pre14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a - 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
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Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 |
EXPRESS-1 EXPEDITED SOLUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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EXPRESS-1
EXPEDITED SOLUTIONS, INC.
429 Post Road
Buchanan, Michigan 49107
(269) 695-2700
Internet Site: www.express-1.com
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
To Be
Held on June 14, 2007
April , 2007
Dear Fellow Stockholders:
On behalf of the Board of Directors of Express-1 Expedited
Solutions, Inc. we invite you to join us at the Annual Meeting
(the Meeting) of Stockholders, which will be held in
our corporate training facility located at 441 Post Road,
Buchanan, Michigan 49107 at 4:00 p.m. Eastern Daylight Time
(EDT), on June 14, 2007.
At the Meeting, you will be asked to (i) elect seven
directors of the Company; (ii) ratify the appointment of
Pender Newkirk & Company LLP, as independent public
accountants for the Company for the year ending
December 31, 2007; (iii) approve and ratify an
amendment to our Certificate of Incorporation and Bylaws
creating three classes of Director (Class I, Class II
and Class III) with staggered three year terms of
appointment; and (iv) act upon such other business as may
properly come before the Meeting or any adjournment(s) or
postponement(s) thereof.
Only stockholders of record on May 1, 2007 will be entitled
to vote at the meeting or any adjournments thereof. The stock
transfer books will not be closed.
We hope that you will be able to attend the Meeting, and we urge
you to read the enclosed Proxy Statement before you decide to
vote. Whether or not you plan to attend, we encourage you to
complete, sign, date and return the enclosed proxy as promptly
as possible in order that your shares are represented at the
Meeting. We look forward to seeing you at the Meeting.
Sincerely,
Michael R. Welch
Director and Chief Executive Officer
EXPRESS-1
EXPEDITED SOLUTIONS, INC.
429 Post Road
Buchanan, Michigan 49107
April , 2007
To Be
Held on June 14, 2007
To the Stockholders of Express-1 Expedited Solutions, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders
(together with any adjournments or postponements thereof, the
Meeting) of Express-1 Expedited Solutions, Inc., a
Delaware corporation (the Company), will be held in
our corporate training center located at 441 Post Road,
Buchanan, Michigan 49107, on June 14, 2007 at
4:00 p.m., EDT, for the purpose of considering and voting
upon the following matters:
(1) To elect a board of seven directors;
(2) To ratify the appointment of Pender Newkirk &
Company LLP as independent public accountants for the Company
for the year ending December 31, 2007;
(3) To approve and ratify an amendment to our Certificate
of Incorporation and Bylaws creating three classes of Director
(Class I, Class II and Class III) with
staggered three-year terms of appointment; and
(4) To Transact such other business as may properly come
before the Meeting.
These items are more fully described in the accompanying Proxy
Statement, which is hereby made a part of this Notice of the
Annual Meeting of Stockholders. The Board has fixed the close of
business on May 1, 2007 as the record date for the
determination of Stockholders entitled to notice of, and to vote
at, the Meeting.
A copy of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2006 is enclosed. The
Report is not a part of the proxy soliciting material enclosed
with this Notice.
BY ORDER OF THE BOARD,
Michael R. Welch
Director and Chief Executive Officer
Buchanan, Michigan
April , 2007
All stockholders are cordially invited to attend the meeting
in person. Whether or not you expect to attend the meeting,
please complete, date, sign and return the enclosed proxy as
promptly as possible in order to ensure your representation at
the meeting. A return envelope (which is postage-prepaid if
mailed in the United States) is enclosed for that purpose. Even
if you have given your proxy, you may still vote in person if
you attend the meeting. Please note, however, that if your
shares are held of record by a broker, bank or other nominee and
you wish to vote at the meeting, you must bring to the meeting a
letter from the broker, bank or other nominee confirming your
beneficial ownership of the shares. Additionally, in order to
vote at the meeting, you must obtain from the record holder a
proxy issued in your name.
PROXY
STATEMENT/ANNUAL MEETING OF STOCKHOLDERS OF
EXPRESS-1
EXPEDITED SOLUTIONS, INC.
April ,
2007
INFORMATION
CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement (the Proxy Statement) and the
accompanying form of proxy are being furnished to the
Stockholders (the Stockholders) of Express-1
Expedited Solutions, Inc. (the Company) in
connection with the solicitation of proxies by the Board of the
Company (the Board) from holders of its outstanding
common stock (the Common Stock), for use at the
Annual Meeting of Stockholders of the Company (together with any
adjournments or postponements thereof, the Meeting)
to be held in the Companys corporate training center
located at 441 Post Road, Buchanan, Michigan 49107, on
June 14, 2007 at 4:00 p.m. EDT. This Proxy Statement,
the accompanying form of proxy, and the Annual Report to
Stockholders are expected to be mailed to Stockholders of the
Company on or about May 1, 2007.
Solicitation
The expense of this solicitation will be borne by the Company.
Solicitation will be primarily by use of the mails. Executive
officers and other employees of the Company may solicit proxies,
without additional compensation, personally and by telephone and
other means of communication. The Company has engaged
Regan & Associates as proxy solicitor at an expected
cost of $12,500. The engagement agreement provides for
best efforts solicitation of the votes of beneficial
owners, with a reduction of fees, in the event the solicitor is
not successful in contacting a large percentage of the
beneficial owners of the Companys common stock for
purposes of recording their votes. The Company will reimburse
brokers and other persons holding Common Stock in their names or
in the names of their nominees for their reasonable expenses in
forwarding proxies and proxy materials to beneficial owners.
Quorum
Requirement
In order to transact business at the Annual Meeting, a quorum
must be present. A quorum is present if a majority of the issued
and outstanding shares of Common Stock as of the Record Date are
represented at the Annual Meeting in person or by proxy. Shares
that are represented at the meeting and are entitled to vote but
that are not voted at the direction of the holder (called
abstentions) and shares that are not voted by a
broker or other record holder due to the absence of instructions
from the beneficial owner (called broker non-votes)
will be counted for the purpose of determining whether a quorum
is present.
Voting
Rights and Outstanding Shares
Stockholders of record as of the close of business on
May 1, 2007 (the Record Date) will be entitled
to vote at the Meeting. Each share of outstanding Common Stock
is entitled to one vote. As of the Record Date, there were
26,555,351 shares of Common Stock outstanding.
The election of directors requires the plurality vote of the
shares of Common Stock present in person or represented by proxy
and voting, therefore abstentions, broker non-votes or the
failure to either return a proxy or to attend the Meeting will
have no effect on the election of directors. The ratification of
Pender Newkirk & Company LLP as our independent public
accountants for the year ending December 31, 2007 requires
the affirmative vote of a majority of the shares of Common Stock
present in person or represented by proxy and voted at the
Meeting, therefore abstentions, broker non-votes or the failure
to either return a proxy or to attend the Meeting will have no
effect on the ratification of Pender Newkirk & Company
LLP. The approval and ratification of an amendment to our
Certificate of Incorporation and Bylaws authorizing the creation
of three classes of director (Class I, Class II and
Class III) with staggered three year terms of
appointment, requires the affirmative vote of a majority of the
shares of Common Stock issued and outstanding, therefore,
abstentions, broker non-votes or the failure to either return a
proxy or to attend the Meeting will have an adverse effect on
the approval of the proposal.
Revocability
of Proxies
The shares of Common Stock represented by proxy will be voted as
instructed if received in time for the Meeting. If no
instructions are indicated, such shares will be voted in favor
of (FOR) (i) each nominee for election as a director
specified herein; (ii) the ratification of the appointment
of Pender Newkirk & Company LLP, as independent public
accountants for the Company for the year ending
December 31, 2007; (iii) the approval and ratification
of an amendment to our Certificate of Incorporation and Bylaws
thereby creating three classes of Director (Class I,
Class II and Class III) with staggered three-year
terms of appointment; and (iv) in the discretion of the
proxy holder as to any other matter that may properly come
before the Meeting or any adjournment(s) or postponement(s)
thereof. Any person signing and mailing the proxy may,
nevertheless, revoke it at any time before it is exercised by
written notice to the Company (Attention: Chief Financial
Officer, 429 Post Road, Buchanan, Michigan 49107), or by
attending in person and voting at the Meeting. Attendance at the
Meeting, however, will not itself constitute the revocation of a
proxy.
PROPOSAL 1
ELECTION
OF DIRECTORS
Seven directors are to be elected at the Meeting. The nominees
of the Board are set forth below. All of the current members of
the Board have been nominated to continue to serve as directors
of the Company. In the event any nominee is unable or declines
to serve as a director at the time of the Meeting, the proxies
will be voted for any nominee who shall be designated by the
Board to fill the vacancy. If additional persons are nominated
for election as directors, then the proxy holders intend to vote
all proxies received by them for the nominees listed below
unless instructed otherwise. As of the date of this Proxy
Statement, the Company is not aware of any nominee who is unable
or who will decline to serve as a director, if elected.
If all nominees are elected, and Proposal 3 regarding the
classification of our Board is approved, Messrs. Jay Taylor
and Michael Welch will be Class I directors, with their
initial terms expiring at the annual meeting in 2008;
Messrs. Jim Martell and Pete Whitehead will be
Class II directors, with their initial terms expiring at
our annual meeting in 2009; and Mrs. Jennifer Dorris and
Messrs. John Affleck-Graves and Mark Patterson will be
Class III directors, with their initial terms expiring at
our annual meeting in 2010. If all nominees are elected and
Proposal 3 is not approved, each newly elected director
will serve until the next Meeting of the Stockholders and until
their successors have been elected and qualified.
Nominees
Set forth below are the names, ages, positions and offices held
and a brief description of the business experience during the
past five years of each person nominated to serve as a director
of the Company.
Non-Employee,
Independent Directors
The following Directors are independent under applicable
American Stock Exchange Listing Standards:
James J. Martell, age 52, is a Director of the
Company and serves as the Chairman of the Board for the Company.
Mr. Martell was initially appointed as a Director in
January 2005. Mr. Martell has 30 years of experience
in the transportation and logistics sector and related
industries. Mr. Martell has served as an independent consultant
to companies operating in the transportation and logistics
sector and related industries from 2004 to the present. From
1999 through 2004, Mr. Martell served as chief executive
officer for SmartMail Services, Inc., a high-volume shipper of
flats and parcels for corporate mailings. In 2004, SmartMail was
acquired by Deutsche Post AG, ending Mr. Martells
tenure as chief executive officer. From 1993 to 1998,
Mr. Martell served as executive vice president of Americas
for UTi Worldwide Inc., a publicly traded non-asset based global
integrated logistics company with gross revenues in excess of
$500 million in 1998. From 1990 to 1993, Mr. Martell
held the position of international vice president and chief
executive officer of Burlington Air Express Canada. From 1985 to
1989, Mr. Martell served as general manager/senior manager
of Federal Express Canada Limited, and its predecessor
companies, where he managed the creation of Federal Express
Corporations Canadian operation. From 1979 to 1985,
Mr. Martell served as regional manager for industrial
engineering at Federal Express Corporation, and from 1975 to
1979, he was station/city manager for United Parcel Service,
Inc. Mr. Martell currently serves as a director of two
publicly traded
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transportation and logistics companies, Global Logistics
Acquisition Corporation and PBB Global Logistics, Inc., as well
as several privately held companies and trade groups including
Urban Express and the Postal Shippers Association.
Mr. Martell received his B.S. in Business Administration
from Michigan Technological University and has completed
coursework towards a Masters of Education from Brock University.
Jay N. Taylor, age 59, currently serves as a
Director of the Company and as Chairperson of the Compensation
Committee. Mr. Taylor was initially appointed as a Director
in March 2004. Mr. Taylor co-founded Capital Resource
Partners, Inc. in 1998 as an investment-banking firm focused on
providing merger and acquisition services to the transportation
and logistics industry. He has represented many transportation
buyers and sellers and evaluated dozens of trucking and
logistics companies. In 1995, Mr. Taylor was co-founder,
President & CEO of Ampace Corporation, which was an
asset-based, publicly traded trucking company serving Fortune
500 shippers. Before that he was Senior Vice President of
Country Wide Truck Service, Inc., Senior Vice President of
Tri-State Motor Transit, Inc., both public companies and a
management consultant focused on trucking company operating
performance improvement. From 1979 to 1987, Mr. Taylor was
a Vice President of Schneider National, Inc. responsible for
marketing, planning and business development for the largest
truckload carrier in North America. He was also General Manager
of Schneiders western division. Mr. Taylor received
his MBA from the University of Iowa in finance and his BS from
Iowa State University, concentrating in transportation.
Calvin (Pete) R. Whitehead, age 59,
currently serves as a Director of the Company and serves as the
Chairperson of the Nominating Committee. Mr. Whitehead was
initially appointed as a Director in January 2005.
Mr. Whitehead is a retired former President of Atlantic
Automotive Components, a joint venture of
Ford/Visteon
and Venture Industries, in Benton Harbor Michigan. While serving
as president from 1995 to 2003, Mr. Whitehead oversaw
revenue growth from $18 million to over $90 million.
From 1992 1995 Mr. Whitehead was the General
Manufacturing Manager for Toledo Molding and Die and was
responsible for 4 manufacturing plants and corporate quality.
From
1967-1992
Mr. Whitehead held various management positions within Ford
Motor Company, both in manufacturing and engineering in the U.S.
and in Europe. Mr. Whitehead received his Bachelor of
Science degree in Business Management from Virginia Polytechnic
Institute.
Jennifer H. Dorris, age 39, currently serves as a
Director of the Company and also serves as the Chairperson of
the Audit Committee. Mrs. Dorris was initially appointed as
a Director in April 2005. Ms. Dorris has extensive
experience in building an effective financial team in a
high-growth environment, implementing financial systems,
integrating acquisitions and centralizing accounting functions.
She currently serves as the Chief Financial officer of MR
Default Services, LLC, a leading provider of outsourced
foreclosure and bankruptcy processing services to law firms on
behalf of their mortgage servicers. Great Hill Partners, the
majority owner, is a Boston-based private equity firm with
$1.5 billion of capital under management. Mrs. Dorris
manages all the corporate finance and human resource functions
including financial reporting, budgeting, financial acquisition
diligence, annual audits and tax compliance. Mrs. Dorris
has led and managed the financial diligence of numerous
acquisitions throughout her career. Ms. Dorris has also
developed acquisition pipelines to stimulate fast growth in
acquisitive companies. Previously, Mrs. Dorris was the
Chief Financial Officer of Smartmail, LLC. Ms. Dorris was
instrumental in Smartmail achieving its strategic goals by
pursuing and attaining growth initiatives, building an
exceptional financial team, and completing and integrating
strategic acquisitions. Previous to this, Mrs. Dorris was
the Vice President and Controller for WebMD were she led the
centralization of over 20 acquired entities into a common system
financial platform. While at WebMD, Ms. Dorris prepared the
Company to go public, was instrumental in the
S-1 filing
and subsequently managed the SEC filings. Mrs. Dorris
background also includes public accounting and has been a CPA
licensed in Georgia since 1996. Mrs. Dorris holds a M.B.A.
in Finance and a B.A. in accounting from Georgia State
University.
John F. Affleck-Graves, age 56, currently serves as
a Director of the Company and was appointed to this position in
October 2006. Mr. Affleck-Graves currently serves as
Executive Vice President (EVP) at the University of Notre Dame.
In his position at Notre Dame, Mr. Affleck-Graves is
responsible for administration of the Universitys
$650 million annual operating budget and an endowment of
more than $4 billion. He is also responsible for the
Universitys workforce of more than 4,000 employees, and he
oversees the Universitys construction program. Prior to
becoming EVP, in 2004, Mr. Affleck-Graves served for three
years as vice president and associate provost at the University.
He served on the Notre Dame faculty from 1986 to 2000, the final
three years as chairman of the Department of Finance and
Business Economics. Mr. Affleck-Graves taught from 1975 to
1986 at the
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University of Cape Town, where he earned bachelors,
masters and doctoral degrees. In addition to his work at
Notre Dame, Mr. Affleck-Graves has served as a consultant
for numerous companies including Allied Signal, Merck, Old
Mutual, and Pharmacia and Upjohn. In recent years he has served
on the boards of Student Loan Corporation and St
Josephs Capital Bank. He is the author of more than 50
articles that deal with aspects of initial public offerings,
valuation and asset pricing models, and shareholder value-added
methodology.
Executive
Officers (Employee Directors)
Michael R. Welch, age 44, joined the Company, in
August of 2004 as President and was appointed a Director at that
time. Mr. Welch was appointed CEO of the Company in June
2005. Mr. Welchs primary focus is on providing
executive leadership and further expanding the Companys
footprint within the Expedite Market. Mr. Welch has been
involved in the transportation industry for over twenty years
with expertise in the expediting industry. In 1989
Mr. Welch co-founded Express-1, Inc., a Midwest based
expedited carrier, which grew to a $30 million dollar
company, and now serves as our principle operating company.
Mr. Welch has a Bachelor of Science degree in Industrial
Marketing from Western Michigan University.
Mark K. Patterson, age 44, joined the Company in
September 2005 as Chief Financial Officer and was appointed to
the Board of Directors in February 2006.
Mr. Pattersons primary focus is providing financial
and executive leadership to the Company and overseeing its
financial and public company affairs. Over the past
20 years, Mr. Patterson has held senior financial
positions at several transportation, distribution and
manufacturing companies. Most recently Mr. Patterson served
as the Director of Corporate Reporting at SIRVA in 2005. Prior
to that Mr. Patterson served as the Controller and Director
of Financial Planning and Analysis at CRST International, Inc.
from 2003 to 2004; as the Chief Financial Officer of Coastal
Resources, Inc. from 2001 to 2003; as the Chief Financial
Officer of Schilli Transportation Services, Inc. from 1998
through 2001; and held various financial positions within
U.S. Xpress Enterprises, Inc. from 1994 through 1998.
Mr. Patterson began his career within the plastics and
paper manufacturing industries with two companies.
Mr. Patterson received a Bachelor of Science degree in
Business Administration with a Concentration in Accounting from
the University of Tennessee.
There are no family relationships among any of the certifying
executive officers or directors of the Company. The CEO has
family relationships with two of our executive officers (John
Welch and James Welch) and one of our managers (William Welch).
Each of these employment relationships existed prior to the
purchase of Express-1, Inc. and the related parties serve as key
members of our management team. No arrangement or understanding
exists between any executive officer or director and any other
person pursuant to which any executive officer was selected as
an executive officer of the Company or any director was
appointed to the Companys board. Executive officers of the
Company are elected or appointed by the Board and hold office
until their successors are elected or until their death,
resignation or removal.
Related
Party Transactions
Transactions
with Related Persons
In August of 2004, the Company acquired Express-1, Inc. and
contractually agreed to provide contingent earn-out payments to
the former owners of Express-1, provided certain performance
hurdles were met. Among the performance hurdles are specified
revenue growth rates and gross margin requirements. Michael R.
Welch, our President and CEO and James M. Welch and John D.
Welch, all Named Executive Officers were principles in the
ownership group of Express-1, Inc. For the year ended
December 31, 2005, the Company paid $1,500,000 to the
former owners of Express-1, Inc. under the provisions of the
purchase agreement. The amount was paid in March and June of
2007 and satisfied in cash. For 2006, the Company accrued
$1,750,000 to satisfy the provisions of the earnout agreement.
The 2006 amount was satisfied with cash in the first quarter of
2007. An additional amount of $2,000,000 is available to the
former owners of Express-1 under the terms of the purchase
agreement, provided certain provisions related to the earn-out
are met. The remaining amount can be satisfied with any
combination of cash or stock, at the discretion of the Company.
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Review,
Approval, or Ratification of Transactions with Related
Parties
The Company has adopted a policy restricting significant
transactions between itself and related parties and has
informally outlined an approval and review process to take place
in the event related party transactions are later deemed in the
interest of the Company. The Board of Directors acts on these
matters and potential related parties abstain from this
discussion and any votes on the issue. Among the items
considered during 2006, was the performance of Express-1 for
2005 for the purpose of determining whether the parameters of an
earn-out arrangement contained within the Express-1, Inc.
purchase agreement had been met and to further determine the
form of payment, either cash or common stock or a combination
thereof. It was the opinion of the Board, that an amount of
$1,500,000 was payable under the terms of the purchase
agreement, based upon this review. It was further concluded that
the form of payment should be in cash. The Board concluded this
form of payment, only after considering the Companys
recent ability to generate cash from operations; the then
current Company cash position; and, the opinions of both the
former owners of Express-1 and our shareholders. These same
factors were reviewed for the 2006 payment completed in March
2007, and will be considered with the remaining potential
payment to be made in March 2008.
Director
Attendance at Annual Meetings and Board Meetings
It is our policy that directors are invited and encouraged to
attend our Annual Meetings. All directors attended our last
Annual Meeting, and are expected to attend the Meeting this year.
During the year ended December 31, 2006, the Board met four
times. All Board and committee members attended 75% or more of
the meetings. The Board is currently comprised of Jim Martell,
Jay Taylor, Pete Whitehead, Jennifer Dorris, John
Affleck-Graves, Mike Welch and Mark Patterson.
The Audit
Committee
The Board has established an audit committee (the Audit
Committee). The Audit Committee is comprised of Jennifer
Dorris, Jay Taylor and John Affleck-Graves, with
Mrs. Dorris serving as its Chairperson and Financial
Expert, as defined in item 407(d)(5) of
regulation S-K. The members of the Audit Committee are
independent as defined by the American Stock Exchange Listing
Standards. During 2006, the Audit Committee met four times. All
members of the Audit Committee attended 75% or more of the
meetings. The Audit Committee convenes when deemed appropriate
or necessary by its members.
The Companys Board of Directors has adopted a written
charter for the Audit Committee, which is available on the
Companys website www.express-1.com under the heading
Corporate Governance.
The primary functions of the Audit Committee are set forth in
its charter and include: (i) selecting the independent
auditors; (ii) reviewing the results and scope of the audit
and other services provided by the Companys independent
auditors, and (iii) reviewing and evaluating the
Companys internal control functions, in support of the
integrity of the Companys financial statements.
As an advisory function of the Audit Committee, members also
participate in financings, review budgets prior to presentation
to the Board of Directors and review budgeted performance versus
actual performance reports.
The Audit Committee reports as follows:
(i) The Audit Committee reviewed and discussed the
Companys audited financial statements for the year ended
December 31, 2006 with the Companys management;
(ii) The Audit Committee discussed with Pender
Newkirk & Company LLP (Pender Newkirk) the
Companys independent public accountant for the year ending
December 31, 2006, the matters required to be discussed by
Statement of Accounting Standards 61;
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(iii) The Audit Committee received the written disclosures
and the letter from Pender Newkirk required by Independent
Standards Board Standard No. 1 (Independence Discussions
with Audit Committees) and has discussed Pender
Newkirks independence with representatives of Pender
Newkirk; and
(iv) Based on the review and discussions referred to above,
the Audit Committee recommended to the Board of Directors that
the audited financial statements be included in the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2006, for filing with the
Securities and Exchange Commission.
Jay Taylor
John Affleck-Graves
Direct
Stockholder Communication with the Audit Committee
Anonymous and direct communication with the Chairperson of the
Audit Committee is available on the Companys website,
www.express-1.com, under the caption, Corporate
Governance.
The
Nominating Committee
In 2005, the Board established a nominating committee (the
Nominating Committee), which is currently comprised
of Pete Whitehead, Jay Taylor and Jim Martell, with
Mr. Whitehead serving as its Chairperson. The members of
the Nominating Committee are independent as defined by the
American Stock Exchange Listing Standards. During 2006, the
Nominating Committee met four times. All members of the
Nominating Committee attended at least 75% of the meetings. The
Nominating Committee convenes when deemed appropriate or
necessary by its members. The Company has adopted a written
Charter of the Nominating Committee. The Nominating Committee
Charter is available on the Companys website at www.
express-1.com.
The Nominating Committee performs the following functions:
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Recommending individuals qualified to serve as directors of the
Company to the Board of Directors for the approval by a majority
of the independent directors;
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Recommending to the Board of Directors, directors to serve on
committees of the Board of Directors;
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Advising the Board of Directors with respect to matters relating
to the composition, procedures and committees of the Board of
Directors;
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Developing and recommending to the Board of Directors a set of
corporate governance principles applicable to the Company and
overseeing corporate governance matters generally; and
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Overseeing the evaluation of individual directors and the Board
of Directors as a whole.
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The Nominating Committee will consider director candidates
recommended by stockholders. In considering candidates submitted
by stockholders, the Nominating Committee will take into
consideration the needs of the Board of Directors and the
qualifications of the candidate. The Nominating Committee may
also take into consideration the number of shares held by the
recommending stockholder and the length of time that such shares
have been held. To have a candidate considered by the Nominating
Committee, a stockholder must submit the recommendation in
writing and must include the following information:
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The name of the stockholder and evidence of the persons
ownership of our common stock, including the number of shares
owned and the length of time of ownership; and
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The name of the candidate, the candidates resume or a
listing of his or her qualifications to be a director of the
Company and the persons consent to be named as a director
if selected by the Nominating Committee and nominated by the
Board of Directors.
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The stockholder recommendation and information described above
must be addressed to our Chief Financial Officer at 429 Post
Road, Buchanan, Michigan 49107, and must be received by our
Chief Financial Officer not less
6
than 120 days prior to the anniversary date of our most
recent annual meeting of stockholders. If, however, we did not
hold an annual meeting the previous year, or if the date of the
annual meeting to which the recommendation applies has been
changed by more than 30 days from the anniversary date of
our most recent annual meeting of stockholders, then the
recommendation and information must be received not later than
the close of business on the 10th day following the day on
which notice of the date of the meeting is mailed or public
disclosure of the date of the meeting is made, whichever occurs
first.
All director candidates recommended by the Nominating Committee
must be consistent with the Board of Directors criteria
for selecting directors. These criteria include the possession
of such knowledge, experience, skills, expertise and diversity
so as to enhance the Board of Directors ability to manage
and direct the affairs and business of the Company, including,
when applicable, to enhance the ability of committees of the
Board of Directors to fulfill their duties
and/or to
satisfy any independence requirements imposed by law, regulation
or AMEX listing requirement. In addition, the Nominating
Committee examines, among other things, a candidates
ability to make independent analytical inquiries, understanding
of our business environment, potential conflicts of interest,
independence from management and the Company, integrity and
willingness to devote adequate time and effort to
responsibilities associated with serving on the Board of
Directors.
The Nominating Committee identifies potential nominees by asking
current directors and executive officers to notify the Committee
if they become aware of persons meeting the criteria described
above who have had a change in circumstances that might make
them available to serve on the Board of Directors
for example, retirement as a senior executive of a public
company. The Nominating Committee also, from time to time, may
engage firms that specialize in identifying director candidates.
As described above, the Committee will also consider candidates
recommended by stockholders.
Once a person has been identified by the Nominating Committee as
a potential candidate, the Committee may collect and review
publicly available information regarding the person to assess
whether the person should be considered further. If the
Nominating Committee determines that the candidate warrants
further consideration, the Chairperson or another member of the
Committee contacts the person. Generally, if the person
expresses a willingness to be considered and to serve on the
Board of Directors, the Nominating Committee requests
information from the candidate, reviews the persons
accomplishments and qualifications, including in light of any
other candidates that the Committee might be considering, and
conducts one or more interviews with the candidate. In certain
instances, Committee members may contact one or more references
provided by the candidate or may contact other members of the
business community or other persons that may have greater
first-hand knowledge of the candidates accomplishments.
The Committees evaluation process does not vary based on
whether or not a candidate is recommended by a stockholder,
although, as stated above, the Board of Directors may take into
consideration the number of shares held by the recommending
stockholder and the length of time that such shares have been
held.
The
Compensation Committee
Purpose, Functions, Composition, and Meetings.
The purpose of the Compensation Committee is to
review, analyze, recommend, and approve all aspects of executive
compensation. As more fully outlined in the Compensation
Committees charter, which is available on the
Companys website at www.express-1.com under the caption
Corporate Governance, the primary functions of the
Compensation Committee include:
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reviewing and approving corporate goals and objectives relating
to the compensation of the Chief Executive Officer, evaluating
the Chief Executive Officers performance in light of those
objectives, and determining and approving the Chief Executive
Officers compensation based upon this evaluation;
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reviewing and making recommendations to the Board regarding the
compensation of our other executive officers;
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reviewing and approving all forms of incentive compensation,
including stock options and other stock-based awards to our
executive officers; and
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administering our stock option plan as in effect from
time-to-time.
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7
During 2006, the Compensation Committee was comprised of Jay
Taylor, Jim Martell and Pete Whitehead, with Mr. Taylor
serving as Chairperson. The Compensation Committee met four
times in 2006. At those meetings, the Compensation Committee
approved executive bonuses for fiscal year 2005, approved the
compensation of, and option grants awarded to, our executive
officers for fiscal year 2006, established cash bonus
performance targets for 2006, issued its Report of the
Compensation Committee for inclusion in this proxy
statement, and reviewed the compensation of our directors who
are not 10% shareholders, officers, or employees of ours
(Outside Directors). See Executive
Compensation Compensation Discussion and
Analysis for a discussion of, including the Compensation
Committees role in implementing, our processes and
procedures for setting executive compensation. See
Executive Compensation Director
Compensation for a discussion of, including the
Compensation Committees role in implementing, our
processes and procedures for setting director compensation.
Compensation
Committee Interlocks and Insider Participation
None of the current members of the Compensation Committee have
been, or are, an officer or employee of our company. During
2006, none of our executive officers served as a member of the
board of directors or compensation committee (or other committee
performing equivalent functions) of any entity that had one or
more executive officers serving as a member of our Board of
Directors. See Transactions with Related
Persons for a description of certain transactions between
us and our other directors, executive officers, or their
affiliates, and Executive Compensation
Director Compensation for a description of compensation of
the members of the Compensation Committee.
Compensation
Committee Report
We have reviewed and discussed the Compensation Discussion and
Analysis contained in this Proxy Statement with management.
Based on that review and discussion, we have recommended to the
Board of Directors that the Compensation Discussion and Analysis
be included in this Proxy Statement and in Express-1 Expedited
Solutions, Inc.s Annual Report on
Form 10-K
for the year ended December 31, 2006.
Jay Taylor, Chairperson
Jim Martell, Member
Pete Whitehead, Member
Executive
Officers
The following table sets forth, as of March 31, 2007,
certain information regarding our named executive officers and
members of senior management.
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Name
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Age
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Position
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Michael R. Welch
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44
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President, Chief Executive Officer
and Director
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Mark K. Patterson
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44
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Chief Financial Officer and
Director
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Jeffrey A. Curry
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45
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Vice President of Corporate
Development and Board Secretary
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Dennis M. McCaffrey
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37
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Vice President of Sales
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James M. Welch
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50
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Vice President of Operations
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John D. Welch
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46
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Corporate Controller
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Joseph C. Campbell
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45
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Director of Information Technology
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Robert J. Tracey
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56
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Director of Safety
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Keith P. Avery
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44
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Director of Partner Carriers
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Brian J. Glaser
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32
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General Manager
Evansville Operations
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8
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
and Philosophy of Compensation
The Compensation Committee has the responsibility to review,
recommend, and approve all executive officer compensation
arrangements. The Compensation Committee has the specific
responsibility to (i) review and approve corporate goals
and objectives relevant to the compensation of our Chief
Executive Officer (CEO), (ii) evaluate the
performance of our CEO in light of those goals and objectives,
and (iii) determine and approve the compensation level of
our CEO based upon that evaluation. The Compensation Committee
also has the responsibility to annually review the compensation
of our other executive officers and to determine whether such
compensation is reasonable under existing facts and
circumstances. In making such determinations, the Compensation
Committee seeks to ensure that the compensation of our executive
officers aligns the executives interests with the
interests of our shareholders. The Compensation Committee must
also review and approve all forms of incentive compensation,
including stock option grants, stock grants, and other forms of
incentive compensation granted to our executive officers. The
Compensation Committee takes into account the recommendations of
our CEO in reviewing and approving the overall compensation of
the other executive officers.
We believe that the quality, skills, and dedication of our
executive officers are critical factors affecting our long-term
value and success. Thus, one of our primary executive
compensation goals is to attract, motivate, and retain qualified
executive officers. We seek to accomplish this goal by rewarding
past performance, providing an incentive for future performance,
and aligning our executive officers long-term interests
with those of our shareholders. Our compensation program is
specifically designed to reward our executive officers for
individual performance, years of experience, contributions to
our financial success, and creation of shareholder value. Our
compensation philosophy is to provide overall compensation
levels that (i) attract and retain talented executives and
motivate those executives to achieve superior results, and
(ii) align executives interests with our corporate
strategies, our business objectives, and the long-term interests
of our shareholders, and (iii) enhance executives
incentives to increase our stock price and maximize shareholder
value. In addition we strive to ensure that our compensation,
particularly salary compensation, is consistent with our
constant focus on controlling costs. Our primary strategy for
building senior management depth is to develop personnel from
within our company to ensure that our executive team as a whole
remains dedicated to our customs, practices, and culture,
recognizing, however, that we may gain talent and new
perspectives from external sources.
Elements
of Compensation
Our compensation program for executive officers and senior
managers generally consists of the following five elements:
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base salary;
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performance-based annual cash bonus determined primarily by
reference to objective financial and operating criteria;
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long-term equity incentives in the form of stock options and
other stock-based awards or grants;
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specified perquisites; and
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employee benefits that are generally available to all of our
employees.
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The Compensation Committee has the responsibility to make and
approve changes in the total compensation of our executive
officers, including the mix of compensation elements. In making
decisions regarding an executives total compensation, the
Compensation Committee considers whether the total compensation
is (i) fair and reasonable to us, (ii) internally
appropriate based upon our culture and the compensation of our
other employees, and (iii) within a reasonable range of the
compensation afforded by other opportunities. The Compensation
Committee also bases its decisions regarding compensation upon
its assessment of the executives leadership, individual
performance, years of experience, skill set, level of commitment
and responsibility required in the position, contributions to
our financial success, the creation of shareholder value, and
current and past
9
compensation. In determining the mix of compensation elements,
the Compensation Committee considers the effect of each element
in relation to total compensation. Consistent with our desired
culture of industry leading performance and cost control, the
Compensation Committee has attempted to keep base salaries at
moderate levels for companies within our market and total
capitalization and weight overall compensation toward incentive
cash and equity-based compensation. The Compensation Committee
specifically considers whether each particular element provides
an appropriate incentive and reward for performance that
sustains and enhances long-term shareholder value. In
determining whether to increase or decrease an element of
compensation, we rely upon the Compensation Committees
judgment concerning the contributions of each executive and,
with respect to executives other than the CEO, we consider the
recommendations of the CEO. We generally do not rely on rigid
formulas (other than performance measures under our annual cash
bonus program) or short-term changes in business performance
when setting compensation.
The following is a discussion of each element of our
compensation program, including (i) why we choose to pay
each element, (ii) how we determine the specific amount to
pay for each element, and (iii) how each element, and our
decisions regarding each element, fit into our overall
compensation objectives and affect decisions regarding other
elements. We also discuss the specific decisions we made with
respect to the compensation of our Chief Executive Officer,
Chief Financial Officer, and our three other most highly
compensated executive officers for the fiscal year ended
December 31, 2006 (collectively, the Named Executive
Officers or NEOs). We made all such
decisions in the context of us achieving profitability and
strong top-line growth in our expedited transportation
operations.
Base
Salary
We pay base salaries at levels that reward executive officers
for ongoing performance and that enable us to attract and retain
highly qualified executives, but not at a level that allows them
to achieve the overall compensation they desire. Base pay is a
critical element of our compensation program because it provides
our executive officers with stability. Such stability allows our
executives to focus their attention and efforts on creating
shareholder value and on our other business objectives. In
determining base salaries, we consider an executives
qualifications and experience, including, but not limited to,
the executives industry knowledge and the quality and
effectiveness of the executives leadership, scope of
responsibilities, past performance, and future potential of
providing value to our shareholders. Although we do not believe
it is appropriate to establish compensation levels based solely
on benchmarking because of geographic and incentive compensation
differences, we consider base salaries of executives having
similar qualifications and holding comparable positions in
companies similarly situated to ours. We set our base salaries
at a level that allows us to pay a portion of an executive
officers total compensation in the form of perquisites,
cash bonuses, and long-term incentives. We believe that such a
mix of compensation helps us incent our executives to maximize
shareholder value. We consider adjustments to base salaries
annually to reflect the foregoing factors but do not apply a
specific weighting to such factors.
Base
Salary of Our Chief Executive Officer
In July 2006, the Compensation Committee of our Board of
Directors, composed exclusively of outside directors, reviewed
the overall compensation of Michael Welch, our President and
CEO. As part of this review, the Compensation Committee reviewed
the compensation of numerous publicly traded companies similarly
situated to ours, including those in the universe of publicly
traded transportation companies, and based upon this review, set
Mr. Welchs base salary at $175,000 for periods after
this date. The decision was based in part on a review of the
Companys financial performance since the conclusion of the
restructuring period, which has been explained more fully within
our annual report on
Form 10-K.
Base
Salary of Our Other Named Executive Officers
In August 2006, after reviewing our financial performance since
the completion of our restructuring period, and considering our
compensation philosophy and the guidelines described above, the
Compensation Committee approved the following annual base salary
increases for our Named Executive Officers, other than our CEO:
(i) a $15,000 increase for Mark Patterson in continued
recognition of his development and level of responsibilities as
our Chief Financial Officer, and (ii) no additional
increases within the remaining group of NEOs.
10
The following table reflects the adjustments we made from 2005
to 2006 to the base salaries of our Named Executive Officers, as
well as the date the increases became effective. Base salaries
of our NEOs are reviewed, and if warranted adjusted by the
Compensation Committee and Board of Directors, in close
proximity to the anniversary date of appointment to the
executives respective position. The amounts reflected
within the columns represent the amount of base salary for each
NEO as of December 31 of each respective year represented.
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2005 Base
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2006 Base
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Salary
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Salary
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Named Executive Officer and Principal Position
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($)
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($)
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Michael R. Welch, President and
CEO (effective
06-19-2006)
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150,000
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175,000
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Mark K. Patterson, Chief Financial
Officer (effective
09-01-2006)
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125,000
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140,000
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James M. Welch, Vice President of
Operations
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125,000
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125,000
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John D. Welch, Corporate Controller
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125,000
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125,000
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Dennis M. McCaffrey, Vice
President of Sales
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116,250
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116,250
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TOTAL
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641,250
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681,250
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Performance-Based
Annual Cash Bonuses
In June 2006, our Board of Directors modified and approved our
2006 Executive Cash Bonus Plan (Cash Bonus Plan). We
use our Cash Bonus Plan to provide annual incentives to
executive officers and members of our senior management team in
a manner designed to (i) link increases in compensation to
increases in our revenues and income in order to reinforce our
focus on creating shareholder value, (ii) reinforce our
desire to control costs, and (iii) link a significant
portion of our executives compensation to the achievement
of such goals. Cash bonuses are designed to reward executive
officers for their contributions to our financial and operating
performance and are based primarily upon our financial results
with weighting apportioned between revenue and earnings growth
targets, as determined by the Compensation Committee each year.
The bonus remains discretionary, and may be adjusted at the sole
discretion of the Board of Directors.
Under the Cash Bonus Plan, the Compensation Committee sets
growth or performance targets, for each of two components,
revenue and earnings. The Compensation Committee assigns a
percentage weighting to each of the components that together
equals one hundred percent. The annual cash bonus amount awarded
to each executive officer is dependent upon the Company
performing to these levels. Growth targets are closely tied to
the Companys budget established by the Board of Directors
and are intended to create long-term value for our shareholders.
Corporate performance targets are typically defined as a
multiple of prior year results. For each of the components, the
executive is eligible to be awarded a portion, or factor, of
their respective base salary corresponding to the weighting
assigned to each component, provided performance targets
established are attained. The eligible amount of base
compensation factor used in the calculations is indexed for each
ten-percentage point change upwards and downwards in the
Companys performance compared to the performance targets.
No bonus award factor is assigned for performance below 75% of
the performance target and no additional award has been assigned
for performance above 150% of the performance target. Each
executive has been classified within a tier, which both reflects
the views of the Compensation Committee of the executives
ability to help the Company meet its long-term goals as
well as differing levels of managerial responsibility for each
executive. The Compensation Committee also reserves and retains
the right to award cash bonuses for achievements outside the
objective performance targets or to reduce the amount awarded at
its discretion. The Compensation Committee sets the specific
performance targets for the executives after (i) reviewing
and considering the Companys budget and strategic goals,
as adopted by the Board of Directors, (ii) engaging in
active dialog with our CEO concerning our strategic objectives
and performance, and (iii) reviewing the appropriateness of
the financial measures used in the Cash Bonus Plan.
The Compensation Committee adjusts revenue and earnings growth
targets used in the cash bonus calculations, in order to reduce
the impact of certain events not previously budgeted such as
acquisitions,
start-ups
and other less common transactions. In determining an executive
officers cash bonus opportunity, the Compensation
Committee considers (i) the value that achieving specific
performance targets will add to our shareholders, (ii) the
degree of difficulty in achieving specific performance targets,
and (iii) each of the other elements comprising the
executives total compensation. When calculating the cash
bonus earned by an executive officer, the Compensation
11
Committee may, in its sole discretion, eliminate or modify the
size of a bonus if it deems such action is appropriate. Further,
the Compensation Committee certifies, prior to payment, that the
Company achieved the respective performance targets underlying
the cash bonus.
Performance-Based
Annual Cash Bonuses Paid to Our Named Executive
Officers
For 2006, our Compensation Committee developed a performance
target that represented revenue growth of approximately 20% in
our remaining expedite transportation operations and earnings,
or net income, of approximately 7% of our revenue. Weighting was
assigned to each of the components, revenue and earnings, with a
weighting of 30% assigned to revenue growth and a weighting of
70% assigned to earnings performance. Greater emphasis was
placed upon earnings performance in 2006, based upon our
historic inability to achieve profitability. For attaining this
level of performance, the Compensation Committee outlined a
potential bonus award of 50% percent of base salary for our
tier I executives; 40% of base salary for our tier II
executives; and 30% of base salary for our tier III
executives. For 2006, our Chief Executive Officer was classified
into tier I; our Chief Financial Officer was classified
into tier II; and our other Named Executive Officers were
classified into tier III.
In January 2007, for the year ended December 31, 2006, the
Compensation Committee approved performance-based cash bonus
awards under which (i) Michael Welch received a cash bonus
of 50% of his base salary; (ii) Mark Patterson received a
cash bonus of 40% of his base salary; and (iii) each of
Dennis McCaffrey, James Welch and John Welch received cash
bonuses ranging from approximately 22% to 30% of their
respective base salaries.
The percentage cash bonus award available for each tier of
executive officer was based on the Compensation Committees
evaluation of the magnitude of each executive officers
ability to impact corporate performance based on the
executives responsibilities at the time. These percentages
may change from time to time as responsibilities of the
executive officers change and as specific goals evolve.
For 2006, we achieved revenue growth of 20% in our remaining
expedite transportation operations, a net income level
representing approximately 7% of earnings and an increase in the
value of our common stock of 87%. For 2006, our Named Executive
Officers received cash bonuses in the following amounts:
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2006 Performance -
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Named Executive Officer and Principal Position
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Based Bonus ($)
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Michael R. Welch, President and CEO
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87,500
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Mark K. Patterson, Chief Financial
Officer
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56,000
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Dennis M. McCaffrey, Vice
President of Sales
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34,875
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James M. Welch, Vice President of
Operations
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28,090
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John D. Welch, Corporate Controller
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37,500
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Long-Term
Incentives
On June 17, 2005, our shareholders approved and ratified
our Amended and Restated 2001 Stock Option Plan (Stock
Option Plan). Our Stock Option Plan is a broad-based
equity compensation plan that we use to attract, motivate, and
retain qualified executive officers by providing them with
long-term incentives. We also use the Stock Option Plan to align
our executives and shareholders long-term interests
by creating a strong and direct link between executive pay and
shareholder return.
The Stock Option Plan allows the Compensation Committee to link
compensation to performance over a period of time by granting
awards that have multiple-year vesting schedules. Awards with
multiple-year vesting schedules, such as stock options, provide
balance to the other elements of our compensation program that
otherwise link compensation to annual performance. Awards with
multiple-year vesting schedules create incentives for executive
officers to increase shareholder value over an extended period
of time because the value received from such awards is based on
the growth of the stock price above the grant price. Such awards
also incent executives to remain with us over an extended period
of time. Thus, we believe our Stock Option Plan is an effective
way of aligning the interests of our executive officers with
those of our shareholders.
Under the Stock Option Plan, the Compensation Committee may
grant stock options or award restricted stock as forms of
executive officer compensation. To date, the Compensation
Committee has only awarded stock options
12
under the Stock Option Plan because the Committee believes that
stock options have historically been an effective means of
providing executive officers an incentive to work toward, and
rewarding them for, increasing shareholder value. The
Compensation Committee recognizes a broad trend toward some
level of restricted stock grants and may, in its discretion,
award restricted stock in the future.
The Compensation Committee considers several factors when
determining the number of options to award to our executive
officers. When determining the number of options to grant
executive officers, the Compensation Committee considers
(i) the recommendations of our CEO; (ii) the value of
the option in relation to other elements of total compensation;
(iii) the number of options currently held by the
executive; (iv) the number of options granted to the
executive in prior years; and (v) the executives
position, scope of responsibility, ability to affect our
profits, ability to create shareholder value, and historic and
recent performance.
Long
Term Incentives Awarded to Our Named Executive
Officers
On February 28, 2006, after considering each of the factors
described above and reviewing the performance of our Company for
2005, the Compensation Committee granted some of our Named
Executive Officers options to purchase shares of our Common
Stock, with an exercise price equal to the fair market value of
the underlying Common Stock on the date of the grant, in the
following amounts:
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Options Granted
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Named Executive Officer and Principal Position
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(#)
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Michael R. Welch, President and CEO
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50,000
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Mark K. Patterson, Chief Financial
Officer
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25,000
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In January 2007, the Compensation Committee approved a policy
whereby the primary grant of options or restricted stock to our
Named Executive Officers will be linked to a reaffirmation of
provisions within a non-compete agreement with each respective
employee receiving such grant. Historically, grants have been
made once per year contemporaneously with or following the
conclusion of the annual audit. Options granted under our Stock
Option Plan (i) have a grant date that is established when
the Compensation Committee approves the grant and all key terms
have been determined, (ii) have an exercise price equal to
the fair market value of the underlying Common Stock on the date
of the grant, (iii) are subject to a vesting schedule,
(iv) are exercisable for a maximum term of 10 years,
and (v) once made, may not be repriced.
Other
Compensation
We provide our Named Executive Officers with certain other
benefits that we believe are reasonable, competitive, and
consistent with our overall executive compensation program. We
believe that these benefits generally allow our executives to
work more efficiently. The costs of these benefits generally
constitute only a small percentage of each executives
total compensation with the exception being the contributions to
the deferred compensation plan made in conjunction with the
terms of the purchase agreement and associated employment
agreements with the former owners of Express-1, Inc. In setting
the amount of these benefits, the Compensation Committee
considers (i) each executives position and scope of
responsibilities, and (ii) all other elements comprising
the executives compensation. We provided the following
additional benefits to some or all of our Named Executive
Officers during 2006: (i) a vehicle allowance, and
(ii) contributions to a non-qualified deferred executive
compensation plan. We report these costs as personal benefits
for the Named Executive Officers in the Non-equity
Deferred Compensation and All Other
Compensation columns in the Summary Compensation Table
below.
The contributions to our non-qualified deferred executive
compensation plan for 2006, were primarily associated with
employment agreements executed between the Company and certain
of our Named Executive Officers related to the purchase of
Express-1, Inc. from a group of former owners that includes
these Named Executive Officers. No other contributions to the
non-qualified plan were made during 2006, with the exclusion of
matching contributions to Named Executive Officers who chose to
contribute some of their own compensation into the plan.
13
Employee
Benefits
Our Named Executive Officers are eligible to participate in all
of our employee benefit plans, such as our 401(k) Plan and
medical, dental, and group life insurance plans, in each case on
the same basis as our other employees.
Employee
Benefits Paid to Our Named Executive Officers
In 2006, in addition to providing medical, dental, and group
life insurance to our Named Executive Officers, we also
contributed $10,052, which represents our matching discretionary
contribution, to the Non-qualified Deferred Compensation and
401(k) Plans of our group of Named Executive Officers.
Employment
Agreements
We currently have employment contracts in place with certain of
our Named Executive Officers. It is the position of the
Compensation Committee that employment contracts are unnecessary
to attract and retain key executives, except in certain
positions. Consequently, the Compensation Committee has used its
discretion to not renew contracts of certain NEOs, as
their existing contracts mature. The section below identifies
the employment contract in place with each of our NEOs and
the maturity date of each contract. The contracts in general
have contained provisions outlining annual compensation, annual
incentive bonuses, stock awards, severance agreements, or
change-of-control
agreements with our Named Executive Officers.
Employment
Contracts
The Company entered into an employment agreement with Michael R.
Welch, the Companys Chief Executive Officer, on
July 1, 2005, which terminates on July 1, 2008. The
agreement shall be automatically extended for an additional
one-year period after the initial term unless at least
30 days prior to the termination date either the Company or
Mr. Welch give written notice to the other that the
employment agreement will not be renewed. In addition to auto,
cellular and other expense allowances, Mr. Welchs
starting base salary was $150,000 under the terms of the
agreement, with provisions for annual increase in base salary of
not less than $10,000 each year. Mr. Welch is also eligible
to receive an annual bonus based on the Companys financial
performance in the form of stock options and cash. The agreement
also granted 100,000 options at a price of $0.57 per share,
vesting over a three-year period. The new agreement replaced a
previous employment agreement entered into in August 2004,
between the Company and Mr. Welch. Mr. Welchs
employment agreement provides for the continuation of
compensation in the event of termination for other than cause or
in the event of a change in control. In either case,
Mr. Welch is to receive twelve months of his then current
base salary, excluding benefits, perquisites and bonuses.
In August 2005, the Company entered into an employment agreement
with Mark Patterson, the Companys Chief Financial Officer,
which terminates July 2008. In addition to reasonable expense
reimbursement, this agreement provided for a salary of $125,000
per year with annual increases in salary and bonuses at the
discretion of the Board of Directors. The agreement also
provided for 100,000 options at a price of $1.25 per share.
Mr. Pattersons employment agreement provides for the
continuation of compensation in the event of termination for
other than cause or in the event of a change in control. In
either case, Mr. Patterson is to receive his then current
base salary, excluding benefits, perquisites and bonuses for the
lesser of a period of twelve months or the remaining term of his
employment contract.
In August 2004, the Company entered into an employment agreement
with John. D. Welch, in conjunction with the purchase agreement
between the Company and Express-1. The agreement terminates in
August 2007. In addition to auto, cellular and other expense
allowances, Mr. Welchs agreement calls for a base
salary of $125,000 per year; a contribution to the
Companys non-qualified deferred compensation plan of
$30,000 per year; and, an annual bonus at the discretion of the
Board of Directors. Mr. Welchs employment agreement
provides for the continuation of compensation in the event of
termination for other than cause or in the event of a change in
control. In the event of termination for other than cause,
Mr. Welch is to receive his base salary, at not less than
$125,000 per year, excluding benefits, perquisites and bonuses,
for the lesser of twenty-four months or the remainder of his
contract. In the event of a change in control, Mr. Welch is
to receive his base salary, at not less than $125,000 per year,
excluding benefits, perquisites and bonuses, for the remainder
of the contract.
14
In August 2004, the Company entered into an employment agreement
with James M. Welch, in conjunction with the purchase agreement
between the Company and Express-1. The agreement terminates in
August 2007. In addition to auto, cellular and other expense
allowances, Mr. Welchs agreement calls for a base
salary of $125,000 annually; a contribution to the
Companys non-qualified deferred compensation plan of
$30,000 per year; an annual cash bonus equivalent to $10,000 per
million in Company income; and, an annual stock option award
equivalent to 15,000 shares per million in Company income
at a strike price of $1.45 per share and a maturity of three
years. Mr. Welchs employment agreement provides for
the continuation of compensation in the event of termination for
other than cause or in the event of a change in control. In the
event of termination for other than cause, Mr. Welch is to
receive his base salary, at not less than $125,000 per year,
excluding benefits, perquisites and bonuses, for the lesser of
twenty-four months or the remainder of his contract. In the
event of a change in control, Mr. Welch is to receive his
base salary, at not less than $125,000 per year, excluding
benefits, perquisites and bonuses, for the remainder of the
contract.
Summary
Compensation Table
The following table sets forth information concerning the total
compensation for fiscal year 2006 awarded to, earned by, or paid
to those persons who were, at December 31, 2006,
(i) our Chief Executive Officer, (ii) our Chief
Financial Officer, and (iii) our three other most highly
compensated executive officers with total compensation exceeding
$100,000 for the fiscal year ended December 31, 2006
(collectively, the Named Executive Officers).
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|
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Cash
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Non-Equity
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Incentive
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Options
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Deferred
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All Other
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Total
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Salary(1)
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Bonus(2)
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Awards(3)
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Compensation(4)
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Compensation(5)
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Compensation
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Name and Position
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Year
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$
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$
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$
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$
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$
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$
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Michael R. Welch
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2006
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162,500
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87,500
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9,234
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30,000
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8,775
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298,009
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President and Chief Executive
Officer
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Mark K. Patterson
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2006
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130,192
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56,000
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4,617
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1,016
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191,825
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Chief Financial Officer
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|
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Dennis M. McCaffrey
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2006
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116,250
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34,875
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8,791
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159,916
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Vice President of Sales
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James M. Welch
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2006
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125,000
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28,090
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30,000
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6,496
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189,586
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Vice President of Operations
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John D. Welch
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2006
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125,000
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37,500
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30,000
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4,399
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196,899
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Corporate Controller
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(1) |
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Included within this column is the base salary of each Named
Executive Officer for the calendar year of 2006. |
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(2) |
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Included within this column are the performance based annual
cash bonus awards for each Named Executive Officer. The amounts
were earned in December 2006, based upon the 2006 performance
and paid in February 2007. |
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(3) |
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Included within this column are the awards of stock options
based upon the Companys 2005 performance. The grant dates
on these awards were February 28, 2006, and the dollar
amount represented is the respective Black-Scholes valuation for
options on each respective grant. |
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(4) |
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Included within this column are the contributions to the
Companys non-qualified deferred compensation plan for each
Named Executive Officer. For 2006, the Company elected to
contribute only the amount contractually obligated by the
purchase agreement between itself and the former owners of
Express-1, Inc. |
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(5) |
|
Included within this column are all other compensation items
paid to each Named Executive Officer. These are further detailed
in the subsequent table titled All Other
Compensation. |
15
All Other
Compensation Table
The following table describes each component of the All
Other Compensation column in the Summary Compensation
Table.
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Matching
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Contributions
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Perquisites and
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to Retirement
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Other Personal
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and 401(k)
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Benefits(1)
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Plans(2)
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Total
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Name
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Year
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($)
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($)
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($)
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Michael R Welch
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2006
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5,254
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3,521
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8,775
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Mark K. Patterson
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2006
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1,016
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0
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1,016
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Dennis M. McCaffrey
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2006
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7,045
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1,746
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8,791
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James M. Welch
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2006
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3,171
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3,325
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6,496
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John D. Welch
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2006
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2,938
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1,461
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4,399
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(1) |
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Included within this column are primarily amounts for cell phone
reimbursements and automobile allowances. |
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(2) |
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Included in this column are matching contributions to the
Companys
401-K plan
and non-qualified deferred compensation plan. Only amounts
contributed directly by the employee are eligible for matching
contributions and these matches are identical to those available
to other employees. |
Narrative
to the Summary Compensation Table
See Executive Compensation Compensation
Discussion and Analysis for a complete description of our
compensation plans pursuant to which the amounts listed under
the Summary Compensation Table were paid or awarded and the
criteria for such award or payment.
Grants of
Plan-Based Awards
The following table sets forth information concerning each grant
of an award made to our Named Executive Officers during 2006.
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Options
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Exercise
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Grant Date
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Granted
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Price
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Fair Value
|
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Named Executive Officer and Principal Position
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(#)
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($)
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($)
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Michael R. Welch, President and CEO
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50,000
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0.79
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9,234
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Mark K. Patterson, Chief Financial
Officer
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25,000
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0.79
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4,617
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Narrative
to Grants of Plan-Based Awards
See Executive Compensation Compensation
Discussion and Analysis for a complete description of
(i) the performance targets for payment of annual
incentives, and (ii) the options that we awarded during the
year.
16
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth information concerning all stock
option grants held by our Named Executive Officers as of
December 31, 2006. All outstanding equity awards are in
shares of our Common Stock.
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All Option Awards
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Grant Date Fair
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Exercise or
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|
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Value of Stock
|
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Number of Securities Underlying Options
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Base Price of
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and Option
|
|
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Option
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Number
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Number
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Number
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Option Awards
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Awards
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Expiration
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Name
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Grant Date
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Granted
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Exerciseable
|
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Unexerciseable
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($/Share)
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($)
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Date
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Michael R. Welch
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8/9/2004
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500,000
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266,667
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233,333
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|
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1.45
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|
|
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77,503
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|
|
|
8/9/2009
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|
|
|
|
7/1/2005
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|
|
|
100,000
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|
|
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58,333
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|
|
|
41,667
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|
|
|
0.57
|
|
|
|
16,411
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|
|
|
7/1/2015
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|
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|
|
2/28/2006
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|
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50,000
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|
|
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18,056
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|
|
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31,944
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|
|
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0.79
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|
|
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9,234
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|
|
|
2/28/2016
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|
Mark K. Patterson
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|
8/15/2005
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|
|
|
100,000
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|
100,000
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|
|
|
|
|
|
|
1.25
|
|
|
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6,728
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|
|
|
8/15/2015
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|
|
|
|
2/28/2006
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|
|
|
25,000
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|
|
|
9,028
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|
|
|
15,972
|
|
|
|
0.79
|
|
|
|
4,617
|
|
|
|
2/28/2016
|
|
Dennis M. McCaffrey
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|
|
9/4/2003
|
|
|
|
100,000
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|
|
|
71,667
|
|
|
|
28,333
|
|
|
|
1.25
|
|
|
|
22,702
|
|
|
|
9/4/2008
|
|
|
|
|
1/4/2004
|
|
|
|
100,000
|
|
|
|
65,000
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|
|
|
35,000
|
|
|
|
1.40
|
|
|
|
56,164
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|
|
|
1/4/2009
|
|
John D. Welch
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|
|
8/9/2004
|
|
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75,000
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|
|
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40,000
|
|
|
|
35,000
|
|
|
|
1.45
|
|
|
|
11,625
|
|
|
|
8/9/2009
|
|
Vesting
Schedule Table
The following table describes the vesting schedule as of
December 31, 2006, for each option listed in the
Outstanding Equity Awards at Fiscal Year-End Table.
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|
|
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All Option Awards
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|
|
Option Grant
|
|
|
|
|
Date
|
|
Option Awards Vesting Schedule
|
|
Michael R. Welch
|
|
8/9/2004
|
|
Equal amounts are vested monthly
over the subsequent three years following date of grant.
|
|
|
7/1/2005
|
|
Equal amounts are vested monthly
over the subsequent three years following date of grant.
|
|
|
2/28/2006
|
|
Equal amounts are vested monthly
over the subsequent three years following date of grant.
|
Mark K. Patterson
|
|
8/15/2005
|
|
100% Vested immediately upon
signing of employment contract.
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|
|
2/28/2006
|
|
Equal amounts are vested monthly
over the subsequent three years following date of grant.
|
Dennis M. McCaffrey
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|
9/4/2003
|
|
Equal amounts are vested monthly
over the subsequent three years following date of grant.
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|
|
1/4/2004
|
|
Equal amounts are vested monthly
over the subsequent three years following date of grant.
|
John D. Welch
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9/9/2004
|
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Equal amounts are vested monthly
over the subsequent three years following date of grant.
|
Option
Exercises and Stock Vested
During 2006, there were no exercises of options or vestings of
stock awards among our Named Executive Officers and Directors.
17
Director
Compensation
The following table sets forth information concerning the
compensation of our non-employee directors for fiscal 2006.
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Fees Earned or Paid
|
|
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Stock
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Option
|
|
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|
|
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in Cash
|
|
|
Awards
|
|
|
Awards
|
|
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Total
|
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Name
|
|
($)
|
|
|
($)
|
|
|
($)
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|
|
($)
|
|
|
James J. Martell
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|
|
21,000
|
|
|
|
|
|
|
|
|
|
|
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21,000
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|
Jay N. Taylor
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|
|
24,500
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|
|
|
|
|
|
|
|
|
|
|
24,500
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|
Calvin (Pete) R. Whitehead
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|
|
19,000
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|
|
|
|
|
|
|
|
|
|
|
19,000
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|
Jennifer H. Dorris
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|
|
29,500
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|
|
|
|
|
|
|
|
|
|
|
29,500
|
|
John F. Affleck-Graves
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|
|
1,000
|
|
|
|
|
|
|
|
44,023(1
|
)
|
|
|
45,023
|
|
|
|
|
(1) |
|
A grant for 100,000 stock options was made in favor of
John F. Affleck-Graves in October 2006 at the time of his
appointment to the board. The strike price of the options was
$1.29 and the options vest monthly over a three-year period with
an expiration date 10 years from grant. The dollar amount
shown represents the Black-Scholes valuation at the date of
grant. |
Narrative
to Director Compensation
The Companys Board appoints the executive officers to
serve at the discretion of the Board. Directors who are also
employees receive no compensation for serving on the Board. In
2006, the Companys non-employee director compensation plan
was modified. New board members, at the time of their
appointment, are awarded a one-time grant of 100,000 options at
the then current market price, with vesting over a three-year
term. In the first quarter of each year, the Board reviews the
Companys results and determines whether an additional
award of stock options will be granted to the non-employee
directors. In December 2006, the Board of Directors approved
stock option awards of 25,000 shares to each non-employee
director to be granted in 2007. Grants are to be made at the end
of the month corresponding to the directors appointment to
the board. The exercise price of the grants is determined at the
time grant, and represents the then current trading price of the
Companys stock. Each non-employee director receives
(i) $2,000 per day for each board meeting attended;
(ii) $500 for participation in a conference call; and
(iii) reasonable reimbursement of expenses associated with
attendance and participation at board meetings. The Chairperson
of the Board of Directors receives an annual fee of $10,000. The
Chairperson of the Compensation Committee receives an annual fee
of $10,000. The Chairperson of the Audit Committee receives an
annual fee of $15,000. The Chairperson of the Nominating
Committee receives an annual fee of $5,000. Each of these fees
to the Chairpersons of the aforementioned Committees, is in four
equal installments, throughout the year.
Stockholder
Communication with the Board
The Board of Directors has established a process to receive
communications from stockholders. Stockholders may contact any
member (or all members) of the Board of Directors (or the
non-management directors as a group) or any committee of the
Board of Directors by mail. To communicate with the Board of
Directors, any individual director or any group or committee of
directors, correspondence should be addressed to the Board of
Directors or any such individual director or group or committee
of directors by either name or title. All such correspondence
should be sent c/o Chief Financial Officer, 429 Post Road,
Buchanan, Michigan 49107.
All communications received as set forth in the preceding
paragraph will be opened by the office of our Chief Financial
Officer for the sole purpose of determining whether the contents
represent a message to our directors. Any contents that are not
in the nature of advertising, promotions of a product or
service, or patently offensive material will be forwarded
promptly to the addressee. In the case of communications to the
Board of Directors or any group or committee of directors, the
Chief Financial Officers office will make sufficient
copies of the contents to send to each director who is a member
of the group or committee to which the correspondence or
e-mail is
addressed.
18
Beneficial
Ownership of Management and Certain Beneficial Owners
The following table sets forth information known to us, as of
March 31, 2007, relating to the beneficial ownership of
shares of common stock by:
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each person who is known by us to be the beneficial owner of
more than 5% of the Companys outstanding common stock;
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each director;
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each executive officer; and
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all executive officers and directors as a group.
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Under securities laws, a person is considered to be the
beneficial owner of securities owned by him (or certain persons
whose ownership is attributed to him) or securities that can be
acquired by him within 60 days, including upon the exercise
of options, warrants or convertible securities. The Company
determines a beneficial owners percentage ownership by
assuming that options, warrants and convertible securities that
are held by the beneficial owner, but not those held by any
other person, and which are exercisable within 60 days,
have been exercised or converted.
The Company believes that all persons named in the table have
sole voting and investment power with respect to all shares of
Common Stock shown as being owned by them. Unless otherwise
indicated, the address of each beneficial owner in the table set
forth below is care of Express-1 Expedited Solutions, Inc., 429
Post Road. Buchanan, Michigan 49107.
As of March 31, 2007, the Company had no knowledge of any
beneficial owner, exclusive of the management group, who had an
ownership interest of more than 5% of the Companys
outstanding common stock. The Company has relied upon public
filings in reaching this conclusion.
Security
Ownership of Certain Beneficial Owners and Management
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Amount and
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Nature of
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Beneficial
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Percentage
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Name/Address of Beneficial Owner
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Ownership
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of Class
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Michael R. Welch(1)
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1,993,286
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7
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%
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Mark K. Patterson(2)
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169,900
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1
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%
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Dennis M. McCaffrey(3)
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281,250
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1
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%
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John D. Welch(4)
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672,257
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2
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%
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James M. Welch(5)
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553,082
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2
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%
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James J. Martell(6)
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375,000
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1
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%
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Jay N. Taylor(7)
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335,000
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1
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%
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Calvin R. (Pete) Whitehead(8)
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276,000
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1
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%
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Jennifer H. Dorris(9)
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255,000
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1
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%
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John F. Affleck-Graves(10)
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110,000
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*
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Executive Officers and Directors
(as a group of 10)
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5,020,775
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18
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%
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* |
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Less than 1% |
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(1) |
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Michael R. Welch is the Companys President , CEO and a
Director. Includes 1,788,286 shares underlying options to
purchase common stock at prices ranging from $0.57 to $1.75 per
share and expiring at dates between August 2009 and February
2016. |
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(2) |
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Mark K. Patterson is the Companys Chief Financial Officer
and a Director. Includes 165,000 shares underlying options
to purchase common stock at prices ranging from $0.79 to $1.48
per share and expiring at dates between August 2015 and February
2017. |
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(3) |
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Dennis M. McCaffrey the Companys Vice President of Sales.
Includes 270,250 shares underlying options to purchase
common stock at prices ranging from $1.25 to $1.48 per share and
expiring at dates between September 2008 and February 2017. |
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(4) |
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John D. Welch is the Companys Corporate Controller.
Includes 507,857 shares underlying options to purchase
common stock at prices ranging from $1.45 to $1.75 per share and
expiring at dates between June 2007 and February 2017. |
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(5) |
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James M. Welch is the Companys Vice President of
Operations. Includes 493,082 shares underlying options to
purchase common stock at prices ranging from $1.45 to $1.75 and
expiring at dates between June 2007 and February 2017. |
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(6) |
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James J. Martell is a Director of the Company and serves as it
Chairman. Includes 375,000 shares underlying common stock
purchase warrants exercisable from $0.74 to $1.35 per share
expiring at dates between January 2010 and January 2017. |
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(7) |
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Jay N. Taylor is a Director of the Company. Includes
325,000 shares underlying common stock purchase warrants
exercisable from $0.74 to $1.33 per share expiring at dates
between January 2010 and March 2017. |
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(8) |
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Calvin R. (Pete) Whitehead is a Director of the Company.
Includes 275,000 shares underlying common stock purchase
warrants exercisable from $0.74 to $1.35 per share expiring at
dates between January 2010 and January 2017. |
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(9) |
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Jennifer Dorris is a Director of the Company. Includes
250,000 shares underlying common stock purchase warrants
exercisable from $0.74 to $1.25 per share expiring at dates
between January 2010 and December 2015. |
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(10) |
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John F. Affleck-Graves is a Director of the Company. Includes
100,000 shares underlying common stock purchase warrants
exercisable at $1.29 per share expiring in October 2016. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934
(the Exchange Act) requires the Companys
directors and executive officers, and persons who own more than
10% of a registered class of the Companys equity
securities, to file with the Securities and Exchange Commission
(SEC) and any securities exchanges on which the
equities of the Company trade, initial reports of ownership and
reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and greater than
10% stockholders are required by SEC regulation to furnish the
Company copies of all Section 16(a) reports they file.
Based solely on the Companys review of copies of forms
filed pursuant to Section 16(a) of the Securities Exchange
Act of 1934, as amended, and written representations from
certain reporting persons, the Company believes that during 2006
all reporting persons timely complied with all filing
requirements applicable to them.
Board
Recommendation
For the reasons outlined above, the Board recommends a
vote FOR each nominee standing for election to the Board of
Directors.
PROPOSAL 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has selected Pender Newkirk to serve as the
Companys independent accountants for the year ending
December 31, 2007. Representatives of Pender Newkirk are
expected to be present at the Annual Meeting and will have an
opportunity to make a statement and to respond to appropriate
questions. Pender Newkirk served as the Companys
independent accountants for the year ended December 31,
2006.
Principal
Account fees & Services
The aggregate fees billed for professional services rendered by
Pender Newkirk for the audit of the Companys annual
financial statements and the reviews of the financial statements
included in the Companys Quarterly
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Reports on
Form 10-Q
were $122,740 for the year ended December 31, 2006, and
were $84,000 for the year ended December 31, 2005. The
foregoing fees were incurred with respect to professional
services that are normally provided by our auditors. In
connection with statutory and regulatory filings or engagements,
such services are rendered for the audit of the Companys
consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports
and services.
Audit-Related
Fees
The Company did not incur any fees for professional services
rendered by Pender Newkirk for assurance and related services
that are reasonably related to the performance of the audit or
review of the Companys financial statements and are not
reported under the caption Audit Fees above for the
year ended December 31, 2006, or for the year ended
December 31, 2005.
Tax
Fees
The aggregate fees billed for professional services rendered by
Pender Newkirk for tax compliance, tax advice, and tax planning
were $25,600 for the year ended December 31, 2006, and were
$25,000 for the year ended December 31, 2005. The foregoing
fees were incurred with respect to professional services
provided in connection with tax compliance, advice and planning.
These services include assistance regarding federal, state and
international tax compliance, assistance with tax reporting
requirements and audit compliance, and mergers and acquisitions
tax compliance.
All Other
Fees
The Company did not incur any fees, in addition to those set
forth above, for other services rendered by Pender Newkirk to
the Company for the year ended December 31, 2006.
Miscellaneous
The Audit Committee reviews, and in its sole discretion
pre-approves, our independent auditors annual engagement
letter including proposed fees and all audit and non-audit
services provided by the independent auditors. Accordingly, all
services described under Audit Fees,
Audit-Related Fees, Tax Fees and
All Other Fees were pre-approved by our Audit
Committee. The Audit Committee may not engage the independent
auditors to perform the non-audit services proscribed by law or
regulation. The Audit Committee may delegate pre-approval
authority to a member of the Audit Committee, and authority
delegated in such manner must be reported at the next scheduled
meeting of the Audit Committee.
Board
Recommendation
The Board recommends that the Stockholders vote FOR the
ratification of the appointment of Pender Newkirk as the
Companys independent accounts for the year ending
December 31, 2007.
PROPOSAL 3
CLASSIFICATION
OF OUR BOARD OF DIRECTORS
The Board of Directors has unanimously approved and recommends
that the stockholders approve an amendment to the Companys
Certificate of Incorporation and Bylaws to provide for the
classification of the Board into three classes of directors with
staggered three-year terms of office.
Description
of Proposal
In accordance with the Certificate of Incorporation and Bylaws
of the Company, the Board has established the number of
directors as seven. Each director currently holds office for a
one-year term until the succeeding annual meeting and thereafter
until the directors successor is elected and qualified.
Delaware law permits corporations to have classified boards of
directors.
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The adoption of this Proposal 3 would divide the Board into
three classes. If this proposal is approved, and each of the
nominees to our Board set forth in Proposal 1 is elected,
Messrs. Jay Taylor and Michael Welch will be Class I
directors, with their initial term expiring at the annual
meeting in 2008; Messrs. Jim Martell and Pete Whitehead
will be Class II directors, with their initial terms
expiring at our annual meeting in 2009; and Mrs. Jennifer
Dorris and Messrs. John Affleck-Graves and Mark Patterson
will be Class III directors, with their initial terms
expiring at our annual meeting in 2010. Each director will hold
office until his or her successor has been duly elected and
qualified. At each annual meeting of stockholders after their
initial election, each director elected to succeed a director
whose term has expired will be elected for a term of office to
expire at the third succeeding annual meeting of stockholders
after his or her election, with each director to hold office
until his or her successor shall have been duly elected and
qualified.
Advantages
of a Classified Board
The Board believes that the staggered three-year term of a
classified board, with its election of approximately one-third
of the directors each year, will help to assure the continuity
and stability of the Companys long-term policies in the
future, since a majority of the directors at any given time will
have prior experience as directors of the Company. This permits
more effective long-term strategic planning.
In addition, the Board believes that the proposal will assist it
in protecting the interests of the Companys stockholders
in the event of an unsolicited offer for the Company. In such an
event, without a classified board, the bidder could potentially
exact undue leverage on the Board by positioning itself to
replace a majority of the Directors at the following annual
meeting of stockholders. The existence of a classified board
will prevent the usage of any such tactics, and, in the opinion
of the Board, encourage any such potential acquirer to negotiate
directly with the Board in good faith. The Company is not aware
of any attempted bids at this time.
Disadvantages
of a Classified Board
Because of the additional time required to change control of the
Board, a takeover bidder will have to work with the Board in
good faith to remove impediments to its acquisition of the
Company. Even if the takeover bidder were to acquire a majority
of our outstanding voting stock, it will tend to discourage
certain takeover bids, perhaps including some takeover bids that
stockholders may believe would be in their best interests. The
proposed classified board amendment will also make it more
difficult for the stockholders to change the composition of the
Board of Directors even if the stockholders believe such a
change would be desirable.
Treatment
of Vacancies on the Board
If the classification proposal is approved, and a vacancy in the
Board arises thereafter, the then existing members of the Board
will have the authority to appoint a replacement member to the
vacant seat on the Board, to serve for the remainder of the
former directors term, which may, depending on the
circumstances, extend beyond the next annual meeting of the
stockholders.
Manner of
Affecting the Amendment
Upon receipt of the approval of the stockholders, the Company
will affect the classification of its Board through the filing
of a Certificate of Amendment to the Certificate of
Incorporation, in the form of the attached appendix A, with
the State of Delaware. The Certificate of Amendment will become
effective on the date of filing. Concurrently with the filing of
the Certificate of Amendment the Companys Bylaws will be
amended to effectuate the classification of the Board in a
manner consistent with the provisions of the Certificate of
Amendment and this Proposal 3. The proposed amended Bylaw
provisions are set forth in the attached Appendix B.
No Rights
of Appraisal
Under applicable Delaware corporation law, our dissenting
stockholders are not entitled to appraisal rights with respect
to the Amendment, and we will not independently provide our
stockholders with any such right.
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Board
Recommendation
For the reasons outlined above, the Board recommends a
vote FOR the proposal to approve and ratify amendments to
our Certificate of Incorporation and Bylaws creating three
classes (Class I, Class II and Class III) of
director each serving for three-year staggered terms.
PROPOSAL 4
OTHER
MATTERS
The Board does not know of any other matters that may come
before the Meeting. If any other matters are properly presented
to the Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise to act, in accordance
with their best judgment on such matters.
STOCKHOLDER
PROPOSALS
Proposals of Stockholders intended to be presented at the
Companys 2008 Meeting of Stockholders must be received by
the Company no later than January 1, 2008, in order to be
included in the proxy statement and the proxy relating to that
Annual Meeting.
Whether or not you plan to attend, you are urged to complete,
sign and return the enclosed proxy in the accompanying envelope.
A prompt response will greatly facilitate arrangements for the
Meeting, and your cooperation will be appreciated. Stockholders
who attend the Meeting may vote their shares personally even
though they have sent in their proxies.
By Order of the Board,
Michael R. Welch
Director and Chief Executive Officer
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APPENDIX A
CERTIFICATE
OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
EXPRESS-1
EXPEDITED SOLUTIONS, INC.
Pursuant to Section 242 of the General Corporation Law of
the State of Delaware, the undersigned officer of Express-1
Expedited Solutions, Inc. (the Corporation), a
corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, certifies:
FIRST: This Certificate of Amendment was
authorized and approved by the Board of Directors on
January 26, 2007, and by the holders of a majority of the
Corporations issued and outstanding voting capital stock
on June 14, 2007.
SECOND: Article VII of the Certificate of
Incorporation is deleted in its entirety and replaced with the
following:
ARTICLE VII
BOARD OF
DIRECTORS
The Board of Directors of this Corporation shall consist of not
more than nine directors nor less than four directors; provided,
however, that, except as otherwise provided in this
Article VII, the number of directors shall not be less than
one or more than nine. The number of directors constituting the
Board of Directors of this Corporation may be increased or
decreased from time to time in the manner specified in the
Bylaws. The directors shall be divided into three classes
designated as Class I, Class II and Class III.
Each class shall consist, as nearly as may be possible, of
one-third of the number of directors constituting the entire
Board of Directors. The term of office of the initial
Class I directors will expire in 2008, the term of office
of the initial Class II directors will expire in 2009 and
the term of office of the initial Class III directors will
expire in 2010. Initial class assignments shall be determined by
the Board of Directors. At each annual meeting of stockholders,
successors to the directors whose terms expired at that annual
meeting shall be elected for a three-year term. A director shall
hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and
qualified, subject, however, to such directors prior
death, resignation, retirement, disqualification or removal from
office.
The Board of Directors of the Corporation shall consist of at
least one member and no more than nine members, each of whom
shall be a natural person. The exact number of directors within
the limitations specified in the preceding sentence shall be
fixed from time to time by, or in the manner provided in, the
Bylaws of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Amendment to be duly executed by its Chief Financial Officer
this ,
2007.
EXPRESS-1
EXPEDITED SOLUTIONS, INC.
Mark Patterson, Chief Financial Officer
A-1
APPENDIX B
If Proposal 3, the classification of our Board, is
approved, Article II Section 2,
Article III Section 2, and
Article III Section 5 of the
Companys Bylaws will be deleted and replaced with the
following:
Article II
Section 2
Annual
Meeting
An annual meeting of the stockholders will be held at such time
as may be determined by the Board of Directors, at which meeting
the stockholders will elect Directors as set forth in the
Certificate of Incorporation and these Bylaws, and transact such
other business as may properly be brought before the meeting.
Article III
Section 2
Qualification;
Election; Term
None of the Directors need to be a stockholder of the
Corporation or a resident of the State of Delaware. The
Directors shall be divided into three classes designated as
Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the
number of Directors constituting the entire Board of Directors.
The term of office of the initial Class I Directors will
expire in 2008, the term of office of the initial Class II
Directors will expire in 2009 and the term of office of the
initial Class III Directors will expire in 2010. At each
annual meeting of stockholders, successors to the Directors
whose terms expired at that annual meeting shall be elected for
a three-year term. A Director shall hold office until the annual
meeting for the year in which his term expires and until his
successor shall be elected and qualified, subject, however, to
such Directors prior death, resignation, retirement,
disqualification or removal from office. Directors shall be
elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote on the
election of Directors at any annual or special meeting of
stockholders.
Article III
Section 5
Vacancies
If the number of Directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain, as
nearly as possible, an equal number of Directors in each class.
In the event an increase or decrease makes it impossible to
maintain an equal number of Directors in each class, increases
shall be allocated to the class or classes with the longest
remaining term, and decreases shall be allocated to the class
with the shortest remaining term. Any Director elected to fill a
vacancy resulting from an increase in such class shall hold
office for a term that shall coincide with the remaining term of
that class. In no event will a decrease in the number of
Directors result in the elimination of an entire class of
Directors, cause any class to contain a number of Directors two
or more greater than any other class, or shorten the term of any
incumbent Director. Any Director elected to fill a vacancy not
resulting from an increase in the number of Directors shall have
the same remaining term as that of his or her predecessor. Any
vacancy on the Board of Directors, whether resulting from an
increase in the number of Directors or otherwise, shall be
filled by the affirmative vote of a majority of the Directors
then holding office, even if less than a quorum, or by a sole
remaining director.
B-1
PROXY FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 14,
2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
EXPRESS-1
EXPEDITED SOLUTIONS, INC.
The undersigned holder of shares of Common Stock of
EXPRESS-1
EXPEDITED SOLUTIONS, INC., a Delaware corporation (the
Company), hereby appoints Michael R. Welch and Mark
K. Patterson, and each of them, with full power of substitution,
the proxies and attorneys of the undersigned, to vote as
specified hereon at the Annual Meeting of Stockholders (the
Meeting) of the Company to be held in the
Companys Training Center located at 441 Post Road,
Buchanan, Michigan 49107, on June 14, 2007 at
4:00 p.m., Eastern Daylight Time, and at any adjournments
or postponements thereof, with all powers (other than the power
to revoke the proxy or vote the proxy in a manner not authorized
by the executed form of proxy on the reverse side hereof) that
the undersigned would have if personally present at the Meeting,
to act in the undersigneds discretion upon any other
matter or matters that may properly be brought before the
Meeting and to appear and vote all the shares of Common Stock of
the Company that the undersigned may be entitled to vote. The
undersigned hereby acknowledges receipt of the accompanying
Proxy Statement and Annual Report on
Form 10-K
for the year ended December 31, 2006, and hereby revokes
any proxy or proxies heretofore given by the undersigned
relating to the Meeting.
This proxy may be revoked at any time prior to the voting
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH PROPOSAL
The Board of Directors recommends a
vote FOR the following proposals:
1. To elect the seven nominees listed below to the Board of
Directors of the Company.
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FOR all nominees (except as marked
below)
o WITHHOLD AUTHORITY
to vote for all nominees
NOMINEES:
Michael R. Welch, Mark
K. Patterson, James J. Martell, Jay N. Taylor, Calvin R.
Whitehead, Jennifer H. Dorris and John F. Affleck-Graves.
INSTRUCTIONS: To withhold
authority to vote for any nominee, enter the name of such
nominee in the following space:
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To ratify the Companys selection of Pender
Newkirk & Company LLP as independent auditors for the
year ending December 31, 2007.
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FOR
o
AGAINST o
ABSTAIN
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3. |
To approve and ratify an amendment to our Certificate of
Incorporation and Bylaws to provide for the classification of
our Board into three classes serving staggered three year terms.
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o
FOR
o
AGAINST o
ABSTAIN
UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED AS IF MARKED
FOR THE PROPOSALS ABOVE.
Dated:
_
_ ,
2007
Signature
Signature
(if jointly held)
Please date and sign as name
appears hereon. When signing as Executor, Administrator,
Trustee, Guardian or Attorney, please give full title as such.
If a corporation, please sign in full corporate name by
president or other authorized corporate officer. If a
partnership, please sign in partnership name by authorized
person. Joint owners should each sign.