EGOV » Topics » COMPENSATION OF DIRECTORS

This excerpt taken from the EGOV DEF 14A filed Mar 31, 2006.

COMPENSATION OF DIRECTORS

     All directors are eligible to participate in the Company's 2004 Stock Option Plan, and will be eligible to participate in the 2006 Stock Option and Incentive Plan, if approved by the Shareholders. Non-employee directors are eligible to participate in the Company's 1999 Employee Stock Purchase Plan.

     The Board will determine the terms and conditions of any such option awards, including those that apply upon the termination of a non-employee director's service as a member of the Board. Directors who are not employees of the Company are reimbursed for travel expenses and other out-of-pocket costs incurred in connection with their attendance at meetings.

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     In 2004, the Board approved compensation for directors for service on the Board during 2005. Each director received non-qualified options to purchase 25,000 shares of Common Stock and non-qualified options to purchase 10,000 shares of Common Stock for service on each committee of the Board during the year, which vest in four equal annual installments, commencing on the first anniversary of the grant date. However, each director had the opportunity to elect to receive the fair value of all or some of such options in cash. Mr. Evans elected to receive $37,500 in cash and Mr. Wilson elected to receive $50,000 in cash.

     In 2005, the Board approved compensation for directors for service on the Board during 2006 and following years, unless subsequently modified by the Board. Each director will receive an annual retainer in the amount of $15,000, plus $1,000 for attendance at each quarterly Board meeting. Directors will also receive compensation for serving on committees. The Chairperson of the Audit Committee will receive an additional $5,000 annually, and each member of the Audit Committee will receive an additional $2,000 annually. The Chairperson of the Compensation Committee and the Corporate Governance and Nominating Committee will each receive an additional $2,500 annually, and the other members of those committees will receive an additional $1,000 annually per committee. Each director will also receive non-qualified options to purchase 10,000 shares of Common Stock, which will vest in four equal annual installments, commencing on the first anniversary of the grant date, and which will be priced as of the close of the market on the date of grant. In addition, upon first joining the Board, any new director will receive a grant of non-qualified options to purchase 25,000 shares of NIC common stock, or an award of restricted stock with an equivalent fair market value on the date of the award, if the 2006 Amended and Restated Stock Option and Incentive Plan is approved by the shareholders.

     On October 26, 2005, the Board approved the acceleration of vesting of all unvested options to purchase common stock of the Company that had an exercise price that was greater than the market price on that date. The closing price of the Company's common stock on the Nasdaq National Market on October 26, 2005 was $5.63 per share. As a condition of the acceleration and to prevent unintended personal benefit, the Company's Directors, executive officers and employees must refrain from selling common stock acquired upon the exercise of accelerated options until the original vesting date or, if earlier, termination of employment with or service to the Company. All other terms and conditions applicable to such options, including exercise prices, remain unchanged. This action resulted in the accelerated vesting of options to purchase 163,873 shares of common stock of the Company, or approximately six percent of the total of all then outstanding Company options. Of this amount, 142,500 options had been granted to the following Directors:

  • Jeffery S. Fraser, Chief Executive Officer and Chairman of the Board - 15,000 options with an exercise price of $7.67 per share granted on November 10, 2003

  • Daniel J. Evans, Director – 37,500 options with an exercise price of $6.97 per share granted on November 10, 2003

  • Pete Wilson, Director – 37,500 options with an exercise price of $6.97 per share granted on November 10, 2003

  • John L. Bunce, Jr., Director – 37,500 options with an exercise price of $6.97 per share granted on November 10, 2003

  • Ross C. Hartley, Director – 15,000 options with an exercise price of 6.97 per share granted on November 10, 2003

     The Company accelerated the vesting of these options because it believed it was in the best interest of its shareholders to reduce future compensation expense that the Company would otherwise be required to report in its statement of income upon adoption of Statement of Financial Accounting Standards ("SFAS") No. 123R (revised 2004), "Share–Based Payment," in the first quarter of 2006. Further, because the options have exercise prices in excess of the current market price, they are viewed to have limited economic value and are not fully achieving their objective of incentive compensation and retention. Through December 31, 2005, the Company accounted for stock options using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and provided pro forma footnote disclosure in its consolidated financial statements (included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) of the compensation expense associated with stock options as if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." As a result of the vesting acceleration, the Company estimates

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that approximately $0.5 million in aggregate future expense will be eliminated over the next three fiscal years. The vesting acceleration did not result in compensation expense in the Company's statement of income, but was reflected in its footnotes as an additional $0.5 million pre-tax charge to pro forma earnings in 2005.

This excerpt taken from the EGOV DEF 14A filed Mar 31, 2005.

Compensation of Directors

All directors are eligible to participate in the Company’s 2004 Stock Option Plan, and non-employee directors are eligible to participate in the Company’s 1999 Employee Stock Purchase Plan.

The Board will determine the terms and conditions of any such option awards, including those that apply upon the termination of a non-employee director’s service as a member of the Board. Directors who are not

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employees of the Company are reimbursed for travel expenses and other out-of-pocket costs incurred in connection with their attendance at meetings.

During 2004, all of a non-employee director’s annual retainer and/or retainer fees or other awards or compensation was payable in non-qualified stock options as determined by the Board. During 2004, Messrs. Bunce, Evans and Wilson each received non-qualified options to purchase 50,000 shares of Common Stock, which vest in four equal annual installments, commencing on the first anniversary of the grant date, and Messrs. Fraser and Hartley each received non-qualified options to purchase 20,000 shares of Common Stock, which vest in four equal annual installments, commencing on the first anniversary of the grant date. With respect to compensation for 2005, each director received non-qualified options to purchase 25,000 shares of Common Stock for service on the Board during the year, and 10,000 shares of Common Stock for service on each committee of the Board during the year, which vest in four equal annual installments, commencing on the first anniversary of the grant date. However, for 2005, each director had the opportunity to elect to receive the fair value of all or some of such options in cash. With respect to compensation for 2005, Mr. Evans elected to receive $37,500 in cash and Mr. Wilson elected to receive $50,000 in cash.

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