Applied Science Products, Inc. DEF 14A 2012
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Check the appropriate box:
2012 PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of FleetCor Technologies, Inc. will be held at
5445 Triangle Parkway, Norcross, GA 30092
on May 22, 2012 at 10:00 a.m.
April 23, 2012
You are cordially invited to attend the Annual Meeting of Stockholders of FleetCor Technologies, Inc., which will be held at our corporate offices at 5445 Triangle Parkway, Norcross, GA 30092, on May 22, 2012 at 10:00 a.m.
The attached Notice of Annual Meeting of Stockholders and Proxy Statement contain details of the business to be conducted at the Annual Meeting.
Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. Therefore, I urge you to promptly vote and submit your proxy by phone or by signing, dating, and returning the enclosed proxy card in the enclosed envelope. If you decide to attend the Annual Meeting, you will be able to vote in person, even if you have previously submitted your proxy.
On behalf of the Board of Directors, I would like to express our appreciation for your continued interest in the affairs of FleetCor. I look forward to greeting as many of our stockholders as possible.
FLEETCOR TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To our stockholders:
The Annual Meeting of the Stockholders of FleetCor Technologies, Inc. will be held at our corporate offices at 5445 Triangle Parkway, Norcross, GA 30092, on May 22, 2012 at 10:00 a.m. for the following purposes:
Only stockholders of record at the close of business on April 9, 2012 are entitled to receive notice of, and to vote at, the Annual Meeting. The Proxy Statement was first mailed to stockholders on or about April 23, 2012.
April 23, 2012
Whether or not you expect to attend the Annual Meeting in person, we urge you to vote your shares at your earliest convenience. This will ensure the presence of a quorum at the meeting. Promptly voting your shares via the Internet, by telephone, or by signing, dating, and returning the enclosed proxy card will save us the expenses and extra work of additional solicitation. If you wish to vote by mail, we have enclosed an addressed envelope for which no postage is required if mailed in the United States. Submitting your proxy now will not prevent you from voting your shares at the meeting if you desire to do so, as your proxy is revocable at your option.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 22, 2012. Our Proxy Statement and Annual Report to Stockholders are available at investor.fleetcor.com.
TABLE OF CONTENTS
FLEETCOR TECHNOLOGIES, INC.
5445 Triangle Parkway
Norcross, Georgia 30092
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 2012
This Proxy Statement was first mailed to Stockholders on or about April 23, 2012. It is furnished in connection with the solicitation of proxies by the Board of Directors of FleetCor Technologies, Inc., to be voted at the Annual Meeting of Stockholders for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting of Stockholders will be held at 10:00 a.m. on May 22, 2012 at our corporate offices at 5445 Triangle Parkway, Norcross, GA 30092. Stockholders who execute proxies retain the right to revoke them at any time before the shares are voted by proxy at the meeting. A Stockholder may revoke a proxy by delivering a signed statement to our Corporate Secretary at or prior to the Annual Meeting or by timely executing and delivering, by telephone, mail, or in person at the Annual Meeting, another proxy dated as of a later date. FleetCor will pay the cost of solicitation of proxies.
Stockholders of record at the close of business on April 9, 2012 will be entitled to vote at the meeting on the basis of one vote for each share held. On April 9, 2012, there were 82,993,674 shares of common stock outstanding, held of record by 74 stockholders.
PROPOSAL 1. ELECTION OF DIRECTORS
The following nominees for director are submitted by the board for election:
Each nominee is presently a director of the Company and has consented to serve a new three-year term.
We recommend that you vote FOR these nominees.
PROPOSAL 2. RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2012
The audit committee of the board has selected Ernst & Young LLP as the independent registered public accounting firm for fiscal year 2012. Stockholder ratification of the appointment is not required under the laws of the State of Delaware, but the audit committee has decided to request that the stockholders ratify the appointment. A representative of Ernst & Young LLP will be present at the meeting to answer appropriate questions from stockholders and will have the opportunity to make a statement on behalf of the firm, if he or she so desires.
If this proposal is not approved by our stockholders at the 2012 annual meeting, the audit committee will reconsider its selection of Ernst & Young LLP. Even if the selection is ratified, the audit committee may, in its discretion, select a different registered public accounting firm at any point during the year if it determines that making a change would be in the best interests of FleetCor and our stockholders.
We recommend that you vote FOR the ratification of Ernst & Young LLP as our independent registered public accounting firm.
We know of no other business to be considered at the meeting and the deadline for stockholders to submit proposals or nominations has passed. However, if other matters are properly presented at the meeting, or at any adjournment or postponement of the meeting, and you have properly submitted your proxy, then Ronald F. Clarke or Eric R. Dey will vote your shares on those matters according to his best judgment.
ELECTION OF DIRECTORS
Our board of directors is divided into three classes, with each class serving for a staggered three-year term. The board of directors consists of three class I directors, three class II directors and two class III directors. Our directors are divided among the three classes as follows:
At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the class I directors, class II directors and class III directors identified above will expire upon the election and qualification of successor directors at the annual meeting of stockholders held during the calendar years 2014, 2012 and 2013, respectively.
Three directors are to be elected at the Annual Meeting to hold office until the annual meeting of Stockholders in 2015, and until their respective successors are elected and qualified. The accompanying proxy will be voted in favor of the nominees named below to serve as directors unless the Stockholder indicates to the contrary on the proxy. All the nominees are current directors. Our current directors were initially designated pursuant to our stockholders agreement, which terminated upon completion of our initial public offering.
The Board of Directors expects that each of the nominees will be available for election, but if any of them is unable to serve at the time the election occurs, the proxy will be voted for the election of another nominee to be designated by our Board.
BOARD OF DIRECTORS AND COMMITTEES
Our board of directors currently consists of eight members. Of our directors, sevenMessrs. Balson, Carroll, Evans, Johnson, Macchia, Marschel and Stullare independent directors as defined under the New York Stock Exchange listing standards. Under our amended and restated bylaws, the number of directors will be determined from time to time by our board of directors.
The Board held four meetings in 2011 and each director attended at least 75 percent of all board and applicable committee meetings. Our independent directors meet in executive session at each regularly scheduled in-person board meeting, when deemed appropriate. The board does not have a policy regarding directors attendance at annual meetings. Three of our directors attended our 2011 annual meeting of stockholders.
Our Board has three standing committees: an audit committee, a compensation, nominating and corporate governance committee, and an executive and acquisitions committee. Each committee has a written charter. The table below provides current membership and fiscal year 2011 meeting information for each of the board committees.
Below is a description of each standing committee of our Board of Directors. Each committee has authority to engage legal counsel or other advisors or consultants as it deems appropriate to carry out its responsibilities.
Our audit committee currently consists of Messrs. Johnson, Macchia and Marschel. Mr. Macchia was elected to the board during July 2010 and subsequently became the chairman of the committee. Our board has determined that each member of the committee meets the definition of independent director for purposes of the New York Stock Exchange rules and the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the Exchange Act). Our board of directors has determined that Mr. Macchia qualifies as an audit committee financial expert under Securities and Exchange Commission rules and regulations.
Our audit committee is responsible for, among other matters:
Our board of directors has adopted a written charter for the committee, which is available on our website.
Compensation, Nominating and Corporate Governance Committee
Our compensation, nominating and corporate governance committee currently consists of Messrs. Balson, Evans, Marschel and Stull. Mr. Evans is the chairman of the committee. Our board of directors has determined that each committee member meets the definition of independent director for purposes of the New York Stock Exchange rules and the definition of outside director for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended. In addition, a sub-committee of our compensation, nominating and corporate governance committee consisting of Messrs. Marschel and Stull approve any compensation that may otherwise be subject to Section 16 of the Exchange Act.
The compensation, nominating and corporate governance committee is responsible for, among other matters:
Our board of directors has adopted a written charter for the committee, which is available on our website.
See Compensation Discussion and Analysis for a description of the processes and procedures of the committee and for additional information regarding the committees role and managements role in determining compensation for executive officers and directors.
Executive and Acquisitions Committee
Our executive and acquisitions committee consists of Messrs. Clarke (chairman), Balson, Evans and Johnson. Between meetings of our board of directors, the executive and acquisitions committee has and may exercise the powers of the board of directors to act upon any matters which, in the view of the Chairman of the Board, should not be postponed until the next previously scheduled meeting of the board of directors, except for those powers expressly reserved to the board. In particular, the executive and acquisitions committee may assist the board of directors in connection with capital expenditures, investments, acquisitions, financing activities and other matters. Our board of directors has adopted a written charter for the committee, which is available on our website.
Our corporate governance guidelines provide that our board will include a majority of independent directors. Our CEO serves as the chairman of the board and has served as such since 2003. We believe this leadership
structure has been effective. Seven of our eight directors are independent, as described above under Director Independence. The members of our audit committee and compensation, nominating and corporate governance committee are also independent, as described above under Audit Committee and Compensation, Nominating and Corporate Governance Committee. We do not have a lead director, but our corporate governance guidelines provide that our non-management directors will meet in executive session, without management present, as frequently as they deem appropriate, typically at the time of each regular board meeting. We anticipate that the chairs of the independent board committees will rotate as presiding director, and the presiding director will act as a liaison between the non-management directors and the chairman and CEO in connection with each regular meeting. We believe that having a combined chairman and CEO, a board with a majority of independent directors who will meet regularly in executive session, and independent chairs for the boards audit committee and compensation, nominating and corporate governance committee provides the best form of leadership for FleetCor and our stockholders and provides an appropriate balance between strategy development and independent oversight of management. The board of directors believes that having our CEO serve as chairman of the board facilitates the boards decision making process because Mr. Clarke possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the company and its business and thus is best positioned to develop agendas that ensure the boards time and attention is focused on the most critical matters. The combined role enables decisive leadership, ensures accountability and enhances the companys ability to communicate its message and strategy clearly and consistently to the companys stockholders, employees and customers.
Our board is responsible for overseeing our risk management. Under its charter, the audit committee is responsible for discussing with management the annual internal audit plan, FleetCors major financial risk exposures, steps management has taken to monitor and control such exposures, risk management and risk assessment policies, significant findings and recommendations and managements responses. The audit committee is also responsible for discussing with management and the independent auditors, periodically, normally on at least an annual basis, the independent auditors annual audit scope and plan and risk assessment and risk management policies. The boards other committees oversee risks associated with their respective areas of responsibility. For example, the compensation, nominating and corporate governance committee considers risks associated with our compensation policies and practices, with respect to both executive compensation and compensation generally. Our board will regularly engage in discussing the most significant risks and how the risks are being managed, and receive reports from senior management and from committee chairs. We believe that our leadership structure, as described above, supports the risk oversight function of the board. While we have a combined chairman and CEO, independent directors chair the audit committee and compensation, nominating and corporate governance committee, which are involved with risk oversight.
Our corporate governance guidelines provide that a majority of our directors will be independent. Our board of directors has adopted director independence guidelines to assist in determining each directors independence. These guidelines are included in our corporate governance guidelines available on our website at investor.fleetcor.com. The guidelines either meet or exceed the independence requirements of the New York Stock Exchange on which our shares are traded.
Under the director independence guidelines, the board of directors must affirmatively determine a director has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. To facilitate this determination, annually each director completes a questionnaire that provides information about relationships that might affect the determination of independence. Management provides the compensation, nominating and corporate governance committee and our board with relevant facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the director independence guidelines.
Based on the review and recommendation by the compensation, nominating and corporate governance committee, the board of directors analyzed the independence of each director and determined that Messrs. Balson, Carroll, Evans, Johnson, Macchia, Marschel and Stull meet the standards of independence under our director independence standards, and applicable New York Stock Exchange listing standards, including that each member is free of any relationship that would interfere with his individual exercise of independent judgment. In making this determination, our board considered that certain board members are principals in private equity firms holding substantial positions in our common stock.
COMPENSATION OF DIRECTORS
Members of our board of directors, except for Messrs. Johnson, Macchia and Marschel, do not receive compensation for serving as directors. Restricted stock awards to Messrs. Johnson, Macchia and Marschel for 2011 service were made on April 13, 2011. Each award was for 5,500 shares of common stock and vested on January 1, 2012. We have not historically paid cash compensation and we do not grant option awards to our directors. However, beginning in 2012, cash compensation in the amount of $20,000 was approved for the audit committee chairman, payable January 1, 2013. The decision to provide cash compensation will be reviewed on an annual basis. All members of our board of directors are reimbursed for actual expenses incurred in connection with attendance at board meetings. Mr. Clarke did not receive any compensation for service on our board of directors. Mr. Clarkes compensation is described in Compensation Discussion and Analysis.
We believe restricted stock awards are an appropriate form of compensation for our directors because the value of the grants will increase as the value of our stock price increases, thus aligning the interests of these directors with those of our stockholders. The amount of these grants was determined based on our board of directors general experience with market levels of director compensation. We expect to continue to make annual grants of restricted stock to each of our non-employee directors (who are not otherwise affiliated with Advantage Capital Partners, Bain Capital Partners or Summit Partners). Annual grants for director service are generally anticipated to have a value of approximately $175,000. The following table sets forth the total compensation granted to each person who received compensation as a director during 2011.
Messrs. Johnson, Macchia and Marschel did not hold any stock option awards as of December 31, 2011. Messrs. Johnson, Macchia and Marschel each held 5,500 unvested restricted stock awards as of December 31, 2011, which vested on January 1, 2012.
The qualifications for directors are described in our corporate governance guidelines, which is available on our website. The following factors, among others, are assessed when considering a directors or nominees qualification:
No director should serve on more than four other public company boards, unless the compensation, nominating and corporate governance committee determines otherwise. Directors should advise the Chairman of the Board and the chair of the compensation, nominating and corporate governance committee in advance of accepting an invitation to serve on another public company board.
The board of directors does not believe that it should limit the number of terms for which a person may serve as a director or require a mandatory retirement age, because such limits could deprive us of the valuable contributions made by a director who develops, over time, significant insights into FleetCor and its operations.
The re-nomination of existing directors is not viewed as automatic, but is based on continuing qualification under the criteria stated above. In addition, the committee considers the existing directors performance on the board and any committee.
SELECTION OF DIRECTOR NOMINEES
Our compensation, nominating and corporate governance committee is responsible for evaluating candidates for election to our board of directors. It also evaluates candidates for election to fill vacancies that may arise between annual meetings. The director qualifications referenced above under Director Qualifications are used to evaluate candidates. The committee may retain a third party search firm to identify director candidates and has sole authority to select the search firm and approve the terms and fees of any director search engagement.
Our current directors were initially designated pursuant to our stockholders agreement, which terminated upon completion of our initial public offering. The committees process for selecting nominees begins with an evaluation of the qualifications and performance of incumbent directors and a determination of whether the board or its committees have specific unfulfilled needs. The committee considers candidates identified by the committee, other directors, executive officers and stockholders, and, if applicable, a third party search firm. Consideration would include determining whether a candidate qualifies as independent under the various standards applicable to the board and its committees. The committee selects nominees to recommend to the board, which considers and makes the final selection of director nominees and directors to serve on its committees. The committee may use whatever process it deems appropriate under the circumstances when evaluating nominees recommended by stockholders.
We do not have a formal policy regarding board diversity. Our compensation, nominating and corporate governance committee currently believes that, while diversity and variety of experiences and viewpoints represented on the board should be considered, a director nominee should not be chosen or excluded solely or largely because of race, gender, national origin or sexual orientation or identity. In selecting a nominee, the committee focuses on skills, expertise or background that would complement the existing directors.
STOCKHOLDER RECOMMENDATIONS OF NOMINEES
The compensation, nominating and corporate governance committee of the board of directors considers recommendations for candidates for nomination to the board of directors by a stockholder. It will consider and evaluate candidates recommended by stockholders in the same manner as candidates recommended from other sources. If the board determines to nominate a stockholder-recommended candidate and recommends his or her election, then that nominees name will be included in the proxy statement for the next annual meeting. Our stockholders also have the right under our bylaws to directly nominate director candidates and should follow the procedures outlined in our bylaws.
To be timely, a stockholders notice to the corporate secretary regarding a direct nomination must be delivered and received no earlier than January 22, 2013, or later than February 21, 2013. However, in the event that the annual meeting is called for a date that is not within 30 days before or after May 22, 2013, notice by the stockholder must be received by the later of the tenth day following the date of the Public Announcement (as defined in our bylaws) of the date of the annual meeting and the 90th day prior to the annual meeting.
Stockholder nominations must be addressed to: FleetCor Technologies, Inc., Attention: Corporate Secretary, 5445 Triangle Parkway, Norcross, Georgia 30092, DIRECTOR CANDIDATE RECOMMENDATION.
Any proposal that a stockholder wishes to be considered for inclusion in our proxy statement and proxy card for the 2013 annual meeting of stockholders must comply with the requirements of Rule 14a-8 under the Exchange Act and must be delivered and received no later than December 24, 2012 at the following address, FleetCor Technologies, Inc., Attention: Corporate Secretary, 5445 Triangle Parkway, Norcross, Georgia 30092, STOCKHOLDER PROPOSAL. However, in the event that the annual meeting is called for a date that is not within thirty days before or after May 22, 2013, notice by the stockholder must be received a reasonable time before we begin to print and mail our proxy materials for the 2013 annual meeting of stockholders.
If a stockholder wishes to present a proposal before the 2013 annual meeting but does not wish to have a proposal considered for inclusion in our proxy statement and proxy in accordance with Rule 14a-8 or to nominate someone for election as a director, the stockholder must give written notice to our Corporate Secretary at the address noted above. To be timely, a stockholders notice to the Corporate Secretary must be delivered and received no earlier than January 22, 2013, nor later than February 21, 2013. However, in the event that the annual meeting is called for a date that is not within thirty days before or after May 22, 2013, notice by the stockholder must be received by the later of the tenth day following the date of the Public Announcement (as defined in our bylaws) of the date of the annual meeting and the 90th day prior to the annual meeting. Our bylaws contain specific procedural requirements regarding a stockholders ability to nominate a director or submit a proposal to be considered at a meeting of stockholders. The bylaws are available on our website at investor.fleetcor.com under Corporate Governance.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The board will give appropriate attention to written communications that are submitted by stockholders and other interested parties, and will respond if and as appropriate. We maintain on our corporate website a link explaining that stockholders and other interested parties who wish to communicate directly with the board of directors may do so by any of the following means:
Writing to the board of directors as a group or the non-management directors as a group at our headquarters mailing address to the attention of the Corporate Secretary:
FleetCor Corporate Secretary
5445 Triangle Parkway
Norcross, GA, 30092
The Corporate Secretary reviews all written and emailed correspondence received from stockholders and other interested parties and forwards such correspondence periodically to the directors if and as appropriate.
GOVERNANCE DISCLOSURES ON OUR WEBSITE
Complete copies of our corporate governance guidelines, committee charters and code of conduct are available on the Corporate Governance section of our website, at investor.fleetcor.com. In accordance with New York Stock Exchange rules, we may also make disclosure of the following on our website:
We will provide any of the foregoing information without charge upon written request to Corporate Secretary, FleetCor Technologies, Inc., 5445 Triangle Parkway, Norcross, Georgia 30092.
OF PRINCIPAL STOCKHOLDERS, DIRECTORS, AND MANAGEMENT
This table shows common stock that is beneficially owned by our directors, our chief executive officer, our chief financial officer and our next three most highly compensated executive officers, whom we refer to as our named executive officers and all persons known to us to own 5 percent or more of our outstanding common stock, as of February 10, 2012. Percentages are based on 82,232,940 shares outstanding as of February 10, 2012.
AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED
This compensation discussion and analysis describes the compensation policies and programs for our named executive officers for 2011, which consist of our chief executive officer, our chief financial officer and three other executive officers with the highest total compensation in 2011, as determined under the rules and regulations of the Securities and Exchange Commission. Our named executive officers for 2011 are Ronald F. Clarke, our President and Chief Executive Officer; Eric R. Dey, our Chief Financial Officer; Jeffrey D. Lamb, our Executive Vice PresidentU.S. Fuel Sales and Marketing; John S. Coughlin, our Executive Vice PresidentCorporate Development; and Todd W. House, our PresidentDirect Business.
Overview of Compensation Program
The compensation committee of our board of directors is responsible for establishing and implementing our compensation philosophy, as detailed below. Our compensation committee evaluates and determines the levels and forms of individual compensation for our executive officers, including salaries, cash incentive compensation, bonuses and equity incentive compensation. Our compensation committee reviews and approves compensation for our executive officers periodically, generally in the first quarter of each fiscal year, based on each executive officers performance and our overall performance during the prior year. The committee designs the program with the overall goal that the total compensation paid to our executive officers is fair, reasonable and competitive and includes incentives that are designed to appropriately drive corporate performance. In addition, our chief executive officer plays a significant role in reviewing the performance of the other executive officers and making compensation recommendations to the compensation committee for the executive officers (other than himself).
Our executive compensation program is designed to help us attract talented individuals to manage and operate all aspects of our business, to reward those individuals for the achievement of our financial and strategic goals, to retain those individuals who contribute to the success of our business and to align the interests of those individuals with those of our stockholders. We believe that annual cash incentive compensation should be linked to metrics that create value for our stockholders and the ownership by management of equity interests in our business is an effective mechanism for providing long-term incentives for management to maximize gains for stockholders.
Overview of Elements of Compensation
As discussed in further detail below, our compensation program consists of the following five principal components:
The role of say-on-pay votes
We provide our stockholders with the opportunity to cast an advisory vote on executive compensation (a say-on-pay proposal) every three years. At our annual meeting of stockholders held in May 2011, a substantial majority of the votes cast on the say-on-pay proposal at that meeting were voted in favor of the proposal. The compensation committee believes this affirms stockholders support of our approach to executive compensation, and did not change its approach in 2011. The compensation committee will continue to consider the outcome of our say-on-pay votes when making future compensation decisions for the named executive officers. Our next say-on-pay vote will be held at our 2014 annual meeting of stockholders.
Determining Compensation for the Named Executive Officers
The compensation committee is responsible for administering our compensation practices and making decisions with respect to the compensation paid to our named executive officers. Our compensation committee has not retained the services of a compensation consultant. Compensation for our executive officers has been individualized, impacted by arms-length negotiations at the time of employment, and based on a variety of factors, including:
Our chief executive officer plays a significant role in reviewing the performance of the other executive officers and making compensation recommendations to the compensation committee for the executive officers. When discussing performance evaluations and setting compensation levels for our executive officers, the compensation committee works closely with our chief executive officer; however, the compensation committee has the discretion to reject or modify the recommendations of our chief executive officer. Our chief executive officer does not participate in determining or recommending the amount of his own compensation.
Our chief executive officer periodically evaluates the other executive officers performance with the compensation committee and makes recommendations for base salary, cash incentive awards and grants of long- term equity incentive awards for all executive officers other than himself. Based on these recommendations from our chief executive officer and in consideration of the objectives described above and the principles described below, the compensation committee approves the annual compensation packages of all our executive officers.
Compensation mix and how each element fits into our overall compensation objectives
The compensation committee strives to achieve an appropriate mix between cash payments and equity incentive awards in order to meet our compensation objectives. Our compensation committee does not have any formal policy for allocating compensation between short-term and long-term compensation and cash and non-cash compensation. We believe the most important indicator of whether our compensation objectives are being met is our ability to motivate our executive officers to deliver superior performance and retain them to continue their careers with us on a cost-effective basis.
Our mix of compensation elements is designed to reward recent results, motivate long-term performance and align our executives interests with those of our stockholders. We achieve this through a combination of cash and equity awards. Base salary and benefits are designed to provide a secure level of cash compensation. Annual cash incentive awards are designed to reward recent results. These awards support our annual operating plan and are earned only if we meet the performance goals established by the compensation committee. Discretionary bonuses are designed to reward for performance above and beyond our operating plan or to round payments to a specific award amount. These bonuses are awarded at the discretion of the compensation committee. Equity awards are our chosen vehicle to motivate long-term performance and align our executives interests with those of our stockholders. Equity awards are granted in the form of stock options and performance-based restricted stock. Stock options have value for our executives only if our stock price increases. Some performance-based restricted stock has value to our executives only if the executive meets the performance goal established by the compensation committee. Other performance-based restricted stock has value to our executives only if the company meets its performance metrics (e.g., earnings per share) as established by the compensation committee.
While we have typically provided cash compensation (base salary) and a cash incentive opportunity to each executive in each year, we do not typically provide equity compensation to each executive on an annual basis. We make equity grants designed to encourage a specific performance goal or to reward an executive for extraordinary performance in a particular year. In determining the size of an equity award the compensation committee considers relative job responsibility, the value of existing unvested awards, individual performance history, prior contributions to us, the size of prior grants, arms-length negotiation at the time of an executives hiring and availability of shares in our pool. The compensation committee considers cash compensation and equity compensation separately, and therefore the grant of an equity award in one year does not impact the potential cash compensation to that executive for the same year.
The compensation committee applies the same compensation policies to all of our named executive officers with the overall goal that the total compensation paid to our executive officers is fair, reasonable and competitive and includes incentives that are designed to appropriately drive corporate performance. The ultimate compensation levels earned by the named executive officers reflect the application of these policies to the varying roles and responsibilities of the executives. Generally, the greater the responsibility of the executive and the greater the potential impact of the executive on revenue and net income growth, the higher the potential compensation that can be earned by the executive. In addition, the compensation committee is aware of the competitive market for executive compensation, which reflects a meaningful variation between the chief executive officer and other executive positions for each element of compensation.
Our chief executive officer has the greatest responsibility in managing and driving the performance of our company. He joined our company in 2000, and has managed our significant growth through a combination of organic initiatives, product and service innovation and over 40 acquisitions of businesses and commercial account portfolios, growing our revenue from $33.0 million in 2000 to $519.6 million in 2011. As a result of our compensation committees assessment of our chief executive officers role and responsibilities within our company, his nearly twelve years of service to our company and the competitive market for chief executive officer compensation, there is a significant compensation differential between his compensation levels and those of our other named executive officers.
Components of Compensation
The components of compensation include base salary, annual cash incentive compensation, discretionary bonus, long-term equity incentive awards and benefits and perquisites.
Historically, we have not applied specific formulas to set base salaries, nor have we sought to benchmark base salaries against similarly situated companies. Initial base salaries for our executive officers are typically
negotiated at arms-length at the time of hiring. Base salaries are reviewed annually and adjusted from time to time, taking into account individual responsibilities, individual performance for the year, the experience of the individual, current salary, retention incentives, internal equity and the compensation committees evaluation of the competitive market, based on its general market experience. No particular weight is assigned to each factor.
Effective February 22, 2011, Mr. Clarke received a base salary increase. Effective February 4, 2011, Messrs. Dey and House received base salary increases. Our compensation committee approved an increase to Mr. Clarkes base salary of 5.5% to $725,000, in recognition of his leadership in successfully completing our initial public offering in 2010 and for his oversight in signing a private label partnership in Europe in 2010. Our compensation committee approved an increase to Mr. Deys base salary of 11.1% to $300,000, in recognition of his increased responsibilities as a result of our initial public offering. Our compensation committee approved an increase to Mr. Houses base salary of 9.1% to $300,000, in recognition of his increased responsibilities of managing our Direct Business. Messrs. Lamb and Coughlin did not receive base salary increases in 2011 due to their respectively short tenures with the company.
The compensation committee may also grant discretionary bonuses based on its subjective evaluation of company performance and the executive officers performance during the year. Discretionary bonus grants to the named executive officers for 2011 performance are discussed below.
Annual cash incentive compensation
Our compensation committee typically provides for an annual cash incentive program for our executive officers. The annual cash incentive program is intended to compensate our executive officers for achieving company-wide and/or individual or business unit performance goals that are important to our success during the fiscal year. Certain goals, which tie directly to our operating budget, we believe, are attainable with good performance. Other goals, which we refer to as stretch targets, are considered far more difficult to achieve and in general require extraordinary performance to attain. Our compensation committee approves all targets and payouts, in consultation with our chief executive officer. Executives are eligible for payments only if they are employed by us both on the last day of the applicable fiscal year and on the actual payment date of the incentive award.
In March 2011, the compensation committee approved our 2011 annual cash incentive program for our executive officers employed at that time. The primary objectives of the program were to provide an incentive for superior work, to motivate our employees toward even higher achievement and business results, to tie our employees goals to company performance and to enable us to attract and retain highly qualified individuals.
The annual cash incentive program was intended to compensate our executives for the achievement of both our annual financial goals and individual or business unit performance objectives, as outlined below, and was structured to result in significant compensation payouts if targets were achieved. Our compensation committee set the target payout levels, generally as a percentage of base salary, for the executive officers based on recommendations from the chief executive officer (except with respect to his own level). The compensation committee determined these target payout levels based on a combination of factors, including each executives role and responsibilities, experience and skills, expected contribution to our company and potential impact on revenue and net income growth. Mr. Clarkes target payout level was set at 100% of his base salary and had the opportunity to earn an additional 21% based on a stretch goal. Mr. Deys target payout level was increased from 33% to 50% of base salary from 2010 to 2011. Mr. Deys increase was due to an increased level of responsibility as a public company chief financial officer. Messrs. Lambs, Coughlins and Houses target payout levels were set at 50% of base salary, consistent with their offer letter agreements.
2011 Performance goals and results. Our compensation committee structured the 2011 annual cash incentive program to include a combination of company-wide, business unit and individual performance goals, as appropriate, for the named executive officers. Individual or business unit performance goals are tied to the
particular area of expertise and responsibilities of the executive and his or her performance in attaining those objectives. Our named executive officers prepare recommendations regarding their individual or business unit performance goals, which are reviewed by our chief executive officer and approved by the compensation committee.
The 2011 performance goals for each named executive officer that participated in the program are described below. Certain of these goals could be paid out in amounts up to 150% of the individual target amounts for performance exceeding objectives. Other goals could be paid out in amounts as low as 50% of the individual target amounts if actual performance achieved minimum thresholds.
Mr. Clarke was eligible to receive (i) 45% of his target award, or $326,250, if we achieved 2011 earnings per share of $1.85, (ii) 55% of his target award, or $398,750 if we achieved growth targets through a combination of acquisitions and partnerships. In addition, a 21% overachievement target was assigned for completing a secondary stock offering. We exceeded the target performance described in (i) above with earnings per share of $2.17, based on net income, adjusted for the impact of certain non-cash items, and Mr. Clarke attained 150%, or $489,375, of this award. Mr. Clarke attained approximately 82%, or $326,250, of his award described in (ii) above. We did not complete a secondary offer in 2011, and as such, Mr. Clarke attained 0% of the overachievement target award.
Mr. Dey was eligible to receive (i) 60% of his target award, or $90,000, by amending our term loan and entering into certain partnerships, and (ii) 40% of his target award, or $60,000, by completing a secondary stock offering. We exceeded the target performance described in (i) above and Mr. Dey attained 142%, or $127,500, of this award. We did not attain the targets described in (ii) above, and Mr. Dey attained 0% of this award during 2011.
Mr. Lamb was eligible to receive (i) 60% of his target award, or $82,800, by attaining sales and marketing goals (e.g. new gallon growth) and (ii) 40% his target award, or $55,000, by achieving new product and distribution goals. Mr. Lamb attained approximately 83%, or $68,750, of his award as described in (i) above and 50%, or $27,500, of his award as described in (ii) above.
Mr. Coughlin was eligible to receive 100% of his target award, or $137,500, if we achieved growth targets through acquisitions. Mr. Coughlin attained 100%, or $137,500, of his award as described above.
Mr. House was eligible to receive (i) 80% of his target award, or $120,000, by achieving certain revenue within certain business units and (ii) 20% his target award, or $30,000, by managing credit risk. Mr. House attained 150%, or $180,000, of his award as described in (i) above and 100%, or $30,000, of his award as described in (ii) above.
The annual incentive award amounts earned by each named executive officer under our cash incentive program are included in the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table for 2011.
2011 Discretionary bonuses. Upon the recommendation of our chief executive officer, the compensation committee determined to award additional discretionary bonuses to certain of our named executive officers for 2011. The compensation committee determined to award a discretionary bonus to Mr. Clarke of $84,375 in recognition of the companys strong performance during its first year as a public company. In addition, Messrs. Dey, Lamb and Coughlin received discretionary bonuses of $10,000, $3,750 and $22,500, respectively. For Mr. Dey, the compensation committee determined to award a discretionary bonus in recognition of the extra effort required as a public company chief financial officer. For Mr. Lamb, the compensation committee determined to award the discretionary bonus amount in order to round his payment for discretionary bonus plus non-equity incentive compensation to $100,000. Mr. Coughlin received a discretionary bonus in recognition of exceeding acquisition target goals during the year, the smooth closing of acquisitions completed and establishing an attractive acquisition pipeline.
The discretionary bonus amounts earned by each named executive officer for 2011 are included in the Bonus column in the Summary Compensation Table.
2012 Annual cash incentive program. The compensation committee has approved a 2012 annual cash incentive program that is materially consistent with our 2011 program. Each executive officer will have the opportunity to earn a target award based on company-wide targets and/or individual targets. In February 2012, the compensation committee approved the 2012 annual cash incentive program.
Long-term equity incentive awards
The goals of our long-term, equity-based incentive awards are to motivate long-term performance and align the interests of our executive officers with the interests of our stockholders. Many of our equity awards require achievement of performance goals for the awards to vest. For other awards, because vesting is based on continued employment, our equity-based incentives also encourage the retention of our executive officers through the vesting period of the awards. We do not typically provide equity awards (in the form of stock options or performance-based restricted stock) to our executives on an annual basis. In 2010, the compensation committee established a three-year program to award a small amount of performance-based restricted stock to each executive based on company-wide performance (e.g. EPS).
We typically use equity awards to compensate our executive officers in the form of (1) initial grants in connection with the commencement of employment and additional refresher grants when an executive has vested in his existing grants and (2) grants designed to encourage a specific performance goal or to reward the executive for extraordinary performance. To date there has been no set program for the award of refresher grants, and our compensation committee retains discretion to make equity awards to executives at any time, including in connection with the promotion of an executive, to reward an executive, for retention purposes or for other circumstances. Our compensation committee has established a pool of shares available for equity awards. All awards are subject to the availability of shares from this pool.
We believe that stock options are an effective tool for meeting our compensation goals because executives are able to profit from stock options only if our stock price increases relative to the stock options exercise price. In addition, we believe that performance-based restricted stock awards are an effective tool for meeting our compensation goals because the conditions to vesting motivate the achievement of performance goals and the value of the grants will increase as the value of our stock price increases.
In determining the size of the long-term equity incentives to be awarded to our executive officers, we take into account a number of internal factors, such as the relative job scope, the value of existing long-term incentive awards, individual performance history, prior contributions to the company, the size of prior grants, arms-length negotiation at the time of an executives hiring and availability of shares in our pool. Our chief executive officer makes equity award grant recommendations for each executive, including our named executive officers (other than himself). Grant recommendations are presented to the compensation committee for its review and approval.
Prior to our initial public offering, we granted options and performance-based restricted stock to our employees, including executive officers, under the FleetCor Technologies, Inc. Amended and Restated Stock Incentive Plan, which we refer to as our 2002 Plan. Since our initial public offering, we have granted options and performance-based restricted stock to our employees including our executive officers, under the FleetCor Technologies, Inc. 2010 Equity Compensation Plan, which we refer to as our 2010 Plan.
The compensation committee may, at any time and from time to time, amend, modify or terminate any outstanding award. Award modifications may be made in order to realign the performance objectives of the award with the current goals of the company and role of the participant in the company. Award modifications are revalued at the date of modification in accordance with applicable accounting guidance.
Stock option grants. The exercise price of each stock option grant is the fair market value of our common stock on the grant date (closing stock price). Stock option awards to our named executive officers typically vest ratably over a period of four to six years and are attainable with continued employment through the vesting period. We believe our vesting schedules generally encourage long-term employment with our company while allowing our executives to realize compensation in line with the value they have created for our stockholders.
Performance-based restricted stock grants. Certain of our performance-based restricted stock grants generally contain individual or business unit performance conditions. Such shares typically do not vest until these performance conditions have been satisfied. Performance conditions are generally set as stretch targets. Stretch targets are set so that approximately 25% of awarded performance-based restricted stock grants will be earned, based on individual or business unit performance conditions. In 2011, approximately 80% of stretch targets related to performance-based restricted stock grants were attained.
We also provide performance-based restricted stock grants based on company-wide performance conditions. The compensation committee approved a three year program for granting of performance-based restricted stock grants based on the company achieving earnings per share targets in 2010, 2011 and 2012. This program awards each executive a yearly grant tied to company-wide goals and helps align executives interests and compensation with those of our stockholders. In 2010 and 2011, the company attained its performance goal and thus executives grants have historically vested. The program, approved by the compensation committee, will be reviewed in 2013.
2011 Equity awards. During 2011, we granted the following equity awards to our named executive officers:
In February 2011, the compensation committee approved a grant of 75,000 shares of performance-based restricted stock to Mr. Dey, one third of which will vest upon our common stock reaching, for a 30 consecutive day trading period, each of 1.20, 1.40 and 1.60 times the public offering price of our common stock in our initial public offering, of which 50,000 vested in 2011. Mr. Dey received these shares of performance-based restricted stock to motivate him toward a long-term view with our newly established public company. Mr. Dey also received a grant of 5,000 shares of performance-based restricted stock, which required the company to achieve a 2011 earnings per share target of $1.85. These shares were granted as part of our program to tie compensation to company-wide performance. As the company achieved earnings per share of $2.17 in 2011, based on net income, adjusted for the impact of certain non-cash items, these 5,000 shares vested in February 2012.
In February 2011, the compensation committee approved a grant of 75,000 shares of performance-based restricted stock to Mr. Lamb, (1) 25,000 of which will vest upon the achievement of certain sales and cost of sales targets in 2012, (2) 25,000 of which will vest upon the introduction of one or more new products or features that results in the achievement of certain sales targets by the end of 2013 and (3) 25,000 of which will vest upon the achievement of certain sales and cost of sales targets in 2013. In February 2011, Mr. Lamb also received a grant of 5,000 shares of performance-based restricted stock, which required the company to achieve 2011 earnings per share target of $1.85. These shares were granted as part of our program to tie compensation to company-wide performance. As the company achieved earnings per share of $2.17 in 2011, based on net income, adjusted for the impact of certain non-cash items, these 5,000 shares vested in February 2012. In addition, the compensation committee approved grants to Mr. Lamb of (1) 210,000 stock options, in February 2011, with an exercise price equal to the fair market value of our common stock on the date of grant, 25% of which vested on
December 10, 2011, and 25% of which will vest on each of December 10, 2012, 2013 and 2014, and (2) 65,000 stock options, in April 2011, with an exercise price equal to the fair market value of our common stock on the date of grant, 25% of which vested on December 10, 2011, and 25% of which will vest on each of December 10,2012, 2013 and 2014. These performance-based grants and the stock option grants were provided to Mr. Lamb as a part of his compensation package upon hire.
In September 2010, the compensation committee approved a grant of 75,000 shares of performance-based restricted stock to Mr. Coughlin, giving effect to a 2.5:1 stock split in December 2010, without vesting criteria. In April 2011, the compensation committee approved the vesting criteria related to this performance-based restricted stock award. Mr. Coughlin agreed to the terms of the award in October 2011. The 75,000 shares of performance-based restricted stock will vest: (1) 25,000 shares upon the achievement of an earnings before interest, taxes, depreciation and amortization (EBITDA) target or invested capital target for entities acquired in 2011; (2) 25,000 shares upon the achievement of an EBITDA target or invested capital target for entities acquired in 2011 and 2012. If 2011 and 2012 targets are met in 2012 and the 2011 target has not been previously achieved, then both 25,000 shares in (1) and 25,000 shares in (2) shall vest; and (3) 25,000 shares upon the achievement of EBITDA target or invested capital target for entities acquired in 2013. If 2011, 2012 and 2013 targets are met in 2013 and the 2011 and 2012 targets have not been previously achieved, then each of the 25,000 shares in (1), 25,000 shares in (2) and 25,000 shares in (3) shall vest. As the vesting criteria for these performance-based restricted stock awards was established and agreed to in 2011, the shares of restricted stock are included as a 2011 grant in the table above. As Mr. Coughlin achieved the targets in (1) above for 2011, these 25,000 performance-based restricted awards vested in February 2012.
Mr. House received grant of 47,500 performance-based restricted stock awards in 2010. The compensation committee modified the performance targets for this award in April 2011 due to a change in Mr. Houses role as of the beginning of 2011. There were no new shares issued related to this award in 2011 and no new shares of stock/restricted stock related to this award modification are included in the table above. The modification of the award resulted in an incremental accounting change and is included in the Summary Compensation Table for 2011. The 47,500 shares of performance-based restricted stock will vest as follows: (1) 15,833 will vest upon the achievement of certain new gallon sales targets below a certain target cost in 2011; (2) 15,833 will vest upon the achievement of certain revenue targets, excluding the impact of acquisitions in 2012 and (3) 15,834 will vest upon the introduction of one or more new products or features that achieve certain revenue targets by December 31, 2013. As Mr. House achieved the targets in (1) above for 2011, these 15,833 performance-based restricted awards vested in February 2012.
Benefits and perquisites
We provide benefits and perquisites to our named executive officers as described below. We offer all U.S.-based employees the opportunity to participate in a 401(k) plan. The general purpose of our 401(k) plan is to provide employees with an incentive to make regular savings contributions in order to provide additional financial security during retirement. Our 401(k) plan provides that we match 25% of an employees contribution, up to an employee contribution of 4% of salary. Our named executive officers participate in this 401(k) plan on the same basis as all of our other participating employees.
We provide to all of our eligible employees, including our named executive officers, health and welfare benefits and we pay the premiums for these benefits on behalf of our named executive officers. We provide to our named executive officers life insurance benefits and long-term care insurance and pay the premiums on their behalf. We also provide certain relocation benefits.
We do not provide any nonqualified deferred compensation arrangements or defined benefit pension plans to our named executive officers.
Severance and Change of Control Benefits
Under their employment agreements or offer letters, and pursuant to our historic practice, our executive officers are generally entitled to certain severance and change of control benefits. If we terminate Mr. Clarkes employment for any reason other than for cause, Mr. Clarke will receive cash severance payments, in equal monthly installments over 12 months, equal to 150% of his then-current annual base salary plus any accrued and unpaid vacation. Mr. Clarke will also receive payment of his health insurance premiums in amounts equal to those made immediately prior to his termination and, if permissible, continuation of coverage under our life and disability insurance plans for 12 months. In addition, if Mr. Clarkes employment is terminated for good reason or is terminated for any reason other than cause, in each case within 12 months following a change in control, he can elect to have us purchase from him all stock options granted to him as of January 1, 2010 and all shares of our stock that he owned as of January 1, 2010 at fair market value. In addition to Mr. Clarkes rights under his employment agreement, he also has all rights and conditions as to stock and stock options granted to him under our 2010 Plan as set forth below.
Each of our other named executive officers will receive cash severance in the amount of six months of his then- current salary, upon execution of a general release, if he is terminated by us for any reason other than for cause. We provide severance compensation if our executives are terminated without cause to incentivize our executive officers to act in the best interests of our stockholders in the face of a transaction even if they may be terminated as a result. For a further discussion of these benefits, see Employment agreements and offer letters and Potential payments on termination or change in control.
Our stock option and restricted stock award agreements under our 2002 Plan do not provide for accelerated vesting under any circumstances. Under our 2010 Plan and the related stock option and stock grant agreements, all conditions to the exercise of outstanding options and issuance or forfeiture of outstanding stock grants will be deemed satisfied as of the effective date of a change in control, if as a result of a change in control all of the outstanding options and stock grants granted under the 2010 Plan are not continued in full force and effect or there is no assumption or substitution of the options and stock grants (with their terms and conditions unchanged) in connection with such change in control. In addition, if outstanding options or stock grants are continued in full force and effect or there is an assumption or substitution of the options and stock grants in connection with a change in control, then any conditions to the exercise of an employees outstanding options and any issuance and forfeiture conditions of outstanding stock grants will automatically expire and have no further force or effect on or after the date that the employees service terminates, if the employees employment with FleetCor is terminated at our initiative for reasons other than cause (as defined in the 2010 Plan) or is terminated at the employees initiative for good reason (as defined in the 2010 Plan) within the two-year period starting on the date of the change in control.
A change in control means, generally:
Executive Equity Ownership Guidelines
Our executive officers are encouraged to hold significant equity interests in the company. Our board expects the following executive officers to own or to acquire, within five years of appointment to such officer position or within five years from December 31, 2010, whichever is later, shares of our common stock having a market value of a multiple of his or her base salary as indicated below:
Our board recognizes that exceptions to this policy may be necessary or appropriate in individual cases, and the chairman of the compensation, nominating and corporate governance committee may approve such exceptions from time to time, as he or she deems appropriate.
Derivative securities are securities, contracts or arrangements whose value varies in relation to the price of our securities. For example, derivative securities would include exchange-traded put or call options, as well as individually arranged derivative transactions, such as prepaid forwards. Many forms of derivatives are speculative in nature (meaning that their value fluctuates based on short-term changes in the price of our shares), and the purchase or sale of such derivatives by our employees could motivate them to take actions that are in conflict with the long-term interests of other stockholders and could also cause the appearance of misuse of inside information. Accordingly, our employees, officers and directors are prohibited by our insider trading compliance policy from purchasing or selling derivative securities, or entering into derivatives contracts relating to our stock. The prohibition on transactions in derivatives does not apply to stock options and other interests issued under our employee benefit plans.
Section 162(m) of the Code limits a public companys deduction for federal income tax purposes to not more than $1 million of compensation paid to certain executive officers in a calendar year. Compensation above $1 million may be deducted if it is performance-based compensation. We rely on an exemption from Section 162(m) for awards made pursuant to our 2010 Plan, which exemption will expire at our 2014 annual meeting of stockholders. Our compensation committee evaluates the effects of compensation limits of Section 162(m) and provides compensation in a manner consistent with our best interests and those of our stockholders.
Summary Compensation Table for 2011
The following table shows the compensation for each of the named executive officers for 2011, 2010 and 2009, calculated in accordance with SEC rules and regulations.
Grants of Plan-Based Awards for 2011
The following table provides information about awards granted in 2011 to each of the named executive officers.
Option Exercises and Stock Vested
The following table shows the number of stock options exercised and stock vested in 2011 by each of the named executive officers.
Outstanding Equity Awards at December 31, 2011
The following table shows the number of stock options and restricted stock held by the named executive officers on December 31, 2011.
Nonqualified Deferred Compensation
We do not provide any nonqualified deferred compensation arrangements to our named executive officers.
We do not provide any defined benefit pension plans to our named executive officers.
Ronald F. Clarke
We entered into an amended and restated employment agreement with Mr. Clarke, on November 29, 2010, which amended and restated his employment agreement entered into in connection with his hiring on September 25, 2000. The initial term of the employment agreement was through December 31, 2011. Per the agreement, Mr. Clarkes agreement automatically renewed on January 1, 2012 and the agreement automatically will renew for successive one year periods unless we provide notice at least 30 days prior to the expiration date. Pursuant to the agreement, Mr. Clarke is entitled to an annual base salary of at least $687,500, with annual increases at the discretion of the compensation committee. We may terminate Mr. Clarkes employment under the agreement by providing 30 days prior written notice and the payment of all sums due under the agreement. If we terminate Mr. Clarkes employment for any reason other than for cause (as defined below), including through non-renewal of the agreement, Mr. Clarke will receive (1) cash severance payments, in equal monthly installments over 12 months (the Severance Period), in an amount equal to 150% of his then- current annual base salary plus any accrued and unpaid vacation; (2) at his election, payment of his health insurance premiums for coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended in amounts equal to those made immediately prior to his termination until the earlier of the expiration of the Severance Period or his commencement of employment with another employer; and (3) continuation of coverage during the Severance Period under our life and disability insurance plans, if permitted by the terms of the plans.
In addition, if Mr. Clarkes employment is terminated (1) for good reason (as defined below) or (2) by us for any reason other than cause, in each case within 12 months following a change in control (as defined below), he can elect to have us purchase from him all stock options granted to him as of January 1, 2010 and all shares of our stock that he owned as of January 1, 2010 at fair market value. In addition to Mr. Clarkes rights under his employment agreement, he also has all rights and conditions as to stock and stock options granted to him under our 2010 Plan, which provides that all awards will accelerate if Mr. Clarke is terminated without cause within the two year period following a change in control or Mr. Clarke resigns for good reason during such period. The fair market value is determined by the change in control price, if the change in control is a cash transaction, or, in all other cases, by the board of directors in good faith.
Cause is defined to mean: Mr. Clarkes (1) failure to render services to us; (2) commission of an act of disloyalty, gross negligence, dishonesty or breach of fiduciary duty; (3) material breach of the agreement; (4) commission of any crime or act of fraud or embezzlement; (5) misappropriation of our assets; (6) violation of our material written rules or policies; (7) commission of acts generating material adverse publicity toward us; (8) commission or conviction of a felony; or (9) death or inability due to disability to perform his essential job functions for a period of three months.
Good reason is defined to mean, following a change in control, and without Mr. Clarkes written consent: (1) there is a significant diminution in his responsibilities; (2) a reduction in his annual base salary or total compensation and benefits in the amount of 10% or more; (3) his principal place of employment is relocated to a place that is 25 miles from the prior principal place of employment; or (4) he is required to be away from his office 25% more than was required prior to the change in control.
Change in control has the same definition as in the 2010 Plan.
Other named executive officers
We entered into offer letter agreements with Messrs. Dey, Lamb, Coughlin and House in connection with their hiring. Consistent with these offer letters and our historic practice, if any of these named executive officers is terminated by us for any reason other than for cause, we will (1) pay cash severance in the amount of six months of his then-current base salary and (2) provide health benefits for six months, each upon execution of a general release.
Confidentiality and Non-Competition Agreements
Under the terms and conditions of the employee confidentiality and non-competition agreement executed by our named executive officers, which survives any termination of such executives employment, our named executive officers, for a period of one year following termination for any reason, have an obligation not to (i) disclose certain of our confidential information, (ii) accept employment with certain enumerated competitors, (iii) solicit, in competition with our sale of products or services, any of our customers with which such executive had substantial contact within one year of such executives termination and (iv) recruit or hire, or attempt to recruit or hire, any of our employees, consultants, contractors or other personnel, who have knowledge of certain of our confidential information and with whom such executive had substantial contact within one year of such executives termination. In addition, pursuant to the employee confidentiality and non-competition agreement, during the term of employment our named executive officers have an obligation not to (i) disclose certain of our confidential information or (ii) accept employment with certain enumerated competitors.
Potential Payments Upon Termination of Employment
The following table shows the potential payments to the named executive officers upon a termination of employment under various circumstances. In preparing the table, we assumed the termination occurred on December 31, 2011.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information, as of December 31, 2011, with respect to our compensation plans under which common stock is authorized for issuance, which consist of our 2010 Equity Compensation Plan and its predecessor, our 2002 Amended and Restated Stock Incentive Plan. We believe that the exercise price for all of the options granted under these plans reflect at least 100% of fair market value on the dates of grant for the options at issue.
COMPENSATION COMMITTEE REPORT
The compensation, nominating and corporate governance committee has reviewed and discussed with management the Compensation Discussion and Analysis provided above. Based on its review and discussions, the committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Bruce R. Evans (Chair)
Andrew B. Balson
Glenn W. Marschel
Steven T. Stull
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers currently serve on the compensation committee or board of directors of any other company of which any member or proposed member of our compensation, nominating and corporate governance committee is an executive officer.
Policies and procedures with respect to related party transactions
In accordance with the charter of our audit committee and our policy on related party transactions, our audit committee is responsible for reviewing and approving related party transactions. The related party transaction policy applies to transactions, arrangements and relationships where the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, where we are a participant and in which a related person has or will have a direct or indirect material interest. A related person is: (1) any of our directors, nominees for director or executive officers; (2) any immediate family member of a director, nominee for director or executive officer; and (3) any person, and his or her immediate family members, or entity that was a beneficial owner of 5% or more of any of our outstanding equity securities at the time the transaction occurred or existed.
In the course of its review and approval of related party transactions, our audit committee considers the relevant facts and circumstances to decide whether to approve such transactions. Our audit committee will approve only those transactions that it determines are in our best interest. In particular, our policy on related party transactions requires our audit committee to consider, among other factors it deems appropriate:
Pursuant to our policy on related party transactions, our audit committee identifies the following categories of transactions as deemed to be preapproved by the audit committee, even if the aggregate amount involved exceeds the $120,000 threshold:
In addition, our Code of Business Conduct and Ethics requires that each of our employees and directors inform his or her superior or the chairman of the audit committee, respectively, of any material transaction or relationship that comes to their attention that could reasonably be expected to create a conflict of interest. Further, at least annually, each director and executive officer will complete a detailed questionnaire that asks questions about any business relationship that may give rise to a conflict of interest and all transactions in which we are involved and in which the executive officer, a director or a related person has a direct or indirect material interest.
Registration Rights Agreement
Pursuant to the terms of a sixth amended and restated registration rights agreement, certain holders of shares of our common stock (including restricted stock) are entitled to rights with respect to the registration of these shares under the Securities Act of 1933, as amended, as described below. These holders include the following 5% holders of a class of our capital stock: Advantage Capital Partners, funds sponsored by Bain Capital Partners, and entities affiliated with Summit Partners (in each case including certain affiliated entities, and collectively, the Affiliated Stockholders).
Demand registration rights
At any time beginning 180 days after the closing of our initial public offering, and upon the written request of entities sponsored by or associated with Bain Capital Partners, LLC or entities affiliated with Summit Partners, we must give notice to all holders of our common stock with registration rights, who would have 30 days to request inclusion in the offering, file a registration statement and use our best efforts to register all shares timely requested to be registered. Entities affiliated with Bain Capital Partners and certain entities affiliated with Summit Partners have two such demand registration rights and certain other entities affiliated with Summit Partners have one such demand registration right. We are generally not obligated to affect a registration during the 120-day period subsequent to our filing a registration statement pursuant to these demand registration rights. We may postpone the filing of a registration statement for up to 90 days twice in a 12-month period, but not more than 120 consecutive days, if we have plans to engage in a registered public offering and our board of directors determines in good faith that such offering would be adversely affected by the requested registration.
Piggyback registration rights
If we register any of our securities for public sale, we must give notice to all holders of our common stock with registration rights, who would have 20 days to request inclusion in the offering, and use our best efforts to cause to be registered shares held by our stockholders with registration rights that request to include their shares in the registration statement. However, this right does not apply to a registration relating to any of our employee benefit plans or a corporate reorganization. The managing underwriter of any underwritten public offering will have the right to limit, due to marketing reasons, the number of shares registered by these holders.
Form S-3 registration rights
The holders of registration rights can request that we register all or a portion of their shares on Form S-3 if we are eligible to file a registration statement on Form S-3, upon which request we must give notice to all holders of our common stock with registration rights, who would have 20 days to request inclusion in the offering. We are required to file no more than one registration statement on Form S-3 upon exercise of these rights per six-month period and we are not required to honor registration requests if the aggregate market value of securities registered would be less than $10 million.
We will pay all expenses incurred in connection with each of the registrations described above, except for underwriters discounts and selling commissions. In addition, we will pay the reasonable fees and disbursements of one counsel for the stockholders participating in such registration.
We have agreed, subject to certain exceptions, to indemnify against liabilities resulting from our initial public offering and the offerings described above, each selling stockholder that is a party to the registration rights agreement, including the Affiliated Stockholders. In addition, we have agreed that, in order to provide for just and equitable contribution to joint liability, if indemnification is not available to such parties, FleetCor and such parties will each contribute to any liability based on the proportion that the price of the shares sold by them relates to the aggregate offering price, subject to certain exceptions.
Expiration of registration rights
The registration rights described above will terminate with respect to a particular stockholder to the extent the shares held by and issuable to such holder may be sold without registration under the Securities Act in the manner and quantity proposed to be sold.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934 requires our directors, executive officers, and persons who own more than 10% of our common stock to file reports of their ownership and changes in ownership of our common stock with the SEC. Our employees prepare these reports for our directors and executive officers who request it on the basis of information obtained from them and from FleetCors records. Based on information available to us during fiscal year 2011, and representations made to us by the reporting persons, we believe that all applicable Section 16(a) filing requirements were met, except that, due to administrative errors. Eric Dey and Ron Clarke were late in filing a report of a market based restricted stock award grant for 75,000 and 416,666 shares, respectively, granted on February 4, 2011.
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the board of directors. It is available on FleetCors website at investor.fleetcor.com under Corporate Governance. The charter, which was adopted November 29, 2010, outlines the audit committees duties and responsibilities. The audit committee will review the charter annually.
The board of directors will annually review the New York Stock Exchange listing standards definition of independence for audit committee members to determine that each member of the audit committee meets the standards. The board has determined that Mr. Macchia is an audit committee financial expert as defined by Securities and Exchange Commission rules.
The board of directors has the ultimate authority for effective corporate governance, including oversight of the management of FleetCor. The audit committee assists the board in fulfilling its responsibilities by overseeing the accounting and financial reporting processes of FleetCor, the audits of FleetCors consolidated financial statements and internal control over financial reporting, the qualifications and performance of the independent registered public accounting firm engaged as FleetCors independent auditor, and the performance of FleetCors internal audit function.
The audit committee relies on the expertise and knowledge of management, the internal audit function, and the independent auditor in carrying out its oversight responsibilities. Management is responsible for the preparation, presentation, and integrity of FleetCors consolidated financial statements, accounting and financial reporting principles, internal control over financial reporting, and disclosure controls and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. Management is responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of FleetCors system of internal control. FleetCors independent auditor, Ernst & Young LLP, is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States. The independent auditor is also responsible for expressing an opinion on the effectiveness of our internal control over financial reporting.
During 2011, the audit committee fulfilled its duties and responsibilities generally as outlined in the charter. The committee had five meetings during 2011, four of which were regular meetings and one a special meeting. In connection with the audit of our consolidated financial statements for the year ended December 31, 2011, the audit committee, among other actions:
The audit committee has reviewed and discussed with management and the independent auditor FleetCors audited consolidated financial statements and related footnotes for the fiscal year ended December 31, 2011, and the independent auditors report on those financial statements. Management represented to the audit committee that FleetCors financial statements were prepared in accordance with generally accepted accounting principles. Ernst & Young LLP presented the matters required to be discussed with the audit committee by Public Company
Accounting Oversight Board (United States) Audit Standard AU Section 380 Communication with Audit Committees and Rule 2-07 of SEC Regulation S-X. This review included a discussion with management and the independent auditor of the quality (not merely the acceptability) of FleetCors accounting principles, the reasonableness of significant estimates and judgments, and the disclosures in FleetCors consolidated financial statements and related footnotes, including the disclosures relating to critical accounting policies.
The Audit Committee recognizes the importance of maintaining the independence of FleetCors independent auditor, both in fact and appearance. Consistent with its charter, the audit committee has evaluated Ernst & Young LLPs qualifications, performance, and independence, including that of the lead audit partner. As part of its auditor engagement process, the audit committee considers whether to rotate the independent audit firm. The audit committee has established a policy pursuant to which all services, audit and non-audit, provided by the independent auditor must be pre-approved by the audit committee or its delegate. Our pre-approval policy is more fully described in this Proxy Statement under the caption Fees Billed by Ernst & Young LLP. The audit committee has concluded that provision of the non-audit services described in that section was compatible with maintaining the independence of Ernst & Young LLP. In addition, Ernst & Young LLP has provided the audit committee with the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountants communications with the audit committee concerning independence, and the audit committee has engaged in dialogue with Ernst & Young LLP about its independence.
Based on the reviews and discussions described above, the audit committee recommended to the Board of Directors that the audited consolidated financial statements be included in FleetCors Annual Report on Form 10-K for the fiscal year ended December 31, 2011 for filing with the SEC. The audit committee also has selected Ernst & Young LLP as the independent registered public accounting firm for fiscal year 2012. The board is recommending that stockholders ratify this selection at the annual meeting.
Richard Macchia (Chair)
Mark A. Johnson
Glenn W. Marschel
Fees Billed by Ernst & Young LLP
Fees. The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of FleetCors annual financial statements for the years ended December 31, 2011 and 2010, and fees billed for other services rendered by Ernst & Young LLP during those periods.
Audit Fees. These amounts represent fees of Ernst & Young LLP for the audit of our annual consolidated financial statements and the services that an independent auditor would customarily provide in connection with subsidiary audits, statutory requirements, regulatory filings, and similar engagements for the fiscal year, such as comfort letters, attest services, consents, and assistance with review of documents filed with the Securities and Exchange Commission, as applicable, including fees related to our initial public offering. Audit Fees also include advice on accounting matters that arose in connection with or as a result of the audit or the review of periodic consolidated financial statements and statutory audits that non-U.S. jurisdictions require.
Audit-Related Fees. Audit-Related Fees consist of assurance and related services that are reasonably related to the performance of the audit or review of FleetCors consolidated financial statements. This category may include fees related to the performance of audits and attest services not required by statute or regulations, audits of our employee benefit plans, due diligence related to mergers, acquisitions, and investments, additional revenue and license compliance procedures related to performance of the review or audit of FleetCors financial statements, and accounting consultations about the application of generally accepted accounting principles to proposed transactions.
The Audit Committee has concluded the provision of the non-audit services listed above is compatible with maintaining the independence of Ernst & Young LLP. None of the services related to the fees described above was approved pursuant to the waiver of pre-approval provisions set forth in applicable rules of the Securities and Exchange Commission.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor
The audit committee has established a policy for pre-approval of audit and permissible non-audit services provided by the independent auditor. Each year, the audit committee approves the terms on which the independent auditor is engaged for the ensuing fiscal year. At least quarterly, the committee will review and, if appropriate, pre-approve services to be performed by the independent auditor, review a report summarizing fiscal year-to-date services provided by the independent auditor, and review an updated projection of the fiscal years estimated fees. The audit committee, as permitted by its pre-approval policy, from time to time delegates the approval of certain permitted services or classes of services to a member of the committee. The committee will then review the delegates approval decisions each quarter.
SOLICITATION OF PROXIES
The Proxy accompanying this Proxy Statement is solicited by our board of directors. Proxies may be solicited by officers, directors, and regular supervisory and executive employees of FleetCor, none of whom will receive any additional compensation for their services. These solicitations may be made personally or by mail, facsimile, telephone, messenger, or via the Internet. FleetCor will pay persons holding shares of common stock in their names or in the names of nominees, but not owning such shares beneficially, such as brokerage houses, banks, and other fiduciaries, for the expense of forwarding solicitation materials to their principals. FleetCor will pay all proxy solicitation costs.
Tabulation of Votes. American Stock Transfer & Trust Company LLC, will tabulate votes cast by proxy or in person at the meeting. We will report the results in a Form 8-K filed with the SEC within four business days of the Annual Meeting.
Vote Required; Effect of an Abstention and Broker Non-Votes. The shares of a stockholder whose ballot on any or all proposals is marked as abstain will be included in the number of shares present at the Annual Meeting for the purpose of determining the presence of a quorum. If you are the beneficial owner of shares held by a broker or other custodian, you may instruct your broker how you would like your shares voted. If you wish to vote the shares you own beneficially at the meeting, you must first request and obtain a legal proxy from your broker or other custodian. If you choose not to provide instructions or a legal proxy, your shares are referred to as uninstructed shares. Whether your broker or custodian has the discretion to vote these shares on your behalf depends on the ballot item. The following table summarizes the vote threshold required for passage of each proposal and the effect of abstentions and uninstructed shares held by brokers.
Where to Find More Proxy Voting Information.
DATED: Norcross, Georgia, April 23, 2012
FLEETCOR TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
May 22, 2012
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF SHAREHOLDERS OF
FLEETCOR TECHNOLOGIES, INC.
May 22, 2012
i Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone. i
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES IN THE ELECTION OF DIRECTORS, AND FOR PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x