ComScore Inc 10-K 2009
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Commission File Number 000-1158172
11950 Democracy Drive, Suite 600
Reston, Virginia 20190
(Address of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes o No o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The aggregate market value of the registrants voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2008, the last business day of the registrants most recently completed second fiscal quarter, was $416,850,698 (based on the closing sales price of the registrants common stock as reported by the NASDAQ Global Market on that date). Shares of the registrants common stock held by each officer and director and each person who owns more than 10% of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date: As of April 15, 2009, there were 29,859,592 shares of the registrants common stock outstanding.
This Amendment No. 1 on Form 10-K/A (this Amendment) amends comScore, Incs Annual Report on Form 10-K for the year ended December 31, 2008, originally filed with the Securities and Exchange Commission, or SEC, on March 16, 2009 (the Original Filing). We are amending and refiling Part III to include information required by Items 10, 11, 12, 13 and 14 because our definitive proxy statement will not be filed within 120 days after December 31, 2008, the end of the fiscal year covered by our Annual Report on Form 10-K. Accordingly, reference to our proxy statement on the cover page has been deleted.
In addition, pursuant to the rules of the SEC, we have also included as exhibits currently dated certifications required under Section 302 of The Sarbanes-Oxley Act of 2002. Because no financial statements are contained within this Amendment, we are not including certifications pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. We are amending and refiling Part IV to reflect the inclusion of those certifications.
Except as described above, no other changes have been made to the Original Filing. Except as otherwise indicated herein, this Amendment continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events that occurred subsequent to the date of the Original Filing. The filing of this Annual Report on Form 10-K/A is not a representation that any statements contained in items of our Annual Report on Form 10-K other than Part III, Items 10 through 14, and Part IV are true or complete as of any date subsequent to the Original Filing.
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K/A
FOR THE PERIOD ENDED DECEMBER 31, 2008
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of our executive officers and directors as of April 30, 2009:
Magid M. Abraham, Ph.D., one of our co-founders, has served as President, Chief Executive Officer and Director since September 1999. In 1995, Dr. Abraham founded Paragren Technologies, Inc., which specialized in delivering large scale Customer Relationship Marketing systems for strategic and target marketing, and served as its Chief Executive Officer from 1995 to 1999. Prior to founding Paragren, Dr. Abraham was employed by Information Resources, Inc. from 1985 until 1995, where he was President and Chief Operating Officer from 1993 to 1994 and later Vice Chairman of the Board of Directors from 1994 until 1995. Since January 2008, Dr. Abraham has also been a member of the board of directors of Milo.com, a startup company. In 2008, Mr. Abraham was inducted into the Entrepreneur Hall of Fame and was named an Ernst & Young Entrepreneur of the Year in the Washington DC area. Dr. Abraham received the Paul Green Award in 1996 and the William F. ODell Award in 2000 from the American Marketing Association for a 1995 article that he co-authored in the Journal of Marketing Research. He received a Ph.D. in Operations Research and an M.B.A. from the Massachusetts Institute of Technology. He also holds an Engineering degree from the École Polytechnique in France.
Gian M. Fulgoni, one of our co-founders, has served as Executive Chairman of the Board of Directors since September 1999. Prior to co-founding comScore, Mr. Fulgoni was employed by Information Resources, Inc., where he served as President from 1981 to 1989, Chief Executive Officer from 1986 to 1998 and Chairman of the Board of Directors from 1991 until 1995. Mr. Fulgoni has served on the board of directors of PetMed Express, Inc. since 2002 and previously served from August 1999 through November 2000. Mr. Fulgoni has also served on the board of directors of INXPO, LLC, an Illinois-based provider of virtual events, since July 2005 and the Advertising Research Foundation, an industry research organization, since 2008. He also served on the board of directors of Platinum Technology, Inc. from 1990 to 1999, U.S. Robotics, Inc. from 1991 to 1994, and Yesmail.com, Inc. from 1999 to 2000. In 1991 and again in 2004, Mr. Fulgoni was named an Illinois Entrepreneur of the Year, the only person to have twice received the honor. In 1992, he received the Wall Street Transcript Award for outstanding contributions as Chief Executive Officer of Information Resources, Inc. in enhancing the overall value of that company to the
benefit of its shareholders. In 2008, Mr. Fulgoni was inducted into the Chicago Entrepreneur Hall of Fame and was named an Ernst & Young Entrepreneur of the Year. Educated in the United Kingdom, Mr. Fulgoni holds an M.A. in Marketing from the University of Lancaster and a B.Sc. in Physics from the University of Manchester.
Kenneth J. Tarpey has served as Chief Financial Officer since April 20, 2009. Prior to joining comScore, Mr. Tarpey was Executive Vice President, Chief Financial Officer and Chief Operating Officer of Objectvideo, Inc., a Reston, Virginia-based provider of video surveillance software, from 2003 until April 2009. From 2002 until 2003, Mr. Tarpey was Senior Vice President, Chief Financial Officer and Treasurer of Ai Metrix, Inc., a Herndon, Virginia-based provider of network optimization software. From 1997 until 2001, Mr. Tarpey was Executive Vice President and Chief Financial Officer of Proxicom, a NASDAQ-listed Internet business consulting and development company. Mr. Tarpey holds an M.B.A. from Babson College and a B.A. from College of the Holy Cross.
Gregory T. Dale has served as Chief Technology Officer since October 2000. Prior to that, he served as Vice President, Product Management starting in September 1999. Prior to joining us, he served as Vice President of Client Service at Paragren Technologies, Inc., a company that specialized in enterprise relationship marketing. He holds a B.S. in Industrial Management from Purdue University.
Christiana L. Lin has served as General Counsel and Chief Privacy Officer since January 2006. Prior to that, she served as our Corporate Counsel and Chief Privacy Officer starting in March 2003. Prior to that, she served as our Deputy General Counsel starting in February 2001. Ms. Lin holds a J.D. from the Georgetown University Law Center and a B.A. in Political Science from Yale University.
Jeffrey Ganek has served as a director since May 2008. Since December 1999, Mr. Ganek has also served as chairman of the board of directors and chief executive officer of NeuStar, Inc. From December 1995 to December 1999, Mr. Ganek was Senior Vice President and Managing Director of Communications Industry Services at Lockheed Martin, an advanced technology company. The Communications Industry Services group of Lockheed Martin was acquired from Lockheed Martin in 1999 to form NeuStar, which provides clearinghouse services to the telecommunications industry. From 1993 to 1995, he was Vice President Asia Operations for Global TeleSystems Group, a communications service provider in Europe and Asia. From 1991 to 1993, Mr. Ganek was Vice President of Marketing at GTE Spacenet, a satellite communications service provider. From 1985 to 1991, he was Director of Marketing and Corporate Development at MCI Communications Corporation, a telecommunications company. From 1976 to 1985, he held management positions at AT&T, a telecommunications company, in Corporate Development, Marketing and Finance. Mr. Ganek holds an M.S. in Public Policy and Management and a B.S. in Economics from Carnegie-Mellon University.
Bruce Golden has served as a director since June 2002. He is a partner at Accel Partners, which he joined in 1997. Mr. Golden has led a number of investments in enterprise software and Internet-related companies while at Accel and currently serves as a member of the boards of directors of several private companies. Mr. Golden holds an M.B.A. from Stanford University and a B.A. from Columbia University.
William J. Henderson has served as a director since August 2001. Mr. Henderson was the 71st Postmaster General of the United States. He served in that position from May 1998 until his retirement in May 2001. Mr. Henderson also served as the Chief Operations Officer of Netflix, Inc. from January 2006 until February 2007. Mr. Henderson also currently serves on the board of directors of Acxiom Corporation, where he has been a director since June 2001. Mr. Henderson holds a B.S. from the University of North Carolina at Chapel Hill and served in the U.S. Army.
William Katz has served as a director since June 2008. Since June 2004, Mr. Katz has also served as the chairman of the board of directors of Visible World Inc., a privately-held multimedia marketing services provider. From 1996 to 2004, Mr. Katz served as President and Chief Executive Officer of BBDO New York, the flagship office of BBDO Worldwide, the worlds third largest global agency network. Mr. Katz also currently serves on the board of directors of Papaya King, a privately-held restaurant chain. Mr. Katz holds a B.A. in Business and Psychology from American University.
Ronald J. Korn has served as a director since November 2005. Since 1991, he has served as the President of Ronald Korn Consulting, which provides business and marketing services. Mr. Korn served as a director, chairman of the audit committee, and member of the loan committee of Equinox Financial Corporation from 1999 until its
acquisition in October 2005. Since 2002, he has served as a director, chairman of the audit committee and a member of the compensation and nominating and governance committees of PetMed Express, Inc., and since July 2003, he has served as a director, chairman of the audit committee and a member of the compensation committee of Ocwen Financial Corporation. Prior to that, Mr. Korn was a partner and employee of KPMG, LLP, from 1961 to 1991, where he was the managing partner of KPMGs Miami office from 1985 until 1991. Mr. Korn holds a B.S. from the Wharton School of Business at the University of Pennsylvania and a J.D. from New York University Law School.
Jarl Mohn, also known as Lee Masters from his radio career, has served as a director since June 2008. Mr. Mohn has also served on the board of directors of Scripps Network Interactive since June 2008. From December 2003 until July 2008, Mr. Mohn served on the board of directors of CNET Networks, Inc., where he also served as non-executive chairman from October 2006 to July 2008. Mr. Mohn also previously served on the boards of directors of XM Satellite Radio, Inc. from May 2004 to July 2008 and the E.W. Scripps Company from 2002 until 2008. Mr. Mohn was the founding President of Liberty Digital Inc., a publicly traded subsidiary of Liberty Media Group involved in interactive television, cable television networks and Internet enterprises, and served as its Chief Executive Officer from June 1999 to March 2002. Prior to founding Liberty Digital, he was President and Chief Executive Officer of E! Entertainment Television. From 1986 to 1989, Mr. Mohn was Executive Vice President and General Manager of MTV and VH1. His professional career also includes twenty years in radio. Mr. Mohn attended Temple University, where he studied Mathematics and Philosophy.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that certain of our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, file reports of ownership and changes in ownership (Forms 3, 4 and 5) with the SEC. Such executive officers, directors and greater than 10% holders are required to furnish us with copies of all of these forms that they file. Certain employees of our company hold a power of attorney to enable such individuals to file ownership and change in ownership forms on behalf of certain of our executive officers and directors.
Based solely on our review of these reports or written representations from certain reporting persons, we believe that during 2008, all filing requirements applicable to our officers, directors, greater-than-10% beneficial owners and other persons subject to Section 16(a) of the Securities Exchange Act of 1934, as amended, were met, except that the following reports, although filed, were not filed timely:
We have adopted a Code of Business Conduct and Ethics that applies to all directors and employees of the company, including our principal executive officer, principal financial officer and principal accounting officer or controller. The full text of our Code of Business Conduct and Ethics is posted under the Investor Relations section on our website at http://www.comscore.com.
Our board of directors has set July 29, 2009 as the date of our 2009 annual meeting of stockholders. We will send a definitive proxy statement to our stockholders of record for such meeting. That proxy statement will contain important information about the meeting and the matters to be considered, and we urge our stockholders to read it when it becomes available. The meeting site and time will be communicated to shareholders in the proxy materials distributed for the annual meeting.
The date of our 2009 annual meeting of stockholders will take place more than thirty (30) days after the anniversary date of our 2008 annual meeting of stockholders. Therefore, the deadline for submitting a proposal pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, to be considered for inclusion in the Companys proxy statement for the annual meeting and for submitting a timely proposal for purposes of Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended, is May 10, 2009. In order for a proposal to be considered timely, it must be submitted in writing and received by us on or prior to such date at our principal executive offices at 11950 Democracy Drive, Suite 600, Reston, Virginia 20190. Proposals should be directed to the attention of our Corporate Secretary.
Other than the foregoing, there have been no material changes to the procedures by which security holders may recommend nominees to our board of directors since those procedures were described in our proxy statement for our 2008 annual meeting of stockholders.
We have a separately-designated audit committee of our board of directors established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended.
The audit committee of our board of directors recommends the appointment of our independent registered public accountant, reviews our internal accounting procedures and financial statements, and consults with and reviews the services provided by our independent registered public accountant, including the results and scope of their audit. The audit committee met fourteen times (including telephonic meetings) during 2008.
The audit committee is currently comprised of Ronald J. Korn (chair), William J. Henderson and Jeffrey Ganek, each of whom is independent within the meaning of the requirements of the Sarbanes-Oxley Act of 2002 and applicable SEC and NASDAQ rules. Ronald J. Korn is chairman of our audit committee as well as our audit committee financial expert, as currently defined under the SEC rules implementing the Sarbanes-Oxley Act of 2002. We believe that the composition and functioning of our audit committee complies with all applicable requirements of the Sarbanes-Oxley Act of 2002, The NASDAQ Global Market, and SEC rules and regulations.
The audit committee operates under a written charter adopted by the board of directors, a copy of which is available under the Investor Relations section of our website, http://www.comscore.com.
The following discussion and analysis of our compensation arrangements with our named executive officers should be read together with the compensation tables and related disclosures set forth elsewhere in this Annual Report on Form 10-K/A. Our named executive officers for the year ended December 31, 2008 are Magid M. Abraham, John M. Green, Gian M. Fulgoni, Gregory T. Dale and Christiana L. Lin. This discussion contains forward-looking statements that are based on our current plans and expectations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion.
The objective of our compensation programs for employees is to attract and retain top talent. Our compensation plans are designed to motivate and reward employees for achievement of positive business results and also to
promote and enforce accountability. In determining the compensation arrangement of our senior executives, we are guided by the following key principles:
We believe that our executive compensation and benefit program balances short-term and long-term components, cash and equity elements, and fixed and contingent payments. We apply our compensation philosophy using both quantitative and qualitative standards to incentivize our senior management and reward them for achieving the following goals:
Our executive compensation structure aims not only to compensate top talent at levels that we believe are at the 50th percentile or greater of an identified peer group, but also to be fair relative to compensation paid to other professionals within our organization, relative to our short- and long-term performance results and relative to the value we deliver to our stockholders. We seek to maintain a performance-oriented culture with a compensation approach that rewards our executive officers when we achieve and exceed our goals and objectives, while putting at risk an appropriate portion of their compensation against the possibility that our goals and objectives may not be achieved. Overall, our approach is designed to relate the compensation of our executive officers to the following: the achievement of short- and long-term goals and objectives; their willingness to challenge and improve existing policies and structures; and their capability to take advantage of unique opportunities and overcome difficult challenges within our business.
Our compensation committee approves, administers and interprets our executive compensation and benefit policies, including our 1999 Stock Plan, our 2007 Equity Incentive Plan and our compensation, incentives and
benefits programs. Our compensation committee is appointed by our board of directors, and consists entirely of directors who are outside directors for purposes of Section 162(m) of the Internal Revenue Code, non-employee directors for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and independent directors under the listing standards of the NASDAQ Stock Market. Our compensation committee is comprised of Messrs. Henderson, Katz and Mohn, and is chaired by Mr. Henderson.
Our compensation committee reviews and approves our executive compensation and benefit program to ensure that it is consistent with our compensation philosophy and corporate governance guidelines. Our compensation committee also is responsible for establishing the executive compensation packages offered to our executive officers.
Our compensation committee has taken the following steps to ensure that our executive compensation and benefit program is consistent with both our compensation philosophy and our corporate governance guidelines:
Prior to our initial public offering in 2007, our compensation committee had not previously conducted formal surveys or analyses of compensation levels in various marketplaces or engaged compensation consultants to do so on our behalf. However, beginning in mid-2007, in addition to utilizing the collective experience and knowledge of our board of directors and executive management, as well as informal reviews of compensation information gained through marketplace contacts and service providers, our compensation committee selected and directly engaged the services of an independent executive compensation consulting firm, Towers Perrin. No member of the compensation committee or any named executive officer has any affiliation with Towers Perrin. Towers Perrin has not performed any other work for us, and it has reported directly to the chairman of the compensation committee.
In December 2007 and in response to a request from the compensation committee, Towers Perrin provided a report to the compensation committee with input on a range of external market factors, including evolving executive compensation trends. Towers Perrin also provided general observations on our executive compensation programs, and it provided recommendations as to the amount or form of compensation for our named executive officers.
Based on the collective inputs from Towers Perrin, management, and the experience of the members of our board of directors and compensation committee, in December 2007 our compensation committee set our executives base salaries, target annual bonus levels and long-term incentive award values for our 2008 fiscal year. Our compensation committee set these components of executive compensation at target levels to fall within the 50th percentile range of an identified peer group in each of the following categories that make up our total compensation: executive base salary, target annual bonus levels and long-term incentive awards. This compensation philosophy was also intended to retain the flexibility of allowing potential cash compensation to fall within the 75th percentile range of the identified peer group for superior performance. In addition, this compensation approach employed a long-term incentive program that had as its goal the retention of key employees, the alignment of employee interests with those of stockholders, and adequate simplicity of both comprehension and administration.
Our compensation committee chose the 50th percentile of this peer group as the baseline for our compensation components with a view towards what our compensation committee believed to be fair to our executives and to the company as well as consistent with industry practices in the technology sector. In making such determination, our compensation committee considered such factors as the stage of our companys development, the size and characteristics of our company, based on both headcount and operations and balance sheet characteristics, as well as the expected future characteristics of our business relative to our identified peer group.
The December 2007 study provided by Towers Perrin referenced both published compensation survey data of comparably-sized companies and a valuation peer group determined based on inputs from investment banks as well as management input as to companies with whom we compete for executive talent, with median annual revenues of $100 million. All of the companies included in the peer group are providers of digital marketing intelligence or related analytical products and services, marketing services and solutions or survey services. Specifically, the peer group consisted of the following companies:
In 2008, as part of our ongoing commitment to link current compensation levels to our compensation philosophy and business strategy, our compensation committee requested that Towers Perrin review our direct compensation, including base salary, total cash compensation and total direct compensation. We define total cash compensation as base salary plus actual annual incentives, and we define total direct compensation as total cash compensation plus the annualized expected value of long-term incentives.
Towers Perrin provided a report to the compensation committee in October 2008 with observations and analyses regarding the direct compensation of our executive officers. This study provided by Towers Perrin referenced the same peer group used for the December 2007 study, except Traffix, Inc. was excluded due to its acquisition in February 2008.
Based on the inputs from Towers Perrin and our management as well as their own review, our compensation committee determined that our executives compensation package for our 2008 fiscal year continued to fall within the 50th percentile range of the identified peer group for executive compensation, and target annual incentives, total cash compensation and total direct compensation were all in line with market medians, with the flexibility to exceed up to the 75th percentile range of the identified peer group. Our compensation committee further determined that, with the exception of Dr. Abraham, our named executive officers base salaries for our 2008 fiscal year continued to fall within the 50th percentile range of our identified peer group for executive base salary. Although Dr. Abrahams base salary was found to be below the 50th percentile range, our compensation committee determined that Dr. Abrahams compensation package was heavily weighted in equity compensation. Such equity component was found to have counterbalanced the shortfall in base salary such that Dr. Abrahams compensation package remained consistent with our compensation philosophy. Moreover, the compensation committee believed that the heavier weighting towards equity compensation would better align Dr. Abrahams interests with the interests of the company and our stockholders. Accordingly, the compensation committee determined in October 2008 to leave 2009 base salaries for our named executive officers unchanged from 2008.
In connection with their October 2008 review of base salaries, the compensation committee requested that Towers Perrin further review our incentive programs, including annual performance bonuses and long-term incentive awards. Since our initial public offering, our annual performance bonuses have been paid in cash and, in recent years, restricted stock in lieu of a portion of the cash bonus at the election of the officers. Our long-term incentive awards utilize restricted stock, although we have used stock option awards in past years as well. Given the economic conditions in late 2008, the compensation committee sought to explore the use of non-cash incentives as
an alternative to cash-based incentives in order to better control the cash usage of the company. At the same time, our management also suggested to the compensation committee that non-cash based incentives may help enhance retention of existing employees and align stockholder interest with employee interests.
Pursuant to the compensation committees request, Towers Perrin provided several reports to the compensation committee during the first few months of 2009 with observations and analysis as well as certain proposals regarding making salary adjustments and increasing the non-cash components of our annual performance bonuses and long-term incentive awards to our executive officers.
Based on the inputs from Towers Perrin and our management as well as their own review, in March 2009 our compensation committee established an incentive award policy for our 2009 fiscal year to the effect that bonus target amounts would be combined with long-term incentive target amounts, and would be paid entirely with awards of restricted stock or restricted stock units according to certain target levels based on respective base salary levels for each of the executive officers included in the policy. The stock associated with such awards would be distributed in 2010, and seventy-five percent of the total shares issued would remain subject to vesting restrictions that would lapse ratably over the three years following the award date.
Based on additional inputs from Towers Perrin, the compensation committee determined, in April 2009, that our named executive officers should have a compensation package that was more heavily weighted in equity than in cash. As a result, the compensation committee determined that the base salary of our named executive officers should be reduced by 7.5% and that additional restricted stock should be awarded to our named executive officers. The amounts and specific terms of these expected grants of additional restricted stock remain subject to additional review and determination by our management and compensation committee, but we anticipate any such grants will be made in the first half of 2009 and will include vesting restrictions consistent with our past practices for restricted stock grants. Such a compensation adjustment is expected to allow us to reduce our cash expenses, increase our long-term retention of employees, and retain additional liquid resources to fund and accelerate certain investments in new product offerings and capabilities within our existing cost structure.
Our compensation committee believes that this format and the target levels are consistent with the 50th percentile range of our identified peer group. In reaching this decision, the compensation committee considered the importance of providing increased incentive opportunities to our executive officers in equity, which would help better align the long-term incentives of those executives with the incentives of our stockholders. The compensation committee also considered the importance of reducing or delaying cash outlays from the company in light of the global economic environment, the inherent cash budgeting uncertainties in such an environment as well as managements planned investments in strategic projects and opportunities. Finally, the compensation committee considered the competitive landscape for compensation, observing that, in light of the current economic conditions, most U.S. technology companies had not necessarily reduced bonus opportunities for executives but rather had changed the threshold performance levels and discretionary components of their bonus programs.
Our executive compensation program consists of three components: short-term compensation (including base salary and annual performance bonuses), long-term incentives (including equity awards in the form of stock options, restricted stock units and/or restricted stock awards) and benefits.
Our compensation committee evaluates executive compensation and strives to apply the mix of these components in a manner that implements our philosophy while meeting our objectives to attract and retain top talent using compensation that is consistent with or more attractive than other opportunities while also adjusting for individual relative performance and responsibilities as well as our business goals. Our compensation committee has no formal policy for allocating compensation among the compensation components described above, but it does strive to set each component at levels that are consistent with the 50th percentile range of our identified peer group.
We utilize short-term compensation, including base salary, annual adjustments to base salary and annual performance bonuses, to motivate and reward our key executives in accordance with our performance-based
program. Each individuals short-term compensation components are tied to an annual assessment of his or her progress against established objectives.
Base salary is used to recognize the experience, skills, knowledge and responsibilities required of each executive officer, as well as to reflect market conditions as indicated by reference to the companys peer group. As we considered our executives compensation for 2008, base salary determinations were guided primarily by our objective to provide compensation at levels to attract and retain top talent. In establishing the 2008 base salaries of the executive officers, our compensation committee and management took into account a number of factors, including the executives seniority, position and functional role, level of responsibility and his or her accomplishments against personal and group objectives. In addition, we considered the market for corresponding positions within comparable geographic areas and industries as well as the state of our business and our cash flows. In initially setting 2008 base salaries, the compensation committee and management also compared their assessments to the results of the December 2007 study by Towers Perrin.
The base salary of our executive officer group is reviewed on an annual basis, and adjustments are made to reflect performance-based factors, marketplace conditions and the overall performance of our business. Increases are considered within the context of our overall annual merit increase structure as well as individual and marketplace factors. We do not apply specific formulas to determine increases. In 2008, due to increasing global economic uncertainty, our compensation committee generally considered the impact of external marketplace conditions as the determinative factor in setting our executive officers salaries for 2008 and 2009. However, we have historically also considered the following when evaluating officer salaries:
Magid M. Abraham, our Chief Executive Officer, periodically reviews the performance of our executive officers in the context of the factors noted above and recommends to the compensation committee any base salary changes or bonuses deemed appropriate.
In late 2007, in connection with the December 2007 report prepared by Towers Perrin, our compensation committee approved an increase of the base salaries of our executive officers for our 2008 fiscal year in order to better align with our companys compensation philosophy of providing executive base salaries at the 50th percentile range of our companys peer group.
In late 2008, in connection with the October 2008 report prepared by Towers Perrin, our compensation committee re-evaluated the base salaries of our executive officers for our upcoming 2009 fiscal year. Although all of our named executive officers achieved various objectives and demonstrated in improvements in their personal capacities, the compensation committee considered the external market factors and economic conditions particularly heavily in the October 2008 review. In light of our overall financial performance and the general uncertainty of the global economic conditions, as well as the competitive conditions within our peer group and industry, our compensation committee determined at that time to set base salaries of our executive officers for our upcoming 2009 fiscal year at the same level as were set in 2008.
In April 2009, based on additional inputs from Towers Perrin, the compensation committee determined that our named executive officers should have a compensation package that was more heavily weighted in equity than in cash. As a result, the compensation committee determined, among other things, that the 2009 base salary of our named executive officers should be reduced by 7.5% from the 2008 base salary.
The base salaries for 2007, 2008 and 2009 for each named executive officer are set forth below:
Annual performance bonuses for our executive officers are tied to the achievement of our annual company goals and objectives, functional area goals, and/or individual performance objectives. Annual performance bonuses are primarily guided by our objectives of accountability for individual and business performance. We set clearly defined goals for each executive officer, with an emphasis on quantifiable and achievable targets. A portion of each executive officers bonus is clearly tied to the achievement of specific targets relative to the performance of the particular business segment or functional area for which they are responsible, with the remainder tied to similar targets relative to our overall financial performance. Individual awards under the program are based on a thorough review of the applicable performance results of our company, business, function or individual as compared to the applicable goals.
Target bonuses are set at a percentage of actual full-year salary. Our compensation committee approves these percentages for our executive officers based on a determination of the appropriate portion of total compensation that should be at risk for a particular executive officer. Generally, target bonuses for our most senior executive officers are set at a higher percentage of salary than for our other executive officers, so as to recognize their broader responsibility for company-wide results and to place a greater portion of their total compensation at risk against the achievement of overall goals and objectives.
The 2008 target bonus and actual bonus award levels as a percentage of 2008 full year base salary for our executive officers were as follows:
In order to further improve our companys retention objectives and alignment of executive compensation with stockholder interests, a portion of each named executive officers bonus was issued in shares of restricted common stock. The value of the stock-based portion of each named executive officers bonus was calculated as twenty-five percent (25%) of the executive officers full target bonus; any difference between what the executive officers actual earned bonus amount and the target amount was then adjusted through the cash component of the bonus. The number of shares underlying the stock-based portion of the bonuses was based on the dollar amount foregone in lieu of cash and the closing stock price of our common stock as reported on the NASDAQ Global Market on February 18, 2009, the date we paid these 2008 bonus payments to our named executive officers.
The annual performance bonuses established for the 2008 fiscal year for Dr. Abraham and Messrs. Green and Fulgoni were based on a mix of quantitative and qualitative factors certain of which were the satisfactory completion of specific projects or initiatives. The 2008 bonus targets for Dr. Abraham and Messrs. Green and Fulgoni were calculated based on the following component factors:
We established the quantitative revenue and EBITDA targets such that, if the company meets the expected publicly announced full-year EBITDA and revenue guidance, they would have achieved approximately 40% of the overall target bonus. The specific milestone levels are not disclosed, as such information is not necessary for the protection of our investors and may allow our competitors to have damaging insight into our plans and cost structure.
The annual performance bonuses established for the 2008 fiscal year for Mr. Dale and Ms. Lin were based solely on qualitative performance factors. Targets were based on qualitative factors such as successful completion and integration of strategic transactions, effective management of their respective organizations, the development and release of new technology or product offerings and the successful implementation of strategic initiatives.
At the end of each fiscal year, each named executive officer completes a self-assessment of his or her performance in the context of their bonus criteria. Dr. Abraham reviews these self-assessments and makes a recommendation to our compensation committee on the achievement of the target bonus amounts. Our named
executive officers earned the following bonuses based on the performance of our business and their individual performances in 2008:
As noted above, our named executive officers did not receive 100% of their target bonuses. Dr. Abrahams, Mr. Greens and Mr. Fulgonis respective bonuses were lower than our target due to our reported revenue results and EBITDA results for 2008 being below the high-end of our targets for our bonus policy. Ms. Lin and Mr. Dale each received a portion of their total bonus target based on their actual performance against their qualitative goals as well as our overall revenue and EBITDA results.
Based on the collective inputs from Towers Perrin, management, and the experience of the members of our board of directors and compensation committee, in February 2009 our compensation committee determined to consolidate our bonus policy for our 2009 fiscal year with our long-term incentive compensation policy, so that executives would be awarded restricted stock according to certain target levels based on each executive officers respective base salary levels.
In reaching this decision, the compensation committee considered the importance of providing increased incentive opportunities to our executive officers in equity, which would help better align the long-term incentives of those executives with the incentives of our stockholders. The compensation committee also considered the importance of reducing or delaying cash outlays from the company in light of the global economic environment, the inherent cash budgeting uncertainties in such an environment as well as managements planned investment activities. Finally, the compensation committee considered the competitive landscape for compensation, observing that, most U.S. technology companies had not necessarily reduced the value of bonus opportunities for executives despite the recent economic downturn but rather had adjusted the threshold performance levels and discretionary components of their bonus programs in order to reduce cash outlays while providing long-term incentives.
Our compensation committee believes that this format of a bonus and long-term compensation policy and the target levels are consistent with the 50th percentile range of our identified peer group based on their experience in the marketplace as well as insight provided by Towers Perrins report. The specifics terms of this combined bonus and long-term compensation policy is summarized in greater detail in the following section titled Long-Term Compensation.
Long-term, equity-based incentives are primarily guided by our objective of aligning executive compensation with the interests of our stockholders. Grants of stock options, restricted stock units and restricted stock made to executive officers are designed to provide them with incentive to execute their responsibilities in such a way as to
generate long-term benefit to us and our stockholders. Through possession of stock options, restricted stock units and shares of restricted stock, our executives participate in the long-term results of their efforts, whether by appreciation of our companys value or the impact of business setbacks, either company-specific or industry based. Additionally, stock options, restricted stock units and shares of restricted stock provide a means of ensuring the retention of key executives, in that they are in almost all cases subject to vesting over an extended period of time, often multiple years.
Stock options, restricted stock units and shares of restricted stock are granted periodically, and are typically subject to vesting based on the executives continued employment. Historically, most of these grants were designed to vest evenly over four years, beginning on the date of the grant. Prior to 2007, our long-term compensation equity grants consisted solely of stock options granted by our board of directors based upon the recommendations of our compensation committee.
Beginning in 2007, we began to use shares of restricted common stock as a form of long-term compensation. Such grants have been made by our board of directors upon the recommendations of our compensation committee. Our compensation committee has preferred the recent use of restricted stock in favor of stock options now that our common stock is publicly traded because it results in less dilution of our existing stockholders and provides some immediate, tangible value to our employees, and it also does not require cash outlay by our employees. At the same time, restricted stock with vesting creates long-term growth incentives for our employees as well. We expect to continue to predominantly use restricted stock awards in favor of stock options as a form of long-term, stock-based compensation in the foreseeable future.
Historically, upon joining us, each executive was granted an initial option award that was primarily based on competitive conditions applicable to the executives specific position. After our initial public offering, upon joining us, each executive is granted an initial restricted stock award that is primarily based on competitive conditions applicable to the executives specific position. In addition, the compensation committee considers the number of shares subject to options or shares of restricted stock owned by other executives in comparable positions within our company when determining the number of shares to grant to each executive, as well as the number of shares that remain unvested. Based upon the findings of the December 2007 study conducted by Towers Perin and reviewed by our compensation committee, we believe this strategy is consistent with the approach of our peer group and, in our compensation committees view, is appropriate for aligning the interests of our executives with those of our stockholders over the long term.
Periodic awards to executive officers are made based on an assessment of their sustained performance over time, their ability to impact results that drive value to our stockholders and their organization level. Equity awards are not granted automatically to our executives on an annual basis. Magid M. Abraham, our Chief Executive Officer, periodically reviews the performance of our executive officers on the basis noted above and recommends to the compensation committee any equity awards deemed appropriate. The compensation committee reviews any such recommendations and presents them to our board of directors for approval, if appropriate.
In connection with the December 2007 Towers Perrin study, in December 2007 our compensation committee approved guidelines for restricted stock awards to be granted in the first quarter of 2008 based on each executives respective 2008 base salary as well as the number of shares held by each executive officer that remain unvested. On February 18, 2008, our compensation committee approved specific restricted common stock awards for our executives using the targets established in December 2007, as well as factors such as the number of unvested shares remaining from option grants previously awarded to the executive and the amount of restricted common stock
awarded to an executive that remains subject to a right of repurchase. The target percentages for each executive as well as the actual grants and the fair value at the time of grant were as follows:
The actual awards to Mr. Dale and Ms. Lin were larger than the target percentages. Our compensation committee considered the existing outstanding awards held by Mr. Dale and Ms. Lin and the degree to which they were already vested. Based on such considerations, the compensation committee determined that a larger grant was necessary for Mr. Dale and Ms. Lin than initially targeted in order to fulfill our goals for incentivizing retention.
As discussed above in the subsection titled Annual Performance Bonuses 2009 Executive Compensation Bonus Policy, in February 2009 our compensation committee combined our bonus policy for our 2009 fiscal year with our long-term compensation policy, so that executives may be awarded restricted stock according to certain target levels based on our executive officers respective base salary levels and their performance during the 2009 fiscal year. If earned, these awards will be paid out following the end of our 2009 fiscal year, with a portion of the shares issued vesting immediately upon the date of the award and the remaining shares vesting over three years thereafter. Our compensation committee believes that this format and the target levels are consistent with or more attractive than other opportunities in those executives respective marketplaces based on their experience in the marketplace as well as insight provided by Towers Perrins report.
The combined bonus and long-term compensation targets for each executive for the 2009 fiscal year bonuses are as follows:
We provide the following benefits to our executive officers on the same basis as the benefits provided to all our employees:
These benefits are consistent with those offered by other companies and specifically with those companies with which we compete for employees.
In general, we do not view perquisites as a significant component of our executive compensation structure. However, the compensation committee has the authority to approve perquisites, primarily for retention purposes or to accommodate specific, and usually temporary, circumstances of executives who do not reside near their work locations.
Dr. Abraham and Messrs. Green and Fulgoni are parties to agreements that provide certain benefits to these executive officers in the event of their termination or a change in control of the Company under certain circumstances.
We believe the following arrangements are useful retention tools that are particularly necessary in an industry, such as ours, where there is frequent market consolidation. We recognize that it is possible that we may be subject to a change of control, and that this possibility could result in the departure or distraction of Dr. Abraham and Messrs. Green and Fulgoni to the detriment of our business. We believe that the following arrangements will help to maintain the continued focus and dedication of Dr. Abraham and Messrs. Green and Fulgoni to their assigned duties to maximize stockholder value without the distraction that could result from the uncertainty of a change of control.
In May 2006, we entered into an offer letter agreement with Mr. Green. Pursuant to this offer letter agreement, in the event that we terminate Mr. Green without cause, Mr. Green is entitled to severance equal to six pay periods of his present salary, or $69,786, in addition to any unpaid prorated base salary, benefits and expense reimbursements to which he is entitled by virtue of his past employment with us.
Other than the severance payment to Mr. Green described above, our named executive officers are not otherwise entitled to additional cash payments upon a change in control or termination of their respective employment.
Pursuant to our offer letter agreement with Mr. Green, options granted to Mr. Green upon his initial employment are subject to certain vesting provisions that are accelerated upon a combination of a change of control of our company and Mr. Greens termination or demotion. Assuming a fair market value of our common stock of $12.75 per share, which represents the closing market price of our common stock as reported on the NASDAQ Global Market on December 31, 2008, Mr. Greens option holdings at December 31, 2008 would have
vested and resulted in an immediate increase in value to Mr. Green upon a change of control December 31, 2008 as follows:
Additionally, certain shares of the restricted common stock held by Dr. Abraham and Messrs. Green and Fulgoni at December 31, 2008 that remain unvested are subject to single trigger acceleration provisions, which results in the repurchase rights fully lapsing upon the occurrence of a change of control event. In general terms, the restricted stock agreements for Dr. Abraham and Messrs. Green and Fulgoni define a change of control event as an acquisition of at least 50% of the voting control of the company, a sale or merger of the company or the sale of substantially all the assets of the company. Assuming a fair market value of our common stock of $12.75 per share, which represents the closing market price of our common stock as reported on the NASDAQ Global Market on December 31, 2008, Dr. Abraham and Messrs. Green and Fulgoni would have obtained an immediate increase in the value of their respective stock holdings upon a change of control at December 31, 2008 as indicated in the table below.
Given Mr. Greens change in position on April 20, 2009 from Chief Financial Officer to Executive Vice President of Human Capital, we anticipate further amending the terms of his employment arrangement, including the severance and change of control provisions, to align his compensation package with one more commensurate with his new role. The terms of this arrangement have not yet been finalized by our management and our compensation committee.
We intend to continue our strategy of compensating our named executive officers at levels consistent with or more attractive than other opportunities for each type of executive, with the opportunity to impact their total annual compensation through performance-based incentive programs that include both cash and equity elements. Our approach to total executive compensation is designed to drive results that maximize our financial performance and deliver value to our stockholders. In light of our compensation philosophy, we believe that the total compensation package for our executives should continue to consist of base salary, annual cash performance bonus and long-term equity-based incentives, reflecting our key compensation principles of compensation to attract and retain top talent, accountability for individual and business performance, and alignment with stockholder interests, respectively. We do not consider benefits to be a key element in attracting executive officers, and we typically offer largely the same benefits to our executive officers as to our other employees. Historically, we have typically offered a combination of short-term and long-term compensation to suit our executives preferences. Certain of our executives who joined us earlier in our history preferred to accept more long-term compensation in the form of stock options, as the potential return was higher at that stage and our ability to fund short-term cash compensation was more limited. At the same time, certain of our executives have preferred greater short-term compensation and reduced long-term compensation. As we have become more profitable and our common stock has become publicly traded, our ability to attract executives through short-term compensation has increased. Accordingly, we expect that our decisions regarding the relationship among our elements of compensation will become less dependent upon our stage as a growing company and more dependent upon our key compensation principles.
Our compensation approach is necessarily tied to our stage of development as a company. Accordingly, the specific direction, emphasis and components of our executive compensation program will continue to evolve as our company and its underlying business strategy continue to grow and develop. For example, we have reduced our executive compensation programs emphasis on stock options as a long-term incentive component in favor of other forms of equity compensation such as restricted stock awards. Similarly, we continue to revise how we measure senior executive performance to take into account the unique requirements of being a public company, including, but not limited to, strict compliance with the standards of the Sarbanes Oxley Act. In addition, we have engaged an outside compensation consultant since mid-2007 to assist our compensation committee in continuing to evolve our executive compensation program, and we may look to programs implemented by comparable public companies in refining our compensation approach.
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Annual Report on Form 10-K/A with company management. Based on the compensation committees review of, and the discussions with management with respect to, the Compensation Discussion and Analysis, the compensation committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K/A for the fiscal year ended December 31, 2008 for filing with the Securities and Exchange Commission.
William J. Henderson, Chairman
The foregoing compensation committee report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, and shall not otherwise be deemed filed under these acts, except to the extent we specifically incorporate by reference into such filings.
The following table sets forth summary information concerning compensation for the following persons: (i) our chief executive officer, (ii) our chief financial officer during 2008 and (iii) the three most highly compensated of our other executive officers who received compensation during 2008 of at least $100,000 and who were executive officers on December 31, 2008. We refer to these persons as our named executive officers elsewhere in this Annual Report on Form 10-K/A statement. The following table includes all compensation earned by the named executive officers for the respective periods, regardless of whether such amounts were actually paid during the period.
The following table sets forth certain information concerning grants of plan-based awards to named executive officers in 2008. No options were granted to our named executive officers during 2008.
Outstanding Equity Awards at December 31, 2008
The following table shows outstanding equity awards held by the named executive officers as of December 31, 2008.
The following table shows the stock options exercised and value realized upon exercise, as well as all stock awards vested and value realized upon vesting by our named executive officers during the year ended December 31, 2008.
Retainers and Meeting Fees: During 2008, our non-employee directors were eligible to receive an annual cash retainer of $25,000 for service on our board of directors, and the chairs of certain of the standing committees of our board of directors were eligible to receive annual cash retainers as follows: $10,000 per year for the chair of our audit committee and $7,500 per year for the chair of our compensation committee. In the case of new non-employee directors, these fees are prorated based on when the non-employee director joined our board of directors during the year. Employee directors are not compensated for board of director or committee service in addition to their regular employee compensation.
Other Equity-Based Compensation: Outside directors are also eligible to receive stock awards and option grants under our 2007 Equity Incentive Plan. Since our initial public offering in 2007, our non-employee directors have been and are entitled to an annual grant of restricted stock having a value of $50,000 at the time of grant. The total amount of each annual grant of restricted stock shall remain unvested until the earlier of (i) the date of the respective directors next anniversary upon joining our board of directors, (ii) the date of the first annual stockholders meeting following the date of grant or (iii) a change of control. The board of directors has discretion to accelerate or modify such vesting schedule due to special circumstances.
Expenses: We reimburse our non-employee directors for all reasonable out-of-pocket expenses incurred in the performance of their duties as directors. Such expense reimbursements are less than $10,000 in the aggregate for any non-employee director during fiscal 2008 and are not included in the table below under the subheading 2008 Director Compensation.
The following table sets forth certain information concerning cash and non-cash compensation earned by the non-employee members of our board of directors in 2008. None of the non-employee members of our board of
directors received option awards or other compensation in 2008, and no expense was incurred during 2008 for existing option awards held by directors.
Between January and June 2008, William J. Henderson, Thomas D. Berman and Frederick R. Wilson served on our compensation committee. Messrs Berman and Wilsons terms as Class I directors expired in June 2008. William Katz and Jarl Mohn were elected to our board of directors in June 2008 and were elected to our compensation committee. None of the current or former members of our compensation committee in 2008 was a present or former officer or employee of our company. In addition, during 2008, none of our officers had an interlock relationship, as that term is defined by the SEC.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to beneficial ownership of our common stock, as of April 15, 2009, by:
Beneficial ownership is determined in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of the common stock that they beneficially own, subject to applicable community property laws. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of April 15, 2009 are deemed outstanding, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, these shares do not include any stock or options awarded after April 15, 2009. A total of 29,859,592 shares of our common stock were outstanding as of April 15, 2009.
Except as otherwise indicated, the address of each of the persons in this table is c/o comScore, Inc., 11950 Democracy Drive, Suite 600, Reston, Virginia 20190.
The following table summarizes our equity compensation plans as of December 31, 2008:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related person transactions, which we define as all transactions involving an executive officer, director, nominee for director or a holder of more than five percent of our common stock, including any of their immediate family members and any entity owned or controlled by such persons, are reviewed and approved by the audit committee of our board of directors or in some cases by a majority of disinterested directors on our board of directors.
In any transaction involving a related person, our audit committee and our board of directors consider all of the available material facts and circumstances of the transaction, including: the direct and indirect interests of the related persons; in the event the related person is a director or nominee for director (or immediate family member of a director or an entity with which a director is affiliated), the impact that the transaction will have on a directors or nominee for directors independence; the risks, costs and benefits of the transaction to us; and whether any alternative transactions or sources for comparable services or products are available.
After considering all such facts and circumstances, our audit committee and our board of directors determines whether approval or ratification of the related person transaction is in our best interests. For example, if our audit committee determines that the proposed terms of a related person transaction are reasonable and at least as favorable as could have been obtained from unrelated third parties, it will recommend to our board of directors that such transaction be approved or ratified. In addition, if a related person transaction will compromise the independence of one of our directors or nominees for director, our audit committee may recommend that our board of directors reject the transaction if it could affect our ability to comply with securities laws and regulations or NASDAQ listing requirements.
Of the transactions described below, the employment agreement with Ms. Abraham and several of the indemnification agreements were entered into prior to the adoption of our audit committee charter. Accordingly, each of those transactions were approved by disinterested members of our board of directors after making a determination that the transaction was executed on terms no less favorable than those we could have obtained from unrelated third parties. The transaction with INXPO, LLC, or INXPO, was ratified by our audit committee after
making a determination that the transaction was executed on terms no less favorable than those we could have obtained from unrelated third parties.
The policies and procedures described above for reviewing and approving related person transactions are not in writing. However, the charter for our audit committee provides that one of the committees responsibilities is to review and approve in advance any proposed related person transactions.
We believe that there has not been any other transaction or series of transactions during 2008 to which we were or are to be a participant in which the amount involved exceeds $120,000 and in which any director, nominee for director, executive officer or holder of more than five percent of our common stock, or members of any such persons immediate family, had or will have a direct or indirect material interest, other than compensation described in Executive Compensation or Director Compensation elsewhere in this Annual Report on Form 10-K/A statement and as described below.
Since our inception in 1999, Linda Boland Abraham, the spouse of our President and Chief Executive Officer, Dr. Magid M. Abraham, has been employed in various management and executive management positions with us. Ms. Abraham has served as our Executive Vice President of Global Product Management since October 2007, and her responsibilities have since increased such that she is one of our executive officers. Ms. Abraham earned approximately $208,000 in salary, and received $51,000 in bonus (of which, approximately $18,000 was paid in the form of restricted stock based on the value at the time of grant) and an award of restricted stock with a value at the time of grant of approximately $97,000 in 2008.
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements and our amended and restated certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
During December 2007, we entered into a services agreement with INXPO, an Illinois-based provider of virtual events. Mr. Fulgoni has been a member of the board of directors of INXPO since July 2005. In 2008, we purchased services under this agreement from INXPO with an aggregated value of $202,000. As of December 31, 2008, no amounts were payable to INXPO.
Our board of directors has determined that each of Messrs. Ganek, Golden, Henderson, Katz, Korn and Mohn is independent under the rules of the Securities and Exchange Commission and the listing standards of the NASDAQ Stock Market; therefore, every member of the audit committee, compensation committee and nominating and governance committee is an independent director in accordance with those standards. There were no related person transactions considered in the last fiscal year in the determination of the independence of the directors.
The following table sets forth a summary of the fees billed to us by Ernst & Young LLP for professional services for the fiscal years ended December 31, 2007 and 2008, respectively. All of the services described in the following fee table were approved by the audit committee.
The audit committee meets regularly with Ernst & Young LLP throughout the year and reviews both audit and non-audit services performed by Ernst & Young LLP as well as fees charged for such services. The audit committee has determined that the provision of the services described above is compatible with maintaining Ernst & Young LLPs independence in the conduct of its audit functions.
Our audit committee has adopted and our board of directors has approved a policy that sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor may be pre-approved. Pursuant to its audit, audit-related and non-audit services pre-approval policy, our audit committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the audit committee at its next scheduled meeting. Our audit committee pre-approved all audit related, tax and other services rendered by Ernst & Young LLP in 2007 and 2008, with the exception of 9.7% of the tax services rendered by Ernst & Young LLP in 2008. Such services were promptly brought to the attention of, and were approved by, the audit committee.
(a)(1) and (a)(2): No financial statements or schedules are filed with this Amendment No. 1 to Annual Report on Form 10-K/A.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Magid M. Abraham, Ph.D.
President, Chief Executive
Officer and Director
April 30, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.