THE ULTIMATE SOFTWARE GROUP, INC.
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Filed by the
Registrant þ
Filed by a party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
Section 240.14a-11(c)
or
Section 240.14a-12
THE ULTIMATE SOFTWARE GROUP, INC.
(Name of Registrant as Specified in
Its Charter)
Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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THE
ULTIMATE SOFTWARE GROUP, INC.
2000 ULTIMATE WAY
WESTON, FLORIDA 33326
April 11, 2008
Dear Stockholder:
You are cordially invited to attend the 2008 Annual Meeting of
Stockholders of The Ultimate Software Group, Inc. (the
Company or Ultimate Software), which
will be held on Tuesday, May 13, 2008, at 10:00 a.m.
(EDT), at the Companys principal corporate office at 2000
Ultimate Way, Weston, Florida 33326 (the Annual
Meeting).
The principal business of the meeting will be (i) to elect
two directors to serve until the 2011 Annual Meeting of
Stockholders or until their successors are duly elected and
qualified; (ii) to ratify the appointment of KPMG LLP as
the Companys independent registered public accounting firm
for the fiscal year ending December 31, 2008; and
(iii) to transact such other business as may properly come
before the meeting or any postponement or adjournment thereof.
During the Annual Meeting, we will also review the results of
the past fiscal year and report on significant aspects of our
operations during the first quarter of fiscal 2008.
Whether you plan to attend the Annual Meeting or not, please
complete, sign, date and return the enclosed proxy card in the
postage prepaid envelope provided so that your shares will be
voted at the meeting. If you decide to attend the meeting, you
may, of course, revoke your proxy and personally cast your votes.
For your benefit, enclosed is a copy of Ultimate Softwares
Annual Report to Stockholders, including our Annual Report on
Form 10-K
filed with the Securities and Exchange Commission, which
includes audited consolidated financial statements and notes
thereto. We thank you for your continued interest in Ultimate
Software.
Sincerely yours,
Scott Scherr
Chairman, President and Chief Executive Officer
THE
ULTIMATE SOFTWARE GROUP, INC.
2000 ULTIMATE WAY
WESTON, FLORIDA 33326
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON MAY 13,
2008
TO THE
STOCKHOLDERS OF THE ULTIMATE SOFTWARE GROUP, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
of The Ultimate Software Group, Inc. (the Company)
will be held on Tuesday, May 13, 2008, at 10:00 a.m.
(EDT), at the Companys principal corporate office at 2000
Ultimate Way, Weston, Florida 33326 for the following purposes:
1. To elect two directors to serve until the 2011 Annual
Meeting of Stockholders or until their successors are duly
elected and qualified;
2. To ratify the appointment of KPMG LLP as the
Companys independent registered public accounting firm for
the fiscal year ending December 31, 2008; and
3. To transact such other business as may properly come
before the meeting or any postponement or adjournment thereof.
Holders of record of the voting stock of the Company at the
close of business on March 17, 2008 are entitled to notice
of and to vote at the Annual Meeting or any postponement or
adjournment thereof.
Enclosed are a Proxy Statement, a form of proxy and an
addressed return envelope. ALL STOCKHOLDERS, WHETHER OR NOT THEY
EXPECT TO BE PRESENT AT THE MEETING, ARE REQUESTED TO FILL IN,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. Stockholders who
attend the meeting may, if they desire, revoke their proxies and
vote in person.
By Order of the Board of Directors:
Vivian Maza
Secretary
Weston, Florida
April 11, 2008
IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDERS MEETING TO BE HELD ON MAY 13, 2008:
The
Companys annual report to stockholders and proxy statement
are available on the Investors
page of the Companys website at:
http://ultimatesoftware.com/investors.asp
THE
ULTIMATE SOFTWARE GROUP, INC.
2000 ULTIMATE WAY
WESTON, FLORIDA 33326
PROXY
STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 2008
The enclosed proxy is solicited on behalf of the Board of
Directors (the Board) of The Ultimate Software
Group, Inc. (the Company) for use at the Annual
Meeting of Stockholders (the Annual Meeting) to be
held on Tuesday, May 13, 2008, at 10:00 a.m. (EDT), at
the Companys principal corporate office at 2000 Ultimate
Way, Weston, Florida 33326 and at any postponement or
adjournment thereof, for the purposes set forth in the Notice of
Annual Meeting of Stockholders. This Proxy Statement, the
accompanying proxy and the Companys Annual Report to
Stockholders for 2007 including therewith the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2007 (the
Form 10-K),
are first being mailed to stockholders commencing on or about
April 11, 2008.
Proxies are being solicited from holders of the Companys
common stock, par value $0.01 per share (the Common
Stock). If a proxy is properly executed and returned, the
shares represented by it will be voted and, where specification
is made by the stockholder as provided in such proxy, will be
voted in accordance with such specification. Unless a
stockholder specifies otherwise, all shares represented by valid
proxies will be voted (i) FOR the election of the persons
named in this Proxy Statement as nominees of the Company under
the heading Election of Directors; (ii) FOR the
ratification of the appointment of KPMG LLP as the
Companys independent registered public accounting firm for
the fiscal year ending December 31, 2008 and (iii) at
the discretion of the proxy holders on any other matter that may
properly come before the Annual Meeting or any adjournment
thereof.
SOLICITATION
OF PROXIES
The Company is paying the costs of solicitation, including the
cost of preparing and mailing this Proxy Statement. Proxies are
being solicited primarily by mail, but in addition, the
solicitation by mail may be followed by solicitation in person,
or by telephone or facsimile, by directors, officers and other
employees of the Company without additional compensation.
Brokers, dealers, banks, voting trusts, custodians and other
institutions, and their nominees, who are holders of shares of
the Companys Common Stock on the Record Date, referred to
below, will be requested to forward the soliciting material to
the beneficial owners of such shares of Common Stock and to
obtain authorization for the execution of proxies. The Company
will, upon request, reimburse such institutions for their
reasonable expenses in forwarding proxy material to their
beneficial owners.
VOTING
RIGHTS AND PROCEDURES
Only stockholders of record of the Common Stock of the Company
at the close of business on March 17, 2008 (the
Record Date), will be entitled to vote at the Annual
Meeting. As of that date, a total of 25,448,977 shares of
Common Stock were outstanding, each share being entitled to one
vote. There is no cumulative voting.
A majority of the issued and outstanding shares of Common Stock
entitled to vote at the Annual Meeting, represented in person or
by proxy, constitutes a quorum for the transaction of business
at the Annual Meeting. If a stockholder abstains from voting as
to any matter, then the shares held by such stockholder shall be
deemed present at the Annual Meeting for purposes of determining
a quorum. If a broker returns a non-vote proxy,
indicating a lack of authority to vote on such matter, then the
shares covered by such non-vote shall be deemed present at the
Annual Meeting for purposes of determining a quorum but shall
not be deemed to have been voted in favor of or against such
matter.
Assuming the presence of a quorum, the affirmative vote of a
plurality of the votes cast is required for the election of
directors. If a stockholder returns a proxy withholding
authority to vote the proxy with respect to a nominee for
director, then the shares of the Common Stock covered by such
proxy shall be deemed present at the Annual Meeting for purposes
of determining a quorum and for purposes of calculating the vote
with respect to such nominee, but shall not be deemed to have
been voted for such nominee. In the election of directors,
abstentions will have no effect on the outcome of the vote.
The affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote at the
Annual Meeting is required for the ratification of the
appointment of KPMG LLP as the Companys independent
registered public accounting firm for the fiscal year ending
December 31, 2008. Abstentions will not be counted either
for or against the proposal for the ratification of the
appointment of KPMG LLP as the Companys independent
registered public accounting firm for 2008.
A stockholder may revoke a proxy at any time prior to its
exercise by giving to the Secretary of the Company a written
notice of revocation of the proxys authority prior to the
voting thereof or by submitting a duly executed proxy bearing a
later date, or by voting in person at the Annual Meeting.
PROPOSAL I
ELECTION OF DIRECTORS
The Board of the Company is currently composed of seven members
divided into three classes. The members of each class are
elected to serve three-year terms with the term of office of
each class ending in successive years. Messrs. LeRoy A.
Vander Putten and Robert A. Yanover serve in the class whose
term expires at the Annual Meeting.
The Board has nominated Messrs. LeRoy A. Vander Putten and
Robert A. Yanover for election to the Board at the Annual
Meeting for a term of three years, expiring at the 2011 Annual
Meeting, and each has indicated a willingness to serve.
Messrs. Rick A. Wilber, Marc D. Scherr and James A.
FitzPatrick, Jr. serve in the class whose term expires at
the Annual Meeting in 2009. Messrs. Scott Scherr and Alois
T. Leiter serve in the class whose term expires at the Annual
Meeting in 2010.
The affirmative vote of a plurality of the votes cast at the
Annual Meeting is necessary to elect the nominees as directors.
The persons named as proxies in the enclosed form of proxy will
vote the proxies received by them FOR the election of
Messrs. LeRoy A. Vander Putten and Robert A. Yanover,
unless authority is withheld by the stockholder in the proxy. In
the event that either of Messrs. LeRoy A. Vander Putten or
Robert A. Yanover becomes unavailable for election at the Annual
Meeting, the persons named as proxies in the enclosed form of
proxy may vote for a substitute nominee in their discretion as
recommended by the Board.
The following table sets forth certain information concerning
the nominees, based on data furnished by them. Information
regarding incumbent directors whose terms are not expiring is
included in the section labeled Directors and Executive
Officers below.
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Name of Nominee
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Age
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Principal Occupation
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Director Since
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LeRoy A. Vander Putten
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73
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Retired; Former Chief Executive Officer, Executive Risk Inc.
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October 1997
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Robert A. Yanover
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71
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Retired; Former President, Computer Leasing Corporation
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January 1997
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LeRoy A. Vander Putten has served as a director of the Company
since October 1997, is Chairman of the Compensation Committee of
the Board and is a member of the Audit Committee of the Board.
Mr. Vander Putten is a retired insurance company executive.
He served as the Executive Chairman of The Insurance Center,
Inc., a holding company for 14 insurance agencies, from October
2001 to January 27, 2006. Previously, he served as the
Chairman of CORE Insurance Holdings, Inc., a member of the GE
Global Insurance Group, engaged in the underwriting of casualty
reinsurance, from August 2000 to August 2001. From April 1998 to
August 2000, he served as Chairman of Trade Resources
International Holdings, Ltd., a corporation engaged in trade
finance for exporters from developing countries. From January
1988 until May
2
1997, Mr. Vander Putten was Chairman and Chief
Executive Officer of Executive Risk Inc., a specialty insurance
holding company.
Robert A. Yanover has served as a director of the Company since
January 1997 and is Chairman of the Audit Committee and a member
of the Compensation Committee of the Board. Mr. Yanover
founded Computer Leasing Corporation of Michigan, a private
leasing company, in 1975 and served as its President from its
founding until 2007 at which time Mr. Yanover retired.
Mr. Yanover also founded Lason, Inc., a corporation
specializing in the imaging business, and served as Chairman of
the Board from its inception in 1987 until 1998 and as a
director through February 2001.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF MESSRS.
LEROY A. VANDER PUTTEN AND ROBERT A. YANOVER AS DIRECTORS OF THE
COMPANY TO HOLD OFFICE UNTIL THE 2011 ANNUAL MEETING AND UNTIL
THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED.
PROPOSAL II RATIFICATION
OF THE APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of the Board (the Audit
Committee) has appointed KPMG LLP as the independent
registered public accounting firm for the Company for the fiscal
year ending December 31, 2008. KPMG LLP has served as the
independent registered public accounting firm for the Company
since 2002. A representative of KPMG LLP will be present at the
Annual Meeting and will be given an opportunity to make a
statement. The representative will also be available to respond
to appropriate questions from stockholders.
Stockholder ratification of the appointment of KPMG LLP as the
Companys independent registered public accounting firm is
not required by the Companys bylaws or otherwise. However,
the Board is submitting the selection of KPMG LLP to the
stockholders for ratification as a matter of corporate practice.
The affirmative vote of the holders of a majority of the shares
represented in person or by proxy and entitled to vote is
required for the ratification of the appointment of KPMG LLP as
the Companys independent registered public accounting firm
for the fiscal year ending December 31, 2008. Abstentions
will not be counted either for or against the proposal for the
ratification of the appointment of KPMG LLP as the
Companys independent registered public accounting firm for
2008. If the stockholders fail to ratify the selection, the
Audit Committee will reconsider whether or not to retain the
firm. Even if the selection is ratified, the Audit Committee, in
its discretion, may direct the appointment of a different
independent registered public accounting firm at any time during
the year if the Audit Committee determines that such a change
would be in the best interests of the Company and its
stockholders.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE COMPANYS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2008.
Corporate
Governance, Board Meetings and Committees of the Board
During fiscal 2007, the Board held four meetings. During fiscal
2007, each director holding office during the year attended all
of the meetings of the Board and all of the meetings of the
committees of the Board on which he served except that
Mr. Vander Putten was unable to attend one special meeting
of the Compensation Committee. The Board has an Executive
Committee, an Audit Committee and a Compensation Committee,
which are described below.
Interested parties may communicate with the Board, anonymously
if they wish, by sending a written note or memo to the
Secretary, The Ultimate Software Group, Inc., 2000 Ultimate Way,
Weston, Florida 33326. Communications that are intended
specifically for non-management or independent directors should
be sent to the above address to the attention of the Chairman of
the Audit Committee. All such communications will be delivered
unopened by the Secretary to the Chairman of the Board or the
Chairman of the Audit Committee, as applicable.
3
Following consultation with counsel and based upon the facts
described below, the Board has determined that the following
individuals are independent directors within the meaning of the
rules of the National Association of Securities Dealers, Inc.
(NASD): James A. FitzPatrick, Jr., LeRoy A.
Vander Putten, Rick A. Wilber, Robert A. Yanover and Alois T.
Leiter. In the course of the Boards determination
regarding the independence of each non-employee director, it
considered any transactions, relationships and arrangements as
required by the NASD rules governing independence standards for
directors. In particular, with respect to each of the three most
recently completed fiscal years, the Board evaluated for
(i) Mr. FitzPatrick, the annual amount of fees the
Company paid for legal services to Dewey & LeBoeuf LLP
(formerly Dewey Ballantine LLP), the law firm in which
Mr. FitzPatrick is a partner, and
(ii) Mr. Leiter, the annual amount of charitable
contributions the Company made to Leiters Landing, the
non-profit charitable organization benefiting children that was
formed by Mr. Leiter, in connection with his acting as a
spokesperson for the Company. These relationships and
transactions are described in further detail below under
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The
Board determined that the annual payment or contribution, as the
case may be, to either of these organizations constituted an
amount less than the greater of $200,000 or five percent of such
organizations annual consolidated gross revenues during
each of such organizations three most recently completed
fiscal years, as such threshold is set forth in NASD
Rule 4200(a)(15)(D). The Board determined that these
relationships would not interfere with the ability of either
Mr. FitzPatrick or Mr. Leiter in exercising
independent judgment in carrying out the responsibilities of a
director.
The independent directors met regularly in executive session and
outside the presence of the Companys management throughout
the 2007 fiscal year, and will do so throughout fiscal 2008 in
compliance with the NASD rules.
Nominating Committee. The Board does
not have a standing nominating committee or committee performing
similar functions. The Board has determined that it is
appropriate not to have a nominating committee because of the
relatively small size of the Board and because the entire Board,
the majority of whom are independent directors, functions in the
capacity of a nominating committee. The Board has adopted
processes with respect to the nomination of directors that
require that a majority of the independent directors shall
recommend to the Board the nominees to stand for election at the
Annual Meeting.
When considering potential director candidates, the Board
considers the candidates independence (as mandated by the
NASD rules), character, judgment, age, skills, financial
literacy, and experience in the context of the needs of the
Company and the Board. In 2007, the Company did not pay any fees
to a third party to assist in identifying or evaluating
potential nominees.
The Board will consider director candidates recommended by the
Companys stockholders in a similar manner as those
recommended by members of management or other directors. The
name and qualifications of, and other information specified in
the Companys By-Laws with respect to, any recommended
candidate for director should be sent to the attention of the
Secretary of the Company in accordance with the procedures set
forth under the caption Stockholder Proposals for the 2009
Annual Meeting.
The Company does not have a policy with respect to attendance by
the directors at the Annual Meeting of Stockholders. Three of
the seven members of the Board attended the 2007 Annual Meeting
of Stockholders.
Executive Committee. The Executive
Committee of the Board is composed of Messrs. Scott Scherr
(Chairman), Marc D. Scherr and Robert A. Yanover. The Executive
Committee has the authority to exercise (except as provided by
law or as may have been specifically reserved by or for the
Board) all the powers and authority of the Board in the
management of the business and affairs of the Company between
regular meetings of the Board and while the Board is not in
session. The Executive Committee held no meetings during fiscal
2007.
Audit Committee. Messrs. Robert A.
Yanover (Chairman), Rick A. Wilber and LeRoy A. Vander Putten
are members of the Audit Committee of the Board. The Audit
Committee oversees the Companys financial reporting
process on behalf of the Board and reviews the independence of
the Companys auditors. The Audit Committee held four
meetings during fiscal 2007.
4
The Board has determined that the Audit Committees current
member composition satisfies the NASD rules that govern audit
committee composition, including the requirement that audit
committee members all be independent directors as
that term is defined by NASD Rule 4200(a)(15). The Board
has determined that Mr. LeRoy A. Vander Putten is an
audit committee financial expert as defined in the
rules of the Securities and Exchange Commission (the
SEC).
The Companys independent registered public accounting firm
for the fiscal year ended December 31, 2007 was KPMG LLP. A
representative of KPMG LLP will be present at the Annual Meeting
and will be given an opportunity to make a statement. The
representative will also be available to respond to appropriate
questions from stockholders.
Compensation
Committee. Messrs. LeRoy A. Vander
Putten (Chairman), Robert A. Yanover, Rick A. Wilber and Alois
T. Leiter are members of the Compensation Committee of the
Board. The Compensation Committee is responsible for determining
the compensation and benefits for the executive officers of the
Company and administers the Companys stock-based plans and
oversees such other benefit plans as the Company may from time
to time maintain. The Compensation Committee held five meetings
during fiscal 2007. The Compensation Committee does not have a
charter.
Director
Compensation
Each non-employee director of the Company receives compensation
for serving on the Board, payable exclusively in the form of
options to purchase Common Stock and restricted stock awards
granted under the Companys Amended and Restated 2005
Equity and Incentive Plan (the Plan). Prior to the
approval of the Plan, non-employee director compensation was
payable exclusively in the form of options to purchase Common
Stock and was granted under the Companys 2005 Equity and
Incentive Plan (the Prior Plan).
During the first two calendar quarters of 2007, as compensation
for serving on the Board, each non-employee director of the
Company received a quarterly retainer of $5,000, payable
exclusively in the form of options to purchase Common Stock
granted under the Plan and the Prior Plan. During that period,
additional compensation was provided for serving on Committees
of the Board, payable exclusively in the form of options to
purchase Common Stock under the Plan, as follows: (1) the
Chairman of the Audit Committee received a quarterly retainer of
$1,250; (2) the Chairman of the Compensation Committee
received a quarterly retainer of $1,250; (3) for attendance
at each Compensation Committee meeting, each Committee member
received $1,000 and the Chairman of the Compensation Committee
received $2,500 during the first and second quarters of fiscal
2007; (4) for attendance at each Audit Committee meeting,
each Committee member received $1,500 and the Committee Chairman
received $2,500. All such options were fully vested upon the
date of grant and have an exercise price equal to 30% of the
fair market value of the Companys Common Stock on the date
of grant. The total discount from fair market value on all
options granted to directors for a calendar quarter was
equivalent to the retainer fees and attendance fees earned by
the non-employee directors for such quarter. Options granted to
officers and employees under the Plan and the Prior Plan
generally have a
10-year
term, vesting 25% immediately and 25% on each of the first three
anniversaries of the grant date. Options granted to non-employee
directors under the Plan and the Prior Plan prior to
July 24, 2007 generally had a
10-year term
and vested and became exercisable immediately on the grant date.
However, certain options granted to non-employee directors for
board services during the period January 3, 2005 through
July 2, 2007 first become exercisable on the earliest of
(i) the fifth anniversary of the date of grant,
(ii) the date on which the director ceases to be a member
of the Board of Directors of the Company (the Board)
or (iii) the effective date of a change in control of the
Company.
On July 24, 2007, the Compensation Committee of the Board
rescinded the previously approved fee schedule for service on
the Board and Board Committees and replaced it with a program
involving options to purchase the Companys Common Stock at
fair market value on the date of grant and restricted stock
awards under the Plan. Under resolutions adopted by the
Compensation Committee, commencing with the third calendar
quarter of 2007, (i) each non-employee director has been
granted an option to purchase 3,750 shares of the
Companys Common Stock for each regular quarterly meeting
of the Board attended, dated as of the date of such meeting, at
an exercise price equal to the closing price of the
Companys Common Stock on
5
NASDAQ on the date of such meeting, and (ii) each of the
Chairman of the Audit Committee of the Board and the Chairman of
the Compensation Committee of the Board has been granted an
option to purchase 2,500 shares of the Companys
Common Stock for each calendar quarter in 2007, dated as of the
date of the regularly scheduled meeting of such Committee during
such quarter, at an exercise price equal to the closing price of
the Companys Common Stock on NASDAQ on the date of such
meeting. These option grants have vested and become exercisable
immediately upon grant.
In addition to the option grants discussed above, commencing
with the third calendar quarter of 2007, each non-employee
director has been granted a restricted stock award under the
Plan for each calendar quarter, dated as of the date of the
regularly scheduled meeting of the Compensation Committee during
such quarter, of that number of shares of the Companys
Common Stock equal to the quotient of $12,500 divided by the
closing price of the Companys Common Stock on NASDAQ on
the date of such meeting, rounded down to the nearest full
number of shares. The restricted stock awards shall vest on the
fourth anniversary of the date of grant, subject to accelerated
vesting in the event of a directors death, disability,
cessation of service at the end of his term or the occurrence of
a change in control of the Company.
All directors are reimbursed (in cash) for expenses incurred in
connection with their attendance at Board and Committee
meetings. In addition, in connection with their having joined
the Board, each non-employee Director has received a single
option grant to purchase 25,000 shares of the
Companys Common Stock. All such options were fully vested
upon the date of grant and have an exercise price equal to 100%
of the fair market value of the Companys Common Stock on
the date of grant.
2007
DIRECTOR COMPENSATION
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Pension
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Value and
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in Cash
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Awards(3)
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
|
James A. FitzPatrick, Jr.
|
|
$
|
|
|
|
$
|
1,956
|
|
|
$
|
116,095
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
118,051
|
|
LeRoy A. Vander Putten
|
|
|
|
|
|
|
1,956
|
|
|
|
199,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201,865
|
|
Rick A. Wilber
|
|
|
|
|
|
|
1,956
|
|
|
|
124,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,337
|
|
Robert A. Yanover
|
|
|
|
|
|
|
1,956
|
|
|
|
198,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,198
|
|
Alois T. Leiter
|
|
|
|
|
|
|
1,956
|
|
|
|
118,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,252
|
|
|
|
|
|
|
The amounts reported in the Director Compensation table above
represent the dollar amount of stock option awards and
restricted stock awards recognized for each director as
compensation costs for Board services (excluding forfeiture
assumptions) in accordance with SFAS No. 123R for
fiscal 2007. |
|
(1) |
|
Messrs. Scott Scherr and Marc D. Scherr are not included in
this table as they are employees of the Company and receive no
compensation for their services as directors. The compensation
for Messrs. Scott Scherr and Marc D. Scherr as employees is
shown in the Summary Compensation Table. |
|
(2) |
|
The amounts included in the Stock Awards column
represent the compensation cost recognized by the Company in
2007 related to restricted stock awards to non-employee
directors, computed in accordance with Statement of Financial
Accounting Standards No. 123 (revised 2004),
Share-Based Payment
(SFAS No. 123R). For a discussion of
valuation assumptions for stock award grants made as
compensation for Board and Committee service, see the table
below. |
|
(3) |
|
The amounts included in the Options Awards column
represent the compensation cost recognized by the Company in
2007 related to stock option awards to non-employee directors,
computed in accordance with SFAS No. 123R. For a
discussion of valuation assumptions for stock option award
grants made as compensation for Board and Committee service, see
the table below. |
6
BLACK-SCHOLES
ASSUMPTIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Grant Date(1)
|
|
|
|
Jan. 3, 2007
|
|
|
Apr. 2, 2007
|
|
|
Jul. 2, 2007
|
|
|
Jul. 24, 2007
|
|
|
Oct. 23, 2007
|
|
|
Risk Free Rate
|
|
|
4.80
|
%
|
|
|
4.50
|
%
|
|
|
4.63
|
%
|
|
|
4.63
|
%
|
|
|
3.88
|
%
|
Expected Volatility
|
|
|
39.45
|
%
|
|
|
39.00
|
%
|
|
|
39.00
|
%
|
|
|
39.00
|
%
|
|
|
39.00
|
%
|
Expected Life
|
|
|
4.88
|
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
5.00
|
|
|
|
5.00
|
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Grant Date Fair Value per share
|
|
$
|
17.59
|
|
|
$
|
20.01
|
|
|
$
|
22.46
|
|
|
$
|
12.55
|
|
|
$
|
14.00
|
|
|
|
|
(1) |
|
Each director was granted stock options with the grant date fair
value input factors above. The grant date fair values of options
granted to non-employee directors were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date Fair Value
|
|
|
|
Jan. 3, 2007
|
|
|
Apr. 2, 2007
|
|
|
Jul. 2, 2007
|
|
|
Jul. 24, 2007
|
|
|
Oct. 23, 2007
|
|
|
James A. FitzPatrick, Jr.
|
|
$
|
5,507
|
|
|
$
|
5,503
|
|
|
$
|
5,502
|
|
|
$
|
47,068
|
|
|
$
|
52,515
|
|
LeRoy A. Vander Purtten
|
|
$
|
11,313
|
|
|
$
|
11,306
|
|
|
$
|
11,319
|
|
|
$
|
78,447
|
|
|
$
|
87,525
|
|
Rick A. Wilber
|
|
$
|
8,269
|
|
|
$
|
8,264
|
|
|
$
|
8,265
|
|
|
$
|
47,068
|
|
|
$
|
52,515
|
|
Robert A. Yanover
|
|
$
|
10,768
|
|
|
$
|
10,745
|
|
|
$
|
10,757
|
|
|
$
|
78,447
|
|
|
$
|
87,525
|
|
Alois T. Leiter
|
|
$
|
5,507
|
|
|
$
|
6,603
|
|
|
$
|
6,603
|
|
|
$
|
47,068
|
|
|
$
|
52,515
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Award Grant Date(2)
|
|
|
|
Jul. 24,
|
|
|
Oct. 23,
|
|
|
|
2007
|
|
|
2007
|
|
|
Vesting Period (Cliff)
|
|
|
4 years
|
|
|
|
4 years
|
|
Awards Granted
|
|
|
411
|
|
|
|
358
|
|
Grant Date Market Value per share
|
|
$
|
30.34
|
|
|
$
|
34.89
|
|
|
|
|
(2) |
|
Each director was awarded restricted stock awards with the grant
date fair value input factors above. There were no stock awards
granted to directors prior to July 24, 2007. The grant date
fair values of awards granted to non-employee directors were as
follows: |
|
|
|
|
|
|
|
|
|
|
|
Grant Date Fair Value
|
|
|
|
Jul. 24,
|
|
|
Oct. 23,
|
|
|
|
2007
|
|
|
2007
|
|
|
James A. FitzPatrick, Jr.
|
|
$
|
12,470
|
|
|
$
|
12,491
|
|
LeRoy A. Vander Purtten
|
|
$
|
12,470
|
|
|
$
|
12,491
|
|
Rick A. Wilber
|
|
$
|
12,470
|
|
|
$
|
12,491
|
|
Robert A. Yanover
|
|
$
|
12,470
|
|
|
$
|
12,491
|
|
Alois T. Leiter
|
|
$
|
12,470
|
|
|
$
|
12,491
|
|
Under SFAS No. 123R, the fair value of each stock
option award is estimated on the grant date using the
Black-Scholes option valuation model based on the assumptions
noted in the table above. The Companys computation of the
expected volatility for each grant date above during the year
ended December 31, 2007 is based primarily upon historical
volatility and the expected term of the option. The expected
term is based on the historical exercise experience under the
share-based plans of the underlying award (including
post-vesting employment termination behavior) and represents the
period of time the share-based awards are expected to be
outstanding. The interest rate is based on the
U.S. Treasury yield in effect at the time of grant for a
period commensurate with the estimated expected life.
Under SFAS No. 123R, the fair value of each stock
award is measured based on the closing market price of the
Companys Common Stock at the date of grant and is
recognized on a straight-line basis over the vesting period.
Holders of Restricted Stock Awards have all rights of a
stockholder including the right to vote the shares and receive
all dividends and other distributions paid or made with respect
thereto. Each Award
7
becomes vested on the fourth anniversary of the respective date
of grant, subject to the grantees continued Board service
or employment with the Company or any of its subsidiaries on
each such vesting date and subject further to accelerated
vesting in the event of a change in control of the Company,
death or disability, the termination of employment by the
Company without cause or, in the case of a non-employee
director, at cessation of his Board Services at the end of his
term.
The number of outstanding Option Awards and Restricted Stock
Awards for each non-employee director as of December 31,
2007 was as follows:
OUTSTANDING
OPTION & STOCK AWARDS NON-EMPLOYEE
DIRECTORS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Restricted
|
|
Name
|
|
Outstanding Option Awards
|
|
|
Stock Awards
|
|
|
James A. FitzPatrick, Jr.
|
|
|
70,179
|
|
|
|
769
|
|
LeRoy A. Vander Putten
|
|
|
60,514
|
|
|
|
769
|
|
Rick A. Wilber
|
|
|
56,979
|
|
|
|
769
|
|
Robert A. Yanover
|
|
|
76,799
|
|
|
|
769
|
|
Alois T. Leiter
|
|
|
33,437
|
|
|
|
769
|
|
8
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Companys Common Stock as of
February 22, 2008 (unless otherwise noted) by (i) each
person who is known by the Company to own beneficially more than
5% of the Common Stock; and (ii) each of the Companys
directors and executive officers and all directors and executive
officers of the Company as a group.
|
|
|
|
|
|
|
|
|
|
|
Amount and
|
|
|
|
|
|
|
Nature of
|
|
|
Percent
|
|
|
|
Beneficial
|
|
|
of
|
|
Name and Address of Beneficial Owner
|
|
Ownership(1)
|
|
|
Class(2)
|
|
|
William Blair & Company, L.L.C.(3)
|
|
|
2,523,987
|
|
|
|
9.9
|
%
|
222 W. Adams
Chicago, IL 60606
|
|
|
|
|
|
|
|
|
Janus Capital Management, LLC(4)
|
|
|
1,956,046
|
|
|
|
7.7
|
%
|
151 Detroit Street
Denver, CO 80206
|
|
|
|
|
|
|
|
|
FMR, L.L.C.(5)
|
|
|
1,740,695
|
|
|
|
6.8
|
%
|
82 Devonshire Street
Boston, MA 02109
|
|
|
|
|
|
|
|
|
TimesSquare Capital Management, L.L.C.(6)
|
|
|
1,272,200
|
|
|
|
5.0
|
%
|
1177 Avenue of the Americas, 39th Floor
New York, NY 10036
|
|
|
|
|
|
|
|
|
Scott Scherr(7)
|
|
|
617,994
|
|
|
|
2.4
|
%
|
Marc D. Scherr(8)
|
|
|
707,366
|
|
|
|
2.8
|
%
|
Mitchell K. Dauerman(9)
|
|
|
205,342
|
|
|
|
|
*
|
James A. FitzPatrick, Jr.(10)
|
|
|
72,748
|
|
|
|
|
*
|
LeRoy A. Vander Putten(11)
|
|
|
91,322
|
|
|
|
|
*
|
Rick A. Wilber(12)
|
|
|
379,113
|
|
|
|
1.5
|
%
|
Robert A. Yanover(13)
|
|
|
210,546
|
|
|
|
|
*
|
Alois T. Leiter(14)
|
|
|
169,756
|
|
|
|
|
*
|
All directors and executive officers as a group
(8 persons)(15)
|
|
|
2,454,187
|
|
|
|
9.6
|
%
|
|
|
|
* |
|
Indicates beneficial ownership of less than 1.0% of the
outstanding Common Stock. |
|
(1) |
|
Beneficial ownership is determined in accordance with the rules
of the SEC and includes voting or investment power with respect
to securities. Shares of Common Stock issuable upon the exercise
of stock options exercisable within 60 days of the date
hereof are deemed outstanding and to be beneficially owned by
the person holding such option for purposes of computing such
persons percentage ownership, but are not deemed
outstanding for the purpose of computing the percentage
ownership of any other person. The Company has made restricted
stock awards to executive officers under the Plan
(Restricted Stock Awards). The shares of Common
Stock issued under the Restricted Stock Awards are subject to
certain vesting requirements and restrictions on transfers. The
holders of such shares have all the rights of a stockholder with
respect to such shares, including the right to vote the shares
and receive all dividends and other distributions paid or made
with respect thereto, unless the Compensation Committee
determines otherwise at the time the Restricted Stock Award is
granted. Each Restricted Stock Award becomes vested on the
fourth (4th) anniversary of the respective date of grant,
subject to the grantees continued employment with the
Company or any subsidiary, or service on the Board by a
non-employee director on each such vesting date and further
subject to accelerated vesting in the event of a Change in
Control or the grantees death, disability or termination
of the grantees employment with the Company without cause
or termination of a non-employee directors service on the
Board at the end of his term. All shares of Common Stock issued
under the Restricted Stock Awards are considered to be
beneficially owned for purposes of computing the holders
respective percentages of ownership in this table. Except for
shares held jointly with a persons spouse or subject to
applicable community property laws, or as |
9
|
|
|
|
|
indicated in the footnotes to this table, each stockholder
identified in the table possesses the sole voting and investment
power with respect to all shares of Common Stock shown as
beneficially owned by such stockholder. The Company has also
made awards of stock units under the Plan (Stock Unit
Awards). A Stock Unit Award is a grant of a number of
hypothetical share units with respect to shares of Common Stock
that are subject to vesting and transfer restrictions and
conditions under a stock unit award agreement. The value of each
unit is equal to the fair market value of one share of Common
Stock on any applicable date of determination. The payment with
respect to each unit under a Stock Unit Award may be made, at
the discretion of the Compensation Committee, in cash or shares
of Common Stock or in a combination of both. Stock Unit Awards
are not included in this table since the grantee does not have
any rights as a stockholder with respect to the shares subject
to a Stock Unit Award until such time as shares of Common Stock
are delivered to the grantee pursuant to the terms of the
related stock unit award agreement. |
|
(2) |
|
Applicable percentage of ownership is based on
25,484,637 shares of Common Stock outstanding. |
|
(3) |
|
Represents shares held as of December 31, 2007 as reported
on Schedule 13G/A filed by William Blair & Company,
L.L.C. (William Blair). As reported on
Schedule 13G/A, William Blair is a broker dealer registered
under Section 15 of the Exchange Act and an investment
adviser registered under Section 203 of the Investment
Advisers Act of 1940, as amended (the Investment Advisors
Act). William Blair has sole voting power and sole
dispositive power of 2,523,987 shares of Common Stock of
the Company. |
|
(4) |
|
Represents shares held as of December 31, 2007 as reported
on Schedule 13G/A filed by the respective stockholders. As
reported on Schedule 13G/A, Janus Capital Management LLC
(Janus Capital) has an indirect 86.5% ownership
stake in Enhanced Investment Technologies, LLC
(INTECH) and an indirect 30% ownership stake in
Perkins, Wolf, McDonnell and Company, LLC (Perkins
Wolf). Due to this ownership structure, holdings for Janus
Capital, Perkins Wolf and INTECH are aggregated for purposes of
the shares reported on the December 31, 2007
Schedule 13G/A. Janus Capital, Perkins Wolf and INTECH are
registered investment advisers, each furnishing investment
advice to various investment companies registered under
Section 8 of the Investment Company Act of 1940, as amended
(the Investment Company Act) and to individual and
institutional clients (collectively referred to as Managed
Portfolios). As a result of its role as investment advisor
or sub-adviser to the Managed Portfolios, Janus Capital may be
deemed to be the beneficial owner of 1,956,046 shares of
Common Stock of the Company held by such Managed Portfolios.
However, Janus Capital does not have the right to receive any
dividends from, or the proceeds from the sale of, the securities
held in the Managed Portfolios and disclaims any ownership
associated with such rights. Janus Venture Fund is an investment
company registered under the Investment Company Act and is one
of the Managed Portfolios to which Janus Capital provides
investment advice. |
|
(5) |
|
Represents shares held as of December 31, 2007 as reported
on Schedule 13G filed by the respective stockholders. As
reported on Schedule 13G, Fidelity Management &
Research Company (Fidelity), a wholly-owned
subsidiary of FMR, L.L.C. and an investment adviser registered
under Section 203 of the Investment Advisors Act of 1940,
is the beneficial owner of 1,740,695 shares of Common Stock
of the Company as a result of acting as investment adviser to
various investment companies registered under Section 8 of
the Investment Company Act of 1940. The ownership of one
investment company, Fidelity Contrafund, amounted to
1,565,056 shares of Common Stock outstanding. Edward C.
Johnson 3d and FMR L.L.C., through its control of Fidelity, and
the funds each has sole power to dispose of the
1,740,695 shares owned by the Funds. Members of the family
of Edward C. Johnson 3d, Chairman of FMR L.L.C., are the
predominant owners, directly or through trusts, of Series B
voting common shares of FMR L.L.C., representing 49% of the
voting power of FMR L.L.C. The Johnson family group and all
other Series B shareholders have entered into a
shareholders voting agreement under which all
Series B voting common shares will be voted in accordance
with the majority vote of Series B voting common shares.
Accordingly, through their ownership of voting common shares and
the execution of the shareholders voting agreement,
members of the Johnson family may be deemed, under the
Investment Company Act of 1940, to form a controlling group with
respect to FMR L.L.C. Neither FMR L.L.C. nor Edward C. Johnson
3d, Chairman of FMR L.L.C., has the sole power to vote or direct
the voting of the shares owned directly by the Fidelity Funds,
which power resides with the Funds Board of Trustees. |
10
|
|
|
|
|
Fidelity carries out the voting of the shares under written
guidelines established by the Funds Boards of Trustees. |
|
(6) |
|
Represents shares held as of December 31, 2007 as reported
on Schedule 13G filed by the respective stockholders. As
reported on Schedule 13G, TimesSquare Capital Management
L.L.C. (TimesSquare) has sole voting power of
1,168,800 shares of Common Stock and sole dispositive power
of 1,272,200 shares of Common Stock of the Company which
shares are also beneficially owned by investment advisory
clients of TimesSquare. In its role as investment adviser,
TimesSquare has voting and dispositive power with respect to
these shares. |
|
(7) |
|
Represents exercisable options to purchase 210,000 shares
of Common Stock held by Mr. Scott Scherr, and
407,994 shares of Common Stock subject to Restricted Stock
Awards. Excludes 24,929 shares of Common Stock subject to
Stock Unit Awards. |
|
(8) |
|
Represents 10,000 shares of Common Stock held by
Mr. Marc D. Scherr, 16,066 shares of Common Stock held
by certain trusts established for the benefit of Mr. Marc
D. Scherrs children, exercisable options to purchase
394,702 shares of Common Stock and 286,598 shares of
Common Stock subject to Restricted Stock Awards. Excludes
20,192 shares of Common Stock subject to Stock Unit Awards.
Mr. Marc D. Scherr disclaims beneficial ownership of the
shares owned by the trusts established for the benefit of his
children. |
|
(9) |
|
Represents exercisable options to purchase 165,342 shares
of Common Stock held by Mr. Dauerman and 40,000 shares
of Common Stock subject to Restricted Stock Awards. |
|
(10) |
|
Represents 2,000 shares of Common Stock held by
Mr. FitzPatrick, exercisable options to purchase
69,540 shares of Common Stock and 1,208 shares of
Common Stock subject to Restricted Stock Awards. |
|
(11) |
|
Represents 31,277 shares of Common Stock held by
Mr. Vander Putten, exercisable options to purchase
58,837 shares of Common Stock and 1,208 shares of
Common Stock subject to Restricted Stock Awards. |
|
(12) |
|
Represents 323,471 shares of Common Stock held by
Mr. Wilber, exercisable options to purchase
54,434 shares of Common Stock and 1,208 shares of
Common Stock subject to Restricted Stock Awards. These shares
shown include 243,173 shares of Common Stock pledged by
Mr. Wilber. |
|
(13) |
|
Represents 88,696 shares of Common Stock held by Yanover
Associates, 44,743 shares of Common Stock held by Yanover
Family Limited Partnership (YFLP), exercisable
options held by Mr. Yanover to purchase 75,899 shares
of Common Stock and 1,208 shares of Common Stock subject to
Restricted Stock Awards. Mr. Yanover is the President of
the general partner of Yanover Associates and an officer of the
general partner of YFLP. Mr. Yanover disclaims beneficial
ownership of the shares held by the YFLP. |
|
(14) |
|
Represents 130,983 shares of Common Stock held by
Mr. Leiter, exercisable options to purchase
36,250 shares of Common Stock, 1,315 shares of Common
Stock held by certain trusts for the benefit of
Mr. Leiters children and 1,208 shares of Common
Stock subject to Restricted Stock Awards. Mr. Leiter
disclaims beneficial ownership of the shares owned by the trusts
established for the benefit of his children. |
|
(15) |
|
Represents an aggregate of 648,551 (both directly and indirectly
owned) shares of Common Stock, 740,632 shares of Common
Stock subject to Restricted Stock Awards and exercisable options
to purchase an aggregate of 1,065,004 shares of Common
Stock. Excludes 45,121 shares of Common Stock subject to
Stock Unit Awards. |
11
DIRECTORS
AND EXECUTIVE OFFICERS
The directors and executive officers (Messrs. Scott Scherr,
Marc D. Scherr and Mitchell K. Dauerman), and their ages as of
February 18, 2008, are as follows:
|
|
|
|
|
Name
|
|
Age
|
|
Position(s)
|
|
Scott Scherr
|
|
55
|
|
Chairman of the Board, President and Chief Executive Officer
|
Marc D. Scherr
|
|
50
|
|
Vice Chairman of the Board and Chief Operating Officer
|
Mitchell K. Dauerman
|
|
50
|
|
Executive Vice President, Chief Financial Officer and Treasurer
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James A FitzPatrick, Jr.
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Director
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Alois T. Leiter
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Director
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LeRoy A. Vander Putten
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Director
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Rick A. Wilber
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Director
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Robert A. Yanover
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Director
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Scott Scherr has served as President and a director of the
Company since its inception in April 1996 and has been Chairman
of the Board and Chief Executive Officer of the Company since
September 1996. Mr. Scherr is also a member of the
Executive Committee of the Board. In 1990, Mr. Scherr
founded The Ultimate Software Group, Ltd. (the
Partnership), the business and operations of which
were assumed by the Company in 1998. Mr. Scherr served as
President of the Partnerships general partner from the
inception of the Partnership until its dissolution in March
1998. From 1979 until 1990, he held various positions at
Automatic Data Processing, Inc. (ADP), a payroll
services company, where his titles included Vice President of
Operations and Sales Executive. Prior to joining ADP,
Mr. Scherr operated Management Statistics, Inc., a data
processing service bureau founded by his father, Reuben Scherr,
in 1959. He is the brother of Marc Scherr, the Vice Chairman of
the Board and Chief Operating Officer of the Company, and the
father-in-law
of Adam Rogers, Senior Vice President and Chief Technology
Officer.
Marc D. Scherr has been a director of the Company since its
inception in April 1996 and has served as Vice Chairman since
July 1998 and as Chief Operating Officer since October 2003.
Mr. Scherr is also a member of the Executive Committee of
the Board. Mr. Scherr became an executive officer of the
Company effective March 1, 2000. Mr. Scherr served as
a director of Gerschel & Co., Inc., a private
investment firm from January 1992 until March 2000. In December
1995, Mr. Scherr co-founded Residential Company of America,
Ltd. (RCA), a real estate firm, and served as
President of its general partner until March 2000.
Mr. Scherr also served as Vice President of RCAs
general partner from its inception in August 1993 until December
1995. From 1990 to 1992, Mr. Scherr was a real estate
pension fund advisor at Aldrich, Eastman & Waltch.
Previously, he was a partner in the Boston law firm of
Fine & Ambrogne. Mr. Scherr is the brother of
Scott Scherr, Chairman of the Board, President and Chief
Executive Officer of the Company
Mitchell K. Dauerman has served as Executive Vice President of
the Company since April 1998 and as Chief Financial Officer and
Treasurer of the Company since September 1996. From 1979 to
1996, Mr. Dauerman held various positions with KPMG LLP,
serving as a Partner in the firm from 1988 to 1996.
Mr. Dauerman is a Certified Public Accountant.
James A. FitzPatrick, Jr. has served as a director of the
Company since July 2000. Mr. FitzPatrick is a partner in
the law firm Dewey & LeBoeuf LLP (formed in October
2007 by merger of Dewey Ballantine LLP and LeBoeuf, Lamb,
Greene & MacRae LLP), which provides legal services to
the Company. Before joining Dewey Ballantine LLP as a partner in
February 1989, Mr. FitzPatrick was a partner in the law
firm LeBoeuf, Lamb, Leiby & MacRae.
Alois T. Leiter has served as director of the Company since
October 2006 and is a member of the Compensation Committee of
the Board. Mr. Leiter was a three-time Major League
Baseball World Champion and two-time All-Star pitcher formerly
with the New York Yankees, New York Mets, Toronto Blue Jays, and
Florida Marlins, and has been an official spokesperson for the
Company since 2002. Mr. Leiter has served as a television
commentator for the Yankees Entertainment and Sports Network
since 2006. Mr. Leiter is president and founder of
Leiters Landing, a charitable organization formed in 1996.
Mr. Leiter has served on the
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Executive Committee of New York Citys official tourism
marketing organization, NYC & Company, since 2000 and
is a member of the Board of Directors of Americas Camp, a
legacy organization of the Twin Towers Fund, on which he also
served as a board member.
Rick A. Wilber has served as a director of the Company since
October 2002 and is a member of the Audit Committee and a member
of the Compensation Committee of the Board. Mr. Wilber
formerly served on the Companys Board of Directors from
October 1997 through May 2000. Since 1995, Mr. Wilber has
been the President of Lynns Hallmark Cards, which owns and
operates a number of Hallmark Card stores. Mr. Wilber was a
co-founder of Champs Sports Shops and served as its President
from 1974 to 1984. He served on the Board of Royce Laboratories,
a pharmaceutical concern, from 1990 until April 1997, when the
company was sold to Watson Pharmaceuticals, Inc., a
pharmaceutical concern.
Information regarding Messrs. LeRoy A. Vander Putten and
Robert A. Yanover is included under the heading
PROPOSAL I ELECTION OF DIRECTORS.
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Compensation Policy
As a provider of Web-based payroll and talent management
solutions, our long-term success depends on our ability to
develop, enhance and market our products and services to keep
pace with our competitors; adapt to technological advancements
and changing industry standards; and expand the functionality of
our products and services to address the increasingly
sophisticated requirements of our customers. To achieve these
goals, it is critical that we be able to attract, motivate and
retain highly talented individuals at all levels of the
organization who are committed to the Companys core values
of excellence, integrity and teamwork.
It is our belief that compensation should be based on the level
of job responsibility, individual performance and Company
performance. As employees progress to higher levels in the
organization, an increasing proportion of their pay should be
linked to Company performance, since they are more able to
affect the Companys results. Additionally, compensation
should reflect the value of the job in the marketplace. In order
to attract and retain a highly skilled work force, we must
remain competitive with the pay of other employers who compete
with us for talent. Although the programs and individual pay
levels will always reflect differences in job responsibilities,
geographies and marketplace considerations, the overall
structure of compensation and benefit programs should be broadly
similar across the Company.
Our Compensation Committee is responsible for developing and
approving the Companys compensation program for the
executive officers and other officers of the Company. In
addition, our Compensation Committee administers the
Companys equity based plan and oversees such other benefit
plans as the Company may from time to time maintain.
Our Compensation Committee is composed of four non-employee
directors, Messrs. LeRoy A. Vander Putten (Chairman), Rick
A. Wilber, Robert A. Yanover and, since February 6, 2007,
Alois T. Leiter.
The executive compensation program was designed to reward
executive officers for achieving the Companys strategic
goals and to align the interests of the executive officers with
those of the Companys stockholders. In particular, the
Companys Amended and Restated 2005 Equity and Incentive
Plan (the Plan) is intended to (i) provide a
vehicle for compensating the Companys key personnel by
giving them the opportunity to acquire a proprietary interest in
the Companys Common Stock by receiving equity-based
incentive compensation; (ii) provide management with equity
ownership in the Company commensurate with Company performance,
as reflected in increased stockholder value; (iii) attract,
motivate and retain key employees and non-employee directors by
maintaining competitive compensation levels; and
(iv) provide an incentive to management for continuous
employment with or service to the Company.
This philosophy is reflected in an executive compensation
package that is generally comprised of three elements
(collectively, Total Compensation): (i) base
salary, which is determined on the basis of the
individuals position and responsibilities with the
Company; (ii) incentive performance awards payable in cash
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and tied to the achievement of the Companys achievement of
specified financial targets; and (iii) long-term
stock-based incentive compensation, which is related to the
Companys achievement of specified financial and other
performance targets and which includes the issuance of
restricted stock awards
and/or stock
unit awards that create a link between executive compensation
and the interests of the Companys stockholders. The
Committee also has granted stock options to executive officers
in prior years.
The
Compensation Committees Processes
The Compensation Committee utilizes different processes to
assist it in ensuring that the Companys executive
compensation program is achieving its objectives. Among those
are:
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Industry Comparison. The Compensation Committee
establishes Total Compensation levels for executives that it
believes are competitive with industry compensation practices of
other software and technology companies of comparable size. In
order to enhance its objectivity and independence, the
Compensation Committee has, from time to time in the past,
obtained advice
and/or
recommendations of an outside compensation consulting firm,
Watson Wyatt and Company (Watson Wyatt). In
addition, the Compensation Committee reviews available
information, including information published in secondary
sources, regarding prevailing salaries and compensation programs
offered to chief executive officers by businesses that are
comparable to the Company in terms of size and industry group.
Included in this group were the following companies: Sonicwall,
Inc., Vignette Corporation, Liquidity Services, Inc., Ariba,
Inc., Openwave Systems, Inc., Internap Network Services
Corporation, Opsware Inc., United Online Inc., CMGI, Inc., and
Websense, Inc. Generally, the Chief Executive Officer provides
recommendations for compensation changes to the Compensation
Committee for its review. The Companys objective is
generally to set the Total Compensation of the executive
officers of the Company in the broad middle range of comparable
sized companies. The Compensation Committee believes Total
Compensation for each of the executive officers is competitive
with other software and technology companies of comparable size.
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Assessment of Company Performance. The Compensation
Committee uses Company performance measures in establishing
total compensation ranges. The Compensation Committee may
consider various measures of Company performance, including
sales, earnings per share and growth in recurring revenue. The
Compensation Committee makes a subjective determination after
considering such measures collectively. In addition, as
described in more detail below, the Compensation Committee may
grant performance awards under a formula provided for under the
Plan. Such awards shall represent the right to receive a payment
in cash or equity if performance goals established by the
Compensation Committee for a certain performance period are
satisfied.
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Assessment of Individual Performance. Individual
performance has a strong impact on the compensation of all
employees, including the executive officers. The members of the
Compensation Committee meet with the Chief Executive Officer,
and then meet in executive session, when compensation is being
considered in order to evaluate the Chief Executive
Officers performance for the year. This evaluation is
considered by the Compensation Committee in setting the Chief
Executive Officers compensation. For the other executive
officers, the Compensation Committee receives a compensation
recommendation from the Chief Executive Officer and may also
exercise its judgment based on the Compensation Committees
assessment of the performance of such executive officers.
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Components
of Executive Compensation for 2007
The Companys compensation program balances both the mix of
cash and equity compensation and the mix of currently-paid and
longer-term compensation in a way that furthers the compensation
objectives discussed above. Following is a discussion of the
Compensation Committees considerations in establishing
each of the components for the executive officers.
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Base
Salary
Base salary is the fixed element of employees annual cash
compensation. Our executive compensation program is designed to
align executive performance with the financial and strategic
objectives of the Company, to reward executive management for
the successful performance of these objectives and to encourage
the executives to be focused on building long-term success.
Therefore, a portion of these employees total compensation
is performance-based.
The Compensation Committee annually reviews and determines the
base salary of the Chief Executive Officer and the base salaries
of the other executive officers based on the recommendations of
the Chief Executive Officer. Base salaries are generally
adjusted to reflect promotions, increases in responsibilities
and competitive considerations. In order to attract and retain
qualified executives, the Company provides base salaries it
considers to be competitive.
While determining the base salary for the Companys
President and Chief Executive Officer, Mr. Scott Scherr,
for 2007, the Compensation Committee reviewed the current and
long term incentive compensation of the chief executive officers
of certain software and technology companies that have market
capitalizations comparable to that of the Company. This
information provided the basis of a competitive review of
Mr. Scherrs compensation; however, the Compensation
Committee did not attempt to benchmark
Mr. Scherrs base salary against the base salary of
these or other chief executive officers. Instead, the
Compensation Committee exercised its own judgment and, based
upon Mr. Scherrs personal performance, in particular
his successful leadership of the Company with a business
strategy that is focused on maximizing recurring revenue streams
by selling the Companys UltiPro software offerings
primarily on a recurring revenue basis, while still offering
perpetual software licenses of UltiPro to customers that do not
prefer a subscription-based arrangement, the Compensation
Committee determined that as of January 1, 2007,
Mr. Scherrs base salary should be increased from
$550,000 to $600,000.
The Compensation Committee reviewed with Mr. Scott Scherr
the performance of Mr. Marc D. Scherr as the Companys
Vice Chairman and Chief Operating Officer in overseeing the
Companys strategic and operational activities. The
Compensation Committee also reviewed with Mr. Scott Scherr
the performance of Mr. Dauerman as the Companys Chief
Financial Officer, including his oversight of financial and
accounting functions and the Companys relationships with
the investment community. Based upon Mr. Scott
Scherrs recommendation and its review with him, the
Compensation Committee determined that as of January 1,
2007, Mr. Marc D. Scherrs base salary should be
increased from $495,000 to $550,000 and Mr. Mitchell K.
Dauermans base salary would remain at $412,500, consistent
with 2006.
Incentive
Compensation
From time to time, on a discretionary basis, the Compensation
Committee approves (i) incentive performance awards payable
in cash and tied to the achievement of performance goals
(Cash Bonuses); and (ii) long-term stock-based
incentive compensation. In order to provide incentives to new
employees and in recognition of superior performance, promotions
and increased responsibilities of executive officers and
employees, the Company provides long-term stock-based incentive
compensation payable through the issuance of (i) options to
purchase shares of the Companys Common Stock (Stock
Options); (ii) Restricted Stock Awards;
and/or
(iii) Stock Unit Awards (collectively, Stock-Based
Compensation). All employees of the Company are eligible
for discretionary Cash Bonuses and Stock-Based Compensation,
based on their individual achievement of performance goals and
as approved by the Compensation Committee. In February 2007, the
Compensation Committee reviewed the Companys business plan
for 2007 with Messrs. Scott Scherr and Marc D. Scherr.
Based upon the recommendation of Mr. Scott Scherr, the
Compensation Committee determined that no incentive compensation
awards for 2007 would be granted to Mr. Scott Scherr and
Mr. Marc D. Scherr. Mr. Scott Scherr indicated that
his recommendation to withhold incentive compensation awards for
both himself and Mr. Marc D. Scherr would assist the
Company in achieving its financial targets for 2007. It was also
Mr. Scott Scherrs recommendation that, to the extent
the Company exceeded $0.70 per share of pre-tax income for 2007,
the Company would grant cash bonuses to certain key personnel of
the
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Company, including Mr. Mitchell K. Dauerman and certain
non-executive officers who are not eligible for commission-based
compensation. Mr. Dauerman received a bonus aggregating
$50,000.
Incentive
Performance Awards
The Compensation Committee may grant performance awards under
the Plan, which shall represent the right to receive a payment
in cash or equity if the performance goals established by the
Compensation Committee for a performance period are satisfied.
At the time a performance award is granted, the Compensation
Committee shall determine, in its sole discretion, the
applicable performance period and performance goals to be
achieved during the performance period, as well as such other
conditions as the Compensation Committee deems appropriate. The
Compensation Committee may also determine a target payment
amount or a range of payment amounts for each award. The
performance goals applicable to a performance award grant may be
subject to adjustments as the Compensation Committee shall deem
appropriate to reflect significant unforeseen events, such as
changes in law, accounting practices or unusual or nonrecurring
items or occurrences. At the end of the performance period, the
Compensation Committee shall determine the extent to which
performance goals have been attained, or a degree of achievement
between minimum and maximum levels, in order to establish the
level of payment to be made, if any.
Upon the recommendation of Mr. Scott Scherr, the
Compensation Committee did not grant to Mr. Scherr or Marc
D. Scherr a Cash Bonus opportunity for performance in 2007.
Mr. Scott Scherr was granted a Cash Bonus in 2007
aggregating $155,834 for 2006 performance (net of the Elected
Deferral, as defined and discussed below).
Mr. Scherrs 2006 Cash Bonus was in connection with
the Companys performance measured against certain
performance criteria under the Plan (as specifically designated
by the Compensation Committee) two-thirds based on growth in
recurring revenues (target of 27.5% increase in recurring
revenues over 2005) and one-third based on pre tax earnings
per share before the charge to earnings resulting from Awards
under the Plan (target of $0.37) (the 2006 Overall Company
Objectives). The Compensation Committee chose these
criteria to encourage the executive officers to focus on
building both recurring revenues and pre tax earnings. Special
emphasis was given to recurring revenue growth as the Company
continues its transition to a model based primarily on recurring
revenue.
Mr. Marc D. Scherr was granted a Cash Bonus in 2007
aggregating $126,225 for 2006 performance (net of the Elected
Deferral). Mr. Scherrs 2006 Cash Bonus was in
connection with the Companys performance measured against
the 2006 Overall Company Objectives.
Long-Term
Stock-Based Incentive Compensation
The Company grants long-term equity incentives in the form of
Stock-Based Compensation that converts into shares of Common
Stock. The Compensation Committee has sole discretion in
awarding stock options and does not delegate such authority to
our management nor does our management have the ability to
select or influence stock option grant dates. The exercise price
of the stock options granted to employees who are participants
under the Plan was equal to 100 percent of the per share
fair market value of the Common Stock at the closing price of
the Common Stock on NASDAQ on the date of grant. In 2007, all
such grants were made on the respective dates of the regular
quarterly meetings of the Board and the Compensation Committee
which are scheduled by the Board or the Compensation Committee,
as applicable, well in advance and generally occur at the same
times each year. Each of the regular quarterly meetings of the
Board and Board committees is held in advance of the date of the
respective earnings release in order that the Board and the
Audit Committee may review the financial results prior to their
release. Prior to the third calendar quarter of 2007, the
exercise price of the stock options granted to non-employee
directors under the Plan as compensation for Board services was
equal to 30% of the per share fair market value of the Common
Stock at the closing price of the Common Stock on NASDAQ on the
first trading day of the calendar quarter following the calendar
quarter in which such compensation was earned. On July 24,
2007, the Compensation Committee of the Board rescinded the
previously approved fee schedule for service on the Board and
Board Committees and replaced it with a program involving
options to purchase the Companys Common Stock at fair
market value on the date of grant and restricted stock awards
under the Plan. Although employees and non-employee directors
may have been in possession of material non-public information
at the time of a stock option grant,
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we have not timed nor do we plan to time our release of material
non-public information for the purpose of affecting the value of
executive compensation.
Stock Options align employee incentives with stockholders
because Stock Options have value only if the stock price
increases over time. The Companys
10-year
Stock Options, granted at the market price on the date of the
grant, help focus employees on long-term growth. In addition,
Stock Options are intended to help retain key employees because
they typically vest over 3 years and, if not exercised, are
forfeited if the employee leaves the Company. The
3-year
vesting also helps keep employees focused on long-term
performance. The Company does not reprice Stock Options;
likewise, if the stock price declines after the grant date, we
do not replace Stock Options.
In 2007, the Company awarded Stock Options to newly hired
employees and to certain employees, other than executive
officers, in recognition of their promotions
and/or
performance. The Compensation Committee did not grant any Stock
Options to executive officers in 2007. However, consistent with
the objective of increasing the equity based component of
executive compensation as recommended by Watson Wyatt in 2004,
the Compensation Committee determined that additional equity
awards should be made to the executive officers in view of their
performance and the respective levels of their equity ownership
in the Company. In order to reduce dilution to stockholders, the
Compensation Committee determined to issue Restricted Stock
Awards, rather than Stock Options, to the executive officers.
Nevertheless, the Company reserves the right to issue Stock
Options to executive officers in the future.
During 2007, the Compensation Committee provided long-term
stock-based incentive compensation to Mr. Scott Scherr
based on his performance as discussed above, his level of equity
ownership in the Company and the determination by the
Compensation Committee to increase the equity related component
of executive compensation, consistent with the recommendations
of Watson Wyatt. During 2007, Mr. Scherr received two
grants of Restricted Stock Awards aggregating 227,994 restricted
shares of Common Stock.
As approved by the Compensation Committee and provided for in
the Plan, Mr. Scott Scherr deferred receipt of one-half of
his cash performance bonus earned for 2006 performance, or
$155,834, in exchange for the grant of a Stock Unit Award under
the Plan (the Elected Deferral). Upon this election
and at the direction of the Compensation Committee, the Company
provided a matching contribution equal to one-half of the amount
deferred (the Company Match). The amount of
Mr. Scherrs Company Match was $77,917. The number of
stock units subject to such Stock Unit Award, or
9,173 units, was determined by dividing the total amount
deferred (including the Company Match) by the fair market value
of a share of the Companys Common Stock on the date of
payment of the non-deferred portion of the cash performance
award. The Stock Unit Award resulting from the Elected Deferral
was granted on a fully vested basis, with a deferred payment
date of five years after the grant date. The Stock Unit Award
resulting from the Company Match vests on the fourth anniversary
of the date of grant, subject to Mr. Scherrs
continued employment with the Company or any subsidiary on such
vesting date and subject further to accelerated vesting in the
event of a Change in Control, his death or disability or the
termination of his employment by the Company without cause. The
Stock Unit Awards granted as a result of the Elected Deferral
and Company Match were earned in respect of 2006 performance and
were issued in February 2007. The amount charged to the
Companys income statement for 2006 and 2007 attributable
to the Stock Unit Awards earned by Mr. Scherr is included
in the Stock Awards column of the Summary
Compensation Table.
During 2007, the Compensation Committee provided long-term
stock-based incentive compensation to Mr. Marc D. Scherr
based on his performance as discussed above, his level of equity
ownership in the Company and the determination by the
Compensation Committee to increase the equity related component
of executive compensation, consistent with the recommendations
of Watson Wyatt. During 2007, Mr. Scherr received two
grants of Restricted Stock Awards aggregating 166,598 restricted
shares of Common Stock.
As approved by the Compensation Committee and provided for in
the Plan, Mr. Marc D. Scherr deferred receipt of one-half
of his cash performance bonus earned for 2006 performance, or
$126,225, in exchange for the grant of a Stock Unit Award under
the Plan. Upon this election and at the direction of the
Compensation Committee, the Company provided a Company Match
equal to approximately one-half of the amount deferred. The
amount of Mr. Scherrs Company Match was $63,112. The
number of stock units subject to such Stock
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Unit Award, or 7,430 units, was determined by dividing the
total amount of cash bonus deferred (including the Company
Match) by the fair market value of a share of the Companys
Common Stock on the date of payment of the non-deferred portion
of the cash performance award. The Stock Unit Award resulting
from the Elected Deferral was granted on a fully vested basis,
with a deferred payment date of five years after the grant date.
The Stock Unit Award resulting from the Company Match vests on
the fourth anniversary of the date of grant, subject to
Mr. Scherrs continued employment with the Company, or
any subsidiary, on such vesting date and subject further to
accelerated vesting in the event of a Change in Control, his
death or disability or the termination of his employment by the
Company without cause. The Stock Unit Awards granted as a result
of the Elected Deferral and Company Match were earned in respect
of 2006 performance and were issued in February 2007. The amount
charged to the Companys income statement for 2006 and 2007
attributable to the Stock Unit Awards earned by Mr. Scherr
is included in the Stock Awards column of the
Summary Compensation Table.
During 2007, the Compensation Committee provided long-term
stock-based incentive compensation to Mr. Mitchell K.
Dauerman based on his performance as discussed above, his level
of equity ownership in the Company and the determination by the
Compensation Committee to increase the equity related component
of executive compensation, consistent with the recommendations
of Watson Wyatt. During 2007, Mr. Dauerman received one
grant of a Restricted Stock Award for 15,000 restricted shares
of Common Stock.
Holders of Restricted Stock Awards have all rights of a
stockholder including the right to vote the shares and receive
all dividends and other distributions paid or made with respect
thereto. Each Restricted Stock Award becomes vested on the
fourth anniversary of the respective date of grant, subject to
the grantees continued employment with the Company or any
subsidiary on each such vesting date.
Holders of Stock Unit Awards do not have any rights as a
stockholder with respect to the shares subject to a Stock Unit
Award until such time as shares of Common Stock are delivered to
the participant pursuant to the terms of the award agreement.
Severance
Benefits
Except as described below, the Company is not obligated to pay
severance or other enhanced benefits to executive officers upon
termination of their employment.
On July 24, 2007, the Board amended and restated two Change
in Control Bonus Plans (previously adopted in March 2004). One
Change in Control Bonus Plan provides for the payment of cash
amounts to the Companys three named executive officers
upon a change in control of the Company. The other
Change in Control Bonus Plan provides for the payment of cash
amounts in the event of a change in control to
employees other than executive officers of the Company as
designated by the Compensation Committee. (The two Amended and
Restated Change in Control Bonus Plans are hereinafter referred
to collectively as the CIC Plan.) A change in
control would occur (i) if the Company were to
complete a consolidation or merger pursuant to which the
stockholders of the Company immediately prior to the merger or
consolidation did not have beneficial ownership of 50% or more
of the combined voting power of the Companys securities
outstanding immediately after the merger or consolidation,
(ii) if the Company were to sell, lease or transfer all or
substantially all of its assets or business or (iii) if
beneficial ownership of more than 50% of the Companys
Common Stock were acquired by a person or entity other than the
Company, a subsidiary or an employee benefit plan of the Company.
The principal amendments effected on July 24, 2007 were
(i) an extension of the term of the CIC Plan, which was due
to expire on March 5, 2009, and (ii) an increase in
the amounts potentially payable to Messrs. Scott Scherr,
Marc D. Scherr and Mitchell K. Dauerman, and the maximum
aggregate amount payable to all participants, under the CIC
Plan. The principal amendments were effected by the Board upon
recommendation of the Compensation Committee, which concluded
that the CIC Plan serves as an important and appropriate
component of the economic stake in the Company shared by senior
and other management personnel and that the amendments would
provide additional incentive to management to maximize the value
of the Companys business and its Common Stock.
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The amount of the payments to be made to the executive officers
under the CIC Plan is based upon the gross consideration
received by the Company or its stockholders in the change in
control transaction (the CIC Consideration). The
aggregate amount of payments (including the gross up
payments described below) that may be made to all participants
under the CIC Plan may not exceed 6% of the CIC Consideration.
To the extent this limit would otherwise be exceeded, the
Compensation Committee would reduce one or more payments in its
discretion in the manner that it determines to be equitable. No
payments will be made under the CIC Plan to any participant
whose employment with the Company is terminated prior to the
consummation of the change in control transaction.
In adopting the CIC Plan, the Board determined not to require
that only participants whose employment was terminated in
connection with a change in control would be eligible to receive
the CIC Consideration. The view of the Board upon adoption of
the CIC Plan was that the ownership of equity in the Company by
executives and employees was relatively small and that the CIC
Consideration would provide a fair and reasonable means by which
they could participate with stockholders in connection with a
change in control. In addition, it was the view of the Board
that these payment arrangements would encourage executives and
employees to remain with the Company during a period of
uncertainty in connection with a proposed change of control.
Under the CIC Plan, Messrs. Scott Scherr, Marc D. Scherr
and Mitchell K. Dauerman would be entitled to payments equal to
1.75%, 1.3125% and 0.4375%, respectively, of the CIC
Consideration. To the extent that change in control payments to
these individuals, whether under the CIC Plan or otherwise,
would exceed the limitations of Section 280G of the
Internal Revenue Code, they would be entitled to receive an
additional gross up payment to indemnify them for
the effect of the resulting excise tax imposed on the
individuals, subject to the 6% aggregate limitation referred to
above. Assuming that there was a change in control on
December 31, 2007, at the closing price of the
Companys Common Stock on NASDAQ on the last trading day of
the year, Messrs. Scott Scherr, Marc D. Scherr and Mitchell
K. Dauerman would have been entitled to receive approximately
$20.4 million, $15.2 million and $4.7 million,
respectively, inclusive of amounts in respect of such
gross up under the CIC Plan.
The Board may amend or terminate the CIC Plan at any time,
provided that any resulting reduction in a participants
right to payments is compensated for by an arrangement of
comparable or greater value. Unless sooner terminated by the
Board, the CIC Plan will automatically terminate on
July 23, 2012.
Accelerated
Vesting
In addition to the severance provisions described above, the
Companys stock-based compensation for our executive
officers is subject to accelerated vesting under certain
circumstances described below.
Stock Options. The Companys stock
options issued to the executive officers pursuant to the Prior
Plan and the Plan ordinarily vest 25% on the date of grant and
25% on each of the first three anniversaries of the date of
grant, subject to each executive officers continued
employment with the Company. However, pursuant to the terms of
the Prior Plan and the Nonqualified Stock Option Award
Agreements entered into between the Company and the executive
officers under the Plan, in the event of death, disability or a
change in control of the Company (each, an Accelerated
Vesting Occurrence), each executive officers
unvested stock options under the Prior Plan and the Plan would
immediately vest and become fully exercisable. Assuming that
there was an Accelerated Vesting Occurrence on December 31,
2007, the unvested stock options held by Messrs. Scott
Scherr and Marc D. Scherr would have automatically vested and
they would have been entitled to receive amounts equal to the
value of $311,400 and $233,550, respectively as a result of such
acceleration. These amounts are derived from the difference
between the per share fair market value of the Common Stock, at
the closing price of the Common Stock on NASDAQ on the last
trading day of 2007 (the Year End Fair Market Value)
and the exercise prices of unvested options held by them,
multiplied by the number of shares subject to the options being
accelerated. Stock options held by Mr. Mitchell K. Dauerman
were fully vested as of December 31, 2007.
Restricted Stock Awards. The Companys
shares of restricted stock issued pursuant to the Plan
ordinarily vest on the fourth anniversary of the date of grant,
subject to each executive officers continued
19
employment with the Company. However, pursuant to the terms of
the Restricted Stock Award Agreements entered into between the
Company and the executive officers under the Plan, in the event
of an Accelerated Vesting Occurrence, each executive
officers shares of unvested restricted stock would
immediately vest. Assuming that there was an Accelerated Vesting
Occurrence on December 31, 2007, the unvested shares of
restricted stock held by Messrs. Scott Scherr, Marc D.
Scherr and Mitchell K. Dauerman would have automatically vested
and they would have been entitled to receive amounts equal to
the value of $12,839,571, $9,019,239 and $1,258,800,
respectively, as a result of such acceleration. These amounts
are derived from the per share Year End Fair Market Value of the
Common Stock multiplied by the number of shares being
accelerated. In addition, pursuant to the terms of the
Restricted Stock Award Agreements entered into between the
Company and the executive officers under the Plan, in the event
an executive officers employment is terminated by the
Company without cause (a Termination Without Cause
Occurrence), 1/48th (one forty-eighth) of the shares
of restricted stock for each complete month of continued
employment by the executive officer with the Company following
the applicable dates of grant would immediately vest. Assuming
that there was a Termination Without Cause Occurrence on
December 31, 2007, a portion of the unvested shares of
restricted stock held by Messrs. Scott Scherr, Marc D.
Scherr and Mitchell K. Dauerman would have automatically vested
on a pro rated basis as described above and they would have been
entitled to receive amounts equal to the value of $3,078,807,
$2,155,824 and $327,813, respectively, as a result of such
acceleration. These amounts are derived from the per share Year
End Fair Market Value of the Common Stock multiplied by the pro
rated number of shares being accelerated.
Stock Units. The Companys stock units
attributable to the Companys matching contribution of a
portion of cash bonuses voluntarily deferred by an executive
officer under the Plan ordinarily vest on the fourth anniversary
of the date of grant, subject to each executive officers
continued employment with the Company. However, pursuant to the
terms of the Stock Unit Award Agreements entered into between
the Company and the executive officers under the Plan, in the
event of an Accelerated Vesting Occurrence, each executive
officers unvested stock units would immediately vest and
become fully exercisable. Assuming that there was an Accelerated
Vesting Occurrence on December 31, 2007, the unvested stock
units held by Messrs. Scott Scherr and Marc D. Scherr would
have automatically vested and they would have been entitled to
receive amounts equal to the value of $261,509 and $211,810,
respectively, as a result of such acceleration. These amounts
are derived from the per share Year End Fair Market Value of the
Common Stock multiplied by the number of shares subject to the
stock units being accelerated.
In addition, pursuant to the terms of the Stock Unit Award
Agreements entered into between the Company and the executive
officers under the Plan, in the event of a Termination Without
Cause Occurrence, 1/48th (one forty-eighth) of the stock
units for each complete month of continued employment by the
executive officer with the Company following the applicable
dates of grant would immediately vest and become fully
exercisable. Assuming that there was a Termination Without Cause
Occurrence on December 31, 2007, a portion of the unvested
stock units held by Messrs. Scott Scherr and Marc D. Scherr
would have automatically vested on a pro rated basis as
described above and they would have been entitled to receive
amounts equal to the value of $95,800 and $77,592, respectively,
as a result of such acceleration. These amounts are derived from
the per share Year End Fair Market Value of the Common Stock
multiplied by the pro rated number of shares subject to the
stock units being accelerated.
Tax
Deductibility of Executive Compensation
In general, Section 162(m) of the Code disallows a
deduction for any compensation paid in excess of $1 million
during a calendar year to any of the chief executive officer and
the four most highly paid executive officers of publicly held
companies, subject to an exception for compensation that
qualifies as performance-based compensation. The
Compensation Committee has endeavored, to the extent it deems
consistent with the best interests of the Company and its
stockholders, to obtain maximum deductibility of compensation
paid to executive officers. For example, awards of stock options
under the Plan satisfy the requirements for performance-based
compensation under Section 162(m). However, the
Compensation Committee also recognizes the need to retain
flexibility to make compensation decisions that may not meet
Section 162(m) standards when necessary to enable the
Company to meet its overall objectives, even if the Company may
not
20
deduct all of the compensation. Accordingly, the Compensation
Committee will award non-deductible compensation in appropriate
circumstances. For 2007, all of the compensation paid by the
Company was tax deductible, consistent with the limitations of
Section 162(m).
Employee
Benefits
The Company offers core employee benefits coverage in order to
provide our workforce with a reasonable level of financial
support in the event of illness or injury, and to enhance
productivity and job satisfaction through programs that focus on
work/life balance.
The benefits available are the same for all U.S. employees
and executive officers and include medical and dental coverage,
disability insurance, and life insurance. In addition, our
401(k) Plan provides a reasonable level of retirement income
reflecting employees careers with the Company. All
U.S. employees, including executive officers, participate
in these plans.
The cost of post-employment benefits is partially borne by the
employee, including each executive officer.
Perquisites
The Company does not provide significant perquisites or personal
benefits to executive officers.
EXECUTIVE
COMPENSATION
SUMMARY
COMPENSATION TABLE
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
Non-Equity
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
Name and
|
|
|
|
|
($)
|
|
|
($)
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
($)
|
|
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
(1)
|
|
|
(2)
|
|
|
(3)
|
|
|
(4)
|
|
|
Total
|
|
|
Scott Scherr
|
|
|
2007
|
|
|
$
|
600,000
|
|
|
$
|
|
|
|
$
|
1,475,811
|
|
|
$
|
225,314
|
|
|
$
|
|
|
|
$
|
3,875
|
|
|
$
|
2,305,000
|
|
Chairman of the Board,
|
|
|
2006
|
|
|
|
550,000
|
|
|
|
|
|
|
|
829,886
|
|
|
|
290,153
|
|
|
|
155,834
|
|
|
|
3,750
|
|
|
|
1,829,623
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc D. Scherr
|
|
|
2007
|
|
|
$
|
550,000
|
|
|
$
|
|
|
|
$
|
1,100,879
|
|
|
$
|
168,986
|
|
|
$
|
|
|
|
$
|
3,875
|
|
|
$
|
1,823,740
|
|
Vice Chairman and Chief
|
|
|
2006
|
|
|
|
495,000
|
|
|
|
|
|
|
|
577,426
|
|
|
|
227,250
|
|
|
|
126,225
|
|
|
|
3,750
|
|
|
|
1,429,651
|
|
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mitchell K. Dauerman
|
|
|
2007
|
|
|
$
|
412,500
|
|
|
$
|
50,000
|
|
|
$
|
158,145
|
|
|
$
|
26,312
|
|
|
$
|
|
|
|
$
|
3,875
|
|
|
$
|
650,832
|
|
Executive Vice President,
|
|
|
2006
|
|
|
|
412,500
|
|
|
|
|
|
|
|
60,096
|
|
|
|
48,249
|
|
|
|
116,875
|
|
|
|
3,750
|
|
|
|
641,470
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
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|
|
|
|
|
|
(1) |
|
Includes shares of Common Stock subject to Restricted Stock
Awards granted to the executive in 2007, 2006 and 2005 under
Restricted Stock Award agreements. The aggregate number of
restricted shares of Common Stock issued to Messrs. Scott
Scherr, Marc D. Scherr and Mitchell K. Dauerman in 2007 was
227,994, 166,598 and 15,000, respectively. In accordance with
SFAS No. 123R, the grant date fair value of such
shares was $7,482,511, $5,336,054 and $523,350, respectively.
The aggregate number of restricted shares of Common Stock issued
to Messrs. Scott Scherr, Marc D. Scherr and Mitchell K.
Dauerman in 2006 was 110,000, 80,000 and 15,000, respectively.
In accordance with SFAS No. 123R, the grant date fair
value of such shares was $2,506,000, $1,819,000 and $363,000,
respectively. The aggregate number of restricted shares of
Common Stock issued to Messrs. Scott Scherr, Marc D. Scherr
and Mitchell K. Dauerman in 2005 was 70,000, 40,000 and 10,000,
respectively. In accordance with SFAS No. 123R, the
grant date fair value of such shares was $1,173,500, $666,250
and $171,100, respectively. The restricted shares granted in
2007, 2006 and 2005 vest upon the fourth anniversary of the
respective date of grant, subject to the executives
continued employment by the Company, or a subsidiary, on the
vesting date and subject further to accelerated vesting in the
event of a Change in Control, the executives death or
disability or the termination of the executives employment
by the Company without cause. In the cases of Messrs. Scott
Scherr and Marc D. Scherr, for 2006 and 2005, the grants of
Stock Unit Awards were made |
21
|
|
|
|
|
in lieu of 50% of their cash performance bonuses earned for 2006
and 2005 performance that they elected to defer pursuant to the
Plan. Upon their election to defer 50% of their earned cash
bonuses, the Company matched 50% of the amounts deferred by
Messrs. Scott Scherr and Marc D. Scherr, payable in Stock
Unit Awards and included herein. The aggregate number of Stock
Unit Awards issued to Messrs. Scott Scherr and Marc D.
Scherr in 2006 (for performance in 2005) was 15,756 and
12,762, respectively. The aggregate number of Stock Unit Awards
issued to Messrs. Scott Scherr and Marc D. Scherr in 2007
(for performance in 2006) was 9,173 and 7,430,
respectively. The total amount in the Stock Awards
column above represents the expense of both Restricted Stock
Awards and Stock Unit Awards recognized in the income statement
for each executive officer as compensation costs (excluding
forfeiture assumptions) in accordance with
SFAS No. 123R during fiscal 2006 and 2007. A
discussion of the assumptions used in calculating these values
may be found in Note 18 on pages
63-72 of the
Annual Report on
Form 10-K. |
|
(2) |
|
Includes option awards granted in 2005, 2004 and 2003. There
were no option awards granted in 2007 or 2006. The aggregate
number of option awards issued to Messrs. Scott Scherr and
Marc D. Scherr in 2005 was 80,000 and 60,000, respectively. The
aggregate number of option awards issued to Messrs. Scott
Scherr, Marc D. Scherr and Mitchell K. Dauerman in 2004 was
100,000, 75,000 and 25,000, respectively. The aggregate number
of option awards issued to Messrs. Scott Scherr, Marc D.
Scherr and Mitchell K. Dauerman in 2003 was 129,167, 98,417 and
31,751, respectively. The amounts reported under Option
Awards above represent the expense of those stock option
awards vesting in 2007 and 2006 recognized in the statement of
operations for each executive officer as compensation costs
(excluding the forfeiture assumption) in accordance with
SFAS No. 123R for fiscal 2007 and 2006. Under
SFAS No. 123R, the fair value of each stock option
award is estimated on the grant date using the Black-Scholes
option valuation model based on the assumptions noted in the
following table. The Companys computation of the expected
volatility for each grant date above during the year ended
December 31, 2007 is based primarily upon historical
volatility and the expected term of the option. The expected
term is based on the historical exercise experience under the
share-based plans of the underlying award (including
post-vesting employment termination behavior) and represents the
period of time the share-based awards are expected to be
outstanding. The interest rate is based on the U.S. Treasury
yield in effect at the time of grant for a period commensurate
with the estimated expected life. The table below details the
assumptions used for the option awards granted in 2005, 2004 and
2003. |
BLACK-SCHOLES
ASSUMPTIONS
|
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|
|
|
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Stock Option Grant Date
|
|
|
|
May 17,
|
|
|
Oct. 20,
|
|
|
Oct. 31,
|
|
|
Jan. 02,
|
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2003
|
|
|
Risk Free Rate
|
|
|
3.63
|
%
|
|
|
3.50
|
%
|
|
|
3.13
|
%
|
|
|
3.13
|
%
|
Expected Volatility
|
|
|
42.57
|
%
|
|
|
46.37
|
%
|
|
|
46.00
|
%
|
|
|
46.00
|
%
|
Expected Life
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
4.00
|
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
Grant Date Fair Value
|
|
$
|
6.01
|
|
|
$
|
5.24
|
|
|
$
|
3.71
|
|
|
$
|
1.38
|
|
|
|
|
(3) |
|
Includes cash performance bonuses earned by the executive
officers in 2006. |
|
(4) |
|
Consists of contributions by the Company to the Companys
401(k) Plan on behalf of the executive officers indicated. |
22
GRANTS OF
PLAN-BASED AWARDS IN 2007
The following table provides information concerning the bonus
and long-term incentive awards made to the executive officers in
fiscal 2007. The annual performance bonuses granted on
February 7, 2007 in the form of stock units were for the
executive officers performance in 2006.
GRANTS OF
PLAN-BASED AWARDS IN 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Stock
|
|
|
|
|
|
|
|
|
Awards: Number
|
|
|
|
|
|
|
|
|
of Shares of
|
|
|
Grant Date
|
|
|
|
|
|
Stock or Units
|
|
|
Fair Value
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
|
($)
|
|
|
Scott Scherr
|
|
2/7/2007
|
|
|
9,173
|
|
|
$
|
233,728
|
|
|
|
5/15/2007
|
|
|
60,000
|
|
|
|
1,621,200
|
|
|
|
10/23/2007
|
|
|
167,994
|
|
|
|
5,861,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc D. Scherr
|
|
2/6/2007
|
|
|
45,000
|
|
|
$
|
1,093,500
|
|
|
|
2/7/2007
|
|
|
7,430
|
|
|
|
189,316
|
|
|
|
10/23/2007
|
|
|
121,598
|
|
|
|
4,242,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mitchell K. Dauerman
|
|
10/23/2007
|
|
|
15,000
|
|
|
$
|
523,350
|
|
The Company has no employment agreements with its executive
officers.
The material factors necessary to understand each of the awards
listed in the Grants of Plan-Based Awards in 2007 table are
discussed in detail above under the heading Compensation
Discussion and Analysis under the subheading
Incentive Compensation.
23
OUTSTANDING
EQUITY AWARDS AT 2007 FISCAL YEAR-END
The following table sets forth, for the Companys Chief
Executive Officer and all other executive officers of the
Company, certain information concerning unexercised stock
options; stock that has not vested; and equity incentive plan
awards as of the end of the Companys last completed fiscal
year:
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Market Value of
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Units That
|
|
|
Shares or Units
|
|
|
Vest Date of
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
That Have Not
|
|
|
Stock
|
|
Name
|
|
Exercisable (#)
|
|
|
Unexercisable (#)
|
|
|
Price ($)
|
|
|
Date
|
|
|
Vested (#)
|
|
|
Vested ($)(3)
|
|
|
Awards
|
|
|
Scott Scherr
|
|
|
50,000
|
|
|
|
|
|
|
$
|
9.40
|
|
|
|
10/31/2013
|
(1)
|
|
|
20,000
|
|
|
$
|
629,400
|
|
|
|
5/17/2009
|
(2)
|
|
|
|
100,000
|
|
|
|
|
|
|
|
13.05
|
|
|
|
10/20/2014
|
(1)
|
|
|
50,000
|
|
|
|
1,573,500
|
|
|
|
10/18/2009
|
(2)
|
|
|
|
60,000
|
|
|
|
|
|
|
|
15.90
|
|
|
|
5/17/2015
|
(1)
|
|
|
60,000
|
|
|
|
1,888,200
|
|
|
|
2/8/2010
|
(2)
|
|
|
|
|
|
|
|
20,000
|
|
|
|
15.90
|
|
|
|
5/17/2015
|
(1)
|
|
|
5,252
|
|
|
|
165,280
|
|
|
|
2/8/2010
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
50,000
|
|
|
|
1,573,500
|
|
|
|
10/23/2010
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
3,058
|
|
|
|
96,235
|
|
|
|
2/7/2011
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
60,000
|
|
|
|
1,888,200
|
|
|
|
5/15/2011
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
167,994
|
|
|
|
5,286,771
|
|
|
|
10/23/2011
|
(2)
|
Marc D. Scherr
|
|
|
1,285
|
|
|
|
|
|
|
$
|
7.75
|
|
|
|
1/27/2009
|
(1)
|
|
|
15,000
|
|
|
$
|
472,050
|
|
|
|
5/17/2009
|
(2)
|
|
|
|
75,000
|
|
|
|
|
|
|
|
8.03
|
|
|
|
2/2/2010
|
(1)
|
|
|
25,000
|
|
|
|
786,750
|
|
|
|
10/18/2009
|
(2)
|
|
|
|
100,000
|
|
|
|
|
|
|
|
3.38
|
|
|
|
2/7/2011
|
(1)
|
|
|
4,254
|
|
|
|
133,873
|
|
|
|
2/8/2010
|
(2)
|
|
|
|
48,417
|
|
|
|
|
|
|
|
3.49
|
|
|
|
1/2/2013
|
(1)
|
|
|
45,000
|
|
|
|
1,416,150
|
|
|
|
2/8/2010
|
(2)
|
|
|
|
50,000
|
|
|
|
|
|
|
|
9.40
|
|
|
|
10/31/2013
|
(1)
|
|
|
35,000
|
|
|
|
1,101,450
|
|
|
|
10/23/2010
|
(2)
|
|
|
|
75,000
|
|
|
|
|
|
|
|
13.05
|
|
|
|
10/20/2014
|
(1)
|
|
|
45,000
|
|
|
|
1,416,150
|
|
|
|
2/6/2011
|
(2)
|
|
|
|
45,000
|
|
|
|
|
|
|
|
15.90
|
|
|
|
5/17/2015
|
(1)
|
|
|
2,477
|
|
|
|
77,951
|
|
|
|
2/7/2011
|
(2)
|
|
|
|
|
|
|
|
15,000
|
|
|
|
15.90
|
|
|
|
5/17/2015
|
(1)
|
|
|
121,598
|
|
|
|
3,826,689
|
|
|
|
10/23/2011
|
(2)
|
Mitchell K. Dauerman
|
|
|
3,591
|
|
|
|
|
|
|
$
|
7.75
|
|
|
|
1/27/2009
|
(1)
|
|
|
10,000
|
|
|
|
314,700
|
|
|
|
10/18/2009
|
(2)
|
|
|
|
75,000
|
|
|
|
|
|
|
|
7.63
|
|
|
|
10/21/2009
|
(1)
|
|
|
15,000
|
|
|
|
472,050
|
|
|
|
10/23/2010
|
(2)
|
|
|
|
30,000
|
|
|
|
|
|
|
|
3.38
|
|
|
|
2/7/2010
|
(1)
|
|
|
15,000
|
|
|
|
472,050
|
|
|
|
10/23/2011
|
(2)
|
|
|
|
11,751
|
|
|
|
|
|
|
|
3.49
|
|
|
|
1/2/2013
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
9.40
|
|
|
|
10/31/2013
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
13.05
|
|
|
|
10/20/2014
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All such options vest and become exercisable in equal annual
installments, each of which shall relate to 25% of the number of
shares of Common Stock subject to such Option, on the respective
dates of grant and each of the first three anniversaries
thereof, subject to the optionees continued employment
with the Company or any Subsidiary on each such vesting date or
accelerated vesting in the event of a Change in Control, death,
disability or termination of employment by the Company without
cause. All such options expire ten years from the date of grant. |
|
(2) |
|
All such restricted stock grants and the matching portion of the
restricted stock units fully vest on the fourth anniversary of
the date of grant subject to accelerated vesting in the event of
a Change in Control, death, disability or termination of
employment by the Company without cause. |
|
(3) |
|
The market value of the unvested equity incentive plan awards
was calculated based on the closing market price of the
Companys stock at the end of the last completed fiscal
year. The closing price of the Companys stock on NASDAQ on
December 31, 2007 was $31.47. |
24
OPTION
EXERCISES AND STOCK VESTED IN 2007
The following table sets forth, for the Companys Chief
Executive Officer and all other executive officers of the
Company, certain information concerning each exercise of stock
options, and each vesting of stock, including restricted stock,
stock units and similar instruments, during the last completed
fiscal year:
OPTION
EXERCISES AND STOCK VESTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
(#)
|
|
|
|
|
|
(#)
|
|
|
|
|
|
|
Number of
|
|
|
($)
|
|
|
Number of
|
|
|
($)
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired on
|
|
|
Realized
|
|
|
Acquired on
|
|
|
Realized on
|
|
Name
|
|
Exercise
|
|
|
on Exercise(1)
|
|
|
Vesting
|
|
|
Vesting(2)
|
|
|
Scott Scherr
|
|
|
123,275
|
|
|
$
|
2,740,990
|
|
|
|
6,116
|
|
|
$
|
155,834
|
|
Marc D. Scherr
|
|
|
95,933
|
|
|
|
1,957,975
|
|
|
|
4,954
|
|
|
|
126,225
|
|
Mitchell K. Dauerman
|
|
|
20,158
|
|
|
|
348,635
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts reflect the difference between the exercise price of the
option and the market price of the underlying shares at the time
of the exercise. |
|
(2) |
|
Amounts reflect the market value of the stock on the day the
stock unit vested. Even though these stock units become fully
vested, they are subject to a deferred payment date of five
years from the date of grant. |
Compensation
Committee Report
The Compensation Committee has reviewed and discussed with the
Companys management the disclosure set forth under the
heading Compensation Discussion and Analysis
appearing on pages 14 to 24 of this Proxy Statement. Based on
such review and discussions, the Compensation Committee has
recommended to the Board that such Compensation Discussion
and Analysis be included in this Proxy Statement.
LeRoy A. Vander Putten, Chairman
Rick A. Wilber
Robert A. Yanover
Alois T. Leiter
Members of the Compensation Committee
Audit
Committee Report
The Audit Committee is composed of three non-employee directors,
Messrs. Robert A. Yanover (Chairman), LeRoy A. Vander
Putten and Rick A. Wilber, and operates under a written charter
adopted by the Board, a copy of which is available on the
Companys website at www.ultimatesoftware.com. The Audit
Committee oversees the Companys financial reporting
process on behalf of the Board, reviews the independence of the
Companys auditors and fulfills the other responsibilities
provided for in its charter. The Audit Committee has sole
authority to appoint the independent auditors and terminate
their engagement.
Management is responsible for the Companys consolidated
financial statements, systems of internal control and the
financial reporting process. The Companys independent
registered public accounting firm, KPMG LLP, is responsible for
performing an independent audit of the Companys
consolidated financial statements and expressing an opinion on
the conformity of those consolidated financial statements with
generally accepted accounting principles. In addition, KPMG was
responsible for expressing an opinion on the Companys
internal control over financial reporting based on their audit
as of December 31, 2007. The Audit Committees
responsibility is to monitor and oversee these processes.
The Audit Committee has implemented procedures to ensure that
during the course of each fiscal year it devotes the attention
it deems necessary or appropriate to fulfill its oversight
responsibilities under the Audit Committees charter. To
carry out its responsibilities, the Audit Committee held four
meetings during fiscal 2007.
25
The Audit Committee hereby reports as follows:
1. The Audit Committee reviewed and discussed the audited
consolidated financial statements with management and has met
with the independent registered public accounting firm, KPMG
LLP, with and without management present, to discuss the results
of their fiscal 2007 examination, their evaluation of the
Companys internal controls, and the overall quality of the
Companys financial reporting.
2. The Audit Committee discussed with KPMG LLP the matters
required to be discussed by Statement on Auditing Standards No.
61, Communication with Audit Committees, as amended.
3. The Audit Committee reviewed the written disclosures and
the letter received from KPMG LLP required by Independence
Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and discussed with KPMG
LLP that firms independence from the Company and its
management, including whether the independent auditors
provision of non-audit services to the Company are compatible
with maintaining their independence.
In reliance on the reviews and discussions referred to above,
the Audit Committee recommended to the Board that the
Companys audited consolidated financial statements as of
and for the year ended December 31, 2007 be included in the
Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007 for filing with
the SEC.
Robert A. Yanover, Chairman
LeRoy A. Vander Putten
Rick A. Wilber
Members of the Audit Committee
KPMG LLP
Fees
The following table presents fees for professional services
rendered by the Companys independent registered public
accounting firm, KPMG LLP, for the audit of the Companys
annual consolidated financial statements and internal control
over financial reporting for the years ended December 31,
2007 and 2006, together with fees billed for other services
rendered by KPMG LLP during those periods.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit Fees(1)
|
|
$
|
424,500
|
|
|
$
|
445,000
|
|
Audit-Related Fees(2)
|
|
|
134,000
|
|
|
|
134,000
|
|
Tax Fees(3)
|
|
|
|
|
|
|
|
|
All Other Fees(4)
|
|
|
3,000
|
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
561,500
|
|
|
$
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Consists of the aggregate fees incurred for the audits of the
Companys consolidated financial statements for fiscal
years 2007 and 2006 and the reviews of the Companys 2007
and 2006 quarterly reports on
Forms 10-Q.
The audit fees for the years ended December 31, 2007 and
2006 also include fees for services rendered in connection with
Section 404 of the Sarbanes-Oxley Act internal controls
audit work and, to a lesser extent, services performed in
connection with review of the Companys
Form S-8
in 2007 and the issuance of a consent resulting from such
reviews. During 2007, the Company filed a registration statement
with the SEC on
Form S-8
covering shares of Common Stock issuable under the Plan. |
|
(2) |
|
Consists of fees incurred for services provided by KPMG LLP in
relation to the issuances of Statement of Auditing Standards
(SAS) 70 service auditors reports during 2007 and 2006. |
|
(3) |
|
There were no fees incurred for tax compliance services during
2007 and 2006. |
|
(4) |
|
Consists of the aggregate fees for products and services
provided by KPMG LLP that were not reported above under
Audit Fees, Audit-Related Fees, or
Tax Fees. During 2007 and 2006, the Company
purchased two licenses for KPMGs Accounting Research
Online software. |
26
Audit
Committee Pre-approval of Audit and Permissible Non-Audit
Services of Independent Auditors
Consistent with the SEC requirements regarding auditor
independence, the Audit Committee has adopted a policy to
pre-approve services to be performed by the Companys
principal independent auditor prior to commencement of the
specified service. Under the policy, the Audit Committee must
pre-approve the provision of services by the Companys
principal auditor prior to commencement of the specified
service. The requests for pre-approval are submitted to the
Audit Committee by the Chairman of the Board, President and
Chief Executive Officer, the Chief Financial Officer, or a
designee of either with a statement as to whether, in their
view, the request is consistent with the SEC rules on auditor
independence. All of the services performed by KPMG LLP during
2007 and 2006 were pre-approved by the Audit Committee.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. James A. FitzPatrick, Jr. is a partner in the law
firm Dewey & LeBoeuf LLP (formerly Dewey Ballantine
LLP), which provides legal services to the Company.
Mr. Alois T. Leiter has entered into an agreement with the
Company pursuant to which he agreed to (i) attend and
participate in certain internal meetings of the Company;
(ii) assist the Companys salespeople with prospects;
and (iii) act as an official spokesperson for the Company
in exchange for which the Company agreed to make contributions
to Leiters Landing, a non-profit charitable organization
benefiting children that was formed by Mr. Leiter, in the
amount of one tenth (1/10) of one percent, or 0.1%, of the
Companys total annual revenue as reported on its financial
statements, such payments not to exceed $200,000 in any one year.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the
Companys executive officers and directors and persons who
beneficially own more than 10% of the Companys Common
Stock to file initial reports of ownership and reports of
changes in ownership with the SEC. Such executive officers,
directors and greater than 10% beneficial owners are required by
the regulations of the SEC to furnish the Company with copies of
all Section 16(a) reports they file. Based solely on a
review of the copies of such reports furnished to the Company
and written representations from the executive officers and
directors, the Company believes that all Section 16(a)
filing requirements applicable to its executive officers and
directors and greater than 10% beneficial owners were met during
2007.
STOCKHOLDER
PROPOSALS FOR THE 2009 ANNUAL MEETING
Under the rules of the SEC, any proposal by a stockholder to be
presented at the 2009 Annual Meeting of Stockholders and to be
included in the Companys Proxy Statement for such meeting
must be received at the Companys principal corporate
office: 2000 Ultimate Way, Weston, Florida 33326, no later than
the close of business on December 12, 2008. Proposals
should be sent to the attention of the Secretary of the Company.
Any such stockholder proposal must comply with the applicable
rules of the SEC.
Under the Companys By-Laws, proposals of stockholders not
included in the proxy materials may be presented at the 2009
Annual Meeting of Stockholders only if the Companys
Secretary has been notified of the nature of the proposal and is
provided certain additional information at least sixty days but
not more than ninety days prior to April 11, 2009, the
first anniversary of the Proxy Statement in connection with the
2008 Annual Meeting of Stockholders (subject to exceptions if
the 2009 Annual Meeting is advanced by more than thirty days and
the proposal is a proper one for stockholder action).
27
OTHER
MATTERS
Financial
Statements
A copy of the Companys Annual Report to Stockholders,
including therewith a copy of the Companys Annual Report
on
Form 10-K
for the year ended December 31, 2007, is being provided to
stockholders of the Company with this Proxy Statement.
Other
The Company is not aware of any other matters that may come
before the Annual Meeting. If other matters are properly
presented at the Annual Meeting, it is the intention of the
persons named as proxies in the enclosed proxy to vote in
accordance with their best judgment.
By Order of the Board of Directors:
Vivian Maza
Secretary
Weston, Florida
April 11, 2008
28
|
|
|
|
Annual Meeting Proxy
Card |
▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
▼
|
|
|
A Proposals
The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposal 2.
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1. |
To elect two directors to serve until the 2011 Annual Meeting. |
+ |
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For |
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Withhold |
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For |
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Withhold |
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01 - LeRoy A. Vander Putten
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o |
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o |
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02 - Robert A. Yanover |
|
o |
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o |
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For |
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Against |
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Abstain |
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2. |
|
To ratify KPMG LLP as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2008. |
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o |
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o |
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o |
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B Non-Voting Items |
|
|
Change of Address
Please print new address below.
|
|
Meeting Attendance |
|
|
|
Mark box to the right if you plan to attend the Annual Meeting. |
|
o |
|
C |
Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
|
Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
|
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|
Date (mm/dd/yyyy) Please
print date below. |
|
Signature 1 Please keep signature within the
box. |
|
Signature 2 Please keep signature within the
box. |
|
/ / |
|
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|
▼ PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
Proxy The Ultimate Software Group, Inc.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 13, 2008
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoints Mitchell K. Dauerman and Vivian Maza, with full power of substitution, as proxies to represent and vote, as designated herein, all the shares of Common Stock of The Ultimate Software Group, Inc. (the Company) which the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders of the Company to be held at 2000 Ultimate Way, Weston, Florida, on Tuesday, May 13, 2008, at 10:00 a.m. (E.D.T.), and at any adjournment thereof (the Annual Meeting).
In their discretion, the proxies are authorized to vote upon such other matters as may properly come before the Annual Meeting.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION AS DIRECTOR OF THE NOMINEES NAMED HEREIN AND FOR THE RATIFICATION OF KPMG LLP AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008.
Attendance of the undersigned at the Annual Meeting will not be deemed to revoke this proxy unless the undersigned shall revoke this proxy in writing or shall deliver a subsequently dated proxy to the Secretary of the Company prior to the Annual Meeting or shall vote in person at the Annual Meeting.
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD ON MAY 13, 2008:
The Companys annual report to stockholders and proxy statement are available on the Investors page of the Companys website at: http://ultimatesoftware.com/investors.asp
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE