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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AFFILIATED MANAGERS GROUP, INC. | ||||
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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AFFILIATED MANAGERS GROUP, INC.
600 Hale Street
Prides Crossing, Massachusetts 01965
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2010MAY 31, 2011
NOTICE IS HEREBY GIVEN that the 20102011 Annual Meeting of Stockholders (the "Annual Meeting") of Affiliated Managers Group, Inc. (the "Company") will be held on Tuesday, June 8, 2010,May 31, 2011, at 10:00 a.m. Eastern time, at the Company's offices, 600 Hale Street, Prides Crossing, Massachusetts 01965, for the following purposes:
This year, we have again saved significant mailing and printing costs by taking advantage of Securities and Exchange Commission rules that allow us to provideproviding proxy materials to you over the Internet.Internet pursuant to Securities and Exchange Commission rules. On or about April 29, 2010,20, 2011, we will mail to our stockholders a Notice of Internet Availability of Proxy Materials ("Notice"(the "Notice") containing instructions on how to access this Proxy Statement and our 20092010 Annual Report on Form 10-K online. The Notice, which cannot itself be used to vote your shares, also provides instructions on how to vote onlineby Internet or by telephone and how to request a paper copy of the proxy materials, if you so desire. Whether you receive the Notice or paper copies of our proxy materials, the Proxy Statement and 20092010 Annual Report on Form 10-K are available to you atwww.proxyvote.com.www.proxyvote.com.
The Company's Board of Directors has fixed the close of business on April 13, 201012, 2011 as the record date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournments or postponements thereof. Your vote is very important. Please carefully review thethis Proxy Statement and submit your proxy by the Internet, telephone or mail whether or not you plan to attend the Annual Meeting. If you hold your shares in street name through a broker, bank or other nominee, please follow the instructions you receive from them to vote your shares.
By Order of the Board of Directors. | ||
John Kingston, III Secretary |
Prides Crossing, Massachusetts
April 29, 201019, 2011
AFFILIATED MANAGERS GROUP, INC.
600 Hale Street
Prides Crossing, Massachusetts 01965
PROXY STATEMENT
FOR 20102011 ANNUAL MEETING OF STOCKHOLDERS
To be Held on June 8, 2010May 31, 2011
April 29, 201019, 2011
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Affiliated Managers Group, Inc. ("AMG", the "Company", "we" or "us") for use at our 20102011 Annual Meeting of Stockholders to be held on Tuesday, June 8, 2010May 31, 2011 at 10:00 a.m. Eastern time, at our offices, 600 Hale Street, Prides Crossing, Massachusetts 01965, and at any adjournments or postponements thereof (the "Annual Meeting"). At the Annual Meeting, stockholders will be asked to elect eight directors, approve the Long-Term Executive2011 Stock Option and Incentive Plan, as amended and restated (the "Long-Termapprove on an advisory basis the compensation of the Company's Named Executive Incentive Plan"),Officers, select on an advisory basis the frequency of the advisory vote on executive compensation, ratify the selection of PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as our independent registered public accounting firm for the current fiscal year, and consider and act upon any other matters properly brought before them.
Important Notice Regarding the Internet Availability of Proxy Materials. This year, we have again saved significant mailing and printing costs by taking advantage ofproviding proxy materials to you over the Internet in accordance with Securities and Exchange Commission ("SEC") rules that allow us to provide proxy materials to you over the Internet.rules. On or about April 29, 2010,20, 2011, we will mail to our stockholders a Notice of Internet Availability of Proxy Materials ("Notice"(the "Notice") containing instructions on how to access this Proxy Statement and our 20092010 Annual Report on Form 10-K online. The Notice, which cannot itself be used to vote your shares, also provides instructions on how to vote onlineby Internet or by telephone and how to request a paper copy of the proxy materials, if you so desire. Whether you received the Notice or paper copies of our proxy materials, the Proxy Statement and 20092010 Annual Report on Form 10-K are available to you atwww.proxyvote.com.
Stockholders of record of the Company's common stock at the close of business on the record date of April 13, 201012, 2011 will be entitled to notice of the Annual Meeting and to one vote per share on each matter presented at the Annual Meeting. As of the record date, there were 42,398,94251,921,772 shares of common stock outstanding and entitled to vote at the Annual Meeting.
The presence, in person or by proxy, of holders of at least a majority of the total number of shares of common stock outstanding and entitled to vote at the Annual Meeting is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Both abstentions and broker non-votes will be counted as present in determining the presence of a quorum. A "broker non-vote" is a proxy from a broker or other nominee indicating that such person has not received instructions from the beneficial owner on a particular matter with respect to which the broker or other nominee does not have discretionary voting power. Brokers have the discretion to vote their clients' proxies only on routine matters. The ratification of auditors is a routine matter.
Beginning with the 2010 proxy season, the New York Stock Exchange (the "NYSE") has changed its rules to makemade the election of directors in an uncontested election a non-routine item. This means that brokers who do not receive voting instructions from their clients as to how to vote their shares for the election of directors cannot exercise discretion to vote for directors. Due to this rule change, at
At this year's Annual Meeting, both the election of directors and(Proposal No. 1), the proposal to approve the Long-Term Executive2011 Stock Option and Incentive Plan will be(Proposal No. 2), the advisory vote on executive compensation (Proposal No. 3), and the advisory vote on the frequency of executive compensation advisory votes (Proposal No. 4) are non-routine items. Therefore, itAt our Annual Meeting, only the ratification of our auditors (Proposal No. 5) is a routine matter. It is important that you instruct your broker as to how you wish to have your shares voted on these proposals, even if you wish to vote as recommended by the Board of Directors.
Directors are elected by a plurality of votes cast, and "withheld" votes will have no effect on the outcome. Approval of the Long-Term Executive Incentive Plan and ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm for the current fiscal year requires the affirmative vote of a majority of the shares of common stock present or represented at the
Annual Meeting and entitled to vote on each such proposal. Abstentions will have the effect of votes against these two proposals. Broker non-votes, which will apply to the proposals to elect the directors and approve the Long-Term Executive Incentive Plan, will have no effect on the outcome for these purposes.
Stockholders are requested to submit a proxy by Internet or telephone, or by returning a completed, signed, and dated proxy card or voting instruction form. If you vote by Internet or telephone, you should not return a proxy card or voting instruction form. Shares represented by a properly submitted proxy received prior to the vote at the Annual Meeting and not revoked will be voted at the Annual Meeting as directed by the proxy. If a properly executed proxy or voting instruction form is submitted without any instructions indicated, the proxy will be voted FOR the election of each of the nominees for director, FOR the approval of the Long-Term Executive2011 Stock Option and Incentive Plan, FOR the approval of the advisory vote on executive compensation, for the ONE-YEAR option on the advisory vote on the frequency of executive compensation advisory votes, and FOR ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm for the current fiscal year. If other matters are presented, proxies will be voted in accordance with the discretion of the proxy holders on such other matters.
A stockholder of record may revoke a proxy at any time before it has been exercised by filing a written revocation with the Secretary of the Company at the address of the Company set forth above; by filing a duly executed proxy bearing a later date; or by appearing in person and voting by ballot at the Annual Meeting. A stockholder of record who voted by the Internet or by telephone may also change his or her vote with a timely and valid later Internet or telephone vote, as the case may be. Any stockholder of record as of the record date attendingmay attend the Annual Meeting may vote in person whether or not a proxy has previously been given, but the presence (without further action) of a stockholder at the Annual Meeting will not constitute revocation of a previously given proxy. If you hold your shares in street name and would like to change your voting instructions, please follow the instructions provided to you by your broker, bank or other nominee.
A stockholder may vote in person at the Annual Meeting upon presenting picture identification and an account statement, Notice of Internet Availability of Proxy Materials, proxy card or voting instruction form. If you hold your shares in street name, you will need to obtain a proxy from your bank or broker to be ablein order to vote in person. Directions toThe address of the Company areis available on the Company's website,www.amg.com, for stockholders who plan to vote in person at the Annual Meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
Introduction
Our Board of Directors currently consists of eight members. At the Annual Meeting, eight directors will be elected to serve until the 20112012 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified. The Board of Directors has nominated Messrs. Samuel T. Byrne, Dwight D. Churchill, Sean M. Healey, Harold J. Meyerman, William J. Nutt, Patrick T. Ryan and Jide J. Zeitlin, and Dr. Rita M. Rodriguez (collectively, the "Nominees") to serve as directors. Each of the Nominees is currently serving as a director of the Company. As more fully discussed below under "Meetings of the Board of Directors and Committees and Corporate Governance Matters," the Board of Directors has determined that sixseven of its eight current Nominees, Messrs. Byrne, Churchill, Meyerman, Nutt, Ryan and Zeitlin and Dr. Rodriguez, have no material relationship with the Company and are "independent" for purposes of the NYSE listing standards. The Board of Directors expects that each of the Nominees will, if elected, serve as a director for the new term. However, if any person nominated by the Board of Directors is unable to accept election, the proxies will be voted for the election of such other person or persons as the Board of Directors may recommend.
Directors are elected by a plurality of votes cast, and abstentions and broker non-votes will not have any effect on the election of directors.
Recommendation of the Board of Directors
The Board of Directors believes that the election of each of the Nominees is in the best interests of the Company and its stockholders, and, therefore, unanimously recommends that stockholders vote FOR the election of each of the Nominees.
Information Regarding the Nominees
The name, age (as of April 1, 2010)2011) and a description of the business experience, principal occupation and past employment and directorships of each of the Nominees during at least the last five years is set forth below. In addition, we have summarized the particular experience, qualifications, attributes and/or skills that the Nominating and Governance Committee and Board of Directors considered as relevant to the determination that each Nominee should serve as a director of the Company.
Name | Age | |||
---|---|---|---|---|
Samuel T. Byrne(1)(2)(†) | ||||
Dwight D. Churchill(3)(†) | ||||
Sean M. Healey | ||||
Harold J. Meyerman(1)(2)(3)(†) | ||||
William J. | ||||
Rita M. Rodriguez(2)(3)(†) | ||||
Patrick T. Ryan(1)(3)(†) | ||||
Jide J. Zeitlin(1)(2)(†) |
Samuel T. Byrne has been a director of the Company since October 2009. Mr. Byrne is a managing partner and co-founder of CrossHarbor Capital Partners LLC, a leading alternative investment management firm specializing in real estate, as well as distressed securities and private equity. The firm manages institutional capital on behalf of investors globally, including public pension systems, endowments, and such foreign institutions as sovereign wealth funds. Before founding CrossHarbor Capital Partners, Mr. Byrne served as a management consultant advising on corporate restructurings and
bankruptcy matters. Prior to that, he was a portfolio manager at Fleet Financial Group and Bank of New England. Mr. Byrne currently serves as Chairman of the Board of the Brookwood School and is onas Co-Chairman of the Board of Trustees of the Peabody Essex Museum. We believe that Mr. Byrne's qualifications to serve on our Board of Directors include his extensive investment management experience, including his particular expertise in private equity and real estate.
Dwight D. Churchill has been a director of the Company since February 2010. Mr. Churchill held a number of senior positions at Fidelity Investments ("Fidelity") before retiring from the firm in early 2009. Having joined Fidelity in 1993, he served as the head of the Fixed Income Division, head of Equity Portfolio Management and President of Investment Services. While at Fidelity, Mr. Churchill also served as the elected chair of the Board of Governors for the 60,000-member Association for Investment Management & Research (now the CFA Institute). Prior to joining Fidelity, Mr. Churchill served as a Managing Director of Prudential Financial, Inc., and as President and Chief Executive Officer of CSI Asset Management, Inc., a subsidiary of Prudential Financial, Inc., and held senior roles at Loomis, Sayles & Company and The Public Employees Retirement System of Ohio. Mr. Churchill also serves on the Boards of Trustees of State Street Global Advisors SPDR ETF Mutual Funds and the Currier Museum of Art, and on the Board of Directors of Legacy Paddlesports LLC, a private company. We believe that Mr. Churchill's qualifications to serve on our Board of Directors include his extensive experience in the investment management industry, including his oversight of internal controls, financial reporting and accounting procedures.
Sean M. Healey is the Company's PresidentChairman and Chief Executive Officer, a roleroles he has served in since January 2005.2011 and January 2005, respectively. Prior to that time, Mr. Healey served as President and Chief Operating Officer of the Company. Mr. Healey has been a memberdirector of the Company's Board of DirectorsCompany since May 2001. Prior to joining the Company in 1995, Mr. Healey was a Vice President in the Mergers and Acquisitions Department at Goldman, Sachs & Co. focusing on financial institutions. He serves onas Co-Chairman of the Board of Trustees of the Peabody Essex Museum, onand as a member of the Board of Directors of the Boys and Girls Clubs of Boston, and the Visiting Committee of the Harvard Law School.School, and the Board of Trustees of the International Game Fish Association. In 2006, Mr. Healey received a presidential appointment to serve on the President's Export Council, the nation's principal advisory committee on international trade. Mr. Healey received a J.D. from Harvard Law School, an M.A. from University College, Dublin and an A.B. from Harvard College. We believe that Mr. Healey's qualifications to serve on our Board of Directors include his direct knowledge of the Company's strategy and operations through his service as President and Chief Executive Officer of the Company and his extensive experience in the financial services and investment management industries, including his experience in investing in investment management firms.
Harold J. Meyerman has been a director of the Company since July 1999. Mr. Meyerman retired as a Managing Director of the Global Financial Institutions and Trade Group of The Chase Manhattan Bank ("Chase") in December 1998. His responsibilities at Chase included overseeing the asset management businesses. Before joining Chase, Mr. Meyerman was President and Chief Executive Officer of First Interstate Bank, Ltd., where he also oversaw several boutique asset management firms. Mr. Meyerman alsocurrently serves on the Board of Directors of the Huntington Medical Research Institutes and as Chairman of Island Capital, Ltd., formerly EIC Corporation, Ltd.the Board of Trustees of the Palm Springs Art Museum. He formerly served on the Boards of GIVF (Genetics & IVF) and, Ansett Aircraft Spares & Services, and Island Capital, Ltd, formerly EIC Corporation, Ltd, as Chairman. Mr. Meyerman also serves as Chairman of the Board of Trustees of the Palm Springs Art Museum. We believe that Mr. Meyerman's qualifications to serve on our Board of
Directors include his extensive service in the financial services and banking industries, his mergers and acquisitions experience, and his international management and advisory experience.
William J. Nutt founded the Company in December 1993 and has been a director of the Company since that time. Mr. Nutt is the Company's Non-Executive Chairman. From 1993 to December 2004, Mr. Nuttformer Chairman, and served as Chief Executive Officer of the Company.Company from 1993 to 2004. Mr. Nutt also served as the Company's President from 1993 to 1999. Prior to founding AMG, Mr. Nutt was President and Chief Operating Officer of The Boston Company and was responsible for its institutional money management business, mutual fund administration, distribution and custody business, and master trustee and custodian business. As Chairman and Chief Executive Officer of The Boston Company's principal subsidiary, Boston Safe Deposit and Trust Company, Mr. Nutt was also responsible for its
personal banking and trust business. He also serves on the Board of Directors of eSecLending, a private company engaged in institutional securities lending. Mr. Nutt receivedlending and as Chairman of the Board of Directors of The Ocean Reef Club, a J.D. from the University of Pennsylvania and a B.A. from Grove City College.private club community in Key Largo, Florida. We believe that Mr. Nutt's qualifications to serve on our Board of Directors include his extensive history with the Company as its founder and prior service asformer President and Chief Executive Officer, as well as his substantial experience in the investment management industry prior to founding AMG.the Company.
Rita M. Rodriguez has been a director of the Company since January 2000. Dr. Rodriguez has been a Fellow and Senior Fellow at the Woodstock Theological Center at Georgetown University since September 2002, and from March 1999 to September 2002 served as an international finance consultant. Dr. Rodriguez was formerly a full-time member of the Board of Directors of the Export Import Bank of the United States from 1982 to March 1999. Prior to joining the Export Import Bank Board, Dr. Rodriguez was a professor in the finance faculties at the University of Illinois at Chicago and at Harvard Business School. In addition, Dr. Rodriguez has authored numerous journal articles and books on the subject of international finance. Dr. Rodriguez also serves on the BoardsBoard of Directors and the Audit CommitteesCommittee of ENSCOEnsco plc, an international offshore contract drilling company, on the Board of Directors, the Audit Committee and as the Chair of the Corporate Social Responsibilities Committee of Phillips-Van Heusen Corporation, an apparel company, and on the Board of Directors, the Audit Committee and the Risk Committee of the Private Export Funding Corporation. We believe Dr. Rodriguez's qualifications to serve on our Board of Directors include her substantial experience in domestic and international accounting, finance and policy, including her academic finance experience, as well as her extensive experience in domestic and international policy matters.serving on corporate boards.
Patrick T. Ryan has been a director of the Company since July 2005. Mr. Ryan currently serves as President, Spend and Clinical Resource segment and on the Board of Directors of MedAssets, Inc. Prior to joining MedAssets, Mr. Ryan served as Chairman and Chief Executive Officer of The Broadlane Group from 2008 until its acquisition by MedAssets in 2010. Additionally, Mr. Ryan currently works with SV Life Sciences as a Venture Partner. From 2004 to 2007, Mr. Ryan served as Chief Executive Officer and as a member of the Board of Directors and Chief Executive Officer of Broadlane, Inc., a leading healthcare services provider. Prior to January 2010, Mr. Ryan served as Managing Director of Clark Street Ventures LLC. From September 2004 to October 2007, Mr. Ryan served as President, Chief Executive Officer and a director of PolyMedica Corporation ("PolyMedica"), prior to PolyMedica'suntil its sale to Medco Health Solutions, Inc. PolyMedica under the Liberty brand, was a leading direct-to-consumer provider of health care products and services for individuals with chronic diseases. Before joining PolyMedica, Mr. Ryan served as the Chairman and CEOChief Executive Officer of Physicians Dialysis Inc., one of the nation's largest dialysis providers, when it was acquireduntil its acquisition by DaVita Inc. in September 2004. Previously, Mr. Ryan has also served as a partner at Westway Ventures, a firm specializing in the strategic development of companies in the healthcare and consumer sectors, as President and Chief Executive Officer of PrincipalCare Inc., a company specializing in women's healthcare, as President and Chief Executive Officer of ImageAmerica, Inc., a publicly traded company that provided medical diagnostic imaging services. Mr. Ryan servedservices, as Co-Founder and President of R.B. Diagnostics, a company providing diagnostic imaging services, and on the Board of Directors of Hill-Rom Holdings, Inc. from 2007 through June 2009, andHe currently serves on the Advisory BoardBoards of Ferrer, Freeman and Company, Avon Old Farms School and as a director for Infusion Resources LLC and the Beth Israel Deaconess Medical Center.Atrius Health. We believe Mr. Ryan's qualifications to serve on our Board of Directors include his substantial executive management experience at several public and private companies.
Jide J. Zeitlin has been a director of the Company since January 2006. Mr. Zeitlin formerly served as a senior investment banker at Goldman, Sachs & Co., where he was elected a partner in 1996, and is nowcurrently a private investor. His career at Goldman Sachs included a number of senior management positions in the firm's investment banking division, where he focused on the industrial, consumer and healthcare industries, as well as service in the firm's executive office. Mr. Zeitlin currently serves as Chairman of the Board of Trustees at Amherst College and is a member of the Boards of Milton Academy, the Harvard Business School Board of Dean's Advisors, Teach for America, Doris Duke Charitable Foundation, Montefiore Medical Center, Playwrights Horizons and Common Ground Community. He also serves on the Board of Directors and Audit Committee of Coach, Inc., a designer and marketer of premium handbags and accessories. We believe Mr. Zeitlin's qualifications to serve on our Board of Directors include his substantial experience as a senior executive in a leading investment bank, as well as his extensive service in Board capacities at numerous organizations.
Meetings of the Board of Directors and Committees and Corporate Governance Matters
During 2009,2010, the Board of Directors met sevensix times. Each member of the Board of Directors attended over 85%80% of the total number of meetings of (i) the Board of Directors and (ii) all standing committees of the Board of Directors on which such director served. We do not have a formal policy regarding director attendance at an annual meeting of stockholders. One director wasThree directors were in attendance at the 20092010 Annual Meeting of Stockholders.
At least annually, the Board of Directors evaluates all relationships between the Company and each directorindependence of our directors in light of the relevant facts and circumstances to determine whether a material relationship exists betweenstandards established by the Company and the director, either directly or indirectly.NYSE. A majority of our Board of Directors must be "independent" within the meaning of the NYSE listing standards. After its most recent evaluation of director independence, the Board of Directors has affirmatively determined that sixseven of itsour eight current directors, Messrs. Byrne, Churchill, Meyerman, Nutt, Ryan and Zeitlin and Dr. Rodriguez, have no material relationship with the Company and are "independent" for purposes of the NYSE listing standards. (Mr. Richard E. Floor had served as a director from the Company's formation in 1993 until his death in February 2010. Mr. Floor also served on the Audit Committee since April 2009, having been determined to be independent by the Board of Directors for purposes of the NYSE listing standards.) The Board of Directors made these determinations based upon questionnaires completed by each director and individual evaluations of a director's employment or Board of Directors affiliations, and any commercial, family or other relationships, that a director may have with the Company, which did not present any transactions for consideration in determining the independence of any such director. Furthermore, in January 2011, the Board of Directors anticipatesdetermined that Mr. Nutt, the formerwho stepped down as Chief Executive Officer of the Company, will in 2011 satisfyon December 31, 2004, satisfied the three year "look-back" provisions with respect to former employees of the Company and becomeis therefore "independent" in accordance with the NYSE listing standards.
The standing committees of the Board of Directors are the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. Only independent directors within the meaning of the NYSE listing standards serve on these committees. Each such committee acts pursuant to a written charter adopted by the respective committee. A description of each committee is set forth below.
Audit Committee. The Audit Committee currently consists of Dr. Rodriguez and Messrs. Churchill, Meyerman, Nutt and Ryan, with Dr. Rodriguez serving as Chair. Mr. Churchill joined the Audit Committee in February 2010.2010, and Mr. Nutt joined in January 2011. Each of the members meets the independence standards applicable to audit committees under the Sarbanes-Oxley Act of 2002 and the NYSE listing standards and is an audit committee financial expert as defined by the SEC. The Audit Committee's purpose is to assist the Board of Directors in oversight of our internal controls and financial statements and the audit process. The Audit Committee met eight times during 2009.2010. Other members of the Board of Directors attend Audit Committee meetings from time to time at the invitation of the Committee.
Compensation Committee. The Compensation Committee currently consists of Messrs. Byrne, Meyerman, Ryan and Zeitlin, with Mr. Ryan serving as Chair. Mr. Byrne joined the Compensation Committee in October 2009. The Compensation Committee is responsible for overseeing our general compensation policies and establishing and reviewing the compensation plans and benefit programs applicable to our executive officers. In that capacity, the
Compensation Committee also administers our stock option and incentive plans, as well as the Long-Term Executive Incentive Plan and the Deferred Compensation Plan.plans. The Compensation Committee met sixfive times during 2009.2010. Other members of the Board of Directors attend Compensation Committee meetings from time to time at the invitation of the Committee.
Nominating and Governance Committee. The Nominating and Governance Committee currently consists of Messrs. Byrne, Meyerman and Zeitlin and Dr. Rodriguez, with Mr. Meyerman serving as Chair. Mr. Byrne joined theThe Nominating and Governance Committee in October 2009. The Nominating and
Governance Committee is primarily responsible for recommending criteria to the Board of Directors for Board of Directors'Directors and committee membership, identifying and evaluating director candidates, overseeing the annual evaluation of the Board of Directors and its committees, and maintaining our Corporate Governance Guidelines.
The Nominating and Governance Committee may solicit director candidate recommendations from a number of sources, including non-management directors, executive officers and third party search firms. The Nominating and Governance Committee will consider for nomination any director candidates, including director candidates recommended by our stockholders, who are deemed qualified by the Nominating and Governance Committee in light of the qualifications and criteria for Board of Directors'Directors membership described below, or such other criteria as approved by the Board of Directors or a committee thereof from time to time. Stockholder recommendations must be submitted to the Nominating and Governance Committee in accordance with the substantive and procedural requirements set forth in our By-laws, including those discussed below under the caption "Other Matters—Stockholder Proposals," and any procedures established from time to time by the Nominating and Governance Committee. The Nominating and Governance Committee does not have a specific policy regarding the consideration of stockholder recommendations for director candidates and considers this appropriate because it evaluates recommendations without regard to their source. The Nominating and Governance Committee evaluates any potential conflicts of interest on a case by case basis, to the extent they may arise. The Nominating and Governance Committee met four times during 2009.2010. Other members of the Board of Directors attend Nominating and Governance Committee meetings from time to time at the invitation of the Committee.
When considering candidates for directorship, the Nominating and Governance Committee takes into account a number of factors, including the following qualifications: the nominee shall have the highest personal and professional integrity and have demonstrated exceptional ability and judgment and the attributes necessary (in conjunction with the other members of the Board of Directors) to best serve the long-term interests of the Company and its stockholders. In addition, the Nominating and Governance Committee reviews from time to time the skills and characteristics necessary and appropriate for directors in light of the then current composition of the Board of Directors, including such factors as business experience, international background, diversity and knowledge of the financial services industry in general and the asset management industry in particular. In considering diversity, the Nominating and Governance Committee considers diversity of background and experience as well as ethnic and other forms of diversity. We do not, however, have a formal policy regarding diversity in identifying nominees for a directorship, but rather, consider it among the various factors relevant to any particular nominee. The Nominating and Governance Committee reviews at least annually our Corporate Governance Guidelines to ensure that we continue to meet best corporate governance practice standards.
Executive Sessions of Non-management Directors. Our non-management directors meet in regularly scheduled executive sessions. In accordance with the charter of the Nominating and Governance Committee and the By-laws of the Company, Mr. Meyerman, the Chair of the Committee, also serves as the lead director calling and chairing the executive sessions, including during the annual Board of Directors off-site, and in communicating with Mr. Healey, PresidentChairman and Chief Executive Officer, and Mr. Nutt, Non-Executive Chairman of the Board of Directors.Officer.
Leadership Structure. Mr. Healey serves as Chairman and Chief Executive Officer, and Mr. NuttMeyerman serves as Non-Executive Chairman. Because neither Mr. Nutt nor Mr. Healey islead director. The Board of Directors believes that having the same person serve as Chief Executive Officer and Chairman focuses leadership, responsibility and accountability in a single
person and that having a lead director provides for effective checks and balances and the ability of the independent directors to work effectively in the board setting.
Recognizing the importance of the lead director position to the Company, the Board of Directors amended the By-laws of the Company to provide that the lead director will perform many of the functions that an independent chairman would perform. The Board of Directors has appointed Mr. Meyerman as lead director under the NYSE rules and because Mr. Meyerman'sof his qualifications, includeincluding his extensive service in the financial services and banking industries, mergers and acquisitions experience, and international management and advisory experience,experience. Mr. Meyerman's principal responsibilities include serving as a key source of communication between the Board of Directors has appointed Mr. Meyerman as lead director. Mr. Meyerman performs manyindependent directors and the Chief Executive Officer, and coordinating the agenda for and leading meetings of the functions that an independent chairman would perform for the Company, and generally coordinates Board activities and the contributions of our independent directors. Recognizing that the Company or Board circumstances may change, the Board has no formal policy with respect to the separation of the offices of the Chairman and Chief Executive Officer.
Risk Oversight. It is a key responsibility of our Chief Executive Officer, Chief Financial Officer, General Counsel, and other members of our senior management team to identify, assess, and manage the Company's exposure to risk. OurThe Board of Directors plays an important role in overseeing management's performance of these functions. The Board of Directors has approved the charter of the Audit Committee, which provides that one of the primary responsibilities of the Audit Committee includeis the assessment of the Company's policies with respect to risk assessment and risk management. The Audit Committee regularly discusses with management and the Company's independent auditors the Company's risk assessment and risk management processes, including major risk exposures, risk mitigants and the design and effectiveness of the Company's processes and controls to prevent and detect fraudulent activity. Furthermore, the Audit Committee and the Board as a whole receive regular reports from management and our independent auditors on prevailing material risks and the actions being taken to mitigate them. Management also reports to the Audit Committee and the Board on steps being taken to enhance our risk management processes and controls in light of evolving market, business, regulatory, and other conditions.
Related Person Transaction Oversight. The Audit Committee is responsible underpursuant to its charter for reviewing any related person transaction identified by management and, in accordance with this authority, has determined that there have been no related person transactions requiring disclosure under Item 404(a) of Regulation S-K.
Stockholder and Interested Party Communications with Non-management Directors or the Board of Directors. A stockholder or other interested party may communicate directly with Mr. Meyerman, the lead director, by sending a confidential letter addressed to his attention at Affiliated Managers Group, Inc., 600 Hale Street, Prides Crossing, Massachusetts 01965. Any communications to the full Board of Directors may be directed to John Kingston, III, Executive Vice President,Chairman, General Counsel and Secretary of the Company, who would, in his discretion, discuss the communications with the Board of Directors at a regular meeting of the Board of Directors.
Availability of Corporate Governance Documents. We maintain a Company web site that includes, among other items, the Board of Directors' Corporate Governance Guidelines; the Code of Business Conduct and Ethics applicable to all directors, officers and employees; the Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer and other senior financial officers; the Insider Trading Policy and Procedures applicable to all directors, officers and employees; and the charters for the Audit, Compensation and Nominating and Governance Committees. This information is available on the investor information"Investor Relations" section of our web site,www.amg.com, under "corporate governance""Corporate Governance", or for the Committee charters under "Board of Directors", but is not incorporated by reference into this Proxy Statement. If we make any substantive amendment to the Code of Ethics or grant any waiver, including any implicit waiver, from a provision of the Code of Ethics to the persons covered thereby, we are obligated to disclose the nature of such amendment or waiver, the name of the person to whom any waiver was granted, and the date of waiver on our web site or in a report on Form 8-K.
Information Regarding Executive Officers of the Company
In February 2011, the Company announced executive management changes. The changes, effective as of May 2, 2011, will be as follows:
The name, age (as of April 1, 2010) and positions of each of our executive officers, as well as a description of their business experience and past employment during at least the last five years, is set forth below:
below. For the biographical information of Mr. Healey, please see "Information Regarding the Nominees" above.
Darrell W. CrateNathaniel Dalton, 44, is an Executive Vice President and the Chief Financial Officer of the Company, a role he has served in since 2001. Prior to that time, Mr. Crate servedcurrently serves as a Senior Vice President and the Chief Financial Officer of the Company. Prior to joining AMG, Mr. Crate was a Managing Director in the Financial Institutions Group of Chase Manhattan Corporation focusing exclusively on investment management firms. Mr. Crate received an M.B.A. from Columbia Business School and a B.A. from Bates College.
Nathaniel Dalton is an Executive Vice President and the Chief Operating Officer of the Company. Mr. Dalton has served as an Executive Vice President, with responsibility for AMG's Affiliate Development efforts, since 2001, and was named as Chief Operating Officer in 2006. Previously, Mr. Dalton served as a Senior Vice President and the General Counsel of the Company. Prior to joining AMG, Mr. Dalton was an attorney at Goodwin Procter LLP, focusing on mergers and acquisitions, including those in the asset management industry. Mr. Dalton received a J.D. from Boston University School of Law and a B.A. from the University of Pennsylvania.
Jay C. Horgen, 40, iscurrently serves as an Executive Vice President of the Company, with responsibility for coordinating the Company's new investment activities. Mr. Horgen joined AMG in 2007. Prior to joining AMG, Mr. Horgen was a Founder and Managing Director of Eastside Partners, a private equity firm. From 2000 to 2005, Mr. Horgen was an investment banker servingserved as a Managing Director in the Financial Institutions Group at Merrill Lynch, Pierce, Fenner & Smith Incorporated. Prior to that, he worked as an investment banker in the Financial Institutions Group at Goldman, Sachs & Co. Mr. Horgen received a B.A. from Yale University.
John Kingston, III, 45, iscurrently serves as an Executive Vice President, and the General Counsel and Secretary of the Company. He has served as the General Counsel and Secretary of the Company since 2002, and was named an Executive Vice President in May 2006. Prior to joining AMG, Mr. Kingston served as a senior counsel to Miller Anderson & Sherrerd, LLP, a division of Morgan Stanley Investment Management, and was an attorney at Ropes & Gray LLP, focusing on corporate and securities laws issues, with a particular focus on the investment management industry. Mr. Kingston received a J.D. from Harvard Law School, and a B.S. and B.A. from the University of Pennsylvania.
Darrell W. Crate, 44, currently serves as an Executive Vice President, Chief Financial Officer and Treasurer of the Company, roles he has served in since 2001. Prior to that time, Mr. Crate served as a Senior Vice President and the Chief Financial Officer of the Company. Prior to joining AMG, Mr. Crate was a Managing Director in the Financial Institutions Group of Chase Manhattan Corporation focusing exclusively on investment management firms. Mr. Crate received an M.B.A. from Columbia Business School and a B.A. from Bates College.
Compensation Discussion and Analysis
Introduction
While the beginning of 2009 was marked by ongoing global financial market difficulties and resulting industry-wide declines in assets under management,Our executive compensation program has been structured over the final three quarters of the year AMG's assets under management, competitive position and stock price rebounded strongly. In comparison with its publicly traded asset management industry peer group, AMG's financial performance was strong, with Cash earnings exceeding the mean and median for the peer group. Throughout the year, AMG took a number of important stepslong-term to position the Company for longer-term success. Most notably, AMG made substantial progress in executing new investmentsfurther two basic objectives: first, that have accelerated the growth of the Company, with five new investments announced in the second half of 2009 and beginning of 2010, while substantially reducing its expense base.
In making its 2009executive compensation determinations, the Compensation Committee considered the 2008 and early 2009 market challenges, as well as senior management's progress in building AMG's business, and on that basis took the following key compensation actions to advance our long-standing objective to align compensation arrangements with important stockholder value and financial performance measures.
First, given the Compensation Committee's commitment to align compensationshould be closely aligned with stockholder value creation and financialour performance 2009as measured by our Economic Net Income per share, or "Economic earnings"; and second, that executive compensation expense incurred byshould be designed to attract, motivate and retain the Company was substantially lower than the levelservices of prior years, with 2009 compensation expense for Mr. Healey (our Chief Executive Officer) reduced by 32%. Compensation expense for Messrs. Crate and Dalton (our Chief Financial Officer and Chief Operating Officer, respectively) was also reduced by approximately 32%, and for Named Executive Officers (as defined in the Executive Compensation Tables section) as a group by approximately 30%. (The Company's Named Executive Officer 2009 compensation amounts and compensation grants, as well as additional context regarding the Company's historical compensation expenses, are discussed in greater detail in the Executive Compensation Tables section.)key members of our senior management.
In 2009, a primary objective of theThe Compensation Committee was to address its ongoing senior management team retention concerns. Membersrecognizes that key members of AMG's senior management team (most notably, Mr.(Mr. Healey (the Company's Chairman and Chief Executive Officer, as well as Mr. Dalton, Chief Operating Officer,Officer) and Mr. Crate, Chief Financial Officer)others) have served the Company and its shareholders together for nearly fourteenfifteen years, establishing a consistent track record of strong CashEconomic earnings and stock price performance throughout that period. More recently, AMG's senior management team has successfully navigated oneIn particular, since the time of the most challenging periods in financial services industry history, opportunistically building a strong foundationCompany's public offering through April 11, 2011, AMG's cumulative total stockholder return is 575%, exceeding the 220% return of its peers, the 74% return for growth in 2010the Standard & Poor's 500 Index, and beyond.the -20% return for the Standard & Poor's 500 Financial Sector Index.
The Committee believes that the strength of the senior management team and the continuity of their tenure together have provided an essential cornerstone for the success of AMG through this period, and, therefore, retaining key team members is an important Committee priority.
Against that backdrop, With these objectives, in any given the meaningful drop in senior management stock ownership discussed in greater detail below, a primary 2009 objective foryear, the Compensation Committee wasreviews and primarily considers the development of a suitable stock-based retention plan to address this important retention concern. Working with an independent outside executive compensation consulting firm, Thomas E. Shea & Associates, LLC ("Shea & Associates"), the Compensation Committee developed a long-term, highly back-loaded cumulative vesting $20 million five year retention plan for AMG's management group (subject to meeting certain performance criteria), with 80% of the potential grant vesting at the end of the fourth and fifth years to further enhance retention.
Finally, the Compensation Committee kept salaries unchanged at the same levels establishedincreases in 2006.
Our Executive Compensation Program
Our executive compensation program has been structured over the long-term to further two basic objectives: first, that executive compensation should be closely aligned with stockholder value and ourEconomic earnings performance as measured by our Cash Net Income per share, or "Cash earnings";over the short and second, that executivelong run, and makes determinations about compensation should be designed to attract, motivate and retain the services of key members of our senior management.
In 2010, AMG's financial performance on an absolute basis as well as relative to its publicly traded asset management industry peer group was very strong, with Economic earnings and stock price growth approximating or exceeding the 75th percentile (depending on the measure) for such peer group. The Compensation Committee reviewed and considered AMG's record growth during the year across all areas of its business, as well as the positioning of the business for future growth around the globe.
Specifically, the Compensation Committee considered that:
In making the 2010 compensation determinations outlined below, the Compensation Committee considered management's performance over the short and long term, and its objectives to align compensation arrangements with key stockholder value and financial performance measures and motivate and retain Mr. Healey and other senior management team members who have contributed to the Company's ongoing success.
Our Executive Compensation Program
We believe that an executive officer's total compensation should be comprised principally of equity and performance-based cash compensation, to best align compensation with increases in stockholder value. Our Compensation Committee believes that given our long-term track record of growth under the leadership of our senior management, the retention of our Chief Executive Officer and other Named Executive Officers is very important, and thatin order to retain key management team members with a long-term track record of success, total compensation should be appropriate relative to the marketplace for the services of our Named Executive Officers.
We assess this marketplace by reviewing the compensation paid to executive officers performing similar functions at other companies in the investment management industry. In particular, executive officer compensation is reviewed against a peer group of publicly traded asset management companies comprised of AllianceBernstein Holding L.P., Ameriprise Financial, Inc., BlackRock, Inc., Eaton Vance Corp., Federated Investors, Inc., Franklin Resources, Inc., Invesco Ltd., Janus Capital Group Inc., Legg Mason Inc., T. Rowe Price Group, Inc., and Waddell & Reed Financial, Inc., as well as against a range of alternative investment and other investment management firms comprising the marketplace for the services of our executive officers. In reviewing this universe, we give consideration to the fact that certain of these companies are more closely comparable to the Company, and accordingly consider the relative comparability of the companies in our assessment of various compensation structures and arrangements. Specifically, we consider which companies are most comparable with respect to size (market capitalization and assets under management) and general business profile (those companies that have similarly specialized equities and alternative investment management capabilities, or with similar business strategies). We also consider the senior management profile of a company in determining compensation comparability (for example, the extent to which founders serve in key senior management roles). While the Compensation Committee reviews peer compensation for comparison purposes, this review is not the determining factor and is only one of many factors that are considered by the Compensation Committee in setting compensation.
As the Committee evaluates competitive compensation arrangements, it considers the overall compensation package to be paid to our executive officers, and in the event that long-term performance objectives are achieved, total compensation is targeted atin the 75th percentiletop quartile for comparable positions at peer group public companies. In light of the Committee's objective to align compensation with increases in stockholder value, the Committee generally intends that the most substantial portion of compensation be equity-based, with the second largest component being performance-based cash compensation. When determining performance-based cash compensation levels, we consider Cashour Economic earnings performance in evaluating ourthe short-term and long-term performance.long-term. We consider CashEconomic earnings the most important measure of our financial performance, as it represents operating performance before non-cash expenses relating to the acquisition of interests in our affiliated investment management firms. (See our 2010 Annual Report on Form 10-K for further detail on the calculation of CashEconomic earnings.) In addition to our equity and performance-based cash compensation, we also utilize competitive base salaries and some limited perquisite compensation tools that the Committee deems appropriate to meet the objective of retaining key members of senior management.
Our Compensation Committee
The Committee oversees our general compensation policies, establishes and reviews the compensation plans and benefit programs applicable to our executive officers, and administers our stock option and incentive plans.
The Committee currently consists of Messrs. Byrne, Meyerman, Ryan and Zeitlin, with Mr. Ryan serving as the Chair. Each of Messrs. Byrne, Meyerman, Ryan and Zeitlin has significant experience in compensation matters as a result of their service as executive officers or advisors to various public and private companies. The Committee's agenda and meeting calendar is determined by the Committee, with input (as appropriate) from Mr. Healey, who generally attends meetings at the request of the Committee.
In his capacity as President and Chief Executive Officer, Mr. Healey takes an active role in discussions with the Committee concerning the compensation of other members of executive management and the design of long-term and equity incentive plans, but does not participate in discussions regarding his own performance goals, contributions or compensation, which occur in executive sessions of the Committee and in meetings of the Committee with our independent compensation consultant. The Committee also invites Mr. Crate, Executive Vice President and Chief Financial Officer, and Mr. Kingston, Executive Vice President and General Counsel, to attend certain meetings to discuss the design, implementation and administration of long-term incentive, equity incentive and deferred compensation plans. The Committee has the sole authority for approving the compensation of our executive officers and the performance goals related to such compensation.plans and programs.
The Committee regularly meets without management team members present, and the Chair from time to time requests that all other independent directors meet with the Committee in executive session. The Committee's independent compensation consultant participates in conference calls and meetings without management present at key points throughout the year, including conference calls and meetings with the Chair of the Committee.
Compensation Consultants
In 2009,2010, the Committee again engaged an independent outside executive compensation consulting firm, Thomas E. Shea & Associates, LLC ("Shea & Associates"), to assist the Committee with compensation matters, including providing peer universe benchmarking information and an independent analysis of how our executive and board compensation policies and practices compared to those of the peer universe. In addition to a review of compensation arrangements across the industry, the analysis provided by Shea & Associates also considered financial metrics for our peers, including market capitalization, assets under management, various measures of profitability, and stock price performance. In order to prepare its analysis for the Committee, Shea & Associates met from time to time with senior management.
Shea & Associates, which provides no other services to us, reported its findings directly to the Committee. In setting executive officer compensation levels, the Committee considered the comparative compensation analyses provided by Shea & Associates, and then applied the collective experience and judgment of the Committee to such data (and the relative significance of the various comparative universe components) to make compensation determinations. In setting director compensation levels, Shea & Associates made recommendations to the Committee, and the Committee made its compensation determinations after considering such recommendations. A representative of Shea & Associates regularly met outside of formal Committee meetings with Committee members, particularly with the Committee Chair, at key points throughout the year. In addition, a representative of Shea & Associates attended fourtwo meetings of the Committee in 2009 (two in person, and two by teleconference),2010, updating the Committee on the status of compensation surveys, and also making recommendations regarding executive officer and director compensation levels.levels, which the Committee has applied in its judgment in making final compensation determinations.
20092010 Compensation Process and Elements
Over2010 Compensation Process
Executive compensation has continued to be a matter of great importance to the Company, and over recent years, executive retention becamehas become a matter of increasing concernongoing significance for AMG'sits Compensation Committee, given the continuing maturitystrong performance of the organization,Company since going public in 1997 and the increasing visibility of the executive team in the marketplace, the favorable performance of the Company through the years leading up to the global financial crisis, and the decline in both unvested senior management stock ownership and management's future stock ownership earnings potential. In particular, members of AMG's senior management team have served the Company and its shareholders together for nearly fourteen years, establishing a consistent track record of strong Cash earnings and stock price performance throughout that period.marketplace.
Against that backdrop, theThe Compensation Committee worked with Shea & Associates throughout 2006-20082010 to explore a variety of additional long-term stock ownership plan alternatives to balance AMG's historical reliance on stock options with competitive and affordable retention tools. A detailedAfter a review of possible alternatives, the Committee implemented a long-term equity interests plan was developedin December 2010 providing an additional
long-term tool to retain management, while aligning incentives with the creation of shareholder value. Under the plan, equity interests may be granted to management from time to time, with vesting, forfeiture and repurchase agreements established under the plan and by the Compensation Committee and Shea & Associates in 2008, but the implementation of such plan was delayed when market conditions deteriorated in the second half of 2008.
While over the course of 2006 and 2007, the Compensation Committee had worked to address such executive retention concerns through the issuance of relatively larger stock option grants that had longer and back-loaded vesting schedules, the benefit of these issuances were eliminated by the stock price effects of the global financial market crisis. Given the limited ongoing retentive and incentive benefit of such options and their ongoing future dilutive earnings effects, in December 2008 AMG management voluntarily surrendered options for approximately 2.1 million shares of common stock (with grant date Black-Scholes value of approximately $58 million), without receiving any value in exchange. Mr. Healey surrendered 835,396 options, Messrs. Crate and Dalton each surrendered 417,698 options, Mr. Horgen surrendered 153,318 options, and Mr. Kingston surrendered 96,257 options. As a consequence, all stock options granted to senior management in 2006 and 2007 were surrendered, and there remained outstanding no equity grants from that period.
As a consequence of these developments, at the beginningtime of 2009 senior management stock ownership had dropped meaningfully from prior years, with very limited remaining unvested senior management stock ownership. The Compensation Committee determined that the development of a suitable stock-based retention plan to address this important retention concern was an important Company objective. Working with Shea & Associates, the Compensation Committee developed a long-term, highly back-loaded cumulative vesting $20 million five year retention plan for AMG's management group, subject to meeting certain performance criteria. To advance the retention and incentive objectives of the Committee, to the extent the performance target associated with this plan is met, 80% of the grant will vest at the end of years four and five of the program, and all pay-outs will be deferred until 2014, ensuring that participating management team members would have a strong incentive to continue to serve the Company over a minimum five-year time horizon. The Committee implemented this plan at its April 2009 meeting.grant.
In addition, consistent with the Compensation Committee's long-standing use of stock options as an equity compensation tool, in July and December 20092010 the Committee granted options to executive officers under the stockholder-approved 2006 Stock Option and Incentive Plan (the "2006 Option Plan"). Consistent with our objective to retain our executive officers,retention objectives, the awards granted were subject to vesting and forfeiture provisions.
In line with its objective2010, as over the past decade, a meaningful portion of our total compensation is performance-based, because we believe that senior management compensation should be tied to substantially reduce total direct compensationour financial performance and increases in 2009, and its review of equity grants to, and the equity holdings of, executive officers in our peer universe, the Committee reduced equity compensation expense by approximately 60% for the Chief Executive Officer, and approximately 56% for the Named Executive Officers as a group. (The Company's Named Executive Officer 2009 compensation amounts and compensation grants, as well as additional context regarding the Company's historical compensation expenses, are discussed in greater detail in the Executive Compensation Tables section.)
stockholder value. The Committee initiated the annual process for establishing appropriate compensation targets and benchmarks for 20092010 during the final Committee meetings of 2008,2009, as the Committee reviewed the
principles and continuing effectiveness of the compensation program with the assistance of Shea & Associates. FollowingAt its January 2010 meetings, the Committee evaluated the appropriate target Economic earnings per share growth rate for 2010, reviewing historical growth rates, prevailing business conditions, and expectations for continuing growth. In evaluating our most recent performance to determine the baseline growth target for the upcoming year, the Committee applies its judgment to make adjustments for specific factors that influenced recent growth rates, including market conditions, the timing of transactions, new financing arrangements and changes in the corporate capital structure, the relative levels of management and performance fees, and any recent or anticipated one-time events.
In preparation for the determinations to be made by the Committee at the end of the year, various members of the Committee (and particularly the Committee Chair) conducted a series of conference calls with Shea & Associates outside of formal meetings to consider cash bonus compensation of our peer universe and potential bonus arrangements. The Committee also met in December 2010 and reviewed updated estimates concerning our performance, as well as potential executive officer bonuses. In that review and consistent with prior years,consideration, the Committee determinedwas not constrained by any particular performance targets for the Company or for any particular Named Executive Officer. In determining how much bonus to continuepay, the Committee considered a market cash bonus compensation analysis of our peer universe as part of developing a total compensation package that was competitive relative to use cash base salary and performance-based cash compensation as the principal elements of cash compensation in 2009. Atmarketplace for our Named Executive Officers. In addition, although the January meetings,Committee does not have specific targets that it applies to such evaluation, the Committee also established its 2009 targets for annual performance-based cash compensation, along with the baseline Cash earnings per share performance level under the Company's Long-Term Executive Incentive Plan that would need to be met for awards to be earned under this plan.
Throughout the year, the Committee regularly requested and received updating analysis from Shea & Associates concerning peer universeconsidered our performance and compensationthe various factors that may have affected such performance in that year (including market conditions, the possible timing of transactions and new financing arrangements, and the relative levels of management and performance fees), as well as trends inthe performance andrelative to the peer universe. Finally, the Committee also evaluated final compensation and on an ongoing basis evaluated that informationdeterminations in the context of its objective to maximize financial performance and realize appropriate growth returns for our performance.stockholders.
At the end of 2009,2010, based upon our performance and the most current peer universe compensation information, the Committee then reviewed 20092010 compensation arrangements and made final performance-based cash compensation and option grant determinations.
The Company's Named Executive Officer 2010 compensation amounts and compensation grants are discussed in greater detail in the following sections, and in the Executive Compensation Tables section.
2010 Compensation Elements—Cash Base Salary
We pay cash base salary because it forms the foundation of any competitive total compensation package. In determining base salary levels for our executive officers, the Committee takes into account the executive's scope of responsibility, performance and salary history as well as internal consistency within our
salary structure. In addition, the Committee annually reviews the base salary being paid to executive officers of other public companies in the peer universe.
Because the Committee believes that equity and performance-based cash compensation should constitute the substantial majority of compensation paid to our Named Executive Officers, we target the level of cash base salary at the median for comparable positions in our public company peer group. Based onIn light of the Committee's philosophy and the factors stated above, the Committee determined that 20102011 base salaries would again remain unchanged from 2006 levels.
Based on the 2009 and recently completed 2010 data analysis ofby Shea & Associates of peer group base salaries, Mr. Healey's salary trailed the median for the peer group, while as a group the base salaries of the Named Executive Officers werecontinues to be in line with the peer group median.median, and the base salary for Mr. Healey also continues to be in line with peer group median—consistent with the Committee's compensation philosophy and targets.
2010 Compensation Elements—Performance-based Cash Compensation
The substantial majority of our total compensation is performance-based, because we believe that senior management compensation should be tied to our financial performance and increases in stockholder value. In designing our performance-based cash compensation arrangements, the Committee believes that such compensation should be awarded in the event that we meet the Committee's expectations for CashEconomic earnings and its objective that a certain level of financial performance and returns for our stockholders be achieved, along with maintaining the financial strength of the Company. Under these arrangements, baseline levels of CashEconomic earnings must be achieved before executive officers are entitled to earn performance-based cash compensation, and higher growth rates in any given year may result in relatively higher compensation payouts.
Our annual cash incentives are awarded under our Long-Term2000 Executive Incentive Plan.Plan (the "Executive Incentive Plan"). At its January 20092010 meetings, the Committee evaluated the appropriate target CashEconomic earnings per share growth rate for 2009,2010, reviewing historical growth rates, prevailing business conditions, and expectations for growth. In evaluating our most recent performance to determine the baseline growth target for 2009,2010, the Committee applied its judgment to make adjustments for specific factors that influenced recent growth rates, including market conditions, the timing of transactions, new financing arrangements and changes in the corporate capital structure, the relative levels of management and performance fees, and any recent or anticipated one-time events. At this meeting, the Committee established the CashEconomic earnings per share growth rate target for 20092010 and the formula by which the incentive pool under that plan would be determined. ItIn addition to a baseline earnings target (for 2010, this target was $4.00 of Economic earnings per share), which would establish an initial discretionary bonus pool of $15.0 million, achievement of a secondary growth target (in 2010, this secondary target was 15% Economic earnings growth), would increase the potential pool for executive officers with Economic earnings above this growth level.
The Committee also established for each participant in the plan the percentage share of the pool that he could earn if the performance target were met.met, as required under Section 162(m) of the Internal Revenue Code. In 2010, the maximum percentage share allocable to the executive officers were as follows: Sean M. Healey, 40%; Darrell W. Crate, 20%; Nathaniel Dalton, 20%; Jay C. Horgen, 12.5%; and John Kingston, III, 7.5%.
In preparation for the determinations to be made by the Committee at the end of the year, various members of the Committee (and particularly the Committee Chair) conducted a series of conference calls with Shea & Associates outside of formal meetings to consider cash bonus compensation of our peer universe and potential bonus arrangements. The Committee then met in December 20092010 and reviewed the Company's performance and potential cash incentive bonuses.
In 2010, we achieved growth of 61% in Economic earnings and 39% in Economic earnings on a per share basis; given that record growth, under the Executive Incentive Plan formula $38 million was available for payment. Under the Compensation Committee's approach to performance-based compensation, although the performance targets determine the amountavailable for the payment of bonuses (or, a ceiling for such payments), the Committee uses its independent judgment (guided by the analyses provided by the Committee's independent compensation consultant) to determine the amount of bonus actuallypaid to each Named Executive Officer, without being constrained by any particular formula (except to the extent of the ceiling of the total pool, or for individual executive officers). In determining the amount of the bonus to pay, the Committee considered a market cash bonus compensation analysis of our peer universe in developing a total compensation package that was competitive relative to the marketplace for our Named Executive Officers. In making this assessment, the Committee considered Shea & Associates' 20092010 peer group review.
In addition, the Committee evaluates the application and effectiveness of its "pay for performance" principles over the longer term, and in 2010 considered the fact that AMG had outperformed its peers on a longer term basis, with stock price growth and Economic earnings in the 75th percentile. Shea & Associates also provided our Compensation Committee with comprehensive comparator company salary, cash incentive bonus, and long-term equity and total direct compensation pay data for the prior three years, along with analyses of AMG's historical pay levels relative to the comparators' 25th percentile, median and 75th percentile pay levels. Finally, the independent compensation consultant provided projections of compensation activity across the financial services industry for 2010, based upon survey and financial press data.
In addition, although the Committee does not have specific targets that it applies to such evaluation, the Committee also considered our performance and the various factors that may have affected such performance in that year (including market conditions, the possible timing of transactions and new financing arrangements, and the relative levels of management and performance fees), as well as the 20092010 performance relative to the peer universe. Finally, the Committee also evaluated final compensation determinations in the context of its objective to maximize financial performance and realize appropriate growth returns for our stockholders. In view of these considerations, after determining and certifying that
The Committee determined to reduce the baseline performance target had been met, in December 2009 the Committee approved bonus amounts it deemed competitive given the marketplace forcash incentive pool payable to our executive officers to $18.4 million, leaving $19.6 million in additional cash incentive pool the Committee determined should not be issued. In making the specific determinations for each executive officer, the Committee observed that consistent with AMG's performance above comparators' medians in 2009, performance bonus levels were between the comparator medians and relevant Company performance factors,75th percentiles, and in light of global financialthat broader competitive market conditions, AMG's financial performance, and the performance of our peer group. The cash bonus payment for Mr. Healey was reduced by 7% over the 2008 cash bonus payment (which was in turn a reduction of 22% over the 2007 payment)projections indicated that 2010 bonuses would be increasing (in comparison to 2009 levels), and the shift from short-term cash bonus payments forcompensation to greater use of longer-term equity awards.
Based on a recently completed analysis by Shea & Associates of peer group 2010 pay levels, as a group the 2010 cash incentives paid to the Named Executive Officers aswere slightly lower than the peer group 75th percentile target, while the cash incentives for Mr. Healey were in line with the 75th percentile target—consistent with the Committee's compensation philosophy and targets for a group were reduced by approximately 7% from 2008 (which wasyear in turn a reduction of 21% overwhich the 2007 payments).Company achieved top quartile performance levels.
The Committee's determinations regarding the amount of performance-based cash compensation to be paid to each executive officer are set forth in the Summary Compensation Table.
2010 Total Cash Compensation Levels
Based on a recently completed analysis by Shea & Associates of peer group 2010 pay levels, as a group the 2010 total cash compensation levels (salaries plus cash incentives) paid to the Named Executive Officers were slightly lower than the peer group 75th percentile level, while the total cash compensation for
Mr. Healey was in line with the 75th percentile target—consistent with the Committee's compensation philosophy and targets for a year in which the Company achieved top quartile performance levels.
2010 Compensation Elements—Equity-based Compensation Awards
We believe that equity-based compensation awards provide long-term incentives that further the Committee's objective to increase stockholder value and retain our senior management team. While the Committee does not follow a strict formula in determining the overall compensation package to be paid to an executive officer, in light of our objective to align compensation with increases in stockholder value, the Committee generally intends that the most substantial portion of total compensation be equity-based.
The Committee grants equity-based incentive compensation awards on the basis of our historical performance (both in terms of CashEconomic earnings growth and increase in stockholder value) and the individual executive officer's contributions to that performance, as well as the expected contribution of the executive officer to our future performance. The Committee also considers the relationship of equity-based compensation awards to the performance-based cash compensation to be paid to each executive officer in any particular year. The Committee further considers equity ownership, including the relative size and structure of historical grants and the portions of an award that are not yet vested, of our executive officers. In addition, the Committee considers the performance and equity-based compensation levels of the Company and our individual executive officers in relationship to the peer group universe, as well as the comparative levels of equity ownership of individual officers at such companies.
In 2010, the eventCommittee made its determinations concerning total equity grants with the assistance of Shea & Associates, based on the analysis of AMG performance and compensation and equity ownership levels relative to our asset management comparators and the consultants' projections concerning general executive compensation market trends among the universe of financial institutions who are relevant competitors for executive talent, as well as projected future management ownership levels relative to AMG's growth over multi-year time horizons. The Committee evaluates the application and effectiveness of its "pay for performance" principles over the longer term, and observed that AMG had outperformed its peers over the Company'slonger term, with Economic earnings and stock price growth in the 75th percentile since the Company went public in 1997. Against that backdrop, our independent compensation consultant provided our Compensation Committee with comprehensive comparator company long-term performance objectives are being achieved,equity and total direct compensation pay data for the prior three-years, along with analyses of AMG's historical pay levels relative to the comparators' 25th percentile, median and 75th percentile pay levels. Finally, the independent compensation consultant provided projections of compensation activity across the financial services industry for 2010, based upon survey and financial press data, with broader market projections indicating that long-term stock and incentive awards would likely increase as many financial institutions continued to pay a larger portion of compensation in the form of equity awards.
The Compensation Committee also worked with Shea & Associates throughout 2010 to explore a variety of additional long-term stock ownership plan alternatives to balance AMG's historical reliance on stock options with competitive and affordable retention tools. After a review of possible alternatives, the Committee implemented the Long-Term Equity Interests Plan (the "2010 Long-Term Equity Plan") in December 2010 providing an additional long-term tool designed to retain management, while aligning incentives with the creation of shareholder value. Under the plan, equity interests may be granted to management from time to time, with vesting, forfeiture and repurchase agreements established under the plan and by the Compensation Committee targetsat the time of grant. The equity compensationinterest structure is similar to the equity structure employed with AMG Affiliate principals, with a ratable portion of ownership interests in all Affiliates transferred to a partnership, with grants to management of equity interests that is abovehave no cash flow interests through 2018.
Given the median equity compensation levelsCommittee's objective to utilize additional long-term stock ownership tools for retention and incentive, and the public company peer group.
As a consequencepotential stability of the option surrender discussed above, atlong-term equity interests as a tool, the beginning of 2009 senior management stock ownership had dropped meaningfully from prior years, with very limited remaining unvested senior management stock ownership. The Compensation Committee determined that the development of a suitable stock-based retention plan to address this important retention concern was an
important Company objective. Working with Shea & Associates, the Compensation Committee developed adetermined to grant long-term highly back-loaded cumulative vesting $20 million five year retention plan for AMG's management group,equity interests to senior management. The equity interest grant was subject to meeting certain performance criteria. To advance the retentionvesting over four years, and incentive objectivesgiven liquidity restrictions, a requirement that management hold portions of the Committee,equity for a minimum of 8 years, in a structure that encourages management to hold the extent that the performance target associated with this plan is met, 80%equity interests through retirement. (The value of the potential grant will vestawards was determined at the enddate of the fourthgrant using a discounted cash flow analysis, with key valuation assumptions including projected assets under management and fifth years, ensuring that participating management team members will be better positioned to serve the Company over a five year time horizon. The Committee implemented this plan at its April 2009 meeting.fee rates, and discount rates utilizing industry market data and historical assumption experience.)
Consistent with the Compensation Committee's long-standing use of stock options as anthe primary equity compensation tool, in July and December 20092010 the Committee granted options to executive officers under the stockholder-approved 2006 Stock Option Plan. In linePlan in grant amounts consistent with its objective to substantially reduce total direct compensation in 2009, and its review of equity grants to, and the equity holdings of, executive officers in our peer universe, the Committee reduced total 2009 equity compensation expense by approximately 60% for the Chief Executive Officer, and approximately 56% for the Named Executive Officers as a group. Consistent with our objective to retain our executive officers, the awards granted were subject to vesting and forfeiture provisions. (Thepast grants.
The Company's Named Executive Officer 20092010 equity compensation amounts and compensation grants as well as additional context regarding the Company's historical compensation expenses, are discussed in greater detail in the Executive Compensation Tables section.)
2010 Total Direct Compensation Levels
Based on a recently completed analysis by Shea & Associates of peer group 2010 pay levels, as a group the 2010 total direct compensation levels (salaries, cash incentives, long term equity and retention awards) paid to the Named Executive Officers was in the top quartile of the peer group, as it was for Mr. Healey—consistent with the Committee's compensation philosophy and targets for a year in which the Company achieved top quartile performance levels.
Other Incentive and Retention Programs
In 2005, the Committee established an Executive Retention Plan to provide it with additional flexibility to meet its objective to retain our executive officers. From time to time, the Committee determines that long-term compensation with vesting and forfeiture provisions is an effective and appropriate retention tool, and may make grants to officers through a trust vehicle in which an officer may choose to invest in our common stock, Affiliate investment products, or cash accounts. In the event that awards in the Executive Retention Plan are forfeited, they are allocated on a pro rata basis to all other remaining participants in the trust. As discussed in further detail in the Outstanding Equity Awards at 20092010 Fiscal Year-End Table, the Committee last made Executive Retention Plan grants in 2005 and no new grants were made in 2009.2010.
In 2006, the Committee established the Deferred Compensation Plan to provide additional retirement plan flexibility for our officers. The plan provides officers and directors the opportunity to voluntarily defer compensation on a pre-tax basis, and invest such deferred amounts in one or more specified measurement funds. In 2009,2010, no executive officer or director elected to defer compensation under the Deferred Compensation Plan.
Other Elements of Compensation
We provide a 401(k) Profit Sharing Plan for all employees and generally contribute a percentage of compensation to such plans. We also provide other benefits such as medical, dental and life insurance and disability coverage to all eligible employees.
Perquisites
Our perquisite compensation is in the lowest quartile of our public company peer group, as we use only certain perquisite tools (such as financial counseling and medical services, and use of Company aircraft) deemed appropriate by the Committee to meet the objectiveobjectives of retaining key members of senior management.management, and optimizing the use of their time and services to the Company.
Potential Severance or Change in Control Compensation and Benefits
We do not have employment or individual change in control agreements with our executive officers or directors, and possible changes in control are addressed through the acceleration of vesting of equity.
Upon our change of control, option vesting pursuant to our stock option and incentive plans and the payout of awards under the Executive RetentionIncentive Plan and the 2010 Long-Term Equity Plan would be accelerated or restrictions would lapse for our executive officers, as well as for allany of our employees participating in such plans.
In the event of our change of control, as of December 31, 2009,2010, awards held by Named Executive Officers (as defined below in the Executive Compensation Tables section) would have accelerated as set forth below. The market value amounts in the table have been calculated using a share price of $67.35,$99.22, which was the closing price of a share of our common stock on December 31, 2009.2010. The market value associated with the acceleration of options has been calculated by using the "spread" value of the options ($67.3599.22 minus the applicable option exercise price) and multiplying it by the number of shares underlying the option that would accelerate. The value associated with the acceleration of units of profits interest awarded under the 2010 Long-Term Equity Plan represents the value of the unvested portion of the award as of December 31, 2010.
Named Executive Officer | Accelerated Options/ Market Value | Accelerated Distribution under the Executive (# Shares)/Market Value | Accelerated Distribution under the 2010 Long-Term Equity Plan (# Units)/Value | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sean M. Healey | ||||||||||||
| 678,158/$21,718,178 | 133,052/$13,201,419 | 178.57/$3,750,000 | |||||||||
Darrell W. Crate | 339,079/$10,859,089 | 66,526/$6,600,710 | 89.29/$1,875,000 | |||||||||
Nathaniel Dalton | 339,079/$10,859,089 | 66,526/$6,600,710 | 89.29/$1,875,000 | |||||||||
Jay C. Horgen | 273,816/$8,817,055 | 38,015/$3,771,848 | 89.29/$1,875,000 | |||||||||
John Kingston, III | 115,154/$ | 19,008/$1,885,974 | 53.57/$1,125,000 |
We do not have employment, severance or individual changeentered into a Transition and Advisory Services contract with Mr. Crate in control agreementsFebruary 2011 in connection with our executive officers or directors.his resignation, effective as of May 2, 2011, as Executive Vice President, Chief Financial Officer and Treasurer. Following such date, Mr. Crate will continue to serve as an employee providing advisory services on an on-going basis to the Company through February 2016. In 2011, Mr. Crate will be eligible to receive compensation for his service to the Company in line with his past compensation, all to be determined by the Board of Directors in its compensation determinations at the end of the year. Mr. Crate's equity awards will continue to remain outstanding, and he will be subject to on-going non-competition and other customary covenants.
Risk Considerations in our Compensation Programs
The Compensation Committee has discussed the concept of risk as it relates to our compensation programs with management and Shea & Associates, and theAssociates. The Compensation Committee does not believe the goals or the underlying philosophy of our compensation programs encourage excessive or inappropriate risk taking. Throughtaking, nor that these programs not create risks that are reasonably likely to have a material adverse effect on the Company.
Throughout our executive compensation structure, comprised principally of equity and performance-based cash compensation we seek to align compensationis aligned with increases in stockholder value.value, and therefore our compensation arrangements do not encourage inappropriate risk taking. The executive officers' salaries are fixed in amount, while bonuses are tied to overall corporate performance, and a substantial portion of compensation is in the form of long-term equity awards that further align executives' interests with those of the Company's shareholders. These awards do not encourage excessive or inappropriate risk-taking given that the value of the awards is tied to the Company's stock price, and the awards are subject to long-term vesting schedules to help ensure that executives have significant value tied to long-term stock price performance.
Stock Ownership Guidelines
As part of our equity-based compensation policies, the Committee approved stock ownership guidelines for our executive officers in 2006.2005. We believe that stock ownership guidelines (which are currently established by the Committee as a multiple of five times base salary, to be achieved over five years from the later of the implementation of these guidelines or becoming an executive officer of the Company) further align the interests of executive officers with those of our stockholders.
Equity Grant Policy
We grant all equity awards, including options, under the terms of an equity grant policy. Generally, we grant equity awards (other than new hire grants) at regularly scheduled meetings of the Committee, with new hire grants occurring at other meetings (or by written action of all Committee members) as appropriate.
The Committee will not approve any equity award grants on any date when it believes, in its reasonable judgment, that there is material non-public information that is reasonably likely to impact the price of our common stock.
Tax Deductibility of Compensation
Section 162(m) of the Internal Revenue Code of 1986, as amended from time to time, and any corresponding provisions of any succeeding law (the "Code") places a limit on the tax deduction for compensation in excess of $1 million paid to any "covered employee" of a publicly held corporation (generally the corporation's chief executive officer and its next three most highly compensated executive officers, excluding the chief financial officer, in the year that the compensation is paid). Under the Long-Term Executive Incentive Plan, performance compensation paid thereunder to such covered employees is intended to be deductible by us. In implementing our compensation policies during fiscal
2009, 2010, we considered, among other things, the Long-Term Executive Incentive Plan and the opportunities it affords to preserve the tax deductibility of compensation to executive officers. The Committee also fixes for each participant the percentage share of the pool that the participant can earn, after considering the internal consistency of such allocation. If Stockholders approve Proposal 2 in this Proxy Statement, the maximum amount payable to any participant under the Long-Term Executive Incentive Plan for any fiscal year may not exceed 7.5% of the sum of pre-tax cash net income (for such purposes, before reduction for the applicable period performance pool) for such fiscal year and the immediately preceding fiscal year.
The Committee's policy with respect to Section 162(m) is to make reasonable efforts to ensure that compensation is deductible to the extent permitted while providing our executive officers with appropriate rewards for their performance.
Compensation Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
PATRICK T. RYAN,Chair
SAMUEL T. BYRNE
HAROLD J. MEYERMAN
JIDE J. ZEITLIN
Supplemental Compensation Information
Effective in early 2010, new SEC presentation rules require that the dollar figures provided in the "Stock Awards" and "Option Awards" columns of the Summary Compensation Table reflect the anticipated value at the time of grant for any stock and option awards in that period, without regard to future performance, service or vesting conditions for such award. Prior to the effectiveness of these rules, the presentation rules required that such figures be consistent with the Company's financial presentation, and reflect the Company's actual compensation expense for that period.
To reflect the compensation expense recognized by the Company in 2009 (consistent with the Company's financial statements and prior presentation rules), we have provided the following supplemental table. Please note that this supplemental table is not required by the SEC under the new presentation rules and is not a substitute for the information provided in the Summary Compensation and other tables in accordance with the new presentation rules.
| Salary ($) | Non-Equity Incentive Plan Compensation ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Sean M. Healey | 750,000 | 5,000,000 | 1,036,733 | 1,167,750 | 138,269 | 8,092,752 | ||||||
Darrell W. Crate | 500,000 | 2,500,000 | 518,363 | 583,875 | 94,676 | 4,196,914 | ||||||
Nathaniel Dalton | 500,000 | 2,500,000 | 518,363 | 583,875 | 60,574 | 4,162,812 | ||||||
Jay C. Horgen | 500,000 | 1,500,000 | 296,205 | 481,518 | 39,067 | 2,816,790 | ||||||
John Kingston, III | 350,000 | 700,000 | 148,103 | 206,638 | 45,262 | 1,450,003 |
The following tables provide information regarding the compensation arrangements for the Company's Chief Executive Officer, Chief Financial Officer and the Company's three other most highly compensated executive officers (collectively, the "Named Executive Officers") under the new SEC presentation rules.
The Summary Compensation Table reflects that for each executive officer the substantial majority of compensation in 2009 was in the form of long-term equity grants, subject to a variety of performance, vesting and forfeiture provisions discussed in further detail in footnotes 2 and 3. In the case of Mr. Healey, for example, approximately $12,000,000 of the total compensation figure (or 67% of the total) is subject to such performance, vesting and forfeiture provisions, and may not be realized. As reflected above, in the event that previous presentation rules had remained in effect, the total compensation figure for Mr. Healey in 2009 would have been approximately $8,000,000.
As previously discussed in greater detail in the Compensation Discussion and Analysis, the long-term equity grants in 2009 reflect the Compensation Committee's determinations to address the meaningful decline in both unvested senior management stock ownership (generally, and as a consequence of the voluntary surrender by senior management of 2.1 million options), and management's future stock ownership earnings potential.
Name and Principal Position | Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($)(5) | Name and Principal Position | Year | Salary ($) | Non-Equity Incentive Plan Compensation ($)(1) | Stock Awards ($) | Option Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sean M. Healey | Sean M. Healey | 2009 | 750,000 | 5,000,000 | 7,000,000 | 5,143,500 | 138,269 | 18,031,769 | Sean M. Healey | 2010 | 750,000 | 7,000,000 | 5,000,000 | (4) | 7,074,000 | 144,321 | 19,968,321 | |||||||||||||||||||||
President and Chief | 2008 | 750,000 | 5,400,000 | — | 4,009,676 | 269,328 | 10,429,004 | President and Chief | 2009 | 750,000 | 5,000,000 | 7,000,000 | (5) | 5,143,500 | 138,269 | 18,031,769 | ||||||||||||||||||||||
Executive Officer | 2007 | 750,000 | 6,900,000 | — | 13,000,000 | 260,947 | 20,910,947 | Executive Officer | 2008 | 750,000 | 5,400,000 | — | 4,009,676 | 269,328 | 10,429,004 | |||||||||||||||||||||||
Darrell W. Crate | Darrell W. Crate | 2009 | 500,000 | 2,500,000 | 3,500,000 | 2,571,750 | 94,676 | 9,166,426 | Darrell W. Crate | 2010 | 500,000 | 3,500,000 | 2,500,000 | (4) | 3,537,000 | 108,515 | 10,145,515 | |||||||||||||||||||||
Executive Vice | 2008 | 500,000 | 2,700,000 | — | 2,004,838 | 196,631 | 5,401,469 | Executive Vice | 2009 | 500,000 | 2,500,000 | 3,500,000 | (5) | 2,571,750 | 94,676 | 9,166,426 | ||||||||||||||||||||||
President, Chief | 2007 | 500,000 | 3,450,000 | — | 6,500,000 | 207,755 | 10,657,755 | President, Chief | 2008 | 500,000 | 2,700,000 | — | 2,004,838 | 196,631 | 5,401,469 | |||||||||||||||||||||||
Financial Officer and Treasurer | Financial Officer and | |||||||||||||||||||||||||||||||||||||
Treasurer | ||||||||||||||||||||||||||||||||||||||
Nathaniel Dalton | Nathaniel Dalton | 2009 | 500,000 | 2,500,000 | 3,500,000 | 2,571,750 | 60,574 | 9,132,324 | Nathaniel Dalton | 2010 | 500,000 | 3,500,000 | 2,500,000 | (4) | 3,537,000 | 61,127 | 10,098,127 | |||||||||||||||||||||
Executive Vice | 2008 | 500,000 | 2,700,000 | — | 2,004,838 | 99,698 | 5,304,536 | Executive Vice | 2009 | 500,000 | 2,500,000 | 3,500,000 | (5) | 2,571,750 | 60,574 | 9,132,324 | ||||||||||||||||||||||
President and Chief | 2007 | 500,000 | 3,450,000 | — | 6,500,000 | 121,588 | 10,571,588 | President and Chief | 2008 | 500,000 | 2,700,000 | — | 2,004,838 | 99,698 | 5,304,536 | |||||||||||||||||||||||
Operating Officer | Operating Officer | |||||||||||||||||||||||||||||||||||||
Jay C. Horgen(6) | 2009 | 500,000 | 1,500,000 | 2,000,000 | 2,057,400 | 39,067 | 6,096,467 | |||||||||||||||||||||||||||||||
Jay C. Horgen | Jay C. Horgen | 2010 | 500,000 | 3,250,000 | 2,500,000 | (4) | 2,829,600 | 64,323 | 9,143,923 | |||||||||||||||||||||||||||||
Executive Vice | 2008 | 500,000 | 1,500,000 | — | 1,670,703 | 58,177 | 3,728,880 | Executive Vice | 2009 | 500,000 | 1,500,000 | 2,000,000 | (5) | 2,057,400 | 39,067 | 6,096,467 | ||||||||||||||||||||||
President | 2007 | 500,000 | 1,700,000 | — | 4,032,183 | 918,274 | 7,150,457 | President | 2008 | 500,000 | 1,500,000 | — | 1,670,703 | 58,177 | 3,728,880 | |||||||||||||||||||||||
John Kingston, III | John Kingston, III | 2009 | 350,000 | 700,000 | 1,000,000 | 857,250 | 45,262 | 2,952,512 | John Kingston, III | 2010 | 350,000 | 1,100,000 | 1,500,000 | (4) | 1,179,000 | 48,396 | 4,177,396 | |||||||||||||||||||||
Executive Vice | 2008 | 350,000 | 750,000 | — | 723,969 | 62,579 | 1,886,548 | Executive Vice | 2009 | 350,000 | 700,000 | 1,000,000 | (5) | 857,250 | 45,262 | 2,952,512 | ||||||||||||||||||||||
President, General | 2007 | 350,000 | 1,050,000 | — | 1,500,000 | 59,440 | 2,959,440 | President, General | 2008 | 350,000 | 750,000 | — | 723,969 | 62,579 | 1,886,548 | |||||||||||||||||||||||
Counsel and Secretary | Counsel and Secretary |
This award became fully vested on March 30, 2007, is distributable in four annual 25% increments beginning in 2009, and is invested in shares of the Company's common stock at the election of Mr. Horgen.
discretion of the Compensation Committee, may or may not be settled in shares of the Company's common stock or in cash, at the discretion of the Compensation Committee.
Grants of Plan-Based Awards in Fiscal Year 20092010
| | | | | | | | | All Other Option Awards: Number of Securities Underlying Options (#)(3) | | | | | | | | | | | Grant Date Fair Value of Units of Profits Interests or Option Awards ($) | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Possible Payouts Under Equity Incentive Plan Awards(2) | | Grant Date Fair Market Value of Option Awards ($) | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | All Other Stock Awards: Number of Units of Profits Interests (2) | All Other Option Awards: Number of Securities Underlying Options (#)(3) | | |||||||||||||||||||||||||||||||||||||
| | | All Other Option Awards: Number of Securities Underlying Options (#)(3) | | | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Units of Profits Interests or Option Awards ($) | ||||||||||||||||||||||||||||||||||||||||||
Name | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||||||||||||||||
Sean M. Healey | Sean M. Healey | 4/21/09 | 147,835 | 147,835 | Sean M. Healey | 7/20/10 | 150,000 | 62.91 | 2,746,500 | ||||||||||||||||||||||||||||||||||||||||
President and Chief | 7/21/09 | 150,000 | 2,505,000 | President and Chief | 12/14/10 | 150,000 | 95.82 | 4,327,500 | |||||||||||||||||||||||||||||||||||||||||
Executive Officer | 12/2/09 | 150,000 | 65.51 | 2,638,500 | Executive Officer | 12/31/10 | 238.10 | 5,000,000 | |||||||||||||||||||||||||||||||||||||||||
5,000,000 | 6,000,000 | 6,000,000 | 4,600,000 | 7,000,000 | 15,200,000 | ||||||||||||||||||||||||||||||||||||||||||||
Darrell W. Crate | Darrell W. Crate | 4/21/09 | 73,917 | 73,917 | Darrell W. Crate | 7/20/10 | 75,000 | 62.91 | 1,373,250 | ||||||||||||||||||||||||||||||||||||||||
Executive Vice President, | 7/21/09 | 75,000 | 62.04 | 1,252,500 | Executive Vice | 12/14/10 | 75,000 | 95.82 | 2,163,750 | ||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 12/2/09 | 75,000 | 65.51 | 1,319,250 | President, Chief | 12/31/10 | 119.05 | 2,500,000 | |||||||||||||||||||||||||||||||||||||||||
and Treasurer | 2,500,000 | 3,000,000 | 3,000,000 | Financial Officer | 2,300,000 | 3,500,000 | 7,600,000 | ||||||||||||||||||||||||||||||||||||||||||
and Treasurer | |||||||||||||||||||||||||||||||||||||||||||||||||
Nathaniel Dalton | Nathaniel Dalton | 4/21/09 | 73,917 | 73,917 | Nathaniel Dalton | 7/20/10 | 75,000 | 62.91 | 1,373,250 | ||||||||||||||||||||||||||||||||||||||||
Executive Vice | 12/14/10 | 75,000 | 95.82 | 2,163,750 | |||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President | 7/21/09 | 75,000 | 62.04 | 1,252,500 | President and | 12/31/10 | 119.05 | 2,500,000 | |||||||||||||||||||||||||||||||||||||||||
and Chief Operating | 12/2/09 | 75,000 | 65.51 | 1,319,250 | Chief Operating | 2,300,000 | 3,500,000 | 7,600,000 | |||||||||||||||||||||||||||||||||||||||||
Officer | 2,500,000 | 3,000,000 | 3,000,000 | Officer | |||||||||||||||||||||||||||||||||||||||||||||
Jay C. Horgen | Jay C. Horgen | 4/21/09 | 42,238 | 42,238 | Jay C. Horgen | 7/20/10 | 60,000 | 62.91 | 1,098,600 | ||||||||||||||||||||||||||||||||||||||||
Executive Vice President | 7/21/09 | 60,000 | 62.04 | 1,002,000 | Executive Vice | 12/14/10 | 60,000 | 95.82 | 1,731,000 | ||||||||||||||||||||||||||||||||||||||||
12/2/09 | 60,000 | 65.51 | 1,055,400 | President | 12/31/10 | 119.05 | 2,500,000 | ||||||||||||||||||||||||||||||||||||||||||
1,500,000 | 1,875,000 | 1,875,000 | 1,400,000 | 3,250,000 | 4,750,000 | ||||||||||||||||||||||||||||||||||||||||||||
John Kingston, III | John Kingston, III | 4/21/09 | 21,119 | 21,119 | John Kingston, III | 7/20/10 | 25,000 | 62.91 | 457,750 | ||||||||||||||||||||||||||||||||||||||||
Executive Vice President, | 7/21/09 | 25,000 | 62.04 | 417,500 | Executive Vice | 12/14/10 | 25,000 | 95.82 | 721,250 | ||||||||||||||||||||||||||||||||||||||||
General Counsel and | 12/2/09 | 25,000 | 65.51 | 439,750 | President, General | 12/31/10 | 71.43 | 1,500,000 | |||||||||||||||||||||||||||||||||||||||||
Secretary | 700,000 | 1,125,000 | 1,125,000 | Counsel and | 900,000 | 1,100,000 | 2,850,000 | ||||||||||||||||||||||||||||||||||||||||||
Secretary |
Outstanding Equity Awards at 20092010 Fiscal Year-End
| | Option Awards(1) | Stock Awards | | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Name | Number of Securities Underlying Unexercised Options which are free of transfer restrictions (#) | Number of Securities Underlying Unexercised Options which are subject to transfer restrictions or unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Stock that have not vested (#)(2) | Market Value of Shares of Stock that have not vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares that have not vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares that have not vested ($) | Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexcercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Units of Profits Interests That Have Not Vested (#)(1) | Number of Shares of Stock That Have Not Vested (#)(2) | Market or Payout Value of Units of Profits Interests and Shares of Stock That Have Not Vested ($) | ||||||||||||||||||||||||
Sean M. Healey | Sean M. Healey | 15,100 | — | 43.50 | 7/24/2010 | 13,143 | 885,181 | 147,835 | 9,956,687 | Sean M. Healey | 132,500 | (3) | — | 45.27 | 7/27/2014 | 178.57 | 133,052 | 16,951,419 | |||||||||||||||||||||||
President and | 116,250 | — | 44.35 | 12/10/2010 | President and | 132,500 | (4) | — | 63.38 | 11/30/2014 | |||||||||||||||||||||||||||||||
Chief Executive | 132,500 | (4) | — | 45.27 | 7/27/2014 | Chief Executive | 153,158 | 153,158 | (5) | 48.38 | 11/3/2015 | ||||||||||||||||||||||||||||||
Officer | 100,700 | 31,800(5) | 63.38 | 11/30/2014 | Officer | 37,500 | 112,500 | (6) | 62.04 | 7/21/2016 | |||||||||||||||||||||||||||||||
76,579 | (5) | 229,737(6) | 48.38 | 11/3/2015 | 37,500 | 112,500 | (6) | 65.51 | 12/2/2016 | ||||||||||||||||||||||||||||||||
150,000(7) | 62.04 | 7/21/2016 | 150,000 | (7) | 62.91 | 7/20/2017 | |||||||||||||||||||||||||||||||||||
150,000(7) | 65.51 | 12/2/2016 | 150,000 | (7) | 95.82 | 12/14/2017 | |||||||||||||||||||||||||||||||||||
Darrell W. Crate | Darrell W. Crate | 105,000 | — | 44.35 | 12/10/2010 | 8,762 | 590,121 | 73,917 | 4,978,310 | Darrell W. Crate | 115,000 | (3) | — | 45.27 | 7/27/2014 | 89.29 | 66,526 | 8,475,710 | |||||||||||||||||||||||
Executive Vice | 115,000 | (4) | — | 45.27 | 7/27/2014 | Executive Vice | 115,000 | (4) | — | 63.38 | 11/30/2014 | ||||||||||||||||||||||||||||||
President, Chief | 87,400 | 27,600(5) | 63.38 | 11/30/2014 | President, Chief | 76,579 | 76,579 | (5) | 48.38 | 11/3/2015 | |||||||||||||||||||||||||||||||
Financial Officer | 38,289 | 114,869(6) | 48.38 | 11/3/2015 | Financial Officer | 18,750 | 56,250 | (6) | 62.04 | 7/21/2016 | |||||||||||||||||||||||||||||||
and Treasurer | 75,000(7) | 62.04 | 7/21/2016 | and Treasurer | 18,750 | 56,250 | (6) | 65.51 | 12/2/2016 | ||||||||||||||||||||||||||||||||
75,000(7) | 65.51 | 12/2/2016 | 75,000 | (7) | 62.91 | 7/20/2017 | |||||||||||||||||||||||||||||||||||
75,000 | (7) | 95.82 | 12/14/2017 | ||||||||||||||||||||||||||||||||||||||
Nathaniel Dalton | Nathaniel Dalton | 105,000 | — | 44.35 | 12/10/2010 | 8,762 | 590,121 | 73,917 | 4,978,310 | Nathaniel Dalton | 115,000 | (3) | — | 45.27 | 7/27/2014 | 89.29 | 66,526 | 8,475,710 | |||||||||||||||||||||||
Executive Vice | 18,000 | — | 31.96 | 12/19/2010 | Executive Vice | 115,000 | (4) | — | 63.38 | 11/30/2014 | |||||||||||||||||||||||||||||||
President and | 115,000 | (4) | — | 45.27 | 7/27/2014 | President and | 76,579 | 76,579 | (5) | 48.38 | 11/3/2015 | ||||||||||||||||||||||||||||||
Chief Operating | 87,400 | 27,600(5) | 63.38 | 11/30/2014 | Chief Operating | 18,750 | 56,250 | (6) | 62.04 | 7/21/2016 | |||||||||||||||||||||||||||||||
Officer | 38,289 | 114,869(6) | 48.38 | 11/3/2015 | Officer | 18,750 | 56,250 | (6) | 65.51 | 12/2/2016 | |||||||||||||||||||||||||||||||
75,000(7) | 62.04 | 7/21/2016 | 75,000 | (7) | 62.91 | 7/20/2017 | |||||||||||||||||||||||||||||||||||
75,000(7) | 65.51 | 12/2/2016 | 75,000 | (7) | 95.82 | 12/14/2017 | |||||||||||||||||||||||||||||||||||
Jay C. Horgen | Jay C. Horgen | 31,908 | 95,724(6) | 48.38 | 11/3/2015 | — | — | 42,238 | 2,844,729 | Jay C. Horgen | 43,816 | 63,816 | (5) | 48.38 | 11/3/2015 | 89.29 | 38,015 | 5,646,848 | |||||||||||||||||||||||
Executive Vice | 60,000(7) | 62.04 | 7/21/2016 | Executive Vice | 15,000 | 45,000 | (6) | 62.04 | 7/21/2016 | ||||||||||||||||||||||||||||||||
President | 60,000(7) | 65.51 | 12/2/2016 | President | 15,000 | 45,000 | (6) | 65.51 | 12/2/2016 | ||||||||||||||||||||||||||||||||
60,000 | (7) | 62.91 | 7/20/2017 | ||||||||||||||||||||||||||||||||||||||
60,000 | (7) | 95.82 | 12/14/2017 | ||||||||||||||||||||||||||||||||||||||
John Kingston, III | John Kingston, III | 30,000 | �� | 43.50 | 7/24/2013 | 4,382 | 295,128 | 21,119 | 1,422,365 | John Kingston, III | 14,919 | — | 44.35 | 12/10/2013 | 53.57 | 19,008 | 3,010,974 | ||||||||||||||||||||||||
Executive Vice | 60,000 | — | 44.35 | 12/10/2013 | Executive Vice | 70,000 | (3) | — | 45.27 | 7/27/2014 | |||||||||||||||||||||||||||||||
President, General | 70,000 | (4) | — | 45.27 | 7/27/2014 | President, General | 70,000 | (4) | — | 63.38 | 11/30/2014 | ||||||||||||||||||||||||||||||
Counsel and | 53,200 | 16,800(5) | 63.38 | 11/30/2014 | Counsel and | 27,653 | 27,654 | (5) | 48.38 | 11/3/2015 | |||||||||||||||||||||||||||||||
Secretary | 13,826 | 41,481(6) | 48.38 | 11/3/2015 | Secretary | 6,250 | 18,750 | (6) | 62.04 | 7/21/2016 | |||||||||||||||||||||||||||||||
25,000(7) | 62.04 | 7/21/2016 | 6,250 | 18,750 | (6) | 65.51 | 12/2/2016 | ||||||||||||||||||||||||||||||||||
25,000(7) | 65.51 | 12/2/2016 | 25,000 | (7) | 62.91 | 7/20/2017 | |||||||||||||||||||||||||||||||||||
25,000 | (7) | 95.82 | 12/14/2017 |
December 31, 2010 and December 31, 2011, and in 40% of the award will vestincrements on each of December 31, 2012 and December 31, 2013,2013. The awards, in each case, subject to the officer remaining employed on such date (with an exception for terminations of employment due to death or disability). If stockholders approve Proposal 2 in this Proxy Statement, the maximum amount that may be paid to a participant in any fiscal year will be 7.5%discretion of the sum of the Company's pre-tax cash net income (for such purposes, before reduction for the applicable period performance pool) for such fiscal year and the immediately preceding fiscal year. If the amount of the award that is actually earned is greater than the plan's individual limit, the amount of the award willCompensation Committee, may or may not be reduced to the amount of such individual limit. To the extent earned and vested, the award will be settled on the first business day following January 1, 2014 in shares of the Company's common stock or in cash, atstock. See footnote (5) to the discretion of theSummary Compensation Committee.Table for additional information regarding these awards.
Option Exercises and Stock Vested in Fiscal Year 20092010
| Option Awards | Stock Awards(1) | ||||||
---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||
Sean M. Healey | 188,852 | 4,244,288 | 13,029 | 565,980 | ||||
Darrell W. Crate | 105,515 | 2,757,148 | 8,686 | 377,320 | ||||
Nathaniel Dalton | 173,953 | 3,933,878 | 8,686 | 377,320 | ||||
Jay C. Horgen | — | — | — | — | ||||
John Kingston, III | — | — | 4,343 | 188,660 |
| Option Awards | Stock Awards | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#)(1) | Number of Units of Profits Interests Acquired on Vesting (#)(2) | Value Realized on Vesting ($) | ||||||||||||
Sean M. Healey | 131,350 | 5,391,074 | 27,926 | 59.53 | 3,601,950 | ||||||||||||
President and Chief | |||||||||||||||||
Executive Officer | |||||||||||||||||
Darrell W. Crate | 105,000 | 3,810,034 | 16,153 | 29.76 | 1,948,456 | ||||||||||||
Executive Vice President, | |||||||||||||||||
Chief Financial Officer and | |||||||||||||||||
Treasurer | |||||||||||||||||
Nathaniel Dalton | 123,000 | 4,500,524 | 16,153 | 29.76 | 1,948,456 | ||||||||||||
Executive Vice President | |||||||||||||||||
and Chief Operating | |||||||||||||||||
Officer | |||||||||||||||||
Jay C. Horgen | 20,000 | 567,598 | 4,223 | 29.76 | 1,044,006 | ||||||||||||
Executive Vice President | |||||||||||||||||
John Kingston, III | 75,081 | 3,077,801 | 6,493 | 17.86 | 879,581 | ||||||||||||
Executive Vice President, | |||||||||||||||||
General Counsel and | |||||||||||||||||
Secretary |
Director Compensation At the request of the Compensation Committee, Shea & Associates In determining current compensation levels for the Company's directors, the Compensation Committee's objective is that cash compensation be Equity grant determinations for directors are made consistent with the Compensation Committee's philosophy that compensation should be directly linked to increases in stockholder Director Compensation in Fiscal Year The following table sets forth information regarding the compensation earned by the Company's non-employee directors in Table and other accompanying compensation tables. Mr. Healey receives no additional compensation for his service as a director. Samuel T. Byrne Richard E. Floor(4) Dwight D. Churchill Richard E. Floor Harold J. Meyerman William J. Nutt Rita M. Rodriguez Patrick T. Ryan Jide J. Zeitlin Equity Compensation Plan Information The following table sets forth information regarding the securities authorized for issuance under our equity compensation plans as of December 31, Equity compensation plans approved by stockholders(1) Equity compensation plans not approved by stockholders(2) Total On April 19, 2011, the Board of Approval of the Benefits and Key Features of the 2011 Plan The 2011 Plan is an important compensation tool designed to retain and motivate officers, other employees, directors and key persons (including consultants and advisors) of the Company and its affiliates who are responsible for or contribute to the management, growth or profitability of the Company and its affiliates, while providing incentives for such persons to create shareholder value. The following is a summary of certain key features of the 2011 Plan: Summary of Outstanding Options and Certain Additional Information After reflecting option activity in the Recommendation of the Board of Directors The Board of Directors believes that the approval of the Summary of the The following description is only a summary of the material features of the 2011 Plan and does not describe all of its provisions. A copy of the 2011 Plan is included in this Proxy Statement asAppendix A. Shares Subject to the 2011 Plan. 4,000,000 shares of common stock have been authorized and reserved for issuance under the 2011 Plan. Awards on no more than 600,000 shares of common stock may be granted to any one individual in any calendar year. Shares of common stock underlying any stock options or SARs which are forfeited (except as described below), cancelled or satisfied without the issuance of common stock or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2011 Plan. Any shares of common stock (i) tendered by a participant to the Company as full or partial payment of the exercise price upon exercise of stock options; (ii) reserved for issuance upon the grant of SARs to the extent the number of reserved shares exceeds the number of shares of common stock actually issued upon exercise of the SARs; (iii) repurchased by the Company using proceeds received by the Company upon exercise of stock options; (iv) underlying any stock option or SAR that is voluntarily forfeited, unless the Company's stockholders have approved the adding back of such shares; or (v) withheld by, or otherwise remitted to, the Company to satisfy a participant's tax withholding obligations upon the exercise of stock options or SARs or upon any other payment or issuance of shares of common stock under the 2011 Plan, will not be added back to the shares of common stock available for issuance under the 2011 Plan. Plan Administration. The 2011 Plan will be administered by the Compensation Committee of the Board of Directors. All members of the Compensation Committee Eligibility. Persons eligible to participate in the Stock Options and Termination of Service. In general, upon termination of a participant's employment or other service relationship with the Company and its affiliates, any Amendments and Termination. The Board of Directors may at any time amend or discontinue the 2011 Plan and the Administrator may at any time amend or cancel outstanding awards (i) for the purpose of satisfying applicable law or (ii) for any other lawful purpose; provided, that, no action taken pursuant to clause (ii) shall adversely affect any rights under an outstanding award without the participant's consent. Prior stockholder approval is required to lower the exercise price of an outstanding award or to cancel and re-grant awards at a lower exercise price. Further, amendments to the 2011 Plan are subject to stockholder approval if and to the extent such amendments would (a) materially increase the benefits accruing to participants under the 2011 Plan, (b) materially increase the number of securities that may be issued under the 2011 Plan, (c) materially modify the requirements as to eligibility in the 2011 Plan, or (d) be required by the Code to preserve the qualified status of Incentive Options or to preserve tax deductibility of compensation earned under stock options and SARs. Adjustments to Awards. As a result of certain transactions (such as any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company's capital stock), the outstanding shares of common stock may be increased or decreased or exchanged for a different number or kind of shares or other securities. Also, as a result of such transactions, cash providesprovided a review of director compensation in the broad peer universe and most comparable peer universe. This analysis includes data on total compensation for directors at such peer companies, as well as on the individual components of that compensation, such as annual retainers, meeting fees and equity awards. The review also provides comparative data on compensation by board position (such as committee chairs and lead directors), and information on the nature of the service of particular directors in their various capacities (e.g., lead directors) at such companies. Shea & Associates also providesprovided information to the Compensation Committee on trends in director compensation at such companies, as well as trends in director compensation at public companies generally.relatively lowset at or near to the median in comparison to directors at comparable public companies, while equity compensation linked to increases in stockholder value isbe higher on a relative basis. In 2009, Shea & Associates' competitive market review reflected that director cash retainer and meeting fee compensation was below the median for the peer group, while cash compensation for committee work was generally in line with the median, and on that basis recommended an increase in annual retainers, combined with a decrease in meeting attendance fees. Accordingly, the Company increased theThe annual fee for service by non-employee directors from $50,000 to $80,000 and eliminatedis $80,000. Directors do not receive quarterly meeting fees. Committee fees remained unchanged:are as follows: members of the Audit Committee receive an annual fee of $20,000, with the Chair receiving an annual fee of $35,000; members of the Compensation Committee receive an annual fee of $17,000, with the Chair receiving an annual fee of $20,000; and members of the Nominating and Governance Committee receive an annual fee of $13,000, with the Chair receiving an annual fee of $15,000. The Chair of each Committee receives the annual Chair fee in lieu of the Committee fee. In addition, the lead director receives a fee of $100,000 for his active role as principal liaison with management of the Company and for his capacityservices as the principal contact on our Board of Directors for our stockholders and other interested parties. All directors of the Company are reimbursed for travel expenses incurred in attending meetings of the Board of Directors and its committees.value, and, on that basis the Committee has historically used option grants to align director and stockholder interests. In 2009, Shea & Associates' market review reflected an increase in the use of full-value equity awards granted to directors as compared to stock options, and on that basis recommended that the Company replace its semi-annual stock option grant policy with a combination ofvalue. Directors receive semi-annual option grants, with an aggregate annual grant date Black-Scholes value of $120,000, and grants of deferred stock units under the Deferred Compensation Plan, with an aggregate annual grant date fair market value of $80,000, based on the closing stock price of the Company's common stock on the date of grant. Each stock option grant and deferred stock grant will generally vest in 25% increments over four years, a vesting period that is longer than the 1-3 year vesting schedules employed by companies in the peer group, and across the market more generally.200920102009.2010. For compensation information with respect to Mr. Healey, and his services as the Company's President and Chief Executive Officer and President, please see the Summary Compensation Fees Earned or
Paid in Cash
($) Stock Awards
($)(1) Option Awards
($)(2) All Other
Compensation
($) Total
($) Fees Earned or
Paid in Cash
($) Stock Awards
($)(1) Option Awards
($) All Other
Compensation
($) Total
($)(3) 27,500 80,045 120,007 0 227,552 110,000 80,064 120,010(2) — 310,074 85,000 80,043 120,002 0 285,045 75,000 120,110 180,010(2) — 375,120 25,000 — 204,453(3) — 229,453 222,000 80,043 120,002 0 422,045 232,000 80,064 120,010(2) — 432,074 70,000 80,043 120,002 0 270,045 80,000 80,064 120,010(2) — 280,074 118,000 80,043 120,002 0 318,045 128,000 80,064 120,010(2) — 328,074 110,000 80,043 120,002 0 310,045 120,000 80,064 120,010(2) — 320,074 100,000 80,043 120,002 0 300,045 110,000 80,064 120,010(2) — 310,074 (with the exception of Mr. Byrne who became a director on October 20, 2009, and was granted an award on such date, vesting in 25% increments on each of October 20, 2009, 2010, 2011, and 2012) on July 21, 2009 (vesting 25% on each of January 1,20, 2010 2011, 2012 and 2013) and December 2, 2009 (vesting 25% on each of January 1, 2011, 2012, 2013 and 2014) and December 14, 2010 (vesting 25% on each of January 1, 2012, 2013, 2014 and 2015). The Company also granted Mr. Churchill, who became a director on February 26, 2010, an award on such date (vesting 25% on each of February 26, 2010, 2011, 2012 and 2013). The grant date fair value of the awards granted on each ofFebruary 26, 2010, July 21, 2009, October 20, 20092010 and December 2, 200914, 2010 to the applicable director, computed in accordance with FASB ASC Topic 718 (or its predecessor(formerly SFAS No. 123R), is $40,016, $40,018$40,046, $40,011 and $40,027,$40,053, respectively.3,5933,277 options to each director (with the exception of Mr. Byrne who became a director on October 20, 2009, and was granted 3,209 options on such date, vesting 25% on each of October 20, 2009, 2010, 2011 and 2012) on July 21, 200920, 2010 (vesting 25% on each of December 31, 2009, 2010, 2011, 2012 and 2012)2013) and 3,4112,080 options to each director on December 2, 200914, 2010 (vesting 25% on each of December 31, 2011, 2012, 2013 and 2014). The Company also granted Mr. Churchill 3,125 options on February 26, 2010 (vesting 25% on each of February 26, 2010, 2011, 2012 and 2013). The grant date fair value of the options granted on each ofFebruary 26, 2010, July 21, 2009, October 20, 20092010, and December 2, 200914, 2010 to the applicable director, computed in accordance with FASB ASC Topic 718 (or its predecessor(formerly SFAS No. 123R), is $60,003,$60,000, $60,002 and $60,008, and $59,999, respectively. At December 31, 2009,2010, the number of shares of common stock subject to options held by each director was as follows: Mr. Byrne: 6,620;11,977; Mr. Churchill: 8,482; estate of Mr. Floor: 93,254;33,750; Mr. Meyerman: 80,129;68,611; Mr. Nutt: 780,573;343,611; Dr. Rodriguez: 85,754;68,611; Mr. Ryan: 68,879;74,236; and Mr. Zeitlin: 63,254.68,611. See Note 23 to the Company's financial statements for the year ended December 31, 20092010 included in our Annual Report on Form 10-K for a discussion of the assumptions used in calculating the grant date fair value of stock options granted in 2009.options.Mr. Byrne became a directorThis figure represents the fair value associated with the extension of the Company on October 20, 2009.(4)Floor served as a director from the formation of the CompanyFloor's options in 1993 untilconnection with his death in February 2010. The Compensation Committee determined, in accordance with the Company's Retirement Equity Policy, to extend the expiration date of his options (which became fully vested and exercisable upon his death) by one year.2009:2010: Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights Weighted-average
exercise price of
outstanding options,
warrants and rights Number of securities
remaining available for
future issuance under
compensation plans
(excluding securities
reflected in column (a)) Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights Weighted-average
exercise price of
outstanding options,
warrants and rights Number of securities
remaining available
for future issuance under
compensation plans
(excluding securities
reflected in column (a)) (a) (b) (c) (a) (b) (c) 2,895,326 $52.61 1,133,820 3,062,736 $65.48 41,525 2,271,018 $56.42 10,958 2,077,406 $57.71 10,958 5,166,344 $54.29 1,144,778 5,140,142 $62.34 52,483 the 2002 Option Plansuch plan may also be issued pursuant to deferred stock awards, restricted stock awards, unrestricted stock awards, performance share awards or dividend equivalent rights.
PROPOSAL 2: APPROVAL OF THE COMPANY'SLONG TERM EXECUTIVE2011 STOCK OPTION AND INCENTIVE PLAN AS AMENDED AND RESTATED With limited exceptions, a publicly-held corporation may not claim a federal income tax deduction for compensation for any year in excessIntroduction$1 million paid to the corporation's chief executive officer or any of its other three most highly paid named executive officers (other than its chief financial officer). An exception to this deduction limitation applies in the case of certain qualifying performance-based compensation paid pursuant to a plan, the material terms of which are periodically approved by the corporation's stockholders. Our stockholders approved the Long-Term Executive Incentive Plan, or Plan, at our Annual Meeting in 2000 and approved amendments to the Plan at our Annual Meetings in 2002 and in 2005. This year, we are amending the Plan,Directors adopted, subject to stockholder approval at the Annual Meeting, the 2011 Stock Option and Incentive Plan (the "2011 Plan"). The 2011 Plan is similar to add eligible employees, increase the individual cash limit, andexisting 2006 Option Plan. The 2011 Plan will permit the grantissuance of stock options and stock appreciation rights ("SARs") to purchase up to 4,000,000 shares of common stock. The Board of Directors believes that the 2011 Plan will provide additional flexibility to implement the Company's objective of retaining and motivating key personnel, upon whose judgment, initiative and efforts the Company depends for sustained growth and profitability. Consistent with this objective, awards with a performance period of a fiscal year or longer, as more fully described below. The Compensation Committee has determined that it is ingranted under the best interest2011 Plan will generally be subject to vesting and forfeiture provisions.Company and our stockholders to adopt and approve these amendments as part of an amended and restated2011 Plan in order to further alignrequires the interests of our senior employees with our stockholders and to encourage employee retention potentially over a longer performance period. We continue to believe that performance-based compensation that is closely aligned with growth in Cash earnings per share will continue to incentivize key members of senior management of the Company. The affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote at the meeting is required for approval of the amended and restated Plan. For this purpose, abstentionsvote. Abstentions will have the same effect of votes castas a vote against the Planthis proposal, and broker non-votes will have no effect. Additionally, the NYSE listing standards require that a majority of the outstanding shares are voted on the proposal, and that a majority of those voted shares approve the 2011 Plan.considered votes cast. In order to continue to make performance-based awardsrepriced without shareholder approval. Furthermore, stock options and SARs that are voluntarily forfeited shall not become available for issuance under the 2011 Plan that will satisfywithout shareholder approval.requirementsfirst quarter of Section 162(m)2011, including exercises, as of March 31, 2011, there were:Code, we need yourrecord date);material terms2011 Plan is in the best interests of the Plan, as amendedCompany and restated, as described below. The material terms ofits stockholders and, therefore, unanimously recommends that the Plan, as amended and restated, are summarized below. This summary is qualified in its entirety by reference to the terms of the Plan, which is attached toCompany's stockholders vote FOR this Proxy Statement asAppendix A.proposal.Material Terms2011 PlanAdministration; Eligible Employees.Introduction. The 2011 Plan permits the grant of three types of awards: (i) options to purchase shares of common stock that are "incentive stock options" ("Incentive Options") under the Code, (ii) options to purchase shares of common stock that do not so qualify under the Code ("Non-Qualified Options"), and (iii) SARs. A SAR gives the holder the right to receive a payment in common stock based on the appreciation (if any) in the price of the share of common stock subject to the SAR. The amount of the payment, if any, is equal to the difference between the base price of the SAR, which can be no less than the fair market value on the date of grant of the share of common stock subject to the award, and the value of that share of common stock at the time of exercise. The term of each option and SAR issued under the 2011 Plan may not exceed seven years (and, in the case of Incentive Options granted to certain ten percent (or greater) stockholders, five years). The 2011 Plan is not required to be qualified under Section 401 of the Code nor is it subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended.who are not officers of the Company. The Compensation Committee is composed ofmust be "non-employee directors,"directors" as that term is defined under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and "outside directors,"directors" as defined in Section 162(m) of the Code and the regulations promulgated thereunder. Executive officersThe Compensation Committee, acting as the administrator of the Company designated by2011 Plan (in such role the Compensation Committee arewill be referred to as the "Administrator"), will have the power and authority to select participants under the 2011 Plan, to make any combination of awards to participants, and to determine (and modify from time to time) the specific terms and conditions of each award, all subject to the provisions of the 2011 Plan. All decisions of, and interpretations by, the Administrator shall be binding on all persons, including the Company and 2011 Plan participants. The Administrator, in its discretion, may delegate authority to the Chief Executive Officer with respect to the granting of awards to certain participants, subject to certain limitations.Plan. Currently, there2011 Plan are five executivethose full and part-time officers, other employees, directors and key persons (including consultants and advisors) of the Company and its affiliates who are eligibleresponsible for or contribute to participate in the Plan. The Compensation Committee may also grant awards under the Plan to senior officersmanagement, growth or profitability of the company orCompany and its affiliates, as selected from time to time by the Administrator in its sole discretion. However, only employees of the Company and its subsidiaries whose compensation is not subject to Section 162(m) of the Code. As amended, additional officers (currently, thirteen) wouldmay be granted Incentive Options. Approximately 500 persons will be eligible to participate in the 2011 Plan. These bonuses are considered separateapart fromStock Appreciation Rights. The exercise price or base price (as applicable) per share of common stock subject to each stock option and SAR will be determined by the Administrator but may not be less than 100% of the fair market value of a share of common stock on the date of grant. Each grant will be subject to such vesting requirements as determined by the Administrator.bonuses granted underaward requiring exercise will cease to be exercisable and any award to the Planextent not already fully vested will be forfeited except that, are intendedall stock options and SARs (i) held by a participant or a participant's permitted transferees, if any, prior to satisfysuch participant's death, to the applicable requirementsextent then exercisable, will remain exercisable for one year, and (ii) held by a participant or a participant's permitted transferees, if any, prior to termination of performance-based compensation under Section 162(m)such relationship for other specified reasons will, to the extent then exercisable, remain exercisable for three months, subject, in each case, to the scheduled expiration of the award. The Administrator may provide in an award (or subsequent writing) for other exceptions to forfeiture upon termination. Unless the Administrator provides otherwise, a participant's employment or service relationship with the Company and its affiliates will be deemed to continue for so long as the participant continues to provide services to the Company or its affiliates, whether as an employee or as a non-employee service provider (such as a consultant or director).Performance Measure; Performance Period; Payment of Awards.Tax Withholding. Under the amended Plan, the Compensation Committee may grant awards with a performance period of a fiscal year or longer instead of only a single fiscal year. Not later than the first 90 days after the start of each performance periodParticipants under the 2011 Plan the Compensation Committee will establish the formula by which an incentive pool will be determinedare responsible for the relevant performance period by reference to growthpayment of any federal, state or local taxes that may become due in connection with the Company's pre-tax cash net income.grant or exercise of awards. The Compensation Committee will also establish for each participant the percentage share of the pool that the participant can earn and a target amount of base Cash earnings per share that must be achieved for the participant to be paid an award under the Plan. Pre-tax cash net income for a year isCompanydefined as cash net income (that is,may deduct any such taxes from any payment otherwise due to a participant. Subject to the Cash earnings thatAdministrator's approval, participants may elect to have the minimum tax withholding obligations satisfied either by authorizing the Company reports when it discloses its financial results) plus all itemsto withhold from shares of income tax expense thatcommon stock otherwise issuable or by transferring to the Company deductedshares of common stock having a value equal to arrivethe amount of such taxes.net income. Awards are paid only if the Compensation Committee certifies performance resultsor in-kind distributions may be made with respect to such shares of common stock or other securities. In such cases, under the performance period. If2011 Plan, the target amountAdministrator will make appropriate adjustments in the maximum number of shares reserved for issuance, the number of stock options and SARs that can be granted to any one individual participant, the number and kind of shares or other securities subject to any then outstanding option and SAR awards, and the price for each share subject to any then outstanding stock options and SARs, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of shares subject to stock options or SARs) as to which such stock options and SARs remain exercisable. The adjustment by the Administrator will be final, binding and conclusive. The Administrator may also adjust the number of shares subject to outstanding awards and the exercise price and the terms of outstanding awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if the Administrator determines that such adjustment is met for such fiscal year,appropriate to avoid distortion in the Compensation Committee uses its pre-established formula to determine the sizeoperation of the performance pool. In addition,2011 Plan.
Noncompetition and Confidentiality. Under the Compensation Committee has full discretionform of award agreement adopted by the Administrator, non-directors may be subject to reducenon-competition provisions during the sizeparticipant's employment (or other applicable service relationship) with the Company and for two years thereafter. These non-competition provisions generally prohibit the participant from engaging, participating or investing in any competing business, and from negotiating with, soliciting or entertaining investments, purchases, proposals, offers or other indications of interest regarding any entity in which the Company holds securities or other investment interests or any investment in an entity with whom the Company was discussing or negotiating any possible investment in the year preceding the termination of the performance pool and/participant's employment. These non-competition provisions would also generally prohibit the participant from employing, attempting to employ, recruiting or to reduce the amount of incentive payments payable to any eligible employee. Multiple awards for overlapping performance periods may be granted under the Plan.
Awards under the Plan will be settled in cash or shares of our common stock. As partotherwise soliciting employees of the amended Plan,Company, and from soliciting or encouraging any client or other person or entity to terminate or otherwise modify adversely its business relationship with the Compensation Committee has determined thatCompany. The form of award agreement adopted by the maximum amount payable to anyAdministrator would also prohibit the participant underfrom disclosing confidential information regarding the Plan for any fiscal year may not exceed 7.5% of the sum of pre-tax cash net income (for these purposes, before reduction for the applicable period performance pool) for such fiscal year and the immediately preceding fiscal year, an amendment from the prior individual cash limit of 5% of the Company's pre-tax cash net income. This new individual limit will apply to awards that are currently outstanding, as described in footnote 2 to our Summary Compensation Table.Company.
EffectChange of Employment TerminationControl and Change in Control.Other Transaction Provisions. Except as otherwise provided for by the Compensation Committee in the case of a termination of employment due to death or disability, orThe 2011 Plan provides that in the event of a changeChange of Control (and except as provided in control, an eligible employee whose employment terminatesaward agreement), each stock option and SAR issued under the 2011 Plan will become fully exercisable. For this purpose a "Change of Control" generally
includes an event in which any person, directly or indirectly, becomes the beneficial owner of 25% or more of the voting power of the Company's voting securities. A Change of Control also includes the consummation of any consolidation or merger where the Company's stockholders immediately before such consolidation or merger would not own immediately after such consolidation or merger at least 50% of the voting shares of the surviving corporation or other business entity (or its ultimate parent). Finally, a Change of Control also includes the consummation of a sale, lease, exchange or other transfer of all or substantially all of the Company's assets as well as the Company's liquidation or dissolution.
Moreover, in connection with certain transactions (such as a consolidation, merger, sale, lease, exchange or other transfer of all or substantially all of the Company's assets or a liquidation of the Company), the Board of Directors may, in its discretion, provide for the assumption or substitution of the awards under the 2011 Plan and/or, upon written notice to the participants, the termination of such awards upon the consummation of such transaction. In the event such termination will occur, all vested awards (including those vesting in connection with such transaction) will be cancelled in exchange for an amount payable in cash or in-kind (or any combination thereof) equal to the difference, if any, between (A) the consideration payable per share of common stock times the number of shares of common stock subject to each award and (B) the respective aggregate exercise price or base price (as applicable) of each such award; provided, that, each participant will be permitted within a specified period determined by the Administrator prior to the date an awardconsummation of such transaction to exercise all outstanding stock options and SARs, including (subject to the consummation of the transaction) any that otherwise would not then be exercisable.
New 2011 Plan Benefits. The future benefits or amounts that would be received under the 2011 Plan by executive officers, non-executive directors and non-executive officer employees are discretionary and are therefore not determinable at this time. Similarly, the benefits or amounts which would have been received by or allocated to such persons for the last completed fiscal year if the 2011 Plan had been in effect would have been discretionary and are, therefore, indeterminable.
Registration Statement. If stockholders approve the 2011 Plan, the Company intends to file a registration statement on Form S-8 under the Securities Act of 1933, as amended, to register the shares of common stock that may be issuable pursuant to the 2011 Plan. This registration statement is paidexpected to become effective upon filing.
Tax Aspects of Any Awards Under the Code
The following is a summary of the principal U.S. federal income tax consequences of transactions under the 2011 Plan. It does not describe all U.S. federal income tax consequences under the 2011 Plan, nor does it describe state, local, foreign tax or all U.S. federal non-income tax consequences.
Incentive Options. No taxable income is generally realized by the optionee upon the grant or exercise of an Incentive Option. If shares of common stock issued to an optionee pursuant to the exercise of an Incentive Option are sold or transferred after two years from the date of grant of the stock option and after one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the exercise price will be taxed to the optionee as a long-term capital gain, and any loss sustained by the optionee will be a long-term capital loss, and (ii) there will be no deduction for the Company for federal income tax purposes. The exercise of an Incentive Option will increase the optionee's alternative minimum taxable income by an amount equal to the option spread, which may result in alternative minimum tax liability for the optionee.
If shares of common stock acquired upon the exercise of an Incentive Option are disposed of prior to the expiration of the two-year and one-year holding periods described above (a "disqualifying disposition"), generally (i) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of common stock acquired on the date of
exercise (or, if less, of the amount realized on a sale of such shares of common stock) over the exercise price, and (ii) the Company will be entitled to deduct such amount. Any additional gain recognized on the disposition is treated as a capital gain to the optionee for which the Company is not entitled to a deduction.
If an Incentive Option is exercised at a time when it no longer qualifies for the tax treatment described above, the stock option is treated as a Non-Qualified Option. Generally, an Incentive Option will not be awarded any incentive payment fromeligible for the performance pool and will forfeittax treatment described above if it is exercised more than three months following termination of the portion of any deferred awardoptionee's employment. In general, an Incentive Option that is unvested at such time. The Compensation Committee may provide for full vesting or paymentexercised more than three months after termination of an award under the Planoptionee's employment is treated as a Non-Qualified Option. Special rules apply in the case of a participant's death orpermanent disability or upondeath. Incentive Options are also treated as Non-Qualified Options to the extent that, in the aggregate, they first become exercisable by an individual in any calendar year for shares of common stock having a fair market value (determined as of the date of grant) in excess of $100,000.
Non-Qualified Options. With respect to Non-Qualified Options under the 2011 Plan, no income is realized by the optionee at the time the stock option is granted and the Company does not receive a tax deduction at such time. Generally (i) at exercise, ordinary income is realized by the optionee in an amount equal to the excess (if any) of the fair market value of the shares of common stock on the date of exercise over the exercise price, and the Company receives a tax deduction for the same amount, and (ii) at disposition of such shares, any appreciation or depreciation in the value of such shares after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held.
Stock Appreciation Rights. The grant of a SAR will not result in taxable income to the participant or in a tax deduction to the Company. Upon the exercise of a SAR, the participant will recognize ordinary income in an amount that equals the fair market value of any shares of common stock received, and the Company will be entitled to a tax deduction in the same amount. Upon disposition of any such shares received on exercise, any appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held.
Parachute Payments. The vesting of any portion of any option or SAR that is accelerated due to the occurrence of a changeChange of Control may cause all or a portion of the payments with respect to such accelerated awards to be treated as "parachute payments" as defined in control.Section 280G of the Code. Any such parachute payments may be non-deductible to the Company, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).
Vesting; Deferral.Section 162(m). AwardsUnder Section 162(m) of the Code, certain remuneration in excess of $1 million may be nondeductible if paid to any "covered employee" of a publicly held corporation (generally the corporation's chief executive officer and its next three most highly compensated executive officers, excluding the chief financial officer, in the year that the compensation is paid). Stock options and SARs issued under the 2011 Plan may be deferred and subjectedare intended to additional time-based vesting. Duringqualify for exemption from the period of such deferral, portions of the deferred awards may be deemed invested in our common stock and/or investment products managed by our affiliates.Section 162(m) deduction limit.
Amendment; Termination.Section 409A. We haveStock option and SARs issued under the right2011 Plan are intended either to amend or terminatebe exempt from the Plan, provided that no amendment or termination may, without the written consentrules of Section 409A of the Plan participants,Code ("Section 409A") or to satisfy those rules, and shall be construed accordingly. Granted stock options and SARs may be modified at any time, in the Committee's discretion, so as to increase the likelihood of exemption from or compliance with the rules of Section 409A. If such awards were subject to Section 409A and the requirements of Section 409A were not satisfied, the holders of such awards would be subject to current tax plus a 20% penalty tax and additional interest on the amount of compensation deferred under such awards, as determined under Section 409A.
PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we provide our stockholders a non-binding, advisory vote to approve the compensation of our Named Executive Officers.
The Compensation Committee will review the results of the vote carefully with the aid of its independent compensation consultant. Depending upon the results of that review, the Compensation Committee will take such action, if any, material adverse way affectas it deems appropriate. Because this vote is advisory, it is not binding on the rightsCompany or the Board of a participantDirectors.
Before you vote on the resolution below, please read the entire Compensation Discussion and Analysis beginning on page 10 of this Proxy Statement. The Compensation Discussion and Analysis describes the Company's executive compensation program and the compensation decisions that the Compensation Committee and Board of Directors made in 2010 with respect to benefits earned priorthe compensation of our Named Executive Officers. Please also carefully review the tables that immediately follow the Compensation Discussion and Analysis, together with the related narrative disclosure and footnotes. The Board of Directors is asking stockholders to cast a non-binding, advisory voteFOR the following resolution:
"RESOLVED, that the compensation paid to the dateCompany's Named Executive Officers, as disclosed pursuant to Item 402 of such amendment or termination.Regulation S-K, including the Compensation Discussion and Analysis and compensation tables, is hereby APPROVED."
New Plan Benefits. Because awards Our executive compensation program is comprised principally of equity and performance-based cash compensation, designed to be granted underalign compensation of our executives with stockholder value and financial performance. As more fully described in the Plan, if any, will be premised uponCompensation Discussion and Analysis, the achievementmix of certain performance objectives,fixed and since at all timesperformance-based compensation and the paymentterms of such awards may be reducedthe Company's long-term incentive compensation plans are designed to enable the Company to attract, motivate and retain key persons while, at the discretionsame time, creating a close relationship between performance and compensation. In addition, the Company regularly reviews its compensation program and the overall compensation package paid to each of its senior executives, including through the engagement of an independent compensation consultant, to assess risk and to ensure that the program is structured appropriately in order to obtain the Company's strategic goals.
Recommendation of the Board of Directors
For the above reasons, the Board of Directors is asking stockholders to support this proposal. Although the vote we are asking you to cast is non-binding, the Compensation Committee such grants cannotand the Board of Directors value the views of our stockholders and will consider, among other factors, the outcome of the vote when determining future compensation arrangements for our Named Executive Officers. The Board of Directors unanimously recommends that the Company's stockholders vote FOR this proposal.
PROPOSAL 4: ADVISORY VOTE ON FREQUENCY OF EXECUTIVE
COMPENSATION ADVISORY VOTES
In Proposal 3 (referred to as a "say-on-pay" vote), the Board of Directors is asking stockholders to cast an advisory vote for the compensation that we paid in 2010 to our Named Executive Officers, as disclosed in this Proxy Statement. The Dodd-Frank Wall Street Reform and Consumer Protection Act also provides that stockholders must be ascertainedgiven the opportunity to indicate their preference, on a non-binding, advisory basis, at least once every six years, as to how frequently we should seek an advisory vote to approve the compensation of our Named Executive Officers.
In this time.Proposal 4, the Board of Directors is asking stockholders to cast a non-binding, advisory vote on how frequently we should have say-on-pay votes in the future. Stockholders will be able to mark the enclosed proxy card or voting instruction form on whether to hold say-on-pay votes every one, two or three years. Alternatively, you may indicate that you are abstaining from voting. The Board of Directors is asking stockholders to cast a non-binding, advisory vote for theONE-YEAR option on the following resolution:
"RESOLVED, that the stockholders of the Company recommend, in a non-binding vote, whether an advisory vote to approve the compensation of the Company's Named Executive Officers should occur every one, two or three years."
The Board of Directors believes that say-on-pay votes should be conducted every year so that stockholders may annually express their views on our executive compensation program. This vote, like the say-on-pay vote itself, is non-binding.
Recommendation of the Board of Directors
The Board of Directors believes that the approval of the Long-Term Executive Incentive Plan, as amended and restated, is in the best interests of the Company and its stockholders and, therefore, unanimously recommends that the Company's stockholders vote FOR this proposal.for the ONE-YEAR option as the frequency of the advisory vote on executive compensation.
PROPOSAL 3:5: RATIFICATION OF THE
SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the current fiscal year, subject to ratification by the Company's stockholders at the Annual Meeting. PricewaterhouseCoopers has acted as the Company's independent registered public accounting firm since the Company's inception. The Company has been advised by PricewaterhouseCoopers that it is a registered public accounting firm with the Public Company Accounting Oversight Board (the "PCAOB") and complies with the auditing, quality control, and independence standards and rules of the PCAOB and the Securities and Exchange Commission.SEC. A representative of PricewaterhouseCoopers is expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement if he or she so desires.
Although stockholder ratification of the selection of PricewaterhouseCoopers is not required, the Board of Directors is nevertheless submitting the selection of PricewaterhouseCoopers to the stockholders for ratification. Unless contrary instructions are given, shares represented by proxies solicited by the Board of Directors will be voted for the ratification of the selection of PricewaterhouseCoopers as the independent registered public accounting firm of the Company for the year ending December 31, 2010.2011. Should the selection of PricewaterhouseCoopers not be ratified by the stockholders, the Audit Committee will reconsider the matter. Even in the event the selection of PricewaterhouseCoopers is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change is in the best interests of the Company and its stockholders.
Ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm for the current fiscal year requires the affirmative vote of a majority of the shares of common stock present or represented at the Annual Meeting and entitled to vote on such proposal. Abstentions will have the same effect as a vote against this proposal.
Recommendation of the Board of Directors
The Board of Directors believes that the selection of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm is in the best interests of the Company and its stockholders and, therefore, unanimously recommends that the Company's stockholders vote FOR this proposal.
During the fiscal year ended December 31, 2009,2010, the Audit Committee consisted of Dr. Rodriguez and Messrs. Floor,Churchill, Meyerman and Ryan, each an independent director of the Company, with Dr. Rodriguez serving as the Chair of the Audit Committee. Mr. Churchill joined the Audit Committee in February 2010.2010, and Mr. Nutt joined in January 2011. The Audit Committee's purpose is to assist the Board of Directors in oversight of the Company's internal controls and financial statements and the audit process. The Board of Directors has determined in its business judgment that all members of the Audit Committee are "independent" as is required by the listing standards of the NYSE.
Management is responsible for the preparation, presentation and integrity of the Company's financial statements, accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm, PricewaterhouseCoopers LLP, is responsible for performing an independent audit of the consolidated financial statements in accordance with the standards of the PCAOB.
In performing its oversight role, the Audit Committee has reviewed and discussed the audited financial statements with management and the independent registered public accounting firm. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61,Public Company Accounting Oversight Board AU Section 380, as amended, Communication with Audit Committees. The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the independent registered public accounting firm's independence.
Based on the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to below and in its charter, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2009.2010.
The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not experts in the fields of accounting or auditing, including with respect to auditor independence. Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and the independent registered public accounting firm. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions referred to above do not assure that the audit of the Company's financial statements has been carried out in accordance with the standards of the PCAOB, that the financial statements are presented in accordance with generally accepted accounting principles or that PricewaterhouseCoopers is in fact "independent."
The Audit Committee operates pursuant to a charter that was most recently adopted by the Board of Directors in October 20092010 and is available on the Company's web site at www.amg.com.www.amg.com.
RITA M. RODRIGUEZ,Chair
DWIGHT D. CHURCHILL
HAROLD J. MEYERMAN
WILLIAM J. NUTT
PATRICK T. RYAN
Principal Accountant Fees and Services
The following table sets forth information regarding the fees for professional services rendered by the Company's independent registered public accounting firm, PricewaterhouseCoopers LLP, in each of the last two fiscal years:
Type of Fee | Year Ended December 31, 2008 | Year Ended December 31, 2009 | Year Ended December 31, 2009 | Year Ended December 31, 2010 | ||||
---|---|---|---|---|---|---|---|---|
Audit Fees(1) | $4,228,954 | $2,484,660 | $2,484,660 | $4,141,900 | ||||
Audit-Related Fees(2) | 1,712,834 | 1,971,951 | 1,971,951 | 1,245,350 | ||||
Tax Fees(3) | 2,386,956 | 2,207,476 | 2,207,476 | 3,688,365 | ||||
All Other Fees | — | — | — | — |
In making its determination regarding the independence of PricewaterhouseCoopers, the Audit Committee considered whether the provision of the services covered in the sections entitled "Audit-Related Fees" and "Tax Fees" was compatible with maintaining such independence. All of the work performed by PricewaterhouseCoopers was performed by full-time employees of the firm.
The retention of the independent registered public accounting firm to audit the Company's financial statements is approved each year by the Audit Committee. At the beginning of the year, the Audit Committee also evaluates other potential engagements by the Company of the accounting firm and approves or rejects each service considering (among other factors) the possible impact of each non-audit service on the accounting firm's independence from management. In accordance with its charter, the Audit Committee pre-approves all auditing services and the terms thereof and any non-audit services provided by the independent registered public accounting firm unless an exception to such pre-approval exists under the Exchange Act or the rules of the SEC. The Audit Committee carefully considers the fees that are proposed to be paid in connection with the approval of audit and non-audit services, and then closely monitors the fees incurred in connection with the provision of such services throughout the year. At each meeting, the Audit Committee receives updates from management on the services that have been provided and fees incurred; from time to time, the Audit Committee may also consider and approve the provision of additional services. In the event that a need arises for the approval of additional services between meetings, the services would be considered and provisionally approved by a designated member of the Audit Committee who would present the scope and fees of the services provisionally pre-approved at the following meeting of the Audit Committee.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 15, 20102011 (unless otherwise noted) regarding the beneficial ownership of common stock by (i) persons or "groups" (as that term is used in Section 13(d)(3) of the Exchange Act) known by us to be the beneficial owner of 5% or more of the common stock of the Company, (ii) Named Executive Officers, (iii) directors and (iv) directors and executive officers as a group. Except as otherwise indicated, we believe, based on information furnished by such persons, that each person listed below has sole voting and investment power over the shares of common stock shown as beneficially owned, subject to community property laws, where applicable.
Name of Beneficial Owner(1) | Number of Shares Beneficially Owned | Percent of Common Stock(2) | ||
---|---|---|---|---|
William Blair & Company, L.L.C.(3) | 2,359,427 | 5.61% | ||
BlackRock, Inc.(4) | 2,427,159 | 5.77% | ||
Sean M. Healey(5) | 531,115 | 1.2% | ||
Darrell W. Crate(6) | 403,568 | *% | ||
Nathaniel Dalton(7) | 448,797 | 1.0% | ||
Jay C. Horgen(8) | 15,345 | *% | ||
John Kingston, III(9) | 256,245 | *% | ||
Samuel T. Byrne(10) | 942 | *% | ||
Dwight D. Churchill(11) | 921 | *% | ||
Harold J. Meyerman(12) | 61,525 | *% | ||
William J. Nutt(13) | 1,088,799 | 2.5% | ||
Rita M. Rodriguez(14) | 61,525 | *% | ||
Patrick T. Ryan(15) | 50,275 | *% | ||
Jide J. Zeitlin(16) | 44,650 | *% | ||
Directors and executive officers as a group (12 persons)(17) | 2,963,707 | 6.6% |
Name of Beneficial Owner(1) | Number of Shares Beneficially Owned | Percent of Common Stock(2) | ||||
---|---|---|---|---|---|---|
BlackRock, Inc.(3) | 2,621,614 | 5.08 | % | |||
Sean M. Healey(4) | 553,598 | 1.06 | % | |||
Darrell W. Crate(5) | 245,579 | * | % | |||
Nathaniel Dalton(6) | 343,841 | * | % | |||
Jay C. Horgen(7) | 36,953 | * | % | |||
John Kingston, III(8) | 214,950 | * | % | |||
Samuel T. Byrne(9) | 3,866 | * | % | |||
Dwight D. Churchill(10) | 2,821 | * | % | |||
Harold J. Meyerman(11) | 43,473 | * | % | |||
William J. Nutt(12) | 717,553 | 1.37 | % | |||
Rita M. Rodriguez(13) | 54,723 | * | % | |||
Patrick T. Ryan(14) | 60,348 | * | % | |||
Jide J. Zeitlin(15) | 54,723 | * | % | |||
Directors and executive officers as a group (12 persons)(16) | 2,332,428 | 4.34 | % |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish to the Company copies of all Section 16(a) forms that they file. To our knowledge, based solely on a review of copies of such reports, all Section 16(a) filing requirements applicable to any of our executive officers, directors and greater than 10% beneficial owners have been satisfied.
Expenses of Solicitation
The cost of solicitation of proxies will be borne by us. In an effort to have as large a representation of stockholders at the Annual Meeting as possible, special solicitation of proxies may, in certain instances, be made personally or by mail, telephone or other electronic means by one or more of our employees or by a proxy solicitor. We also may reimburse brokers, banks, nominees and other fiduciaries for postage and reasonable clerical expenses of forwarding the proxy materials to their principals who are beneficial owners of common stock. We may retain a proxy solicitation firm
The Company has retained Morrow & Co., Inc. for services in connection with the solicitation of proxies for customary fees and expenses.a fee of approximately $20,000.
Stockholder Proposals
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 and intended to be presented at the Company's 20112012 Annual Meeting of Stockholders must be received by us at our principal executive office on or before December 30, 201021, 2011 to be eligible for inclusion in the Proxy Statement and form of proxy to be distributed by the Board of Directors in connection with such meeting.
Any stockholder proposals (including recommendations of nominees for election to the Board of Directors) intended to be presented at the Company's 20112012 Annual Meeting of Stockholders, other than a stockholder proposal submitted pursuant to Exchange Act Rule 14a-8, must be received in writing at our principal executive office no earlier than February 8, 2011,1, 2012, nor later than March 25, 2011,17, 2012, together with all supporting documentation required by our By-laws.
As required by our By-laws, a stockholder's proposal nominating a director must include: (1) the name, age, business address and residence address of the proposed nominee, (2) the principal occupation or employment of the proposed nominee, (3) the class and number of shares of the Company's capital stock which are beneficially owned by the proposed nominee on the date of such stockholder notice, and (4) the consent of the proposed nominee to serve as a director if elected. A stockholder's proposal shall further set forth information about the beneficial ownership of capital stock by the stockholder making the proposal, such stockholder's name and address, and a description of all arrangements or understandings between such stockholder and the proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by such stockholder. For more complete information on these requirements, please refer to our By-laws.
Householding of Proxy Statement
Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of this Proxy Statement and the 20092010 Annual Report on Form 10-K may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of our Proxy Statement and 20092010 Annual Report on Form 10-K to you if you write or call us at the following address or telephone number: Affiliated Managers Group, Inc., 600 Hale Street, Prides Crossing, Massachusetts 01965, Attention: Investor Relations, (617) 747-3300. If you would like to receive separate copies of these materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address and telephone number.
Other Matters
The Board of Directors does not know of any matters other than those described in this Proxy Statement that will be presented for action at the Annual Meeting. If other matters are presented, proxies will be voted in accordance with the discretion of the proxy holders.
For those stockholders who receive the Notice of Internet Availability of Proxy Materials, this Proxy Statement and the 20092010 Annual Report on Form 10-K are available atwww.proxyvote.com. In addition, a copy of the 20092010 Annual Report on Form 10-K and the certifications required by Section 302 of the Sarbanes-Oxley Act will be provided without charge upon the written request of any stockholder to Affiliated Managers Group, Inc., 600 Hale Street, Prides Crossing, Massachusetts 01965, Attention: Investor Relations, and may be found on the Company's website atwww.amg.com. The 20092010 Annual Report on Form 10-K is not a part of the Company's proxy solicitation materials.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE COMPANY. PLEASE SUBMIT A PROXY BY INTERNET, BY TELEPHONE OR BY RETURNING A COMPLETED, SIGNED, AND DATED PROXY CARD OR VOTING INSTRUCTION FORM.
AFFILIATED MANAGERS GROUP, INC.LONG-TERM EXECUTIVE2011 STOCK OPTION AND INCENTIVE PLAN
MAY 31, 2011
SECTION 1. PURPOSE. ThisGENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Affiliated Managers Group, Inc. 2011 Stock Option and Incentive Plan (the "Plan"). The purpose of the Plan is intended to create incentives to allowencourage and enable the officers, employees, directors (including Independent Directors) and other key persons (including consultants and advisors) of Affiliated Managers Group, Inc. (the "Company") and its Affiliates upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to attract and retain individuals who will contribute to increasesacquire a proprietary interest in stockholder value, and that Awards made under this Plan be used to achieve the objectives of (i) aligning executive incentive compensation with such increases in stockholder value, and (ii) using deferred incentive compensation as a tool to retain key employees.Company. It is anticipated that providing such persons with a direct stake in the intentCompany's welfare will assure a closer identification of their interests with those of the Company, that compensation payable under this Plan shall qualify asthereby stimulating their efforts on the Company's (or its Affiliates') behalf and strengthening their desire to remain with the Company (or its Affiliates). In the case of an Award intended to be eligible for the performance-based compensation exception under Section 162(m), the Plan and such Award shall be construed to the maximum extent permitted by law in a manner consistent with qualifying the Award for such exception.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Administrator" is defined in Section 2(a).
"Affiliate" means any corporation or other entity that stands in a relationship to the Company that would result in the Company and such corporation or other entity being treated as one employer under Section 414(b) or Section 414(c) of the Code. The Company may apply Sections 414(b) and 414(c) of the Code by substituting "at least 50%" for "at least 80%" under Section 1563(a)(1), (2) and (3) of the Code and Treas. Regs. § 1.414(c)-2; and may, to the extent permitted under Section 409A, use "at least 20%" in lieu of "at least 50%"; provided, that the lower ownership threshold described in this definition (50% or 20% as the case may be) shall apply only if the same definition of affiliation is used consistently with respect to all compensatory stock options or stock awards and rights (whether under the Plan or another plan), and any designation of a different permissible ownership threshold percentage may not be made effective until 12 months after the adoption of such change (or such other period as required by Section 409A). The Company may at any time by amendment provide that different ownership thresholds (consistent with Section 409A) apply.
"Award" or"Awards," means Incentive Stock Options, Non-Qualified Stock Options and SARs.
"Board" means the Board of Directors of the Company.
"Change of Control" is defined in Section 10.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
"Covered Employee" means an employee who is a "covered employee" within the meaning of Section 162(m) of the Code (except toCode.
"Effective Date" means the extent otherwise expressly provideddate on which the Plan is approved by stockholders as set forth in Section 16 of this Plan).12.
2. DEFINITIONS. Capitalized terms not otherwise defined herein shall have the meanings set forth below:
(a) "AWARD" shall mean, for any Participant, that percentage of an Incentive Pool granted by the Committee to the Participant pursuant to Section 5.2.
(b) "BASE CASH NET INCOME" for any fiscal year shall mean the Company's Cash Net Income, less the after-tax impact of such Performance Fees as the Committee may determine.
(c) "BASE CASH EARNINGS PER SHARE" for any fiscal year shall mean Base Cash Net Income, divided by the adjusted diluted average number of Shares during the fiscal year calculated in a manner consistent with the Company's presentation of cash earnings per share in its financial disclosures for such fiscal year.
(d) "CASH NET INCOME" for any fiscal year shall mean the Company's cash net income calculated in a manner consistent with the Company's presentation of such measure in its financial disclosures for such fiscal year.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" shall mean those members of the Compensation Committee of the Board of Directors of the Company who are "outside directors" and "non-employee directors," as such terms are defined under the Code and applicable regulations and Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, respectively. If the Compensation Committee includes members who are not outside directors or non-employee directors, as so defined, it shall actFair Market Value" means, with respect to this Plan withoutStock, (i) for so long as such Stock is readily tradeable on an established securities market (within the participationmeaning of Section 409A), the closing price on the trading day of the grant, and (ii) otherwise, the fair market value of such nonqualifying members, and all references herein to the Committee shall be deemed to refer to the Compensation Committee so acting.
(g) "COMPANY" shall mean Affiliated Managers Group, Inc.
(h) "FISCAL YEAR" shall mean the fiscal year of the Company, which is the calendar year.
(i) "INCENTIVE POOL" shall mean, with respect to any Performance Period, the total amount available for Awards for such Performance Period as determined in accordance with Section 6.1.
(j) "PARTICIPANT" shall mean an executive officer designated by the Committee pursuant to Section 4 to participate herein with respect to a Performance Period, or such other individual described in Section 16 of the Plan to the extent designated by the Committee to participate herein.
(k) "PERFORMANCE FEES" shall mean, with respect to any Performance Period, those fee revenuesStock determined by the Committee to be non-recurringby a reasonable application of a reasonable valuation method (within the meaning of Section 409A).
"Incentive Stock Option" means any Stock Option designated and qualified as an "incentive stock option" as defined in natureSection 422 of the Code.
�� "Independent Director" means a member of the Board who is not also an employee of the Company or any Affiliate and not appropriate for inclusion in Base Cash Net Income.
(l) "PERFORMANCE MEASURE" for any Performance Period shall mean Base Cash Earnings per Share meeting the target level set bywho, if a member of the Committee, formeets the requirements of such Performance Period.membership as set forth in Section 2(a).
(m) "PERFORMANCE PERIOD" shall mean a period"Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option.
"Option" or"Stock Option" means any option to purchase shares of at least a full fiscal yearStock granted pursuant to Section 5.
"Person" means an individual, partnership, joint venture, association, corporation, trust, estate, limited liability company, limited liability partnership, unincorporated entity of any kind, governmental entity or any other legal entity.
"Stock Appreciation Right" or"SAR" has the meaning set forth in Section 5.
"Section 409A" means Section 409A of the Company. (ForCode and the avoidance of doubt,regulations thereunder.
"Stock" means the Committee may grant Awards hereunder with an Award period of more than one-year and a Performance Period of only one fiscal year.)
(n) "PLAN" shall mean the Affiliated Managers Group, Inc. Long-Term Executive Incentive Plan, as amended from time to time.
(o) "PRE-TAX CASH NET INCOME" for any fiscal year shall mean the Company's Cash Net Income plus any component of consolidated income tax expense used to calculate Cash Net Income for such fiscal year.
(p) "SHARE" shall mean a share of the common stock,Common Stock, par value $.01 per share, of the Company.
(q) "STOCK PLAN" shall mean any authorized stock plan of the Company.
(r) "TRUST" shall mean any trust established pursuantCompany, subject to a trust agreement between the Company and a trustee, or any similar or successor trust, under which Awards may be paidadjustments pursuant to Section 6.43.
SECTION 2.ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT PARTICIPANTS AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by a committee of this Plan.
3. ADMINISTRATION. Subject to Section 15,not less than two Independent Directors, which may be a subcommittee of the Committee (the "Administrator"). Each member of the Committee shall have sole discretionary power to interpretbe an "outside director" within the provisionsmeaning of this Plan, to administer and make all decisions and exercise all rights of the Company with respect to this Plan. The Committee shall have final authority to apply the provisions of the Plan and determine, in its sole discretion, the amount of the Incentive Pool and Awards to be paid or allocated to Participants hereunder and shall also have the exclusive discretionary authority to make all other determinations (including, without limitation, the interpretation and construction of the Plan and the determination of relevant facts) regarding the entitlement to benefits hereunder and the amount of benefits to be paid from the Plan. The Committee's exercise of this discretionary authority shall at all times be in accordance with the terms of the Plan and shall be entitled to deference upon review by any court, agency or other entity empowered to review its decision, and shall be enforced provided that it is not arbitrary, capricious or fraudulent.
4. ELIGIBILITY. For each Performance Period, the Committee in its discretion shall select those eligible employees of the Company or its subsidiaries who shall be Participants. The selection of an individual to be a Participant in any one Performance Period does not entitle the individual to be a Participant in any other Performance Period.
5. PERFORMANCE MEASURE AND AWARDS.
5.1 PERFORMANCE MEASURE. Not later than 90 days after the start of a Performance Period, the Committee shall establish the target amount or amounts of Base Cash Earnings per Share and the formula for determining the size of the Incentive Pool for such Performance Period, which target amount or amounts and formula shall be set forth in the minutes of the meetings of the Committee. The size of the Incentive Pool shall be determined by reference to growth in the Company's Pre-Tax Cash Net Income.
5.2 GRANTING OF AWARDS. Within the period of time prescribed by Section 162(m) of the Code and the regulations promulgated thereunder and a "non-employee director" within the Committeemeaning of Rule 16b-3(b)(3)(i) promulgated under the Act, or any successor definition under said rule.
(b) Powers of Administrator. The Administrator (or, if the Administrator has delegated its power pursuant to Section 2(c) below, the Chief Executive Officer) shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority, subject to terms and restrictions contained in the Plan:
(i) to select the individuals to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options and SARs, or any combination of the foregoing, granted to any Participant an Award representing a percentageone or more participants;
(iii) to determine the number of shares of Stock to be covered by any Award;
(iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Incentive Pool to be determined for such Performance Period. In no event shall Awards representing more than 100 percent of an Incentive Pool be granted to Participants. In addition to the foregoing limit, the maximum amount payable to any individual Participant under the Plan, for any fiscal year shall not exceed 7.5 percent of the sum of the Company's Pre-Tax Cash Net Income (for these purposes, before reduction for the applicable period performance pool) for such fiscal year and the immediately preceding fiscal year. The Committee shall notify each Participant of the grant of an Award in such manner as it shall deem appropriate. The Award to each Participant shall be set forth in the minutes of the meetings of the Committee. Multiple Awards for overlapping Performance Periods may be granted under the Plan.
5.3 NATURE OF AWARDS. The Awards granted under this Plan shall be used solely as a device for the measurement and determination of certain compensation to be paid to each Participant as provided herein. Awards shall not constitute or be treated as property or as a trust fund of any kind or as capital stock of the Company, stock options or other form of equity or security until they are paid out inAward, which terms and conditions may differ among individual Awards and participants, and to approve the form of cashwritten instruments evidencing the Awards;
(v) to accelerate at any time the exercisability or Shares.
6. VALUATION OF INCENTIVE POOL AND PAYMENTS.
6.1 VALUATION. If at the endvesting of a Performance Period, the Performance Measure for such Performance Period has been attained, the total valueall or any portion of the Incentive Pool for the Performance Period shall be determined based upon the formula adopted by the Committee for such Performance Period. The value of each Participant'sany Award shall be equal to the percentage of the Incentive Pool represented by such Award which has been allocated to him or her for the Performance Period.
6.2 COMMITTEE CERTIFICATION. No Participant shall receive any cash or Shares under this Plan unless the Committee has certified, by resolution or other appropriate action in writing, that the amount of the Incentive Pool has been accurately determined in accordance with the terms, conditions and limits of the Plan and that the Performance Measure has in fact been satisfied. The Committee shall have the discretion to reduce the size of the Incentive Pool or the sizelapsing at any time of any individual Award, but the Committee may not, however, increase the maximum amount permitted to be paid torestrictions on transfer of all or any Participant under Section 5.2 of this Plan, increase the sizeportion of any individual Award or authorize the payment of cash or Shares under this Plan if the Performance Measure has not been satisfied.Award;
6.3 PAYMENTS TO PARTICIPANTS. Once the value of the Incentive Pool is determined pursuant to Section 6.1 and certified by the Committee in accordance with Section 6.2, and once attainment of the Performance Measure has also been so certified, and(vi) subject to the provisions of Section 10, a Participant shall be paid his or her Award in cash or Shares. Any payment hereunder shall be made no later than March 15th following5(a)(ii), to extend at any time the last day of the calendar yearperiod in which Stock Options or SARs may be exercised;
(vii) to determine at any time whether, to what extent, and under what circumstances distribution or the Award is earned or,receipt of Stock and other amounts payable with respect to thosean Award shall be deferred either automatically or at the election of the participant and whether and to what extent the Company shall pay or credit amounts constituting interest (at rates determined by the Administrator) or dividends or deemed dividends on such deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.
All decisions of and interpretations by the Administrator shall be binding on all persons, including the Company and Plan participants.
(c) Limited Delegation of Authority to Grant Awards. The Administrator, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Administrator's authority and duties with respect to the granting of Awards at Fair Market Value, but only with respect to individuals who are not subject to the reporting and other provisions of Section 16 of the Act and who are not Covered Employees. Any such delegation by the Administrator shall include a limitation as to the amount of Awards that are subjectmay be granted during the period of the delegation and shall contain guidelines as to multiplethe determination of the exercise price of any Option or SAR, any conversion ratio and the vesting conditions, becomes vested, subject to applicable regulatory requirements andcriteria. The Administrator may revoke or amend the terms of the Company's stock plans.
6.4 DEFERRAL OF PAYMENTS. Notwithstanding the foregoing, the Committee reserves the right to defer payment of Awards to Participants, subject toa delegation at any time but such terms and provisions as the Committee may determine (including additional time-based vesting), through the Trust or otherwise, consistent with its intention to employ long-term incentive award arrangements in which the value of awards may be directly tied to the valueaction shall not invalidate any prior actions of the Company's common stock. Any such deferral shall be designed to comply with the requirements of Section 409A of the Code to the extent applicable. Any portion of the Awards set aside in the Trust shall be subject to and accordanceAdministrator's delegate or delegates that were consistent with the terms of the Trust.Plan.
7. FORFEITURE. ExceptSECTION 3.STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 4,000,000. For purposes of this limitation, the shares of Stock underlying any Awards which are forfeited (except as described below), cancelled or satisfied without the issuance of Stock or otherwise expressly providedterminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan. Any shares of Stock (i) tendered by Plan participants as full or partial payment to the Company upon exercise of Stock Options, (ii) reserved for issuance upon the grant of SARs to the extent the number of reserved shares exceeds the number of shares of Stock actually issued upon exercise of the SARs, (iii) repurchased by the CommitteeCompany using proceeds received by the Company upon exercise of Stock Options, (iv) underlying any Stock Option or SAR that is voluntarily forfeited, unless the Company's stockholders have approved the adding back of such shares, or (v) withheld by, or otherwise remitted to, the Company to satisfy a Plan participant's tax withholding obligations upon the exercise of Awards or upon any other payment or issuance of shares of Stock under the Plan shall not be added back to the shares of Stock available for issuance under the Plan. Subject to such overall limitation, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that Stock Options and SARs with respect to no more than 600,000 shares of Stock may be granted to any one individual participant during any one calendar year period. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company and held in its treasury.
(b) Changes in Stock. If, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company's capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other
securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, the Administrator shall make appropriate adjustments in (i) the maximum number of shares reserved for issuance under the Plan, (ii) the number of Stock Options and SARs that can be granted to any one individual participant, (iii) the number and kind of shares or other securities subject to any then outstanding Stock Option and SAR Awards under the Plan, and (iv) the price for each share subject to any then outstanding Stock Options and SARs under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of shares of Stock subject to Stock Options or SARs, as applicable) as to which such Stock Options or SARs remain exercisable. The adjustment by the Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares.
The Administrator may also adjust the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Administrator that such adjustment is appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Stock Option, without the consent of the participant, if it would constitute a Participant's death, disabilitymodification, extension or renewal of the Option within the meaning of Section 424(h) of the Code. Any adjustment hereunder shall be done on terms and conditions consistent with Section 409A and, in the case of Awards intended to qualify for the performance-based compensation exception Section 162(m) of the Code, having due regard for continued qualification for that exception.
(c) Certain Transactions. In contemplation of and subject to the consummation of a changeconsolidation or merger or a sale, lease, exchange or other transfer of all or substantially all of the assets of the Company in control (aswhich outstanding shares of Stock are exchanged for securities, cash or other property of an unrelated corporation (or other business entity) or in the event of a liquidation of the Company (in each case, a "Transaction"), the Board, and/or the board of directors of any corporation (or other business entity) assuming the obligations of the Company, may, in its discretion, take either, or any combination, of the following actions as to outstanding Awards: (i) provide that such terms mayAwards shall be definedassumed or equivalent awards shall be substituted, by the Committeeacquiring or succeeding corporation (or an affiliate thereof), and/or (ii) upon written notice to the participants and subject to the next sentence, provide that all Awards will terminate upon the consummation of the Transaction. In the event that, pursuant to clause (ii) above, Awards will terminate upon the consummation of the Transaction, all vested Awards (including those vesting in any individual Award agreement under the Plan), a Participant whose employmentconnection with the Company terminatesTransaction) shall be cancelled in exchange for an amount payable in cash or in kind (or any reason prior to payment of an Award (including paymentcombination thereof) equal to the Trust) or prior to fulfillingdifference, if any, between (A) the vesting requirements for his or her deferred Award hereunder shall forfeit all rightsconsideration payable per share of Stock pursuant to the Award,business combination (the "Transaction Price") times the number of shares of Stock subject to such outstanding Stock Options or SARs (to the unvested portionextent then exercisable at prices not in excess of the deferred Award,Transaction Price), as applicable, and (B) the case may be. Inrespective aggregate exercise or base prices (as applicable) of all such outstanding Stock Options or SARs; provided, however, that each participant shall be permitted, within a specified period determined by the case of a Participant's death or disability or the occurrence of a change in control (either before or after the conclusion of a Performance Period), the Committee may also provide that the Award will vest and/or be paid upon such event. The Committee may allocate part or all of an Award forfeitedAdministrator prior to the completionconsummation of the Performance PeriodTransaction, to exercise all outstanding Stock Options and SARs, including any that would not then be exercisable (but for this proviso), subject to the consummation of the Transaction, and provided, further, that any restrictions on transfer then in effect with respect to any outstanding Stock Options or SARs shall lapse and be of no further force or effect. For the avoidance of doubt, in the event that, pursuant to clause (ii) above, Awards terminate upon the consummation of the Transaction, each Award period, as applicable, to onefor which the exercise price equals or more eligibleexceeds the Transaction Price shall be cancelled without payment of consideration.
(d) Substitute Awards. The Administrator may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of another corporation who become employees of the Company or an Affiliate as the result of a merger or consolidation of the employing corporation with the
Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the employing corporation. The Administrator may direct that the substitute awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances.
SECTION 4.ELIGIBILITY
Participants in the Plan will be those full and part-time officers, other employees, directors (including Independent Directors) and key persons (including consultants and advisors) of the Company and its subsidiariesAffiliates who are responsible for or contribute to the management, growth or profitability of the Company and its Affiliates as are selected from time to time by the Administrator (or, if the Administrator has delegated its power pursuant to Section 2(c) above, the Chief Executive Officer) in its sole discretion.
SECTION 5.STOCK OPTIONS AND SARS
Any Stock Option or SAR granted under the Plan shall be in such form as the Administrator may from time to time approve. Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Affiliate that is a "subsidiary corporation" within the meaning of Section 424(f) of the Code. To the extent that any Option does not presently designatedqualify as Participants, including newly hired executives. In accordancean Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option. No Award shall be granted under the Plan more than ten (10) years after the Effective Date of the Plan.
(a) Grant of Awards. The Administrator in its discretion may grant Stock Options and SARs to any eligible person described in Section 4. Stock Options and SARs granted pursuant to this Section 5(a) shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Trust, forfeituresPlan, as the Administrator shall deem desirable. Grants of AwardsSARs will be settled in Common Stock (except that occurcash may be issued in lieu of fractional shares) and the Administrator at the time of grant or thereafter may define the manner of determining the excess in value of the shares of Stock.
(i) Exercise Price. The exercise price per share for the Stock covered by an Award granted pursuant to this Section 5(a) shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the option price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date.
(ii) Term. The term of each Award shall be fixed by the Administrator, but no Award shall be exercisable more than seven (7) years after the paymentdate the Award is granted. If an employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation and an Incentive Stock Option is granted to such employee, the term of such option shall be no more than five (5) years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Awards shall become exercisable at such time or times and any Stock issued or issuable thereunder shall become free of any restrictions on transfer, whether or not in installments, as shall be determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability or the lapsing of any restriction on transfer, as the case may be, of all or any portion of any Award. Participants shall have the rights of a stockholder only as to shares acquired upon the exercise of an Award, subject to any applicable restrictions on transfer on the issued Stock, and not as to any unexercised Awards.
(iv) Method of Exercise. Awards may be exercised in whole or in part, by giving written notice of exercise to the TrustCompany, specifying the number of shares to be purchased (in the case of Stock Options) or the number of shares as to which an Award is being exercised (in the case of SARs). In the case of Stock Options, payment of the purchase price may be made by one or more of the following methods unless otherwise provided in the Option Award agreement:
(A) In cash, by certified or bank check or other instrument acceptable to the Administrator;
(B) Through the delivery (or attestation to the ownership) of shares of Stock that are not then subject to restrictions under any Company plan and that have been purchased by the optionee on the open market or have been beneficially owned by the optionee for at least six months, if permitted by the Administrator in its discretion. Such surrendered shares shall be valued at Fair Market Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure.
Payment instruments will be allocatedreceived subject to other Participants. In no event shallcollection. The issuance of shares of Stock upon the reallocationexercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option agreement and the Plan) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Stock Option agreement, the Plan or any applicable provision of law. In the event an optionee chooses to pay the purchase price by delivery of previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of shares attested to.
(v) Annual Limit on Incentive Stock Options. To the extent required for "incentive stock option" treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.
(b) Non-transferability of Awards. No Stock Option or SAR shall be transferable by the optionee other than by will or by the laws of descent and distribution and all Stock Options and SARs shall be exercisable, during the optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the Administrator, in its sole discretion, may provide in the Award agreement regarding a given Option or SAR that the optionee or holder of the SAR, as applicable, may transfer, without consideration for the transfer, his Non-Qualified Stock Options or SARs to members of his immediate family, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee (and, as required by the Administrator, the beneficiaries, partners or members of such transferee) agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Option or SAR agreement, as the case may be.
(c) Termination. Subject to Section 7, immediately upon the cessation of the Participant's employment or other service relationship with the Company and its Affiliates an Award requiring exercise that is then held by the participant or the participant's permitted transferees, if any, will cease to be exercisable and all Awards that are then held by the participant or the participant's permitted transferees, if any, to the extent not already fully vested will be forfeited, (i) except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 8 below, in writing after the Award agreement is issued (but in all events subject to Section 5(a)(ii)), and (ii) except that:
(A) All Options and SARs held by a participant or the participant's permitted transferees, if any, immediately prior to the participant's death, to the extent then exercisable, will remain exercisable by such participant's executor or administrator or the person or persons to whom the Option or SAR is transferred by will or the applicable laws of descent and distribution or by such permitted transferree, in each case for the lesser of (1) the one year period ending with the first anniversary of the participant's death or (2) the period ending on the latest date on which such Option or SAR could have been exercised without regard to this Section 5(c), and shall thereupon terminate; and
(B) All Options and SARs held by the participant or the participant's permitted transferees, if any, immediately prior to the cessation of the participant's employment or other service relationship for reasons other than death, to the extent then exercisable, will remain exercisable for the lesser of (1) a period of three months or (2) the period ending on the latest date on which such Option or SAR could have been exercised without regard to this Section 5(c), and shall thereupon terminate.
Unless the Administrator expressly provides otherwise, a participant's "employment or other service relationship with the Company and its Affiliates" will be deemed to continue for so long as the participant continues to provide services to the Company or its Affiliates, whether as an employee or as a non-employee service provider (such as a consultant or director).
SECTION 6.TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the date as of which the value of an Award or portion thereof resultof any Stock or other amounts received thereunder first becomes includable in the gross income of the participant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any increaseFederal, state, or local taxes of any kind required by law to be withheld with respect to such income. The Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the participant. The Company's obligation to issue Stock to any participant under the Plan is subject to and conditioned on tax obligations being satisfied by the participant.
(b) Payment in Stock. Subject to approval by the Administrator, a participant may elect to have the minimum tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due, or (ii) transferring to the Company shares of Stock owned by the participant with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due.
SECTION 7.TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
(a) a transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or
(b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee's right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing.
SECTION 8.AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award intended(a) for the purpose of satisfying applicable law (including, without
limitation, Section 10D of the Act) or (b) for any other lawful purpose, provided that no such action taken pursuant to satisfyclause (b) shall adversely affect rights under any outstanding Award without the holder's consent. If and to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code or to ensure that compensation earned under Awards qualifies as performance-based exception requirements ofcompensation under Section 162(m) of the Code.Code, if and to the extent intended to so qualify, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. Except as provided in Section 3(b) or 3(c), any action by the Board or the Administrator to reduce the exercise price of any outstanding Award or to cancel any outstanding Award and re-grant such Award at a lower exercise price, shall be subject to approval by the Company's stockholders entitled to vote at a meeting of stockholders. Furthermore, if a Plan amendment would (i) materially increase the benefits accruing to Participants under the Plan, (ii) materially increase the number of securities that may be issued under the Plan, or (iii) materially modify the requirements as to eligibility in the Plan, then, such amendment shall be subject to approval by the Company's stockholders entitled to vote at a meeting of stockholders. Nothing in this Section 8 shall limit the Board's authority to take any action permitted pursuant to Section 3(c).
SECTION 9.STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a participant, a participant shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company's obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 10.CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 10:
(a) Except as otherwise provided in an applicable Award agreement, each outstanding Award shall automatically become fully exercisable and free of any restrictions on transfer.
(b) "Change of Control" shall mean the occurrence of any one of the following events:
(i) any"person," as such term is used in Sections 13(d) and 14(d) of the Act (other than the Company, any of its Affiliates, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its Affiliates), together with all "affiliates" and "associates" (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company's then outstanding securities having the right to vote in an election of the Company's Board of Directors ("Voting Securities") (in such case other than as a result of an acquisition of securities directly from the Company); or
(ii) the consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate 50 percent or more of the voting shares of the corporation (or other business entity) issuing cash or securities in the consolidation or merger (or of its ultimate parent, if any), (B) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company or (C) the liquidation or dissolution of the Company.
8. AMENDMENT OR TERMINATION OF PLAN. The Company may amend or terminate this Plan at any time or from time Notwithstanding the foregoing, a "Change of Control" shall not be deemed to time; provided, however, that no such amendment or termination shall, without the written consenthave occurred for purposes of the Participants,foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person to 25 percent or more of the combined voting power of all then outstanding Voting Securities;provided,however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any material adverse way affectadditional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the rightsCompany), then a "Change of Control" shall be deemed to have occurred for purposes of the foregoing clause (i).
SECTION 11.GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied. The Administrator may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.
(b) Issuance of Stock. Any Stock required to be issued to participants under the Plan shall be evidenced in such manner as the Administrator may deem appropriate, including book-entry registration or delivery of a Participant with respectstock certificate or certificates. In the event that the Administrator determines that Stock certificates will be issued to benefits earned prior toparticipants under the date of amendment or termination.
9. LIMITATION OF COMPANY'S LIABILITY. Subject to its obligation to make payments as providedPlan, such Stock certificates shall be deemed delivered for hereunder, neitherall purposes when the Company nor any person acting on behalfor a stock transfer agent of the Company shall be liable for any act performed orhave mailed such certificates in the failureUnited States mail, addressed to perform any actthe participant, at the participant's last known address on file with respect tothe Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan exceptshall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the event that there has been a judicial determinationgrant of willful misconduct on the part ofAwards do not confer upon any employee any right to continued employment with the Company or such person. The Company isany Affiliate.
(d) Trading Policy Restrictions. Option exercises and other Awards under no obligation to fund any of the payments required to be made hereunder in advance of their actual payment or to establish any reserves with respect to this Plan. Any benefits which become payable hereunder shall be paid from the general assets of the Company. No Participant, or his or her beneficiary or beneficiaries, shall have any right, other than the right of an unsecured general creditor, against the Company in respect of the benefits to be paid hereunder.
10. WITHHOLDING OF TAX. Anything to the contrary notwithstanding, all payments required to be made by the Company hereunderPlan shall be subject to such Company's insider-trading-policy-related restrictions, terms and conditions as may be established by the withholdingAdministrator, or in accordance with policies set by the Administrator, from time to time.
(e) Application of such amounts asCode Section 409A. Awards under the Company reasonably may determine that it is required to withhold pursuant to applicable federal, state or local law or regulation. Withholding can be made in the form of Shares, if the Committee so determines.
11. ASSIGNABILITY. Except as otherwise provided by law, no benefit hereunder shall be assignable, or subject to alienation, garnishment, execution or levy of any kind, and any attempt to cause any benefitPlan are intended either to be so subject shall be void.
12. NO CONTRACT FOR CONTINUING SERVICES. This Plan shall not be construed as creating any contract for continued services betweenexempt from the Companyrules of Section 409A or to satisfy those rules, and any Participant and nothing herein contained shall give any Participant the right to be retained as an employee of the Company.
13. GOVERNING LAW. This Plan shall be construed administered,accordingly. Granted Awards may be modified at any time, in the Committee's discretion, so as to increase the likelihood of exemption from or compliance with the rules of Section 409A.
SECTION 12.EFFECTIVE DATE OF PLAN
This Plan is effective when approved by the Company's stockholders.
SECTION 13.GOVERNING LAW
This Plan and enforcedall Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the CommonwealthState of Massachusetts.
14. NON-EXCLUSIVITY. SubjectDelaware, applied without regard to Section 15, the Plan does not limit the authorityconflict of the Company, the Committee, or any subsidiary of the Company, to grant awards or authorize any other compensation under any other plan or authority, including, without limitation, awards or other compensation based on the same Performance Measure used under the Plan. In addition, executives not selected to participate in the Plan may participate in other plans of the Company.
15. SECTION 162(M) CONDITIONS; BIFURCATION OF PLAN. It is the intent of the Company that the Plan and Awards made hereunder satisfy and be interpreted in a manner, that, in the case of Participants who are or may be persons whose compensation is subject to Section 162(m), satisfies any applicable requirements as performance-based compensation. Any provision, application or interpretation of the Plan inconsistent with this intent to satisfy the standards in Section 162(m) of the Code shall be disregarded. Notwithstanding anything to the contrary in the Plan, the provisions of the Plan may at any time be bifurcated by the Committee in any manner so that certain provisions of the Plan intended (or required in order) to satisfy the applicable requirements of Section 162(m) are applicable only to persons whose compensation is subject to Section 162(m).
16. OTHER AWARDS. The Committee may grant Awards under this Plan to senior officer employees of the Company or its subsidiaries whose compensation is not subject to Section 162(m) of the Code (such employees, "Non-Covered Employees"). Any Awards granted to Non-Covered Employees may, but need not, be subject to those provisions of this Plan that are intended to satisfy the applicable requirements of performance-based compensation under Section 162(m) of the Code. Awards granted to Non-Covered Employees under this Section 16 shall be construed as separate and apart from any Awards granted hereunder that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code.law principles.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date AFFILIATED MANAGERS GROUP, INC. |
AFFILIATED MANAGERS GROUP, INC. Annual Meeting of Stockholders May 31, 2011 10:00 AM This proxy is solicited by the Board of Directors The undersigned hereby appoints Sean M. Healey |