UNITED STATES
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April 23, 2010

 

Dear Fellow Stockholders,

 

You are invited to attend our 2010 annual meeting of stockholders. The meeting will be held on Friday, May 21, 2010, at 8:00 a.m., Eastern Time, at the Wright Express Long Creek campus in South Portland, Maine.

 

At the meeting we will:

 

 

Whether or not you attend the annual meeting, it is important that your shares be represented and voted at the meeting. As a stockholder of record, you can vote your shares by signing and dating the enclosed proxy card and returning it by mail in the enclosed envelope. If you decide to attend the annual meeting and vote in person, you may then revoke your proxy. If you hold your stock in “street name,” you should follow the instructions provided by your bank, broker or other nominee.

 

On behalf of the Board of Directors and the employees of Wright Express Corporation, we would like to express our appreciation for your continued interest in the Company.

 

Sincerely,

 

Michael E. Dubyak

CHAIRMAN OF THE BOARD,

PRESIDENT AND CHIEF EXECUTIVE OFFICER

 

NOTICE OF 2010 ANNUAL MEETING OF STOCKHOLDERS

 

April 23, 2010

 

The 2010 annual meeting of stockholders of Wright Express Corporation will be held on Friday, May 21, 2010, at 8:00 a.m., Eastern Time, at the Wright Express Corporation Long Creek Campus located at 225 Gorham Road, South Portland, Maine, 04106, to conduct the following items of business:

 

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on May 21, 2010:

 

The proxy statement and annual report to stockholders are available at http://ir.wrightexpress.com.

 

Stockholders who owned shares of our common stock at the close of business on March 23, 2010 are entitled to attend and vote at the meeting and any adjournment or postponement of the meeting. A complete list of registered stockholders will be available at least 10 days prior to the meeting at our offices located at 225 Gorham Road, South Portland, Maine, 04106.

 

By Order of the Board of Directors,

 

 

Hilary A. Rapkin

SENIOR VICE PRESIDENT,

GENERAL COUNSEL AND

CORPORATE SECRETARY

TABLE OF CONTENTS

 

 

 

This proxy statement describes the proposals on which you may vote as a stockholder of Wright Express Corporation. It contains important information to consider when voting.

 

The Company’s board of directors, or the Board, is sending these proxy materials to you in connection with the Board’s solicitation of proxies. Our annual report to stockholders and our proxy materials were first mailed on or about April 23, 2010.

 

Your vote is important. Please complete, execute and promptly mail your proxy card as soon as possible even if you plan to attend the annual meeting.

 

Stockholders who owned the Company’s common stock at the close of business on March 23, 2010, the record date, may attend and vote at the annual meeting. Each share is entitled to one vote. There were 38,507,739 shares of common stock outstanding on the record date.

 

How do I vote?

 

 

You do this by completing and signing your proxy card and mailing it in the enclosed prepaid and addressed envelope.

 

 

We will pass out ballots to any record holder who wants to vote at the meeting. However, if you hold your shares in street name, you must request a proxy from your stockbroker in order to vote at the meeting. Holding shares in “street name” means you hold them through a brokerage firm, bank or other nominee, and as a result, the shares are not held in your individual name but through someone else.

 

If you hold your shares in “street name,” you should follow the instructions provided by your bank, broker or other nominee, including any instructions provided regarding your ability to vote by telephone or through the Internet.

 

How do I vote my shares held in the Wright Express Corporation Employee Savings Plan?

 

If you participate in our Wright Express Corporation Employee Savings Plan, commonly referred to as the “401(k) Plan,” shares of our common stock equivalent to the value of the common stock interest credited to your account under the plan will be voted automatically by the trustee in accordance with your instruction, if it is received by May 18, 2010. Otherwise, the share equivalents credited to your account will be voted by the trustee in the same proportion that it votes share equivalents for which it receives timely instructions from all plan participants.

 

Please refer to the “Information about Voting Procedures” section.

 

 

Our nominees for director this year are:

 

 

Each nominee is presently a director of the Company and has consented to serve a new three-year term.

 

We recommend a vote FOR these nominees.

 

 

The Wright Express Corporation 2010 Equity and Incentive Plan, or the 2010 Plan, is being submitted to the Company’s stockholders in order that the Company may use it to maintain a competitive position in attracting, retaining and motivating key personnel. We describe why this is important in Appendix A to this proxy statement and have included the complete text of the 2010 Plan in Appendix B. If the 2010 Plan is not approved by our stockholders, no awards will be made under the 2010 Plan and we will need to develop other means of providing incentive compensation so we can continue to attract and retain talented directors, executives and other employees.

 

We recommend a vote FOR the approval of the Wright Express Corporation 2010 Equity and Incentive Plan.

 

 

The Audit Committee of the Board has selected Deloitte & Touche LLP, or D&T, as the independent registered public accounting firm for the Company’s fiscal year 2010. Stockholder ratification of the appointment is not required under the laws of the State of Delaware, but the Audit Committee has decided to request that the stockholders ratify the appointment. A representative of D&T will be present at the meeting to answer appropriate questions from stockholders and will have the opportunity to make a statement on behalf of the firm, if he or she so desires.

 

If this proposal is not approved by our stockholders at the 2010 annual meeting, the Audit Committee will reconsider its selection of D&T. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different registered public accounting firm at any point during the year if it determines that making a change would be in the best interests of the Company and our stockholders.

 

We recommend a vote FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm.

 

OTHER BUSINESS

 

We know of no other business to be considered at the meeting and the deadline for stockholders to submit proposals or nominations has passed. However, if:

 

 

then Michael E. Dubyak or Melissa D. Smith will vote your shares on those matters according to his or her best judgment.

 

BOARD LEADERSHIP

 

Our Board is led by our Chairman, Mr. Dubyak, who is also our President and Chief Executive Officer. The Chairman leads all meetings of the Board at which he is present, sets meeting schedules and agendas and manages information flow to the Board to ensure appropriate understanding and discussion regarding matters of interest or concern to the Board. The Chairman also has such additional powers and performs such additional duties consistent with organizing and leading the actions of the Board as may be prescribed.

 

In addition to our Chairman, the Board has appointed Dr. Moriarty as our Vice Chairman and Lead Director. Dr. Moriarty chairs meetings of the independent directors in executive session and chairs any meetings at which the Chairman is not present. In addition, he facilitates communications between other members of the Board and the Chairman. The Lead Director is authorized to call meetings of the independent directors and is available to consult with any of the Company’s senior executives regarding any concerns an executive may have. Dr. Moriarty also aids in the preparation of meeting agendas and is authorized to meet with stockholders as a representative of the independent directors.

 

Our Board believes that having one person serve as chairman and chief executive officer allows that individual to use his substantial knowledge gained from both roles to lead the Company most effectively and to provide strong and consistent leadership, without risking overlap or conflict of roles. Our chief executive officer is also more familiar with our business and strategy than an independent, non-employee Chairman would be and is thus better positioned to focus the Board’s agenda on the key issues facing the Company. Our Board further believes that with the appointment of Dr. Moriarty as our Vice Chairman and Lead Director, the Board has in place a leadership structure that provides an independent view of governance and business-related matters for both stockholders and other parties.

 

THE BOARD’S ROLE IN RISK OVERSIGHT

 

Our Board oversees our risk management processes directly and through a risk management program overseen by the Company’s Senior Vice President, General Counsel and Corporate Secretary, who reports directly to the Chief Executive Officer. Risks are identified and prioritized by management, and each prioritized risk is then referred by the full Board to a Board committee for oversight. In general, our Board oversees risk management activities relating to business strategy, acquisitions, capital allocation, organizational structure and certain operational risks; our Audit Committee oversees risk management activities related to financial controls, legal and compliance risks and other risks as outlined in its charter; our Compensation Committee oversees risk management activities relating to the Company’s compensation policies and practices and management succession planning; and our Corporate Governance Committee oversees risk management activities relating to Board composition and governance issues. In addition, the Board receives periodic assessments, as necessary, from each committee with regard to its respective oversight activities and annually reviews the Company’s risk management program as a whole.

MEMBERS OF THE BOARD OF DIRECTORS

 

 

NUMBER OF DIRECTORS AND TERMS

 

Our certificate of incorporation provides that our Board shall consist of such number of directors as is fixed by our By-Laws. Our By-Laws provide that our Board shall consist of such number of directors as from time to time is fixed exclusively by resolution of the Board. Currently, the Board has fixed the size of the Board at eight directors, who serve staggered terms as follows:

 

 

BOARD AND COMMITTEE MEETINGS

 

The Board held eight meetings in 2010 and each director attended at least 75 percent of all Board and applicable committee meetings. Our independent directors meet in executive session at each regularly scheduled in-person Board meeting. As provided in our Corporate Governance Guidelines, we expect directors to attend the annual meeting of stockholders. All of our directors attended the 2009 annual meeting of stockholders.

Our Board has created the following committees:

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

No member of our Compensation Committee (the members of which are listed in the table in the “Board and Committee Meetings” section) is or was one of our or our subsidiaries’ former officers or employees. During 2009, there were no Compensation Committee interlocks as required to be disclosed under SEC rules.

 

DIRECTOR COMPENSATION

 

In 2010, the compensation committee requested that DolmatConnell & Partners, Inc. (DC&P) review our director compensation plan and provide the committee with recommendations on any changes to meet the following objectives of the compensation plan:

 

 

The committee reviewed DC&P’s analysis and agreed that no changes to the Wright Express Corporation Non-Employee Director Compensation Plan were necessary to meet the above objectives.

 

The plan splits the director retainer between cash and equity as shown below to meet our objectives of attracting and retaining directors while aligning director compensation with stockholder interests.

 

 

 

 

Non-Employee Directors Deferred Compensation Plan

 

Director Compensation

 

 

 

 

The following table indicates the full grant date fair value of stock awards made during 2009 to certain directors.

 

Grant Date Fair Values

 

 

NON-EMPLOYEE DIRECTOR OWNERSHIP GUIDELINES

 

On September 7, 2006, the Committee established and approved equity ownership guidelines for all non-employee directors. “Equity” for the purpose of these guidelines is defined to include shares of the Company’s common stock, vested restricted stock units and deferred stock units. Under the guidelines of the equity ownership program, all directors are expected to own equity equal in value to at least three times each director’s annual director cash retainer. The Compensation Committee assesses progress against the guidelines each year on July 31. Directors have three years from July 31, 2007, or, if later, three years following their appointment to the Board, to achieve this level of ownership. All of our non-executive directors exceed the holdings in the guidelines.

 

This table shows common stock that is beneficially owned by our directors, our chief executive officer, our chief financial officer and our next three most highly compensated executive officers as of December 31, 2009, whom we refer to as our “named executive officers,” and all persons known to us to own 5 percent or more of the outstanding Company common stock, as of March 9, 2010.

 

AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED

 

 

 

 

DIRECTOR INDEPENDENCE

 

We have considered the independence of each member of the Board. To assist us in our determination, we reviewed NYSE requirements and our general guidelines for independence, which are part of our corporate governance guidelines.

 

To be considered independent: (1) a director must be independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) in the Board’s judgment, the director must not have a material

relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).

 

The Board has established guidelines to assist it in determining whether a director has a material relationship with the Company. Under these guidelines, a director will not be considered to have a material relationship with the Company if (1) he or she is independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) he or she: (i) serves as an executive officer of another company which is indebted to the Company, or to which the Company is indebted, provided that the total amount of either company’s indebtedness to the other is less than one percent of the total consolidated assets of the company he or she serves as an executive officer; (ii) serves as an officer, director or trustee of a tax exempt organization, provided that the Company’s discretionary contributions to such organization are less than the greater of $1 million or 2 percent of that organization’s consolidated gross revenues; or (iii) serves as a director of another company with which the Company engages in a business transaction or transactions, provided that the director owns less than 5 percent of the equity interests of such other company and recuses himself or herself from deliberations of the Board with respect to such transactions. In addition, ownership of a significant amount of the Company’s stock, by itself, does not constitute a material relationship. For relationships not covered by the guidelines set forth above, the determination of whether a material relationship exists shall be made by the other members of the Board of Directors who are independent as defined above.

 

Based on our guidelines and NYSE corporate governance standards, we have determined that the following directors are independent: Shikhar Ghosh, Ronald T. Maheu, George L. McTavish, Rowland T. Moriarty, Kirk P. Pond, Regina O. Sommer and Jack VanWoerkom.

 

DIRECTOR NOMINATIONS

 

The Corporate Governance Committee is composed entirely of independent directors as determined by the Board in accordance with its independence guidelines and the listing standards of the NYSE. Among the committee’s responsibilities is recommending candidates for nomination to the Board. In that capacity, the Corporate Governance Committee, with Mr. Ghosh abstaining, recommended Mr. Ghosh for election by our stockholders and, with Mr. Pond abstaining, recommended Mr. Pond for election. Messrs. Ghosh and Pond have served as members of our Board since February 2005.

 

The Corporate Governance Committee will consider candidates nominated by stockholders for next year’s meeting in the same manner as candidates nominated by the Corporate Governance Committee. If the Board determines to nominate a stockholder-recommended candidate and recommends his or her election, then that nominee’s name will be included in the proxy card for the next annual meeting. Our stockholders also have the right under our By-Laws to directly nominate director candidates and should follow the procedures outlined in the answer to the question section entitled “How do I submit a stockholder proposal, including suggesting a candidate for nomination as a director to the Corporate Governance Committee, for next year’s annual meeting?”

 

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received not earlier than January 21, 2011 nor later than February 20, 2011. However, in the event that the annual meeting is called for a date that is not within 25 days before or after May 21, 2011, notice by the stockholder must be received no earlier than 120 days prior to the annual meeting and no later than the later of the 90th day prior to the annual meeting or the tenth day following the day on which notice of the date of the annual meeting is mailed or publicly disclosed.

 

Stockholder nominations must be addressed to:

 

Wright Express Corporation
Attention: Corporate Secretary
97 Darling Avenue
South Portland, ME 04106

 

Director Qualifications

 

The qualifications for directors are described in our Corporate Governance Guidelines and the guidelines for evaluating director nominees are in the Corporate Governance Committee’s charter, each of which is available on our website. In addition, the Corporate Governance Committee believes that a nominee for the position of director must meet the following specific, minimum qualifications:

 

 

Our Corporate Governance Committee does not have a formal policy with respect to diversity, but believes that our Board, taken as a whole, should embody a diverse set of skills, experiences and backgrounds. In this regard, the Committee takes into consideration the diversity, with respect to gender, race and national origin, of our Board members. In addition, our Corporate Governance Committee’s charter provides that nominees shall not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis prescribed by law.

 

Application of Criteria to Existing Directors

 

The re-nomination of existing directors is not viewed as automatic, but is based on continuing qualification under the criteria listed above. In addition, the Corporate Governance Committee considers the existing directors’ performance on the Board and any committee, which shall include consideration of the extent to which the directors undertook continuing director education.

 

The backgrounds and qualifications of the directors considered as a group are to provide a significant breadth of experience, knowledge and abilities in order to assist the Board in fulfilling its responsibilities. The rationale for the Company’s determination that each director is well suited to serve on the Board is specified with his or her respective biographical entry under the “Members of the Board of Directors” section of this proxy statement.

COMMUNICATIONS WITH THE BOARD OF DIRECTORS

 

The Board believes that the Chief Executive Officer and his designees speak for the Company. Individual Board members may, from time to time, meet or otherwise communicate with various constituencies who are involved with the Company. It is, however, expected that Board members would do so with the knowledge of and, absent unusual circumstances or as contemplated by the committee charters, only at the request of the Company’s senior executives.

 

The Board will give appropriate attention to written communications that are submitted by stockholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by the committee charters, the Vice Chairman and Lead Director shall, subject to advice and assistance from the General Counsel, (1) be primarily responsible for monitoring communications from stockholders and other interested parties, and (2) provide copies or summaries of such communications to the other directors as he considers appropriate.

 

If you wish to communicate with the Board or the independent members of the Board, you may send your communication in writing to:

 

Independent Director Communication

Wright Express Corporation

Attention: Corporate Secretary

97 Darling Avenue

South Portland, ME 04106

 

You should include your name and address in the written communication and indicate whether you are a stockholder.

 

Governance Disclosures on Our Website

 

Complete copies of our corporate governance guidelines, committee charters and code of conduct are available on the Corporate Governance section of our website, at www.wrightexpress.com. In accordance with NYSE rules, we may also make disclosure of the following on our website:

 

 

AUDIT COMMITTEE REPORT

 

The board of directors appointed us as an audit committee to monitor the integrity of Wright Express’ consolidated financial statements, its system of internal controls and the independence and performance of its internal audit department and independent registered public accounting firm. As an audit committee, we select the independent registered public accounting firm.

 

We are governed by a written charter adopted by the Board, which is available through the Investor Relations page of the Company’s website at www.wrightexpress.com.

Our committee consisted of three non-employee directors at the time that the actions of the committee described in this report were undertaken. Each member of the audit committee is “independent” within the meaning of the New York Stock Exchange rules and the Securities Exchange Act of 1934. Wright Express’ management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. Wright Express’ independent registered public accounting firm is responsible for auditing those financial statements and for reporting on the effectiveness of our system of internal controls. Our responsibility is to monitor and review these processes. However, we are not professionally engaged in the practice of accounting or auditing. We have relied, without independent verification, on the information provided to us and on the representations made by Wright Express’ management and independent registered public accounting firm.

 

In fulfilling our oversight responsibilities, we discussed with representatives of Deloitte & Touche LLP, the independent registered public accounting firm for fiscal year 2009, the overall scope and plans for their audit of the consolidated financial statements for fiscal year 2009. We met with them, with and without Wright Express management present, to discuss the results of their examinations, their evaluations of the Company’s internal control over financial reporting and the overall quality of Wright Express’ financial reporting. We reviewed and discussed the audited consolidated financial statements for fiscal year 2009 with management and the independent registered public accounting firm.

 

We also reviewed the report of management contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC, as well as the Report of Independent Registered Public Accounting Firm included in the annual report on Form 10-K related to their audit of (i) the consolidated financial statements and (ii) the effectiveness of internal control over financial reporting. We continue to oversee the Company’s efforts related to its internal control over financial reporting and management’s preparations for the evaluation in fiscal 2010.

 

We discussed with the independent registered public accounting firm the matters required to be discussed by Statement of Auditing Standards (“SAS”) No. 61, Communication with Audit Committees, as amended, as adopted by the Public Company Accounting Oversight Board, including a discussion of Wright Express’ accounting principles, the application of those principles, and the other matters required to be discussed with audit committees under generally accepted auditing standards.

 

In addition, we received from the independent registered public accounting firm the letter and the written disclosures required by the applicable requirements of the Public Company Accounting Oversight Board, and discussed the disclosures with them, as well as other matters relevant to their independence from management and Wright Express. In evaluating the independence of our independent registered public accountant, we considered whether the services they provided beyond their audit of the consolidated financial statements were compatible with maintaining their independence. We also considered the amount of fees they received for audit and non-audit services.

 

Based on our review and these meetings, discussions and reports, we recommended to the board of directors that the audited consolidated financial statements for fiscal year 2009 be included in the Annual Report on Form 10-K.

 

THE AUDIT COMMITTEE

 

Ronald T. Maheu, Chair

Regina O. Sommer

George L. McTavish

 

AUDITOR SELECTION AND FEES

 

Auditor Selection

 

The Audit Committee has selected D&T as the Company’s independent registered public accountant for the 2010 fiscal year. D&T has served as the Company’s independent registered public accountants since our initial public offering.

Audit Fees

 

The following is a description of the fees billed to the Corporation by D&T for the years ended December 31, 2009 and 2008:

 

 

 

 

Pre-Approval Policies and Procedures

 

The Audit Committee has adopted a policy regarding pre-approval of audit and non-audit services performed by D&T. According to the policy, the Audit Committee shall pre-approve all audit services to be provided to the Company, whether provided by the principal independent registered public accountant or other firms, and all other permitted services (review, attest and non-audit) to be provided to the Company by the independent registered public accountant; provided, however, that de minimis permitted non-audit services may instead be approved in accordance with applicable SEC rules. The independent registered public accountant is not authorized to provide any prohibited non-audit services (as defined in Rule 2-01(c)(4) of Regulation S-X). The Chairman of the Audit Committee has the authority to pre-approve any permitted services on behalf of the Audit Committee and shall notify the full committee of such approval at its next meeting.

 

Since our initial public offering on February 16, 2005, the Audit Committee has pre-approved all of the services performed by D&T.

 

Non-Director Members of the Executive Management Team

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This Compensation Discussion and Analysis, or CD&A, describes our compensation objectives and programs for our executive officers. The CD&A also describes the specific decisions, and the process supporting those decisions, which were made with respect to 2009 for the executive officers named in the Summary Compensation Table.

 

The following discussion includes statements regarding performance targets in the limited context of our compensation programs. These targets should not be understood to be statements of management’s expectations of our future results or other guidance. Investors should not apply these targets in any other context.

 

Compensation Philosophy

 

Our compensation programs are designed and administered to balance the achievement of near-term operational results and long-term growth goals with the ultimate objective of increasing long-term stockholder value. We achieve this by structuring our compensation programs to:

 

 

We are a leading provider of fleet and corporate charge cards, providing payment processing and information management services to the United States commercial and government vehicle fleet industry. We compete for both clients and employees with significantly larger companies. Our primary differentiator in this competitive market is our client-centered partnering approach. Our clients count on this when they outsource their branded business to us. The experience and performance of our associates, including the members of our executive team, are critical to sustaining this level of differentiation. Our chairman, president and chief executive officer has been with the Company for 24 years and has been instrumental in guiding this approach and in our resulting growth. The other members of our executive team bring significant industry and company experience which is critical to our continued success. Accordingly, in addition to being designed to support our goals of achieving strong year-over-year and long-term growth and stockholder value, our compensation programs reflect the competitive environment in which we operate and our focus on differentiation in the marketplace through continuity of leadership and culture.

Compensation Objectives

 

We recognize the role total compensation plays in achieving our objectives of attracting, retaining and motivating our high-performing associates, including our executives, to achieve results. The chart below identifies the compensation elements and method of delivery used to support each of our compensation objectives.

 

 

 

 

We believe the compensation of our executives should, and does, reflect the success of our Company. In setting compensation levels for each executive, we evaluate total direct compensation (base salary plus short-term incentive at target plus long-term equity incentive at target) against multiple factors including:

 

 

Annually, we reevaluate each compensation element with a focus on total direct compensation. We also evaluate equity ownership levels for each executive. The purpose of this review is to appropriately reward and motivate our executive team to increase stockholder value with a focus on providing compensation above target levels when Company performance is above target and compensation below target levels when we do not achieve our performance goals.

 

In evaluating the components of compensation and the metrics used to determine individual and Company performance, the committee considers whether these factors drive an appropriate level of risk taking. The committee believes that the mix and design of the elements of compensation incent management to assume appropriate levels of risk to achieve both near-term operational goals and long-term growth. The committee reviews the strategic, financial, and execution risks and exposures associated with the initiatives that drive our performance based incentive compensation. In addition, the committee believes the following ensure an appropriate level of risk in our compensation programs:

 

 

 

Annual Process of the Compensation Committee

 

The compensation committee is responsible for review and oversight of executive compensation. This includes approval of corporate goals and objectives used in the compensation programs for executives as well as setting executive compensation and approving annual incentive plan payouts and long-term incentive stock grants. The committee meets at least once each quarter. In addition to the three independent directors who serve on the compensation committee, typical attendance at these meetings includes the Senior Vice President, Human Resources, the Vice President of HR Strategy, Compensation and Benefits and the Associate General Counsel and Assistant Corporate Secretary. Mr. Dubyak, our Chairman, President and CEO, generally joins two meetings each year to discuss the mid-year and end-of-year appraisal of his performance with the committee. Otherwise, he generally does not attend committee meetings.

 

In the first quarter of each fiscal year, the committee reviews the Board’s assessment of the CEO’s performance with him and reviews the Company results for the prior year. In addition, the committee approves the following as explained in the Annual Review of Executive Compensation section:

 

 

Agenda items for the second quarter vary each year but this meeting generally focuses on plan benchmarking and assessing how effectively our executive compensation programs are meeting their objectives.

 

The compensation committee generally conducts its annual review of executive compensation in the third quarter of each year. The data reviewed includes target ranges for:

 

 

In the final quarter of each fiscal year, management generally presents the committee with recommended executive compensation changes for each element of compensation. This includes:

 

 

 

Role of the Compensation Consultant

 

In 2009, the committee utilized DolmatConnell & Partners, Inc., or DC&P, reporting directly to the committee, to provide advice regarding the Company’s executive compensation practices. The primary services provided by DC&P were an evaluation of executive officers’ base salaries, annual incentive targets and long-term incentive targets relative to identified peers and the broader market and a recommendation of compensation ranges for each executive officer. DC&P has also provided advice on the design of the Company’s incentive plans and evaluated the impact of the Company’s equity programs on the total pool of shares available for grant. DC&P was selected by the committee given its expertise and experience in working with firms the size of Wright Express. The committee contracts directly with DC&P and DC&P provides requested analysis and consulting directly to the committee.

 

Role of the Executive Officers

 

In approving compensation levels, the committee reviews competitive market data, Company performance and Mr. Dubyak’s recommendations regarding total direct compensation for the executive officers. Mr. Dubyak provides the committee with an assessment of each executive officer’s performance to support his recommendations. These assessments include the results of specific operational and strategic goals as well as progress in the area of succession planning and concerns, if any, in the area of retention of the executive officer. Mr. Dubyak does not provide recommendations for his own compensation. Ms. Smith, in her role as CFO and Executive Vice President, Finance and Operations, recommends performance goals for the upcoming fiscal year.

 

Peer Group

 

The peer group used by the Company is established by the compensation consultant, based on input from management and a review by the committee. It is generally reviewed each year and modified as needed to reflect our growth and to account for changes due to market consolidation among peers.

 

In 2009, no changes were made to base salaries, STIP targets or LTIP targets for the named executive officers. As a result, no changes were made to the peer group shown below which was originally developed in August of 2007 and used to determine 2008 compensation targets for the executive officers.

 

 

 

In May of 2009, the peer group was modified to remove four companies which had either been acquired or had market capitalization levels outside of the range recommended by DC&P. CheckFree Corporation, eFunds, Advanta Corporation and Moneygram International, Inc. were removed and replaced by the following five companies: Alliance Data Systems Corporation, CSG Systems International, Inc, Cybersource Corporation, Global Cash Access Holdings, Inc and TNS Inc. In May of 2009, the average last month end market capitalization of the companies added to the peer group was $974 million compared to market capitalization for the Company for the same period of $910 million.

 

The peer group listed below was used to determine 2010 executive compensation targets. The committee believes that understanding compensation practices for these companies of our size in the payment processing and similar industries is one important element in determining the appropriate compensation level for each of our executives.

 

 

 

Note: Net Income and EBITDA for Wright Express represent non-GAAP financials. 2009 Peer Group Company Data represents most current fiscal year data available as of May 1, 2009.

 

Annual Review of Executive Compensation

 

Each year, at the request of the committee, DC&P provides recommended ranges of compensation for base salary, total cash and total direct compensation for each executive. This is done after DC&P identifies any recommended changes to the peer group and provides analysis of our performance versus the peer group for the previous fiscal year. DC&P collects comparable position survey data on each executive from two sources:

 

• Market survey data at the 50th percentile for companies of comparable revenue

 

 

This data is blended equally for each executive to produce a target range for that executive which we believe represents a “competitive” compensation range. We believe market survey data at the 50th percentile for companies of comparable revenues is the appropriate target in order to meet our objectives of attracting and retaining talent. However, given the average revenue of our identified peer group, we believe the 40th percentile of the companies in our peer group is more appropriate than the 50th percentile in targeting compensation that will both attract and retain the members of our executive team. DC&P used the following surveys in establishing the 50th percentile market survey data for companies of our size for 2009 compensation:

 

• Mercer US Americas Executive Remuneration Database

 

 

 

Data from companies in our revenue category who participated in these surveys was aggregated and incorporated into the target compensation ranges provided to the committee by DC&P. The committee did not receive data identified for any individual company in these surveys. DC&P provides the committee and the Company’s human resources department with the current placement of each executive within the target range. Management uses the DC&P data to provide the committee with recommended base salary changes, annual cash incentive targets and long-term equity targets for each of the executive officers. In addition, management provides the following information to the committee:

 

Pay for Performance

 

• Company performance against strategic and operational goals for the previous fiscal year

 

 

Total compensation summaries, showing historic, current and proposed total direct compensation for each executive officer are reviewed by the committee each year. These summaries provide the target value of all components of the executive officers’ proposed compensation as well as the value of outstanding equity awards, deferred compensation, benefits, perquisites and exit pay in the event of various termination scenarios, including a change of control. The purpose of this review is to assess whether the overall compensation package is consistent with the individual executive’s contribution toward Company performance. Annual review of the total compensation summaries also provides the committee with a view of the impact of historical changes to compensation over time and an opportunity to assess effectiveness in attracting and retaining our executives and driving high performance.

 

The committee looks at the total impact of all year-over-year changes in executive compensation to decide whether changes are necessary and appropriate. In reviewing total cash and equity compensation, the committee considers the retention value of the long-term equity currently held by the executive and the impact that retirement or voluntary termination would have on the executive. Based on this review, the committee can decide to adjust one or more elements of an executive’s total compensation. The committee aims to provide competitive total direct compensation and assesses an executive’s total compensation package when looking at the executive’s competitive standing relative to the market.

 

Compensation levels for 2009 were based on the committee’s review of executive total compensation in November 2008 and March 2009. At the time of the November 2008 review, all named executive officer base, total cash and total direct compensation fell within 10% of the market composite identified by our previous compensation consultant for the committee. Based on this review and in light of the challenging economic environment and actions being taken at the Company to manage expenses, management recommended and the committee approved no increase to the base salaries, STIP targets and LTIP targets of the named executive officers for 2009.

 

2009 Executive Compensation Overview

 

Base Salary.  Base salary is provided at a competitive level in order to attract and retain key talent and is reviewed annually. Annual adjustments to base salary are made based on a review of both the individual performance assessed by the CEO and reported to the committee by management and the location of the executive officer’s current base salary in the target range provided by DC&P. In 2009, consistent with the Company’s decision to suspend merit increases to Wright Express employees for 2009, no named executives received increases to their base salaries.

 

Annual Incentive Compensation.  The short term annual incentive compensation program (STIP) is an annual bonus opportunity for associates at all levels of the organization who generally share the same key

goals, other than those on commission and departmental incentive plans. The actual payouts of the STIP are contingent upon committee-approved financial performance goals. For the executive officers, a performance-based bonus focuses management on our fiscal year financial results in specific targeted areas approved by the committee at the beginning of each year.

 

At the target level of performance, named executive officer STIP payouts generally represent the 50th percentile of a market composite which is created by averaging the 40th percentile of our peers and the 50th percentile of market survey data for companies of our revenue size. At the maximum level of performance, which would represent performance that significantly exceeded target goals, STIP payouts would be at or above the 75th percentile of this market composite. If we fail to meet the threshold level goals as defined by the committee, the executive officers receive no payout under the STIP. In 2009, the Company was required to achieve threshold results for adjusted net income in order for any portion of the STIP to be paid to any employees, including the executive officers. In establishing our targets for the 2009 STIP, we utilized the following principles:

 

 

Each year, management proposes performance level goals based on estimated achievability and current factors supporting or inhibiting achievement. The goals for 2009 were approved by the committee in March 2009 and progress toward these goals was reported by the CEO to the Board of Directors throughout the year. 2009 STIP performance objectives and final payout factors used for each of the executive officers are shown below:

 

 

 

 

We have generally used adjusted net income and PPG adjusted revenue as performance measures in STIP each year. They represent key areas of focus for continued growth and stockholder return. We chose diversified ANI achievement as a STIP measure in 2009 to incent participants for achievement of net income in emerging areas of our business, which are important to the future growth of our Company.

Under the terms of the 2009 STIP, each eligible participant, including each of the executive officers, could receive from 0 percent to a maximum of 200 percent of their target STIP award if specified levels of performance were achieved by December 31 of the plan year. At the end of the annual performance period, the committee evaluates potential adjustments to performance as provided in the STIP and has discretion to include all or part of an item of loss or expense or to exclude all or part of an item of gain or income that the committee believes was not attributable to or does not accurately reflect the continuing performance of the Company.

 

The bonus targets for the named executives employed on December 31, 2009, ranged from 45 percent to 100 percent of base salary. No adjustments were made to 2009 STIP targets for the named executive officers. Our executives’ STIP targets are set based primarily on the target ranges provided by DC&P. Their current STIP percentages represent what we believe is appropriate positioning within these targets based on their experience, performance and role in the Company. Mr. Dubyak’s STIP target of 100 percent is larger than those of our other executives due primarily to two factors:

 

• Consistency with the target range provided by DC&P for the role of Chairman, President and CEO

 

 

Named executives received 2009 STIP as shown below:

 

 

 

 

Long Term Incentive Compensation.  The Company provides long-term equity-based incentives through the Wright Express Corporation Long Term Incentive Program, or LTIP, to retain our executives and reward them for performance aligned with stockholder interests.

 

Grants under the LTIP have generally been provided as a mix of performance-based restricted stock units, or PSUs, which vest from 0% to 200% based on the achievement of performance goals and restricted stock units, or RSUs, which vest based on the passage of time. The metric used to determine the vesting of PSUs has generally been the achievement of adjusted net income targets set by the committee. PSUs and RSUs generally vest over a three or four year period of employment. At the higher levels in the Company, an executive’s overall compensation is weighted more heavily toward equity than cash as compared to non-executive employees.

The LTIP is implemented under our 2005 Equity and Incentive Plan which allows us to grant employees and directors stock options, stock awards (including restricted stock), stock appreciation rights, performance-contingent awards and other awards. Eligible participants include executive officers and other selected employees in the Company. Each of the executive officers received a grant in 2009 through the LTIP.

 

The committee grants stock awards at the fair market value of the stock at the time of grant. In determining the size of equity grants to executive officers, the committee considers survey data used by DC&P for companies of our revenue size and awards to individuals holding comparable positions in our identified peer group. The committee also reviews potential equity ownership as a percentage of shares outstanding for each executive versus comparable positions within the peer group. Management does not grant awards without committee approval. With the exception of limited grants to newly hired associates, grants are generally awarded in March of each year.

 

2008 Special Bonus.  As with many other companies in 2008, our net income was impacted by the deteriorating economy. In December of 2008, the Committee recommended that management investigate the impact of granting a special bonus for all eligible employees including executive officers. The purpose of this bonus was to reward employees at all levels for significant efforts in 2008 and to retain employees at the management level and above. For non-management employees, a cash bonus was approved in December of 2008. For management employees and above, including executive officers, an option award was granted in February 2009. The options vest equally over two years. The number of shares available to purchase pursuant to the option was based on the approved dollar amount to be awarded, divided by the value of one option, which we determined to be the Black-Scholes value on the grant date. The exercise price of $13.51 for these stock options was based on the closing price of the company’s stock on the date of grant. The individual awards to the named executive officers are shown in the table below:

 

 

2009 Annual Grant.  In March 2009, executive LTIP award targets for the annual grant were set at a blended rate equally weighting the 50th percentile of market survey data and the 40th percentile of our peer group for each executive. Mr. Dubyak’s equity grant value is larger than the other named executive officers due to the scope of his role as Chairman, President and CEO and our intent to provide more of Mr. Dubyak’s total direct compensation in the form of performance-based compensation. In determining the appropriate level for each of the named executive officer grants, the committee reviewed a range of values provided by DC&P with the midpoint of the range being a blend of peer data and market data for the role held by each named executive officer. Actual amounts granted were within twenty percent of this blended mid-point with individual variation based on the following factors:

 

 

For the 2009 annual LTIP grant, named executive officers were allocated 50 percent of their target grant value in RSUs and 50 percent of their target grant value in stock options. The Company has historically used a mix of RSUs and PSUs in the annual grant to named executive officers. As a result of the impact of the economic downturn, no PSUs granted in 2008 to our named executive officers vested. Given the level of economic uncertainty that continued in the first quarter of 2009 and recognizing the need for management to

remain focused on achievement of 2009 goals, the committee chose a mix of RSUs and options for the 2009 annual grant. Both RSUs and options vest over a three year period. The committee believes the mix of RSUs and options in the 2009 annual LTIP grant increased the Company’s capability to provide motivational reward for increasing shareholder value in the challenging economic environment.

 

Grants under the 2009 Annual Grant to the named executive officers totaled 75,512 RSUs and 179,544 stock options. The amount granted to the named executive officers represented approximately 41 percent of the total amount granted to all associates. The exercise price of $13.60 for these stock options was based on the closing price of the Company’s stock on the date of grant. The individual grants for each of the named executive officers are shown below:

 

 

2010 Annual Grant.  In the first quarter of 2010, the committee approved the 2010 annual grant which includes a mix of time-based RSUs and performance-based PSUs. Vesting on the PSUs granted to the executive officers is based on achievement of three-year revenue and earnings growth goals. At the time the 2010 annual grant was approved, the committee also approved a grant of stock options to Mr. Dubyak based on their review of analysis conducted by DC&P. The purpose of this stock option grant was to increase Mr. Dubyak’s ownership in the Company to a level competitive with peers in companies of our size and length of time as a public corporation and to further align Mr. Dubyak’s interests with our stockholders in the long-term growth of the company. Mr. Dubyak received 62,500 PSUs and an option to purchase 131,250 shares of stock under the 2010 annual grant. The exercise price of $30.06 for these stock options was based on the closing price of the Company’s stock on the date of the grant.

 

Tax Deductibility of Compensation.  Section 162(m) of the Internal Revenue Code generally places a limit of $1 million on the amount of compensation that Wright Express may deduct in any one year with respect to its CEO and the other three officers (other than the Chief Financial Officer) whose compensation is required to be reported to our stockholders pursuant to the Exchange Act by reason of being among the most highly paid executive officers, other than our CFO. Wright Express receives no federal income tax deduction for any compensation that is (a) over $1 million and (b) is not performance-based as defined under Section 162(m). The STIP as well as the PSU and options components of our LTIP are intended to provide fully tax-deductible compensation. The time-based RSU component of our LTIP and discretionary cash bonuses are not considered performance-based under Section 162(m). The committee has the authority to adjust payments under the STIP and LTIP up or down at its discretion with the exception of any adjustments which may increase or accelerate payment to any participant who is impacted by Section 162(m). We review the impact of Section 162(m) annually. The results of this analysis are considered in the committee’s decisions each year regarding executive compensation. The committee may approve compensation that is not considered performance-based under Section 162(m) when it believes that such compensation is appropriate and consistent with our goal of building long-term stockholder value. In 2009, Mr. Dubyak received $849,055 in non-deductible compensation over the $1 million limit imposed by Section 162(m) of the Internal Revenue Code. No other named executive officers received non-deductible compensation over the 162(m) limit of $1 million.

 

Executive Officer Equity Ownership Guidelines.  We believe executive ownership of Company securities demonstrates a commitment to continued success and aligns the efforts of our executives with stockholders. The committee established equity ownership guidelines for all executive officers in October 2005. “Equity,” for the purposes of executive officer ownership guidelines, includes shares of our common stock and ownership interests in the Wright Express Common Stock Fund held in the Company’s 401(k) Plan. It does not include any RSUs or PSUs prior to their vesting and conversion to shares of stock.

Under these guidelines, the President and Chief Executive Officer is required to hold securities equal in value to at least three times his annual base salary and all other executive officers are required to hold securities equal in value to at least one times their annual base salaries. Beyond these ownership guidelines, the Company does not have a policy specifying a minimum period of time an executive must hold some or all of the Company shares obtained upon exercise of options or vesting of stock units. The committee monitors progress annually and executive officers have four years from the later of (i) October 2005, or (ii) their promotion to executive officer, to achieve the level of ownership described above. The annual measurement date under the guidelines is July 31st of each year. For 2009, all named executive officers were in compliance with the guidelines.

 

Employment Agreements.  The Company believes that employment agreements, including severance and change of control benefits, play an important role in attracting and retaining key executive officers. The Company also believes that in the event, or threat, of a change of control transaction, these agreements reduce uncertainty and provide compensation for the significant levels of executive engagement and support required during an ownership transition that results in the termination of their employment. In addition, our employment agreements contain non-compete, non-solicitation, non-disparagement and non-disclosure provisions which protect the Company in the event that the executive terminates their employment. These employment agreements represent competitive severance and change of control benefits based on analysis conducted by DC&P and reviewed by the committee annually to assess whether the total value to an executive provided by the agreement remains at the level needed to attract and retain executives without being considered excessive in the opinion of the committee. The specific material provisions of these contracts are discussed in the “Employment Agreements, Severance and Change of Control Benefits” section of this proxy.

 

Benefits and Perquisites.  We provide competitive benefits to attract and retain high performing associates at all levels. This includes a health and welfare benefits package and a 401(k) plan. We offer a modest perquisites package to executives representing the benefits we have identified as most critical in attracting and retaining executives.

 

Nonqualified Deferred Compensation.  The Company administers an Executive Deferred Compensation Plan, or EDCP, that provides each of the executive officers with the opportunity to defer up to 80 percent of base salary and/or up to 98 percent of annual short-term incentive compensation. The Company provides a match of up to 6 percent of the participant’s annual bonus deferred into the EDCP. Investment income on contributions and Company match is accrued for participants to reflect performance of investment funds identified by each participant during their annual election period. The investment funds and their performance used to calculate earnings in the EDCP generally mirror those used in the 401(k) Plan.

 

Each of the named executives serving in their role at the time of election chose to defer a portion of their 2009 bonus into the EDCP in 2010. Due to the fact that the Company did not pay a bonus under the 2008 STIP in 2009, no executives deferred bonus into the EDCP in 2009. No named executive deferred a portion of their base salary into the EDCP in 2009.

 

Prior to our initial public offering, we offered the Wright Express Corporation Supplemental Investment and Savings Plan, or SERP, which allowed participants to defer compensation. The SERP was frozen to new contributions on December 31, 2004. Mr. Dubyak and Ms. Smith have balances in this plan, which continue to earn investment returns based on the funds they selected. These investment returns are market competitive for the type of funds offered; there is no preferential interest earned in either the EDCP or SERP accounts. No other executive officers participated in the SERP when it was an active plan.

 

Financial Planning.  The Company provides personal financial advisory services to executive officers. This service includes tax preparation and estate planning services. We value this benefit based on the actual charge for the services which includes travel and expense reimbursement for the financial advisor.

 

Company-sponsored Automobile.  A Company-leased automobile was made available to all executive officers for personal and business use. For total compensation purposes in this proxy, the value of a Company automobile for executive officers was based on the value of the annual lease and maintenance costs which are paid on behalf of the executive by the Company.

Travel.  Directors and executive officers, when traveling on Wright Express business, are reimbursed for their travel costs. No personal travel for directors or executive officers was reimbursed in 2009.

 

Memberships.  The Company maintains a limited number of country club memberships for business use. In the event the facilities were used for personal reasons, the executive officers paid for the expenses incurred but not for any portion of the membership expense.

 

The aggregate value of all perquisites received by each of the executive officers exceeded $10,000 in 2009 and is detailed in the footnotes to the Summary Compensation Table. In September of 2009, the Company eliminated the tax gross-up on perquisites. All executive officers at the Company are now responsible for taxes associated with these perquisites.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

 

The compensation committee is comprised entirely of independent directors as determined by the Board of Directors in accordance with its independence guidelines and the listing standards of the New York Stock Exchange.

 

Our committee is responsible for review and oversight of executive compensation. This includes approval of corporate goals and objectives used in the compensation programs for executives as well as setting executive compensation and approving annual incentive plan payouts and long-term incentive stock grants. In connection with that responsibility, our committee reports to the Board on the Company’s activities at each meeting of the Board. The compensation committee charter, which describes in detail the purpose, structure, membership, authority, responsibilities, procedures and administration of the compensation committee is available on the Company’s website.

 

Our committee reviewed and discussed the Compensation Discussion and Analysis with members of senior management and, based on this review and discussion, we recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s annual report on Form 10-K and proxy statement on Schedule 14A.

 

THE COMPENSATION COMMITTEE

 

Kirk P. Pond, Chair

Shikhar Ghosh

Regina O. Sommer

 

The Compensation Committee believes that the compensation provided to the named executive officers in 2009 is in alignment with the Company’s financial performance for 2009 and the individual performance of each of the named executive officers. The Compensation Committee also believes that the total compensation paid to the executive officers collectively in 2009 was an appropriate reward for their efforts in driving stockholder value during the period.