o Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
o Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material under
Rule 14a-12
LCC International, Inc.
(Name of Registrant as Specified in
its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ
No fee required.
o
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(Set forth the amount on which the filing fee is calculated and
state how it was determined):
(4)
Proposed maximum aggregate value of transaction:
o
Fee paid previously with preliminary materials.
(1)
Proposed maximum aggregate value of transaction:
(2)
Total fee paid:
o
Fee paid previously with preliminary materials.
o
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 he form or Schedule and the date of its
filing.
(1)
Amount previously paid.
(2)
Form, Schedule or Registration Statement No.
(3)
Filing party.
(4)
Date field.
LCC
INTERNATIONAL, INC.
7900 Westpark Drive,
Suite A-315 McLean, VA22102
Dear Stockholder:
You are cordially invited to attend the 2008 annual meeting of
stockholders of LCC International, Inc. to be held on Thursday,
July 31, 2008 at 10:00 a.m., EDT, at the offices of
LCC International, Inc., 7900 Westpark Drive,
Suite A-315,
McLean, Virginia22102.
At this meeting, you will be asked to vote, in person or by
proxy, on the following matters: (i) the election of six
members of the board of directors; (ii) the approval of the
removal of certain limitations under the NASDAQ Marketplace
Rules on the issuance of shares of our class A common stock
upon conversion of the series A convertible preferred
stock; and (iii) any other business as may properly come
before the meeting or any adjournments thereof. The official
notice of meeting, proxy statement and form of revocable proxy
and our Annual Report on
Form 10-K
are included with this letter. The matters listed in the notice
of meeting are described in detail in the proxy statement.
Regardless of your plans for attending in person, it is
important that your shares be represented and voted at the 2008
annual meeting. Accordingly, you are urged to complete, sign and
mail the enclosed revocable proxy as soon as possible.
WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED PRE-ADDRESSED AND POSTAGE-PAID ENVELOPE OR SUBMIT
YOUR VOTE VIA THE INTERNET AT www.proxyvote.com OR BY PHONE AT
1-800-690-6903.
LCC
INTERNATIONAL, INC.
7900 Westpark Drive,
Suite A-315 McLean, Virginia22102
NOTICE IS HEREBY GIVEN that the 2008 annual meeting of
stockholders (the “annual meeting”) of
LCC International, Inc. will be held on Thursday,
July 31, 2008 at 10:00 a.m., EDT, at the offices of
LCC International, Inc., 7900 Westpark Drive,
Suite A-315,
McLean, Virginia22102, to consider and act upon the following
proposals:
1. To elect six members of the board of directors;
2. To approve the removal of certain limitations under the
NASDAQ Marketplace Rules on the issuance of shares of the
company’s class A common stock upon conversion of the
series A convertible preferred stock; and
3. To transact such other business as may properly come
before the annual meeting or any adjournments thereof.
The board of directors has fixed the close of business on
June 5, 2008 as the record date for the determination of
stockholders entitled to notice of and to vote at the annual
meeting. Only those stockholders who held shares of our
class A common stock or Series A preferred stock of
record at the close of business on the record date will be
entitled to notice of and to vote at the annual meeting or any
adjournments thereof. A list of our stockholders entitled to
vote at the annual meeting will be open to the examination of
any stockholder for any purpose germane to the meeting during
ordinary business hours for a period of ten days before the
annual meeting at our offices.
LCC
INTERNATIONAL, INC.
7900 Westpark Drive,
Suite A-315 McLean, Virginia22102
PROXY
STATEMENT
Annual Meeting of Stockholders July 31, 2008
SOLICITATION,
VOTING AND REVOCABILITY OF PROXIES
This proxy statement and the accompanying notice of annual
meeting and form of revocable proxy are being furnished, on or
about June 30, 2008, to the stockholders of LCC
International, Inc. (referred to in this proxy statement as
“we,”“our,”“Company,”“us” or “LCC”), in connection with the
solicitation of proxies by our board of directors to be used at
the 2008 annual meeting of stockholders of LCC (referred to in
this proxy statement as the “annual meeting”) to be
held on Thursday, July 31, 2008 at 10:00 a.m., EDT, at
our offices at 7900 Westpark Drive,
Suite A-315,
McLean, Virginia22102, and any adjournment thereof.
The purpose of the annual meeting is to (i) elect six
members of the board of directors, (ii) approve the removal
of certain limitations under the NASDAQ Marketplace Rules on the
issuance of shares of the company’s class A common
stock upon conversion of the series A convertible preferred
stock, and (iii) transact such other business as may
properly come before the annual meeting or any adjournments
thereof.
If the enclosed form of proxy is properly executed and returned
to us in time to be voted at the annual meeting, the shares
represented thereby will be voted in accordance with the
instructions thereon. Executed but unmarked proxies will be
voted FOR the election of six directors to the board of
directors and FOR the approval of the removal of certain
limitations under the NASDAQ Marketplace Rules on the issuance
of shares of our class A common stock upon conversion of
the series A convertible preferred stock. If any other
matters are properly brought before the annual meeting, proxies
will be voted in the discretion of the proxy holders. We are not
aware of any such matters that are proposed to be presented at
our annual meeting.
The cost of soliciting proxies in the form enclosed herewith
will be borne entirely by us. In addition, proxies may be
solicited by our directors, officers and regular employees,
without extra remuneration, by personal interviews, telephone,
telegraph or otherwise. We may choose to hire a proxy solicitor
in the event that we deem the response insufficient, and, in
such case, the cost will be borne solely by us. We will request
persons, firms and corporations holding shares in their names or
in the names of their nominees, which are beneficially owned by
others, to send proxy materials to, and obtain proxies from, the
beneficial owners and will reimburse the holders for their
reasonable expenses in doing so.
Securities
Entitled to Vote
The securities which can be voted at the annual meeting consist
of shares of our class A common stock (referred to as the
“common stock”) and series A convertible
preferred stock (referred to as the “series A
preferred stock”), which vote together with the holders of
the common stock as a single class on an as-converted basis;
provided that only the shares permitted to be converted without
stockholder approval will be entitled to vote until any
stockholder approval required by NASDAQ Marketplace
Rule 4350(i)(1)(D) is obtained. Each outstanding share of
common stock entitles its owner to one vote on each matter as to
which a vote is taken at the annual meeting. In addition, each
holder of record of series A preferred stock will be
entitled to a number of votes per share of preferred stock as
such holder would have been entitled to receive in the event
each such share of preferred stock held as of the record date
had been converted into common stock at the initial conversion
price, subject to the foregoing proviso. The close of business
on June 5, 2008 (referred to as the “record
date”) has been fixed by the board of directors as the
record date for determination of stockholders entitled to vote
at the annual meeting. As of the record date,
26,409,468 shares of common stock and 5,737,500 shares
of Series A preferred were outstanding
and entitled to vote. Holders of series A preferred stock
are not entitled to vote shares on Proposal No. 2,
which is described in clause (ii) above.
Votes
Required for Approval
The presence, in person or by proxy, of holders of at least of a
majority of outstanding shares entitled to vote on the record
date is necessary to constitute a quorum at the annual meeting.
Stockholders’ votes will be tabulated by persons appointed
by the board of directors to act as inspector of election for
the annual meeting. Under Delaware corporate law and our amended
and restated bylaws, directors are elected by a plurality of
votes cast by the shares present (in person or by proxy) and
entitled to vote. The approval of Proposal No. 2
requires the affirmative vote of holders of a majority of the
votes cast on the proposal. Pursuant to IM-4350-2 of the NASDAQ
Marketplace Rules, holders of shares of series A preferred
stock are not entitled to vote such shares on this matter.
Abstentions and broker non-votes are counted towards a quorum,
but will not be counted for any purpose in determining whether
Proposal No. 2 has been approved. Except as noted
above, unless otherwise required by law or our restated
certificate of incorporation or amended and restated bylaws, any
other matter put to a stockholder vote will be decided by the
affirmative vote of a majority of the votes cast on the matter.
Shares represented by proxies that are marked
“abstain” or which constitute broker non-votes will be
counted as present at the meeting for the purpose of determining
a quorum, but none of the shares represented by these proxies
will be counted for the purpose of determining the number of
votes cast at the meeting. A broker non-vote occurs when a
nominee holding shares for a beneficial owner does not have
discretionary voting power and does not receive voting
instructions from the beneficial owner.
If you were a stockholder as of the record date, you are
entitled to vote at the Annual Meeting, and we encourage you to
attend and vote in person. However, whether or not you intend
to attend the annual meeting, you should complete, sign, date
and return the accompanying proxy in order to ensure the
presence of a quorum. A pre-addressed and postage-paid
return envelope is enclosed for your convenience. Alternatively,
you may cast your vote via the internet at www.proxyvote.com or
by phone by calling
1-800-690-6903.
The presence of a stockholder at the annual meeting will not
automatically revoke the stockholder’s proxy. However, a
stockholder may revoke a proxy at any time prior to its exercise
by (i) filing with our corporate secretary a written notice
of revocation, (ii) delivering to us a duly executed proxy
bearing a later date, or (iii) attending the annual meeting
and voting in person.
THE BOARD
OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE PROPOSALS SET FORTH IN THIS PROXY
STATEMENT.
2
MATTERS
TO BE ACTED ON
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
The entire board of directors consists of eight members. At the
annual meeting, six directors will be elected, each to serve
until the next annual meeting of stockholders and until his or
her successor is elected and qualified or until such
director’s earlier death, resignation or removal. Two seats
on the board of directors will remain vacant. No decision has
yet been made as to whether to eliminate or fill one or more of
these vacancies. Stockholders do not have cumulative voting
rights and therefore, proxies cannot be voted for a greater
number of persons than the nominees named in the proxy.
Unless otherwise instructed on the proxy, the persons named in
the proxy to vote the shares represented by each properly
executed proxy shall vote FOR the election as directors the
persons named below as nominees. Directors will be elected by a
plurality vote.
The board of directors recommends a vote FOR the election of
its nominees for directors.
Information
as to Nominees
Set forth below is certain information with respect to the
nominees of the board of directors for election as directors at
the annual meeting.
Name
Age
Position
Director Since
Julie A. Dobson
51
Chairperson of the Board of Directors and interim Chief
Executive Officer
2003
Ted L. Hoffman
61
Director Nominee
Melvin L. Keating
61
Director
2007
Richard J. Lombardi
66
Director
2005
Susan Ness
59
Director
2001
Mark A. Slaven
51
Director
2007
Julie A. Dobson has served as the Chairperson of the
board of directors since March 2005 and has been a director
since July 2003. Ms. Dobson was a member of our audit
committee and our compensation committee until she was named as
interim chief executive officer in May 2008. Since 2002,
Ms. Dobson has served as the Chairperson of TeleBright
Corp., a company that develops software and tools for telecom
services. From July 1998 until February 2002, Ms. Dobson
was Chief Operating Officer of TeleCorp PCS, Inc., a wireless
telecommunications provider. Ms. Dobson joined TeleCorp PCS
as a
start-up and
was responsible for all aspects of operations and participated
in raising debt and equity financing, until AT&T Wireless
purchased the company in February 2002. Ms. Dobson spent
18 years with Bell Atlantic Corporation, a
telecommunications company, where she held various positions in
several of its domestic and international business units,
including serving as President, New York region of Bell
Atlantic Mobile (formerly Bell Atlantic Corp and now known as
Verizon Wireless), from October 1997 through July 1998, Vice
President, Strategic Planning and Business Development, Bell
Atlantic Enterprises Corporation from 1996 to 1997, and
President and Chief Executive Officer, Bell Atlantic Business
Systems, International from 1993 to 1996. Ms. Dobson also
serves on the board of directors of PNM Resources, Inc., a
holding company of energy and
energy-related
companies, and Safeguard Scientifics, Inc., a holding company
for information technology companies. On May 13, 2008,
Ms. Dobson was named as interim chief executive officer
effective on June 6, 2008 in conjunction with the effective
date of the resignation of Dean J. Douglas as our
Chief Executive Officer.
Ted L. Hoffman. Mr. Hoffman is the retired vice
president — technology development of Verizon Wireless
where he was responsible for technical product and service
development. He was with Verizon Wireless, and its predecessor
Bell Atlantic Mobile, since July 1, 1993. Mr. Hoffman
was responsible for managing the company’s network
transition from analog to digital Code Division Multiple
Access (CDMA) infrastructure. In addition to the CDMA
transition, Ted managed the build out of Verizon Wireless’
data infrastructure through coordination of the implementation
of its CDPD, 1X and DO networks. He had responsibility for
development of such products as vCast, Verizon’s wireless
3
audio and video services, location based services, enhanced
messaging and many, many more. Ted was a member of the Board of
Directors of Omnitel Pronto Italia, a Verizon Communications
Wireless affiliate operating in Italy. He is a past officer on
the Board of the CDMA Development Group, an organization
responsible for promotion, advancement, deployment and future
developments of CDMA. And, he has served on the Wireless
Engineering Advisory Board at Auburn University as well as on
the Intel Communications Advisory Board. He is currently a
member of the Board of Directors of Smith Micro, Incorporated
and w2bi, Incorporated. Mr. Hoffman began his
telecommunications career at Bell Telephone Laboratories in 1969
as a member of the technical staff. He joined Bell Atlantic in
1976 holding a variety of engineering, operations, marketing,
external affairs, corporate planning and headquarters positions
there. Ted received a BA from Elizabethtown College, a BS in
Electrical Engineering from Penn State University, an MS in
Electrical Engineering from Northwestern University and an
MBA from Drexel University. He holds three patents.
Melvin L. Keating has been a director since October 2007
and serves on our audit committee and as Chairperson of our
compensation committee. He has been President and Chief
Executive Officer of Alliance Semiconductor Corp, a worldwide
manufacturer and seller of semiconductors, since October 2005.
From April 2004 to September 2005, Mr. Keating served as
Executive Vice President, Chief Financial Officer and Treasurer
of Quovadx Inc., a healthcare software company. Mr. Keating
was employed as a Strategy Consultant for Warburg Pincus Equity
Partners, from 1997 to 2004, providing acquisition and
investment target analysis and transactional advice while also
serving on the board of directors and chairing the audit
committee of Price Legacy, a public REIT he created with
Warburg’s investment. Mr. Keating also was President
and Chief Executive Officer of Sunbelt Management Company, a
private, European-owned real estate development firm, from 1995
to 1997. From 1986 to 1995, Mr. Keating was Senior Vice
President — Financial Administration of
Olympia & York Companies/Reichmann International,
responsible for joint ventures, financial reporting and
acquisitions. Mr. Keating serves on the board of directors,
and is chairman of the audit committee, of Integrated Silicon
Solutions, Inc., a fabless semiconductor company that designs
and markets integrated circuits for the digital consumer
electronics, networking, mobile communications and automotive
electronics markets. He is also on the board of directors, and a
member of the audit committee, of Kitty Hawk Inc., a holding
company of freight services companies.
Richard J. Lombardi has been a director since September
2005 and is the Chairperson of our audit committee and a member
of our nominating and corporate governance committee. From 1998
to present, Mr. Lombardi has been a self-employed
consultant providing services for various telecommunications
entities, such as AT&T and NetCom Solutions.
Mr. Lombardi was president of AT&T Government Markets,
a company that engages in government contracts for network
integration capabilities, professional services and advanced
technologies, from 1993 to 1997. In addition to having been
President of AT&T Government Markets, Mr. Lombardi was
Vice President of AT&T Federal Systems and Vice
President of the AT&T Southern Region from
1988-1993
and 1985 to 1988, respectively. Mr. Lombardi also served as
a director and Chairperson of the audit and operations committee
at NetCom Solutions International, Inc., a network services and
logistics integration company, from 1998 to 2004.
Mr. Lombardi has served on the executive committee of the
Computer & Communications Industry Association, a
nonprofit membership organization for companies in the computer,
Internet, information technology and telecommunications
industries, including serving one year as its chairperson, since
1995.
Susan Ness has been a director since June 2001 and is the
Chairperson of our nominating and governance committee and a
member of our audit committee. Since 2001, Ms. Ness has
been a business consultant to communication companies. From
2005 — 2007, she was CEO of GreenStone Media, a
company that produced and syndicated audio programming on
multiple distribution platforms. She was Distinguished Visiting
Professor of Communication at the Annenberg School for
Communication (University of Pennsylvania) and Director of
Information and Society of the Annenberg Policy Center for the
2001-2002
academic year. Ms. Ness was a commissioner of the Federal
Communications Commission from 1994 until 2001. During her
tenure with the Federal Communications Commission, Ms. Ness
focused extensively on spectrum matters, both domestically and
globally, including serving as the Federal Communications
Commission’s senior representative to three world radio
communications conferences. Prior to joining the Federal
Communications Commission, Ms. Ness was a Vice President of
American Security Bank, a full-service bank located in
Washington, DC, and was the group head for lending to
communications companies. She also was assistant general counsel
to the Banking, Currency and Housing Committee of the United
States House of Representatives during the mid-1970s. May 2003,
Ms. Ness
4
became a director of Adelphia Communications Corporation, a
cable media company which had previously filed for bankruptcy in
June 2002. The assets of that company have been sold and the
board dissolved.
Mark A. Slaven has been a director since December 2007
and serves on our compensation committee and our nominating and
corporate governance committee. He served as the Executive Vice
President, Chief Financial Officer and Treasurer of Cross Match
Technologies, Inc. (“Cross Match”) from August 2006
until January 2008. He served as the Senior Vice President,
Chief Financial Officer and Treasurer of Cross Match from
October 2005 until August 2006. From October 2004 until August
2005, Mr. Slaven served as Chief Financial Officer of
Spectrasite Communications, Inc., a North American wireless
communications site operator. In June 1997, Mr. Slaven
joined 3Com Corporation, a networking solution provider, where
he served as a Vice President until June 2002, at which time he
was promoted to Chief Financial Officer and served in such
capacity until August 2004. Prior to that time, he held a
variety of senior financial management positions at Lexmark
International, Inc. and International Business Machines
Corporation. He also practiced as an engineer with General
Dynamics Corporation.
Corporate
Governance and Related Matters
Our board of directors and audit committee have implemented a
number of corporate governance measures designed to serve the
long-term interests of our stockholders and employees. The
corporate governance measures comply with rules adopted by The
NASDAQ Stock Market and the Securities and Exchange Commission,
or the SEC. Our board will continue to evaluate, and improve
upon as appropriate, our corporate governance principles and
policies. Set forth below are several of the corporate
governance initiatives adopted by our board of directors and
audit committee to assure that we are governed by the highest
standards.
Corporate Standards of Conduct. Our board of
directors and audit committee have adopted the Company’s
Corporate Standards of Conduct, or the Policy. The Policy is a
code of conduct and ethics applicable to every director, officer
and employee of our Company and sets forth our policies and
expectations on a number of topics, including conflicts of
interest, relationships with others, corporate payments,
disclosure policy, compliance with laws, corporate opportunities
and the protection and proper use of our assets. We have also
established formal procedures for receiving and handling
complaints for violations of the Corporate Standards of Conduct,
violations of laws, regulations, rules, and violations regarding
accounting, auditing and internal controls matters. In addition
to reporting violations through management and the
Company’s human resources department, employees or others
can report concerns on an anonymous basis by
e-mailing or
writing to our general counsel or to the Audit Committee Chair
at the addresses provided on our internal website. Any concerns
regarding accounting or auditing matters so reported will be
communicated to our audit committee.
Director Independence. The board of directors
has affirmatively determined that, with the exception of
Ms. Dobson, who was appointed as interim chief executive
officer effective on June 6, 2008, all our current
directors and director nominees are “independent
directors” as that term is defined in the listing standards
of The NASDAQ Stock Market.
Audit Committee Independence and Financial
Expertise. In addition to meeting The NASDAQ
Stock Market’s tests for director independence, all members
of the audit committee must meet additional independence
requirements. Our board of directors has determined that each of
the current members of our audit committee meets these
additional independence requirements. Our board has determined
that Mr. Keating qualifies as an “audit committee
financial expert” within the meaning of the SEC
Item 407 of
Regulation S-K,
and that all of the members of our audit committee are
“independent” as that term is used in the SEC rules.
The audit committee’s responsibilities are described in a
written charter adopted by our board of directors and include
the responsibility of selecting our registered independent
public accountants, examining and considering matters relating
to our financial affairs and reviewing our financial releases
and interim and annual financial statements, reviewing the scope
of the independent annual audit and internal audits and the
independent auditors’ letter to management concerning the
effectiveness of our internal financial and accounting controls,
approving guidelines for the hiring of former employees of the
independent auditors.
Nominating and Corporate Governance
Committee. The nominating and corporate
governance committee is charged with identifying individuals
qualified to become board members, recommending to the board the
director nominees for the next annual meeting of stockholders,
recommending to the board desired changes to the size and
composition of the board, considering from time to time the
board committee structure and makeup and
5
recommending to the board retirement policies and procedures
affecting board members. The committee also takes a leadership
role with respect to our corporate governance practices. Each
member of this committee is an “independent director”
as defined in the listing standards of The NASDAQ Stock Market.
The nominating and corporate governance committee charter sets
forth certain criteria for the committee to consider in
evaluating potential director nominees. The charter provides
that the committee, in selecting nominees, should assess the
nominee’s qualifications as independent, as well as his or
her knowledge, perspective, skills, broad business judgment and
leadership, relevant industry or regulatory affairs knowledge,
business creativity and vision, experience, age and diversity.
Our nominating and corporate governance committee relies
primarily on recommendations from members of the board and
management to identify director nominee candidates. The
committee may retain search firms to assist in identifying
suitable candidates. The committee also will consider timely
written suggestions from stockholders. Stockholders wishing to
suggest a candidate for director nomination for the 2009 annual
meeting should mail their suggestions to LCC International,
Inc., 7900 Westpark Drive,
Suite A-315,
McLean, Virginia22102, Attn: corporate secretary. Suggestions
must be received by our corporate secretary no later than the
date designated for receipt of stockholders’ proposals in a
prior public disclosure made by us. If we have not made such
prior public disclosure, then a stockholder’s notice must
be delivered, or mailed to and received by us not less than
60 days nor more than 90 days prior to the annual
meeting. In the event we give less than 70 days’
notice of the annual meeting date, a stockholder’s notice
must be received by us no later than the close of business on
the 10th day following the day on which we mail notice of
the annual meeting or make a public announcement of the meeting
date. Director nominee candidates recommended by our
stockholders are evaluated in the same manner in which
candidates recommended by other sources are evaluated. In
addition, pursuant to our amended and restated bylaws,
stockholders eligible to vote at the annual meeting may also
make nominations for directors if such nominations are made
pursuant to timely notice, as specified above, in writing to our
corporate secretary and include certain information concerning
the nominating stockholder and each person the stockholder
proposes to nominate for election, as detailed in
Section 3.4 of our amended and restated bylaws (dated
July 23, 1996).
Compensation Committee. Each member of our
compensation committee (referred to in this proxy statement as
the “compensation committee”) is an “independent
director” within the meaning of the listing standards of
The NASDAQ Stock Market. The compensation committee has overall
responsibility for approving and evaluating our compensation
plans, policies and programs, including administering our stock
incentive plans. The compensation committee considers and makes
recommendations to our board of directors with respect to
programs for human resource development and management
organization and succession, approves changes in senior
executive compensation and considers and makes recommendations
to our board of directors with respect to general compensation
matters and policies. Additional information about this
committee can be found under the heading “Compensation
Discussion and Analysis” below.
Communicating with the Board of Directors. The
board welcomes communications from stockholders and has adopted
a procedure for receiving and addressing stockholder
communications. Stockholders may send written communications to
the entire board by addressing such communications to LCC
International, Inc., 7900 Westpark Drive,
Suite A-315,
McLean, Virginia22102, Attn: corporate secretary. Our corporate
secretary will provide all such correspondence to the entire
board of directors.
Availability of the Policy and Committee
Charters. The written charters governing the
audit committee, the nominating and corporate governance
committee and the compensation committee, as well as the Policy,
are posted on the corporate governance page of our website at
http://www.lcc.com.
You may also obtain a copy of any of these documents without
charge by writing to LCC International, Inc., 7900 Westpark
Drive,
Suite A-315,
McLean, Virginia22102, Attn: corporate secretary.
Board
Meetings and Committee Meetings
During the year ended December 31, 2007, our board of
directors held 13 meetings, and it took action by unanimous
written consent on three occasions. No director attended fewer
than 75% of the total number of meetings of our board of
directors or any committee of our board of directors on which he
or she served during the period on which he or she served. Six
members of the board of directors attended our 2007 annual
meeting of stockholders. We encourage, but do not require,
members of our board of directors to attend the annual meeting
of stockholders.
6
Our nominating and corporate governance committee is currently
comprised of Mr. Lombardi, Ms. Ness and
Mr. Slaven, who joined the committee in December 2007.
Ms. Ness is chairperson of our nominating and corporate
governance committee. Our nominating and corporate governance
committee met two times during the year ended December 31,2007.
Our compensation committee currently is comprised of
Mr. Keating and Mr. Slaven, who joined the committee
in December 2007. Mr. Keating is chairperson of our
compensation committee. Our compensation committee met five
times and it took action by unanimous written consent on one
occasion during the year ended December 31, 2007.
Ms. Dobson was a member of the compensation committee until
May 13, 2008 when she agreed to assume the post of interim
chief executive officer. She is expected to resume her board
committee positions when a permanent chief executive officer is
hired.
Our audit committee currently is comprised of Mr. Keating,
Mr. Lombardi and Ms. Ness. Mr. Lombardi is the
chairperson of our audit committee. The audit committee met 11
times during the year ended December 31, 2007.
Ms. Dobson was a member of the audit committee until
May 13, 2008 when she agreed to assume the post of interim
chief executive officer. She is expected to resume her board
committee positions when a permanent chief executive officer is
hired.
7
MANAGEMENT
In addition to the information provided above with regard to
Ms. Dobson, the Company’s interim chief executive
officer, the following is information about the Company’s
other senior executive officers:
Name
Age
Position
Louis Salamone, Jr.
61
Executive Vice President, Chief Financial Officer and Treasurer
Peter A. Deliso
47
Senior Vice President New Ventures, General Counsel and Secretary
Kenneth M. Young
44
President and Chief Operating Officer
Louis Salamone, Jr. has served as Senior Vice
President, Chief Financial Officer and Treasurer since
May 15, 2006. He was promoted by the board of directors to
Executive Vice President, Chief Financial Officer, Treasurer
effective January 1, 2007. Mr. Salamone served as
Senior Vice President and Chief Financial Officer of Global
eXchange Services (“GXS”), a provider of
business-to-business integration, synchronization and
collaboration solutions from December 2004 until May 2006. Prior
thereto, Mr. Salamone served as Senior Vice President and
Chief Financial Officer of US internetworking (“USi”),
a leading Application Service Provider (“ASP”), from
May 2002 to November 2004. He joined USi following the merger of
Interpath Communications, Inc. (“Interpath”), another
leading ASP, and USi, both of which were controlled by Bain
Capital, as part of USi’s emergence from bankruptcy in May
of 2002. Mr. Salamone served as executive vice president
and chief financial officer of Interpath from November of 2000
until its merger with USi in May 2002. Prior to joining
Interpath, Mr. Salamone was Executive Vice President and
Chief Financial Officer and a member of the board of directors
from March 1996 to June 2000 of Applied Graphics Technologies,
Inc., a multinational leader in providing a broad range of
graphics and media related services to the advertising and
entertainment industries, as well as directly to advertisers and
media companies. From 1993 to 1996, Mr. Salamone served as
Senior Vice President and Chief Financial Officer of Nextel
Communications, Inc., a leading provider of wireless
communications services. Mr. Salamone began his career with
Deloitte & Touche (“Deloitte”) in 1968 where
he was a partner. While with Deloitte he served in various
leadership capacities, including Partner in Charge of the New
York Metro Region middle market practice and was a leader in the
firm’s High Technology practice.
Peter A. Deliso has served as our Senior Vice President,
New Ventures, General Counsel & Secretary since
October 2005, as our interim chief executive officer from March
2005 to October 2005, and as our Vice President Corporate
Affairs, General Counsel and Secretary since June 1994. During
this time, Mr. Deliso has served as a principal member of
the Company’s senior executive staff, assuming various
legal, operational and corporate development roles with the
Company. From late 1989 until January 1994, Mr. Deliso
served as corporate counsel for Mobile Telecommunications
Technologies Corp. (“Mtel”) and its various domestic
and international subsidiaries. Prior to his employment with
Mtel, Mr. Deliso was with the law firm of Garvey,
Schubert & Barer specializing in international,
corporate and securities law. Mr. Deliso has advised the
Company that he will resign from all positions with the Company
effective June 30, 2008.
Kenneth M. Young has served as President and Chief
Operating Officer since May 2008 and served as Senior Vice
President and Chief Marketing Officer and President of Americas
from July 2007 to April 2008 and as Senior Vice President and
Chief Marketing Officer from May 2006 to July 2007. From May
2004 to May 2006, Mr. Young served as Chief Operating
Officer for Liberty Media’s Connectid mobile content
subsidiary as well as Senior Vice President and Chief Marketing
Officer of Liberty Media’s TruePosition location based
services organization. Before joining Liberty Media,
Mr. Young spent over 16 years with the now AT&T
corporation and held senior management positions with Cingular
Wireless, SBC Wireless, and Southwestern Bell Telephone
operations. During his tenure with SBC, Mr. Young led
various marketing, sales, business development and P&L
operations focused on consumer and enterprise markets.
8
COMPENSATION
DISCUSSION AND ANALYSIS
This section provides information regarding the compensation
policies and programs in place for our principal executive
officer, our principal financial officer and the other highest
paid executive officers of the Company who were serving as
executive officers as of December 31, 2007 (collectively,
our “NEOs”). It includes, among other things, the
overall objectives of our compensation program and each element
of compensation that we provide.
Compensation
Philosophy and Objectives
Our overall compensation philosophy is designed to facilitate
the recruitment, retention and motivation of our executive
officers and employees and to align their incentives with those
of our stockholders. In this regard, our compensation objectives
are:
•
To provide a compensation package at a level at which we can
successfully recruit talented executives;
•
To reward executive officers in a manner that is directly
associated with creating stockholder value;
•
To compensate employees fairly and equitably in return for
high-quality delivery of services to our clients;
•
To reward employees for supporting profit growth, disciplined
spending, identifying and seizing opportunities to save, and
hard work; and
•
To reward employees as stockholders and contributors as Company
profitability increases and thereby retain valuable employees.
Our compensation committee is charged with making decisions with
respect to the compensation of our NEOs, as well as our other
executive officers, and administering our various incentive and
benefit plans.
Setting
Executive Compensation
In determining each of the components of the compensation paid
to our executive officers, including the NEOs, as well as the
amount of each component, the compensation committee looks to
both objective/market-based metrics, as well as more
subjective/internal analyses.
Market
Analysis
In setting the total compensation packages for our NEOs, the
compensation committee periodically engages independent outside
consultants, such as Mercer, the Hay Group and Watson Wyatt, to
assist us in determining the reasonableness of executive
compensation for our executive officers by providing their
insight into current compensation philosophies, current market
trends and compensation benchmark data for both public and
private companies within the wireless telecommunications
industry. For each executive position in our Company, the
benchmark data our consultants provide is based upon a range of
compensation packages for each comparable position of other
companies within the wireless industry.
To supplement and confirm the analysis provided by our
consultants, the compensation committee consults the public
filings of a smaller group of similar telecommunications
companies and those we consider our “peer group.” This
smaller group of companies changes from year to year, but has
historically included Boston Communications Group Inc.,
FiberTower Network Services Corp., Wireless Facilities, Inc.,
Telecommunications Systems Inc. and WPCS International Inc.
Internal
Analysis
In addition to the market analysis described above, the
compensation committee also reviews the results of operations
during the course of the previous year. The compensation
committee compares this with our targeted results for the year,
and compares these results with the operating results of the
peer group. In addition, the compensation committee reviews and
approves the proposed compensation levels of each of our
executives, including the bonus programs and equity grant
programs, to determine whether the compensation packages
provided to executives are appropriate given the information
garnered above.
9
Role
of Executive Officers in Compensation Discussions
With regard to compensation paid to the other NEOs, our CEO
reviews, on at least an annual basis, the amount of each
component of compensation paid to each NEO during the previous
year. That analysis factors the executive’s individual
performance, contribution to the Company and execution of
responsibilities. Based on this review, our CEO makes
recommendations to the compensation committee regarding the
compensation to be paid to such persons during the following
year. While the compensation committee takes our CEO’s
recommendations into consideration, the compensation committee
makes the ultimate decision relating to the amounts and form of
compensation paid to the NEOs based on the totality of its
analysis. During 2007, our former CEO, Dean J. Douglas, was
present during the compensation committee’s deliberations
of the compensation paid to each NEO other than himself. The
compensation committee also may meet in executive session to
discuss these recommendations. Our CEO is not present for the
executive session. The review of our CEO’s compensation
from year-to-year is conducted exclusively by the compensation
committee.
Elements
of Compensation
For the fiscal year ended December 31, 2007, NEO
compensation consisted on base salary and long-term equity
awards granted in prior years. We made no grants of long-term
equity awards in 2007 and did not adopt a bonus plan in 2007.
Therefore, no annual incentive cash compensation was paid to or
accrued by any of our NEOs for 2007.
The compensation committee considers these elements in the
aggregate in determining the total compensation to be paid to
our NEOs for a given year.
•
Base salary;
•
Long-term equity awards;
•
Annual incentive cash compensation; and
•
Post-termination compensation.
Base
Salary
We provide the NEOs with a base salary that we believe is
competitive and compensates them for services rendered during
the year. In addition, as discussed below, in prior years we
have granted an annual incentive award to each NEO based on a
percentage of the NEO’s base salary.
In setting the base salary of our chief executive officer only,
the compensation committee determined that it was in the best
interests of the Company and its stockholders to set the base
salary at the lower end of salaries of chief executive officers
of our peer group and increase the compensation to our chief
executive officer in the form of equity awards (options,
restricted stock units, etc.). The goal of compensating our
chief executive officer in this manner is to tie his
compensation to the performance of the Company through equity
rights. Under this model, the chief executive officer is
incented to focus on areas that result in an increase in price
per share of our stock and a better overall return to our
stockholders.
Long-Term
Equity Participation
Historically, we have granted equity awards, in the form of both
performance-based and service-based stock options and
service-based restricted stock units, to our NEOs pursuant to
our Equity Incentive Plan. In recent years, the compensation
committee determined that the majority of the awards made to our
NEOs under the Equity Incentive Plan should be in the form of
performance-based options so that our NEO’s interests are
closely aligned with those of our stockholders. To that end, of
the approximately 3,387,000 shares outstanding under our
Equity Incentive Plan, approximately 2,195,000 are based on
performance criteria.
The amount of equity compensation that is provided to each NEO
in a given year is generally determined by reference to the
number of shares remaining available for issuance under the
Equity Incentive Plan, the trading price of a share of our
common stock, the potential trading price of share of our common
stock considering our future
10
business plans and the potential proceeds from equity ownership
our NEO’s could realize. In addition, we have begun to
grant equity awards to key employees based upon this same
methodology, adjusted to reflect the appreciation in share
price. The Compensation Committee did not make any grants or
awards to NEOs under the Equity Incentive Plan during 2007.
Annual
Incentive Cash Compensation
In prior years our NEOs have participated in an annual executive
bonus plan. Pursuant to these executive bonus plans, the NEO may
receive a cash bonus if performance targets for the applicable
year are met. The performance targets were established by the
compensation committee at the beginning of each year. After
reviewing the 2006 financial performance and in view of
developments in the business in 2007, the Compensation Committee
determined not to implement an annual executive bonus plan in
2007.
Equity
Grant Practices
Historically, the compensation committee has made broad-based,
annual grants of equity awards to our employees. Typically, this
was done on the first regularly scheduled compensation committee
meeting of each year, which is generally in February. The
exercise price of these options is the closing market price of
our common stock on the date prior to the date of grant, and the
date of grant is the date of compensation committee approval of
the award.
Recently, the compensation committee has transitioned to a
practice of granting equity awards primarily to our executive
officers and other senior employees of the Company. These grants
are generally made throughout the year in connection with new
hires or otherwise in the discretion of the compensation
committee. The compensation committee generally meets as
necessary to make these awards and the exercise price for any
options granted will be the closing market price of our common
stock on the date prior to such grant date.
Pursuant to a resolution of the compensation committee adopted
in 2000, the chief executive officer was authorized to make
grants through the end of 2006 to newly hired employees below
the level of vice president for options and restricted stock
units in an amount according to a sliding scale dependent upon
the level of the newly hired employee. This authorization is no
longer in effect.
We do not have a program, plan or practice of timing equity
grants in coordination with the release of material non-public
information.
Post-Termination
Compensation
We have entered into agreements with certain of our NEOs
providing for payments and other benefits if the NEO’s
employment terminates due to certain circumstances, such as
being terminated without “cause,” leaving employment
for “good reason” or upon a change in control.
The severance arrangements for Mr. Salamone is set forth in
his employment agreement with the Company. The compensation
committee believes these severance arrangements are an important
part of overall compensation for Mr. Salamone as they
provide reasonable protection of his expectations in joining the
Company, specifically with respect to equity incentive grants.
The severance arrangements for Mr. Deliso are set forth in
the Company’s Change in Control Severance Plan.
Mr. Deliso has announced his intention to resign effective
June 30, 2008. His voluntary resignation did not trigger
any severance payments under the Change in Control Severance
Plan. The employment agreement between the Company and Dean J.
Douglas, the former president and chief executive officer of the
Company, provided for severance and change in control payments
in certain events. Mr. Douglas voluntarily resigned
effective June 6, 2008. His resignation did not trigger any
severance payments under his employment agreement. The severance
arrangements for Mr. Baravalle are set forth in a
Settlement Agreement entered into on November 29, 2007 by
LCC UK Limited, a subsidiary of the Company (“LCC
UK”), and SEMAB Management Srl, a private limited liability
company controlled by Mr. Baravalle (“SEMAB”).
Pursuant to the Settlement Agreement, Mr. Baravalle ceased
to serve as the Company’s Executive Vice President, Europe,
Middle-East, Africa and Asia-Pacific; effective
November 29, 2007 he assumed the role of Senior Advisor to
the Chief Executive Officer focused on business development
activities primarily in the Middle East. Under the Settlement
Agreement, Mr. Baravalle was paid his
11
regular monthly fees through April 5, 2008, at which point
he received a lump sum payment of €228,000. See
“Certain Transactions with Carlo Baravalle”on
page 28 of this proxy statement below.
Additional information regarding these post-termination
agreements, including a definition of key terms and a
quantification of benefits that would have been received by our
NEOs had termination occurred on December 31, 2007, is
found under the heading “Potential Payments upon
Termination or Change of Control.”
The compensation committee also believes that these arrangements
are important as a recruitment and retention device as all or
nearly all of the companies with which the Company competes for
talented executives have similar agreements in place for their
NEOs.
Compensation
Deductibility Policy
Under Section 162(m) of the Internal Revenue Code of 1986,
as amended, and applicable Treasury regulations, no deduction is
allowed for annual compensation in excess of $1,000,000 paid by
a publicly-traded company to its chief executive officer and the
four other most highly compensated officers. Under those
provisions, however, there is no limitation on the deductibility
of “qualified performance-based compensation.” In
general, our policy has been, and will continue to be, to
maximize the extent of tax deductibility of executive
compensation under the provisions of Section 162(m) so long
as doing so is compatible with its determinations as to the most
appropriate methods and approaches for the design and delivery
and compensation to our executive officers.
COMPENSATION
COMMITTEE REPORT
The compensation committee, which is composed solely of
independent members of the board of directors, assists the board
in fulfilling its responsibilities with regard to compensation
matters, and is responsible under its charter for determining
the compensation of our executive officers. The compensation
committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of
Regulation S-K
with management and, based on such review and discussion, the
compensation committee recommended to the board of directors
that the Compensation Discussion and Analysis be included in
this proxy statement.
THE COMPENSATION COMMITTEE
Melvin L. Keating (Chairperson)
Julie A. Dobson*
Mark A. Slaven
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Each of our NEOs is eligible to receive severance payments and
other benefits in the event of termination of employment or a
change of control of the Company. The payments for
Messrs. Douglas and Salamone are set forth in their
employment agreements while the payments for certain of our
other NEOs are set forth in our Change in Control Severance
Plan, adopted in June 2005. In addition, certain awards granted
under our Equity Incentive Plan are affected by a change in
control of the Company. The employment agreement between the
Company and Dean J. Douglas, the former President and
Chief Executive Officer of the Company, provided for severance
and change in control payments in certain events.
Mr. Douglas voluntarily resigned effective June 6,2008. His resignation did not trigger any severance payments
under his employment agreement.
* Ms. Dobson served on our compensation committee
until May 13, 2008 when she agree to assume the post of
interim chief executive officer and was a member of the
compensation committee at the time it held the meetings and
reviewed and discussed the Compensation Discussion and Analysis
included in this proxy statement.
12
Employment
Agreement with Messrs. Douglas and Salamone
Severance
Payments
We entered into employment agreements with Mr. Douglas on
October 4, 2005 and Mr. Salamone on April 21,2006. These agreements provide for severance and change in
control payments as follows:
•
Death or Disability. If the executive’s
employment is terminated by reason of his death or disability,
he will be entitled to receive any earned and unpaid salary,
earned and unpaid benefits (such as accrued but unused
vacation), and prior years’ bonuses earned but not yet paid;
•
Non-Renewal. If the executive’s
employment is terminated due to his election not to renew the
employment agreement or by our election not to renew the
agreement at any time after his
66th birthday,
the executive will be entitled to earned and unpaid salary,
earned and unpaid benefits, prior years’ bonuses earned but
not yet paid, and any earned bonus for his final year of
employment;
•
Cause, Without Good Reason. If the
executive’s employment is terminated by us for
“cause,” or by the executive without “good
reason,” the executive is entitled to receive any earned
and unpaid salary and benefits, but not any bonuses.
•
as used in the employment agreements, “cause” means
(i) the executive’s committing a felony or act of
fraud or neglect; (ii) the continuing failure of the
executive to perform his duties; (iii) any material
violation of a published Company policy; (iv) any material
violation of the non-competition, non-solicitation,
non-disclosure and assignment of inventions covenants contained
in the employment agreement; or (v) the executive’s
material breach of his employment agreement.
•
as used in the employment agreements, “good reason”
means (i) a material reduction of the executive’s
authority, duties and responsibilities; (ii) a reduction in
the executive’s annual salary, except in connection with a
reduction in compensation generally applicable to senior
management, provided that for Mr. Salamone, such a
reduction may not exceed 15% of his base salary as established
on April 21, 2006; (iii) the Company’s material
and willful breach of the employment agreement; and (iv) in
the case of Mr. Douglas, (A) a requirement that his
work location be moved more than 50 miles from McLean,
Virginia, or (B) the failure of the Company to obtain the
assumption of Mr. Douglas’ employment agreement by its
successor.
•
Without Cause, For Good Reason. If the
executive’s employment is terminated by us without cause,
or by the executive for good reason, the executive is entitled
to receive:
•
any earned and unpaid salary and benefits;
•
prior years’ bonuses earned but not yet paid; and
•
a severance payment equal to, in the case of Mr. Douglas,
1.5 times, and in the case of Mr. Salamone, one time, the
sum of his annual salary in effect on the day of termination and
his target bonus for the calendar year in which the termination
of his employment occurs or, if no target bonus for the year of
termination has been set on or prior to the termination of his
employment, the target bonus for the prior year.
•
Without Cause or For Good Reason in Change in Control
Period. If the executive’s employment is
terminated by us without cause, in the case of Mr. Douglas
within 3 months prior to or 18 months following a
change in control of the Company, and in the case of
Mr. Salamone, within 365 days following a change in
control of the Company, each executive will receive:
•
the severance benefits described above (in the event of a
termination without cause or a termination for good reason),
except that the severance payment for Mr. Douglas will
equal 2 times the sum of his annual salary and target bonus and
the severance payment for Mr. Salamone will equal 1.5 times
his annual salary and target bonus;
•
an amount equal to any excise taxes charged to them as a result
of his receipt of change in control payments; and
13
•
in the case of Mr. Douglas only, if he elects COBRA health
care continuation coverage, for 12 months following
termination of his employment he will be entitled to the
difference between his share of pre-termination group health
plan costs and the cost of COBRA coverage.
The payments described above would be made in a lump sum within
30 days of the date of termination, unless a delay is
required in order to avoid an excise tax pursuant to
Section 409A of the Internal Revenue Code.
Acceleration
of Certain Equity Grants
In addition to the above severance arrangements, pursuant to the
employment agreements, (i) Mr. Douglas was granted
500,000 restricted stock units and options to purchase
1,000,000 shares of our common stock, and
(ii) Mr. Salamone was granted 150,000 restricted stock
units and options to purchase 400,000 shares of our common
stock. The executive’s employment agreement provides for
accelerated vesting of such equity awards in the following
circumstances:
Death or Disability: If the executive’s
employment is terminated by reason of his death or disability,
100% of the outstanding restricted stock units and options vest.
Without Cause, For Good Reason: If the
executive’s employment is terminated by us without cause,
or by the executive for good reason, 100% of the outstanding
restricted stock units vest.
Without Cause or For Good Reason in Change in Control
Period: If the executive’s employment is
terminated by us without cause, or by the executive for good
reason, in either case within three months prior to, or
18 months following a change in control of the Company,
100% of the outstanding options vest.
Change in Control within 18 months of Grant
Date: If there is a change in control within
18 months of the grant date, the restricted stock units
will vest to the extent of
662/3%
of the total amount thereof and the options will vest to the
extent of 50% of the amount thereof.
Conditions
to Receipt of Severance Payments
Pursuant to the employment agreements, Mr. Douglas and
Mr. Salamone each agreed that, during the term of the
employment agreement and for one year thereafter, he would not
engage in any competitive activity with us or solicit any of our
employees, customers or vendors. The employment agreements also
contain an agreement by the executives to maintain the
confidentiality of our confidential information.
Summary
of Payments
The following is a summary of the estimated payments
Mr. Douglas would have received in connection with a
termination of employment. The summary below assumes that
(i) Mr. Douglas was terminated on December 31,2007, (ii) our stock price was equal to $1.80, the closing
market price of our stock on December 31, 2007, and
(iii) upon termination of employment he had been fully paid
all earned salary and prior years’ bonuses.
Bonus for Final
Acceleration of
Year of
Equity Awards
Tax Gross
Employment
Severance
Benefits
(Intrinsic Value)
up Payments
Total
Death or Disability
—
—
$
43,269
$
599,998
—
$
643,267
Non-Renewal of Agreement prior to
66th Birthday
—
$
43,269
—
—
$
43,269
Termination without Cause or for Good Reason
—
$
1,125,000
$
43,269
$
599,998
—
$
1,768,267
Termination without Cause or For Good Reason during Change in
Control Period
The following is a summary of the estimated payments
Mr. Salamone would have received in connection with a
termination of employment. The summary below assumes that
(i) Mr. Salamone was terminated on December 31,2007, (ii) our stock price was equal to $1.80, the closing
market price of our stock on December 31, 2007, and
(iii) upon termination of employment he had been fully paid
all earned salary and prior years’ bonuses.
Bonus for Final
Acceleration of
Year of
Equity Awards
Tax Gross
Employment
Severance
Benefits
(Intrinsic Value)
up Payments
Total
Death or Disability
—
—
$
34,327
$
180,000
—
$
214,327
Non-Renewal of Agreement prior to
66th Birthday
—
$
34,327
—
—
$
34,327
Termination without Cause or for Good Reason
—
$
612,500
$
34,327
—
—
$
646,827
Termination without Cause or For Good Reason during Change in
Control Period
—
$
918,750
$
34,327
—
$
524,690
$
1,477,767
LCC
International, Inc. Change in Control Severance Plan
On June 15, 2005, we adopted the LCC International, Inc.
Change in Control Severance Plan (the “Change in Control
Plan”). The plan provides that the compensation committee
will designate those employees who will participate in the
Change in Control Plan. The compensation committee has
designated Peter A. Deliso as a participant in the plan.
Mr. Deliso has announced his intention to resign effective
June 30, 2008. His voluntary resignation did not trigger
any severance payments under the Plan. In the future, the
compensation committee may designate additional participants in
the Change in Control Plan.
Severance
Payments
Pursuant to the Change in Control Plan, if a participant is
“involuntarily terminated” within 12 months
following a change in control of the Company, he is entitled to
receive:
•
accrued but unpaid compensation;
•
a pro-rata bonus for the year of termination determined by
multiplying his target bonus for the year of termination by a
fraction, the numerator of which is the number of days through
the termination date and the denominator of which is 365;
•
payment of both the employer and employee portion of the COBRA
premiums for continuation of group health coverage during the
18-month
period immediately following termination of employment; and
•
a cash payment equal to 150% of the executive’s annualized
base salary at the rate in effect during the last regularly
scheduled payroll period immediately preceding either
(i) the occurrence of the change in control, or
(ii) the executive’s involuntary termination,
whichever is greater.
As defined under the plan, an involuntary termination is:
•
an executive’s termination by us without cause;
•
the executive’s resignation following a reduction in annual
base pay or target bonus opportunity, a material reduction in
benefits or a relocation of his place of employment which is
more than 35 miles from his place of employment prior to
the change in control, if any of such changes or reductions were
made without the executive’s consent; or
•
the executive’s resignation following a change in his
position with the Company (or with a successor entity) that is
effected without the executive’s written consent and
materially reduces his level of responsibility or authority or
that materially increases his level of responsibility or
authority without an appropriate increase in compensation.
15
The payments described above would be made in a lump sum within
30 days of the date of termination, unless a delay is
required in order to avoid an excise tax pursuant to
Section 409A of the Internal Revenue Code.
Each executive must execute a general release of claims to
receive a severance payment and is subject to a covenant not to
compete with us for the
18-month
period immediately following a covered termination of
employment. In addition, the Change in Control Plan provides
that at the discretion of the compensation committee, we may
provide a tax
gross-up
payment to participants whose payments under the Change in
Control Plan are subject to the excise tax under the Internal
Revenue Code on excess parachute payments.
The following is a summary of the estimated payments
Mr. Deliso would have received in connection with an
involuntary termination of employment. The summary below assumes
that (i) the executive was terminated on December 31,2007, (ii) our stock price was equal to $1.80, the closing
market price of our stock on December 31, 2007, the last
trading day of 2007, and (iii) upon termination of
employment the executive was not entitled to accrued but unpaid
compensation. The tax gross up payments include the amounts
attributable to the acceleration of equity awards under the
Equity Incentive Plans described below.
Pro-Rata
COBRA
Bonus
Premiums
Severance
Tax Gross up
Total
Peter A. Deliso
—
$
21,479
$
450,000
$
213,717
$
685,196
Awards
Granted under the Equity Incentive Plan
Generally, the award agreements covering options and restricted
stock units (“RSUs”) granted to our NEOs pursuant to
our Equity Incentive Plans provide that unvested options and
RSUs vest in full upon a change in control of our Company or our
Equity Incentive Plan gives the Company the discretion to
accelerate the vesting of such awards. As noted above, the
option and RSU agreements that Messrs. Douglas and Salamone
entered into in connection with their employment agreements
provide for different treatment of their options and RSUs in
connection with a change in control. As of December 31,2007, neither Mr. Douglas nor Mr. Salamone held any
options or RSUs other than those granted to them pursuant to
their employment agreements.
The following is a summary of the payments our NEOs, other than
Mr. Douglas and Mr. Salamone, would receive in
connection with the acceleration of their equity awards upon a
change in control of the Company.
Acceleration of
Acceleration of
Options
RSUs
Total
Peter A. Deliso
$
—
$
195,001
$
195,001
Kenneth M. Young
$
—
$
—
$
—
16
SUMMARY
COMPENSATION TABLE
The table below summarizes the total compensation paid or earned
by each of the named executive officers for the fiscal year
ended December 31, 2007.
Stock
Option
Non-Equity
All Other
Salary
Bonus
Awards
Awards
Incentive Plan
Compensation
Total
Name and Principal Position
Year
($)
($)(2)
($)(3)
($)(4)
Compensation(5)
($)(6)
($)
Dean J. Douglas
2007
375,000
—
226,217
378,459
—
7,517
987,193
Former President and Chief Executive Officer(1)
2006
375,000
381,250
(7)
193,426
216,065
—
31,986
(8)
1,197,727
Louis Salamone Jr.(9)
2007
350,000
—
102,075
234,425
—
43,603
730,103
Executive Vice President, Chief Financial Officer, and Treasurer
2006
220,076
164,063
61,144
104,348
—
28,265
(10)
577,896
Carlo Baravalle(11)
2007
671,642
—
85,593
189,764
330,676
—
1,277,675
Former Executive Vice President, Europe, Middle-East, Africa and
Asia-Pacific
2006
599,138
—
61,167
132,972
223,363
—
1,016,640
Peter A. Deliso(12)
2007
300,000
—
85,593
—
—
7,277
392,870
Senior Vice President New Ventures, General Counsel and Secretary
2006
300,000
150,000
61,167
4,528
—
6,977
522,672
Kenneth M. Young(12)
2007
260,000
—
—
92,168
—
1,925
354,093
President and Chief Operating Officer
2006
163,485
156,249
(13)
—
37,505
—
11,460
368,699
(1)
Mr. Douglas resigned as President and Chief Executive
Officer and as a director of LCC effective June 6, 2008.
(2)
Represents discretionary bonuses awarded to the named executive
officers under the 2006 Executive Bonus Plan. Each of
Messrs. Douglas, Salamone, Deliso and Young elected to
receive 100% of his bonus under the 2006 Incentive Bonus Plan in
fully vested stock units. Under this arrangement, the number of
stock units issued will equal the NEO’s bonus amount
divided by the fair market value of a share of common stock on
the first day that the next trading window for executive
officers opens under the Company’s insider trading policy;
provided that the price used would be no less than the closing
price on the trading day immediately prior to the date of the
compensation committee’s approval of the bonus award of
$4.27 per share.
(3)
Represents the amount recognized for financial statement
reporting purposes in accordance with SFAS No. 123(R),
other than any estimates relating to forfeitures, for awards of
restricted stock units, or RSUs, under the Company’s Equity
Incentive Plan for the fiscal years ended December 31, 2006
and 2007. Assumptions used in the calculations of these amounts
are included in Note 14, Equity Incentive Plans, in
the Company’s consolidated financial statements.
(4)
Represents the amount recognized for financial statement
reporting purposes in accordance with SFAS No. 123(R),
other than any estimates relating to forfeitures, for awards of
stock options under the Company’s Equity Incentive Plan for
the fiscal years ended December 31, 2006 and 2007.
Assumptions used in the calculations of these amounts are
included in Note 14, Equity Incentive Plans, in the
Company’s consolidated financial statements.
(5)
Reflects an annual cash incentive award of $223,363 paid to
Mr. Baravalle in 2006 for 2005 performance, and an annual
cash incentive award of $374,462 earned by Mr. Baravalle
under the 2006 Executive Bonus Plan. Of this amount $330,676 was
paid in December 2007 and the remaining $43,786 was paid in
February 2008.
(6)
This column includes (i) 401(k) matching contributions
under the LCC International, Inc. 401(k) and Profit Sharing Plan
for 2007 and 2006, respectively, as follows:
Mr. Douglas — $6,600 and $1,219,
Mr. Salamone - $6,600 and $875, Mr. Deliso —
$6,600 and $6,300, and for Mr. Young $1,625 (2007);
(ii) premiums on term life insurance for 2007 and 2006,
respectively, as follows: Mr. Douglas — $690 and
$450, Mr. Salamone — $1,980 and $1,238,
Mr. Deliso — $450 and $450,
Mr. Young — $300 and $188; (iii) long term
disability
17
premiums for 2007 and 2006, respectively, as follows:
Mr. Douglas — $227 and $227,
Mr. Deliso — $227 and $227 and
Mr. Salamone — $227 (2007).
(7)
In addition to Mr. Douglas’ discretionary bonus,
includes the $100,000 second and final installment of a $175,000
signing bonus payable under Mr. Douglas’
October 4, 2005 employment agreement.
(8)
In addition to the amounts set forth in note 5 above,
amount includes $30,090 paid to Mr. Douglas for relocation
expenses pursuant to the terms of his employment agreement.
(9)
Mr. Salamone was hired as the Company’s Senior Vice
President and Chief Financial Officer on April 21, 2006,
commenced employment on May 15, 2006 and was promoted to
Executive Vice President, Chief Financial Officer and Treasurer
on January 1, 2007.
(10)
In addition to the amounts set forth in note 5 above,
amount includes a monthly housing allowance of $2,300 paid to
Mr. Salamone from May 15, 2006 through the end of
December 2006 and during 2007 and travel reimbursements in the
amount of $11,200 and $7,196, in 2006 and 2007, respectively.
(11)
Mr. Baravalle provides services to the Company as a
consultant pursuant to a consulting agreement by and between LCC
United Kingdom, Ltd. (“LCC UK”) and SEMAB Management
Srl., a consulting company owned by Mr. Baravalle and other
members of his family. The Company pays Mr. Baravalle a
flat consulting fee. Mr. Baravalle does not participate in
the Company’s benefit plans other than the Equity Incentive
Plan and the Executive Bonus Plan. Mr. Baravalle’s
compensation is paid in Euros. The exchange rate used to
determine the U.S. dollar equivalent of
Mr. Baravalle’s compensation was 1.3139 U.S. dollars
per Euro and 1.4729 U.S. dollars per euro in 2006 and 2007,
respectively. Effective November 29, 2007,
Mr. Baravalle ceased to serve as Executive Vice President,
Europe, Middle-East, Africa and Asia-Pacific and assumed the
role of Senior Advisor to the Chief Executive Officer.
(12)
Mr. Deliso has announced his resignation from all positions
at LCC effective June 30, 2008.
(12)
Mr. Young was hired as the Company’s Senior Vice
President and Chief Marketing Officer on May 15, 2006 and,
effective as of July 2007, served as Senior Vice President,
Chief Marketing Officer and President of the Americas. On
May 13, 2008, Mr. Young was named as President and
Chief Operating Officer.
(13)
In addition to Mr. Young’s discretionary bonus,
includes a $75,000 signing bonus paid to Mr. Young upon his
commencement of employment on May 15, 2006.
GRANTS OF
PLAN-BASED AWARDS FOR 2007
There were no grants of Plan-based awards for 2007 to any NEOs.
As previously disclosed, on March 14, 2008 the compensation
committee approved the immediate grant of RSUs that vest ratably
over a three-year period and vest automatically in full upon the
grantee’s death or disability or upon a change in control
of the Company as defined in the applicable award agreement.
These awards were made to Kenneth M. Young —
131,000 shares and
Louis Salamone, Jr. — 75,000 shares. In
addition, the compensation committee approved the delayed grant
of RSUs to be made and delivered at the commencement of the next
available open trading window subject to each grant
recipient’s continued employment with the Company. These
delayed grants will be fully vested on the date of delivery.
These awards were made to Kenneth M. Young —
44,000 shares and Louis Salamone,
Jr. — 25,000 shares.
18
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
Option Awards
Stock Awards
Equity
Incentive
Plan
Equity
Awards:
Incentive
Market or
Equity
Plan Awards:
Payout
Incentive
Number of
Value of
Plan
Market
Unearned
Unearned
Awards:
Number of
Value of
Shares,
Shares,
Number of
Number of
Number of
Shares or
Shares or
Units or
Units or
Securities
Securities
Securities
Units of
Units of
Other
Other
Underlying
Underlying
Underlying
Stock
Stock
Rights
Rights
Unexercised
Unexercised
Unexercised
Option
That
That
That
That
Options
Options
Unearned
Exercise
Option
Have not
Have not
Have not
Have not
(#)
(#)
Options
Price
Expiration
Vested
Vested
Vested
Vested
Name
Exercisable
Unexercisable
(#)
($)
Date
(#)
($)(2)
(#)
($)
Dean J. Douglas(1)
—
—
—
—
—
166,667
(3)
300,001
—
—
250,000
750,000
(4)
2.49
10/04/2015
—
—
—
—
Louis Salamone, Jr.
—
—
—
—
—
37,500
(5)
172,500
—
—
100,000
—
300,000
(6)
3.75
04/21/2016
—
—
—
—
Carlo Baravalle
—
—
—
—
—
—
46,668
—
—
—
—
—
—
—
50,000
(7)
67,500
—
—
100,000
—
—
5.64
04/24/2011
—
—
—
—
6,667
—
—
2.12
06/06/2012
—
—
—
—
16,667
—
—
2.38
02/05/2013
—
—
—
—
30,000
—
5.84
03/25/2014
—
—
—
—
100,000
—
300,000
(8)
3.26
01/03/2016
—
—
—
—
Peter A. Deliso(9)
—
—
—
—
—
—
46,668
—
—
—
—
—
—
—
18,750
(10)
86,250
—
—
25,000
—
—
5.00
02/10/2009
—
—
—
—
11,250
—
5.84
03/25/2014
—
—
—
—
6,667
—
—
2.38
02/05/2013
—
—
—
—
2,834
—
—
2.12
06/06/2012
—
—
—
—
Kenneth M. Young(11)
43,750
—
131,250
(12)
3.31
05/16/2016
—
—
—
—
(1)
Mr. Douglas resigned as President and Chief Executive
Officer and as a director of LCC effective June 6, 2008.
(2)
Market value calculated by multiplying the closing market price
of the Company’s common stock on December 31, 2007, or
$1.80, by the number of shares or units of stock.
(3)
Mr. Douglas’ unvested RSUs were scheduled to vest on
October 4, 2008.
(4)
Mr. Douglas’ options were scheduled vest as to 25% of
the total amount of options granted if and when the
20-day
average closing price per share of the common stock at any time
equals or exceeds the following amounts (to be adjusted for
stock splits and reverse stock splits): $4.00 (as to the first
25%), $5.75 (as to the second 25%), $7.25 (as to the third 25%)
and $9.00 (as to the final 25%). The
20-day
average closing price per share equaled or exceeded $4.00 on
February 2, 2007.
(5)
Mr. Salamone’s unvested RSUs will vest on
April 21, 2009.
(6)
Mr. Salamone’s options vest as to 25% of the total
amount of options granted if and when the
20-day
average closing price per share of the common stock at any time
equals or exceeds the following amounts (to be adjusted for
stock splits and reverse stock splits): $4.00 (as to the first
25%), $5.75 (as to the second 25%), $7.25 (as to the third 25%)
and $9.00 (as to the final 25%). The
20-day
average closing price per share equaled or exceeded $4.00 on
February 2, 2007.
(7)
Mr. Baravalle’s unvested RSUs will vest on
April 10, 2009.
(8)
Mr. Baravalle’s options vest as to 25% of the total
amount of options granted if and when the
20-day
average closing price per share of the common stock at any time
equals or exceeds the following amounts (to be adjusted for
stock splits and reverse stock splits): $4.25 (as to the first
25%), $6.00 (as to the second 25%), $7.50 (as to the third 25%)
and $9.00 (as to the final 25%).
(9)
Mr. Deliso has announced his resignation from all positions
at LCC effective June 30, 2008.
(10)
Mr. Deliso’s unvested RSUs are scheduled to vest on
April 10, 2009.
(11)
On May 13, 2008, Mr. Young was named as President and
Chief Operating Officer.
19
(12)
Mr. Young’s options vest as to 25% of the total amount
of options granted if and when the
20-day
average closing price per share of the common stock at any time
equals or exceeds the following amounts (to be adjusted for
stock splits and reverse stock splits): $4.00 (as to the first
25%), $5.75 (as to the second 25%), $7.25 (as to the third 25%)
and $9.00 (as to the fourth 25%).
OPTION
EXERCISES AND STOCK VESTED
Options Awards
Stock Awards
Number of Shares
Number of Shares
Acquired on
Value Realized
Acquired on
Value Realized
Exercise
on Exercise
Vesting
on Vesting
Name
(#)
($)(1)
(#)
($)(1)
Dean J. Douglas
—
—
166,666
644,997
Louis Salamone, Jr.
—
—
—
—
Carlo Baravalle
—
—
—
—
Peter A. Deliso
—
—
16,666
64,497
Kenneth M. Young
—
—
—
—
(1)
Value realized calculated by multiplying the number of shares or
units by the market price of the Company’s common stock on
the vesting date.
DIRECTOR
COMPENSATION
Our standard compensation arrangement for our directors during
2007 was:
•
an annual board service fee of $30,000;
•
meeting fees of $1,000 for each meeting of the board of
directors attended;
•
$1,000 for each committee meeting attended;
•
an annual committee service fee of $2,000 for each committee on
which a director serves, with an additional annual fee of $3,000
for any committee which a director chairs; and
•
an annual grant of options to purchase 10,000 shares of our
class A common stock, which typically vest in one-third
increments on each of the first three anniversaries of the grant
date.
On June 2, 2008, each member of the Board of Directors was
granted 20,000 restricted stock units and 10,000 stock options
at an exercise price of $1.26 per share, the closing price of a
share of common stock on the immediately preceding trading day
of May 30, 2008. The RSUs vest in full on the first
anniversary of the grant date and the stock options vest in
three equal installments on the first, second and third
anniversaries of the grant date.
20
Ms. Dobson, our chairperson of the board of directors,
receives the fees described in the table above, however, her
annual board service fee is $50,000 (in lieu of $30,000). On
May 13, 2008, Ms. Dobson was named as interim chief
executive officer effective as of June 6, 2008. At that
time her annual board service fee was increased to $100,000
during her term of service as interim CEO. Additionally, the
Board approved a grant to Ms. Dobson of 25,000 restricted
stock units under LCC’s amended and restated equity
incentive plan vesting in one year from date of grant, subject
to acceleration upon determination by the compensation committee
of the Board of Directors that Ms. Dobson has
satisfactorily completed her assignment as interim CEO.
Fees Earned or
Option
Paid in Cash
Awards
Total
Name
($)
(1)(2)($)
($)
Julie Dobson
86,000
16,792
102,792
Mark Ein(3)
47,693
7,685
55,378
Susan Ness
73,000
8,113
81,113
Dr. Raj Singh(4)
—
7,411
7,411
Neera Singh(4)
—
8,113
8,113
Melvin Keating
13,250
575
575
Richard Lombardi
65,000
6,497
71,497
Mark Slaven(5)
—
429
429
Dean J. Douglas(6)
—
—
—
(1)
Includes fees earned in 2006 and paid in 2007 as well as all
fees earned in 2007 and paid in 2007.
(2)
Represents the amount recognized for financial statement
reporting purposes in accordance with SFAS No. 123(R),
other than any estimates relating to forfeitures, for the fiscal
year ended December 31, 2007. The full grant date fair
value of each option grant made in 2007, computed in accordance
with SFAS No. 123(R), was $1.54 for
Mr. Keating’s October 24, 2007 grant of 2,050
options and $0.92 for the remainder of the director grants, all
made December 26, 2007. Assumptions used in the
calculations of these amounts are included in Note 13,
Equity Incentive Plans, in the Company’s
consolidated financial statements. As of December 31, 2007,
the number of outstanding options held by each director was as
follows: Ms. Dobson — 68,000 (of which 39,665
were exercisable), Mr. Ein — 80,000 (of which
69,999 were exercisable), Mr. Lombardi — 27,100 (of
which 8,066 were exercisable), Ms. Ness — 69,400
(of which 49,399 were exercisable), Dr. Singh —
70,000 (of which 49,999 were exercisable), Mr. Keating
12,050 (of which none were exercisable),
Ms. Singh — 70,000 (of which 49,999 were
exercisable), and Mr. Slaven — 10,000 (of which
none were exercisable).
(3)
As reported in our Current Report on
Form 8-K
filed on October 25, 2007, on October 19, 2007
Mr. Ein resigned from our board of directors. As also
reported in such Current Report, on October 24, 2007 Melvin
L. Keating was appointed as a member of our board of directors.
(3)
All of Mr. Ein’s board fees were paid to his Company,
Leland Investments, Inc.
(4)
We do not provide any of the fees earned or paid in cash
described above to Dr. Singh or Ms. Singh because of
their affiliation with Telecom Ventures. See “Certain
Relationships between Mark Ein and Dr. Rajendra Singh on
page 28 of this proxy statement below. Ms. Singh chose
not to stand for reelection at our 2007 annual meeting and is no
longer a director.
(5)
Messrs. Keating and Slaven joined our board of directors on
October 24, 2007 and December 26, 2007, respectively,
and did not receive any cash fees from LLC during 2007.
(6)
Mr. Douglas, our former President and Chief Executive
Officer served on our board of directors until his resignation
effective June 6, 2008. Mr. Douglas did not receive
any compensation other than otherwise disclosed in the tables
above for such service.
Directors
Stock Option Plan
Our directors stock option plan provides for the grant of
options that are not intended to qualify as “incentive
stock options” under Section 422 of the Code to our
directors who are not our officers or employees or officers or
21
employees of any of our subsidiaries. The directors stock option
plan authorizes the issuance of up to 250,000 shares of
common stock pursuant to options granted under our directors
stock option plan (subject to anti-dilution adjustments in the
event of a stock split, recapitalization or similar
transaction). The option exercise price for options granted
under our directors stock option plan will be 100% of the fair
market value of the shares of common stock on the date of grant
of the option. Our directors are entitled to receive options to
purchase shares of common stock in an amount determined at the
discretion of our board of directors.
Payment for shares purchased under our directors stock option
plan may be made either in cash or by exchanging shares of
common stock with a fair market value equal to the option
exercise price and cash or certified check for any difference.
Options may be exercised by directing that certificates for the
shares purchased be delivered to a licensed broker as agent for
the optionee, provided that the broker tenders to us cash or
cash equivalents equal to the option exercise price plus the
amount of any taxes that we may be required to withhold in
connection with the exercise of the option.
Options granted under our directors stock option plan are not
transferable (other than by will or the laws of descent and
distribution) and may be exercised only by the optionee during
his or her lifetime. If any optionee’s service as a
director with the Company terminates by reason of death or
permanent and total disability, the optionee’s options,
whether or not then exercisable, may be exercised within
180 days after such death or disability (but not later than
the date the option would otherwise expire). If the
optionee’s service as a director terminates for any reason
other than death or disability, options held by such optionee
will terminate 60 days after such termination (but not
later than the date the option would otherwise expire).
Our board of directors may amend our directors stock option plan
with respect to shares of common stock as to which options have
not been granted but no more than once in a six-month period
other than to comport with changes in applicable United States
federal laws. However, our stockholders must approve any
amendment that would: (i) change the requirements as to
eligibility to receive options; (ii) materially increase
the benefits accruing to participants under our directors stock
option plan; or (iii) materially increase the number of
shares of common stock that may be sold pursuant to options
granted under our directors stock option plan (except for
adjustments upon changes in capitalization). In addition,
amendments will be submitted for stockholder approval to the
extent required by the stock market on which our common stock is
listed or other applicable laws.
Compensation
Committee Interlocks and Insider Participation
No member of our compensation committee was at any time during
the past fiscal year an officer or employee of either us or any
of our subsidiaries. During the past year, none of our executive
officers served as: (i) a member of the compensation
committee (or other committee of the board of directors
performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, one
of whose executive officers served on our compensation
committee; (ii) a director of another entity, one of whose
executive officers served on our compensation committee; or
(iii) a member of the compensation committee (or other
committee of the board of directors performing equivalent
functions or, in the absence of any such committee, the entire
board of directors) of another entity, one of whose executive
officers served as our director.
Certain
Relationships and Related Transactions
The following is a summary of certain relationships and related
transactions among us and our associated entities, and among our
directors, executive officers and stockholders and our
associated entities.
Provision
of Services and Products to Telcom Ventures and Parties Related
Thereto
RF Investors transferred all but 425,577 shares of its
class B common stock to the Foundation on December 22,2006, and upon such transfer the transferred class B common
stock and the remaining shares held by RF Investors converted to
common stock. As a result, immediately after such transfer, the
shares of common stock held by the Foundation and by RF
Investors constituted approximately 15.8% and 1.7%,
respectively, of the outstanding voting power of the common
stock. The aggregate balance of the voting power of the common
stock, approximately 82.5%, is held by the Company’s other
stockholders.
22
Prior to our initial public offering, both our employees and the
employees of Telcom Ventures were eligible to participate in our
life, medical, dental and 401(k) plans. In connection with the
initial public offering in 1996, we agreed pursuant to an
Overhead and Administrative Services Agreement to allow the
employees of Telcom Ventures to continue to participate in our
employee benefit plans in exchange for full reimbursement of the
cash costs and expenses. We billed Telcom Ventures $77,000,
$128,000 and $74,000 during the years ended December 31,2007, 2006, and 2005, respectively, for payments made by us
pursuant to this agreement. We received reimbursements from
Telcom Ventures of $70,000, $135,000 and $67,000 during the
years ended December 31, 2007, 2006, and 2005,
respectively. At December 31, 2007 and 2006, outstanding
amounts associated with payments made by us under this agreement
were $7,000 and $1,000, respectively, and are included as due
from related parties and affiliates within the consolidated
balance sheets in the Company’s consolidated financial
statements.
During the year ended December 31, 2007, we provided
services to one customer where Telcom Ventures has a minority
investment. Revenues earned from this customer during the year
ended December 31, 2007 were approximately $101,000. Billed
and unbilled receivables of approximately $35,000 were
outstanding at December 31, 2007, and are included in trade
accounts receivable and unbilled receivables in the accompanying
consolidated Balance Sheet. During the year ended
December 31, 2007, we provided services to Telcom Ventures
directly, generating revenues of approximately $33,000 which
have been collected.
We entered into a registration rights agreement with RF
Investors in 1996 prior to our initial public offering. The
registration rights agreement grants RF Investors specified
rights with respect to the registration of their shares of our
common stock under the Securities Act of 1933.
Certain
Relationships between Mark Ein, Dr. Rajendra Singh and
Neera Singh
Vernon Investors II, LLC, a company owned by Dr. Rajendra
Singh, Neera Singh and certain Singh family trusts, invested
$1,666,666 in Venturehouse Group, LLC in 1998. Dr. Singh
also joined the board of directors of Venturehouse Group at the
time of such investment. Mark Ein is the founder of Venturehouse
Group and has been its chief executive officer since 1999. In
June 2001, Venturehouse Group redeemed Vernon Investors’
entire investment in Venturehouse Group in exchange for a
promissory note in the principal amount of $317,000. The
promissory note is due in full on June 13, 2011, and
interest on the note is due and payable annually on
June 12th. Dr. Singh no longer serves on the board of
directors of Venturehouse Group. Mr. Ein resigned from our
board of directors on October 19, 2007.
Certain
Transactions with Carlo Baravalle
On December 23, 2004, LCC UK entered into a Consulting
Agreement with SEMAB Management Srl (“SEMAB”) a
private limited company controlled by Carlo Baravalle (the
“SEMAB Consulting Agreement”). Under the terms of the
SEMAB Consulting Agreement, SEMAB agreed that a consultant,
mutually agreeable to SEMAB and LCC UK, would provide services
as a senior vice president of the Europe, Middle-East, Africa
and Asia-Pacific regions to LCC UK on a full-time independent
contractor basis. Concurrently therewith, SEMAB and LCC UK
entered into an Appointment Letter Agreement which provided that
Mr. Baravalle was appointed by SEMAB and accepted by LCC UK
as the consultant. LCC UK agreed to pay SEMAB an annual service
fee of €420,000 (less any fees paid to the consultant for
service on any board of directors of LCC UK, us or any of our
subsidiaries) in addition to a commencement fee of
€114,726. LCC UK also agreed to reimburse SEMAB for certain
out-of-pocket business expenses in connection with the
performance of services by Mr. Baravalle.
The SEMAB Consulting Agreement has an initial term of five
years. Notwithstanding the foregoing, the SEMAB Consulting
Agreement provides, among other termination rights, that LCC UK
may terminate the agreement at any time, for any reason, upon
12 months written notice. On October 5, 2007, LCC UK
notified SEMAB that it was exercising its right to terminate the
SEMAB Consulting Agreement at the end of a
12-month
notice period. Accordingly, the SEMAB Consulting Agreement will
terminate on October 4, 2008.
On November 29, 2007, LCC UK and SEMAB executed a
Settlement Agreement pursuant to which Mr. Baravalle ceased
to serve as the Company’s Executive Vice President, Europe,
Middle-East, Africa and
23
Asia-Pacific and, effective November 29, 2007, he assumed
the role of Senior Advisor to the Chief Executive Officer
focused on business development activities primarily in the
Middle East. Pursuant to the Settlement Agreement,
Mr. Baravalle will be paid his regular monthly fees through
April 15, 2008, at which point he will receive a lump sum
payment of Euro 228,000. He will also be eligible to
receive bonus compensation as described in the Settlement
Agreement.
Under the terms of our Equity Incentive Plan, options granted to
Mr. Baravalle will remain in effect in accordance with
their original terms for so long as Mr. Baravalle continues
to provide services to us as a consultant. Prospectively,
Mr. Baravalle will be entitled, subject to the provisions
of our Equity Incentive Plan, to receive stock options under the
plan as may be determined advisable by, and approved by, the
compensation committee of our board of directors. LCC UK has
also agreed to reimburse SEMAB for certain out-of-pocket
business expenses in connection with the performance of the
Mr. Baravalle’s services.
Policy
on Related Party Transactions
Our audit committee charter requires that our audit committee
review and approve transactions in which officers, directors or
other related parties have an interest or which involve parties
whose relationship with our Company may enable them to negotiate
terms more favorable than those available to other, more
independent parties. The audit committee charter containing this
conflict of interest policy was adopted by our board of
directors in March 2003 in response to corporate governance
rules proposed and subsequently adopted by the NASD and the SEC.
With the exception of the transactions involving
Mr. Baravalle, the related party transactions discussed
above were not reviewed by the audit committee because all of
these transactions were entered into before this conflict of
interest policy was adopted.
PROPOSAL NO. 2
APPROVAL
OF THE REMOVAL OF CERTAIN LIMITATIONS UNDER NASDAQ
MARKETPLACE RULE 4350(I)(1)(D) ON THE ISSUANCE OF SHARES
OF OUR COMMON STOCK UPON CONVERSION OF
THE SERIES A CONVERTIBLE PREFERRED STOCK
Background
The purpose of Proposal No. 2 is to obtain the
stockholder approvals required under the Nasdaq Marketplace
Rules to allow for full conversion and voting rights for the
series A preferred stock issued by the Company in January
2008 under a Settlement Agreement reached with investors as
discussed below. Shareholder approval is required because the
full conversion of the series A preferred stock may result
in the issuance of 20% or more shares of our common stock.
Moreover, currently, the voting power of the series A
preferred is also subject to the NASDAQ 20% cap. Nasdaq
Marketplace Rule 4350(i)(1)(D) requires shareholder
approval of full voting and conversion rights. Since the common
stock is trading on the Nasdaq Global Market, we are subject to
the Nasdaq Marketplace Rules, including Rule 4350(i)(1)(D).
The
Series A Preferred Stock
On April 19, 2007, we entered into a Purchase Agreement
(the “Purchase Agreement”) with twelve investors (the
“Investors”), including entities related to Riley
Investment Management LLC, for the sale of common stock in a
private placement (the “Private Placement”). Pursuant
to the Purchase Agreement, the Investors purchased a total of
5,100,000 shares of common stock at a purchase price of
$3.35 per share, for a total purchase price of $17,085,000. Cash
proceeds to the Company net of placement commissions and related
fees of approximately $879,250 totaled approximately $16,205,750.
On December 27, 2007, we entered into an Exchange and
Settlement Agreement (the “Settlement Agreement”) with
the Investors. As part of Private Placement, we entered into a
registration rights agreement under which we agreed to register
the Investors’ shares of common stock by no later than
June 3, 2007 or to pay a penalty of 1% per month up to
10% until the registration statement was filed with the SEC. In
addition, we agreed to an
24
additional monthly penalty of 1% if the registration statement
was not declared effective by August 20, 2007. We were not
able to meet our obligation to the Investors to register their
shares because we were not current in our reporting obligations
with the SEC. Under the registration rights agreement we accrued
penalties every month, payable in cash, for our failure to
register the shares. We entered into the Settlement Agreement
with the Investors to resolve the matter without our having to
pay any cash amounts and to obtain a release from further
penalties.
Under the Settlement Agreement, on January 29, 2008 we
exchanged each share of common stock held by the Investors for
1.125 shares of a series A preferred stock. The
series A preferred stock by its terms converts back into
common stock in connection with our next qualifying equity
financing transaction of $10 million or more or, if we do
not conduct such a financing, at the end of 18 months. The
conversion will be at the sale price in the qualifying equity
financing transaction (or the market price of the common stock,
if conversion is after the 18 months) but not below a floor
price of $2.00 per share. In return, the Investors agreed to
release us from our non-compliance with the registration
requirement and all accrued penalties, and gave us a general
release from claims arising out of the investment, if any,
including any failure to disclose that we would not be able to
register their shares for a substantial period. We agreed to
take the necessary steps to register their shares once we have
become current in our SEC filings or in connection with
registering shares issued in our next qualifying equity
financing transaction.
Until the earlier of the consummation of a qualifying equity
financing transaction or six months following the time when the
Company becomes compliant with its SEC filing obligations, the
Investors are prohibited from effecting any short sales of the
common stock or other types of hedging transactions involving
the common stock. After that time, this prohibition will only
apply when the Company advises the Investors that it is actively
seeking to complete a qualifying equity financing transaction.
The series A preferred stock does not accrue any dividends
prior to December 31, 2008; however, at January 1,2009, if it has not been converted back into common stock,
dividends would begin to accrue, initially at 6% and then
increasing at set intervals thereafter up to a maximum of 12% on
any preferred shares then outstanding.
We have the right under the Certificate of Designations to
redeem all of the outstanding shares of series A preferred
stock that are not converted by paying the stated value of such
shares plus any unpaid and accrued dividends. However, we are
not permitted to redeem shares of stock under the terms of our
credit facility, and would need a waiver for any such
redemption. In addition, any holder of preferred shares may
convert such shares into an equal number of shares of common
stock at any time at the holder’s option prior to the
mandatory conversion of the series A preferred stock.
We are seeking stockholder approval under applicable Nasdaq
Marketplace Rules since the conversion of the series A
preferred stock could result in the issuance of more than 20% of
our common stock outstanding as of the day preceding the Private
Placement. Until that approval is obtained, the number of shares
of series A preferred stock converted will be reduced on a
pro rata basis so that the maximum amount permitted to be
converted without stockholder approval will be converted, and
the remaining shares of series A preferred stock would
continue to be outstanding.
Impact on
Existing Stockholders
Assuming approval by the Company’s stockholders of
Proposal No. 2 at the annual meeting, the aggregate
number of shares of common stock underlying the outstanding
series A preferred stock that would be issued assuming
conversions occur on the record date at the Initial Conversion
Price of $3.35 would be 5,737,500, representing approximately
17.8% of the Company’s outstanding shares of common stock
on the record date, as adjusted for the conversion.
On the other hand, if Mandatory Conversion occurs on the
18-month
anniversary of the issuance of the series A preferred stock
, the Company may be required to issue a greater number of
shares of common stock in the event the conversion price in
effect is less than $3.35 per share. This could occur if the
applicable conversion price is the End-of-Period Conversion
Price, which is determined as the lower of (i) the average
of the closing bid prices of the common stock on each of last
ten trading days ending immediately prior to the date of
determination and (ii) $3.35 (adjusted for stock splits,
etc.). In such an event there could be a significant dilutive
effect on the ownership interests and voting rights of the
Company’s then-existing holders of common stock.
25
Reasons
for Seeking Stockholder Approval
Under the Purchase Agreement, the Company agreed in certain
circumstances to obtain stockholder approval if the conversion
of the series A preferred stock could result in the Company
issuing a number of shares of common stock that is equal to, or
in excess of, 20% or more of the outstanding shares of common
stock or voting power as of the date immediately preceding the
Private Placement. Section 4350(i)(1)(D) of the NASDAQ
Marketplace Rules generally requires that company’s obtain
stockholder consent to any nonpublic sale, issuance or potential
issuance of common stock (or securities convertible into or
exercisable for common stock) at a price less than the greater
of book or market value of such securities (on an as-converted
basis) which equals 20% or more of the common stock or voting
power of the company outstanding before such transaction. As of
the date immediately preceding the Private Placement and as of
the date hereof, the number of shares of common stock issuable
under the Certificate of Designations is indeterminable,
depending on, among other things, (i) whether dividends
accrue on the series A preferred stock, (ii) the
number of holders of Series A preferred stock who elect to
convert such shares into common stock, and (iii) the amount
of the applicable conversion price as of the date of any
conversion of series A preferred stock. Accordingly, the
Company is seeking stockholder approval of
Proposal No. 2 to comply with Nasdaq Marketplace
Rule 4350(i)(1)(D).
The approval of Proposal No. 2 will allow the Company
to issue any shares to the holders of the series A
preferred stock even to the extent that such issuance is equal
to 20% or more of the outstanding voting stock of the Company as
of the date immediately preceding the issuance of the
series A preferred. Pursuant to IM-4350-2 of the Nasdaq
Marketplace Rules, holders of shares of Series A preferred
stock may not vote such shares on Proposal No. 2.
Recommendation
of the Board of Directors on Proposal No. 2
The Board of Directors of the Company believes that it is in the
best interests of the Company and its stockholders to approve
the full conversion and voting rights of the series A
preferred stock, even if such conversion would result in the
issuance, on an as-converted basis of shares of common stock
equal to 20% or more of the outstanding voting stock of the
Company as of the date immediately preceding the Private
Placement. The Board of Directors of the Company believes that
approval of this Proposal No. 2 is in the best
interests of the Company and its stockholders as the Private
Placement has provided the Company with equity financing and
working capital for growth and operating needs.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR”
APPROVAL OF THE REMOVAL OF CERTAIN LIMITATIONS UNDER NASDAQ
MARKETPLACE RULE 4350(I)(1)(D) ON THE ISSUANCE OF SHARES
OF OUR COMMON STOCK UPON CONVERSION OF
THE SERIES A CONVERTIBLE PREFERRED STOCK
26
BENEFICIAL
OWNERSHIP OF SECURITIES
The table below sets forth certain information regarding
beneficial ownership of our common stock and Series A
preferred stock as of May 31, 2008 by (i) each
director (and director nominee), (ii) each named executive
officer, (iii) all persons known to us to be beneficial
owners of more than 5% of our outstanding common stock,
including beneficial owners of our Series A preferred stock
who are owners of more than 5% of our common stock on an
as-converted basis, and (iv) all directors and executive
officers as a group. This information is based upon the most
recent filing made by such persons with the SEC or information
provided to us by such persons. The number of shares
beneficially owned by each stockholder is determined under rules
promulgated by the SEC. The information does not necessarily
indicate beneficial ownership for any other purpose. Under these
rules, the number of shares of our common stock deemed
outstanding includes shares the respective person or group has
the right to acquire within 60 days after the record date,
including but not limited to any right to acquire such shares
through the exercise of an option. For purposes of calculating
each person’s or group’s percentage ownership, any
shares not outstanding which are subject to such option shall be
deemed to be outstanding for the purpose of computing the
percentage of outstanding common stock owned by such person or
group, but shall not be deemed to be outstanding for the purpose
of computing the percentage of common stock owned by any other
person or group.
Percentage
Class A
of Class A
Common
Common
Shares
Shares
Name of Executive Officer, Director or 5% Beneficial
Owner(1)
Owned
Owned
Dimensional Fund Advisors LP(2)
1,704,335
6.48
Riley Investment Management LLC(3)
4,035,025
15.34
State of Wisconsin Investment Board(4)
1,416,624
5.39
Zesiger Capital Group LLC(5)
2,429,650
9.24
Carlo Baravalle(6)
395,737
*
Peter A. Deliso(7)
148,979
*
Julie A. Dobson(8)
47,665
*
Dean J. Douglas(9)
549,889
*
Melvin L. Keating
—
*
Richard J. Lombardi(10)
11,399
*
Susan Ness(11)
56,232
*
Louis Salamone Jr.(12)
306,346
*
Dr. Rajendra Singh(13)
4,559,741
17.34
Neera Singh(13)
4,559,741
17.34
Mark A. Slaven
—
—
Kenneth M. Young(14)
174,750
*
All Executive Officers and Directors as a Group (10 persons)
5,855,001
21.84
*
Less than 1% of the outstanding shares of common stock.
(1)
Unless otherwise noted and subject to applicable community
property laws, to our knowledge, each person has sole voting and
investment power over the shares shown as beneficially owned by
such person, except to the extent authority is shared by spouses
under applicable law. In addition, unless otherwise noted, the
address of each of the beneficial owners identified is
c/o LCC
International, Inc., 7900 Westpark Drive, McLean, Virginia22102.
(2)
Information presented in the table is based upon information
contained in a Schedule 13G/A, filed by the reporting
person, on February 6, 2008. All securities reported by
Dimensional Fund Advisors LP are owned by investment funds
and accounts managed by Dimensional Fund Advisors. To the
knowledge of Dimensional Fund Advisors, none of such
investment funds or accounts owns more than 5% of the class. The
address of Dimensional Fund Advisors LP is 1299 Ocean Ave.,
Santa Monica, California90401.
(3)
Information presented in the table is based upon information
contained in a Schedule 13G/A filed on February 8,2008. Because Riley Investment Management LLC has sole
investment and voting power over
27
1,021,126 shares of common stock and Series A
Preferred Stock convertible into 1,219,410 shares of Common
Stock (assuming conversion limitation) held by Riley Investment
Partners Master Fund, L.P. and 476,618 shares held in
managed accounts by its investment advisory clients, Riley
Investment Management LLC may be deemed to have beneficial
ownership of these shares. Riley Investment Management LLC has
shared voting and dispositive power over 1,317,871 shares
of Common Stock held by its investment advisory clients in
managed accounts, which are indirectly affiliated with
Mr. Riley or Riley Investment Partners Master Fund, L.P.
Although Mr. Riley controls Riley Investment Management
LLC’s voting and investment decisions for its investment
advisory clients, Mr. Riley disclaims beneficial ownership
of these shares. The address of each of the foregoing reporting
persons is 11100 Santa Monica Blvd., Suite 800, LosAngeles, California90025.
(4)
Information presented in the table is based upon information
contained in a Schedule 13G/A filed on February 8,2008. The address of the State of Wisconsin Investment Board is
P.O. Box 7842, Madison, Wisconsin53707.
(5)
Information presented in the table is based upon information
contained in a Schedule 13G/A filed on February 11,2008. All securities reported by Zesiger Capital Group LLC are
held in discretionary accounts which Zesiger Capital Group
manages. Zesiger Capital Group disclaims beneficiary ownership
of these shares. No single client account owns more than 5% of
the class. The address of Zesiger Capital Group LLC is 320 Park
Avenue,
30th
Floor, New York, New York10022.
(6)
Includes 253,334 shares of common stock which may be
acquired within 60 days of May 31, 2008 pursuant to
stock options granted under our Equity Incentive Plan. Effective
November 29, 2007, Mr. Baravalle ceased to serve as
Executive Vice President, Europe, Middle-East, Africa and
Asia-Pacific and assumed the role of Senior Advisor to the Chief
Executive Officer.
(7)
Includes 45,751 shares of common stock which may be
acquired within 60 days of May 31, 2008 pursuant to
stock options granted under our Equity Incentive Plan.
Mr. Deliso announced his resignation from all positions at
LCC effective June 30, 2008.
(8)
Includes 39,665 shares of common stock which may be
acquired within 60 days of May 31, 2008 pursuant to
stock options granted under our directors stock option plan.
(9)
Includes 125,000 shares of common stock which may be
acquired within 60 days of May 31, 2008, pursuant to
stock options granted under our Equity Incentive Plan and
125,000 shares of common stock which may be acquired within
60 days of May 31, 2008 pursuant to stock options
granted under our Dean J. Douglas Employment Inducement Plan.
Mr. Douglas resigned as President and Chief Executive
Officer and as a director of LCC effective June 6, 2008.
(10)
Consists entirely of shares of common stock which may be
acquired within 60 days of May 31, 2008 pursuant to
options granted under our directors stock option plan.
(11)
Includes 52,732 shares of common stock which may be
acquired within 60 days of May 31, 2008 pursuant to
options granted under our directors stock option plan.
(12)
Includes 100,000 shares of common stock which may be
acquired within 60 days of May 31, 2008 pursuant to
options granted under our Equity Incentive Plan.
(13)
Includes: (i) 106,664 shares of common stock which may
be acquired within 60 days of May 31, 2008 pursuant to
options granted to Dr. Singh and Ms. Singh under our
Equity Incentive Plan; (ii) 40,000 shares of common
stock held by Dr. Singh and Ms. Singh;
(iii) 425,577 shares of common stock held by RF
Investors; and (iv) 3,987,500 shares of common stock
the Company held by The Raj and Neera Singh Charitable
Foundation, Inc. The address of Dr. Singh and Neera Singh
is 201 North Union Street, Suite 360, Alexandria, Virginia22314.
(14)
Includes 43,750 shares of common stock which may be
acquired within 60 days of May 31, 2008 pursuant to
stock options granted under our Equity Incentive Plan.
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires that our officers, directors and persons who
own more than 10% of our class A common stock file with the
SEC reports about their ownership of our class A common
stock. The reporting persons are required by rules of the SEC to
furnish us with copies of all
28
Section 16(a) reports they file. Except as noted below,
based solely on our review of the copies of such reports
furnished to us by our directors and officers during and with
respect to the year 2007 or upon written representations that no
other reports were required, we believe that all
Section 16(a) filing requirements applicable to our
directors, officers and greater than 10% beneficial owners were
satisfied timely, except that one Form 4 reporting a
transaction by Mr. Baravalle was filed late.
Report of
the Audit Committee of the Board of Directors
For the year ended December 31, 2007, the audit committee
was comprised of Julie A. Dobson, Melvin L. Keating, Richard J.
Lombardi and Susan Ness. Mr. Lombardi is chairperson of the
committee. The audit committee’s responsibilities, as set
forth in the committee’s written charter, include examining
and considering matters relating to the financial affairs of
LCC, such as reviewing LCC’s annual financial statements,
the scope of the independent annual audit and internal audits
and the independent auditors’ letter to management
concerning the effectiveness of LCC’s internal financial
and accounting controls.
The audit committee has implemented a number of corporate
governance measures in response to rules adopted by the SEC and
The NASDAQ Stock Market. The audit committee’s charter
requires the audit committee to approve transactions in which
officers, directors or other related parties have an interest or
which involve parties whose relationship with LCC may enable
them to negotiate terms more favorable than those available to
other, more independent parties. In addition, the board of
directors has determined that each of the current members of the
audit committee meets the independence and experience
requirements adopted by the SEC and The NASDAQ Stock Market and
Julie A. Dobson and Melvin L. Keating are “audit committee
financial experts” within the meaning of the SEC rules.
The audit committee has reviewed and discussed LCC’s
audited financial statements for the year ended
December 31, 2007 with management and with LCC’s
Registered Public Accounting Firm, Grant Thornton LLP. The audit
committee has discussed with Grant Thornton LLP the matters
required to be discussed by Statement on Auditing Standards
No. 61 relating to the conduct of the audit. The audit
committee has received the written disclosures and the letter
from Grant Thornton LLP required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with Grant Thornton LLP its
independence.
Based on the audit committee’s review of LCC’s audited
financial statements and the review and discussions described in
the foregoing paragraph, the audit committee recommended to the
board of directors that the audited financial statements for the
year ended December 31, 2007 be included in LCC’s
Annual Report on
Form 10-K
for the year ended December 31, 2007 for filing with the
SEC.
Respectfully submitted,
AUDIT COMMITTEE
Richard J. Lombardi (Chairperson)
Julie A. Dobson*
Melvin L. Keating
Susan Ness
Change in
Registered Independent Accountants
Effective as of December 12, 2007, the Company engaged
Grant Thornton LLP (“Grant Thornton”) as its
independent registered public accounting firm to audit the
consolidated financial statements of the Company. The engagement
of Grant Thornton was approved by the Audit Committee of the
Board of Directors of the Company on
* Ms. Dobson served on the audit committee until
May 13, 2008 when she agree to assume the post of interim
chief executive officer and was a member of the audit committee
at the time it held the meetings and made the recommendations
referred to in the above report.
29
December 12, 2007. Grant Thornton replaces the
Company’s former independent accounting firm, KPMG LLP
(“KPMG”), whose engagement terminated following the
filing of the Company’s Annual Report on
Form 10-K
for the 2006 fiscal year on December 12, 2007.
During the Company’s two fiscal years ended
December 31, 2006 and the subsequent interim period through
December 12, 2007, there were no (1) disagreements
with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of
KPMG, would have caused KPMG to make reference to the subject
matter of such disagreements in connection with its report, or
(2) reportable events (as defined in Item 304(a)(1)(v)
of
Regulation S-K),
except that KPMG has advised the Company of the material
weaknesses described below in connection with their audits of
management’s assessment of the effectiveness of internal
control over financial reporting and the effectiveness of
internal control over financial reporting as of
December 31, 2006 and 2005.
The audit reports of KPMG on the Company’s consolidated
financial statements as of and for the years ended
December 31, 2006 and 2005 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting
principles, except as follows:
KPMG’s report on the consolidated financial statements of
the Company as of and for the years ended December 31, 2006
contained a separate paragraph stating that “As discussed
in Note 2 to the consolidated financial statements,
effective January 1, 2006, the company adopted Statement of
Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment.”
The audit reports of KPMG on management’s assessment of the
effectiveness of internal control over financial reporting and
the effectiveness of internal control over financial reporting
as of December 31, 2006 and 2005 did not contain any
adverse opinion or disclaimer of opinion, and were not qualified
or modified as to uncertainty, audit scope, or accounting
principles, except as follows:
KPMG’s report on management’s assessment of the
effectiveness of internal control over financial reporting and
the effectiveness of internal control over financial reporting
as of December 31, 2005 contained an adverse opinion on the
effectiveness of internal control over financial reporting. The
adverse opinion in the report identified the following material
weakness as of December 31, 2005: The Company did not have
effective policies and procedures related to accounting for
fixed-price customer contracts accounted for under the
percentage-of-completion method. Specifically, there was not an
effective review of the performance status of fixed-price
contracts by personnel with sufficient technical expertise
related to accounting for contracts under the
percentage-of-completion method. As a result, material
misstatements were identified in revenues and cost of revenues
in the Company’s preliminary 2005 consolidated financial
statements.
KPMG’s report on management’s assessment of the
effectiveness of internal control over financial reporting and
the effectiveness of internal control over financial reporting
as of December 31, 2006 contained an adverse opinion on the
effectiveness of internal control over financial reporting and
contained a separate paragraph stating that “Management
excluded Detron Belgium, which was acquired on December 29,2006, from its evaluation of the effectiveness of the
Company’s internal control over financial reporting as of
December 31, 2006. As of and for the year ended
December 31, 2006, Detron Belgium represented
$4.2 million (including goodwill of $1.6 million) of
total assets and $0 of revenue, respectively, in the
consolidated financial statements of the Company.”
The adverse opinion in the report identified the following
material weakness as of December 31, 2006:
•
The Company’s entity-level policies and procedures for
monitoring the effectiveness of control activities that relate
to individual accounts and classes of transactions were not
effective. Specifically, there was not effective planning of the
nature, timing or extent of monitoring activities or adequate
resources to ensure monitoring is performed on a timely basis by
personnel with sufficient expertise. As a result of this
material weakness, deficiencies in the design or operation of
internal control over financial reporting, including
deficiencies that represent more than a remote likelihood of a
material misstatement in the Company’s annual or interim
financial statements, may not be identified and remediated on a
timely basis.
•
The Company’s policies and procedures were not designed in
a manner to ensure that all costs (primarily related to Valued
Added Tax and the impact of changes in foreign currency exchange
rates) were included in the accrual of costs related to its
operations in Algeria and lacked adequate supervisory review.
This material weakness resulted in errors in the accrued
liabilities in the Company’s preliminary 2006 financial
statements
30
and in more than a remote likelihood that a material
misstatement of the Company’s annual or interim financial
statements would not be prevented or detected.
The Company provided KPMG with a copy of this disclosure and
requested that KPMG furnish it with a letter addressed to the
Securities and Exchange Commission stating whether KPMG agrees
with the above statements. KPMG provided the requested letter on
December 19, 2007, which was filed in our Current Report on
Form 8-K
dated December 19, 2007.
Principal
Accounting Fees and Services
The following table sets forth the fees billed for professional
services rendered by KPMG LLP for the years ended
December 31, 2007 and 2006. Grant Thornton, LLP, the
Company’s current independent registered public accounting
firm, did not bill fees in 2007.
Fee Category
2007 Fees
2006 Fees
Audit Fees
$
1,852,740
$
2,337,136
Audit-Related Fees
—
27,260
Tax Fees
—
—
All Other Fees
—
—
Total Fees
$
1,852,740
$
2,364,396
Audit Fees. The aggregate fees for
professional services rendered by KPMG LLP for the audit of
LCC’s annual financial statements, the reviews of the
financial statements included in LCC’s
Forms 10-Q,
registration statements filed with the SEC and statutory audits
for LCC’s foreign subsidiaries for fiscal years 2007 and
2006 were approximately $1.9 million and $2.3 million,
respectively.
Audit-related fees. The aggregate fees for
assurance and related services rendered by KPMG LLP that were
reasonably related to their audit of LCC’s consolidated
financial statements and reviews of the condensed consolidated
financial statements included in LCC’s
Form 10-Q
for 2007 and 2006 were approximately $0 and $27,260 respectively.
Tax fees.The Company did not retain either
Grant Thornton, LLP or KPMG LLP for tax compliance, tax advice,
or tax planning services for fiscal years 2007 and 2006;
therefore, no fees were paid to Grant Thornton, LLP or KPMG LLP
for these services.
All other fees. No other services were
rendered by either Grant Thornton, LLP or KPMG LLP for fiscal
years 2007 and 2006.
Pre-Approval
of Services Provided by Independent Auditors
The audit committee has adopted a policy for the pre-approval of
services provided by our independent auditors. Pursuant to this
pre-approval policy, each engagement for services to be provided
by our Registered Public Accounting Firm must be approved by the
audit committee before commencement of such engagement. The
policy sets forth the procedures and conditions pursuant to
which audit, review and attest services and non-audit services
to be provided to us by our Registered Public Accounting Firm
may be pre-approved. In accordance with the terms of the policy,
the audit committee has delegated pre-approval authority for
certain non-audit services to the chairperson of the audit
committee, which currently is Mr. Lombardi.
Mr. Lombardi may pre-approve permitted non-audit services,
without consultation with the full audit committee, where the
anticipated fees payable by us for such services are $50,000 or
less and provided he reports such approved services to the audit
committee at its next scheduled meeting. 100% of audit and
non-audit services provided by to us by Grant Thornton, LLP or
KPMG LLP for the fiscal year ended December 31, 2007 and
2006 were pre-approved by the audit committee.
31
DATE OF
SUBMISSION OF STOCKHOLDER PROPOSALS
TO BE INCLUDED IN PROXY MATERIALS FOR 2009 ANNUAL
MEETING
We anticipate holding our 2009 annual meeting in May 2009. Any
proposal or proposals intended to be presented by any
stockholder at the 2009 annual meeting of stockholders must be
received by us no later than January 9, 2009 to be
considered for inclusion in our proxy statement and form of
proxy relating to that meeting. Nothing in this paragraph shall
be deemed to require us to include in our proxy statement and
proxy relating to the 2009 annual meeting of stockholders any
stockholder proposal which may be omitted from our proxy
materials pursuant to applicable regulations of the SEC in
effect at the time such proposal is received. Stockholders
intending to present a proposal at our 2009 annual meeting,
without inclusion in our proxy statement or form of proxy for
that meeting, must submit the proposal to us at our principal
executive offices prior to the close of business no later than
the date designated for receipt of stockholders’ proposals
in a prior public disclosure made by us. If we have not made
such prior public disclosure, then a stockholder’s notice
must be delivered, or mailed to and received by us not less than
60 days nor more than 90 days prior to the annual
meeting. In the event we give less than 70 days’
notice of the annual meeting date, a stockholder’s notice
must be received by us no later than the close of business on
the 10th day following the day on which we mail notice of
the annual meeting or make a public announcement of the meeting
date. If we do not receive notice of such proposal within the
time frame specified above, the proposal will be considered
untimely and management will be entitled to vote proxies in its
discretion with respect to such proposal.
OTHER
BUSINESS TO BE TRANSACTED
As of the date of this proxy statement, the board of directors
knows of no other business which may come before the annual
meeting. If any other business is properly brought before the
annual meeting, it is the intention of the proxy holders to vote
or act in accordance with their best judgment with respect to
such matters.
A copy of our Annual Report on
Form 10-K
accompanies this proxy statement.
32
LCC INTERNATIONAL, INC.
7900 WESTPARK DRIVE SUITE A-315 MCLEAN, VA22102
VOTE
BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up
until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card
in hand when you access the website and follow the instructions to obtain your records and to create an
electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by LCC International, Inc. in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy cards and
annual reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access stockholder communications
electronically in future years.
VOTE
BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M.
Eastern Time the day before the cut-off date or meeting date. Have your proxy card in
hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or
return it to LCC International, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
LCCIN1
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
LCC INTERNATIONAL, INC.
For
All
Withhold
All
For All
Except
To withhold authority to vote for
any individual nominee(s), mark “For All Except” and write the
number(s) of the nominee(s) on the line below.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS.
Proposal One: Election of the Board of Directors:
o
o
o
NOMINEES:
01) Julie A. Dobson
04) Richard J. Lombardi
02) Ted L. Hoffman
05) Susan Ness
03) Melvin L. Keating
06) Mark A. Slaven
For
Against
Abstain
Proposal Two:
Approval of the removal of certain limitations under the NASDAQ Marketplace Rules on the issuance
of shares of our class A common stock upon conversion of the series A
convertible preferred stock.
o
o
o
In
the discretion of the proxy holders, on any other matters that may
properly come before the Annual meeting, or any adjournments
thereof.
Note:
Please sign exactly as your name or names appear(s) on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee, or guardian, please give full title as such. If the
signer is a corporation, please sign in full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership, please
sign in partnership name by authorized person.
Yes
No
PLEASE INDICATE IF
YOU PLAN TO ATTEND THE ANNUAL
STOCKHOLDERS’ MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder hereby appoints Kenneth M. Young and Louis Salamone, Jr., or either of
them, attorneys and proxies of the undersigned, with full power of substitution and with authority
in each of them to act in the absence of the other, to vote and act for the undersigned at the
Annual Meeting of Stockholders of LCC International, Inc. to be held on Thursday, July 31 at 10:00
a.m. (Eastern Time) at the offices of LCC International, Inc., 7900 Westpark Drive, Suite A-315,
McLean, Virginia22102, and at any adjournments thereof, in respect of all shares of the Common
Stock and Preferred Stock of the Company which the undersigned may be entitled to vote, on the
matters designated on the reverse side.
The undersigned hereby acknowledges prior receipt of a copy of the Notice of Annual Meeting of
Stockholders and Proxy Statement dated June 30, 2008 and the Company’s Annual Report on Form 10-K, and hereby
revokes any proxy or proxies heretofore given. This Proxy may be revoked at any time before it is
voted by delivering to the Secretary of the Company either a written revocation of proxy or a duly
executed proxy bearing a later date, or by appearing at the Annual Meeting and voting in person.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES IN
PROPOSAL 1.
If you receive more than one proxy card, please sign and return all cards in the accompanying
envelope.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN A FEW OR MANY SHARES. DELAY IN RETURNING YOUR PROXY
MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE.)
Dates Referenced Herein and Documents Incorporated by Reference