CFO-Covers(small):Layout 1 12/30/09 12:02 PM Page 1ocbj.media.clients.ellingtoncms.com/static/ocbj/supplements/CFO_Guide_2010.pdfThat’s a claim not just any bank can make. ©2010

CFO-Covers(small):Layout 1 12/30/09 12:02 PM Page 1

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January 11, 2010 ORANGE COUNTY BUSINESS JOURNAL / CFO OF THE YEAR AWARDS ADVERTISING SUPPLEMENT Get local breaking news: www.ocbj.com Page A-1

s the U.S. economy undergoes vast changes, new occupations are beingcreated while others have grown obsolete. Through these changes,according to the Bureau of Labor Statistics, a Chief Financial Officerʼs offi-cial job description has remained consistent:

“Chief financial officers direct the organizationʼs financial goals, objec-tives, and budgets. They oversee the investment of funds and manageassociated risks, supervise cash management activities, execute capital-raising strategies to support a firmʼs expansion, and deal with mergers andacquisitions.”

In 40 words or less, thatʼs not a bad start. But it barely begins to describe the changeswe have witnessed at Rothstein Kass, working close-ly with California CFOs.

Perhaps a better way to understand the changingrequirements of a CFOʼs role is in these excerpts ofCFO “Help Wanted” ads we have seen:

• “Candidate must have the highest integrity”• “Efficient user and learner of technology”• “Not afraid to answer honestly”• “High energy and a genuine passion for business”• “Must be able to work at 20,000 feet and in the weeds”• “Must be able to predict the future of the energy industries,

the state of highway maintenance and repairs, and the gross average fast-food intakeweight of the American automotive buyer.”

In other words, a CFO merely needs to be a superhero.Does your employer expect all this of you?Probably not – because other members of your executive management team, including

your CEO, know you are human. You are an integral part of a team that has learned toleverage each otherʼs professional strengths and fill personal gaps or weaknesses. Inmany ways, your role on the team keeps expanding with your changing job description.New pressures from all sides

As humorous as some of these CFO “help wanted” ads may be, they help to highlightchanges in your knowledge, skills and responsibilities that have evolved over time. Few jobdescriptions in America – including the CEOʼs – have changed as much as yours.

Many CEOs have the flexibility to negotiate or implement their own job descriptions.CFOs, on the other hand, have become the focal point for pressures from all directions inthe organization – above and below, across department lines, and even across genera-tions of employees.

The management strengths you need to direct Baby Boomers are different than thosethat will motivate results with Generation X or Generation Y workers. The skills required toperform traditional CFO functions are far different from the new competencies you mustdemonstrate as an agent of change and provider of strategic business guidance.

CFOs need to guard against being too focused on day-to-day tasks or risk missing outon fully comprehending how their work requires a change in mindset, or the implications ofmacro changes for their companies and careers. Rothstein Kass appreciates the opportu-nity to have worked closely with many outstanding California CFOs. We would like to cel-ebrate the 3rd Annual CFO of the Year Awards by helping you evaluate all that you do, andthe increased value you are adding to your organization.

We describe these changes as six new or amplified core competencies of your expand-ing role. We invite you to reflect on specific ways that you have increased your knowledge,skills or responsibilities in each area.

By becoming more aware of the value you are adding, we believe you will become evenmore effective in helping your organization respond to a challenging economy and chang-ing marketplace.1. Enabling simplicity and transparency

Traditionally, CFOs were taught to tabulate historically financial data by following rules-based U.S. accounting standards. As the audience of financial data users expands glob-ally, CFOs are being challenged to go beyond traditional tabulations and meet the princi-ple-based standards of international commerce. As a result, CFOs are developing moreproficiency in presenting complex information effectively. Even as financial informationarrays keep growing more sophisticated, todayʼs top CFOs are simplifying presentations,emphasizing transparency, and identifying cause-and-effect relationships.

Principle-based standards often require more judgment and interpretation than rules-based standards. For example, they may force a CFO to look at financial statementsthrough the eyes of diverse audiences and fill gaps in understanding, so a more completeand accurate picture of a companyʼs financial health emerges. Footnotes may no longerbe adequate for disclosing assumptions, especially when users of financial data speak dif-ferent languages, have different customs, and use different accounting standards. Theability to emphasize “intuitive clarity” has become a valuable CFO competency.

For another example, suppose the Board of Directors approves a transaction that movesan asset or liability to a separate entity, appropriately off the companyʼs balance sheet.Knowing that this issue is important to diverse audiences, the CFO still might need todefine the most appropriate data and depth for describing this transaction, so that itsimpact is intuitively clear for all users.

This proficiency also requires CFOs to become more creative problem-solvers. Under

TThhee CChhaannggiinngg RRoollee ooff tthhee CCFFOO::Six New Core Competencies of Your Expanding Role

by Vincent Calcagno, Principal, Rothstein Kass

Arules-based accounting, a merger between business entities may require only a pro formaestimate of the combined entityʼs hypothetical historic and projected future results. The cre-ative CFO anticipates questions that potential investors or lenders will have about thetransaction and addresses them with focused analysis. The CFO also will play a pivotal rolein supporting strategic decisions and developing data models during the integration of com-bined entities, to help their CEOs exploit synergies, eliminate vulnerabilities, and follow crit-ical paths.2. Advocating new values and measurements

Traditionally, CFOs were the keepers of financial scorecards based on objective numer-ical data such as revenues, expenses, and profits. Inturn, these scorecards aligned with organizationalvalues and incentive/bonus structures. If the compa-ny met its profit targets, the executive team earnedincentives options and line managers earned year-end bonuses. Everyone was on the same financialpage, where the lines were black and white.

Today, this alignment is changing as organizations adopt new values based on non-finan-cial and subjective results, including “intangibles” such as employee creativity, workplacequality and customer satisfaction. Under new paradigms such as the Balanced Scorecard,financial and non-financial metrics are combined to define values, strategic direction andincentives. A business unitʼs work can be deemed exemplary and valuable even if it is aloss-leader. An executive can qualify for personal incentives by going against the grain anddriving innovation that may not prove profitable for years, if ever.

This shift requires CFOs to become advocates and enablers of change, and it also addscomplexity to traditional tasks such as profit forecasting. In some organizations, CFOs arein perhaps the best position to negotiate transitions between old and new values and iden-tify opportunities for fine-tuning measurement metrics and incentives. CFOs also can beindispensable in helping CEOs champion new values and communicate their benefits to theboard of directors and all stakeholders. 3. Managing the bottom line

In recent years, CFOs have faced a new set of challenges in achieving cost-cutting tar-gets and evaluating expense-driven initiatives, such as automation and outsourcing. Insome organizations, CFOs have become the cost-efficiency experts by default, becauseCEOs are preoccupied with maintaining top-line growth while line managers may lack thediscipline to make cost-cutting measures stick.

Modern CFOs understand intangible factors such as momentum, morale and organiza-tional inter-dependencies. They also have a critical eye for identifying underperformingunits, supply chain inefficiencies and non-productive assets. They avoid the pressures ofquota-driven cost cuts by implementing targeted, productivity-based initiatives that pareexpenses without disrupting workflows or downsizing valuable people.

CFOs also are supporting Chief Information Officers and IT staff in evaluating cost-sav-ing technologies and automation initiatives. In addition to justifying high-tech investmentsʼcosts and benefits, todayʼs CFOs help to evaluate transition impacts and ongoing riskssuch as system security and disaster recovery. They also work to assure the organizationʼsintegrity, reliability and competitive position across multi-year tech upgrade cycles.4. Choosing and using the best financial tools

Itʼs hard to believe that companies have been using spreadsheet software for only about30 years – and already spreadsheets have been replaced by more sophisticated tools forintegrating data, monitoring financial trends and modeling scenarios. Whether or not youhave an information technical background, evaluating the blur of changing financial andbusiness analysis tools has become part of your job description.

In larger organizations, CFOs are implementing world-class financial management tools

RRootthhsstteeiinn KKaassss

Rothstein Kass is a premier public accounting and advisory services firmthat has served privately held and publicly traded companies, individuals,

and families for 50 years.The Rothstein Kass Orange County Office is located at 2050 Main Street,

Suite 200, Irvine, CA 92614. For more information, please phone (949) 833-8900.

VViinncceenntt JJ.. CCaallccaaggnnooVincent J. Calcagno is the Principal-In-Charge

of Rothstein Kass’ Beverly Hills and OrangeCounty offices. He previously worked as the leadFinancial Services Principal in Rothstein Kass’San Francisco office. He graduated cum laudefrom Fordham University with a BS degree inaccounting and has completed the Leading Professional Services FirmsExecutive Program at the Harvard Business School. He is a member ofthe AICPA and CalCPA.

continued on page A-22

CFO-Guide(small):Layout 1 1/8/10 10:34 AM Page 1

Page A-2 Get local breaking news: www.ocbj.com ORANGE COUNTY BUSINESS JOURNAL / CFO OF THE YEAR AWARDS ADVERTISING SUPPLEMENT January 11, 2010

IntroductionOwners and management of target companies in merger and acquisition

(M&A) transactions are often surprised to learn that, in addition to whatever busi-ness, operational and financial due diligence may be undertaken by the acquirorand its financial and accounting representatives, an entirely separate and distinctparallel due diligence review of the targetʼs corporate governance, contracts andother material legal documents will be conducted by the acquirorʼs internal legalteam and/or outside law firm.

In many transactions, particularlythose involving private-company tar-gets, the companyʼs owners, manage-

ment team and M&A counsel expend unnecessarytime and attention addressing deficiencies discov-ered during the legal due diligence process.Resolving these deficiencies typically results insignificantly increased legal fees for the targetcompany (which is money out of the ownersʼ pock-ets), a delayed closing and, in some cases, theacquiror altogether walking away from the deal.The good news is that most, if not all, of thesecosts and delays can be reduced or perhaps avoided by taking some simple steps to prop-erly maintain the companyʼs corporate governance and legal matters and, where necessary,consulting with experienced corporate or M&A counsel.

Whether an exit event is around the corner or years away, it is much simpler and morecost-effective to implement and maintain sound corporate governance and legal practicesthan it is to correct problems after the fact. To the extent a company already has problems,it is better to discover and resolve them now than to have them emerge weeks or days priorto the anticipated closing date.

The following is a summary of some of the more common legal due diligence issues sell-ing companies encounter when engaging in an M&A transaction, along with some sugges-tions on how to avoid them. While some of the examples below refer to corporations organ-ized under the laws of California or Delaware, the principles generally hold true regardlessof the state of incorporation and, for the most part, also apply to other business entities suchas partnerships and limited liability companies.II. Articles and bylaws

A corporationʼs articles of incorporation and bylaws are the basic documents that governthe corporationʼs operation. Take an hour or so to read them. Yes, it can be a boring read –particularly for the creative, entrepreneurial personality – but the average business ownershould be able to understand most if not all of their contents. These documents containimportant information such as the authorized number of shares that may be issued; theauthorized number of directors; quorum requirements for board and shareholder meetings;and whether board or shareholder action can be taken by written consent (as opposed toactually holding a meeting). Becoming familiar with the foregoing provisions of the articlesand bylaws can help avoid some frequent and problematic corporate governance violationssuch as issuing too many shares, operating with the wrong number of directors, failing tohave a quorum when matters are approved by the board or shareholders, and taking actionby written consent when it is not authorized.III. Meetings and minutes; board and shareholder approvals

The corporate laws of both California and Delaware require that a corporation hold ameeting of shareholders at least annually. Similarly, most bylaws require that the board ofdirectors meet at least annually. Corporate law generally also requires that a corporationkeep accurate minutes of all shareholder, board and board committee proceedings. Theserules apply even if a corporation has just a single shareholder and/or director.

While the owners and directors of a private company may often see these as insignificantformalities, there are compelling reasons to take the time to comply with these require-ments. For example, a potential acquiror may become dissuaded by poorly-kept or missingminutes, as it may call into question whether the companyʼs activities have been conduct-ed with proper board and shareholder authorization or whether inattention to detail is per-vasive throughout the company, thus diminishing its valuation. More generally, failure tomaintain proper books and records is a violation of general corporate law and can be a fac-tor in holding shareholders personally liable for the acts of the corporation (a legal conceptcommonly known as “piercing the corporate veil” or “alter-ego liability”).

A non-exclusive list of matters typically requiring board approval includes: electing officersannually; adoption of employee benefit plans (401(k) plans, stock option plans, etc.); exec-utive-level employment agreements, salary and bonuses; the purchase, sale or lease of realproperty; credit facilities and other significant debt (other than ordinary course debt such astrade payables); and the issuance of stock, stock options and warrants to purchase stock.

KKeeeeppiinngg ((OOrr GGeettttiinngg)) YYoouurr CCoorrppoorraattee HHoouussee iinn OOrrddeerrSSiimmppllee sstteeppss ttoo aavvooiidd uunnnneecceessssaarryy aanndd ccoossttllyy hheeaaddaacchhee aanndd ddeellaayy ffoorr MM&&AA ttaarrggeett ccoommppaanniieess ttoo ffaacciilliittaattee aa ssmmooootthh eexxiitt ssttrraatteeggyy

by Garett Sleichter, Esq. Rutan & Tucker, LLP

1.Shareholders should elect directors on an annual basis and approve any fundamental

transactions, such as a merger or the sale or transfer of all or substantially all of a corpora-tionʼs assets. Shareholder approval may also be required for other transactions under appli-cable corporate law and to gain the advantage of certain tax treatment for a corporationʼsstock option or similar incentive-based plans.

A corporation that conducts these and other transactions at the direction of its manage-ment without obtaining board and/or shareholder approval may find that the conduct tran-spired without proper corporate authorization. The consequences of failing to obtain appro-

priate corporate authorization include the conductbeing void or subject to rescission and may exposethe company to various claims and liabilities. Tryingto correct these failures after the fact can be difficultand costly, particularly if the shareholders or boardmembers existing at the time of the conduct are nolonger in the picture or have become hostile to man-agement or each other. IV. Compliance with governing corporate laws

The corporate law of a corporationʼs state oforganization, as well as court decisions interpretingthose laws, are filled with nuances that can cause

the most well-intending board members and shareholders to trip up on corporate gover-nance matters. Here are just a few examples: • A California corporation must have two or more board members if it has two or more share-

holders; and must have three or more board members if it has three or more shareholders. • Except in limited circumstances, shareholders of a California corporation may not appoint

directors by written consent – the holding of an actual shareholdersʼ meeting is required. • Action taken by written consent of the stockholders of a Delaware corporation is invalid

unless each stockholder individually dates his or her signature to the consent. Failure to comply with these and other technicalities can result in corporate actions that

are not properly authorized. Again, improper authorization can be a substantial deterrent topotential acquirors and often require significant time and legal fees to correct. V. Contracts

A potential buyer will want to know that a company has the right to enforce the terms ofits contractual relationships. A company should appoint someone (ideally someone familiarwith negotiating or drafting agreements) to review the companyʼs contracts at least annual-ly to ensure they have not expired. If the company has numerous contracts and it provestoo burdensome to review them all, apply a Pareto-principled review – focusing on thosecontracts that are most material to the business. Contracts that have expired should beextended in writing or a new contract entered into. Also, check to make sure the terms ofthe contract match the current terms of the relationship and amend nonconforming provi-sions as necessary.

Oral contracts present similar problems. While a business owner may be comfortable withits ten-year oral arrangement with a certain customer or supplier, a potential buyer will like-

RRuuttaann && TTuucckkeerr

Rutan & Tucker has enjoyed a leading role in shaping Orange County andCalifornia businesses and communities, today standing as the largest full-service business law firm based in Orange County. Rutan & Tucker repre-sents a broad spectrum of clients, from major multinational corporationsand financial institutions to family-owned businesses and private individu-als; from high-technology and industrial enterprises to agricultural firms;

from real estate developers to governmental agencies, educational institu-tions, and charities. The firm's practice extends throughout the UnitedStates and includes both the representation of foreign companies doingbusiness in the United States and domestic companies engaged in activitiesabroad.

GGaarreetttt SSlleeiicchhtteerrGarett Sleichter is a senior associate in Rutan &

Tucker’s Corporate and Securities Section, wherehe represents both public and private clients in avariety of corporate matters, including mergersand acquisitions, securities, corporate finance,business organizations, technology, licensingand general corporate transactions. Mr. Sleichter’s mergers and acquisi-tions practice involves representing buyers and sellers in a broad rangeof business sales and acquisition transactions, including mergers, stockpurchases, asset sales and joint ventures. Mr. Sleichter can be reachedat [email protected].




CalCPA is a proud sponsor of the Orange County Business Journal CFO of the Year event.

Behind all the numbers,people are the bottom line.CalCPA Members. Trusted. Objective.At the heart of sound financial decisions.

www.calcpa.org100Y E A R S

CalCPA



n ordinary times, the most obvious wayto help high-performing employeesadvance in their careers is to promotethem. This enables you retain top talentand creates growth opportunities forother promising staff members. Butthese are not ordinary times, as mostbusinesses know only too well.

Nonetheless, to maintain your competitiveedge, you need to continue to help your mostexperienced staff members move upward alongtheir career ladders. But how do you createopportunities for growth when everything is “onhold?”

Actual advancement may not be possible inmany cases, but preparation for it still is. Thismeans you need to think in terms of groomingfuture leaders by providing meaningful ways for employees to build their skills, expandtheir knowledge base and gain hands-on experience.

Let employees take the lead. In a recent Robert Half survey, 42 percent of respon-dents said that challenging assignments provide the greatest job satisfaction.Appointing qualified employees to direct and manage project teams is a good way tonurture leadership potential.

Tap staff membersʼ expertise. Even if you donʼt have the budget to reimburseemployees for continuing education expenses, you donʼt have to forego professionaldevelopment. You may be able to offer cost-effective training by using in-house sub-ject matter experts. In this way, youʼll leverage the knowledge of one employee to edu-cate many other staff members. For example, if someone on your staff is proficientwith the newest inventory tracking software, consider holding a staff lunch where thatindividual can share her knowledge with coworkers.

Cross-pollinate. If your company is a small one with limited upward mobility even ingood times, you may want to “cross-pollinate” by training employees in complemen-tary areas of expertise. Such rotational programs are an extremely effective – andinexpensive – strategy for enhancing professional development. Whether rotationsinvolve moving staff into another department or just a different role in the same areafor a time, they allow employees to expand skills and deepen their understanding ofyour companyʼs products and services. These experiences also can be highly moti-vating because they provide staff members with new roles and perspectives—espe-cially important when an advancement opportunity is not immediately available.

The benefit for your company is that you will have a more versatile group of employ-ees with a better understanding of how all the separate parts (their individual respon-sibilities) come together to make the whole (a successful, profitable business).

Set up a mentoring program. Formal and informal mentoring is a proven way to keepvalued people, groom employees for advancement and foster collaboration and cama-raderie among staff members. Mentoring enhances the skills of mentees, builds ded-ication and loyalty, and provides senior staff with a sense of ownership and investmentin the companyʼs future.

Redefine career paths. In the context of performance reviews, talk to your employ-ees about their aspirations and goals. Using their input as a point of departure, brain-

NNuurrttuurriinngg SSttaaffff DDeevveellooppmmeenntt DDuurriinngg tthhee DDoowwnnttuurrnnPromotions may not be in the cards right now,

but you can still find ways to foster employees ̓professional growthby Brett Good, District President, Robert Half International

Istorm ways you might restructure positions toaccommodate and advance those goals.

Without making pie-in-the-sky promises,help them envision tangible rewards on thehorizon. This applies to both junior staff mem-bers as well as to those employees whoalready have considerable tenure. In fact, it isthis latter group that may be at a higher risk ofleaving, especially if they feel that theircareers have stalled at your firm.

To develop career paths, many firms usecompetency modeling, which involves “inter-viewing” top employees to determine whatthey feel makes them so successful at whatthey do. You can then apply these types ofskills and attributes to form the basis of careerprograms for others in the same or similar

role. Once employees learn which abilities are required to advance, they can work ondeveloping their strengths and filling in skill or knowledge “gaps.”

Your ability to provide professional development opportunities for your employeesdirectly impacts your retention efforts. Even in the current economy, you run the riskof losing good people if they think there are more promising prospects with your com-petitors. Your company will especially feel this “talent drain” when the economic cyclestarts to pick up again. By creating a collaborative, supportive environment in whichemployees feel that their skills are valued and their talents nurtured, youʼll maintain astrong team to carry you through to better times.

For more management and career advice, listen to Robert Halfʼs podcast series,The Management Minute, at www.rhi.com/podcast. Robert Half International is theworldʼs first and largest specialized staffing firm and the parent company of RobertHalf Management Resources. The company has more than 145 locations worldwide,including an office in Irvine. For more information visit Robert Half ManagementResources online at www.roberthalfmr.com.

BBrreetttt GGooooddBrett Good is a District President for Robert

Half International, the world’s first and largestspecialized staffing firm, and the parent com-pany of Robert Half Management Resources.The company has more than 145 locations

worldwide, including an office in Irvine. Brett joined Robert Half International in 1998, and oversees opera-

tions throughout Los Angeles, Orange and Ventura Counties, as wellArizona. He has more than 15 years of experience in staffing servicemanagement, as well as three years of consulting experience, spe-cializing in core process re-engineering, financial turnarounds and

business reorganization.



helping your business

challenginggrow in a

economy

Challenged by the economy?

For a FREE COPY OF THE BOOK

19 Ways to Help Your Company Grow in a Challenging Economy visit www.cbiz19.com.



ith the economy on rocky footing, bankruptcies are on the rise. Forthe 12 months ending June 30, bankruptcies filed under chapters 7and 11 exceeded 920,000 in the United States. Thatʼs a huge leapfrom the estimated 620,000 filings the year prior. Chapter 11 filingsalmost doubled. Californians filed more than 130,000 bankruptciesunder chapters 7 and 11 for the year ending June 30—an increaseof more than 150 percent over the prior year. These statistics do notbode well for small businesses and entrepreneurs.

Knowing bankruptcy basics is essential for a businessperson,whether your own firm needs to consider bankruptcy or you have a client or vendor whois bankrupt. A bankruptcy can result in slow collec-tions, loss of business, impending foreclosure, layoffsor a combination of these and other factors. The fol-lowing information can help you better understandbankruptcy and its implications.Bankruptcy basics

Although there are several types of bankruptcies,chapters 7 and 11 are the most common. Chapter 7 applies to individuals, married cou-ples, partnerships and corporations. It is a way to liquefy and redistribute assets and dis-charge debt. A Chapter 11 bankruptcy typically means that the debtor—usually a compa-ny—plans to continue operating and restructure its debt. Often in a Chapter 11, the debtorwill file a Plan of Reorganization, which provides the specifics of how the estate will treatclaims and implement the plan.

Bankruptcies are filed in federal—not state—court. A bankruptcy judge is assigned tothe case, and the United States Trusteeʼs Office ensures that debtors and creditors followprocedures. Debtors can voluntarily file for bankruptcy. But debtors also can find them-selves in an involuntarily bankruptcy when their creditors satisfy certain requirements.

The period before the bankruptcy is filed is the pre-petition period. The period from thedate of the bankruptcyʼs filing through the discharge is the post-petition period.

The filing of Chapter 7 or Chapter 11 by an individual creates a new taxpaying entity.That entity is separate and apart from the debtor. There are special tax rules that apply toboth the debtor (pre- and post-petition) and to the estate in individual, corporate and part-nership bankruptcy cases.

Depending on a number of factors, a debtor in Chapter 11 may act as a debtor-in-pos-session and continue to run the business after the bankruptcy is filed. The court, howev-er, may appoint a trustee to oversee the entity through the bankruptcy proceedings. Thetrustee then is responsible for managing the business and operations of the debtor.Bankruptcies also may involve attorneys, creditors, accountants to the trustee and a cred-itorsʼ committee.

Among the key documents are the voluntary or involuntary bankruptcy petition; state-ment of financial affairs; and the schedules of assets and liabilities, current income andexpenditures, unexpired leases and executory contracts (contracts between the debtorand another party in which both sides have to perform—e.g., a real estate lease). Thesedocuments provide the date of the bankruptcy, the assets and liabilities of the company,the key background and operational information, and a list of creditors.

If you are a creditor, you should file a proof of claim with the estate so that the claim isrecognized and the trustee or debtor-in-possession can review it. He or she will then eitherapprove or dispute the claim and classify it according to type. Creditors often band togeth-er and form creditorsʼ committees in Chapter 11 cases. Separate counsel may representthese committees, which receive payments through the bankruptcy estate.The options

A debtor can use bankruptcy to take a step back and regroup in order to cope with finan-cial obstacles. The bankruptcy code affords debtors what is known as the “automatic stay,”which halts any litigation against a debtor. No one can bring or enforce a foreclosure, gar-nishment, repossession or other lawsuits against a debtor or property of a debtor unlessthe bankruptcy judge grants relief from the automatic stay.

On the other hand, the court does not minimize a secured creditorʼs rights, and it pro-vides a creditor with adequate protection. That means that the debtor-in-possession ortrustee must maintain and protect a creditorʼs interest in property.

Avoidance actions are another tool at the disposal of a debtor-in-possession or trustee.Each provides a method by which money or other property may be brought back into anestate. There are three types of avoidance actions: preferences, fraudulent transfers andpost-petition transfers.

DDeebbttoorrss,, CCrreeddiittoorrss NNeeeedd ttoo KKnnooww BBaannkkrruuppttccyy BBaassiiccssby Maryellen K. Sebold, CPA

(This article is adapted from an article that originally appeared in the October 2009 issue of California CPA magazine.)

WUnder a preference action, trustees or debtors-in-possession may retrieve money or

property transferred to a particular creditor on or within 90 days before the filing of thebankruptcy petition. They have up to one year to recover transfers made to an “insider,”such as a relative or someone closely involved with the bankrupt entity. A successful pref-erence action provides additional funds to the estate that it can use to pay creditors.Fraudulent transfers allow a similar avoidance of transfers on or within two years of the fil-ing of the petition under federal law (or longer under state fraudulent transfer laws) ifeither:

1. There was intent to hinder, delay or defraud creditors, or 2. The debtor received less than reasonably equivalent value for the transfer and was

insolvent. Post-petition transfers are transfers of property of

the estate made after the petition has been filed.They, too, can be avoided.

The specific rules surrounding avoidance actionsare complex and more detailed than what isexplained here. The bankruptcy code secs. 547, 548and 549 provide more details. Regardless, a bank-

ruptcy estate may benefit from avoidance actions if they result in additional funds in his orher estate. A creditor or other party, however, may be on the other end of an avoidanceaction lawsuit for having received funds that the trustee or debtor-in-possession seeks torecover.Making the call

One of the biggest decisions for a creditor to make after bankruptcy is filed is whetherto assume or reject an unexpired lease or executory contract. Of course, if the debtordefaulted on the lease or contract, the creditor cannot assume a contract unless thedefault is cured, there is assurance of future performance, and compensation is paid tothe party to the lease or contract.

These decisions are critical when considering a businessʼs future operations andrestructuring options. There also are time limits under which assumption or rejection mustoccur. Therefore, if you happen to be the landlord of the debtor, you need to address theseissues soon after the debtor files bankruptcy. You should calculate the obligations underthe lease as of the date of bankruptcy and monitor collection of future rents.

If you are a creditor in a bankrupt estate, the court will assign your claim a priority.Secured claims receive the highest priority and are paid first. Secured claims are liens onparticular property of the debtor up to the value of the collateral, or they are subject to aset-off. Unsecured claims are those that are not secured by any collateral. They get thelowest priority and are typically paid last. Often, unsecured claimants do not receive thefull amount owed them because of the lack of funds available for distribution. There areseveral layers of priorities between these claims. Each creditor in each claim priority ispaid pro rata with the other creditors in that group, however.

Bankruptcy can be a long process or streamlined to conclude quickly—especially if youdo significant pre-bankruptcy planning. Regardless, bankruptcy is complicated. Youshould consult a financial adviser, such as a certified public accountant, if you are con-sidering bankruptcy or if you are a creditor in a bankruptcy estate. The adviser may sug-gest alternate ways to handle the situation. If you do declare bankruptcy or are a creditorin one, you may need to retain counsel to ensure your rights are protected.

CCaalliiffoorrnniiaa SSoocciieettyy ooff CCPPAAss

With more than 33,000 members, the California Society of Certified PublicAccountants (CalCPA) is the largest CPA organization in the state and largeststate CPA society in the nation. CalCPA has 14 chapters throughout the state,including the Orange County/Long Beach Chapter, which has more than 4,000members. The Society’s headquarters are in Redwood City.Thirty-six accountants from Sacramento and San Francisco formed CalCPA

in 1909 to promote high standards for the accounting profession. Today,CalCPA continues that mission by providing programs and professional devel-opment opportunities that help members improve their professional abilitiesand strengthen their relationships with clients, employers, government

agencies and the public.CalCPA members play a vital role in California’s economy. They counsel

businesses and entrepreneurs about how to improve their financial situationand better manage their resources. They assist individuals with the filing oftaxes, help them prudently invest their funds, and guide them through estateplanning to protect their wealth for their heirs.Through CalCPA Institute, the Society’s members conduct financial literacy

programs in the state’s schools and for community organizations. TheSociety’s Web site, www.calcpa.org, also provides financial literacy tips,including budgeting and saving advice. To arrange a financial literacy programfor a school or community organization, contact Crystil Turner at [email protected].

MMaarryyeelllleenn KK.. SSeebboollddMaryellen K. Sebold, CPA/CFF, CIRA, is a

managing director with Durkin Forensic, Inc.,in Los Angeles. She is a member of the

California Society of CPAs (CalCPA) and is amember of the board of trustees of the CalCPA

Education Foundation.





ne year ago, the International Financial Reporting Standards (IFRS)Roadmap in Release No. 33-8982 had been given up for dead. But despitethe apparent lack of enthusiasm for the international rules among somesenior SEC officials, the plan to replace U.S. GAAP is still active. TheSecurity and Exchange Commissionʼs (SECʼs) Chief Accountant, JamesKroeker, has stated that the proposal is very much one of his priorities.As financial statement preparers and accountants expected, the appoint-ment of a chief accountant at the SEC is answering some questions about

the status of international convergence.Unifying U.S. GAAP with IFRS will be a priority for regulators in the “coming weeks and

months,” said Kroeker at the AICPAʼs banking conference in Washington, on September14, 2009, his first public speech since being named the SECʼs Chief Accountant.Kroeker had the job in an acting capacity for eight months after his predecessor, ConradHewitt, retired. Kroeker said the SEC staff continues to analyze comments it received tothe proposed roadmap for IFRS issued in November 2008 as Release No. 33-8982,“Roadmap for the Potential Use of Financial Statements Prepared in Accordance withInternational Financial Reporting Standards by U.S. Issuers.”

Kroeker added that some accounting practitioners viewed the SECʼs decision earlier thisyear to extend the comment period as a sign that the SEC no longer supported moving toIFRS. However, Kroeker said this was a wrong assumption, and the comment period wasextended because a number of potential respondents to the roadmap had called the SECsaying the original 90-day comment period was too short.

About half of the over 200 comment letters that the SEC received came from preparersof financial statements, and Kroeker explained that while commentators generally said theU.S. should move to a set of high-quality standards, that is really where any consensus onthe issue ended.

“There are just an array of views and perspectives about how to move toward a suitableset of high-quality standards, when to do that, and whether the current standards underIFRS represent that body of standards,” he said.

Wayne Carnall, Chief Accountant in the Division of Corporate Finance at the SEC, saidhe was surprised the SEC did not receive more comment letters. Kroeker made it clearthat IFRS will receive a much higher profile in the office of the Chief Accountant under hisleadership, but neither he nor Carnall could provide a definitive timeline for the commis-sionʼs plan to address the proposal. Kroeker did say that his staff is working on a commentletter summary.

One thing that may help speed up the SECʼs handling of IFRS is the financial crisis,which has highlighted the importance of global solutions, “even on an accounting front,” tocomplex issues, Kroeker said. “We saw last fall, folks in Europe pointing to some provi-sions in U.S. GAAP that allowed for reclassifications in rare circumstances,” he stated.Additionally, the G-20 recently called on international accounting bodies to complete theirconvergence project by June 2011.

SSEECC CChhiieeff AAccccoouunnttaanntt CCoommmmiittssttoo GGiivviinngg IIFFRRSS RRooaaddmmaapp aa SSeeccoonndd LLooookk

by Scott Appel, Partner-in-Charge, Irvine Office, HEIN & ASSOCIATES LLP

O

HHEEIINN & ASSOCIATES LLP

HHEEIINN & ASSOCIATES LLP is a full-service public accounting and advisoryfirm with offices in Denver, Houston, Dallas, and Irvine, California. For over30 years, we have provided a broad range of accounting and business advi-sory services to companies of all sizes in a variety of industries. Our networkaffiliation with two of the largest international associations of accounting andadvisory firms in the world allows us to provide seamless client care domes-tically and throughout the world. The team-based approach of our profes-sionals provides you with a full range of technical expertise, experience, and

specialized industry knowledge to forge customized solutions for your busi-ness. We are ranked as one of the top 60 accounting and advisory firms in thecountry1, and our SEC practice is recognized as among the largest in thenation.2 In addition, HHEEIINN & ASSOCIATES LLP is consistently recognized byInside Public Accounting as a “Best of the Best” firm, an honor bestowed ononly 25 firms per year based exclusively on management performance.

1 Accounting Today, April, 20092 Public Accounting Report, March, 2009

SSccootttt AAppppeellScott Appel is the Partner-in-Charge of the

Irvine office of HHEEIINN & ASSOCIATES LLP, andhas over 25 years of professional experienceproviding public and private companies withaccounting, auditing, financial reporting, andbusiness advisory services. He specializes inSecurities and Exchange Commission (SEC) reporting, regularly con-sulting with public companies on matters related to SOX 404 andGAAP compliance. Scott’s hands-on experience as both a CFO and aCOO enables him to relate to the challenges facing business leaders,and identify a solution that complements their business objectives.

The Security and Exchange Commissionʼs (SECʼs) Chief Accountant, James Kroeker, has stated that the International Financial Reporting Standards

(IFRS) Roadmap is very much one of his priorities.





ongratulations to each of the nominees for the Third Annual CFO of theYear Awards presented by the Orange County Business Journal. We joinin honoring these outstanding financial professionals for their achieve-ments as corporate and non-profit stewards.

In a survey about international banking that we conducted last year withOrange County CFOs, we learned that you want to simplify and consoli-date your international banking relationships. High on your international

wish lists were banks that offer:• Quick, locally based credit decisions• Access to local banking officers• Global credit advice from a local banker about international credit opportunities• Global trade finance advice, particularly about foreign government subsidies and

programs• Competitive global loan commitment hold levelsWe heard that multinational companies want to work with fewer banks; and with

banks that offer a broad portfolio of international products and services.Coordinating your global banking

A solution that CFOs can consider is working with banks that offer comprehensiveglobal finance solutions.

For instance, in banks that have a global business coordination unit, corporate rela-tionship managers can seamlessly bring together customized global offerings to solveeach companyʼs needs. The relationship managers can tap the full strength of thebankʼs international units, and act as the local liaison for the company.

Among the services a global business relationship manager can provide:• Offering effective global treasury management tools• Managing yield and tax expense from domestic and offshore asset pools• Hedging exposure through interest rate risk management• Offering trade-finance solutions such as supply-chain financing and offshore

accounts receivable factoring• Arranging foreign currency loans for international operating subsidies.One particularly effective global treasury management tool is Global Treasury

Service. With this service, companies of all sizes can open and access accountsaround the world, and centralize them in one, easy to use, online location.Global Treasury Service

Some of the benefits companies can realize from Global Treasury Service:• Open offshore accounts around the world through a single point of contact.• Consolidate information reporting of U.S. and foreign account balances, through a

single sign-on in the U.S.• Initiate and manage in-country, domestic payments for payroll, contractors,

vendors, utilities, taxes and insurance, as well as monitor receivables—all from asingle online platform.

• Control and assign account access, easily and securely online.Union Bank currently offers Global Treasury Service as one of many global solutions

provided to our clients through our relationship managers. This service gives compa-nies the ability to open foreign bank accounts in more than 30 key financial markets inAsia and Europe—and manage them centrally.

Many companies are using Union Bankʼs global financial advisory capabilities to helpsecure offshore local-currency loans. These loans may be used to fund internationaloperations without investing capital in a country where it cannot be recovered easily.

Another powerful tool that Union Bankʼs global business unit has offered to OrangeCounty companies is accounts receivable factoring for companies selling in Japan. It isan effective way of managing cash flow, because Japanese companies traditionally pay

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by Scott Connella, Union Bank Market President

C slower than U.S. cycles.Union Bankʼs relationship managers are able to work closely with bankers at our par-

ent bank in Japan, The Bank of Tokyo-Mitsubishi UFJ (BTMU), which has a lendingrelationship with thousands of that nationʼs companies.

This puts Union Bank in a unique position as a U.S.-based Asian niche bank to helpU.S. multinational companies tap into the some of the worldʼs fastest growingeconomies in Asia.

The bottom line: Union Bank gives multinational companies a U.S.-based liaison thatcan seamlessly knit together many offshore deposit and lending resources such asopening multiple accounts, consolidating information reporting within one computermodule, and interacting directly with in-country clients and vendors.

Financing subject to credit and collateral approval. Other restrictions apply. Termsand conditions subject to change.

UUnniioonnBBaannCCaall CCoorrppoorraattiioonn && UUnniioonn BBaannkk,, NN..AA..

Headquartered in San Francisco, UnionBanCal Corporation is a financialholding company with assets of $78.2 billion at September 30, 2009. Itsprimary subsidiary, Union Bank, N.A., is a full-service commercial bank pro-viding an array of financial services to individuals, small businesses, mid-dle-market companies, and major corporations. The bank has 337 bankingoffices in California, Oregon, Washington and Texas and two international

offices. UnionBanCal Corporation is a wholly-owned subsidiary of The Bankof Tokyo-Mitsubishi UFJ, Ltd., which is a subsidiary of Mitsubishi UFJFinancial Group, Inc. Union Bank is a proud member of the Mitsubishi UFJFinancial Group (MUFG, NYSE:MTU), one of the world’s largest financialorganizations. Visit www.unionbank.com for more information.

SSccootttt CCoonnnneellllaaScott Connella is the Market President forUnion Bank’s Commercial Banking Group –

Southern California. He oversees corporate bank-ing at the Orange County, San Diego, San GabrielValley and Inland Empire regional offices. He canbe reached at [email protected] or

(949) 553-6855.

A Direct Link to Asian Business and FinanceAs a wholly-owned subsidiary of one of the largest banks in Asia, Union Bank is a

leader in providing financial services to U.S. companies that want to launch or expandtheir business in Asia.

Union Bankʼs parent company is The Bank of Tokyo-Mitsubishi UFJ, Ltd.(BTMU),which is in turn a subsidiary of Mitsubishi UFJ Financial Group (MUFG), one of theworldʼs largest financial organizations.

Union Bankʼs Global Business Coordination Unit officers talk weekly with BTMUteams based in Tokyo, Singapore and Shanghai to discuss ways to bring global cap-ital market solutions to customers.

The Union Bank team also travels quarterly to Japan, China, Singapore, Malaysiaand other Asian nations to team up with senior BTMU specialists and visit the over-seas regional treasury centers of U.S.-based clients. BTMU officers are also regular-ly making visits to the U.S.

This collaboration has allowed Union Bank relationship managers to help severalOrange County based companies set up treasury management services in Asia andpursue a large credit facility in Japan, for example.

The Union Bank-BTMU connection makes Union Bank relevant as a global partnerfor Orange Countyʼs top-tier multinational companies.





ver the past decade, closely held companies have increasingly ventured over-seas to sell products and provide services. It is not unusual for U.S. business-es to be required by domestic laws to pay tax on income locally and pay againin the country in which the income was earned. This results in double taxation.

Through proper planning and business strategy, U.S. companies may beable to take advantage of tax credit opportunities and international tax strate-gies, allowing for the efficient flow of goods and services across national bor-ders. Below are several tax strategies as well as some cautionary signs forcompanies selling overseas.

Understanding the U.S. worldwide income tax regimeThe U.S. maintains a worldwide taxation system in which U.S. persons (including individual

citizens and residents, corporations, partnerships and LLCs) are subject to tax on income fromall of their worldwide activities. Thus, income earned by a U.S. person in a foreign country issubject to U.S. federal income tax, even if that same income is subject to tax in the foreign coun-try.Caution: Seeking to close perceived loopholes favoring corporations and high net worth indi-viduals, the Obama Administration has proposed numerous reforms that would make sweep-ing changes to the current international tax rules. The need to understand the existing com-plexities of international tax, the proposed material changes to the current rules, and the inter-relationships with other taxing jurisdictions, becomes increasingly important as the burden ofavoiding taxation by multiple jurisdictions falls squarely on the taxpayer.Meeting the U.S. foreign tax credit requirements

To avoid double taxation, U.S. taxpayers may be able to claim a foreign tax credit for taxespaid to foreign jurisdictions.

The amount of available credit is subject to certain limitations. It is required that foreign sourceincome as well as expenses be allocated and apportioned among U.S. source income and for-eign source income. Therefore, characterization issues as well as the location of the sales orservices are critical in maximizing a companyʼs foreign tax credit. Corporate U.S. taxpayers(excluding S Corporations) that own foreign corporations may be able to claim a deemed paidcredit on the foreign taxes paid by the foreign subsidiary. In addition, unused foreign tax creditscan be carried back one year and forward ten years.Caution: Proposed changes by the Obama Administration could restrict foreign tax credits bylinking the amount of the foreign tax credit to the amount of the consolidated earnings and prof-its of the foreign subsidiaries that are repatriated to the U.S. To avoid this pitfall, companies look-ing to repatriate foreign earning should consult with their U.S. tax advisor before doing so.Taking advantage of existing income tax treaties

The U.S. is party to a number of income tax treaties that provide for a reduction in withhold-ing tax on interest, dividends and royalties paid to or from U.S. persons. These treaties definethe types of business income that may be subject to tax in each country. Contact your interna-tional tax advisor to identify if the U.S. has an income tax treaty currently in force with any of thecountries in which your company sells its products or services.Deferral of U.S. tax on foreign earnings

The earnings of a foreign corporation owned by a U.S. person are generally not subject toU.S. taxation, unless and until such earnings are repatriated back to the U.S. Under certain cir-cumstances, if the foreign corporation is considered a controlled foreign corporation (CFC), thedeferral from U.S. tax is not allowed. A CFC is generally defined as any foreign corporationwhere more than 50% is owned by U.S. shareholders. The U.S. shareholders will generally berequired to include in income their pro rata share of specifically defined types of income earnedby the foreign company, denominated as “Subpart F income.”

The passive foreign investment company (PFIC) rules apply to foreign corporations heavilyengaged in investing in passive assets or companies that generate passive income. The rulesare intended to tax U.S. owners on income from foreign companies that are not engaged inactive business.Caution: Under the proposed international tax changes, U.S.-based multinationals may haveto defer deductions for expenses properly allocated and apportioned to a CFCʼs foreign incomeuntil profits are repatriated.Proactive transfer pricing

If two or more businesses are owned or controlled by the same owners, the IRS may reallo-cate gross income, deductions, credits, or allowances between the businesses. The IRS willperform this reallocation when it is necessary to prevent the evasion of taxes or to clearly reflectthe income of the organizations.

MMiinniimmiizziinngg YYoouurr IInntteerrnnaattiioonnaall TTaaxx BBuurrddeennssAvoiding double taxation and other possible pitfalls

by Ralf Eschenburg, CPA, CBIZ MHM International Tax Services Group

OFor example, a U.S. company that sells widgets in England for $100 with per unit costs of

$40 would normally be subject to U.S. tax on the $60 of profit. Assume the U.S. companyforms a wholly-owned Bermuda subsidiary corporation and first sells the widgets to Bermudafor $45 and then Bermuda sells the widgets to England for $100. In this case, the U.S. com-pany would be subject to tax on $5 from the sale to Bermuda, with the remaining $55 profitdeferred from U.S. tax since it is held by the company in Bermuda. In this example, assumingthere are no activities in Bermuda, the IRS may reallocate the income and have all of the prof-it ($60) subject to U.S. tax.

By proactive transfer pricing that supports, through contemporaneous documentation, cer-tain activities and risks in Bermuda, the company could maintain tax deferral on a substantialportion of the profits in the above example.Caution: There are a number of proposed changes in the international taxation area. Pleasesee our article President Obamaʼs International Tax Reform Proposals on our website atwww.cbiz.com/taxplanning for more information. The Importance of filing the correct international forms and returns

One of the most common problems for companies with overseas activities is the failure tofile the necessary forms, returns or reports. In recent years, the IRS has increased the penal-ties for noncompliance and enforcement resources are being directed to this area. It is impor-tant that you work with your financial advisor to determine if you have filed all required reports,whether you qualify for an amnesty program, and what action, if any, you need to take.Tips for expatriates

Many businesses have employees working outside the country who are U.S. citizens or res-idents, and as previously discussed, the U.S. taxes citizens and residents on their worldwideincome. A qualifying individual who is living or working abroad may elect to exclude up to$91,400 (for 2009) of foreign earned income from U.S. taxation. In addition, a qualified indi-vidual may elect to exclude a certain amount of employer-provided foreign housing expensesthat are included in the salary of the individual.

A qualified individual is one who has met either the bona fide residence or physical presencetest to establish a foreign tax home, which generally means that an individual must have anoverseas assignment of greater than one year. In either test, it does not matter if there is morethan one foreign country involved.

Foreign earned income includes wages, salaries and other compensation amounts for serv-ices actually rendered overseas and while the individual had a foreign tax home. The exclu-sion amounts are for a full calendar year, and are prorated by days for the first and last yearan individual qualifies, if less than the full calendar year.

For foreign income taxed by a foreign country that is not excluded under provisions notedabove, or does not qualify for such provisions, an individual is entitled to a foreign tax credit.Contact a qualified international tax expert

International tax is a complicated area to which more businesses are becoming subject asthey expand overseas. Before moving forward, arm yourself with the information and planningsupport you need to navigate international tax codes and regulations; speak to a dedicatedinternational tax expert today.

CCBBIIZZ,, IInncc..

CBIZ, Inc. (NYSE:CBZ) is a publicly traded, national company providing awide range of professional business services to help clients manage theirfinances, employees and technology. Our highly experienced tax specialistsoffer top-quality tax compliance and consulting services including; interna-tional tax, Research and Development (R&D) tax credit and State and LocalTax (SALT) services.

Mayer Hoffman McCann P.C.Mayer Hoffman McCann P.C. (MHM) is a national independent CPA firm.

MHM was founded over 50 years ago and has been helping public and privatecompanies, nonprofit organizations and government entities since its incep-tion. As a result, we have experienced steady growth and matured into one ofthe nation’s top accounting firms.Together, CBIZ and MHM is the eighth largest accounting provider in the

country.To speak to one of our professionals in the local office, contact Lloyd Miller

at 949-727-1323 or [email protected].

RRaallff EEsscchheennbbuurrggRalf Eschenburg, CPA, leads the CBIZ MHMInternational Tax Services Group in the WestRegion. He is responsible for advising clientsand prospects of the Firm about all aspects ofinternational tax. He has worked exclusively in

the international tax arena since 1989, including over 18 years working in the Big Four

accounting firm environment. Ralf can be reached at [email protected]

or (949) 727-1324.





he major stock market indices have improved significantly from theirdepressed levels of nine months ago, the rising unemployment rateappears to be in the initial stages of leveling off and the term “green shoots”is seeing something of a revival in the media.

Although cautious optimism for a sustained economic recovery is begin-ning to take hold in some circles, the markets remain well below their his-toric highs of two years ago. For companies with stock prices that remaindepressed or have not fully recovered, and with competitors that either arecash-rich or have weathered the downturn with high-value stock, the com-

bination of low valuations and cautious optimism is creating a vulnerable situation fraughtwith hostile takeover risks.

Although overall M&A activity generally has been indecline in the past two years, hostile M&A activity has beenon the rise since the beginning of 2008. Many companiesalready have some sort of hostile takeover defense inplace, whether by default to protective provisions in statecorporation law or by careful planning and consideration. In this environment, however,the time is ripe for companies to review their potential exposure to a hostile takeover and,in consultation with legal counsel, update, re-institute or implement new hostile takeoverdefenses.

Hostile takeover defenses can range from customized charter provisions, such as aclassified board of directors, to comprehensive plans, such as a “poison pill.” There existsno default set of defenses befitting all companies. Each company is unique both in itsdefense needs as well as in the degree of defenses its stockholders are likely to approve.Nonetheless, each company should review the adequacy of its takeover defenses nowbefore it faces a hostile bid that does not reflect the true long-term value of its business.In undertaking this review, a company should consider all defensive measures availableto it, including, but not limited to, the following deterrents commonly implemented byDelaware corporations.Classified board of directors

A classified or staggered board of directors serves as a common hostile takeoverdefense. A companyʼs certificate of incorporation can provide for the division of its boardinto two or more classes, with the election of directors staggered each year based on theclass to be elected. As a result, only a subset of the board is subject to election in anygiven year and a hostile party may be prevented from gaining control of the board for twoor more years. To be effective, classified board provisions typically are combined withprovisions that limit stockholder ability to remove directors and that give the board thesole authority to determine the number of directors and fill vacancies. These measuresmay deter proxy contests to replace incumbent directors and, accordingly, may also deterhostile bids. If a company currently does not have a classified board and related provi-sions, an amendment to its certificate of incorporation to provide for such would requirestockholder approval.Elimination or limitation of stockholder ability to act by written consent or to callspecial meetings

Another common hostile takeover defense, typically found in a companyʼs bylaws, is toeliminate or limit stockholder ability to take action by written consent. By doing so, pro-

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by Randall Wood, Associate, and Parker Schweich, Partner, Dorsey & Whitney LLP

Tposals for taking stockholder action that could facilitate a takeover would be delayed untilthe next meeting of stockholders. Although eliminating stockholder written consent alto-gether may impose an unnecessary impediment to effectuating certain desirable actionsfor smaller public companies, limiting stockholder written consent to matters that havebeen previously approved by the board can provide an alternative for companies thatwish to retain stockholder ability to act by written consent while also providing a takeoverdefense.

In addition, eliminating or limiting the ability of stockholders to call special meetings willmake it more difficult for a stockholder to initiate an action to which the board is opposed.

When combined with a limit on actions by written consent,this takeover defense can be useful to thwart activist stock-holders.Supermajority vote requirements

Including stockholder supermajority vote requirements ina companyʼs certificate of incorporation and bylaws canhelp prevent a stockholder or group of stockholders holding

a majority of the outstanding shares from amending the charter documents to unravelother takeover defenses implemented by that company, such as a classified board.Common actions to which stockholder supermajority vote requirements typically areapplied include: (i) increasing or reducing the number of directors, (ii) amending anyother hostile takeover defense provisions in the bylaws or certificate of incorporation and(iii) approving certain business combinations, dispositions or similar transactions, suchas mergers, sales of assets, reorganizations or transactions with interested stockholders.These measures can make hostile takeovers more difficult to accomplish, but should becarefully tailored so as not to confer an unwanted veto power upon the minority stock-holders.Advance notice bylaw provisions

Advance notice bylaw provisions establish a procedure that a stockholder must followto validly propose new business at a stockholder meeting, including the nomination ofdirectors. Typically, the stockholder must provide detailed notice to the company of theproposed business for consideration at the stockholder meeting. Notice deadlines vary,but typically are tied to the anniversary of the prior yearʼs annual stockholders meetingand generally fall between 60 and 120 days prior to such anniversary date.

Advance notice bylaw provisions can be effective in eliminating last-minute stockhold-er proposals raised at or before a stockholder meeting and give the board sufficient timeto consider the qualifications of the proposed nominees or the merits of other stockhold-er proposals. These bylaw provisions do not, however, impact the rules for inclusion ofcertain stockholder proposals in a companyʼs proxy statement made pursuant to SECRule 14a-8.

In light of recent Delaware case law, which has favored a narrow reading of advancenotice bylaw provisions to the advantage of stockholders, companies should carefullyreview their advance notice bylaw provisions to ensure that they are not ambiguous, that

DDoorrsseeyy && WWhhiittnneeyy LLLLPP

Clients have relied on Dorsey since 1912 as a valued business partner. Withmore than 650 lawyers in 19 locations in the United States, Asia Pacific,Canada and Europe, Dorsey provides an integrated, proactive approach to itsclients' legal and business needs. Dorsey represents a number of the world'smost successful Fortune 500 companies from a broad range of disciplines,including leaders in the financial services, investment banking, life sciences,securities, technology and energy sectors, as well as nonprofit and

government entities.Dorsey lawyers in the Southern California office practice in the areas of cor-

porate law, securities and corporate finance, intellectual property, labor andemployment, general business litigation, including securities litigation andcompliance advice, and corporate trust. More information about the firm can be found at www.dorsey.com.

PPaarrkkeerr SScchhwweeiicchhParker Schweich is a Partner in Dorsey’s

Corporate Group and has extensive experiencerepresenting companies, investment banks andventure capital firms in corporate finance trans-actions, including mergers and acquisitions, ini-tial public offerings and other registered public

offerings, PIPE transactions and other private placements of equity anddebt, and venture capital financings. He can be reached at (949) 932-

3600 or [email protected].

RRaannddaallll WWooooddRandall Wood is a corporate associate at

Dorsey. He focuses his practice on corporateand securities law, including mergers and acqui-sitions, SEC registered offerings, private place-

ments, venture capital financings, SEC reportingand compliance and general corporate counsel-

ing and governance. He can be reached at (949) 932-3600 [email protected].




merica is a land of smart shoppers, and given the right plans, tools and informa-tion, people will be able to make rational, wise and successful health care deci-sions. At CIGNA, we also know that healthy people spend less on health care, aremore productive and contribute more to their companyʼs overall performance.Thatʼs why CIGNA Choice Fund®, our easy-to-use consumer-driven health plan(CDHP), focuses on improving health.

CIGNA Choice Fund is designed to deliver both immediate andsustainable cost savings. We do it by delivering the right mix of influ-encers to change behavior so individuals make value-oriented invest-

ments in care to improve their health.While most CDHPs primarily focus on using short-term tactics like high deductibles

to shift cost, CIGNA focuses on strategies to shift behavior. These new, improvedbehaviors will lead to improved health and immediate – and sustainable – lowercosts.

Why is this approach better? Cost shifting is a quick fix to lower a companyʼs over-head, but it doesnʼt address the root cause of rising costs – too much illness and dis-ease. Unless you can reduce the production of new disease – and the destructionfrom existing disease – within an employee population, a companyʼs health care costs will con-tinue to increase, even if the company is paying a smaller portion of the expense.

Using our extensive experience in behavioral health, CIGNA built Choice Fund to deliver theright mix of influencers to change behavior. We make it easy for individuals to confidently seek,find and receive care that empirical research has proven is most effective at improving health andlowering costs.

In the end, individuals in CIGNA Choice Fund are more in control of their health and have theconfidence to invest wisely in care – today and into the future. Whatʼs more, the organizations theywork for perform better, are more productive and have lower sustainable costs.CIGNA CDHPs reduce health care costs as quality improves

As overall medical costs continue to increase by double digits annually, a recent CIGNA studyshows that medical costs for individuals in account-based CDHPs go down 26 percent over fouryears, while levels of care for their preventive medicine, chronic disease management and evi-dence-based treatments are higher than their counterparts in traditional PPO and HMO healthplans.

A new multi-year study of health care claims experience of 655,000 CIGNA customers, theFourth Annual CIGNA Choice Fund Experience Study is the latest evidence that more than anyhealth reform proposal currently on the table, these innovative free market plans consistentlydeliver actual quality, accessible health coverage at substantially lower costs.

CIGNA's study shows that the incentives offered by its Choice Fund CDHPs – lower premiums,freedom of choice and the ability to build up health savings – result in an immediate and sustainedimprovement in health care quality and lower costs. Key findings include:

SSaavviinngg MMoonneeyy WWiitthhoouutt CCoommpprroommiissiinngg CCaarreeConsumer-driven health plans deliver real world health care reform

A• Immediate and sustainable cost savings: CIGNA Choice Fund medical costs are 14 percent

less than traditional plans the first year, cumulative cost savings decline by 19 percent in the sec-ond year, 23 percent in the third year and 26 percent the fourth year.

• Less cost for those with chronic conditions: Medical cost trend was substantially less forCIGNA Choice Fund customers with hypertension (27 percent less), joint disease (21 percent

less), and diabetes (15 percent less), than for individuals with either of those diseasesin traditional CIGNA health plans. According to the study data, these cost savings wereachieved without sacrificing care.Individuals make the most of their health benefits

Our study undeniably confirms that when health plans provide people with ways tobe engaged, their health care quality goes up and costs go down. People enrolled inCIGNA Choice Funds receive recommended care at compliance rates that are similaror better than people covered by traditional health plans. For example:Preventive care: In the first year, preventive care visits for CIGNA Choice Fund cus-tomers were an average of 16 percent greater when compared to traditional plans. Inaddition, Choice Fund customers continued to take advantage of preventive care visits

at higher rates than those in traditional plans in the second year.Prescription drugs: The trend in pharmacy costs for new CIGNA Choice Fund customers whoalso have their pharmacy benefits with CIGNA was cut by more than half when compared to thoseenrolled in traditional plans. This suggests that these customers were not only more compliant withtheir medications, but they also took advantage of cost-lowering options such as generic medica-tions and home delivery purchasing. Disease management: CIGNA Choice Fund customers with chronic health illnesses were moreengaged and more likely to comply with and complete their disease management programs.Disease management program follow-through and completion rates are 22 percent higher amongthose in CIGNA Choice Fund plans than their counterparts in traditional CIGNA managed careplans.

During the past four years, CIGNA Choice Fund studies have consistently demonstrated thatwhen health plans provide people with ways to be engaged in their health care, the quality of thatcare goes up and costs go down.

Thatʼs why we believe that CDHPs are an undeniable part of the solution for creating a moreaffordable, accessible, sustainable and high quality health care system. In fact, if the share ofAmericans enrolled in CDHPs rose from a current 18 percent to 50 percent, and the results of theCIGNA study were applied, the U.S. could achieve $357 billion dollars in savings over 10 years.These savings would go a long way toward extending coverage to the uninsured – without raisingtaxes, increasing the federal deficit or hurting American economic competitiveness.

For more information on Cignaʼs Consumer Driven Health Plans readers can login towww.cigna.com/our_plans/medical/consumer_driven_plans.html.



s we work our way through of one of the worst economic crisis since theGreat Depression, it is not surprising that business executives have fallenin the publicʼs opinion. The latest Gallup annual Honesty and Ethics of pro-fessions survey placed business executives firmly in the bottom 10 of jobpositions, just a few slots away from car salesmen, telemarketers, and lob-byists. Whether this is fair or not, much will be written about the leader-ship—or seemingly lack thereof—that pervaded Wall Street to Main Streetat the end of the first decade of the 21st century.

At the Graziadio School of Business and Management, we have alwaysplaced an emphasis on strong, values-driven leadership. Since our founding in 1969, longbefore the Enrons and WorldComs became synonymous with unethical business prac-tices, the Graziadio Schoolattracted students who believedthat there is a higher purpose tobusiness than simply the exclu-sive pursuit of shareholderwealth. And while trends andinnovations will change the mar-ketplace, such core values asintegrity, stewardship, courage,and compassion shouldnʼt, and mustnʼt, change if we are to prosper as a society.

Iʼm often reminded of these values when I speak to Graziadio students, particularlythose enrolled in our Presidential and Key Executive program (bschool.pepperdine.edu/pke). This MBA program is the only one of its kind exclusively for C-level businessexecutives, leaders in their own right who have chosen to return to the classroom to honetheir skills and insights. Whatʼs more, because the program is restricted to top level exec-utives, they are given the rare opportunity to learn and collaborate with their peer group.These unique individuals understand that leaders never stop learning, and take full advan-tage of the program as their own “personal boardroom” for an experience that many grad-uates have called transformative.

As this program addresses the specific needs of senior executives, it isnʼt the rightchoice for all business practitioners. But that doesnʼt mean they, and we, cannot learn fromsenior level business executives who represent what is right in American business today.Over the past few years the Graziadio School and Farmers Insurance Group have spon-sored the Deanʼs Executive Leadership Series (bschool.pepperdine.edu/dels ) to connecttop business practitioners and thought leaders in an interactive forum with our students,alumni, and faculty. Often, our discussions touch on what constitutes an effective leader.Here are some of their thoughts on leadership.Character, not charisma

William George, a professor of Management Practice at Harvard Business School, is theformer chairman and CEO of Medtronics and author of True North: Discover Your Auth-entic Leadership. During the height of CEO popularity, he reminded us that substancecomes before style.

“The more traditional view is to find somebody who is charismatic, who has a great style,has a great image. I think this is nonsense…itʼs counterproductive to the kind of leaderswe need,” says George.

“I think we need leaders with character, with integrity, not image, and with substance, notstyle. CEOs are not cut out to be charismatic in the classic sense of the word. I think theyare cut out, though, to be very empowering leaders of other people, and I think organiza-tions that understand that develop those kinds of leaders from the outset.

But that then means you have leaders who are true to what they believe in, that can bethemselves. They know their values and they practice those values every day—especial-ly under pressure. They build long-term connected relationships and they recognize theylead with their hearts, not just with their heads, and by that I mean they lead with com-passion, empathy, and courage. And those are really important—those are all qualities ofthe heart, but thatʼs what makes a great leader.”Integrity, not conformity

Deborah Platt Majoras served as chairman of the U.S. Federal Trade Commission from2004 until 2008, when she announced her departure to serve as vice president and gen-eral counsel for Procter & Gamble. In discussing her view of leadership, she emphasizedthe need for integrity in the decision-making process.

“First and foremost, a leader of an organization has to set the tone for how decisionmaking is going to be accomplished,” says Platt Majoras. “One thing that I demand is thatwe make decisions on the merits and without worrying just about which way the wind isblowing…I think that is absolutely critical. I think youʼve got to have the respect of yourfolks and the respect of your constituencies outside so you have to have integrity.”Service, not entitlement

According to president and COO of Jelly Belly Candy Company Robert Simpson, at theend of the day leaders are role models. As such, if they expect service to be at the heartof their organization, then service should start at the top.

LLeessssoonnss ffrroomm LLeeaaddeerrssby Linda A. Livingstone, Ph.D.

Dean, Graziadio School of Business and Management

A“Youʼve got to be willing to do it,” says Simpson. “Our owner has built a culture and heʼs

done it by if there is a paper on the floor, heʼll pick it up. If somethingʼs broken, heʼll fix itright then. If thereʼs a mess over there, heʼll stop what heʼs doing and clean it up himself.He wonʼt ask for help. He wonʼt expect anybody to run over and help him. Now, that sendsa very powerful message to the rest of the organization.”Teams, not silos

Another compelling insight from Simpson is the age-old reminder that together we canaccomplish much more than we would on our own. In an age of global organizations tiedtogether by emails and complex reporting matrixes, it may be difficult to overcome a silomentality, but the rewards are significant.

“Itʼs really all about your ownpersonal relationships you havewith each other,” says Simpson.“I enjoy interacting with peopleand helping them achievebeyond their accomplishmentgoals—that gives me the great-est sense of pleasure. Iʼm notthe expert and Iʼve always made

a practice of hiring a lot of smart people…much smarter than I am. But itʼs all about theteam, itʼs all about the business, and itʼs all about what we can get accomplished togeth-er…one thing that I do bring and I insist upon is working together is not an option—thatʼswhat we do and we all win together.”Vision, not ambiguity

Kathryn Karlic, president of institutional sales and marketing for GE Asset Management(GEAM), shared a piece of advice she received early in her career and continues to fol-low to this day concerning articulating a clear vision.

“I was advised long ago if youʼre a leader, youʼre the one that sets vision and that is yourjob,” says Karlic. “To set vision you have to be a clear thinker because thereʼs a lot of datathat comes at you from so many places. There is so much noise and individuals aredepending upon you to be a clear thinker and being able to communicate your vision.Youʼve got to reinforce it.”Courage, not popularity

Julia Stewart, chairman of the board and CEO of DineEquity, Inc. the largest full-serv-ice dining company in the world, places a premium on longstanding courage over fleetingpopularity.

“Did you take a cab or did you take a driver? Did you cut things that you thought wereimportant for you or for the company? Did you make choices that benefited a few or ben-efited all?” asks Stewart.

“More than any other time, employees are looking at leadership and asking, ʻWhat areyou doing for me and what are you doing to ensure our fate?ʼ …And what that tells you isemployees want that vision and that direction and that leadership, but they also want youto make the hard choices and the right choices for the business. Itʼs probably the tough-

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Values-centered, student-focused, and experience-driven, the Graziadio School of Businessand Management at Pepperdine University offers the senior executive, full-time, and part-timestudent a collaborative supportive environment in which to pursue an MBA, masters or bach-elor’s completion degree.

We believe our students’ success begins with a degree that nurtures values, fosters leader-ship and advances responsible business practice. We affirm a higher purpose for businesspractice than the exclusive pursuit of shareholder wealth. Our curriculum gives our students

a deeper understanding of their own authentic character, so that they in turn may make deci-sions that better reflect their unique leadership style. By helping our students to successfullyanchor those decisions in the core values of integrity, stewardship, courage and compassion,we prepare them for the challenges of life and business as a “values-centered” leader.

Visit bschool.pepperdine.edu to learn more about the Graziadio School of Business andManagement

LLiinnddaa AA.. LLiivviinnggssttoonnee,, PPhh..DD..Dr. Livingstone has served as dean since

2002. She has overseen a $200 million expan-sion of the business school’s campuses,

increased our international partnerships to 30business schools around the world, and led the

school to membership in the GloballyResponsible Leadership Initiative and as a signatory to the Principles

for Responsible Management Education. Dr. Livingstone serves on theBoard of Directors of AACSB International and Graduate Management

Admission Council, and is a member of Young PresidentsOrganization. She received her B.S., MBA and Ph.D. from Oklahoma

State University.






FOs are challenged every day to do more with less, even more so in thecurrent economic conditions. At the same time, CFOs must help their com-panies compete for clients who are more and more discriminating and fru-gal. The only way to achieve this is through innovation. To manage thisdynamic environment and inspire valuable innovation requires an “AgileCFO.”

IBM Institute for Business Value describes an Agile CFO as follows. “Intodayʼs world, the CFO must be a key contributor and leader in innovationand business strategy. The CFO is a leader who is close to both the strate-

gic vision and the real realities of the health and operations of the company. This vitallinkage makes the CFO a highly valued, if not critical, developer and enabler of innova-tion.”

The traditional views assume that innovation is the CEOʼs responsibility. He takes thelead to set the strategic direction while appearing as company ambassador to the mar-ket. In contrast, the CFO is the accountant, controller and cost manager; more or less adisciplinarian with an eye to manage risk. This view is no longer accurate; today the CFOhas become a strategic decision maker in the modern and innovative commercial enter-prise.

The 2006 Global CFO study of 1,200+ CFOs conducted by the IBM Institute forBusiness Value states: “This shift from the tactical to the strategic corresponds with thetrend of tapping CFOs for the CEO position. 20% of Fortune 100 CEOs were once CFOsthemselves. ” According to a recent IBM study of CFOs, the energy the CFO will spendon transactional or control measures will reduce significantly (by almost a quarter), whilethe time spent on strategic focus will double over the current decade (see Figure 1).

How does a CFO implement innovations that are essential for the survival of compa-nies in the modern economy? Engage thinkASG to design and deploy InformationTechnologies (IT) to enable innovations! IT is the main enabler of innovations created byhuman capital. A Premier Business Partner of IBM and a consultative integrator,thinkASG with IBM will help you. The Agile CFO will find ways to better leverage yourmost important assets - your people and your tools.

It would be an oversight if one did not also acknowledge the changing role of the ChiefInformation Officer (CIO) and his organization. He is now the main ally of the CFO in theinnovation journey. He implements tools for innovation while helping the CFO to do morewith less. The optimal CIO has become a pragmatic, collaborative business leader.According to the 2009 edition of the Global CIO study published by the IBM Institute forGlobal Business Value, these attributes of the CIO are especially prominent in compa-nies that outperform their peers.

That study grouped 2500+ Global CIOs into three categories. Those from organiza-tions with High profit before tax (PBT) growth, Medium PBT growth and Low PBT growth.The Spider diagram (Figure 2) identifies focus roles of CIOs from each category. CIOs inHigh-growth organizations use an approach that is well-balanced, and de-emphasizes

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Csome aspects of being an IT Manager. As a result, the High-growth profile is characterizedby a focus on the Visionary, Business Leader and Pragmatist roles. These roles corre-spond to High-growth CIOsʼ heavy emphasis on proposing innovative change, collaborat-ing with colleagues across the business and putting innovation into practice, respectively.These are the CIOs that enable an Agile CFO.

The Agile CFO and his CIO, embarking on the innovation journey, will need trusted tech-nology partners who will find ways to leverage people and tool investments. thinkASG isuniquely positioned to do just that from its Southern California base in Orange County.Their mission is delivering measurable value and integrating technology solutions throughtheir people, process and principles. Given a clientʼs need, using their propriety process,thinkASG will diagnose the situation, develop a solution, deploy it, and provide docu-mentation for on-going support and use. Essentially, help the CFO and CIO to find waysto do more with less, protect investments, leverage existing technologies and optimize ITpartnerships, all while innovating to compete in todayʼs markets. thinkASG and IBM togeth-er represent the ideal IT partner that enables the Agile CFO and his CIO.

thinkASG is a trusted advisor to many companies in Orange County. Share your busi-ness issues and put thinkASG to work on “thinking” of ways to save your firm critical ITinvestment dollars. thinkASG can analyze current server and storage deployments and fre-quently find immediate cost reduction via consolidation and optimization, leveraging IBMscutting edge technologies and thinkASG engineering. In this environment where budgetincreases are rare, take advantage of the thinkASG and IBM relationship to create strongerreturns on investment.

IBM conducts a Global CFO Study biannually and is now commencing work on the 2010IBM Global CFO Study. The Study will explore how senior finance executives make theirenterprises smarter in this era of uncertainty. Specifically, it will address topics including:

• How can CFOs drive transparency to enable timely and informed decision-making? • How can CFOs help the enterprise anticipate and shape its environment?• How can CFOs build a team for tomorrow?• How will finance continue to build increasingly efficient, flexible, dynamic and scalable

organizations?Congratulations to all winners and nominees of the OCBJ 2009 CFO of the Year! We are

pleased to recognize your accomplishment with a special offer. IBM will review the 2010CFO Study results with you, in person to expand your understanding of the latest industrytrends and help you innovate. Moreover, thinkASG will perform a tailored innovationassessment specific to your enterprise and designed to assist you in the cost recapturejourney.

To schedule your session, contact Prasanna Wijayagunaratne at 714.614.8213 [email protected] or visit www.thinkasg.com/ocbj.

thinkASG is a Premier IBM Business Partner and consultative integrator based in Irvine.thinkASG assists and serves enterprises across industry and all over Southern Californiasince the mid 1990s.





ly require the certainty that comes with a written agreement.Another contract issue that arises in the M&A context, particularly in deals structured as

an asset sale, are provisions that prohibit assignment of the contract without the consent ofthe other party. Check under the “Miscellaneous,” “General Provisions” or similar headingnear the end of a contract and you will often find a provision that sets forth the conditionsunder which the contract may be assigned. More likely than not, in well crafted contracts, theprovision will state that either one or both parties is prohibited from assigning the contractwithout the written consent of the other party. The task of trying to track down written con-sents to assign contracts from uncooperative or hostile third parties is notorious for delayingdeal closings.To reduce the number of consents that will be required to close an M&A transaction, man-

agement should review the assignment provisions prior to executing an agreement and tryto negotiate out any requirement that the company obtain the consent of the other party priorto assignment. Be aware, however, that this may be met with some resistance (the otherparty may want to have control over whom they are bound to in the contract) or result in theother party asking for reciprocal language with respect to its ability to assign the contact with-out the companyʼs consent (which the company may not be comfortable with for the samereason).If a company has its own form of contract that it regularly enters into with customers or

clients, it should consider drafting the assignment provision so that the company can assignthe contract without the consent of the other party (whether the company wants to grant areciprocal right to the other party or, alternatively, require that the other party seek the com-panyʼs consent prior to assignment depends on multiple factors, including the type of thecontract and the nature of the companyʼs business). A would-be seller can quickly becomefrustrated upon learning that the form of contract it has been using requires that it seek thewritten consent of each of its customers that signed the contract before the company canclose its M&A transaction.A final word on assignment provisions: although they often appear straightforward, they

can be entwined with legal nuance. Those that arenʼt sophisticated in the drafting or inter-pretation of these provisions should consult with someone familiar with contract law toensure the language results in the intended consequences.VI. Stock option and other incentive plansCompanies typically have the best of intentions when implementing a stock option or sim-

ilar incentive plan – the owners value their employees and want them to have the opportu-nity to participate in the upside of the business. However, some of the most well-intendedincentive plans have been the downfall of the very exit event from which the owners had

KEEPING (OR GETTING) YOURCORPORATEHOUSE INORDERcontinued from page A-2

hoped the planʼs participants would benefit.The procedure for adopting and implementing a stock option or similar incentive plan is

filled with traps for the inexperienced. Generally, the plan, and in most cases, each grantunder the plan, must be approved by the companyʼs board of directors; the plan must con-tain certain provisions to take advantage of certain laws and to not violate others; the grant-ing of options or similar awards are typically subject to compliance with state and federalsecurities laws; and establishing an improper fair-value exercise price can wreak havoc on alater valuation of the company or a subsequent audit.VII. The perfect storm – a real-life exampleA recent transaction where the founder and majority owner was seeking to sell his tech-

nology company illustrates the potential impact of failing to properly maintain some of thecorporate governance and other legal matters discussed above. In this particular case,the founder had acted as the companyʼs sole director since the inception of the Californiacorporation (even though there were three shareholders), widely distributed a memoran-dum purporting to allow every employee of the company to earn stock options based onthe companyʼs sales volume (without obtaining board approval or adopting a formal stockoption plan) and had minutes and material contracts that were unsigned or altogethermissing.These deficiencies called into question the validity of much of the corporationʼs historical

activities and left more than 40 current and former employees with potential claims for unde-fined stock options. The result: two potential private-equity suitors that had signed letters ofintent and progressed toward closing eventually backed out of the deal due to concerns relat-ed to these problems. While the deal did eventually close nearly a year later with a thirdbuyer, the founder incurred significant legal fees correcting these problems, paid a significantprice to obtain releases from potential option holders and had a substantial portion of the pur-chase price held back in escrow at closing to provide security to the buyer.VIII. ConclusionAn exit event is a pivotal moment for the owners of a privately-held company – often rep-

resenting the culmination of years, if not decades, of proverbial blood, sweat and tears. Whilean exciting transition, it is frequently accompanied by frustration, stress and anxiety – par-ticularly for those not familiar with the process. Implementing the suggestions described inthis article can significantly reduce the risk of being ensnared by some of the more commonlegal due diligence problems and help facilitate a smooth path toward a successful consum-mation of the exit event.

If you have any questions or would like any assistance regarding the matters discussed inthis article, please contact the author, Garett Sleichter 714.641.3495 [email protected] your regular Rutan & Tucker contact.

This information is a general description of the law; it is not intended to provide legal advice nor is it intended to cre-ate an attorney-client relationship with Rutan & Tucker, LLP. Before taking any legal action on this information youshould seek professional legal counsel.

Universal Services of America would like to extend theircongratulations to Scott Savoie for his nomination asChief Financial Officer of the Year. His execution of ourshared vision has enabled us to surpass our goals, and his role as a key strategic player will launch our company to new heights.

Universal Services of America provides a full range of building services throughout Arizona, California, Colorado and Washington, and includes Universal Protection Service, Universal Building Maintenance, UniversalProtection Security Systems and Universal Fire/Life Safety Services. Visit us at: http://www.universalpro.com.

State Licenses: 1003458, 14417, 1025514, 0600, 58361



they are consistent with case law and that they offer adequate takeover protection.Stockholder Rights Plan

Adopting a stockholder rights plan, or “poison pill,” encourages hostile parties to nego-tiate with the targetʼs board. Under a “poison pill,” each stockholder would be issued aright that entitled the non-hostile stockholders, in the event of a takeover attempt that hasnot been approved by the board, to receive additional stock of the company and/oracquirer. Although “poison pills” had lost some of their popularity in recent years, theyhave mounted a comeback.

Although “poison pills” can take a number of different forms, the basic concept is gen-erally the same for most plans:

(i) The board declares a dividend of one common or preferred stock purchase right foreach outstanding share of the companyʼs common stock.

(ii) In the event that a hostile stockholder acquires in excess of a specified percentageof the companyʼs voting stock without board approval or launches a tender offer, the rightentitles all other stockholders of the company to purchase additional voting shares of thecompany at a substantial discount to market price.

(iii) If, after such an event, the company is involved in a business combination or sub-stantial asset sale with any party, a “poison pill” may also provide that all stockholders(except the hostile stockholder) are entitled to purchase, at a substantial discount to mar-ket price, the most senior voting securities of the ultimate corporate parent resulting fromthe transaction.

“Poison pills” can be effective deterrents to hostile takeover attempts. Although a “poi-son pill” can be quickly adopted without stockholder approval as long as the companyhas a sufficient number of authorized shares of preferred stock and common stock avail-able to cover issuances after a triggering event, it is best practice to obtain approval orratification of the “poison pill” to appease institutional investor advisory groups such asRiskMetrics. “Poison pills” can be complex, and care must be taken in their implementa-tion. Companies with an existing “poison pill” should, in consultation with legal counsel,make sure that their “poison pill” is up-to-date and includes all appropriate provisions.Final considerations

The finality of an M&A transaction warrants adoption or enhancement of appropriatedefenses against hostile bids to ensure full stockholder value is realized. Although thetakeover defenses outlined in this article are by no means exhaustive, they are commondeterrents that should be taken into consideration. Now is the time for companies to beproactive and review, discuss and potentially update, re-institute or adopt various hostiletakeover defenses. As we all hope for a brighter economic future ahead, preparation forall possible scenarios, including a hostile M&A transaction, will provide a companyʼs boardof directors the tools necessary to ensure the realization of maximum stockholder value.

TAKE COVERcontinued from page A-14

ongratulations to the winners and nominees of the 2009 CFO of the Year Awards.Achieving this recognition during a period of challenging economic times is amomentous accomplishment.

During periods of economic downturn, companies are analyzing and reviewingtheir financial statements with a magnifying glass. However, one of the hiddencosts that may not be evident on the face of the financial statements is lossesfrom fraudulent activities. In a recent survey conducted by PricewaterhouseCoopers (PWC), companies are reporting that both the incidents and cost of fraudhave increased within the last twelve months. The Association of Certified Fraud

Examiners (ACFE) estimated that US Companies loseapproximately 7 percent of their annual revenues tofraud. The median loss was $175,000, with one-fourthof the cases involving losses of at least $1 million. Forprivately held companies, the median loss was$278,000.

Sixty eight percent of those surveyed by PWCbelieve that the increase in incidents of fraud is partlydue to increases in incentives or pressure to meetfinancial targets because people are afraid of losingtheir jobs. Eighteen percent believe that there is anincrease in opportunity to commit fraud in the downturneconomy. Staff reductions have resulted in less segre-gation of duties and less monitoring. In addition, man-agement has shifted its focus to business survivalrather than assessing and monitoring fraud risks.Managing fraud risk

Keeping the focus on business survival is no doubt the most important aspect of running abusiness in todayʼs economy. However, we cannot ignore fraud risks as the data above hasshown. The AICPA, ACFE, and the Institute of Internal Auditors together have issued a guid-ance, which lists the following key principles for establishing an environment to effectively man-age fraud risk:

• Establish a fraud risk management program• Perform periodic assessment of fraud risk• Implement prevention and detection techniques• Perform investigation and corrective action

The extent of a fraud risk assessment program is dependent upon the size of the companyand the cost/benefit of performing such procedures. However, the most important step in man-aging fraud risk is designing proper internal controls. Studies have shown that lack of adequateinternal controls is the most common factor in fraudulent schemes. Strong internal controls canprevent or detect fraudulent activities in a timely manner.Internal controls

In designing proper internal controls, segregation of duties is one of the most effective con-trols in preventing or detecting misappropriations of assets. When possible, incompatible dutiesshould be performed by different employees or an owner/manager. Although adequate segre-gation of duties may be more difficult to implement for smaller organizations or in cases wherecompanies have had reduced staff, it is still more feasible than most people think.

The ACFE reports that approximately 85 percent of asset misappropriation incidents involvedthe theft or misuse of cash. Two common schemes for misappropriation of cash are (1) accept-ing payments from customers but not recording the sale (skimming) or (2) making payments onfictitious purchases or personal purchases by submitting false invoices or check tampering. Ingeneral, the following rules over cash controls are especially beneficial:

• Do not allow a single employee to handle a cash transaction from beginning to end.

• The cash handling function should be separated from the function of recording cashtransactions in the books.

• The receipt of cash should be centralized.

• Cash receipts should be deposited to the bank intact on a daily basis.

• All cash disbursements should be made by check.

• Employees involved with cash processing should not prepare bank reconciliations.

• Bank reconciliations should be performed on a timely basis at the end of each month.

For small privately held businesses, a senior management member or owner should openand review the bank statements and copies of the canceled checks before handing them off, orreview the activities online. Any unusual items should be immediately investigated.

An organization can look to outside parties such as its bank to provide additional controls.For example, you can set up a lockbox system where customers send payments directly to thebank, which can help minimize skimming schemes. An organization can also use positive payservice, in which the organization provides the bank with an electronic listing of all disburse-ments, including payroll if elected. As each check is presented to the bank for payment, it iscompared to this database (check number, amount, payee, date, etc.). The organization is noti-fied immediately of any checks that do not match the listing exactly and make the final deter-mination of payment. Organizations that use Automated Clearing House (ACH) or pay billsonline should consult with their banks on implementing further security measures.

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CDespite the best intentions or designs, it is impossible to implement internal controls that com-

pletely eliminate the possibility of fraud. Collusion among members of the organization can sig-nificantly undermine the effectiveness of even the most well designed internal controls.However, regularly assessing fraud risk and evaluating the effectiveness of the internal controlsin place will help minimize fraud risk. With technology changing at a rapid pace, the controls thatwere put in place five years ago may not be operating effectively in todayʼs world.Fraud detection

Unfortunately fraudsters do not come in one size fits all. The most common red flag behaviorsof fraud perpetrators are those living beyond their means or those experiencing financial diffi-

culties. Most fraudsters act alone. The study performed bythe ACFE also did not show a strong correlation betweenthe amount of time an employee had worked with a compa-ny in relation to committing fraud. However, it did note thatlonger-term employees tend to commit much larger frauds,resulting in larger losses to the company.

Based on surveys performed by various organizations,approximately half of the incidents of fraud were detected bytips from employees, vendors, or customers. While publiccompanies are mandated by the Sarbanes-Oxley Act toimplement whistleblower hotlines, private companies shouldconsider installing hotlines allowing for anonymous report-ing of suspected or incidents of fraud. Studies also found

other effective detection measures including performing internal or external audits, or havingstrong internal controls in place. Conclusion

In performing audits for companies in various industries, we find that while most companiesare concerned about fraud, they are not proactive in assessing fraud risk. Most companies willreact once fraud is discovered, put a band-aid on the situation, and move on without assessingpotential fraud risks in other areas of the organization. Companies should be more proactive inassessing fraud risks, especially in current economic conditions, to minimize losses. In otherwords, if you look for fraud, you will more likely find fraud.

For more information regarding fraud risk assessment or other audit and tax related services,please contact David P. Doran at (714) 978-1300. For additional information about White,Nelson & Co. LLP, please visit our website at whitenelson.com.



at the top of their companies while also leading initiatives to unify, simplify and streamlinereporting systems “from the bottom up.” To eliminate the information silos that emerge whenbusiness units adopt non-compatible technologies, CFOs have become evangelists for unified“financial supply chain” standards. By speeding and simplifying the flow of financial managementdata, they also have enabled the development of “dashboard systems” for financial controls.CFOs are “raising the efficiency bar” in Finance & Accounting (F&A) functions by consolidat-

ing general ledgers, reducing processing time and errors, and improving on-time reconciliations.These CFOs and their F&A departments are leading their organizations toward higher produc-tivity goals by example.5. Maintaining integrity and independenceThe Enron scandal dramatized the hazards of a CFO who is too complicit with a company cul-

ture that was perceived as being based on bending rules and inflating earnings. In the aftermath,there has been a renewed emphasis towards CFOs having the highest standards of personalintegrity. They also are serving as role models and advocates for cultures that seamlessly blendprofitability and sound ethical principles.CFOs must maintain consistent and appropriate financial methods and models even when

they appear to be obstacles to growth or profitability. They know that this is integral to their workbecause it indicates the importance of independent oversight, which is more valuable than everto investors, lenders, regulators, the media and the public. Todayʼs CFOs also are expected tochallenge other corporate officers more than ever, if they step outside the bounds of sound finan-

THE CHANGING ROLEOF THE CFOcontinued from page A-1

est thing I think we as leaders do because,in any given day, or time, or choice youmake, itʼs not necessarily going to makeeverybody happy. But you have to dowhatʼs right for the company and what youbelieve will sustain you into the future.”New leaders, not followersAs senior vice president of Human

Resources of the U.S. PharmaceuticalGroup for McKesson Corporation, PriscillaStewart-Jones knows a little somethingabout recruiting and fostering talent. Shecites that effective leaders nurture new lead-ers, as opposed to growing their fan base,for the welfare of their organizations.“For me, one of the things that you do as

a leader is really have the responsibility ofidentifying talent and identifying individualsthat have potential within your organization,”says Stewart-Jones. “They may be on yourteam or they may be in other parts of theorganization, and at times they can even bepeers. And then, frankly, volunteering, goingto them and offering ways that you can sup-port them.“Vocation, not just a careerTo these insights, I would also add that a

leader needs to have a vocation—a callingbeyond personal and career goals, beyondtraining and skills. Vocation brings a senseof purpose and meaning to bear on the workand enhances a leaderʼs value. A leaderneeds to have the will and the passion tocreate a better company, a better organiza-tion, and a better society. I know this to betrue simply by witnessing the transformationof business professionals from managers toleaders here at the Graziadio School. And inthe case of our Presidential and KeyExecutive program, we see how currentbusiness leaders are changed and revital-ized in ways they never imagined.And at a time when many feel as though

leadership is a lost art form, it is encourag-ing to remind ourselves that some values dopass the test of time and there are alwaysbest practices that can lead us once againto greater achievements.To learn more about the Graziadio School

and its Presidential and Key Executive pro-gram, please visit bschool.pepperdine.edu.

cial practices.Under Sarbanes-Oxley, the CFOs of public companies are personally responsible for certify-

ing quarterly financial statements (along with CEOs). But even in non-public or non-profit organ-izations, where such certification is not required, a CFOʼs personal responsibility for financialintegrity has increased to a permanently higher level.6. Working as an agent of changeWe have come a long way from the days when CFOs wore green eyeshades and worked in

the back room, tallying numbers. One of the most stunning changes in corporate cultures overthe past decade has been the rising visibility of the CFO position itself. Todayʼs CFO has theopportunity to be an effective communicator and leader, inside and outside the organization.In the past, CFOs who consistently provided strategic advice and guidance to the CEO were

the exception. Now, they have become the “new norm.”Even if you are not a fluid writer or natural-born speaker, you increase your value by commu-

nicating effectively with employees, stakeholders, the public and professional peers. Having aCFO who is technically competent, visible and influential can increase credibility for the entireorganization. It can help to develop new customers and relationships, attract and retain keyemployees, and build goodwill in local and professional communities. It also can help your CEOdrive cultural changes, achieve strategic goals and maximize competitive opportunities.There are many CFO winnersWhen you first became a CFO, nobody told you these changes were coming. You werenʼt

handed a manual that defined your changing job description and duties. Nobody warned you thatyou would be expected to master so many new competencies while also keeping the financial

LESSONS FROM LEADERScontinued from page A-16

shop of your organization humming day-to-day.Each of the individuals nominated and rec-

ognized by the 3rd Annual CFO of the YearAwards has performed at a high professionallevel while also setting and achieving uniquepersonal goals. They each exemplify theextraordinary strides that their profession hasmade in challenging times.At Rothstein Kass, we would like to take this

opportunity to salute them – and you. We willcontinue to help you adapt to changes andincrease your professional competencies andvalue to your organization.



Theodore AbajianCKR Restaurants, Inc.

Theodore Abajian was appointed executive vice president and chief finan-cial officer of CKE Restaurants, Inc. in April 2003. He joined the company aschief administrative officer in March 2002, following the completion of theacquisition of Santa Barbara Restaurant Group, Inc. Prior to the merger,Abajian served as president and chief executive officer of Santa BarbaraRestaurant Group, Inc. beginning in November 2000, and as executive vicepresident and chief financial officer from May 1998. From January 2000 toOctober 2000, he held the position of senior vice president and chief financialofficer for Checkers Drive-In Restaurants, Inc. Before he joined SantaBarbara Restaurant Group, Inc. Abajian served as chief financial officer ofStar Buffet, Inc.

Thomas AbateEdwards LifeSciences

During his tenure as finance chief at Edwards Life Sciences, Thomas Abatehas helped lead the company to substantial growth. Heʼs been part of theBaxter/Edwards family since 1982 and has provided continuity and financialleadership in a period that has seen dramatic economic uncertainty, a weak-ening dollar, and international competition within the industry. He cites theinternational experience he gained while working for Baxter as one of thelargest influences on the way he goes about his role today.

Abate earned a bachelorʼs degree in accounting from the University ofIllinois and an MBA from Northern Illinois University.

Ed BeckerOlive Crest

As chief financial officer for Olive Crest, a not-for-profit organization thatprovides support and services for at-risk children and foster families, EdBecker has got a full plate. Heʼs responsible for all accounting and financialfunctions of four corporations in three states, with annual operations serving700 employees and an annual budget of $35 million. He also is responsiblefor all Mental Health Programs, Management Information Systems andProperties Management at Olive Crest.

Ed is a founding member and the current president of the CaliforniaMunicipal Finance Authority, and is active in the various community projectssponsored by the Calvary Chapel church. He has been actively involved inadvocating for underrepresented children at the state and county levels withboth private and municipal entities.

Bart BedardBal Seal Engineering, Inc.

Bart Bedard joined Bal Seal Engineering, Inc. in April 2005 when annual sales were $42M. Lastyear the company had sales of $59M, which equates to a compounded growth of 11% per year. In

March 2006 the company implemented the JD Edwards Enterprise One compa-ny-wide software solution –an endeavor in which Bedard played an instrumentalrole. Some of his key accomplishments with the organization include saving prod-uct costing, driving creation of inventory control, reducing fees with competitivebidding, successfully mediating a class action lawsuit, achieving a finance staffturnover of zero for the past two years, and delivering accurate forecasts.Additionally, he has set up a system for capturing qualified research expenditures.

Peter J. BlottValeant Pharmaceuticals International

Blott has a finance and accounting background that spans more than 20years and includes extensive experience in accounting and operations in thepharmaceutical industry. Heʼs been the executive vice president, chief financialofficer of Valeant Pharmaceuticals since March 2007. He served as the com-panyʼs senior vice president, group financial controller from March 2004 toMarch 2007. Prior to that, he served as its vice president, operations financefrom July 2003 to February 2004. From January 2002 to June 2003, Blottserved as head of finance and logistics for Otsuka Pharmaceuticals Europe.Prior to that he worked at GlaxoSmithKline (formerly Glaxo Wellcome), wherehe held a number of management and financial positions within various manu-facturing, commercial and head office operations.

Brand CasoTenacore Holdings

Brand Caso has been a financial professional since graduating college in1996 and starting his own business, Tenacore Holdings. As Tenacoreʼs chieffinancial officer, he has continued to successfully grow the company, achievinga revenue growth rate of 30% every year along with increasing net margins by10-15% a year. Whatʼs more, heʼs successfully expanded the product offeringsof the company through internal R&D. As a result, Tenacore has expanded somuch that it recently was able to purchase its own 34,000 square-foot building.

In addition to working in excess of 50 hours each week, Caso coaches youthbasketball and baseball in San Juan Capistrano.

Richard CastaldoBDS Marketing

During his 20-year career as a finance professional, Richard Castaldo has become expert at linkingbusiness operations to improve financial results. He claims to be most effective working in complexbusiness environments that allow him to manage multiple economic models simultaneously. He has areputation for driving profitable growth through partnering with operational leaders, developing enter-prise-wide process and productivity improvements while driving cost efficiencies through spending forimpact.

Over the course of his five-year tenure at BDS, he has led a 73% growth in revenues and intro-duced strategies that have increased the enterprise value by 600%.

he Orange County Business Journal, in association with the Cal CPA Society –Orange County/Long Beach Chapter, is proud to present the Third Annual CFO ofthe Year Awards Dinner & Program on January 27, 2010 at the Hyatt Regency Irvine.Given the continuing challenges of our business climate, outstanding financial lead-ership and seasoned fiscal wisdom have become more important than ever. Whetherby enabling a company to weather the economic storm or by leading a year of recordgrowth or transformation, each of the 43 professionals nominated for the 2009 CFOof the Year Awards represents a story of success. Implementing a selection processunique to this event, the judging panel (comprised of representatives from the

Business Journal, CAL CPA Society and the eventʼs Diamond and Platinum Sponsors) made aneffort to interview all of the candidates in order to gain an accurate perspective on each individualand his or her accomplishments. Winners were selected in six categories: Outstanding CFO of aPublic Company, Private Company and Not-for-Profit Organization; Outstanding TransformationAgent; Outstanding Lifetime Achievement; and Outstanding Community Service.Public Company/Private Company/Not-for-Profit Organization

These awards are given to CFOs whoʼvemade outstanding contributions to their compa-niesʼ performances as well as to the greaterOrange County business community over thepast year. The winners played key roles in sig-nificant company achievements, as demonstrat-ed by the companyʼs financial performance,improved competitive position and/or improvedcompany image. On a personal level, winnersdemonstrated special qualities and abilities – inaddition to being confidants to their CEOs,theyʼre outstanding mentors and extraordinaryperformers, particularly amidst difficult circum-stances.Transformation Agent

This award honors a CFO who has brokenthrough the traditional boundaries of finance incontributing to a significant transaction, transfor-mation or turnaround of his/her company. Achievements are measurable in terms of capital struc-ture improvement, growth in market cap and/or revenue, consistency, and/or positive ratingchanges from equity research analysts and/or debt rating agencies.Lifetime Achievement

Designed to honor a current or former CFO whose contributions have significantly and unique-

22000099 CCFFOO ooff tthhee YYeeaarr AAwwaarrddssly impacted the Orange County business community over the course of his/her career, this awardis given to recognize a lengthy tenure as a top corporate steward.Community Service

This award is presented to a CFO who is exemplary not only in her/her ability to be a great finan-cial leader, but in his/her extraordinary commitment to giving back through community involve-ment, philanthropic endeavors and charitable organizations.

The Business Journal would like to extend a special thanks to everyone who contributed to thisyearʼs judging process. Because of the time and effort you so generously put forth to evaluate thecandidates, we can proudly and confidently say that the CFO of the Year Awards is one of the mostobjective and legitimate programs of its kind. Without your hard work, this event would not be pos-sible.

Monica Rebella, representing event sponsorCAL CPA Society OC/Long Beach Chapter,applauds nominees at last year's awards

celebration.

The Business Journal and CAL CPA Society are delighted to welcome backRob Ukropina as master of ceremonies for this yearʼs CFO of the Year AwardsDinner. His engaging and entertaining style was a big hitat last yearʼs program and we look forward to havingRob “emcee” our program again on January 27.

As partner with venture capital firm Black DiamondVentures, Rob heads up the Newport Beach Office. Hesits on various entrepreneurial advisory boards, and is aguest lecturer at USC, UCLA, Chapman, the Orange

County Business Forum and many entrepreneurial organizations. Hewas the keynote speaker at the Harvard Business School AnnualEntrepreneur Conference in 2007.

Rob has been honored as Father of the Year-Orange County by theFatherʼs Day Council, and is a recipient of the Business Journalʼs Excellence inEntrepreneurship Award. He was chosen Small Business Person of the Year-OrangeCounty by Southland Development Corporation, and named Small Business Person of theYear-California by the SBA.

Founder of the successful delivery company Overnite Express (sold to Norco Corp. in2007), Rob has been featured in several business publications including Forbes Magazine,Smart Business, the Orange County Register and the Los Angeles Times. He is a gradu-ate of the USC Marshall School of Business.

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Raymond CookSTEC

STEC is a leading global provider of enterprise-class Flash solid-state drives(SSDs) that are designed to increase the performance of storage systems andservers enterprises use to retain and access their critical data. Since Cookjoined the firm in September 2008, he has played a significant role in the com-panyʼs noteworthy success over the past year, including increased revenues,margins, stock price, and successfully transitioning the companyʼs entire manu-facturing from Santa Ana to Malaysia.Cook has more than 20 years of financial experience ranging from public

accounting to internal auditing and beyond. He has a BS in Accounting and anMBA in Finance from Loyola Marymount University. He also is a COA in thestate of California and a Beta Gamma Sigma recipient.

Martin CortesCardenas Markets

Cortesʼs career as a financial professional started when he took a job at asupermarket to put himself through school at Cal State Long Beach. Upon grad-uating, he gained experience in operations, going on to work for organizationssuch as Anaheimʼs CKE Restaurants. Today, he acts as chief financial officer forCardenas Markets—a position heʼs held for about a year. In this capacity he actsas a strategic and tactical partner to managing principals, offering executiveoversight of finance and accounting operations, technology, risk managementand internal audit. Within the first 60 days at Cardenas Markets, he introducednew processes that will save the company $300,000 annually.

Scott DavidsonQuest Software

As finance chief for Quest Software, Davidson is responsible for the compa-nyʼs global financial strategy and day-to-day financial and accounting opera-tions. He joined the organization as treasurer in 2002, with responsibility forworldwide treasury and investment operations, SEC reporting, investor rela-tions, risk management, purchase accounting and corporate development.Between 1997 and 2001, Davidson was director of corporate treasury at CitrixSystems. From 1996 to 1997, he was manager of pricing for telecommunica-tion services with Precision Response Corporation, which was acquired byInterActive Corporation.

Davidson holds a bachelorʼs degree in finance from Florida AtlanticUniversity and an MBA from the University of Miami.

Jeffrey L. EdwardsAllergan, Inc.

In 1983, Jeffrey Edwards began his career as a finance professional workingfor Security Pacific Bank. Today, heʼs the executive vice president of finance andbusiness development/chief financial officer for Allergan, Inc. He joined the com-pany in 1993 and has held his current position since 2005. Heʼs been instru-mental in developing and executing Allerganʼs financial and investor relationsstrategies. Whatʼs more, heʼs played an integral role in the financial stewardshipof the company during difficult economic times, helping it maintain its position asa leader in its field.Despite working nearly 70 hours each week, Edwards acts as the president

of the girlsʼ soccer booster club at Santa Margarita Catholic High School, in addi-tion to being involved with organizations such as Top Soccer and Corazon.

John FinneranEdison Mission Group

Finneran, who acts as senior vice president and chief financial officer forEdison Mission Group, is a dynamic professional who has driven processimprovement from supply chain to financial reporting and beyond. He not onlyhelped transform the companyʼs financial, operational and trading systems, butcontinues to identify creative ways in which to optimize business operations.Heʼs also played a key role in making EMG an industry leader in renew-able/alternative energy resources. Most notably, he introduced an innovativecapital preservation plan that has enabled EMGʼs three SEC subsidiaries andmore than 200 non-public subsidiaries to successfully weather the economicdownturn.

Matthew FristoeCrescent Solutions

At a very critical time in the history of Crescent Solutions, Matthew Fristoe was approached by thecompanyʼs owners to come on board. The organization was entering uncharted territory, experiencingdebilitating financial and cash flow constraints, all at a time when capital was needed for its continuedrapid growth in operations and revenue. During his four year tenure as Crescent Solutionsʼ chief finan-cial officer, Fristoe has led the company to a three-year revenue growth of more than 877%. Whatʼsmore, he increased cash flow management, assisting the companyʼs growth in gross revenues from$12-32M in just two years.

Bryan HackworthUniversal Electronics

Bryan Hackworth went out of his way to pursue his dream of being a top finan-cial professional, enduring a bothersome commute to get to school. His hardwork paid off when he got hired at Deloitte shortly after graduation; thus, hiscareer was launched. Working for such a large, prominent organization, hedeveloped good habits early on, gaining a valuable perspective on business andhoning the skills that he utilizes today as the chief financial officer for UniversalElectronics.Hackworth takes a tremendous amount of pride in empowering the individu-

als he works with to do the best that they can. Since he joined UniversalElectronics, the company has had great success with its current employees andits overall functionality.

Harold HewittChapman University

Harold Hewitt is extremely dedicated to the higher education industry as awhole, and not simply higher education in Orange County. During the past yearalone, heʼs served as a WASC reviewer and commissioner and chaired theWACUBO annual conference planning committee as well as the PACCONannual meeting. All of this is in addition to serving as the executive vice presi-dent and chief operating officer/chief financial officer of Chapman University.Hewitt holds an MBA with a concentration in finance from the Peter Drucker

Center at Claremont University. He volunteers with numerous organizations,including the Western Region of National Association of College and UniversityBusiness Officers.

Paul HoltQuality Systems

After receiving his MBA from USC in 1990, Paul Holt began his professionalcareer in finance with the accounting firm of McGladrey & Pullen. Since 2000,Holt has been the chief financial officer for Quality Systems; the organizationhas experienced tremendous growth during his tenure, and he has providedkey leadership in developing the systems, controls and procedures necessaryto manage that growth. He also has helped establish a culture of transparencyand honesty within his department, placing the entire organization in an optimalposition for success.Holt is part of the CFO Roundtable and USC Alumni Association, and also

serves as a junior high group leader at his church.

William HumesIngram Micro

As senior executive vice president and chief financial officer of Ingram Micro, William Humes over-sees the companyʼs global financial operations, including financial planning and analysis, controller-ship, internal audit, tax and treasury. As an NYSE-listed company officer, he regularly interfaces with



the investment community and helps set the tone for Ingram Microʼs corporategovernance.For the quarter ending July 4, 2009, Ingram Micro had a record-high cash

balance of more than $1 billion, giving the company flexibility to extend cred-it and seek out attractive investments. Under the leadership of Humes,Ingram consistently balances strategic risk management with prudent stew-ardship of shareowner interests and controls.

Scharrell JacksonSquar Milner

Scharrell Jackson is an integral part of operations at Squar Milner, wheresheʼs served as finance chief for the past nine years. In addition to facilitat-ing two major mergers for the firm (assisting the managing partner with nec-essary analysis and overseeing and handling all administrative logistics theyentailed) she has spearheaded several major software conversions, includ-ing the integration of Practice Solutions, which is the companyʼs primarytime, billing and financial reporting system.Jackson launched a philanthropic team at Squar Milner to help better the

local community by working with several organizations, includingOrangewood Childrenʼs Foundation, Girls, Inc., Human Options and WorkingWardrobes.

Bret W. JohnsenMindspeed Technologies

Bret Johnsen is an exceptional chief financial officer who in 15 months haschanged the financial viability and external perception of Mindspeed. He hassuccessfully guided the company through the economic downturn, helping itachieve revenue growth in all its key product areas while lowering operatingexpenses to the lowest level in company history. Now, Mindspeed is posi-tioned to emerge from the downturn significantly stronger—and thatʼs large-ly due to Johnsenʼs key balance sheet and operating expense initiatives.A CPA in California, Johnsen has a BS in accounting and a MS in Finance.

A girlsʼ basketball coach, Johnsen is involved with recruiting at USC and with-in the Del Mar Schools Foundation.

Scott LambICU Medical

Up until April 2008, Scott Lamb served as controller for ICU Medical.Based on his exceptional financial and operational skills, not to mention thesterling reputation he had earned within the public markets, he was promot-ed to the role of chief financial officer. Since then, he has worked diligently torevamp the accounting staff and improve ICUʼs cost structure and convertand implement a new IT system—all while growing company revenues byadding new products in oncology and by making an acquisition, which in itselfis expected to add 17% to top line revenues.Lamb has been a financial professional for more than 25 years.

Brandon LaVernePC Mall Inc.

Brandon LaVerne was appointed chief financial officer of PC Mall by itsboard of directors in July 2008. Having been with the company since 1998,heʼs also served as its vice president and controller.During his tenure at the company, LaVerne has played a significant role in

its operations and success. Heʼs been instrumental in the financial perform-ance, reporting and integration of the companyʼs operations through multipleacquisitions and spin-offs. He manages and mentors a large accounting andfinance department in addition to working closely with the other members ofthe executive team on all company operations and strategic initiatives.LaVerne earned a BS In accounting from USC and is a certified public

accountant.

Jennifer LawlerFelt Bicycles

Jennifer Lawler is a financial professional with more than 20 years ofexperience. Having worked as the finance chief for Felt Bicycles for the pastfour years, she has accomplished a great deal in a short amount of time. Inher first year with the company, she changed banks and obtained anincreased LOC to accommodate the double-digit growth it was experiencing.The new banking structure also unencumbered the ownerʼs personal resi-dence as collateral.Whatʼs more, the companyʼs sales were $18 million in 2005. Felt Bicycles

is expected to finish 2009 with approximately $25 million in sales, and thatʼsa result of Lawlerʼs cost controls.

Don LawsonHidden Villa Ranch

A financial professional for the last 34 years, Don Lawson has worked for several high profileorganizations, including Walt Disney. During his tenure as chief financial officer for Hidden Villa

Ranch, the company has flourished, managing to successfully acquire sev-eral egg producers. In his current capacity, Lawson is in charge of a depart-ment of about ten people. Notably, heʼs nurtured the companyʼs internalgrowth while helping it maintain the best possible position for success.Lawson is involved with several community initiatives, including Pagway

Village, an organization that helps the mentally handicapped.

Jim LeonettiBakerCorp

Jim Leonetti has been finance chief for Baker Corp., the industry leader in containment, pumpingand filtration equipment rental solutions since he joined the company inMarch 2007. He brings to the position the experience of having served asCFO of several other high profile organizations, including CommercialCapital Bank, Watt Commercial Properties and CB Richard Ellis. Skilled inboth operational and finance leadership, heʼs versatile enough to handletreasury functions, SEC reporting, strategic planning and information sys-tems. When identifying and solving problems, he exhibits both a deep ana-lytical ability and the capacity to look at questions broadly and ask multidis-ciplinary questions.Leonetti holds a BS in business administration from USC and is a CPA.

Sean McCarthyDiedrich Coffee

Sean McCarthy joined Diedrich Coffee in 2004 as vice President, controller and was appointedthe companyʼs chief financial officer, treasurer and secretary in 2006. Duringa time of tremendous growth and internal change, McCarthy has led his teamand the company through dedication, hard work and singular devotion, trans-forming the organization from a struggling coffeehouse company to a suc-cessful, profitable manufacturing and distribution organization. He hasplaced a premium on the development of his staff while insuring a work-lifebalance for all which has resulted in a very strong, motivated and cohesiveteam of finance and accounting professionals.McCarthy graduated from Pepperdine University with a degree in Business

Management and earned his MBA at USC.

Jim MieleIteris Inc.

Miele has served as the vice president of finance and chief financial officer of Iteris since 2004.Prior to holding this position, he was the companyʼs controller, beginning in2001. In his time as CFO for the firm, he has been instrumental in helping itsgrowth by focusing on cash management and getting the company addition-al financing.Prior to joining Iteris, Miele was an audit manager with Ernst & Young

LLP, supervising financial statement audits for a variety of public and pri-vately held companies.Miele holds a BS in business administration with an emphasis on

accounting from San Diego State University and is a licensed CPA inCalifornia.

Transforming the lives of at-risk childrenthrough the healing power of family

Board of Directors: Darrel Anderson, Chairman, Tom Zeigler, Vice Chairman, and Dayna Devito-Fleck, Michael Grant, Pike Lambeth, John Lemme, John Luker, Brad Mitchell, Timothy Myers, William Potter, Dan Raatjes, Daniel Schlothan, Stan Short, Paul Whalen, and Chris Wing.

Board of Trustees: Steven Bernardy, President, and Lorraine Bader, Kira Bruno, Paul Cannon, Pati Cinkle, Laurel Enloe, Debbie Ferree, William Meehan, John Melbon,Lisa Neal, Kelly Neavel, William Neavel, Paul Nienow, Terri Sjodin, and Leslie Wulff.

Olive Crest’s Board of Directors and Orange County Board of TrusteesCongratulate Ed Becker for his Nomination for CFO of the Year

Call 1.800.550.CHILD (2445) or visit www.olivecrest.org



Jennifer MitznerHoag Hospital

Jennifer Mitzner has been in the financial department of Hoag for 15 years, andfor the last seven of those sheʼs acted as its vice president of finance. In thiscapacity, she oversees all hospital accounting, including general accounting, pay-roll, accounts payable, and treasury. She also holds responsibility for the financedepartment, corporate compliance, internal audit, new technology evaluation andmaterials management, which includes purchasing, inventory control and centralsupply. Additionally, she serves as the hospitalʼs corporate compliance officer.Prior to her tenure at Hoag, Mitzner worked as a CPAwith KPMGPeat Marwick.

She received her bachelorʼs degree in accounting from Texas Christian Universityand her masterʼs degree in public administration/healthcare administration fromthe University of San Francisco.

Darrin MontalvoSt. Joseph Health System

As senior vice president/chief financial officer for St. Joseph Health System, Darrin Montalvo overseescorporate finance, reporting and consolidation, internal audit, supply chain, treas-ury, revenue cycle, financial planning, budgeting and payer contracting for the $4billion not-for-profit health system.In the past two years, Montalvo has presided over conversion of a debt portfo-

lio of $1.2 billion in auction notes into a combination of fixed and variable ratebonds. Additionally, he initiated a system-wide revenue cycle effort to raise oper-ating income by one percent and implemented a five-year integrated strategic andfinancial plan.Montalvo earned an MBA at USC in 1996 with a concentration in finance and

health care administration.

Jerry MoreyMetagenics, Inc.

Jerry Morey, finance chief at Metagenics, Inc. possesses a unique blend of financial expertise and oper-ational savvy. These attributes, combined with his people skills, drive and creativ-ity have been critical during the last couple of years in supporting the companyʼsgrowth. During his tenure at the Metagenics, Morey has facilitated a total of eightacquisitions; the last couple of those helped ensure the successful sale of thecompany to Alticor in August 2009.Morey has been with Metagenics for a total of 13 years. He was initially hired

as a controller.Despite working an average of 60 hours every week, Morey devotes time and

energy to Miocean, a nonprofit foundation whose aim is to preserve and protectOrange Countyʼs coastline.

Robert PoterajOcean Institute

Three years ago Robert Poteraj joined the Ocean Institute team as the orga-nizationʼs chief financial officer. Having a science background (he has a bach-elorʼs degree in biology from Notre Dame) he connects with the organizationʼseducational staff; having also an extensive background in finance, including anMBA from UCLA, heʼs able to help the staff become better managers by help-ing them understand the fiscal side of the operation.Poteraj is very active in the fundraising aspect of the Ocean Institute. Not just

a number cruncher, he has a deep love for the ocean and spends much of hisfree time surfing.

Michael PuntorieroAllianz Global Investors of America L.P.

A financial professional for the past 30 years, Michael Puntoriero today actsas managing director and chief financial officer for Allianz Global Investors ofAmerica L.P. In this capacity he provides financial support to several organiza-tions under the Allianz umbrella.Puntoriero has completed the director training certification program at the

UCLAAnderson School of Management. He also holds a CPA designation. Heearned his bachelorʼs degree in accounting and finance at California StateUniversity Northridge and his Masters in Business Administration from theUniversity of Southern California.

Steven RichardsTTM Technologies

Steven Richards has served as the chief financial officer for TTM technologies since 2005. Prior tothat, he was the companyʼs vice president and treasurer. Before he joined TTM technologies, heworked for Atlantic Richfield, an oil and gas company, from June 1996 to April 2000 in financial plan-ning, analysis and reporting.Richards holds a bachelors degree in journalism from the University of Missouri and an MBA from

USC.

Phillip J. RiesDiocese of Orange

Phillip Ries is the director of finance for the Diocese of Orange, an organiza-tion that he joined in 1991. In all, it oversees 60 parishes with a total populationin excess of one million in addition to 40 schools (which have more than 18,000students in all). Prior, he worked as director of finance for the Diocese ofReno/Las Vegas—a position he held from 1976 to 1991. He also served in theUnited States Army as an officer for four years in the early 1970s.Ries has provided immeasurable financial leadership to the Orange Diocese

during a tumultuous time. Itʼs partly because of his extensive expertise that theorganization is now able to meet its financial obligations.

Jeffrey J. RitcheyPro-Dex

Pro-Dex is a growing public medical and dental equipment engineering and manufacturing compa-ny, with related operations in motion control products and small motor manufacturing. Jeffrey Ritcheywas originally hired as the companyʼs main subsidiary controller and was promoted to chief financialofficer in 2002. He is responsible for all financial activities including internal financial and SEC report-ing, cost accounting, receivables, payables, financial planning and analysis, investor relations, financ-ing, tax and insurance. In fiscal year 2006, he completed and integrated two acquisitions—one of aproduct line and one of a subsidiary.Ritchey is involved with a number of community organizations, including AYSO, Boy Scouts, and

the Knights of Columbus.

Preston RommObagi Medical Products

Romm joined Obagi on July 1, 2008, bringing more than 14 years ofsenior level experience in finance, operations and administration includingfinancing growth strategies, negotiating and integrating several mergersand acquisitions.Prior to joining Obagi, Romm was CFO at Iomega Corporation, where

he successfully completed the companyʼs sale to EMC Corporation. AtIomega Romm was responsible for all administrative functions includingfinance, SEC compliance, treasury, investor relations and information sys-tems.Romm also currently serves as a member of the board of directors at

Netlist where he is chairman of the audit committee and a member of thenominating and governance committees.

Scott SavoieUniversal Services of America

Universal Services of America is a $235 million-plus holding company ofthree property services businesses: uniformed security, janitorial, and securi-ty monitoring systems. Since Scott Savoie joined in 2005, the organization hasgrown dramatically, more than doubling its revenues and increasing its head-count to more than 7000 employees. In 2006, Savoie led a management buy-out, which culminated in retiring two founding partners from the business. Thenext year, he completed two acquisitions. Today, the company is in three west-ern states with plans to expand to other states.In his spare time, Savoie is involved with AYSO, acting as a coach and a ref-

eree.

Charles SlacikBeckman Coulter

Since Charles Slacik joined Beckman Coulter in 2006, he has been an agent oftremendous change. He has worked on realigning finance and IT and has signifi-



cantly restructured the companyʼs cost structure using Lean Six Sigma initiative. Further, heʼs expandedits balance sheet.In February 2009 it was announced that Beckman would be acquiring a Japanese division of Olympus

(a public Japanese company) for approximately $800 million in yen. During this time, while other compa-nies were feeling the burden of the changing economy, Slacik managed to raise $250 million in the equi-ty market and $500 million in the bond market while refinancing/increasing their revolver from $300 mil-lion to $350 million.

Larry SullivanPassco Companies, LLC

Larry Sullivan joined Passco Inc. as its chief financial officer in 2004. Upon join-ing the company, he began a critical and successful process of building anaccounting department that now produces monthly reports on more than 12 mil-lion square feet of real estate in over 35 affiliated property owning groups, alongwith preparing the financial statements for the ownership groups.In addition to leading the companyʼs accounting group, Sullivan has excelled

in accessing equity and debt capital, working with the companyʼs outside audi-tors and overseeing analystsʼ evaluation of property acquisitions. Since 2004 hehas worked with the other company managers to successfully acquire nearly$815 million in debt financing and $250 million in equity capital more than $1 bil-lion of real estate acquisitions.

Robert TellesThe Stearns Companies

When Robert Telles joined The Stearns Companies in 2000, it was a youngerand smaller organization and its accounting systems and procedures were inneed of reorganization. As the companyʼs chief financial officer, he made signif-icant and crucial changes, restructuring its general ledger, cash receipts, andcash disbursement systems, implementing a loan level accounting system, con-tribution margin reporting, and GAAP accounting. As a result, the companyexperienced improved cost control, risk management, internal controls and oper-ational efficiency. Stearns lending has not merely survived these tough econom-ic times—itʼs flourished, and thatʼs largely due to the vast and extensive effortsTelles has put forth.

Phong TruongSouth County Senior Services

Phong Truong has worked with South County Senior Services for nearly 13 years.In that time, he has worked very diligently tomove the organization from a small non-profit serving two communities to a larger enterprise serving fourteen cities.Truong has been involved in all the organizationʼs fundraising projects and

maintains the accountability that every nonprofit needs. He manages multiple accounts, oversees thecompanyʼs investment accounts, and monitors its endowment. He interfaces with its outside accountingfirm, and maintains excellent relations with all the government auditors and outside auditors—as a result,he is greatly respected within the nonprofit industry.

Mindy WeinheimerHuman Options

Mindy Weinheimer joined Human Options in December 2005. At that time, theorganization employed a part-time accountant but had limited institutional knowl-edge of its accounting policies and financial operations. In consultation with theaudit committee, the organizations external auditor and the board, she immedi-ately wrapped her arms around the finance operations so that the organizationcould position itself for greater success.In addition to doing volunteer work for Human Options, Weinheimer sits on the

board of directors of Building Friends, an organization that serves special needsin children. She also does pro bono consulting for a pre-school and for YMCA.

David WolfePacific Pharmacy Group

Pacific Pharmacy Groupʼs chief financial officer, David Wolfe has been instru-mental in establishing a first-class finance and accounting team that has offeredsupport to the rapidly growing company. When he joined PPG in 2008, it had nofinance and accounting infrastructure. He was tasked with building his departmentfrom the ground up while simultaneously playing catch-up on historical reportsand implementing tools that would allow the company to succeed—all in the midstof multiple acquisitions.Wolfe also has created a series of management reporting tools that rival those

at companies ten times the size of PPG.

Daniel WuTickets.com

When Daniel Wu finished his undergraduate degree at Cal State LongBeach, he got a job at KPMG LLP, launching his career as a top financial pro-fessional. Today, heʼs the chief financial officer for Tickets.com, a wholly-owned subsidiary of MLA Advanced Media, L.P. and a leading business-to-business ticketing solutions provider for live events. When he joined the com-pany in 2005, the company needed new employees, new software, and a newmission. Wu tackled these unique challenges with aplomb, and as a result thecompany is now hitting its stride. Recently, it launched new software, whichprovides ticketing software as well as support in the form of a call center andkiosk outlets for large franchises.





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CFO-Covers(small):Layout 1 12/30/09 12:02 PM Page 1ocbj.media.clients.ellingtoncms.com/static/ocbj/supplements/CFO_Guide_2010.pdfThat’s a claim not just any bank can make. ©2010