UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14A-6(E)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
VCA ANTECH, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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the offsetting fee was paid previously. Identify the previous
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VCA ANTECH, INC.
12401 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064-1022
WWW.VCAANTECH.COM
[VCA ANTECH, INC. LOGO]
April 27, 2007
Dear Fellow Stockholder:
Our 2007 Annual Meeting will be held on Monday, June 4, 2007 at our
corporate offices located at 12401 West Olympic Boulevard, Los Angeles,
California 90064-1022. Details regarding the meeting and the business to be
conducted are more fully described in the accompanying Notice of 2007 Annual
Meeting of Stockholders and Proxy Statement.
Your vote is important. Whether or not you plan to attend the meeting, I
urge you to vote your shares as soon as possible. Instructions on the proxy card
will tell you how to cast your vote. The Proxy Statement explains more about
proxy voting. Please read it carefully.
Thank you for your continued support of our company.
Sincerely,
/s/ Robert L. Antin
Robert L. Antin
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
VCA ANTECH, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TIME................................................. 10:00 a.m. Pacific Time on Monday, June 4,
2007
PLACE................................................ 12401 West Olympic Boulevard
Los Angeles, California 90064-1022
ITEMS OF BUSINESS.................................... (1) To elect one Class II member of the
Board of Directors for a term of three
years.
(2) To ratify the appointment of KPMG LLP as
our independent registered public
registered accounting firm for the year
ending December 31, 2007.
(3) To approve the VCA Antech, Inc. 2007
Annual Cash Incentive Plan.
(4) To transact any other business as may
properly come before the Annual Meeting
and any adjournment or postponement.
RECORD DATE.......................................... You can vote if, at the close of business
on April 16, 2007, you were a stockholder
of the Company.
PROXY VOTING......................................... All stockholders are cordially invited to
attend the Annual Meeting in person.
However, to ensure your representation at
the Annual Meeting, you are urged to vote
promptly by signing and returning the
enclosed proxy card. If you hold your
shares in street name, you may also access
the World Wide Web site indicated on your
voting instruction card to vote via the
Internet.
April 27, 2007 /S/ TOMAS W. FULLER
--------------------------------------------
Tomas W. Fuller
CHIEF FINANCIAL OFFICER, VICE PRESIDENT
AND SECRETARY
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS 1
---------------------
Q: Who may vote at the Annual Meeting? 1
Q: What items of business will be voted on at the Annual Meeting? 1
Q: How does the Board of Directors recommend that I vote? 1
Q: How can I vote my shares in person at the Annual Meeting? 1
Q: How can I vote my shares without attending the Annual Meeting? 2
Q: What happens if additional matters are presented at the Annual Meeting? 2
Q: What happens if I do not give specific voting instructions? 2
Q: What happens if I abstain? 3
Q: What is the quorum requirement for the Annual Meeting? 3
Q: How can I change my vote after I return my proxy card? 3
Q: What is the voting requirement to approve each of the items? 3
Q: Where can I find the voting results of the Annual Meeting? 3
Q: How can I obtain a separate set of proxy materials? 3
Q: Who pays for the cost of this proxy solicitation? 4
Q: Is there a list of stockholders entitled to vote at the Annual Meeting? 4
Q: Are copies of the proxy materials and annual report available electronically? 4
Q: What is the deadline to propose actions for consideration at next year's annual meeting? 4
Q: How do I recommend a candidate for election as a director? 5
Q: How can I communicate with the Board of Directors? 5
CORPORATE GOVERNANCE 6
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Corporate Governance Guidelines 6
Code of Ethics 6
Committee responsibilities 6
Independence 6
Stockholder communication 6
Director attendance at Annual Meetings 7
Executive sessions 7
Outside advisors 7
Director education 7
ITEM 1: ELECTION OF DIRECTORS 8
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Nominee 8
i
MANAGEMENT 9
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Directors and Executive Officers 9
FURTHER INFORMATION REGARDING THE BOARD OF DIRECTORS 11
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Composition 11
Meetings and Committees 11
Audit Committee 11
Compensation Committee 11
Nominating and Corporate Governance Committee 12
Director Attendance 13
Compensation Committee Interlocks and Insider Participation 13
ITEM 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 14
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AUDIT AND NON-AUDIT FEES 15
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Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services 15
REPORT OF AUDIT COMMITTEE 16
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ITEM 3: PROPOSAL TO APPROVE VCA ANTECH, INC. 2007 ANNUAL CASH INCENTIVE PLAN 18
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Purpose of our 2007 Annual Cash Incentive Plan 18
Summary of our 2007 Annual Cash Incentive Plan 18
New Plan Benefits 21
EXECUTIVE COMPENSATION 22
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Compensation Discussion and Analysis 22
Summary Compensation Table 26
Grants of Plan-Based Awards in Fiscal 2006 27
Outstanding Equity Awards at Fiscal Year-End 27
Options Exercised and Stock Vested 28
Summary of Equity Compensation Plan 28
Employment Agreements; Payments Upon Termination and Change in Control 29
REPORT OF COMPENSATION COMMITTEE 35
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DIRECTOR COMPENSATION 36
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CERTAIN TRANSACTIONS WITH RELATED PERSONS 38
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Transactions with Zoasis Corporation 38
Legal Services 38
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 39
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PRINCIPAL STOCKHOLDERS 40
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ANNEX A - VCA ANTECH, INC. 2007 ANNUAL CASH INCENTIVE PLAN A-1
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ii
VCA ANTECH, INC.
12401 WEST OLYMPIC BOULEVARD
LOS ANGELES, CALIFORNIA 90064-1022
PROXY STATEMENT
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Our Board of Directors is soliciting proxies to be voted at the 2007 Annual
Meeting of Stockholders, which we refer to as the "Annual Meeting," to be held
on June 4, 2007. Your vote is very important. For this reason, our Board of
Directors is requesting that you permit your common stock to be represented at
the Annual Meeting by the proxies named on the enclosed proxy card. This Proxy
Statement contains important information for you to consider when deciding how
to vote on the matters brought before the Annual Meeting. Please read it
carefully.
Proxy materials, which include the Proxy Statement, proxy card and the
Annual Report on Form 10-K for the fiscal year ended December 31, 2006, which we
refer to as the "2006 Annual Report," were mailed by us to our stockholders
beginning April 27, 2007. In this Proxy Statement, VCA Antech, Inc. is referred
to as the "Company," "VCA," "we," "us" and "our."
QUESTIONS AND ANSWERS
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Q. WHO MAY VOTE AT THE ANNUAL MEETING?
A. You may vote your VCA common stock at the Annual Meeting if our records
show that you owned your shares of common stock at the close of
business on April 16, 2007, which we refer to as the "Record Date." At
that time, there were 84,031,643 shares of common stock outstanding,
and approximately 189 holders of record. Each share of common stock is
entitled to one vote on each matter properly brought before the Annual
Meeting.
Q. WHAT ITEMS OF BUSINESS WILL BE VOTED ON AT THE ANNUAL MEETING?
A. There are three items of business scheduled to be voted on at the
Annual Meeting:
o Election of one member to the Board of Directors;
o Ratification of the appointment of KPMG LLP as our independent
registered public accounting firm for the year ending December
31, 2007;
o Approval of our 2007 Annual Cash Incentive Plan.
We will also consider other business that comes properly before the
Annual Meeting.
Q. HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
A. Our Board of Directors recommends that you vote:
o "FOR" the election of VCA's nominee to the Board of Directors;
o "FOR" ratification of the appointment of KPMG LLP as our
independent registered public accounting firm for the year ending
December 31, 2007; and
o "FOR" approval of the VCA Antech, Inc. 2007 Annual Cash Incentive
Plan.
Q. HOW CAN I VOTE MY SHARES IN PERSON AT THE ANNUAL MEETING?
A. If your shares are registered directly in your name with U.S. Stock
Transfer Corporation, our "Transfer Agent," you are considered the
stockholder of record with respect to those shares and the proxy
materials, including the proxy card, are being sent directly to you by
VCA. As the stockholder of record, you have the right to vote in person
at the meeting. If you choose to do so, you can bring the enclosed
proxy card or vote using the ballot provided at the Annual Meeting.
Even if you plan to attend the Annual Meeting, we
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recommend that you vote your shares in advance as described below so
that your vote will be counted if you decide later not to attend the
Annual Meeting.
Most stockholders of VCA hold their shares in street name through a
broker, bank or other nominee rather than directly in their own name.
In that case, you are considered the beneficial owner of shares held in
street name, and the proxy materials are being forwarded to you
together with a voting instruction card. As the beneficial owner, you
are also invited to attend the Annual Meeting. Because a beneficial
owner is not the stockholder of record, you may not vote these shares
in person at the Annual Meeting unless you obtain a "legal proxy" from
the broker, trustee or nominee that holds your shares, giving you the
right to vote the shares at the meeting. You will need to contact your
broker, trustee or nominee to obtain a legal proxy, and you will need
to bring it to the Annual Meeting in order to vote in person.
Q. HOW CAN I VOTE MY SHARES WITHOUT ATTENDING THE ANNUAL MEETING?
A. Whether you hold shares in your name or through a broker, bank or other
nominee, you may vote without attending the Annual Meeting. You may
vote by granting a proxy or, for shares held through a broker, bank or
other nominee, by submitting voting instructions to that nominee. For
shares held through a broker, bank or other nominee, follow the
instructions on the voting instruction card included with your voting
materials. If you provide specific voting instructions, your shares
will be voted as you have instructed and as the proxy holders may
determine within their discretion with respect to any other matters
that properly come before the Annual Meeting.
A number of brokerage firms and banks offer Internet voting options.
Specific instructions to be followed by owners of shares of common
stock held in street name are set forth on the voting instruction card
accompanying your proxy card. The Internet voting procedures are
designed to authenticate stockholders' identities, to allow
stockholders to give their voting instructions and to confirm that
stockholders' instructions have been recorded properly. Stockholders
voting via the Internet should understand that there may be costs
associated with electronic access, such as usage charges from telephone
companies and Internet access providers that must be borne by the
stockholder.
Q. WHAT HAPPENS IF ADDITIONAL MATTERS ARE PRESENTED AT THE ANNUAL MEETING?
A. Other than the three items of business described in this Proxy
Statement, we are not aware of any other business to be acted upon at
the Annual Meeting. If you grant a proxy, the persons named as proxies,
Robert L. Antin and Tomas W. Fuller, will have the discretion to vote
your shares on any additional matters properly presented for a vote at
the Annual Meeting.
Q. WHAT HAPPENS IF I DO NOT GIVE SPECIFIC VOTING INSTRUCTIONS?
A. If you hold shares in your name, and you sign and return a proxy card
without giving specific voting instructions, the proxy holders will
vote your shares in the manner recommended by our Board of Directors on
all matters presented in this Proxy Statement, and, with respect to any
other matters that properly come before the Annual Meeting, as the
proxy holders may determine in their discretion.
If you hold your shares through a broker, bank or other nominee and you
do not provide your broker with specific voting instructions, your
broker will have the authority to vote your shares on routine matters,
but not on non-routine matters. As a result:
o Your broker will have the authority to vote your shares with
respect to Item 1 (election of directors) and Item 2
(ratification of independent registered public accounting firm)
because these matters are considered routine.
o Your broker will not have the authority to vote your shares with
respect to Item 3 (approval of our 2007 Annual Cash Incentive
Plan) because this matter is considered non-routine.
As the items of business to be acted upon at the Annual Meeting include
both routine and non-routine matters, the broker may turn in a proxy
card for uninstructed shares that votes "FOR" the election of VCA's
nominee to the Board of Directors and ratification of VCA's independent
registered public
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accounting firm, but expressly states that the broker is NOT voting on
the Item 3 (approval of our 2007 Annual Cash Incentive Plan). The
votes with respect to Item 3 in this case are referred to as "broker
non-votes." In tabulating the voting result for any particular item,
broker non-votes are not considered votes cast affirmatively or
negatively on that item. Broker non-votes are counted as present for
the purpose of determining the existence of a quorum at the Annual
Meeting.
Q. WHAT HAPPENS IF I ABSTAIN?
A. For purposes of determining whether the stockholders have approved
matters other than the election of directors, abstentions are treated
as shares present or represented and voting, so abstaining has the same
effect as a negative vote.
Q. WHAT IS THE QUORUM REQUIREMENT FOR THE ANNUAL MEETING?
A. A majority of VCA's outstanding shares as of the Record Date must be
present at the Annual Meeting in order to hold the Annual Meeting and
conduct business. This is called a quorum. Your shares will be counted
for purposes of determining if there is a quorum, whether representing
votes for, against, withheld or abstained, or broker non-votes, if you:
o are present and vote at the Annual Meeting; or
o properly submit a proxy card or vote over the Internet.
Q. HOW CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
A. You can revoke your proxy and change your vote at any time before the
final vote at the Annual Meeting. You may do this by:
o written notice to the Secretary of the Company;
o timely delivery of a valid, later-dated proxy or a later-dated
vote on the Internet; or
o if you are a record holder, voting by ballot at the Annual
Meeting.
Q. WHAT IS THE VOTING REQUIREMENT TO APPROVE EACH OF THE ITEMS?
A.
Item 1--Election of director The person receiving the highest
number of "FOR" votes at the Annual
Meeting will be elected
Item 2--Ratification of appointment of To be approved by the stockholders,
independent registered public accounting firm this item must receive the affirmative
"FOR" vote of a majority of the votes
casts on this item at the Annual Meeting
Item 3--VCA Antech, Inc. 2007 Annual Cash To be approved by the stockholders, this
Incentive Plan item must receive the affirmative "FOR"
vote of a majority of the votes cast on
this item at the Annual Meeting
Q. WHERE CAN I FIND THE VOTING RESULTS OF THE ANNUAL MEETING?
A. The preliminary voting results will be announced at the Annual Meeting.
The final voting results will be tallied by our Transfer Agent and
Inspector of Elections and published in our Quarterly Report on Form
10-Q for the fiscal quarter ending June 30, 2007.
Q. HOW CAN I OBTAIN A SEPARATE SET OF PROXY MATERIALS?
A. To reduce the expense of delivering duplicate proxy materials to our
stockholders who may have more than one VCA common stock account, we
are delivering only one set of the 2006 Annual Report and the Proxy
Statement to certain stockholders who share an address, unless
otherwise requested. A separate proxy card
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is included in the proxy materials for each of these stockholders. If
you share an address with another stockholder and have received only
one set of proxy materials, you may write or call us to request to
receive a separate copy of these materials at no cost to you.
Similarly, if you share an address with another stockholder and have
received multiple copies of our proxy materials, you may write or call
us to request future delivery of a single copy of these materials. You
may contact us regarding these matters by writing or calling us at:
VCA Antech, Inc.
Attention: Investor Relations
12401 West Olympic Boulevard
Los Angeles, California 90064-1022
(310) 571-6500
Q. WHO PAYS FOR THE COST OF THIS PROXY SOLICITATION?
A. We will pay the costs of the solicitation of proxies. We may reimburse
brokerage firms and other persons representing beneficial owners of
shares for expenses incurred in forwarding the voting materials to
their customers who are beneficial owners and obtaining their voting
instructions. In addition to soliciting proxies by mail, our board
members, officers and employees may solicit proxies on our behalf,
without additional compensation, personally or by telephone.
Q. IS THERE A LIST OF STOCKHOLDERS ENTITLED TO VOTE AT THE ANNUAL MEETING?
A. The names of stockholders of record entitled to vote at the Annual
Meeting will be available at the Annual Meeting and for ten days prior
to the Annual Meeting for any purpose relevant to the Annual Meeting,
between the hours of 9:00 a.m. and 5:00 p.m., at our principal
executive offices by contacting the Secretary of the Company.
Q. ARE COPIES OF THE PROXY MATERIALS AND ANNUAL REPORT AVAILABLE
ELECTRONICALLY?
A. The Notice of Annual Meeting and Proxy Statement and the 2006 Annual
Report, which we refer to as the "Annual Report," are available on our
web site at http://investor.vcaantech.com.
Q. WHAT IS THE DEADLINE TO PROPOSE ACTIONS FOR CONSIDERATION AT NEXT
YEAR'S ANNUAL MEETING?
A. Any stockholder who intends to present a proposal at the 2008 Annual
Meeting for inclusion in our Proxy Statement and proxy card relating
to our 2008 Annual Meeting must submit his, her or its proposal to VCA
Antech, Inc., c/o Office of Secretary, 12401 West Olympic Boulevard,
Los Angeles, California 90064 by December 28, 2007. The rules and
regulations of the U.S. Securities and Exchange Commission, which we
refer to as the "SEC," provide that if the date of the Company's 2008
Annual Meeting is advanced or delayed more than 30 days from the date
of the 2007 Annual Meeting, stockholder proposals intended to be
included in the proxy materials for the 2008 Annual Meeting must be
received by the Company within a reasonable time before the Company
begins to print and mail the proxy materials for the 2008 Annual
Meeting. Upon determination by the Company that the date of the 2008
Annual Meeting will be advanced or delayed by more than 30 days from
the date of the 2007 Annual Meeting, the Company will disclose that
change in the earliest possible Quarterly Report on Form 10-Q.
If a stockholder intends to present a proposal at our 2008 Annual
Meeting, but does not intend to have it included in our Proxy
Statement, the proposal must be delivered to our Secretary no earlier
than March 6, 2008 and no later than April 5, 2008. If the date of our
2008 Annual Meeting is advanced or delayed by more than 30 days from
the date of the 2007 Annual Meeting, the proposal must be delivered by
the close of business on the tenth day following the day we publicly
announce the date of our 2008 Annual Meeting. Furthermore, if a
stockholder who presents a proposal (or a qualified representative of
that stockholder) does not appear at the annual meeting of stockholders
to present the proposal, the proposal will be disregarded,
notwithstanding that proxies in respect of the proposal may have been
received by the Company.
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Q. HOW DO I RECOMMEND A CANDIDATE FOR ELECTION AS A DIRECTOR?
A. Stockholders who wish to recommend a candidate for election as a
director at our 2008 Annual Meeting must submit their recommendations
no earlier than March 6, 2008 and no later than April 5, 2008.
Stockholders may recommend candidates for consideration by the Board
of Directors' Nominating and Corporate Governance Committee by
providing written notice to VCA Antech, Inc., c/o Office of Secretary,
12401 West Olympic Boulevard, Los Angeles, California 90064. The
written notice must provide the candidate's name, age, business and
residence addresses, biographical data, including principal
occupation, qualifications, the number and class of our shares, if
any, beneficially owned by the candidate, and all other information
regarding candidates required by Section 14 of the Securities Exchange
Act of 1934, as amended, which we refer to as the "Exchange Act," and
the rules and regulations promulgated thereunder. A written statement
from the candidate consenting to be named as a candidate and, if
nominated and elected, to serve as a director should accompany any
stockholder recommendation. Any stockholder who wishes to recommend a
nominee for election as director must also provide his, her or its
name and address, the number and class of shares beneficially owned by
the stockholder, a description of all arrangements or understandings
relating to the nomination among the stockholder making the
nomination, the proposed nominee and any other person or persons
(including their names), and all other information regarding the
stockholder required by Section 14 of the Exchange Act and the rules
and regulations promulgated thereunder.
The Company will include a candidate recommended by a stockholder in
its Proxy Statement only if the Nominating and Corporate Governance
Committee, after evaluating the candidate, decides to propose the
candidate to the Board, and the Board nominates the candidate.
Furthermore, if a stockholder who recommends a nominee (or a qualified
representative of that stockholder) does not appear at the annual
meeting of stockholders to present the nomination, the nomination will
be disregarded, notwithstanding that proxies in respect of the
nomination may have been received by the Company.
Q. HOW CAN I COMMUNICATE WITH THE BOARD OF DIRECTORS?
A. Stockholders may communicate with the Board of Directors by sending a
letter to the Board of Directors of VCA Antech, Inc., c/o Office of
the Secretary, 12401 West Olympic Boulevard, Los Angeles, California
90064. Each communication must contain a clear notation indicating
that it is a "Stockholder -- Board Communication" or "Stockholder --
Director Communication," and each communication must identify the
author as a stockholder. The office of the Secretary will receive the
correspondence and forward it to the Chairman of the Board or to any
individual director or directors to whom the communication is
directed, unless the communication is unduly hostile, threatening,
illegal, does not reasonably relate to us or our business, or is
similarly inappropriate. The office of the Secretary has authority to
discard any inappropriate communications or to take other appropriate
actions with respect to any inappropriate communications.
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CORPORATE GOVERNANCE
--------------------
Our business is managed by our employees under the direction and oversight of
the Board of Directors. Except for Mr. Antin, none of the members of our Board
of Directors is an employee of VCA. We keep the members of our Board of
Directors informed of our business through discussions with management,
materials we provide to them, visits to our offices and their participation in
Board of Directors and committee meetings.
We believe transparent, effective, and accountable corporate governance
practices are key elements of our relationship with our stockholders. To help
our stockholders understand our commitment to this relationship and our
governance practices, several of our key governance initiatives are summarized
below.
CORPORATE GOVERNANCE GUIDELINES
Our Board of Directors has adopted Corporate Governance Guidelines which govern,
among other things, criteria for membership on the Board of Directors, vacancies
on the Board of Directors, director responsibilities, director education, and
committee composition and charters. You can access these Corporate Governance
Guidelines, along with other materials such as committee charters, on our
website at http://investor.vcaantech.com.
CODE OF ETHICS
We have adopted a Code of Ethics and Business Conduct applicable to all of our
employees as well as our directors and executive officers. Our Code of Ethics
and Business Conduct is designed to set the standards of business conduct and
ethics and to help directors and employees resolve ethical issues. Our Code of
Ethics and Business Conduct applies to our Chief Executive Officer, Chief
Financial Officer, all other senior financial executives, our directors when
acting in their capacity as directors and to all of our employees. The purpose
of our Code of Ethics and Business Conduct is to ensure to the greatest possible
extent that our business is conducted in a consistently legal and ethical
manner. Employees may submit concerns or complaints regarding audit, accounting,
internal controls or other ethical issues on a confidential basis by means of an
anonymous toll-free telephone call or email. We investigate all concerns and
complaints. Our Code of Ethics and Business Conduct is posted on our website at
http://investor.vcaantech.com.
We intend to disclose on our website amendments to, or waivers from, any
provision of our Code of Ethics and Business Conduct which applies to our Chief
Executive Officer, Chief Financial Officer, Principal Accounting
Officer/Controller and persons performing similar functions and amendments to,
or waivers from, any provision which relates to any element of our Code of
Ethics and Business Conduct described in Item 406(b) of Regulation S-K.
COMMITTEE RESPONSIBILITIES
VCA has three committees of the Board of Directors: the Audit Committee, the
Compensation Committee and the Nominating and Corporate Governance Committee.
Each committee meets regularly and has a written charter approved by the Board
of Directors. See "Further Information Regarding Board of Directors - Meetings
and Committees" contained elsewhere in this Proxy Statement.
INDEPENDENCE
NASDAQ rules require listed companies to have a board of directors with at least
a majority of independent directors. Our Board of Directors has determined that
four of our five current directors are independent under the NASDAQ Global
Select Market listing standards. Our independent directors are: John M. Baumer,
John B. Chickering, Jr., John Heil and Frank Reddick. In addition, all of the
directors currently serving on the Audit Committee, the Compensation Committee
and the Nominating and Corporate Governance Committee are independent under the
NASDAQ Global Select Market listing standards.
STOCKHOLDER COMMUNICATION
Stockholders may communicate with the Board of Directors by sending a letter to
the Board of Directors of VCA Antech, Inc., c/o Office of the Secretary, 12401
West Olympic Boulevard, Los Angeles, California 90064. Each communication must
contain a clear notation indicating that it is a "Stockholder -- Board
Communication" or
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"Stockholder -- Director Communication," and each communication must identify
the author as a stockholder. The office of the Secretary will receive the
correspondence and forward it to the Chairman of the Board or to any individual
director or directors to whom the communication is directed, unless the
communication is unduly hostile, threatening, illegal, does not reasonably
relate to us or our business, or is similarly inappropriate. The Office of the
Secretary has authority to discard any inappropriate communications or to take
other appropriate actions with respect to any inappropriate communications.
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS
All directors are encouraged to attend VCA's Annual Meetings of stockholders.
Three of our directors attended our 2006 Annual Meeting of Stockholders.
EXECUTIVE SESSIONS
VCA's independent directors regularly meet in executive session without
management present.
OUTSIDE ADVISORS
The Board of Directors, the Audit Committee, the Compensation Committee and the
Nominating and Corporate Governance Committee may each retain outside advisors
and consultants of their choosing at VCA's expense.
DIRECTOR EDUCATION
Frank Reddick routinely participates in continuing legal education programs on
corporate governance, and board and board committee functions.
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ITEM 1: ELECTION OF DIRECTOR
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We have five members on our Board of Directors. Four of the five members of our
Board of Directors have been determined by our Board of Directors to meet the
independence requirements of the NASDAQ Global Select Market listing standards.
As provided in our Amended and Restated Certificate of Incorporation, the Board
of Directors has been grouped into three classes, as nearly equal in number as
possible, which are elected for staggered terms. Our Class II director will be
elected at this Annual Meeting and will hold office for three years until the
2010 Annual Meeting and thereafter until his successor is duly elected and
qualified. The terms of our Class III directors expire at our 2008 Annual
Meeting. The terms of our Class I directors expire at our 2009 Annual Meeting.
In accordance with our Corporate Governance Guidelines, any director appointed
to fill a vacant seat in a class other than the class of directors whose terms
expire at the next annual meeting of stockholders will stand for re-election at
the next annual meeting of stockholders.
Although we know of no reason why this nominee would not be able to serve, if
the nominee is unavailable for election, the proxies will vote your common stock
to approve the election of any substitute nominee proposed by our Nominating and
Corporate Governance Committee. The Board of Directors may choose to reduce the
size of the Board, as permitted by our Bylaws, provided we maintain the number
of independent directors required by the listing standards of the NASDAQ Global
Select Market. The Board of Directors has no reason to believe that VCA's
nominee will be unwilling or unable to serve if elected as director.
NOMINEE
Our nominee for election as a Class II Director, Robert L. Antin, is currently a
director, and has agreed to be named in this Proxy Statement and to serve if
elected.
The Board of Directors proposes the following candidate for election as Class II
director:
CLASS II DIRECTOR NOMINEE
-------------------------
Robert L. Antin
The principal occupation and certain other information about the nominee, our
other directors and our executive officers are set forth on the following pages.
A plurality of the votes cast is required for election as a director. All
proxies will be voted to approve the election of the nominee listed above unless
a contrary vote is indicated on the enclosed proxy card.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
NOMINEE IDENTIFIED ABOVE.
8
MANAGEMENT
----------
DIRECTORS AND EXECUTIVE OFFICERS
The following persons serve as our directors:
DIRECTORS AGE PRESENT POSITION
--------- --- ----------------
CLASS I DIRECTORS
-----------------
John M. Baumer............................... 39 Director
Frank Reddick................................ 54 Director
CLASS II DIRECTOR
-----------------
Robert L. Antin.............................. 57 Chairman of the Board
CLASS III DIRECTORS
-------------------
John B. Chickering, Jr....................... 58 Director
John Heil.................................... 54 Director
The following persons serve as our executive officers:
EXECUTIVE OFFICERS AGE PRESENT POSITION
------------------ --- ----------------
Robert L. Antin............................... 57 Chief Executive Officer and President
Arthur J. Antin............................... 60 Chief Operating Officer and Senior Vice President
Neil Tauber................................... 56 Senior Vice President of Development
Tomas W. Fuller............................... 49 Chief Financial Officer, Vice President and Secretary
Dawn R. Olsen................................. 48 Principal Accounting Officer, Vice President and
Controller
Our executive officers are appointed by and serve at the discretion of our Board
of Directors. Robert L. Antin and Arthur J. Antin are brothers. There are no
other family relationships between any director and/or any executive officer.
ROBERT L. ANTIN, one of our founders, has served as our Chairman of the Board,
Chief Executive Officer and President since our inception in 1986. From
September 1983 to 1985, Mr. Antin was President, Chief Executive Officer, a
director and co-founder of AlternaCare Corp., a publicly held company that
owned, operated and developed freestanding out-patient surgical centers. From
July 1978 until September 1983, Mr. Antin was an officer of American Medical
International, Inc., an owner and operator of health care facilities. Mr. Antin
received his MBA with a certification in hospital and health administration from
Cornell University.
JOHN M. BAUMER has served as our director since September 2000. Mr. Baumer is a
partner of Leonard Green & Partners, LP, where he has been employed since May
1999. Prior to joining Leonard Green & Partners, LP, he served as a Vice
President in the Corporate Finance Division of Donaldson, Lufkin & Jenrette
Securities Corporation, or DLJ, in Los Angeles. Prior to joining DLJ in 1995,
Mr. Baumer worked at Fidelity Investments and Arthur Andersen LLP. Mr. Baumer
currently serves on the boards of directors of The Brickman Group, Ltd., FTD,
Inc., Intercontinental Arts, Inc., Leslie's Poolmart, Inc., Petco Animal
Supplies, Inc. and Rand McNally & Company. Mr. Baumer is a 1990 graduate of the
University of Notre Dame. He received his MBA from the Wharton School at the
University of Pennsylvania.
JOHN B. CHICKERING, JR. has served as one of our directors since April 2004 and
previously served as a director from 1988 to 2000. Mr. Chickering is a certified
public accountant. Mr. Chickering is currently a private investor and
independent consultant. Mr. Chickering served in a variety of executive
positions within Time Warner, Inc. and Warner Bros., Inc., most recently as the
Vice President--Financial Administration for Warner Bros. International
Television Distribution until February 1996. Prior to his employment at Warner
Bros., Mr. Chickering served as a staff accountant at KPMG Peat Marwick from
August 1975 to June 1977. Mr. Chickering holds an MBA degree with emphasis in
accounting and finance from Cornell University.
9
JOHN HEIL has served as one of our directors since February 2002 and previously
served as a director from 1995 to 2000. Mr. Heil currently serves as President
of United Pet Group, Inc., a global manufacturer and marketer of pet supplies
and subsidiary of Spectrum Brands, Inc. Mr. Heil also serves on Spectrum Brands'
Executive Committee as Chief Operating Officer. Prior to joining United Pet
Group, Mr. Heil spent twenty-five years with the H. J. Heinz Company in various
executive and general management positions including President and Managing
Director of Heinz Pet Products and President of Heinz Specialty Pet Foods. Mr.
Heil holds a BA degree in economics from Lycoming College.
FRANK REDDICK has served as one of our directors since February 2002. For more
than the past five years, Mr. Reddick has been a partner in Akin Gump Strauss
Hauer & Feld LLP, a global, full service law firm. Mr. Reddick serves on the
firm's national steering committee for the Corporate Finance & Mergers and
Acquisitions section. Mr. Reddick is principally engaged in the practice of
corporate and securities law, with a concentration on corporate finance, mergers
and acquisitions, joint ventures and other strategic alliances. Mr. Reddick
holds a JD from the University of California, Hastings College of the Law.
ARTHUR J. ANTIN, one of our founders, has served as our Chief Operating Officer
and Senior Vice President since our inception. From 1986 until June 2004, Mr.
Antin also served as our Secretary and as a director. From October 1983 to
September 1986, Mr. Antin served as Director of Marketing/Investor Relations of
AlternaCare Corp. At AlternaCare Corp., Mr. Antin developed and implemented
marketing strategies for a network of outpatient surgical centers. Mr. Antin
received an MA in Community Health from New York University.
NEIL TAUBER, one of our founders, has served as our Senior Vice President of
Development since our inception. From 1984 to 1986, Mr. Tauber served as the
Director of Corporate Development at AlternaCare Corp. At AlternaCare Corp., Mr.
Tauber was responsible for the acquisition of new businesses and syndication to
hospitals and physician groups. From 1981 to 1984, Mr. Tauber served as Chief
Operating Officer of MDM Services, a wholly owned subsidiary of Mediq, a
publicly held health care company, where he was responsible for operating and
developing a network of retail dental centers and industrial medical clinics.
Mr. Tauber holds an MBA from Wagner College.
TOMAS W. FULLER joined us in January 1988 and served as Vice President and
Controller until November 1990 when he became Chief Financial Officer. In June
2004, Mr. Fuller became Secretary. From 1980 to 1987, Mr. Fuller worked at
Arthur Andersen LLP, the last two years of which he served as audit manager. Mr.
Fuller received his BA in business/economics from the University of California
at Los Angeles.
DAWN R. OLSEN joined us in January 1997 as Vice President, Controller. In March
2004, Ms. Olsen became Principal Accounting Officer. From 1993 to 1996, Ms.
Olsen served as Senior Vice President, Controller of Optel, Inc., a privately
held telecommunications company. From 1987 to 1993, Ms. Olsen served as
Assistant Controller and later as Vice President, Controller of Qintex
Entertainment, Inc., a publicly held television film distribution and production
company. From 1981 to 1987, Ms. Olsen worked at Arthur Andersen LLP, the last
year of which she served as audit manager. Ms. Olsen currently serves on the
board of the Women's Leadership Council in Los Angeles. Ms. Olsen is a certified
public accountant and received her BS in business/accounting from California
State University, Northridge.
10
FURTHER INFORMATION REGARDING THE BOARD OF DIRECTORS
----------------------------------------------------
COMPOSITION
Four of the five members of our Board of Directors have been determined by our
Board of Directors to meet the independence requirements of the NASDAQ Global
Select Market listing standards. We refer to each of these directors as an
"independent director."
MEETINGS & COMMITTEES
During fiscal 2006, the Board of Directors held four meetings and acted four
times by unanimous written consent. VCA's independent directors regularly meet
in executive session without management present.
The Board of Directors has an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee, all of which are constituted
solely of independent directors.
AUDIT COMMITTEE
The Audit Committee consists of John M. Baumer, John B. Chickering, Jr.
(Chairman) and John Heil, each an independent director and each financially
literate as required by the NASDAQ Global Select Market listing standards. Our
Board of Directors has determined that Messrs. Baumer, Chickering and Heil
qualify as "audit committee financial expert[s]" as that term is defined in Item
401(h) of Regulation S-K of the Exchange Act. During fiscal 2006, the Audit
Committee held nine meetings and acted two times by unanimous written consent.
Among other matters, the Audit Committee:
o engages and replaces the independent registered public accounting firm
as appropriate;
o evaluates the performance of, independence of and pre-approves all
services provided by the independent registered public accounting
firm;
o discusses with management, internal auditor and the independent
registered public accounting firm the quality of our accounting
principles and financial reporting; and
o oversees our internal controls.
Our Audit Committee charter is posted on our website at
http://investor.vcaantech.com.
COMPENSATION COMMITTEE
The Compensation Committee consists of John M. Baumer, John B. Chickering, Jr.
and Frank Reddick (Chairman), each an independent director. During fiscal 2006,
the Compensation Committee held seven meetings.
The Compensation Committee's principal purposes are to:
o assist the Board of Directors in ensuring that a proper system of
long-term and short-term compensation is in place to provide
performance-oriented incentives to management, and that compensation
plans are appropriate and competitive and properly reflect the
objectives and performance of management and the Company;
o establish the compensation of all of our executive officers;
o prepare a report of the Compensation Committee for inclusion in the
Company's annual proxy statement; and
o administer the Company's equity incentive programs.
11
The Compensation Committee is responsible for overseeing the determination,
implementation and administration of remuneration, including compensation,
benefits and perquisites, of all executive officers and other members of senior
management whose remuneration is the responsibility of the Board of Directors.
More specifically, the Compensation Committee's responsibilities include: (a)
reviewing and approving goals and objectives relevant to each executive
officer's compensation package; (b) establishing a procedure for evaluating each
executive officer's performance; (c) annually evaluating that performance in
light of the goals and objectives established; (d) having the chairman of the
Compensation Committee review, after completion of the annual evaluation, with
each executive officer the results of the Compensation Committee's evaluation of
the executive officer's performance; (e) reviewing, at least annually, and
setting the base salary and annual and long-term incentive compensation of the
executive officers, after taking into account the annual evaluation of each
executive officer; (f) reviewing and making periodic recommendations to the
Board of Directors as to the general compensation and benefits policies and
practices of the Company, including incentive-compensation plans and
equity-based plans; (g) reviewing and adopting, and recommending to the Board of
Directors (and for stockholder approval where required by applicable law, our
Amended and Restated Certificate of Incorporation or our Bylaws), compensation
and benefits policies, plans and programs and amendments thereto, determining
eligible employees and the type, amount and timing of such compensation and
benefits; (h) overseeing the administration of such policies, plans and programs
and, on an ongoing basis to monitor them to assure that they remain competitive
and within the Board of Director's compensation objectives for executive
officers and other members of senior management; and (i) reviewing and
considering recommendations with respect to the compensation and benefits of
non-employee directors and recommending any changes to the Board of Directors
that the Compensation Committee deems appropriate.
The Compensation Committee has the authority to delegate the responsibilities
listed above to subcommittees of the Compensation Committee if it determines
such delegation would be in the best interest of the Company. On April 24, 2007,
the Compensation Committee established the 162(m) Subcommittee (as defined
below), which consists of the two "outside directors" (as such term is defined
in Treasury Regulation 1.162-27(e)(3)) of the Compensation Committee, John M.
Baumer and John B. Chickering, Jr. The 162(m) Subcommittee has the power and
authority, to the same extent as would the Compensation Committee, to act, in
the name of and on behalf of the Company, with respect to (i) the administration
of the VCA Antech Inc. 2006 Equity Incentive Plan and the VCA Antech, Inc. 2007
Annual Cash Incentive Plan, which we refer to collectively as the "Plans," in
accordance with the terms of each Plan, (ii) the establishment of the
performance goals under each Plan, (iii) the grant or payment of all qualified
performance-based compensation and (iv) all stock option grants made to the
executive officers of the Company pursuant to the terms of the Plans.
The Compensation Committee seeks the views of our Chief Executive Officer with
respect to establishing appropriate compensation packages for the Named
Executive Officers (other than the Chief Executive Officer). Although its
charter grants the Compensation Committee the authority to hire a compensation
consultant to advise it and to survey the compensation practices in the
Company's industry, the Compensation Committee neither engaged during 2006 nor
currently engages any consultant related to compensation matters.
Our Compensation Committee charter is posted on our website at
http://investor.vcaantech.com.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee consists of John M. Baumer,
John B. Chickering, Jr. and Frank Reddick (Chairman), each an independent
director. During fiscal 2006, the Nominating and Corporate Governance Committee
held two meetings.
The principal responsibilities of the Nominating and Corporate Governance
Committee are to:
o review the criteria for selection of new directors and nominees,
including the establishment of procedures for the review of potential
nominees proposed by stockholders and review with our Board of
Directors the desired mix of experience, skills and other qualities;
o propose to the Board of Directors a slate of nominees for election by
the stockholders at our Annual Meetings; and
12
o review and reassess the adequacy of the Corporate Governance
Guidelines and recommend any proposed changes to the Board of
Directors.
Our Nominating and Corporate Governance Committee charter is posted on our
website at http://investor.vcaantech.com.
In considering director candidates, the Nominating and Corporate Governance
Committee considers the entirety of each candidate's credentials and does not
have any specific minimum qualifications that must be met in order to be
recommended as a nominee. The Nominating and Corporate Governance Committee does
believe, however, that all members of the Board of Directors should have high
personal and professional ethics, integrity, practical wisdom and mature
judgment, no conflict of interest that would interfere with their performance as
a director of a public corporation, a commitment to serve on the Board of
Directors over a period of several years, a willingness to represent the best
interests of all stockholders and objectively appraise management performance
and sufficient time to devote to matters of the Board of Directors.
Our Nominating and Corporate Governance Committee may employ a variety of
methods for identifying and evaluating nominees for director, including
stockholder recommendations. The Nominating and Corporate Governance Committee
considers candidates recommended by our stockholders, provided that the
recommendations are made in accordance with the procedures required under our
Bylaws, as summarized in the "Questions and Answers" section of this Proxy
Statement. If vacancies are anticipated or otherwise arise, the Nominating and
Corporate Governance Committee will consider various potential candidates for
director who may come to the Nominating and Corporate Governance Committee's
attention through current members of the Board of Directors, professional search
firms or consultants, stockholders, or other persons. The Nominating and
Corporate Governance Committee may hire and pay a fee to consultants or search
firms to assist in the process of identifying and evaluating candidates. In
2006, no professional search firms or consultants were retained and,
accordingly, no fees were paid in this regard to professional search firms or
consultants in 2006. The Nominating and Corporate Governance Committee does not
evaluate candidates differently based on who made the recommendation for
consideration.
DIRECTOR ATTENDANCE
All incumbent directors attended 75% or more of all the meetings of the Board of
Directors in fiscal 2006. All incumbent directors attended 75% or more of all
the meetings of those committees on which they served in fiscal 2006. The
Company encourages, but does not require, all incumbent directors and director
nominees to attend our Annual Meetings of stockholders. Three of our directors
attended our 2006 Annual Meeting of Stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2006, the Compensation Committee of our Board of Directors
consisted of John B. Chickering, Jr., John M. Baumer and Frank Reddick. None of
these individuals was one of our officers or employees at any time during fiscal
2006. Mr. Reddick is a partner at Akin Gump Strauss Hauer & Feld LLP, which
provided legal services to us during fiscal 2006 and is providing legal services
to us in fiscal 2007. In 2006, the Company paid Akin Gump Strauss Hauer & Feld
LLP $550,000 for legal services. Nevertheless, Mr. Reddick is not disqualified
from serving as an independent director on our Board of Directors under the
NASDAQ Global Select Market listing standards because of the relatively small
amount of fees we paid to Akin Gump Strauss Hauer & Feld LLP in fiscal years
2006, 2005 and 2004 in relation to our total revenues and the total revenues of
Akin Gump Strauss Hauer & Feld LLP for those same periods. None of our executive
officers served as a member of the board of directors or compensation committee
of any entity that has or has had one or more executive officers serving as a
member of our Board of Directors or Compensation Committee.
13
ITEM 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
--------------------------------------------------------------------------------
The Audit Committee has engaged the firm of KPMG LLP to continue to serve as our
independent registered public accounting firm for the current fiscal year ending
December 31, 2007. KPMG LLP has served as VCA's principal independent registered
public accounting firm since June 14, 2002.
We are asking the stockholders to ratify the appointment of KPMG LLP as our
independent public accounting firm for the fiscal year ending December 31, 2007.
The ratification of KPMG LLP as the Company's independent registered public
accounting firm for the fiscal year ending December 31, 2007, will require the
affirmative vote of a majority of the shares of common stock present or
represented and entitled to vote at the Annual Meeting. All proxies will be
voted to approve the appointment unless a contrary vote is indicated on the
enclosed proxy card.
We anticipate that a representative of KPMG LLP will attend the Annual Meeting
for the purpose of responding to appropriate questions. The representative of
KPMG LLP will be afforded an opportunity to make a statement if he or she so
desires at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
14
AUDIT AND NON-AUDIT FEES
------------------------
The following table sets forth the aggregate fees billed to us by KPMG LLP, our
independent registered public accounting firm, for professional services
rendered during the fiscal years ended December 31, 2006 and 2005.
2006 2005
----------------- -----------------
Audit Fees $1,716,724 $1,324,513
Tax Fees (1) 29,500 -
All Other Fees (2) 6,567 3,289
----------------- -----------------
Total $1,752,791 $1,327,802
================= =================
-----------------------
(1) Consists of $25,000 for consultation on the tax impact of certain
transactions and $4,500 for review of corporate tax returns.
(2) Consists of miscellaneous consulting services provided by KPMG LLP.
---------------------------------
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES
The Audit Committee is responsible for appointing, setting the compensation of
and overseeing the work of the independent registered public accounting firm. In
recognition of this responsibility, the Audit Committee has established a policy
with respect to the pre-approval of audit and permissible non-audit services and
fees provided by the independent registered public accounting firm. The Audit
Committee's pre-approval policy requires that all audit and permissible
non-audit services and fees be pre-approved by the Audit Committee. Specific
pre-approval is not required for permissible non-audit services provided that
they:
o do not, in the aggregate, amount to more than five percent of total
revenues paid by the Company to the independent registered public
accounting firm in the fiscal year in which the services are provided;
o were not recognized by the Company as non-audit services at the time
of the relevant engagement; and
o are promptly brought to the attention of the Audit Committee and
approved by the Audit Committee (or its designated representatives)
prior to the completion of the annual audit.
Pursuant to the pre-approval policy, the Audit Committee's Chairman is delegated
the authority to pre-approve audit services and fees, provided he reports those
approvals at the next meeting of the Audit Committee. The term of any
pre-approval granted by the Audit Committee with respect to a given service is
twelve months. All fees in excess of pre-approved levels require specific
pre-approval by the Audit Committee. All audit and permissible non-audit
services provided to us in 2006 were approved by the Audit Committee.
15
REPORT OF AUDIT COMMITTEE
-------------------------
THE INFORMATION IN THIS AUDIT COMMITTEE REPORT SHALL NOT BE DEEMED TO
BE "SOLICITING MATERIAL," OR TO BE "FILED" WITH THE SECURITIES AND
EXCHANGE COMMISSION OR TO BE SUBJECT TO REGULATION 14A OR 14C AS
PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION, OR TO THE
LIABILITIES OF SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF 1934.
During fiscal year 2006, the Audit Committee consisted of Messrs. Baumer,
Chickering and Heil. Mr. Chickering is the Chairman of the Committee and a
financial expert. Messrs. Baumer and Heil are also financial experts. All
members of the Committee are independent within the meaning of the NASDAQ Global
Select Market listing standards.
The Committee is responsible for overseeing, on behalf of the Board of
Directors, the Company's accounting and financial reporting process and the
audits of VCA's financial statements. As set forth in its charter, the Committee
acts only in an oversight capacity and relies on the work and assurances of
management, which has the primary responsibility for the financial reporting
process, including the system of internal controls, and the financial
statements.
The Committee met nine times and acted two times by unanimous written consent
during fiscal 2006. During the course of some of these meetings, the Committee
met and held executive sessions with management, the internal auditor and the
independent registered public accounting firm regarding the fair and complete
presentation of the Company's results.
The Committee believes that a candid, substantive and focused dialogue with the
internal auditor and the independent registered public accounting firm is
fundamental to the Committee's oversight responsibilities. To support this
belief and as required by its charter, the Committee periodically, and at least
once a year, meets separately with the internal auditor and KPMG LLP, without
management present. In the course of its discussions in these meetings, the
Committee asked a number of questions intended to bring to light any areas of
potential concern related to VCA's financial reporting and internal controls.
The Committee has discussed significant accounting policies applied by the
Company in its financial statements, as well as alternative treatments.
Management represented to the Committee that the Company's consolidated
financial statements were prepared in accordance with generally accepted
accounting principles, and the Committee has reviewed and discussed the
consolidated financial statements with management and the independent registered
public accounting firm. The Committee discussed with the independent registered
public accounting firm matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication With Audit Committees).
The Committee reviewed and discussed with management the Company's policies with
respect to risk assessment and risk management.
The Committee received from KPMG LLP its audit report on management's assessment
of internal control over financial reporting and on VCA's internal control over
financial reporting. The Committee reviewed and discussed the results of
management's assessment and KPMG LLP's audit as part of its oversight
responsibility.
In addition, the Committee has received the written disclosures and the letter
from the independent registered public accounting firm required by the
Independence Standards Board Standard No. 1 (Independence Discussions With Audit
Committees), and the Committee has discussed with the independent registered
public accounting firm the independent accountant's independence from the
Company and its management. The Committee also has considered whether the
independent registered public accounting firm's provision of non-audit services
to the Company is compatible with the accountant's independence. The Committee
has concluded that the independent registered public accounting firm is
independent from the Company and its management.
The Committee discussed with the Company's independent registered public
accounting firm the overall scope and plans for its audit.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board of Directors approved, that
the audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2006, for filing with the Securities
and Exchange
16
Commission. In addition, the Committee has selected and engaged KPMG LLP as the
Company's independent registered public accounting firm for the fiscal year
ending December 31, 2007.
Audit Committee
JOHN M. BAUMER
JOHN B. CHICKERING, JR.
JOHN HEIL
17
ITEM 3: PROPOSAL TO APPROVE VCA ANTECH, INC. 2007 ANNUAL CASH INCENTIVE PLAN
--------------------------------------------------------------------------------
We are asking you to approve the 2007 Annual Cash Incentive Plan, which we refer
to as the "2007 Annual Cash Incentive Plan" or the "Plan," as set forth in ANNEX
A to this Proxy Statement. The Plan is intended to comply with Section 162(m) of
the Internal Revenue Code, which we refer to as the "Code." If approved by
stockholders, the Plan will allow for the payment of bonuses to the executive
officers of VCA and its subsidiaries, and other key executives who are selected
to participate in the Plan by the 162(m) Subcommittee of the Compensation
Committee, which was formed by the Compensation Committee on April 24, 2007 and
which we refer to as the "162(m) Subcommittee." The bonuses will be performance
awards based on the satisfaction of performance goals as described below.
On April 24, 2007, the Board of Directors approved the 2007 Annual Incentive
Plan. The 2007 Annual Cash Incentive Plan permits the Compensation Committee to
grant performance awards based upon pre-established performance goals to
executives of VCA selected by the 162(m) Subcommittee, whether or not such
executives, at the time of grant, are subject to the limit on deductible
compensation under Section 162(m) of the Code.
In order to qualify for deductibility under Section 162(m) of the Code, the
Plan, including the performance goals set forth in the Plan, must be approved by
the stockholders. No performance awards will be granted under the 2007 Annual
Incentive Plan regardless of whether the performance goals are achieved, unless
the Plan is approved by the affirmative vote of a majority of the shares of
common stock present or represented and entitled to vote at the Annual Meeting.
All proxies will be voted to approve the Plan unless a contrary vote is
indicated on the enclosed proxy card.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
2007 ANNUAL CASH INCENTIVE PLAN.
PURPOSE OF OUR 2007 ANNUAL CASH INCENTIVE PLAN
Stockholder approval of the 2007 Annual Cash Incentive Plan is recommended by
the Board of Directors to provide an incentive to executive officers and other
selected key executives of VCA and its subsidiaries to contribute to the growth,
profitability and increased shareholder value of VCA, to obtain and retain such
executives, and to endeavor to maintain the tax-deductible status of such
incentive payments to VCA's Chief Executive Officer, Chief Financial Officer and
the three other most-highly paid executive officers at year end who are named in
VCA's proxy statement for the year in which such amounts are claimed as a
deduction by VCA.
SUMMARY OF OUR 2007 ANNUAL CASH INCENTIVE PLAN
The following summary of our 2007 Annual Cash Incentive Plan is qualified by
reference to the full text of the Plan, which is attached as ANNEX A to this
Proxy Statement.
ELIGIBILITY
The 2007 Annual Cash Incentive Plan provides for the grant of performance-based
incentive compensation, which we refer to as "Performance Awards," to executive
officers of VCA and its subsidiaries and other key executives of VCA and its
subsidiaries selected by the 162(m) Subcommittee, which we refer to as the
"Eligible Employees." Under the 2007 Annual Cash Incentive Plan, the 162(m)
Subcommittee, in its sole discretion, may grant Performance Awards to Eligible
Employees. The number of participants in the 2007 Annual Cash Incentive Plan is
not determinable from year to year.
PERFORMANCE AWARDS, GOALS AND OBJECTIVES
Under the 2007 Annual Cash Incentive Plan, the 162(m) Subcommittee has the
authority to grant Performance Awards. Performance Awards provide participants
with the right to an award based upon the achievement of one or more levels of
performance required to be attained with respect to one or more Performance
Criteria, which we refer to as "Performance Goals." The 2007 Annual Cash
Incentive Plan contemplates that the "Performance Criteria," any of which may be
selected by the 162(m) Subcommittee, will mean or may be expressed in terms of
any of the following business criteria: revenue, sales, earnings before
interest, taxes, depreciation and amortization (EBITDA),
18
funds from operations, funds from operations per share, operating income,
pre-tax or after-tax income, cash available for distribution, cash available for
distribution per share, cash or cash equivalents available for operations, net
earnings, earnings per share, return on equity, return on assets, return on
capital, economic value added, share price performance, improvements in the
Company's attainment of expense levels, and implementing or completion of
critical projects, or improvement in cash-flow (before or after tax). Such
objective Performance Criteria are not required to be based on increases in a
specific business criteria, but may be based on maintaining the status quo or
limiting economic losses. A Performance Criterion may be measured over a
Performance Period on a periodic, annual, cumulative or average basis and may be
established on a corporate-wide basis or established with respect to one or more
operating units, divisions, subsidiaries, acquired businesses, minority
investments, partnerships or joint ventures. For purposes of the 2007 Annual
Cash Incentive Plan, a "Performance Period" shall mean the calendar year, or
such other shorter or longer period designated by the 162(m) Subcommittee,
during which performance will be measured in order to determine a participant's
entitlement to receive payment of a Performance Award. The initial Performance
Period will be the period beginning on April 1, 2007 and ending on December 31,
2007.
The 2007 Annual Cash Incentive Plan contemplates that the 162(m) Subcommittee
will establish the Performance Goals for each Performance Award, consisting of
one or more business criteria permitted as Performance Criteria under the 2007
Plan and one or more levels of performance with respect to each such criteria.
In addition, the 162(m) Subcommittee will establish the amount or amounts
payable or other rights that the participant will be entitled to as a
Performance Award upon achievement of such levels of performance. The
Performance Goals applicable to a Performance Period must be established by the
162(m) Subcommittee prior to, or reasonably promptly following the inception of,
a Performance Period, but no later than the earlier of the date that is 90 days
after the commencement of the Performance Period or the date prior to the date
on which twenty-five percent (25%) of the Performance Period has elapsed, as
required by Section 162(m) of the Code.
Upon certification of the achievement of Performance Goals by the 162(m)
Subcommittee which entitle a participant to the payment of a Performance Award,
the award shall be settled in cash; PROVIDED, HOWEVER, that with respect to a
participant who is not a Covered Employee during the taxable year of the Company
in which the Performance Award will be paid, an award may be settled in cash
without the 162(m) Subcommittee's certification. A participant will not be
granted a Performance Award for any Performance Periods that permit the
participant in the aggregate to earn a cash payment in excess of the lesser of
(x) five (5) times such participant's base salary or (y) $7 million in a
calendar year.
The 162(m) Subcommittee is authorized at any time during or after a Performance
Period, in its sole and absolute discretion, to reduce or eliminate the
Performance Award of any participant, for any reason, including changes in the
participant's position or duties with VCA or any subsidiary during a Performance
Period, whether due to any termination of employment (including death,
disability, retirement, voluntary termination or termination with or without
cause) or otherwise. To the extent necessary to preserve the intended economic
effects of the 2007 Annual Cash Incentive Plan to VCA and the participants, the
162(m) Subcommittee is also authorized during or after a Performance Period to
adjust the Performance Goals and/or the Performance Awards to take into account
a change in corporate capitalization, a corporate transaction, any partial or
complete liquidation of VCA or any subsidiary or a change in accounting rules
(with respect to Performance Awards, a change in accounting rules will not be
taken into account for purposes of this adjustment unless the 162(m)
Subcommittee determines otherwise no later than the earlier of the date that is
90 days after the commencement of the Performance Period or the date prior to
the date on which twenty-five percent (25%) of the Performance Period has
elapsed); PROVIDED that no such adjustment may cause any Performance Awards to
fail to qualify as "qualified performance based compensation" under Section
162(m) of Code.
In the event a participant terminates his or her employment for any reason
during a Performance Period or prior to the payment of the Performance Award, he
or she (or his or her beneficiary, in the case of death) will generally not be
entitled to receive a Performance Award for such Performance Period unless the
participant is not a Covered Employee for the taxable year of the Company in
which the Performance Award will be paid and the 162(m) Subcommittee, in its
sole and absolute discretion, elects to pay a Performance Award to such
participant. In the event of the death of a participant, any payments due to
such participant will continue to be paid to his or her beneficiary or, failing
such designation, to his or her estate. For purposes hereof, a "Covered
Employee" means any employee of the Company who, on the last day of the
Company's taxable year, is the chief executive officer of the Company or among
the four highest compensated officers of the Company (other than the chief
executive officer), each as determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
19
DEFERRAL OF PAYMENT
A participant may elect to defer receipt of part or all payment due in respect
of a Performance Award in accordance with the following requirements, subject to
such terms and administrative guidelines as the 162(m) Subcommittee shall
specify from time to time.
A participant's irrevocable election to defer payment in respect of a
Performance Award shall be made not later than the close of the calendar year
immediately preceding the calendar year in which the Performance Period begins.
Notwithstanding the foregoing, with respect to any Performance Award for a
Performance Period of at least 12 consecutive months and that otherwise
qualifies as "performance-based compensation" as that term is defined in
Treasury Regulation Section 1.409A-1(e), which we refer to as "409A
Performance-Based Compensation," a participant's election to defer payment in
respect of such Performance Award shall be made and irrevocable on or before the
date that is six months before the end of the Performance Period; PROVIDED the
participant is continuously employed by the Company from the later of (i) the
beginning of the Performance Period or (ii) the date the Performance Criteria
are established through the date of such election; PROVIDED FURTHER that in no
event may a participant elect to defer such payment after the Performance Award
has become both calculable and substantially certain to be paid. A Performance
Award shall be deemed 409A Performance-Based Compensation only if its terms
provide that the 162(m) Subcommittee shall only pay such Performance Award upon
the certification by the 162(m) Subcommittee that the Performance Goals and
other material terms have been met.
A participant's election to defer payment of all or part of a Performance Award
shall specify a time or fixed schedule for the payment of such amount, including
interest accrued thereon. Notwithstanding the foregoing, any payment deferred in
respect of a Performance Award shall be paid in a lump sum upon the first to
occur of the following: (i) the participant's separation from service (within
the meaning of Treasury Regulation Section 1.409A-1(h)); PROVIDED, HOWEVER, that
if the Participant is a "specified employee" (within the meaning of Treasury
Regulation section 1.409A-1(i)) as of the date of his or her separation from
service, such payment shall be made on the earlier of (A) the date that is six
months and one day after the participant's separation from service or (B) the
participant's death; (ii) the date of the participant's death; (iii) the date on
which the participant becomes Disabled (as defined in Section 6 of the Plan);
(iv) the occurrence of an Unforeseeable Emergency (as defined in Section 6 of
the Plan), but only to the extent reasonably necessary to satisfy the emergency
need, including amounts necessary to pay taxes or penalties reasonably
anticipated as a result of such payment, after taking into account the extent to
which the emergency is or may be relieved through reimbursement or compensation
by insurance or otherwise or by liquidation of the participant's other assets
(to the extent such liquidation would not itself cause severe financial
hardship); and (v) the occurrence of a Change in Control Event (as defined in
Section 6 of the Plan).
Except upon the occurrence of either of the following events, payment in respect
of a Performance Award that has been deferred may not be accelerated or paid
before the time set forth in the preceding paragraph: (i) the acceleration of
the time or schedule of payment to an individual other than the participant
shall be permitted as may be necessary to comply with the terms of a "domestic
relations order" (as defined in Section 414(p)(1)(B) of the Code); and (ii) the
acceleration of the time or schedule of payment shall be permitted to the extent
reasonably necessary to avoid violation of an applicable ethics law or conflicts
of interest law (including to permit the participant to participate in
activities in the normal course of his or her position with the Company in which
the participant would otherwise not be able to participate under an applicable
rule), as provided by Treasury Regulation Section 1.409A-3(j)(4)(iii).
A participant may subsequently elect to delay payment of an amount previously
deferred; PROVIDED that such election shall be made and irrevocable not less
than 12 months before the date the deferred payment is scheduled to be paid, and
shall not take effect until at least 12 months after the date on which the
election is made; PROVIDED FURTHER that the payment shall be deferred for at
least an additional five years from the date such amount would otherwise have
been paid.
Interest shall accrue on amounts deferred at a reasonable rate of interest
determined by the 162(m) Subcommittee, commencing one day following the date
such amount would have been paid had it not been deferred and ending on the date
of payment.
UNFUNDED STATUS OF AWARDS
The 2007 Annual Cash Incentive Plan will constitute an "unfunded" plan for
incentive and deferred compensation. Under the terms of the Plan, a participant
has only rights which are no greater than those of a general creditor of VCA.
The 2007 Annual Cash Incentive Plan permits the Compensation Committee to
authorize the creation of
20
trusts and deposit therein cash or other property or make other arrangements to
meet VCA's obligations under the 2007 Annual Cash Incentive Plan.
ADMINISTRATION OF THE PLAN
The 2007 Annual Cash Incentive Plan will be administered by the 162(m)
Subcommittee. The Committee has the authority to: (i) select participants; (ii)
grant Performance Awards under the Plan; (iii) determine the terms and
conditions of, and all other matters relating to, Performance Awards; (iv)
prescribe Performance Award agreements; (v) establish, modify or rescind such
rules and regulations as it deems necessary for the proper administration of the
Plan; and (vi) make such determinations and interpretations and to take such
steps in connection with the Plan or the Performance Awards granted thereunder
as it deems necessary or advisable.
EFFECTIVE DATE
The Plan is effective on January 1, 2007, subject to the approval by the
stockholders within 12 months of the Effective Date.
AMENDMENT OF THE PLAN AND AWARDS; TERM
The Board of Directors, or a committee designated by the Board of Directors,
may, at any time, terminate or amend, modify or suspend the 2007 Annual Cash
Incentive Plan and the terms and provisions of any Performance Award theretofore
awarded to any participant which has not been settled; PROVIDED, HOWEVER, that
no amendment or modification to any Performance Award shall be authorized or
made if the 162(m) Subcommittee determines that such authorization or the making
of such amendment or modification would increase or accelerate a payment under a
Performance Award, decrease a Performance Goal, or otherwise cause a Performance
Award to fail to qualify as "qualified performance based compensation" under
Section 162(m) of the Code. No Performance Award may be granted during any
suspension of the Plan or after its termination. Any such amendment may be made
without stockholder approval.
NEW PLAN BENEFITS
The amounts payable under the 2007 Annual Cash Incentive Plan that (i) would
have been received for fiscal 2006 if the Plan had been in effect or (ii) will
be received under the Plan by each of (a) the executive officers of VCA named in
the Summary Compensation Table, (b) the executive officers of VCA as a group,
(c) the directors of VCA who are not executive officers as a group and (d) VCA
employees who are not executive officers is not currently determinable.
21
EXECUTIVE COMPENSATION
----------------------
COMPENSATION DISCUSSION AND ANALYSIS
OVERVIEW OF COMPENSATION PROGRAM
We believe that compensation of our executive and other officers and senior
managers should be directly and materially linked to operating performance. The
fundamental objective of our compensation program is to attract, retain and
motivate top quality executive and other officers through compensation and
incentives which are competitive with the market and industry in which we
compete for talent and which align the interests of our officers and senior
management with the interests of our stockholders.
Overall, we have designed our compensation program to:
o support our business strategy and business plan by clearly
communicating what is expected of executives with respect to goals and
results and by rewarding achievement;
o recruit, motivate and retain executive talent; and
o create a strong performance alignment with stockholders.
We seek to achieve these objectives through a variety of compensation elements:
o annual base salary;
o an annual incentive bonus, the amount of which is determined after
consideration of both Company performance and individual performance
during the prior fiscal year;
o long-term incentive compensation, delivered in the form of stock
options grants and restricted stock awards that are awarded based on
the factors described below and that are designed to align executive
officers' interests with those of stockholders by rewarding
outstanding performance and providing long-term incentives; and
o other executive benefits and perquisites.
COMPENSATION PRACTICES
Compensation objectives are developed based on market pay data from proxy
statements and other sources, when available, of companies we have identified as
being comparable with us in terms of industry, market capitalization, exchange
traded and scope of operations ("Industry Peers") (including Laboratory
Corporation of America, Idexx Laboratories, Inc., Patterson Companies, Inc.,
Pediatrix Medical Group, Inc., PetSmart, Inc., Quest Diagnostics Incorporated
and Stericycle, Inc.).
In making decisions with respect to any element of executive compensation, the
Compensation Committee considers the total compensation that may be awarded to
the officer, including salary, annual bonus and long-term incentive
compensation. Multiple factors are considered in determining the amount of total
compensation (the sum of base salary, annual incentive bonus and long-term
compensation delivered through stock option grants and restricted stock awards)
to award to executive officers each year. Among these factors are:
o how proposed amounts of total compensation to our executives compare
to amounts paid to similar executives by our Industry Peers both for
the prior year and over a multi-year period;
o internal pay equity considerations; and
o broad trends in executive compensation generally.
In addition, in reviewing and approving employment agreements for Named
Executive Officers, the Compensation Committee considers the other benefits to
which the officer is entitled by the agreement, including compensation
22
payable upon termination of the agreement under a variety of circumstances. The
Compensation Committee's goal is to award compensation that is reasonable when
all elements of potential compensation are considered.
COMPONENTS OF 2006 EXECUTIVE COMPENSATION
For the fiscal year ended December 31, 2006, the principal components of
compensation for the Named Executive Officers were:
o base salary;
o annual cash bonus;
o grants of stock options and other long-term incentive compensation;
and
o perquisites and other personal benefits.
BASE SALARY
We provide Named Executive Officers with competitive base salaries to compensate
them for services rendered to the Company during the fiscal year. The
Compensation Committee conducts its annual compensation review of the Named
Executive Officers in June of each year. Base salaries of the Named Executive
Officers are set at levels comparable to salaries paid by our Industry Peers.
The salaries of all Named Executive Offices are determined through mutual
negotiations between the executive and the Compensation Committee. We may enter
into employment agreements with executive officers, in which case we are
required to compensate those executive officers in accordance with their
employment agreements. We currently have employment agreements with our Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer. We
believe that employment agreements with key executives are in our best interests
to assure continuity of management.
Minimum base salaries for our Chief Executive Officer, Chief Operating Officer
and Chief Financial Officer are determined pursuant to their employment
agreements. These minimum salaries, the amount of any increase over these
minimums and base salaries for the executive officers whose salaries are not
specified in an agreement are determined by the Compensation Committee based on
a variety of factors, including:
o compensation levels of similarly positioned executive officers in
comparable companies;
o the performance of the Company as a whole;
o the performance of the business area or function for which the Named
Executive Officer is responsible;
o qualitative factors reflecting the individual performance of the
particular Named Executive Officer; and
o the recommendations of the Chief Executive Officer (except in the case
of his own compensation).
Adjustments to base salaries for the Named Executive Officers are effective July
1st of each year. The base salary paid to each Named Executive Officer in fiscal
year 2006 is reflected in the column titled "Salary" of the Summary Compensation
Table on page 26 of this Proxy Statement.
ANNUAL CASH BONUS
We grant discretionary cash bonuses to the Named Executive Officers that are
designed to create a direct link between performance and compensation for the
Named Executive Officers. Under the discretionary cash bonus program, the
Compensation Committee may award annual cash bonuses to the Named Executive
Officers in amounts determined in its sole discretion. The Compensation
Committee may take into account any criteria that it deems relevant to assessing
the performance and contributions of the Named Executive Officers, including
revenue, market share, earnings per share, income from operations, earnings
before interest, taxes, depreciation, and amortization (EBITDA), Adjusted EBITDA
(adjusted to exclude certain significant items as determined in the sole
23
discretion of the Compensation Committee), net income, net income per common
share, the price of the Company's common stock, stockholder return, return on
equity, return on investment, return on capital and the performance of the Named
Executive Officer in the discharge of that officer's particular duties.
In determining the cash bonuses for the Named Executive Officers for fiscal year
2006, the Compensation Committee compared the actual Adjusted EBITDA and
adjusted net income per common share for fiscal year 2006 to the Company's
targets for these metrics for the year and took into account the increase in the
price of the Company's common stock over fiscal 2005 and the performance of the
Named Executive Officer in the discharge of that officer's particular duties.
The Compensation Committee also considered the recommendations of the Chief
Executive Officer (except in the case of his own bonus).
The cash bonus awarded on April 24, 2007 to each Named Executive Officers under
the discretionary cash bonus program for such officer's performance in fiscal
year 2006 is reflected in the column titled "Bonus" of the Summary Compensation
Table on page 26 of this Proxy Statement.
GRANTS OF STOCK OPTIONS AND OTHER LONG-TERM INCENTIVE COMPENSATION
The long-term incentive compensation element provides a periodic award
(typically semi-annual) that is performance based. The objective of the program
is to align compensation for executive officers over a multi-year period
directly with the interests of our stockholders by motivating and rewarding
creation and preservation of long-term stockholder value. The level of long-term
incentive compensation is determined based on an evaluation of competitive
factors in conjunction with total compensation provided to Named Executive
Officers and the overall goals of the compensation program described above.
At December 31, 2006, 112 employees held stock option grants under our equity
incentive plans. Equity ownership for all executive officers, our other officers
and senior managers is important for purposes of incentive, retention and
alignment with stockholders.
Historically, the Compensation Committee has granted stock options to the Named
Executive Officers. However, at a Compensation Committee meeting held in
December 2006, the Compensation Committee discussed the relative tax and
accounting treatment of restricted stock awards and stock option grants and the
dilutive impact of the two forms of compensation on existing stockholders. In
January 2007, the Compensation Committee decided to grant restricted stock
awards to the Named Executive Officers in lieu of stock options.
Although there is no specified grant date for equity awards, at the Compensation
Committee meeting held in December 2006, the Compensation Committee adopted a
policy pursuant to which it will, at a regularly scheduled Compensation
Committee meeting, set in advance the meeting date for granting equity awards to
Named Executive Officers. The Compensation Committee adopted this policy to
mitigate against the perception that grant dates are set to achieve any benefits
for the Named Executive Officers.
On January 5, 2007, the Compensation Committee made a restricted stock award to
each Named Executive Officer under the VCA Antech, Inc. 2006 Equity Incentive
Plan. These awards are not reflected in the Summary Compensation Table because
they were not granted during the fiscal year ending December 31, 2006.
PERQUISITES AND OTHER PERSONAL BENEFITS
In order to better enable us to attract and retain highly skilled executive
officers and to round out a competitive compensation package for Named Executive
Officers, we provide Named Executive Officers with perquisites and other
personal benefits that we believe are reasonable and consistent with our overall
compensation philosophy and objectives. The Compensation Committee periodically
reviews the levels of perquisites and other personal benefits provided to Named
Executive Officers.
The Named Executive Officers, among other things, are provided use of
automobiles, are reimbursed for their out-of-pocket medical expenses and
participate in the plans and programs described above.
The attributed costs and a more detailed description of the perquisites and
other personal benefits received by each Named Executive Officer for fiscal year
2006 are included in column titled "All Other Compensation," and the footnotes
thereto, of the Summary Compensation Table on page 26 of this Proxy Statement.
24
TERMINATION AND CHANGE IN CONTROL PAYMENTS
We have entered into employment agreements with certain of our Named Executive
Officers. These employment agreements, which are designed to promote stability
and continuity of senior management, provide for termination and change in
control payments. A summary of these severance payments is set forth under the
heading "Employment Agreements; Payment Upon Termination and Change in Control"
on page 29 of this Proxy Statement.
TAX AND ACCOUNTING IMPLICATIONS
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Compensation Committee reviews and considers the deductibility of executive
compensation under Section 162(m) of the Code, which provides that the Company
may not deduct non-performance based compensation of more than $1,000,000 that
is paid to certain executive officers. Except with respect to a portion of the
compensation paid to our Chief Executive Officer, all compensation paid to the
Named Executive Officers for fiscal year 2006 will be fully deductible. In order
to maintain flexibility in compensating the Named Executive Officers in a manner
designed to promote varying corporate goals, we have not adopted a policy that
all compensation must be deductible.
On April 24, 2007, the Board of Directors adopted the 2007 Annual Cash Incentive
Plan. The Company designed the 2007 Annual Cash Incentive Plan so that the
payments made under the Plan are eligible for deduction under Section 162(m) of
the Code, subject to approval of the Plan by our stockholders at the Annual
Meeting. See Item 3 on page 18 of this Proxy Statement.
ACCOUNTING FOR STOCK-BASED COMPENSATION
Beginning on January 1, 2006, the Company began accounting for stock-based
payments to employees, including stock options, in accordance with the
requirements of SFAS No. 123R.
25
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid or earned by our Chief
Executive Officer, Chief Financial Officer and each of our other three most
highly compensated executive officers (whose compensation exceeded $100,000
during the last fiscal year) for services rendered to us for the year ended
December 31, 2006. We refer to these officers as the Named Executive Officers.
CHANGE IN
PENSION VALUE
NON-EQUITY AND NONQUALIFIED
INCENTIVE DEFERRED
NAME AND PRINCIPAL STOCK OPTION PLAN COMPENSATION ALL OTHER
POSITION YEAR SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
-------- ---- ------ ------ ------ ------ ------------- ---------- ------------- -----
(1) (2) (3)
($) ($) ($) ($) ($) ($) ($) ($)
ROBERT L. ANTIN, 2006 $683,617 $825,000 $-- $19,333 $-- $-- $81,800 $1,609,750
Chairman of the Board,
Chief Executive Officer
and President
ARTHUR J. ANTIN, 2006 $508,846 $472,500 $-- $15,333 $-- $-- $56,451 $1,053,130
Chief Operating Officer
and Senior Vice President
NEIL TAUBER, 2006 $346,923 $248,500 $-- $6,667 $-- $-- $60,117 $662,207
Senior Vice President of
Development
TOMAS W. FULLER, 2006 $346,923 $248,500 $-- $11,333 $-- $-- $21,229 $627,985
Chief Financial Officer,
Vice President and
Secretary
DAWN R. OLSEN, 2006 $219,615 $50,625 $-- $76,629 $-- $-- $3,916 $350,785
Principal Accounting
Officer, Vice President
and Controller
-----------------------
(1) Amounts in the "Bonus" column were determined by the Compensation
Committee at its April 24, 2007 meeting in accordance with the
Company's discretionary bonus program, which is discussed in further
detail on page 23 of this Proxy Statement, and were paid shortly
thereafter.
(2) The amounts in this column represent the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended
December 31, 2006, in accordance with SFAS 123R, and include amounts
from options granted prior to 2006. The assumptions used in the
calculation of these amounts are included in footnote 8 to the
Company's audited financial statements for the fiscal year ended
December 31, 2006 included in the Company's Annual Report on Form 10-K
filed with the SEC on March 1, 2007.
(3) All Other Compensation for the fiscal year ended December 31, 2006
consists of the following:
ROBERT L. ANTIN ARTHUR J. ANTIN NEIL TAUBER TOMAS W. FULLER DAWN R. OLSEN
---------------- ------------------- ----------------- ------------------ ---------------
Automobile lease and auto $ 40,210 $ 33,359 $ 28,893 $ 9,405 $ --
insurance (a)
Medical insurance premiums 40,103 21,605 29,737 10,817 2,909
and reimbursement of
out-of-pocket medical
expenses
401(k) Company contribution 1,487 1,487 1,487 1,007 1,007
---------------- ------------------- ------------------ ---------------- --------------
Total $ 81,800 $ 56,451 $ 60,117 $ 21,229 $ 3,916
================ =================== ================== ================ ==============
------------------
(a) For disclosure purposes, the annual cost of the Company leased
automobile was determined based on the Annual Lease Value as provided
in the Code.
26
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2006
The Company did not make any grants of plan-based awards during the fiscal year
ended December 31, 2006 to the Named Executive Officers.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth the number of securities underlying outstanding
plan awards for each Named Executive Officer as of December 31, 2006.
OPTION AWARDS STOCK AWARDS
---------------------------------------------- ----------------------------------------
EQUITY EQUITY EQUITY
INCENTIVE PLAN INCENTIVE PLAN INCENTIVE PLAN
AWARDS: AWARDS: AWARDS: MARKET
NUMBER OF NUMBER OF MARKET VALUE NUMBER OF OR PAYOUT VALUE
NUMBER OF NUMBER OF SECURITIES SHARES OR OF SHARES OR UNLEARNED OF UNEARNEDS
SECURITIES SECURITIES UNDERLYING UNITS OF UNITS OF SHARES, UNITS SHARES, UNITS
UNDERLYING UNDERLYING UNEXERCISED OPTION OPTION STOCK THAT STOCK THAT OR OTHER OR OTHER RIGHTS
UNEXERCISED UNEXERCISED UNEARNED EXERCISE EXPIRATION HAVE NOT HAVE NOT RIGHTS THAT THAT HAVE NOT
NAME OPTIONS OPTIONS OPTIONS PRICE DATE VESTED VESTED HAVE NOT VESTED VESTED
---- ------- ------- --------- ----- ----- --------- ------- -------------- --------------
(#) (#) (#) ($) (#) ($) (#) ($)
EXERCISABLE UNEXERCISABLE
Robert L. Antin 290,000 -- -- $7.00 12/17/2012 -- -- -- --
425,000 -- -- $19.40 10/19/2010 -- -- -- --
Arthur J. Antin 45,690 -- -- $0.50 9/20/2010 -- -- -- --
230,000 -- -- $7.00 12/17/2012 -- -- -- --
175,000 -- -- $19.40 10/19/2010 -- -- -- --
Neil Tauber 42,500 -- -- $7.00 12/17/2012 -- -- -- --
175,000 -- -- $19.40 10/19/2010 -- -- -- --
Tomas W. Fuller 40,000 -- -- $0.50 9/20/2010 -- -- -- --
170,000 -- -- $7.00 12/17/2012 -- -- -- --
175,000 -- -- $19.40 10/19/2010 -- -- -- --
Dawn R. Olsen 46,958 1,042 (1) -- $7.00 12/17/2012 -- -- -- --
16,000 24,000 (2) -- $16.11 3/11/2010 -- -- -- --
30,000 -- -- $23.68 10/31/2012 -- -- -- --
--------------------
(1) Unvested options vest in one installment of 1,042 on January 1, 2007.
(2) Unvested options vest in two installments: 8,000 on September 1, 2007
and 16,000 on September 1, 2008.
27
OPTIONS EXERCISED AND STOCK VESTED
The following table sets forth information regarding the stock option awards
that were exercised by each of our Named Executive Officers during the fiscal
year ended December 31, 2006.
OPTION AWARDS STOCK AWARDS
------------- ------------
NUMBER OF SHARES NUMBER OF SHARES
ACQUIRED VALUE REALIZED ON ACQUIRED VALUE REALIZED ON
NAME ON EXERCISE EXERCISE (1) ON VESTING VESTING
---- ----------- ------------ ---------- -------
(#) ($) (#) ($)
Robert L. Antin -- -- -- --
Arthur J. Antin -- -- -- --
Neil Tauber -- -- -- --
Tomas W. Fuller -- -- -- --
Dawn R. Olsen 28,000 $873,741 -- --
-----------------
(1) The dollar amount represents the difference between the aggregate
market price of the shares of common stock underlying the options at
exercise and the aggregate exercise price of the options.
SUMMARY OF EQUITY COMPENSATION PLAN
The following table sets forth information concerning all equity compensation
plans and individual compensation arrangements in effect during the fiscal year
ended December 31, 2006.
NUMBER OF SECURITIES TO BE NUMBER OF SECURITIES REMAINING
ISSUED UPON EXERCISE OF WEIGHTED AVERAGE EXERCISE AVAILABLE FOR FUTURE ISSUANCE
PLAN CATEGORY OUTSTANDING OPTIONS PRICE OF OUTSTANDING OPTIONS UNDER EQUITY COMPENSATION PLANS
------------- ------------------- ---------------------------- -------------------------------
Equity Compensation Plans Approved
by Security Holders........ 5,289,763 $15.72 6,490,412
Equity Compensation Plans Not
Approved By Security Holders -- -- --
--------------------------- ------------------------------- -------------------------
5,289,763 $15.72 6,490,412
Total......................
=========================== =============================== =========================
28
EMPLOYMENT AGREEMENTS; PAYMENTS UPON TERMINATION AND CHANGE IN CONTROL
We have employment agreements with Robert L. Antin, Arthur J. Antin and Tomas W.
Fuller, and a severance agreement with Neil Tauber. Each of these agreements
provide for certain payments upon termination or Change In Control. For purposes
of this section, a "Change in Control" shall be deemed to have occurred if (a)
there shall be consummated (x) any consolidation or merger of the Company into
or with another "person" (as such term is used in Sections 13(d)(3) and 14(d)(2)
of Exchange Act) pursuant to which shares of the Company's common stock would be
converted into cash, securities or other property, other than any consolidation
or merger of the Company in which the persons who were stockholders of the
Company immediately prior to the consummation of such consolidation or merger
are the beneficial owners (within the meaning of Rule 13d-3 under the Exchange
Act), immediately following the consummation of such consolidation or merger, of
62.5% or more of the combined voting power of the then outstanding voting
securities of the person surviving or resulting from such consolidation or
merger, or (y) any sale, lease or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the assets of the
Company, or (b) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company, or (c) any person who is not,
immediately following the occurrence of a Public Offering Event (as defined in
the Stockholders Agreement, dated as of September 20, 2000, by and among the
Company, certain officers of the Company and the other signatories thereto, as
amended), the beneficial owner of 10% or more of the Company's outstanding
common stock (or any person who is not an affiliate or related party of such a
beneficial owner of 10% or more of the Company's outstanding common stock) shall
become the beneficial owner of 25% or more of the Company's outstanding common
stock, or (d) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire board of directors of the Company
cease for any reason to constitute a majority thereof unless the election, or
the nomination for election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period).
ROBERT L. ANTIN
Mr. Antin's employment agreement, dated as of November 27, 2001, provides for
Mr. Antin to serve as our Chairman of the Board, Chief Executive Officer and
President for a term of five years from any given date, such that there shall
always be a minimum of at least five years remaining under his employment
agreement. The employment agreement provides for Mr. Antin to receive an annual
base salary of $520,000, subject to annual increase based on comparable
compensation packages provided to executives in similarly situated companies,
and to participate in a bonus plan based on annual performance standards to be
established by the compensation committee. Mr. Antin also is entitled to
specified perquisites.
If Mr. Antin's employment is terminated due to his death, the employment
agreement provides that we will pay Mr. Antin's estate his accrued and unpaid
salary, his accrued and unused vacation and sick pay, his base salary during the
scheduled term of the employment agreement, accelerate the vesting of his
options and continue to provide family medical benefits. If Mr. Antin's
employment is terminated due to his disability, the employment agreement
provides that we will pay Mr. Antin his accrued and unpaid salary, his accrued
and unused vacation and sick pay, his remaining base salary during the remaining
scheduled term of the employment agreement (reduced by any amounts paid under
long-term disability insurance policy maintained by us for the benefit of Mr.
Antin), accelerate the vesting of his options and continue to provide specified
benefits and perquisites. In the case of termination due to death or disability,
any unexercised options will remain exercisable for the full term.
If Mr. Antin terminates the employment agreement for "cause," if we terminate
the employment agreement without cause or in the event of a Change in Control,
in which event the employment of Mr. Antin terminates automatically, we will pay
Mr. Antin his accrued and unpaid salary, his accrued and unused vacation and
sick pay, his remaining base salary during the remaining scheduled term of the
employment agreement and an amount equal to five times the greater of Mr.
Antin's last annual bonus or the average of all bonuses paid to Mr. Antin under
the employment agreement. In addition, we will accelerate the vesting of his
options and continue to provide specified benefits and perquisites. In these
circumstances, Mr. Antin may exercise his options immediately upon termination
and thereafter during the term of the option. For purposes of this paragraph,
"cause" means as the result of (x) a willful breach of any of the material
obligations of the Company to Mr. Antin under the employment agreement following
written notice delivered to the Company and a reasonable cure period not to
exceed 30 days; (y) the Company's chief executive offices moving to a location
outside of Los Angeles County, California; or (z) Mr. Antin failing to be
reelected to, or being removed from, the Board of Directors.
29
If Mr. Antin terminates the employment agreement without cause or we terminate
the employment agreement for "cause," Mr. Antin is entitled to receive all
accrued and unpaid salary and other compensation and all accrued and unused
vacation and sick pay. For purposes of this paragraph, for "cause" means for a
conviction (including any plea of guilty or no contest) of (x) any felony
involving the embezzlement, theft or misappropriation of monies or other
property, of the Company or otherwise, or (y) any crime of moral turpitude.
If any of the payments due Mr. Antin upon termination qualify as "excess
parachute payments" under the Code, Mr. Antin also is entitled to an additional
payment to cover the tax consequences associated with excess parachute payments.
In the event of a Change in Control and at our request, Mr. Antin is obligated
to continue to serve under the same terms and conditions of his employment
agreement for a period of up to 180 days following the termination date at his
then-current base salary.
THE FOLLOWING TABLE DESCRIBES THE POTENTIAL PAYMENTS TO MR. ROBERT L. ANTIN UPON
TERMINATION OR CHANGE IN CONTROL.
PAYMENTS & BENEFITS BY OFFICER BY OFFICER BY COMPANY BY COMPANY CHANGE IN
UPON TERMINATION (1) DEATH DISABILITY FOR CAUSE WITHOUT CAUSE WITHOUT CAUSE FOR CAUSE CONTROL
---------------------- -------------- -------------- ------------- -------------- -------------- ----------- -----------
ACCRUED & UNPAID SALARY $ 31,731 $ 31,731 $ 31,731 $ 31,731 $ 31,731 $ 31,731 $ 31,731
(2)
ACCRUED VACATION (3) -- -- -- -- -- -- --
CASH SEVERANCE 4,125,000 4,115,500 8,250,000 -- 8,250,000 -- 8,250,000
ACCELERATION OF STOCK -- -- -- -- -- -- --
OPTIONS (4)
AUTOMOBILE -- 233,298 233,298 -- 233,298 -- 233,298
CLUB MEMBERSHIP -- 133,288 133,288 -- 133,288 -- 133,288
GROUP LIFE, MEDICAL AND 130,884 140,744 140,744 -- 140,744 -- 140,744
OTHER COMPANY INSURANCE
PLANS (5)
EXCISE TAX / GROSS-UP -- -- -- -- -- -- 4,194,310
------------- ------------- ------------- ------------ ------------ ---------- -----------
TOTAL $ 4,287,615 $4,654,561 $ 8,789,061 $ 31,371 $8,789,061 $ 31,731 $12,983,371
============= ============= ============= ============ ============= =========== ===========
-----------------------
(1) Upon the termination of Mr. Antin's employment or a Change in Control, Mr.
Antin will receive a lump sum payment consisting of (a) accrued and unpaid
salary, (b) cash severance and (c) an additional amount to cover the tax
consequences associated with "excess parachute payments" under the Code, if
any. All other payments set forth above will be paid over a five year
period. For example, during such five year period, Mr. Antin will receive
an average annual payment of $46,660 towards the cost of an automobile.
(2) Reflects Mr. Antin's accrued and unpaid salary as of December 29, 2006.
(3) As of December 29, 2006, Mr. Antin had no accrued vacation.
(4) As of December 29, 2006, all options held by Mr. Antin were vested.
(5) Includes approximately $10,000 per year for reimbursement of out-of-pocket
medical expenses and related insurance premiums (for a total of
approximately $50,000 for the five year period during which Mr. Antin is
entitled to such reimbursement). The average annual amount was calculated
by dividing the sum of the reimbursements of out-of-pocket medical expenses
to Mr. Antin and the related insurance premiums paid by the Company for the
last four fiscal years (2003-2006) by four. However, in accordance with the
terms of the executive health insurance plans maintained by the Company,
Mr. Antin is entitled to a maximum annual reimbursement of $200,000 (of
which the Company is responsible for $120,000 with insurance paying the
remainder). In addition, the Company pays an insurance premium equal to 10%
of the reimbursements paid by it up to a maximum of $12,000 per year. As a
result, if Mr. Antin was reimbursed the maximum amount per year during the
five year period during which he is entitled to such reimbursement, the
amounts set forth in the "Group Life, Medical and Other Company Insurance
Plans" row would have to be increased by $1,010,515.
30
ARTHUR J. ANTIN
Mr. Antin's employment agreement, dated as of November 27, 2001, provides for
Mr. Antin to serve as our Chief Operating Officer, Senior Vice President and
Secretary for a term equal to three years from any given date, such that there
shall always be a minimum of at least three years remaining under his employment
agreement. (Mr. Antin no longer serves as the Company's Secretary.) The
employment agreement provides for Mr. Antin to receive an annual base salary of
$416,000, subject to annual increase based on comparable compensation packages
provided to executives in similarly situated companies, and to participate in a
bonus plan based on annual performance standards to be established by the
compensation committee. Mr. Antin also is entitled to specified perquisites.
If Mr. Antin's employment is terminated due to his death, the employment
agreement provides that we will pay Mr. Antin's estate his accrued and unpaid
salary, his accrued and unused vacation and sick pay, his base salary during the
scheduled term of the employment agreement, accelerate the vesting of his
options and continue to provide family medical benefits. If Mr. Antin's
employment is terminated due to his disability, the employment agreement
provides that we will pay Mr. Antin his accrued and unpaid salary, his accrued
and unused vacation and sick pay, his remaining base salary during the remaining
scheduled term of the employment agreement (reduced by any amounts paid under
long-term disability insurance policy maintained by us for the benefit of Mr.
Antin), accelerate the vesting of his options and continue to provide specified
benefits and perquisites. In the case of termination due to death or disability,
any unexercised options will remain exercisable for the full term.
If Mr. Antin terminates the employment agreement for "cause," if we terminate
the employment agreement without cause or in the event of a Change in Control,
in which event the employment of Mr. Antin terminates automatically, we will pay
Mr. Antin his accrued and unpaid salary, his accrued and unused vacation and
sick pay, his remaining base salary during the remaining scheduled term of the
employment agreement and an amount equal to three times the greater of Mr.
Antin's last annual bonus or the average of all bonuses paid to Mr. Antin under
the employment agreement. In addition, we will accelerate the vesting of his
options and continue to provide specified benefits and perquisites. In these
circumstances, Mr. Antin may exercise his options immediately upon termination
and thereafter during the full term of the option. For purposes of this
paragraph, for "cause" means as the result of (x) a willful breach of any of the
material obligations of the Company to Mr. Antin under the employment agreement
following written notice delivered to the Company and a reasonable cure period
not to exceed 30 days; or (y) the Company's chief executive offices moving to a
location outside of Los Angeles County, California.
If Mr. Antin terminates the employment agreement without cause or we terminate
the employment agreement for "cause," Mr. Antin is entitled to receive all
accrued and unpaid salary and other compensation and all accrued and unused
vacation and sick pay. For purposes of this paragraph, for "cause" means for a
conviction (including any plea of guilty or no contest) of (x) any felony
involving the embezzlement, theft or misappropriation of monies or other
property, of the Company or otherwise, or (y) any crime of moral turpitude.
If any of the payments due Mr. Antin upon termination qualify as "excess
parachute payments" under the Code, Mr. Antin also is entitled to an additional
payment to cover the tax consequences associated with excess parachute payments.
In the event of a Change in Control and at our request, Mr. Antin is obligated
to continue to serve under the same terms and conditions of his employment
agreement for a period of up to 180 days following the termination date at his
then-current base salary.
31
THE FOLLOWING TABLE DESCRIBES THE POTENTIAL PAYMENTS TO MR. ARTHUR J. ANTIN UPON
TERMINATION OR CHANGE IN CONTROL.
PAYMENTS & BENEFITS BY OFFICER BY OFFICER BY COMPANY BY COMPANY CHANGE IN
UPON TERMINATION (1) DEATH DISABILITY FOR CAUSE WITHOUT CAUSE WITHOUT CAUSE FOR CAUSE CONTROL
------------------------- ----------- ------------ -------------- ------------- ------------- --------------- --------------
ACCRUED & UNPAID SALARY $ 20,192 $ 20,192 $ 20,192 $ 20,192 $ 20,192 $ 20,192 $ 20,192
(2)
ACCRUED VACATION (3) -- -- -- -- -- -- --
CASH SEVERANCE 1,575,000 1,569,900 2,992,500 -- 2,992,500 -- 2,992,500
ACCELERATION OF STOCK -- -- -- -- -- -- --
OPTIONS (4)
AUTOMOBILE -- 110,422 110,422 -- 110,422 -- 110,422
CLUB MEMBERSHIP -- 50,695 50,695 -- 50,695 -- 50,695
GROUP LIFE, MEDICAL AND 79,256 84,572 84,572 -- 84,572 -- 84,572
OTHER COMPANY INSURANCE
PLANS (5)
EXCISE TAX / GROSS-UP -- -- -- -- -- -- $1,428,638
----------- ----------- ---------- ---------- ------------ ------------- --------------
TOTAL $ 1,674,448 $ 1,835,781 $3,258,381 $ 20,192 $3,258,381 $ 20,192 $4,687,019
=========== =========== ========== ========== ============ ============= ==============
------------------
(1) Upon the termination of Mr. Antin's employment or a Change in Control, Mr.
Antin will receive a lump sum payment consisting of (a) accrued and unpaid
salary, (b) cash severance and (c) an additional amount to cover the tax
consequences associated with "excess parachute payments" under the Code, if
any. All other payments set forth above will be paid over a three year
period. For example, during such three year period, Mr. Antin will receive
an average annual payment of $36,807 towards the cost of an automobile.
(2) Reflects Mr. Antin's accrued and unpaid salary as of December 29, 2006.
(3) As of December 29, 2006, Mr. Antin had no accrued vacation.
(4) As of December 29, 2006, all options held by Mr. Antin were vested.
(5) Includes approximately $10,000 per year for reimbursement of out-of-pocket
medical expenses and related insurance premiums (for a total of
approximately $30,000 for the three year period during which Mr. Antin is
entitled to reimbursement). The average annual amount was calculated by
dividing the sum of the reimbursements of out-of-pocket medical expenses to
Mr. Antin and the related insurance premiums paid by the Company for the
last four fiscal years (2003-2006) by four. However, in accordance with the
terms of the executive health insurance plans maintained by the Company,
Mr. Antin is entitled to a maximum annual reimbursement of $200,000 (of
which the Company is responsible for $120,000 with insurance paying the
remainder). In addition, the Company pays an insurance premium equal to 10%
of the reimbursements paid by it up to a maximum of $12,000 per year. As a
result, if Mr. Antin was reimbursed the maximum amount per year during the
three year period during which he is entitled to reimbursement, the amounts
set forth in the "Group Life, Medical and Other Company Insurance Plans"
row would have to be increased by $605,583.
TOMAS W. FULLER
Mr. Fuller's employment agreement dated as of November 27, 2001, provides for
Mr. Fuller to serve as our Chief Financial Officer, Vice President and Assistant
Secretary for a term equal to two years from any given date, such that there
shall always be a minimum of at least two years remaining under his employment
agreement. (Mr. Fuller currently serves as the Company's Secretary.) The
employment agreement provides for Mr. Fuller to receive an annual base salary of
not less than $244,000, subject to annual increase based on comparable
compensation packages provided to executives in similarly situated companies,
and to participate in a bonus plan based on annual performance standards to be
established by the compensation committee.
If Mr. Fuller's employment is terminated due to his death, the employment
agreement provides that we will pay Mr. Fuller's estate his accrued and unpaid
salary, his accrued and unused vacation and sick pay, his base salary during the
scheduled term of the employment agreement, accelerate the vesting of his
options and continue to provide family medical benefits. If Mr. Fuller's
employment is terminated due to his disability, the employment agreement
32
provides that we will pay Mr. Fuller his accrued and unpaid salary, his accrued
and unused vacation and sick pay, his remaining base salary during the remaining
scheduled term of the employment agreement (reduced by any amounts paid under
long-term disability insurance policy maintained by us for the benefit of Mr.
Fuller), accelerate the vesting of his options and continue to provide specified
benefits and perquisites. In the case of termination due to death or disability,
any unexercised options will remain exercisable for the full term.
If Mr. Fuller terminates the employment agreement for "cause," if we terminate
the employment agreement without cause or in the event of a Change in Control,
in which event the employment of Mr. Fuller terminates automatically, we will
pay Mr. Fuller his accrued and unpaid salary, his accrued and unused vacation
and sick pay, his remaining base salary during the remaining scheduled term of
the employment agreement and an amount equal to two times the greater of Mr.
Fuller's last annual bonus or the average of all bonuses paid to Mr. Fuller
under the employment agreement. In addition, we will accelerate the vesting of
his options and continue to provide specified benefits and perquisites. In these
circumstances, Mr. Fuller may exercise his options immediately upon termination
and thereafter for the full term of the option. For purposes of this paragraph,
for "cause" means as the result of (x) a willful breach of any of the material
obligations of the Company to Mr. Fuller under the employment agreement
following written notice delivered to the Company and a reasonable cure period
not to exceed 30 days; or (y) the Company's chief executive offices moving to a
location outside of Los Angeles County, California.
If Mr. Fuller terminates the employment agreement without cause or we terminate
the employment agreement for "cause," Mr. Fuller is entitled to receive all
accrued and unpaid salary and other compensation and all accrued and unused
vacation and sick pay. For purposes of this paragraph, for "cause" means for a
conviction (including any plea of guilty or no contest) of (x) any felony
involving the embezzlement, theft or misappropriation of monies or other
property, of the Company or otherwise, or (y) any crime of moral turpitude.
If any of the payments due Mr. Fuller upon termination qualify as "excess
parachute payments" under the Code, Mr. Fuller also is entitled to an additional
payment to cover the tax consequences associated with excess parachute payments.
In the event of a Change in Control and at our request, Mr. Fuller is obligated
to continue to serve under the same terms and conditions of his employment
agreement for a period of up to 180 days following the termination date at his
then-current base salary.
THE FOLLOWING TABLE DESCRIBES THE POTENTIAL PAYMENTS TO MR. TOMAS W. FULLER UPON
TERMINATION OR CHANGE IN CONTROL.
PAYMENTS & BENEFITS BY OFFICER BY OFFICER BY COMPANY BY COMPANY CHANGE IN
UPON TERMINATION (1) DEATH DISABILITY FOR CAUSE WITHOUT CAUSE WITHOUT CAUSE FOR CAUSE CONTROL
------------------------- ------------ ------------ ------------ ------------- -------------- ------------ -------------
ACCRUED & UNPAID SALARY $ 13,654 $ 13,654 $ 13,654 $ 13,654 $ 13,654 $ 13,654 $ 13,654
(2)
ACCRUED VACATION (3) -- -- -- -- -- -- --
CASH SEVERANCE 710,000 707,720 1,207,000 -- 1,207,000 -- 1,207,000
ACCELERATION OF STOCK -- -- -- -- -- -- --
OPTIONS (4)
AUTOMOBILE -- 20,244 20,244 -- 20,244 -- 20,244
GROUP LIFE, MEDICAL AND 25,732 28,156 28,156 -- 28,156 -- 28,156
OTHER COMPANY INSURANCE
PLANS (5)
EXCISE TAX / GROSS-UP -- -- -- -- -- -- $ 571,005
----------- ----------- ------------ ----------- ------------ ----------- ---------------
TOTAL $749,386 $769,774 $1,269,054 $ 13,654 $1,269,054 $ 13,654 $1,840,059
=========== =========== ============ =========== ============ =========== ===============
----------------------
(1) Upon the termination of Mr. Fuller's employment or a Change in Control, Mr.
Fuller will receive a lump sum payment consisting of (a) accrued and unpaid
salary, (b) cash severance and (c) an additional amount to cover the tax
consequences associated with "excess parachute payments" under the Code, if
any. All other payments set forth above will be paid over a two year
period. For example, during such two year period, Mr. Fuller will receive
an average annual payment of $10,122 towards the cost of an automobile.
33
(2) Reflects Mr. Fuller's accrued and unpaid salary as of December 29, 2006.
(3) As of December 29, 2006, Mr. Fuller had no accrued vacation.
(4) As of December 29, 2006, all options held by Mr. Fuller were vested.
(5) Includes approximately $1,300 per year for reimbursement of out-of-pocket
medical expenses and related insurance premiums (for a total of
approximately $2,600 for the two year period during which Mr. Fuller is
entitled to such reimbursement). The average annual amount was calculated
by dividing the sum of the reimbursements of out-of-pocket medical expenses
to Mr. Fuller and the related insurance premiums paid by the Company for
the last four fiscal years (2003-2006) by four. However, in accordance with
the terms of the executive health insurance plans maintained by the
Company, Mr. Fuller is entitled to a maximum annual reimbursement of
$200,000 (of which the Company is responsible for $120,000 with insurance
paying the remainder). In addition, the Company pays an insurance premium
equal to 10% of the reimbursements paid by it up to a maximum of $12,000
per year. As a result, if Mr. Fuller was reimbursed the maximum amount per
year during the two year period during which he is entitled to
reimbursement, the amounts set forth in the "Group Life, Medical and Other
Company Insurance Plans" row would have to be increased by $421,416.
NEIL TAUBER
On March 3, 2003, we executed a severance agreement with Mr. Tauber which
provides that if Mr. Tauber's employment with us terminates for any reason other
than for "cause," then we will pay Mr. Tauber the amount he would have earned as
base salary during the 12 months following the termination date (reduced by any
amounts paid under any long-term disability insurance policy maintained by us
for the benefit of Mr. Tauber) and continue to provide medical benefits for the
12 months following the termination date. For purposes of this paragraph, for
"cause" means for (i) a conviction (including any plea of guilty or no contest)
of (x) any misdemeanor or felony involving the embezzlement, theft or
misappropriation of monies or other property of the Company, or (y) any felony
involving the theft or misappropriation of monies or other property or any crime
of moral turpitude, or (ii) willful and continued neglect of Mr. Tauber's
duties, but only if such neglect continues for thirty days following receipt by
Mr. Tauber of written notice from the Company specifying that breach and
demanding that Mr. Tauber cease those activities.
THE FOLLOWING TABLE DESCRIBES THE POTENTIAL PAYMENTS TO MR. NEIL TAUBER UPON
TERMINATION.
TERMINATION
PAYMENTS & BENEFITS UPON (FOR ANY REASON OTHER THAN
TERMINATION FOR CAUSE)
-------------------------------- ----------------------------
ACCRUED & UNPAID SALARY (1) $ 13,654
CASH SEVERANCE (2) 355,000
MEDICAL INSURANCE (3) 36,117
----------------------------
TOTAL $ 404,771
============================
(1) Reflects Mr. Tauber's accrued and unpaid salary as of December 29, 2006.
(2) If Mr. Tauber's employment terminates because of his disability, the cash
severance payment would be $353,100.
(3) Includes approximately $18,000 for reimbursement of out-of-pocket medical
expenses and related insurance premiums. This amount was calculated by
dividing the sum of the reimbursements of out-of-pocket medical expenses to
Mr. Tauber and the related insurance premiums paid by the Company for the
last four fiscal years (2003-2006) by four. However, in accordance with the
terms of the executive health insurance plans maintained by the Company,
Mr. Tauber is entitled to a maximum annual reimbursement of $200,000 (of
which the Company is responsible for $120,000 with insurance paying the
remainder). In addition, the Company pays an insurance premium equal to 10%
of the reimbursements paid by it up to a maximum of $12,000 per year. As a
result, if Mr. Tauber was reimbursed the maximum amount for the year during
which he is entitled to reimbursement, the amount set forth in the "Medical
Insurance" row would have to be increased by $194,135.
34
REPORT OF COMPENSATION COMMITTEE
--------------------------------
The Compensation Committee has reviewed and discussed with management the
Compensation Discussion and Analysis. Based on such review and discussions, the
Compensation Committee recommended to the Board that the Compensation Discussion
and Analysis be included in this Proxy Statement.
The Compensation Committee
JOHN M. BAUMER
JOHN B. CHICKERING, JR.
FRANK REDDICK
35
DIRECTOR COMPENSATION
---------------------
The following table and related footnotes summarize the compensation paid by the
Company to each non-employee director for the fiscal year ended December 31,
2006. Non-employee director compensation during fiscal 2006 consisted of (i) an
annual retainer of $10,000 payable in four equal quarterly installments, (ii)
fees for attending meetings of the Board of Directors and its committees in
person ($2,000) or telephonically ($1,000), (iii) an annual audit committee
chair fee of $10,000 payable in four equal quarterly installments and (iv) an
annual option grant to purchase 8,000 shares of the Company's common stock (as
adjusted based on whether the last option grant to each non-employee director
was more or less than 12 months from the date of the 2006 annual meeting of
stockholders).
CHANGE IN PENSION
NON-EQUITY VALUE AND NONQUALIFED
NAME FEES EARNED OR STOCK OPTION AWARDS INCENTIVE PLAN DEFERRED COMPENSATION ALL OTHER
(1) PAID IN CASH AWARDS (2) COMPENSATION EARNINGS COMPENSATION TOTAL
------- -------------- ------ ------------- -------------- ------------------- ------------ -------
($) ($) ($) ($) ($) ($) ($)
John M . Baumer $24,500 -- $142,019 (3) -- -- -- $166,519
John B. Chickering, Jr. $44,000 -- $78,081 (4) -- -- -- $122,081
John A. Heil $19,500 -- $31,803 (5) -- -- -- $51,303
Frank Reddick $20,500 -- $31,803 (6) -- -- -- $52,303
------------------
(1) Mr. Robert L. Antin, the Chairman of the Board, Chief Executive
Officer and President of the Company, has been omitted from this table
since he is an employee director and does not receive any compensation
for serving on the Board of Directors. Mr. Antin's compensation is set
forth on the Summary Compensation Table on page 26 of this Proxy
Statement.
(2) The amounts in this column represent the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended
December 31, 2006, in accordance with SFAS 123R, and include amounts
from options granted prior to and during 2006. The assumptions used in
the calculation of these amounts are included in footnote 8 to the
Company's audited financial statements for the fiscal year ended
December 31, 2006 included in the Company's Annual Report on Form 10-K
filed with the SEC on March 1, 2007.
(3) The grant date fair value of the option award to Mr. Baumer in fiscal
year 2006 was $106,025. At December 31, 2006, Mr. Baumer held options
to purchase 39,665 shares of the Company's common stock.
(4) The grant date fair value of the option award to Mr. Chickering in
fiscal year 2006 was $98,576. At December 31, 2006, Mr. Chickering
held options to purchase 8,986 shares of the Company's common stock.
(5) The grant date fair value of the option award to Mr. Heil in fiscal
year 2006 was $113,485. At December 31, 2006, Mr. Heil held options to
purchase 40,345 shares of the Company's common stock.
(6) The grant date fair value of the option award to Mr. Reddick in fiscal
year 2006 was $113,485. At December 31, 2006, Mr. Reddick held options
to purchase 92,845 shares of the Company's common stock.
The Compensation Committee reviews director compensation on an annual basis. On
January 5, 2007, the Compensation Committee adopted a new compensation program
for its non-employee directors, which it subsequently amended on February 28,
2007. Our current non-employee director compensation program is as follows:
ANNUAL RETAINER
We pay our non-employee directors $10,000 per year, paid quarterly in arrears,
$2,000 for each Board of Directors meeting attended in person or committee
meeting attended in person which is not held on the same day as a Board of
Directors meeting, including reimbursement for out-of-pocket expenses incurred
in attending, and $1,000 for each Board of Directors meeting attended
telephonically or committee meeting attended telephonically which is not held on
the same day as a Board of Directors meeting. We pay the Chairman of our Audit
Committee an additional $10,000 per year, paid quarterly in arrears. No employee
director receives compensation for his or her service as a member of our Board
of Directors.
36
RESTRICTED SHARES
Upon appointment to the Board of Directors, each non-employee director receives
an initial grant, under our 2006 Equity Incentive Plan, of 2,000 restricted
shares of stock. These restricted shares will vest in three equal annual
installments, in each of the three 12-month periods, each an "annual period,"
following the date of grant on that day during such annual period which is the
earlier to occur of (a) the day immediately preceding the date of an annual
meeting of the Company's stockholders occurring during such annual period and
(b) on the anniversary of the date of grant.
If the date of grant is fewer than 12 months prior to the date of the next
annual meeting of stockholders, the number of shares granted will be reduced on
a pro-rata basis, based upon the number of months until the next annual meeting
of stockholders (e.g., if a non-employee director is appointed January 1 and the
next annual meeting of stockholders is April 1, such non-employee director will
receive 500 restricted shares).
In addition, each non-employee director receives an annual automatic grant of
2,000 restricted shares on the date of the annual meeting. These restricted
shares will vest in three equal annual installments, in each of the three annual
periods following the date of grant on that day during such annual period which
is the earlier to occur of (a) the day immediately preceding the date of an
annual meeting of the Company's stockholders occurring during such annual period
and (b) on the anniversary of the date of grant.
37
CERTAIN TRANSACTIONS WITH RELATED PERSONS
-----------------------------------------
In accordance with its charter, our Audit Committee is responsible for reviewing
and approving all related party transactions. At least once a year, the Audit
Committee reviews a summary of all related party transactions, including the
Company's transactions with our executive officers and directors and with the
firms that employ the directors.
Except as disclosed below, neither our directors or executive officers, nor any
stockholder owning more than five percent of our issued shares, nor any of their
respective associates or affiliates, had any material interest, direct or
indirect, in any material transaction to which we were a party during fiscal
2006, or which is presently proposed.
We believe, based on our reasonable judgment, but without further investigation,
that the terms of each of the following transactions or arrangements between us
and our affiliates, officers, directors or stockholders which were parties to
the transactions were, on an overall basis, at least as favorable to us as could
then have been obtained from unrelated parties.
TRANSACTIONS WITH ZOASIS CORPORATION
We incurred marketing expenses for vaccine reminders and other direct mail
services provided by Zoasis, a company that is majority owned by Robert Antin,
our Chief Executive Officer and Chairman. We purchased services of $1.9 million,
$1.1 million and $946,000 for 2006, 2005 and 2004, respectively. Arthur J.
Antin, our Chief Operating Officer, owns a 10% interest in Zoasis, and a
separate officer sold his entire 1% interest in Zoasis in 2004 for less than
$15,000. We believe the pricing of these services is comparable to prices paid
by us to independent third parties.
In 2003, we entered into an agreement with Zoasis pursuant to which we acquired
all of Zoasis' right, title and interest in and to certain software in exchange
for all our preferred stock of Zoasis then held by us. Concurrent with the
purchase of the software, we granted to Zoasis a limited royalty-free,
non-exclusive license to this software in exchange for Zoasis providing certain
support for the software. Both we and Zoasis have a right to make modifications
to the software, but all modifications and derivative works are owned by us. The
software is hosted at our expense at a third-party hosting facility for the
benefit of both parties.
LEGAL SERVICES
The law firm of Akin Gump Strauss Hauer & Feld LLP currently provides, and
provided during fiscal year 2006, legal services to us. In 2006, the Company
paid Akin Gump Strauss Hauer & Feld LLP $550,000 for legal services. Frank
Reddick, who joined us as a director in February 2002, is a partner in Akin Gump
Strauss Hauer & Feld LLP.
38
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------
Section 16(a) of the Exchange Act requires that our executive officers,
directors and persons who own more than ten percent of a registered class of our
equity securities file reports of ownership and changes in ownership with the
SEC. Executive officers, directors and greater-than-ten percent stockholders are
required by SEC regulations to furnish us with all Section 16(a) forms that they
file. Based solely upon our review of copies of the forms received by us and
written representations from certain reporting persons that they have complied
or not complied with the relevant filings requirements, we believe that, during
the year ended December 31, 2006, all of our executive officers, directors and
greater-than-ten percent stockholders complied with all Section 16(a) filing
requirements.
39
PRINCIPAL STOCKHOLDERS
----------------------
The following table sets forth information regarding beneficial ownership of our
common stock as of March 31, 2007, by:
o each of our directors;
o each of our Named Executive Officers;
o all of our directors and Named Executive Officers as a group; and
o all other stockholders known by us to beneficially own more than 5% of
our outstanding common stock.
Beneficial ownership is determined in accordance with the rules of the SEC. In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of common stock subject to options held by that
person that are currently exercisable or exercisable within 60 days of the date
as of which this information is provided, and not subject to repurchase as of
that date, are deemed outstanding. These shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any other
person.
Except as indicated in the notes to this table, and except pursuant to
applicable community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares shown as beneficially
owned by them. Percentage ownership is based on 83,656,593 shares of common
stock outstanding on March 31, 2007. Unless otherwise indicated, the address for
each of the stockholders listed below is c/o VCA Antech, Inc., 12401 West
Olympic Boulevard, Los Angeles, California 90064.
NUMBER OF SHARES OF
COMMON STOCK BENEFICIALLY PERCENT OF COMMON
OWNED STOCK OUTSTANDING
--------------------------- ----------------------
Baillie Gifford & Co (1).................................................. 6,435,725 7.7%
Franklin Resources, Inc. (2).............................................. 4,982,644 6.0
Select Equity Group, Inc. & Select Offshore Advisors, LLC (3)............. 4,917,193 5.9
FMR Corp. (4)............................................................. 4,783,091 5.7
Robert L. Antin (5)....................................................... 2,445,669 2.9
Arthur J. Antin (6)....................................................... 793,185 *
Tomas W. Fuller (7)....................................................... 527,120 *
Neil Tauber (8)........................................................... 247,500 *
Dawn R. Olsen (9)......................................................... 98,500 *
John M. Baumer (10)....................................................... 17,953 *
John B. Chickering, Jr. (11).............................................. 2,746 *
John A. Heil (12)......................................................... 33,161 *
Frank Reddick (13)........................................................ 85,661 *
All directors and executive officers as a group
(9 persons) (14)....................................................... 4,251,495 5.1%
* Indicates less than one percent.
-----------------------
(1) Information based on a Schedule 13G filed on February 9, 2007 with the SEC
by Baillie Gifford & Co. According to the Schedule 13G, Baillie Gifford &
Co has sole voting power over 4,983,655 shares and sole dispositive power
over 6,435,728 shares. The address of the stockholder is Calton Square, 1
Greenside Row, Edinburgh EH1 3AN, Scotland, UK.
(2) Information based on a Schedule 13G/A filed on February 6, 2007 with the
SEC by Franklin Resources, Inc. and certain related entities. According to
the Schedule 13G/A: (a) Franklin Advisors, Inc. has sole voting power over
4,908,986 shares and sole dispositive power over 4,922,886 shares; and (b)
Franklin Templeton Portfolio Advisors, Inc. has sole voting and sole
dispositive power over 59,758 shares. Franklin Resources, Inc. is the
parent company of these entities. Charles B. Johnson and Rupert H. Johnson,
Jr. are the principal stockholders of Franklin Resources, Inc. The address
of each entity and each principal stockholder is One Franklin Parkway, San
Mateo, California 94403-1906.
(3) Information based on a Schedule 13G/A filed on February 15, 2007 with the
SEC by Select Equity Group, Inc. and certain related entities. According to
the Schedule 13G/A: (a) Select Equity Group, Inc. has sole voting and sole
dispositive power over 4,081,225 shares; and (b) Select Offshore Advisors,
LLC has sole voting and sole dispositive power over 835,968 shares. George
S. Loening is the controlling stockholder of each of these stockholders.
The address for each stockholder and George S. Loening is 380 Lafayette
Street, 6th Floor, New York, New York 10003.
40
(4) Information based on Schedule 13G/A filed on February 14, 2007 with the SEC
by FMR Corp. and certain related entities. According to the Schedule 13G:
(a) Fidelity Management & Research Company beneficially owns 4,584,976
shares as a result of acting as an investment adviser to various investment
companies registered under Section 8 of the Investment Company Act of 1940;
(b) Fidelity International Limited beneficially owns 197,600 shares as a
result of serving as investment advisor and manager of a number of non-U.S.
investment companies and certain institutional investors; and (c) Strategic
Advisers, Inc. beneficially owns 515 shares as a result of providing
investment advisory services to certain individuals. FMR Corp. is the
parent company of these entities and has sole voting power over 198,315
shares and sole dispositive power over 4,783,091 shares. Edward C. Johnson
3d and certain members of his family, collectively, may form a controlling
group with respect to FMR Corp. The address of each entity and Edward C.
Johnson 3d is 82 Devonshire Street, Boston, Massachusetts 02109.
(5) Includes (a) 45,000 shares of restricted stock of the Company subject to
future vesting conditions ("restricted stock") and (b) 715,000 shares of
common stock reserved for issuance upon exercise of stock options that are
or will be exercisable on or before May 30, 2007.
(6) Includes (a) 30,000 shares of restricted stock and (b) 450,690 shares of
common stock reserved for issuance upon exercise of stock options which are
or will become exercisable on or before May 30, 2007.
(7) Includes (a) 30,000 shares of restricted stock and (b) 385,000 shares of
common stock reserved for issuance upon exercise of stock options which are
or will become exercisable on or before May 30, 2007.
(8) Consists of (a) 30,000 shares of restricted stock and (b) 217,500 shares of
common stock reserved for issuance upon exercise of stock options which are
or will become exercisable on or before May 30, 2007.
(9) Consists of (a) 4,500 shares of restricted stock and (b) 94,000 shares of
common stock reserved for issuance upon exercise of stock options which are
or will become exercisable on or before May 30, 2007.
(10) Consists of 17,953 shares of common stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or before
May 30, 2007.
(11) Consists of 2,746 shares of common stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or before
May 30, 2007.
(12) Consists of 33,161 shares of common stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or before
May 30, 2007.
(13) Consists of 85,661 shares of common stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or before
May 30, 2007.
(14) Includes 2,001,711 shares of common stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or before
May 30, 2007.
ON BEHALF OF THE BOARD OF DIRECTORS
/S/ TOMAS W. FULLER
-------------------------------------------
TOMAS W. FULLER
CHIEF FINANCIAL OFFICER, VICE PRESIDENT
AND SECRETARY
12401 West Olympic Boulevard
Los Angeles, California 90064-1022
April 27, 2007
41
ANNEX A
VCA ANTECH, INC.
2007 ANNUAL CASH INCENTIVE PLAN
1. PURPOSES. The purposes of this 2007 Annual Cash Incentive Plan are to
provide an incentive to executive officers and other selected key
executives of VCA Antech, Inc. (the "COMPANY") to contribute to the growth,
profitability and increased shareholder value of the Company, to obtain and
retain such executives and endeavor to qualify the compensation paid under
the Plan for tax deductibility under Section 162(m) of the Code.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be defined
as set forth below:
(a) "BOARD" shall mean Board of Directors of VCA Antech, Inc.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor
provisions thereto.
(c) "COMMITTEE" shall mean a committee composed of at least two members of
the Board who qualify as "outside directors" within the meaning of
Section 162(m) of the Code.
(d) "COVERED EMPLOYEE" shall mean any employee of the Company who, on the
last day of the Company's taxable year, is the chief executive officer
of the Company or among the four highest compensated officers of the
Company (other than the chief executive officer), each as determined
pursuant to the executive compensation disclosure rules under the
Securities Exchange Act of 1934.
(e) "EFFECTIVE DATE" shall mean January 1, 2007.
(f) "ELIGIBLE EMPLOYEE" shall mean each executive officer of the Company,
including those employed by subsidiaries, and other key executives of
the Company and its subsidiaries selected by the Committee.
(g) "GAAP" shall mean U.S. Generally Accepted Accounting Principles.
(h) "PARTICIPANT" shall mean an Eligible Employee designated by the
Committee to participate in the Plan for a designated Performance
Period.
(i) "PERFORMANCE AWARD" shall mean the right of a Participant to receive
cash following the completion of a Performance Period based upon
performance in respect of one or more of the Performance Criteria
during such Performance Period, as specified in SECTION 5.
(j) "PERFORMANCE CRITERIA" shall mean or may be expressed in terms of any
of the following business criteria (by way of example and without
limitation): revenue, sales, earnings before interest, taxes,
depreciation and amortization (EBITDA), funds from operations, funds
from operations per share, operating income, pre-tax or after-tax
income, cash available for distribution, cash available for
distribution per share, cash or cash equivalents available for
operations, net earnings, earnings per share, return on equity, return
on assets, return on capital, economic value added, share price
performance, improvements in the Company's attainment of expense
levels, and implementing or completion of critical projects, or
improvement in cash-flow (before or after tax). Such objective
Performance Criteria are not required to be based on increases in
specific business criteria, but may be based on maintaining the status
quo or limiting economic losses. A Performance Criterion may be
measured over a Performance Period on a periodic, annual, cumulative
or average basis and may be established on a corporate-wide basis or
established with respect to one or more operating units, divisions,
subsidiaries, acquired businesses, minority investments, partnerships
or joint ventures. Unless otherwise determined by the Committee by no
later than the earlier of the date that is ninety days after the
commencement of the Performance Period or the day prior to the date on
which twenty-five percent (25%) of the Performance Period has elapsed,
the Performance Criteria will be determined by not accounting for a
change in GAAP during a Performance Period.
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(k) "PERFORMANCE GOALS" shall mean the level or levels of performance
required to be attained with respect to specified Performance Criteria
in order that a Participant shall become entitled to specified rights
in connection with a Performance Award.
(l) "PERFORMANCE PERIOD" shall mean the calendar year, or such other
shorter or longer period designated by the Committee, during which
performance will be measured in order to determine a Participant's
entitlement to receive payment of a Performance Award. The initial
Performance Period shall be the period beginning on April 1, 2007 and
ending on December 31, 2007.
(m) "PLAN" shall mean this 2007 Annual Cash Incentive Plan, as amended
from time to time.
3. ADMINISTRATION.
(a) AUTHORITY. The Plan shall be administered by the Committee. The
Committee is authorized, subject to the provisions of the Plan, in its
sole discretion, from time to time to: (i) select Participants; (ii)
grant Performance Awards under the Plan; (iii) determine the terms and
conditions of, and all other matters relating to, Performance Awards;
(iv) prescribe Performance Award agreements (which need not be
identical); (v) establish, modify or rescind such rules and
regulations as it deems necessary for the proper administration of the
Plan; and (vi) make such determinations and interpretations and to
take such steps in connection with the Plan or the Performance Awards
granted thereunder as it deems necessary or advisable. All such
actions by the Committee under the Plan or with respect to the
Performance Awards granted thereunder shall be final and binding on
all persons.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee may delegate
its responsibility with respect to the administration of the Plan to
one or more officers of the Company, to one or more members of the
Committee or to one or more members of the Board; PROVIDED, HOWEVER,
that the Committee may not delegate its responsibility (i) to make
Performance Awards to executive officers of Company; (ii) to make
Performance Awards which are intended to constitute "qualified
performance-based compensation" under Section 162(m) of the Code; or
(iii) to certify the satisfaction of Performance Goals pursuant to
SECTION 5(e) in accordance with Section 162(m) of the Code. The
Committee may also appoint agents to assist in the day-to-day
administration of the Plan and may delegate the authority to execute
documents under the Plan to one or more members of the Committee or to
one or more officers of the Company.
(c) LIMITATION OF LIABILITY. The Committee and each member thereof shall
be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or employee of the
Company, the Company's independent certified public accountants,
consultants or any other agent assisting in the administration of the
Plan. Members of the Committee and any officer or employee of the
Company acting at the direction or on behalf of the Committee shall
not be personally liable for any action or determination taken or made
in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company
with respect to any such action or determination.
4. TYPES OF AWARDS. Subject to the provisions of the Plan, the Committee has
the discretion to grant to Participants Performance Awards described in
SECTION 5 in respect of any Performance Period.
5. PERFORMANCE AWARDS.
(a) FORM OF AWARD. The Committee is authorized to grant Performance Awards
pursuant to this SECTION 5. A Performance Award shall represent the
conditional right of the Participant to receive cash based upon
achievement of one or more pre-established Performance Goals during a
Performance Period, subject to the terms of this SECTION 5 and the
other applicable terms of the Plan. Performance Awards shall be
subject to such conditions, including deferral of settlement, risks of
forfeiture and other terms and conditions as shall be specified by the
Committee.
A-2
(b) PERFORMANCE GOALS. The Committee shall establish the Performance Goals
for each Performance Award, consisting of one or more business
criteria permitted as Performance Criteria hereunder and one or more
levels of performance with respect to each such criterion. In
addition, the Committee shall establish the amount or amounts payable
or other rights that the Participant will be entitled to as a
Performance Award upon achievement of such levels of performance. The
Performance Goals shall be established by the Committee prior to, or
reasonably promptly following the inception of, a Performance Period
but, to the extent required by Section 162(m) of the Code, by no later
than the earlier of the date that is ninety (90) days after the
commencement of the Performance Period or the day prior to the date on
which twenty-five percent (25%) of the Performance Period has elapsed.
(c) ADDITIONAL PROVISIONS APPLICABLE TO PERFORMANCE AWARDS. More than one
Performance Criterion may be incorporated in a Performance Goal, in
which case achievement with respect to each Performance Criterion may
be assessed individually or in combination with each other. The
Committee may, in connection with the establishment of Performance
Goals for a Performance Period, establish a matrix setting forth the
relationship between performance on two or more Performance Criteria
and the amount of the Performance Award payable for that Performance
Period. The level or levels of performance specified with respect to a
Performance Criterion may be established in absolute terms, as
objectives relative to performance in prior periods, as an objective
compared to the performance of one or more comparable companies or an
index covering multiple companies, or otherwise as the Committee may
determine. Performance Goals shall be objective and shall otherwise
meet the requirements of Section 162(m) of the Code. Performance Goals
may differ for Performance Awards granted to any one Participant or to
different Participants.
(d) DURATION OF THE PERFORMANCE PERIOD. The Committee shall establish the
duration of each Performance Period at the time that it sets the
Performance Goals applicable to that Performance Period. The Committee
shall be authorized to permit overlapping or consecutive Performance
Periods.
(e) CERTIFICATION. Following the completion of each Performance Period,
the Committee shall certify in writing, in accordance with the
requirements of Section 162(m) of the Code, whether the Performance
Goals and other material terms for paying amounts in respect of each
Performance Award related to that Performance Period have been
achieved or met. Unless the Committee determines otherwise with
respect to a Participant who is not a Covered Employee for the taxable
year of the Company in which the Performance Award will be paid,
Performance Awards shall not be settled until the Committee has made
the certification specified under this SECTION 5(e).
(f) ADJUSTMENT. The Committee is authorized at any time during or after a
Performance Period to reduce or eliminate the Performance Award of any
Participant for any reason, including, without limitation, changes in
the position or duties of any Participant with the Company during or
after a Performance Period, whether due to any termination of
employment (including death, disability, retirement, voluntary
termination or termination with or without cause) or otherwise. In
addition, to the extent necessary to preserve the intended economic
effects of the Plan to the Company and the Participants, the Committee
shall adjust Performance Goals, the Performance Awards or both to take
into account: (i) a change in corporate capitalization, (ii) a
corporate transaction, such as any merger of the Company or any
subsidiary into another corporation, any consolidation of the Company
or any subsidiary into another corporation, any separation of the
Company or any subsidiary (including a spin-off or the distribution of
stock or property of the Company or any subsidiary), any
reorganization of the Company or any subsidiary or a large, special
and non-recurring dividend paid or distributed by the Company (whether
or not such reorganization comes within the definition of Section 368
of the Code), (iii) any partial or complete liquidation of the Company
or any subsidiary or (iv) a change in accounting or other relevant
rules or regulations (any adjustment pursuant to this Clause (iv)
shall be subject to the timing requirements of the last sentence of
SECTION 2(J) of the Plan); PROVIDED, HOWEVER, that no adjustment
hereunder shall be authorized or made if and to the extent that the
Committee determines that such authority or the making of such
adjustment would cause the Performance Awards to fail to qualify as
"qualified performance-based compensation" under Section 162(m) of the
Code.
(g) TIMING OF PAYMENT. Except as provided below and subject to SECTION 6,
any cash amounts payable in respect of Performance Awards for a
Performance Period will generally be paid as soon as practicable
following the determination in respect thereof made pursuant to
SECTION 5(E), but in any event no later than the 15th day of the third
month following the end of the Company's taxable year in which it was
earned.
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(h) MAXIMUM AMOUNT PAYABLE PER PARTICIPANT UNDER THIS SECTION 5. A
Participant shall not be granted Performance Awards for all of the
Performance Periods commencing in any calendar year that permit the
Participant in the aggregate to earn a cash payment in excess of the
lesser of five (5) times such Participant's base salary or $7,000,000.
6. PARTICIPANT DEFERRAL OF PAYMENT. Subject to such terms and administrative
guidelines as the Committee shall specify from time to time, a Participant
may elect to defer receipt of part or all payment due in respect of a
Performance Award in accordance with the following requirements.
(a) TIMING OF ELECTION.
(i) IN GENERAL. Except as otherwise provided in SECTION 6(a)(ii), a
Participant's election to defer payment in respect of a
Performance Award shall be made and irrevocable not later than
the close of the calendar year immediately preceding the calendar
year in which the Performance Period begins.
(ii) 409A PERFORMANCE-BASED COMPENSATION. With respect to any
Performance Award for a Performance Period of at least 12
consecutive months and that otherwise qualifies as
"performance-based compensation" as that term is defined in
Treasury Regulation Section 1.409A-1(e) ("409A PERFORMANCE-BASED
COMPENSATION"), a Participant's election to defer payment in
respect of such Performance Award shall be made and irrevocable
on or before the date that is six months before the end of the
Performance Period, PROVIDED the Participant is continuously
employed by the Company from the later of the beginning of the
Performance Period or the date the Performance Criteria are
established through the date of such election, and PROVIDED
FURTHER that in no event may a Participant elect to defer such
payment after the Performance Award has become both calculable
and substantially certain to be paid. A Performance Award shall
be deemed 409A Performance-Based Compensation only if its terms
provide that, notwithstanding anything to the contrary in
SECTIONS 5(E) and 7(A) hereof, the Committee shall have no
discretion to pay such Performance Award unless the Committee has
made the certification specified under SECTION 5(e).
(b) PAYMENT OF DEFERRED PERFORMANCE AWARDS. A Participant's election to
defer payment of all or part of a Performance Award shall specify a
time or fixed schedule for the payment of such amount, including
interest accrued thereon. Notwithstanding the foregoing, any payment
deferred in respect of a Performance Award shall be paid in a lump sum
upon the first to occur of the following.
(i) The Participant's separation from service (within the meaning of
Treasury Regulation Section 1.409A-1(h)), PROVIDED, HOWEVER, that
if the Participant is a "specified employee" (within the meaning
of Treasury Regulation section 1.409A-1(i)) as of the date of his
or her separation from service, such payment shall be made on the
earlier of (A) the date that is six months and one day after the
Participant's separation from service or (B) the Participant's
death.
(ii) The date of the Participant's death.
(iii) The date on which the Participant becomes Disabled (within the
meaning of SECTION 6(f)(ii) hereof).
(iv) The occurrence of an Unforeseeable Emergency (within the meaning
of SECTION 6(f)(iii) hereof), but only to the extent reasonably
necessary to satisfy the emergency need, including amounts
necessary to pay taxes or penalties reasonably anticipated as a
result of such payment, after taking into account the extent to
which the emergency is or may be relieved through reimbursement
or compensation by insurance or otherwise or by liquidation of
the Participant's other assets (to the extent such liquidation
would not itself cause severe financial hardship).
(v) The occurrence of a Change in Control Event (within the meaning
of SECTION 6(f)(i) hereof).
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(c) NO ACCELERATION. Payment in respect of a Performance Award that has
been deferred pursuant to SECTION 6(a) may not be accelerated or paid
before the time set forth in SECTION 6(b) except in the case of one of
the following events.
(i) DOMESTIC RELATIONS ORDER. The acceleration of the time or
schedule of payment to an individual other than the Participant
shall be permitted as may be necessary to comply with the terms
of a "domestic relations order" (as defined in Section
414(p)(1)(B) of the Code).
(ii) CONFLICTS OF INTEREST. The acceleration of the time or schedule
of payment shall be permitted to the extent reasonably necessary
to avoid violation of an applicable ethics law or conflicts of
interest law (including to permit the Participant to participate
in activities in the normal course of his or her position with
the Company in which the Participant would otherwise not be able
to participate under an applicable rule), as provided by Treasury
Regulation Section 1.409A-3(j)(4)(iii).
(d) SUBSEQUENT DEFERRAL ELECTION. A Participant may subsequently elect to
delay payment of an amount previously deferred under SECTION 6(a),
PROVIDED that such election shall be made and irrevocable not less
than 12 months before the date the deferred payment is scheduled to be
paid, and shall not take effect until at least 12 months after the
date on which the election is made; and PROVIDED FURTHER that the
payment shall be deferred for at least an additional five years from
the date such amount would otherwise have been paid. For purposes of
the preceding sentence, the entitlement to a series of installment
payments shall be treated as the entitlement to a single payment
payable on the date of the first scheduled payment. Any subsequent
deferral under this SECTION 6(d) shall be subject to the requirements
of SECTION 6(b) and (c).
(e) INTEREST. Interest shall accrue on amounts deferred under this SECTION
6 at a reasonable rate of interest determined by the Committee,
commencing one day following the date such amount would have been paid
had it not been deferred and ending on the date of payment under this
SECTION 6.
(f) DEFINITIONS. Solely for purposes of this SECTION 6 and not for other
purposes of the Plan, the following terms shall be defined as set
forth below.
(i) "CHANGE IN CONTROL EVENT" means the occurrence of a change in the
ownership or effective control of the Company, or a change in the
ownership of a substantial portion of the assets of the Company
(within the meaning of Treasury Regulation Section
1.409A-3(i)(5)). For example, a Change in Control Event will
occur if a person or more than one person acting as a group:
A. acquires ownership of stock that brings such person's or
group's total ownership in excess of 50% of the outstanding
stock of the Company; or
B. acquires ownership of 30% or more of the total voting power
of the Company within a 12 month period; or
C. acquires ownership of assets from the Company equal to 40%
or more of the total value of all assets of the Company
within a 12 month period.
(ii) "DISABLED" means a Participant is, by reason of any medically
determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous
period of not less than 12 months, (A) unable to engage in any
substantial gainful activity, or (B) receiving income replacement
benefits for a period of not less than three months under an
accident and health plan covering employees of the Company.
(iii) "UNFORESEEABLE EMERGENCY" means a severe financial hardship to
the Participant resulting from an illness or accident of the
Participant or the Participant's spouse, beneficiary or dependent
(as defined in Section 152 of the Code, without regard to
subsections (b)(1), (b)(2) and (d)(1)(B) thereof); loss of the
Participant's property due to casualty; or similar extraordinary
and unforeseeable circumstances arising as a result of events
beyond the Participant's control. For example, the imminent
foreclosure of or eviction from the
A-5
Participant's primary residence may constitute an Unforeseeable
Emergency, as may the need to pay for medical expenses, including
nonrefundable deductibles and the costs of prescription
medication. The need to pay for the funeral expenses of a spouse,
beneficiary or dependent may also constitute an Unforeseeable
Emergency. The purchase of a home and the payment of college
tuition, however, are not Unforeseeable Emergencies.
7. GENERAL PROVISIONS.
(a) TERMINATION OF EMPLOYMENT. In the event a Participant terminates
employment for any reason during a Performance Period or prior to the
Performance Award payment, he or she (or his or her beneficiary, in
the case of death) shall not be entitled to receive any Performance
Award for such Performance Period unless the Participant is not a
Covered Employee for the taxable year of the Company in which the
Performance Award will be paid and the Committee, in its sole and
absolute discretion, elects to pay a Performance Award to such
Participant.
(b) DEATH OF THE PARTICIPANT. Subject to SECTION 7(a), in the event of the
death of a Participant, any payments hereunder due to such Participant
shall be paid to his or her beneficiary as designated in writing to
the Committee or, failing such designation, to his or her estate. No
beneficiary designation shall be effective unless it is in writing and
received by the Committee prior to the date of death of the
Participant.
(c) TAXES. The Company is authorized to withhold from any Performance
Award granted, any payment relating to a Performance Award under the
Plan, or any payroll or other payment to a Participant, amounts of
withholding and other taxes due in connection with any transaction
involving a Performance Award, and to take such other action as the
Committee may deem advisable to enable the Company and Participants to
satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any Performance Award. This authority shall
include authority for the Company to withhold or receive other
property and to make cash payments in respect thereof in satisfaction
of a Participant's tax obligations, either on a mandatory or elective
basis in the discretion of the Committee.
(d) LIMITATIONS ON RIGHTS CONFERRED UNDER PLAN AND BENEFICIARIES. Neither
status as a Participant nor receipt or completion of a deferral
election form shall be construed as a commitment that any Performance
Award will become payable under the Plan. Nothing contained in the
Plan or in any documents related to the Plan or to any Award shall
confer upon any Eligible Employee or Participant any right to continue
as an Eligible Employee, Participant or in the employ of the Company
or constitute any contract or agreement of employment, or interfere in
any way with the right of the Company to reduce such person's
compensation, to change the position held by such person or to
terminate the employment of such Eligible Employee or Participant,
with or without cause, but nothing contained in this Plan or any
document related thereto shall affect any other contractual right of
any Eligible Employee or Participant. No benefit payable under, or
interest in, this Plan shall be transferable by a Participant except
by will or the laws of descent and distribution or otherwise be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge.
(e) CHANGES TO THE PLAN AND AWARDS. Notwithstanding anything herein to the
contrary, the Board, or a committee designated by the Board, may, at
any time, terminate or, from time to time, amend, modify or suspend
the Plan and the terms and provisions of any Performance Award
theretofore granted to any Participant which has not been settled
(either by payment or deferral); PROVIDED, HOWEVER, that no amendment
or modification to any Performance Award shall be authorized or made
if the Committee determines that such authority or the making of such
amendment or modification would increase or accelerate a payment under
the Performance Award, decrease a Performance Goal, or otherwise cause
the Performance Award to fail to qualify as "qualified
performance-based compensation" under Section 162(m) of the Code. No
Performance Award may be granted during any suspension of the Plan or
after its termination. Any such amendment may be made without
stockholder approval.
(f) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any amounts payable to a Participant pursuant to a
Performance Award, nothing contained in the Plan (or in any documents
related thereto), nor the creation or adoption of the Plan, the grant
of any Performance Award, or the taking of any other action pursuant
to the Plan shall give any such Participant any rights that are
greater than those of a general creditor of the Company; PROVIDED that
the Committee may authorize the creation of trusts and deposit therein
cash or other property or make other arrangements, to meet the
Company's obligations under the Plan. Such trusts or other
arrangements shall be
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consistent with the "unfunded" status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant.
The trustee of such trusts may be authorized to dispose of trust
assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Committee may specify in
accordance with applicable law.
(g) NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board (or a committee designated by the Board) nor submission of the
Plan or provisions thereof to the stockholders of the Company for
approval shall be construed as creating any limitations on the power
of the Board to adopt such other incentive arrangements as it may deem
necessary.
(h) GOVERNING LAW. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan, and any Performance Award
shall be determined in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of laws,
and applicable Federal law.
(i) EXEMPTION UNDER SECTION 162(M) OF THE CODE. The Plan, and all
Performance Awards issued thereunder, are intended to be exempt from
the application of Section 162(m) of the Code, which restricts under
certain circumstances the Federal income tax deduction for
compensation paid by a public company to named executives in excess of
$1 million per year. The Committee may, without stockholder approval,
amend the Plan retroactively or prospectively to the extent it
determines necessary in order to comply with any subsequent
clarification of Section 162(m) of the Code required to preserve the
Company's Federal income tax deduction for compensation paid pursuant
to the Plan. The Committee does not have discretion or authority,
however, to increase the maximum amount payable to any employee during
a calendar year or amounts to be paid under any Performance Award, or
to decrease any Performance Goal.
(j) EFFECTIVE DATE. The Plan is effective on the Effective Date, subject
to subsequent approval thereof by the Company's stockholders within 12
months of the Effective Date, and shall remain in effect until it has
been terminated pursuant to SECTION 7(e). If the Plan is not approved
by the stockholders within 12 months of the Effective Date, the Plan
and all interests in the Plan awarded to Participants before such date
shall be void ab initio and of no further force and effect. Unless the
Company determines to submit SECTION 5 of the Plan and the definition
of "Performance Criterion" to the Company's stockholders at the first
stockholder meeting that occurs in the fifth year following the year
in which the Plan was last approved by stockholders (or any earlier
meeting designated by the Board), in accordance with the requirements
of Section 162(m) of the Code, and such stockholder approval is
obtained, then no further Performance Awards shall be made under
SECTION 5 after the date of such annual meeting, but the remainder of
the Plan shall continue in effect until terminated in accordance with
SECTION 7(e).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, upon authorization of the Board of Directors, the
undersigned has caused the 2007 Annual Cash Incentive Plan to be executed
effective as of the 24th day of April, 2007.
VCA ANTECH, INC.
By:
---------------------------------------------
Robert L. Antin, Chief Executive Officer
and President
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VCA ANTECH, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a stockholder of VCA Antech, Inc., a Delaware corporation,
which we refer to as the "Company," hereby nominates, constitutes and appoints
Robert L. Antin and Tomas W. Fuller, or either one of them, as proxy of the
undersigned, each with full power of substitution, to attend, vote and act for
the undersigned at the Annual Meeting of Stockholders of the Company, to be held
on Monday, June 4, 2007, which we refer to as the "Annual Meeting," and any
postponements or adjournments thereof, and in connection therewith, to vote and
represent all of the shares of the Company which the undersigned would be
entitled to vote with the same effect as if the undersigned were present, as
follows:
A VOTE "FOR" ALL ITEMS IS RECOMMENDED BY THE BOARD OF DIRECTORS:
Item 1. To elect the nominee as Class II director:
CLASS II
Robert L. Antin
|_| FOR THE NOMINEE LISTED ABOVE
|_| WITHHELD for the nominee listed above
The undersigned hereby confer(s) upon the proxies and each of them
discretionary authority with respect to the election of directors
in the event that the above nominee is unable or unwilling to
serve.
Item 2. To ratify the appointment of KPMG LLP as the Company's
independent registered public accounting firm.
|_| FOR |_| AGAINST |_| ABSTAIN
Item 3. To approve the VCA Antech, Inc. 2007 Annual Cash Incentive Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
The undersigned hereby revokes any other proxy to vote at the Annual Meeting,
and hereby ratifies and confirms all that said attorneys and proxies, and each
of them, may lawfully do by virtue hereof. With respect to matters not known at
the time of the solicitation hereof, said proxies are authorized to vote in
accordance with their best judgment.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE OR,
TO THE EXTENT NO CONTRARY DIRECTION IS INDICATED, WILL BE TREATED AS A GRANT OF
AUTHORITY TO VOTE FOR THE ITEMS. IF ANY OTHER BUSINESS IS PRESENTED AT THE
ANNUAL MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE PROXIES.
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The undersigned acknowledges receipt of a copy of the Notice of Annual Meeting
dated April 27, 2007 and the accompanying Proxy Statement relating to the Annual
Meeting.
Dated:___________________________, 2007
Signature:_____________________________
Signature:_____________________________
-----------------------------
Signature(s) of Stockholder(s)
(See Instructions Below)
The signature(s) hereon should
correspond exactly with the name(s)
of the Stockholder(s) appearing on
the Share Certificate. If stock is
held jointly, all joint owners should
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. If signer is a corporation,
please sign the full corporation name,
and give title of signing officer.
|_| Please indicate by checking this box if you anticipate attending the Annual
Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
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