Under its charter, the Audit Committee of our Board is
charged with reviewing all potential related party transactions. Our policy has
been that the Audit Committee, which is comprised solely of independent,
disinterested directors, reviews and then recommends such related party
transactions to the entire Board for further review and approval. All such
related party transactions are then required to be reported under applicable SEC
rules. Aside from this policy, we have not adopted additional procedures for
review of, or standards for approval of, related party transactions, but instead
review such transactions on a case-by-case basis.
EXECUTIVE
COMPENSATION
Our
Executive Officers
Executive
officers are elected by our Board and serve at its discretion. There are no
family relationships between any director or executive officer and any other
directors or executive officers. Set forth below is information regarding our
executive officers as of March 5, 2010.
|
|
|
|
|
|
|
Name
|
|
Position
|
|
Age
|
|
Year
Appointed
|
Eric
DeMarco
|
|
Chief
Executive Officer and President
|
|
46
|
|
2003
|
Deanna
Lund
|
|
Executive
Vice President and Chief Financial Officer
|
|
42
|
|
2004
|
Laura
Siegal
|
|
Vice
President, Corporate Controller, Secretary and Treasurer
|
|
47
|
|
2006
|
Benjamin
Goodwin
|
|
President,
Public Safety & Security Segment
|
|
69
|
|
2008
|
Each
executive officer holds office until his or her respective successor has been
elected and duly qualified, or until his or her earlier death, resignation or
removal. Historically, our Board has elected officers annually at its first
meeting following the annual meeting of stockholders.
Mr.
DeMarco’s biographical information is included with those of the other members
of our Board.
Ms. Lund
has served as Kratos’ Executive Vice President and Chief Financial Officer since
April 2004. Prior to joining Kratos, Ms. Lund most recently served as Vice
President of The Titan Corporation from July 1998 to 2004, then an NYSE-listed
corporation, prior to its acquisition by L-3 Communications, and as its
Corporate Controller beginning in December 1996. Ms. Lund was also Titan’s
Corporate Manager of Operations Analysis from 1993 to 1996. Prior to that time,
Ms. Lund worked for Arthur Andersen LLP. Ms. Lund received her bachelor’s degree
in accounting from San Diego State University, Magna Cum Laude, and is a
Certified Public Accountant.
Ms.
Siegal has served as Kratos’ Vice President and Corporate Controller since April
2006, Treasurer since July 2008, and Secretary since January 2008. Prior to that
time, she had served as our Vice President, Finance and Risk Management since
September 2004. Ms. Siegal joined Kratos in August 2000 and served as our
Treasurer from December 2003 through March 2006, our Director of Corporate
Planning from August 2002 to December 2003, Director of Financial Planning and
Analysis from January 2001 to August 2002, and Director of Purchasing from
August 2000 to January 2001. Throughout her career, Ms. Siegal has held a
variety of financial management positions in technology and consulting companies
including Controller of MEC Analytical Systems. Ms. Siegal received a bachelor’s
degree in Economics from the University of California, San Diego.
Mr.
Goodwin has served as President of the Public Safety & Security segment
since joining the Company in July 2008. Prior to that, Mr. Goodwin
served as Senior Vice President of Sales and Marketing and President of the
Public Safety, Security and Industrial Products Group of SYS from July 2005
until SYS’s merger with Kratos in July 2008. Mr. Goodwin has held a variety of
executive management positions in his career. From 2004 to 2005, Mr. Goodwin was
Chief Operating Officer and VP of Sales for Aonix, a developer of software
product solutions for the aerospace, telecommunications, and transportation
industries. Mr. Goodwin had previously served as Chief Executive Officer of
Aonix from 1996 to 2000. From 2000 to 2002, Mr. Goodwin was Executive Vice
President of Sales & Marketing for FinanCenter, a developer of financial
decision tools, and Chairman of the Board for Template Graphics Solutions, a
provider of 3D graphics tools. From 1976 to 1996, Mr. Goodwin was the President
and Chief Operating Officer of Thomson Software Products and President and Chief
Executive Officer of SofTech Microsystems. In these capacities, Mr. Goodwin was
responsible for the successful completion of an IPO, private placements and a
merger in addition to significant revenue growth within the companies. Mr.
Goodwin has a B.S. in Psychology from Millsaps College.
Compensation
Discussion and Analysis
Overview
This
compensation discussion and analysis explains the material elements of the
compensation awarded to, earned by, or paid to each of our executive officers
who served as named executive officers during the last completed fiscal
year. The named executive officers during the last completed fiscal
year include Eric DeMarco, President and Chief Executive Officer; Deanna Lund,
Executive Vice President and Chief Financial Officer; Laura Siegal, Vice
President, Corporate Controller, Secretary, and Treasurer; Benjamin Goodwin,
President, Public Safety and Security Segment; and Howard Bates, President,
Kratos Government Solutions Segment, who served as an executive officer in 2009
until his departure from the Company effective December 31, 2009.
Compensation
Program Objectives and Philosophy
The
Compensation Committee of our Board, which we refer to in this section as the
“Committee,” currently oversees the design and administration of the executive
compensation program at Kratos. The Committee has adopted an executive
compensation policy that has as its primary objective serving our stockholders
by attracting, retaining and motivating talented and qualified individuals to
manage and lead our business. The Committee’s primary objectives in structuring
and administering the executive compensation policy are to:
·
|
attract,
motivate and retain talented and dedicated executive
officers;
|
·
|
tie
annual and long-term cash and stock incentives to achievement of
measurable corporate and individual performance objectives;
and
|
·
|
reward
individual performance; and reinforce business strategies and objectives
for enhanced stockholder value.
|
The
Committee evaluates both performance and compensation of employees to ensure
that we have the ability to attract and retain employees and that compensation
provided to employees remains competitive relative to the compensation paid to
similarly situated employees of peer companies. The Committee endeavors to
ensure that the total compensation paid to our executive officers is fair,
reasonable and competitive.
The
principal elements of the current executive compensation program are base
salary, annual incentive cash bonus awards, long-term equity incentives in the
form of restricted stock units, other benefits and perquisites, post-termination
severance and accelerated vesting of previously granted equity awards upon
termination and/or a change in control. Other benefits and perquisites at Kratos
consist of life and health insurance benefits and a qualified 401(k) savings
plan equivalent to those offered to all employees.
The
Committee views these components of compensation as related but distinct.
Although the Committee does review total compensation, we do not believe that
significant compensation derived from one component of compensation should
negate or offset compensation from other components. We determine the
appropriate level for each compensation component based in part, but not
exclusively, on compensation for similar positions at peer companies, the
Committee’s view of internal equity and consistency, and other considerations we
deem relevant, such as rewarding extraordinary performance.
Determination
of Compensation Awards
The
Committee has historically performed, at least annually, a strategic review of
our executive officers’ compensation to determine whether we provide adequate
incentives and motivation to our executive officers and whether we adequately
compensate our executive officers relative to comparable officers in other
similarly situated companies. The Committee’s most recent review occurred in
November 2009.
Committee
meetings typically have included, for all or a portion of each meeting, not only
the Committee members but also our Chief Executive Officer and Vice President of
Human Resources. For compensation decisions relating to executive officers other
than the Chief Executive Officer, the Committee typically considers
recommendations from the Chief Executive Officer. When determining compensation
for the Chief Executive Officer, the Committee takes into account, but does not
rely solely upon, the recommendation of the Chief Executive Officer.
Compensation for the Chief Executive Officer is determined by discussions among
and action by the members of the Committee acting in consultation with the other
independent members of the Board and market data obtained on behalf of the
Committee. Neither the Company nor the Committee engaged a
compensation consultant during fiscal 2009.
It is our
policy generally to qualify compensation paid to executive officers for
deductibility under Section 162(m) of the Internal Revenue Code. Section 162(m)
generally prohibits the company from deducting the compensation of officers that
exceeds $1,000,000 unless that compensation is based on the achievement of
objective performance goals. We believe that our 1999 and 2005 Equity Incentive
Plans (the “Equity Plans”) are structured to qualify the stock options,
restricted shares and stock unit awards issued thereunder as performance-based
compensation and to maximize the tax deductibility of such awards. However, we
may at our discretion pay compensation to our officers that is
non-deductible.
Base
Compensation
We
provide our named executive officers and other executives with base salaries
that we believe enable us to hire and retain individuals in a competitive
environment and to reward individual performance and contribution to our overall
business goals, while taking into account the unique circumstances of our
company. We review base salaries for our named executive officers annually and
salary increases, if any, are based on the executive’s success in contributing
to our short-term and long-term objectives, as well as any unique challenges
faced by us. We also take into account the base compensation paid by companies
believed to be our competitors and by other public companies with which we
believe we generally compete for key executives within our market and
geographical region. The base salary of our Chief Executive Officer is reviewed
and recommended by the Committee acting in consultation with the other
independent members of our Board.
In
November 2009, the Committee applied the above principles and decided to adjust
certain of the executive officers’ salaries commensurate with their various
roles and responsibilities and applied the above principles in connection with
their review of peer companies’ executive compensation policies, taking into
consideration the size and organizational structure of those peer
companies. The Committee determined to increase Mr. DeMarco’s base
salary from $440,000 to $490,000, Ms. Lund’s base salary from $330,000 to
$350,000, Ms. Siegal’s base salary from $225,000 to $236,000, and Mr. Goodwin’s
base salary from $210,000 to $218,000, all effective on March 29,
2010.
Retention
Cash Bonus Awards
For
fiscal 2009, Mr. DeMarco, Ms. Lund, and Ms. Siegal were eligible to receive cash
retention awards under our retention cash bonus awards program (the “Retention
Program”). In establishing the Retention Program, the Committee considered the
continuing significant challenges faced by our corporate management team related
to, among other things, (i) the refocusing of our business as a defense
contractor and security systems integrator for the federal government and state
and local agencies, (ii) ongoing matters relating to historical legal issues,
(iii) the implementation of our growth strategy through acquisitions and related
integration activities and (iv) ongoing securities litigation. The Committee
also considered the critical importance of retaining Mr. DeMarco, Ms. Lund and
Ms. Siegal to the Company and the multiple roles each of these executives
performs for the Company. In particular, the Committee considered the fact that
most comparable companies have much larger executive teams performing the
functions allocated to Mr. DeMarco, Ms. Lund and Ms. Siegal. The Committee was
influenced by the fact that Mr. DeMarco effectively performed the role of Chief
Executive Officer, President and Chief Operating Officer and many of the
functions typically handled by executives in charge of corporate development and
strategy, mergers and acquisitions and investor relations at comparable
companies. Similarly, Ms. Lund and Ms. Siegal performed functions typically
assigned to a corporate treasurer, senior vice president of finance and planning
and corporate risk manager at comparable companies. Further, the vacancy in our
general counsel position required each of these executives to perform additional
duties that increased their level of commitment and responsibility to our
Company. Finally, the Committee acknowledged that each of these executives
possessed vital institutional knowledge that could not be quickly or effectively
replaced in the event that any of them were to resign, and as a result the
Committee placed the highest priority on designing a retention bonus program
that would motivate these executives to remain with the Company. The Committee
determined in November 2008 that the Retention Program should be continued
through 2009 in order to retain key executive officers through our ongoing and
demanding transition period.
The cash
awards under the Retention Program vested over the course of fiscal year 2009,
with the last vesting date occurring on December 27, 2009, and were paid out in
increments over this period and during the first quarter of 2010. These awards
were offered based upon the significant critical contributions delivered prior
to and during the transformation of the Company as well as expected future
performance and contributions, including those in relation to addressing ongoing
historical legal matters and continued growth of the Company within an
aggressive time frame. Because the awards are based upon these critical
contributions to the Company’s success, they are contingent upon continued
employment through the vesting period. If the eligible executive officer’s
employment were to have terminated during fiscal year 2009, the executive
officer would have forfeited all subsequent payouts. The value of the award for
each executive officer was determined at the recommendation of the chief
executive officer based on an assessment of the retention risk for each eligible
executive officer and such individual’s expected impact on the future success
and growth of the Company and their roles in addressing the historical
matters.
The
Committee determined in November 2009 that these executive officers would be
eligible to receive performance based awards under our annual cash bonus award
program for 2010 and elected to discontinue the Retention Program in recognition
of the successful conclusion of significant legacy issues and integration of
acquired businesses.
The
following table sets forth the awards and vesting periods for each of the named
executive officers under the Retention Program.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named
Executive Officer
|
|
Vesting
June
28,
2009
|
|
Vesting
September
27,
2009
|
|
Vesting
December
27,
2009
|
|
Total
Possible
Payments
|
|
Eric
DeMarco
|
|
$
|
220,000
|
|
$
|
110,000
|
|
$
|
220,000
|
|
$
|
550,000
|
|
Deanna
Lund
|
|
|
123,750
|
|
|
61,875
|
|
|
123,750
|
|
|
309,375
|
|
Laura
Siegal
|
|
|
50,625
|
|
|
25,312
|
|
|
50,625
|
|
|
126,563
|
|
Benjamin
Goodwin (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Howard
Bates (1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1) Mr.
Bates and Mr. Goodwin were not eligible to participate in the Retention Program,
as they were instead eligible to receive performance based awards under our
annual cash bonus award program.
Annual
Cash Bonus Awards
All
employees are eligible for an annual cash bonus award based upon achievement or
contributions to the Company. The executive officers who do not participate in
the Retention Program and other key members of our management have the
opportunity to receive incentive compensation in the form of annual
discretionary bonuses of cash based upon the achievement of certain individual
and company performance objectives during the fiscal year. Typically, target
cash bonus awards are based upon a percentage of the executive’s salary and
range from 25% to 100% of the executive officer’s salary. In determining the
appropriate level of target bonus for each officer, the Committee considers the
recommendation of the chief executive officer and other information collected
from public sources for similar positions at peer companies. Under the bonus
plan, a majority of each executive’s target bonus amount is based on goals
related to the Company’s achievement of specific financial targets for the
fiscal year, which typically include a combination of EBITDA, cash flow,
revenues, and other key financial metrics of the business, while the remaining
portion of the bonus is based on specific individualized operational objectives.
In order to receive any award on the financial targets, a minimum threshold must
be achieved. Once achieved, the executive would typically receive a pro rata
percentage of his or her bonus target based on linear interpolation. Generally,
the executive will not receive any of the company performance-based portion of
the target bonus if the financial metrics fall below the minimum achievement
threshold.
The
Committee and/or our Chief Executive Officer retain wide discretion to interpret
the terms of the cash bonus plan and to identify the extent to which an
individual’s performance objectives have been met in any particular fiscal year.
The Committee and/or the Chief Executive Officer also retain the right to
exclude extraordinary charges or other special circumstances in determining
whether the objectives were met during any particular fiscal year and may decide
to grant 100% of the targeted cash bonus award even if the financial targets do
not fall within the specified range, based upon an evaluation of business
conditions and industry trends. In addition, the Committee and/or Chief
Executive Officer may approve cash bonuses outside of the cash bonus plan. For
example, the Committee and/or Chief Executive Officer may approve bonus awards
in connection with an executive officer’s efforts and accomplishments with
respect to our strategic initiatives and milestones, and such bonus awards may
overlap with or be in addition to bonus awards under the cash bonus
plan.
Mr.
Bates, who served as President of our Government Solutions segment until
December 2009, and Mr. Goodwin, who serves as President of our Public Safety and
Security segment, were the only named executive officers eligible to participate
in the above cash bonus award plan for fiscal year 2009. Under the plan, Mr.
Bates was eligible to receive up to $150,000, or 50% of his annual salary, if
financial targets and individual performance goals were achieved, and up to an
additional $150,000, or 50% of his annual salary, if financial targets were
exceeded; and Mr. Goodwin was eligible to receive up to a maximum of $84,000, or
40% of his annual salary. They were each eligible to receive up to
25% of their annual target bonus amount if they achieved certain individualized
performance goals including improvement in identifying, winning and retaining
new business through implementation of better processes, achievement of
consistently high customer satisfaction, aggressive management of overhead costs
and utilization rates, limitation of unallowable usage compared to budgets,
improvement of voluntary retention, improvement of division proposal skills, and
support of corporate initiatives, and 75% of their annual target bonus amount if
we achieved certain financial targets such as reaching consolidated EBITDA
goals, and each of their respective business segments achieving EBITDA, revenue,
win rate, and cash collection goals. In January 2010, as part of Mr. Bates’s
separation agreement, Mr. Bates received cash payments equal to $57,552, based
on the estimated attainment of financial and individual objectives for
2009. In March 2010, under the cash bonus award plan for 2009, Mr.
Goodwin received cash payments equal to $18,000 based on meeting financial and
individual objectives.
During
fiscal year 2009, the Committee did not establish a cash bonus award plan for
our named executive officers other than Messrs. Bates and Goodwin. Instead, the
annual cash bonus awards for all other named executive officers were replaced
for fiscal year 2009 with the cash awards under the Retention Program described
in detail above. As a result, Mr. DeMarco, Ms. Lund and Ms. Siegal did not
participate in our cash bonus award plan in 2009. As described above, the
Committee has decided to discontinue the Retention Program for these executive
officers in 2010 and to establish a cash bonus award plan based on the
attainment of financial and individual objectives, similar to the award plans
described for Messrs. Bates and Goodwin.
Equity
Compensation
We
believe that equity ownership by our executive officers provides important
incentives for such officers to make decisions and take actions that maximize
long-term stockholder value. The Committee develops its equity award
determinations based on its judgments as to whether the complete compensation
packages provided to our executives, including prior equity awards, provide
sufficient incentives to build stockholder value and align the interests of our
executive officers with those of our stockholders, and are sufficient to retain,
motivate and adequately award each of our executives. This judgment is based in
part on information provided by reviewing the equity compensation practices of
companies believed to be our competitors and by other public companies with
which we believe we generally compete for key executives.
We grant
equity compensation to our executive officers and other employees under our
Equity Plans. Most initial equity awards vest over a four-year period from the
date of grant, with 25% vesting on the first anniversary of the date of grant
and the balance vesting monthly over a three-year period. Subsequent equity
awards to employees with over one year of service vest on a monthly basis over a
four-year period. Our equity awards typically have a 10-year contractual term.
In addition, as of April 1, 2008, our employees, including our executive
officers, have been able to purchase shares of our Common Stock under our 1999
Employee Stock Purchase Plan.
The
Committee reviews and approves all grants made to our officers under the Equity
Plans and in connection with the initial hiring, promotions, extraordinary
achievements or compensation adjustments. In addition to these factors, the size
and timing of grants are generally subject to policies established by the
Committee regarding the position of the grantee within our company, the overall
number of options actually granted to the optionee in the past and the extent of
vesting of prior grants. In general, the option grants are also subject to
post-termination and change-in-control provisions. In January 2007, for various
business reasons, we generally discontinued the use of stock options as a form
of equity compensation and instead began to issue restricted stock units on a
limited basis. No options were granted to executive officers during fiscal years
2007, 2008 or 2009.
Beginning
in fiscal year 2007, the Board adopted a policy of equity ownership to our
executive officers through restricted stock units. These restricted stock units
vest at the earlier of (i) ten years from the date of grant, (ii) upon a change
in control of the company, or (iii) upon termination of employment without
cause. Consistent with its belief that equity ownership by executive officers
provides important incentives to make decisions and take actions that maximize
long-term stockholder value, on January 2, 2009, we granted restricted stock
unit awards as follows:
|
|
|
|
|
Grantee
Officer
|
|
No.
Restricted Stock
Unit
Awards Granted
|
|
Eric
DeMarco
|
|
|
30,000
|
|
Deanna
Lund
|
|
|
20,000
|
|
Laura
Siegal
|
|
|
5,000
|
|
Benjamin
Goodwin
|
|
|
7,500
|
|
Howard
Bates
|
|
|
20,000
|
|
In
addition, on January 4, 2010, the Committee granted further restricted stock
unit awards set forth in the table below (subject to the approval of the
increase in the share reserve of our 2005 Plan, as described elsewhere in this
Proxy Statement). Mr. DeMarco, Ms. Lund and Ms. Siegal vest fully at
the earlier of (i) ten years from the date of grant, (ii) upon a change in
control of the Company, or (iii) upon termination of employment without
cause. Mr. Goodwin’s award vests annually over five years and vests
fully (i) upon a change in control of the Company, or (ii) upon a separation
from service not related to voluntary termination or termination for
cause.
|
|
|
|
|
Grantee
Officer
|
|
No.
Restricted Stock
Unit
Awards Granted
|
|
Eric
DeMarco
|
|
|
50,000
|
|
Deanna
Lund
|
|
|
30,000
|
|
Laura
Siegal
|
|
|
10,000
|
|
Benjamin
Goodwin
|
|
|
12,500
|
|
Howard
Bates
|
|
|
---
|
|
Executive
Benefits and Perquisites
All of
our executives are eligible to participate in our employee benefit plans,
including medical, dental, life insurance and 401(k) plans. These plans are
available to all benefit eligible employees on an equal basis. It is generally
our policy not to extend significant perquisites to executives that are not
available to employees generally. We have no current plans to make changes to
levels of benefits and perquisites provided to executives.
Change
in Control and Severance Benefits
Pursuant
to employment agreements with Mr. DeMarco and Mr. Bates and severance and change
in control agreements with Ms. Lund, Mr. Goodwin, and Ms. Siegal, we provide
these officers the opportunity to receive additional compensation and benefits
in the event of their termination or a change in control. Severance and change
in control provisions are summarized below in the section headed “Employment
Agreements; Potential Payments upon Termination or Change in Control.” The
Committee’s analysis indicates that our severance and change in control
provisions are consistent with the provisions and benefit levels of other
companies disclosing such provisions as reported in public SEC filings. We
believe that our severance and change in control arrangements with our executive
officers are reasonable and within the range offered by peer
companies.
COMPENSATION
COMMITTEE REPORT(1)
The
Compensation Committee reviews and approves our compensation programs on behalf
of the Board. In fulfilling its oversight responsibilities, the Committee has
reviewed and discussed the Compensation Discussion and Analysis required by Item
402(b) of Regulation S-K with management and, based on such review and
discussions, the Committee recommended to our Board that the Compensation
Discussion and Analysis be included in our Annual Report on Form 10-K and this
Proxy Statement.
THE
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Scot Jarvis, Chairperson
Bandel
Carano
William
Hoglund
(1) The
material in this Compensation Committee report is not “soliciting material,” is
not deemed “filed” with the SEC and is not to be incorporated by reference in
any of our filings under the Securities Act of 1933, as amended, or the Exchange
Act, whether made before, on or after the date hereof and irrespective of any
general incorporation language in any such filing.
Summary
Compensation Table
The
following table summarizes the total compensation earned by each of our named
executive officers for fiscal years 2009, 2008 and 2007. In setting the
individual components of compensation for each of our named executive officers,
the Compensation Committee reviews not only the individual elements of
compensation, but also total compensation, including the value of equity
compensation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(i)
|
|
(j)
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)(1)
|
|
Stock
Awards
($)(2)
|
|
Option
Award(s)
($)(2)
|
|
Non-Equity
Incentive
Plan
Compensation
($)(3)
|
|
All
Other
Compensation
($)
|
|
Total
Compensation
($)
|
|
Eric
DeMarco
|
|
|
2009
|
|
|
440,000
|
|
|
—
|
|
|
420,000
|
|
|
—
|
|
|
550,000
|
|
|
12,750
|
|
|
1,422,750
|
|
|
President
and Chief Executive
|
|
|
2008
|
|
|
440,000
|
|
|
—
|
|
|
922,500
|
|
|
—
|
|
|
550,000
|
|
|
51,018
|
(4)
|
|
1,963,518
|
|
|
Officer
|
|
|
2007
|
|
|
440,000
|
|
|
—
|
|
|
3,397,000
|
|
|
—
|
|
|
550,000
|
|
|
12,750
|
|
|
4,399,750
|
|
Deanna
Lund
|
|
|
2009
|
|
|
321,827
|
|
|
—
|
|
|
280,000
|
|
|
—
|
|
|
309,375
|
|
|
|
|
|
911,202
|
|
|
Executive
Vice President and
|
|
|
2008
|
|
|
305,000
|
|
|
—
|
|
|
205,000
|
|
|
—
|
|
|
285,938
|
|
|
|
|
|
795,938
|
|
|
Chief
Financial Officer
|
|
|
2007
|
|
|
305,000
|
|
|
—
|
|
|
688,000
|
|
|
—
|
|
|
285,938
|
|
|
—
|
|
|
1,278,938
|
|
Howard
Bates
|
|
|
2009
|
|
|
298,440
|
|
|
—
|
|
|
280,000
|
|
|
—
|
|
|
57,552
|
|
|
17,167
|
(5)
|
|
653,159
|
|
|
President,
Kratos Government
|
|
|
2008
|
|
|
250,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,000
|
|
|
402,500
|
|
|
682,500
|
|
|
Solutions
Segment
|
|
|
2007
|
|
|
—
|
|
|
—
|
|
|
157,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
157,500
|
|
Laura
Siegal
|
|
|
2009
|
|
|
225,000
|
|
|
—
|
|
|
70,000
|
|
|
—
|
|
|
126,563
|
|
|
—
|
|
|
421,563
|
|
|
Vice
President, Corporate
|
|
|
2008
|
|
|
225,000
|
|
|
—
|
|
|
46,125
|
|
|
—
|
|
|
112,500
|
|
|
—
|
|
|
383,625
|
|
|
Controller,
Secretary and Treasurer
|
|
|
2007
|
|
|
205,000
|
|
|
—
|
|
|
154,800
|
|
|
—
|
|
|
102,500
|
|
|
—
|
|
|
462,300
|
|
Benjamin
Goodwin
|
|
|
2009
|
|
|
209,423
|
|
|
—
|
|
|
105,000
|
|
|
—
|
|
|
18,000
|
|
|
—
|
|
|
332,423
|
|
|
President,
Public Safety and
|
|
|
2008
|
|
|
96,160
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
96,160
|
|
|
Security
Segment
|
|
|
2007
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
Represents
cash bonus awards to named executive officers earned in the referenced
fiscal year as set forth above. Annual cash bonus awards under Kratos'
cash bonus plans are typically paid based on the achievement of certain
objectives approved by the Compensation Committee as described in further
detail above.
|
(2)
|
The
amounts shown in columns (e) and (f) equals the fair value of
restricted stock unit awards and option awards at date of
grant. The value is calculated in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718,
Compensation—Stock Compensation (FASB ASC Topic 718). We
caution that the amount ultimately realized from the restricted stock unit
awards and option awards will likely vary based on a number of factors,
including our actual operating performance, stock price fluctuations and
the timing of exercises (in the case of options only) and sales.
|
(3)
|
Represents
bonuses under the annual and retention cash bonus plans to named executive
officers earned in the referenced fiscal year as described in further
detail above. Annual cash bonus awards under the cash bonus plan are
typically paid based on the achievement of certain individual and Kratos
performance objectives approved by the Compensation Committee as described
in further detail above. Retention cash bonus award criteria are described
in further detail above. For fiscal year 2008, the Chief Executive
Officer, not the Compensation Committee, determined individualized and
company performance objectives for Messrs. Bates' and Goodwin’s cash
bonus awards.
|
(4)
|
Represents
the taxable income attributable to Mr. DeMarco for his use of a
company automobile in the referenced fiscal year in the amount of $12,750
and a cash payout of $38,268 for paid time off in 2008.
|
(5)
|
For fiscal year 2009, represents $10,667 for
Priority Physicians Access and $6,500 for an automobile
allowance. For fiscal year 2008, represents negotiated bonus
payments in the amounts of (i) $250,000, with respect to
Mr. Bates' performance of services for Haverstick
Consulting, Inc. in connection with, and contingent upon the closing
of, its merger with Kratos, and (ii) $146,000, based upon
Mr. Bates' 2007 performance assessed under certain criteria
determined prior to Kratos' acquisition of Haverstick
Consulting, Inc. and $6,500 taxable income attributable to
Mr. Bates for an automobile allowance in the referenced fiscal year.
|
Grants
of Plan-Based Awards
The
following table sets forth for the fiscal year ended December 27, 2009,
certain information regarding grants of plan-based awards to each of our named
executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(i)
|
|
(l)
|
|
|
|
|
|
Estimated
Possible Payouts Under
Non-Equity
Incentive Plan Awards
|
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units
(#)(2)
|
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)(3)
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)(1)
|
|
Maximum
($)
|
|
Eric
DeMarco
|
|
|
|
|
|
—
|
|
|
550,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
1/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
420,000
|
|
Deanna
Lund
|
|
|
|
|
|
—
|
|
|
309,375
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
1/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
280,000
|
|
Howard
Bates
|
|
|
1/2/2009
|
(4)
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
280,000
|
|
|
|
|
|
|
|
—
|
|
|
150,000
|
|
|
300,000
|
|
|
|
|
|
|
|
Laura
Siegal
|
|
|
|
|
|
—
|
|
|
126,563
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
1/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
70,000
|
|
Benjamin
Goodwin
|
|
|
|
|
|
—
|
|
|
84,000
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
1/2/2009
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
105,000
|
|
(1)
|
Amounts
shown in column (d) are the estimated possible payouts for fiscal
year 2009 under the Retention Bonus Program set forth above for
Mr. DeMarco, Ms. Lund and Ms. Siegal, and under the annual
cash bonus program for Messrs. Bates and Goodwin, based on certain
assumptions. Non-equity Incentive Plan Awards for Mr. DeMarco,
Ms. Lund and Ms. Siegal vested over the course of fiscal year
2009 and were paid out in increments over this period and during the first
quarter of 2010. The actual bonuses awarded to the named executive
officers for the 2009 fiscal year are reported in the above Summary
Compensation Table under the column "Non-Equity Incentive Plan
Compensation."
|
(2)
|
Amounts
shown in column (i) represent restricted stock unit awards to the
named executive officers in fiscal year 2009 as more fully described
above.
|
(3)
|
The
fair value of stock and option awards as calculated in accordance with
FASB ASC Topic 718, is $14.00 per share.
|
(4)
|
Issued
in connection with Mr. Bates’ employment agreement executed at the
closing of the Haverstick Consulting, Inc. acquisition on
December 31, 2007, for employment during fiscal year 2009.
|
The
following table summarizes the number of securities underlying outstanding
equity awards for each named executive officer as of December 27, 2009, as
well as the number of outstanding unvested shares of restricted stock units held
by our named executive officers as of December 27, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date(2)
|
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested(8)
(#)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested(9)
($)
|
|
Eric
DeMarco
|
|
|
124,999
|
|
|
61.90
|
(3)
|
|
11/17/2013
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
60.50
|
(7)
|
|
8/18/2014
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
53.80
|
(7)
|
|
8/9/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
223,125
|
|
|
2,275,875
|
|
Deanna
Lund
|
|
|
20,000
|
|
|
61.90
|
(4)
|
|
4/20/2014
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
60.50
|
(7)
|
|
8/18/2014
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
53.80
|
(7)
|
|
8/9/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
612,000
|
|
Howard
Bates
|
|
|
|
|
|
|
|
|
|
|
|
27,500
|
|
|
280,500
|
|
Laura
Siegal
|
|
|
509
|
|
|
44.70
|
|
|
10/1/2011
|
|
|
|
|
|
|
|
|
|
|
3,600
|
|
|
42.30
|
|
|
4/30/2012
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
61.90
|
(5)
|
|
5/23/2013
|
|
|
|
|
|
|
|
|
|
|
1,800
|
|
|
61.90
|
(6)
|
|
4/8/2014
|
|
|
|
|
|
|
|
|
|
|
850
|
|
|
60.50
|
(7)
|
|
8/18/2014
|
|
|
|
|
|
|
|
|
|
|
3,500
|
|
|
53.80
|
(7)
|
|
8/9/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
142,800
|
|
Benjamin
Goodwin
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
76,500
|
|
(1)
|
All
options listed are fully vested and exercisable.
|
(2)
|
Expiration
date assumes that optionee remains in service of the Company through the
full term of the stock option grant.
|
(3)
|
Represents
option shares originally granted to Mr. DeMarco on November 17,
2003, with respect to which the vesting was accelerated on May 18,
2005, pursuant to the Compensation Committee's determination to accelerate
the vesting on all outstanding and unvested stock options held by
employees, officers and directors of the company with an exercise price of
more than $100.00 per share. The option was cancelled and re-issued on
December 30, 2005, as part of a repricing of all outstanding employee
stock options that were originally granted at exercise prices greater than
120% of the Company's closing stock price on the Nasdaq Global Select
Market on December 30, 2005.
|
(5)
|
Represents
option shares that were originally granted to Ms. Siegal on
May 23, 2003, with respect to which the vesting was accelerated on
September 19, 2005, pursuant to the Compensation Committee's
determination to accelerate the vesting on all outstanding and unvested
stock options held by employees, officers and directors of the company
with an exercise price of more than $80.00 per share. The option was
cancelled and re-issued on December 30, 2005, as part of a repricing
of all outstanding employee stock options that were originally granted at
exercise prices greater than 120% of the Company's closing stock price on
the Nasdaq Global Select Market on December 30, 2005.
|
(6)
|
Represents
option shares originally granted to Ms. Siegal on April 8, 2004, with
respect to which the vesting was accelerated on May 18, 2005,
pursuant to the Compensation Committee's determination to accelerate the
vesting on all outstanding and unvested stock options held by employees,
officers and directors of the company with an exercise price of more than
$100.00 per share.
|
(7)
|
Represents
option shares granted to Ms. Lund, Ms. Siegal and
Mr. DeMarco with respect to which the vesting was subsequently
accelerated on December 29, 2006, when the Board of Directors
approved the acceleration of vesting of all outstanding options issued
prior to June 30, 2006 under the 1999 Equity Incentive and 2000
Nonqualified Stock Option Plans.
|
(8)
|
Amounts
listed in column (g) reflect restricted stock unit awards to the
named executive officers outstanding at December 27, 2009, as
described more fully above, including 223,125 shares for Mr. DeMarco,
60,000 shares for Ms. Lund, and 14,000 shares for Ms. Siegal,
all of which vest at the earlier of (a) 10 years from the date
of grant; (b) upon a change in control of the issuer; or
(c) upon termination of employment without cause; 7,500 shares for Mr. Goodwin,
which vest at the earlier of (a) annually over five years on the
anniversary of the date of grant, (b) upon a change in control of the
Company, or (c) upon a separation from service not related to voluntary
termination or termination for cause; and 27,500 shares for
Mr. Bates, which vest at the earlier of (a) annually over a four year
period on the anniversary of the date of grant for 7,500 of the shares and
annually over a five year period on the anniversary of the date of grant
for 20,000 of the shares, (b) upon a change in control of the Company, or
(c) upon termination of employment without cause.
|
(9)
|
Amounts
listed in column (h) represent the aggregate market value of the
unvested restricted stock units awards held by the named executive
officers as of December 27, 2009, based on the closing price of a
share of Kratos common stock of $10.20 on December 24, 2009.
|
Option
Exercises and Stock Vested
There
were no exercises of stock options by our named executive officers during fiscal
year ended December 27, 2009. The following table shows restricted
stock units vested for the named executive officers during the fiscal year ended
December 27, 2009:
(a)
|
(d)
|
(e)
|
|
Stock
Awards
|
Name
|
Number
of Shares Acquired on Vesting
(#)
|
Value
Realized on Vesting
($)
|
Eric
DeMarco
|
--
|
--
|
Deanna
Lund
|
--
|
--
|
Howard
Bates
|
1,875
|
26,250
|
Laura
Siegal
|
--
|
--
|
Benjamin
Goodwin
|
--
|
--
|
Employment
Agreements; Potential Payments Upon Termination or Change in
Control
In
addition to other compensation arrangements described elsewhere in this Proxy
Statement, we have entered into agreements with four of our named executive
officers as follows:
On
November 14, 2003, we entered into an Executive Employment Agreement with Mr.
DeMarco in connection with his duties as an executive of the company. The
agreement was amended and restated on August 4, 2008. Among other things, the
terms of the amended and restated agreement provide for Mr. DeMarco’s
compensation, eligibility to receive annual incentive awards and to participate
in long-term incentive, employee benefit and retirement programs. In the event
that Mr. DeMarco is terminated without cause, he will be entitled to a lump sum
equal to three times the sum of his current base salary, plus three times his
target bonus potential for the year, less any bonus already received for such
year, vesting of all equity awards and participation for Mr. DeMarco and his
dependents in our employee health care program for one year or, if earlier,
until Mr. DeMarco procures health care coverage through another employer.
Additionally, in the event that there is a change of control of the Company, Mr.
DeMarco shall be entitled to accelerated vesting of 50% of all outstanding and
unvested equity awards. Furthermore, Mr. DeMarco shall also be entitled to the
severance compensation described above should Mr. DeMarco’s employment be
terminated as a result of such change in control. The vesting terms
of Mr. DeMarco’s restricted stock units are governed by the agreements under
which each restricted stock unit was granted; and pursuant to such restricted
stock unit agreements, Mr. DeMarco’s unvested restricted stock units vest in the
event of a termination of service without cause and a change in control.
Assuming a change in control had occurred on December 27, 2009, this provision
would have resulted in accelerated vesting of unvested equity awards valued at
$2,275,875.
If Mr.
DeMarco had been terminated on December 27, 2009 without cause or in connection
with a change in control, he would have received the following benefits under
his employment agreement: (i) a lump sum payment of $2,970,000, equal to three
times his current base salary and three times his target bonus potential for the
year, (ii) the accelerated vesting of his restricted stock unit awards with an
aggregate market value on December 27, 2009 of $2,275,875, (iii) continued
participation by Mr. DeMarco and his family in the company’s group health
insurance benefits on the same terms as during his employment until the earlier
of one year following his termination or procurement of health care coverage
through another employer, provided that if the company’s insurance carrier will
not allow for such benefits continuation the company shall pay the premiums
required to continue Mr. DeMarco’s group health care coverage during the period
under the applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”), with an aggregate annual cost of $16,
111.
Under Mr.
DeMarco’s agreement, a change in control is deemed to have occurred in the event
of any one of the following occurrences: (i) the acquisition by an individual
person or entity or a group of individuals or entities acting in concert,
directly or indirectly, through one transaction or a series of related
transaction, of more than 50% of the company’s outstanding voting securities;
(ii) a merger or consolidation of the company with or into another entity after
which the company’s stockholders immediately prior to such transaction hold less
than 50% of the voting securities of the surviving entity; (iii) a sale of all
or substantially all of the company’s assets; or (iv) the change in the majority
of the Board of Directors pursuant to a successful hostile proxy
contest.
On March
28, 2005, we entered into a Severance and Change in Control Agreement with Ms.
Lund, which was subsequently amended and restated on March 28, 2006. The
agreement was further amended and restated on August 4, 2008. The terms of this
amended and restated agreement provide that upon a change in control of the
company, Ms. Lund shall be entitled to accelerated vesting of 50% of all of her
outstanding and unvested stock options and any applicable stock appreciation
rights. Upon the one-year anniversary of a Change in Control or a Triggering
Event (as defined below), whichever occurs first, all remaining unvested stock
options and applicable stock appreciation rights shall be fully vested.
Additionally, in the event of a termination without cause Ms. Lund shall be
entitled to accelerated vesting of 100% of her outstanding and unvested stock
options and any applicable stock appreciation rights.
The
Severance and Change in Control Agreement also provides for severance payments
to Ms. Lund as follows: (i) if Ms. Lund is terminated without cause, she is
entitled to (A) severance compensation equal to one year of her base salary then
in effect, (B) continuation of her then current health insurance coverage at the
same cost to her as prior to termination for a period of one year following
termination, and (C) the vesting of any then unvested stock options held by her
or (ii) if she voluntarily resigns after a change in control as a result of a
material change in the nature of her role or job responsibilities or the
relocation of her principal place of work to a location more than 30 miles from
her work location immediately prior to the change in control (each of which we
refer to as a “Triggering Event”), she is entitled to: (A) severance
compensation, equal to two years of her base salary then in effect, plus her
maximum bonus amount for two years and (B) continuation of her then current
health insurance coverage at the same cost to her as prior to termination for a
period of two years following termination or resignation.
A “Change
In Control” is deemed to have occurred in the event of (i) the acquisition by an
individual person or entity or a group of individuals or entities acting in
concert, directly or indirectly, through one transaction or a series of
transactions, of more than 50% of the outstanding voting securities of the
company; (ii) a merger or consolidation of the company with or into another
entity after which the stockholders of the company immediately prior to such
transaction hold less than 50% of the voting securities of the surviving entity;
(iii) any action or event that results in the Board of Directors consisting of
fewer than a majority of Incumbent Directors (“Incumbent Directors” refers to
directors who either (A) are directors of the company as of the date of the
Change in Control Agreements, or (B) are elected or nominated for election to
the Board with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination); or (iv) a sale of all or
substantially all of the assets of the Company.
The
vesting terms of Ms. Lund’s restricted stock units are governed by the
agreements under which each restricted stock unit was granted; and pursuant to
such restricted stock unit agreements, Ms. Lund’s unvested restricted stock
units vest in the event of a termination of service without cause and a change
in control. Assuming a change in control had occurred on December 27, 2009, this
provision would have resulted in accelerated vesting of unvested equity awards
valued at $612,000.
Under her
Severance and Change in Control Agreement, if Ms. Lund had been terminated
without cause on December 27, 2009, she would have received the following
benefits: (i) severance compensation equal to one year of her base salary then
in effect, in the amount of $330,000 and (ii) continuation of her then current
health insurance coverage at the same cost to her as prior to her termination
for a period of one year following termination with an aggregate annual cost of
$10,583, and the accelerated vesting of her restricted stock unit awards with an
aggregate market value on December 27, 2009 of $612,000. If Ms. Lund had
voluntarily resigned on December 27, 2009 following a Triggering Event and a
Change in Control she would have received the following benefits: (i) severance
compensation equal to two years of her base salary and target bonus then in
effect, in the amount of $1,155,000 (ii) continuation of her then current health
insurance coverage at the same cost to her as prior to her termination for a
period of two years following termination totaling $21,166, and (iii) the
accelerated vesting of her restricted stock unit awards with an aggregate market
value on December 27, 2009 of $612,000.
On July
12, 2007, we entered into a Severance and Change in Control Agreement with Ms.
Siegal, which was subsequently amended and restated on August 4, 2008, providing
that, upon a change of control Ms. Siegal shall be entitled to (i) the immediate
vesting of 50% of all stock options and any applicable stock appreciation rights
granted to Ms. Siegal that remain unvested as of the date of the change in
control and (ii) the vesting of the remaining stock options and stock
appreciation rights on the earlier of the one year anniversary date of the
change of control or the termination of, or resignation by, Ms. Siegal as a
result of certain triggering events following the change in
control.
In
addition, if following a change of control Ms. Siegal is terminated without
cause, Ms. Siegal shall be entitled to receive a severance payment equal to nine
months of her base salary and, if needed, her then current health insurance
coverage at the then current employee cost during the nine month period
following such termination. If Ms. Siegal resigns from the Company as a result
of certain triggering events following a change in control, Ms. Siegal is
entitled to receive a severance payment equal to nine months of her base salary
plus her maximum bonus amount for such nine month period and, if needed, her
then current health insurance coverage at the then current employee cost during
the nine month period following such resignation. Further, in the event that Ms.
Siegal is terminated without cause, Ms. Siegal is entitled to the immediate
vesting of 100% of all stock options and stock appreciation rights granted to
Ms. Siegal as of the date of such termination.
The
vesting terms of Ms. Siegal’s restricted stock units are governed by the
agreements under which each restricted stock unit was granted; and pursuant to
such restricted stock unit agreements, Ms. Siegal’s unvested restricted stock
units vest in the event of a termination of service without cause and a change
in control. Assuming a change in control had occurred on December 27, 2009, this
provision would have resulted in accelerated vesting of unvested equity awards
valued at $142,800.
Under her
Severance and Change in Control Agreement, if Ms. Siegal had been terminated
without cause on December 27, 2009, she would have received the following
benefits: (i) severance compensation equal to nine months of her base salary
then in effect, in the amount of $168,750, (ii) continuation of her then current
health insurance coverage at the same cost to her as prior to her termination
for a period of nine months following termination totaling $1,474, and (iii) the
accelerated vesting of her restricted stock unit awards with an aggregate market
value on December 27, 2009 of $142,800. If Ms. Siegal had voluntarily resigned
on December 27, 2009 following a Triggering Event and a Change in Control she
would have received the following benefits: (i) severance compensation equal to
nine months of her base salary and target bonus then in effect in the amount of
$236,250 (ii) continuation of her then current health insurance coverage at the
same cost to her as prior to her termination for a period of nine months
following termination totaling $1,474, and (iii) the accelerated vesting of her
restricted stock unit awards with an aggregate market value on December 27, 2009
of $142,800.
On
December 31, 2007, we entered into an Employment Agreement with Mr. Bates. Among
other things, the terms of the agreement provide for Mr. Bates’ compensation,
eligibility to receive annual incentive awards and to participate in long-term
incentive, employee benefit and retirement programs. On December 31, 2009, we
entered into a Separation Agreement and General Release (the “Release”) with Mr.
Bates. The Release provided for continuing salary and benefits
payments to Mr. Bates during 2010, consistent with his existing employment
agreement with the Company which the Company assumed when it acquired Haverstick
in 2007.
Mr.
Bates’ Separation Agreement provides for a severance payment equal to (i) his
base salary of $300,000 through December 31, 2010, payable on a bi-weekly basis,
(ii) continuation of premiums and benefits with respect to health, disability
and welfare plans, with an annual aggregate cost of $17,868, as though Mr. Bates
had remained employed through December 31, 2010, and (iii) the accelerated
vesting of his restricted stock unit awards, which had an aggregate market value
on December 27, 2009 of $280,500. All amounts noted above will be paid to Mr.
Bates over 2010 on a bi-weekly basis.
On June
28, 2008, when we acquired SYS Technologies, we assumed an existing Employment
Agreement between SYS Technologies and Mr. Goodwin, in connection with his
duties as an executive of SYS Technologies. Among other things, the
terms of the agreement provide for Mr. Goodwin’s compensation, eligibility to
receive incentive compensation and to participate in long-term incentive,
employee benefit and retirement programs. Additionally, in the event
that there is a termination of Mr. Goodwin’s employment without cause, or in the
event Mr. Goodwin terminates his employment with good reason because his
position or duties have been modified by the Company to such an extent that his
duties are substantially no longer consistent with the position for which he was
employed, Mr. Goodwin shall be entitled to receive (A) severance compensation
equal to one year of his base salary then in effect, and (B) continuation of his
then current health insurance coverage at the same cost to him as prior to
termination for a period of one year following termination. Pursuant
to the agreement under which restricted stock units were granted to Mr. Goodwin,
unvested restricted stock units held by him would vest upon a change in control
or termination without cause. Assuming a change in control had
occurred on December 27, 2009, this provision would have resulted in accelerated
vesting of unvested equity awards valued at $76,500. Under his
Employment Agreement and restricted stock unit agreement, if Mr. Goodwin had
been terminated without cause or terminated his employment with us for good
reason on December 27, 2009, he would have received the following benefits: (i)
severance compensation equal to one year of his base salary then in effect, in
the amount of $210,000 and (ii) continuation of his then current health
insurance coverage at no cost to him for a period of one year following
termination with an aggregate annual cost of $10,583, and (iii) the accelerated
vesting of his stock options awards and restricted stock unit awards with an
aggregate market value on December 27, 2009 of $76,500.
DIRECTOR
COMPENSATION
The
following table summarizes the quarterly retainer and committee fees payable to
our non-employee directors during the fiscal year ended December 27, 2009. All
such fees are paid quarterly in arrears.
|
|
|
Quarterly
Retainer
|
|
$3,500
|
Audit
Committee Chair
|
|
$3,000
|
Audit
Committee Chair Regular Meeting Fee
|
|
$2,000
|
Audit
Committee Chair Calls
|
|
$1,000
|
Other
Audit Committee Matters
|
|
$1,000
to $4,000
(as
determined by the Chairman of the Board)
|
Committee
Chair Retainer
|
|
$1,000
|
Board
Meetings
|
|
$4,000
|
Board
Conference Calls
|
|
$2,000
|
Board
Chair Meeting Fee
|
|
$2,000
|
Committee
Meetings
|
|
$1,000
|
Committee
Conference Calls
|
|
$ 500
|
Annual
Restricted Stock Unit Award
|
|
1,000
shares
|
Our
directors also receive reimbursement for all out-of-pocket expenses related to
their duties, including, but not limited to, travel, car rental and lodging
fees.
Director
Summary Compensation Table
The
following table summarizes the total compensation that our directors (other than
directors who are named executive officers) earned during the fiscal year ended
December 27, 2009 for services rendered as members of our Board.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(g)
|
|
|
(h)
Total
($)
|
|
|
Name
|
|
Fees
Earned
or
Paid
in
Cash ($)
|
|
Stock
Awards
($)(1)
|
|
Option
Awards
($)(2)
|
|
All
Other Compensation
($)
|
|
|
|
|
Scott
Anderson (3)
|
|
|
51,500
|
|
|
14,000
|
|
|
—
|
|
|
—
|
|
|
65,500
|
|
Bandel
Carano (4)
|
|
|
—
|
|
|
—
|
|
|
26,054
|
|
|
—
|
|
|
26,054
|
|
William
Hoglund (5)
|
|
|
46,000
|
|
|
14,000
|
|
|
—
|
|
|
—
|
|
|
60,000
|
|
Scot
Jarvis (6)
|
|
|
47,000
|
|
|
14,000
|
|
|
—
|
|
|
—
|
|
|
61,000
|
|
Samuel
Liberatore (7)
|
|
|
28,000
|
|
|
—
|
|
|
—
|
|
|
54,159
|
|
|
82,159
|
|
(1)
|
Amounts
shown in this column reflect the grant date fair value computed in
accordance with FASB ASC Topic 718, with respect to awards of Restricted
Stock Units (RSUs) made during the indicated year. On January
2, 2009, each of Messrs. Anderson, Hoglund, and Jarvis were granted 1,000
RSUs for their service on the Board. The grant date fair value
of each RSU granted on January 2, 2009, was $14.00. The
assumptions on which this valuation is based are set forth in Note 1 to
the audited financial statements included in the Company’s annual report
on Form 10-K filed with the SEC on March 11, 2010.
|
(2)
|
Amounts shown in this column
reflect the grant date fair value computed in accordance with FASB ASC
Topic 718, with respect to awards of options to purchase shares of Kratos
made during the indicated year. The following awards of stock
options during 2009 were made pursuant to the Non-Management Directors
Stock Option Fee Program, of which Mr. Carano is the only
participant: (a) March 6, 2009, stock option to purchase
1,591 shares of common stock in lieu of $10,500 accrued directors’ fees,
$8,500 of which was earned during fiscal year 2009 and $2,000 of which was
earned during fiscal year 2008, and where such option is fully vested;
(b) June 4, 2009,
stock option to purchase 1,180 shares of common stock in lieu of $8,500
accrued directors’ fees, which option is fully vested; (c) September 17, 2009, stock
option to purchase 763 shares of common stock in lieu of $6,500 accrued
directors’ fees, which option is fully vested; and (d) November 10,
2009, stock option to purchase 1,042 shares of common stock in lieu of
$10,500 accrued directors’ fees, which option is fully
vested. Mr. Carano’s options granted in 2009 had an aggregate
grant date fair value of $5.69. The assumptions on which this
valuation is based are set forth in Note 1 to the audited financial
statements included in the Company’s annual report on Form 10-K filed with
the SEC on March 11, 2010.
|
(3)
|
Mr. Anderson
had outstanding options to purchase 11,000 shares and held 3,000 RSUs as
of December 27, 2009.
|
(4)
|
Mr. Carano
had outstanding options to purchase 21,779 shares as of December 27,
2009.
|
(5)
|
Mr. Hoglund
had outstanding options to purchase 12,000 shares and held 3,000 RSUs as
of December 27, 2009.
|
(6)
|
Mr. Jarvis
had outstanding options to purchase 11,000 shares and held 3,000 RSUs as
of December 27, 2009.
|
(7)
|
All other
compensation for Mr. Liberatore represents salary paid, including a
final payment of personal time off not used of $43,802, as Chief Operating
Officer of Madison Research Corporation through January 2,
2009.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information concerning the beneficial
ownership of our common stock as of March 5, 2010, by (i) each
stockholder known to us to be the beneficial owner of 5% or more of the
outstanding shares of our common stock, (ii) each director and nominee for
director, (iii) each of the executive officers named in the Summary
Compensation Table, and (iv) all executive officers and directors as a
group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Ownership(1)
|
|
|
|
Common
Stock
|
|
Series B
Convertible
Preferred
Stock
|
|
Common
Shares on an
As-Converted
Basis
|
|
Identity
of Owner or Group
|
|
Shares
|
|
%
Ownership
|
|
Shares
|
|
%
Ownership
|
|
Shares
|
|
%
Ownership
|
|
Named Executive Officers
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
DeMarco
|
|
|
218,157
|
(3)
|
|
1.36
|
%
|
|
—
|
|
|
—
|
|
|
218,157
|
|
|
1.35
|
%
|
Deanna
Lund
|
|
|
44,613
|
(4)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
44,613
|
|
|
*
|
|
Laura
Siegal
|
|
|
14,955
|
(5)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
14,955
|
|
|
*
|
|
Benjamin
Goodwin
|
|
|
27,558
|
|
|
*
|
|
|
—
|
|
|
—
|
|
|
27,558
|
|
|
*
|
|
Howard
Bates
|
|
|
58,840
|
(6)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
58,840
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Anderson
c/o
Cedar Grove Investments, LLC
3825
Issaquah Pine Lake Road
Sammamish,
WA 98075
|
|
|
72,401
|
(7)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
72,401
|
|
|
*
|
|
Bandel
Carano
Oak
Investment Partners
525
University Avenue, Suite 1300
Palo
Alto, CA 94301
|
|
|
694,280
|
(8)
|
|
4.37
|
%
|
|
—
|
|
|
—
|
|
|
694,280
|
|
|
4.34
|
%
|
William
Hoglund
P.O.
Box 1914
Wilson,
WY 83014
|
|
|
12,000
|
(9)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
12,000
|
|
|
*
|
|
Scot
Jarvis
c/o
Cedar Grove Investments, LLC
3825
Issaquah Pine Lake Road
Sammamish,
WA 98075
|
|
|
41,200
|
(10)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
41,200
|
|
|
*
|
|
Samuel
Liberatore
106
Betts Spring Drive
Huntsville,
AL 35824
|
|
|
1,242
|
(11)
|
|
*
|
|
|
—
|
|
|
—
|
|
|
1,242
|
|
|
*
|
|
5%
Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B
Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean
Tayebi
|
|
|
168,830
|
|
|
1.06
|
%
|
|
10,000
|
|
|
100.00
|
%
|
|
268,830
|
|
|
1.68
|
%
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. Rowe
Price Associates, Inc.
100
E. Pratt Street
Baltimore,
MD 21202
|
|
|
2,021,350
|
(12)
|
|
12.73
|
%
|
|
—
|
|
|
—
|
|
|
2,021,350
|
|
|
12.65
|
%
|
State
of Wisconsin Investment Board
P.O. Box 7842
Madison,
WI 53707
|
|
|
899,797
|
|
|
5.67
|
%
|
|
—
|
|
|
—
|
|
|
899,797
|
|
|
5.63
|
%
|
Wellington
Management Company, LLP
75
State Street
Boston,
MA 02109
|
|
|
1,131,999
|
|
|
7.13
|
%
|
|
—
|
|
|
—
|
|
|
1,131,999
|
|
|
7.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial
Ownership(1)
|
|
|
|
Common
Stock
|
|
Series B
Convertible
Preferred
Stock
|
|
Common
Shares on an
As-Converted
Basis
|
|
Identity
of Owner or Group
|
|
Shares
|
|
%
Ownership
|
|
Shares
|
|
%
Ownership
|
|
Shares
|
|
%
Ownership
|
|
All
Directors and Officers as a Group (9 persons)
|
|
|
1,185,246
|
|
|
7.44
|
%
|
|
—
|
|
|
—
|
|
|
1,185,246
|
|
|
7.39
|
%
|
Total
Shares Outstanding
|
|
|
15,875,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
for Preferred Shares Conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B,
if Converted, Additional Shares
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Common Shares (If Converted)
|
|
|
15,975,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Represents less than one percent (1%).
(1)
|
This
table is based upon information supplied by officers, directors and
principal stockholders and Schedules 13G filed with the SEC, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual or entity has sole or shared voting power or
investment power and any shares as to which the individual or entity has
the right to acquire beneficial ownership within 60 days of March 5,
2010 through the exercise of any stock option or other right. The
inclusion of such shares, however, does not constitute an admission that
the named stockholder is a direct or indirect beneficial owner of, or
receives the economic benefit from, such shares. Applicable percentages
are based on 15,875,919 shares of common stock and 10,000 shares of
Series B convertible preferred stock outstanding on March 5,
2010.
|
(2)
|
The
address for all executive officers is 4810 Eastgate Mall, San Diego, CA
92121.
|
(3)
|
Includes
2,499 shares held in Kratos' 401(k) Plan, 2,578 shares purchased through
the Kratos Employee Stock Purchase Plan, and 197,499 shares subject to
options exercisable within 60 days from March 5, 2010.
|
(4)
|
Includes
2,638 shares held in Kratos' 401(k) Plan, 1,975 shares purchased through
the Kratos Employee Stock Purchase Plan, and 40,000 shares subject to
options exercisable within 60 days from March 5, 2010.
|
(5)
|
Includes
2,626 shares held in Kratos’ 401(k) Plan, 45 shares purchased through the
Kratos Employee Stock Purchase Plan, and 12,259 shares subject to options
exercisable within 60 days from March 5, 2010.
|
(6)
|
Includes
2,193 shares purchased through the Kratos Employee Stock Purchase
Plan.
|
(7)
|
Includes
11,000 shares subject to options exercisable within 60 days from
March 5, 2010.
|
(8)
|
Includes
22,364 shares subject to options exercisable within 60 days of
March 5, 2010. Includes 255 shares of common stock held directly by
Mr. Carano, 267,786 shares of common stock held by Oak Investment
Partners IX, Limited Partnership, 2,853 shares of common stock held
by Oak IX Affiliates Fund, Limited Partnership, 6,426 shares of
common stock held by Oak IX Affiliates Fund-A, Limited Partnership,
388,359 shares of common stock held by Oak Investment Partners X,
Limited Partnership, 6,237 shares of common stock held by Oak X
Affiliates Fund, Limited Partnership. Mr. Carano is a managing member of
the respective general partner of each of Oak Investment
Partners IX, L.P., Oak IX Affiliates Fund, L.P., and
Oak IX Affiliates Fund-A, L.P., and, as such, may be deemed to
possess shared and indirect beneficial ownership of the shares of common
stock held by such entities. Mr. Carano is the managing member
of each of Oak Investment Partners X, L.P. and Oak X
Affiliates Fund, L.P., and, as such, may be deemed to possess shared
and indirect beneficial ownership of the shares of common stock held by
such entities. Mr. Carano disclaims beneficial ownership of the
shares held by Oak Investment Partners IX, L.P., Oak IX
Affiliates Fund, L.P., Oak IX Affiliates Fund-A, L.P., Oak
Investment Partners X, L.P. and Oak X Affiliates
Fund, L.P.
|
(9)
|
Includes
12,000 shares subject to options exercisable within 60 days from
March, 5, 2010.
|
(10)
|
Includes
11,000 shares subject to options exercisable within 60 days from
March 5, 2010.
|
(11)
|
Includes
842 shares held in Kratos’ 401(k) Plan.
|
(12)
|
These
securities are owned by various individual and institutional investors,
including T. Rowe Price Small-Cap Value Fund, Inc. (which owns 970,000
shares, representing 6.11% of the shares outstanding), which T. Rowe Price
Associates, Inc. (“Price Associates”) serves as an investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such
securities; however Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities.
|
Information
about our equity compensation plans as of December 27, 2009 is as follows
(shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Plan
Category
|
|
Number
of Securities to be
Issued
Upon Exercise of
Outstanding
Options,
and
Rights
|
|
Weighted
Average
Exercise
Price of
Outstanding
Options,
and
Rights
(3)
|
|
Number
of Securities
Remaining
Available
for
Future Issuance
|
|
Equity
Compensation Plans Approved by Shareholders(1)
|
|
|
1,841
|
|
$
|
28.58
|
|
|
273
|
(4)
|
Equity
Compensation Plans Not Approved by Shareholders(2)
|
|
|
21
|
|
$
|
58.15
|
|
|
0
|
|
|
Total
|
|
|
1,862
|
|
|
|
|
|
273
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes
1997 Stock Option Plan, 1999, 2005 Equity Incentive Plan, and 1999
Employee Stock Purchase Plan.
|
(2)
|
Includes
2000 Non-Statutory Stock Option Plan, 1998 Digital Fusion, Inc. Stock
Option Plan, 1999 Digital Fusion, Inc. Stock Option Plan, 2000
Digital Fusion, Inc. Stock Option Plan, and Amended and Restated 2005
Digital Fusion, Inc. Equity Incentive Plan.
|
(3)
|
The
Weighted Average Exercise Price does not take into account the shares
issuable upon vesting of outstanding stock awards, which have no exercise
price.
|
(4)
|
Includes
approximately 120,000 shares reserved for issuance under the 1999 Employee
Stock Purchase Plan.
|
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our Directors, executive officers and holders
of more than ten percent (10%) of a registered class of our equity securities
(the “Reporting Persons”), to file reports regarding their ownership and changes
in ownership of our securities with the SEC, and to furnish us with copies of
all Section 16(a) reports that they file.
To the
best of our knowledge and based solely upon our review of the copies of such
reports furnished to us for the fiscal year ended December 27, 2009, and the
information provided to us by the Reporting Persons, we believe that the
Reporting Persons complied with Section 16(a) during the 2009 fiscal year,
except that (i) Mr. Liberatore filed a late report on Form 4 covering one
transaction, (ii) Mr. Bates filed two late reports on Form 4 each covering two
transactions, and (iii) Mr. Jarvis filed one late report on Form 4 covering one
transaction.
REPORT
OF THE AUDIT COMMITTEE
As more
fully described in its charter, the Audit Committee oversees our financial
reporting process on behalf of our Board. Management has the primary
responsibility for the financial statements and the reporting process including
the systems of internal controls. Grant Thornton is responsible for performing
an audit of our annual consolidated financial statements in accordance with
generally accepted accounting principles (GAAP) and for issuing a report on
those statements and expressing an opinion on the conformity of these audited
financial statements. Grant Thornton also reviews our interim financial
statements in accordance with Statement on Auditing Standards No. 100 (interim
financial information). The Audit Committee oversees our financial reporting
process and internal control structure on behalf of the Board. The Audit
Committee met six times during 2009, including meeting regularly with Grant
Thornton and our internal auditors, both privately and with management
present.
In
fulfilling its oversight responsibilities, the Audit Committee reviewed and
discussed with management and Grant Thornton the audited and interim financial
statements, including Management’s Discussion and Analysis, included in the
Company’s Reports on Form 10-K and Form 10-Q. These reviews included a
discussion of:
·
|
our
critical accounting policies;
|
·
|
the
reasonableness of significant financial reporting judgments made in
connection with the financial statements, including the quality (and not
just the acceptability) of our accounting
principles;
|
·
|
the
clarity and completeness of financial
disclosures;
|
·
|
the
effectiveness of our internal control over financial reporting, including
management’s and Grant Thornton’s reports thereon, the basis for the
conclusions expressed in those reports and changes made to our internal
control over financial reporting during
2009;
|
·
|
items
that could be accounted for using alternative treatments within GAAP, the
ramifications thereof and the treatment preferred by Grant
Thornton;
|
·
|
the
annual management letter issued by Grant Thornton, management’s response
thereto and other material written communications between management and
Grant Thornton;
|
·
|
unadjusted
audit differences noted by Grant Thornton during its audit of our annual
financial statements; and
|
·
|
the
potential effects of regulatory and accounting initiatives on our
financial statements.
|
In
connection with its review of our annual consolidated financial statements, the
Audit Committee also discussed with Grant Thornton other matters required to be
discussed with the auditors under Statement on Auditing Standards No. 61, as
modified or supplemented (communication with audit committees) and those
addressed by Grant Thornton’s written disclosures and its letter provided under
Independence Standards Board Standard No. 1, as modified or supplemented
(independence discussions with audit committees).
The Audit
Committee is responsible for the engagement of the independent auditors and has
appointed Grant Thornton to serve in that capacity since July 2005. In
connection therewith, the Audit Committee:
·
|
reviewed
Grant Thornton’s independence from the Company and management, including
Grant Thornton’s written disclosures described
above;
|
·
|
reviewed
periodically the level of fees approved for payment to Grant Thornton and
the pre-approved non-audit services it has provided to us to ensure their
compatibility with Grant Thornton’s independence;
and
|
·
|
reviewed
Grant Thornton’s performance, qualifications and quality control
procedures.
|
Among
other matters, the Audit Committee also:
·
|
reviewed
the scope of and overall plans for the annual audit and the internal audit
program;
|
·
|
consulted
with management and Grant Thornton with respect to our processes for risk
assessment and risk management;
|
·
|
reviewed
the adequacy of certain of our financial
policies;
|
·
|
reviewed
and approved our policy with regard to the hiring of former employees of
the independent auditors;
|
·
|
reviewed
and approved our policy for the pre-approval of audit and permitted
non-audit services by the independent
auditors;
|
·
|
received
reports pursuant to our policy for the submission and confidential
treatment of communications from employees and others about accounting,
internal controls and auditing
matters;
|
·
|
reviewed
with management the scope and effectiveness of our disclosure controls and
procedures, including for purposes of evaluating the accuracy and fair
presentation of our financial statements in connection with certifications
made by the Chief Executive Officer and Chief Financial Officer;
and
|
·
|
reviewed
significant legal developments and our processes for monitoring compliance
with law and Company policies.
|
Based on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board, and the Board approved, that the audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended December
27, 2009 for filing with the SEC. The Audit Committee also recommended, and the
Board has approved, the selection of Grant Thornton as our independent auditors
for 2010.
Respectfully submitted,
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Scott Anderson, Chairperson
William Hoglund
Scot Jarvis
This
report of the Audit Committee shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that we specifically incorporate
this information by reference, and shall not otherwise be deemed filed under
such acts.
HOUSEHOLDING
OF PROXY MATERIALS
The SEC
has adopted rules that permit companies and intermediaries (e.g., brokers) to
satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by delivering a
single proxy statement addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially means extra convenience for
stockholders and cost savings for companies.
This
year, a number of brokers with account holders who are the Company’s
stockholders will be “householding” our proxy materials. A single proxy
statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker that they will be “householding”
communications to your address, “householding” will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would prefer to receive a
separate proxy statement and annual report, please notify your broker, direct
your written request to Kratos Defense & Security Solutions, Inc., c/o
Corporate Secretary, 4810 Eastgate Mall, San Diego, California 92121 or call
Investor Relations at (858) 812-7300. Stockholders who currently receive
multiple copies of the proxy statement at their address and would like to
request “householding” of their communications should contact their
brokers.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), stockholders may present proper
proposals for inclusion in our proxy statement and for consideration at our next
annual meeting of stockholders. To be eligible for inclusion in our 2011 proxy
statement, a stockholder’s proposal must be received by us no later than
December 2, 2010 and must otherwise comply with Rule 14a-8 under the Exchange
Act.
Pursuant to the terms of our Bylaws,
stockholders wishing to submit
proposals or director nominations,
including those that are not to be included in such proxy statement and proxy,
must provide timely notice in writing to our Secretary. To be timely,
a stockholder’s notice must be delivered to or mailed and received at our
principal executive offices not less than 120 days prior to the date on which we
first mailed our notice of the meeting for the previous year’s annual meeting of
stockholders, or not later than the
tenth day following the date on which we
mail the notice of meeting for the current year if during the prior year we did
not hold an annual meeting or if the date of the annual meeting was changed more
than 30 days from the prior year, or in the event of a special
meeting. Stockholders are
advised to review our Bylaws, which contain additional requirements with respect
to advance notice of stockholder proposals and director
nominations.
While our board will consider proper stockholder
proposals that are properly brought before the annual meeting, we reserve the
right to omit from our 2011 proxy statement stockholder proposals that we are
not required to include under the Exchange Act, including Rule 14a-8
thereunder.
Our 2009 Annual Report on Form 10-K accompanies the
proxy materials being provided to all stockholders. We will provide,
without charge, additional copies of our 2009 Annual Report on Form 10-K upon
the receipt of a written request by any stockholder.
OTHER
MATTERS
The Board
of Directors knows of no other matters that will be presented for consideration
at our annual meeting. If any other matters are properly brought before the
meeting, it is the intention of the persons named in the accompanying proxy to
vote on such matters in accordance with their best judgment.
|
|
|
|
|
By
Order of the Board of Directors
|
|
|
|
|
|
Eric
DeMarco
President
and Chief Executive Officer
|