Unassociated Document
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
(Amendment
No. )
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x |
Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Under Rule 14a-12
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FORTRESS
INTERNATIONAL GROUP, INC.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee
was paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its filing:
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1)
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Amount
previously paid:
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2)
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Form,
Schedule or Registration Statement No:
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3)
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Filing
party:
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4)
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Date
Filed:
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7226
Lee DeForest Drive, Suite 203
Columbia,
Maryland 21046
(410)
423-7438
October
30, 2008
Dear
Stockholder,
We
cordially invite you to attend our 2008 annual meeting of stockholders to be
held at 10:00 a.m. on Tuesday, December 2, 2008, at our corporate offices at
7226 Lee DeForest Drive, Suite 203, Columbia, Maryland 21046. The attached
notice of annual meeting and proxy statement describe the business we will
conduct at the annual meeting and provide information about us, that you should
consider when you vote your shares.
At
the
annual meeting, three persons will be elected to our Board of Directors. In
addition, we will ask stockholders to ratify the selection of Grant Thornton
LLP
as our independent registered public accounting firm for our fiscal year ending
December 31, 2008. The Board of Directors recommends the approval of each of
these proposals. Such other business will be transacted as may properly come
before the annual meeting.
We
hope
you will be able to attend the annual meeting. Whether you plan to attend the
annual meeting or not, it is important that your shares are represented.
Therefore, when you have finished reading the proxy statement, you are urged
to
complete, sign, date and return the enclosed proxy card promptly in accordance
with the instructions set forth on the card. We encourage you to vote by proxy
so that your shares will be represented and voted at the meeting, whether or
not
you can attend.
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Sincerely,
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Thomas
P. Rosato
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Chief
Executive Officer
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FORTRESS
INTERNATIONAL GROUP, INC.
7226
Lee DeForest Drive, Suite 203
Columbia,
Maryland 21046
(410)
423-7438
NOTICE
OF 2008 ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON DECEMBER 2, 2008
To
the
Stockholders
of
Fortress International Group, Inc.:
NOTICE
IS
HEREBY GIVEN that the annual meeting of Fortress International Group, Inc.
will
be held on December 2, 2008 (the “Annual Meeting”), for the following
purposes:
1.
To
elect Messrs. C. Thomas McMillen, Thomas P. Rosato and John Morton, III, as
three Class III directors to serve three-year terms expiring in
2011;
2.
To
ratify the selection of Grant Thornton LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2008;
and
3.
To
transact such other business as may properly presented before the Annual Meeting
and any adjournments or postponements thereof.
Only
those holders of our common stock of record as of the close of business on
October 21, 2008, are entitled to notice of, and to vote at, the Annual Meeting
and at any adjournments or postponements thereof. A list of stockholders of
record will be available at the meeting and, during the 10 days prior to the
meeting, at our offices 7226 Lee DeForest Drive, Suite 203, Columbia, Maryland
21046.
A
total
of 12,557,669 shares of our common stock were issued and outstanding as of
that
record date. Each share of our common stock entitles its holder to one vote.
Cumulative voting of shares of common stock is not permitted.
All
stockholders are cordially invited to attend the Annual Meeting. At least a
majority of all issued and outstanding shares of common stock is required to
constitute a quorum. Accordingly, whether you plan to attend the Annual Meeting
or not, we ask that you complete, sign, date and return the enclosed proxy
card
as soon as possible in accordance with the instructions on the proxy card.
A
pre-addressed, postage prepaid return envelope is enclosed for your convenience.
In the event you are able to attend the meeting, you may revoke your proxy
and
vote your shares in person.
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BY
ORDER OF THE BOARD OF DIRECTORS
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Thomas
P. Rosato
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Chief
Executive Officer
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Table
of Contents
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Page
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GENERAL
INFORMATION ABOUT THE ANNUAL MEETING
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1
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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5
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MANAGEMENT
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7
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COMPENSATION
COMMITTEE REPORT
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16
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EXECUTIVE
COMPENSATION
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16
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NON-EMPLOYEE
DIRECTOR COMPENSATION
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22
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REPORT
OF AUDIT COMMITTEE
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25
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SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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26
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CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
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26
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PROPOSALS
TO BE VOTED UPON BY STOCKHOLDERS
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30
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CODE
OF CONDUCT AND ETHICS
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33
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OTHER
MATTERS
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33
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STOCKHOLDER
PROPOSALS AND NOMINATIONS FOR DIRECTOR
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33
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PROXY
CARD
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FORTRESS
INTERNATIONAL GROUP, INC.
7226
Lee DeForest Drive, Suite 203
Columbia,
Maryland 21046
(410)
423-7438
PROXY
STATEMENT
2008
ANNUAL MEETING OF STOCKHOLDERS
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING
Why
Did You Send Me this Proxy Statement?
We
sent
you this proxy statement and the enclosed proxy card because our Board of
Directors is soliciting your proxy to vote at the 2008 annual meeting of
stockholders and any adjournments or postponements of the meeting to be held
at
10:00 a.m. on Tuesday, December 2, 2008, at 7226 Lee DeForest Drive, Suite
203,
Columbia, Maryland 21046. This proxy statement along with the accompanying
Notice of Annual Meeting of Stockholders summarize the purposes of the meeting
and the information you need to know to vote at the annual meeting.
On
October 30, 2008, we will begin sending this proxy statement, the attached
notice of annual meeting and the enclosed proxy card to all stockholders
entitled to vote at the meeting. Although not part of this proxy statement,
we
are also sending along with this proxy statement, our 2007 annual report, which
includes our financial statements for the fiscal year ended December 31, 2007.
You can also find a copy of our 2007 Annual Report on Form 10-K, as amended,
on
the Internet through the SEC’s electronic data system called EDGAR at
www.sec.gov
or
through the Investor Relations section of our website at www.thefigi.com.
Who
Can Vote?
Only
stockholders who owned our common stock at the close of business on October
21,
2008 are entitled to vote at the annual meeting. On this record date, there
were
12,557,669 shares of our common stock outstanding and entitled to vote. Our
common stock is our only class of voting stock.
You
do
not need to attend the annual meeting to vote your shares. Shares represented
by
valid proxies, received in time for the meeting and not revoked prior to the
meeting, will be voted at the meeting. A stockholder may revoke a proxy before
the proxy is voted by providing a signed statement of revocation or a duly
executed proxy card bearing a later date to us at 7226 Lee DeForest Drive,
Suite
203, Columbia, Maryland 21046, Attention: Thomas P. Rosato, Chief Executive
Officer. Any stockholder who has executed a proxy card but attends the meeting
in person may revoke the proxy and vote at the meeting.
How
Many Votes Do I Have?
Each
share of our common stock that you own entitles you to one vote.
How
Do I Vote?
Whether
you plan to attend the annual meeting or not, we urge you to vote by proxy.
Voting by proxy will not affect your right to attend the annual meeting. If
your
shares are registered directly in your name through our stock transfer agent,
Continental Stock Transfer & Trust Company, 17 Battery Place, New York, NY
10004, or you have stock certificates, you may vote:
•
By
mail.
Complete and mail the enclosed proxy card in the enclosed postage prepaid
envelope. Your proxy will be voted in accordance with your instructions. If
you
sign the proxy card but do not specify how you want your shares voted, they
will
be voted as recommended by our Board of Directors.
•
In
person at the meeting.
If you
attend the meeting, you may deliver your completed proxy card in person or
you
may vote by completing a ballot, which will be available at the
meeting.
If
your
shares are held in “street name” (held in the name of a bank, broker or other
nominee), you must provide the bank, broker or other nominee with instructions
on how to vote your shares and can do so as follows:
•
By
mail.
You
will receive instructions from your broker or other nominee explaining how
to
vote your shares.
•
In person at the meeting.
Contact
the broker or other nominee who holds your shares to obtain a broker’s proxy
card and bring it with you to the meeting. You will not be able to vote at
the
meeting unless you have a proxy card from your broker.
How
Does the Board of Directors Recommend That I Vote on the
Proposals?
The
Board
of Directors recommends that you vote as follows:
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“FOR”
the election of Messrs. C. Thomas McMillen, Thomas P. Rosato and
John
Morton, III, as Class III
directors;
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•
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“FOR”
ratification of the selection of independent registered public accounting
firm for our fiscal year ending December 31,
2008.
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If
any
other matter is presented, the proxy card provides that your shares will be
voted by the proxy holder listed on the proxy card in accordance with his or
her
best judgment. At the time this proxy statement was printed, we knew of no
matters that needed to be acted on at the annual meeting, other than those
discussed in this proxy statement.
May
I Revoke My Proxy?
If
you
give us your proxy, you may revoke it at any time before the meeting. You may
revoke your proxy in any one of the following ways:
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signing
a new proxy card and submitting it, as instructed
above;
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notifying
us at 7226 Lee DeForest Drive, Suite 203, Columbia, Maryland 21046,
Attention: Thomas P. Rosato, Chief Executive Officer, in writing
before
the annual meeting that you have revoked your proxy;
or
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•
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attending
the meeting in person and voting in person. Attending the meeting
in
person will not in and of itself revoke a previously submitted proxy,
unless you specifically request it.
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What
if I Receive More Than One Proxy Card?
You
may
receive more than one proxy card or voting instruction form if you hold shares
of our common stock in more than one account, which may be in registered form
or
held in street name. Please vote in the manner described under “How Do I Vote?”
for each account to ensure that all of your shares are voted.
Will
My Shares be Voted if I Do Not Return My Proxy Card?
If
your
shares are registered in your name or if you have stock certificates, they
will
not be voted if you do not return your proxy card by mail or vote at the meeting
as described above under “How Do I Vote?”
If
your
shares are held in street name and you do not provide voting instructions to
the
bank, broker or other nominee that holds your shares as described above under
“How Do I Vote?,” the bank, broker or other nominee has the authority to vote
your unvoted shares on both Proposals 1 and 2, even if it does not receive
instructions from you. We encourage you to provide voting instructions. This
ensures your shares will be voted at the meeting in the manner you desire.
If
your broker cannot vote your shares on a particular matter because it has not
received instructions from you and does not have discretionary voting authority
on that matter or because your broker chooses not to vote on a matter for which
it does have discretionary voting authority, this is referred to as a “broker
non-vote”.
What
Vote is Required to Approve Each Proposal and How are Votes Counted?
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Proposal
1: Elect Three Class III Directors |
The
affirmative vote of a plurality of the shares of common stock cast
by
stockholders present in person or represented by proxy at the annual
meeting is required to elect Messrs. C. Thomas McMillen, Thomas
P. Rosato
and John Morton, III, the nominees for election as Class III directors.
You may vote either FOR all of the nominees, WITHHOLD your vote
from all
of the nominees or WITHHOLD your vote from any one or more of the
nominees. Votes that are withheld will not be included in the vote
for the
election of directors. Brokerage firms have authority to vote customers’
unvoted shares held by the firms in street name for the election
of
directors. If a broker does not exercise this authority, such broker
non-votes will have no effect on the results of this
vote.
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Proposal
2: Ratify Selection of Auditors |
The
affirmative vote of a majority of the votes present or
represented by
proxy and entitled to vote at the annual meeting is required to ratify
the
selection of independent registered public accounting firm. Abstentions
will be treated as votes against this proposal. Brokerage firms have
authority to vote customers’ unvoted shares held by the firms in street
name on this proposal. If a broker does not exercise this authority,
such
broker non-votes will have no effect on the results of this vote.
We are
not required to obtain the approval of our stockholders to select
our
independent registered public accounting firm. However, if our
stockholders do not ratify the selection of Grant Thornton LLP as
our
independent registered public accounting firm for 2008, our Audit
Committee of our Board of Directors will reconsider its
selection.
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Is
Voting Confidential?
We
will
keep all the proxies, ballots and voting tabulations private. We only let our
Inspectors of Election, Continental Stock Transfer & Trust Company, examine
these documents. Management will not know how you voted on a specific proposal
unless it is necessary to meet legal requirements. We will, however, forward
to
management any written comments you make, on the proxy card or
elsewhere.
What
Are the Costs of Soliciting these Proxies?
We
will
pay all of the costs of soliciting these proxies. Our directors and employees
may solicit proxies in person or by telephone, fax or email. We will pay these
employees and directors no additional compensation for these services. We will
ask banks, brokers and other institutions, nominees and fiduciaries to forward
these proxy materials to their principals and to obtain authority to execute
proxies. We will then reimburse them for their expenses.
What
Constitutes a Quorum for the Meeting?
The
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of our common stock is necessary to constitute a quorum at the meeting.
Votes of stockholders of record who are present at the meeting in person or
by
proxy, abstentions, and broker non-votes are counted for purposes of determining
whether a quorum exists.
Attending
the Annual Meeting
The
annual meeting will be held at 10:00 a.m. on Tuesday, December 2, 2008, at
our
corporate offices at 7226 Lee DeForest Drive, Suite 203, Columbia, Maryland
21046. When you arrive at our offices, signs will direct you to the appropriate
meeting rooms. You need not attend the annual meeting in order to
vote.
Householding
of Annual Disclosure Documents
In
December 2000, the Securities and Exchange Commission adopted a rule concerning
the delivery of annual disclosure documents. The rule allows us, or your broker,
to send a single set of our annual report and proxy statement to any household
at which two or more of our shareholders reside, if we or your broker believe
that the shareholders are members of the same family. This practice, referred
to
as “householding,” benefits both you and us. It reduces the volume of duplicate
information received at your household and helps to reduce our expenses. The
rule applies to our annual reports, proxy statements and information statements.
Once you receive notice from your broker or from us that communications to
your
address will be “householded,” the practice will continue until you are
otherwise notified or until you revoke your consent to the practice. Each
shareholder will continue to receive a separate proxy card or voting instruction
card.
If
your
household received a single set of disclosure documents this year, but you
would
prefer to receive your own copy, please contact our transfer agent, Continental
Stock Transfer & Trust Company by calling 212.509.4000 ext. 206, or by
e-mail at [email protected].
If
you do
not wish to participate in “householding” and would like to receive your own set
of our annual disclosure documents in future years, follow the instructions
described below. Conversely, if you share an address with another shareholder
and together both of you would like to receive only a single set of our annual
disclosure documents, follow these instructions:
•
If
your
shares are registered in your own name, please contact our transfer agent,
Continental Stock Transfer & Trust Company, and inform them of your request
by calling them at 212.509.4000 ext. 206, or by e-mail at
[email protected], or writing them at 17 Battery Place, New York,
NY
10004.
•
If
a
broker or other nominee holds your shares, please contact the broker or other
nominee directly and inform them of your request. Be sure to include your name,
the name of your brokerage firm and your account number.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information with respect to the beneficial
ownership of our common stock as of October 21, 2008 for (a) the executive
officers named in the Summary Compensation Table on page 16 of this proxy
statement, (b) each of our directors and director nominees, (c) all of our
current directors and executive officers as a group, and (d) each stockholder
known by us to own beneficially more than 5% of our common stock. Beneficial
ownership is determined in accordance with the rules of the SEC and includes
voting or investment power with respect to the securities. We deem shares of
common stock that may be acquired by an individual or group within 60 days
of
October 21, 2008, pursuant to the exercise of options or warrants to be
outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in the table.
Except as indicated in footnotes to this table, we believe that the stockholders
named in this table have sole voting and investment power with respect to all
shares of common stock shown to be beneficially owned by them based on
information provided to us by these stockholders. Percentage of ownership is
based on 12,557,669 shares of common stock outstanding on October 21, 2008.
Unless otherwise indicated, the address for each director and current executive
officer is c/o Fortress International Group, Inc., 7226 Lee DeForest Drive,
Suite 203, Columbia, Maryland 21046.
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Beneficially
Owned
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Ownership
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C.
Thomas McMillen (1)
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575,000
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4.6
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%
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Harvey
L. Weiss (2)
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1,070,000
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8.2
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%
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Thomas
P. Rosato (3)
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2,542,906
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19.8
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%
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Timothy
C. Dec (4)
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80,000
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*
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Gerard
J. Gallagher
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1,360,516
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10.8
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%
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David
J. Mitchell (5)
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170,000
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1.4
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%
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Donald
L. Nickles (6)
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220,000
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1.8
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%
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John
Morton, III (7)
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38,416
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*
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Asa
Hutchinson (8)
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220,000
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1.8
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%
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William
L. Jews (9)
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38,416
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*
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All
directors and offices combined as a group (10 persons) (10)
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6,315,254
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47.5
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%
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5%
Stockholders
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Hummingbird
Management, LLC, Hummingbird Capital, LLC, and Hummingbird
Concentrated Fund, LP (11)
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1,537,241
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12.1
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%
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Paul
D. Sonkin (12)
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1,957,641
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15.0
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%
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Wellington
Management Company, LLP (13)
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1,725,600
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13.1
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%
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The
Pinnacle Fund, L.P. (14)
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1,201,204
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9.3
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%
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Robert
I. Green (15)
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1,735,000
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12.1
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%
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Southwell
Partners, L.P. (16)
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795,000
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6.3
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%
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*
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Represents
beneficial ownership of less than 1% of the outstanding shares of
our
common stock.
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(1)
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Includes
575,000 shares held by Washington Capital Advisors, LLC, of which
Mr.
McMillen is the chief executive officer and the sole owner.
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(2) |
Includes
452,000 shares of common stock issuable upon the exercise of warrants
held
by Mr. Weiss.
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(3) |
Includes
294,870 shares of common stock issuable upon the exercise of warrants
held
by Mr. Rosato.
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(4) |
Includes
80,000 shares of restricted common stock which are subject to
forfeiture.
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(5)
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Includes
9,999 shares of unvested restricted common stock which are subject
to
forfeiture.
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(6)
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Includes
9,999 shares of unvested restricted common stock which are subject
to
forfeiture.
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(7)
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Includes 22,276
shares of unvested restricted common stock which are subject to
forfeiture.
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(8)
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Includes
9,999 shares of unvested restricted common stock which are subject
to
forfeiture.
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(9)
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Includes
22,276 shares of unvested restricted common stock which are subject
to
forfeiture.
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(10)
|
Includes
746,870 shares of common stock issuable upon the exercise of warrants
and
154,549 shares of unvested restricted common stock subject to
forfeiture.
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(11)
|
Derived
from a Form 4 filed on June 23, 2008, by Paul D. Sonkin, The Hummingbird
Value Fund, LP (“HVF”), The Hummingbird Microcap Value Fund, LP (“Microcap
Fund”), The Hummingbird Concentrated Fund, LP (“Concentrated Fund”),
Hummingbird Management, LLC (“Hummingbird”) and Hummingbird Capital, LLC
(“Hummingbird Capital”). HVF, Microcap Fund and Concentrated Fund are the
beneficial owner of 327,114, 394,683 and 720,444 shares of our
common stock, respectively. Concentrated Fund is also the beneficial
owner
of an additional 95,000 shares of common stock issuable upon the
exercise
of warrants. Concentrated Fund Holdings were determined from a Form
4
filed on March 20, 2008, by Paul Sonkin. Hummingbird is the investment
manager of HVF, Microcap Fund and Concentrated Fund and may be deemed
to
have the sole voting and investment authority over the shares owned
by
such entities. Hummingbird Capital, as the general partner of each
of HVF,
Microcap Fund and Concentrated Fund, may also be deemed to have the
sole
voting and investment authority over the shares owned by HVF, Microcap
Fund and Concentrated Fund. Hummingbird and Hummingbird Capital disclaim
any beneficial ownership of such shares. The business address of
Mr.
Sonkin and the foregoing Hummingbird entities is 460 Park Avenue,
12th
Floor, New York, New York 10022.
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(12)
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Includes
392,000 shares of common stock issuable upon the exercise of warrants
held
in Mr. Sonkin’s and Mrs. Sonkin's IRA accounts and an additional 28,400
shares of common stock issuable upon the exercise of warrants held
in IRA
accounts of various other parties for which Mr. Sonkin has dispositive
power and for which Mr. Sonkin disclaims beneficial ownership. As
the
managing member and control person of Hummingbird, Mr. Sonkin may
also be
deemed to have the sole voting and investment authority over the
shares
beneficially owned by Hummingbird. Mr. Sonkin disclaims any beneficial
ownership of such shares, except by pecuniary interest in the 392,000
warrants owned by him and his wife
personally.
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(13)
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Derived
from a Schedule 13G/A filed by Wellington Management Company, LLP
(“Wellington”) on February 14, 2008. Wellington, in its capacity as an
investment advisor, may be deemed to beneficially own 1,725,600 shares
of
common stock which are held of record by clients of Wellington. Those
clients have the right to receive, or the power to direct the receipt
of,
dividends from, or the proceeds from the sale of, such securities.
No such
client is known to have such right or power with respect to more
than five
percent of our common stock. Wellington has shared voting control
over
1,092,400 shares of common stock and shared investment control over
1,725,600 shares of common stock. Wellington’s business address is 75
State Street, Boston, MA 02109.
|
(14)
|
Derived
from a Form 4 filed jointly by The Pinnacle Fund, L.P.
(Pinnacle) and Barry Kitt (collectively “Reporting Persons”) on August 15,
2008 and Form 4 filed by the Reporting Persons on August 20, 2008.
The ownership includes 291,691 shares of common stock issuable upon
the exercise of warrants. Pinnacle Advisers, L.P. (“Advisers”) is the
general partner of Pinnacle. Pinnacle Fund Management, LLC (“Management”)
is the general partner of Advisers. Mr. Kitt is the sole member of
Management. Mr. Kitt may be deemed to be the beneficial owner of
the
shares of common stock beneficially owned by Pinnacle. Mr. Kitt expressly
disclaims beneficial ownership of all shares of common stock beneficially
owned by Pinnacle. The principal business office of the reporting
persons
is 4965 Preston Park Blvd., Suite 240, Plano, TX
75093.
|
(15)
|
Derived
from a Schedule 13D filed by Robert I. Green on January 26, 2007.
Includes
1,735,000 shares of common stock issuable upon exercise of warrants
beneficially owned by Mr. Green. Of such shares, 1,485,000 shares
of
common stock issuable upon the exercise of warrants are held by Starwood
Group L.P. and 250,000 shares of common stock issuable upon the exercise
of warrants are held by an individual retirement account for the
benefit
of Mr. Green. Mr. Green is the general partner of Starwood Group
L.P. The
business address of Mr. Green is 150 Bears Club Drive, Jupiter, Florida
33477.
|
(16)
|
Derived
from a Schedule 13G/A filed jointly by Southwell Partners, L.P.,
Southwell
Management, L.P., Southwell Holdings, LLC, and Wilson S. Jaeggli
on
February 12, 2008. Southwell is the general partner of Southwell
Partners
and may be deemed to beneficially own securities owed and or held
by
and/or for the account and/or benefit of Southwell Partners. Southwell
Holdings is the general partner of Southwell Management and may be
deemed
to beneficially own securities owned and/or held by and/or for the
account
and/or benefit of Soutwehll Management. Mr. Jaeggli is the managing
director of Southwell Holdings and may be deemed to beneficially
own
securities owned and/or held by and/or for the account and/or benefit
of
Southwell Holdings. The principal business office of each f the reporting
persons is 1901 North Akard, 2nd Floor, Dallas, TX
75201.
|
MANAGEMENT
The
Board of Directors
Our
Certificate of Incorporation and By-laws provide that our business is to
be
managed by or under the direction of our Board of Directors. Our Board of
Directors is divided into three classes for purposes of election. One class
is
elected at each annual meeting of stockholders to serve for a three-year
term.
Our Board of Directors currently consists of nine members, classified into
three
classes as follows:
|
•
|
Messrs.
C. Thomas McMillen, Thomas P. Rosato and John Morton, III, constitute
a
class with a term ending at the 2008 annual meeting of stockholders;
and
|
|
•
|
Messrs.
David J. Mitchell, Gerard J. Gallagher and Asa Hutchinson, constitute
a
class with a term ending at the 2009 annual meeting of stockholders;
and
|
|
•
|
Messrs.
Harvey L. Weiss, Donald L. Nickles and William L. Jews, constitute
a class
with a term ending at the 2010 annual meeting of
stockholders.
|
Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible,
each
class will consist of one-third of the directors.
On
September 23, 2008, our Board of Directors voted to nominate C. Thomas McMillen,
Thomas P. Rosato and John Morton, III, for election at the 2008 annual meeting
for a term of three years to serve until the 2011 annual meeting of
stockholders, and until their respective successors have been elected and
qualified, or until their earlier death, resignation or removal.
Set
forth
below are the names of the persons nominated as directors, and directors
whose
terms do not expire this year, their ages, their offices in the company,
if any,
their principal occupations or employment for the past five years, the length
of
their tenure as directors and the names of other public companies in which
such
persons hold directorships.
Name
|
|
Age
|
|
Position
with the Company
|
Harvey
L. Weiss
|
|
65
|
|
Chairman
of the Board
|
C.
Thomas McMillen*
|
|
55
|
|
Vice
Chairman of the Board
|
Thomas
P. Rosato
|
|
56
|
|
Chief
Executive Officer and Director
|
Gerard
J. Gallagher
|
|
51
|
|
President,
Chief Operating Officer and Director
|
David
J. Mitchell*(1)(3)
|
|
47
|
|
Director
|
Donald
L. Nickles*(2)
|
|
59
|
|
Director
|
John
Morton, III*(1)(2)(3)
|
|
64
|
|
Director
|
Asa
Hutchinson*(1)(2)(3)
|
|
57
|
|
Director
|
William
L. Jews*(1)(3)
|
|
56
|
|
Director
|
*
Non-employee director.
(1)
Member of the Audit Committee
(2)
Member of the Compensation Committee
(3)
Member of the Special Committee
Harvey
L. Weiss,
age 65,
became our Chairman of the Board upon the closing of our acquisition of
TSS/Vortech on January 19, 2007. From our inception through the closing of
the
acquisition, Mr. Weiss had served as our Chief Executive Officer, President
and
a member of our Board. He has over 35 years of experience in the information
technology and security market place. From 2002 to August 1, 2004, Mr. Weiss
was
the Chief Executive Officer and President of System Detection, Inc., a software
security company. From 2000 to 2002, he served as President of Engineering
Systems Solutions, Inc., a security and biometrics integration firm. During
1999, Mr. Weiss was the Chief Executive Officer and President of Global
Integrity Corporation, a SAIC subsidiary specializing in information security
and served as a Director until the company was sold in 2002. From 1996 to
1998,
until sold to Network Associates, Inc, Mr. Weiss was President of the Commercial
Division, Secretary and Director of Trusted Information Systems, Inc., a
Nasdaq-listed security network company. Prior to that time, from 1994 to
1996,
Mr. Weiss served as President of Public Sector Worldwide Division for Unisys
Corporation. From 1991 to 1993, Mr. Weiss was the Vice President of Sales
and
the President and Chief Operating Officer of Thinking Machines Corporation,
a
massively parallel processing company. Prior to that time, he served in various
senior capacities in Digital Equipment Corporation. Mr. Weiss serves on the
Board of Forterra Systems, Inc., a simulation company, is a member of the
Brookings Institution Council, and is a trustee of Capitol College. Mr. Weiss
received a Bachelor of Science in Mathematics from the University of
Pittsburgh.
C.
Thomas McMillen,
age 55,
became our Vice Chairman of the Board upon the closing of our acquisition
of
TSS/Vortech on January 19, 2007. From our inception through the closing of
the
acquisition, Mr. McMillen had served as our Chairman of the Board. He has
over
20 years of experience in government, finance and mergers and acquisitions.
Mr.
McMillen has also served, since August 2005, as the President, Chief Executive
Officer and Chairman of the Board of Homeland Security Capital Corporation,
a
consolidator of homeland security companies that provides capital, management
advice and investments for developing companies. Mr. McMillen co-founded
Global
Secure Corp., a homeland security company providing critical infrastructure
services, in 2003, and served as its Chief Executive Officer until February
2004. From February 2004 until February 2005, Mr. McMillen served as a
consultant to Global Secure Corp. In addition, from October 2004 through
July
2005, he served as a Chairman of the Board of Global Defense Corporation,
a
development stage company focused on acquiring companies in critical
infrastructure security. From December 2003 to February 2004, Mr. McMillen
served as Vice Chairman and Director of Sky Capital Enterprises, Inc., a
venture
firm, and until February 2005 served as a consultant. From March 2003 to
February 2004, Mr. McMillen served as Chairman of Sky Capital Holdings, Ltd,
Sky
Capital Enterprises’ London stock exchange-listed brokerage affiliate. Mr.
McMillen has also been Chief Executive Officer of Washington Capital Advisors,
LLC, a merchant bank and one of our stockholders, since 2003. Mr. McMillen
has
also been an independent consultant throughout his career. From 1994 through
February 1999, Mr. McMillen served as the Founder, Chief Executive Officer
and
Director of Nasdaq-listed Complete Wellness Centers, Inc., a medical
multi-disciplinary clinic management company. In addition, Mr. McMillen is
the
Co-Chairman of the Board and Co-Chief Executive Officer of Secure America
Acquisition Corporation, a blank check company formed for the purpose of
acquiring one or more domestic and international operating businesses in
the
homeland security industry, but not businesses that design, build or maintain
mission-critical facilities. Mr. McMillen was appointed by President Clinton
to
Co-Chair the President’s Council on Physical Fitness and Sports from 1993 to
1997. From 1987 through 1993, he served three consecutive terms in the United
States House of Representatives from the 4th Congressional District of Maryland.
Prior to that, Mr. McMillen played 11 years in the National Basketball
Association. Mr. McMillen received a Bachelor of Science in chemistry from
the
University of Maryland and a Bachelor of Arts and a Master of Arts from Oxford
University as a Rhodes Scholar.
Thomas
P. Rosato,
age 56,
became a Director and our Chief Executive Officer upon our acquisition of
TSS/Vortech on January 19, 2007. Mr. Rosato has over 25 years of experience
in
mission-critical service businesses. Since 2002, he has served as the co-founder
and chairman of TSS and the co-founder and chairman of Vortech. From 1998
to
2001, Mr. Rostato served as the President - Group Maintenance of
America/Encompass Services Corporation, National Accounts Division. From
1995 to
1998, he served as the founder and President of Commercial Air, Power &
Cable, Inc. From 1980 to 1995, he served in various capacities at Com-Site
Enterprises, most recently as Chief Financial Officer and Chief Operating
Officer. Mr. Rosato started his career in 1973 as a certified public accountant
at Coopers & Lybrand. Mr. Rosato received a Bachelor of Science in
Accounting from Temple University.
Gerard
J. Gallagher,
age 51,
became a Director and our President and Chief Operating Officer upon our
acquisition of TSS/Vortech on January 19, 2007. Mr. Gallagher has more than
25
years of experience in mission-critical fields. Since 2002, he has served
as the
co-founder and President of TSS and the co-founder and President of Vortech.
From 1998 to 2001, Mr. Gallagher served as the President of the Total Site
Solutions division of Encompass Services Corp. From 1997 to 1998, he served
as
the President of the Total Site Solutions division of Commercial Air, Power
& Cable, Inc. From 1991 to 1997, he served as the Chief Facilities
Operations and Security Officer of the International Monetary Fund. From
1980 to
1991, Mr. Gallagher served in various capacities at Com Site International,
most
recently as Senior Vice President of Engineering and Sales. Mr. Gallagher
received a Bachelor of Science in Fire Science from the University of Maryland
and a Bachelor of Science in Organizational Management (Summa Cum Laude)
from
Columbia Union College.
David
J. Mitchell,
age 47,
has served as a member of our Board since its inception and has over 25 years
of
investment, finance and mergers and acquisition experience. Mr. Mitchell
is President of Mitchell Holdings LLC, a New York-based merchant banking
company
he founded in January of 1991, and since June 2004, Managing Partner of Las
Vegas Land Partners LLC, a real estate development firm. From 1996 until
the business was sold to American Express in August 1998, Mr. Mitchell was
the
Founder and Co-Chief Executive Officer of Americash LLC. Mr. Mitchell served
as
a Director of Kellstrom Industries from its inception until January 2002.
Mr. Mitchell served as a director of Centerpoint Corporation (including its
predecessor companies) from October 1996 until January 2003. Prior to
1991, Mr. Mitchell held various senior positions at New York Stock Exchange
member firms. From 1988 to 1990, he was a Managing Director and Principal
of
Rodman & Renshaw, Inc., and from 1985 to 1988, he was a Managing Director of
Laidlaw Adams & Peck, Inc. Previous to 1985, Mr. Mitchell was with Bear
Stearns and Oppenheimer & Co
Donald
L. Nickles,
age 59,
has served as a Director since February 2005. Mr. Nickles currently serves
as a
member of the board of directors of Chesapeake Energy Corporation, Valero
Energy
Corporation and Washington Mutual Investors Fund. In 2005, after his retirement
from the United States Senate, Senator Nickles founded and is currently Chairman
and Chief Executive Officer of The Nickles Group, LLC, a consulting and business
venture firm headquartered in Washington, D.C. Senator Nickles was elected
to
the United States Senate in 1980 where he represented the state of Oklahoma
and
held numerous leadership positions, including Assistant Republican Leader
from
1996 to 2002 and Chairman of the Senate Budget Committee from 2003 to 2004.
Senator Nickles also served on the Energy and Natural Resources Committee
and
the Finance Committee. While serving in the Unites States Senate, Senator
Nickles was instrumental in several key areas of legislation including securing
Senate passage of the Homeland Security Act of 2002, the legislation creating
the Department of Homeland Security and the 2003 Tax Relief Act. Prior to
his
service in the United States Senate, Senator Nickles served in the Oklahoma
State Senate from 1979 to 1980 and worked at Nickles Machine Corporation
in
Ponca City, Oklahoma, becoming Vice President and General Manager. Senator
Nickles served in the National Guard from 1970 to 1976 and graduated from
Oklahoma State University in 1971.
John
Morton III,
age 64,
has served as a Director since January 2007. Prior to his election as a
Director, Mr. Morton had served as a director of Broadwing Corp. from April
2006
until January 2007, when Broadwing Corp. was acquired by Level 3 Communications,
Inc. Prior to that, Mr. Morton had served as President of Premier Bank, Bank
of
America until his retirement in September 2005 and was a member of Bank of
America’s Management Operating Committee. From 1997 to 2001, Mr. Morton served
as President of Mid-Atlantic Region, Bank of America. Prior to assuming the
Regional President position, Mr. Morton was President of the Private Client
Group from 1996 to 1997. From 1994 to 1996, he was Chairman, Chief Executive
Officer and President of The Boatmen’s National Bank of St. Louis. From 1993 to
1994, he was Chief Executive Officer and President of Farm and House Financial
Corporation. From 1990 to 1991, Mr. Morton served as Perpetual Financial
Corporation’s Chairman, Chief Executive Officer and President. Mr. Morton was a
member of the Executive Committee of the Federal City Council in Washington
D.C.
and a former Chairman of the Greater Baltimore Committee in Baltimore and
currently serves as a member of the board of directors of Boston Private
Financial Holdings, Barry-Wehmiller Companies and Dynamac International.
Mr.
Morton holds a Bachelor of Science from the U.S. Naval Academy and a Master
in
Business Administration from Harvard University. He served in the U.S. Navy
as a
lieutenant aboard the nuclear submarine U.S.S. George Washington
Carver.
Asa
Hutchinson,
age 57,
has served as a Director since January 2007. Prior to his election as a
Director, Mr. Hutchinson had acted as our special advisor. Mr. Hutchinson
was
one of the original leaders of the Department of Homeland Security serving
as
Undersecretary for Border and Transportation Security for the first two years
of
the Department’s history. Mr. Hutchinson served three terms in the United States
House of Representatives from the 3rd Congressional District of Arkansas
(1997-2001) and as Administrator of the Drug Enforcement Administration
(2001-2003). Since 2001, Mr. Hutchinson has been engaged in the homeland
security law practice in Little Rock, Arkansas, and he is also a law partner
in
the firm of Venable LLP in Washington, D.C. Mr. Hutchinson is also the principal
of Hutchinson Group, a consulting firm that provides homeland security counsel
for companies. Mr. Hutchinson serves on the board of directors of Identiphi
Inc., a company that offers software solutions to protect intellectual property,
secure assets and eliminate passwords. Also, Mr. Hutchinson is a director
of
Secure America Acquisition Corporation, a blank check company formed for
the
purpose of acquiring one or more domestic and international operating businesses
in the homeland security industry, but not businesses that design, build
or
maintain mission-critical facilities. Mr. Hutchinson received a Bachelor
of
Science from Bob Jones University and a Juris Doctor from the University
of
Arkansas School of Law.
William
L. Jews,
age 56,
has served as a Director since April 24, 2007. Mr. Jews served as President
and
Chief Executive Officer of CareFirst, Inc., a health care insurer and the
seventh largest Blue Cross Blue Shield Plan, from1993 to December 2006. During
this period, Mr. Jews was also President and Chief Executive Officer of Blue
Cross Blue Shield of Maryland and the Blue Cross and Blue Shield Plan of
the
National Capital area and Chief Executive Officer of the Delaware Blue Cross
and
Blue Shield Plan. From 1990 to 1993, Mr. Jews was President and Chief Executive
Officer of Dimensions Health Corporation, a multi-faceted healthcare corporation
based in Landover, Maryland. From 1979 to 1990, Mr. Jews was President and
Chief
Executive Officer of Liberty Medical Center, Inc., of Baltimore MD. Mr. Jews
currently serves on the boards of The Ryland Group Inc., Camden Learning
Corporation and Choice Hotels International. Mr. Jews received a Bachelor
of
Arts Degree from The Johns Hopkins University and a Master from Morgan State
University.
Our
Board
of Directors has reviewed the materiality of any relationship that each of
our
directors has with the company, either directly or indirectly. Based upon
this
review, our Board has determined that the following non-employee members
of the
Board of Directors are “independent directors” as defined by The Nasdaq Stock
Market, LLC and has no relationship with us, except as a director and/or
stockholder: David J. Mitchell, Donald L. Nickles, Asa Hutchinson, John Morton,
III, and William L. Jews.
Committees
of the Board of Directors and Meetings
Meeting
Attendance
During
the fiscal year ended December 31, 2007, our Board of Directors and the various
committees of the Board of Directors held the following meetings:
|
|
Number
of
|
|
|
Meetings
|
|
|
|
Board
of Directors
|
|
7
|
Audit
Committee
|
|
4
|
Compensation
Committee
|
|
4
|
Special
Committee
|
|
5
|
Although
we do not have any formal policy regarding director attendance at our annual
meetings, we will attempt to schedule our annual meetings so that all of
our
directors can attend. All of our directors attended the 2007 annual meeting
either in person or telephonically. During the fiscal year ended December
31,
2007, all of our directors attended at least 75% of the meetings of the Board
and committees of the Board of Directors on which they served.
Audit
Committee
Our
Audit
Committee currently has four members, John Morton, III (Chairman), David
J.
Mitchell, Asa Hutchinson and William L. Jews. Our Audit Committee’s role and
responsibilities are set forth in a written charter and include the authority
to
retain and terminate the services of our independent registered public
accounting firm, review annual financial statements, review quarterly financial
statement, consider matters relating to accounting policy and internal controls
and review the scope of annual audits.
All
members of the Audit Committee satisfy the current independence standards
promulgated by the Securities and Exchange Commission and The Nasdaq Stock
Market, as such standards apply specifically to members of audit committees.
The
Board has determined that Mr. Morton is an “audit committee financial expert,”
as the Securities and Exchange Commission has defined that term in Item 407
of
Regulation S-K.
A
copy of
the Audit Committee’s written charter is publicly available on our website at
www.thefigi.com.
Compensation
Committee
Our
Compensation Committee currently has three members, Donald L. Nickles
(Chairman), Asa Hutchinson and John Morton, III. Our Compensation Committee
reviews, approves and makes recommendations regarding our compensation policies,
practices and procedures to ensure that legal and fiduciary responsibilities
of
the Board of Directors are carried out and that such policies, practices
and
procedures contribute to our success. The Compensation Committee is responsible
for the determination of the compensation of our Chief Executive Officer
and our
Chief Financial Officer, and shall conduct its decision-making process with
respect to that issue without the Chief Executive Officer and Chief financial
Officer present. All members of the Compensation Committee qualify as
independent directors under the definition promulgated by the Securities
and
Exchange Commission and The Nasdaq Stock Market.
A
copy of
the Compensation Committee’s written charter is publicly available on our
website at www.thefigi.com.
Special
Committee
Our
Special Committee currently has four members, John Morton, III (Chairman),
David
J. Mitchell, Asa Hutchinson and William L. Jews. Our Special Committee’s role
and responsibility have been to review a potential transaction with a related
party. All members of the Special Committee qualify as independent directors
under the definition promulgated by the Securities and Exchange Commission
and
The Nasdaq Stock Market.
Nominations
for Directors
We
do not
currently have a standing Nominating Committee since our Board of Directors
determined that the independent members of the Board of Directors (Messrs.
Mitchell, Nickles, Morton, Hutchinson and Jews) adequately fulfill the
obligations of a nominating committee without the need of incurring additional
costs of committee meetings.
The
Board
of Directors considers recommendations of potential candidates from current
directors, management and stockholders. Stockholders’ nominations for directors
must be made in writing and include the nominee’s written consent to the
nomination and sufficient background information on the candidate to enable
the
Board of Directors to assess his or her qualifications. Nominations must
be
addressed to the Chairman of the Board of Directors at our headquarters address
listed below, and generally must be received no later than 60 days nor earlier
than 90 days prior to the first anniversary of the preceding year’s annual
meeting, in order to be considered for the next annual election of
directors.
Chairman
of the Board of Directors
7226
Lee
DeForest Drive, Suite 203
Columbia,
Maryland 21046
Shareholder
Communications to the Board
Shareholders
who wish to address questions regarding our business directly with the Board
of
Directors, or any individual director, should direct his or her questions
in
writing to the Chairman of the Board at 7226 Lee DeForest Drive, Suite 203,
Columbia, Maryland 21046. Communications will be distributed to the Board,
or to
any individual director or directors as appropriate, depending on the facts
and
circumstances outlined in the communications. Items that are unrelated to
the
duties and responsibilities of the Board may be excluded, such
as:
•
junk
mail
and mass mailings,
•
resumes
and other forms of job inquiries,
•
surveys,
or
•
solicitations
or advertisements.
In
addition, any material that is unduly hostile, threatening, or illegal in
nature
may be excluded, provided that any communication that is filtered out will
be
made available to any outside director upon request.
Executive
Officers
Set
forth
below is information as of October 21, 2008 about our Chief Executive Officers,
Timothy C. Dec, our only executive officer who is not also director. We have
an
employment agreement with Mr. Dec.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Timothy
C. Dec
|
|
50
|
|
Chief
Financial Officer
|
Timothy
C. Dec,
age 50, was appointed as Chief Financial Officer of the Company, effective
August 20, 2007. Prior to his appointment and since June 2006, Mr. Dec was
the
Chief Financial Officer of Presidio Networked Solutions Inc., the nation’s
largest independent value-added solutions provider that offers a wide range
of
Cisco-centric network infrastructure and collaborative solutions. From 1999
until May 2006, Mr. Dec was Senior Vice President, Chief Accounting Officer
& Treasurer of Broadwing Corporation, a NASDAQ listed telecommunications
company. Broadwing Corp was acquired by Level 3 Inc in 2007. From 1997 to
1999,
Mr. Dec was Director of Accounting and Administration for Thermo Trilogy
Corporations, a subsidiary of AMEX listed Thermo Electron Company. Earlier
in
his career, Mr. Dec held finance and accounting related positions at North
American Vaccine, Inc. an AMEX listed company engaged in the research,
development and manufacturing of vaccines, privately held general contractor
Clark Construction and Intertek Services International, LTD, a division of
Inchcape Group, a multinational public company based in London, England.
Mr. Dec
holds a Bachelor of Science degree in Accounting from Mount Saint Mary’s
University in Emmitsburg, Maryland, and a Masters of Business Administration
from American University in Washington DC. He is a Certified Public
Accountant.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
On
January 19, 2007, we consummated the acquisition of TSS/Vortech. Our
Compensation Committee has developed a comprehensive executive compensation
program and philosophy with respect to our executive officers. The Compensation
Committee has not selected or hired a compensation consulting firm to assist
in
the development of a comprehensive executive compensation program and
philosophy, but may consider doing so in the future.
The
Compensation Committee of our Board makes all decisions regarding the
compensation of our executive officers, which decisions are subject to
ratification by our Board. On March 7, 2007, we established a Compensation
Committee consisting of Donald Nickles and Asa Hutchinson, and on April 24,
2007, John Morton, III, was appointed to the Committee. Our Board has determined
that each of these directors is an “independent director” within the meaning of
the rules of the Nasdaq Stock Market and Rule 10A-3 promulgated under the
Securities and Exchange Act of 1934, as amended. The Compensation Committee
has
the responsibility to:
|
•
|
review,
modify and approve our overall compensation
strategy;
|
|
•
|
recommend
to the Board the compensation and terms of employment of our executive
officers, including Thomas P. Rosato, our Chief Executive Officer,
Gerard
J. Gallagher, our President and Chief Operating Officer, and Timothy
C.
Dec, our Chief Financial Officer, and to evaluate their respective
performance in light of relevant goals and
objectives;
|
|
•
|
review
and recommend to our board the type and amount of compensation
to be paid
or awarded to the members of our
Board;
|
|
•
|
recommend
to our Board the adoption, amendment and termination of any bonus,
equity
and other deferred compensation plans, including the 2006 Omnibus
Incentive Compensation Plan (“2006 Stock
Plan”);
|
|
•
|
determine
appropriate insurance coverage for our executive officers and directors;
and
|
|
•
|
review,
discuss and assess its own performance at least
annually.
|
General
Compensation Philosophy
We
recognize the importance of maintaining sound principles for the development
and
administration of our compensation and benefits programs. The overall
compensation philosophy of our company is primarily driven by our business
environment and our desire to align the interest of the employees with the
interests of our company. It is also based on the principles of competitive
and
fair compensation, as well as our goal to attract, retain and motivate qualified
employees.
The
compensation and benefit plans are designed to enable us to meet our corporate
goals and performance. The objectives of our compensation structure are
to:
|
•
|
enable
the company to attract, engage and retain key executives and employees
critical to future success;
|
|
•
|
motivate
and inspire employee behavior which fosters a high performance
culture;
and
|
|
•
|
support
the overall business objectives and ensure that a significant component
of
the compensation opportunity will be related to factors that both
directly
and indirectly influence shareholder
value.
|
We
measure the success of our compensation plans on overall business performance
and our ability to attract and retain key talent which, in turn, will minimize
risk and optimize return for our shareholders.
To
this
end, the Compensation Committee affirms that the total compensation plan
should
consist of:
|
•
|
Annual
salary.
Designed to reward the core competence in the executive role relative
to
the skills, experience and contribution to our
company.
|
|
•
|
Annual
cash incentive/bonus awards.
Designed to reward the executive for specific contributions to
our company
aligned to both corporate and individual
objectives.
|
|
•
|
Long-term
equity compensation.
Designed to align the executives’ interests with those of the
shareholders.
|
|
•
|
Certain
other benefits, including retirement and welfare
plans.
|
The
use
of the above components of our overall compensation plan enables us to reinforce
our pay for performance philosophy and strengthen our ability to attract
and
retain high caliber and experienced executives. We believe that our combination
of programs provides an appropriate mix of fixed and variable pay, balances
short-term operational performance with longer-term shareholder value and
facilitates effective executive recruitment and retention.
We
will
seek to target both short and long-term compensation levels competitively
among
a peer group of similar companies based on available survey data. The companies
that will comprise our peer group to benchmark executive compensation levels
against companies that have executive positions with responsibilities similar
in
breadth and scope to ours and have businesses which compete with us for
executive talent.
Compensation
Components
Base
Salary
The
salaries of our executive officers are the only non-variable element of our
compensation and are reviewed on an annual basis. The salaries reflect each
executive’s responsibilities, the importance and impact of the executive’s role,
and the contribution each executive delivers to us. Salary revisions are
based
on an evaluation of the individual’s performance, as part of our Annual
Performance Review process. Performance-related increases generally take
effect
as of April 1 of each year.
Bonuses
Our
Compensation Committee will be responsible for establishing and implementing
pre-established quantitative and qualitative performance standards for executive
bonuses as well as guidelines and requirements for the distribution of such
bonuses. To the extent that our employment agreements contain qualitative
standards for discretionary bonuses, our Board intends to take the following
steps to ensure direct correlation between executive compensation and
performance:
|
•
|
initiate
a practice of periodically reviewing the performance of all senior
executives at Board meetings; and
|
|
•
|
establish
annual reviews of compensation reports for the named executive
officers.
|
Long-Term
Equity Compensation
We
believe that long-term incentive compensation, primarily in the form of
restricted stock awards, ensures that our executive officers have an ongoing
stake in the long-term success of the company, as well as giving our employees
the opportunity to share in any appreciation in the value of our common stock.
Under the 2006 Stock Plan, stock options and stock appreciation rights may
be
granted; however, we currently have no plans or intentions of using these
as a
form of compensation.
The
Compensation Committee supports the belief that equity participation aligns
employees’ interests with those of the shareholders. However, we have not yet
instituted stock ownership or retention guidelines for our executive
officers.
Other
Benefits
We
provide a number of benefits as part of our overall remuneration package
to all
eligible employees including the named executive officers.
We
operate a defined contribution retirement plan — a qualified 401(k) Plan which
allows each of our employees to contribute up to the limits imposed by the
Internal Revenue Code (US), on a pre-tax basis. We provide for matching payments
up to 50% of the first six percent of employee contributions.
We
also
provide other benefits such as medical, dental, life insurance and short
and
long-term disability coverage to each named executive officer, as well as
to all
of our full-time employees. In addition, we provide paid time off and other
paid
holidays to all employees, including our named executive officers, which
we
believe are in line with our peers in the industry.
Tax
Considerations
The
Compensation Committee’s compensation strategy is to be cost and tax effective.
Therefore, the Compensation Committee’s policy is to preserve corporate tax
deductions, while maintaining the flexibility to approve compensation
arrangements that it deems to be in the best interests of our company and
our
stockholders, even if such arrangements do not always qualify for full tax
deductibility.
Employment
Agreements
Descriptions
of the employment agreements with Messrs. Rosato, Gallagher, Dec and Weiss
are
set forth below. The terms and conditions of Messrs. Rosato’s and Gallagher’s
employment agreements were negotiated with the sellers of TSS/Vortech as
well as
with such executives as part of the negotiation of the overall terms and
conditions of the acquisition. We expect that the Compensation Committee
will,
in connection with the development of a comprehensive executive compensation
program and philosophy, recommend to our Board the compensation and terms
of
employment for our other executive officers whereupon we may enter into
appropriate employment agreements with them.
Change
in Control and Severance
As
described below, the employment agreements of Messrs. Rosato, Gallagher,
Dec and
Weiss provide for severance benefits. We have not yet developed any
comprehensive severance policies for our executive officers but expect to
do so
in connection with the development of our comprehensive executive compensation
program and philosophy.
Role
of Executive Officers in Executive Compensation
We
expect
that our Compensation Committee will approve and make recommendations to
our
Board with respect to the compensation for our executive officers, other
than
Mr. Rosato, with the advice of Mr. Rosato and/or one or more other executive
officers designated by Mr. Rosato. We expect Mr. Rosato and any such other
executive officers to play no role in the Compensation Committee’s determination
of their respective compensation. However, to the extent we enter into
employment agreements with our executive officers, such agreements would
be
subject to negotiation between us and the applicable executive
officer.
COMPENSATION
COMMITTEE REPORT
The
Compensation Committee of our Board has reviewed and discussed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K, which
appears
elsewhere in this annual report, with our management. Based on this review
and
discussion, the Compensation Committee has recommended to the Board that
the
Compensation Discussion and Analysis be included in this annual
report.
Members
of the Fortress International Group, Inc. Compensation Committee:
Donald
L.
Nickles
Asa
Hutchinson
John
Morton, III
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table shows the total compensation paid or accrued by us during the
fiscal year ended December 31, 2007 to our (1) Chief Executive Officer, (2)
President and Chief Operating Officer, (3) Chief Financial Officer and (4)
Chairman, during the fiscal year ended December 31, 2007. Collectively, these
are the “named executive officers”. The 2006 reported amounts for Mr. Rosato and
Mr. Gallagher below were received from the predecessor, Vortech, LLC and VTC,
L.L.C. (TSS/Vortech), which was acquired by us on January 19, 2007.
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|
|
|
Annual
Compensation
|
|
Name
and Principal Position(s)
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock
Awards
(1)
|
|
Other
Compensation
(2)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Rosato (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer
|
|
|
2007
|
|
$
|
401,665
|
|
|
-
|
|
|
-
|
|
$
|
282,881
|
|
$
|
684,546
|
|
|
|
|
2006
|
|
$
|
166,788
|
|
|
-
|
|
|
-
|
|
$
|
33,563
|
|
$
|
200,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
J. Gallagher (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President
and Chief Operating Officer
|
|
|
2007
|
|
$
|
405,865
|
|
|
-
|
|
|
-
|
|
$
|
277,505
|
|
$
|
683,370
|
|
|
|
|
2006
|
|
$
|
350,000
|
|
$
|
42,580
|
|
|
-
|
|
$
|
48,710
|
|
$
|
441,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
C. Dec (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
2007
|
|
$
|
76,757
|
|
|
-
|
|
$
|
33,278
|
|
$
|
3,200
|
|
$
|
113,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harvey
L. Weiss (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman
and former Chief Executive Officer
|
|
|
2007
|
|
$
|
180,769
|
|
|
-
|
|
|
-
|
|
$
|
34,091
|
|
$
|
214,860
|
|
|
(1)
|
This
column represents the dollar amount recognized as compensation expense
for
financial statement reporting purposes with respect to the referenced
fiscal year for the fair value of restricted stock granted in that
fiscal
year. These values have been calculated in accordance with SFAS 123R
using
the closing price of our common stock on the grant date. Pursuant
to SEC
rules, the amounts shown exclude the effect of estimated forfeitures
related to service-based vesting conditions. The amounts in this
column
reflect our accounting expense for these awards, and may not correspond
to
the actual value that will be recognized by the named executive officer.
In connection with his new hiring, Mr. Timothy C. Dec was the only
executive officer to receive a stock grant during the fiscal year
ended
December 31, 2007, see “Grant of Plan Based Awards”
below.
|
|
(2)
|
See
“All Other Compensation Table” below for additional information regarding
the components of the amounts set forth in this
column.
|
|
(3)
|
Mr.
Rosato’s and Mr. Gallagher’s employment commenced January 19, 2007 in
connection with the acquisition of TSS/Vortech. Accordingly, compensation
reflects the partial period January 19, 2007 through December 31,
2007.
Mr. Rosato and Mr. Gallagher received $11,538 and $14,423, respectively,
from TSS/Vortech during the period from January 1, 2007 to January
18,
2007. In addition to the amounts included above, distributions of
$1,386,473 and $1,337,972 were made during 2006 by TSS/Vortech to
Mr.
Rosato and Mr. Gallagher, respectively. Such distributions represented
payments for income taxes and profit distributions of the
companies.
|
|
(4)
|
Mr.
Dec’s employment commenced on August 20, 2007. Accordingly, compensation
reflects the partial period from August 20, 2007 through December
31,
2007.
|
|
(5)
|
Mr.
Weiss entered into an employment agreement on January 19, 2007.
Accordingly, his compensation reflects the partial period from January
19,
2007 through December 31, 2007.
|
All
Other Compensation Table
The
following table shows the components of all other compensation with respect
to
our named executive officers.
|
|
401(k)
|
|
Club
|
|
Rent
|
|
Automobile
|
|
Interest
|
|
Long-term
|
|
|
|
|
|
Match
($)(1)
|
|
Membership
($)(2)
|
|
Expense
($)(3)
|
|
Allowance
($)(4)
|
|
Payments
($)(5)
|
|
Disability
($)(6)
|
|
Total ($)
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Rosato
|
|
|
7,654
|
|
|
4,645
|
|
|
33,000
|
|
|
19,248
|
|
|
218,334
|
|
|
-
|
|
|
282,881
|
|
Gerald
J. Gallagher
|
|
|
7,750
|
|
|
16,407
|
|
|
-
|
|
|
16,636
|
|
|
234,247
|
|
|
2,466
|
|
|
277,505
|
|
Timothy
C. Dec
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,200
|
|
|
-
|
|
|
-
|
|
|
3,200
|
|
Harvey
L. Weiss
|
|
|
1,091
|
|
|
-
|
|
|
33,000
|
|
|
-
|
|
|
|
|
|
-
|
|
|
34,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
(paid by Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
P. Rosato
|
|
|
6,657
|
|
|
12,105
|
|
|
-
|
|
|
14,801
|
|
|
-
|
|
|
-
|
|
|
33,563
|
|
Gerald
J. Gallagher
|
|
|
6,115
|
|
|
25,941
|
|
|
-
|
|
|
16,654
|
|
|
-
|
|
|
-
|
|
|
48,710
|
|
|
(1)
|
We
offer employees a 401(k) matching contribution up to 50% of the first
6%
of an employee’s compensation contributed to our 401(k) Plan. These
amounts reflect Company contributions to the employee account under
the
matching program.
|
|
(2) |
We
reimbursed golf club memberships not exclusively used for business
entertainment.
|
|
(3)
|
Per
their respective employment agreements, Mr. Rosato and Mr. Weiss
each
received $3,000 per month for the reimbursement of the cost associated
with separately maintaining their own
office.
|
|
(4)
|
Reflects
reimbursement for automobile and associated costs not exclusively
used for
business.
|
|
(5)
|
Represents
interest paid on our convertible, promissory notes issued to Mr.
Rosato
and Mr. Gallagher in conjunction with our purchase of TSS/Vortech.
The
notes bear interest at 6% per
annum.
|
|
(6)
|
We
paid premiums for a supplemental long-term disability policy on behalf
of
Mr. Gallagher.
|
Grants
of Plan-Based Awards
The
2006
Stock Plan was approved on January 17, 2007. Timothy C. Dec was the only named
executive officer that received an equity award under the Stock Plan during
the
fiscal year ended December 31, 2007.
|
|
|
|
Stock Awards
|
|
|
|
|
|
Restricted Stock
|
|
Grant Date
|
|
|
|
|
|
Granted
|
|
Fair Value of Stock
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
($)
|
|
|
|
|
|
|
|
|
|
Timothy
C. Dec
|
|
|
9/7/2007
|
|
|
40,000
|
|
|
239,600
|
|
|
|
|
9/7/2007
|
|
|
40,000
|
|
|
239,600
|
|
Outstanding
Equity Awards at 2007 Fiscal Year End
The
following table provides information on the current holdings of restricted
stock
by Mr. Dec, who is the only named executive officer with outstanding equity
awards. This table includes unvested restricted stock and the vesting schedule
is footnoted accordingly.
|
|
|
|
|
|
Market Value
|
|
|
|
|
|
Number of
|
|
of Shares of
|
|
Name
|
|
Grant Date
|
|
Shares that
Have not
Vested (#)
|
|
Stock that
Have Not
Vested ($)
|
|
|
|
|
|
|
|
|
|
Timothy
C. Dec
|
|
|
9/7/2007 (1)
|
|
|
40,000
|
|
|
194,000
|
|
|
|
|
9/7/2007 (2)
|
|
|
40,000
|
|
|
194,000
|
|
|
(1)
|
Shares
vest 50% at 18 months from the grant date and the remaining 50% vest
at 36
months from the grant date.
|
|
(2)
|
Shares
vest based on specific performance targets established by the Board.
The
market value of the stock awards is determined by multiplying the
number
of shares times $4.85, the closing price of our common stock on the
Nasdaq
Capital Market on December 31, 2007, the last day of our fiscal
year.
|
Stock
Vested in 2007
As
no
restricted shares of common stock vested during 2007, the named executive
officers acquired no shares during fiscal year 2007.
Pension
Benefits
Our
named
executive officers did not participate in, or otherwise receive any benefits
under, any pension or retirement plan sponsored by us during the fiscal year
ended December 31, 2007.
Nonqualified
Deferred Compensation
Our
named
executive officers did not earn any nonqualified deferred compensation benefits
from us during the fiscal year ended December 31, 2007.
Employment
Agreements
Employment
Agreement with Thomas P. Rosato
On
January 19 2007, we entered into an employment agreement with Thomas P. Rosato
whereby Mr. Rosato agreed to serve as our Chief Executive Officer for a period
of three years. Under the terms of the employment agreement, Mr. Rosato’s base
compensation is $425,000 per year (subject to a minimum annual increase of
5%
per year), Mr. Rosato is eligible to receive an annual bonus of up to 50% of
his
then applicable base compensation (the amount of the bonus and the criteria
for
the bonus to be determined by the Board), and Mr. Rosato is eligible for the
share performance bonus described below. In addition to base compensation and
bonus eligibility, (i) we will pay the premiums on the life insurance policies,
(ii) Mr. Rosato is entitled to an office allowance of $3,000 monthly, and (iii)
Mr. Rosato is otherwise entitled to receive vacation, health insurance and
other
benefits as generally made available to our other executives.
Pursuant
to the terms of the employment agreement, if we terminate Mr. Rosato’s
employment for reasons other than “Cause” or Mr. Rosato terminates his
employment for “Good Reason” (as those terms are defined in the employment
agreement), Mr. Rosato is entitled to receive his base compensation as and
when
it would otherwise be payable if his employment had not been terminated
(provided, however that if termination occurs during the last twelve months
of
Mr. Rosato’s employment, then Mr. Rosato shall be entitled to receive amounts
equal to base compensation (as and on the terms otherwise payable) for twelve
months from the date of termination).
Share
performance bonus.
Up to
$5.0 million in additional shares of our common stock will be issuable to Mr.
Rosato if during the period from the closing of the acquisition (January 19,
2007) through July 13, 2008, certain share performance thresholds (alternative
and not cumulative) set forth below are satisfied:
|
•
|
if
the highest average share price of our shares of common stock during
any
60 consecutive trading day period between the closing of the acquisition
and July 13, 2008 exceeds $9.00 per share but is no more than $10.00
per
share, he will be entitled to $0.5 million worth of additional shares;
or
|
|
•
|
if
the highest average share price of our shares of common stock during
any
60 consecutive trading day period between the closing of the acquisition
and July 13, 2008 exceeds $10.00 per share but is no more than $12.00
per
share, he will be entitled to $1.5 million worth of additional shares;
or
|
|
•
|
if
the highest average share price of our shares of common stock during
any
60 consecutive trading day period between the closing of the acquisition
and July 13, 2008 exceeds $12.00 per share but is no more than $14.00
per
share, he will be entitled to $3.0 million worth of additional shares;
or
|
|
•
|
if
the highest average share price of shares of common stock during
any 60
consecutive trading day period between the closing of the acquisition
and
July 13, 2008 exceeds $14.00 per share, he will be entitled to $5.0
million worth of additional shares.
|
On
May 8,
2008, our Compensation Committee approved the elimination of certain perquisites
payments for club membership fees and car allowances paid to Mr. Rosato under
his employment agreement. Simultaneously, and in connection with the elimination
of these perquisites payments, the Compensation Committee approved an increase
of $30,000 in the annual base salary of Mr. Rosato, representing the aggregate
annual amount of the perquisite payments previously paid.
In
addition, on August 26, 2008, we entered into an amendment to Mr. Rosato’s
employment agreement. The amendment provides for a reduction of the current
annual base salary payable under Mr. Rosato’s employment agreement, from
$455,000 to $300,000, and for the elimination of the annual base salary increase
for subsequent years. Furthermore, effective August 26, 2008, the monthly
payment of $3,000 to which Mr. Rosato was entitled to under his employment
agreement for office allowance ceased.
Employment
Agreement with Gerard J. Gallagher
On
January 19, 2007, we entered into an employment agreement with Gerard J.
Gallagher whereby Mr. Gallagher agreed to serve as our President and Chief
Operating Officer for a period of three years. Under the terms of the employment
agreement, Mr. Gallagher’s base compensation is $425,000 per year (subject to a
minimum annual increase of 5% per year), Mr. Gallagher will be eligible to
receive an annual bonus of up to 50% of his then applicable base compensation
(the amount of the bonus and the criteria for the bonus to be determined by
the
Board), and Mr. Gallagher is eligible to receive a share performance bonus
on
terms identical to those described above under “Employment Agreement with Thomas
P. Rosato” set forth above. In addition to base compensation and eligibility for
a bonus, (i) we pay the premiums on the life insurance policies, and (ii) Mr.
Gallagher is otherwise entitled to receive vacation, health insurance and other
benefits as generally made available to our other executives. Pursuant to the
terms of the employment agreement, if we terminate Mr. Gallagher’s employment
for reasons other than “Cause” or Mr. Gallagher terminates his employment for
“Good Reason” (as those terms are defined in the employment agreement), Mr.
Gallagher is entitled to receive his base compensation as and when it would
otherwise be payable if his employment had not been terminated (provided,
however that if termination occurs during the last twelve months of Mr.
Gallagher’s employment, then Mr. Gallagher shall be entitled to receive amounts
equal to base compensation (as and on the terms otherwise payable) for twelve
months from the date of termination).
On
May 8,
2008, our Compensation Committee approved the elimination of certain perquisites
payments for club membership fees and car allowances paid to Mr. Gallagher
under
his employment agreement. Simultaneously, and in connection with the elimination
of these perquisites payments, the Compensation Committee approved an increase
of $30,000 in the annual base salary of Mr. Gallagher, representing the
aggregate annual amount of the perquisite payments previously paid.
In
addition, on August 26, 2008, we entered into an amendment to Mr. Gallagher’s
employment agreement. The amendment provides for a reduction of the current
annual base salary payable under the employment agreement, from $455,000 to
$300,000, and for the elimination of the annual base salary increase for
subsequent years.
Employment
Agreement with Timothy C. Dec
On
August
20, 2007, we entered into an employment agreement with Timothy C. Dec whereby
Mr. Dec agreed to serve as our Chief Financial Officer and will be responsible
for our finance, accounting and treasury functions for a period of three years.
Under the terms of the employment agreement, Mr. Dec’s base compensation is
$225,000 per year (subject to a minimum annual increase of 5% per year), and
he
is eligible to receive an annual bonus of up to 50% of his then applicable
base
compensation (the amount of the bonus and the criteria for the bonus to be
determined by the Board of Directors). Mr. Dec received 40,000 shares of
restricted common stock of which 50% of the shares vest 18 months from his
commencement of employment date and the remainder vest 36 months from his
commencement of employment date. An additional 40,000 common shares were granted
to Mr. Dec and vest on achieving certain milestones set by the Board. In
addition to base compensation, eligibility for a bonus, and equity compensation
(i) we will pay the premiums on a life insurance policy, and (ii) Mr. Dec is
otherwise entitled to receive vacation, health insurance and other benefits
as
generally made available to our other executives. Pursuant to the terms of
the
employment agreement, if we terminate Mr. Dec’s employment for reasons other
than “Cause” or Mr. Dec terminates his employment for “Good Reason” (as those
terms are defined in the employment agreement), Mr. Dec is entitled to receive
his base compensation as and when it would otherwise be payable if his
employment had not been terminated (provided, however that if termination occurs
during the last twelve months of Mr. Dec’s employment, then Mr. Dec shall be
entitled to receive amounts equal to base compensation (as and on the terms
otherwise payable) for twelve months from the date of termination).
In
addition, on August 26, 2008, we entered into an amendment to Mr. Dec’s
employment agreement. The amendment provides for a decrease of $5,000 in the
current annual base salary payable under the employment agreement.
Employment
Agreement with Harvey L. Weiss
On
January 19, 2007, we entered into an employment agreement with Harvey L. Weiss
whereby Mr. Weiss agreed to serve as our chairman for a period of three years.
Under the terms of the employment agreement, Mr. Weiss’ base compensation is
$200,000 per year (subject to a minimum annual increase of 5% per year) and
Mr.
Weiss is eligible to receive an annual bonus of up to 50% of his then applicable
base compensation (the amount of the bonus and the criteria for the bonus to
be
determined by the Board of Directors). In addition to base compensation and
eligibility for a bonus, (i) Mr. Weiss is entitled to a referral fee equal
to 5%
of the “Gross Profits” (as defined in the Employment Agreement) attributable to
any client or customer (other than the federal government, or any agency or
subdivision thereof) identified by Mr. Weiss to us or our subsidiaries, (ii)
Mr.
Weiss is entitled to an “office allowance” of $3,000 per month and (iii) Mr.
Weiss is otherwise entitled to receive vacation, health insurance and other
benefits as generally made available to our other executives. Pursuant to the
terms of the employment agreement, if we terminates Mr. Weiss’ employment for
reasons other than “Cause” or Mr. Weiss terminates his employment for “Good
Reason” (as those terms are defined in the Employment Agreement), Mr. Weiss is
entitled to receive his base compensation as and when it would otherwise be
payable if his employment had not been terminated (provided, however that if
termination occurs during the last twelve months of Mr. Weiss’ employment, then
Mr. Weiss shall be entitled to receive amounts equal to base compensation (as
and on the terms otherwise payable) for twelve months from the date of
termination).
In
addition, on August 26, 2008, we entered into an amendment to Mr. Weiss’s
employment agreement. The amendment provides for a reduction of the current
annual base salary payable under the employment agreement, from $200,000 to
$100,000, and for the elimination of the annual base salary increase for
subsequent years. Furthermore, effective August 26, 2008, the monthly payment
of
$3,000 to which Mr. Weiss was entitled to under his employment agreement for
office allowance ceased. The amendment also provides for a two-year extension
of
the employment period.
Executive
2007 Performance and Compensation Review
During
2008, our Compensation Committee completed its 2007 annual performance reviews
for our executive officers, Chairman of the Board and Vice Chairman of the
Board
consistent with terms of their respective employment or consulting agreements,
as applicable. Per their respective agreements, the aforementioned individuals
were entitled to a minimum 5% raise of their base salary and were eligible
for
annual bonuses up to 50% of their base salary. The Compensation Committee
elected to leave their base pay unchanged during the first half of 2008, and
agreed to reevaluate it in the second half of the 2008 and determined that
no
bonuses would be paid to the individuals for fiscal year 2007. In addition,
on
August 26, 2008, each of our executive officers entered into an amendment to
his
respective employment agreement with us, as discussed above.
Potential
Payments Upon Termination or Change-in-Control
Termination
by the Company for reasons other than “Cause” or by the Executive for “Good
Reason”.
Pursuant
to terms of their respective employment agreements, if we terminate each of
Mr.
Rosato’s, Mr. Gallagher’s, Mr. Dec’s or Mr. Weiss’s employment for reasons other
than “Cause” or the executive terminates his employment for “Good Reason” (as
those terms are defined in their respective employment agreement), each of
the
named executive officers is entitled to severance and health care payments,
as
described in the following table. Additionally, per the terms of his restricted
stock agreement, Mr. Dec is entitled to accelerated vesting of any unvested
restricted stock outstanding at the date of termination.
|
|
|
|
Health
|
|
Restricted
|
|
|
|
|
|
Severance ($)
|
|
Care ($)(4)
|
|
Stock ($)
|
|
Total($)
|
|
Thomas
P. Rosato (1)
|
|
|
873,288
|
|
|
4,476
|
|
|
-
|
|
|
877,764
|
|
Gerald
J. Gallagher (1)
|
|
|
873,288
|
|
|
6,074
|
|
|
-
|
|
|
879,362
|
|
Timothy
C. Dec (2)
|
|
|
225,000
|
|
|
6,074
|
|
|
388,000
|
|
|
619,074
|
|
Harvey
L. Weiss (3)
|
|
|
410,959
|
|
|
4,476
|
|
|
-
|
|
|
415,435
|
|
|
(1)
|
Per
their respective employment agreement, each of Mr. Rosato and Mr.
Gallagher is entitled to receive base compensation as and when it
would
otherwise payable if his employment had not been terminated from
the date
of termination through January 19, 2010, the expiration date of the
employment period. If the termination occurs during the last twelve
months
of their employment, then the executive shall be entitled to receive
amounts equal to his base compensation (as and on terms otherwise
payable)
for twelve months from the date of
termination.
|
|
(2)
|
Per
his employment agreement, Mr. Dec is entitled to amounts equal to
his base
compensation (as and on terms otherwise payable) for 12 months from
the
date of termination. Mr. Dec’s restricted stock award is valued at $4.85
per share based on our closing stock price at December 31,
2007.
|
|
(3)
|
Per
his employment agreement, Mr. Weiss is entitled to receive base
compensation as and when it would otherwise payable if his employment
had
not been terminated from the date of termination through January
19, 2010,
the expiration date of the employment period. If the termination
occurs
during the last 24 months of his employment, then the executive shall
be
entitled to receive amounts equal to base compensation (as and on
terms
otherwise payable) for 24 months from the date of
termination.
|
|
(4)
|
Per
their respective employment agreements, each of Mr. Rosato, Mr. Gallagher,
Mr. Dec and Mr. Weiss is entitled to the reimbursement of a portion
of any
elected COBRA coverage for twelve months from the date of termination.
We
will pay a percentage of the premium for such COBRA health coverage
equal
to the percentage of the premium for health insurance coverage paid
by the
Company on the date of termination.
|
As
defined in the 2006 Stock Plan, any remaining restrictions on the restricted
common stock will lapse immediately, upon the occurrence of a change of control
of Fortress International Group, Inc.
Compensation
Committee Interlocks and Insider Participation
During
the 2007 fiscal year, none of the members of our Compensation Committee were
an
officer of our company. During the 2007 fiscal year, no interlocking
relationship existed between our board and the Board or the Compensation
Committee of any other company, nor has any such interlocking relationship
existed in the past.
NON-EMPLOYEE
DIRECTOR COMPENSATION
During
the 2007 fiscal year, each of our non-employee directors, other than Mr.
McMillen, received an annual retainer fee of $20,000 and $3,000 for each
in-person Board meeting attended and $1,000 for each telephonic Board meeting
attended. In addition, each member of the Audit Committee (except the chairman)
shall receive $10,000 per year and the chairman of the Audit Committee shall
receive $30,000 per year. Each member of the Compensation Committee (except
the
chairman) shall receive $5,000 per year and the chairman of the Compensation
Committee shall receive $15,000 per year. Each member of the Special Committee
receives $1,000 for each committee meeting attended. However, on August 26,
2008, our Board of Directors and Compensation Committee approved a reduction
of
50% of all the cash fees payable to our non-employee directors for their
participation as members of the board of directors and the committees through
2009.
We
also
compensate our non-employee directors, other than Mr. McMillen, with restricted
stock. The compensation policy provides such non-employee directors with an
annual grant of 10,000 shares of restricted stock under our 2006 Stock Plan
to
be granted on or about May 1 of each calendar year (unless the Board determines
otherwise), and which vest over a two-year period with one-third of the shares
vesting on the grant date, and each one-half of the balance of such shares
vesting on the first and second anniversaries of the grant date,
respectively.
In
addition, for the new members who joined the Board in 2007, they received a
one-time grant of $100,000 worth of restricted stock under the 2006 Stock Plan,
based on the closing price on the grant date of our common stock on the Nasdaq
Stock Market. Such shares will vest over a three-year period, with one-third
of
such shares vesting on each of the first, second and third anniversaries of
the
grant date.
We
reimburse our directors for travel, lodging and other reasonable out-of-pocket
expenses in connection with the attendance at Board, committee, and stockholder
meetings, as well as for other reasonable expenses related to service on the
Board. We also provide liability insurance for our directors and officers.
American International Group and XL Insurance Company are the primary carriers.
The annual cost of this coverage is approximately $0.2 million.
We
do not
maintain any pension, nonqualified defined contribution or other deferred
compensation plans for our non-employee directors. The following table
summarizes compensation earned by our non-employee directors during fiscal
year
2007.
|
|
|
|
|
|
All
|
|
|
|
|
|
Fees Earned
|
|
Stock
|
|
Other
|
|
Total
|
|
Name
|
|
or Paid in Cash ($)
|
|
Awards ($)(1)
|
|
Compensation ($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
Asa
Hutchinson
|
|
$
|
57,000
|
|
$
|
28,658
|
|
$
|
-
|
|
$
|
85,658
|
|
William
L. Jews
|
|
|
29,000
|
|
|
50,881
|
|
|
-
|
|
|
79,881
|
|
C.
Thomas McMillen (2)
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
|
200,000
|
|
David
J. Mitchell
|
|
|
57,000
|
|
|
28,658
|
|
|
-
|
|
|
85,658
|
|
John
Morton, III
|
|
|
75,000
|
|
|
50,881
|
|
|
-
|
|
|
125,881
|
|
Donald
L. Nickles
|
|
|
52,000
|
|
|
28,658
|
|
|
-
|
|
|
80,658
|
|
(1)
|
This
column represents the dollar amount recognized as compensation expenses
for financial statement reporting purposes with respect to the referenced
fiscal year for the fair value of restricted stock granted in that
fiscal
year. These values have been calculated in accordance with SFAS 123R
using
the closing price of our common stock on the grant date. Pursuant
to SEC
rules, the amounts shown exclude the effect of estimated forfeitures
related to service-based vesting conditions. The amounts in this
column
reflect our accounting expense for these awards, and may not correspond
to
the actual value that will be recognized by the
director.
|
(2)
|
Represents
fees earned under the consulting agreement between us and the Washington
Capital Advisors, LLC, which is principally owned and managed by
Mr.
McMillen. See description of the consulting agreement below under
the
caption “ Related Party
Transactions.”
|
The
non-employee directors without a consulting agreement received the following
equity awards under the 2006 Stock Plan during fiscal year 2007.
|
|
|
|
Stock Awards
|
|
|
|
|
|
Restricted Stock
|
|
Grant Date
|
|
|
|
|
|
Granted
|
|
Fair Value of Stock
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
($)
|
|
|
|
|
|
|
|
|
|
Asa
Hutchinson
|
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
William
L. Jews
|
|
|
5/1/2007
|
|
|
18,416
|
|
|
100,000
|
|
|
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
David
J. Mitchell
|
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
John
Morton, III
|
|
|
5/1/2007
|
|
|
18,416
|
|
|
100,000
|
|
|
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
Donald
L. Nickles
|
|
|
5/1/2007
|
|
|
10,000
|
|
|
54,300
|
|
Potential
Payments upon Death, Disability or Termination
Termination
due to either Death, Disability, or by the Company for reasons other than
“Cause” or upon a “Change of Control”
Pursuant
to terms of their stock agreements, if the individual terminates due to death
or
disability, or we terminate each of Mr. Hutchinson’s, Mr. Jew’s, Mr. Mitchell’s,
Mr. Morton’s, or Mr. Nickle’s employment on the board for reasons other than
“Cause” or upon a “Change of Control” (as those terms are defined in their
respective stock agreements), each of the named executive officers is entitled
to accelerated vesting of any unvested restricted stock outstanding at the
date
of termination. Pursuant to Mr. McMillen’s consulting agreement, if we terminate
Mr. McMillen for reasons other than “Cause” or the executive terminates his
contract for “Good Reason” (as those terms are defined in his consulting
agreement), Mr. McMillen is entitled to severance payments.
|
|
Severance($)(1)
|
|
Restricted
Stock($)
(2)
|
|
Total($)
|
|
Asa
Hutchinson
|
|
|
-
|
|
|
32,333
|
|
|
32,333
|
|
William
L. Jews
|
|
|
-
|
|
|
121,652
|
|
|
121,652
|
|
C.
Thomas McMillen
|
|
|
410,959
|
|
|
-
|
|
|
410,959
|
|
David
J. Mitchell
|
|
|
-
|
|
|
32,333
|
|
|
32,333
|
|
John
Morton, III
|
|
|
-
|
|
|
121,652
|
|
|
121,652
|
|
Donald
L. Nickles
|
|
|
-
|
|
|
32,333
|
|
|
32,333
|
|
(1)
|
Per
his consulting agreement, Mr. McMillen is entitled to receive base
compensation as and when it would otherwise payable if his employment
had
not been terminated from the date of termination through January
19, 2010,
the expiration date of the employment period. If the termination
occurs
during the last twelve months of his employment, then the executive
shall
be entitled to receive amounts equal to base compensation (as and
on terms
otherwise payable) for twelve months from the date of
termination.
|
(2)
|
The
restricted stock value is valued at $4.85 per share based on our
closing
stock price at December 31, 2007.
|
REPORT
OF AUDIT COMMITTEE
The
Audit
Committee of the Board of Directors, which consists entirely of directors who
meet the independence and experience requirements of The Nasdaq Stock Market,
has furnished the following report:
The
Audit
Committee assists the Board in overseeing and monitoring the integrity of our
financial reporting process, compliance with legal and regulatory requirements
and the quality of internal and external audit processes. This committee’s role
and responsibilities are set forth in a our charter adopted by the Board, which
is available on our website at www.thefigi.com.
This
committee reviews and reassesses our charter annually and recommends any changes
to the Board for approval. The Audit Committee is responsible for overseeing
our
overall financial reporting process, and for the appointment, compensation,
retention, and oversight of the work of our independent registered public
accounting firm. In fulfilling its responsibilities for the financial statements
for fiscal year ended December 31, 2007, the Audit Committee took the following
actions:
•
Reviewed and discussed the audited financial statements for the fiscal year
ended December 31, 2007 with management and Grant Thornton LLP, our independent
registered public accounting firm, 2007;
•
Discussed with Grant Thornton LLP the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended, as adopted by the Public
Company Accounting Oversight Board in Rule 3200T, relating to the conduct of
the
audit; and
•
Received written disclosures and the letter from Grant Thornton LLP regarding
its independence as required by Independence Standards Board Standard No. 1,
as
adopted by the Public Company Accounting Oversight Board in Rule 3600T. The
Audit Committee further discussed with Grant Thornton LLP their independence.
The Audit Committee also considered the status of pending litigation, taxation
matters and other areas of oversight relating to the financial reporting and
audit process that the committee determined appropriate.
Based
on
the Audit Committee’s review of the audited financial statements and discussions
with management and Grant Thornton LLP, the Audit Committee recommended to
the
Board that the audited financial statements be included in our Annual Report
on
Form 10-K for the fiscal year ended December 31, 2007 for filing with the
SEC.
Members
of the Audit Committee:
John
Morton, III (Chairman)
David
J.
Mitchell
Asa
Hutchinson
William
L. Jews
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our
executive officers, directors and 10% stockholders are required under Section
16(a) of the Securities Exchange Act of 1934, as amended, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Copies of these reports must also be furnished to us.
Based
solely on our review of copies of reports furnished to us, or written
representations that no reports were required, we believe that during 2007
our
executive officers, directors and 10% stockholders complied with all filing
requirements of Section 16(a) in a timely manner, except for Timothy C. Dec,
Chief Financial Officer and Paul D. Sonkin and Hummingbird, as described
below.
Mr.
Dec
was hired on August 20, 2007 and on September 7, 2007 received restricted common
stock grants of (i) 40,000 shares, one half vesting 18 months from the grant
date and one half vesting 36 months from the grant date and (ii) 40,000 shares
vesting based on certain performance criteria. Accordingly, Form 3 and Form
4
were required to be filed by August 30, 2007 and September 11, 2007,
respectively, but were not filed until March 20, 2008.
Paul
D.
Sonkin, The Hummingbird Value Fund L.P., The Hummingbird Microcap Value Fund
L.P., The Hummingbird Concentrated Fund, L.P., Hummingbird Capital, LLC, and
Hummingbird Management, LLC (collectively, “Hummingbird”) filed late Form 3 and
Form 4. The date of the reporting event associated with the Form 3 was September
25, 2006, requiring filing by no later than October 5, 2006. The date of the
reporting event associated with the Form 4 was October 12, 2006, requiring
filing by no later than October 16, 2006. The Form 3 and Form 4 were filed
by
Hummingbird on January 8, 2007.
CERTAIN
RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Convertible
Note Repayment
On
August
29, 2007, we, acting upon approval of our disinterested directors and approved
by our Audit Committee, entered into a prepayment agreement (the “Agreement”)
with Thomas P. Rosato, our Chief Executive Officer and a member of our Board,
to
revise the repayment terms of the $5,000,000 Convertible Promissory Note, dated
January 19, 2007, issued to Mr. Rosato us (the “Rosato Note”), as consideration
in connection with our acquisition of TSS/Vortech. Pursuant to the Agreement,
we
paid down a portion of the Rosato Note in the amount of $2,000,000 as a
prepayment of the Rosato Note and Mr. Rosato agreed that such prepayment retired
$2,500,000 of the Rosato Note. In addition, pursuant to a 10b5-1 Plan with
a
designated broker in accordance with the conditions of Rule 10b-18 of the
Securities Exchange Act of 1934, as amended, Mr. Rosato used the $2,000,000
of
funds received from us to purchase 273,398 shares of our publicly traded common
stock at a weighted average price of $5.96 per share and warrants to purchase
an
additional 294,870 shares of common stock at weighted average cost of $1.31
per
warrant.
Prior
Share Issuances
On
March
9, 2005, we issued 1,750,000 shares of our common stock to the individuals
set
forth below for $25,000 in cash, at an average purchase price of approximately
$0.014 per share, as follows:
Name
|
|
Number of
Shares
|
|
Washington Capital
Advisors, LLC
|
|
|
575,000
|
|
Harvey
L. Weiss
|
|
|
575,000
|
|
David
J. Mitchell
|
|
|
150,000
|
|
Donald
L. Nickles
|
|
|
200,000
|
|
Asa
Hutchinson
|
|
|
200,000
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
24,765
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
15,926
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
5,553
|
|
Paladin
Homeland Security Fund, L.P.
|
|
|
3,756
|
|
All
of
the shares of our common stock outstanding prior to our initial public offering
(“initial shares”) and held by the above stockholders (“initial stockholders”)
were placed in escrow with Continental Transfer & Trust Company, as escrow
agent, until the earliest of: July 13, 2008; our dissolution and liquidation;
or
the consummation of a liquidation, merger, stock exchange or other similar
transaction which results in all of our stockholders having the right to
exchange their shares of common stock for cash, securities or other property
subsequent to our consummating a business combination with a target
business.
During
the escrow period, the initial stockholders will not be able to sell or transfer
their securities except to their spouses and children or trusts established
for
their benefit or otherwise as provided in the stock escrow agreement, but will
retain all other rights as our stockholders, including, without limitation,
the
right to vote their shares of common stock and the right to receive cash
dividends, if declared. If dividends are declared and payable in shares of
common stock, such dividends will also be placed in escrow.
Registration
Rights.
The
holders of the majority of the initial shares are entitled to make up to two
demands that we register the initial shares. The holders of the majority of
the
initial shares may elect to exercise these registration rights at any time
after
the date on which the initial shares are released from escrow, which, except
in
limited circumstances, is not before July 13, 2008. In addition, the initial
stockholders have certain “piggyback” registration rights on registration
statements filed subsequent to the date on which these shares of common stock
are released from escrow. We will bear the expenses incurred in connection
with
the filing of any such registration statements. On October 10, 2008, we filed
a
registration statement on Form S-3 for the resale of the initial shares,
pursuant to a demand of the holders of the initial shares.
Washington
Capital Advisors, LLC.
We paid
Washington Capital Advisors, LLC (“Washington Capital Advisors”), of which Mr.
C. Thomas McMillen , our vice chairman and a director, is the principal equity
owner and officer, $7,500 per month for office space and general administrative
services. This arrangement was agreed to by Washington Capital Advisors, the
successor-in-interest to Global Defense Corporation, also an affiliate of Mr.
McMillen, for our benefit and was not intended to provide Mr. McMillen
compensation in lieu of salary. Upon completion of the acquisition of
TSS/Vortech, we were no longer required to pay this monthly fee. We paid an
aggregate of $97,500 pursuant to this agreement, of which $7,500 was paid during
the fiscal year ended December 31, 2007.
Consulting
Agreement with C. Thomas McMillen
On
January 19, 2007, we entered into a consulting agreement with Washington Capital
Advisors, of which Mr. C. Thomas McMillen , our vice chairman and a director,
is
the principal equity owner and officer, pursuant to which Washington Capital
Advisors is engaged to serve as a consultant for a period of three years. Under
the terms of the Consulting Agreement, Washington Capital Advisors provides
advisory services relating to strategic, financial, marketing and business
development matters and will also provide mergers and acquisitions assistance.
The base compensation to Washington Capital Advisors is $200,000 per year
(subject to a minimum annual increase of 5% per year) and Washington Capital
Advisors is eligible to receive an annual bonus of up to 50% of its then
applicable base compensation (the amount of the bonus and the criteria for
the
bonus to be determined by the Board). In addition to base compensation and
eligibility for a bonus, Washington Capital Advisors is entitled to a referral
fee equal to 5% of the “Gross Profits” (as defined in the Consulting Agreement)
attributable to any client or customer (other than the federal government,
or
any agency or subdivision thereof) identified by Washington Capital Advisors
to
us or any of our subsidiaries. Pursuant to the terms of the Consulting
Agreement, if we terminate the Consulting Agreement for reasons other than
“Cause” or Washington Capital Advisors terminates the Consulting Agreement for
“Good Reason” (as those terms are defined in the Consulting Agreement),
Washington Capital Advisors is entitled to receive its base compensation as
and
when it would otherwise be payable if the Consulting Agreement had not been
terminated (provided, however that if termination occurs during the last twelve
months of the Consulting Agreement, then Washington Capital Advisors shall
be
entitled to receive amounts equal to base compensation (as and on the terms
otherwise payable) for twelve months from the date of termination). During
the
fiscal year ended December 31, 2007, $200,000 was paid pursuant to this
agreement. In addition, on August 26, 2008, we entered into an amendment to
the
consulting agreement pursuant to which the annual base fee payable under the
consulting agreement will be reduced from $200,000 to $100,000 and we will
not
be obligated to pay a minimum base fee increase for subsequent years. In
addition, the amendment provides for a two-year extension of the consulting
term.
Our
Audit
Committee in accordance with its written charter reviews and approves in advance
all related party transactions greater than $25,000 and follows a pre-approved
process for contracts with related party for less than $25,000.
We
participate in transactions with the following entities affiliated through
common ownership and management. The Audit Committee of the Board reviewed
and
approved in advance all of these related party transactions in accordance with
its written charter.
S3
Integration L.L.C.
S3
Integration L.L.C. (S3 Integration) is owned 15% each by our Chief Executive
Officer and President. S3 Integration provides commercial security systems
design and installation services as a subcontractor to us.
Chesapeake
Systems, L.L.C.
(Chesapeake Systems) is 9% owned and significantly indebted to our Chief
Executive Officer. Chesapeake Systems is a manufacturers’ representative and
distributor of mechanical and electrical equipment and purchased certain assets
of Chesapeake Tower Systems, Inc. in February 2007.
Chesapeake
Mission Critical, L.L.C.
(Chesapeake MC) is 9% owned each by our Chief Executive Officer and President.
Additionally, it is significantly indebted to our Chief Executive Officer.
Chesapeake MC is a manufacturers’ representative and distributor of electrical
equipment and purchased certain assets of Chesapeake Tower Systems, Inc. in
February 2007.
Chesapeake
Tower Systems, Inc.
Chesapeake Tower Systems, Inc. (Chesapeake) is 100% owned by our Chief Executive
Officer. On February 28, 2007, Chesapeake sold substantially all of its assets
to Chesapeake Systems and Chesapeake MC and, except for an office space sublease
agreement, does not engage in any business with us. Chesapeake was a
manufacturer’s representative and distributor of mechanical and electrical
equipment, which Chesapeake sold to us. In addition, we acted as a subcontractor
to Chesapeake for certain equipment installation on project-by-project
basis.
CTS
Services, L.L.C. (CTS)
is
55% owned by our Chief Executive Officer and 5% owned by our Treasurer. CTS
is a
mechanical contractor that acts as a subcontractor to us for certain projects.
In addition, CTS utilizes us as a subcontractor on projects as
needed.
L.H.
Cranston Acquisition Group, Inc.
L.H.
Cranston Acquisition Group, Inc. (Cranston) is 25% owned by our Chief Executive
Officer. Cranston is a mechanical, electrical and plumbing contractor that
acts,
directly or through its Subsidiary L.H. Cranston and Sons, Inc., as
subcontractor to us on a project-by-project basis.
Telco
P&C, L.L.C.
is 55%
owned by our Chief Executive Officer. Telco P&C is a specialty electrical
installation company that acts as a subcontractor to us. We have also acted
as a
subcontractor to Telco as needed.
Automotive
Technologies, Inc.
Automotive Technologies, Inc. is 60% owned by our Chief Executive Officer and
provides vehicle maintenance and repair services to us.
TPR
Group Re Three, L.L.C.
As of
November 1, 2006, TPR Group Re Three, L.L.C. (TPR Group Re Three) is owned
50%
each by our Chief Executive Officer and our President. TPR Group Re Three leases
office space to us under the terms of a real property lease to TSS/Vortech.
We
had an independent valuation, which determined the lease to be at fair
value.
|
|
Year Ended
December 31,
2007
|
|
Revenue
|
|
|
|
|
CTS Services, L.L.C.
|
|
$
|
183,532
|
|
Chesapeake
Systems, L.L.C.
|
|
|
105,965
|
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
106,627
|
|
Total
|
|
$
|
396,124
|
|
|
|
|
|
|
Cost
of Revenue
|
|
|
|
|
CTS
Services, L.L.C.
|
|
$
|
3,439,631
|
|
Chesapeake
Systems, L.L.C.
|
|
|
161,178
|
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
144,924
|
|
Chesapeake
Tower Systems, Inc.
|
|
|
1,052
|
|
S3
Integration, L.L.C.
|
|
|
267,848
|
|
LH
Cranston & Sons, Inc.
|
|
|
234,252
|
|
Telco
P&C, L.L.C.
|
|
|
29,174
|
|
Total
|
|
$
|
4,278,059
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
|
|
Office
rent paid on Chesapeake sublease agreement
|
|
|
207,671
|
|
Office
rent paid to TPR Group Re Three, L.L.C.
|
|
|
384,271
|
|
Vehicle
repairs to Automotive Technologies, Inc.
|
|
|
4,442
|
|
Total
|
|
$
|
596,384
|
|
The
following table sets forth transactions we entered into with the above related
parties during the fiscal year ended December 31, 2007. It should be noted
that
revenue represents amounts earned on contracts with related parties under
which
we provide services; and cost of revenue represents costs incurred in connection
with related parties which provide services to us on contracts for our
customers. Accordingly, a direct relationship to the revenue and cost of
revenue
information below should not be expected.
|
|
December 31,
2007
|
|
Accounts
receivable/(payable):
|
|
|
|
|
|
CTS
Services, L.L.C.
|
|
$
|
44,821
|
|
|
|
|
CTS
Services, L.L.C.
|
|
|
|
|
|
(2,969,671
|
)
|
Chesapeake
Systems, L.L.C.
|
|
|
611
|
|
|
|
|
Chesapeake
Systems, L.L.C.
|
|
|
|
|
|
(873
|
)
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
104,397
|
|
|
|
|
Chesapeake
Mission Critical, L.L.C.
|
|
|
|
|
|
(18,950
|
)
|
Telco
P&C, L.L.C.
|
|
|
|
|
|
(8,000
|
)
|
LH
Cranston & Sons, Inc.
|
|
|
|
|
|
(11,575
|
)
|
S3
Integration, L.L.C.
|
|
|
|
|
|
(60,556
|
)
|
Total
Accounts receivable (payable)
|
|
$
|
149,829
|
|
|
(3,069,625
|
)
|
|
|
|
|
|
|
|
|
PROPOSALS
TO BE VOTED UPON BY STOCKHOLDERS
ELECTION
OF DIRECTORS
(Notice
Item 1)
On
September 23, 2008, our Board of Directors voted to nominate C. Thomas McMillen,
Thomas P. Rosato and John Morton, III, for election at the 2008 annual meeting
of stockholders for a term of three years to serve until the 2011 annual meeting
of stockholders, and until their respective successors have been elected and
qualified, or until their earlier death, resignation or removal.
The
Board
of Directors currently consists of nine members, classified into three classes
as follows:
|
•
|
Messrs.
C. Thomas McMillen, Thomas P. Rosato and John Morton, III, constitute
a
class with a term ending at the 2008 annual meeting of stockholders;
and
|
|
•
|
Messrs.
David J. Mitchell, Gerard J. Gallagher and Asa Hutchinson, constitute
a
class with a term ending at the 2009 annual meeting of stockholders;
and
|
|
•
|
Messrs.
Harvey L. Weiss, Donald L. Nickles and William L. Jews, constitute
a class
with a term ending at the 2010 annual meeting of
stockholders.
|
At
each
Annual Meeting of Stockholders, directors are elected for a full term of three
years to succeed those directors whose terms are expiring. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors.
The
Board
of Directors has voted (i) to set the size of the Board of Directors at nine
members and (ii) to nominate Messrs. C. Thomas McMillen, Thomas P. Rosato and
John Morton, III, for election at the 2008 Annual Meeting for a term of three
years to serve until the 2011 Annual Meeting of Stockholders, and until their
respective successors are elected and qualified, or until their earlier death,
resignation or removal. The Class I directors, Messrs. David J. Mitchell, Gerard
J. Gallagher and Asa Hutchinson and the Class II directors, Messrs. Harvey
L.
Weiss, Donald L. Nickles and William L. Jews , will serve until the Annual
Meetings of Stockholders to be held in 2009 and 2010, respectively, and until
their respective successors have been elected and qualified, or until their
earlier death, resignation or removal.
Unless
authority to vote for any of these nominees is withheld, the shares represented
by the enclosed proxy will be voted FOR
the
election as directors of Messrs. C. Thomas McMillen, Thomas P. Rosato and John
Morton, III. In the event that either nominee becomes unable or unwilling to
serve, the shares represented by the enclosed proxy will be voted for the
election of such other person as the Board of Directors may recommend in his
place. We have no reason to believe that any nominee will be unable or unwilling
to serve as a director.
A
plurality of the shares voted affirmatively at the annual meeting is required
to
elect each nominee as a director.
THE
BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF MESSRS. C. THOMAS MCMILLEN,
THOMAS
P. ROSATO AND JOHN MORTON, III, AS DIRECTORS, AND PROXIES SOLICITED BY THE
BOARD
WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE
ON
THE PROXY.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(Notice
Item 2)
The
Audit
Committee has appointed Grant Thornton LLP (“Grant Thornton”), independent
registered public accounting firm, to audit our financial statements for the
fiscal year ending December 31, 2008. The
Board
proposes that the stockholders ratify the appointment. Grant
Thornton audited
our financial statements for the fiscal year ended December 31, 2007. We expect
that representatives of Grant
Thornton
will be
present at the meeting, will be able to make a statement if they so desire,
and
will be available to respond to appropriate questions. Goldstein
Golub Kessler, LLP (“GGK”) were our independent registered public accounting
firm for the fiscal year ended December 31, 2006.
The
following table presents fees for professional audit services rendered by Grant
Thornton and GGK for the audit of our annual financial statements for the years
ended December 31, 2007 and 2006, respectively, and fees billed for other
services rendered by Grant Thornton and GGK during those periods.
Audit
and Non-Audit Fees
|
|
2006
|
|
2007
|
|
Audit
fees
|
|
$
|
38,000
|
|
$
|
240,130
|
|
Audit-related
fees
|
|
|
17,786
|
|
|
52,775
|
|
Tax
fees
|
|
|
2,612
|
|
|
6,000
|
|
All
other fees
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
58,398
|
|
$
|
298,905
|
|
Audit
Fees
Audit
fees consisted of professional services rendered by Grant Thornton and GGK
for
the audit of the annual consolidated financial statements included in our Annual
Report on Form 10-K, for the reviews of the consolidated quarterly financial
statements included in our Forms 10-Q and assistance and review of such
documents filed with the SEC.
Audit-Related
Fees
Audit-related
fees consisted principally of fees for professional services associated with
the
audits in connection with acquisitions. We paid Grant Thornton $49,275 in
connection with opening balance sheet audits and other related work for our
acquisitions of TSS/Vortech, Innovative, and Rubicon.
We
paid
GGK $17,786 in 2006 for services related to the preparation and filing of the
proxy statement in connection with our acquisition of TSS/Vortech. We paid
GGK
$3,500 in 2007 in connection with the review of certain 2007 filings for
purposes of referencing previously audited financial statements by
GGK.
Tax
Fees
Tax
fees
consisted of professional services provided associated with tax compliance,
tax
planning and tax advice. We have paid no fees to our principal auditor for
tax
compliance or consultation in 2007; however, we did pay RSM McGladry, an
affiliate of GGK, $6,000 in 2007 for tax services. Fees paid to GGK associated
with tax compliance and tax consultation were and $2,612 in 2006.
All
Other Fees
We
paid
no other fees to either Grant or GGK 2007 and 2006,
respectively.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services
of
Independent Registered Public Accounting Firm
Consistent
with policies of the Securities and Exchange Commission regarding auditor
independence, the Audit Committee has responsibility, pursuant to its written
charter, for appointing, setting compensation and overseeing the work of the
independent registered public accounting firm. In recognition of this
responsibility, the audit committee has established a policy to pre-approve
all
audit and permissible non-audit services provided by the independent registered
public accounting firm. The Audit Committee’s policy is to approve all audit and
non-audit services provided by our independent registered public accounting
firm
prior to the commencement of the services using a combination of pre-approvals
for certain engagements up to predetermined dollar thresholds in accordance
with
the pre-approval policy and specific approvals for certain engagements on a
case-by-case basis. The Audit Committee has delegated authority to the
committee’s chairman to pre-approve between committee meetings those services
that have not already been pre-approved by the committee. The Chairman of the
Audit Committee is required to report any such pre-approval decisions to the
full committee at its next scheduled meeting.
Prior
to
engagement, the Audit Committee pre-approves these services by category of
service. The fees are budgeted and the Audit Committee requires the independent
registered public accounting firm and management to report actual fees versus
the budget periodically throughout the year by category of service. During
the
year, circumstances may arise when it may become necessary to engage the
independent registered public accounting firm for additional services not
contemplated in the original pre-approval. In those instances, the Audit
Committee requires specific pre-approval before engaging the independent
registered public accounting firm.
The
Audit
Committee may delegate pre-approval authority to one or more of its members.
The
member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
In
the
event the stockholders do not ratify the appointment of Grant Thornton LLP
as
our independent registered public accounting firm, the Audit Committee will
reconsider its appointment.
The
affirmative vote of a majority of the shares present or represented and entitled
to vote at the 2008 Annual Meeting is required to ratify the appointment of
the
independent registered public accounting firm.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE TO RATIFY THE SELECTION OF GRANT THORNTON
LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AND PROXIES SOLICITED
BY
THE BOARD WILL BE VOTED IN FAVOR OF SUCH RATIFICATION UNLESS A STOCKHOLDER
INDICATES OTHERWISE ON THE PROXY.
CODE
OF CONDUCT AND ETHICS
We
have
adopted a code of ethics that applies to all of our employees, including our
chief executive officer and chief financial and accounting officers. The text
of
the code of conduct and ethics is posted on our website at www.thefigi.com.
The
code of ethics is also available to stockholders, without charge, upon request
in writing to the Corporate Secretary at Chief Executive Officer at 7226 Lee
DeForest Drive, Suite 203, Columbia, Maryland 21046. Disclosure regarding any
amendments to, or waivers from, provisions of the code of conduct and ethics
that apply to our directors, principal executive and financial officers will
be
included in a Current Report on Form 8-K within four business days following
the
date of the amendment or waiver.
OTHER
MATTERS
The
Board
of Directors knows of no other business which will be presented to the annual
meeting. If any other business is properly brought before the annual meeting,
proxies in the enclosed form will be voted in accordance with the judgment
of
the persons voting the proxies.
STOCKHOLDER
PROPOSALS AND NOMINATIONS FOR DIRECTOR
To
be
considered for inclusion in the proxy statement relating to our Annual Meeting
of Stockholders to be held in 2009, stockholder proposals must be delivered
to
or mailed and received at our principal executive offices not less than 60
days
nor more than 90 days prior to the meeting; provided,
however,
that in
the event that less than 75 days’ notice or prior public disclosure of the date
of the meeting is given or made to the stockholders, notice by the stockholder
to be timely must be so received no later than the close of business on the
fifteenth day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made, whichever first occurs. Proposals
received after that date will not be voted on at the annual meeting. If a
proposal is received before that date, the proxies that management solicits
for
the meeting may still exercise discretionary voting authority on the proposal
under circumstances consistent with the proxy rules of the SEC. All stockholder
proposals should be marked for the attention of Chief Executive Officer,
Fortress International Group, Inc., 7226 Lee DeForest Drive, Suite 203,
Columbia, Maryland 21046.
COLUMBIA,
MARYLAND
October
30, 2008
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as
amended, (other than exhibits thereto) filed with the SEC, which provides
additional information about us, is available on the Internet at
www.thefigi.com
and is available in paper form to beneficial owners of our common stock without
charge upon written request to Thomas P. Rosato, Chief Executive Officer,
Fortress International Group, Inc., 7226 Lee DeForest Drive, Suite 203,
Columbia, Maryland 21046.
PROXY
CARD