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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
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-12 |
Deltek, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
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NOTICE OF
2009 ANNUAL MEETING OF STOCKHOLDERS
May 22, 2009
To Deltek Stockholders:
This is to notify you that the 2009 Annual Meeting of Stockholders (the “Annual Meeting”) of Deltek, Inc., a Delaware corporation (“Deltek” or the “Company”), will be held on Friday, May 22, 2009, at 8:00 a.m., Eastern Time, at Deltek’s principal executive offices located at 13880 Dulles Corner Lane, Herndon, Virginia 20171, for the following purposes:
| 1. | To elect ten directors to serve for the ensuing year and until their successors are duly elected and qualified. |
| 2. | To ratify the appointment of Deloitte & Touche, LLP as Deltek’s independent registered public accounting firm for the fiscal year ending December 31, 2009. |
| 3. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
This year, in accordance with rules enacted by the U.S. Securities and Exchange Commission, we are furnishing proxy materials to you via the Internet. Unless you have already requested to receive a printed set of proxy materials, you will receive a Notice of Availability of Proxy Materials (“Notice of Materials”). The Notice of Materials contains instructions on how to access proxy materials and vote your shares via the Internet or, if you prefer, to request a printed set of proxy materials, including the proxy statement for the Annual Meeting, our 2008 Annual Report and a form of proxy card, at no additional cost to you.
The preceding items of business are more fully described in our proxy statement relating to the Annual Meeting. Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting is properly adjourned or postponed.
Only stockholders of record at the close of business on March 26, 2009 are entitled to notice of and to vote at the Annual Meeting. The Notice of Materials, our proxy materials and our Annual Report on Form 10-K are being made available to stockholders via the Internet on or about April 1, 2009.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read our proxy statement and vote on the Internet or by telephone or submit your proxy card as soon as possible. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers About the 2009 Annual Meeting and Procedural Matters.”
All stockholders are cordially invited to attend the Annual Meeting in person. Any stockholder attending the Annual Meeting may vote in person even if such stockholder previously signed and returned a proxy card or voted on the Internet or by telephone.
Thank you for your ongoing support of Deltek.
| Sincerely, |
|
Kevin T. Parker |
Chairman, President and Chief Executive Officer |
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FOR
2009 ANNUAL MEETING OF STOCKHOLDERS
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Change of Control and Potential Payments Upon Termination or Change of Control | 31 | |
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DELTEK, INC.
13880 Dulles Corner Lane
Herndon, Virginia 20171
PROXY STATEMENT
FOR
2009 ANNUAL MEETING OF STOCKHOLDERS
ABOUT THE 2009 ANNUAL MEETING
AND PROCEDURAL MATTERS
| Q: | Why am I receiving a Notice of Availability of Proxy Materials? |
| A: | The Board of Directors of Deltek, Inc. is making available to you the Notice of Availability of Proxy Materials (the “Notice of Materials”), the proxy statement relating to our 2009 Annual Meeting of Stockholders (the “Annual Meeting”) and our 2008 Annual Report on Form 10-K in connection with the solicitation of proxies for use at the Annual Meeting to be held on Friday, May 22, 2009, at 8:00 a.m., Eastern Time, and at any adjournment or postponement thereof, for the purpose of considering and acting upon the matters set forth in this proxy statement. The Notice of Materials, our proxy materials and our 2008 Annual Report on Form 10-K are being made available to you via the Internet on or about April 1, 2009. |
The Annual Meeting will be held at Deltek’s principal executive offices, located at 13880 Dulles Corner Lane, Herndon, Virginia, 20171. The telephone number at that location is (703) 734-8606.
All holders of record at the close of business on the Record Date (as described below) are invited to attend the Annual Meeting and are requested to vote on the proposals described in this proxy statement.
| Q: | May I attend the Annual Meeting? |
| A: | You are invited to attend the Annual Meeting if you were a stockholder of record or a beneficial owner as of March 26, 2009 (the “Record Date”). You should bring photo identification for entrance to the Annual Meeting. The meeting will begin promptly at 8:00 a.m., Eastern Time, and you should leave ample time for the check-in procedures. |
| Q: | Who is entitled to vote at the Annual Meeting? |
| A: | You may vote your shares of Deltek common stock if our records show that you owned your shares at the close of business on the Record Date. As of March 11, 2009, there were 43,498,610 shares of Deltek common stock outstanding and entitled to vote at the Annual Meeting. You may cast one vote for each share of common stock you hold as of the Record Date on all matters presented. |
| Q: | What is the difference between holding shares as a stockholder of record or as a beneficial owner? |
| A: | If your shares are registered directly in your name with Deltek’s transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, to be the “stockholder of record,” and these proxy materials are being made available directly to you by Deltek. As the stockholder of record, you have the right to grant your voting proxy directly to Deltek or to a third party, or to vote in person at the Annual Meeting. Deltek has made available a proxy card for you to use. |
If your shares are held by a brokerage account or by another nominee, you are considered to be the “beneficial owner” of shares held in “street name,” and the proxy materials are being made available to you
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together with voting instructions on behalf of your broker, trustee or nominee. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote and you are also invited to attend the Annual Meeting. Your broker, trustee or nominee has made available or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
If you are a beneficial owner of shares, your broker may have authority to vote shares for routine matters (including the election of directors and ratification of the appointment of the independent registered public accounting firm) in the absence of voting instructions from the beneficial owner.
| Q: | How can I vote my shares in person at the Annual Meeting? |
| A: | Shares held in your name as the stockholder of record may be voted in person at the Annual Meeting. Shares held beneficially in street name may be voted in person at the Annual Meeting only if you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares giving you the right to vote the shares.Even if you plan to attend the Annual Meeting, we recommend that you also submit your voting instructions or, if applicable, your proxy card, as described below, so that your vote will be counted even if you later decide not to attend the meeting. |
| Q: | How can I vote my shares without attending the Annual Meeting? |
| A: | Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder of record, you may vote by submitting a proxy by mail, on the Internet or by telephone. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. For instructions on how to vote, please refer to the instructions below or, for shares held beneficially in street name, the voting instructions provided to you by your broker, trustee or nominee. |
By Internet—Stockholders of record of Deltek common stock with Internet access may submit proxies by following the “Vote by Internet” instructions on the Notice of Materials until 12:00 a.m., Eastern Time, on May 22, 2009. Most Deltek stockholders who hold shares beneficially in street name may vote by accessing the web site specified in the voting instructions provided by their brokers, trustees or nominees. Please check the voting instructions for Internet voting availability.
By telephone—Stockholders of record of Deltek common stock who live in the United States or Canada and who have requested a printed copy of the proxy materials may submit proxies by following the “Vote by Telephone” instructions on the proxy card until 12:00 a.m., Eastern Time, on May 22, 2009. Most Deltek stockholders who hold shares beneficially in street name may vote by phone by calling the number specified in the voting instructions provided by their brokers, trustees or nominees. Please check the voting instructions for telephone voting availability.
By mail—Stockholders of record of Deltek common stock who received their proxy materials by mail may submit proxies by completing, signing and dating their proxy cards and mailing them in the accompanying pre-addressed envelopes. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted.
| Q: | How many shares must be present or represented to conduct business at the Annual Meeting? |
| A: | The presence of the holders of a majority of the shares entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Such stockholders are counted as present at the meeting if (1) they are present in person at the Annual Meeting or (2) have properly submitted a proxy. |
Under the General Corporation Law of the State of Delaware, abstentions and broker “non-votes” are counted as present and entitled to vote and are, therefore, included for the purposes of determining whether a quorum is present at the Annual Meeting.
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A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.
| Q: | What proposals will be voted on at the Annual Meeting? |
| A: | The proposals scheduled to be voted on at the Annual Meeting are: |
| • | The election of ten directors to serve for the ensuing year and until their successors are duly elected and qualified; |
| • | The ratification of the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009; and |
| • | To transact such other business as may properly come before the meeting or any adjournment. |
| Q: | What is the voting requirement to approve each of the proposals? |
| A: | Election of Directors—Because this is an uncontested election, a nominee for director will be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. |
Ratification of Independent Registered Public Accounting Firm—The affirmative vote of a majority of votes cast is required to ratify the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009.
Other Business to be Transacted—The affirmative vote of a majority of votes cast is required to approve any other business transacted at the meeting or any adjournment.
| Q: | How are votes counted? |
| A: | You may vote “FOR” or “AGAINST” or “ABSTAIN” on each of the nominees for election as director. A nominee for director will be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. Therefore, abstentions or broker non-votes will not affect the outcome of the election. The Board of Directors expects a director to tender his or her resignation if the director fails to receive the required number of votes for re-election. The Board of Directors will act on an expedited basis to determine whether or not to accept the director’s resignation in accordance with our Majority Voting Policy. See “Election of Directors—General.” |
You may vote “FOR,” “AGAINST” or “ABSTAIN” on the proposal to ratify the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009.Abstentions are deemed to be votes cast and have the same effect as a vote against this proposal. However, broker non-votes are not deemed to be votes cast and, therefore, are not included in the tabulation of the voting results on this proposal.
All shares entitled to vote and represented by properly executed proxy cards received prior to the Annual Meeting (and not revoked) will be voted at the Annual Meeting in accordance with the instructions indicated on the completed proxies. If no instructions are indicated on a properly executed proxy, the shares represented by that proxy will be voted as recommended by the Board of Directors.
| Q: | How does the Board of Directors recommend that I vote? |
| A: | The Board of Directors recommends that you vote your shares: |
| • | “FOR” the ten nominees for election as directors; and |
| • | “FOR” the ratification of the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009. |
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| Q: | Do any stockholders have the ability to significantly impact the results of the matters to be voted on? |
| A: | As of March 11, 2009, New Mountain Partners II, L.P., New Mountain Affiliated Investors II, L.P. and Allegheny New Mountain Partners, L.P. (the “New Mountain Funds”) collectively own approximately 58% of our common stock and are able to control all matters requiring stockholder approval, including the election of directors, as long as they continue to collectively own a majority of the outstanding shares of our common stock on the date of the Annual Meeting. New Mountain Capital Partners II, L.P. and certain shareholders referred to as the “deLaski Shareholders” also have the right, pursuant to an investor rights agreement, to designate a certain number of directors. The New Mountain Funds and the deLaski Shareholders are required to take action to effect the terms of the investor rights agreement, including voting for the election of the directors nominated by the other party. We are also required to take all necessary or desirable action within our control to cause the individuals designated by New Mountain Partners II, L.P. and the deLaski Shareholders to be elected as directors. |
| Q: | What happens if additional matters are presented at the Annual Meeting? |
| A: | If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxy holders, David Schwiesow and Salman Ahmad, or either of them, will have discretion to vote on those matters in accordance with their best judgment. Deltek does not currently anticipate that any other matters will be properly raised at the Annual Meeting. |
| Q: | May I change my vote? |
| A: | Subject to any rules your broker, trustee or nominee may have, you may change your proxy instructions at any time before your proxy is voted at the Annual Meeting. |
If you are the stockholder of record, you may change your vote (1) by granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) by providing a written notice of revocation to Deltek’s Corporate Secretary at Deltek, Inc., 13880 Dulles Corner Lane, Herndon, VA 20171 prior to your shares being voted, or (3) by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request.
If you are a beneficial owner of shares held in street name, you may change your vote by (1) submitting new voting instructions to your broker, trustee or nominee or (2) if you have obtained a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote your shares, by attending the Annual Meeting and voting in person.
| Q: | What happens if I decide to attend the Annual Meeting but I have already voted or submitted a proxy covering my shares? |
| A: | Subject to any rules your broker, trustee or nominee may have, you may attend the Annual Meeting and vote in person even if you have already voted or submitted a proxy card. Any previous votes that were submitted by you will be superseded by the vote you cast at the Annual Meeting. Please be aware that attendance at the Annual Meeting will not, by itself, revoke a proxy. |
If a broker, trustee or nominee beneficially holds your shares in street name and you wish to attend the Annual Meeting and vote in person, you must obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares.
| Q: | What should I do if I receive more than one set of voting materials? |
| A: | You may receive more than one Notice of Materials. For example, if you hold your shares in more than one brokerage account, you may receive separate voting instructions for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one Notice of Materials. Please complete the voting instructions in each Notice of Materials that you receive to ensure that all your shares are voted. |
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| Q: | Is my vote confidential? |
| A: | Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Deltek or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders may provide comments which will be forwarded to Deltek management. |
| Q: | Who will serve as inspector of election? |
| A: | The inspector of election will be Computershare Trust Company, N.A. |
| Q: | Where can I find the voting results of the Annual Meeting? |
| A: | We intend to announce preliminary voting results at the Annual Meeting and will publish final results in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2009. |
| Q: | Who will bear the cost of soliciting votes for the Annual Meeting? |
| A: | Deltek is making this solicitation and will pay the entire cost of preparing, and distributing the proxy materials and soliciting votes. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners for their reasonable expenses in forwarding solicitation material to such beneficial owners. Our directors, officers and employees may also solicit proxies in person or by other means of communication. Such directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. |
You are responsible for Internet access charges you may incur for accessing the proxy materials. If you choose to vote by telephone, you are responsible for telephone charges you may incur.
| Q: | What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors? |
| A: | You may submit proposals, including recommendations of director candidates, for consideration at future stockholder meetings. |
For inclusion in Deltek’s proxy materials—Stockholders of record may present proper proposals for inclusion in Deltek’s proxy statement and for consideration at the next annual meeting of its stockholders by submitting their proposals in writing to Deltek’s Corporate Secretary in a timely manner. In order to be included in the proxy statement for the 2010 annual meeting of stockholders, stockholder proposals must be received by Deltek’s Corporate Secretary no later than December 2, 2009, and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any other applicable rules established by the Securities and Exchange Commission.
To be brought before the annual meeting—In addition, Deltek’s bylaws establish an advance notice procedure for stockholders of record who wish to present certain matters before an annual meeting of stockholders. In general, nominations for the election of directors may be made by the Board of Directors or any stockholder entitled to vote who has delivered written notice to Deltek’s Corporate Secretary no later than the Notice Deadline (as defined below), which notice must contain specified information concerning the nominees and concerning the stockholder proposing such nominations.
Deltek’s bylaws also provide that the only business that may be conducted at an annual meeting is business that is (1) specified in the notice of meeting given by or at the direction of the Board of Directors, (2) properly brought before the meeting by or at the direction of the Board of Directors or (3) properly brought before the meeting by a stockholder who has delivered written notice to Deltek’s Corporate
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Secretary no later than the Notice Deadline (as defined below), which notice must contain specified information concerning the matters to be brought before such meeting and concerning the stockholder proposing such matters.
The “Notice Deadline” is generally defined as that date which is 90 days prior to the one year anniversary of the previous year’s annual meeting of stockholders. As a result, the Notice Deadline for the 2010 annual meeting of stockholders is February 21, 2010.
If a stockholder who has notified Deltek of his or her intention to present a proposal at an annual meeting does not appear, in person or by proxy, to present his or her proposal at such meeting or is no longer a stockholder of record on the record date applicable to such meeting, Deltek need not present the proposal for vote at such meeting.
A copy of the full text of the bylaw provisions discussed above may be obtained by writing to Deltek’s Corporate Secretary at our principal executive offices. All notices of proposals by stockholders, whether or not included in Deltek’s proxy materials, should be sent to Deltek’s Corporate Secretary at our principal executive offices.
| Q: | How may I obtain a separate set of proxy materials or the 2008 Annual Report on Form 10-K? |
| A: | If you share an address with another stockholder, each stockholder may not receive a separate Notice of Materials. Stockholders who do not receive a separate Notice of Materials and want to receive a separate copy may request to receive a separate copy of, or stockholders may request additional copies of, our Notice of Materials, proxy materials and 2008 Annual Report on Form 10-K by following the “Obtaining a Copy of the Proxy Materials” instructions on the Notice of Materials, by calling (703) 885-9768 or by writing to Deltek, Inc., 13880 Dulles Corner Lane, Herndon, VA 20171, Attention: Office of the General Counsel. Stockholders who share an address and receive multiple copies of our Notice of Materials may also request a single copy following the instructions above. |
We are able to distribute our proxy materials to stockholders in a fast and efficient manner via the Internet. You may elect to view all proxy materials on the Internet or to receive all proxy materials by mail. To make an election regarding how to receive these materials going forward, please log on towww.envisionreports.com/PROJ and follow the instructions on the screen to select your delivery preferences.
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EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is information concerning our executive officers as of March 11, 2009.
Name | Age | Position(s) | ||
Kevin T. Parker | 49 | Chairman of the Board, President and Chief Executive Officer | ||
Eric J. Brehm | 50 | Executive Vice President of Product Development | ||
William D. Clark | 49 | Executive Vice President and Chief Marketing Officer | ||
Garland T. Hall | 48 | Senior Vice President of Global Support | ||
Richard M. Lowenstein | 46 | Executive Vice President of Professional Services | ||
Richard P. Lowrey | 49 | Executive Vice President of Products and Strategy | ||
Carolyn J. Parent | 42 | Executive Vice President of Worldwide Sales | ||
Holly C. Kortright | 42 | Senior Vice President of Human Resources | ||
David R. Schwiesow | 58 | Senior Vice President, General Counsel and Secretary | ||
Mark L. Wabschall | 53 | Executive Vice President, Chief Financial Officer and Treasurer |
Kevin T. Parker has served as our President and Chief Executive Officer since June 2005 and as Chairman of the Board since April 2006. Prior to joining Deltek, Mr. Parker served as Co-President and Chief Financial Officer of PeopleSoft, Inc., an enterprise applications software company, from October 2004 to December 2004, and as Executive Vice President of Finance and Administration and Chief Financial Officer of PeopleSoft from January 2002 to October 2004. Prior to January 2002, Mr. Parker held various positions, including Senior Vice President and Chief Financial Officer of PeopleSoft, Senior Vice President and Chief Financial Officer of Aspect Communications Corporation, a customer relationship management software company, and Senior Vice President of Finance and Administration at Fujitsu Computer Products of America. He currently serves on the Boards of Directors of Polycom, Inc. and Camber Corporation. Mr. Parker received his B.S. in Accounting from Clarkson University, where he serves on the board of trustees.
Eric J. Brehm has served as our Executive Vice President of Product Development since June 2006. From November 2001 to June 2006, Mr. Brehm served as our Executive Vice President and General Manager of the Professional Services Market Group. Previously, Mr. Brehm served as Vice President of Development for Harper and Shuman, Inc., a software company that we acquired in 1998. Mr. Brehm received his B.A. in Economics from Brandeis University and his Master of Information Sciences from Northeastern University.
William D. Clark has served as our Executive Vice President and Chief Marketing Officer since October 2005. From February 2005 to October 2005, Mr. Clark served as Vice President of Global Product Marketing at Novell, Inc., an enterprise applications software developer. Prior to joining Novell, from May 2003 to September 2004, Mr. Clark served as Executive Vice President and Chief Marketing Officer of Mantas, Inc., a financial services software developer, and, from December 2001 to May 2003, he served as Vice President of Marketing of Bang Networks, Inc., a computer technology and service firm. Mr. Clark also has held various positions at IBM Corporation and JP Morgan & Co. Mr. Clark received his B.S. in Business Administration from Drexel University.
Garland T. Hall has served as our Senior Vice President of Global Support since October 2008. Prior to joining Deltek, Mr. Hall served as Chief Customer Officer of Enterprise DB, a provider of enterprise-class database products and services, from 2006 to September 2008. From 2005 to 2006, Mr. Hall served as Vice President of Strategic Alliances for Composite Software, a data services company. From 2001 to 2004, Mr. Hall was Chief Customer Officer at webMethods, Inc., a provider of business integration and optimization software. Mr. Hall received his B.S. in Clinical Psychology from Liberty University.
Richard M. Lowenstein has served as our Executive Vice President of Professional Services since June 2006. From August 2003 to March 2006, Mr. Lowenstein served as Vice President of Professional Services of Agile Software Corporation, a product lifecycle management software developer. From September 2002 to July
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2003, Mr. Lowenstein served as Managing Director of Alberdale Capital, a private equity firm. Prior to joining Alberdale Capital, Mr. Lowenstein held various management positions at PeopleSoft, Inc., Workscape, Inc., Sybase, Inc. and Accenture Ltd. Mr. Lowenstein received his B.S. in Industrial and Systems Engineering from the University of Florida.
Richard P. Lowrey has served as our Executive Vice President of Products and Strategy since June 2006. Mr. Lowrey joined us as a systems consultant in 1995 and has since served as Managing Consultant, Director of Training, Director of Time Collection Product Group, Business Development Director, Vice President of Strategy and Business Development and, most recently, as Executive Vice President and General Manager of the Enterprise Solutions Group for the Company. Prior to joining our Company, Mr. Lowrey held financial positions at Titan Corporation, Digicon Corporation and SRA International. Mr. Lowrey received his B.S. in Public Administration from George Mason University.
Carolyn J. Parent has served as our Executive Vice President of Worldwide Sales since March 2006. From March 2004 to March 2006, Ms. Parent served as National Sales Director at BearingPoint, Inc., a management and technology consulting firm. From January 2002 to March 2004, Ms. Parent served as Executive Vice President of Sales at Sequation, Inc., a software company. Prior to joining Sequation, Ms. Parent held various executive positions at Enterworks, Inc. and Xacta Corporation, a division of Telos Corporation, a software company. Ms. Parent received her B.A. in English from Villanova University.
Holly C. Kortright has served as our Senior Vice President of Human Resources since October 2006. From March 2006 to October 2006, Ms. Kortright was Vice President of Human Resources for Capital One Financial Corporation, a global diversified financial services provider. From August 1999 through March 2006, she held various positions at Capital One, including Director of Human Resources, Director of Leadership Development and Senior Management Development Consultant. Ms. Kortright received her B.S. in Industrial Engineering from Lehigh University and her M.B.A. from Indiana University.
David R. Schwiesow has served as our Senior Vice President and General Counsel since May 2006. From December 2000 to May 2006, Mr. Schwiesow, at different times, served as Deputy General Counsel, Managing Director and Vice President of BearingPoint, Inc., a management and technology consulting firm. Prior to December 2000, Mr. Schwiesow served as Vice President and Associate General Counsel for The Rouse Company. He received his B.S. in Economics from The Wharton School of the University of Pennsylvania and his J.D. from Stanford Law School.
Mark L. Wabschall has served as our Executive Vice President, Chief Financial Officer and Treasurer since May 2008. From 2007 to 2008, Mr. Wabschall provided financial consulting services to high technology and other businesses. From 2004 to 2007, Mr. Wabschall was an Executive Vice President of webMethods, Inc., a leading provider of business integration and optimization software, and was also its Chief Financial Officer from 2004 to 2006. Prior to joining webMethods, Mr. Wabschall was Vice President of Finance for Innovative Technology Application, Inc., a diversified technology firm, from 2003 to 2004. From 2000 to 2003, Mr. Wabschall was President of Delphi Business Solutions, LLC, a consulting company providing operational, financial, strategic planning and other consulting services to high technology businesses, government contractors and other companies. Mr. Wabschall received his B.S. in Business Administration and Accounting from The Ohio State University and is a Certified Public Accountant in Texas and Ohio.
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ELECTION OF DIRECTORS
Deltek’s Board of Directors currently has ten authorized directors. The Board of Directors has selected ten nominees for election to Deltek’s Board of Directors, all of whom are currently serving as directors of Deltek. Nine of the nominees were elected directors of Deltek at the 2008 Annual Meeting of Stockholders held on May 27, 2008. The Board of Directors appointed Thomas M. Manley to the Board of Directors on August 13, 2008 after the number of authorized directors was increased to ten. Because this is an uncontested election, a majority of the votes cast is required for the election of directors, meaning that the number of votes cast “FOR” a director nominee must exceed the number of votes cast “AGAINST” that director nominee.
In accordance with our Majority Voting Policy, the Board of Directors will nominate for election or re-election as a director only candidates who agree to tender promptly following the annual meeting at which he or she is elected or re-elected as director, an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which he faces re-election and (ii) acceptance by the Board of Directors of such resignation. In addition, the Board of Directors will fill director vacancies and new directorships only with candidates who agree to tender the same form of resignation promptly following their appointment to the Board of Directors.
If an incumbent director fails to receive the required vote for re-election, the Board of Directors will act on an expedited basis to determine whether or not to accept the director’s resignation.
Any director who tenders his or her resignation pursuant to this Majority Voting Policy may not participate in any decision by the Board of Directors regarding such resignation.
Each director holds office until the next annual meeting of stockholders or until that director’s successor is duly elected and qualified. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unavailable to serve. In the event any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who may be designated by the present Board of Directors to fill the vacancy. Unless otherwise instructed, the proxy holders will vote the proxies received by them “FOR” the nominees named below. Your proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.
As of March 11, 2009, the New Mountain Funds owned approximately 58% of our common stock and 100% of our outstanding Class A common stock and, together with agreements with other stockholders (including an investor rights agreement), are entitled to designate a majority of the members of the Board of Directors and are able to control all other matters requiring stockholder approval, including any transaction subject to stockholder approval, as long as they collectively own a majority of the outstanding shares of our Class A common stock and at least one-third of the outstanding shares of our common stock. The Class A common stock does not otherwise carry any general voting rights, dividend entitlement or liquidation preference. The New Mountain Funds have designated Michael B. Ajouz, Steven B. Klinsky and Alok Singh for election as directors. The deLaski stockholders have designated Kathleen deLaski for election as a director. We are required to take the necessary action within our control to cause the designated individuals to be elected as members of our Board of Directors. See “Certain Relationships and Related Transactions—Investor Rights Agreement.”
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FORTHE ELECTION OF THE NOMINEES LISTED BELOW.
Information Regarding the Nominees for Director
The names of the nominees for director, their ages, their positions with Deltek and other biographical information as of March 11, 2009, are set forth below. There are no family relationships among any of Deltek’s directors, director nominees or executive officers.
Name | Age | Position | ||
Kevin T. Parker | 49 | Chairman of the Board, Chief Executive Officer and President | ||
Alok Singh (1) | 54 | Lead Director | ||
Michael B. Ajouz | 35 | Director | ||
Nanci E. Caldwell (1)(2) | 50 | Director | ||
Kathleen deLaski (1) | 49 | Director | ||
Joseph M. Kampf (1) | 64 | Director | ||
Steven B. Klinsky | 52 | Director | ||
Thomas M. Manley (2) | 50 | Director | ||
Albert A. Notini | 52 | Director | ||
Janet R. Perna (2) | 60 | Director |
| (1) | Member of Compensation Committee |
| (2) | Member of Audit Committee |
Kevin T. Parker has served as our President and Chief Executive Officer since June 2005 and as Chairman of the Board since April 2006. Prior to joining Deltek, Mr. Parker served as Co-President and Chief Financial Officer of PeopleSoft, Inc., an enterprise applications software company, from October 2004 to December 2004, and as Executive Vice President of Finance and Administration and Chief Financial Officer of PeopleSoft from January 2002 to October 2004. Prior to January 2002, Mr. Parker held various positions, including Senior Vice President and Chief Financial Officer of PeopleSoft, Senior Vice President and Chief Financial Officer of Aspect Communications Corporation, a customer relationship management software company, and Senior Vice President of Finance and Administration at Fujitsu Computer Products of America. He currently serves on the Boards of Directors of Polycom, Inc. and Camber Corporation. Mr. Parker received his B.S. in Accounting from Clarkson University, where he serves on the board of trustees.
Alok Singh has served as a director since April 2005, and as lead director since April 2006. Mr. Singh’s duties as lead director are to assist the Chairman of the Board in establishing the agenda for meetings of the Board of Directors, to preside, in the absence of the Chairman of the Board, at meetings consisting solely of the non-executive members of the Board of Directors and to act as a liaison between the Board of Directors and stockholders or other third parties who request direct communications with the Board of Directors. Mr. Singh is a Managing Director of New Mountain Capital, a private equity investment firm based in New York. Prior to joining New Mountain Capital in September 2002, Mr. Singh served as a Partner and Managing Director of Bankers Trust. He also established and led the Corporate Financial Advisory Group for the Americas for Barclays Capital. Mr. Singh is non-executive Chairman of Overland Solutions, Inc., lead director of Camber Corporation and serves on the Boards of Directors of Apptis, Inc., Ikaria Holdings, Inc., Tygris Commercial Finance Group, Inc. and Validus Holdings, Ltd. He also serves on the advisory board of Sonenshine Partners, an investment bank. Mr. Singh received both his B.A. in Economics and History and his M.B.A. in Finance from New York University.
Michael B. Ajouz has served as a director since April 2005. Mr. Ajouz joined New Mountain Capital in 2000 and is currently a Managing Director. Prior to 2000, Mr. Ajouz served as an Associate at the private equity firm of Kohlberg Kravis Roberts & Co., where he conducted analytical evaluations in various industries and in various analyst positions at Goldman, Sachs & Co. and Cornerstone Research. Mr. Ajouz serves as a director of Connextions, Inc., Apptis, Inc., Inmar, Inc., Camber Corporation and Oakleaf Global Holdings, Inc. Mr. Ajouz received his B.S. in Economics from The Wharton School of the University of Pennsylvania.
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Nanci E. Caldwell has served as a director since August 2005. Ms. Caldwell has been a technology consultant since January 2005. From April 2001 to December 2004, Ms. Caldwell worked at PeopleSoft, Inc., serving as Senior Vice President and Chief Marketing Officer from April 2001 to January 2002, and as Executive Vice President and Chief Marketing Officer from January 2002 to December 2004. Prior to joining PeopleSoft in 2001, Ms. Caldwell held various senior management positions at Hewlett-Packard Company. Ms. Caldwell serves on the Boards of Directors of Citrix Systems, Inc., Live Ops, Inc. and Sophos Plc. Ms. Caldwell received her B.A. in Psychology from Queen’s University, Kingston, Canada, and completed the University of Western Ontario’s Executive Marketing Management Program.
Kathleen deLaski has served as a director since April 2006. Ms. deLaski has been a Senior Program Officer at the Walton Family Foundation, a charitable organization managing education grants in the areas of public charter school finance and school district reform, since June 2008. From February 2005 to June 2008, Ms. deLaski served as President of The Sallie Mae Fund, a charitable organization sponsored by SLM Corporation (generally known as Sallie Mae) to increase access to higher education. From April 2001 to February 2005, Ms. deLaski held various other positions at Sallie Mae, including Senior Vice President, Chief Communications Officer and Senior Vice President of Consumer Marketing. Prior to April 2001, Ms. deLaski served as AOL Group Director for America Online, Inc. Ms. deLaski received her B.A. degree in political science and English from Duke University and her Masters of Public Administration from the John F. Kennedy School of Government of Harvard University. Ms. deLaski is the sister of Kenneth E. deLaski and daughter of Donald deLaski, our co-founders.
Joseph M. Kampf has served as a director since April 2006. Mr. Kampf has served as Chairman and Chief Executive Officer of CoVant Management, Inc., a technology investment company, since July 2006. From 1996 until June 2006, Mr. Kampf served as President and Chief Executive Officer of Anteon International Corporation, an information technology and engineering service company. Prior to 1996, Mr. Kampf served as a senior partner of Avenac Corporation, a consulting firm providing management and strategic planning advice to middle market companies. He served as Chairman of the Professional Services Council from 2003 to 2004 and as a member of its Executive Committee. Mr. Kampf serves on the Board of Directors of CoVant Management, Inc., CoVant Technologies, LLC, A-T Solutions, Inc. and the Wolf Trap Foundation for the Performing Arts. He received his B.A. in Economics from the University of North Carolina, Chapel Hill.
Steven B. Klinsky has served as a director since April 2005. Mr. Klinsky is a Managing Director of New Mountain Capital and has served as its Founder and Chief Executive Officer since its inception in 1999. Prior to 1999, Mr. Klinsky served as a General Partner and an Associate Partner with Forstmann Little & Co. and co-founded Goldman, Sachs & Co.’s Leveraged Buyout Group. He serves on the Boards of Directors of MailSouth, Inc., Overland Solutions, Inc., Apptis, Inc., Inmar, Inc., Connextions, Inc. and Oakleaf Global Holdings, Inc. Mr. Klinsky received his B.A. in economics and political philosophy from the University of Michigan. He received his M.B.A. from Harvard Business School and his J.D. from Harvard Law School.
Thomas M. Manley has served as a director since August 2008. Mr. Manley has served as Chief Financial Officer of Avaya Inc., a leading global provider of business communications applications, systems and services, since July 2008. From 2001 to July 2008, Mr. Manley was the Chief Financial Officer and Senior Vice President of Administration for Cognos, Inc. (an IBM company), a leader in business intelligence and performance management solutions. Prior to 2001, Mr. Manley spent 18 years with Nortel Networks and held various positions, including Chief Financial Officer for the High Performance Optical Component Solutions Group. He received his B.S. in Engineering from Carleton University in Ottawa, Canada.
Albert A. Notini has served as a director since August 2005. Mr. Notini has served as Chief Executive Officer of Apptis, Inc., a provider of information technology solutions and services, since August 2007 and is the Chairman of its Board of Directors. Mr. Notini also serves as a senior advisor to New Mountain Capital. Prior to August 2007, he served as President and Chief Operating Officer and as a member of the Board of Directors of Sonus Networks, Inc., a voice infrastructure product provider, since April 2004. From May 2000 to March 2004,
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Mr. Notini served as the Chief Financial Officer and a member of the Board of Directors of Manufacturers’ Services Limited, a global electronics and supply chain services company. Prior to May 2000, Mr. Notini served as Executive Vice President of information technology services provider Getronics NV, following its acquisition of technology services provider Wang Global, Inc., where Mr. Notini had served as Executive Vice President of Corporate Development and Administration and General Counsel. Mr. Notini serves on the Boards of Directors of Apptis, Inc. Camber Corporation and Saints Memorial Hospital. He received his A.B. from Boston College, his M.A. from Boston University and his J.D. from Boston College Law School.
Janet R. Perna has served as a director since June 2006. Ms. Perna served as General Manager of Information Management for IBM’s Software Group from November 1996 until her retirement in January 2006. Prior to November 1996, she held various other system programming and management positions at IBM. Ms. Perna serves on the Boards of Directors of Varicent Software Incorporated and Acresso Software. Ms. Perna received her B.S. degree in Mathematics from the State University of New York at Oneonta.
See “Corporate Governance” and “Executive Compensation—Compensation of Directors” below for additional information regarding the Board of Directors.
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RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected Deloitte & Touche, LLP as Deltek’s independent registered public accounting firm for the fiscal year ending December 31, 2009, which will include an audit of the full-year financial statements and of the effectiveness of Deltek’s internal control over financial reporting. Deloitte & Touche, LLP has audited Deltek’s financial statements since fiscal year 2004. A representative of Deloitte & Touche, LLP is expected to be present at the meeting, and will have the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to appropriate questions.
Stockholder ratification of the selection of Deloitte & Touche, LLP is not required by our bylaws or other applicable legal requirements. However, the Board of Directors is submitting the selection of Deloitte & Touche, LLP to the stockholders for ratification as a matter of good corporate practice. If this selection of an independent registered public accounting firm is not ratified by the affirmative vote of a majority of the shares present and voting at the meeting in person or by proxy, the appointment of the independent registered public accounting firm will be reconsidered by the Audit Committee. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of Deltek and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR
THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE, LLP
AS DELTEK’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2009.
Principal Accounting Fees and Services
The following table presents fees billed for professional audit services and other services rendered to Deltek by Deloitte & Touche, LLP for the years ended December 31, 2007 and December 31, 2008.
| 2007 | 2008 | |||||
Audit Fees (1) | $ | 2,038,500 | $ | 1,858,000 | ||
Audit-Related Fees (2) | — | — | ||||
Tax Fees (3) | — | — | ||||
All Other Fees (4) | — | — | ||||
Total | $ | 2,038,500 | $ | 1,858,000 | ||
| (1) | Audit fees include audits of consolidated financial statements, quarterly reviews, statutory audits, reviews of registration statement filings, comment letters, comfort letters, consents and correspondence related to SEC filings. |
| (2) | There were no fees billed to us by the Deloitte entities for audit-related services for the years ended December 31, 2008 and December 31, 2007. |
| (3) | There were no fees billed to us by the Deloitte entities for tax services for the years ended December 31, 2008 and December 31, 2007. |
| (4) | We did not engage the Deloitte entities for any services other than those listed above during 2008 or 2007. |
Pre-Approval of Audit and Non-Audit Services
Deltek’s Audit Committee Charter requires that the Audit Committee approve in advance any significant audit or non-audit engagement or relationship between the Company and its independent auditor, which is not prohibited by law, and approve the fees for such services. Deltek’s Audit Committee Charter is available on Deltek’s website at http://www.deltek.com—“Investor Relations”—“Corporate Governance.”
All significant Deloitte & Touche, LLP services and fees in fiscal year 2007 and fiscal year 2008 were pre-approved by the Audit Committee.
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Code of Business Conduct and Ethics
Deltek has adopted a Code of Business Conduct and Ethics, which is applicable to our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller or persons performing similar functions. The Code of Business Conduct and Ethics is available on Deltek’s website at http://www.deltek.com—“Investor Relations”—“Corporate Governance.” Deltek will disclose on its website any amendment to the Code of Business Conduct and Ethics, as well as any waivers of the Code of Business Conduct and Ethics, that are required to be disclosed by the rules of the Securities and Exchange Commission (the “SEC”) or The Nasdaq Global Select Market (“Nasdaq”).
Composition of the Board of Directors
Our Board of Directors currently consists of ten members, nine of whom are non-management members. Each director holds office until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. The Board of Directors has determined that Ms. Caldwell, Ms. Perna, Mr. Kampf and Mr. Manley meet the independence requirements under the applicable listing standards of Nasdaq.
Messrs. Ajouz, Klinsky and Singh, each a Managing Director of New Mountain Capital, L.L.C., were appointed to our Board of Directors pursuant to an investor rights agreement under which New Mountain Partners II, L.P. has a right to designate a certain number of the members of our Board of Directors (ranging from a majority of the Board of Directors to one director, depending on the collective stock ownership percentage of the New Mountain Funds). Ms. deLaski was appointed to our Board of Directors pursuant to the investor rights agreement under which the deLaski stockholders, who include Kenneth E. deLaski and Donald deLaski, have a right to designate a certain number of the members of our Board of Directors (either two directors or one director, depending on their stock ownership percentage). See “Certain Relationships and Related Transactions.”
More than 50% of our voting power is held by the New Mountain Funds, and as a result, we are deemed to be a “controlled company” under the rules established by Nasdaq, and qualify for, and rely on, the “controlled company” exception to the Board of Directors and committee composition requirements under the rules of The Nasdaq Global Select Market. Pursuant to this exception, we are exempt from the rule that requires our Board of Directors to be comprised of a majority of “independent directors” and our Compensation Committee to be comprised solely of “independent directors,” as defined under the rules of Nasdaq. The “controlled company” exception does not modify the independence requirements for the Audit Committee, and we have complied with the requirements of the Sarbanes-Oxley Act and Nasdaq rules, which require that our Audit Committee be composed of at least three members, each of whom is independent. See “Certain Relationships and Related Transactions.”
During the 2008 fiscal year, the Board of Directors held five meetings. Each of the directors attended or participated in 75% or more of the aggregate of the total number of meetings of the Board of Directors and the total number of meetings held by all committees of the Board of Directors on which he or she served during the past fiscal year. The Board of Directors has two standing committees: an Audit Committee and a Compensation Committee.
Our Board of Directors has established an Audit Committee and a Compensation Committee. The members of each committee are appointed by the Board of Directors and serve until their successor is elected and qualified, unless they are earlier removed or resign.
As a controlled company we are not required under the applicable listing standards of Nasdaq to have a standing nominating committee. The functions of evaluating and selecting directors have been performed by our
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Board of Directors as a whole. The Board of Directors has not adopted a formal written charter or policy addressing the process for the nomination of directors. In addition, we are party to an investor rights agreement with certain of our stockholders that provides the New Mountain Funds and the deLaski stockholders the right to designate a certain number of members of the Board of Directors. See “Certain Relationships and Related Transactions.”
We do not have a policy with regard to the consideration of director candidates recommended by stockholders. However, as described above, our controlling stockholders are entitled to designate a certain number of members of the Board of Directors. Stockholder recommendations relating to director nominees may be submitted in accordance with the procedures set forth under the heading “Questions and Answers About the 2009 Annual Meeting and Procedural Matters.”
We have an Audit Committee consisting of Ms. Caldwell, Ms. Perna and Mr. Manley. Mr. Manley chairs the committee, and the Board of Directors has determined that Mr. Manley satisfies the applicable requirements as an “audit committee financial expert” as defined in Item 407 of Regulation S-K. In addition, the Board of Directors has determined that Ms. Caldwell, Ms. Perna and Mr. Manley meet the independence requirements under the applicable listing standards of Nasdaq, including meeting the definition of “independent director” set forth in Nasdaq Rule 4200(a)(15) and the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act.
During 2008, our Audit Committee was comprised of Ms. Caldwell, Ms. Perna, Mr. Notini (until his resignation from the Audit Committee effective August 15, 2008) and Mr. Manley (upon his appointment to the Audit Committee effective August 16, 2008). No other person served as a member of the Audit Committee during 2008.
The Audit Committee assists our Board of Directors in fulfilling its responsibility to stockholders, the investment community and governmental agencies that regulate our activities in its oversight of, among other things:
| • | the integrity of our financial reporting process and financial statements and systems of internal controls; |
| • | our compliance with legal and regulatory requirements; |
| • | the independent registered public accounting firm’s selection, qualifications and independence and performance; and |
| • | when we establish an internal audit function, the performance of our internal audit function. |
The Audit Committee may study or investigate any matter of interest or concern that the committee determines is appropriate and may retain outside legal, accounting or other advisors for this purpose.
The Audit Committee held ten meetings during the last fiscal year. The Audit Committee has adopted a written charter approved by the Board of Directors, which is available on Deltek’s website at http://www.deltek.com—“Investor Relations”—“Corporate Governance.”
The Audit Committee Report is included in this proxy statement on page 55.
We have a Compensation Committee consisting of Ms. Caldwell, Ms. deLaski and Messrs. Kampf and Singh. Mr. Singh chairs the committee. The Board of Directors has determined that Ms. Caldwell and Mr. Kampf meet the independence requirements under the applicable listing standards of Nasdaq. Mr. Singh and Ms. deLaski do not meet the independence requirements under the applicable listing standards of Nasdaq. The purpose of the Compensation Committee is to, among other things:
| • | discharge the responsibilities of our Board of Directors relating to compensation of our officers and certain employees, including our incentive compensation and equity-based plans, policies and programs; and |
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| • | review the compensation discussion and analysis to be included in our filings with the Securities and Exchange Commission, discuss the compensation discussion and analysis with management and approve a report of the committee for inclusion in our annual report or annual proxy statement. |
The Compensation Committee has a subcommittee consisting of Ms. Caldwell and Mr. Kampf for purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code (the “Code”) and Section 16 of the Exchange Act.
The Compensation Committee held four meetings during the last fiscal year. The Compensation Committee has adopted a written charter approved by the Board of Directors, which is available on Deltek’s website at http://www.deltek.com—“Investor Relations”—“Corporate Governance.”
The Compensation Committee Report is included in this proxy statement on page 39.
Compensation Committee Interlocks and Insider Participation
During 2008, our Board of Directors or our Compensation Committee determined the compensation of our executive officers. None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.
During 2008, our Compensation Committee was comprised of Ms. Caldwell, Ms. deLaski, Messrs. Kampf and Singh. No other person served as a member of the Compensation Committee during 2008.
Attendance at Annual Meetings of Stockholders by the Board of Directors
We do not have a formal policy regarding attendance by members of the Board of Directors at Deltek’s annual meeting of stockholders. One member of our Board of Directors attended our 2008 Annual Meeting of Stockholders.
Contacting the Board of Directors
Deltek has adopted a Policy Regarding Communications from Shareholders to enable stockholders to submit communications to the Board of Directors or individual members of the Board of Directors. These communications may be submitted, addressed to the Board of Directors or the individual member, as appropriate, in either of the following ways:
| • | by mail: |
Deltek, Inc.
Attn: General Counsel/Board of Directors
13880 Dulles Corner Lane
Herndon, VA 20171
| • | by Internet: |
www.ethicspoint.com (click on “File a New Report” and enter “Deltek” as the Organization Name)
Stockholders may submit their communications to the Board of Directors or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Confidential—To be opened only by [the Chairman of the Audit Committee or Appropriate Director].”
The Policy Regarding Communications from Shareholders is available on Deltek’s website at http://www.deltek.com—“Investor Relations”—“Corporate Governance.”
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EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Overview
The Compensation Committee of our Board of Directors has overall responsibility for the compensation program for our executive officers. Members of the Compensation Committee are appointed by the Board of Directors. Currently, the Compensation Committee consists of four members of the Board of Directors, none of whom are executive officers of the Company.
Our executive compensation program is designed to encourage our executives to think and act like owners of the Company, focusing on increasing stockholder value in the short term and long term by thinking strategically and maximizing bottom line results, while mitigating risks.
Our objective is to provide a competitive total compensation package to attract and retain key personnel and drive effective results. Our executive compensation program provides for the following elements:
| • | base salaries, which are designed to allow us to attract and retain qualified candidates in the geographic market where the job is being performed; |
| • | variable compensation, which provides additional cash compensation and is designed to support our pay-for-performance philosophy; |
| • | equity compensation, in the form of restricted stock and stock options, which are granted to incentivize executive behavior that results in increased stockholder value; and |
| • | a benefits package that is available to all of our employees. |
A detailed description of these components is provided below.
Our named executive officers as of December 31, 2008 are Kevin T. Parker (Chairman of the Board, President and Chief Executive Officer), Mark L. Wabschall (our Executive Vice President, Chief Financial Officer and Treasurer effective May 16, 2008), Richard P. Lowrey (Executive Vice President of Products and Strategy), Carolyn J. Parent (Executive Vice President of Worldwide Sales) and Richard M. Lowenstein (Executive Vice President of Professional Services). James C. Reagan was our Executive Vice President, Chief Financial Officer and Treasurer prior to May 16, 2008, and this status makes him a named executive officer.
2008 Executive Compensation
Our 2008 executive compensation program is based on benchmarking each executive’s individual compensation components against our peer group’s base salary, variable compensation and equity components for similar positions, subject to modifications to reflect individual performance and contribution to our success. Our Compensation Committee retained Frederic W. Cook & Co., Inc. (“Frederic Cook”), an independent third party compensation consulting services firm, to assist in the evaluation of our executive compensation program until June 2008. From June 2008, our Compensation Committee retained Pearl Meyer & Partners (“Pearl Meyer”), an independent third party compensation consulting services firm, to assist in the evaluation of the executive compensation program.
As part of the executive compensation program, each of our compensation consultants was asked to provide:
| • | summary observations and considerations for our executive compensation program; |
| • | a competitive assessment of base salary, short-term and long-term total compensation targets, including with respect to cash and incentive compensation; |
| • | financial performance comparisons with respect to our peer group; and |
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| • | equity analysis and comparisons with respect to our peer group. |
We supplement the information provided to the Compensation Committee by our compensation consultants with data we obtain from participation in market surveys that target the high technology, software and consulting industries and provide other market information.
Compensation Philosophy
Our Compensation Committee has determined that compensation for our executives should be clearly linked to personal contribution and performance and should be competitive within the market in which we operate, so that each executive is fully engaged and motivated. As a result, our executive compensation program is designed to achieve the following objectives:
| • | that the executive’s compensation goals are aligned with the Company’s goals; and |
| • | that compensation for each of our executives is competitive with the compensation for similar positions within our identified peer group. |
The Company’s elements of compensation, and the Company’s decisions regarding those elements, are intended to provide an appropriate balance between fixed and variable compensation, short-term and long-term performance horizons and cash and equity compensation.
We expect our compensation programs to allow us to attract, retain and motivate executives who:
| • | think and act like owners; |
| • | focus on strategic objectives; |
| • | achieve bottom line results; and |
| • | create long-term appreciation of stockholder value. |
We use base salary, variable compensation and equity to compensate each of our named executives.
| • | Base salary is utilized to provide financial stability, recognize immediate contributions and compensate for significant responsibility. |
| • | Variable compensation is leveraged to ensure that executives deliver on short-term financial and operating goals and to ensure that we pay for performance. |
| • | Equity is utilized to balance executives’ short-term thinking with long-term perspective, reward for innovation, ensure alignment with stockholder interests and attract and retain key talent. |
We do not have pre-defined specific ratios in determining the base salary, variable compensation and equity components of compensation nor do we have pre-defined specific allocations between cash and non-cash compensation. Rather, we seek to benchmark each executive’s individual compensation component against our peer group’s base salary, bonus and equity components for similar positions. Because we expect our executives’ individual performance to exceed that of our peer group, we have targeted the 50th to 75th percentiles as the appropriate benchmark for each component of compensation, depending on the contribution and performance of the executive. As a direct result, our total cash compensation (base salary and variable compensation) and equity compensation is targeted to be above average relative to the identified peer group.
The evaluation of base salary, variable compensation and equity goals is done by the Compensation Committee, in the case of our chief executive officer, and by our chief executive officer and the Compensation Committee, in the case of the other executives. Our chief executive officer regularly meets with the Compensation Committee to discuss executive compensation matters and reviews his recommendations with the chairman of the Compensation Committee and with the Compensation Committee. Our chief executive officer,
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the chairman of the Compensation Committee and the Compensation Committee have the right to seek input from others, including third-party compensation consultants and generally to take other steps they consider to be necessary or appropriate in determining the appropriate compensation components for our executives.
The chairman of the Compensation Committee or the Compensation Committee each have the discretion to modify individual compensation components for our executives after reviewing our chief executive officer’s recommendations.
Our compensation policies and decisions related to executive compensation apply equally to all of our named executive officers, so there are no material differences in our compensation policies for different named executive officers. Any material differences in compensation levels among our executives generally reflect differences in compensation levels among executives in the peer group since we benchmark each element of each executive’s individual compensation against the same elements of compensation for similar positions in our peer group.
In the first half of 2008, our peer group was comprised of 18 software and technology companies, all of which are public companies. This peer group was established by identifying other companies that have similar financial parameters to Deltek based on revenue, net income, market capitalization and employee headcount. The peer group, which was analyzed by Frederic Cook and approved by our Compensation Committee, consisted of: TIBCO Software, Ansys, MicroStrategy, Quest Software, Lawson Software, Blackbaud, Blackboard, Manhattan Associates, Altiris, Witness Systems, Concur Technologies, RightNow Technologies, Equinix, Neustar, Digital River, WebEx, J2 Global and Websense.
In the second half of 2008, our Compensation Committee, with the assistance of Pearl Meyer, re-evaluated our peer group based on comparable revenue, net income, market capitalization and employee headcount metrics. As a result, our peer group was revised to consist of the following 15 software and high technology companies: Ariba, Blackboard, Blackbaud, Concur Technologies, Epicor Software, Informatica, JDA Software Group, Lawson Software, Manhattan Associates, Microstrategy, RightNow Technologies, SPSS, Tyler Technologies, Ultimate Software Group and Websense.
This peer group will continue to be re-evaluated by the Compensation Committee annually to ensure that we are using the appropriate companies for benchmarking purposes.
Base Salaries
We utilize base salary as a principal means of providing compensation for performing the essential elements of an executive officer’s job. We believe our base salaries are set at levels that allow us to attract and retain executives in the markets where we compete for talent. We believe that base salaries for our named executive officers are competitive with companies of a similar size in the software/technology industry.
Incentive Compensation
The Company’s named executive officers participate in our Employee Incentive Compensation Program (“EICP”), along with all employees not covered by another plan (Sales or Consulting).
The EICP provides variable compensation and is designed to reward executives for the achievement of our financial and strategic goals. Target payout levels correspond to our performance against the revenue and profit objectives discussed below. This program links executive rewards to activities that drive measurable success and progress. This program provides a direct and measurable way to align the executive’s goals with our corporate objectives of increasing revenue and profit and creating long-term stockholder value. Achievement of the goals requires a high level of performance.
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The EICP provides monetary compensation when quarterly Company financial and individual objectives are achieved. On an annual basis, the target payout as a percentage of an executive’s base salary is established by our chief executive officer based on a review of competitive market data of our peer group, with input from the senior vice president of human resources. The chairman of the Compensation Committee reviews the recommendations of the chief executive officer. That compensation is generally a pre-established percentage of an executive’s base salary, depending on the specific position and responsibilities for each executive. Our chief executive officer reviews each quarter’s financial results with the Compensation Committee and provides a recommendation for payout based on Company performance against the established quarterly objectives. The Compensation Committee approves the final payout percentage for the EICP program. Once the final overall payout percentage for the quarter has been established, the individual payment to our chief executive officer is determined by the chairman of the Compensation Committee, based on a review of the chief executive officer’s performance for the quarter, and subsequently approved by the Compensation Committee and reported to the Board of Directors.
Payments to our executive officers, other than our chief executive officer, are based on a quarterly evaluation of executive performance by our chief executive officer and a review of that evaluation with the chairman of the Compensation Committee. The chairman of the Compensation Committee approves the payment award after having considered whether any proposed payouts should be adjusted upward or downward. The chairman of the Compensation Committee and the Compensation Committee have the discretion to modify a payout in the event that either disagrees with our chief executive officer’s evaluations. Our other executives are generally not significantly involved in this process.
Payout of the EICP is based on the following components:
Plan Structure
The 2008 EICP target payout ranged between 50% to 97% of annual base salary for each of our named executive officers, depending on the specific position and responsibilities for each executive. Generally, the target percentage was a function of the ability of the executive, depending on the executive’s responsibilities, to affect our financial performance. As a result, the EICP targets as a percentage of annual base salary during 2008 were 63%, 62%, 50% and 60% for Messrs. Lowenstein, Lowrey, Wabschall and Reagan, respectively. Ms. Parent’s EICP target was 70% of her 2008 annual base salary; this higher percentage for her bonus potential is typical for the lead sales position in a software company. Mr. Parker’s EICP target was 97% of his 2008 annual base salary; this higher percentage for his bonus potential is typical for the chief executive officer of a software company. The percentages described above reflect the changes to the target EICP payouts that became effective on April 1, 2008 and the changes to base salary that became effective on February 16, 2008 for each of our named executive officers other than Mr. Wabschall, who became Executive Vice President, Chief Financial Officer and Treasurer effective May 16, 2008. The EICP amounts are earned and paid quarterly based on quarterly performance against our financial goals and individual objectives. Quarterly EICP payments are earned ratably. In addition, the payments may be increased to reward significant personal contributions to our performance and to assure that the total EICP payments for a year properly reflect the executive’s contribution to our full-year financial results.
The quarterly EICP payout is calculated based on two components: Company performance against specific financial targets relating to revenue, EBITDA and EBITDA margin and individual performance against identified quarterly goals and objectives.
In 2008, Mr. Parker approved the individual goals and objectives for each named executive officer. Mr. Parker’s goals, which relate solely to our performance, are set annually and reviewed by the Board of Directors.
Company Performance:The EICP is funded based on achievement of quarterly financial goals relating to revenue, EBITDA and our EBITDA margin performance as a percentage of revenue. The revenue and EBITDA
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goals are weighted equally. The resulting amount is then adjusted upward or downward based on the performance of our EBITDA margin against our target. For 2008, the total revenue goal was $315 million, the EBITDA goal was $80 million and the goal for EBITDA margin was 25%.
We believe that our EICP financial targets for 2008 (based on our corporate revenue, EBITDA and EBITDA margin performance as a percentage of revenue) were set at challenging levels that required superior performance on our part in that they required us to achieve strong revenue and EBITDA growth and to carefully control costs to meet the EBITDA margin goals. We established financial targets, however, that would be attainable if we had what we considered to be a successful year. For 2008, the EICP goals were partially achieved, resulting in a partial payout under the EICP.
EBITDA for purposes of the EICP calculation is earnings before interest, taxes, depreciation, amortization, severance costs, stock-based compensation expense and costs associated with compliance with the Sarbanes-Oxley Act.
Personal Performance:Performance against individual goals is used in determining the individual quarterly EICP payout for all executive officers except our chief executive officer, whose incentive payout relates solely to our performance. For example, an executive with 90% personal performance against his or her goals would have a multiplier of 90% of his or her individual EICP target compensation opportunity (subject to the Company performance multiplier based on our achievement of quarterly financial goals). Individual goals are established quarterly. Due to differences in roles and responsibilities among executives, individual goals vary from executive to executive. For example, individual goals for an executive in a sales function may include the achievement of certain sales or revenue goals, while individual goals for other executives may include the completion of certain initiatives, projects or transactions.
For 2008, the primary individual performance goals considered by our Compensation Committee, and by our chief executive officer in making payout recommendations to our Compensation Committee, were as follows:
| • | for Mr. Wabschall, his contributions to improving our financial reporting functions and internal control process, enhancing our investor relations activities and developing a budget plan for the upcoming fiscal year; |
| • | for Mr. Lowrey, his efforts in developing and delivering on product roadmaps and strategic plans, structuring and developing our product development team and improving our operational efficiency within and outside our organizational structure; |
| • | for Ms. Parent, her achievement of pipeline, budget and revenue goals and her efforts in reorganizing and building our sales team and improving sales processes and sales training; |
| • | for Mr. Lowenstein, his achievement of revenue and margin goals and his efforts in structuring and developing our services team and developing resource allocation, utilization and analysis tools; and |
| • | for Mr. Reagan, his contributions to improving our financial reporting functions, complying with the public company regulatory environment and managing our internal control process. |
During 2008, Mr. Lowrey’s performance ratings ranged from 58% to 90%, Ms. Parent’s performance ratings ranged from 67% to 100% and Mr. Lowenstein’s performance ratings ranged from 92% to 100%. Mr. Wabschall’s performance ratings were set at 100% for 2008 based on the terms of his employment agreement. Mr. Reagan did not receive any variable compensation for 2008 and ceased to serve as Executive Vice President, Chief Financial Officer and Treasurer effective May 16, 2008.
It is possible under the plan for an executive to receive a partial payment because the executive has reached his or her individual objectives even though the Company as a whole has failed to meet its financial objectives (or vice versa). Furthermore, our Compensation Committee and chief executive officer retain the discretion to increase or decrease any payouts under the EICP in connection with the review of performance of an executive against the Company’s financial goals and his or her personal goals.
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Quarterly EICP Payout Calculation:As indicated above, the calculation of an executive’s quarterly variable compensation is based on the product of both Company performance against objectives and individual performance against quarterly goals. Accordingly, EICP payouts are not based on a weighted average of each target element.
The quarterly EICP calculation is as follows:
| Quarterly | X | Company | X | Personal | = | Quarterly Payout | ||||||
| Target | Performance | Performance |
| • | Quarterly Target = EICP quarterly target opportunity for each executive; |
| • | Company Performance = The Company’s achievement against revenue, EBITDA and EBITDA margin goals; and |
| • | Personal Performance = Achievement of executive’s individual quarterly goals. |
As illustrated in the above calculation, the amount of payout may increase or decrease based on our Board of Directors’ assessment of our EBITDA margin performance and other financial results as well as individual performance.
Timeline
The EICP is a calendar-year program with payouts made on a quarterly basis.
2008 EICP Payouts
Our Compensation Committee awarded payouts for performance during the year ended December 31, 2008 based upon our achievement against the revenue and EBITDA performance goals established in our 2008 internal financial budget and forecast.
Based on our actual achievement level of 92% of budgeted revenue, 84% of budgeted EBITDA, and 92% of budgeted EBITDA margin, and adjusting payouts to recognize individual performance and contribution to our 2008 financial performance, Mr. Parker received a total payout for 2008 of $331,250 (63% of his base salary, with a target EICP payout of 97% of his base salary), Ms. Parent received a total payout for 2008 of $140,653 (44% of her base salary, with a target EICP payout of 70% of her base salary), Mr. Lowrey received a total payout for 2008 of $101,250 (31% of his base salary, with a target EICP payout of 62% of his base salary) and Mr. Lowenstein received a total payout for 2008 of $112,064 (39% of his base salary, with a target EICP payout of 63% of his base salary). Mr. Wabschall received a total payout for 2008 of $93,750 (based on guaranteed EICP payouts agreed upon at the commencement of his employment). Mr. Reagan did not receive an EICP payout in 2008 as he ceased to serve as Executive Vice President, Chief Financial Officer and Treasurer in 2008.
Code Section 162(m)
Section 162(m) of the Code was not applicable to us in 2008 because we were a private company until November 1, 2007. We intend to rely on an exemption from Section 162(m) for a plan adopted prior to the time a company becomes a public company. This pre-initial public offering exemption will no longer be available to us after the date of our annual meeting that occurs after the third calendar year following the year of our initial public offering, or if we materially modify the relevant plan before such time.
Equity
We use equity awards in the form of restricted stock and stock options as a means of incentivizing and aligning executive behavior to increase stockholder value, to foster a long-term commitment to us and our stockholders and as a means of attracting and retaining executives.
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A number of factors are considered when determining the size of all equity grants, including labor market conditions, executive performance and a review of the executive’s overall compensation package. Initial option grants are designed to attract experienced executives with established records of success and significant public company experience. Subsequent grants of stock options or restricted stock, including the grants made to our executive officers on February 22, 2008, are designed to ensure that equity compensation remains competitive within our peer group and that we incentivize and retain the executive officers who are critical to our success. The February 22, 2008 grants were designed to ensure that the executives received an annual grant that is consistent with the grants within our peer group and that the total value of each executive’s equity holdings was sufficient to retain such executive. The February 22, 2008 grants were not taken into consideration in setting the compensation targets for our executives for 2008. We do not have any stock ownership requirements or objectives for our executives.
In April 2007, we implemented our 2007 Stock Incentive and Award Plan (“2007 Plan”) that provides for the potential award of various equity instruments, including stock options, restricted stock, stock appreciation rights and dividend equivalent rights. Our 2007 Plan was approved by the Compensation Committee and our stockholders. The equity awards described in this section were made pursuant to our 2007 Plan.
All option awards under our 2005 Plan and 2007 Plan to our named executive officers vest ratably at 25% per year and have a 10-year maximum term, with a strike price set at the fair market value on the date of grant. Vesting occurs on each anniversary date of the grant, except for the initial grant, which vests on each anniversary date of employment. The portion of an option under our 2005 Plan that is vested must be exercised within 180 days after the date of termination of an executive. The portion of an option under our 2007 Plan that is vested must be exercised within 45 days after the date of termination of an executive.
Restricted stock awards made in 2008 to our named executive officers under our 2007 Plan vest ratably at 25% per year, with vesting occurring on each anniversary of the date of grant. The restricted stock awards made in 2008 were subject to the restrictions set forth in a shareholders’ agreement. See “Certain Relationships and Related Transactions—Shareholder Agreements.”
Stock Appreciation Rights
Our SAR Plan was in effect prior to the acquisition of 75% of our common stock by the New Mountain Funds in April 2005. This plan was discontinued at that time, though fixed payments under the plan pertaining to Mr. Lowrey continued until January 2008. The payments were made in installments and were based on the share price as of the acquisition date. The value of the SARs was fixed on April 22, 2005, the recapitalization date, with payments occurring according to the terms of the initial SAR grant.
Mr. Lowrey is the last executive officer to receive payments under this plan. He received his final payment of $134,489 in January 2008. See “Executive Compensation—Employment Agreements and Arrangements” and “Certain Relationships and Related Transactions—Recapitalization Agreement.”
Benefits
Our executives participate in our standard benefit plans, which are offered to all U.S.-based employees and include our 401(k) plan. We currently provide a profit-sharing contribution to our 401(k) plan of 4% of an employee’s salary up to a maximum of $4,000 per calendar year.
Our executives have the opportunity to participate in our health and welfare benefit programs, which include a group medical program, a group dental program, a vision program, life insurance, disability insurance and flexible spending accounts. These benefits are the same as those offered to all other U.S.-based employees. Through our benefit programs, each of our named executive officers received group term life insurance equivalent to 100% of their annual base salary. While provided as a benefit, the cost of the group term life insurance is included in the “All Other Compensation” column of the Summary Compensation Table.
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Employment Agreements and Arrangements
We have entered into employment agreements or arrangements with Messrs. Parker, Wabschall, Lowrey, Lowenstein and Reagan and Ms. Parent. These employment agreements or arrangements are currently in effect, except for with respect to Mr. Reagan, who ceased to serve as Executive Vice President, Chief Financial Officer and Treasurer effective May 16, 2008. Other than with respect to Mr. Lowrey, the employment agreements or arrangements are intended to establish the key employment terms (including reporting responsibilities, base salary and annual bonus, the initial stock option grant and other benefits), to provide for severance benefits and to establish a non-competition agreement. The agreement with Mr. Lowrey sets forth certain terms that govern his stock options, provides for severance benefits and establishes a non-competition agreement. See “Executive Compensation—Employment Agreements and Arrangements.”
Additional Compensation Actions Taken in 2008
In February 2008, the Compensation Committee undertook a review of the compensation of the executive management team, including the named executive officers. This review included a detailed examination of our executive compensation compared to a peer group as well as surveys that cover the high-technology software industry, and review and comment by Frederic Cook. Consistent with market practice, each executive’s compensation was benchmarked against the executive’s counterparts in the peer group. As a result, any differences in compensation levels among our executives generally reflect differences in compensation levels among executives in the peer group. Where limited comparable peer group compensation data existed for a particular executive, such executive’s compensation was benchmarked against other members of the executive team. The review did not take into account, and was not based upon, the total compensation paid to the executives in 2007.
The Compensation Committee approved changes to compensation to adjust the base salary and variable compensation components to compete with market levels for each executive officer and to also reflect the executive’s performance and the Company’s overall performance. Specifically, the following base salary and bonus adjustments went into effect as of February 16, 2008.
Executive | Annual Salary prior to February 16, 2008 | Annual Salary effective February 16, 2008 | ||||
Kevin T. Parker | $ | 490,000 | $ | 530,000 | ||
Richard P. Lowrey | $ | 300,000 | $ | 325,000 | ||
Carolyn J. Parent | $ | 300,000 | $ | 325,000 | ||
Richard M. Lowenstein | $ | 275,000 | $ | 290,000 | ||
James C. Reagan | $ | 285,000 | $ | 300,000 | ||
Executive | Annual Variable Compensation Opportunity Prior to April 1, 2008 | Annual Variable Compensation Opportunity effective April 1, 2008 | ||||
Kevin T. Parker | $ | 441,000 | $ | 530,000 | ||
Richard P. Lowrey | $ | 200,000 | $ | 200,000 | ||
Carolyn J. Parent | $ | 225,000 | $ | 225,000 | ||
Richard M. Lowenstein | $ | 175,000 | $ | 185,000 | ||
James C. Reagan | $ | 175,000 | $ | 180,000 | ||
The Compensation Committee also reviewed the equity holdings of each executive officer and provided an additional grant of stock options and/or restricted stock as appropriate. The February 22, 2008 grants were designed to ensure that the executives received an annual grant that is consistent with the grants within our peer group and that the total value of each executive’s equity holdings was sufficient to retain such executive. Options were granted effective February 22, 2008, with an exercise price of $12.98 per share, the then-current fair value of our common stock.
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On May 7, 2008, the Compensation Committee approved an annual base salary of $300,000 and a variable compensation opportunity of $150,000 in connection with Mr. Wabschall’s employment as Executive Vice President, Chief Financial Officer and Treasurer.
Executive | Stock Options Granted February 22, 2008 | Restricted Stock Granted February 22, 2008 | ||
Kevin T. Parker | 211,565 | — | ||
Richard P. Lowrey | 37,000 | 11,000 | ||
Carolyn J. Parent | 35,000 | 19,000 | ||
Richard M. Lowenstein | 37,000 | 11,000 | ||
James C. Reagan | 57,000 | — |
On May 7, 2008, the Compensation Committee approved a grant of 150,000 stock options under our 2007 Plan to Mr. Wabschall in connection with his employment as Executive Vice President, Chief Financial Officer and Treasurer. The grant was effective May 12, 2008, with an exercise price of $8.83 per share, the then-current fair value of our common stock.
The following tables and narrative set forth information concerning the compensation paid to, awarded to or earned by our chief executive officer, our chief financial officer and the three other most highly compensated executive officers who served in such capacities as of December 31, 2008. We also have provided such compensation information with respect to our chief financial officer who served in this capacity until May 16, 2008. We refer to these officers collectively as our “named executive officers.”
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Summary Compensation Table
The following table sets forth information regarding compensation earned by our named executive officers with respect to 2008:
Name and Principal Position | Year | Salary ($) | Bonus ($) | Equity Awards (2) ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation (3) ($) | Total ($) | |||||||||||||||
Kevin T. Parker Chairman of the Board, President and Chief Executive Officer | 2008 2007 2006 | $ $ $ | 523,333 478,333 450,000 |
| — — — |
| $ $ $ | 893,327 504,656 301,608 | $ $ $ | 331,250 514,999 400,000 | $ $ $ | 24,148 7,458 629,328 | (4)
| $ $ $ | 1,772,059 1,505,446 1,780,936 | |||||||
Mark L. Wabschall Executive Vice President, Chief Financial Officer and Treasurer | 2008 | $ | 179,545 | 75,000 | (1) | $ | 110,412 | $ | 18,750 | $ | 4,433 | (5) | $ | 388,141 | ||||||||
Richard P. Lowrey Executive Vice President of Products and Strategy | 2008 2007 2006 | $ $ $ | 320,833 292,708 271,250 |
| — — — |
| $ $ $ | 359,181 238,680 96,698 | $ $ $ | 101,250 177,241 181,260 | $ $ $ | 138,978 248,201 246,799 | (6)
| $ $ $ | 920,242 956,830 796,007 | |||||||
Carolyn J. Parent Executive Vice President of Worldwide Sales | 2008 2007 2006 | $ $ $ | 320,833 292,708 217,708 |
$ | — — 100,000 |
(1) | $ $ $ | 450,337 303,170 126,419 | $ $ $ | 140,653 227,600 123,033 | $ $ $ | 17,504 5,909 123,033 | (7)
| $ $ $ | 929,327 829,387 571,105 | |||||||
Richard M. Lowenstein Executive Vice President of Professional Services | 2008 2007 | $ $ | 287,500 267,708 |
| — — |
| $ $ | 473,002 317,629 | $ $ | 112,064 147,854 | $ $ | 11,642 56,050 | (8)
| $ $ | 884,208 789,241 | |||||||
James C. Reagan Executive Vice President, Chief Financial Officer and Treasurer | 2008 2007 2006 | $ $ $ | 324,740 282,083 275,000 |
$ | — — 40,000 |
(1) | $ $ $ | 95,084 146,608 96,698 | $ $ $ | — 155,474 107,140 | $ $ $ | 10,918 4,430 4,356 | (9)
| $ $ $ | 430,743 588,861 523,194 | |||||||
| (1) | The amounts shown reflect EICP payments that were guaranteed at the time of hire pursuant to the individual’s offer of employment. |
| (2) | Reflects the dollar amount recognized for financial statement reporting purposes (disregarding an estimate of forfeitures related to service-based vesting conditions) for fiscal 2008, in accordance with FAS 123(R), and thus may include amounts from awards granted in and prior to 2008. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 13, 2009. |
| (3) | Includes our contributions to our 401(k) plan up to $4,000 per calendar year and group life insurance contributions on behalf of the named executive officers, among other items for Messrs. Parker, Wabschall, Lowrey, Lowenstein and Reagan and Ms. Parent identified in footnotes (4) to (9). |
| (4) | For 2008, the compensation for Mr. Parker includes $4,000 of 401(k) plan contributions, $794 of group life insurance contributions and $4,714 treated as income for a tax gross-up related to reimbursement of travel, meal and hotel expenses related to his attendance at Deltek’s President’s Club. |
| (5) | For 2008, the compensation for Mr. Wabschall includes $4,000 of 401(k) plan contributions and $433 of group life insurance contributions. |
| (6) | For 2008, the compensation for Mr. Lowrey includes $134,489 as a result of a final SAR payment in 2008, $4,000 of 401(k) contributions and $489 of group life insurance contributions. The amount and timing of the SAR payment was fixed in April 2005 when our SAR Plan was terminated. We have not issued SARs since then. |
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| (7) | For 2008, the compensation for Ms. Parent includes $4,000 of 401(k) plan contributions, $326 of group life insurance contributions and $3,210 treated as income for a tax gross-up related to reimbursement of travel, meal and hotel expenses related to her attendance at Deltek’s President’s Club. |
| (8) | For 2008, the compensation for Mr. Lowenstein includes $4,000 of 401(k) contributions, $429 of group life insurance contributions and $1,757 treated as income for a tax gross-up related to reimbursement of travel, meal and hotel expenses related to his attendance at Deltek’s President’s Club. |
| (9) | For 2008, the compensation for Mr. Reagan includes $4,000 of 401(k) plan contributions, $628 of group life insurance contributions and $1,532 treated as income for a tax-related gross-up related to reimbursement of travel, meal and hotel expenses related to his attendance at Deltek’s President’s Club. |
Grants of Plan-Based Awards for Year Ended December 31, 2008
The following table sets forth each grant of plan-based awards to our named executive officers with respect to 2008.
Name | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | All Other Stock Awards: Number of Restricted Stock Awards (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock Option and Restricted Stock Awards (2) | ||||||||||
| Target ($) | ||||||||||||||||
Kevin T. Parker | 2/22/2008 | $ | 530,000 | — | 211,565 | $ | 12.98 | $ | 1,422,444 | |||||||
Mark L. Wabschall | 5/12/2008 | $ | 150,000 | (3) | — | 150,000 | $ | 8.83 | $ | 688,898 | ||||||
Richard P. Lowrey | 2/22/2008 | $ | 200,000 | 11,000 | 37,000 | $ | 12.98 | $ | 391,547 | |||||||
Carolyn J. Parent | 2/22/2008 | $ | 225,000 | 19,000 | 35,000 | $ | 12.98 | $ | 481,940 | |||||||
Richard M. Lowenstein | 2/22/2008 | $ | 185,000 | 11,000 | 37,000 | $ | 12.98 | $ | 391,547 | |||||||
James C. Reagan | 2/22/2008 | $ | 180,000 | — | 57,000 | $ | 12.98 | $ | 383,236 | |||||||
| (1) | There are no thresholds or maximum payouts under the EICP. The information provided relates to the prorated targets that were in effect during 2008. Effective April 1, 2008, the target cash variable compensation for our named executive officers changed. See “Management—Compensation Discussion and Analysis—Additional Compensation Actions Taken in 2008.” |
| (2) | The amounts shown represent the estimated fair value of the stock options and restricted stock on the grant date as determined in accordance with FAS 123(R), using the modified prospective method to estimate the fair value of stock options and restricted stock. For additional information on the valuation assumptions, refer to the notes to our consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2008. |
| (3) | Reflects Mr. Wabschall’s full annual target variable compensation. However, Mr. Wabschall was eligible for a pro rated EICP payout as he became our Executive Vice President, Chief Financial Officer and Treasurer effective May 16, 2008. |
Employment Agreements and Arrangements
The following is a description of the material actions taken with respect to the employment agreements and arrangements for our named executive officers during 2008. This description is being provided to explain the quantitative data disclosed above in the Summary Compensation Table for Year Ended December 31, 2008 and the table regarding Grants of Plan-Based Awards for Year Ended December 31, 2008.
Kevin T. Parker
On February 7, 2008, our Compensation Committee reviewed and adjusted both Mr. Parker’s base salary and 2008 variable compensation target to $530,000.
Mark L. Wabschall
In May 2008, we entered into an employment letter agreement with Mark L. Wabschall, our Executive Vice President, Chief Financial Officer and Treasurer. The agreement has no set term, and employment under it is at
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will. The agreement provides for an annual base salary of $300,000. In addition, Mr. Wabschall is eligible to receive performance-based variable compensation, to be paid quarterly, based on the satisfaction of agreed-upon targets. The target annual variable compensation to be received by Mr. Wabschall is $150,000. The minimum quarterly variable compensation for the first two quarters after Mr. Wabschall’s start date (i.e., the second quarter beginning May 12, 2008, the third quarter of 2008 and a portion of the fourth quarter of 2008) is guaranteed to be 100% of his target payout. In connection with the commencement of his employment with us, we granted Mr. Wabschall an option to purchase 150,000 shares of our common stock at an exercise price of $8.83 per share in May 2008.
Carolyn J. Parent, Richard P. Lowrey, Richard M. Lowenstein and James C. Reagan
On February 14, 2008, our Compensation Committee reviewed and adjusted Ms. Parent’s annual salary from $300,000 to $325,000. Her target annual variable compensation opportunity for 2008 remained at $225,000.
On February 14, 2008, our Compensation Committee reviewed and adjusted Mr. Lowrey’s annual salary from $300,000 to $325,000. His target annual variable compensation opportunity for 2008 remained at $200,000.
On February 14, 2008, our Compensation Committee reviewed and adjusted Mr. Lowenstein’s annual salary from $275,000 to $290,000 and his target annual variable compensation opportunity for 2008 from $175,000 to $185,000.
On February 14, 2008, our Compensation Committee reviewed and adjusted Mr. Reagan’s annual salary from $285,000 to $300,000 and his target annual variable compensation opportunity for 2008 from $175,000 to $180,000.
These adjustments were effective as of February 16, 2008 with respect to annual salary and as of April 1, 2008 with respect to target annual variable compensation opportunity.
Prior to our recapitalization in April 2005, Mr. Lowrey was a participant under our SAR Plan. In connection with the recapitalization, all outstanding SARs were cancelled, and SARs holders became entitled to receive cash payments, payable in accordance with the original vesting schedules of the applicable SARs. Pursuant to this arrangement, Mr. Lowrey received a final payment of $134,489 in January 2008.
See “Change in Control and Potential Payments Upon Termination or Change of Control.”
2005 Stock Option Plan
Our Board of Directors adopted our 2005 Stock Option Plan on July 20, 2005. In connection with the reincorporation and name change of Deltek Systems, Inc., a Virginia corporation, to Deltek, Inc., a Delaware corporation, which occurred on April 10, 2007, the options to acquire Deltek Systems, Inc. common stock became options to acquire Deltek, Inc. common stock on the same terms, for the same number of shares and at the same exercise price as applied to the options prior to the reincorporation. The converted options are subject to our 2005 Stock Option Plan (as amended and restated in connection with the reincorporation) and to the related stock option agreements.
The plan provides for the grant of options to purchase shares of our common stock to employees, directors and consultants of the Company or our subsidiaries. These options are not intended to qualify as incentive stock options. Prior to the establishment of our Compensation Committee, the plan was administered by our Board of Directors. The plan is now administered by the Compensation Committee of our Board of Directors, and the committee sets the terms and conditions of the options.
The plan provides that the Compensation Committee has the authority to adjust the maximum number of shares of common stock issuable under the plan, the number of shares covered by outstanding options, the applicable exercise price of an existing option and any other terms of an outstanding option as a result of any change in the number of shares of common stock resulting from a merger, consolidation, reorganization, recapitalization, stock dividend, stock split or other similar transaction.
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The plan also gives our Board of Directors the right to amend or terminate the plan, except that, to the extent necessary under any applicable law, no amendment will be effective unless approved by our stockholders. In addition, no amendment may adversely affect the rights of any optionee without the optionee’s consent. Notwithstanding the foregoing sentence, an amendment to increase the number of shares of common stock available for issuance under the plan will not be deemed to adversely affect any optionee. The plan was approved by our stockholders.
The form of stock option agreement provides that options generally vest and become exercisable in equal installments on each of the first four anniversaries of the grant date. Options granted under the plan have a maximum term of 10 years from the date of grant, unless terminated earlier. For a discussion regarding vesting of options upon a change of control and the effect of a termination of an optionee’s employment, see “Potential Payments Upon Termination or Change in Control.”
Under the 2005 Plan, each optionee is required to execute a shareholders’ agreement, among other conditions, prior to being deemed the holder of, or having any rights with respect to, any shares of our common stock. In accordance with the shareholders’ agreement, stockholders which are party to the agreement are entitled to participate proportionately in an offering of common stock by the New Mountain Funds. If the number of shares of our common stock which the optionee is entitled to sell in this offering exceeds the number of shares of common stock held by the optionee, any options held by the optionee (including unvested options) may be exercised to the extent of the excess. A stockholder may choose any combination of shares and options (if vested) in determining the securities the stockholder will sell in the public or private offering. Any unvested options may only be exercised to the extent there is an amount of securities that such stockholder may sell that has not been covered by shares or vested options. See “Certain Relationships and Related Transactions.”
Prior to the adoption of our 2007 Plan (described in more detail below), a total of 6,310,000 shares of common stock issuable upon exercise of options were authorized under the 2005 Plan. As of December 31, 2008, options to purchase a total of 4,683,744 shares of common stock were issued and outstanding under the 2005 Plan. No further grants have been made under the 2005 Plan as of April 11, 2007. Subsequent equity grants have been made under our 2007 Plan. See “Incentive and Benefit Plans—2007 Stock Incentive and Award Plan.”
Employee Incentive Compensation Program
The Company’s named executive officers participate in our EICP. The EICP provides monetary compensation that is generally a pre-established percentage of an executive’s base salary. The 2008 EICP target variable compensation ranged between 50% to 97% of annual base salary for each of our named executive officers. The EICP amounts are earned and paid quarterly and are calculated based on two components: Company performance against specific targets and personal performance against identified quarterly goals and objectives. As an incentive to join our Company, certain named executive officers were guaranteed that their quarterly payout for the first two quarters after their start date would be a minimum of 100% of their target. See “Executive Compensation—Incentive Compensation—Plan Structure” and “Executive Compensation—Additional Compensation Actions Taken in 2008.”
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Outstanding Equity Awards at December 31, 2008
Option Awards
The following table sets forth outstanding stock option awards for each of our named executive officers at December 31, 2008.
Name | Number of Securities Underlying Unexercised Options (#) Exercisable (1) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | |||||
Kevin T. Parker | 463,390 51,937 40,000 0 | 207,755 17,313 120,000 211,565 | $ $ $ $ | 3.61 7.22 13.10 12.98 | 7/19/2015 7/19/2015 3/14/2017 2/21/2018 | ||||
Mark L. Wabschall | 0 | 150,000 | $ | 8.83 | 5/11/2018 | ||||
Richard P. Lowrey | 162,405 15,000 25,000 0 | 62,500 15,000 75,000 37,000 | $ $ $ $ | 3.61 7.22 13.10 12.98 | 11/2/2015 11/2/2015 3/14/2017 2/21/2018 | ||||
Carolyn J. Parent | 34,209 7,311 25,000 0 | 67,500 7,312 75,000 35,000 | $ $ $ $ | 7.91 11.48 13.10 12.98 | 3/8/2016 12/3/2016 3/14/2017 2/21/2018 | ||||
Richard M. Lowenstein | 35,847 13,669 18,750 0 | 67,500 13,670 56,250 37,000 | $ $ $ $ | 11.48 11.48 13.10 12.98 | 10/22/2016 12/3/2016 3/14/2017 2/21/2018 | ||||
James C. Reagan | 187,500 45,000 10,000 | 0 0 0 | $ $ $ | 3.61 7.22 13.10 | 5/14/2009 5/14/2009 5/14/2009 | ||||
| (1) | With respect to Ms. Parent and Messrs. Parker, Wabschall, Lowenstein and Reagan, options granted at the commencement of their employment vest 25% on each anniversary of their hire dates. |
Mr. Parker’s hire date is June 27, 2005, and his options vest as follows: (i) 207,755 shares at $3.61 and 17,312 shares at $7.22 on June 27, 2006, (ii) 207,755 shares at $3.61 and 17,312 shares at $7.22 on June 27, 2007, (iii) 207,755 shares at $3.61 and 17,313 shares at $7.22 on June 27, 2008 and (iv) 207,755 shares at $3.61 and 17,313 shares at $7.22 on June 27, 2009.
Mr. Wabschall’s hire date is May 12, 2008, and his options vest as follows: (i) 37,500 at $8.83 on May 12, 2009, (ii) 37,500 at $8.83 on May 12, 2010, (iii) 37,500 at $8.83 on May 12, 2011 and (iv) 37,500 at $8.83 on May 12, 2012.
Mr. Lowenstein’s hire date is June 26, 2006, and his options vest as follows: (i) 40,584 shares on June 26, 2007, (ii) 40,585 shares on June 26, 2008, (iii) 40,585 shares on June 26, 2009 and (iv) 40,585 shares on June 26, 2009.
Mr. Lowrey’s options vest as follows: (i) 62,500 shares at $3.61 and 15,000 shares at $7.22 on May 2, 2006, (ii) 62,500 shares at $3.61 and 15,000 shares at $7.22 on May 2, 2007, (iii) 62,500 shares at $3.61 and 15,000 shares at $7.22 on May 2, 2008 and (iv) 62,500 shares at $3.61 and 15,000 shares at $7.22 on May 2, 2009.
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Ms. Parent’s hire date is March 1, 2006, and her options vest as follows: (i) 33,750 shares at $7.91 and 3,655 shares at $11.48 on March 1, 2007, (ii) 33,750 shares at $7.91 and 3,656 shares at $11.48 on March 1, 2008, (iii) 33,750 shares at $7.91 and 3,656 shares at $11.48 on March 1, 2009 and (iv) 33,750 shares at $7.91 and 3,656 shares at $11.48 on March 1, 2010.
Mr. Reagan’s hire date was October 6, 2005, and his options vested as follows: (i) 62,500 shares at $3.61 and 15,000 shares at $7.22 on October 6, 2006, (ii) 62,500 shares at $3.61 and 15,000 shares at $7.22 on October 6, 2007 and (iii) 62,500 shares at $3.61 and 15,000 shares at $7.22 on October 6, 2008.
Options granted to Ms. Parent and Messrs. Parker, Lowenstein, Lowrey and Reagan on March 15, 2007 vest as follows: (i) 25,000 shares, 40,000 shares, 18,750 shares, 25,000 shares and 10,000 to Ms. Parent and Messrs. Parker, Lowenstein, Lowrey and Reagan, respectively, on March 15, 2008, (ii) 25,000 shares, 40,000 shares, 18,750 shares and 25,000 shares to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey, respectively, on March 15, 2009, (iii) 25,000 shares, 40,000 shares, 18,750 shares and 25,000 shares to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey, respectively, on March 15, 2010 and (iv) (i) 25,000 shares, 40,000 shares, 18,750 shares and 25,000 shares to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey, respectively, on March 15, 2011.
Options granted to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey on February 22, 2008 vest as follows: (i) 8,750 shares, 52,891 shares, 9,250 shares and 9,250 shares to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey, respectively, on February 22, 2009, (ii) 8,750 shares, 52,891 shares, 9,250 shares and 9,250 shares to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey, respectively, on February 22, 2010, (iii) 8,750 shares, 52,891 shares, 9,250 shares and 9,250 shares to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey, respectively, on February 22, 2011 and (iv) 8,750 shares, 52,892 shares, 9,250 shares and 9,250 shares to Ms. Parent and Messrs. Parker, Lowenstein and Lowrey, respectively, on February 22, 2012. None of the options granted to Mr. Reagan on February 22, 2008 vested.
Restricted Stock Awards
The following table sets forth outstanding restricted stock awards for each of our named executive officers at December 31, 2008.
Name | Number of Shares of Restricted Stock (Vested) | Number of Shares of Restricted Stock (Unvested) | Grant Date | |||
Kevin T. Parker | — | — | — | |||
Mark L. Wabschall | — | — | — | |||
Richard P. Lowrey | — | 11,000 | 2/22/2008 | |||
Carolyn J. Parent | — | 19,000 | 2/22/2008 | |||
Richard M. Lowenstein | — | 11,000 | 2/22/2008 | |||
James C. Reagan | — | — | — |
Option Exercises and Stock Vested
During the fiscal year ended December 31, 2008, none of our named executive officers exercised any stock options or realized value on the exercise of stock options or had any restricted stock grants vest.
Change in Control and Potential Payments Upon Termination or Change in Control
For purposes of our change in control policy, a “change in control” will occur if:
| • | any third party not affiliated with the New Mountain Funds or any of their affiliates, but excluding Kenneth E. deLaski and persons and entities related to him, owns, directly or indirectly, more of our voting capital stock than the New Mountain Funds or any of their affiliates own; or |
| • | a third party not affiliated with the New Mountain Funds or any of their affiliates has or obtains the right to elect a majority of our Board of Directors. |
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Kevin T. Parker
Under Mr. Parker’s amended employment agreement, if we terminate Mr. Parker’s employment without “cause” or give a notice of non-renewal of the agreement or if Mr. Parker terminates his employment for “good reason” (as such terms are defined below) (a “qualifying termination”), Mr. Parker will be entitled to receive as severance, two years’ salary continuation at his then-current base salary rate, a lump sum payment equal to two times his target annual variable compensation for the year in which termination occurs and continuation of medical benefits for 18 months at active-employee rates. If Mr. Parker’s employment is terminated due to his death or disability, he will receive as severance, salary continuation at his then-current base salary rate for 12 months, a lump sum payment equal to two times his target annual cash incentive compensation for the year in which termination occurs and continuation of medical benefits for 18 months at active-employee rates. If we terminate Mr. Parker’s employment for “cause,” Mr. Parker will be entitled to receive only accrued base salary and benefits as of the date of termination.
Upon a “qualifying termination,” the options held by Mr. Parker will become exercisable as to those portions that would have become exercisable had Mr. Parker been employed during the entirety of the one-year period following termination. Upon a change in control, the options held by Mr. Parker will immediately be accelerated and deemed to be vested and exercisable in full.
For purposes of Mr. Parker’s amended employment agreement, “cause” is defined as:
| • | a conviction for a felony; |
| • | fraud or gross misconduct on Mr. Parker’s part that causes material damage to us; or |
| • | Mr. Parker’s breach of a material term of his employment agreement that is not cured within 30 days after written notice to him. |
“Good reason” is defined as:
| • | a reduction in the nature and scope of Mr. Parker’s authorities, powers, functions or duties that is not cured within 30 days after written notice to us (which reduction will be assumed if Mr. Parker no longer serves as our sole chief executive officer and a voting member of our Board of Directors); |
| • | a reduction in Mr. Parker’s compensation (including base salary or target cash incentive compensation opportunity); |
| • | an office relocation resulting in a commute that is more than 75 miles from Mr. Parker’s residence or more than 120% (in miles) of Mr. Parker’s prior commute, whichever is greater; or |
| • | our material breach of any material terms of Mr. Parker’s employment or Mr. Parker’s employment agreement that is not cured within 30 days after written notice to us. |
Mr. Parker’s employment agreement automatically extends each year for an additional one-year term unless either party gives notice of non-renewal to the other party at least six months prior to the expiration of the relevant period.
If any payments or distributions due to Mr. Parker in connection with a change in control of us, including by reason of his termination of employment, would be subject to the excise tax imposed by Section 4999 of the Code, we will provide Mr. Parker with a gross-up payment so that he will be made whole for any excise tax imposed on the payments or distributions resulting from the change in control.
Mr. Parker is bound by obligations of confidentiality during the term of his employment and thereafter. Mr. Parker’s employment agreement contains non-solicitation provisions that apply during the term of Mr. Parker’s employment and for a period of 12 months following termination of his employment for any reason. A restrictive covenant relating to non-competition applies during the term of Mr. Parker’s employment and for a period of
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12 months thereafter, if Mr. Parker is terminated for any reason prior to a change in control, or for six months thereafter, if Mr. Parker is terminated for any reason on or after a change in control.
Mark L. Wabschall, Richard P. Lowrey, Carolyn J. Parent and Richard M. Lowenstein
If the employment of any of Messrs. Wabschall, Lowrey and Lowenstein or Ms. Parent is terminated prior to a change in control either by us without “cause” or by the executive for “good reason” (as such terms are defined below), the executive will receive as severance six months’ salary continuation at the executive’s then-current base salary rate and continuation of medical benefits for 12 months at active-employee rates.
If, on the date of or within 18 months following a change in control, the employment of any of Messrs. Wabschall, Lowrey and Lowenstein or Ms. Parent is terminated either by us or our successor without “cause” or by the executive for “good reason” the executive will receive as severance 18 months’ salary continuation at the executive’s then-current base salary rate, a lump sum payment equal to one and one-half times the executive’s target annual cash incentive compensation for the year in which termination occurs and continuation of medical benefits for 18 months at active-employee rates.
If the employment of any of Messrs. Wabschall, Lowrey and Lowenstein or Ms. Parent is terminated by us for “cause,” the executive will be entitled to receive only accrued base salary and benefits as of the date of termination.
The employment letter agreements also provide that if the employment of any of Messrs. Wabschall, Lowrey and Lowenstein or Ms. Parent is terminated either by us or our successor without “cause” or by the executive for “good reason” on the date of or within 18 months following a change in control, the options held by the executive will immediately be accelerated and deemed to be vested and exercisable in full.
For purposes of the employment letter agreements with each of Messrs. Wabschall, Lowrey and Lowenstein and Ms. Parent, “cause” is defined as:
| • | a conviction for a felony; |
| • | fraud or gross misconduct on the executive’s part that causes material damage to us; |
| • | the executive’s material violation of the executive’s non-competition agreement; or |
| • | the executive’s breach of a material term of the executive’s employment letter agreement that is not cured within 30 days after written notice to the executive. |
“Good reason” is defined as:
| • | a material reduction in the nature and scope of the executive’s authorities, powers, functions or duties that is not cured within 30 days after written notice to us (provided, however, that neither a change in the executive’s reporting responsibilities nor our ceasing to be a publicly registered company will automatically constitute “good reason” unless, as a result thereof, there is a material reduction, without the executive’s consent, of the nature and scope of the executive’s authorities, powers, functions or duties); |
| • | a reduction in the executive’s compensation (including base salary or target bonus opportunity); |
| • | an office relocation resulting in a commute that is more than 75 miles from the executive’s residence or more than 120% (in miles) of the executive’s prior commute, whichever is greater; or |
| • | our material breach of the executive’s employment letter agreement that is not cured within 30 days after written notice to us. |
If any payments or distributions due to any of the executives in connection with a change in control of us would be subject to the excise tax imposed by Section 4999 of the Code, the executive will receive either the full amount of the severance payments or a reduced amount such that no excise tax is payable, whichever is more favorable to the executive.
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James C. Reagan
Mr. Reagan’s employment letter agreement provided that if his employment were terminated prior to a change in control either by us without “cause” or by Mr. Reagan for “good reason” (as such terms are defined below), Mr. Reagan would have received as severance six months’ salary continuation at the executive’s then-current base salary rate and continuation of medical benefits for 12 months.
If Mr. Reagan’s employment were terminated either by us or our successor without “cause” or by Mr. Reagan for “good reason” on the date of or within 18 months following a change in control, Mr. Reagan would have received as severance 18 months’ salary continuation at his then-current base salary rate, a lump sum payment equal to one and one-half times his target annual cash incentive compensation for the year in which termination occurs and continuation of medical benefits for 18 months.
If we were to have terminated Mr. Reagan’s employment for “cause,” he would have been entitled to receive only accrued base salary and benefits as of the date of termination.
The options held by Mr. Reagan that were granted to him upon commencement of his employment would have been immediately accelerated and deemed to be vested and exercisable in full upon a change in control. With respect to options that were subsequently granted to Mr. Reagan, if Mr. Reagan’s employment would have been terminated either by us or our successor without “cause” or by Mr. Reagan for “good reason” on the date of or within 18 months following a change in control, the options would have been accelerated and deemed to be vested and exercisable in full.
For purposes of Mr. Reagan’s employment letter agreement, “cause” was defined as:
| • | a conviction for a felony; |
| • | fraud or gross misconduct on Mr. Reagan’s part that causes material damage to us; |
| • | a material violation by Mr. Reagan of his non-competition agreement; or |
| • | a breach by Mr. Reagan of a material term of his employment letter agreement that is not cured within 30 days after written notice to him. |
“Good reason” was defined as:
| • | a material reduction in the nature and scope of Mr. Reagan’s authorities, powers, functions or duties that is not cured within 30 days after written notice to us (which reduction will be assumed if Mr. Reagan no longer serves as our sole chief financial officer or if we cease to be a public company); |
| • | a reduction in Mr. Reagan’s compensation (including base salary or target cash incentive compensation); |
| • | an office relocation resulting in a commute that is more than 75 miles from Mr. Reagan’s residence or more than 120% (in miles) of Mr. Reagan’s prior commute, whichever is greater; or |
| • | our material breach of Mr. Reagan’s employment letter agreement that is not cured within 30 days after written notice to us. |
If any payments or distributions due to Mr. Reagan in connection with a change in control of us would have been subject to the excise tax imposed by Section 4999 of the Code, we would have provided Mr. Reagan with a gross-up payment so that he would have been made whole for any excise tax imposed on the payments or distributions resulting from the change in control.
Pursuant to his employment letter agreement, Mr. Reagan was required to enter into a non-competition agreement with us as a condition to his employment. Under the non-competition agreement, Mr. Reagan is bound by obligations of confidentiality during the term of his employment and thereafter. The non-competition agreement also requires him to abide by restrictive covenants relating to non-solicitation and non-competition during the term of his employment and for a period of 12 months following termination of his employment.
Mr. Reagan did not receive a severance payment in connection with his ceasing to serve as our Executive Vice President, Chief Financial Officer and Treasurer.
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Employment Agreements and Arrangements
Messrs. Wabschall, Lowrey and Lowenstein and Ms. Parent have each entered into a non-competition agreement with us as a condition of their employment. Under the non-competition agreements, the executives are bound by obligations of confidentiality during the term of their employment and thereafter. The non-competition agreements also require each of the executives to abide by restrictive covenants relating to non-solicitation and non-competition during the term of their employment and for a period of 12 months following termination of their employment.
Except as described above and under “Potential Payments Upon Termination or Change in Control,” employment for our executive officers is “at will” and for no set term.
2005 Stock Option Plan
Unless otherwise set forth in a stock option agreement, our 2005 Stock Option Plan (as amended and restated) and the form of stock option agreement state that all unvested options will terminate upon the termination of an optionee’s employment for any reason. In addition, the form of stock option agreement provides that vested options may be exercised during the 180-day period following termination, but in no event after the expiration of the term of the options. Any portion of vested options not exercised during this 180-day period will terminate and be of no further force and effect. If an optionee’s employment is terminated by us for cause, the options held by the optionee will immediately terminate, regardless of vesting.
The plan provides that in the event of the liquidation or dissolution of our Company or a merger or consolidation of our Company, and unless otherwise provided in a stock option agreement, all options issued under the plan will continue in effect in accordance with their respective terms, except that following such transactions:
| • | each outstanding option will be treated as provided for in the operative plan or agreement entered into in connection with the transaction; or |
| • | if not so provided in the plan or agreement entered into in connection with the transaction, each optionee will be entitled to receive upon exercise of any outstanding option, the same number and kind of stock, securities, cash, property or other consideration that each holder of our common stock was entitled to receive in the transaction. Any consideration received will remain subject to all of the conditions applicable to the options prior to the transaction. |
In addition, the plan provides that, upon the merger or consolidation of our Company, liquidation of our Company or sale to a third party of all or substantially all of our assets or the sale to a third party of our common stock (other than through a public offering) in which the New Mountain Funds cease to beneficially own any of our voting securities, the plan and the unexercised portion of any outstanding options will terminate, unless continuation or substitution of the option is provided for in writing in connection with the transaction.
The form of stock option agreement also contains the provisions described in the prior two paragraphs. In addition, the form stock option agreement, together with our shareholders’ agreement, provides that, if the New Mountain Funds sell any of their shares of our common stock to a third party (including in the case of a total sale of their common stock to a third party), optionees are entitled to sell, and may be required to sell, the same percentage of the shares of our common stock as the New Mountain Funds sell. Any options held by an optionee may be exercised to the extent of the excess, if any, of:
| • | the number of shares with respect to which the optionee is entitled to, or is being required to, participate in the sale; over |
| • | the number of shares previously issued to the optionee upon exercise of any options held by the optionee that have not been previously disposed of. |
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If the sale is not consummated, any options held by the optionee will be exercisable thereafter only to the extent they would have been exercisable if notice of the sale had not been given. The form stock option agreement provides that the options would continue in effect in accordance with their terms in the event of a total sale by the New Mountain Funds of their common stock to a third party if provided for in writing in connection with the transaction.
The form of stock option agreement under the 2005 Stock Option Plan prohibits each optionee from:
| • | disclosing or furnishing to any other person any confidential or proprietary information about us or any of our affiliates; |
| • | directly or indirectly soliciting for employment any of our employees or any employee of any of our affiliates at any time before the second anniversary of the optionee’s termination of employment; and |
| • | selling, transferring, assigning, exchanging, pledging, encumbering or otherwise disposing of any option. |
The form of stock option agreement also provides that, at our discretion, we will be entitled to terminate the options, or any unexercised portion of the options, held by the optionee if any optionee:
| • | engages in any prohibited disclosure (or breaches the holder’s obligations under any non-disclosure or non-use of confidential information provision contained in any employment agreement to which the optionee is a party), prohibited solicitation (or breaches any non-solicitation obligations under any employment agreement to which the optionee is a party) or prohibited transfer of the holder’s options; |
| • | owns, manages or is employed by any of our competitors or is a competitor of the Company in an individual capacity; or |
| • | is convicted of a felony against us or our affiliates. |
With respect to the treatment of outstanding options upon an optionee’s termination of employment or a change in control of us, the options held by our named executive officers are subject to additional or different terms than those summarized above. See “Potential Payments Upon Termination or Change in Control.”
Payments Upon Termination or Change in Control
The following table sets forth information concerning the payments that would be received by each named executive officer upon a termination of employment (including by reason of death or disability) or a change in control. The table assumes:
| • | the termination and/or change in control took place on December 31, 2008; and |
| • | all options were cancelled in exchange for the right to receive, for each share subject to the option, the excess of $4.64 (the fair market value of our common stock on December 31, 2008) over the exercise price of the option. |
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Name | Benefit | Termination Without Cause or for Good Reason | Termination Upon Death or Disability | Termination for Cause | Termination Immediately Following a Change in Control Without Cause or for Good Reason | Change in Control | |||||||||||
Kevin T. Parker | Severance Payment | $ | 2,132,000 | $ | 1,599,000 | $ | — | $ | 2,132,000 | $ | — | ||||||
| Payment for Equity | |||||||||||||||||
—Vested Equity | 477,292 | 477,292 | — | 477,292 | 477,292 | ||||||||||||
—Unvested Equity | 213,988 | 213,988 | — | 213,988 | 213,988 | ||||||||||||
| Continued Medical | 24,070 | 24,070 | — | 24,070 | — | ||||||||||||
| Total | $ | 2,847,350 | $ | 2,314,350 | $ | — | $ | 2,847,350 | $ | 691,280 | |||||||
Mark L. Wabschall | Severance Payment | $ | 150,000 | $ | — | — | $ | 675,000 | — | ||||||||
| Payment for Equity | |||||||||||||||||
—Vested Equity | — | — | — | — | — | ||||||||||||
—Unvested Equity | — | — | — | — | — | ||||||||||||
| Continued Medical | 16,047 | — | — | 24,070 | — | ||||||||||||
| Total | 166,047 | — | — | 699,070 | — | ||||||||||||
Richard P. Lowrey | Severance Payment | $ | 162,500 | $ | — | $ | — | $ | 787,500 | $ | — | ||||||
| Payment for Equity | — | ||||||||||||||||
—Vested Equity | 167,277 | 167,277 | — | 167,277 | 167,277 | ||||||||||||
—Unvested Equity | — | — | — | 115,415 | — | ||||||||||||
| Continued Medical | 16,047 | — | — | 24,070 | — | ||||||||||||
| Total | $ | 345,824 | $ | 167,277 | $ | — | $ | 1,094,262 | $ | 167,277 | |||||||
Carolyn J. Parent | Severance Payment | $ | 162,500 | $ | — | $ | — | $ | 825,000 | $ | — | ||||||
| Payment for Equity | |||||||||||||||||
—Vested Equity | — | — | — | 88,160 | — | ||||||||||||
—Unvested Equity | — | — | — | — | |||||||||||||
| Continued Medical | 16,047 | — | — | 24,070 | — | ||||||||||||
| Total | $ | 178,547 | $ | — | $ | — | $ | 937,230 | $ | — | |||||||
Richard M. Lowenstein | Severance Payment | $ | 145,000 | $ | — | $ | — | $ | 712,500 | $ | — | ||||||
| Payment for Equity | |||||||||||||||||
—Vested Equity | — | — | — | 51,040 | — | ||||||||||||
—Unvested Equity | — | — | — | — | — | ||||||||||||
| Continued Medical | 16,047 | — | — | 24,070 | — | ||||||||||||
| Total | $ | 161,047 | $ | — | $ | — | $ | 787,610 | $ | — | |||||||
| Note: | Mr. Reagan was not eligible for any change in control payments as he ceased to be employed by us prior to December 31, 2008. |
In addition, Mr. Parker would be entitled to the payments set forth above in the column “Termination Without Cause or for Good Reason” if his employment were terminated by us upon expiration of his term of employment after giving notice that his term would not be extended.
2007 Stock Incentive and Award Plan
Our Board of Directors adopted our 2007 Plan in April 2007, and our stockholders have approved it. Certain holders of stock options, restricted stock or other awards under the plan are subject to a shareholders’ agreement. See “Certain Relationships and Related Transactions.” The plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Code and stock options which do not so qualify, restricted stock and performance-based restricted stock, stock appreciation rights, dividend equivalent rights, performance units and performance shares, cash incentive awards, phantom stock awards and share awards. Directors, officers, employees, including future employees who have received written offers of employment, and consultants and
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advisors to us and our subsidiaries (each an eligible individual) may receive grants under the plan. The plan is designed to comply with the requirements for “performance-based compensation” under Section 162(m) of the Code as currently in effect, and the conditions for exemptions from short-swing profit recovery rules under Rule 16b-3 under the Exchange Act.
The plan requires that a committee of at least two members of the Board of Directors administer the plan. The committee may consist of the entire Board of Directors, but:
| • | if the committee consists of less than the entire Board of Directors, then with respect to any option or award granted to an eligible individual who is subject to Section 16 of the Exchange Act, the committee must consist of at least two directors, each of whom must be a “non-employee director” for purposes of Section 16 of the Exchange Act; and |
| • | if needed for any option or award to qualify as performance-based compensation following the period ending on the earlier of the date of our annual meeting in 2011 and the expiration of the “reliance period” under Treasury Regulation Section 1.162-27(f)(2) (the “transition period”), the committee must consist of at least two directors, each of whom must be an outside director for purposes of Section 162(m) of the Code. |
The Compensation Committee currently administers the plan and has appointed a subcommittee to satisfy the requirements of Section 16 of the Exchange Act and Section 162(m) of the Code described above. Generally, the committee (and if appropriate, the subcommittee) has the right to grant options and other awards to eligible individuals and to determine the terms and conditions of options and awards, including the vesting schedule and exercise price of options and awards.
The plan authorized the initial issuance of 1,840,000 shares of our common stock. Until the termination of the plan, the number of shares available for issuance is increased annually on January 1st of each year, in an amount equal to 3% of the total number of our shares of common stock issued and outstanding as of December 31st of the immediately preceding calendar year. On January 1, 2008, the number of shares available for issuance under the plan was increased by 1,291,395 shares. Our Board of Directors has the discretion to reduce the amount of the annual increase in any particular year. Both the initial share reserve and the increased number of shares available for issuance under the plan are subject to adjustment in the event of any change in capitalization affecting our outstanding common stock. No more than 1,840,000 shares may be made the subject of incentive stock options under the plan. Following the transition period permitted under Section 162(m) of the Code, the number of shares that may be subject to options and stock appreciation rights granted to an eligible individual in any calendar year may not exceed 1,500,000 shares, and the number of shares that may be subject to performance shares or performance-based restricted stock granted to an eligible individual in any calendar year may not exceed 1,500,000 shares (with such limit to be applied separately to each type of award). The dollar amount of cash that may be the subject of performance units or cash incentive awards granted to an eligible individual in any calendar year may not exceed $1,500,000 and $2,000,000, respectively.
In the event of certain transactions involving our common stock, including a merger or consolidation, the plan and the options and awards issued under the plan will continue in effect in accordance with their respective terms, except that following these transactions either:
| • | each outstanding option or award will be treated as provided for in the agreement entered into in connection with the transaction; or |
| • | if not so provided in the agreement, each optionee or grantee will be entitled to receive in respect of each share of common stock subject to any outstanding option or award, upon exercise of an option or payment or transfer in respect of any award, the same consideration that each holder of a share of common stock was entitled to receive in the transaction, provided, however, that unless otherwise determined by the committee, the consideration will remain subject to all of the conditions, restrictions and performance criteria which were applicable to the options and awards prior to the transaction. In addition, in the event of a change in ownership or effective control of us, the committee may provide, |
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in an agreement evidencing the grant of an option or award or at any time thereafter, that options or awards may become vested and exercisable and may become free of restrictions, to the extent of all or any portion of the option or award. |
The plan will automatically terminate on the day preceding the tenth anniversary of its approval by our Board of Directors, unless terminated earlier by our Board of Directors. Generally, our Board of Directors may terminate, amend, modify or suspend the plan at any time, except that no such action may impair and adversely affect the rights under any award previously granted to a participant without the participant’s consent, and no material modification to performance goals and targets under the plan may be made without stockholder approval.
Employee Stock Purchase Plan
Our Employee Stock Purchase Plan (“ESPP”) is designed to enable eligible employees to periodically purchase shares of our common stock at a discount from the fair market value of our common stock on the date of purchase. Our executive officers and directors are not eligible to participate in our ESPP.
Limitations of Liability and Indemnification Matters
Our certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breach of fiduciary duty as a director, except for liabilities arising:
| • | from any breach of the director’s duty of loyalty to us or our stockholders; |
| • | from acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of any law; |
| • | from authorizing illegal dividends or redemptions; and |
| • | from any transaction from which the director derived an improper personal benefit. |
In addition, our bylaws provide that we will fully indemnify any person who was or is a party, or is threatened to be made a party, or is involved in any threatened, pending or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that the person is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred or suffered by the person in connection with the action, suit or proceeding. Delaware law also provides that indemnification permitted under law is not to be deemed exclusive of any other rights to which the directors and officers may be entitled under a corporation’s bylaws, any agreement, a vote of stockholders or otherwise.
We are authorized to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions, regardless of whether Delaware law would permit indemnification. We have obtained liability insurance for our officers and directors.
At present, we are the subject of one pending lawsuit or proceeding involving a director, officer, employee or agent as to which indemnification or advancement of expenses will be required or permitted under our bylaws. The lawsuit relates to an employee who is not an officer or director of the company.
The Compensation Committee oversees Deltek’s compensation policies, plans and benefit programs. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2008.
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Respectfully submitted by the members of the Compensation Committee of the Board of Directors
Alok Singh (Chair)
Kathleen deLaski
Nanci E. Caldwell
Joseph M. Kampf
Compensation for Fiscal 2008
The following table provides information concerning the compensation paid by us to each of our non-employee directors for fiscal 2008.
Name | Fees Earned or Paid in Cash ($) | Option Awards ($)(1)(2)(3) | Total ($) | |||
Michael B. Ajouz | — | — | — | |||
Nanci E. Caldwell | 60,000 | 113,277 | 173,277 | |||
Kathleen deLaski | 55,000 | 154,391 | 209,391 | |||
Joseph M. Kampf | 55,000 | 143,520 | 198,520 | |||
Steven B. Klinsky | — | — | — | |||
Thomas M. Manley | 26,727 | 8,480 | 35,207 | |||
Albert A. Notini (4) | 62,500 | 113,277 | 175,777 | |||
Janet R. Perna | 55,000 | 135,994 | 190,994 | |||
Alok Singh | — | — | — |
| (1) | Reflects the dollar amount recognized for financial statement reporting purposes (disregarding an estimate of forfeitures related to service-based vesting conditions) for fiscal 2008, in accordance with FAS 123(R), and thus may include amounts from awards granted in and prior to 2008. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 13, 2009. |
| (2) | In fiscal 2008, each of our non-employee directors received the following options to purchase shares of our common stock (directors affiliated with the New Mountain Funds do not receive equity grants): |
Name | Grant Date | Number of Shares | Exercise Price Per Share ($) | Grant Date Fair Value ($) (a) | ||||||
Nanci E. Caldwell | January 1, 2008 | 7,500 | (b) | $ | 15.23 | 60,178 | ||||
Kathleen deLaski | January 1, 2008 | 7,500 | (b) | $ | 15.23 | 60,178 | ||||
Joseph M. Kampf | January 1, 2008 | 7,500 | (b) | $ | 15.23 | 60,178 | ||||
Thomas M. Manley | August 13, 2008 | 20,000 | (c) | $ | 7.40 | 87,802 | ||||
Albert A. Notini | January 1, 2008 | 7,500 | (b) | $ | 15.23 | 60,178 | ||||
Janet R. Perna | January 1, 2008 | 7,500 | (b) | $ | 15.23 | 60,178 | ||||
(a) | The amounts shown represent the estimated fair value of the stock options on the grant date as determined in accordance with FAS 123(R), using the modified prospective method to estimate the fair value of stock options. For additional information on the valuation assumptions, refer to the notes to our consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2008. |
| (b) | The options represented by these grants vest 100% on the one-year anniversary of the option grant date. |
| (c) | Reflects shares granted to Mr. Manley in connection with his election to the Board of Directors in August 2008. The options represented by this grant vest ratably (25% per year) over a four-year period, commencing on the first anniversary of the option grant date. |
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| (3) | As of December 31, 2008, the aggregate number of shares underlying options outstanding for each of our non-employee directors was: |
Name | Aggregate Number of Shares | |
Michael B. Ajouz | ��� | |
Nanci E. Caldwell | 62,700 | |
Kathleen deLaski | 65,177 | |
Joseph M. Kampf | 70,735 | |
Steven B. Klinsky | — | |
Thomas M. Manley | 20,000 | |
Albert A. Notini | 62,700 | |
Janet R. Perna | 56,921 | |
Alok Singh | — |
| (4) | In 2008, Mr. Notini received a partial payment of the annual retainer payable to the Audit Committee chair as he did not serve on the Audit Committee for the full year. |
The following table sets forth the outstanding equity awards held by non-employee directors at December 31, 2008.
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exerciseable | Number of Securities Underlying Unexercised Options (#) Unexerciseable | Option Exercise Price $ | Vesting Schedule | |||||
Nanci E. Caldwell | 8/2/2005 | 20,775 | 6,925 | 3.61 | 25% per year beginning on 8/2/2006 | |||||
| 2/21/2007 | 5,000 | 15,000 | 13.10 | 25% per year beginning on 2/21/2008 | ||||||
| 2/21/2007 | 7,500 | 0 | 13.10 | 100% on 2/21/2008 | ||||||
| 1/1/2008 | 0 | 7,500 | 15.23 | 100% on 1/01/2009 | ||||||
Kathleen deLaski | 6/2/2006 | 9,425 | 18,850 | 9.00 | 25% per year beginning on 6/2/2007 | |||||
| 12/4/2006 | 2,634 | 5,268 | 11.48 | 25% per year beginning on 6/2/2007 | ||||||
| 1/19/2007 | 3,500 | 10,500 | 12.24 | 25% per year beginning on 1/19/2008 | ||||||
| 2/21/2007 | 7,500 | 0 | 13.10 | 100% on 2/21/2008 | ||||||
| 1/1/2008 | 0 | 7,500 | 15.23 | 100% on 1/01/2009 | ||||||
Joseph M. Kampf | 6/2/2006 | 18,850 | 18,850 | 9.00 | 25% per year beginning on 6/2/2007 | |||||
| 12/4/2006 | 5,267 | 5,268 | 11.48 | 25% per year beginning on 6/2/2007 | ||||||
| 1/19/2007 | 1,875 | 5,625 | 12.24 | 25% per year beginning on 1/19/2008 | ||||||
| 2/21/2007 | 7,500 | 0 | 13.10 | 100% on 2/21/2008 | ||||||
| 1/1/2008 | 0 | 7,500 | 15.23 | 100% on 1/01/2009 | ||||||
Thomas M. Manley | 8/13/2008 | 0 | 20,000 | 7.40 | 25% per year beginning on 8/13/2009 | |||||
Albert A. Notini | 8/2/2005 | 20,775 | 6,925 | 3.61 | 25% per year beginning on 8/2/2006 | |||||
| 2/21/2007 | 5,000 | 15,000 | 13.10 | 25% per year beginning on 2/21/2008 | ||||||
| 2/21/2007 | 7,500 | 0 | 13.10 | 100% on 2/21/2008 | ||||||
| 1/1/2008 | 0 | 7,500 | 15.23 | 100% on 1/01/2009 | ||||||
Janet R. Perna | 6/2/2006 | 9,536 | 18,850 | 9.00 | 25% per year beginning on 6/2/2007 | |||||
| 12/4/2006 | 5,267 | 5,268 | 11.48 | 25% per year beginning on 6/2/2007 | ||||||
| 1/19/2007 | 750 | 2,250 | 12.24 | 25% per year beginning on 1/19/2008 | ||||||
| 2/21/2007 | 7,500 | 0 | 13.10 | 100% on 2/21/2008 | ||||||
| 1/1/2008 | 0 | 7,500 | 15.23 | 100% on 1/01/2009 | ||||||
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Standard Director Compensation Arrangements
Each director who is neither an officer nor an employee of us and is not affiliated with New Mountain Capital will receive an annual retainer of $50,000 and an annual retainer of $5,000 for service on each committee. An annual retainer of $10,000 is payable to the Compensation Committee chair in lieu of the $5,000 committee fee. Effective August 12, 2008, an annual retainer of $20,000 is payable to the Audit Committee chair in lieu of the $5,000 committee fee. Prior to August 12, 2008, the annual retainer payable to the Audit Committee chair was $15,000. All retainers are paid quarterly and in cash.
The following table provides information regarding the amount of annual cash fees payable to non-affiliate directors in 2008 and 2009.
Position | 2008 Fees ($) | 2009 Fees ($) | |||
Member of the Board of Directors | 50,000 | 50,000 | |||
Lead Director | — | — | |||
Audit Committee: | |||||
Chair | 20,000 | (1) | 20,000 | ||
Member | 5,000 | 5,000 | |||
Compensation Committee: | |||||
Chair | 10,000 | 10,000 | |||
Member | 5,000 | 5,000 |
| (1) | Effective August 12, 2008, the annual retainer payable to the Audit Committee Chair was increased from $15,000 to $20,000. |
Equity Compensation
Our directors receive an initial grant of 20,000 options that vest 25% per year upon initial election as a director and an annual stock option grant of 7,500 options on the first business day of each calendar year that vest 100% on the first anniversary of the date of grant. Options granted have a per share exercise price equal to the fair value of a share of our common stock underlying our options at the time of grant.
Equity Compensation Plan Information
The following table summarizes the number of outstanding options, warrants, rights and shares of restricted stock granted to employees and directors, as well as the number of securities remaining available for future issuance, under Deltek’s equity compensation plans as of December 31, 2008. No warrants or rights have been granted under our equity compensation plans.
| (a) | (b) | (c) | |||||||
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | Weighted-average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(6) (#) | ||||||
Equity compensation plans approved by security holders (1) | 6,737,859 | (1) | 9.21 | (2) | 791,631 | (3)(4)(5) | |||
Equity compensation plans not approved by security holders | — | — | — | ||||||
Total | 6,737,859 | (1) | 9.21 | (2) | 791,631 | (3)(4)(5) |
| (1) | Includes 4,683,744 securities to be issued upon exercise of outstanding options under Deltek’s 2005 Stock Option Plan and 2,054,115 securities to be issued upon exercise of outstanding options under Deltek’s 2007 Stock Incentive and Award Plan as of December 31, 2008. Excludes 285,650 restricted shares granted under outstanding stock awards under Deltek’s 2007 Stock Incentive and Award Plan as of December 31, 2008. |
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| (2) | The weighted-average exercise price does not take into account 285,650 shares of restricted stock issued under outstanding stock awards under Deltek’s 2007 Stock Incentive and Award Plan, which have no exercise price. |
| (3) | No further securities may be issued under our 2005 Stock Option Plan after April 11, 2007. |
| (4) | Includes 791,631 securities remaining available for future issuance as of December 31, 2008 under Deltek’s 2007 Stock Incentive and Award Plan. |
| (5) | Excludes 667,264 shares available for future issuance as of December 31, 2008 under Deltek’s Employee Stock Purchase Plan. |
| (6) | The Deltek, Inc. 2007 Stock Incentive and Award Plan provides that the aggregate number of shares reserved and available for grant and issuance is increased on January 1 of each year commencing on January 1, 2008 by 3% of the total number of our shares of common stock issued and outstanding on December 31 of the previous year. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Recapitalization Agreement
We entered into the recapitalization agreement with the New Mountain Funds, the deLaski stockholders and certain management stockholders on December 23, 2004. The recapitalization closed on April 22, 2005. In 2008, we made a final payment to Mr. Lowrey of $134,489 in connection with the accelerated vesting of his stock appreciation rights in connection with the recapitalization.
Advisory Agreement
On April 22, 2005, we entered into an advisory agreement with New Mountain Capital, L.L.C. (“New Mountain Capital”) pursuant to which New Mountain Capital was engaged to provide management, financial and investment banking services to us on a non-exclusive basis. New Mountain Capital was to receive $500,000 annually as an advisory fee for these services (payable quarterly in advance) and, separately, is entitled to receive a transaction fee, on a transaction by transaction basis, equal to 2% of the transaction value of each significant transaction directly or indirectly involving us or any of our controlled affiliates, including acquisitions, dispositions, mergers or other similar transactions, debt, equity or other financing transactions, public or private offerings of our securities and joint ventures, partnerships and minority investments. Transaction fees are payable upon the consummation of a significant transaction. No fee is payable for a transaction with a value of less than $25 million. In 2007, New Mountain Capital agreed to waive its advisory fee for the third quarter of 2007 and for subsequent quarters. We did not pay any transaction fees to New Mountain Capital in 2008.
Under the advisory agreement, we are required to pay directly or reimburse New Mountain Capital for its out-of-pocket expenses incurred in connection with the services provided under the agreement. We paid approximately $150,000 in 2008 in total expense reimbursements arising under the advisory agreement to New Mountain Capital.
The advisory agreement terminates when, among other things, the New Mountain Funds cease to beneficially own at least 15% of our outstanding common stock or a change of control occurs, which will generally occur:
| • | upon the consolidation, merger or other business combination of us into another person; |
| • | upon the sale, lease, transfer or other disposition of all or substantially all of our assets; |
| • | upon any transaction or series of related transactions in which the holders of our voting capital immediately prior to the transaction do not continue to hold more than 40% of the combined voting power of the voting securities of the surviving entity having the power to vote with respect to the election of directors; or |
| • | when the directors who were members of our Board of Directors at the close of business on April 22, 2005 (or any new director who has been approved by a vote of at least a majority of those directors) cease to constitute a majority of the members of our Board of Directors. |
Investor Rights Agreement
On April 22, 2005, we entered into an investor rights agreement with the New Mountain Funds and certain other persons, including the deLaski stockholders, and on August 10, 2007, we amended the investor rights agreement. The investor rights agreement contains a voting agreement that provides, among other things, that New Mountain Partners II, L.P. (“New Mountain Partners”) and the deLaski stockholders will be entitled to designate a certain number of members of the Board of Directors and that we are required to take the necessary action within our control to cause the designated individuals to be elected as members of our Board of Directors. Further, at each stockholder meeting at which directors are to be elected, the New Mountain Funds, and any assignee of the New Mountain Funds, and the deLaski stockholders are required to take all necessary and desirable action to effect the terms of the voting agreement, including with respect to the election of directors.
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Three of our current directors, Messrs. Ajouz, Klinsky and Singh, were appointed by New Mountain Partners and Allegheny New Mountain, and one of our current directors, Ms. deLaski, was appointed by the deLaski stockholders pursuant to the investor rights agreement. The rights granted in the investor rights agreement to New Mountain Partners, Allegheny New Mountain and the deLaski stockholders to appoint directors is subject to reduction and elimination as the stock ownership percentages of the New Mountain Funds or the deLaski stockholders, as applicable, decline. So long as New Mountain Partners owns a majority of the outstanding shares of our Class A common stock and beneficially owns one-third or more of the outstanding shares of our common stock, it has the right to designate at a least a majority of our Board of Directors, provided that:
| • | if the New Mountain Funds (including any transferee of the New Mountain Funds) beneficially own less than one-third, but at least 15% of the outstanding shares of our common stock, New Mountain Partners will be entitled to elect three of the members of our Board of Directors; |
| • | if the New Mountain Funds (including any transferee of the New Mountain Funds) beneficially own less than 15% but at least 5% of the outstanding shares of our common stock, New Mountain Partners will be entitled to elect two of the members of our Board of Directors; and |
| • | if the New Mountain Funds (including any transferee of the New Mountain Funds) beneficially own less than 5% of the outstanding shares of our common stock, then so long as the New Mountain Funds beneficially own any shares of our common stock, New Mountain Partners will be entitled to elect at least one member of our Board of Directors. |
Notwithstanding the foregoing, as long as New Mountain Partners has the right to designate more than one director, and Allegheny New Mountain owns any shares of our Class A common stock, Allegheny New Mountain has the right to designate one director to our Board of Directors in lieu of the director being designated by New Mountain Partners.
In addition, as long as the deLaski stockholders beneficially own at least 15% of our outstanding common stock, they have the right to designate two members of our Board of Directors. If the deLaski stockholders beneficially own less than 15% but at least 5% of our outstanding common stock, they have the right to designate one member of our Board of Directors. Any members designated by the deLaski stockholders must be reasonably acceptable to the New Mountain Funds.
If any member of our Board of Directors designated by New Mountain Partners, Allegheny New Mountain or the deLaski stockholders ceases to serve as a director for any reason, the resulting vacancy will be filled by the person or entity entitled to designate the director (provided that the person or entity still has the right to designate a director as described above). In addition, the New Mountain Funds and the deLaski stockholders will not vote in favor of the removal of any designated director unless the person or entity having the right to designate the director to our Board of Directors recommends his or her removal. In such case, the New Mountain Funds and the deLaski stockholders are required to vote in favor of the director’s removal.
The voting agreement with respect to the election of directors and vacancies and removals of directors requires that our certificate of incorporation and bylaws provide for indemnification of, advancement of expenses to and limitation of personal liability to the directors of our Board of Directors. Under this agreement, we are not permitted to amend, repeal or modify in a manner adverse to our directors any provision of our certificate of incorporation until at least six years following the date that New Mountain Partners, Allegheny New Mountain and the deLaski stockholders are no longer entitled to designate directors to our Board of Directors.
Under the investor rights agreement, the prior written consent of the New Mountain Funds is required upon the occurrence of certain events. We cannot, without the prior written consent of the New Mountain Funds, take certain actions, including actions to:
| • | consolidate or merge with any other person, sell or transfer all or substantially all of our assets to another person or enter into any other similar business combination transaction; |
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| • | enter into any transaction with any stockholder holding more than 1% of our outstanding common stock, director, officer or employee unless the transaction is determined by a majority of our Board of Directors to be fair and reasonable and is approved by a majority of disinterested directors; |
| • | change significantly the scope or nature of our business; |
| • | incur indebtedness of more than $10 million (other than indebtedness incurred under our current credit agreement as in effect on April 22, 2005 or under any amendment to, or refinancing of, our credit agreement, provided that the prior consent of the New Mountain Funds to any amendment or refinancing is obtained); |
| • | sell, lease, transfer or otherwise dispose of any asset or group of assets with a book value or fair market value of $10 million or more; |
| • | purchase, acquire or obtain any capital shares or other proprietary interest in any entity or related entity; |
| • | purchase, acquire or obtain any business or assets of another person having a value in excess of $5 million; |
| • | pay or declare a dividend or distribution on any shares of our capital stock (other than dividends on our common stock payable in additional shares of common stock); |
| • | issue, sell, offer for sale or solicit offers to buy any shares of our common stock or any convertible or non-convertible securities other than granting of options under our stock option plan, which grants have been approved by our Board of Directors (or a Board of Directors committee) inclusive of at least one director appointed by the New Mountain Funds or pursuant to a stock dividend or upon any stock split or other subdivision or combination of shares of our capital stock; |
| • | increase the number of directors of our Board of Directors to more than eight directors; |
| • | amend, repeal or change any provision of our certificate of incorporation or bylaws in any manner adverse to the New Mountain Funds or any assignee of the New Mountain Funds; |
| • | become a party to any agreement which restricts our ability to perform the investor rights agreement or the shareholders’ agreement; |
| • | change our independent auditors (other than to a “Big 4” accounting firm); |
| • | grant any severance or termination pay to any of our executive officers except payments made pursuant to pre-existing written agreements, in the ordinary course of business consistent with past practice or as determined by counsel to be required by law; |
| • | enter into, amend or modify any contract that would purport to apply to the New Mountain Funds; |
| • | remove, replace or establish the level of compensation payable to any of our executive officers, except in the ordinary course of business consistent with past practice; and |
| • | agree or otherwise commit to do any of the foregoing (unless the commitment is conditioned on obtaining the approval of the New Mountain Funds). |
The prior written consent of the deLaski stockholders is required to amend, repeal or change any provision of the advisory agreement, described below, and to enter into any transaction with any stockholder holding more than 1% of our common stock, any director, officer or employee of the Company, or any affiliate of the foregoing unless the transaction is determined to be fair and reasonable and is either approved by a majority of the disinterested members of the Board of Directors or is on terms at least as favorable to us as the terms that would be available from an independent third party on an arm’s-length basis.
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The approval rights of the New Mountain Funds under the investor rights agreement terminate when the New Mountain Funds and any assignee of the New Mountain Funds beneficially owns less than 15% of the shares of our outstanding common stock, and the deLaski approval rights terminate at the time the number of shares beneficially owned by the deLaski stockholders constitutes less than 52.8% of the number of shares of common stock owned by them on April 22, 2005.
The investor rights agreement provides certain registration rights which, among other things:
| • | allow the New Mountain Funds and any assignee of the New Mountain Funds to require that we effect the registration under the Securities Act of all or a part of the shares of our common stock held by them up to four times; |
| • | allow the New Mountain Funds and any assignee of the New Mountain Funds the right to include certain shares of our common stock held by them in any registration statement filed by us with respect to any offering of our equity securities; and |
| • | restrict our ability to grant a holder or prospective holder of our securities demand or incidental registration rights, unless the rights are subordinate to the rights granted to the New Mountain Funds and any assignee of the New Mountain Funds. |
The investor rights agreement contains indemnification provisions in favor of the stockholders that are party to the agreement and each control person of the stockholders against any losses arising out of the registration of our securities. We will reimburse these persons for any reasonable legal or other fees or expenses incurred in connection with investigating or defending any loss. We will not be liable to any of these persons if the loss arises out of or is based upon an untrue statement or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to us by or on behalf of the person.
Shareholders’ Agreements
The following stockholders are required to execute a shareholders’ agreement with respect to the shares of our common stock held by them:
| • | stockholders that have purchased shares from us prior to our initial public offering, including stockholders who were or are our directors, officers or employees; |
| • | stockholders that acquire shares pursuant to our 2005 Stock Option Plan; and |
| • | stockholders that acquire shares pursuant to our 2007 Plan and are “covered persons” as described below. |
We refer to these agreements collectively as the “shareholder agreements.” Shares of our common stock acquired pursuant to our ESPP are not subject to the shareholder agreements.
Under the shareholder agreements (other than the agreement applicable to shares acquired pursuant to the exercise of options granted under our 2007 Plan), each stockholder party to the agreement may participate proportionately in any private sale or public offering of common stock by the New Mountain Funds of their shares of our common stock. Each stockholder may sell in the private sale or public offering up to the same percentage of the stockholder’s shares of our common stock as the New Mountain Funds sell in the private sale or public offering, determined based on the aggregate number of shares of common stock owned and the aggregate number of shares of common stock being sold by the New Mountain Funds (assuming conversion, exchange or exercise of all convertible securities held by the New Mountain Funds and the stockholders, including vested and unvested options). If the number of shares which a stockholder is entitled to sell exceeds the number of shares of common stock held by the stockholder, any options held by the stockholder (including unvested options) may be exercised to the extent of the excess. A stockholder may choose any combination of shares and options (if vested) in determining the securities the stockholder will sell in the public or private
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offering. Any unvested options may only be exercised to the extent there is an amount of securities that such stockholder may sell that has not been covered by shares or vested options. In lieu of permitting the stockholder to exercise any vested or unvested options to enable a stockholder to participate in the public offering of shares owned by the New Mountain Funds, we may, at our option, cause the options and the shares underlying the options to be registered, thereby permitting the stockholder to sell these shares at a later date.
The shareholder agreements, as amended, also provide that if a stockholder party to the shareholder agreements is a “covered person” and if the New Mountain Funds propose to sell all or any portion of their shares of common stock in a bona fide arm’s-length transaction (by merger or otherwise) or if we propose to sell or otherwise transfer for value all or substantially all of our stock, assets or business:
| • | the New Mountain Funds, at their option, may require in the case of a sale of stock by them, that each covered person (as defined in the shareholder agreements) sell their shares proportionate to the New Mountain Funds and waive any appraisal rights in connection with the sale transaction; and |
| • | if stockholder approval of the transaction is required and our stockholders are entitled to vote on the transaction, each covered person is required to vote all of their shares in favor of the transaction. |
For purposes of the shareholder agreements, “covered person” will include:
| • | each of our current or former executive officers; |
| • | any other current or former officer who is or was employed by us at the Senior Vice President level or higher; or |
| • | any other stockholder who beneficially owns at least 100,000 shares of our common stock (including shares owned by any permitted transferee under the shareholder agreements). |
The sale of shares of our common stock by the covered persons upon exercise by the New Mountain Funds of these rights will be for the same per share consideration and on substantially the same terms and conditions as the sale of shares owned by the New Mountain Funds. The consideration may be adjusted, as needed, if the covered persons and the New Mountain Funds are selling different types of capital stock, except that there will be no adjustment in the consideration per share if the New Mountain Funds are also selling their shares of Class A common stock. If the consideration consists of securities and the sale would require either a registration statement under the Securities Act or the preparation of a disclosure statement pursuant to Regulation D under the Securities Act (or similar provision under state securities laws) and the registration statement or disclosure statement is not otherwise being prepared, then, at the option of the New Mountain Funds, the covered persons may receive, in lieu of securities, the fair market value of the securities in cash.
The shareholder agreements (other than those agreements entered into by our directors or by stockholders who have acquired shares through the exercise of options granted under our 2007 Plan) provide that, upon termination of an employee stockholder’s employment (other than Mr. Parker’s employment, whose rights under his joinder agreement are described below), we have the right to purchase for a period of six months all or any portion of the shares of our common stock held by the employee or acquired by the employee after the date of termination upon the exercise of any stock options held by the employee. If the employee is terminated by us for cause, the purchase price per share of the employee’s common stock will be equal to the lesser of 90% of the stockholder’s cost of their shares of common stock and the fair market value of the stockholder’s common stock. If an employee is terminated by us for any reason other than cause or if the employee’s employment with us terminates by reason of death, permanent disability or adjudicated incompetency, the purchase price per share of the employee’s common stock will be equal to the fair market value of the stockholder’s common stock. The fair market value of any shares repurchased by us will equal the average of the daily closing prices of our common stock on the 20 consecutive trading days immediately prior to the employee’s termination or, if the shares are not publicly listed or traded, will be determined by our Board of Directors in good faith.
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The shareholder agreements, moreover, prohibit stockholders party to the agreement (other than those agreements entered into by our directors or by stockholders who have acquired shares through the exercise of options granted under our 2007 Plan) from engaging in certain prohibited activities. Under the shareholder agreements, these stockholders may not:
| • | disclose or furnish to any other person confidential or proprietary information, defined as any non-public information acquired in the course of the stockholder’s employment with us, if applicable, that is reasonably likely to have competitive value to us, any of our affiliates or any competitor, excluding information that has become public other than as a result of breach by the stockholder of the shareholder agreements; or |
| • | directly or indirectly solicit for employment any of our employees or employees of any of our affiliates (in the case of employee stockholders only). |
In addition, stockholders who held shares of our common stock immediately prior to our initial public offering and stockholders who hold shares of our common stock acquired pursuant to the exercise of options acquired under our 2005 Stock Option Plan are prohibited from selling, transferring, assigning or otherwise disposing of the shares of our common stock held by them, except for certain permitted transfers to family members and entities related to the stockholder or family member.
We have the right to purchase all or any portion of the shares of our common stock then held by a stockholder who is party to the shareholder agreements if:
| • | a stockholder engages in any of the prohibited activities described above (if applicable); |
| • | an employee stockholder at any time prior to the second anniversary of the employee’s termination, owns, manages or is employed by any of our competitors or is a competitor of the Company in an individual capacity or engages in any other competitive activity (including breaching any non-competition obligations under any non-competition agreement or employee agreement to which the stockholder is a party); or |
| • | a stockholder is convicted of a felony against us or any of our affiliates. |
If we exercise this right, the purchase price per share of the stockholder’s common stock will be equal to the lesser of 90% of the stockholder’s cost of their shares of common stock and the fair market value of the stockholder’s common stock.
Under the shareholder agreements, from and after the date the New Mountain Funds and any assignee of the New Mountain Funds ceases to beneficially own shares of our common stock representing at least 15% of the total number of votes that may be cast in the general election of directors of the Company:
| • | all other provisions of the agreements regarding the rights and restrictions on our common stock terminate, including the repurchase provisions upon termination of employment or in the event of certain prohibited activities (applicable to all stockholders party to the agreement other than director stockholders); |
| • | any shares of common stock owned by current stockholders or holders of shares acquired upon exercise of options granted under our 2005 Stock Option Plan may be sold, transferred or assigned free of the restrictions contained in the agreements applicable to them; and |
| • | the stockholders party to the agreements will not be entitled to any of the rights contained in the agreements, except for those rights of current stockholders or holders of shares acquired upon exercise of options granted under our 2005 Stock Option Plan relating to their participation in private sales and public offerings by the New Mountain Funds. |
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Kevin T. Parker Joinder Agreement to Shareholders’ Agreement
Each executive officer who has purchased shares of our common stock entered into joinder agreements to the shareholder agreements dated as of the date of purchase of the shares. With the exception of Mr. Parker, each executive officer has the same rights and obligations as all other employees under the shareholder agreements.
Under Mr. Parker’s joinder agreement, if Mr. Parker’s employment is terminated, the period in which we are able to purchase shares of common stock owned by him is limited to two months after his termination (as opposed to six months for all other employees). In addition, in determining the purchase price for the shares of common stock owned by Mr. Parker, the fair market value of the shares of common stock owned by him will equal the average of the daily closing prices of our common stock on the 20 consecutive trading days immediately prior to his termination or, if the shares are not publicly listed or traded, will be determined by the mutual agreement of us and Mr. Parker or, in the absence of mutual agreement, by an investment banker or other third party valuation firm (or, in the absence of mutual agreement, by the American Arbitration Association). Under Mr. Parker’s employment agreement, we are required to maintain an effective registration statement covering the resale of shares purchased by Mr. Parker or ensure that we satisfy the requirements of Rule 144 of the Securities Act so that Rule 144 is available for Mr. Parker to sell his shares. Mr. Parker, however, will remain subject to the contractual and legal restrictions on resale applicable to him under his shareholder agreement.
Employment Arrangements with Executive Officers
In September 2008, we entered into an employment letter agreement with Garland T. Hall, our Senior Vice President of Global Support. The agreement has no set term, and employment under it is at will. The agreement provided for an annual base salary of $225,000. In addition, Mr. Hall is eligible to receive performance-based cash incentive compensation, to be paid quarterly, based on the satisfaction of agreed-upon targets. The target annual cash incentive compensation to be received by Mr. Hall was $115,000. In connection with the commencement of his employment with us, we granted Mr. Hall in October 2008 an option to purchase 100,000 shares of our common stock at an exercise price of $6.17 per share.
Stock Purchases by Executive Officers and Directors
Other than through the exercise of stock options, no executive officer purchased shares of our common stock during 2008. During 2008, one director purchased shares of our common stock in the open market as follows:
| Date | Shares Purchased | Average Price Per Share | |||||
Albert A. Notini | 5/30/2008 | 5,000 | $ | 10.19 | |||
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Equity Grants to Executive Officers and Directors
Each of the non-employee directors not affiliated with New Mountain Capital was granted options to purchase 7,500 shares of our common stock at a per share exercise price of $15.23 on January 1, 2008. On August 13, 2008, Mr. Manley received a stock option grant to purchase 20,000 shares of our common stock at a purchase price of $7.40 in connection with his appointment to our Board of Directors.
On February 22, 2008, we granted options to purchase shares of our common stock to our named executive officers. These options were granted with a per share exercise price of $12.98. We also granted restricted stock to three of our named executive officers on February 22, 2008.
Policies and Procedures for Review and Approval of Related Person Transactions
Our Board of Directors has adopted a written related person transaction policy for the review, approval or ratification of related person transactions in accordance with applicable rules and regulations of the Securities and Exchange Commission and The Nasdaq Global Select Market. Under this policy, related person transactions, which are defined for purposes of the policy as any transaction in which we are a participant and any of our directors, nominees for director, executive officers, employees, stockholders holding more than five percent of our common stock or members of their immediate families (other than immediate family members of employees who are not executive officers) have a direct or indirect interest, must be reviewed and approved or ratified.
The policy provides that management must bring to the Audit Committee for review and approval each proposed related person transaction in which the amount involved exceeds $25,000 (other than related person transactions involving compensation matters or employees who are not executive officers). After appropriate review, the Audit Committee will approve a related person transaction if it is in the best interests of us and our stockholders. Management must also bring to the Audit Committee for its review and approval any proposed material modification to any previously approved related person transaction. If it is not practical for the Audit Committee to review in advance a particular related person transaction or material modification, management must bring to the Audit Committee for its ratification the related person transaction or modification and make those changes as the Audit Committee may require. Related person transactions with employees that are not executive officers and related person transactions with other related persons in which the amount involved is less than $25,000 are required to be approved by our general counsel or his designee.
All related person transactions involving compensation matters relating to a director, nominee for director or executive officer will be approved by the Compensation Committee and, as necessary, any independent subcommittee of the Compensation Committee.
Loans or advances to employees are generally prohibited under the policy and must be approved by the chief executive officer and otherwise be made in accordance with the policy and applicable laws or regulations, including those of the Securities and Exchange Commission and The Nasdaq Global Select Market. In addition, we are prohibited from hiring as employees any immediate family member of our directors or executive officers.
Under the policy, no further approvals are required for any of our obligations arising under existing agreements at the time of this offering. In addition, related person transactions with New Mountain Capital or its affiliates, the deLaski stockholders or any of our directors or executive officers resulting from the agreements entered into in connection with our recapitalization (including, without limitation, by virtue of the joinder of a related person to, or execution by a related person of, these agreements subsequent to the recapitalization) are not considered related person transactions requiring review and approval.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who own more than 10% of our common stock to file reports of their ownership and changes in ownership of our common stock with the SEC and provide us with copies. Our employees prepare these reports for our directors and executive officers on the basis of information obtained from them and from Deltek’s records. Based on information available to us, and written representations from certain of our executive officers and directors, we believe that all applicable Section 16(a) filing requirements were met during fiscal year 2008.
The following table sets forth certain information regarding the beneficial ownership of Deltek’s common stock (as of March 11, 2009, unless otherwise indicated) for the following:
| • | each person (or group of affiliated persons) who is known by us to beneficially own 5% or more of the outstanding shares of our common stock; |
| • | each of our non-employee directors; |
| • | each of our current executive officers named in the Summary Compensation Table of this proxy statement; and |
| • | all directors and current executive officers of Deltek as a group. |
Each of our stockholders who was a stockholder prior to our initial public offering is a party to a shareholder agreement with us. Pursuant to these agreements, if, among other things, the New Mountain Funds propose to sell all or any portion of their shares of our common stock in a transaction and if stockholder approval is required for the transaction, directors, executive officers, other employees at the senior vice president level or above and beneficial owners of more than 100,000 shares of our common stock (including through the exercise of options under our stock plans), are required to vote their shares of our common stock in favor of the transaction. There is also an investor rights agreement among certain stockholders listed below requiring them to vote for director nominees nominated by the New Mountain Funds and by the deLaski stockholders under various circumstances. Accordingly, these persons may be deemed to be members of a group, and, as of March 11, 2009, the New Mountain Funds would be deemed to beneficially own all of the shares of common stock beneficially held by these persons for purposes of Section 13 of the Exchange Act, or approximately 36,600,000 shares of common stock (approximately 81% of the dispositive power of our common stock). The table below represents the number of shares owned by each disclosed stockholder but without taking into account that certain stockholders may be part of a group under the shareholder agreements.
For a description of the shareholder and investor rights agreements and any other material relationships with the New Mountain Funds, see “Certain Relationships and Related Transactions.”
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| Shares Beneficially Owned (2) | Percentage Beneficially Owned (2) | ||||
5% Stockholders, Directors and Officers (1) | |||||
5% Stockholders: | |||||
New Mountain Partners II, L.P. (3)(4) | 23,099,386 | 53.1 | % | ||
New Mountain Affiliated Investors II, L.P. (3)(4) | 401,287 | * | |||
Allegheny New Mountain Partners, L.P. (3)(4) | 1,780,951 | 4.1 | % | ||
Kenneth E. deLaski (5) | 4,829,821 | 11.1 | % | ||
Non-Employee Directors: | |||||
Michael B. Ajouz (3)(4) | — | — | |||
Nanci E. Caldwell (6) | 74,422 | * | |||
Kathleen deLaski (7) | 155,820 | * | |||
Joseph M. Kampf (8) | 72,867 | * | |||
Steven B. Klinsky (3)(4) | 25,281,624 | 58.1 | % | ||
Thomas M. Manley (9) | — | * | |||
Albert A. Notini (10) | 73,417 | * | |||
Janet R. Perna (11) | 42,414 | * | |||
Alok Singh (3)(4) | — | — | |||
Named Executive Officers: | |||||
Kevin T. Parker (12) | 936,719 | 2.1 | % | ||
Mark L. Wabschall (13) | — | — | |||
Richard P. Lowrey (14) | 368,214 | * | |||
Richard M. Lowenstein (15) | 148,267 | * | |||
Carolyn J. Parent (16) | 195,852 | * | |||
All directors and current executive officers as a group | 2,887,989 | 6.4 | % | ||
| * | Represents less than 1% of total shares issued and outstanding. |
| (1) | Unless otherwise indicated in the table, the address for each listed person is c/o Deltek, Inc., 13880 Dulles Corner Lane, Herndon, Virginia 20171. |
| (2) | The number and percentage of shares beneficially owned is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of March 11, 2009, through the exercise of any stock option or other right. Unless otherwise indicated in the footnotes, each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares shown as beneficially owned. Percentage beneficially owned is based on 43,498,610 shares of common stock outstanding on March 11, 2009. |
| (3) | The general partner of each of New Mountain Partners II, L.P., New Mountain Affiliated Investors II, L.P. and Allegheny New Mountain Partners, L.P. is New Mountain Investments II, L.L.C., a Delaware limited liability company, and the manager of each of the New Mountain Funds is New Mountain Capital, L.L.C., a Delaware limited liability company. Steven B. Klinsky is the managing member of, and Michael B. Ajouz and Alok Singh are members of, New Mountain Investments II, L.L.C., and Mr. Klinsky is the sole member and chief executive officer of, and Messrs. Ajouz and Singh are managing directors of New Mountain Capital, L.L.C. New Mountain Investments II, L.L.C. has decision making power over the disposition and voting of shares of portfolio investments of each of the New Mountain Funds. New Mountain Capital, L.L.C. also has voting power over the shares of portfolio investments of the New Mountain Funds. Mr. Klinsky, as the managing member of New Mountain Investments II, L.L.C., has voting and investment power over the shares held by New Mountain Investments II, L.L.C. Because New Mountain Investments II, L.L.C. has decision making power over the New Mountain Funds, and New Mountain Capital, L.L.C. has voting power over the shares of portfolio investments of the New Mountain Funds, Mr. Klinsky may be deemed to beneficially own the shares that the funds hold of record or may be deemed to beneficially own. |
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Messrs. Klinsky, Ajouz and Singh, New Mountain Partners II, L.L.C. and New Mountain Capital, L.L.C. expressly disclaim beneficial ownership of these shares. The address of each of the foregoing is c/o New Mountain Capital, L.L.C., 787 Seventh Avenue, 49th Floor, New York, New York 10019. |
| (4) | New Mountain Partners, New Mountain Affiliated and Allegheny New Mountain collectively own all of the issued and outstanding shares of our Class A common stock. |
| (5) | Shares beneficially owned by Mr. deLaski include shares held by the trusts for the benefit of certain family members. Mr. deLaski exercises voting and/or dispositive power over these shares. Kenneth E. deLaski is our former chief executive officer and a former director of the Company. |
| (6) | Includes options to acquire 45,775 shares of our common stock which are exercisable within 60 days of March 11, 2009. Ms. Caldwell is a member of our Board of Directors. |
| (7) | Includes options to acquire 34,060 shares of our common stock which are exercisable within 60 days of March 11, 2009. Also includes 81,760 shares held jointly by Kathleen deLaski and Edward Grubb. Ms. deLaski is a member of our Board of Directors and is the sister of Kenneth E. deLaski and daughter of Donald deLaski. |
| (8) | Includes options to acquire 42,868 shares of our common stock which are exercisable within 60 days of March 11, 2009. Mr. Kampf is a member of our Board of Directors. |
| (9) | Mr. Manley is a member of our Board of Directors. |
| (10) | Includes options to acquire 45,775 shares of our common stock which are exercisable within 60 days of March 11, 2009. Mr. Notini is a member of our Board of Directors and is the chief executive officer and chairman of the Board of Directors of Apptis, Inc., a portfolio company of New Mountain Capital. |
| (11) | Includes options to acquire 31,304 shares of our common stock which are exercisable within 60 days of March 11, 2009. Ms. Perna is a member of our Board of Directors. |
| (12) | Includes 78,947 shares held by the Kevin T. Parker Family Trust (2007). Mr. Parker’s spouse is the trustee of this trust. Also includes options to acquire 648,219 shares of our common stock which are exercisable within 60 days of March 11, 2009. Mr. Parker is our Chairman of the Board, President and Chief Executive Officer. |
| (13) | Mr. Wabschall became our Executive Vice President, Chief Financial Officer and Treasurer effective May 16, 2008. |
| (14) | Includes options to acquire 314,155 shares of our common stock which are exercisable within 60 days of March 11, 2009. Mr. Lowrey is our Executive Vice President of Products and Strategy. |
| (15) | Includes options to acquire 96,267 shares of our common stock which are exercisable within 60 days of March 11, 2009. Mr. Lowenstein is our Executive Vice President of Professional Services. |
| (16) | Includes options to acquire 137,676 shares of our common stock which are exercisable within 60 days of March 11, 2009. Ms. Parent is our Executive Vice President of Worldwide Sales. |
| (17) | Includes options to acquire 1,895,407 shares of our common stock which are exercisable within 60 days of March 11, 2009. Excludes 26,119 shares held by James C. Reagan, our former Executive Vice President, Chief Financial Officer and Treasurer as of May 16, 2008 and excludes options to acquire 242,500 shares of our common stock which are exercisable within 60 days of March 11, 2009. Excludes shares held of record by the New Mountain Funds. See footnote 3 above. |
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The Audit Committee assists the Board of Directors in fulfilling its responsibilities for oversight of the integrity of Deltek’s financial statements, our internal accounting and financial controls, our compliance with legal and regulatory requirements, the organization and performance of our internal audit function and the qualifications, independence and performance of our independent registered public accounting firm.
The management of Deltek is responsible for establishing and maintaining internal controls and for preparing Deltek’s consolidated financial statements. The independent registered public accounting firm is responsible for auditing the financial statements. It is the responsibility of the Audit Committee to oversee these activities.
The Audit Committee has:
| • | Reviewed and discussed the audited financial statements with Deltek’s management and with Deloitte & Touche, LLP, Deltek’s independent registered public accounting firm; |
| • | Discussed with Deloitte & Touche, LLP the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended; and |
| • | Received the written disclosures and the letter from Deloitte & Touche, LLP required by Independence Standards Board Standard No. 1, and has discussed Deloitte & Touche, LLP’s independence with them. |
Based upon these discussions and review, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Deltek’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 for filing with the United States Securities and Exchange Commission.
Respectfully submitted by the members of the Audit Committee of the Board of Directors
Thomas M. Manley (Chair)
Nanci E. Caldwell
Janet R. Perna
Deltek knows of no other matters to be submitted at the Annual Meeting. If any other matters properly come before the 2009 Annual Meeting, it is the intention of the persons named in the proxy materials to vote the shares they represent as the Board of Directors may recommend. Discretionary authority with respect to such other matters is granted by the execution of the proxy.
It is important that your shares be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by Internet or by telephone as instructed in the proxy materials or request, execute and return, within the time period specified in the proxy materials, a proxy card.
THE BOARD OF DIRECTORS
Herndon, Virginia
March 19, 2009
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| 000004 | 000000000.000000 ext 000000000.000000 ext | |||||||||||
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| Electronic Voting Instructions | ||||||||||||
| You may vote by Internet or telephone! | ||||||||||||
| Available 24 hours a day, 7 days a week! | ||||||||||||
| Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. | ||||||||||||
| VALIDATION DETAILS ARE LOCATED BELOW IN THE SHADED TITLE BAR. | |||||||||||
Proxies submitted by the Internet or telephone must be received by 12:00 a.m., Eastern Time, on May 22, 2009.
| ||||||||||||
 | Vote by Internet | |||||||||||
• Log on to the Internet and go to | ||||||||||||
http://www.envisionreports.com/PROJ | ||||||||||||
• Follow the steps outlined on the secure website. | ||||||||||||
 | Vote by telephone | |||||||||||
• Call toll free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico anytime on a touch tone telephone. There isNO CHARGEto you for the call. • Follow the instructions provided by the recorded message. | ||||||||||||
Using ablack ink pen, mark your votes with anX as shown in this example. Please do not write outside the designated areas. | x | |||||||||||
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
A
| Proposals — The Board of Directors recommends a voteFOR the nominees listed in Proposal 1 andFOR Proposal 2. | +
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| 1. Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | |||||||||||||||||
01 - Michael Ajouz | ¨ | ¨ | ¨ | 02 - Nanci E. Caldwell | ¨ | ¨ | ¨ | 03 - Kathleen deLaski | ¨ | ¨ | ¨ | |||||||||||||||
04 - Joseph M. Kampf | ¨ | ¨ | ¨ | 05 - Steven B. Klinsky | ¨ | ¨ | ¨ | 06 - Thomas M. Manley | ¨ | ¨ | ¨ | |||||||||||||||
07 - Albert A. Notini | ¨ | ¨ | ¨ | 08 - Kevin T. Parker | ¨ | ¨ | ¨ | 09 - Janet R. Perna | ¨ | ¨ | ¨ | |||||||||||||||
10 - Alok Singh | ¨ | ¨ | ¨ | |||||||||||||||||||||||
| For | Against | Abstain | ||||||||
| 2. | To ratify the appointment of Deloitte & Touche, LLP as Deltek’s independent registered public accounting firm for the fiscal year ending December 31, 2009. |
¨ |
¨ |
¨ | To transact such other business as may properly come before the meeting. |
B
| Non-Voting Items | |||||||||||
Change of Address— Please print your new address below.
| Comments — Please print your comments below.
| Meeting Attendance | ||||||||||
| Mark the box to the right | ¨ | |||||||||||
| if you plan to attend the | ||||||||||||
| Annual Meeting. | ||||||||||||
| C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |||||
| Please sign this proxy exactly as your name appears above. Joint owners should each sign personally. Trustees and other fiduciaries should indicate the capacity in which they sign. If a corporation or partnership, this signature should be that of an authorized officer who should state his or her title. | ||||||
Date (mm/dd/yyyy) — Please print date below.
| Signature 1 — Please keep signature within the box.
| Signature 2 — Please keep signature within the box.
| ||||||
| / / |
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |
Proxy — Deltek, Inc.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting of Stockholders – May 22, 2009
Those signing on the reverse side, revoking any prior proxies, hereby appoint(s) David Schwiesow and Salman Ahmad, or each of them with full power of substitution, as proxies for those signing on the reverse side to act and vote at the 2009 Annual Meeting of Stockholders of Deltek, Inc. and any adjournments thereof as indicated upon all matters referred to on the reverse side and described in the Proxy Statement for the Annual Meeting, and, in their discretion, upon any other matters which may properly come before the Annual Meeting.
This Proxy, when properly executed, will be voted in the manner directed by the Undersigned Stockholder(s). If no other indication is made, the Proxies shall vote “FOR” Proposals 1 and 2.
PLEASE VOTE, DATE AND SIGN ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
| SEE REVERSE SIDE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SEE REVERSE SIDE |