Payment
of Filing Fee (Check the appropriate box):
|
____X
|
No
fee required.
|
|
____
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
|
|
|
|
(1)
|
Title
of each class of securities to which transaction
applies:
|
|
|
|
|
|
|
|
(2)
|
Aggregate
number of securities to which transaction applies:
|
|
|
|
|
|
|
|
|
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule
|
|
|
0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
|
|
|
|
|
|
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
|
|
|
|
|
(5)
|
Total
fee paid:
|
|
|
|
|
|
|
|
____
|
Fee
paid previously with preliminary materials:
|
|
|
|
|
|
|
|
____
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the
|
|
|
filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration
|
|
|
statement
number, or the form or schedule and the date of its
filing.
|
|
|
|
|
(1)
|
Amount
previously paid:
|
|
|
|
|
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
|
|
|
|
|
|
|
(3)
|
Filing
Party:
|
|
|
|
|
|
|
|
(4)
|
Date
Filed:
|
|
|
|
|
|
|
CPI
AEROSTRUCTURES, INC.
60
Heartland Blvd.
Edgewood,
New York 11717
(631)
586-5200
Notice
of Annual Meeting of Shareholders
to
be held on June 11, 2009
To the
Shareholders of CPI Aerostructures, Inc.:
You are
cordially invited to attend the annual meeting of shareholders of CPI
Aerostructures, Inc. to be held at the offices of Graubard Miller, our general
counsel, located at The Chrysler Building, 405 Lexington Avenue, 19
th
Floor,
New York, New York 10174, on Thursday, June 11, 2009, at 9:00 a.m., to consider
and act upon the following matters:
|
(1)
|
To
elect two Class II directors to serve for the ensuing three-year period
until their successors are elected and qualified;
and
|
|
(2)
|
To
approve the CPI Aerostructures, Inc. Performance Equity Plan 2009 (the
“Performance Equity Plan 2009”);
and
|
|
(3)
|
To
transact such other business as may properly come before the meeting and
any and all postponements or adjournments
thereof.
|
Only
shareholders of record at the close of business on April 24, 2009 will be
entitled to notice of, and to vote at, the meeting and any postponements or
adjournments thereof.
You
are urged to read the attached proxy statement, which contains information
relevant to the actions to be taken at the meeting. Whether or not
you expect to attend the meeting, you are earnestly requested to date, sign and
return the accompanying form of proxy in the enclosed addressed, postage-prepaid
envelope. Returning a proxy will not affect your right to vote in
person if you attend the meeting. You may revoke your proxy if you so
desire at any time before it is voted. We would greatly appreciate the prompt
return of your proxy as this will assist us in preparing for the
meeting.
By Order
of the Board of Directors
Vincent
Palazzolo, Secretary
Edgewood,
New York
April 30,
2009
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JUNE 11, 2009
Our proxy
statement and our annual report on Form 10-K for the fiscal year ended December
31, 2008 are available at
http://www.cpiaero.com/ir.php
under “Annual Reports” and “Proxy”
CPI
AEROSTRUCTURES, INC.
PROXY
STATEMENT
Annual
Meeting of Shareholders
to
be held on June 11, 2009
__________
This
proxy statement and the accompanying form of proxy is furnished to shareholders
of CPI Aerostructures, Inc. in connection with the solicitation of proxies by
our board of directors for use in voting at our annual meeting of shareholders
to be held at the offices of Graubard Miller, our general counsel, located at
The Chrysler Building, 405 Lexington Avenue, 19
th
Floor,
New York, New York 10174, on Thursday, June 11, 2009, at 9:00 a.m., and at any
and all postponements or adjournments.
This
proxy statement, the accompanying notice of meeting of shareholders, the proxy
and the annual report to shareholders for the year ended December 31, 2008 are
being mailed on or about April 30, 2009 to shareholders of record on April 24,
2009. We are bearing all costs of this solicitation.
What
matters am I voting on?
You are
being asked to vote on the following matters:
|
(1)
|
to
elect two Class II directors to serve for the ensuing three-year period
until their successors are elected and qualified;
and
|
|
(2)
|
to
approve the CPI Aerostructures, Inc. Performance Equity Plan 2009 (the
“Performance Equity Plan 2009”);
and
|
|
(3)
|
any
other business that may properly come before the meeting and any and all
postponements or adjournments.
|
Who
is entitled to vote?
Holders
of our common stock as of the close of business on April 24, 2009, the record
date, are entitled to vote at the meeting. As of the record date, we
had issued and outstanding 5,995,465 shares of common stock, our only class of
voting securities outstanding. Each holder of our common stock is
entitled to one vote for each share held on the record date.
What
is the effect of giving a proxy?
Proxies
in the form enclosed are solicited by and on behalf of our board. The
persons named in the proxy have been designated as proxies by our
board. If you sign and return the proxy in accordance with the
procedures set forth in this proxy statement, the persons designated as proxies
by the board will vote your shares at the meeting as specified in your
proxy.
If you
sign and return your proxy in accordance with the procedures set forth in this
proxy statement but you do not provide any instructions as to how your shares
should be voted, your shares will be voted FOR the election of the nominees
listed below under Proposal 1 and FOR the approval of the Performance Equity
Plan 2009 described below under Proposal 2.
If you
give your proxy, your shares also will be voted in the discretion of the proxies
named on the proxy card with respect to any other matters properly brought
before the meeting and any postponements or adjournments. If any
other matters are properly brought before the meeting, the persons named in the
proxy will vote the proxies in accordance with their best judgment.
May
I change my vote after I return my proxy card?
You may
revoke your proxy at any time before it is exercised by:
|
·
|
delivering
written notification of your revocation to our
secretary;
|
|
·
|
voting
in person at the meeting; or
|
|
·
|
delivering
another proxy bearing a later date.
|
Please
note that your attendance at the meeting will not alone serve to revoke your
proxy.
What
is a quorum?
A quorum
is the minimum number of shares required to be present at the meeting for the
meeting to be properly held under our bylaws and New York law. The
presence, in person or by proxy, of a majority of the votes entitled to be cast
at the meeting will constitute a quorum at the meeting. A proxy
submitted by a shareholder may indicate that all or a portion of the shares
represented by the proxy are not being voted (“shareholder withholding”) with
respect to a particular matter. Similarly, a broker may not be
permitted to vote stock (“broker non-vote”) held in street name on a particular
matter in the absence of instructions from the beneficial owner of the
stock. The shares subject to a proxy which are not being voted on a
particular matter because of either shareholder withholding or broker non-vote
will not be considered shares present and entitled to vote on that
matter. These shares, however, may be considered present and entitled
to vote on other matters and will count for purposes of determining the presence
of a quorum if the shares are being voted with respect to any matter at the
meeting. If the proxy indicates that the shares are not being voted
on any matter at the meeting, the shares will not be counted for purposes of
determining the presence of a quorum. Abstentions are voted neither
“for” nor “against” a matter, but are counted in the determination of a
quorum.
How
many votes are needed for approval of each matter?
The election of directors
The
election of directors requires a plurality vote of the votes cast at the
meeting. “Plurality” means that the individuals who receive the
largest number of votes cast “FOR” are elected as
directors. Consequently, any shares not voted “FOR” a particular
nominee, whether as a result of a direction of the shareholder to withhold
authority, abstentions or a broker non-vote, will not be counted in the
nominee’s favor.
The approval of the Performance
Equity Plan 2009
The Performance Equity Plan 2009 must be approved by the
affirmative vote of a majority of the votes cast at the
meeting. Abstentions from voting are counted as “votes cast” with
respect to the proposal and, therefore, have the same effect as a vote against
the proposal. Shares deemed present at the meeting but not entitled
to vote because of either shareholder withholding or broker non-vote are not
deemed “votes cast” with respect to the proposal, and therefore will have no
effect on the vote.
How
do I vote?
You may
vote your shares in one of three ways: by mail, facsimile or in person at the
meeting. The prompt return of the completed proxy card will assist us
in preparing for the meeting. Date, sign and return the accompanying
proxy in the postage-prepaid envelope enclosed for that purpose. You
can specify your choices by marking the appropriate boxes on the proxy
card. If you attend the meeting, you may deliver your completed proxy
card in person or fill out and return a ballot that will be supplied to you. If
you wish to fax your proxy, please copy both the front and back of the signed
proxy and fax it to American Stock Transfer & Trust Co. at (718) 234-2287
(phone: (718) 921-8278).
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table
and accompanying footnotes set forth certain information as of April 24, 2009
with respect to the ownership of our common shares by:
|
·
|
each
person or group who beneficially owns more than 5% of our common
shares;
|
|
·
|
our
chief executive officer and chief financial officer, our only executive
officers (collectively, the “named executive officers”);
and
|
|
·
|
all
of our directors and executive officers as a
group.
|
A person
is deemed to be the beneficial owner of securities that can be acquired by the
person within 60 days from the record date upon the exercise of options or
warrants. Accordingly, common shares issuable upon exercise of
options and warrants that are currently exercisable or exercisable within 60
days of April 24, 2009 have been included in the table with respect to the
beneficial ownership of the person owning the options or warrants, but not with
respect to any other persons.
|
Name
and Address
of Beneficial Owner
(1)
|
Shares
Beneficially Owned
(2)
|
Percent of Class
(3)
|
|
Edward
J. Fred
|
410,464
(4)
|
6.4%
|
|
Vincent
Palazzolo
|
75,719
(5)
|
1.3%
|
|
Walter
Paulick
|
66,000
(6)
|
1.1%
|
|
Kenneth
McSweeney
|
69,334
(7)
|
1.2%
|
|
Harvey
J. Bazaar
|
79,333
(8)
|
1.3%
|
|
Eric
Rosenfeld
c/o
Crescendo Partners
825
Third Avenue, 40
th
Floor
New
York, NY 10022
|
1,084,334
(9)
|
17.6%
|
|
Rutabaga
Capital Management
64
Broad Street, 3
rd
Floor
Boston,
MA 02109
|
720,844
(10)
|
12.0%
|
|
Skiritai
Capital, LLC
388
Market Street, Suite 700
San
Francisco, CA 94111
|
443,127
(11)
|
7.4%
|
|
Royce
& Associates, LLC
1414
Avenue of the Americas
New
York, NY 10019
|
401,800
(12)
|
6.7%
|
|
All
directors and executive officers as a group (six persons)
|
1,785,184
(13)
|
26.3%
|
|
|
____________________________________
|
|
(1)
|
Unless
otherwise noted, the business address of each of the following persons is
c/o CPI Aerostructures, Inc., 60 Heartland Blvd., Edgewood, New York
11717.
|
|
(2)
|
Unless
otherwise noted, we believe that all persons named in the table have sole
voting and investment power with respect to all common shares beneficially
owned by them, subject to community property laws, where
applicable.
|
|
(3)
|
There
are 5,995,465 shares currently issued and outstanding. Each
person beneficially owns a percentage of our outstanding common shares
equal to a fraction, the numerator of which is the number of common shares
held by such person plus the number of common shares that such person can
acquire within 60 days of April 24, 2009 upon the exercise or conversion
of options, warrants or convertible securities and the denominator of
which is 5,995,842 (the number of common shares currently outstanding)
plus the number of shares such person can so acquire during such 60-day
period.
|
|
(4)
|
Includes
385,000 common shares that Mr. Fred has the right to acquire upon exercise
of options.
|
|
(5)
|
Includes
66,666 common shares that Mr. Palazzolo has the right to acquire upon
exercise of options. Excludes options to purchase
8,334 common shares that are not exercisable within 60 days of the
record date.
|
|
(6)
|
Includes
55,000 common shares that Mr. Paulick has the right to acquire upon
exercise of options.
|
|
(7)
|
Includes
50,000 common shares that Mr. McSweeney has the right to acquire upon
exercise of options.
|
|
(8)
|
Includes
78,333 common shares that Mr. Bazaar has the right to acquire upon
exercise of options.
|
|
(9)
|
Represents
(a) 46,000 common shares beneficially owned as joint tenants by Mr.
Rosenfeld and his wife, (b) 883,334 shares held by Crescendo Partners II,
L.P. Series L (“Crescendo Partners II”) and (c) 150,000 common shares that
Mr. Rosenfeld has the right to acquire upon exercise of
options. Mr. Rosenfeld is the senior managing member of the
sole general partner of Crescendo Partners II. Mr. Rosenfeld
disclaims beneficial ownership of the shares held by Crescendo Partners
II, except to the extent of his pecuniary interest
therein.
|
|
(10)
|
The
information with respect to Rutabaga Capital Management is derived from an
Amendment to Schedule 13G filed with the Securities and Exchange
Commission on February 5, 2009.
|
|
(11)
|
The
information with respect to Royce & Associates is derived from an
Amendment to Schedule 13G filed with the Securities and Exchange
Commission on January 23, 2009.
|
|
(12)
|
The
information with respect to Skiritai Capital, LLC is derived from a
Schedule 13G filed with the Securities and Exchange Commission on July 17,
2008.
|
|
(13)
|
Includes
an aggregate of 784,999 common shares that Messrs. Fred, Palazzolo,
Paulick, McSweeney, Bazaar and Rosenfeld have the right to acquire upon
exercise of outstanding options.
|
PROPOSAL
1
ELECTION
OF DIRECTORS
Our board
of directors is divided into three classes with only one class of directors
being elected in each year and each class serving a three-year
term. The term of office of the second class of directors (Class II),
consisting of Walter Paulick and Eric Rosenfeld, will expire at this year’s
annual meeting. The term of office of the third class of directors
(Class III), consisting of Edward J. Fred, will expire at our annual meeting in
2010. The term of office of the first class of directors (Class I), consisting
of Kenneth McSweeney and Harvey J. Bazaar, will expire at our annual meeting in
2011.
Unless
authority is withheld, the proxies solicited by our board of directors will be
voted “FOR” the reelection of Walter Paulick and Eric Rosenfeld. Our
management has no reason to believe that Messrs. Paulick and Rosenfeld will not
be candidates or will be unable to serve. However, if either should
become unable or unwilling to serve as a director, the proxy will be voted for
the election of another person as shall be designated by the board of
directors.
Information
About Directors, Nominees, Executive Officers and Significant
Employees
Our
directors, executive officers and significant employees are as
follows:
|
Name
|
Age
|
Position
|
|
Eric
Rosenfeld (1)(2)(4)
|
51
|
Chairman
of the Board of Directors (non-executive)
|
|
Edward
J. Fred (1)
|
50
|
Chief
Executive Officer, President and Director
|
|
Vincent
Palazzolo
|
45
|
Chief
Financial Officer
|
|
Walter
Paulick (2)(3)(4)
|
62
|
Director
|
|
Kenneth
McSweeney (2)(3)(4)
|
77
|
Director
|
|
Harvey
J. Bazaar (3)
|
68
|
Director
|
|
Significant Employee
|
|
|
|
Douglas
McCrosson
|
46
|
Senior
Vice President of Operations
|
__________________________________________
(1)
Member of strategic planning committee.
(2)
Member of compensation committee.
(3)
Member of audit committee.
(4)
Member of nominating committee.
Eric S. Rosenfeld
has been the
non-executive chairman of our board of directors since January 2005 and a
director and chairman of our strategic planning committee since April 2003. Mr.
Rosenfeld has been the President and Chief Executive Officer of Crescendo
Partners, L.P., a New York based investment firm, since its formation in
November 1998. Prior to forming Crescendo Partners, he held the
position of Managing Director at CIBC Oppenheimer and its predecessor company
Oppenheimer & Co., Inc for fourteen years. He was Chairman of the Board of
Spar Aerospace Limited from 1999 through 2001.
Mr.
Rosenfeld is chairman of the board of Computer Horizons Corp., an IT Services
Company. He is also a director of Primoris Services Corporation, a NASDAQ listed
specialty construction firm that went public by merging with Rhapsody
Acquisition Corporation. In addition, Mr. Rosenfeld is a director of Hill
International, a NYSE listed construction management firm that went public by
merging with Arpeggio Acquisition Corporation. Both Rhapsody and Arpeggio were
blank check companies of which Mr. Rosenfeld was chairman, president and CEO. He
is also a director of Matrikon Inc, a Toronto Stock Exchange listed company that
is a provider of industrial intelligence solutions and a director of DALSA
Corp., a Toronto Stock Exchange listed digital imaging and semiconductor
firm. He is also a director of Cott Corporation, a NYSE and Toronto
Stock Exchange listed beverage company.
Mr.
Rosenfeld was a director of Emergis Inc., a Toronto Stock Exchange-listed
electronic commerce company until its recent acquisition by Telus. He
was a director of Sierra Systems Group Inc., a Toronto Stock Exchange-listed
information technology, management consulting and systems integration firm until
it was acquired in early 2007. He served as a director of the Geac Computer
Corporation Limited, a Toronto Stock Exchange and NASDAQ listed enterprise
software company until it was sold in 2006. Mr. Rosenfeld served as a
director and head of the special committee of Pivotal Corporation, a Vancouver
based customer relations management software company. Until its sale
in 2004 to Kronos Incorporated, he was also a director of AD OPT Technologies,
Inc., a company based in Montreal that provides advanced workforce planning,
scheduling and management solutions. Mr. Rosenfeld is a regular guest
lecturer at Columbia Business School and he is a faculty member at the Directors
College. He has served on numerous panels at Queen’s University
Business Law School Symposia, McGill Law School, the World Presidents’
Organization, the Canadian Corporate Counsel Association Conference and the
Canadian Foundation for Investor Education. He has also been a
regular guest host on CNBC. Mr. Rosenfeld received an MBA from Harvard
University and an AB degree in economics from Brown University.
Edward J. Fred
has been an
officer since February 1995 and a member of our board of directors since January
1999. He was our controller from February 1995 to April 1998, when he
was appointed chief financial officer, a position he held until June 2003 and
then from January 2004 to May 2004. He was executive vice president
from May 2000 until December 2001 and was appointed to the position of president
in January 2002 and to the position of chief executive officer in January
2003. For approximately ten years prior to joining CPI Aero, Mr. Fred
served in various positions for the international division of Grumman, where he
last held the position of controller. Mr. Fred holds a Bachelor of
Business Administration in Accounting from Dowling College and an Executive MBA
from Hofstra University.
Vincent Palazzolo
has been our
chief financial officer since May 2004 and our secretary since March
2008. From December 2003 to May 2004, he was employed by J. H. Cohn
LLP as an audit partner. From 1988 through November 2003, Mr.
Palazzolo was employed by Goldstein Golub Kessler LLP (“GGK”), where he was an
audit partner from September 1999 through November 2003. While
employed by GGK, from September 1999 to November 2003, Mr. Palazzolo also served
as a managing director of American Express Tax and Business Services,
Inc. Mr. Palazzolo holds a Bachelor of Business Administration in
Accounting from Hofstra University, is a certified public accountant and is a
member of the American Institute of Certified Public Accountants and the New
York State Society of Certified Public Accountants.
Walter Paulick
has been a
director since April 1992 and chairman of our nominating committee since March
2004. From June 2006 until April 2007, he served as chairman of our
audit committee. Mr. Paulick is currently a self-employed real estate
development consultant. From 1982 to November 1992, Mr. Paulick was a
vice president of Parr Development Company, Inc., a real estate development
company. From 1980 to 1982, Mr. Paulick was employed by Key Bank,
where he last held the position of vice president. From 1971 to 1980,
Mr. Paulick was a vice president of National Westminster U.S.A. Mr.
Paulick holds an associate degree in Applied Science from Suffolk Community
College and Bachelor of Business Administration from Dowling
College.
Kenneth McSweeney
has been a
director since February 1998 and chairman of our compensation committee since
April 2003. Mr. McSweeney has been an independent consultant to the
aerospace industry since January 1995. From 1961 to 1995, Mr.
McSweeney served in various management positions for Northrop Grumman
Corporation, most recently as the vice president of its Aerostructures Division
and a director of business development for the Mideast and gulf coast
region. Mr. McSweeney has extensive experience in aerostructures and
logistics support products and is a licensed professional engineer in New York
State. He holds Bachelor and Master of Science degrees in Electrical
Engineering from the Polytechnic Institute of Brooklyn and a Masters degree in
Business Management from CW Post College. He also completed the
Executive Development Program at the Cornell School of Business and Public
Administration.
Harvey J. Bazaar
has been a
director since December 2006 and chairman of our audit committee since April
2007. A certified public accountant, Mr. Bazaar has spent most of his
career in public accounting, having retired from PricewaterhouseCoopers in 2000
as the Global and Americas Leader for the Capital Markets Group. At
Coopers & Lybrand, which merged with PriceWaterhouse to form
PricewaterhouseCoopers, Mr. Bazaar served on the firm’s Executive Committee and
as Managing Partner of the New York City office. In post-retirement,
from September 2001 to December 2002, Mr. Bazaar served as the chief operating
officer of DML Global Services, a company providing fund accounting and related
services to private investment funds and other businesses. Mr. Bazaar
holds a Bachelor of Science Degree from Kent State University and is a member of
the board of trustees of the Kent State University Foundation.
Douglas McCrosson
has been
with CPI Aero since May 2003, serving as director of business development from
May 2003 to January 2006, vice president of business development from February
2006 to January 2007, vice president of operations from February 2007 to
December 2008 and senior vice president of operations since December
2008. From 1997 to May 2003, Mr. McCrosson was corporate secretary
and vice president of Frisby Technologies, Inc. From 1988 to 1997, he
was employed by Frisby Aerospace, Inc. in various engineering and marketing
positions. He started his professional career as a mechanical
engineer at Grumman Corporation. Mr. McCrosson holds a Bachelor of
Science degree in mechanical engineering from the State University of New York
at Buffalo and a Master of Science degree in Management from Polytechnic
University.
Independence
of Directors
Our
common stock is listed on the NYSE Amex LLC (“NYSE Amex”). As a
result, we follow the rules of the NYSE Amex in determining whether a director
is independent. The board of directors also consults with our counsel
to ensure that the board’s determinations are consistent with those rules and
all relevant securities and other laws and regulations regarding the
independence of directors. Consistent with these considerations, the
board of directors affirmatively has determined that Kenneth McSweeney, Walter
Paulick, Harvey J. Bazaar and Eric Rosenfeld will be independent directors of
CPI Aero for the ensuing year. The other remaining director, Edward
J. Fred, is not independent because he is currently employed by
us. All members of our audit, compensation and nominating committees
are independent.
Code
of Ethics
In March
2004, our board of directors adopted a written code of ethics that applies to
our directors, officers and employees. A copy of our code of ethics
was filed as exhibit 14 to our Annual Report on Form 10-KSB for the year ended
December 31, 2003. Requests for copies of our code of ethics should
be sent in writing to CPI Aerostructures, Inc., 60 Heartland Blvd., Edgewood,
New York 11717, Attention: Corporate Secretary.
Board
of Directors Meetings and Committees
Our board
of directors held seven meetings in 2008 and acted by unanimous written consent
on one occasion. All directors attended the 2008 annual shareholder
meeting. Although we do not have any formal policy regarding director
attendance at annual shareholder meetings, we attempt to schedule our annual
meetings so that all of our directors can attend. In addition, we
expect our directors to attend all board and committee meetings and to spend the
time needed and meet as frequently as necessary to properly discharge their
responsibilities. No member of our board of directors attended fewer
than 75% of the total number of meetings of the board and committees thereof
upon which he served during 2008. We have standing compensation, audit,
nominating and strategic planning committees.
Strategic
Planning Committee Information
Our
strategic planning committee is currently comprised of Eric Rosenfeld (chairman)
and Edward J. Fred. The main role of the strategic planning committee is to
evaluate and analyze strategic options for the company, including potential
merger or acquisition partners. The strategic planning committee held
one meeting during 2008.
Compensation
Committee Information
Our
compensation committee is currently comprised of Kenneth McSweeney (chairman),
Walter Paulick and Eric Rosenfeld, each an independent director under the NYSE
Amex listing standards. The compensation committee held three
meetings during 2008 and acted by unanimous consent on one
occasion. The responsibilities of the compensation committee, which
does not have a charter, include:
|
·
|
establishing
the general compensation policy for our executive officers, including the
chief executive officer;
|
|
·
|
administering
our 1992 Employee Stock Option Plan, 1995 Stock Option Plan, 1998
Performance Equity Plan and Performance Equity Plan 2000;
and
|
|
·
|
in
administering each of these plans, determining who participates in the
plans, establishing performance goals, if any, and determining specific
grants and bonuses to the
participants.
|
The
compensation committee makes all final determinations with respect to
compensation of executive officers based on its assessment of the value of each
executive’s contribution, the results of recent past fiscal years in light of
prevailing business conditions, our goals for the ensuing fiscal year and, to a
lesser extent, prevailing compensation levels at companies considered to be
comparable to our company. Our compensation committee considers
recommendations from our chief executive officer relating to the compensation of
our other executive officers, but the chief executive officer does not make
recommendations regarding his own compensation. Executive officers
other than our chief executive officer generally are not involved in determining
executive compensation.
From time
to time, our compensation committee may utilize the services of third parties,
including subscriptions to executive compensation surveys and other databases,
to assist with their review of compensation for executive
officers. Our compensation committee is charged with performing an
annual review of the compensation of our executive officers to determine whether
they are provided with adequate incentives and motivation, and whether they are
compensated appropriately in accordance with our compensation
policies.
Nominating
Committee Information and Report
General
The board
of directors has a nominating committee comprised of Walter Paulick (chairman),
Kenneth McSweeney and Eric Rosenfeld, each an independent director under the
NYSE Amex listing standards. The nominating committee held one
meeting during 2008. The nominating committee is responsible for overseeing the
selection of persons to be nominated to serve on our board of
directors. The nominating committee considers persons identified by
its members, management, shareholders, investment bankers and
others.
The board
of directors has adopted a written charter and established guidelines for
selecting nominees and a method by which shareholders may propose to the
nominating committee candidates for selection as nominees for directors.
The nominating committee charter and guidelines were included as Appendix A to
our 2007 Proxy Statement filed with the Securities and Exchange Commission on
April 30, 2007.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees generally provide that persons to be nominated
should be actively engaged in business endeavors, have an understanding of
financial statements, corporate budgeting and capital structure, be familiar
with the requirements of a publicly traded company, be familiar with industries
relevant to our business endeavors, be willing to devote significant time to the
oversight duties of the board of directors of a public company, and be able to
promote a diversity of views based on the person’s education, experience and
professional employment. The nominating committee evaluates each
individual in the context of the board as a whole, with the objective of
recommending a group of persons that can best implement our business plan,
perpetuate our business and represent shareholder interests. The nominating
committee may require certain skills or attributes, such as financial or
accounting experience, to meet specific board needs that arise from time to
time. The nominating committee does not distinguish among nominees
recommended by shareholders and other persons.
Procedure
for Shareholders to Recommend Director Candidates
Shareholders
and others who wish to recommend candidates to the nominating committee for
consideration as directors must submit their written recommendations to the
nominating committee and include all of the information described in the section
“Shareholder Proposals and Recommendations”.
The
nominating committee recommended to the board to nominate Walter Paulick and
Eric Rosenfeld for re-election as Class II directors. The nominating
committee did not receive proposals from any shareholders or others for
suggested director candidates.
Audit
Committee Information and Report
General
Our audit
committee is currently comprised of Harvey J. Bazaar (chairman), Walter Paulick
and Kenneth McSweeney. During the year ended December 31, 2008, the
audit committee held five meetings. All of the members of the audit
committee are “independent directors” and are “financially literate” as defined
under the NYSE Amex listing standards. The current NYSE Amex listing
standards define an “independent director” generally as a person, other than an
officer of the company, who does not have a relationship with the company that
would interfere with the director’s exercise of independent
judgment. The NYSE Amex’s listing standards define “financially
literate” as being able to read and understand fundamental financial statements,
including a company’s balance sheet, income statement and cash flow
statement.
Financial
Expert on Audit Committee
We must
certify to the NYSE Amex that the audit committee has, and will continue to
have, at least one member who has past employment experience in finance or
accounting, requisite professional certification in accounting, or other
comparable experience or background that results in the individual’s financial
sophistication. The board of directors has determined that Harvey J.
Bazaar satisfies the NYSE Amex’s definition of financial sophistication and also
qualifies as an “audit committee financial expert,” as defined under the rules
and regulations of the Securities and Exchange Commission.
Principal
Accountant Fees
|
|
2008
|
2007
|
|
Audit
Fees
(1)
|
$218,000
|
$202,000
|
|
Audit
Related Fees
|
–
|
–
|
|
Tax
Fees
(2)
|
35,375
|
29,600
|
|
All
Other Fees
(3)
|
3,849
|
731
|
|
Total
|
$257,224
|
$232,331
|
__________________________
|
(1)
|
Represents
the aggregate fees billed for professional services rendered by our
principal accountants for the audits of our annual financial statements
for the years ended December 31, 2008 and 2007 and review of financial
statements included in our quarterly reports on Form 10-Q or services that
are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those
periods.
|
|
(2)
|
Represents
the aggregate fees billed for professional services rendered by our
principal accountants for the preparation of our federal and state income
tax returns for the years ended December 31, 2008 and
2007.
|
|
(3)
|
Represents
the aggregate fees billed for other professional services rendered by our
principal accountants, including out-of-pocket
expenses.
|
Audit
Committee Pre-Approval Policies and Procedures
In
accordance with Section 10A(i) of the Securities Exchange Act of 1934, before we
engage our independent accountants to render audit or non-audit services, the
engagement is approved by our audit committee. Our audit committee
approved all of the fees referred to in the sections entitled “Audit Fees,”
“Audit-Related Fees,” “Tax Fees” and “All Other Fees” above.
Audit
Committee Report
The board
of directors has a written audit committee charter, which was included as
Appendix B to our 2007 Proxy Statement filed with the Securities and Exchange
Commission on April 30, 2007. The audit committee charter, which is
reviewed annually, was last reviewed on May 9, 2008. According to the
audit committee charter, our audit committee’s responsibilities include, among
other things:
|
·
|
reviewing
and discussing with management and the independent auditor the annual
audited financial statements, and recommend to the board whether the
audited financial statements should be included in our Form
10-K;
|
|
·
|
discussing
with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
our financial statements;
|
|
·
|
discussing
with management and the independent auditor the effect on our financial
statements of (i) regulatory and accounting initiatives and (ii)
off-balance sheet structures;
|
|
·
|
discussing
with management major financial risk exposures and the steps management
has taken to monitor and control such exposures, including our risk
assessment and risk management
policies;
|
|
·
|
reviewing
disclosures made to the audit committee by our chief executive officer and
chief financial officer during their certification process for our Form
10-Ks and Form 10-Qs about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein and any
fraud involving management or other employees who have a significant role
in our internal controls;
|
|
·
|
verifying
the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by
law;
|
|
·
|
reviewing
and approving all related-party
transactions;
|
|
·
|
inquiring
and discussing with management our compliance with applicable laws and
regulations;
|
|
·
|
pre-approving
all audit services and permitted non-audit services to be performed by
our
|
independent
auditor, including the fees and terms of the services to be
performed;
|
·
|
appointing
or replacing the independent
auditor;
|
|
·
|
determining
the compensation and oversight of the work of the independent auditor
(including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work;
and
|
|
·
|
establishing
procedures for the receipt, retention and treatment of complaints received
by us regarding accounting, internal accounting controls or reports which
raise material issues regarding our financial statements or accounting
policies.
|
Management
has reviewed the audited financial statements in the company’s annual report on
Form 10-K with the audit committee, including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant accounting judgments and estimates, and the clarity of disclosures
in the financial statements. In addressing the quality of
management’s accounting judgments, members of the audit committee asked for
management’s representations and reviewed certifications prepared by the chief
executive officer and chief financial officer that the unaudited quarterly and
audited financial statements of the company fairly present, in all material
respects, the financial condition and results of operations of the
company.
In
performing all of these functions, the audit committee acts only in an oversight
capacity. The committee reviews the company’s annual reports and
generally reviews its quarterly reports prior to filing with the Securities and
Exchange Commission. In its oversight role, the audit committee
relies on the work and assurances of the company’s management, which has the
responsibility for financial statements and reports, and of the independent
registered public accounting firm, who, in their report, express an opinion on
the conformity of the company’s annual financial statements to generally
accepted accounting principles. The audit committee has met and held
discussions with management and the company’s independent registered public
accounting firm. Management represented to the audit committee that
the company’s financial statements were prepared in accordance with generally
accepted accounting principles, and the audit committee has reviewed and
discussed the financial statements with management and the independent
registered public accounting firm. The audit committee discussed with
the independent registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The company’s independent registered public accounting
firm also provided the audit committee with the written disclosures required by
independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and the audit committee discussed with the independent registered
public accounting firm and management the auditor’s independence, including with
regard to fees for services rendered during the fiscal year and for all other
professional services rendered by the company’s independent registered public
accounting firm. In reliance on these reviews and discussions and the
report of the independent registered public accounting firm, the audit committee
recommended to the board of directors, and the board has approved, that the
audited financial statements be included in the company’s annual report on Form
10-K for the fiscal year ended December 31, 2008, for filing with the Securities
and Exchange Commission.
Members of the Audit
Committee:
Harvey J. Bazaar
(chairman)
Walter Paulick
Kenneth McSweeney
Summary
Compensation Table
The
following table sets forth the compensation paid or earned by each of our named
executive officers for each of the fiscal years ended December 31, 2008, 2007
and 2006.
|
Name
and Principal Position
|
Year
|
Salary
($)(1)
|
Bonus
($)
|
Option
Awards
($)
|
All
Other Compensation
($)
|
Total
($)
|
|
Edward
J. Fred
|
2008
|
$300,000
|
$214,920(2)
|
–
|
$26,389(3)
|
$541,309
|
|
Chief Executive Officer
and
President
|
2007
|
$283,150
|
$255,348(4)
|
–
|
$23,084(5)
|
$561,582
|
|
|
2006
|
$267,120
|
–
|
–
|
$12,963(6)
|
$280,083
|
|
Vincent
Palazzolo
|
2008
|
$208,000
|
$103,162(7)
|
$31,492(8)
|
|
$342,654
|
|
Chief Financial
Officer
|
2007
|
$200,000
|
124,866(9)
|
$31,492(8)
|
–
|
$356,358
|
|
|
2006
|
$183,750
|
–
|
$30,741(8)
|
–
|
$214,491
|
__________________
|
(1)
|
Reflects
actual base salary amounts paid for each of the years
indicated.
|
|
(2)
|
Represents
the bonus earned by Mr. Fred for the year ended December 31, 2008 as
calculated pursuant to the terms of Mr. Fred’s employment agreement dated
July 18, 2007 and included as an exhibit to our Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 23,
2007. The bonus was comprised of $177,460 of cash and 9,249
shares of common stock, valued at $37,460 ($4.05 per
share).
|
|
(3)
|
Represents
(a) $15,517 for a portion of an automobile lease, insurance and
maintenance attributable to personal use and (b) $10,872 for life
insurance premiums paid by us for the benefit of Mr.
Fred.
|
|
(4)
|
Represents
the bonus earned by Mr. Fred for the year ended December 31, 2007 as
calculated pursuant to the terms of Mr. Fred’s employment agreement dated
July 18, 2007 and included as an exhibit to our Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 23,
2007. The bonus was comprised of $197,674 of cash and 7,115
shares of common stock, valued at $57,674 ($8.10 per
share).
|
|
(5)
|
Represents
(a) $11,490 for a portion of an automobile lease, insurance and
maintenance attributable to personal use and (b) $11,594 for life
insurance premiums paid by us for the benefit of Mr.
Fred.
|
|
(6)
|
Represents
(a) $12,290 for a portion of an automobile lease, insurance and
maintenance attributable to personal use and (b) $673 for life insurance
premiums paid by us for the benefit of Mr.
Fred.
|
|
(7)
|
Represents
the bonus earned by Mr. Palazzolo for the year ended December 31, 2008 as
calculated pursuant to the terms of Mr. Palazzolo’s employment agreement
dated December 1, 2006 and included as an exhibit to our Current Report on
Form 8-K filed with the Securities and Exchange Commission on December 5,
2006. The bonus was comprised of $89,081 of cash and 3,477
shares of common stock, valued at $14,081 ($4.05 per
share).
|
|
(8)
|
The
assumptions related to the valuation of our stock options are disclosed in
Note 9 of our audited financial statements for the year ended December 31,
2008 included in our annual report on Form 10-K filed with the Securities
and Exchange Commission on March 26,
2009.
|
|
(9)
|
Represents
the bonus earned by Mr. Palazzolo for the year ended December 31, 2007 as
calculated
|
pursuant
to the terms of Mr. Palazzolo’s employment agreement dated December 1, 2006 and
included as an exhibit to our Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 5, 2006. The bonus was
comprised of $99,933 of cash and 3,076 shares of common stock, valued at $24,933
($8.10 per share).
Compensation
Arrangements for Executive Officers
Edward
J. Fred
On July
18, 2007, we entered into an amended and restated employment agreement with
Edward J. Fred, which provides for Mr. Fred to continue to serve as our
President and Chief Executive Officer until December 31, 2010. Mr.
Fred’s annual base salary was $283,150 for 2007, was increased to $300,000
for 2008 and will increase to $318,000 for 2009 and to $337,000 for
2010. In addition, Mr. Fred is eligible to receive an annual bonus,
calculated based on changes in our revenues and earnings before interest, taxes,
depreciation and amortization (“EBITDA”) from the prior
year. Twenty-five percent (25%) of the bonus amount is determined by
revenues and 75% by EBITDA. Changes in revenues and EBITDA for the current
year are measured from the previous year, except that if EBITDA for the
year preceding the year for which the EBITDA bonus is to be determined is less
than $1 million, then the EBITDA bonus will be calculated by comparing the
current year’s EBITDA to the EBITDA of the first preceding year in which EBITDA
was in excess of $2 million (“EBITDA Comparison Year”). To the extent
that a 10% annual increase in revenues and EBITDA from the prior year, or EBITDA
Comparison Year, as appropriate, is achieved, Mr. Fred is entitled to a target
annual bonus equal to 65% of his annual base salary. Should the
revenue and/or EBITDA levels fall short of or exceed a 10% increase from the
prior year, or EBITDA Comparison Year, as appropriate, Mr. Fred’s bonus will
decrease or increase by predetermined percentages. If there is more
than a 15% annual decrease in EBITDA or revenues, no EBITDA bonus or revenue
bonus will be paid. If there is an annual increase of 100% or more in
EBITDA or revenues, Mr. Fred’s EBITDA bonus or revenue bonus will be 75% more
than the target annual bonus. Both bonuses will be adjusted pro rata
if EBITDA and/or revenues fall in between two designated
percentages. The first $140,000 of bonus will be paid in cash and the
balance will be paid half in cash and half in shares of our common
stock. The shares of common stock will be valued at the average of
the last sale prices of our common stock for five consecutive trading days
ending two trading days before issuance. For the year ended December 31, 2008,
Mr. Fred received a bonus comprised of $177,460 of cash and 9,249 shares of our
common stock, valued at $37,460 ($4.05 per share). For the year ended December
31, 2007, Mr. Fred received a bonus comprised of $197,674 of cash and 7,115
shares of our common stock, valued at $57,674 ($8.10 per share).
Mr.
Fred’s employment agreement also provides that if, during the employment term,
we terminate Mr. Fred without “cause” or he terminates his employment for “good
reason” (as such terms are defined in the employment agreement), we will be
required to pay him his base salary through the end of the employment term and
provide medical insurance coverage until June 30,
2012. Notwithstanding the foregoing, if a change of control (as such
term is defined in the agreement) occurs prior to a termination by us without
“cause” or by Mr. Fred for “good reason,” then, at Mr. Fred’s option, in lieu of
the above compensation and benefits, we will pay him a lump sum equal to three
times the total compensation (including salary and bonus) earned by him during
the last full calendar year of his employment. Under the agreement,
Mr. Fred is prohibited from disclosing confidential information about us and he
has agreed not to compete with us during the term of his employment and for two
years thereafter.
Vincent
Palazzolo
On
December 1, 2006, we entered into an amended and restated employment agreement
with Vincent Palazzolo, which provides for Mr. Palazzolo to continue to be
employed as our chief financial officer until
December
31, 2009. Mr. Palazzolo’s annual base salary was $200,000 for
2007, was increased to $208,000 for 2008 and will increase to $216,300 for
2009.In addition, Mr. Palazzolo is eligible to receive an annual bonus,
calculated based on changes in our revenues and EBITDA from the prior
year. Twenty-five percent (25%) of the bonus amount is determined by
revenues and 75% by EBITDA. Changes in revenues and EBITDA for the current
year are measured from the previous year, except that if EBITDA for the
year preceding the year for which the EBITDA bonus is to be determined is less
than $1 million, then the EBITDA bonus will be calculated by comparing the
current year’s EBITDA to the EBITDA Comparison Year. To the extent
that a 10% annual increase in revenues and EBITDA from the prior year, or EBITDA
Comparison Year, as appropriate, is achieved, Mr. Palazzolo will be entitled to
a target annual bonus equal to 45% of his annual base salary. Should
the revenue and/or EBITDA levels fall short of or exceed a 10% increase from the
prior year, or EBITDA Comparison Year, as appropriate, Mr. Palazzolo’s bonus
will decrease or increase by predetermined percentages. If there is
more than a 15% annual decrease in EBITDA or revenues, no EBITDA bonus or
revenue bonus will be paid. If there is an annual increase of 100% or
more in EBITDA or revenues, Mr. Palazzolo’s EBITDA bonus or revenue bonus will
be 75% more than the target annual bonus. Both bonuses will be
adjusted pro rata if EBITDA and/or revenues fall in between two designated
percentages. The first $75,000 of bonus will be paid in cash and the
balance will be paid half in cash and half in shares of our common
stock. The shares of common stock will be valued at the average of
the last sale prices of the common stock for five consecutive trading days
ending two trading days before issuance. For the year ended December 31, 2008,
Mr. Palazzolo received a bonus comprised of $89,081 of cash and 3,477 shares of
our common stock, valued at $14,081 ($4.05 per share). For the year
ended December 31, 2007, Mr. Palazzolo received a bonus comprised of $99,933 of
cash and 3,076 shares of our common stock, valued at $24,933 ($8.10 per
share).
In
addition to his base salary, on December 1, 2006, we granted Mr. Palazzolo a
ten-year option to purchase 25,000 shares of common stock under the Performance
Equity Plan 2000 at a price of $6.75 per share, exercisable in three equal
annual installments commencing on the first anniversary of the date of
grant.
Mr.
Palazzolo’s employment agreement also provides that if, during the employment
term, we terminate Mr. Palazzolo without “cause” or he terminates his employment
for “good reason” (as such terms are defined in the employment agreement), we
will be required to pay him his base salary through the end of the employment
term. Under the agreement, Mr. Palazzolo is prohibited from
disclosing confidential information about us and he has agreed not to compete
with us during the term of his employment and for two years
thereafter. Mr. Palazzolo’s employment agreement does not contain any
change of control provisions.
Grants
of Plan-Based Awards
We did
not grant any options or other plan-based awards to our named executive officers
during the year ended December 31, 2008.
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes the outstanding option awards as of December 31, 2007
for each named executive officer.
|
|
Option
Awards
|
|
Name
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
|
Edward
J. Fred
Chief
Executive Officer and President
|
60,000
125,000
100,000
100,000
|
0
0
0
0
|
$2.53
$2.59
$1.20
$6.35
|
12/31/2009
5/31/2010
8/13/2011
6/18/2012
|
|
Vincent
Palazzolo
Chief
Financial Officer
|
50,000
16,666
|
0
8,334(1)
|
$10.48
$6.75
|
5/16/2014
11/30/2016
|
|
|
__________________________
|
|
(1)
|
Exercisable
as to 8,334 shares on November 30, 2009. After a portion of the
option becomes exercisable, it will remain exercisable until the close of
business on November 30, 2016.
|
Option
Exercises in 2007
Neither
of the named executive officers exercised options during the year ended December
31, 2007.
Stock
Option Plans
Performance
Equity Plan 2000
The
Performance Equity Plan 2000 authorizes the grant of 1,230,000 stock options,
stock appreciation rights, restricted stock, deferred stock, stock reload
options, and other stock based awards. As of December 31, 2008,
options to purchase an aggregate of 1,135,333 common shares had been granted
under this plan, of which 817,333 options remain outstanding at exercise prices
ranging from $2.59 to $10.24 per share. As of April 24, 2009, options
to purchase 39,167 common shares remain available for grant.
1998
Performance Equity Plan
The 1998
Performance Equity Plan authorizes the grant of 463,334 stock options, stock
appreciation rights, restricted stock, deferred stock, stock reload options, and
other stock based awards. As of December 31, 2008, options to
purchase an aggregate of 546,002 common shares had been granted, of which
110,000 remain outstanding at exercise prices ranging from $2.53 to $11.31 per
share. As of April 24, 2009, options to purchase 14,000 common shares
remain available for grant.
1995
Stock Option Plan
The 1995
Employee Stock Option Plan authorizes the grant of 200,000 stock options and
stock appreciation rights. As of December 31, 2007, options to
purchase an aggregate of 419,000 common shares had been granted, of which
120,001 remain outstanding at exercise prices ranging from $6.97 to $10.48 per
share. As of April 24, 2009, options to purchase 285 additional
common shares remain available for grant.
Equity
Compensation Plan Information
The
following table sets forth certain information at December 31, 2008 with respect
to our equity compensation plans that provide for the issuance of options,
warrants or rights to purchase our securities.
|
Plan
Category
|
Number
of Securities to be Issued upon Exercise of Outstanding Options, Warrants
and Rights
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and Rights
|
|
Number
of Securities Remaining Available for Future Issuance under Equity
Compensation Plans (excluding securities reflected in the first
column)
|
|
Equity
Compensation Plans Approved by Security Holders
|
1,047,332
|
|
$6.42
|
|
123,452
|
_________________________
(1) See
“Other Options and Warrants” for a description of these plans.
Compensation
of Directors
Each of
our non-employee directors receives an annual cash fee of $10,000 (payable
quarterly) and 10,000 options on or about April 1
st
of each
year. The audit committee chairman also receives an additional annual
cash fee of $20,000 (payable quarterly) and an additional 15,000 options on
April 1
st
of each
year. The chairman of the strategic planning committee receives an
additional annual cash fee of $10,000 (payable quarterly). The
chairman of the board receives an additional annual cash fee of $40,000 (payable
quarterly) and an additional 25,000 options on or about January 1
st
of each
year. Our non-employee directors are reimbursed for the reasonable
expenses they incur to attend meetings.
The
following table summarizes the compensation of our directors for the year ended
December 31, 2008. Directors who are employees of ours do not receive
separate compensation for their service as a director.
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Option
Awards ($)(1)
|
Total
($)
|
|
Eric
Rosenfeld(2)
|
$60,000
|
$193,252
|
$253,252
|
|
Harvey
J. Bazaar(3)
|
$30,000
|
$128,934
|
$158,934
|
|
Kenneth
McSweeney
|
$10,000
|
$51,574
|
$61,574
|
|
Walter
Paulick
|
$10,000
|
$51,574
|
$61,574
|
__________________________
|
(1)
|
The
assumptions related to the valuation of our stock options are disclosed in
Note 9 of our audited financial statements for the year ended December 31,
2008 included in our annual report on Form 10-K filed with the Securities
and Exchange Commission on March 26,
2009.
|
|
(2)
|
In
addition to his regular annual director compensation, Mr. Rosenfeld
received $50,000 in cash and was granted 25,000 immediately exercisable
options for serving as non-executive chairman of the
board.
|
|
(3)
|
In
addition to his regular annual director compensation, Mr. Bazaar received
$20,000 in cash and was granted 15,000 immediately exercisable options for
serving as chairman of the audit
committee.
|
Pension
Benefits
Other
than our 401(k) plan, we do not maintain any other plan that provides for
payments or other benefits at, following, or in connection with
retirement.
PROPOSAL
2
APPROVAL
OF CPI AEROSTRUCTURES, INC. PERFORMANCE EQUITY PLAN 2009
Background
Our
Performance Equity Plan 2009 has been approved by our board of directors and
will take effect upon approval by the shareholders at the Annual
Meeting. We are submitting the plan to our shareholders for their
approval so that options granted under the plan may qualify for treatment as
incentive stock options and awards under the plan may constitute
performance-based compensation not subject to Section 162(m) of the Internal
Revenue Code of 1986, as amended (“IRC”).
The plan
reserves 500,000 shares of our common stock for issuance in accordance with the
plan’s terms. The purpose of the plan is to enable us to offer our employees,
officers, directors, and consultants whose past, present and/or potential
contributions to us have been, are or will be important to our success, an
opportunity to acquire a proprietary interest in us. The various types of
incentive awards that may be provided under the plan are intended to enable us
to respond to changes in compensation practices, tax laws, accounting
regulations and the size and diversity of our business.
All
employees, officers, directors and consultants of ours will be eligible to be
granted awards under the plan. An incentive stock option may be granted under
the plan only to a person who, at the time of the grant, is an employee of ours.
No allocations of shares that may be subject to awards have been made in respect
of the executive officers or any other group. All awards will be subject to the
recommendations of a committee designated by our board of directors and approval
by such committee.
A summary
of the principal features of the plan is provided below, but is qualified in its
entirety by reference to the full text of the plan, which is attached to this
proxy statement/prospectus as an Appendix.
Administration
The plan
is administered by a committee of our board of directors comprised of at least
two “outside directors,” as defined in the regulations issued under Section
162(m) of the IRC. Subject to the provisions of the plan, the committee
determines, among other things, the persons to whom from time to time awards may
be granted, the specific type of awards to be granted, the number of shares
subject to each award, share prices, any restrictions or limitations on the
awards, and any vesting, exchange, deferral, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions related to the
awards.
Stock
Subject to the Plan
Shares of
stock subject to other awards that are forfeited or terminated will be available
for future award grants under the plan. If a holder pays the exercise price of a
stock option by surrendering any previously owned shares of common stock or
arranges to have the appropriate number of shares otherwise issuable upon
exercise withheld to cover the withholding tax liability associated with the
stock option exercise, then the in the committee’s discretion, the number of
shares available under the plan may be increased by the lesser of the number of
such surrendered shares and shares used to pay taxes and the number of shares
purchased under the stock option.
Under the
plan, on a change in the number of shares of our common stock as a result of a
dividend on shares of common stock payable in shares of common stock, common
stock forward split or reverse split or other extraordinary or unusual event
that results in a change in the shares of common stock as a whole, the terms of
the outstanding award may be proportionately adjusted.
Eligibility
We may
grant awards under the plan to employees, officers, directors and consultants
who are deemed to have rendered, or to be able to render, significant services
to us and who are deemed to have contributed, or to have the potential to
contribute, to our success.
Types
of Awards
Options
. The plan provides
both for “incentive” stock options as defined in Section 422 of the IRC, and for
options not qualifying as incentive options, both of which may be granted with
any other stock based award under the plan. The committee determines the
exercise price per share of common stock purchasable under an incentive or
non-qualified stock option, which may not be less than 100% of the fair market
value on the day of the grant or, if greater, the par value of a share of common
stock. However, the exercise price of an incentive stock option granted to a
person possessing more than 10% of the total combined voting power of all
classes of our stock may not be less than 110% of the fair market value on the
date of grant. The aggregate fair market value of all shares of common stock
with respect to which incentive stock options are exercisable by a participant
for the first time during any calendar year (under all of our plans), measured
at the date of the grant, may not exceed $100,000 or such other amount as may be
subsequently specified under the IRC or the regulations thereunder.
An
incentive stock option may only be granted within a ten-year term commencing
with shareholder approval of the Performance Equity Plan 2009 and may only be
exercised within ten years from the date of the grant, or within five years in
the case of an incentive stock option granted to a person who, at the time of
the grant, owns common stock possessing more than 10% of the total combined
voting power of all classes of our stock. Subject to any limitations or
conditions the committee may impose, stock options may be exercised, in whole or
in part, at any time during the term of the stock option by giving written
notice of exercise to us specifying the number of shares of common stock to be
purchased. The notice must be accompanied by payment in full of the purchase
price, either in cash or, if provided in the agreement, in our securities or in
combination of the two.
Generally,
stock options granted under the plan may not be transferred other than by will
or by the laws of descent and distribution and all stock options are
exercisable, during the holder’s lifetime, only by the holder, or in the event
of legal incapacity or incompetency, the holder’s guardian or legal
representative. However, a holder, with the approval of the committee, may
transfer a non-qualified stock option by gift to a family member of the holder,
by domestic relations order to a family member of the holder or by transfer to
an entity in which more than 50% of the voting interests are owned by family
members of the holder or the holder, in exchange for an interest in that
entity.
Generally,
if the holder is an employee, no stock options granted under the plan may be
exercised by the holder unless he or she is employed by us or a subsidiary of
ours at the time of the exercise and has been so employed continuously from the
time the stock options were granted. However, in the event the holder’s
employment is terminated due to disability, the holder may still exercise his or
her vested stock options for a period of 12 months or such other greater or
lesser period as the committee may determine, from the date of termination or
until the expiration of the stated term of the stock option, whichever period is
shorter.
Similarly,
should a holder die while employed by us or a subsidiary, his or her legal
representative or legatee under his or her will may exercise the decedent
holder’s vested stock options for a period of 12 months from the date of his or
her death, or such other greater or lesser period as the board or committee may
determine or until the expiration of the stated term of the stock option,
whichever period is shorter. If the holder’s employment is terminated due to
normal retirement, the holder may still exercise his or her vested stock options
for a period of 12 months from the date of termination or until the expiration
of the stated term of the stock option, whichever period is shorter. If the
holder’s employment is terminated for any reason other than death, disability or
normal retirement, the stock option will automatically
terminate,
except
that if the holder’s employment is terminated by us without cause, then the
portion of any stock option that is vested on the date of termination may be
exercised for the lesser of three months after termination of employment, or
such other greater or lesser period as the committee may determine but not
beyond the balance of the stock option’s term.
Stock Appreciation Rights
.
Under the plan, we may grant stock appreciation rights to participants who have
been, or are being, granted stock options under the plan as a means of allowing
the participants to exercise their stock options without the need to pay the
exercise price in cash, or we may grant them alone and unrelated to an option.
In conjunction with nonqualified stock options, stock appreciation rights may be
granted either at or after the time of the grant of the non-qualified stock
options. In conjunction with incentive stock options, stock appreciation rights
may be granted only at the time of the grant of the incentive stock options. A
stock appreciation right entitles the holder to receive a number of shares of
common stock having a fair market value equal to the excess fair market value of
one share of common stock over the exercise price of the related stock option,
multiplied by the number of shares subject to the stock appreciation rights. The
granting of a stock appreciation right will not affect the number of shares of
common stock available for awards under the plan. The number of shares available
for awards under the plan will, however, be reduced by the number of shares of
common stock acquirable upon exercise of the stock option to which the stock
appreciation right relates.
Restricted Stock
. Under the
plan, we may award shares of restricted stock either alone or in addition to
other awards granted under the plan. The board or committee determines the
persons to whom grants of restricted stock are made, the number of shares to be
awarded, the price if any to be paid for the restricted stock by the person
receiving the stock from us, the time or times within which awards of restricted
stock may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the restricted stock
awards. For purposes of determining the number of shares available for awards,
each share of common stock subject to a restricted stock award shall be deemed
to be 1.5 shares.
Restricted
stock awarded under the plan may not be sold, exchanged, assigned, transferred,
pledged, encumbered or otherwise disposed of, other than to us, during the
applicable restriction period. In order to enforce these restrictions, the plan
requires that all shares of restricted stock awarded to the holder remain in our
physical custody until the restrictions have terminated and all vesting
requirements with respect to the restricted stock have been fulfilled. Other
than regular cash dividends and other cash equivalent distributions as we may
designate, pay or distribute, we will retain custody of all distributions made
or declared with respect to the restricted stock during the restriction period.
A breach of any restriction regarding the restricted stock will cause a
forfeiture of the restricted stock and any retained distributions. Except for
the foregoing restrictions, the holder will, even during the restriction period,
have all of the rights of a shareholder, including the right to receive and
retain all regular cash dividends and other cash equivalent distributions as we
may designate, pay or distribute on the restricted stock and the right to vote
the shares.
Other Stock-Based Awards
.
Under the plan, we may grant other stock-based awards, subject to limitations
under applicable law, that are denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, shares of common
stock, as deemed consistent with the purposes of the plan. These other
stock-based awards may be in the form of purchase rights, shares of common stock
awarded that are not subject to any restrictions or conditions, convertible or
exchangeable debentures or other rights convertible into shares of common stock
and awards valued by reference to the value of securities of, or the performance
of, one of our subsidiaries. These other stock-based awards may include
performance shares or options, whose award is tied to specific performance
criteria. These other stock-based awards may be awarded either alone, in
addition to, or in tandem with any other awards under the plan or any of our
other plans.
Accelerated Vesting and
Exercisability
. If any one person, or more than one person acting as a
group, acquires the ownership of stock of the company that, together with the
stock held by such person or group,
constitutes
more than 50% of the total fair market value or combined voting power of the
stock of the company, and the company’s board of directors does not authorize or
otherwise approve such acquisition, then the vesting periods of any and all
stock options and other awards granted and outstanding under the plan shall be
accelerated and all such stock options and awards will immediately and entirely
vest, and the respective holders thereof will have the immediate right to
purchase and/or receive any and all common stock subject to such stock options
and awards on the terms set forth in the plan and the respective agreements
respecting such stock options and awards. An increase in the percentage of stock
owned by any one person, or persons acting as a group, as a result of a
transaction in which the company acquires its stock in exchange for property is
not treated as an acquisition of stock.
The
committee may, in the event of an acquisition by any one person, or more than
one person acting as a group, together with acquisitions during the 12-month
period ending on the date of the most recent acquisition by such person or
persons, of assets from the company that have a total gross fair market value
equal to or more than 50% of the total gross fair market value of all of the
assets of the company immediately before such acquisition or acquisitions, or if
any one person, or more than one person acting as a group, acquires the
ownership of stock of the company that, together with the stock held by such
person or group, constitutes more than 50% of the total fair market value or
combined voting power of the stock of the company, which has been approved by
the company’s board of directors, (i) accelerate the vesting of any and all
stock options and other awards granted and outstanding under the plan, or (ii)
require a holder of any award granted under the plan to relinquish such award to
the company upon the tender by the company to the holder of cash in an amount
equal to the repurchase value of such award. For this purpose, gross fair market
value means the value of the assets of the company, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
such assets.
Notwithstanding
any provisions of the plan or any award granted thereunder to the contrary, no
acceleration shall occur with respect to any award to the extent such
acceleration would cause the plan or an award granted thereunder to fail to
comply with IRC Section 409A.
Repurchases
. The
committee may at any time offer to repurchase a stock option previously granted,
at a purchase price not to exceed the repurchase value and under such terms and
conditions as the committee shall establish and communicate to the holder of
stock at the time of the offer.
Award Limitation
. No
participant may be granted awards for more than 50,000 shares in any calendar
year.
Other Limitations
. The
committee may not modify or amend any outstanding option or stock appreciation
right to reduce the exercise price of such option or stock appreciation right,
as applicable, below the exercise price as of the date of grant of such option
or stock appreciation right. In addition, no option or stock appreciation right
may be granted in exchange for, or in connection with, the cancellation or
surrender of an option or stock appreciation right or other award having a lower
exercise price.
Withholding
Taxes
Upon the
exercise of any award granted under the plan, the holder may be required to
remit to us an amount sufficient to satisfy all federal, state and local
withholding tax requirements prior to delivery of any certificate or
certificates for shares of common stock.
Term
and Amendments
Unless
terminated by the board, the plan shall continue to remain effective until no
further awards may be granted and all awards granted under the plan are no
longer outstanding. Notwithstanding the foregoing, grants of incentive stock
options may be made only until ten years from the date of shareholder approval
of the Performance Equity Plan 2009. The board may at any time, and from time to
time, amend the plan, provided that no amendment will be made that would impair
the rights of a holder under any agreement
entered
into pursuant to the plan without the holder’s consent.
Federal
Income Tax Consequences
The
following discussion of the federal income tax consequences of participation in
the plan is only a summary of the general rules applicable to the grant and
exercise of stock options and other awards and does not give specific details or
cover, among other things, state, local and foreign tax treatment of
participation in the plan. The information contained in this section is based on
present law and regulations, which are subject to being changed prospectively or
retroactively.
Incentive Stock Options
.
Participants will recognize no taxable income upon the grant of an incentive
stock option. The participant generally will realize no taxable income when the
incentive stock option is exercised. The excess, if any, of the fair market
value of the shares on the date of exercise of an incentive stock option over
the exercise price will be treated as an item of adjustment for a participant’s
taxable year in which the exercise occurs and may result in an alternative
minimum tax liability for the participant. We will not qualify for any deduction
in connection with the grant or exercise of incentive stock options. Upon a
disposition of the shares after the later of two years from the date of grant or
one year after the transfer of the shares to a participant, the participant will
recognize the difference, if any, between the amount realized and the exercise
price as long-term capital gain or long-term capital loss, as the case may be,
if the shares are capital assets.
If common
stock acquired upon the exercise of an incentive stock option is disposed of
prior to the expiration of the holding periods described above, the participant
will recognize ordinary compensation income in the taxable year of disposition
in an amount equal to the excess, if any, of the fair market value of the shares
on the date of exercise over the exercise price paid for the shares; and we will
qualify for a deduction equal to any amount recognized, subject to the
limitation that the compensation be reasonable.
Non-Qualified Stock Options
.
With respect to non-qualified stock options:
|
·
|
upon
grant of the stock option, the participant will recognize no income
provided that the exercise price was not less than the fair market value
of our common stock on the date of
grant;
|
|
·
|
upon
exercise of the stock option, if the shares of common stock are not
subject to a substantial risk of forfeiture, the participant will
recognize ordinary compensation income in an amount equal to the excess,
if any, of the fair market value of the shares on the date of exercise
over the exercise price, and we will qualify for a deduction in the same
amount, subject to the requirement that the compensation be reasonable;
and
|
|
·
|
we
will be required to comply with applicable federal income tax withholding
requirements with respect to the amount of ordinary compensation income
recognized by the participant.
|
On a
disposition of the shares, the participant will recognize gain or loss equal to
the difference between the amount realized and the sum of the exercise price and
the ordinary compensation income recognized. The gain or loss will be treated as
capital gain or loss if the shares are capital assets and as short-term or
long-term capital gain or loss, depending upon the length of time that the
participant held the shares.
If the
shares acquired upon exercise of a non-qualified stock option are subject to a
substantial risk of forfeiture, the participant will recognize ordinary income
at the time when the substantial risk of forfeiture is removed, unless the
participant timely files under Section 83(b) of the IRC to elect to be taxed on
the receipt of shares, and we will qualify for a corresponding deduction at that
time. The amount of ordinary income will be equal to the excess of the fair
market value of the shares at the time the income is recognized over the amount,
if any, paid for the shares.
Stock Appreciation Rights
.
Upon the grant of a stock appreciation right, the participant recognizes no
taxable income and we receive no deduction. The participant recognizes ordinary
income and we receive a deduction at the time of exercise equal to the cash and
fair market value of common stock payable upon the exercise.
Restricted Stock
. A
participant who receives restricted stock will recognize no income on the grant
of the restricted stock and we will not qualify for any deduction. At the time
the restricted stock is no longer subject to a substantial risk of forfeiture, a
participant will recognize ordinary compensation income in an amount equal to
the excess, if any, of the fair market value of the restricted stock at the time
the restriction lapses over the consideration paid for the restricted stock. A
participant’s shares are treated as being subject to a substantial risk of
forfeiture so long as his or her sale of the shares at a profit could subject
him or her to a suit under Section 16(b) of the Exchange Act. The holding period
to determine whether the participant has long-term or short-term capital gain or
loss begins when the restriction period expires, and the tax basis for the
shares will generally be the fair market value of the shares on this
date.
A
participant may elect under Section 83(b) of the IRC, within 30 days of the
transfer of the restricted stock, to recognize ordinary compensation income on
the date of transfer in an amount equal to the excess, if any, of the fair
market value on the date of transfer of the shares of restricted stock, as
determined without regard to the restrictions, over the consideration paid for
the restricted stock. If a participant makes an election and thereafter forfeits
the shares, no ordinary loss deduction will be allowed. The forfeiture will be
treated as a sale or exchange upon which there is realized loss equal to the
excess, if any, of the consideration paid for the shares over the amount
realized on such forfeiture. The loss will be a capital loss if the shares are
capital assets. If a participant makes an election under Section 83(b), the
holding period will commence on the day after the date of transfer and the tax
basis will equal the fair market value of shares, as determined without regard
to the restrictions, on the date of transfer.
On a
disposition of the shares, a participant will recognize gain or loss equal to
the difference between the amount realized and the tax basis for the
shares.
Whether
or not the participant makes an election under Section 83(b), we generally will
qualify for a deduction, subject to the reasonableness of compensation
limitation, equal to the amount that is taxable as ordinary income to the
participant, in the taxable year in which the income is included in the
participant’s gross income. The income recognized by the participant will be
subject to applicable withholding tax requirements.
Dividends
paid on restricted stock that is subject to a substantial risk of forfeiture
generally will be treated as compensation that is taxable as ordinary
compensation income to the participant and will be deductible by us subject to
the reasonableness limitation. If, however, the participant makes a Section
83(b) election, the dividends will be treated as dividends and taxable as
ordinary income to the participant, but will not be deductible by
us.
Other Stock-Based Awards
. The
federal income tax treatment of other stock-based awards will depend on the
nature and restrictions applicable to the award.
Section 162(m) Limits
.
Section 162(m) of the IRC places a limit of $1,000,000 on the amount of
compensation that a publicly traded company may deduct in any one year with
respect to each of its chief executive officer and 4 most highly paid executive
officers. Certain performance-based compensation approved by shareholders is not
subject to the deduction limit. The plan is qualified such that awards under the
plan may constitute performance-based compensation not subject to Section 162(m)
of the IRC. One of the requirements for equity compensation plans is
that there must be a limit to the number of shares granted to any one individual
under the plan. Accordingly, the plan provides that the maximum number of shares
for which awards may be made to any participant in any calendar year is 50,000.
The maximum amount payable pursuant to that portion of a cash award granted
under the plan for any fiscal year to any
participant
that is intended to satisfy the requirements for “performance-based
compensation” under Section 162(m) of the IRC may not exceed
$500,000.
Certain Awards Deferring or
Accelerating the Receipt of Compensation
. Section 409A of the IRC,
enacted as part of the American Jobs Creation Act of 2004, imposes certain new
requirements applicable to “nonqualified deferred compensation plans.” If a
nonqualified deferred compensation plan subject to Section 409A fails to meet,
or is not operated in accordance with, these new requirements, then all
compensation deferred under the plan may become immediately taxable. Stock
appreciation rights and deferred stock awards that may be granted under the plan
may constitute deferred compensation subject to the Section 409A
requirements.
It is our
intention that any award agreement governing awards subject to Section 409A will
comply with these rules.
Recommendation
and Vote Required
Approval
of our incentive compensation plan will require the affirmative vote of the
holders of a majority of the votes cast at the Annual Meeting.
Our board
of directors unanimously recommends that our shareholders vote
FOR
the Performance Equity
Plan 2009.
Certain
Relationships and Related Party Transactions
Related
party policy
Our Code
of Ethics requires us to avoid, wherever possible, all related party
transactions that could result in actual or potential conflicts of interest,
except under guidelines approved by the board of directors (or the audit
committee). Securities and Exchange Commission rules generally define
related-party transactions as transactions in which (1) the aggregate amount
involved will or may be expected to exceed $120,000 in any calendar year, (2) we
or any of our subsidiaries is a participant, and (3) any (a) executive officer,
director or nominee for election as a director, (b) greater than 5 percent
beneficial owner of our common stock, or (c) immediate family member of the
persons referred to in clauses (a) and (b), has or will have a direct or
indirect material interest (other than solely as a result of being a director or
a less than 10 percent beneficial owner of another entity). A
conflict of interest situation can arise when a person takes actions or has
interests that may make it difficult to perform his or her work objectively and
effectively. Conflicts of interest may also arise if a person, or a
member of his or her family, receives improper personal benefits as a result of
his or her position.
Our audit
committee, pursuant to its written charter, is responsible for reviewing and
approving related-party transactions to the extent we enter into such
transactions. The audit committee considers all relevant factors when
determining whether to approve a related party transaction, including whether
the related party transaction is on terms no less favorable than terms generally
available to an unaffiliated third-party under the same or similar circumstances
and the extent of the related party’s interest in the transaction. No
director may participate in the approval of any transaction in which he or she
is a related party, but that director is required to provide the audit committee
with all material information concerning the
transaction. Additionally, we require each of our directors and
executive officers to complete a directors’ and officers’ questionnaire annually
that elicits information about related party transactions. These
procedures are intended to determine whether any such related party transaction
impairs the independence of a director or presents a conflict of interest on the
part of a director, employee or officer.
Related party transactions
None.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our officers,
directors and persons who own more than ten percent of a registered class of our
equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. These reporting persons also are
required by regulation to furnish us with copies of all Section 16(a) forms they
file. To our knowledge, based solely on the review of the copies of
these forms furnished to us and representations that no other reports were
required during the year ended December 31, 2008, all filing requirements
applicable to our officers, directors and greater than ten percent beneficial
owners were complied with.
INDEPENDENT
AUDITOR
A
representative of J.H. Cohn LLP, our independent registered public accounting
firm for the year ended December 31, 2008, is expected to be present at the
meeting. The representative will have the opportunity to make a
statement and will be available to respond to appropriate questions from
shareholders. The board of directors has selected the independent
registered public accounting firm of J.H. Cohn LLP as our auditors for the year
ending December 31, 2009.
SOLICITATION
OF PROXIES
The
solicitation of proxies in the enclosed form is made on behalf of our board of
directors and we are bearing the cost of this solicitation. In
addition to the use of the mails, proxies may be solicited personally or by
telephone using the services of directors, officers and regular employees at
nominal cost. Banks, brokerage firms and other custodians, nominees
and fiduciaries will be reimbursed by us for expenses incurred in sending proxy
material to beneficial owners of our common stock. Additional
solicitation of proxies may be made by an independent proxy solicitation firm or
other entity possessing the facilities to engage in such
solicitation. If any independent entity is used for such
solicitation, we will be required to pay them reasonable fees and reimburse
expenses incurred by them in rendering solicitation services.
2010
ANNUAL MEETING SHAREHOLDER PROPOSALS AND NOMINATIONS
In order
for any shareholder proposal or nominations to be presented at the annual
meeting of shareholders to be held in 2010 or to be eligible for inclusion in
our proxy statement for such meeting, we must receive it at our principal
executive offices by January 2, 2010. Each proposal should include
the exact language of the proposal, a brief description of the matter and the
reasons for the proposal, the name and address of the shareholder making the
proposal and the disclosure of that shareholder’s number of shares of common
stock owned, length of ownership of the shares, representation that the
shareholder will continue to own the shares through the shareholder meeting,
intention to appear in person or by proxy at the shareholder meeting and
material interest, if any, in the matter being proposed.
Shareholders
who wish to recommend to the nominating committee a candidate for election to
the board of directors should send their letters to CPI Aerostructures, Inc., 60
Heartland Boulevard, Edgewood, New York 11717, Attention: Nominating
Committee. The corporate secretary will promptly forward all such
letters to the members of the nominating committee. Shareholders must
follow certain procedures to recommend to the nominating committee candidates
for election as directors. In general, in order to provide sufficient
time to enable the nominating committee to evaluate candidates recommended
by
shareholders
in connection with selecting candidates for nomination in connection with our
annual meeting of shareholders, the corporate secretary must receive the
shareholder’s recommendation no later than thirty days after the end of our
fiscal year.
The
recommendation must contain the following information about the
candidate:
|
·
|
Current
business and residence addresses and telephone numbers, as well as
residence addresses for the past 20
years;
|
|
·
|
Principal
occupation or employment and employment history (name and address of
employer and job title) for the past 20 years (or such shorter period as
the candidate has been in the
workforce);
|
|
·
|
Educational
background;
|
|
·
|
Permission
for the company to conduct a background investigation, including the right
to obtain education, employment and credit
information;
|
|
·
|
The
number of shares of common stock of the company beneficially owned by the
candidate;
|
|
·
|
The
information that would be required to be disclosed by the company about
the candidate under the rules of the Securities and Exchange Commission in
a proxy statement soliciting proxies for the election of such candidate as
a director (which currently includes information required by Items 401,
404 and 405 of Regulation S-K); and
|
|
·
|
A
signed consent of the nominee to serve as a director of the company, if
elected.
|
OTHER
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The board
of directors provides a process for shareholders and interested parties to send
communications to the board. Shareholders and interested parties may
communicate with the board of directors, any committee chairperson or the
non-management directors as a group by writing to the board or committee
chairperson in care of CPI Aerostructures, Inc., 60 Heartland Blvd., Edgewood,
New York 11717. Each communication will be forwarded, depending
on the subject matter, to the board, the appropriate committee chairperson or
all non-management directors.
DISCRETIONARY
VOTING OF PROXIES
Pursuant
to Rule 14a-4 promulgated by the Securities and Exchange Commission,
shareholders are advised that our management will be permitted to exercise
discretionary voting authority under proxies it solicits and obtains for the
2010 annual meeting of shareholders with respect to any proposal presented by a
shareholder at such meeting, without any discussion of the proposal in our proxy
statement for such meeting, unless we receive notice of such proposal at our
principal office in Edgewood, New York, not later than March 16,
2010.
INCORPORATION
BY REFERENCE
This
proxy statement incorporates by reference certain information included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2008,
including our audited financial statements and supplementary data, management’s
discussion and analysis of financial condition and results of operations and our
quantitative and qualitative disclosures about market risk.
OTHER
MATTERS
The board
of directors knows of no matter that will be presented for consideration at the
meeting other than the matters referred to in this proxy
statement. Should any other matter properly come before the meeting,
it is the intention of the persons named in the accompanying proxy to vote the
proxy in accordance with their best judgment.
By Order
of the Board of Directors
Vincent
Palazzolo, Secretary
Edgewood,
New York
April 30,
2009
CPI
Aerostructures, Inc.
Performance
Equity Plan 2009
Section 1.
Purpose;
Definitions.
1.1.
Purpose
.
The purpose of the
Performance Equity Plan 2009 (“Plan”) is to enable the Company to offer to its
employees, officers, directors and consultants whose past, present and/or
potential contributions to the Company and its Subsidiaries have been, are or
will be important to the success of the Company, an opportunity to acquire a
proprietary interest in the Company. The various types of long-term incentive
awards that may be provided under the Plan will enable the Company to respond to
changes in compensation practices, tax laws, accounting regulations and the size
and diversity of its businesses.
1.2.
Definitions
.
For purposes of
the Plan, the following terms shall be defined as set forth below:
(a) “Agreement”
means the agreement between the Company and the Holder, or such other document
as may be determined by the Committee, setting forth the terms and conditions of
an award under the Plan.
(b) “Board”
means the Board of Directors of the Company.
(c) “Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
(d) “Committee”
means the committee of the Board designated to administer the Plan as provided
in Section 2.1.
(e) “Common
Stock” means the Common Stock of the Company, par value $0.001 per
share.
(f) “Company”
means CPI Aerostructures, Inc., a corporation organized under the law of the
State of New York.
(g) “Disability”
means physical or mental impairment as determined under procedures established
by the Committee for purposes of the Plan.
(h) “Effective
Date” means the date determined pursuant to Section 11.1.
(i) “Fair
Market Value,” unless otherwise required by any applicable provision of the Code
or any regulations issued thereunder, means, as of any given date: (i) if the
Common Stock is listed on a national securities exchange or the Nasdaq Stock
Market, the last sale price of the Common Stock in the principal trading market
for the Common Stock on such date, as reported by the exchange or Nasdaq, as the
case may be; (ii) if the Common Stock is not listed on a national securities
exchange or the Nasdaq Stock Market, but is traded in the over-the-counter
market, the closing bid price for the Common Stock on such date, as reported by
the OTC Bulletin Board or Pink Sheets, LLC or similar publisher of such
quotations; and (iii) if the fair market value of the Common Stock cannot be
determined
pursuant
to clause (i) or (ii) above, such price as the Committee shall determine, in
good faith.
(j) “Holder”
means a person who has received an award under the Plan.
(k) “Incentive
Stock Option” means any Stock Option intended to be and designated as an
“incentive stock option” within the meaning of Section 422 of the
Code.
(l) “Non-qualified
Stock Option” means any Stock Option that is not an Incentive Stock
Option.
(m) “Normal
Retirement” means retirement from active employment with the Company or any
Subsidiary on or after such age which may be designated by the Committee as
“retirement age” for any particular Holder. If no age is designated, it shall be
65.
(n) “Other
Stock-Based Award” means an award under Section 8 that is valued in whole or in
part by reference to, or is otherwise based upon, Common Stock.
(o) “Parent”
means any present or future “parent corporation” of the Company, as such term is
defined in Section 424(e) of the Code.
(p) “Plan”
means the CPI Aerostructures, Inc. Performance Equity Plan 2009, as
hereinafter amended from time to time.
(q) “Repurchase
Value” shall mean the Fair Market Value if the award to be settled under Section
2.2(e) or repurchased under Section 9.2 is comprised of shares of Common Stock
and the difference between Fair Market Value and the Exercise Price (if lower
than Fair Market Value) if the award is a Stock Option or Stock Appreciation
Right; in each case, multiplied by the number of shares subject to the
award.
(r) “Restricted
Stock” means Common Stock received under an award made pursuant to
Section 7 that is subject to restrictions under Section 7.
(s) “SAR
Value” means the excess of the Fair Market Value (on the exercise date) over (a)
the exercise price that the participant would have otherwise had to pay to
exercise the related Stock Option or (b) if a Stock Appreciation Right is
granted unrelated to a Stock Option, the Fair Market Value of a share of Common
Stock on the date of grant of the Stock Appreciation Right, in either case,
multiplied by the number of shares for which the Stock Appreciation Right is
exercised.
(t) “Stock
Appreciation Right” means the right to receive from the Company, on surrender of
all or part of the related Stock Option, without a cash payment to the Company,
a number of shares of Common Stock equal to the SAR Value divided by the Fair
Market Value (on the exercise date).
(u) “Stock
Option” or “Option” means any option to purchase shares of Common Stock which is
granted pursuant to the Plan.
(v)
“Subsidiary” means any present or future “subsidiary corporation” of the
Company, as such term is defined in Section 424(f) of the Code.
(w) “Vest”
means to become exercisable or to otherwise obtain ownership rights in an
award.
Section
2. Administration.
2.1.
Committee
Membership
.
The Plan shall be
administered by a Committee of the Board of at least two directors, all of whom
are “outside directors” within the meaning of the regulations issued under
Section 162(m) of the Code. Committee members shall serve for such term as the
Board may in each case determine and shall be subject to removal at any time by
the Board.
2.2.
Powers of
Committee
.
The Committee
shall have full authority to award, pursuant to the terms of the Plan: (i) Stock
Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, and/or (iv)
Other Stock-Based Awards. For purposes of illustration and not of limitation,
the Committee shall have the authority (subject to the express provisions of
this Plan):
(a) to
select the officers, employees, directors and consultants of the Company or any
Subsidiary to whom Stock Options, Stock Appreciation Rights, Restricted Stock
and/or Other Stock-Based Awards may from time to time be awarded
hereunder.
(b) to
determine the terms and conditions, not inconsistent with the terms of the Plan,
of any award granted hereunder (including, but not limited to, number of shares,
share exercise price or types of consideration paid upon exercise of such
options, such as other securities of the Company or other property, any
restrictions or limitations, and any vesting, exchange, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions, as the Committee
shall determine);
(c) to
determine any specified performance goals or such other factors or criteria
which need to be attained for the vesting of an award granted
hereunder;
(d) to
determine the terms and conditions under which awards granted hereunder are to
operate on a tandem basis and/or in conjunction with or apart from other equity
awarded under this Plan and cash and non-cash awards made by the Company or any
Subsidiary outside of this Plan; and
(e) to
make payments and distributions with respect to awards (
i.e
., to “settle” awards)
through cash payments in an amount equal to the Repurchase Value.
The
Committee may not modify or amend any outstanding Option or Stock Appreciation
Right to reduce the exercise price of such Option or Stock Appreciation Right,
as applicable, below the exercise price as of the date of grant of such Option
or Stock Appreciation Right. In addition, no Option or Stock
Appreciation Right may be granted in exchange for, or in connection with, the
cancellation or surrender of an Option or Stock Appreciation Right or other
award having a higher exercise price.
Notwithstanding
anything to the contrary, the Committee shall not grant to any one Holder in any
one calendar year awards for more than 50,000 shares in the
aggregate.
2.3.
Interpretation of
Plan
.
(a)
Committee
Authority
.
Subject to Section
10, the Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable to interpret the terms and provisions of the
Plan and any award issued under the Plan (and to determine the form and
substance of all agreements relating thereto), and to otherwise supervise the
administration of the Plan. Subject to Section 10, all decisions made by the
Committee pursuant to the provisions of the Plan shall be made in the
Committee’s sole discretion and shall be final and binding upon all persons,
including the Company, its Subsidiaries and Holders.
(b)
Incentive Stock
Options
.
Anything in the
Plan to the contrary notwithstanding, no term or provision of the Plan relating
to Incentive Stock Options (including but not limited to Stock Appreciation
rights granted in conjunction with an Incentive Stock Option) or any Agreement
providing for Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify the Plan under Section 422 of the Code or, without the consent
of the Holder(s) affected, to disqualify any Incentive Stock Option under such
Section 422.
Section
3. Stock Subject to Plan.
3.1.
Number of
Shares
.
Subject to the
last sentence of Section 7.1, the total number of shares of Common Stock
reserved and available for issuance under the Plan shall be 500,000 shares.
Shares of Common Stock under the Plan (“Shares”) may consist, in whole or in
part, of authorized and unissued shares or treasury shares. If any shares of
Common Stock that have been granted pursuant to a Stock Option cease to be
subject to a Stock Option, or if any shares of Common Stock that are subject to
any Stock Appreciation Right, Restricted Stock award or Other Stock-Based Award
granted hereunder are forfeited, or any such award otherwise terminates without
a payment being made to the Holder in the form of Common Stock, such shares
shall again be available for distribution in connection with future grants and
awards under the Plan. If a Holder pays the exercise price of a Stock Option by
surrendering any previously owned shares and/or arranges to have the appropriate
number of shares otherwise issuable upon exercise withheld to cover the
withholding tax liability associated with the Stock Option exercise, then, in
the Committee’s discretion, the number of shares available under the Plan may be
increased by the lesser of (i) the number of such surrendered shares and shares
used to pay taxes; and (ii) the number of shares purchased under such Stock
Option.
3.2.
Adjustment Upon Changes in
Capitalization, Etc.
In the event of
any common stock dividend payable on shares of Common Stock, Common Stock split
or reverse split, combination or exchange of shares of Common Stock, or other
extraordinary or unusual event which results in a change in the shares of Common
Stock of the Company as a whole, the Committee shall determine, in its sole
discretion, whether such change equitably requires an adjustment in the terms of
any award in order to prevent dilution or enlargement of the benefits available
under the Plan (including number of shares subject to the award and the exercise
price) or the aggregate number of shares reserved for issuance under the Plan.
Any such adjustments will be made by the Committee, whose determination will be
final, binding and conclusive.
Section
4. Eligibility.
Awards
may be made or granted to employees, officers, directors and consultants who are
deemed to have rendered or to be able to render significant services to the
Company or its
Subsidiaries
and who are deemed to have contributed or to have the potential to contribute to
the success of the Company and which recipients are qualified to receive
options under the regulations governing Form S-8 registration statements under
the Securities Act of 1933, as amended (“Securities Act”). No Incentive Stock
Option shall be granted to any person who is not an employee of the Company or
an employee of a Subsidiary at the time of grant or so qualified as set forth in
the immediately preceding sentence. Notwithstanding the foregoing, an award may
also be made or granted to a person in connection with his hiring or retention,
or at any time on or after the date he reaches an agreement (oral or written)
with the Company with respect to such hiring or retention, even though it may be
prior to the date the person first performs services for the Company or its
Subsidiaries; provided, however, that no portion of any such award shall vest
prior to the date the person first performs such services and the date of grant
shall be deemed to be the date hiring or retention commences.
Section
5. Stock Options.
5.1.
Grant and
Exercise
.
Stock Options
granted under the Plan may be of two types: (i) Incentive Stock Options and (ii)
Non-qualified Stock Options. Any Stock Option granted under the Plan shall
contain such terms, not inconsistent with this Plan, or with respect to
Incentive Stock Options, not inconsistent with the Plan and the Code, as the
Committee may from time to time approve. The Committee shall have the authority
to grant Incentive Stock Options or Non-qualified Stock Options, or both types
of Stock Options which may be granted alone or in addition to other awards
granted under the Plan. To the extent that any Stock Option intended to qualify
as an Incentive Stock Option does not so qualify, it shall constitute a separate
Non-qualified Stock Option.
5.2.
Terms and
Conditions
.
Stock Options
granted under the Plan shall be subject to the following terms and
conditions:
(a)
Option Term
.
The term of each
Stock Option shall be fixed by the Committee; provided, however, that an
Incentive Stock Option may be granted only within the ten-year period commencing
from the Effective Date and may only be exercised within ten years of the date
of grant (or five years in the case of an Incentive Stock Option granted to an
optionee who, at the time of grant, owns Common Stock possessing more than 10%
of the total combined voting power of all classes of voting stock of the Company
(“10% Shareholder”)).
(b)
Exercise Price
.
The exercise price
per share of Common Stock purchasable under a Stock Option shall be determined
by the Committee at the time of grant and may not be less than 100% of the Fair
Market Value on the date of grant (or, if greater, the par value of a share of
Common Stock); provided, however, that the exercise price of an Incentive Stock
Option granted to a 10% Shareholder will not be less than 110% of the Fair
Market Value on the date of grant.
(c)
Exercisability
.
Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. The Committee intends
generally to provide that Stock Options be exercisable only in
installments, i.e., that they vest over time, typically over a three-year
period. The Committee may waive such installment exercise provisions
at any time at or after the time of grant in whole or in part, based upon such
factors as the Committee determines. Notwithstanding the foregoing,
in the case of an Incentive Stock Option, the aggregate Fair Market Value (on
the date of grant of the Option) with respect to which Incentive Stock Options
become exercisable for the first time by a Holder during any calendar year
(under all such plans of the Company and its Parent and Subsidiaries) shall not
exceed $100,000.
(d)
Method of
Exercise
.
Subject to
whatever installment, exercise and waiting period provisions are applicable in a
particular case, Stock Options may be exercised in whole or in part at any time
during the term of the Option by giving written notice of exercise to the
Company specifying the number of shares of Common Stock to be purchased. Such
notice shall be accompanied by payment in full of the purchase price, which
shall be in cash or, if provided in the Agreement, either in shares of Common
Stock (including Restricted Stock and other contingent awards under this Plan)
or partly in cash and partly in such Common Stock, or such other means which the
Committee determines are consistent with the Plan’s purpose and applicable law.
Cash payments shall be made by wire transfer, certified or bank check or
personal check, in each case payable to the order of the Company; provided,
however, that the Company shall not be required to deliver certificates for
shares of Common Stock with respect to which an Option is exercised until the
Company has confirmed the receipt of good and available funds in payment of the
purchase price thereof (except that, in the case of an exercise arrangement
approved by the Committee and described in the last sentence of this paragraph,
payment may be made as soon as practicable after the exercise). The
Committee may permit a Holder to elect to pay the Exercise Price upon the
exercise of a Stock Option by irrevocably authorizing a third party to sell
shares of Common Stock (or a sufficient portion of the shares) acquired upon
exercise of the Stock Option and remit to the Company a sufficient portion of
the sale proceeds to pay the entire Exercise Price and any tax withholding
resulting from such exercise.
(e)
Stock Payments
.
Payments in the
form of Common Stock shall be valued at the Fair Market Value on the date of
exercise. Such payments shall be made by delivery of stock certificates in
negotiable form that are effective to transfer good and valid title thereto to
the Company, free of any liens or encumbrances. A Holder shall have none of the
rights of a Shareholder with respect to the shares subject to the Option until
such shares shall be transferred to the Holder upon the exercise of the
Option.
(f)
Transferability
.
Except as may be
set forth in the next sentence of this Section or in the Agreement, no Stock
Option shall be transferable by the Holder other than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable, during the
Holder’s lifetime, only by the Holder (or, to the extent of legal incapacity or
incompetency, the Holder’s guardian or legal representative). Notwithstanding
the foregoing, a Holder, with the approval of the Committee, may transfer a
Non-Qualified Stock Option (i) (A) by gift, for no consideration, or (B)
pursuant to a domestic relations order, in either case, to or for the benefit of
the Holder’s “Immediate Family” (as defined below), or (ii) to an entity in
which the Holder and/or members of Holder’s Immediate Family own more than fifty
percent of the voting interest, in exchange for an interest in that entity,
subject to such limits as the Committee may establish and the execution of such
documents as the Committee may require, and the transferee shall remain subject
to all the terms and conditions applicable to the Non-Qualified Stock Option
prior to such transfer. The term “Immediate Family” shall mean any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships, any person sharing the Holder’s household (other than a tenant or
employee), a trust in which these persons have more than fifty percent
beneficial interest, and a foundation in which these persons (or the Holder)
control the management of the assets. The Committee may, in its sole
discretion, permit transfer of an Incentive Stock Option in a manner consistent
with applicable tax and securities law upon the Holder’s request.
(g)
Termination by Reason of
Death
.
If a Holder’s
employment by, or association with, the Company or a Subsidiary terminates by
reason of death, any Stock Option held by such Holder, unless otherwise
determined by the Committee and set forth in the Agreement, shall thereupon
automatically terminate, except that the portion of such Stock Option that
has
vested
on the date of death may thereafter be exercised by the legal representative of
the estate or by the legatee of the Holder under the will of the Holder, for a
period of one year (or such other greater or lesser period as the Committee may
specify in the Agreement) from the date of such death or until the expiration of
the stated term of such Stock Option, whichever period is shorter.
(h)
Termination by Reason of
Disability
.
If a Holder’s
employment by, or association with, the Company or any Subsidiary terminates by
reason of Disability, any Stock Option held by such Holder, unless otherwise
determined by the Committee and set forth in the Agreement, shall thereupon
automatically terminate, except that the portion of such Stock Option that has
vested on the date of termination may thereafter be exercised by the Holder for
a period of one year (or such other greater or lesser period as the Committee
may specify in the Agreement) from the date of such termination or until the
expiration of the stated term of such Stock Option, whichever period is
shorter.
(i)
Termination by Reason of
Normal
Retirement
.
Subject to the
provisions of Section 12.3, if such Holder’s employment by, or association with,
the Company or any Subsidiary terminates due to Normal Retirement, any
Stock Option held by such Holder, unless otherwise determined by the Committee
and set forth in the Agreement, shall thereupon automatically terminate, except
that the portion of such Stock Option that has vested on the date of termination
may thereafter be exercised by the Holder for a period of one year (or such
other greater or lesser period as the Committee may specify in the
Agreement) from the date of such termination or until the expiration of the
stated term of such Stock Option, whichever period is shorter.
(j)
Other
Termination
.
Subject to the
provisions of Section 12.3, if such Holder’s employment by, or association with,
the Company or any Subsidiary terminates for any reason other than death,
Disability or Normal Retirement, any Stock Option held by such Holder,
unless otherwise determined by the Committee and set forth in the Agreement,
shall thereupon automatically terminate, except that, if the Holder’s employment
is terminated by the Company or a Subsidiary without cause, the portion of such
Stock Option that has vested on the date of termination may thereafter be
exercised by the Holder for a period of three months (or such other
greater or lesser period as the Committee may specify in the
Agreement) from the date of such termination or until the expiration of the
stated term of such Stock Option, whichever period is shorter.
(k)
Buyout and Settlement
Provisions
.
The Committee may
at any time, in its sole discretion, offer to repurchase a Stock Option
previously granted, at a purchase price not to exceed the Repurchase Value and
under such terms and conditions as the Committee shall establish and communicate
to the Holder at the time that such offer is made.
Section
6. Stock Appreciation Rights.
6.1.
Grant and
Exercise
.
Subject to the
terms and conditions of the Plan, the Committee may grant Stock Appreciation
Rights in tandem with an Option or alone and unrelated to an Option. The
Committee may grant Stock Appreciation Rights to participants who have been or
are being granted Stock Options under the Plan as a means of allowing such
participants to exercise their Stock Options without the need to pay the
exercise price in cash. In the case of a Non-qualified Stock Option, a Stock
Appreciation Right may be granted either at or after the time of the grant of
such Non-qualified Stock Option. In the case of an Incentive Stock Option, a
Stock Appreciation Right may be granted only at the time of the grant of such
Incentive Stock Option.
6.2.
Terms and
Conditions
.
Stock Appreciation
Rights shall be subject to the following terms and conditions:
(a)
Exercisability
.
Stock Appreciation
Rights shall be exercisable as shall be determined by the Committee and set
forth in the Agreement, subject to the limitations, if any, imposed by the Code
with respect to related Incentive Stock Options.
(b)
Termination
.
A Stock
Appreciation Right shall terminate and shall no longer be exercisable upon the
termination or after the exercise of the related Stock Option.
(c)
Method of
Exercise
.
Stock Appreciation
Rights shall be exercisable upon such terms and conditions as shall be
determined by the Committee and set forth in the Agreement and by surrendering
the applicable portion of the related Stock Option. Upon such exercise and
surrender, the Holder shall be entitled to receive a number of shares of Common
Stock equal to the SAR Value divided by the Fair Market Value on the date the
Stock Appreciation Right is exercised.
(d)
Shares Affected Upon
Plan
.
The granting of a
Stock Appreciation Right shall not affect the number of shares of Common Stock
available for awards under the Plan. The number of shares available for awards
under the Plan will, however, be reduced by the number of shares of Common Stock
acquirable upon exercise of the Stock Option to which such Stock Appreciation
Right relates.
Section
7. Restricted Stock.
7.1.
Grant
.
Shares of
Restricted Stock may be awarded either alone or in addition to other awards
granted under the Plan. The Committee shall determine the eligible persons to
whom, and the time or times at which, grants of Restricted Stock will be
awarded, the number of shares to be awarded, the price (if any) to be paid by
the Holder, the time or times within which such awards may be subject to
forfeiture (“Restriction Period”), the vesting schedule and rights to
acceleration thereof and all other terms and conditions of the
awards. Notwithstanding anything to the contrary elsewhere in this
Plan, for purposes of determining the number of Shares available for awards
pursuant to Section 3.1, each share of Common Stock subject to a Restricted
Stock award shall be deemed to be 1.5 Shares.
7.2.
Terms and
Conditions
.
Each Restricted
Stock award shall be subject to the following terms and conditions:
(a)
Certificates
.
Restricted Stock,
when issued, will be represented by a stock certificate or certificates
registered in the name of the Holder to whom such Restricted Stock shall have
been awarded. During the Restriction Period, certificates representing the
Restricted Stock and any securities constituting Retained Distributions (as
defined below) shall bear a legend to the effect that ownership of the
Restricted Stock (and such Retained Distributions) and the enjoyment of all
rights appurtenant thereto are subject to the restrictions, terms and conditions
provided in the Plan and the Agreement. Such certificates shall be deposited by
the Holder with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to the Company of
all or any portion of the Restricted Stock and any securities constituting
Retained Distributions that shall be forfeited or that shall not become vested
in accordance with the Plan and the Agreement.
(b)
Rights of
Holder
.
Restricted Stock
shall constitute issued and outstanding shares of Common Stock for all corporate
purposes. The Holder will have the right to vote such Restricted Stock and to
exercise all other rights, powers and privileges of a holder of Common Stock
with respect to such Restricted Stock, with the exceptions that (i) the Holder
will not be entitled to delivery of the stock certificate or certificates
representing such Restricted Stock until the Restriction Period shall have
expired and unless all other vesting requirements with respect thereto shall
have been fulfilled; (ii) the Company will retain custody of the stock
certificate or certificates representing the Restricted Stock during the
Restriction Period; (iii) the Company will retain custody of all dividends and
distributions (“Retained Distributions”) made, paid or declared with respect to
the Restricted Stock (and such Retained Distributions will be subject to the
same restrictions, terms and conditions as are applicable to the Restricted
Stock) until such time, if ever, as the Restricted Stock with respect to which
such Retained Distributions shall have been made, paid or declared shall have
become vested and with respect to which the Restriction Period shall have
expired; (iv) a breach of any of the restrictions, terms or conditions contained
in this Plan or the Agreement or otherwise
established
by the Committee with respect to any Restricted Stock or Retained Distributions
will cause a forfeiture of such Restricted Stock and any Retained Distributions
with respect thereto.
(c)
Vesting;
Forfeiture
.
Upon the
expiration of the Restriction Period with respect to each award of Restricted
Stock and the satisfaction of any other applicable restrictions, terms and
conditions (i) all or part of such Restricted Stock shall become vested in
accordance with the terms of the Agreement, and (ii) any Retained Distributions
with respect to such Restricted Stock shall become vested to the extent that the
Restricted Stock related thereto shall have become vested. Any such Restricted
Stock and Retained Distributions that do not vest shall be forfeited to the
Company and the Holder shall not thereafter have any rights with respect to such
Restricted Stock and Retained Distributions that shall have been so
forfeited.
Section
8. Other Stock-Based Awards.
Other
Stock-Based Awards may be awarded, subject to limitations under applicable law,
that are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to, shares of Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, purchase rights, shares of Common Stock awarded which are not
subject to any restrictions or conditions, convertible or exchangeable
debentures, or other rights convertible into shares of Common Stock and awards
valued by reference to the value of securities of or the performance of
specified Subsidiaries. These other stock-based awards may include performance
shares or options, whose award is tied to specific performance criteria. Other
Stock-Based Awards may be awarded either alone or in addition to or in tandem
with any other awards under this Plan or any other plan of the Company. Each
other Stock-Based Award shall be subject to such terms and conditions as may be
determined by the Committee.
Section
9. Accelerated Vesting and Exercisability.
9.1.
Non-Approved
Transactions
.
If any one
person, or more than one person acting as a group, acquires the ownership of
stock of the Company that, together with the stock held by such person or group,
constitutes more than 50% of the total fair market value or combined voting
power of the stock of the Company, and the Board does not authorize or otherwise
approve such acquisition, then the vesting periods of any and all Stock Options
and other awards granted and outstanding under the Plan shall be accelerated and
all such Stock Options and awards will immediately and entirely vest, and the
respective holders thereof will have the immediate right to purchase and/or
receive any and all Common Stock subject to such Stock Options and awards on the
terms set forth in this Plan and the respective Agreements respecting such Stock
Options and awards. An increase in the percentage of stock owned by any one
person, or persons acting as a group, as a result of a transaction in which the
Company acquires its stock in exchange for property is not treated as an
acquisition of stock for purposes of this Section 9.1.
9.2.
Approved
Transactions
.
The
Committee may, in the event of an acquisition by any one person, or more than
one person acting as a group, together with acquisitions during the 12-month
period ending on the date of the most recent acquisition by such person or
persons, of assets from the Company that have a total gross fair market value
equal to or more than 50% of the total gross fair market value of all of the
assets of the Company immediately before such acquisition or acquisitions, or if
any one person, or more than one person acting as a group, acquires the
ownership of stock of the Company that, together with the stock held by such
person or group, constitutes more than 50% of the total fair market value or
combined voting power of the stock of the Company, which has been approved
by the Company’s Board of Directors, (i) accelerate the vesting of any and all
Stock Options and other awards granted and outstanding under the Plan, or (ii)
require a Holder of any award granted under this Plan to relinquish such award
to the Company upon the tender by the Company to Holder of cash in an amount
equal to the Repurchase Value of such award. For this purpose, gross fair
market value means the value of the assets of the Company, or the value of the
assets being disposed of, determined without regard to any liabilities
associated with such assets.
9.3.
Code Section
409A
.
Notwithstanding
any provisions of this Plan or any award granted hereunder to the contrary, no
acceleration shall occur with respect to any award to the extent such
acceleration would cause the Plan or an award granted hereunder to fail to
comply with Code Section 409A.
Section
10. Amendment and Termination.
The Board
may at any time, and from time to time, amend alter, suspend or discontinue any
of the provisions of the Plan, but no amendment, alteration, suspension or
discontinuance shall be made that would impair the rights of a Holder under any
Agreement theretofore entered into hereunder, without the Holder’s consent,
except as set forth in this Plan.
Section
11. Term of Plan.
11.1.
Effective Date
.
The Plan shall be
effective as of June 11, 2009.
11.2.
Termination
Date
.
Unless terminated
by the Board, this Plan shall continue to remain effective until such time as no
further awards may be granted and all awards granted under the Plan are no
longer outstanding. Notwithstanding the foregoing, grants of Incentive Stock
Options may be made only during the ten-year period beginning on the Effective
Date.
Section
12. General Provisions.
12.1.
Written
Agreements
.
Each award granted
under the Plan shall be confirmed by, and shall be subject to the terms of, the
Agreement executed by the Company and the Holder, or such other document as may
be determined by the Committee. The Committee may terminate any award made under
the Plan if the Agreement relating thereto is not executed and returned to the
Company within 10 days after the Agreement has been delivered to the Holder for
his or her execution.
12.2.
Unfunded Status of
Plan
.
The Plan is
intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a Holder by the
Company, nothing contained herein shall give any such Holder any rights that are
greater than those of a general creditor of the Company.
12.3.
Employees
.
(a)
Engaging in Competition With
the Company; Solicitation of Customers and Employees; Disclosure of Confidential
Information
.
If a Holder’s
employment with the Company or a Subsidiary is terminated for any reason
whatsoever, and within 12 months after the date thereof such Holder either (i)
accepts employment with any competitor of, or otherwise engages in competition
with, the Company or any of its Subsidiaries, (ii) solicits any customers or
employees of the Company or any of its Subsidiaries to do business with or
render services to the Holder or any business with which the Holder becomes
affiliated or to which the Holder renders services or (iii) uses or discloses to
anyone outside the Company any confidential information or material of the
Company or any of its Subsidiaries in violation of the Company’s policies or any
agreement between the Holder and the Company or any of its Subsidiaries, the
Committee, in its sole discretion, may require such Holder to return to the
Company the economic value of any award that was realized or obtained by such
Holder at any time during the period beginning on the date that is six months
prior to the date such Holder’s employment with the Company is terminated. In
such event, Holder agrees to remit to the Company, in cash, an amount equal to
the difference between the Fair Market Value of the Shares on the date of
termination (or the sales price of such Shares if the Shares were sold during
such six month period) and the price the Holder paid the Company for such
Shares.
(b)
Termination for
Cause
.
If a Holder’s
employment with the Company or a Subsidiary is terminated for cause, the
Committee may, in its sole discretion, require such Holder to return to the
Company the economic value of any award that was realized or obtained by such
Holder at any time
during
the period beginning on that date that is six months prior to the date such
Holder’s employment with the Company is terminated. In such event, Holder agrees
to remit to the Company, in cash, an amount equal to the difference between the
Fair Market Value of the Shares on the date of termination (or the sales price
of such Shares if the Shares were sold during such six month period) and the
price the Holder paid the Company for such Shares.
(c)
No Right of
Employment
.
Nothing contained
in the Plan or in any award hereunder shall be deemed to confer upon any Holder
who is an employee of the Company or any Subsidiary any right to continued
employment with the Company or any Subsidiary, nor shall it interfere in any way
with the right of the Company or any Subsidiary to terminate the employment of
any Holder who is an employee at any time.
12.4.
Investment Representations;
Company Policy
.
The Committee may
require each person acquiring shares of Common Stock pursuant to a Stock Option
or other award under the Plan to represent to and agree with the Company in
writing that the Holder is acquiring the shares for investment without a view to
distribution thereof. Each person acquiring shares of Common Stock pursuant to a
Stock Option or other award under the Plan shall be required to abide by all
policies of the Company in effect at the time of such acquisition and thereafter
with respect to the ownership and trading of the Company’s
securities.
12.5.
Additional Incentive
Arrangements
.
Nothing contained
in the Plan shall prevent the Board from adopting such other or additional
incentive arrangements as it may deem desirable, including, but not limited to,
the granting of Stock Options and the awarding of Common Stock and cash
otherwise than under the Plan; and such arrangements may be either generally
applicable or applicable only in specific cases.
12.6.
Withholding
Taxes
.
Not later than the
date as of which an amount must first be included in the gross income of the
Holder for Federal income tax purposes with respect to any Stock Option or other
award under the Plan, the Holder shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal, state and
local taxes of any kind required by law to be withheld or paid with respect to
such amount. If permitted by the Committee, tax withholding or payment
obligations may be settled with Common Stock, including Common Stock that is
part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditioned upon such payment
or arrangements and the Company or the Holder’s employer (if not the Company)
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Holder from the Company or any
Subsidiary.
12.7.
Governing Law
.
The Plan and all
awards made and actions taken thereunder shall be governed by and construed in
accordance with the law of the State of New York (without regard to choice of
law provisions).
12.8.
Other Benefit
Plans
.
Any award granted
under the Plan shall not be deemed compensation for purposes of computing
benefits under any retirement plan of the Company or any Subsidiary and shall
not affect any benefits under any other benefit plan now or subsequently in
effect under which the availability or amount of benefits is related to the
level of compensation (unless required by specific reference in any such other
plan to awards under this Plan).
12.9.
Non-Transferability
.
Except as
otherwise expressly provided in the Plan or the Agreement, no right or benefit
under the Plan may be alienated, sold, assigned, hypothecated, pledged,
exchanged, transferred, encumbranced or charged, and any attempt to alienate,
sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the
same shall be void.
12.10.
Applicable
Laws
.
The obligations of
the Company with respect to all Stock Options and awards under the Plan shall be
subject to (i) all applicable laws, rules and regulations and such approvals by
any governmental agencies as may be required, including, without limitation, the
Securities Act, and (ii) the rules and regulations of any securities exchange on
which the Common Stock may be listed.
12.11.
Conflicts
.
If any of the
terms or provisions of the Plan or an Agreement conflict with the requirements
of Section 422 of the Code, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with such requirements. Additionally,
if this Plan or any Agreement does not contain any provision required to be
included herein under Section 422 of the Code, such provision shall be deemed to
be incorporated herein and therein with the same force and effect as if such
provision had been set out at length herein and therein. If any of the terms or
provisions of any Agreement conflict with any terms or provisions of the Plan,
then such terms or provisions shall be deemed inoperative to the extent they so
conflict with the requirements of the Plan. Additionally, if any Agreement does
not contain any provision required to be included therein under the Plan, such
provision shall be deemed to be incorporated therein with the same force and
effect as if such provision had been set out at length therein.
12.12.
Certain Awards
Deferring or Accelerating the Receipt of Compensation
.
To the extent
applicable, all awards granted, and all Agreements entered into, under the Plan
are intended to comply with Section 409A of the Code, which was added by the
American Jobs Creation Act of 2004 and relates to deferred compensation under
nonqualified deferred compensation plans. The Committee, in administering the
Plan, intends, and the parties entering into any Agreement intend, to restrict
provisions of any awards that may constitute deferred receipt of compensation
subject to Code Section 409A requirements to those consistent with this Section.
The Board may amend the Plan to comply with Code Section 409A in the
future.
12.13.
Non-Registered
Stock
.
The shares of
Common Stock to be distributed under this Plan have not been, as of the
Effective Date, registered under the Securities Act or any applicable state or
foreign securities laws and the Company has no obligation to any Holder to
register the Common Stock or to assist the Holder in obtaining an exemption from
the various registration requirements, or to list the Common Stock on a national
securities exchange or any other trading or quotation system.
|
CPI AEROSTRUCTURES,
INC
.
PROXY
Solicited
By The Board Of Directors
for
Annual Meeting To Be Held on June 11, 2009
|
|
|
|
|
P
|
The
undersigned shareholder(s) of
CPI AEROSTRUCTURES,
INC.
, a New York corporation ("Company"), hereby appoints Kenneth
McSweeney and Edward J. Fred, or either of them, with full power of
substitution and to act without the other, as the agents, attorneys and
proxies of the undersigned, to vote the shares standing in the name of the
undersigned at the Annual Meeting to be held on June 11, 2009 and at all
adjournments thereof. This proxy will be voted in accordance with the
instructions given below. If no instructions are given, this proxy will be
voted
FOR
all of
the following proposals
|
|
R
|
|
O
|
|
X
|
|
Y
|
|
|
|
|
|
(
Continued and to be signed on the reverse side)
|
|
|
|
|
n
|
14475
|
n
|
ANNUAL
MEETING OF SHAREHOLDERS OF
CPI
AEROSTRUCTURES, INC.
June
11, 2009
NOTICE OF
INTERNET AVAILABILITY OF PROXY MATERIAL
:
The
Notice of Meeting, Proxy Statement, Proxy Card
are
available at http://www.cpiaero.com/ir.php under “Proxy”.
Please
sign, date and mail
your
proxy card in the
envelope
provided as soon
as
possible.
â
Please
detach along perforated line and mail in the envelope provided
â
|
n
20230000000000001000 9
|
061109
|
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE
IN BLUE OR BLACK INK AS SHOWN HERE
x
|
1.
Election of the following directors:
|
2.
To approve the Performance Equity Plan 2009
|
FOR
AGAINST ABSTAIN
¨
¨
¨
|
|
NOMINEES:
|
|
|
|
¨
FOR ALL
NOMINEES
|
O
Walter
Paulick
O
Eric
Rosenfeld
|
3. In
their discretion, the proxies are authorized to vote upon such other
business as may come before the meeting or any adjournment
thereof.
|
|
|
|
|
|
¨
WITHHOLD AUTHORITY FOR ALL NOMINEES
|
|
|
|
|
¨
FOR ALL EXCEPT
(See
instructions below)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INSTRUCTIONS:
To
withhold authority to vote for any individual nominee(s), mark
“FOR
ALL EXCEPT”
and fill in the circle next to each nominee you wish to
withhold, as shown here:
˜
|
|
|
|
|
|
|
To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted via
this method.
¨
|
I plan on attending the Annual
Meeting.
¨
|
|
|
|
|
Signature
of Shareholder
|
|
Date
|
|
Signature
of Shareholder
|
|
Date:
|
|
|
n
|
Note:
Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person
|
n
|