UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ____)
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Preliminary
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive
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Definitive
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Soliciting
Material Pursuant to § 240.14a-12
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NATIONAL RESEARCH
CORPORATION
(Name of Registrant as Specified in its Charter)
_________________________________________
(Name of Person(s)
Filing Proxy Statement if other than the Registrant)
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Per
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NATIONAL RESEARCH
CORPORATION
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
To Be Held May 2, 2008
To the Shareholders of
National
Research Corporation:
NOTICE
IS HEREBY GIVEN
that the Annual Meeting of Shareholders of National Research
Corporation will be held on Friday, May 2, 2008, at 9:00 A.M., local time, at our
corporate offices located at 1245 Q Street, Lincoln, Nebraska 68508, for the following
purposes:
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1. To
elect three directors to hold office until the 2011 Annual Meeting of
Shareholders and until their successors are duly elected and qualified.
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2. To
consider and act upon such other business as may properly come before the
meeting or any adjournment or postponement thereof.
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The
close of business on March 14, 2008, has been fixed as the record date for the
determination of shareholders entitled to notice of, and to vote at, the meeting and any
adjournment or postponement thereof.
A
proxy for the meeting and a proxy statement are enclosed herewith.
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By Order of the Board of Directors
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NATIONAL RESEARCH CORPORATION
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Patrick E. Beans
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Secretary
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Lincoln, Nebraska
April 4, 2008
YOUR VOTE IS IMPORTANT NO MATTER
HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY
AS YOUR NAME APPEARS THEREON AND RETURN IMMEDIATELY.
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NATIONAL RESEARCH CORPORATION
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1245 Q Street
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Lincoln, Nebraska 68508
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PROXY STATEMENT
For
ANNUAL MEETING OF
SHAREHOLDERS
To Be Held May 2, 2008
This
proxy statement is being furnished to shareholders by the Board of Directors (the
“Board”) of National Research Corporation (the “Company”) beginning on
or about April 4, 2008, in connection with a solicitation of proxies by the Board for use
at the Annual Meeting of Shareholders to be held on Friday, May 2, 2008, at 9:00 A.M.,
local time, at the Company’s corporate offices located at 1245 Q Street, Lincoln,
Nebraska 68508, and all adjournments or postponements thereof (the “Annual
Meeting”) for the purposes set forth in the attached Notice of Annual Meeting of
Shareholders.
Execution
of a proxy given in response to this solicitation will not affect a shareholder’s
right to attend the Annual Meeting and to vote in person. Presence at the Annual Meeting
of a shareholder who has signed a proxy does not in itself revoke a proxy. Any shareholder
giving a proxy may revoke it at any time before it is exercised by giving notice thereof
to the Company in writing or in open meeting.
A
proxy, in the enclosed form, which is properly executed, duly returned to the Company and
not revoked, will be voted in accordance with the instructions contained therein. The
shares represented by executed but unmarked proxies will be voted FOR the three persons
nominated for election as directors referred to herein and on such other business or
matters which may properly come before the Annual Meeting in accordance with the best
judgment of the persons named as proxies in the enclosed form of proxy. Other than the
election of three directors, the Board has no knowledge of any matters to be presented for
action by the shareholders at the Annual Meeting.
Only
holders of record of the Company’s common stock, $.001 par value per share (the
“Common Stock”), at the close of business on March 14, 2008, are entitled to
vote at the Annual Meeting. On that date, the Company had outstanding and entitled to vote
6,743,081 shares of Common Stock, each of which is entitled to one vote per share.
ELECTION OF DIRECTORS
The
Company’s By-Laws provide that the directors shall be divided into three classes,
with staggered terms of three years each. At the Annual Meeting, the shareholders will
elect three directors to hold office until the 2011 Annual Meeting of Shareholders and
until their successors are duly elected and qualified. Unless shareholders otherwise
specify, the shares represented by the proxies received will be voted in favor of the
election as directors of the three persons named as nominees herein. The Board has no
reason to believe that the listed nominees will be unable or unwilling to serve as
directors if elected. However, in the event that any nominee should be unable to serve or
for good cause will not serve, the shares represented by proxies received will be voted
for another nominee selected by the Board. Each director will be elected by a plurality of
the votes cast at the Annual Meeting (assuming a quorum is present). Consequently, any
shares not voted at the Annual Meeting, whether due to abstentions, broker non-votes or
otherwise, will have no impact on the election of the directors. Votes will be tabulated
by an inspector of elections appointed by the Board.
2
The
following sets forth certain information, as of March 15, 2008, about the Board’s
nominees for election at the Annual Meeting and each director of the Company whose term
will continue after the Annual Meeting.
Nominees for Election at
the Annual Meeting
Terms expiring at the
2011 Annual Meeting
Joseph
W. Carmichael,
age 44, has served as President of the Company since August 2004. Prior
to August 2004, Mr. Carmichael held various positions with the Company since April 1983,
most recently as Senior Vice President from May 2002 to August 2004.
JoAnn
M. Martin
,
53, has served as a director of the Company since June 2001. Ms.
Martin was elected President and Chief Executive Officer of Ameritas Life Insurance Corp.,
an insurance and financial services company, in July 2005. From April 2003 to July 2005,
she served Ameritas Life Insurance Corp. as President and Chief Operating Officer. Prior
thereto, Ms. Martin served as Senior Vice President and Chief Financial Officer of
Ameritas for more than the last five years. Ms. Martin also has served as Executive Vice
President and Chief Financial Officer of Ameritas Holding Company and UNIFI Mutual Holding
Company (previously named Ameritas Acacia Mutual Holding Company) for more than the last
five years. Ms. Martin has served as an officer of Ameritas and/or its affiliates since
1988. Ms. Martin is also a director of Ameritas Life Insurance Corp. Separate Account
LLVL, Ameritas Life Insurance Corp. Separate Account LLVA, Calvert Asset Management
Company, the Saint Elizabeth Regional Medical Center, the Lincoln Chamber of Commerce,
Nebraska Wesleyan University and the Omaha Branch of the Federal Reserve Bank of Kansas
City.
Paul
C. Schorr III
, 71, has served as a director of the Company since February 1998.
Mr. Schorr has been the President and Chief Executive Officer of ComCor Holding Inc.,
an electrical contractor specializing in construction consulting services, since
1987. Mr. Schorr is also a director of Western Sizzlin Corp. and Ameritas Life Insurance
Corp.
THE BOARD RECOMMENDS THE FOREGOING
NOMINEES FOR ELECTION AS DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE “FOR” SUCH
NOMINEES. SHARES OF COMMON STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED “FOR” SUCH NOMINEES.
Directors Continuing in
Office
Terms expiring at the
2009 Annual Meeting
Michael
D. Hays
,
53, has served as Chief Executive Officer and as a director since he
founded the Company in 1981. From 1981 to 2004, he also served as the Company’s
President. Prior to founding the Company, Mr. Hays served for seven years as a Vice
President and a director of SRI Research Center, Inc. (n/k/a the Gallup Organization).
John
N. Nunnelly
,
55, has served as a director of the Company since December 1997.
Mr. Nunnelly has been a Vice President of Strategic Planning at McKesson Corporation, a
leader in the healthcare information industry, since April 2005. Mr. Nunnelly has served
in various other positions during his 24 year tenure with McKesson, including Group
President of Resource Management and Home Health Solutions, Vice President and General
Manager of the Amherst Product Group and Vice President of Sales-Decision Support. Mr.
Nunnelly also serves as an adjunct professor at the University of Massachusetts, teaching
information technology in the School of Nursing.
3
Terms expiring at the
2010 Annual Meeting
Patrick
E. Beans
, 50, has served as Vice President, Treasurer, Chief Financial Officer and
Secretary and a director of the Company since 1997, and as the principal financial officer
since he joined the Company in August 1994. From June 1993 until joining the Company, Mr.
Beans was the finance director for the Central Interstate Low-Level Radioactive Waste
Commission, a five-state compact developing a low-level radioactive waste disposal plan.
From 1979 to 1988 and from June 1992 to June 1993, he practiced as a certified public
accountant.
Gail
L. Warden
, 69, has served as a director of the Company since January 2005. Mr. Warden
is currently President Emeritus of Detroit-based Henry Ford Health System, where he served
as President and Chief Executive Officer from 1988 until 2003. Prior to this role, Mr.
Warden served as President and Chief Executive Officer of Group Health Cooperative of
Puget Sound, as well as Executive Vice President of the American Hospital Association. Mr.
Warden serves as Chairman to several national healthcare committees and as a board member
to many other healthcare related committees and institutions.
CORPORATE GOVERNANCE
Independent Directors
and Annual Meeting Attendance
Of
the seven directors currently serving on the Board of Directors, the Board has determined
that JoAnn M. Martin, John N. Nunnelly, Paul C. Schorr III and Gail L. Warden are
“independent directors” as that term is defined in the listing standards of The
NASDAQ Stock Market.
Directors
are expected to attend the Company’s annual meeting of shareholders each year. All
seven of the directors attended the Company’s 2007 Annual Meeting.
Committees
The
Board held four meetings in 2007. During 2007, each director attended all of the meetings
of the Board for which he or she was a director in 2007 and at least 96% of the total
number of meetings held by all committees of the Board on which such director served
during the period that the director so served during 2007.
The
Board has a standing Audit Committee, Compensation Committee and Nominating Committee.
Each of these committees has the responsibilities set forth in formal written charters
adopted by the Board. The Company makes available on its website located at
www.nationalresearch.com
copies of each of these charters free of charge.
The
Audit Committee’s primary function is to assist the Board in fulfilling its oversight
responsibilities by overseeing the Company’s systems of internal controls regarding
finance, accounting, legal compliance and ethics that management and the Board have
established; the Company’s accounting and financial reporting processes; and the
audits of the financial statements of the Company. The Audit Committee presently consists
of Paul C. Schorr III (Chairperson), JoAnn M. Martin, John N. Nunnelly and Gail L. Warden,
each of whom meets the independence standards of the Nasdaq Stock Market and the
Securities and Exchange Commission for audit committee members. The Board has determined
that JoAnn M. Martin qualifies as an “audit committee financial expert,” as that
term is defined by the Securities and Exchange Commission, because she has the requisite
attributes through, among other things, education and experience as a president, chief
financial officer and certified public accountant. The Audit Committee held six meetings
in 2007.
4
The
Compensation Committee reviews and recommends to the Board the compensation structure for
the Company’s directors, officers and other managerial personnel, including salary
rates and participation in equity and non-equity incentive compensation plans, and
administers the National Research Corporation 2006 Equity Incentive Plan (the “2006
Equity Incentive Plan”), the National Research Corporation 2001 Equity Incentive Plan
(the “2001 Equity Incentive Plan”), the National Research Corporation 1997
Equity Incentive Plan, under which no additional awards may be granted, the National
Research Corporation 2004 Director Stock Plan (the “2004 Director Plan”) and the
National Research Corporation Director Stock Plan, under which no additional awards may be
granted. John N. Nunnelly (Chairperson), JoAnn M. Martin, Paul C. Schorr III and Gail L.
Warden are the current members of the Compensation Committee. The Compensation Committee
held five meetings in 2007.
The
Nominating Committee consists of JoAnn M. Martin (Chairperson), John N. Nunnelly, Paul C.
Schorr III and Gail L. Warden, each of whom meets the independence standards of The NASDAQ
Stock Market for nominating committee members. The Nominating Committee’s primary
functions are to: (1) recommend persons to be selected by the Board as nominees for
election as directors and (2) recommend persons to be elected to fill any vacancies on the
Board. The Nominating Committee held one meeting in 2007.
Nominations of Directors
The
Nominating Committee will consider persons recommended by shareholders to become nominees
for election as directors. Recommendations for consideration by the Nominating Committee
should be sent to the Secretary of the Company in writing together with appropriate
biographical information concerning each proposed nominee. The Company’s By-laws also
set forth certain requirements for shareholders wishing to nominate director candidates
directly for consideration by the shareholders. With respect to an election of directors
to be held at an annual meeting, a shareholder must, among other things, give notice of an
intent to make such a nomination to the Secretary of the Company not less than 60 days or
more than 90 days prior to the second Wednesday in the month of April.
In
identifying and evaluating nominees for director, the Nominating Committee seeks to ensure
that the Board possesses, in the aggregate, the strategic, managerial and financial skills
and experience necessary to fulfill its duties and to achieve its objectives, and seeks to
ensure that the Board is comprised of directors who have broad and diverse backgrounds,
possessing knowledge in areas that are of importance to the Company. The Nominating
Committee looks at each nominee on a case-by-case basis regardless of who recommended the
nominee. In looking at the qualifications of each candidate to determine if their election
would further the goals described above, the Nominating Committee takes into account all
factors it considers appropriate, which may include strength of character, mature
judgment, career specialization, relevant technical skills or financial acumen, diversity
of viewpoint and industry knowledge. In addition, the Board and the Nominating Committee
believe that the following specific qualities and skills are necessary for all directors
to possess:
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A
director must display high personal and professional ethics, integrity and values.
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A
director must have the ability to exercise sound business judgment.
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A
director must be accomplished in his or her respective field, with broad experience at
the administrative and/or policy-making level in business, government, education,
technology or public interest.
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A
director must have relevant expertise and experience, and be able to offer advice and
guidance based on that expertise and experience.
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3
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A
director must be independent of any particular constituency, be able to represent all
shareholders of the Company and be committed to enhancing long-term shareholder value.
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A
director must have sufficient time available to devote to activities of the Board of
Directors and to enhance his or her knowledge of the Company’s business.
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The
Board also believes the following qualities or skills are necessary for one or more
directors to possess:
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At
least one independent director must have the requisite experience and expertise to be
designated as an “audit committee financial expert,” as defined by applicable
rules of the Securities and Exchange Commission, and have past employment experience in
finance or accounting, requisite professional certification in accounting, or any other
comparable experience or background which results in the member’s financial
sophistication, as required by the rules of NASDAQ.
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One
or more of the directors generally must be active or former executive officers of public
or private companies or leaders of major complex organizations, including commercial,
scientific, government, educational and other similar institutions.
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Directors
must be selected so that the Board is a diverse body.
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Transactions with
Related Persons
Except
as disclosed in this section, we had no transactions during 2007, and none are currently
proposed, in which we were a participant and in which any related person had a direct or
indirect material interest. Our Board has adopted policies and procedures regarding
related person transactions. For purposes of these policies and procedures:
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A
"related person" means any of our directors, executive officers or nominees for
director or any of their immediate family members; and
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A
“related person transaction” generally is a transaction (including any
indebtedness or a guarantee of indebtedness) in which we were or are to be a participant
and the amount involved exceeds $120,000, and in which a related person had or will have
a direct or indirect material interest.
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Each
of our executive officers, directors or nominees for director is required to disclose to
the Audit Committee certain information relating to related person transactions for
review, approval or ratification by the Audit Committee. Disclosure to the Audit Committee
should occur before, if possible, or as soon as practicable after the related person
transaction is effected, but in any event as soon as practicable after the executive
officer, director or nominee for director becomes aware of the related person transaction.
The Audit Committee’s decision whether or not to approve or ratify a related person
transaction is to be made in light of the Audit Committee’s determination that
consummation of the transaction is not or was not contrary to our best interests. Any
related person transaction must be disclosed to the full Board of Directors.
Mr.
Warden serves as a director of the Picker Institute. During 2003 and 2004, the
Company advanced to the Picker Institute $600,000 to fund designated research
projects which, as of the date of this proxy statement, $428,464 has been spent
and the remaining amount of $171,536 is expected to be spent during 2008. In
addition, the Company is a party to a support services agreement with the
Picker Institute under which the Company conducts the annual NRC Picker
Symposium. Under the support services agreement, the Picker Institute receives
a portion of the gross receipts of each symposium, which amounted to $15,298 in
2007.
6
Communications with the
Board of Directors
Shareholders
may communicate with the Board by writing to National Research Corporation, Board of
Directors (or, at the shareholder’s option, to a specific director), c/o Patrick E.
Beans, Secretary, 1245 Q Street, Lincoln, Nebraska 68508. The Secretary will ensure that
the communication is delivered to the Board or the specified director, as the case may be.
7
REPORT OF THE AUDIT
COMMITTEE
In
accordance with its written charter, the Audit Committee’s primary function is to
assist the Board in fulfilling its oversight responsibilities by overseeing the
Company’s systems of internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have established; the Company’s
accounting and financial reporting processes; and the audits of the financial statements
of the Company.
In
fulfilling its responsibilities, the Audit Committee has reviewed and discussed the
audited financial statements contained in the 2007 Annual Report on Form 10-K with the
Company’s management and independent registered public accounting firm. Management is
responsible for the financial statements and the reporting process, including the system
of internal controls. The independent registered public accounting firm is responsible for
expressing an opinion on the conformity of those audited financial statements with
accounting principles generally accepted in the United States.
The
Audit Committee discussed with the independent registered public accounting firm matters
required to be discussed by Statement on Auditing Standards No. 61, “Communication
with Audit Committees,” as amended. In addition, the Company’s independent
registered public accounting firm provided to the Audit Committee the written disclosures
required by the Independence Standards Board Standard No. 1, “Independence
Discussions with Audit Committees,” and the Audit Committee discussed with the
independent registered public accounting firm the firm’s independence. The Audit
Committee pre-approves all audit and permissible non-audit services provided by the
independent registered public accounting firm on a case-by-case basis. The Audit Committee
has considered whether the provision of the services relating to the
Audit-Related
Fees
,
Tax Fees
and
All Other Fees
set forth in “Miscellaneous
– Independent Registered Public Accounting Firm” was compatible with maintaining
the independence of the independent registered public accounting firm and determined that
such services did not adversely affect the independence of the firm.
In
reliance on the reviews and discussions referred to above, the Audit Committee recommended
to the Board (and the Board has approved) that the audited financial statements be
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007, for filing with the SEC.
This
report shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and shall not
otherwise be deemed filed under such Acts.
AUDIT COMMITTEE
Paul C. Schorr III,
Chairperson
JoAnn M. Martin
John N. Nunnelly
Gail L. Warden
8
PRINCIPAL SHAREHOLDERS
Management and Directors
The
following table sets forth certain information regarding the beneficial ownership of
Common Stock as of March 10, 2008, by: (1) each director and director nominee; (2) each of
the executive officers named in the Summary Compensation Table set forth below; and (3)
all of the directors, director nominees and executive officers (including the executive
officers named in the Summary Compensation Table) as a group. Except as otherwise
indicated in the footnotes, each of the holders listed below has sole voting and
investment power over the shares beneficially owned. As of March 10, 2008, there were
6,743,081 shares of Common Stock outstanding.
Name of Beneficial Owner
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Shares of
Common Stock
Beneficially Owned
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Percent of
Common Stock
Beneficially Owned
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Michael D. Hays
(1)
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4,872,247
(2)
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72.3%
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Patrick E. Beans
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88,113
(3)
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1.3%
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Paul C. Schorr III
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37,400
(4)
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*
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JoAnn M. Martin
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52,500
(4)
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*
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Joseph W. Carmichael
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42,111
(5)
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*
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Gail L. Warden
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36,000
(4)
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*
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John N. Nunnelly
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31,800
(4)
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*
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Jona S. Raasch
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0
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*
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All directors, nominees and executive
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officers as a group (eight persons)
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5,160,171
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76.5%
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* Denotes less than 1%.
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(1)
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The
address of Mr. Hays is 1245 Q Street, Lincoln, Nebraska 68508.
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(2)
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Includes
1,200,000 shares pledged as security.
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(3)
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Includes
1,500 shares held by Mr. Beans as custodian for his minor children and
50,180 shares owned by eight trusts for which Mr. Beans is the sole
trustee.
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(4)
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Includes
shares of Common Stock that may be purchased under stock options which are
currently exercisable or exercisable within 60 days of March 15, 2008, as
follows: Ms. Martin, 50,000 shares; Mr. Schorr, 24,000 shares; Mr.
Nunnelly, 24,000 shares; Mr. Warden, 36,000 shares; and all directors,
nominees and executive officers as a group, 146,000 shares.
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(5)
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Includes
11 shares held by Mr. Carmichael as a result of his membership in an
investment club.
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9
Other Beneficial Owners
The
following table sets forth certain information regarding beneficial ownership by the only
other persons known to the Company to own more than 5% of the outstanding Common Stock.
The beneficial ownership information set forth below has been reported in filings made by
the beneficial owners with the Securities and Exchange Commission.
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Amount and Nature of Beneficial Ownership
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Voting Power
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Investment Power
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Name and Address of
Beneficial Owner
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Sole
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Shared
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Sole
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Shared
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Aggregate
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Percent
of Class
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Burnham Asset
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-0-
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-0-
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-0-
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350,000
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350,000
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5.2
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Management Corporation
(1)
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1325 Avenue of the Americas
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New York, NY 10019
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(1)
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Represents
a joint filing by Burnham Asset Management Corporation and Burnham Securities
Inc.
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10
COMPENSATION
DISCUSSION AND ANALYSIS
The
following discussion and analysis relates to the compensation of the individuals named in
the Summary Compensation Table, a group we refer to as our “named executive
officers.” In this discussion, the terms “we,” “our,”
“us” or similar terms refer to the Company.
Overview of Executive
Compensation Philosophy
We
recognize the importance of maintaining sound principles for the development and
administration of our executive compensation and benefit programs. Specifically, we design
our executive compensation and benefit programs to advance the following core principles:
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We
strive to compensate our executive officers at competitive levels to ensure that we
attract and retain a highly competent, committed management team.
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We
provide our executive officers with the opportunity to earn competitive pay as measured
against comparable companies.
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•
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We
link our executive officers’ compensation, particularly annual cash bonuses, to
established Company financial performance goals.
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We
believe that a focus on these principles will benefit us and, ultimately, our shareholders
in the long term by ensuring that we can attract and retain highly-qualified executive
officers who are committed to our long-term success.
Role of the Compensation
Committee
The
Board appoints the Compensation Committee, which consists entirely of directors who are
“outside directors” for purposes of Section 162(m) of the Internal Revenue Code
and “non-employee directors” for purposes of the Securities Exchange Act of
1934. The following individuals are members of the Compensation Committee:
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•
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John
N. Nunnelly (Chairperson)
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The
Compensation Committee determines compensation programs for our executive officers,
reviews management’s recommendations as to the compensation to be paid to other key
personnel and administers our equity-based compensation plans.
The
Compensation Committee periodically reviews and determines our compensation and benefit
programs, with the objective of ensuring the executive compensation and benefits programs
are consistent with our compensation philosophy. At the time of such reviews, our
management has engaged a nationally recognized compensation consultant.
11
For
our review of our compensation and benefit programs in 2007, our management engaged Buck
Consultants, a nationally recognized compensation consultant. Our management instructed
Buck Consultants to benchmark the base salary, total cash compensation and total direct
compensation that we offer our named executive officers. Buck Consultants worked with our
management to update the group of companies that we had used during our last major review
of our compensation and benefit programs in 2003 to ensure that the companies included in
the group have revenue that is comparable to ours and a similar industry and market focus.
Buck Consultants and our management selected companies based on one or more of the
following characteristics:
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A
Global Industry Classification Standard code the same or similar to ours;
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A
business model similar to ours;
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Stable
financial performance over recent periods;
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Annual
revenues approximating $20 million to $150 million;
|
|
|
•
|
Directly
competitive with us, regardless of revenue comparability.
|
The
companies selected for our review of compensation in 2007 were the following:
|
•
|
Opinion Research Corporation
|
•
|
Guideline, Inc.
|
|
|
|
|
|
|
•
|
The Advisory Board Company
|
•
|
Netsmart Technologies Inc.
|
|
|
|
|
|
|
•
|
Forrester Research, Inc.
|
•
|
Mediware Information Systems, Inc.
|
|
|
|
|
|
|
•
|
Greenfield Online, Inc.
|
•
|
Rainmaker Systems, Inc.
|
|
|
|
|
|
|
•
|
Phase Forward Incorporated
|
•
|
The Management Network Group, Inc.
|
|
|
|
|
|
|
•
|
Landauer, Inc.
|
•
|
HealthStream, Inc.
|
|
|
|
|
|
|
•
|
NetRatings, Inc.
|
•
|
Insightful Corporation
|
|
|
|
|
|
|
•
|
Keynote Systems, Inc.
|
•
|
Health Grades, Inc.
|
|
|
|
|
|
|
•
|
Vitria Technology, Inc.
|
|
|
|
|
|
|
•
|
BrandPartners Group Inc.
|
We
refer to these companies as “comparable companies.” In determining compensation
levels for our named executive officers in 2007, our Compensation Committee reviewed the
comparable company data to the extent the data reflected positions similar to those held
by our named executive officers. Our Compensation Committee considered these data and
other information provided by Buck Consultants to assess our competitive position with
respect to the following components of compensation:
|
|
•
|
Annual
cash incentive compensation; and
|
|
|
•
|
Long-term
equity incentive compensation.
|
12
The
objective of the Compensation Committee is to establish base salary at a competitive level
compared with comparable companies to attract and retain highly-qualified executive
officers. We consider base salary to be at a “competitive level” if it is within
20% above or below the median level paid by comparable companies to similarly situated
executives. The Compensation Committee also considers individual performance, level of
responsibility, skills and experience, and internal comparisons among executive officers
in determining base salary levels. Based on this comparable information and other
information, the Compensation Committee resets executive salary levels at the time of each
significant compensation review, which levels are then generally adjusted only to reflect
changes in responsibilities or comparable company data.
The
Compensation Committee administers our annual cash incentive program and long-term equity
incentive plans, and approves all awards made under the program and plans. For annual and
long-term incentives, the Compensation Committee considers internal comparisons and other
existing compensation awards or arrangements in making compensation decisions and
recommendations. In its decision-making process, the Compensation Committee receives and
considers the recommendations of our Chief Executive Officer as to executive compensation
programs for all of the other officers. The Compensation Committee makes its decisions
regarding general program adjustments to future base salaries, annual incentives and
long-term incentives concurrently with its assessment of the executive officers’
performance. Adjustments generally become effective in January of each year.
In
fulfilling its objectives as described above, the Compensation Committee took the
following steps in 2007:
|
|
•
|
Considered
the comparative company data provided by Buck Consultants;
|
|
|
•
|
Reviewed
the performance of our Chief Executive Officer and determined his total compensation;
|
|
|
•
|
Reviewed
the performance of our other executive officers and other key associates (i.e.,
employees) with assistance from our Chief Executive Officer; and
|
|
|
•
|
Determined
total compensation for our named executive officers based on the 2007 compensation
review, recommendations by our Chief Executive Officer (as to the other officers) and
changes in officer responsibilities.
|
Total Compensation
We
intend to continue our strategy of compensating our executive officers at competitive
levels through programs that emphasize performance-based incentive compensation in the
form of cash and equity-based awards. To that end, we have structured total executive
compensation to ensure that there is an appropriate balance between a focus on our
long-term versus short-term performance. We believe that the total compensation paid or
awarded to the executive officers during 2007 was consistent with our financial
performance and the individual performance of each of our executive officers. We also
believe that this total compensation was reasonable in its totality and is consistent with
our compensation philosophies described above.
CEO Compensation
The
Compensation Committee reviews annually the salary and total compensation levels of
Michael D. Hays, our Chief Executive Officer. Based on the comparative company data that
Buck Consultants provided as part of our compensation review completed in 2007, Mr.
Hays’ salary and overall compensation are significantly below the median level paid
to chief executive officers of comparable companies. Due to Mr. Hays’ large holding
of our stock and his desire to materially align his compensation with the interests of our
other shareholders, he requested that his base salary and targeted overall compensation
remain unchanged. The Compensation Committee has not proposed an increase in his salary or
overall compensation since 2005.
13
Elements of Compensation
Base Salary
The
objective of the Compensation Committee is to establish base salary at a competitive level
compared with comparable companies, with the exception of Mr. Hays’ salary as noted
above. The Compensation Committee also considers individual performance, level of
responsibility, skills and experience, and internal comparisons among executive officers
in determining base salary levels. Within the framework of offering competitive base
salaries, we attempt to minimize base salary increases in order to limit our exposure if
we do not meet performance targets under our incentive compensation program. Based on
comparable company information and the other factors noted above, the Compensation
Committee resets executive salary levels at the time of each significant compensation
review, which are then generally adjusted only to reflect changes in responsibilities. For
2007, the annual base salaries of our named executives did not change, except that Patrick
E. Beans’ base salary increased 16.5% beginning on May 6, 2007. The Compensation
Committee increased Mr. Beans’ base salary to bring it up to a competitive level
compared with similarly situated executives at comparable companies. In 2007, base
salaries paid to our named executive officers represented the following percentages of
their total compensation.
Base Salary as a Percentage
of Total Compensation
|
Michael D. Hays
|
49%
|
Joseph W. Carmichael
|
33%
|
Jona S. Raasch
|
46%
|
Patrick E. Beans
|
55%
|
Annual Cash Incentive
Our
executive officers are eligible for annual cash incentive awards under our incentive
compensation program. Please note that, while we may refer to annual cash incentive awards
as bonuses in this discussion, the award amounts are reported in the Summary Compensation
Table under the column titled “Non-Equity Incentive Plan Compensation” pursuant
to the Securities and Exchange Commission’s regulations.
We
intend for our incentive compensation program to provide an incentive to meet and exceed
financial and personal goals, and to promote a superior level of performance. Within the
overall context of our pay philosophy and culture, the program:
|
|
•
|
Provides
competitive levels of total cash compensation;
|
|
|
•
|
Aligns
pay with organizational and individual performance;
|
14
|
|
•
|
Focuses
executive attention on key business metrics;
|
|
|
•
|
Provides
a significant incentive for achieving and exceeding performance goals.
|
Under
our incentive compensation program, the Compensation Committee establishes performance
objectives for our named executive officers at the beginning of each year. For Messrs.
Hays, Carmichael and Beans, the Compensation Committee used our overall revenue and
operating income as performance measures for 2007 because the Compensation Committee
believes these are key measures of our ability to deliver value to our shareholders for
which Messrs. Hays, Carmichael and Beans have primary responsibility. The Compensation
Committee weighted the two performance measures equally in determining bonus payouts. The
Compensation Committee established:
|
|
•
|
Target
levels for overall revenue for the year, the first quarter of the year and each month
in the final three quarters of the year;
|
|
|
•
|
Target
levels for overall operating income for the year and for each quarter of the year; and
|
|
|
•
|
Threshold
and maximum levels at 85% and 125%, respectively, of target for each period.
|
The
Compensation Committee also set target bonus amounts for 2007 that Messrs. Hays,
Carmichael and Beans would receive if the target level of performance for both performance
measures were achieved for 2007. The bonus amounts would be 50% of the target bonus amount
at the threshold performance level, 125% of the target bonus amount at the maximum
performance level and pro rated in between. The portion of the bonus paid for performance
with respect to revenue would be determined 50% by performance for the year, 12.5% by
performance for the first quarter and approximately 4.2% by performance for each month in
the final three quarters of the year. The portion of the bonus paid for performance with
respect to operating income would be determined 50% by performance for the year and 12.5%
by performance for each quarter of the year.
As
in past years, the Compensation Committee established thresholds, targets and maximums at
a level such that achievement of any of these would require performance representing
substantial revenue and operating income growth. Since we achieved significant increases
with respect to these measures in 2006 compared to 2005, achievement of any bonus amount
for 2007 required sustained and superior financial performance. Consistent with previous
years, the Compensation Committee set thresholds, targets and maximums for 2007
aggressively, as demonstrated by the fact that over the previous five years, full-year
payouts have always been less than target.
For
2007, the Compensation Committee used the revenue and operating income of The Governance
Institute, one of our divisions, as the performance measures for Ms. Raasch’s annual
cash incentive award because she is primarily responsible for the financial performance of
The Governance Institute. The Compensation Committee set the performance targets for Ms.
Raasch’s award based on 2006 performance of The Governance Institute. Achievement of
the target payout required performance at a level that represented substantial revenue and
operating income growth over 2006.
In
addition to setting performance targets, the Compensation Committee also sets each
executive officer’s target bonus amount. The Compensation Committee considered the
comparative company data and Buck Consultant’s recommendations resulting from the
2007 compensation review, and concluded that our practice of setting annual target payouts
at 50% of base salary continues to provide competitive compensation consistent with our
goals for annual incentive awards. For 2007, target bonus percentages and amounts for our
named executive officers were as follows.
15
Name
|
2007 Target Bonus
Percentage
of Base Salary
|
2007 Target
Bonus
Amount
|
Michael D. Hays
|
50%
|
$63,700
|
Joseph W. Carmichael
|
50%
|
$88,350
|
Jona S. Raasch
|
50%
|
$79,000
|
Patrick E. Beans
|
50%
|
$75,128
|
The
following table shows amounts actually earned by our named executive officers for 2007,
along with the percentages of their base salaries these amounts represent.
Name
|
2007 Actual
Bonus
Amount
|
2007 Actual Bonus
Percentage of
Total Compensation
|
Michael D. Hays
|
$21,101
|
8%
|
Joseph W. Carmichael
|
$29,265
|
5%
|
Jona S. Raasch
|
$65,328
|
19%
|
Patrick E. Beans
|
$24,887
|
8%
|
The
Compensation Committee has established the following target bonus percentages and amounts
for 2008 for our named executive officers.
Name
|
2008 Target Bonus
Percentage
of Base Salary
|
2008 Target
Bonus
Amount
|
Michael D. Hays
|
50%
|
$63,700
|
Joseph W. Carmichael
|
50%
|
$88,350
|
Jona S. Raasch
|
50%
|
$86,500
|
Patrick E. Beans
|
50%
|
$87,500
|
16
Long-Term Equity Incentive
To
provide an additional performance incentive for our executive officers and other key
management personnel, our executive compensation package includes stock options and
restricted stock grants. Under our 2006 Equity Incentive Plan, the Compensation Committee
also has the authority to grant other equity-based awards, including stock appreciation
rights and performance shares. The general purpose of our current equity-based plans is to
promote the achievement of our long-range strategic goals and enhance shareholder value.
We grant stock options with a per-share exercise price of 100% of the fair market value of
a share of our common stock on the date of grant so that the value of the option will be
dependent on the future market value of the common stock. We believe this helps to align
the economic interests of our key management personnel with the interests of our
shareholders. To encourage our key management personnel to continue in employment with us,
we generally grant restricted stock under the 2006 Equity Incentive Plan subject to a
three-year restriction period.
The
Compensation Committee considered the comparative company data and Buck Consultant’s
recommendations resulting from the 2007 compensation review, and concluded that our
practice of setting annual target equity awards for our executive officers at 50% of their
respective then-current base salaries continues to provide competitive compensation
consistent with our goals for equity awards. The Compensation Committee generally grants
options to purchase shares of our common stock effective on a date in the first week of
January. Accordingly, on January 5, 2007, the Compensation Committee granted options to
each of our named executive officers approximately equal in value to 50% of their
respective then-current base salaries. To determine the number of options equal to 50% of
an executive officer’s base salary, the Compensation Committee used an approximation
of the Black-Scholes value of such options. The method used to approximate the Black
Scholes value resulted in a slightly lower number of options than the Black-Scholes method
would have indicated, as a result of which our grants to our named executive officers had
a grant date fair value of somewhat less than 50% of our named executive officers’
respective base salaries. On February 21, 2007, the Compensation Committee also granted
shares of restricted stock to Mr. Carmichael as the final payout under a plan implemented
in 2004 in connection with his promotion to the position of President that year. The
number of options and shares of restricted stock granted to our named executive officers
is shown in the Grants of Plan-Based Awards Table.
Our
Compensation Committee may condition awards on the achievement of various performance
goals, including the following:
|
|
•
|
Return on equity;
|
•
|
Net earnings;
|
|
|
|
|
|
|
|
|
•
|
Return on investment;
|
•
|
Net earnings per share;
|
|
|
|
|
|
|
|
|
•
|
Return on net assets;
|
•
|
Working capital as a percent of net cash provided by operating
|
|
|
|
|
|
activities;
|
|
|
|
|
|
|
|
|
•
|
Shareholder value added;
|
•
|
Market price for our common stock; and
|
|
|
|
|
|
|
|
|
•
|
Earnings from operations;
|
•
|
Total shareholder return.
|
|
|
|
|
|
|
|
|
•
|
Pre-tax profits;
|
17
In
conjunction with selecting the applicable performance goal or goals, the Compensation
Committee will also fix the relevant performance level or levels (
e.g.
, a 15%
return on equity) that must be achieved with respect to the goal or goals in order for key
associates to earn performance shares. For 2007, no awards were conditioned on such
performance goals.
Other Benefits
To
assist our associates in preparing financially for retirement, we maintain a 401(k) plan
for all salaried associates, including our executive officers. Pursuant to the 401(k)
plan, we match 25% of the first 6% of compensation contributed by our associates up to
allowable IRS limitations. We also maintain group life, health and dental insurance
programs for all of our salaried employees, and our named executive officers are eligible
to participate in these programs on the same basis as all other eligible employees.
Agreements with Officers
We
do not have employment, retention, severance, change of control or similar agreements with
any of our executive officers. While we enter into award agreements with our executive
officers and other participants under our long-term equity award plans, these agreements
and plans do not provide for acceleration of vesting or other benefits upon a change of
control or termination.
18
SUMMARY COMPENSATION
TABLE
Set
forth below is information regarding compensation earned by or paid or awarded to the
following of our executive officers during 2007: (1) Michael D. Hays, Chief Executive
Officer; (2) Joseph W. Carmichael, President; (3) Jona S. Raasch, President of the
Governance Institute, a division of National Research Corporation; and (4) Patrick E.
Beans, Vice President, Treasurer, Chief Financial Officer and Secretary. We have no other
executive officers, as defined in Rule 3b-7 of the Securities Exchange Act of 1934, whose
total compensation exceeded $100,000 during 2007. The identification of such named
executive officers is determined based on the individual’s total compensation for
2007, as reported below in the Summary Compensation Table, other than amounts reported as
above-market earnings on deferred compensation and the actuarial increase in pension
benefit accruals.
The
following table sets forth for our named executive officers: (1) the dollar value of base
salary earned during 2007; (2) the dollar value of the compensation cost of all
outstanding stock and option awards recognized with respect to 2007, computed in
accordance with Statement of Financial Accounting Standards No. 123(R) (“SFAS No.
123R”) (without reduction for estimated forfeitures); (3) the dollar value of
earnings for services pursuant to awards granted during the year under non-equity
incentive plans; (4) all other compensation for the year; and (5) the dollar value of
total compensation for the year.
Name and
Principal Position
|
Year
|
Salary
|
Stock
Awards
(1)
|
Option
Awards
(1)
|
Non-Equity
Incentive
Plan
Compensation
|
All Other
Compensation
(2)
|
Total
|
Michael D. Hays
|
2007
|
$127,400
|
--
|
$107,135
|
$21,101
|
$2,381
|
$258,017
|
|
Chief Executive
|
|
Officer
|
2006
|
$127,400
|
--
|
$ 95,602
|
$38,179
|
$2,573
|
$263,754
|
Joseph W. Carmichael
|
2007
|
$176,700
|
$246,347
|
$ 80,181
|
$29,265
|
$3,302
|
$535,795
|
|
President
|
|
|
2006
|
$176,700
|
$247,353
|
$ 64,074
|
$52,956
|
$3,300
|
$544,383
|
Jona S. Raasch
|
2007
|
$158,000
|
--
|
$118,560
|
$65,328
|
$3,038
|
$344,926
|
|
President of the
|
|
Governance Institute, a
|
2006
|
$158,000
|
--
|
$104,214
|
$47,353
|
$3,083
|
$312,650
|
|
division of National
|
|
Research Corporation
|
Patrick E. Beans
|
2007
|
$167,159
|
--
|
$109,447
|
$24,887
|
$3,036
|
$304,529
|
|
Vice President,
|
|
Treasurer, Chief
|
2006
|
$150,255
|
--
|
$ 95,800
|
$45,033
|
$3,012
|
$294,100
|
|
Financial Officer
|
|
and Secretary
|
|
(1)
|
Represents
the share-based compensation expense recognized by the Company during the
year in accordance with SFAS No. 123R (without reduction for estimated
forfeitures). See Note 8 to the Company’s Consolidated Financial
Statements included in its Annual Report on Form 10-K for the years ended
December 31, 2007, and December 31, 2006, for a discussion of assumptions
made in the valuation of share-based compensation.
|
|
(2)
|
Represents amount of Company 401(k) matching contribution.
|
19
GRANTS OF PLAN-BASED
AWARDS
We
maintain the 2006 Equity Incentive Plan and the 2001 Equity Incentive Plan pursuant to
which grants may be made to our executive officers. The following table sets forth
information regarding all such incentive plan awards that were made to the named executive
officers in 2007. No equity incentive awards were granted to the named executive officers
in 2007.
|
|
|
Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards
(1)
|
Name
|
Grant Date
|
Threshold
|
Target
|
Maximum
|
All Other
Stock Awards:
No. of
Shares
of
Stock or Units
|
All Other
Option Awards:
No. of
Securities
Underlying
Options
|
Exercise or
Base Price of
Option Awards
|
Grant Date Fair
Value of Stock and
Option Awards
|
Michael D. Hays
|
1/05/2007
|
|
|
|
--
|
8,356
|
$22.87
|
$ 59,160
|
|
|
|
$31,850
|
$63,700
|
$ 79,625
|
|
|
|
|
Joseph W. Carmichael
|
1/05/2007
|
|
|
|
--
|
11,589
|
$22.87
|
$ 82,050
|
|
|
2/21/2007
|
|
|
|
25,674
|
--
|
--
|
$584,340
|
|
|
|
$44,175
|
$88,350
|
$110,438
|
|
|
|
|
Jona S. Raasch
|
1/05/2007
|
|
|
|
--
|
10,363
|
$22.87
|
$ 73,370
|
|
|
|
$39,500
|
$79,000
|
$ 98,750
|
|
|
|
|
Patrick E. Beans
|
1/05/2007
|
|
|
|
--
|
9,855
|
$22.87
|
$ 69,773
|
|
|
|
$37,564
|
$75,128
|
$ 93,910
|
|
|
|
|
|
(1)
|
The
threshold payments specified in the table represent the payment that would be
made to the named executive officer if the threshold performance level for each
performance measure is achieved. Because the payments are determined in part by
monthly and quarterly performance as well as annual performance for each named
executive officer, and it is possible that a threshold performance level may be
achieved for some performance measures, but not others, a named executive
officer may receive a total cash incentive award payment that is less than the
threshold amount specified in the table, which represents the aggregate
threshold amount for the year taken as a whole.
|
20
OUTSTANDING EQUITY
AWARDS AT DECEMBER 31, 2007
The
following table sets forth information on outstanding option and stock awards held by the
named executive officers at December 31, 2007, including the number of shares underlying
both exercisable and unexercisable portions of each stock option, as well as the exercise
price and expiration date of each outstanding option.
|
|
Option Awards
|
Stock Awards
|
Name
|
No. of
Securities
Underlying
Unexercised
Options
(Exercisable)
|
No. of
Securities
Underlying
Unexercised
Options
(Unexercisable)
|
Option
Exercise
Price
|
Option
Expiration Date
|
No. of
Shares or
Units of
Stock That
Have
Not Vested
|
Market Value
of Shares or
Units of
Stock That
Have
Not Vested
|
|
|
Michael D. Hays
|
--
|
38,182
(1)
|
$11.00
|
06/26/13
|
--
|
--
|
|
|
|
18,298
(2)
|
$16.10
|
01/05/14
|
|
|
|
|
|
11,078
(3)
|
$17.25
|
01/05/16
|
|
|
|
|
|
8,356
(4)
|
$22.87
|
01/05/17
|
|
|
|
|
|
|
|
|
|
|
|
Joseph W. Carmichael
|
--
|
32,727
(1)
|
$11.00
|
06/26/13
|
34,304
(5)
|
$926,208
|
|
|
|
12,634
(2)
|
$16.10
|
01/05/14
|
|
|
|
|
|
11,589
(4)
|
$22.87
|
01/05/17
|
|
|
|
|
|
|
|
|
|
|
Jona S. Raasch
|
--
|
34,091
(1)
|
$11.00
|
06/26/13
|
--
|
--
|
|
|
|
13,388
(2)
|
$16.10
|
01/05/14
|
|
|
|
|
|
15,330
(6)
|
$15.46
|
01/05/15
|
|
|
|
|
|
13,739
(3)
|
$17.25
|
01/05/16
|
|
|
|
|
|
10,363
(4)
|
$22.87
|
01/05/17
|
|
|
|
|
|
|
|
|
|
|
Patrick E. Beans
|
--
|
31,364
(1)
|
$11.00
|
06/26/13
|
--
|
--
|
|
|
|
12,121
(2)
|
$16.10
|
01/05/14
|
|
|
|
|
|
13,884
(6)
|
$15.46
|
01/05/15
|
|
|
|
|
|
13,066
(3)
|
$17.25
|
01/05/16
|
|
|
|
|
|
9,855
(4)
|
$22.87
|
01/05/17
|
|
|
|
(1)
|
Options
vest in full on the fifth anniversary of the grant date. These options will
vest on June 26, 2008.
|
|
(2)
|
Options
vest in full on the fifth anniversary of the grant date. These options will
vest on January 5, 2009.
|
|
(3)
|
Options
vest in full on the fifth anniversary of the grant date. These options will
vest on January 5, 2011.
|
|
(4)
|
Options
vest in full on the fifth anniversary of the grant date. These options will
vest on January 5, 2012.
|
|
(5)
|
Restricted
shares vest ratably over three years. The unvested restricted shares held by
Mr. Carmichael will vest as follows:
|
Vesting Date
|
Shares Vesting
|
02/21/08
|
8,558
|
|
05/09/08
|
726
|
|
05/10/08
|
2,392
|
|
08/09/08
|
695
|
|
08/10/08
|
2,064
|
|
11/13/08
|
666
|
|
02/21/09
|
8,558
|
|
05/09/09
|
726
|
|
08/09/09
|
695
|
|
11/13/09
|
666
|
|
02/21/10
|
8,558
|
|
(6)
|
Options
vest in full on the fifth anniversary of the grant date. These options will
vest on January 5, 2010.
|
21
OPTION EXERCISES AND
STOCK VESTED
The
following table sets forth information regarding each exercise of stock options and
vesting of restricted stock that occurred during 2007 for each of the Company’s named
executive officers on an aggregated basis:
Name
|
Number of Shares
Acquired on Exercise
|
Value Realized
on Exercise
|
Number of Shares
Acquired on Vesting
|
Value Realized
on Vesting
|
Michael D. Hays
|
--
|
--
|
--
|
--
|
Joseph W. Carmichael
|
--
|
--
|
6,543
|
$167,152
|
Jona S. Raasch
|
--
|
--
|
--
|
--
|
Patrick E. Beans
|
--
|
--
|
--
|
--
|
DIRECTOR COMPENSATION
Directors
who are executive officers of the Company receive no compensation for service as members
of either the Board or committees thereof. Directors who are not executive officers of the
Company receive an annual retainer of $10,000 and a fee of $500 for each committee meeting
attended which is not held on the same date as a Board meeting. Additionally, directors
are reimbursed for out-of-pocket expenses associated with attending meetings of the Board
and committees thereof. In 2007, Ms. Martin was appointed our lead director. She receives
$500 for each meeting with our chief executive officer. In 2007, two such meetings were
held.
Pursuant
to the 2004 Director Plan, each director who is not an associate (
i.e.
, employee)
of the Company receives an annual grant of an option to purchase 12,000 shares of our
common stock on the date of each Annual Meeting of Shareholders. The options have an
exercise price equal to the fair market value of the common stock on the date of grant and
vest one year after the grant date.
The
following table sets forth information regarding the compensation received by each of the
Company’s directors during 2007:
Name
|
Fees Earned or
Paid in Cash
|
Option Awards
(1)
|
Total
|
JoAnn M. Martin
|
$13,000
|
$62,552
|
$75,552
|
John N. Nunnelly
|
$11,500
|
$62,552
|
$74,052
|
Paul C. Schorr III
|
$11,500
|
$62,552
|
$74,052
|
Gail L. Warden
|
$11,500
|
$62,552
|
$74,052
|
|
|
(1)
|
Represents
the share-based compensation expense recognized by the Company during the
year in accordance with SFAS No. 123R (without reduction for estimated
forfeitures). See Note 8 to the Company’s Consolidated Financial
Statements included in its Annual Report on Form 10-K for the year ended
December 31, 2007, for a discussion of assumptions made in the valuation
of share-based compensation. The grant date fair value of each director’s
2007 option award was $5.18 per option share.
|
22
COMPENSATION COMMITTEE
REPORT
The
Compensation Committee has reviewed and discussed the above Compensation Discussion and
Analysis with management and, based on such review and discussion, has recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in the
Company’s proxy statement.
John N. Nunnelly,
Chairperson
JoAnn M. Martin
Paul C. Schorr III
Gail L. Warden
23
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s directors,
executive officers and any owner of greater than 10% of the Company’s Common Stock to
file reports with the Securities and Exchange Commission concerning their ownership of the
Company’s Common Stock. Based solely upon information provided to the Company by
individual directors and executive officers, the Company believes that, during the fiscal
year ended December 31, 2007, all of its directors and executive officers and owners of
greater than 10% of the Company’s Common Stock complied with the Section 16(a) filing
requirements, except that Joseph W. Carmichael did not timely file a Form 4 reporting a
grant of restricted stock on February 21, 2007; Patrick E. Beans did not timely file a
Form 4 reporting a sale of shares by a trust on March 12, 2007; and Mr. Carmichael did not
timely file a Form 4 reporting payment of tax liability upon the vesting of restricted
stock in May 2006.
MISCELLANEOUS
Independent Registered
Public Accounting Firm
KPMG
LLP acted as the independent registered public accounting firm for the Company in 2007 and
it is anticipated that such firm will be similarly appointed to act in 2008. The Audit
Committee is solely responsible for the selection, retention, oversight and, when
appropriate, termination of the Company’s independent registered public accounting
firm. Representatives of KPMG LLP are expected to be present at the Annual Meeting with
the opportunity to make a statement if they so desire. Such representatives are also
expected to be available to respond to appropriate questions.
The
fees to KPMG LLP for the fiscal years ended December 31, 2007 and 2006 were as follows:
|
|
2007
|
2006
|
|
Audit Fees
(1)
|
|
|
$
|
124,200
|
|
$
|
123,299
|
|
|
Audit-Related Fees
(2)
|
|
|
|
18,132
|
|
|
600
|
|
|
Tax Fees
(3)
|
|
|
|
15,965
|
|
|
17,086
|
|
|
All Other Fees
|
|
|
|
--
|
|
|
--
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
158,297
|
|
$
|
140,985
|
|
|
|
|
|
|
|
|
|
(1)
|
Audit
of annual financial statements and review of financial statements included in
Forms 10-Q.
|
|
|
(2)
|
Due
diligence and accounting consultations.
|
|
|
(3)
|
Tax
consultations and tax return preparation including out-of-pocket expenses.
|
The
Audit Committee has established pre-approval policies and procedures with respect to audit
and permitted non-audit services to be provided by its independent registered public
accounting firm. Pursuant to these policies and procedures, the Audit Committee may form,
and delegate authority to, subcommittees consisting of one or more members when
appropriate to grant such pre-approvals, provided that decisions of such subcommittee to
grant pre-approvals are presented to the full Audit Committee at its next scheduled
meeting. The Audit Committee’s pre-approval policies do not permit the delegation of
the Audit Committee’s responsibilities to management. During 2007, no fees to the
independent registered public accounting firm were approved pursuant to the de minimis
exception under the Securities and Exchange Commission’s rules.
24
Shareholder Proposals
Proposals
that shareholders of the Company intend to present at and have included in the
Company’s proxy statement for the 2009 Annual Meeting pursuant to Rule 14a-8 under
the Securities Exchange Act of 1934, as amended (“Rule 14a-8”), must be received
by the Company by the close of business on December 5, 2008. In addition, a shareholder
who otherwise intends to present business at the 2009 Annual Meeting (including nominating
persons for election as directors) must comply with the requirements set forth in the
Company’s By-Laws. Among other things, to bring business before an annual meeting, a
shareholder must give written notice thereof, complying with the By-Laws, to the Secretary
of the Company not less than 60 days and not more than 90 days prior to the second
Wednesday in the month of April (subject to certain exceptions if the Annual Meeting is
advanced or delayed a certain number of days). Under the By-Laws, if the Company does not
receive notice of a shareholder proposal submitted otherwise than pursuant to Rule 14a-8
(
i.e.
, proposals shareholders intend to present at the 2009 Annual Meeting but do
not intend to include in the Company’s proxy statement for such meeting) prior to
February 7, 2009, then the notice will be considered untimely and the Company will not be
required to present such proposal at the 2009 Annual Meeting. If the Board chooses to
present such proposal at the 2009 Annual Meeting, then the persons named in proxies
solicited by the Board for the 2009 Annual Meeting may exercise discretionary voting power
with respect to such proposal.
Other Matters
The
cost of soliciting proxies will be borne by the Company. In addition to soliciting proxies
by mail, proxies may be solicited personally and by telephone by certain officers and
regular associates of the Company. The Company will reimburse brokers and other nominees
for their reasonable expenses in communicating with the persons for whom they hold Common
Stock.
Pursuant
to the rules of the Securities and Exchange Commission, services that deliver the
Company’s communications to shareholders that hold their stock through a bank, broker
or other holder of record may deliver to multiple shareholders sharing the same address a
single copy of the Company’s annual report to shareholders and proxy statement. Upon
written or oral request, the Company will promptly deliver a separate copy of the annual
report to shareholders and/or proxy statement to any shareholder at a shared address to
which a single copy of each document was delivered. Shareholders may notify the Company of
their requests by calling or writing Patrick E. Beans, Secretary, National Research
Corporation, 1245 Q Street, Lincoln, Nebraska 68508.
|
|
By Order of the Board of Directors
|
|
|
NATIONAL RESEARCH CORPORATION
|
|
|
|
|
Patrick E. Beans
|
|
|
Secretary
|
April 4, 2008
25
PROXY
PLEASE
SIGN, DATE AND RETURN USING THE ENVELOPE PROVIDED
NATIONAL RESEARCH
CORPORATION
2008 ANNUAL MEETING OF SHAREHOLDERS
This Proxy is Solicited on Behalf of the
Board of Directors
The undersigned hereby appoints
Michael D. Hays and Patrick E. Beans, and each of them, as Proxies with the power of
substitution (to act jointly or if only one acts then by that one) and hereby authorizes
them to represent and to vote as designated below all of the shares of Common Stock of
National Research Corporation held of record by the undersigned on March 14, 2008, at
the Annual Meeting of Shareholders to be held on May 2, 2008, or any adjournment or
postponement thereof.
This proxy when properly executed
will be voted in the manner directed herein by the undersigned shareholder. If no
direction is made, this proxy will be voted “FOR” the election of the
Board’s nominees.
|
1.
|
ELECTION OF DIRECTORS:
|
1.
|
Joseph W. Carmichael (Term expiring at the 2011 Annual Meeting)
|
|
|
|
2.
|
JoAnn M. Martin (Term expiring at the 2011 Annual Meeting)
|
|
|
|
3.
|
Paul C. Schorr III (Term expiring at the 2011 Annual Meeting)
|
|
|_|
|
FOR the nominees listed
|
|_|
|
WITHHOLD AUTHORITY
|
|
|
above (except as specified below).
|
|
to vote for the nominees
|
|
|
|
|
listed above.
|
|
|
|
|
(Instructions: To withhold authority to vote for any
|
|
|
indicated nominee(s), write the name(s) of the
|
|
|
nominee(s) in the box provided to the right.)
|
|
|
|
|
|
2.
|
IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
|
|
Check appropriate box
|
Date_____________________________, 2008
|
|
Indicate changes below:
|
|
Address Change?
|
|_|
|
Name Change?
|
|_|
|
|
|
|
|
|_|
|
Please check this box if you plan to attend
|
|
|
|
the Annual Meeting. Number of persons
|
__________________________________________________
|
|
|
attending:_____.
|
(Registered Owner)
|
|
|
|
__________________________________________________
|
|
|
|
(Registered Owner if held jointly)
|
|
|
|
|
|
Signature(s)
in Box
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If a corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
|
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