UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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VCA ANTECH, INC.

(Name of Registrant as Specified in Its Charter)

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

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VCA Antech, Inc.

12401 West Olympic Boulevard

Los Angeles, California 90064-1022

www.vcaantech.com

 

 

April 22, 2009

 

Dear Fellow Stockholder:

 

Our 2008 Annual Meeting will be held on Monday, June 1, 2009, at our corporate offices located at 12401 West Olympic Boulevard, Los Angeles, California 90064-1022. Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of Internet Availability of Proxy Materials and Proxy Statement.

 

Your vote is important. Whether or not you plan to attend the meeting, I urge you to vote your shares as soon as possible. Instructions on the proxy card will tell you how to cast your vote. The Proxy Statement explains more about proxy voting. Please read it carefully.

 

Thank you for your continued support of our company.

 

Sincerely,

 

Robert L. Antin

Chairman of the Board, Chief Executive

Officer and President

 

VCA ANTECH, INC.

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 1, 2009

 

The Notice of Internet Availability of Proxy Materials, the Proxy Statement and our 2008 Annual Report are available at www.proxyvote.com.

 

TABLE OF CONTENTS

 

 

VCA ANTECH, INC.

12401 West Olympic Boulevard

Los Angeles, California 90064-1022

 

PROXY STATEMENT

 

 

Our Board of Directors is soliciting proxies to be voted at the 2009 Annual Meeting of Stockholders, which we refer to as the “Annual Meeting,” to be held on June 1, 2009. Your vote is very important. For this reason, our Board of Directors is requesting that you permit your common stock to be represented at the Annual Meeting by the proxies named on the proxy card. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully. In this Proxy Statement, VCA Antech, Inc. is referred to as the “Company,” “VCA,” “we,” “us” and “our.”

 

In accordance with rules and regulations of the Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of our proxy materials to each stockholder of record or beneficial owner, we are now furnishing proxy materials, which include the Proxy Statement, proxy card and the Annual Report on Form 10-K for the fiscal year ended December 31, 2008, which we refer to as the “2008 Annual Report,” to our shareholders over the Internet. On April 22, 2009, we mailed the Notice of Internet Availability of Proxy Materials to our stockholders and made available the proxy materials to our stockholders at www.proxyvote.com.

 

Because you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials unless you have previously made a permanent election to receive these materials in hard copy. Instead, the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review all of the important information contained in the proxy materials. The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your proxy. If you received the Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials.

 

 

 

 

 

 

Item 1—Election of directors		The persons receiving the highest number of “FOR” votes at the Annual Meeting will be elected
Item 2—Ratification of appointment of independent registered public accounting firm		To be approved by the stockholders, this item must receive the affirmative “FOR” vote of a majority of the votes casts on this item at the Annual Meeting

 

 

Our business is managed by our employees under the direction and oversight of the Board of Directors. Except for Robert Antin, none of the members of our Board of Directors is an employee of VCA. We keep the members of our Board of Directors informed of our business through discussions with management, materials we provide to them, visits to our offices and their participation in Board of Directors and committee meetings.

 

We believe transparent, effective, and accountable corporate governance practices are key elements of our relationship with our stockholders. To help our stockholders understand our commitment to this relationship and our governance practices, several of our key governance initiatives are summarized below.

 

Our Board of Directors has adopted Corporate Governance Guidelines which govern, among other things, criteria for membership on the Board of Directors, vacancies on the Board of Directors, director responsibilities, director education, and committee composition and charters. You can access these Corporate Governance Guidelines, along with other materials such as committee charters, on our website at http://investor.vcaantech.com.

 

We have adopted a Code of Ethics and Business Conduct applicable to all of our employees as well as our directors and executive officers. Our Code of Ethics and Business Conduct is designed to set the standards of business conduct and ethics and to help directors and employees resolve ethical issues. Our Code of Ethics and Business Conduct applies to our Chief Executive Officer, Chief Financial Officer, all other senior financial executives, our directors when acting in their capacity as directors and to all of our employees. The purpose of our Code of Ethics and Business Conduct is to ensure to the greatest possible extent that our business is conducted in a consistently legal and ethical manner. Employees may submit concerns or complaints regarding audit, accounting, internal controls or other ethical issues on a confidential basis by means of an anonymous toll-free telephone call or email. We investigate all concerns and complaints. Our Code of Ethics and Business Conduct is posted on our website at http://investor.vcaantech.com.

 

We intend to disclose on our website amendments to, or waivers from, any provision of our Code of Ethics and Business Conduct which applies to our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer/Controller and persons performing similar functions and amendments to, or waivers from, any provision which relates to any element of our Code of Ethics and Business Conduct described in Item 406(b) of Regulation S-K.

 

VCA has three committees of the Board of Directors: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee meets regularly and has a written charter approved by the Board of Directors. See “Further Information Regarding Board of Directors — Meetings and Committees” contained elsewhere in this Proxy Statement.

 

NASDAQ rules require listed companies to have a board of directors with at least a majority of independent directors. Our Board of Directors has determined that four of our five current directors are independent under the NASDAQ Global Select Market listing standards. Our independent directors are: John M. Baumer, John B. Chickering, Jr., John Heil and Frank Reddick. In addition, all of the directors currently serving on the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee are independent under the NASDAQ Global Select Market listing standards.

 

Stockholders may communicate with the Board of Directors by sending a letter to the Board of Directors of VCA Antech, Inc., c/o Office of the Secretary, 12401 West Olympic Boulevard, Los Angeles, California 90064. Each communication must contain a clear notation indicating that it is a “Stockholder — Board Communication” or “Stockholder — Director Communication,” and each communication must identify the author as a stockholder. The Office of the Secretary will receive the correspondence and forward it to the Chairman of the Board or to any individual director or directors to whom the communication is directed, unless the communication is unduly hostile, threatening, illegal, does not reasonably relate to us or our business, or is similarly inappropriate. The Office of the Secretary has authority to discard any inappropriate communications or to take other appropriate actions with respect to any inappropriate communications.

 

All directors are encouraged to attend VCA’s Annual Meetings of stockholders. Two of our directors attended our 2008 Annual Meeting of Stockholders.

 

VCA’s independent directors regularly meet in executive session without management present.

 

The Board of Directors, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee may each retain outside advisors and consultants of their choosing at VCA’s expense.

 

On February 10, 2009, John B. Chickering, Jr., attended the 2009 Annual Audit Committee Issues Conference, which is a director education program accredited by Risk Metrics Group (formerly known as Institutional Shareholder Services).

 

Frank Reddick routinely participates in continuing legal education programs on corporate governance, and board and board committee functions.

 

 

 

We have five members on our Board of Directors. Four of the five members of our Board of Directors have been determined by our Board of Directors to meet the independence requirements of the NASDAQ Global Select Market listing standards.

 

As provided in our Amended and Restated Certificate of Incorporation, the Board of Directors has been grouped into three classes, as nearly equal in number as possible, which are elected for staggered terms. Our Class I directors will be elected at this Annual Meeting and will hold office for three years until the 2012 Annual Meeting and thereafter until their successors are duly elected and qualified. The term of our Class II director expires at our 2010 Annual Meeting. The terms of our Class III directors expire at our 2011 Annual Meeting. In accordance with our Corporate Governance Guidelines, any director appointed to fill a vacant seat in a class other than the class of directors whose terms expire at the next annual meeting of stockholders will stand for re-election at the next annual meeting of stockholders.

 

Although we know of no reason why these nominees would not be able to serve, if any nominee is unavailable for election, the proxies will vote your common stock to approve the election of any substitute nominee proposed by our Nominating and Corporate Governance Committee. The Board of Directors may choose to reduce the size of the Board, as permitted by our Bylaws, provided we maintain the number of independent directors required by the listing standards of the NASDAQ Global Select Market. The Board of Directors has no reason to believe that VCA’s nominees will be unwilling or unable to serve if elected as directors.

 

Our nominees for election as Class I directors, John M. Baumer and Frank Reddick, are currently directors and have agreed to be named in this Proxy Statement and to serve if elected.

 

The Board of Directors proposes the following candidates for election as Class I directors:

 

Class I Director Nominees

 

John M. Baumer

Frank Reddick

 

The principal occupation and certain other information about the nominees, our other directors and our executive officers are set forth on the following pages.

 

A plurality of the votes cast is required for election as a director. All proxies will be voted to approve the election of the nominees listed above unless a contrary vote is indicated on the enclosed proxy card.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEES IDENTIFIED ABOVE.

 

 

The following persons serve as our directors:

 

 

The following persons serve as our executive officers:

 

 

Our executive officers are appointed by and serve at the discretion of our Board of Directors. Robert L. Antin and Arthur J. Antin are brothers. There are no other family relationships between any director and/or any executive officer.

 

Robert L. Antin, one of our founders, has served as our Chairman of the Board, Chief Executive Officer and President since our inception in 1986. From September 1983 to 1985, Mr. Antin was President, Chief Executive Officer, a director and co-founder of AlternaCare Corp., a publicly held company that owned, operated and developed freestanding out-patient surgical centers. From July 1978 until September 1983, Mr. Antin was an officer of American Medical International, Inc., an owner and operator of health care facilities. Mr. Antin received his MBA with a certification in hospital and health administration from Cornell University.

 

John M. Baumer has served as our director since September 2000. Mr. Baumer is a partner of Leonard Green & Partners, LP, where he has been employed since May 1999. Prior to joining Leonard Green & Partners, LP, he served as a Vice President in the Corporate Finance Division of Donaldson, Lufkin & Jenrette Securities Corporation, or DLJ, in Los Angeles. Prior to joining DLJ in 1995, Mr. Baumer worked at Fidelity Investments and Arthur Andersen LLP. Mr. Baumer currently serves on the board of directors of Leslie’s Poolmart, Inc. Mr. Baumer is a 1990 graduate of the University of Notre Dame. He received his MBA from the Wharton School at the University of Pennsylvania.

 

John B. Chickering, Jr. has served as one of our directors since April 2004 and previously served as a director from 1988 to 2000. Mr. Chickering is a certified public accountant. Mr. Chickering is currently a private investor and independent consultant. Mr. Chickering served in a variety of executive positions within Time Warner, Inc. and Warner Bros., Inc., most recently as the Vice President — Financial Administration for

Warner Bros. International Television Distribution until February 1996. Prior to his employment at Warner Bros., Mr. Chickering served as a staff accountant at KPMG Peat Marwick from August 1975 to June 1977. Mr. Chickering holds an MBA degree with emphasis in accounting and finance from Cornell University.

 

John Heil has served as one of our directors since February 2002 and previously served as a director from 1995 to 2000. Mr. Heil currently serves as President of United Pet Group, Inc., a global manufacturer and marketer of pet supplies and subsidiary of Spectrum Brands, Inc. Mr. Heil also serves on Spectrum Brands’ Executive Committee. Prior to joining United Pet Group, Mr. Heil spent twenty-five years with the H. J. Heinz Company in various executive and general management positions including President and Managing Director of Heinz Pet Products and President of Heinz Specialty Pet Foods. Mr. Heil holds a BA degree in economics from Lycoming College.

 

Frank Reddick has served as one of our directors since February 2002. For more than the past five years, Mr. Reddick has been a partner in Akin Gump Strauss Hauer & Feld LLP, a global, full service law firm. Mr. Reddick co-chairs Akin Gump’s firm-wide corporate practice group. Mr. Reddick is principally engaged in the practice of corporate and securities law, with a concentration on corporate finance, mergers and acquisitions, joint ventures and other strategic alliances. Mr. Reddick holds a JD from the University of California, Hastings College of the Law.

 

Arthur J. Antin, one of our founders, has served as our Chief Operating Officer and Senior Vice President since our inception. From 1986 until June 2004, Mr. Antin also served as our Secretary and as a director. From October 1983 to September 1986, Mr. Antin served as Director of Marketing/Investor Relations of AlternaCare Corp. At AlternaCare Corp., Mr. Antin developed and implemented marketing strategies for a network of outpatient surgical centers. Mr. Antin received an MA in Community Health from New York University.

 

Neil Tauber, one of our founders, has served as our Senior Vice President of Development since our inception. From 1984 to 1986, Mr. Tauber served as the Director of Corporate Development at AlternaCare Corp. At AlternaCare Corp., Mr. Tauber was responsible for the acquisition of new businesses and syndication to hospitals and physician groups. From 1981 to 1984, Mr. Tauber served as Chief Operating Officer of MDM Services, a wholly owned subsidiary of Mediq, a publicly held health care company, where he was responsible for operating and developing a network of retail dental centers and industrial medical clinics. Mr. Tauber holds an MBA from Wagner College.

 

Tomas W. Fuller joined us in January 1988 and served as Vice President and Controller until November 1990 when he became Chief Financial Officer. In June 2004, Mr. Fuller became Secretary. From 1980 to 1987, Mr. Fuller worked at Arthur Andersen LLP, the last two years of which he served as audit manager. Mr. Fuller received his BA in economics from the University of California at Los Angeles.

 

Dawn R. Olsen joined us in January 1997 as Vice President, Controller. In March 2004, Ms. Olsen became Principal Accounting Officer. From 1993 to 1996, Ms. Olsen served as Senior Vice President, Controller of Optel, Inc., a privately held telecommunications company. From 1987 to 1993, Ms. Olsen served as Assistant Controller and later as Vice President, Controller of Qintex Entertainment, Inc., a publicly held television film distribution and production company. From 1981 to 1987, Ms. Olsen worked at Arthur Andersen LLP, the last year of which she served as audit manager. Ms. Olsen currently serves on the board of the Women’s Leadership Council in Los Angeles. Ms. Olsen is a certified public accountant and received her BS in business/accounting from California State University, Northridge.

 

Josh Drake joined us in 1992. In February 2008, Mr. Drake became President of our laboratory division, Antech Diagnostics. Over the past five years, Josh Drake has held various positions at VCA Antech, including, Group Vice President of our animal hospital division, Group Vice President of Antech Diagnostics and Senior Vice President of Antech Diagnostics. Mr. Drake received his BS in economics from the University of California at Santa Barbara.

 

 

Four of the five members of our Board of Directors have been determined by our Board of Directors to meet the independence requirements of the NASDAQ Global Select Market listing standards. We refer to each of these directors as an “independent director.”

 

During fiscal 2008, the Board of Directors held three meetings and acted twice by unanimous written consent. VCA’s independent directors regularly meet in executive session without management present.

 

The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, all of which are constituted solely of independent directors.

 

The Audit Committee consists of John M. Baumer, John B. Chickering, Jr. (Chairman) and John Heil, each an independent director and each financially literate as required by the NASDAQ Global Select Market listing standards. Our Board of Directors has determined that Messrs. Baumer, Chickering and Heil qualify as “audit committee financial expert[s]” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act. During fiscal 2008, the Audit Committee held eight meetings.

 

Among other matters, the Audit Committee:

 

 

Our Audit Committee charter is posted on our website at http://investor.vcaantech.com.

 

The Compensation Committee consists of John M. Baumer, John B. Chickering, Jr. and Frank Reddick (Chairman), each an independent director. During fiscal 2008, the Compensation Committee held five meetings and acted once by unanimous written consent. The Compensation Committee:

 

 

The Compensation Committee is responsible for overseeing the determination, implementation and administration of remuneration, including compensation, benefits and perquisites, of all executive officers. The

Compensation Committee seeks the views of our Chief Executive Officer with respect to establishing appropriate compensation packages for the executive officers (other than the Chief Executive Officer). The Compensation Committee also has the authority to delegate its responsibilities to subcommittees of the Compensation Committee if it determines such delegation would be in the best interest of the Company. The Compensation Committee has established a 162(m) subcommittee, which consists of the two “outside directors” (as such term is defined in Treasury Regulation 1.162-27(e)(3)) of the Compensation Committee, John M. Baumer and John B. Chickering, Jr. The 162(m) subcommittee has the power and authority to (i) grant equity awards to the Company’s named executive officers pursuant to the terms of the VCA Antech Inc. 2006 Equity Incentive Plan, (ii) grant performance awards consisting of equity and/or cash to the Company’s named executive officers under the Plans, (iii) establish the performance goals underlying the performance awards, and (iv) determine whether these performance goals have been met.

 

The Chairman of the Compensation Committee develops the meeting calendar for the year based on member availability and other relevant events within our corporate calendar. The Compensation Committee meeting agendas are generally developed by our Compensation Committee Chairman. The Compensation Committee generally meets in executive session, with no member of management being present at the meetings. In addition, the Compensation Committee may request that any of our directors, officers or employees, or other persons attend its meetings to provide advice, counsel or pertinent information as the Compensation Committee requests.

 

The Compensation Committee has the sole authority to retain independent counsel or other advisors, as it deems necessary in connection with its responsibilities at the Company’s expense. Relatedly, the Compensation Committee has the sole authority to retain and terminate compensation consultants.

 

Our Compensation Committee charter is posted on our website at http://investor.vcaantech.com.

 

The Nominating and Corporate Governance Committee consists of John M. Baumer, John B. Chickering, Jr. and Frank Reddick (Chairman), each an independent director. During fiscal 2008, the Nominating and Corporate Governance Committee held one meeting. The principal responsibilities of the Nominating and Corporate Governance Committee are to propose to the Board of Directors a slate of nominees for election by the stockholders at our Annual Meetings and to review and reassess the adequacy of the Corporate Governance Guidelines and recommend any proposed changes to the Board of Directors.

 

In considering director candidates, the Nominating and Corporate Governance Committee considers the entirety of each candidate’s credentials and does not have any specific minimum qualifications that must be met in order to be recommended as a nominee. The Nominating and Corporate Governance Committee does believe, however, that all members of the Board of Directors should have high personal and professional ethics, integrity, practical wisdom and mature judgment, no conflict of interest that would interfere with their performance as a director of a public corporation, a commitment to serve on the Board of Directors over a period of several years, a willingness to represent the best interests of all stockholders and objectively appraise management performance and sufficient time to devote to matters of the Board of Directors. Our Nominating and Corporate Governance Committee may employ a variety of methods for identifying and evaluating nominees for director, including stockholder recommendations. The Nominating and Corporate Governance Committee will consider candidates recommended by our stockholders, provided that the recommendations are made in accordance with the procedures required under our Bylaws, as summarized in the “Questions and Answers” section of this Proxy Statement. The Nominating and Corporate Governance Committee will not evaluate candidates differently based on who made the recommendation for consideration. Our Nominating and Corporate Governance Committee charter is posted on our website at http://investor.vcaantech.com.

 

All directors attended 75% or more of all the meetings of the Board of Directors in fiscal 2008. All directors attended 75% or more of all the meetings of those committees on which they served in fiscal 2008. The

Company encourages, but does not require, all directors and director nominees to attend our Annual Meetings of stockholders. Two of our directors attended our 2008 Annual Meeting of Stockholders.

 

During fiscal 2008, the Compensation Committee of our Board of Directors consisted of John B. Chickering, Jr., John M. Baumer and Frank Reddick. None of these individuals was one of our officers or employees at any time during fiscal 2008. Mr. Reddick is a partner at Akin Gump Strauss Hauer & Feld LLP, which provided legal services to us during fiscal 2008 and is providing legal services to us in fiscal 2009. In 2008, the Company paid Akin Gump Strauss Hauer & Feld LLP $600,000 for legal services. Nevertheless, Mr. Reddick is not disqualified from serving as an independent director on our Board of Directors under the NASDAQ Global Select Market listing standards because of the relatively small amount of fees we paid to Akin Gump Strauss Hauer & Feld LLP in fiscal years 2008, 2007 and 2006 in relation to our total revenues and the total revenues of Akin Gump Strauss Hauer & Feld LLP for those same periods. None of our executive officers served as a member of the board of directors or compensation committee of any entity that has or has had one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

 

 

The Audit Committee has engaged the firm of KPMG LLP to continue to serve as our independent registered public accounting firm for the current fiscal year ending December 31, 2009. KPMG LLP has served as VCA’s principal independent registered public accounting firm since June 14, 2002.

 

We are asking the stockholders to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009. The ratification of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009, will require the affirmative vote of a majority of the shares of common stock present or represented and entitled to vote at the Annual Meeting. All proxies will be voted to approve the appointment unless a contrary vote is indicated on the proxy card.

 

We anticipate that a representative of KPMG LLP will attend the Annual Meeting for the purpose of responding to appropriate questions. The representative of KPMG LLP will be afforded an opportunity to make a statement if he or she so desires at the Annual Meeting.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

The following table sets forth the aggregate fees billed to us by KPMG LLP, our independent registered public accounting firm, for professional services rendered during the fiscal years ended December 31, 2008, and 2007.

 

 

 

 

The Audit Committee has established a policy with respect to the pre-approval of audit and permissible non-audit services and fees provided by the independent registered public accounting firm. The Audit Committee’s pre-approval policy requires that all audit and permissible non-audit services and fees be pre-approved by the Audit Committee. Specific pre-approval is not required for permissible non-audit services provided that they:

 

 

Pursuant to the pre-approval policy, the Audit Committee’s Chairman is delegated the authority to pre-approve audit services and fees, provided he reports those approvals at the next meeting of the Audit Committee. The term of any pre-approval granted by the Audit Committee with respect to a given service is twelve months. All fees in excess of pre-approved levels require specific pre-approval by the Audit Committee. All audit and permissible non-audit services provided to us in connection to fiscal 2008 were approved by the Audit Committee.

 

 

The Audit Committee Report does not constitute “soliciting material,” and shall not be deemed “filed” with the Securities and Exchange Commission or to be subject to Regulation 14A or 14C as promulgated by the Securities and Exchange Commission, or to the liabilities of Section 18 of the Securities Exchange Act of 1934.

 

The Committee is responsible for overseeing, on behalf of the Board of Directors, the Company’s accounting and financial reporting process and the audits of VCA’s financial statements. The Committee acts only in an oversight capacity and relies on the work and assurances of management, which has the primary responsibility for the financial reporting process, including the system of internal controls, and the financial statements.

 

The Committee has:

 

 

The Committee also has considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with the accountant’s independence. The Committee has concluded that the independent registered public accounting firm is independent from the Company and its management.

 

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, for filing with the Securities and Exchange Commission.

 

Audit Committee

 

John M. Baumer

John B. Chickering, Jr.

John Heil

 

 

Preamble

 

The U.S. financial crisis and related economic uncertainty had a negative impact on the Company’s revenue and profitability in 2008. We experienced a decline in the frequency of visits to our animal hospitals, the number of orders placed in our animal hospitals and the average revenue per requisition in our laboratories. These factors contributed to a decline in our Animal Hospital segment’s same-store revenue growth and the rate of our Laboratory segment’s internal revenue growth in 2008. We also experienced a decline in the number of orders received for our digital radiography equipment, which forms part of our Medical Technology segment. Notwithstanding these factors, the Company experienced a one-year and three-year growth in sales of 10% and 15% and a Return on Equity of 19% and 25% over the same periods. Although we revise our compensation programs as conditions change, the Compensation Committee believes it is important to maintain consistency in our compensation philosophy and objectives and to recognize performance over a multi-year period. We recognize that value-creating performance by our executive officers does not always translate immediately into appreciation in the Company’s stock price, particularly in periods of severe economic crisis such as the current one. The Compensation Committee is aware of the impact the current economic crisis has had on the Company’s stock price, but intends to continue to appropriately reward management’s performance based on its belief that over time strong operating performance will be reflected through stock price appreciation. We set 2008 compensation in this context.

 

Overview of Compensation Program

 

We believe that compensation of our executive and other officers and senior managers should be directly and materially linked to operating performance. The fundamental objective of our compensation program is to attract, retain and motivate top quality executive and other officers through compensation and incentives which are competitive with the market and industry in which we compete for talent and which align the interests of our officers and senior management with the interests of our stockholders. We seek to promote individual service longevity and to provide our executives with long-term wealth accumulation opportunities, assuming that we are able to maintain a high-level of financial performance. The Compensation Committee evaluates both performance and compensation annually to ensure that we maintain our ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of our Comparison Group (as discussed below). To achieve these objectives, we believe executive compensation packages should include both cash and equity-based compensation that rewards performance as measured against established goals.

 

Overall, we have designed our compensation program to:

 

 

We seek to achieve these objectives through a variety of compensation elements, including:

 

 

 

Governance

 

The Compensation Committee oversees our executive compensation and benefit plans and practices, while establishing management compensation policies and procedures to be reflected in the compensation program offered to our executive officers. The Compensation Committee operates under the written charter approved by the entire Board of Directors, a copy of which is available at http://www.vcaantech.com. When necessary, the Compensation Committee recommends amendments to its charter to the Board of Directors for approval. In addition, the Compensation Committee has established a Section 162(m) subcommittee, consisting of Messrs. Baumer and Chickering, each of whom meet the definition of “outside director” for purposes of Section 162(m) of the Internal Revenue Code. The Section 162(m) subcommittee (i) grants equity awards to the named executive officers pursuant to the terms of the VCA Antech Inc. 2006 Equity Incentive Plan, (ii) grants performance awards consisting of equity and/or cash to the named executive officers under the Plans, (iii) establishes the performance goals underlying the performance awards and (iv) determines whether these performance goals have been met.

 

The Compensation Committee has the sole authority to retain independent counsel or other consultants, as it deems necessary, in connection with its responsibilities at the Company’s expense. In 2009, the Compensation Committee determined to undertake a review of the structure and elements of its compensation program. As part of this review, the Compensation Committee engaged Mercer as its compensation consultant. This review is ongoing at the date of this Proxy Statement. The Compensation Committee may request that any of our directors, officers or employees, or other persons attend its meetings to provide advice, counsel or pertinent information as the Committee requests.

 

Role of Executive Officers in Compensation Decisions

 

Our Chief Executive Officer is involved in the design and implementation of our executive compensation programs. He typically provides his input through consultation with the Chairman of the Compensation Committee and typically is not present at Compensation Committee meetings. Our Chief Executive Officer annually reviews the performance of each executive officer (other than the Chief Executive Officer whose performance is reviewed by the Compensation Committee) and presents his conclusions and recommendations regarding base salary and incentive award amounts for each executive officer (other than the Chief Executive Officer) to the Compensation Committee for its consideration. The Compensation Committee can exercise its discretion in accepting, rejecting and/or modifying any such executive compensation recommendations.

Elements of Compensation Programs and Relationship to Compensation Objectives

 

The following is a description of each of the elements of the Company’s compensation program and the specific objectives each is designed to advance. Generally these elements support the objective to balance rewards for both short-term results and long-term strategic decisions, which is especially important in the current economic climate in which the risks related to a short-term focus on stock price may be particularly acute due to the Company’s depressed stock price.

 

 

Compensation Practices

 

The Compensation Committee sets base salary and incentive compensation for our executives following a review of company-wide performance, individual performance, salary and incentive compensation practices among our Comparison Group, internal equity considerations and other factors. Our 162(m) subcommittee sets incentive compensation for our “covered employees” (as such term is defined in the Internal Revenue Code of 1986, as amended (the “Code”)). Individual performance targets are set based on the stated financial goals for the year. In addition, the Compensation Committee reviews the Chief Executive Officer’s recommendations with regard to base salary and incentive compensation (except in the case of his own compensation).

 

The Compensation Committee applies essentially the same compensation policies to all executive officers. The difference in the amount of base salary and annual incentive awards awarded to our Chief Executive Officer relative to the amount of base salary and annual incentive awards awarded to each other executive officer is generally attributable to differences in the Compensation Committee’s assessment in relative contribution to the performance of the Company, benchmarking data for the positions held by them and general trends in executive compensation. The base salary and annual incentive awards provided to the chief executive officer position at companies in our Comparison Group and other public companies generally are almost always higher than for the other executive officers at such companies. The difference between the Chief Executive Officer’s base salary and annual incentive awards and the other executive officers’ reflects: the larger scope of the Chief Executive Officer’s responsibilities and authority; and the Chief Executive Officer’s individual contributions to the success of the Company. For 2008, the Compensation Committee reviewed all elements of the Chief Executive Officer’s compensation. The internal relationship of total compensation awarded to our executive officers has remained generally consistent for more than the last five years.

 

In making decisions with respect to any element of executive compensation, the Compensation Committee considers the total compensation that may be awarded to an executive officer, including base salary and annual incentive awards and long-term incentive compensation. Multiple factors are considered in determining the amount of total compensation (the sum of base salary, annual cash awards and long-term incentive

compensation delivered through equity awards) to award the executive officers each year. Among these factors are:

 

 

In addition, in establishing total compensation for each executive officer for the applicable fiscal year, the Compensation Committee considers the benefits to which the officer is entitled under his employment or severance agreement.

 

Our executive officers’ base salary is typically reviewed and adjusted effective on July 1 of each year.

 

Equity awards are typically reviewed and granted during the first quarter of each year. All equity awards are granted on the date the Compensation Committee approves the awards using the fair market value of the Company’s common stock at the close of that business day.

 

The performance targets related to cash and equity performance awards granted for the preceding fiscal year are typically certified by the 162(m) subcommittee during the current year’s first quarter, once audited results for the preceding fiscal year are available. The 162(m) subcommittee then sets performance targets and incentive awards for the current fiscal year.

 

The worsening economic environment in 2008 presented unique challenges for the Company. The changes in the general economy during the year made it more difficult to forecast results and to differentiate between changes in the Company’s financial performance resulting from changes in the general economy and those reflecting management’s performance. As a result, the Compensation Committee modified the mix of the elements of compensation payable to its executive officers for 2008. Compensation for 2008 was heavily weighted to equity awards and no cash performance awards or bonus was awarded to our four senior executive officers.

 

Components of 2008 Executive Compensation

 

For the year ended December 31, 2008, the principal components of compensation for the executive officers were:

 

 

Base Salary

 

We take into account compensation levels at similarly situated companies for similar positions referred to as benchmarking in establishing the base salaries for our executive officers. We use benchmarking as a point of reference for measurement, and the Compensation Committee has discretion in determining how much weight to place on the benchmarking analysis. Benchmarking helps the Compensation Committee assess whether our level of executive pay is appropriate when compared to industry standards. In 2006, the Compensation

Committee adjusted the base salaries of each of our executive officers. In doing so, it established a comparison group of companies, which we refer to as the “Comparison Group,” consisting of: Idexx Laboratories, Inc., Laboratory Corporation of America, MEDNAX, Inc. (formerly known as Pediatrix Medical Group, Inc.), Patterson Companies, Inc., PetSmart, Inc., Quest Diagnostics and Stericycle, Inc. The information gathered from this Comparison Group included base salary, cash performance awards or cash bonuses and equity incentive compensation, and has been updated and reviewed by the Compensation Committee every year since 2006.

 

In addition to benchmarking, the Compensation Committee reviews the executive officer’s historical compensation, the executive officer’s compensation in relation to other officers, individual performance of the executive officer and corporate performance. Salary levels are also considered upon a promotion or other change in job responsibility. Salary adjustment recommendations are based on our overall performance and an analysis of compensation levels necessary to maintain and attract quality personnel. In addition, the Compensation Committee takes into account internal equity considerations in making its executive compensation decisions. While the Compensation Committee sets the base salary for the Chief Executive Officer, the base salaries for all other executive officers are established after a review of the recommendations of the Chief Executive Officer.

 

The annual base salary of each executive officer as of the date of this Proxy Statement is set forth below:

 

 

Increases in base salary for each of the executive officers (other than Josh Drake, who had a change in position and responsibilities) in 2007 and 2008 were limited to 4%, the targeted increase in base salary for the Company’s employee base as a whole during the respective periods. Salary increases were established at these levels in order to be consistent with compensation awards made to other senior employees of the Company for the same periods. A review of the compensation of the companies in our Comparison Group indicated that our Chief Executive Officer ranked in the first and fourth quartiles, and our other named executive officers ranked in the second and fourth quartiles, with regard to total cash compensation and total compensation.

 

The base salary paid to each executive officer for fiscal year 2008 is reflected in the column titled “Salary” of the Summary Compensation Table on page 25 of this Proxy Statement.

 

Annual Cash Performance Awards or Bonuses

 

We grant cash performance awards that are designed to create a direct link between performance and compensation for the executive officers. Under the 2007 Annual Cash Incentive Plan, the 162(m) subcommittee has the authority to grant cash performance awards in amounts determined in its sole discretion and to reduce the amount of performance awards in its sole discretion. Performance awards provide participants with the right to an award based upon the achievement of one or more levels of performance required to be attained with respect to one or more performance criteria, which we refer to as “performance goals.” The 162(m) subcommittee did not grant cash performance awards in 2008 and no cash bonus was awarded to our four senior executive officers for the year as part of the decision to weight compensation for the year to equity based awards, which have a direct alignment with the interests of the shareholders. Josh Drake, the President of our Laboratory Division, received a cash bonus for the year, which is reflected in the column titled “Bonus” of the Summary Compensation Table on page 25 of this Proxy Statement.

Grants of Equity Awards

 

The long-term incentive compensation component provides a periodic equity award that is performance based. The objective of the program is to align compensation for executive officers over a multi-year period directly with the interests of our stockholders by motivating and rewarding creation and preservation of long-term stockholder value. The level of long-term incentive compensation is determined by our Compensation Committee by assessing each executive officer’s individual performance and contribution to our success.

 

At December 31, 2008, 96 employees held stock options and 140 employees held restricted stock awards under our equity incentive plans. Equity ownership for all executive officers, our other officers and senior managers is important for purposes of incentive, retention and alignment with stockholders.

 

We do not have, nor do we intend to have, a program, plan or practice to select the grant dates of equity awards for executive officers in coordination with the release of material non-public information. Although there is no specified grant date for equity awards, the Compensation Committee has adopted a policy pursuant to which it will, at a regularly scheduled Compensation Committee meeting, set in advance of the meeting date, consider the grant of equity awards to the executive officers. The Compensation Committee adopted this policy to mitigate against the perception that grant dates are set to achieve benefits for the executive officers.

 

During the first quarter of 2008, the 162(m) subcommittee made awards under the 2006 Equity Incentive Plan to certain executive officers of performance-based restricted stock that vested, in part, if the Company’s financial performance achieved specified performance goals for fiscal year 2008, as set forth below:

 

 

The restricted shares set forth above represented the maximum number of restricted shares each executive officer could have earned upon the achievement of pre-established performance goals as described below, and were subject to forfeiture. The actual number of performance-based restricted shares earned by each executive officer was to be determined upon certification by the 162(m) subcommittee of the achievement of certain pre-established performance goals.

 

The 162(m) subcommittee established Adjusted EBITDA and Adjusted Earnings per Diluted Share goals for the year ended December 31, 2008. The 162(m) subcommittee believed that the performance required to earn an award at the minimum performance goal level (i.e., 80% of the performance goals) was attainable, the performance required to earn an award at the target performance goal level (i.e., 100% of the performance goals) was challenging but attainable, and the performance required to receive an award at the maximum performance goal level (i.e., 107% of the performance goals) was very difficult to attain.

 

Performance goals shall be based on Adjusted EBITDA and Adjusted Earnings per Diluted Share and, to the extent necessary to preserve the economic intent of an award, the 162(m) subcommittee may adjust performance goals, performance awards or both to account for any extraordinary, unusual and/or non-recurring events; provided, however, that no adjustment hereunder shall be authorized or made if and to the extent the 162(m) subcommittee determines that such authority or the making of such adjustment would cause the performance awards to fail to qualify as “qualified performance-based compensation” under Section 162(m) of the Code. The 162(m) subcommittee uses Adjusted EBITDA and Adjusted Earnings per Diluted Share because they exclude the effect of significant items that we believe are not representative of our core operations for the periods presented. The only amounts excluded for purposes of determining whether the performance goals were achieved in 2008 was the positive impact of the decrease in the Company’s workers’ compensation insurance liability for policy periods prior to 2008.

The annual performance goals for 2008 were as follows:

 

 

The actual performance award earned by each executive officer is the number of restricted shares set forth below determined by reference to the average of (x) the percentage derived by comparing the actual Adjusted EBITDA to the Adjusted EBITDA goal and (y) the percentage derived by comparing the actual Adjusted Earnings per Diluted Share to the Adjusted Earnings per Diluted Share goal:

 

 

In determining the performance awards earned by each eligible executive officer, the 162(m) subcommittee compared the actual results for Adjusted EBITDA and Adjusted Earnings per Diluted Share to the performance goals. In April 2009, the 162(m) subcommittee certified that the actual Adjusted EBITDA and Adjusted Earnings per Diluted Shares were in excess of 95% of the performance goals but less than 100%. As a result, each executive officer forfeited and earned the following number of restricted shares:

 

 

The performance-based restricted stock awards described above are reflected in the column titled “Stock Awards” of the Summary Compensation Table on page 25 of this Proxy Statement.

 

In March 2008, the 162(m) subcommittee also made a restricted stock award to Josh Drake under the 2006 Equity Incentive Plan. This restricted stock award is reflected in the column titled “Stock Awards” of the Summary Compensation Table on page 25 of this Proxy Statement.

 

In October 2008, the Compensation Committee made a grant of stock options under the 2006 Equity Incentive Plan to each of the executive officers as part of a wider grant by the Compensation Committee to senior employees across the Company to provide continuing equity incentives to the Company’s employees in a declining stock market. These option awards are reflected in the column titled “Option Awards” of the Summary Compensation Table on page 25 of this Proxy Statement.

In 2009, the Compensation Committee awarded restricted stock units, in lieu of the payment of a cash performance award or bonus to each of the four senior executive officers for services performed in fiscal year 2008 as follows: Robert L. Antin (39,871), Arthur J. Antin (22,835), Tomas W. Fuller (12,010) and Neil Tauber (12,010). Each of the restricted stock units was fully vested on the date of grant and had a payment date of May 1, 2012. These awards are reflected in the column titled “Bonus” of the Summary Compensation Table on page 25 of this Proxy Statement.

 

Perquisites and Other Personal Benefits

 

In order to better enable us to attract and retain highly skilled executive officers and to round out a competitive compensation package for our executive officers, we provide our executive officers with perquisites and other personal benefits that we believe are reasonable and consistent with our overall compensation philosophy and objectives. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to our executive officers.

 

The executive officers, among other things, are provided use of automobiles and are reimbursed for their out-of-pocket medical expenses.

 

The attributed costs and a more detailed description of the perquisites and other personal benefits received by each executive officer for fiscal year 2008 are included in column titled “All Other Compensation,” and the footnotes thereto, of the Summary Compensation Table on page 25 of this Proxy Statement.

 

Stock Ownership

 

Although the Company has not formally adopted stock ownership guidelines, each named executive officer holds a substantial amount of shares of our common stock, including shares of restricted stock, and vested in-the-money options. See Outstanding Equity Awards at Fiscal Year-End Table and the Principal Stockholders Table on pages 27 and 44 of this Proxy Statement, respectively.

 

Termination and Change in Control Payments

 

We have entered into employment agreements with three of our executive officers and into a severance agreement with another executive officer. These employment agreements and severance agreement, which are designed to promote stability and continuity of senior management, provide for termination and change in control payment. We have also entered into post-retirement medical benefits coverage agreements with our four senior executive officers. We entered into post-retirement medical benefits agreements with our senior executive officers as recognition of each officer’s extended service to the Company. A summary of these severance payments and post-termination benefits is set forth under the heading “Employment Agreements; Post-Retirement Medical Benefits Coverage Agreements; Payment Upon Termination and Change in Control” on page 28 of this Proxy Statement.

 

Tax Implications

 

The Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Code, which provides that the Company may not deduct non-performance based compensation of more than $1,000,000 that is paid to certain executive officers. As discussed above, the 162(m) subcommittee established performance goals for the awards of restricted stock it made to the executive officers in 2008. As a result, the performance-based restricted stock awards did not count against the deductibility limit. However, in order to maintain flexibility in compensating our executive officers in a manner designed to promote varying corporate goals, we have not adopted a policy that all compensation must be deductible. Except with respect to a portion of the compensation paid to our Chief Executive Officer, all compensation paid to the executive officers for fiscal year 2008 will be fully deductible.

 

The following table sets forth all compensation paid or earned by our Chief Executive Officer, Chief Financial Officer and each of our other three most highly compensated executive officers (whose compensation exceeded $100,000 during the last fiscal year) for services rendered to us for the years ended December 31, 2008, 2007, and 2006. We refer to these officers as the “named executive officers.”

 

 

 

 

 

 

All equity grants in fiscal year 2008 to the named executive officers were made under the VCA Antech, Inc. 2006 Equity Incentive Plan. The following table sets forth certain information regarding the grant of plan-based awards made during the fiscal year ended December 31, 2008, to each named executive officer.

 

 

 

The following table sets forth the number of securities underlying outstanding plan awards for each named executive officer as of December 31, 2008.

 

 

 

The following table sets forth information regarding the stock option awards that were exercised by each of our named executive officers during the fiscal year ended December 31, 2008.

 

 

 

The following table sets forth information concerning all equity compensation plans and individual compensation arrangements in effect during the fiscal year ended December 31, 2008.

 

 

We have employment agreements with Robert L. Antin, Arthur J. Antin and Tomas W. Fuller, and a severance agreement with Neil Tauber. Each of these agreements provide for certain payments upon termination or Change in Control. For purposes of this proxy statement, a “Change in Control” shall be deemed to have occurred if (a) there shall be consummated (x) any consolidation or merger of the Company into or with another “person” (as such term is used in Sections 13(d)(3) and 14(d)(2) of Exchange Act) pursuant to which shares of the Company’s common stock would be converted into cash, securities or other property, other than any consolidation or merger of the Company in which the persons who were stockholders of the Company immediately prior to the consummation of such consolidation or merger are the beneficial owners (within the meaning of Rule 13d-3 under the Exchange Act), immediately following the consummation of such consolidation or merger, of 62.5% or more of the combined voting power of the then outstanding voting securities of the person surviving or resulting from such consolidation or merger, or (y) any sale, lease or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (b) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (c) any person who is not, immediately following the occurrence of a Public Offering Event (as defined in the Stockholders Agreement, dated as of September 20, 2000, by and among the Company, certain officers of the Company and the other signatories thereto, as amended), the beneficial owner of 10% or more of the Company’s outstanding common stock (or any person who is not an affiliate or related party of such a beneficial owner of 10% or more of the Company’s outstanding common stock) shall become

the beneficial owner of 25% or more of the Company’s outstanding common stock, or (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company’s stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period).

 

In addition, we have post-retirement medical benefits coverage agreements with Robert L. Antin, Arthur J. Antin, Tomas W. Fuller and Neil Tauber.

 

Robert L. Antin

 

Mr. Antin’s employment agreement, dated as of November 27, 2001, provides for Mr. Antin to serve as our Chairman of the Board, Chief Executive Officer and President for a term of five years from any given date, such that there shall always be a minimum of at least five years remaining under his employment agreement. The employment agreement provides for Mr. Antin to receive an annual base salary established by the Compensation Committee based on comparable compensation packages provided to executives in similarly situated companies, and to participate in the Company’s bonus plan. Mr. Antin also is entitled to specified perquisites.

 

If Mr. Antin’s employment is terminated due to his death, the employment agreement provides that we will pay Mr. Antin’s estate his accrued and unpaid salary, his accrued and unused vacation and sick pay, his base salary during the scheduled term of the employment agreement, accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination and continue to provide family medical benefits. If Mr. Antin’s employment is terminated due to his disability, the employment agreement provides that we will pay Mr. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement (reduced by any amounts paid under long-term disability insurance policy maintained by us for the benefit of Mr. Antin), accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination and continue to provide specified benefits and perquisites. In the case of termination due to death or disability, any options that accelerate on the date of termination will remain exercisable for the full term.

 

If Mr. Antin terminates the employment agreement for “cause,” if we terminate the employment agreement without cause or in the event of a Change in Control, in which event the employment of Mr. Antin terminates automatically, we will pay Mr. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement and an amount equal to five times the greater of Mr. Antin’s last annual bonus or the average of all bonuses paid to Mr. Antin under the employment agreement. In addition, we will accelerate the vesting of his equity awards and continue to provide specified benefits and perquisites. In these circumstances, Mr. Antin may exercise his options, which are accelerated on the date of termination, immediately upon termination and thereafter during the term of the option. For purposes of this paragraph, “cause” means as the result of (x) a willful breach of any of the material obligations of the Company to Mr. Antin under the employment agreement following written notice delivered to the Company and a reasonable cure period not to exceed 30 days; (y) the Company’s chief executive offices moving to a location outside of Los Angeles County, California; or (z) Mr. Antin failing to be reelected to, or being removed from, the Board of Directors.

 

If Mr. Antin terminates the employment agreement without cause or we terminate the employment agreement for “cause,” Mr. Antin is entitled to receive all accrued and unpaid salary and other compensation and all accrued and unused vacation and sick pay. For purposes of this paragraph, for “cause” means for a conviction (including any plea of guilty or no contest) of (x) any felony involving the embezzlement, theft or misappropriation of monies or other property, of the Company or otherwise, or (y) any crime of moral turpitude.

 

If any of the payments due Mr. Antin upon termination qualify as “excess parachute payments” under the Code, Mr. Antin also is entitled to an additional payment to cover the tax consequences associated with excess parachute payments.

In the event of a Change in Control and at our request, Mr. Antin is obligated to continue to serve under the same terms and conditions of his employment agreement for a period of up to 180 days following the termination date at his then-current base salary.

 

Mr. Antin’s post-retirement medical benefits coverage agreement provides that Mr. Antin and his family will continue to receive medical benefits coverage from the date employment is terminated until the last to occur of Mr. Antin’s death, the death of Mr. Antin’s spouse, or the end of the year in which each of Mr. Antin’s children has a 25th birthday. The medical benefits coverage afforded to Mr. Antin and his family after the termination of his employment will be at least as favorable as the most favorable level, type and basis of medical coverage provided to Mr. Antin and his family at any time during the five years prior to termination. Upon Mr. Antin’s eligibility for Medicare or a similar program, Mr. Antin will have the option to enroll in Medicare or such similar program. If Mr. Antin or any eligible family member elects to enroll in such program, the Company’s obligation under the post-retirement medical benefits coverage agreement will be limited to providing Medicare supplementary coverage and Executive Medical Excess Claims Insurance or a substantially similar policy. If the continuation of medical benefits coverage is subject to taxation under Section 409A(a)(1) of the Code as a result of the failure of the post-retirement medical benefits coverage agreement to comply with Section 409A, the Company will make a payment to Mr. Antin equal to all federal, state and local taxes incurred by Mr. Antin as a result thereof.

 

The following table describes the potential payments to Mr. Robert L. Antin upon termination or Change in Control.

 

 

Arthur J. Antin

 

Mr. Antin’s employment agreement, dated as of November 27, 2001, provides for Mr. Antin to serve as our Chief Operating Officer, Senior Vice President and Secretary for a term equal to three years from any given date, such that there shall always be a minimum of at least three years remaining under his employment agreement. (Mr. Antin no longer serves as the Company’s Secretary.) The employment agreement provides for Mr. Antin to receive an annual base salary established by the Compensation Committee based on comparable compensation packages provided to executives in similarly situated companies, and to participate in the Company’s bonus plan. Mr. Antin also is entitled to specified perquisites.

 

If Mr. Antin’s employment is terminated due to his death, the employment agreement provides that we will pay Mr. Antin’s estate his accrued and unpaid salary, his accrued and unused vacation and sick pay, his base salary during the scheduled term of the employment agreement, accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination and continue to provide family medical benefits. If Mr. Antin’s employment is terminated due to his disability, the employment agreement provides that we will pay Mr. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement (reduced by any amounts paid under long-term disability insurance policy maintained by us for the benefit of Mr. Antin), accelerate the vesting of his equity awards that would have vested during the 24 months following the date of termination and continue to provide specified benefits and perquisites. In the case of termination due to death or disability, any option that is accelerated on the date of termination will remain exercisable for the full term.

 

If Mr. Antin terminates the employment agreement for “cause,” if we terminate the employment agreement without cause or in the event of a Change in Control, in which event the employment of Mr. Antin terminates automatically, we will pay Mr. Antin his accrued and unpaid salary, his accrued and unused vacation and sick pay, his remaining base salary during the remaining scheduled term of the employment agreement and an amount equal to three times the greater of Mr. Antin’s last annual bonus or the average of all bonuses paid to Mr. Antin under the employment agreement. In addition, we will accelerate the vesting of his equity awards and continue to provide specified benefits and perquisites. In these circumstances, Mr. Antin may exercise his options that are accelerated on the date of termination during the full term of the option. For purposes of this paragraph, for “cause” means as the result of (x) a willful breach of any of the material obligations of the Company to Mr. Antin under the employment agreement following written notice delivered to the Company and a reasonable cure period not to exceed 30 days; or (y) the Company’s chief executive offices moving to a location outside of Los Angeles County, California.

 

If Mr. Antin terminates the employment agreement without cause or we terminate the employment agreement for “cause,” Mr. Antin is entitled to receive all accrued and unpaid salary and other compensation and all accrued and unused vacation and sick pay. For purposes of this paragraph, for “cause” means for a conviction (including any plea of guilty or no contest) of (x) any felony involving the embezzlement, theft or misappropriation of monies or other property, of the Company or otherwise, or (y) any crime of moral turpitude.

 

If any of the payments due Mr. Antin upon termination qualify as “excess parachute payments” under the Code, Mr. Antin also is entitled to an additional payment to cover the tax consequences associated with excess parachute payments.

In the event of a Change in Control and at our request, Mr. Antin is obligated to continue to serve under the same terms and conditions of his employment agreement for a period of up to 180 days following the termination date at his then-current base salary.

 

Mr. Antin’s post-retirement medical benefits coverage agreement provides that Mr. Antin and his family will continue to receive medical benefits coverage commencing on or after the date that Mr. Antin attains age 60 until the last to occur of Mr. Antin’s death, the death of Mr. Antin’s spouse, or the end of the year in which each of Mr. Antin’s children has a 25th birthday. The medical benefits coverage afforded to Mr. Antin and his family after the termination of his employment will be at least as favorable as the most favorable level, type and basis of medical coverage provided to Mr. Antin and his family at any time during the five years prior to termination. Upon Mr. Antin’s eligibility for Medicare or a similar program, Mr. Antin will have the option to enroll in Medicare or such similar program. If Mr. Antin or any eligible family member elects to enroll in such program, the Company’s obligation under the post-retirement medical benefits coverage agreement will be limited to providing Medicare supplementary coverage and Executive Medical Excess Claims Insurance or a substantially similar policy. The coverage provided by the Company is secondary to any employer’s group medical plan in which Mr. Antin or an eligible family member participates as an active employee, any employer’s group medical plan in which Mr. Antin is covered as the spouse or dependent or an active employee, any individual medical benefits coverage under which Mr. Antin or an eligible family member is covered, or Medicare coverage. If the continuation of medical benefits coverage is subject to taxation under Section 409A(a)(1) of the Code as a result of the failure of the post-retirement medical benefits coverage agreement to comply with Section 409A, the Company will make a payment to Mr. Antin equal to all federal, state and local taxes incurred by Mr. Antin as a result thereof. Furthermore, the Company’s obligation to provide post-retirement medical benefits coverage to Mr. Antin will cease if he causes any person or entity controlled by him to induce or attempt to induce (a) any employee of the Company or any of its affiliates to leave the Company or any of its affiliates or (b) any customer, supplier, vendor, licensee, distributor, contractor or other business relation of the Company or any of its affiliates to cease doing business with, or knowingly adversely alter its business relationship with, the Company or any of its affiliates.

 

The following table describes the potential payments to Mr. Arthur J. Antin upon termination or Change in Control.