UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant þ

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

 

Diebold, Incorporated

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5995 Mayfair Road
P. O. Box 3077 • North Canton, Ohio 44720-8077

 

October 9, 2008

 

Dear Shareholder:

 

The 2008 Annual Meeting of Shareholders of Diebold, Incorporated will be held at the Sheraton Suites, 1989 Front Street, Cuyahoga Falls, Ohio 44221, on Wednesday, November 12, 2008 at 10:00 a.m. EST. For your convenience, we are pleased to offer a live webcast of the annual meeting at http://www.diebold.com.

 

All holders of record of Diebold Common Shares as of October 3, 2008, are entitled to vote at the 2008 Annual Meeting.

 

As described in the accompanying Notice and Proxy Statement, you will be asked to (i) elect ten directors and (ii) ratify the appointment of KPMG LLP as independent auditors for 2008.

 

Diebold’s Annual Report for the year ended December 31, 2007 is included herein. Your proxy card is enclosed. Please indicate your voting instructions and sign, date and mail this proxy card promptly in the return envelope.

 

If you are planning to attend the meeting, directions to the meeting location are included on the back page. If you are unable to attend the meeting, you may listen to a live broadcast that will be available from Diebold’s web site at http://www.diebold.com. The replay can also be accessed on the site soon after the meeting for up to three months.

 

We look forward to seeing those of you who will be attending the meeting.

 

Sincerely,

 

 

5995 Mayfair Road
P.O. Box 3077 • North Canton, Ohio 44720-8077

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 12, 2008
10:00 a.m. EST

 

Dear Shareholder,

 

The Annual Meeting of Shareholders of Diebold, Incorporated will be held at the Sheraton Suites, 1989 Front Street, Cuyahoga Falls, Ohio 44221, on November 12, 2008 at 10:00 a.m. EST, for the following purposes:

 

1. To elect ten directors; and

 

2. To ratify the appointment of KPMG LLP as the Company’s independent auditors for the year 2008.

 

Your attention is directed to the attached proxy statement, which fully describes these items.

 

Any action on the items of business described above may be considered at the annual meeting at the time and on the date specified above or at any time and date to which the annual meeting may be properly adjourned or postponed.

 

Holders of record of Diebold Common Shares at the close of business on October 3, 2008 will be entitled to vote at the meeting.

 

The enclosed proxy card is solicited, and the persons named therein have been designated, by the Board of Directors of the Company.

 

By Order of the Board of Directors

 

Chad F. Hesse
Corporate Counsel and Corporate Secretary

 

October 9, 2008

(approximate mailing date)

 

YOU ARE REQUESTED TO COOPERATE IN ASSURING A

QUORUM BY FILLING IN, SIGNING AND DATING THE ENCLOSED PROXY

AND PROMPTLY MAILING IT IN THE RETURN ENVELOPE.

DIEBOLD, INCORPORATED
5995 Mayfair Road
P.O. Box 3077 • North Canton, Ohio 44720-8077

 

 

PROXY STATEMENT

 

 

Annual Meeting of Shareholders, November 12, 2008

 

This proxy statement is furnished to shareholders of Diebold, Incorporated in connection with the solicitation by the Board of Directors of proxies that will be used at the 2008 Annual Meeting of Shareholders to be held on November 12, 2008, at 10:00 a.m. EST, or any adjournments thereof, for the purpose of considering and acting upon the matters referred to in the preceding Notice of Annual Meeting and more fully discussed below.

 

Record Date and Share Ownership

 

On October 3, 2008, the record date for the meeting, the outstanding voting securities of the Company consisted of 66,100,709 Common Shares, $1.25 par value per share, all of one class. Each shareholder of record as of the close of business on October 3, 2008 will be entitled to one vote for each Common Share held on that date.

 

Submitting and Revoking Your Proxy

 

This proxy statement and accompanying form of proxy were first mailed to shareholders on or about October 9, 2008. If you complete and submit your proxy, the persons named as proxies on your proxy card, which we refer to as the Proxy Committee, will vote the shares represented by your proxy in accordance with your instructions.

 

If you submit a proxy card but do not fill out the voting instructions on the proxy card, the Proxy Committee will vote the shares represented by your proxy as follows:

 

 

In addition, if other matters are properly presented for voting at the Annual Meeting, the Proxy Committee will vote on such matters in accordance with their best judgment. We have not received notice of other matters that may properly be presented for voting at the Annual Meeting.

 

Shareholders may revoke the authority granted by their proxies at any time before the exercise of the powers conferred thereby by: notice in writing delivered to the Secretary of the Company; submitting a subsequently dated proxy; or attending the Annual Meeting, withdrawing the proxy and voting in person.

 

Cumulative Voting

 

If a shareholder gives written notice to the President, any Vice President or Secretary at least forty-eight hours prior to the time fixed for holding the Annual Meeting that the shareholder desires that the voting for the election of directors shall be cumulative, and if an announcement of the giving of such notice is made upon convening of the Annual Meeting by the Chairman or Secretary or by or on behalf of the shareholder giving such notice, each shareholder will have cumulative voting rights.

 

In cumulative voting, each shareholder may cast a number of votes equal to the number of shares owned multiplied by the number of directors to be elected, and the votes may be cast for one nominee only or distributed among the nominees.

 

In the event that voting at the Annual Meeting is to be cumulative, unless contrary instructions are received on the enclosed proxy, it is presently intended that all votes represented by properly executed proxies will be divided evenly among the candidates nominated by the Board. However, if voting in such manner would not be effective to elect all such nominees, such votes will be cumulated at the discretion of the Proxy Committee so as to maximize the number of such nominees elected.

 

Votes Required to Adopt Proposals

 

The results of shareholder voting at the Annual Meeting will be tabulated by the inspectors of elections appointed for the Annual Meeting. The Company intends to treat properly executed proxies that are marked “abstain” as present for purposes of determining whether

a quorum has been achieved at the Annual Meeting, but will not count any broker non-votes for such purpose.

 

The director-nominees receiving the greatest number of votes will be elected. Votes withheld with respect to the election of directors will not be counted in determining the outcome of that vote. However, our Board of Directors has adopted a policy that any director-nominee that is elected but receives a greater number of votes withheld from his or her election than votes in favor of election is expected to tender his or her resignation following certification of the shareholder vote, as described in greater detail below under “Proposal No. 1: Election of Directors.” All other matters to be considered at the Annual Meeting require, for approval, the affirmative vote of a majority of Common Shares voted at the meeting in person or by proxy. Abstentions with respect to the proposal to ratify the appointment of the independent auditors will not be counted for determining the outcome of that proposal.

 

The Company does not anticipate receiving any broker non-votes at the Annual Meeting in light of the nature of the matters to be acted upon thereat; however, any broker non-votes received in respect of the ratification of the appointment of the independent auditors will not affect the voting on such proposal.

 

 

DIRECTOR INDEPENDENCE

 

 

The Board has determined that each of Louis V. Bockius III, Phillip R. Cox, Richard L. Crandall, Gale S. Fitzgerald, Phillip B. Lassiter, John N. Lauer, Eric J. Roorda, Henry D. G. Wallace and Alan J. Weber, which includes each of the current members of the Audit Committee, the Board Governance Committee and the Compensation Committee, has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company) and is independent within the Company’s director independence standards, which reflect the New York Stock Exchange director independence standards as currently in effect and as they may be changed from time to time.

 

In making this determination with respect to Mr. Weber, the Board determined that the provision of proxy processing, mailing and tabulation services by Broadridge Financial Solutions, Inc., the board of directors of which Mr. Weber is a member, did not create a material relationship or impair the independence of Mr. Weber because he serves only as a member of such board, and the nature of the services provided and the fees paid by the Company for such services were less than $80,000 in 2007.

 

Under the Company’s director independence standards, a director will be determined not to be independent under the following circumstances:

 

 

 

Thomas W. Swidarski does not meet the aforementioned independence standards because he is the President and Chief Executive Officer, and is an employee of, the Company.

 

The Company’s director independence standards are available on the Company’s web site at http://www.diebold.com or by written request to the Corporate Secretary.

 

In addition, except for employment arrangements with the Chief Executive Officer and other management directors that may be on the Board from time-to-time, the Company does not engage in transactions with directors or their affiliates if a transaction would cause an independent director to no longer be deemed independent, would present the appearance of a conflict of interest or is otherwise prohibited by law, rule or regulation. This includes, directly or indirectly, any extension, maintenance or renewal of an extension of credit to any director of the Company.

 

This prohibition also includes significant business dealings with directors or their affiliates, charitable contributions which would require disclosure in the Company’s proxy statement under the rules of the NYSE, and consulting contracts with, or other indirect forms of compensation to, a director. Any waiver of this policy may be made only by the Board and must be promptly disclosed to the Company’s shareholders.

 

 

COMMUNICATIONS WITH DIRECTORS

 

 

In accordance with the NYSE’s corporate governance standards, the Company’s non-management directors meet at regularly scheduled executive sessions without management present. The Company’s Chairman of the Board, John N. Lauer, is an independent director and presides at these sessions. Shareholders and interested parties may communicate with our committee chairs or with our non-management directors as a group, by sending an email to:

 

 

 

 

Communication may also be directed in writing to such person or group at Diebold, Incorporated, Attention: Corporate Secretary, 5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077. The Board has approved a process for handling communications received by the Company and addressed to non-management members of the Board. Under that process, the Corporate Secretary will review all such communications and determine whether such communications require immediate attention. The Corporate Secretary will forward such communications, or a summary of such communications, to the appropriate director or directors.

 

A majority of the independent directors of the Board approved the above-described process for determining which communications are forwarded to various members of the Board.

 

 

BUSINESS ETHICS POLICY

 

 

All of the directors, executive officers and employees of the Company are required to comply with certain policies and protocols concerning business ethics and conduct, which we refer to as our Business Ethics Policy.

 

The Business Ethics Policy applies not only to the Company, but also to all of those domestic and international companies in which the Company owns or controls a majority interest. The Business Ethics Policy describes certain responsibilities that the directors, executive officers and employees have to the Company, to each other and to the Company’s global partners and communities including, but not limited to, compliance with laws, conflicts of interest, intellectual property and the protection of confidential information.

 

The Business Ethics Policy is available on the Company’s web site at http://www.diebold.com or by written request to the Corporate Secretary.

 

DIRECTOR COMMITTEES AND COMPOSITION

 

 

During 2007, the Board held six meetings. All of the current directors of the Company attended 75% or more of the aggregate of all meetings of the Board and the Board committees on which they served during the period. During 2007, the Board had five standing committees: Audit Committee, Board Governance Committee, Compensation Committee, Investment Committee and Information Technology Oversight Committee. Below is a summary of our committee structure and membership information during 2007:

 

 

 

 

Audit Committee

 

This committee is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, and its functions are described below under “Report of Audit Committee.” The committee’s current charter is available on the Company’s web site at http://www.diebold.com or by written request to the Corporate Secretary.

 

The current members of the Audit Committee are Henry D. G. Wallace, Chair, Louis V. Bockius III, Richard L. Crandall, Eric J. Roorda and Alan J. Weber, all of whom are independent. In addition, the Board has determined that Messrs. Wallace and Weber are audit committee financial experts. This committee met in person or telephonically six times during 2007, and had informal communications between themselves and management, as well as with the Company’s independent auditors, at various other times during the year.

 

Board Governance Committee

 

This committee’s functions include reviewing the qualifications of potential director candidates and making recommendations to the Board to fill vacancies or to expand the size of the Board, when appropriate. This committee also makes recommendations as to the composition of the various committees of the Board and as to the compensation paid to the directors for their services on the Board and on Board committees. The committee’s current charter is available on the Company’s web site at http://www.diebold.com or by written request to the Corporate Secretary.

 

The current members of the Board Governance Committee are Gale S. Fitzgerald, Chair, Louis V. Bockius III, Phillip B. Lassiter and John N. Lauer, all of whom are independent. This committee met in person or telephonically four times during 2007.

 

Compensation Committee

 

This committee administers the Company’s executive pay program. The role of the committee is to oversee the Company’s equity plans (including reviewing and approving equity grants to executive officers) and to annually review and approve all pay decisions relating to executive officers. This committee also assesses achievement of corporate and individual goals, as applicable, by the executive officers under the Company’s short- (annual) and long-term incentive plans. This committee reviews the management succession plan and proposed changes to any benefit plans of the Company such as retirement plans, deferred compensation plans and 401(k) plans. The committee’s current charter is available on the Company’s web site at http://www.diebold.com or by written request to the Corporate Secretary.

 

The current members of the Compensation Committee are Phillip B. Lassiter, Chair, Phillip R. Cox, Gale S. Fitzgerald and John N. Lauer, all of whom are independent. This committee met in person or telephonically four times during 2007.

 

Investment Committee

 

This committee’s functions include establishing the investment policies, including asset allocation, for the Company’s cash, short-term securities and retirement plan assets, overseeing the management of those assets, ratifying fund managers recommended by management and reviewing at least annually the investment performance of the Company’s retirement plans and 401(k) plans to assure adequate and competitive returns. The committee’s current charter is available on the Company’s web site at http://www.diebold.com or by written request to the Corporate Secretary.

 

The current members of the Investment Committee are Alan J. Weber, Chair, Phillip R. Cox, Eric J. Roorda and Henry D. G. Wallace. This committee met one time in 2007.

 

Information Technology Oversight Committee

 

This committee’s functions include overseeing and providing guidance to management with respect to major information technology-related projects and decisions, and advising the Board on information technology-related matters facing the Company.

 

During 2007, the members of the Information Technology Oversight Committee were Richard L. Crandall, Chair, Gale S. Fitzgerald and Alan J. Weber. This committee met in person or telephonically three times during 2007. In April 2008, the Board decided to discontinue this committee.

2007 COMPENSATION OF NON-EMPLOYEE DIRECTORS

 

 

The following table details the cash retainers and fees received by non-employee directors during 2007, as well as the dollar amount recognized for financial statement reporting purposes of stock and stock option grants awarded during 2007 and in prior years pursuant to the Amended and Restated 1991 Equity and Performance Incentive Plan of the Company, which we refer to herein as the 1991 Plan:

 

2007 Director Compensation

 

		Fees Earned
		or Paid				Stock				Option
		in Cash2				Awards3				Awards4				Total
Name		($)				($)				($)				($)
Louis V. Bockius III		$	64,000			$	77,136			$	32,991			$	174,127
Phillip R. Cox			60,000				52,478				21,184				133,662
Richard L. Crandall			77,000				77,136				35,365				189,501
Gale S. Fitzgerald			69,500				52,478				46,131				168,109
Phillip B. Lassiter			67,000				77,136				35,365				179,501
John N. Lauer			162,000				77,136				35,365				274,501
William F. Massy1			17,333				0				37,112				54,445
Eric J. Roorda			62,000				52,478				42,846				157,324
Henry D. G. Wallace			68,000				52,478				38,936				159,414
Alan J. Weber			68,500				52,478				19,845				140,823

 

 

 

		Audit				Board Governance				Compensation				Investment				IT Oversight
Name		Committee				Committee				Committee				Committee				Committee
Louis V. Bockius III		$	9,000			$	5,000			$	—			$	—			$	—
Phillip R. Cox			—				—				7,000				3,000				—
Richard L. Crandall			9,000				—				—				3,000				15,000
Gale S. Fitzgerald			—				8,000				7,000				—				4,500
Phillip B. Lassiter			—				5,000				12,000				—				—
John N. Lauer			—				5,000				7,000				—				—
William F. Massy			3,000				—				—				1,000				—
Eric J. Roorda			9,000				—				—				3,000				—
Henry D. G. Wallace			15,000				—				—				3,000				—
Alan J. Weber			9,000				—				—				5,000				4,500

 

 

 

 

Prior to May 1, 2007, non-employee directors received an annual retainer of $40,000 per year for their service as directors. However, in April 2007, in connection with its annual review of director pay, the Board Governance Committee engaged the services of the Compensation Committee’s independent compensation consultant to provide an analysis of the Company’s director pay practices relative to the Company’s peers. For this analysis, the Board Governance Committee used the same methodology, including the same peer group of companies, as the Compensation Committee for its executive pay review. A more detailed discussion of the Company’s peer group can be found below under “Compensation Discussion and Analysis.”

 

As a result of its review, the Board Governance Committee determined that the directors’ total pay was below the median of the Company’s peer group. Therefore, upon recommendation of the Board Governance Committee, the Board approved an increase in the non-employee directors’ annual retainer to $55,000 per year, effective May 1, 2007.

 

Further, prior to May 1, 2007, the non-employee Chairman of the Board received an additional retainer of $10,000 per month. However, in connection with its annual review, the Board Governance Committee anticipated a reduced role for the non-employee Chairman going forward. Therefore, upon recommendation of the Board Governance Committee, the Board approved a reduction in the Chairman’s additional retainer to $7,500 per month, effective May 1, 2007.

 

In addition to their annual retainer, the non-employee directors also receive the following committee fees for their participation as a member or as Chair of one or more of the Company’s committees:

 

 

A director may elect to defer receipt of all or a portion of his or her pay pursuant to the 2005 Deferred Compensation Plan for Directors.

 

Each non-employee director may also receive equity awards under the 1991 Plan. Unlike prior years, in which the directors were awarded stock options, in 2007, each non-employee director was awarded 1,600 deferred Common Shares, which vest one year from the date of grant, but receipt of which is deferred until the later of (1) three years from the date of grant, (2) retirement from the Board or (3) attainment of the age of 65.

 

In addition, all directors’ stock options that vested prior to December 31, 2005 are entitled to reload rights, under which an optionee can elect to pay the exercise price using previously owned shares and receive a new option at the then-current market price for a number of shares equal to those surrendered. The reload feature is only available, however, if the optionee agrees to defer receipt of the balance of the option shares for at least two years.

 

Director Stock Ownership Guidelines

 

In April 2007, the Board Governance Committee established stock ownership guidelines for each non-employee director of the Company. Under the ownership guidelines, each non-employee director is expected to own at least 6,500 Common Shares. These ownership guidelines are intended to build stock ownership among non-employee directors and ensure that their long-term economic interests are aligned with those of other shareholders.

 

CONSIDERATION OF DIRECTOR NOMINEES

 

Shareholder Nominees

 

The policy of the Board Governance Committee is to consider properly submitted shareholder nominations for candidates for membership on the Board as described below under “Identifying and Evaluating Nominees for Directors.” In evaluating such nominations, the Board Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth below under “Director Qualifications.”

 

Any shareholder nominations proposed for consideration by the Board Governance Committee should include:

 

 

Shareholder nominations should be addressed to Diebold, Incorporated, 5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077, Attention: Corporate Secretary. See also below under “Proposals of Shareholders.”

 

Director Qualifications

 

In evaluating director-nominees, the Board Governance Committee considers such factors as it deems appropriate, consistent with the Company’s Corporate Governance Guidelines and other criteria established by the Board. The Board Governance Committee’s goal in selecting directors for nomination to the Board is generally to seek to create a well-balanced team that combines diverse experience, skill and intellect of seasoned directors in order to enable the Company to pursue its strategic objectives.

 

The Board Governance Committee has not reduced the qualifications for service on the Company’s Board to a checklist of specific standards or minimum qualifications, skills or qualities. Rather, the Company seeks, consistent with the vacancies existing on the Company’s Board at any particular time and the interplay of a particular candidate’s experience with the experience of other directors, to select individuals whose business experience, knowledge, skills, diversity, integrity, and global experience would be considered a desirable addition to the Board and any committees thereof.

 

In addition, the Board Governance Committee annually conducts a review of incumbent directors using the same criteria as outlined above, in order to determine whether a director should be nominated for re-election to the Board. The Board Governance Committee makes its determinations as to director selection based upon the facts and circumstances at the time of the receipt of the director candidate recommendation. Applicable considerations include:

 

 

Final approval of any candidate will be determined by the full Board.

 

A copy of the Company’s Corporate Governance Guidelines is available on the Company’s web site at http://www.diebold.com or by written request to the Corporate Secretary.

 

Identifying and Evaluating Nominees for Directors

 

The Board Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Board Governance Committee regularly reviews the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise.

 

In the event that vacancies are anticipated, or otherwise arise, the Board Governance Committee considers various potential candidates for director. Candidates may come to the attention of the Board Governance Committee through current Board members, professional search firms, shareholders or other persons.

 

As described above, the Board Governance Committee considers properly submitted shareholder nominations

for candidates for the Board. Following verification of the recommending shareholder’s status, recommendations are considered by the Board Governance Committee at a regularly scheduled meeting.

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

The members of the Compensation Committee during the year ended December 31, 2007 were Phillip B. Lassiter, Chair, Phillip R. Cox, Gale S. Fitzgerald and John N. Lauer.

 

No officer or employee of the Company served on the Compensation Committee during such period.

 

 

PROPOSAL NO. 1: ELECTION OF DIRECTORS

 

The Board recommends that its ten nominees for director be elected at the Annual Meeting, each to hold office for a term of one year from the date of the Annual Meeting or until the election and qualification of a successor. However, under the policy adopted by the Board, in an uncontested election, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election, which we refer to as a Majority Withheld Vote, is expected to tender his or her resignation following certification of the shareholder vote. The Board Governance Committee shall consider the tendered resignation and make a recommendation to the Board. The Board will act on the Corporate Governance Committee’s recommendation within 90 days following certification of the shareholder vote. Any director who tenders his or her resignation pursuant to this policy shall not participate in the Board Governance Committee recommendation or Board action regarding whether to accept or reject the tendered resignation.

 

However, if each member of the Board Governance Committee received a Majority Withheld Vote in the same election, then the Board will appoint a committee comprised solely of independent directors who did not receive a Majority Withheld Vote at that election to consider each tendered resignation offer and recommend to the Board whether to accept or reject each resignation. Further, if all of the directors received a Majority Withhold Vote in the same election, then the Board will appoint a committee comprised solely of independent directors to consider each tendered resignation offer and recommend to the Board whether to accept or reject each resignation.

 

In the absence of contrary instruction, the Proxy Committee will vote the proxies for the election of the ten nominees.

 

All director-nominees are presently members of the Board. A substantial majority of the director-nominees are independent as required by the corporate governance standards of the NYSE. In addition, it is expected that all director-nominees attend the Annual Meeting unless there are extenuating circumstances for nonattendance. All ten directors standing for re-election attended the 2007 Annual Meeting.

 

If for any reason any director-nominees are not available for election when the election occurs, the designated proxies, at their option, may vote for substitute nominees recommended by the Board.

 

Alternatively, the Board may reduce the number of director-nominees. The Board has no reason to believe that any director-nominee will be unavailable for election when the election occurs. Further, Mr. Bockius currently exceeds the retirement age set forth in the Company’s Corporate Governance Guidelines; however, upon recommendation of the Board Governance Committee, the Board is extending the retirement age for Mr. Bockius and is again nominating Mr. Bockius for re-election at the Annual Meeting.

 

THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ITS

TEN NOMINEES AS DIRECTORS.

The Director-Nominees are:

 

 

BENEFICIAL OWNERSHIP OF SHARES

 

To the knowledge of the Corporation, no person beneficially owned more than five percent of the outstanding Common Shares as of September 25, 2008, except for the shareholders listed below. The information provided below is derived from Schedules 13D or 13G filed with the SEC.

 

				Amount and Nature of				Percent of
Title of Class		Name of Beneficial Owner		Beneficial Ownership				Class
Common Shares		GGCP, Inc. et al. One Corporate Center Rye, New York 10580			4,706,9001				7.2
Common Shares		Cooke & Bieler, L.P. 1700 Market Street Suite 3222 Philadelphia, Pennsylvania 19103			3,736,0712				5.7
Common Shares		Janus Capital Management LLC et al. 151 Detroit Street Denver, Colorado 80206			3,557,6483				5.4
Common Shares		Capital World Investors 333 South Hope Street Los Angeles, California 90071			3,325,0004				5.1

 

 

 

SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT

 

 

The following table shows the beneficial ownership of Common Shares of the Company, including those shares which individuals have a right to acquire (for example, through exercise of options under the 1991 Plan) within the meaning of Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, by (a) each director-nominee, (b) the Chief Executive Officer, the Chief Financial Officer, and the other three most highly compensated executive officers of the Company, whom we refer to collectively as the Named Executive Officers, and (c) all director-nominees, Named Executive Officers and other executive officers of the Company as a group as of September 25, 2008.

 

Ownership is also reported as of August 1, 2008 for shares in the 401(k) Savings Plan over which the individual has voting power, together with shares held in the Employee Stock Purchase Plan.

 

		Common Shares				Stock Options
		Beneficially				Exercisable				Deferred				Percent of
Director-Nominees:		Owned				Within 60 Days				Shares1				Class
Louis V. Bockius III			192,867				14,125				1,600				0.31
Phillip R. Cox			—				4,500				1,600				*
Richard L. Crandall			9,089				18,125				1,600				0.04
Gale S. Fitzgerald			6,089				18,125				1,600				0.04
Phillip B. Lassiter			8,771				18,125				1,600				0.04
John N. Lauer			19,721				15,125				2,877				0.05
Eric J. Roorda			313,568				22,125				1,600				0.51
Thomas W. Swidarski			61,687	2,3			162,975				—				0.34
Henry D. G. Wallace			1,000				14,125				1,600				0.02
Alan J. Weber			1,500				5,625				1,600				0.01
Other Named Executive Officers:
Kevin J. Krakora Executive Vice President and Chief Financial Officer			19,426	2			55,625				—				0.11
David Bucci Senior Vice President, Customer Solutions Group			49,779	2,3			171,250				7,500				0.33
Dennis M. Moriarty Senior Vice President, Global Security Division			20,754				54,000				1,475				0.11
James L.M. Chen Senior Vice President, EMEA/AP Divisions			42,816				32,875				—				0.11
All Current Director-Nominees and Executive Officers as a Group (26)			861,367	2,3			848,187				26,762				2.59

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than 10% of the Company’s Common Shares, to file with the SEC reports of ownership of the Company’s securities on Form 3 and changes in reported ownership on Form 4 or Form 5. Such directors, executive officers and 10% shareholders are also required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely upon a review of the reports furnished to the Company, or written representations from reporting persons that all reportable transactions were reported, the Company believes that during the year ended December 31, 2007, the Company’s directors, executive officers and 10% shareholders timely filed all reports they were required to file under Section 16(a).

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

The Company’s executive pay program is managed by the Compensation Committee, which we refer to throughout this Compensation Discussion and Analysis as the Committee. The role of the Committee is to oversee the Company’s executive pay plans and policies, administer its stock plans and annually review and make recommendations to the Board for all pay decisions relating to the Company’s executives, including the Named Executive Officers (the Chief Executive Officer, the Chief Financial Officer, and the other three most highly compensated executive officers of the Company).

 

The Company’s executive pay program is designed to:

 

 

The Company’s executive pay program is consistent with these objectives. An overview of this program is described below.

Executive Pay Program Overview

 

The following table summarizes the key elements of the Company’s executive pay program:

 

				Factors Increasing or		Target Pay Position
Element		Primary Purpose		Decreasing Rewards		Relative to Peer Group
Base Salary		Reward individuals’ skills, competencies, experience and performance		• Performance against objectives • Individual responsibilities and experience level • Performance of the Company		Below median in order to emphasize variable pay components
Annual Cash Bonuses		Motivate and reward achievement of annual financial objectives and individual goals		• Corporate earnings per share, or EPS • Achievement of individual financial and non-financial goals		Above median to bring total cash compensation at or around median, at target performance
Long-Term Incentives
Performance Shares		Incentivize performance and achievement of strategic goals over a three-year period		• Total shareholder return, or TSR, relative to peers and S&P 400 Mid-Caps		Total potential value is above median to provide competitive total pay and build ownership. Value is typically delivered in the form of: • Approximately 50% performance shares at target results
Stock Options		Incentivize increase in shareholder value		• Stock price growth		• Approximately 50% options, valued using the Black-Scholes method
Benefits and Perquisites		Provide for basic life and income security needs		• Years of service		Median levels
Change-in-Control Benefits		Bridge to future employment if employment is terminated		• None; only paid in the event the executive’s employment is terminated		Below median levels

 

 

The mix of base salary, annual cash bonuses and long-term incentives noted in the above table, which we refer to throughout this Compensation Discussion and Analysis as total pay, makes up the Company’s executive pay program. In addition to the pay elements noted in the above table, the Company occasionally awards special grants of restricted stock or restricted stock units in cases of the hiring, promotion and retention of executives. In order to confirm the continued appropriateness of each element of the Company’s executive pay program, the Committee annually reviews the pay practices of similar size peer companies in related industries.

 

Market Benchmarking of Executive Pay

 

In setting pay for executives, including the Named Executive Officers, the Company targets total pay at the middle of a peer group of companies, which we refer to throughout this Compensation Discussion and Analysis as the Peer Group. However, actual pay can vary significantly from year-to-year and between individuals within a given year based on corporate and individual performance, and experience.

 

The Committee reviews Peer Group practices annually for total pay and periodically for new pay elements or emerging trends. In addition to Peer Group data, the Committee also reviews data obtained from nationally recognized compensation surveys for a broad range of companies of comparable size and similar revenue. This additional information helps confirm Peer Group results and represents the broader market in which the Company competes for senior executives. In 2007, the Company developed data from both sources to benchmark all elements of total pay, as well as for retirement practices.

 

Peer Group

 

Each year the Committee also reviews the Peer Group itself, as companies may get merged, acquired, liquidated or otherwise disposed of, or may no longer be deemed to adequately represent the Company’s peers in the market.

 

Several factors are used to select Peer Group companies:

 

 

At the beginning of 2007, the Peer Group consisted of 31 companies; however, during 2007, several companies in the Peer Group merged or were otherwise removed due to changes in their business condition, leaving the Peer Group at 28 companies as of December 31, 2007. The Company believes that this group fairly represents the companies with which it competes for executive talent. The Peer Group also serves as one of the indexes used to assess the Company’s TSR as part of its performance share plan.

 

During 2007, the following companies made up the Peer Group and, as such, served as the primary basis for benchmarking the Company’s pay levels and practices:

 

Peer Group:
Affiliated Computer Ametek Benchmark Electronics Cooper Industries Corning Crane Deluxe Donaldson Dover Fiserv FMC Technologies		Harris Hubbell International Game Technology Lennox Mettler-Toledo NCR Pall PerkinElmer Pitney Bowes Rockwell Automation Rockwell Collins		Sauer Danfoss Teleflex Thermo Fisher Scientific Thomas & Betts Unisys Varian Medical Removed in 2007: American Power Conversion Avaya Genlyte

 

 

Pay Setting Process

 

Pay recommendations for the Company’s executives, including the Named Executive Officers, are typically made at the Committee’s first meeting each year, which is normally held in February. Decisions with respect to prior year performance, performance for other relevant periods and any resulting award payouts, as well as equity awards, base salary increases and target performance levels for the current year and beyond, are also made at this meeting.

 

With respect to the CEO’s pay, the Committee reviews and evaluates the CEO’s performance in executive session, without management or the CEO. The Committee’s final pay recommendations for the CEO are then presented to the independent members of the Board. During an executive session of the Board, the Board conducts its own review and evaluation of the CEO’s performance and ultimately approves the pay actions for the CEO that it deems appropriate after considering all input.

 

In evaluating the Company’s total pay program for its executives, conducting benchmarking, assessing its results, designing appropriate plans and recommending other potential actions, the Committee and management from time to time use the services of an independent compensation consultant in accordance with the Committee’s charter. In 2007, the Committee engaged the services of Towers Perrin, a global professional services consulting firm, in this capacity.

 

Role of Compensation Consultant

 

Towers Perrin is engaged by, and serves at the will of, the Committee and reports directly to its Chair. Towers Perrin does not provide any consulting services directly to the Company or management. However, as noted above under “2007 Compensation of Non-Employee Directors,” in 2007 Towers Perrin was also engaged by the Board Governance Committee to review and provide recommendations on the Company’s pay program for non-employee directors.

 

Towers Perrin is generally engaged by the Committee to develop external pay data primarily consisting of comparative analyses of the Company’s Peer Group and companies of comparable size that are outside of the Company’s Peer Group, as well as Fortune 500 companies. Towers Perrin also provides advice on current compensation trends such as long-term incentives, executive retirement, change-in-control severance benefits, deferred compensation programs and governance practices in connection with executive pay.

 

At the direction of the Committee, Towers Perrin also provides this external pay data to the Company’s Chief Human Resources Officer, or CHRO, to use to prepare pay recommendations for the Company’s executives.

 

At the Committee’s discretion, Towers Perrin may also be asked to attend Committee meetings dealing with executive pay matters. On such occasions, Towers Perrin generally participates in the Committee’s deliberations on executive pay decisions, answers questions regarding compensation trends or the market data it developed, and may provide additional advice or input as requested by the Committee.

 

Role of Management

 

As the Company’s primary contact with the Committee, the CHRO attends and actively participates in all Committee meetings. With respect to executive pay, the CHRO typically meets independently with Towers Perrin in preparation for upcoming Committee meetings to review the data prepared by Towers Perrin that will be presented at the meeting. The CHRO will then make pay recommendations to the CEO based upon market pay comparisons and an analysis of the executives’ individual performance goals, as well as other internal factors (such as expanded job responsibilities during the year or extraordinary performance during the year that is not tied to any of the executive’s stated goals). The CEO then reviews these recommendations and, along with the CHRO, makes final pay recommendations to the Committee. The Committee ultimately approves the executive pay actions it deems appropriate after considering all input.

 

Role of the CEO

 

At the Committee’s request, the CEO periodically attends Committee meetings and provides input on pay decisions affecting his management team. As discussed above, the CEO makes recommendations to the Committee with respect to the pay actions and target incentive levels for his management team.

 

The CEO may also meet with Towers Perrin, along with the CHRO, to review data that will be presented at a Committee meeting. However, the only input the CEO and CHRO have with respect to Towers Perrin’s data is to correct factual information about the Company or management.

 

While the CEO does not make specific recommendations to the Committee with respect to his own pay, the CEO does provide a self-evaluation to the Committee that includes his achievement against the prior year’s goals established by the Committee and his proposed goals for the coming year, which are based on the annual strategic, operational and financial plans for the Company that are approved by the full Board prior to any CEO pay discussions.

 

Committee Deliberation and Rationale

 

There are many factors that the Committee evaluates in determining increases or decreases in each pay element and in total pay for each executive, including the Named Executive Officers, including:

 

 

Some of these factors are discussed in more detail below in connection with the individual pay elements.

 

The amount of total pay achieved or potentially achievable from prior awards does not directly impact annual pay decisions or future pay opportunities. Moreover, the Committee does not have a specific formula for allocating total pay between short- and long-term pay elements or between cash and non-cash pay elements. However, the Committee does vary the mix of these elements based on competitive practices and management level, to recognize each individual’s operating responsibilities and ability to impact short- and long-term results of the Company. The mix of these elements is reviewed by the Committee at least annually.

 

As part of its deliberation process, the Committee annually reviews a “snapshot” of total direct pay for each executive for purposes of general benchmarking and comparative analysis with the Company’s Peer Group. In this way, the Committee can validate its target pay positions with respect to direct pay elements relative to its Peer Group.

 

The Committee analyzes data from the Company’s Peer Group, as well as data for executives in similar positions at companies of comparable size that are outside of the Peer Group, to determine their pay positions for each element of compensation. The summary table above under “Executive Pay Program Overview” contains disclosure on how individual pay elements are targeted against the Peer Group under the column “Target Pay Position Relative to Peer Group.”

 

For example, the Committee targets base salaries below median levels to ensure that a significant percentage of total pay is contingent on short- and long-term achievement of performance goals and shareholder value creation. Annual cash bonuses are targeted slightly above median levels to produce total cash pay at target results that approximate the median of the Peer Group. The total value of long-term incentives is targeted above median levels in order to provide competitive total pay at target, as well as to build stock ownership, enhance ties to shareholder returns and emphasize variable over fixed pay. However, the Committee does not choose specific percentile ranges for targeting individual pay elements above or below the Peer Group median.

 

For 2007, in accordance with its stated philosophy, the Committee approved base salaries for executives that were, on average, 90% of the median levels of the Peer Group. When base salaries are coupled with target bonuses, resulting cash pay levels approach median levels of the Peer Group, on average. The total value of long-term incentives at target, when added to base salary and target bonus, positions the potential total pay for the executives at approximately 115% of median levels of the Peer Group.

 

Internal Equity

 

The Company provides similar pay ranges for positions with similar characteristics and scope of responsibility, including Named Executive Officer positions. Any differences in compensation among the Named Executive Officers are based on each individual’s experience, operating responsibilities, ability to impact short- and long-term results and future potential, as determined by the Committee. Further, in order to attract and retain quality executive officers, the Committee feels it is necessary and proper to provide total pay for each executive position that is commensurate with market practice (determined specifically by reference to the practices of the Company’s Peer Group).

 

The Committee makes no other distinctions in its pay policies and decisions as among the Named Executive Officers or among the Named Executive Officers and any other executive officer, and such pay policies and decisions are applied consistently among the executives.

 

Timing of Equity Awards

 

As previously indicated, pay recommendations for the executives, including the Named Executive Officers, are typically made by the Committee at its first scheduled meeting of the year. This is usually five to 15 days after the Company reports its financial results for the fourth quarter and year-end of the preceding fiscal year. It is also more than two months before the Company reports its first quarter earnings.

 

Any increases in base salary approved at this meeting are made effective retroactively to the beginning of the current year. Further, any equity awards approved by the Committee at this meeting are approved by the Board and dated as of the date of the Board meeting held the following day. As such, the Committee does not time the grants of options or any other equity incentives to the release of material non-public information.

 

The exceptions to this timing are awards to executives who are promoted or hired from outside the Company during the year. These executives may receive salary increases or equity awards effective or dated, as applicable, as of the date of their promotion or hire.

 

Elements of Executive Pay

 

Base Salaries

 

The Company pays base salaries to recognize the skills, competencies, experience and individual performance an executive brings to his or her position. As a result, changes in salary result primarily from changes in the executive’s responsibilities and an assessment of annual performance.

 

At the start of each year, each executive, including the Named Executive Officers, provides personal performance goals that relate to his/her applicable position, business unit or department. As a result, these personal goals vary for each executive to recognize his/her responsibilities and areas of influence. Performance against these goals is assessed annually by the CEO and the CHRO, who then make salary recommendations to the Committee. The Company’s Board assesses the CEO’s performance.

The Committee relies upon several factors when deciding on increases in salary:

 

 

In assessing the results of an executive’s individual performance, the Committee relies on its judgment and does not rely on a specific formula. This evaluation ensures the Company has the financial capability to provide the increases and that they are reasonable in light of corporate performance.

 

2007 Base Salary Actions.  Salary increases in 2007 for the executives as a whole, excluding promotions, were generally less than 5% on average. Increases maintained the Committee’s desired position in the market, which is below the median of the Peer Group and other comparable-size companies. The Committee did not consider any extraordinary factors in determining salary increases for executives in 2007.

 

2008 Base Salary Actions.  Salary increases in 2008 for the executives as a whole, excluding promotions, were generally less than 4% on average. As previously disclosed, in light of and in connection with the restatements of the Company’s financial statements, Messrs. Bucci and Krakora did not receive salary increases in 2008.

 

Annual Cash Bonuses

 

Executives, including the Named Executive Officers, also have the ability to earn annual cash bonuses under the Company’s Annual Cash Bonus Plan, or Cash Bonus Plan, which was approved by shareholders in 2005. Payout under the Cash Bonus Plan depends upon the performance of the Company against objective performance measures established by the Board at the beginning of each fiscal year.

 

Cash bonuses under the plan provide incentives to meet or surpass specific short-term corporate financial goals. As a result, the Cash Bonus Plan balances the objectives of the Company’s other pay programs, which concentrate on long-term financial results (performance shares) and stock price growth (performance shares and stock options). Finally, annual cash bonuses allow the Company to maintain relatively low fixed compensation costs and still provide executives with competitive cash pay, subject to performance.

 

Cash Bonus Opportunity.  The Committee intends target bonuses to be above median levels relative to the Peer Group to make up for its below-median salary position and to provide competitive overall cash pay at target results. For 2007, the target bonuses were as follows:

 

 

The potential earnout levels of the executives, as a percentage of income, are set by the Committee so as to provide a reasonable opportunity to achieve total cash pay at target that approximates the median total cash pay of the Company’s Peer Group.

 

Actual bonuses can range from 0% to 200% of target depending on actual Company performance. In this manner, the Company can reward executives with high levels of cash pay for results that substantially exceed target performance expectations. Conversely, the Company rewards relatively low levels of cash pay for results that are below target performance expectations, or none at all for results that fail to meet minimally acceptable standards.

 

Company Performance Measures.  The Company has historically used EPS as the performance criteria for the annual cash bonuses. The Committee believes EPS represents an important bottom-line financial result that investors use to evaluate the value of the Company’s Common Shares. As a result, consistent increases in EPS over time should lead to improvements in shareholders’ investment. However, the Cash Bonus Plan allows the Committee to choose from other performance measures to be used instead, including, in particular, the following:

 

 

The EPS level fixed by the Committee for purposes of target payout of the cash bonuses is intended to approximately mirror the Company’s annual EPS guidance to investors. The performance levels for payout of cash bonuses at threshold and maximum are then automatically set as a percentage of the target EPS level. Because the Committee’s pay philosophy is to pay less than median for base salary compared to the Company’s Peer Group, with the difference in median total cash pay to be made up by cash bonus, the threshold for payout is set at a level that is intended to be reasonably capable of achievement. Conversely, the target for maximum payout is set at a level that would require a fairly extraordinary effort to achieve.

 

In establishing these goals and evaluating results, the Committee may consider certain non-recurring or extraordinary items to be outside the normal course of business and not reflective of the Company’s core performance. Accordingly, the Committee’s determination of EPS results for payout under the Cash Bonus Plan may exclude these items. Further, under the plan, the Committee is authorized to consider negative discretion with respect to bonuses on an individual basis.

 

Payout of Cash Bonuses.  To pay these bonuses, the Company funds a bonus pool based on (1) the level of EPS achieved relative to the target EPS and (2) the target bonus available to each executive. For 2007, the following levels of EPS would fund the following results

 

 

Accordingly, the bonus pool, and thus the maximum cash bonus award payable to each executive, is based entirely on company performance measures.

 

The Company uses two factors to distribute the pool. One-half of an executive’s funded award is paid automatically based on the Company’s EPS results. In this way, the Company retains a strong emphasis on consolidated results because no bonuses are funded unless the Company achieves a threshold level of EPS performance. For example, an executive with a target bonus equal to 50% of salary can earn an annual bonus equal to 25% of salary if the Company achieves its target EPS goal.

 

Under the Cash Bonus Plan, the Committee is only authorized to use negative discretion with respect to any awards under the plan. As such, payment of the other half of an executive’s funded award is based on the achievement of the executive’s individual performance goals, which allows the Committee to award less than the total amount funded for an executive by the Company’s EPS results if his/her individual performance is deemed by the Committee to be below expectations.

 

Individual Performance Measures.  Each executive typically has from six to 10 individualized goals. The goals are tied to the individual’s operating unit, functional area or department and they may consist of a mixture of quantitative measures (for example, revenue, operating profit, free cash flow and inventory goals) and qualitative measures (for example, operational and organizational improvements, product/service development and customer loyalty). The CEO establishes the individual goals for his management team at the beginning of each fiscal year and the Committee sets the CEO’s individual performance objectives.

 

In determining the effect of the individual performance measures on the executives’ cash bonus, the Committee has no set criteria, formula or weighting system, but instead bases its determination primarily on a subjective assessment made by the CEO and reported to the Committee. Accordingly, the individual performance goals act as a limiting factor in relation to the maximum potential cash bonus award funded by achievement of the Company’s performance measures.

 

For example, if an executive is deemed not to have achieved some or all of his individual performance goals, as determined by the CEO and recommended to the Committee, then the executive will receive a cash bonus award less than the maximum award funded, but not less then 50% of the funded award, which is based solely on achievement of the Company performance measure.

 

2007 Cash Bonus Plan Payout.  In 2007, the Company did not achieve the threshold level of EPS, and therefore, the executives did not receive cash bonuses under the Company’s Cash Bonus Plan.

 

Other Cash Bonus Actions.  While the Company’s EPS results for 2007 did not fund a bonus pool under the Company’s Cash Bonus Plan, revenue for the Company’s financial self-service and security businesses achieved 6% and 8% growth, respectively. Excluding the results of the Company’s election systems and lottery businesses, the Company’s EPS would have funded a pool approximately equal to threshold payout under the Company’s Cash Bonus Plan.

 

Accordingly, the Committee felt that it was appropriate to reward the Company’s executives, including certain Named Executive Officers, for the Company’s performance in 2007 notwithstanding these businesses. As a result, in February 2008, the Board of Directors, based on the recommendation of the Committee, approved discretionary cash bonuses to the executives, including the

following Named Executive Officers: Thomas W. Swidarski, $360,000; Dennis M. Moriarty, $53,714; and James L.M. Chen, $113,964. As previously disclosed, in light of and in connection with the restatements of the Company’s financial statements, Messrs. Bucci and Krakora did not receive a discretionary cash bonus.

 

2008 Cash Bonus Plan Actions.  For 2008 cash bonuses to the Named Executive Officers, which are payable in 2009, the Committee again based the Company performance measures under the Cash Bonus Plan on the attainment by the Company of certain target levels of EPS.

 

Long-Term Incentives

 

Overview.  The 1991 Plan provides the Company flexibility in the types of long-term incentives, or LTI, it can award to executives, including the Named Executive Officers, and includes stock options, performance shares, restricted stock and restricted stock units, or RSUs. The LTI granted in 2007 — collectively and individually — support the Company’s pay philosophy:

 

 

LTI opportunities are based largely on competitive practices of the Company’s Peer Group. In addition, the Committee takes into account the competitiveness of executives’ target cash pay (salary plus target bonus) and competitive total pay levels. This dollar difference represents the target value of LTI that the Committee delivers in the form of options and performance shares.

 

Stock Options.  Approximately 50% of the target LTI is delivered in the form of stock options. In this manner, the Committee strikes a balance between awards tied only to stock price appreciation and those based on the full value of the Company’s Common Shares, as well as other performance factors. LTI delivered in the form of stock options are valued using the Black-Scholes option valuation method, the same one used by the Company to determine its accounting cost.

 

Grant guidelines are developed according to an executive’s salary grade or level, organizational level, reporting relationships and job responsibilities, in order to maintain internal equity in the grants to participants. Actual grants also vary based on an assessment of several factors, including the market value of the Company’s Common Shares, the Company’s financial performance, shares available under the 1991 Plan, an individual’s target total compensation and his or her performance against individual performance goals.

 

Executives, including the Named Executive Officers, receive option grants with the following characteristics:

 

 

On occasion, the Committee has granted stock options to executives with special vesting requirements in order to emphasize retention and to reward only for sustained long-term results. Typically, under these special vesting requirements, the award does not vest until the seventh anniversary of the grant. One-half of the award may vest early if the Company’s stock price reaches a certain price per share for a specified number of trading days, and the other half of the award may vest early if the Company’s stock reaches a second, higher price per share for a specified number of trading days.

 

Grants of stock options approved by the Committee to the Named Executive Officers during 2007 can be found below under “2007 Grants of Plan-Based Awards.”

 

Performance Shares.  The Committee delivers the remaining 50% of target LTI in the form of performance shares. Performance shares are earned over a three-year performance period, determined as of the date of the Company’s fourth quarter and year-end earnings release immediately following such performance period, with actual awards varying from target based on the achievement

of financial objectives established by the Committee at the start of the period. No dividends are paid on performance shares until earned.

 

The award of performance shares in this way is consistent with the Committee’s objective to take a balanced approach to LTI by rewarding sustained financial performance as well as stock price appreciation. The expected value of a performance share at the time of grant (based on the Company’s stock price) determines the number of target performance shares potentially awarded. The Committee then develops performance share grant guidelines on the same principles used to develop stock option grant guidelines.

 

Executives, including the Named Executive Officers, received target performance share awards for the 2007 to 2009 period with the following characteristics:

 

 

 

For the 2005 to 2007 performance period, executives received performance shares approximately equal to 29% of target. Goals for this period were similar to those established for the 2007 to 2009 period. The Company’s TSR performance relative to the Peer Group and the S&P Mid-Cap 400 Index determined actual awards, with results in each area equally weighted. Each measure had threshold and maximum results, with a matrix used to determine awards for performance between threshold and maximum. An executive’s individual performance is not a factor in determining actual performance shares awarded.

 

The Company’s TSR for the 2005 to 2007 period was 34th in the Peer Group and 309th in the S&P Mid-Cap 400 Index. This was between the threshold and maximum performance objectives set at the start of the period and produced an award equal to 29% of the target award. Executives received shares equal to this percent of target, as no discretion was used to increase or decrease the results based on the Company’s relative TSR. Accordingly, the performance shares earned by the Named Executive Officers for the 2005 to 2007 performance period were as follows: Thomas W. Swidarski, 2,668 shares; Dennis M. Moriarty, 812 shares; and James L.M. Chen, 1,044 shares. As previously disclosed, in light of and in connection with the restatements of the Company’s financial statements, Messrs. Krakora and Bucci did not receive performance shares for the 2005 to 2007 performance period.

 

Restricted Stock and RSUs.  At times, the Company may hire new executives or a current executive may take on a new role or greatly expanded responsibilities. As a result, the Committee believes that it is sometimes important to provide such executives with an additional incentive in the form of restricted stock or RSUs. These awards typically vest three years after the date of grant and may include performance features for early vesting. The purpose of these awards is to ensure retention of the executives’ services for a specified period of time and to enhance their incentive for building shareholder value. In furtherance of these purposes, in 2007, Mr. Swidarski was awarded 40,000 RSUs. None of the other Named Executive Officers received restricted stock or RSUs in 2007.

 

Perquisites and Other Personal Benefits

 

The Company’s executives, including the Named Executive Officers, are also eligible to participate in the following additional pay elements as part of their total pay package.

 

Benefits

 

The Company provides executives with medical, dental, long-term disability, life insurance and severance

benefits under the same programs used to provide benefits to all U.S.-based associates. Executives may buy additional life insurance coverage at their own expense, but not long-term disability. The maximum life insurance that may be bought by an executive is $1.5 million. Executives’ benefits are not tied to individual or Company performance, which is the same approach used for other associates. Moreover, changes to executives’ benefits reflect the changes to the benefits of other associates.

 

Perquisites

 

The Company provides its executives with perquisites that are also not tied to individual or Company performance. The Committee believes that these benefits are set at a reasonable level, are highly valued by recipients, have limited cost, are part of a competitive reward program and help in attracting and retaining high quality executives. The Company’s executives receive the following perquisites, the values of which differ based on an executive’s reporting level:

 

 

The Committee periodically reviews the Company’s practices in this area and makes any necessary adjustments based on competitive practices, consistency with the Company’s total pay philosophy and objectives, and cost to provide these personal benefits. As a result of its review, beginning in 2008, the Company will no longer provide tax gross-ups in connection with any executive perquisites.

 

Deferred Compensation

 

Executives, including the Named Executive Officers, have the ability to defer receipt of annual cash bonuses and performance shares pursuant to the Company’s 2005 Deferred Incentive Compensation Plan. Current investment choices under the plan for cash deferrals (cash bonuses and dividends on deferred performance shares) mirror those in the Company’s 401(k) plan, except Company stock. As a result, the plan offers executives another means to save for retirement. The Company’s deferred compensation plan does not provide participants with additional pay, but merely provides a tax deferred investment vehicle. Deferrals represent earned incentives that would have been paid to the executive except for the voluntary election of the executive. Moreover, the Company does not guarantee any specific rate of return and does not contribute to the return that may be earned. As a result, the current program does not increase the Company’s compensation costs.

 

Retirement

 

The Company also maintains qualified and non-qualified retirement programs. The executives, including the Named Executive Officers, participate in the Company’s qualified defined benefit (pension) and defined contribution (401(k)) plans on the same terms as all other associates. Under the Company’s 401(k) plan, for executives hired prior to July 1, 2003, the Company will match 60% of the first 3% of pay that is contributed by the associate to the plan, and 40% of the next 3% of pay contributed. For executives hired on or after such date, the Company will match 100% of the first 3% of pay that is contributed by the associate to the plan, and 60% of the next 3% of pay contributed.

 

The Company also has four non-qualified supplemental retirement plans as follows: the Supplemental Executive Retirement Plan I, or SERP I, the Pension Supplemental Executive Retirement Plan, or Pension SERP, the Pension Restoration Supplemental Executive Retirement Plan, or Pension Restoration SERP, and the 401(k) Restoration Supplemental Executive Retirement Plan, or 401(k) Restoration SERP.

 

The Pension SERP, Pension Restoration SERP and 401(k) Restoration SERP became effective January 1, 2007:

 

 

The Committee added these non-qualified supplemental retirement plans to:

 

 

These plans are described in more detail below under “2007 Pension Benefits.”

 

Participation in the plans is limited to executive officers in positions that help develop, implement and modify the Company’s long-term strategic plan, as nominated by the CEO and approved by the Committee.

 

Mr. Bucci participates in the SERP I, but is not eligible for early retirement. Mr. Swidarski, Mr. Krakora, and Mr. Moriarty participate in the Pension SERP, Pension Restoration SERP and the 401(k) Restoration SERP; however, any benefits accrued under the Restoration SERPs offset benefits accrued under the Pension SERP to avoid duplication of benefits provided.

 

Employment Agreements

 

The Company typically only enters into employment agreements with the CEO and also the President when that title is held by someone other than the CEO. When an employment agreement is deemed necessary, the Committee usually models the agreement after prior employment agreements, and makes adjustments as necessary given, among other factors, a competitive analysis of the market for the position, the needs of the Company and the relative experience level of the individual accepting the position. These employment agreements may then go through a negotiation process with the individual and his or her legal counsel.

 

Change-in-Control Benefits

 

The Company has an historical practice of providing change-in-control agreements to its executive officers, including the Named Executive Officers. These agreements provide executives with the potential for continued employment for three years following a change-in-control. As a result, these agreements help retain these executives and provide for management continuity in the event of an actual or threatened change-in-control. They also help ensure that the executives’ interests remain aligned with shareholders’ interests during a time when their continued employment may be in jeopardy. Finally, they provide some level of income continuity should an executive’s employment be terminated without cause.

 

The agreements provide:

 

 

Change-in-control benefits are only paid upon the occurrence of two events, a so-called “double trigger.” First, there must be a “change-in-control” of the Company, as defined in the agreements. Second, the executives must be terminated without cause or they must terminate their own employment for good cause, as described in the agreements. In this manner, benefits are only paid to executives if they are adversely affected by a change-in-control, consistent with the agreements’ objectives.

 

The terms and conditions of these agreements are identical in all material respects, except for the multiple of base salary noted above. The Committee periodically reviews the Company’s policy with respect to these change-in-control agreements, and in 2006 engaged Towers Perrin to provide a competitive analysis of the Company’s practices. It was determined that this type of agreement was still a valued component of overall compensation for purposes of attracting and retaining quality executive officers. Based upon these reviews, the Committee believes its change-in-control benefits, providing for payments of two and three times base salary, as applicable, are below median levels for executives in similar positions in its Peer Group and at other comparable companies and, therefore, remained consistent with the Committee’s philosophy relative to these types of awards. As such, the Committee approved the continued award of these agreements to new executives. The Committee does not take the value of these agreements into consideration when making any other compensation decisions.

 

Separation Agreements

 

It is also the Company’s historical practice to enter into separation agreements with its executive officers upon their separation from service, in order to reinforce that individual’s confidentiality, non-competition and non-solicitation

obligations. As with employment agreements, the Committee usually models the agreement after prior separation agreements, and makes appropriate adjustments, taking into consideration the past service of the individual, the reason for the separation and any other factors the Committee deems relevant. These separation agreements generally then go through a negotiation process with the individual and his or her legal counsel. These agreements are only prepared at the time of an executive’s separation from the Company, and as such, do not affect the Committee’s decisions on other compensation elements.

 

Expatriate Benefits

 

Executives sent on expatriate assignments receive payments to cover housing, automobile and other expenses under the Company’s standard expatriate policies. With the exception of Mr. Chen, who was asked to relocate to China when he was hired by the Company, none of the Named Executive Officers received expatriate benefits in 2007. Mr. Chen’s expatriate benefits are described in more detail below in footnote 4 to the “2007 Summary Compensation Table.”

 

Other Compensation Policies

 

Stock Ownership Guidelines

 

The Company established stock ownership guidelines for its executives in 1996. Ownership guidelines reinforce the primary goals of the Company’s LTI: build stock ownership among executives and ensure their long-term economic interests are aligned with those of other shareholders.

 

Prior to 2007, ownership guidelines were based on a multiple of an executive’s salary, the executive’s stock holdings and the Company’s stock price, and as a result, changes in these criteria could change the number of shares required to meet the executive’s guideline. As such, in 2006 the Committee reviewed the Company’s ownership guidelines, and found that the Company’s ownership guidelines were well-above median levels for executives in similar positions in its Peer Group and at other comparable companies. The Company’s approach to LTI supported this practice, as LTI were usually set above median levels. However, in 2007, the Company modified its ownership requirements to:

 

 

As a result, the Company adopted fixed share ownership guidelines. The new levels of ownership set forth in these guidelines are approximately the same as the Company’s pre-existing ownership guidelines based on the executives’ current salaries and the Company’s stock price on October 5, 2006.

 

 

In addition, until guidelines are met, executives must hold at least 80% of the net shares of stock received from any equity-based awards, after deductions for taxes and exercise costs. Once the guidelines are met, the executives are required to hold at least 40% of the net shares of stock received from any equity-based awards, after such deductions.

 

In determining an executive’s stock holdings, the Company counts the shares directly owned by the executive, including unvested restricted shares and shares deferred pursuant to the Company’s deferred compensation program, as well as the following stock equivalents: deferred shares/RSUs and the potential after-tax shares owned through the executive’s 401(k) savings plan account. Outstanding options and unearned performance shares do not count toward the executives’ stock ownership guidelines.

 

The stock holdings of the Named Executive Officers are set forth above under “Security Ownership of Directors and Management.”

 

The Committee reviews management’s stock holdings annually to monitor progress toward the stock ownership guidelines. However, the Company does not impose any penalties on executives who fail to meet the stock ownership guidelines. This is because the new guidelines mandate some level of stock ownership whenever an executive would realize any value from an equity-based award. Moreover, the Company does not allow executives to hedge the economic risk associated with stock ownership.

 

Company-Imposed Black-Out Periods

 

Any time an executive of the Company is in possession of material non-pubic information, he or she is prohibited from trading in Company stock. Apart from these trading restrictions, the Company also prohibits executives, including the Named Executive Officers, from trading during a Company-imposed black-out period that begins on the first day of the third month of each quarter and extends through the third business day following the Company’s quarterly earnings release, which is typically issued during the last week of the first month of the following quarter. Company-imposed black-out periods are an example of good corporate governance and help to protect both the Company and the individual from allegations of insider trading violations. However, the Company’s black-out policy was not intended to penalize employees for this type of positive corporate behavior.

 

Due to such a black-out period imposed by the Company, employees of the Company who received a stock option grant in 1997 under the 1991 Plan were recently unable to exercise their outstanding options under this 1997 grant prior to the expiration of such options. As a result, in February 2007, the Committee determined that it was in the best interests of the Company to grant affected employees, including certain of the Named Executive Officers, a cash distribution equivalent to the difference between the exercise price of the expired stock options and the fair market value of the Company’s Common Stock on the date of expiration of the options.

 

As a result of the expiration of the 1997 stock option grants, the following Named Executive Officers received the following cash distributions, which amounts are reflected in the “2007 Summary Compensation Table” below:

 

		Stock Options (#)				Cash Dist. ($)
Thomas Swidarski			900				5,913
David Bucci			2,250				14,783
Dennis Moriarty			3,000				19,710

 

Limitations on Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of compensation paid by a public company to its CEO and certain other highly compensated executive officers to $1 million in the year the compensation becomes taxable to the executive. There is an exception to the limit on deductibility for performance-based compensation that meets certain requirements.

 

 

In order to qualify as performance-based compensation, the Company’s compensation plans must meet certain requirements, including shareholder approval. The Company has taken steps intended to ensure it is not adversely affected by Section 162(m). To that end, the Company’s annual bonuses, grants of performance shares and awards of stock options are designed to meet the section’s deductibility requirements. Nevertheless, the Committee also believes that it must maintain flexibility to take actions that it deems to be in the best interests of the Company, but that may not qualify for tax deductibility under Section 162(m).

 

 

Base salaries and grants of restricted stock do not qualify as performance-based compensation and would not be excluded from the limitation on deductibility. As a result, the Company has a policy pursuant to which certain executives have entered into agreements to automatically defer amounts affected by the $1 million limitation until the time when that limitation no longer applies.

 

COMPENSATION COMMITTEE REPORT

 

As noted above, the Compensation Committee is comprised of Phillip B. Lassiter, Chair, Phillip R. Cox, Gale S. Fitzgerald and John N. Lauer. Each member meets the independence standards of the NYSE corporate governance requirements.

 

The Committee has reviewed and discussed the above “Compensation Discussion and Analysis” with management and, based on such review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 and this proxy statement.

 

The foregoing report was submitted by the Compensation Committee of the Board and shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A promulgated by the SEC or Section 18 of the Securities Exchange Act of 1934.

 

The Compensation Committee:

 

Phillip B. Lassiter, Chair
Phillip R. Cox
Gale S. Fitzgerald
John N. Lauer

 

EXECUTIVE COMPENSATION

 

The table below summarizes the total compensation paid or earned by each of the Named Executive Officers of the Company for the fiscal year ended December 31, 2007. The amounts shown include compensation for services in all capacities that were provided to the Company.

 

2007 Summary Compensation Table

 

																										Change in
																										Pension
																										Value and
																						Non-Equity				Non-qualified
														Stock				Option				Incentive Plan				Deferred				All Other
						Salary				Bonus1				Awards2				Awards3				Compensation				Compensation				Compensation5				Total
Name and Principal Position		Year				($)				($)				($)				($)				($)				Earnings4 ($)				($)				($)
Thomas W. Swidarski
President and Chief			2007				687,111				365,913				1,096,523				898,350				0				177,000				70,835				3,295,732
Executive Officer			2006				550,000				0				674,188				597,741				392,500				21,000				93,727				2,329,156
Kevin J. Krakora
Executive Vice President			2007				375,354				0				716,351				219,988				0				127,000				38,668				1,477,361
and Chief Financial Officer			2006				320,000				0				381,635				158,861				171,273				11,000				44,578				1,087,347
David Bucci
Senior Vice President,			2007				322,037				14,783				521,271				251,432				0				0				42,753				1,152,276
Customer Solutions Group			2006				302,940				0				543,001				604,016				154,035				0				51,174				1,655,166
Dennis M. Moriarty
Senior Vice President,			2007				275,855				73,424				583,214				119,827				0				125,000				35,171				1,212,491
Global Security Division			2006				250,000				0				279,983				115,495				130,462				16,000				37,581				829,521
James L.M. Chen
Senior Vice President,			2007				292,215				113,964				269,869				118,480				0				n/a				236,864				1,031,392
EMEA/AP Divisions			2006				—				—				—				—				—				—				—				—

 

 

 

 

		All Other Compensation ($)
Names		(a)				(b)				(c)				(d)				(e)				(f)
Thomas W. Swidarski			27,435				19,603				1,395				7,402				15,000				0
Kevin J. Krakora			11,554				5,777				1,187				7,575				12,575				0
David Bucci			13,576				9,503				2,087				7,587				10,000				0
Dennis M. Moriarty			17,402				5,515				897				7,627				3,730				0
James L.M. Chen			30,144				840				0				0				0				205,880

 

 

2007 Grants of Plan-Based Awards

 

																														All Other				All Other
																														Stock				Option
																														Awards:				Awards:				Exercise or				Grant Value
																														Number of				Number of				Base Option				Fair Value
						Estimated Possible Payouts Under																								Shares of				Securities				of Option				of Stock and
						Non-Equity Incentive Plan Awards1												Estimated Future Payouts Under Equity Incentive Plan Awards2												Stock or				Underlying				Awards				Option
						Thresh				Target				Max				Thresh				Target				Max				Units				Options3				Awards				Awards4
Name		Grant Date				($)				(#)				($)				(#)				(#)				($)				(#)				(#)				($/Sh)				($)
Thomas W. Swidarski			2/14/07				—				—				—				—				—				—				40,000				—				47.27				1,890,800
			2/14/07				—				—				—				6,000				20,000				40,000				—				—				—				945,400
			2/14/07				274,844				687,111				1,374,222				—				—				—				—				—				—				—
Kevin J. Krakora			2/14/07				—				—				—				—				—				—				—				25,000				47.27				363,000
			2/14/07				—				—				—				3,000				10,000				20,000				—				—				—				472,700
			2/14/07				112,606				281,516				563,031				—				—				—				—				—				—				—
David Bucci			2/14/07				—				—				—				—				—				—				—				20,000				47.27				290,400
			2/14/07				—				—				—				3,000				10,000				20,000				—				—				—				472,700
			2/14/07				96,611				241,528				483,056				—				—				—				—				—				—				—
Dennis M. Moriarty			2/14/07				—				—				—				—				—				—				—				9,500				47.27				137,940
			2/14/07				—				—				—				1,500				5,000				10,000				—				—				—				236,350
			2/14/07				82,757				206,891				413,782				—				—				—				—				—				—				—
James L.M. Chen			2/14/07				—				—				—				—				—				—				—				9,500				47.27				137,940
			2/14/07				—				—				—				1,500				5,000				10,000				—				—				—				236,350
			2/14/07				87,665				219,161				438,322				—				—				—				—				—				—				—

 

Narrative Disclosure to 2007 Summary Compensation Table
and 2007 Grants of Plan-Based Awards Table

 

Many of the details on the amounts for the Named Executive Officers reflected in the “2007 Summary Compensation Table” and the “2007 Grants of Plan-Based Awards” table are discussed in the footnotes to the tables or elsewhere in this Proxy, for example, above under “Compensation Discussion and Analysis.” However, the following narrative is intended to further clarify these amounts or provide further explanation on the decision-making process relative to these amounts.

 

In addition, the Company feels that the table following this narrative, which consolidates certain columns from the “2007 Summary Compensation Table” (Salary, Effective Bonus (defined below) and All Other Compensation) with columns from the “2007 Grants of Plan-Based Awards” table (Grant Date Fair Value of Stock and Option Awards), provides a clearer illustration of the total pay provided to the Company’s Named Executive Officers in 2007 or pay provided to the Company’s Named Executive Officers in 2008 for 2007 performance. These columns reflect actual cash compensation received, as well as the fair value on the date of grant of equity compensation and are not calculated in accordance with SEC regulations or guidance.

 

Mr. Swidarski’s Employment Agreement

 

In April 2006, the Company entered into an employment agreement with Mr. Swidarski, with a term of two years and with automatic one-year renewals thereafter unless either party notifies the other at least six months before the scheduled expiration date that the term is not to renew. Pursuant to his agreement, Mr. Swidarski was to receive a base salary of $550,000 for the first year, with a cash bonus opportunity up to 200% of base salary, as well as other compensation. Further, as part of his employment agreement, Mr. Swidarski is also entitled to the following perquisites: a monthly auto allowance up to $3,295; financial planning and tax preparation services up to $20,000 annually; country club dues and fees; and an annual physical examination. Mr. Swidarski had previously been entitled to a tax gross-up on his auto allowance, but he agreed to the discontinuance of this benefit in 2007.

 

In the event that Mr. Swidarski is terminated without cause, he is entitled to receive severance payments, including: a lump sum amount equal to two years base salary; a lump sum amount equal to twice his target annual cash bonus for the year in which termination occurs; a pro rata annual cash bonus for the year in which termination occurs, but only to the extent an annual cash bonus is paid to others for the year of termination; and continued participation in the Company’s employee benefits plans for a period of two years (not including any qualified or non-qualified pension plan or 401(k) plan). Mr. Swidarski is also subject to non-competition and non-solicitation obligations for a period of two years following his termination of employment, regardless of the circumstances surrounding such termination.

 

Other than Mr. Swidarski, the Company has not entered into any employment agreements with any of the other Named Executive Officers.

 

Change in Pension Value and Non-qualified Deferred Compensation Earnings

 

These benefits are discussed in more detail below under “2007 Pension Benefits”; however, the benefit values for Mr. Bucci remain at zero, primarily due to an increase in the discount rate used to determine the pension values. The benefit values for Mr. Swidarski, Mr. Krakora and Mr. Moriarty reflect their January 1, 2007 participation in the Pension SERP and Restoration SERPs based upon 11, six and 11 years of service, respectively.

 

Base Salary

 

Based on the fair value of equity awards granted to Named Executive Officers in 2007, “Salary” accounted for approximately 24% of the total pay to the Named Executive Officers, while short- and long-term performance-based compensation accounted for approximately 70% of the total compensation to the Named Executive Officers.

 

Bonus vs. Non-Equity Incentive Plan Compensation

 

Cash bonus payments for 2007 performance made to the Named Executive Officers in 2008 under the Company’s Annual Cash Bonus Plan would typically be reflected in the “2007 Summary Compensation Table” under the column “Non-Equity Incentive Plan Compensation.” One-time cash payments made to the Named Executive Officers in 2007, or made in 2008 and attributable to 2007 performance, that are not made pursuant to a Company plan would typically be reflected in the “Bonus” column. These aggregate bonus payments comprise the “Effective Bonus” awarded to the Named Executive Officers in the table below.

 

As discussed above under “Compensation Discussion and Analysis,” there were no payouts made to Named Executive Officers under the Company’s Annual Cash Bonus Plan. However, discretionary bonuses were awarded in 2008 for 2007 performance, and these amounts are reflected in the “Bonus” column in the “2007 Summary Compensation Table” above, and in the “Effective Bonus” column in the “2007 Actual Compensation” table below.

 

In addition to these discretionary bonuses, these columns also reflect the following Board-approved cash payouts made in 2007 to compensate certain of the Named Executive Officers for expiring stock option grants, as discussed above under “Compensation Discussion and Analysis”:

 

		Stock Options (#)				Cash Dist. ($)
Thomas Swidarski			900				5,913
David Bucci			2,250				14,783
Dennis Moriarty			3,000				19,710

 

Stock and Option Awards

 

Because the value of equity awards in the “2007 Summary Compensation Table” is based on the grant date fair value determined in accordance with FAS 123R, which may include prior years’ awards, the percentages indicated in the above narrative under “Base Salary” may not be able to be derived using the amounts reflected in that table. The table below reflects the grant date fair value as reflected in the “Grant Date Fair Value of Stock and Option Awards” column in the “2007 Grants of Plan-Based Awards” table above. The percentages in the above narrative under “Base Salary” are derived using these amounts.

 

2007 Actual Compensation
(Not calculated in accordance with SEC regulations or guidance)

 

						Effective				Stock				Option				All Other
		Base Salary				Bonus				Awards				Awards				Compensation				Total Value
Name		($)				($)				($)				($)				($)				($)
Thomas W. Swidarski			687,111				365,913				2,836,200				0				70,835				3,960,059
Kevin J. Krakora			375,354				0				472,700				363,000				38,668				1,249,722
David Bucci			322,037				14,783				472,700				290,400				42,753				1,142,673
Dennis M. Moriarty			275,855				73,424				236,350				137,940				35,171				758,740
James L.M. Chen			292,215				117,721				236,350				137,940				236,864				1,021,090

 

Outstanding Equity Awards at 2007 Fiscal Year-End

 

 

The following table provides information relating to exercisable and unexercisable stock options as of December 31, 2007 for the Named Executive Officers. In addition, the following table provides information relating to grants of restricted shares, RSUs and performance shares to the Named Executive Officers that have not yet vested as of December 31, 2007. No stock appreciation rights were outstanding as of December 31, 2007.

 

						Option Awards1																				Stock Awards
														Equity Incentive
														Plan Awards:																				Equity Incentive Plan Awards:
														Number												Number of								Number of				Market or Payout
														of Securities												Shares or				Market Value				Unearned Shares,				Value of Unearned
						Number of Securities								Underlying												Units of Stock				of Shares or				Units or Other				Shares, Units or
						Underlying Unexercised								Unexercised				Option								That				Units of Stock				Rights That				Other Rights
						Options								Unearned				Exercise				Option				Have Not				That Have				Have Not				That Have
		Grant Date				Exercisable				Unexercisable				Options				Price				Expiration				Vested2				Not Vested3				Vested4				Not Vested3
Name		of Award				(#)				(#)				(#)				($)				Date				(#)				($)				(#)				($)
Thomas W. Swidarski			1/29/98				600				—				—				47.53				1/28/08				—			$	—				—			$	—
			1/28/99				1,300				—				—				34.81				1/27/09				—				—				—				—
			1/27/00				1,500				—				—				22.88				1/26/10				—				—				—				—
			2/7/01				8,000				—				—				28.69				2/6/11				—				—				—				—
			2/6/02				15,000				—				—				36.59				2/5/12				—				—				—				—
			2/5/03				20,000								—				36.31				2/4/13				—				—				—				—
			2/11/04				18,750				6,250				—				53.10				2/10/14				—				—				—				—
			2/10/05				11,450				11,450				—				55.23				2/9/15				—				—				—				—
			12/12/05				75,000				75,000				—				37.87				12/11/15				—				—				—				—
			2/14/07				—				—				—				—				—				40,000				1,159,200				—				—
			2/6/02				—				—				—				—				—				—				—				700				20,286
			2/11/05				—				—				—				—				—				—				—				9,200				266,616
			2/20/06				—				—				—				—				—				—				—				20,000				579,600
			2/14/07				—				—				—				—				—				—				—				20,000				579,600
Kevin J. Krakora			9/18/01				5,000				—				—				35.60				9/17/11				—				—				—				—
			2/6/02				10,000				—				—				36.59				2/5/12				—				—				—				—
			2/5/03				10,000				—				—				36.31				2/4/13				—				—				—				—
			2/11/04				5,250				1,750				—				53.10				2/10/14				—				—				—				—
			2/10/05				3,250				3,250				—				55.23				2/9/15				—				—				—				—
			2/20/06				6,250				18,750				—				39.43				2/19/16				—				—				—				—
			2/14/07				—				25,000				—				47.27				2/13/17				—				—				—				—
			2/20/06				—				—				—				—				—				7,500				217,350				—				—
			2/6/02				—				—				—				—				—				—				—				200				5,796
			2/11/05				—				—				—				—				—				—				—				3,800				110,124
			2/20/06				—				—				—				—				—				—				—				10,000				289,800
			2/14/07				—				—				—				—				—				—				—				10,000				289,800
David Bucci			1/29/98				9,000				—				—				47.53				1/28/08				—				—				—				—
			1/27/00				35,000				—				—				22.88				1/26/10				—				—				—				—
			2/7/01				25,000				—				—				28.69				2/6/11				—				—				—				—
			2/6/02				25,000				—				—				36.59				2/5/12				—				—				—				—
			2/5/03				25,000				—				—				36.31				2/4/13				—				—				—				—
			2/11/04				18,750				6,250				—				53.10				2/10/14				—				—				—				—
			2/10/05				12,500				12,500				—				55.23				2/9/15				—				—				—				—
			2/20/06				6,250				18,750				—				39.43				2/19/16				—				—				—				—
			2/14/07				—				20,000				—				47.27				2/13/17				—				—				—				—
			2/10/05				—				—				—				—				—				1,250				36,225				—				—
			2/6/02				—				—				—				—				—				—				—				1,700				49,266
			2/11/05				—				—				—				—				—				—				—				9,400				272,412
			2/20/06				—				—				—				—				—				—				—				10,000				289,800
			2/14/07				—				—				—				—				—				—				—				10,000				289,800
Dennis M. Moriarty			1/29/98				1,500				—				—				47.53				1/28/08				—				—				—				—
			1/28/99				4,000				—				—				34.81				1/27/09				—				—				—				—
			1/27/00				4,000				—				—				22.88				1/26/10				—				—				—				—
			2/7/01				8,000				—				—				28.69				2/6/11				—				—				—				—
			2/6/02				8,000				—				—				36.59				2/5/12				—				—				—				—
			2/5/03				10,000				—				—				36.31				2/4/13				—				—				—				—
			2/11/04				5,250				1,750				—				53.10				2/10/14				—				—				—				—
			2/10/05				3,750				3,750				—				55.23				2/9/15				—				—				—				—
			2/20/06				2,500				7,500				—				39.43				2/19/16				—				—				—				—
			2/14/07				—				9,500				—				47.27				2/13/17				—				—				—				—
			2/10/05				—				—				—				—				—				750				21,735				—				—
			2/20/06				—				—				—				—				—				4,500				130,410				—				—
			2/6/02				—				—				—				—				—				—				—				800				23,184
			2/11/05				—				—				—				—				—				—				—				2,800				81,144
			2/20/06				—				—				—				—				—				—				—				5,000				144,900
			2/14/07				—				—				—				—				—				—				—				5,000				144,900
James L.M. Chen			2/6/02				5,000				—				—				36.59				2/5/12				—				—				—				—
			2/5/03				7,500				—				—				36.31				2/4/13				—				—				—				—
			2/11/04				6,000				2,000				—				53.10				2/10/14				—				—				—				—
			2/10/05				4,000				4,000				—				55.23				2/9/15				—				—				—				—
			2/20/06				2,000				6,000				—				39.43				2/19/16				—				—				—				—
			2/14/07				—				9,500				—				47.27				2/13/17				—				—				—				—
			2/20/06				—				—				—				—				—				750				21,735				—				—
			2/6/02				—				—				—				—				—				—				—				900				26,082
			2/11/05				—				—				—				—				—				—				—				3,600				104,328
			2/20/06				—				—				—				—				—				—				—				5,000				144,900
			2/14/07				—				—				—				—				—				—				—				5,000				144,900