def14a
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 þ
Filed by a Party other than the Registrant o
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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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-12 |
Marlin Business Services Corp.
(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):
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and identify the filing for which the offsetting fee was paid previously. Identify the
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MARLIN BUSINESS SERVICES CORP.
300 Fellowship Road
Mount Laurel, NJ 08054
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 22, 2008
To the Shareholders of Marlin Business Services Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the Annual Meeting) of Marlin
Business Services Corp. (the Corporation), a Pennsylvania corporation, will be held on May 22,
2008, at 9:00 a.m. at the Doubletree Hotel, 515 Fellowship Road, Mount Laurel, New Jersey, 08054,
for the following purposes:
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To elect a Board of Directors of seven (7) directors to serve until the next annual meeting
of shareholders of the Corporation and until their successors are elected and qualified; |
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To approve an increase in the number of shares of common stock authorized for issuance under
the Corporations 2003 Equity Compensation Plan (the Plan) and to approve the Plan, as
amended; and |
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To transact such other business as may properly come before the meeting or any adjournment or
postponement thereof. |
The Board of Directors has fixed April 11, 2008, as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting or any adjournment thereof.
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By order of the Board of Directors
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/s/ GEORGE D. PELOSE
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George D. Pelose |
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Secretary |
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Your vote is important, regardless of the number of shares you own. Even if you plan to attend the
meeting, please date and sign the enclosed proxy form, indicate your choice with respect to the
matters to be voted upon, and return it promptly in the enclosed envelope. A proxy may be revoked
before exercise by notifying the Secretary of the Corporation in writing or in open meeting, by
submitting a proxy of a later date or attending the meeting and voting in person.
Dated: April 22, 2008
MARLIN BUSINESS SERVICES CORP.
300 Fellowship Road
Mount Laurel, NJ 08054
Proxy Statement
Introduction
This Proxy Statement and the enclosed proxy card are furnished in connection with the solicitation
of proxies by the Board of Directors of Marlin Business Services Corp. (the Corporation), a
Pennsylvania corporation, to be voted at the Annual Meeting of Shareholders (the Annual Meeting)
of the Corporation to be held on Thursday, May 22, 2008, at 9:00 a.m., at the Doubletree Hotel, 515
Fellowship Road, Mount Laurel, New Jersey, 08054, or at any adjournment or postponement thereof,
for the purposes set forth below:
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To elect a Board of Directors of seven (7) directors to serve until the next annual meeting
of shareholders of the Corporation and until their successors are elected and qualified; |
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To approve an increase in the number of shares of common stock authorized for issuance under
the Corporations 2003 Equity Compensation Plan (the Plan) and to approve the Plan, as
amended; and |
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To transact such other business as may properly come before the meeting or any adjournment or
postponement thereof. |
This Proxy Statement and related proxy card have been mailed on or about April 22, 2008, to all
holders of record of common stock of the Corporation as of the record date. The Corporation will
bear the expense of soliciting proxies. The Board of Directors of the Corporation has fixed the
close of business on April 11, 2008, as the record date for the determination of shareholders
entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement
thereof. The Corporation has only one class of common stock, of which there were 12,386,150 shares
outstanding as of April 11, 2008.
Proxies and voting procedures
Each outstanding share of common stock of the Corporation will entitle the holder thereof to one
vote on each separate matter presented for vote at the Annual Meeting. Votes cast at the meeting
and submitted by proxy are counted by the inspectors of the meeting who are appointed by the
Corporation.
You can vote your shares by properly executing and returning a proxy in the enclosed form. The
shares represented by such proxy will be voted at the Annual Meeting and any adjournment or
postponement thereof. If you specify a choice, the proxy will be voted as specified. If no choice
is specified, the shares represented by the proxy will be voted for the election of all of the
director nominees named in the Proxy Statement; for the approval to increase by 1,200,000 shares
the number of shares authorized for issuance under the Plan and to approve the entire Plan, as
amended; and in accordance with the judgment of the persons named as proxies with respect to any
other matter which may come before the meeting. If you are the shareholder of record, you can also
choose to vote in person at the Annual Meeting.
A proxy may be revoked before exercise by notifying the Secretary of the Corporation in writing or
in open meeting, by submitting a proxy of a later date or attending the meeting and voting in
person. You are encouraged to date and sign the enclosed proxy form, indicate your choice with
respect to the matters to be voted upon, and promptly return it to the Corporation.
If your shares are held in a stock brokerage account or by a bank or other nominee, you are
considered the beneficial owner of shares held in street name, and these proxy materials are being
forwarded to you by your broker or nominee, who is considered, with respect to those shares, the
shareholder of record. As the beneficial owner, you have the right to direct how your broker votes
your shares. You are also invited to attend the meeting. However, because you are not the
shareholder of record, you may not vote your street name shares in person at the Annual Meeting
unless you obtain a proxy executed in your favor from the holder of record. Your broker or nominee
has enclosed a voting instruction card for you to use in directing the broker or nominee to vote
your shares.
Quorum and voting requirements
The presence, in person or by proxy, of shareholders entitled to cast a majority of the votes which
shareholders are entitled to cast on each matter to be voted upon at the meeting will constitute a
quorum for the meeting. If, however, the meeting cannot be organized because a quorum is not
present, in person or by proxy, the shareholders entitled to vote and present at the meeting will
have the
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power, except as otherwise provided by statute, to adjourn the meeting to such time and place as
they may determine. Those who attend or participate at a meeting that has been previously adjourned
for lack of a quorum, although less than a quorum, shall nevertheless constitute a quorum for the
purpose of electing directors.
At the Annual Meeting, in connection with the election of the directors, you will be entitled to
cast one vote for each share held by you for each candidate nominated, but will not be entitled to
cumulate your votes. Votes may be cast in favor of or withheld with respect to each candidate
nominated. The seven (7) director nominees receiving the highest number of votes will be elected to
the Board of Directors. Votes that are withheld will be excluded entirely from the vote and will
have no effect, other than for purposes of determining the presence of a quorum.
The proposal to increase the number of shares authorized for issuance under the Plan and to approve
the entire Plan, as amended, requires for its approval the affirmative vote of a majority of the
shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this
proposal. Any abstentions will have the effect of votes against the proposal.
Brokers that are member firms of the New York Stock Exchange and who hold shares in street name for
customers have the discretion to vote those shares with respect to certain matters if they have not
received instructions from the beneficial owners. Brokers will have this discretionary authority
with respect to the election of directors. As a result, where brokers submit proxies but are
otherwise prohibited and thus must refrain from exercising discretionary authority in voting shares
on certain matters for beneficial owners who have not provided instructions with respect to such
matters (commonly referred to as broker non-votes), those shares will be included in determining
whether a quorum is present but will have no effect in the outcome of the election of directors or
in the voting on the proposal to increase the shares authorized under the Plan and the approval of
the Plan, as amended.
As to all other matters properly brought before the meeting, the majority of the votes cast at the
meeting, present in person or by proxy, by shareholders entitled to vote thereon will decide any
question brought before the Annual Meeting, unless the question is one for which, by express
provision of statute or of the Corporations Articles of Incorporation or Bylaws, a different vote
is required. Generally, abstentions and broker non-votes on these matters will have the same effect
as a negative vote because under the Corporations Bylaws, these matters require the affirmative
vote of the holders of a majority of the Corporations common stock, present in person or by proxy
at the Annual Meeting. Broker non-votes and abstentions will be counted, however, for purposes of
determining whether a quorum is present.
Governance of the Corporation
Board of Directors
Currently, our Board of Directors has seven (7) members. The Board has affirmatively determined
that John J. Calamari, Lawrence J. DeAngelo, Edward Grzedzinski, Kevin J. McGinty, Matthew J.
Sullivan and James W. Wert are each independent directors. This constitutes more than a majority of
our Board of Directors. Only independent directors serve on our Audit Committee, Compensation
Committee and Nominating and Governance Committee.
In 2004, the Board of Directors established the position of Lead Independent Director and
unanimously elected Kevin J. McGinty to the position. Mr. McGinty continues to serve as the Lead
Independent Director. The duties of the Lead Independent Director include providing the Chairman
with input as to the preparation of the agendas for the Board of Director and Committee meetings,
serving as the principal liaison between the independent directors and executive management of the
Corporation, being available for consultation and direct communication with major shareholders as
necessary, and coordinating and moderating regularly scheduled executive sessions of the Boards
independent directors.
Committees
The Corporation has three standing Committees: the Audit Committee, the Compensation Committee, and
the Nominating and Governance Committee.
Audit Committee. The Audit Committee of the Board currently consists of three independent
directors: Messrs. Calamari (chairman), McGinty and Wert. The Board has determined that Messrs.
Calamari and Wert each qualify as an audit committee financial expert as defined under current SEC
rules and regulations and NASD listing standards, and that the members of the Audit Committee
satisfy the independence and other requirements for audit committee members under such rules,
regulations and listing standards. The Audit Committees primary purpose is to assist the Board in
overseeing and reviewing: 1) the integrity of the Corporations financial reports and financial
information provided to the public and to governmental and regulatory agencies; 2) the adequacy of
the Corporations
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internal accounting systems and financial controls; 3) the annual independent audit of the
Corporations financial statements, including the independent registered public accountants
qualifications and independence; and 4) the Corporations compliance with law and ethics programs
as established by management and the Board. In this regard, the Audit Committee, among other
things, (a) has sole authority to select, evaluate, terminate and replace the Corporations
independent registered public accountants; (b) has sole authority to approve in advance all audit
and non-audit engagement fees and terms with the Corporations independent registered public
accountants; and (c) reviews the Corporations audited financial statements, interim financial
results, public filings and earnings press releases prior to issuance, filing or publication. The
Board has adopted a written charter for the Audit Committee, which is accessible on the investor
relations page of the Corporations website at www.marlincorp.com. The Corporations website is
not part of this Proxy Statement and references to the Corporations website address are intended
to be inactive textual references only.
Compensation Committee. The Compensation Committee of the Board currently consists of three
independent directors: Messrs. McGinty (chairman), DeAngelo and Grzedzinski. The functions of the
Compensation Committee include: 1) evaluating the performance of the Corporations named executive
officers and approving their compensation; 2) preparing an annual report on executive compensation
for inclusion in the Corporations proxy statement; 3) reviewing and approving compensation plans,
policies and programs, considering their design and competitiveness; and 4) reviewing the
Corporations non-employee independent director compensation levels and practices and recommending
changes as appropriate. The Compensation Committee reviews and approves corporate goals and
objectives relevant to chief executive officer compensation, evaluates the chief executive
officers performance in light of those goals and objectives, and recommends to the Board the chief
executive officers compensation levels based on its evaluation. The Compensation Committee also
administers the Corporations 2003 Equity Compensation Plan and 2003 Employee Stock Purchase Plan.
The Compensation Committee is governed by a written charter that is accessible on the investor
relations page of the Corporations website at www.marlincorp.com.
Nominating and Governance Committee. The Nominating and Governance Committee of the Board (the
Nominating Committee) currently consists of four independent directors: Messrs. DeAngelo
(chairman), McGinty, Sullivan and Wert. The Nominating Committee is responsible for seeking,
considering and recommending to the Board qualified candidates for election as directors and
proposing a slate of nominees for election as directors at the Corporations annual meeting of
shareholders. The Nominating Committee is responsible for reviewing and making recommendations on
matters involving general operation of the Board and its Committees, and will annually recommend to
the Board nominees for each Committee of the Board. The Nominating Committee is governed by a
written charter that is accessible on the investor relations page of the Corporations website at
www.marlincorp.com.
The Nominating Committee has determined that no one single criteria should be given more weight
than any other criteria when it considers the qualifications of a potential nominee to the Board.
Instead, it believes that it should consider the total skills set of an individual. In evaluating
an individuals skills set, the Nominating Committee will consider a variety of factors,
including, but not limited to, the potential nominees background, education, character, integrity,
judgment, general business experience, and relevant industry experience. The Nominating Committees
process for identifying and evaluating potential nominees includes soliciting recommendations from
existing directors and officers of the Corporation and reviewing the Director and Committee
Assessments completed by the directors. The Corporation does not currently pay any fees to third
parties to assist in identifying or evaluating potential nominees, but the Corporation may seek
such assistance in the future.
The Nominating Committee will also consider recommendations from shareholders regarding potential
director candidates provided that such recommendations are made in compliance with the nomination
procedures set forth in the Corporations Bylaws. The procedures in the Corporations Bylaws
require the shareholder to submit written notice of the proposed nominee to the Secretary of the
Corporation no less than 90 days prior to the anniversary date of the immediately preceding annual
meeting of shareholders. To be in proper form, such written notice must include, among other
things, (i) the name, age, business address and residence of the proposed nominee, (ii) the
principal occupation or employment of such nominee, (iii) the class and number of shares of capital
stock of the Corporation owned beneficially or of record by such nominee, and (iv) any other
information relating to the proposed nominee that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations of proxies for the
election of directors. In addition, as to the shareholder giving the notice, the notice must also
provide (a) such shareholders name and record address, (b) the class and number of shares of
capital stock of the Corporation owned beneficially or of record by such shareholder, (c) a
description of all arrangements or understandings between such shareholder and each proposed
nominee and any other persons (including their names) pursuant to which the nominations are to be
made by such shareholder, (d) a representation that such shareholder (or his or her authorized
representative) intends to appear in person or by proxy at the meeting to nominate the persons
named in the notice, and (e) any other information relating to the shareholder that would be
required to be disclosed in a proxy statement or other filings required to be made in connection
with solicitations of proxies for the election of directors. If the shareholder of record is not
the beneficial owner of the shares, then the notice to the Secretary of the Corporation must
include the name and address of the beneficial owner and the information referred to in clauses (c)
and (e) above (substituting the beneficial owner for such shareholder).
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Whistleblower Procedures
The Corporation has established procedures that provide employees with the ability to make
anonymous submissions directly to the Audit Committee regarding concerns about accounting or
auditing matters. The independent directors that comprise the Audit Committee will review,
investigate and, if appropriate, respond to each submission made. Additionally, the Corporation has
reminded employees of its policy to not retaliate or take any other detrimental action against
employees who make submissions in good faith.
Code of Ethics and Business Conduct
All of the Corporations directors, officers and employees (including its senior executive,
financial and accounting officers) are held accountable for adherence to the Corporations Code of
Ethics and Business Conduct (the Code). The Code is posted on the investor relations section of
the Corporations website at www.marlincorp.com. The purpose of the Code is to establish standards
to deter wrongdoing and promote honest and ethical behavior. The Code covers many areas of
professional conduct, including compliance with laws, conflicts of interest, fair dealing,
financial reporting and disclosure, confidential information and proper use of the Corporations
assets. Employees are obligated to promptly report any known or suspected violation of the Code
through a variety of mechanisms made available by the Corporation. Waiver of any provision of the
Code for a director or executive officer (including the senior executive, financial and accounting
officers) may only be granted by the Board of Directors or the Audit Committee.
Board and Committee meetings
From January 1, 2007 through December 31, 2007, there were eight meetings of the Board of
Directors, eight meetings of the Audit Committee, six meetings of the Compensation Committee and
four meetings of the Nominating Committee. All of our Directors attended at least 75% of the
aggregate number of meetings of our Board and Board Committees on which they served, except for Mr.
Grzedzinski, who attended 71% of all such meetings, and Mr. Sullivan, who was not on the Board or
any Board Committee in 2007.
Directors are encouraged, but not required, to attend annual meetings of the Corporations
shareholders. Each director attended the Corporations 2007 Annual Meeting of Shareholders, except
for Mr. Sullivan, who did not join the Board until April 2008.
Communications with the Board
Shareholders may communicate with the Board or any of the directors by sending written
communications addressed to the Board or any of the directors, c/o Corporate Secretary, Marlin
Business Services Corp., 300 Fellowship Road, Mount Laurel, New Jersey, 08054. All communications
are compiled by the Corporate Secretary and forwarded to the Board or the individual director(s)
accordingly.
Proposal 1 Election of Directors
Nominees for election
In general, the Corporations directors are elected at each annual meeting of shareholders.
Currently, the number of directors of the Corporation is seven (7). At the Annual Meeting, the
Corporations shareholders are being asked to elect seven (7) directors to serve until the next
annual meeting of shareholders and until their successors are elected and qualified, or until their
earlier death, resignation or removal. The nominees receiving the greatest number of votes at the
Annual Meeting up to the number of authorized directors will be elected.
All seven (7) of the nominees for election as directors at the Annual Meeting as set forth in the
following table are incumbent directors. Except for Mr. Sullivan, all of the nominees have been
previously elected as directors by the Corporations shareholders. Mr. Sullivan was appointed to
the Board of Directors in April 2008 as the designee for Peachtree Equity Partners pursuant to the
Letter Agreement, dated June 18, 2007 (the Letter Agreement), by and among the Corporation,
Peachtree Equity Investment Management, Inc. and WCI (Private Equity) LLC. See Certain
Relationships and Related Transactions herein for a description of this Letter Agreement. Each of
the nominees has consented to serve as a director if elected. Except to the extent that authority
to vote for any directors is withheld in a proxy, shares represented by proxies will be voted for
such nominees. In the event that any of the nominees for director should, before the Annual
Meeting, become unable to serve if elected, shares represented by proxies will be voted for such
substitute nominees as may be recommended by the Corporations existing Board, unless other
directions are given in the proxies. To the best of the Corporations knowledge, all the nominees
will be available to serve.
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The following biographical information is furnished with respect to the seven (7) nominees for
election at the Annual Meeting as of March 1, 2008:
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Principal Occupation |
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Director Since |
Daniel P. Dyer
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CEO of Marlin Business
Services Corp.
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1997 |
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John J. Calamari
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Executive Vice President and
Chief Financial Officer of
J.G. Wentworth
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2003 |
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Lawrence J. DeAngelo
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Partner with Roark Capital
Group
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2001 |
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Kevin J. McGinty
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Managing Director of
Peppertree Partners LLC
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1998 |
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James W. Wert
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President & CEO of Clanco
Management Corp.
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1998 |
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Edward Grzedzinski
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Former Chairman and CEO of
NOVA Corporation
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2006 |
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Matthew J. Sullivan
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Partner with Peachtree Equity
Partners
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2008 |
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Daniel P. Dyer has been Chairman of the Board of Directors and Chief Executive Officer since
co-founding our Corporation in 1997. In December of 2006, Mr. Dyer also assumed the role of
President of the Corporation. Prior to that, from 1986 to 1997, Mr. Dyer served in a number of
positions, most recently as Senior Vice President and Chief Financial Officer of Advanta Business
Services, where he was responsible for financial and treasury functions. Mr. Dyer received his
undergraduate degree in accounting and finance from Shippensburg University and is a licensed
certified public accountant (non-active status).
John J. Calamari has been a Director since November 2003. Mr. Calamari is Executive Vice President
and Chief Financial Officer of J.G. Wentworth, a position he has held since joining J.G. Wentworth
in March 2007. Prior to that time, Mr. Calamari was Senior Vice President, Corporate Controller of
Radian Group Inc. where he oversaw Radians global controllership functions, a position he held
after joining Radian in September 2001. From 1999 to August 2001, Mr. Calamari was a consultant to
the financial services industry, where he structured new products and strategic alliances and
established financial and administrative functions and engaged in private equity financing for
startup enterprises. Mr. Calamari served as Chief Accountant of Advanta from 1988 to 1998, as Chief
Financial Officer of Chase Manhattan Bank Maryland and Controller of Chase Manhattan Bank (USA)
from 1985 to 1988 and as Senior Manager at Peat, Marwick, Mitchell & Co. (now KPMG LLP) prior to
1985. In addition, Mr. Calamari served as a director of Advanta National Bank, Advanta Bank USA and
Credit One Bank. Mr. Calamari received his undergraduate degree in accounting from St. Johns
University in 1976.
Lawrence J. DeAngelo has been a Director since July 2001. Mr. DeAngelo is a Partner with Roark
Capital Group, a private equity firm based in Atlanta, Georgia. Prior to joining Roark in 2005, Mr.
DeAngelo was a Managing Director of Peachtree Equity Partners, a private equity firm based in
Atlanta, Georgia. Prior to co-founding Peachtree in April 2002, Mr. DeAngelo held numerous
positions at Wachovia Capital Associates, the private equity investment group of Wachovia Bank,
from 1996 to April 2002, the most recent of which was Managing Director. From 1995 to 1996, Mr.
DeAngelo worked at Seneca Financial Group, and from 1992 to 1995, Mr. DeAngelo worked in the
Corporate Finance Department at Kidder, Peabody & Co. From 1990 to 1992, Mr. DeAngelo attended
business school. From 1988 to 1990, Mr. DeAngelo was a management consultant with Peterson & Co.
Consulting. Mr. DeAngelo received his undergraduate degree in economics from Colgate University and
his MBA from the Yale School of Management.
Kevin J. McGinty has been a Director since February 1998. Mr. McGinty is a Managing Director and
co-founder of Peppertree Partners LLC. Prior to founding Peppertree in January 2000, Mr. McGinty
served as a Managing Director of Primus Venture Partners during the period from 1990 to December
1999. In both organizations Mr. McGinty was involved in private equity investing, both as a
principal and as a limited partner. From 1970 to 1990, Mr. McGinty was employed by Society National
Bank, now KeyBank, N.A., where in his final position he was an Executive Vice President. Mr.
McGinty received his undergraduate degree in economics from Ohio Wesleyan University and his MBA in
finance from Cleveland State University.
James W. Wert has been a Director since February 1998. Mr. Wert is President and CEO of Clanco
Management Corp., which is headquartered in Cleveland, Ohio. Prior to joining Clanco in May 2000,
Mr. Wert served as Chief Financial Officer and then Chief
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Investment Officer of KeyCorp, a financial services company based in Cleveland, Ohio, and its
predecessor, Society Corporation, until 1996, after holding a variety of capital markets and
corporate banking leadership positions spanning his 25 year banking career. Mr. Wert received his
undergraduate degree in finance from Michigan State University in 1971 and completed the Stanford
University Executive Program in 1982.
Edward Grzedzinski has been a Director since May 2006. Mr. Grzedzinski served as the Chairman and
Chief Executive Officer of NOVA Corporation from September 1995 to November 2004, and Vice Chairman
of US Bancorp from July 2001 to November 2004. Mr. Grzedzinski has 25 years of experience in the
electronic payments industry and was a co-founder of the predecessor of NOVA Corporation, NOVA
Information Systems, in 1991. Mr. Grzedzinski served as a member of the Managing Committee of US
Bancorp, and was a member of the Board of Directors of US Bank, N.A. Mr. Grzedzinski also served as
Chairman of euroConex Technologies, Limited, a European payment processor owned by US Bancorp until
November 2004 and was a member of the Board of Directors of Indus International Inc., a global
provider of enterprise asset management products and services until October 2004. Mr. Grzedzinski
is also a director of Neenah Paper, Inc.
Matthew J. Sullivan became a Director in April 2008. Mr. Sullivan is a Partner with Peachtree
Equity Partners (Peachtree). Mr. Sullivan co-founded Peachtree in 2002. From 1994 to 2002, Mr.
Sullivan held numerous positions at Wachovia Capital Associates, the private equity investment
group of Wachovia Bank, the most recent of which was Managing Director. From 1983 to 1994, Mr.
Sullivan worked in the Corporate Finance Department at Kidder, Peabody & Co. and previously with
Arthur Andersen & Company where he earned his CPA (currently non-active status). Mr. Sullivan
received his undergraduate degree in finance from the University of Pennsylvania and his MBA from
Harvard Business School.
Recommendation of the Board
The Board recommends that the shareholders vote FOR the seven (7) nominees listed above. Proxies
received will be so voted unless shareholders specify otherwise in the proxy.
Proposal 2- Approval of Increase in Number of Shares Authorized Under the Corporations 2003 Equity
Compensation Plan and Amendment of the Corporations 2003 Equity Compensation Plan
On April 8, 2008, the Board adopted, subject to shareholder approval at the Annual Meeting, an
amendment to the Corporations 2003 Equity Compensation Plan (the Plan) that would increase the
total number of shares of our common stock authorized for issuance under the Plan from 2,100,000
shares to 3,300,000 shares, an increase of 1,200,000 shares. The Board has directed that the
proposal to increase the number of shares authorized for issuance under the Plan be submitted to
our shareholders for their approval at the Annual Meeting. In addition, the Corporations
shareholders are being asked to approve the entire Plan, as amended. Shareholder approval of the
increase in shares authorized for issuance under the Plan, as well as of the entire Plan, as
amended, is being sought (i) so that compensation attributable to grants under the Plan may
continue to qualify for an exemption from the $1,000,000 deduction limit under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the Code) (see discussion of Section 162(m)
under Federal Income Tax Consequences below), and (ii) in order for incentive stock options to
meet the requirements of the Code. As of April 1, 2008, there were 16,288 shares of common stock
available for future grants under the Plan. As of April 1, 2008, a net total of 2,083,712 stock
option and restricted stock awards had been granted under the Plan. If the amendment to the Plan
to increase the number of shares of common stock authorized to be issued under the Plan is
approved, the total number of shares of common stock that may be issued under the Plan will be
3,300,000 shares of common stock, meaning that 1,216,288 shares of common stock will be available
for grants under the Plan.
The Board believes that the number of shares currently available for issuance under the Plan is not
sufficient in view of our compensation structure and strategy. The Board has concluded that our
ability to attract, retain and motivate top quality management and employees is material to our
success and would be enhanced by our continued ability to grant equity compensation under the Plan.
In addition, the Board believes that our interests and the interests of our shareholders will be
advanced if we can continue to offer our employees, advisors, consultants and non-employee
directors the opportunity to acquire or increase their proprietary interests in us. The Board
believes that the availability of the additional 1,200,000 shares will ensure that we continue to
have a sufficient number of shares authorized for issuance under the Plan.
The material terms of the Plan are summarized below. A copy of the proposed amendment to the Plan
is attached as Appendix A to this Proxy statement. A copy of the Plan can be received by
submitting a request c/o Corporate Secretary, Marlin Business Services Corp., 300 Fellowship Road,
Mount Laurel, New Jersey, 08054. This summary of the Plan and the proposed amendment are not
7
intended to be a complete description of the Plan and the amendment. This summary is qualified in
its entirety by the actual text of the Plan and the amendment to which reference is made.
Material Features of the Plan
General
The Plan initially became effective on October 12, 2003 and provides for the grant of nonqualified
stock options (NQSOs), incentive stock options (ISOs, and together with NQSOs, Options)),
stock awards (Stock Awards), stock appreciation rights (SARs), stock units (Stock Units),
dividend equivalents (Dividend Equivalents), and other equity-based awards (Other Equity
Awards).
The Plan currently authorizes the issuance of 2,100,000 shares of common stock; provided, however,
that not more than 1,050,000 shares shall be available for issuance as Stock Awards, Stock Units
and Other Equity Awards. The Corporations shareholders are being asked to consider and approve an
amendment to the Plan that would, commencing on the date of the Annual Meeting, increase the number
of shares of common stock available for grants under the Plan by an additional 1,200,000 shares, so
that the total number of shares of common stock that may be granted under the Plan will be
3,300,000. This amendment also provides that no more than 1,650,000 shares of common stock shall
be available for issuance as Stock Awards, Stock Units and Other Equity Awards under the Plan. The
Plan provides that the maximum number of shares of common stock that may be subject to grants to
any individual in any calendar year is 100,000 shares.
If any grant terminates, expires or is canceled, forfeited, exchanged or surrendered without having
been exercised or if any Stock Awards, Stock Units, or Other Equity Awards are forfeited, the
shares subject to such grants shall again be available for purposes of the Plan. If certain
extraordinary events affecting the Corporations common stock occur, the Compensation Committee may
make adjustments to the total number of shares of common stock available for grants under the Plan,
the maximum number of shares of common stock that may be awarded under the Plan to an individual in
any year, the number and kind of shares of common stock covered by outstanding grants, the kind of
shares to be issued or transferred under the Plan, and the price per share of the grants.
Administration. The Plan is administered and interpreted by the Compensation Committee. However,
the Board will approve and administer all grants to non-employee directors. The Compensation
Committee may delegate its authority under the Plan to a subcommittee. The Compensation Committee
of the Board currently consists of Messrs. McGinty (chairman), DeAngelo and Grzedzinski, each of
whom is a non-employee and outside director. The Compensation Committee shall have the sole
authority to (i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such individual, (iii)
determine the time when the grants will be made and the duration of any applicable exercise or
restriction period, including the criteria for exercisability and the acceleration of
exercisability, (iv) amend the terms of any previously issued grant, and (v) deal with any other
matters arising under the Plan.
Eligibility for Participation. All employees of the Corporation and its subsidiaries (Employees),
including Employees who are officers or members of the Board, and members of the Board who are not
Employees (Non-Employee Directors) are eligible to participate in the Plan. Consultants and
advisors who perform services for the Corporation or any of its subsidiaries (Key Advisors) shall
also be eligible to participate in the Plan, subject to certain conditions set forth in the Plan.
The Employees, Non-Employee Directors and Key Advisors are collectively referred to herein as
Grantees.
Types of Grants
Options. The Compensation Committee may grant to a Grantee Options intended to qualify as ISOs,
within the meaning of Section 422 of the Code, or NQSOs that are not intended to qualify as ISOs,
or any combination of ISOs and NQSOs. Options become exercisable according to the terms and
conditions determined by the Compensation Committee and set forth in the grant instrument. The
Compensation Committee may accelerate the exercisability of any or all outstanding Options at any
time for any reason.
The exercise price per share subject to an Option will be determined by the Compensation Committee
and will be equal to or greater than the fair market value of the Corporations shares of common
stock on the date of grant. The Compensation Committee also determines the term of each Option, up
to a maximum ten-year term. If the Grantee of an ISO is a person who holds more than ten percent of
the total combined voting power of all classes of the Corporations outstanding shares, the term
may not exceed five years from the date of grant and the exercise price cannot be less than 110% of
the fair market value of the shares of common stock on the date of grant.
8
Grantees may pay the exercise price of an Option: (i) in cash, (ii) by delivering to the
Corporation shares of common stock owned by the Grantee and having a fair market value on the date
of exercise equal to part or all of the exercise price of the Option or by attestation to ownership
of such shares, (iii) by payment through a broker in accordance with procedures permitted by
Regulation T of the Federal Reserve Board, or (iv) by such other method approved by the
Compensation Committee.
Stock Awards. The Compensation Committee may issue or transfer shares of common stock to a Grantee
under a Stock Award upon such terms as the Committee deems appropriate. The Compensation Committee
may require that Grantees pay consideration for the Stock Awards and may establish conditions under
which restrictions on Stock Awards lapse over a period of time or according to such other criteria
as the Committee determines appropriate. The Compensation Committee shall determine the number of
shares of common stock to be issued or transferred pursuant to a Stock Award and the restrictions
applicable to such shares. Unless the Compensation Committee determines otherwise, during the
restriction period, the Grantee will have the right to vote the shares of common stock subject to
the Stock Award and to receive any dividends or other distributions paid on such shares, subject to
any restrictions determined appropriate by the Compensation Committee.
Stock Appreciation Rights. The Compensation Committee may grant SARs to a Grantee separately or in
tandem with any Option. The base amount of each SAR shall be established by the Compensation
Committee at the time the SAR is granted and, unless the Committee determines otherwise, the base
amount of each SAR shall equal the per share exercise price of the related Option or, if there is
no related Option, the fair market value of the Corporations common stock on the date of the grant
of the SAR. Upon exercise of a SAR, the Grantee will receive an amount equal to the excess of the
fair market value of the Corporations common stock on the date of exercise over the base amount of
the SAR set forth in the grant instrument. Such payment to the Grantee will be in cash, in common
stock of the Corporation or a combination of cash and common stock, as determined by the
Compensation Committee. The Compensation Committee will also determine the period when SARs vest
and become exercisable and whether SARs will be granted in connection with, or independently of,
any Options. The Compensation Committee may accelerate the exercisability of any or all outstanding
SARs at any time for any reason. SARs may be exercised while the Grantee is employed by or
providing service to the Corporation or within a specified period of time after termination of such
service or employment.
Stock Units. The Compensation Committee may grant phantom units representing one or more shares of
common stock to a Grantee upon such terms as the Committee deems appropriate. Each Stock Unit shall
represent the right of the Grantee to receive an amount based on the value of a share of common
stock, if specified conditions are met, or under other circumstances. The Compensation Committee
determines the number of Stock Units that will be granted, the requirements applicable to the Stock
Units and any other terms and conditions of the Stock Unit. Payments with respect to Stock Units
will be paid to the Grantee in cash, the Corporations common stock or a combination of cash and
common stock, as determined by the Compensation Committee.
Other Equity Awards. The Compensation Committee may grant Other Equity Awards that are awards
(other than Options, SARs, Stock Awards, Stock Units or Dividend Equivalents) that are based on,
measured by or payable in the Corporations common stock to any Grantee, on such terms and
conditions as the Committee shall determine. These Other Equity Awards may be awarded subject to
the achievement of performance goals or other conditions and are payable in cash, the Corporations
common stock or any combination of cash and common stock. The terms and conditions for these Other
Equity Awards will be determined by the Compensation Committee.
Dividend Equivalents. The Compensation Committee may include in a grant instrument with respect to
any grant a Dividend Equivalent right entitling the Grantee to receive amounts equal to the
ordinary dividends that would be paid, during the time the grant is outstanding and unexercised, on
the shares of the Corporations common stock covered by the grant as if such shares were then
outstanding. The Compensation Committee determines whether Dividend Equivalents shall be paid
currently or credited to a bookkeeping account as a dollar amount or in the form of Stock Units.
The terms and conditions of Dividend Equivalents are determined by the Compensation Committee.
Qualified Performance-Based Compensation
The Compensation Committee may determine that Stock Awards, Stock Units, Dividend Equivalents or
Other Equity Awards granted to an Employee shall be considered qualified performance-based
compensation under section 162(m) of the Code. When Stock Awards, Stock Units, Dividend
Equivalents or Other Equity Awards that are to be considered qualified performance-based
compensation are granted, the Compensation Committee shall establish in writing (i) the objective
performance goals that must be met, (ii) the performance period during which the performance goals
must be met, (iii) the threshold, target and maximum amounts that may be paid if the performance
goals are met, and (iv) any other conditions that the Committee deems appropriate and consistent
with the Plan and Section 162(m) of the Code, including the employment requirements and payment
terms. The performance goals may relate to the Employees business unit or the performance of the
Corporation and its subsidiaries as a whole, or any combination
9
of the foregoing. The Compensation Committee shall use objectively determinable performance goals
based on one or more of the following criteria: total shareholder return; total shareholder return
as compared to total shareholder return of comparable companies or a publicly available index; net
income; pretax earnings; earnings before interest expense and taxes (EBIT); earnings before
interest expense, taxes, depreciation and amortization (EBITDA); earnings per share; return on
equity; return on assets; revenues; asset growth; operating ratios; access to and availability of
funding; or asset quality.
The Compensation Committee shall establish the performance goals in writing either before the
beginning of the performance period or during a period ending no later than the earlier of (i) 90
days after the beginning of the performance period or (ii) the date on which 25% of the performance
period has been completed, or such other date as may be required or permitted under applicable
regulations under section 162(m) of the Code. The performance goals shall satisfy the requirements
for qualified performance-based compensation, including the requirement that the achievement of
the goals be substantially uncertain at the time they are established and that the goals be
established in such a way that a third party with knowledge of the relevant facts could determine
whether and to what extent the performance goals have been met. The Compensation Committee shall
not have discretion to increase the amount of compensation that is payable upon achievement of the
designated performance goals.
The maximum number of shares of the Corporations common stock that may be subject to grants made
to an individual during a calendar year shall not exceed 100,000 shares. If Dividend Equivalents
are granted as qualified performance-based compensation, the maximum amount of Dividend
Equivalents that may be credited to the Employees account in a calendar year is $250,000.
Announcement of Grants
The Compensation Committee shall certify and announce the results for each performance period to
all Grantees immediately following the announcement of the Corporations financial results for the
performance period. If and to the extent that the Compensation Committee does not certify that the
performance goals have been met, the grants of Stock Awards, Stock Units, Dividend Equivalents or
Other Equity Awards for the performance period shall be forfeited or shall not be made, as
applicable. Any grants that are to be paid as a result of achievement of performance goals shall be
paid as specified in the grant instrument.
Deferrals
The Compensation Committee may permit or require a Grantee to defer receipt of the payment of cash
or the delivery of shares that would otherwise be due to such Grantee in connection with any grant
under the Plan. If any such deferral election is permitted or required, the Compensation Committee
shall establish rules and procedures for such deferrals.
Change of Control of the Corporation
Upon a Change of Control (as defined in the Plan), (i) the Corporation shall provide each Grantee
with outstanding grants written notice of such Change of Control, (ii) all outstanding Options and
SARs shall automatically accelerate and become fully exercisable, (iii) the restrictions and
conditions on all outstanding Stock Awards shall immediately lapse, and (iv) all Grantees holding
Stock Units, Dividend Equivalents and Other Equity Awards shall receive a payment in settlement of
such Stock Units, Dividend Equivalents and Other Equity Awards in an amount determined by the
Compensation Committee.
Assumption of Grants. Upon a Change of Control where the Corporation is not the surviving
corporation (or survives only as a subsidiary of another corporation), unless the Compensation
Committee determines otherwise, all outstanding Options and SARs that are not exercised shall be
assumed by, or replaced with comparable options or rights by, the surviving corporation (or a
parent or subsidiary of the surviving corporation), and other outstanding grants shall be converted
to similar grants of the surviving corporation (or a parent or subsidiary of the surviving
corporation).
Other Alternatives. Notwithstanding the foregoing, in the event of a Change of Control, unless the
Grantees employment agreement, if any, with the Corporation provides otherwise, the Compensation
Committee may take one or both of the following actions with respect to any or all outstanding
Options and SARs: the Committee may (i) require that Grantees surrender their outstanding Options
and SARs in exchange for a payment by the Corporation, in cash or the Corporations common stock as
determined by the Committee, in an amount equal to the amount by which the then fair market value
of the shares of the Corporations common stock subject to the Grantees unexercised Options and
SARs exceeds the exercise price of the Options or the base amount of the SARs, as applicable, or
(ii) after giving Grantees an opportunity to exercise their outstanding Options and SARs, terminate
any or all unexercised Options and SARs at such time as the Committee deems appropriate. Such
surrender or termination shall take place as of the date of the Change of Control or such other
date as the Committee may specify.
10
Shareholder Approval for Qualified Performance-Based Compensation.
If Stock Awards, Stock Units, Dividend Equivalents or Other Equity Awards are granted as qualified
performance-based compensation under section 162(m) of the Code, the Plan must be re-approved by
the Companys shareholders no later than the first shareholder meeting that occurs in the fifth
year following the year in which the shareholders previously approved the Plan.
Amendment and Termination of the Plan
The Board may amend or terminate the Plan at any time; provided, however, that the Board shall not
amend the Plan without shareholder approval if such approval is required in order to comply with
the Code or applicable laws or to comply with applicable stock exchange requirements. The Plan
shall terminate on the day immediately preceding the tenth anniversary of its effective date,
unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of
the shareholders.
Grants under the Plan
As of April 1, 2008, there were 16,288 shares of common stock available for future grants under the
Plan. As of April 1, 2008, a net total of 2,083,712 Options and Stock Awards had been granted
under the Plan. No SARs, Stock Units, Dividend Equivalents or Other Equity Awards have been granted
under the Plan. If the amendment to the Plan to increase the number of shares of common stock
authorized to be issued under the Plan is approved, the total number of shares of common stock that
may be issued under the Plan will be 3,300,000 shares of common stock, meaning that 1,216,288
shares of common stock will be available for grants under the Plan.
No grants have been made under the Plan that are subject to shareholder approval at the Annual
Meeting. It is not possible at present to predict the number of grants that will be made or who
will receive any such grants under the Plan after the Annual Meeting.
Federal Income Tax Consequences
The federal income tax consequences of grants under the Plan will depend on the type of grant. The
following description provides only a general description of the application of federal income tax
laws to grants under the Plan. This discussion is intended for the information of shareholders
considering how to vote at the Annual Meeting and not as tax guidance to Grantees, as the
consequences may vary with the types of grants made, the identity of the Grantees and the method of
payment or settlement. The summary does not address the effects of other federal taxes (including
possible golden parachute excise taxes) or taxes imposed under state, local, or foreign tax laws.
From the Grantees standpoint, as a general rule, ordinary income will be recognized at the time of
delivery of shares of common stock or payment of cash under the Plan. Future appreciation on shares
of common stock held beyond the ordinary income recognition event will be taxable as capital gain
when the shares of common stock are sold. As a general rule, the Corporation will be entitled to a
tax deduction that corresponds in time and amount to the ordinary income recognized by the
recipient, and the Corporation will not be entitled to any tax deduction with respect to capital
gain income recognized by the grantee.
Exceptions to these general rules arise under the following circumstances:
|
(i) |
|
If shares of common stock, when delivered, are subject to a substantial risk of
forfeiture by reason of any employment or performance-related condition, ordinary income
taxation and the Corporations tax deduction will be delayed until the risk of
forfeiture lapses, unless the Grantee makes a special election to accelerate taxation
under section 83(b) of the Code. |
|
|
(ii) |
|
If an employee exercises an Option that qualifies as an ISO, no ordinary income
will be recognized, and the Corporation will not be entitled to any tax deduction, if
shares of common stock acquired upon exercise of the Option are held until the later of
(A) one year from the date of exercise and (B) two years from the date of grant.
However, if the employee disposes of the shares acquired upon exercise of an ISO before
satisfying both holding period requirements, the employee will recognize ordinary income
to the extent of the difference between the fair market value of the shares on the date
of exercise (or the amount realized on the disposition, if less) and the exercise price,
and the Corporation will be entitled to a tax deduction in that amount. The gain, if
any, in excess of the amount recognized as ordinary income will be long-term or
short-term capital gain, depending upon the length of time the employee held the shares
before the disposition. |
11
|
(iii) |
|
A grant may be subject to a 20% tax, in addition to ordinary income tax, at the
time the grant becomes vested, plus interest, if the grant constitutes deferred
compensation under section 409A of the Code and the requirements of section 409A of the
Code are not satisfied. |
Section 162(m) of the Code generally disallows a publicly-held corporations tax deduction for
compensation paid to its chief executive officer or any of its four other most highly compensated
officers in excess of $1 million in any year. Qualified performance-based compensation is excluded
from the $1 million deductibility limit, and therefore remains fully deductible by the corporation
that pays it. We intend that Options and SARs granted under the Plan will be qualified
performance-based compensation. Stock Units, Stock Awards, Dividend Equivalents, and Other Equity
Awards granted under the Plan may be designated as qualified performance-based compensation if the
Compensation Committee conditions such grants on the achievement of specific performance goals in
accordance with the requirements of section 162(m) of the Code.
Under the Plan, we have the right to require that Grantees pay to us an amount necessary for us to
satisfy our federal, state or local tax withholding obligations with respect to grants. We may
withhold from other amounts payable to a Grantee an amount necessary to satisfy these obligations.
The Compensation Committee may permit a Grantee to satisfy our withholding obligation with respect
to grants paid in common stock by having shares withheld, at the time the grants become taxable,
provided that the number of shares withheld does not exceed the individuals minimum applicable
withholding tax rate for federal, state and local tax liabilities.
Recommendation of the Board
The Board recommends that the shareholders vote FOR the approval of increase in number of shares
authorized under the Corporations 2003 Equity Compensation Plan and the approval of the
Corporations 2003 Equity Compensation Plan, as amended. Proxies received will be so voted unless
shareholders specify otherwise in the proxy.
12
Directors Compensation
The non-employee independent members of the Board of Directors receive a $30,000 annual retainer
(payable in quarterly installments) for their service on the Board of Directors. Non-employee
independent members of the Board of Directors are granted an Option to purchase 5,000 shares of the
Corporations common stock upon their initial appointment or election to the Board. These Options
vest in four equal annual installments. In addition, non-employee independent members of the Board
of Directors receive annual grants under the Corporations 2003 Equity Compensation Plan of (i)
restricted stock yielding a present value of $27,000 at the Stock Award grant date and (ii) Options
yielding a present value of $9,000 at the grant date (using an option pricing model). The annual
restricted Stock Awards vest at the earlier of (a) seven years from the grant date and (b) six
months following the non-employee independent directors termination of Board service. The annual
Option grants cliff vest one year from the grant date. The per share exercise price of all Options
granted to non-employee independent members of the Board of Directors is equal to the fair market
value per share on the date the Option is granted.
The chairman of the Audit Committee receives additional compensation of $10,000 per year, the
chairman of the Compensation Committee receives additional compensation of $4,000 per year, the
chairman of the Nominating Committee receives additional compensation of $2,000 per year, and the
Lead Independent Director receives additional compensation of $25,000 per year. These fees are
paid in quarterly installments.
The following table sets forth compensation from the Corporation for the non-employee independent
members of the Board of Directors in 2007. The table does not include reimbursement of travel
expenses related to attending Board, Committee and Corporation business meetings.
Director Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or Paid |
|
|
|
|
|
|
|
|
|
Total |
Name |
|
In Cash ($) |
|
Stock Awards ($) |
|
Option Awards ($) |
|
($) |
Kevin J. McGinty |
|
$ |
59,000 |
|
|
$ |
6,108 |
|
|
$ |
16,224 |
|
|
$ |
81,332 |
|
John J. Calamari |
|
$ |
40,000 |
|
|
$ |
6,108 |
|
|
$ |
16,186 |
|
|
$ |
62,294 |
|
James W. Wert |
|
$ |
30,000 |
|
|
$ |
6,108 |
|
|
$ |
16,224 |
|
|
$ |
52,332 |
|
Lawrence J. DeAngelo |
|
$ |
32,000 |
|
|
$ |
6,108 |
|
|
$ |
16,186 |
|
|
$ |
54,294 |
|
Edward Grzedzinski |
|
$ |
30,000 |
|
|
$ |
6,108 |
|
|
$ |
19,100 |
|
|
$ |
55,208 |
|
Matthew J. Sullivan
(1) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
(1) |
|
Mr. Sullivan was appointed to the Corporations Board of Directors in April 2008. |
Director Ownership Requirements
Non-employee independent directors are subject to certain ownership requirements. Within five
years of joining the Corporations Board of Directors (or five years from May 26, 2005 for each
individual who was a director on that date), each non-employee independent director shall be
required to own stock of the Corporation with a value equal to five times the directors annual
retainer. Restricted shares may be counted toward the ownership requirement. Non-employee
independent directors are also required to hold 50% of the net, after tax profit realized on the
exercise of stock options in the form of shares of Corporation stock for a minimum period of one
year after the exercise. All non-employee independent directors have been in compliance with these
requirements.
13
Executive Officers
The following table provides information, as of March 1, 2008, about the Corporations executive
officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Occupation for the Past Five Years and |
Name |
|
Age |
|
Position Held with the Corporation and its Subsidiaries |
Daniel P. Dyer
|
|
|
49 |
|
|
Mr. Dyer has been Chairman of the Board of Directors
and Chief Executive Officer since co-founding our
Corporation in 1997. In December 2006, Mr. Dyer also
assumed the position of President of our Corporation.
Prior to that, from 1986 to 1997, Mr. Dyer served in a
number of positions, most recently as Senior Vice
President and Chief Financial Officer of Advanta
Business Services, where he was responsible for
financial and treasury functions. Mr. Dyer received
his undergraduate degree in accounting and finance
from Shippensburg University and is a licensed
certified public accountant (non-active status). |
|
|
|
|
|
|
|
George D. Pelose
|
|
|
43 |
|
|
Mr. Pelose has been with our Corporation since 1999,
serving as General Counsel and Secretary since 1999.
In December 2006, Mr. Pelose became the Chief
Operating Officer of the Corporation. From 1997 to
1999, Mr. Pelose was an attorney with Merrill Lynch
Asset Management, providing legal and transactional
advice to a portfolio management team that invested
principally in bank loans and high-yield debt
securities. From 1994 to 1997, Mr. Pelose was an
associate at Morgan, Lewis & Bockius LLP in the firms
Business & Finance section where he worked on a
variety of corporate transactions, including
financings, mergers, acquisitions, private placements
and public offerings. From 1991 to 1994, Mr. Pelose
attended law school. From 1986 to 1991, Mr. Pelose was
a corporate loan officer in the commercial lending
division of PNC Bank. Mr. Pelose received both his
undergraduate degree in economics and his law degree
from the University of Pennsylvania, both with honors.
Mr. Pelose is licensed to practice law in New Jersey
and Pennsylvania. |
|
|
|
|
|
|
|
Lynne C. Wilson
|
|
|
45 |
|
|
Ms. Wilson has been our Chief Financial Officer since
June 5, 2006. Prior to joining the Corporation, from
1999 to 2006, Ms. Wilson was with General Electric
Company, serving in a variety of finance positions for
different subsidiaries and divisions of GE. From 2002
to 2006, Ms. Wilson worked for GE Equipment
Services-TFS/Modular Space, most recently serving as
Manager of Finance, Strategic Marketing (from 2005 to
2006) and previously as Manager, Financial Planning
and Analysis (from 2002 to 2005). From 1999 to 2002,
Ms. Wilson was the Global Controller for GE Commercial
Finance-Fleet Services. Prior to joining GE, Ms.
Wilson held senior financial positions at Bank One
Corporation (from 1996 to 1999) and Fleet National
Bank of NY/Northeast Savings (from 1989 to 1996),
where she served as Senior Vice President, Controller
and Principal Accounting Officer. Ms. Wilson started
her career at Ernst & Young International working from
1984 to 1989 as an Audit Manager. Ms. Wilson obtained
a BA in Business Administration from Siena College and
is a licensed certified public accountant (non-active
status). |
14
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information with respect to the beneficial ownership of our common
stock as of March 1, 2008, by:
|
|
each person or entity known by us to own beneficially more than 5% of our stock; |
|
|
each of our named executive officers in the Summary Compensation Table below; |
|
|
each of our directors and nominees; and |
|
|
all of our executive officers, directors and nominees as a group. |
Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that
person has or shares voting power, which includes the power to vote or to direct the voting of such
security, or investment power, which includes the power to dispose of or to direct the disposition
of such security. A person is also deemed to be a beneficial owner of any securities for which that
person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one
person may be deemed a beneficial owner of the same securities and a person may be deemed to be the
beneficial owner of securities as to which such person has no economic interest.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Percent |
Name of Beneficial Owner |
|
Beneficially Owned |
|
of Class |
Executive Officers, Directors and Nominees |
|
|
|
|
|
|
|
|
Daniel P. Dyer(1,2) |
|
|
327,714 |
|
|
|
2.7 |
% |
George D. Pelose(1,2) |
|
|
218,780 |
|
|
|
1.8 |
|
Lynne C. Wilson(1,2) |
|
|
26,918 |
|
|
|
* |
|
John J. Calamari(1,3) |
|
|
14,817 |
|
|
|
* |
|
Lawrence J. DeAngelo(1,3) |
|
|
14,817 |
|
|
|
* |
|
Edward Grzedzinski(1,3) |
|
|
5,041 |
|
|
|
* |
|
Kevin J. McGinty(1,3) |
|
|
48,588 |
|
|
|
* |
|
James W. Wert(1,3) |
|
|
44,008 |
|
|
|
* |
|
Matthew J. Sullivan(4) |
|
|
2,316,934 |
|
|
|
19.0 |
|
All executive officers, directors and nominees as a group (9 persons)(1,5) |
|
|
3,017,617 |
|
|
|
24.1 |
|
5% Shareholders |
|
|
|
|
|
|
|
|
Peachtree Equity Investment Management, Inc.(6)
1170 Peachtree St., Ste. 1610
Atlanta, GA 30309 |
|
|
2,309,934 |
|
|
|
19.6 |
|
Columbia Wanger Asset Management, L.P.(7)
227 West Monroe Street, Suite 3000
Chicago, IL 60606 |
|
|
1,255,000 |
|
|
|
10.18 |
|
William Blair & Company(8)
222 W. Adams Street
Chicago, IL 60606 |
|
|
723,396 |
|
|
|
6.01 |
|
Primus Venture Partners IV, Inc.(9)
5900 Landerbrook Dr., Ste. 200
Cleveland, OH 44124-4020 |
|
|
832,713 |
|
|
|
6.7 |
|
JP Morgan Chase & Co.(10)
270 Park Avenue
New York, NY 10017 |
|
|
642,732 |
|
|
|
5.2 |
|
|
|
|
* |
|
Represents less than 1%. |
|
(1) |
|
Does not include options vesting more than 60 days after March 1, 2008, held by Mr. Dyer
(48,297), Mr. Pelose (29,762), Ms. Wilson (13,099), Mr. Calamari (1,284), Mr. DeAngelo
(1,284), Mr. Grzedzinski (5,034), Mr. McGinty (1,284) and Mr. Wert (1,284). Does include,
where applicable, shares held in the 2003 Employee Stock Purchase Plan and restricted shares
awarded under the 2003 Equity Compensation Plan. |
|
(2) |
|
Includes options for Mr. Dyer (142,297), Mr. Pelose (124,598) and Ms Wilson (1,498) to
purchase shares that are currently exercisable or will become exercisable within 60 days
following March 1, 2008. |
15
|
|
|
(3) |
|
Includes options for Mr. Calamari (8,869), Mr. DeAngelo (8,869), Mr. Grzedzinksi (2,458), Mr.
McGinty (40,060) and Mr. Wert (18,669) to purchase shares that are currently exercisable or
will become exercisable within 60 days following March 1, 2008. |
|
(4) |
|
Includes 2,000 unrestricted shares owned directly by Mr. Sullivan and 5,000 restricted shares
awarded to Mr. Sullivan in April 2008 in connection with his appointment to the Board in
accordance with the Corporations Director compensation program described above in Directors
Compensation. The remaining 2,309,934 shares are reported as beneficially owned by Peachtree
Equity Investment Management, Inc. are based on a Schedule 13G filed jointly by such entity,
WCI (Private Equity) LLC (WCI) and Matthew J. Sullivan with the Securities and Exchange
Commission (SEC) on February 17, 2004. The shares are reported as directly owned by WCI,
whose sole manager is Peachtree Equity Investment Management, Inc. (the Manager). The
Manager could be deemed to be an indirect beneficial owner of the reported shares, and could
be deemed to share such beneficial ownership with WCI. Matthew J. Sullivan is a director of
the Manager, and could be deemed to be an indirect beneficial owner of the reported shares,
and could be deemed to share such indirect beneficial ownership with the Manager and WCI. Mr.
Sullivan disclaims beneficial ownership of the reported shares except to the extent of his
pecuniary interest therein. |
|
(5) |
|
Includes options to purchase 347,318 shares that are currently exercisable or will become
exercisable within 60 days following March 1, 2008. |
|
(6) |
|
The shares reported as beneficially owned by Peachtree Equity Investment Management, Inc. are
based on a Schedule 13G filed jointly by such entity, WCI (Private Equity) LLC (WCI) and
Matthew J. Sullivan with the SEC on February 17, 2004. The shares are reported as directly
owned by WCI, whose sole manager is Peachtree Equity Investment Management, Inc. (the
Manager). The Manager could be deemed to be an indirect beneficial owner of the reported
shares, and could be deemed to share such beneficial ownership with WCI. Matthew J. Sullivan
is a director of the Manager, and could be deemed to be an indirect beneficial owner of the
reported shares, and could be deemed to share such indirect beneficial ownership with the
Manager and WCI. Mr. Sullivan disclaims beneficial ownership of the reported shares except to
the extent of his pecuniary interest therein. |
|
(7) |
|
The shares reported as beneficially owned by Columbia Wanger Asset Management, L.P.
(Columbia) are reported as of December 31, 2007, based on a Schedule 13G filed by Columbia
on February 8, 2008. Columbia is the beneficial owner of 1,255,000 shares and these shares
include shares held by Columbia Acorn Trust (CAT), a Massachusetts business trust that holds
9.74% of the shares of issuer. |
|
(8) |
|
The shares reported as beneficially owned by William Blair & Company, L.L.C (Blair) are
reported as of December 31, 2007, based on a Schedule 13G filed by Blair on January 9, 2008. |
|
(9) |
|
The shares reported as beneficially owned by Primus Venture Partners IV, Inc. are based on an
amendment to a Schedule 13G filed jointly by Primus Capital Fund IV Limited Partnership (PCF
IV LP), Primus Venture Partners IV Limited Partnership (PVP IV LP) and Primus Venture
Partners IV, Inc. (PVP IV Inc.) with the SEC on February 8, 2008. Each such reporting person
has reported that, as of December 31, 2007, they held shared power to vote or to direct the
vote and shared power to dispose or to direct the disposition of the shares as follows: (i)
PCF IV LP has shared power to vote and to dispose of 790,764 shares currently held by PCF IV
LP; (ii) PVP IV LP, as the sole general partner of PCF IV LP, may be deemed to have shared
power to vote and to dispose of 790,764 shares currently held by PCF IV LP. In addition, PVP
IV LP is also the sole general partner of Primus Executive Fund Limited Partnership (PEF LP)
and, in such capacity, may be deemed to have shared power to vote and dispose of the 32,949
shares currently held by PEF LP; (iii) PVP IV Inc., as the sole general partner of PVP IV LP,
may be deemed to have the shared power to vote and to dispose of 790,764 shares currently held
by PCF IV LP and the 32,949 shares currently held by PEF LP. PVP IV Inc. has five
shareholders and directors: Loyal W. Wilson, James T. Bartlett, William C. Mulligan, Jonathan
E. Dick and Steven Rothman. Each of PCF IV LP, PVP IV LP and PVP IV Inc. disclaims beneficial
ownership of any shares beneficially owned by each other entity. |
|
(10) |
|
The shares reported as beneficially owned by JPMorgan Chase & Co. (JPMorgan) are reported
as of December 31, 2007, based on a Schedule 13G filed by JPMorgan on January 29, 2008.
JPMorgan is the beneficial owner of 642,732 shares on behalf of other persons known to have
one or more of the following: the right to receive dividends for such securities; the power to
direct the receipt of dividends from such securities; the right to receive the proceeds from
the sale of such securities; and the right to direct the receipt of proceeds from the sale of
such securities. No such person is known to have an interest in more than 5% of the class of
shares reported. |
16
Compensation Discussion and Analysis
Compensation Overview
The Compensation Committee of the Board of Directors sets and administers the policies that
govern our executive compensation, including:
|
|
|
establishing and reviewing executive base salaries; |
|
|
|
|
overseeing the Corporations annual incentive compensation plans; |
|
|
|
|
overseeing the Corporations long-term equity-based compensation plan; |
|
|
|
|
approving all bonuses and awards under those plans; and |
|
|
|
|
annually approving and recommending to the Board all compensation
decisions for executive officers, including those for the Chief
Executive Officer (CEO) and the other officers named in the Summary
Compensation Table (the Executive Officers). |
The current Executive Officers of the Corporation are Daniel P. Dyer, George D. Pelose and Lynne C.
Wilson. All of them were Executive Officers during 2007.
The Compensation Committee operates under a written charter (accessible on the investor relations
page of the Corporations website at www.marlincorp.com) and only independent directors
serve on the Compensation Committee.
Compensation Philosophy. The Compensation Committee believes that the most effective executive
compensation program is one that is designed to reward the achievement of specific annual,
long-term and strategic goals by the Corporation, and which aligns executives interests with those
of the shareholders by rewarding performance against established goals, with the ultimate objective
of improving shareholder value. The Compensation Committee evaluates both performance and
compensation to ensure that the Corporation maintains its ability to attract and retain superior
employees in key positions and that compensation provided to key employees remains competitive in
the marketplace. To that end, the Compensation Committee believes executive compensation packages
provided by the Corporation to its executives, including the Executive Officers, should include
both cash and equity-based compensation that reward performance as measured against established
goals.
Managements Role in the Compensation-Setting Process. The Compensation Committee makes all
compensation decisions relating to the Executive Officers; however, management plays a significant
role in the compensation-setting process, including:
|
|
|
evaluating employee performance; |
|
|
|
|
establishing performance targets and objectives; and |
|
|
|
|
recommending salary and bonus levels and equity awards. |
The CEO works with the Compensation Committee Chairman in establishing the agenda for Compensation
Committee meetings.
Management also prepares meeting information for each Compensation Committee meeting. The CEO also
participates in Compensation Committee meetings at the Chairmans request to provide:
|
|
|
background information regarding the Corporations strategic objectives; |
|
|
|
|
a tally sheet for each Executive Officer, setting forth total compensation and
aggregate equity awards for each Executive Officer; |
|
|
|
|
an evaluation of the performance of the Corporations officers, including the
Executive Officers; and |
|
|
|
|
compensation and equity award recommendations as to the Corporations officers,
including the Executive Officers. |
The Compensation Committee can exercise its discretion in modifying any recommended awards to the
Corporations officers, including the Executive Officers. At a Compensation Committee meeting held
on February 29, 2008, the Committee approved the 2007 bonus and the equity incentive award
recommendations put forth by the CEO, with one exception. In approving the bonus recommendations
for the Executive Officers, the Compensation Committee decided to pay approximately one-half of the
recommended bonus in cash and the remainder in restricted stock that vests in one year (as opposed
to paying the entire recommended bonus in cash). The Compensation Committee made this modification
to the CEOs recommendation to further exemplify the
17
importance of equity ownership at all levels of the business and to reemphasize the importance of
shareholders in the Corporations planning and its execution of its plans.
External Consultants and Benchmarking. The Compensation Committee utilizes the services of an
independent consulting firm, Watson & Wyatt. In 2004, the Compensation Committee first engaged
Watson & Wyatt, to conduct a study of the Corporations Executive Officer compensation programs and
strategies (the Watson Study). The Watson Study compared the Corporations executive compensation
levels with that of (i) a peer group comprised of companies with a business services and financing
focus that are similar in size to the Corporation (the peer group), (ii) compensation details
from various market surveys across several industries (together with the peer group, the
comparison group), and (iii) broader financial services industry practices. The Watson Study
selected a compensation peer group of companies consisting of eight publicly-traded companies in a
similar industry and size with executive positions with responsibilities similar in breadth and
scope as the Corporation. The peer group used in the initial benchmark analysis contained in the
Watson Study consisted of: California First National Bank (CFNB); Credit Acceptance Corp. (CACC);
Financial Federal Corp. (FIF); First Marblehead Corp. (FMD); Medallion Financial Corp. (TAXI);
Portfolio Recovery Associates Inc. (PRAA); First Investors Financial Services Group Inc. (FIFS);
and World Acceptance Corp. (WRLD).
The Watson Study concluded that the Corporations Executive Officers are paid conservatively
relative to the comparison group. The study noted that the Executive Officers base salaries at
the time of the report were generally below the 50th percentile of the comparison group,
but the competitiveness of the Executive Officers total annual cash compensation improved with
above market bonus opportunities. The Watson Study further noted that the value of the existing
long-term incentives granted to the executives (primarily in the form of stock options) was below
market levels.
In response to the findings of the Watson Study and in keeping with our philosophy of providing
strong incentives for superior performance, the Compensation Committee modified the structure of
the Corporations Executive Officer compensation programs. Based on recommendations contained in
the Watson Study, effective in 2005, the Compensation Committee modified the stock-based incentive
award program for the Executive Officers to include the three separate components set forth below
(i.e., stock option grants, restricted stock grants, and the MSOP). The Watson Study suggested that
this mix of stock-based awards will improve the competitiveness of the Corporations long-term
incentive plan for its Executive Officers and will better serve to align the overall interests of
the Executive Officers with the Corporations shareholders.
Compensation Components
As part of the Watson Study, Watson Wyatt reviewed the Corporations existing executive
compensation structure and assisted in the development of executive compensation programs that (a)
are competitive among companies in similar growth and development stages to attract and retain
talented management, (b) provide incentives that focus on the critical needs of the business on an
annual and continuing basis, and (c) reward management commensurate with the creation of
shareholder and market value.
The Watson Study included an initial benchmark analysis of the Corporations executive compensation
program, comparing it to (i) the peer group, (ii) the comparison group, and (iii) broader financial
services industry practices. The peer group used in the initial benchmark analysis consisted of:
California First National Bank (CFNB); Credit Acceptance Corp. (CACC); Financial Federal Corp.
(FIF); First Marblehead Corp. (FMD); Medallion Financial Corp. (TAXI); Portfolio Recovery
Associates Inc. (PRAA); First Investors Financial Services Group Inc. (FIFS); and World Acceptance
Corp. (WRLD). The Compensation Committee used this benchmark data to set the Executive Officers
compensation levels in 2004. On an ongoing basis, the Compensation Committee reviews a variety of
factors in assessing and setting overall executive compensation levels, including references to
this peer group and the market surveys, broader financial services industry practices, tally sheets
and executive performance.
The components of compensation paid to the Executive Officers are as follows:
|
|
|
Base Salary. The Compensation Committee establishes base salaries that it believes
to be sufficient to attract and retain quality Executive Officers who can contribute to
the long-term success of the Corporation. The Committee determines the Executive
Officers base salary through a thorough evaluation of a variety of factors, including
the executives responsibilities, tenure, job performance and prevailing levels of
market compensation. The Compensation Committee reviews these salaries at least annually
for consideration of increase based on merit and competitive market factors. |
|
|
|
|
Bonus. The annual incentive bonus awards are designed to reward the Executive
Officer for the achievement of certain corporate and individual performance goals. The
Compensation Committee sets threshold, target and maximum bonus levels for each goal.
As part of the Watson Study, the Corporation sought to set the Executive Officers total
target |
18
|
|
|
compensation levels at levels that were near the median of the data from the peer group
and the broader industry practices. This resulted in the setting of threshold, target and
maximum bonus levels (as a percentage of base salaries), which are currently as follows:
Daniel P. Dyer: 42.5% threshold, 85% target and 148.75% maximum; George D. Pelose: 37.5%
threshold, 75% target and 108.75% maximum; and Lynne C. Wilson: 22.5% threshold, 45%
target and 63% maximum. |
|
|
|
|
Prior to the beginning of each year, the Corporation sets target levels for the items of
corporate performance that are to be measured that year for assessing the bonus
opportunity for the Executive Officers. Some of the target levels are standard for each
Executive Officer (such as corporate pre-tax income), and some are specific to that
Executive Officers primary area of responsibility (such as unit performance and
individual development). The full matrix of performance measurements varies by Executive
Officer and by year, as do the weightings of each item, which can range from 15%-75% of
the total bonus opportunity. To achieve the target bonus payout associated with a
performance measurement, the Executive Officer must achieve 100% of the plan for that
performance measurement. If the Executive Officer does not achieve 100% of the planned
performance measurements for that year, he/she can still achieve the threshold bonus
payout if the performance level exceeds certain minimum requirements (for example,
threshold payout for the pre-tax income component in 2007 required pre-tax income to be at
least 13.5% greater than the prior years figure). Maximum bonus payout can be achieved if
the Executive Officer exceeds the planned levels for the performance measurements (for
example, in 2007, achieving greater than 104.5% of that years planned pre-tax income
measurement would have resulted in maximum payout for that weighted component). Each
Executive Officer has a portion of his or her bonus opportunity measured against
individual roles (MBOs) and performance. The weighting of the individual performance
component varies by Executive Officer and by year, and may range from 15%-75% of the
Executive Officers total bonus opportunity. Individual performance goals typically
include performance on specific projects or initiatives assigned to the Executive Officer
as well as overall professional development. |
|
|
|
|
Equity-Based Incentive Awards. The Compensation Committee believes that share
ownership provided by equity-based compensation emphasizes and reinforces the mutuality
of interest among the Executive Officers and shareholders. After each fiscal year, the
Compensation Committee reviews and approves stock-based awards for the Executive
Officers based primarily on the Corporations results for the year and the executives
individual contribution to those results. The stock-based incentive awards include three
separate components: (1) stock option grants, (2) restricted stock grants, and (3) a
management stock ownership program (MSOP). Options are awarded at the NASDAQ closing
price of the Corporations common stock on the date of the grant. |
|
|
|
|
Other Benefits. The Executive Officers participate in employee benefits plans
generally available to all of the Corporations employees, including medical and health
plans and 401(k) and ESPP programs. In addition, Messrs. Dyer and Pelose received
reimbursement of life and disability insurance premiums pursuant to their employment
agreements. |
Components of Equity-Based Incentive Awards
As mentioned above, the equity-based incentive awards include three separate components: (1) stock
option grants, (2) restricted stock grants, and (3) a management stock ownership program (MSOP).
|
|
|
Stock Option Grants. The stock option grants are divided between Time Vested options
and Performance Based options. The Time Vested options have a term of seven years and
vest 25% per year for the first four years from the grant date. The Performance Based
options have a term of seven years and vest four years from the grant date. The number
of Performance Based option shares that vest on such date is determined by the
Corporations EPS compounded average growth rate over the four fiscal years following
the grant date, as follows: |
|
|
|
|
|
Four-Year EPS Compounded Average Growth Rate |
|
% of Grant that shall vest in four years |
Less than 13.5% |
|
|
0 |
% |
13.5%-14.99% |
|
|
33.33 |
% |
15.0%-16.49% |
|
|
66.66 |
% |
16.5% or greater |
|
|
100.00 |
% |
|
|
|
Restricted Stock Grants. The restrictions on the restricted stock grants lapse after
seven years, but are subject to accelerated performance vesting. Vesting of the
restricted stock shall immediately accelerate (and all restrictions shall lapse) upon
the Corporation reporting compounded average net income growth of 15% or greater for a
period of four |
19
|
|
|
consecutive fiscal years after the grant date (using the Corporations reported net income
for the most recently concluded fiscal year as the initial measurement point). |
|
|
|
Management Stock Ownership Program. The MSOP provides for a matching grant of
restricted stock to a participant who owns common stock of the Corporation (subject to a
maximum matching grant value determined by the Compensation Committee). The
restrictions on the matching MSOP restricted shares lapse after ten years, but are
subject to accelerated vesting. Vesting of the matching MSOP restricted shares shall
immediately accelerate (and all restrictions shall lapse) after three years if the
grantee maintained continuous outright ownership of a matching number of unrestricted shares of the Corporation for the entire three year period. |
Ownership Guidelines
In an effort to ensure that the Executive Officers and other officers and managers of the
Corporation maintain sufficient equity ownership so that their thinking and actions are aligned
with the interests of our shareholders, the Corporation adopted in 2006 management ownership
guidelines, which apply to all participants in the equity-based incentive award program. The
ownership guidelines are summarized below:
|
|
|
Ownership that counts toward the guidelines is (i) all unrestricted stock of the
Corporation owned outright by the participant and (ii) the net value of vested, unexercised
options. |
|
|
|
|
The ownership guideline is measured as a percentage of the participants base salary. |
|
|
|
|
Participants are divided into three tiers with different guidelines. The ownership
requirements for each tier over three years are set forth below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Ownership Guidelines (% of Salary) |
Tier |
|
Participants |
|
Year 1 |
|
Year 2 |
|
Year 3 |
|
I |
|
|
Senior Management |
|
|
100 |
% |
|
|
150 |
% |
|
|
200 |
% |
II |
|
Officers |
|
|
50 |
% |
|
|
75 |
% |
|
|
100 |
% |
III |
|
Managers |
|
|
25 |
% |
|
|
30 |
% |
|
|
35 |
% |
|
|
|
Compliance will be reviewed at least annually. |
If an equity incentive program participant sells shares of the Corporation while such participant
is not in compliance with the ownership guidelines, the Compensation Committee will take this into
account prior to making additional equity awards to such participant.
As of January 17, 2008, Mr. Dyer and Mr. Pelose were in compliance with the ownership guidelines.
Ms. Wilson, who did not join the Corporation until June 2006, did not meet the ownership guidelines
as of January 17, 2008.
Employment Agreements
In November 2003, the Corporation entered into employment agreements with Messrs. Dyer and Pelose,
the terms of which are substantially similar to each other. The employment agreements establish
minimum salary and target bonus levels for the executives. The agreements require the executives
to devote substantially all of their business time to their employment duties. Each agreement had
an initial two year term that automatically extends on each anniversary of the effective date of
the agreement for successive one-year terms unless either party to the agreement provides 90 days
notice to the other party that he does not wish to renew the agreement. The agreements currently
run through November 2009.
The Corporation may terminate the employment agreements for or without cause, and the executive may
terminate his employment agreement with or without good reason. The employment agreements provide
for severance in the case of termination without cause or for good reason (which includes the
occurrence of a change in control). Upon termination of the employment agreement, the executive
will be subject to certain protective non-competition and non-solicitation covenants. In addition,
for a 24-month period after termination of employment, the executive is prohibited from hiring the
Corporations employees.
20
Compensation for Executive Officers in 2007
Base Salary. In March 2007, the Compensation Committee increased Mr. Peloses base salary to
$295,000 from $275,000 upon his appointment to Chief Operating Officer. In June 2007, Ms. Wilsons
base salary was increased to $252,937 from $237,500 based on her performance during her first year
of employment with the Corporation. The Corporation is currently paying the Executive Officers the
following base salaries: Mr. Dyer, $320,000, Mr. Pelose, $295,000, and Ms. Wilson, $252,937.
Annual Bonuses. In 2007, the Executive Officers were eligible for annual bonuses at the following
threshold, target and maximum bonus levels (as a percentage of base salaries): Daniel P. Dyer:
42.5% threshold, 85% target and 148.75% maximum; George D. Pelose: 37.5% threshold, 75% target and
108.75% maximum; and Lynne C. Wilson: 22.5% threshold, 45% target and 63% maximum. The annual
incentive bonus awards are designed to reward the Executive Officer for the achievement of certain
corporate and individual performance goals. Each year, the Compensation Committee reviews and
approves goals for each Executive Officer, and in 2007 those goals consisted of a corporate goal
(i.e., growth in pre-tax income) and specific individual goals. In 2007, the corporate goal
weighting was 50% of each Executive Officers bonus opportunity, and the individual goal weighting
represented the remaining 50% of the bonus opportunity.
In 2007, the corporate goal for each Executive Officer was based on the achievement of a certain
level of pre-tax income. Achieving 2007 pre-tax income that was at least 13.5% above the pre-tax
income for 2006 would yield the threshold payout for that component of the bonus calculation,
achieving the planned pre-tax income for 2007 would yield the target payout for that component, and
achieving 104.5% of the planned pre-tax income for 2007 would yield the maximum payout for that
component. The Corporations pre-tax income of $18.3 million in 2007 did not meet the threshold
payout level, so the Executive Officers received no bonus payout with respect to this half of their
bonus opportunity.
In 2007, the individual goals for the Executive Officers included the following: Mr. Dyer
recruiting and integrating additional management talent into the organization, developing effective
leaders, and formulating and acting upon long-term growth strategies; Mr. Pelose transitioning
into the Chief Operating Officer role, developing the management talent in the sales, credit,
collections, operations and legal teams, and overseeing the implementation of improvements to the
sales model; and Ms. Wilson institutionalizing driver based analysis, driving controls around
expense management, improving productivity in the finance group, and developing pricing models. In
2007, the Compensation Committee determined that Mr. Dyer achieved 70% of his individual goals, Mr.
Pelose achieved 80% of his individual goals, and Ms. Wilson achieved 80% of her individual goals.
The weighted calculation of the bonus payable to each executive in 2007 is as follows: Mr. Dyer
corporate goal (50% weighting times 0% achievement) plus individual goal (50% weighting times 70%
achievement) equals 35% payout of the target bonus of $272,000, or $95,200; Mr. Pelose corporate
goal (50% weighting times 0% achievement) plus individual goal (50% weighting times 80%
achievement) equals 40% payout of the target bonus of $221,250, or $88,500; and Ms. Wilson
corporate goal (50% weighting times 0% achievement) plus individual goal (50% weighting times 80%
achievement) equals 40% payout of the target bonus of $113,800, or $45,519. The table below shows
the aggregate 2007 bonus opportunity at the threshold, target and maximum levels, the actual bonus
achieved and the allocation of the bonus achieved between restricted stock and cash. As described
earlier in this Proxy Statement, the Compensation Committee decided to pay approximately one-half
the 2007 bonus in cash for each Executive Officer and the remainder in restricted stock that vests
in one year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 Annual Bonus Opportunity |
|
Actual Bonus |
|
Allocation of Bonus Achieved |
|
|
Threshold |
|
Target |
|
Maximum |
|
Achieved for 2007 |
|
Restricted Stock |
|
Cash Bonus |
Daniel P. Dyer |
|
$ |
136,000 |
|
|
$ |
272,000 |
|
|
$ |
476,000 |
|
|
$ |
95,200 |
|
|
$ |
47,600 |
|
|
$ |
47,600 |
|
George D. Pelose |
|
$ |
110,625 |
|
|
$ |
221,250 |
|
|
$ |
320,813 |
|
|
$ |
88,500 |
|
|
$ |
44,250 |
|
|
$ |
44,250 |
|
Lynne C. Wilson |
|
$ |
56,902 |
|
|
$ |
113,800 |
|
|
$ |
159,327 |
|
|
$ |
45,519 |
|
|
$ |
21,372 |
|
|
$ |
24,147 |
|
Equity-Based Incentives. In connection with the Corporations annual equity-based incentive
program, in 2007 the Compensation Committee reviewed and approved stock-based awards for the
Executive Officers based on the Corporations results for the year and the executives individual
contribution to those results. Grants made under the annual equity-based incentive plan to the
Executive Officers in 2007 consisted of the following:
|
|
|
Time Vested Options: These non-qualified stock options were granted by the Compensation
Committee on March 16, 2007 at a strike price equal to $20.77 (the closing price of the
Corporations common stock on that date). These options have a term of seven years and
vest 25% per year for the first four years from the grant date. In 2007, the Corporation
granted the |
21
|
|
|
following amount of Time Vested options to the Executive Officers: Mr. Dyer 9,314; Mr.
Pelose 7,156; and Ms. Wilson 3,457. |
|
|
|
|
Performance Based Options: These non-qualified stock options were granted by the
Compensation Committee on March 16, 2007 at a strike price equal to $20.77 (the closing
price of the Corporations common stock on that date). These options have a term of seven
years and vest four years from the grant date. In 2007, the Corporation granted the
following amount of Performance Based options to the Executive Officers: Mr. Dyer
12,919; Mr. Pelose 9,924; and Ms. Wilson 4,794. The number of Performance Based
option shares that vest on such date will be determined by the Corporations EPS compounded
average growth rate over the four fiscal years following the grant date, as follows: |
|
|
|
|
|
Four-Year EPS Compounded Average Growth Rate |
|
% of Grant that shall vest in four years |
Less than 13.5% |
|
|
0 |
% |
13.5%-14.99% |
|
|
33.33 |
% |
15.0%-16.49% |
|
|
66.66 |
% |
16.5% or greater |
|
|
100.00 |
% |
|
|
|
Restricted Stock Awards: The bi-annual restricted stock grant to the Executive Officers
was made by the Compensation Committee on March 16, 2007. The restrictions on the
restricted stock grants lapse after seven years, but are subject to accelerated performance
vesting. Vesting of the restricted stock shall immediately accelerate (and all
restrictions shall lapse) upon the Corporation reporting compounded average net income
growth of 15% or greater for a period of four consecutive fiscal years after the grant date
(using the Corporations reported net income for fiscal year 2006 as the initial
measurement point). In 2007, the Corporation made the following restricted stock awards to
the Executive Officers: Mr. Dyer 8,320 shares; Mr. Pelose 6,391 shares; and Ms.
Wilson 3,087 shares. |
|
|
|
|
Matching Grant of MSOP Restricted Stock: Pursuant to the Corporations MSOP plan, the
Compensation Committee made matching grants of restricted stock to the Executive Officers.
The restrictions on the MSOP restricted stock will lapse ten years from the date of grant;
however, if the Executive Officer continuously maintains ownership of an equal number of
common shares for three years, the vesting on the matching shares shall accelerate and
fully vest at the end of such three year period. In 2007, the Corporation granted the
following matching shares of restricted stock to the Executive Officers; Mr. Dyer 2,773;
Mr. Pelose 2,130; and Ms. Wilson 1,029. |
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set
forth above with management and, based on such review and discussions, the Compensation Committee
recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy
Statement and incorporated by reference into the Corporations Annual Report on Form 10-K for the
year ended December 31, 2007.
This report is submitted by the members of the Compensation Committee of the Board of Directors:
Kevin J. McGinty (Chairman)
Lawrence J. DeAngelo
Edward Grzedzinski
22
Compensation and Plan Information
Summary Compensation Table
The following table sets forth the compensation awarded or paid, or earned or accrued for services
rendered to the Corporation in all capacities during fiscal years 2007 and 2006 by the
Corporations Chief Executive Officer, Chief Financial Officer and the other individual who was an
executive officer during fiscal year 2007. In accordance with SEC rules, the compensation described
in the table does not include medical, group life insurance or other benefits which are available
generally to all our salaried employees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
All Other |
|
|
Name & Principal |
|
|
|
|
|
Salary |
|
Bonus |
|
Stock |
|
Option |
|
Compensation ($) |
|
Compensation |
|
Total |
Position |
|
Year |
|
($) |
|
($) |
|
Awards ($) |
|
Awards ($) |
|
(2) |
|
($)(3) |
|
($) |
Daniel Dyer |
|
|
2007 |
|
|
$ |
320,000 |
|
|
|
|
|
|
$ |
111,318 |
|
|
$ |
71,752 |
|
|
$ |
47,600 |
|
|
$ |
13,591 |
|
|
$ |
564,261 |
|
Chairman of the |
|
|
2006 |
|
|
$ |
302,077 |
|
|
|
|
|
|
$ |
244,893 |
|
|
$ |
124,942 |
|
|
$ |
72,750 |
|
|
$ |
12,391 |
|
|
$ |
757,053 |
|
Board of Directors
& Chief Executive
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George D. Pelose |
|
|
2007 |
|
|
$ |
290,154 |
|
|
|
|
|
|
$ |
190,373 |
|
|
$ |
55,381 |
|
|
$ |
44,250 |
|
|
$ |
6,636 |
|
|
$ |
586,794 |
|
Chief Operating |
|
|
2006 |
|
|
$ |
270,048 |
|
|
|
|
|
|
$ |
360,847 |
|
|
$ |
85,501 |
|
|
$ |
105,497 |
|
|
$ |
8,787 |
|
|
$ |
830,680 |
|
Officer and General
Counsel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynne C. Wilson |
|
|
2007 |
|
|
$ |
245,812 |
|
|
|
|
|
|
$ |
52,672 |
|
|
$ |
5,691 |
|
|
$ |
24,147 |
|
|
$ |
2,451 |
|
|
$ |
330,773 |
|
Senior Vice |
|
|
2006 |
|
|
$ |
129,712 |
|
|
$ |
31,250 |
|
|
$ |
55,520 |
|
|
$ |
7,780 |
|
|
$ |
66,129 |
|
|
$ |
3,219 |
|
|
$ |
293,610 |
|
President and Chief
Financial Officer
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Ms. Wilsons employment with the Corporation commenced on June 5, 2006. She received a
$31,250 starting bonus upon the commencement of her employment. |
|
(2) |
|
Figures represent the cash portion of the bonuses earned for that year (but paid in first quarter
of the following year). On February 29, 2008, the Compensation Committee approved the bonuses for the
Executive Officers that were recommended by the CEO, with one exception: rather than paying
the entire bonus amounts in cash, the Compensation Committee decided to pay approximately
one-half in cash (which is reflected in the Non-Equity Incentive Plan Compensation column for
2007) and the remainder in restricted stock awards (Mr. Dyer 5,000 shares; Mr. Pelose
4,648 shares; and Ms. Wilson 2,245 shares at a per share exercise price equal to $9.52,
which was the closing price of the Corporations common stock on that date). |
|
(3) |
|
Includes contributions made by the Corporation to the 401(k) plan on behalf of the
Executive Officers, and, except with respect to Ms. Wilson, reimbursement of life and
disability insurance premiums pursuant to their employment agreements. The 2007 figure for Mr.
Dyer includes reimbursement of the cost of an executive physical examination. |
23
Current Compensation Grants of Plan-Based Awards Table
The following Grants of Plan-Based Awards table provides additional information about stock and
option awards and equity incentive plan awards granted to our Executive Officers during the year
ended December 31, 2007. The Corporation does not have any non-equity incentive award plans and has
therefore omitted the corresponding columns. The compensation plans under which the grants in the
following table were made are described in the Compensation for Executive Officers in 2007
Equity-Based Incentives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All other |
|
All other |
|
|
|
|
|
Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
Option |
|
|
|
|
|
Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
Awards: |
|
Exercise |
|
Fair |
|
|
|
|
|
|
Estimated Future |
|
Number of |
|
Number of |
|
or Base |
|
Value of |
|
|
|
|
|
|
Payouts Under Equity |
|
Shares of |
|
Securities |
|
Price of |
|
Stock |
|
|
|
|
|
|
Incentive Plan Awards |
|
Stock or |
|
Under-lying |
|
Option |
|
and Option |
|
|
|
|
|
|
Threshold |
|
Target |
|
Maximum |
|
Units |
|
Options |
|
Awards |
|
Awards |
Name |
|
Grant Date |
|
(#) |
|
(#) |
|
(#) |
|
(#) |
|
(#) |
|
($/sh) |
|
($) |
Daniel P. Dyer |
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,314 |
|
|
$ |
20.77 |
|
|
$ |
72,090 |
|
|
|
|
3/16/2007 |
|
|
|
4,306 |
|
|
|
8,613 |
|
|
|
12,919 |
|
|
|
|
|
|
|
|
|
|
$ |
20.77 |
|
|
$ |
108,003 |
|
|
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,320 |
|
|
|
|
|
|
|
|
|
|
$ |
172,806 |
|
|
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,773 |
|
|
|
|
|
|
|
|
|
|
$ |
57,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George D. Pelose |
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,156 |
|
|
$ |
20.77 |
|
|
$ |
55,387 |
|
|
|
|
3/16/2007 |
|
|
|
3,308 |
|
|
|
6,616 |
|
|
|
9,924 |
|
|
|
|
|
|
|
|
|
|
$ |
20.77 |
|
|
$ |
82,965 |
|
|
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,391 |
|
|
|
|
|
|
|
|
|
|
$ |
132,741 |
|
|
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,130 |
|
|
|
|
|
|
|
|
|
|
$ |
44,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynne C. Wilson |
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,457 |
|
|
$ |
20.77 |
|
|
$ |
26,757 |
|
|
|
|
3/16/2007 |
|
|
|
1,598 |
|
|
|
3,196 |
|
|
|
4,794 |
|
|
|
|
|
|
|
|
|
|
$ |
20.77 |
|
|
$ |
40,078 |
|
|
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,087 |
|
|
|
|
|
|
|
|
|
|
$ |
64,117 |
|
|
|
|
3/16/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,029 |
|
|
|
|
|
|
|
|
|
|
$ |
21,372 |
|
24
Outstanding Equity Awards at Fiscal Year-End 2007
The following table summarizes the equity awards we have made to our Executive Officers which are
outstanding as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
Awards : |
|
Plan |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
Number |
|
Value |
|
Number |
|
Awards : |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
of |
|
of |
|
of |
|
Market or |
|
|
|
|
|
|
|
|
|
|
Plan |
|
|
|
|
|
|
|
|
|
Shares |
|
Shares |
|
Unearned |
|
Payout |
|
|
|
|
|
|
|
|
|
|
Awards; |
|
|
|
|
|
|
|
|
|
or |
|
or |
|
Shares, |
|
Value of |
|
|
Number |
|
Number |
|
Number |
|
|
|
|
|
|
|
|
|
Units |
|
Units |
|
Units |
|
Unearned |
|
|
of |
|
of |
|
of |
|
|
|
|
|
|
|
|
|
of |
|
of |
|
or |
|
Shares, |
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
Stock |
|
Stock |
|
Other |
|
Units or |
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
that |
|
that |
|
Rights |
|
Other |
|
|
Unexercised |
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
Have |
|
Have |
|
that |
|
Rights that |
|
|
Options |
|
Options |
|
Unearned |
|
Exercise |
|
Option |
|
Not |
|
Not |
|
Have Not |
|
Have Not |
|
|
(#) |
|
(#) |
|
Options |
|
Price |
|
Expiration |
|
Vested |
|
Vested |
|
Vested |
|
Vested |
Name |
|
Exercisable |
|
Unexercisable |
|
(#) |
|
($) |
|
Date |
|
(#) |
|
(#) |
|
(#) |
|
($) |
Daniel P. Dyer |
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
$ |
4.23 |
|
|
|
4/30/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,240 |
|
|
|
|
|
|
|
|
|
|
$ |
10.18 |
|
|
|
10/4/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.39 |
|
|
|
1/17/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.39 |
|
|
|
1/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,650 |
|
|
|
|
|
|
|
|
|
|
$ |
10.18 |
|
|
|
1/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,000 |
|
|
|
9,000 |
1 |
|
|
|
|
|
$ |
18.80 |
|
|
|
1/29/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,714 |
|
|
|
10,715 |
2 |
|
|
|
|
|
$ |
17.52 |
|
|
|
1/11/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,004 |
|
|
|
6,012 |
3 |
|
|
|
|
|
$ |
21.60 |
|
|
|
3/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,026 |
6 |
|
$ |
21.60 |
|
|
|
3/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,314 |
4 |
|
|
|
|
|
$ |
20.77 |
|
|
|
3/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,919 |
7 |
|
$ |
20.77 |
|
|
|
3/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,760 |
12 |
|
$ |
33,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000 |
13 |
|
$ |
108,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,833 |
14 |
|
$ |
34,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,495 |
15 |
|
$ |
30,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,320 |
16 |
|
$ |
100,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,773 |
17 |
|
$ |
33,442 |
|
|
|
|
|
|
|
|
|
|
George D. Pelose |
|
|
5,050 |
|
|
|
|
|
|
|
|
|
|
$ |
5.01 |
|
|
|
7/27/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.39 |
|
|
|
8/22/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,700 |
|
|
|
|
|
|
|
|
|
|
$ |
10.18 |
|
|
|
10/4/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.39 |
|
|
|
1/17/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
$ |
3.39 |
|
|
|
1/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,055 |
|
|
|
|
|
|
|
|
|
|
$ |
10.18 |
|
|
|
1/13/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
$ |
14.00 |
|
|
|
11/11/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,875 |
|
|
|
5,625 |
1 |
|
|
|
|
|
$ |
18.80 |
|
|
|
1/29/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,623 |
|
|
|
4,623 |
2 |
|
|
|
|
|
$ |
17.52 |
|
|
|
1/11/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
973 |
|
|
|
2,918 |
3 |
|
|
|
|
|
$ |
21.60 |
|
|
|
03/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,838 |
8 |
|
$ |
21.60 |
|
|
|
3/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,156 |
4 |
|
|
|
|
|
$ |
20.77 |
|
|
|
03/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,924 |
9 |
|
$ |
20.77 |
|
|
|
03/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
712 |
12 |
|
$ |
8,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,883 |
13 |
|
$ |
46,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,294 |
14 |
|
$ |
15,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,211 |
15 |
|
$ |
14,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,050 |
18 |
|
$ |
338,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,500 |
21 |
|
$ |
307,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,391 |
16 |
|
$ |
77,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,130 |
17 |
|
$ |
25,688 |
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
Awards : |
|
Plan |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
Number |
|
Value |
|
Number |
|
Awards : |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
|
|
|
|
|
|
|
Of |
|
of |
|
of |
|
Market or |
|
|
|
|
|
|
|
|
|
|
Plan |
|
|
|
|
|
|
|
|
|
Shares |
|
Shares |
|
Unearned |
|
Payout |
|
|
|
|
|
|
|
|
|
|
Awards; |
|
|
|
|
|
|
|
|
|
Or |
|
or |
|
Shares, |
|
Value of |
|
|
Number |
|
Number |
|
Number |
|
|
|
|
|
|
|
|
|
Units |
|
Units |
|
Units |
|
Unearned |
|
|
Of |
|
Of |
|
of |
|
|
|
|
|
|
|
|
|
of |
|
of |
|
or |
|
Shares, |
|
|
Securities |
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
Stock |
|
Stock |
|
Other |
|
Units or |
|
|
Underlying |
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
That |
|
that |
|
Rights |
|
Other |
|
|
Unexercised |
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
Have |
|
Have |
|
that |
|
Rights that |
|
|
Options |
|
Options |
|
Unearned |
|
Exercise |
|
Option |
|
Not |
|
Not |
|
Have Not |
|
Have Not |
|
|
(#) |
|
(#) |
|
Options |
|
Price |
|
Expiration |
|
Vested |
|
Vested |
|
Vested |
|
Vested |
Name |
|
Exercisable |
|
Unexercisable |
|
(#) |
|
($) |
|
Date |
|
(#) |
|
(#) |
|
(#) |
|
($) |
Lynne C. Wilson |
|
|
634 |
|
|
|
1,904 |
5 |
|
|
|
|
|
$ |
21.32 |
|
|
|
6/5/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,808 |
10 |
|
$ |
21.32 |
|
|
|
6/5/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,457 |
4 |
|
|
|
|
|
$ |
20.77 |
|
|
|
03/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,794 |
11 |
|
$ |
20.77 |
|
|
|
3/16/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,100 |
19 |
|
$ |
109,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,932 |
20 |
|
$ |
23,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,825 |
22 |
|
$ |
82,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,087 |
16 |
|
$ |
37,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,029 |
17 |
|
$ |
12,410 |
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
The expiration date of the options is ten years after the grant date. The options
granted will vest and become exercisable over an eight year period at the following annual
increments: 2.5% in first year; 5.0% in second year; 7.5% in third year; 10.0% in fourth year;
15.0% in fifth year; and 20.0% in each of the sixth, seventh and eighth years. On March 9, 2007 the
Corporation reported GAAP net income greater than $17.0 million for a fiscal year, accelerating
vesting of the options so that the remaining amount of unexercised shares from the seventh and
eighth years of the vesting schedule became immediately exercisable. |
|
2 |
|
Stock options vest at the rate of 25% per year, with vesting dates for the remaining
50% at 1/11/2008; and 1/11/2009. |
|
3 |
|
Stock options vest at the rate of 25% per year, with vesting dates for the remaining
75% at 3/28/2008; 3/28/2009; and 3/28/2010. |
|
4 |
|
Stock options vest at the rate of 25% per year, with vesting dates of 3/16/2008;
3/16/2009; 3/16/2010; and 3/16/2011. |
|
5 |
|
Stock options vest at the rate of 25% per year, with vesting dates for the remaining
75% at 6/5/2008; 6/5/2009; and 6/5/2010. |
|
6 |
|
The Performance Based non-qualified stock options were granted on March 28, 2006 at a
strike price equal to $21.60 (the closing price of the Corporations common stock on that date).
These options have a term of seven years and vest four years from the grant date. The number of
option shares that vest on such date will be determined by the Corporations EPS compounded average
growth rate over the four fiscal years following the grant date, as follows: EPS compounded average
growth rate over the four fiscal years at less than 13.5%, 0; at 13.5%-14.99%, 4,008; at
15.0%-16.49%, 8,017; at 16.5% or greater, 12,026. |
|
7 |
|
The Performance Based non-qualified stock options were granted on March 16, 2007 at a
strike price equal to $20.77 (the closing price of the Corporations common stock on that date).
These options have a term of seven years and vest four years from the grant date. The number of
option shares that vest on such date will be determined by the Corporations EPS compounded average
growth rate over the four fiscal years following the grant date, as follows: EPS compounded average
growth rate over the four fiscal years at less than 13.5%, 0; at 13.5%-14.99%, 4,306; at
15.0%-16.49%, 8,612; at 16.5% or greater, 12,919. |
|
8 |
|
The Performance Based non-qualified stock options were granted on March 28, 2006 at a
strike price equal to $21.60 (the closing price of the Corporations common stock on that date).
These options have a term of seven years and vest four years from the grant date. The number of
option shares that vest on such date will be determined by the Corporations EPS compounded average
growth rate over the four fiscal years following the grant date, as follows: EPS compounded average
growth rate over the four fiscal years at less than 13.5%, 0; at 13.5%-14.99%, 1,946; at
15.0%-16.49%, 3,892; at 16.5% or greater, 5,838. |
|
9 |
|
The Performance Based non-qualified stock options were granted on March 16, 2007 at a
strike price equal to $20.77 (the closing price of the Corporations common stock on that date).
These options have a term of seven years and vest four years from the grant date. The number of
option shares that vest on such date will be determined by the Corporations EPS compounded average
growth rate over the four fiscal years following the grant date, as follows: EPS compounded average
growth rate over the four fiscal years at less than 13.5%, 0; at 13.5%-14.99%, 3,308; at
15.0%-16.49%, 6,616; at 16.5% or greater, 9,924. |
|
10 |
|
The Performance Based non-qualified stock options were granted on June 5, 2006 at a
strike price equal to $21.32 (the closing price of the Corporations common stock on that date).
These options have a term of seven years and vest four years from the grant date. The number of
option shares that vest on such date will be determined by the Corporations EPS compounded average
growth rate over the four fiscal years following the grant date, as follows: EPS compounded average
growth rate over the four fiscal years at less than 13.5%, 0; at 13.5%-14.99%, 1,269; at
15.0%-16.49%, at 2,539; at 16.5% or greater, 3,808. |
|
11 |
|
The Performance Based non-qualified stock options were granted on March 16, 2007 at a
strike price equal to $20.77 (the closing price of the Corporations common stock on that date).
These options have a term of seven years and vest four years from the grant date. The number of
option shares that vest on such date will be determined by the Corporations EPS compounded average
growth rate over the four fiscal years following the grant date, as follows: EPS compounded average
growth rate over the four fiscal years at less than 13.5%, 0; at 13.5%-14.99%, 1,598; at
15.0%-16.49%, 3,196; at 16.5% or greater, 4,794. |
|
12 |
|
The shares were granted on March 9, 2004, and vest ten years from the grant date. |
|
13 |
|
Represents grant of restricted shares made on January 11, 2005 (the grant date stock
price was $17.52). The restrictions on these shares shall lapse on January 11, 2012. Vesting shall
immediately accelerate (and all restrictions shall lapse) upon the Corporation reporting certain
minimum compounded average net income growth for a period of four consecutive fiscal years after
the date of grant (using reported net income for 2004 as the initial measurement point). |
|
14 |
|
Represents matching grant of restricted stock under MSOP made on January 11, 2005
(the grant date stock price was $17.52). The restrictions on these matching restricted shares shall
lapse on January 11, 2015. Vesting shall immediately accelerate (and all restrictions shall lapse)
after three years (on January 11, 2008) if the grantee maintained continuous outright ownership of
a matching number of unrestricted shares of the Corporation for the entire three year period. |
|
15 |
|
Represents matching grant of restricted stock under MSOP made on March 28, 2006 (the
grant date stock price was $21.60). The restrictions on these matching restricted shares shall
lapse on March 28, 2016. Vesting shall immediately accelerate (and all restrictions shall lapse)
after three years (on March 28, 2009) if the grantee maintained continuous outright ownership of a
matching number of unrestricted shares of the Corporation for the entire three year period. |
|
16 |
|
Represents grant of restricted shares made on March 16, 2007 (the grant date stock
price was $20.77). The restrictions on these shares shall lapse on March 16, 2014. Vesting shall
immediately accelerate (and all restrictions shall lapse) upon the Corporation reporting certain
minimum compounded average net income growth for a period of four consecutive fiscal years after
the date of grant (using reported net income for 2006 as the initial measurement point). |
|
17 |
|
Represents matching grant of restricted stock under MSOP made on March 16, 2007 (the
grant date stock price was $20.77). The restrictions on these matching restricted shares shall
lapse on March 16, 2017. Vesting shall immediately accelerate (and all restrictions shall lapse)
after three years (on March 16, 2010) if the grantee maintained continuous outright ownership of a
matching number of unrestricted shares of the Corporation for the entire three year period. |
|
18 |
|
Represents an original grant of 33,000 of restricted shares granted on May 19, 2006,
that vested 15% on May 19, 2007, and will vest 15% on May 19, 2008 and 70% on May 19, 2009. |
|
19 |
|
Represents grant of restricted shares made on June 5, 2006 (the grant date stock
price was $21.32). The restrictions on these shares shall lapse on June 5, 2010. |
|
20 |
|
Represents grant of restricted shares made on June 5, 2006 (the grant date stock
price was $21.32). The restrictions on these shares shall lapse on June 5, 2013. Vesting shall
immediately accelerate (and all restrictions shall lapse) upon the Corporation reporting certain
minimum compounded average net income growth for a period of four consecutive fiscal years after
the date of grant (using reported net income for 2005 as the initial measurement point). |
|
21 |
|
Shares of performance based restricted stock granted on May 19, 2006, whereby all or
a portion of these shares may vest three years after the issuance date depending on the diluted EPS
compound average growth rate over such three year period (i.e., the number of shares that vest
could be 0; 8,500; 17,000; or 25,500). |
|
22 |
|
Shares of restricted stock granted on June 5, 2006, whereby all or a portion of these
shares may vest four years after the issuance date depending on the diluted EPS compound average
growth rate over such four year period (i.e., the number of shares that vest could be 0; 2,275;
4,550; or 6,825). |
26
Option Exercises and Stock Vested Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
Stock Awards |
|
|
Number of Shares |
|
|
|
|
|
Number of Shares |
|
|
|
|
Acquired on |
|
Value Realized on |
|
Acquired on Vesting |
|
Value Realized on |
Name |
|
Exercise (#) |
|
Exercise ($)(1) |
|
(#) |
|
Vesting ($) |
Daniel P. Dyer |
|
|
|
|
|
|
|
|
|
|
8,279 |
|
|
$ |
186,443 |
|
George D. Pelose |
|
|
3,750 |
|
|
$ |
70,837 |
|
|
|
8,307 |
|
|
$ |
175,392 |
|
Lynne C. Wilson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The value realized represents the difference between the exercise price of the option
shares and the market price of the option shares on the date the option was exercised. The
value realized was determined without considering any taxes that may have been owed. |
Securities Authorized for Issuance under Equity Compensation Plans
The following table discloses, as of December 31, 2007, the number of outstanding options and other
rights granted by the Corporation to participants in equity compensation plans, as well as the
number of securities remaining available for future issuance under these plans. The table provides
this information separately for equity compensation plans that have and have not been approved by
shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
|
|
|
|
|
|
|
|
Remaining Available for |
|
|
Number of Securities |
|
|
|
|
|
Future Issuance Under |
|
|
to be Issued Upon |
|
Weighted Average |
|
Equity Compensation |
|
|
Exercise of |
|
Exercise Price of |
|
Plans Excluding |
|
|
Outstanding Options |
|
Outstanding Options |
|
Securities Reflected in |
Plan Category |
|
and Other Rights |
|
and Other Rights |
|
Column (a) |
|
|
(a) |
|
(b) |
|
(c) |
Equity Compensation Plans Approved by Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
2003 Equity Compensation Plan |
|
|
727,184 |
|
|
$ |
13.20 |
|
|
|
275,791 |
|
2003 Employee Stock Purchase Plan |
|
|
None |
|
|
|
n/a |
|
|
|
107,359 |
|
Equity Compensation Plans Not Approved by Shareholders |
|
|
None |
|
|
|
n/a |
|
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
727,184 |
|
|
$ |
13.20 |
|
|
|
383,150 |
|
27
Potential Payments Upon Termination of Employment or Change in Control
The following tables show potential payments to Messrs. Dyer and Pelose upon termination of
employment, including without limitation a change in control, assuming a December 31, 2007
termination date. Stock option benefit amounts are computed for each option as to which vesting
will be accelerated upon the occurrence of the termination event by multiplying the number of
shares underlying the option by the difference between the $12.06 closing price per share of our
common stock on December 31, 2007 and the exercise price per share of the option. Restricted stock
benefit amounts are computed by multiplying the number of restricted shares as to which vesting
will be accelerated by the $12.06 per share closing price of our common stock on December 31, 2007.
A description of the applicable provisions of the employment agreements for Messrs. Dyer and Pelose
follows the tables.
Daniel P. Dyer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Change in |
|
|
|
|
|
|
Change in Control |
|
Control |
|
|
|
|
|
|
Termination without |
|
Termination without |
|
For Cause or |
|
|
|
|
Cause or for Good |
|
Cause or for Good |
|
Voluntary |
|
Death or |
Benefit Type |
|
Reason |
|
Reason |
|
Termination |
|
Disability |
Lump Sum Payments |
|
$ |
1,207,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bi-Weekly Payments |
|
|
|
|
|
$ |
1,207,679 |
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits |
|
$ |
22,244 |
|
|
$ |
22,244 |
|
|
|
|
|
|
|
|
|
Supplemental
Life and Disability Insurance |
|
$ |
15,982 |
|
|
$ |
15,982 |
|
|
|
|
|
|
|
|
|
Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
$ |
339,863 |
|
|
$ |
339,863 |
|
|
|
|
|
|
$ |
339,863 |
|
Excise Tax Gross-Ups |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George D. Pelose
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Change in |
|
|
|
|
|
|
Change in Control |
|
Control |
|
|
|
|
|
|
Termination without |
|
Termination without |
|
For Cause or |
|
|
|
|
Cause or for Good |
|
Cause or for Good |
|
Voluntary |
|
Death or |
Benefit Type |
|
Reason |
|
Reason |
|
Termination |
|
Disability |
Lump Sum Payment |
|
$ |
929,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bi-Weekly Payments |
|
|
|
|
|
$ |
929,606 |
|
|
|
|
|
|
|
|
|
Health and Welfare Benefits |
|
$ |
22,172 |
|
|
$ |
22,172 |
|
|
|
|
|
|
|
|
|
Supplemental
Life and Disability Insurance |
|
$ |
8,773 |
|
|
$ |
8,773 |
|
|
|
|
|
|
|
|
|
Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
|
$ |
834,198 |
|
|
$ |
834,198 |
|
|
|
|
|
|
$ |
834,198 |
|
Excise Tax Gross-Ups |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
The Corporation has employment agreements with Messrs. Dyer and Pelose, which run through November
2009.
The Corporation may terminate the employment agreements for or without cause. A termination for
cause requires a vote of two-thirds of our directors and prior written notice to the executive
providing an opportunity to remedy the cause. Cause generally means: 1) willful fraud or material
dishonesty by the executive in connection with the performance of his employment duties; 2) grossly
negligent or intentional failure by the executive to substantially perform his employment duties;
3) material breach by the executive of certain protective covenants (as described below); or 4) the
conviction of, or plea of nolo contendere to, a charge of commission of a felony by the executive.
The executive may terminate his employment agreement with or without good reason. A termination by
the executive for good reason requires prior written notice providing the Corporation with the
opportunity to remedy the good reason. Good reason generally means: 1) a material diminution in
title or a material change in authority, duties, responsibilities or reporting lines not approved
in writing by the executive; 2) a breach by the Corporation of its material obligations under the
employment agreement; 3) the relocation of the Corporations principal office to a location more
than 25 miles from Mt. Laurel, New Jersey, which is not approved by the executive; 4) any reduction
in the executives base salary or target bonus percentage, or a material reduction in benefits; 5)
the occurrence of a change in control (as defined in the agreements); or 6) a written notice of
non-extension of the employment agreement given by the Corporation.
Pursuant to the terms of their employment agreements, if the employment of Messrs. Dyer or Pelose
ends for any reason, the Corporation will pay accrued salary, bonuses and incentive payments
already determined and other existing obligations. In addition, if the Corporation terminates the
executives employment without cause or if the executive terminates his employment with good reason
(which includes the occurrence of a change in control (as defined in the agreements)), the
Corporation will be obligated to pay the executive an amount equal to two times the sum of the
executives then current base salary plus the average bonus earned by the executive for the two
preceding fiscal years payable over an 18-month period; provided, however, that such amount shall
be paid to the executive in a lump sum if such termination occurs six months prior to or following
a change in control. In addition, the executive will be entitled to the continuation of the
benefits in place at the time of termination for two years thereafter. In the event of a
termination by the Corporation for any reason other than for cause, all of the options, restricted
stock and other stock incentives granted to the executive will become fully vested, and the
executive will have up to two years in which to exercise all vested options that were granted after
the commencement of the employment agreement. If any payments due to the executive under the
employment agreement would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code, then the Corporation will be required to gross up the executives payments for the
amount of the excise tax plus the amount of income and other taxes due as a result of the gross up
payment.
Upon termination of the employment agreement, the executive will be subject to certain protective
covenants. If the Corporation terminates the executives employment without cause or if the
executive terminates his employment with good reason, the executive will be prohibited from
competing with the Corporation and from soliciting its customers for an 18-month period; provided
that such period shall be 12 months for all other terminations. In addition, for a 24-month period
after termination of employment, the executive is prohibited from hiring the Corporations
employees.
Compensation Committee Interlocks and Insider Participation
The members of the Corporations Compensation Committee are named above. None of these individuals
has ever been an officer or employee or the Corporation or any of its subsidiaries and no
compensation committee interlocks existed during 2007.
Report of the Audit Committee
Management is responsible for the Corporations internal financial controls and the financial
reporting process. The Corporations outside independent registered public accountants, Deloitte &
Touche LLP, are responsible for performing an independent audit of the Corporations consolidated
financial statements and to express an opinion as to whether those financial statements fairly
present the financial position, results of operations and cash flows of the Corporation, in
conformity with generally accepted accounting principles in the United States (GAAP). The Audit
Committees responsibility is to monitor and oversee these processes. In addition, the Audit
Committee meets at least quarterly with our management and outside independent registered public
accountants to discuss our financial statements and earnings press releases prior to any public
release or filing of the information.
29
The Audit Committee has reviewed and discussed the audited financial statements of the Corporation
for the year ended December 31, 2007, with the Corporations management. The Audit Committee has
discussed with the outside independent registered public accountants the matters required to be
discussed by SAS 61 (Codification of Statements of Auditing Standards, AU §380).
The outside independent registered public accountants provided to the Audit Committee the written
disclosure required by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees). The Audit Committee discussed with the outside independent registered public
accountants their independence and considered whether the non-audit services provided by the
outside independent registered public accountants are compatible with maintaining their
independence.
Based on the Audit Committees review and discussions noted above, the Audit Committee recommended
to the Board that the Corporations audited financial statements be included in the Corporations
Annual Report on Form 10-K for the year ended December 31, 2007, for filing with the SEC.
This report is submitted by the members of the Audit Committee of the Board of Directors:
John J. Calamari (Chairman)
James W. Wert
Kevin J. McGinty
Independent Registered Public Accountants
A representative of Deloitte & Touche LLP, the Corporations independent registered public
accountants, will be present at the Annual Meeting and will be given the opportunity to make a
statement if desired. The representative will also be available to respond to appropriate
questions.
The following sets forth the fees paid to the Corporations independent registered public
accountants for the last two fiscal years:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
Audit Fees |
|
$ |
911,270 |
|
|
$ |
880,012 |
|
Audit-Related Fees |
|
$ |
31,335 |
|
|
$ |
27,158 |
|
Tax Fees |
|
$ |
19,500 |
|
|
$ |
0 |
|
All Other Fees |
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
Total |
|
$ |
962,105 |
|
|
$ |
907,170 |
|
Audit Fees. Consists of fees related to the performance of the audit or review of the
Corporations financial statements and internal control over financial reporting, including
services in connection with assisting the Corporation in its compliance with its obligations under
Section 404 of the Sarbanes-Oxley Act and related regulations. This category also includes annual
agreed upon procedures relating to servicer reviews and the issuance of term asset-backed
securitizations.
Audit-Related Fees. Consists of fees related to audits of the Corporations 401(k) Plan by
Deloitte & Touche LLP.
Tax Fees. Consists of assistance rendered in preparation of various state corporate tax returns
and proxy disclosures.
The Audit Committee has the sole authority to consider and approve in advance any audit,
audit-related and tax work to be performed for the Corporation by its independent registered public
accountants.
Certain Relationships and Related Transactions
The Corporation obtains all of its commercial, healthcare and other insurance coverage through The
Selzer Company, an insurance broker located in Warrington, Pennsylvania. Richard Dyer, the brother
of Daniel P. Dyer, the Chairman of our Board of Directors and Chief Executive Officer, is the
President of The Selzer Company. We do not have any contractual arrangement with The Selzer Company
or Richard Dyer, nor do we pay either of them any direct fees. Insurance premiums paid to The
Selzer Company totaled $521,000 in 2007.
Joseph Dyer, the brother of Daniel P. Dyer, the Chairman of our Board of Directors and Chief
Executive Officer, is a vice president in our treasury group and was paid compensation in excess of
$120,000 for such services in 2007.
30
On March 11, 2008, the Corporation received approval from the Federal Deposit Insurance Corporation
(FDIC) for federal deposit insurance for its wholly-owned subsidiary, Marlin Business Bank, an
industrial bank chartered by the State of Utah (the Bank), and approved the Bank to commence
operations effective March 12, 2008. As a result of the approval, the Corporation became subject to
the terms, conditions and obligations of a Letter Agreement, dated as of June 18, 2007 (the Letter
Agreement), by and among the Corporation, Peachtree Equity Investment Management, Inc.
(Peachtree) and WCI (Private Equity) LLC (WCI). On March 26, 2007, the Corporation announced
that it had received correspondence from the FDIC approving the application for federal deposit
insurance for the Bank, subject to certain conditions set forth in the order issued by the FDIC,
dated as of March 20, 2007 (the Order). The Order provided that the approval of the Corporations
Bank application was conditioned on Peachtree and WCI, whose sole manager is Peachtree, executing a
passivity agreement with the FDIC to eliminate Peachtree and WCIs ability to control the Bank.
Therefore, Peachtree, WCI and the FDIC entered into a Passivity Agreement, dated as of June 18,
2007 (the Passivity Agreement), which would be deemed effective on the date of issuance from the
FDIC of the federal deposit insurance for the Bank. In connection with the execution of the
Passivity Agreement, the Corporation entered into the Letter Agreement, which is also deemed
effective on the date of issuance from the FDIC of the federal deposit insurance for the Bank.
Therefore, the effective date for both the Passivity Agreement and the Letter Agreement is March
11, 2008. Under the terms of the Letter Agreement, the Corporation agreed to create one vacancy on
the Corporations Board of Directors by increasing the size of the Board from six to seven
directors. The Corporation also agreed to take all necessary action to appoint one individual
proposed by Peachtree and WCI as a member of the Board who will serve as a director until the
expiration of the term at the Annual Meeting. In addition, the Corporation agreed to include an
individual proposed by Peachtree and WCI on the Boards slate of nominees for election as a
director of the Corporation and to use its best efforts to cause the election of such individual so
long as Peachtree and WCI are subject to the terms and conditions of the Passivity Agreement.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporations directors,
executive officers and shareholders who beneficially own more than 10% of the Corporations
outstanding equity stock to file initial reports of ownership and reports of changes in ownership
of common stock and other equity securities of the Corporation with the SEC. Based on a review of
copies of the reports we received and on the statements of the reporting persons, to the best of
the Corporations knowledge, all required reports in 2007 were filed on time except that the
Corporation, on behalf of John J. Calamari, Lawrence J. DeAngelo, Edward Grzedzinski, Kevin J.
McGinty and James W. Wert, our independent Directors, failed to timely file Form 4s to report the
annual equity grants made to the independent Directors on May 25, 2007. The Corporation filed the
Form 4s for such grants on July 23, 2007 on behalf of Lawrence J. DeAngelo, Edward Grzedzinski,
Kevin J. McGinty and James W. Wert, and on July 24, 2007 on behalf of John J. Calamari.
Shareholder Proposals
In order to be considered for inclusion in the Corporations proxy statement for the annual meeting
of shareholders to be held in 2009, all shareholder proposals must be submitted to the Corporate
Secretary at the Corporations office, 300 Fellowship Road, Mount Laurel, New Jersey, 08054 on or
before December 22, 2008.
Additional Information
Any shareholder may obtain a copy of the Corporations Annual Report on Form 10-K for the year
ended December 31, 2007, including the financial statements and related schedules and exhibits,
required to be filed with the SEC, without charge, by submitting a written request to the Corporate
Secretary, Marlin Business Service Corp., 300 Fellowship Road, Mount Laurel, New Jersey, 08054. You
may also view these documents on the investor relations section of the Corporations website at
www.marlincorp.com.
31
Other Matters
The Board of Directors knows of no matters other than those discussed in this Proxy Statement that
will be presented at the Annual Meeting. However, if any other matters are properly brought before
the meeting, any proxy given pursuant to this solicitation will be voted in accordance with the
recommendations of Board of Directors.
|
|
|
|
|
|
BY ORDER OF THE BOARD OF DIRECTORS
|
|
|
/s/ GEORGE D. PELOSE
|
|
|
George D. Pelose Secretary |
|
|
Mount Laurel, New Jersey April 22, 2008 |
|
|
32
APPENDIX A
AMENDMENT 2008-1
to the
MARLIN BUSINESS SERVICES CORP.
2003 EQUITY COMPENSATION PLAN
WHEREAS, the Marlin Business Services Corp. (the Company) maintains the Marlin Business
Services Corp. 2003 Equity Compensation Plan (the Plan) for the benefit of eligible employees of
the Company and its subsidiaries, non-employee directors, consultants and advisors;
WHEREAS, since the adoption of the Plan, shares of the Companys Common Stock, par value $0.01
per share (Common Stock), have been issued to eligible participants consistent with the terms and
conditions of the Plan; and
WHEREAS, in consideration of the number of unissued shares of Common Stock remaining in the
Plan and the anticipated number of shares of Common Stock to be issued or transferred under the
Plan during the foreseeable future, the Board of Directors of the Company desires to amend the Plan
to increase the total number of shares of Common Stock authorized for issuance or transfer under
the Plan by an additional 1,200,000 shares, to a total of 3,300,000 shares.
NOW, THEREFORE, in accordance with the foregoing, effective upon approval by the Companys
shareholders, the Plan is hereby amended as follows:
The first sentence of Section 3(a) of the Plan is hereby amended in its entirety to read as
follows:
Subject to adjustment as described below, the aggregate number of shares of common
stock of the Company (Company Stock) that may be issued or transferred under the
Plan is 3,300,000 shares; provided, however, that not more than 1,650,000 shares of
Company Stock shall be available for issuance as Stock Awards (excluding restricted
shares received as a result of an early exercise of an Option pursuant to Section
5(d)(ii)), Stock Units and Other Equity Awards.
IN WITNESS WHEREOF, to record the adoption of this Amendment 2008-1 to the Plan, the Company
has caused the execution of this instrument on this day of , 2008.
|
|
|
|
|
Attest: |
MARLIN BUSINESS SERVICES CORP.
|
|
|
By: |
|
|
|
|
Title: |
|
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|
|
|
|
33
PROXY
MARLIN BUSINESS SERVICES CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
MARLIN BUSINESS SERVICES CORP.
I/We hereby appoint George D. Pelose and Lynne C. Wilson, or any one of them with power of
substitution in each, as proxy-holders for me/us, and hereby authorize them to represent me/us at
the 2008 Annual Meeting of Shareholders of Marlin Business Services Corp. to be held at the
Doubletree Hotel, 515 Fellowship Road, Mount Laurel, New Jersey, on May 22, 2008 at 9:00 a.m., and
at any adjournment thereof, and at this meeting and any adjournment, to vote, as designated below,
the same number of shares as I/we would be entitled to vote if then personally present.
|
|
|
|
|
I. Election of Directors
|
|
o FOR all nominees listed
|
|
o WITHHOLD all nominees listed |
|
|
(except as written to the contrary below) |
|
|
NOMINEES: 01-Daniel P. Dyer, 02- John J. Calamari, 03-Lawrence J. DeAngelo, 04-Edward
Grzedzinski,
05-Kevin J. McGinty, 06-James W. Wert, and 07-Matthew J. Sullivan
(INSTRUCTION: To withhold authority to vote for one or more individual nominees, write their
name(s) on the line below)
II. |
|
Approval of Amendment to Increase by 1,200,000 the Number of Shares Authorized for
Issuance under the Corporations 2003 Equity Compensation Plan and Approval of the
Corporations 2003 Equity Compensation Plan, as Amended. |
|
|
|
|
|
o FOR
|
|
o AGAINST
|
|
o ABSTAIN |
THIS PROXY, WHEN PROPERLY SIGNED BY YOU, WILL BE VOTED IN THE MANNER YOU DIRECT ON THIS CARD. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF DIRECTORS,
FOR ITEM II, AND IN THE DISCRETION OF THE PROXYHOLDERS NAMED IN THIS PROXY UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT.
THIS PROXY MAY BE REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING.
I/we hereby acknowledge the receipt, prior to the signing of this Proxy, of a Notice of Annual
Meeting of Shareholders and an attached Proxy Statement for the 2008 Annual Meeting, and the Annual
Report of Marlin Business Services Corp. for the year ended December 31, 2007.
|
|
|
|
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|
|
DATE:
, 2008 |
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Signature
|
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Signature
|
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|
Please sign exactly as your name appears above and
print the date on which you sign the proxy in the
spaces provided above. |
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If signed on behalf of a corporation, please sign in
corporate name by an authorized officer. If signing
as a representative, please give full title as such.
For joint accounts, only one owner is required to
sign. |
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