UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. )
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Filed
by the Registrant
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Filed
by a Party other than the Registrant
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Check
the appropriate box:
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Preliminary Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Section
240.14a-12
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INTERACTIVE INTELLIGENCE,
INC.
(Name of
Registrant as Specified in its Charter)
______________________________
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
T
No fee
required.
*
Fee computed
on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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_______________________________________________________________________________
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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_______________________________________________________________________________
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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_______________________________________________________________________________
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*
Fee paid
previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously.
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Identify
the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1)
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Amount
Previously Paid:
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Form,
Schedule or Registration Statement No.:
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(3)
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Party:
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April 17
,
200
9
To Our
Shareholders:
Our Board
of Directors joins me in extending to you a cordial invitation to
attend the 2009 Annual Meeting of Shareholders of Interactive Intelligence,
Inc. The meeting will be held at our world headquarters located at 7601
Interactive Way, Indianapolis, Indiana 46278 at 1:30 p.m., Eastern Time, on
Thursday, May 28, 2009.
In
addition to voting on the matters described in this proxy statement, we will
review our 2008 business results and discuss our plans for 2009 and beyond.
There will also be an opportunity to discuss matters of interest to you as a
shareholder.
This year
we are again providing access to our proxy materials via the Internet. On
or about April 17, 2009, we mailed a Notice of Internet Availability of Proxy
Materials (the “Notice”) to certain street name holders, and on or about the
same date we mailed a printed copy of the proxy statement and a proxy card to
our other shareholders. On the mailing date of the Notice, all shareholders of
record and street name holders will have the ability to access all of the proxy
materials, including the proxy statement, via the Internet.
Regardless
of the number of shares you own, it is important that your shares be represented
whether or not you attend the meeting. Shareholders of record can vote their
shares via the Internet, by using a toll-free telephone number or by traditional
mail. Instructions for using these convenient services appear on the Notice, the
proxy card and in the proxy statement. If you received a printed copy of the
proxy materials, you can vote your shares by marking your votes on the proxy
card, signing and dating it and mailing it promptly using the envelope provided.
Any shareholder attending our meeting may vote in person even if a proxy has
been returned.
We hope
that you will be able to attend our meeting, and we look forward to seeing
you.
Sincerely,
Donald E.
Brown, M.D.
Chairman
of the Board
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INTERACTIVE
INTELLIGENCE, INC.
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7601
INTERACTIVE WAY
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INDIANAPOLIS,
INDIANA 46278
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NOTICE
OF ANNUAL MEETING OF
SHAREHOLDERS
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TIME AND DATE
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1:30
p.m., Eastern Time, on Thursday, May 28, 2009
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PLACE
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Interactive
Intelligence, Inc. World Headquarters
7601
Interactive Way
Indianapolis,
Indiana 46278
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ITEMS OF BUSINESS
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1.
To
elect one director to hold office for a term of three years or
until his successor is elected and
has qualified;
2.
To
consent to the appointment of KPMG LLP as our independent
registered public accouting
firm for 2
009;
and
3. To transact any other business that may be properly
brought before our meeting or any
adjournment or postponement
thereof.
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RECORD DATE
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You
can vote if you are a shareholder of record on March 31,
2009.
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ANNUAL REPORT
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Our
2008 Annual Report, which is not a part of these proxy materials, is
enclosed.
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PROXY VOTING
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Your
vote is important, regardless of the number of shares you own. If you do
not attend the meeting to vote in person, your vote will not be counted
unless a proxy representing your shares is presented at the meeting. To
ensure that your shares will be voted at the meeting, please vote in one
of these ways:
1.
Go
to
www.proxyvote.com
shown on the
Notice of Internet Availability of Proxy Materials or your
proxy card and vote via the Internet;
2.
You
may vote by touchtone telephone by calling 1 (800) 690-6903 (this call is
toll-free in the United
States); or
3.
If
you received a printed copy of the proxy card by mail, then MARK, SIGN,
DATE AND
PROMPTLY RETURN your proxy card in the postage-paid
envelope.
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If
you do attend the meeting, you may revoke your proxy and vote by
ballot.
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By
order of the Board of Directors,
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Indianapolis,
Indiana
April
1
7
,
2009
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Stephen
R. Head
Corporate
Secretary
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TABLE
OF CONTENTS
INTERACTIVE
INTELLIGENCE, INC.
7601
INTERACTIVE WAY
INDIANAPOLIS,
INDIANA 46278
__________________________________________________
PROXY STATEMENT
SOLICITATION
OF PROXIES
FOR
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD AT 1:30 P.M. EASTERN TIME ON MAY 28, 2009
GENERAL INFORMATION
This
proxy statement and accompanying proxy card are being provided to shareholders
on or about
April 17, 2009
in
connection with the solicitation by the Board of Directors of Interactive
Intelligence, Inc. (“Interactive,” “we,” “us,” “our” or the “company”) of
proxies to be voted at the 2009 annual meeting of shareholders on May 28,
2009.
Why
did I receive a Notice of Internet Availability of Proxy Materials?
Instead of initially mailing a printed
copy of the proxy materials to each shareholder, we may now furnish proxy
materials to our shareholders via the Internet under the e-proxy rules adopted
by the Securities and Exchange Commission (the “SEC”). On or about April 17,
2009, we mailed a Notice of Internet Availability of Proxy Materials (the
“Notice”) to certain street name holders as of the close of business on March
31, 2009 (the “Record Date”), and we mailed a printed copy of the proxy
materials to our other shareholders. If you received a Notice by mail, you will
not receive a printed copy of the proxy materials unless you request such a copy
in the manner described in the Notice. The Notice also instructs you as to how
you may access and review this proxy statement and our 2008 Annual Report on
Form 10-K for the year ended December 31, 2008, which is our 2008 Annual Report
to Shareholders, and how you may submit your proxy to vote at the annual
meeting.
This
proxy statement, the form of the proxy card and voting instructions are being
made available to our shareholders on or about April 17, 2009 at
www.proxyvote.com
.
Our 2008 Annual Report on Form 10-K is being made available at the same time and
by the same method. The 2008 Annual Report on Form 10-K is not to be considered
as part of the proxy solicitation materials or as having been incorporated by
reference.
What
is a proxy and how do I vote by proxy?
A proxy
is your legal designation of another person (the “proxy”) to vote on your
behalf. If you are a shareholder of record, we encourage you to vote via the
Internet or by telephone. Internet voting information is provided on the Notice
and the proxy card. You may vote by touchtone telephone by calling 1 (800)
690-6903. You will need to have the Notice or, if you received a printed copy of
the proxy materials, your proxy card or voting instruction card, available when
voting via the Internet or by telephone. These methods are convenient and save
us significant postage and processing expense. In addition, when you vote via
the Internet or by telephone prior to the meeting date, your vote is recorded
immediately and there is no risk that postal delays will cause your vote to
arrive late and therefore not be counted.
If you
are a shareholder of record and you received a printed copy of the proxy
materials, you may vote by marking your proxy card, dating and signing it, and
mailing it in the postage-paid envelope. The shares represented will be voted
according to your directions. If your proxy card is signed and returned without
specifying a vote or an abstention on any proposal, it will be voted according
to the recommendation of the Board on that proposal.
If you
are a “street name” holder, you must provide instructions on voting to your
bank, broker, trust or other nominee holder.
What
is the difference between a “shareholder of record” and a “street name”
holder?
These
terms describe how your shares are held. If your shares are registered directly
in your name with our independent transfer agent and registrar, Computershare
Investor Services, LLC, you are a “shareholder of record”. If your shares are
held in the name of a brokerage, bank, trust or other nominee as a custodian,
such as Broadridge Financial Solutions, Inc. (“Broadridge”), you are a “street
name” holder.
How
many proxy cards will I receive?
You will
receive multiple proxy cards if you hold your shares in different ways (e.g.,
joint tenancy, trusts and custodial accounts) or in multiple accounts. If your
shares are held in “street name”, you will receive your proxy card or other
voting information from your broker, and you will return your proxy card or
cards to your broker. You should complete and sign each proxy card you
receive.
VOTING INFORMATION
Who
is qualified to vote?
You are
qualified to receive notice of and to vote at our annual meeting if you own
shares of our common stock at the close of business on the Record Date for our
annual meeting. At the close of business on the Record Date, there were
16,961,626
shares of our common stock issued and outstanding. Each shareholder
will have one (l) vote for each share held.
Is
there a list of shareholders entitled to vote at the annual
meeting?
A list of
shareholders entitled to vote at our annual meeting will be available for
inspection for a purpose germane to our annual meeting by any shareholder during
usual business hours at our world headquarters during the ten days prior to our
meeting date.
How
do I use my shares to cast a vote?
Depending
on whether you hold your shares directly as a “shareholder of record” or you
hold your shares as a “street name” holder, there are several methods you can
choose from to cast your vote.
If you
are a “shareholder of record”, you can vote your proxy in any one of these
methods:
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1.
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Go
to
www.proxyvote.com
shown on the Notice or your proxy card and vote via the
Internet;
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2.
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You
may vote by touchtone telephone by calling 1 (800) 690-6903 (this call is
toll-free in the United States); or
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3.
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If
you received a printed copy of the proxy card by mail, then mark, sign,
date and promptly return your proxy card in the postage-paid
envelope.
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You will
need to have the Notice or, if you received a printed copy of the proxy
materials, your proxy card or voting instruction card, available when voting via
the Internet or by telephone. Therefore, please follow the specific instructions
set forth on the Notice, proxy card or voting instruction card. For security
purposes, our electronic voting system has been designed to authenticate your
identity as a shareholder of our common stock.
If you
hold your shares as a “street name” holder, your broker, bank, custodian or
nominee will provide you with materials and instructions for voting your
shares.
Can
I vote my shares in person at the annual meeting?
If you
decide to join us in person at our annual meeting and you are a “shareholder of
record”, you may vote your shares in person at the meeting. If you hold your
shares as a “street name” holder, you must obtain a proxy from your broker,
banker, trustee or nominee, giving you the right to vote the shares at the
meeting.
Can
I change my vote after I have sent in my proxy card?
Shareholders
who execute a proxy card retain the right to revoke it at any time before it is
voted by attending our annual meeting and voting in person or by notifying our
Corporate Secretary in writing of such revocation prior to our annual meeting.
If you execute more than one proxy card, the proxy card having the latest date
will revoke any earlier proxy cards.
What
constitutes a quorum and why is it required?
The
holders of a majority of our shares of common stock issued and outstanding and
entitled to vote, present in person, or represented by proxy, shall constitute a
quorum at our annual meeting. A quorum is required in order for our
shareholders to conduct business at our annual meeting.
What
is the Board’s recommendation on how I should vote my shares?
Our Board
recommends a vote
“
FOR
”
the director nominee and
“
FOR
”
the consent by our
shareholders to the appointment of our independent registered public accounting
firm for 2009.
How
would my shares be voted if I do not specify how I would prefer them to be
voted?
If no
choice is specified, your proxy will be voted
“
FOR
”
the election of
the director nominee and
“
FOR
”
the consent by our
shareholders to the appointment of our independent registered public accounting
firm for 2009. A proxy or proxy card may indicate that all or a portion of the
shares represented by such proxy or proxy card are not being voted with respect
to a specific proposal. This could occur, for example, when a broker is not
permitted to vote shares held in street name on certain proposals in the absence
of instructions from the beneficial owner. Shares that are not voted with
respect to a specific proposal will be considered as not present and not
entitled to vote on such proposal, even though such shares will be considered
present for purposes of determining a quorum and voting on other
proposals.
What
vote is required to approve a proposal? Also, how are abstentions and broker
non-votes treated?
The
election of the director nominee will be determined by a plurality of the shares
voting on such election, which means that the director nominee receiving the
most
"
FOR
"
votes will be elected at
the annual meeting. The consent by our shareholders to the
appointment of the independent registered public accounting firm will be
approved if more shares are voted
"
FOR
"
the proposal than
"
AGAINST
"
. Neither
abstentions nor broker non-votes will affect the outcome of either of these
proposals.
Who
will pay for the cost of this proxy solicitation?
This
solicitation will be conducted by mail, except that in a limited number of
instances proxies may be solicited by our officers, directors and regular
employees personally, by telephone, by facsimile or by other electronic
communication. We do not presently anticipate payment of any compensation or
fees of any nature to anyone for the solicitation of these proxies, except that
we may pay persons holding shares in their name, or of their nominees, for the
expense of sending proxies or proxy cards and proxy material to principals. The
entire cost of solicitation will be borne by us.
Who
will count the votes?
At our
annual meeting, votes will be counted by a representative from Broadridge. Such
representative will be present at the annual meeting to process the votes cast
by our shareholders, make a report of inspection, count the votes cast by our
shareholders and certify as to the number of votes cast on each
proposal.
Where
can I find the voting results of the annual meeting?
We will
announce preliminary voting results at our annual meeting and publish final
results in our Quarterly Report on Form 10-Q for the second quarter of
2009.
How
do I submit a shareholder proposal for next year’s annual meeting?
If you
wish to submit a shareholder proposal to be included in next year’s proxy
statement, you must comply with our advance notice requirements set forth in our
Amended and Restated By-Laws, as currently in effect, as described in
“Date of Receipt of Shareholder
Proposals for Our 2010 Annual Meeting
”
on
page 41.
What
if I want to receive a printed copy of the Annual Report on Form 10-K and this
proxy statement?
If you
received a Notice, you may request a printed copy of the Annual Report on Form
10-K and proxy statement by any of the following methods: via the Internet at
www.proxyvote.com
, by
telephone at 1 (800) 579-1639, or by sending an e-mail to
sendmaterial@proxyvote.com
.
Our shareholders may also request an Information Packet, which includes our most
recent Annual Report on Form 10-K and proxy statement. Please
visit our Investor Relations page located on our website at
http://investors.inin.com
and click on the “Contact Us” link. You will be asked to provide general contact
information before continuing. Or you may call
(
317
) 872-3000
and press option
“4”
to speak with an
investor relations representative.
If
you have any further questions about voting your shares or attending our annual
meeting, please contact our Investor Relations Team via email at
investor.relations@inin.com
or by telephone at (317) 872-3000 and press option “4”.
ELECTION
OF DIRECTOR
(ITEM
1 ON PROXY CARD)
Our Board
currently consists of six directors divided into three classes, with the term of
one class of directors expiring each year, pursuant to our Amended and Restated
By-Laws, as currently in effect. Generally, each director serves until the
annual meeting held in the year that is three years after such director’s
election and until such director’s successor is elected and has
qualified.
The terms
of Edward L. Hamburg, Ph.D. and Samuel F. Hulbert, Ph.D., two of our six
directors, will expire at this annual meeting. Our Board has nominated Dr.
Hamburg upon recommendation of our Nominating and Corporate Governance Committee
to be elected at this annual meeting for a term of three years to expire at our
2012 Annual Meeting or until his successor is elected and has qualified.
On March
23, 2009, Samuel F. Hulbert, Ph.D., notified our Chairman and CEO who then
notified the Board of his decision to not stand for re-election at this annual
meeting. Dr. Hulbert’s three year term is set to expire on the date of this
annual meeting. Dr. Hulbert currently serves as the Chairman of the Nominating
and Corporate Governance Committee and serves as a member of the Compensation
and Stock Option Committee. Dr. Hulbert’s decision was not the result of any
disagreement with us on any matter relating to our operations, policies or
practices.
After the election of a director at the annual meeting, our Board will consist
of five directors, including the four directors whose present terms extend
beyond the annual meeting. The Board plans to appoint Mark E. Hill, a
current member of the Board of Directors and Nominating and Corporate Governance
Committee, as Chairman of the Nominating and Corporate Governance Committee, to
replace Dr. Hulbert, effective immediately after the annual meeting. The Board
plans to appoint an additional director in due course following the selection of
a suitable candidate, in accordance with our Amended and
Restated
By-Laws.
Unless
proxy cards
are otherwise marked, the persons named as proxies will vote
the shares represented by all executed proxies which are received
"
FOR
"
the election of our
director nominee.
Our Board
has no reason to believe that the nominee will refuse to act or be unable to
accept election; however, in such event, and if any other unforeseen
contingencies should arise, it is the intention of the persons named as proxies
to vote for other nominees selected by our Nominating and Corporate Governance
Committee in accordance with their best judgment.
The
following descriptions set forth certain information, as of March 31, 2009,
about each director, including each person’s business experience for the past
five years. There is no family relationship between any of our directors or
officers.
Nominee
For Term To Expire in 2012
EDWARD L.
HAMBURG, Ph.D.; Director since 2004; Age 57; Chicago, Illinois. Dr. Hamburg is
the former Executive Vice President of Corporate Operations and Chief Financial
Officer of SPSS Inc. (“SPSS”), a multinational computer software firm that
provides predictive analytic technology and services. He held this position from
1992 to 2004 after heading business development for SPSS from 1986 to 1992. Dr.
Hamburg held an advisory position with SPSS through December 31, 2008 and
currently serves as a director and audit committee chairman of Interlink
Electronics, Inc., a developer of specialized electronic component technologies.
He is also a director of five privately-held high-technology companies and a
venture partner with Morgan Stanley Private Equity. Dr. Hamburg received a Ph.D.
from the University of Chicago and both his M.A. and B.A. from the University of
Maryland at College Park.
The Board
recommends a vote “
FOR
” the nominee
listed above.
Directors Whose Present Terms Expire in
2010
MARK E.
HILL; Director since 2004; Age 52; Carmel, Indiana. Mr. Hill is Managing Partner
of Collina Ventures, LLC, a private investment company focusing on technology
companies. In 1983, Mr. Hill co-founded Baker Hill Corporation®, which serves as
a trusted advisor to its banking clients and delivers solutions that address
business process needs. In 2005, Baker Hill was acquired by Experian®, a global
information solutions company. Mr. Hill oversaw the transition through 2006. Mr.
Hill also serves on the board of four non-public technology companies. Mr. Hill
serves Central Indiana in various capacities, including board membership on the
Central Indiana Corporate Partnership, the Central Indiana Community Foundation,
the United Way of Central Indiana and the TechPoint Foundation. Mr. Hill is an
adjunct professor at the Indiana University School of Informatics and former
chair of its Dean’s Council. Mr. Hill started his career at IBM and holds a
B.B.A. from the University of Notre Dame and an M.B.A. from the Indiana
University Kelley School of Business.
MICHAEL
C. HEIM; Director since 2007; Age 54; Zionsville, Indiana. Mr. Heim is the Vice
President, Information Technology and Chief Information Officer of Eli Lilly and
Company (“Lilly”), a position he has held since January 2004. From November 1999
until January 2004, Mr. Heim was the chief technology officer with
accountability for enterprise architecture and data strategy, the global
implementation of SAP, and global financial and human resources information
technology solutions at Lilly. Mr. Heim joined Lilly in 1979 and has served in
numerous roles including information technology, internal audit, engineering and
the corporations operations committee. Mr. Heim serves on a number of executive
councils including the Microsoft Pharmaceutical Advisory Council, the SAP Life
Sciences Executive Council, and the Dean’s Advisory Council–Indiana University
School of Informatics. A native of Cincinnati, Ohio, Mr. Heim received a B.A.
degree in business administration from Marian College and an M.B.A. from Bowling
Green State University.
Directors
Whose Present Terms Expire in 2011
DONALD E.
BROWN, M.D.; Director since 1994; Age 53; Indianapolis, Indiana. Dr. Brown
is our Chairman of the Board and President and Chief Executive Officer and has
held these positions since 1994 in the case of President, since 1995 in the case
of Chief Executive Officer and since 1998 in the case of Chairman of the Board.
Dr. Brown co-founded Interactive Intelligence in 1994. Dr. Brown graduated from
the Indiana University School of Medicine and also holds two additional degrees
from Indiana University, an M.S. in computer science and a B.S. in
physics.
RICHARD A. RECK; Director
since 2005; Age 59; Hinsdale, Illinois. Mr. Reck is the founder and President of
Business Strategy Advisors LLC, a business strategy consultancy that focuses on
serving technology, services and entertainment companies. Mr. Reck was a partner
with KPMG LLP from 1973 through his retirement in 2002. Mr. Reck also serves on
the Board of Directors of two other high-technology public companies, Merge
Healthcare, Inc., a public healthcare software and information company, and
Advanced Life Sciences Holdings, Inc., a public biopharmaceutical company. Mr.
Reck received a Bachelor of Arts degree in mathematics from DePauw University
and an M.B.A. in accounting from the University of Michigan.
Current Director Whose Term Expires at the Annual
Meeting
SAMUEL F.
HULBERT, Ph.D.; Director since 2001; Age 72; Naples, Florida. Dr. Hulbert is the
former President of Rose-Hulman Institute of Technology, an engineering, science
and mathematics college located in Terre Haute, Indiana. Dr. Hulbert held such
position from 1976 until his retirement in 2004. Prior to
Rose-Hulman, Dr. Hulbert held professorships at Tulane University and Clemson
University. Dr. Hulbert has been named to numerous “who's who” lists and has
been honored with a variety of awards for his accomplishments in biomedical
engineering and he serves on the board of directors of Cook Biotech and the
regional board of directors for Old National Bancorp. Dr. Hulbert received his
B.S. and Ph.D. degrees in Ceramic Science from Alfred University in Alfred, New
York. Dr. Hulbert has also received honorary degrees from Indiana State
University (doctor of law), Clarkson University (doctor of science), Indiana
University (doctor of science), Rose-Hulman (doctor of engineering) and Kanazawa
Institute of Technology (doctor of engineering). Dr. Hulbert is not standing for
re-election.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
On June
8, 2007, our Board adopted Corporate Governance Guidelines (the “Guidelines”) to
assist the Board in the exercise of its responsibilities. These Guidelines
reflect the Board’s commitment to monitoring the effectiveness of policy and
decision-making both at the Board and management level, with a view to enhancing
shareholder value over the long term. These Guidelines are in addition to, and
are not intended to change or interpret, any federal or state law or regulation,
including the Indiana Business Corporation Law, or our Restated Articles of
Incorporation or Amended and Restated By-Laws, as currently in effect. The
Guidelines are reviewed periodically and updated as necessary by our Board
based upon recommendations from our Nominating and Corporate Governance
Committee to reflect changes in regulatory requirements and Board oversight
practices. The Guidelines comply with requirements contained in the
listing standards of The NASDAQ Stock Market LLC (“NASDAQ”) (the exchange on
which our equity securities are registered) and otherwise enhance our corporate
governance policies. We will provide to any person, without charge, a copy of
these Guidelines, upon request to our Corporate Secretary at our world
headquarters. These Guidelines are also available on our website at
http://investors.inin.com
under “Corporate Governance”
.
We intend to disclose any amendments or updates to these Guidelines by
posting such amendments or updates on our website.
Director Independence and Board
Meetings
Our Board
has determined that Drs. Hamburg and Hulbert and Messrs. Hill, Heim and Reck are
“independent directors”, as defined by the NASDAQ listing standards and the
director independence rules of the SEC.
Our Board
has determined that each of Drs. Hamburg and Hulbert and Messrs. Hill, Heim and
Reck has no material direct or indirect relationship with us that would
interfere with the exercise of his independent judgment in carrying out the
responsibilities of a director on our Board.
In making
its independence determination with respect to Dr. Hamburg, the Board considered
his advisory position with SPSS, a customer that uses our products and has
licensed our applications through one of our partners. During 2008, we received
$108,000 from our partner that SPSS licenses our applications from, but Dr.
Hamburg was not involved in SPSS’ decision to license our products and has not
received any consulting, advisory or other compensatory fees from us. After
reviewing the terms of this transaction and the relationship that Dr. Hamburg
has with SPSS, the Board determined that Dr. Hamburg does not have a material
direct or indirect interest in the transaction and that our business
relationship with SPSS does not diminish his ability to exercise his independent
judgment on issues affecting our business. Our Board will continue to monitor
this relationship.
In making its independence
determination with respect to Mr. Heim, the Board considered Mr. Heim’s
executive position with Lilly, a customer that uses our products and has
licensed our applications directly through us. Because of Mr. Heim’s executive
position at Lilly, the Board analyzed that relationship and the payments we
received from Lilly for our products and applications during the last three
years. As Lilly’s Chief Information Officer, it is our understanding that
Mr. Heim could be involved in Lilly’s decision to license our products; however,
Lilly has licensed our products since December 2001, well before Mr. Heim became
Lilly’s Chief Information Officer or joined our Board. During 2008,
2007 and 2006, Lilly paid us approximately $368,000, $162,000 and $144,000,
respectively, to license our applications and for related support and
services. None of the payments exceeded the greater of $200,000 or 5% of
our consolidated gross revenues in any of the three years, as set forth in Rule
4200(a)(15) of the NASDAQ listing standards.
In
addition, Mr. Heim has not received any consulting, advisory or other
compensatory fees from us. After reviewing the terms of this transaction, and
the relationship that Mr. Heim has with Lilly, the Board determined that Mr.
Heim does not have a material direct or indirect interest in the transactions
and that our business relationships with Lilly do not diminish his ability to
exercise his independent judgment on issues affecting our business. Our Board
will continue to monitor this relationship.
In
making its independence determination with respect to Mr. Hill, the Board
considered his position with Collina Ventures, LLC (“Collina"). Collina has a
37% ownership interest in Bluelock, LLC (“Bluelock”), and Mr. Hill serves
as Chairman of the Board of Bluelock. Bluelock provided products and
services to us during 2008 amounting to approximately $72,000, which was less
than the $200,000 threshold set forth in Rule 4200(a)(15) of the NASDAQ
listing standards and was less than 5% of Bluelock’s consolidated gross
revenues in 2008. Mr. Hill did not receive any commissions or other form of
compensation in connection with the transaction between us and Bluelock. The
Board determined that Mr. Hill does not have a material direct or indirect
interest in the transactions and that our business relationships with Bluelock
do not diminish his ability to exercise his independent judgment on issues
affecting our business. Our Board will continue to monitor this
relationship.
Our Board holds regularly
scheduled quarterly meetings. Typically, committee meetings occur the day prior
to the Board meeting so that the evening prior to the Board meeting and the day
of the Board meeting can be devoted to presentations and discussions with senior
management about our short and long-term strategies. In addition to the
quarterly meetings, special meetings may be scheduled at our Board’s discretion.
During 2008, our Board held four meetings. During 2008, each of our directors
attended or participated in at least 75% of the aggregate of (i) the total
number of meetings of our Board and (ii) the total number of meetings held
by all committees of our Board on which each such director served.
We have a policy that
states that all directors properly nominated for election are expected to attend
our annual meetings. All of our directors attended our 2008 Annual Meeting in
person.
Board and Committee
Membership
The
responsibility for good corporate governance rests with our Board, whose primary
role is providing oversight, counseling and direction in the best long-term
interests of us and our shareholders. Our Board has three standing committees:
the Audit Committee; the Compensation and Stock Option Committee; and the
Nominating and Corporate Governance Committee (together, our “Standing
Committees”). Each Standing Committee is described below. The following table
sets forth information regarding which Standing Committee(s) each of our
directors served on during 2008:
|
|
|
STANDING
COMMITTEES OF THE BOARD
|
|
|
|
|
Compensation
and
Stock
Option
Committee
|
Nominating
and
Corporate
Governance
Committee
|
|
Donald
E. Brown, M.D. (1)
|
Chair
|
|
|
|
|
|
|
|
|
|
|
Edward
L. Hamburg, Ph.D.
|
X
|
Chair
|
|
|
|
|
|
|
|
|
|
Michael
C. Heim
|
X
|
X
|
|
|
|
|
|
|
|
|
|
Mark
E. Hill (2)
|
X
|
|
Chair
|
X
|
|
|
|
|
|
|
|
Samuel
F. Hulbert, Ph.D.
|
X
|
|
X
|
Chair
|
|
|
|
|
|
|
|
Richard
A. Reck
|
X
|
X
|
X
|
|
|
|
|
|
|
|
|
2008
Total Meetings Held
|
4
|
12
|
4
|
2
|
______________________
|
(1)
Dr. Brown is our President and Chief Executive Officer and is our only
employee that serves on our Board. Dr. Brown attended Standing Committee
meetings
as
a
member of management, except certain meetings where management was
excluded.
|
|
(
2)
|
The
Board intends to appoint Mr. Hill as the Chairman of the Nominating and
Corporate Governance Committee to replace Dr. Hulbert, effective
immediately
after the annual meeting.
|
Standing Committees of
the Board
Audit
Committee
Our Audit
Committee operates under a written charter adopted by our Board, a copy of which
is available, free of charge, on our website at
http://investors.inin.com
under “Corporate Governance”
.
Our Audit Committee reviews and assesses the adequacy of its charter and
performance on an annual basis. Our Board established our
Audit
Committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) for the primary purpose of overseeing
our accounting and financial reporting processes and audits of our annual
financial statements and internal control over financial reporting by our
independent registered public accounting firm.
Among its
current primary functions, our Audit Committee has the sole authority to perform
the following:
|
·
|
retain
and terminate our independent registered public accounting
firm;
|
|
·
|
approve
compensation and provide oversight of the work of our independent
registered public accounting firm;
|
|
·
|
evaluate
the qualifications, performance and independence of our independent
registered public accounting firm;
|
|
·
|
pre-approve
all auditing services and permitted non-audit services, including the fees
and terms for such services (subject to the de minimus exception for
non-audit services that are approved by our Audit Committee prior to
completion of the audit) provided by our independent registered public
accounting firm;
|
|
·
|
review and discuss
with our
management and our independent registered public accounting firm our
annual and quarterly financial
statements;
|
|
·
|
discuss
with our management and our independent registered public accounting firm
major issues regarding accounting principles and financial statement
presentations and the adequacy of our internal control over financial
reporting; and
|
|
·
|
review
and approve all related person
transactions.
|
All
members of our Audit Committee have been and currently are “independent” as such
term is defined for audit committee members under the NASDAQ listing standards
and Rule 10A-3 of the Exchange Act. Our Board has determined that Dr. Hamburg
and Mr. Reck meet the definition of an “audit committee financial expert”, as
defined in Item 407(d)(5)(ii) of Regulation S-K of the Exchange
Act.
Compensation
and Stock Option Committee
Our
Compensation and Stock Option Committee (our “Compensation Committee”) operates
under a written charter adopted by our Board, a copy of which is available, free
of charge, on our website at
http://investors.inin.com
under “Corporate Governance”.
Our Compensation
Committee reviews and assesses the adequacy of its charter and performance on an
annual basis. Among its current primary functions, our Compensation Committee
reviews and determines the annual compensation of our non-employee directors;
the annual base salaries, performance-based cash incentive awards and other
incentive compensation of our executive officers; administers our stock option
plans in which directors, executive officers and other key employees
participate; and discusses with management the Compensation Discussion and
Analysis and, if appropriate, recommends its inclusion in our Annual Report on
Form 10-K and proxy statement. For a description of the role of management in
setting compensation, see
“Compensation Discussion and
Analysis—Role of Management in Compensation”.
We did not utilize a compensation consultant during
2008.
Compensation
Committee Interlocks and Insider Participation
All
members of our Compensation Committee have been and currently are "independent"
directors, as defined under the NASDAQ listing standards, and no member is our
employee or former employee. In addition, no member of our Compensation
Committee had any relationship requiring disclosure under the section
“Certain Relationships and Related
Person Transactions”
beginning
on
pa
ge
4
0.
During 2008, none of
our executive officers served on the compensation committee or board of
directors of another entity.
Nominating
and Corporate Governance Committee
Our
Nominating and Corporate Governance Committee (our “Nominating Committee”)
operates under a written charter adopted by our Board, a copy of which is
available, free of charge, on our website at
http://investors.inin.com
under “Corporate Governance”
.
Our Nominating Committee assists our Board in (i) identifying individuals
qualified to become Board members, (ii) developing our Corporate Governance
Guidelines, (iii) advising our Board in the annual review of our Board’s
performance and (iv) recommending directors for each Standing Committee.
The members of our Nominating Committee have been and currently are
“independent”, as defined under the NASDAQ listing standards.
Our
Nominating Committee considers candidates for membership on our Board who are
recommended by shareholders and/or fellow Board members. In accordance with Rule
14a-8(i)(8) of the Exchange Act, which was amended in December 2007 by the SEC
and became effective on January 10, 2008, certain shareholder proposals related
to the election of directors are no longer permitted. A shareholder
who wishes to recommend a director candidate for consideration by our Nominating
Committee should send such recommendation to our Corporate Secretary addressed
to: Interactive Intelligence, Inc. Nominating Committee, c/o Corporate Secretary
at our world headquarters. Our Corporate Secretary has been instructed by our
Board to forward such shareholder director candidate recommendations to our
Nominating Committee. Any such recommendation should include a description of
the candidate’s qualifications for board service, the candidate’s written
consent to be considered for nomination and to serve if nominated and elected
and the addresses and telephone numbers for contacting the shareholder and the
candidate for more information. A shareholder who wishes to nominate an
individual as a director candidate at an annual meeting of shareholders, rather
than recommend the individual to our Nominating Committee as a nominee, must
comply with our advance notice requirements set forth in our Amended and
Restated By-Laws, as currently in effect, as described in
“Date of Receipt of Shareholder
Proposals for Our 2010 Annual Meeting”
on
page 41.
Our
Nominating Committee is responsible, when the need arises, for seeking
individuals qualified to become Board members for recommendation to our Board.
The Nominating Committee identifies any specific needs in terms of industry or
professional background and determines independence standards for nominees. Our
entire Board nominates members for election to our Board. Nominees for director
are selected on the basis of board experience, judgment, integrity, ability to
make independent inquiries, understanding our business and environment and
willingness to devote adequate time to Board duties, while considering such
factors as geographic, occupational, gender, race and age diversity. Our
Nominating Committee’s process for identifying and evaluating nominees for
director will be the same whether the nominee is from our Nominating Committee’s
search for a candidate, or whether the nominee was recommended by a
shareholder.
Shareholder Communications
Our Board
has a process whereby our shareholders may send communications to our Board’s
attention. Any shareholder desiring to communicate with our Board, or one or
more specific members thereof, should communicate in a writing addressed to
Interactive Intelligence, Inc., Board of Directors, c/o Corporate Secretary at
our world headquarters. Our Corporate Secretary has been instructed by our Board
to promptly forward all such communications to the specified
addressees.
Code of
Ethics
We have
adopted a Code of Business Conduct and Ethics (our “Ethics Code”) that applies
to all of our directors, officers and employees. We will provide to any person a
copy of our Ethics Code, free of charge, upon request to our Corporate Secretary
at our world headquarters. Our Ethics Code is available on our website at
http://investors.inin.com
under “Corporate Governance”
.
We intend to disclose any amendments or updates to our Ethics Code by
posting such amendments or updates on our website. In addition, any waivers of
our Ethics Code for our directors or executive officers will be posted on our
website under “Corporate Governance”. There were no waivers of our Ethics
Code by any of our executive officers or directors during 2008.
DIRECTOR COMPENSATION AND BENEFITS
Only
non-employee directors receive compensation for their services as directors. Our
compensation package for non-employee members of our Board is comprised of cash
(annual retainers and committee meeting fees) and stock option grants. Directors
are also entitled to reimbursement of expenses incurred in connection with
attendance at Board and/or committee meetings. Our director pay package is
designed to attract and retain highly-qualified, independent professionals to
monitor the effectiveness of policy and decision-making both at the Board and
management level, with a view to enhancing shareholder value over the long term.
Our Compensation Committee generally reviews our non-employee director
compensation program on an annual basis. Actual annual pay varies
among directors based on committee memberships, committee chair responsibilities
and meeting attendance.
Members
of our Board are eligible to receive automatic stock option grants under the
Interactive Intelligence, Inc. 2006 Equity Incentive Plan (the "2006 Plan"),
which was adopted by our Board in April 2006 and approved by our shareholders at
our 2006 Annual Meeting.
An
amendment to our 2006 Plan was approved by our shareholders at our 2008 Annual
Meeting. Our 2006 Plan replaced our Outside Directors Stock Option
Plan (our "Directors Plan"), which was adopted in April 1999.
Under
our 2006 Plan, the exercise price for option grants is equal to the closing
price of our common stock, as reported by The NASDAQ Global Market, on the
business day immediately preceding the date of grant, rather than on the day of
grant under the terms of the Directors Plan, and the term of the
options are six years.
For most
options granted to our directors prior to 2005, the term of each option was ten
years from the date of grant.
Our Board
also has the full and complete authority and discretion, except as limited by
our 2006 Plan, to grant additional options to eligible directors from time to
time and to provide the terms and conditions (which need not be identical among
eligible directors), including without limitation the vesting provisions,
thereof.
Any
option grants previously awarded under our Directors Plan, but not yet
forfeited, cancelled, terminated, exercised or expired, remain subject to their
original terms, which are generally not different from the terms upon which
annual option grants for directors are granted under our 2006 Plan, except as
described above.
Director Stock Options
On the
date of the annual meeting of shareholders, each eligible non-employee director
is granted an annual stock option to purchase 8,000 shares of our common stock.
For any newly elected non-employee director, our Compensation Committee may
approve an option award to such director to purchase an aggregate of 20,000
shares of our common stock for joining our Board. These options have terms in
accordance with our 2006 Plan, generally vest over four years and expire six
years from the anniversary date of the grant.
In 2008,
each of our non-employee directors was entitled to receive the following
compensation:
|
|
|
|
|
|
Cash
Retainers:
|
|
|
|
|
Annual
Cash Retainer (1)
|
|
$
|
25,000
|
|
|
Annual
Cash Retainer for Committee Chair:
|
|
|
|
|
|
Audit
Committee (1)
|
|
$
|
15,000
|
|
|
Compensation
and Nominating Committees (1)
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
Board
and Committee Attendance Fee (per meeting attended that was not held in
conjunction with a meeting of our full Board):
|
|
|
|
|
|
In
person (2)
|
|
$
|
1,500
|
|
|
By
teleconference (2)
|
|
$
|
750
|
|
|
|
|
|
|
|
|
Stock
Options:
|
|
|
|
|
|
Annual Stock Option
Retainer (3)
|
|
8,000
shares
|
|
|
Stock Option Grant
for Newly Elected Directors (4)
|
|
20,000
shares
|
|
|
(1)
All annual cash
retainers were paid in advance in equal quarterly installments, and at
times some have been paid in the immediately preceding year
in preparation for Board and/or committee meetings to be held during the
first quarter of the current
year.
|
|
(2)
All attendance fees
were paid in arrears, and at times some have been paid in the following
year once meeting attendance results are
known.
|
|
(3)
Represents an
annual stock option to purchase shares of our common stock, which will be
granted at each annual meeting of shareholders. These options
were
granted to all of our non-employee directors on May 30, 2008, the date of
our 2008 Annual Meeting, in accordance with the terms of our 2006
Plan.
|
|
(4)
There were no new
director option grants in 2008.
|
Director Compensation in 2008
The
following table sets forth information regarding the compensation that each
non-employee director earned during 2008. Dr. Brown did not earn any additional
compensation for serving on our Board in 2008.
|
|
|
|
|
|
Fees
Earned or Paid in Cash (1)
|
|
|
|
|
|
|
|
|
Edward
L. Hamburg, Ph.D.
|
|
$
|
52,000
|
|
|
$
|
40,762
|
|
|
$
|
92,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
C. Heim
|
|
|
37,000
|
|
|
|
59,124
|
|
|
|
96,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
E. Hill
|
|
|
36,000
|
|
|
|
36,929
|
|
|
|
72,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel
F. Hulbert, Ph.D.
|
|
|
33,750
|
|
|
|
28,490
|
|
|
|
62,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Reck
|
|
|
37,000
|
|
|
|
43,701
|
|
|
|
80,701
|
|
|
(1)
|
The
amounts in this column include the annual retainer and the amounts earned
by each director for attending Board and/or committee meetings in person
and/or by teleconference that were not held in conjunction with a meeting
of our full Board. For the Chairman of each of our Audit Committee, our
Compensation Committee and our Nominating Committee, the additional annual
retainer is also included.
|
|
(2)
|
The
amounts in this column represent the aggregated compensation cost
recognized during the year ended December 31, 2008 in accordance with
Statement of Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment
(“SFAS 123R”) (except that the estimated forfeitures related to
service-based vesting conditions were disregarded) of options held by our
non-employee directors and therefore include options granted during and
prior to 2008. For valuation assumptions used to determine these amounts,
refer to Note 6 of Notes to Consolidated Financial Statements in our
Annual Report on Form 10-K for the year ended December 31,
2008. The aggregate grant date fair value of option awards
granted during 2008, as of the grant date in accordance with SFAS 123R,
was $54,820 for each of our non-employee directors. Our non-employee
directors had the following shares of our common stock underlying stock
options outstanding as of December 31, 2008: Dr. Hamburg: 47,556 shares;
Mr. Heim: 28,000 shares; Mr. Hill: 48,114 shares; Dr. Hulbert: 52,282
shares; and Mr. Reck: 44,000
shares.
|
Non-Employee Director Change-of-Control
Agreements
On June
7, 2007, we entered into Non-Employee Director Change-of-Control Agreements
(each, a “Director Change-of-Control Agreement”) with Dr. Hamburg and Messrs.
Hill and Reck. In addition, on May 29, 2008, we entered into Director
Change-of-Control Agreements with Dr. Hulbert and Mr. Heim. Under the terms
of each Director Change-of-Control Agreement, in the event the service on our
Board of Directors is terminated for any reason following an event where a
“Change-of-Control” has occurred (as defined under
“Employment Agreements and
Post-Termination and Change-of-Control Arrangements”
), any and all
outstanding stock options granted under our 2006 Plan and/or our Directors Plan
will vest on an accelerated pro-rata monthly basis, including full credit for
partial months elapsed. In addition, with respect to stock option vesting, each
director will be credited with one additional month of service for each month of
service completed, up to a maximum of 24 additional months of service
credit.
OUR EXECUTIVE OFFICERS
The
following table sets forth information, as of March 31, 2009, about our
executive officers followed by their biographies:
|
Name
|
|
Age
|
|
Position
|
|
Donald
E. Brown, M.D.
|
|
53
|
|
Chairman
of the Board, President and Chief Executive Officer
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
53
|
|
Executive
Vice President, Worldwide Sales
|
|
|
|
|
|
|
|
William
J. Gildea III
|
|
42
|
|
Vice
President, Business Development
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
55
|
|
Chief
Financial Officer, Vice President, Finance and Administration,
Secretary
and Treasurer
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
47
|
|
Vice
President, Worldwide Customer Services
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
49
|
|
Senior
Vice President, Worldwide
Marketing
|
Donald E. Brown, M.D
.
co-founded Interactive Intelligence in October 1994 and has served as our Chief
Executive Officer since April 1995 and President since inception. This is the
third software company founded by Dr. Brown. Dr. Brown also serves as our
Chairman of the Board, a position he has held since July 1998. Dr. Brown has
been a director since our inception. In March 1988, Dr. Brown co-founded
Software Artistry, Inc. (“Software Artistry”), a developer of customer support
software that became a public company in March 1995 and was subsequently
acquired by IBM in January 1998. At Software Artistry, Dr. Brown served as Chief
Executive Officer and director from inception through September 1994. Dr.
Brown’s first software company was acquired by Electronic Data Systems, Inc. in
September 1987. Dr. Brown graduated from the Indiana University School of
Medicine. He also holds two additional degrees from Indiana University, a M.S.
in Computer Science and a B.S. in Physics.
Gary R. Blough
has served as
our Executive Vice President, Worldwide Sales since July 2004. Mr. Blough served
as our Vice President of Sales for Europe, the Middle East and Africa from
January 2002 to July 2004 and previously served as our Area Director and Vice
President of Sales for Western U.S. and Latin America since joining us in
February 1997. From January 1992 to February 1997, Mr. Blough held
various sales positions at Software Artistry, including Manager of Western
Region Sales. From January 1990 to December 1991, Mr. Blough was
Director of Sales for On-Line Software, a developer of programmer productivity
tools. Mr. Blough has a B.S. degree in Marketing from Virginia
Polytechnic Institute and State University.
William J. Gildea III
has
served as our Vice President, Business Development since March
2008. Prior to joining us, Mr. Gildea was a sell-side financial
analyst covering the communications technology industry at Janney Montgomery
Scott from April 2004 to February 2008 and an associate analyst at Wachovia
Securities from April 2000 to March 2004. Mr. Gildea started his
career as a communications attorney in private practice in Washington, D.C. from
October 1993 to June 1998. Mr. Gildea holds a B.A. from William &
Mary, a J.D. from Catholic University, and an M.B.A. from the University of
North Carolina.
Stephen R. Head
has served as
our Chief Financial Officer, Vice President of Finance, Secretary and Treasurer
since joining us in November 2003 and our Vice President of Finance and
Administration since February 2004. Mr. Head previously served as Chief
Financial Officer of Gilian Technologies Ltd. (now Breach Security, Inc.), a Web
security applications developer, from 2001 to 2003. Prior to Gilian
Technologies, Mr. Head was Senior Vice President, Finance and Administration
from 1999 to 2001 at planetU, Inc., an e-commerce company serving the consumer
packaged goods industry, which was acquired by Transora in December 2000. Other
financial roles Mr. Head has held in the software industry include Vice
President, Finance and Administration and Chief Financial Officer at Made2Manage
Systems, Inc. (now Consona Corporation), and Vice President, Finance and Chief
Financial Officer of Software Artistry. Mr. Head began his career in public
accounting at KPMG LLP. He has also served in positions in private industry. Mr.
Head is a graduate of Indiana University, where he received both an M.B.A. and
B.S. in Business with a concentration in Accounting.
Pamela J. Hynes
has
served as our Vice President, Worldwide Customer Services, which includes
Educational Services, Technical Support Services, Professional Services and
Communication as a Service, since October 2004. From 2006 to 2008, Ms.
Hynes resided in the United Kingdom and worked to grow our services
presence internationally. Ms. Hynes served as our Vice President, Customer
Loyalty from September 2003 to October 2004 and our Vice President, Client
Services, the Americas and Europe, the Middle East and Africa from July 2001
until September 2003. Ms. Hynes served as our Vice President, North American
Client Services from September 1999 until July 2001 and prior to that as our
Director of Client Services since joining us in November 1996. Ms. Hynes was an
Account Manager at Software Artistry from July 1996 to October 1996 and the
Support Services Manager of Software Artistry from August 1992 to July 1996.
Prior to August 1992, she served in a number of technical roles at Software
Artistry, including Application Development, Technical Instructor and Field
Engineer. Before joining Software Artistry, she served as Technical Support
Engineer at American Financial Resources, a software development company. Ms.
Hynes holds a B.S. degree in Management Information Systems from New Hampshire
College.
Joseph
A. Staples
has served as our Senior Vice President, Worldwide Marketing
since joining us in January 2005. Prior to joining us, Mr. Staples was the
principal of FirstLight Marketing, a marketing services company. For the six
years prior to that, Mr. Staples was Executive Vice President of Corporate
Marketing at Captaris, Inc., a provider of business communication solutions.
Previously, Mr. Staples was the Vice President of Marketing for Callware
Technologies, Inc., a provider of unified messaging software. He was also
employed by Novell, Inc., in management positions over a five year period.
Mr. Staples is an alumnus of Brigham Young University and earned a bachelor's
degree in business administration from the University of Phoenix with an
emphasis in Marketing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
As
required by Items 403(a) and (b) of Regulation S-K, the following table sets
forth, as of March 31, 2009, information about the beneficial ownership of our
common stock by 5% or greater beneficial owners and ownership of management,
including each of our incumbent directors and director nominees, our named
executive officers and all executive officers and directors as a group. Except
as otherwise indicated below, the individual or entity owns such common stock
directly with sole investment and sole voting power. For each of our named
executive officers and directors, the following table also includes options to
purchase shares of our common stock that are exercisable on or within 60 days
after March 31, 2009.
5%
or Greater Beneficial Owners:
|
|
|
|
|
|
|
Name
and Address of Beneficial Owner**
|
|
Amount
and Nature of Beneficial Ownership
|
|
|
|
|
|
Bares
Capital Management, Inc.
221
W. 6th Street, Suite 1225
Austin,
TX 78701
|
|
|
2,363,168
|
(1)
|
|
|
13.9
|
%
(1)
|
|
|
|
|
|
|
|
|
|
|
Officer
and Director Stock Ownership:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Beneficial Ownership
|
|
|
|
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
L. Hamburg, Ph.D.
|
|
|
--
|
|
|
|
35,556
|
|
|
|
35,556
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
C. Heim
|
|
|
--
|
|
|
|
7,000
|
|
|
|
7,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
E. Hill
|
|
|
55,000
|
(4)
|
|
|
36,114
|
|
|
|
91,114
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel
F. Hulbert, Ph.D.
|
|
|
--
|
|
|
|
40,282
|
|
|
|
40,282
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Reck
|
|
|
10,000
|
|
|
|
27,000
|
|
|
|
37,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Donald
E. Brown, M.D.**
|
|
|
4,188,459
|
|
|
|
498,700
|
|
|
|
4,687,159
|
|
|
|
26.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
30,500
|
(5)
|
|
|
144,911
|
|
|
|
175,411
|
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
59,977
|
|
|
|
201,780
|
|
|
|
261,757
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
18,716
|
(6)
|
|
|
45,693
|
|
|
|
64,409
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
3,000
|
|
|
|
82,500
|
|
|
|
85,500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers as a
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and Executive
Officers as a Group (11 persons)
|
|
|
4,370,297
|
|
|
|
1,126,240
|
|
|
|
5,496,537
|
|
|
|
30.4
|
%
|
_________________________
|
*
|
Indicates ownership
of less than one percent of the outstanding shares of our common
stock.
|
** As
discussed above, Dr. Brown is our Chairman of the Board, President and Chief
Executive Officer and a beneficial owner of more than 5% of our
outstanding common stock. Therefore, information pertaining to his beneficial
ownership of our common stock is presented once as a named executive
officer.
|
(1)
Information based
solely on a Schedule 13G/A filed by such shareholder with the SEC on
January 12, 2009, indicating beneficial ownership as of
December 31, 2008. T
he
shareholder is an investment adviser and has sole power to vote or direct
the vote and dispose or direct the disposition of
52,355 shares, and shares the p
ower
to vote or direct the vote and dispose or direct the disposition of
2,310,813 shares. This includes the shares
beneficially owned by Duke University and
the
Employees' Retirement Plan of Duke University reflected in the Schedule
13G filed by Duke
University,
the Duke Endowment and the Employees' Retirement
Plan
of Duke University on October 27,
2008.
|
|
(2)
Represents the
number of shares beneficially owned, excluding shares which may be
acquired through the exercise of stock
options.
|
|
(3)
Represents shares
which may be acquired through the exercise of stock options as of March
31, 2009 or within 60 days after that
date.
|
|
(4)
Includes
27,500 shares held indirectly by a grantor
retained
annuity
trust account in Mr. Hill's name and 27,500
shares held indirectly
by a
grantor
retained annuity trust account in his wife’s
name.
|
|
(5)
Includes 550 shares
held by his children, over which Mr. Head disclaims beneficial ownership.
|
(6)
Includes 1,900
shares held by her children, over which Ms. Hynes disclaims beneficial
ownership.
|
EXECUTIVE COMPENSATION AND RELATED
INFORMATION
Compensation Committee Report
We, the
Compensation Committee, have reviewed and discussed the following
“Compensation Discussion and
Analysis”
section of this proxy statement
with Interactive
Intelligence’s management. Based on our review and discussions, we recommended
to the Board of Directors that the following
“Compensation Discussion and
Analysis”
section be included in this proxy statement on Schedule 14A and
incorporated by reference into Interactive Intelligence’s Annual Report on Form
10-K for the year ended December 31, 2008, as filed with the
SEC.
Submitted by the
Compensation Committee
Mark E.
Hill, Chairman
Samuel F.
Hulbert
Richard
A. Reck
Compensation Discussion and Analysis
Overview
This
Compensation Discussion and Analysis supplements the more detailed information
concerning executive compensation that appears in the tables and the narrative
discussion that follows the tables. Our goal is to provide our
current and potential shareholders and the investing public with a better
understanding of our executive compensation practices and the decisions made
concerning the compensation payable to our executive officers, including the
persons named in the Summary Compensation Table, who are our named executive
officers, which appears on page 24
.
The
Compensation Committee of our Board of Directors, referred to in this section as
the committee, plays a key role in designing and administering our executive
compensation program. All principal elements of compensation paid to
our executive officers are subject to approval by the committee. The
report of the committee appears above.
Objectives
of Our Compensation Programs
We
believe we have assembled a strong executive management group comprised of
certain individuals that have been with us for many years and all of whom have
extensive experience with other companies in the software
industry. This combination of different experiences allows us to
continue the innovations that have long been our core competence, while at the
same time positioning us for future growth.
The
purposes of our compensation programs are to retain our executives by designing
compensation programs that are highly competitive with comparable positions
within our industry and to align our executive officers’ compensation targets
with our overall goals and shareholder interests. We compensate our
executive officers using a combination of salary, performance-based cash
incentive compensation and stock option awards. We attempt to combine
these elements of compensation to maximize our executives’ contribution to our
company to ultimately achieve our goal of maximizing shareholder
value.
The
committee determined our 2008 executive compensation with the following
objectives in mind:
|
·
|
Compensation
should be designed to reward employees for their individual performance as
well as that of our company. To achieve this objective, many executives
have compensation aligned with company objectives as well as individual
objectives over which they control.
|
|
·
|
Compensation
should be commensurate with comparable companies in the software
industry. We must attract and retain employees who may be
recruited by other companies, so our compensation package should remain
competitive. We achieve this objective by comparing our executive
officers’ compensation with comparable positions within our peer group
and/or industry.
|
|
·
|
We
want to reward short-term accomplishments of our executive officers, while
also focusing their efforts on the achievement of our long-term
objectives. We achieve this objective by offering performance-based cash
incentive compensation as well as stock option
awards.
|
|
·
|
Our
compensation program should align our executive officers’ objectives with
those of our shareholders. We achieve this objective by setting corporate
objectives based on our non-GAAP operating income targets, excluding the
impact of compensation expense related to SFAS 123R, which we believe is a
performance metric that our shareholders monitor and also rewards our
executive officers for their efforts to attain profitability
goals.
|
Review
of Compensation Programs
The
committee reviewed the compensation plans for each of our executive officers and
made adjustments to each compensation plan for 2008. The changes were made to
reflect the committee’s determination of the metrics that most effectively
measure the performance of each individual executive officer. The changes were
also based on the committee’s comparison of the salary, bonus and equity
compensation packages of our executive officers with the most recently
reported compensation packages of individuals holding the same or similar
positions at the following peer companies that are comparable in size to
us:
Art of
Technology AG, Sum Total Systems, Inc., RightNow Technologies, Inc., Ultimate
Software, Emageon, Inc., TeleCommunications Systems, Inc., Pegasystems, Inc.,
Actuate Corporation, 3D Systems, Inc., Midway Home Entertainment, Inc.,
Blackboard, Inc., Blackbaud, Inc., Tyler Technologies, Inc., Convergys’
Intervoice, Inc. and Venint Systems, Inc.’s Witness Actionable Solutions.
Those changes and the reasons for the changes are described in more
detail below under the sections
“Elements of our Compensation
Programs -- Annual Base Salary”
and
“-- Performance-Based Cash
Incentive Compensation”
.
Role
of Management in Compensation
Dr.
Brown, our Chief Executive Officer, provides the committee with recommendations
on the compensation of our executive officers. These recommendations are
presented by Dr. Brown, with the assistance of Mr. Head, our Chief Financial
Officer (collectively referred to in this Compensation Discussion and Analysis
as “management”), taking into account such factors as compensation history,
tenure, responsibilities, leadership qualities, market data for comparable
positions at companies within our peer group and/or industry, retention concerns
and the need to maintain consistency within the organization. The
committee gives significant consideration to the recommendations of Dr. Brown,
but also considers the committee’s own review of our executive officer
compensation packages compared to those for comparable positions at companies in
our peer group. The final compensation decisions affecting our
executive officers are within the committee's discretion. The
committee is also responsible for reviewing the performance of Dr. Brown and Mr.
Head, without their participation, and determines their
compensation.
Elements
of our Compensation Programs
Our
compensation programs are comprised of three major elements: (i) annual
base salary; (ii) performance-based cash incentive compensation; and
(iii) long-term stock-based incentive compensation, each of which is
described below.
Annual
Base Salary
We use
base salary to provide an appropriate level of fixed compensation that will
promote executive recruitment and retention. The annual base salary
for each of our named executive officers is set on the basis of business
responsibilities, personal performance during the prior year against established
targets and leadership qualities. In setting base salaries for 2008,
management and the committee also reviewed the market data on comparable
positions at other companies in our peer group, which was compiled by
management, and took into consideration the operating results that we reported
in 2007. Based on their reviews, on February 1, 2008, management
recommended, and the committee approved, the following base salaries for our
named executive officers, effective January 1, 2008:
|
|
|
|
|
|
Percentage
Increase
from 2007
|
|
|
Donald
E. Brown, M.D.
|
|
$
|
350,000
|
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
235,000
|
|
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
210,000
|
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
185,000
|
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
220,000
|
|
|
|
2.3
|
%
|
Performance-Based
Cash Incentive Compensation
Each
year, management recommends the targets for each named executive officer, which
is presented to the committee for its review and approval. The
performance targets for our named executive officers, which are set forth below,
were developed based on our 2007 financial performance and the expected growth
of our business during 2008. The individual performance targets were aligned
with the named executive officer’s areas of responsibility, within which he or
she has the authority to effect change. The company performance award targets
were designed to align our named executive officers’ objectives with those of
our shareholders and are intended to maximize shareholder value. Each
of our named executive officer’s performance awards (both individual and company
related) are paid to each individual after the
committee's determination that, based on our financial results, the
respective target has been achieved and the financial statements have been
approved for issuance by our Audit Committee. The following
performance-based cash incentive compensation awards were established for 2008
for our named executive officers:
|
Company Performance
Award.
Each named executive officer’s compensation package in
2008, except Mr. Blough's, included a company performance
award. This award was designed to be paid to our named
executive officers for achieving targeted operating income (excluding
stock option expense related to SFAS 123R) (“operating income”)
results. The committee designed this award to align our named
executive officers’ interests with those of our shareholders by rewarding
the named executive officers for their efforts to attain growth and
profitability goals.
|
|
Company
performance awards were to be paid quarterly to Messrs. Head and Staples
upon achieving the quarterly operating income targets and annually to Dr.
Brown and Ms. Hynes upon achieving the annual operating income target. Dr.
Brown had an annual potential payout of $185,000 if our 2008 annual
operating income target was achieved. Ms. Hynes had an annual potential
payout of $5,000 if our 2008 annual operating income target was achieved.
The committee determined that based on their respective positions and
related responsibilities, Dr. Brown and Ms. Hynes’ performance was best
measured over a full year of company results. Messrs. Head and
Staples were eligible to receive an award of $10,000 per quarter in 2008
if our quarterly operating income targets were met. Mr. Head was
eligible to receive an additional annual award of $20,000 if our 2008
annual operating income target was met and our Sarbanes-Oxley Act audit
was completed successfully without any identified material weakness. Mr.
Staples was also eligible to receive an additional annual award of $15,000
if our 2008 annual operating income target was
achieved.
|
Quarterly operating
income targets, based in part on our 2008 budget, were recommended by management
and submitted to the committee for its review and approval. The annual target
was set based on approximately
26%
growth in operating income. The result was an annual target of $13.2 million.
There was no carryover of awards from quarter to quarter if the award was not
earned in a particular quarter.
The quarterly and
annual operating income targets approved by the committee for 2008 were as
follows:
|
|
|
Operating
Income
Target
(in
millions)
|
|
|
1
st
Quarter
|
|
$
|
2.3
|
|
|
|
|
|
|
|
|
2
nd
Quarter
|
|
|
3.0
|
|
|
|
|
|
|
|
|
3
rd
Quarter
|
|
|
3.3
|
|
|
|
|
|
|
|
|
4
th
Quarter
|
|
|
4.6
|
|
|
|
|
|
|
|
|
Annual
|
|
$
|
13.2
|
|
The quarterly and annual
operating income targets were subject to change based on material external
events at the discretion of Dr. Brown, subject to the approval of the committee,
but no such changes were made in 2008. The operating income target
was met by Messrs. Head and Staples during the first quarter of 2008. No
additional quarterly or annual operating income targets were met during
2008.
Superior Achievement
Award.
This annual award was designed to be paid to each of
our named executive officers if we achieved annual operating income in excess of
the annual operating income target of $13.2 million set forth
above. The committee designed this award to align our named executive
officers’ interests with those of our shareholders by rewarding our named
executive officers for their efforts to improve efficiency in all aspects of our
business and to attain growth and profitability goals.
Subject to exceeding the
2008 annual operating income target, our named executive officers each had the
opportunity to receive a certain percentage of the excess amount, as
follows:
|
|
|
Superior
Achievement Award Excess Percentage
|
|
|
Donald
E. Brown, MD
|
|
|
2.40
|
%
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
0.90
|
%
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
0.90
|
%
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
0.70
|
%
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
0.70
|
%
|
No superior achievement
awards were earned in 2008, as our annual operating income did not exceed the
$13.2 million target.
Operating Margin Performance
Award.
Under this award (called the expense control
performance award in 2007), Mr. Head was eligible to receive $10,000 per
quarter, based upon achieving the quarterly operating margin percentage
targets set forth below, which are calculated by dividing operating
income by total revenues. This award was designed to manage our operating
margin, which, as Chief Financial Officer, is one of Mr. Head's primary
responsibilities. There was no carryover of awards from quarter to quarter if
the award was not earned in a particular quarter.
|
|
|
Operating
Margin
Performance
Award
Target
Percentage
|
|
|
1
st
Quarter
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
2
nd
Quarter
|
|
|
9.0
|
%
|
|
|
|
|
|
|
|
3
rd
Quarter
|
|
|
10.0
|
%
|
|
|
|
|
|
|
|
4
th
Quarter
|
|
|
12.5
|
%
|
The quarterly operating
margin performance target was met for the first quarter of 2008. The remaining
quarterly targets were not met during 2008.
|
Orders Performance Award.
Under this award, Mr. Staples was eligible to receive $10,000 per
quarter if the gross profit on global product orders throughout the
worldwide sales organization met certain targets or the gross profit of
year-to-date orders met certain targets. The committee established this
award, based on management’s recommendation, to encourage Mr. Staples to
oversee an innovative and effective marketing campaign to increase our
brand recognition and positively increase orders from customers and
partners across all regions. This award differed from the
orders performance award Mr. Staples was eligible to receive in 2007
because it focused on total orders (orders from existing and new
customers) throughout our worldwide sales organization rather than
solely on new orders. The committee felt this was a better measure of
Mr. Staples' performance as our marketing efforts are directed towards new
and existing customers.
Mr. Staples did
not meet any of the quarterly or year-to-date gross profit targets during
2008.
|
|
Services Revenue
Award.
The committee established this award, based on
management’s recommendation, for Ms. Hynes, who is responsible for
services revenue and the profitability of those services, which is a
significant portion of our total revenues. The committee believed
that this award would focus Ms. Hynes’ efforts on maximizing our services
revenue and profitability.
|
Under this award, Ms.
Hynes was eligible to receive $15,000 per quarter if quarterly targets for
services revenue and gross margin (excluding stock option expense related to
SFAS 123R) were achieved. There was no carryover of the awards from quarter to
quarter if the award was not earned in a particular quarter. The quarterly
services revenue and gross margin targets for 2008 were as
follows:
|
|
|
Services
Revenue
Target
(in millions)
|
|
|
Services
Gross
Margin
Target
Percentage
|
|
|
1
st
Quarter
|
|
$
|
15.0
|
|
|
|
60.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2
nd
Quarter
|
|
|
16.0
|
|
|
|
60.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
3
rd
Quarter
|
|
|
17.0
|
|
|
|
60.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
4
th
Quarter
|
|
|
18.0
|
|
|
|
60.0
|
%
|
None of the quarterly
services revenue or gross margin targets were met during 2008.
Sales Performance Award.
Under this award, Mr. Blough was eligible to receive an award on new
named customer orders, add-on orders and Professional Services Organization and
education orders during 2008. The committee established this award to motivate
Mr. Blough to increase the gross profit of orders for product solutions and
professional and educational services. Mr. Blough earned $158,506 in sales
performance awards during 2008.
See the
Summary
Compensation Table on
page 24
for further details on the performance-based cash incentive compensation earned
by our named executive officers during 2008 under each of these
awards.
Long-Term Stock-Based Incentive Compensation
In
addition to granting performance-based cash incentive compensation, management
and the committee continue to view stock options as a way to motivate our
executive officers and retain key employees for the long-term by aligning their
goals with those of our shareholders. Prior to 2007, stock options were granted
to our executive officers after the performance measure was achieved and/or
exceeded. If the company and/or individual performance targets were
met, an executive officer would not recognize any benefit from any increased
stock performance related to their efforts during that period because the option
was not granted until after the performance measure was achieved. In
2007 and 2008, the committee approved the grants of stock options to our
executive officers within the first two months of the fiscal year, subject to
cancellation if the specified performance targets for the year were not
achieved. Management and the committee believe this approach serves to promote
superior performance because the holder benefits from any increase in the value
of underlying shares of the options during the period during which they met
their performance targets. At its
February
1, 2008 meeting, the committee, based on discussions with management, approved
the following option grants to each of our named executive officers related to
company and/or individual performance for 2008:
|
|
|
Number
of Shares
Underlying
Options
|
|
|
Donald
E. Brown, M.D.
|
|
|
50,000
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
30,000
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
35,000
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
25,000
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
25,000
|
|
The stock options awarded to each of our named executive officers were granted
at an exercise price of $16.38 per share, the closing price of our common stock,
as reported by The NASDAQ Global Market, on January 31, 2008, the business day
immediately preceding the grant date, in accordance with the provisions of our
2006 Plan. If not cancelled, these stock options vest in four equal
annual installments beginning on January 1, 2010.
These
stock options were subject to full cancellation if we did not achieve the $13.2
million annual operating income target set forth under
“Performance-Based Cash Incentive
Compensation—Company Performance Award
.” The annual operating income
target for 2008 was not met and, therefore, all of the stock options listed
above were cancelled. For more information regarding the stock option awards
that were granted to our named executive officers during 2008, see the Grants of
Plan-Based Awards table on page
27.
The
committee has the ability to make grants of stock options to other designated
key employees to reward them for their contributions on an annual
basis. Dr. Brown presented a list of employees that he recommended to
receive these options on February 1, 2008 and the committee approved the grants
of these options. In addition, the committee approves a set number of stock
options on a quarterly basis for Dr. Brown to grant at his discretion to
employees (with the exception of executives). Typically the options, if granted,
are used to compensate new hires or employees who, in Dr. Brown’s discretion,
are deserving of an award based on their performance.
Total
Direct Compensation
In making
executive compensation decisions, the committee focuses on the “total direct
compensation” that an executive officer will receive annually. This
consists of salary and performance-based incentive compensation, including the
value of option awards granted with respect to performance for that
year.
The
committee does not have a specific policy for allocating the amount of
compensation among the pay elements (short versus long-term or cash versus
equity-based compensation), but seeks to target each executive officer's total
compensation opportunity to the level the committee considers market competitive
and reflective of individual performance.
Some of
the cash incentives and option awards with respect to performance in a given
year are paid or granted in the following year. Under the SEC's
rules, cash incentive payments earned in a given year but paid the following
year are reflected in the
Summary Compensation
Table in the year earned. However, option awards earned in one year
but granted in a subsequent year are not reflected in the Summary Compensation
Table until the year in which they are granted. The amounts of total
direct compensation paid to our named executive officers for 2008, 2007 and 2006
are shown in the Supplemental
Table
on page 26.
This table illustrates the committee's calculation
of total direct compensation earned during 2008, 2007 and 2006, regardless of
when the cash incentive payments were paid or when the option awards were
granted and takes into account any stock option grants in 2008, 2007 and
2006 that were cancelled in the subsequent year.
Benefits
Available to Executive Officers and All Other Employees
Retirement
and Health and Welfare Benefits
We have
never had a traditional or defined benefit pension plan. We maintain
a 401(k) Savings Plan (the “401(k) Plan”) to provide retirement benefits for
substantially all of our North American employees. Participants in
the 401(k) Plan may elect to contribute up to 50% of their pre-tax annual
compensation to the 401(k) Plan, subject to applicable Internal Revenue Service
(“IRS”) limits and regulations. Participants may also contribute amounts
representing qualified rollovers from other qualified benefit plans.
At our discretion, we
may also make company matching contributions to the 401(k) Plan.
Subject
to us achieving specified operating income targets, we make an annual company
matching contribution to eligible participants, including our named executive
officers, up to 25% of the first 4% of the participants’ pre-tax compensation
contributed to the 401(k) Plan. If an additional operating income
target is met, we make an annual matching contribution to eligible participants
up to 25% of the first 8% of the participants’ pre-tax compensation contributed
to the 401(k) Plan. We met the first performance target during 2008, and each
eligible participant received a company matching contribution up to 25% of the
first 4% of the participant's pre-tax compensation contributed to the 401(k)
Plan.
The
company matching contribution vests in equal installments over four years based
on the initial date of the participant’s employment. For an eligible participant
who has worked for us for four or more years at the time of the contribution,
the contribution is 100% vested. The company matching contributions we made to
the 401(k) Plan accounts of our named executive officers are shown in the All
Other Compensation column of the Summary Compensation Table on page 24
.
Although
we have not expressed any intent to terminate the 401(k) Plan, we have the
option to do so at any time subject to the provisions of the Employee Retirement
Income Security Act of 1974. Upon termination of the 401(k) Plan, either full or
partial participants, including our named executive officers, become fully
vested in their entire account balances.
All of
our executive officers, including our named executive officers, are also
eligible to participate in other employee benefit plans that are generally
available to all of our employees, including our Employee Stock Purchase Plan
and life and health insurance programs. The committee believes that
these additional plans are competitive with benefits offered by the other
companies in our peer group.
Perquisites
Certain
of our executive officers and employees may be entitled to receive perquisites,
as defined in their respective employment agreements. There were no perquisites,
individually or in the aggregate, that exceeded $10,000 that were given to any
director or executive officer during 2008.
Employment
Agreements and Change-of-Control Arrangements
We have
employment agreements with Messrs. Head, Blough and Staples and Ms.
Hynes. The employment agreements for Messrs. Head and Staples and Ms.
Hynes provide for severance payments if they are terminated by us for any reason
other than for cause. In addition, we have change-of-control and
retention agreements with Messrs. Head, Staples and Blough and Ms.
Hynes. These change-of-control agreements are intended to maintain
continuity of management, particularly in the context of a transaction in which
we undergo a change of control. These agreements are "double
triggered", which means that an executive officer is only entitled to severance
payments if (1) we experience a change of control, as defined in the agreement,
and (2) the executive officer's employment is terminated by us other than for
cause or if the executive officer resigns for good reason. For a more detailed
description of the material terms of these agreements, see
“Employment Agreements and
Post-Termination and Change-of-Control Arrangements—Employment
Agreements”
and
“—Change-of-Control and Retention
Agreements”
beginning on page 31
.
Other
Benefits and Reimbursements
Our Board of Directors
has adopted a travel policy whereby Dr. Brown is permitted for business travel
to fly private aircraft within certain limitations. Dr. Brown is one
of our most frequently traveled senior executive officers and is often
required to travel on extremely short notice and to areas that have limited
access to commercial flights. Dr. Brown is reimbursed for expenses
incurred in the operation of his privately owned aircraft when used for company
business,
provided
such expenses do not exceed the rate charged for equivalent third party
travel.
Because the reimbursement is for business travel only that
is integrally and directly related to the performance of his duties, our
reimbursement is not considered a perquisite. For further details, see
"
Certain Relationships and Related Person
Transactions"
on page 4
0.
Tax
Deductibility Under Code Section 162(m) and Other Related Issues
Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) eliminates,
subject to certain exceptions, the deductibility of compensation paid to certain
executives to the extent their compensation for any year exceeds $1,000,000.
Exceptions to amounts included in executive compensation for purposes of Section
162(m) involve various types of “qualifying performance based” compensation
(i.e. compensation paid only if the individual's performance meets
pre-established objective goals based on performance criteria approved by the
committee under plans that have been approved by our shareholders). Currently,
our compensation levels for all of our executive officers fall below $1,000,000.
In the event that in the future the annual remuneration of any of our executive
officers approaches $1,000,000, the committee will consider the various
alternatives to preserving the deductibility of compensation payments to the
extent reasonably practicable and consistent with our compensation
objectives.
The
Sarbanes-Oxley Act of 2002 subjects our Chief Executive Officer and Chief
Financial Officer to forfeiture of incentive compensation and profits from the
sale of stock in the event of an accounting restatement associated with
non-compliance, as a result of misconduct, with any financial reporting
requirement under the securities laws. At this time, the committee
has not adopted any additional forfeiture provisions for incentive
compensation.
Executive Compensation Tables and
Narratives
The
Summary Compensation Table appearing below sets forth information regarding the
compensation paid and/or awarded to each of our named executive officers for the
years ended December 31, 2008, 2007 and, where appropriate, 2006. For a
more thorough discussion of our executive compensation practices, refer
to our
“Compensation
Discussion and Analysis”
beginning on
page
16.
SUMMARY COMPENSATION
TABLE
|
Name
and Principal Position
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Compensation
(3)
|
|
All
Other Compensation
(4)
|
|
|
|
Donald
E. Brown, M.D.
Chairman,
President and
Chief
Executive Officer
|
|
2008
|
|
$
|
350,000
|
|
$
|
342,614
|
|
$
|
--
|
|
$
|
2,300
|
|
$
|
694,914
|
|
|
|
2007
|
|
|
325,000
|
|
|
489,966
|
|
|
174,486
|
|
|
2,250
|
|
|
991,702
|
|
|
|
2006
|
|
|
300,000
|
|
|
261,130
|
|
|
224,704
|
|
|
--
|
|
|
785,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
Chief
Financial Officer,
Vice
President of Finance
and
Administration,
Secretary
and Treasurer
|
|
2008
|
|
|
235,000
|
|
|
165,581
|
|
|
20,000
|
|
|
2,300
|
|
|
422,881
|
|
|
|
2007
|
|
|
215,000
|
|
|
232,608
|
|
|
70,794
|
|
|
2,250
|
|
|
520,652
|
|
|
|
2006
|
|
|
200,000
|
|
|
125,418
|
|
|
94,298
|
|
|
--
|
|
|
419,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
Executive
Vice President,
Worldwide
Sales
|
|
2008
|
|
|
210,000
|
|
|
187,868
|
|
|
158,506
|
|
|
2,300
|
|
|
558,674
|
|
|
|
2007
|
|
|
200,000
|
(5)
|
|
263,476
|
|
|
207,921
|
(5)
|
|
2,250
|
|
|
673,647
|
|
|
|
2006
|
|
|
200,000
|
(5)
|
|
174,866
|
|
|
193,980
|
(5)
|
|
--
|
|
|
568,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
Vice
President,
Customer
Services
|
|
2008
|
|
|
185,000
|
|
|
108,635
|
|
|
--
|
|
|
2,300
|
|
|
295,935
|
|
|
|
2007
|
|
|
175,000
|
|
|
130,494
|
|
|
34,346
|
|
|
2,250
|
|
|
342,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
Senior
Vice President,
Worldwide
Marketing
|
|
2008
|
|
|
220,000
|
|
|
221,094
|
|
|
10,000
|
|
|
2,300
|
|
|
453,394
|
|
|
|
2007
|
|
|
215,000
|
|
|
220,790
|
|
|
65,794
|
|
|
2,250
|
|
|
503,834
|
|
|
|
2006
|
|
|
200,000
|
|
|
83,500
|
|
|
89,384
|
|
|
--
|
|
|
372,884
|
_________________________
|
(1)
Includes the base
salary earned by each named executive officer during the respective
year.
|
|
(2)
The amounts in this
column represent the aggregate compensation cost recognized during the
respective year in accordance with SFAS 123R (except the
estimated forfeitures related to service-based vesting conditions are
disregarded) of stock options held by our named executive officers, and
therefore
includes options granted during and prior to the respective year.
For the valuation assumptions used to determine these amounts for 2008,
2007 and
2006, refer to Note 6 of Notes to Consolidated Financial Statements in our
Annual Reports on Form 10-K for the years ended December 31,
2008
,
2007
and 2006, respectively. As discussed in
“Compensation Discussion and
Analysis–Elements of our Compensation Programs -- Long-
Term
Stock-
Based Incentive Compensation"
, in 2008,
the committee approved the grants of stock options to our executive
officers within
the
first two months
of the fiscal year, subject to cancellation if the s
pecified
performance targets for the year were not achieved. The performance
targets for 2008 were
not
met and the 2008 stock options were cancelled. As a result,
the
aggregate
compensation cost related to these options was not included in
the
amounts for 2008.
|
|
(3)
The amounts in this
column represent the aggregate dollar value of performance-based cash
incentives earned
with
respect to performance in
the respective year, regardless of when actually paid. Each
performance-based cash incentive award for 2008 is
described
in
more detail in
“Compensation Discussion
and Analysis–Elements of our Compensation Programs–Performance-Based Cash
Incentive Compensation”
.
The amounts awarded to each named
executive
officer under his or her 2008, 2007 and, if applicable,
2006 compensation programs
include:
|
|
|
|
Company
Performance Award
|
|
|
Superior
Achievement Award
|
|
|
Individual
Performance Awards (a)
|
|
|
Total
Non-Equity Incentive Plan Compensation
|
|
|
Donald
E. Brown, M.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
2007
|
|
|
160,000
|
|
|
|
14,486
|
|
|
|
--
|
|
|
|
174,486
|
|
|
2006
|
|
|
141,656
|
|
|
|
83,048
|
|
|
|
--
|
|
|
|
224,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
10,000
|
|
|
|
--
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
2007
|
|
|
30,000
|
|
|
|
5,794
|
|
|
|
35,000
|
|
|
|
70,794
|
|
|
2006
|
|
|
37,775
|
|
|
|
41,523
|
|
|
|
15,000
|
|
|
|
94,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
--
|
|
|
|
--
|
|
|
|
158,506
|
|
|
|
158,506
|
|
|
2007
|
|
|
--
|
|
|
|
5,794
|
|
|
|
202,127
|
(5)
|
|
|
207,921
|
(5)
|
|
2006
|
|
|
--
|
|
|
|
--
|
|
|
|
193,980
|
(5)
|
|
|
193,980
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
2007
|
|
|
18,000
|
|
|
|
4,346
|
|
|
|
12,000
|
|
|
|
34,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
10,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
10,000
|
|
|
2007
|
|
|
30,000
|
|
|
|
5,794
|
|
|
|
30,000
|
|
|
|
65,794
|
|
|
2006
|
|
|
37,775
|
|
|
|
16,609
|
|
|
|
35,000
|
|
|
|
89,384
|
|
|
(a)
Individual
performance awards include the
following:
|
|
·
|
Mr.
Head received an operating margin performance award in 2008, an expense
control performance award in 2007 and a collections performance award in
2006.
|
|
·
|
Mr.
Blough received a sales performance award in 2008, 2007 and 2006. He also
received a quarterly quota achievement award in
2006.
|
|
·
|
Ms.
Hynes received a services revenue award in
2007.
|
|
·
|
Mr.
Staples received a new orders gross profit quota achievement award in 2007
and a Vonexus gross profit quota achievement award in
2006.
|
|
(4)
The amounts in this column
represent the company matching contribution for 2008 made to each named
executive officer's account under our 401(k) Plan.
|
|
|
|
(
5)
For 2008, the committee determined that the sales performance award Mr.
Blough received was non-equity incentive plan compensation rather
than
commissions. As a result,
$202,127 in 2007 and
$173,980 in 2006 was reclassified and was included in the "Non-Equity
Incentive Plan Compensation"
column rather than the "Salary" column for the
respective year.
This did not affect Mr. Blough's total compensation for any
year.
|
SUPPLEMENTAL TABLE
Total
Direct Compensation Earned (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan Compensation (3)
|
|
|
Total
Direct Compensation
|
|
|
Donald
E. Brown, M.D.
|
|
2008
|
|
$
|
350,000
|
|
|
$
|
--
|
|
|
$
|
--
|
|
|
$
|
350,000
|
|
|
|
|
2007
|
|
|
325,000
|
|
|
|
473,962
|
|
|
|
174,486
|
|
|
|
973,448
|
|
|
|
|
2006
|
|
|
300,000
|
|
|
|
495,284
|
|
|
|
224,704
|
|
|
|
1,019,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
2008
|
|
|
235,000
|
|
|
|
--
|
|
|
|
20,000
|
|
|
|
255,000
|
|
|
|
|
2007
|
|
|
215,000
|
|
|
|
236,981
|
|
|
|
70,794
|
|
|
|
522,775
|
|
|
|
|
2006
|
|
|
200,000
|
|
|
|
275,158
|
|
|
|
94,298
|
|
|
|
569,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
2008
|
|
|
210,000
|
|
|
|
--
|
|
|
|
158,506
|
|
|
|
368,506
|
|
|
|
|
2007
|
|
|
200,000
|
|
|
|
331,773
|
|
|
|
207,921
|
|
|
|
739,694
|
|
|
|
|
2006
|
|
|
200,000
|
|
|
|
302,735
|
|
|
|
193,980
|
|
|
|
696,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
2008
|
|
|
185,000
|
|
|
|
--
|
|
|
|
--
|
|
|
|
185,000
|
|
|
|
|
2007
|
|
|
175,000
|
|
|
|
197,232
|
|
|
|
34,346
|
|
|
|
406,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
2008
|
|
|
220,000
|
|
|
|
--
|
|
|
|
10,000
|
|
|
|
230,000
|
|
|
|
|
2007
|
|
|
215,000
|
|
|
|
236,981
|
|
|
|
65,794
|
|
|
|
517,775
|
|
|
|
|
2006
|
|
|
200,000
|
|
|
|
275,158
|
|
|
|
89,384
|
|
|
|
564,542
|
|
_________________________
|
(1)
Total direct
compensation consists solely of salary, performance-based cash incentive
compensation and stock-based incentive
compensation
and did not
include all elements of compensation shown in the Summary Compensation
Table.
|
|
(2)
Represents the
aggregate grant date fair value of options awarded with respect to
performance in the respective year, regardless of when actually granted,
in
accordance with SFAS 123R. For valuation assumptions used to determine the
value of options granted to each named executive officer during
2008,
2007 and 2006, refer to Note 6 of Notes to Consolidated Financial
Statements in our Annual Reports on Form 10-K for the years ended December
31, 2008
,
2007 a
nd
2006, respectively. As the specified performance targets were not met
during 2008, the
option
awards granted in 2008 were
cancelled.
|
|
(3)
Represents the
aggregate dollar value of performance-based cash incentives earned with
respect to performance in the respective year, regardless of when
actually paid.
|
GRANTS OF PLAN-BASED
AWARDS
|
|
|
|
|
|
|
|
Estimated
Possible Payouts Under Non-Equity Incentive
Plan Awards
Target
($)
|
|
|
Estimated
Possible Payouts Under Equity Incentive Plan
Awards
Target
(#)
|
|
|
Exercise
Price of Option Awards (2)
|
|
|
Closing
Market Price on Date of Grant (2)
|
|
|
Grant
Date Fair Value of Option Awards (3)
|
|
|
Donald
E. Brown, M.D.
|
|
2/1/2008
|
|
|
$
|
--
|
|
|
|
50,000
|
(4
|
)
|
|
16.38
|
|
|
|
17.13
|
|
|
|
427,000
|
|
|
|
|
|
--
|
|
|
|
185,000
|
(5
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
45,000
|
(6
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
|
|
|
--
|
|
|
|
30,000
|
(4
|
)
|
|
16.38
|
|
|
|
17.13
|
|
|
|
256,200
|
|
|
|
|
|
--
|
|
|
|
60,000
|
(5
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
16,875
|
(6
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
40,000
|
(7
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
|
|
|
--
|
|
|
|
35,000
|
(4
|
)
|
|
16.38
|
|
|
|
17.13
|
|
|
|
298,900
|
|
|
|
|
|
--
|
|
|
|
16,875
|
(6
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
201,000
|
(8
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
|
|
|
--
|
|
|
|
25,000
|
(4
|
)
|
|
16.38
|
|
|
|
17.13
|
|
|
|
213,500
|
|
|
|
|
|
--
|
|
|
|
5,000
|
(5
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
13,125
|
(6
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
60,000
|
(9
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
|
|
|
--
|
|
|
|
25,000
|
(4
|
)
|
|
16.38
|
|
|
|
17.13
|
|
|
|
213,500
|
|
|
|
|
|
--
|
|
|
|
55,000
|
(5
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
13,125
|
(6
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
--
|
|
|
|
40,000
|
(10
|
)
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
______________________
|
(1)
For 2008, our
Compensation Committee granted stock options to our named executive
officers on February 1, 2008
. The
approval date and the grant date
for the 2008 option grants
were
the same.
|
|
(2)
The exercise price
of our stock option awards is the closing price of our common stock as
reported on The NASDAQ Global Market on the business day
immediately
preceding the date of grant, in accordance with the provisions of our 2006
Plan. Due to the terms of our 2006 Plan, it is possible that the
exercise price could be less than the closing price of our common stock on
the date of grant, as was the case for
2008.
|
|
(3)
Amounts in this
column represent the aggregate grant date fair value of each option award
in accordance with SFAS 123R. For the valuation
assumptions
used to determine the amounts, refer to Note 6 of Notes to Consolidated
Financial Statements in our Annual Report on Form 10-K
for the year ended December 31, 2008. As discussed in footnote 4, these
stock options have been cancelled.
|
|
(4)
Amounts represent
the number of shares underlying options granted to our named executive
officers on February 1, 2008, which options were subject to
cancellation
if our 2008 annual
operating
income target was not met. The 2008 annual operating income target was not
achieved, thus the 2008 options
awarded to each of our named
executive
officers were cancelled.
|
|
(5)
Amounts represent
the aggregate company performance award potential for Dr. Brown and
Messrs. Head and Staples and Ms. Hynes. The first quarterly
performance target was met by Messrs. Head and Staples. The second, third
and fourth quarterly performance targets as well as the annual performance
targets were not met by any named executive officer. As a result, Messrs.
Head and Staples earned the following amount related to their
respective company
performance award for 2008: Mr. Head: $10,000; and Mr. Staples:
$10,000.
|
|
(6)
Each of our named
executive officers was eligible to receive a superior achievement
award in 2008 calculated by taking the 2008
annual
budgeted
operating
income (excluding stock option expense related to SFAS 123R), less the
2008 annual operating income target, and multiplying t
he
difference by 2.4%, 0.9%, 0.9%, 0.7% and 0.7%, respectively. The 2008
annual operating income target was not met, and therefore, none of
our
named
executive officers earned a superior achievement
award.
|
|
(7)
Amount represents
Mr. Head’s aggregate operating margin performance award
potential. The quarterly operating margin performance target
was met for the
first
quarter of 2008. The remaining quarterly targets were not met during 2008.
As a result, Mr. Head earned $10,000 related to this
award.
|
|
(8)
Amount consists of
Mr. Blough’s aggregate sales performance award at target. Mr. Blough
earned $158,506 related to this award in
2008.
|
|
(9)
Amount represents Ms. Hynes’ aggregate services revenue award
potential. The quarterly performance targets for 2008 were not
met, so no amounts were
earned related to this award in
2008.
|
|
(10) Amount
represents
Mr. Staples’ aggregate orders performance award
potential. The quarterly performance targets for 2008 were not
met, so no amounts
were earned related to this award in
2008.
|
Narrative
Discussion
Our
Stock Option Plans
1995,
1999 and 2006 Plans
Our stock
option plans, adopted in 1995, 1999 and 2006, authorize our Board or our
Compensation Committee, as applicable, to grant incentive and/or nonqualified
stock options, and, in the case of our 2006 Plan, stock appreciation rights,
restricted stock, restricted stock units, performance shares, performance units
and other stock-based awards. After adoption of our 2006 Plan, we no longer
issue grants under any of the previous plans, but any shares subject to awards
under our 1999 Stock Option and Incentive Plan (the “1999 Plan”) and our
Directors Plan (collectively, the “1999 Option Plans”) that were
cancelled will be added to shares available under our 2006 Plan. The number of
shares available under our 2006 Plan is subject to adjustment for certain
changes in our capital structure. The exercise price of stock options granted
under our 2006 Plan must not be less than the fair market value of our common
stock at the date of grant, which is defined in our 2006 Plan as the closing
market price of our common stock, as reported by The NASDAQ Global Market, on
the business day immediately preceding the date of grant. Options granted under
our 2006 Plan generally vest in equal annual installments over four years from
the first anniversary of the grant date and have a life of six years, although
vesting and option term is at the discretion of our Compensation Committee, as
further limited by our 2006 Plan provisions.
For most
options granted prior to 2005, the term of each option was ten years from the
date of grant. In 2005, we began issuing options with a term of six years from
the date of grant.
If an
incentive stock option is granted to an employee who, at the time the option is
granted, owns stock representing more than 10% of the voting power of all
classes of our stock, the exercise price of the option may not be less than 110%
of the market value per share on the date the option is granted and the term of
the option shall be not more than five years from the date of
grant.
The plans
may be terminated by our Board at any time.
2000
Employee Stock Purchase Plan
At our
2000 Annual Meeting, our shareholders approved our 2000 Employee Stock Purchase
Plan (our “2000 Purchase Plan”). A total of 500,000 shares of common stock were
reserved for issuance under our 2000 Purchase Plan. At our 2005 Annual Meeting,
our shareholders approved an amendment to our 2000 Purchase Plan, which
increased the number of shares of our common stock available for issuance
and purchase from 500,000 to 750,000. Our 2000 Purchase Plan permits eligible
employees to acquire shares of our common stock through periodic payroll
deductions of up to 20% of their total compensation up to a maximum of $1,000
per pay period. Prior to December 31, 2005, the price at which our common
stock could be issued and purchased under our 2000 Purchase Plan was 85% of the
lesser of the fair market value of our common stock on the first or last
business day of the immediately preceding calendar quarter. As of January 1,
2006, our 2000 Purchase Plan was
amended
such that the price at which our common stock may be issued and purchased
is 95% of the fair market value of our common stock on the purchase date of
the stock, which is generally the first business day of the next calendar
quarter. An eligible participant may set aside no more than $25,000 to purchase
shares annually. In addition, participants who are executive officers may not
purchase, in the aggregate, more than 50% of our common stock purchased
under our 2000 Purchase Plan during a calendar year. The initial offering
period commenced on April 1, 2000. A total of 24,501 shares of our common stock
were issued and purchased during 2008 at an average price of
$12.90. As of December 31, 2008, 197,677 shares were available for issuance
under our 2000 Purchase Plan.
Our 2000
Purchase Plan was modified as of January 1, 2006 to ensure that it is considered
non-compensatory under SFAS 123R. We have not recognized any stock-based
compensation expense related to this plan.
Other
For
additional information regarding the cash and equity incentive awards reflected
in the Grants of Plan-Based Awards table, see
“Compensation
Discussion and Analysis – Elements of Our Compensation Programs –
Performance-Based Cash Incentive Compensation”
and
“–
Long-Term Stock-Based Incentive Compensation”
.
For
additional information regarding our employment agreements and our retention
agreements with our named executive officers, see
"Employment
Agreements and Post-Termination and Change-of-Control Arrangements"
beginning on page 31.
OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
|
|
|
|
|
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive Plan Awards:
Number
of Securities
Underlying
Unexercised Unearned Options
(#)
|
|
|
|
|
Option
Exercise
Price
($)
|
|
|
|
Donald
E. Brown, M.D.
|
|
|
5,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
14.38
|
|
4/2/2011
|
|
|
|
|
5,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
8.70
|
|
7/26/2011
|
|
|
|
|
90,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.99
|
|
12/26/2011
|
|
|
|
|
12,053
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.80
|
|
2/11/2014
|
|
|
|
|
12,500
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.09
|
|
6/10/2012
|
|
|
|
|
21,250
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
2.51
|
|
7/1/2012
|
|
|
|
|
21,250
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.17
|
|
11/12/2012
|
|
|
|
|
21,250
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.00
|
|
2/20/2013
|
|
|
|
|
22,420
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
2.90
|
|
8/13/2013
|
|
|
|
|
26,977
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
4.24
|
|
11/19/2013
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.35
|
|
4/23/2013
|
|
|
|
|
100,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.61
|
|
2/13/2014
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.72
|
|
5/19/2014
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.56
|
|
8/18/2014
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
4.31
|
|
12/14/2014
|
|
|
|
|
11,250
|
|
|
|
3,750
|
(2
)
|
|
--
|
|
2/17/2005
|
|
|
|
4.20
|
|
2/17/2011
|
|
|
|
|
24,000
|
|
|
|
24,000
|
(2
)
|
|
--
|
|
1/27/2006
|
|
|
|
5.17
|
|
1/27/2012
|
|
|
|
|
15,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.80
|
|
2/11/2014
|
|
|
|
|
11,250
|
|
|
|
33,750
|
(2
)
|
|
--
|
|
2/9/2007
|
|
|
|
20.50
|
|
2/9/2013
|
|
|
|
|
--
|
|
|
|
50,000
|
(3)
|
|
--
|
|
2/15/2007
|
|
|
|
17.28
|
|
1/1/2014
|
|
|
|
|
--
|
|
|
|
--
|
|
|
50,000
|
(4
)
|
2/01/2008
|
|
|
|
16.38
|
|
2/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
2,411
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.80
|
|
2/11/2014
|
|
|
|
|
60,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.30
|
|
11/3/2013
|
|
|
|
|
25,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.61
|
|
2/13/2014
|
|
|
|
|
6,250
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.72
|
|
5/19/2014
|
|
|
|
|
5,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.56
|
|
8/18/2014
|
|
|
|
|
6,250
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
4.61
|
|
11/16/2014
|
|
|
|
|
4,688
|
|
|
|
1,562
|
(2
)
|
|
--
|
|
2/17/2005
|
|
|
|
4.20
|
|
2/17/2011
|
|
|
|
|
10,000
|
|
|
|
10,000
|
(2
)
|
|
--
|
|
1/27/2006
|
|
|
|
5.17
|
|
1/27/2012
|
|
|
|
|
6,250
|
|
|
|
18,750
|
(2
)
|
|
--
|
|
2/9/2007
|
|
|
|
20.50
|
|
2/9/2013
|
|
|
|
|
--
|
|
|
|
25,000
|
(3)
|
|
--
|
|
2/15/2007
|
|
|
|
17.28
|
|
1/1/2014
|
|
|
|
|
--
|
|
|
|
--
|
|
|
30,000
|
(4
)
|
2/01/2008
|
|
|
|
16.38
|
|
2/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
25,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.99
|
|
12/26/2011
|
|
|
|
|
4,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.09
|
|
6/10/2012
|
|
|
|
|
108,080
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
5.84
|
|
7/2/2014
|
|
|
|
|
5,000
|
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
|
3.15
|
|
4/3/2013
|
|
|
|
|
9,525
|
|
|
|
3,175
|
(2
)
|
|
--
|
|
2/17/2005
|
|
|
|
4.20
|
|
2/17/2011
|
|
|
|
|
1,876
|
|
|
|
624
|
(2
)
|
|
--
|
|
5/19/2005
|
|
|
|
4.84
|
|
5/19/2011
|
|
|
|
|
1,875
|
|
|
|
625
|
(2
)
|
|
--
|
|
8/17/2005
|
|
|
|
5.48
|
|
8/17/2011
|
|
|
|
|
1,875
|
|
|
|
625
|
(2
)
|
|
--
|
|
11/15/2005
|
|
|
|
5.19
|
|
11/15/2011
|
|
|
|
|
13,750
|
|
|
|
13,750
|
(2
)
|
|
--
|
|
1/27/2006
|
|
|
|
5.17
|
|
1/27/2012
|
|
|
|
|
1,250
|
|
|
|
1,250
|
(2
)
|
|
--
|
|
4/21/2006
|
|
|
|
9.52
|
|
4/21/2012
|
|
|
|
|
1,250
|
|
|
|
1,250
|
(2
)
|
|
--
|
|
7/21/2006
|
|
|
|
12.77
|
|
7/21/2012
|
|
|
|
|
1,250
|
|
|
|
1,250
|
(2
)
|
|
--
|
|
10/20/2006
|
|
|
|
17.21
|
|
10/20/2012
|
|
|
|
|
5,625
|
|
|
|
16,875
|
(2
)
|
|
--
|
|
2/9/2007
|
|
|
|
20.50
|
|
2/9/2013
|
|
|
|
|
--
|
|
|
|
18,000
|
(3
)
|
|
--
|
|
2/15/2007
|
|
|
|
17.28
|
|
1/1/2014
|
|
|
|
|
--
|
|
|
|
--
|
|
|
35,000
|
(4
)
|
2/01/2008
|
|
|
|
16.38
|
|
2/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
7,000
|
|
|
|
--
|
|
|
--
|
|
--
|
|
|
|
5.99
|
|
12/26/2011
|
|
|
|
|
2,000
|
|
|
|
--
|
|
|
--
|
|
--
|
|
|
|
22.25
|
|
1/2/2011
|
|
|
|
|
8,568
|
|
|
|
--
|
|
|
--
|
|
--
|
|
|
|
5.20
|
|
1/2/2014
|
|
|
|
|
7,500
|
|
|
|
7,500
|
(2)
|
|
--
|
|
1/27/2006
|
|
|
|
5.17
|
|
1/27/2012
|
|
|
|
|
2,500
|
|
|
|
2,500
|
(2)
|
|
--
|
|
2/17/2005
|
|
|
|
4.20
|
|
2/17/2011
|
|
|
|
|
3,750
|
|
|
|
11,250
|
(2)
|
|
--
|
|
2/9/2007
|
|
|
|
20.50
|
|
2/9/2013
|
|
|
|
|
--
|
|
|
|
17,500
|
(3)
|
|
--
|
|
2/15/2007
|
|
|
|
17.28
|
|
1/1/2014
|
|
|
|
|
--
|
|
|
|
--
|
|
|
25,000
|
(4)
|
2/01/2008
|
|
|
|
16.38
|
|
2/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A.
Staples
|
|
|
26,250
|
|
|
|
18,750
|
(2)
|
|
--
|
|
1/3/2005
|
|
|
|
4.36
|
|
1/3/2011
|
|
|
|
|
12,500
|
|
|
|
12,500
|
(2)
|
|
--
|
|
1/27/2006
|
|
|
|
5.17
|
|
1/27/2012
|
|
|
|
|
6,250
|
|
|
|
18,750
|
(2)
|
|
--
|
|
2/9/2007
|
|
|
|
20.50
|
|
2/9/2013
|
|
|
|
|
--
|
|
|
|
25,000
|
(3)
|
|
--
|
|
2/15/2007
|
|
|
|
17.28
|
|
1/1/2014
|
|
|
|
|
--
|
|
|
|
--
|
|
|
25,000
|
(4)
|
2/01/2008
|
|
|
|
16.38
|
|
2/1/2015
|
_________________________
|
(1)
Includes stock
options to purchase shares of our common stock, granted at the closing
price of our common stock, as reported on The NASDAQ Global
Market, on (a) the date of grant for stock options granted prior to the
adoption and approval of our 2006 Plan on May 18, 2006 or (b) the business
day
immediately
preceding the date of grant for stock options granted under our 2006
Plan.
|
|
(2)
Options become
exercisable in four equal annual installments each year beginning on the
first anniversary of the grant
date.
|
|
(3) Options
become exercisable in four equal annual installments each year beginning
on January 1, 2009.
|
|
(4)
Represents the
stock options granted to our named executive officers on February 1, 2008,
which options were subject to cancellation if the specified
performance
targets for 2008 were not achieved. The specified performance targets for
the named executive officers
for
2008 were not met and, as a
result, these options were
cancelled.
|
|
OPTION EXERCISES
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares Acquired on Exercise
(#)
|
|
|
Value
Realized on Exercise
(1)
|
|
|
Donald
E. Brown, M.D.
|
|
|
67,500
|
|
|
$
|
305,775
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
7,500
|
|
|
$
|
60,525
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
--
|
|
|
|
--
|
|
_________________________
|
(1)
The amounts in this
column represent the pre-tax dollar value realized on exercise, calculated
on the basis of the difference between the option exercise price
and
the market price of our common stock, as reported on The NASDAQ Global
Market on the date of exercise, multiplied by the number of shares of our
common
stock underlying the stock option. These amounts do not represent the
grant date fair value or recognized stock-based compensation expense
disclosed elsewhere in this proxy
statement.
|
SECURITIES AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS
Securities authorized for
issuance under our equity compensation plans as of December 31, 2008 are as
follows:
|
|
|
A
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
|
|
B
Weighted
average exercise price of outstanding options, warrants and
rights
|
|
|
C
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in Column
A)
|
|
|
Equity
compensation plans approved by security holders
(1)
|
|
|
3,300,565
|
(2)
|
|
$
|
9.46
|
|
|
|
1,586,646
|
(3)
|
____________________
|
(1)
Amount includes our
1995 Incentive Stock Option Plan, 1995 Nonstatutory Plan, 1999 Option
Plans, 2000 Purchase Plan and 2006
Plan.
|
|
(2)
The weighted
average remaining life of these options was 4.0
years.
|
|
(3)
Amount consists of
1,388,969 shares available for issuance under our 2006 Plan and 197,677
shares available for issuance and purchase under our 2000
Purchase
Plan.
|
EMPLOYMENT AGREEMENTS AND POST-TERMINATION
AND CHANGE-OF-CONTROL ARRANGEMENTS
Employment Agreements
On
November 4, 1996, November 3, 2003, January 3, 2005 and May 26, 2006, we entered
into Employment Agreements with Ms. Hynes and Messrs. Head, Staples and Blough,
respectively. Ms. Hynes’ Employment Agreement was amended on February 23,
2000.
Each
Employment Agreement contains non-competition, non-solicitation and
non-disclosure provisions, which are in effect during the term of the agreement
and for a defined period after the agreement is terminated. The non-disclosure
provisions continue indefinitely after termination of employment. The
non-competition and non-solicitation provisions continue for a period of
12 months after termination in the case of Mr. Staples, 18 months in the
case of Mr. Head and Ms. Hynes and either 12 or 18 months in the case of Mr.
Blough. If any of the aforementioned executives are terminated for cause or in
the event they resign, they will receive their respective base salary and any
other benefits which have been accrued and to which the executive is entitled,
but will not receive any severance compensation. If any of the aforementioned
executives, other than Mr. Blough, are terminated by us for any reason other
than for cause, in addition to receiving all accrued salary and benefits to
which the executives are entitled, they will also receive the following
severance payments: one month of base salary in the case of Mr. Head and Ms.
Hynes; and three months of base salary in the case of Mr. Staples. If
Messrs. Head and Staples and Ms. Hynes were terminated for any reason other than
for cause as of December 31, 2008 (assuming no Change-of-Control under the
Retention Agreements as discussed below), they would have been entitled to
severance payments as follows: Mr. Head: $19,583; Mr. Staples: $55,000 and Ms.
Hynes: $15,417. Mr. Blough’s Employment Agreement does not provide for any
severance payments.
Change-of-Control and Retention
Agreements
We
entered into Change-of-Control and Retention Agreements (each, a “Retention
Agreement”) on March 13, 2006 with Messrs. Head and Staples and Ms. Hynes and on
May 26, 2006 with Mr. Blough. Under the terms of each Retention Agreement, in
the event of a “Change-of-Control” (as defined below), if employment is
terminated by us for any reason other than for “Cause” (as defined below) or as
a result of the executive officer's disability or the executive officer
resigns for “Good Reason” (as defined below), in each case during the period
commencing on the date we publicly announce a definitive agreement that results
in a Change-of-Control and ending on the date which is 18 months after the
Change-of-Control, each of Messrs. Head, Staples and Blough and Ms. Hynes will
be entitled (a) to receive a lump sum payment of all salary and accrued vacation
earned through the date of termination, (b) to receive a lump sum payment for
any cash incentive amounts attributable to any completed period for which a cash
incentive was earned but unpaid on the date of termination and attributable to
any uncompleted period for which a potential cash incentive award exists and was
earned based on the level of performance achieved as of the date of termination,
(c) to receive a lump sum cash severance payment equal to the lesser of his/her
annual base salary or the prorated amount of salary he/she would have received
had he/she remained an employee through the first anniversary date of the
Change-of-Control, (d) to have accelerated the vesting of his/her unvested
options to purchase our common stock and any other then unvested or restricted
equity grants, in each case that would have become vested based solely on the
passage of time (which excludes grants, the vesting of which is contingent upon
specified performance criteria having been met) during the two year period
following the date of termination of employment, (e) to receive a lump sum cash
stipend equal to 12 times the monthly premiums pursuant to the continuation
coverage requirements of the Consolidated Budget Reconciliation Act of 1985, as
amended (“COBRA”) (whether or not he/she actually elects COBRA continuation
coverage), and (f) to receive coverage under our directors’ and officers’
insurance policy for 24 months following the termination of employment. The
Retention Agreements also provide that if any amounts payable to Messrs. Head,
Staples or Blough or Ms. Hynes under the Retention Agreement or otherwise would
be subject to the excise tax or denial of deduction imposed by Sections 280G and
4999 of the Code, then the amounts payable will be reduced in order to avoid any
such excess parachute payment. The Retention Agreement provides that
in the event the executive receives payments thereunder, he/she shall not be
entitled to any other severance, benefits or other payments from us, including
under his/her Employment Agreement or under our stock option plans.
The
Retention Agreements provide for a 12-month non-solicitation period following
the executive's termination upon a Change-of-Control. In addition, in
order to receive the severance benefits provided for by the Retention
Agreements, the executive must provide us with a general release of any claims
he/she may have against us, except with respect to any claims the executive may
have to be indemnified by us.
“Change-of-Control”
is generally defined in the Retention Agreements as follows: (a) the acquisition
by any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) of the “beneficial ownership” (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of our securities
representing fifty (50%) percent or more of (i) the then outstanding shares of
our common stock, or (ii) the combined voting power of our then outstanding
voting securities; provided, however, that acquisitions from or by us or one of
our employee benefit plans, and acquisitions by Dr. Brown or a person controlled
by him or upon his death, shall not constitute a Change-of-Control; (b) we are a
party to a merger or consolidation which results in our voting securities
outstanding immediately prior thereto failing to continue to represent at least
fifty (50%) percent of the combined voting power of our voting securities or the
surviving entity outstanding immediately after such merger or consolidation; (c)
the sale or disposition of all or substantially all of our assets; (d) a change
in the composition of our Board within any consecutive two-year period, as a
result of which fewer than a majority of the directors are Incumbent Directors
(meaning directors who either (i) were our directors as of the effective date of
the Retention Agreement, or (ii) are elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of those directors whose
election or nomination was not in connection with an actual or threatened proxy
contest related to the election of our directors); or (e) our dissolution or
liquidation.
“Cause”
means a good faith determination, on a reasonable basis, by not less than two
thirds of the members of the Board that the executive:
|
·
|
willfully
failed to follow the lawful written directions of the Board provided to
the executive prior to such failure; provided that no termination for such
Cause shall occur unless the executive: (i) has been provided with notice,
specifying such willful failure in reasonable detail, of our intention to
terminate the executive for Cause; and (ii) has failed to cure or correct
such willful failure within thirty (30) days of receiving such
notice;
|
|
·
|
engaged
in gross misconduct which is materially detrimental to us; provided that
no termination for such Cause shall occur unless the executive: (i) has
been provided with notice, specifying such gross misconduct in reasonable
detail, of our intention to terminate the executive for Cause; and (ii)
has failed to cure or correct such gross misconduct within thirty (30)
days of receiving such notice;
|
|
·
|
willfully
failed to comply in any material respect with our Confidentiality and/or
Proprietary Rights Agreement, insider trading policy, or any of our other
reasonable policies, in each case provided, or reasonably made available,
to the executive prior to such failure, where non-compliance would be
materially detrimental to us; provided that no termination for such Cause
shall occur unless the executive: (i) has been provided with notice,
specifying such willful failure in reasonable detail, of our intention to
terminate the executive for such Cause; and (ii) has failed to cure or
correct such willful failure within thirty (30) days of receiving such
notice; or
|
|
·
|
has
been convicted of a felony (other than a felony arising from a violation
of a motor vehicle law) or a crime involving moral turpitude, or it has
been determined by a court that he or she committed a fraud, against us or
a fraud against any other person or entity that is materially detrimental
to us.
|
“Good
Reason” generally means the occurrence of any of the following conditions,
without the executive officer’s written consent:
|
·
|
assignment
to the executive officer of a title, position, responsibilities or duties
that is not a substantive functional equivalent to the title, position,
responsibilities or duties which the executive officer had immediately
prior to the Change-of-Control;
|
|
·
|
a reduction in
the executive
officer’s base salary or target cash incentive opportunity in effect
immediately prior to the Change-of-Control (subject to applicable
performance requirements with respect to the actual amount of cash
incentive compensation earned that are similar to the applicable
performance requirements in effect immediately prior to the
Change-of-Control);
|
|
·
|
our
failure (i) to continue to provide the executive officer an opportunity to
participate in any benefit or compensation plans provided to employees who
held positions with us or our successor comparable to the executive
officer’s position immediately prior to the Change-of-Control, or (ii) to
provide the executive officer all other fringe benefits (or the
equivalent) in effect for the benefit of any employee group which includes
any employee who held a position with us or our successor comparable to
the executive officer’s position immediately prior to the
Change-of-Control;
|
|
·
|
requirements
by us of the executive officer to (i) relocate to any office or location
more than 50 miles (one-way) from our office where the executive officer
was based immediately prior to the Change-of-Control, or (ii) to engage in
travel in the performance of services on our behalf at a frequency or for
a duration substantially in excess of such travel required by us prior to
the Change-of-Control;
|
|
·
|
a
material breach of the Retention Agreement by us, including our failure to
obtain the agreement of a successor to perform all of our obligations
under the Retention Agreement; or
|
|
·
|
any
act, set of facts or omissions with respect to the executive officer that
would, under applicable law, constitute a constructive termination of the
executive officer.
|
Notwithstanding
the foregoing, nothing described in any of previous items shall constitute Good
Reason unless the executive officer provides us written notice, in reasonable
detail, of his/her belief that an action or inaction constituting such Good
Reason has occurred and we fail to cure or correct such action or inaction,
within thirty (30) days of our receipt of such written notice, such that the
asserted Good Reason no longer exists.
Should
Messrs. Head, Blough and Staples and Ms. Hynes have been terminated upon a
Change-of-Control under the Retention Agreement as of December 31, 2008, in
addition to accrued vacation, each would be entitled to severance payments
indicated in the following table:
|
TERMINATION
UPON CHANGE-OF-CONTROL UNDER THE RETENTION AGREEMENT
|
|
|
Name
|
|
Salary
|
|
|
Non-Equity
Incentive Plan Compensation (1)
|
|
|
Health
Benefits Coverage (COBRA)
|
|
|
Value
Realized on Stock Options (2)
|
|
|
Total
Severance Upon Change-of-Control
|
|
|
Stephen
R. Head
|
|
$
|
235,000
|
|
|
$
|
--
|
|
|
$
|
11,925
|
|
|
$
|
15,852
|
|
|
$
|
262,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
210,000
|
|
|
|
--
|
|
|
|
9,927
|
|
|
|
26,390
|
|
|
|
246,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
185,000
|
|
|
|
--
|
|
|
|
11,925
|
|
|
|
14,825
|
|
|
|
211,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
220,000
|
|
|
|
--
|
|
|
|
14,159
|
|
|
|
53,938
|
|
|
|
288,097
|
|
______________
(1)
Represents the aggregate
dollar value of performance-based cash incentives that would have been earned
for the fourth quarter and annual performance
targets
for 2008. No such incentives were earned in 2008.
(2)
Represents the intrinsic
value of the executive's "in-the-money" unvested stock options, the vesting
of which would accelerate as a
r
esult
of the
executive’s
termination
of
employment on
December
31, 2008 due to a Change-of-Control (as defined in the Retention Agreement). The
value i
s
calculated on the basis of
t
he d
ifference
between the
exercise
price and $6.41, the closing price of our common stock as reported on The
NASDAQ
Global
Market on
December 31,
2008,
multiplied by
the
number of shares of common stock underlying such options. These options
include
unvested
stock
options from the 1999 Plan
only as none
of
the unvested stock
options from the 2006 Plan were "in-the-money."
Stock Option Plans
Unless
otherwise specifically provided by our Compensation Committee, the 1999 Plan and
the 2006 Plan provide for the following treatment of outstanding options in the
event of a termination of employment:
1999
Plan
|
·
|
Termination
for Cause.
Upon the executive’s termination of employment or
service for cause (as defined in the plan), all rights under any options
granted to the executive will terminate immediately, and the executive
will, if the Compensation Committee, in its sole discretion determines, be
obligated to repay to the company within ten (10) days of the
Compensation Committee’s demand the amount of any gain realized by the
executive upon any exercise within the 90-day period prior to the
termination of employment of any options granted to such executive under
the plan.
|
|
·
|
Termination
Due to Retirement or Without Cause or Voluntary
Termination.
If the executive is terminated by reason of
retirement, terminated by the company without cause, or by voluntary
termination, the executive may exercise outstanding options, under the
plan, to the extent that the executive was entitled to exercise the
options at the date of termination, but only within the period of one
(1) month immediately succeeding the executive’s termination, and in
no event after the applicable expiration dates of the options. Any option
that is not exercisable on the date of termination shall terminate and be
forfeited effective on such date.
|
|
·
|
Termination
Due to Death or Disability.
In the event of the
executive’s death or disability, the executive or the executive’s
beneficiary, as the case may be, may exercise outstanding options to the
extent that the executive was entitled to exercise the options at the date
of termination, but only within the one (1)-year period
immediately
succeeding the executive’s termination of continuous service in the
case of disability, and in no event after the applicable expiration
date of the options. Any option that is not exercisable on the date of
termination shall terminate and be forfeited effective on such
date.
|
|
·
|
Termination
Upon Change-of-Control
.
Upon a
change-of-control (defined in the plan as (i) any third person becoming
the beneficial owner of shares of our common stock with respect to which
25% or more of the total number of votes for the election of our Board may
be cast; (ii) the persons who were our directors ceasing to constitute a
majority of our Board as a result of any cash tender offer, exchange
offer, merger or other business combination, sale of assets or contested
election, or combination of the foregoing; or (iii) our shareholders
approving an agreement providing for a transaction in which we will cease
to be an independent publicly owned entity or for a sale or other
disposition of all or substantially all of our assets), unless the
Compensation Committee shall have otherwise provided in the option
agreement, all outstanding options not fully exercisable
shall become exercisable in full and shall remain so
exercisable in accordance with their terms; provided, however, that no
option which has previously been exercised or otherwise terminated shall
become exercisable.
|
2006
Plan
|
·
|
Termination
for Cause.
Upon the executive’s termination of employment or
service for cause (as defined in the plan), all rights under any options
granted to the executive will terminate immediately, and the executive
will, if the Compensation Committee, in its sole discretion determines, be
obligated to repay to the company within ten (10) days of the
Compensation Committee’s demand the amount of any gain realized by the
executive upon any exercise within the 90-day period prior to the
termination of employment of any options granted to such executive under
the plan.
|
|
·
|
Termination
Due to Retirement or Without Cause or Voluntary
Termination.
If the executive is terminated by reason of
retirement, terminated by the company without cause, or by voluntary
termination, the executive may exercise outstanding options, under the
plan, to the extent that the executive was entitled to exercise the
options at the date of termination, but only within the period of one
(1) month immediately succeeding the executive’s termination, and in
no event after the applicable expiration dates of the
options.
|
|
·
|
Termination
Due to Death or Disability.
In the event of the
executive’s death or disability, the executive or the executive’s
beneficiary, as the case may be, may exercise outstanding options to the
extent that the executive was entitled to exercise the options at the date
of termination, but only within the one (1)-year period immediately
succeeding the executive’s death or disability, and in no event after the
applicable expiration date of the
options.
|
|
·
|
Termination
Upon Change-of-Control.
Except as
otherwise provided in an executive’s award agreement, if an executive’s
employment or service is involuntarily terminated, for any reason, at any
time within 12 months after a change-of-control (which is defined
substantially similar to the definition of Change-of-Control under the
Retention Agreements but does not include a carve out for acquisitions by
Dr. Brown, a person under his control or upon his death), unless otherwise
specifically prohibited by law:
|
|
§
|
any
and all outstanding options with time-based vesting provisions will vest
on a pro rata monthly basis, including full credit for partial months
elapsed; and
|
|
§
|
any
and all outstanding options with performance-based vesting provisions will
vest on a pro rata monthly basis, including full credit for partial months
elapsed, and will be paid (A) based on the level of performance achieved
as of the date of the termination, if determinable, or (B) at the target
level, if not determinable. The amount of the vested award may be computed
under the following formula: total award number of shares times (number of
full months elapsed in shortest possible vesting period divided by number
of full months in shortest possible vesting period) times percent
performance level achieved immediately prior to the effective date of the
termination.
|
As stated
above, there may be circumstances that constitute a “change-of-control” under
the 1999 Plan and the 2006 Plan, but not under the Retention Agreements. If any
of our named executive officers had been terminated upon a change-of-control
that does not constitute a Change-of-Control under the Retention Agreements on
December 31, 2008, the value realized with respect to the options granted under
the plans would be as follows:
TERMINATION
UPON CHANGE-OF-CONTROL
|
|
|
|
|
Value
Realized on Options Under the 1999 Plan (1)
|
|
|
Value
Realized on Options Under the 2006 Plan (1)
|
|
|
|
|
|
Donald
E. Brown, M.D.
|
|
$
|
38,048
|
|
|
$
|
--
|
|
|
$
|
38,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
R. Head
|
|
|
15,852
|
|
|
|
--
|
|
|
|
15,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
R. Blough
|
|
|
26,390
|
|
|
|
--
|
|
|
|
26,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela
J. Hynes
|
|
|
14,825
|
|
|
|
--
|
|
|
|
14,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Staples
|
|
|
53,938
|
|
|
|
--
|
|
|
|
53,938
|
|
________________
|
(1)
Amounts represent
the intrinsic value as of December 31, 2008 of the executive’s “in the
money” unvested stock options, the vesting of which would
accelerate as a result of the executive’s termination of employment on
December 31, 2008 due to a change-of-control (as defined in the applicable
stock
option
plan). The value is calculated on the basis of the difference
between the exercise price and $6.41, the closing price of our common
stock as reported
on The NASDAQ Global Market on December 31, 2008, multiplied by the number
of shares of common stock underlying such options.
|
CONSENT TO THE APPOINTMENT OF THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM (ITEM 2 ON PROXY CARD)
KPMG
has served as our independent registered public accounting firm since 2003. KPMG
has issued an unqualified opinion for each of the years that it has been engaged
to audit our consolidated financial statements, including 2008, and there were
no disagreements on any matters regarding accounting principles or practices
applied by management, financial statement disclosure or auditing scope or
procedures. Representatives from KPMG will be present at our annual meeting, and
will have the opportunity to make any statements they desire and are expected to
be available to respond to appropriate questions.
At this meeting, we are asking our
shareholders to consent to the Audit Committee’s appointment of KPMG as our
independent registered public accounting firm for 2009. In the event this
proposal is not approved, the Audit Committee will take into consideration the
views of the shareholders and may, but will not be required to, appoint a
different independent registered public accounting
firm.
Notwithstanding consent by the shareholders, the Audit
Committee reserves the right to appoint a different independent registered
public accounting firm for 2009.
The
Board recommends a vote "
FOR
" the consent
by our shareholders to the appointment of
KPMG
LLP as our independent registered public accounting firm for 2009.
AUDIT
COMMITTEE
MATTERS
Audit Committee Pre-Approval Policy of Audit and
Permissible Non-Audit Services of KPMG
The
Sarbanes-Oxley Act of 2002 and the independence rules of the SEC require all
independent registered public accounting firms that audit issuers to obtain
pre-approval from the issuers’ respective audit committees in order to provide
professional services without impairing independence. As such, our Audit
Committee’s policy is to pre-approve all audit and permissible non-audit
services provided by KPMG. These services may include audit services,
audit-related services, tax services and other services. Pre-approval is
generally provided for up to one year and any pre-approval is detailed as to the
particular service or category of services and is generally subject to a
specific budget. KPMG and management are required to periodically report to our
Audit Committee regarding the extent of services provided by KPMG in accordance
with this pre-approval, and the fees for the services performed to date. Our
Audit Committee may also pre-approve particular services on a case-by-case
basis.
Each
year, our Audit Committee discusses and approves the hiring of the independent
registered public accounting firm. Once a resolution is approved, our Audit
Committee Chairman executes an engagement letter for the annual audit and
quarterly reviews. Our Chief Financial Officer may execute an engagement letter
for additional services, such as tax consulting, with the approval of our Audit
Committee. Additionally, from time to time, we may desire additional permitted
professional services. Pre-approval for these services is obtained from the
Audit Committee Chairman prior to such services commencing.
Fees
Paid to KPMG
The
following table presents fees for professional audit services rendered by KPMG
for the audits of our consolidated financial statements for the years ended
December 31, 2008 and 2007, and fees for other services rendered by KPMG during
those periods. All of the services described in the following fee
table were approved in conformity with our Audit Committee’s pre-approval
process (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
391
|
|
|
$
|
370
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees
|
|
|
21
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
Fees
|
|
|
6
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other Fees
|
|
|
12
|
|
|
|
--
|
|
|
Total
|
|
$
|
430
|
|
|
$
|
442
|
|
Audit
Fees
Audit
fees consisted of the aggregate fees billed by KPMG for professional services
rendered in connection with the audit of our consolidated financial statements
included in our Annual Report on Form 10-K for each of our last two years,
as well as for the review of our condensed consolidated financial statements
included in our Quarterly Reports on Form 10-Q during each year. In
addition, audit fees included professional services rendered in connection with
KPMG’s separate audit of our internal control over financial reporting as of
December 31, 2008 and 2007.
Pursuant
to Section 404 of the Sarbanes-Oxley Act and due to our public float exceeding
$75 million as of June 30, 2008, we continued to be classified by the SEC as an
accelerated filer as of December 31, 2008. As a result, we were required to
remain in compliance with the provisions of Section 404 of the Sarbanes-Oxley
Act that required: (i) management to assess the effectiveness of our internal
control over financial reporting and (ii) the independent registered public
accounting firm to perform its own separate audit of our internal control over
financial reporting. See
“Audit Committee Report”
below for further details.
Audit-Related
Fees
Audit-related
fees consisted of the aggregate fees billed by KPMG for assurance and related
services rendered in each of our last two years that were not included in “Audit
Fees”, as discussed above. These fees were primarily related to the audit of our
401(k) Plan’s financial statements included in our Annual Report on Form 11-K
for each year, typically filed with the SEC within 180 days after our year
end.
Tax
Fees
Tax fees
consisted of the aggregate fees billed by KPMG for professional services
rendered in connection with tax compliance, tax advice and tax planning for each
of our last two years.
All
Other Fees
All other
fees consist of potential fees that could be billed by KPMG for other
professional and/or assurance services that are not included in “Audit Fees”,
“Audit-Related Fees” and “Tax Fees”. For 2008, this included fees billed by KPMG
for professional services rendered in connection with our Form S-3 registration
statement.
For 2008,
pre-approved non-audit services included only those services described above for
“Audit-Related Fees”, “Tax Fees” and "All Other Fees".
The aggregate
amount of all such non-audit services represented approximately 9% of the total
amount of fees paid to KPMG. Our Audit Committee has concluded that the
provision of the non-audit services listed above is compatible with maintaining
the independence of KPMG.
AUDIT COMMITTEE REPORT
We, the
Audit Committee, oversee Interactive Intelligence’s financial reporting process
on behalf of the Board of Directors. Interactive Intelligence’s
management is responsible for the preparation and integrity of the consolidated
financial statements and notes thereto and the financial reporting process,
including a system of internal control over financial reporting, and has
represented to us that the consolidated financial statements were prepared in
accordance with U.S. generally accepted accounting principles. The independent
registered public accounting firm is responsible for performing an independent
audit of Interactive Intelligence’s consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and expressing an opinion on the conformity of those
audited consolidated financial statements with U.S. generally accepted
accounting principles, as well as expressing an opinion on the effectiveness of
Interactive Intelligence’s internal control over financial
reporting.
In
fulfilling our responsibilities, we have reviewed and discussed Interactive
Intelligence’s audited consolidated financial statements with its management and
the independent registered public accounting firm. We met with the independent
registered public accounting firm to discuss the results of its examinations and
its evaluations of Interactive Intelligence’s internal control over financial
reporting. We reviewed and discussed Interactive Intelligence’s compliance with
Section 404 of the Sarbanes-Oxley Act of 2002, including consideration of the
PCAOB’s Auditing Standard No. 5,
An Audit of Internal Control Over
Financial Reporting That is Integrated with an Audit of Financial
Statements
, which was released during May 2007 and superseded PCAOB
Auditing Standard No. 2,
An
Audit of Internal Control Over Financial Reporting Performed in Conjunction with
an Audit of Financial Statements
.
We also
discussed with the independent registered public accounting firm the matters
required by the American Institute of Certified Public Accountants Statement on
Auditing Standards No. 61,
Communication with Audit
Committees
,
as amended
(Codification of Statement on Auditing Standards, AU 380),
as adopted by
the PCAOB in Rule 3200T, which include but are not limited to: (i) the scope and
results of the audit, (ii) the responsibility of the independent registered
public accounting firm, (iii) Interactive Intelligence’s significant accounting
policies, (iv) management’s judgments and estimates and (v) significant audit
adjustments.
We have
also received the written disclosures and the letter from KPMG required by
applicable requirements of the PCAOB regarding KPMG’s communications with us
concerning independence, and have discussed with KPMG its independence from
Interactive Intelligence and its management. In addition, we considered whether
KPMG’s independence would be jeopardized by providing non-audit services to
Interactive Intelligence.
Based on
the reviews and discussions referred to above, we, the Audit Committee,
recommended to the Board of Directors that the audited consolidated financial
statements be included in Interactive Intelligence’s Annual Report on Form 10-K
for the year ended December 31, 2008, as filed with the SEC.
Submitted by the Audit
Committee
Edward L.
Hamburg, Chairman
Richard
A. Reck
Michael
C. Heim
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
On an
annual basis, each director and executive officer is obligated to complete a
director and officer questionnaire which requires disclosure of any transactions
with us in which the director or executive officer, or any member of his or her
immediate family, has an interest. Under our Audit Committee’s charter, which is
available free of charge on our website at
http://investors.inin.com
under “Corporate Governance”, our Audit Committee must review and approve all
related person transactions in which any executive officer, director, director
nominee or more than 5% shareholder of the company, or any of their immediate
family members, has a direct or indirect material interest. The Audit
Committee may not approve a related person transaction unless (1) it is in or
not inconsistent with our best interests and (2) where applicable, the terms of
such transaction are at least as favorable to us as could be obtained from an
unrelated third party. No related person transaction in an amount
exceeding $120,000 occurred during 2008.
Under our
Ethics Code, which is available free of charge on our website at
http://investors.inin.com
under “Corporate Governance”, related person transactions are strictly
prohibited unless approved or ratified by the Audit Committee, and other
conflicts of interest involving our executive officers or directors are
prohibited unless approved by the Audit Committee.
In
November 2007, our Compensation Committee adopted a travel policy for our Chief
Executive Officer wherein Dr. Brown is permitted to utilize his private airplane
for business travel. As set forth in the Compensation Committee minutes
approving the travel policy, Dr. Brown will be reimbursed for expenses incurred
in the operation of his private plane only when used for company business. The
cost reimbursement shall occur upon us receiving supporting documentation, at a
practicable date after completion of each trip, of the expenses incurred by Dr.
Brown and documentation evidencing that the trip was business related.
During 2008, we reimbursed Dr. Brown for approximately $43,620 in expenses
pursuant to this reimbursement policy. The hourly reimbursement rate in effect
for 2008 was approved by our Compensation Committee and ratified and approved by
our Audit Committee based on the standards set forth in the Audit Committee's
charter and described above. The hourly reimbursement rate was negotiated by us
on an arms-length basis, and was made on terms no less favorable to us than
could be obtained from an unaffiliated third party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Pursuant
to Section 16(a) of the Exchange Act, our executive officers, directors and
holders of more than ten percent of the outstanding shares of our common stock
(“Insiders”) are required to file reports (on prescribed forms) of their
beneficial ownership of our common stock and/or shares of our common stock
underlying stock options with the SEC and furnish copies of such forms to us.
Based solely on a review of the copies of such forms furnished to us, or written
representations that no other reports were required to be filed, we believe that
for the year ended December 31, 2008, all Forms 3, 4 and 5 required by
Section 16(a) to be filed by Insiders were filed on a timely basis, except
that
one Form
4 for Mr. Gildea, reporting a grant of options to purchase our common stock, was
inadvertently filed late.
OTHER BUSINESS AT OUR ANNUAL MEETING
Our Board
is not aware of any business which properly may be presented for action at our
meeting other than the matters set forth in the Notice of Annual Meeting. Should
any other matter requiring a vote of the shareholders properly arise, the
enclosed proxy gives discretionary authority to the persons named in the proxy
to vote on such matters in accordance with their best judgment.
DATE OF RECEIPT OF SHAREHOLDER PROPOSALS FOR OUR 2010 ANNUAL
MEETING
All
shareholder proposals intended for inclusion in our 2010 proxy materials
for presentation at our 2010 Annual Meeting must be received by us (to the
attention of our Corporate Secretary) at our world headquarters no later than
December 18, 2009. As mentioned previously, in accordance with
amended Rule 14a-8(i)(8) of the Exchange Act, certain shareholder proposals
related to the election of directors are no longer permitted. In addition, our
Amended and Restated By-Laws, as currently in effect, established procedures for
shareholder nominations for election of directors and bringing business before
our annual meeting of shareholders. Among other requirements, to bring business
before our 2010 Annual Meeting or to nominate a person for election as a
director, a shareholder must give written notice to our Corporate Secretary no
less than 90 days or more than 120 days prior to May 28, 2010.
However, in the event our 2010 Annual Meeting is advanced by more than
30 days or delayed by more than 60 days from May 28, 2010, the written
notice must be delivered no earlier than 120 days prior to such annual
meeting and no later than the close of business on the later of 90 days
prior to such annual meeting or 10 days following the day on which public
announcement of the date of such meeting is first made. The notice must contain
certain information concerning the proposed business or the nominee and the
shareholder making the proposal. Any shareholder interested in making a
nomination or proposal should request a copy of the applicable By-Law
provisions, as currently in effect, from our Corporate
Secretary.
By order
of the Board of Directors,
Interactive
Intelligence, Inc.
Stephen
R. Head
Corporate
Secretary
Indianapolis,
Indiana
April 17
,
200
9
|
|
|
VOTE
BY INTERNET-
www.proxyvote.com
|
|
INTERACTIVE INTELLIGENCE,
INC.
C/O
Investor Relations
7601
Interactive Way
Indianapolis, IN 46278
|
|
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time on May 27,
2009. Have your proxy card
in hand when you access the web site and
follow the instructions to obtain your records and to create an electronic
voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE
SHAREHOLDER
COMMUNICATIONS
If
you would like to reduce the costs incurred by Interactive Intelligence,
Inc. in mailing proxy materials, you can consent to receiving all future
proxy statements, proxy cards and annual reports electronically via e-mail
or the Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate
that you agree to receive or access shareholder communications
electronically in future years.
|
|
|
|
VOTE
BY PHONE - 1 (800) 690-6903
|
|
|
|
Use
any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time on May 27, 2009. Have your proxy card in hand when
you call and then follow the instructions.
|
|
|
|
|
|
|
|
VOTE
BY MAIL
|
|
|
|
Mark,
sign and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Interactive Intelligence, Inc., c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
|
|
|
|
|
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
KEEP
THIS PORTION FOR YOUR RECORDS
|
|
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
DETACH
AND RETURN THIS PORTION ONLY
|
INTERACTIVE
INTELLIGENCE, INC.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE
“
FOR
” ITEMS
1 AND
2.
Vote
on Director
|
1.
Election of Director:
|
For
All
|
Withhold
All
|
For
All
Except
|
To
withhold authority to vote for any individual nominee(s), mark "For All
Except" and write the number(s) of the nominee(s) on the line
below.
|
|
Nominee:
01
- Edward L. Hamburg, Ph.D.
|
£
|
£
|
£
|
|
Vote on
Proposal
|
|
For
|
Against
|
Abstain
|
|
2. Consent
to the Appointment of KPMG LLP as Independent Registered Public
Accounting Firm.
|
£
|
£
|
£
|
3.
In their
discretion, upon such other matters that may properly come before the meeting or
any adjournment or adjournments
thereof.
The shares represented by this proxy, when properly executed, will be voted in the manner directed herein by the undersigned
Shareholder(s).
If
no
direction
is
made,
this
proxy
will
be
voted
FOR
items
1 and
2
.
If any other matters
properly come before the meeting, the person named in
this
proxy card will vote in their discretion.
|
For
address changes please check this box and write them on the back where
indicated.
|
o
|
|
|
|
|
|
|
(
NOTE:
Please sign exactly as your
name(s) appear(s) hereon. All holders must sign. When signing as attorney,
executor, administrator, or other fiduciary, please give full title as
such. Joint owners should each sign personally. If a corporation, please
sign in full corporate name, by authorized officer. If a partnership,
please sign in partnership name by authorized person.)
|
|
|
|
|
|
|
|
|
|
Signature
[PLEASE SIGN WITHIN BOX]
|
Date
|
|
Signature
(Joint Owners)
|
Date
|
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice of Annual Meeting and Proxy Statement and Annual Report
on Form 10-K are available at www.proxyvote.com.
|
|
|
INTERACTIVE
INTELLIGENCE, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL
MEETING OF SHAREHOLDERS
MAY
28, 2009
By signing the proxy, you revoke all prior proxies and appoint Donald E.
Brown, M.D. and Stephen R. Head, and each of them, with full power of
substitution,
to vote your shares on the matters shown on the reverse side and any other
matters which may come before the Annual Meeting
of
Sh
areholders
of the
Company
to be held at the Company's World Headquarters, 7601 Interactive Way,
Indianapolis, Indiana on Thursdy, May 28, 2009 at 1:30 p.m. Eastern Time,
and at any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF NOMINEE LISTED ON THE REVERSE SIDE FOR THE BOARD OF
DIRECTORS AND FOR PROPOSAL 2.
PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
REPLY ENVELOPE
Address
Changes:__________________________________________________________________________________
(If
you noted any Address Changes above, please mark corresponding box on the
reverse side.)
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
|
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Interactive Intelligence Grp., Inc. (NASDAQ:ININ)
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From Jun 2023 to Jun 2024
