def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
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:
o Preliminary Proxy Statement.
o Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
þ Definitive Proxy Statement.
o Definitive Additional Materials.
o Soliciting Material Pursuant to §240.14a-12.
AMERICAN RAILCAR INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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SEC 1913 (02-02)
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Persons who are to respond to the collection of
information contained in this form are not required to
respond unless the form displays a currently valid OMB
control number. |
100 Clark Street, St. Charles Missouri 63301
www.americanrailcar.com
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
June 4, 2008
To Our Stockholders:
The Annual Meeting of Stockholders of American Railcar
Industries, Inc. (the Company, ARI,
we, us, our) will be held
beginning at 1:00 p.m., local time, on June 4, 2008 at
Brown Rudnick Berlack Israels LLP, Seven Times Square, New York,
New York 10036 for the following purposes:
1. To elect nine directors to serve for the ensuing year
and until their successors are duly elected.
2. To transact such other business as may properly come
before the meeting or any adjournment thereof.
These items are more fully described in the proxy statement
accompanying this Notice. Only stockholders of record at the
close of business on April 18, 2008 will be entitled to
notice of and to vote at the Annual Meeting and any adjournment
or postponement thereof. A list of stockholders will be open to
the examination of any stockholder, for any purpose germane to
the Annual Meeting, for a period of ten days prior to the
meeting at the Companys principal executive office, 100
Clark Street, St. Charles, Missouri 63301.
All stockholders are cordially invited to attend the meeting.
However, to assure your representation at the meeting, you are
urged to mark, sign, date and return the enclosed proxy as
promptly as possible in the enclosed postage-prepaid envelope.
Stockholders who attend the Annual Meeting may revoke their
proxies and vote in person, if they so desire.
A Proxy Statement, proxy card and a copy of the Annual Report of
the Company for the last fiscal year accompany this Notice of
Annual Meeting of Stockholders.
By order of the Board of Directors
-s- Michael Obertop
Michael Obertop
Secretary
May 6, 2008
St. Charles, Missouri
YOUR VOTE IS IMPORTANT!
Whether or not you expect to attend the Annual Meeting,
please mark, sign and date the enclosed proxy card and return it
as promptly as possible in the enclosed envelope. Even if you
have given your proxy, the proxy may be revoked at any time
prior to exercise by filing with the Secretary of the Company a
written revocation, by executing a proxy with a later date, or
by attending and voting at the meeting.
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE COMPANYS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON JUNE 4, 2008: This Proxy Statement, the Companys Annual
Report for the fiscal year ended December 31, 2007 and the
Proxy Card are available at the Companys website,
www.americanrailcar.com.
AMERICAN
RAILCAR INDUSTRIES, INC.
Proxy
Statement
TABLE OF
CONTENTS
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2008 ANNUAL MEETING OF
STOCKHOLDERS
June 4, 2008
General
The enclosed proxy is solicited on behalf of the board of
directors of American Railcar Industries, Inc. (the
Company, ARI, we,
us, our) for use at the Annual Meeting
of Stockholders to be held on June 4, 2008 (the
Annual Meeting), or at any adjournment or
postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at Brown Rudnick Berlack Israels
LLP, Seven Times Square, New York, New York 10036. This proxy
statement, the accompanying Notice of Annual Meeting, the proxy
card and the annual report to stockholders were first mailed or
delivered on or about May 6, 2008.
Record
Date, Stock Ownership and Voting
Only stockholders of record at the close of business on
April 18, 2008 will be entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof. As of that date,
there were outstanding and entitled to vote
21,302,296 shares of our common stock, par value $.01 per
share (our Common Stock). Each stockholder is
entitled to one vote for each share of Common Stock. Shares
represented by the enclosed proxy, if properly executed and
returned to the Company prior to the meeting, will be voted at
the Annual Meeting and at any adjournment or postponement
thereof in the manner specified, or, if not specified, in favor
of the election of the nine nominees for director. If any other
matters shall properly come before the Meeting, the enclosed
proxy will be voted by the proxies in accordance with their best
judgment.
The presence, in person or by proxy, of the holders of record of
a majority of the shares of Common Stock outstanding and
entitled to vote is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. If a quorum is
not present, a vote of a majority of the votes properly cast
will adjourn the Meeting. A holder of Common Stock will be
entitled to one vote per share on each matter properly brought
before the meeting.
The proxy card provides space for a stockholder to withhold
voting for any or all nominees for the board of directors. The
affirmative vote of the holders of a plurality of the shares of
Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting is required for the
election of directors. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by an inspector of elections
appointed by the Company for the Annual Meeting. The inspector
of elections will treat both abstentions and broker
non-votes (shares held by a broker or nominee that does
not have the authority, either express or discretionary, to vote
on the matter) as shares of Common Stock that are present and
entitled to vote for purposes of determining a quorum.
Abstentions will have no effect on the outcome of the vote for
the election of directors. Broker non-votes on any other matter
will be treated as shares not entitled to vote with respect to
that matter and will have no effect on the proposal not voted.
Revocability
of Proxies
The proxy may be revoked at any time before it is exercised by
filing with the Secretary of the Company a written revocation,
by executing a proxy bearing a later date or by attending the
Annual Meeting and voting in person.
Costs of
Solicitation
All costs of this solicitation of proxies will be borne by the
Company. The Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their
reasonable expenses incurred in forwarding solicitation
materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram, or
personal solicitations by directors, officers or employees of
the Company. No additional compensation will be paid for any
such services.
Our executive office is located at 100 Clark Street, St.
Charles, Missouri 63301.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting nine directors are to be elected who shall
hold office until the next Annual Meeting of Stockholders. The
persons listed below, each of whom is currently a director of
the Company, have been nominated by the board of directors for
election as directors. The proposed nominees are not being
nominated pursuant to any arrangement or understanding with any
person.
Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the election of each of the nine
nominees listed below. All nominees have consented to serve as
directors if elected, but if any of them should decline or be
unable to serve as a director at the time of the Annual Meeting,
the proxies will be voted for the nominee, if any, who shall be
designated by the present board of directors to fill the
vacancy. The term of office of each person elected as a director
will continue until our next Annual Meeting of Stockholders or
until a successor has been elected and qualified.
The Board
of Directors unanimously recommends you vote FOR the election of
each
of the nine nominees to the Board of Directors set forth
below.
Set forth below is certain biographical information regarding
the nominees as of April 18, 2008.
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Director
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Age
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Since
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Carl C. Icahn
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Chairman of the Board
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1994
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James J. Unger
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President, Chief Executive Officer and Director
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1995
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Vincent J. Intrieri*
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Director
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2005
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James C. Pontious **
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Director
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2006
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James M. Laisure **
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Director
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2006
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Peter K. Shea
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Director
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2006
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Harold First ***
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Director
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2007
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Brett Icahn*
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Director
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2007
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Hunter Gary
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Director
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2008
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Member of the Compensation Committee |
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Member of the Audit Committee |
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Chair of the Audit Committee |
Nominees
Carl C. Icahn. Mr. Carl Icahn has been
our principal beneficial stockholder and has served as chairman
of the board and as a director since 1994. Mr. Carl Icahn
has served as chairman of the board and a director of Starfire
Holding Corporation (Starfire), a privately-held
holding company, and chairman of the board and a director of
various subsidiaries of Starfire, since 1984. Since August 2007,
through his position as Chief Executive Officer of Icahn Capital
LP, a wholly-owned subsidiary of Icahn Enterprises L.P.
(Icahn Enterprises), and certain related entities,
Mr. Carl Icahns principal occupation is managing
private investment funds, including Icahn Partners LP,
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Icahn Partners Master Fund LP, Icahn Partners Master
Fund II LP, and Icahn Partners Master Fund III LP.
Prior to August 2007, Mr. Carl Icahn conducted this
occupation through his entities CCI Onshore Corp. and CCI
Offshore Corp., since September 2004. Since November 1990,
Mr. Carl Icahn has been chairman of the board of Icahn
Enterprises G.P. Inc., the general partner of Icahn Enterprises.
Icahn Enterprises is a diversified holding company engaged in a
variety of businesses, including investment management, metals,
real estate, and home fashion. Mr. Carl Icahn was chairman
of the board and president of Icahn & Co., Inc., a
registered broker-dealer and a member of the National
Association of Securities Dealers, from 1968 to 2005. From
October 1998 through May 2004, Mr. Carl Icahn was the
president and a director of Stratosphere Corporation, the owner
and operator of the Stratosphere Hotel and Casino in Las Vegas,
which, until February 2008, was a subsidiary of Icahn
Enterprises. From September 2000 to February 2007, Mr. Carl
Icahn served as the chairman of the board of GB Holdings, Inc.,
which owned an interest in Atlantic Coast Holdings, Inc., the
owner and operator of The Sands casino in Atlantic City until
November 2006. Mr. Carl Icahn has been chairman of the
board and a director of XO Holdings, Inc., a telecommunications
services provider, since February 2006, and of its predecessor
from January 2003 to February 2006. Mr. Carl Icahn has
served as a Director of Cadus Corporation, a company engaged in
the ownership and licensing of yeast-based drug discovery
technologies since July 1993. In May 2005, Mr. Carl Icahn
became a director of Blockbuster Inc., a provider of in-home
movie rental and game entertainment. In October 2005,
Mr. Carl Icahn became a director of WestPoint
International, Inc., a manufacturer of bed and bath home fashion
products. In September 2006, Mr. Carl Icahn became a
director of ImClone Systems Incorporated (ImClone),
a biopharmaceutical company, and since October 2006, has been
the chairman of the board of ImClone. In August 2007,
Mr. Carl Icahn became a director of WCI Communities, Inc.
(WCI), a homebuilding company, and since September
2007, has been the chairman of the board of WCI. In December
2007, Mr. Carl Icahn became a director of Federal-Mogul
Corporation (Federal-Mogul), a supplier of
automotive products, and since January 2008, has been the
chairman of the board of Federal-Mogul. In April, 2008,
Mr. Carl Icahn became a director of Motricity, Inc., a
company that provides mobile content services and solutions.
Mr. Carl Icahn received his B.A. from Princeton University.
James J. Unger. Mr. Unger has served as
our president, chief executive officer and director since March
1995. Prior to joining us, he served ACF Industries, Inc. (now
known as ACF Industries, LLC) (ACF) as its president
from 1988 to 1995, as its senior vice president and chief
financial officer from 1984 to 1988 and on its board of
directors from August 1993 to March 2005. After he joined us in
1995, Mr. Unger simultaneously continued to serve as the
vice chairman of ACF until March 2005. ACF is controlled by
Mr. Carl Icahn. Since July 2007, Mr. Unger has served
on the executive committee of Axis, LLC, the axle manufacturing
joint venture in which we have a 37.5% interest, and, since
January 2008, he has served as a director of Axis Operating
Company, LLC, which is wholly owned by Axis, LLC and is the
operating entity for the joint venture. Since June 2003,
Mr. Unger has served as president of Ohio Castings Company,
LLC (Ohio Castings), the joint venture in which we
have a one-third interest. Mr. Unger was on the board of
directors of Aspen Resources Group, an oil and gas exploration
company from May 2002 until April 2007. Mr. Unger
participates in several industry organizations, including as an
executive committee member for the Railway Supply Institute,
Inc., or RSI. He also is a board member of the
American Railway Car Institute, a member of the project review
committee for the RSI-AAR Railroad Tank Car Safety Research Test
Project, a steering committee member of the RSI Committee on
Tank Railcars, and a member of the National Freight and
Transportation Association. Mr. Unger served as a member of
the board of directors of Ranken Technical College from 1990 to
2002. Mr. Unger received a B.S. in Accounting from the
University of Missouri, Columbia and is a Certified Public
Accountant.
Vincent J. Intrieri. Mr. Intrieri served
as our senior vice president, treasurer and secretary from March
2005 to December 2005 and has served on our board of directors
since August 2005, and as a member of our compensation committee
since January 2006. Since July 2006, Mr. Intrieri has been
a director of Icahn Enterprises G.P. Inc., the general partner
of Icahn Enterprises L.P., a diversified holding company engaged
in a variety of businesses, including investment management,
metals, real estate and home fashion. Since November 2004,
Mr. Intrieri has been a Senior Managing Director of Icahn
Capital LP, the entity through which Mr. Carl Icahn manages
third party private investment funds. Since January 1,
2005, Mr. Intrieri has been Senior Managing Director of
Icahn Associates Corp. and High River Limited Partnership,
entities primarily engaged in the business of holding and
investing in securities. Since April 2005, Mr. Intrieri has
been the President and Chief Executive Officer of Philip
Services Corporation, a metal recycling and industrial services
company. Since April 2003, Mr. Intrieri has been Chairman
of the Board of Directors and a director of Viskase Companies,
Inc., a producer of
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cellulosic and plastic casings used in preparing and packaging
processed meat products. Mr. Intrieri also serves on the
boards of directors of the following companies: Lear
Corporation, a supplier of automotive interior systems and
components; National Energy Group, Inc., a company engaged in
the business of managing the exploration, production and
operations of natural gas and oil properties; XO Holdings, Inc.,
a telecommunications company; WestPoint International, Inc., a
manufacturer of bed and bath home fashion products; and
Federal-Mogul Corporation, a supplier of automotive products.
With respect to each company mentioned above, Mr. Carl
Icahn, directly or indirectly, either (i) controls such
company or (ii) has an interest in such company through the
ownership of securities. Mr. Intrieri is a certified public
accountant. Mr. Intrieri received a BS in Accounting from
The Pennsylvania State University.
James C. Pontious. Mr. Pontious has
served on our board of directors since January 2006. Since May
2005, Mr. Pontious has been a consultant in the areas of
business development and acquisitions to Wabtec Corporation
(Wabtec), a public company that supplies air brakes
and other equipment for locomotives, freight cars and passenger
transit vehicles. In 2005, Mr. Pontious helped Wabtec found
Intermodal Trailer Express Corp., an intermodal operating
company established to focus on hauling highway trailers over
the nations railroads. Mr. Pontious is a principal of
this newly founded company. Mr. Pontious served Wabtec as
vice president of special projects from January 2003 through
April 2005 and as vice president of sales and marketing from
April 1990 to January 2003. Mr. Pontious also served as
vice president of sales and marketing at New York Air Brake
Company, a unit of General Signal Corporation, from 1977 to
1990. Prior to this, Mr. Pontious served the
Pullman-Standard division of Pullman, Inc., a freight and
passenger railcar manufacturer, from 1961 to 1977 in various
management positions in the areas of sales, marketing and
operations. Mr. Pontious currently serves as a director of
the Intermodal Transportation Institute at the University of
Denver. Mr. Pontious holds a B.B.A. from the University of
Minnesota.
James M. Laisure. Mr. Laisure has served
on our board of directors since January 2006. Since March 2007,
Mr. Laisure has served as President of Remy, Inc., a
manufacturer and distributor of rotating electrics and a
subsidiary of Remy International, Inc. Since May 2005,
Mr. Laisure has been consulting as an independent
contractor for the automotive and industrial manufacturing
space. Prior to this, he spent 32 years in various
corporate accounting, sales, engineering and operational
positions with Dana Corporation (Dana), a publicly
held corporation that designs, manufactures and supplies vehicle
components and technology, and its predecessors.
Mr. Laisure served as president of Danas Automotive
Systems Group from March 2004 to May 2005. From December 2001 to
February 2004, Mr. Laisure served as president of
Danas engine and fluid management group and, from December
1999 to November 2001, he served as president of Danas
fluid management group. In addition, he served on the board of
directors of various Dana Corporation joint ventures, including
joint ventures in Germany, Indonesia, Mexico and Turkey.
Mr. Laisure served as director of finance of
P.T. Spicer Indonesia, a manufacturer of axles and
driveshafts, from 1982 to 1984. Also, he served as accountant,
internal auditor and controller at Perfect Circle, a
manufacturer of automotive engine components, from 1973 to 1981.
Mr. Laisure received a B.A. in Accounting from Ball State
University and an M.B.A. from Miami (Ohio) University, and has
completed the Harvard University Advanced Management Program.
Peter K. Shea. Mr. Shea has served on our
board of directors since December 2006. Mr. Shea has been
head of portfolio company operations at Icahn Enterprises since
December 2006, and since December 2006, president of API. Since
December 2006, Mr. Shea has also served as a director of XO
Holdings and as a director of WestPoint Since November 2006,
Mr. Shea has been a director of Viskase. From 2002 to
November 2006, Mr. Shea was an independent consultant to
various companies and an advisor to private equity firms. From
1997 to 2001 he was a Managing Director of H.J. Heinz Company in
Europe, a manufacturer and marketer of a broad line of food
products across the globe. Mr. Shea has an M.B.A. from the
University of Southern California and a B.B.A. from Iona College.
Harold First. Mr. First has served on our
board of directors since January 2007. Mr. First has been
an independent financial consultant since January 1993.
Mr. First is currently a director of WestPoint. Since
November 2007, Mr. First has been a director of Lexington
Realty Trust, a New York Stock Exchange (NYSE)
traded real estate investment trust that merged with Newkirk
Realty Trust, Inc. (Newkirk), another NYSE traded
real estate investment trust on December 31, 2006. From
January 2006 through December 2006, Mr. First was a
director of
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Newkirk. Mr. First was a director of PANACO Inc., an oil
and gas drilling firm, from September 1997 to December 2003.
Mr. First is a Certified Public Accountant and holds a B.S.
from Brooklyn College.
Brett Icahn. Mr. Brett Icahn has served
on our board of directors since January 2007. Mr. Brett
Icahn is the son of Mr. Carl Icahn. In 2001, Mr. Brett
Icahn founded Myelin Media, an interactive software publishing
company controlled by Mr. Carl Icahn. Mr. Brett Icahn
is also an investment analyst for Icahn Partners, Icahn Master,
Icahn Master II and Icahn Master III. In addition,
Mr. Brett Icahn is also the Vice President of Modal LLC, a
company wholly owned and controlled by Mr. Carl Icahn and
through which Mr. Carl Icahn beneficially owns shares in
us. Mr. Brett Icahn received a B.A. from Princeton
University.
Hunter Gary. Mr. Gary has served on our
board of directors since January 2008. Since 2003, Mr. Gary
has been the Chief Operating Officer of Icahn Sourcing LLC,
where he is responsible for value enhancement of companies in
which Mr. Carl Icahn has a significant interest, and has
been employed by Icahn Associates Corp since June 2003. Since
2007, Mr. Gary has also served as a director of WestPoint
and as a director for Motricity, Inc., a company that provides
mobile content services and solutions. Motricity is controlled
by Mr. Carl Icahn. Mr. Gary is married to
Mr. Carl Icahns wifes daughter. Mr. Gary
received his B.A. from Georgetown University.
CORPORATE
GOVERNANCE
Director
Independence and Controlled Company Status
Our Common Stock is listed on the Global Select market of the
NASDAQ Stock Market LLC, or Nasdaq, and Nasdaqs standards
and definitions relating to director independence apply to us.
Our board of directors has determined that three of our current
directors, Messrs. Pontious, Laisure and First, each of
whom is also a nominee for director at the Annual Meeting, are
independent under these standards and definitions. Each of
Mr. Intrieri, Mr. Gary, Mr. Brett Icahn and
Mr. Shea are employed by
and/or
otherwise affiliated with Mr. Carl Icahn or entities
controlled by Mr. Carl Icahn, and Mr. Unger is our
President and Chief Executive Officer. Our board of directors
considered several factors in determining that
Messrs. Pontious, Laisure and First are independent. As to
Mr. First, the directors analysis included
consideration of (i) his current directorship of WestPoint,
which is an affiliate of Mr. Carl Icahn, (ii) his past
employment, from November 1990 to January 1993, as chief
financial officer of Icahn Holding Corporation, an affiliate of
Mr. Carl Icahn and (iii) his prior directorships of
various public and private companies affiliated with
Mr. Carl Icahn. The board of directors did not assign any
particular weight or importance to any one of these factors but
rather considered them as a whole. After considering all of
these factors, our board of directors concluded that none of
Messrs. Pontious, Laisure and First had any relationship
that would interfere with their exercise of independent judgment
in carrying out the responsibilities of a director, and that
each of them satisfied Nasdaqs standards and definitions
for independence.
During 2007 and through the date of this Proxy Statement,
Mr. Carl Icahn, our principal beneficial stockholder and
the chairman of our board of directors, controlled more than 50%
of the voting power of our Common Stock. See Security
Ownership of Certain Beneficial Owners and Management,
below. Consequently, we are a controlled company
under applicable Nasdaq rules. Under these rules, a
controlled company may elect not to comply with
certain Nasdaq corporate governance requirements, including
requirements that: (i) a majority of the board of directors
consist of independent directors; (ii) director nominees be
selected or recommended for selection by a majority of the
independent directors or by a nominating committee composed
solely of independent directors; and (iii) compensation of
officers be determined or recommended to the board of directors
by a majority of its independent directors or by a compensation
committee that is composed entirely of independent directors.
We have elected to use these exemptions. As a result,
(i) we do not have a majority of independent directors,
(ii) we do not have a nominating committee or a nominating
committee charter, and (iii) our compensation committee
does not satisfy Nasdaqs corporate governance requirements
applicable to compensation committees of non-controlled
companies and does not have a charter.
5
Board of
Directors Meetings and Committees
Our board of directors held twelve meetings during the fiscal
year ended December 31, 2007. During 2007, each director
attended at least 75% of the meetings of the board of directors
and each committee on which they served.
All of our directors are encouraged to attend our annual
meetings of stockholders, and last year four of our then nine
directors attended our 2007 annual meeting of stockholders.
Our standing committees are our audit committee and our
compensation committee. We have in the past and may in the
future establish special committees under the direction of the
board of directors when necessary to address specific issues.
Director
Nominations
We do not maintain a formal policy with respect to the review of
potential nominees to our board of directors. All of the members
of our board of directors participate in the review of potential
nominees to our board of directors. The board has determined
that, given the importance of the director nomination process,
the entire board of directors should participate in the
evaluation of potential board members. As a result of his
control of a majority of our outstanding Common Stock,
Mr. Carl Icahn may control the election of all of the
members of our board of directors. Our board of directors has
therefore deemed it appropriate not to form a standing
nominating committee because the influence exercisable by
Mr. Carl Icahn in the nomination and election process would
make a separate process superfluous in light of Mr. Carl
Icahns and the boards review of potential nominees.
The board of directors may consider candidates recommended by
stockholders as well as from other sources such as other
directors or officers, third party search firms or other
appropriate sources. In general, persons recommended by
stockholders will be considered on the same basis as candidates
from other sources. If a stockholder wishes to recommend a
candidate for director for election at the 2009 Annual Meeting
of Stockholders, it must follow the procedures described below
in Stockholder Proposals and Recommendations for
Director.
Audit
Committee
We established our audit committee in January 2006 in connection
with the initial public offering of our Common Stock. Our audit
committee meets formally at least once every quarter and more
often if necessary. Our board of directors has adopted a written
charter for our audit committee. That charter conforms to
applicable rules and regulations of the Securities and Exchange
Commission, or SEC, and Nasdaq. A copy of the audit committee
charter is publicly available on our web site at
www.americanrailcar.com under the heading Investor
Relations and the sub-heading Corporate
Governance.
Messrs. First, Pontious and Laisure are currently the
members of our audit committee. Our board of directors has
determined that Mr. First qualifies as an audit
committee financial expert, as defined by applicable SEC
rules, and that he satisfies Nasdaqs financial
sophistication standards. Our board of directors has also
determined that Messrs. First, Laisure and Pontious are
independent under applicable SEC and Nasdaq rules
and standards.
SEC
Rule 10A-3,
promulgated under the Securities Exchange Act of 1934, as
amended (the Exchange Act), provides that a minority
of the members of our audit committee were permitted to be
exempt from the SECs independence requirements until
January 19, 2007, the one year anniversary of the date of
effectiveness of our registration statement under the Securities
Act of 1933, as amended (the Securities Act)
covering the initial public offering of our Common Stock. During
2006 and through January 16, 2007, we relied on this
exemption and Mr. Intrieri, who is not an independent
director, was a member of our audit committee. On
January 16, 2007, Mr. Intrieri stepped down from the
audit committee and Mr. First was appointed to the audit
committee as its chair. As a result, we complied with the time
period provided by the exemption and all of the members of our
audit committee are currently independent, under
applicable SEC and Nasdaq rules. The board of directors assessed
our reliance on this exemption and determined that it did not
materially adversely affect the ability of the audit committee
to act independently during 2006 and to satisfy the other
requirements of
Rule 10A-3.
6
Our audit committee held six meetings during the fiscal year
ended December 31, 2007. Mr. Intrieri did not
participate in any of those meetings as they all occurred after
January 16, 2007, when Mr. Intrieri stepped down from
the audit committee.
Our audit committee is responsible for oversight of the
qualifications, independence, appointment, retention,
compensation and performance of the Companys independent
registered public accounting firm and for assisting the board of
directors in monitoring the Companys financial reporting
process, accounting functions and internal controls. It also is
responsible for oversight of whistle-blowing
procedures, approving transactions with related persons and
certain other compliance matters.
Independent
Registered Public Accounting Firm
We engaged Grant Thornton LLP (Grant Thornton) as
our independent registered public accounting firm during the
fiscal years ended December 31, 2007 and 2006. The decision
to engage Grant Thornton during those years was unanimously
approved by our audit committee. The audit committee intends to
appoint Grant Thornton to audit our consolidated financial
statements for the fiscal year ending December 31, 2008,
subject to satisfactory negotiations regarding fees and
services. A representative of Grant Thornton is expected to
attend our annual meeting, where he or she will have the
opportunity to make a statement, if he or she desires, and will
be available to respond to appropriate questions.
Fees
Billed by Independent Registered Public Accounting
Firm
Audit Fees. We incurred $1,056,080 in audit
fees and expenses for the year ended December 31, 2007 and
$683,638 in audit fees and expenses for the year ended
December 31, 2006 from Grant Thornton. We include in the
category of audit fees those fees billed by our independent
registered public accounting firm for professional services
rendered for the audit of our consolidated financial statements,
the quarterly reviews associated with the filing of our
quarterly
10-Q reports
with the SEC, fees associated with testing our internal controls
over financial reporting and other related services that are
normally provided in connection with such statutory and
regulatory filings. 2007 was the first year we were required to
comply with Section 404 of the Sarbanes-Oxley Act of 2002
and, thus, was the first year that we incurred significant audit
fees related to our auditors testing our internal control over
financial reporting. The amounts included for the year ended
December 31, 2006 included $115,627, relating to the review
of our
Form S-1
in connection with the initial public offering of our Common
Stock.
Audit-Related Fees. We incurred $19,496 and
$29,694, respectively, in fees from Grant Thornton for
audit-related services for the years ended December 31,
2007 and 2006. These services related to financial due diligence
in 2007 and work related to our acquisition of Custom Steel in
2006.
Tax Fees. We did not incur any fees from Grant
Thornton for tax compliance, tax advice or tax planning services
in the year ended December 31, 2007. For the year ended
December 31, 2006, we incurred tax planning fees of $43,768
from Grant Thornton.
All Other Fees. We did not incur any other
fees from Grant Thornton in the years ended December 31,
2007 and 2006.
The audit committee has considered whether the provision of
non-audit services by its independent registered public
accounting firm is compatible with maintaining auditor
independence and has determined that the provision of such
services is compatible.
Audit
Committee Policy on Pre-Approval of Services
The audit committees policy is to pre-approve all audit
and permissible non-audit services provided by the
Companys independent registered public accounting firm.
These services may include audit services, audit-related
services, tax services and other services. Pre-approval is
generally provided for up to one year. The audit committee may
also pre-approve particular services on a
case-by-case
basis.
7
Audit
Committee Report
In connection with the issuance of the Companys Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2007, the audit
committee:
1. Reviewed and discussed with management the
Companys audited financial statements as of
December 31, 2007 and 2006 and for the years ended
December 31, 2007, 2006 and 2005;
2. Discussed with Grant Thornton the Companys
independent registered public accounting firm, the matters
required to be discussed by the Auditing Standards Board
Statement of Auditing Standards (SAS) No. 61, as
amended;
3. Requested and obtained from Grant Thornton the written
disclosures and the letter required by Independence Standards
Board (ISB) Standard No. 1, as amended,
regarding Grant Thorntons independence, and has discussed
with Grant Thornton its independence; and
Based on the review and discussions referred to in paragraph
numbers (1) (3) above, the audit committee
recommended to our board of directors that the audited financial
statements as of December 31, 2007 and 2006 and for the
years ended December 31, 2007, 2006 and 2005 be included in
the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 for filing with
the Securities and Exchange Commission.
Respectfully submitted by the Audit Committee,
Harold First, Chairman
James M. Laisure
James C. Pontious
Compensation
Committee
We established our compensation committee in February 2006 to
review and approve our compensation policies and arrangements.
Messrs. Intrieri and Brett Icahn are the current members of
our compensation committee. Mr. Brett Icahn replaced
Mr. Meister when Mr. Meister resigned from our board
of directors in January 2008. Our compensation committee held
four meetings during the fiscal year ended December 31,
2007. As discussed above under Director
Independence and Controlled Company Status, our
compensation committee does not satisfy Nasdaqs corporate
governance requirements applicable to compensation committees of
non-controlled companies, is not comprised of independent
directors and does not have a charter.
For further information about our processes and procedures for
the consideration and determination of executive and director
compensation, please see Executive
Compensation Compensation Discussion and
Analysis, below.
Compensation
Committee Interlocks and Insider Participation
We formed our compensation committee in February 2006. During
2007, none of our executive officers served on the compensation
committee (or equivalent), or the board of directors, of another
entity whose executive officer(s) served on our board of
directors.
Stockholder
Communications With Directors
Stockholders may contact the board of directors of the Company
by writing to them
c/o Investor
Relations, American Railcar Industries, Inc., 100 Clark Street,
St. Charles, Missouri 63301. All communications addressed to the
board of directors will be delivered to the board of directors.
If stockholders desire, they may contact individual members of
the board of directors, our independent directors as a group, or
a particular committee of the board of directors by
appropriately addressing their correspondence to the same
address. In each case, such correspondence will be delivered to
the appropriate director(s).
8
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of April 18,
2008, with respect to the beneficial ownership of our Common
Stock by (i) each director, (ii) our named executive
officers for the fiscal year ended December 31, 2007,
(iii) all of our directors and executive officers as a
group, and (iv) each person who is known to us to be the
beneficial owner of more than five percent of our Common Stock.
This information is based upon information received from or on
behalf of the named individuals or from publicly available
information and filings by or on behalf of those persons with
the SEC. Beneficial ownership is determined in accordance with
rules promulgated under the Exchange Act and generally includes
voting
and/or
investment power with respect to securities. In computing the
number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock
issuable upon the exercise of stock options that are currently
exercisable, or are exercisable within 60 days, are deemed
to be issued and outstanding. Unless otherwise indicated, each
person has sole voting power and sole investment power with
respect to the shares listed. Unless otherwise indicated, the
address of each of the following is:
c/o American
Railcar Industries, Inc., 100 Clark Street, St. Charles,
Missouri 63301.
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock
|
|
|
|
Beneficially Owned
|
|
|
|
|
|
|
Percent of
|
|
Name
|
|
Number
|
|
|
Class
|
|
|
Carl C. Icahn(1)(2)
|
|
|
11,587,945
|
|
|
|
54.4
|
%
|
James J. Unger
|
|
|
191,428
|
|
|
|
*
|
|
James Cowan(3)
|
|
|
151,606
|
|
|
|
*
|
|
William P. Benac(4)
|
|
|
24,999
|
|
|
|
*
|
|
Alan C. Lullman(5)
|
|
|
19,047
|
|
|
|
*
|
|
Vincent J. Intrieri
|
|
|
|
|
|
|
|
|
James C. Pontious
|
|
|
5,000
|
|
|
|
*
|
|
James M. Laisure
|
|
|
|
|
|
|
|
|
Peter K. Shea
|
|
|
|
|
|
|
|
|
Harold First(6)
|
|
|
1,500
|
|
|
|
*
|
|
Brett Icahn
|
|
|
|
|
|
|
|
|
Hunter Gary
|
|
|
|
|
|
|
|
|
Marsico Capital Management, LLC(7)
|
|
|
997,299
|
|
|
|
4.7
|
%
|
Keeley Asset Management Corp.(8)
|
|
|
2,018,523
|
|
|
|
9.5
|
%
|
Baron Capital Group, Inc.(9)
|
|
|
1,495,600
|
|
|
|
7.0
|
%
|
All executive officers and directors as a group (12 persons)
|
|
|
11,981,526
|
|
|
|
56.5
|
%
|
|
|
|
(1) |
|
The following information is based on a Form 4 filed with
the Securities and Exchange Commission on November 21, 2007
by Mr. Carl Icahn and certain other parties (the
Icahn Form 4): Mr. Carl Icahn beneficially
owns 5,037,165 of these shares directly and an additional
6,550,780 of these shares (the Additional Shares)
are owned as follows: (i) 4,290,918 of these shares are
owned by Modal LLC, a Delaware limited liability company
(Modal); (ii) 2,236,062 of these shares are
owned by Hopper Investments, LLC, a Delaware limited liability
company (Hopper); and (iii) 23,800 of these
shares are owned by Ms. Gail Golden, Mr. Carl
Icahns spouse. Hopper is wholly owned by Barberry Corp., a
Delaware corporation (Barberry). Each of Barberry
and Modal is wholly owned by Mr. Carl Icahn. Mr. Carl
Icahn may be deemed to have shared voting power and shared
investment power with regard to the Additional Shares.
Mr. Carl Icahn has sole voting power and sole investment
power with regard to the 5,037,165 shares he owns directly.
Mr. Carl Icahn, by virtue of his relationships to Hopper,
Modal and Ms. Golden, may be deemed to beneficially own (as
that term is defined in
Rule 13d-3
under the Exchange Act) the Additional Shares. Mr. Carl
Icahn disclaims beneficial ownership of such Additional Shares
for all other purposes. |
9
|
|
|
(2) |
|
The following information is based on a Schedule 13D filed
with the Securities and Exchange Commission on January 31,
2006 by Mr. Carl Icahn and certain other parties (the
Icahn 13D): In connection with the Companys
initial public offering, on January 20, 2006, pursuant to a
stock purchase agreement dated December 7, 2005, among
Modal, High Coast Limited Partnership, a Delaware limited
partnership and The Foundation for a Greater Opportunity, a
Delaware not-for-profit corporation (the
Foundation), Modal purchased 4,290,918 shares
of Common Stock of the Company (the Modal Shares)
from the Foundation. In connection with the purchase by Modal of
the Modal Shares, Modal and the Foundation entered into a pledge
security agreement (the Pledge Security Agreement),
dated January 20, 2006. After an event of default (as
defined in the Pledge Security Agreement) and upon notice, the
Modal Shares may be transferred to the Foundation. Assuming no
other changes to Mr. Carl Icahns beneficial ownership
of our Common Stock, as reported in the table above, such a
transfer may constitute a change in control of the Company. |
|
(3) |
|
Mr. Cowan beneficially owns 151,606 shares.
Mr. Cowan has the right to acquire 136,106 of these shares
pursuant to currently exercisable options to purchase Common
Stock. |
|
(4) |
|
Mr. Benac beneficially owns 24,999 shares.
Mr. Benac has the right to acquire all 24,999 shares
pursuant to currently exercisable options to purchase Common
Stock. |
|
(5) |
|
Mr. Lullman beneficially owns 19,047 shares.
Mr. Lullman has the right to acquire all 19,047 shares
pursuant to currently exercisable options to purchase Common
Stock. |
|
(6) |
|
Includes 1,500 shares held by the Harold First Pension Plan. |
|
(7) |
|
Pursuant to Marsico Capital Management, LLCs
(MCM) Schedule 13G/A filed with the Securities
and Exchange Commission on September 10, 2007, MCM has the
sole power to vote 979,588 shares and the sole dispositive
power over 997,299 shares. The address of MCM is 1200 17th
Street, Suite 1600, Denver, Colorado 80202. |
|
(8) |
|
Pursuant to Keeley Asset Management Corp.s
(Keeley) Schedule 13G filed with the Securities
and Exchange Commission on February 14, 2008, Keeley has
the sole power to vote 1,879,943 shares and the sole
dispositive power over 2,018,523 shares. The address of
Keeley is 401 South LaSalle Street, Chicago, Illinois 60605. |
|
(9) |
|
Pursuant to Baron Capital Group, Inc.s (Baron)
Schedule 13G filed with the Securities and Exchange
Commission on February 14, 2008, Baron has the sole power
to vote 1,290,900 shares and the sole dispositive power
over 1,495,600 shares. The address of Baron is
767 Fifth Avenue, New York, New York 10153. |
CODE OF
ETHICS
Pursuant to Section 406 of the Sarbanes-Oxley Act of 2002,
we have adopted a Code of Ethics for Senior Financial Officers
that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller,
and other persons performing similar functions. Our Code of
Ethics for Senior Financial Officers is publicly available on
our web site at www.americanrailcar.com under the heading
Investor Relations and the sub-heading
Corporate Governance. We may satisfy the disclosure
requirement of Item 5.05 of Current Report on
Form 8-K
regarding an amendment to, or waiver from, a provision of our
Code of Ethics by either disclosing such information in a
Current Report on
Form 8-K
or by posting such information on our web site, at the internet
address specified above.
10
EXECUTIVE
OFFICERS
The names of the Companys executive officers who are not
directors of the Company, and certain biographical information
regarding them as of April 18, 2008, are set forth below.
None of the persons listed below was appointed pursuant to any
arrangement or understanding with any person, other than the
employment agreements we have or had entered into with each of
Messrs. Cowan, Benac and Lullman relating to their service
in such capacities, discussed below under Executive
Compensation Compensation Discussion and
Analysis Employment Agreements. Executive
officers are chosen by and serve at the discretion of the board
of directors.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
James Cowan
|
|
|
50
|
|
|
Executive Vice President and Chief Operating Officer
|
William P. Benac
|
|
|
61
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer
|
Alan C. Lullman
|
|
|
53
|
|
|
Senior Vice President, Sales Marketing and Services
|
James Cowan. Mr. Cowan has served as our
executive vice president and chief operating officer since
December 2005. Prior to joining us, he spent the last
26 years in various positions involving the engineering,
construction and manufacturing of multiple steel and tubular
products. From March 2003 to August 2005, Mr. Cowan served
as president and chief operating officer of Maverick Tube
Corporation, a North American manufacturer of welded tubular
steel products used in the energy industry. Prior to this
position, from June 2002 to March 2003, Mr. Cowan served as
president and chief operating officer of Vallourec &
Mannesmann Star, a French, German and Japanese joint venture and
seamless manufacturer of tubular steel products. From January
1992 to June 2002, he served as general manager responsible for
all sales and operations of three different steel manufacturing
facilities for North Star Steel, a business previously owned by
Cargill. Mr. Cowan was responsible for the complete
greenfield development, construction and
start-up of
one of these facilities. From July 1979 to January 1992, he
served in differing operational capacities for Cargills
steel group, North Star Steel. During 2000 and 2001,
Mr. Cowan served as the Chairman of the Governor of
Ohios Steel Council. Mr. Cowan received his B.S. in
Metallurgical Engineering from Michigan Technological University.
William P. Benac. Mr. Benac has served as
our senior vice president and chief financial officer since
January 2005 and has served as our treasurer since December
2005. Prior to joining us, he spent the last 32 years in
various corporate finance, turnaround and value creation
positions. Mr. Benac co-founded bpmx, a financial services
and consulting restructuring company, where he served as senior
managing director and chief financial officer from December 2003
to January 2005. From August 2002 to February 2003,
Mr. Benac served Kinkos Inc., a print services
company, as senior vice president and chief financial officer.
From November 2000 to November 2001, Mr. Benac was the
executive vice president and chief financial officer of Grass
Valley Group, a manufacturer of digital broadcast technology.
Mr. Benac served simultaneously as an executive vice
president and chief financial officer of UICI, a diversified
financial services company, and as chief executive officer of
United Credit National Bank, a subsidiary of UICI and a credit
card bank, from May 1999 to November 2000. Mr. Benac has
held a variety of other financial management positions,
including serving Electronic Data Systems Corporation from
February 1992 to October 1997 as global vice president and
treasurer, and numerous positions with Verizon Corporation and
its predecessor companies from 1973 to 1990, including as
president of GTE Finance Corp. from 1986 to 1990. Mr. Benac
is a Certified Public Accountant and a Certified Management
Accountant. He has served on the National Advisory Council of
the Marriott School of Management Brigham Young
University since 1997. Mr. Benac received his B.A. and his
M.B.A. from Brigham Young University and his J.D. from Pace
University School of Law.
Alan C. Lullman. Mr. Lullman has served
as our senior vice president sales, marketing and services since
October 2004. From August 1998 to September 2004, he served as
our vice president sales and marketing. Prior to joining us, he
served as a regional sales manager at the Houston office of ACF
from March 1989 to July 1998, where he was responsible for sales
across 22 states. From August 1987 to February 1989,
Mr. Lullman was a district sales manager at ACF. He held
numerous other sales positions at ACF sales offices in the
Southwest, Midwest and Northeast from October 1978 to July 1987.
Mr. Lullman is a member of the National Grain Car Council,
North America Freight Car Association, National Coal
Transportation Association and Renewable Fuels Association. He
received a B.A. from Westminster College. He also served in the
U.S. Marine Corps Reserve from 1973 to 1976, when he
received an honorable discharge.
11
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Prior to our initial public offering in January 2006, our
executive compensation programs were determined by our entire
board of directors. In February 2006, our board of directors
formed a compensation committee, which has the ongoing
responsibility for establishing, implementing and monitoring our
executive compensation programs. The following Compensation
Discussion and Analysis describes the material elements of
compensation for our named executive officers identified in the
Summary Compensation Table below.
The compensation committee currently consists of
Mr. Intrieri and Mr. Brett Icahn, both of whom are
employees of companies controlled by our chairman and principal
beneficial stockholder, Mr. Carl Icahn. Mr. Brett
Icahn replaced Mr. Meister as a member of our compensation
committee in January 2008. The compensation committee, at its
discretion, has consulted and expects to continue to consult
with Mr. Carl Icahn and members of the staff of various
entities controlled by Mr. Carl Icahn, including staff at
Icahn Enterprises, L.P. and Icahn Sourcing LLC, with expertise
in compensation and benefits. These staff members research
compensation standards and practices in a range of businesses
including businesses comparable to us. The committee also
consults with Mr. Unger, our chief executive officer,
regarding compensation matters.
Executive Compensation Philosophy. The
compensation committee believes that compensation paid to
executive officers should assist the Company in attracting,
motivating and retaining superior talent. Our compensation
programs are intended to motivate the named executive officers
to achieve our business objectives and to align their financial
interests with those of our stockholders. Based on this
philosophy, the compensation of our named executive officers has
included a combination of salary, cash bonuses, equity awards,
stock-based compensation and other employment benefits. In
addition, we have employment agreements with each of our named
executive officers.
Base Salary. The compensation committee
reviews base salaries for our executive officers, subject to the
terms of applicable employment agreements. The 2007 base
salaries of each of our named executive officers were
established pursuant to employment agreements negotiated at
arms length with each of those officers. The employment
agreement with Mr. Unger was entered into in November 2005
in anticipation of the completion of our initial public offering
and provides for a minimum base salary of $350,000. The
employment agreements for our other named executive officers
provide for a minimum base salary of $300,000 for
Mr. Cowan, $250,000 for Mr. Benac and $250,000 for
Mr. Lullman. Each officer was granted a 4% raise in base
salary for 2008. Our compensation committee believes that these
salaries represent reasonable and fair salaries for the
positions and responsibilities for each of our named executive
officers.
Bonus Compensation. We have established a
target bonus plan for certain employees, including our named
executive officers, under which targets are determined on an
annual basis equal to a percentage of the employees base
salary. This plan was established to provide additional
compensation to eligible participants for their contribution to
the achievement of our objectives, to encourage and stimulate
superior performance, and to assist in attracting and retaining
highly qualified key employees. Under this plan, and consistent
with our employment agreements with each of our named executive
officers, Mr. Ungers 2007 target bonus amount was 60%
of his base salary, Mr. Benacs 2007 target bonus
amount was 60% of his base salary, Mr. Cowans 2007
target bonus amount was 50% of his base salary and
Mr. Lullmans 2007 target bonus amount was 50% of his
base salary. Under our bonus plan, the actual bonus earned by
each of these executives was based 50% on the achievement by the
Company of an EBITDA-based financial target established for the
year and 50% on the achievement of individual goals, including
financial, strategic, corporate, divisional and other goals. The
compensation committee retained sole discretion over all matters
relating to the potential 2007 target bonus payments, including,
without limitation, the decision to pay any bonuses, the amount
of each bonus, if any, the ability to increase or decrease any
bonus payment and make changes to any performance measures or
targets, and discretion over the payment of partial awards in
the event of employment termination.
12
The 2007 EBITDA target under the bonus plan was set based upon
our internal budgets and required us to achieve significant
growth in our EBITDA over the prior year, which management and
the compensation committee believed were achievable based upon
our recent plant expansion, as well as continuing investments in
efficiency improvements. Based on our fiscal 2007 results, the
EBITDA target under the bonus plan was not achieved and each of
the named executive officers achieved a bonus at 97.5% of the
target. The bonuses awarded to each of our named executive
officers for 2007 were as follows:
|
|
|
|
|
Named Executive Officer
|
|
2007 Bonus ($)
|
|
|
James J. Unger
|
|
|
204,750
|
|
James Cowan
|
|
|
146,250
|
|
William P. Benac
|
|
|
146,250
|
|
Alan C. Lullman
|
|
|
121,875
|
|
Special IPO Bonus. Under his employment
agreement, Mr. Benac also was paid a special cash bonus of
$500,000 in 2007, relating to the successful completion of our
initial public offering in January 2006. This cash bonus payment
is described more fully under the description of his employment
agreement below.
Stock-Based Compensation. The board of
directors believes that stock-based compensation causes our
executives to have an ongoing stake in our long-term success.
Our 2005 Equity Incentive Plan was designed, in part, to
optimize our profitability and growth over a longer term. These
long-term grants to executive officers are based on job
responsibilities and potential for individual contribution. When
it makes grants, the compensation committee exercises judgment
and discretion in view of its general policies. The combination
of annual cash bonuses and stock-based compensation is intended
to benefit stockholders by enabling us to better attract and
retain top talent in a marketplace where such incentives are
prevalent. As described below, in 2006, we granted certain of
our named executive officers stock options under our 2005 Equity
Incentive Plan and in 2007 we granted all of our named executive
officers stock appreciation rights under our 2005 Equity
Incentive Plan.
Stock Options. Stock options provide for
financial gain derived from the potential appreciation in stock
price from the date that the option is granted until the date
that the option is exercised. In connection with the initial
public offering of our Common Stock in January 2006, we granted
a total of 484,876 options to purchase shares of our Common
Stock under our 2005 Equity Incentive Plan, including options to
purchase 249,160 shares to Mr. Cowan and options to
purchase 42,857 shares to Mr. Lullman. The exercise
price of these options is $21.00 per share, which was our
initial public offering price. The options vest in three equal
annual installments on January 19, 2007, January 19,
2008 and January 19, 2009 and have a five year term. In
addition, we granted options to purchase 75,000 shares of
our Common Stock to Mr. Benac on April 3, 2006. The
exercise price of these options is $35.69 per share, which was
the closing price of our Common Stock on that date. The options
vest in three annual installments on April 3, 2008,
April 3, 2009, and April 3, 2010 and have a five year
term. Both of these groups of options were approved prior to
grant by our board of directors or compensation committee, as
applicable. To date, we have not granted any stock options to
Mr. Unger, who received restricted stock in connection with
our initial public offering, as further described below.
The grant of options to Messrs. Cowan, Benac and Lullman
was intended to provide long-term incentive to reward those
officers for appreciation in the price of our Common Stock and
to further align the interests of our named executive officers
with those of our stockholders.
Stock Appreciation Rights. Stock appreciation
rights (SARs) provide for financial gain derived from the
potential appreciation in the price of our Common Stock from the
date that SARs are granted until the date that SARs are
exercised. On April 4, 2007, we granted a total of 273,800
SARs under our 2005 Equity Incentive Plan, including 50,000 SARs
to Mr. Unger, 15,000 SARs to Mr. Cowan, 15,000 SARs to
Mr. Benac and 15,000 SARs to Mr. Lullman. The SARs
settle in cash and have an exercise price of $29.49 per right,
which was the closing price of our Common Stock on the date of
grant. The SARs vest in four equal annual installments on
April 4, 2008, April 4, 2009, April 4, 2010 and
April 4, 2011 and have a seven year term. These SARs were
approved on the grant date by our compensation committee.
The grant of SARs to Messrs. Unger, Cowan, Benac and
Lullman was intended to provide additional long-term incentive
in addition to the incentive provided by the stock options to
reward those officers for appreciation in the price of our
Common Stock and to further align the interests of our named
executive officers with those of our stockholders.
13
CEO Restricted Stock. When Mr. Unger
joined us at the time of our original formation, we entered into
an employment agreement with Mr. Unger, which provided that
Mr. Unger would be granted an option to purchase 2.0% of
our outstanding common shares at a price equal to 2.0% of the
common equity contribution by Mr. Carl Icahn at our
formation. The agreement provided that this option would be
exercisable at the time of our initial public offering. In
anticipation of our initial public offering, we entered into a
letter agreement with Mr. Unger that replaced any option
grants to Mr. Unger under the original agreement. Pursuant
to this letter agreement, we issued Mr. Unger
285,714 shares of our Common Stock upon the closing of our
initial public offering. Certain of these shares were subject to
vesting and transferability and other restrictions at the time
they were issued, but all 285,714 shares have since vested
and are free of restrictions. We filed a registration statement
on
Form S-8
with the SEC to cover the registration of 40% of these shares on
August 15, 2006. We have agreed to include the balance of
these shares in any registration statement we file on behalf of
Mr. Carl Icahn with regard to the registration for sale of
our shares held by Mr. Carl Icahn.
Other Employment Benefits. Our named executive
officers are provided with a limited number of perquisites. In
the case of country club and athletic club dues paid on behalf
of certain named executive officers, we believe that these
perquisites assist such officers in maintaining a presence in
the community and with business development activities.
The Company provides the following, all of which is quantified
in the table below entitled All Other Compensation:
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Automobile allowances
|
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|
|
Country club and athletic club dues
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|
|
Reimbursements for taxes paid on reimbursed travel expenses
considered as income
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|
|
Various premiums on insurance policies
|
Our named executive officers are entitled to various other forms
of compensation. These forms of compensation include but are not
limited to the perquisites identified above, tax reimbursements,
dividends on restricted stock, increases in actuarial estimated
pension benefit value, matching contributions on executive
deferrals to our 401(k) plan and other compensation amounts.
Section 162(m). Section 162(m) of
the Internal Revenue Code of 1986, as amended, provides that
compensation in excess of $1,000,000 paid to the Chief Executive
Officer or to any of the other four most highly compensated
executive officers of a publicly held corporation will not be
deductible for federal income tax purposes unless such
compensation is paid pursuant to one of the enumerated
exceptions set forth in Section 162(m), including
transition rules for newly public companies. In general, stock
options and SARs granted under our 2005 Equity Incentive Plan
are intended to qualify under and comply with the
performance based compensation exemption provided
under Section 162(m), thus excluding from the
Section 162(m) compensation limitation any income
recognized by executives pursuant to such stock options and
SARs. The compensation committee intends to review periodically
the potential impacts of Section 162(m) on structuring and
administering our compensation programs.
Compensation
Committee Report
The compensation committee reviewed and discussed the above
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with the Companys management. Based on the review and
discussions, the compensation committee recommended to the board
of directors that the Compensation Discussion and Analysis be
included in this proxy statement.
Respectfully submitted by the Compensation Committee,
Brett Icahn
Vincent J. Intrieri
14
SUMMARY
COMPENSATION TABLE
The following table summarizes the compensation of the named
executive officers for the fiscal years ended December 31,
2007 and 2006. The named executive officers are Mr. Unger,
Mr. Cowan, Mr. Benac and Mr. Lullman. We have no
other executive officers.
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|
|
|
|
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|
|
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|
|
|
|
|
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|
|
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Change in the
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Non-Equity
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Pension
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Incentive
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Value and
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Stock
|
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Option
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Plan
|
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Non-qualified
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All Other
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Salary
|
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Bonus
|
|
Awards
|
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Awards
|
|
Compensation
|
|
Deferred
|
|
Compensation
|
|
Total
|
Name
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
Compensation ($)
|
|
($)(4)
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|
($)
|
|
James J. Unger
|
|
|
2007
|
|
|
|
350,000
|
|
|
|
|
|
|
|
300,000
|
|
|
|
54,547
|
|
|
|
204,750
|
|
|
|
19,000
|
|
|
|
63,820
|
|
|
$
|
992,117
|
|
President and Chief Executive Officer
|
|
|
2006
|
|
|
|
350,000
|
|
|
|
|
|
|
|
5,700,000
|
|
|
|
|
|
|
|
210,000
|
|
|
|
24,000
|
|
|
|
74,728
|
|
|
$
|
6,358,728
|
|
James Cowan
|
|
|
2007
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
517,861
|
|
|
|
146,250
|
|
|
|
|
|
|
|
37,817
|
|
|
$
|
1,001,928
|
|
Executive Vice President and Chief Operating Officer
|
|
|
2006
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
1,105,710
|
|
|
|
150,000
|
|
|
|
|
|
|
|
27,132
|
|
|
$
|
1,582,842
|
|
William P. Benac
|
|
|
2007
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
369,438
|
|
|
|
146,250
|
|
|
|
|
|
|
|
65,015
|
|
|
$
|
830,703
|
|
Senior Vice President and Chief Financial Officer
|
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2006
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
264,806
|
|
|
|
650,000
|
(5)
|
|
|
|
|
|
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64,491
|
|
|
$
|
1,229,297
|
|
Alan C. Lullman
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|
2007
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
102,625
|
|
|
|
121,875
|
(6)
|
|
|
|
|
|
|
35,437
|
|
|
$
|
509,937
|
|
Senior Vice President Sales, Marketing and Services
|
|
|
2006
|
|
|
|
204,167
|
|
|
|
|
|
|
|
|
|
|
|
190,189
|
|
|
|
108,419
|
|
|
|
|
|
|
|
34,997
|
|
|
$
|
537,772
|
|
|
|
|
(1) |
|
Amounts earned under the 2007 Executive Incentive Plan and 2006
Executive Incentive Plan are included in the Non-Equity
Incentive Plan Compensation column. |
|
(2) |
|
Amount shown does not reflect compensation actually received by
Mr. Unger nor does it necessarily reflect the actual value
that will be recognized by Mr. Unger. Instead, the amount
shown is the stock based compensation expense of restricted
stock granted to Mr. Unger as determined pursuant to
FAS 123(R). The assumptions used to calculate the value of
restricted stock awards are set forth under Note 17 - Stock
Based Compensation to our consolidated financial statements
included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007. |
|
(3) |
|
Amounts shown do not reflect compensation actually received by
the named executive officers nor does it necessarily reflect the
actual value that will be recognized by the named executive
officers. Instead, the amounts shown are the stock-based
compensation expense of option awards and SARs awards granted to
the named executive officers as determined pursuant to
FAS 123(R). The assumptions used to calculate the value of
option awards are set forth under Note 17
Stock-Based Compensation to our consolidated financial
statements included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007. The
FAS 123(R) value as of the grant date for stock option
awards and SARs awards are expensed over the number of months of
service required for the grant to become non-forfeitable. SARs
awards are expensed over the number of months of service
required for the grant to become non-forfeitable and are
adjusted every reporting period until settlement or expiration
occurs. The table below details the stock-based compensation
expenses we recognized in 2007 and 2006 relating to stock
options and SARs awards. |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options ($)
|
|
SARs ($)
|
|
Total ($)
|
|
James J. Unger
|
|
|
2007
|
|
|
|
|
|
|
|
54,547
|
|
|
|
54,547
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Cowan
|
|
|
2007
|
|
|
|
501,497
|
|
|
|
16,364
|
|
|
|
517,861
|
|
|
|
|
2006
|
|
|
|
1,105,710
|
|
|
|
|
|
|
|
1,105,710
|
|
William P. Benac
|
|
|
2007
|
|
|
|
353,074
|
|
|
|
16,364
|
|
|
|
369,438
|
|
|
|
|
2006
|
|
|
|
264,806
|
|
|
|
|
|
|
|
264,806
|
|
Alan C. Lullman
|
|
|
2007
|
|
|
|
86,261
|
|
|
|
16,364
|
|
|
|
102,625
|
|
|
|
|
2006
|
|
|
|
190,189
|
|
|
|
|
|
|
|
190,189
|
|
15
|
|
|
(4) |
|
See All Other Compensation Table below for amounts,
which include perquisites, tax reimbursements, our match on
executive contributions to our 401(k) plan and various other
compensation amounts. |
|
(5) |
|
Includes a bonus of $500,000 paid to Mr. Benac on
April 22, 2007 as a result of the completion of the initial
public offering in January 2006. See Employment
Agreements, William P. Benac, below for more information
about this bonus. |
|
(6) |
|
Mr. Lullmans pension benefits value decreased $9,000
during 2007. |
ALL OTHER
COMPENSATION TABLE
|
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|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites and
|
|
|
|
Dividends on
|
|
401(k)
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Tax
|
|
Restricted
|
|
Matching
|
|
Insurance
|
|
|
|
|
|
|
|
|
Personal
|
|
Reimbursements
|
|
Stock
|
|
Contributions
|
|
Premiums
|
|
|
|
|
Name
|
|
Year
|
|
Benefits ($)
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)
|
|
Other ($)
|
|
Total ($)
|
|
James J. Unger
|
|
|
2007
|
|
|
|
35,741
|
(2)
|
|
|
|
|
|
|
10,286
|
(3)
|
|
|
6,750
|
|
|
|
11,043
|
(4)
|
|
|
|
|
|
$
|
63,820
|
|
|
|
|
2006
|
|
|
|
35,097
|
(2)
|
|
|
|
|
|
|
22,286
|
(3)
|
|
|
6,600
|
|
|
|
10,745
|
(4)
|
|
|
|
|
|
$
|
74,728
|
|
James Cowan
|
|
|
2007
|
|
|
|
27,923
|
(5)
|
|
|
|
|
|
|
|
|
|
|
6,750
|
|
|
|
3,144
|
(6)
|
|
|
|
|
|
$
|
37,817
|
|
|
|
|
2006
|
|
|
|
23,988
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
|
|
3,144
|
(6)
|
|
|
|
|
|
$
|
27,132
|
|
William P. Benac
|
|
|
2007
|
|
|
|
|
|
|
|
23,323
|
(8)
|
|
|
|
|
|
|
6,750
|
|
|
|
3,322
|
(9)
|
|
|
31,620
|
(10)
|
|
$
|
65,015
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
23,274
|
(8)
|
|
|
|
|
|
|
5,975
|
|
|
|
3,689
|
(9)
|
|
|
31,553
|
(10)
|
|
$
|
64,491
|
|
Alan C. Lullman
|
|
|
2007
|
|
|
|
23,612
|
(11)
|
|
|
|
|
|
|
|
|
|
|
5,875
|
|
|
|
5,950
|
(4)
|
|
|
|
|
|
$
|
35,437
|
|
|
|
|
2006
|
|
|
|
24,638
|
(11)
|
|
|
|
|
|
|
|
|
|
|
5,156
|
|
|
|
5,203
|
(4)
|
|
|
|
|
|
$
|
34,997
|
|
|
|
|
(1) |
|
These amounts represent our matching contributions to each named
executive officers 401(k) plan account equal to 50% of his
deferrals up to a maximum of 6% of covered compensation. |
|
(2) |
|
Includes payments we made of behalf of Mr. Unger of $28,765
for car allowance (and related tax reimbursements) and $6,976
for country club dues in 2007 and $26,422 for car allowance and
$8,675 for country club dues in 2006. |
|
(3) |
|
Represents dividends earned on restricted stock that was granted
to Mr. Unger in connection with our initial public
offering. See further description of this grant in Grants
of Plan Based Awards Table. |
|
(4) |
|
These amounts represent the taxable income related to payment of
premiums for group term life insurance, personal liability
umbrella insurance and executive survivor insurance for the
benefit of the employees. |
|
(5) |
|
Includes payments we made of behalf of Mr. Cowan of $20,603
for car allowance (and related tax reimbursements) and $7,320
for country club dues in 2007 and $16,668 for car allowance and
$7,320 for country club dues in 2006. |
|
(6) |
|
These amounts represent the taxable income related to payment of
premiums for group term life insurance for the benefit of the
employee. |
|
(7) |
|
Mr. Cowan was not eligible for the Company 401(k) matching
contributions until January 1, 2007 (after completing one
full year of full time employment). |
|
(8) |
|
Represents a payment made to Mr. Benac for reimbursement of
taxes owed as a result of additional compensation for commuting
expenses to and from Dallas, Texas. |
|
(9) |
|
These amounts represent the taxable income related to payment of
premiums for group term life insurance and personal liability
umbrella insurance for the benefit of the employee. |
|
(10) |
|
Represents living and commuting expenses that were incurred as a
result of Mr. Benacs travel to and from Dallas, Texas
that were not deductible business expenses under federal tax law. |
|
(11) |
|
Includes payments we made of behalf of Mr. Lullman of
$22,092 for car allowance (and related tax reimbursements) and
$1,520 for athletic club dues in 2007 and $24,638 for car
allowance in 2006. |
We do not provide any termination plans or deferred compensation
plans for our named executive officers, nor do we provide for
discounted security purchases for any of our named executive
officers.
Employment Agreements. In order to attract and
retain qualified executives, we have entered into employment
agreements with our named executive officers as described below.
16
James J. Unger. In November 2005, we entered
into an employment agreement with Mr. Unger. The agreement,
which was effective on the closing of our initial public
offering on January 24, 2006, provides that Mr. Unger
shall serve as our President and Chief Executive Officer for an
initial one year term. Thereafter, the agreement may be
extended, at the discretion of our board of directors, for two
additional one year terms. Both additional one year extensions
were granted. Thus, the term of Mr. Ungers employment
agreement now extends until January 24, 2009.
Under the terms of the employment agreement, Mr. Unger
received a base salary of $350,000 in 2007. In addition,
Mr. Unger is eligible to receive an annual bonus, as
determined by our board of directors, in its sole discretion,
from year to year. The employment agreement also provides that
Mr. Unger is entitled to receive health care, vacation,
401(k) participation, transportation and other similar benefits
we offer our senior executives. If Mr. Unger is terminated
without cause (as defined in the agreement) or resigns for good
reason (as defined in the agreement), then we shall pay him, in
addition to any unpaid and earned base salary and bonus, the
base salary Mr. Unger would have earned through the end of
his term, as extended, if applicable, by our board of directors.
Effective January 1, 2008, the compensation committee
granted a 4% raise in the base salaries of all named executive
officers. Accordingly, Mr. Ungers current base salary
is $364,000.
Mr. Ungers employment agreement contains
non-competition, non-solicitation and confidentiality
provisions. The non-competition and non-solicitation provisions
prohibit Mr. Unger from directly or indirectly competing
with us, or soliciting our employees as long as he is our
employee and generally for a one-year period thereafter.
In connection with the employment agreement, we also entered
into a letter agreement with Mr. Unger that replaced any
option grants to Mr. Unger under his prior employment
agreement, as described above under CEO Restricted
Stock.
As described above under Stock Appreciation Rights,
we also granted Mr. Unger 50,000 SARs in April 2007. The
exercise price of each SAR is $29.49, the fair market value of
our Common Stock at the time of grant.
James Cowan. In December 2005, we entered into
an employment agreement with Mr. Cowan to serve as our
Chief Operating Officer through December 31, 2008, unless
earlier terminated pursuant to the agreement.
Under the terms of the agreement, Mr. Cowan is entitled to
receive a base salary at an annual rate of $300,000 per year.
Mr. Cowan is also entitled to an annual bonus for each
calendar year of employment ending on or after December 31,
2006 of up to 50% of his then applicable base salary, provided
certain performance targets established by our board of
directors are achieved. Effective January 1, 2008, the
compensation committee granted a 4% raise in the base salaries
of all named executive officers. Accordingly,
Mr. Cowans current base salary is $312,000.
In addition to the compensation described above and pursuant to
the terms of his employment agreement, on the pricing of our
initial public offering of Common Stock in January 2006, we
granted Mr. Cowan an option to purchase 249,160 shares
of Common Stock. The exercise price of the option is $21.00, the
fair market value of our Common Stock at the time of grant.
As described above under Stock Appreciation Rights,
we also granted Mr. Cowan 15,000 SARs in April 2007. The
exercise price of each SAR is $29.49, the fair market value of
our Common Stock at the time of grant.
Mr. Cowan is eligible to participate in all health care,
group term life insurance, group long-term disability insurance,
401 (k) participation, vacation and other similar benefits
we offer our senior executives. In addition, he will be
reimbursed for the reasonable use of an automobile and for the
payment of reasonable country club dues (excluding initiation
fees) on terms consistent with our other senior executives.
Mr. Cowan may terminate the agreement upon
30 days written notice. We may terminate
Mr. Cowans employment at any time, with or without
cause. If Mr. Cowans employment is terminated due to
death or disability, he is entitled to receive earned and
accrued base salary and unreimbursed business expenses due and
unpaid as of the date of his termination, bonus compensation
earned and due with respect to a completed calendar year but not
paid as of the date of termination, and a pro-rated portion of
his bonus compensation payable for any incomplete calendar year.
If Mr. Cowan is terminated without cause, he is entitled to
receive earned and accrued base salary and
17
unreimbursed business expenses due and unpaid as of the date of
his termination, bonus compensation earned and due with respect
to a completed calendar year but not paid as of the date of
termination, a pro-rated portion of his bonus compensation
payable for any incomplete calendar year and, in addition, a
continuation of the payment of the base salary he would have
earned through December 31, 2008 had he continued to be
employed by us through such date. If Mr. Cowan resigns or
if we terminate Mr. Cowan for cause, he is entitled to
receive earned and accrued base salary and unreimbursed business
expenses due and unpaid as of the date of his termination.
Mr. Cowans employment agreement contains
non-competition and non-solicitation provisions that prohibit
Mr. Cowan from directly or indirectly competing with us
during the term of his employment and generally for a one-year
period thereafter. Mr. Cowans employment agreement
also contains provisions requiring him to protect confidential
information during his employment and at all times thereafter.
William P. Benac. In July 2005, we entered
into an employment agreement with William P. Benac to serve as
our Chief Financial Officer for a period of one year. The
agreement was effective as of April 22, 2005, and
automatically renewed for successive one-year terms unless
terminated by either party at least 180 days before the
expiration of the then applicable term. With renewals, the
agreement was effective through April 22, 2008. On
October 23, 2007 we notified Mr. Benac that we were
not renewing his existing employment agreement beyond
April 22, 2008. The notification was given pursuant to the
notice provisions of the employment agreement. As of the date of
this filing, Mr. Benacs employment agreement is no
longer in effect and Mr. Benac continues to serve as our
Chief Financial Officer as an
employee-at-will.
Under the terms of Mr. Benacs agreement, he received
a minimum annual base salary of $250,000. Criteria for cash
bonuses that were awarded following 2005 were subject to
negotiation and were determined during the first quarter of each
calendar year the agreement was effective. The target bonus
amounts during each year were not less than $150,000. Effective
January 1, 2008, the compensation committee granted a 4%
raise in the base salaries of all named executive officers.
Accordingly, Mr. Benacs current base salary is
$260,000.
In addition to the salary and bonus compensation described
above, Mr. Benac received a one-time special cash bonus of
$500,000 on April 22, 2007, because we issued Common Stock
to the public in an offering registered with the SEC. In
addition, under the terms of his employment agreement, if we
terminated Mr. Benacs employment other than for
cause, death or disability, or if he terminated his employment
for good reason, he would have been entitled to receive a lump
sum severance payment of $200,000. Mr. Benacs right
to any severance would have immediately terminated if his
employment was terminated for cause or he resigned without good
reason.
Under the terms of his employment agreement, Mr. Benac was
entitled to be reimbursed for reasonable and necessary business
related expenses, including those expenses associated with
commuting from Dallas to our headquarters in St. Charles,
Missouri, such as air and car travel and reasonable living
expenses. He was eligible to participate in all health care,
group term life insurance, group long-term disability insurance,
401(k) participation , vacation and other similar employee
benefits we offer our senior executives. Mr. Benacs
employment agreement also contained provisions requiring him to
protect our confidential information during his employment and
at all times thereafter.
Under the terms of his employment agreement, Mr. Benac
could have terminated his employment for good reason upon at
least 30 days prior written notice to us, or without
good reason upon at least 60 days prior written
notice to us. We could have terminated Mr. Benacs
employment without cause upon 30 days prior written
notice or immediately for cause or upon his death or disability.
In addition to the compensation described above, in April 2006,
we granted Mr. Benac an option to purchase
75,000 shares of Common Stock. The exercise price of the
option is $35.69, the fair market value of our Common Stock at
the time of grant.
The agreement that describes the terms and conditions of the
option to purchase 75,000 shares of our Common Stock
contains non-competition and non-solicitation provisions that
prohibit Mr. Benac from directly or indirectly competing
with us during the term of his employment and generally for a
one-year period thereafter.
As described above under Stock Appreciation Rights,
we also granted Mr. Benac 15,000 SARs in April 2007. The
exercise price of each SAR is $29.49, the fair market value of
our Common Stock at the time of grant.
18
Alan C. Lullman. In March 2007, we entered
into an employment agreement with Mr. Lullman to serve as
Senior Vice President, Sales, Marketing & Services.
The term of Mr. Lullmans employment agreement began
on January 1, 2007 and will continue through
December 31, 2009, unless earlier terminated pursuant to
the agreement. Under the terms of the agreement,
Mr. Lullman receives a base salary at an annual rate of
$250,000 per year. Mr. Lullman is also entitled to an
annual bonus for each calendar year of employment ending on or
after December 31, 2007 of up to 50% of his then applicable
base salary, provided certain objective performance targets
established by our board of directors are achieved. Effective
January 1, 2008, the compensation committee granted a 4%
raise in the base salaries of all named executive officers.
Accordingly, Mr. Lullmans current base salary is
$260,000.
Mr. Lullman is entitled to receive health care, group term
life insurance, group long-term disability insurance, 401(k)
participation, vacation, and other similar employee benefits we
generally provide to our senior executives. In addition, he will
be reimbursed for the reasonable use of an automobile and for
the payment of reasonable athletic club dues (excluding
initiation fees) on terms consistent with other senior employees.
The agreement shall terminate and Mr. Lullmans
employment shall end upon his death or disability, if we
discharge Mr. Lullman with or without cause, or if
Mr. Lullman resigns for good reason. We may discharge
Mr. Lullman at any time with or without cause. If
Mr. Lullmans employment is terminated due to death or
disability, he is entitled to receive earned and accrued base
salary and unreimbursed business expenses due and unpaid as of
the date of his termination, bonus compensation earned and due
with respect to a completed calendar year but not paid as of the
date of termination, and a pro-rated portion of his bonus
compensation payable for any incomplete calendar year.
If Mr. Lullman is terminated without cause or if he
terminates the agreement for good reason, he is entitled to
receive (i) earned and accrued base salary and unreimbursed
business expenses due and unpaid as of the date of his
termination, (ii) bonus compensation earned and due with
respect to a completed calendar year but not paid as of the date
of termination, (iii) a pro-rated portion of his bonus
compensation payable for any incomplete calendar year and
(iv) a continuation of the payment of the base salary he
would have earned through December 31, 2009 had he
continued to be employed by us through such date. We are
entitled to an offset of the continuation payments under
clause (iv) above on account of any remuneration or other
benefit attributable to any subsequent employment that
Mr. Lullman may obtain.
Mr. Lullmans employment agreement contains
non-competition and non-solicitation provisions that prohibit
Mr. Lullman from directly or indirectly competing with us
during the term of Mr. Lullmans employment and
generally for a one-year period thereafter.
Mr. Lullmans employment agreement also contains
provisions requiring Mr. Lullman to protect confidential
information during Mr. Lullmans employment and at all
times thereafter.
In addition to the compensation described above, on the pricing
of our initial public offering of Common Stock in January 2006,
we granted Mr. Lullman an option to purchase
42,857 shares of Common Stock. The exercise price of the
option is $21.00, the fair market value of our Common Stock at
the time of grant.
As described above under Stock Appreciation Rights,
we also granted Mr. Lullman 15,000 SARs in April 2007. The
exercise price of each SAR is $29.49, the fair market value of
our Common Stock at the time of grant.
19
2007
GRANTS OF PLAN-BASED AWARDS TABLE
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Exercise or
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All Other
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Base
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Fair
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Option
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Price of
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Value of
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Awards:
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Option or
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Equity
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Grant
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Number of
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Other
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Based Units,
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Dates of
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Securities
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Stock
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Stock
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Equity-
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Underlying
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Based
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and Option
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Based
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Options
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Awards
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Awards
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Name
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Awards
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Estimated Future Payouts Under Non-Equity Incentive Plan
Awards
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(#)(1)
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($/Sh)
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($)(1)
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Threshold ($)
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Target ($)
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Maximum ($)
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James J. Unger
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4/4/2007
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50,000
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$
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29.49
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$
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151,125
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James J. Unger
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210,000
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(2)
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James Cowan
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4/4/2007
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15,000
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$
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29.49
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$
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45,338
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James Cowan
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150,000
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(2)
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William P. Benac
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4/4/2007
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15,000
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$
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29.49
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$
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45,338
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William P. Benac
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150,000
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(2)
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Alan C. Lullman
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4/4/2007
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15,000
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$
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29.49
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$
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45,338
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Alan C. Lullman
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125,000
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(2)
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(1) |
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The SARs granted to Messrs. Unger, Cowan, Benac and Lullman
were approved by our compensation committee on April 4,
2007 and were granted effective on the same day. SARs granted to
Messrs. Unger, Cowan, Benac and Lullman become exercisable
in four equal annual installments on April 4, 2008,
April 4, 2009, April 4, 2010 and April 4, 2011.
The last column on the right represents the aggregate FAS 123(R)
values of SARs granted in 2007. The per-SAR FAS 123(R)
value was $3.02 (as of December 31, 2007) for each
right issued to Messrs. Unger, Cowan, Benac and Lullman.
The assumptions used to calculate the value of option awards are
set forth under Note 17 Stock Based
Compensation to our consolidated financial statements included
in the Annual Report of
Form 10-K
for the fiscal year ended December 31, 2007. The FAS 123(R)
value for SARs is expensed over the number of months of service
required for the grant to become non-forfeitable. Amounts shown
do not reflect compensation actually received by the named
executive officers nor does it necessarily reflect the actual
value that will be recognized by the named executive officers.
Instead, the amounts shown are the stock based compensation
expense of SARs granted to the named executive officers as
determined pursuant to FAS 123(R). |
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(2) |
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Amounts shown reflect target bonus amounts for performance in
2007. Actual bonus payments amounted to 97.5% of each named
executive officers target. Thus, bonuses paid in March
2008 for 2007 performance amounted to $204,750 for
Mr. Unger, $146,250 for Messrs. Cowan and Benac and
$121,875 for Mr. Lullman. Bonus targets were determined
based upon a percentage of base salary as in effect on December
31 of the year before payment is made. The target bonuses did
not have threshold or maximum amounts. These bonuses were based
on a combination of an EBITDA based financial target for the
year before payment is made and a variety of other qualitative
and quantitative criteria relating to the year before payment is
made, including financial, strategic, corporate, divisional and
individual goals. |
On April 4, 2007, we granted a total of 273,800 SARs under
our 2005 Equity Incentive Plan, including 50,000 SARs to
Mr. Unger and 15,000 SARs each to Messrs. Cowan, Benac
and Lullman, as shown above in the All Other Option
Awards column. The SARs settle in cash and have an
exercise price of $29.49, which was the closing price of our
Common Stock on the date of grant. The SARs vest in four equal
annual installments on April 4, 2008, April 4, 2009,
April 4, 2010 and April 4, 2011 and have a seven year
term. The SARs are subject to the terms and conditions of our
2005 Equity Incentive Plan, as amended, and SAR agreements,
which contain non-solicitation, non-competition and
confidentiality provisions.
Our compensation committee chose to grant SARs to these officers
to align their interests with those of our stockholders and give
them a vested interest in the long term success of the company.
No other timing constraints were used or applied when issuing
stock-based compensation.
20
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR ENDED DECEMBER 31, 2007
TABLE
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Option Awards
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Number of
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Number of
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Securities
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Securities
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Underlying
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Underlying
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Unexercised Options
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Unexercised Options
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Option
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(#)
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(#)
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Exercise Price
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Option
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Name
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Exercisable
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Unexercisable
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($)
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Expiration Date
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James J. Unger
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50,000
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(1)(2)
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$
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29.49
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4/4/2014
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James Cowan
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53,053
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181,107
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(3)(4)
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$
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21.00
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1/19/2011
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15,000
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(2)(5)
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$
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29.49
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4/4/2014
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William P. Benac
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90,000
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(6)(7)
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$
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35.69
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4/3/2011
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15,000
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(2)(5)
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$
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29.49
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4/4/2014
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Alan C. Lullman
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4,761
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43,572
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(4)(8)
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$
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21.00
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1/19/2011
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15,000
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(2)(5)
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$
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29.49
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4/4/2014
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(1) |
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12,500 of these SARs became exercisable on April 4, 2008. |
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(2) |
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SARs granted on April 4, 2007 vest and become exercisable
in equal installments on the first, second, third and fourth
anniversary of their grant, and expire on the date shown above,
which is the seventh anniversary of their grant. |
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(3) |
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83,053 of these options became exercisable on January 19,
2008. |
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(4) |
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Options granted on January 19, 2006 vest and become
exercisable in equal installments (subject to rounding) on the
first, second and third anniversary of their grant, and expire
on the date shown above, which is the fifth anniversary of their
grant. |
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(5) |
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3,750 of these SARs became exercisable on April 4, 2008. |
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(6) |
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Options granted on April 3, 2006 vest and become
exercisable in equal installments (subject to rounding) on the
second, third and fourth anniversary of their grant, and expire
on the date shown above, which is the fifth anniversary of their
grant. |
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(7) |
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24,999 of these options became exercisable on April 3, 2008. |
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(8) |
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14,286 of these options became exercisable on January 19,
2008. |
2007
OPTION EXERCISES AND STOCK VESTED TABLE
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Option Awards
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Stock Awards
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Number of Shares
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Value Realized
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Number of Shares
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Value Realized
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Acquired on Exercise
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Upon Exercise
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Acquired on Vesting
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on Vesting
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Name
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(#)
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($)
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(#)
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($)
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James J. Unger
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171,428
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(1)
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3,599,988
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(1)
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James Cowan
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30,000
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(2)
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535,397
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William P. Benac
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Alan C. Lullman
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9,524
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(2)
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82,002
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(1) |
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These 171,428 and 114,286 shares were issued in connection
with our initial public offering and valued at our initial
public offering price of $21.00 per share. |
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(2) |
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These options were granted in connection with our initial public
offering at an exercise price of $21.00 per share. |
21
2007
PENSION AND POSTRETIREMENT BENEFITS TABLE
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Number of Years
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Present Value of
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Payments During
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Credited Service
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Accumulated Benefit
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Last Fiscal Year
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Name
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Plan Name
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(#)
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($)
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($)
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James J. Unger
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Supplemental Executive Retirement Plan
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26
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1,059,000
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Postretirement Health and Life Insurance Benefits
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67,000
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Pension Plan(1)
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26
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988,000
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Executive Survivor Insurance Plan(2)
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Alan C. Lullman
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Pension Plan(1)
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24
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311,000
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Executive Survivor Insurance Plan(2)
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(1) |
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Messrs. Unger and Lullman are eligible for benefits under a
pension plan, the benefits of which are to be funded by ACF
Industries LLC as described below. |
|
(2) |
|
The Executive Survivor Insurance Plan requires one year of
continuous service prior to March 31, 2004 and pays certain
benefits upon death of an active or retired participant. |
Pension Plan. Funding of the benefits for the
pension plan described here is the responsibility of ACF
Industries LLC. Mr. Unger and Mr. Lullman are entitled
to pension benefits under the Employees Retirement Plan of
ACF Industries LLC. Each executives benefit under the
retirement plan is based on 2.25% of average annual compensation
for each year of service after April 30, 1981; plus the
highest of the executives annual compensation for five
consecutive years of employment prior to May 1, 1981 that
results in the highest such average multiplied by number of
years of service completed prior to May 1, 1981; plus a
fixed dollar amount. This fixed dollar amount is $12,800 for
Mr. Unger and $6,108 for Mr. Lullman. For purposes of
this plan, years of service include years of service with both
ACF and us. This total is then reduced by an amount equal to
0.5% of the executives covered compensation multiplied by
the number of years of service up to 35. The benefits under this
plan were frozen effective as of March 31, 2004. As a
result, no additional benefits are accruing under this plan. The
benefits under the ACF retirement plan are generally paid
monthly for the life of the executive, following retirement in
the form of a joint and survivor annuity. As most recently
determined by the actuaries for the retirement plan, based on
current years of service with us and ACF, the estimated annual
pension in the form of a joint and survivor annuity commencing
at age 65 for each of the named executives is as follows:
Mr. Unger: $91,610 and Mr. Lullman: $45,361. These
named executives are fully vested in their retirement plan
benefits.
We entered into an agreement, effective December 1, 2005,
with ACF for allocating the assets and liabilities of the
pension benefit plans retained by ACF in the 1994 ACF asset
transfer (as defined below under Supplemental Executive
Retirement Plan) in which some of our employees were
participants, which relieved us of our further employee benefit
reimbursement obligations to ACF under the 1994 ACF asset
transfer agreement. The principal employee benefit plans
affected by this arrangement are two ACF sponsored pension
plans, known as the ACF Employee Retirement Plan and the ACF
Shippers Car Line Pension Plan, and certain ACF sponsored
retiree medical and retiree life insurance plans. Under the
arrangement, in exchange for our payment to ACF of approximately
$9.2 million and us becoming the sponsoring employer under
the ACF Shippers Car Line Pension Plan, including the assumption
of all obligations for our and ACFs employees under that
plan, we ceased to be a participating employer under the ACF
Employee Retirement Plan and were relieved of all further
reimbursement and funding obligations, including for our
employees, under that plan. The payment of approximately
$9.2 million, which was made by us to ACF, represents our
and ACFs estimate of the payment required to be made by us
to achieve an appropriate allocation of the assets and
liabilities of the benefit plans accrued after the 1994 ACF
asset transfer, with respect to each of our and ACFs
employees in connection with the two plans. This allocation was
determined in accordance with the actuarial calculations that
would be required to be used by us and ACF in allocating plan
assets and liabilities at such time as we cease to be a member
of ACFs controlled group.
22
Executive Survivor Insurance Plan. We provide
an executive survivor insurance plan for certain of our named
executive officers who had one year of continuous service prior
to March 31, 2004. This plan provides life insurance
benefits to the qualified spouse of a named executive officer
upon his death during his employment or following retirement at
or after age 55. We have purchased a group term life
insurance policy to off-set the cost of providing this benefit.
Benefits payable under this plan are separate from any benefit
payable under our retirement plans. If the named executive
officer retires and dies after attaining age 55, then his
qualified spouse is entitled to a monthly benefit equal to what
would have been payable under our retirement plan if the named
executive officer had retired with a 50% joint and survivor
benefit. If the named executive officer dies while actively
employed and before attaining age 55, then his qualified
spouse is entitled to a monthly benefit equal to 20% of the
named executive officers salary, reduced by any amount
payable under the survivor provisions of our retirement plan. If
the named executive officer dies while actively employed and on
or after attaining age 55, then his qualified spouse is
entitled to a benefit equal to the greater of (a) the
benefit described in the preceding sentence (for death while
employed and not yet age 55) and (b) the amount
determined as if the named executive officer had retired on the
first day of the month coincident with or next following the
date of death. In no event may the amounts paid under this plan
exceed $6,500 per month. We have reserved the right to amend,
modify or terminate this plan.
Postretirement Obligations. We also provide
postretirement health and life insurance benefits for certain of
our named executive officers who had one year of continuous
service prior to March 31, 2004. Our named executive
officers may become eligible for these benefits if they retire
after attaining age 55 with 10 years of service.
Benefits received under this plan include health coverage and
life insurance coverage. We have reserved the right to amend,
modify or terminate this plan.
2007
NON-QUALIFIED DEFERRED COMPENSATION TABLE
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|
|
|
|
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|
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|
|
Executive
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|
Registrant
|
|
|
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Aggregate/
|
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Aggregate
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|
|
Contributions in
|
|
Contributions in
|
|
Aggregate Earnings
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|
Withdrawals/
|
|
Balance
|
|
|
Last FY
|
|
Last FY
|
|
in Last FY
|
|
Distributions
|
|
in Last FY
|
Name
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)(1)
|
|
James J. Unger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,059,000
|
|
|
|
|
(1) |
|
Represents the present value of the accrued benefit as of
December 31, 2007. |
Supplemental Executive Retirement
Plan. Mr. Unger is entitled to benefits from
a supplemental executive retirement plan, or SERP. The SERP
benefit is generally equal to the benefit that would be provided
under the Employees Retirement Plan of ACF, if certain
Internal Revenue Code limits and exclusions from compensation
under the retirement plan did not apply, less the actual benefit
payable under the ACF retirement plan. ACF is responsible for
payment of that portion of Mr. Ungers SERP benefit
related to service with ACF prior to our acquisition, in 1994,
of properties and assets used in ACFs railcar components
manufacturing business and its railcar servicing business at
specified locations, and certain intellectual property rights
associated with the transferred assets and businesses, as well
as specified assets used in the manufacture and sale of
industrial size mixing bowls (the 1994 ACF asset
transfer). We are responsible for payment of that portion
of the benefit related to service with us after the 1994 ACF
asset transfer. The SERP benefits were frozen effective as of
March 31, 2004. As a result, no further benefits are
accruing under the SERP. These benefits are generally paid at
the same time and in the same form as the participants
benefit under the retirement plan.
23
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
We describe the triggering events that may result in payments of
compensation and other benefits to each of our named executive
officers upon termination or upon a change in control under
Employment Agreements above. The table below
quantifies the payments, other than accrued liabilities and
benefits described above, that would have been payable to our
named executive officers if they had been terminated on
December 31, 2007.
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|
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Termination
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Executive
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Payment (1)
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James J. Unger
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$
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23,014
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(2)
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James Cowan
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$
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300,000
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(3)
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Williams P. Benac
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$
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200,000
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(4)
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Alan C. Lullman
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$
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500,000
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(5)
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|
|
|
(1) |
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Upon a termination that would give rise to termination payments
as described in the footnotes below, the executives would also
be entitled to receive bonuses, if any, that are then earned and
unpaid. For 2007, we awarded bonuses under our target bonus plan
of $204,750, $146,250, $146,250, $121,875 to each of
Messrs. Unger, Cowan, Benac and Lullman, respectively.
These bonuses were determined by our compensation committee in
February 2008. The compensation committee retains sole
discretion over all matters relating to such bonus payments,
including, without limitation, the decision to pay any bonuses,
the amount of each bonus, if any, the ability to increase or
decrease any bonus payment and make changes to any performance
measures or targets, and discretion over the payment of partial
awards in the event of employment termination. |
|
(2) |
|
This amount represents a continuation of base salary of $23,014
through the end of Mr. Ungers then-applicable
employment term (January 24, 2008), pursuant to the terms
of his employment agreement, payable upon termination without
cause or resignation for good reason, as
each such term is defined in Mr. Ungers employment
agreement. On January 22, 2008, our compensation committee
extended the term of Mr. Ungers employment agreement
for another year, through January 24, 2009. |
|
(3) |
|
This amount includes a continuation of base salary of $300,000
per year through the end of Mr. Cowans employment
term (December 31, 2008), payable upon termination without
cause, as such term is defined in
Mr. Cowans employment agreement. |
|
(4) |
|
This amount includes a severance payment of $200,000 payable
upon termination other than for cause, death or
disability, or for good reason, as each such term is
defined in Mr. Benacs employment agreement. |
|
(5) |
|
This amount includes a continuation of base salary of $250,000
per year through the end of Mr. Lullmans employment
term (December 31, 2009), payable upon termination without
cause, as such term is defined in
Mr. Lullmans employment agreement. |
DIRECTOR
COMPENSATION TABLE
Each director is entitled to reimbursement for out-of-pocket
expenses incurred for each meeting of the full board or a
committee of the board attended. The annual compensation for our
independent directors is $30,000. In addition, each independent
director is entitled to receive $1,000 for each board or
committee meeting attended and an annual stipend of $5,000 if he
is a chairperson of a committee. Non-independent members of our
board of directors and directors affiliated with Mr. Carl
Icahn are not paid any compensation for serving on our board of
directors. The following table discloses the fees earned by or
paid to our directors in 2007.
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Fees earned or paid in cash
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|
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Total
|
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Name
|
|
($)
|
|
|
($)
|
|
|
Harold First
|
|
$
|
52,000
|
|
|
$
|
52,000
|
|
James C. Pontious
|
|
$
|
47,000
|
|
|
$
|
47,000
|
|
James M. Laisure
|
|
$
|
48,000
|
|
|
$
|
48,000
|
|
24
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
The following table discloses the securities authorized for
issuance under the Companys equity compensation plans as
of December 31, 2007.
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|
|
|
|
|
|
|
|
Number of Securities
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|
|
|
|
|
|
|
|
|
Remaining available
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
|
for Future Issuance
|
|
|
|
to be Issued
|
|
|
Exercise Price of
|
|
|
under Equity
|
|
|
|
upon Exercise of
|
|
|
Outstanding
|
|
|
Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
(Excluding Securities
|
|
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
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|
|
465,353
|
|
|
$
|
23.37
|
|
|
|
440,124
|
|
Equity compensation plans not approved by security holders
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|
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|
|
|
|
|
|
|
|
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Total
|
|
|
465,353
|
|
|
$
|
23.37
|
|
|
|
440,124
|
(1)
|
|
|
|
(1) |
|
As of April 18, 2008, 440,124 shares of our Common
Stock remain available for issuance under our 2005 Equity
Incentive Plan, as amended. |
TRANSACTIONS
WITH RELATED PERSONS
Other than the transactions described below, for the last fiscal
year there has not been, nor is there currently proposed, any
transaction, as defined by the SEC:
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|
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to which we are or will be a participant
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|
|
|
in which the amount involved exceeded or will exceed
$120,000; and
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|
|
in which any related person, as defined by the SEC,
had or will have a direct or indirect material interest.
|
We believe that each of the transactions described below is on
terms no less favorable to us than could have been obtained from
unaffiliated third parties. Although we do not have a separate
conflicts policy, we intend to comply with Delaware law with
respect to transactions involving potential conflicts. Delaware
law requires that all transactions between us and any director
or executive officer are subject to full disclosure and approval
of the majority of the disinterested members of our board of
directors, approval of the majority of our stockholders or the
determination that the contract or transaction is intrinsically
fair to us.
TRANSACTIONS
WITH MR. CARL ICAHN AND ENTITIES AFFILIATED WITH
MR. CARL ICAHN
Overview
Our company was formed in 1988 as a company beneficially owned
by Mr. Carl Icahn. Mr. Carl Icahn is our principal
beneficial stockholder and is the chairman of our board of
directors. We grew our company through the transfer of certain
assets to us from ACF Industries, Incorporated (now known as ACF
Industries, LLC), a company also beneficially owned by
Mr. Carl Icahn. Since our formation, we have entered into
agreements relating to the acquisition of assets from and
disposition of assets to entities controlled by Mr. Carl
Icahn, the provision of goods and services to us by entities
controlled by Mr. Carl Icahn, the provision of goods and
services by us to entities affiliated with Mr. Carl Icahn
and other matters involving entities controlled by Mr. Carl
Icahn. We have received substantial benefit from these
agreements and we expect that in the future we will continue to
conduct business with entities affiliated with or controlled by
Mr. Carl Icahn. In addition, we receive other benefits from
our affiliation with Mr. Carl Icahn and companies
controlled by Mr. Carl Icahn, such as our participation in
buying groups and other arrangements with entities controlled by
Mr. Carl Icahn.
We describe below the material arrangements and other
relationships that we are, or have been, a party to with
Mr. Carl Icahn and entities affiliated with Mr. Carl
Icahn since January 1, 2007. All of the arrangements and
relationships described below that are required to be disclosed
pursuant to Item 404 of
Regulation S-K
and that took
25
effect since our January 2006 initial public offering and our
admission to Nasdaq have been approved by the independent
members of our audit committee, in accordance with applicable
listing standards of Nasdaq and our audit committee charter.
TRANSACTIONS
WITH ACF INDUSTRIES LLC AND AMERICAN RAILCAR LEASING
LLC
Overview
We have entered into a variety of agreements and transactions
with ACF Industries LLC (which we refer to, along with its
predecessor, ACF Industries, Inc., as ACF), American
Railcar Leasing LLC (ARL), and certain other parties
related to these companies. These transactions and agreements
are described in further detail below. During the periods
discussed, ACF and ARL were beneficially owned and controlled by
Mr. Carl Icahn, and they continue to be so owned and
controlled.
Manufacturing operations. We sell railcars and
railcar components to ARL and we sell railcar components to ACF.
In 2007, our revenues from manufacturing operations included
$140.2 million from transactions with affiliates. The
majority of these revenues were attributable to railcars and
railcar components that we sold to ARL. As of December 31,
2007, our backlog included $259.3 million in railcar orders
by ARL. These orders are on substantially the same terms as we
provide to our other customers. ACF has also been a significant
supplier of components for our business. Components supplied to
us by ACF include tank railcar heads, wheel sets and various
structural components. In the year ended December 31, 2007,
we purchased inventory of $46.9 million from ACF.
In January 2005, we acquired Castings LLC
(Castings), the joint venture partner in Ohio
Castings Company, LLC (Ohio Castings) from ACF
Industries Holding Corp., an indirect parent of ACF that is
beneficially owned and controlled by Mr. Carl Icahn. Our
cost of railcar manufacturing for the year ended
December 31, 2007 included $41.2 million in products
produced by Ohio Castings. Inventory at December 31, 2007
included approximately $3.7 million of purchases from Ohio
Castings. Approximately $0.5 million of costs were
eliminated at December 31, 2007 as it represented profit
from a related party for inventory still on hand.
Railcar services. In the year ended
December 31, 2007, our revenues from railcar repair and
refurbishment and fleet management services included
$16.0 million from transactions with ARL.
Amounts due from and to affiliates. As of
December 31, 2007, amounts due from affiliates were
$17.2 million. As of December 31, 2007, amounts due to
affiliates were $2.9 million.
CERTAIN
TRANSACTIONS INVOLVING ACF INDUSTRIES LLC
1994 ACF
Asset Transfer
On October 1, 1994, under an asset transfer agreement with
ACF, we acquired properties and assets used in ACFs
railcar components manufacturing business and its railcar
servicing business at specified locations, and certain
intellectual property rights associated with the transferred
assets and businesses, as well as specified assets used in the
manufacture and sale of industrial size mixing bowls. We refer
to this transaction as the 1994 ACF asset transfer.
Pursuant to the 1994 ACF asset transfer, ACF retained and agreed
to indemnify us for certain liabilities and obligations relating
to ACFs conduct of business and ownership of the assets at
these locations prior to their transfer to us, including
liabilities relating to employee benefit plans, subject to
exceptions for transferred employees described below, workers
compensation, environmental contamination and third-party
litigation. As part of the 1994 ACF asset transfer, we agreed
that the ACF employees transferred to us would continue to be
permitted to participate in ACFs employee benefit plans
for so long as we remained a part of ACFs controlled
group, and we further agreed to assume the ongoing expense for
such employees continued participation in those plans. In
the event that we cease to be a member of ACFs controlled
group, ACF was required to terminate the further accrual of
benefits by our transferred employees under its benefit plans,
and we and ACF were required to cooperate to achieve
26
an allocation of the assets and liabilities of the benefits
plans accrued after the 1994 ACF asset transfer with respect to
each of our and ACFs employees as we and ACF deemed
appropriate. In anticipation of our no longer being a part of
ACFs controlled group and the completion of our initial
public offering, we entered into a retirement benefit separation
agreement, effective December 1, 2005, with ACF for
allocating the assets and liabilities of the pension benefit
plans retained by ACF in the 1994 ACF asset transfer in which
some of our employees were participants, and which has relieved
us of our further employee benefit reimbursement obligations to
ACF under the 1994 ACF asset transfer agreement. See
Note 19 Related Party Transactions to our
consolidated financial statements included in our Annual Report
on
Form 10-K
for the fiscal year ended December 31, 2007.
Also in connection with the 1994 ACF asset transfer, we entered
into several administrative and operating agreements with ACF,
effective as of October 1, 1994. Those that remained in
effect as of January 1, 2007, are described below. During
2007, we incurred $51.0 million of expenses related to
transactions with ACF.
Manufacturing Services Agreement. Under the
manufacturing services agreement, ACF has agreed to manufacture
and, upon our instruction, distribute various railcar components
and industrial size mixing bowls using assets that we acquired
pursuant to the 1994 ACF asset transfer but were retained by ACF
at its Milton, Pennsylvania and Huntington, West Virginia
manufacturing facilities. This equipment included presses and
related equipment that were impracticable to move to our
premises. ACF transferred its Milton, Pennsylvania repair
facility, but not its Milton, Pennsylvania manufacturing
facility, to us under the 1994 ACF asset transfer. Under our
manufacturing services agreement, ACF is required to maintain
and insure the equipment during the term of the manufacturing
services agreement and is permitted to use the equipment for its
own purposes in the ordinary course of business, provided that
it does not interfere with ACFs timely performance of the
manufacturing services under this agreement. Upon termination of
the agreement, ACF is required, at our expense, to remove and
deliver the equipment to any site designated by us in the
continental U.S. As payment for these services, we agreed
to pay ACF its direct costs, including the cost of all raw
materials not supplied by us, and a reasonable allocation of
overhead expenses attributable to the services, including the
cost of maintaining employees to provide the services. We
believe that payments to ACF under this arrangement are
comparable to the cost we would have paid to an independent
third party to manufacture such components. This agreement
automatically renews on an annual basis unless we provide six
months prior written notice of termination. There is no right of
termination for ACF under this agreement. In the year ended
December 31, 2007, we purchased $46.9 million of
railcar components from ACF under this agreement.
License Agreement from ACF. Under a license
agreement with ACF, ACF granted us a non-exclusive, perpetual,
royalty-free license to the patents and other intellectual
property owned by it, which could be used by us in the conduct
of our business, but did not exclusively relate to our business,
including the 12 patents and one patent application, now issued
as a patent, listed in that agreement. Of these patents, ten
patents have expired and the remaining three patents have
expiration dates ranging from 2012 to 2013. These remaining
patents primarily relate to pneumatic outlets and railcar hopper
gaskets. Under this agreement, we could not use the licensed
patents for the production of railcar components for third
parties without the consent of ACF. In 1997, ACF transferred the
patents covered by this license to us. This license is not
assignable by either party, without the prior consent of the
other, except in connection with the sale of substantially all
of either partys business.
License Agreement to ACF. Under a license
agreement with ACF, we granted ACF a non-exclusive, perpetual,
royalty-free license to the intellectual property exclusively
relating to our business that was transferred to us in the 1994
ACF asset transfer. There are no restrictions on ACFs use
of the information licensed under this agreement. This license
is not assignable by either party, without the prior consent of
the other, except in connection with the sale of substantially
all of either partys business.
Raw
Material and Other Product Purchase Agreements
We have entered into various agreements for the purchase of
products, including steel and gas. Under these agreements, we
are entitled to favorable pricing based upon the aggregate
amount of our purchases, of which certain pricing benefits are
also extended to ACF.
27
Inventory
Storage Agreements
In 2006, we entered into two inventory storage agreements with
ACF to store designated inventory that we had purchased under
our manufacturing services agreement with ACF, described above,
at ACFs Huntington facility. Under these agreements, ACF
holds the inventory at its facility in segregated locations
until such time that the inventory is shipped to us.
Wheel Set
Component And Finished Wheel Set Storage Agreement
In 2006, we entered into a wheel set component and finished
wheel set storage agreement with ACF. This agreement provides
that we would procure, purchase and own the raw material
components for wheel sets that are used by ACF to assemble wheel
sets for us under our manufacturing services agreement with ACF,
described above. Under the wheel set component and finished
wheel set storage agreement, we continue to pay ACF for its
services under the manufacturing services agreement,
specifically labor and overhead, in assembling the wheel sets.
ACF
Manufacturing Agreement
In May 2007, we entered into a manufacturing agreement with ACF,
pursuant to which we agreed to purchase certain of our
requirements for tank railcars from ACF. Under the terms of the
manufacturing agreement, we have agreed to purchase at least
1,400 tank railcars from ACF with delivery expected to be
completed by March 31, 2009. The profit realized by us upon
sale of the tank railcars to our customers was first paid to ACF
to reimburse it for the
start-up
costs involved in implementing the manufacturing arrangements
evidenced by the agreement, and thereafter, we have and will
continue to pay ACF half the profits realized. The term of the
agreement is for five years. Either party may terminate the
agreement before its fifth anniversary upon six months prior
written notice, with certain exceptions. The agreement may also
be terminated immediately upon the happening of certain
extraordinary events. In the year ended December 31, 2007,
we incurred costs under this agreement of $4.1 million in
connection with railcars that were manufactured and delivered to
our customers during that period. We recognized revenue of
$17.3 million related to railcars shipped to unaffiliated
third parties under this agreement in 2007.
CERTAIN
TRANSACTIONS INVOLVING AMERICAN RAILCAR LEASING LLC
Manufacturing
Operations and Railcar Services
ARL is a railcar leasing company controlled by Mr. Carl
Icahn, our principal beneficial stockholder and the chairman of
our board of directors. We sell railcars and railcar components
to ARL and its subsidiaries. We believe that since ARLs
formation in 2004, we have been the only supplier of railcars to
ARL, although ARL is not precluded from purchasing railcars from
others. In 2007, our revenues from manufacturing operations
included $140.2 million from transactions with ARL. As of
December 31, 2007, our backlog included $259.3 million
in railcar orders by ARL. These orders are on substantially the
same terms as we provide to our other customers. We have entered
into various agreements with ARL from time to time, including
the following agreements that were effective during 2007.
ARL Sales Contracts. We have in the past
manufactured and sold railcars to ARL on a purchase order basis.
In March 2006, we entered into an agreement with ARL for us to
manufacture and ARL to purchase 1,000 railcars in 2007. The
agreement also included additional purchase options. In 2006,
ARL exercised an option to purchase 1,400 railcars in 2008. In
2007, ARL exercised another option to purchase an additional 71
railcars in 2007.
In September 2006, we entered into an agreement with ARL for us
to manufacture and ARL to purchase 500 railcars in both 2008 and
2009.
ARL Fleet Services Agreement. In April 2005,
we entered into a railcar servicing agreement with ARL. Under
this agreement, we provided ARL with railcar repair and
maintenance services, fleet management services, and consulting
services on safety and environmental matters for railcars owned
or managed by ARL and leased or held for lease by ARL. Under the
agreement with ARL, ARL was required to pay us a monthly fee,
based upon the number of railcars covered, plus a charge for
labor, components and materials. For materials and components we
28
manufactured, ARL paid us our current market price, and for
materials and components we purchased, ARL paid us our
purchasing costs plus 15%. For painting, lining and cleaning
services, ARL paid the then current market rate. For other labor
costs, ARL paid us a fixed hourly fee. We had agreed that the
charges for our services were to be on at least as favorable
terms as our terms with any other party for similar purposes.
This agreement extended through June 30, 2008, and was
automatically renewable for additional one year periods unless
either party gave at least six months prior notice of
termination or otherwise upon mutual agreement by the parties.
Under the terms of the railcar servicing agreement, if we
elected to terminate the agreement, we were required to pay a
termination fee of $0.5 million.
Effective as of January 1, 2008, we entered into a new
fleet services agreement with ARL which replaced the April 2005
railcar servicing agreement described above. The new agreement
reflects a reduced level of fleet management services, relating
primarily to logistics management services, for which ARL now
pays a fixed monthly fee. Additionally, under the new agreement,
we continue to provide railcar repair and maintenance services
to ARL at a charge for labor, components and materials. We
currently provide such repair and maintenance services for
approximately 21,700 railcars for ARL. The new agreement extends
through December 31, 2010, and is automatically renewable
for additional one year periods unless either party gives at
least sixty days prior notice of termination. There is no
termination fee if we elect to terminate the new agreement.
ARL Services Agreement and ARI/ARL Separation
Agreement. In April 2005, we entered into a
services agreement with ARL. Under this agreement, ARL provided
us certain information technology services, rent and building
services and limited administrative services. The rent and
building services includes our use of our headquarters space,
which is leased by ARL from an affiliate of James J. Unger, our
President and Chief Executive Officer. See Certain
transactions involving James J. Unger. Also under this
agreement, we agreed to provide purchasing and engineering
services to ARL. Each party is required to pay the other a fixed
annual fee for each of the listed services under this agreement.
Other than the rent and building services provided to us by ARL,
all of these services were terminated pursuant to a services
separation agreement we entered into with ARL on March 30,
2007, which was effective as of January 1, 2007.
ARI/ARL Rent and Building Services Extension
Agreement. Effective December 31, 2007, we
entered into a rent and building services agreement with ARL.
Under this agreement, ARL will continue to provide us with the
use of our headquarters space. This agreement will continue
until terminated upon six months prior written notice by either
party or upon the mutual agreement of the two parties.
ARL Trademark License Agreement. Effective
June 30, 2005, we entered into a trademark license
agreement with ARL. Under this agreement, for an annual fee of
$1,000, we have granted a nonexclusive, perpetual, worldwide
license to ARL to use our common law trademarks American
Railcar and the diamond shape of our ARI logo.
ARL may only use the licensed trademarks in connection with the
railcar leasing business.
CERTAIN
TRANSACTIONS INVOLVING MR. CARL ICAHN AND OTHER RELATED
ENTITIES
Transactions
with Philip Environmental Services Corp.
We engaged Philip Environmental Services Corp., an environmental
consulting company beneficially owned and controlled by
Mr. Carl Icahn, to provide environmental consulting
services to us. In the year ended December 31, 2007, we
incurred $0.2 million of expenses associated with such
consulting services. We continue to use Philip Environmental
Services Corp. to assist us in our environmental compliance.
Transactions
with Icahn Sourcing LLC
Icahn Sourcing LLC (Icahn Sourcing) is an entity formed and
controlled by Mr. Carl Icahn, our principal beneficial
stockholder and the chairman of our board of directors, in order
to leverage the potential buying power of a group of entities
with which Mr. Icahn either owns or otherwise has a
relationship in negotiating with a wide range of suppliers of
goods, services and tangible and intangible property. We are a
member of the buying group and, as such, are afforded the
opportunity to purchase goods, services and property from
vendors with whom Icahn Sourcing has negotiated rates and terms.
Icahn Sourcing does not guarantee that we will purchase any
goods,
29
services or property from any such vendors, and we are under no
obligations to do so. We do not pay Icahn Sourcing any fees or
other amounts with respect to the buying group arrangement. We
have purchased a variety of goods and services as a member of
the buying group at prices and on terms that we believe are more
favorable than those which would be achieved on a stand-alone
basis.
CERTAIN
TRANSACTIONS INVOLVING JAMES J. UNGER
Facilities
Leasing Arrangements
Our headquarters facilities and our Corbitt manufacturing
facilities in St. Charles, Missouri are owned by St. Charles
Properties, an entity controlled by James J. Unger, our
President and Chief Executive Officer. Under two leases dated
May 1, 1995 and March 1, 2001, St. Charles Properties
leased these facilities to ACF. We reimbursed ACF for our
proportionate share of the cost of renting these facilities
through April 1, 2005. On that date, ACF assigned the
March 1, 2001 lease, covering our Corbitt manufacturing
facilities, to us and the May 1, 1995 lease, covering our
and ARLs headquarters facility, to ARL. We continue to
maintain our headquarters in the space that has been leased to
ARL. Under our rent and building services agreement with ARL, we
pay ARL $0.5 million per year, which represents the
estimate of our proportionate share of ARLs costs for the
space that we use under the lease, including rent and building
services.
Under the terms of the lease agreement assigned to ARL, ARL has
leased approximately 78,000 square feet of office space.
The lease expires on December 31, 2010. Rent is payable
monthly in the amount of $25,000. Under the terms of the lease,
ARL pays one-tenth of the property tax and insurance expenses
levied upon the property. In addition, ARL must pay 17% and 54%
of any increase in taxes and property insurances costs,
respectively. ARL is also required to repair and maintain the
facility at its costs and expense. We use approximately 80% of
the office space leased by ARL under this agreement.
Under the terms of the lease agreement assigned to us, we occupy
approximately 128,000 square feet of space, which we use
for our Corbitt manufacturing facility. The lease expires on
February 28, 2011 with an option to renew the lease for one
successive five-year term. Rent is payable monthly in the amount
of $29,763. The maximum monthly rent for the renewal period is
$32,442 per month. We are required to pay 27% of all tax
increases assessed or levied upon the property and the cost of
the utilities we use, as well as repair and maintain the
facility at our expense.
In 2007, we incurred $0.9 million of costs to affiliates
under these two leasing arrangements.
Registration
Rights
We entered into a registration rights agreement, effective upon
the completion of our initial public offering, with certain of
our existing stockholders. The stockholders that are party to
the registration rights agreement will have the right to require
us, subject to certain terms and conditions, to register their
shares of our Common Stock under the Securities Act at any time
following expiration of the
lock-up
period applicable to them. These stockholders collectively will
have an aggregate of five demand registration rights, three of
which relate solely to registration on a short-form registration
statement, such as a
Form S-3.
In addition, if we propose to register any additional shares of
our capital stock under the Securities Act, these stockholders
will be entitled to customary piggyback registration
rights, which will entitle them to include their shares of
Common Stock in a registration of our securities for sale by us
or by other security holders. The registration rights granted
under the registration rights agreement are subject to customary
exceptions and qualifications and compliance with certain
registration procedures. Approximately 11.4 million shares
of our Common Stock are entitled to the benefits of these
registration rights.
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REVIEW,
APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED
PERSONS
Our audit committee, which is comprised of independent members
of our board of directors, is responsible under its charter for
reviewing and approving related person transactions,
as those terms are defined by the SEC, for potential conflict of
interest situations on an ongoing basis, unless such duty has
been delegated to another committee of the board of directors
consisting solely of independent directors.
Our audit committee generally does not pre-approve matters
involving executive compensation, related party transactions not
required to be disclosed under Item 404 of
Regulation S-K,
or agreements involving the purchase or sale of inventory, goods
or services that are entered into in the ordinary course of
business under various of our manufacturing and services
agreements with ACF and ARL, each of which are companies
affiliated with Mr. Carl Icahn, our principal beneficial
stockholder and the chairman of our board of directors (though
proposed material amendments to such agreements would warrant
consideration for possible pre-approval by our audit committee).
At each audit committee meeting, management reports any related
person transactions under consideration. After review, the audit
committee approves or disapproves such transactions. In
reviewing, approving or ratifying related person transactions,
the audit committee is responsible for obtaining the material
facts of the related person transaction, reviewing whether the
related person transaction is on terms no less favorable than
terms generally available to an unaffiliated third party under
the same or similar circumstances, and considering such factors
as it deems appropriate.
OTHER
MATTERS
Stockholder
Proposals and Recommendations for Director
Stockholder proposals for inclusion in the Companys proxy
materials for the Companys 2009 Annual Meeting of
Stockholders must be received by the Company no later than
December 31, 2008. These proposals must also meet the other
requirements of the rules of the SEC and the Companys
By-laws relating to stockholder proposals.
Stockholders who wish to make a proposal at the Companys
2009 Annual Meeting, other than one that will be included in the
Companys proxy materials, should notify the Company no
later than March 14, 2009. If a stockholder who wishes to
present such a proposal fails to notify the Company by this
date, the proxies that management solicits for the meeting will
have discretionary authority to vote on the stockholders
proposal if it is properly brought before the meeting. If a
stockholder makes a timely notification, the proxies may still
exercise discretionary voting authority under circumstances
consistent with the proxy rules of the Securities and Exchange
Commission.
Stockholders may make recommendations to the board of directors
of candidates for its consideration as nominees for director at
the Companys 2009 Annual Meeting of Stockholders by
submitting the name, qualifications, experience and background
of such person, together with a statement signed by the nominee
in which he or she consents to act as such, to the board of
directors,
c/o Secretary,
American Railcar Industries, Inc., 100 Clark Street, St.
Charles, Missouri 63301. Notice of such recommendations should
be submitted in writing not later than 90 days prior to the
anniversary date of the immediately preceding annual meeting and
must contain specified information and conform to certain
requirements set forth in the Companys Bylaws. The letter
of recommendation from one or more stockholders should state
whether or not the person(s) making the recommendation has
beneficially owned 5% or more of the Companys Common Stock
for at least one year. The board of directors may refuse to
acknowledge the nomination of any person not made in compliance
with these procedures or in the Companys Bylaws.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive
officers, directors and persons who own more than
10 percent of our Common Stock to file initial reports of
their ownership and changes in ownership of our Common Stock
with the SEC. To the best of our knowledge, based solely on a
review of reports furnished to us and written
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representations from reporting persons, each person who was
required to file such reports complied with the applicable
filing requirements during 2007.
Stockholders
Sharing an Address
Only one proxy statement is being delivered to multiple
stockholders sharing an address, unless we have received
contrary instructions from one or more of the stockholders. We
will undertake to deliver promptly upon written or oral request
a separate copy of the proxy statement to a stockholder at a
shared address to which a single copy of the proxy statement was
delivered. You may make a written or oral request by sending a
written notification to the Secretary, American Railcar
Industries, Inc., 100 Clark Street, St. Charles, Missouri 63301,
stating your name, your shared address, and the address to which
we should direct the additional copy of the information
statement, or by calling our executive office at
(636) 940-6000.
If multiple stockholders sharing an address have received one
copy of this proxy statement and would prefer us to mail each
stockholder a separate copy of future mailings, you may send
notification to or call our executive office. Additionally, if
current stockholders with a shared address received multiple
copies of this proxy statement and would prefer us to mail one
copy of future mailings to stockholders at the shared address,
notification of that request may also be made by mail or
telephone call to our executive office.
Report On
Form 10-K
The Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, as amended, as
filed with the Securities and Exchange Commission, including
financial statements, was included with the Annual Report mailed
to each stockholder with this Proxy Statement. Stockholders may
obtain without charge another copy of the
Form 10-K,
as amended, excluding certain exhibits, by writing to the
Secretary, American Railcar Industries, Inc., 100 Clark Street,
St. Charles, Missouri 63301.
Incorporation
by Reference
To the extent that this proxy statement has been or will be
specifically incorporated by reference into any filing by the
Company under the Securities Act or the Exchange Act, the
section of the proxy statement entitled Audit Committee
Report shall not be deemed to be so incorporated, unless
specifically otherwise provided in any such filing.
Other
Business
Management knows of no other matters that will be presented for
action at the Annual Meeting. However, the enclosed proxy gives
discretionary authority to the persons named in the proxy in the
event that any other matters should be properly presented to the
meeting.
It is important that proxies be returned promptly. Therefore,
stockholders are urged, regardless of the number of shares
owned, to date, sign and return the enclosed proxy in the
enclosed business reply envelope.
By Order of the Board of Directors
Michael Obertop,
Secretary
May 6, 2008
St. Charles, Missouri
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AMERICAN RAILCAR INDUSTRIES, INC.
100 CLARK STREET
ST. CHARLES, MISSOURI 63301
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 4, 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of American Railcar Industries, Inc., a Delaware corporation (the
Company), hereby appoints Vincent
J. Intrieri and Michael Obertop, and each of them acting
singly, with full power of substitution, attorneys and proxies to represent the undersigned at the
Annual Meeting of Stockholders of the Company to be held at the offices of Brown Rudnick Berlack
Israels LLP Seven Times Square, New York, New York 10036, on Wednesday, June 4, 2008 at 1:00 P.M.,
local time, and at any adjournment or postponement thereof, with all power which the undersigned
would possess if personally present, and to vote all shares of stock that the undersigned may be
entitled to vote at said meeting upon the matters set forth in the Notice of Annual Meeting of
Stockholders in accordance with the following instructions and with discretionary authority upon
such other matters as may come before the meeting. All previous proxies are hereby revoked.
(Continued and to be signed on the reverse side.)
39
ANNUAL MEETING OF STOCKHOLDERS OF
AMERICAN RAILCAR INDUSTRIES, INC.
June 4, 2008
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
ê Please
detach along perforated line and mail in the envelope
provided. ê
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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The Board of Directors recommends a vote FOR the election of the nominees as directors.
1. The election as directors of all nominees listed below:
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transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
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NOMINEES: |
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FOR ALL NOMINEES |
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Carl C. Icahn
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James J. Unger |
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. |
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WITHHOLD AUTHORITY |
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Vincent J. Intrieri |
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FOR ALL NOMINEES
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Peter K. Shea |
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James M. Laisure |
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FOR ALL EXCEPT
(See instructions below) |
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James C. Pontious Harold First Brett Icahn Hunter Gary |
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This proxy will be voted as specified or, where no direction is given, will be voted FOR all nominees listed in Proposal No. 1. The undersigned stockholder hereby acknowledges receipt of a copy of the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement and hereby revokes any proxy or proxies previously given. This proxy may be revoked at anytime prior to its exercise.
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INSTRUCTION:
To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT and fill in the circle next to each
nominee you wish to withhold, as shown here:
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Please complete,
date, sign and mail this proxy promptly in the enclosed postage-prepaid envelope. |
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method.
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Signature
of Stockholder
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Date:
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Signature of Stockholder
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Date:
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Note: §
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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