Market Leader, Inc. DEF 14A 2012
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Market Leader, Inc.
(Name of Registrant as Specified In Its Charter)
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 24, 2012
You are cordially invited to attend the Annual Meeting of Shareholders of Market Leader, Inc. (Market Leader) which will be held on May 24, 2012 at 10:00 a.m. local time at Market Leaders principal executive offices located at 11332 NE 122nd Way, Suite 200, Kirkland, WA 98034. Shareholders of record who owned our common stock at the close of business on March 30, 2012, are entitled to vote at the Annual Meeting. At the Annual Meeting we will ask you to:
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSED DIRECTOR DESCRIBED IN THE PROXY STATEMENT AND FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP, AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2012.
To assure your representation at the Annual Meeting, you are urged to submit your proxy as promptly as possible. Registered shareholders may vote by Internet, by telephone or by completing, signing, dating and returning the enclosed proxy card as promptly as possible in the enclosed postage prepaid envelope. Your shares will be voted in accordance with your instructions. You may attend the Annual Meeting and vote in person even if you have previously returned your proxy card or voted by Internet or telephone.
If your shares are registered in the name of a broker, bank or other holder of record, please follow the voting instructions you receive from the holder of record to vote your shares. If your shares are registered in the name of a broker, bank or other holder of record and you plan to attend the Annual Meeting in person, please bring a letter, account statement or other evidence of your beneficial ownership as of March 30, 2012 to the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to Be Held on May 24, 2012
The proxy statement, 2011 annual report to shareholders and other proxy materials are available at
By Order of the Board of Directors,
President and Chief Executive Officer
April 16, 2012
MARKET LEADER, INC.
2012 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is being furnished in connection with the solicitation by the Board of Directors of Market Leader, Inc. (Market Leader) of proxies for use at the 2012 Annual Meeting of Shareholders (the Annual Meeting) to be held at Market Leaders principal executive offices located at 11332 NE 122nd Way, Suite 200, Kirkland, WA 98034 at 10:00 a.m. local time on May 24, 2012. Market Leaders telephone number at its principal executive offices is 425-952-5500. You may contact us at this telephone number to obtain directions to be able to attend the Annual Meeting and vote in person. It is expected that this Proxy Statement and the accompanying proxy card will be mailed to shareholders on or about April 23, 2012.
Record Date and Outstanding Shares
Shareholders of record who owned our common stock at the close of business on Friday, March 30, 2012 are entitled to notice of and to attend and vote at the Annual Meeting. On that date, 25,575,723 shares of common stock were issued and outstanding.
Registered shareholders may vote by mail, by telephone or by Internet.
If your shares are held of record in the name of a bank, broker or other nominee you should follow the separate instructions that the nominee provides to you. Although most banks and brokers now offer telephone and Internet voting, availability and specific processes will depend on their voting arrangements.
If the Annual Meeting is postponed or adjourned for any reason, at any subsequent reconvening of the Annual Meeting all proxies will be voted in the same manner as the proxies would have been voted at the original convening of the Annual Meeting, except for any proxies that have at that time effectively been revoked or withdrawn, even if the proxies had been effectively voted on the same or any other matter at a previous meeting.
In Person at the Annual Meeting
If you attend the Annual Meeting and wish to vote in person, you may request a ballot when you arrive. If your shares are held of record in the name of your bank, broker or other nominee and you would like to vote in
person at the Annual Meeting, you must bring to the Annual Meeting a letter, account statement or other evidence from the nominee indicating that you were the beneficial owner of the shares on March 30, 2012, the record date for the Annual Meeting.
Revocability of Proxies
If you give your proxy card to us or vote by telephone or the Internet, you have the power to revoke your proxy or change your vote by taking any of the following actions before your proxy is voted at the Annual Meeting:
However, attendance at the Annual Meeting will not, by itself, revoke a proxy.
Matters Being Presented at the Annual Meeting
You are being asked to elect one director to our Board of Directors nominated by the Board to serve until the 2015 Annual Meeting of Shareholders and to ratify the appointment of KPMG LLP as our independent registered public accounting firm.
Quorum and Voting
The presence at the Annual Meeting, in person or by proxy, of the holders of at least a majority of the shares of common stock outstanding on the record date will constitute a quorum for purposes of conducting business at the Annual Meeting. Abstentions and broker non-votes will be included in determining the presence of a quorum at the Annual Meeting.
For the proposal relating to the election of the director, the nominee for election to the Board of Directors who receives the greatest number of affirmative votes cast by holders of common stock present, in person or by proxy, and entitled to vote at the Annual Meeting, will be elected to the Board of Directors. You are not entitled to cumulate votes in the election of directors. In a plurality election such as this, broker non-vote, abstentions and withhold votes have no effect on the outcome, since approval by a specified percentage of the shares present or outstanding is not required to elect directors.
For the proposal relating to the ratification of KPMG LLP as our independent registered public accounting firm as well as any other proposals that properly come before the meeting, the votes cast for must exceed the votes cast against to be approved. Abstentions and, if applicable, broker non-votes are not counted as votes for or against these proposals and therefore do not affect the outcome.
You are entitled to one vote for each share of common stock you held as of the record date. If your shares are represented by proxy, they will be voted in accordance with your directions. If your proxy is signed and returned without any directions given, your shares will be voted in accordance with our Board of Directors recommendations.
We are not aware, as of the date of this Proxy Statement, of any matters to be voted on at the Annual Meeting other than as stated in this Proxy Statement and the accompanying Notice of Annual Meeting of Shareholders. If any other matters are properly brought before the Annual Meeting, the enclosed proxy and proxies submitted by telephone or the Internet gives discretionary authority to the persons named as proxy to vote the shares in their best judgment.
Other than for purposes of determining the presence of a quorum, abstentions and broker non-votes will have no effect on the proposals to be voted on at the Annual Meeting because they will not represent votes cast at the Annual Meeting for the purposes of voting on such proposals. Broker non-votes occur when a person holding shares through a bank or brokerage account does not provide instructions as to how his or her shares should be voted and the broker either does not exercise, or is not permitted to exercise, discretion to vote those shares on a particular matter. Brokers may exercise discretion to vote shares as to which instructions are not given with respect to the ratification of the appointment of KPMG LLP, as Market Leaders independent registered public accounting firm for fiscal year 2012, but may not exercise discretion to vote shares as to which instructions are not given with respect to the election of directors.
Solicitation of Proxies
Proxies may be solicited by certain of our directors, officers and regular employees, without payment of any additional compensation to them. Proxies may be solicited by personal interview, mail, electronic mail or telephone. Market Leader will bear any costs relating to such solicitation of proxies. However, you will need to obtain your own Internet access if you choose to access the proxy materials over the Internet. In addition, Market Leader may reimburse banks, brokerage firms and other persons representing beneficial owners of shares of common stock for their expenses in forwarding proxy materials to such beneficial owners.
PROPOSAL 1ELECTION OF DIRECTORS
In accordance with our Bylaws, the Board of Directors shall be composed of not less than five nor more than nine directors, the specific number to be set by resolution of the Board of Directors.
Our Board of Directors is divided into three classes: Class 1, made up of three directors; Class 2, made up of two directors; and Class 3, made up of two directors. Our Board of Directors is currently comprised of six directors, with one vacancy in Class 2. Directors will be elected for three-year terms that are staggered such that a portion of the directors are elected each year. Generally, one class of directors will be elected each year by our shareholders. Each director will hold office until the election and qualification of his or her successor or upon earlier resignation or removal. This year, the term of one Class 2 director expires. Accordingly, one nominee for the Board of Directors will be elected at the Annual Meeting to serve as a Class 2 director for a three-year term expiring in 2015. The Board of Directors may add additional directors when it identifies suitable candidates who are willing to serve as directors of Market Leader. Additional directorships resulting from an increase in the number of directors will be distributed among the three classes, so that as nearly as possible each class will consist of an equal number of directors.
Biographical information for our Board of Directors is set forth below. Ages listed are as of March 30, 2012.
The Board of Directors has no reason to believe that the nominee named below will be unable to serve as a director. If, however, if the nominee should be unwilling or unable to serve, the persons named as proxies will have discretionary authority to vote for the election of such substitute nominee(s) as may be designated by the Board of Directors.
Unless you indicate otherwise, the persons named as proxies will vote FOR the election of the nominee listed below.
Class 2 DirectorTerm Expiring in 2015
Nicolas J. Hanauer, age 52, has served as a director since December 2000. Since March 2000, Mr. Hanauer has served as a partner with Second Avenue Partners, which he co-founded. In 2000, Mr. Hanauer also founded and served as Chairman of Gear.com, an online sporting goods company, until its merger with Overstock.com in 2001. From 2001 to 2004, Mr. Hanauer acted as Chief Executive Officer and Co-Chairman of Pacific Coast
Feather Company, a pillow and bedding manufacturing company. He was employed at Pacific Coast Feather as its Executive Vice President of Sales and Marketing from 1990 to 2000. In 1997, Mr. Hanauer co-founded aQuantive, Inc. (formerly Avenue A, Inc.), an Internet media company, where he served as Chief Executive Officer from June 1998 to September 1999. He is a board member of Marchex, Inc. Mr. Hanauer holds a B.A. from the University of Washington. Mr. Hanauers individual qualification and skills as a director include his specific experience in business and technology innovation, as well as, investment strategy and strategic planning.
The Board of Directors recommends voting FOR the election of the nominee named above.
DIRECTORS CONTINUING IN OFFICE
Class 1 Director Nominees Standing for ElectionTerms Expiring in 2014
Jon W. Gacek, age 50, has served as a director since November 2004. Mr. Gacek currently serves as President and Chief Executive Officer of Quantum Corporation (Quantum), a publicly traded company that provides network storage subsystems. He served as Chief Financial Officer and Executive Vice PresidentFinance and Operations of Advanced Digital Equipment Corporation (ADIC) from November 1999 until August 2006, when ADIC was acquired by Quantum. From 1996 to 1999, Mr. Gacek served as a partner at PricewaterhouseCoopers LLP, a registered public accounting firm. From September 2002 until June 2009, Mr. Gacek served as a director of Loud Technologies, Inc., a public company until March 2009. Since November 2008, Mr. Gacek has served as a director of Power-One, Inc., a publicly traded company. Mr. Gacek holds a B.A. from Western Washington University. We believe that Mr. Gaceks qualifications to serve as a director include his specific experience in corporate finance and accounting, operations, and corporate governance, as well as his strong skills in strategic planning, and mergers and acquisitions.
Richard A. Mendenhall, age 67, has served as a director since August 2004. Mr. Mendenhall has co-owned Resource Home Loans, a real estate mortgage firm, since 1995. Since 1991, Mr. Mendenhall has owned, co-owned, and served as a broker in a variety of real estate brokerage firms affiliated with RE/MAX International, Inc., a global real estate agency network. Since 1974, Mr. Mendenhall has owned Boone Realty Corporation, a real estate commercial brokerage firm. Mr. Mendenhall served as President of the National Association of Realtors in 2001. He also serves as director of a number of privately held companies. Mr. Mendenhall holds an M.A. and a B.S. from the University of Missouri. We believe that Mr. Mendenhalls qualification to serve as a director include his specific experience in real estate and technology, as well as strong skills in providing business strategy and development guidance.
Ian Morris, age 43, has served as our Chief Executive Officer since June 2003 and a director since April 2004. Mr. Morris joined Market Leader in June 2002 as Executive Vice President of Marketing and Business Development and served as our Chief Operating Officer from September 2002 to May 2003. From 1997 to 2002, Mr. Morris served in a variety of positions for MSN HomeAdvisor, the online real estate business of Microsoft Corporation, a software and technology company, including Director of Marketing, Group Manager and General Manager. Mr. Morris holds an M.B.A. from Harvard Business School and a B.S. from Bryant College. We believe that Mr. Morris qualification to serve as a director include his specific experience in business and technology innovation, as well as, investment strategy and strategic planning.
Class 3 DirectorsTerms Expiring in 2013
Frank M. (Pete) Higgins, age 54, is the Chairman of the Board and has served as a director since April 2004. Since March 2000, Mr. Higgins has served as a partner with Second Avenue Partners, which he co-founded. From 1983 to 1999, Mr. Higgins worked for Microsoft Corporation. During his time at Microsoft, Mr. Higgins served as Group Vice President of the Interactive Media Group from 1996 to 1998, Group Vice President of Applications and Content from 1995 to 1996, Senior Vice President of the Desktop Applications Division from 1992 to 1995, and General Manager and then Vice President of the Analysis Business Unit from
1988 to 1992. Mr. Higgins was also a member of the Office of the President, reporting to then CEO Bill Gates. Mr. Higgins is a director of a number of privately held companies, including Ice Energy, Modumetal, and Rubicon Interactive. He is a strategic director of Madrona Investments Partners, LLC, a venture capital firm. Mr. Higgins also serves on the Board of Trustees for Stanford University and Hoh River Trust. Mr. Higgins holds an M.B.A. and an undergraduate degree in economics and history from Stanford University. We believe that Mr. Higgins qualification to serve as a director include his extensive experience in product and software development, business strategy, development and marketing, as well as public company executive compensation.
Michael T. Galgon, age 44, has served as a director since April 2010, when he was appointed to fill a vacancy in Class 3 of our Board of Directors. Mr. Galgon served as Chief Advertising Strategist for Microsoft Corporation from August 2007 until January 2009. In 1997, Mr. Galgon co-founded aQuantive, Inc. (formerly Avenue A, Inc.), an Internet media company, where he served as President and General Manager from 1997 through 1999, and as Chief Strategy Officer from 2000 to 2007. Prior to founding aQuantive, Mr. Galgon served as a full-time volunteer with Volunteers In Service To America (VISTA) from October 1994 to October 1995 and as an officer in the U.S. Navy from 1990 to 1994. He currently serves as a director for BuddyTV, a privately held company, and for Global Partnerships, a Seattle-based microfinance organization. Mr. Galgon holds an M.B.A. from the Harvard Business School and a B.A. in economics from Duke University. We believe that Mr. Galgons qualification to serve as a director include his extensive software, technology, advertising, and merger and acquisition expertise, as well as strong skills in business strategy, development and marketing.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Independence of the Board of Directors
The Board of Directors has reviewed the relationships between Market Leader and each of its directors and has determined that all of the directors other than Mr. Morris, who currently serves as our Chief Executive Officer and President, are independent as that term is defined in the listing standards of The Nasdaq Stock Market.
Board Leadership Structure and Role in Risk Oversight
The positions of Chief Executive Officer and Chairman are held by different persons. The Chief Executive Officer is responsible for setting the strategic direction for our Company and for the day to day leadership and performance of the Company, including execution of its strategy, while the Chairman of the Board provides guidance to the Chief Executive Officer, sets the agenda for meetings of the Board of Directors, and presides over meetings of the full Board. The Board of Directors believes that this leadership structure enhances its oversight of, and independence from, Market Leaders management and the Boards ability to carry out its roles and responsibilities on behalf of shareholders.
The Board of Directors role in our risk oversight process includes receiving regular reports from members of senior management on areas of material risk to our Company, including operational, financial, legal, regulatory and strategic risks. While the Board of Directors is ultimately responsible for risk oversight, each of the committees of the Board of Directors assists in fulfilling these oversight responsibilities. The Audit Committee oversees management of operational and financial risks. The Compensation Committee is responsible for overseeing the management of risks relating to the compensation of executives, employees and non-employee directors. The Nominating and Corporate Governance Committee manages risks associated with corporate governance, including the independence of directors and composition of our Board of Directors.
During 2011, there were five meetings of the Board of Directors. In addition, the Board of Directors acted seven times by written consent in 2011. Except for Mr. Hanauer, each of our directors attended at least 75% of the aggregate of (a) the total number of meetings of the Board of Directors and (b) the total number of meetings
held by each of the committees on which he served in 2011. Market Leader does not have a formal policy with regard to director attendance at its Annual Meeting of Shareholders, but encourages each director to attend. No directors other than Mr. Morris attended the 2011 Annual Meeting of Shareholders.
The Board of Directors has established director cash and equity compensation arrangements for our non-employee directors that are designed and implemented to ensure we both attract and retain high quality Board members. The program consists of an annual cash retainer for non-employee directors, an annual cash retainer for committee chairs, Board and committee meeting fees and an annual stock option grant. Directors who are employees of our company receive no additional or special remuneration for serving as directors.
Non-employee directors are entitled to receive the following cash compensation annually, in addition to reimbursement for out-of-pocket expenses:
For 2011, non-employee directors, other than the Chairman of the Board, were granted an annual stock option to purchase 15,000 shares of our common stock. For 2011, the Chairman of the Board was granted an annual stock option to purchase 25,000 shares of our common stock. The options are granted under our Amended and Restated 2004 Equity Incentive Plan (2004 Equity Incentive Plan) at the beginning of the year and vest one year later, subject to continued service as a director until such date. The options have an exercise price equal to the average of the high and low prices of our common stock on the date of grant. The unvested portions of such options automatically become fully vested and exercisable in the event of certain corporate transactions, such as a merger or sale of assets.
2011 Director Compensation
Committees of the Board of Directors
The Board of Directors has three standing committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee.
Our current directors memberships on the committees of the Board of Directors are as follows:
The Audit Committee is composed of three independent directors. The Audit Committee assists the Board of Directors by overseeing our accounting and financial reporting processes and the audits of our financial statements and reviewing the financial information to be provided to our shareholders and others. Among other duties and responsibilities specified in its written charter, the Audit Committee:
The Board of Directors has determined that, under the rules of the SEC and the applicable listing standards of The Nasdaq Stock Market, all of the members of the Audit Committee are independent and financially literate. The Board of Directors has also determined that Mr. Gacek meets the SEC criteria for audit committee financial expert.
The Audit Committee held four meetings in 2011. In addition, the Audit Committee acted one time by written consent in 2011.
A copy of the Audit Committees written charter can be accessed at the Corporate Governance link on the Investor Relations section of our website, located at www.marketleader.com.
Our Compensation Committee is composed of four directors. The Compensation Committee has overall responsibility for approving and evaluating compensation plans, policies and programs for our executive officers. The Compensation Committee, when appropriate, may form and delegate authority to subcommittees and may delegate authority to one or more designated members of the Board of Directors or Market Leaders officers. Among other duties and responsibilities specified in its written charter, the Compensation Committee:
Additionally, our Chief Executive Officer and Chief Financial Officer have a role in recommending the amount and form of compensation for executive officers. The Chief Executive Officer reports to the Compensation Committee periodically on the results of the evaluations of our executive officers (other than the CEO). In addition to the CEOs involvement in setting individual performance goals, conducting evaluations and making compensation recommendations for other executive officers, our management team plays an active role in updating the Compensation Committee on the trends and challenges of hiring, retaining and competing for talent. The management team periodically suggests alternative forms of compensation or compensation strategies to the Compensation Committee that will enable us to attract and retain key talent.
Market Leader retains Milliman, Inc. (Milliman), as directed by the Compensation Committee, to act as an independent compensation consultant to the Compensation Committee. Milliman works with management and the Compensation Committee on executive compensation program design and provides information on comparative market data and industry best practices on compensation practices and programs. Milliman does not determine or recommend executive or director compensation, but rather provides the Compensation Committee with guidance based on comparative market data and Millimans experience and understanding of Market Leaders needs and objectives.
Each of the Compensation Committee members is (i) independent in accordance with applicable listing standards of The Nasdaq Stock Market, (ii) a non-employee director within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and (iii) an outside director within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The Compensation Committee held four meetings in 2011. In addition, the Compensation Committee acted three times by written consent in 2011.
A copy of the Compensation Committees written charter can be accessed at the Corporate Governance link on the Investor Relations section of our website, located at www.marketleader.com.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee is composed of three directors. The principal functions of the Nominating and Corporate Governance Committee are to:
Each of the Nominating and Corporate Governance Committee members is independent in accordance with applicable listing standards of The Nasdaq Stock Market.
The Nominating and Corporate Governance Committee took action by written consent once in 2011.
A copy of the Nominating and Corporate Governance Committees written charter can be accessed at the Corporate Governance link on the Investor Relations section of our website, located at www.marketleader.com.
Director Nominations and Qualifications
To nominate a director for election to the Board of Directors at an Annual Meeting of Shareholders, a shareholder must deliver written notice of such nomination to the Secretary of Market Leader not fewer than 60 days nor more than 90 days prior to the anniversary date of the prior years Annual Meeting of Shareholders. If the date of the Annual Meeting of Shareholders is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding years Annual Meeting of Shareholders, notice of director nominations by a shareholder must be delivered not earlier than the close of business on the 90th day and not later than the close of business on the later of (a) the 60th day prior to such annual meeting or (b) the tenth day following the day on which the notice of the date of the Annual Meeting of Shareholders was mailed or such public disclosure was made.
The notice of a shareholders intention to nominate a director must include: (a) the name and address of the shareholder; (b) a representation that the shareholder is entitled to vote at the meeting at which directors will be elected; (c) a statement of the number of Market Leader shares that are beneficially owned by the shareholder; (d) a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; and (e) the following information with respect to each person nominated by the shareholder: (i) name and address; (ii) other information regarding such nominee as would be required in a proxy statement filed pursuant to applicable rules promulgated by the SEC; (iii) a description of any arrangements or understandings between the shareholder and the nominee and any other persons (including their names), pursuant to which the nomination is made; and (iv) the consent of each such nominee to serve as a director if elected.
The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders. Shareholders who wish to recommend a director nominee should submit their suggestions in writing to the following:
Chairperson of Nominating and Corporate Governance Committee
c/o Corporate Secretary
Market Leader, Inc.
11332 NE 122nd Way, Suite 200
The Chairman of the Board, other directors or senior management of Market Leader may also recommend director nominees. If necessary or desirable in the opinion of the Nominating and Corporate Governance Committee, the Committee will determine appropriate means for seeking additional director candidates, which may involve the engagement of an outside consultant to assist the Nominating and Corporate Governance Committee in the identification of director candidates.
The Nominating and Corporate Governance Committee will evaluate director nominees, including nominees that are submitted by shareholders, taking into consideration certain qualifications, including the following:
In addition, the Nominating and Corporate Governance Committee will consider the following factors, among others, when determining Board needs and evaluating director candidates to fill such needs: the nominees independence, diversity, professional and public company board and committee experience, industry knowledge, accounting or financial skills and expertise, leadership qualities, non-business-related activities and experience, board continuity, the size of the board, number and type of committees and committee sizes, and legal and Nasdaq Stock Market requirements and recommendations and other corporate governance related guidance regarding board and committee composition. Although the Board of Directors has no formal policy regarding diversity, diversity is listed as one of the factors in the Director Selection Guidelines to be considered by the Nominating and Corporate Governance committee in evaluating appropriate director candidates, among other factors. Neither the Director Selection Guidelines nor any other policy of the Board of Directors or any of its committees define diversity or set any affirmative goals with respect to diversity on our Board of Directors. Neither the Director Selection Guidelines nor any other policy of the Board of Directors or any of its committees specifically address how we implement the guideline of considering diversity as a factor in evaluating director candidates, nor is there any process or procedure for assessing whether we are effective in considering diversity as a factor in evaluating director candidates. The Nominating and Corporate Governance Committee does not assign specific weight to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. The Board of Directors believes that the backgrounds and qualifications of the directors, considered as a group, should provide an overall mix of skills and characteristics that will allow the Board to function effectively.
Shareholder Communications with the Board
Shareholders may contact an individual director or the Board of Directors collectively by directing written correspondence to Market Leader, Inc., c/o Corporate Secretary, at 11332 NE 122nd Way, Suite 200, Kirkland, WA98034.
Shareholders should clearly specify in each communication the name of the individual director or group of directors to whom the communication is addressed. Shareholder communications sent to the Secretary of Market Leader will be forwarded to the specified director addressees. Shareholders wishing to submit proposals for inclusion in the proxy statement relating to the 2013 Annual Meeting of Shareholders should follow the procedures specified under Shareholder Proposals for 2013 Annual Meeting below. Shareholders wishing to nominate directors should follow the procedures specified under Director Nominations and Qualifications.
Code of Ethics
We have adopted a code of ethics applicable to our accounting and financial employees, including the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer or Controller, or persons performing similar functions, as well as a code of conduct applicable to all employees, officers and directors. These codes
are posted at the Corporate Governance link on the Investor Relations section of our website, located at www.marketleader.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to or waiver from the application of the code of ethics with respect to the covered persons by posting such information on our website.
PROPOSAL 2RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
The Audit Committee has appointed KPMG LLP (KPMG) to be Market Leaders independent registered public accounting firm for the 2012 fiscal year. Representatives of KPMG are expected to be present at the Annual Meeting, with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
KPMG has served as our independent registered public accounting firm since 2001. Shareholder approval of the selection of KPMG as our independent registered public accounting firm is not required by our bylaws or otherwise. If our shareholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain KPMG but may elect to retain KPMG notwithstanding the shareholder vote. Even if the appointment is ratified by our shareholders, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be advisable.
The Board of Directors recommends voting FOR ratification of the appointment of KPMG as the Companys independent registered public accounting firm for fiscal year 2012.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information regarding the beneficial ownership of our common stock as of March 30, 2012 (or such earlier date as indicated in the footnotes to the table) for: (a) each of our named executive officers included under the heading 2011 Summary Compensation Table below; (b) each of our directors; (c) our directors and executive officers as a group; and (d) each shareholder known by us to own more than 5% of our common stock.
Beneficial ownership is determined in accordance with rules of the SEC and includes shares over which the indicated beneficial owner exercises voting and/or investment power. Shares of common stock subject to options or warrants currently exercisable within 60 days of March 30, 2012 are considered outstanding for computing the percentage ownership of the person holding the options or warrants, but are not considered outstanding for computing the percentage ownership of any other person. Except as otherwise indicated in the footnotes to the table, we believe the beneficial owners of the common stock listed below, based on information furnished by them, have sole voting and investment power with respect to the shares listed opposite their names.
TRANSACTIONS WITH RELATED PARTIES
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PARTIES
On an annual basis, each of our directors and executive officers must complete a Director and Officer Questionnaire that requires disclosure of any transaction, arrangement or relationship, or any current proposed transaction, arrangement or relationship, with Market Leader since the beginning of the last fiscal year in which the director or executive officer, or any member of his or her immediate family, had a direct or indirect material interest. Any transaction, arrangement or relationship disclosed in the Director and Officer Questionnaire submitted by a director or executive officer is reviewed and considered by the Board of Directors in making independence determinations with respect to directors and resolving any conflicts of interest that may be implicated.
Our directors and executive officers are expected to disclose to the Chairman of the Board or Chief Executive Officer the material facts of any transaction that could be considered a related person transaction promptly upon gaining knowledge of the transaction. Upon collection of the relevant information, the Chairman of the Board or the Chief Executive Officer presents the transaction to the Audit Committee for consideration. A related person transaction is generally defined as any transaction required to be disclosed under Item 404(d) of Regulation S-K, the SECs related person transaction disclosure rule.
When determining whether to approve or ratify a related person transaction, the Audit Committee will review relevant facts regarding the related person transaction, including:
If any related person transaction is not approved or ratified, the Audit Committee may take such action as it may deem necessary or desirable in the best interests of Market Leader and its shareholders.
The following persons are executive officers of Market Leader as of March 30, 2012 and will serve in the capacities noted until their successors are duly appointed or until their resignation or removal.
For a biographical summary of Mr. Morris, see Proposal 1Election of Directors.
Jacqueline L. Davidson has served as our Chief Financial Officer since February 2008. Ms. Davidson served as our Vice President of Finance from November 2004 to January 2008 and served as our Chief Financial Officer on an interim basis from July 2006 to January 2007. From 1996 to 2004, Ms. Davidson served in a number of executive financial positions at public and private companies, including Penford Corporation and The Cobalt Group, Inc. Ms. Davidson is a CPA who began her career at PricewaterhouseCoopers LLP. She holds a B.A. in Business Administration from Washington State University.
2011 Summary Compensation Table
The following table summarizes compensation earned by our Chief Executive Officer and our Chief Financial Officer for 2011 and 2010 (collectively, the named executive officers).
We have entered into employment agreements with our named executive officers, which in December 2008 were amended for purposes of compliance with Section 409A of the Internal Revenue Code of 1986, as amended. The descriptions of the employment agreements below and in Effect of Termination of Employment or Change in Control describe the employment agreements, as amended.
Ian Morris Employment Agreement. In May 2004, we entered into an employment agreement with our Chief Executive Officer, Ian Morris. Under the terms of the agreement, Mr. Morris is entitled to an annual base salary, with the ability to earn an annual bonus, as determined by the Compensation Committee. The agreement provides that Mr. Morris is an at-will employee. If Mr. Morris employment is terminated without cause, or if he resigns for good reason, both as defined in the agreement and summarized below under Effect of Termination of Employment or Change in Control, he will be entitled to receive the following benefits: (i) termination payments equal to twelve months annual base salary payable in 24 semi-monthly installments, (ii) any unpaid base salary for services previously performed as of the date of termination, (iii) a severance bonus equal to 100% of the most recent annual bonus paid to him, and (iv) payment of COBRA premiums until termination or expiration of eligibility for COBRA coverage. In addition, if Mr. Morris resigns for good reason, all unvested outstanding options to purchase shares of our common stock granted on or prior to the date of the agreement will become 100% vested and immediately exercisable. In the event that we terminate his employment without cause, all unvested options that would have been exercisable on the fourth quarterly vesting date following his termination will become vested and exercisable as of the date of termination. Market Leader carries a $2.5 million life insurance policy on Mr. Morris that names his wife as the beneficiary. Additionally, in the event of Mr. Morris death or disability, he and his eligible dependents will be entitled to payment of COBRA premiums for twelve months thereafter.
Jacqueline Davidson Employment Agreement. In February 2008, we entered into a new employment agreement with Ms. Davidson concurrent with her promotion to Chief Financial Officer. Under the terms of Ms. Davidsons employment agreement, we agreed to pay her an annual base salary, with the ability to earn an annual bonus. The agreement provides that Ms. Davidson is an at-will employee. If Ms. Davidsons employment is terminated without cause or if she resigns for good reason, both as summarized below under Effect of Termination of Employment or Change in Control, she will be entitled to receive the following benefits: (i) termination payments equal to six months annual base salary and (ii) payments equal to six months of COBRA premiums, provided that she sign a separation agreement releasing any claims against Market Leader. In the event of Ms. Davidsons death or disability, she and her eligible dependents will be entitled to receive six months of COBRA premiums.
Equity Compensation Plans
Market Leader has two equity compensation plans under which our executive officers have been granted equity awards: the 1999 Stock Incentive Plan and the 2004 Equity Incentive Plan. We currently grant equity-based awards only under the 2004 Equity Incentive Plan.
Annual Incentive Bonuses
On February 3, 2011, the Compensation Committee approved the Market Leader, Inc. 2011 Management Variable Cash Compensation Plan (the Bonus Plan), which provides for incentive payments to executive officers based upon achievement of specified quarterly revenue and gross margin goals. Incentive payments are
based on a percentage of base salary for each executive officer ranging from 45% to 100% of base salary, depending on the level of achievement of the goals. Mr. Morris 2011 target bonus was equal to 60% of his base salary and Ms. Davidsons was equal to 45% of her base salary. If Market Leaders performance is between target and top-level target, bonus amounts may exceed the target percentages set forth above. The Compensation Committee assesses achievement of the stated goals under the Bonus Plan, determines and approves incentive payments for each executive officer and may modify incentive payment amounts or award vehicles and differentiate between executives in their discretion. Executives will not receive a bonus under the Bonus Plan if minimum performance targets are not met. For 2011, the revenue goal was achieved in two out of four quarters and the gross margin goal was achieved in four out of four quarters, resulting in payouts at 65% of target amounts. The amounts for Mr. Morris and Ms. Davidson are disclosed for 2011 under the Non-Equity Incentive Plan Compensation column of the 2011 Summary Compensation Table.
2011 Outstanding Equity Awards at Fiscal Year-End Table
The following table provides information about outstanding stock options, stock appreciation rights, and restricted stock units held by our named executive officers as of December 31, 2011.
Effect of Termination of Employment or Change in Control
Employment Agreements. We have employment agreements with Mr. Morris and Ms. Davidson that include termination of employment provisions and change in control arrangements. As described in more detail
in the narrative after the 2011 Summary Compensation Table, under these agreements, Market Leader may be required to pay a compensation and benefits package if we terminate their employment other than for cause, as defined below, or if one of those executive officers terminates employment for good reason, as defined below. The compensation and benefits packages may include severance payments and payment of COBRA premiums, or the acceleration of stock option vesting.
Termination of employment benefits would not be paid if an executive officer was terminated for cause. The definition of cause generally includes the following:
In the case of Mr. Morris employment agreement, cause is also defined as the continued failure of the executive to satisfactorily perform his duties for a period of 60 consecutive days after receipt of written notice that specifically identifies the areas in which the executives performance is deficient and the executive fails to cure such acts or omissions within 30 days after receipt of the written notice.
If an executive officer terminates his employment for good reason, he would be entitled to termination of employment benefits. Good reason is generally defined as:
Termination of employment by the executive will not be deemed to be for good reason unless the executive provides notice to Market Leader of the good reason event or condition within 30 days of its occurrence and Market Leader has a 30-day opportunity after such notice to cure such conduct or event.
Change in Control Provisions under the 2004 Equity Incentive Plan. Unless the Compensation Committee provides otherwise at the time of grant of an award under the 2004 Equity Incentive Plan, in the event of certain company transactions, as defined below, each outstanding stock option, stock appreciation right, or restricted stock unit generally will automatically accelerate and become fully vested and exercisable or payable immediately before the company transaction, unless the award is assumed, continued or replaced with a comparable award by the successor entity or the parent of the successor entity. Any stock option, stock appreciation right, or restricted stock unit that is assumed, continued or replaced with a comparable award in the company transaction will retain its original vesting schedule. Notwithstanding the above, we may instead provide that awards will be terminated and exchanged for cash in connection with a company transaction, either to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Compensation Committee in its sole discretion.
Under the 2004 Equity Incentive Plan, a company transaction is generally defined as
Other Termination or Change in Control Arrangements. Under the terms of the stock appreciation right granted to Mr. Morris in October 2011, if Mr. Morris employment is terminated without cause or if he resigns for good reason (as such terms are defined in his employment agreement), the unvested portion of the stock appreciation right that would have been exercisable as of the fourth quarterly vesting date following termination will become vested and exercisable.
As of December 31, 2011, we also had a change in control arrangement in effect with Mr. Morris that provides for accelerated vesting of equity awards in addition to the standard acceleration provisions in the 2004 Equity Incentive Plan. Pursuant to these agreements, including that for the stock appreciation right granted to Mr. Morris in 2011, in the event of certain company transactions, as defined above, 50% of the unvested portion of the awards subject to these agreements will automatically become vested and exercisable, and the remaining portion of these awards will vest in equal quarterly increments over the shorter of (i) two years immediately following such company transaction or (ii) the amount of time remaining under the awards original vesting schedule.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The aggregate fees for professional services rendered for fiscal years 2011 and 2010 by KPMG, our independent registered public accounting firm, were as follows:
The Audit Committee pre-approves all audit and permissible non-audit services provided by our independent registered public accounting firm. The policy is designed to ensure that the provision of these services does not impair the auditors independence. Under the policy, unless a type of service to be provided by the independent registered public accounting firm has received general pre-approval, it will require specific pre-approval by the Audit Committee. In addition, any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee. Under the policy, the Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated is required to report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate responsibilities to pre-approve services performed by the independent registered public accounting firm to management.
For 2011 and 2010, all audit and non-audit services were pre-approved by the Audit Committee.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of three directors who are independent directors as defined under the rules of The Nasdaq Stock Market and the SEC. The Audit Committee operates under a written charter approved by the Board of Directors, a copy of which is available at the Corporate Governance link on the Investor Relations section of our website,www.marketleader.com.
Responsibilities. The primary function of the Audit Committee is to oversee the accounting and financial reporting processes of Market Leader and the audit of the financial statements of Market Leader. The responsibilities of the Audit Committee include, among others, appointing an independent registered public accounting firm as Market Leaders independent registered public accounting firm and considering, in consultation with the independent auditors, the audit scope and plan. The Audit Committee Charter describes in greater detail the responsibilities of the Audit Committee. Management is responsible for Market Leaders internal controls and financial reporting process. The independent auditors are responsible for performing an independent audit of Market Leaders consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board and for issuing a report thereon.
Review with Management and Independent Auditors. In this context, the Audit Committee has met and held discussions with management and the independent registered public accounting firm. The Audit Committee has reviewed and discussed with management and the independent registered public accounting firm Market Leaders audited consolidated financial statements as of and for the fiscal year ended December 31, 2011 and the independent registered public accounting firms report thereon. Management represented to the Audit Committee that Market Leaders consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
The Audit Committee discussed with the independent auditors the matters required to be discussed by the Statement on Auditing Standards No. 61, Communication with Audit Committees, as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee also received and reviewed the written disclosures and the letter from the independent auditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors communications with the Audit Committee concerning independence, and has discussed with the independent auditors the independent auditors independence.
Summary. Based on the reviews and discussions with management and the independent auditors referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in Market Leaders Annual Report on Form 10-K for the fiscal year ended December 31, 2011 for filing with the SEC.
In connection with its review of Market Leaders consolidated audited financial statements referred to above, the Audit Committee relied on advice and information that it received in its discussions with management and advice and information it received in the audit report of and discussions with the independent registered public accounting firm.
This report is submitted over the names of the members of the Audit Committee.
Jon W. Gacek, Chair
Nicolas J. Hanauer
Frank M. (Pete) Higgins
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers, directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and
changes in ownership with respect to our equity securities with the SEC. Based solely on our review of the copies of such forms that we received we believe that our officers, directors and greater than 10% beneficial owners complied with all filing requirements on a timely basis during 2011.
SHAREHOLDER PROPOSALS FOR 2013 ANNUAL MEETING
Submission of Shareholder Proposals for Inclusion in Proxy Statement
Under the SECs proxy rules, shareholder proposals that meet certain conditions may be included in Market Leaders proxy statement and form of proxy for a particular Annual Meeting of Shareholders. Shareholders who intend to have a proposal considered for inclusion in our proxy materials for the 2013 Annual Meeting of Shareholders must submit the proposal at our principal executive offices no later than December 21, 2012.
Advance Notice Procedures for Director Nominations and Other Business at Annual Meeting of Shareholders
Shareholders who intend to nominate persons for election to the Board of Directors or to present a proposal at the 2013 Annual Meeting of Shareholders without inclusion of the proposal in our proxy materials must provide advance written notice of such nomination or proposal in the manner required by our Bylaws. Notice of nominations or other business proposed to be considered by shareholders at the Annual Meeting of Shareholders, complying with Sections 2.6.1 and 3.3.1 of the Bylaws, as applicable, must be delivered to the Corporate Secretary no earlier than February 25, 2013 and no later than March 25, 2013. Notices should be sent to: Market Leader, Inc., Attn: Corporate Secretary, 11332 NE 122nd Way, Suite 200, Kirkland, WA98034. For additional information regarding director nomination procedures, see Board of Directors and Corporate GovernanceDirector Nominations and Qualifications above.
For proposals that are timely filed, Market Leader retains discretion to vote proxies it receives provided that (1) Market Leader includes in its proxy statement advice on the nature of the proposal and how it intends to exercise its voting discretion and (2) the proponent does not issue a proxy statement.
The Board of Directors does not intend to present any business at the Annual Meeting other than as described in the accompanying Notice of Annual Meeting of Shareholders, and has no present knowledge that others intend to present business at the Annual Meeting. If, however, other matters requiring the vote of the shareholders properly come before the Annual Meeting, the persons named in the accompanying form of proxy intend to exercise their discretionary authority to vote the proxies held by them in accordance with their best judgment as to such matters.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Market Leader 2011 Annual Report to Shareholders, which includes the Market Leader Annual Report on Form 10-K for the fiscal year ended December 31, 2011, accompanies this Proxy Statement. Additional copies may be obtained, without charge, upon request to Market Leader, Inc., Attn: Investor Relations at 11332 NE 122nd Way, Suite 200, Kirkland, WA98034.
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YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting. Both are available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern Time the day prior to the shareholder meeting date.
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.
FOLD AND DETACH HERE
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR ITEMS 1 AND 2.
Please mark your votes as indicated in this example X
MARKET LEADER, INC.
1. Proposal to elect one Class 2 director. Nominee:
01 Nicolas J. Hanaver
FOR THE NOMINEE
WITHHOLD AUTHORITY TO VOTE FOR THE NOMINEE
2. Proposal to ratify the appointment of KPMG, LLP, as Market Leaders independent registered public accounting firm for fiscal year 2012.
FOR AGAINST ABSTAIN
In giving this Proxy, I understand that I may personally vote my shares if I attend the Annual Meeting, not withstanding that I have previously executed and returned the Proxy to the Company.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR THE PROPOSALS.
Will Attend Meeting
RESTRICTED AREA - SCAN LINE
Mark Here for Address Change or Comments
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
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You can now access your Market Leader, Inc. account online.
Access your Market Leader, Inc. account online via Investor ServiceDirect® (ISD).
The transfer agent for Market Leader, Inc., now makes it easy and convenient to get current information on your shareholder account.
View account status
View certificate history
View book-entry information
View payment history for dividends
Make address changes
Obtain a duplicate 1099 tax form
Visit us on the web at http://www.bnymellon.com/shareowner/equityaccess For Technical Assistance Call 1-877-978-7778 between 9am-7pm Monday-Friday Eastern Time
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose MLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect® at www.bnymellon.com/shareowner/equityaccess where step-by-step instructions will prompt you through enrollment.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The Proxy Statement and the Annual Report to security holders are available at:
FOLD AND DETACH HERE
MARKET LEADER, INC. 11332 NE 122nd WAY
SUITE 200 KIRKLAND,WA 98034
ANNUAL MEETING OF SHAREHOLDERS, MAY 24, 2012
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MARKET LEADER, INC
The undersigned revokes all previous proxies, acknowledges receipt of the Notice of the Annual Meeting of Shareholders to be held May 24, 2012 and the Proxy Statement related thereto, and appoints Ian Morris, Jacqueline Davidson, and Gregg Eskenazi, and each of them (with full power to act alone), the proxy of the undersigned, with full power of substitution, to vote all shares of Common Stock of Market Leader, Inc. which the undersigned is entitled to vote, either on his or her own behalf or on behalf of an entity or entities, at the Annual Meeting of Shareholders of the Company to be held on Thursday, May 24, 2012 at 10:00 a.m., or at any adjournments, continuations or postponements thereof, with the same force and effect as if the undersigned were personally present and voting. The proxies are authorized to vote upon the proposals on the reverse side and, in their discretion, upon all other matters that may properly come before the Annual Meeting of Shareholders.
The Board of Directors unanimously recommends a vote FOR the matters described on the reverse side. This Proxy, when properly executed, will be voted in the manner directed herein. If no directions are given, the shares represented by this Proxy will be voted FOR the nominee listed in Proposal 1, FOR Proposal 2, and in accordance with the discretion of other persons named as proxies herein on any other matters that may properly come before the Annual Meeting of Shareholders.
(Mark the corresponding box on the reverse side)
SHAREOWNER SERVICES P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
RESTRICTED AREA - SCAN LINE
(Continued and to be marked, dated and signed, on the other side) 21442
RESTRICTED AREA - SIGNATURE LINES