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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.  )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
DOLAN MEDIA COMPANY
 
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)   Title of each class of securities to which transaction applies:
 
 
     
 
 
  (2)   Aggregate number of securities to which transaction applies:
 
 
     
 
 
  (3)   Per unit price of other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
     
 
 
 
  (4)   Proposed maximum aggregate value of transaction:
 
 
     
 
 
  (5)   Total fee paid:
 
 
     
 
o   Fee paid previously with preliminary materials.
 
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)   Amount Previously Paid:
 
 
     
 
 
  (2)   Form, Schedule or Registration Statement No.:
 
 
     
 
 
  (3)   Filing Party:
 
 
     
 
 
  (4)   Date Filed:
 
 
     
 
 
 
      Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number


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(DOLAN MEDIA LOGO)
 
April 7, 2010
 
Dear Fellow Stockholder:
 
I am pleased to invite you to attend Dolan Media Company’s Annual Meeting of Stockholders, which we will hold on May 26, 2010, at the Minneapolis Club, 729 Second Avenue South, Minneapolis, MN 55402. The meeting will begin promptly at 9:00 a.m., central daylight time.
 
Please read the accompanying Notice of Annual Meeting and Proxy Statement for more details about the annual meeting and matters that will be presented to stockholders for a vote.
 
I, and other members of our management team, as well as members of our board of directors, will be available to respond to your questions and comments. We look forward to this opportunity to communicate directly with our stockholders and share information about our operations and activities and hope that you are able to join us.
 
Your vote is very important to us. Whether you own a few shares or many, it is important that your shares are represented at our annual meeting. If you cannot attend the annual meeting in person, please vote as soon as possible. We offer three convenient ways for you to vote — on the Internet (which we recommend), by telephone, or, if you requested a paper copy of these materials, by completing and mailing the proxy card in the postage-paid envelope provided. Instructions regarding these voting options are described in the Notice of Internet Availability of Proxy Materials we mailed to you and on the proxy card, if you requested one be sent to you.
 
We appreciate your continued support of Dolan Media Company and look forward to meeting you at our annual meeting.
 
Very truly yours,
 
/s/  James P. Dolan
James P. Dolan
Chairman, Chief Executive Officer and President


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(DOLAN MEDIA LOGO)
 
 
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
 
Dolan Media Company will hold its Annual Meeting of Stockholders as follows:
 
Date and Time May 26, 2010, 9:00 a.m. (central daylight time)
 
Place Minneapolis Club
729 Second Avenue South
Minneapolis, MN 55402
 
Items of Business
1.  To elect the three Class III directors nominated by our board to serve for a period of three years;
 
2.  To approve the Dolan Media Company 2007 Incentive Compensation Plan, as amended and restated, which includes authorizing an additional 2,100,000 shares of our common stock for potential future issuance under the plan, and reapproving the performance goals under which compensation may be paid under the plan for purposes of Section 162(m) of the Internal Revenue Code;
 
3.  To ratify the Dolan Media Company Rights Agreement, as amended, which is our stockholders rights plan;
 
4.  To approve an amendment to our Amended and Restated Certificate of Incorporation to change our name from Dolan Media Company to The Dolan Company;
 
5.  To ratify the Audit Committee’s appointment of McGladrey & Pullen, LLP as our independent registered public accounting firm for 2010; and
 
6.  To act upon any other business as may properly come before the stockholders at the annual meeting or any adjournment or postponement of the meeting.
 
Record Date If you were a stockholder of record at the close of business on March 29, 2010, you are entitled to vote at our annual meeting on the items of business identified above.
 
Proxy Voting Your vote is important to us. If you are unable to attend our annual meeting, you may vote your shares by proxy over the Internet (which our board recommends), by telephone or, if you requested a paper copy of these materials, by completing, signing and returning a proxy card in the envelope provided. For specific instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials that we mailed to you or your proxy card, if you requested one. If you are voting by proxy, we must receive your vote no later than (1) 11:59 p.m., eastern daylight time, on May 25, 2010, if you are voting on the Internet or by telephone, or (2) 6:00 p.m., central daylight time, on May 25, 2010, if you are voting by mail. We encourage you to vote by proxy even if you plan to attend the meeting in person. If you attend the meeting in person, you can revoke your proxy and vote in person if you so desire.
 
Adjournments and Postponements Our stockholders may consider any item of business described above at the annual meeting at the time and the date specified in this Notice of Annual Meeting or at any other time or date to which the annual meeting has been properly adjourned or postponed.


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Notice of Internet Availability of Proxy Materials We mailed our Notice of Internet Availability of Proxy Materials on or about April 7, 2010. Our proxy statement and annual report to stockholders for the year ended December 31, 2009, are available at www.proxyvote.com. Our annual report contains financial and other information about us, including our Form 10-K. You will need your 12-digit control identification number to access these materials. The control identification number is included on the Notice of Internet Availability of Proxy Materials that you received from us in the mail.
 
By Order of the Board of Directors,
 
/s/  Vicki J. Duncomb
Vicki J. Duncomb, Corporate Secretary


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(DOLAN MEDIA LOGO)
 
 
PROXY STATEMENT
 
Annual Meeting of Stockholders
May 26, 2010
 
 
 
 
Our board of directors is soliciting proxies for the 2010 Annual Meeting of Stockholders and we are providing these proxy materials in connection with that solicitation. You are receiving these proxy materials because you owned shares of our common stock on March 29, 2010, and are entitled to vote at the annual meeting. If you are unable to attend the annual meeting in person, you may vote your shares by proxy. This proxy statement describes the proposals that we would like you to consider and vote on and provides additional information to you relating to these proposals so that you can make an informed decision.
 
Proposals You Are Asked to Vote on and the Board’s Voting Recommendation
 
You will be asked to vote on five proposals at the annual meeting. Our Board recommends that you vote your shares on these proposals as indicated below:
 
     
Proposal
  Board’s Voting Recommendation
 
1.  The election of James P. Dolan, John Bergstrom and George Rossi as Class III Directors
  FOR
2.  To approve the Dolan Media Company 2007 Incentive Compensation Plan, as amended and restated, which includes authorizing an additional 2,100,000 shares of our common stock for potential future issuance under the plan, and reapproving the performance goals under which compensation may be paid under the plan for purposes of Section 162(m) of the Internal Revenue Code
  FOR
3.  The ratification of the Dolan Media Company Rights Agreement, as amended, which is our stockholders rights plan
  FOR
4.  To approve an amendment to our Amended and Restated Certificate of Incorporation to change our name from Dolan Media Company to The Dolan Company
  FOR
5.  The ratification of the appointment of McGladrey & Pullen, LLP as our independent registered public accounting firm for 2010
  FOR
 
The Board is not aware of any other matters to be presented to you for a vote at the annual meeting. If you grant a proxy by the Internet, telephone or by signing and returning a proxy card by mail, James P. Dolan, our chairman, chief executive officer and president, and Vicki J. Duncomb, our vice president and chief financial officer, or either of them, may, as your proxies, vote your shares in their discretion for any additional matters that properly come before the stockholders at the annual meeting. Further, if any director candidate is unavailable to serve as director prior to the election at the annual meeting, Mr. Dolan and Ms. Duncomb, or either of them, will vote your proxy for another candidate nominated by our board unless our board allows the vacancy to remain open or reduces the size of our board.
 
Stockholders Entitled to Vote at Annual Meeting
 
If you owned shares of our common stock at the close of business on March 29, 2010, the record date, you may vote at the annual meeting. On that date, there were 30,315,032 shares of common stock outstanding. You have one vote for each share of common stock you held on that date. This includes shares for which you are the “stockholder of record” and those for which you are the “beneficial owner.”


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You are the STOCKHOLDER OF RECORD if your shares are registered directly in your name with our transfer agent, BNY Mellon Shareholder Services. If you are the stockholder of record, we have made these proxy materials available to you directly and you may grant your voting proxy directly to us or vote in person at the annual meeting.
 
You are a BENEFICIAL OWNER if your shares are held in a stock brokerage account or by another person, as nominee, on your behalf (sometimes referred to as being held in “street name”). If you are a beneficial owner, your broker or nominee is making these proxy materials available to you and will provide you a voting instruction card to use. You must use this voting card or follow its instructions regarding voting on the Internet or by telephone to instruct your broker or nominee as to how you would like to vote your shares. You are invited to attend the annual meeting, but may not vote your shares in person at the meeting, unless you receive a proxy from your broker or nominee and are present at the meeting.
 
Voting Requirements
 
We need a majority of the votes that could be cast by stockholders entitled to vote, present in person at the annual meeting or represented by proxy, to constitute a quorum for the transaction of business at this meeting. We count abstentions and broker non-votes, if applicable, as present and entitled to vote for purposes of determining a quorum.
 
The nominees for director will be elected by a plurality of the votes of the shares present and entitled to vote on the proposal, whether in person or by proxy. A plurality means the nominees receiving the largest number of votes cast at the meeting will be elected for the available director positions. It is possible that a plurality might not be a majority of the votes cast at the meeting in person or by proxies. An affirmative “FOR” vote by a majority of the votes of the shares present and entitled to vote on the proposal, whether in person or by proxy, is required on the following matters: (1) approving the 2007 Incentive Compensation Plan, as amended and restated, which includes authorizing an additional 2,100,000 shares of our common stock for potential future issuance under the plan, and reapproving the performance goals under which compensation may be paid under the plan for purposes of Section 162(m) of the Internal Revenue Code; (2) ratifying the Rights Agreement, as amended; (3) ratifying the appointment of McGladrey & Pullen, LLP; and (4) approving all other matters that are properly presented to the stockholders at the annual meeting or any adjournment or postponement of it. The affirmative “FOR” vote by a majority of the shares outstanding and entitled to vote on the proposal, whether in person or by proxy, is required to approve the amendment to the Amended and Restated Certificate of Incorporation.
 
A “broker non-vote” occurs when a beneficial owner fails to provide voting instructions to his/her broker or nominee with respect to a matter which the broker or nominee indicates when voting by proxy that it does not have the discretionary authority to vote on such matter. We believe that brokers or nominees have discretionary authority to vote shares held by beneficial owners with respect to only two of the five proposals: Proposal 4 — Approval of an Amendment to the Amended and Restated Certificate of Incorporation and Proposal 5 — Ratification of the appointment of McGladrey & Pullen, LLP. Therefore, if you are a beneficial owner, to ensure that your shares are voted in the manner you wish, please provide voting instructions to your broker or nominee.
 
Counting Votes
 
You may either vote “FOR” or “WITHHOLD” authority to vote for the nominees for the board of directors. Withholding your authority to vote for a nominee and broker non-votes will not affect the outcome of the elections for directors. You may either vote “FOR,” “AGAINST,” or ABSTAIN” on the four other proposals set forth on the agenda. If you “ABSTAIN” from voting on any of those proposals, your vote will be counted as a vote “AGAINST” this proposal. Broker non-votes, if applicable, may affect the outcome of some of our proposals. If you are a beneficial owner and do not send voting instructions to your broker, if applicable, your broker may vote your shares at its discretion on Proposals 4 and 5, because the New York Stock Exchange considers these two proposals routine matters. If you are a stockholder of record and sign and mail a proxy card, but do not include voting instructions, the proxies will vote your shares “FOR” all of the proposals and, in their discretion, as to any other matter that may properly come before the stockholders at the annual meeting.


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A representative of Broadridge Financial Solutions, Inc. will tabulate the votes represented in person or by proxy at our annual meeting and act as the inspectors of the election.
 
How To Vote
 
Please refer to “Stockholders Entitled to Vote at Annual Meeting” to determine if you are the stockholder of record of your shares or if you are a beneficial owner of your shares.
 
Stockholders of record may vote their shares in person at the annual meeting or by granting a proxy. If you are a stockholder of record, you may vote by proxy on the Internet (which our board recommends) or by telephone by following the voting instructions set forth on the Notice of Internet Availability of Proxy Materials you received. If you requested a paper copy of our proxy materials, you may also vote by marking, signing and dating the proxy card and mailing it to us in the envelope provided. Please sign your name exactly as it appears on your proxy card.
 
Internet and telephone voting ends at 11:59 p.m., eastern daylight time, on May 25, 2010.
 
If you mail your proxy card, we must receive it no later than 6:00 p.m. central daylight time, on May 25, 2010, for your vote to be counted at the annual meeting.
 
We encourage you to vote by proxy even if you plan to attend the annual meeting in person.
 
Please refer to “Changing Your Vote” for more information about the effect of your proxy if you vote in person at the annual meeting.
 
Beneficial owners may vote their shares by providing voting instructions to their broker or nominee before our annual meeting. If you are a beneficial owner, you may not vote your shares in person at our annual meeting unless you obtain and present at the annual meeting a proxy from your broker or nominee; however, you may attend the annual meeting.
 
If you received more than one Notice of Internet Availability of Proxy Materials, you hold shares registered in more than one name. This sometimes occurs when a stockholder holds shares in his/her own name and then also in a representative capacity, such as a trustee on behalf of a trust. Please vote all shares for which you received a Notice of Internet Availability of Proxy Materials so that you can ensure all of your shares are represented at the meeting.
 
Attending the Annual Meeting
 
The annual meeting begins promptly at 9:00 a.m., central daylight time. Please arrive no later than 8:30 a.m. to allow us to register your attendance and to ensure that we start the meeting on time. You must bring a valid driver’s license or other proof of identification.
 
Changing Your Vote
 
You may change your vote and revoke your proxy at any time prior to the vote at the annual meeting. If you are a stockholder of record, you may change your vote by:
 
  •  Sending a written statement, revoking your proxy, to our corporate secretary addressed as follows:
 
     
By Mail
Dolan Media Company
Attention: Corporate Secretary
222 South Ninth Street
Suite 2300
Minneapolis, MN 55402
  By electronic mail
secretary@dolanmedia.com


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We must receive your written statement, revoking your proxy, by 6:00 p.m., central daylight time, May 25, 2010, for it to be effective.
 
  •  Voting on the Internet or by telephone at a later time;
 
  •  Mailing a properly signed proxy card to us, having a later date; or
 
  •  Voting in person at the annual meeting.
 
If you are a beneficial owner, you may change your vote by submitting new voting instructions to your broker or nominee by the deadline your broker or nominee has set for changing voting instructions.
 
Delivery of Proxy Materials
 
Pursuant to SEC rules, we are making our proxy materials, which include our notice of the 2010 annual meeting of stockholders, proxy statement and annual report to stockholders, available to you over the Internet at www.proxyvote.com instead of mailing you a printed set of the proxy materials. You will need your 12-digit Control Identification Number, provided with the Notice of Internet Availability of Proxy Materials, to access the notice of the 2010 annual meeting of stockholders, proxy statement and annual report to stockholders. We believe that this e-proxy process will expedite your receipt of proxy materials, lower our costs and reduce the environmental impact of our annual meeting. In accordance with the e-proxy process, we mailed to each of our stockholders of record as of March 29, 2010, a Notice of Internet Availability of Proxy Materials, which mailing commenced on or about April 7, 2010. The Notice contains instructions on how you may access our proxy materials and vote your shares over the Internet or by telephone. If you would like to receive a printed copy of our proxy materials from us instead of downloading them from the Internet, please follow the instructions included with the Notice of Internet Availability of Proxy Materials.
 
Stockholders List
 
We will make available, upon request, a list of the names of all stockholders of record who are eligible to vote at our annual meeting. This list will be available ten days prior to the annual meeting during the hours of 8:30 a.m. to 4:30 p.m. (central daylight time) at our principal executive offices, located at 222 South Ninth Street, Suite 2300, Minneapolis, Minnesota 55402. You may review the list for any purpose relevant to the annual meeting by contacting our corporate secretary in writing, either by mail address to our principal executive offices, attention Corporate Secretary, or by email to secretary@dolanmedia.com. We will also make this list available at the annual meeting.
 
Proxy Solicitation Costs
 
We will pay the costs of preparing, assembling, printing, mailing and distributing the Notice of Internet Availability of Proxy Materials and any proxy materials that our stockholders have requested be mailed to them. This includes reimbursing stockholders of record for the expenses they incur in forwarding our proxy materials to beneficial owners. Our directors, officers and employees may solicit proxies personally, by mail, telephone, fax or over the Internet. We do not pay our directors, officers or employees any extra compensation for soliciting proxies. We have also engaged Morrow & Co., LLC to solicit proxies on our behalf, either by mail, telephone, fax, or over the Internet. Morrow & Co., LLC’s address is 470 West Ave., Stamford, CT 06902. We expect to pay Morrow & Co. approximately $30,000 for its proxy solicitation services, consisting of a flat fee of $7,000, along with a fee of $5.50 for each stockholder of record and beneficial owner it contacts to solicit a proxy on our behalf. We will also reimburse Morrow & Co. for reasonable expenses it incurs on our behalf in connection with soliciting proxies.
 
Transfer Agent
 
Our transfer agent is BNY Mellon Shareholder Services. If you are a stockholder of record and need to change your name or address, need information regarding the transfer of your shares, or have other questions regarding your shares, please contact BNY Mellon Shareholder Services directly, at 1-800-953-2495, on the Internet at www.bnymellon.com/shareowner/isd or in writing at BNY Mellon Shareholder Services, P.O. Box 358015, Pittsburgh, PA 15252-8015.


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COMPANY GOVERNANCE
 
Corporate Governance Guidelines
 
Our board has adopted corporate governance guidelines. These, along with our committee charters, provide a framework for the governance of our company. These guidelines provide, among other things, that:
 
  •  Our board of directors consists of a majority of independent directors and that each of the board’s three standing committees consists of members who are independent. Currently, Mr. Dolan, our chairman, chief executive officer and president, is the only director who is not independent. Mr. Dolan does not serve on any of the board’s committees.
 
  •  Our directors possess the highest personal and professional ethics and are committed to the long-term interests of our company’s stockholders.
 
  •  No director serves on the boards of more than three public companies, unless the board determines that this does not impair the director’s ability to serve effectively on our board.
 
  •  The nominating and corporate governance committee oversees and manages an annual evaluation of the board.
 
The nominating and corporate governance committee is responsible for overseeing these guidelines and ensuring that we adhere to them. The committee periodically reviews and reassesses the adequacy of these guidelines and recommends proposed changes to the board of directors for consideration.
 
Copies of our corporate governance guidelines and committee charters are available under Corporate Governance in the Investor Relations section of our web site at www.dolanmedia.com, or by written request to our corporate secretary. Please refer to “Communications with the Company and the Board” in this proxy statement for information about how to contact our corporate secretary.
 
Our Codes of Ethics and Business Conduct Policies
 
We have adopted two codes of ethics: a Code of Business Conduct and Ethics, which we refer to as our Code of Conduct, and a Code of Ethics for our Senior Financial Officers, Chief Operating Officer and Principal Executive Officer, which we refer to as our Code of Ethics. We adopted these policies to ensure that all of our directors, officers and employees observe the highest standards of ethics in conducting our business.
 
Under our Code of Conduct, our core values include respect for individuals, honesty, integrity and leadership by example. Among other things, our Code of Conduct:
 
  •  requires all directors, officers and employees to conduct our business affairs fairly, free of conflicts of interests and in an ethical manner;
 
  •  prohibits conduct that may raise questions to our honesty, integrity or reputation; and
 
  •  includes a process for reporting complaints and concerns about violations of this code of conduct or other similar policies to a compliance committee, consisting of our chief operating officer, our chief financial officer and our controller.
 
Our Code of Ethics requires our senior financial officers (including our principal financial officer), chief operating officer and principal executive officer to:
 
  •  act with honesty and integrity and in an ethical manner, avoiding actual or apparent conflicts of interests in personal and professional relationships;
 
  •  promptly disclose to the audit committee any material relationship or transaction that could give rise to a conflict of interest;
 
  •  comply with generally accepted accounting principles and ensure that accounting entries are promptly and accurately recorded and documented; and


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  •  report to the audit committee or nominating and corporate governance committee any violations to the Code of Ethics or other company policies, compliance programs or laws, including material weaknesses in the design or operation of internal controls, fraud or material information that calls into question disclosures we have made in our periodic reports on file with the Securities and Exchange Commission.
 
Mr. Dolan, Mr. Pollei, Ms. Duncomb, who also acts as our principal accounting officer, our controller, and our senior financial officers at National Default Exchange, DiscoverReady and Counsel Press are subject to this policy.
 
The nominating and corporate governance committee is responsible for overseeing and periodically evaluating these policies. The committee recommends proposed changes to these policies to the Board for consideration. Both our Code of Conduct and our Code of Ethics are available in the Corporate Governance section of our web site under the Investor Relations at www.dolanmedia.com, or by written request from our corporate secretary. Please refer to “Communications with the Company and our Board.”
 
Related Party Transactions and Policies
 
Our board of directors recognizes that transactions or other arrangements between us and any of our directors or executive officers may present potential or actual conflicts of interest. Accordingly, as a general matter, it is our board’s preference to avoid such transactions and other arrangements. Nevertheless, our board recognizes that there are circumstances where such transactions or other arrangements may be in, or not inconsistent with, our best interests. We have adopted a formal written policy that requires any transaction, arrangement or relationship in which we will be a participant and in which the amount involved exceeds $120,000, and in which any related person (directors, executive officers, stockholders owning at least 5% of any class of our voting securities, their immediate family members and any entity in which any of the foregoing persons is employed or is a general partner or principal) had or will have a direct or indirect material interest, to be submitted to our audit committee for review, consideration and approval.
 
In the event that a proposed transaction with a related person involves an amount that is less than $120,000, the transaction will be subject to the review and approval of our chief financial officer (or our chief executive officer, if the chief financial officer, an immediate family member of the chief financial officer, or an entity in which any of the foregoing persons is employed or is a general partner or principal is a party to such transaction). If the transaction is approved by the chief financial officer or chief executive officer, if applicable, such officer will report the material terms of the transaction to our audit committee at its next meeting. The policy provides for periodic monitoring of pending and ongoing transactions. In approving or rejecting the proposed transaction, our audit committee (or chief financial officer or chief executive officer, if applicable) will consider the relevant facts and circumstances available to the audit committee (or chief financial officer or chief executive officer, if applicable), including (1) the impact on a director’s independence if the related person is a director or his or her family member or related entity, (2) the material terms of the proposed transaction, including the proposed aggregate value of the transaction, (3) the benefits to us, (4) the availability of other sources for comparable services or products (if applicable), and (5) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to our employees generally. Our audit committee (or chief financial officer or chief executive officer, if applicable) will approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests and the best interest of our stockholders.
 
The following is a summary of transactions since January 1, 2009, (1) to which we have been a party in which the amount involved exceeded $120,000 and in which any related person had or will have a direct or indirect material interest, other than compensation arrangements that are described in “Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation” in this proxy statement, or (2) that we otherwise believe should be disclosed. Except as noted below, all of the transactions described below are continuing related party transactions that we initially entered into prior to our board’s adoption of a written policy regarding related party relationships in July 2007. The audit committee reviewed and ratified such continuing transactions at its February 2009 and 2010 committee meetings in accordance with our related party transactions policy.


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David A. Trott
 
David A. Trott is the chairman and chief executive officer of our majority-owned subsidiary, American Processing Company, LLC d/b/a National Default Exchange, which we refer to as NDeX. Mr. Trott owns a 68% interest in and is the managing attorney of Trott & Trott, P.C., one of eight law firm customers with whom NDeX has entered an exclusive long-term services agreement to provide mortgage default processing services. See “Services Agreement” below.
 
Until January 4, 2010, Mr. Trott owned a 5.1% interest in NDeX. From January 1, 2009, through November 30, 2009, he held this interest indirectly through his ownership in APC Investments, LLC, whose members comprised the members of Mr. Trott’s law firm, Trott & Trott. APC Investments held a 7.6% interest in NDeX. On December 1, 2009, APC Investments distributed its interest in NDeX to each of its members, including Mr. Trott, who had a 68% ownership interest in APC Investments. On December 31, 2009, the members of APC Investments sold an aggregate 5.1% interest in NDeX (including Mr. Trott, who sold a 3.5% interest) to our wholly-owned subsidiary, Dolan APC, LLC. On January 4, 2010, the members of APC Investments, including Mr. Trott, sold their remaining interest in NDeX (including 1.7% held by Mr. Trott) to Dolan APC. See “Notes Payable to and Stock Issued to Mr. Trott” below for more information regarding the sale of Mr. Trott’s interest in NDeX.
 
During 2009, NDeX made distributions to APC Investments (or its members) in the aggregate amount of $1.6 million, of which Mr. Trott received approximately $1.1 million. Under the terms of NDeX’s amended and restated operating agreement, APC Investments had the right until February 7, 2010, to require NDeX to repurchase all or any portion of its membership interests at a purchase price based on 6.25 times NDeX’s trailing twelve month earnings before interest, depreciation and amortization, less the aggregate amount of any interest bearing indebtedness outstanding for NDeX as of the date the repurchase occurs. This put right expired when the members of APC Investments, including Mr. Trott, sold their interest in NDeX in January 2010.
 
Services Agreement.  During the year ended December 31, 2009, Trott & Trott was one of NDeX’s eight law firm customers. In 2009, Trott & Trott was NDeX’s second largest law firm customer, accounting for 28.7% of our mortgage default processing services revenues. NDeX’s relationship with Trott & Trott is governed by a services agreement dated March 14, 2006. The services agreement provides for the exclusive referral of files from Trott & Trott to NDeX for servicing, unless Trott & Trott is otherwise directed by its clients. The services agreement is for an initial term of fifteen years, with the term to be automatically extended for up to two successive ten-year periods unless either party provides the other party with written notice of its intention not to extend the initial or extended term then in effect. During 2009, NDeX was paid a fixed fee for each file its customers directed NDeX to process, with the amount of such fixed fee being based upon the type of file (e.g., foreclosure, bankruptcy, eviction or litigation). For the year ended December 31, 2009, NDeX received revenues of $43.5 million from fees for mortgage default processing services by Trott & Trott, which takes into account an increase in the fees Trott & Trott pays to us that took effect in January 2009. The success of our mortgage default processing services business is tied to the number of files that Trott & Trott and NDeX’s other customers receive from their mortgage lender and loan servicer clients or that NDeX receives directly from its customers related to residential real estate in California. We therefore rely upon Mr. Trott, who through Trott & Trott has developed and maintains relationships with a substantial number of Trott & Trott’s clients, to attract additional business from its current and/or new clients.
 
Detroit Legal News Publishing.  We own 35.0% of the membership interests in The Detroit Legal News Publishing Company, or DLNP, the publisher of Detroit Legal News. Mr. Trott and his family members indirectly own 80.0% of Legal Press, LLC, which is the holder of 10.0% of the membership interests in DLNP.
 
In November 2005, DLNP entered into an agreement with Trott & Trott pursuant to which Trott & Trott agreed to forward to DLNP for publication all legal notices that Trott & Trott is required to publish on behalf of its mortgage default clients in Michigan. As a result, Detroit Legal News publishes, or through its statewide network causes to be published, all public notices required to be filed in connection with files serviced by NDeX for Trott & Trott that involve foreclosures in Michigan. DLNP also agreed that it would provide certain other services for Trott & Trott, including attending foreclosure sales, bidding on real property and recording


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of sheriff’s deeds in connection with foreclosure sales. In exchange for the services provided by DLNP under the agreement, Trott & Trott pays DLNP according to fees agreed to by the parties from time to time. These fees, however, are not permitted to exceed the customary fee that DLNP charges its other customers. In 2009, Trott & Trott paid DLNP $21.3 million to post foreclosure notices in Detroit Legal News and for other related services. The agreement terminates on December 31, 2015 (unless at such date, Legal Press, LLC remains a member of DLNP, in which case the agreement would terminate at such date when Legal Press, LLC, or its successor, is no longer a member of DLNP), but Trott & Trott may terminate the agreement at any time upon the failure by DLNP to cure a material breach of its obligations under the agreement. DLNP maintains a small number of its clerical employees at the offices of Trott & Trott to facilitate the provision of services for Trott & Trott.
 
In November 2005, DLNP entered into a consulting agreement with Mr. Trott whereby Mr. Trott agreed to provide consulting services related to the business of DLNP for a term lasting until December 31, 2015. The agreement may be terminated by either party prior to December 31, 2015, in the event of a material breach by either party or in the event the number of foreclosure notices submitted to DLNP by Trott & Trott is less than 1,000 in any calendar year during the term of the agreement. Under the consulting agreement, DLNP agreed to obtain, for its benefit, an insurance policy on the life of Mr. Trott in the amount of $15.0 million for a term of 15 years. In exchange for the consulting services provided to DLNP, Mr. Trott is entitled to receive a consulting fee equal to the lesser of (1) $500,000 or (2) the amount equal to 7% of DLNP’s net income less the amount paid by DLNP for the life insurance policy. In 2009, Mr. Trott was paid $483,974 in fees by DLNP for his consulting services. In addition to the fees Mr. Trott receives under the consulting agreement, DLNP also pays Mr. Trott an annual salary of $20,000.
 
Notes Payable and Stock Issued to David A. Trott.  In connection with the sale to us of his aggregate 5.1% ownership interest in two transactions on December 31, 2009, and January 4, 2010, we issued 168,644 shares of our common stock, having an aggregate value of $1.7 million based on the closing share price on December 31, 2009, and agreed to pay him $8.8 million (exclusive of interest on $2.3 million of the balance payable beginning August 1, 2010). Through the date of this proxy statement, we have paid him $4.1 million. We will pay an additional $0.7 million on the first business day of April, May, June and July 2010. Beginning on August 1, 2010, we will pay the remaining $2.3 million balance (including interest accruing at a rate of 4.25%) in 29 equal monthly installments. This transaction was not made in accordance with the terms of our related party transaction policy because it was approved by our board of directors, instead of our audit committee.
 
Net Director.  Mr. Trott owns approximately 11.1% of the membership interests in Net Director, LLC, which provides an information clearing house service used by NDeX. NDeX paid Net Director approximately $0.1 million for these services in 2009. The Barrett law firm, NDeX’s largest customer, also owns a 5.0% interest in Net Director.
 
American Servicing Corporation.  Mr. Trott owns 50% of American Servicing Corporation, or ASC, a provider of property tax searches and courier services to NDeX. NDeX paid ASC approximately $0.3 million for these services in 2009.


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Loan Agreements.  While Mr. Trott directly or indirectly owned an interest in NDeX, Dolan Finance Company, our wholly-owned subsidiary, entered into loan agreements with NDeX, in the following amounts with the following borrowing and maturity dates:
 
                         
                Aggregate
                Principal
                and Interest
                Payments
    Principal
  Borrowing
  Maturity
  made in
Acquisition
  Amount   Date   Date   2009
 
Robert Tremain & Associates(1)
  $ 3,300,000     November 11, 2006   November 11, 2010     $  948,272  
Feiwell & Hannoy(2)
    13,000,000     January 9, 2007   January 9, 2011     3,791,137  
      1,750,000     January 9, 2008   January 9, 2012     544,144  
      1,750,000     January 9, 2009   January 9, 2013     478,535  
Barrett-NDEx(3)
    166,000,000     September 2, 2008   September 2, 2017     29,039,514  
      13,000,000     December 4, 2009   November 30, 2013     321,319  
Albertelli(4)
    7,000,000     October 1, 2009   September 30, 2013     527,192  
 
 
(1) This loan was made to fund a portion of the purchase price for NDeX’s acquisition of the mortgage default processing services business of Robert A. Tremain & Associates. At such time, Trott & Trott also acquired the law-related assets of Robert A. Tremain & Associates.
 
(2) In connection with NDeX’s acquisition of the mortgage default processing services business of Feiwell & Hannoy Professional Corporation, Dolan Finance made three term loans to NDeX in the amounts and on the dates in 2007, 2008 and 2009, set forth in the table. The loan in the principal amount of $13.0 million funded the cash portion of the purchase price for the business acquired. The two loans, each in the principal amount of $1.75 million, funded payments NDeX owed to Feiwell & Hannoy under a promissory note entered at the time of the acquisition.
 
(3) Dolan Finance made the first loan in the amount of $166.0 million to fund a portion of the purchase price for the acquisition of National Default Exchange, LP and its affiliated entities (“Barrett-NDEx”), and the second loan in the amount of $13.0 million to fund the earnout payment due to the sellers of Barrett-NDEx. The $166.0 million loan was not made in accordance with the terms of our related party transaction policy because it was approved by our board of directors, instead of the audit committee.
 
(4) Dolan Finance made this loan to fund a portion of the purchase price for the acquisition of the mortgage default processing services and related business of James E. Albertelli, P.A., The Albertelli Firm, P.C., Albertelli Title, Inc. and James E. Albertelli (together, “Albertelli”). This loan was not made in accordance with the terms of our related party transaction policy because it was approved by our board of directors, instead of the audit committee.
 
Each of the loans described above bears interest at the prime rate plus 2.0% and interest and principal for each loan are payable in equal monthly installments over such loan’s term. In connection with the loans made to NDeX to fund the acquisition of the mortgage default processing services business of Feiwell & Hannoy, Dolan Finance Company agreed to pay Trott & Trott a fee equal to 1/2% of the outstanding balance times Trott & Trott’s (or its assignees) ownership percentage of NDeX so long as the loan is outstanding. During 2009, Dolan Finance made aggregate payments of approximately $2,398 to Trott & Trott pursuant to this agreement. This agreement terminated when we acquired the remaining portion of Trott & Trott’s interest in NDeX from the former members of APC Investments in January 2010.
 
Lease of Office Space.  On April 1, 2007, NDeX and our Michigan Lawyers Weekly publishing unit began subleasing approximately 30,000 square feet in suburban Detroit, Michigan from Trott & Trott at a rate of $10.50 per square foot, triple net, which sublease expires on March 31, 2012. During 2009, NDeX and Michigan Lawyers Weekly paid Trott & Trott an aggregate of $688,970 in lease payments. Trott & Trott leases this space from NW13, LLC, a limited liability company in which Mr. Trott owns 75% of the membership interests.


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Employment of Mr. Dolan’s Spouse
 
Mr. Dolan’s spouse administers Dolan Media Newswires, our Internet-based, subscription newswire, and is our employee. In 2009, we paid $72,288 to Mr. Dolan’s spouse as compensation for her services. On May 15, 2009, in connection with annual employee stock grants, we issued to Mr. Dolan’s spouse stock options with an exercise price equal to $12.51 that are exercisable for 455 shares of common stock, as well as 250 shares of restricted stock. The options and restricted stock vest in four equal annual installments commencing on May 15, 2010, and the options terminate in seven years.
 
Employment of Mr. Stodder’s Brother
 
We employ Mr. Stodder’s brother as the director of social media for our Business Information Division. In 2009, we paid Mr. Stodder’s brother $120,000 for his services. On May 15, 2009, in connection with annual employee stock grants, we issued to Mr. Stodder’s brother stock options with an exercise price equal to $12.51 that are exercisable for 800 shares of common stock, as well as 439 shares of restricted stock. The options and restricted stock vest in four equal annual installments commencing on May 15, 2010, and the options terminate in seven years.
 
BOARD COMMITTEES AND COMMITTEE MEMBERSHIP
 
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee and the charters for these committees are available under the Investor Relations section of our web site at www.dolanmedia.com. Our board may establish other committees from time to time to facilitate the management of Dolan Media Company.
 
During 2009, our board of directors held six meetings. During 2009, each incumbent director attended all of the board meetings and meetings of committees on which he or she served that occurred while such director was a member of our board and such committees, except Ms. Rich Fine who attended 83% of the board meetings and 100% of the compensation committee meetings.
 
Our practice is that all directors attend our annual meeting, unless a director is unable to attend due to illness or another emergency or because his or her term is ending and he or she has not been nominated for re-election to the Board. We expect that most of our directors will attend our 2010 annual meeting.
 
Mr. Christianson serves on the boards of more than three public companies, including us. Our board has determined that his service as a director on these other boards does not impair his ability to serve us effectively.
 
The following table describes the composition of each of the board’s standing committees during the year ended December 31, 2009. In accordance with our corporate governance guidelines and the requirements of the New York Stock Exchange, each of our committees consists solely of independent directors.
 
                         
            Nominating and
Name
  Audit   Compensation   Corporate Governance
 
John C. Bergstrom
            X *     X  
Anton J. Christianson
    X (1)             X *
Arthur F. Kingsbury
    X (1)     X          
Jacques Massicotte
    X               X  
Lauren Rich Fine
            X          
George Rossi
    X *                
                         
X = member; * = chair
                       
 
 
(1) Mr. Christianson served on our audit committee until July 31, 2009, when the board appointed Mr. Kingsbury to serve on the audit committee.


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Audit Committee
 
In 2009, the audit committee met four times and each member of the committee attended every meeting. Our audit committee oversees a broad range of issues relating to our accounting and financial reporting processes and audits of our financial statements. In particular, our audit committee:
 
  •  assists our board in monitoring the integrity of our consolidated financial statements, our compliance with legal and regulatory requirements, our independent registered public accounting firm’s qualifications and independence, and the performance of our independent registered public accounting firm;
 
  •  appoints, compensates, retains and oversees the work of any independent registered public accounting firm engaged for the purpose of performing any audits, reviews or attest services;
 
  •  oversees the work of our internal auditor; and
 
  •  prepares the audit committee report that the SEC rules require be included in this proxy statement.
 
The committee reviews and approves all engagement letters between our independent registered public accounting firm and us. Please refer to our discussion on the audit committee’s “Policy on Pre-approval of Audit and Permissible Non-Audit Services” later in this proxy statement for more information about the committee’s policies and practices related to the approval of services our independent registered public accounting firm performs for us. The committee also reviews all related party transactions (unless it has elevated a transaction to our board for its review and consideration) and resolves conflicts of interest involving our directors, executive officers and us. Please refer to “Related Party Transactions and Policies” for more detailed information about how we address transactions between our directors, executive officers, other related persons and us. Our audit committee is responsible for receiving and investigating complaints or reports regarding our accounting practices, internal controls and financial matters and has developed procedures that allow our employees to communicate anonymously and/or confidentially these concerns directly to our audit committee.
 
Our Board has determined that each member of the audit committee is “independent” under the New York Stock Exchange listing standards, Section 10A(m)(3) of the Securities Exchange Act of 1934 and our corporate governance guidelines. The Board has also determined that, as required by the committee’s charter, each member is financially literate and no member serves on the audit committees of more than three public companies. Our audit committee chair, Mr. Rossi, is our financial expert under the SEC rules implementing Section 407 of the Sarbanes-Oxley Act, although both Messrs. Massicotte and Kingsbury also qualify as a financial expert under the SEC Rules implementing Section 407 of the Sarbanes-Oxley Act.
 
Compensation Committee
 
In 2009, the compensation committee met eleven times and each member of the committee attended every meeting that occurred while he or she was a member. The committee reviews our compensation practices and policies and approves the compensation plans of our executive officers and key employees. In particular, the compensation committee is responsible for:
 
  •  reviewing and approving corporate goals and objectives for Mr. Dolan and our other executive officers;
 
  •  evaluating Mr. Dolan’s and, with the assistance of Mr. Dolan, our other executive officers’ performance in relation to those goals and objectives and determining and approving Mr. Dolan’s and our other executive officers’ compensation based on that evaluation;
 
  •  administering all of our equity-based and other incentive compensation plans and determining all awards granted under our equity-based and other incentive compensation plans, except for grants to non-employee directors under these plans;
 
  •  reviewing, and recommending for our board’s approval, directors fees, committee fees, equity-based compensation and other amounts we pay to our non-employee directors for their service as a director;
 
  •  overseeing our policies to preserve tax deductibility of our executive compensation programs;


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  •  reviewing our compensation policies and practices for risk; and
 
  •  reviewing and discussing with our senior managers the Compensation Discussion and Analysis required by the SEC’s disclosure rules for executive compensation and furnishing a report to be included in our proxy statement.
 
In addition, the committee reviews all employment, severance and change-in-control agreements for our chief executive officer and other executive officers, approves those agreements for the chief executive officer and either approves, or recommends for approval by the board, those agreements for other executive officers. The committee also periodically reviews our equity-based and other incentive compensation plans and makes recommendations to our board regarding those plans. In determining the compensation of our executive officers and awards under our incentive compensation plans other than for our chief executive officer, the committee considers the recommendations of Mr. Dolan, our chief executive officer. The committee believes that Mr. Dolan is in the best position to regularly evaluate the performance of the other executive officers and our other employees.
 
From time to time, the compensation committee engages third party consultants to assist it in making decisions about executive compensation, our equity-based and other incentive compensation plans and other compensation related matters. During 2008 and 2006, the committee engaged Hewitt Associates, a human resources consulting firm, to conduct an analysis of the executive compensation of certain peer companies. In 2009 and 2007, our compensation committee did not conduct an analysis of executive compensation of peer companies because the committee believes that this study is not required on an annual basis. However, the committee did engage Hewitt Associates in 2009 and 2007 to assist the committee in designing executive compensation plans, including the equity compensation awards we granted in connection with our initial public offering in 2007. The committee expects to continue to conduct peer company analyses from time to time to ensure that our executive compensation is consistent with that of similar companies.
 
You should refer to our “Compensation Discussion and Analysis” later in this proxy statement for more information about our compensation committee’s use of Hewitt Associates and for additional information on the committee’s processes and practices relating to the compensation of our board and executive officers.
 
Our Board has determined that each member of the compensation committee is “independent” under the New York Stock Exchange listing standards and our corporate governance guidelines. Our Board also has determined that each member qualifies as a “non-employee director” under Rule 16(b)(3) of the Securities Exchange Act of 1934 and that each member qualifies as an “outside director” under Section 162(m) of the Code.
 
Nominating and Corporate Governance Committee
 
In 2009, our nominating and corporate governance committee met seven times and each member of the committee attended every meeting that occurred. Our nominating and corporate governance committee:
 
  •  oversees and assists our board of directors in identifying, reviewing and recommending nominees for election as directors;
 
  •  advises our board of directors with respect to board composition, procedures and committees;
 
  •  recommends directors to serve on each committee;
 
  •  oversees the evaluation of our board of directors and our management; and
 
  •  develops, reviews and recommends corporate governance guidelines, code of ethics and other similar company policies.
 
Our board of directors has determined that each member of our nominating and corporate governance committee is “independent” under the New York Stock Exchange listing standards and our company’s corporate governance guidelines.


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Company’s Leadership Structure, Lead Independent Director and Executive Sessions
 
Our corporate governance guidelines require our board to select its chairman and our chief executive officer in any way that it considers to be in our best interests. Our board believes that an effective leadership structure can be achieved either by combining or separating the chairman and chief executive officer positions as long as the structure encourages the free and open dialogue of competing views and provides for strong oversight of management. Our board further believes that the decision of whether to combine or separate these positions depends upon our particular circumstances at a given point in time. Accordingly, our board has no policy with respect to separating the offices of chairman and chief executive officer, believing that this issue is part of our succession planning and that it is in our best interests for the board to make this determination each time it elects a new chief executive officer.
 
Since 1992 (which includes time served for our predecessor company), Mr. Dolan has served as both the chairman of our board of directors and our chief executive officer. Our board believes that Mr. Dolan is best situated to serve as its chairman because he is very familiar with our business and the industries we serve and is most capable of effectively identifying the opportunities (including potential acquisitions) and challenges we face. Because of his long service to us as both chief executive officer and chairman, our board believes that Mr. Dolan is in the best position to lead discussions on and execute our operating strategy and develop agendas to ensure our board is focusing on the issues that are most important to our long-term growth. Therefore, we believe that Mr. Dolan generally speaking for and leading both the company and our board is appropriate and in our best interests.
 
Our non-employee directors have designated Mr. Christianson, the chair of our nominating and corporate governance committee, to serve as the board’s lead independent director for an indefinite term. Like Mr. Dolan, Mr. Christianson is a founder of our company and has served on our board (including the board of our predecessor company) since 1992. Mr. Christianson sets the agenda for and presides over all executive sessions of the non-employee directors of our board. In addition, Mr. Christianson performs those duties our board delegates to him to assist the board in fulfilling its responsibilities to us. Our board meets regularly in executive session, without Mr. Dolan and other members of our management team, and Mr. Christianson acts as the board’s liaison in discussing matters raised in these sessions with Mr. Dolan and other members of our management team.
 
We believe that our current leadership structure, whereby a single person with the knowledge, skills and experience of Mr. Dolan sets the tone and has primary responsibility for managing our operations, allows for decisive leadership and ensures that we are able to communicate our message and strategy clearly and consistently to our stockholders, employees, customers and other stakeholders. Further, we believe our leadership structure provides effective oversight of our board for the following reasons:
 
  •  Mr. Christianson is a strong, independent lead director;
 
  •  Our board has established and follows detailed corporate governance guidelines;
 
  •  Our board regularly and rigorously reviews the leadership structure and assesses its effectiveness;
 
  •  Seven of our eight directors are independent;
 
  •  Each of our board committees is made up entirely of independent directors;
 
  •  Our independent directors meet regularly in executive session (e.g., after each regularly scheduled meeting in 2009);
 
  •  Our compensation committee annually reviews Mr. Dolan’s performance as our chief executive officer and president; and
 
  •  Our directors, as a group, possess a broad range of skills and experience, which we believe, provide the leadership and strategic direction we require to maximize long-term value for our stockholders.
 
Board’s Role in Risk Oversight
 
From time to time, we are exposed to risks, including strategic, operational, financial and compliance risks. Our management has designed an enterprise-wide risk management process to identify, monitor and


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evaluate these risks. Our board of directors is responsible for overseeing our risk management process and ensuring that this process, as designed, is adequate to effectively manage the risks that we face. Annually, our board reviews the risk assessments undertaken by our management team and assists us in ensuring that we have policies and practices in place to mitigate potential risks we have identified.
 
While our board is ultimately responsible for overseeing our risk management, our audit committee assists our board in fulfilling this responsibility by working with our management team to evaluate and assess our financial risk exposure and plans we have implemented to monitor and mitigate these risks. These risks include threatened and pending litigation, published reports that raise material issues regarding our financial statements or accounting policies, tax matters, legal and regulatory compliance, and matters that could materially impact our internal control over financial reporting, disclosure controls and financial reporting. At each meeting of our audit committee, our chief financial officer reports to the audit committee on these risks and other enterprise risks we are facing, highlighting any new risks that may have arisen since the committee last met. Our audit committee updates the board on these discussions and the results of the risk assessments that the committee has reviewed. The audit committee further ensures that our management updates and presents its enterprise risk assessment to the board at least annually. We have designed the audit committee’s role in risk management oversight to provide our board visibility regarding identifying and assessing the critical risks we face, as well as mitigation strategies we have employed to manage these risks.
 
In addition, our compensation committee evaluates the compensation programs and practices for certain key employees to ensure these programs are designed so these key employees are incentivized to make decisions that lead to long-term value for our stockholders, without encouraging excessive behavior and risks that are reasonably likely to have a material adverse effect on us.
 
Director Compensation
 
The following table provides information for the year ended December 31, 2009, regarding all plan and non-plan compensation awarded to, earned by or paid to each person who served as a director during 2009.
 
                                 
    Fees Earned or
  Option
  All Other
   
Name
  Paid in Cash   Awards(2)   Compensation   Total
 
James P. Dolan(1)
  $     $     $     $  
John C. Bergstrom
    44,925       39,679       4,618 (3)     89,222  
Anton J. Christianson
    43,520       39,679             83,199  
Arthur F. Kingsbury
    34,830       30,284       7,731 (3)     74,381  
Jacques Massicotte
    40,100       36,017             76,117  
Lauren Rich Fine
    33,125       30,284             63,409  
George Rossi
    37,000       33,946             70,946  
 
 
(1) Mr. Dolan does not receive compensation for his service to us as a director. See “Executive Compensation-Summary Compensation Table” in this proxy statement for information about the compensation we paid to Mr. Dolan during the year ended December 31, 2009.
 
(2) We calculated the amounts in these columns, which represent the aggregate grant date fair value of the equity awards, using the provisions of FASB ASC Topic 718. See Note 14 to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Application of Critical Accounting Policies and Estimates — Share-Based Compensation Expense,” both included in our annual report on Form 10-K for the year ended December 31, 2009, that we filed with the SEC on March 8, 2010, for information regarding the assumptions used in the valuation


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of equity awards. On May 15, 2009, we granted to each non-employee director non-qualified options to purchase our common stock as follows:
 
         
Name
  Number of Options
 
John C. Bergstrom
    7,413  
Anton J. Christianson
    7,413  
Arthur F. Kingsbury
    5,658  
Jacques Massicotte
    6,729  
Lauren Rich Fine
    5,658  
George Rossi
    6,342  
 
The options have an exercise price equal to $12.51 per share, the closing share price of our common stock on the grant date, which was also the date of our 2009 annual meeting. The number of options we granted to each non-employee director had a target economic value that was 100% of the annual retainer and attendance fees we expected to make to these directors during the 2009 calendar year. The compensation committee determined the target economic value in the same manner as described for the named executive officers in “Long-Term Equity Incentive Compensation” later in this proxy statement. These stock options vest in four equal annual installments beginning on May 15, 2010, and terminate seven years after the grant date.
 
In addition to those stock options awarded to our directors in 2009, each of our directors who served in 2009 had the following other stock option awards outstanding at December 31, 2009:
 
                                 
    Option Awards
    Number of
  Number of
       
    Securities
  Securities
       
    Underlying
  Underlying
       
    Unexercised
  Unexercised
  Option
  Option
    Options
  Options
  Exercise
  Expiration
Name
  Exercisable   Unexercisable   Price   Date
 
John C. Bergstrom(a)
    1,719       5,157     $ 16.52       05/13/2015  
(b)
    6,380       6,379       14.50       08/01/2014  
Anton J. Christianson(a)
    1,719       5,157       16.52       05/13/2015  
(b)
    5,914       5,912       14.50       08/01/2014  
Arthur F. Kingsbury(c)
    2,711       8,136       18.00       08/11/2015  
Jacques Massicotte(a)
    1,646       4,940       16.52       05/13/2015  
(b)
    4,980       4,979       14.50       08/01/2014  
Lauren Rich Fine(c)
    2,711       8,136       18.00       08/11/2015  
George Rossi(a)
    1,719       5,157       16.52       05/13/2015  
(b)
    5,602       5,601       14.50       08/01/2014  
 
(a) On May 13, 2008, we granted nonqualified stock options to each of the non-employee directors (except Mr. Kingsbury and Ms. Rich Fine, who were not directors on that date) in the amounts set forth opposite each non-employee director in the table above. The stock options vest and become exercisable in four equal installments beginning on May 13, 2009.
 
(b) On August 1, 2007, we granted nonqualified stock options to each of the non-employee directors (except Mr. Kingsbury and Ms. Rich Fine, who were not directors on that date) in the amounts set forth opposite each non-employee director in the table above. The stock options vest and become exercisable in four equal annual installments beginning on August 1, 2008.
 
(c) On August 11, 2008, we granted nonqualified stock options to Mr. Kingsbury and Ms. Rich Fine in connection with their appointments to our board. The stock options vest and become exercisable in four equal annual installments, beginning on August 11, 2009.


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(3) We offer medical coverage under our medical insurance plan to our directors at no cost to them. During 2009, Messrs. Bergstrom and Kingsbury were the only directors who participated in our group health plan. We self-insure for health insurance and the amount shown is the gross amount of the premiums we set for the medical coverage elected by these two directors.
 
The table below describes the cash fees we paid to each non-employee director for his or her services as a director and for services on board committees for the year ended December 31, 2009, and that we will pay our non-employee directors during the year ending December 31, 2010. The compensation committee reviews the payments we make to directors for serving on our board and the board’s committees and recommends proposed changes to our board for approval on an annual basis. From time to time, the committee collects and reviews information about director compensation for comparably-sized public companies. In determining the board fees for 2010, the committee reviewed and considered information provided by Hewitt Associates. For 2010, the committee recommended an increase to the fees because, after reviewing a Hewitt survey of director compensation for comparably-sized companies, it determined that the retainer and other cash fees paid to our directors were well below the average of these companies. In addition, as the committee did not recommend an increase to the board fees in 2009 consistent with our overall policy of not granting increases in base salary in 2009, the committee believed an increase was appropriate in 2010 and necessary to more closely align our director compensation with that paid to the directors of our peers.
 
                 
    Amount of Fee
Type of Fee
  2009   2010
 
Annual Retainer (Board Services)(1)
  $ 20,800       26,000  
In-Person Board Meetings
    1,025       1,400  
Telephone Board Meetings
    525       600  
Annual Retainer (Committee Services)(1)
    4,100       5,200  
Annual Committee Chair Retainer(1)
    4,100       8,000  
In-Person Committee Meetings
    525       650  
Telephone Committee Meetings
    250       325  
 
 
(1) We pay annual retainers for board, committee and committee chair services in equal quarterly installments.
 
The stock option grants to non-employee directors in 2009, as described above, reflect our policy, which the board adopted in December 2007, to grant to each non-employee director non-qualified stock options exercisable for shares of our common stock or other equity awards on the date of each regular annual stockholders meeting if such director is elected at such meeting to serve as a non-employee director or continues to serve as a non-employee director. We use a formula that provides for awards with a certain targeted economic value, calculated in the same manner as described for the named executive officers in “Compensation Discussion and Analysis — Long-Term Equity Incentive Compensation” later in this proxy statement. The economic value of the awards would be equal to a percentage (100% in 2009 for continuing directors and 200% in 2009 for new directors) of the expected cash payments to be made to such non-employee director in the form of the annual retainer and attendance fees, assuming the director attends all board meetings and the meetings of committees for which he or she is a member, during the applicable year.
 
In 2010 and for future years, we expect to continue to make grants of stock options (1) to each continuing and re-elected director coincident with each annual stockholders meeting having a target economic value that is 100% of the expected cash payments to be made during the calendar year and (2) to each newly elected director having a target economic value equal to 200% of the cash payments we would have expected to make during the calendar year in which the director is elected if he or she had served us as a director for the entire year. For example, in the first quarter of 2010, we granted an option exercisable for the purchase of 9,477 shares of our common stock to Mr. Stern, who was appointed to our board in January. The option had a target economic value of $68,900, which was 200% of the cash fees we would expect to pay him during 2010.
 
All directors are also reimbursed for their reasonable out-of-pocket expenses incurred in attending board and committee meetings and associated with board or board committee responsibilities. We also offer medical coverage under our self-insured medical plan to our directors at no cost to them. In addition, we reimburse our directors up to $5,000 annually in connection with training related to their service on our board.


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From time to time, the compensation committee may consider and propose special consulting arrangements or other fees for directors for our board’s approval. No director receives, or received in 2009, any payments or equity awards in compensation for his services as a director or on a committee other than as set forth above.
 
Stock Ownership Guidelines for Non-Employee Directors
 
In 2010, our board of directors adopted stock ownership guidelines. These guidelines require each of our non-employee directors to own shares of our common stock, having a value equal to 300% of the annual retainer for board services (based on the closing sales price for a share of our common stock on the measurement date). Our non-employee directors have a period of five years to fully comply with the guidelines and we measure their ownership on January 1 of each year. Under the phase-in provisions of our guidelines, each of our non-employee directors, except Mr. Stern, must own shares of our common stock, having a value at least equal to the percentage of the target level set forth for each measurement date below:
 
                 
January 1, 2010
  January 1, 2011   January 1, 2012   January 1, 2013   January 1, 2014
 
20% of Target Level
  40% of Target Level   60% of Target Level   80% of Target Level   100% of Target Level
 
For purposes of this table, “target level” means 300% of the annual retainer for board services that we would pay our non-employee directors during the calendar year in which the measurement date occurs. So, for example, for our non-employee directors, except Mr. Stern, to fully comply with our ownership guidelines on January 1, 2014, such directors would need to own shares of our common stock, having a value at least equal to 300% of the annual retainer for board services that we would pay our non-employee directors in 2014. For Mr. Stern, the first measurement date of the five year phase-in is January 1, 2011. For each new non-employee director appointed or elected to our board in the future, the five-year phase-in period will begin on January 1 following the effective date of the director’s appointment or election to our board.
 
For purposes of satisfying these guidelines, the non-employee directors may use stock they own directly or for which they have investment and/or voting control and unvested shares of restricted stock that we may grant to them in connection with their service as directors. As of the date of this proxy statement, all of our non-employee directors, except Mr. Stern, have met the first year phase-in requirement of holding 20% of the targeted number of shares of our common stock. As discussed above, Mr. Stern, who joined our board in January 2010, is not yet subject to these guidelines.
 
Our named executive officers are also subject to these stock ownership guidelines. You should refer to “Compensation Discussion and Analysis — Policies related to Compensation — Stock Ownership Guidelines” for information about how these guidelines affect our named executive officers.
 
Director Independence
 
We have a policy that our board consists of a majority of outside directors who are independent and that our audit, compensation and nominating and corporate governance committees consist solely of independent directors. A director is “independent” if our board, as a whole, affirmatively determines that the director has no material relationship with us (or our consolidated subsidiaries) either directly or as a partner, shareholder or officer of an organization that has a relationship with us (or our consolidated subsidiaries). In determining whether a relationship is material and thus whether a director is independent, our board uses the “independence” tests set forth in Section 303A.02 of the New York Stock Exchange’s Listing Company Manual. In addition, our board also has adopted specific independence guidelines that conform to, or augment, the independence tests prescribed by the New York Stock Exchange. Under these guidelines, a director will not be independent if, within the last three years:
 
  •  Employment Relationship:  A director is or has been an employee of Dolan Media Company, excluding employment as an interim chairman of the board or chief executive officer, or whose immediate family member is or has been an executive officer of Dolan Media Company.
 
  •  Compensation:  A director who received, or whose immediate family member received, more than $120,000 per year in direct compensation from us or any of our consolidated subsidiaries other than (1) director and committee fees and pension or other forms of deferred compensation for prior service


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  (provided the compensation is not contingent on continued service), (2) compensation received by a director for service as an interim chairman of the board or chief executive officer; and (3) compensation received by an immediate family member of the director for service as a non-executive employee.
 
  •  Relationships with Auditors:  A director is or has been affiliated with or employed by, or a member of a director’s immediate family is or has been affiliated with or employed in a professional capacity, by our (or our consolidated subsidiaries’) present or former internal or external auditor.
 
  •  Compensation Committee Relationships:  A director, or a member of the director’s immediate family, is or has been employed as an executive officer of another company where one of our (or of our consolidated subsidiaries’) executive officers serves on that company’s compensation committee.
 
  •  Business Relationships:  A director is or has been a director, an executive officer or an employee, or a member of a director’s immediate family is or has been a director or executive officer, of a company (including customers or suppliers) that has made payments to, or has received payments from, us (or any of our consolidated subsidiaries) for property or services in an amount that, in any single fiscal year, exceeds the greater of $1 million or 2% of our or the director’s company’s consolidated gross revenues.
 
  •  Charitable Relationships:  A director, or a member of a director’s immediate family, is or has been a director or an executive officer of a charitable organization that receives payments from us (or any of its consolidated subsidiaries) in an amount that, in any single fiscal year, exceeds the greater of $1 million or 2% of our or the director’s charitable organization’s consolidated gross revenues.
 
  •  Debt Arrangements:  A director, or a member of a director’s immediate family, is or has been indebted to us (or any of our consolidated subsidiaries) in an amount that at any time exceeds $100,000 or such indebtedness is not on arm’s-length terms.
 
  •  Advisor Relationships:  A director, or a member of a director’s immediate family, is a principal of a law firm, an investment banking firm, a financial advisory firm or a consulting firm that performs services for us (or any of our consolidated subsidiaries), and payments made by us (or any of our consolidated subsidiaries) to the firm in any single year exceed the greater of $1 million or 1% of our or the firm’s consolidated gross revenues.
 
These independence guidelines are part of our corporate governance guidelines, which are available under Corporate Governance in the Investor Relations section of our web site at www.dolanmedia.com. For purposes of the New York Stock Exchange’s independence tests and our independence guidelines, an immediate family member is a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares the person’s home. In addition to applying the NYSE independence tests and our independence guidelines, the board considers all relevant facts and circumstances, and considers the issue from the standpoint of both the director and person or organization affiliated with the director.
 
Members of our audit committee will not be considered independent if the member directly or indirectly accepts any consulting, advisory or other compensation fee from us (or any of our consolidated subsidiaries), other than compensation as a director or a member of our board’s committees, or is an affiliated person of us (or any of our consolidated subsidiaries). A director is an affiliated person if the director directly or indirectly controls, is controlled by, or is under common control with us (or any of our consolidated subsidiaries), including an executive officer, employee, general partner or managing member of the affiliated person. A director will not be deemed to be in control of us (or one of our consolidated subsidiaries) if the director does not beneficially own more than 10% of our common stock and is not an executive officer of us or our consolidated subsidiary.
 
In accordance with these guidelines, our board undertook its annual review of director independence at the regularly scheduled board meeting following our 2009 annual meeting of stockholders. During this review, our board considered transactions and relationships between each director or any member of his or her immediate family and us and our consolidated subsidiaries. Our board also considered whether there were any


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transactions or relationships between directors or any member of their immediate families (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder). For example, the board also reviewed relationships between Messrs. Bergstrom, Christianson and Dolan, who also serve on the board of directors of Peoples Educational Holdings, Inc. (NASDAQ: PEDH) together. Also, in connection with his appointment to our board in January 2010, our board evaluated the independence of Mr. Stern.
 
Based on this review, our board determined that no such transactions or relationships existed or they were immaterial, including the fact that Messrs. Dolan, Bergstrom and Christianson serve on another board together, because they did not approach the thresholds set forth in either the New York Stock Exchange’s independence tests or our independence guidelines.
 
In addition to the foregoing, several of our directors were designated to our board pursuant to the rights of stockholders under an amended and restated stockholders agreement dated September 1, 2004. These directors were Messrs. Dolan and Rossi. The rights of the stockholders who designated these directors terminated upon the consummation of our initial public offering. Both Messrs. Dolan and Rossi are the Board’s nominees for election as directors at the 2010 annual meeting. See “Proposal 1— Election of Directors” below for more information.
 
As a result of this review, our board has affirmatively determined that each of our non-employee directors are independent. The board has also determined that no members of the audit committee received any compensation from us other than directors’ fees and, in the case of Mr. Kingsbury, medical benefits for the last three years. Mr. Dolan is considered an inside director because of his employment as our chairman, chief executive officer and president.
 
Director Nominations
 
Our nominating and corporate governance committee is responsible for conducting searches and identifying, reviewing and evaluating candidates for election to our board. In addition to identifying their own candidates, the committee also considers candidates suggested by stockholders. If you are interested in recommending a person to the nominating and corporate governance committee to serve as a director of our company, you must notify the corporate secretary in writing no later than December 16, 2010. Your recommendation should include biographical information about your proposed candidate as well as the supporting information required by our bylaws and our corporate governance guidelines. Our bylaws require that you disclose the following additional information: (1) information regarding any stockholder associated with you; (2) a description of any derivative positions and other hedging transactions that you or any stockholder affiliated with you may have entered into; and (3) a description of any agreement, arrangement or understanding that your proposed candidate is or intends to become a party to with respect to how your proposed candidate, if elected, will act or vote on any issue coming before our board or pursuant to which another person will compensate or indemnify your proposed candidate, if elected, for his or her service as our director.
 
The nominating and corporate governance committee will review and evaluate your proposed candidate, along with any potential candidates the committee has identified through its candidate searches. Provided that you have timely submitted your candidate in accordance with our bylaws, as amended, the committee will give appropriate consideration to your candidate as it does to our other candidates. If an incumbent director has consented to re-nomination and that director continues to be qualified and has satisfactorily performed his duties and no reason otherwise exists as to why this director should not stand for re-election, the committee’s policy is to propose the incumbent director to our board for re-election. After evaluating all the candidates, the committee will recommend candidates to our board to be included as our board’s nominees for our next annual meeting. The committee makes its recommendations based upon the director criteria described in our corporate governance guidelines. Our guidelines require that our directors possess the highest personal and professional ethics; have sufficient time to carry out their duties and responsibilities effectively; and be committed to serving on our board for an extended period of time. In addition, the nominating and corporate governance committee considers the candidate’s experience, business skills, judgment and the existence of conflicts of


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interest between the candidate and us. In addition, although our board does not have a policy with regard to the consideration of diversity in identifying director nominees, among the many factors that our nominating and corporate governance committee carefully considers are the benefits to us of diversity, including gender and racial diversity, in board composition. Further, our board does not discriminate on the basis of race, gender or ethnicity and is supportive of any qualified candidate that would also provide our board with more diversity, including diversity in skills and experiences.
 
Our bylaws are available on the SEC’s web site (www.sec.gov) as Exhibit 3.2 to our current report on Form 8-K filed with the SEC on December 18, 2008. Our corporate governance guidelines are available in the Corporate Governance section of our web site under Investor Relations at www.dolanmedia.com. You may also request copies of the bylaws and corporate governance guidelines by sending a written request to our corporate secretary. Please refer to “Communications with the Company and our Board” below for information about how to request information from our corporate secretary and the address for sending your candidates for consideration by our nominating and corporate governance committee.
 
Alternatively, if you intend to attend the annual meeting in person and would like to nominate a candidate for election by the stockholders at that meeting (in cases where our board does not intend to nominate your candidate or you have not requested that the nominating and corporate governance committee consider your candidate for inclusion in our board’s slate of nominees), you must comply with the procedures set forth in our bylaws and corporate governance guidelines regarding director nominations. See “Requirements for Submission of Stockholder Proposals” below for information about these procedures.
 
Requirements for Submission of Stockholder Proposals
 
If you intend to bring business appropriate for stockholder action at our next annual meeting and intend to have your stockholder proposal (other than a nominee for election to our board) considered for inclusion in our proxy materials, our corporate secretary must receive your stockholder proposal no later than 5:00 p.m. central daylight time, December 16, 2010. You should send your proposals by registered, certified or express mail, courier, electronic mail or other means that allow you to determine when we received the notice and/or proposal, addressed to the corporate secretary at the address set forth in “Communications with the Company and our Board” below. Your proposal must contain the information required by our bylaws, including the following information: (1) information regarding any stockholder associated with you; and (2) a description of any derivative positions and other hedging transactions that you or any stockholder affiliated with you may have entered into. In addition, you must also comply with Rule 14a-8 of the Securities Exchange Act and other applicable SEC rules regarding the inclusion of your proposal in company-sponsored proxy materials. The advance notice requirements and the procedures set forth in our bylaws are the sole and exclusive means for you to propose business to be heard at our stockholders meetings.
 
If you intend to present a proposal at the next annual meeting, but do not intend to have it included in our proxy materials, you still must comply with the advance notice and other requirements set forth in our bylaws. The bylaws require, among other things, that you give written notice of proposals to our corporate secretary no sooner than December 16, 2010, and no later than February 14, 2011. The written notice must contain the information required by our bylaws, including (1) information regarding any stockholder associated with you; and (2) a description of any derivative positions and other hedging transactions that you or any stockholder affiliated with you may have entered into. If you are nominating a person to be considered as a director, the written notice must also include the supporting information required by our corporate governance guidelines, as well as a description of any agreement, arrangement or understanding that your proposed candidate is or intends to become a party to with respect to how your proposed candidate, if elected, will act or vote on any issue coming before our board or pursuant to which another person will compensate or indemnify your proposed candidate, if elected, for his or her service as our director.
 
If our corporate secretary receives your proposal after the deadlines set forth above, your proposal will not be acted upon at our 2011 annual meeting, and, if applicable, will not be included in our proxy materials for such meeting.


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Communications with the Company and our Board
 
If you would like to communicate with a member of the board of directors, you may send a letter or an email to our board of directors addressed as follows:
 
By mail or courier: Dolan Media Company
Board of Directors
Attn: Corporate Secretary
222 South Ninth Street
Suite 2300
Minneapolis, MN 55402
 
By email: secretary@dolanmedia.com
Subject Line: Communication for Board of Directors
 
Please include the following information in your communication to our board: (1) your address, telephone number and email address (if you have one); (2) if you are a stockholder, a statement of the type and amount of securities you own; (3) if you are not a stockholder, the nature of your interest in us; and (4) any special interest you may have in the subject matter of your communication to our board.
 
Our corporate secretary reviews all correspondence to our board and regularly forwards to our board a summary of correspondence or copies of correspondence that relates to the functions of our board or its committees. These matters include communications regarding governance matters or potential accounting, control or auditing concerns. Our corporate secretary will not forward other communications to our board; however, our corporate secretary may, from time to time, update the chairman of our board with a brief description of communications received, but not forwarded to our board.
 
To request copies of our corporate governance documents, including our committee charters, or to otherwise communicate with our corporate secretary, please send a written request to our corporate secretary at our principal executive offices, 222 South Ninth Street, Suite 2300, Minneapolis, MN 55402 or by email to secretary@dolanmedia.com.


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PROPOSALS
 
Proposal 1 — Election of Directors
 
Our board of directors currently consists of eight directors, divided into three classes as follows: Class 1 (3 directors), Class II (2 directors) and Class III (3 directors). Members in each class are elected to serve for three year terms.
 
Our Board has nominated our chair, James P. Dolan, as well as John C. Bergstrom and George Rossi for re-election to the board of directors to serve until the 2013 annual meeting and until his respective successor is elected and qualified, subject to his earlier death, resignation, retirement or removal. Mr. Dolan, who also serves as our chief executive officer, is not independent. Both Messrs. Bergstrom and Rossi are independent directors and also serve as the chairs of our compensation committee and audit committee, respectively. Messrs. Dolan and Rossi were previously designated as directors pursuant to the terms of an amended and restated stockholder agreement. This agreement terminated upon the consummation of our initial public offering on August 7, 2007.
 
Each of Messrs. Dolan, Bergstrom and Rossi has consented to his respective nomination in this proxy statement and each has indicated that he is willing to serve as a director, if elected. If any of Messrs. Dolan, Bergstrom or Rossi becomes unable or declines to serve before the election at our annual meeting, the proxies may vote any shares represented by proxy that are voted in favor of Messrs. Dolan, Bergstrom or Rossi for a substitute nominee the board has designated unless our board has decided to leave the director position vacant or reduce the size of our board.
 
Nominees for Director for Three-Year Term Ending at 2013 Annual Meeting
 
Class III Directors
 
John C. Bergstrom, age 49, has served as our director since July 2003, and also served as a director of our predecessor company from its inception in 1992 to July 2003. Mr. Bergstrom has served as managing partner of RiverPoint Investments, a St. Paul, Minnesota-based business and financial advisory firm, since June 1995. Mr. Bergstrom is also a director of Peoples Educational Holdings, Inc. (NASDAQ: PEDH), an educational materials publisher; and Znomics, Inc. (OTCBB:ZNOM), a shell public company. Mr. Bergstrom also served as a director of Make Music, Inc. ( NASDAQ:MMUS) from 2004 to 2006. Mr. Bergstrom also serves as a director for several private companies including Tecmark, Inc., a provider of business services focused on loyalty marketing programs; Instrumental, Inc., a provider of technology services to the government sector; Creative Publishing Solutions, Inc., a specialty marketing publisher; Cramer, LLC, an office furniture supplier; and JobDig, Inc., a provider of employment advertising services. Because Mr. Bergstrom has served us for more than seventeen years, he brings an extensive knowledge about our business and industry and its evolution. In addition, he has built his career advising fast-growing companies similar to ours, making him a skilled adviser to us in the areas of corporate governance, executive compensation and other organizational management matters.
 
James P. Dolan, age 60, has served as our president, chief executive officer and chairman of the board since July 2003, and as president, chief executive officer and chairman of the board of our predecessor company rom 1992 to July 2003. Through his long service to our company, both as our chief executive and as a director, Mr. Dolan is uniquely positioned to understand the opportunities and challenges that we face as company and has the most in-depth knowledge about our core businesses and long-term growth strategies. In addition, through the industry experiences described below, he offers us organizational and operational management skills that are critical for leading our company as chief executive officer and our board as its chairman. From January 1989 to January 1993, Mr. Dolan served first as managing director, and then executive vice president, of the Jordan Group, New York City, an investment bank specializing in media. He has previously held executive positions with Kummerfeld Associates, Inc., a media mergers and acquisitions advisory firm in New York and Chicago; News Corporation in New York and San Antonio; Sun-Times Company in Chicago; and Centel Corp. in Chicago, and also was an award-winning reporter and editor at newspapers in Texas. Mr. Dolan is currently a director of each of Advisor Media, Inc., a magazine and


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conference company; Peoples Educational Holdings, Inc. (NASDAQ: PEDH), an educational materials publisher; and The Greenspring Companies, the for-profit arm of The American Public Media Group. He also serves as chairman of the board of Greenspring.
 
George Rossi, age 57, has served as our director since April 2005. Since 1985, Mr. Rossi has provided independent consulting services to Capital NDSL, Inc., a Montréal-based investment company. Mr. Rossi also regularly provides independent consulting services to Radio Nord Communications, a Montréal-based media company. From October 2000 through May 2002, Mr. Rossi served as senior vice president and chief financial officer, and from June 2002 through July 2003, as interim president, of Cinar Corporation, a Montréal-based children’s entertainment company. From January 1983 through September 2000, Mr. Rossi served as chief financial officer and treasurer of Radiomutuel, a Montréal-based public media company. Mr. Rossi currently serves as a director of Student Transportation of America (TSE: STB.UN), a New Jersey-based provider of school bus transportation in the United States, and Radio Nord Communications, a Montréal-based media company, and serves on the investment valuation committee of Investissement Desjardins, a Montréal-based fund. Mr. Rossi is a chartered accountant. He also served as a director for Spectra Premium, a manufacturer of fuel tanks (TSE: SPD) from 2005 to 2008, and two then-public companies: Kangaroo Media, a Montréal-based manufacturer and distributor of portable media devices, where he served from 2006 to 2010; and OFI Income Fund, an Ottawa-based manufacturer and distributor of insulation materials, where he served from 2005 to 2009. Through these experiences, Mr. Rossi is qualified to continue to serve us a director as well as audit committee chair because he offers us an in-depth knowledge and understanding of financial and operational issues that are critical to the management of our company. In addition, Mr. Rossi’s varied industry experiences, including his service on a number of public company boards, makes him a highly valuable director.
 
Vote Required
 
A plurality of the votes of the shares represented in person or by proxy at the annual meeting and entitled to vote on this proposal is required to elect a nominee for director.
 
The board of directors unanimously recommends a vote FOR the election of John C. Bergstrom, James P. Dolan and George Rossi as Class III directors.
 
Directors Continuing in Office
 
Class I Directors (Term ends in 2011)
 
Arthur F. Kingsbury, age 61, has served as our director since June 2008. Mr. Kingsbury has more than thirty-five years of business and financial experience in the media and communications sectors and is currently a private investor. His experience includes financial, senior executive and director positions at companies engaged in publishing, internet research, radio broadcasting, cable television, and cellular telephone communications. Mr. Kingsbury is well qualified to serve on our board because of his extensive experience in managing and leading fast growing companies, particularly in the media sector. During his career he has been president and chief operating officer of VNU-USA, Inc., vice chairman and chief operating officer of BPI Communications, Inc., and chief financial officer of Affiliated Publications, Inc. Currently Mr. Kingsbury also serves on the board of HSW International, Inc. (NASDAQ: HSWI), an internet publisher and web site developer, and Solera Holdings, Inc. (NYSE: SLH), a provider of claims processing software and information for automobile insurance companies. He served as a director on the boards of then-public companies: NetRatings, Inc., a provider of web site analytics from 2000 to 2007 and Affiliated Publications, Inc., the former parent company of the Boston Globe, and McCaw Cellular Communications, Inc., an operator of cellular telephone systems, during the late eighties and early nineties.
 
Lauren Rich Fine, age 50, has served as our director since July 2008. Ms. Rich Fine serves as a practitioner in residence at Kent State University’s College of Communication and Information, where she teaches and is helping the school develop its curricula to serve the changing media landscape. She recently completed a term on the advisory board of the Poynter Institute, a school for journalists. Previously, Ms. Rich Fine was managing director at Merrill Lynch & Co. in the Economics & Securities Research Division covering the publishing, information, advertising and online industries. During her 19-year equity research career at


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Merrill Lynch, Ms. Rich Fine was a ranked member of the Institutional Investor All-American Research Team for 14 years, holding the number one position for 11 years. Her experience as an analyst, her extensive industry connections, and her deep insights into large numbers of comparable fast-growing companies makes her a valuable resource for our board. Ms. Rich Fine is also a certified financial analyst.
 
Gary H. Stern, age 65, has served as our director since January 2010. Prior to joining our board, Mr. Stern served as the president and chief executive officer of the Federal Reserve Bank of Minneapolis from 1985 until his retirement in 2009. He joined the Federal Reserve Bank of Minneapolis as its senior vice president and director of research in 1982. Prior to 1982, he was a partner in a New York based consulting firm and also spent seven years at the Federal Reserve Bank of New York. He has also served on the faculties of Columbia University, Washington University and New York University. Through his career leading the Federal Reserve Bank of Minneapolis and his extensive executive experience, Mr. Stern has a unique understanding of national economic and fiscal conditions, trends and drivers that affect many of our businesses.
 
Class II Directors (Term ends in 2012)
 
Anton J. Christianson, age 57, has served as our director since July 2003, and also served as a director of our predecessor company from its inception in 1992 to July 2003, making him very familiar with our business and industry, as well as the evolution of our business over the last seventeen years. Since October 1980, Mr. Christianson has served as the chairman and managing partner of Cherry Tree Companies, a Minnetonka, Minnesota-based firm involved in investment management and investment banking. Affiliates of Cherry Tree Companies act as the general partner of Adam Smith Fund, LLC and Adam Smith Growth Partners, L.P. Mr. Christianson also serves as a director of each of Peoples Educational Holdings, Inc. (NASDAQ: PEDH), an educational materials publisher; AmeriPride Services, Inc., a provider of customized apparel for companies; Titan Machinery, Inc. (NASDAQ: TITN), a provider of new and used farm and construction equipment; Arctic Cat, Inc. (NASDAQ:ACAT), a manufacturer of snowmobiles and related equipment; and Znomics, Inc. (NASDAQ: ZNOM), a public shell company. Mr. Christianson also served as a director of Capella Education Company (NYSE: CPLA) from 1993 to 2006 and Fair Isaac Corporation (NYSE:FICO) from 1999 to 2009. In addition to his perspective on our business due to his long service to us as a director, Mr. Christianson offers valuable insights regarding investor relations, business and capital strategy, and corporate governance.
 
Jacques Massicotte, age 56, has served as our director since December 2006. Mr. Massicotte is a certified financial analyst and private investor. From December 2000 through February 2004, he served as managing director, investment banking of TD Securities Inc., a Canadian investment banking firm. From 1986 to 2000, Mr. Massicotte served as a financial analyst, covering the Canadian media and communications sectors with Newcrest Capital (1995-2000), RBC Dominion Securities (1994-1995) and Nesbitt Thomson (1986-1994). Through his investment banking experience, and particularly his experience as an analyst covering public companies, Mr. Massicotte offers valuable insight on how our communications, strategies and business will be viewed by analysts and investors in the market.
 
Proposal 2 — Approval of the Dolan Media Company 2007 Incentive Compensation Plan, as amended and restated, which includes authorizing an additional 2,100,000 shares of our common stock for potential future issuance under the plan, and reapproving the performance goals under which compensation may be paid under the plan for purposes of Section 162(m) of the Internal Revenue Code.
 
Background
 
The Dolan Media Company Incentive Compensation Plan was originally adopted in 2006, and our board amended and restated the plan on June 22, 2007, prior to the completion of our initial public offering. The plan, as amended and restated, was approved by our stockholders on July 9, 2007. As of December 31, 2009, we had 734,144 shares of common stock available for issuance under the plan. On March 2, 2010, our board amended and restated the plan, which would, subject to stockholder approval, authorize an additional 2,100,000 shares of our common stock for issuance under the plan. The amended and restated plan included other changes to the plan that were not material. The following table sets forth information regarding the


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number of shares underlying stock options and restricted stock that we have granted since the plan’s adoption in 2006.
 
                                 
    2009     2008     2007     2006  
 
Stock options granted
    414,882       440,750       881,398       126,000  
Stock options forfeited
    (128,239 )     (72,336 )     (14,731 )      
Restricted stock granted
    129,990       54,139       196,519        
Restricted stock forfeited
    (16,104 )     (21,456 )     (24,956 )        
Weighted average basic shares outstanding
    29,831,660       26,985,345       15,868,033       9,253,972  
 
The table below sets forth information regarding securities authorized for issuance under the plan as of December 31, 2009, including those authorized for issuance under an Employee Stock Purchase Plan, which has an effective date after December 31, 2007, but which we have not yet implemented.
 
                         
                Number of Securities
 
    Number of
    Weighted-
    Remaining Available
 
    Securities to be
    Average Exercise
    for Future Issuance
 
    Issued upon
    Price of
    under Equity
 
    Exercise of
    Outstanding
    Compensation Plans
 
    Outstanding
    Options,
    (Excluding Securities
 
    Options, Warrants
    Warrants and
    Reflected in First
 
Plan Category
  and Rights     Rights     Column)  
 
Equity compensation plans approved by security holders
                       
2007 Incentive Compensation Plan
    1,629,760     $ 13.81       734,144 (1)
Employee Stock Purchase Plan
                900,000  
                         
Subtotal
    1,629,760     $ 13.81       1,634,144  
                         
Equity compensation plans not approved by security holders
                 
                         
Total
    1,629,760     $ 13.81       1,634,144  
                         
 
 
(1) Includes 16,104 shares of restricted stock that were forfeited by grantees during 2009, which are available to be reissued under the 2007 Incentive Compensation Plan.
 
We intend to use between 400,000 to 730,000 of the remaining shares available for issuance under the plan in connection with annual equity grants to be awarded in conjunction with the 2010 annual meeting of stockholders. To the extent that our stockholders do not approve the plan, as amended and restated, our ability to issue the equity awards to our non-employee directors and named executive officers as described in “Director Compensation” and “Compensation Discussion and Analysis” will be affected in future years.
 
The purpose of the plan is to attract and retain exceptionally qualified employees, consultants and directors upon whom, in large measure, our sustained progress, growth and profitability depend. By encouraging our employees, consultants and directors to acquire a proprietary interest in our growth and performance, we intend to motivate employees, consultants and directors to achieve our long-term goals and to more closely align such persons’ interests with those of our other stockholders.
 
Why We Are Seeking Stockholder Approval
 
We are seeking stockholder approval of the plan, as recently amended and restated by our board, to obtain approval from our stockholders to add 2,100,000 shares of our common stock to the shares available for grants, for a total share authorization of 4,800,000 shares. If the stockholders do not approve to increase the shares available for grant, we will continue to issue equity awards under the plan until we have used all of the shares authorized for issuance. In addition, we are seeking stockholder approval of the plan, as amended and restated, because such approval would constitute reapproval by the stockholders of the material terms of the performance goals under which compensation may be paid under the plan, for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). In general, under Section 162(m), in order for


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us to be able to deduct compensation in excess of $1 million paid in any one year to our chief executive officer or any of our other named executive officers (other than our chief financial officer), such compensation must qualify as performance-based. One of the requirements of performance-based compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by stockholders at least once every five years. For purposes of Section 162(m), the material terms include the employees eligible to receive compensation, a description of the business criteria on which performance goals may be based, and the maximum amount of compensation that can be paid to an employee under the performance goals.
 
Material Terms of the 2007 Incentive Compensation Plan
 
Summary.  The following description of the plan is only a summary of certain provisions of the plan and is qualified in its entirety by reference to the full text of the plan, marked to show changes including the proposed amendment to Section 4.1, which is included in the electronic copy of this proxy statement as Appendix A. You may also request a copy of the 2007 Incentive Compensation Plan, as amended and restated, including the proposed amendment to Section 4.1, by sending a written request to our corporate secretary. Please refer to “Communications with the Company and the Board” in this proxy statement for information about how to contact our corporate secretary. We have registered the shares authorized for issuance under this plan on Form S-8, which we filed with the SEC on August 1, 2007, and plan to register the additional shares authorized for issuance if the stockholders approve the plan, including the proposed amendment to increase the number of shares available for issuance under the plan.
 
Administration of Plan.  The plan is administered by our compensation committee, which interprets the plan and has broad discretion to select the eligible persons to whom awards will be granted, as well as the type, size and terms and conditions of each award, including the exercise price of stock options, the number of shares subject to awards and the expiration date of, and the vesting schedule or other restrictions applicable to, awards. The committee may establish, amend, suspend or waive any rules relating to the plan, and make any other determination or take any other action that may be necessary or advisable for the administration of the plan. Except as otherwise expressly provided in the plan, all determinations, designations, interpretations and other decisions of the committee are final, conclusive and binding. While the committee has the general authority to administer the plan and the awards to be granted thereunder, our board of directors has the authority to determine, upon the recommendation of the committee, the awards to be made to non-employee directors. In addition, the committee has delegated to our chief executive officer the authority to grant option awards in connection with the hiring of new non-executive employees and/or the promotion of non-executive employees. The chief executive officer, however, may only grant options exercisable for (1) an aggregate of 45,000 shares of our common stock to non-executive employees during each fiscal year and (2) 9,000 shares of our common stock to any one non-executive employee during each fiscal year.
 
Awards.  The plan allows us to grant the following types of awards:
 
  •  options (non-qualified and incentive stock options);
 
  •  stock appreciation rights, or SARs;
 
  •  restricted stock;
 
  •  restricted stock units;
 
  •  deferred shares;
 
  •  performance units;
 
  •  other stock-based units; and
 
  •  annual cash incentive awards.
 
In any calendar year, no grantee may be granted awards for options, SARs, restricted stock, deferred stock, restricted stock units or performance units (or any other award that is determined by reference to the value of shares of our common stock or appreciation in the value of such shares) that exceed, in the aggregate,


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450,000 underlying shares of our common stock. No grantee may be granted cash awards for any grant year that exceed 300% of the grantee’s annual base salary, up to a maximum of $1,000,000 of base salary.
 
Options.  Options may be granted by the committee (or the board of directors or our chief executive officer as provided above) and may be either non-qualified options or incentive stock options. Options are subject to the terms and conditions, including vesting conditions, set by the committee (and incentive stock options are subject to further statutory restrictions that are set forth in the plan). The exercise price for all stock options granted under the plan will be determined by the committee (or our board of directors or chief executive officer as provided above), except that no stock options can be granted with an exercise price that is less than 100% of the fair market value of our common stock on the date of grant. Further, stockholders who own greater than 10% of our voting stock will not be granted incentive stock options that have an exercise price less than 110% of the fair market value of our common stock on the date of grant. The term of all stock options granted under the plan will be determined by the committee (or our board of directors or chief executive officer), but may not exceed 10 years (five years for incentive stock options granted to stockholders who own greater than 10% of our voting stock). No incentive stock option may be granted to an optionee, which, when combined with all other incentive stock options becoming exercisable in any calendar year that are held by that optionee, would have an aggregate fair market value becoming exercisable in the year in excess of $100,000. In the event an optionee is awarded incentive stock options with more than $100,000 becoming exercisable in any calendar year, any incentive stock options having in excess of $100,000 becoming exercisable during the same year will be treated as non-qualified stock options. Each stock option will be exercisable at such time and pursuant to such terms and conditions as determined by the committee (or our board of directors or chief executive officer) in the applicable stock option agreement. Each option gives the grantee the right to receive a number of shares of our common stock upon exercise of the option and payment of the exercise price. The exercise price may be paid by cash (including cash obtained through a broker selling the share acquired on exercise) or, if approved by the committee, shares of our common stock or restricted common stock.
 
Stock Appreciation Rights, or SARs.  All SARs must be granted on a stand-alone basis (i.e., not in conjunction with stock options granted under the plan). A SAR granted under the plan entitles its holder to receive, at the time of exercise, an amount per share equal to the excess of the fair market value (at the date of exercise) of a share of our common stock over a specified price, known as the strike price, fixed by the committee, which will not be less than 100% of the fair market value of our common stock on the grant date of the SAR. Payment may be made in cash, shares of our common stock, or other property, in any combination as determined by the committee.
 
Restricted Stock and Restricted Stock Units.  Restricted stock is our common stock that is forfeitable until the applicable restrictions lapse. Restricted stock units are rights granted as an award to receive shares of our common stock, conditioned upon the satisfaction of restrictions imposed by the committee. The committee will determine the restrictions for each award and the purchase price in the case of restricted stock, if any. Restrictions on the restricted stock and restricted stock units may include time-based restrictions, the achievement of specific performance goals or, in the case of restricted stock units, the occurrence of a specific event. Vesting of restricted stock and restricted stock units is conditioned upon the grantee’s continued employment. Grantees do not have voting rights in restricted stock units. If the performance goals are not achieved or the restrictions do not lapse within the time period provided in the award agreement, the grantee will forfeit his or her restricted stock and/or restricted stock units.
 
Deferred Stock.  Deferred stock is the right to receive shares of our common stock at the end of a specified deferral period. The committee will determine the number of shares and terms and conditions for each deferred stock award, and whether such deferred stock will be acquired upon the lapse of restrictions on restricted stock or restricted stock units. Grantees do not have voting rights in deferred stock, but grantees’ deferred stock may be credited with dividend equivalents to the extent dividends are paid or distributions made during the deferral period.
 
Performance Units.  Performance units are any grant of (1) a bonus consisting of cash or other property the amount and value of which, and/or the receipt of which, is conditioned upon the achievement of certain


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performance goals specified by the committee, or (2) a unit valued by reference to a designated amount of property. Performance units may be paid in cash, shares of common stock or restricted stock units. The committee will determine the number and terms of all performance units, including the performance goals and performance period during which such goals must be met. If the performance goals are not attained during the performance period specified in the award agreement, the grantee will forfeit all of his or her performance units.
 
Annual Incentive Awards.  The plan includes annual incentive awards. The committee will determine the amounts and terms of all annual incentive awards, including performance goals, which may be weighted for different factors and measures. The committee will designate individuals eligible for annual incentive awards within the first 90 days of the year for which the annual cash incentive award will apply, with certain exceptions, and will certify attainment of performance goals within 60 days following the end of each year. In addition, the committee will establish the threshold, target and maximum annual incentive award opportunities for each grantee. Payment may be made in cash, shares of our common stock, options or any other award or any combination as provided in the award agreement or determined by the committee.
 
Performance-Based Compensation.  The objective performance criteria for awards (other than stock options and SARs) granted under the plan that are designed to qualify for the performance-based exception from the tax deductibility limitations of Section 162(m) of the Code, and are to be based on one or more of the following measures relating to the Company and/or any of its subsidiaries:
 
  •  earnings (either in the aggregate or on a per share basis);
 
  •  net income or loss (either in the aggregate or on a per share basis);
 
  •  operating profit;
 
  •  EBITDA or adjusted EBITDA;
 
  •  growth or rate of growth in cash flow;
 
  •  cash flow provided by operations (either in the aggregate or on a per share basis);
 
  •  free cash flow (either in the aggregate or on a per share basis);
 
  •  costs;
 
  •  gross revenues;
 
  •  reductions in expense levels;
 
  •  operating and maintenance cost management and employee productivity;
 
  •  stockholder returns (including return on assets, investments, equity, or gross sales);
 
  •  return measures (including return on assets, equity, or sales);
 
  •  growth or rate of growth in return measures;
 
  •  share price (including growth measures and total stockholder return or attainment by the shares of a specified value for a specified period of time);
 
  •  net economic value;
 
  •  economic value added;
 
  •  aggregate product unit and pricing targets;
 
  •  strategic business criteria, consisting of one or more objectives based on meeting specified revenue, market share, market penetration, geographic business expansion goals, objectively identified project milestones, production volume levels, cost targets, and goals relating to acquisitions or divestitures;
 
  •  achievement of business or operational goals such as market share and/or business development;


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  •  achievement of diversity objectives;
 
  •  results of customer satisfaction surveys; or
 
  •  debt ratings, debt leverage and debt service.
 
The committee may, on the grant date of an award intended to comply with the performance-based exception under Section 162(m), and in the case of other awards, at any time, provide that the formula for such award may include or exclude items to measure specific objectives, such as losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts and any unusual, nonrecurring gain or loss. The committee shall have the discretion to adjust the determinations of the degree of attainment of the pre-established performance goals; provided that any awards designed to qualify for the performance-based exception generally may not be adjusted upward (the committee shall retain the discretion to adjust such awards downward).
 
Change in Control.  Except as otherwise set forth in an award agreement, in the event of a change in control (as defined in the plan) of Dolan Media Company, all awards will become vested, all restrictions will lapse and all performance goals shall be deemed to be met, as applicable, except that no payment of an award shall be accelerated to the extent that such payment would violate Section 409A of the Code. The committee may, in order to maintain a grantee’s rights in the event of any change in control, (1) make any adjustments to an outstanding award to reflect such change in control or (2) cause the acquiring or surviving entity to assume or substitute rights with respect to an outstanding award. Furthermore, the committee may cancel any outstanding unexercised options or SARs (whether or not vested) that have an exercise price or strike price, as applicable, that is greater than the fair market value of our common stock as of the date of the change in control. Under the plan, the committee will also have the ability to cash out any options or SARs (whether or not vested) that have an exercise price or strike price, as applicable, that is less than the fair market value of our common stock as of the date of the change in control.
 
Termination of Employment.  With respect to stock options and SARs granted pursuant to an award agreement, unless the applicable award agreement provides otherwise, in the event of a grantee’s termination of employment or service for any reason other than cause, retirement, disability or death, such grantee’s stock options or SARs (to the extent exercisable at the time of such termination) will remain exercisable until 60 days after such termination and thereafter will be cancelled and forfeited to us. Unless the applicable award agreement provides otherwise, in the event of a grantee’s termination of employment or service due to retirement, disability or death, such grantee’s stock options or SARs (to the extent exercisable at the time of such termination) will remain exercisable until one year after such termination and thereafter will be cancelled and forfeited to us. In the event of a grantee’s termination of employment or service for cause, such grantee’s outstanding stock options or SARs will immediately be cancelled and forfeited to us.
 
Unless the applicable award agreement provides otherwise, or unless otherwise determined by the committee as provided in the plan, (1) with respect to restricted stock, in the event of a grantee’s termination of employment or service for any reason other than death or disability, all unvested shares will be forfeited to us, (2) upon termination because of death or disability, all unvested shares of restricted stock will immediately vest, (3) all performance units and unvested restricted stock units will be forfeited upon termination for any reason, and (4) annual cash incentive awards will be forfeited in the event of a grantee’s termination of employment or service.
 
Amendment and Termination.  Unless the plan is earlier terminated by our board of directors, the plan will automatically terminate on June 22, 2017. Awards granted before the termination of the plan may extend beyond that date in accordance with their terms. The committee is permitted to amend the plan or the terms and conditions of outstanding awards, including to extend the exercise period and accelerate the vesting schedule of such awards, subject to the prohibition on repricing described below. However, no such action may adversely affect the rights of any participant with respect to outstanding awards without the applicable grantee’s written consent and no such action or amendment may violate rules under Section 409A of the Code regarding the form and timing of payment of deferred compensation. Stockholder approval of any such


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amendment will be obtained if required to comply with applicable law or the rules of the New York Stock Exchange.
 
No Repricing Without Stockholder Approval.  In general, without the prior approval of the company’s stockholders, (i) no option or SAR will be repriced, replaced, or regranted through cancellation, (ii) the exercise price of a previously granted option or SAR will not be lowered and (iii) no option or SAR will be exchanged for an option or SAR with a lower exercise price, for any other award or for cash.
 
Transferability.  Unless otherwise determined by the committee, awards granted under the plan are not transferable except by will or the laws of descent and distribution, and except that certain assignments are permitted in connection with marriage dissolutions. The committee will have sole discretion to permit the transfer of an award to certain family members specified in the plan.
 
Adjustments.  In the event a stock dividend, stock split, reorganization, recapitalization, spin-off, or other similar event affects shares such that the committee determines an adjustment to be appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the plan, the committee will (among other actions and subject to certain exceptions) adjust the number and type of shares available under the plan, the number and type of shares subject to outstanding awards and the exercise price of outstanding stock options and other awards.
 
Federal Income Tax Consequences
 
Grant of Options and SARs.  The grant of an option or SAR is not expected to result in any taxable income for the participant.
 
Exercise of Options and SARs.  Upon exercising a non-qualified stock option, the holder must recognize ordinary income equal to the excess of the fair market value of the shares of our common stock acquired on the date of exercise over the exercise price, and we will generally be entitled at that time to an income tax deduction for the same amount. Upon the exercise of a SAR, the amount of any cash received by the participant and the fair market value on the exercise date of any shares of our common stock received are taxable to the recipient as ordinary income and generally deductible by us.
 
Upon exercising an incentive stock option, generally the stock option holder is not taxed (except that an alternative minimum tax liability may arise), and we are not entitled to a deduction so long as the requirements of Section 422 of the Code continue to be met. If the stock option holder meets the employment requirements and does not dispose of the shares of our common stock acquired upon exercise of an incentive stock option until at least one year after date of the exercise of the stock option and at least two years after the date the stock option was granted, gain or loss realized on sale of the shares will be treated as long-term capital gain or loss. If the shares of our common stock are disposed of before those periods expire, which is called a disqualifying disposition, the stock option holder will be required to recognize ordinary income in an amount equal to the lesser of (a) the excess, if any, of the fair market value of our common stock on the date of exercise over the exercise price, or (b) if the disposition is a taxable sale or exchange, the amount of gain realized. Upon a disqualifying disposition, we will generally be entitled, in the same tax year, to a deduction equal to the amount of ordinary income recognized by the stock option holder.
 
Disposition of Shares Acquired Upon Exercise of Options and SARs.  The tax consequence upon a disposition of shares acquired through the exercise of an option or SAR will depend on how long the shares have been held. Ordinarily, any gain realized upon a disposition will be treated as a capital gain, with the precise character of that gain (either short or long term) being determined by the length of time during which the holder has held the shares. Generally, there will be no tax consequence to us in connection with the disposition of shares acquired under an option or SAR.
 
Awards Other than Options and SARs.  As to other awards granted under the plan that are payable either in cash or shares of our common stock that are either transferable or not subject to substantial risk of forfeiture, the holder of the award must recognize ordinary income equal to (a) the amount of cash received or, as applicable, (b) the excess of (i) the fair market value of the shares received (determined as of the date of


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receipt) over (ii) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.
 
As to an award that is payable in shares of our common stock that are restricted from transfer and subject to substantial risk of forfeiture, unless a special election is made by the holder of the award under the Code, the holder must recognize ordinary income equal to the excess of (1) the fair market value of the shares received (determined as of the first time the shares become transferable or not subject to substantial risk of forfeiture, whichever occurs earlier) over (2) the amount (if any) paid for the shares by the holder of the award. We will generally be entitled at that time to an income tax deduction for the same amount.
 
Income Tax Deduction.  Subject to the usual rules concerning reasonable compensation, including our obligation to withhold or otherwise collect certain income and payroll taxes, we will generally be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the plan. However, in general, under Section 162(m), in order for our company to be able to deduct compensation in excess of $1 million paid in any one year to our chief executive officer or certain of our other officers with the highest compensation, the compensation in excess of $1 million must qualify as “qualified performance based compensation” within the meaning of Section 162(m). We expect that options, SARs and certain other performance awards paid under the plan will continue to qualify as performance based compensation. As discussed above, stockholder approval of the amendment of the plan also will constitute reapproval of the material terms of the performance goals for purposes of the approval requirements of Section 162(m) of the Code.
 
Delivery of Shares for Tax Obligation.  Under the plan, the committee may permit participants receiving or exercising awards, subject to the discretion of the committee and upon any terms and conditions it may impose, to deliver shares of our common stock (either shares received upon the receipt or exercise of the award or shares previously owned by the participant) to us to satisfy federal and state tax obligations.
 
Withholding.  We have the right to withhold from any payments made under the plan or to collect as a condition of payment, any taxes required by law to be withheld. The participant may satisfy this obligation in whole or in part by electing to have us withhold shares of common stock having a fair market value up to the minimum amount of withholding taxes required to be collected on the transaction.
 
Plan Benefits
 
The committee in its sole discretion will determine the number and types of awards that will be granted under the plan. Therefore, it is not possible to determine at this time the benefits that will be received by eligible participants if the amendment to the plan is approved by our stockholders. However, to the extent that our stockholders do not approve this amendment, our ability to issue the equity awards to our non-employee directors and named executive officers as described in “Director Compensation” and “Compensation Discussion and Analysis” will be affected in future years. The closing price per share of our common stock as reported on the NYSE on March 29, 2010, was $10.43.
 
Vote Required
 
The affirmative vote of a majority of the shares represented in person or by proxy at the annual meeting and entitled to vote on the proposal is required for the approval of the Dolan Media Company 2007 Incentive Compensation Plan, as amended and restated, which includes increasing the shares of common stock available for issuance under the plan to 4,800,000 shares, and reapproving the performance goals under which compensation may be paid under the plan, for purposes of Section 162(m) of the Code.


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The board of directors unanimously recommends a vote FOR the Dolan Media Company 2007 Incentive Compensation Plan, as amended and restated, which includes increasing the shares of common stock available for issuance under the plan to 4,800,000 shares and reapproving the performance goals under which compensation may be paid under the plan, for purposes of Section 162(m) of the Internal Revenue Code.
 
Proposal 3 — Ratification of Rights Agreement, as amended
 
Background
 
We are currently a party to a Rights Agreement, dated as of January 29, 2009, as amended March 17, 2010, with Mellon Investor Services, LLC. Under the Rights Agreement, we declared a dividend distribution of one preferred share purchase right for each outstanding share of our common stock outstanding on February 9, 2009. Our board has approved the Rights Agreement to enable the board of directors to assure that our stockholders are able to realize the long-term value of an investment in our common stock. Although none of our certificate of incorporation, our bylaws or applicable law require stockholder approval or ratification of a stockholder rights plan or similar arrangement, our board has decided to request stockholder ratification of the Rights Agreement as a matter of sound corporate governance. If the stockholders do not ratify the Rights Agreement, the board will reconsider its decision to keep the Rights Agreement in place, but will not be required to terminate the Rights Agreement. Even if our stockholders ratify the Rights Agreement, our board could terminate the Rights Agreement prior to the distribution date (as described below). If the board does not otherwise terminate the Rights Agreement, it will expire under its current terms on January 29, 2013. We have summarized certain key provisions of the Rights Agreement below. Because this is a summary, it may not contain all of the information that is important to you. Accordingly, this summary is qualified in its entirety by its reference to the specific provisions of the Rights Agreement, as amended, the full text of which we have included as Appendix B to the electronic copy of this proxy statement. You may also request a copy of the Rights Agreement, as amended, by sending a written request to our corporate secretary. Please refer to “Communications with the Company and the Board” in this proxy statement for information about how to contact our corporate secretary.
 
We have recently amended the rights agreement to meet the standards of sound corporate governance, as determined by many institutional investors. As a result, our rights agreement contains a number of provisions that have been tailored to meet these standards and are intended to be “stockholder friendly,” including, but not limited to the following: (1) 20% flip-in and flip-over thresholds as described under “Flip-in and Flip-Over Events and Adjustments” below; (2) a three-year sunset provision as described under “Term” below; (3) no features that would limit the ability of a future board of directors of the company to redeem the rights or otherwise make the rights agreement non-applicable to a particular transaction prior to a person or group becoming an “acquiring person;” and (4) a permitted or qualified offer feature that, under certain circumstances, allows the holders of 10% of our outstanding common stock to direct our board to call a special meeting of stockholders to consider a resolution authorizing a redemption of all of the outstanding rights.
 
Reasons for the Rights Agreement
 
Our board adopted the Rights Agreement as a precautionary measure and believes that it is in our stockholders’ best interests for the following reasons:
 
  •  The rights agreement is intended to help our board ensure that all of our stockholders receive fair and equal treatment in the event of a takeover proposal and to safeguard against coercive tactics designed to take control over our company without allowing our stockholders to realize the long-term value of their investment. Our board believes that implementing these safeguards will assist us in preventing an acquirer from gaining control of our company without offering a fair price to our stockholders.
 
  •  The rights agreement provides the board with adequate time to evaluate unsolicited offers and may deter or delay offers that are not in the stockholders’ or the company’s best interests by encouraging the potential acquirer to negotiate with our board to have the rights redeemed before the potential acquirer


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  acquires more than 20% or more of our common stock. Accordingly, the rights agreement allows the board time to pursue alternate strategies to maximize our stockholders’ long-term value.
 
The rights may have certain anti-takeover effects. The rights will cause substantial dilution to any person or group that attempts to acquire us without our board’s approval. As a result, the overall effect of the rights may be to render more difficult or discourage any attempt to acquire us even if such acquisition may be favorable to the interests of our stockholders. Because our board can redeem the rights and amend the rights agreement in any respect prior to a person or group owning more than 20% of our outstanding common stock, the rights should not interfere with a merger or other business combination that our board approves or any other potential acquirer that is willing to make an offer at a fair price or otherwise in our stockholders’ best interests.
 
Our rights agreement is similar to rights agreements that other public companies have adopted and our adoption of this plan was not prompted by any external actions. We have received no hostile communications or takeover approaches of any kind. We adopted the plan to give our board time to evaluate and respond to any unsolicited future attempts to acquire our company and to protect the long-term value of our stockholders’ investment in us.
 
Description of Rights Agreement
 
Distribution of Rights.  On January 29, 2009, our board declared a dividend of one right for each outstanding share of our common stock, $0.001 par value per share, or common stock, to stockholders of record at the close of business on February 9, 2009. Each right entitles the registered holder to purchase from us one ten-thousandth of a share of our series A junior participating preferred stock, or preferred stock, at a purchase price of $40.00 in cash per one ten-thousandth of a share, subject to adjustment. The rights are attached to the certificates representing shares of our common stock and do not trade separately. Until the distribution date, the rights are not exercisable or transferable separately from the common stock.
 
Term.  The rights currently will expire on January 29, 2013, unless earlier redeemed or exchange. If our stockholders do not ratify the Rights Agreement at the annual meeting, our board may, but is not required to, terminate the rights agreement prior to January 29, 2013.
 
Events Causing Exercisability of Rights.  The rights will separate from our common stock after the distribution date which is the earlier to occur of the following:
 
  •  the close of business on the tenth day after the first public announcement that a person or group has become an “acquiring person” (as defined below); and
 
  •  the close of business on the tenth day (or a later date determined by action of our board prior to such time as any person or group becomes an acquiring person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer, which when consummated would result in a person or group becoming an acquiring person.
 
Acquiring Person.  Our rights agreement generally defines an “acquiring person” as a person or group of affiliated or associated persons that have acquired beneficial ownership of at least 20% of our outstanding shares of common stock. As described below, after a person or group becomes an acquiring person, the rights may not be redeemed or amended.
 
Authority of the Board.  When evaluating decisions surrounding the redemption of the rights or any amendment to the rights agreement to delay or prevent the rights from detaching and becoming exercisable as a result of a particular transaction, the board, or any future board, is not subject to restrictions that would limit its ability to redeem the rights or ototherwise make the rights non-applicable to a particular transaction prior to a person or group becoming an “acquiring person.”
 
Flip-in and Flip-Over Events and Adjustment.  After a person or group of affiliated or associated persons becomes an acquiring person, each holder of a right, except an acquiring person, will have the right to receive, upon exercise, shares of our common stock (or, in certain circumstances, cash, property or other securities of the company) having a value equal to two times the purchase price of the right instead of our preferred stock.


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At any time after a person or group of affiliated or associated persons becomes an acquiring person, but prior to the acquisition by an acquiring person of 50% or more of our outstanding shares of our common stock, our board may exchange the rights (other than rights owned by such acquiring person that have become null and void), in whole or in part, without any additional payment, for shares of our common stock, at an exchange ratio of one share of common stock (or of a share of a class or series of the company’s preferred shares having equivalent rights, preferences and privileges) per right (subject to adjustment).
 
At any time after the first date of public announcement by the company or an acquiring person that an acquiring person has become such, if (1) the company is the surviving corporation in a merger with any other company or entity, (2) the company is acquired in a merger or other business combination transaction, (3) 50% or more of the company’s consolidated assets or earning power are sold, or (4) an acquiring person engages in certain “self-dealing” transactions with the company, each holder of a right (other than those of an acquiring person whose rights have become null and void) will thereafter have the right to receive, upon the exercise thereof at the then-current purchase price of the right, that number of shares of common stock of the surviving or acquiring company which at the time of such transaction will have a market value of two times the purchase price of such right.
 
Redemption of Rights.  At any time prior to a person or group of affiliated or associated persons becomes an acquiring person, our board may redeem all, but not less than all, of the rights at a price of $.001 per right, which we refer to as the “redemption price.” The redemption of the rights may be made effective at such time, on such basis and with such conditions as the board in its sole discretion may establish. Immediately upon any redemption of the rights, the right to exercise the rights will terminate and the only right of the holders of rights will be to receive the redemption price. Immediately upon any redemption of the rights, the right to exercise the rights will terminate and the only right of the holders of rights will be to receive the redemption price.
 
Qualified Offer.  A qualifying offer is an offer that, among other things, our board of directors has determined to have the following characteristics:
 
  •  is an all-cash tender offer or stock exchange offer or combination thereof for any and all of our outstanding shares of common stock;
 
  •  is an offer whose per-share price represents a reasonable premium over the highest market price of the common stock in the preceding 18 months, with, in the case of an offer that includes shares of common stock of the offeror, such per-share offer price being determined using the lowest reported market price for common stock of the offeror during the five trading days immediately preceding and the five trading days immediately following the commencement of the offer;
 
  •  is an offer which, within 20 business days after the commencement date of the offer (or within 10 business days after any increase in the offer consideration), does not result in a nationally recognized investment banking firm retained by our board rendering an opinion to the board that the consideration being offered to our stockholders is either unfair or inadequate;
 
  •  is subject only to the minimum tender condition described below and other customary terms and conditions, which conditions shall not include any requirements with respect to the offeror or its agents being permitted to conduct any due diligence with respect to our books, records, management, accountants and other outside advisers;
 
  •  is accompanied by an irrevocable written commitment by the offeror to us that the offer will remain open for at least 120 business days and, if a special meeting is duly requested by our stockholders with respect to the offer, at least 10 business days after the date of the special meeting or, if no special meeting is held within 90 business days following receipt of the notice of the special meeting, for at least 10 business days following that 90-day period;
 
  •  is accompanied by an irrevocable written commitment by the offeror to us that, in addition to the minimum time periods specified above, the offer will be extended for at least 15 business days after any increase in the price offered, and after any bona fide alternative offer is made;


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  •  is conditioned on a minimum of a majority of the shares of our common stock being tendered and not withdrawn as of the offer’s expiration date;
 
  •  is accompanied by an irrevocable written commitment by the offeror to us to consummate promptly upon successful completion of the offer a second-step transaction whereby all shares of our common stock not tendered in the offer will be acquired at the same consideration per share actually paid pursuant to the offer, subject to stockholders’ statutory appraisal rights, if any;
 
  •  is accompanied by an irrevocable written commitment by the offeror to us that no amendments will be made to the offer to reduce the offer consideration or otherwise change the terms of the offer in a way that is adverse to a tendering stockholder; and
 
  •  is accompanied by certifications of the offeror and its chief executive officer and chief financial officer that all information that may be material to an investor’s decision to accept the offer have been, and will continue to be promptly for the pendency of the offer, fully and accurately disclosed.
 
Further, any offers that have cash or common stock as all or partial consideration are subject to further conditions for qualification as “qualifying offers,” as set forth in the Rights Agreement, as amended.
 
Under the qualified offer provisions of our Rights Agreement, as amended, if our board does not hold a special meeting within 90 business days of receipt of the notice from holders of 10% of our outstanding common stock (excluding the acquiring person), the rights will be automatically redeemed at the close of business on the 10th business day following that date. If a meeting is held and the holders of a majority of our outstanding common stock representing a majority of the shares of common stock represented at the meeting at which a quorum is present vote in favor of the redemption of the rights, the qualifying offer will be deemed exempt from the Rights Agreement, provided that no acquiring person has emerged and the qualifying offer continues to be a qualifying offer.
 
Vote Required
 
The affirmative vote of a majority of the shares represented in person or by proxy at the annual meeting and entitled to vote on the proposal is required for ratification of the Rights Agreement, as amended.
 
The board of directors unanimously recommends a vote FOR ratification of the Rights Agreement, as amended.
 
Proposal 4 — Approval of Amendment to Amended and Restated Certificate of Incorporation to Change the Company’s Name to The Dolan Company
 
Our board of directors has approved an amendment to our Amended and Restated Certificate of Incorporation to change the name of the company from “Dolan Media Company” to “The Dolan Company.” Our board is recommending the change to our name because a majority of our revenues are now derived from our Professional Services Division, which provides outsourced services to the legal profession through our subsidiaries, NDeX, DiscoverReady and Counsel Press. While our Business Information Division, which consists of business journals, court and commercial newspapers and other business information products and services, remains an important part of our business, our board believes that the name “Dolan Media Company” no longer fully and accurately describes the breadth of our operations.
 
As approved by our board, the change of our name to “The Dolan Company” will not become effective until our stockholders approve the amendment to our Amended and Restated Certificate of Incorporation and we file it with the Delaware Secretary of State. We anticipate filing the Certificate of Amendment to our Amended and Restated Certificate of Incorporation on May 26, 2010, or as soon as practicable thereafter, if our stockholders approve the amendment at our 2010 annual meeting.
 
If the stockholders approve this proposal, Article FIRST of the Company’s Certificate of Incorporation will be amended to read in its entirety as follows:
 
“The name of the Corporation is “The Dolan Company.”


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As described above, our board believes that changing our name is in our best interests because “The Dolan Company” more accurately reflects our current operations. We have included the full text of the Certificate of Amendment to our Amended and Restated Certificate of Incorporation as Appendix C to the electronic copy of this proxy statement. You may also request a copy of the proposed amendment to our Amended and Restated Certificate of Incorporation by sending a written request to our corporate secretary. Please refer to “Communications with the Company and the Board” in this proxy statement for information about how to contact our corporate secretary.
 
Vote Required
 
Approval of the amendment to our Amended and Restated Certificate of Incorporation to change our name to “The Dolan Company” requires the affirmative vote of the holders of a majority of the shares outstanding and entitled to vote on this matter.
 
The board of directors unanimously recommends a vote FOR the approval of the amendment to our Amended and Restated Certificate of Incorporation, changing our name from “Dolan Media Company” to “The Dolan Company.”
 
Proposal 5 — Ratification of Appointment of Independent Registered Public Accounting Firm
 
Our audit committee has appointed McGladrey & Pullen, LLP, certified public accountants and independent registered public accounting firm, as Dolan Media Company’s independent registered public accounting firm for the year ending December 31, 2010. Our audit committee has engaged McGladrey & Pullen, LLP as our independent registered accounting firm since 2003. Although it is not required by our audit committee’s charter or Delaware law, the audit committee is submitting the selection of McGladrey & Pullen, LLP for stockholders’ ratification at the annual meeting because we believe it is a good corporate practice. If the stockholders do not ratify the committee’s selection of McGladrey & Pullen, LLP, the committee will reconsider its decision, but will not be required to change its decision to appoint McGladrey & Pullen, LLP as the company’s independent registered public accounting firm. Even if our stockholders’ ratify this appointment, our audit committee may change this appointment at any time during the year if it determines that a change would be in our or our stockholders’ best interests.
 
We expect representatives of McGladrey & Pullen, LLP to be present at the annual meeting. They will have an opportunity to make a statement to the stockholders if they desire and you will have an opportunity to ask them appropriate questions.
 
Vote Required
 
The affirmative vote of a majority of the shares represented in person or by proxy at the annual meeting and entitled to vote on the proposal is required for ratification of the audit committee’s appointment of McGladrey & Pullen, LLP, as our independent registered public accounting firm for 2010.
 
The board of directors unanimously recommends a vote FOR ratification of the audit committee’s appointment of McGladrey & Pullen, LLP, as our independent registered public accounting firm for 2010.


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AUDIT COMMITTEE REPORT
 
The audit committee of the board of directors of Dolan Media Company has reviewed and discussed the company’s audited consolidated financial statements for the year end December 31, 2009, with the company’s management, which has primary responsibility for the financial statements. The committee has discussed with the company’s independent registered public accounting firm, McGladrey & Pullen, LLP, the matters required to be discussed by the statement on Auditing Standards No. 61, Communication with Audit Committees, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the PCAOB in Rule 3200T. Further, the committee has received the written disclosures and the letter from the company’s independent registered public accounting firm required by Rule 3526 of the Public Accounting Oversight Board “Communication with Audit Committees Concerning Independence,” and the committee has discussed with McGladrey & Pullen, LLP, the company’s registered public accounting firm, that firm’s independence.
 
Based upon the review and discussions described above, the audit committee recommended to the board of directors that the company’s audited consolidated financial statements be included in its annual report on Form 10-K for the year ended December 31, 2009, for filing with the SEC.
 
Submitted by the Audit Committee
 
George Rossi, chair
Arthur F. Kingsbury
Jacques Massicotte


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AUDIT COMMITTEE MATTERS
 
Fees of the Independent Registered Public Accounting Firm
 
The following table presents fees for professional services rendered by McGladrey & Pullen, LLP for the audit of our consolidated financial statements for the years ended December 31, 2009, and 2008, and fees billed for other services rendered by McGladrey & Pullen, LLP during those periods.
 
Audit and Non-Audit Fees
 
                 
    2009     2008  
    ($ in thousands)  
 
Audit Fees:(1)
  $ 720     $ 999  
Audit Related Fees:(2)
    80       276  
Tax Fees:(3)
           
All Other Fees:
           
                 
Total:
    800     $ 1,275  
                 
 
 
(1) Audit fees are fees billed for professional services for the audit of our annual financial statements and the audit of our internal control over financial reporting. Audit fees also include fees billed for professional services for the review of our financial statements included in our quarterly reports on Form 10-Q.
 
(2) This category relates to all fees for assurance and related services that are reasonably related to the performance of our audit, including audits of acquisition targets.
 
(3) McGladrey & Pullen, LLP does not provide tax compliance, tax advice, tax planning or other tax related services to us.
 
Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services
 
As described earlier in this proxy statement, our audit committee is responsible for appointing and overseeing the work of McGladrey & Pullen, LLP, our independent registered public accounting firm, and has established the following procedures for the pre-approval of all audit, audit-related, and other permissible services that McGladrey & Pullen, LLP provides to us. At this time, McGladrey & Pullen, LLP does not provide any tax services to us.
 
During the first quarter of each fiscal year, the committee determines the type of audit, audit-related, and other permissible services that it expects McGladrey & Pullen, LLP will provide to us during that year. McGladrey & Pullen, LLP then provides the audit committee with detailed information regarding the specific services in those categories and the proposed fee structure for the fiscal year. After reviewing the information McGladrey & Pullen, LLP provides, the committee will pre-approve those services up to a specific fee level for that fiscal year. All other services that McGladrey & Pullen, LLP expects to provide or that exceed the pre-approved fee level require separate pre-approval from the committee. McGladrey & Pullen, LLP and our chief financial officer, Ms. Duncomb, submit joint requests to our audit committee for approval of services requiring the separate pre-approval of our audit committee. These requests include a joint statement, describing whether, in their view, the request is consistent with the SEC’s rules on auditor independence.
 
The policy authorizes our audit committee to delegate to one or more of its members pre-approval authority with respect to permitted services. During the year ended December 31, 2009, and for the fiscal year 2010, our audit committee has delegated its pre-approval authority to its chair, Mr. Rossi. He must report any pre-approval decisions to the audit committee at its next scheduled meeting.
 
Our audit committee pre-approved all audit and permissible non-audit related services that McGladrey & Pullen, LLP provided to us during the year ended December 31, 2008, in accordance with this pre-approval policy. Our audit committee further concluded that McGladrey & Pullen, LLP could provide these services to us and still maintain their independence. You may request a copy of our audit committee’s pre-approval policy by writing to our corporate secretary. See “Communications with the Company and the Board” in this proxy statement for our corporate secretary’s mailing and email addresses.


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EXECUTIVE OFFICERS
 
The following table sets forth information concerning our executive officers, including their age as of the date of this proxy statement.
 
         
Name
 
Age
 
Position
 
James P. Dolan
  60   Chairman of the Board, Chief Executive Officer and President
Vicki J. Duncomb
  53   Vice President, Chief Financial Officer and Corporate Secretary
Scott J. Pollei
  49   Executive Vice President and Chief Operating Officer
Mark W.C. Stodder
  50   Executive Vice President — Business Information
David A. Trott
  49   Chairman and Chief Executive Officer, National Default Exchange
 
You should refer to “Nominees for Director for Three-Year Term Ending at 2013 Annual Meeting” earlier in this proxy statement for biographical information about our chairman, chief executive officer and president, James P. Dolan. Biographical information for our other executive officers is set forth below.
 
Vicki J. Duncomb has served as our vice president and chief financial officer since August 2009. Prior to serving in this capacity, she served as our vice president — finance from July 2006 until August 2009. She has also served as our corporate secretary since April 2007. From February 2000 through March 2006, Ms. Duncomb served as the director of finance and operations for The McGraw-Hill Companies Healthcare Information Group, an Edina, Minnesota-based educational and professional healthcare information provider.
 
Scott J. Pollei has served as our executive vice president and chief operating officer since August 2009 and our executive vice president and chief financial officer from December 2001 to August 2009. From January 1994 to December 2001, Mr. Pollei served as our vice president of finance. Prior to 1994, Mr. Pollei was a senior manager at KPMG LLP. Mr. Pollei is an inactive certified public accountant.
 
Mark W.C. Stodder has served as our executive vice president — business information since February 2005. Prior to serving in this capacity, Mr. Stodder served as our vice president, newspapers, from January 2004 to February 2005; as our chair, Circulation Marketing Board, from May 2001 to January 2004; and as our vice president and publisher, Daily Reporter Publishing Company in Milwaukee, from March 1994 to January 2004. Prior to joining Dolan Media Company, Mr. Stodder held news reporting, editing and executive positions with community newspapers in Los Angeles and Colorado. Mr. Stodder is active in a number of newspaper, media and legislative associations. He is a director of DLNP and the National Newspaper Association, and is the president of the Public Notice Resource Center, a non-profit foundation which tracks and studies public notice legislation across the country. He is a past president of American Court and Commercial Newspapers, Inc.
 
David A. Trott has served as chairman and chief executive officer of National Default Exchange since September 2008 and its president from March 2006 to September 2008. In addition, since January 1992, Mr. Trott has served as the managing attorney of Trott & Trott, P.C., a law firm located in Farmington Hills, Michigan, of which he is the majority shareholder, and the president of Attorneys Title Agency, LLC, a title agency located in Southfield, Michigan. Mr. Trott has also previously served as president of the Michigan Mortgage Bankers Association and the U.S. Foreclosure Network, one of the largest organizations of foreclosure attorneys in the United States.


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COMPENSATION DISCUSSION AND ANALYSIS
 
Overview
 
The compensation committee of our board of directors, or for purposes of this compensation discussion and analysis, the committee, has responsibility for establishing, implementing and administering our executive compensation program. In this section, we discuss certain aspects of our executive compensation program as it relates to James P. Dolan, our chairman, chief executive officer and president; Vicki J. Duncomb, our vice president and chief financial officer (who has served as our principal financial officer since August 1, 2009); Scott J. Pollei, our executive vice president and chief operating officer (who served as our principal financial officer from January 1, 2009, through July 31, 2009); and our two other most highly-compensated executive officers in 2009 (Mark W.C. Stodder, executive vice president, Business Information Division; and David A. Trott, chairman and chief executive officer of NDeX). We have also included Mark Baumbach, our former vice president — technology, who would have been one of our three other most highly compensated executive officers in 2009 if he were employed with us at December 31, 2009. We refer to these individuals as our “named executive officers.”
 
Compensation Philosophy and Objectives
 
The committee’s primary objectives with respect to executive compensation are to (1) attract, motivate and retain talented and dedicated executive officers, (2) tie annual and long-term cash and equity incentives to the achievement of measurable corporate and individual performance objectives, (3) compensate our executives at levels comparable to executives at similar companies to remain competitive in our recruiting, and (4) align the interests of our executives with the long-term interests of our stockholders through award opportunities that will result in the ownership of our common stock. To achieve these objectives, the committee has designed and implemented an executive compensation program for the named executive officers consisting of a mix of the following items:
 
  •  base salary;
 
  •  performance-based short-term cash incentive compensation;
 
  •  long-term equity incentive compensation;
 
  •  perquisites and other benefits; and
 
  •  severance and change in control benefits.
 
The relative mix of compensation for the three primary components (base salary, performance-based short term cash incentive and long term equity incentive) for each of our named executive officers (excluding Mr. Baumbach who was not employed with us at the end of 2009) based on compensation paid in 2009 is set forth in the charts below. We have also presented the targeted 2009 compensation mix for each named executive officer (excluding Mr. Baumbach who was not employed with us at the end of 2009) for comparison purposes. As discussed in “Performance-based Short Term Cash Incentives” below, we paid each of our named executive officers (excluding Mr. Baumbach who was not employed with us at the end of 2009) more than the targeted short-term cash incentive because our performance in relation to each performance metric exceeded the performance targets.
 
     
(PERFORMANCE GRAPH)   (PERFORMANCE GRAPH)


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(PERFORMANCE GRAPH)   (PERFORMANCE GRAPH)
 
Compensation Consultant
 
Since 2006, our compensation committee has engaged Hewitt Associates, a human resources consulting firm, to advise the committee and assist us in ensuring that our compensation plans are consistent with our strategic and financial goals. We do not use Hewitt Associates or any of its affiliated entities for any other work. In 2006 and again in 2008, as a part of this process, Hewitt, in consultation with the committee, developed a peer group for compensation purposes composed of companies with similar revenues and in industries with respect to which we believe we compete for executive talent. The peer group that was developed consisted of public companies that are generally in the business information, business process outsourcing, business services or publishing industries. On February 1, 2010, Hewitt spun-off its executive compensation business into a separate company known as Meridian Compensation Partners, LLC. Since the spin-off, Meridian, rather than Hewitt, has been advising our compensation committee on the matters in which the compensation committee had previously engaged Hewitt.

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Peer Study
 
Hewitt delivered the most recent version of this study to the committee in writing as well by presentation at the committee’s meeting held on October 29, 2008. The 2008 Hewitt study consisted of the following peer group companies, who were chosen because they operate in similar industries and have similar annual revenues to us. As shown by the table below, these twenty companies ranged in size from $83 million to $749 million in revenues, with a mean and median revenue size of $300 million and $206 million, respectively, as compared to our 2009 annual revenues of $263 million.
 
             
        Revenues
Peer Company
  Industry (as Defined by Hewitt & Associates)   (In millions)(1)
 
Advent Software, Inc. 
  Bank office software   $ 240  
Amrep Corporation
  Publication services     166  
Bottomline Technologies, Inc. 
  Payment processing     131  
Concur Technologies, Inc. 
  Business spend processing     194  
Corporate Executive Board, Co. 
  Business research services     557  
Costar Group, Inc. 
  Real estate information services     206  
Courier Corp. 
  Book publisher     285  
Cybersource Corp. 
  E-payment services     181  
Digital River, Inc. 
  Online sale services     381  
Epiq Systems, Inc. 
  Legal technology systems     203  
Factset Research Systems Inc. 
  Financial information services     551  
InfoGroup, Inc. 
  Database services     749  
Interactive Data Corp. 
  Financial information and analytics     725  
Marchex Inc. 
  Online advertising services     145  
Morningstar, Inc. 
  Investment research information     487  
NIC, Inc. 
  Internet services for governments     94  
Online Resources Corp. 
  Payment services     149  
Primedia, Inc. 
  Real estate publishing     314  
SkillSoft Public Limited Company
  E-learning for employers     317  
Value Line
  Investment publications     83  
Webmedia Brands Inc. (formerly Jupiter Media Corp.)
  Online business information     140  
Mean of Peer Companies
      $ 300  
Median of Peer Companies
      $ 206  
Dolan Media Company total 2009 revenues
      $ 263  
 
 
(1) We calculated the revenues for each of our peer companies using information from the most recent four quarters that were publicly available for each company when the Hewitt’s peer study was issued to our compensation committee in October 2008.
 
The peer group study examined the most recently available stockholder meeting proxy information, which for the 2008 study was generally from the 2008 annual stockholders meeting and therefore included 2007 fiscal year compensation information for each of the peer companies.
 
The committee has carefully considered Hewitt’s analyses of the peer group compensation information, as well as other factors in establishing our executive compensation programs. For example, the committee also considers the results of its performance evaluation of the named executive officers an important factor in setting total compensation packages. In general, the committee intends to establish total compensation packages for our named executive officers at or near the 50th percentile level for total compensation paid to executives in similar positions and with similar responsibilities at companies in our peer group but does not require that total compensation packages meet or exceed this level. In particular, the allocation of total compensation for each named


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executive officer among base salary, short-term cash incentive, long-term equity-based incentive and other non-cash benefit components was based, in part, on a review of the results of the Hewitt study, with the objective of providing a significant portion of total compensation in the form of performance-based compensation. The Hewitt study is one, but not the only, factor the committee reviews in setting compensation for our named executive officers. For 2008 and 2009, total compensation packages for our named executive officers were at or near the 50th percentile level of similarly situated executives at our peer companies.
 
Compensation Components
 
Base Salary
 
Base salary is intended to reflect the executive’s skill level, knowledge base and performance record, and takes into account competitive market compensation paid by companies in our peer group for similar positions. The committee reviews the base salaries of our named executive officers on an annual basis, and adjusts base salaries from time to time to realign salaries with market levels, taking into account individual responsibilities, performance and experience, and to comply with the requirements in any applicable employment agreements. The committee approves the base salary of our president and chief executive officer, and, with input from our president and chief executive officer, the base salary for each executive officer below the chief executive officer level.
 
For the year ended December 31, 2009, the committee established base salaries for each of the named executive officers at the same level as the named executive officers’ respective base salaries for the year ended December 31, 2008. This was consistent with an overall decision by us to maintain 2008 salary levels due to the general economic environment. Further, Messrs. Dolan, Pollei and Stodder, who each have employment agreements with automatic increases to their base salaries, executed waivers of their contractual increases. We promoted Mr. Pollei to executive vice president and chief operating officer and Ms. Duncomb to vice president and chief financial officer on August 1, 2009. In connection with those promotions, we increased Mr. Pollei’s and Ms. Duncomb’s salaries to $289,000 and $225,000, respectively.
 
In January 2010, the committee established base salaries for the year ending December 31, 2010, based on a combination of the Hewitt study information, individual performance evaluations, changes in the cost of living in the area where the executive resides, as well as any requirements of employment agreements between us and the executives. The committee also noted that, other than the increases in connection with the promotions of Ms. Duncomb and Mr. Pollei, it had not awarded any increases in base salaries to the named executive officers in 2009. The committee further noted that a part of the consideration for determining Mr. Trott’s base salary level is the fact that he splits his time between NDeX and his law firm, Trott & Trott. The increase in base salaries for our named executive officers ranged between three and eleven percent to meet the committee’s overall goal of compensating our named executive officers similar to the executive officers of our peer companies, as well as providing compensation packages that, in the committee’s judgment, were appropriate given the competitive market for talent. Based upon the Hewitt analysis of our peer groups for 2008, as adjusted for changes in the cost of living, the total target compensation packages for 2010 are approximately equal to, or below, the 50% percentile of the compensation packages for similarly situated executive officers at our peer companies. The committee also noted that salaries are set forth in the employment agreements for all of the named executive officers and that, except in the case of Mr. Trott, will, at a minimum, increase each year at a rate based on a change in the consumer price index specified in these employment agreements. See “Executive Compensation — Employment Agreements” for further information regarding the matters set forth above.


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In January 2010, the committee established the base salaries for each of the named executives for the year ending December 31, 2010, as follows:
 
                                 
                Percent
    2008 Base
  2009 Base
  2010 Base
  Change
Executive Officer
  Salary   Salary   Salary   (2009 to 2010)
 
James P. Dolan
  $ 479,000     $ 479,000     $ 527,000       10.0 %
Vicki J. Duncomb(1)
    200,000       225,000       250,000       11.1 %
Scott J. Pollei(1)
    264,000       289,000       317,000       11.2 %
Mark W.C. Stodder
    232,800       232,800       240,000       3.1 %
David A. Trott
    269,000       269,000       277,000       3.0 %
Mark E. Baumbach(2)
    217,400       217,400              
 
 
(1) Reflects Ms. Duncomb and Mr. Pollei’s base salary for 2009 after their respective promotions, which were effective August 1, 2009. See the “Summary Compensation Table” for actual amounts that we paid Ms. Duncomb and Mr. Pollei during 2009 as base salary. Consistent with the compensation committee’s decision not to increase base salaries at the beginning of 2009, Ms. Duncomb’s and Mr. Pollei’s base salaries from January 1, 2009, through the effective date of their promotions on August 1, 2009, were $200,000 and $264,000, respectively.
 
(2) Mr. Baumbach was no longer employed with us at December 31, 2009.
 
Performance-Based Short-Term Cash Incentives
 
Under our 2007 incentive compensation plan, which includes a cash short-term incentive program, we provide annual short-term cash incentives to our named executive officers. Annually, the committee establishes the target cash incentive for each named executive officer as a targeted percentage of base salary. In addition, the committee scales performance based on achieving results above or below targeted performance-metric levels. This provides the named executive officers with an opportunity to earn more or less than the targeted incentive amount. The maximum payout of this cash incentive is capped at 2 times the target cash incentive. The table below provides the threshold cash incentive, the target cash incentive, and the maximum cash incentive that could have been earned, as well as the actual cash incentive earned, for each named executive officer in 2009.
 
                                         
                    Actual
        Threshold
      Maximum
  Cash
    2009
  Cash
  Target Cash
  Cash
  Incentive
Name
  Base Salary   Incentive(3)   Incentive(4)   Incentive(5)   Earned (6)
 
James P. Dolan
  $ 479,000     $     $ 287,400     $ 574,800     $ 500,076  
Vicki J. Duncomb(1)
    210,417             105,209       210,417       183,063  
Scott J. Pollei(1)
    274,417             137,209       274,417       238,743  
Mark W.C. Stodder
    232,800             116,400       232,800       192,806  
David A. Trott
    269,000             134,500       269,000       210,358  
Mark E. Baumbach(2)
    217,400             108,700       217,400        
 
 
(1) Reflects the actual amounts paid to Ms. Duncomb and Mr. Pollei as base salary during 2009 as their salaries were increased in August 2009, in connection with their promotions to vice president and chief financial officer and executive vice president and chief operating officer, respectively. See “Summary Compensation Table” for more information.
 
(2) Mr. Baumbach’s employment with us ended on July 22, 2009, at which time he had not earned his short-term cash incentive. See “Severance and Other Payments made to Mark E. Baumbach” for information about payments we paid to Mr. Baumbach in connection with the termination of his employment.
 
(3) The named executive officers are entitled to no portion of their cash incentive if the actual performance metrics are 80% or less than the performance target the compensation committee set. The named executive


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officers are entitled to a portion of their bonus if the actual performance metric is more than 80% of the performance target.
 
(4) The named executive officers are entitled to the target cash incentive if the actual performance metrics are equal to (i.e., 100% of) the performance targets the compensation committee set.
 
(5) The named executive officers are entitled to the maximum cash incentive if the actual performance metrics are 150% of the performance targets that the compensation committee set.
 
(6) Reflects the actual amounts earned by each named executive officer in connection with the achievement of the performance targets.
 
The committee sets the performance targets, which our named executive officers must achieve to earn a short-term cash incentive payment. In each case, the performance targets, as established by the committee for 2009, consisted of a combination of cash earnings per diluted share, adjusted EBITDA for Dolan Media Company, adjusted EBITDA for NDeX, adjusted EBITDA for the Business Information Division or other metrics. The relative weight of each performance target as it relates to the named executive officer is set forth in the following table:
 
                                         
        Adjusted
      Adjusted
   
        EBITDA for
      EBITDA for
   
    Cash
  Dolan
  Adjusted
  Business
   
    Earnings per
  Media
  EBITDA for
  Information
   
Name
  Diluted Share   Company   NDeX   Division   Other(1)
 
James P. Dolan
    50 %     50 %                  
Vicki J. Duncomb
    50 %     50 %                  
Scott J. Pollei
    50 %     50 %                  
Mark W.C. Stodder
    34 %                 66 %      
David A. Trott
    34 %           66 %            
Mark E. Baumbach
    34 %                       66 %
 
 
(1) This performance metric consisted of meeting technology spending and other information technology department objectives as set by our chief operating officer.
 
We define cash earnings as net income attributable to Dolan Media Company before (1) non-cash interest income or expense related to the change in fair value of our interest rate swaps; (2) non-cash compensation expense; (3) amortization of intangibles, including the DLNP intangible; (4) non-recurring items of income or expense; and (5) an adjustment to income tax expense related to the reconciling items at the effective tax rate. We define cash earnings per diluted share as cash earnings divided by the weighted average number of diluted common shares outstanding over the period measured. We define adjusted EBITDA for Dolan Media Company as net income (loss) attributable to Dolan Media Company (1) before (a) non-cash interest expense related to redeemable preferred stock; (b) interest expense, net; (c) income tax expense; (d) depreciation and amortization (including the amortization of the DLNP intangible); (e) non-cash compensation expense; (f) noncontrolling interest, and (g) non-recurring income and/or expense, and (2) after cash distributions paid to holders of noncontrolling interest. We calculate adjusted EBITDA for NDeX in the same manner as we calculate adjusted EBITDA for Dolan Media Company, except as follows: (1) we start from net income attributable to NDeX and only add back that portion of each reconciling item that is attributable to our NDeX operations; and (2) we do not add back the amortization expense for our DLNP intangible as it is not attributable to our NDeX operations. We calculate adjusted EBITDA for our Business Information Division in the same manner as we calculate adjusted EBITDA for Dolan Media Company, except as follows: (1) we start with the net income of our Business Information Division; and (2) do not add back non-controlling interest or subtract the cash distributions we pay to the holders of our noncontrolling interests as those reconciling items are not attributable to our Business Information Division.
 
The committee believes that adjusted EBITDA and cash earnings per diluted share are more appropriate measures than EBITDA, earnings per share and other similar GAAP financial metrics, as well as EBITDA, because they are the same primary metrics being used by our management and board of directors to evaluate our financial performance.


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We have grown in large part through acquisitions, many of which were financed with debt. These acquisitions have generally resulted in relatively significant levels of interest expense due to increased debt service obligations and amortization expense due to the amortization of acquired finite-lived intangibles. The committee believes that the combination of increased interest expense and amortization expense renders our accounting profits or losses less meaningful as a measure of success of our business operations than EBITDA or adjusted EBITDA, which the committee believes also serve as a proxy for operational cash flow. The committee expects that we will continue to identify and evaluate potential acquisition opportunities and, accordingly, the committee and our board of directors has established a rigorous process of amending adjusted EBITDA targets during the fiscal year to account for acquisitions.
 
We also believe cash earnings per diluted share provides a meaningful measure of our cash earnings on a per share basis, after both interest and taxes, which are generally paid in cash, but before amortization expense which is a non-cash charge. The committee believes that the combination of amortization expense and certain other non-cash charges related to interest rate swaps renders our accounting earnings per share less meaningful as a measure of success of our business operations than cash earnings per diluted share.
 
The performance targets for the metrics set forth above, along with the actual performance for those metrics, as adjusted by the compensation committee, where applicable, is set forth in the table below (in thousands, except per share amounts and percentages).
 
                         
        2009 Results,
   
    Target for
  as adjusted,
  Percentage
    Performance
  for Performance
  OverPerformance/
Performance Metric
  Metric   Metric(1)   UnderPerformance(3)
 
Cash earnings per diluted share
  $ 0.94     $ 1.39       149 %
Adjusted EBITDA for Dolan Media Company(2)
    67,741       85,151       126 %
Adjusted EBITDA for NDeX(2)
    45,379       53,499       118 %
Adjusted EBITDA for Business Information Division
    25,562       31,944       125 %
 
 
(1) For purposes of determining the 2009 results for the cash earnings per diluted share and adjusted EBITDA for Dolan Media Company performance metrics, the compensation committee added $0.05 and $2.4 million, respectively, which represents the gain from the sale of our interest in GovDelivery, Inc., to the cash earnings per diluted share and adjusted EBITDA for Dolan Media Company metrics that we reported in our fourth quarter 2009 earnings release (which we also furnished to the SEC on Exhibit 99 to our Form 8-K dated February 23, 2010). The committee made this adjustment for compensation purposes because it believed that management should be credited for the gain received from this sale as management had evaluated the investment in GovDelivery and recommended that investment to the board for its approval.
 
(2) The committee increased the adjusted EBITDA performance target during 2009 to account for the acquisitions of DiscoverReady (for Dolan Media Company only) and Albertelli (for NDeX and Dolan Media Company) that occurred during the fourth quarter of 2009.
 
(3) For purposes of this table, “overperformance” means any percentage over 100% and “underperformance” means any percentage under 100%.
 
We developed our target cash earnings per diluted share and adjusted EBITDA goals as a company and for NDeX and the Business Information Division during our annual financial planning process, when we assess our operations, the markets we serve and our competitors, and formulate internal financial projections. Our cash earnings per diluted share and adjusted EBITDA targets for 2009 were established based on a careful examination of the prospects for the business. The committee’s ultimate objective is to set performance targets that are likely to be achieved such that the target cash incentive will be paid out. This would mean that the actual performance metrics would equal the performance targets. Our targeted adjusted EBITDA for Dolan Media Company and NDeX were increased by our committee to reflect acquisitions occurring during 2009. We further note that, in the past three years, we paid our named executive officers at above the targets in both 2007 and 2009 and below the targets in 2008 because in each of 2009 and 2007, the actual results for the performance metrics exceeded the targets the committee had set and in 2008.


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For 2010, the committee has established the target short-term incentive payouts for each of the named executive officers, based on weighted performance metrics, as follows:
 
                                 
        Threshold
      Maximum
    2010
  Cash
  Target Cash
  Cash
Name
  Base Salary   Incentive   Incentive   Incentive
 
James P. Dolan
  $ 527,000     $     $ 316,200     $ 632,400  
Vicki J. Duncomb
    250,000             125,000       250,000  
Scott J. Pollei
    317,000             190,200       380,400  
Mark W.C. Stodder
    240,000             125,000       240,000  
David A. Trott
    277,000             138,500       277,000  
 
                                         
        Adjusted
      Adjusted
   
        EBITDA for
      EBITDA for
   
    Cash
  Dolan
  Adjusted
  Business
  Material
    Earnings per
  Media
  EBITDA for
  Information
  Geographic
Name
  Diluted Share   Company   NDeX   Division   Expansion(1)
 
James P. Dolan
    50 %     50 %                  
Vicki J. Duncomb
    50 %     50 %                  
Scott J. Pollei
    50 %     50 %                  
Mark W.C. Stodder
    25 %                 50 %     25 %
David A. Trott
    25 %           50 %           25 %
 
 
(1) This is a new performance metric for Messrs. Stodder and Trott. As this performance metric relates to Mr. Stodder, “material geographic expansion” means providing business information services in markets that our Business Information Division did not serve at December 31, 2009. As this performance metric relates to Mr. Trott, “material geographic expansion” means providing mortgage default processing services in states where NDeX did not provide these services at December 31, 2009. The compensation committee, with advice from our chief executive officer and chief operating officer, will determine whether a geographic expansion in either the Business Information Division or at NDeX is material.
 
Similar to the process in the prior year, our adjusted EBITDA and cash earnings per diluted share targets for 2010 were established based on a careful examination of the prospects for the business and represent a significant increase over the results of the prior year. These targets were set with the objective of making it equally likely that actual results for each performance metric will exceed the performance target or fall short of those targets. As with 2009, the named executive officers are entitled to a short term cash incentive payment, ranging from the threshold cash incentive to the maximum cash incentive depending upon whether the actual performance metrics exceed the performance targets set by the committee. The named executive officers are entitled to a portion of their short term cash incentive to the extent a performance metric exceeds 80% of the performance target.
 
For more information about expected and earned payouts to the named executive officers under our short term incentive performance plan, please refer to the “Executive Compensation” and the “Grants under Non-Equity Incentive Plans” and “Summary Compensation” tables in that section of this proxy statement.
 
Long-Term Equity Incentive Compensation
 
The committee believes that long-term company performance will be improved through the development of an ownership culture that includes the use of stock-based awards as a part of our executive compensation program. Our incentive plan permits the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, performance shares and other stock awards to our executive officers, employees, consultants and non-employee board members.
 
After consultation with Hewitt and Associates, the committee has determined that equity awards under our 2007 Incentive Compensation Plan should be made on an annual basis using a formula that provides for aggregate awards with an economic value equal to a designated percentage of each named executive officer’s


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base salary. The economic value of an award is calculated based on certain assumptions determined by the compensation committee to be appropriate for compensation purposes, which may or may not be consistent with valuations determined for accounting purposes. In particular, the committee utilizes a value of its common stock based on a weighted average trading price for a period of time, while for accounting purposes the valuation of stock and options granted for compensation purposes is based exclusively on the value of stock as traded on the single date of the issuance of the stock or options. In addition, certain assumptions utilized in the Black-Scholes model for determining the value of stock options for compensation purposes are not the same as the assumptions used in the accounting version of that calculation.
 
For 2009, the committee issued long term equity awards to each named executive officer, having a targeted economic value of 110% of base salary for Mr. Dolan, 75% of base salary for Messrs. Pollei, Stodder and Trott, and 60% of base salary for Ms. Duncomb and Mr. Baumbach. For 2009, the committee allowed each of the named executive officers to decide whether they wanted that targeted economic value in the form of stock options or a mix of 50% stock options and 50% restricted stock. Messrs. Pollei and Trott and Ms. Duncomb elected to take both options and restricted stock. The committee believes it is advantageous to provide executive officers with such a choice, as this can enhance the perceived value of the award to that officer. These grants were issued on May 15, 2009, to each of the named executive officers in the amounts and components set forth in the table below.
 
                 
    Restricted
   
    Stock Grants   Stock Options
 
James P. Dolan
          87,817  
Vicki. J. Duncomb
    5,484       10,000  
Scott J. Pollei
    9,049       16,500  
Mark W.C. Stodder
          29,100  
David A. Trott
    9,221       16,813  
Mark E. Baumbach
          21,740  
 
The restricted stock and stock options we granted vest in four equal annual installments beginning on May 15, 2010. The stock options have an exercise price of $12.51 and have a term of seven years. See the Summary Compensation Table and the Grants under Equity Incentive Plans for more information about the stock options granted to our named executive officers under this plan in 2009.
 
For 2010, the committee increased the targeted economic value of long term equity awarded to Mr. Pollei and Ms. Duncomb to 85% and 75% of base salary, respectively, as a result of their promotions in 2009. The targeted economic value of long term equity awarded to each of Messrs. Dolan, Stodder and Trott did not change. The committee will continue to evaluate this targeted economic value for each named executive officer on an annual basis. The committee again will allow the named executive officers to decide whether they would prefer long term equity compensation in the form of stock options or a mix of stock options and restricted stock. We expect that 2010 awards made under the incentive plan to the named executive officers as well as awards to other management employees may be either non-qualified stock options, restricted stock grants or a combination thereof. “Executive Compensation — Incentive Compensation Plan” for further information regarding our incentive plan. The committee again will allow the named executive officers to decide whether they would prefer long term equity compensation in the form of stock options or a mix of stock options and restricted stock.
 
Perquisites and Other Benefits
 
The committee believes that it has taken a conservative approach to other elements of its compensation program relative to companies similarly situated to us. We provide our named executive officers with various perquisites and other personal benefits that are described below. The committee does not consider these benefits and perquisites when working to establish total compensation at or near the 50th percentile level of executives at companies in our competitive peer group.


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401(k) Plan Contributions.  Our 401(k) retirement savings plan is a qualified defined contribution plan under which employees may make pre-tax contributions into the plan, up to certain specified annual limits. We also provide discretionary employer matching contributions. We provided in 2009, and provide in 2010, a discretionary employer matching contribution of 50% of the first 6% of employee contributions. For highly compensated employees, including the named executive officers, this match was capped at $7,350 for 2009 and 2010.
 
Medical and Dental Insurance.  We self-insure for medical insurance by withholding an amount from participating employees’ compensation to fund our medical insurance program. In 2009 for each of Messrs. Dolan, Stodder, and Baumbach, we withheld $9,268, $11,966 and $8,078, respectively, less than the amount withheld by us from our other employees for applicable medical coverage. We do not self-insure for dental insurance; however, in 2009, we paid $990 on behalf of Messrs. Dolan, Stodder and Baumbach for dental insurance premiums. In 2009, we paid $18,121 to a third party provider on Mr. Trott’s behalf for medical insurance.
 
Club Memberships.  We pay club membership dues to a professional or social club for each of Messrs. Dolan, Pollei and Trott. We believe these club memberships serve to facilitate their roles as our representatives in the local business communities that we serve.
 
Minneapolis Apartment and Commuting Expenses.  Mr. Stodder, who lives in Whitefish Bay, Wisconsin, receives a rent reimbursement for an apartment that we lease for him near our offices in Minneapolis. We also pay for Mr. Stodder’s flights between Minneapolis and his home in Whitefish Bay. In 2009, we reimbursed Mr. Stodder $10,140 for rent and paid $4,969 for such flights.
 
Parking Expenses.  In 2009, we paid parking expenses in the amounts of $3,000, $2,392, and $1,750 for each of Ms. Duncomb, Mr. Pollei and Mr. Baumbach (through July 31, 2009), respectively, because they drove to our headquarters in Minneapolis on a regular basis.
 
Home Office Expenses.  In 2009, we paid $1,704 for home Internet access for Mr. Dolan because Mr. Dolan and his spouse, who administers Dolan Media Newswires, use his home office on a regular basis for business purposes. This amount represents the portion of such payments attributable to personal use of the home office and Internet access, which we have assumed constitutes 25% of total use.
 
Use of Company Apartment in New York City.  We have acquired the right to use an apartment in New York City in connection with our employees’ business travel. We also make this apartment available for the named executive officers to use for personal reasons. During 2009, Mr. Dolan and Ms. Duncomb used this apartment for personal reasons, the benefit of which equaled $650 and $975, respectively.
 
2010 Compensation Plan
 
The graphs below set forth the 2010 target compensation mix (exclusive of perquisites, severance payments and other benefits) for each of the named executive officers (except Mr. Baumbach, who is no longer employed by us).
 
     
(PERFORMANCE GRAPH)   (PERFORMANCE GRAPH)


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Severance Arrangements and Change in Control Plan
 
Severance Benefits.  The committee believes that severance arrangements for our named executive officers will allow us to continue to attract, motivate and retain the best possible executive talent in a marketplace where such protections are commonly offered. In particular, severance benefits help ease the named executive officer’s burden if he or she is unexpectedly terminated by us for reasons other than cause. Accordingly, our employment agreements with each named executive officer contain severance arrangements pursuant to which each such executive officer will receive severance benefits if their employment with us is terminated by us without cause or, with respect to the named executive officers, except Mr. Trott, if such named executive officer terminates his employment with us for good reason. See “Executive Compensation — Employment Agreements” and “Executive Compensation — Potential Payments Upon Termination or Change In Control” for further information regarding these severance benefits and “Executive Compensation — Severance and Other Payments to Mark E. Baumbach” for information about severance benefits we paid to Mr. Baumbach in connection with the termination of his employment relationship with us. Mr. Baumbach did not have an employment agreement with us.
 
Change in Control Plan.  Our board of directors, upon the recommendation of the committee, has adopted an Executive Change of Control Plan that provides each of the named executive officers other than Mr. Trott with certain severance benefits in the event of termination of employment in connection with a qualified change of control event. The committee believes that this change in control plan will provide continuity and focus for these named executive officers in the event of a change in control of the company. See “Executive Compensation — Potential Payments Upon Termination or Change In Control” for further information regarding these severance benefits.
 
Policies Related to Compensation
 
Guidelines for Equity Awards
 
The committee and our board of directors have approved and adopted guidelines for equity awards, or guidelines. Among other things, the guidelines delineate the authority of our board of directors, the committee and our chief executive officer with respect to the grant of equity awards, specify procedures for equity awards to be made under various circumstances, address the timing of equity awards in relation to the availability of information about us and provide procedures for grant information to be communicated to and tracked by our human resources and finance departments. The guidelines require that any stock options or stock appreciation rights have an exercise or strike price not less than the fair market value of our common stock on the date of the grant. See “Executive Compensation — Incentive Compensation — Administration of Plan” for more information regarding the approval of our equity awards by the committee, our board of directors or our chief executive officer.
 
Stock Ownership Guidelines
 
Consistent with the committee’s executive pay philosophy, the board of directors adopted stock ownership guidelines in 2010. These guidelines require that all of our executive officers own shares of our common stock, and establish a targeted level of stockholder ownership with a value equal to the ownership multiple set forth in the table below (based on the closing sales price for a share of our common stock on the measurement date).
 
     
Executive
 
Stock Ownership Multiple
 
Chief Executive Officer
  300% of base salary
Chief Operating Officer
  200% of base salary
Other executive officers
  100% of base salary
 
The phase-in provision of our guidelines require each of our named executive officers, except Mr. Baumbach who is no longer employed by us, to own common stock, having a value equal to the target level set forth for each measurement date below:
 
                 
January 1, 2010   January 1, 2011   January 1, 2012   January 1, 2013   January 1, 2014
 
20% of Target Level
  40% of Target Level   60% of Target Level   80% of Target Level   100% of Target Level


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For purposes of this table, “target level” means the named executive officer’s stock ownership multiple, using base salary for that calendar year. So, for example, for our named executive officers, except Mr. Baumbach, to fully comply with our ownership guidelines on January 1, 2014, such named executive officers would need to own common stock, having a value equal to their respective stock ownership multiple, using their base salary for 2014. For each executive officer appointed in the future, the five-year phase-in period will begin on January 1 following the effective date of the executive officer’s appointment. For purposes of satisfying these guidelines, the executive officers may use stock they own directly or for which they have investment and/or voting control and unvested shares of restricted stock that we may grant to them in connection with their service as officers. As of the date of this proxy statement, each executive officer has met the first year phase-in requirement of holding at least 20% of the targeted number of shares of our common stock.
 
Our non-employee directors are also subject to these stock ownership guidelines. You should refer to “Board Committees and Committee Membership — Stock Ownership Guidelines” for information about how these guidelines affect our non-employee directors.
 
Compliance with Sections 162(m) and 409A of the Code
 
We generally intend for our executive compensation program to comply with Code Section 162(m) and Code Section 409A. The committee currently intends for all compensation paid to the named executive officers to be tax deductible to us pursuant to Section 162(m) of the Code. Section 162(m) provides that compensation paid to the named executive officers, except our chief financial officer, Ms. Duncomb, in excess of $1,000,000 cannot be deducted by us for federal income tax purposes unless, in general, such compensation is performance based, is established by a committee of independent directors, is objective and the plan or agreement providing for such performance based compensation has been approved in advance by stockholders. In the future the committee may determine to provide compensation, or to adopt a compensation program, that does not satisfy the conditions of Section 162(m) if, in its judgment, after considering the additional costs of not satisfying Section 162(m), such compensation or program is appropriate. During the year ended December 31, 2009, none of our named executive officers received non-performance based compensation in excess of the Section 162(m) tax deduction limit.
 
Section 409A of the Code addresses certain nonqualified deferred compensation benefits payable to our executives and provides that, if such benefits do not comply with Section 409A, they will be taxable in the first year they are not subject to a substantial risk of forfeiture. In such case, our executives are subject to regular federal income tax, interest and an additional federal income tax of 20% of the benefit includible in income. In 2008, we amended the employment agreements of Messrs. Dolan, Stodder and Trott, as well as our executive change in control plan, to comply with Section 409A. Ms. Duncomb and Mr. Pollei’s employment agreements were entered into after the effective date of Section 409A.
 
Risk Assessment
 
In the first quarter of 2010, the committee reviewed the company’s compensation policies and practices for executive and management employees who, in the committee’s judgment, had positions with us where their compensation plans could potentially raise material risks to us if we did not design their plans appropriately. These employees included all of our named executive officers, as well as certain highly-compensated management employees in both of our divisions. In selecting the compensation plans of these employees, the committee considered a number of factors, including whether the employee had the ability to direct strategic and operational decisions for a significant operating unit or multiple operating units of the business.
 
The committee reviewed base salary, short-term incentive and equity compensation for each of the employees the committee selected, evaluating both 2009 actual compensation results and 2010 compensation plans. In particular, the committee reviewed these policies and practices to ensure they were designed in a way that did not encourage excessive risk-taking, including evaluating the plans for, among other things: (1) too much focus on equity compensation; (2) too much focus on short-term incentive compensation; (3) uncapped formulas for short-term incentives; (4) highly leveraged payout curves for short-term incentives; (5) incentive


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targets or thresholds set at unreasonably high levels; and (6) steep cliffs on payout plans under short-term incentive formulas.
 
In evaluating the plans, the committee noted certain features of our compensation plans and programs that mitigate and reduce the likelihood that these employees would engage in excessive risk-taking, as follows:
 
  •  All compensation plans are balanced as their design is based on a mix of base salary, short-term incentives and annual equity grants.
 
  •  Base salaries for all employees reviewed have been set at a sufficient level to avoid excessive reliance on short-term cash incentive payments.
 
  •  Short-term cash incentive plan targets are based on reasonable goals and include scaling formulas which result in reasonable incremental payments for achievable incremental results.
 
  •  All short-term cash incentive plans are capped at a maximum payment level relative to targeted level of payment, ranging from 125% to 200% of target.
 
  •  Equity grants include vesting provisions over a four-year period and executive officers are also subject to ownership guidelines, requiring them to hold a certain number of shares during their employment.
 
  •  Equity awards generally include a mixture of both stock options and restricted stock grants, providing for long-term value to the employees selected, which yields a wide variety of stock valuation outcomes.
 
Based on this review and analysis, the committee determined that, for these employees, the company’s compensation policies and practices for 2009, and as proposed for 2010, do not encourage excessive risk taking and, thus, are not reasonably likely to encourage behavior that would have a material adverse effect on us or our operations.


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COMPENSATION COMMITTEE REPORT
 
The compensation committee of the board of directors of Dolan Media Company has reviewed and discussed with management the compensation discussion and analysis required by Item 402(b) of Regulation S-K and included in this proxy statement and incorporated by reference in the company’s annual report on Form 10-K filed with the SEC on March 8, 2010. Based on this review and these discussions with management, the compensation committee recommended to the board of directors that this compensation discussion and analysis be included in the company’s 2010 proxy statement and incorporated by reference in the company’s annual report on Form 10-K.
 
Submitted by the Compensation Committee
 
John C. Bergstrom, chair
Arthur F. Kingsbury
Lauren Rich Fine


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EXECUTIVE COMPENSATION
 
Summary Compensation Table
 
The following table provides information concerning the compensation for services in all capacities to us for the years ended December 31, 2009, 2008, and 2007, earned by our named executive officers. See “Compensation Discussion and Analysis,” “Employment Agreements” and “Severance and Other Payments to Mark E. Baumbach” in this proxy statement for a description of the material factors necessary to understand the information in the table below.
 
                                                                 
                        Non-Equity
       
                Stock
  Option
  Incentive Plan
  All Other
   
Name and Position
  Year   Salary   Bonus(4)   Awards(5)   Awards(5)   Compensation(4)   Compensation(6)   Total
 
James P. Dolan
    2009     $ 479,000     $     $     $ 470,040     $ 500,076     $ 24,772     $ 1,473,888  
President and Chief Executive Officer
    2008       479,000                   420,435       172,000       18,460       1,089,895  
      2007       463,000                   1,003,745       389,000       157,139       2,012,884  
Vicki J. Duncomb(1)
    2009       210,417             68,605       53,525       183,063       11,325       525,935  
Vice President and Chief Financial Officer
                                                               
Scott J. Pollei(2)
    2009       274,417             113,203       88,316       238,743       16,054       730,733  
Executive Vice President and
    2008       264,000                   157,992       79,000       15,439       516,431  
Chief Operating Officer
    2007       255,000                   376,922       179,000       87,300       898,222  
Mark W.C. Stodder
    2009       232,800                   155,758       192,805       33,633       614,996  
Executive Vice President — Business
    2008       232,800                   139,322       105,000       31,016       508,138  
Information
    2007       225,000                   332,579       158,000       57,639       773,218  
David A. Trott,
    2009       269,000             115,355       89,992       210,358       25,451       710,156  
Chairman and Chief Executive Officer,
    2008       269,000       60,000             160,986             28,360       518,346  
NDeX
    2007       260,000       100,000             384,312             19,172       763,484  
Mark E. Baumbach(3)
    2009       127,932                   116,363             338,675       582,970  
Former Vice President — Technology
    2008       217,400                   104,084       94,000       15,102       430,586  
      2007       210,000                   248,324       119,000       52,377       629,701  
 
 
(1) Ms. Duncomb was promoted to vice president and chief financial officer on August 1, 2009. She also serves as our principal financial and principal accounting officers. In connection with her promotion, her base salary of $200,000 was increased to $225,000 effective August 1, 2009. While she was an executive officer in 2008 and 2007, she was not one of our three most highly compensated officers.
 
(2) Mr. Pollei was promoted to executive vice president and chief operating officer on August 1, 2009. He had previously served as our executive vice president and chief financial officer, as well as our principal financial officer. In connection with his promotion, his base salary of $264,000 was increased to $289,000 effective August 1, 2009.
 
(3) Mr. Baumbach served as our vice president — technology until July 22, 2009. His annual base salary for 2009 was $217,400. In connection with the end of his employment relationship with us, we entered into a separation agreement and general release under the terms of which we paid to him or on his behalf the amounts set forth in columns (a) through (c) below. In September 2009, we entered into a consulting agreement with Mr. Baumbach, under the terms of which we paid him $32,725 in 2009. The aggregate sum of the severance and other payments we made to him or on his behalf are included in the table above as “All Other Compensation.” See “Severance and Other Payments to Mark E. Baumbach” for more information about these payments. We also allowed Mr. Baumbach to retain the laptop computer he used as our employee. The laptop was fully depreciated and thus, we believe the value to him was de minimus. On July 22, 2009, Mr. Baumbach had vested stock options exercisable for the purchase of 21,765 shares of our common stock, not including the option to acquire 1,125 shares that we vested upon the execution of his severance agreement. Of those, he exercised an option to acquire 4,500 shares of our common stock at an exercise price of $2.22 and forfeited the remaining vested options, as well as unvested options to acquire 76,911 shares of our common stock.
 


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                Value of
       
            Medical
  Accelerated
       
        Severance
  and Dental
  Stock
  Consulting
   
Name
  Year   Payment(a)   Insurance(b)   Options(c)   Fees(d)   Total
 
Mark E. Baumbach
    2009     $ 271,750     $ 6,376     $ 13,039     $ 32,725     $ 323,890  
 
(a) Represents 52 weeks’ pay at the rate in effect on July 22, 2009, along with one-half of the short-term performance-based cash incentive that Mr. Baumbach would be expected to earn had he been employed with us through December 31, 2009. We paid $176,637 of the severance payment in 2010.
 
(b) Represents the medical and dental premiums we paid on Mr. Baumbach’s behalf under COBRA for the period August 1, 2009, through December 31, 2009.
 
(c) The compensation committee accelerated the vesting on an option to acquire 1,125 shares of our common stock in connection with the end of Mr. Baumbach’s employment relationship with us. This option would have vested on October 11, 2010, had Mr. Baumbach remained our employee. This option had an exercise price of $2.22 and the value was calculated using the closing per share price on July 22, 2009, assuming that Mr. Baumbach exercised the options and then sold the shares on that date.
 
(d) Represents fees we paid to Mr. Baumbach under a consulting agreement through December 31, 2009.
 
(4) We paid a portion of the amounts set forth in these columns for the year ended December 31, 2009, to each named executive officer during the first quarter of 2010.
 
(5) We calculated the amounts in these columns, which represent the aggregate grant date fair value of the equity awards, using the provisions of FASB ASC Topic 718. See Note 14 to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Application of Critical Accounting Policies and Estimates — Share-Based Compensation Expense,” both included in our annual report on Form 10-K for the year ended December 31, 2009, that we filed with the SEC on March 10, 2010, for information regarding the assumptions used in the valuation of equity awards. See “Outstanding Equity Awards at Year End 2009” below for more information about our equity awards to the named executive officers.
 
(6) All other compensation for the year ended December 31, 2009, consisted of the following components.
 
                                                                         
                    Rent for
               
                Use of
  Apartment
               
        Medical
      Company
  in MN and
               
        and
  401(k)
  Apartment
  Flights from
  Home
           
    Club
  Dental
  Matching
  in New
  MN to Place
  Office
      Severance
   
    Membership   Insurance(a)   Contribution   York City   of Residence   Expenses(b)   Parking   Payments   Total
 
James P. Dolan
  $ 4,835     $ 10,258     $ 7,350     $ 625     $     $ 1,704     $     $     $ 24,772  
Vicki J. Duncomb
                7,350       975                   3,000             11,325  
Scott J. Pollei
    6,312             7,350                         2,392             16,054  
Mark W.C. Stodder
          12,956       5,568             15,109                         33,633  
David A. Trott
    7,330       18,121                                           25,451  
Mark E. Baumbach
          9,068       4,057                         1,750       323,890       338,765  
 
 
(a) We self-insure for medical insurance by withholding an amount from participating employees’ compensation to fund our medical insurance program. With the exception of the amount reported for Mr. Trott, the amount in this column represents amounts withheld by us during 2009 (and for Mr. Baumbach from January 1, 2009, through July 31, 2009) from our other participating employees in excess of that which was withheld by us from the named executive officers for applicable medical coverage and premiums paid on behalf of such officers for dental insurance. Mr. Trott does not participate in our medical insurance program. Instead, the amount reported in this column for Mr. Trott reflects premiums paid on his behalf to a third-party provider for medical insurance.
 
(b) In 2009, we paid for home Internet access for Mr. Dolan because Mr. Dolan and his spouse, who administers Dolan Media Newswires, use his home office on a regular basis for business purposes. This amount represents the portion of such payments attributable to personal use of the home office and Internet access, which we have assumed constitutes 25% of the total use.

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Employment Agreements
 
James P. Dolan Employment Agreement
 
We entered into an employment agreement with James P. Dolan as of April 1, 2002, pursuant to which Mr. Dolan agreed to serve as president and chief executive officer of Dolan Media Company. We amended and restated Mr. Dolan’s employment agreement, effective as of April 1, 2007, for an initial term of two years. In December 2008, we amended Mr. Dolan’s employment agreement in connection with the effective date of Section 409A of the Code. Beginning April 1, 2008, and on each day thereafter the employment term will be automatically extended for one day, such that at any given time the remaining employment term will be one year. This day-to-day extension may be terminated immediately upon written notice by either Mr. Dolan or us. The agreement provides that Mr. Dolan reports to our board of directors.
 
Under the amended and restated employment agreement, Mr. Dolan’s annual base salary was $463,000 for 2007. For each calendar year after 2007, Mr. Dolan’s base salary will be increased, at a minimum, by the positive percentage change, if any, in the consumer price index from the month of December from two years prior to the month of December from the previous year. For 2010, the committee set Mr. Dolan’s base salary at $527,000, which was an increase of 10 percent over 2009. Because Mr. Dolan waived the increase that would have been due as of January 1, 2009, his base salary for both of 2009 and 2008 was $479,000. In addition to his base salary, Mr. Dolan is eligible to receive an annual cash short-term incentive payment of at least 60% of his base salary that will be based on performance goals for the applicable fiscal year set by the compensation committee, in its sole discretion, as part of an annual cash short-term incentive program that is established in accordance with our incentive compensation plan. The employment agreement provides Mr. Dolan four weeks of paid vacation annually, a club membership as approved by our compensation committee and the right to participate in our 401(k), welfare and fringe benefit plans and to receive perquisites that we generally make available to our other executive officers. We paid, or will pay, as applicable, Mr. Dolan’s fees in connection with the negotiation, preparation and enforcement of his employment agreement.
 
Mr. Dolan is entitled to severance benefits upon a termination of his employment without cause or a resignation by Mr. Dolan with good reason. See “Executive Compensation — Potential Payments Upon Termination or Change In Control” for a description of the severance payments and other benefits that Mr. Dolan would receive, including those payments and benefits under our change of control plan if he incurs a termination in connection with a change of control of our company, and for a description of the definitions of “cause” and “good reason” as those terms relate to Mr. Dolan.
 
Mr. Dolan has agreed to restrictive covenants that will survive for one year following expiration or termination of his employment agreement pursuant to which he has agreed to not compete with our business, subject to certain limited exceptions, nor solicit or interfere with our relationships with our employees and independent contractors.
 
Vicki J. Duncomb Employment Agreement
 
We entered into an employment agreement with Vicki J. Duncomb, effective as of August 1, 2009, pursuant to which Ms. Duncomb agreed to serve as executive vice president and chief financial officer of Dolan Media Company. Ms. Duncomb’s employment agreement has an initial term of two years. Beginning August 1, 2010, and on each day thereafter, the employment term will be automatically extended for one day, such that at any given time the remaining employment term will be one year. This day-to-day extension may be terminated immediately upon written notice by either Ms. Duncomb or us. The agreement provides that Ms. Duncomb will report to our chief operating officer and, indirectly, to our chief executive officer and our board of directors.
 
Under the employment agreement, Ms. Duncomb’s annual base salary was $225,000 for the remainder of 2009. For each calendar year after 2009, Ms. Duncomb’s base salary will be increased, at a minimum, by the positive percentage change, if any, in the consumer price index from the month of December from two years prior to the month of December from the previous year. For 2010, the committee set Ms. Duncomb’s base


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salary at $250,000, which was an 11.1% increase. In addition to her base salary, Ms. Duncomb is eligible to receive an annual cash short-term incentive payment that will be based on performance goals set by the compensation committee, in its sole discretion, as part of an annual cash short-term incentive program that is established in accordance with our incentive compensation plan. The employment agreement provides Ms. Duncomb four weeks of paid vacation annually, a club membership as approved by our compensation committee and the right to participate in our 401(k), welfare and fringe benefit plans and to receive perquisites that we generally make available to our other executive officers. We have paid, or will pay, as applicable, Ms. Duncomb’s fees in connection with the negotiation, preparation and enforcement of her employment agreement.
 
Ms. Duncomb is entitled to severance benefits upon a termination of her employment without cause or a resignation by Ms. Duncomb with good reason. See “Executive Compensation — Potential Payments Upon Termination or Change In Control” for a description of the severance payments and other benefits that Ms. Duncomb will receive, including those payments and benefits under our change of control plan if she incurs a termination in connection with a change of control of our company, and for a description of the definitions of “cause” and “good reason” as those terms relate to Ms. Duncomb
 
Ms. Duncomb has agreed to restrictive covenants that will survive for one year following expiration or termination of her employment agreement pursuant to which she has agreed to not compete with our business, subject to certain limited exceptions, nor solicit or interfere with our relationships with our employees and independent contractors
 
Scott J. Pollei Employment Agreement
 
We entered into an amended and restated employment agreement with Scott J. Pollei, effective as of August 1, 2009, pursuant to which Mr. Pollei agreed to serve as executive vice president and chief operating officer of Dolan Media Company. Mr. Pollei’s employment agreement has an initial term of two years. Beginning August 1, 2010, and on each day thereafter, the employment term will be automatically extended for one day, such that at any given time the remaining employment term will be one year. This day-to-day extension may be terminated immediately upon written notice by either Mr. Pollei or us. The agreement provides that Mr. Pollei will report to our chief executive officer and our board of directors.
 
Under the employment agreement, Mr. Pollei’s annual base salary was $289,000 for the remainder of 2009. For each calendar year after 2009, Mr. Pollei’s base salary will be increased, at a minimum, by the positive percentage change, if any, in the consumer price index from the month of December from two years prior to the month of December from the previous year. For 2010, the committee set Mr. Pollei’s base salary at $317,000, which was an 11.2% increase. In addition to his base salary, Mr. Pollei is eligible to receive an annual cash short-term incentive payment that will be based on performance goals set by the compensation committee, in its sole discretion, as part of an annual cash short-term incentive program that is established in accordance with our incentive compensation plan. The employment agreement provides Mr. Pollei four weeks of paid vacation annually, a club membership as approved by our compensation committee and the right to participate in our 401(k), welfare and fringe benefit plans and to receive perquisites that we generally make available to our other executive officers. We have paid, or will pay, as applicable, Mr. Pollei’s fees in connection with the negotiation, preparation and enforcement of his employment agreement.
 
Mr. Pollei is entitled to severance benefits upon a termination of his employment without cause or a resignation by Mr. Pollei with good reason. See “Executive Compensation — Potential Payments Upon Termination or Change In Control” for a description of the severance payments and other benefits that Mr. Pollei will receive, including those payments and benefits under our change of control plan if he incurs a termination in connection with a change of control of our company, and for a description of the definitions of “cause” and “good reason” as those terms relate to Mr. Pollei.
 
Mr. Pollei has agreed to restrictive covenants that will survive for one year following expiration or termination of his employment agreement pursuant to which he has agreed to not compete with our business, subject to certain limited exceptions, nor solicit or interfere with our relationships with our employees and independent contractors.


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Mark W.C. Stodder Employment Agreement
 
We entered into an employment agreement with Mark W.C. Stodder, effective as of April 1, 2007, pursuant to which Mr. Stodder agreed to continue to serve as executive vice president, Business Information Division, of Dolan Media Company. Mr. Stodder’s employment agreement had an initial term of two years. Beginning April 1, 2008, and on each day thereafter, the employment term has been and will be automatically extended for one day, such that at any given time the remaining employment term will be one year. This day-to-day extension may be terminated immediately upon written notice by either Mr. Stodder or us. In December 2008, we amended Mr. Stodder’s employment agreement in connection with the effective date of Section 409A of the Code. In August 2009, we amended his employment agreement to change his reporting relationship from our chief executive officer to our chief operating officer.
 
Under the employment agreement, Mr. Stodder’s annual base salary was $225,000 for 2007. For each calendar year after 2007, Mr. Stodder’s base salary will be increased, at a minimum, by the positive percentage change, if any, in the consumer price index from the month of December from two years prior to the month of December from the previous year. For 2010, the committee set Mr. Stodder’s base salary at $240,000, an increase of 3.1% over 2009. Because Mr. Stodder waived the increase that would have been due as of January 1, 2009, his base salary for both of 2009 and 2008 was $232,800. In addition to his base salary, Mr. Stodder is eligible to receive an annual cash short-term incentive payment that will be based on performance goals set by the compensation committee, in its sole discretion, as part of an annual cash short-term incentive program that is established in accordance with our incentive compensation plan. The employment agreement provides Mr. Stodder four weeks of paid vacation annually, a club membership as approved by our compensation committee and the right to participate in our 401(k), welfare and fringe benefit plans and to receive perquisites that we generally make available to our other executive officers. We have paid or will pay, as applicable, Mr. Stodder’s fees in connection with the negotiation, preparation and enforcement of his employment agreement.
 
Mr. Stodder is entitled to severance benefits upon a termination of his employment without cause or a resignation by Mr. Stodder with good reason. See “Executive Compensation — Potential Payments Upon Termination or Change In Control” for a description of the severance payments and other benefits that Mr. Stodder will receive, including those payments and benefits under our change of control plan if he incurs a termination in connection with a change of control of our company, and for a description of the definitions of “cause” and “good reason” as those terms relate to Mr. Stodder.
 
Mr. Stodder has agreed to restrictive covenants that will survive for one year following expiration or termination of his employment agreement pursuant to which he has agreed to not compete with our business, subject to certain limited exceptions, nor solicit or interfere with our relationships with our employees and independent contractors.
 
David A. Trott Employment Agreement
 
NDeX, our majority-owned subsidiary, entered into an employment agreement with David A. Trott on March 14, 2006, pursuant to which Mr. Trott agreed to serve as chairman and chief executive officer of NDeX and report to the president of Dolan Media Company. Mr. Trott’s employment agreement includes an initial two-year employment term, with an automatic one-year renewal, unless either party provides prior written notice of its or his intent not to renew the agreement to the other party at least sixty days prior to the end of the term. In December 2008, we amended Mr. Trott’s employment agreement in connection with the effective date of Section 409A of the Code.
 
Under the terms of the employment agreement, Mr. Trott received an annual salary of $260,000 for his services during 2006 and 2007 and also is entitled to three weeks of paid vacation annually. Mr. Trott must devote no less than one-half of his full business time to NDeX. Mr. Trott is also entitled to participate in and receive such benefits under NDeX’s welfare benefit plans and its other general practices, policies and arrangements, including medical and hospitalization coverage, group term life insurance, disability insurance, accidental death insurance, retirement plans and fringe benefits, that NDeX makes generally available to its senior management employees. Mr. Trott’s employment agreement with NDeX automatically renewed for an


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additional one year term on each of March 14, 2008, 2009 and 2010. In January 2008, the compensation committee approved a 3.5% increase in Mr. Trott’s base salary to $269,000 for year ended 2008, and did not approve an increase for 2009. For 2010, the committee set Mr. Trott’s base salary at $277,000, which is a 3.0% increase over 2009.
 
Either party may terminate Mr. Trott’s employment at any time, with or without cause and with or without notice. If NDeX terminates Mr. Trott’s employment without cause, Mr. Trott is entitled to severance benefits. See “Executive Compensation — Potential Payments Upon Termination or Change In Control” for a description of the severance payments and other benefits that Mr. Trott will receive upon a termination without case and for a description of the definition of “cause” as that term relates to Mr. Trott.
 
Mr. Trott has agreed to restrictive covenants that will survive for three years following expiration or termination of his employment agreement pursuant to which he has agreed to not compete with NDeX’s business, subject to certain limited exceptions, or solicit or interfere with NDeX’s or any of NDeX’s members’ relationships with NDeX’s or NDeX’s members’ employees and independent contractors. Mr. Trott also has agreed to maintain the confidentiality of NDeX’s proprietary information and assign any inventions to NDeX that he acquired or developed during his relationship with NDeX. Additionally, Mr. Trott has agreed not to divert any corporate opportunities from NDeX or Dolan Media Company during the term of his employment. See “Executive Compensation — Potential Payments Upon Termination or Change In Control” for a further description of severance benefits Mr. Trott will receive.
 
Severance and Other Payments to Mark E. Baumbach
 
On July 22, 2009, we mutually agreed with Mr. Baumbach to end his employment with us as our vice president — technology. In connection with that agreement, we entered into a separation agreement and general release under the terms of which we agreed to pay Mr. Baumbach $271,750 in two lump sum payments, which amount represents fifty-two weeks’ pay at the rate in effect on July 22, 2009, and 50% of the expected short-term performance based cash incentive the Company would have paid Mr. Baumbach if we had employed him through December 31, 2009, and if he had satisfied all applicable performance criteria. We also agreed to pay on Mr. Baumbach’s behalf the premiums for his health and dental coverage under COBRA until he becomes eligible for coverage under the health plan of a new employer or, if earlier, July 31, 2010. We further agreed to accelerate the vesting of the unvested portion of the incentive stock option granted to him on October 11, 2006, representing 1,125 option shares, and extend the time by which he may exercise any vested portion of the options granted to him during his employment to November 19, 2009. We further agreed that he could retain the laptop computer he used while an employee.
 
In exchange for the severance benefits described above, Mr. Baumbach released any and all claims he may have against us and reaffirmed his obligations under the restrictive covenant agreement between Mr. Baumbach and us dated effective August 1, 2007. Under the terms of the restrictive covenant agreement, he agreed, among other things, not to compete with the company for 12 months following July 22, 2009.
 
On September 28, 2009, we entered into a consulting agreement with Mr. Baumbach to provide us technology consulting services in connection with acquisitions. During 2009, we paid him $32,725 in consulting fees.
 
The aggregate value of the severance and other payments we made to, or on behalf of, Mr. Baumbach in connection with the termination of his employment relationship with us are set forth as Note 3 to the Summary Compensation Table above.


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Grants of Plan-Based Awards in 2009
 
The following table sets forth certain information with respect to cash compensation paid, options to purchase shares of our common stock granted, and restricted shares of our common stock granted, during the year ended December 31, 2009, to our named executive officers. See “Compensation Discussion and Analysis — Performance-Based Short-Term Cash Incentives” for a description of the material factors necessary to understand the information in the table below.
 
                                                                 
        Estimated Possible Payouts
               
        under Non-Equity Incentive
      All Other
       
        Plan Awards(1)       Option
       
                    All Other
  Awards:
  Exercise
  Grant Date
                    Stock
  Number of
  or Base
  Fair Value
                    Awards:
  Securities
  Price of
  of Stock
    Grant
              Number of
  Underlying
  Option
  and Option
Name
  Date   Threshold   Target   Maximum   Shares(2)   Options (2)   Awards   Awards(3)
 
James P. Dolan
    05/15/09           $ 287,400     $ 574,800             87,817     $ 12.51     $ 470,040  
Vicki J. Duncomb
    05/15/09             105,209       210,417             10,000       12.51       53,525  
      05/15/09                         5,484                   68,605  
Scott J. Pollei
    05/15/09             137,209       274,417             16,500       12.51       88,316  
      05/15/09                         9,049                   113,203  
Mark W.C. Stodder
    05/15/09             116,400       232,800             29,100       12.51       155,758  
David A. Trott
    05/15/09             134,500       269,000             16,813       12.51       89,992  
      05/15/09                         9,221                   115,355  
Mark E. Baumbach(4)
    05/15/09             108,700       217,400             21,740       12.51       116,363  
 
 
(1) These columns describe the range of cash payments that could have been made with respect to our 2009 short-term cash incentive program described under “Compensation Discussion and Analysis — Performance Based Short-Term Cash Incentives” You should also refer to the “Summary Compensation” table for specific information about the amounts paid to each named executive officer in 2009 as performance-based short-term cash incentives and “Severance and Other Payments to Mark E. Baumbach” for more information.
 
(2) These shares of restricted stock and options vest and become exercisable in four equal annual installments beginning on May 15, 2010. None of Messrs. Dolan, Stodder or Baumbach elected to take a portion of his long-term equity compensation in the form of restricted stock.
 
(3) This column shows the full grant date fair value of restricted stock and stock options granted to the named executive officers in 2009, using the provisions of FASB ASC Topic 718. See Note 14 to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Application of Critical Accounting Policies and Estimates — Share-Based Compensation Expense,” both included in our annual report on Form 10-K for the year ended December 31, 2009, that we filed with the SEC on March 10, 2010, for information regarding the assumptions used in the valuation of equity awards.
 
(4) Mr. Baumbach’s employment with us ended on July 22, 2009. At that time, he forfeited the options granted to him in 2009. See “Severance and Other Payments to Mark E. Baumbach” for information about payments we made to Mr. Baumbach in connection with the termination of his employment.


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Outstanding Equity Awards at Year End 2009
 
The following table sets forth certain information with respect to all unexercised options to purchase shares of our common stock and unvested shares of restricted stock awarded to each of the named executive officers as of December 31, 2009.
 
                                                 
    Option Awards   Stock Awards
    Number of
  Number of
              Market
    Securities
  Securities
          Number of
  Value of
    Underlying
  Underlying
          Shares of
  Shares of
    Unexercised
  Unexercised
  Option
  Option
  Stock that
  Stock that
    Options
  Options
  Exercise
  Expiration
  have not
  have not
Name
  Exercisable   Unexercisable   Price   Date   Vested   Vested
 
James P. Dolan(1)
          87,817     $ 12.51       05/15/2016           $  
              (2)
    21,488       64,466       16.52       05/12/2015              
              (3)
    105,664       105,664       14.50       08/01/2014              
Vicki J. Duncomb(1),(5)
          10,000       12.51       05/15/2016       5,484       55,992  
                (2)
    4,894       14,682       16.52       05/12/2015              
                (3)
    18,672       18,672       14.50       08/01/2014              
                (4)
    4,500             2.22       10/11/2016              
Scott J. Pollei(1),(5)
          16,500       12.51       05/15/2016       9,049       92,390  
               (2)
    8,075       24,225       16.52       05/12/2015              
               (3)
    39,678       39,679       14.50       08/01/2014              
Mark W.C. Stodder(1),(6)
          29,100       12.51       05/15/2016              
                 (2),(6)
    7,120       21,363       16.52       05/12/2015              
                 (3),(6)
    35,010       35,011       14.50       08/01/2014              
David A. Trott(1),(5)
          16,813       12.51       05/15/2016       9,221       94,146  
              (2)
    8,228       24,684       16.52       05/12/2015              
              (3)
    40,456       40,457       14.50       08/01/2014              
Mark E. Baumbach(7)
                                   
 
 
(1) On May 15, 2009, we granted nonqualified stock options to each of the named executive officers in the amounts set forth opposite each named executive officer in the table above. The stock options vest and become exercisable in four equal installments on each of May 15, 2010, 2011, 2012 and 2013.
 
(2) On May 12, 2008, we granted nonqualified stock options to each of the named executive officers in the amounts set forth opposite each named executive officer in the table above. The stock options vest and become exercisable in four equal installments on each of May 12, 2009, 2010, 2011 and 2012. At December 31, 2009, each named executive is fully vested in one quarter of the options granted and has the right to exercise them through May 12, 2015.
 
(3) On August 1, 2007, we granted nonqualified stock options to each of the named executives in the amounts set forth opposite each named executive in the table above. The stock options vest and become exercisable in four equal installments on each of August 1, 2008, 2009, 2010 and 2011. At December 31, 2009, each named executive is fully vested in one half of the options granted and has the right to exercise them through August 1, 2014.
 
(4) On October 11, 2006, we granted incentive stock options to purchase 4,500 shares of common stock to Ms. Duncomb, all of which are fully vested. Ms. Duncomb has the right to exercise these options through October 11, 2016.
 
(5) On May 15, 2009, we granted restricted shares of our common stock to Ms. Duncomb, Mr. Pollei and Mr. Trott in the amounts set forth opposite each named executive officer in the table above. The restricted shares vest in four equal installments on each of May 15, 2010, 2011, 2012 and 2013.
 
(6) Includes vested and unvested options to acquire an aggregate 63,802 shares of our common stock that Mr. Stodder assigned to his former spouse in connection with a marital termination agreement in 2009.


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(7) Mr. Baumbach forfeited unvested options to purchase an aggregate 76,911 shares of our common stock in connection with the termination of his employment in July 2009. He forfeited vested options to purchase an aggregate of 21,765 shares of our common stock because he failed to exercise them within the 120 day period the compensation committee had set for their exercise. He exercised a vested option to purchase 4,500 shares of common stock, 1,125 which vesting was accelerated in connection with the execution of Mr. Baumbach’s severance agreement. At December 31, 2009, Mr. Baumbach had no outstanding options.
 
Option Exercises and Stock Vested for 2009
 
The following table sets forth certain information with respect to options our named executive officers exercised to purchase shares of our common stock during 2009. No restricted stock awards granted to our named executive officers vested during 2009.
 
                                 
    Option Awards   Stock Awards
    Number
      Number of
   
    of Shares
  Value
  Shares
  Value
    Acquired on
  Realized
  Acquired
  Realized
Name
  Exercise   on Exercise   on Vesting   on Vesting
 
James P. Dolan(1)
        $           $  
Vicki J. Duncomb
                       
Scott J. Pollei
                       
Mark W.C. Stodder
                       
David A. Trott
                       
Mark E. Baumbach
    4,500       49,230              
 
 
(1) Does not include shares of restricted stock held by Mr. Dolan’s spouse of which 237 were vested at December 31, 2009.
 
Non-qualified Deferred Compensation for 2009
 
Our named executive officers did not earn any non-qualified deferred compensation benefits from us during the year ended December 31, 2009.
 
Pension Benefits
 
Our named executive officers did not participate in, or otherwise receive any benefits under, any pension or supplemental retirement plans sponsored by us during the year ended December 31, 2009.
 
Potential Payments Upon Termination or Change in Control
 
As of December 31, 2009, we were party to certain agreements and had in place a change of control plan that would have required us to provide compensation to our named executive officers (other than Mr. Baumbach whose employment with us ended prior to December 31, 2009 and to whom we paid severance as described above in “Severance and Other Payments to Mark E. Baumbach”) in the event that their employment with us was terminated or if we experienced a change in control. A description of these agreements follows. A qualitative analysis of the amount of compensation payable to each of these named executive officers in each situation involving a termination of employment or change in control, assuming that each had occurred as of December 31, 2009, is listed in the tables below.
 
Severance Payments
 
James P. Dolan.  Under Mr. Dolan’s employment agreement with us, if Mr. Dolan’s employment was terminated by us without cause or by Mr. Dolan with good reason (as such terms are defined below), then in addition to his base salary and benefits through the termination date and any unpaid annual short-term incentive payment due to Mr. Dolan for the preceding fiscal year, we would provide Mr. Dolan (1) for a period of twelve months from the date of termination severance pay equal to his base salary, (2) a pro-rated portion


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of his annual short-term incentive payment that would have been payable to him for such fiscal year had he remained employed by us for the entire year, and (3) medical and dental benefits for Mr. Dolan and his covered dependents for a period of eighteen months following his termination. If Mr. Dolan’s employment was terminated due to his death or disability or by us for cause or by Mr. Dolan without good reason, we would pay to Mr. Dolan (or his beneficiary, as applicable) (1) any accrued but unpaid base salary and benefits earned through the date of termination, and (2) a pro-rated portion of his annual short-term incentive payment that would have been payable to him for such fiscal year had he remained employed by us for the entire year in the case of termination due to death or disability.
 
“Cause” is defined in Mr. Dolan’s employment agreement to mean the occurrence of any of the following events: (1) a material breach by Mr. Dolan of his employment agreement that remains uncured for 30 days after he receives written notice of the breach; (2) Mr. Dolan continues to willfully and materially fail to perform his duties under his employment agreement, or engages in excessive absenteeism unrelated to illness or permitted vacation, for a period of 30 days after delivery of a written demand for performance that specifically identifies the manner in which we believe Mr. Dolan has not performed his duties; (3) Mr. Dolan is convicted of, or pleads guilty or nolo contendere to, theft, fraud, misappropriation or embezzlement in connection with our or our affiliates’ business, or (4) Mr. Dolan is convicted of, or pleads guilty or nolo contendere to, criminal misconduct constituting a felony. Mr. Dolan’s employment agreement defines “good reason” as the following: (1) we move our principal offices from the Minneapolis-St. Paul metropolitan area and require Mr. Dolan to relocate, (2) we remove Mr. Dolan as our chief executive officer or substantially diminish his duties or responsibilities; (3) we materially breach any of our obligations under Mr. Dolan’s employment agreement, which breach remains uncured for 30 days after we receive written notice of the breach, or (4) a diminution of Mr. Dolan’s base salary or the target amount of any annual short-term incentive payment, or a material diminution in benefits available to Mr. Dolan, other than (a) an inadvertent and isolated act or omission that is promptly cured upon notice to us or (b) a diminution of benefits applicable to our other executive officers.
 
Scott Pollei, Mark Stodder and Vicki Duncomb.  Under each of Messrs. Pollei and Stodder and Ms. Duncomb’s employment agreements, if such officer’s employment was terminated by us without cause or by the officer with good reason (as such terms are defined below), then in addition to such officer’s base salary and benefits through the termination date and any unpaid annual short-term incentive payment due to such officer for the preceding fiscal year, we would provide such officer (1) an amount equal to one year of such officer’s annual base salary, in effect at the time of the termination, (2) a pro-rated portion of his or her annual short-term incentive payment that would have been payable to him or her for such fiscal year had he or she remained employed by us for the entire year, and (3) medical and dental benefits for such officer and his or her covered dependents for a period of eighteen months following his or her termination. If such officer’s employment was terminated due to his or her death or disability or by us for cause or the executive without good reason, we would pay to such officer (or his or her beneficiary, as applicable) (1) any accrued but unpaid base salary and benefits earned through the date of termination, and (2) a pro-rated portion of his or her annual short-term incentive payment that would have been payable to him for such fiscal year had he remained employed by us for the entire year in the case of termination due to death or disability. .
 
For these officers, “cause” and “good reason” have the meanings set forth in their employment agreements. “Cause” means the occurrence of any of the following events: (1) a material breach by the executive officer of his or her employment agreement that remains uncured for 10 days after he receives notice of the breach; (2) the executive officer continues to willfully and materially fail to perform his or her duties under his or her employment agreement, or engages in excessive absenteeism unrelated to illness or permitted vacation, for a period of 10 days after delivery of a written demand for performance that specifically identifies the manner in which we believe the executive officer has not performed his or her duties; (3) the executive officer’s commission of theft, fraud, misappropriation or embezzlement in connection with our or our affiliates’ business; or (4) the executive officer’s commission of criminal misconduct constituting a felony. “Good reason” means: (1) we move our principal offices from the Minneapolis-St. Paul metropolitan area and require the executive officer to relocate, (2) any material diminution by us in the executive officer’s duties or responsibilities inconsistent with the terms of his or her employment agreement which remains uncured for


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30 days after we receive notice; (3) we materially breach any of our obligations under the executive officer’s employment agreement that remains uncured for 30 days after we receive notice of the breach, or (4) a diminution in the executive officer’s base salary or the target amount of any annual short-term incentive payment, or a material diminution in benefits available to the executive officer, other than: (a) an inadvertent and isolated act or omission that is promptly cured upon notice to us or (b) a diminution of benefits applicable to our other executive officers.
 
David A. Trott.  Under NDeX’s employment agreement with Mr. Trott, if we terminate Mr. Trott’s employment without cause, then we must pay Mr. Trott a monthly severance amount of $21,666.67 for the twelve-month period beginning on the last day of the month following the termination date and we must provide medical insurance to Mr. Trott for the twelve-month period following the termination date.
 
Mr. Trott’s employment agreement defines “cause” to mean that: (1) Mr. Trott has committed an act of dishonesty against NDeX that results or is intended to result in his gain or personal enrichment or has, or is intended to have, a detrimental effect on the reputation of NDeX or NDeX’s business of providing non-legal foreclosure, bankruptcy and eviction processing and related services; (2) Mr. Trott has committed an act or acts of fraud, moral turpitude against NDeX or a felony; (3) any breach by Mr. Trott of any material provision of his employment agreement that, if curable, has not been cured by Mr. Trott within 10 days of notice of such breach from NDeX; (4) any intentional act or gross negligence by Mr. Trott (other than an act in good faith and with a reasonable belief that such act was in the best interests of NDeX) that has, or is intended to have, a detrimental effect on the reputation of NDeX or its business; or (5) Mr. Trott’s refusal, after notice thereof, to perform specific directives of the president of Dolan Media Company that are reasonable and consistent with the scope and nature of this duties and responsibilities that are set forth in his employment agreement.
 
Stock Option and Restricted Stock Rights upon Termination or Change of Control
 
As of December 31, 2009, our named executed officers held options to purchase an aggregate 842,918 shares of our common stock, 293,785 of which have vested, and 23,754 shares of restricted stock, none of which have vested. These totals do not include stock options or restricted shares that were issued to Mr. Dolan’s spouse in connection with her employment with us. See “Related Party Transactions — Employment of Mr. Dolan’s spouse” for more information regarding her equity awards.
 
Under our incentive compensation plan, no stock options or restricted stock held by any named executive officer would vest upon the termination of his or her employment, except in those circumstances described below. If any named executive officer incurs a termination of service due to his or her death, disability or retirement, options may be exercised for a period of one year from the date of such termination to the extent that the options were exercisable at the time of his termination. If, however, any of the named executive officers is terminated for cause, the options (whether or not vested) will be immediately cancelled and forfeited. “Cause” has the meaning set forth in each such named executive officer’s employment agreement. If a named executive officer incurs a termination of service either without cause or due to a reason other than his or her death, disability or retirement, the options may be exercised for a period of 60 days from the date of such termination to the extent that the options were exercisable at the time of his termination. Unvested shares of restricted stock will immediately vest upon a termination of service due to a named executive officer’s death, disability or retirement.
 
Our incentive compensation plan further provides that, in the case of a change of control, all unvested stock options and shares of restricted stock that we have granted will immediately vest and become exercisable upon a change of control. The table below describes the pre-tax amount each named executive officer would receive if a change of control had occurred on December 31, 2009, and, on that date, each named executive officer sold all shares of restricted stock that vested upon such change of control and exercised and sold all of the underlying shares of common stock that would be issued upon the exercise of options that became exercisable upon such change of control; however, because at December 31, 2009, the exercise price of the unvested options was greater than the closing per share price of our common stock as reported by the New


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York Stock Exchange, the table below does not reflect the named executive officers’ receiving any amount upon the exercise of such options.
 
                                                 
                      Fair
             
                      Market
             
                Number of
    Value at
          Amount
 
    Grant
    Number of
    Restricted
    December 31,
    Exercise
    Received
 
Name
  Date     Options     Shares     2009(1)     Price     (before taxes)  
 
James P. Dolan
    08/01/07       105,664           $ 10.21     $ 14.50     $  
      05/12/08       64,466             10.21       16.52        
      05/15/09       87,817             10.21       12.51        
                                                 
Total
                                             
Vicki J. Duncomb
    08/01/07       18,672             10.21       14.50        
      05/12/08       14,682             10.21       16.52        
      05/15/09       10,000       5,484       10.21       12.51       55,992  
                                                 
Total
                                            55,992  
Scott J. Pollei
    08/01/07       39,679             10.21       14.50        
      05/12/08       24,225             10.21       16.52        
      05/15/09       16,500       9,049       10.21       12.51       92,390  
                                                 
Total
                                            92,390  
Mark W.C. Stodder
    08/01/07       35,011 (2)           10.21       14.50        
      05/12/08       21,363 (2)           10.21       16.52        
      05/15/09       29,100 (2)           10.21       12.51        
                                                 
Total
                                             
David A. Trott
    08/01/07       40,457             10.21       14.50        
      05/12/08       24,684             10.21       16.52        
      05/15/09       16,813       9,221       10.21       12.51       94,146  
                                                 
Total
                                            94,146  
 
 
(1) The closing per share price for our common stock on December 31, 2009, as reported by the New York Stock Exchange.
 
(2) Includes unvested options to acquire shares of our common stock that Mr. Stodder assigned to his former spouse in connection with a marital termination agreement in 2009. Under that agreement, his former spouse received an aggregate of 42,737, which represents one-half of the unvested options in each of the grants dated April 1, 2007, May 12, 2008, and May 15, 2009, respectively.
 
Change of Control Plan
 
We have adopted an Executive Change of Control Plan that provides each of our named executive officers (other than Mr. Trott), as well as certain other members of our senior management (each referred to as a “participant”), with certain severance benefits in the case of a qualified change of control event. Under the change of control plan, a participant is entitled to receive a severance payment and additional severance benefits if his or her employment with us is terminated by us or the acquirer without cause or by the employee for good reason 90 days prior to or within 12 months following a change in control (as defined below). In connection with such change of control termination, each of Messrs. Dolan, Pollei and Stodder will receive two times his base salary plus annual target short-term incentive amounts for the year in which the termination occurs, and Ms. Duncomb and all other participants will receive one times such participant’s base salary plus annual target short-term incentive amounts for the year in which the termination occurs. In addition, the terminated participant will receive 18 months of continuing health and dental coverage on the same terms as the participant received such benefits during employment, and will receive outplacement services for 12 months following termination. Under the terms of the change of control plan, if any payments or benefits to which a


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participant becomes entitled are considered “excess parachute payments” under Section 280G of the Code, then he or she will be entitled to an additional “gross-up” payment from us in an amount such that, after payment by the participant of all taxes, including any excise tax imposed upon the gross-up payment he or she will retain a net amount equal to the amount he or she would have been entitled to had the excise tax not been imposed upon the payment; provided, however, that if the total payments that the participant is entitled to receive from us do not exceed 110% of the greatest amount that could be paid to the participant without becoming an excess parachute payment, then no “gross-up” payment will be made by us, and the participant’s payments will be reduced to the greatest amount that could be paid without cause the payments to be “excess parachute payments.”
 
Change in control is defined in the plan to mean (1) the acquisition by a third party of more than 50% of our voting shares, (2) a merger, consolidation or other reorganization if our stockholders following such transaction no longer own more than 50% of the combined voting power of the surviving organization, (3) our complete liquidation or dissolution, or (4) a sale of substantially all of our assets. The definitions of “cause” and “good reason” for Messrs. Dolan, Pollei and Stodder and Ms. Duncomb for purposes of the plan are the same as is contained in such executive officer’s employment agreement. For all other participants, “cause” is defined as (1) the willful and continued failure to substantially perform the participant’s duties (other than due to illness or after notice of termination by us without cause or by the executive officer for good reason) and such failure continues for 10 days after a demand for performance is delivered, or (2) the participant willfully engages in illegal or gross misconduct that injures our reputation. Also, for all other participants of the plan, “good reason” is defined as (1) the participant’s base salary and target short-term incentive opportunity is reduced immediately prior to a change of control, (2) a material or adverse change in the participant’s authority, duties, responsibilities, title or offices following a change of control or an adverse change, following a change of control, in the duties, responsibilities, authority or managerial level of the individual(s) to who the participant reports, (3) we require the participant to be based more than 50 miles from the executive officer’s employment base prior to a change of control, or (4) our failure to require our successor to assume the change of control plan.
 
In addition, our employment agreements with the named executive officers contain severance arrangements pursuant to which each such executive officer will receive severance benefits if, in the absence of a change in control, we terminate their employment without cause or if such executive officer terminates his employment with us for good reason. See “Executive Compensation — Employment Agreements” for further information regarding the terms of these employment agreements.
 
Summary of Payments upon Termination or Change in Control
 
James P. Dolan.  The following table describes the potential payments and benefits upon termination of employment or in connection with a change in control for James P. Dolan, our president and chief executive officer, assuming such event occurred as of December 31, 2009.
 
                                         
          Not for Cause
                   
          Termination or
                   
    Normal
    Resignation for
    Death or
    For Cause
    Change in
 
Payment and Benefits
  Retirement     Good Reason     Disability     Termination     Control  
 
Base Salary
  $     $ 479,000     $     $     $ 958,000  
Non-Equity Incentive Compensation Plan Payment(1)
          500,076       500,076             1,000,152  
Stock Options(2)
                             
Outplacement Service
                            45,000  
Medical and Dental Benefits(3)
          16,470                   16,470  
Section 280G Gross Up(4)
                            309,191  
                                         
Total
  $     $ 995,546     $ 500,076     $     $ 2,328,813  
                                         


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(1) This amount reflects the non-equity incentive compensation plan payment Mr. Dolan earned as of December 31, 2009.
 
(2) At December 31, 2009, Mr. Dolan had unvested options to acquire 257,947 shares of our common stock, all of which would vest upon a change of control. The exercise price of these options was greater than the closing per share price of our common stock on December 31, 2009, so we have assumed that Mr. Dolan did not exercise and sell the options for purposes of this table.
 
(3) We self-insure for medical insurance by withholding an amount from the participating employees’ compensation to fund our medical insurance program. Reflects 18 months of the COBRA premium for medical and dental benefits at the rate in effect at December 31, 2009.
 
(4) This amount is an estimate of the payment we would be obligated to make to Mr. Dolan under the executive change in control plan in addition to those payments Mr. Dolan receives upon a change in control under that plan. Our estimate of this payment assumes that the base amount is equal to the average of Mr. Dolan’s total compensation for the years ended December 31, 2009, 2008 and 2007, as reported in the Summary Compensation Table earlier in this proxy statement. The base amount is used to determine whether any payments received by Mr. Dolan upon a change in control constitute excess parachute payments under Section 280G of the Code. Our estimate of this payment also assumes that payments made on his behalf for continuing medical and dental coverage constitute parachute payments under Section 280G.
 
Under the change in control plan, we are only obligated to provide a gross-up payment for the base salary, short term non-equity incentive compensation payment, the outplacement service payment and any amounts paid on Mr. Dolan’s behalf for continuing medical and dental coverage. In calculating this estimated payment, we have used 35% for the federal income tax rate and 7.85% for the Minnesota income tax rate.
 
Vicki J. Duncomb.  The following table describes the potential payments and benefits upon termination of employment or in connection with a change in control for Vicki J. Duncomb, our vice president, chief financial officer and corporate secretary, assuming such event occurred as of December 31, 2009.
 
                                         
          Not for Cause
                   
          Termination or
                   
    Normal
    Resignation for
    Death or
    For Cause
    Change in
 
Payment and Benefits
  Retirement     Good Reason     Disability     Termination     Control  
 
Base Salary(1)
  $     $ 210,417     $     $     $ 210,417  
Non-Equity Incentive Compensation
Plan Payment(2)
          183,063                   183,063  
Stock Options(3)
                             
Sale of Restricted Stock(4)
                  55,992             55,992  
Outplacement Service
                            45,000  
Medical and Dental Benefits(5)
          18,431                   18,431  
Estimated Section 280G Gross Up(6)
                            55,354  
                                         
Total
  $     $ 411,911     $ 55,992     $     $ 568,257  
                                         
 
 
(1) Ms. Duncomb’s base salary from January 1, 2009, through July 31, 2009, was $200,000. Her salary was increased to $225,000 on August 1, 2009, in conjunction with her promotion to our vice president and chief financial officer.
 
(2) This amount reflects the non-equity incentive compensation plan payment Ms. Duncomb earned as of December 31, 2009.
 
(3) At December 31, 2009, Ms. Duncomb had unvested options to acquire 43,354 shares of our common stock, all of which would vest upon a change of control. The exercise price of these options was greater than the closing per share price of our common stock on December 31, 2009, so we have assumed that Ms. Duncomb did not exercise and sell the options for purposes of the table.


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(4) Reflects 5,484 shares of restricted stock, which have not yet vested. In connection with a termination due to Ms. Duncomb’s death or disability or in connection with a change in control, the unvested restricted shares would vest immediately. In connection with any other termination of Ms. Duncomb’s employment, she would forfeit any shares of restricted stock, which has not yet vested. The amount in the table assumes that Ms. Duncomb sold all such shares (including restricted shares that would vest upon such event) at $10.21, the closing per share price of our common stock on December 31, 2009.
 
(5) We self-insure for medical insurance by withholding an amount from the participating employees’ compensation to fund our medical insurance program. Reflects 18 months of the COBRA premium for medical and dental benefits at the rate in effect at December 31, 2009.
 
(6) This amount is an estimate of the payment we would be obligated to make to Ms. Duncomb under the executive change in control plan in addition to those payments Ms. Duncomb receives upon a change in control under that plan. Our estimate of this payment assumes that the base amount is equal to the average of Ms. Duncomb’s total compensation for the years ended December 31, 2009, 2008 and 2007, which is $180,139. The base amount is used to determine whether any payments received by Ms. Duncomb upon a change in control constitute excess parachute payments under Section 280G of the Code. Our estimate of this payment also assumes that payments made on her behalf for continuing medical and dental coverage constitute parachute payments under Section 280G.
 
Under the change in control plan, we are only obligated to provide a gross-up payment for the base salary, short term non-equity incentive compensation payment, the outplacement service payment and any amounts paid on Ms. Duncomb’s behalf for continuing medical and dental coverage. In calculating this estimated payment, we have used 35% for the federal income tax rate and 7.85% for the Minnesota income tax rate.
 
Scott J. Pollei.  The following table describes the potential payments and benefits upon termination of employment or in connection with a change in control for Scott J. Pollei, our executive vice president and chief operating officer, assuming such event occurred as of December 31, 2009.
 
                                         
          Not for Cause
                   
          Termination or
                   
    Normal
    Resignation for
    Death or
    For Cause
    Change in
 
Payment and Benefits
  Retirement     Good Reason     Disability     Termination     Control  
 
Base Salary(1)
  $     $ 274,417     $     $     $ 548,834  
Non-Equity Incentive Compensation Plan Payment(2)
          238,743                   477,486  
Stock Options(3)
                             
Sale of Restricted Stock(4)
                92,390             92,390  
Outplacement Service
                            45,000  
Medical and Dental Benefits(5)
          18,431                   18,431  
Estimated Section 280G Gross Up(6)
                            187,066  
                                         
Total
  $     $ 531,591     $ 92,390     $     $ 1,369,207  
                                         
 
 
(1) Mr. Pollei’s base salary from January 1, 2009, through July 31, 2009, was $264,000. His salary was increased to $289,000 on August 1, 2009, in conjunction with his promotion to our executive vice president and chief operating officer.
 
(2) This amount reflects the non-equity incentive compensation plan payment Mr. Pollei earned as of December 31, 2009.
 
(3) At December 31, 2009, Mr. Pollei had unvested options to acquire 80,404 shares of our common stock. The exercise price of Mr. Pollei’s options was greater than the closing per share price of our common stock on December 31, 2009, so we have assumed that Mr. Pollei did not exercise and sell the options for purposes of this table.


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(4) Reflects 9,049 shares of restricted stock, which have not yet vested. In connection with a termination due to Mr. Pollei’s death or disability or in connection with a change in control, the unvested restricted shares would vest immediately. In connection with any other termination of Mr. Pollei’s employment, he would forfeit any shares of restricted stock, which has not yet vested. The amount in the table assumes that Mr. Pollei sold all such shares (including restricted shares that would vest upon such event) at $10.21, the closing per share price of our common stock on December 31, 2009.
 
(5) We self-insure for medical insurance by withholding an amount from participating employees’ compensation to fund our medical insurance program. Reflects 18 months of the COBRA premium for medical and dental benefits at the rate in effect at December 31, 2009.
 
(6) This amount is an estimate of the payment we would be obligated to make to Mr. Pollei under the executive change in control plan in addition to those payments Mr. Pollei receives upon a change in control under that plan. Our estimate of this payment assumes that the base amount is equal to the average of Mr. Pollei’s total compensation for the years ended December 31, 2009, 2008 and 2007, as reported in the Summary Compensation Table earlier in this proxy statement. The base amount is used to determine whether any payments received by Mr. Pollei upon a change in control constitute excess parachute payments under Section 280G of the Code. Our estimate of this payment also assumes that payments made on his behalf for continuing medical and dental coverage constitute parachute payments under Section 280G.
 
Under the change in control plan, we are only obligated to provide a gross-up payment for the base salary, short term non-equity incentive compensation payment, the outplacement service payment and any amounts paid on Mr. Pollei’s behalf for continuing medical and dental coverage. In calculating this estimated payment, we have used 35% for the federal income tax rate and 7.85% for the Minnesota income tax rate.
 
Mark W.C. Stodder.  The following table describes the potential payments and benefits upon termination of employment or in connection with a change in control for Mark W.C. Stodder, our executive vice president — Business Information Division, assuming such event occurred as of December 31, 2009.
 
                                         
          Not for Cause
                   
          Termination or
                   
    Normal
    Resignation for
    Death or
    For Cause
    Change in
 
Payment and Benefits
  Retirement     Good Reason     Disability     Termination     Control  
 
Base Salary
  $     $ 232,800     $     $     $ 465,600  
Non-Equity Incentive Compensation Plan Payment(1)
          192,805       192,805             385,610  
Stock Options(2)
                             
Outplacement Service
                            45,000  
Medical and Dental Benefits(3)
          16,470                   16,470  
Estimated Section 280G Gross Up(4)
                            133,918  
                                         
Total
  $     $ 447,475     $ 192,805     $     $ 1,046,598  
                                         
 
 
(1) This amount reflects the non-equity incentive compensation plan payment Mr. Stodder earned as of December 31, 2009.
 
(2) At December 31, 2009, Mr. Stodder had unvested options to acquire 85,474 shares of our common stock, including an aggregate 42,737 unvested options he assigned to his former spouse in connection with a marital termination agreement. The exercise price of these options was greater than the closing per share price of our common stock on December 31, 2009, so we have assumed that Mr. Stodder did not exercise and sell the options for purposes of this table.
 
(3) We self-insure for medical insurance by withholding an amount from the participating employees’ compensation to fund our medical insurance program. Reflects 18 months of the COBRA premium for medical and dental benefits at the rate in effect at December 31, 2009.


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(4) This amount is an estimate of the payment we would be obligated to make to Mr. Stodder under the executive change in control plan in addition to those payments Mr. Stodder receives upon a change in control under that plan. Our estimate of this payment assumes that the base amount is equal to the average of Mr. Stodder’s total compensation for the years ended December 31, 2009, 2008 and 2007, as reported in the Summary Compensation Table earlier in this proxy statement. The base amount is used to determine whether any payments received by Mr. Stodder upon a change in control constitute excess parachute payments under Section 280G of the Code. Our estimate of this payment also assumes that payments made on his behalf for continuing medical and dental coverage constitute parachute payments under Section 280G.
 
Under the change in control plan, we are only obligated to provide a gross-up payment for the base salary, short term non-equity incentive compensation payment, the outplacement service payment and any amounts paid on Mr. Stodder’s behalf for continuing medical and dental coverage. In calculating this estimated payment, we have used 35% for the federal income tax rate and 6.75% for the Wisconsin income tax rate.
 
David A. Trott.  The following table describes the potential payments upon termination of employment or in connection with a change in control for David A. Trott, chairman and chief executive officer of National Default Exchange, assuming such event occurred as of December 31, 2009.
 
                                         
          Not for Cause
                   
          Termination or
                   
    Normal
    Resignation for
    Death or
    For Cause
    Change in
 
Payment and Benefits
  Retirement     Good Reason     Disability     Termination     Control  
 
Severance Payment(1)
  $     $ 260,000     $     $     $  
Stock Options(2)
                             
Sale of Restricted Stock(3)
                94,146             94,146  
Medical and Dental Benefits(4)
          18,483                    
                                         
Total
  $     $ 278,483     $ 94,146     $     $ 94,146  
                                         
 
 
(1) Twelve monthly payments of $21,666.67 commencing on the last day of the full calendar month following the termination date.
 
(2) At December 31, 2009, Mr. Trott had vested options to acquire 48,684 shares of our common stock. The exercise price of Mr. Trott’s options was greater than the closing per share price of our common stock on December 31, 2009, so we have assumed that Mr. Trott did not exercise and sell the options for purposes of this table.
 
Under our incentive compensation plan, Mr. Trott has a period of 1 year, in the case of a termination of his employment due to death, retirement or disability, or sixty days, in the case of a termination without cause or resignation for good reason or in connection with a change in control. If Mr. Trott is terminated for cause, he forfeits all of his stock options, including any which have vested.
 
(3) Reflects 227,895 shares of our common stock, which Mr. Trott owned as of December 31, 2009. This includes 9,221 shares of restricted stock, which have not yet vested. In connection with a termination due to Mr. Trott’s death or disability or in connection with a change in control, the unvested restricted shares would vest immediately. In connection with any other termination of Mr. Trott’s employment, he would forfeit any shares of restricted stock, which has not yet vested. The amount in the table assumes that Mr. Trott sold all such shares (including restricted shares that would vest upon such event) at $10.21, the closing per share price of our common stock on December 31, 2009.
 
(4) Reflects 12 months of medical benefits under COBRA at the premium amount in effect at December 31, 2009.


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COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
 
John C. Bergstrom, Arthur Kingsbury and Lauren Rich Fine served on our board’s compensation committee for the year ended December 31, 2009. No member of our compensation committee has any relationship requiring any disclosure. None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve on our compensation committee.


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PRINCIPAL STOCKHOLDERS AND
BENEFICIAL OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
 
The following table describes information with respect to the beneficial ownership of our common stock as of March 29, 2010, by:
 
  •  Each person or group of affiliated persons known by us to beneficially own more than 5% of our outstanding shares of common stock;
 
  •  Each of our directors;
 
  •  Each of our executive officers; and
 
  •  All of our directors and executive officers as a group.
 
We have determined beneficial ownership according to SEC rules. In computing the percentage ownership of each person, we have included shares of common stock subject to options that person holds, to the extent such options are currently exercisable or may be exercisable within 60 days of March 29, 2010. These shares, however, were not included for purposes of computing the percentage ownership for any other person.
 
Unless otherwise indicated, the stockholders in this table have sole voting and investment power with respect to those shares set forth opposite that stockholder’s name. We have based our computation of the percentage ownership of our common stock on 30,315,032 shares outstanding on March 29, 2010. The address for each executive officer and director is c/o Dolan Media Company, 222 South Ninth Street, Suite 2300, Minneapolis, Minnesota 55402.
 
                 
        Percentage of
    Number of Shares
  Common Stock
Name and Address of Beneficial Owner
  Beneficially Owned   Outstanding
 
Beneficial Owners of More than 5%
               
T. Rowe Price Associates, Inc.(1)
               
100 E. Pratt Street
               
Baltimore, Maryland 21202
    2,912,141       9.6 %
William Blair & Company, L.L.C.(2)
               
222 W. Adams
               
Chicago, Illinois 60606
    1,808,614       6.0 %
Executive Officers and Directors
               
James P. Dolan(3)
    1,700,328       5.6 %
Vicki J. Duncomb(4)
    39,405       *
Scott J. Pollei(5)
    264,676       *
Mark W. C. Stodder(6)
    74,039       *
David A. Trott(7)
    276,579       *
John C. Bergstrom(8)
    74,819       *
Anton J. Christianson(9)
    374,699       1.2 %
Arthur F. Kingsbury(10)
    8,711       *
Jacques Massicotte(11)
    16,626       *
Lauren Rich Fine(12)
    12,711       *
George Rossi(13)
    17,321       *
Gary H. Stern
           
Executive Officers and Directors as a group (12 persons)(14)
    2,859,914       9.3 %
 
 
less than 1% beneficial ownership
 
(1) The information provided here is based upon a Schedule 13G/A filed on February 12, 2010, and information by the stockholder. These shares are owned by various individual and institutional investors, including T. Rowe Price New Horizons Fund, Inc. (which owns 2,000,000 shares, representing 6.6% of the


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shares outstanding on March 29, 2010) for which T. Rowe Price Associates, Inc. serves as investment advisor with power to direct investments and/or sole power to vote the shares, and therefore, may be deemed to be the beneficial owner of these shares; however, T. Rowe Price Associates, Inc. expressly disclaims beneficial ownership of these shares. T. Rowe Price Associates, Inc. is the wholly-owned subsidiary of T. Rowe Price Group, Inc., a publicly traded financial services holding company.
 
(2) The information provided here is based upon a Schedule 13G filed on February 5, 2010 and information previously provided by the stockholder. William Blair & Company, LLC, as investment advisor to each of the entities that own the shares reported here has voting and/or investment power with respect to these shares and, therefore, may be deemed to be the beneficial owner of these shares. However, William Blair & Company, LLC expressly disclaims beneficial ownership of these shares.
 
(3) These shares include the following: (a) 16,338 shares owned by Mr. Dolan’s spouse (including 555 shares of restricted stock that are not yet vested) and options to acquire 721 shares of common our common stock, which Mr. Dolan’s spouse may exercise during the 60-day period following March 29, 2010; and (b) options to acquire 127,152 shares of our common stock, which Mr. Dolan may exercise during the 60-day period following March 29, 2010. Mr. Dolan disclaims beneficial ownership of all shares his spouse owns, including shares she could own pursuant to the exercise of any stock options.
 
(4) These shares include the following: (a) 5,484 shares of restricted stock that were granted to Ms. Duncomb in connection with her employment, of which none is vested, and (b) options to acquire 28,066 shares of our common stock, which Ms. Duncomb may exercise during the 60-day period following March 29, 2010.
 
(5) These shares include the following: (a) 14,998 shares that Mr. Pollei owns through an individual retirement account, (b) 9,049 shares of restricted stock that were granted to Mr. Pollei in connection with his employment, none of which is vested, (c) an aggregate 180,000 shares held in four separate trusts for Mr. Pollei’s children, and (d) options to acquire 47,753 shares of common stock, which Mr. Pollei may exercise during the 60-day period following March 29, 2010. Mr. Pollei is the trustee of each trust and has sole voting and investment power with respect to the shares held by each trust. Mr. Pollei disclaims beneficial ownership of the shares held in trust for his children.
 
(6) These shares include the following: (a) 250 shares owned by his minor daughter; and (b) options to acquire 21,066 shares of our common stock, which Mr. Stodder may exercise during the 60-day period following March 29, 2010. Mr. Stodder disclaims beneficial ownership of those shares his minor daughter owns. The shares reported do not include an aggregate 52,473 shares and options to acquire 21,065 shares of common stock, which are exercisable during the 60-day period following March 29, 2010, that Mr. Stodder assigned to his former spouse in connection with a marital termination agreement in 2009.
 
(7) These shares include the following: (a) 50,000 shares owned by the David Trott Revocable Trust for which Mr. Trott is the trustee; (b) 9,221 shares of restricted stock that were granted to Mr. Trott in connection with his employment, of which none is vested; (c) options to acquire 48,684 shares of our common stock, which Mr. Trott may exercise in the 60-day period following March 29, 2010, (d) 168,644 shares issued to Mr. Trott, as partial consideration, for the sale of a 5.1% membership interest in American Processing Company, LLC d/b/a NDeX, and (e) 30 shares owned by Mr. Trott’s spouse. Mr. Trott disclaims beneficial ownership of the shares owned by his spouse. In addition, the shares reported exclude an aggregate of 7,200 shares held by three separate trusts for the benefit of Mr. Trott’s children on March 1, 2010. Mr. Trott is not a trustee of these trusts and has no investment or voting power with respect to the shares the trusts own.
 
(8) These shares include the following: (a) 10,000 shares that Mr. Bergstrom owns through an individual retirement account, and (b) options to acquire 8,099 shares of our common stock which Mr. Bergstrom may exercise during the 60-day period following March 29, 2010.
 
(9) These shares include (a) 12,880 shares held by Adam Smith Growth Partners, L.P., (b) 351,895 shares held by Adam Smith Fund, L.L.C., (c) 1,300 shares held by Adam Smith Companies, LLC, and (d) options to purchase 7,633 shares of our common stock, which Mr. Christianson may exercise during the 60-day period following March 29, 2010. Mr. Christianson is the chairman of Adam Smith Companies, LLC, the general partner of Adam Smith Growth Partners L.P. Mr. Christianson is also the president


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of Adam Smith Management, LLC, the managing member of the Adam Smith Fund, L.L.C. Mr. Christianson has shared voting and investment power with respect to, and therefore may be deemed to be the beneficial owner of the shares of common stock owned by Adam Smith Growth Partners, L.P., Adam Smith Fund, L.L.C. and Adam Smith Companies, LLC. Mr. Christianson disclaims beneficial ownership to the shares of our common stock owned by Adam Smith Growth Partners, L.P., Adam Smith Fund, L.L.C., and Adam Smith Companies, LLC, except to the extent of his indirect ownership in those entities.
 
(10) These shares include options to acquire 2,711 shares of our common stock, which Mr. Kingsbury may exercise in the 60-day period following March 29, 2010.
 
(11) These shares include options to acquire 6,626 shares of our common stock, which Mr. Massicotte may exercise in the 60-day period following March 29, 2010.
 
(12) These shares include options to acquire 2,711 shares of our common stock, which Ms. Rich Fine may exercise in the 60-day period following March 29, 2010.
 
(13) These shares include options to acquire 7,321 shares of our common stock, which Mr. Rossi may exercise in the 60-day period following March 29, 2010.
 
(14) See Notes 3 through 13 above.
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock to file reports of their ownership, and changes in their ownership, with the SEC. We are required to identify any person who fails to file these reports on a timely basis. To our knowledge, all filings were made on a timely basis during 2009. In making this statement, we have relied upon our examination of the Forms 3, 4 and 5 on file with the SEC for each of our directors and executive officers and also those directors and executive officers’ written representations to us.
 
By order of the Board of Directors,
 
/s/  Vicki J. Duncomb
Vicki J. Duncomb
Corporate Secretary
 
April 7, 2010


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Appendix A
Dolan Media Company
2007 Incentive Compensation Plan
(Amended and restated in 2010)

 


Table of Contents

Table of Contents
         
        Page
Section 1. Establishment, Purpose and Duration
      1
1.1 Effective Date and Purpose
      1
1.2 Duration of the Plan.
      1
 
       
Section 2. Definitions
      1
2.1 Annual Incentive Award
      1
2.2 Award
      1
2.3 Award Agreement
      2
2.4 Beneficiary
     
12
2.5 Board
     
12
2.6 Bonus Opportunity
      2
2.7 Cause
      2
2.8 Change in Control
      2
2.9 Code
     
34
2.10 Committee
      4
2.11 Common Stock
      4
2.12 Company
      4
2.13 Covered Employee
      4
2.14 Deferred Compensation Awards
      4
2.15 Deferred Stock
      4
2.16 Disability
      4
2.17 Dividend Equivalent
      4
2.18 Effective Date
      4
2.19 Eligible Person
      4
2.20 Employer
      4
2.21 Exchange Act
     
45
2.22 Exercise Date
     
45
2.23 Fair Market Value
     
45
2.24 Grant Date
      5
2.25 Grantee
      5
2.26 Incentive Stock Option
      5
2.27 including
      5
2.28 Non-Qualified Stock Option
      5
2.29 Option
      5
2.30 Option Price
      6
2.31 Performance-Based Exception
     
56
2.32 Performance Goal
     
56
2.33 Performance Measures
      6
2.34 Performance Period
      6
2.35 Performance Unit
      6
2.36 Person
      6
2.37 Restricted Stock
      6
2.38 Restricted Stock Unit or RSU
      6
2.39 Restrictions
      6

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        Page
2.40 Retirement
     
67
2.41 Rule 16b-3
     
67
2.42 SEC
     
67
2.43 Section 16 Non-Employee Director
      7
2.44 Section 16 Person
      7
2.45 Settlement Date
      7
2.46 Share
      7
2.47 Stock Appreciation Right or SAR
      7
2.48 Strike Price
      7
2.49 Subsidiary
      7
2.50 Substitute Award
      7
2.51 Term
      7
2.52 Termination of Service
      8
2.53 Year
     
78
 
       
Section 3. Administration
     
78
3.1 Committee
     
78
3.2 Powers of the Committee
      8
 
       
Section 4. Shares Subject to the Plan and Adjustments
      10
4.1 Number of Shares Available for Grants
      10
4.2 Adjustments in Authorized Shares and Awards
     
1011
4.3 Compliance With Code Section 162(m)
      11
4.4 Performance -Based Exception Under Section 162(m)
     
1112
 
       
Section 5. Eligibility and General Conditions of Awards
      14
5.1 Eligibility
      14
5.2 Award Agreement
      14
5.3 General Terms and Termination of Service
      14
5.4 Nontransferability of Awards
      16
5.5 Cancellation and Rescission of Awards
     
1617
5.6 Substitute Awards
     
1617
5.7 Exercise by Non-Grantee
     
1617
5.8 No Cash Consideration for Awards
     
1617
 
       
Section 6. Stock Options
      18
6.1 Grant of Options
      18
6.2 Award Agreement
      18
6.3 Option Price
     
18
6.4 Vesting
     
1718
6.5 Grant of Incentive Stock Options
     
1718
6.6 Exercise and Payment
     
1819
 
       
Section 7. Stock Appreciation Rights
     
1920
7.1 Grant of SARs
     
1920
7.2 Award Agreements
     
1921
7.3 Strike Price
      21
7.4 Vesting
      21
7.5 Exercise and Payment
      21

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            Page
7.6 Grant Limitations
         
2021
 
           
Section 8. Restricted Stock
         
2021
8.1 Grant of Restricted Stock
         
2021
8.2 Award Agreement
         
2021
8.3 Consideration for Restricted Stock
         
2021
8.4 Vesting
         
2021
8.5 Effect of Forfeiture
         
2022
8.6 Escrow; Legends
          22
8.7 Stockholder Rights in Restricted Stock
         
2122
 
           
Section 9. Restricted Stock Units
         
2122
9.1 Grant of Restricted Stock Units
         
2122
9.2 Award Agreement
         
2122
9.3 Crediting Restricted Stock Units
         
2123
 
           
Section 10. Deferred Stock
         
2223
10.1 Grant of Deferred Stock
         
2223
10.2 Award Agreement
         
2224
10.3 Deferred Stock Elections
          24
10.4 Deferral Account
         
2324
 
           
Section 11. Performance Units
         
2425
11.1 Grant of Performance Units
         
2425
11.2 Value/Performance Goals
         
2425
11.3 Earning of Performance Units
          26
11.4 Adjustment on Change of Position
         
2526
11.5 Dividend Rights
         
2526
 
           
Section 12. Annual Incentive Awards
         
2526
12.1 Annual Incentive Awards.
         
2526
12.2 Determination of Amount of Annual Incentive Awards.
         
2527
12.3 Time of Payment of Annual Incentive Awards.
         
2628
12.4 Form of Payment of Annual Incentive Awards.
         
2628
 
           
Section 13. Change in Control
         
2628
13.1 Acceleration of Vesting
         
2628
13.2 Special Treatment In the Event ofif a Change in Control Occurs
          28
 
           
Section 14. Dividend Equivalents
         
2729
 
           
Section 15. Stockholders’ Agreement 27 Section 16. Amendments and Termination 28 16.1
          29
15.1 Amendment and Termination
          29
16.2 15.2 Effect of Termination or Amendments on Previously Granted Awards
          29
 
           
Section 17.16. Beneficiary Designation
         
2830
 
           
Section 18.17. Withholding
         
2830
18.117.1 Required Withholding
         
2830
18.217.2 Notification under Code Section 83(b) of the Code
         
29 31
 
           
Section 19.18. General Provisions
         
2931
19.118.1 Governing Law
         
2931

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            Page
19.2
18.2
 Severability
         
2931
19.3
18.3
 Successors
         
2931
19.4
18.4
 Requirements of Law
         
3032
19.5
18.5
 Securities Law Compliance
         
3032
19.6
18.6
 Section 409A
         
3032
19.7
18.7
 No Rights as a Stockholder
         
3133
19.8
18.8
 Awards Not Taken Into Account for Other Benefits
         
3133
19.9
18.9
 Employment Agreement Supersedes Award Agreement
         
3133
19.10
18.10
 Non-Exclusivity of Plan
         
3133
19.11
18.11
 No Trust or Fund Created
         
3133
19.12
18.12
  No Right to Continued Employment or Awards
         
3133
19.13
18.13
 Military Service
         
3234
19.14
18.14
  Construction
         
3234
19.15
18.15
 No Fractional Shares
         
3234
19.16
18.16
 Plan Document Controls.
          32 34

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Dolan Media Company
2007 Incentive Compensation Plan
(Amended and restated in 2010)
Section 1.
Establishment, Purpose and Duration
     1.1 Effective Date and Purpose. Dolan Media Company, a Delaware corporation (the “Company), hereby amends and restates the Dolan Media Company 2006 Equity Incentive Plan (the “2006 Plan”), and renames it the Dolan Media Company 2007 Incentive Compensation Plan (the “Plan”). The Plan is intended to attract and retain exceptionally qualified employees, consultants and directors upon whom, in large measure, the sustained progress, growth and profitability of the Company depend. By encouraging employees, consultants and directors of the Company and its subsidiaries to acquire a proprietary interest in the Company’s growth and performance, the Company intends to motivate employees, consultants and directors to achieve long-term Company goals and to more closely align such persons’ interests with those of the Company’s other stockholders. The amended and restated Plan was approved by the Board on June 22, 2007 March 2, 2010 (the “Effective Date”), subject to approval by the Company’s stockholders. All numbers of shares included in the Plan have been adjusted to reflect a nine-for-one stock split effective August 7, 2007.
     1.2 Duration of the Plan. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Board of Directors of the Company to amend or terminate the Plan at any time pursuant to Section 1615 hereof, until the earlier to occur of (a) the date all Shares subject to the Plan shall have been purchased or acquired and the Restrictions on all Restricted Stock granted under the Plan shall have lapsed, according to the Plan’s provisions, and (b) ten (10) years from the Effective Date of thethis amended and restated Plan. The termination of the Plan shall not adversely affect any Awards outstanding on the date of termination.
Section 2.
Definitions
     As used in the Plan, in addition to terms elsewhere defined in the Plan, the following terms shall have the meanings set forth below:
     2.1 “Annual Incentive Award means a performance bonus determined under Section 12.
     2.2 “Award means any Option (including Non-Qualified Stock Options and Incentive Stock Options), Stock Appreciation Right, Restricted Stock, Share, Restricted Stock Unit, Deferred Stock, Performance Unit, Substitute Award, Dividend Equivalent or Annual Incentive Award.

 


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     2.3 “Award Agreement” means any written agreement, contract, or other instrument or document evidencing any Award granted hereunder between the Company and the Grantee.
     2.4 “Beneficiary” means the Person designated to receive Plan benefits, if any, following the Grantee’s death in accordance with Section 17.16.
     2.5 “Board” means the Board of Directors of the Company.
     2.6 “Bonus Opportunity” means a Grantee’s threshold, target and maximum bonus opportunity for a Year,; provided that such bonus opportunity shall be either (ia) to the extent that the Grantee has entered into an employment agreement with the Company, the threshold, target and maximum bonus levels, if any, specified in the employment agreement for such Year based on the Grantee’s base salary in effect on the first day of such Year, or (iib) if there is no employment agreement in effect between the Company and the Grantee as of the first day of such Year or if the employment agreement does not specify such bonus levels, the percentageapplicable threshold, target and maximum percentages of such Grantee’s base salary in effect on the first day of such Year (or such later date as such person is designated as a Grantee), as determined by the Committee in its sole discretion within the first ninety (90) days of such Year (or before such later date as such person is designated as a Grantee, subject to the time limit stated in Section 12.1, if applicable).
     2.7 “Cause” means, as determined by the Committee, the occurrence of any one of the following: (a) any act of dishonesty, willful misconduct, gross negligence, intentional or conscious abandonment or neglect of duty; (b) commission of a criminal activity, fraud or embezzlement; (c) any unauthorized disclosure or use of confidential information or trade secrets; or (d) any violation of any non-compete or non-disclosure agreement between an Eligible Person and any Employer; provided, however, that in the eventif a Grantee is a party to an employment agreement with the Company or a Subsidiary that contains a different definition of Cause, the definition of Cause contained in such employment agreement shall be controlling.
     2.8 “Change in Control” means, with respect to Awards other than Deferred Compensation Awards, the occurrence of any one or more of the following: (ia) the acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of more than fifty percent (50%) of the outstanding voting Shares; provided, however, that a Change in Control shall not be deemed to occur solely because more than fifty percent (50%) of the outstanding voting Shares is acquired by (Ai) a trustee or other fiduciary holding securities under one or more employee benefit plans maintained by the Company or any of its subsidiaries, or (Bii) any Person whichthat, immediately prior tobefore such acquisition, is owned directly or indirectly by the stockholders of the Company in approximately the same proportion as their ownership of voting Shares immediately prior tobefore such acquisition; (iib) a merger, consolidation or other reorganization involving the Company if the stockholders of the Company and their affiliates, immediately before such merger, consolidation or other reorganization, do not, as a result of such merger, consolidation, or other reorganization, own directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting shares of the Person resulting from such merger, consolidation or other reorganization; (iiic) a complete liquidation or dissolution of the Company; or (ivd) the sale or other disposition of all or substantially all of the assets of the Company and its subsidiaries determined on a consolidated

 


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basis. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement, an initial public offering of the Shares of the Company (an “IPO”) shall not constitute a Change in Control for purposes of the Plan or any Award Agreement hereunder.
     “Change in Control” means, with respect to Deferred Compensation Awards, the occurrence one or more of any of the following:
     (a) A Change in the Ownership of the Company. A change in ownership of the Company shall occur on the date that any one Person, or more than one Person acting as a “Group” (as defined under Code Section 409A), acquires ownership of stock of the Company that, together with stock held by such Person or Group, constitutes more than 50% of the total fair market valueFair Market Value or total voting power of the stock of the Company; provided, however, that, if any one Person, or more than one Person acting as a Group, is already considered to own more than 50% of the total fair market valueFair Market Value or total voting power of the stock of the Company, the acquisition of additional stock by the same Person or Persons is not considered to cause a change in the ownership of the Company.
     (b) A Change in the Effective Control of the Company. A change in the effective control of the Company occurs on the date that any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of the Company possessing 50% or more of the total voting power of the stock of the Company; or
     (c) A Change inthe Ownership of aSubstantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total Gross Fair Market Value (as defined below in this Section) equal to or more than 50% of the total Gross Fair Market Value of all of the assets of the Company immediately prior tobefore such acquisition or acquisitions; provided, however, that, a transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to:
     (i) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;
     (ii) an entity, 50% or more of the total Fair Market Value or voting power of which is owned, directly or indirectly, by the Company;
     (iii) a Person, or more than one Person acting as a Group, that owns, directly or indirectly, 50% or more of the total Fair Market Value or voting power of all the outstanding stock of the Company; or
     (iv) an entity, at least 50% of the total Fair Market Value or voting power of which is owned, directly or indirectly, by a Person described in clause (iii) of this paragraph 2.8(c).

 


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     For purposes of this definition, Gross Fair Market Value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
     For all purposes of the latter definition of Change in Control that applies to Deferred Compensation Awards, stock ownership is determined under Code Section 409A.
     2.9 “Code” means the Internal Revenue Code of 1986 (and any successor thereto), as amended from time to time. References to a particular Code section of the Code include references to regulations and rulings and other guidance thereunder; and to successor provisions.
     2.10 “Committee” has the meaning set forth in Section 3.1(a).
     2.11 “Common Stock” means common stock, par value $.001 per share, of the Company.
     2.12 “Company” has the meaning set forth in Section 1.1.
     2.13 “Covered Employee” means a Grantee who, as of the last day of the fiscalCompany’s taxable year in which the value of an Award is includable in income for federal income tax purposes, is one of the group of “covered employees,” within the meaning of Code Section 162(m), with respect to the Company.
     2.14 “Deferred Compensation Awards” means Awards that could be subject to liability under Code Section 409A and do not qualify for an exemption from Code Section 409A coverage.
     2.15 “Deferred Stock” means a right, granted as an Award under Section 10, to receive payment in the form of Shares (or measured by the value of Shares) at the end of a specified deferral period.
     2.16 “Disability” means a Grantee’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, as determined by the Committee.
     2.17 “Dividend Equivalent” means any right to receive payments equal to dividends or property, if and when paid or distributed, on Shares or Restricted Stock Units.
     2.18 “Effective Date” has the meaning set forth in Section 1.1.
     2.19 “Eligible Person” means any employee of an Employer, non-employee director of the Company or consultant engaged by an Employer.
     2.20 “Employer” means the Company or any Subsidiary.

 


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     2.21 “Exchange Act” means the Securities and Exchange Act of 1934, as amended, or any successors thereto, and the rules and regulations promulgated thereunder, all as shall be amended from time to time.
     2.22 “Exercise Date” means the date the holder of an Award that is subject to exercise delivers notice of such exercise to the Company, accompanied by such payment, attestations, representations and warranties or other documentation as required hereunder, under the applicable Award Agreement or as the Committee may otherwise specify.
     2.23 “Fair Market Value” means, as of any applicable date, (a) the closing sales price for one Share on such date as reported on the New York Stock Exchange or, if the foregoing does not apply, on such other market system or stock exchange on which the Company’s Common Stock is then listed or admitted to trading, or on the last previous day on which a sale was reported if no sale of a Share was reported on such date, or (b) if the foregoing subsection (a) does not apply, the fair market value of a Share as reasonably determined in good faith by the Board in accordance with Code Section 409A. For purposes of subsection (b), the determination of such Fair Market Value by the Board will be made no less frequently than every twelve (12) months and will either (x) use one of the safe harbor methodologies permitted under Proposed Treasury Regulation Section 1.409-1(b)(5)(iv)(B)(2) (or such other similar final regulation provision as may be provided); or (y) include, as applicable, the value of tangible and intangible assets of the Company, the present value of future cash flows of the Company, the market value of stock or other equity interests in similar corporations and other entities engaged in trades or businesses substantially similar to those engaged in by the Company, the value of which can be readily determined through objective means (such as through trading prices or an established securities market or an amount paid in ana recent