UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

 

 

 

Check the appropriate box:

 

A. T. Cross Company

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement if other than Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD APRIL 22, 2010

 

TO THE SHAREHOLDERS OF A.T. CROSS COMPANY:

 

Notice is hereby given that the annual meeting of shareholders of A.T. Cross Company (the “Company”) will be held on Thursday, April 22, 2010 at 10:00 a.m. at the offices of the Company, One Albion Road, Lincoln, Rhode Island 02865, for the following purposes:

 

1.  Fixing the number of directors at nine, of which three shall be Class A directors and six shall be Class B directors (by holders of Class A and Class B common stock voting together as a single class).

 

2.  Electing three Class A directors (by holders of Class A common stock only) and six Class B directors (by holders of Class B common stock only) to hold office until the next annual meeting of shareholders or until their successors are duly elected and qualified.

 

3.  Transacting such other and further business as may properly come before said meeting upon which the holders of Class A common stock or Class B common stock, respectively, are entitled to vote.

 

The stock transfer books will not be closed. The close of business on February 25, 2010 has been fixed as the record date for determining shareholders entitled to vote at the annual meeting or any adjournments or postponements thereof, and only holders of record of Class A common stock or Class B common stock as of that time are entitled to receive notice of and to vote at said meeting or any adjournments or postponements thereof.

 

By order of the Board of Directors

 

Tina C. Benik

Vice President, Legal and Human Resources

Corporate Secretary

 

March 23, 2010

 

PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE USED.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 22, 2010.

 

The Company’s Proxy Statement and Annual Report are available at:

http://www.edocumentview.com/ATX.

 

ONE ALBION ROAD

LINCOLN, RHODE ISLAND 02865

 

PROXY STATEMENT

FOR ANNUAL SHAREHOLDERS’ MEETING

APRIL 22, 2010

 

 

This statement is furnished in connection with the accompanying proxy which is solicited by the Board of Directors of A.T. Cross Company (the “Company”) from holders of Class A common stock of the Company for use at the annual meeting to be held April 22, 2010 at 10:00 a.m. at the offices of the Company, One Albion Road, Lincoln, Rhode Island 02865. Any shareholder giving a proxy may revoke the same prior to its exercise by filing a later proxy with the Company, by attending the meeting and voting in person, or by giving notice in writing or in person to the Corporate Secretary. If not revoked, the persons named in the accompanying proxy will vote such proxy in the manner specified therein and, in the discretion of the persons named, for or against any matter upon which holders of Class A common stock are entitled to vote which properly comes before the meeting and which has been omitted from the proxy and proxy statement. The cost of solicitation of proxies, including the cost of reimbursing brokerage houses and other custodians, nominees or fiduciaries for forwarding proxies and proxy statements to their principals, will be borne by the Company. Solicitation may be made in person or by telephone or telegraph by officers or other employees of the Company, who will not receive additional compensation. In addition, the Company has retained Georgeson Shareholder Communications Inc., New York, N.Y., to aid in the solicitation of proxies. The charges of such firm, estimated at $6,500, plus expenses, will be paid by the Company. This proxy statement and the enclosed form of proxy are expected to be sent to shareholders on or about March 23, 2010.

 

A copy of the Company’s annual report for the year 2009 containing financial statements for the year ended January 2, 2010 is also enclosed, but is not to be considered a part of the proxy soliciting material.

 

As of February 25, 2010 the Company had outstanding 11,760,738 shares of Class A common stock and 1,804,800 shares of Class B common stock. Only shareholders of record at the close of business on that date are entitled to vote at the annual meeting. Shareholders shall be entitled to one vote for each share held on the foregoing record date with respect to matters on which shares of that class are eligible to vote.

 

SHAREHOLDERS’ PROPOSALS

 

Any proposal of a shareholder intended to be presented at the next annual meeting of the Company, scheduled to be held April 28, 2011, must be received by the Company’s Corporate Secretary not later than November 29, 2010 for inclusion in the proxy statement and form of proxy relating to that meeting. Any shareholder proposal intended to be presented at the next annual meeting of the Company without being included in the proxy statement and form of proxy relating to such meeting must be received by the Company’s Corporate Secretary not later than February 7, 2011.

 

VOTING RIGHTS

 

Holders of Class A common stock have the right to elect one-third of the number of directors from time to time fixed by the holders of Class A and Class B common stock voting together as a single class; provided, however, that if the total number of directors is not evenly divisible by three, then the holders of Class A common stock have the right to elect that number of directors which is the nearest whole number when the total number of directors is divided by three. Holders of Class B common stock have the right to elect the remaining directors. It is proposed that the number of directors for the ensuing year be fixed at nine (see “Election of Directors” on page 4), and if this proposal is adopted, holders of Class A common stock will have the right to elect three directors.

 

In addition, holders of Class A and Class B common stock vote together as a single class:

 

 

 

 

     If the consummation of any transaction described above would, with respect to either the Class A common stock or the Class B common stock, result in a change in the designations, preferences, limitations or relative rights of the shares of such class or have certain other effects as specified in the Company’s articles, the holders of Class A and Class B common stock vote as separate classes on such transaction.

 

     Except as stated above or otherwise required by law or applicable stock exchange listing standards, all voting power is vested in the holders of Class B common stock so long as any shares of Class B common stock are outstanding.

 

VOTING PROCEDURES

 

The numbers of Class A and Class B directors will be fixed by vote of the holders of a majority of the Class A and Class B shares present at the annual meeting in person or represented by proxy, voting as a single class. The Class A directors will be elected in each case by vote of the holders of a majority of the Class A shares present or represented at the meeting, and the Class B directors will be similarly elected by the holders of a majority of the Class B shares.

 

Shares represented by proxies which are marked “abstain” with respect to fixing the number of directors or “withheld” with respect to the election of any particular nominee for director, will be counted as shares present and entitled to vote, and accordingly any such marking of a proxy will have the same effect as a vote against the proposal to which it relates. The Board of Directors does not know of any matters which will be brought before the meeting other than those specifically set forth in the accompanying Notice of Annual Meeting. If any other matters are presented to the meeting, the persons named in the enclosed proxy have discretionary authority to vote and will vote all proxies with respect to such matters in accordance with their judgment.

 

Brokers who hold Class A shares in street name have the authority to vote such shares on certain items, including fixing the number of directors, unless they have received instructions from the beneficial owners to the contrary, in which case the shares are to be voted or the votes relating thereto withheld, as directed by the beneficial owners. Effective January 1, 2010, the election of directors is no longer considered to be a routine matter, and your broker will not have discretion to vote “for” the election of directors unless you specifically instruct your broker to do so by returning your signed voting instruction card. If you do not provide voting instructions to your broker, your shares will not be voted for any director nominee or on any proposal on which your broker does not have discretionary authority (resulting in a broker non-vote). Broker non-votes will have the same effect as a vote against a proposal, but will have no effect on the election of directors.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth as of February 25, 2010 (except as otherwise noted) certain information concerning the ownership of shares of Class A or Class B common stock of the Company by (i) each person or group known by the Company to beneficially own more than 5% of the outstanding Class A or Class B common stock, (ii) each director and nominee for director, (iii) each executive officer named in the Summary Compensation Table on page 13, and (iv) all directors and executive officers as a group. Except as otherwise indicated, each person named has sole investment and voting power with respect to the securities shown.

 

 

ELECTION OF DIRECTORS

 

It is proposed to fix the number of directors at nine, of which three will be designated “Class A Directors” and six will be designated “Class B Directors”. It is also proposed to elect three Class A directors (by holders of Class A common stock only) and six Class B directors (by holders of Class B common stock only) to hold office until the next annual meeting of shareholders or until their successors are duly elected and qualified. Proxies will be voted for the nominees set forth below unless authorization to do so is withheld. All nominees are currently members of the Board of Directors with the exception of Dwain L. Hahs Should any nominee become unavailable for any reason to accept nomination or election as a director, the persons named in the proxy will vote for the election of such other person or persons as management may recommend unless the shareholders vote to reduce the authorized number of directors. The principal occupation and certain other information regarding the background and qualifications of the nominees, including the experience and skills that led to the selection of that nominee for membership on the Company’s Board, are set forth below. The terms of all directors will expire when their successors are duly elected at the annual meeting of shareholders scheduled to be held April 28, 2011. The following tables reflect information as of January 1, 2010.

 

 

 

Corporate Governance

 

Board of Director and Shareholder Meetings:  The Board of Directors met five times during the fiscal year ended January 2, 2010 (“fiscal year 2009”). All directors attended at least 75% of the Board of Directors meetings and applicable committee meetings in fiscal year 2009. The Company has adopted a policy that requires members of the Board of Directors to make every effort to attend the Company’s Annual Meeting. All members of the Board of Directors attended the Company’s 2009 Annual Meeting.

 

Board of Director Independence:  The Board of Directors is committed to strong, independent board leadership and believes that objective oversight of management performance is a critical aspect of effective corporate governance. The Board of Directors has reviewed the relationship that each current and nominee director has with the Company and with other parties. Only those directors who do not have any of the categorical relationships that preclude them from being independent within the meaning of applicable NASDAQ rules (“NASDAQ Rules”) and who the Board of Directors affirmatively determines have no relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, are considered to be independent directors. The Board of Directors has reviewed a number of factors to evaluate the independence of each of its members and prospective members. These factors include those persons’ current and historic relationships with the Company and its competitors, suppliers and customers; their relationships with management and other directors; the relationships their current and former employers have with the Company; and the relationships between the Company and other companies of which the Board members are directors or executive officers. Specifically, the Board considered that Bernard V. Buonanno and Russell A. Boss are cousins by marriage and that Mr. Buonanno is Senior Partner in a law firm that has in the past performed a relatively small amount of legal work for the Company (less than $15,000 in 2009). After evaluating these factors, the Board of Directors has determined that the following directors and nominees for director are independent directors within the meaning of applicable NASDAQ Rules: Bernard V. Buonanno, Jr; Edward J. Cooney; Galal P. Doss; Susan M. Gianinno, Dwain L. Hahs, Harlan M. Kent; and Andrew J. Parsons.

 

Independent members of the Board of Directors are scheduled to meet at least twice per year in executive session without management, but will meet as often as is deemed necessary.

 

In addition, we have an independent Chairman of the Board of Directors. The Board of Directors believes that separating the roles of Chairman and Chief Executive Officer provides an independent viewpoint and focus at board meetings, and ensures that our CEO will be able to focus his entire energy on running the Company. We believe this structure provides strong leadership for the Board of Directors, while also positioning the chief executive officer as the leader of the Company in the eyes of our customers, employees and shareholders.

 

Shareholder Communications:  The Company’s shareholders may communicate directly with the members of the Board of Directors or the individual chairmen of standing Board of Directors committees by writing directly to those individuals at the following address: One Albion Road, Lincoln, RI 02865. The Company’s general policy is to forward, and not to intentionally screen, any mail received at the Company’s corporate offices that is sent directly to an individual unless the Company believes the communication may pose a security risk.

 

Code of Ethics:  The Board of Directors originally adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) in 1996 which has been periodically updated and amended. This Code of Ethics applies to all of the Company’s (and its subsidiaries’) employees, officers and directors, including its principal financial officers. A link to the Code of Ethics is on the Company’s website at www.cross.com under the Company’s Investor Relations section.

 

Board’s Role in Strategic Planning and Risk Oversight:  Our Board meets regularly to discuss the strategic direction and the issues and opportunities facing our company in light of trends and developments in the consumer products industry and general business environment. Throughout the year, our Board provides guidance to management regarding our strategy and helps to refine our operating plans to implement our strategy. Each year, the Board holds an extensive meeting with senior management dedicated to discussing and reviewing our long-term operating plans and overall corporate strategy. A discussion of key risks to the plans and strategy as well as risk mitigation plans and activities is led by the Chairman and Chief Executive Officer as part of the meeting. The involvement of the Board in setting our business strategy is critical to the determination of the types and appropriate levels of risk undertaken by the company. Our Board administers its risk oversight function as a whole and through its Board Committees. For example, the Audit Committee regularly discusses with management our major risk exposures, their potential financial impact on our company and our risk mitigation strategies.

 

Committees of the Board of Directors

 

The Board of Directors has standing Audit, Compensation, Nominating and Corporate Governance, and Executive Committees.

 

Audit Committee.  The members of the Audit Committee are Edward J. Cooney, who serves as

Chairman, Susan M. Gianinno, James C. Tappan and Andrew J. Parsons. The Board has determined that the members of the Audit Committee are independent within the meaning of applicable NASDAQ Rules and Section 10A(m)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”). The Board of Directors has determined that Edward J. Cooney is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K. The Audit Committee meets on an as needed basis and met five times during fiscal year 2009.

 

The Audit Committee has oversight responsibility for the establishment and maintenance of an effective financial controls environment, for overseeing the procedures for evaluating the system of internal accounting controls and for evaluating audit performance. In addition to the responsibilities listed above, the Audit Committee has responsibilities and authority necessary to comply with Rule 10A-3(b) (2), (3), (4), and (5) under the Exchange Act. These and other aspects of the Audit Committee’s authority are more particularly described in the Audit Committee Charter adopted by the Board of Directors in 2000, as amended. A current copy of the Charter is available on the Company’s website, www.cross.com, in the Investor Relations section. See also the “Report of the Audit Committee” on page 27.

 

Compensation Committee.  The members of the Compensation Committee are Bernard V. Buonanno, who serves as Chairman, and Edward J. Cooney. The Board has determined that the members of the Compensation Committee are independent within the meaning of applicable NASDAQ Rules. The Compensation Committee met two times during fiscal year 2009. The Compensation Committee has responsibility for developing, overseeing and implementing the overall compensation policy for the Company including the implementation of an incentive compensation plan for the Company. The Compensation Committee also determines, and/or makes recommendations to the Board of Directors concerning compensation, including incentive compensation, of the Chief Executive Officer and all other executive officers. The Compensation Committee administers the Company’s equity incentive plan. See “Compensation Discussion and Analysis” beginning on page 8. The Compensation Committee has a charter which was adopted by the Board in February 2008. That charter is available on the Company’s website, www.cross.com, in the Investor Relations section. The Compensation Committee may not delegate its authority for the responsibilities described in this paragraph.

 

Executive Committee.  The members of the Executive Committee are Russell A. Boss and David G. Whalen. The Executive Committee meets on an as needed basis and met once during fiscal year 2009. The Executive Committee has the authority in certain circumstances to act in the stead of the Board between regular Board meetings.

 

Nominating and Corporate Governance Committee.  The members of the Nominating and Corporate Governance Committee (“NCGC”) are Andrew J. Parsons, who serves as Chairman, Harlan M. Kent and James C. Tappan. The Board has determined that the members of the NCGC are independent within the meaning of the applicable NASDAQ rules. The NCGC met five times during fiscal year 2009.

 

The NCGC has adopted a charter which was approved by the Board of Directors in February 2007, and which has been since amended (the “NCGC Charter”). The NCGC Charter is available on the Company’s website, www.cross.com, in the Investor Relations section.

 

The NCGC is responsible for identifying, evaluating and recommending individuals for election or reelection to the Board of Directors, including those recommendations submitted by the Class A and Class B shareholders, and is also responsible for determining, with input from the Board, the desired criteria and attributes for Board members that will best meet the current and future needs of the Company. In addition, the NCGC is responsible for overseeing the Chief Executive Officer succession planning process and for overseeing management succession plans generally. Further, the Committee is responsible for corporate governance matters relating to the Board and the Company including conducting Board and Board Committee evaluations, implementing and maintaining Corporate Governance Guidelines, recommending Board Committee structure and composition and recommending and implementing governance best practices.

 

It is the policy of the NCGC that candidates for director possess the highest personal and professional ethics and integrity, have demonstrated effectiveness and sound business judgement, and possess skills and experience relevant to the business needs and objectives of the Company and to best serve the interests of the Company and its shareholders.

 

The NCGC’s process for identifying and evaluating nominees is as follows:

 

(1) in the case of incumbent directors whose terms of office are set to expire, the NCGC reviews such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, any change of status and any related party transactions with the Company during the applicable time period; and

 

(2) in the case of new director candidates, the NCGC conducts such inquiries into the backgrounds and qualifications of possible candidates as the NCGC deems necessary or appropriate after considering the composition of the Board of Directors and

needs of the Company. The Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Board believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.

 

The NCGC discusses and considers such candidates’ qualifications, including whether the nominee is independent for purposes of Exchange Act Rule 10A-3(b) and the NASDAQ Rules, and selects candidates for recommendation to the Board of Directors by majority vote of the committee. In seeking potential nominees, the Nominating and Corporate Governance Committee uses its network of contacts to identify potential candidates, but may also engage, if it deems appropriate, a professional search firm, at the Company’s expense.

 

The Committee utilized its network of contacts to identify a candidate for the open position created by Mr. James C. Tappan’s retirement from the Board.

 

The NCGC is authorized to adopt and implement such additional procedures and processes to discharge its responsibilities as it deems appropriate.

 

The Committee considers director candidates recommended by shareholders provided the shareholders follow the procedures set forth below. The NCGC does not intend to alter the manner in which it evaluates candidates, including the criteria set forth above, based on whether the candidate was recommended by a shareholder or otherwise.

 

The NCGC considers all bona fide candidates for Class A director positions recommended by Class A shareholders holding Class A common stock of the Company. The Committee considers all bona fide candidates for Class B director positions recommended by Class B shareholders holding Class B common stock of the Company. The Committee considers such Class A and Class B candidates using the same screening criteria as are applied to all other potential nominees for election based on the considerations set forth above. Third parties wishing to recommend candidates for consideration by the NCGC may do so in writing by providing the recommended candidate’s name, biographical data, qualifications and a statement describing the basis for the recommendation, together with the recommended candidate’s consent to serve if nominated, to the Chairman of the Nominating and Corporate Governance Committee.

 

In addition, the Company’s by-laws also permit shareholders entitled to vote in the election of directors for the class of shares that they hold to nominate candidates for election as Class A directors or Class B directors, as the case may be. For nominees for election to the Board of Directors proposed by shareholders under the by-laws to be considered, the following information concerning each nominee must be timely submitted in accordance with the required procedures: (1) the nominee’s name, age, business address, residence address, principal occupation or employment, the class and number of shares of the Company’s capital stock the nominee beneficially owns, the nominee’s qualifications to serve as a director of the Company and any other information relating to the nominee that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations thereunder; and (2) as to the shareholder proposing such nominee, that shareholder’s name and address, the class and number of shares of the Company’s capital stock that the shareholder beneficially owns, a description of all arrangements and understandings between the shareholder and the nominee or any other person or persons (including their names) pursuant to which the nomination is made, a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person named in its notice and any other information relating to the shareholder that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations thereunder. The notice must also be accompanied by a written consent of the proposed nominee to being named as a nominee and to serve as a director if elected.

 

COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER

PARTICIPATION

 

As indicated under “Compensation Discussion and Analysis” beginning on page 8, the 2009 compensation of David G. Whalen, a member of the Board of Directors of the Company, was established by the Compensation Committee and submitted to the Board of Directors for approval. The Compensation Committee is comprised of Bernard V. Buonanno, Jr. and Edward J. Cooney. The compensation of the remaining executive officers of the Company was similarly reviewed and approved by the Compensation Committee and submitted to the Board of Directors for approval.

 

There are no Compensation Committee interlocks.

 

EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

Introduction

 

The Compensation Committee of the Company’s Board of Directors has responsibility for developing, overseeing and implementing the overall compensation philosophy of the Company. It recommends for the approval of the full Board both the incentive compensation plans that apply to all levels of management within the Company and the specific elements of compensation that make up the total compensation of the Company’s Chief Executive Officer and other named executive officers.

 

In this analysis, the term “named executive officers” refers to the Company’s Chief Executive Officer, Chief Financial Officer, and the other executive officers included in the Summary Compensation Table on page 13.

 

Compensation Philosophy and Objectives

 

In general, the Company’s executive compensation program is designed to attract, motivate, reward and retain high caliber executives to enable the Company to achieve its strategic and operating objectives. The program is designed to compensate executives at a level that is commensurate with both corporate and individual performance achievement with the ultimate goal of increasing shareholder value. The Compensation Committee’s objective is to design a compensation package that is fair to both the executives and shareholders in relation to corporate performance and contributions to shareholder value, that is competitive in relation to companies of similar size and complexity of operations, that is balanced appropriately between fixed and variable components, and that is balanced appropriately between cash and equity-based compensation. As part of this compensation package, the Committee includes incentive-based compensation designed to reward the executive for both short and long-term company success. Short-term performance is measured each fiscal year and is typically rewarded through cash incentive payments. Long-term performance is typically targeted through equity awards granted from time to time. These awards are designed to align the executives’ interests with those of other shareholders of the Company.

 

Overview of Compensation and Process

 

The Compensation Committee oversees the executive compensation program and typically makes the recommendations of compensation elements and amounts for the named executive officers to the Board of Directors for approval.

 

The Compensation Committee makes recommendations relating to compensation levels of executive officers, including the named executive officers, and also makes recommendations relating to the elements of compensation generally for Company management, which in each case is presented to the Board for approval. In making such recommendations, the Committee relies on the support from, and recommendations of, the Company’s Human Resources Department and, except with respect to his own compensation, the Company’s Chief Executive Officer. The Company’s Human Resources Department formulates a proposal with respect to the Chief Executive Officer’s compensation package that is submitted to the Committee for consideration. This recommendation is based in significant part on third-party data as described below. The Chief Executive Officer participates in formulating the compensation proposal for the other executive officers. The Compensation Committee can exercise discretion to increase or decrease any recommended compensation levels, adjustments or awards to executives not otherwise earned under the annual incentive plan described below.

 

The Compensation Committee has not directly engaged a compensation consultant in connection with the structuring of compensation programs or the setting of individual compensation or performance targets. However, the Chief Executive Officer and the Human Resources Department rely on materials and data provided by Towers Watson, a global human resource and executive compensation consulting firm, in formulating their recommendations to the Committee. First, the Company regularly engages Towers Watson to do regression analyses on certain of the named executive officers every year. In general, in a year for those named executive officers for which it does not commission regression analyses, the Company utilizes regression analyses done in the past 12 to 24 months which are then aged to reflect the marketplace. The Company uses regression analyses to obtain more accurate benchmark data since most of the readily available survey information reflects companies that are significantly larger in revenue size than the Company. Second, the Company seeks specific advice from Towers Watson from time to time regarding the elements of its compensation program. For example, Towers Watson has been engaged in the past to review and analyze the structure of the Company’s annual incentive plan described on page 9. Towers Watson is not consulted every year, however, and is not

necessarily consulted with respect to every component of the executive management team’s total compensation. The Compensation Committee has not directly retained or obtained guidance from Towers Watson in this respect, but it has access to Towers Watson personnel in considering the proposals put forth by management. The Compensation Committee has the authority, to the extent it deems necessary, to retain its own advisors in developing its recommendations.

 

The Company does not have a formal policy relating to the allocation of compensation between cash and non-cash elements such as equity awards. In the recent past, the Company has utilized both cash and non-cash awards for variable compensation programs. Since the Company’s adoption of the accounting rules for share-based payments under FASB SFAS No. 123(R) for fiscal year 2006, the Company has limited the use of equity grants as a form of incentive compensation. While equity grants have not been part of a regularized or annual program in the recent past, unless financial conditions otherwise dictate, the Company is expecting to make long term equity grants on a more periodic basis to a limited group of executives. The purpose of instituting periodic grants is to provide a more effective retention vehicle for senior executives and to continually align their interests with the longer-term interests of the Company’s shareholders.

 

When structuring incentive compensation programs, the Company will determine the appropriate form of grant — cash or equity — depending on the objective of that particular program. The Company generally uses cash incentive awards to drive shorter term (i.e. one year) performance on a broader basis, and equity based grants to provide recognition or to drive longer term performance (i.e. from one to three years) on a more limited basis.

 

In addition to the equity awards made from time to time to senior management, equity grants are also made as appropriate as a means of attracting highly qualified new executives and more closely aligning their interests with those of the Company’s shareholders. Equity grants are also made on an ad hoc basis to reward or incent specific individual performance.

 

The Company has no formal stock ownership guidelines for officers or for directors, although directors are required to receive a portion of their annual retainer in the form of equity, as described in the “Director Compensation” discussion on page 25.

 

Elements of the 2009 Compensation

 

There were four primary components of the compensation package of the named executive officers for 2009. Those components are:

 

 

In addition, each executive receives standard health and life insurance benefits. The Company does not currently grant perquisites or other personal benefits.

 

Base Salary

 

The Company provides named executive officers, like its other employees, a fixed base salary in order to compensate them for the services that they provide to the Company over the course of the year for sustained performance. Base pay is generally based on the responsibilities of the position, the skills and experience required for the job, the individual performance of the employee, business performance, labor market conditions and by reference to market median salary levels. Specifically for CEO compensation, as one element of the analysis, the Human Resources Department benchmarks other companies’ CEO’s compensation as it formulates its recommendation to the Compensation Committee. Companies were chosen as benchmarks based on their revenue size and the industry in which they operate. Specifically, companies that manufacture or distribute consumer products and that had the revenue closest in size to the Company and for which publicly available information was available, were chosen. Following are the benchmarked companies: Tiffany & Company; Fossil, Inc.; Movado Group; Coach, Inc.; Tandy Brands; Callaway Golf; K-Swiss and Swank. In reviewing this data, the Company’s CEO compensation falls within the lower range of these benchmarked companies’ CEOs’ compensation, as does the Company’s revenue size.

 

For all employees, salaries are typically evaluated and adjusted annually. Salary increases typically take effect in April of each year, unless business circumstances dictate differently. Like the other elements of compensation, these adjustments are recommended to the Compensation Committee by the Human Resources Department for the salary of the Chief Executive Officer, and by the Chief Executive Officer and the Human Resources Department together for other named executives.

 

Cash Incentive Programs

 

At the beginning of each year, following a proposal of the Human Resources Department, the Compensation Committee recommends performance-based annual incentive plans to the Board of Directors for its approval for that year which generally cover management and other exempt employees other than the CEO. The CEO’s plan is set by the Compensation

Committee and the Board, with input from the CEO. The annual incentive plans are designed to be the primary compensation element to drive and recognize performance against established business objectives and to reward accomplishments within any given year. The Plan for 2009 was designed primarily to reward corporate segment success in generating earnings per share, operating income and to a lesser extent, individual achievement. Target award levels are generally set by reference to a percentage of the employee’s base salary. For 2009, the Annual Incentive Plans provided that, generally, annual incentive payments would be made to participants upon the achievement of applicable corporate or divisional segment earnings per share (“EPS”) or operating income before taxes (“OIBT”) objectives for the year. The Company believes that achieving increasing EPS and OIBT levels are key to enhancing shareholder value and utilizes those as the key criteria for Company performance. For the purposes of determining incentive compensation, OIBT is defined as operating income before taxes but excluding extraordinary or non-recurring items. The award made to participants is then adjusted depending on the achievement of other previously identified individual objectives.

 

In addition to EPS, the CEO is measured against other performance metrics that drive shareholder value; revenue growth, free cash flow, net cash and cost reduction.

 

During 2009, the named executive officers (the “NEO’s”), other than the CEO, had the opportunity under the applicable annual incentive plan to earn a target bonus of between 35% and 45% if OIBT targets were met. The NEO’s, other than the CEO, have a maximum bonus opportunity equal to 150% of their target, with the exception of Charles MacDonald who has a maximum opportunity of 200%. The CEO has a target bonus opportunity of 75% of his base salary, and a maximum opportunity of 100%.

 

The Chief Executive Officer earned a bonus for 2009 by achieving against the objectives previously determined by the Compensation Committee. Following is a chart outlining the fiscal 2009 performance measures for CEO performance and the results against which an award was paid:

 

 

Based on the foregoing, Mr. Whalen earned 65% of his target bonus ($435,000) resulting in an award of $284,000.

 

The Compensation Committee determined to award bonuses to named executive officers other than the CEO based on their performance on individual objectives as well as the results of the consolidated entity or the individual division as applicable. While the majority of the bonus amounts paid to the NEOs, including the CEO, were earned under the applicable incentive plan, several of the NEOs, other than the CEO, received relatively small discretionary bonus payments in recognition of their performance during the economic recession. Elements that the Compensation Committee considered in awarding the bonuses were segment OIBT, EPS, operating cash flow, cost reduction, and revenue generation.

 

Equity-based Awards

 

The Company does not make equity awards every year. However, the Compensation Committee considers equity-based performance awards to be an important tool in 1) retaining talent for long term growth and 2) rewarding and incenting executive performance that will have a long term impact on shareholder value.

 

Equity-based awards, including restricted stock awards, may be made by the Compensation Committee in its sole discretion, though in practice the Committee recommends such awards to the full Board for approval. At the time an award of restricted stock is made, if the award is performance based, the Committee establishes a restricted period and prescribes conditions for the lapse of restrictions during the restricted period, including the lapse of restrictions upon the attainment of certain objectives designed to drive shareholder value and, for retention purposes, upon the passage of time. Upon the grant of restricted stock, shares equal to the number of shares of restricted stock granted to an employee are registered in the employee’s name but is held in custody by the Company for the employee’s account. The shares are valued at the fair market value of the common stock on the date of the grant.

 

The Company granted no equity awards to the CEO and NEOs in 2009. The Company’s process for granting options is prescribed in the Company’s Omnibus Incentive Plan, as amended, which is administered by the Compensation Committee. The Committee follows this practice in setting the exercise price of nonqualified stock options as well. The Committee has on occasion authorized the grant of options to occur in the future, with an exercise price equal to the fair market value as of the effective date of the grant. The Committee has never granted options with a grant date that preceded the Committee’s authorization of the

grant, nor has it granted stock options with an exercise price of less than the fair market value on the date of grant.

 

Retirement-related Benefits

 

401(k) plan.  The 401(k) plan is a tax-qualified retirement savings plan pursuant to which all of the Company’s U.S. based employees, including the named executive officers, are able to contribute the lesser of 25% of their annual salary or the limit prescribed by the Internal Revenue Service to the plan on a before-tax basis. The Company matches the participants’ contributions based on the following schedule:

 

 

In addition to the Company match, all participants qualify for an annual core contribution of 2% of pay.

 

The vesting schedule for all Company contributions to the 401(k) plan is 20% for each year a participant works 1,000 hours, with 100% vesting after five years of working 1,000 hours for each year.

 

Pension plans.  The Company maintains two defined benefit retirement plans, as further described in the “Pension Benefits” discussion beginning on page 17. The qualified pension plan (the Cross Company Pension Plan) was structured to provide funded, tax-qualified benefits up to the limits on compensation and benefits permitted under the Internal Revenue Code and was designed to provide tax-qualified pension benefits for most employees of the Company, including the named executive officers. The Company amended its Cross Company Pension Plan in May 2006 to freeze benefit accruals. As a result of the freeze, any accrued benefits which participants had in that plan as of May 20, 2006 are theirs. However, benefits no longer grew after that point since compensation and years of service after that date are not to be included in calculating pension benefits. Benefits payable under the qualified pension plan were based on the employee’s earnings up to a compensation limit under the Internal Revenue Code ($245,000 in 2009). In addition, benefits provided under the qualified pension plan may not exceed a benefit limit under the Internal Revenue Code (the limit in 2009 was $195,000 payable as a single life annuity beginning at any age from age 62 through Social Security normal retirement age).

 

The nonqualified plan (the A.T. Cross Company Unfunded Excess Benefits Plan) provides unfunded, non-qualified benefits in excess of the limits applicable to the A.T. Cross Company Pension Plan and the 401(k) plan.

 

Nonqualified deferred compensation plan.  The Company offers its executives a deferred compensation plan, whereby the executive can elect to defer a portion of his or her future base salary and/or cash bonus. Any amounts deferred and interest or earnings credited on such amounts are exempt from income taxes during the deferral period. The full amount credited to the executive’s deferred compensation account becomes payable at the earlier of the end of the deferral period elected by the executive or upon the executive’s retirement from the Company. Currently, no executive of the Company participates in the deferred compensation plan.

 

Post-Termination Compensation

 

In order to attract, motivate, and retain executives, the Company believes that certain severance arrangements for the named executive officers are appropriate and necessary. These severance arrangements were determined using benchmark compensation survey data. Currently, the Company relies on several industry surveys to determine appropriate levels of severance.

 

In 2005, the Board of Directors approved certain severance arrangements whereby the Chief Executive Officer and the other named executive officers will receive payments in the event that there is a change in control of the Company’s Class B stock (i.e., a sale of more than 50% to unaffiliated parties) and a subsequent termination or constructive termination, or in the event that the executive is terminated without cause, provided the executive signs an acceptable release agreement. The terms of these arrangements are discussed in greater detail starting on page 19.

 

The Board also approved certain gross-up payments to the Chief Executive Officer and the other named executive officers under certain circumstances in the event of change in control payments. Internal Revenue Code Section 4999 imposes a non-deductible 20% excise tax on a recipient for any change in control payments that are in excess of three times his or her average annual taxable compensation over the prior five-year period (the “base amount”). In the event that the change in control payments made to a named executive officer exceed three times such base amount (the “safe harbor amount”), the Company will provide a gross-up to the Chief Executive Officer to provide him or her the after tax benefit he or she would have received had the excise tax not been triggered, and will provide a conditional gross-up to the other named executives in the event that the change in control payments exceed the safe harbor amount by more than

a specified amount. The conditional gross-up provides that the change in control payments will be capped to fall below the safe harbor amount if the amount by which the change in control payments exceed such safe harbor amount is $50,000 or less. If the change in control payments exceed such safe harbor amount by greater than $50,000, the named executive will receive a gross-up. Any change in control payments that exceed the safe harbor amount (including any gross-up) are not deductible by the Company.

 

Tax and Accounting Implications

 

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1,000,000 paid for any fiscal year to any of the corporation’s chief executive officer and the four other most highly compensated executive officers as of the end of any fiscal year. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met. The Board and the Compensation Committee will work to structure performance-based compensation, including equity-based grants and annual bonuses, to executive officers who may be subject to Section 162(m) in a manner that satisfies those requirements. The Board and the Compensation Committee reserve the authority to award non-deductible compensation in certain circumstances as they deem appropriate. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued under it, no assurance can be given, despite the Company’s efforts, that compensation intended by the Company to satisfy the requirements for deductibility under Section 162(m) does in fact do so.

 

Effective January 1, 2006, the Company accounts for equity-based grants, including stock options and restricted stock awards, in accordance with the requirements of SFAS 123(R). The effect of those requirements is considered in structuring equity awards and has weighted recent total compensation in favor of cash with a performance-based stock grant component, where expense is recognized by the Company only to the extent that satisfaction of the performance conditions is probable, and in certain circumstances, a time-based stock component, where expense is recognized ratably over the life of the time-based grant.

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on this review and discussion, the Compensation Committee recommends to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 

2009 Compensation Committee

 

Bernard V. Buonanno, Jr., Chairman

Edward J. Cooney

 

SUMMARY COMPENSATION TABLE
FISCAL YEAR 2009

 

The following table sets forth certain information with respect to the Company’s Chief Executive Officer and the four other most highly compensated executive officers during 2009 (collectively, the “named executive officers”).

 

 

GRANTS OF PLAN BASED AWARDS

DURING FISCAL YEAR 2009

 

The following table describes awards to the named executive officers during fiscal year 2009 under the Company’s performance-based annual incentive plan. No grants were made to the named executive officers during fiscal year 2009 under the Company’s long term incentive plan. Both plans are described in greater detail beginning on page 9.

 

 

All named executives have a maximum possible incentive plan award of one hundred fifty percent of the target bonus opportunity with the exception of Mr. MacDonald, whose annual incentive plan formula for 2009 had a maximum of two hundred percent of the target bonus.

OUTSTANDING EQUITY AWARDS AT THE END OF FISCAL YEAR 2009

 

 

 

OPTION EXERCISES AND STOCK VESTED

DURING FISCAL YEAR 2009

 

 

PENSION BENEFITS

 

In the United States, A.T. Cross Company maintains two defined benefit plans. One is the A.T. Cross Company Pension Plan, which provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Internal Revenue Code (referred to as the “Qualified Pension Plan”). The other is the A.T. Cross Company Unfunded Excess Benefits Plan, which provides unfunded, non-qualified benefits in excess of the limits applicable to the Qualified Pension Plan and the 401(k) plan (referred to as the “Excess Plan” or the “Nonqualified Excess Plan”). The Excess Plan benefits and provisions described here and shown in the Pension Benefits Table on page 18 pertain solely to the excess pension benefits attributable to the Qualified Pension Plan. The Excess Plan benefits attributable to benefits in excess of the limits applicable to the 401(k) plan are shown in the Nonqualified Deferred Compensation Table on page 19.

 

The “Present Value of Accumulated Benefits” shown in the Pension Benefits Table is the present value as of December 31, 2009 of the annual pension benefit earned as of December 31, 2009 payable under a plan for the executive’s life beginning on the named executive officer’s normal retirement age. The normal retirement age is defined as age 65 in each of the plans. Certain assumptions were used to determine the present value and to determine the annual pension that is payable beginning at normal retirement age. Those assumptions are described in footnote 1 to the Pension Benefits Table on page 18.

 

Qualified Pension Plan

 

General

 

The Qualified Pension Plan was designed to provide tax-qualified pension benefits for most employees of the Company. Benefits under the Qualified Pension Plan are funded by an irrevocable tax-exempt trust. An executive’s benefits under the Qualified Pension Plan are payable from the assets held by the tax-exempt trust.

 

Benefits provided under the Qualified Pension Plan are based on earnings up to a compensation limit under the Internal Revenue Code (which was $245,000 in 2009). In addition, benefits provided under the Qualified Pension Plan may not exceed a benefit limit under the Internal Revenue Code (which in 2009 was $195,000 payable as a single life annuity beginning at any age from age 62 through Social Security Normal Retirement Age).

 

Material terms and conditions

 

Effective May 20, 2006, both the Qualified Pension Plan and the Excess Plan were amended to freeze benefit accruals.

 

The accrued benefit under the Qualified Pension Plan is expressed as an annual single life annuity payable from normal retirement age and is determined under the following formula:

 

40% of Average Earnings less the Social Security Credit, prorated for less than 25 years of credited service. In no event is the accrued benefit less than 20% of Average Earnings, prorated for 25 years of credited service.

 

The Social Security Credit is equal to the lesser of (i) and (ii), multiplied by (iii):

 

 

(ii)  Social Security covered compensation

 

 

For purposes of the above formula, “Average Earnings” is the average of the five consecutive years earnings that produce the highest average and “Credited Service” of one year is granted for 1,000 or more hours of service during a plan year. No credit is recognized for employment before January 1, 1984. Credited service was frozen as of May 20, 2006.

If the participant has attained age 62 and 5 years of service, the accrued benefit is reduced by 5/9 of 1% for each month by which the early retirement date precedes the normal retirement date.

 

If the participant is vested in the Qualified Pension Plan and dies while still employed by the Company, his or her spouse will receive a life annuity equal to 100% of the amount the participant would have received if he or she had elected a 100% Joint & Survivor annuity payment form commencing on his or her earliest retirement date and died the next day. If the participant dies after terminating employment, the benefit is the same as above, except that the spouse’s annuity is reduced to 50% of the amount the participant would have received under the above analysis.

 

Eligibility of the named executive officers for unreduced pensions before normal retirement age

 

None; the pension benefit under the Qualified Pension Plan is reduced if paid before normal retirement age.

 

Elements of compensation included in applying the payment and benefit formula

 

Compensation includes base salary, bonus, overtime, commissions, any deferrals to the Company’s 401(k) plan, and other pre-tax contributions to a Section 125, Section 402(e)(3) or Section 402(h) plan.

 

Company policy with regard to granting extra years of Credited Service

 

Generally, an eligible employee earns one year of Credited Service for each plan year in which he or she completes 1,000 hours of service. Additional years of Credited Service are generally not granted to participants in this plan and no extra years of service have been granted to the named executives. Their respective years of Credited Service are included in the Pension Benefits Table on page 18.

 

Form of payment

 

Lump sum payments are generally only available on de minimis amounts. Based on current benefit levels, the named executives’ benefits are only payable in the form of a monthly annuity. Optional annuity forms with the spouse as beneficiary are available which are actuarially equivalent in value.

 

Excess Plan

 

General

 

The Excess Plan provides participants with benefits that may not be provided under the Qualified Pension Plan and the 401(k) plan because of the limits on compensation and benefits. The Excess Plan is unfunded and maintained as a book reserve account. No funds are set aside in a trust or otherwise; participants in the Excess Plan are general creditors of the Company with respect to the payment of their Excess Plan benefits.

 

Material terms and conditions

 

The Excess Plan provides a benefit that is equal to the benefit that would be provided under the Qualified Pension Plan and the 401(k) plan if the compensation and benefit limits did not exist, less the benefit actually provided under the Qualified Pension Plan. Due to the benefit freeze under the Qualified Pension Plan, the benefits under this plan as they apply to the Qualified Pension Plan were also frozen effective May 20, 2006.

 

Eligibility for unreduced pensions before normal retirement age

 

None; the pension benefit under the Excess Plan is reduced if paid before normal retirement age.

 

Elements of compensation included in applying the payment and benefit formula

 

Compensation includes the same elements as under the Qualified Pension Plan, but without regard to Internal Revenue Code 401(a)(17) limits on compensation.

 

Company policy with regard to granting extra years of Credited Service

 

The Company’s policy with respect to the Excess Plan is identical to the Company’s policy with respect to the Qualified Pension Plan, as stated above.

 

Form of payment

 

For the named executives, benefits have generally been payable as provided under the Qualified Pension Plan or 401(k) plan, as applicable. Effective January 1, 2007, participants may receive their benefit in the form of a lump sum payment or annuity based upon their election made subject to the requirements of Internal Revenue Code Section 409A.

PENSION BENEFITS

FOR FISCAL YEAR 2009

 

 

 

(1) Assumptions for Calculation of Present Value of Accumulated Benefit disclosed in Pension Benefits Table:

 

 

NONQUALIFIED DEFERRED COMPENSATION
FOR FISCAL YEAR 2009

 

 

 

 

The Nonqualified Deferred Compensation Table above shows information about two Company programs: the Excess Plan described on page 17, and the deferred compensation plan described below. The Excess Plan is designed to allow each executive to receive a Company contribution of match, and core contribution (2% of eligible compensation). The Excess Plan is administered in the same manner as the Company’s 401(k) plan, with the same participation and investment elections.

 

Executive officers may also defer receipt of all or part of their cash compensation under the Company’s deferred compensation plan. Amounts deferred by executives under this program are credited with interest. The participant may elect that amounts credited to his or her account be allocated between two sub-accounts: the “Interest Income Account” and the “Fixed Income Account”. The rate of interest to be credited to the Interest Income Account is equal to the six-month treasury bill rate in effect at the time interest is credited. The Fixed Income Account will be credited with income, gains, or losses that would have been earned during that period had such account been invested in the Stable Asset Fund (or such successor fund as offered under the Company’s qualified defined contribution plan). Interest is credited each June 30 and December 31. Participants may elect to receive the funds in a lump sum or in up to 10 annual installments following retirement, but may not make withdrawals during their employment, except in the event of hardship as approved by the Company. All deferral elections and associated distribution schedules are irrevocable. Both plans are unfunded and subject to forfeiture in the event of bankruptcy.

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

The named executive officers of the Company qualify for certain benefits in the event of termination of such executive’s employment. The amount of compensation payable to each named executive officer is dependent on the nature of the termination. Payments that may be made in cases of voluntary termination, early retirement, involuntary termination, termination following a change in control and in the event of disability or death of the executive are discussed below. The amounts payable referenced in the discussion assume that such termination was effective as of December 31, 2009, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. Generally, amounts are reported in the tables below only to the extent that they are more favorable to the named executive officer than what is available to the Company’s other employees and are in addition to accrued benefits or earned compensation noted elsewhere in this proxy statement. The actual amounts to be paid out upon termination or change in control can only be determined at the time of such executive’s separation from the Company.

 

Payments Made Upon Termination

 

Regardless of the nature of a named executive officer’s termination, he or she may be entitled to receive benefits accrued and compensation earned during his or her term of employment. Such amounts may include:

 

 

 

Payments Made Upon Retirement

 

In the event of the retirement of a named executive officer, in addition to the items identified above, the retiring executive officer will have the option to continue medical benefits until age 65 at the full premium cost in the same manner as offered to other employee participants.

 

Payments Made Upon Death or Disability

 

In the event of the death or disability of a named executive officer, in addition to the applicable benefits listed under the headings “Payments Made Upon Termination” and “Payments Made Upon Retirement” above, the named executive officer or his or her estate may receive benefits under the Company’s disability plan or payments under the Company’s life insurance plan, as appropriate and in the same manner as other employee participants.

 

Payments Made Upon Involuntary Termination Without Cause

 

In the event of an involuntary termination without cause, in addition to the items identified above under the heading “Payments Made Upon Termination” above, each of the named executive officers other than Mr. Whalen will receive a severance payment equal to 1.0 times the executive’s base salary and Mr. Whalen will receive a severance payment equal to 2.0 times his base salary and target bonus under the annual incentive plan (75% of his base salary).

 

Payments Made Upon a Change in Control

 

The Company has a Change in Control Severance Program (the “Program”). Pursuant to this Program, if an executive’s employment is actually or constructively terminated following a change in control (other than termination by the Company for cause), in addition to the items identified above under the heading “Payments Made Upon Involuntary Termination Without Cause”, the named executives may receive the following payments and benefits:

 

 

 

 

 

Generally, pursuant to the Program, a change in control is deemed to occur if (a) there is a change in the beneficial ownership of more than fifty percent of the Class B common stock of the Company, or (b) the Company’s stockholders approve a consolidation or merger in which the Company will not be the surviving corporation, or approve the sale of substantially all of the Company’s assets.

 

The following tables set forth the estimated value of payments and benefits that the Company’s named executive officers would be entitled to receive assuming certain terminations of employment and/or assuming a change in control of the Company, in each case occurring on December 31, 2009.

 

 

Mr. Whalen

 

 

Mr. Mahoney

 

 

 

Mr. MacDonald

 

 

Mr. Mellen

 

 

 

Ms. Benik

 

 

 

DIRECTOR COMPENSATION

 

 

Members of the Company’s Board of Directors who are not employees of the Company were compensated for their services during 2009 at the rate of $40,000 per annum (the “Retainer”), plus $1,000 for each Board meeting attended. During 2009, the Board of Directors held five meetings. In addition, non-employee members of the Compensation, Nominating and Corporate Governance, and Executive Committees received $1,500 ($2,000 in the case of the committee chair) for each committee meeting attended. Members of the Audit Committee received $2,000 ($3,000 in the case of the committee chair) for each committee meeting attended. Board and Committee members receive $500 for participation in special (i.e., not regularly scheduled) telephonic meetings.

 

Sixty percent of the Retainer paid to non-employee directors is paid in Class A common stock of the Company (the “Mandatory Shares”). Non-employee directors may elect to receive the balance of the Retainer and any supplemental Board and committee meeting fees in Class A common stock. The Retainer is paid in quarterly increments on the date of the first Board meeting in each quarter. The number of shares of Class A common stock awarded as Mandatory Shares or as shares which the director has elected to receive in lieu of cash is determined by dividing the dollar amount of the compensation payable by the fair market value of those shares on the payment date. Non-employee directors also have the option of deferring any or all of their compensation. If they elect to defer stock payments, they receive phantom stock units, the cash value of which is calculated and paid to them at the end of the election period they specify. Said election period must be at least three years. All deferred compensation is paid out at the end of the election period or when the individual ceases to serve as a director, whichever occurs first. The director can elect to receive the deferred compensation in a lump sum or in up to ten annual installments.

 

2009 DIRECTOR COMPENSATION