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:
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[ ]Preliminary
Proxy Statement
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[ ]Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[X]Definitive
Proxy Statement
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[ ]Definitive
Additional Materials
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[ ]Soliciting
Material Pursuant to §240.14a-12
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COSTAR
GROUP, 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):
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fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
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(2)
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Aggregate
number of securities to which transaction
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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[ ]
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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.
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(1)
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previously paid:
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schedule or registration statement
no.:
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party:
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May 1,
2009
Dear
Stockholder:
You are
cordially invited to attend the 2009 Annual Meeting of Stockholders of CoStar
Group, Inc., to be held at 10:00 a.m., local time, on Tuesday, June 2,
2009 at 2 Bethesda Metro Center, Bethesda, Maryland 20814.
At the
Annual Meeting, you will be asked (1) to elect seven directors and
(2) to ratify the appointment of Ernst & Young LLP as the
Company’s independent registered public accounting firm for 2009. The
accompanying Notice of 2009 Annual Meeting of Stockholders and Proxy Statement
describe these matters.
The Board
of Directors recommends that stockholders vote in favor of each of these
proposals.
Whether
or not you plan to attend the Annual Meeting in person, please return your
executed proxy card in the enclosed postage- prepaid and addressed envelope and
your shares will be voted in accordance with the instructions you have given in
your proxy card.
Sincerely,
Andrew
C. Florance
Chief
Executive Officer and President
COSTAR
GROUP, INC.
May
1, 2009
NOTICE OF 2009 ANNUAL MEETING OF
STOCKHOLDERS
TO
BE HELD TUESDAY, JUNE 2, 2009
The 2009
Annual Meeting of Stockholders (the “Annual Meeting”) of CoStar Group, Inc.
(“CoStar”, “we” or the “Company”) will be held at 2 Bethesda Metro Center,
Bethesda, Maryland 20814, at 10:00 a.m., local time, on Tuesday,
June 2, 2009, for the following purposes:
1. To
elect seven directors to hold office until the next Annual Meeting of
Stockholders, or until their respective successors are elected and
qualified;
2. To
ratify the appointment of Ernst & Young LLP as the Company’s
independent registered public accounting firm for 2009; and
3. To
transact any other business properly presented before the Annual
Meeting.
The Board
of Directors has fixed Monday, April 6, 2009 as the record date for
determining stockholders entitled to receive notice of and to vote at the Annual
Meeting (or any adjournment or postponement of it). Only stockholders of record
at the close of business on that date are entitled to notice of and to vote at
the Annual Meeting.
WE INVITE YOU TO ATTEND THE ANNUAL
MEETING IN PERSON, BUT WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE PROVIDED AS
PROMPTLY AS POSSIBLE.
By Order
of the Board of Directors,
Jonathan
Coleman
Secretary
Item 1 - ELECTION OF DIRECTORS
APPENDIX A - PROXY CARD
COSTAR
GROUP, INC.
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON TUESDAY, JUNE 2, 2009
The Board
of Directors (the “Board”) of CoStar Group, Inc. (“CoStar”, “we” or the
“Company”) solicits your proxy for use at the Annual Meeting of Stockholders
(the “Annual Meeting”) to be held at 10:00 a.m., local time, on Tuesday,
June 2, 2009, at 2 Bethesda Metro Center, Bethesda, Maryland
20814, and at any adjournment or postponement of the Annual
Meeting.
Our
headquarters are located at 2 Bethesda Metro Center, Tenth Floor, Bethesda,
Maryland 20814. We are mailing this proxy statement and the accompanying proxy
card to our stockholders eligible to vote at the Annual Meeting on or about May
1, 2009.
The
Notice of Meeting and this proxy statement are available on our corporate
website at www.CoStar.com/Investors/SECFilings.aspx
and our 2008 annual report to stockholders is available on our corporate website
at www.CoStar.com/Investors/Reports.aspx.
At the
close of business on the record date, Monday, April 6, 2009, there were
19,725,101 shares of common stock outstanding and entitled to vote at the
Annual Meeting. Each outstanding share of common stock is entitled to one vote
on each proposal, except as specifically provided below with respect to the
election of directors.
The
presence at the Annual Meeting, in person or by proxy, of a majority of the
outstanding shares as of the record date constitutes a quorum (the minimum
number of shares required to take action) for the Annual Meeting. Both
abstentions and broker non-votes will be counted as shares present for purposes
of obtaining a quorum.
The
required vote and the calculation method for each of the matters scheduled for
consideration at the Annual Meeting are as follows:
Item 1 — Election of
Directors. Each outstanding share of common stock is entitled
to cast one vote for up to seven nominees. The seven nominees who receive the
most votes will be elected as directors.
Item 2 — Ratification of the Appointment of
Independent Registered
Public Accounting Firm. For stockholders to approve this
proposal, the number of votes cast in favor must exceed the number of votes cast
against this proposal.
Abstentions
and broker non-votes (shares held by brokers that do not have discretionary
authority to vote on the matter and have not received voting instructions from
their clients) will have no effect on the election of directors. For the
proposal to ratify the independent registered public accounting firm,
abstentions and broker non-votes are disregarded in calculating the total number
of votes on the proposals. Banks and brokers that have not received voting
instructions from their clients may vote their clients’ shares on the proposal
to ratify Ernst & Young LLP as our independent registered public
accounting firm.
You may
vote by signing your proxy card, or if your shares are held in street name, by
signing the voting instruction card included by your broker or nominee, and
mailing it in the enclosed, postage prepaid and addressed envelope. If you
properly complete and execute your proxy card and return it before the Annual
Meeting:
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Your
shares will be voted in accordance with your
instructions.
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For
any items for which you do not provide instructions, your shares will be
voted “FOR” the item, as recommended by the
Board.
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You may
revoke your proxy at any time before it is voted by:
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delivering
to the Corporate Secretary written notice that you are revoking your
proxy;
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submitting
a properly-executed proxy bearing a later
date; or
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attending
the Annual Meeting and voting in person. If you are not the owner of
record, but rather hold your shares through a broker or bank, you should
take appropriate steps to obtain a legal proxy from the owner of record if
you wish to attend and vote at the Annual
Meeting.
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Simply
attending the Annual Meeting will not revoke your proxy. If you instructed a
broker to vote your shares, you must follow your broker’s directions for
changing those instructions.
Only
stockholders as of the record date, their proxy holders and our invited guests
may attend the Annual Meeting. If you intend to attend the Annual Meeting,
please mark your proxy card accordingly. Beneficial owners whose ownership is
registered under another party’s name and who plan to attend the Annual Meeting
in person should obtain an admission ticket in advance by sending written
requests, along with proof of beneficial ownership, such as a bank or brokerage
firm account statement, to: Tim Trainor, Communications Director, CoStar Group,
Inc., 2 Bethesda Metro Center, Tenth Floor, Bethesda, Maryland 20814.
Beneficial owners who do not present valid admission tickets at the registration
counter at the Annual Meeting will be admitted at CoStar’s sole discretion and
may be required to verify share ownership, which may be established by providing
a bank or brokerage firm account statement and photo identification, at the
registration counter at the Annual Meeting. Stockholders as of the record date
or their proxy holders who plan to attend the Annual Meeting may also be asked
to present photo identification at the registration counter at the Annual
Meeting to gain admittance to the Annual Meeting.
ELECTION
OF DIRECTORS
The Board
has fixed the number of directors constituting the Board at seven. The Board has
nominated each of the current directors for reelection. The persons named as
proxy holders on the proxy card will vote your shares for each of the seven
nominees unless you instruct otherwise on your proxy card.
Each of
our directors will serve until the next Annual Meeting of Stockholders or until
his successor is elected and qualified. If any of the nominees should become
unable to serve prior to the Annual Meeting, proxies that do not withhold
authority to vote for directors may be voted for any other nominee or nominees
selected by the Board unless the Board votes to reduce the size of the Board to
match the actual number of nominees. In no event may proxies be voted for a
greater number of persons than the number of nominees named. Information about
each of the nominees appears below.
2
Nominees
for the Board of Directors
The
following table lists the seven director nominees and their current committee
memberships:
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Name
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Employment
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Years
as a
Director
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Committee Membership
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Michael
R.
Klein
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Chairman,
CoStar Group, Inc.; Chairman, The Sunlight Foundation; Chairman,
Shakespeare Theatre Company
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22 |
Compensation;
Nominating & Corporate Governance
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Andrew
C. Florance*
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CEO &
President, CoStar Group, Inc.
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22 |
None
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David
Bonderman
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Founding
Partner, TPG Capital, L.P.
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14 |
Compensation
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Michael
J. Glosserman
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Managing
Member, The JBG Companies
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1 |
Audit
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Warren
H.
Haber
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Chairman
of the Board & CEO, Founders Equity Inc.
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14 |
Audit;
Compensation
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Josiah
O.
Low, III
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Senior
Advisor, Catterton Partners L.P.
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10 |
Audit;
Nominating & Corporate Governance
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||||
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Christopher
J. Nassetta
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CEO &
President, Hilton Hotels Corporation
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7 |
Compensation;
Nominating & Corporate
Governance
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||||
____________
* Executive
Officer
Information
about each of our nominees for the Board appears below.
Michael R. Klein has been the
Chairman of our Board of Directors since he and Mr. Florance started the
Company in 1987. Mr. Klein serves as Vice Chairman of the Board of
Directors and Lead Director of Perini Corporation, and as the Lead Director of
SRA International, Inc., both publicly held companies listed on the New York
Stock Exchange, and as a director of several privately held companies.
Mr. Klein also currently serves as Chairman of the Board of Directors of
both The Sunlight Foundation, a non-profit educational organization, and of the
Shakespeare Theatre Company, a non-profit theatrical and educational
organization. He was a partner of the Wilmer Cutler Pickering Hale &
Dorr, LLP law firm from 1974 through 2005. Mr. Klein is 67 years
old.
Andrew C. Florance founded
the Company, the industry’s first independent commercial real estate information
research organization, in 1987. As President and CEO of CoStar, Mr.
Florance has directed CoStar’s successful expansion from start-up, to its IPO in
July 1998, to its market-leading position today with approximately 1,300 people
working for the Company worldwide, a client base that includes the commercial
real estate industry’s leading brokerage firms and property owners and an
international service platform that includes the entire United States, London,
England, other parts of the United Kingdom and Paris, France. Mr.
Florance is actively involved in building awareness of energy efficiency and
sustainability within the commercial property sector, and he is a frequent
speaker on this topic at industry events. He co-authored the first
comprehensive, nationwide analysis of leasing and sales activity in
energy-efficient office buildings with Dr. Norm Miller, professor and director
of academic programs at the Burnham-Moores Center for Real
Estate. The study, which was published in the Journal of Real Estate
Portfolio Management, was selected by the American Real Estate Society as the
Best Paper published in the JREPM for 2008. The groundbreaking study
was also a critical factor in the Company being selected as the only commercial
real estate-related company to win an ENERGY STAR award for excellence from the
U.S. Environmental Protection Agency. In addition, Mr. Florance is
the recipient of numerous other awards recognizing his accomplishments as an
entrepreneur and corporate leader, including: Cornell Real Estate Review’s
Real Estate Industry Executive of the Year for 2009; Transwestern’s 2007 Public
Company Trendsetter of the Year for revolutionizing the way the commercial real
estate industry gathers, analyzes and uses information on commercial property
and markets; Ernst & Young’s Entrepreneur of the Year award in 2000 for his
pioneering work in real estate information services; and Commercial Real Estate
Women’s (CREW’s) 15th anniversary award for industry innovation. He serves on
the Board of Directors for the American Real Estate Society, an association of
real estate thought leaders, the Board of Trustees for The St. Andrews School in
Middletown, Delaware and the Board of Trustees for Ford’s Theater in Washington,
D.C. Mr. Florance received a B.A. in economics from Princeton
University. He is 45 years old.
David Bonderman is a Founding
Partner of TPG Capital, L.P. (“TPG”). TPG generally makes significant
investments in operating companies through acquisitions and restructurings
across a broad range of industries throughout the United States, Europe and
Asia. Prior to forming TPG in 1992, Mr. Bonderman was Chief Operating
Officer of the Robert M. Bass Group, Inc. (now doing business as Keystone Group,
L.P.) in Fort Worth, Texas. Prior to joining RMBG in 1983,
Mr. Bonderman was a partner in the law firm of Arnold & Porter in
Washington, D.C., where he specialized in corporate, securities, bankruptcy and
antitrust litigation. From 1969 to 1970, Mr. Bonderman was a
Fellow in Foreign and Comparative Law in conjunction with Harvard University,
and from 1968 to 1969, he was Special Assistant to the U.S. Attorney General in
the Civil Rights Division. From 1967 to 1968, Mr. Bonderman was
Assistant Professor at Tulane University School of Law in New
Orleans. Mr. Bonderman serves on the Boards of Directors of the
following public companies: Gemalto N.V. and Ryanair Holdings, plc, of which he
is Chairman. He also serves on the Boards of Directors of The
Wilderness Society, the Grand Canyon Trust, The University of Washington
Foundation and The American Himalayan Foundation. Mr. Bonderman
graduated Magna Cum Laude from Harvard Law School in 1966. He was a
member of the Harvard Law Review and a Sheldon Fellow. He is a 1963
graduate of the University of Washington in
Seattle. Mr. Bonderman is 66 years old.
3
Michael J. Glosserman is a
Managing Partner of The JBG Companies (“JBG”). Prior to joining JBG
in 1979, commencing in 1972, Mr. Glosserman worked in commercial real estate
investment and development with The Rouse Company. Prior to his
position at The Rouse Company, Mr. Glosserman began his career as a staff
attorney with the U.S. Department of Justice. He serves as Chairman
of the Board, National Building Museum; Executive Board Trustee, Federal City
Council; Board Member, the University of Pennsylvania Institute for Urban
Research; and Board Member, the Shakespeare Theatre Company. Mr.
Glosserman received a B.S. in Economics from the Wharton School at the
University of Pennsylvania, and a J.D. from University of Texas Law
School. He is 63 years old.
Warren H. Haber is managing partner, Chairman and Chief Executive
Officer of Founders Equity, Inc., a New York based private equity firm that he
co-founded in 1969. Mr. Haber presently serves as a director of Founders
Property Corp and of a number of privately held businesses. Mr. Haber is a
Trustee of the East Hampton Historical Society, of the Leadership Enterprise for
a Diverse America, and the National Kidney Registry. He is also an Executive
Committee Member of the Board of Overseers of the Mailman School of Public
Health at Columbia University. Mr. Haber holds a BBA in Finance from
Baruch College. He is 68 years old.
Josiah O. Low, III is a
Senior Advisor to Catterton Partners L.P., a private equity firm, where he
previously served as a venture partner from 2001 to 2007. Prior to that,
Mr. Low worked for 16 years at the investment banking firm of Credit
Suisse First Boston (formerly Donaldson, Lufkin & Jenrette), where he
most recently served as Managing Director/Senior Advisor. Prior to joining
Credit Suisse First Boston in 1985, Mr. Low worked at Merrill Lynch,
Pierce, Fenner & Smith and was a founding Managing Director of the
Merrill Lynch Capital Market Group in 1977. Mr. Low also serves on the
board of directors of Rosetta Resources, Inc. and was recently elected Chairman
for the State Board of Audubon, Connecticut. Mr. Low is 69 years
old.
Christopher J. Nassetta has
been the President and Chief Executive Officer of Hilton Hotels Corporation
since December 2007. Prior to joining Hilton Hotels Corporation, Mr.
Nassetta served as the President and Chief Executive Officer of Host
Hotels & Resorts, Inc. (fka Host Marriott Corporation) from May
2000 to December 2007. Mr. Nassetta joined Host Hotels & Resorts
in 1995 as Executive Vice President and was elected the Chief Operating Officer
in 1997. Prior to joining Host Hotels & Resorts, Mr. Nassetta
served as President of Bailey Realty Corporation from 1991 until 1995, and he
previously served as Chief Development Officer and in various other positions
with the Oliver Carr Company from 1984 through 1991. Mr. Nassetta is the
Chairman of the Real Estate Round Table. He is also a member of the McIntire
School of Commerce Advisory Board for the University of Virginia.
Mr. Nassetta is 46 years old.
THE
BOARD RECOMMENDS A VOTE FOR EACH OF THESE NOMINEES.
RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit
Committee has recommended and the Board has approved the appointment of
Ernst & Young LLP as the independent registered public accounting firm
for the Company for 2009. As a matter of good corporate governance, the Board
would like stockholders to ratify this appointment, even though ratification is
not legally necessary. If stockholders do not ratify this appointment, the Board
may, but is not required to, reconsider such appointment.
Ernst &
Young LLP has served as the independent registered public accounting firm for
the Company, its subsidiaries, and its predecessors since 1994. A representative
from Ernst & Young LLP will attend the Annual Meeting, may make a
statement and will be available to respond to appropriate
questions.
During
the years ended December 31, 2007 and 2008, Ernst & Young LLP
billed CoStar the fees set forth below, including expenses, in connection with
services rendered to CoStar:
4
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Year Ended December 31,
2007
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Year Ended December 31,
2008
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|||||||
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Audit
Fees
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$ | 793,583 | $ | 806,593 | ||||
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Audit
Related
Fees
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$ | 0 | $ | 0 | ||||
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Tax
Fees
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$ | 42,800 | $ | 20,000 | ||||
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All
Other
Fees
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$ | 0 | $ | 0 | ||||
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Total
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$ | 836,383 | $ | 826,593 | ||||
Ernst &
Young LLP did not provide any financial information systems design and
implementation services to the Company for the years ended December 31,
2007 and 2008.
Audit
Fees include fees for services performed for the audit of CoStar’s annual
financial statements, review of financial statements included in CoStar’s
periodic filings with the Securities and Exchange Commission (the “SEC”), audit
of CoStar’s internal control over financial reporting and statutory audits
required internationally. This category also includes fees for statutory audits,
consents and assistance with and review of documents filed with the
SEC.
Audit
Related Fees include fees associated with assurance and related services that
are reasonably related to the performance of the audit or review of CoStar’s
financial statements. There were no audit related fees for 2007 or
2008.
Tax Fees
primarily include fees associated with tax return preparation, tax compliance,
tax advice and tax planning. This category also includes fees associated with
the tax planning on mergers and acquisitions and restructurings. In
2007, Tax Fees also included charges for services provided in connection with
the adoption of Financial Accounting Standards Board Interpretation 48 Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109 (FIN
48).
Audit
Committee Pre-Approval Policy
The Audit
Committee’s policy is that all audit and non-audit services provided by CoStar’s
independent registered public accounting firm, Ernst & Young LLP, shall
either be approved before the independent registered public accounting firm is
engaged for the particular services or shall be rendered pursuant to
pre-approval procedures established by the Audit Committee. These services may
include audit services and permissible audit-related services, tax services and
other services. Pre-approval spending limits for audit services are established
on an annual basis, detailed as to a particular service or category of services
to be performed and implemented by CoStar’s financial officers. Pre-approval
spending limits for permissible non-audit services are established on a periodic
basis, detailed as to a particular service or category of services to be
performed and implemented by CoStar’s financial officers. Any audit or non-audit
service fees that may be incurred by CoStar during a period that fall outside
the limits pre-approved by the Audit Committee for a particular service or
category of services must be reviewed and approved by the Chairperson of the
Audit Committee prior to the performance of services. CoStar’s Chief Financial
Officer reports to the Audit Committee on a quarterly basis on all services
rendered by the independent registered public accounting firm for which
pre-approval has been granted and all fees paid to the independent registered
public accounting firm for such services during the current year and the
previous quarter. The Audit Committee may revise its pre-approval spending
limits and policies at any time.
All fees
paid to the independent registered public accounting firm in 2008 were
pre-approved by the Audit Committee, and therefore no services were approved
after the services were rendered pursuant to the “de minimus” exception
established by the SEC for the provision of non-audit services.
THE BOARD RECOMMENDS THAT YOU VOTE
FOR RATIFYING THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR
2009.
We do not
know of any other matter that will be presented for consideration at the Annual
Meeting. If any other matter does properly come before the Annual Meeting, the
proxy holders will, unless otherwise specified in the proxy, vote on it as they
think best in their discretion.
5
FOR
DIRECTORS FOR THE 2010 ANNUAL MEETING
A
stockholder who intends to introduce a proposal for consideration at our 2010
Annual Meeting of Stockholders may seek to have that proposal and a statement in
support of the proposal included in our proxy statement if the proposal relates
to a subject that is permitted under Rule 14a-8 under the Securities
Exchange Act of 1934 (the “Exchange Act”). Additionally, in order to be eligible
for inclusion in our proxy statement, the stockholder must submit the proposal
and supporting statement to our Corporate Secretary in writing not later than
Friday, January 1, 2010, and must satisfy the other requirements of
Rule 14a-8. Stockholders interested in submitting such a proposal are
advised to contact knowledgeable counsel with regard to the detailed
requirements of applicable securities laws. The submission of a stockholder
proposal does not guarantee that it will be included in our proxy
statement.
A
stockholder may otherwise propose business for consideration or nominate persons
for election to the Board, in compliance with federal proxy rules, applicable
state law and other legal requirements and without seeking to have the proposal
included in our proxy statement pursuant to Rule 14a-8. Our Amended and
Restated Bylaws provide that any such proposals or nominations must be submitted
to us no less than 75 or more than 105 days before the first anniversary
date of the preceding year’s annual meeting. In the event that the date of the
Company’s annual meeting is more than 30 days before or more than 70 days after
the first anniversary of the preceding year’s annual meeting (other than as a
result of adjournment or postponement), then, to be timely, such stockholder’s
notice must be submitted in writing not earlier than the close of business on
the 105th day
prior to such annual meeting and not later than the close of business on the
75th
day prior to such annual meeting or the 10th day
following the date on which the public announcement of the date of such meeting
is first made by the Company. Accordingly, stockholders who wish to
nominate persons for election as directors or bring other proposals outside of
Rule 14a-8 at the 2010 Annual Meeting must give notice of their intention
to do so in writing to our Corporate Secretary on or before Friday, March 19,
2010, but no sooner than Wednesday, February 17, 2010, to be considered “timely”
within the meaning of Rule 14a-4. The stockholder’s submission must include
certain specified information concerning the proposal or nominee, as the case
may be, and information as to the stockholder’s ownership of common stock as
required by the Company’s Amended and Restated Bylaws. Proposals or nominations
not meeting these requirements will not be entertained at the 2010 Annual
Meeting.
In
accordance with applicable Delaware law and the Company’s Amended and Restated
Bylaws, the business and affairs of the Company are managed under the direction
of its Board. The Board, which is elected by the Company’s stockholders, is the
ultimate decision-making body of the Company except with respect to those
matters reserved to the stockholders. The Board selects, advises and monitors
the performance of the Company’s senior management team, which is charged with
the conduct of the Company’s business. The Board has established certain
standing committees to assist it in fulfilling its responsibilities as described
below.
During
2008, the Board of Directors held six meetings and acted on three occasions by
unanimous consent. The Board has Audit, Compensation and Nominating &
Corporate Governance committees. All directors attended at least 75% of the
meetings of the Board and the committees of which they were members, which were
held during the period in which each such director served in that
capacity.
Board
Committees
The
following table sets forth the composition of each of our Board committees as of
the date of this proxy statement.
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Audit Committee
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Compensation Committee
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Nominating & Corporate Governance
Committee
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Warren
H. Haber (Chairman)
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Christopher
J. Nassetta (Chairman)
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Josiah
O. Low, III (Chairman)
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Michael
J. Glosserman
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David
Bonderman
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Michael
R. Klein
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Josiah
O. Low, III
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Warren
H. Haber
Michael
R. Klein
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Christopher
J. Nassetta
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6
Audit
Committee. The Audit Committee is currently composed of Warren
H. Haber (Chairman), Michael J. Glosserman and Josiah O. Low, III. CoStar’s
Board has determined that each of the members of our Audit Committee is
independent as defined under Rule 4200(a)(15) of the NASDAQ Marketplace
Rules. In addition, the Board has determined that Committee members Haber,
Glosserman and Low are each “audit committee financial experts,” as defined by
regulations promulgated by the SEC. Catherine B. Reynolds served on
the Company’s Board in 2008 until the annual stockholder’s meeting held on June
10, 2008. During that time, Ms. Reynolds served on the Company’s
Audit Committee. CoStar’s Board previously determined that Ms.
Reynolds was independent as defined under Rule 4200(a)(15) of the NASDAQ
Marketplace Rules. During 2008, the Audit Committee met four times
and acted on one occasion by unanimous written consent. The Audit Committee’s
responsibility is to assist the Board in fulfilling its oversight
responsibilities as to accounting policies, internal controls, audit activities
and reporting practices of the Company. The Audit Committee is also responsible
for producing the report of the Audit Committee for inclusion in the Company’s
proxy statement. The Audit Committee operates under a written charter adopted by
the Board and reviewed annually by the Audit Committee.
Compensation
Committee. The members of the Compensation Committee are
Christopher J. Nassetta (Chairman), David Bonderman, Warren H. Haber and Michael
R. Klein. CoStar’s Board has determined that each of the members of our
Compensation Committee is independent as defined under Rule 4200(a)(15) of
the NASDAQ Marketplace Rules. In 2008, the Compensation Committee met two times
and acted on one occasion by unanimous written consent. The Compensation
Committee operates under a written charter adopted by the Board and reviewed
annually by the Compensation Committee.
The
purpose of the Compensation Committee is to discharge the responsibilities of
the Board relating to compensation of the Company’s executive officers and
directors, as well as to produce the Compensation Committee report on executive
compensation for inclusion in the Company’s proxy statement. The
Compensation Committee’s authority and responsibilities include:
|
·
|
overseeing
the Company’s compensation structure, policies and programs for executive
officers and assessing whether the compensation structure establishes
appropriate incentives for the executive
officers;
|
|
·
|
reviewing
and approving corporate goals and objectives relevant to the compensation
of the Chief Executive Officer and other executive officers of the
Company, evaluating those executive officers’ performance in light of
their goals and setting their compensation levels based on the
Compensation Committee’s evaluation and the recommendations of the
CEO;
|
|
·
|
approving
stock options and other stock incentive awards for executive
officers;
|
|
·
|
reviewing
and approving the design of benefit plans pertaining to executive
officers;
|
|
·
|
reviewing
and recommending employment agreements for executive
officers;
|
|
·
|
approving,
amending or modifying the terms of any compensation or benefit plan that
does not require stockholder approval;
and
|
|
·
|
reviewing
the compensation of directors for service on the Board and its committees
and recommending changes in compensation to the
Board.
|
In
addition, the Board has designated the Compensation Committee as the
Administrator of both the Company’s 1998 Stock Incentive Plan, as amended (the
“1998 Plan”), and the Company’s 2007 Stock Incentive Plan, as amended (the “2007
Plan”). The Compensation Committee may delegate its duties or
responsibilities to a subcommittee of the Compensation Committee, and it has
authority to retain and to direct management to retain outside advisors and
experts that it determines appropriate to assist with performance of its
functions.
Our Chief
Executive Officer and Chief Financial Officer make recommendations to the
Compensation Committee for each element of compensation awarded to executives,
but the Compensation Committee must approve each element of (and any changes to)
executive compensation. Periodically, the Compensation Committee also
retains independent compensation consulting firms to assist it in gathering
benchmarking data and to provide it with information about trends in
compensation among comparable companies based on factors such as market
capitalization, annual revenues, products, and potential competition for talent
or business. Most recently, the Compensation Committee retained
Towers Perrin in 2006 and again in 2008 and made several changes to the
Company’s executive compensation structure based in part on Towers Perrin’s
recommendations, as described below in the section titled “Compensation
Discussion and Analysis” beginning on page 17 of this proxy statement. Towers
Perrin reported directly to the Compensation Committee through its chair, and,
at the direction of the Compensation Committee chair, also worked directly with
the Company’s management to develop materials and proposals with respect to
executive officer compensation. In future years, the Compensation
Committee plans at its discretion to retain Towers Perrin (or another consulting
firm) to update or perform new studies to be used in connection with its
executive compensation decisions.
7
Nominating & Corporate
Governance Committee. The members of the Nominating &
Corporate Governance Committee are Josiah O. Low, III (Chairman), Michael
R. Klein and Christopher J. Nassetta. CoStar’s Board has determined that each of
the members of our Nominating & Corporate Governance Committee is
independent as defined under Rule 4200(a)(15) of the NASDAQ Marketplace
Rules. The purpose of the Nominating & Corporate Governance Committee
is to identify individuals qualified to become Board members, recommend to the
Board director candidates to be nominated at the Annual Meeting of Stockholders
and perform a leadership role in shaping the Company’s corporate governance. In
2008, the Nominating & Corporate Governance Committee met one time and acted
on one occasion by unanimous written consent. The
Nominating & Corporate Governance Committee operates under a written
charter adopted by the Board and reviewed annually by the Nominating &
Corporate Governance Committee.
All of
the charters for the Company’s Board committees are available in the “Investors”
section of the Company’s website at www.CoStar.com/Investors/Corpgovernance.aspx.
Identifying
and Evaluating Nominees
The
Nominating & Corporate Governance Committee identifies nominees for
director on its own as well as by considering recommendations from other members
of the Board, officers and employees of CoStar, and other sources that the
Nominating & Corporate Governance Committee deems appropriate. The
Nominating & Corporate Governance Committee will also consider Board
nominees suggested by stockholders subject to such recommendations being made in
accordance with CoStar’s Amended and Restated Bylaws and applicable laws.
Specifically, any stockholder recommendation for a nominee for director to be
voted upon at the 2010 Annual Meeting of Stockholders should be submitted in
writing to our Corporate Secretary at 2 Bethesda Metro Center, Tenth Floor,
Bethesda, MD 20814 no less than 75 nor more than 105 days before
the first anniversary date of the preceding year’s annual meeting. In
the event that the date of the Company’s annual meeting is more than 30 days
before or more than 70 days after the first anniversary of the preceding year’s
annual meeting (other than as a result of adjournment or postponement), then, to
be timely, such stockholder’s notice must be submitted in writing not earlier
than the close of business on the 105th day
prior to such annual meeting and not later than the close of business on the
75th
day prior to such annual meeting or the 10th day
following the date on which the public announcement of the date of such meeting
is first made by the Company. Accordingly, stockholders who wish to
nominate persons for election as directors at the 2010 Annual Meeting must give
notice of their intention to do so in writing to our Corporate Secretary on or
before Friday, March 19, 2010, but no sooner than Wednesday, February 17,
2010.
The
stockholder’s submission must include the information required by CoStar’s
Amended and Restated Bylaws, including:
|
(1)
|
as
to each person whom the stockholder proposes to nominate for election, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Exchange
Act, and such person’s written consent to be named as a nominee to serve
as a director;
|
|
(2)
|
as
to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination is made, (a) the name and address of such
stockholder, as they appear on the Company’s books, and of such beneficial
owner, (b) the class and number of shares of stock of the Company
which are owned of record by such stockholder and such beneficial owner as
of the date of the notice, and the stockholder’s agreement to notify the
Company in writing within five business days after the record date of the
class and number of shares owned of record by such stockholder and
beneficial owner as of the record date, and (c) a representation that the
stockholder intends to appear in person or by proxy at the meeting to
propose the nomination; and
|
|
(3)
|
as
to the stockholder giving the notice or, if the notice is given on behalf
of a beneficial owner on whose behalf the nomination is made, as to the
beneficial owner, (a) the class and number of shares of stock of the
Company which are beneficially owned by such stockholder or beneficial
owner as of the date of the notice, and the stockholder’s agreement to
notify the Company in writing within five business days after the record
date of the class and number of shares beneficially owned by such
stockholder or beneficial owner as of the record date, (b) a description
of any agreement or understanding with respect to the nomination between
such stockholder or beneficial owner and any other person and the
stockholder’s agreement to notify the Company in writing within five
business days after the record date of any such agreement in effect as of
the record date, (c) a description of any agreement or understanding that
has been entered into as of the date of the notice by, or on behalf of,
such stockholder or beneficial owner, the effect or intent of which is to
manage risk or benefit from changes in the share price of the Company’s
stock, or increase or decrease the voting power of the stockholder or
beneficial owner with respect to the Company’s stock, and the
stockholder’s agreement to notify the Company in writing within five
business days after the record date of any such agreement in effect as of
the record date, and (d) a representation whether the stockholder or
beneficial owner, if any, will engage in a solicitation with respect to
the nomination and, if so, the name of each participant in such
solicitation and whether such person intends to deliver a proxy statement
and/or form of proxy to holders of the Company’s
stock.
|
8
The
Company may require any proposed nominee to furnish other information as
reasonably required to determine eligibility to serve as a director of the
Company, including information regarding independence. The
requirements set forth above are separate from the requirements that
stockholders must meet to include proposals in the proxy materials for the 2010
Annual Meeting in accordance with Rule 14a-8, discussed earlier in this proxy
statement.
When
evaluating nominees for director, the Nominating & Corporate Governance
Committee considers, among other things, an individual’s business experience and
skills, independence, judgment, integrity and ability to commit sufficient time
and attention to the activities of the Board, as well as the absence of any
potential conflicts with the Company’s interests. When considering a director
standing for reelection as a nominee, in addition to the attributes described
above, the Nominating & Corporate Governance Committee also considers
that individual’s past contribution and future commitment to CoStar. The
Nominating & Corporate Governance Committee evaluates the totality of
the merits of each prospective nominee that it considers and does not restrict
itself by establishing minimum qualifications or attributes. There is no
difference in the manner by which the Nominating & Corporate Governance
Committee evaluates prospective nominees for director based on the source from
which the individual was first identified.
Stockholder
Communications with the Board
Stockholders
may communicate with our Board by sending written correspondence to
CoStar Group, Inc., Attention: Corporate Secretary, 2 Bethesda Metro
Center, Bethesda MD 20814. Such communications will be opened by the Corporate
Secretary. A copy of the contents will be made and retained by the Corporate
Secretary and the contents will be promptly forwarded to the Chairman of the
Nominating & Corporate Governance Committee. The Corporate Secretary
together with the Chairman of the Nominating & Corporate Governance
Committee and his duly authorized agents are responsible for collecting and
organizing stockholder communications. Absent a conflict of interest, the
Chairman of the Nominating & Corporate Governance Committee is
responsible for evaluating the materiality of each stockholder communication and
determining which stockholder communications are to be presented to the full
Board or other appropriate body.
Independent
Directors and Executive Sessions
CoStar’s
Board has determined that Messrs. Klein, Bonderman, Glosserman, Haber, Low
and Nassetta are each independent as defined under Rule 4200(a)(15) of the
NASDAQ Marketplace Rules. Catherine B. Reynolds served on the
Company’s Board in 2008 until the annual stockholder’s meeting held on June 10,
2008. CoStar’s Board previously determined that Ms. Reynolds was
independent as defined under Rule 4200(a)(15) of the NASDAQ Marketplace
Rules. In making these independence determinations, the Board
determined that none of the independent directors has any direct or indirect
relationship with the Company other than his or her relationship as a
director.
The
independent directors of the Board of Directors meet in regularly scheduled
executive sessions, which are typically run by the Chairman of the Board, Mr.
Klein.
Policy
Regarding Attendance at Annual Meetings
CoStar
encourages, but does not require, directors to attend the Annual Meetings of
Stockholders. In 2008, Mr. Florance attended the Annual Meeting of
Stockholders.
Codes
of Conduct
CoStar
has adopted a Code of Conduct for its directors. In addition, CoStar has adopted
a separate Code of Conduct for its officers and employees, including its
principal executive officer and principal financial officer. Copies of each of
these codes may be found in the “Investors” section of the Company’s website at
www.CoStar.com/Investors/Corpgovernance.aspx.
The Audit
Committee reviews the Company’s financial reporting process on behalf of the
Board. Management has the primary responsibility for the financial statements
and the reporting process. The Company’s independent registered public
accounting firm is responsible for expressing an opinion on the conformity of
the Company’s audited consolidated financial statements to generally accepted
accounting principles.
In this
context, the Audit Committee has reviewed and discussed with management and the
independent registered public accounting firm the Company’s audited consolidated
financial statements for 2008. The Audit Committee has discussed with the
independent registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1. AU Section 380), as adopted by the PCAOB in
Rule 3200T. In addition, the Audit Committee has received from
the independent registered public accounting firm the written disclosures and
the letter required by the PCAOB in Rule 3526, and discussed with them their
independence from the Company and its management. The Audit Committee has also
considered whether the independent registered public accounting firm’s provision
of non-audit services to the Company is compatible with the auditors’
independence.
9
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board that the audited consolidated financial statements be
included in the Company’s annual report on Form 10-K for the year ended
December 31, 2008, for filing with the SEC.
By the
Audit Committee
of the
Board of Directors
April 21,
2009
Warren H.
Haber, Chairman
Michael
J. Glosserman
Josiah O.
Low, III
The
Compensation Committee of the Board annually reviews director compensation for
service on the Board and for service on any Board committees and subsequently
recommends director compensation and any changes to such compensation to the
Board for approval. The Board annually reviews and approves director
compensation for Board and committee services based on the recommendations of
the Compensation Committee. Current director compensation is set out
below.
Board Fees. Each
director, other than the Chairman of the Board and any employee director,
receives $20,000 annually as compensation for serving on the Company’s
Board.
Attendance
Fees. Each director, other than the Chairman of the Board and
any employee director, receives $2,000 for each meeting of the Board attended in
person or by telephone. Attendance fees are not paid for special meetings
attended by telephone or other similar means of remote
communication.
Chairman. The
Chairman of the Board receives $120,000 annually as compensation for services
that he is required to perform in his role as Chairman.
Stock
Grants. Annually on the date of the first regular Board
meeting following the annual meeting of stockholders: (a) each non-employee
Board member is entitled to receive a restricted stock grant worth at least
$72,000 on the date of grant; (b) the Chairperson of the Audit Committee is
entitled to receive a restricted stock grant worth at least $30,000 on the date
of grant; (c) each member of the Audit Committee (other than the
Chairperson) is entitled to receive a restricted stock grant worth at least
$15,000 on the date of grant; and (d) the Chairperson of each of the
Compensation and Nominating & Corporate Governance Committees of the
Company is entitled to receive a restricted stock grant worth at least $15,000
on the date of grant. The number of shares of restricted stock granted pursuant
to each such restricted stock grant to the directors is determined by dividing
the total dollar amount awarded by the closing price of the Company’s common
stock on the date of grant. Each award vests in equal increments on
each of the first four anniversaries of the date of grant, as long as the
director is still serving on our Board on the respective vesting
date.
Pursuant
to the Company’s 2007 Plan and related award agreements, upon a change of
control, all restrictions on stock grants will lapse. For more
detailed information, see “Change of Control Provisions under the Company’s 1998
and 2007 Plans” on page 39. Further, under the 2007 Plan, recipients
of restricted stock are entitled to receive all dividends and other
distributions, if any, paid with respect to the common stock. The
Company’s Compensation Committee will determine if any such dividends or
distributions will be automatically reinvested in additional shares of
restricted stock and subject to the same restrictions as the restricted stock or
whether the dividend or distribution will be paid in cash.
Expenses. Each
director is entitled to reimbursement of his expenses for serving as a member of
our Board, including expenses in connection with attending each meeting of the
Board and each meeting of any committee.
10
Director
Compensation Table for Fiscal Year 2008
The
following Director Compensation table shows the compensation we paid in 2008 to
our non-employee directors.
|
Name
|
Fees
Earned or
Paid
in Cash(1)
($)
|
Stock
Awards(2)
($)
|
Option
Awards(2)
($)
|
Total
($)
|
||||||||||||
|
Michael
R. Klein, Chairman
|
$ | 120,000 | $ | 59,730 | $ | 7,120 | $ | 186,849 | ||||||||
|
David
Bonderman
|
$ | 26,000 | $ | 59,730 | $ | 7,120 | $ | 92,849 | ||||||||
|
Michael
J. Glosserman
|
$ | 20,111 | $ | 7,028 | $ | 0 | $ | 27,139 | ||||||||
|
Warren
H. Haber
|
$ | 28,000 | $ | 84,608 | $ | 9,968 | $ | 122,575 | ||||||||
|
Josiah
O. Low, III
|
$ | 28,000 | $ | 84,608 | $ | 8,544 | $ | 121,151 | ||||||||
|
Christopher
J. Nassetta
|
$ | 28,000 | $ | 72,173 | $ | 7,120 | $ | 107,293 | ||||||||
|
Catherine
B. Reynolds(3)
|
$ | 12,000 | $ | (6,264 | )(4) | $ | (15,391 | )(4) | $ | (9,656 | )(4) | |||||
__________
|
(1)
|
This
column shows the amount of cash compensation earned in 2008 for Board and
Committee service.
|
|
(2)
|
This
column shows the compensation cost recognized in the Company’s
2008 financial statements for reporting purposes with respect
to restricted stock granted in 2008 and prior years or stock options
granted in prior fiscal years, as applicable, in accordance with Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
123 (revised 2004), as modified or supplemented (“SFAS 123(R)”), except no
assumptions for forfeitures were included. Additional
information related the assumptions used in calculating these values may
be found in Note 15 to the audited financial statements in the Company’s
Annual Report on Form 10-K for the period ended December 31,
2008.
|
The
following table shows the number of shares of restricted stock granted to each
non-employee director during 2008 and the full grant date fair value of each
award under SFAS 123(R), as well as the aggregate number of shares of restricted
stock and stock options held by each non-employee director as of December 31,
2008. Ms. Reynolds, whose service on the Board terminated on June 10,
2008, did not receive a grant of restricted stock in 2008. Generally,
the grant date fair value is the amount the Company expenses in its financial
statements over the awards’ vesting period and is based on the closing price of
our common stock on the date of grant, which was $55.07 on September 4,
2008.
|
Name
|
Number
of Shares of Restricted Stock
Granted 9/4/08
|
Grant
Date Fair Value of Stock Awards Granted
9/4/08
|
Aggregate
Shares of Restricted Stock Held
as of 12/31/08
|
Aggregate
Stock Options Held
as of 12/31/08
|
||||||||||||
|
Michael
R. Klein, Chairman
|
1,308 | $ | 72,032 | 3,635 | 19,000 | |||||||||||
|
David
Bonderman
|
1,308 | $ | 72,032 | 3,635 | 20,000 | |||||||||||
|
Michael
J. Glosserman
|
1,580 | $ | 87,011 | 1,580 | 0 | |||||||||||
|
Warren
H. Haber
|
1,853 | $ | 102,045 | 5,149 | 28,000 | |||||||||||
|
Josiah
O. Low, III
|
1,853 | $ | 102,045 | 5,149 | 22,000 | |||||||||||
|
Christopher
J. Nassetta
|
1,580 | $ | 87,011 | 4,392 | 15,000 | |||||||||||
|
Catherine
B. Reynolds
|
0 | $ | 0 | 0 | 0 | |||||||||||
|
(3)
|
Ms.
Reynolds did not seek reelection to the Board at our 2008 annual
meeting. Therefore, her service as a director of the Company
ended effective June 10, 2008.
|
|
(4)
|
The
Company expenses the compensation cost associated with restricted stock
and option awards over the applicable vesting
period. Forfeiture of an award due to termination of service as
a director results in a reversal of the expense for the portion of the
award that did not vest. The negative number reported with
respect to the awards granted to Ms. Reynolds represents the reversal of
the amount previously expensed with respect to the portion of the award
forfeited.
|
11
The
following table lists our current executive officers and key
employees:
|
Name
|
Age(1)
|
Years of Service(2)
|
Position
|
||||||
|
Andrew
C. Florance*
|
45 | 22 |
Chief
Executive Officer, President and Director
|
||||||
|
Brian
J. Radecki*
|
38 | 12 |
Chief
Financial Officer and Treasurer
|
||||||
|
John
Stanfill*
|
41 | 14 |
Sr.
Vice President of Sales and Customer Service
|
||||||
|
Jennifer
L. Kitchen*
|
36 | 15 |
Sr.
Vice President of Research
|
||||||
|
Paul
Marples*
|
47 | 8 | (3) |
Managing
Director, CoStar UK Limited
|
|||||
|
Jonathan
Coleman
|
44 | 9 |
General
Counsel and Secretary
|
||||||
|
Frank
Simuro
|
42 | 10 |
Chief
Information Officer
|
||||||
|
Daniel
Kimball
|
34 | 3 |
Vice
President of Marketing
|
||||||
|
Craig
Farrington
|
51 | 26 | (3) |
Vice
President of Research
|
|||||
|
Dean
Violagis
|
42 | 20 |
Vice
President of Research
|
||||||
____________
* Executive
Officer.
|
(1)
|
Age
determined as of June 1, 2009.
|
|
(2)
|
Years
of service include the current year of
service.
|
|
(3)
|
Includes
years of service with acquired
companies.
|
Information
about Mr. Florance appears above under “Item 1 — Election of
Directors.” Information about each of the other individuals appears
below.
Brian J. Radecki, our Chief
Financial Officer and Treasurer, joined the Company in 1997 as our Corporate
Controller. Prior to his appointment as Chief Financial Officer in
2007, Mr. Radecki served as Vice President of Research Operations, the Company’s
largest operating area, and before that he was Director of Accounting and
Finance where he was involved in every aspect of the Company's accounting and
finance functions in the United States and United Kingdom. From
February 2000 until February 2001, Mr. Radecki was Chief Financial Officer of
Comps, Inc. (formerly a wholly owned subsidiary of the Company). Before joining
CoStar, Mr. Radecki was the Accounting Manager at Axent Technologies, Inc.
(“Axent”), a publicly-held international security software company. Prior to
Axent, Mr. Radecki worked at Azerty, Inc. and the public accounting firm,
Lumsden & McCormick, LLP, in Buffalo, NY. Mr. Radecki received a B.S. in
business administration and a dual degree in both accounting and finance from
the State University of New York at Buffalo.
John Stanfill, our Senior
Vice President of Sales & Customer Service, joined us in June 1995 as an
Account Executive for the New York City market. Since then, he has
held positions of increasing responsibility at CoStar, ranging from positions in
business development and national market expansion to management of the
Company’s Inside Sales Division. Before being appointed Senior Vice
President of Sales & Customer Service in June 2008, Mr. Stanfill held the
position of Senior Vice President of Marketing & Product Management from
January 2008 to June 2008. Mr. Stanfill received a B.A. from Boston
University.
Jennifer L. Kitchen, our
Senior Vice President of Research, joined CoStar in 1994 as a research analyst
for the Company’s first New York City research team. Prior to her
appointment as Senior Vice President of Research in 2006, Ms. Kitchen held
management positions with increasing responsibility. Between 1995 and
1997, she led CoStar’s research expansion into the Los Angeles market and
managed its research operations on the West Coast. In 1998, Ms. Kitchen
established CoStar’s first field research and photography operations and was
subsequently promoted to Director of Field Research and Photography. She was
appointed Vice President of Field Research in 2004, where she led the Company’s
overall field operations for collecting building-level data and photographing
properties throughout the United States. Ms. Kitchen is currently
responsible for our entire research operations. Ms. Kitchen holds a B.A. in
history from Wellesley College.
Paul Marples, the Managing
Director of our U.K. subsidiary, CoStar UK Limited, is in charge of our CoStar
FOCUS service and our European operations. Mr. Marples joined us upon
the acquisition of Property Investment Exchange Limited (“Propex”) in February
2007. Mr. Marples previously served as Managing Director of Propex
from 2001 to 2007. Mr. Marples began his career in the commercial property
industry in 1984, as a Chartered Surveyor for Weatherall Green and Smith
(Atisreal) in London and Spain. From 1984 to 1996, Mr. Marples rose from
Chartered Surveyor to Partner (London) to Managing Director (Spain) of
Weatherall Green and Smith. In 1996, he established Brown Cooper Marples (BCM),
a London-based investment brokerage firm where he served as Managing Director,
before helping launch Propex beginning in 2001 through the consolidation of a
number of property-related, Internet-based businesses. Mr. Marples received a
M.A. in geography from Oxford University.
12
Jonathan Coleman, our General
Counsel and Secretary, joined us in May 2000 as Deputy General Counsel. He has
served as General Counsel and Secretary since July 2005. From October 1996 to
May 2000, Mr. Coleman was a Trial Attorney with the U.S. Department of
Justice’s Civil Division. Prior to that, Mr. Coleman was an associate at
Fried, Frank, Harris, Shriver & Jacobson, where he practiced commercial
litigation. Mr. Coleman received a B.A. in economics and public policy
studies from Dickinson College and his J.D. from George Washington
University.
Frank Simuro, our Chief
Information Officer, joined the Company in December 1999 as Director of
Information Systems. He served as Senior Vice President of Information Systems
from May 2005 to January 2008. Prior to joining CoStar, Mr. Simuro was
Director of Data Warehousing at GRC International (“GRC”). Prior to GRC,
Mr. Simuro was a technology consultant specializing in operational
efficiency and database technologies. Mr. Simuro received a M.S. in
information systems from George Washington University and a B.A. in computer
science from State University of New York — Geneseo.
Daniel Kimball, our Vice
President of Marketing, joined us in January 2007 as Senior Director of
Ecommerce. He has served as Vice President of Marketing since January 2008. From
December 2005 to January 2007, Mr. Kimball was Director of Interactive
Marketing at Educap, a student lending firm. Prior to that, Mr. Kimball was
a Marketing Director at Capital One Financial, where he was tasked with driving
new business for the company’s auto insurance business. Mr. Kimball
received a B.A. in philosophy from Colgate University.
Craig S. Farrington, our Vice
President of Research, joined the Company as a result of the merger of COMPS.COM
and CoStar Group, Inc. in February 2000. Mr. Farrington is responsible for
our San Diego, California research operations and has product management
responsibility for CoStar COMPS®.
Mr. Farrington joined COMPS.COM in 1983, where he served in various senior
management roles throughout the company, including Vice President of Marketing
and Product Development. Mr. Farrington received a B.A. in business and
economics from Westmont College.
Dean L. Violagis, our Vice
President of Research, joined us in 1989 as a research analyst. He has served as
Vice President of Research since May 1996. Over the years, he has been
involved in the Company’s geographic market expansion. Mr. Violagis is
responsible for our Bethesda, Maryland research operations. Mr. Violagis
received a B.A. in real estate finance from American University.
The
following table provides certain information regarding the beneficial ownership
of our common stock as of April 1, 2009, unless otherwise noted,
by:
|
|
•
|
our
Chief Executive Officer and President, our Chief Financial Officer, the
three most highly compensated executive officers of the Company (other
than the CEO and CFO) who were serving as executive officers on
December 31, 2008, consisting of our three other executive officers
(whom we refer to collectively in this proxy statement as the “named
executive officers”);
|
|
|
•
|
each
of our current directors and a former director who served in that capacity
during 2008;
|
|
|
•
|
each
person we know to be the beneficial owner of more than 5% of our
outstanding common stock (based solely upon Schedule 13D and
Schedule 13G filings with the Securities and Exchange Commission,
which can be reviewed for further information on each such beneficial
owner’s holdings); and
|
|
|
•
|
all
of our named executive officers and our current directors as a
group.
|
13
|
Name and Address(1)
|
Shares
Beneficially Owned(1)
|
Percentage
of
Outstanding Shares(1)
|
||||||
|
Michael
R. Klein(2)
|
926,055 | 4.69 | % | |||||
|
Andrew
C. Florance(3)
|
460,108 | 2.30 | % | |||||
|
Brian
J. Radecki(4)
|
40,335 | * | ||||||
|
John
Stanfill(5)
|
57,448 | * | ||||||
|
Jennifer
L. Kitchen(6)
|
27,508 | * | ||||||
|
Paul
Marples(7)
|
25,403 | * | ||||||
|
David
Bonderman(8)
|
287,047 | 1.45 | % | |||||
|
Michael
J. Glosserman(9)
|
1,580 | * | ||||||
|
Warren
H. Haber(10)
|
119,887 | * | ||||||
|
Josiah
O. Low, III(11)
|
37,577 | * | ||||||
|
Christopher
J. Nassetta(12)
|
22,316 | * | ||||||
|
Catherine
B. Reynolds(13)
|
0 | — | ||||||
|
Barclays
Global Investors and related entities(14)
|
1,133,847 | 5.75 | % | |||||
|
Baron
Capital Group, Inc and related entities and persons(15)
|
1,925,600 | 9.76 | % | |||||
|
FMR
LLC and Edward C. Johnson 3d(16)
|
1,465,566 | 7.43 | % | |||||
|
Janus
Capital Management LLC(17)
|
1,567,152 | 7.94 | % | |||||
|
Morgan
Stanley and related entity(18)
|
2,189,497 | 11.10 | % | |||||
|
TimesSquare
Capital Management, LLC(19)
|
1,410,589 | 7.15 | % | |||||
|
Waddell
& Reed Financial, Inc. and related entities(20)
|
1,145,692 | 5.81 | % | |||||
|
All
directors and named executive officers as a group (11
persons)(21)
|
2,005,264 | 9.97 | % | |||||
____________
|
(1)
|
Unless
otherwise noted, each listed person’s address is c/o CoStar Group,
Inc., 2 Bethesda Metro Center, Tenth Floor, Bethesda, Maryland 20814.
Beneficial ownership, as determined in accordance with Rule 13d-3
under the Exchange Act, includes sole or shared power to vote or direct
the voting of, or to dispose or direct the disposition of shares, as well
as the right to acquire beneficial ownership within 60 days of
April 1, 2009, through the exercise of an option or otherwise. Except
as indicated in the footnotes to the table, we believe that the persons
named in the table have sole voting and investment power with respect to
the indicated shares of common stock. The use of * indicates ownership of
less than 1%. As of April 1, 2009, the Company had
19,725,101 shares of common stock
outstanding.
|
|
(2)
|
Includes
19,000 shares issuable upon options exercisable within 60 days
of April 1, 2009, as well as 3,635 shares of restricted stock
that are subject to vesting
restrictions.
|
|
(3)
|
Includes
238,225 shares issuable upon options exercisable within 60 days
of April 1, 2009, as well as 89,797 shares of restricted stock that
are subject to vesting
restrictions.
|
|
(4)
|
Includes
15,041 shares issuable upon options exercisable within 60 days
of April 1, 2009, as well as 21,357 shares of restricted stock
that are subject to vesting
restrictions.
|
|
(5)
|
Includes
6,750 shares issuable upon options exercisable within 60 days of
April 1, 2009, as well as 47,745 shares of restricted stock that
are subject to vesting
restrictions.
|
|
(6)
|
Includes
16,299 shares issuable upon options exercisable within 60 days of
April 1, 2009, as well as 9,815 shares of restricted stock that
are subject to vesting
restrictions.
|
|
(7)
|
Includes
1,766 shares issuable upon options exercisable within 60 days of
April 1, 2009, as well as 9,600 shares of restricted stock that
are subject to vesting
restrictions.
|
|
(8)
|
Includes
20,000 shares issuable upon options exercisable within 60 days
of April 1, 2009, as well as 3,635 shares of restricted stock
that are subject to vesting
restrictions.
|
|
(9)
|
Includes
1,580 shares of restricted stock that are subject to vesting
restrictions.
|
|
(10)
|
Includes
6,000 shares held by Mr. Haber’s spouse and excludes
20,000 shares held by Mr. Haber’s adult son for which
Mr. Haber disclaims beneficial ownership. Also includes
28,000 shares issuable upon options exercisable within 60 days
of April 1, 2009, as well as 5,149 shares of restricted stock
that are subject to vesting
restrictions.
|
|
(11)
|
Includes
1,000 shares held by Mr. Low’s spouse for which Mr. Low
disclaims beneficial ownership. Also includes 22,000 shares issuable
upon options exercisable within 60 days of April 1, 2009, as
well as 5,149 shares of restricted stock that are subject to vesting
restrictions.
|
|
(12)
|
Includes
15,000 shares issuable upon options exercisable within 60 days
of April 1, 2009, as well as 4,392 shares of restricted stock
that are subject to vesting
restrictions.
|
14
|
(13)
|
Ms.
Reynolds did not seek reelection to the Board at our 2008 annual
meeting. Therefore, her service as a director of the Company
ended effective June 10, 2008.
|
|
(14)
|
Based
on a Schedule 13G filed by Barclays Global Investors, NA, Barclays Global
Fund Advisors, Barclays Global Investors, Ltd., Barclays Global Investors
Japan Limited, Barclays Global Investors Canada Limited, Barclays Global
Investors Australia Limited, and Barclays Global Investors (Deutschland)
AG on February 5, 2009. Barclays Global Investors, NA had sole
voting power with respect to 609,548 shares, shared voting and shared
dispositive power with respect to no shares, and sole dispositive power
with respect to 691,062 shares. Barclays Global Fund Advisors
had sole voting and sole dispositive power with respect to 442,785 shares,
and shared voting and shared dispositive power with respect to no
shares. None of Barclays Global Investors, Ltd., Barclays
Global Investors Japan Limited, Barclays Global Investors Canada Limited,
Barclays Global Investors Australia Limited, and Barclays Global Investors
(Deutschland) AG had any voting or dispositive power. The
address of Barclays Global Investors, NA and Barclays Global Fund Advisors
is 400 Howard Street, San Francisco, CA
94105.
|
|
(15)
|
Based
on a Schedule 13G/A filed by Baron Capital Group, Inc. (“BCG”),
BAMCO, Inc. (“BAMCO”), Baron Capital Management, Inc. (“BCM”) and Ronald
Baron on February 12, 2009. BCG and Ronald Baron both had sole voting
and sole dispositive power with respect to no shares, shared voting power
with respect to 1,715,100 shares, and shared dispositive power with
respect to 1,925,600 shares. BAMCO had sole voting and sole
dispositive power with respect to no shares, shared voting power with
respect to 1,613,000 shares, and shared dispositive power with
respect to 1,819,000 shares. BCM had sole voting and sole dispositive
power with respect to no shares, shared voting power with respect to
102,100 shares, and shared dispositive power with respect to
106,600 shares. BCG and Ronald Baron disclaim beneficial ownership of
shares held by their controlled entities (or the investment advisory
clients thereof) to the extent such shares are held by persons other than
BCG and Ronald Baron. BAMCO and BCM disclaim beneficial ownership of
shares held by their investment advisory clients to the extent such shares
are held by persons other than BAMCO, BCM and their affiliates. The
address of the reporting person is 767 Fifth Avenue, New York, NY
10153.
|
|
(16)
|
Based
on a Schedule 13G/A filed by FMR LLC on February 17, 2009. The
reporting person had sole voting power with respect to 2,064 shares,
shared voting power with respect to no shares, sole dispositive power with
respect to 1,465,566 shares, and shared dispositive power with
respect to no shares. Fidelity Management & Research Company
(“Fidelity”), a wholly owned subsidiary of FMR LLC, is the beneficial
owner of 1,463,502 shares as a result of acting as investment adviser
to various investment companies registered under Section 8 of the
Investment Company Act of 1940. The ownership of one investment company,
Fidelity Mid Cap Stock Fund, amounted to 996,400 shares or 5.05% of
the common stock outstanding. Edward C. Johnson 3d and FMR LLC, through
its control of Fidelity, and the funds each has sole power to dispose of
the 1,463,502 shares owned by the Funds. Members of the family of
Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners,
directly or through trusts, of Series B voting common shares of FMR
LLC, representing 49% of the voting power of FMR LLC. The Johnson family
group and all other Series B shareholders have entered into a
shareholders’ voting agreement under which all Series B voting common
shares will be voted in accordance with the majority vote of Series B
voting common shares. Accordingly, through their ownership of voting
common shares and the execution of the shareholders’ voting agreement,
members of the Johnson family may be deemed, under the Investment Company
Act of 1940, to form a controlling group with respect to FMR LLC. Neither
FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power
to vote or direct the voting of the shares owned directly by the Fidelity
Funds, which power resides with the Funds’ Boards of Trustees. Fidelity
carries out the voting of the shares under written guidelines established
by the Funds’ Boards of Trustees. The address of the reporting person is
82 Devonshire Street, Boston, MA
02109.
|
|
(17)
|
Based
on a Schedule 13G/A filed by Janus Capital Management LLC (“Janus
Capital”) on February 17, 2009. The reporting person had sole voting
and sole dispositive power with respect to 1,567,152 shares, and
shared voting and shared dispositive power with respect to no shares. The
address of the reporting person is 151 Detroit Street, Denver, CO
80206. Janus Capital has a direct 89.9% ownership stake in
INTECH Investment Management (“INTECH”) and a direct 78.4% ownership stake
in Perkins Investment Management LLC (“Perkins”). Due to this
ownership structure, holdings for Janus Capital, Perkins and INTECH are
aggregated in their Schedule 13G/A.
|
|
(18)
|
Based
on a Schedule 13G/A filed by Morgan Stanley and Morgan Stanley
Investment Management Inc. on February 17, 2009. Morgan Stanley had
sole voting power with respect to 2,005,267 shares, shared voting and
shared dispositive power with respect to no shares, and sole dispositive
power with respect to 2,189,497 shares. Morgan Stanley
Investment Management Inc. had sole voting power with respect to 1,521,266
shares, shared voting and shared dispositive power with respect to no
shares, and sole dispositive power with respect to 1,620,816
shares. The securities being reported on by Morgan Stanley as a
parent holding company are owned, or may be deemed to be beneficially
owned, by Morgan Stanley Investment Management Inc., an investment adviser
in accordance with Rule 13d-1(b)(1)(ii)(E), as amended. Morgan
Stanley Investment Management Inc. is a wholly owned subsidiary of Morgan
Stanley. The address of the reporting person is 1585 Broadway,
New York, NY 10036, and the address of Morgan Stanley Investment
Management Inc. is 522 Fifth Avenue, New York,
NY 10036.
|
15
|
(19)
|
Based
on a Schedule 13G/A filed by TimesSquare Capital Management, LLC on
February 9, 2009. The reporting person had sole voting power with respect
to 1,278,189 shares, shared voting and shared dispositive power with
respect to no shares, and sole dispositive power with respect to
1,410,589 shares. The address of the reporting person is 1177 Avenue
of the Americas — 39th Floor, New York,
NY 10036.
|
|
(20)
|
Based
on a Schedule 13G/A filed by Ivy Investment Management Company
(“IICO”), Waddell & Reed Investment Management Company (“WRIMCO”),
Waddell & Reed, Inc. (“WRI”), Waddell & Reed Financial Services,
Inc. (“WRFSI”), and Waddell & Reed Financial, Inc. (“WDR”) on February
4, 2009. IICO had sole voting and sole dispositive power with
respect to 111,669 shares, and shared voting and shared dispositive
power with respect to no shares. WRIMCO, WRI and WRFSI had sole
voting and sole dispositive power with respect to 1,034,023 shares, and
shared voting and shared dispositive power with respect to no
shares. WDR had sole voting and sole dispositive power with
respect to 1,145,692 shares, and shared voting and shared dispositive
power with respect to no shares. The securities reported on in
the Schedule 13G/A are beneficially owned by one or more open-end
investment companies or other managed accounts which are advised or
sub-advised by IICO, an investment advisory subsidiary of WDR or WRIMCO,
an investment advisory subsidiary of WRI. WRI is a
broker-dealer and underwriting subsidiary of WRFSI, a parent holding
company. In turn WRFSI is a subsidiary of WDR, a publicly
traded company. The investment advisory contracts grant IICO
and WRIMCO all investment and/or voting power over securities owned by
such advisory clients. The investment sub-advisory contracts
grant IICO and WRIMCO investment power over securities owned by such
sub-advisory clients and, in most cases, voting power. Any
investment restriction of a sub-advisory contract does not restrict
investment discretion or power in a material manner. Therefore,
IICO and/or WRIMCO may be deemed the beneficial owner of the securities
covered by the Schedule 13G/A. The address of the reporting
person is 6300 Lamar Avenue, Overland Park, KS
66202.
|
|
(21)
|
Includes
382,081 shares issuable upon options exercisable within 60 days
of April 1, 2009, as well as 201,854 shares of restricted stock
that are subject to vesting restrictions. Beneficial ownership
of shares by Ms. Reynolds, a former director who served in that capacity
until the Company’s 2008 annual meeting, is set forth individually in the
beneficial ownership table above, but is not included in the aggregate
number of shares held by directors and named executive
officers.
|
The
following table sets forth information with respect to the Company’s equity
compensation plans approved by security holders. The Company does not have any
equity compensation plans not approved by security holders. The information in
this table is as of December 31, 2008.
|
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 the first column)
|
|||||||||
|
Equity
compensation plans approved by security holders (1)
|
815,586 | $ | 33.98 | 879,267 | ||||||||
__________
|
(1)
|
The
Company’s 1998 Plan and the Company’s 2007 Plan, provide for various types
of awards, including options and restricted stock grants. In
April 2007, the Company’s Board of Directors adopted the 2007 Plan,
subject to stockholder approval, which was obtained on June 7,
2007. All shares of common stock that were authorized for
issuance under the 1998 Plan that, as of June 7, 2007, remained available
for issuance under the 1998 Plan (excluding shares subject to outstanding
awards) were rolled into the 2007 Plan and, as of that date, no shares of
common stock remained available for issuance pursuant to new awards under
the 1998 Plan. The 1998 Plan continues to govern unexercised
and unexpired awards issued under the 1998 Plan prior to June 7,
2007.
|
Messrs. Nassetta,
Bonderman, Haber and Klein, the current members of the Compensation Committee,
are each non-employee directors. Mr. Klein serves as the Chairman of the
Board of the Company. During 2008, none of the members of the Compensation
Committee were officers or employees of the Company or any of its subsidiaries.
During 2008, none of the Company’s executive officers served as a director or
compensation committee member of any entity with an executive officer or
director who served as a director or Compensation Committee member of the
Company.
16
The
Compensation Committee has reviewed and discussed with management the following
Compensation Discussion and Analysis section of the Company’s 2009 proxy
statement. Based on its review and discussions with management, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in the Company’s Annual Report on Form 10-K and this
proxy statement.
By the
Compensation Committee
of the
Board of Directors
Christopher
J. Nassetta, Chairman
Warren H.
Haber
David
Bonderman
Michael
R. Klein
Compensation
Philosophy and Objectives
The
Company’s Compensation Committee (the “Committee”) is responsible for designing
and maintaining the Company’s executive compensation program consistent with the
objectives below. The Committee operates under a written charter approved by the
Board. For additional information about the Committee’s authority and
its ability to delegate its authority, see the section of this proxy statement
titled “Additional Information—Board Meetings and Committees—Compensation
Committee” on page 7. The Committee annually establishes and reviews
all forms of direct compensation, including base salaries, annual incentive
bonuses, and both the terms and types of equity awards, for the Company’s named
executive officers as well as other officers of the Company.
The
Company’s executive compensation program seeks to
|
·
|
link
executive compensation with the achievement of overall corporate
goals,
|
|
·
|
encourage
and reward superior performance,
and
|
|
·
|
assist
the Company in attracting, motivating and retaining talented
executives.
|
Accordingly,
executive compensation is structured to ensure that a significant portion of
compensation paid to named executive officers is directly related to the
Company’s short-term and long-term performance, thereby aligning the interests
of named executive officers with those of the Company’s
stockholders. For example, as discussed below, a major portion of the
named executive officers’ opportunities under the Company’s cash incentive and
equity compensation programs is tied to the Company’s revenue growth objectives,
earnings objectives and stock performance. The Committee also recognizes that
the market for executives in the commercial real estate information services
industry is highly competitive, and therefore seeks to provide a competitive
total compensation package so that the Company may maintain its leadership
position in this industry by attracting, retaining, and motivating executives
capable of enhancing stockholder value.
Determination
of Executive Compensation
As part
of the compensation review process, the Committee annually reviews and approves
each element and the mix of compensation that comprises each named executive
officer’s total compensation package. Our Chief Executive Officer and
Chief Financial Officer make recommendations to the Committee for each element
of compensation awarded to named executive officers (including establishment of
individual and corporate financial goals), but the Committee must approve each
element of (and any changes to) executive compensation. The Committee
may consider a number of factors in establishing or revising each named
executive officer’s total compensation, including individual performance, the
Company’s financial performance, external market and peer group practices,
current compensation arrangements, certain internal pay equity considerations
and long-term potential to enhance stockholder value. Particular
factors considered by the Committee with respect to each element of executive
compensation are discussed below.
Periodically
the Committee also retains independent compensation consulting firms to assist
it in gathering benchmarking data and to provide it with information about
trends in compensation among comparable companies based on factors such as
market capitalization, annual revenues, products and potential competition for
talent or business. The Committee believes that comparing the compensation of
each of the Company’s named executive officers with executives in comparable
positions at these peer companies helps to ensure that the total compensation
provided to the Company’s named executive officers is set at an appropriate
level to reward, attract and retain top performers over the long
term.
17
The
Committee engaged an independent compensation consultant, Towers Perrin, in 2006
and again in 2008 to provide peer data and to assess the competitiveness of the
Company’s executive compensation program. The Committee’s decisions
regarding executive compensation for 2008 were based in part on Towers Perrin’s
recommendations resulting from its May 2006 engagement and in part from its 2008
engagement. The details of the Company’s executive compensation
structure for 2008 are discussed below. The Committee made several
additional changes to the Company’s executive compensation program beginning in
2009 based on Towers Perrin’s recommendations in 2008, which are also summarized
below.
As
referenced above, in 2006 and in 2008, the Committee retained the independent
consulting firm of Towers Perrin to assess the competitiveness of the Company’s
executive pay structure and to identify potential modifications based on market
practices and trends, the Company’s business priorities, structure and growth
expectations, and views of management and the Committee. In each case, Towers
Perrin reported directly to the Committee through its chair, and, at the
direction of the Committee chair, also worked directly with the Company’s
management to develop materials and proposals with respect to named executive
officer compensation. In future years, the Committee plans at its
discretion to retain Towers Perrin (or another consulting firm) to update or
perform new studies to be used in connection with its executive compensation
decisions.
The
following is the list of peer companies selected and approved by the Committee
in 2006, based upon the recommendation of Towers Perrin, as comparable to the
Company in terms of market capitalization and annual revenues, and in terms of
product and potential competition for talent or business:
|
· Advent
Software, Inc.
|
· The
Medicines Company
|
|
· Advisory
Board Company
|
· Myogen
Inc.
|
|
· ANSYS
Inc.
|
· Onyx
Pharmaceuticals Inc.
|
|
· Atwood
Oceanics Inc.
|
· Quality
Systems Inc.
|
|
· Brookline
Bancorp Inc.
|
· Shuffle
Master Inc.
|
|
· Commercial
Net Lease Realty
|
· Sycamore
Networks Inc.
|
|
· Cyberonics
Inc.
|
· TALX
Corp.
|
|
· Entertainment
Properties Trust
|
· Theravance
Inc.
|
|
· Idenix
Pharmaceuticals Inc.
|
· TrustCo
Bank Corp NY
|
|
· Immucor
Inc.
|
· CSG
Systems International Inc.
|
|
· IXIA
|
· Infocrossing
Inc.
|
|
· LCA-Vision
Inc
|
· LoopNet
Inc.
|
|
· Matria
Healthcare Inc
|
· Move
Inc.
|
The
Towers Perrin study also considered general industry pay data (based on a survey
prepared by Towers Perrin) for comparably sized companies based on annual
revenues, as well as data processing and information services industry pay
data. The Committee was not made aware of the names of the companies
who participated in Towers Perrin’s surveys of general industry pay data and
data processing and information services industry pay data.
The
Committee utilized peer company and survey data as presented by Towers Perrin in
2006 when evaluating the executives’ base salary, total cash compensation (base
salary and bonus), and total compensation (base salary, bonus and expected value
at grant of long-term incentives) for 2007. In general, the Committee
determined that each element of executive compensation was market competitive if
it fell within +/- 15% of the median levels of peer company and/or survey data
provided by Towers Perrin. Named executive officers’ base salary and
cash incentive awards for 2008 were based on the metrics put in place effective
in 2007.
In
connection with its engagement in 2008, Towers Perrin recommended a revised list
of peer companies. The following is the list of peer companies
selected and approved, based upon the recommendation of Towers Perrin, as
comparable to the Company in terms of market capitalization and annual revenues,
and in terms of business model and financial performance.
18
|
· Advent
Software, Inc.
|
· Liquidity
Services Inc.
|
|
· Advisory
Board Company
|
· LoopNet
Inc.
|
|
· Arbitron
Inc.
|
· Morningstar
Inc.
|
|
· Allscripts-Misys
Healthcare Solutions Inc.
|
· Move
Inc.
|
|
· Bankrate
Inc.
|
· MSCI
Inc.
|
|
· comScore
Inc.
|
· NeuStar
Inc.
|
|
· Corporate
Executive Board Company
|
· Omniture
Inc.
|
|
· DealerTrack
Holdings Inc.
|
· Riskmetrics
Group Inc.
|
|
· Digital
River Inc.
|
· Salary.com
Inc.
|
|
· ExlService
Holdings Inc.
|
· Solera
Holdings Inc.
|
|
· FactSet
Research Systems Inc.
|
· TradeStation
Group Inc.
|
|
· Forrester
Research Inc.
|
· Travelzoo
Inc.
|
|
· Global
Traffic Network Inc.
· Harris
Interactive Inc.
· Lionbridge
Technologies Inc.
|
· Ultimate
Software Group Inc.
· WebMD
Health Corp.
· Wright
Express Corp.
|
The 2008
Towers Perrin study also considered general industry executive compensation data
from a survey prepared by Towers Perrin, size-adjusted based on CoStar’s annual
revenues. Where size-adjusted data was not available in the Towers
Perrin survey data, Towers Perrin referred to data compiled from general
compensation surveys conducted by Watson Wyatt and Mercer. The
Committee was not made aware of the names of the companies who participated in
Towers Perrin’s survey of general industry executive compensation data or that
were considered in the Watson Wyatt and Mercer surveys.
Where
available, the Committee utilized peer company data presented by Towers Perrin
as the primary competitive benchmark when evaluating the executives’ long-term
incentive awards for 2008 performance, as discussed in more detail
below. In those cases where peer data was unavailable, the Committee
took into account previous equity awards to the respective named executive
officers as well as internal pay equity considerations.
Towers
Perrin’s preliminary findings and recommendations from its engagement in 2008
were presented to Mr. Nassetta in late 2008 and to the full Committee in
February 2009. On March 2, 2009, after having discussed the Towers Perrin study
and its recommendations, the Committee adjusted the long-term incentive target
award values for certain named executive officers, as discussed
below.
The
Committee has designed the executive compensation program to align executives’
compensation with the Company’s performance and to enable the Company to
attract, motivate and retain talented executives. The Committee
reevaluates and approves executive compensation each year and, as indicated
above, may retain consulting firms in the future to assist with updating or
performing studies to be used to assist with executive compensation
decisions.
Elements
of the Compensation Program
The
Company’s executive compensation program consists primarily of base salary,
annual cash bonuses and an annual award of restricted stock and stock
options. Additionally, each of our U.S. named executive officers are
eligible to receive compensation in the form of a Company 401(k) match, as well
as health insurance and similar benefits that are generally available to the
Company’s U.S. employees, and our U.K. named executive officer is eligible to
receive compensation in the form of a pension scheme contribution to a defined
contribution plan and Company-paid private medical insurance. As discussed more
fully below, our Senior Vice President of Sales and Customer Service, John
Stanfill, is eligible to receive commission payments based on monthly production
of our U.S. sales force as a component of his total
compensation.
The
Company has an employment arrangement with each of its named executive officers
that specifies a named executive officer’s base salary, annual cash bonus based
on a percentage of base compensation subject to achievement of individual and
corporate goals, and equity awards (including restricted stock subject to
achievement of corporate goals and stock options), which may vest over time
and/or in full after a specified period of time. Each of these components is
discussed in further detail below. Overall, the Company strives to motivate its
executives with straightforward, transparent and competitive compensation
arrangements intended to reward excellent individual and corporate performance
and enhance stockholder value.
19
Base
Salaries
Named
executive officers’ base salaries set a minimum level of compensation for
performance. Salary levels are reviewed annually by the
Committee. In establishing salary levels, the Committee considers
each executive’s individual responsibilities and performance, prior base salary
and total compensation, the pay levels of similarly situated executives within
the Company and data on market base salary and total compensation levels
(including Towers Perrin peer group and survey data). In early 2008,
the Committee reviewed 2007 base salaries and determined to increase salaries
for 2008 for the named executive officers (other than Mr. Stanfill, who was
not an executive officer at that time) by 4% over their salaries for 2007
primarily to account for cost of living adjustments. Mr. Stanfill was
appointed Senior Vice President of Sales and Customer Service effective June 16,
2008. Mr. Stanfill received an 11% increase in his base salary
to bring it within a market competitive range, to account for internal pay
equity considerations and in recognition of his new responsibilities as a member
of the executive team. As a result of these increases, the annual
base salaries of our named executive officers effective as of January 1, 2008
(for all named executive officers other than Mr. Stanfill), were as
follows:
|
Name
|
Title
|
Annual Base
Salary
|
||||
|
Andrew
Florance
|
President &
CEO
|
$ | 456,560 | |||
|
Brian
Radecki
|
CFO &
Treasurer
|
$ | 249,600 | |||
|
John
Stanfill
|
Sr.
Vice President, Sales & Customer Service
|
$ | 250,000 | (1) | ||
|
Jennifer
Kitchen
|
Sr.
Vice President, Research
|
$ | 197,600 | |||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
$ | 273,728 | (2) | ||
|
(1)
|
Mr.
Stanfill’s base salary was effective June 16, 2008, upon his appointment
as Senior Vice President of Sales and Customer
Service.
|
|
(2)
|
All
dollar amounts listed for Mr. Marples have been converted from British
pounds using a conversion rate of 1.86,
which is the average exchange
rate for period from January 1, 2008 to December 31,
2008.
|
In light
of the current global economic environment, the Company temporarily suspended
pay increases for all employees at the Company in order to stabilize costs and
minimize new spending. Accordingly, the Committee did not award pay
increases to the named executive officers for 2009, and their 2009 base salaries
are the same as those for 2008.
Annual
Cash Incentive Plan
The
Committee administers an annual cash incentive plan under which the Company’s
named executive officers may earn a cash incentive bonus based on a fixed target
percentage of base salary during the fiscal year, if individual and corporate
performance objectives for the fiscal year are achieved. At the beginning of
each year, the Committee establishes individual goals for each named executive
officer based upon recommendations from our Chief Executive Officer, as well as
Company financial goals that apply to all named executive officers, based upon
recommendations from our Chief Executive Officer and our Chief Financial
Officer. The Committee also determines the target percentages of base pay for
each named executive officer and the weighting of the various individual and
Company financial goals, which may vary among the named executive officers by
position due to functional accountability and responsibility and are subject to
change from year to year, based upon recommendations from our Chief Executive
Officer and Chief Financial Officer. The Committee seeks to establish
performance goals that are challenging but realistic given the expected
operating environment at the time they are established. These
performance goals are intended to provide named executive officers with
incentive to achieve the Company’s financial and operating
goals. After the completion of each year, the Committee reviews
individual and Company performance to determine the extent to which the goals
were achieved and the actual cash bonuses to be paid to the named executive
officers.
In the
Committee’s view, the use of annual performance-based cash incentive bonuses
creates a direct link between executive compensation and individual and
corporate performance. The following table shows each named executive
officer’s fiscal 2008 minimum, target, and maximum awards, which are expressed
as a percentage of his or her base salary:
20
|
Name
|
Title
|
Minimum
|
Target
|
Maximum
|
||||||||||
|
Andrew
C.
Florance
|
President &
CEO
|
0 | % | 75 | % | 150 | % | |||||||
|
Brian
J.
Radecki
|
CFO &
Treasurer
|
0 | % | 40 | % | 80 | % | |||||||
|
John
Stanfill(1)
|
Sr.
Vice President, Sales & Customer Service
|
0 | % | 25 | % | 50 | % | |||||||
|
Jennifer
L.
Kitchen
|
Sr.
Vice President, Research
|
0 | % | 55 | % | 110 | % | |||||||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
0 | % | 40 | % | 80 | % | |||||||
|
(1)
|
During
2008, Mr. Stanfill served as Senior Vice President of Marketing through
June 16, 2008, at which point he was appointed Senior Vice President of
Sales & Customer Service, which is an executive officer
position. Mr. Stanfill’s cash incentive award targets and
weighting differ depending on the position held during the
year. While in the position of Senior Vice President of
Marketing, his minimum was 0%, target was 40% and maximum was
80%. Mr. Stanfill’s payout for 2008 was based on the targets in
place and goals achieved throughout the year and prorated for the time
spent in each role. Mr. Stanfill’s target percentage is
currently lower relative to other named executive officers because he is
eligible to receive commission payments based on achievement of
performance objectives described
below.
|
These
targets generally represent compensation in the 50th to
75th percentile
of the 2006 Towers Perrin market data for annual cash bonuses and were
determined based primarily on peer group and survey data, previous cash
incentive awards granted (if applicable) and internal pay equity considerations.
The target amounts for the 2008 cash incentive awards were not increased from
2007 target amounts. The annual cash incentive plan provides each
named executive officer with the potential to earn up to 200% of their target
for exceptional performance as measured against pre-established metrics and
goals, each of which is discussed below.
Named
executive officers may earn an incentive bonus equal to, greater than or less
than the target percentage of his or her base salary depending on whether the
individual and the Company achieve the performance objectives. These objectives
include individual qualitative performance goals, as well as Company-wide
financial goals. For 2008, the Committee selected Company-wide financial goals
based on the Company’s achievement of: (1) annual revenue
targets included in the Company’s 2008 operating plan approved by the Company’s
Board at the beginning of 2008 (the “2008 Operating Plan”); and (2) net
income (loss) before interest, income taxes, depreciation and amortization
(“EBITDA”) targets included in the 2008 Operating Plan, with no adjustment to
eliminate equity charges. EBITDA is our GAAP-basis net income (loss)
before interest, income taxes, depreciation and amortization. These
financial goals were selected by the Committee to focus on enhancing stockholder
value.
The
individual performance goals established for the named executive officers at the
beginning of 2008 and those implemented for Mr. Stanfill upon his promotion to
Senior Vice President, Sales & Customer Service are strategic and leadership
goals tailored to the individual’s position and focused on the Company’s
strategic initiatives. The individual goals assist the Committee in assessing
the named executive officer’s individual performance in key areas that help
drive the Company’s operating and financial results. The use of both individual
and corporate goals advances the Company’s executive compensation philosophy
that individual executives be held accountable for both their own individual
performance as well as the Company’s performance.
Performance
goals and the weighting given to each may change in the Committee’s discretion
from year to year. The measures and the relative weighting of
individual and financial performance goals for each of the named executive
officers is reviewed by the Committee annually at the beginning of the
year. The Chief Executive Officer reviews and proposes any changes to
the measures and the weighting of each one for approval by the Committee based
on the Company’s current strategic initiatives and corporate
objectives. The weighting of the individual and corporate objectives
for the named executive officers for 2008 is shown in the table
below.
2008
Performance Against Corporate and Individual Objectives
In March
2009, the Committee assessed the Company’s and each named executive officer’s
achievement of the goals and targets for 2008. Information regarding the target
percentages of base salary for each named executive officer’s 2008 cash
incentive award, percentage of target achieved and actual 2008 cash incentive
awards paid to each named executive officer, as well as the weighting of
individual and financial performance goals for 2008, are shown in the table
below. A description of 2008 performance against the corporate and
individual objectives follows the table.
21
2008
Annual Cash Incentive Awards
|
Name
|
Title
|
Target
as a
%
of Salary
|
Percentage
of Target Achieved
|
Actual
Award
as a
%
of Salary
|
Actual
Cash
Award ($)
|
Individual
Goals as a %
of TargetAward
|
Revenue
Target as a % of Target Award
|
EBITDA
Target as a % of Target Award
|
||||||||||||||||||||||
|
Andrew
C. Florance
|
President &
CEO
|
75 | % | 145.9 | % | 109.4 | % | $ | 499,493 | 0 | % | 30 | % | 70 | % | |||||||||||||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
40 | % | 153.3 | % | 61.3 | % | $ | 153,059 | 20 | % | 20 | % | 60 | % | |||||||||||||||
|
John
Stanfill(1)
|
Sr.
Vice President, Sales & Customer Service
|
25 | % | 90.0 | % | 22.5 | % | $ | 30,469 | 100 | % | 0 | % | 0 | % | |||||||||||||||
|
Sr.
Vice President, Marketing
|
40 | % | 96.0 | % | 38.4 | % | $ | 39,582 | 35 | % | 40 | % | 25 | % | ||||||||||||||||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
55 | % | 121.8 | % | 67.0 | % | $ | 132,331 | 30 | % | 20 | % | 50 | % | |||||||||||||||
|
Paul
Marples(2)
|
Managing
Director, CoStar UK Limited
|
40 | % | 22.0 | % | 8.8 | % | $ | 23,770 | 20 | % | 30 | % | 50 | % | |||||||||||||||
|
(1)
|
During
2008, Mr. Stanfill served as Senior Vice President of Marketing through
June 16, 2008, at which point he was appointed Senior Vice President of
Sales & Customer Service, which is an executive officer
position. Mr. Stanfill’s cash incentive award targets and
weighting differ depending on the position held during the
year. The amounts paid were prorated for the amount of time Mr.
Stanfill served in each such position. As Senior Vice President
of Sales & Customer Service, Mr. Stanfill’s cash incentive award is
based solely on his individual goals because he is entitled to commission
payments based on a percentage of the Company’s monthly net new
subscription contract amounts.
|
|
(2)
|
Mr.
Marples financial goals for 2008 are based on CoStar UK Limited, a wholly
owned subsidiary of the Company, achieving (a) annual revenue targets
included in the Company’s 2008 Operating Plan approved by the Company’s
Board at the beginning of 2008; and (b) EBITDA targets included in that
2008 Operating Plan. All dollar amounts listed for Mr. Marples
have been converted from British pounds using a conversion rate of 1.86,
which is the average exchange
rate for period from January 1, 2008 to December 31,
2008.
|
Individual
Performance Goals for 2008 Annual Cash Incentive Awards
The
Company is not disclosing the named executive officers’ specific individual
performance goals because they are based on key short-term operational
objectives that would signal the Company’s strategic direction and could be used
by competitors to gain insight into market dynamics. For
example, individual performance goals may include the development and release of
new services, the implementation of geographic and/or service expansion plans,
the implementation of customer service and quality control measures, and
database growth objectives. These individual goals could also be used
by competitors to target recruitment of key personnel.
The
Committee sets aggressive individual performance criteria for annual cash
incentive awards that are challenging, but realistic to achieve in order to
motivate named executive officers to excel and perform at a higher level and to
focus on overall corporate objectives. Named executive officers were
entitled to between 0% and 200% credit for the individual performance component
of their annual cash incentive, depending upon achievement of established goals
for 2008, which percentage credit is then multiplied by the weighting applied
for the individual performance component of the cash incentive
award. The Committee determines the credit earned for the individual
performance criteria based upon recommendations from our Chief Executive
Officer. The Committee intends to set the individual performance
criteria for the annual cash incentive awards such that the relative difficulty
of achieving the target level is consistent from year to year. Mr.
Florance did not have individual performance goals in 2008 as the Committee
currently believes that it is in the best interests of the Company to have our
Chief Executive Officer’s annual incentive award tied completely to the
financial performance of the Company.
The table
below sets forth the percentage of individual performance goals achieved by each
of the named executive officers for 2008 for the annual cash incentive award, as
determined by the Committee in early 2009.
|
Name
|
Title
|
Percentage
of Individual Performance Goals Achieved
|
||||
|
Andrew
C. Florance(1)
|
President &
CEO
|
— | ||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
150 | % | |||
|
John
Stanfill(2)
|
Sr.
Vice President, Sales & Customer Service
|
90 | % | |||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
60 | % | |||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
110 | % | |||
|
(1)
|
Mr.
Florance’s 2008 cash incentive award was based solely on corporate revenue
and EBITDA targets.
|
|
(2)
|
During
2008, Mr. Stanfill served as Senior Vice President of Marketing through
June 16, 2008, at which point he was appointed Senior Vice President of
Sales & Customer Service, which is an executive officer
position. Mr. Stanfill’s individual performance goals differed
depending on the position held during the year. Mr. Stanfill
achieved 90% of his individual performance goals while in the position of
Senior Vice President, Sales and Customer Service and 100% of his
individual performance goals while in the position of Senior Vice
President, Marketing.
|
22
Revenue
Target for 2008 Annual Cash Incentive Awards
The
revenue target in the 2008 Operating Plan for the named executive officers other
than Mr. Marples was $220.1 million, while Mr. Marples revenue target for CoStar
UK Limited included in the 2008 Operating Plan was £13.1
million. Named executive officers were entitled to between 0% and
200% credit for the revenue component of their annual cash incentive,
depending upon actual revenue achieved for 2008. Revenue at target
would result in 100% credit for the revenue component of the
goals. Revenue below 95% of the target would result in no credit for
the revenue component of the goals. Revenue above 105% of the
target would not increase the percentage credited for that component of the
award above 200%. Accordingly, actual annual revenue that falls
between 95% and 105% (or more) of the revenue target translates into a
percentage (between 0% and 200%) that is credited for that specific
target, which is then multiplied by the weighting applied for the
revenue component of the cash incentive award. Based on the
Company’s $212.4 million of actual revenue for 2008, the named executive
officers (other than Mr. Marples) achieved 96.5% of the 2008 revenue target
($220.1 million). Based on CoStar UK Limited’s £12.0 million of actual
revenue for 2008, Mr. Marples received no credit for this component of his
award.
EBITDA
Target for 2008 Annual Cash Incentive Awards
The
EBITDA target in the 2008 Operating Plan for the named executive officers other
than Mr. Marples was $47.5 million, while Mr. Marples EBITDA target for CoStar
UK Limited included in the 2008 Operating Plan was £89,000. Named
executive officers were entitled to between 0% and 200% credit for the EBITDA
component of their annual cash incentive, depending upon actual EBITDA achieved
for 2008. EBITDA at target would result in 100% credit for the EBITDA
component of the goals. EBITDA below 80% of the target would result
in no credit for the EBITDA component of the goals. EBITDA above 120%
of the target would not increase the percentage credited for that component of
the award above 200%. Accordingly, actual EBITDA that falls between
80% and 120% (or more) of the EBITDA target translates into a percentage
(between 0% and 200%) that is credited for that specific target, which is then
multiplied by the weighting applied for the EBITDA component of the cash
incentive award. Based on the Company’s EBITDA of $56.6 million for
2008, the named executive officers (other than Mr. Marples) achieved 119.1% of
the 2008 EBITDA target ($47.5 million). Based on CoStar UK Limited’s
negative EBITDA for 2008, Mr. Marples received no credit for this component of
his award. EBITDA is our GAAP-basis net income (loss) before
interest, income taxes, depreciation and amortization.
In
addition to his 2008 annual cash incentive award, Mr. Marples was awarded a
discretionary cash bonus in the amount of $40,517 based on CoStar UK Limited’s
achievement of positive EBITDA for the fourth quarter 2008 despite current
difficult economic conditions.
2009
Annual Cash Incentive Awards Goals
In March
2009, the Committee determined the relative weighting of individual and
financial performance goals for the 2009 cash incentive awards to be paid in
early 2010 and revised the credit awarded at threshold performance for the
revenue and EBITDA targets. In an effort to ensure the weightings
best support the Company’s current business and strategic objectives, the
Committee revised the weightings from those in place for 2008
awards. The relative weighting of individual and financial
performance goals for each of the current named executive officers for 2009 are
set forth in the table below:
|
Name
|
Title
|
Individual
Goals
as
a % of
Target Award
|
Revenue
Target
as
a % of
Target Award
|
EBITDA
Target
as
a % of
Target Award
|
||||||||||
|
Andrew
C.Florance
|
President &
CEO
|
0 | %(1) | 50 | % | 50 | % | |||||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
30 | % | 35 | % | 35 | % | |||||||
|
John
Stanfill
|
Sr.
Vice President, Sales & Customer Service
|
100 | %(2) | 0 | % | 0 | % | |||||||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
50 | % | 25 | % | 25 | % | |||||||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
30 | % | 35 | %(3) | 35 | %(3) | |||||||
_____________
|
(1)
|
Based
on peer data from the 2008 Towers Perrin study which indicates that more
commonly the chief executive officer’s annual incentive is tied solely to
corporate results and the Compensation Committee’s determination that it
is in the best interests of the Company to have our Chief Executive
Officer’s annual incentive award tied completely to the financial
performance of the Company, Mr. Florance, does not have individual
performance goals for 2009.
|
23
|
(2)
|
Mr.
Stanfill’s cash incentive award is based solely on his individual goals
because he is entitled to commission payments based on a percentage of the
Company’s monthly net new subscription contract
amounts.
|
|
(3)
|
Mr.
Marples financial goals for 2009 are based on CoStar UK Limited, a wholly
owned subsidiary of the Company, achieving (1) annual revenue targets
included in the Company’s 2009 operating plan approved by the Company’s
Board at the beginning of 2009; and (2) EBITDA targets included in
that 2009 operating plan.
|
The
Committee did not adjust the target and maximum award values for the named
executive officers from 2008 levels. However, in order to make the
annual cash incentive award program more competitive and consistent with those
of the Company’s peer group as presented by Towers Perrin in its 2008 study, the
Committee adjusted the credit awarded for achievement of the threshold
performance for the revenue and EBITDA targets. Commencing with
awards for 2009 payable in 2010, named executive officers will earn 50% of their
target for performance at the pre-established threshold for revenue and EBITDA
targets. For performance below threshold, named executive officers
receive 0% of the target. For example, revenue at 95% of the target
would result in 50% credit for the revenue component of the goals, while revenue
below 95% of the target would result in no credit. Further, EBITDA at
80% of the target would result in 50% credit for the EBITDA component of the
goals, while EBITDA below 80% of the target would result in no
credit. Executives will continue to have the opportunity to earn up
to 200% credit for each component of the award.
Commission
Payments
In
addition to an annual cash incentive award, Mr. Stanfill is entitled to
receive monthly commissions based on a percentage of the Company’s monthly net
new subscription contract amounts. Mr. Stanfill’s annual cash incentive
award target described above is less than other named executive officers because
he is entitled to these commission payments. The commission payments provide
incentive for Mr. Stanfill to continue to grow the Company’s business and
generate revenues, and the rates of payment are set to provide challenging, but
achievable goals to motivate Mr. Stanfill to maintain his focus on sales of the
Company’s subscription-based services, the Company’s primary source of
revenue. The Company is not disclosing the specific commission rates
because they are based on key operational objectives that would signal the
Company’s strategic direction and also could be used by competitors to target
recruitment of Mr. Stanfill. Mr. Stanfill did not earn any commission
payments for 2008.
Equity
Incentive Plan
The
Committee has designed the executive equity incentive compensation program to
achieve its goal of aligning executive incentives with long-term stockholder
value. The Committee believes that equity-based compensation and executive
ownership ensures that the Company’s named executive officers have a continuing
stake in the long-term success of the Company.
Each
named executive officer is eligible to receive equity awards under the Company’s
2007 Stock Incentive Plan, as amended (the “2007 Plan”). The Committee generally
grants restricted stock and/or stock options to each executive when he or she
joins the Company or upon promotion to an executive position as an incentive to
accept employment and become a member of the Company’s executive team. The
grants made to Mr. Stanfill as a result of his promotion to Senior Vice
President, Sales & Customer Service and in recognition of his new
responsibilities as a member of the executive team are set forth in the “Grants
of Plan-Based Awards” table set forth on page 33 of this proxy
statement. As set forth in more detail below, the Committee currently
also makes annual grants of equity awards as part of the executive compensation
program, including restricted stock subject to achievement of corporate goals
and stock options.
The
Committee determined to grant a mix of equity awards because each type of award
helps achieve some of the objectives of the executive compensation program.
Restricted stock that vests over time promotes executive retention and focuses
executives’ attention on total stockholder return, while stock options also
include the potential for significant value appreciation tied to the Company’s
stock price. The Committee believes that the use of multi-year vesting periods
for equity awards (whether stock options or restricted stock) emphasizes a
longer-term perspective and therefore encourages executive
retention.
In 2006,
the Committee adopted a long-term equity incentive plan designed to measure
incremental growth for certain performance targets over the base year of 2006
for each year during a four-year period (i.e., 2007-2010). The
performance measures selected were revenue, EBITDA and stock price and each is
weighted equally. EBITDA is our GAAP-basis net income (loss) before
interest, income taxes, depreciation and amortization. The Committee
chose these metrics for the plan because of its belief that they are the most
relevant measures of the Company’s financial performance. The
Company’s executive compensation program, including the long-term equity
incentive plan, is subject to change at the Committee’s
discretion. In fact, the Committee decided to revise the current
long-term equity incentive plan commencing with grants for 2009 performance, as
discussed below under the subheading “2009 Long-Term Equity Compensation
Program”.
24
Under the
long-term equity incentive plan put into place in 2006, each year through 2010
the targets for each component increase by a set percentage measured against the
base year, as determined by the Committee. In this manner, annual
incremental growth is measured for each financial performance criteria and
provides the basis for determining the value of restricted stock granted to a
named executive officer for performance in the preceding
year. Executives remain focused on achieving the long-term financial
goals by the end of the four-year period because any shares not awarded for any
given year are subject to recovery at the end of the fourth year based on
performance over the four-year period. Any awards granted are not
subject to forfeiture in the event that the named executive officers do not
achieve targets in a subsequent year. The performance criteria
established by the Committee for restricted stock awards granted in early 2008
are described further below under the caption “2007 Performance-Based Stock
Awards.” The performance criteria established by the Committee for
restricted stock awards granted in early 2009 are described further below under
the caption “2008 Performance-Based Stock Awards.”
The
values of the annual performance-based stock awards granted to our named
executive officers are based on a target award dollar amount, and vary among
named executive officers by position, depending upon individual responsibility
and performance, external market and peer group practices and certain internal
pay equity considerations, as well as achievement of the performance criteria as
described below. Once the achievement level of each performance
target and the total amount of the award for each named executive officer has
been determined by the Committee, the number of restricted shares actually
granted to a named executive officer is determined using the fourth quarter
average daily closing price of the Company’s common stock. The number
of shares of restricted stock awarded to each named executive officer is
ultimately approved by the Committee and awarded under our 2007
Plan. The grant date of the annual performance-based stock awards is
the date that the Committee approves the grants, and they vest one third on each
anniversary date of such grant over three years. Grants of
performance-based restricted stock are accounted for using the fair market value
of such stock on the date of grant.
The
Committee supplements the named executive officers’ annual performance-based
stock award with an annual award of stock options. The Committee has
determined that the annual option grants will also be based on target award
values and vest pro rata over three years, and that the value awarded to each
named executive officer will be converted to a number of shares underlying
options based on the Towers Perrin recommended value per option, which may be
updated from time to time. The exercise price for each option granted
shall be equal to the closing price of the Company’s common stock on the date of
grant.
Although
the Company does not currently have security ownership requirements or
guidelines for its executive officers or directors, the Committee may adopt such
ownership requirements in the future. Pursuant to the Company’s
insider trading policy, the Company does not permit directors, officers or other
employees to engage in speculative or short-term financial activities involving
the Company’s stock or derivatives based on the Company’s securities without
consent of the Company’s compliance officer. Further, the Company does not
generally allow any such activities or other hedging activities by its executive
officers or directors absent an extraordinary circumstance.
The
Company does not have any program, plan or practice to time equity awards in
coordination with the release of material non-public information, nor does the
Company time the release of material nonpublic information for the purpose of
affecting the value of executive compensation.
Target
Equity Incentive Awards Granted in 2008
The chart
below sets forth the target award values for each of the annual
performance-based stock awards granted in 2008 for 2007 performance and the
annual stock option awards granted in early 2008. These target award values are
subject to change in the future in the discretion of the
Committee. These target award values generally represent values of
long-term incentives in the 50th to
75th percentile
of the 2006 Towers Perrin market data for long-term equity compensation and were
determined based primarily on peer group and survey data and internal pay equity
considerations. The value of restricted stock ultimately awarded to
our named executive officers in 2008 for 2007 performance was determined based
upon achievement of financial performance criteria as described
below. Each named executive officer had the potential to earn up to
200% of his or her annual restricted stock target award value for exceptional
performance as measured against pre-established metrics and goals.
25
|
Name
|
Title
|
Annual
Stock Target Award
Values
|
Annual
Option Target Award
Values
|
|||||||
|
Andrew
C. Florance
|
President &
CEO
|
$ | 750,000 | $ | 750,000 | |||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
$ | 200,000 | $ | 200,000 | |||||
|
John
Stanfill(1)
|
Sr.
Vice President, Sales & Customer Service
|
— | — | |||||||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
$ | 100,000 | $ | 100,000 | |||||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
$ | 100,000 | $ | 100,000 | |||||
_____________
|
(1)
|
Mr.
Stanfill was not a named executive officer in 2007 and was not eligible to
receive an annual restricted stock award based upon 2007 performance or an
annual stock option award pursuant to the executive compensation
program. Upon his appointment as Senior Vice President of Sales
& Customer Service, Mr. Stanfill’s annual award target values were
established as $100,000 for restricted stock and $100,000 for stock
options.
|
2007
Performance-Based Stock Awards
On
February 27, 2008, the Committee approved and awarded each named executive
officer a grant of restricted stock, the size of which was based on the target
award values set forth above and achievement of certain Company financial goals
for 2007 (the “2007 Performance-Based Stock Awards”). As stated
above, in December 2006 the Committee established the financial goals to be used
for calculation of the named executive officers’ annual stock awards each year
over a four-year period (2007 – 2010). The three performance metrics
selected by the Committee were revenue growth, EBITDA growth and share price
growth. These financial goals reflect a significant level of growth
each year over the four-year period and are designed to be challenging for the
executives given the Company’s dynamic business environment. These
three goals are equally weighted and the value of a named executive officer’s
stock award is determined based on the attainment of each goal.
Revenue
Target for 2007 Performance-Based Stock Awards
The
annual revenue target for the 2007 Performance-Based Stock Awards was $184.3
million. Named executive officers were entitled to between 0% and
200% credit for the revenue component of their annual performance-based stock
awards, depending upon actual revenue achieved for 2007. Revenue at
target would result in 100% credit for the revenue component of the
goals. Revenue below 95% of the target would result in no credit for
the revenue component of the goals. Revenue above 105% of the target
would not increase the percentage credited for that component of the award above
200%. Accordingly, actual annual revenue that falls between 95% and
105% (or more) of the revenue target translates into a percentage (between 0%
and 200%) that is credited for that specific target, which is then multiplied by
the weighting (33%) applied for the revenue component of the performance-based
stock award. Based on the Company’s $192.8 million of actual revenue
for 2007, the named executive officers achieved 104.6% of the 2007 revenue
target ($184.3 million).
Adjusted
EBITDA Targets for 2007 Performance-Based Stock Awards
The
adjusted EBITDA target for the 2007 Performance-Based Stock Awards was $36.4
million. Named executive officers were entitled to between 0% and
200% credit for the adjusted EBITDA component of their annual performance-based
stock awards, depending upon actual adjusted EBITDA achieved for
2007. Adjusted EBITDA at target would result in 100% credit for the
adjusted EBITDA component of the goals. Adjusted EBITDA below 80% of
the target would result in no credit for the adjusted EBITDA component of the
goals. Adjusted EBITDA above 120% of the target would not increase
the percentage credited for that component of the award above
200%. Accordingly, actual adjusted EBITDA that falls between 80% and
120% (or more) of the adjusted EBITDA target translates into a percentage
(between 0% and 200%) that is credited for that specific target, which is then
multiplied by the weighting (33%) applied for the adjusted EBITDA component of
the annual performance-based stock award. Based on the Company’s
adjusted EBITDA of $39.4 million for 2007, the named executive officers achieved
108.3% of the adjusted EBITDA target ($36.4 million). Adjusted EBITDA
is our GAAP-basis net income (loss) before interest, income taxes, depreciation
and amortization, adjusted to eliminate equity charges.
26
Stock
Price Targets for 2007 Performance-Based Stock Awards
The stock
price target for the 2007 Performance-Based Stock Awards was $55.88. Named
executive officers were entitled to between 0% and 200% credit for the stock
price growth component of their annual performance-based stock award, depending
upon actual stock price growth achieved for 2007 (measured as the fourth quarter
average). Stock price growth at target would result in 100% credit for the stock
price component of the goals. Stock price growth less than 5% over
the base year (2006 for 2007 awards) would result in no credit for the stock
price component of the goals. Stock price growth greater than 25% over the base
year would not increase the percentage credited for that component of the award
above 200%. Accordingly, stock price growth between 5% and 25% (or more) over
the base year translates into a percentage (between 0% and 200%) that is
credited for that specific target, which is then multiplied by the weighting
(33%) applied for the stock price component of the annual performance-based
stock award. Based on the Company’s 2007 fourth quarter average stock price of
$53.11, stock price growth was 9.3% over the 2006 fourth quarter average stock
price and the
named executive officers achieved 95% of the 2007 stock price
target.
Based on
the performance achieved, each named executive officer received 125.7% of the
target stock award value set for that executive. The 2007
Performance-Based Stock Awards were granted February 27, 2008. The
Committee awarded additional shares of restricted stock to the named executive
officers on May 28, 2008 for 2007 performance for amounts due to the named
executive officers as a result of a recalculation of the award
earned. The aggregate award value earned by each named executive
officer is shown in the table below. For additional information, see
the “Grants of Plan-Based Awards” table on page 33 of this proxy
statement.
2007
Performance-Based Stock Awards Granted in 2008
|
Name
|
Title
|
Award
Earned
Value ($)
|
Actual
Award
of Shares (#)(1)
|
|||||||
|
Andrew
C. Florance
|
President &
CEO
|
$ | 942,590 | 17,800 | ||||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
$ | 251,357 | 4,800 | ||||||
|
John
Stanfill(2)
|
Sr.
Vice President, Sales & Customer Service
|
— | — | |||||||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
$ | 125,679 | 2,400 | ||||||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
$ | 125,679 | 2,400 | ||||||
_____________
|
(1)
|
The
number of shares granted is determined by dividing the earned award value
by the fourth quarter average daily price ($53.11), rounded up to the
nearest 100 shares.
|
|
(2)
|
Mr.
Stanfill was not a named executive officer in 2007 and was not eligible to
receive a restricted stock award under the Company’s executive equity
incentive plan in early 2008 for performance in 2007. Mr.
Stanfill’s restricted stock and option grants made as a result of his
promotion to Senior Vice President, Sales & Customer Service are set
forth in the “Grants of Plan-Based Awards” table on page 33 of this proxy
statement.
|
2008
Stock Option Awards
In 2008,
the Committee awarded the named executive officers’ stock
options. The number of shares of common stock underlying the option
awards granted to named executive officers was based on the target award
values. The value awarded to each named executive officer was
converted to a number of shares underlying options based on the Towers Perrin
recommended value per option, which may be updated from time to
time. The exercise price for each option granted is equal to the
closing price on the date of grant, which is the date of approval by the
Company’s Compensation Committee. These option grants vest over a
period of three years. The table below sets forth the option award
values and the number of shares of common stock underlying each option award for
the option grants to the named executive officers granted in early
2008.
27
|
Name
|
Title
|
Option Award Values
|
Shares
Underlying Option
Awards(1)
|
|||||||
|
Andrew
C. Florance
|
President &
CEO
|
$ | 750,000 | 39,300 | ||||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
$ | 200,000 | 10,500 | ||||||
|
John
Stanfill(2)
|
Sr.
Vice President, Sales & Customer Service
|
— | — | |||||||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
$ | 100,000 | 5,300 | ||||||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
$ | 100,000 | 5,300 | ||||||
_____________
|
(1)
|
The
number of shares granted is determined by dividing the option award value
by the Towers Perrin recommended value per option, rounded up to the
nearest 100 shares.
|
|
(2)
|
Mr.
Stanfill was not eligible to receive an annual stock option award in early
2008 pursuant to the Company’s executive equity incentive
plan. Mr. Stanfill’s stock and option grants made as a result
of his promotion to Senior Vice President, Sales & Customer Service
are set forth in the “Grants of Plan-Based Awards” table on page 33 of
this proxy statement.
|
Target
Equity Incentive Awards Granted in 2009
The chart
below sets forth the target award values for each of the annual
performance-based stock awards granted in 2009 for 2008 performance and the
stock option awards granted in 2009. The long term equity incentive target award
values set by the Committee for 2008 performance (and noted in the chart below)
take into account 2008 Towers Perrin peer data where available, as well as
previous equity awards to the respective named executive officers and internal
pay equity considerations. The target award value set by the
Committee for the Chief Executive Officer falls within 15 percent of the 50th
percentile of the 2008 Towers Perrin peer data. The target award
value for the Chief Financial Officer was increased 25 percent over his target
award value for 2007 in order to make it more competitive based on the peer data
and now falls within 15 percent of the 50th percentile of the 2008 Towers Perrin
peer data. The target award value set by the Committee for the Senior
Vice President of Sales and Customer Service does not fall within 15 percent of
the 50th
percentile of the 2008 Towers Perrin peer data, rather was below that range,
because he had received a grant of restricted stock and options upon being
promoted to his current role earlier in 2008. The grants made to Mr.
Stanfill in connection with his promotion are set forth in the “Grants of
Plan-Based Awards” table in this proxy statement. The target award
values set by the Committee for both the Senior Vice President of Research and
Managing Director of CoStar UK Limited were based upon internal pay equity
considerations because no peer data was available with respect to long term
equity incentive compensation for these positions. As a result, the
target award value set by the Committee for the Senior Vice President of
Research was increased 12.5 percent over her target award value for
2007. The value of restricted stock ultimately awarded to our named
executive officers in early 2009 for 2008 performance was determined based upon
achievement of financial performance criteria described below. Each
named executive officer had the potential to earn up to 200% of his or her
annual restricted stock target award value for exceptional performance as
measured against pre-established metrics and goals.
|
Name
|
Title
|
Annual
Stock
Target Award Values
|
Annual
Option Target Award
Values
|
|||||||
|
Andrew
C. Florance
|
President &
CEO
|
$ | 750,000 | $ | 750,000 | |||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
$ | 250,000 | $ | 250,000 | |||||
|
John
Stanfill
|
Sr.
Vice President, Sales & Customer Service
|
$ | 100,000 | $ | 100,000 | |||||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
$ | 112,500 | $ | 112,500 | |||||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
$ | 100,000 | $ | 100,000 | |||||
2008
Performance-Based Stock Awards
On March
2, 2009, the Committee approved and awarded each named executive officer a grant
of restricted stock, the size of which was based on the target award values set
forth above and achievement of certain Company financial goals for 2008 (the
“2008 Performance-Based Stock Awards”). As stated above, the
Committee established three equally-weighted financial goals in December 2006
that are used to determine the actual value of annual restricted stock awards
granted each year over a four-year period (2007 – 2010). The goals
selected by the Committee are revenue growth, EBITDA growth and share price
growth.
28
Revenue
Target for 2008 Performance-Based Stock Awards
The
annual revenue target for the 2008 Performance-Based Stock Awards was $213.8
million. Named executive officers were entitled to between 0% and
200% credit for the revenue component of their annual performance-based stock
awards, depending upon actual revenue achieved for 2008. Revenue at
target would result in 100% credit for the revenue component of the
goals. Revenue below 95% of the target would result in no credit for
the revenue component of the goals. Revenue above 105% of the target
would not increase the percentage credited for that component of the award above
200%. Accordingly, actual annual revenue that falls between 95% and
105% (or more) of the revenue target translates into a percentage (between 0%
and 200%) that is credited for that specific target, which is then multiplied by
the weighting (33%) applied for the revenue component of the performance-based
stock award. Based on the Company’s $212.4 million of actual revenue
for 2008, the named executive officers achieved 99.4% of the 2008 revenue target
($213.8 million).
EBITDA
Target for 2008 Performance-Based Stock Awards
The
EBITDA target for the 2008 Performance-Based Stock Awards was $37.3
million. Named executive officers were entitled to between 0% and
200% credit for the EBITDA component of their annual performance-based stock
awards, depending upon actual EBITDA achieved for 2008. EBITDA at
target would result in 100% credit for the EBITDA component of the
goals. EBITDA below 80% of the target would result in no credit for
the EBITDA component of the goals. EBITDA above 120% of the target
would not increase the percentage credited for that component of the award above
200%. Accordingly, actual EBITDA that falls between 80% and 120% (or
more) of the EBITDA target translates into a percentage (between 0% and 200%)
that is credited for that specific target, which is then multiplied by the
weighting (33%) applied for the EBITDA component of the annual performance-based
stock award. Based on the Company’s EBITDA of $56.6 million for 2008,
the named executive officers achieved 151.7% of the EBITDA target ($37.3
million). EBITDA is our GAAP-basis net income (loss) before interest, income
taxes, depreciation and amortization.
Stock
Price Targets for 2008 Performance-Based Stock Awards
The stock
price target for the 2008 Performance-Based Stock Awards is a 15% annual
compounded increase over the 2006 base year price of $48.59. Named executive
officers were entitled to between 0% and 200% credit for the stock price growth
component of their annual performance-based stock award, depending upon actual
stock price growth achieved for 2008 (measured as the fourth quarter average).
Compounded stock price growth at target would result in 100% credit for the
stock price component of the goals. Compounded stock price growth
less than 5% over the base year (2007 for 2008 awards) would result in no credit
for the stock price component of the goals. Compounded stock price growth
greater than 25% over the base year would not increase the percentage credited
for that component of the award above 200%. Accordingly, compounded
stock price growth between 5% and 25% (or more) over the base year translates
into a percentage (between 0% and 200%) that is credited for that specific
target, which is then multiplied by the weighting (33%) applied for the stock
price component of the annual performance-based stock award. Based on the
Company’s 2008 fourth quarter average stock price of $33.61, the named executive
officers received no credit for this component of the award.
2008
Performance-Based Stock Awards Granted in 2009
For 2008
performance, each named executive officer received 95.7% of his or her target
award value. The 2008
Performance-Based Stock Awards were granted March 2, 2009, and the stock award
value earned by each named executive officer is shown in the table
below. As these awards were granted in early 2009, any compensation
expense associated with these awards is not included in the Summary Compensation
Table below, but will be reflected in next year’s proxy statement.
|
Name
|
Title
|
Award
Earned
Value ($)
|
Actual
Award
of Shares (#)(1)
|
|||||||
|
Andrew
C. Florance
|
President &
CEO
|
$ | 717,535 | 21,400 | ||||||
|
Brian
J. Radecki
|
CFO &
Treasurer
|
$ | 239,178 | 7,200 | ||||||
|
John
Stanfill
|
Sr.
Vice President, Sales & Customer Service
|
$ | 95,671 | 2,900 | ||||||
|
Jennifer
L. Kitchen
|
Sr.
Vice President, Research
|
$ | 107,630 | 3,300 | ||||||
|
Paul
Marples
|
Managing
Director, CoStar UK Limited
|
$ | 95,671 | 2,900 | ||||||
|
(1)
|
The
number of shares granted is determined by dividing the earned award value
by the fourth quarter average daily price ($33.61), rounded up to the
nearest 100 shares.
|
29
2009
Long-Term Equity Compensation Program
The
details of the Company’s current long-term incentive program may change in the
future to reflect the impact of changes in the Company’s business, executives’
individual performance or relevant new information (e.g., new information about
trends in compensation among the Company’s peer groups). For example, the
Committee may modify the financial goals that form the basis for the annual
performance-based stock grants (e.g. as a result of acquisition activity or
unusual or non-recurring accounting transactions). In fact, based in
part on the Towers Perrin study presented to the Committee in early 2009, the
Committee recently determined to revise the long-term incentive program to
simplify the program, to make the mechanics of the program more transparent and
easier to understand, and to better align the program with market
practices. Commencing with 2009 performance-based awards to be
granted in 2010, the revenue and EBITDA goals will be aligned with those for the
annual cash incentive plan; the stock price goal will be eliminated; the catch
up provision will be eliminated (i.e.,
shares not awarded in previous years are no longer recoverable); and,
similar to the annual incentive awards, the minimum award will be adjusted from
0% to 50% of target once the Company achieves the set threshold performance
level. The Committee believes that these changes will simplify the
long-term equity incentive program and allow it to retain its focus on long-term
retention because one half of the awards are stock options which become valuable
only if the Company’s stock price increases over time and all stock option and
restricted stock awards vest over three years. The Committee will
determine the actual terms of any future grant of options or restricted
stock.
Termination
and Change of Control Payments
Except
for Messrs. Florance and Marples, each of whom have termination provisions in
their respective employment agreements, the Company does not provide significant
severance or termination payments to named executive officers. In
2008, the Company adopted a company-wide severance plan that provides payments
that do not discriminate in scope, terms or operation in favor of executive
officers of the Company and that are available generally to all salaried
employees, including the named executive officers. Pursuant to the
Company’s severance policy, full-time staff who are part of a position reduction
may receive severance pay equal to two weeks current base pay for the first year
or less of employment, plus one week current base pay for each completed
additional year of continuous service (up to a 16-week maximum payout) in
exchange for a full release of claims. All Company employees are at
will and unless specified otherwise by an employment agreement, CoStar is not
liable to pay severance but has chosen to adopt this severance policy to apply
only in limited circumstances. The Company may amend, alter or
discontinue the severance policy at any time.
Similarly,
except for Mr. Florance, who negotiated change of control provisions in his
employment agreement, the Company does not provide significant cash payments to
named executive officers upon a change of control or similar
event. However, the Company’s 1998 and 2007 stock incentive plans
provide for acceleration of vesting of stock and option grants and rights to
exercise stock options upon certain significant events. Those rights
do not discriminate in scope, terms or operation, in favor of named executive
officers of the Company and are available generally to all employees who
participate in those plans, including the named executive
officers. Details of the potential termination payments for Messrs.
Florance and Marples and of the rights triggered under the 1998 and 2007 stock
incentive plans in the case of a significant event are set out below in the
section entitled “Other Post-Employment Compensation and Potential Payments Upon
a Change of Control” beginning on page 37 of this proxy statement.
Continued
on next page.
30
The
following table includes information concerning compensation paid to or earned
by the Company’s “named executive officers” listed in the table for 2006, 2007
and 2008.
SUMMARY
COMPENSATION TABLE
|
Name and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards(1)
($)
|
Option Awards(1)
($)
|
Non-Equity
Incentive
Plan
Compensation(2)
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||||||||||||
|
Andrew
C. Florance
|
2008
|
$ | 456,154 | — | $ | 1,205,505 | $ | 907,028 | $ | 499,493 | $ | 29,575 | (3a) | $ | 3,097,755 | |||||||||||||||
|
Chief
Executive Officer
|
||||||||||||||||||||||||||||||
|
and
President
|
2007
|
$ | 438,352 | — | $ | 961,636 | $ | 920,332 | $ | 404,584 | $ | 16,612 | $ | 2,741,516 | ||||||||||||||||
|
2006
|
$ | 399,185 | — | $ | 298,758 | $ | 419,120 | $ | 363,813 | $ | 27,999 | $ | 1,508,875 | |||||||||||||||||
|
Brian
J. Radecki (4)
|
2008
|
$ | 249,377 | — | $ | 211,224 | $ | 224,856 | $ | 153,059 | $ | 15,297 | (3b) | $ | 853,813 | |||||||||||||||
|
Chief
Financial Officer
|
||||||||||||||||||||||||||||||
|
and
Treasurer
|
2007
|
$ | 206,215 | — | $ | 109,171 | $ | 116,540 | $ | 120,845 | $ | 12,373 | $ | 565,144 | ||||||||||||||||
|
John
Stanfill (5)
|
2008
|
$ | 236,443 | — | $ | 294,211 | $ | 103,291 | $ | 70,051 | $ | 12,613 | (3b) | $ | 716,608 | |||||||||||||||
|
Sr.
Vice President
|
||||||||||||||||||||||||||||||
|
Sales &
Customer Service
|
||||||||||||||||||||||||||||||
|
Jennifer
L. Kitchen
|
2008
|
$ | 197,424 | — | $ | 103,405 | $ | 134,550 | $ | 132,331 | $ | 12,641 | (3b) | $ | 580,351 | |||||||||||||||
|
Sr.
Vice President
|
||||||||||||||||||||||||||||||
|
Research
|
2007
|
$ | 190,000 | — | $ | 74,425 | $ | 143,683 | $ | 128,410 | $ | 13,556 | $ | 550,074 | ||||||||||||||||
|
2006
|
$ | 125,480 | — | $ | 17,335 | $ | 88,133 | $ | 36,167 | $ | 8,837 | $ | 275,952 | |||||||||||||||||
|
Paul
Marples(6)
|
2008
|
$ | 268,383 | $ | 40,517 | (7) | $ | 146,392 | $ | 71,341 | $ | 23,770 | $ | 20,314 | (3c) | $ | 570,717 | |||||||||||||
|
Managing
Director,
|
||||||||||||||||||||||||||||||
|
CoStar
UK Limited
|
2007
|
$ | 246,485 | — | $ | 102,191 | — | $ | 140,562 | $ | 21,508 | (3d) | $ | 510,746 | ||||||||||||||||
__________
|
(1)
|
This
column shows the compensation cost recognized for financial statement
reporting purposes with respect to each reported year for restricted stock
or stock options, as applicable, granted in the respective year and prior
years, in accordance with SFAS 123(R), except no assumptions for
forfeitures were included. Additional information regarding the size of
the awards is set forth in the notes to the “Grants of Plan Based Awards”
and “Outstanding Equity Awards” tables. Assumptions used in
calculating the expense for awards granted in 2006 are described in Note
12 to the audited financial statements in the Company’s Annual Report on
Form 10-K for the period ended December 31,
2006. Assumptions used in calculating the expense for awards
granted in 2007 are described in Note 13 to the audited financial
statements in the Company’s Annual Report on Form 10-K for
the period ended December 31, 2007. Assumptions used in
calculating the expense for awards granted in 2008 are described in Note
15 to the audited financial statements in the Company’s Annual Report
on Form 10-K for the period ended December 31,
2008.
|
|
(2)
|
This
amount represents the annual cash incentive paid under the Company’s
annual incentive bonus plan based on the executive’s achievement of
pre-determined individual and Company financial goals. These
bonuses are awarded and paid in the following year after actual financial
results are determined for the year for which performance was
measured. For additional information regarding the annual cash
incentives paid for 2008 performance, see “Compensation Discussion and
Analysis” at pages 20-23 of this proxy
statement.
|
|
(3a)
|
Pursuant
to the CoStar Realty Information, Inc. 401(k) Plan (a defined contribution
plan available generally to employees of the Company) (the “401(k) Plan”),
for the 2008 plan year, Mr. Florance deferred a portion of his annual
compensation and CoStar contributed a matching contribution in the amount
of $15,500. The Company paid $1,112 in annual premiums to
maintain a $1 million life insurance policy for the benefit of Mr.
Florance. Mr. Florance also received an aggregate of $12,963 of
perquisites in 2008, including family accompaniment while on business
travel valued at $10,623 and a parking subsidy valued at
$2,340. Perquisites are valued based on the cost to the
Company.
|
|
(3b)
|
Pursuant
to the 401(k) Plan, for the respective plan year, the named executive
officer deferred a portion of his or her annual compensation and the
Company contributed a matching contribution in the amount deferred by each
executive officer. The amount shown is the Company’s matching
contribution.
|
31
|
(3c)
|
Pursuant
to a defined contribution scheme available generally to employees of the
Company’s wholly owned subsidiary, CoStar UK Limited, Mr. Marples defers a
portion of his annual compensation and CoStar UK Limited makes a
corresponding contribution in an amount specifically tied to the amount
deferred by Mr. Marples, based on the Company’s contribution rules for
defined contribution schemes and Mr. Marples employment
agreement. The employer contribution is capped at six percent
of the executive’s gross pay. CoStar UK Limited’s corresponding
contribution for 2008 was $16,207, based on the conversion rate from
British pounds of 1.86, which is the average exchange rate for the period
from January 1, 2008 to December 31, 2008. Executives are
entitled to make contributions either to the CoStar UK Limited pension
scheme or their personal pension scheme. Mr. Marples has
elected to have his contributions made to his personal pension
scheme. In addition, the Company paid $4,107 based on the
conversation rate of 1.86, in health insurance premiums for the benefit of
Mr. Marples.
|
|
(3d)
|
CoStar
UK Limited’s corresponding contribution to Mr. Marples defined
contribution scheme for 2008 was $16,867 based on the conversion rate from
British pounds of 2.01, which is the average exchange rate for the period
from February 16, 2007 to December 31, 2007. For a more
detailed description of this benefit, please see footnote (4e) immediately
above. In addition, the Company paid $4,641, based on the
conversation rate of 2.01, in health insurance premiums for the benefit of
Mr. Marples, which amount was inadvertently omitted from the Company’s
2008 proxy statement.
|
|
(4)
|
Mr.
Radecki was appointed Chief Financial Officer of the Company in June
2007.
|
|
(5)
|
Mr.
Stanfill was appointed an executive officer of the Company in June
2008.
|
|
(6)
|
Mr.
Marples was appointed an executive officer of the Company in September
2007. All dollar amounts listed for Mr. Marples for 2008 have
been converted from British pounds using a conversion rate of 1.86, which
is the average exchange rate for the period from January 1, 2008 to
December 31, 2008, and all dollar amounts listed for Mr. Marples for 2007
have been converted from British pounds using a conversion rate of 2.01,
which is the average exchange
rate for period from February 16, 2007 to December 31,
2007. Mr. Marples joined the Company on February 16, 2007 as a
result of the Company’s acquisition of
Propex.
|
|
(7)
|
Mr.
Marples was awarded a discretionary bonus based on CoStar UK Limited’s
achievement of positive EBITDA for the fourth quarter
2008.
|
Continued
on next page.
32
Grants
of Plan-Based Awards for Fiscal-Year 2008
The
following Grants of Plan-Based Awards table provides additional information
about stock and option awards and non-equity incentive plan awards earned by our
named executive officers during the year ended December 31,
2008.
|
Estimated
Possible
|
All
Other
|
All
Other
|
||||||||||||||||||||||||||||
|
Payouts
|
Stock
Awards:
|
Option
Awards:
|
||||||||||||||||||||||||||||
|
Under
Non-Equity
|
Number
of
|
Number
of
|
Exercise
or
|
Grant
Date
|
||||||||||||||||||||||||||
|
Incentive
Plan
|
Shares
of
|
Securities
|
Base
Price
|
Fair
Value
|
||||||||||||||||||||||||||
|
Awards(1)
|
Stock
or
|
Underlying
|
of
Option
|
of
Stock and
|
||||||||||||||||||||||||||
|
Threshold
|
Target
|
Maximum
|
Units(2)
|
Options(3)
|
Awards(4)
|
Option
|
||||||||||||||||||||||||
|
Name
|
Grant Date
|
($)
|
($)
|
($)
|
(#)
|
(#)
|
($/Sh)
|
Awards(5)
|
||||||||||||||||||||||
|
Andrew
C. Florance
|
— | $ | 342,420 | $ | 684,840 | |||||||||||||||||||||||||
|
2/27/08
|
15,800 | $ | 695,042 | |||||||||||||||||||||||||||
|
5/28/08
|
2,000 | (2a) | $ | 94,720 | ||||||||||||||||||||||||||
|
2/27/08
|
39,300 | $ | 43.99 | $ | 1,050,657 | |||||||||||||||||||||||||
|
Brian
J. Radecki
|
— | $ | 99,840 | $ | 199,680 | |||||||||||||||||||||||||
|
2/27/08
|
4,200 | $ | 184,758 | |||||||||||||||||||||||||||
|
5/28/08
|
600 | (2a) | $ | 28,416 | ||||||||||||||||||||||||||
|
2/27/08
|
10,500 | $ | 43.99 | $ | 280,710 | |||||||||||||||||||||||||
|
John
Stanfill(6)
|
— | $ | 33,854 | $ | 67,708 | |||||||||||||||||||||||||
| — | $ | 41,250 | $ | 82,500 | ||||||||||||||||||||||||||
|
2/13/08
|
10,000 | (2b) | $ | 381,000 | ||||||||||||||||||||||||||
|
9/4/08
|
35,000 | (2c) | 15,000 | (2c) | $ | 55.07 | $ | 2,429,470 | ||||||||||||||||||||||
|
Jennifer
L. Kitchen
|
— | $ | 108,680 | $ | 217,360 | |||||||||||||||||||||||||
|
2/27/08
|
2,100 | $ | 92,379 | |||||||||||||||||||||||||||
|
5/28/08
|
300 | (2a) | $ | 14,208 | ||||||||||||||||||||||||||
|
2/27/08
|
5,300 | $ | 43.99 | $ | 141,693 | |||||||||||||||||||||||||
|
Paul
Marples
|
— | $ | 109,491 | $ | 218,982 | |||||||||||||||||||||||||
|
2/27/08
|
2,100 | $ | 92,379 | |||||||||||||||||||||||||||
|
5/28/08
|
300 | (2a) | $ | 14,208 | ||||||||||||||||||||||||||
|
2/27/08
|
5,300 | $ | 43.99 | $ | 141,693 | |||||||||||||||||||||||||
__________
|
(1)
|
Except
as specifically noted otherwise, amounts in these columns are possible
amounts payable under the Company’s cash incentive plan for
2008. No amount is shown in the “Threshold” column as there is
no threshold amount under the plan. The actual cash payments
made in 2009 for 2008 performance under the Company’s cash incentive plan
are reported in the Summary Compensation table above. The
Company’s cash incentive plan in effect for 2008 is described more fully
in the section titled “Compensation Discussion and Analysis” at
pages 20-23 of this proxy
statement.
|
|
(2)
|
The
amounts shown in this column represent restricted stock awards granted to
named executive officers in 2008.
|
|
(2a)
|
Due
to a recalculation of the shares earned by and payable to the executive
officers under the executive equity incentive plan for performance in
2007, Messrs. Florance, Radecki and Marples and Ms. Kitchen were granted
additional shares of restricted stock on May 28,
2008.
|
|
(2b)
|
Mr.
Stanfill received a restricted stock grant on February 13, 2008, before
being appointed an executive officer, in connection with his appointment
as Senior Vice President,
Marketing.
|
|
(2c)
|
Mr.
Stanfill received restricted stock and option grants on September 4, 2008
in connection with his appointment as Senior Vice President, Sales and
Customer Service.
|
|
(3)
|
Amounts
shown in this column represent stock options granted to named executive
officers on the respective dates.
|
|
(4)
|
The
exercise price is the closing price of our common stock on the date of
grant, as reported on the Nasdaq Global Select
Market.
|
|
(5)
|
The
amounts shown in this column represent the grant date fair value of each
equity award computed in accordance with SFAS 123(R). For a
discussion of the assumptions used in calculating the fair value of each
award see Note 15 to the audited financial statements in the Company’s
Annual Report on Form 10-K for the period ended
December 31, 2008.
|
|
(6)
|
During
2008, Mr. Stanfill served as Senior Vice President of Marketing through
June 16, 2008, at which point he was appointed Senior Vice President of
Sales and Customer Service, which is an executive officer
position. Mr. Stanfill’s cash incentive award targets and
weighting differ depending on the position held during the
year. The first row of estimated possible payouts under
non-equity incentive plan awards represents the potential payouts for his
service as Senior Vice President of Sales and Customer Service prorated
for the six and a half months for which he served in that
position. The second row represents the potential payouts for
his service as Senior Vice President of Marketing prorated for the five
and a half months for which he served in that
position.
|
33
Employment
Agreements and Arrangements
We have
employment agreements with Messrs. Florance and Marples, and we have at
will employment terms with Mr. Radecki, Mr. Stanfill and
Ms. Kitchen. Our employment agreement with Mr. Florance
became effective as of January 1, 1998, and Mr. Marples’ employment
agreement became effective February 16, 2007. Mr. Florance’s
employment agreement currently automatically renews for successive one-year
terms unless we, or the executive, terminate the agreement. Mr.
Marples’ employment agreement continues in effect until
terminated. All employees, including our named executive officers,
are required to execute terms and conditions of employment, which state that
employment is at will and set forth restrictive covenants, including duties of
confidentiality, non-solicitation of customers and employees and
non-competition. Mr. Radecki’s current employment terms became
effective as of December 1, 1997. Mr. Stanfill’s current employment
terms became effective as of April 25, 2001. Ms. Kitchen’s
current employment terms became effective as of March 6, 2001.
Chief
Executive Officer Employment Agreement
Pursuant
to his employment agreement, Mr. Florance is entitled to base salary, an annual
cash bonus, six weeks of paid vacation per year, the same health insurance,
accident and disability insurance, life insurance, and other fringe benefits
provided to most senior executives of the Company, and additional term life
insurance coverage not to exceed one million dollars (at a cost to the Company
not to exceed $2,000 per year), payable as designated by Mr.
Florance. Mr. Florance’s employment agreement automatically renews
for successive one-year terms unless either the Company or Mr. Florance provides
the other with written notice of termination at least three months prior to the
end of the term.
The
Company is permitted to terminate Mr. Florance at any time, without “cause,”
upon 60 days written notice, and Mr. Florance may voluntarily terminate for
“good reason” upon at least 60 days written notice, at which time Mr. Florance
is entitled to severance payments set out in more detail below under “Other
Post-Employment Compensation and Potential Payments Upon a Change of
Control.” The acquisition or change of control of the Company is one
of the events included within the meaning of the term “good reason” if Mr.
Florance terminates his employment within one year after such an
event. If the Company terminates Mr. Florance without cause or Mr.
Florance terminates his employment for good reason, all of Mr. Florance’s
unvested stock options would immediately vest and Mr. Florance would have 180
days post-termination to exercise all vested options. If all or any
portion of Mr. Florance’s stock options cannot be accelerated under the terms of
the applicable stock incentive plan, Mr. Florance is entitled to receive cash
consideration in lieu of acceleration for that portion that could not be
accelerated. Mr. Florance shall also have the right at any time to
terminate his employment without good reason upon 180 days written notice to the
Company and the Company shall have the right at any time to terminate Mr.
Florance for cause. In either such event, Mr. Florance would not be
entitled to any base salary or fringe benefits for any period after termination,
and he would forfeit any unvested stock options and his right to participate in
the Company’s cash incentive program. In the event of a termination
for cause or by Mr. Florance without good reason, Mr. Florance would have 60
days post-termination to exercise all vested options. “Cause” and
“good reason” in the context of Mr. Florance’s employment agreement are defined
below under “Other Post-Employment Compensation and Potential Payments Upon a
Change of Control.”
Mr. Florance’s
employment agreement also provides that in the event of his disability, the
Company shall have the right to terminate his employment. In the
event of termination of his employment due to disability or his death, Mr.
Florance (or his estate) would be entitled to (i) a prorated portion of his
unvested stock options due to vest during the calendar year of his disability or
death, and (ii) a prorated share of his bonus for the year of his
disability or death. In the event of termination due to disability or
his death, Mr. Florance (or his estate) would have one year to exercise all
vested options.
Pursuant
to his employment agreement, Mr. Florance is subject to confidentiality and
non-compete restrictive covenants. The non-compete restrictions apply
during the term of the agreement, any period of time during which he remains
employed “at will” and through the second anniversary of the date of his
termination.
Other
Executive Employment Agreements
Pursuant
to his executive service contract, Mr. Marples is entitled to base salary,
participation in the Company’s stock incentive plan, health and life insurance
benefits, disability benefits, Company contributions in an amount that
corresponds to his individual contributions to an HMRC (Her Majesty’s Revenue
and Customs) approved pension scheme, and twenty-five days of paid vacation per
year. Mr. Marples’ service contract continues until terminated
pursuant to the terms of the agreement. Mr. Marples may terminate his
service contract on not less than three months’ prior written
notice. The Company may terminate Mr. Marples’ employment by
providing him with six months’ prior written notice or a payment in lieu thereof
as described below under “Other Post-Employment Compensation and Potential
Payments Upon a Change of Control.”
34
Further,
the Company may terminate Mr. Marples’ service contract immediately upon notice
if one of the events listed under “Other Post-Employment Compensation and
Potential Payments Upon a Change of Control” below occurs. In the
event of termination by the Company as a result of one of those events, Mr.
Marples forfeits all unvested restricted stock and any unpaid
bonus. Pursuant to his employment agreement, Mr. Marples is subject
to confidentiality and non-compete restrictive covenants. The
non-compete restrictions apply for twelve months following termination of
employment.
Equity
Awards
All
grants of equity awards made in 2008 were made under the Company’s 2007
Plan. In April 2007, the Company’s Board adopted the 2007 Plan,
subject to stockholder approval, which was obtained on June 7,
2007. All shares of common stock that were authorized for issuance
under the 1998 Plan that, as of June 7, 2007, remained available for issuance
under the 1998 Plan (excluding shares subject to outstanding awards) were rolled
into the 2007 Plan and, as of that date, no shares of common stock remained
available for issuance pursuant to new awards under the 1998 Plan.
Stock
options and restricted stock granted to named executive officers in 2008 and
restricted stock granted in 2009 for performance in 2008 vest in equal
installments over the first three anniversaries following the date of
grant. For a description of the criteria applied in determining the
number of shares of restricted stock awarded in 2008 and 2009 for performance in
2007 and 2008, respectively, see “Compensation discussion and Analysis” at pages
25-29 of this proxy statement. For a discussion of the effect of a
change of control on outstanding restricted stock and option awards, see “Change
of Control Provisions under the Company’s 1998 and 2007 Plans” on pages 39-40 of
this proxy statement. For a discussion of the effect of Mr.
Florance’s termination on his outstanding equity awards, see “Termination and
Change of Control Provisions pursuant to Employment Agreements” on pages 38-39
of this proxy statement. Under the 2007 Plan, recipients of
restricted stock are entitled to receive all dividends and other distributions,
if any, paid with respect to the common stock. The Company’s
Compensation committee will determine if any such dividends or distributions
will be automatically reinvested in additional shares of restricted stock and
subject to the same restrictions as the restricted stock or whether the dividend
or distribution will be paid in cash.
Continued
on next page.
35
Outstanding
Equity Awards at December 31, 2008
The
following table summarizes the equity awards we have made to our named executive
officers that are outstanding as of December 31, 2008.
|
Option Awards(1)
|
Stock Awards
|
||||||||||||||||||||||
|
Market
|
|||||||||||||||||||||||
|
Number
of
|
Number
of
|
Number
of
|
Value of
|
||||||||||||||||||||
|
Securities
|
Securities
|
Shares
or
|
Shares
or
|
||||||||||||||||||||
|
Underlying
|
Underlying
|
Units of
|
Units of
|
||||||||||||||||||||
|
Unexercised
|
Unexercised
|
Option
|
Stock
That
|
Stock
That
|
|||||||||||||||||||
|
Options
|
Options
|
Exercise
|
Option
|
Have
Not
|
Have
Not
|
||||||||||||||||||
|
(#)
|
(#)
|
Price
|
Expiration
|
Vested
|
Vested(2)
|
||||||||||||||||||
|
Name
|
Grant Date(1)
|
Exercisable
|
Unexercisable
|
($)
|
Date
|
(#)
|
($)
|
||||||||||||||||
|
Andrew
C. Florance
|
6/21/2000
|
12,940 | $ | 24.88 |
6/20/2010
|
||||||||||||||||||
|
4/17/2001
|
44,463 | $ | 18.06 |
4/16/2011
|
|||||||||||||||||||
|
6/4/2002
|
45,074 | $ | 20.30 |
6/3/2012
|
|||||||||||||||||||
|
9/23/2003
|
46,448 | $ | 28.15 |
9/22/2013
|
|||||||||||||||||||
|
3/1/2004
|
50,000 | $ | 39.00 |
2/28/2014
|
|||||||||||||||||||
|
12/12/2006
|
26,200 | 13,100 | $ | 51.92 |
12/11/2016
|
||||||||||||||||||
|
2/27/2008
|
39,300 | $ | 43.99 |
2/26/2018
|
|||||||||||||||||||
| 77,643 | (3a) | $ | 2,557,560 | ||||||||||||||||||||
|
Brian
J. Radecki
|
12/2/2002
|
1,875 | $ | 18.28 |
12/1/2012
|
||||||||||||||||||
|
2/6/2004
|
6,000 | $ | 39.81 |
2/5/2014
|
|||||||||||||||||||
|
1/29/2007
|
1,333 | 2,667 | $ | 48.25 |
1/28/2017
|
||||||||||||||||||
|
6/5/2007
|
1,000 | 2,000 | $ | 54.12 |
6/4/2017
|
||||||||||||||||||
|
2/27/2008
|
10,500 | $ | 43.99 |
2/26/2018
|
|||||||||||||||||||
| 15,557 | (3b) | $ | 512,448 | ||||||||||||||||||||
|
John
Stanfill
|
8/6/2002
|
750 | $ | 19.71 |
8/5/2012
|
||||||||||||||||||
|
9/4/2003
|
1,000 | $ | 30.06 |
9/3/2013
|
|||||||||||||||||||
|
5/5/2004
|
5,000 | $ | 39.53 |
5/4/2014
|
|||||||||||||||||||
|
9/4/2008
|
15,000 | $ | 55.07 |
9/3/2018
|
|||||||||||||||||||
| 47,345 | (3c) | $ | 1,559,544 | ||||||||||||||||||||
|
Jennifer
L. Kitchen
|
9/4/2003
|
1,000 | $ | 30.06 |
9/3/2013
|
||||||||||||||||||
|
9/9/2004
|
10,000 | $ | 44.86 |
9/8/2014
|
|||||||||||||||||||
|
12/12/2006
|
3,533 | 1,767 | $ | 51.92 |
12/11/2016
|
||||||||||||||||||
|
2/27/2008
|
5,300 | $ | 43.99 |
2/26/2018
|
|||||||||||||||||||
| 7,215 | (3d) | $ | 237,662 | ||||||||||||||||||||
|
Paul
Marples
|
2/27/2008
|
5,300 | $ | 43.99 |
2/26/2018
|
||||||||||||||||||
| 9,900 | (3e) | $ | 326,106 | ||||||||||||||||||||
__________
|
(1)
|
The
dates of grant of each named executive officer’s stock option awards
outstanding as of December 31, 2008 are set forth in the table above,
and the vesting dates for each award can be determined based on the
vesting schedules described in this footnote. Except as noted below, the
awards of stock options become exercisable in installments of 25 percent
on the first four anniversaries of the date of grant, assuming continued
employment. Stock options granted on December 12, 2006, January 29, 2007,
June 5, 2007, February 27, 2008, and September 4, 2008 become exercisable
in installments of one third on the first three anniversaries of the date
of grant, assuming continued
employment.
|
|
(2)
|
Market
value based on the closing price of the Company’s common stock as of
December 31, 2008 of $32.94 per
share.
|
|
(3a)
|
As
of December 31, 2008, Mr. Florance held (i) 3,980 shares of restricted
stock, which vest in their entirety on March 10, 2009; (ii) 6,313 shares
of restricted stock, which vest in equal shares on April 27, 2009 and
2010; (iii) 43,400 shares of restricted stock, which vest in their
entirety on December 12, 2010; (iv) 6,150 shares of restricted stock,
which vest in equal shares on April 17, 2009, 2010 and 2011; (v) 15,800
shares of restricted stock, which vest in equal shares on February 27,
2009, 2010 and 2011; and (vi) 2,000 shares of restricted stock, which vest
in equal shares on May 28, 2009, 2010 and
2011.
|
|
(3b)
|
As
of December 31, 2008, Mr. Radecki held (i) 241 shares of restricted stock,
which vest in their entirety on September 8, 2009; (ii) 625 shares of
restricted stock, which vest in equal shares on September 7, 2009, and
2010; (iii) 2,500 shares of restricted stock, which vest in their entirety
on January 29, 2011; (iv) 7,391 shares of restricted stock, which vest in
their entirety on June 5, 2011; (v) 4,200 shares of restricted stock,
which vest in equal shares on February 27, 2009, 2010 and 2011; and (vi)
600 shares of restricted stock, which vest in equal shares on May 28,
2009, 2010 and 2011.
|
36
|
(3c)
|
As
of December 31, 2008, Mr. Stanfill held (i) 179 shares of restricted
stock, which vest in their entirety on September 8, 2009; (ii) 416 shares
of restricted stock, which vest in equal shares on September 7, 2009 and
2010; (iii) 1,000 shares of restricted stock, which vest in equal shares
on December 12, 2009 and 2010; (iv) 750 shares of restricted stock, which
vest in equal shares on December 6, 2009, 2010 and 2011; (v) 10,000 shares
of restricted stock, which vest in equal shares on February 13, 2009,
2010, 2011 and 2012; and (vi) 35,000 shares of restricted stock, which
vest in their entirety on September 4,
2012.
|
|
(3d)
|
As
of December 31, 2008, Ms. Kitchen held (i) 230 shares of restricted stock,
which vest in their entirety on September 8, 2009; (ii) 685 shares of
restricted stock, which vest in equal shares on September 7, 2009 and
2010; (iii) 3,900 shares of restricted stock, which vest in their entirety
on December 12, 2010; (iv) 2,100 shares of restricted stock, which vest in
equal shares on February 27, 2009, 2010 and 2011; and (v) 300 shares of
restricted stock, which vest in equal shares on May 28, 2009, 2010 and
2011.
|
|
(3e)
|
As
of December 31, 2008, Mr. Marples held (i) 7,500 shares of restricted
stock, which vest in equal shares on February 16, 2009, 2010 and 2011;
(ii) 2,100 shares of restricted stock, which vest in equal shares on
February 27, 2009, 2010 and 2011; and (iii) 300 shares of restricted
stock, which vest in equal shares on May 28, 2009, 2010 and
2011.
|
Fiscal
Year 2008 — Option Exercises and Stock Vested
The
following Option Exercises and Stock Vested table provides additional
information about the value realized by the named executive officers on option
award exercises and stock award vesting during the year ended December 31,
2008.
|
Option Awards
|
Stock Awards
|
|||||||||||||||
|
Name
|
Number
of Shares
Acquired on Exercise(#)
|
Value
Realized
on
Exercise(1)
($)
|
Number
of Shares
Acquired on
Vesting
(#)
|
Value
Realized
on
Vesting
(2)
($)
|
||||||||||||
|
Andrew
C.
Florance
|
25,447 | $ | 565,178 | 9,186 | $ | 406,790 | ||||||||||
|
Brian
J.
Radecki
|
— | — | 553 | $ | 29,270 | |||||||||||
|
John
Stanfill
|
— | — | 1,137 | $ | 43,201 | |||||||||||
|
Jennifer
L.
Kitchen
|
— | — | 571 | $ | 30,223 | |||||||||||
|
Paul
Marples
|
— | — | 2,500 | $ | 98,250 | |||||||||||
__________
|
(1)
|
With
respect to shares of common stock sold upon exercise (on the date
acquired), the value was calculated by multiplying the difference between
the sale price per share and the exercise price per share by the number of
shares sold and aggregating all such sales during 2008. With
respect to shares of common stock held upon exercise, the value was
calculated by multiplying the difference between the closing price of our
common stock on the date of exercise and the exercise price per share by
the number of shares acquired and aggregating all such exercises during
2008.
|
|
(2)
|
Calculated
by multiplying the number of shares acquired upon vesting by the closing
price of our common stock on the vesting
date.
|
This
section discusses the incremental compensation that would be payable by the
Company to each named executive officer in the event of a change-in-control of
the Company or a termination of the named executive officer’s employment with
the Company for various described reasons, sometimes referred to herein as a
“triggering event.” In accordance with applicable SEC rules, unless otherwise
specifically noted below, the following discussion assumes that the triggering
event in question — the change-in-control or termination of employment,
death or disability — occurred on December 31, 2008, the last business
day of 2008.
Pursuant
to applicable SEC rules, the analysis contained in this section does not
consider or include payments made to a named executive officer with respect to
contracts, agreements, plans or arrangements to the extent they do not
discriminate in scope, terms or operation, in favor of executive officers of the
Company and that are available generally to all salaried employees, except for
the Company’s 1998 Plan and the Company’s 2007 Plan.
The
actual amounts that would be paid upon a named executive officer’s termination
of employment can only be determined at the time of such executive’s separation
from the Company. Due to the number of factors that affect the nature and amount
of any benefits provided upon the events discussed below, any actual amounts
paid or distributed may be higher or lower than reported below. Factors that
could affect these amounts include the timing during the year of any such event
and the Company’s stock price.
37
Termination
and Change of Control Provisions pursuant to Employment Agreements
The
employment agreements for Messrs. Florance and Marples generally provide
that, if the Company terminates the executive’s employment without “cause” (as
defined in their agreements), the executive is entitled to certain severance
benefits as follows.
Mr.
Florance
The
Company is permitted to terminate Mr. Florance’s employment at any time, without
“cause”, upon 60 days written notice, and Mr. Florance may voluntarily terminate
for “good reason” upon at least 60 days written notice. “Cause” is
defined as (a) a material failure by Mr. Florance to perform his duties, which
remains uncured for 60 days after written notice of the failure is provided by
the Company, (b) Mr. Florance being convicted of a felony or pleading nolo
contendre to a felony, or (c) any other willful act or omission by Mr. Florance
which materially harms the financial condition or business reputation of the
Company. “Good reason” is defined as (a) requiring Mr. Florance
to relocate more than 45 miles from his current principal office, (b) Mr.
Florance ceasing involuntarily to be Chief Executive Officer of the Company or
being required to perform duties that are materially inconsistent with those
normally performed by a chief executive officer, (c) the Company materially
reducing the nature of his authority and duties, (d) Mr. Florance being required
to report to someone other than the Board, (e) a material breach by the Company
of its obligations under his employment agreement, which remain uncured for 90
days after written notice is provided by Mr. Florance to the Company, or (f)
there is an acquisition or change of control of the Company and Mr. Florance
terminates his employment within one year after such event. For these
purposes, an acquisition or change of control means (i) the acquisition of
beneficial ownership of more than 50% of the outstanding common stock of the
Company, (ii) election or appointment as directors comprising one-half or more
of the Board of persons who were not nominated, recommended or appointed by the
Company’s incumbent Board, (iii) the Company entering into a merger pursuant to
which it is not the surviving entity, and (iv) sale by the Company of all or
substantially all of its assets.
In the
event that the Company terminates Mr. Florance’s employment without cause or if
he terminates his employment for good reason, Mr. Florance is entitled to
receive his base salary for one year ($456,560 for 2008), his bonus for the year
in which the termination occurred ($499,493 for 2008), the immediate vesting of
all of his unvested stock options ($0) and a gross-up payment, if any, to cover
any taxes assessed under Section 4999 of the Internal Revenue
Code. Upon termination by the Company without cause or by Mr.
Florance for good reason, all of his unvested stock options will become
immediately exercisable and he will have 180 days to exercise all vested
options. If all or any portion of Mr. Florance’s stock options cannot
be accelerated under the terms of the applicable stock incentive plan, Mr.
Florance is entitled to receive cash consideration in lieu of acceleration for
each share underlying that portion of his stock options that cannot be so
accelerated equal to the excess (if any) of the highest closing price of the
Company’s common stock during the 180 days following the executive's date of
termination (or, if the Company is no longer publicly traded as of the date of
termination, the per-share price in connection with the transaction(s) that
resulted in the Company no longer being publicly traded) over the exercise price
of such option.
Mr. Florance’s
employment agreement also provides that in the event of termination due to his
disability or death, he (or his estate) would be entitled to (i) a prorated
portion of his unvested stock options due to vest during the calendar year of
his disability or death, and (ii) a prorated share of his bonus for the
year of his disability or death. For the purposes of this analysis, which
assumes a triggering event on December 31, 2008, he (or his estate) would
be entitled to the amount of his bonus for 2008 ($499,493 for
2008).
Mr.
Marples
If the
Company terminates Mr. Marples without cause, he is entitled to receive either
six months’ prior written notice or six months’ base salary ($135,057 if he had
been terminated December 31, 2008) payable over a period of six months in lieu
of such notice. Any such payment is subject to Mr. Marples executing
a release of all claims arising from termination of his employment.
If Mr.
Marples (a) commits a serious breach or, after notice, any repeated or continued
material breach of his obligations to the Company, (b) fails to satisfactorily
performed his duties, (c) is guilty of an act of gross negligence, dishonesty or
serious misconduct, (d) is declared bankrupt, (e) is convicted of any criminal
offense, (f) is disqualified from holding any Company office or resigns from
such office without prior written approval, (g) is prevented by illness, injury
or other incapacity from performing his obligations to the Company for 130 days
in any 12 months, (h) commits a breach of the Propex acquisition agreement, (i)
refuses to abide by or comply with the directives of the Board, (j) materially
violates the Company’s code of conduct or (k) abuses alcohol or drugs, the
Company may terminate his employment immediately upon notice. In such
an event, Mr. Marples forfeits all unvested restricted stock and any unpaid
bonus.
38
Others
Except as
may be provided to all employees of the Company generally, Mr. Radecki, Mr.
Stanfill and Ms. Kitchen are not entitled to any post-employment
compensation if their employment is terminated without cause, except as provided
pursuant to the Company’s stock incentive plans (as detailed
below).
Change
of Control Provisions under the Company’s 1998 and 2007 Plans
Pursuant
to the Company’s 1998 Plan and 2007 Plan and related award agreements, upon a
change of control, all options will immediately vest and all restrictions on
stock grants will lapse. For purposes of the stock incentive plans, a
“change of control” means: (a) acquisition by a third party of more
than 80% of the undiluted total voting power of the Company's then outstanding
securities eligible to vote to elect members of the Board, (b) consummation of a
merger or consolidation of the Company into any other entity, unless the holders
of the Company’s voting securities outstanding immediately before such
transaction hold securities that represent immediately after such merger or
consolidation at least 20% of the combined voting power of the then outstanding
voting securities of either the Company or the other surviving entity or its
parent; or (c) the stockholders of the Company approve (i) a plan of complete
liquidation or dissolution of the Company or (ii) an agreement for the Company's
sale or disposition of all or substantially all the Company's assets, and such
liquidation, dissolution, sale, or disposition is
consummated. Further, upon a substantial corporate change, if awards
are not assumed, substituted or continued, the awards shall immediately vest and
become exercisable before the consummation of the transaction. For
purpose of the stock incentive plans, a “substantial corporate change”
means: (w) dissolution or liquidation of the Company, (x) merger,
consolidation, or reorganization of the Company with one or more corporations in
which the Company is not the surviving corporation, (y) the sale of
substantially all of the assets of the Company to another corporation, or (z)
with respect to the 1998 Plan, any transaction (including a merger or
reorganization in which the Company survives) approved by the Board that results
in any person or entity (other than any affiliate of the Company as defined in
Rule 144(a)(1) under the Securities Act) owning 100% of the combined voting
power of all classes of stock of the Company, and, with respect to the 2007
Plan, a person acquires ownership of 100% of the combined voting power of all
classes of stock of the Company.
The table
below summarizes the potential termination and change of control payments
described above for each of the named executive officers, excluding any payments
that may be available under the Company’s company-wide severance plan that
provides payments that do not discriminate in scope, terms or operation, in
favor of executive officers of the Company and that are available generally to
all salaried employees, including the named executive officers. The
terms defined above apply to those used in this table. Unless
otherwise specifically noted below, all amounts assume that the triggering event
in question — the termination upon a change-in-control, termination without
cause or for good reason, death or disability — occurred on
December 31, 2008, the last business day of 2008.
|
Name
|
Termination
by Company “without cause”
|
Termination
by Executive for “good reason”
|
Termination
due to death or disability
|
Termination
upon change of control
|
Upon
a Change of Control without Termination(1)
|
|||||||||||||||
|
Andrew
C. Florance
|
$ | 956,053 | (2) | $ | 956,053 | (2) | $ | 499,493 | (3) | $ | 3,513,613 | (4) | $ | 2,557,560 | ||||||
|
Brian
J. Radecki
|
— | — | — | $ | 512,448 | (1) | $ | 512,448 | ||||||||||||
|
John
Stanfill
|
— | — | — | $ | 1,559,544 | (1) | $ | 1,559,544 | ||||||||||||
|
Jennifer
L. Kitchen
|
— | — | — | $ | 237,662 | (1) | $ | 237,662 | ||||||||||||
|
Paul
Marples
|
$ | 202,586 | (5) | — | — | $ | 326,106 | (1) | $ | 326,106 | ||||||||||
__________
|
(1)
|
Consists
of the values realizable by the named executive officers with respect to
unvested stock options (that are in-the-money) and restricted stock under
the Company’s 1998 and 2007 Plans in the event of a change of control or
substantial corporate change, as defined in the plans and described above,
as of December 31, 2008, which values are summarized in the table below.
The intrinsic value of the stock options was calculated by multiplying the
number of unvested options by the difference between the exercise price of
each unvested option and the closing price of the Company’s common stock
($32.94) on December 31, 2008, excluding options whose exercise price
is greater than the closing price on December 31, 2008. The
intrinsic values of the restricted stock were calculated using the closing
price of the Company’s common stock on December 31, 2008
($32.94).
|
39
|
Name
|
Unvested
(in-the-money) Options (# shares)
|
Intrinsic
Value
|
Unvested
Restricted Stock (# shares)
|
Intrinsic
Value
|
Total
|
|||||||||||||||
|
Andrew
C. Florance
|
— | — | 77,643 | $ | 2,557,560 | $ | 2,557,560 | |||||||||||||
|
Brian
J. Radecki
|
— | — | 15,557 | $ | 512,448 | $ | 512,448 | |||||||||||||
|
John
Stanfill
|
— | — | 47,345 | $ | 1,559,544 | $ | 1,559,544 | |||||||||||||
|
Jennifer
L. Kitchen
|
— | — | 7,215 | $ | 237,662 | $ | 237,662 | |||||||||||||
|
Paul
Marples
|
— | — | 9,900 | $ | 326,106 | $ | 326,106 | |||||||||||||
|
(2)
|
Includes
base salary for one year ($456,560), bonus for 2008 ($499,493), and the
immediate vesting of all unvested stock options ($0). The value
of stock option vesting included in this amount was calculated by
multiplying the number of unvested options by the difference between the
exercise price of each unvested option and the closing price of the
Company’s common stock ($32.94) on December 31, 2008, excluding
options whose exercise price is greater than the closing price on December
31, 2008. As of December 31, 2008, all of Mr. Florance’s
unvested options had an exercise price greater than the closing price on
December 31, 2008.
|
|
(3)
|
Consists
of the cash incentive bonus for
2008.
|
|
(4)
|
Mr.
Florance’s agreement provides for a termination payment if there is an
acquisition or change of control of the Company and Mr. Florance
terminates his employment within one year after that
event. Assuming, for these purposes, that those conditions are
met as of December 31, 2008, Mr. Florance would be entitled to the amount
set forth, which includes base salary for one year ($456,560), his cash
incentive bonus for 2008 ($499,493), and the immediate vesting of all
unvested stock options ($0) and all unvested restricted stock ($2,557,560)
under the respective stock incentive plans. The value of stock
option vesting included in this amount was calculated by multiplying the
number of unvested options by the difference between the exercise price of
each unvested option and the closing price of the Company’s common stock
($32.94) on December 31, 2008, excluding options whose exercise price
is greater than the closing price on December 31, 2008. As of
December 31, 2008, all of Mr. Florance’s unvested options had an exercise
price greater than the closing price on December 31, 2008. The
value of the restricted stock was calculated by multiplying the number of
outstanding restricted shares by the closing price of the Company’s common
stock on December 31, 2008
($32.94).
|
|
(5)
|
If
the Company had terminated Mr. Marples employment before his second
anniversary (February 16, 2009), he would have been entitled to nine
months’ salary, which is the amount set forth. The amount set
forth has been converted from British pounds using a conversion rate of
1.86, which is the average exchange
rate for the period from January 1, 2008 to December 31,
2008.
|
Section 162(m)
of the Internal Revenue Code disallows the deduction of compensation paid by a
company to its Chief Executive Officer and each of the other three most highly
compensated executive officers (not including the Company’s Chief Financial
Officer) that exceeds $1 million. Compensation that is considered
“performance-based” is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals under a plan approved by the
stockholders. While the Committee may consider tax deductibility as one of the
factors in determining executive compensation, to retain maximum flexibility in
designing compensation programs that meet the Committee’s stated objectives, the
Committee may not necessarily limit compensation to those levels or types of
compensation that are deductible. The Committee will continue to monitor total
compensation and, should compensation exceed the 162(m) limit, take the measures
that it deems appropriate.
The
Company does not have a specific policy requiring the recovery of
awards.
In April
2009, the Company entered into an engagement with ghSMART & Company, Inc.
(“ghSMART”), a management consulting firm, to evaluate the Company’s sales force
senior management and provide guidance with respect to hiring and recruiting
best practices for the Company’s sales force. Randy Street, a Partner
of ghSMART is the brother-in-law of our Chief Executive Officer. Mr.
Street will act as the senior client manager on this project. He has
a less than 0.5% equity stake in ghSMART. Mr. Street will be paid 25
percent of the amounts paid by the Company pursuant to the
engagement. Pursuant to the engagement, we have currently agreed to
pay ghSMART $202,000. In accordance with the procedures described
below for Interested Transactions (as defined below), the Audit Committee
reviewed and approved the engagement with ghSMART prior to commencement of the
engagement. The Company may enter into additional engagements with
ghSMART in the future.
40
Since
January 1, 2008, other than the ghSMART transaction discussed above, none
of our executive officers or directors has engaged in or had a direct or
indirect interest in any transactions with us that are required to be disclosed
in this proxy statement.
The Board
recognizes that Interested Transactions can present potential or actual
conflicts of interest and create the appearance that Company decisions are based
on considerations other than the best interests of the Company and its
stockholders. In April 2006, the Board delegated authority to the Audit
Committee to review and approve Interested Transactions, and the Audit Committee
has adopted written procedures as detailed below for the review, approval, or
ratification of Interested Transactions.
An
“Interested Transaction” is any transaction, arrangement or relationship
(including any indebtedness or guarantee of indebtedness), or any series of
similar transactions, arrangements or relationships, in which (a) the
aggregate amount involved will or may be expected to exceed $100,000 in any
calendar year, (b) the Company is a participant, and (c) any Related
Party (defined below) has or will have a direct or indirect interest (other than
solely as a result of being a director or trustee (or any similar position) or a
less than 10 percent beneficial owner of another entity). A “Related Party”
is any (a) person who is or was (since the beginning of the last year for
which the Company has filed an annual report on Form 10-K and proxy
statement, even if they do not presently serve in that role) an executive
officer, director or nominee for election as a director of the Company,
(b) greater than 5 percent beneficial owner of the Company’s
outstanding common stock, or (c) Immediate Family Member of any of the
foregoing. An “Immediate Family Member” is any child, stepchild, parent,
stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law and any person (other than a
tenant or employee) sharing the household of a person.
The Audit
Committee shall review all of the relevant facts and circumstances of all
Interested Transactions that require the Audit Committee’s approval and either
approve or disapprove of the entry into the Interested Transaction, subject to
limited exceptions described in the Interested Transactions policy. In
determining whether to approve or ratify an Interested Transaction, the Audit
Committee will take into account, among other factors it deems appropriate,
whether the Interested Transaction is on terms no less favorable than terms
generally available to an unaffiliated third-party under the same or similar
circumstances and the extent of the Related Party’s interest in the
transaction.
Section 16(a)
of the Securities Exchange Act of 1934 requires that our directors and executive
officers, and anyone who beneficially owns more than 10% of our common stock,
file with the SEC reports of initial ownership and reports of changes in
ownership of our common stock, and to furnish us with copies of those reports.
Based solely on a review of the reports furnished to us, we believe that during
2008, our directors, executive officers and 10% stockholders complied with these
requirements, except that Mr. Marples did not timely report the withholding of
shares for taxes upon vesting of shares of restricted stock on February 16,
2008. Mr. Marples made the required disclosure on a Form 4 filed with
the SEC on March 11, 2008.
We have
included a copy of our Annual Report for the year ended December 31, 2008
with this proxy statement. The Annual Report contains our annual report on
Form 10-K for the year ended December 31, 2008. In addition, you may obtain a copy of our annual report on
Form 10-K, including the financial statements and financial statement
schedules, without charge by sending a written request to Tim Trainor,
Communications Director, CoStar Group, Inc., 2 Bethesda Metro Center, Tenth Floor,
Bethesda, Maryland 20814.
If you
and others who share your mailing address own common stock in street name,
meaning through bank or brokerage accounts, you may have received a notice that
your household will receive only one annual report and proxy statement from each
company whose stock is held in such accounts. This practice, known as
“householding,” is designed to reduce the volume of duplicate information and
reduce printing and postage costs. Unless you responded that you did not want to
participate in householding, you were deemed to have consented to it and a
single copy of this proxy statement and the 2008 Annual Report have been sent to
your address. Each stockholder will continue to receive a separate voting
instruction form. If you would like to revoke your consent to householding and
in the future receive your own set of proxy materials or if your household is
currently receiving multiple copies of the proxy materials and you would like in
the future to receive only a single set of proxy materials at your address,
please contact our transfer agent, American Stock Transfer and Trust Company, at
59 Maiden Lane, Plaza Level, New York, NY 10038, or at (718) 921-8200 and
indicate your name, the name of each of your brokerage firms or banks where your
shares are held, and your account numbers. The revocation of consent to
householding will be effective 30 days following its receipt. If your
household only received one set of proxy materials due to householding and you
would like to receive an additional set, you may obtain an additional set,
without charge, by sending a written request to Tim Trainor, Communications
Director, CoStar Group, Inc., 2 Bethesda Metro Center, Tenth Floor, Bethesda,
Maryland 20814 or by calling Mr. Trainor at (301) 215-8300.
41
This
Proxy is solicited on behalf of the Board by directors, officers or employees.
The Company will bear all expenses in connection with the Annual Meeting and
this proxy solicitation. We have also retained Innisfree M&A Incorporated to
assist in distribution of these proxy materials and soliciting proxy voting
instructions, at an estimated cost not to exceed $10,000 plus reasonable
expenses. Proxies may be solicited in person, by telephone, by mail, telegram,
facsimile, or other electronic or other means. Innisfree M&A
Incorporated will request that brokerage houses, banks and other custodians
forward proxy material to beneficial owners of our common stock. We will
reimburse brokerage houses, banks, and other custodians for their reasonable
expenses for forwarding these materials to beneficial owners.
American Stock Transfer and Trust Company will act as proxy
tabulator.
42
APPENDIX A
PROXY PROXY
COSTAR
GROUP, INC.
Annual
Meeting of Stockholders – June 2, 2009
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY
The undersigned stockholder of CoStar
Group, Inc., a Delaware corporation (the “Company”), hereby acknowledges receipt
of the Notice of 2009 Annual Meeting of Stockholders and Proxy Statement, each
dated May 1, 2009, and the 2008 Annual Report, hereby revokes any proxy or
proxies previously given and hereby appoints Michael R. Klein, Andrew C.
Florance and Brian J. Radecki, or any of them, with full power to each of
substitution on behalf and in the name of the undersigned, as the proxies and
attorneys-in-fact to vote and otherwise represent all of the shares registered
in the name of the undersigned at the 2009 Annual Meeting of Stockholders of the
Company (the “Annual Meeting”) to be held at 2 Bethesda Metro Center, Bethesda,
Maryland 20814, at 10:00 a.m. local time on Tuesday, June 2, 2009, and any
adjournment or postponement thereof, with the same effect as if the undersigned
were present and voting such shares, on the matters and in the manner set forth
on the reverse side of this Proxy card.
THIS PROXY, WHEN PROPERLY EXECUTED
AND TIMELY DELIVERED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. UNLESS CONTRARY DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED “FOR” THE
ELECTION OF THE NOMINEES LISTED IN THE ACCOMPANYING PROXY STATEMENT, “FOR”
RATIFICATION OF THE APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR 2009 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES AS TO OTHER
MATTERS.
(Continued
and to be signed on the reverse side.)
43
Annual
Meeting of Stockholders of
COSTAR
GROUP, INC.
June
2, 2009
IMPORTANT
NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER
MEETING TO BE HELD ON JUNE 2, 2009:
The
Notice of Meeting and Proxy Statement are available at www.CoStar.com/Investors/SECFilings.aspx
and the 2008 Annual Report is available at www.CoStar.com/Investors/Reports.aspx.
Please
sign, date and mail your proxy card
in
the envelope provided as soon as possible.
↓ Please
detach along perforated line and mail in the envelope
provided. ↓
|
þ
|
Please
mark your vote in blue or
black ink as shown here.
|
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE PROPOSALS.
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
|
(1)
Proposal to elect the following persons as directors of the
Company.
|
Nominees:
|
¡
|
Michael
R. Klein
|
|||
|
¡
|
Andrew
C. Florance
|
|||||
|
¡
|
David
Bonderman
|
|||||
|
FOR
ALL NOMINEES
|
¡
|
Michael
J. Glosserman
|
||||
|
o
|
¡
|
Warren
H. Haber
|
||||
|
¡
|
Josiah
O. Low III
|
|||||
|
WITHHOLD
AUTHORITY FOR ALL NOMINEES
|
¡
|
Christopher
J. Nassetta
|
||||
|
o
|
||||||
|
FOR
ALL EXCEPT (See instructions below)
|
||||||
|
o
|
INSTRUCTION: To
withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT”
and fill in the circle next to each nominee you wish to withhold, as shown
here: ●
|
FOR
|
AGAINST
|
ABSTAIN
|
||||||
|
(2)
|
Proposal
to ratify the appointment of Ernst & Young LLP as the Company’s
independent registered public accounting firm for
2009.
|
o
|
o
|
o
|
||||
|
(3)
|
To
vote or otherwise represent the shares on any other business which may
properly come before the meeting or any adjournment or postponement
thereof, according to their discretion and in their
discretion.
|
|||||||
The
shares represented by this proxy will be voted in accordance with the
specification made. If no specification is made, the shares represented by this
proxy will be voted FOR
each of the above persons and proposals, and for or against such other
matters as may properly come before the meeting as the proxy holders in their
discretion deem advisable.
PLEASE PROMPTLY COMPLETE, DATE, SIGN
AND MAIL THIS PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. IF YOU RECEIVE
MORE THAN ONE PROXY CARD, PLEASE COMPLETE, SIGN, DATE AND RETURN EACH
CARD.
Mark
“X” here if you plan to attend the meeting. o
44
To
change the address on your account, please check the box at right and indicate
your new address in the address space above. Please note that changes to the
registered name(s) on the account may not be submitted via this method. o
Signature
of
Stockholder Date:
Signature of Stockholder Date:
|
NOTE:
|
Please
sign exactly as your name or names appear on this Proxy. When shares are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
|
45