def14a
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
PROXY STATEMENT
PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to § 240.14a-12
AMERICAN REPROGRAPHICS COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Per unit price or other underlying value of transaction computed pursuant to
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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. |
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Form, Schedule or Registration Statement No.: |
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AMERICAN REPROGRAPHICS COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 22, 2006
To Our Stockholders:
We cordially invite you to attend the 2006 Annual Meeting of
Stockholders of American Reprographics Company (the
Company), our first annual meeting since the closing
of our initial public offering on February 9, 2005. The
annual meeting will take place at the Glendale Hilton Hotel,
100 West Glenoaks Boulevard, Glendale, California 91202 on
Monday, May 22, 2006, at 2:00 p.m. local time. We look
forward to your attendance either in person or by proxy.
The purpose of the annual meeting is to:
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1. Elect seven directors, each for a term of one year, or
until their successors are elected and qualified; |
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2. Ratify the appointment of PricewaterhouseCoopers LLP as
the Companys independent auditors for fiscal year
2006; and |
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3. Transact any other business that may properly come
before the annual meeting and any postponements or adjournments
of the annual meeting. |
The foregoing items of business are more fully described in the
proxy statement accompanying this notice of annual meeting of
stockholders. Only stockholders of record at the close of
business on March 27, 2006 will receive notice of, and be
eligible to vote at the annual meeting or any postponements or
adjournments of the annual meeting. A list of such stockholders
will be available at the Annual Meeting, and, during ordinary
business hours ten days prior to the Annual Meeting, at the
office of the Secretary of the Company at 700 North Central
Avenue, Suite 550, Glendale, California 91203. If you would
like to review the stockholder list, please contact our
Secretary at 818-500-0225 to schedule an appointment.
A copy of the Companys Annual Report for the fiscal year
ended December 31, 2005 is included with this mailing.
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By order of the Board of Directors, |
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Mark W. Legg |
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Chief Financial Officer and Secretary |
April 17, 2006
YOUR VOTE IS VERY IMPORTANT
Please read the Proxy Statement and the voting instructions
on the enclosed proxy card. Then, whether or not you plan to
attend the annual meeting in person, and no matter how many
shares you own, please complete, sign, date and promptly return
the enclosed proxy card in the enclosed return envelope. This
will ensure that your vote is counted even if you cannot attend
the annual meeting in person. The enclosed return envelope
requires no additional postage if mailed in either the United
States or Canada.
AMERICAN REPROGRAPHICS COMPANY
2006 ANNUAL MEETING
PROXY STATEMENT
TABLE OF CONTENTS
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AMERICAN REPROGRAPHICS COMPANY
700 North Central Avenue, Suite 550
Glendale, CA 91203
(818) 500-0225
April 17, 2006
PROXY STATEMENT
American Reprographics Company closed its initial public
offering on February 9, 2005, and our common stock was
listed on the New York Stock Exchange (NYSE), on
February 4, 2005. We were previously organized as American
Reprographics Holdings, L.L.C., a California limited liability
company, or Holdings. Immediately prior to our initial public
offering, we reorganized as a Delaware corporation, American
Reprographics Company. We conduct our operations through our
wholly-owned operating subsidiary, American Reprographics
Company, L.L.C., a California limited liability company, or
Opco, and its subsidiaries.
The Board of Directors (the board) of American
Reprographics Company is furnishing you this proxy statement in
connection with the solicitation of proxies on its behalf for
the 2006 Annual Meeting of Stockholders (the Annual
Meeting or meeting). The meeting will take
place at the Glendale Hilton Hotel, 100 West Glenoaks
Boulevard, Glendale, California 91202 on Monday, May 22,
2006, at 2:00 p.m. local time. In this proxy statement we
refer to American Reprographics Company as the
Company, we, us,
our or ARC. At the meeting, stockholders
will vote on the election of seven directors, the ratification
of the appointment of PricewaterhouseCoopers LLP as our
independent auditors for fiscal year 2006, and will transact any
other business that may properly come before the meeting,
although we know of no other business to be presented.
By submitting your proxy (by signing and returning the enclosed
proxy card), you authorize Mark W. Legg, Chief Financial Officer
and Secretary of ARC, Sathiyamurthy Chandramohan, the Chief
Executive Officer and Chairman of the Board of ARC, and
Kumarakulasingam Suriyakumar, the President, Chief Operating
Officer and a director of ARC, to represent you and vote your
shares at the meeting in accordance with your instructions. They
also may vote your shares to adjourn the meeting and will be
authorized to vote your shares at any postponements or
adjournments of the meeting.
We are first sending this proxy statement, form of proxy and
accompanying materials to stockholders on or about
April 17, 2006.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING, PLEASE PROMPTLY SUBMIT YOUR PROXY IN THE ENCLOSED
ENVELOPE.
ANNUAL MEETING AND VOTING INFORMATION
The board seeks your proxy for use in voting at our 2006 annual
meeting of stockholders or any postponements or adjournments of
the meeting. Our annual meeting will be held at the Glendale
Hilton Hotel, 100 West Glenoaks Boulevard, Glendale,
California 91202 on Monday, May 22, 2006, at 2:00 p.m.
local time. We intend to begin mailing this proxy statement, the
attached notice of annual meeting, the accompanying proxy card
and our Annual Report to Stockholders on
Form 10-K for the
fiscal year ended December 31, 2005 on or about
April 17, 2006 to all holders of our common stock, par
value $0.001 per share, entitled to vote at the meeting.
Our Annual Report to Stockholders on
Form 10-K for the
fiscal year ended December 31, 2005 does not constitute a
part of the proxy solicitation materials and is not incorporated
by reference into this proxy statement.
Purpose of the annual meeting.
At the annual meeting, stockholders of ARC will be asked to:
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1. Elect seven directors, each for a term of one year, or
until their successors are elected and qualified; and |
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2. Ratify the appointment of PricewaterhouseCoopers LLP as
the Companys independent auditors for fiscal year 2006. |
Stockholders also will transact any other business that may
properly come before the meeting. Members of ARCs
management team and a representative of PricewaterhouseCoopers
LLP, the Companys independent auditor, will be present at
the meeting to respond to appropriate questions from
stockholders. The representative of PricewaterhouseCoopers LLP
will also make a statement if they so desire.
Admission to the annual meeting.
All record or beneficial owners of ARCs common stock may
attend the annual meeting in person. When you arrive at the
annual meeting, please present photo identification, such as a
drivers license. Beneficial owners must also provide
evidence of stock holdings, such as recent brokerage account or
bank statement showing that you owned ARC common stock on the
record date of March 27, 2006. ARC also has invited certain
ARC employees and certain agents of the Company to attend the
annual meeting.
Record date and voting.
The record date for the meeting is March 27, 2006. Only
stockholders of record at the close of business on that date are
entitled to vote at the meeting. The only class of stock
entitled to be voted at the meeting is ARCs common stock.
Each outstanding share of common stock is entitled to one vote
for all matters presented for a vote at the meeting. At the
close of business on the record date there were
44,745,297 shares of ARC common stock outstanding.
If you submit a proxy but do not indicate any voting
instructions, your shares will be voted:
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FOR the election of the seven nominees to the Board of
Directors; and |
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FOR the ratification of PricewaterhouseCoopers LLP as the
Companys independent auditor. |
Voting shares held in street name.
If your shares are held by a bank or brokerage firm, you are
considered the beneficial owner of shares held in
street name. If your shares are held in street name,
these proxy materials are being forwarded to you by your bank or
brokerage firm (the record holder), along with a
voting instruction card. As the beneficial owner, you have the
right to direct your record holder how to vote your shares, and
the record holder is required to vote your shares in accordance
with your instructions. If you do not give instructions to your
bank or brokerage firm, it will nevertheless be entitled to vote
your shares with respect to discretionary items, but
will not be permitted to vote your shares with respect to
non-discretionary items. In the case of a
non-discretionary item, your shares will be considered
broker non-votes on that proposal. The election of
directors and the ratification of appointment of ARCs
independent auditors are discretionary items.
As the beneficial owner of shares, you are invited to attend the
meeting. If you are a beneficial owner, however, you may not
vote your shares in person at the meeting unless you obtain a
proxy form from the record holder of your shares.
Quorum.
A quorum must be present at the meeting for any business to be
conducted. The presence at the meeting, in person or by proxy,
of the holders of a majority of the shares of common stock
outstanding on the record date will constitute a quorum. Proxies
received but marked as abstentions or treated as broker
non-votes will be included in the calculation of the number of
shares considered to be present at the meeting for quorum
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purposes. If a quorum is not present at the scheduled time of
the meeting, the stockholders who are represented may adjourn
the meeting until a quorum is present. The time and place of the
adjourned meeting will be announced at the time the adjournment
is taken, and no other notice will be given.
Voting instructions.
If you properly complete and sign the accompanying proxy card
and return it in the enclosed envelope, it will be voted in
accordance with your instructions. By so doing you are
authorizing the individuals listed on the proxy card to vote
your shares in accordance with your instructions. The enclosed
envelope requires no additional postage if mailed in either the
United States or Canada.
If you are a registered stockholder and attend the meeting, you
may deliver your completed proxy card in person. Additionally,
we will pass out written ballots to registered stockholders who
wish to vote in person at the meeting. If you attend the annual
meeting, please bring the enclosed proxy card or proof of
identification. Beneficial owners of shares held in street
name who wish to vote at the meeting will need to obtain a proxy
form from their record holder.
If your shares are held in street name, you may be able to vote
your shares electronically by telephone or on the internet. A
large number of banks and brokerage firms participate in a
program provided through ADP Investor Communications Services
that offers telephone and internet voting options. If your
shares are held in an account at a bank or brokerage firm that
participates in such a program, you may vote those shares
electronically by telephone or on the internet by following the
instructions set forth on the voting form provided to you by
your record holder.
Revoking your proxy.
You may revoke your proxy at any time before your shares are
voted and change your vote:
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by signing another proxy with a later date and delivering it in
accordance with the instructions set forth in this proxy
statement; or |
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if you are a registered stockholder, by giving written notice of
such revocation to the Secretary of ARC prior to or at the
meeting or by voting in person at the meeting. |
Your attendance at the meeting itself will not revoke your proxy
unless you give written notice of revocation to the Secretary of
ARC before your proxy is voted or you vote in person at the
meeting.
Any written notice of revocation, or later dated proxy, should
be delivered to:
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American Reprographics Company |
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700 North Central Avenue, Suite 550 |
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Glendale, California 91203 |
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Attention: Mark W. Legg, Chief Financial Officer and Secretary |
Vote required to elect the director nominees.
The affirmative vote of a plurality of the votes cast at the
meeting is required to elect the seven nominees named in
Proposal 1 as directors. This means that the seven nominees
will be elected if they receive more affirmative votes than any
other person. If you vote Withheld with respect to
one or more nominees, your shares will not be voted with respect
to the person or persons indicated, although they will be
counted for purposes of determining whether there is a quorum.
Nominee who is unable to stand for election.
If a nominee is unable to stand for election, the board may
either reduce the number of directors to be elected or select a
substitute nominee. If a substitute nominee is selected, the
proxy holders will vote your shares for the substitute nominee,
unless you have withheld authority.
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Votes required to ratify the appointment of ARCs
independent auditors.
The ratification of the appointment of PricewaterhouseCoopers
LLP as ARCs independent auditors for fiscal year 2006, as
specified in Proposal 2, requires the affirmative vote of a
majority of the shares present at the meeting in person or by
proxy and entitled to vote.
Other Business.
We know of no other business that will be presented at the
meeting. If any other matter properly comes before the
stockholders for a vote at the meeting, however, the proxy
holders will vote your shares in accordance with their best
judgment.
Board recommended vote on the proposals.
Your board recommends that you vote:
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FOR the election of the seven nominees to the Board of
Directors; and |
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FOR the ratification of PricewaterhouseCoopers LLP as ARCs
independent auditors. |
Counting votes.
ARCs transfer agent, Mellon Investor Services, will
tabulate and certify the votes. A representative of the transfer
agent will serve as an inspector of election.
Treatment of abstentions and broker non-votes.
Abstentions will be treated as shares present for quorum
purposes and entitled to vote. Abstentions from voting on a
proposal described in this proxy statement will not affect the
outcome of the vote on that proposal. A broker non-vote occurs
when a broker is unable to vote on a particular matter without
instructions from the beneficial holder and such instructions
are not received. Broker non-votes will be treated as shares
present for quorum purposes, but not entitled to vote.
Therefore, broker non-votes will have no effect on the outcome
of the vote on the election of directors or the ratification of
our independent auditors.
Voting results of the annual meeting.
We plan to announce preliminary voting results at the annual
meeting and to publish final results in our Quarterly Report on
Securities and Exchange Commission
Form 10-Q for the
quarter ended June 30, 2006.
Solicitation of Proxies.
ARC is soliciting the proxies and will bear the entire cost of
this solicitation, including the preparation, assembly, printing
and mailing of this proxy statement and any additional materials
furnished to our stockholders. Copies of solicitation materials
will be furnished to banks, brokerage houses and other agents
holding shares in their names that are beneficially owned by
others so that they may forward this solicitation material to
these beneficial owners. In addition, if asked, we will
reimburse these persons for their reasonable expenses in
forwarding the solicitation material to the beneficial owners.
We have asked banks, brokerage houses and other custodians,
nominees and fiduciaries to forward all solicitation materials
to the beneficial owners of the shares they hold of record.
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PROPOSAL 1 ELECTION OF DIRECTORS
Nominees for Director
The board currently consists of seven directors, each of whom
has been nominated to serve for a term of one (1) year and
until their successors are duly elected and qualified. Our board
is not classified and thus all of our directors are elected
annually. Edward D. Horowitz has announced his decision not to
stand for re-election. The Company takes this opportunity to
thank Mr. Horowitz for his Board service and his
contributions to the Company and its stockholders.
Each of the nominees have consented to being named in this proxy
statement and has agreed to serve as a member of the board if
elected. The Company has no reason to believe that any nominee
will be unable to serve. If a nominee is unable to stand for
election, the board may either reduce the number of directors to
be elected or select a substitute nominee. If a substitute
nominee is selected, the proxy holders will vote your shares for
the substitute nominee, unless you have withheld authority.
The affirmative vote of a plurality of the votes cast at the
meeting is required to elect the seven nominees as directors.
This means that the seven nominees will be elected if they
receive more affirmative votes than any other person.
The following table sets forth, with respect to each nominee,
his name, the year in which he first became a director of ARC,
and his age as of April 11, 2006.
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Year First | |
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Sathiyamurthy Chandramohan
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1998(1) |
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Kumarakulasingam Suriyakumar
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1998(1) |
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Thomas J. Formolo
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2000(2) |
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Dewitt Kerry McCluggage
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2006 |
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Mark W. Mealy
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2005 |
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Manuel Perez de la Mesa
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2002(3) |
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Eriberto R. Scocimara
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70 |
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Served as an advisor of Holdings since 1998 and as a director of
ARC since October 2004. |
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Served as an advisor of Holdings since 2000 and as a director of
ARC since October 2004. |
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Functioned as a director of Holdings since 2002 and served as a
director of ARC since October 2004. |
The following is a brief description of the principal occupation
and business experience of each of our directors during the past
five years and their other affiliations.
Sathiyamurthy (Mohan) Chandramohan has
served as an advisor and the Chairman of the Board of Advisors
of Holdings since March 1998 and has served as a director and
the Chairman of the Board of Directors of American Reprographics
Company since October 2004. Mr. Chandramohan joined Micro
Device, Inc. (our predecessor company) in February 1988 as
President and became the Chief Executive Officer in March 1991.
Prior to joining our company, Mr. Chandramohan was employed
with U-Save Auto Parts Stores from December 1981 to February
1988, and became the companys Chief Financial Officer in
May 1985 and Chief Operating Officer in March 1987.
Mr. Chandramohan served as the President of the
International Reprographics Association (IRgA) from
August 1, 2001 to July 31, 2002 and continues to be an
active member of the IRgA.
Kumarakulasingam (Suri) Suriyakumar
has served as an advisor of Holdings since March 1998
and has served as a director of American Reprographics Company
since October 2004. Mr. Suriyakumar joined Micro Device,
Inc. in 1989. He became the Vice President of Micro Device, Inc.
in 1990 and became the companys President and Chief
Operating Officer in 1991. Prior to joining our company,
Mr. Suriyakumar was
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employed with Aitken Spence & Co. LTD, a highly
diversified conglomerate and one of the five largest
corporations in Sri Lanka. Mr. Suriyakumar is an active
member of the IRgA.
Thomas J. Formolo has served as an advisor of
Holdings since April 2000 and has served as a director of
American Reprographics Company since October 2004.
Mr. Formolo has been a partner of Code Hennessy &
Simmons LLC, or CHS, since 1997 and employed by its affiliates
since 1990.
Dewitt Kerry McCluggage was appointed as a
director of American Reprographics Company in February 2006.
Mr. McCluggage has served as the President of Craftsman
Films, Inc., which produces motion pictures and television
programs, since January 2002. Mr. McCluggage has also
served as the Co-Chairman of Ardustry Home Entertainment, a
distributor of home videos, since March 2005. From 1991 to 2003,
Mr. McCluggage served as Chairman of the Paramount
Television Group where he was responsible for overseeing
television operations. Prior to that, Mr. McCluggage served
as President of Universal Television from 1987 to 1991.
Mark W. Mealy was appointed as a director of
American Reprographics Company in March 2005. Mr. Mealy
served as the Managing Director and Group Head of Mergers and
Acquisitions of Wachovia Securities, Inc., an investment banking
firm, from March 2000 until October 2004. Mr. Mealy served
as the Managing Director, Mergers and Acquisitions of First
Union Securities, Inc., an investment banking firm, from April
1998 to March 2000. Mr. Mealy also serves as a director of
Morton Industrial Group, Inc. a metal fabrication supplier to
off-highway construction and agricultural equipment markets.
Manuel Perez de la Mesa functioned as a director
for Holdings from July 2002 until his appointment as a director
of American Reprographics Company in October 2004.
Mr. Perez de la Mesa has been Chief Executive Officer of
SCP Pool Corporation, a wholesale distributor of swimming pool
supplies and related equipment, since May 2001 and has also been
the President of SCP Pool Corporation since February 1999.
Mr. Perez de la Mesa served as Chief Operating Officer of
SCP Pool Corporation from February 1999 to May 2001.
Eriberto R. Scocimara is a director nominee.
Mr. Scocimara has served as the President and Chief
Executive Officer of the Hungarian-American Enterprise Fund, a
privately managed investment company created by the President
and Congress of the United States and funded by the
U.S. Government, since 1994. Mr. Scocimara also has
served as the President and Chief Executive Officer of
Scocimara & Company, Inc, a financial consulting firm,
since he founded the company in 1984. Mr. Scocimara has
over 30 years of experience in corporate management,
acquisitions and operational restructuring. Mr. Scocimara
serves as a director of Carlisle Companies Incorporated, Roper
Industries, Inc., Quaker Fabric Corporation and Euronet
Worldwide, Inc.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
THE ELECTION OF EACH OF THE SEVEN NOMINEES.
CORPORATE GOVERNANCE PROFILE
We are committed to good corporate governance practices and as
such we have adopted formal corporate governance guidelines to
enhance our effectiveness. A copy of our corporate governance
guidelines can be accessed on our Website www.e-arc.com, by
clicking on the Investor Relations link at the top
of the page and then selecting Corporate Governance
from the Investor Relations Webpage. The guidelines govern,
among other things, board member responsibilities,
qualifications, committees, compensation, access, education,
management succession, and performance evaluation.
The boards practice is to hold regularly scheduled
executive sessions without management. The Nominating and
Corporate Governance Committee selects from among our
independent directors a lead director to chair the executive
sessions of the non-management directors.
We have adopted a Code of Conduct applicable to all employees,
officers and directors, including our chief executive officer,
our chief financial officer and our controller which meets the
definition of a code of ethics set forth in
Item 406 of
Regulation S-K of
the Securities and Exchange Act of 1934 (Exchange
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Act). A copy of our Code of Conduct can be accessed on our
Website www.e-arc.com, by clicking on the Investor
Relations link at the top of the page and then selecting
Corporate Governance from the Investor Relations
Webpage. We will post any amendments to the Code of Conduct, and
any waivers that are required to be disclosed by the rules of
either the Securities and Exchange Commission (SEC)
or the NYSE, on our internet site.
The board has adopted the American Reprographics Company
Corporate Governance Guidelines. Those Guidelines set forth,
among other things, director qualification standards and the
factors to be considered in making nominations to the board.
While the selection of qualified directors is a complex,
subjective process that requires consideration of many
intangible factors, the Corporate Governance Guidelines provide
that the Nominating and Corporate Governance Committee and the
board should take into account the following criteria, among
others, in considering directors and candidates for the board:
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Judgment, experience, skills and personal character of the
candidate; and |
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the needs of the board. |
Our stockholders may recommend director nominees, and the
Nominating and Corporate Governance Committee will consider
nominees recommended by stockholders. To date, we have not
received any recommendations from our stockholders requesting
that the board or any of its committees consider a nominee for
inclusion among the boards slate of nominees in the proxy
statement for our annual meeting. A stockholder wishing to
submit a director nominee recommendation should comply with the
provisions of our amended and restated bylaws and the provisions
set forth herein under the heading Stockholder Proposals
and Stockholder Board Nominations. We anticipate that
nominees recommended by stockholders will be evaluated in the
same manner as nominees recommended by anyone else, although the
Nominating and Corporate Governance Committee may prefer
nominees who are personally known to the existing directors and
whose reputations are highly regarded. The Nominating and
Corporate Governance Committee will consider all relevant
qualifications as well as the needs of the company in terms of
compliance with NYSE listing standards and SEC rules. On
March 2, 2006, we retained Highland Partners to help us
identify new board member candidates.
Director Independence
As required by the rules of the NYSE, our board evaluates the
independence of its members at least annually, and at other
appropriate times (e.g., in connection with a change in
employment status) when a change in circumstances could
potentially impact the independence of one or more directors.
Under NYSE rules, a director is independent if the board
affirmatively determines that he or she currently has no direct
or indirect material relationship with the Company or any of its
consolidated subsidiaries. In addition, a director must meet
each of the following standards to be considered independent
under NYSE rules:
|
|
|
|
|
The director is not and has not been an employee of the Company,
and no member of the directors immediate family is or has
served as an executive officer of the Company or any of its
consolidated subsidiaries, during the last three years. |
|
|
|
Neither the director nor any member of the directors
immediate family has received more than $100,000 in direct
compensation from the Company or any of its consolidated
subsidiaries (excluding director and committee fees, pensions or
deferred compensation for prior service) during any twelve-month
period within the last three years. |
|
|
|
The director: (i) is not, and does not have an immediate
family member that is a current partner of a firm that is the
Companys, or any of its consolidated subsidiaries,
internal or external auditor; (ii) is not a current
employee of such external audit firm; (iii) does not have
an immediate family member who is a current employee of such
external audit firm who participates in such firms audit,
assurance or tax compliance (but not tax planning) practice; and
(iv) was not, and does not have an immediate family member
that was, within the last three years (but is no longer) a
partner or employee of such |
7
|
|
|
|
|
external audit firm who personally worked on the Companys,
or any of its consolidated subsidiaries, audit within that
time. |
|
|
|
Neither the director nor any member of the directors
immediate family is or has been employed within the last three
years as an executive officer of any company whose compensation
committee, or the compensation committee of any of its
consolidated subsidiaries, includes or included an executive
officer of the Company. |
|
|
|
The director is not a current employee of, and does not have an
immediate family member who is a current executive officer of,
another company that has made payments to, or has received
payments from, the Company or any of its consolidated
subsidiaries, for property or services in an amount which, in
any of the last three fiscal years, exceeds the greater of
$1 million or 2% of the consolidated gross revenues of such
other company. |
In determining whether a material relationship exists between
the Company and each director, the board broadly considers all
relevant facts and circumstances, including:
|
|
|
|
|
the nature of any relationships with the Company, |
|
|
|
the significance of the relationship to the Company, the other
organization and the individual director, |
|
|
|
whether or not the relationship is solely a business
relationship in the ordinary course of the Companys and
the other organizations businesses and does not afford the
director any special benefits, and |
|
|
|
any commercial, industrial, banking, consulting, legal,
accounting, charitable and familial relationships, and such
other criteria as the board may determine from time to time. |
|
|
|
If a proposed director serves as an executive officer, director
or trustee of a tax exempt organization, whether contributions
from the Company, or any of its consolidated subsidiaries, to
such tax exempt organization in any of the last three fiscal
years are less than the greater of (i) $1 million or
(ii) 2% of the consolidated gross revenues of such tax
exempt organization for its last completed fiscal year. |
After considering the policies set forth in the Companys
Corporate Governance Guidelines and the standards for
independence adopted by the NYSE described above, the board has
determined that, in its judgment, Messrs. Horowitz,
McCluggage, Mealy and Perez de la Mesa are independent. In
making these determinations, the board has considered all
relevant facts and circumstances.
Compensation of Directors
Except for reimbursement for reasonable travel expenses relating
to attendance at board meetings, employee directors are not
compensated for their services as directors.
Directors who are our employees are eligible to participate in
our 2005 Stock Option Plan and our 2005 Employee Stock Purchase
Plan. The compensation of our employee directors is set forth in
the Summary Compensation Table on page 16.
Directors who are not our employees receive cash compensation
for their services as directors at a rate of $90,000 per
year ($50,000 of which shall be paid through an annual grant of
nonstatutory stock options under our 2005 Stock Plan rather than
in cash). In addition, directors who are not our employees will
receive $5,000 per year for duties as any committee chair.
8
2005 Non-Employee Directors Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committee | |
|
|
|
|
Non-Employee Directors |
|
Annual Retainer | |
|
Chair Fees | |
|
Stock Options(1) | |
|
Total(2) | |
|
|
| |
|
| |
|
| |
|
| |
Andrew W. Code
|
|
$ |
40,000 |
|
|
$ |
|
|
|
|
9,854 |
|
|
$ |
90,000 |
|
Thomas J. Formolo
|
|
$ |
40,000 |
|
|
$ |
|
|
|
|
9,854 |
|
|
$ |
90,000 |
|
Edward D. Horowitz
|
|
$ |
40,000 |
|
|
$ |
5,000 |
|
|
|
9,854 |
|
|
$ |
95,000 |
|
Mark W. Mealy
|
|
$ |
40,000 |
|
|
$ |
5,000 |
|
|
|
9,854 |
|
|
$ |
95,000 |
|
Manuel Perez de la Mesa
|
|
$ |
40,000 |
|
|
$ |
5,000 |
|
|
|
9,854 |
|
|
$ |
95,000 |
|
|
|
(1) |
Reflects those options granted under the 2005 Stock Option Plan,
as described above. |
|
(2) |
Table does not include compensation for items such as
reimbursement for travel and expenses to attend board meetings. |
Board Meetings
The Companys Board of Directors held six board meetings
during 2005. In 2005, all incumbent directors of the Company
attended at least 75% of the aggregate of the meetings of the
board and the committees on which they served.
Board Committees
Currently, the committees of the board include an Audit
Committee, a Compensation Committee and a Nominating and
Corporate Governance Committee. Committee memberships are as
follows:
|
|
|
|
|
|
|
|
|
Nominating and Corporate Governance |
Audit Committee |
|
Compensation Committee |
|
Committee |
|
|
|
|
|
Mark W. Mealy
|
|
Manuel Perez de la Mesa |
|
Edward D. Horowitz |
Edward D. Horowitz
|
|
Edward D. Horowitz |
|
Mark W. Mealy |
Manuel Perez de la Mesa
|
|
Dewitt Kerry McCluggage |
|
Dewitt Kerry McCluggage |
Audit Committee
The Audit Committee is governed by the Audit Committee Charter,
which can be found in the Corporate Governance Section under
Investor Relations on our website, http://www.e-arc.com, and is
available in print to any stockholder who requests it. The Audit
Committee Charter also is attached to this proxy statement as
Appendix I. The functions of our Audit Committee are
described in the Audit Committee Charter and include, among
other things the following: (i) reviewing the adequacy of
our system of internal accounting controls; (ii) reviewing
the results of the independent registered public accounting
firms annual audit, including any significant adjustments,
management judgments and estimates, new accounting policies and
disagreements with management; (iii) reviewing our audited
financial statements and discussing the statements with
management; (iv) reviewing disclosures by our independent
registered public accounting firm concerning relationships with
our Company and the performance of our independent registered
public accounting firm and annually recommending the independent
registered public accounting firm; and (v) preparing such
reports or statements as may be required by securities laws. The
Audit Committee Charter provides that the Audit Committee shall
meet as often as it determines advisable but no less frequently
than quarterly.
The members of our Audit Committee are Mark W. Mealy, Edward D.
Horowitz and Manuel Perez de la Mesa. Our board of directors has
determined that all members of our Audit Committee meet the
applicable tests for independence and the requirements for
financial literacy that are applicable to audit committee
members under the rules and regulations of the SEC and NYSE. Our
board of directors has determined that Manuel Perez de la Mesa
is an audit committee financial expert as defined by
the applicable rules of the SEC and NYSE as a result of his
education and experience actively supervising a principal
financial officer and controller. Our board of directors has
determined that Mark W. Mealy also is an audit committee
9
financial expert as defined by the applicable rules of the
SEC and NYSE, as a result of his substantial familiarity and
experience with the use and analysis of financial statements of
public companies. For the last 15 years, Mr. Mealy has
served in various positions in which he analyzed financial
statements in connection with the refinance, recapitalization
and restructure of debt and equity securities and the evaluation
of mergers and acquisitions.
The Audit Committee met four times in 2005.
Compensation Committee
The Compensation Committee is governed by the Compensation
Committee Charter, which can be found in the Corporate
Governance Section under Investor Relations on our website,
http://www.e-arc.com, and is available in print to any
stockholder who requests it. The functions of the Compensation
Committee are described in the Compensation Committee Charter
and include, among other things, evaluating and approving
director and officer compensation, benefit and perquisite plans,
policies and programs and producing a compensation committee
report on executive officer compensation.
The Board has affirmatively determined that all of the members
of its compensation committee meet the definition of an
independent director as established by the NYSE.
The Compensation Committee met once in 2005.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is governed by
the Nominating and Corporate Governance Committee Charter, which
can be found in the Corporate Governance Section under Investor
Relations on our website, http://www.e-arc.com, and is available
in print to any stockholder who requests it. The functions of
the Nominating and Corporate Governance Committee are described
in the Nominating and Corporate Governance Committee Charter and
include, among other things, identifying individuals qualified
to become members of the board, selecting or recommending to the
board the nominees to stand for election as directors,
developing and recommending to the board a set of corporate
governance principles and overseeing the evaluation of the board
and management.
The Board has affirmatively determined that all of the members
of its Nominating and Corporate Governance Committee meet the
definition of an independent director as established by the NYSE.
The Nominating and Corporate Governance Committee met once in
2005.
Stockholder Communications with Directors
Stockholders seeking to communicate with the board should submit
their written comments to the Secretary, American Reprographics
Company, 700 North Central Avenue, Suite 550, Glendale,
California 91203. The Secretary will forward all such
communications (excluding routine advertisements and business
solicitations and communications which the Secretary, in his or
her sole discretion, deems to be a security risk or for
harassment purposes) to each member of the board, or if
applicable, to the individual director(s) named in the
correspondence.
ARC reserves the right to screen materials sent to its directors
for potential security risks and/or harassment purposes, and ARC
also reserves the right to verify ownership status before
forwarding stockholder communications to the board.
The Secretary will determine the appropriate timing for
forwarding stockholder communications to the directors. The
Secretary will consider each communication to determine whether
it should be forwarded promptly or compiled and sent with other
communications and other board materials in advance of the next
scheduled board meeting.
If a stockholder or other interested person seeks to communicate
exclusively with the non-management directors, such
communication should be sent directly to the Secretary who will
forward any such
10
communication directly to the Chair of the Nominating and
Corporate Governance Committee. The Secretary will first consult
with and receive the approval of the Chair of the Nominating and
Corporate Governance Committee before disclosing or otherwise
discussing the communication with members of management or
directors who are members of management.
Director Attendance at Annual Meeting
This is the Companys first annual meeting of stockholders
since the completion of its initial public offering in February
2005. Although we do not have a formal policy regarding the
attendance by members of the board at such meetings of
stockholders, we encourage the members of the board to attend.
EXECUTIVE OFFICERS
Our executive officers are appointed annually by our board of
directors and serve at the discretion of our board of directors.
The names, ages and positions of all of our executive officers
as of April 11, 2006 are listed below:
|
|
|
|
|
|
|
Name |
|
Age | |
|
Position |
|
|
| |
|
|
Sathiyamurthy Chandramohan
|
|
|
47 |
|
|
Chief Executive Officer; Chairman of the Board of Directors |
Kumarakulasingam Suriyakumar
|
|
|
53 |
|
|
President; Chief Operating Officer; Director |
Mark W. Legg
|
|
|
51 |
|
|
Chief Financial Officer; Secretary |
Rahul K. Roy
|
|
|
46 |
|
|
Chief Technology Officer |
The following is a brief description of the business experience
of each of our executive officers during the past five years and
their other affiliations. Biographical information for
Mr. Chandramohan and Mr. Suriyakumar is provided above
under Board of Directors.
Mark W. Legg joined Holdings as its Chief
Financial Officer in April 1998. From 1987 to 1998,
Mr. Legg was employed at Vivitar Corporation, a distributor
of photographic, optical, electronic and digital imaging
products, as a Vice President and the Chief Financial Officer,
and later as its Chief Operating Officer. Before Vivitar, he was
director of corporate accounting at Sunrise Medical from 1984 to
1986. From 1979 to 1984, Mr. Legg was employed on the
professional staff at Price Waterhouse & Co.
Rahul K. Roy joined Holdings as its Chief
Technology Officer in September 2000. Prior to joining our
company, Mr. Roy was the Founder, President and Chief
Executive Officer of MirrorPlus Technologies, Inc., which
developed software for the reprographics industry, from August
1993 until it was acquired by us in 1999. Mr. Roy served as
the Chief Operating Officer of InPrint, a provider of printing,
software, duplication, packaging, assembly and distribution
services to technology companies, from 1993 until it was
acquired by us in 1999.
AUDIT COMMITTEE REPORT AND DISCLOSURES
All of the members of the Audit Committee of the board (the
Audit Committee) are independent directors as
required by and in compliance with the listing standards of the
NYSE. The Audit Committee operates pursuant to a written charter
adopted by the board.
The Audit Committee is responsible for overseeing the
Companys financial reporting process on behalf of the
board. Management of the Company has the primary responsibility
for the Companys financial reporting process, principles
and internal controls as well as preparation of its financial
statements. The Companys independent auditors are
responsible for performing an audit of the Companys
financial statements and expressing an opinion as to the
conformity of such financial statements with accounting
principles generally accepted in the United States.
The Audit Committee has reviewed and discussed the
Companys audited financial statements as of and for the
year ended December 31, 2005 with management and the
independent auditors. The Audit Committee
11
has discussed with the independent auditors the matters required
to be discussed under standards established by the Public
Company Accounting Oversight Board (United States), including
those matters set forth in Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as currently
in effect. The independent auditors have provided to the Audit
Committee the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as currently in effect, and
the Audit Committee has discussed with the auditors their
independence from the Company. The Audit Committee has also
considered whether the independent auditors provision of
information technology and other non-audit services to the
Company is compatible with maintaining the auditors
independence. The Audit Committee has concluded that the
independent auditors are independent from the Company and its
management.
Based on the reports and discussions described above, the Audit
Committee has recommended to the board that the Companys
audited financial statements be included in its Annual Report on
Form 10-K for the
year ended December 31, 2005 for filing with the SEC.
Submitted by the members of the Audit Committee of the
Companys Board of Directors.
Mark W. Mealy (Chairman)
Edward D. Horowitz
Manuel Perez de la Mesa
The foregoing Report of the Audit Committee of the Board of
Directors shall not be deemed to be soliciting material or be
incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent ARC specifically incorporates this
information by reference, and shall not otherwise be deemed to
be filed with the Securities and Exchange Commission under such
Acts.
BENEFICIAL OWNERSHIP OF VOTING SECURITIES
The following table sets forth information, as of April 11,
2006, regarding the beneficial ownership of our common stock by:
|
|
|
|
|
each person who is known to us to own beneficially more than 5%
of our common stock; |
|
|
|
all directors and Named Executive Officers as a group; and |
|
|
|
each of our directors and each of our executive officers named
in the Summary Compensation Table on page 16. |
The table includes all shares of common stock issuable within
60 days of April 11, 2006 upon the exercise of options
and other rights beneficially owned by the indicated
stockholders on that date. Beneficial ownership is determined in
accordance with the rules of the SEC and includes voting and
investment power with respect to shares. The applicable
percentage of ownership for each stockholder is based on
44,945,297 shares of common stock outstanding as of
April 11, 2006, together with applicable options for that
stockholder. Shares of common stock issuable upon exercise of
options and other rights beneficially owned were deemed
outstanding for the purpose of computing the percentage
ownership of the person holding these options and other rights,
but are not deemed outstanding for computing the percentage
ownership of any other person. To our knowledge, except under
applicable community property laws or as otherwise indicated in
the footnotes to this table, beneficial ownership is direct and
the persons named in the table below have sole voting and sole
investment control regarding all shares beneficially owned.
12
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially | |
|
|
Owned | |
|
|
| |
Name and Address of Beneficial Owner |
|
Number | |
|
Percent | |
|
|
| |
|
| |
Principal Stockholders:
|
|
|
|
|
|
|
|
|
|
ARC Acquisition Co., L.L.C.(1)
|
|
|
6,150,643 |
|
|
|
13.7 |
% |
|
10 S. Wacker Drive, Suite 3175 |
|
|
|
|
|
|
|
|
|
Chicago, IL 60606 |
|
|
|
|
|
|
|
|
Micro Device, Inc.
|
|
|
5,684,842 |
|
|
|
12.7 |
% |
OCB Reprographics, Inc.
|
|
|
3,714,948 |
|
|
|
8.3 |
% |
Billy E. Thomas(2)
|
|
|
3,818,621 |
|
|
|
8.5 |
% |
|
600 North Central Expressway |
|
|
|
|
|
|
|
|
|
Richardson, TX 75080 |
|
|
|
|
|
|
|
|
Delaware Management Holdings(13)
|
|
|
2,638,936 |
|
|
|
5.9 |
% |
|
2005 Market Street |
|
|
|
|
|
|
|
|
|
Philadelphia, PA 19103 |
|
|
|
|
|
|
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
|
|
Sathiyamurthy Chandramohan(2)(4)(5)(6)
|
|
|
11,705,232 |
|
|
|
26.0 |
% |
Kumarakulasingam Suriyakumar(2)(4)(5)(6)(7)
|
|
|
11,653,251 |
|
|
|
25.9 |
% |
|
1981 N. Broadway, Suite 202 |
|
|
|
|
|
|
|
|
|
Walnut Creek, CA 94596 |
|
|
|
|
|
|
|
|
Thomas J. Formolo(3)(8)
|
|
|
6,178,597 |
|
|
|
13.7 |
% |
Edward D. Horowitz(8)
|
|
|
17,854 |
|
|
|
** |
|
Mark W. Legg(9)
|
|
|
341,482 |
|
|
|
** |
|
Dewitt Kerry McCluggage
|
|
|
0 |
|
|
|
** |
|
Mark W. Mealy(8)(10)
|
|
|
79,854 |
|
|
|
** |
|
Manuel Perez de la Mesa(11)
|
|
|
55,354 |
|
|
|
** |
|
Rahul K. Roy(12)
|
|
|
444,000 |
|
|
|
1.0 |
% |
All directors and Named Executive Officers as a group
(nine persons)
|
|
|
19,053,036 |
|
|
|
41.9 |
% |
|
|
|
|
* |
Except as otherwise noted, the address of each person listed in
the table is c/o American Reprographics Company, 700 North
Central Avenue, Suite 550, Glendale, California 91203. |
|
|
|
|
** |
Less than one percent of the outstanding shares of common stock. |
|
|
|
|
(1) |
The sole member of ARC Acquisition Co., L.L.C. is Code
Hennessey & Simmons IV LP. The general partner of
Code Hennessy & Simmons IV LP is CHS
Management IV LP. The general partner of CHS
Management IV LP is Code Hennessy & Simmons LLC.
Code Hennessy & Simmons LLC, CHS Management IV LP
and Code Hennessy & Simmons IV LP may be deemed to
beneficially own these shares, but disclaim beneficial ownership
of shares in which they do not have a pecuniary interest. The
investment committee of Code Hennessy & Simmons LLC is
composed of Andrew W. Code, Daniel J. Hennessy, Brian P.
Simmons, Thomas J. Formolo, Peter M. Gotsch, Steven R. Brown,
David O. Hawkins and Richard A. Lobo. Messrs. Code,
Hennessy, Simmons, Formolo, Gotsch, Brown, Hawkins and Lobo may
be deemed to beneficially own these shares due to the fact that
they share investment and voting control over shares held by ARC
Acquisition Co., L.L.C., but disclaim beneficial ownership of
shares in which they do not have a pecuniary interest. |
|
|
(2) |
Includes 3,714,948 shares held by OCB Reprographics, Inc.
As Messrs. Chandramohan, Suriyakumar and Thomas have
ownership interests of 22.4%, 17.6% and 40%, respectively, in
OCB Reprographics, Inc. and serve on its board of directors,
each could be deemed to have beneficial ownership of all these
shares. Messrs. Chandramohan, Suriyakumar and Thomas each
disclaim beneficial ownership of these shares except to the
extent of each of their pecuniary interests therein. |
|
|
(3) |
Includes 6,150,643 shares held by ARC Acquisition Co.,
L.L.C. and 10,100 shares held by CHS Associates IV. Thomas
J. Formolo is a member of the investment committee of Code
Hennessy & |
13
|
|
|
|
|
Simmons LLC, the general partner of CHS Management IV LP,
which in turn is the general partner of Code Hennessy &
Simmons IV LP, which is the sole member of ARC Acquisition
Co., L.L.C. Code Hennessy & Simmons LLC is also the
general partner of CHS Associates IV. Messr. Formolo may be
deemed to beneficially own the shares owned by ARC Acquisition
Co., L.L.C. and CHS Associates IV, but disclaims beneficial
ownership of shares in which he does not have a pecuniary
interest. |
|
|
(4) |
Includes 5,684,842 shares held by Micro Device, Inc. As
Messrs. Chandramohan and Suriyakumar have ownership
interests of 56% and 44%, respectively, in Micro Device, Inc.
and serve on its board of directors, each could be deemed to
have beneficial ownership of all these shares.
Messrs. Chandramohan and Suriyakumar each disclaim
beneficial ownership of these shares except to the extent of
each of their pecuniary interests therein. |
|
|
(5) |
Includes 1,332,361 shares held by Brownies Blueprint, Inc.
As Messrs. Chandramohan and Suriyakumar have ownership
interests of 42% and 33%, respectively, in Brownies Blueprint,
Inc. and serve on its board of directors, each could be deemed
to have beneficial ownership of all these shares.
Messrs. Chandramohan and Suriyakumar each disclaim
beneficial ownership of these shares except to the extent of
each of their pecuniary interests therein. |
|
|
(6) |
Includes 690,437 shares held by Dieterich Post Company. As
Messrs. Chandramohan and Suriyakumar have ownership
interests of 47.6% and 37.4%, respectively, in Dieterich Post
Company and serve on its board of directors, each could be
deemed to have beneficial ownership of all these shares.
Messrs. Chandramohan and Suriyakumar each disclaim
beneficial ownership of these shares except to the extent of
each of their pecuniary interests therein. |
|
|
(7) |
Includes 114,613 shares held by the Suriyakumar Family
Trust. Mr. Suriyakumar and his spouse, as trustees of the
Suriyakumar Family Trust, share voting and investment power over
these shares. |
|
|
(8) |
Includes 9,854 shares issuable upon exercise of outstanding
stock options exercisable within 60 days of April 11,
2006. |
|
|
(9) |
Includes 15,000 shares issuable upon exercise of
outstanding stock options exercisable within 60 days of
April 11, 2006. Shares held by the Legg Family Trust.
Mr. Legg and his spouse, as trustees of the Legg Family
Trust, share voting and investment power over these shares. |
|
|
(10) |
Includes 70,000 shares held by Eastover Group LLC.
Mr. Mealy has controlling voting and investment power over
these shares. |
|
(11) |
Includes 35,354 shares issuable upon exercise of
outstanding stock options exercisable within 60 days of
April 11, 2006. Also includes 6,000 shares held by
Mr. Perezs children. |
|
(12) |
Includes 444,000 shares issuable upon exercise of
outstanding stock options exercisable within 60 days of
April 11, 2006. |
|
(13) |
This information is based solely on a Schedule 13G jointly
filed by Delaware Management Holdings and Delaware Management
Business Trust on February 9, 2006. According to the
Schedule 13G, Delaware Management Holdings and Delaware
Management Business Trust have sole voting power with respect to
2,628,992 shares, shared voting power with respect to
403 shares and sole dispositive power with respect to
2,638,936. |
14
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of
December 31, 2005 regarding all compensation plans
previously approved by our security holders and all
compensations plans not previously approved by our security
holders.
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
(c) | |
|
|
(a) | |
|
|
|
Number of Securities | |
|
|
Number of Securities | |
|
(b) | |
|
Remaining Available for | |
|
|
to be Issued | |
|
Weighted-Average | |
|
Future Issuance Under | |
|
|
Upon Exercise of | |
|
Exercise Price of | |
|
Equity Compensation Plans | |
|
|
Outstanding Options, | |
|
Outstanding Options, | |
|
(Excluding Securities | |
Plan Category |
|
Warrants and Rights | |
|
Warrants and Rights | |
|
Reflected in Column (a)) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 Stock Plan
|
|
|
1,422,585 |
(1) |
|
$ |
5.91 |
|
|
|
3,249,315 |
(2) |
|
2005 Employee Stock Purchase Plan
|
|
|
362,061 |
|
|
$ |
11.05 |
|
|
|
387,939 |
|
Equity compensation plans not approved by stockholders
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,784,646 |
|
|
$ |
|
|
|
|
3,637,254 |
|
|
|
(1) |
Represents outstanding options granted under the 2005 Stock Plan
to acquire common stock. |
|
(2) |
The total shares of common stock currently reserved and
authorized for issuance under the 2005 Stock Plan equals
5,000,000 shares of common stock. This authorization
automatically increases annually on the first day of our fiscal
year, from 2006 through and including 2010, by the lesser of
(i) 1.0% of the outstanding shares on the date of the
increase; (ii) 300,000 shares; or (iii) such
smaller number of shares determined by our board of directors.
The board may elect to increase, with stockholder approval, or
reduce the number of additional shares authorized in any given
year. |
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The compensation paid to our Chief Executive Officer and the
other executive officers who received compensation in excess of
$100,000 for services in all capacities to our company and our
subsidiaries during 2003, 2004 and 2005 (the Named
Executive Officers) is set forth below. We did not grant
any membership unit appreciation rights, stock appreciation
rights, restricted unit, restricted stock, long-term incentive
plan, or LTIP awards to our executive officers during 2003, 2004
or 2005.
15
Summary Compensation Table
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|
Long Term | |
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|
|
Compensation | |
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|
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|
|
Awards | |
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|
|
Annual Compensation | |
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| |
|
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|
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| |
|
Securities | |
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|
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|
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Other Annual | |
|
Underlying | |
|
All Other | |
Name and Principal Position |
|
Year | |
|
Salary | |
|
Bonus | |
|
Compensation(1) | |
|
Options | |
|
Compensation | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
S. Chandramohan
|
|
|
2005 |
|
|
$ |
649,583 |
|
|
$ |
1,080,000 |
(2) |
|
$ |
|
(3) |
|
|
|
|
|
$ |
270 |
(4) |
|
Chairman of the Board of |
|
|
2004 |
|
|
|
600,000 |
|
|
|
225,000 |
|
|
|
58,718 |
(5) |
|
|
|
|
|
|
288 |
(4) |
|
Directors and Chief |
|
|
2003 |
|
|
|
600,000 |
|
|
|
|
|
|
|
52,150 |
(6) |
|
|
|
|
|
|
288 |
(4) |
|
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
K. Suriyakumar
|
|
|
2005 |
|
|
|
649,583 |
|
|
|
1,080,000 |
(7) |
|
|
|
(3) |
|
|
|
|
|
|
383 |
(4) |
|
President, Chief Operating |
|
|
2004 |
|
|
|
600,000 |
|
|
|
225,000 |
|
|
|
66,332 |
(8) |
|
|
|
|
|
|
288 |
(4) |
|
Officer and Director |
|
|
2003 |
|
|
|
600,000 |
|
|
|
|
|
|
|
66,527 |
(8) |
|
|
|
|
|
|
288 |
(4) |
Mark W. Legg
|
|
|
2005 |
|
|
|
243,461 |
|
|
|
250,000 |
|
|
|
|
(3) |
|
|
|
|
|
|
1,593 |
(9) |
|
Chief Financial Officer |
|
|
2004 |
|
|
|
196,667 |
|
|
|
490,000 |
|
|
|
|
|
|
|
15,000 |
|
|
|
1,280 |
(10) |
|
and Secretary |
|
|
2003 |
|
|
|
200,000 |
|
|
|
387,000 |
|
|
|
|
|
|
|
|
|
|
|
1,288 |
(11) |
Rahul K. Roy
|
|
|
2005 |
|
|
|
403,077 |
|
|
|
|
(15) |
|
|
|
(3) |
|
|
|
|
|
|
3,580 |
(12) |
|
Chief Technology Officer |
|
|
2004 |
|
|
|
360,000 |
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
3,018 |
(13) |
|
|
|
|
2003 |
|
|
|
360,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,688 |
(14) |
|
|
|
|
(1) |
Certain perquisites and other personal benefits provided by us
to the Named Executive Officers are not included in the above
table as permitted by the SEC regulations because the aggregate
amount of such perquisites and other personal benefits for each
Named Executive Officer in each year reflected in the table did
not exceed the lesser of $50,000 or 10% of the sum of such
officers salary and bonus in each respective year. |
|
|
(2) |
Represents incentive bonus paid under terms of employment
agreement consisting of 40,326 shares of the Companys
common stock. The employment agreement provides that
Mr. Chandramohan can elect to receive his incentive bonus
in cash, the Companys common stock, or partly in each. If
the incentive bonus is paid in the Companys common stock,
such stock is valued using the average of the closing prices of
the Companys common stock on the NYSE for the 10 trading
days immediately preceding the valuation date (March 1,
2006) of the Companys common stock in payment of the
incentive bonus. |
|
|
(3) |
Messrs. Chandramohan, Suriyakumar, Legg and Roy received
standard benefits received by full-time employees under the
terms of their employment agreements. These include an employee
stock purchase plan (which is not reflected in this table.) |
|
|
(4) |
Consists of premiums for life insurance. |
|
|
(5) |
Includes $54,218 for automobile lease payments. |
|
|
(6) |
Includes $47,770 for automobile lease payments. |
|
|
(7) |
Represents incentive bonus paid under terms of employment
agreement consisting of 40,326 shares of the Companys
common stock. The employment agreement provides that
Mr. Suriyakumar can elect to receive his incentive bonus in
cash, the Companys common stock, or partly in each. If the
incentive bonus is paid in the Companys common stock, such
stock is valued using the average of the closing prices of the
Companys common stock on the NYSE for the 10 trading days
immediately preceding the valuation date of the Companys
common stock in payment of the incentive bonus. |
|
|
(8) |
Consists of automobile lease payments. |
|
|
(9) |
Consists of $414 of premiums for life insurance and $1,179 paid
by us as the employer match under our 401(k) plan. |
|
|
(10) |
Consists of $213 of premiums for life insurance and $1,067 paid
by us as the employer match under our 401(k) plan. |
|
(11) |
Consists of $288 of premiums for life insurance and $1,000 paid
by us as the employer match under our 401(k) plan. |
16
|
|
(12) |
Consists of $903 of premiums for life insurance and $2,677 paid
by us as the employer match under our 401(k) plan. |
|
(13) |
Consists of $360 of premiums for life insurance and $2,658 paid
by us as the employer match under our 401(k) plan. |
|
(14) |
Consists of $288 of premiums for life insurance and $2,400 paid
by us as the employer match under our 401(k) plan. |
|
(15) |
The amount of Mr. Roys bonus has not yet been
determined. |
Option Grants During the Year Ended December 31, 2005
The Company did not grant any stock options, stock appreciation
rights, restricted stock or LTIP awards to the Named Executive
Officers during the fiscal year ended December 31, 2005.
Aggregated Option Exercises During the Year Ended
December 31, 2005 and Value of Options Held at
December 31, 2005
The following table provides summary information concerning the
shares of common stock acquired in 2005, the value realized upon
exercise of stock options in 2005, and the year end number and
value of unexercised options with respect to each of the Named
Executive Officers as of December 31, 2005. The value was
calculated by determining the difference between the fair market
value of underlying securities and the exercise price. The fair
market value of our common stock at December 31, 2005 was
$25.41 per share.
|
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|
|
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|
|
Number of Securities | |
|
Value of Unexercised | |
|
|
|
|
|
|
Underlying Unexercised | |
|
In-the-Money | |
|
|
Shares | |
|
|
|
Options at FY-End | |
|
Options at FY-End | |
|
|
Acquired | |
|
|
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| |
|
| |
Name |
|
on Exercise | |
|
Value Realized | |
|
Exercisable/ Unexercisable | |
|
Exercisable/ Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
S. Chandramohan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
K. Suriyakumar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark W. Legg
|
|
|
|
|
|
|
|
|
|
|
15,000/0 |
|
|
$ |
296,898/$0 |
|
Rahul K. Roy
|
|
|
76,000 |
|
|
$ |
958,955 |
|
|
|
604,000/120,000 |
|
|
$ |
12,248,553/$2,371,092 |
|
Employment Agreements
We entered into a 2005 Bonus Plan with Mr. Legg providing
for the payment to Mr. Legg of (1) a bonus of $62,500
upon the completion by December 31, 2005 of all required
documentation for ARC to be in compliance with Section 404
of the Sarbanes Oxley Act, (2) a bonus of $62,500 upon the
completion by December 31, 2005 of the internal audit
action plan, and (3) a bonus of $125,000 will be earned if
the actual cash increase of the business during 2005 is at least
equal to the following formula: EBITDA less cash interest, cash
taxes, cash distributions, cash acquisitions expenditures, debt
repayments, capitalized IPO and debt finance expenditures, and
other cash items not included in EBITDA to be approved by the
CEO. In accordance with the 2005 Bonus Plan, $100,000 of the
bonus was paid in advance on August 15, 2005, and the
balance of $150,000 was paid on February 15, 2006.
We have entered into an Agreement to Grant Stock with Rahul K.
Roy, our Chief Technology Officer, that became effective
December 7, 2004. The Agreement to Grant Stock provides
that we will issue Mr. Roy shares of restricted common
stock having a market value at the time of the grant of
$1,000,000 upon his development and maintenance of certain
software applications. The Agreement to Grant Stock with
Mr. Roy provides that in the event the shares of restricted
common stock are granted, the shares will vest five years after
the date of the grant, subject to Mr. Roys continued
employment.
We have entered into employment agreements with each of the
Named Executive Officers that became effective February 3,
2005. Each employment agreement provides for a three-year term
which automatically renews for additional one-year terms subject
to the provisions thereof.
17
The employment agreements with Messrs. Chandramohan and
Suriyakumar provide for an annual base salary of $650,000. Each
of Messrs. Chandramohan and Suriyakumar may also earn an
annual bonus equal to $60,000 for each full percentage point by
which our pre-tax earnings per share for a fiscal year exceed by
more than 10% our pre-tax earnings per share for the previous
year. The employment agreement with Mr. Legg provides for
an annual base salary of $250,000. The employment agreement with
Mr. Roy provides for an annual base salary of $400,000.
Each of Messrs. Legg and Roy may also earn an annual bonus
of up to $250,000 and $300,000, respectively, under performance
criteria to be recommended annually by the CEO, endorsed by the
Compensation Committee and ratified by the Board. Each of the
employment agreements provide for standard employee benefits.
We may terminate the employment of any executive with or without
cause and an executive may terminate his employment with or
without good reason, as those terms are defined in the
agreements. If we terminate the employment of an executive other
than for cause or disability, or the executive terminates his
employment for good reason, his medical benefits will continue
and he will receive as severance benefits his base salary paid
in periodic installments over the remaining term of the
agreement, and all stock options or other equity awards will
immediately vest. The executive will receive no severance or
medical benefits if we terminate his employment for cause or if
he terminates his employment for other than good reason.
The severance payments and benefits described above are only
payable if the executive executes and delivers to us an
agreement releasing us and our related parties for all claims
and liabilities that the executive may have against us and our
related parties.
Each executive has agreed to confidentiality, non-solicitation
and non-competition provisions in his respective employment
agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors, which is
comprised solely of independent directors, administers all
Company stock plans and reviews and makes recommendations to the
Board regarding compensation and benefits of executive officers
and certain other senior managers. After consideration of the
Compensation Committees recommendations, the entire Board
reviews and approves the salaries, bonuses and benefit programs
for the Companys executive officers and certain other
senior managers. The Compensation Committee has the authority to
engage and employ the services of outside advisers to assist it.
In 2005 the Compensation Committee engaged a compensation
consulting firm to assist the Committee in its development of a
Stock Option program.
Compensation Philosophy
The compensation philosophy of the Company is to link executive
compensation to continuous improvements in corporate performance
and increases in stockholder value. This philosophy applies to
all employees, with a more significant level of variability and
compensation at risk as an employees level of
responsibility increases. The goals of the Companys
executive compensation program are as follows:
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|
|
to establish pay levels that are necessary to retain and attract
highly qualified executives in light of the overall
competitiveness of the market for high quality executive talent; |
|
|
|
to recognize superior individual performance, new
responsibilities and new positions within the Company; |
|
|
|
to balance short-term and long-term compensation to complement
the Companys annual and long-term business objectives and
strategy and encourage executive performance in furtherance of
the fulfillment of those objectives; |
|
|
|
to provide variable compensation opportunities based on the
individuals and the Companys performance; |
|
|
|
to encourage stock ownership by executive officers and senior
management; and |
|
|
|
to align executive remuneration with the interests of the
stockholders. |
18
Compensation Program Components
The Compensation Committee reviews the Companys executive
compensation program to ensure that pay levels and incentive
opportunities are competitive with similar positions in the
market and reflect the performance of the Company. Each element
of the compensation program for executive officers is further
explained below.
Base Salary. The base salary levels for all executive
officers are set based upon the officers level of
responsibility, experience, past performance and the competitive
market for executive talent.
Annual Incentive Bonus. The annual bonuses paid to the
executive officers are paid according to formulas that are based
almost entirely on objective performance criteria with a small
component being discretionary. The performance criteria used to
determine the bonus of each of our CEO, Mr. Sathiyamurthy
Chandramohan, and our President & COO,
Mr. Kumarakulasingam Suriyakumar, under each of their
Employment Agreements is based upon the increase, if any, of the
Companys pre-tax earnings per share over the pre-tax
earnings per share of the prior fiscal year in excess of ten
percent. The bonus for each of Messrs. Chandramohan and
Suriyakumar is based upon an amount equal to $60,000 for each
full percentage point by which pre-tax earnings per share from
operations for current fiscal year exceeds by more than ten
percentage points the pre-tax earnings per share for the prior
year. The bonus is payable in either cash or stock of the
Company, as elected by the executive. Messrs. Chandramohan
and Suriyakumar have elected to waive their 2006 bonus
opportunity due, in part, to the extraordinary benefit being
received in 2006 from the debt refinancing completed in
December, 2005. The objective portion of the bonuses of the
other executive officers is based upon various specific criteria
within the scope of the executives responsibilities. The
bonus for our CFO, Mr. Mark W. Legg, is based upon his
achievement of specific audit and compliance objectives as well
as the effective conversion of EBITDA to cash flow from
operations. The bonus for our CTO, Mr. Rahul K. Roy, is
based upon the effective and timely completion of specific
technology initiatives. The Company utilizes annual bonuses to
focus behavior on the achievement of goals for growth, financial
performance and other specific annual objectives.
Stock Options. The Compensation Committee believes that
the Company can closely align executive interests with the
longer term interests of stockholders by encouraging equity
participation in the Company. The Compensation Committee
believes stock option awards promote the Companys long
term performance goals and further executive retention. All
senior managers are eligible to receive stock options with
individual option grants based on the Companys and the
individuals performance as well as the individuals
level of responsibility.
Employee Stock Purchase Plan. Our employees can also
acquire Company stock through a tax-qualified employee stock
purchase plan, or ESPP, which is generally available to all
employees. This plan allows participants to buy up to the lesser
of (i) 400 shares of common stock, or, (ii) a
number of shares of common stock having an aggregate value of
$10,000. The purchase price of shares offered under the ESPP
during 2005 was equal to the lesser of 85% of the fair market
value of the stock (i) on the IPO date, or (ii) on the
purchase date, (subject to certain limitations), with the
objective of allowing employees to profit when the value of the
Companys stock increases over time. Commencing in 2006,
the purchase price of shares of common stock offered under the
ESPP is equal to 95% of the fair market value of such shares on
the purchase date.
Setting Executive Compensation
In setting the annual compensation for each executive officer,
the Compensation Committee reviews executive compensation
information derived from publicly available information.
The Compensation Committee further reviews the executive officer
compensation levels for internal pay equity within the Company.
The Compensation Committee also reviews the total remuneration
that each executive officer could potentially receive if certain
events occur, including a change in control, retirement,
termination (for cause and without), and continuation of
employment. Total remuneration includes total cash
19
compensation, the future value of stock options and restricted
stock and the dollar value to the executive and cost to the
Company of all perquisites and other personal benefits.
We may terminate the employment of any executive with or without
cause and an executive may terminate his employment with or
without good reason, as those terms are defined in the
employment agreements. If we terminate the employment of an
executive other than for cause or disability, or the executive
terminates his employment for good reason, his medical benefits
will continue and he will receive as severance benefits his base
salary paid in periodic installments over the remaining term of
the agreement, and all stock options or other equity awards will
immediately vest. The executive will receive no severance or
medical benefits if we terminate his employment for cause or if
he terminates his employment for other than good reason. The
severance payments and benefits described above are only payable
if the executive executes and delivers to us an agreement
releasing us and our related parties for all claims and
liabilities that the executive may have against us and our
related parties. Based on this review, the Compensation
Committee finds total compensation for all executive officers
(and, in the case of the severance and
change-in-control
scenarios, the potential payouts) in the aggregate to be
reasonable and consistent with the market.
Certain Tax Considerations
Section 162(m) of the Internal Revenue Code
(Section 162(m)) generally disallows a tax
deduction to public companies for compensation in excess of
$1.0 million paid to a companys chief executive
officer or any of the four other most highly compensated
officers. Performance-based compensation that meets certain
requirements under Section 162(m) is not subject to the
deduction limitation. The Companys policy with respect to
Section 162(m) is to make reasonable efforts to ensure that
compensation is deductible without limiting the Companys
ability to attract and retain qualified executives. The
Compensation Committee has not adopted a policy that all
compensation must be deductible.
Summary
After its review of all existing programs, the Compensation
Committee believes that the total compensation program for
executives of the Company is focused on increasing value for
stockholders and enhancing corporate performance. The
Compensation Committee currently believes that a significant
portion of compensation of executive officers is properly tied
to increasing value for shareholders and stock appreciation by
measuring bonus calculations against increase in the
Companys pre-tax earnings per share and increase in cash
flow from operations. The Compensation Committee believes that
executive compensation levels at the Company are competitive
with the compensation programs provided by other corporations
with which the Company competes for executive talent.
Submitted by the members of the Compensation Committee of the
Companys board.
Manuel Perez de la Mesa (Chairman)
Edward D. Horowitz
Dewitt Kerry McCluggage
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Prior to our reorganization to a Delaware corporation in
February 2005, we were governed under the direction of a board
of advisors, consisting of Messrs. Chandramohan,
Suriyakumar, Code, Formolo and Marcus J. George, a managing
director of CHS. Up until our reorganization as a Delaware
corporation, our entire board of advisors determined executive
compensation and we did not have a compensation committee apart
from the board of advisors. Beginning in February 2005 and
continuing through December 31, 2005, our compensation
committee consisted of Messrs. Perez de la Mesa, Formolo
and Horowitz.
During 2005, Mr. Chandramohan served as our Chief Executive
Officer and Mr. Suriyakumar served as our President and
Chief Operating Officer.
20
Messrs. Chandramohan and Suriyakumar, both members of our
board of directors, are affiliated with Sumo Holdings LA, LLC,
Sumo Holdings San Jose, LLC, Sumo Holdings Irvine, LLC,
Sumo Holdings Sacramento, LLC, Sumo Holdings Maryland, LLC, and
Sumo Holdings Costa Mesa, LLC, each of which are parties to
various real property leases with our subsidiaries relating to
our facilities.
Messrs. Code and Formolo are affiliated with CHS
Management IV LP. We were a party to a management agreement
with CHS Management IV LP, pursuant to which CHS
Management IV LP provided certain consulting services to
us. The management agreement terminated upon the consummation of
our initial public offering.
During fiscal 2005, no executive officer of the Company served
as a director, or as a member of any compensation committee, of
any other for-profit entity that had an executive officer that
served on the Board of Directors or Compensation Committee of
the Company.
For a further description of the transactions between the
members of our board of directors, their affiliates and us, see
Certain Relationships and Related Transactions.
STOCK PERFORMANCE GRAPH
The following stock performance graph compares the cumulative
total stockholder return on our common stock with the Russell
2000 Index and the S&P 600 Diversified Commercial &
Professional Services Index for the period beginning
February 4, 2005 and ending December 31, 2005. The
comparison assumes $100 was invested on February 4, 2005
(the first day that our common stock was listed on the NYSE) in
each of our common stock, the Russell 2000 Index and the S&P
600 Diversified Commercial & Professional Services
Index, and that all dividends were reinvested.
Please note that historic performance shown on the graph is not
necessarily indicative of future price performance. The Company
has not paid dividends on its common stock.
21
COMPARISON OF 11 MONTH CUMULATIVE TOTAL RETURN*
AMONG AMERICAN REPROGRAPHICS COMPANY, THE RUSSELL 2000 INDEX
AND THE S&P 600 DIVERSIFIED COMMERCIAL & PROFESSIONAL
SERVICES INDEX
|
|
* |
$100 invested on 2/4/05 in stock or index-including reinvestment
of dividends. Fiscal year ending December 31. |
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Cumulative Total Return | |
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| |
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2/4/05 | |
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2/05 | |
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3/05 | |
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4/05 | |
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5/05 | |
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6/05 | |
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7/05 | |
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8/05 | |
|
9/05 | |
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10/05 | |
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11/05 | |
|
12/05 | |
AMERICAN REPROGRAPHICS COMPANY |
|
|
100.00 |
|
|
|
105.09 |
|
|
|
104.36 |
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|
|
102.18 |
|
|
|
108.36 |
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|
|
117.02 |
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|
129.45 |
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|
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123.56 |
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124.36 |
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|
|
122.55 |
|
|
|
156.44 |
|
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|
184.80 |
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RUSSELL 2000
|
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|
100.00 |
|
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|
99.54 |
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|
96.69 |
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91.15 |
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|
|
97.12 |
|
|
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100.86 |
|
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|
107.25 |
|
|
|
105.26 |
|
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|
105.59 |
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102.31 |
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107.28 |
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106.79 |
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|
S & P 600 DIVERSIFIED COMMERCIAL &
PROFESSIONAL SERVICES |
|
|
100.00 |
|
|
|
99.57 |
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|
94.62 |
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|
88.09 |
|
|
|
95.08 |
|
|
|
100.81 |
|
|
|
103.92 |
|
|
|
103.74 |
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103.96 |
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|
98.40 |
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|
101.85 |
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101.97 |
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22
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act, requires directors and
certain officers of ARC and persons who own more than ten
percent of our common stock to file with the SEC initial reports
of beneficial ownership (Form 3) and reports of subsequent
changes in their beneficial ownership (Form 4 or
Form 5) of ARCs common stock. Such directors,
officers and greater-than-ten-percent stockholders are required
to furnish us with copies of the Section 16(a) reports they
file. The SEC has established specific due dates for these
reports, and ARC is required to disclose in this report any late
filings or failures to file.
Based solely on our review of copies of the Section 16(a)
reports received or written representations from such officers,
directors and more than ten percent stockholders, we believe
that all Section 16(a) filings applicable to our officers,
directors and more than ten percent stockholders were complied
with during the fiscal year ended December 31, 2005, except
for the following: (i) Thomas J. Formolo, a director, filed
a Form 4 amendment on March 11, 2005 which included
the late reporting of shares acquired on February 9, 2005;
(ii) Andrew W. Code, a former director, filed a Form 4
amendment on March 11, 2005 which included the late
reporting of shares acquired on February 9, 2005;
(iii) Sathiyamurthy Chandramohan, our Chief Executive
Officer, Chairman of the Board and a beneficial owner of more
than 10% of our common stock, filed a Form 4 on
January 4, 2006 which included the late reporting of shares
disposed of on December 29, 2005; and
(iv) Kumarakulasingam Suriyakumar, our President and Chief
Operating Officer, a director and a beneficial owner of more
than 10% of our common stock, filed a Form 4 on
January 4, 2006 which included the late reporting of shares
disposed of on December 29, 2005.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of our directors, executive officers, 5% beneficial
owners and their affiliates have engaged in transactions with us
in the ordinary course of business. We believe these
transactions involved terms comparable to terms that would be
obtained from an unaffiliated third party at the times the
transactions were consummated. The following is a description of
these transactions since the beginning of our last fiscal year.
Related Party Leases and Purchases
We are party to certain leases with entities owned by
Mr. Chandramohan and Mr. Suriyakumar for our
facilities located in Los Angeles, California, San Jose,
California, Irvine, California, Sacramento, California, Oakland,
California, Gaithersburg, Maryland, and Costa Mesa, California.
Under these leases, we paid these entities rent in the aggregate
amount of approximately $2,738,000 in 2005. We are also
obligated to reimburse these entities for certain real property
taxes and assessments. These leases expire through July 2019.
We sell certain products and services to Thomas Reprographics,
Inc., and Albinson Inc., each of which is owned or controlled by
Billy E. Thomas, who beneficially owns more than 5% of our
common equity. These companies purchased products and services
from us of approximately $54,000 during the twelve months ended
December 31, 2005.
Management Agreement
We were previously party to a management agreement with CHS
Management IV LP, a Delaware limited partnership, that
terminated upon the completion of our initial public offering in
February 2005. Mr. Formolo, a member of our board of
directors, and Mr. Andrew W. Code, who was a member of our
Board of Directors during 2005 and who resigned from our Board
of Directors in January 2006, have a direct beneficial ownership
in CHS Management IV LP. Under the management agreement, we
paid CHS Management IV LP a management fee of $217,000 in
2005. The annual management fee was subject to an annual
increase based on our financial results but could not exceed
$1,000,000 annually. The management fee was in consideration of
CHS Management IV LP providing ongoing consulting and
management advisory services to us.
23
Indemnification Agreements
We have entered into indemnification agreements with each
director and named executive officer which provide
indemnification under certain circumstances for acts and
omissions that may not be covered by any directors and
officers liability insurance. The indemnification
agreements may require us, among other things, to indemnify our
officers and directors against certain liabilities that may
arise by reason of their status or service as officers and
directors (other than liabilities arising from willful
misconduct of a culpable nature), to advance their expenses
incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain officers and
directors insurance if available on reasonable terms.
Registration Rights Agreement
We have previously entered into a registration rights agreement
with Messrs. Chandramohan and Suriyakumar and certain other
holders of our common stock and holders of warrants to purchase
our common stock, including entities affiliated with certain of
our directors. As of April 11, 2006, the holders of
14,382,213 shares of common stock are entitled to certain
rights with respect to the registration of such shares under the
Securities Act of 1933, as amended (Securities Act).
These registration rights are described below.
Demand Registrations. At any time following six months
after the closing of our initial public offering, the holders of
a majority of the registrable securities held by ARC Acquisition
Co., L.L.C. and the holders of a majority of the registrable
securities held by Messrs. Chandramohan and Suriyakumar (or
entities in which they control a majority of the voting shares)
shall each be entitled (as a group) to request up to two
registrations on
Form S-1 or
similar long-form registration statements, respectively, and two
short-form registrations on
Form S-2, S-3
or any similar short-form registration statements, respectively.
The holders of a majority of all other registrable securities
under this agreement are entitled to request one short-form
registration.
Piggyback Rights. The holders of registrable securities
other than those originally requesting registration pursuant to
a demand registration can request to participate in, or
piggyback on, any demand registration.
Piggyback Registrations. If we propose to register any of
our equity securities under the Securities Act (other than
pursuant to a demand registration of registrable securities or a
registration on
Form S-4 or
Form S-8) for us
or for holders of securities other than the registrable
securities, we will offer the holders of registrable securities
the opportunity to register their registrable securities.
Conditions and Limitations; Expenses. The registration
rights are subject to conditions and limitations, including the
right of the underwriters to limit the number of shares to be
included in a registration and our right to delay or withdraw a
registration statement under specified circumstances. We will
pay the registration expenses of the holders of registrable
securities in demand registrations and piggyback registrations
in connection with the registration rights agreement.
Investor Unitholders Agreement
Holdings previously entered into an Investor Unitholders
Agreement with ARC Acquisition Co., L.L.C. and certain other
parties that held warrants to purchase Holdings common units.
Under this agreement, subject to certain exceptions,
(i) Holdings had a right of first refusal in connection
with a transfer of units acquired by the warrant holders,
(ii) the warrant holders had a right to participate in
transfers of units by ARC Acquisition Co., L.L.C.,
(iii) ARC Acquisition Co., L.L.C. had limited preemptive
rights in connection with an issuance of units by Holdings to
the warrant holders and the warrant holders had limited
preemptive rights in connection with an issuance of units by
Holdings to ARC Acquisition Co., L.L.C., (iv) the warrant
holders had the right to receive certain financial information
from Holdings, and (v) the warrant holders had certain
property inspection rights. The Investor Unitholders Agreement
terminated upon the consummation of our initial public offering
in February 2005.
24
PROPOSAL 2 RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
Appointment of Auditors
PricewaterhouseCoopers LLP audited ARCs annual financial
statements for the fiscal year ended December 31, 2005. The
Audit Committee has appointed PricewaterhouseCoopers LLP to be
ARCs independent auditors for the fiscal year ending
December 31, 2006. The stockholders are asked to ratify
this appointment at the annual meeting. A representative of
PricewaterhouseCoopers LLP will be present at the meeting to
respond to appropriate questions and to make a statement if they
so desire.
Auditor Fees
A summary of the services provided by PricewaterhouseCoopers LLP
for the years ended December 31, 2005 and 2004 are as
follows (in thousands):
|
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|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Audit fees(a)
|
|
$ |
780 |
|
|
$ |
678 |
|
Audit related fees(b)
|
|
|
43 |
|
|
|
981 |
|
Tax fees(c)
|
|
|
56 |
|
|
|
63 |
|
All other fees(d)
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
$ |
879 |
|
|
$ |
1,722 |
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Consists of aggregate fees billed or expected to be billed for
professional services rendered for the audit of our annual
consolidated financial statements for each of the fiscal years
ended December 31, 2005 and December 31, 2004, reviews
of financial statements in the Companys quarterly reports
on Form 10-Q for
each of the fiscal years ended December 31, 2005 and
December 31, 2004, and other services normally performed in
connection with statutory and regulatory filings or engagements. |
|
(b) |
|
Consists of aggregate fees billed or expected to be billed for
assurance and related services reasonably related to the
performance of the audit or review of the Companys
financial statements for each of the fiscal years ended
December 31, 2005 and December 31, 2004 and are not
included in the Audit Fees listed above. Of the aggregate fees
of $981 for the fiscal year ended December 31, 2004, $172
of this aggregate amount was for retrospective reviews of the
Companys quarterly consolidated financial statements
during the years ended December 31, 2004 and 2003, and $809
of this aggregate amount was for review of registration
statement on
Form S-1 and
related matters. |
|
(c) |
|
Consists of aggregate fees billed or expected to be billed for
tax compliance, tax advice, and tax planning for each of the
fiscal years ended December 31, 2005 and December 31,
2004. |
|
(d) |
|
Consists of aggregate fees billed or expected to be billed for
all other services not included in the three categories set
forth above for each of the fiscal years ended December 31,
2005 and December 31, 2004. |
The Audit Committee has adopted a Pre-approval Policy governing
the engagement of the Companys independent registered
public accounting firm for all audit and non-audit services. The
Audit Committees Pre-approval Policy provides that the
Audit Committee must pre-approve all audit services and
non-audit services to be performed for the Company by its
independent registered public accounting firm prior to their
engagement for such services. The Audit Committee Pre-approval
Policy establishes pre-approved categories of certain non-audit
services that may be performed by the Companys independent
registered public accounting firm during the fiscal year,
subject to dollar limitations that may be set by the Audit
Committee. Pre-approved services include certain audit related
services, tax services and various non-audit related services.
The term of any pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee specifically provides
for a different period. The Audit Committee may delegate
pre-approval authority to one or more of its members. The
member(s) to whom such authority is delegated must report any
pre-approval decisions to the Audit Committee at its next
meeting. One hundred percent of the services
25
provided by PricewaterhouseCoopers LLP during 2004 and 2005 were
approved by the Audit Committee in accordance with the
pre-approval procedures described above.
Under Company policy and/or applicable rules and regulations,
the independent registered public accounting firm is prohibited
from providing the following types of services to the Company:
(1) bookkeeping or other services related to the
Companys accounting records or financial statements,
(2) financial information systems design and
implementation, (3) appraisal or valuation services,
fairness opinions or
contribution-in-kind
reports, (4) actuarial services, (5) internal audit
outsourcing services, (6) management functions,
(7) human resources, (8) broker-dealer, investment
advisor or investment banking services, and (9) legal
services.
Vote Required For Ratification
The Audit Committee was responsible for selecting ARCs
independent auditors for fiscal year 2006 pursuant to the terms
of the Audit Committee charter. Accordingly, stockholder
approval is not required to appoint PricewaterhouseCoopers LLP
as ARCs independent auditors for fiscal year 2006. The
board believes, however, that submitting the appointment of
PricewaterhouseCoopers LLP to the stockholders for ratification
is a matter of good corporate governance. The Audit Committee is
solely responsible for selecting ARCs independent
auditors. If the stockholders do not ratify the appointment, the
Audit Committee will review its future selection of independent
auditors.
The ratification of the appointment of PricewaterhouseCoopers
LLP as ARCs independent auditors requires the affirmative
vote of a majority of the shares present at the meeting in
person or by proxy and entitled to vote.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR THE
RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITOR FOR 2006
OTHER MATTERS
We know of no other business that will be presented at the
meeting. If any other matter properly comes before the
stockholders for a vote at the meeting, however, the proxy
holders will vote your shares in accordance with their best
judgment.
ADDITIONAL INFORMATION
Householding of Proxies
Under rules adopted by the SEC, we are permitted to deliver a
single set of any proxy statement, information statement, annual
report and prospectus to any household at which two or more
stockholders reside if we believe the stockholders are members
of the same family. This process, called householding, allows us
to reduce the number of copies of these materials we must print
and mail. Even if householding is used, each stockholder will
continue to receive a separate proxy card or voting instruction
card.
The Company is not householding for those stockholders who hold
their shares directly in their own name. If you share the same
last name and address with another Company stockholder who also
holds his or her shares directly, and you would each like to
start householding for the Companys annual reports, proxy
statements, information statements and prospectuses for your
respective accounts, then please contact us at American
Reprographics Company, 700 North Central Avenue, Suite 550,
Glendale, California 91203, Attention: Mark W. Legg, Telephone
(818) 500-0225.
This year, some brokers and nominees who hold Company shares on
behalf of stockholders may be participating in the practice of
householding proxy statements and annual reports for those
stockholders. If your household received a single proxy
statement and annual report for this year, but you would like to
receive
26
your own copy this year, please contact us at, American
Reprographics Company, 700 North Central Avenue, Suite 550,
Glendale, California 91203, Attention: Mark W. Legg, Telephone
(818) 500-0225, and we will promptly send you a copy. If a
broker or nominee holds Company shares on your behalf and you
share the same last name and address with another stockholder
for whom a broker or nominee holds Company shares, and together
both of you would like to receive only a single set of the
Companys disclosure documents, please contact your broker
or nominee as described in the voting instruction card or other
information you received from your broker or nominee.
If you consent to householding, your election will remain in
effect until you revoke it. Should you later revoke your
consent, you will be sent separate copies of those documents
that are mailed at least 30 days or more after receipt of
your revocation.
Stockholder Proposals and Stockholder Board Nominations
Our amended and restated bylaws set forth the requirements that
must be satisfied in order for a stockholder to recommend a
nominee for election to our board of directors at our annual
meeting or to bring other business properly before our annual
meeting. For nominations or other business to be properly
brought before an annual meeting by a stockholder, (i) the
stockholder must give timely notice of the nomination in writing
to our Secretary, (ii) such other business must be a proper
matter for stockholder action, (iii) if the stockholder
provides the Company with a Solicitation Notice (as defined
below), the stockholder must deliver a proxy statement and form
of proxy, in the case of a stockholder proposal of other
business, to holders of at least the percentage of the
corporations voting shares required under applicable law
to carry any such proposal and, in the case of a nomination, to
holders of a percentage of our voting securities reasonably
believed by the stockholder to be sufficient to elect the
nominee, and must, in either case, have included in such
materials the Solicitation Notice, and (iii) if no
Solicitation Notice is timely provided, then the stockholder
must not have solicited a number of proxies sufficient to have
required the delivery of such a solicitation notice.
To be timely, a stockholders notice must be delivered to
our secretary at our principal executive office not later than
the close of business on the ninetieth day nor earlier than the
close of business on the one hundred twentieth day prior to the
first anniversary of the preceding years annual meeting.
If the date of the annual meeting is advanced more than
30 days prior to or delayed by more than 30 days after
the anniversary of the preceding years annual meeting,
notice by the stockholder must be delivered not earlier than the
close of business on the one hundred twentieth day prior to the
annual meeting and not later than the close of business on the
later of the ninetieth day prior to the annual meeting or the
tenth day following the day on which public announcement of the
date of such meeting is first made. Public announcement of an
adjournment of our annual meeting will not commence a new time
period for the giving of a stockholders notice.
The stockholders notice must set forth: (A) as to
each person whom the stockholder proposed to nominate for
election or reelection as a director, all information relating
to the nominee that is required to be disclosed in solicitations
of proxies for election of directors pursuant to
Regulation 14A under the Exchange Act and
Rule 14a-4(d)
thereunder (including such persons written consent to
being named in the proxy statement as a nominee and to serving
as a director if elected); and (B) as to any other business
that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (C) as to the stockholder giving
the notice (i) the name and address of the stockholder, as
they appear on our books and records, (ii) the class and
number of shares of our stock that are owned beneficially and of
record by the stockholder, and (iii) whether the
stockholder intends to deliver a proxy statement and form of
proxy to holders of, in the case of the stockholder proposal, at
least the percentage of the corporations voting shares
required under applicable law to carry the stockholder proposal
or, in the case of a nomination, a sufficient number of holders
of the corporations voting shares to elect such nominee or
nominees (such an affirmative statement being referred to as a
Solicitation Notice).
27
You may contact the Secretary at ARC at our principal executive
offices to request a copy of the relevant amended and restated
bylaws provision regarding the requirements for making
stockholder proposals and nominating director candidates.
Additional Information
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file with the SEC at the SECs public reference
room at 450 Fifth Street, NW, Washington, DC 20549. Please
call the SEC at
1-800-SEC-0330 for
information on the public reference room. The SEC maintains an
internet site that contains annual, quarterly and current
reports, proxy and information statements and other information
that issuers file electronically with the SEC. The SECs
internet site is www.sec.gov.
Our internet address is www.e-arc.com. You can access our
Investor Relations webpage through our internet site,
www.e-arc.com, by clicking on the Investor Relations
link at the top of the page. We make available free of charge,
on or through our Investor Relations webpage, our proxy
statements, annual report on
Form 10-K,
quarterly reports on
Form 10-Q, current
reports on
Form 8-K and any
amendments to those reports filed or furnished pursuant to the
Exchange Act, as soon as reasonably practicable after such
material is electronically filed with, or furnished to, the SEC.
We also make available, through our Investor Relations webpage,
statements of beneficial ownership of our equity securities
filed by our directors, officers, 10% or greater stockholders
and others under Section 16 of the Exchange Act. The
reference to our Website address does not constitute
incorporation by reference of the information contained in the
Website and should not be considered part of this document.
A copy of our Code of Conduct, as defined under Item 406 of
Regulation S-K,
including any amendments thereto or waivers thereof, Corporate
Governance Guidelines, and Board Committee Charters can also be
accessed on our Website www.e-arc.com, by clicking on the
Investor Relations link at the top of the page and
then selecting Corporate Governance from the
Investor Relations Webpage. Our Code of Conduct applies to all
directors, officers and employees, including our chief executive
officer, our chief financial officer and our controller. We will
post any amendments to the Code of Conduct, and any waivers that
are required to be disclosed by the rules of either the SEC or
the NYSE, on our internet site.
You can request a copy of these documents, excluding exhibits,
at no cost, by contacting Investor Relations at the above
telephone number or address.
YOUR VOTE AT THIS YEARS MEETING IS IMPORTANT, NO MATTER
HOW MANY OR HOW FEW SHARES YOU OWN. PLEASE SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID
ENVELOPE PROMPTLY.
|
|
|
By order of the Board of Directors, |
|
|
|
|
|
|
Mark W. Legg |
|
Chief Financial Officer and Secretary |
April 17, 2006
28
APPENDIX I
AMERICAN REPROGRAPHICS COMPANY
AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee (the Audit Committee) of
American Reprographics Company (the Company) is
appointed by the Companys Board of Directors (the
Board) to assist the Board in monitoring
(i) the integrity of the Companys financial
statements of the Company, (ii) the Companys
compliance with legal and regulatory requirements,
(iii) the independent auditors qualifications and
independence, and (iv) the performance of the
Companys internal audit function and independent auditors.
The Audit Committee shall prepare the report required by the
rules of the Securities and Exchange Commission (the
Commission) to be included in the Companys
annual proxy statement.
Committee Membership
The Audit Committee shall consist of no fewer than three
members. The members of the Audit Committee shall meet the
independence and experience requirements of the New York Stock
Exchange, Section 10A(m)(3) of the Exchange Act of 1934
(the Exchange Act) and the rules and regulations of
the Commission. At least one member of the Audit Committee shall
be an audit committee financial expert as defined by
the Commission. Audit Committee members shall not simultaneously
serve on the audit committees of more than two other public
companies. One member of the Audit Committee will serve as the
Chairperson of the Audit Committee. The Committee may also
appoint a secretary, who need not be a director, whose primary
responsibility will be to keep the minutes of the Audit
Committee meetings.
Members of the Committee and the Committee Chairperson shall be
appointed by and may be removed by the Board on the
recommendation of the Nominating and Corporate Governance
Committee.
Meetings
The Audit Committee shall meet as often as it determines, but
not less frequently than quarterly. The Audit Committee shall
meet periodically in separate executive sessions with management
(including the chief financial officer and chief accounting
officer), the internal auditors and the independent auditor, and
have such other direct and independent interaction with such
persons from time to time as the members of the Audit Committee
deem appropriate. The Audit Committee may request any officer or
employee of the Company or the Companys outside counsel or
independent auditor to attend a meeting of the Committee or to
meet with any members of, or consultants to, the Committee.
Committee Authority and Resources
The Audit Committee shall have the sole authority to appoint or
replace the independent auditor (subject, if applicable, to
stockholder ratification). The Audit Committee shall be directly
responsible for 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. The independent auditor shall
report directly to the Audit Committee.
The Audit Committee shall pre-approve all auditing services,
internal control-related services and permitted non-audit
services (including the terms thereof) to be performed for the
Company by its independent auditor, subject to the
de minimus exceptions for non-audit services described in
Section 10A(i)(1)(B) of the Exchange Act which are approved
by the Audit Committee prior to the completion of the audit. The
Audit Committee may form and delegate authority to
sub-committees consisting of one or more members when
appropriate, including the authority to grant pre-approvals of
audit and permitted non-
I-1
audit services, provided that decisions of such subcommittee to
grant pre-approvals shall be presented to the full Audit
Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it
deems necessary or appropriate, to retain independent legal,
accounting or other advisors. The Company shall provide for
appropriate funding, as determined by the Audit Committee, for
payment of compensation to the independent auditor for the
purpose of rendering or issuing an audit report and to any
advisors employed by the Audit Committee.
Committee Duties and Responsibilities
The Audit Committee, to the extent it deems necessary or
appropriate, shall:
|
|
|
Financial Statement and Disclosure Matters |
1. Review and discuss with management and the independent
auditor the annual audited financial statements, including
disclosures made in managements discussion and analysis,
and recommend to the Board whether the audited financial
statements should be included in the Companys
Form 10-K.
2. Review and discuss with management and the independent
auditor the Companys quarterly financial statements prior
to the filing of its
Form 10-Q,
including the results of the independent auditors review
of the quarterly financial statements.
3. Discuss with management and the independent auditor
significant financial reporting issues and judgments made in
connection with the preparation of the Companys financial
statements, including any significant changes in the
Companys selection or application of accounting principles.
4. Review and discuss with management and the independent
auditor any major issues as to the adequacy of the
Companys internal controls, any special steps adopted in
light of material control deficiencies and the adequacy of
disclosures about changes in internal control over financial
reporting.
5. Review and discuss with management (including the senior
internal audit executive) and the independent auditor the
Companys internal controls report and the independent
auditors attestation of the report prior to the filing of
the Companys
Form 10-K.
6. Review and discuss quarterly reports from the
independent auditors on:
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(a) all critical accounting policies and practices to be
used; |
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(b) all alternative treatments of financial information
within generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent auditor; and |
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(c) other material written communications between the
independent auditor and management, such as any management
letter or schedule of unadjusted differences. |
7. Discuss with management the Companys earnings
press releases, including the use of pro forma or
adjusted non-GAAP information, as well as financial
information and earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be
disclosed and the types of presentations to be made).
8. Discuss with management and the independent auditor the
effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Companys financial
statements.
9. Discuss with management the Companys major
financial risk exposures and the steps management has taken to
monitor and control such exposures, including the Companys
risk assessment and risk management policies.
10. Discuss with the independent auditor the matters
required to be discussed by Statement on Auditing Standards
No. 61 relating to the conduct of the audit, including any
difficulties encountered in the course of
I-2
the audit work, any restrictions on the scope of activities or
access to requested information, and any significant
disagreements with management.
11. Review disclosures made to the Audit Committee by the
Companys CEO and CFO during their certification process
for the Form 10-K
and Form 10-Q
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 the Companys internal controls.
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Oversight of the Companys Relationship with the
Independent Auditor |
12. Review and evaluate the lead partner of the independent
auditor team.
13. Obtain and review a report from the independent auditor
at least annually regarding (a) the independent
auditors internal quality-control procedures, (b) any
material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional
authorities within the preceding five years respecting one or
more independent audits carried out by the firm, (c) any
steps taken to deal with any such issues, and (d) all
relationships between the independent auditor and the Company.
Evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the
auditors quality controls are adequate and the provision
of permitted non-audit services is compatible with maintaining
the auditors independence, taking into account the
opinions of management and internal auditors. The Audit
Committee shall present its conclusions with respect to the
independent auditor to the Board.
14. Ensure the rotation of the audit partners as required
by law. Consider whether, in order to assure continuing auditor
independence, it is appropriate to adopt a policy of rotating
the independent auditing firm on a regular basis.
15. Recommend to the Board policies for the Companys
hiring of employees or former employees of the independent
auditor.
16. Discuss with the independent auditor material issues on
which the national office of the independent auditor was
consulted by the Companys audit team.
17. Meet with the independent auditor prior to the audit to
discuss the planning and staffing of the audit.
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Oversight of the Companys Internal Audit
Function |
18. Review the appointment and replacement of the senior
internal auditing executive.
19. Review the significant reports to management prepared
by the internal auditing department and managements
responses.
20. Discuss with the independent auditor and management the
internal audit department responsibilities, budget and staffing
and any recommended changes in the planned scope of the internal
audit.
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Compliance Oversight Responsibilities |
21. Obtain from the independent auditor assurance that
Section 10A(b) of the Exchange Act has not been implicated.
22. Obtain reports from management, the Companys
senior internal auditing executive and the independent auditor
that the Company and its subsidiary/foreign affiliated entities
are in conformity with applicable legal requirements and the
Companys Code of Business Conduct and Ethics. Review
reports and disclosures of insider and affiliated party
transactions. Advise the Board with respect to the
Companys policies and procedures regarding compliance with
applicable laws and regulations and with the Companys Code
of Business Conduct and Ethics.
I-3
23. Establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters,
and the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
24. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any
published reports which raise material issues regarding the
Companys financial statements or accounting policies.
25. Discuss with the Companys General Counsel legal
matters that may have a material impact on the financial
statements or the Companys compliance policies and
internal controls.
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Other Duties and Responsibilities |
26. Review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for
approval.
27. Conduct an annual performance evaluation of the Audit
Committee and report the results of this review to the Board.
28. Review and recommend to the Board for approval policies
relating to the delegation of authority to the officers and
employees of the Company.
29. Perform any other duties or responsibilities expressly
delegated to the Audit Committee by the Board from time to time.
Limitation of Audit Committees Role
While the Audit Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Audit
Committee to plan or conduct audits or to determine that the
Companys financial statements and disclosures are complete
and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations.
These are the responsibilities of management and the independent
auditor.
Reports
The Audit Committee shall make regular reports to the Board. The
Audit Committee will, to the extent it deems appropriate, record
its summaries of recommendations to the Board in written form
that will be incorporated as a part of the minutes of the Board.
The Audit Committee will also prepare and sign a Report of the
Audit Committee for inclusion in the Companys proxy
statement for its annual meeting of stockholders.
February 2005
Copyright
©
2005, American Reprographics Company. All Rights Reserved.
I-4
AMERICAN REPROGRAPHICS COMPANY
Audit Committee Pre-Approval Policy
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STATEMENT OF PRINCIPLES |
The Audit Committee must pre-approve the audit and non-audit
services per-formed by the independent auditor in order to
assure that the provision of such services does not impair the
auditors independence. Before the Company or any of its
subsidiaries engages the independent auditor to render a
service, the engagement must be either:
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1. specifically approved by the Audit Committee; or |
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2. entered into pursuant to this Pre-Approval Policy. |
The appendices to this Pre-Approval Policy describe in detail
the particular audit, audit-related, tax and other services that
have the pre-approval of the Audit Committee pursuant to this
Pre-Approval Policy.(1) The term of any pre-approval is
12 months from the date of pre-approval, unless the Audit
Committee specifically provides for a different period. The
Audit Committee shall periodically revise the list of
pre-approved services.
The Audit Committee may delegate pre-approval authority to one
or more of its members. The member or members to whom such
authority is delegated shall report any pre-approval decisions
to the Audit Committee at its next scheduled meeting. The Audit
Committee may not delegate to management the Audit
Committees responsibilities to pre-approve services
performed by the independent auditor.
The Audit Committee must specifically pre-approve the terms of
the annual audit services engagement. The Audit Committee shall
approve, if necessary, any changes in terms resulting from
changes in audit scope, Company structure or other matters.
In addition to the annual audit services engagement approved by
the Audit Committee, the Audit Committee may grant pre-approval
for other audit services, which are those services that only the
independent auditor reasonably can provide. The Audit Committee
has pre-approved the audit services listed in Appendix A.
All other audit services not listed in Appendix A must be
specifically pre-approved by the Audit Committee.
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IV. |
AUDIT-RELATED SERVICES |
Audit-related services, including internal control-related
services, are assurance and related services that are reasonably
related to the performance of the audit or review of the
Companys financial statements and/or the Companys
internal control over financial reporting and that are
traditionally performed by the independent auditor. The Audit
Committee believes that the provision of audit-related services
does not impair the independence of the auditor, and has
pre-approved the audit-related services listed in
Appendix B. All other audit-related services not listed in
Appendix B, and all internal control-related services, must
be specifically pre-approved by the Audit Committee.
The Audit Committee believes that the independent auditor can
provide tax services to the Company such as tax compliance, tax
planning and tax advice without impairing the auditors
independence. However, the Audit Committee shall scrutinize
carefully the retention of the independent auditor in connection
with any tax-related transaction initially recommended by the
independent auditor. The Audit Committee has pre-
1 The services listed in the appendices are for
illustrative purposes only.
I-5
approved the tax services listed in Appendix C. All tax
services not listed in Appendix C must be specifically
pre-approved by the Audit Committee.
The Audit Committee may grant pre-approval to those permissible
non-audit ser-vices classified as other services that it
believes would not impair the independence of the auditor,
including those that are routine and recurring services. The
Audit Committee has pre-approved the other services listed in
Appendix D. Permissible other services not listed in
Appendix D must be specifically pre-approved by the Audit
Committee.
A list of the non-audit services prohibited under the rules of
the Securities and Exchange Commission (the
Commission) is attached to this Pre-Approval Policy
as Exhibit 1. The rules of the Commission and the Public
Company Accounting Oversight Board (the PCAOB) and
relevant guidance should be consulted to determine the precise
definitions of these services and the applicability of
exceptions to certain of the prohibitions.
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VII. |
PRE-APPROVAL FEE LEVELS |
The Audit Committee may consider the amount or range of
estimated fees as a factor in determining whether a proposed
service would impair the auditors independence. Where the
Audit Committee has approved an estimated fee for a service, the
pre-approval applies to all services described in the approval.
However, in the event the invoice in respect of any such service
is materially in excess of the estimated amount or range, the
Audit Committee must approve such excess amount prior to payment
of the invoice. The Audit Committee expects that any requests to
pay invoices in excess of the estimated amounts will include an
explanation as to the reason for the overage. The Companys
independent auditor will be informed of this policy.
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VIII. |
SUPPORTING DOCUMENTATION |
With respect to each proposed pre-approved service, the
independent auditor must provide the Audit Committee with
detailed back-up
documentation regarding the specific ser-vices to be provided.
The Companys management shall inform the Audit Committee
of each service performed by the independent auditor pursuant to
this Pre-Approval Policy.
Requests or applications to provide services that require
separate approval by the Audit Committee shall be submitted to
the Audit Committee by both the independent auditor and the
Chief Financial Officer, and must include a joint statement as
to whether, in their view, the request or application is
consistent with the rules of the Commission and the PCAOB on
auditor independence.
February 2005
Copyright
©
2005, American Reprographics Company. All Rights Reserved.
I-6
Appendix A
Form used for:
Pre-Approved Audit Services for Fiscal Year 2005
Dated:
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Service |
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Estimated Range of Fees | |
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Statutory audits or financial audits for subsidiaries or
affiliates of the Company
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Services associated with registration statements, periodic
reports and other documents filed with the Commission or other
documents issued in connection with securities offerings (e.g.,
comfort letters, consents), and assistance in responding to
Commission comment letters
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Consultations by the Companys management as to the
accounting or disclosure treatment of transactions or events
and/or the actual or potential impact of final or proposed
rules, standards or interpretations by the Commission, PCAOB,
FASB, or other regulatory or standard-setting bodies (Note:
Under Commission rules, some consultations may be
audit-related services rather than audit
services)
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I-7
Appendix B
Form used for:
Pre-Approved Audit-Related Services for Fiscal Year 2005
Dated:
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Service |
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Estimated Range of Fees | |
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Due diligence services pertaining to potential business
acquisitions/dispositions
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Financial statement audits of employee benefit plans
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Agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with
financial, accounting or regulatory reporting matters
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Consultations by the Companys management as to the
accounting or disclosure treatment of transactions or events
and/or the actual or potential impact of final or proposed
rules, standards or interpretations by the Commission, PCAOB,
FASB, or other regulatory or standard-setting bodies (Note:
Under the rules of the Commission, some consultations may be
audit services rather than audit-related
services)
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Attest services not required by statute or regulation
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I-8
Appendix C
Form used for:
Pre-Approved Tax Services for Fiscal Year 2005
Dated:
[ ]
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Service |
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Estimated Range of Fees | |
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U.S. federal, state and local tax planning and advice
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U.S. federal, state and local tax compliance
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International tax planning and advice
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International tax compliance
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Review of federal, state, local and international income,
franchise and other tax returns
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Licensing or purchase of income tax preparation software from
the independent auditor, provided the functionality is limited
to preparation of tax returns
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I-9
Appendix D
Form used for:
Pre-Approved Other Services for Fiscal Year 2005
Dated:
[ ]
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Service |
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Estimated Range of Fees | |
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I-10
Exhibit 1
Prohibited Non-Audit Services
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Bookkeeping or other services related to the accounting records
or financial statements of the audit client |
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Financial information systems design and implementation |
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Appraisal or valuation services, fairness opinions or
contribution-in-kind
reports |
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Actuarial services |
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Internal audit outsourcing services |
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Management functions |
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Human resources |
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Broker-dealer, investment adviser or investment banking services |
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Legal services |
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Expert services unrelated to the audit |
I-11
PROXY
AMERICAN REPROGRAPHICS COMPANY
Proxy for Annual Meeting of Stockholders to be held May 22, 2006
The undersigned hereby appoints Mark W. Legg, Chief Financial Officer and Secretary of ARC,
Sathiyamurthy Chandramohan, the Chief Executive Officer and Chairman of the Board of ARC, and
Kumarakulasingam Suriyakumar, the President, Chief Operating Officer and a director of ARC, and
each of them, with full power of substitution, proxies of the undersigned to vote all shares of
Common Stock of American Reprographics Company held by the undersigned on March 27, 2006, at the
annual meeting of stockholders to be held at the Glendale Hilton Hotel, 100 West Glenoaks
Boulevard, Glendale, California 91202 on Monday, May 22, 2006,
at 2:00 p.m. local time, and at any
postponements or adjournments thereof. Without limiting the authority granted herein, the above
named proxies are expressly authorized to vote as directed by the undersigned as to those matters
set forth on the reverse side hereof. If no directions are given, this Proxy will be voted for all
of the director nominees named on the reverse side and for Item 2. The above named proxies
will vote in their discretion on all other matters that are properly brought before the Annual
Meeting. The undersigned hereby revokes any proxy heretofore given to vote at such meeting.
(CONTINUED,
AND TO BE SIGNED ON THE OTHER SIDE)
Address
Change/Comments (Mark the corresponding box
on the reverse side)
pDETACH
HERE FROM PROXY VOTING CARDp
AMERICAN REPROGRAPHICS COMPANY
Proxy for Annual Meeting of Stockholders to be held May 22, 2006
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Mark Here
for Address
Change or
Comments |
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PLEASE SEE REVERSE SIDE |
THIS
PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION INDICATED, WILL BE
VOTED FOR THE PROPOSALS.
1. Elect seven directors, each for a term of one year:
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Nominees:
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For All
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Withhold
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01 Sathiyamurthy Chandramohan
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All
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02 Kumarakulasingam Suriyakumar
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o
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03 Thomas J. Formolo |
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04 Dewitt Kerry McCluggage |
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05 Mark W. Mealy |
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06 Manuel Perez de la Mesa |
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07 Eriberto R. Scocimara |
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Withheld
for the nominees you list below. (Write that nominees name in the
space provided below.)
ITEM
2 Ratify the appointment of PricewaterhouseCoopers LLP as the Companys independent auditors for
2006.
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o FOR
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o AGAINST
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o ABSTAIN |
ITEM
3 In their discretion, to transact such other business as may properly come before the meeting and
any adjournments thereof.
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WILL ATTEND |
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If you plan to attend the Annual Meeting, please
mark the WILL ATTEND box |
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Choose
MLinkSM
for fast, easy and secure 24/7 online access to your future proxy
materials, investment plan statements, tax documents and more. Simply
log on to Investor ServiceDirect® at
www.melloninvestor.com/isd where step-by-step instructions will
prompt you through enrollment. |
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Signature:
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Signature: Date: |
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(Please sign exactly as your name or names appear on certificate and mail this Proxy
promptly in the enclosed paid envelope. When signing in representative capacity,
insert title and attach papers showing authority unless already on file with the corporation.) |
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pPLEASE SIGN AND MAIL THIS PROXYp