UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Wright Express Corporation

(Name of Registrant as Specified In Its Charter)

 

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Dear Fellow Stockholders,

 

You are invited to attend our 2007 annual meeting of stockholders. The meeting will be held on Friday, May 18, 2007, at 8:00 a.m., Eastern Time, at the Portland Marriott at Sable Oaks in South Portland, Maine.

 

At the meeting we will:

 

 

Whether or not you attend the annual meeting, it is important that your shares be represented and voted at the meeting. As a stockholder of record, you can vote your shares by signing and dating the enclosed proxy card and returning it by mail in the enclosed envelope. If you decide to attend the annual meeting and vote in person, you may then revoke your proxy. If you hold your stock in “street name,” you should follow the instructions provided by your bank, broker or other nominee.

 

On behalf of the Board of Directors and the employees of Wright Express Corporation, we would like to express our appreciation for your continued interest in the Company.

 

Sincerely,

 

Rowland T. Moriarty

CHAIRMAN OF THE BOARD

 

Michael E. Dubyak

PRESIDENT AND CHIEF EXECUTIVE OFFICER

 

 

 

NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS

 

The 2007 annual meeting of stockholders of Wright Express Corporation will be held on Friday, May 18, 2007, at 8:00 a.m., Eastern Time, at the Portland Marriott at Sable Oaks, 200 Sable Oaks Drive, South Portland, Maine, 04106, to conduct the following items of business:

 

 

Stockholders who owned shares of our common stock at the close of business on March 20, 2007 are entitled to attend and vote at the meeting and any adjournment or postponement of the meeting. A complete list of registered stockholders will be available at least 10 days prior to the meeting at our offices located at 225 Gorham Road, South Portland, Maine, 04106.

 

By Order of the Board of Directors,

 

 

Hilary A. Rapkin

SENIOR VICE PRESIDENT,

GENERAL COUNSEL AND

CORPORATE SECRETARY

 

 

TABLE OF CONTENTS

 

 

This proxy statement describes the proposals on which you may vote as a stockholder of Wright Express Corporation. It contains important information to consider when voting.

 

The Company’s board of directors, or the Board, is sending these proxy materials to you in connection with the Board’s solicitation of proxies. Our annual report to stockholders and our proxy materials were first mailed on or about April 13, 2007.

 

Your vote is important. Please complete, execute and promptly mail your proxy card as soon as possible even if you plan to attend the annual meeting.

 

Stockholders who owned the Company’s common stock at the close of business on March 20, 2007, the record date, may attend and vote at the annual meeting. Each share is entitled to one vote. There were 40,533,060 shares of common stock outstanding on the record date.

 

How do I vote?

 

 

You do this by completing and signing your proxy card and mailing it in the enclosed prepaid and addressed envelope.

 

 

We will pass out ballots to any record holder who wants to vote at the meeting. However, if you hold your shares in street name, you must request a proxy from your stockbroker in order to vote at the meeting. Holding shares in “street name” means you hold them through a brokerage firm, bank or other nominee, and as a result, the shares are not held in your individual name but through someone else.

 

If you hold your shares in “street name,” you should follow the instructions provided by your bank, broker or other nominee, including any instructions provided regarding your ability to vote by telephone or through the Internet.

 

How do I vote my shares held in the Wright Express Corporation Employee Savings Plan?

 

If you participate in our Wright Express Corporation Employee Savings Plan, commonly referred to as the “401(k) Plan,” shares of our common stock equivalent to the value of the common stock interest credited to your account under the plan will be voted automatically by the trustee in accordance with your proxy, if the proxy is received by May 15, 2007. Otherwise, the share equivalents credited to your account will be voted by the trustee in the same proportion that it votes share equivalents for which it receives timely instructions from all plan participants.

 

Please refer to the “Information about Voting Procedures” section.

 

Our nominees for director this year are:

 

 

Each nominee is presently a director of the Company and has consented to serve a new three-year term.

 

We recommend a vote FOR these nominees.

 

The Audit Committee of the Board has selected Deloitte & Touche LLP, or D&T, as the independent registered public accounting firm for the Company for the fiscal year 2007. Stockholder ratification of the appointment is not required under the laws of the State of Delaware, but the Audit Committee has decided to request that the stockholders ratify the appointment. A representative of D&T will be present at the meeting to answer questions from stockholders and will have the opportunity to make a statement on behalf of the firm, if he or she so desires.

 

If this proposal is not approved by you at the 2007 annual meeting, the Audit Committee will reconsider its selection of D&T. Even if the selection is ratified, the Audit Committee may, in its discretion, select a different registered public accounting firm at any point during the year if it determines that making a change would be in the best interests of the Company and our stockholders.

 

We recommend a vote FOR the ratification of Deloitte & Touche LLP as our independent registered public accounting firm.

 

We know of no other business to be considered at the meeting and the deadline for stockholders to forward proposals has passed. However, if:

 

 

Our Board is led by our non-executive Chairman, Dr. Moriarty. The non-executive Chairman is not an officer of Wright Express and leads all meetings of the Board at which he is present. The non-executive Chairman serves on appropriate committees as reasonably requested by the Board, sets meeting schedules and agendas and manages information flow to the Board to assure appropriate understanding and discussion regarding matters of interest or concern to the Board. The non-executive Chairman also has such additional powers and performs such additional duties consistent with organizing and leading the actions of the Board as may be prescribed.

 

 

Our certificate of incorporation provides that our Board shall consist of such number of directors as is fixed by our By-Laws. Our By-Laws provide that, by resolution of the Board, we shall have eight directors. Our directors serve staggered terms as follows:

 

 

The Board held eleven meetings in 2006 and each director attended at least 75% of all Board and applicable committee meetings. Our non-management directors meet in executive session at each regularly scheduled in-person Board meeting and we have at least one meeting per year of our independent directors. Our Chairman of the Board leads the executive sessions of non-management directors. As provided in our Corporate Governance Guidelines, we expect directors to attend the annual meeting of stockholders. All directors who were serving at that time attended our 2006 annual meeting of stockholders.

 

Our Board has created the following committees:

 

 

You will find the following documents under the corporate governance tab of the investor relations page of our website at www.wrightexpress.com: our Corporate Governance Guidelines; Code of Business Conduct and Ethics for Directors; employee Code of Business Conduct and Ethics; and the charters for the Audit Committee, Compensation Committee, and Corporate Governance Committee. You also may obtain a paper copy of these documents, without charge, by contacting our investor relations department:

 

Investor Relations
Wright Express Corporation
97 Darling Avenue South Portland, ME 04106
Telephone: (866) 230-1633
Email: investors@wrightexpress.com

 

No member of our Compensation Committee (the members of which are listed in the table in the “Board and Committee Meetings” section) is or was one of our or our subsidiaries’ former officers or employees. During 2006, there were no Compensation Committee interlocks as defined under SEC rules.

 

2006 Director Compensation

 

The following table shows the compensation plan which was used in paying our non-employee directors in 2006. It was established in 2005 at the time of our initial public offering. Directors were paid under this plan for all of 2006.

 

 

 

 

Non-employee directors deferred compensation plan

 

Under our Non-Employee Directors Deferred Compensation Plan, as governed by the Wright Express Corporation 2005 Equity and Incentive Plan, or the E&I Plan, our non-employee directors may elect to defer their compensation as deferred stock units, or DSUs. As noted above, in 2006 we paid a portion of compensation to our non-employee directors in the form of deferred stock units and this compensation is represented in the table below. The deferred stock units granted pursuant to this elective deferral are issued under our E&I Plan. Our non-employee directors could also elect to defer certain other designated fees that would otherwise be payable in cash. On the 200th day after the director leaves the Board, a one-time distribution equivalent to the units deferred is payable to the director in shares. Actual director compensation earned in 2006, according to this schedule, is shown below.

 

DIRECTOR COMPENSATION

 

 

 

 

In 2006, at the request of the Compensation Committee, Buck Consultants, LLC, or Buck, conducted a thorough analysis of our director compensation programs including peer group and general market comparisons. As a result of this analysis, on September 7, 2006, the Compensation Committee adopted the Wright Express Corporation Non-Employee Director Compensation Plan, or the Director Plan, and director equity ownership guidelines, effective January 1, 2007. The Director Plan separates the retainer into two components; one for cash and one for equity, changes the form of equity to restricted stock units with a 3-year vesting period, eliminates the Committee member retainer used in the original plan and adjusts the value of the compensation based on a market review.

 

The Director Plan for 2007 is as follows:

 

 

 

 

On September 7, 2006 the Committee established and approved equity ownership guidelines for all non-executive directors. “Equity” for the purpose of these guidelines is defined to include shares of the Company’s common stock, vested restricted stock units and deferred stock units. Under the guidelines of the equity ownership program, all directors are expected to own equity equal in value to at least three times each director’s annual director cash retainer or non-executive chairman cash retainer. The Compensation Committee assesses progress against the guidelines each year on July 31. Directors have three years from July 31, 2007, or, if later, three years following their appointment to the Board, to achieve this level of ownership.

 

This table shows common stock that is beneficially owned by our directors, our chief executive officer, our chief financial officer and our next three most highly compensated executive officers as of December 31, 2006, whom we refer to as our “named executive officers,” and all persons known to us to own 5% or more of the outstanding Company common stock, as of March 7, 2007.

 

 

 

 

We have considered the independence of each member of the Board. To assist us in our determination, we reviewed NYSE requirements and adopted general guidelines for independence.

 

To be considered independent: (1) a director must be independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) in the Board’s judgment, the director must not have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company).

 

The Board has established guidelines to assist it in determining whether a director has a material relationship with the Company. Under these guidelines, a director will not be considered to have a material relationship with the Company if (1) he or she is independent as determined under Section 303A.02(b) of the NYSE Listed Company Manual and (2) he or she: (i) serves as an executive officer of another company which is indebted to the Company, or to which the Company is indebted, provided that the total amount of either company’s indebtedness to the other is less than one percent of the total consolidated assets of the company he or she serves as an executive officer; (ii) serves as an officer, director or trustee of a tax exempt organization, provided that the company’s discretionary contributions to such organization are less than the greater of $1 million or 2% of that organization’s consolidated gross revenues (the Company’s automatic matching of employee charitable contributions will not be included in the amount of the Company’s contributions for this purpose); or (iii) serves as a director of another company with which the Company engages in a business transaction or transactions, provided that the director owns less than 5% of the equity interests of such other

company and recuses himself or herself from deliberations of the Board with respect to such transactions. In addition, ownership of a significant amount of the Company’s stock, by itself, does not constitute a material relationship. For relationships not covered by the guidelines set forth above, the determination of whether a material relationship exists shall be made by the other members of the Board of Directors who are independent as defined above.

 

Based on our guidelines and NYSE corporate governance standards, we have determined that the following directors are independent: Shikhar Ghosh, Ronald T. Maheu, George L. McTavish, Kirk P. Pond, Regina O. Sommer and Jack VanWoerkom.

 

When considering the independence of the directors listed above, the Board was aware that Mr. VanWoerkom is an executive officer of a company that does business with us in the ordinary course and that such relationship is deemed immaterial under the NYSE bright-line independence tests and our categorical standards. The amounts involved were substantially less than 1% of either party’s consolidated gross revenues for 2006.

 

The Corporate Governance Committee is composed entirely of independent directors as determined by the Board in accordance with its independence guidelines and the listing standards of the NYSE. Among the committee’s responsibilities is recommending candidates for nomination to the Board. In that capacity, the Corporate Governance Committee recommended both Messrs. Pond and Ghosh for election by our stockholders. Each of Messrs. Pond and Ghosh abstained in the committee’s recommendations of each as a candidate for election. Both Messrs. Pond and Ghosh have served as members of our Board since February 2005.

 

Mr. McTavish was recommended by Mr. Dubyak to the Corporate Governance Committee as a candidate for election as a director, and was subsequently appointed by our Board. The Corporate Governance Committee will consider candidates nominated by stockholders for next year’s meeting in the same manner as candidates nominated by the Corporate Governance Committee if the nomination is made in accordance with our By-Laws. Our By-Laws require, among other things, that a stockholder submitting a nominee for consideration include in the notice: (i) the name, age, business address and residence address of the person, (ii) the principal occupation and employment of the person, (iii) the class and series and number of shares of each class and series of capital stock which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other SEC filing. We refer you to the copy of our By-Laws that are posted on our website for a complete list of the requirements and procedures for submitting a candidate for director.

 

To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received not earlier than January 21, 2008 nor later than February 18, 2008. However, in the event that the annual meeting is called for a date that is not within twenty-five days before or after May 18, 2008, notice by the stockholder must be received no later than the earlier of the close of business on the tenth day following the day on which notice of the date of the annual meeting is mailed or publicly disclosed.

 

Stockholder nominations must be addressed to:

 

Wright Express Corporation

Attention: Corporate Secretary

97 Darling Avenue

South Portland, ME 04106

 

Director Qualifications

 

The qualifications for directors are described in our Corporate Governance Guidelines and the guidelines for evaluating director nominees are in the Corporate Governance Committee’s charter, each of which is available on our website. In addition, the committee believes that a nominee for the position of director must meet the following specific, minimum qualifications:

 

 

 

Application of Criteria to Existing Directors

 

The re-nomination of existing directors is not viewed as automatic, but is based on continuing qualification under the criteria listed above. In addition, the Corporate Governance Committee considers the existing directors’ performance on the Board and any committee, which shall include consideration of the extent to which the directors undertook continuing director education.

 

The backgrounds and qualifications of the directors considered as a group are to provide a significant breadth of experience, knowledge and abilities in order to assist the Board in fulfilling its responsibilities.

 

The Board believes that the Chief Executive Officer and his designees speak for the Company. Individual Board members may, from time to time, meet or otherwise communicate with various constituencies who are involved with the Company. It is, however, expected that Board members would do so with the knowledge of and, absent unusual circumstances or as contemplated by the committee charters, only at the request of the Company’s senior executives.

 

The Board will give appropriate attention to written communications that are submitted by stockholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by the committee charters, the Chairman of the Board shall, subject to advice and assistance from the General Counsel, (1) be primarily responsible for monitoring communications from stockholders and other interested parties, and (2) provide copies or summaries of such communications to the other directors as he considers appropriate.

 

If you wish to communicate with the Board or the non-management members of the Board, you may send your communication in writing to:

 

Non-Management Director Communication

Wright Express Corporation

Attention: Corporate Secretary

97 Darling Avenue

South Portland, ME 04106

 

You should include your name and address in the written communication and indicate whether you are a stockholder.

 

The board of directors appointed us as an audit committee to monitor the integrity of Wright Express’ consolidated financial statements, its system of internal controls and the independence and performance of its internal auditor and independent registered public accounting firm. As an audit committee, we select the independent registered public accounting firm.

 

We are governed by a written charter adopted by the Audit Committee, which was recently amended and is available through the Investor Relations page of our website at www.wrightexpress.com.

 

Our committee consisted of three non-employee directors at the time that the actions of the Committee described in this report were undertaken. Subsequently, a fourth member was added. Each member of the audit committee is “independent” within the meaning of the New York Stock Exchange rules. Wright Express’ management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. Wright Express’ independent registered public accounting firm is responsible for auditing those financial statements. Our responsibility is to monitor and review these processes. However, we are not professionally engaged in the practice of accounting or auditing. We have relied, without independent verification, on the information provided to us and on the representations made by Wright Express’ management and independent registered public accounting firm.

 

In fulfilling our oversight responsibilities, we discussed with representatives of Deloitte & Touche LLP, the independent registered public accounting firm for fiscal year 2006, the overall scope and plans for their audit of the consolidated financial statements for fiscal year 2006. We met with them, with and without Wright Express management present, to discuss the results of their examinations and their evaluations of the internal controls and the overall quality of Wright Express’ financial reporting. We reviewed and discussed the audited consolidated financial statements for fiscal year 2006 with management and the independent auditors.

 

In addition, during the course of fiscal year 2006, our management completed the documentation, testing, and evaluation of the system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. We were kept apprised of the progress of the evaluation and provided oversight to management during the process. In connection with this oversight, we received periodic updates provided by management and D&T at each appropriate scheduled audit committee meeting, as well as at a number of special meetings to review our progress. At the conclusion of the process, management provided us with and we reviewed a report on the effectiveness of the internal control over financial reporting. We also reviewed the report of management contained in the annual report on Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC, as well as D&T’s Report of Independent Registered Public Accounting Firm included in the Annual Report on Form 10-K related to its audit of (i) the consolidated financial statements, (ii) management’s assessment of the effectiveness of internal control over financial reporting, and (iii) the effectiveness of internal control over financial reporting. We continue to oversee our Company’s efforts related to its internal control over financial reporting and management’s preparations for the evaluation in fiscal 2007.

 

We discussed with the independent registered public accounting firm the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended and supplemented by Statement of Auditing Standards No. 114, including a discussion of Wright Express’ accounting principles, the application of those principles, and the other matters required to be discussed with audit committees under generally accepted auditing standards.

 

In addition, we received from the independent registered public accounting firm a letter containing the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and discussed the disclosures with them, as well as other matters relevant to their independence from management and Wright Express. In evaluating the independence of our independent registered public accountant, we considered whether the services they provided beyond their audit and review of the consolidated financial statements were compatible with maintaining their independence. We also considered the amount of fees they received for audit and non-audit services.

 

Based on our review and these meetings, discussions and reports, and subject to the limitations on our role and responsibilities referred to above and in the audit committee charter, we recommended to the board of directors that the audited consolidated financial statements for fiscal year 2006 be included in the annual report on Form 10-K.

 

THE AUDIT COMMITTEE

 

Ronald T. Maheu, Chair

Regina Sommer

Jack VanWoerkom

 

 

Auditor Selection

 

The Audit Committee has selected D&T as the Company’s independent registered public accountant for the 2007 fiscal year. D&T has served as the Company’s independent registered public accountants since our IPO. We expect representatives of D&T to attend the annual meeting of stockholders. They will respond to appropriate questions from stockholders and will have the opportunity to make a statement.

 

Audit Fees

 

The following is a description of the fees billed to the Company by D&T for the years ended December 31, 2005 and 2006:

 

 

 

 

The fees associated with our IPO included in 2005 were billed directly to Cendant Corporation for services provided to Cendant and its affiliates, which included the Company prior to the IPO.

 

Pre-Approval Policies and Procedures

 

The Audit Committee has adopted a policy regarding pre-approval of non-audit services performed by D&T. According to the policy, the Audit Committee shall pre-approve all audit services to be provided to the Company, whether provided by the principal independent registered public accountant or other firms, and all other permitted services (review, attest and non-audit) to be provided to the Company by the independent registered public accountant; provided, however, that de minimis permitted non-audit services may instead be approved in accordance with applicable SEC rules. The independent registered public accountant is not authorized to provide any prohibited non-audit services (as defined in Rule 2-01(c)(4) of Regulation S-X). The Chairman of the Audit Committee has the authority to pre-approve any permitted services on behalf of the Audit Committee and shall notify the full committee of such approval at its next meeting.

 

Since our IPO on February 16, 2005, the Audit Committee has pre-approved all of the services performed by D&T.

 

 

Compensation Philosophy

 

Our compensation programs are designed and administered to balance the achievement of short-term operational results and long-term goals with the ultimate objective of increasing long-term stockholder value. We do this by ensuring our compensation programs:

 

 

We recognize the role total compensation plays in achieving our objectives of attracting, retaining and motivating our associates, including our executives, to achieve these results. Multiple elements of compensation are used simultaneously to achieve our objectives, including:

 

 

We believe the compensation of our executives should and does reflect the success our company has achieved in creating stockholder value.

 

Compensation Process

 

In setting compensation levels for each executive, we compare each element and the total compensation package for the executive against multiple factors, including:

 

 

We reevaluate each element of compensation annually and conduct a review of the total compensation package and company ownership levels to ensure that our executive team is rewarded and motivated to increase stockholder value.

 

Management makes recommendations to the Compensation Committee of the Board of Directors, or the Compensation Committee, regarding recommended base salary changes, short-term incentive targets and long-term equity targets for each of the executive officers with assistance from an independent compensation consultant. These targets are identified using:

 

 

The Compensation Committee also uses the compensation consultant to provide a recommended range for CEO compensation targets, based on similar factors. The Compensation Committee uses this data to determine base salary as well as short and long-term target compensation for Mr. Dubyak and each of the executive officers each year.

 

In 2005, Wright Express issued a request for proposals with multiple compensation advisors and selected Buck. Buck served as an independent advisor to the Compensation Committee on compensation related issues for all of 2006. Their role was to advise the Compensation Committee on the design and competitive positioning of our compensation programs. They attended certain Compensation Committee meetings and communicated with members of the Compensation Committee as needed. Buck assisted the Compensation Committee in a thorough review of our then existing executive and director compensation programs with the goal of ensuring that our compensation was in alignment with our strategic and operational goals as a new public company. Buck worked with the Compensation Committee to review all of our compensation programs and recommended changes and compensation levels for our executive team.

 

Buck also worked with the Compensation Committee to select our initial peer group in 2005, shortly after our initial public offering. Data from this peer group was used as one factor in the identification of appropriate 2006 compensation levels for our executive officers. The initial peer group represented a combination of payment processing and business services companies with revenues in the range of $50 million to $650 million. This initial peer group included:

 

• Akamai Technologies Inc.

 

• Bottomline Technologies Inc.

 

• eFunds Corporation (EFD)

 

• Electronic Clearinghouse Inc.

 

• eSpeed Inc.

 

• Euronet Worldwide Inc.

 

• Global Payments Inc.

 

• iPayment Inc.

 

• Lightbridge Inc.

 

• Salesforce.com Inc.

 

• SS&C Technologies Inc.

 

• Tier Technologies Inc

 

At the end of 2006, we reassessed the peer group to more tightly align with our industry segment and market capitalization. The new peer group was not used to determine 2006 compensation, however, it will be used going forward. The new peer group consists of the following companies:

 

 

After the creation of the initial peer group in 2005, Buck conducted a complete review of our compensation programs and provided the Compensation Committee with recommended levels of base compensation. They also provided their recommendations on the design of our short term incentive program, or STIP, and our long term incentive program, or LTIP.

 

Collectively, these programs were designed to achieve our objectives of attracting, retaining and rewarding the executive team while increasing stockholder value. Compensation comparisons to peer and market data were reviewed at base, base and bonus and base, bonus and equity compensation for each of the executives. The Compensation Committee’s final decisions regarding compensation were based on a review of each element of compensation as well as an analysis of the role each element played in retaining and motivating each executive.

 

Total compensation tally sheets for each of the executive officers were also prepared by Buck and reviewed by the Compensation Committee in October of 2005. These tally sheets provided the value of all components of the executive officers’ proposed 2006 compensation, including base pay, short term cash incentive through STIP, long term incentive compensation equity awards, deferred compensation, benefits,

perquisites and severance payable in the event of various termination scenarios including a change of control. The Compensation Committee reviews similar tally sheets with this information at least once each year.

 

In approving 2006 executive compensation, the Compensation Committee considered recommendations from Mr. Dubyak regarding total compensation for those executives reporting directly to him. With the exception of the Senior Vice President, Human Resources, who provided Mr. Dubyak’s recommendations to the Compensation Committee, the other executives were not involved in the analysis or recommendation process.

 

Overview of Executive Compensation

 

Base Salary.  Base salary is provided at a competitive level in order to attract and retain key talent and is reviewed annually. For 2006, the Compensation Committee established salary targets generally at the 50th to 60th percentile of the peer group. These target amounts were then adjusted based on individual performance, experience, and the criticality of the individual to overall business strategy. Annual adjustments to base salary are made based on a review of both the individual performance as reported by the CEO, an executive officer’s current base salary (compared to the peer group and the general market) and the overall budget for compensation for Wright Express.

 

Short Term Incentive Compensation.  The Wright Express Corporation 2005 Equity and Incentive Plan, or E&I Plan, was ratified by stockholders at our first annual meeting on May 19, 2006. The E&I Plan governs the STIP which applies to all employees who are not otherwise covered by another short term incentive plan.

 

The purpose of the STIP is to motivate the achievement of annual operational goals and key milestones for our strategic initiatives. These goals and milestones, when consistently achieved, demonstrate short-term progress toward our long-term goal of growth in stockholder value. The short-term incentive program is also seen as critical in attracting and retaining key talent within our organization.

 

For 2006, the Compensation Committee set STIP target levels for the executives generally at the 50th percentile of the peer group. Where appropriate, targets were adjusted and set to reflect Wright Express’ relative size in comparison to the peer group. At the maximum level of performance, which would represent performance that significantly exceeded target goals, STIP payout would be at or above the 75th percentile of the peer group. If we failed to meet the threshold level goals as defined by the Compensation Committee, the executive officers would have received no payout under the STIP. At the end of each performance period, the Compensation Committee evaluates adjustments to performance as defined in the STIP and has discretion to include all or part of an item of loss or expense or to exclude all or part of an item of gain or income that the Compensation Committee believes was not attributable to or does not accurately reflect the continuing performance of the Corporation.

 

Under the terms of the 2006 STIP, each eligible participant, including each of the executive officers, could receive from 0 percent to a maximum of 200 percent of their target STIP award if specified levels of performance were achieved by December 31st of the plan year. In 2006, we were required to achieve threshold results for Adjusted Net Income in order to pay out any portion of the STIP. For 2006, the bonus targets for the Named Executive Officers ranged from 45 percent to 100 percent of base salary as shown in the following chart:

 

Financial measures are predominately used in establishing annual STIP goals and non-financial measures are considered as needed. In 2006, the STIP performance objectives and weighting for each of the executive officers included the following:

 

 

The goals for 2006 were approved by the Compensation Committee in March of 2006 and progress toward these goals was reported by the CEO to the Compensation Committee during the year.

 

In assessing performance against these objectives, the Compensation Committee reviewed management’s achievement against goals established for each objective at threshold, target and maximum levels of achievement. These results determined the percent of the award that was to be paid to each executive officer. In 2006, the Compensation Committee excluded a small portion of expense which it felt did not accurately reflect corporate performance. This adjustment affected all employees, including the executive officers, and increased the total amount paid to all employees by approximately $60,000. Based on its overall assessment of performance against the 2006 STIP goals, the Compensation Committee approved Mr. Dubyak’s short-term incentive payment for 2006 of $488,325 which represented a payout of 115 percent of his aggregate STIP target.

 

As part of the 2006 STIP, Mr. Maxsimic had an additional revenue incentive award which provided the potential to earn from $0 to $200,000 for the achievement of PPG Adjusted Revenue above the corporate target. If results exceeded the maximum level of performance identified in this special incentive, Mr. Dubyak could have recommended a higher payout for approval by the Compensation Committee. This additional award was only to be paid out if revenue achieved was above corporate target revenue for the Company. In 2006, PPG Adjusted Revenue was achieved at the corporate target; as a result, Mr. Maxsimic did not receive a payout as part of this revenue incentive.

 

Long Term Incentive Compensation.  We believe that equity-based compensation ensures that the Company’s executive officers have a continuing stake in the long-term success of the Company and that their interests are aligned with stockholder interests. We provide long-term equity-based incentives through the Wright Express Corporation Long Term Incentive Program, or LTIP, to retain our key talent and reward them for sustained achievement of key operational and strategic goals that drive long-term stockholder value.

 

The LTIP is governed under the E&I Plan which allows us to grant employees and directors stock options, stock awards (including restricted stock), stock appreciation rights, performance-contingent awards and other equity-based awards. The LTIP is currently administered as a broad-based program provided to executive officers and other selected employees in the Company. Each of the executive officers received a grant under the E&I Plan as part of the 2006 LTIP.

 

The Company generally provides an equity grant to eligible participants annually. The Compensation Committee grants awards at fair market value and uses a grant price that is the closing price of Wright Express Corporation stock on the last day the stock is traded prior to the grant award date. In determining the size of equity grants to executive officers, the Compensation Committee considers similar awards to individuals holding comparable positions in our identified peer group. The Compensation Committee also reviews potential equity ownership as a percentage of shares outstanding for each executive versus comparable positions within the peer group.

 

The Compensation Committee approves grants at its scheduled meetings or by unanimous written consent. The timing of equity grants to executives is not coordinated with the release of material non-public

information. Management does not grant awards without Compensation Committee approval. The Compensation Committee reviews the design of the LTIP each year and makes changes as needed to ensure that the type of equity grant that is used best meets our goals of retaining key talent and increasing long-term stockholder value. Since our IPO, the Compensation Committee has chosen restricted stock units, or RSUs, and performance-based restricted stock units, or PSUs, over other types of equity compensation for our executives.

 

In 2006, we targeted executive LTIP award dollar levels to reflect the 50th percentile of the initial peer group and competitive industry practice. Actual awards were adjusted based on individual performance and the importance of retaining and motivating the individual to achieve our long-term goals.

 

Prior to the approval of 2006 compensation for the executives, the Compensation Committee reviewed historical and prospective analyses of the total compensation components for each executive officer. The Compensation Committee also reviewed projected equity ownership levels, based on the equity granted to date to each executive officer. The scenarios included various share price appreciation amounts over a four-year period. The assumptions used were based on Buck’s recommendation and were derived from peer group and general market data.

 

For the 2006 LTIP grant, awards vest over four years with 25 percent of the grant vesting each year on the anniversary of the grant. The total grant is typically a combination of RSUs and PSUs depending on the individual’s job level with a higher weighting on performance-based units at the executive officer level. In 2006, 50 percent of an executive officer’s target grant value was delivered in RSUs and 50 percent was delivered in PSUs. PSUs are granted at target performance level and are converted to restricted stock units prior to vesting, based on Compensation Committee approval of the performance result at the end of the performance period.

 

For 2006, the performance metric used for PSUs was Adjusted Net Income as defined in the STIP. To the extent that the final performance result differed from the target objective, the value of the PSU portion of the grant could have ranged from 0 percent to 200 percent of the target amount identified at the time of the grant.

 

When restricted stock units vest, they immediately convert to shares. During that process, shares are withheld to cover the minimum tax impact of the vesting for all recipients including the executive officers. The performance goals are set by the Compensation Committee within the time period prescribed by, and otherwise comply with, the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Tax Code.

 

In 2006, the Compensation Committee approved a broad-based grant for eligible employees under the LTIP of 144,468 units at target. At the end of 2006, Adjusted Net Income performance was approved by the Compensation Committee at 100 percent of target and as a result, the PSU portion of the 2006 grant converted to RSUs at the same number of units as initially granted at target. Grants to the Named Executive Officers totaled 56,574 units and represented 40 percent of the total units granted. The individual grants for each of the Named Executive Officers are shown in the Grants of Plan Based Award table.

 

Tax Deductibility of Compensation.  Section 162(m) places a limit of $1 million on the amount of compensation that Wright Express may deduct in any one year with respect to each of its five most highly paid executive officers. Wright Express generally receives no federal income tax deduction for any compensation that is over $1 million and is not performance-based as defined under Section 162(m). The STIP and the performance-based component of our LTIP are both designed to meet the requirements for performance based compensation under Section 162(m). The restricted stock unit component of our LTIP is not considered performance-based under Section 162(m). At Wright Express, the Compensation Committee has the authority to adjust payments under the STIP and LTIP up or down at its discretion with the exception of any adjustments which may increase or accelerate payment to any participant who is impacted by Section 162(m). We review compensation annually, including an analysis of the Section 162(m) impact. The results of this analysis are considered in the decisions the Compensation Committee makes each year regarding executive compensation. In making those decisions, the Compensation Committee uses its judgment in approving compensation that is not considered performance-based under Section 162(m) when it believes that such compensation is appropriate and consistent with our goal of building long-term stockholder value.

 

Executive Officer Equity Ownership Guidelines.  The Compensation Committee established equity ownership guidelines for all executive officers in October of 2005. “Equity,” for the purposes of executive officer ownership guidelines, includes shares of our common stock, vested restricted stock units and ownership interests in the Wright Express Common Stock Fund held in the Wright Express Corporation Employee Savings Plan, or the 401(k) Plan.

 

Under the guidelines of the stock ownership program, the President and Chief Executive Officer is required to own securities equal in value to at least three times his annual base salary and all other executive officers are required to own securities equal in value to at least one times their annual base salaries. The Compensation Committee monitors progress over time and employees have four years from October 2005, or four years from their date of hire if later, to achieve the level of ownership described above.

 

Benefits and perquisites.  Wright Express provides benefits and a small number of executive perquisites which are customarily offered in our peer group. We do not use additional executive perquisites that are not necessary to achieve our objectives of attracting and retaining executives. Instead, we rely primarily on performance-based compensation to attract and retain management talent.

 

Retirement Benefits.  The 401(k) Plan is a qualified defined contribution plan and is available to all employees, including executive officers. The 401(k) Plan provides participating employees the opportunity to contribute up to 20 percent of eligible compensation, on a pre-tax basis. In addition, under the 401(k) Plan, Wright Express matches 100 percent of eligible employee contributions to the plan up to six percent of their eligible compensation. Matching contributions are invested in the same participant directed funds and at the same percentage as contributions. Amounts deferred, if any, under the 401(k) Plan by the executive officers are included in the “Salary” column of the Summary Compensation Table. Matching contributions allocated to the executive officers under the 401(k) Plan are shown in the “All Other Compensation” column of the Summary Compensation Table. The executive officers receive no preferential interest on their 401(k) Plan contributions or match. Wright Express does not offer a pension plan to its executives or any other employees.

 

Nonqualified Deferred Compensation.  The Company also administers an Executive Deferred Compensation Plan, or EDCP, which is a non-qualified deferred compensation plan that provides each of the executive officers the opportunity to defer base salary and/or annual short term incentive compensation. The EDCP provides each executive officer with the ability to defer up to 80 percent of their base salary and/or up to 98 percent of their annual short term incentive compensation. The Company provides a match of up to six percent of the participant’s annual STIP deferral into the EDCP.

 

Investment income on contributions and the company match is accrued for participants to reflect the performance of investment funds selected by each participant during their annual election period. The investment funds and their performance used to calculate earnings in the EDCP mirror those used in the 401(k) Plan. No above market earnings are provided to executives who participate in this plan.

 

Each of the executive officers chose to defer a portion of their bonus into the EDCP in 2006. Only Mr. Maxsimic deferred a portion of his base salary into the EDCP during 2006. His base salary deferrals are included in the Executive Contributions column of the Nonqualified Deferred Compensation Table.

 

Prior to our initial public offering, while still a subsidiary of our former corporate parent, we offered the Wright Express Corporation Supplemental Investment & Savings Plan or SERP, which allowed participants to defer compensation. The SERP was frozen to new contributions on December 31, 2004. Mr. Dubyak and Ms. Smith have balances in this plan which continue to earn investment returns based on the funds they selected. These investment returns are market competitive for the type of funds offered; there is no preferential interest earned in either the EDCP or SERP accounts.

 

SERP balances as of December 31, 2006 for Mr. Dubyak and Ms. Smith are shown below. None of the other executive officers participated in the SERP when it was an active plan.

 

Health Benefits.  The employee benefits provided to our executive officers are no different than those provided to other full-time employees. The Company provides up to one and a half times base salary in life insurance coverage and up to $210,000 in long term disability coverage. The value of these benefits is not required to be included in the Summary Compensation Table since they are made available on a Company-wide basis to all employees.

 

Executive Perquisites.  The Company provided certain perquisites to the executive officers and directors in 2006 as summarized below.

 

Automobiles.  A company leased car was made available to all executive officers for personal and business use. For total compensation purposes in this proxy, the value of a Company car for executive officers, was based on the cost of the annual lease and maintenance costs which are paid on behalf of the executive by the Company. For tax purposes, the cost of the cars was imputed as income and grossed up for all taxes.

 

Financial Planning.  The Company provided personal financial advisory services valued at $10,000 per person to each of our executive officers. We value this benefit based on the actual charge for the services which included travel and expense reimbursement for the financial advisor. For tax purposes, the cost of these services was imputed as income and grossed up for all taxes.

 

Memberships.  The Company did not provide or reimburse for country club memberships for the personal use of any officers. The Company maintains a limited number of memberships for business use. In the event the facilities were used for personal reasons, the executive officers reimbursed Wright Express for the expenses incurred.

 

The aggregate value of all perquisites received by each of the executive officers is detailed in the footnotes to the Summary Compensation Table.

 

Employment Agreements, Severance and Change-in-Control Benefits

 

In October of 2005, the Compensation Committee reviewed employment agreements as part of the initial executive compensation review process and new employment agreements were created for each of the executive officers. These employment agreements represent competitive severance and change of control benefits based on analysis conducted by Buck and reviewed by the Compensation Committee.

 

The Compensation Committee has considered the advisability of using employment agreements and determined that under certain circumstances it is in the best interests of the Company and its stockholders insofar as, among other reasons, it allows the Company to achieve its desired goals of retaining the best possible executive talent and obtaining post-employment non-competition covenants from executive officers.

 

Each employment agreement contains important restrictive covenants intended to protect confidential information and limit each officer’s ability to compete against the Company or solicit its employees. As part of Mr. Dubyak and Ms. Smith’s employment agreements, the Company agrees to indemnify each to the fullest extent permitted by Delaware law, the Company’s charter or its By-Laws. The agreements are governed by Maine law and provide for all claims to be settled by arbitration.

 

The agreements also contain the following provisions:

 

Term:  The term of Mr. Dubyak’s employment agreement is three years from the date it was signed with an annual renewal beginning on October 28, 2006 and continuing each year on October 28th unless written notice to terminate the agreement is provided at least 30 days prior to the anniversary date. The remaining executive officers have signed two-year employment agreements with a similar annual renewal component.

 

Benefits Payable upon Death or Disability:  Under the terms of each of the executive officer’s agreements, if their employment is terminated by reason of death or disability, either their estate or they are entitled to receive base salary and incentive compensation awards earned but unpaid as of the date of

termination and a prorated portion of their annual incentive bonus at target for the year in which the disability or death occurred.

 

Severance without change of control:  If their employment is terminated outside of a change of control as defined in the employee agreement and for reasons other than death, disability or for cause as defined in the agreement, they are entitled to receive the following:

 

Mr. Dubyak:  A cash payment equal to the sum of Mr. Dubyak’s base salary plus his target STIP award, multiplied by 200 percent, any and all base salary and incentive compensation awards earned but unpaid through the date of such termination and reimbursement for any legitimate previously unreimbursed business expenses. In addition, any outstanding and unvested stock options and restricted stock units granted to Mr. Dubyak which would have otherwise become vested between the date of termination of employment and the second anniversary of such date of termination of employment will immediately become vested without regard for performance based vesting criteria. In the event that Mr. Dubyak elects to continue medical and dental benefits as a result of the termination, his cost for the first 12 months of such coverage will be no greater than the cost to active full-time employees at Wright Express.

 

Ms. Smith:  A cash payment equal to the sum of Ms. Smith’s base salary plus her target STIP award, any and all base salary and incentive compensation awards earned but unpaid through the date of such termination and reimbursement for any legitimate previously unreimbursed business expenses. In addition, any outstanding and unvested stock options and restricted stock units granted to Ms. Smith which would have otherwise become vested between the date of termination of employment and the first anniversary of such date of termination of employment will immediately become vested without regard for performance based vesting criteria. In the event that Ms. Smith elects to continue medical and dental benefits as a result of the termination, her cost for the first 12 months of such coverage will be no greater than the cost to active full-time employees at Wright Express.

 

Mr. Maxsimic:  A cash payment equal to the sum of his base salary plus target STIP award, any and all base salary and incentive compensation awards earned but unpaid through the date of such termination and reimbursement for any legitimate previously unreimbursed business expenses.

 

Mr. Demeter:  A cash payment equal to the sum of his base salary, any and all base salary and incentive compensation awards earned but unpaid through the date of such termination and reimbursement for any legitimate previously unreimbursed business expenses.

 

Ms. Greenleaf:  On December 6, 2006, Ms. Greenleaf entered into a separation agreement and general release with Wright Express which supersedes any previous employment agreements. Pursuant to this agreement, Ms. Greenleaf terminated her employment on April 2, 2007 and, as a result of her termination, will receive the following:

 

Salary continuation:  $157,500 in nine equal monthly installments during the period from April 2, 2007 through December 31, 2007.

 

Vesting of RSUs:  Vesting as scheduled on February 22, 2007 of 4,583 RSUs; vesting as scheduled on March 31, 2007 of 813 RSUs and 813 PSUs; and vesting as scheduled on October 28, 2007 of 10,533 RSUs. All other unvested RSUs and PSUs which were awarded to Ms. Greenleaf prior to December 6, 2006 will automatically terminate on her separation date of April 2, 2007.

 

Short-Term Incentive:  Payment under the Company’s 2006 STIP in the first quarter of 2007. The amount paid to Ms. Greenleaf was $108,591.

 

Benefits:  A lump-sum payment of $16,000 to assist in the continuation of medical and dental benefits under the federal law generally referred to as “COBRA.”

 

Severance with Change of Control:  The employment agreements signed by each of the executive officers include a ‘double trigger’ provision which means a change-of-control, as defined in the agreement, and termination of employment as a result of this change of control is required for the following benefits to be paid.

 

In the case of Mr. Dubyak, this termination must occur between 90 days prior to and 540 days after the change-of-control. In the case of all other executive officers, this termination must occur between 90 days prior and 365 days after the change-of-control.

 

In the event of termination with a change of control, the executive officers are entitled to receive:

 

Mr. Dubyak:  A cash payment equal to the sum of Mr. Dubyak’s base salary plus his target STIP award, multiplied by 300 percent, any and all base salary and incentive compensation awards earned but unpaid through the date of such termination and reimbursement for any legitimate previously unreimbursed business expenses. Any outstanding and unvested stock options and restricted stock units granted to Mr. Dubyak will immediately become vested. Wright Express will also pay to Mr. Dubyak an amount equal to the present value of Wright Express’ share of the cost of medical and dental insurance premiums for a 36 month period.

 

All other executive officers:  A cash payment equal to their base salary plus their target incentive compensation award, multiplied by 200 percent, any and all base salary and incentive compensation awards earned but unpaid through the date of such termination and reimbursement for any legitimate previously unreimbursed business expenses. Wright Express will also pay each of the executive officers an amount equal to the present value of Wright Express’ share of the cost of medical and dental insurance premiums for a 24 month period, and any outstanding and unvested stock options and restricted stock units granted to each of the executive officers will immediately become vested.

 

280G:  Section 280G and related Internal Revenue Code sections provide that executive officers could be subject to additional taxes if they receive payments or benefits in connection with a change of control that exceed certain limits and that Wright Express could lose a tax deduction on the amounts subject to the additional tax. In the event any payment or distribution to Mr. Dubyak under his employment agreement is determined to be subject to this tax, he is entitled to receive a payment on an after-tax basis equal to the excise taxes imposed, and any penalties and interest. This is commonly referred to as a “280G gross up.” No 280G gross up will be provided to the other executive officers.

 

Non-Compete Agreements:  Each of the employment agreements signed by the executive officers, including Mr. Dubyak, contain a provision which restrict the executive officers from performing any acts which advance the interests of any existing or prospective competitors of Wright Express. In the event of a termination with severance payout, the executive officers are under restriction for a period of two years. In all other cases, the restriction period is one year.

 

Summary of Termination Payments and Benefits.  The following table summarizes the value of the termination payments and benefits that our named executive officers would receive if they had terminated employment on December 31, 2006 under the circumstances shown.

 

POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT

 

 

Effective April 2, 2007, Ms. Greenleaf was no longer an employee of Wright Express Corporation. Please refer to the Employment Agreement section of the Compensation Discussion and Analysis for the terms of Ms. Greenleaf’s separation agreement and general release.

 

 

 

 

The Compensation Committee is composed entirely of independent directors as determined by the Board of Directors in accordance with its independence guidelines and the listing standards of the NYSE.

 

Our committee oversees and administers the compensation programs for the Chief Executive Officer and all other executive officers of the Company. In connection with that responsibility, we report to the Board on our activities at each meeting of the Board. The Compensation Committee Charter, which describes in detail the purpose, structure, membership, authority, responsibilities, procedures and administration of the Compensation Committee is available on the Company’s website.

 

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with members of senior management and, based on this review, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s annual report on Form 10-K and proxy statement on Schedule 14A filed with the Securities and Exchange Commission.

 

THE COMPENSATION COMMITTEE

 

Kirk P. Pond, Chair

Shikhar Ghosh

Regina O. Sommer

 

 

Total compensation for our Named Executive Officers, is shown in the Summary Compensation Table below. The Compensation Committee believes that the compensation provided to the Named Executive Officers in 2006 is in alignment with the Company’s financial performance for 2006 and the individual performance of each of the Named Executive Officers. The Compensation Committee also believes that the total compensation paid to the executive officers collectively in 2006 was an appropriate reward for their efforts driving stockholder value during the period.

 

SUMMARY COMPENSATION TABLE

 

 

 

 

 

 

 

The following table represents all plan-based awards granted to the Named Executive Officers in 2006.

 

GRANTS OF PLAN-BASED AWARDS FOR 2006

 

 

 

 

The following table represents stock options exercised and stock vested in 2006 by each of the Named Executive Officers. All stock options were awarded when Wright Express was a subsidiary of Cendant Corporation and were converted to Wright Express options at the time of our initial public offering.

 

OPTION EXERCISES AND STOCK VESTED

 

 

The following table represents stock options and unvested stock units held by each of the Named Executive Officers as of December 31, 2006. The stock options and stock units granted prior to February 2005 were granted when Wright Express was a subsidiary of Cendant Corporation and were converted to Wright Express Corporation options and stock units at the time of the initial public offering.

 

OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR-END

 

 

 

 

 

 

The following table represents the amounts deferred by each of the Named Executive Officers in the Wright Express Corporation EDCP which is described in the Nonqualified Deferred Compensation section of the Compensation Discussion and Analysis.

 

NONQUALIFIED DEFERRED COMPENSATION DURING 2006