition, the offer letter provided for Mr. Schilling to
participate in the Company’s Equity Plan at a level below
the CEO of the Company.
The offer letter provided for Mr. Schilling to receive a
severance benefit in accordance with the Company’s
Severance Agreements if his employment was terminated by the
Company for any reason other than for cause (as defined in the
Severance Agreements). The offer letter contained a provision
restricting Mr. Schilling from competing against the
34
Company or soliciting employees of the Company for a period of
one year following the termination of his employment. In October
2007, Mr. Schilling was appointed the COO/CFO of the
Company. In September 2010, Mr. Schilling voluntarily
resigned as the Company’s COO/CFO. Upon his resignation,
Mr. Schilling executed a three-year non-compete and a
four-year non-solicitation agreement with the Company.
James H.
Boso
Mr. Boso became an employee of the Company upon the merger
of Metrocall and Arch. Mr. Boso is employed at will with no
separate arrangement other than the severance benefits outlined
in the Company’s Severance Agreements.
Bonnie
Culp
Ms. Culp became an employee of the Company upon the merger
of Metrocall and Arch. Ms. Culp is employed at will with no
separate arrangement other than the severance benefits outlined
in the Company’s Severance Agreements.
Thomas G.
Saine
The Company employed Mr. Saine pursuant to an offer letter
dated July 24, 2007 in the role of Vice President for
Corporate Technical Operations at an annual salary of $170,000
with an annual STIP award up to 40 percent of his base
salary, based on the accomplishment of predetermined goals and
objectives set by the Board for the wireless segment. On
October 18, 2007, Mr. Saine was promoted to CTO and on
January 1, 2008, Mr. Saine received a related salary
increase to $200,000. In this new role, Mr. Saine was
eligible for an annual STIP award of 75 percent of his base
salary, which was based on the accomplishment of predetermined
goals and objectives set by the Board for the wireless segment.
On July 16, 2008, Mr. Saine was promoted to CIO and
received a salary increase to $275,000 effective August 1,
2008. Mr. Saine is employed at will with no separate
arrangement other than the severance benefits outlined in the
Company’s Severance Agreements.
COMPENSATION
COMMITTEE REPORT
The Compensation Committee reviewed and discussed the
Company’s Compensation Discussion and Analysis
(“CD&A”) for the year ended December 31,
2010 with management. Based on the review and discussion, the
Compensation Committee recommended to the Board that the
Company’s CD&A be included in its Proxy Statement for
the year ended December 31, 2010, for filing with the SEC.
Compensation Committee:
Brian O’Reilly
Samme L. Thompson
Royce Yudkoff
The foregoing report shall not be deemed incorporated by
reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Acts, except to
the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed
filed under the Acts.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2010:
| • | Mr. O’Reilly served as Chair of the Compensation Committee and Messrs. Thompson and Yudkoff served as members of the Compensation Committee throughout 2010; | |
| • | None of the members of the Compensation Committee were officers (or former officers) or employees of the Company or any of its subsidiaries; | |
| • | None of the members of the Compensation Committee entered into (or agreed to enter into) any transaction or series of transactions with the Company or any of its subsidiaries in which the amount involved exceeded $120,000 except for Mr. Thompson whose relationships with ATC (since the merger with SpectraSite, Inc.), a landlord of a substantial percentage of transmission tower sites used by the Company, is described under |
35
| “The Board of Directors and Committees,” and amounts paid by the Company to ATC (since the merger with SpectraSite, Inc.) are listed under “Certain Relationships and Related Transactions”; |
| • | None of the Company’s executive officers served on the Compensation Committee (or another Board committee with similar functions) of any entity where one of that entity’s executive officers served on the Company’s Compensation Committee; | |
| • | None of the Company’s executive officers were directors of another entity where one of that entity’s executive officers served on the Company’s Compensation Committee; and | |
| • | None of the Company’s executive officers served on the Compensation Committee (or another Board committee with similar functions) of another entity where one of that entity’s executive officers served as a director on the Board. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
OWNERS AND MANAGEMENT
The following table provides summary information regarding
beneficial ownership of the Company’s common stock as of
March 17, 2011 for:
| • | Each person or group who beneficially owns more than 5 percent of the Company’s common stock on a fully diluted basis including restricted stock granted; | |
| • | each of the NEOs; | |
| • | each of the directors and nominees to become a director; and | |
| • | all of the directors and executive officers (including the NEOs) as a group. |
Beneficial ownership of shares is determined under the rules of
the SEC and generally includes any shares over which a person
exercises sole or shared voting
and/or
investment power. The information on beneficial ownership in the
table is based upon the Company’s records and the most
recent Form 3, Form 4, Schedule 13D or
Schedule 13G filed by each such person or entity through
March 17, 2011. Except as indicated by footnote, and
subject to applicable community property laws, each person
identified in the table possesses sole voting and investment
power with respect to all shares of common stock shown as
beneficially owned by them. Unless otherwise noted, the address
for each director and executive officer (including NEOs) is
c/o USA
Mobility, Inc., 6850 Versar Center, Suite 420, Springfield,
Virginia
22151-4148.
|
Amount and |
||||||||
|
Nature of |
||||||||
|
Beneficial |
Percentage |
|||||||
|
Name of Beneficial Owner
|
Ownership | of Class | ||||||
|
Vincent D. Kelly, CEO(a)
|
50,000 | * | ||||||
|
Shawn E. Endsley, CFO(b)
|
5,500 | * | ||||||
|
James H. Boso, EVP Sales & Marketing(c)
|
3,884 | * | ||||||
|
Bonnie Culp, EVP HR & Administration(d)
|
— | * | ||||||
|
Thomas G. Saine, CIO(e)
|
395 | * | ||||||
|
Royce Yudkoff, Director(f)
|
12,839 | * | ||||||
|
Nicholas A. Gallopo, Director(g)
|
7,646 | * | ||||||
|
Brian O’Reilly, Director(f)
|
1,697 | * | ||||||
|
Matthew Oristano, Director(f)
|
1,697 | * | ||||||
|
Samme L. Thompson, Directors(f)
|
11,820 | * | ||||||
|
All directors and executive officers as a group (10 persons)
|
95,478 | * | ||||||
|
The Vanguard Group, Inc.(h)
|
1,670,896 | 7.6 | % | |||||
|
BlackRock Inc.(i)
|
2,520,043 | 11.4 | % | |||||
|
Renaissance Technologies LLC and Renaissance Technologies
Holdings Corporation(j)
|
1,793,684 | 8.1 | % | |||||
| * | Denotes less than 1%. | |
| (a) | The information regarding this stockholder is derived from a Form 4 filed by the stockholder with the SEC on March 9, 2011. |
36
| (b) | The information regarding this stockholder is derived from an amended Form 4 filed by the stockholder with the SEC on March 16, 2011. | |
| (c) | The information regarding this stockholder is derived from a Form 4 filed by the stockholder with the SEC on March 16, 2011. | |
| (d) | The information regarding this stockholder is derived from a Form 4 filed by the stockholder with the SEC on November 12, 2009. | |
| (e) | The information regarding this stockholder is derived from a Form 4 filed by the stockholder with the SEC on March 22, 2010. | |
| (f) | The information regarding this stockholder is derived from a Form 4 filed by the stockholder with the SEC on January 3, 2011. Included in the table above are 789 shares of restricted stock, which will vest on April 1, 2011. | |
| (g) | The information regarding this stockholder is derived from a Form 4 filed by the stockholder with the SEC on January 3, 2011. Included in the table above are 987 shares of restricted stock, which will vest on April 1, 2011. | |
| (h) | The information regarding this stockholder is derived from a Schedule 13G filed by the stockholder with the SEC on February 9, 2011. The Vanguard Group, Inc. has sole voting power with respect to 33,919 shares and sole dispositive power with respect to 1,636,977 shares and shared dispositive power with respect to 33,919 shares. The Vanguard Group, Inc.’s address is as follows: 100 Vanguard Blvd, Malvern, PA 19355. | |
| (i) | The information regarding this stockholder is derived from a Schedule 13G filed by the stockholder with the SEC on January 7, 2010. BlackRock Inc. has sole voting and dispositive power with respect to all shares reported herein. BlackRock Inc.’s address is as follows: 40 East 52nd Street, New York, NY 10022. | |
| (j) | The information regarding this stockholder is derived from a Schedule 13G filed by the stockholder with the SEC on February 11, 2011. Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation have sole voting power with respect to 1,724,400 shares and sole dispositive power with respect to 1,766,046 shares and shared dispositive power with respect to 27,638 shares. Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation’s address is as follows: 800 Third Avenue, New York, NY 10022. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Company’s executive officers and directors, and persons who
own more than 5 percent of a registered class of the
Company’s stock to file reports of ownership and changes in
ownership with the SEC. Executive officers, directors and
greater than 5 percent stockholders are required by SEC
regulation to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on a review
of such reports furnished to the Company, the Company believes
that, for the year ended December 31, 2010, all
Section 16(a) filing requirements applicable to its
directors, executive officers and greater than 5 percent
beneficial owners were timely met.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions
with Related Persons
Since November 16, 2004, a member of the Board,
Mr. Samme L. Thompson also serves as a director for an
entity that leases transmission tower sites to the Company.
Mr. Thompson was a member of the Board of SpectraSite, Inc.
from June 2004 to August 2005. Since August 2005, he has been a
member of the Board of ATC (which merged with SpectraSite,
Inc.), a landlord of a substantial percentage of tower
transmission sites used by the Company. Due to his relationships
with SpectraSite, Inc. and ATC, Mr. Thompson has recused
himself from any decision by the Board on matters relating to
SpectraSite, Inc., and has and will continue to recuse himself
from any decision by the Board on matters relating to ATC (since
the merger with SpectraSite, Inc.).
Review,
Approval or Ratification of Transactions with Related
Persons
Related party transactions have the potential to create actual
or perceived conflicts of interest between the Company and its
directors
and/or
executive officers and members of their families. While the
Company does not maintain a written policy with respect to the
identification, review, approval or ratification of transactions
with
37
related persons, the Company’s Code of Business Conduct and
Ethics prohibits conflicts of interest between an employee and
the Company and requires an employee to report any such
potential conflict to the EVP, HR & Administration,
who will review the matter with the Audit Committee. In
addition, each director is expected to identify to the
Secretary, by means of an annual director questionnaire, any
transactions between the Company and any person or entity with
which the director may have a relationship that is engaged or
about to be engaged in a transaction with the Company. The Board
reviews with the Secretary and management any such transaction
with the affected director excused from such review. There were
no transactions involving the Company and related persons during
2010, other than the tower leasing contract with ATC identified
above.
CODE OF
BUSINESS CONDUCT AND ETHICS
USA Mobility has adopted a Code of Business Conduct and Ethics
that applies to all of the Company’s employees including
the CEO, CFO and Controller. This Code of Business Conduct and
Ethics may be found on the Company’s website at
http://www.usamobility.com/about _
us/investor _ relations/. During the period covered
by this report, the Company did not request a waiver of its Code
of Business Conduct and Ethics and did not grant any such
waivers.
STOCKHOLDER
PROPOSALS
Stockholder proposals intended for inclusion in the
Company’s Proxy Statement for the Annual Meeting of
Stockholders in the year 2012 must be received by Sharon Woods
Keisling, Secretary and Treasurer, USA Mobility, Inc., 6850
Versar Drive, Suite 420, Springfield, Virginia
22151-4148,
no later than November 25, 2011.
The Company’s Bylaws provide that stockholders desiring to
nominate a director or bring any other business before the
stockholders at an annual meeting must notify the Secretary of
the Company thereof in writing during the period 60 to
90 days before the first anniversary of the date of the
preceding year’s annual meeting (or, if the date of the
annual meeting is more than 20 days before or more than
60 days after such anniversary date, notice by the
stockholder to be timely must be so delivered during the period
60 to 90 days before such annual meeting or 10 days
following the day on which public announcement of the date of
such meeting is first made by the Company). Pursuant to the
requirements of the Company’s Bylaws, stockholders must
notify the Secretary in writing at a time that is not before
February 18, 2012 and not after March 19, 2012. These
stockholder notices must set forth certain information specified
in the Company’s Bylaws.
OTHER
MATTERS
The Board knows of no other business that will be presented at
the Annual Meeting. If any other business is properly brought
before the Annual Meeting, proxies will be voted in respect
thereof in accordance with the judgments of the persons voting
the proxies.
Stockholders are urged to submit the proxy or voting
instructions by telephone or over the Internet.
The Company has filed its 2010
Form 10-K
with the SEC. Stockholders may obtain, free of charge, a copy of
the Annual Report which includes the 2010
Form 10-K
by writing to USA Mobility, Inc., Attn: Investor Relations, 6850
Versar Center, Suite 420 Springfield, Virginia
22151-4148.
Stockholders may also obtain a copy of the 2010
Form 10-K
by accessing the Company’s website at www.usamobility.com.
By Order of the Board of Directors,
Sharon Woods Keisling
Secretary and Treasurer
March 22, 2011
Springfield, Virginia
38
| IMPORTANT ANNUAL MEETING INFORMATION Electronic Voting Instructions You can vote by Internet or telephone! Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Eastern Daylight Time, on May 18, 2011. Vote by Internet Log on to the Internet and go to www.envisionreports.com/usmo Follow the steps outlined on the secured website. Vote by telephone Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada any time on a touch tone telephone. There is NO CHARGE to you for the call. Follow the instructions provided by the recorded message. Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X Annual Meeting Proxy Card IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3 and every ONE YEAR for proposal 4. 1. Election of Directors:01 — Nicholas A. Gallopo 02 — Vincent D. Kelly03 — Brian O’Reilly 04 — Matthew Oristano 05 — Samme L. Thompson 06 — Royce Yudkoff 01 02 03 04 05 06 For All EXCEPT — To withhold a vote for one or more nominees, mark the box to the left and the corresponding numbered box(es) to the right. Mark here to vote FOR all nominees Mark here to WITHHOLD vote from all nominees For Against Abstain For Against Abstain 2. Ratification to appoint Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2011. 1 Yr 2 Yrs 3 Yrs Abstain 4. Say When on Pay — An advisory vote on the approval of the frequency of stockholder votes on executive compensation. B Non-Voting Items Change of Address — Please print new address below. 3. Say on Pay — An advisory vote on the approval of executive compensation. 5. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournments thereof. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. 01AEZC |
| IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — USA MOBILITY, INC. FORM OF PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints Shawn E. Endsley and Vincent D. Kelly (the “Proxy Committee”), and each of them singly, with full power of substitution to act as the lawful agent and proxy for the undersigned and to vote all shares of common stock of USA Mobility, Inc. that the undersigned is entitled to vote and holds of record on March 17, 2011 at the Annual Meeting of Stockholders of USA Mobility, Inc. to be held on Wednesday, May 18, 2011, at The Westin Alexandria, 400 Courthouse Square, Whitney Room, Alexandria, VA, 22314 at 9:00 a.m., local time, and at any adjournments thereof, on all matters coming before the Annual Meeting. You are encouraged to specify your choices by marking the appropriate boxes on the reverse side but you need not mark any boxes if you wish to vote in accordance with the recommendations of the Board of Directors. The Proxy Committee cannot vote your shares unless you sign and return this card. You may revoke this proxy at any time before it is voted by delivering to the Secretary of the Company either a written revocation of the proxy or a duly executed proxy bearing a later date, or by appearing at the Annual Meeting and voting in person. This proxy when properly executed will be voted in the manner you have directed. If you do not specify any directions, this proxy will be voted FOR all the nominees listed in Proposal 1, FOR Proposal 2 and Proposal 3, for ONE YEAR for Proposal 4, and in accordance with the Proxy Committee’s discretion on such other matters that may properly come before the meeting to the extent permitted by law. IF YOU CHOOSE TO VOTE BY MAIL, PLEASE MARK, SIGN AND DATE YOUR CARD AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. (TO BE SIGNED ON REVERSE SIDE) |