UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by
the Registrant T
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
¨
Preliminary Proxy Statement
¨ Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
T
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Under § 240.14a-12
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Registrant as Specified In Its Charter)
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(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
T
No fee required.
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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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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(5)
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Total
fee paid:
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¨
Fee paid previously with preliminary materials.
¨
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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(2)
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Form,
Schedule or Registration Statement
No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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BANKRATE,
INC.
11760
U.S. Highway One, Suite 200
North
Palm Beach, Florida 33408
(561)
630-2400
May
7,
2007
Dear
Bankrate, Inc. Shareholders,
You
are
cordially invited to attend the Annual Meeting of Shareholders of Bankrate,
Inc., to be held on Wednesday, June 20, 2007. The Annual Meeting will begin
promptly at 9:00 a.m., local time, at The Embassy Suites Hotel, 4350 PGA
Boulevard, Palm Beach Gardens, Florida 33410.
The
Notice of Annual Meeting and Proxy Statement on the following pages contain
information about the official business of the Annual Meeting. Whether or not
you expect to attend, please complete, sign, date and return your Proxy Card
promptly to assure that your shares will be represented at the Annual Meeting.
Alternatively, registered shareholders may transmit voting instructions for
their shares electronically through the Internet or by telephone by following
the simple instructions on the Proxy Card. Of course, if you decide to attend
the Annual Meeting, you will have the opportunity to revoke your proxy and
vote
your shares in person.
We
gratefully acknowledge your continuing interest in our business, and we hope
that many of you will attend the Annual Meeting.
Sincerely,
Thomas
R.
Evans
President
and Chief Executive Officer
BANKRATE,
INC.
11760
U.S. Highway One, Suite 200
North
Palm Beach, Florida 33408
(561)
630-2400
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD JUNE 20, 2007
NOTICE
IS HEREBY GIVEN
that the
Annual Meeting of Shareholders of Bankrate, Inc. will be held at The Embassy
Suites Hotel, 4350 PGA Boulevard, Palm Beach Gardens, Florida 33410, at 9:00
a.m., local time, on Wednesday, June 20, 2007, for the following
purposes:
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1.
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To
elect two directors to the Board of
Directors;
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2.
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To
ratify the appointment of Grant Thornton LLP as our independent registered
public accounting firm for the current fiscal
year;
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3.
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To
approve the Second Amended and Restated 1999 Equity Compensation
Plan;
and
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4.
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To
transact any business as may properly come before the Annual Meeting
or
any adjournments or postponements.
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The
Board
of Directors has fixed the close of business on April 16, 2007 as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting.
By
Order
of the Board of Directors,
Edward
J.
DiMaria
Senior
Vice President-Chief Financial Officer
Secretary
May
7,
2007
North
Palm Beach, Florida
IMPORTANT
WHETHER
OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED; NO POSTAGE
IS REQUIRED FOR MAILING IN THE UNITED STATES. YOU MAY ALSO PROVIDE US YOUR
VOTING INSTRUCTIONS ELECTRONICALLY THROUGH THE INTERNET OR BY TELEPHONE. FURTHER
INSTRUCTIONS ARE FOUND ON THE PROXY CARD. IF YOU ARE ABLE TO ATTEND THE ANNUAL
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
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BANKRATE,
INC.
11760
U.S. Highway One, Suite 200
North
Palm Beach, Florida 33408
(561)
630-2400
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON
JUNE
20, 2007
Introduction
We
are
furnishing this Proxy Statement and the enclosed Proxy Card on behalf of Board
of Directors (the “Board of Directors”) of Bankrate, Inc., a Florida
corporation, for use at our 2007 Annual Meeting of Shareholders, or at any
adjournments or postponements (the “Annual Meeting”), for the purposes set forth
below and in the accompanying Notice of Annual Meeting. The Annual Meeting
will
be held at The Embassy Suites Hotel, 4350 PGA Boulevard, Palm Beach Gardens,
Florida 33408, at 9:00 a.m. local time, on Wednesday, June 20, 2007. The Company
is first sending or delivering this Proxy Statement and the accompanying Proxy
Card on or about May 7, 2007, to all shareholders entitled to vote at the Annual
Meeting.
As
used
in this Proxy Statement, the terms “us”, “we”, “our”, refer to Bankrate, Inc.,
and, where appropriate, Bankrate, Inc., and its subsidiaries. The term “Common
Stock” means shares of our common stock, par value, $.01 per share.
Shareholders
Entitled to Notice and to Vote; Quorum
Only
holders of record of our Common Stock at the close of business on April 16,
2007, which the Board of Directors has set as the record date, will be entitled
to notice of, and to vote, at the Annual Meeting. As of the record date, we
had
18,270,969 shares of Common Stock outstanding and entitled to vote at the Annual
Meeting. Each holder of record of Common Stock on the record date will be
entitled to one vote for each share held on all matters to be voted upon at
the
Annual Meeting. There are no cumulative voting rights in the election of
directors.
The
presence, in person or by proxy, of not less than thirty-three and one-third
percent (33 1/3% of the votes entitled to be cast on a matter to be voted on
at
the Annual Meeting constitutes a quorum for action on that matter. The shares
of
Common Stock represented by properly executed Proxy Cards or properly
authenticated voting instructions recorded electronically through the Internet
or by telephone, will be counted for purposes of determining the presence of
a
quorum at the Annual Meeting. Abstentions and broker non-votes both will be
counted toward fulfillment of quorum requirements. A broker non-vote occurs
when
a nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that proposal and has not received instructions from the beneficial
owner.
Voting
Requirements
At
the
Annual Meeting, shareholders will consider and act upon the election of two
directors, the ratification of the appointment of our independent registered
public accounting firm, the approval of the Second Amended and Restated 1999
Equity Compensation Plan, and such other business as may properly come before
the Annual Meeting.
Our
Bylaws provide that directors are elected by a plurality of the votes cast.
The
withholding of authority by a shareholder (including broker non-votes) as to
the
election of directors (Proposal 1) thus has no effect on the results of the
election.
Under
Florida law, the ratification of the appointment of our independent registered
public accounting firm (Proposal 2) must be approved by a majority of the votes
cast. Abstentions and broker non-votes are not treated as votes “cast” and thus
have no effect on the vote for Proposal 2.
Under
Florida law and pursuant to Rule 4350(i) of the NASDAQ Marketplace Rules, the
approval of the Second Amended and Restated 1999 Equity Compensation Plan
(Proposal 3) must be approved by a majority of the votes cast. Abstentions
and
broker non-votes are not treated as votes “cast” and thus have no effect on the
vote for Proposal 3.
At
the
record date, our directors and executive officers owned or controlled the power
to vote 5,484,545 shares of Common Stock eligible to be voted at the Annual
Meeting, constituting approximately 30% of the outstanding Common Stock. We
believe that our directors and executive officers will vote all of their shares
of Common Stock in favor of the election of each of the director nominees and
in
favor of Proposals 2 and 3 and, therefore, assuming the presence of a quorum,
the election of the director nominees, the ratification of the appointment
of
the independent registered public accounting firm, and the approval of the
Second Amended and Restated Compensation Plan is reasonably
assured.
Proxies
To
ensure
your Common Stock will be voted at the Annual Meeting, please complete, sign,
date and promptly return the enclosed Proxy Card. A return envelope, which
requires no postage if mailed in the United States, has been provided for your
use. Alternatively, you may transmit voting instructions electronically through
the Internet or by using the toll-free telephone number listed on the Proxy
Card. The deadline for transmitting voting instructions electronically via
the
Internet or telephonically is 11:59 p.m., local time, West Palm Beach, Florida,
on June 19, 2007. The Internet and telephone voting procedures are designed
to authenticate shareholders’ identities, to allow shareholders to give their
voting instructions, and to confirm that shareholders’ voting instructions have
been properly recorded. Shareholders voting through the Internet should
understand that there may be costs associated with electronic access, such
as
usage charges from Internet access providers and telephone companies, that
they
will bear.
The
shares of Common Stock represented by a properly executed Proxy Card or properly
authenticated voting instructions recorded electronically through the Internet
or by telephone, that are received prior to the Annual Meeting and not revoked,
will be voted by the persons designated on the Proxy Card at the Annual Meeting
in accordance with the shareholder’s instructions. In the absence of such
instructions, those shares will be voted in
favor
of each
of the nominees for election to the Board of Directors, as set forth in Proposal
1, in
favor
of the
ratification of the appointment of the independent registered public accounting
firm, as set forth in Proposal 2, and in
favor
of the
Second Amended and Restated 1999 Equity Compensation Plan, as set forth in
Proposal 3.
The
persons identified as having the authority to vote the proxies granted by the
Proxy Card will also have discretionary authority to vote, in their discretion,
to the extent permitted by applicable law, on such other business as may
properly come before the Annual Meeting and any postponement or adjournment.
The
Board of Directors is not aware of any other matters that are likely to be
brought before the Annual Meeting. If any other matter is properly presented
for
action at the Annual Meeting, including a proposal to adjourn or postpone the
Annual Meeting to permit us to solicit additional proxies in favor of any
proposal, the persons named in the Proxy Card will vote on such matter in their
own discretion.
Any
shareholder who signs and returns a Proxy Card has the power to revoke the
proxy
granted by the Proxy Card at any time before it is exercised by providing
written notice of revocation to our Corporate Secretary or by filing with our
Corporate Secretary a Proxy Card bearing a later date. Alternatively, you can
revoke a Proxy by attending the Annual Meeting and voting in
person.
Proxies
will be solicited from our shareholders by mail. We will pay all expenses in
connection with the solicitation, including postage, printing and handling,
and
the expenses incurred by brokers, custodians, nominees and fiduciaries in
forwarding proxy material to beneficial owners. We may employ a proxy
solicitation firm to solicit proxies in connection with the Annual Meeting,
and
we estimate that the fee payable for such services would be less than $10,000.
It is possible that our directors, officers and other employees may make further
solicitations personally or by telephone, facsimile or mail.
Our
directors, officers and other employees will receive no additional compensation
for any such further solicitations.
The
following table sets forth the amount and percent of shares of Common Stock
that
as of April 16, 2007, are deemed under the rules of the Securities and Exchange
Commission to be “beneficially owned” by each member of the Board of Directors,
by each nominee for election to the Board of Directors, by each of our executive
officers named in the Summary Compensation Table below, by all of our directors
and executive officers as a group, and by any person or “group” (as that term is
used in the Securities Exchange Act of 1934, as amended (“Exchange Act”)) known
to us to be a “beneficial owner” of more than 5% of the outstanding shares of
Common Stock as of that date. The information concerning the beneficial
ownership of our directors and officers is based solely on information provided
by those individuals. Unless otherwise stated, the beneficial owner has sole
voting and investment power over the listed Common Stock or shares such power
with his spouse.
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Common
Stock
Beneficially
Owned (1)
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Name
of Beneficial Owner
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Number
of Shares of Common
Stock
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Percentage
of
Class
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|||||
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Peter
C. Morse
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4,722,375
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25.7%
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Principal
Shareholder and Chairman of the Board of Directors
100
Front Street, Suite 900
West
Conshohocken, PA 19428
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Trafelet
& Company, LLC (2)
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1,741,600
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8.8%
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Principal
Shareholder
900
Third Avenue, 5th Floor
New
York, NY 10022
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Capital
Research and Management Company (3)
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1,575,000
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8.0%
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Principal
Shareholder
333
South Hope Street
Los
Angeles, CA 90071
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Tracer
Capital Management L.P. (4)
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1,266,918
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6.4%
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Principal
Shareholder
540
Madison Avenue, 33rd
Floor
New
York, NY 10022
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T.
Rowe Price Associates, Inc. (5)
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1,078,600
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5.4%
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Principal
Shareholder
100
E. Pratt Street
Baltimore,
MD 21202
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Thomas
R. Evans
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988,333
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5.1%
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President,
Chief Executive Officer and Director
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|||||||
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Randall
E. Poliner
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531,056
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2.9%
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Director
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Robert
P. O’Block
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438,099
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2.4%
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Director
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Bruce
J. Zanca
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89,541
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*
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Senior
Vice President-Chief Communications/Marketing Officer
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Robert
J. DeFranco
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56,718
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*
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Senior
Vice President-Finance
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William
C. Martin
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50,715
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*
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Director
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|||||||
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Edward
J. DiMaria
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43,750
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*
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Senior
Vice President-Chief Financial Officer
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Steven
L. Horowitz
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38,332
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*
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Senior
Vice President-Product and Business Development
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|||||||
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Richard
J. Pinola
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25,000
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*
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Director
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|||||||
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All
current executive officers and directors as a group (13
persons)
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7,020,218
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35.4%
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||||
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*
Less than 1% of the outstanding Common Stock
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|||||||
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(1)
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For
purposes of calculating the percentage beneficially owned, the number
of
shares of Common Stock deemed outstanding includes (i) 18,270,969
shares
outstanding as of April 16, 2007, and (ii) shares issuable by us
pursuant
to options held by the respective persons which may be exercised
within 60
days following the record date. The shares issuable pursuant to options
are considered to be outstanding and beneficially owned by the person
holding such options for the purpose of computing the percentage
ownership
of such person but are not treated as outstanding for the purpose
of
computing the percentage ownership of any other person. The shares
issuable by us pursuant to options exercisable within 60 days include:
Mr.
Morse, 75,000 shares; Mr. Evans, 988,333 shares; Mr. Poliner, 75,000
shares; Mr. O’Block 75,000 shares; Mr. Zanca, 88,541 shares; Mr DeFranco,
56, 718 shares; Mr. Martin, 40,000 shares; Mr. DiMaria, 43,750 shares;
Mr.
Horowitz, 38,332 shares; and Mr. Pinola, 20,000
shares.
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(2)
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In
a Schedule 13G/A filed with the SEC on February 14, 2007, Trafelet
&
Company, LLC (“Trafelet”) reported that it was deemed to be the beneficial
owner of 1,741,600 shares of Common Stock as of December 31, 2006,
as a
result of acting as an investment adviser. Trafelet, a registered
investment adviser, reported that it had shared investment power
over
1,741,600 shares of Common Stock and shared voting power over 1,741,600
shares of Common Stock. Trafelet disclaimed beneficial ownership
of the
reported shares of Common Stock.
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(3)
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In
a Schedule 13G/A filed with the SEC on February 12, 2007, Capital
Research
and Management Company (“Capital Research”) reported that it was deemed to
be the beneficial owner of 1,575,000 shares of Common Stock as of
February
6, 2007 as a result of acting as an investment adviser. Capital Research,
a registered investment adviser, reported that it had sole investment
power over 1,575,000 shares of Common Stock and sole voting power
over
1,575,000 shares of Common Stock. Capital Research disclaimed beneficial
ownership of the reported shares of Common Stock.
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(4)
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In
a Schedule 13G filed with the SEC on January 26, 2007, Tracer Capital
Management, L.P. (“Tracer”) reported that it was the beneficial owner of
1,226,918 shares of Common Stock as of December 31, 2006, as a result
of
acting as an investment adviser. Tracer, a registered investment
adviser,
reported that it had shared investment power over 1,226,918 shares
of
Common Stock and shared voting power over 1,266,918 shares of Common
Stock.
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(5)
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In
a Schedule 13G filed with the SEC on February 13, 2007, T. Rowe Price
Associates, Inc. (“T. Rowe”) reported that it was the beneficial owner of
1,078,600 shares of Common Stock as of December 31, 2006, as a result
of
acting as an investment adviser. T. Rowe, a registered investment
adviser,
reported that it had sole investment power over 1,078,600 shares
of Common
Stock and sole voting power over 111,400 shares of Common Stock.
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ELECTION
OF DIRECTORS
Introduction
The
Board
of Directors is divided into three classes, each of whose members serve for
staggered three-year terms. At each annual meeting of shareholders, a class
of
directors is elected for a three-year term to succeed the directors of the
same
class whose terms are then expiring. The Board of Directors is currently
comprised of two Class I directors (Mr. O’Block and Mr. Poliner) whose terms
expire at the 2009 Annual Meeting of Shareholders, two Class II directors (Mr.
Evans and Mr. Pinola) whose terms expire at the Annual Meeting, and two Class
III directors (Mr. Morse and Mr. Martin) whose terms expire at the 2008 Annual
Meeting of Shareholders. The independent directors of our Board of Directors
have nominated Mr. Evans and Mr. Pinola to stand for reelection as directors
at
the Annual Meeting. If reelected, they will serve as Class II directors with
terms expiring at the 2010 Annual Meeting of Shareholders. There are no family
relationships among any of the directors or the nominees.
Shares
represented by validly executed Proxies will be voted for the election of the
nominees, if authority to do so is not withheld. In the event that any nominee
is unavailable for election, such shares may be voted for the election of such
substitute nominee or nominees, if any, as the Board of Directors may
select.
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The
Board of Directors recommends a vote FOR each of the
nominees.
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Information
Concerning the Nominees and Directors
Biographical
information for each director and nominee appears below. The information is
based entirely upon information provided by the respective directors and
nominees.
Nominees
to Serve as Class II Directors (Term Expiring in
2010)
Thomas
R. Evans,
age 52,
has served as our director since 2004, and was appointed President and Chief
Executive Officer in June 2004. From August 1999 to August 2003, Mr. Evans
served as Chairman and Chief Executive Officer of Official Payments Corp.,
specializing in processing consumer credit card payments for government taxes,
fees and fines. From 1998 to 1999, Mr. Evans was President and Chief Executive
Officer of GeoCities Inc., a community of personal Web sites on the Internet.
From 1991 to 1998, Mr. Evans was President and Publisher of U.S.
News & World Report.
In
addition to his duties at U.S.
News & World Report,
Mr.
Evans served as President of The
Atlantic Monthly
(1996-1998) and as President and Publisher of Fast
Company
(1995-1998), a magazine launched in 1995. Mr. Evans received a Bachelor of
Science degree in business administration from Arizona State University. Mr.
Evans is also a director of Navisite, Inc. and Future Fuel Corp.
Richard
J. Pinola,
age 61,
has served as our director since 2004. Mr. Pinola has served as principal of
Eric M. Golshalk & Co. since February 2005. From July 1992 until his
retirement in February 2005, Mr. Pinola was President and Chief Executive
Officer of Right Management Consultants, a career transition and organizational
consulting firm and a wholly-owned subsidiary of Manpower Inc. Mr. Pinola also
serves as a director of K-Tron International, Nobel Learning Communities, Inc.,
Kenexa, Inc., and three real estate investment trusts-Corporate Property
Associates 14 Inc., Corporate Property Associates 15 Inc., and Corporate
Property Associates 16-Global Inc. In addition, he serves on the Board of
Trustees of King’s College in Wilkes-Barre, Pennsylvania. Mr. Pinola received a
Bachelor of Science degree in accounting from King’s College.
Continuing
Directors
Our
directors continuing in office as Class I Directors, with terms expiring at
the
2009 Annual Meeting of Shareholders, are as follows:
Robert
P. O’Block,
age 64,
has served as our director since 1999. Mr. O’Block held senior positions with
McKinsey & Company, Inc. for 30 years until his retirement in 1998, serving
as a consultant to a wide variety of business, nonprofit and public sector
organizations in the United States, Europe and the Far East. As a director
of
McKinsey
& Company, Mr. O’Block led studies in financial restructuring; corporate,
business unit and product strategy; manufacturing operations; and organization.
He started his career as a member of the faculty of Harvard University, where
he
performed research and taught courses in the areas of production and operations
management, business economics and real estate. Mr. O’Block is currently a
general partner of Freeport Center, a real estate and distribution complex
in
Utah. He is the current Vice Chairman of the Boston Symphony Orchestra Board
of
Trustees and is also a Trustee Emeritus of the U.S. Ski and Snowboard Team
Foundation. Mr. O’Block received a bachelor’s degree in mechanical engineering
from Purdue University and an M.B.A. from Harvard Business School.
Randall
E. Poliner,
age 51,
has served as our director since 1998. Since 1993, Mr. Poliner has served as
President of Antares Capital Corporation, a private venture capital firm
investing equity capital in developmental and expansion stage companies. Mr.
Poliner holds a Bachelor of Electrical Engineering from the Georgia Institute
of
Technology, an M.S. from Carnegie-Mellon University and an M.B.A. from Harvard
Business School.
Our
directors continuing in office as Class III Directors, with terms expiring
at
the 2008 annual meeting of Shareholders, are as follows:
Peter
C. Morse,
age 60,
has been our director since 1993, and served as our Chief Executive Officer
from
1993 until 1997. Mr. Morse served as our Chairman from 1997 until 1999, and
since 2002. Since 1982, Mr. Morse has also served as president of Morse
Partners, Ltd., a private equity firm that acquires operating companies and
provides expansion capital, and is also a general partner of Permit Capital.
From 1986 to 1990, Mr. Morse was chairman of FAO Schwarz, the national chain
of
children’s gift stores. Mr. Morse currently serves on the Board of Trustees of
Children’s Hospital of Philadelphia and is Chairman of the Investment Committee.
Mr. Morse is also a member of the Board of Governors of Boys and Girls Clubs
of
America, the Board of Directors of Georgetown University, the Board of Trustees
of the J.M. Foundation, and the Board of Trustees of Gesu School. Mr. Morse
holds a B.S.B.A. from Georgetown University and an M.B.A. from Columbia
University Graduate School of Business.
William
C. Martin,
age 29,
has served as our director since 2000. He is a co-founder and principal of
Indie
Research LLC, a provider of proprietary investment and research tools for
individual and institutional investors. In 1998, Mr. Martin co-founded Raging
Bull, an online financial media company.
Board
of Directors Meetings and Committees
During
2006, the Board of Directors held five meetings. Each incumbent director
attended at least 75% of the aggregate number of meetings of the Board of
Directors and committees of the Board of Directors on which he
served.
The
Board
of Directors affirmatively determined that a majority of our directors are
independent directors under the NASDAQ Global Select Market listing
requirements. There
were no transactions, relationships, or arrangements not otherwise disclosed
in
this Proxy Statement that were considered by the Board of Directors in
determining the independence of any of the directors deemed to be independent
under the NASDAQ
Global Select Market listing requirements. Our
independent directors include current directors, Messers. Martin, O’Block,
Poliner, and current director and nominee, Mr. Pinola.
Our
independent directors have established a policy to meet separately from the
other directors in regularly scheduled executive sessions at least twice
annually, and at such other times as may be deemed appropriate by our
independent directors. Any independent director may call an executive
session of independent directors at any time. In 2006, the independent
directors met in an executive session four times.
The
Board
of Directors has two standing committees: the Audit Committee and the
Compensation Committee. The Audit Committee has a written charter, which is
published on the Investor Relations section of our Web site at www.bankrate.com.
The
Compensation Committee does not have a written charter. The Board of Directors
has determined that all members of the Audit and Compensation Committees are
independent as that term is defined in Rule 4200(a)(15) of the NASDAQ
Marketplace Rules.
The
members of the Audit Committee are Messrs. Pinola (Chairman), O’Block and
Poliner. The Board of Directors has determined that each Audit Committee member
meets the NASDAQ Global Select Market listing standards’ financial knowledge
requirements. In addition, the Board of Directors determined that Mr. Poliner
qualifies as an “audit committee financial expert” as defined by the Securities
and Exchange Commission. The Audit Committee’s primary function is to assist the
Board of Directors in fulfilling its oversight responsibilities by reviewing
the
financial reports and other financial information provided by us to governmental
bodies or the public; our systems of internal controls regarding finance,
accounting, legal compliance and ethics established by management and the Board
of Directors; and our accounting and financial reporting process. The Audit
Committee encourages continuous improvement of, and fosters adherence to, our
policies, procedures and practices at all levels. In 2006, the Audit Committee
met seven times.
The
members of the Compensation Committee are Messrs. Poliner (Chairman) and
O’Block, both of whom are independent directors within the meaning of applicable
NASDAQ Global Select Market listing standards. Our Board of Directors has vested
authority in our Compensation Committee to review, evaluate and approve the
compensation and benefits of all of our officers at the Senior Vice-President
level and above, and to review and recommend to our Board of Directors general
policy matters relating to compensation and benefits of our employees. Our
Board
of Directors has also delegated the authority to administer our stock option
plans to the Compensation Committee, and, if the Second Amended and Restated
1999 Equity Compensation Plan is approved by our shareholders, the Compensation
Committee may further delegate such responsibility to the extent permitted
by
law. In 2006, the Compensation Committee met 10 times.
Nomination
of Directors
The
Board
of Directors does not have a standing nominating committee or a charter with
respect to the process for nominating directors for election to our Board of
Directors. The Board of Directors determined that it is appropriate and in
our
best interests to have all independent directors evaluate all Board of Director
nominees rather than have a separate designated committee. Our Board of
Directors adopted a resolution establishing nominating procedures. Under our
nominating procedures, members of our Board of Directors submit nominees for
election to our independent directors of our Board of Directors for their
consideration.
Our
Bylaws provide that a shareholder may submit a nomination for election to our
Board of Directors by written notice, The notice must be delivered to or mailed
and received at our principal executive offices not less than sixty (60) days
prior to an Annual or Special Meeting of the shareholders; provided, however,
that if shareholders are provided with fewer than seventy (70) days notice
of
such meeting, the shareholder’s notice will be timely if we receive it no later
than the close of business on the tenth (10th)
day
following the earlier of the day on which notice of the meeting was mailed
or
the date on which public disclosure of the meeting was made.
The
shareholder’s notice must set forth, as to each person that the shareholder
proposes to nominate for election (or re-election) as a director:
| § |
The
proposed nominee’s name, age, business address and residence
address;
|
| § |
The
proposed nominee’s principal occupation or
employment;
|
| § |
The
class and number of shares of our Common Stock beneficially owned
by the
proposed nominee; and
|
| § |
Any
other information relating to the proposed nominee that is required
to be
disclosed in solicitations for proxies for election of directors
pursuant
to Schedule 14A under the Exchange
Act.
|
The
shareholder’s notice to us must also set forth, as to the shareholder giving
notice:
| § |
The
shareholder’s name and address, as they appear on our books;
and
|
| § |
The
class and number of shares of Common Stock beneficially owned by
the
shareholder on the date of such
notice.
|
We
may
require any proposed nominee to furnish such other information as may be
reasonably required by us to determine the proposed nominee’s eligibility to
serve as a director.
Messers.
Evans and Pinola were nominated for re-election by the other independent
directors of our Board of Directors. We did not receive any recommendations
from
shareholders requesting that the Board of Directors consider a candidate for
inclusion among the nominees in our Proxy Statement for this Annual Meeting.
The
absence of such a recommendation does not mean, however, that a recommendation
would not have been considered had one been received. The Board of Directors
would have considered any candidate proposed in good faith by a shareholder.
To
propose a nominee, a shareholder should send the candidate’s name, credentials,
contact information, and his or her consent to be considered as a candidate
to
Edward J. DiMaria, our Senior Vice President-Chief Financial Officer. The
proposing shareholder should also include his or her contact information and
a
statement of his or her share ownership (how many shares owned and for how
long).
In
evaluating a director nominee, the Board of Directors considers the following
factors:
| § |
the
appropriate size of our Board of
Directors;
|
| § |
our
needs with respect to the particular talents and experience of our
directors;
|
| § |
the
nominee’s knowledge, skills and experience, including experience in
finance, administration or public service, in light of prevailing
business
conditions and the knowledge, skills and experience already possessed
by
other members of the Board of
Directors;
|
| § |
whether
the nominee is independent, as that term is defined under NASDAQ
Global
Select Market listing standards;
|
| § |
the
familiarity of the nominee with our
industry;
|
| § |
the
nominee’s experience in political
affairs;
|
| § |
the
nominee’s experience with accounting rules and practices;
and
|
| § |
the
desire to balance the benefit of continuity with the periodic injection
of
the fresh perspective provided by new Board of Directors
members.
|
Our
goal
is to assemble a Board of Directors that brings together a variety of
perspectives and skills derived from high quality business and professional
experience. In doing so, the Board of Directors will also consider candidates
with appropriate non-business backgrounds.
Other
than the foregoing, there are no stated minimum criteria for director nominees,
although the independent directors may also consider such other factors as
they
may deem are in our best interests and the best interest of our shareholders.
We
also believe it is appropriate for certain key members of our management to
participate as members of the Board of Directors.
Members
of the Board of Directors identify nominees by first evaluating the current
members of the Board of Directors willing to continue in service. Current
members of the Board of Directors with skills and experience that are relevant
to our business and who are willing to continue in service are considered for
re-nomination. If any member of the Board of Directors does not wish to continue
in service or if the independent directors decide not to re-nominate a member
for re-election, the Board of Directors then identifies the desired skills
and
experience of a new nominee in light of the criteria above. Current members
of
the Board of Directors of Directors are polled for suggestions as to individuals
meeting the criteria described above. The independent directors may also engage
in research to identify qualified individuals. To date, we have not engaged
third parties to identify or evaluate or assist in identifying potential
nominees, although we reserve the right in the future to retain a third party
search firm, if necessary.
Shareholder
Communications with the Board of Directors
Every
effort is made to ensure that the Board of Directors or individual directors,
as
applicable, hear the views of shareholders and that appropriate responses are
provided to shareholders in a timely manner. Any matter intended for the Board
of Directors, or for any individual member or members of the Board of Directors,
should be directed to Edward J. DiMaria, our Senior Vice President-Chief
Financial Officer, with a request to forward the matter to the intended
recipient. All such communications will be forwarded unopened.
Director
Attendance at Annual Meeting of Shareholders
We
encourage all incumbent directors, as well as all nominees for election as
director, to attend the Annual Meeting of Shareholders. All of our incumbent
directors attended our Annual Meeting in June 2006 except Mr.
Poliner.
Codes
of Conduct and Ethics
We
have
adopted the Bankrate, Inc. Code of Business Conduct applicable to all officers,
directors and employees, and the Bankrate, Inc. Finance Code of Professional
Conduct, applicable to our Chief Executive Officer, Chief Financial Officer,
Controller and other finance organization employees. Both the Code of Conduct
and the Finance Code of Ethics are publicly available on our Web site at
http://www.bankrate.com/investor-relations/default.asp.
Review
and Approval of Transactions with Related Persons
On
an
annual basis, each director and executive officer is required to complete a
questionnaire that requires disclosure of any transactions the director or
executive officer, or their immediate family members or associates, may have
with us in which the director or executive officer, or their immediate family
members or associates, has a direct or indirect material interest. The Audit
Committee which is responsible for reviewing and approving any related person
transactions, considers the responses in the questionnaires and other
information regarding potential relationships between us and the directors
and
executive officers. The Audit Committee has determined that there are no related
person transactions to report.
Compensation
Committee Interlocks and Insider Participation
The
following non-employee directors were the members of the Compensation Committee
of the Board of Directors during 2006: Randall E. Poliner (Chairman) and Robert
P. O’Block. None of the members of the Compensation Committee is an executive
officer of a public company of which a Bankrate executive officer is a
director.
EXECUTIVE
OFFICERS
The
names, ages, and current positions of our executive officers as of the record
date are listed in the table below. Executive officers are elected annually
by
the Board of Directors at its meeting following the annual meeting of
shareholders to serve for a one year term and until their successors are elected
and qualified. There are no family relationships among the executive officers
nor is there any agreement or understanding between any officer and any other
person pursuant to which the officer was elected. Mr. Evans serves as a director
and an executive officer. For information pertaining to Mr. Evans’ business
experience, see “Election of Directors.”
|
Name
|
Age
|
Position
|
||
|
Thomas
R. Evans
|
52
|
President,
Chief Executive Officer and Director
|
||
|
Robert
J. DeFranco
|
50
|
Senior
Vice President-Finance
|
||
|
Edward
J. DiMaria
|
41
|
Senior
Vice President-Chief Financial Officer
|
||
|
Daniel
P. Hoogterp
|
47
|
Senior
Vice President-Chief Technology Officer
|
||
|
Steven
L. Horowitz
|
35
|
Senior
Vice President-Product and Business Development
|
||
|
Donaldson
M. Ross
|
43
|
Senior
Vice President-Chief Revenue Officer
|
||
|
Lynn
Varsell
|
46
|
Senior
Vice President-Publisher
|
||
|
Bruce
J. Zanca
|
46
|
Senior
Vice President-Chief Communications/Marketing
Officer
|
||
Robert
J. DeFranco.
Mr.
DeFranco has served as our Senior Vice President-Finance since April 2006.
Prior
to that, he served as our Senior Vice President and Chief Financial Officer
since September 2000, and as Vice President-Finance and Chief Accounting Officer
from March 1999. From 1986 to 1999, he held various positions in corporate
accounting and finance for companies including Ocwen Financial Corporation
(as
Director of Finance from January 1998 through March 1999), SunTrust Banks,
Inc.
(as Vice President-Financial Reporting from February 1995 through December
1997), Ryder System, Inc. and Southeast Banking Corporation. From 1978 to 1986,
he was a member of the commercial audit division of Arthur Andersen & Co.,
Miami, Florida. Mr. DeFranco is a Certified Public Accountant and a member
of
the American Institute of Certified Public Accountants. Mr. DeFranco received
a
Bachelor of Science degree with a major in Accounting from Florida State
University in 1978.
Edward
J. DiMaria.
Mr.
DiMaria has served as our Senior Vice President and Chief Financial Officer
since April 2006. From February 2006 until April 2006, he served as our
consultant, assisting us with our finance and accounting functions. Prior to
that, Mr. DiMaria was an independent consultant for various clients on numerous
matters, including private equity transactions, mergers and acquisitions, and
other corporate finance projects. From August 2000 to August 2002, Mr. DiMaria
was the Chief Financial Officer of Official Payments Corporation. From August
1994 to August 2000, Mr. DiMaria was employed by Best Friends Pet Care, Inc.,
where his final position was Executive Vice President and Chief Financial
Officer. Mr. DiMaria has also held finance and accounting positions with
Business Express, Inc., Advanced Network & Services, Inc., and was a member
of the commercial audit division of KPMG LLP. Mr. DiMaria is a Certified Public
Accountant in the State of New York and received his Bachelor of Business
Administration degree with a major in Public Accounting from Pace University
in
New York.
Daniel
P. Hoogterp.
Mr.
Hoogterp has served as our Senior Vice President and Chief Technology Officer
since May 2005. From November 2002 until May 2005, he served as Chief Executive
Officer of TQuist, LLC, a technology consulting company. From February 2001
to
September 2002, Mr. Hoogterp served as Executive Vice President and Chief
Technology Officer of Enamics, Inc., a company specializing in business
technology management. From July 1999 to February 2001, he served as Senior
Vice
President and Chief Technology Officer of Sagemaker, Inc., a provider of
enterprise information portals. From March 1991 to July 1999, he served as
Chief
Executive Officer of Retrieval Technologies, Inc. Mr. Hoogterp received a
Post-Graduate Certificate in Business from Heriott-Watt University’s Edinburgh
Business School in Scotland in 2004.
Steven
L. Horowitz.
Mr.
Horowitz has served as Senior Vice President, Product and Business Development
since May 2005. Mr. Horowitz joined us as our Vice President and Publisher
in
October 2004. From 2002 to 2004, Mr. Horowitz served in various positions at
America Online (Time Warner), most recently as Vice President eCommerce
Classifieds. From 1998 to 2002, he held Director and Senior Manager positions
with Yahoo! and GeoCities, Inc. specializing in business and sales strategy
for
classifieds and local properties. Additionally, Mr. Horowitz served as Associate
Director of Internet Marketing for BMG Music Club at BMG Direct, Bertelsmann
(1998), Director of Internet Venues at a start-up entertainment Web site (1996
to 1997) and Online Publicist for Turner Entertainment Group at Tuner
Broadcasting Systems, Inc. (1995 to 1996). Mr. Horowitz received a Bachelor
of
Arts degree with a major in English from the State University of New York at
Oswego in 1993.
Donaldson
M. Ross.
Mr.
Ross has served as our Senior Vice President-Chief Revenue Officer since
September 2006. From
June
2001 until September 2006, Mr. Ross was Senior Vice President-Sales &
Marketing for Harris Connect, a leader in affinity marketing for the directory,
Internet and data services business in the education and association market
place. From 2000 to 2001, he held an executive management position at
zUniversity.com. From 1989 to 1998, Mr. Ross held various positions in media
sales and sales management at U. S. News & World Report, where he rose to
the position of Vice President of Advertising Sales. Mr. Ross received his
Bachelor
of Arts degree
from Denison University and his Masters in Advertising and Marketing from
Michigan State University.
Lynn
Varsell.
Ms. Varsell has served as our Senior Vice President-Publisher since
February 2006 after joining us as Vice President- Publisher in May 2005. From
2003 to 2005, she served as iMedia Ad Sales
Marketing Director for Discovery Communications
overseeing 14 television networks. From 1999 to 2002, she served as
Vice President, Design & Development for Official Payments Corp.,
specializing in processing consumer credit card payments for government taxes,
fees and fines. From 1996 to 1999, she held various creative and
development positions at Disney Internet Group including Creative Director
of
ABC.com, Oprah.com and Oscar.com where she was responsible for launching
Oprah.com on the Web and developing the first successful synch-to-broadcast
event. Ms. Varsell holds a Bachelor of Arts degree with honors from Boston
College and a Master Degree in Interactive Telecommunications from New York
University Tisch School of the Arts.
Bruce
J. Zanca.
Mr.
Zanca has served as our Senior Vice President and Chief Communications/Marketing
Officer since July 2004. From January 2002 to June 2004, Mr. Zanca owned and
operated a communications and marketing consulting practice. From September
1999
to December 2001, Mr. Zanca was Senior Vice President of Communications and
Administration at Official Payments Corp., specializing in processing consumer
credit card payments for government taxes, fees and fines. From August 1998
to
June 1999 he served as Vice President - Corporate Communications at GeoCities,
Inc., a community of personal Web sites on the Internet. From 1995 to 1998,
Mr.
Zanca was Vice President of Corporate Communications at U.S. News & World
Report Magazine Group. From 1981 to 1992, Mr. Zanca was a press aide in the
Reagan and Bush administrations. During the first Bush administration he was
a
White House Spokesman and deputy to Marlin Fitzwater.
Compensation
Committee Process and Procedures
The
members of the Compensation Committee are Messrs. Poliner (Chairman) and
O’Block. The Compensation Committee meets regularly, at least 5 times throughout
the year, and agendas for the meetings are typically established with input
from
the Committee's Chairman, our Chief Executive Officer ("CEO") and our Chief
Financial Officer ("CFO"). At times, our CEO, CFO, or both, attend portions
of
the meetings of the Compensation Committee. However, the Compensation Committee
also conducts meetings regularly to consider, discuss and evaluate issues
without the presence of any of our executive officers. Our CEO is not present
during voting or deliberations with respect to his own compensation.
To
assist
the Compensation Committee in the design of effective compensation programs,
policies and practices, including developing a mix of cash and equity
compensation and annual and long-term compensation that promotes our
compensation objectives and that is competitive in the marketplace, the
Compensation Committee retains a compensation consultant from time to
time.
Compensation
Discussion and Analysis
Overview
and Objectives
Our
Board
of Directors has delegated to its Compensation Committee overall
responsibility for establishing the compensation programs for all
executive officers, including our named executive officers. In this
capacity, the Compensation Committee establishes, reviews and recommends
compensation policy to the Board of Directors, approves compensation levels
and
performance goals, and evaluates executive performance against those
objectives. Although this discussion and analysis refers principally to
compensation for our named executive officers, the same compensation
principles and practices generally apply to all executives.
The
primary objective of our compensation program is the same objective that we
have
for our overall operations: to create long-term value for our shareholders.
The
Compensation Committee is responsible for establishing, reviewing and evaluating
our compensation plans, policies and programs and for approving the total
compensation package awarded to each of our executive officers, including the
CEO.
The
Compensation Committee works directly with the CEO to ensure the compensation
objectives are aligned with our mission and overall objectives and to provide
a
decision-making framework for use in formulating recommendations for each
executive's compensation.
The
Compensation Committee’s overall objective is to establish a compensation policy
that will (1) align the interests of executives with those of our long-term
shareholders; (2) attract, retain and incentivize highly-qualified executives
who drive our performance and help us achieve our business objectives; and
(3)
motivate executives to consistently deliver outstanding performance. In
addition, our compensation program is intended to reward individual performance
in a way that emphasizes strategic thinking necessary to create long-term value
while balancing rewards for short-term increases in operating results. We
compensate executive officers with a combination of salary and incentives
designed to focus their efforts on maximizing both our near-term and long-term
financial performance.
The
Compensation Committee takes measure of the competitive market for senior
executives by reviewing market compensation levels provided by comparable
companies, although it does not benchmark compensation paid to our executives
to
specified levels of compensation paid to executives at the comparable companies.
In 2006, a group of companies with a similar growth rate, performance, industry,
competitive
employment markets, track record, market positions and other factors
was
identified by the Compensation Committee. This and other market information
is a
useful informational tool, which provides the Compensation Committee with a
range of compensation paid in the market and various market alternatives to
compensation package design. Compensations levels are determined from an
assortment of factors with competitive information being one of the factors
considered. However, typically the most heavily weighted factor centers on
our
performance, which the Compensation Committee believes most closely aligns
the
interests of management and shareholders.
Our
executive compensation packages are comprised primarily of base salary, cash
incentive performance bonus and long-term equity awards. The Compensation
Committee believes that each element of the total compensation program serves
an
important function in achieving the overall objectives of our compensation
program. The Compensation Committee strives to pay a base salary that is
competitive within our industry in order to attract and retain top-level talent
in a highly competitive market. The year-end cash bonuses that are paid under
our Management Incentive Plan are designed to provide executives with strong
incentive to achieve individual and our financial and operational goals,
which are intended to drive year over year growth in key performance metrics.
Finally, the long-term equity awards granted to executive officers upon joining
us are designed to closely align the executives’ interests with those of our
shareholders.
Each
executive officer’s compensation package is designed to provide an appropriately
weighted mix of these elements, which cumulatively provide a competitive level
of compensation that motivates and incentivizes executives to achieve objectives
which are beneficial to our shareholders, to us, and to our management. In
general, the Compensation Committee has emphasized long-term equity awards
to
align key executives’ interests with shareholder interests in the creation of
wealth and incentive cash bonuses to drive near term and annual performance.
On
average, it is intended that our senior executive officers earn the majority
of
their annual compensation from sources that are “at risk” year to year based on
the results of operations.
Compensation
Elements
Base
Salary. Base
salary levels for each of our executive officers, including the CEO, are
generally set within a range of base salaries that the Compensation Committee
believes are competitive and appropriate for us given the performance objectives
the Compensation Committee expects us to continue to achieve and the
qualifications and experience of the individual required for the job. In
addition, the Compensation Committee will generally review our past financial
performance and future expectations, as well as the performance of the
executives and changes in the executives’ responsibilities. The annual base
salary we have agreed to pay each executive is specified in his or her
employment agreement with us, subject to adjustment by the Committee.
Base
salary is reviewed on an annual basis and decisions regarding base salary
increases take into account the executive’s current base salary, the competitive
market place, retention and other factors as described above. Our CEO is
responsible for assessing the contributions and performance of each executive
reporting to him and reviewing his assessment with the Compensation Committee.
The Compensation Committee reviews and assesses the performance of our CEO
and
also considers the recommendations the CEO provides regarding other executives.
The Compensation Committee makes the final decision on all executive
pay.
Incentive
Cash Bonus.
Our
executive officers are hired to lead and grow our organization and as such
we
believe that a significant portion of our executive officer’s compensation
should be tied to our overall performance. We maintain an incentive cash
compensation plan, which emphasizes pay-for-performance by providing our
executives with the opportunity to receive bonuses only if we achieve
or exceed certain corporate performance objectives.
Objective
annual performance metrics and goals are established at the beginning of each
fiscal year by the CEO in consultation with the executive officers that report
directly to him and approved by the Board of Directors. Based on these
performance objectives and the business plan and budget approved by the Board
of
Directors, the Compensation Committee establishes threshold minimum, target,
and
maximum financial performance goals, generally based on a factor of sustained
growth in earnings before interest, taxes, depreciation, amortization and stock
compensation expense, balanced for risk, for the purposes of paying incentive
bonuses. In order for awards to be payable under the plan, a minimum financial
performance threshold must be achieved and higher amounts are payable if we
meet
or exceed the established target. The Compensation Committee determines
incentive bonus financial performance goals taking into account various factors,
including management’s assessment of the probability of achieving higher levels
of financial performance within the fiscal year.
Amounts
payable to each individual executive officer upon achievement of the incentive
bonus financial performance goals are established based on the scope of the
executive’s responsibilities, the executive’s continued dedication and service
to us, and other
competitive data compiled and reviewed by the Compensation Committee.
Target
bonus opportunities are established for our named executive officers in their
employment agreements and by the Compensation Committee. The target bonus
opportunities established in the employment agreements range from $110,000
to
$130,000.
In
certain limited circumstances, the Compensation Committee may also pay a
discretionary bonus to an executive officer for extraordinary individual
achievement, service or dedication to us. Discretionary bonuses are evaluated
and awarded by the Compensation Committee on a case by case basis and are
heavily influenced by the circumstances giving rise to the award.
Equity
Incentive Awards.
We
use
equity
incentive awards to provide a stock-based incentive to improve our financial
performance and to assist in the recruitment, retention and motivation of
professional, managerial and other personnel. Equity incentive awards are also
designed to align the interests of our executive officers with those of our
shareholders by encouraging executive officers to enhance our value, the price
of the Common Stock, and hence, the shareholders’ return over the long term.
Historically, the Compensation Committee has used stock options to recognize
these goals.
Generally,
stock options are granted to executive officers from time to time based
primarily upon the individual’s actual and potential contributions to us and our
financial performance over the long term. The Compensation Committee approves
stock option grants. Generally, options are awarded on the date of hire,
however, the Compensation Committee retains discretion to award additional
stock
options to executives and other key employees at other times, including to
reward exceptional performance, for retention purposes, upon accepting an
expanded role and increased responsibility with us, or for other circumstances
as recommended by the CEO or Compensation Committee. The performance of our
executive officers is reviewed annually and based on those reviews and our
performance during the year; employees may be awarded additional stock options.
The number of stock options awarded to an executive is determined by the
Compensation Committee based on a number of factors, including the executive’s
prior experience, their role and responsibilities with us, competitive retention
and market data compiled and reviewed by the Compensation Committee, and
performance and demonstrated leadership with us.
The
exercise price of options grants is set at the closing price of our Common
Stock
on the date of grant. To date, with the exception of our CEO, stock option
grants to executives generally vest in equal installments over a
four-year period
and have a seven-year term. Our CEO, Thomas R. Evans, was granted 600,000 stock
options on June 25, 2004, upon joining us. The options have a seven-year term,
200,000 options vested on July 1, 2005 and the remaining 400,000 vest on a
monthly schedule pursuant to which Mr. Evans will be fully vested on July 1,
2007. Mr. Evans was also granted 500,000 stock options on October 26, 2004.
The
options have a seven-year term and all 500,000 shares vest five years from
the
grant date. Vesting accelerates if at any point during the term of the option,
the fair market value of our Common Stock is at or above the following
incremental thresholds for ninety consecutive trading days: $20.00 - 100,000
shares; $22.50 - 50,000 shares; $25.00 - 75,000 shares; $27.50 - 50,000 shares;
$30.00 - 75,000 shares; $32.50 - 75,000 shares; $35.00 - 75,000 shares.
Currently, 425,000 of the 500,000 stock options granted to Mr. Evans on October
26, 2004 have vested pursuant to these incremental thresholds.
Other
Benefits.
We
maintain certain broad-based benefit plans in which our employees, including
our
executive officers, are entitled to participate. These plans include health
and
life insurance and a qualified 401(k) savings plan. We make a matching
contribution equal to 3% for the qualified 401(k) savings plan, subject to
Internal Revenue Code limitations.
Perquisites.
We
provide a limited number of perquisites consistent with comparable companies
the
aggregate of which did not exceed $10,000 for each named executive officer.
The
level of perquisites does not factor into decisions on total
compensation.
2006
Executive Compensation
The
specific compensation decisions made for each of our executive officers in
2006
reflect our overall compensation objectives described above, as well as our
2006
performance.
Base
Salary.
The
Compensation Committee conducted its annual review and evaluation of the
compensation levels of the executive team. Our CEO, Mr. Evans, received an
increase in his base salary of $100,000, from $300,000 to $400,000, as a result
of the Compensation Committee’s review of our performance as well as external
market factors. Mr. Evans is considered a highly qualified CEO with a proven
track record of
delivering
solid performance. Mr. Evans continued retention with us is considered to be
a
critical component to our future success. Mr. DiMaria joined us in 2006 and
was
not given an increase in base salary during the year. Based on performance,
external market, retention and other factors, Messrs. Cunningham, DeFranco,
Horowitz and Zanca each received raises of $10,000 in 2006, such that their
base
salaries in 2006 were increased to $240,000, $210,000, $210,000 and $210,000
respectively.
Incentive
Cash Bonus.
As
described above, employment agreements with our executive officers establish
their applicable target bonus opportunity. Under these agreements, the target
bonus opportunities for each of Messrs. DiMaria, Horowitz and Zanca are
$125,000, $120,000 and $120,000 respectively. In addition, the Compensation
Committee has established target bonuses of $130,000, $125,000 and $110,000
for
Messrs. Evans, Cunningham and DeFranco respectively. For new executives, we
typically follow a policy of pro rating the earned bonus during the initial
year
of employment based on the time worked during that fiscal year. The target
bonus
for our chief executive officer, Mr. Evans, must be maintained at or above
$100,000. During 2006, we achieved a level of performance above the target
financial performance objective as reviewed and approved by the Compensation
Committee whereby executives earned 130% of target. Accordingly, in 2006,
Messrs. Evans, DiMaria DeFranco, Cunningham, Horowitz and Zanca received the
following bonus payments under our Management Incentive Plan: Mr. Evans received
$169,000, which represents 46.25% of his 2006 salary; Mr. DiMaria received
a
pro-rated bonus equal to $121,875, which represents 73.86% of his 2006 salary;
Messrs. DeFranco, Cunningham, Horowitz and Zanca received $143,000, $162,500,
$156,000 and $156,000 respectively. In addition, a discretionary bonus of
$50,000 was approved by the Compensation Committee and awarded to Mr. DiMaria
in
2007 for the leadership, performance and dedication he displayed after joining
us in 2006.
Stock
Options.
Pursuant to an employment agreement entered into between us and Mr. DiMaria
effective on April 3, 2006, Mr. DiMaria was granted 150,000 stock options at
the
inception of his employment, with ratable vesting over four years. The
Compensation Committee made the grant of options to this executive after
determining the appropriate award level for the executive given his experience,
job responsibilities, our objectives, and market factors. Based on the same
or
similar factors, other executives were each provided an annual option award
of
12,500 shares, except for Mr. Evans who did not receive an option award in
2006.
Employment
Agreements
We
have
entered into employment agreements with each of our named executive officers
in
order to secure their continued service and dedication to us. These agreements
generally establish minimum salary commitments and target bonus opportunities.
The agreements also restrict the executive’s ability to engage in or perform any
activities that are competitive to our business or to solicit our employees
away
from our service while we employ the executive and for a period of one year
thereafter. Our termination payments are generally structured such that the
executive is entitled to one year’s base salary at the time of termination if
the executive is terminated by us without cause or if the executive terminates
the agreement with cause. The termination benefits that each executive officer
is entitled to receive are more fully described in “Potential Payments upon
Termination or Change of Control” below.
Tax
Deductibility of Compensation
Limitations
on the deductibility of compensation may occur under Section 162(m) of the
Internal Revenue Code of 1986, which generally limits a publicly held
corporation’s tax deduction for compensation paid to each of its chief executive
officer and next four most highly compensated executive officers to $1 million
in any year. In addition, Section 162(m) specifically exempts certain
performance-based compensation from the deduction limit. The annual salary,
cash
incentive bonus and equity compensation we generally pay to our executive
officers do not exceed this limit. The Compensation Committee’s intent is to
design compensation packages that are deductible without limitation, where
doing
so will further the purposes of our executive compensation program. However,
the
Compensation Committee will take into consideration various other factors,
together with Section 162(m) consideration, in making executive compensation
decisions and could, in certain circumstances, approve and authorize
compensation that is not fully tax deductible.
Equity
Grant Practices
Annual
equity awards, as described above, are generally made at the January meeting
of
the Compensation Committee. The date of this meeting is typically chosen 3
months in advance, and therefore awards are not coordinated with the release
of
material non-public information.
Compensation
Committee Report on Executive Compensation
We,
as a
Compensation Committee, have reviewed and discussed with management the
Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K
included in this Proxy Statement. Based on that review and discussion, we have
recommended to the Board of Directors of the Company that the Compensation
Discussion and Analysis be included in this Proxy Statement.
Compensation
Committee:
Randall
E. Poliner, Chairman
Robert
P.
O’Block
This
report shall not be deemed to be incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, or the Exchange Act, and shall not otherwise be
deemed filed under these acts.
Information
about Executive Compensation
Summary
Compensation Table for 2006
The
following table shows the compensation of each individual who served at anytime
during 2006 as our principal executive officer and our principal financial
officer. We have also included our three other most highly compensated officers
who were serving as our executive officers as of December 31, 2006 (other than
the principal executive and principal financial officers). We refer to each
of
the individuals named in the table below as “named executive
officers.”
|
(a)
|
(b)
|
(c)
|
(d)
|
(f)
|
(g)
|
(i)
|
(j)
|
|||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
$
|
Bonus(1)
$
|
Option
Awards(2)
$
|
Non-Equity
Incentive Plan Compensation(3)
$
|
All
Other Compensation(4)
$
|
Total
$
|
|||||||||||||||
|
Thomas
R. Evans
President,
Chief Executive Officer and Director
|
2006
|
$
|
365,385
|
$
|
—
|
$
|
2,591,180
|
$
|
169,000
|
$
|
16,977
|
$
|
3,142,542
|
|||||||||
|
Edward
J. DiMaria
Senior
Vice President-Chief Financial Officer
|
2006
|
165,000
|
50,000
|
740,981
|
121,875
|
37,890
|
1,115,746
|
|||||||||||||||
|
G.
Cotter Cunningham(5)
Senior
Vice President-Chief Operating Officer
|
2006
|
240,000
|
—
|
302,933
|
162,500
|
6,600
|
712,033
|
|||||||||||||||
|
Robert
J. DeFranco
Senior
Vice President-Finance
|
2006
|
210,000
|
—
|
211,622
|
143,000
|
17,365
|
581,987
|
|||||||||||||||
|
Steven
L. Horowitz
Senior
Vice President-Product and Business Development
|
2006
|
210,000
|
—
|
252,098
|
156,000
|
15,505
|
633,603
|
|||||||||||||||
|
Bruce
J. Zanca
Senior
Vice President-Chief Communications/Marketing Officer
|
2006
|
210,000
|
—
|
287,043
|
156,000
|
14,837
|
667,880
|
|||||||||||||||
|
(1)
|
The
amount in column (d) for Mr. DiMaria reflects the dollar value of
a
discretionary bonus of $50,000, which was approved by the Compensation
Committee and awarded to Mr. DiMaria in 2007 for the leadership,
performance and dedication he displayed after joining us in 2006.
|
|
(2)
|
The
amounts in column (f) reflect the dollar amount recognized for financial
statement reporting purposes for the respective fiscal year, in accordance
with SFAS 123R of awards pursuant to our equity incentive award program,
and thus may include amounts from awards granted prior to the year
for
which the compensation is reported in this table. Awards are discussed
in
further detail on page 15 under the heading “Equity
Incentive Award.”
Assumptions used in the calculation of these amounts are included
in
footnote 3 to our audited consolidated financial statements for the
fiscal
year ended December 31, 2006, included in our Annual Report on Form
10-K
filed with the Securities and Exchange Commission on March 16,
2007.
|
|
(3)
|
The
amounts in column (g) reflect the cash awards to the named individuals
under the Management Incentive Plan or “MIP”, the details of which are
discussed in further detail on page 14 under the heading “Incentive
Cash Bonus.”
|
|
(4)
|
The
amount shown in column (i) includes for each named executive officer:
amounts paid for Exec-U-Care supplemental healthcare benefit program,
401(k) company matches, and certain company-paid commuting expenses.
In
addition, for Mr. DiMaria, the amount in column (i) includes consulting
fees of $35,900, which we paid to Mr. DiMaria before he joined us
as
Senior Vice President-Chief Financial Officer.
|
|
(5)
|
Mr. Cunningham resigned his employment with us effective April 6, 2007. |
Grants
of Plan-Based Awards in 2006
The
following table provides information concerning plan-based compensation granted
to the named executive officers under any plan.
|
Estimated
Possible Payouts Under Non-Equity Incentive Plan
Awards(1)
|
||||||||||||||||||||||||||||
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(j)
|
(k)
|
(l)
|
|||||||||||||||||||||
|
Name
|
Award
Type
|
Grant
Date
|
Approval
Dat
|
Threshold $
|
Target
$
|
Maximum
$
|
All
Other Option Awards: Number of Securities Underlying Options(2)
#
|
Exercise
or Base Price of Option Awards/Share
|
Grant
Date Fair Value of Stock and Option
Awards(3)
$
|
|||||||||||||||||||
|
Thomas
R. Evans
|
MIP
|
N/A
|
N/A
|
$
|
65,000
|
$
|
130,000
|
$
|
260,000
|
—
|
—
|
—
|
||||||||||||||||
|
Edward
J. DiMaria
|
MIP
|
N/A
|
N/A
|
62,500
|
125,000
|
250,000
|
—
|
—
|
—
|
|||||||||||||||||||
|
|
Options
|
4/3/06
|
3/30/06
|
—
|
—
|
—
|
150,000
|
$
|
42.33
|
$
|
4,018,878
|
|||||||||||||||||
|
G.
Cotter Cunningham
|
MIP
|
N/A
|
N/A
|
62,500
|
125,000
|
250,000
|
—
|
—
|
—
|
|||||||||||||||||||
|
|
Options
|
2/7/06
|
2/3/06
|
—
|
—
|
—
|
12,500
|
35.75
|
268,571
|
|||||||||||||||||||
|
Robert
J. DeFranco
|
MIP
|
N/A
|
N/A
|
55,000
|
110,000
|
220,000
|
—
|
—
|
—
|
|||||||||||||||||||
|
|
Options
|
2/7/06
|
2/3/06
|
—
|
—
|
—
|
12,500
|
35.75
|
268,571
|
|||||||||||||||||||
|
Steven
L. Horowitz
|
MIP
|
N/A
|
N/A
|
60,000
|
120,000
|
240,000
|
—
|
—
|
—
|
|||||||||||||||||||
|
|
Options
|
2/7/06
|
2/3/06
|
—
|
—
|
—
|
12,500
|
35.75
|
268,571
|
|||||||||||||||||||
|
Bruce
J. Zanca
|
MIP
|
N/A
|
N/A
|
60,000
|
120,000
|
240,000
|
—
|
—
|
—
|
|||||||||||||||||||
|
|
Options
|
2/7/06
|
2/3/06
|
—
|
—
|
—
|
12,500
|
35.75
|
268,571
|
|||||||||||||||||||
| (1) |
The
amounts shown in column (c) reflect the minimum payment level under
our
Management Incentive Plan. The amount shown in column (e) is 200%
of the
target amount. The Compensation Committee determines these amounts
annually. The business measurements, performance goals, and criteria
for
determining payout are discussed in the Compensation Discussion &
Analysis on page 12. Because Mr. DiMaria joined us mid-year (April
2006),
his estimated possible payouts were reduced pro rata based on his
length
of service with us in 2006.
|
| (2) |
As
discussed in the Compensation Discussion and Analysis, stock options
are
awarded pursuant to our Amended and Restated 1999 Equity Compensation
Plan. The amounts in column (j) show the number of options granted
in 2006
to our named executive officers. The options vest and become exercisable
ratably in monthly installments over the course of three years, beginning
one-year after the grant date.
|
| (3) |
The
amounts in column (l) show the full grant date fair value of stock
options
under SFAS 123R granted to our named executive officers in
2006.
|
Outstanding
Equity Awards at December 31, 2006
The
following table provides information concerning unexercised options as of
December 31, 2006 for each of named executive officer.
|
Number
of Securities Underlying
Unexercised
Options (1)
|
|||||||||||||
|
Name
|
Exercisable
#
|
Unexercisable
#
|
Option
Exercisable
Price $
|
Option
Expiration
Date
|
|||||||||
|
Thomas
R. Evans
|
483,333
|
116,667
|
$
|
8.46
|
6/25/2011
|
||||||||
|
405,000
|
75,000
|
10.01
|
10/26/2011
|
||||||||||
|
Edward
J. DiMaria
|
—
|
150,000
|
42.33
|
4/3/2013
|
|||||||||
|
G.
Cotter Cunningham
|
500
|
—
|
0.85
|
3/2/2009
|
|||||||||
|
36,458
|
13,542
|
12.63
|
1/5/2011
|
||||||||||
|
16,500
|
19,500
|
18.44
|
2/1/2012
|
||||||||||
|
|
—
|
12,500
|
35.75
|
2/7/2013
|
|||||||||
|
Robert
J. DeFranco
|
12,500
|
—
|
0.85
|
3/2/2009
|
|||||||||
|
10,000
|
—
|
0.85
|
2/16/2010
|
||||||||||
|
10,000
|
—
|
0.85
|
6/13/2010
|
||||||||||
|
6,198
|
11,511
|
12.63
|
1/5/2011
|
||||||||||
|
6,666
|
8,125
|
18.44
|
2/1/2012
|
||||||||||
|
|
—
|
12,500
|
35.75
|
2/7/2013
|
|||||||||
|
Steven
L. Horowitz
|
21,666
|
45,834
|
10.30
|
10/25/2011
|
|||||||||
|
|
—
|
12,500
|
35.75
|
2/7/2013
|
|||||||||
|
Bruce
J. Zanca
|
65,625
|
59,375
|
8.11
|
7/15/2011
|
|||||||||
|
|
—
|
12,500
|
35.75
|
2/7/2013
|
|||||||||
| (1) |
All
stock options other than those issued to Mr. Evans have a seven year
term
and vest ratably over four years following the date of grant, 1/4
on the
first anniversary date, and the remaining 3/4 in monthly installments
over
three years beginning one year from the date of grant. Mr. Evans
was
granted 600,000 stock options with a seven year term on June 25,
2004, of
which 200,000 options vested on July 1, 2005 and the remaining 400,000
vest on a monthly schedule pursuant to which Mr. Evans will be fully
vested on July 1, 2007. Mr. Evans was also granted 500,000 stock
options
with a seven year term on October 26, 2004, all of which vest five
years
from the grant date. Vesting accelerates if at any point during the
term
of the option, the fair market value of our Common Stock is at or
above
the following incremental thresholds for ninety consecutive trading
days:
$20.00 - 100,000 shares; $22.50 - 50,000 shares; $25.00 - 75,000
shares;
$27.50 - 50,000 shares; $30.00 - 75,000 shares; $32.50 - 75,000 shares;
$35.00 - 75,000 shares. Currently, 425,000 of the 500,000 stock options
granted to Mr. Evans on October 26, 2004 have vested pursuant to
these
incremental thresholds.
|
Option
Exercises for 2006
The
following table provides information concerning each exercise of stock options
during the year ended December 31, 2006 for each named executive
officer.
|
Name
|
Number
of Shares Acquired on Exercise
#
|
Value
Realized on
Exercise
$
|
|||||
|
Thomas
R. Evans
|
45,000
|
$
|
1,716,550
|
||||
|
G.
Cotter Cunningham
|
25,000
|
1,250,000
|
|||||
|
Robert
J. DeFranco
|
25,000
|
954,286
|
|||||
|
Steven
L. Horowitz
|
25,000
|
1,013,750
|
|||||
|
Bruce
J. Zanca
|
25,000
|
1,068,500
|
|||||
Nonqualified
Deferred Compensation for 2006
|
Name
|
Executive
Contributions
in Last FY
$
|
Registrant
Contributions
in Last FY
$
|
Aggregate
Earnings
in
Last
FY
$
|
Aggregate
Withdrawals/
Distributions
$
|
Aggregate
Balance
at
Last
FYE
$
|
|||||||||||
|
G.
Cotter Cunningham
|
$
|
24,500
|
$
|
0
|
$
|
16,672
|
$
|
0
|
$
|
132,350
|
||||||
Employment
Agreements
On
January 1, 2004, we entered into an employment agreement with Robert J. DeFranco
currently our Senior Vice President-Finance. Under the terms of the employment
agreement, Mr. DeFranco is entitled to receive an annual base salary as
stipulated in the employment agreement and an annual bonus contingent on
achieving certain performance criteria. Under the terms of the employment
agreement, Mr. DeFranco agrees to assign to us all of his copyrights, trade
secrets and patent rights that relate to our business. Additionally, during
the
term of his employment and for a period of one year thereafter, Mr. DeFranco
agrees not to compete with us and not to recruit any of our employees. Upon
Mr.
DeFranco’s termination of employment without cause, we have agreed to pay a
separation payment equal to one year’s base salary at the then-current rate
payable in three equal installments; one-third payable 15 days after the
termination date; one-third payable six months after the termination date;
and
one-third payable 12 months from the termination date.
On
June
21, 2004, we entered into an employment agreement with Thomas R. Evans, our
President and Chief Executive Officer. Under the terms of the employment
agreement, Mr. Evans is entitled to receive an annual base salary as stipulated
in the employment agreement and an annual bonus contingent on achieving certain
performance criteria. Under the terms of the employment agreement, Mr. Evans
agrees to assign to us all of his copyrights, trade secrets and patent rights
that relate to our business. Additionally, during the term of his employment
and
for a period of one year thereafter, Mr. Evans agrees not to compete with us
and
not to recruit any of our employees. Upon Mr. Evans’ termination of employment
for certain reasons (i.e., without cause or resignation for good reason), we
have agreed to pay a separation payment equal to one year’s base salary at the
then-current rate payable in three equal installments; one-third payable 15
days
after the termination date; one-third payable six months after the termination
date; and one-third payable 12 months from the termination date. Mr. Evans
was
also granted options to purchase 600,000 shares of our common stock at $8.46,
the fair market value on the date of grant. The options have a seven year term
and vest as follows: 200,000 shares on July 1, 2005; and 16,666.667 shares
on
the first day of each month beginning August 1, 2005 and ending July 1, 2007.
On
October 26, 2004, Mr. Evans was granted options to purchase 500,000 shares
of
our common stock at $10.01, the fair market value on the date of grant. The
options have a seven year term and vest as to all 500,000 shares five years
from
the
date
of
grant. Vesting accelerates if, at any point during the term of the option,
the
fair market value of the our common stock is at or above the following
incremental thresholds for ninety consecutive trading days; $20.00 - 100,000
shares; $22.50 - 50,000 shares; $25.00 - 75,000 shares; $27.50 - 50,000 shares;
$30.00 - 75,000 shares; $32.50 - 75,000 shares; $35.00 - 75,000
shares.
On
July
15, 2004, we entered into an employment agreement with Bruce J. Zanca, our
Senior Vice President and Chief Communications/Marketing Officer and entered
into an employment agreement with us. Under the terms of the employment
agreement, Mr. Zanca is entitled to receive an annual base salary as stipulated
in the employment agreement and an annual bonus contingent on achieving certain
performance criteria. Under the terms of the employment agreement, Mr. Zanca
agrees to assign to us all of his copyrights, trade secrets and patent rights
that relate to our business. Additionally, during the term of his employment
and
for a period of one year thereafter, Mr. Zanca agrees not to compete with us
and
not to recruit any of our employees. Upon Mr. Zanca’s termination of employment
without cause, we have agreed to pay a separation payment equal to one year’s
base salary at the then-current rate payable in three equal installments;
one-third payable 15 days after the termination date; one-third payable six
months after the termination date; and one-third payable 12 months from the
termination date. Mr. Zanca was also granted options to purchase 150,000 shares
of our common stock at $8.11, the fair market value on the date of grant. The
options have a seven year term and vest as follows: 37,500 shares on July 15,
2005; and 3,125 shares on the first day of each month beginning August 1, 2005
and ending July 15, 2008.
On
October 4, 2004, we entered into an employment agreement with Steve Horowitz,
our Senior Vice President-Product and Business Development. Under the terms
of
the employment agreement, Mr. Horowitz is entitled to receive an annual base
salary as stipulated in the employment agreement and an annual bonus contingent
on achieving certain performance criteria. Under the terms of the employment
agreement, Mr. Horowitz agrees to assign to us all of his copyrights, trade
secrets and patent rights that relate to the our business. Additionally, during
the term of his employment and for a period of one year thereafter, Mr. Horowitz
agrees not to compete with us and not to recruit any of our employees. Upon
Mr.
Horowitz’ termination of employment without cause, we have agreed to pay a
separation payment equal to six month’s base salary at the then-current rate
payable in three equal installments; one-third payable 15 days after the
termination date; one-third payable three months after the termination date;
and
one-third payable six months from the termination date. Mr. Horowitz was also
granted options to purchase 100,000 shares of our common stock at $10.30, the
fair market value on the date of grant. The options have a seven year term
and
vest as follows: 25,000 shares on October 25, 2005; and 2,083.333 shares on
the
first day of each month beginning November 1, 2005 and ending October 25,
2008.
On
May
23, 2005, we
entered into an employment agreement with Lynn
Varsell who currently is our Senior Vice President-Publisher. Under the terms
of
the employment agreement, Ms. Varsell is entitled to receive an annual base
salary as stipulated in the employment agreement, an annual bonus contingent
on
achieving certain performance criteria. Under the terms of the employment
agreement, Ms. Varsell agrees to assign to us all of her copyrights, trade
secrets and patent rights that relate to our business. Additionally, during
the
term of her employment and for a period of six months thereafter, Ms. Varsell
agrees not to compete with us and not to recruit any of our employees. Upon
Ms.
Varsell’s termination of employment without cause, we have agreed to pay a
separation payment equal to six months’ base salary at the then-current rate
payable in three equal installments; one-third payable 15 days after the
termination date; one-third payable three months after the termination date;
and
one-third payable six months from the termination date. Ms. Varsell was also
granted options to purchase 50,000 shares of our common stock at $17.13, the
fair market value on the date of grant. The options have a seven-year term
and
vest as follows: 12,500 shares on May 23, 2006; and 1,041.667 shares on the
first day of each month beginning April 1, 2006 and ending May 23,
2009.
On
May
31, 2005, we entered into an employment agreement with Daniel P. Hoogterp,
our
Senior Vice President-Chief Technology Officer. Under the terms of the
employment agreement, Mr. Hoogterp is entitled to receive an annual base salary
as stipulated in the employment agreement, an annual bonus contingent on
achieving certain performance criteria, and a guaranteed bonus of $50,000 for
2005 that was paid in the first quarter of 2006. Under the terms of the
employment agreement, Mr. Hoogterp agrees to assign to us all of his copyrights,
trade secrets and patent rights that relate to our business. Additionally,
during the term of his employment and for a period of six months thereafter,
Mr.
Hoogterp agrees not to compete with us and, for a period of one year
thereafter, not to recruit any of our employees. Upon Mr. Hoogterp’s
termination of employment without cause, we have agreed to pay a separation
payment equal to one year’s base salary at the then-current rate payable in
three equal installments; one-third payable 15 days after the termination date;
one-third payable six months after the termination date; and one-third payable
12 months from the termination date. Mr. Hoogterp was also granted options
to
purchase 80,000
shares
of
our common stock at $18.26, the fair market value on the date of grant. The
options have a seven-year term and vest as follows: 20,000 shares on May 31,
2006; and 1,666.667 shares on the first day of each month beginning April 1,
2006 and ending May 31, 2009.
On
April
3, 2006, we entered into an employment agreement with Edward J. DiMaria, our
Senior Vice President-Chief Financial Officer. Under the terms of the employment
agreement, Mr. DiMaria is entitled to receive an annual base salary as
stipulated in the employment agreement, an annual bonus contingent on achieving
certain performance criteria. Under the terms of the employment agreement,
Mr.
DiMaria agrees to assign to us all of his copyrights, trade secrets and patent
rights that relate to our business. Additionally, during the term of his
employment and for a period of six months thereafter, Mr. DiMaria agrees not
to
compete with us and not to recruit any of our employees. Upon Mr. DiMaria’s
termination of employment without cause, we have agreed to pay a separation
payment equal to one year’s base salary at the then-current rate payable in
three equal installments; one-third payable 15 days after the termination date;
one-third payable six months after the termination date; and one-third payable
12 months from the termination date. Mr. DiMaria was also granted options to
purchase 150,000 shares of our common stock at $42.33, the fair market value
on
the date of grant. The options have a seven-year term and vest as follows:
37,500 shares on April 3, 2007; and 3,125 shares on the first day of each month
beginning May 1, 2007 and ending April 3, 2010.
On
September 11, 2006, we entered into an employment agreement with Donaldson
M.
Ross, our Senior Vice President-Chief Revenue Officer. Under the terms of the
employment agreement, Mr. Ross is entitled to receive an annual base salary
as
stipulated in the employment agreement and an annual bonus contingent on
achieving certain performance criteria. Under the terms of the employment
agreement, Mr. Ross agrees to assign to us all of his copyrights, trade secrets
and patent rights that relate to our business. Additionally, during the term
of
his employment and for a period of twelve months thereafter, Mr. Ross agrees
not
to compete with us and not to recruit any of our employees. Upon Mr. Ross’s
termination of employment without cause, we agree to pay a separation payment
equal to twelve months’ base salary at the then-current rate payable in three
equal installments; one-third payable 15 days after the termination date;
one-third payable six months after the termination date; and one-third payable
twelve months from the termination date. Mr. Ross was also granted options
to
purchase 100,000 shares of our common stock at $29.31, the fair market value
on
the date of grant. The options have a seven-year term and vest as follows:
25,000 shares on September 11, 2007; and 2,083.33 shares on the first day of
each month beginning October 1, 2007 and ending September 11, 2010.
Potential
Payments upon Termination or Change of Control
Payments
upon Termination without Cause or Resignation for Good
Reason
Pursuant
to the employment agreements with Messrs. Evans, DiMaria, DeFranco, Horowitz
and
Zanca, in the event that we terminate the employment of any of these executives
without “cause”, or, in the case of Mr. Evans, if he resigns for “good reason,”
the executive officer would be entitled to an accrued bonus through the
effective date of the termination, payable within fifteen (15) days of the
effective termination date, and we must pay
a
separation payment equal to one year’s base salary, or in the case of Mr.
Horowitz 6 month’s base salary, at the then-current rate payable in three equal
installments; one-third payable 15 days after the termination date; one-third
payable 6 months (3
months
for Mr. Horowitz)
after
the termination date; and one-third payable 12 months (6 months for Mr.
Horowitz) from the termination date.
For
these purposes, the term “cause” generally means, the executives’ (i) material
breach of his or her employment agreement; (ii) dishonesty or fraud; (iii)
willful or negligent insubordination; (iv) conviction of, or guilty plea to,
a
felony or crime involving moral turpitude; or (v) resignation. Termination
without “cause” generally means any termination other than for “cause” and other
than in the event of death or a mental or physical disability, which prevents
the executive from performing his or her duties for an extended period of time.
For the purposes of Mr. Evans’ employment agreement, the term “good reason”
generally means a reduction in his title, duties or responsibilities; his
relocation; the failure of any successor to assume his employment agreement;
our
breach of the agreement; and our failure to allow him to participate in employee
benefit plans generally available to executives.
Assuming
the employment of Messrs. Evans, DiMaria, DeFranco, Horowitz and Zanca had
been
terminated without “cause” by us effective December
31, 2006,
they
would have been entitled to the following payments in addition to accrued
amounts owed to them for prior service:
|
Name
|
Cash(1)
|
|||
|
Thomas
R. Evans
|
$
|
569,000
|
||
|
Edward
J. DiMaria
|
341,875
|
|||
|
Robert
J. DeFranco
|
353,000
|
|||
|
Steven
L. Horowitz
|
366,000
|
|||
|
Bruce
J. Zanca
|
366,000
|
|||
| (1) |
Cash
payment amounts are based on the following
components:
|
| § |
base
pay using current salary; and
|
|
§
|
an
accrued annual cash bonus, calculated based on the targets established
by
the Compensation Committee at the beginning of each fiscal year,
as
discussed in the Compensation Discussion and Analysis.
|
Payments
upon Termination for Cause, Resignation, Death or
Disability
Pursuant
to employment agreements entered into with Messrs. Evans, DiMaria, DeFranco,
Horowitz and Zanca, in
the
event of a termination with “cause” or resignation, death or disability,
each
executive officer would be entitled to any accrued bonus through the effective
date of the termination, payable within fifteen (15) days of the effective
termination date.
Payments
Upon a Change of Control
Under
the
terms of our 1997 Equity Compensation Plan and our Amended and Restated 1999
Equity Compensation Plan, unless the Board of Directors determines otherwise,
all outstanding stock options automatically accelerate and become immediately
exercisable upon a change of control. Upon a change of control in which we
are
not the surviving corporation, any options not exercised must be assumed by,
or
replaced with comparable options by, the surviving corporation. Assuming a
change of control had occurred on December 31, 2006 and the executive officers
exercised the full amount of their awards, the cash value of the accelerated
awards for each of the executive officers would have been as
follows:
|
Name
|
Value of
Accelerated Equity Awards(1)(2)
|
|||
|
Thomas
R. Evans
|
$
|
5,536,010
|
||
|
Edward
J. DiMaria
|
0
|
|||
|
Robert
J. DeFranco
|
913,727
|
|||
|
Steven
L. Horowitz
|
1,294,810
|
|||
|
Bruce
J. Zanca
|
1,799,250
|
|||
|
(1)
|
Assumes
a stock price of $37.95, which was the closing price of our common
stock
on December 29, 2006, the last trading day of the
year.
|
| (2) |
The
value of accelerated equity awards is calculated by multiplying the
difference between the closing price of our common stock on December
29,
2006 and the exercise price of the option by the number of options
accelerated.
|
Under
the
terms of the equity incentive plans, a “change of control” shall be deemed to
have occurred if: (a) any “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) (other than a person who is our shareholder as of
the
effective date of the Plan) becomes a “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of our securities
representing more than 50% of the voting power of our then outstanding
securities; or (b) our shareholders approve (or, if shareholder approval is
not
required, the Board of
Directors
approves) an agreement providing for (i) our merger or consolidation with
another entity, which results in our shareholders immediately prior to the
merger or consolidation, not beneficially owning, immediately after the merger
or consolidation, shares entitling them to cast more than 50% of all of the
votes that the shareholders of the surviving entity would be entitled in the
election of directors, (ii) the sale or other disposition of all or
substantially all of our assets, or (iii) our liquidation or
dissolution.
Termination
Following a Change of Control
None
of
our executive officers has a change of control agreement with us. However,
pursuant to Mr. Evans’ employment agreement, any successor to all or
substantially all of our business and/or assets that fails to assume his
employment agreement, Mr. Evans would be permitted to resign for “good reason”
(see “Payments
upon Termination without Cause or Resignation for Good Reason”).
Restrictive
Covenants
Pursuant
to the employment agreements with Messrs. Evans, DiMaria, DeFranco, Horowitz
and
Zanca, each executive officer has agreed not to compete with us and not to
recruit any of our employees during the term of his employment and for a period
of one year thereafter. In addition, each executive officer has also agreed
not
to disclose any of our confidential information during the term of his
employment and for a period of three years thereafter and not to disclose any
of
our trade secrets for so long as they remain trade secrets. In order to receive
the benefits described above in “Payments
upon Termination without Cause or Resignation for Good Reason,”
the
executives must comply with each of these restrictive covenants and must enter
into a separation and release agreement with us releasing us from any and all
liability and settling all claims of any kind. The waiver by either party of
a
breach of any provision of the relevant employment agreement by the other party,
including the restrictive covenant provisions, does not operate and is not
construed as a waiver of any subsequent breach.
Annually,
on the first business day of the year, each non-employee director receives
an
option to purchase 10,000 shares of our Common Stock at the fair market value
on
the date of grant. The stock options have a seven year term, and fully vest
on
the last business day of the year in which the option is granted. In addition,
we pay the Audit Committee Chairman $25,000 in cash compensation. In 2006,
Mr.
Pinola received additional cash compensation for serving as our Audit Committee
Chairman. No other directors receive any cash compensation. We reimburse each
director for reasonable out-of-pocket expenses incurred in attending meetings
of
the Board of Directors and any of its committees.
2006
Director Compensation Table
|
Name
|
Fees
Earned or Paid in Cash
$
|
Option
Awards(1)
$
|
Total
$
|
|||||||
|
Peter
C. Morse
|
$
|
—
|
$
|
170,514
|
$
|
170,514
|
||||
|
William
C. Martin
|
—
|
170,514
|
170,514
|
|||||||
|
Robert
P. O’Block
|
—
|
170,514
|
170,514
|
|||||||
|
Richard
J. Pinola
|
25,000
|
170,514
|
195,514
|
|||||||
|
Randall
E. Poliner
|
—
|
170,514
|
170,514
|
|||||||
| (1) |
The
amounts in this column reflect the dollar amount recognized for financial
statement reporting purposes for the respective fiscal year, in accordance
with SFAS 123R. Assumptions used in the calculation of these amounts
are
included in footnote 3 to our audited consolidated financial statements
for the fiscal year ended December 31, 2006, included in our Annual
Report
on Form 10-K filed with the Securities and Exchange Commission on
March
16, 2007. As all options vest in the year of grant, the amount reflected
in this column reflects the full grant date fair value of the award.
As of
December 31, 2006, the stock options outstanding for each director
(all of
which are vested) are as follows: Mr. Morse - 75,000; Mr. Martin
- 40,000;
Mr. O’Block - 75,000; Mr. Pinola - 20,000; and Mr. Poliner -
75,000.
|
Section
16(a) of the Exchange Act requires our directors and executive officers and
any
persons who own more than 10% of our common stock to file reports with the
SEC
with respect to their ownership of common stock. Directors, executive officers
and persons owning more than 10% of our common stock are required to furnish
us
with copies of all Section 16(a) reports they file.
Based
solely on our review of the copies of such reports received by us and any
written representations from reporting persons that no other reports were
required of those persons, we believe that during 2006, all filing requirements
applicable to our directors and executive officers were complied with in a
timely manner except that Messrs. Martin, Morse, O’Block, Pinola, and Poliner
each filed a late Form 4 in February 2006; Mr. DiMaria filed a late Form 4
in
April 2006; and Mr. Ross filed a late Form 3 in October 2006. We are not aware
of any other persons other than directors and executive officers who own more
than 10% of our common stock.
The
Audit
Committee operates under a written charter adopted by the Board of Directors
and
is published on the investor relations section of the Company’s Web site at
www.bankrate.com. This report reviews the actions taken by the Audit Committee
with regard to the Company’s financial reporting process during 2006 and
particularly with regard to the Company’s audited consolidated financial
statements as of December 31, 2006 and 2005 and for the three years ended
December 31, 2006.
The
Audit
Committee selects the Company’s independent registered public accounting firm
and meets with the Company’s independent registered public accounting firm to
discuss the scope and review the results of the annual audit.
The
Audit
Committee has implemented procedures to ensure that during the course of each
fiscal year it devotes the attention that it deems necessary or appropriate
to
each of the matters assigned to it under the Committee’s Charter. The Audit
Committee met seven times during 2006.
All
of
the directors who serve on the Audit Committee are “independent” for purposes of
the NASDAQ Global Select Market listing standards. That is, the Board of
Directors has determined that none of the members of the Committee has any
relationship to the Company that may interfere with his independence from the
Company and its management.
The
Audit
Committee reviewed the Company’s 2006 financial statements and met with both
management and KPMG, the Company’s independent registered public accounting firm
for 2006, to discuss those financial statements. Management represented to
us
that the financial statements were prepared in conformity with accounting
principles generally accepted in the United States of America. The Committee
also received from and discussed the written disclosures and the letter from
KPMG required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), as adopted by the Public Company Accounting
Oversight Board in Rule 3600 T, and has discussed with KMPG their independence.
The Audit Committee also discussed with KPMG any matters required to be
discussed by Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1, AU section 380), as adopted by the Public
Company Oversight Board in Rule 3200 T.
On
the
basis of these reviews and discussions, the Audit Committee recommended to
the
Board of Directors that the Board of Directors approve the inclusion of the
Company’s audited financial statements in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2006, for filing with the Securities
and Exchange Commission.
Members
of the Audit Committee
Richard
J. Pinola, Chairman
Robert
P.
O’Block
Randall
E. Poliner
This
report shall not be deemed to be incorporated by reference by any general
statement incorporating by reference the Proxy Statement into any filing under
The Securities Act of 1933 or Exchange Act, and shall not otherwise be deemed
filed under these Acts.
RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
On
January 30, 2007, the Audit Committee of our Board of Directors determined
to
consider a change of our independent accountants and directed management to
undertake a request for proposal from independent registered public accounting
firms to serve as our auditor for fiscal 2007. We initiated this process on
March 5, 2007. Seven large public accounting firms, including KPMG LLP, were
asked to submit proposals.
On
March
27, 2007, KPMG LLP notified the Audit Committee of our Board of Directors that
KPMG LLP would not submit a proposal and declined to stand for re-election
as
principal accountants. KPMG LLP indicated it would complete its procedures
regarding our unaudited condensed financial statements for the quarter ended
March 31, 2007 and the Form 10-Q in which such financial statements would be
included.
On
April
12, 2007, the Audit Committee of our Board of Directors engaged Grant Thornton
LLP to act as our principal accountant for the fiscal year ending December
31,
2007. Also on April 12, 2007, the Audit Committee of our Board of Directors
notified KPMG LLP of its decision to have Grant Thornton complete the review
of
our interim financial statements as of March 31, 2007 and for the three-month
period then ended. As such, the auditor-client relationship with KPMG LLP ceased
on that date.
KPMG
LLP’s audit reports on our consolidated financial statements as of and for the
years ended December 31, 2006 and 2005 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles, except as follows:
KPMG
LLP’s report on our consolidated financial statements as of and of and for the
years ended December 31, 2006 and 2005, contained a separate paragraph stating
that “As discussed in Note 2 to the consolidated financial statements, effective
January 1, 2006, the Company changed its method of accounting for share-based
compensation by adopting Statement of Financial Accounting Standards No. 123(R),
Share-Based
Payment.”
The
audit
reports of KPMG LLP on management’s assessment of the effectiveness of internal
control over financial reporting and the effectiveness of internal control
over
financial reporting as of December 31, 2006 and 2005 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles, except as
follows:
KPMG
LLP’s report on management’s assessments of the effectiveness of internal
control over financial reporting and the effectiveness of internal control
over
financial reporting as of December 31, 2005, contains an explanatory paragraph
that states that Bankrate, Inc. acquired Wescoco LLC, d/b/a FastFind and
Mortgage Market Information Services, Inc. and Interest.com on November 30,
2005
and December 1, 2005, respectively, and management excluded from its assessments
of the effectiveness of Bankrate, Inc.’s internal control over financial
reporting as of December 31, 2005, Wescoco LLC’s and Mortgage Market Information
Services, Inc. and Interest.com’s internal control over financial reporting
associated with total assets of $10,557,000 and $32,697,000 and total revenues
of $166,000 and $1,271,000, respectively, included in the consolidated financial
statements of Bankrate, Inc. and subsidiaries as of and for the year ended
December 31, 2005. KPMG LLP’s audit of internal control over financial reporting
of Bankrate, Inc. also excluded an evaluation of internal control over financial
reporting or Wescoco LLC, d/b/a FastFind and Mortgage Market Information
Services, Inc. and Interest.com.
During
the fiscal years ended December 31, 2006 and 2005 and the subsequent interim
period through April 12, 2007, (i) there were no disagreements between us and
KPMG LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements,
if
not resolved to the satisfaction of KPMG LLP, would have caused KPMG LLP to
make
reference to the subject matter of the disagreement in its report on our
consolidated financial statements, and (ii) there were no “reportable events” as
that term is defined in Item 304(a)(1)(v) of Regulation S-K.
During
the fiscal years ended December 31, 2006 and 2005 and the subsequent interim
period through April 12, 2007, neither we nor anyone acting on our behalf
consulted Grant Thornton regarding (1) the application of accounting principles
to a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our consolidated financial statements; or
(2)
any matter that was either the subject of a
disagreement
as defined in Item 304(a)(1)(iv) of Regulation S-K or a “reportable event”
described in Item 304(a)(1)(v) of Regulation S-K.
Representatives
of KPMG LLP will not attend the 2007 Annual Meeting. Representatives of Grant
Thornton are expected to attend the 2007 Annual Meeting and, if in attendance,
will have an opportunity to make a statement if they so desire and to respond
to
appropriate questions.
Shareholder
ratification of the selection of Grant Thornton as our independent public
accountants is not required by our bylaws or other applicable legal requirement.
However, the Board of Directors is submitting the selection of Grant Thornton
to
the shareholders for ratification as a matter of good corporate practice. If
the
shareholders fail to ratify the selection, the Audit Committee will reconsider
whether or not to retain that firm. Even if the selection is ratified, the
Audit
Committee at its discretion may direct the appointment of a different
independent accounting firm at any time during the year if it determines that
such a change would be in our best interests and our shareholders’ best
interests.
The
affirmative vote of the holders of a majority of the shares of Common Stock
entitled to vote on this matter at the Annual Meeting, whether in person or
represented by proxy, will approve the proposal to ratify Grant Thornton as
our
independent auditors for the fiscal year ending December 31, 2007.
|
The
Board of Directors unanimously recommends a vote FOR the ratification
of
our appointment of
Grant
Thornton LLP as our independent registered public accounting firm
for the
current fiscal
year.
|
Audit
and Non-Audit Fees
The
following table presents fees for professional audit services rendered by
KPMG
LLP
for
the
audits of our annual financial statements and the effectiveness of internal
controls for the years ended December 31, 2006 and 2005 and fees billed for
other services rendered by KPMG LLP during those periods.
|
Type
of Fees
|
2006
|
2005
|
|||||
|
Audit
Fees (1)
|
$
|
524,963
|
$
|
369,150
|
|||
|
Audit-Related
Fees (2)
|
—
|
44,370
|
|||||
|
Tax
Fees (3)
|
35,590
|
18,500
|
|||||
|
All
Other Fees
|
—
|
—
|
|||||
|
Total
|
$
|
560,553
|
$
|
432,020
|
|||
| (1) |
Audit
fees for 2006 and 2005 consist of professional services rendered
for the
annual audit of our financial statements and review of financial
statements included in our quarterly reports, auditing our internal
controls over financial reporting, accounting consultation, and in
2006,
services rendered in connection with our secondary
offering.
|
| (2) |
Audit-related
fees for 2005 primarily consist of fees paid to KPMG LLP related
to our
acquisitions.
|
| (3) |
Tax
fees for 2006 and 2005 consist of fees related to preparing the 2006
and
2005 U.S. corporate income and state income and franchise tax
returns.
|
Policy
on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent
Auditor
The
Audit
Committee of the Board of Directors has implemented procedures under our Audit
Committee Pre-Approval Policy for Audit and Non-Audit Services to ensure that
all audit and permitted non-audit services provided to us are pre-approved
by
the Audit Committee. Specifically, the Audit Committee pre-approves the use
of
an independent accountant for specific audit and non-audit services, within
approved monetary limits. If a proposed service has not been pre-approved
pursuant to the Pre-Approval Policy, then it must be specifically pre-approved
by the Audit Committee before it may be provided by our independent accountant.
Any pre-approved services exceeding the pre-approved monetary limits require
specific approval by the Audit Committee. The Audit Committee may delegate
pre-approval authority to one or more of its members when expedition of services
is necessary.
All
of
the audit-related, tax and all other services provided by KPMG LLP to us in
2006
were approved by the Audit Committee by means of specific pre-approvals or
pursuant to the procedures contained in the Pre-Approval Policy. The Audit
Committee has determined that all non-audit services provided by KPMG LLP in
2006 were compatible with maintaining its independence in the conduct of its
auditing functions.
PROPOSAL
TO APPROVE THE SECOND AMENDED AND RESTATED
1999
EQUITY COMPENSATION PLAN
On
April
25, 2007, our Board of Directors approved, subject to shareholder approval,
several amendments to the Bankrate, Inc. 1999 Equity Compensation Plan, as
previously amended and restated through March 15, 2007 (the “1999 Plan”), to be
adopted in the form of a new amended and restated plan document. If approved,
the amendments would increase the number of shares reserved for issuance under
the 1999 Plan from 3,500,000 to 4,500,000. Under Florida law and pursuant to
Rule 4350(i) of the NASDAQ Marketplace Rules, the approval of the 1999 Plan
and
the conditional stock option awards described below must be approved by a
majority of the votes cast.
The
following is a summary of the material features of the Second Amended and
Restated 1999 Equity Compensation Plan (the “New Plan”). This summary may not
contain all of the information important to you. You are urged to read the
entire New Plan, a copy of which appears as Appendix A to this proxy
statement.
General
Description of the New Plan
The
purpose of the New Plan is to advance our interests by providing eligible
participants in the New Plan with the opportunity to receive equity-based or
cash incentive awards, thereby aligning their economic interests with those
of
our shareholders. The New Plan will become effective on the date of its approval
by the shareholders and will expire on March 10, 2009. The closing price of
our
common stock on April 27, 2007 was $38.43 per share, as reported by The NASDAQ
Stock Market.
Eligibility.
Participation in the New Plan is limited to those key employees and directors
of, and consultants and advisors to us or our affiliates who, in the opinion
of
the Administrator, are in a position to make a significant contribution to
our
success and our affiliates and who are selected by the Administrator to receive
an award. The group of employees from which the Administrator may select
participants consists of approximately 160.
Administration.
The
New
Plan will be administered by the Compensation Committee. The term
“Administrator” is used in this Proxy Statement to refer to the person (the
Compensation Committee and its delegatees) charged with administering the New
Plan. The Administrator has the authority to interpret the New Plan; determine
eligibility for and grant awards; determine, modify or waive the terms and
conditions of any award; prescribe forms, rules and procedures; and otherwise
do
all things necessary to carry out the purposes of the New Plan.
Award
Types.
Awards
may be in the form of stock options, stock appreciation rights (“SARs”),
restricted or unrestricted stock, restricted or unrestricted stock units,
performance awards, any other awards that are convertible into or otherwise
based on our Common Stock, or cash awards. The Administrator may provide for
the
payment of amounts in lieu of cash dividends or other cash distributions with
respect to shares of Common Stock subject to an award.
Limits
on Shares Deliverable Under the New Plan.
The
maximum number of shares of Common Stock that may be issued in satisfaction
of
awards made under the New Plan is 4,500,000. The maximum number of shares of
Common Stock for which stock options may be granted to any person in any
calendar year and the maximum number of shares of Common Stock subject to SARs
granted to any person in any calendar year will each be 750,000. The maximum
number of shares subject to other awards granted to any person in any calendar
year will be 500,000. The maximum amount payable to any person in any year
under
cash awards will be 1,500,000. The
number of shares delivered in satisfaction of awards is determined net of (i)
shares we withheld in payment of the exercise price of the award, (ii) shares
withheld in satisfaction of tax withholding requirements with respect to the
award, and (iii) shares of Restricted Stock that are forfeited. The limits
set
forth in the New Plan shall be construed to comply with Section 422 of the
Internal Revenue Code. The shares and the limit on option awards described
above
are subject to adjustment for stock splits, stock dividends, and certain
transactions affecting our capital stock. In such event, the Administrator
will
also make appropriate adjustments to the number and kind of shares of stock
subject to awards, and to exercise prices of awards affected by the
change.
As
of
March 31, 2007, under the 1999 Plan there were:
|
§
|
3,500,000
shares of our Common Stock authorized for
issuance;
|
|
§
|
1,546,028
shares of our Common Stock issued pursuant to exercises of
awards;
|
|
§
|
1,769,471
shares of our Common Stock subject to outstanding options;
and
|
|
§
|
299,000
shares of our common stock subject to outstanding options that are
subject
to shareholder approval of the amendment and
restatement.
|
Description
of Types of Awards Under the New Plan
Stock
Options.
Stock
options give the holder the right to purchase shares of our Common Stock within
a specified period of time at a specified price, which is not less than the
fair
market value of the Common Stock at the time of grant. Stock options granted
under the New Plan may not be repriced other than in accordance with the
applicable shareholder approval requirements of the NASDAQ Global Select Market
listing requirements. Two types of stock options may be granted under the New
Plan: incentive stock options, or “ISOs,” which are subject to special tax
treatment as described below, and nonstatutory options, or “NSOs.” Eligibility
for ISOs is limited to our employees and employees of our subsidiaries. The
expiration date of all options cannot be more than ten years after the date
of
the original grant.
Stock
Appreciation Rights (SARs).
The
Administrator may grant SARs under the New Plan. A SAR entitles the holder
upon
exercise to receive cash or shares of Common Stock equal in value to the excess
of the fair market value of the shares of Common Stock subject to the right
over
the fair market value of such shares on the date of grant. SARs granted under
the New Plan may not be repriced other than in accordance with the applicable
shareholder approval requirements of the NASDAQ Global Select Market listing
standards.
Stock
Awards; Stock Units.
The New
Plan provides for awards of nontransferable shares of restricted Common Stock,
as well as unrestricted shares of Common Stock. Generally, awards of restricted
stock are subject to the requirement that the shares be forfeited or resold
to
us unless specific conditions are met. The recipient of an award of restricted
stock will have all the rights as a shareholder, including the right to vote
the
shares and to receive dividends, subject to restrictions, which may be imposed
by the Administrator requiring that it be redelivered or offered for sale to
us
if specified conditions are not satisfied. Other awards under the New Plan
may
also be settled with restricted stock. The New Plan provides also for stock
units, including restricted stock units, entitling the recipient to receive
shares of Common Stock (or cash measured by the value of the Common Stock)
in
the future on such conditions as the Administrator may specify.
Performance
Awards.
The New
Plan provides for performance awards entitling the recipient to receive cash
or
common stock following the attainment of performance goals determined by the
Administrator. Performance conditions may also be attached to other awards
under
the New Plan. In the case of any performance award intended to qualify for
the
performance-based remuneration exception described in Section 162(m) of the
Internal Revenue Code of 1986, as amended, the Administrator will use one or
more objectively determinable measures of performance relating to any or any
combination of the following (measured either absolutely or by reference to
an
index or indices and determined either on a consolidated basis or, as the
context permits, on a divisional, subsidiary, line of business, project or
geographical basis or in combinations thereof): sales; revenues; assets;
expenses; earnings before or after deduction for all or any portion of interest,
taxes, depreciation, or amortization, whether or not on a continuing operations
or an aggregate or per share basis (basic or fully diluted); return on equity,
investment, capital or assets; one or more operating ratios such as earnings
before interest, taxes and/or depreciation and amortization; borrowing levels,
leverage ratios or credit rating; market share; capital expenditures; cash
flow;
free cash flow, cash flow, return on investment (discounted or otherwise),
net
cash provided by operations, or cash flow in excess of cost of capital; stock
price; shareholder return; sales of particular products or services; customer
acquisition or retention; acquisitions and divestitures (in whole or in part);
economic value added; strategic business criteria, consisting of one or more
objectives based on meeting specific market penetration, geographic business
expansion goals, facility construction or completion goals, geographic facility
relocation or completion goals, cost targets, customer satisfaction, supervision
of litigation or information technology; joint ventures and strategic alliances;
spin-offs, split-ups and the like; reorganizations; or recapitalizations,
restructurings, financings (issuance of debt or equity) or refinancings (each,
a
“Performance
Criterion”).
A Performance Criterion and any targets with respect thereto determined by
the
Administrator need not be based upon an increase, a positive or improved result
or avoidance of loss. To the extent consistent with the requirements for
satisfying the performance-based compensation exception under
Section 162(m), the Administrator may provide in the case of any award
intended to qualify for such exception that one or more of the Performance
Criteria applicable to such award will be adjusted in an objectively
determinable manner to reflect events (for example, but without limitation,
acquisitions or dispositions) occurring during the performance period that
affect the applicable Performance Criterion or Criteria.
Termination
of Awards.
Unless
the Administrator provides otherwise, upon cessation of employment, all awards
will cease to be exercisable and will terminate except:
|
·
|
Any
stock options and SARs that were exercisable prior to cessation of
service
will remain exercisable for three months following cessation of
service;
|
|
·
|
Stock
options and SARs that were exercisable prior to death or termination
from
service by reason of disability will remain exercisable for 1 year
following death or termination from service by reason of disability;
and
|
|
·
|
Stock
options and SARs will be terminated upon cessation of service if
the
Administrator in its sole discretion determines that such cessation
of
service resulted from conduct constituting cause for
termination.
|
Mergers
and Similar Transactions.
In the
case of certain mergers, consolidations or similar transactions, including
a
sale of substantially all of our assets, or our dissolution or liquidation,
awards will no longer automatically vest, but the following rules will apply
unless the Administrator provides otherwise in an award:
|
·
|
If
we are acquired or liquidated and there is a surviving or acquiring
corporation, the Administrator may provide for the assumption or
replacement of some or all outstanding
awards.
|
|
·
|
If
the transaction involves a cash payment or other payment to our
shareholders, the Administrator may provide for cash-out payments
with
respect to outstanding awards or portions thereof. For awards subject
to
performance or other vesting conditions, including restricted stock,
any
payments may also be restricted.
|
|
·
|
If
the transaction does not involve an award assumption or substitution
or a
cash payment as described above, each award requiring exercise will
become
fully exercisable, and stock units will be paid out, prior to the
consummation of the transaction on a basis that gives the holder
a
reasonable opportunity to participate as a shareholder in the transaction.
The awards will then terminate in the transaction. For awards subject
to
performance or other vesting conditions, any payments may also be
restricted.
|
Amendment
and Termination.
The
Administrator may at any time or times amend the New Plan or any outstanding
award for any purpose which may at the time be permitted by law, and may at
any
time terminate the New Plan as to any future grants of awards. The Administrator
may not, however, alter the terms of an award so as to affect materially and
adversely the participant’s rights under an award without the participant’s
consent, unless the terms of the New Plan expressly so provide or the
Administrator expressly reserved the right to do so at the time of the
award.
Material
Changes to the 1999 Plan
The
material changes to the existing plan effected by the amendment and restatement
include:
|
·
|
The
number of shares of common stock available for issuance under the
1999
Plan will be increased by 1,000,000 shares, making a total of 4,500,000
shares of common stock reserved and available for issuance under
the New
Plan.
|
|
o
|
The
types of awards available under the 1999 Plan will be expanded to
include
stock appreciation rights (SARs), unrestricted stock, stock units,
restricted stock units, performance awards, cash awards, and awards
that
are otherwise convertible into or based on stock.
|
| · |
The
maximum amount of cash awards payable to any person in any year will
be
$1,500,000.
|
| · |
Unless
the Administrator provides otherwise, upon cessation of service,
all
awards will cease to be exercisable and will terminate
except:
|
|
o
|
Any
stock options and SARs that were exercisable prior to cessation of
service
will remain exercisable for three months following cessation of
employment;
|
|
o
|
Stock
options and SARs that were exercisable prior to death or termination
from
service
by
reason of disability will remain exercisable for 1 year following
death or
termination from service by reason of disability;
and
|
|
o
|
Stock
options and SARs will be terminated upon cessation of service if
the
Administrator in its sole discretion determines that such cessation
of
service resulted from conduct constituting cause for
termination.
|
|
·
|
Upon
the occurrence of a change of control transaction, awards will no
longer
become vested except as the board of directors otherwise determines;
instead, the Administrator has the discretion to determine that the
awards
will be assumed or substituted by the surviving entity, cashed-out,
accelerated, or terminated.
|
New
Plan Benefits
Because
future awards will be within the discretion of our Compensation Committee,
it is
not possible to predict to whom future awards will be granted under the New
Plan
or the number of shares underlying any award.
Certain
employees and directors were awarded conditional stock options under the 1999
Plan in 2006 and 2007, subject to shareholder approval of such awards. The
table
set forth below provides for each such conditional award the grant date, number
of shares, and exercise price per share to be paid for such shares. These awards
under the New Plan will not become exercisable, nor continue to remain
outstanding, unless a majority of our shareholders approve the New
Plan.
|
Name
and Position
|
Grant
Date
|
Number
of Shares
|
Exercise
Price/Share
|
|||||||
|
Thomas
R. Evans
Chief
Executive Officer and Director
|
N/A
|
0
|
N/A
|
|||||||
|
Edward
J. DiMaria
Senior
Vice President-Chief Financial Officer
|
N/A
|
0
|
N/A
|
|||||||
|
G.
Cotter Cunningham
Senior
Vice President-Chief Operating Officer
|
N/A
|
0
|
N/A
|
|||||||
|
Robert
J. DeFranco
Senior
Vice President-Finance
|
N/A
|
0
|
N/A
|
|||||||
|
Steven
L. Horowitz
Senior
Vice President-Product & Business Development
|
N/A
|
0
|
N/A
|
|||||||
|
Bruce
J. Zanca
Senior
Vice President-Chief Communications/
Marketing
Officer
|
N/A
|
0
|
N/A
|
|||||||
|
Executive
Group
|
12/21/06
|
65,000
|
$
|
37.63
|
||||||
|
Non-Executive
Director Group
|
1/10/07
|
50,000
|
$
|
37.32
|
||||||
|
Non-Executive
Officer Employee Group
|
10/9/06
-11/20/06
|
184,00
|
$
|
27.26
-$36.13
|
||||||
Federal
Income Tax Consequences Relating to the New Plan
The
following discussion summarizes certain federal income tax consequences of
the
issuance and receipt of options under the New Plan. The summary does not purport
to cover federal employment tax or other federal tax consequences that may
be
associated with the New Plan, nor does it cover state, local or
non-U.S. taxes.
Incentive
Stock Options.
In
general, an optionee realizes no taxable income upon the grant or exercise
of an
incentive stock option (ISO). However, the exercise of an ISO may result in
an
alternative minimum tax liability to the optionee. With certain exceptions,
a
disposition of shares purchased under an ISO within two years from the date
of
grant or within one year after exercise produces ordinary income to the optionee
(and a deduction to us) equal to the value of the shares at the time of exercise
less the exercise price. Any additional gain recognized in the disposition
is
treated as a capital gain for which we are not entitled to a deduction. If
the
optionee does not dispose of the shares until after the expiration of these
one-
and two-year holding periods, any gain or loss recognized upon a subsequent
sale
is treated as a long-term capital gain or loss for we are not entitled to a
deduction.
Nonstatutory
Options.
In
general, in the case of a nonstatutory option (NSO), the optionee has no taxable
income at the time of grant but realizes income in connection with exercise
of
the option in an amount equal to the excess (at the time of exercise) of the
fair market value of the shares acquired upon exercise over the exercise price.
A corresponding deduction is available to us. Any gain or loss recognized upon
a
subsequent sale or exchange of the shares, appreciation or depreciation after
the date of exercise is treated as capital gain or loss for which we are not
entitled to a deduction.
In
general, an ISO that is exercised more than three months after termination
of
employment (other than termination by reason of death or permanent and total
disability, as to which special rules apply) is treated as a NSO. ISOs are
also
treated as non-ISOs to the extent they first become exercisable by an individual
in any calendar year for shares having a fair market value (determined as of
the
date of grant) in excess of $100,000.
Under
the
so-called “golden parachute” provisions of the Internal Revenue Code, the
vesting or accelerated exercisability of awards in connection with our change
in
control may be required to be valued and taken into account in determining
whether participants have received compensatory payments, contingent on the
change in control, in excess of certain limits. If these limits are exceeded,
a
substantial portion of amounts payable to the participant, including income
recognized by reason of the grant, vesting or exercise of awards under the
New
Plan, may be subject to an additional 20% federal tax and may not be deductible
to us.
Awards
under the New Plan are intended either to be exempt from the rules of Section
409A of the Internal Revenue Code or to satisfy those rules and shall be
construed accordingly. However, we will not be liable to any participant or
other holder of an award with respect to any award-related adverse tax
consequences arising under Sections 409A, 422, or 4999 of the Internal Revenue
Code.
Equity
Compensation Plan Information
The
following table sets forth certain information relating to the shares of Common
Stock that may be issued under our stock-based incentive plans at December
31,
2006.
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future
issuance
|
|||||||
|
Equity
compensation plans approved by security holders
|
2,749,590
|
$
|
17.08
|
76,349
|
||||||
|
Equity
compensation plans not approved by security
holders
|
0
|
0
|
0
|
|||||||
|
Total
|
2,749,590
|
$
|
17.08
|
76,349
|
||||||
|
The
Board of Directors unanimously recommends a vote FOR the
Second
Amended and Restated 1999 Equity Compensation Plan as set forth herein.
The
full text of the New Plan is attached as Appendix
A
to this Proxy Statement.
|
Rules
of
the SEC require that any proposal by a shareholder for consideration at the
2008
Annual Meeting of Shareholders must be received by us no later than February
21,
2007, if it is to be eligible for inclusion in the our proxy materials for
its
2008 Annual Meeting of Shareholders. Under these rules, we are not required
to
include shareholder proposals in our proxy materials unless certain other
conditions specified in such rules are met.
In
order
for a shareholder to bring any other business or director nominations before
an
Annual Meeting of Shareholders, the shareholder must comply with certain
conditions set forth in Article II, Sections 16 and 17, of our Amended and
Restated Bylaws, including delivery of notice to us in sufficient time prior
to
the Annual Meeting of Shareholders. Shareholder proposals for the 2008 Annual
Meeting of Shareholders that are not intended to be included in the Proxy
Statement for that meeting must be received by April 21, 2008, or the Board
of
Directors can vote the proxies in its discretion on the proposal.
If
you
and other persons in your household own shares of our Common Stock in “street”
name, your broker or bank may have given notice that your household will receive
only one copy of our annual report and proxy statement. This practice is known
as “householding.” Unless you responded to that notice that you did not wish to
participate in householding, you would be deemed to have consented to
participating, and only one copy of our annual report and proxy statement would
be sent to your address (however, each shareholder would continue to receive
a
separate proxy card). This procedure reduces our printing costs and postage
fees.
Any
shareholder who wishes to receive his or her own set of our annual reports
and
proxy statements, or who shares an address with another shareholder of Bankrate
and together would like to receive only one set of annual disclosure documents,
should contact us at 11760 U.S. Highway One, Suite 200, North Palm Beach,
Florida 33408, Attention: Corporate Secretary, being sure to supply the names
of
all shareholders at the same address, the name of the bank or brokerage firm,
and the account number(s). You can also reach us at (561) 630-2400. The
revocation of a consent to householding should be effective 30 days after the
notice is received.
BANKRATE,
INC.
SECOND
AMENDED AND RESTATED
1999
EQUITY COMPENSATION PLAN
| 1. |
DEFINED
TERMS
|
Exhibit
A, which is incorporated by reference, defines the terms used in the Plan and
sets forth certain operational rules related to those terms.
| 2. |
PURPOSE
|
The
Plan
was established effective March 10, 1999 to provide for the grant to
Participants of Stock Options and Restricted Stock. The Plan is hereby amended
and restated effective [June 20, 2007]. The purpose of the amended and restated
Plan is to advance the interests of the Company by providing for the grant
of
Stock-based and other incentive Awards.
| 3. |
ADMINISTRATION
|
The
Administrator has discretionary authority, subject only to the express
provisions of the Plan, to interpret the Plan; determine eligibility for and
grant Awards; determine, modify or waive the terms and conditions of any Award;
prescribe forms, rules and procedures; and otherwise do all things necessary
to
carry out the purposes of the Plan. In the case of any Award intended to be
eligible for the performance-based compensation exception under Section 162(m),
the Administrator will exercise its discretion consistent with qualifying the
Award for that exception. Determinations of the Administrator made under the
Plan will be conclusive and will bind all parties.
| 4. |
LIMITS
ON AWARDS UNDER THE PLAN
|
(a) Number
of Shares.
A
maximum of 4,500,000 shares of Stock may be delivered in satisfaction of Awards
under the Plan.
The
number of shares of Stock delivered in satisfaction of Awards shall, for
purposes of the preceding sentence, be determined net of (1) shares of Stock
withheld by the Company in payment of the exercise price of the Award, (2)
shares of Stock withheld in satisfaction of tax withholding requirements with
respect to the Award, and (3) shares of Restricted Stock that are forfeited
to
the Company. The limits set forth in this Section 4(a) shall be construed to
comply with Section 422. To the extent consistent with the requirements of
Section 422 and with other applicable legal requirements (including applicable
stock exchange requirements), Stock issued under awards of an acquired company
that are converted, replaced, or adjusted in connection with the acquisition
shall not reduce the number of shares available for Awards under the
Plan.
(b) Type
of Shares.
Stock
delivered by the Company under the Plan may be authorized but unissued Stock
or
previously issued Stock acquired by the Company. No fractional shares of Stock
will be delivered under the Plan.
(c) Section
162(m) Limits.
The
maximum number of shares of Stock for which Stock Options may be granted to
any
person in any calendar year and the maximum number of shares of Stock subject
to
SARs granted to any person in any calendar year will each be 750,000. The
maximum number of shares subject to other Awards granted to any person in any
calendar year will be 500,000 shares. The maximum amount payable to any person
in any year under Cash Awards will be $1,500,000. The
foregoing provisions will be construed in a manner consistent with Section
162(m).
| 5. |
ELIGIBILITY
AND PARTICIPATION
|
The
Administrator will select Participants from among those key Employees and
directors of, and consultants and advisors to, the Company or its Affiliates
who, in the opinion of the Administrator, are in a position to make a
significant contribution to the success of the Company and its Affiliates;
provided,
that,
subject to such express
exceptions,
if any, as the Administrator may establish, eligibility shall be further limited
to those persons as to whom the use of a Form S-8 registration statement is
permissible. Eligibility for ISOs is limited to employees of the Company or
of a
"parent corporation" or "subsidiary corporation" of the Company as those terms
are defined in Section 424 of the Code.
| 6. |
RULES
APPLICABLE TO AWARDS
|
| (a) |
All
Awards
|
(1) Award
Provisions.
The
Administrator will determine the terms of all Awards, subject to the limitations
provided herein. Notwithstanding any provision of this Plan to the contrary,
awards of an acquired company that are converted, replaced or adjusted in
connection with the acquisition may contain terms and conditions that are
inconsistent with the terms and conditions specified herein, as determined
by
the Administrator.
(2) Term
of Plan.
No
Awards may be made after March 9, 2009, but previously granted Awards may
continue beyond that date in accordance with their terms.
(3) Transferability.
Neither
ISOs nor, except as the Administrator otherwise expressly provides in accordance
with the second sentence of this Section 6(a)(3), other Awards may be
transferred other than by will or by the laws of descent and distribution,
and
during a Participant's lifetime ISOs (and, except as the Administrator otherwise
expressly provides in accordance with the second sentence of this Section
6(a)(3), other Awards requiring exercise) may be exercised only by the
Participant. The Administrator may permit Awards other than ISOs to be
transferred by gift, subject to such limitations as the Administrator may
impose.
(4) Vesting,
etc.
The
Administrator may determine the time or times at which an Award will vest or
become exercisable and the terms on which an Award requiring exercise will
remain exercisable. Without limiting the foregoing, the Administrator may at
any
time accelerate the vesting or exercisability of an Award, regardless of any
adverse or potentially adverse tax consequences resulting from such
acceleration. Unless the Administrator expressly provides otherwise, however,
the following rules will apply: immediately upon the cessation of the
Participant's Employment, each Award requiring exercise that is then held by
the
Participant or by the Participant's permitted transferees, if any, will cease
to
be exercisable and will terminate, and all other Awards that are then held
by
the Participant or by the Participant's permitted transferees, if any, to the
extent not already vested will be forfeited, except that:
(A) subject
to (B) and (C) below, all Stock Options and SARs held by the Participant or
the
Participant's permitted transferees, if any, immediately prior to the cessation
of the Participant's Employment, to the extent then exercisable, will remain
exercisable for the lesser of (i) a period of three months or (ii) the period
ending on the latest date on which such Stock Option or SAR could have been
exercised without regard to this Section 6(a)(4), and will thereupon
terminate;
(B) all
Stock
Options and SARs held by a Participant or the Participant's permitted
transferees, if any, immediately prior to the Participant's death or termination
from Employment by reason of Disability, to the extent then exercisable, will
remain exercisable for the lesser of (i) the one year period ending with the
first anniversary of the Participant's death or termination from Employment
by
reason of Disability or (ii) the period ending on the latest date on which
such
Stock Option or SAR could have been exercised without regard to this Section
6(a)(4), and will thereupon terminate; and
(C) all
Stock
Options and SARs held by a Participant or the Participant's permitted
transferees, if any, immediately prior to the cessation of the Participant's
Employment will immediately terminate upon such cessation if the Administrator
in its sole discretion determines that such cessation of Employment has resulted
from conduct constituting Cause for Termination.
(5) Taxes.
The
Administrator will make such provision for the withholding of taxes as it deems
necessary. The Administrator may, but need not, hold back shares of Stock from
an Award or permit a Participant to tender previously owned shares of Stock
in
satisfaction of tax withholding requirements (but not in excess of the minimum
withholding required by law).
(6) Dividend
Equivalents, etc.
The
Administrator may provide for the payment of amounts in lieu of cash dividends
or other cash distributions with respect to Stock subject to an Award. Any
entitlement to dividend equivalents or similar entitlements shall be established
and administered consistent either with exemption from, or compliance with,
the
requirements of Section 409A.
(7) Rights
Limited.
Nothing
in the Plan will be construed as giving any person the right to continued
employment or service with the Company or its Affiliates, or any rights as
a
shareholder except as to shares of Stock actually issued under the Plan. The
loss of existing or potential profit in Awards will not constitute an element
of
damages in the event of termination of Employment for any reason, even if the
termination is in violation of an obligation of the Company or any Affiliate
to
the Participant.
(8) Section
162(m).
This
Section 6(a)(8) applies to any Performance Award intended to qualify as
performance-based for the purposes of Section 162(m) other than a Stock Option
or SAR. In the case of any Performance Award to which this Section 6(a)(8)
applies, the Plan and such Award will be construed to the maximum extent
permitted by law in a manner consistent with qualifying the Award for such
exception. With respect to such Performance Awards, the Administrator will
preestablish, in writing, one or more specific Performance Criteria no later
than 90 days after the commencement of the period of service to which the
performance relates (or at such earlier time as is required to qualify the
Award
as performance-based under Section 162(m)). Prior to the grant, vesting or
payment of the Performance Award, as the case may be, the Administrator will
certify whether the applicable Performance Criteria have been attained and such
determination will be final and conclusive.
(9) Coordination
with Other Plans.
Awards
under the Plan may be granted in tandem with, or in satisfaction of or
substitution for, other Awards under the Plan or awards made under other
compensatory plans or programs of the Company or its Affiliates. For example,
but without limiting the generality of the foregoing, awards under other
compensatory plans or programs of the Company or its Affiliates may be settled
in Stock (including, without limitation, Unrestricted Stock) if the
Administrator so determines, in which case the shares delivered shall be treated
as awarded under the Plan (and shall reduce the number of shares thereafter
available under the Plan in accordance with the rules set forth in Section
4).
In any case where an award is made under another plan or program of the Company
or its Affiliates and such award is intended to qualify for the
performance-based compensation exception under Section 162(m), and such award
is
settled by the delivery of Stock or another Award under the Plan, the applicable
Section 162(m) limitations under both the other plan or program and under the
Plan shall be applied to the Plan as necessary (as determined by the
Administrator) to preserve the availability of the Section 162(m)
performance-based compensation exception with respect thereto.
(10) Section
409A.
Each
Award shall contain such terms as the Administrator determines, and shall be
construed and administered, such that the Award either (i) qualifies for an
exemption from the requirements of Section 409A, or (ii) satisfies such
requirements.
(11) Certain
Requirements of Corporate Law.
Awards
shall be granted and administered consistent with the requirements of applicable
Florida law relating to the issuance of stock and the consideration to be
received therefor, and with the applicable requirements of the stock exchanges
or other trading systems on which the Stock is listed or entered for trading,
in
each case as determined by the Administrator.
| (b) |
Awards
Requiring Exercise
|
(1) Time
and Manner of Exercise.
Unless
the Administrator expressly provides otherwise, an Award requiring exercise
by the holder will not be deemed to have been exercised until the Administrator
receives a notice of exercise (in form acceptable to the Administrator) signed
by the appropriate person and accompanied by any payment required under the
Award. If the Award is exercised by any person other than the Participant,
the
Administrator may require satisfactory evidence that the person exercising
the
Award has the right to do so.
(2) Exercise
Price.
The
exercise price (or in the case of a SAR, the base value from which appreciation
is to be measured) of each Award requiring exercise shall be 100% (in the case
of an ISO granted to a ten-percent shareholder within the meaning of subsection
(b)(6) of Section 422, 110%) of the fair market value of the Stock subject
to the Award, determined as of the date of grant on the basis of the closing
price of the Stock on
such
date, or such higher amount as the Administrator may determine in connection
with the grant. No such Award, once granted, may be repriced other than in
accordance with the applicable shareholder approval requirements of NASDAQ.
Fair
market value shall be determined by the Administrator consistent with the
applicable requirements of Section 422 and Section 409A.
(3) Payment
Of Exercise Price.
Where
the exercise of an Award is to be accompanied by payment, payment of the
exercise price shall be by cash or check acceptable to the Administrator, or,
if
so permitted by the Administrator and if legally permissible, (i) through the
delivery of shares of Stock that have been outstanding for at least six months
(unless the Administrator approves a shorter period) and
that
have a fair market value equal to the exercise price, (ii) through a
broker-assisted exercise program acceptable to the Administrator, (iii) by
other
means acceptable to the Administrator, or (iv) by any combination of the
foregoing permissible forms of payment. The delivery of shares in payment of
the
exercise price under clause (i) above may be accomplished either by actual
delivery or by constructive delivery through attestation of ownership, subject
to such rules as the Administrator may prescribe.
(4) Maximum
Term.
Awards
requiring exercise will have a maximum term not to exceed ten (10) years from
the date of grant.
| 7. |
EFFECT
OF CERTAIN TRANSACTIONS
|
| (a) |
Mergers,
etc.
Except as otherwise provided in an Award, the following provisions
shall
apply in the event of a Covered
Transaction:
|
(1) Assumption
or Substitution.
If the
Covered Transaction is one in which there is an acquiring or surviving entity,
the Administrator may provide for the assumption of some or all outstanding
Awards or for the grant of new awards in substitution therefor by the acquiror
or survivor or an affiliate of the acquiror or survivor.
(2) Cash-Out
of Awards.
If the
Covered Transaction is one in which holders of Stock will receive upon
consummation a payment (whether cash, non-cash or a combination of the
foregoing), the Administrator may provide for payment (a "cash-out"), with
respect to some or all Awards or any portion thereof, equal in the case of
each
affected Award or portion thereof to the excess, if any, of (A) the fair market
value of one share of Stock (as determined by the Administrator in its
reasonable discretion consistent with Section 409A) times the number of shares
of Stock subject to the Award or such portion, over (B) the aggregate exercise
or purchase price, if any, under the Award or such portion (in the case of
an
SAR, the aggregate base value above which appreciation is measured), in each
case on such payment terms (which need not be the same as the terms of payment
to holders of Stock) and other terms, and subject to such conditions, as the
Administrator determines;
provided,
that
the Administrator shall not exercise its discretion under this Section 7(a)(2)
with respect to an Award or portion thereof in a manner that would constitute
an
extension or acceleration of, or other change in, payment terms if such change
would be inconsistent with the applicable requirements of Section
409A.
(3) Acceleration
of Certain Awards.
If the
Covered Transaction (whether or not there is an acquiring or surviving entity)
is one in which there is no assumption, substitution or cash-out, each Award
requiring exercise will become fully exercisable, and the delivery of any shares
of Stock remaining deliverable under each outstanding Award of Stock Units
(including Restricted Stock Units and Performance Awards to the extent
consisting of Stock Units) will be accelerated and such shares will be
delivered, prior to the Covered Transaction, in each case on a basis that gives
the holder of the Award a reasonable opportunity, as determined by the
Administrator, following exercise of the Award or the delivery of the shares,
as
the case may be, to participate as a shareholder in the Covered Transaction;
provided,
that to
the extent acceleration pursuant to this Section 7(a)(3) of an Award subject
to
Section 409A would cause the Award to fail to satisfy the requirements of
Section 409A, the Award shall not be accelerated and the Administrator in lieu
thereof shall take such steps as are necessary to ensure that payment of the
Award is made in a medium other than Stock and on terms that as nearly as
possible, but taking into account adjustments required or permitted by this
Section 7, replicate the prior terms of the Award.
(4) Termination
of Awards Upon Consummation of Covered Transaction.
Each
Award will terminate upon consummation of the Covered Transaction, other than
the following: (i) Awards assumed pursuant to Section 7(a)(1) above; (ii) Awards
converted pursuant to the proviso in Section 7(a)(3) above into an
ongoing
right to receive payment other than Stock; and (iii) outstanding shares of
Restricted Stock (which shall be treated in the same manner as other shares
of
Stock, subject to Section 7(a)(5) below).
(5) Additional
Limitations.
Any
share of Stock and any cash or other property delivered pursuant to
Section 7(a)(2) or Section 7(a)(3) above with respect to an Award may, in
the discretion of the Administrator, contain such restrictions, if any, as
the
Administrator deems appropriate to reflect any performance or other vesting
conditions to which the Award was subject and that did not lapse (and were
not
satisfied) in connection with the Covered Transaction. In the case of Restricted
Stock that does not vest in connection with the Covered Transaction, the
Administrator may require that any amounts delivered, exchanged or otherwise
paid in respect of such Stock in connection with the Covered Transaction be
placed in escrow or otherwise made subject to such restrictions as the
Administrator deems appropriate to carry out the intent of the
Plan.
| (b) |
Changes
in and Distributions With Respect to Stock.
|
(1) Basic
Adjustment Provisions.
In the
event of a stock dividend, stock split or combination of shares (including
a
reverse stock split), recapitalization or other change in the Company's capital
structure, the Administrator shall make appropriate adjustments to the maximum
number of shares specified in Section 4(a) that may be delivered under the
Plan
and to the maximum share limits described in Section 4(c), and shall also make
appropriate adjustments to the number and kind of shares of stock or securities
subject to Awards then outstanding or subsequently granted, any exercise prices
relating to Awards and any other provision of Awards affected by such change.
(2) Certain
Other Adjustments.
The
Administrator may also make adjustments of the type described in Section 7(b)(1)
above to take into account distributions to shareholders other than those
provided for in Section 7(a) and 7(b)(1), or any other event, if the
Administrator determines that adjustments are appropriate to avoid distortion
in
the operation of the Plan and to preserve the value of Awards made hereunder,
having due regard for the qualification of ISOs under Section 422, the
requirements of Section 409A, and for the performance-based compensation rules
of Section 162(m), where applicable.
(3) Continuing
Application of Plan Terms.
References in the Plan to shares of Stock will be construed to include any
stock
or securities resulting from an adjustment pursuant to this Section
7.
| 8. |
LEGAL
CONDITIONS ON DELIVERY OF
STOCK
|
The
Company will not be obligated to deliver any shares of Stock pursuant to the
Plan or to remove any restriction from shares of Stock previously delivered
under the Plan until: (i) the Company is satisfied that all legal matters in
connection with the issuance and delivery of such shares have been addressed
and
resolved; (ii) if the outstanding Stock is at the time of delivery listed on
any
stock exchange or national market system, the shares to be delivered have been
listed or authorized to be listed on such exchange or system upon official
notice of issuance; and (iii) all conditions of the Award have been satisfied
or
waived. If the sale of Stock has not been registered under the Securities Act
of
1933, as amended, the Company may require, as a condition to exercise of the
Award, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act. The Company may require
that certificates evidencing Stock issued under the Plan bear an appropriate
legend reflecting any restriction on transfer applicable to such Stock, and
the
Company may hold the certificates pending lapse of the applicable restrictions.
| 9. |
AMENDMENT
AND TERMINATION
|
The
Administrator may at any time or times amend the Plan or any outstanding Award
for any purpose which may at the time be permitted by law, and may at any time
terminate the Plan as to any future grants of Awards; provided,
that
except as otherwise expressly provided in the Plan the Administrator may not,
without the Participant's consent, alter the terms of an Award so as to affect
materially and adversely the Participant's rights under the Award, unless the
Administrator expressly reserved the right to do so at the time of the Award.
Any amendments to the Plan shall be conditioned upon shareholder approval only
to the extent, if any, such approval is required by law (including the Code
and
applicable stock exchange requirements), as determined by the
Administrator.
| 10. |
OTHER
COMPENSATION ARRANGEMENTS
|
The
existence of the Plan or the grant of any Award will not in any way affect
the
Company's right to Award a person bonuses or other compensation in addition
to
Awards under the Plan.
| 11. |
MISCELLANEOUS
|
(a) Waiver
of Jury Trial.
By
accepting an Award under the Plan, each Participant waives any right to a trial
by jury in any action, proceeding or counterclaim concerning any rights under
the Plan and any Award, or under any amendment, waiver, consent, instrument,
document or other agreement delivered or which in the future may be delivered
in
connection therewith, and agrees that any such action, proceedings or
counterclaim shall be tried before a court and not before a jury. By accepting
an Award under the Plan, each Participant certifies that no officer,
representative, or attorney of the Company has represented, expressly or
otherwise, that the Company would not, in the event of any action, proceeding
or
counterclaim, seek to enforce the foregoing waivers.
(b) Limitation
of Liability.
Notwithstanding anything to the contrary in the Plan, neither the Company,
nor
any Affiliate, nor the Administrator, nor any person acting on behalf of the
Company, any Affiliate, or the Administrator, shall be liable to any Participant
or to the estate or beneficiary of any Participant or to any other holder of
an
Award by reason of any acceleration of income, or any additional tax, asserted
by reason of the failure of an Award to satisfy the requirements of Section
422
or Section 409A or by reason of Section 4999 of the Code; provided, that nothing
in this Section 11(b) shall limit the ability of the Administrator or the
Company to provide by separate express written agreement with a Participant
for
a gross-up payment or other payment in connection with any such tax or
additional tax.
EXHIBIT
A
Definition
of Terms
The
following terms, when used in the Plan, will have the meanings and be subject
to
the provisions set forth below:
"Administrator":
The
Compensation Committee or any delegate thereof to the extent permitted by law.
In the event of any delegation described in the preceding sentence, the term
"Administrator" shall include the person or persons so delegated to the extent
of such delegation.
"Affiliate":
Any
corporation or other entity in a chain of corporations or other entities in
which each corporation or other entity has a controlling interest in another
corporation or other entity in the chain, beginning with the Company and ending
with such corporation or other entity. For purposes of the preceding sentence,
except as the Administrator may otherwise determine subject to the requirements
of Treas. Reg. §1.409A-1(b)(5)(iii)(E)(1), the term “controlling interest” has
the same meaning as provided in Treas. Reg. §1.414(c)-2(b)(2)(i), provided that
the words “at least 50 percent” are used instead of the words “at least 80
percent” each place such words appear in Treas. Reg.
§1.414(c)-2(b)(2)(i).
"Award":
Any or a
combination of the following:
(i)
Stock
Options.
(ii)
SARs.
(iii)
Restricted Stock.
(iv)
Unrestricted Stock.
(v)
Stock
Units, including Restricted Stock Units.
(vi)
Performance Awards.
(vii)
Cash Awards.
(viii)
Awards (other than Awards described in (i) through (vii) above) that are
convertible into or otherwise based on Stock.
"Board":
The
Board of Directors of the Company.
"Cash
Award":
An Award
denominated in cash.
"Cause
for Termination":
Except
as specified otherwise by the Administrator at the time of the Award grant,
a
finding by the Board that the Participant (i) has breached his or her employment
or service contract or noncompetition agreement with the Company; (ii) has
engaged in disloyalty or dishonesty to the Company, including without
limitation, fraud, embezzlement, theft, malfeasance, gross negligence or
misconduct that, in the judgment of the Board, is, or is likely to, lead to
material injury to the Company or the business reputation of the Company; (iii)
has willfully failed to comply with the direction of the Board or failed to
follow the policies, procedures and rules of the Company; (iv) has negligently
failed to comply with the direction of the Board or failed to follow the
policies, procedures and rules of the Company and such negligent failure was
not
cured within thirty (30) days of receipt of written notice; (v) has been
convicted of, or has entered a plea of guilty or no contest to, a felony or
crime involving moral turpitude; or (vi) has disclosed trade secrets or
confidential information of the Company to persons not entitled to receive
such
information.
"Code":
The U.S.
Internal Revenue Code of 1986 as from time to time amended and in effect, or
any
successor statute as from time to time in effect.
"Compensation
Committee":
The
Compensation Committee of the Board.
"Company":
Bankrate, Inc.
"Covered
Transaction": Any
of
(i) a consolidation, merger, or similar transaction or series of related
transactions, including a sale or other disposition of stock, in which the
Company is not the surviving corporation or which results in the acquisition
of
all or substantially all of the Company's then outstanding common stock by
a
single person or entity or by a group of persons and/or entities acting in
concert, (ii) a sale or transfer of all or substantially all the Company's
assets, or (iii) a dissolution or liquidation of the Company. Where
a
Covered Transaction involves a tender offer that is reasonably expected to
be
followed by a merger described in clause (i) (as determined by the
Administrator), the Covered Transaction shall be deemed to have occurred upon
consummation of the tender offer.
"Disability":
A
Participant becoming disabled within the meaning of Section 22(e)(3) of the
Code.
"Employee":
Any
person who is employed by the Company or an Affiliate.
"Employment":
A
Participant's employment or other service relationship with the Company and
its
Affiliates. Employment will be deemed to continue, unless the Administrator
expressly provides otherwise, so long as the Participant is employed by, or
otherwise is providing services in a capacity described in Section 5 to the
Company or its Affiliates. If a Participant's employment or other service
relationship is with an Affiliate and that entity ceases to be an Affiliate,
the
Participant's Employment will be deemed to have terminated when the entity
ceases to be an Affiliate unless the Participant transfers Employment to the
Company or its remaining Affiliates.
"ISO":
A Stock
Option intended to be an "incentive stock option" within the meaning of Section
422. Each option granted pursuant to the Plan will be treated as providing
by
its terms that it is to be a non-incentive stock option unless, as of the date
of grant, it is expressly designated as an ISO.
"Participant":
A person
who is granted an Award under the Plan.
"Performance
Award":
An
Award subject to Performance Criteria. The Committee in its discretion may
grant
Performance Awards that are intended to qualify for the performance-based
compensation exception under Section 162(m) and Performance Awards that are
not
intended so to qualify.
"Performance
Criteria":
Specified criteria, other than the mere continuation of Employment or the mere
passage of time, the satisfaction of which is a condition for the grant,
exercisability, vesting or full enjoyment of an Award. For purposes of Awards
that are intended to qualify for the performance-based compensation exception
under Section 162(m), a Performance Criterion will mean an objectively
determinable measure of performance relating to any or any combination of the
following (measured either absolutely or by reference to an index or indices
and
determined either on a consolidated basis or, as the context permits, on a
divisional, subsidiary, line of business, project or geographical basis or
in
combinations thereof): sales; revenues; assets; expenses; earnings before or
after deduction for all or any portion of interest, taxes, depreciation, or
amortization, whether or not on a continuing operations or an aggregate or
per
share basis; return on equity, investment, capital or assets; one or more
operating ratios; borrowing levels, leverage ratios or credit rating; market
share; capital expenditures; cash flow; stock price; shareholder return; sales
of particular products or services; customer acquisition or retention;
acquisitions and divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split-ups and the like; reorganizations; or
recapitalizations, restructurings, financings (issuance of debt or equity)
or
refinancings. A Performance Criterion and any targets with respect thereto
determined by the Administrator need not be based upon an increase, a positive
or improved result or avoidance of loss. To the extent consistent with the
requirements for satisfying the performance-based compensation exception under
Section 162(m), the Administrator may provide in the case of any Award
intended to qualify for such exception that one or more of the Performance
Criteria applicable to such Award will be adjusted in an objectively
determinable manner to reflect events (for example, but without limitation,
acquisitions or dispositions) occurring during the performance period that
affect the applicable Performance Criterion or Criteria.
"Plan":
The
Bankrate, Inc. Second Amended and Restated 1999 Compensation Plan as from time
to time amended and in effect.
"Restricted
Stock":
Stock
subject to restrictions requiring that it be redelivered or offered for sale
to
the Company if specified conditions are not satisfied.
"Restricted
Stock Unit":
A Stock
Unit that is, or as to which the delivery of Stock or cash in lieu of Stock
is,
subject to the satisfaction of specified performance or other vesting
conditions.
"SAR":
A
right
entitling the holder upon exercise to receive an amount (payable in cash or
in
shares of Stock of equivalent value) equal to the excess of the fair market
value of the shares of Stock subject to the right over the base value from
which
appreciation under the SAR is to be measured.
"Section
409A":
Section
409A of the Code.
"Section
422":
Section
422 of the Code.
"Section
162(m)":
Section
162(m) of the Code.
"Stock":
Common
Stock of the Company, par value $0.01 per share.
"Stock
Option":
An
option entitling the holder to acquire shares of Stock upon payment of the
exercise price.
"Stock
Unit":
An
unfunded and unsecured promise, denominated in shares of Stock, to deliver
Stock
or cash measured by the value of Stock in the future.
"Unrestricted
Stock": Stock
not
subject to any restrictions under the terms of the Award.
