Neustar DEFA14A 2012
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
2012 Annual Meeting of Stockholders to be Held on June 20, 2012
The following Questions and Answers were prepared by NeuStar, Inc. (the Company or Neustar) for proxy solicitation.
As we approach Neustars Annual Meeting of Stockholders, we ask for your support of the Boards recommendation for each of the proposals in the 2012 Proxy Statement. In particular, we draw your attention to Proposal 4, the approval of the Amended and Restated NeuStar, Inc. 2009 Stock Incentive Plan (the Amended Plan). We were disappointed to learn that Glass Lewis & Co. (Glass Lewis) and Institutional Shareholder Services (ISS), two proxy advisory services, have recommended that stockholders vote against Proposal 4. We strongly disagree with Glass Lewis and ISS and encourage you to vote FOR the Amended Plan.
As you evaluate Proposal 4, we believe that, in addition to the information disclosed in our 2012 Proxy Statement, you should consider the important information provided below.
In 2011, we changed our strategic vision and expanded our business from one that provides authoritative directory and policy management services to one that also provides real-time information and analytics services. We are in the early stages of implementing this new business strategy, which requires all levels of our organization to be involved. This process is incredibly challenging, and to implement it successfully, our executive management and employees must embrace both this new strategic direction and an innovation-based, entrepreneurial culture. We will also need to attract and retain the talent necessary to develop additional services and solutions, stretch into new markets, and develop new capabilities and skills. Since our employees are critical to the successful execution of our new long-term strategy, we granted a special equity award to over 1,200 employees, reaching across all organizational levels of the Company. This is the only such grant to employees since we went public in June 2005.
These special grants are multi-year, time-based restricted stock units (RSUs) and multi-year, performance-based restricted stock units (PVRSUs) that are designed to reward performance that meets or exceeds the goals our Compensation Committee has established (or will establish with respect to future years) to create stockholder value. We issued a total of 0.6 million RSUs and a total of 2.1 million PVRSUs in the most recent annual grant in the first quarter of 2012. Under the NeuStar, Inc. 2009 Stock Incentive Plan (the Plan), a fungible pool ratio of 1.5 is applied to all full-value awards (e.g., RSUs and PVRSUs). To ensure that the Company adequately reduced the pool of shares available for future grants under the Plan following the RSU and PVRSU grants in the first quarter of 2012, we conservatively applied an additional ratio of 1.5 to the PVRSU awards to reflect the maximum payout of the PVRSUs upon the maximum achievement of the performance targets. As a result of this conservative approach, the pool of shares available for future grants under the Plan was reduced by 5.7 million shares.
Our decision to provide the special multi-year equity grants to our employees in the first quarter of 2012 resulted in relatively few shares being available for any future equity awards. Due to the multi-year nature of the 2012 grants, the 5.7 million share reduction is not representative of expected future awards, which we anticipate being smaller in the aggregate. Nevertheless, in order to have available a sufficient pool of available shares in the future and to maintain our historic mix of cash- and equity-based compensation for our employees, including our executive officers, we are requesting to add an additional 3.0 million shares to the Plan to ensure the continuity of our compensation programs. Moreover, the proposed increase in the share pool under the Amended Plan permits Neustar to continue to align the interests of its employees, including its executive management, with the interests of its stockholders. Your vote FOR Proposal 4, the approval of the Amended Plan, will keep this important equity compensation plan available to Neustar to attract, retain and motivate our employees.
ISS based its voting recommendation on its stockholder value transfer (SVT) analysis, which measures the amount of stockholder equity that may be transferred from the Company to our employees under our stock incentive plan. Glass Lewis based its voting recommendation on its belief that the existing pool of shares as of December 31, 2011 is enough to meet the Companys historical burn rate, and it prefers that companies seek approval of new plans when their existing plans are inadequate to meet near-term needs. We disagree with their recommendations for the following reasons:
We believe the Amended Plan will permit Neustar to continue to align the interests of its employees, including its executive management, with the interests of its stockholders. The Amended Plan will allow us to continue to retain and attract the talent needed to support our strategic growth plan. Our inability to grant equity awards to our employees will make it increasingly difficult for us to attract and retain the talent necessary to execute our strategy of becoming the worlds leader in real-time information and analytics services derived from our addressing, routing and policy management core.
Our fiscal 2011 burn rate was 5.17%, or 3.86%, net of forfeitures and our 3-year average annual burn rate for fiscal 2009 through fiscal 2011 was 4.47%, or 3.36% net of forfeitures, well below the ISS burn rate threshold of 7.76% based on our GICS code. We believe that we have managed the burn rate appropriately in the past, and we will continue to do so in the future. Burn rate is just one of several factors that we consider when determining equity award grants.
Although there are many variables that will affect the impact on voting power dilution, ISS concluded that the total potential dilution following the addition of 3.0 million new shares is below the GICS median and the GICS 75th percentile. As of March 31, 2012, the dilution impact of 3.0 million new shares added to the outstanding shares available for grant plus the outstanding equity awards will be 4.5% on a basic basis and 3.7% on a fully-diluted basis. We understand that maintaining reasonable dilution levels is important to our stockholders, and it is to us as well. In fact, one of the goals of our established stock repurchase program is to help offset dilution. We continually monitor our voting power dilution levels, and dilution is a consideration when determining our annual equity award amounts.
As of March 31, 2012, we had approximately 8.2 million shares outstanding under the Plan and prior plans (including approximately 4.6 million outstanding options and approximately 3.6 million outstanding unvested restricted stock awards, time-based restricted stock units and performance vested restricted stock units).
We at Neustar remain committed to delivering value for our stockholders. To that end, we believe that Glass Lewiss and ISSs recommendations with respect to the vote on our proposed amendment to our 2009 Stock Incentive Plan are inappropriate. We continue to recommend a vote FOR Proposal 4 approval of the Amended and Restated NeuStar, Inc. 2009 Stock Incentive Plan.
If you would like to discuss the proposed amendment to the 2009 Stock Incentive Plan, please feel free to contact Investor Relations at 571-434-5400.
Certain statements in this proxy material, other than purely historical information, including estimates, projections, statements relating to future equity issuances, our business plans and objectives, and the assumptions upon which those statements are based, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by words such as believe, expect, estimate, intend, strategy, future, opportunity, plan, may, should, will, would, will be, will continue, will likely result, and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section titled Risk Factors of our most recent Form 10-K and subsequent periodic reports. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.