Filed by Bowne Pure Compliance
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:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-1(c) or §240.14a-12 |
StarTek, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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Fee paid previously with preliminary materials. |
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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. |
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Amount previously paid:
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Form, Schedule, or Registration Statement No.:
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Filing Party:
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Date filed:
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NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS May 5, 2008
PROXY STATEMENT
StarTek, Inc.
44 Cook Street, 4th Floor
Denver, Colorado 80206
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 5, 2008
To the Stockholders:
The 2008 Annual Meeting of Stockholders of StarTek, Inc., a Delaware corporation, will be held at
the offices of StarTek, Inc., 44 Cook Street, 4th Floor, Denver, CO, 80206, on May 5,
2008, at 9:00 a.m. local time, for the following purposes:
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To elect five directors to hold office for a term of one year and until their
successors are elected and qualified. |
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To ratify the appointment of Ernst & Young, LLP as our independent registered public
accounting firm for the year ending December 31, 2008. |
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To approve the StarTek, Inc. Employee Stock Purchase Plan. |
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To approve the StarTek, Inc. 2008 Equity Incentive Plan. |
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To consider and act upon such other business as may properly come before the Annual
Meeting. |
Only stockholders of record at the close of business on March 6, 2008 are entitled to notice
of and to vote at the meeting and any adjournment thereof.
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By order of the board of directors,
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A. Laurence Jones |
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President and Chief Executive Officer |
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March 20, 2008
IMPORTANT
Whether or not you expect to attend the Annual Meeting in person, we urge you to vote your shares
at your earliest convenience. This will ensure the presence of a quorum at the meeting. Promptly
voting your shares will save us the expense and extra work of additional solicitation. Please vote
your shares, as instructed in the Notice of Internet Availability of Proxy Materials, over the
Internet or by telephone after your receipt of hard copies of the proxy materials, as promptly as
possible. You may also request a paper proxy card, which will include a reply envelope, to submit
your vote by mail, as described in the Notice of Internet Availability of Proxy Materials.
Submitting your proxy now will not prevent you from voting your shares at the meeting if you desire
to do so, as your proxy is revocable at your option.
STARTEK, INC.
TABLE OF CONTENTS
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ii
PROXY STATEMENT
STARTEK, INC.
44 COOK STREET, 4th FLOOR DENVER, COLORADO 80206
(303) 262-4500
2008 ANNUAL MEETING OF STOCKHOLDERS
May 5, 2008
This Proxy Statement was first made available to stockholders on or about March 20, 2008. It is
furnished in connection with the solicitation of proxies by the board of directors of StarTek,
Inc., a Delaware corporation, to be voted at the 2008 Annual Meeting of Stockholders for the
purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The 2008 Annual
Meeting of Stockholders will be held at the offices of StarTek, Inc., 44 Cook Street, 4th Floor,
Denver, CO, 80206, on May 5, 2008, at 9:00 a.m. local time.
OUTSTANDING STOCK AND VOTING RIGHTS
The only outstanding securities entitled to vote at the Annual Meeting are shares of our common
stock, $.01 par value. Stockholders of record at the close of business on March 6, 2008 will be
entitled to vote at the meeting on the basis of one vote for each share held. On March 6, 2008,
there were 14,735,791 shares of common stock outstanding.
Under new rules of the Securities and Exchange Commission, we are furnishing proxy materials to our
shareholders on the Internet, rather than mailing printed copies to our stockholders. If you
received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a
printed copy of the proxy materials unless you request one as instructed in that notice. Instead,
the Notice of Internet Availability of Proxy Materials will instruct you as to how you may access
and review the proxy materials on the Internet. If you received a Notice of Internet Availability
of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, please
follow the instructions included in the Notice of Internet Availability of Proxy Materials.
Proxies will be voted according to the instructions received either on the proxy card or online via
the Internet or telephone. In the absence of specific instructions, proxies will be voted (i) FOR
the proposals described in this Proxy Statement, and (ii) in the discretion of the proxy holders on
any other matter which properly comes before the Annual Meeting.
Stockholders who execute proxies retain the right to revoke them at any time before the shares are
voted by proxy at the meeting. A stockholder may revoke a proxy by delivering a signed statement
to our Corporate Secretary at or prior to the Annual Meeting or by timely executing and delivering,
by mail, Internet, telephone, or in person at the Annual Meeting, another proxy dated as of a later
date. StarTek will pay the cost of solicitation of proxies.
The quorum necessary to conduct business at the Annual Meeting consists of a majority of the
outstanding shares of common stock as of the record date. The election of the directors nominated
will require a plurality (i.e., the highest number) of the votes cast in person or by proxy at the
Annual Meeting by stockholders. In the election of directors, each stockholder is entitled to cast
one vote per share for each director to be elected. Cumulative voting is not permitted.
The affirmative vote of the holders of a majority of the shares of our common stock present at the
Annual Meeting, whether in person or by proxy, is required to approve ratification of our
independent registered accounting firm. The affirmative vote of the holders of a majority of the
shares of our common stock present at the Annual Meeting, whether in person or by proxy, is
required to approve the StarTek, Inc. Employee Stock Purchase Plan and the StarTek, Inc. 2008
Equity Incentive Plan. Furthermore, the holders of a majority of the shares of our common stock
outstanding must vote on the proposals to approve the StarTek, Inc. Employee Stock Purchase Plan
and the StarTek, Inc. 2008 Equity Incentive Plan.
Votes withheld from nominees for directors, abstentions, and broker non-votes (i.e., when a broker
does not have authority to vote on a specific issue) are counted as present in determining whether
the quorum requirement is satisfied. Votes withheld from nominees will have no effect on their
election. For purposes of the remaining proposals and any other matters properly brought before
the Annual Meeting, broker non-votes will not be considered present and do not affect the vote
taken; however, abstentions are considered as being present and have the effect of a no vote.
Brokers cannot vote on their customers behalf on non-routine proposals such as the approval of
these plans. Because brokers may not vote unvoted shares on behalf of their customers for such
non-routine matters, it is critical that stockholders vote their shares.
1
The board of directors has selected Ed Zschau and A. Laurence Jones, and each of them, to act as
proxies with full power of substitution. Solicitation of proxies may be made by mail, personal
interview, telephone and facsimile transmission by our officers and other management employees,
none of whom will receive any additional compensation for their soliciting activities. The total
expense of any solicitation will be borne by us and may include reimbursement paid to brokerage
firms and others for their expenses in forwarding material regarding the Annual Meeting to
beneficial owners.
Unless otherwise noted in this definitive proxy statement, any description of us, we, our,
etc. refers to StarTek, Inc. and our subsidiaries.
2
BENEFICIAL OWNERSHIP OF COMMON STOCK BY
DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL STOCKHOLDERS
The table below presents information as of March 1, 2008, regarding the beneficial ownership of
shares of our common stock by:
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Each of our directors, our nominee for director, and the executive officers named in the
Summary Compensation Table; |
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Each person we know to have beneficially owned more than five percent of our common stock
as of that date; and |
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All of our executive officers and directors as a group. |
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Beneficial |
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Ownership of Shares |
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Number of |
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Percentage of |
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Name of Beneficial Owner |
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Shares(1) |
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Class |
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A. Laurence Jones (2)(6) |
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149,668 |
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1.01 |
% |
Steven D. Butler (3) |
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0 |
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David G. Durham (2)(7) |
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15,000 |
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Patrick M. Hayes (2)(8) |
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50,799 |
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Michael Griffith (2)(9) |
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22,474 |
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Mary Beth Loesch (2)(10) |
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14,584 |
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Ed Zschau (2)(11) |
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43,000 |
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Albert C. Yates (2)(12) |
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15,000 |
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P. Kay Norton (2)(13) |
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15,000 |
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Harvey A. Wagner (4) |
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0 |
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A. Emmet Stephenson, Jr. (2)(5) |
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3,214,382 |
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21.81 |
% |
T. Rowe Price Associates (14) |
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1,850,300 |
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12.56 |
% |
Wellington Management Company, LLP (15) |
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1,201,900 |
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8.16 |
% |
Heartland Advisors, Inc. (16) |
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817,900 |
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5.55 |
% |
Dimensional Fund Advisors LP (17) |
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763,441 |
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5.18 |
% |
Barclays Global Investors, N.A. (18) |
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741,731 |
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5.03 |
% |
All Directors and Executive Officers as a group (10 persons) (19) |
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349,588 |
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2.33 |
% |
(1) |
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Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of 1934, as amended
(the Exchange Act). Under Rule 13d-3(d), shares not outstanding that are subject to
options, warrants, rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned by such person,
but are not deemed outstanding for the purpose of calculating the percentage owned by each
other person listed. Accordingly, share ownership in each case includes shares issuable
upon exercise of outstanding options that are exercisable within 60 days after March 1,
2008. Unless otherwise indicated in the footnotes and subject to community property laws
where applicable, each of the named persons has sole voting and investment power with
respect to the shares shown as beneficially owned. |
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The address of such person is c/o StarTek, Inc., 44 Cook Street, 4th Floor,
Denver, Colorado 80206. |
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The address of such person is 32556 Woodside Drive, Evergreen, Colorado 80439. |
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The address of such person is 10 City Place, #31H, White Plains, NY 10601. |
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Mr. Stephenson is one of our co-founders. He served as chairman of our board of
directors until his retirement on May 31, 2006. Mr. Stephenson has entered into an
Investor Rights Agreement with us, which is more fully described on page 25 of this
definitive proxy statement. |
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Mr. Jones was appointed President and Chief Executive Officer on January 5, 2007, after
having served as a director since July 17, 2006. The 149,668 shares include 3,000 shares
of common stock underlying vested stock options that were granted upon Mr. Jones
appointment to the board, 106,668 shares of common stock underlying vested stock options
that were granted upon Mr. Jones appointment as President and Chief Executive Officer,
10,000 shares purchased by Mr. Jones on the open market, 10,000 shares granted to Mr. Jones
upon his appointment as President and Chief Executive Officer, pursuant to a restricted
stock award, that have since vested, and 20,000 restricted shares that were granted to Mr.
Jones upon his appointment as President and Chief Executive Officer. The 20,000 unvested
restricted shares are subject to forfeiture
and the restrictions lapse on January 5, 2011, unless the restrictions lapse earlier
pursuant to certain performance requirements, as described more fully under Employment
Agreements on page 18. |
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(7) |
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Mr. Durham is our Executive Vice President, Chief Financial Officer and Treasurer. The
15,000 shares include 5,000 shares purchased by Mr. Durham on the open market and 10,000
restricted shares that were granted to Mr. Durham upon his appointment as Executive Vice
President, Chief Financial Officer and Treasurer. The restricted shares are subject to
forfeiture and lapse as to 3,333 shares on September 10, 2008, 3,333 shares on September
10, 2009 and 3,334 shares on September 10, 2010. |
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Mr. Hayes is our Executive Vice President and Chief Operating Officer. The 50,799
shares included are shares of common stock underlying vested stock options. |
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Mr. Griffith is our Senior Vice President of Sales and Marketing. The 22,474 shares
included are shares of common stock underlying vested stock options. |
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Ms. Loesch is our Senior Vice President of Business Development. The 14,584 shares
included are shares of common stock underlying vested stock options. |
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Dr. Zschau is chairman of our board of directors. The 43,000 shares include 10,000
shares owned by the Zschau Living Trust, and 33,000 shares of common stock underlying
vested stock options. |
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Dr. Yates is one of our directors. The 15,000 shares included are shares of common
stock underlying vested stock options. |
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Ms. Norton is one of our directors. The 15,000 shares included are shares of common
stock underlying vested stock options. |
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This disclosure is based on a Schedule 13G/A filed with the Securities and Exchange
Commission (SEC) by T. Rowe Price on February 12, 2008. The address of this stockholder is
100 East Pratt Street, Baltimore, Maryland 21202. These securities are owned by various
individual and institutional investors, including T. Rowe Price Small-Cap Value Fund, Inc.
(which owns 920,000 shares, representing 6.2% of the shares outstanding), which T. Rowe
Price Associates, Inc. (Price Associates) serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of the reporting
requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities. T. Rowe Price Associates, Inc. reports sole voting
power with respect to 852,400 shares and sole dispositive power with respect to 1,850,300
shares. |
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This disclosure is based on a Schedule 13G filed with the SEC by Wellington Management
Company, LLP on February 14, 2008. The address of this stockholder is 75 State Street,
Boston, Massachusetts 02109. Wellington Management Company, LLP reports shared voting
power with respect to 812,400 shares and shared dispositive power with respect to 1,201,900
shares. |
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This disclosure is based on a Schedule 13G filed with the SEC by Heartland Advisors,
Inc. and William J. Nasgovitz, President and principal shareholder of Heartland Advisors,
Inc., on February 8, 2008. The address of this stockholder is 789 North Water Street,
Milwaukee, Wisconsin 53202. These securities are owned by various individual and
institutional investors, including Heartland Value Fund, a series of the Heartland Group,
Inc. (which owns 750,000 shares, representing 5.1% of the shares outstanding), which
Heartland Advisors, Inc. serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting requirements of
the Exchange Act, Heartland Advisors, Inc. and William J. Nasgovitz are deemed to be
beneficial owners of such securities; however, each of Heartland Advisors, Inc. and Mr.
Nasgovitz expressly disclaim that it is, in fact, the beneficial owner of such securities.
Heartland Advisors, Inc. reports shared voting power with respect to 817,000 shares and
shared dispositive power with respect to 817,900 shares. |
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(17) |
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This disclosure is based on a Schedule 13G filed with the SEC by Dimensional Fund
Advisors LP on February 6, 2008. The address of this stockholder is 1299 Ocean Avenue,
Santa Monica, California 90401. For purposes of the reporting requirements of the Exchange
Act, Dimensional Fund Advisors LP is deemed to be a beneficial owner of such securities;
however, Dimensional Fund Advisors, LP expressly disclaims that it is, in fact, the
beneficial owner of such securities. Dimensional Fund Advisors LP reports sole voting
power with respect to 763,441 shares and sole dispositive power with respect to 763,441
shares. |
4
(18) |
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This disclosure is based on a Schedule 13G filed with the SEC by Barclays Global
Investors, N.A. on February 6, 2008. The address of this stockholder is 45 Fremont Street,
17th Floor, San Francisco, California 94105. Barclays Global Investors, N.A.
reports sole voting power with respect to 634,058 shares and sole dispositive power with
respect to 741,731 shares. Barclays Global Investors, Ltd. reports sole dispositive power
with respect to 11,646 shares. |
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(19) |
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Includes an aggregate of 284,588 shares of common stock underlying vested stock options
held by our directors and executive officers. |
Except as set forth in the table presented previously, we know of no other person that beneficially
owns 5% or more of our outstanding common stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers and beneficial
owners of more than 10% of our outstanding common stock (collectively, Insiders) to file reports
with the SEC disclosing direct and indirect ownership of our common stock and changes in such
ownership. The rules of the SEC require Insiders to provide us with copies of all Section 16(a)
reports filed with the SEC. Based solely upon a review of copies of Section 16(a) reports received
by us, and written representations that no additional reports were required to be filed with the
SEC, we believe that Insiders have timely filed all Section 16(a) filing requirements applicable
during the 2007 fiscal year.
CODE OF ETHICS
We have adopted a Corporate Code of Ethics and Business Conduct that applies to all of our
employees, including our principal executive officer, principal financial officer, and principal
accounting officer. The Corporate Code of Ethics and Business Conduct is available on the investor
relations page of our website at www.startek.com. We intend to disclose on our website any
amendments to or waivers of the code applicable to our principal executive officer, principal
financial officer, chief accounting officer, controller, treasurer and other persons performing
similar functions within four business days following the date of such amendment or waiver.
PROPOSAL 1.
ELECTION OF DIRECTORS
Our By-laws provide that our board of directors must consist of at least one director and no more
than nine. Each director serves a one year term (or until his or her successor is elected and
qualified). At the Annual Meeting our stockholders will elect five directors to serve until the
2009 Annual Meeting of Stockholders or until successors are duly elected and qualified.
The board of directors, upon recommendation of the Governance and Nominating Committee, has
nominated Messrs. Ed Zschau, Albert C. Yates, A. Laurence Jones and Ms. Kay Norton for re-election
to serve as directors until their terms expire in 2009. The board of directors, upon
recommendation of the Governance and Nominating Committee, also nominated Mr. Harvey A. Wagner to
serve as a new director. The names of the nominees, their principal occupations, and years in which
they became directors are set forth below. In the event any nominee declines or is unable to
serve, proxies will be voted in the discretion of the proxy holders. We have no reason to
anticipate that this will occur.
Biographical information regarding the board of director nominees seeking election is as follows:
Dr. Ed Zschau; age 68; Visiting Lecturer at Princeton University (a), (b), (c)
Dr. Zschau has served as one of our directors since January 1997 and was appointed Vice Chairman in
December 2004. He was appointed Chairman of the board of directors in May 2006. He is Visiting
Lecturer at Princeton University in the Department of Electrical Engineering and was a Professor of
Management at Harvard Business School from September 1996 to August 2000. From April 1993 to July
1995, Dr. Zschau was General Manager, IBM Corporation Storage Systems Division.
Kay Norton; age 56; President of the University of Northern Colorado (a), (b), (c)
Ms. Norton was appointed as a director in September 2004. She has served as the President of the
University of Northern Colorado for the past five years, after a term as Vice President for
University Affairs and General Counsel. Ms. Norton was a trustee of the University from 1995 to
1998. Previously, she was Vice President of Legal and Government Affairs and General Counsel at
ConAgra Red Meats Company in Greeley, Colorado.
5
Dr. Albert C. Yates; age 66; Business Consultant and member of Board of Directors of Centennial
Bank Holdings,
Inc. (a), (b), (c)
Dr. Yates was appointed as a director in September 2004. He is currently a business consultant and
serves as a member of the board of directors of Centennial Bank Holdings, Inc., based in Denver,
Colorado, and Level 3 Communications. Dr. Yates was President of Colorado State University for 13
years. He served on the board of First Interstate Bank of Denver from 1990 to 1997 and was a
Director of the Federal Reserve Bank of Kansas City-Denver branch for six years. Dr. Yates was
also a trustee of the Berger Funds and formerly served in the Navy for two years.
A. Laurence Jones; age 55; President and Chief Executive Officer, StarTek, Inc.
Mr. Jones has served on our board of directors since July 17, 2006 and as our President and Chief
Executive Officer since January 5, 2007. Mr. Jones most recently served as principal of Aegis
Management, LLC, which provides management consulting services. He served as President and CEO of
Activant Solutions, Inc., a software company that provides vertical ERP solutions for distribution
industries, from 2004 until May 2006, when the company was sold to a private equity firm. He served
as a director of Activant for six years prior to taking the President and CEO position there. From
November 2002 through July 2004, Mr. Jones was Chairman and CEO of Interelate, Inc., which provided
outsourced customer relationship management services. From 1999 until 2002, Mr. Jones was
President and CEO of MessageMedia, a public internet company which provides e-marketing services.
He has also held management and/or director positions at Exabyte Corporation, WebClients, Neodata
Services, Inc., GovPX, Inc., Automatic Data Processing, and Wang Laboratories. Mr. Jones currently
serves as a director of Work Options Group, a private company that provides child and elderly care
benefits programs for large corporations.
Harvey A. Wagner; 67; Managing Principal of H.A. Wagner Group, LLC.
Mr. Wagner is a new director nominee. Mr. Wagner is currently Managing Principal of the H.A.
Wagner Group, LLC, an investment and consulting firm based in White Plains, New York. He
previously served as President and Chief Executive Officer of Quovadx, Inc., a global software and
services company, from October 2004 to July 2007, and as a member of its board of directors from
April 2004 to July 2007. He served as its Acting President and Chief Executive Officer from May
2004 to October 2004. Prior to joining Quovadx, Mr. Wagner served as Executive Vice President and
Chief Financial Officer of Mirant Corporation, an independent energy company, from January 2003 to
April 2004. A voluntary Chapter 11 bankruptcy petition was filed by Mirant in July 2003, and
Mirant emerged from bankruptcy in January 2006. Before his service at Mirant, Mr. Wagner was
Executive Vice President of Finance, Secretary, Treasurer and Chief Financial Officer of Optio
Software, Inc., a software provider, from February 2002 to December 2002. From May 2001 to January
2002, he performed independent consulting services for various corporations. He was Chief
Financial Officer, General Manager and Chief Operating Officer for PaySys International, Inc., a
provider of financial payment processing applications, from December 1999 to April 2001. He also
served as Executive Vice President of Finance and Administration and Chief Financial Officer for
Premiere Technologies, Inc. from April 1998 to September 1999. He is currently a director of
FormFactor, Inc. and Cree, Inc.
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(a) |
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Member of the Compensation Committee of the board of directors |
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(b) |
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Member of the Audit Committee of the board of directors |
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(c) |
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Member of the Governance and Nominating Committee of the board of directors |
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The board of directors during 2007 was comprised of Dr. Ed Zschau, Dr. Albert C. Yates, Ms. Kay
Norton, and Mr. A. Laurence Jones, the biographies for whom are set out above. Former director and
CEO, Mr. Steven Butler, resigned from the board immediately before the boards first meeting in
2007, which meeting was held on January 5, 2007. The board of directors held 14 meetings during
2007 and took three actions by unanimous written consent in lieu of a meeting. All directors
attended all meetings of the board of directors and of the Committees on which they served during
2007 that occurred while they were a director, except for Dr. Yates, who was unavailable for one
day on which the board, Audit Committee, Compensation Committee, and Governance and Nominating
Committee each met. We do not require that our directors attend our annual meetings of
stockholders; however all directors attended the 2007 Annual Meeting.
Our board of directors has determined that each of Dr. Zschau, Dr. Yates and Ms. Norton are
independent directors under the regulations of the New York Stock Exchange and that Mr. Wagner
would also qualify as an independent director. None of these directors or nominees has any
relationship or has been party to any transactions that the board believes could impair the
independent judgment of these directors or nominees in considering matters relating to us. The
independent directors meet regularly without management present, and Dr. Zschau, our Chairman,
presides as lead director at these meetings.
6
Our board of directors has an Audit Committee established in accordance with section 3(a)(58)(A) of
the Exchange Act, which assists the board of directors in fulfilling its oversight responsibility
relating to our financial statements and financial reporting process and our systems of internal
accounting and financial controls. The Audit Committee has a charter. The charter is available on
our website
at www.startek.com. The Audit Committee is also responsible for the selection and retention of our
independent auditors, reviewing the scope of the audit function of the independent auditors and
approving non-audit services provided to us by our auditors, and reviewing audit reports rendered
by our independent auditors. The members of the Audit Committee are Dr. Zschau, Dr. Yates, and Ms.
Norton, each of whom is an independent director as defined in Section 303A.02 of the NYSEs
listing standards. Our board of directors has determined that Dr. Zschau, Chairman of the Audit
Committee, qualifies as an audit committee financial expert under SEC rules. The Audit Committee
met five times during 2007 and took one action by unanimous written consent in lieu of a meeting.
Our board of directors also has a Compensation Committee, for which the Board has adopted a written
Compensation Committee Charter. A current copy of this charter is available on our website,
www.startek.com. The Compensation Committee reviews our compensation programs and exercises
authority with respect to payment of direct salaries and incentive compensation to our executive
officers. In addition, the committee is responsible for oversight of the StarTek, Inc. Stock Option
Plan. The members of the Compensation Committee are Dr. Zschau, Dr. Yates, and Ms. Norton, each of
whom is an independent director as defined in Section 303A.02 of the NYSEs listing standards.
The Compensation Committee met 10 times in 2007 and took two actions by unanimous written consent
in lieu of a meeting. Dr. Yates is the Chairman of the Compensation Committee.
The Governance and Nominating Committee of our board of directors is responsible for the nomination
of candidates for election to our board, including identification of suitable candidates, and also
oversees our corporate governance principles and recommends the form and amount of compensation for
directors to the board for approval. The Governance and Nominating Committee has a charter. The
charter is available on our website, www.startek.com. The members of the Governance and Nominating
Committee are Dr. Zschau, Dr. Yates, and Ms. Norton, each of whom is an independent director as
defined in Section 303A.02 of the NYSEs listing standards. Ms. Norton is the Chairman of the
Governance and Nominating Committee. Notwithstanding the Governance and Nominating Committee,
certain of our nominees to our board of directors may be named in the future by certain of our
stockholders pursuant to the terms of an Investor Rights Agreement described on page 25 under
Investor Rights Agreement. The Governance and Nominating Committee held four meetings in 2007.
The Governance and Nominating Committee does not have an express policy with regard to the
consideration of any director candidates recommended by our stockholders because our by-laws permit
any stockholder to nominate director candidates, and the committee believes that it can adequately
evaluate any such nominees on a case by case basis. The committee will consider director candidates
proposed in accordance with the procedures set forth on page 34 under Stockholder Proposals, and
will evaluate stockholder-recommended candidates under the same criteria as other candidates.
Although the committee does not currently have formal minimum criteria for nominees, substantial
relevant business and industry experience would generally be considered important qualifying
criteria, as would the ability to attend and prepare for Board and committee meetings. Any
candidate must state in advance his or her willingness and interest in serving on our Board. In
identifying prospective director candidates, the Governance and Nominating Committee seeks
referrals from other members of the Board, management, shareholders and other sources. The
Governance and Nominating Committee also may, but need not, retain a professional search firm in
order to assist it in these efforts. The Governance and Nominating Committee utilizes the same
criteria for evaluating candidates regardless of the source of the referral. When considering
director candidates, the Governance and Nominating Committee seeks individuals with backgrounds and
qualities that, when combined with those of our incumbent directors, provide a blend of skills and
experience to further enhance the Boards effectiveness. Mr. Wagner was referred to the Governance
and Nominating Committee by our Chief Executive Officer, who learned of Mr. Wagner as a result of
our Chief Executive Officers networking among his peers at other companies.
Copies of our key corporate governance documents, including those committee charters described
previously, are available on the investor relations page of our website at www.startek.com. Any
stockholder that wishes to obtain a hard copy of any of these corporate governance documents may do
so without charge by writing to: Director of SEC Reporting, 44 Cook St., 4th Floor,
Denver, Colorado, 80206.
EXECUTIVE OFFICERS
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Officer |
Name |
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Age |
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Position |
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Since |
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A. Laurence Jones |
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55 |
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President and Chief Executive Officer |
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2007 |
David G. Durham |
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46 |
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Executive Vice President, Treasurer and Chief Financial Officer |
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2007 |
Patrick M. Hayes |
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45 |
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Executive Vice President and Chief Operating Officer |
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2004 |
D. Michael Clayton |
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58 |
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Senior Vice President, Secretary and General Counsel |
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2007 |
Michael Griffith |
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52 |
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Senior Vice President of Sales and Marketing |
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2004 |
Mary Beth Loesch |
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47 |
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Senior Vice President of Business Development |
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2007 |
Susan L. Morse |
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61 |
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Senior Vice President of Human Resources |
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2007 |
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Mr. Jones biography appears under the heading Election of Directors.
David G. Durham; age 46; Executive Vice President, Treasurer and Chief Financial Officer
Mr. Durham has served as our Executive Vice President, Treasurer and Chief Financial Officer since
September 2007. Mr. Durham most recently served as chief financial officer and treasurer for
CIBER, Inc., an international information technology consulting company. Mr. Durham joined CIBER
in May of 1995 when the company acquired St. Louis based Spencer & Spencer Systems, Inc. where he
was vice president and chief financial officer. Mr. Durham began his career in public accounting
with St. Louis based Rubin Brown.
Patrick M. Hayes; age 45; Executive Vice President and Chief Operating Officer
Mr. Hayes has served as our Executive Vice President and Chief Operating Officer since May 2006.
Mr. Hayes served as our Senior Vice President of Corporate Development and Strategic Planning from
August 2005 to April 2006. He has been a Vice President of StarTek, Inc. since September 2004.
From April 2003 to September 2004, he served as Chief Financial Officer and General Manager of
COCAT, Inc., a property restoration services company. From September 1999 to January 2003, he
served as Vice President of Business Operations at MessageMedia, Inc., which was purchased by
Doubleclick, Inc. in 2001.
D. Michael Clayton; age 58; Senior Vice President, Secretary and General Counsel
Mr. Clayton has served as our Senior Vice President, Secretary and General Counsel since February
2007. From March 2003 to December 2006, Mr. Clayton served as International and IP Counsel for
Intrado, Inc., a global provider of integrated data and telecommunications solutions. From
September 2000 to December 2002, Mr. Clayton served as Vice President, General Counsel and
Secretary at Alliente, Inc., a business process outsourcer which provides indirect procurement
services to global clients in the telecommunications industry. From 1984 to 1999, he served as
Vice President, General Counsel and Secretary at Samsonite Corporation.
Michael Griffith; age 52; Senior Vice President of Sales and Marketing
Mr. Griffith has served as our Senior Vice President of Sales and Marketing since October 2005 and
has been a Vice President of StarTek, Inc. since October 2004. From 2001 to 2004, he served as
Senior Vice President of Sales for CEON Corporation. He also held Vice President of Sales
positions at Teletech from 1999 to 2001 and at Oracle from 1995 to 1999. Mr. Griffith is currently
on the board of directors of Summit Bank and Trust.
Mary Beth Loesch; age 47; Senior Vice President of Business Development
Ms. Loesch has served as our Senior Vice President of Business Development since January 2007.
From 2004 to 2006, Ms. Loesch served as Senior Vice President of Business Development at Activant
Solutions, Inc., a software company that provides vertical ERP solutions for distribution
industries. From 2003 to 2004, she was Senior Vice President of Mergers and Acquisitions at
Interelate, Inc., which provided outsourced customer relationship management services. Ms. Loesch
served as Senior Vice President of International and Corporate Development for MessageMedia from
1999 to 2002, a public internet company which provides e-marketing services. She has also served
in various executive roles at KPMG Consulting, CSG Systems and US West.
Susan L. Morse; age 61; Senior Vice President of Human Resources
Ms. Morse has served as our Senior Vice President of Human Resources since February 2007. From
2005 to 2006, Ms. Morse was a Vice President of Human Resources at Carrier Access, a
telecommunications equipment technology company. Ms. Morse served as Senior Vice President of
Human Resources at Whitewave Foods, a subsidiary of Dean Foods, from 2002 to 2005. From 1999 to
2002, Ms. Morse was Vice President of Human Resources at MessageMedia, a public internet company
which provides e-marketing services. From 1993 to 1999, she served as Division President of Human
Resources at Centrobe, Inc., formerly Neodata Services, Inc. She has also held various other human
resources positions at Wang Laboratories.
COMPENSATION DISCUSSION AND ANALYSIS
Objectives
Our compensation programs are intended to provide a link between the creation of shareholder value
and the compensation earned by our executive officers and certain key personnel. The objectives of
our compensation programs are to:
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attract, motivate, and retain superior talent, |
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ensure that compensation is commensurate with our performance and shareholder returns
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ensure that our executive officers and certain key personnel have enough financial
incentive to motivate them to achieve sustainable growth in shareholder value. |
8
Business Strategy
We seek to create shareholder value by becoming a market leader in providing high-value services to
clients in the communications industry. To be a leader in the market, our strategy is to:
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grow our existing client base by deepening and broadening our relationships, |
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add new clients in the communications segment and continue to diversify our client base, |
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improve the profitability of our business through operational improvements and securing
higher margin business, |
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add new services to broaden our offerings to the communications segment, and |
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make prudent acquisitions to expand our business scale and service offerings. |
Elements of Executive Compensation Structure
Our compensation structure is simple, and consists of three tiers of remuneration.
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The first tier consists of competitive base pay for executive officers, plus a
competitive suite of retirement, health, and welfare benefits. Our executives enjoy the
same retirement, health, and welfare package provided to all of our exempt employees, plus
supplemental company-paid life insurance, long-term disability and accidental death and
dismemberment insurance. We also offer a deferred compensation plan that is available to
highly-compensated individuals, as defined by the Internal Revenue Code (the Code) that
allows participants to defer compensation and receive benefits at a later date as provided
in the plan. We have few participants in this plan. This tier of remuneration is designed
to be sufficiently competitive, given market and economic conditions, to attract and retain
high-quality executives. |
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The second tier consists of a short-term incentive bonus plan. The incentive bonus plan
is linked to annual individual and company performance. Payouts under this plan vary based
on individual level and performance and the extent to which the company meets its stated
goals. |
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The third tier consists of long-term incentives designed to reward certain key
personnel, primarily middle and senior management, for the achievement of sustainable
growth in shareholder value. Stock option grants are made under the StarTek, Inc. Stock
Option Plan, as amended. |
Reasons for Current Incentive Plan Structure
The reason for the short-term incentive plan structure is to ensure that executives stay focused on
improving operating efficiencies, despite short-term challenges such as significant growth efforts.
We recognize that growth in revenue without increased operating efficiencies and income from
operations is counter-productive. The short-term incentive plan is designed to keep executives
focused on this reality and on improving company performance.
Long-term incentives provided to our executives consist of stock options which are designed to keep
executives focused on increasing long-term shareholder value through sustainable improvements in
our business, as reflected in our stock price. Pressure, real or perceived, to achieve short-term
earnings goals could create a temptation to slow longer-term growth. However, it is the
combination of growth and sustained improvement in profitability that is necessary for sustained
improvement in our stock value. Accordingly, the long-term incentives keep executives focused on
both the short and long term and could potentially be the largest source of compensation for each
executive officer in the long run.
How We Determine to Pay What We Pay
Our cash compensation policy is based both on market competitive norms and performance. We
determine market norms by referencing executive officer salaries and bonuses at a 15-company peer
group of business processing outsourcing companies (see Benchmarking of Compensation on page 10),
and third party compensation surveys. Base pay for executive officers is currently at or slightly
below the 50th percentile of the peer group. However, our maximum bonus opportunity can
be significantly above the midpoint of the market range depending on company and individual
performance. The level at which company performance determines a certain executives bonus payout
is different depending on the level of the executive; generally, the bonus criteria for the CEO and
CFO are tied more closely to company performance, while the bonuses of other management personnel
are based partially on company performance and partially on individual performance during the year.
Our Compensation Committee takes several factors into account in determining the level of long-term
incentive opportunity to grant to executive officers. In 2007, the Compensation Committee
primarily took the following factors into account:
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each executive officers performance, |
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equity compensation grants made in the past, |
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value realized by executives from past grants, |
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the financial statement impact of equity compensation grants, |
9
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the level of grant required to keep executives focused and motivated in the coming year,
and |
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competitive practices with regard to long-term incentives in that particular year. |
In future years, the Compensation Committee may take other factors into account.
Our approach to allocating between long-term and short-term compensation is based on the following
key assumptions:
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Currently, the majority of an employees cash compensation comes in the form of base
salary, which is at or slightly below the median peer group level. The cash from these
base salaries can be enhanced by the payment of a bonus that is at or above market norms.
This level of payment will only come, however, if we achieve improvements in revenue and
profitability or earnings per share. Therefore, by linking company performance to all or
some of the payment of an annual bonus, particularly for executives, we can provide a
strong incentive for our executives to improve key business drivers and thus, profitability
and margins. |
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We expect that in the long run, the bulk of executive officer compensation will come
from stock price appreciation and other long-term incentives. Executives are allocated
sufficient equity upside to ensure that they will be rewarded for sustained increases in
stock value. We believe that we can drive increases in stock value through sustainable
growth and improvement in profitability as well as by maintaining credibility in the
marketplace. Through these means, we hope to motivate our executives to create the kind of
sustained increase in share value that will reward shareholders and executives alike. |
Benchmarking of Compensation and Determination of Pay
In determining compensation for executive officers in 2007, we looked at publicly traded business
process outsourcing companies which have annual revenue in the range of $200 million to $500
million. We included the following companies in our benchmark analysis: APAC Customer Services,
CDI, COMFORCE, Computer Task Group, ExlService Holdings, First Consulting Group, ICT Group, iGate,
Intelligroup, Lionbridge Technologies, PeopleSupport, PFSweb, Rainmaker Systems, Sykes Enterprises,
and Virtusa. We looked at the compensation paid to the executive officers of these companies to
assess where we stand relative to market. We observed that our base pay was at or slightly below
the midpoint of base pay for executive officers of these companies. We also observed that our
annual incentive opportunity was around the 50th percentile of the executive officers
working for companies in this group. Finally, we examined the long-term incentive opportunity for
our executive officers in the form of stock options granted in 2006. Compared to the grants made
for executive officers in the above referenced companies, our equity awards have been aggressive
and have ensured that the executive group will share appropriately in any future value creation.
In 2007, we hired several new executives, and our new hire salaries were based on the negotiations
required for these new executives to join our company. We utilized our benchmark data as a means
to ensure that our pay levels were competitive. In 2007, we increased the pay of one of our
executives based on performance and internal equity considerations, as well as the benchmark data.
Two of our executives, Patrick Hayes and Michael Griffith, had in previous years received benefits
reimbursements; in 2007 we rolled these amounts ($9,000 and $9,000, respectively) into their base
pay. We utilized both our experience in recruiting executives and the 50th percentile
of the benchmark data to set our ranges for our executive base pay. Since we view the benchmark
companies as competitors for talent, we believe it is useful to continue to examine their pay
practices from time to time. Once we establish our base pay ranges, performance and experience in
the role differentiate the base pay that executives earn.
Long Term Compensation Basis for Reward and Downside Risk
To date, the Compensation Committee has only awarded stock options under the StarTek, Inc. Stock
Option Plan, as amended, but it may consider other equity-based incentives in the future. Options
bear a relationship to the achievement of our long-term goals in that options increase in value as
our stock increases in value. A significant portion of managements compensation package is stock
option-based; as such, management bears significant exposure to downside equity risk as the income
they derive from these stock options is contingent upon our stocks appreciation in the
marketplace. Management has carefully evaluated the cost of options it grants to its executive
officers. It will continue to evaluate the cost of options and other forms of equity compensation
vehicles against the benefit those vehicles are likely to yield in building sustainable share
value.
In 2007, we granted restricted stock as an inducement to recruit A. Laurence Jones and David G.
Durham. We believe that this was an appropriate use of equity, as it aligned this component of
their executive compensation with the interests of our stockholders.
Equity Grants and Market Timing
We have not granted options in coordination with the release of material, non-public information,
and our option grant practices are separate from discussions regarding the release of such
information. The Compensation Committee makes the decision to grant options when new hire offers
occur, when the annual grant period occurs, and when the Compensation Committee determines that
additional stock option opportunities are necessary to retain key talent. The Compensation
Committee has approved guideline ranges
for new hire annual grants by level of position to ensure our ability to attract and retain key
employees. Option grants are made on the date the Compensation Committee approves the grants and
are not matched to other specific company events or, in the case of a new hire not yet started, the
actual start date.
10
Except as stated below, we have no program, plan, or practice of awarding options and setting the
exercise price based on any price other than the fair market value of our stock on the grant date.
The StarTek, Inc. Stock Option Plan, as amended, defines fair market value as the closing price
of one share of our common stock on the trading day as of which such fair market value is
determined (i.e., the grant date).
On January 5, 2007, upon his appointment as President and Chief Executive Officer, Mr. Jones
received 30,000 shares of restricted stock which will vest based on the passage of time and
achievement of certain performance requirements, as described more fully under Employment
Agreements on page 17. Mr. Jones Employment Agreement executed upon his appointment also
provided that he would be granted 400,000 stock options within 60 days of the execution of the
Employment Agreement. These options were granted once the insider trading window opened on January
24, 2007.
On September 10, 2007, upon his appointment as Executive Vice President and Chief Financial
Officer, Mr. Durham received 10,000 shares of restricted stock which will vest based on the passage
of time and achievement of certain performance requirements, as described more fully under
Employment Agreements on page 17. Also upon his appointment on September 10, 2007, Mr. Durham
was granted 165,000 stock options with an exercise price equal to the fair market value of our
common stock on the date of his appointment.
Specific Forms of Compensation and the Role of Compensation Committee Discretion
The Compensation Committee retains the authority to review executive officer base compensation and
approve increases based on general performance and market norms. The Compensation Committee also
retains the authority to make long-term incentive grants (historically, stock options) based on
several factors discussed in this Compensation Discussion and Analysis. The Committee intends to
retain the discretion to make decisions about executive officer base compensation and certain
levels of stock option grants without predetermined performance goals.
In addition, the Board approves the executive incentive bonus plan and related corporate financial
targets annually based upon the Compensation Committees recommendation. The plan provides that
the plan can be changed, suspended or eliminated, in whole or in part, at any time, with or without
notice to participants in the incentive bonus plan.
Payments made under the annual executive bonus plan are subject to both individual and company-wide
objectives, except for the CEO and CFO whose plans are based on company-wide objectives only. The
extent to which individual objectives weigh on an individuals bonus payment is different depending
on the level of the individual in the organization. Specifically, lower level executives bonus
payouts are weighted more heavily towards individual and business unit goals and higher ranking
executives bonuses are weighted more heavily towards company-wide financial metrics.
The 2007 bonus payouts were based on two factors: corporate financial targets and individual goals.
Corporate financial targets were established for revenue and earnings per share (CEO and CFO
targets) and revenue and operating income for all other executives and managers eligible to
participate in the 2007 Incentive Bonus Plan. The minimum target for bonus payment was set at an
80% level of achievement. Below an 80% level of attainment, the payout would be zero. Otherwise,
the bonus payout related to corporate financial targets would have ranged from 50% to 150% of a
participants base salary as the percentage of achievement of each target ranged from 80% to 125%+
of corporate financial targets. The individual portion of the bonus was paid out based on
individual attainment of individual goals. These goals were specific to the executives role and
included such milestones as bookings goals or site operational performance goals. The individual
opportunity portion for executives ranged from 0% to 25% of total bonus opportunity.
In 2007, the threshold level of corporate financial performance was not achieved, so no bonuses
based on corporate financial targets were paid out. We view the financial targets to be
confidential information, which, if disclosed, would result in competitive harm to the company, and
immaterial to investors understanding of the compensation paid in 2007, because the targets were
not achieved. Our targets were set aggressively as evidenced by our inability to attain them.
How Individual Forms of Compensation are Structured and Implemented to Reflect the Named Executive
Officers Individual Performance and Contribution
We are engaged in a focused strategic effort to increase revenue, profitability and operating
efficiencies. The executive officers work as a team to accomplish this. Their base pay and annual
bonus opportunity reflect their relative contributions to the company and
market practices. Their respective long-tem incentive opportunities also reflect their individual
contributions to the company and market practices. The extent to which individual bonuses are paid
depends on (1) whether the executive officers as a team achieve sufficient revenue and
profitability objectives and (2) the executive officers individual performance and attainment of
specific bonus goals. The extent to which the long-term incentive is realized depends on the
executive teams ability to improve our stock price.
11
Policy Regarding Adjustment of Awards if Relevant Performance Measures Are Restated or Adjusted
We reserve the right to seek disgorgement from an executive officer should a restatement occur that
would have materially affected the amount of a previously paid award. In 2007, no discretion was
exercised to award compensation absent attainment of relevant performance goals.
Factors Considered in Decisions to Increase or Decrease Compensation Materially
When the compensation of a high performing executive is significantly low in comparison to what is
being paid for similar responsibilities in comparable companies and/or to peers within the company,
we may consider making a material increase in that executives compensation to bring it into line
with the marketplace and/or to peers within the company. The principal factors that would be
considered in decisions to decrease compensation materially would be a clear, sustained market
trend and financial problems experienced by the company. Mr. Jones employment agreement specifies
that his base salary may only be reduced if such reduction is part of a general pro-rata reduction
in the base salaries of all executives implemented as a result of financial problems experienced by
the company, but must be returned to its unreduced level upon cessation of such financial problems.
Impact of Previously Earned Compensation on Other Compensation
We maintain no supplemental pension plans or other programs where gains from prior compensation
could influence amounts earned currently.
The Basis for a Change of Control Triggering Payment
During 2007, there were no payments made related to a change of control. Certain of our executives
have change in control agreements with us. These agreements are more fully described in the
section of this definitive proxy statement entitled Employment Agreements on page 17.
Severance Arrangements
We have entered into key employee agreements with the Chief Executive Officer and each of the other
named executive officers, the terms of which are described below under Employment Agreements. The
Compensation Committee believes that it is in the best interests of our company and our
shareholders to design compensation programs that assist our company in attracting and retaining
qualified executive officers, assure that our company will have the continued dedication of our
executive officers in the event of a pending, threatened or actual change of control, provide
certainty about the consequences of terminating certain executive officers employment, protect our
company by obtaining non-compete covenants from certain executive officers that continue after
their termination of employment not involving a change of control and to obtain a release of any
claims from those former executive officers. Accordingly, the agreements generally provide for
certain benefits if the executive officers employment or executive officers service is terminated
involuntarily by our company without cause, or in the case of the Chief Executive Officer resigns
for good reason. The current form of key employee agreement was approved by the Compensation
Committee in July 2007, and amended in February 2008 (see Exhibits 10.10 and 10.11 in the Annual
Report on Form 10-K for the fiscal year ending December 31, 2007 that we filed with the SEC on
February 29, 2008 the 2007 Form 10-K), after reviewing the key employee agreements previously
in effect and current market practices related to severance arrangements and benefit levels related
thereto.
Impact of Accounting and Tax Treatment on Various Forms of Compensation
We take into account the impact of accounting and tax treatment on each particular form of
compensation. Our incentive payments are designed so that they are deductible under Section
162(m) of the Internal Revenue Code. Where possible we seek to administer our programs, other than
our deferred compensation plan, in such a manner that they do not constitute deferred compensation
under Code Section 409A. We have no established policy related to tax gross ups in the event there
is a change of control and excise taxes are due pursuant to Section 280G and related sections of
the Code. We closely monitor the accounting treatment of our equity compensation plans, and in
making future grants, we will always take the accounting treatment into account.
12
Ownership Requirements and Policies Regarding Hedging Risk in Companys Equity Securities
We currently have no security ownership requirements in place for outside directors.
We have no security ownership requirements for executives, except for A. Laurence Jones and David
G. Durham, and no policies regarding hedging economic risk and ownership. Under Mr. Jones
employment agreement, Mr. Jones may be terminated for cause if he fails to own, on or after January
5, 2009, at least 30,000 shares of our common stock or shares of our common stock having a market
value of at least $300,000. Under Mr. Durhams employment agreement, Mr. Durham may be terminated
for cause if he fails to own, on or after March 10, 2008, at least 5,000 shares of our common
stock.
We plan to institute stock ownership guidelines for outside directors and executives if the
shareholders approve the companys ability to make full-value grants under the new equity plan
proposed in Proposal 4.
The Role of Executive Officers in Determining Compensation
In 2007, our Compensation Committee engaged Frederic W. Cook., Inc. to perform a review of the
companys executive compensation program focusing on the programs effectiveness in supporting the
companys business strategy; its relative reasonableness compared to competitive practice for
companies in related businesses of similar size and market value; and the changing business and
regulatory environment, including new executive compensation disclosure rules effective for fiscal
year 2007, institutional investor initiatives, corporate governance considerations, etc. The
review included salaries, annual performance bonuses, long-tern incentives and other program
features. In 2008, our Chief Executive Officer and Senior Vice President of Human Resources
supplied the committee with performance evaluations of the Executives 2007 performance attainment
on performance objectives and compliance with the StarTek principles. Our Chief Executive Officer
and Senior Vice President of Human Resources also proposed executive officer base pay increases for
2008 as well as 2008 short term incentives. The committee then considered the market data and
managements suggestions in determining 2008 base pay and 2008 short term incentives.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with
management.
Based on the review and discussions referred to above, the Compensation Committee recommended to
the board of directors that the Compensation Discussion and Analysis be included in the Companys
2008 Notice of Annual Meeting and Proxy Statement.
By the Compensation Committee:
Dr. Albert C. Yates, Chairman
Dr. Ed Zschau
Ms. P. Kay Norton
13
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning the compensation of the individuals
who served as Chief Executive Officer and Chief Financial Officer in 2007 and the next three
executive officers who, in addition to the Chief Executive and Chief Financial Officers, received
the highest compensation among all executive officers in 2007 (referred to as the named executive
officers):
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
Bonus (a) |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
|
|
Name and Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) (b) |
|
|
($) (b) |
|
|
($) |
|
|
Total ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. Laurence Jones |
|
|
2007 |
|
|
|
443,365 |
|
|
|
225,000 |
(k) |
|
|
197,100 |
|
|
|
336,726 |
|
|
|
21,311 |
(c)(e) |
|
|
1,223,502 |
|
President, CEO and Director |
|
|
2006 |
|
|
|
22,750 |
(d) |
|
|
|
|
|
|
|
|
|
|
10,388 |
(d) |
|
|
255 |
(d) |
|
|
33,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven D. Butler |
|
|
2007 |
|
|
|
178,094 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
(f) |
|
|
365,942 |
(f) |
|
|
544,036 |
|
Former President, CEO and Director |
|
|
2006 |
|
|
|
469,688 |
|
|
|
|
|
|
|
|
|
|
|
112,821 |
|
|
|
51,200 |
(c)(f) |
|
|
633,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David G. Durham |
|
|
2007 |
|
|
|
99,485 |
|
|
|
128,000 |
(j) |
|
|
9,761 |
|
|
|
46,682 |
|
|
|
184 |
(c) |
|
|
284,112 |
|
Executive VP, CFO and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick M. Hayes |
|
|
2007 |
|
|
|
281,417 |
|
|
|
30,658 |
|
|
|
|
|
|
|
80,315 |
|
|
|
5,505 |
(c) |
|
|
397,895 |
|
Executive VP and COO |
|
|
2006 |
|
|
|
243,101 |
|
|
|
|
|
|
|
|
|
|
|
36,812 |
|
|
|
6,106 |
(c)(g) |
|
|
286,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Griffith |
|
|
2007 |
|
|
|
484,996 |
(h) |
|
|
|
|
|
|
|
|
|
|
25,976 |
|
|
|
8,987 |
(c) |
|
|
519,959 |
|
Senior VP, Sales and Marketing |
|
|
2006 |
|
|
|
449,123 |
(h) |
|
|
|
|
|
|
|
|
|
|
14,680 |
|
|
|
2,228 |
(c) |
|
|
466,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Beth Loesch |
|
|
2007 |
|
|
|
199,564 |
|
|
|
16,773 |
|
|
|
|
|
|
|
46,682 |
|
|
|
928 |
(c) |
|
|
263,947 |
|
Senior VP, Business Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
None of the named executive officers earned bonuses for 2006. |
|
(b) |
|
The amounts shown in these columns reflect the total estimated
compensation expense for financial reporting purposes under FAS 123(R),
excluding forfeitures for service-based vesting, related to stock awards
and options granted to each named executive officer during 2007 and 2006,
respectively. This does not reflect amounts paid to or realized by the
named executive officers. The amounts include the cost not only of stock
awards and option awards made in 2007 and 2006, respectively but also
certain awards made in prior years for which we incurred cost in 2007 and
2006. The assumptions used when calculating this cost are set forth in
Note 9, Share-Based Compensation to our Consolidated Financial
Statements, included in Item 15, Exhibits and Financial Statement
Schedules of our Annual Report on Form 10-K. |
|
(c) |
|
Our executive officers are covered under a group term life and disability
insurance policy for which the company pays a portion of the premium.
The taxable benefit related to this plan received by our named executive
officers in 2007 was as follows: $926 for Mr. Jones, $184 for Mr.
Durham, $630 for Mr. Hayes, $966 for Mr. Griffith and $578 for Ms.
Loesch. During 2006, the taxable benefit related to this plan received
by our named executive officers was as follows: $656 for Mr. Butler,
$429 for Mr. Hayes and $1,006 for Mr. Griffith. |
|
(d) |
|
On January 5, 2007, Mr. Jones was appointed as our President and Chief
Executive Officer. Mr. Jones has served on our board of directors since
July 17, 2006. The compensation amounts shown for 2006 relate to his
service as a director. |
|
(e) |
|
Included in All Other Compensation is an allowance to Mr. Jones for
health insurance expenses and car expenses of $6,485 and $13,200,
respectively, during 2007. |
|
(f) |
|
Mr. Butlers employment with the company terminated in January 2007.
Under the terms of Mr. Butlers Separation Agreement, Mr. Butler was paid
a lump sum payment of salary (less applicable withholding) and vacation
pay as if he had been employed through April 4, 2007 totaling $178,094.
In addition, he was entitled to receive $472,500 in severance pay, which
commenced on July 23, 2007 and was to be paid in equal installments of
$26,250 per pay period according to StarTeks regular payroll schedule
through April 8, 2008. Mr. Butler received $315,000 in severance pay
during 2007. In January 2008, the remaining severance payments were
accelerated and paid in one lump sum according to the amended separation
agreement. In 2007, Mr. Butler also received reimbursement related to
health insurance premiums of $12,144 and reimbursement related to life
and disability insurance premiums of $37,776. During 2007, 350,000 stock
options expired, and as of December 31, 2007, Mr. Butler did not have any
options outstanding. During 2006, we reimbursed Mr. Butler for $46,446
related to reimbursement of insurance premiums. |
14
|
|
|
(g) |
|
During 2006, we reimbursed Mr. Hayes $1,082 related to insurance premiums. |
|
(h) |
|
Mr. Griffiths salary during 2007 and 2006 includes commissions of
$297,538 and $274,123, respectively. Mr. Griffiths commissions are
based on actual billed monthly revenue for clients he sold services to.
In the first year after contract closure, his commission can range from
0.12% to 1.75% of billed monthly revenue, depending on quality of the
contract and nature of the customer. In the second year after contract
closure, Mr. Griffiths commission rates are approximately one-half of
the first year commission rates and are subject to a maximum of 0.40% of
the billed monthly revenue. |
|
(i) |
|
Included in All Other Compensation was employer contributions related
to our 401(k) Plan of $788, $4,875 and $8,021 to Mr. Butler, Mr. Hayes
and Mr. Griffith, respectively, during 2007. |
|
(j) |
|
Mr. Durham received $64,000 as a signing bonus as an inducement to join
StarTek, and another $64,000 was guaranteed by his employment contract as
the minimum bonus he would receive under the 2007 Incentive Bonus Plan. |
|
(k) |
|
Mr. Jones received a bonus of $225,000 in 2007, which was guaranteed in
his employment contract as the minimum bonus he would receive under the
2007 Incentive Bonus Plan. |
GRANTS OF PLAN-BASED AWARDS IN 2007
The following table includes plan-based awards made to named executive officers in 2007. During
2007, we granted short-term incentive plan awards, stock option awards and restricted stock awards.
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
|
|
|
|
Aggregate |
|
|
|
|
|
|
|
|
|
|
|
Estimated Potential Payouts |
|
|
Awards: |
|
|
Awards: |
|
|
Exercise or |
|
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
Under Non-Equity Incentive Plan |
|
|
Number of |
|
|
Number of |
|
|
Base Price of |
|
|
Fair Value of |
|
|
|
|
|
|
|
|
|
|
|
Awards (a) |
|
|
Shares of |
|
|
Securities |
|
|
Option |
|
|
Stock and |
|
|
|
Grant |
|
|
Approval |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Restricted |
|
|
Underlying |
|
|
Awards |
|
|
Option |
|
Name |
|
Date |
|
|
Date |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Stock (#) |
|
|
Options (#) |
|
|
($/Share) |
|
|
Awards ($) |
|
A. Laurence Jones |
|
|
1/5/2007 |
|
|
|
1/5/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
(b) |
|
|
|
|
|
|
|
|
|
|
394,200 |
|
|
|
|
1/24/2007 |
|
|
|
1/5/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000 |
|
|
|
9.60 |
|
|
|
1,756,829 |
|
|
|
|
|
|
|
|
|
|
|
|
225,000 |
|
|
|
450,000 |
|
|
|
562,500 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David G. Durham |
|
|
9/10/2007 |
|
|
|
8/22/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
(d) |
|
|
|
|
|
|
|
|
|
|
100,400 |
|
|
|
|
9/10/2007 |
|
|
|
8/22/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,000 |
|
|
|
10.04 |
|
|
|
640,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,000 |
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick M. Hayes |
|
|
5/11/2007 |
|
|
|
5/11/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
9.71 |
|
|
|
134,328 |
|
|
|
|
11/9/2007 |
|
|
|
11/9/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
8.97 |
|
|
|
178,993 |
|
|
|
|
|
|
|
|
|
|
|
|
52,258 |
|
|
|
139,354 |
|
|
|
165,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Griffith |
|
|
5/11/2007 |
|
|
|
5/11/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
9.71 |
|
|
|
40,298 |
|
|
|
|
|
|
|
|
|
|
|
|
23,591 |
|
|
|
102,461 |
|
|
|
90,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Beth Loesch |
|
|
2/16/2007 |
|
|
|
2/19/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
10.85 |
|
|
|
151,656 |
|
|
|
|
5/11/2007 |
|
|
|
5/11/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
9.71 |
|
|
|
134,328 |
|
|
|
|
|
|
|
|
|
|
|
|
28,591 |
|
|
|
76,242 |
|
|
|
114,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Non-equity incentive plan refers to our executive incentive bonus
plan, which is paid based on specified individual and company-wide
financial goals, as described more fully on page 9. |
|
(b) |
|
Mr. Jones was granted 30,000 restricted shares pursuant to his
appointment as President and Chief Executive Officer. The shares vest
as follows: 10,000 shares on January 5, 2008 and 20,000 shares on
January 5, 2011. The second tranche of 20,000 shares may vest on an
accelerated schedule of 10,000 upon certification by the Compensation
Committee that Mr. Jones achieved at least 80% performance of
specified criteria for the 2008 fiscal year and 10,000 shares upon
certification by the Compensation Committee that Mr. Jones achieved at
least 80% performance of specified criteria for the 2009 fiscal year. |
|
(c) |
|
Pursuant to Mr. Durhams employment agreement, he was eligible to
participate in the executive incentive bonus plan with a bonus
potential of 60% of base salary based on 100% attainment of company
goals, which was to be prorated based on the number of full months of
service. The incentive bonus was subject to a guaranteed minimum of
$64,000. |
|
(d) |
|
Mr. Durham was granted 10,000 restricted shares upon appointment as
our Executive Vice President, Chief Financial Officer and Treasurer.
The shares vest as follows: 3,333 shares on September 10, 2008, 3,333
shares on September 10, 2009 and 3,334 shares on September 10, 2010. |
|
(e) |
|
Pursuant to his employment agreement, Mr. Jones was guaranteed a
minimum of $225,000 under the 2007 Incentive Bonus Plan. |
15
OUTSTANDING EQUITY AWARDS AT 2007 FISCAL YEAR END
The following table identifies the exercisable and unexercisable option awards and unvested stock
awards for each of the named executive officers as of December 31, 2007. All stock options were
granted ten years prior to the expiration date listed in the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Market |
|
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Shares of |
|
|
Value of |
|
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Restricted |
|
|
Shares of |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
|
Stock That |
|
|
Stock That |
|
|
|
Options (#) |
|
|
Options (#) |
|
|
Exercise |
|
|
Expiration |
|
|
Have Not |
|
|
Have Not |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
Price ($) |
|
|
Date |
|
|
Vested (#) |
|
|
Vested ($) |
|
A. Laurence Jones |
|
|
|
|
|
|
400,000 |
|
|
|
9.60 |
|
|
|
1/24/2017 |
|
|
|
|
|
|
|
|
(g) |
|
|
|
3,000 |
|
|
|
|
|
|
|
12.45 |
|
|
|
7/17/2016 |
|
|
|
|
|
|
|
|
(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
394,200 |
(e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David G. Durham |
|
|
|
|
|
|
165,000 |
|
|
|
10.04 |
|
|
|
9/10/2017 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
100,400 |
(f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patrick M. Hayes |
|
|
|
|
|
|
75,000 |
|
|
|
8.97 |
|
|
|
11/9/2017 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
|
|
|
|
50,000 |
|
|
|
9.71 |
|
|
|
5/11/2017 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
6,833 |
|
|
|
13,667 |
|
|
|
11.09 |
|
|
|
8/14/2016 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
9,374 |
|
|
|
15,626 |
|
|
|
13.58 |
|
|
|
6/12/2016 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
8,000 |
|
|
|
12,000 |
|
|
|
13.50 |
|
|
|
8/24/2015 |
|
|
|
|
|
|
|
|
(d) |
|
|
|
7,800 |
|
|
|
11,700 |
|
|
|
16.52 |
|
|
|
7/29/2015 |
|
|
|
|
|
|
|
|
(d) |
|
|
|
15,000 |
|
|
|
|
|
|
|
29.14 |
|
|
|
12/15/2014 |
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Griffith |
|
|
|
|
|
|
15,000 |
|
|
|
9.71 |
|
|
|
5/11/2017 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
5,624 |
|
|
|
9,376 |
|
|
|
13.58 |
|
|
|
6/12/2016 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
5,600 |
|
|
|
8,400 |
|
|
|
16.52 |
|
|
|
7/29/2015 |
|
|
|
|
|
|
|
|
(d) |
|
|
|
10,000 |
|
|
|
|
|
|
|
26.50 |
|
|
|
2/16/2015 |
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Beth Loesch |
|
|
|
|
|
|
50,000 |
|
|
|
9.71 |
|
|
|
5/11/2017 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
|
|
|
|
50,000 |
|
|
|
10.85 |
|
|
|
2/16/2017 |
|
|
|
|
|
|
|
|
(a) |
|
|
|
(a) |
|
Options vest as to 25% of the option shares on the first anniversary of the date of grant and 2.0833%
of the shares each month thereafter for 36 months. |
|
(b) |
|
On January 5, 2007, Mr. Jones was appointed as our President and Chief Executive Officer. Mr. Jones
has served on our board of directors since July 17, 2006. Upon election to the board of directors,
Mr. Jones received the option to acquire 3,000 shares of common stock under the Directors Option
Plan which vested immediately upon grant. |
|
(c) |
|
Prior to our adoption of FAS No. 123(R), we accelerated 143,860 employee stock options, all with
exercise prices of $21.80 or above, such that they immediately vested as of December 30, 2005. The
purpose of this action was to eliminate future compensation expense that we would otherwise have
recognized upon implementation of FAS No. 123(R). Because, prior to the acceleration, the options
had intrinsic values that were more than the intrinsic value of the options after acceleration, no
compensation expense related to the acceleration was recognized in our Consolidated Statements of
Operations for the year ended December 31, 2005. All terms of options with an exercise price of less
than $21.80 remained unchanged. |
|
(d) |
|
Options vest as to 20% of the option shares on the each anniversary of the date of grant through and
including the fifth anniversary of the date of grant. |
|
(e) |
|
The 30,000 shares of restricted stock granted to Mr. Jones upon appointment as our President and
Chief Executive Officer vest as follows: 10,000 shares on January 5, 2008 and 20,000 shares on
January 5, 2011. The second tranche of 20,000 shares may vest on an accelerated schedule of 10,000
upon certification by the Compensation Committee that Mr. Jones achieved at least 80% performance of
specified criteria for the 2008 fiscal year and 10,000 shares upon certification by the Compensation
Committee that Mr. Jones achieved at least 80% performance of specified criteria for the 2009 fiscal
year. |
|
(f) |
|
The 10,000 shares of restricted stock granted to Mr. Durham upon appointment as our Executive Vice
President, Chief Financial Officer and Treasurer vest as follows: 3,333 shares on September 10,
2008, 3,333 shares on September 10, 2009 and 3,334 shares on September 10, 2010. |
|
(g) |
|
Options vest as to 20% on the first anniversary of the date of grant and 1.667% each month thereafter. |
16
2007 OPTION EXERCISES AND STOCK VESTED
None of our named executive officers exercised stock options or vested in any shares of restricted
stock during 2007.
NONQUALIFIED DEFERRED COMPENSATION IN 2007
Our deferred compensation plan is available to company officers, senior management and others as
designated by the Compensation Committee. Participants in the plan may elect to defer a percentage
of their annual base salary, commissions or their incentive compensation. Plan contributions are
subject to the following minimums and maximums:
|
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
Maximum |
|
|
|
annual |
|
|
annual |
|
|
|
contribution |
|
|
contribution |
|
Base salary |
|
$ |
2,500 |
|
|
|
50 |
% |
Bonus |
|
$ |
2,500 |
|
|
|
100 |
% |
Commissions |
|
$ |
2,500 |
|
|
|
100 |
% |
Contributions to the plan may be determined on an annual basis and are irrevocable during the plan
year. Participants in the plan may choose from a variety of mutual fund investments and
participant accounts will be credited with a rate to return indexed to the funds selected by the
participant. These investment elections can be changed at any time during the year. The entire
account is 100% vested to the participant.
Participant accounts will be distributed, either in a lump sum or in annual installments over five,
ten or fifteen years, at the discretion of the participant, upon either termination of employment,
retirement or early retirement, disability, or death of the participant. Retirement is defined
under the plan as termination after age 65. In certain cases where the participant has elected
in-service distributions at the time of the deferral, distributions will be paid in a lump sum
without penalty provided that the schedule date of distribution is at least five years in the
future. Loans are not available under the plan.
Should an event occur that triggers a change in control of StarTek, Inc., the plan provides that
participant accounts are only available for benefit payments or for our creditors in the event of
insolvency.
The following table provides information about the named executive officers who participated in our
deferred compensation plan during 2007. Contribution amounts shown in this table are included in
the named executive officers base salary in the Summary Compensation Table. Aggregate earnings
related to the named executive officers deferred compensation account have been included in All
Other Compensation in the Summary Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive |
|
|
Registrant |
|
|
Aggregate |
|
|
Aggregate |
|
|
Aggregate |
|
|
|
Contributions |
|
|
Contributions in |
|
|
Earnings in |
|
|
Withdrawls/ |
|
|
Balance at |
|
Name |
|
in last FY ($) |
|
|
last FY ($) |
|
|
Last FY ($) |
|
|
Distributions ($) |
|
|
Last FYE ($) |
|
Patrick M. Hayes |
|
|
0 |
|
|
|
0 |
|
|
|
1,355 |
|
|
|
0 |
|
|
|
26,080 |
(a) |
Michael Griffith |
|
|
0 |
|
|
|
0 |
|
|
|
432 |
|
|
|
0 |
|
|
|
4,200 |
|
|
|
|
(a) |
|
Of this amount, $2,868 was included in the Summary Compensation Table as All Other Compensation in 2006. |
During 2007, Mr. Hayes and Mr. Griffith earned rates of return of 5.48% and 11.45%, respectively,
on their deferred compensation accounts, based on their participant-directed investment
allocations.
17
EMPLOYMENT AGREEMENTS
A. Laurence Jones
On January 5, 2007, StarTek and Mr. Jones entered into an Employment Agreement in connection with
the appointment of Mr. Jones as President and Chief Executive Officer of StarTek. The Employment
Agreement provides for an annual base salary of $450,000, subject to review at least once per year
by the Compensation Committee based on performance and a comparison to market conditions. Mr.
Jones base salary can only be reduced in connection with a general, pro-rata reduction in base
salaries of all executive officers as a result of financial problems experienced by StarTek and his
salary must be returned to the unreduced level upon conclusion of any such financial problems. Mr.
Jones will be eligible for an annual incentive bonus for each fiscal year of up to 125% of his then
current annual base salary, subject to achievement of performance criteria and satisfaction of
terms established by the Compensation Committee after consultation with Mr. Jones. Mr. Jones
annual incentive bonus payout amount for 2007 will be determined based on performance against
pre-determined targets for revenue and earnings per share, each of these criteria being weighted
equally. Mr. Jones bonus payout will equal 50% of his annual base salary unless the percentage of
achievement for each of
these criteria exceeds 80%. The Compensation Committee approved a maximum bonus payout for 2007 of
150% rather than 125%. Therefore, his bonus payout for 2007 will range from 50% to 150% of his
annual base salary, as the percentage achievement of each target ranges from 80% to 125%. For
example, achievement of 100% of each target would result in Mr. Jones bonus payout being equal to
100% of his annual base salary.
The Employment Agreement also provides for the grant of an option to purchase 400,000 shares of
StarTek common stock and the grant of 30,000 shares of restricted stock. The options were granted
on January 24, 2007, with an exercise price of $9.60 (equal to the closing price of StarTek common
stock on that date). The option vested as to 20% of the shares on January 5, 2008, and vests as to
1.667% of the option shares on the 5th day of each month thereafter. The option expires ten years
after the date of grant; however, if Mr. Jones employment with StarTek terminates earlier, all
unvested options will be forfeited and he will have (a) three months to exercise any vested options
in the event of termination of his employment by StarTek for cause, (b) eighteen months to exercise
any vested options in the event of termination of his employment by StarTek without cause or
termination by Mr. Jones for good reason and (c) six months to exercise any vested options in the
event of any other termination of his employment. The restrictions on the shares of restricted
stock lapsed as to 10,000 shares on January 5, 2008, and lapse as to 20,000 shares on January 5,
2011; provided that the restrictions on the 20,000 share tranche may lapse earlier as to 10,000 of
such shares upon certification by the Compensation Committee that Mr. Jones achieved at least 80%
performance of the specified performance criteria for the 2008 fiscal year and as to 10,000 of such
shares upon certification by the Compensation Committee that Mr. Jones achieved at least 80%
performance of the specified performance criteria for the 2009 fiscal year. Mr. Jones will also
receive a car allowance of $1,200 per month. Mr. Jones employment with StarTek can be terminated
at any time for any reason by StarTek or Mr. Jones. However, if Mr. Jones employment is terminated
without cause, or if Mr. Jones resigns with good reason, he will be entitled to receive a lump sum
payment equal to 150% of his then current annual base salary plus a bonus equal to 150% of his then
current annual base salary, and he will receive continued health care benefits for 18 months.
StarTek is only required to make such payments if Mr. Jones is in material compliance with the
Employment Agreement, he resigns from all positions with StarTek, he completes any transition
duties and he signs a release of claims in favor of StarTek. Cause and good reason are defined
in the Employment Agreement. Among other things, StarTek can terminate Mr. Jones for cause if he
fails to own, on or after January 5, 2009, at least 30,000 shares of StarTek common stock or shares
of StarTek common stock having a market value of at least $300,000.
The Employment Agreement also provides for non-disclosure by Mr. Jones of StarTeks confidential or
proprietary information, and
includes covenants by Mr. Jones not to compete with StarTek or hire or solicit its employees,
suppliers and customers, in each case for
a restricted period equal to (i) 18 months, if Mr. Jones is entitled to the severance payments
described above or (ii) 12 months for any other termination of employment. Mr. Jones also assigned
to StarTek any rights he may have to intellectual property conceived in the
scope of his employment.
Steven D. Butler
On January 17, 2007, we entered into a Separation Agreement with Steven D. Butler pursuant to his
previously announced termination of employment on January 5, 2007. His employment with StarTek
ended effective January 17, 2007 (the Butler Termination Date). Under the terms of the Separation
Agreement (see Exhibit 10.15 in the 2007 Form 10-K), Mr. Butler was paid a lump sum payment of
salary (less applicable withholding) and vacation pay as if he had been employed through April 4,
2007, and was entitled to receive $472,500 in severance pay, payable in equal monthly installments
commencing on our first regular payday that was no less than six months after the Butler
Termination Date and continuing according to our regular payroll schedule through April 8, 2008.
Mr. Butler was also reimbursed for certain insurance premiums that he paid in April 2007 for
coverage through April 2008.
The Separation Agreement also stipulates that options granted to Mr. Butler during his tenure with
StarTek will vest in accordance with the terms and provisions of each option agreement that existed
on the Butler Termination Date as if Mr. Butlers employment with StarTek had terminated on April
4, 2007, and all of such vested options will be exercisable through December 31, 2007. As of the
Butler Termination Date, options to purchase an aggregate 120,000 shares had vested, none of which
were exercised on or before December 31, 2007.
On December 13, 2007, the Separation Agreement with Mr. Butler was amended to provide that the
final three monthly installments of severance pay, originally scheduled to be paid in January,
February, and March of 2008, would be made in a single lump sum on January 17, 2008. (See Exhibit
10.16 to the 2007 Form 10-K.)
18
David G. Durham
On August 22, 2007, StarTek and Mr. Durham entered into an Employment Agreement in connection with
the appointment of Mr. Durham as Executive Vice President, Chief Financial Officer, and Treasurer
of StarTek. The agreement provides for an annual salary of $320,000, subject to periodic review and
adjustment by the company. Mr. Durham was also paid a one-time, lump-sum signing bonus of $64,000.
Mr. Durham will also be eligible to participate in the Companys annual Incentive Bonus Plan with a
bonus potential of 60% of his then current annual base salary at 100% target attainment. For 2007,
all of Mr. Durhams bonus will be based on Company revenue and earnings per share goals, will be
prorated based on the number of full months of service he renders to the
Company during 2007, and will be subject to a guaranteed minimum of $64,000. A copy of the 2007
Incentive Bonus Plan was filed as an exhibit to the Quarterly Report on Form 10-Q filed by the
Company with the SEC on August 8, 2007.
The Employment Agreement also provides for the grant of an option to purchase 165,000 shares of
StarTek common stock, and the grant of 10,000 shares of restricted stock, each on the date that Mr.
Durham commenced employment with the Company, with an exercise price for the option equal to the
closing price of StarTek common stock on such date of grant. The option will vest as to 25% of the
shares after one year with ratable monthly vesting thereafter, subject to accelerated vesting upon
a change of control. The option was granted pursuant to the terms of the StarTek, Inc. Stock Option
Plan, as amended, which was filed as an exhibit to Schedule 14A filed with the SEC on March 27,
2007.
The restrictions on the shares of restricted stock lapse as to 3,333 shares on September 10, 2008,
as to 3,333 shares on September 10, 2009, and as to 3,334 shares on September 10, 2010.
Mr. Durhams employment with StarTek can be terminated at any time for any reason by StarTek or Mr.
Durham. However, if Mr. Durhams employment is terminated without cause, or if Mr. Durham resigns
with good reason, he will be entitled to receive a lump sum payment equal to twelve months of his
then current annual base salary plus a bonus payment equal to 60% of his then current annual base
salary, and if Mr. Durham timely elects continuation of health insurance pursuant to COBRA, the
Company will reimburse Mr. Durham for a portion of the cost of his COBRA premiums that is equal to
the Companys monthly contribution toward his health benefit premiums as of the date of
termination. Cause and good reason are defined in the Employment Agreement. Among other things,
StarTek can terminate Mr. Durham for cause if he fails to own, on or after March 10, 2008, at least
5,000 shares of StarTek common stock.
The agreement also provides for non-disclosure by Mr. Durham of StarTeks confidential or
proprietary information, and includes covenants by Mr. Durham not to compete with StarTek or hire
or solicit its employees, suppliers and customers, in each case for a restricted period equal to 12
months. Mr. Durham also assigned to the Company any rights he may have to intellectual property
conceived in the scope of his employment.
Executive Officer Employment Contracts
During 2007, the Compensation Committee approved new employment contracts with its executive
officers, other than the Chief Executive Officer and the Chief Financial Officer, using a form of
employment contract which was previously approved by the Compensation Committee. This form of
agreement was used for Mr. Durham, as described in more detail above.
The principal terms and conditions of the contracts include: (a) that employment is at-will, (b)
full-time service is to be rendered exclusively to the Company, (c) customary employee benefits,
expense reimbursement, and paid time off, (d) obligation to comply with the Companys policies and
procedures, (e) payment of base salary, bonus, and (if applicable) other incentive compensation,
(f) that stock options, if granted, shall be subject to terms of the Companys stock option plan
and any notice or agreements approved by the Companys board of directors, (g) execution of the
Companys Proprietary Information and Inventions Agreement whereby the Companys information must
be kept confidential and certain intellectual property rights conveyed to the Company, (h) during
and for a period of time following employment a duty not to compete with the Company nor to solicit
its employees, (i) termination provisions, including Company-paid severance in the event employment
is terminated by the Company without Cause as that term is defined in the contract, (j) only in
the case of an executive vice president, such as the Chief Operating Officer or Chief Financial
Officer, Company-paid severance also in the event employment is terminated by the executive for
Good Reason as that term is defined in the contract, and (k) other provisions customary for an
employment contract.
19
Each of the executive officers, other than the Chief Executive Officer, has signed the general form
of employment agreement. Material differences among those agreements, such as salary, bonus, and
severance, are described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Base Salary(1) |
|
Bonus(2) |
|
Severance(3) |
David Durham(4) |
|
$ |
320,000 |
|
|
|
60 |
%(5) |
|
12 months |
Patrick Hayes |
|
$ |
320,000 |
|
|
|
50 |
% |
|
12 months |
Michael Clayton |
|
$ |
200,000 |
|
|
|
40 |
% |
|
9 months |
Susan Morse |
|
$ |
220,000 |
|
|
|
40 |
% |
|
9 months |
Mary Beth Loesch |
|
$ |
215,000 |
|
|
|
40 |
% |
|
9 months |
Michael Griffith(6) |
|
$ |
194,000 |
|
|
|
25 |
% |
|
9 months |
Notes:
(1)
Base salary is stated on a per annum basis.
(2) Bonus denotes potential bonus amount, expressed as a percent of base salary, in the event
of 100% target attainment. Actual amount of bonus, if any, may be more or less than this amount
depending on actual performance. See the 2007 Incentive Bonus Plan attached as Exhibit 10.114
to Quarterly Report on Form 10-Q filed with the SEC on August 8, 2007.
(3) Severance denotes the amount of severance payment expressed as months of base salary and
months used to calculate the prorated bonus, as well as the period of time following
termination of employment in which the non-competition and non-solicitation covenants remain in
effect. In addition, for up to the same number of months, the Company will continue to pay a
portion of the executives monthly health insurance premiums under COBRA equal to the Companys
monthly contribution towards the executives health insurance prior to termination of
employment.
(4) Mr. Durhams employment contract also provided for grants of restricted stock and stock
options pursuant to separate agreements. As with grants of stock options to the other
executive officers named above, the grant to Mr. Durham was made pursuant to the terms of the
StarTek, Inc. Stock Option Plan, as amended, using the form of agreement approved by the
Compensation Committee to be used for such grants. Other than the Chief Executive Officer and
Mr. Durham, none of the executive officers have received grants of restricted stock.
(5) Mr. Durhams employment contract also included a one-time, lump-sum signing bonus of
$64,000 and further provided that for 2007, all of Mr. Durhams bonus will be based on Company
revenue and earnings per share goals, will be prorated based on the number of full months of
service he renders to the Company during 2007, and be subject to a guaranteed minimum of
$64,000.
(6) Mr. Griffiths incentive compensation includes: (i) 25% of base salary if the Company
achieves 100% of its 2007 corporate business targets for operating income and revenue growth,
(ii) 30% of base salary for achieving 2007 bookings target for new business and (iii) sales
commission pursuant to the terms of the 2007 Sales Commission Plan. See the description of Mr.
Griffiths other incentive compensation in Current Report on Form 8-K filed with the SEC on May
17, 2007, and the 2007 Sales Commission Plan attached as Exhibit 10.113 to Quarterly Report on
Form 10-Q filed with the SEC on August 8, 2007.
Prior to the current form of employment agreements being signed, these executive officers had
employment contracts that differed from the general form of agreement. As compared to those prior
agreements, the current form of agreement made severance provisions more uniform and added
obligations for the executive officer not to compete with the Company following termination of
employment.
A. Emmet Stephenson, Jr.
In 2006, we entered into a verbal agreement with A. Emmet Stephenson, Jr. under which Mr.
Stephenson is an employee of our Domain.com subsidiary. Mr. Stephenson is paid $50,000 per year
for managing our Domain.com subsidiary.
20
Potential Payments Upon Termination or Change in Control
A summary of the potential payments that each of our named executive officers would have received
upon involuntary termination for other than cause (as described in each respective named
executive officers employment agreement summary, above) and upon a termination related to change
in control, assuming that each triggering event occurred on December 31, 2007, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary termination for other than cause, |
|
|
|
|
|
|
whether or not related to a change in control |
|
|
Change in Control |
|
|
|
|
|
|
Acceleration of |
|
|
|
|
|
|
|
|
|
|
|
Perquisites |
|
|
|
|
|
|
Equity Awards |
|
|
|
Severance ($) |
|
|
Bonus ($) |
|
|
($) (a) |
|
|
Total ($) |
|
|
($) (b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A. Laurence Jones (c) |
|
|
675,000 |
|
|
|
675,000 |
|
|
|
10,774 |
|
|
|
1,360,774 |
|
|
|
|
|
David G. Durham (c) |
|
|
320,000 |
|
|
|
192,000 |
|
|
|
7,183 |
|
|
|
519,183 |
|
|
|
|
|
Patrick M. Hayes |
|
|
320,000 |
|
|
|
160,000 |
|
|
|
5,387 |
|
|
|
485,387 |
|
|
|
25,500 |
|
Michael Griffith |
|
|
194,000 |
|
|
|
106,700 |
|
|
|
|
|
|
|
300,700 |
|
|
|
|
|
Mary Beth Loesch |
|
|
220,000 |
|
|
|
88,000 |
|
|
|
3,163 |
|
|
|
311,163 |
|
|
|
|
|
|
|
|
(a) |
|
The perquisites relate to reimbursement of health insurance premiums. |
|
(b) |
|
Upon a change in control, the StarTek, Inc. Stock Option Plan, as
amended (the Option Plan), would terminate and all options then
outstanding under the Option Plan would become immediately vested and
exercisable in full. Each holder of such an option would receive
notice at least five days prior to the effective date of termination
of the Option Plan in order to permit such holder to exercise his
options prior to the effective date of termination. Any option not
exercised by the effective date of termination of the Option Plan
terminates on such date. Unvested restricted shares do not accelerate
upon a change in control. The table above shows the value as of
December 31, 2007, of the acceleration of equity awards upon a change
in control. |
|
(c) |
|
Mr. Jones and Mr. Durham receive the same potential payments for
termination for good reason as they would receive for involuntary
termination for other than cause. The terms cause and good
reason are defined in their employment agreements (see below). |
Steven D. Butler.
On January 17, 2007, we entered into the Separation Agreement with Mr. Butler, whose employment
with us ended effective on the Butler Termination Date. Under the terms of the Separation
Agreement as amended, Mr. Butler was paid a lump sum payment of salary (less applicable
withholding) and vacation pay as if he had been employed through April 4, 2007, and received
$472,500 in severance pay, payable in equal monthly installments commencing on our first regular
payday that was no less than six months after the Butler Termination Date and continuing according
to our regular payroll schedule through April 8, 2008. Per the amendment to his Separation
Agreement, on January 17, 2008, we paid as a lump sum all payments that were scheduled to be made
thereafter. Mr. Butler was also reimbursed for certain insurance premiums that he paid in April
2007 for coverage through April 2008. The Separation Agreement also stipulated that options
granted to Mr. Butler during his tenure with us would vest in accordance with the terms and
provisions of each option agreement that existed on the Butler Termination Date as if Mr. Butlers
employment with us had terminated on April 4, 2007, and that all of such vesting options would be
exercisable through December 31, 2007. As of the Butler Termination Date, options to purchase an
aggregate 120,000 shares had vested, none of which were exercised on or before December 31, 2007.
A. Laurence Jones.
Mr. Jones employment with us can be terminated at any time for any reason by us or Mr. Jones.
However, if Mr. Jones employment is terminated without cause, or if Mr. Jones resigns with good
reason, he will be entitled to receive a lump sum payment equal to 150% of his then current annual
base salary plus a bonus equal to 150% of his then current annual base salary and he will receive
continued health care benefits for 18 months. Cause and good reason are defined in his
employment agreement (See Exhibits 10.17 and 10.18 in our 2007 Form 10-K) and summarized here:
In general, cause includes:
|
(a) |
|
fraud or dishonesty with respect to us; |
|
|
(b) |
|
conviction of a felony or crime involving moral turpitude, deceit, dishonesty, or
fraud; |
|
|
(c) |
|
gross negligence, willful misconduct, or intentional insubordination; |
|
|
(d) |
|
material breach by him of any agreement with us that is not cured within 30 days;
or |
|
|
(e) |
|
his failure, on or after January 5, 2009, to own at least (i) 30,000 shares of
our common stock or (ii) shares having a total market value of at least $300,000. |
In general, good reason includes:
|
(a) |
|
assignment of duties to him that are substantially inconsistent with his role as
our chief executive officer; |
|
|
(b) |
|
reduction of his base salary, except as part of across-the-board reductions of
all of our executive officers; |
|
|
(c) |
|
being required by us to relocate his primary residence more than 35 miles from
Boulder, Colorado; or |
|
|
(d) |
|
material breach by us of any agreement with him that is not cured within 30 days. |
21
We are required to make such payments, but only if Mr. Jones is in material compliance with his
employment agreement, he resigns from all positions with us, he completes any transition duties and
he signs a release of claims in favor of us. Among other things, we can terminate Mr. Jones for
cause if he fails to own, on or after January 5, 2009, at least 30,000 shares of StarTek common
stock or shares of StarTek common stock having a market value of at least $300,000. Mr. Jones must
comply with covenants in his employment agreement that provide for non-disclosure by Mr. Jones of
our confidential or proprietary information and that Mr. Jones will not to compete with us or hire
or solicit our employees, suppliers and customers, in each case for a restricted period equal to 18
months.
David G. Durham.
Mr. Durhams employment with us can be terminated at any time for any reason by us or Mr. Durham.
However, if Mr. Durhams employment is terminated without cause, or if Mr. Durham resigns with good
reason, he will be entitled to receive a lump sum payment equal to twelve months of his then
current annual base salary plus a bonus payment equal to 60% of his then current annual base
salary, and if Mr. Durham timely elects continuation of health insurance pursuant to COBRA, the
Company will reimburse Mr. Durham for a portion of the cost of his COBRA premiums that is equal to
the Companys monthly contribution toward his health benefit premiums as of the date of
termination. Cause and good reason are defined in his employment agreement (See Exhibit 10.21
in our 2007 Form 10-K). In general, good reason includes:
|
(a) |
|
reduction of his base salary, bonus, or benefits except as part of
across-the-board reductions of all of our executive officers; |
|
|
(b) |
|
assignment of duties that are substantially inconsistent with his position with
us and not a reasonable advancement for him; or |
|
|
(c) |
|
the executives principal place of performing services for us being relocated
more than 60 miles from its current location. |
For a summary of cause, see Summary of Cause below. Among other things, we can terminate Mr.
Durham for cause if he fails to own, on or after March 10, 2008, at least 5,000 shares of StarTek
common stock. Mr. Durham must comply with covenants in his employment agreement that provide for
non-disclosure by Mr. Durham of our confidential or proprietary information and that Mr. Durham
will not to compete with us or hire or solicit our employees, suppliers and customers, in each case
for a restricted period equal to 12 months.
Patrick Hayes.
The employment of Mr. Hayes with us can be terminated at any time for any reason by us or Mr.
Hayes. However, if Mr. Hayes employment is terminated without cause, he will be entitled to
receive a lump sum payment equal to twelve months of his then current annual base salary plus a
bonus payment equal to 50% of his then current annual base salary prorated for time and performance
as judged by our Chief Executive Officer. If Mr. Hayes timely elects continuation of health
insurance pursuant to COBRA, then we will reimburse Mr. Hayes for a portion of the cost of his
COBRA premiums that is equal to the our monthly contribution toward his health benefit premiums as
of the date of termination. Cause is defined in his employment agreement (See Exhibit 10.10 in
our 2007 Form 10-K and Summary of Cause below). Mr. Hayes must comply with his covenants in his
employment agreement that provide for non-disclosure by Mr. Hayes of our confidential or
proprietary information and that Mr. Hayes will not to compete with us or hire or solicit our
employees, suppliers and customers, in each case for a restricted period equal to 12 months.
Michael Griffith.
The employment of Mr. Griffith with us can be terminated at any time for any reason by us or Mr.
Griffith. However, if Mr. Griffiths employment is terminated without cause, he will be entitled
to receive a lump sum payment equal to nine months of his then current annual base salary plus a
bonus payment equal to 25% of his then current annual base salary prorated for time and performance
as judged by our Chief Executive Officer. If Mr. Griffith timely elects continuation of health
insurance pursuant to COBRA, then we will reimburse Mr. Griffith for a portion of the cost of his
COBRA premiums that is equal to the our monthly contribution toward his health benefit premiums as
of the date of termination. Cause is defined in his employment agreement (See Exhibit 10.10 in
our 2007 Form 10-K and Summary of Cause below). Mr. Griffith must comply with his covenants in
his employment agreement that provide for non-disclosure by Mr. Griffith of our confidential or
proprietary information and that Mr. Griffith will not to compete with us or hire or solicit our
employees, suppliers and customers, in each case for a restricted period equal to nine months.
Mary Beth Loesch.
The employment of Ms. Loesch with us can be terminated at any time for any reason by us or Ms.
Loesch. However, if Ms. Loeschs employment is terminated without cause, she will be entitled to
receive a lump sum payment equal to nine months of her then current annual base salary plus a bonus
payment equal to 40% of her then current annual base salary prorated for time and performance as
judged by our Chief Executive Officer. If Ms. Loesch timely elects continuation of health
insurance pursuant to COBRA, then we will reimburse Ms. Loesch for a portion of the cost of her
COBRA premiums that is equal to the our monthly contribution toward her health benefit premiums as
of the date of termination. Cause is defined in her employment agreement (See Exhibit 10.10 in
our 2007 Form 10-K and Summary of Cause below). Ms. Loesch must comply with her covenants in her
employment agreement that
provide for non-disclosure by Ms. Loesch of our confidential or proprietary information and that
Ms. Loesch will not to compete with us or hire or solicit our employees, suppliers and customers,
in each case for a restricted period equal to nine months.
22
Summary of Cause
The definition of cause appearing in the employment agreements of Mr. Durham, Mr. Hayes, Mr.
Griffith, and Ms. Loesch is the same. In general, that definition of cause includes:
|
(a) |
|
incompetence; |
|
|
(b) |
|
failure or refusal to perform required duties; |
|
|
(c) |
|
violation of law (other than traffic violations, misdemeanors or similar
offenses), court order, regulatory directive, or agreement; |
|
|
(d) |
|
material breach of the executives fiduciary duty to us; or |
|
|
(e) |
|
dishonorable or disruptive behavior that would be reasonably expected to harm us
or bring disrepute to us, our business, or any of our customers, employees or vendors. |
Acceleration of Equity Awards upon Change in Control
Options granted to each of Ms. Loesch and Messrs. Jones, Durham, Hayes, and Griffith were granted
under the Option Plan. Upon a change in control, the Option Plan would terminate and all options
then outstanding under Option Plan would become immediately vested and exercisable in full. Each
holder of such an option would receive notice at least five days prior to the effective date of
termination of the Option Plan in order to permit such holder to exercise his options prior to the
effective date of termination. Any option not exercised by the effective date of termination of
the Option Plan terminates on such date. Under the terms of the Option Plan, a change in control
includes our dissolution or liquidation, or our reorganization, merger or consolidation with one or
more corporations where either (a) we are not the surviving corporation, or (b) we are the
surviving corporation and our stockholders immediately prior to such transaction do not own at
least fifty percent (50%) of our issued and outstanding common stock immediately after such
transaction. A change in control also includes a sale of substantially all of our assets to
another entity or the sale of our common stock to another person or entity in one or a series of
transactions with the result that such person or entity owns more than fifty percent (50%) of our
issued and outstanding common stock immediately after such sale(s). Vesting of restricted shares
granted to Messrs. Jones and Durham does not accelerate upon a change in control.
COMPENSATION OF DIRECTORS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or |
|
|
Option Awards |
|
|
|
|
Name |
|
Paid in Cash ($) |
|
|
(a) ($) |
|
|
Total ($) |
|
Ed Zschau |
|
$ |
62,500 |
|
|
$ |
33,547 |
|
|
$ |
96,047 |
|
P. Kay Norton |
|
$ |
47,500 |
|
|
$ |
33,547 |
|
|
$ |
81,047 |
|
Albert C. Yates |
|
$ |
46,500 |
|
|
$ |
33,547 |
|
|
$ |
80,047 |
|
|
|
|
(a) |
|
The amounts shown in this column reflect the total estimated
compensation expense for financial reporting purposes under FAS
123(R), excluding forfeitures for service-based vesting, related to
options granted to each director during 2007. Because options granted
under the Directors Option Plan vest immediately upon grant, this
also represents the grant date fair value of options granted during
2007. This does not reflect amounts paid to or realized by the
directors. The amounts include the cost not only of option awards
made in 2007 but also certain awards made in prior years for which we
incurred cost in 2007. The assumptions used when calculating this
cost are set forth in Note 9, Share-Based Compensation to our
Consolidated Financial Statements included in Item 15, Exhibits and
Financial Statement Schedules of our Annual Report on Form 10-K for
fiscal year 2007. |
During 2007, our non-employee directors received a quarterly cash retainer of $7,500, plus $1,000
for each regularly scheduled Board meeting attended and $750 for each special board meeting
attended. Members of the committees of our board of directors also received an additional $750 for
each committee meeting attended, unless such meetings occurred on the same day as regularly
scheduled board meetings. The Chairman of the board received an additional $15,000 for his or her
services as Chairman during the year.
Effective January 1, 2008, non-employee directors receive cash retainers at the rates set forth
below, which are earned and paid on a quarterly basis:
|
|
|
|
$35,000 |
per annum |
|
Retainer for each non-employee director |
$15,000 |
per annum |
|
Additional retainer for serving as Chairman of the Board |
$ 7,500 |
per annum |
|
Retainer for each member of the Audit Committee |
$ 7,500 |
per annum |
|
Additional retainer for serving as Chairman of the Audit Committee |
$ 5,000 |
per annum |
|
Retainer for each member of the Compensation Committee |
$ 5,000 |
per annum |
|
Additional retainer for serving as Chairman of the Compensation Committee |
$ 2,500 |
per annum |
|
Retainer for each member of the Governance and Nominating Committee |
$ 2,500 |
per annum |
|
Additional retainer for serving as Chairman of the Governance and Nominating Committee |
23
Effective January 1, 2008, for attending a special meeting of our board of directors that the
Chairman determines to be required due to an extraordinary event, such as a potential merger or
acquisition, internal investigation, or the like, but not with respect to other special meetings of
our board, each non-employee director also receives a meeting fee of $1,000.
During 2007, the Directors Option Plan was amended to provide for the grant of 6,000 options to
each non-employee director upon initial election to the board of directors and at each annual
meeting at which such director is re-elected. The options are fully vested upon grant. The
Directors Option Plan is administered by our board of directors.
As of December 31, 2007, 63,000 shares had vested with respect to stock options granted to our
current non-employee directors, as follows:
|
|
|
|
|
|
|
Aggregate number of |
|
Director |
|
vested stock options |
|
Ed Zschau |
|
|
33,000 |
|
P. Kay Norton |
|
|
15,000 |
|
Albert C. Yates |
|
|
15,000 |
|
CERTAIN TRANSACTIONS
Review, Approval and Ratification of Related Party Transactions
Pursuant to the Audit Committee charter, the Audit Committee of the board of directors reviews
periodically, but at least annually, a summary of our transactions with directors and executive
officers of the company and with firms that employ directors, as well as any other material related
party transactions, for the purpose of recommending to the disinterested members of the board of
directors that the transactions are fair, reasonable and within company policy and should be
ratified and approved. This list of transactions is compiled via questionnaires that are
distributed annually to all directors and officers of the company and upon initial employment
and/or election to the board.
Registration Rights Agreement
We have entered into a registration rights agreement with Mr. Stephenson, a greater than 10%
stockholder and former director, Toni E. Stephenson, Mr. Stephensons wife, and certain other
members of Mr. Stephensons family. The agreement was effective on June 9, 2004 and terminates on
the earlier of (i) June 9, 2009, or (ii) when the number of shares registrable for resale under the
agreement constitutes less than 10% of our common stock outstanding. Mr. Stephenson owned
3,214,382 shares, or 21.8%, of our common stock outstanding as of March 1, 2007. Under the
registration rights agreement, the holders of one-third or more of the registrable shares, as
defined in the registration rights agreement, may demand that we file a registration statement
under the Securities Act of 1933 covering some or all of their registrable shares. We are obligated
to file no more than two such demand registration statements (unless the number of shares requested
to be included in a demand registration has been reduced by more than 15% by an underwriter). The
filing of a demand registration statement may be subject to further delay upon the occurrence of
other specified events. In addition to these demand registration rights, if we propose to register
any of our equity securities under the Securities Act, other than pursuant to registration
statements on Forms S-4 or S-8, the holders of registrable securities may require that we include
all or a portion of their registrable securities in the registration statement and in any related
underwriting. In an underwritten offering, the managing underwriter, if any, has the right, subject
to specified conditions, to limit the number of registrable securities included in the offering.
Registration of shares of our common stock pursuant to the rights granted to the holders of
registrable securities pursuant to the registration rights agreement, and subsequent sale of such
shares under the registration statement, will result in such shares becoming freely tradable
without restriction under the Securities Act. In connection with demand registrations, we will bear
the expenses related to such registrations to the extent we would be required to incur such
expenses within 12 months or obtain substantial benefit from complying with the demand. We will
bear the expenses related to registrations we file in which the selling stockholders include
registrable securities, except that the selling stockholders will bear their pro-rata portion of
the underwriting discounts and commissions applicable to any such registration. The selling
stockholders will bear all other fees, costs and expenses of registrations under the registration
rights agreement, including underwriting discounts and commissions.
The agreement also provides that, upon the occurrence of a change of control of us by merger, share
exchange, stock sale or tender offer, or in the event members of the Stephenson family sell in the
aggregate 15% or more of our outstanding common stock in any two year period (subject to certain
conditions), no member of the Stephenson family will accept a premium for their shares in such
transactions without providing an opportunity to all our other stockholders to sell their shares
(or at least the same proportionate interest as the Stephenson family proposes to sell) at the same
price; provided that the Stephenson family will be free to sell shares at any time in sales
registered under the Securities Act, so long as the applicable members of the Stephenson family are
named as selling stockholders in the related prospectus, or in Rule 144 transactions, without
restriction under this provision.
24
Investor Rights Agreement
We have entered into an investor rights agreement with Mr. Stephenson that took effect on June 9,
2004 and terminates if Mr. Stephenson ceases to beneficially own at least 10% of our common stock.
The agreement provides that, subject to the board of directors fiduciary duties under applicable
law, we will nominate for election to our board of directors designees named by Mr. Stephenson
representing (i) a number of directors equal to one less than a majority of the Board if there is
an odd number of directors, or two less than a majority if there is an even number of directors, so
long as Mr. Stephenson, together with members of his family, beneficially owns 30% or more of our
outstanding common stock, or (ii) one director, so long as Mr. Stephenson, together with members of
his family, beneficially owns between 10% and 30% of our outstanding common stock. Accordingly, Mr.
Stephenson currently has the right to elect one director; however none of the nominees named in
Proposal 1 were elected by Mr. Stephenson. Mr. Stephensons nominees under these provisions need
not be independent or meet other specific criteria, so long as a majority of the members of our
Board are independent under the rules of the SEC and the New York Stock Exchange. The agreement
also required that we amend Article II, Section 6 of our Bylaws to provide that a holder of 10% or
more of our outstanding common stock is entitled to call a special stockholders meeting. The
investor rights agreement provides that so long as Mr. Stephenson, together with members of his
family, beneficially owns 10% or more of our outstanding common stock, Article II, Section 6 of the
Bylaws, as amended, may not be further amended by our board of directors without Mr. Stephensons
consent.
The rights provided to Mr. Stephenson in the investor rights agreement may not be transferred to
any third party other than to Mrs. Stephenson, upon the death or incompetence of Mr. Stephenson and
to her estate, upon the subsequent death or incompetence of Mrs. Stephenson. Mr. Stephenson does
not have the right to vote shares of stock held by other members of the Stephenson family.
PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee and the board of directors has appointed Ernst & Young LLP, independent
registered public accounting firm, to act as our independent auditors for the year ending December
31, 2008. Ernst & Young LLP has been our auditor since the year ended June 30, 1991, and has
advised us that it does not have any direct or indirect financial interest in us or any of our
subsidiaries, and has not had any such interest during the past five years. We expect that a
representative of Ernst & Young LLP will be present at the Annual Meeting, will have an opportunity
to make a statement if he or she desires to do so, and will be available to respond to appropriate
questions.
The aggregate fees for professional services rendered to us by Ernst & Young LLP for the years
ended December 31, 2007 and 2006 were as follows:
Audit Fees. Fees rendered for professional audit services related to our annual financial
statements for the years ended December 31, 2007 and 2006 were $372,000 and $378,567, respectively.
These amounts include fees associated with the annual audit of our consolidated financial
statements and our internal control over financial reporting (which includes procedures related to
the implementation of the internal control provisions set forth in Section 404 of the
Sarbanes-Oxley Act of 2002). Fees for audit services also include fees for the reviews our
Quarterly Reports on Form 10-Q, registration statements filed with the SEC, other SEC filings and
consents.
Audit-Related Fees. During the years ended December 31, 2007 and 2006, we paid $7,516 and $15,000,
respectively, to Ernst & Young LLP for audit-related services. Audit-related services primarily
included attest services related to reports to regulatory agencies and local municipalities.
Tax Fees. During the years ended December 31, 2007 and 2006, we paid $13,015 and $12,966,
respectively, to Ernst & Young LLP for tax services. Tax fees included fees for tax compliance and
consulting services related to our annual federal and state tax returns.
All Other Fees. During the years ended December 31, 2007 and 2006, there were no other fees billed
or incurred.
In accordance with our Audit Committee Charter, the Audit Committee approves in advance any and all
services provided by our independent registered public accounting firm, including audit engagement
fees and terms, and non-audit services provided to us by our independent auditors (subject to the
de minimis exception for non-audit services contained in Section 10A(i)(1)(B) of the Exchange Act,
as amended), all as required by applicable law or listing standards. The independent auditors and
our management are required to periodically report to the Audit Committee the extent of services
provided by the independent auditors and the fees associated with these services.
25
AUDITOR INDEPENDENCE
The Audit Committee has determined that the non-audit services provided by Ernst & Young LLP were
compatible with maintaining the firms independence.
The Audit Committee and the board of directors unanimously recommend that the Companys
stockholders vote FOR ratification and approval of Ernst & Young LLP as our independent
registered public accounting firm for the year ending December 31, 2008.
AUDIT COMMITTEE REPORT
The Audit Committee oversees our financial reporting process on behalf of the board of directors.
Management has the primary responsibility for the consolidated financial statements and the
reporting process, including the systems of internal controls. In fulfilling its oversight
responsibilities, the Audit Committee reviewed the audited consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2007 with management,
which review included a discussion of the application of generally accepted accounting principles,
the reasonableness of significant estimates and judgments, and the clarity and completeness of
disclosures in the financial statements.
The Audit Committee discussed with our independent registered public accounting firm, who are
responsible for expressing an opinion on the conformity of those audited financial statements with
generally accepted accounting principles, their judgments as to the application of generally
accepted accounting principles and such other matters as are required to be discussed between the
Audit Committee and the independent registered public accounting firm under Statement on Auditing
Standards No. 61, SEC rules, and other professional standards. The Audit Committee has received
from the independent registered public accounting firm the written disclosures and letter required
by Independence Standards Board Standard No. 1, and has discussed with our independent registered
public accounting firm their independence. In addition, the Audit Committee has considered the
effect that all other fees paid to the independent registered public accounting firm may have on
their independence.
The Audit Committee discussed with our independent registered public accounting firm the overall
scope and plans for their respective audits. The Audit Committee meets with the independent
registered public accounting firm, with and without management present, to discuss the results of
their examinations, their evaluations of our internal controls, and the overall quality of our
financial reporting. The Audit Committee held five meetings during 2007 and took one action by
unanimous written consent in lieu of a meeting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to
the board of directors (and the Board has approved) that the audited financial statements be
included in the Annual Report on Form 10-K for the year ended December 31, 2007, for filing with
the SEC.
By the Audit Committee:
Dr. Ed Zschau, Chairman
Dr. Albert C. Yates
Ms. Kay Norton
EQUITY COMPENSATION PLANS
The following table summarizes information as of December 31, 2007, about our stock option plans
for employees and non-employee directors. We do not offer any other equity compensation plans. The
information presented in this table does not give effect to the proposed adoption of the StarTek,
Inc. 2008 Equity Incentive Plan or the Employee Stock Purchase Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
|
|
(a) |
|
|
(b) |
|
|
Number of Securities |
|
|
|
Number of |
|
|
Weighted-Average |
|
|
Available for Future |
|
|
|
Securities to be |
|
|
Exercise Price of |
|
|
Issuance Under Equity |
|
|
|
Issued Upon |
|
|
Outstanding |
|
|
Compensation Plans |
|
|
|
Exercise of |
|
|
Options, Warrants, |
|
|
(Excluding Securities |
|
Plan Category |
|
Outstanding Options |
|
|
and Rights |
|
|
Reflected in Column (a)) |
|
Equity compensation plans
approved by stockholders |
|
|
1,620,342 |
|
|
$ |
12.50 |
|
|
|
252,438 |
|
Equity compensation plans not
approved by stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,620,342 |
|
|
$ |
12.50 |
|
|
|
252,438 |
|
|
|
|
|
|
|
|
|
|
|
26
PROPOSAL 3.
APPROVAL OF THE STARTEK, INC. EMPLOYEE STOCK PURCHASE PLAN
Introduction
On February 25, 2008, the Compensation Committee of our board of directors approved, subject to
stockholder approval, the StarTek, Inc. Employee Stock Purchase Plan (the Purchase Plan). On
February 25, 2008, our board of directors also approved the Purchase Plan and directed that the
Purchase Plan be submitted for approval by our stockholders at our 2008 Annual Meeting of
Stockholders. The full text of the Purchase Plan is set forth in Exhibit A to this proxy statement
and the following summary description is qualified in its entirety by reference to the full text of
the Purchase Plan.
Purpose
The purpose of the Purchase Plan is to provide the employees of our company and our subsidiaries
with an opportunity to acquire an equity interest in our company through the purchase of our common
stock and, thus, to develop a stronger incentive to work for our continued success. The Purchase
Plan is intended to be an employee stock purchase plan within the meaning of Section 423 of the
Internal Revenue Code (the Code), and is interpreted and administered in a manner consistent with
such intent.
Administration
The Purchase Plan is administered by the Compensation Committee of our board of directors (the
Committee). The Committee is authorized to make any uniform rules that may be necessary to carry
out the provisions of the Purchase Plan. Subject to the terms of the Purchase Plan, the Committee
shall determine the term of each purchase period and the manner for determining the purchase price
of shares to be sold during the purchase period. The Committee is also authorized to determine any
questions arising in the administration, interpretation and application of the Purchase Plan, and
all such determinations are conclusive and binding on all parties.
Eligibility and Number of Shares
If the Purchase Plan is approved by our stockholders, there will be a total of 200,000 shares of
our common stock available for purchase under the Purchase Plan, subject to appropriate adjustments
by the Committee in the event of certain changes in the outstanding shares of common stock by
reason of stock dividends, stock splits, corporate separations, recapitalizations, mergers,
consolidations, combinations, exchanges of shares or similar transactions.
Any of our employees, and any employees of a parent or subsidiary corporation of our company who is
approved for participation by our board of directors, who have been employed for at least six
months prior to the start of a Purchase Period (as defined below) and whose customary employment is
at least 20 hours per week, are eligible to participate in the Purchase Plan. A Purchase Period
is each calendar quarter, or such other period of time as may be designated by the Committee.
Any eligible employee may elect to become a participant in the Purchase Plan for any Purchase
Period by filing an enrollment form with us before the first day of the Purchase Period. The
enrollment form will be effective as of the first day of the next succeeding
Purchase Period following receipt by us of the enrollment form and will continue to be effective
until the employee modifies his or her authorization, withdraws from the Purchase Plan or ceases to
be eligible to participate in the Purchase Plan.
No employee may participate in the Purchase Plan if the employee would be deemed for purposes of
the Code to own stock possessing 5% or more of the total combined voting power or value of all
classes of our stock.
As of January 1, 2008, we had approximately 4,441 employees who would be eligible to participate in
the Purchase Plan.
Participation
An eligible employee who elects to participate in the Purchase Plan authorizes us to make payroll
deductions of a specified amount of the employees compensation. The minimum and maximum amounts
that may be withheld during a pay period are 1% and 10%, respectively, of the employees gross cash
compensation. A participant may increase or decrease the amount of his or her payroll deductions,
or discontinue deductions entirely. A participant may also elect to withdraw from the Purchase
Plan during any Purchase Period, in which event the entire balance of his or her payroll deductions
during the Purchase Period will be paid to the participant in cash within 15 days after our receipt
of notice of the withdrawal. A participant who stops payroll deductions during a Purchase Period
may not thereafter resume payroll deductions during the same Purchase Period, and any participant
who withdraws from the Purchase Plan will not be eligible to reenter the Purchase Plan until the
next succeeding Purchase Period.
27
We hold withheld amounts under the Purchase Plan as part of our general assets until the end of the
Purchase Period and then apply such amounts to the purchase of common stock. No interest is
credited or paid to a participant for amounts withheld.
Purchase of Stock
Amounts withheld for a participant in the Purchase Plan are used to purchase our common stock as of
the last day of the Purchase Period at a price established from time to time by the Committee,
which shall be no less than the lesser of: (a) 85% of the Fair Market Value (as defined in the
Purchase Plan) of a share of common stock on the first day of the Purchase Period; or (b) 85% of
the Fair Market Value of a share of common stock on the last day of the Purchase Period. All
amounts so withheld are used to purchase whole shares of common stock, unless the participant has
properly notified us that he or she elects to withdraw in cash all of such withheld amounts. Any
amount that is not used to purchase shares, including any amount that is insufficient to purchase a
whole share of common stock, will be refunded to the participant in cash within 15 days after the
end of the Purchase Period.
If purchases by all participants would exceed the number of shares of common stock available for
purchase under the Purchase Plan, each participant will be allocated a ratable portion of the
available shares of common stock. Any withheld amount not used to purchase shares of common stock
will be refunded to the participant in cash.
Shares of our common stock acquired by participants under the Purchase Plan will be held in a
general securities brokerage account maintained for the benefit of all participants with an agent
selected by us. A participant may request that certificates for the number of shares of common
stock purchased by the participant and credited to his or her account be issued and delivered to
him or her.
No more than $25,000 in Fair Market Value of shares of common stock may be purchased by any
participant under the Purchase Plan and all other employee stock purchase plans we sponsor in any
calendar year.
Death, Disability, Retirement or Other Termination of Employment
If the employment of a participant is terminated for any reason, including death, disability or
retirement, the amounts previously withheld under the Purchase Plan and not used to purchase shares
will be refunded in cash to the participant within 15 days.
Rights Not Transferable
The rights of a participant under the Purchase Plan are exercisable only by the participant during
his or her lifetime. No right or interest of any participant in the Purchase Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of descent and
distribution.
Amendment or Modification
Our board of directors may at any time amend the Purchase Plan in any respect that will not
adversely affect the rights of participants pursuant to shares of common stock previously acquired
under the Purchase Plan, provided that approval by our stockholders is required to: (a) increase
the number of shares of common stock to be reserved under the Purchase Plan (except for adjustments
by
reason of stock dividends, stock splits, corporate separations, recapitalizations, mergers,
consolidations, combinations, exchanges of shares or similar transactions), (b) decrease the
minimum purchase price, (c) withdraw the administration of the Purchase Plan from the Committee, or
(d) change the definition of employees eligible to participate in the Purchase Plan.
Termination
All rights of participants under the Purchase Plan will terminate at the earlier of: (a) the day
that participants become entitled to purchase a number of shares of common stock equal to or
greater than the number of shares of common stock remaining available for purchase; or (b) at any
time, at the discretion of our board of directors, upon at least 30 days notice to the
participants. Upon termination or suspension of the Purchase Plan, shares of common stock shall be
purchased for participants and cash will be refunded as if the Purchase Plan was terminated at the
end of a Purchase Period.
28
Federal Tax Considerations
Payroll deductions under the Purchase Plan are made after taxes. Participants do not recognize any
additional income as a result of participation in the Purchase Plan until the disposal of shares of
common stock acquired under the Purchase Plan or the death of the participant. Participants who
hold their shares of common stock for more than eighteen months or die while holding their shares
of common stock will recognize ordinary income in the year of disposition or death equal to the
lesser of: (a) the excess of the fair market value of the shares of common stock on the date of
disposition or death over the purchase price paid by the participant; or (b) the excess of the fair
market value of the shares of common stock on the first day of the Purchase Period as of which the
shares were purchased over the purchase price. If the eighteen month holding period has been
satisfied when the participant sells the shares of common stock or if the participant dies while
holding the shares of common stock, we will not be entitled to any deduction in connection with the
disposition of such shares by the participant.
Participants who dispose of their shares of common stock within eighteen months after the shares of
common stock were purchased will be considered to have realized ordinary income in the year of
disposition in an amount equal to the excess of the fair market value of the shares of common stock
on the date they were purchased by the participant over the purchase price paid by the participant.
If such dispositions occur, we generally will be entitled to a deduction at the same time and in
the same amount as the participants who make those dispositions are deemed to have realized
ordinary income.
Participants will have a basis in their shares of common stock equal to the purchase price of their
shares of common stock plus any amount that must be treated as ordinary income at the time of
disposition of the shares of common stock, as explained above. Any additional gain or loss
realized on the disposition of shares of common stock acquired under the Purchase Plan will be
capital gain or loss.
Vote Required and Board Recommendation
Under the rules of the New York Stock Exchange, approval of the Purchase Plan requires the
affirmative vote of the holders of a majority of the outstanding shares of common stock represented
in person or by proxy at the Annual Meeting, and at least a majority of the shares of common stock
outstanding must vote on this matter.
The board unanimously recommends that the stockholders vote for the approval of the StarTek, Inc.
Employee Stock Purchase Plan.
PROPOSAL 4.
APPROVAL OF THE STARTEK, INC. 2008 EQUITY INCENTIVE PLAN
Introduction
On February 25, 2008, the Compensation Committee of the board of directors approved, subject to
stockholder approval, the StarTek, Inc. 2008 Equity Incentive Plan (the 2008 Plan). On February
25, 2008, the board of directors also approved the 2008 Plan and directed that the 2008 Plan be
submitted for approval by our stockholders at our 2008 Annual Meeting of Stockholders.
The 2008 Plan is intended to replace the StarTek, Inc. Stock Option Plan and StarTek, Inc.
Directors Stock Option Plan (the Prior Plans) in their entirety, and no further awards will be
made under the Prior Plans if the 2008 Plan is approved by stockholders. In addition, because the
vesting and payout of awards under the 2008 Plan may be conditioned upon the satisfaction of
performance measures specified in the 2008 Plan, such awards are intended to meet the requirements
of Section 162(m) of the Internal Revenue
Code (Section 162(m)) regarding the deductibility of executive compensation that is
performance-based. We are therefore seeking approval from stockholders of the performance
measures set forth in the 2008 Plan.
The full text of the 2008 Plan is set forth in Exhibit B to this proxy statement and the following
summary description is qualified in its entirety by reference to the full text of the 2008 Plan.
Purpose
The purpose of the 2008 Plan is to attract, motivate and retain the best available personnel and
align their interests with those of our stockholders, thereby promoting our long-term success and
increases in stockholder value.
29
Administration
The 2008 Plan will be administered by the Compensation Committee of our board of directors (the
Committee). The Committee has the authority to determine to whom awards will be granted, the
timing, type and amount of any award and other terms and conditions of awards. Subject to certain
requirements, the Committee may cancel or suspend an award, accelerate vesting or extend the
exercise period of an award, or otherwise amend the terms and conditions of any outstanding award.
No action of any kind may be taken, however, to decrease the exercise price of any stock option or
stock appreciation right without stockholder approval.
The Committee may establish, amend or rescind rules in order to administer the 2008 Plan. The
Committee may delegate its authority under the 2008 Plan to one or more of our non-employee
directors or executive officers with respect to the determination and administration of awards for
participants who are not considered officers, directors or 10% stockholders under applicable
federal securities laws.
The 2008 Plan provides that members of the Committee must be outside directors for purposes of
Section 162(m), as well as independent directors within the meaning of the rules and regulations
of the New York Stock Exchange, and non-employee directors within the meaning of Exchange Act
Rule 16b-3.
Eligibility
Any employee, non-employee director, consultant or advisor who is a natural person and who provides
services to our company, or to a parent or subsidiary corporation of our company, is eligible to
participate in the 2008 Plan. Individuals who our company desires to induce to become employees,
non-employee directors, consultants or advisors are also eligible to participate, as long as the
grant is contingent upon the individual becoming an employee, non-employee director, consultant or
advisor. Only employees are eligible for grants of Incentive Stock Options (as defined below).
Number of Shares Available for Issuance
A total of 900,000 shares of our common stock are authorized for grant under the 2008 Plan, and
any shares remaining available for grant under the Prior Plans on the date the stockholders approve
the 2008 Plan shall also become available under the 2008 Plan. The total number of shares
available for issuance is subject to adjustment in connection with certain changes in
capitalization, and may be increased under circumstances described in the following paragraph. As
of February 29, 2008, a total of 260,303 shares were available for grant under the Prior Plans.
These 260,303 shares constituted the then remaining balance of the aggregate total of 2,740,000
shares that had been authorized previously for grant under the Prior Plans, after deducting 867,220
shares that had been issued upon exercise of options and 1,612,477 shares that were still subject
to outstanding options.
The number of shares available for issuance under the 2008 Plan will be increased to the extent
that an award under the 2008 Plan or an award that was outstanding under the Prior Plans on the
date the stockholders approve the 2008 Plan is forfeited, expires, is settled for cash or otherwise
does not result in the issuance of all of the shares subject to the award. This would include, for
example, the settlement of a stock appreciation right for a number of shares that is less than the
total number of shares subject to the stock appreciation right. Similarly, the number of shares
available for issuance under the 2008 Plan will be increased to the extent that shares of our
common stock are delivered or withheld to pay an exercise price or satisfy a tax withholding
obligation in connection with an award under the 2008 Plan or an award that was outstanding under
the Prior Plans on the date the stockholders approve the 2008 Plan.
All of the shares authorized for grant may be granted as Incentive Stock Options. The aggregate
number of shares subject to options and/or stock appreciation rights that may be granted during any
calendar year to any participant cannot exceed 750,000. If the number of shares subject to an
award is variable at the grant date, or if two or more types of awards are granted in tandem such
that the exercise of one type cancels at least an equal number of shares of the other, the maximum
number of shares that could be received will be counted against the limit prior to the settlement
of an award. If we grant awards under the 2008 Plan in substitution for, or in
connection with the assumption of, existing awards issued by a company that we acquire, the shares
subject to those awards will not be counted against the share limits established under the 2008
Plan. In addition, if a company we acquire has shares remaining available for issuance under a
pre-existing stockholder-approved plan, the number of those shares (adjusted as necessary to
reflect valuation or exchange ratios in connection with the acquisition) may be used to make awards
under the 2008 Plan to individuals who were not our employees or directors prior to the
acquisition.
General Terms of Awards
Award Agreements. Except for awards that involve only the immediate issuance of unrestricted and
fully vested shares, each award will be evidenced by an agreement setting forth the number of
shares subject to the award, along with other terms and conditions as determined by the Committee.
Vesting and Term. Each agreement will set forth the period until the award is scheduled to expire,
which will not be more than ten years from the grant date, and the performance period. The
Committee may determine the vesting conditions of awards; however, subject to certain exceptions,
an award that is not subject to the satisfaction of performance measures may not fully vest or
become fully exercisable earlier than three years from the grant date, and the performance period
for an award subject to performance measures may not be shorter than one year.
30
Transferability. Awards may not be sold, assigned, transferred, exchange or encumbered, other than
by will or the laws of descent and distribution. The Committee may provide that an award is
transferable by gift to certain family members. Each participant may designate a beneficiary to
exercise any award or receive payment under any award payable on or after the participants death.
Termination of Service. Upon termination of service for cause, all unexercised options and stock
appreciation rights and all unvested portions of any other outstanding awards will immediately be
forfeited without consideration. Upon termination of service for any other reason, all unvested
and unexercisable portions of any outstanding awards will be immediately forfeited without
consideration. Upon termination of service for any reason other than cause, death or disability,
the currently vested and exercisable portions of awards may be exercised within three months of the
date of termination. Upon termination of service due to death or disability, the currently vested
and exercisable portions of awards may be exercised within six months of termination. All of the
foregoing provisions may be changed if expressly provided for in an individual award agreement.
Types of Awards
The types of awards that may be granted under the 2008 Plan include restricted stock awards,
restricted stock unit awards, stock option awards, stock appreciation rights and performance units.
The Committee also has the discretion to grant other types of awards, as long as they are
consistent with the terms and purposes of the 2008 Plan. In addition to the general terms of all
the awards, as described above, the basic characteristics of the awards that may be granted under
the 2008 Plan are as follows:
Restricted Stock Awards. Restricted stock awards are subject to vesting conditions and other
restrictions as determined by the Committee. Unvested shares of restricted stock are subject to
transfer restrictions, and book entries or stock certificates evidencing the shares will bear a
restrictive legend to that effect until such shares have vested. Participants who receive
restricted stock awards are entitled to all the other rights of a stockholder, including the right
to receive dividends and the right to vote the shares of restricted stock, unless otherwise
provided in the applicable award agreement.
Restricted Stock Units. Restricted stock unit awards are subject to vesting conditions and other
restrictions as determined by the Committee. After a restricted stock unit award vests, payment
will be made to the participant in the form of cash, shares or a combination of cash and shares as
determined by the Committee, and within the time period after vesting as will qualify the payment
for the short-term deferral exemption from Section 409A of the Internal Revenue Code (Section
409A).
Stock Option Awards. The agreement pursuant to which a stock option is granted will specify
whether it is an Incentive Stock Option or a Non-Statutory Stock Option. Non-Statutory Stock
Options are all stock option awards that do not meet the requirements of Incentive Stock Options,
as described below. The exercise price will be determined by the Committee and may not be less
than the fair market value of a share of common stock on the grant date. The exercise price is
payable in full at the time of exercise and may be paid in cash and/or, if permitted by the
Committee, by withholding shares issuable upon exercise or delivery of shares already owned by the
participant. Each option is exercisable in whole or in part on the terms provided in the
agreement, but in no event will an option be exercisable after its scheduled expiration.
An option will be considered an Incentive Stock Option only if (i) the participant receiving the
award is an employee, (ii) it is designated as an Incentive Stock Option in the agreement, and
(iii) the aggregate fair market value of the shares subject to Incentive Stock Options held by the
participant which first become exercisable in any calendar year does not exceed $100,000. A
participant
may not receive an Incentive Stock Option under the 2008 Plan if, immediately after the grant of
the award, the participant would own shares with more than 10% of the total combined voting power
of all classes of stock of the company or a parent or subsidiary corporation of the company,
subject to certain exceptions.
Stock Appreciation Rights. An award of a stock appreciation right entitles the participant to
receive, upon exercise of the award, all or a portion of the excess of (i) the fair market value of
a specified number of shares as of the date of exercise over (ii) a specified exercise price that
will not be less than 100% of the fair market value of the shares on the grant date. Each stock
appreciation right is exercisable in whole or in part on the terms provided in the agreement, but
in no event will a stock appreciation right be exercisable after its scheduled expiration. Upon
exercise, payment may be made to the participant in the form of cash, shares or a combination of
cash and shares, as determined by the Committee. The agreement may provide for a limitation upon
the amount or percentage of total appreciation on which payment may be made upon exercise.
31
Performance Units. An award of performance units entitles the participant to future payments of
cash, shares or a combination of cash and shares, as specified by the Committee in the award
agreement, based upon the achievement of a specified level of one or more performance measures over
the course of a performance period. The agreement will specify the nature and requisite level of
achievement for each performance measure, the length of the performance period, and may provide
that a portion of the award will be paid for performance that exceeds the minimum target but falls
below the maximum target applicable to the award. Payment of any performance unit award will be
made within the time period after vesting that will qualify the payment for the short term
deferral exemption from Section 409A. The agreement may permit the acceleration of the
performance period and an adjustment of performance measures and payments with respect to some or
all of the performance units upon the occurrence of certain events. The agreement may also provide
for a limitation on the value of an award of performance units that a participant may receive.
Effect of a Change in Control
Unless otherwise provided in an award agreement, if a change in control, generally involving a
merger or consolidation of our company or a sale of substantially all of our companys assets,
occurs, then each outstanding award that is not yet fully exercisable or vested will immediately
become exercisable or vested with respect to 50% of the shares that were unexercisable or unvested
immediately before the change in control. If, in connection with a change in control, the awards
were either continued in effect or assumed or replaced by the surviving corporation, and within two
years after the change in control, a participant is involuntarily terminated other than for cause,
then each outstanding award will immediately become vested and exercisable in full and will remain
exercisable for 24 months.
Corporate Transactions
In the event of certain corporate transactions, as defined under the 2008 Plan, the Committee may
protect outstanding stock options and stock appreciation rights by providing for the substitution
of awards issued by the surviving corporation, or the Committee may provide written notice prior to
the occurrence of the transaction that each outstanding stock option or stock appreciation right
will be cancelled at the time of, or immediately prior to the occurrence of, the corporate
transaction in exchange for payment within 20 days of the transaction. The amount of the payment
would equal the spread between an awards exercise price and the fair market value of the
underlying shares at the time of the transaction. In the case of cancellation, outstanding awards
will immediately become exercisable in full during the period between the provision of written
notice and the time of cancellation.
Performance-Based Compensation
If the Committee determines that an award, other than an option or stock appreciation right award,
is granted to a participant who is an executive officer and is, or is likely to be, a covered
employee for purposes of Section 162(m), then the lapsing of restrictions on the award and the
distribution of cash, shares or other property pursuant to the award may be made subject to the
achievement of one or more performance measures, as described below. When establishing performance
measures for a performance period, the Committee may exclude amounts or charges relating to an
event or occurrence that the Committee determines, consistent with the requirements of Section
162(m), should appropriately be excluded. The Committee may also adjust performance measures for a
performance period to the extent permitted by Section 162(m) to prevent the dilution or enlargement
of a participants rights with respect to performance-based compensation. The Committee will
determine any amount payable in connection with such an award consistent with the requirements of
Section 162(m), and may adjust downward, but not upward, any amount determined to be otherwise
payable in connection with such an award. Subject to adjustment in the event of certain changes in
capitalization, no participant may be granted performance-based compensation in any calendar year
with respect to more than 300,000 shares, for awards denominated in shares, and the maximum dollar
value payable to any participant in any 12 month period with respect to performance-based
compensation denominated in cash is $2,000,000.
With respect to recipients who are covered employees under Section 162(m), the performance
measures are set by the Committee at the start of each performance period and are based on one or a
combination of two or more of the following performance criteria: net sales; net earnings;
earnings before income taxes; earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; earnings per share (basic or diluted); profitability as measured by
return ratios (including, but not limited to, return on assets, return on equity, return on
investment and return on net sales) or by the degree to which any of the foregoing earnings
measures exceed a percentage of net sales; cash flow; market share; margins (including, but not
limited to, one or more of gross, operating and net earnings margins); stock price; total
stockholder return; asset quality; non-performing assets; revenue growth; operating income; pre- or
after-tax income; cash flow per share; operating assets; improvement in or attainment of expense
levels or cost savings; economic value added; and improvement in or attainment of working capital
levels. Any performance measure utilized may be expressed in absolute amounts, on a per share
basis, as a growth rate or change from preceding periods, or as a comparison to the performance of
specified companies or other external measures, and may relate to one or any combination of
corporate, group, unit, division, affiliate or individual performance.
32
Duration, Amendment and Termination
The 2008 Plan will remain in effect until all shares subject to it are distributed, all awards have
expired or terminated, the 2008 Plan is terminated, or the tenth anniversary of the date of
stockholder approval of the plan, whichever occurs first. The board of directors may at any time
terminate, suspend or amend the 2008 Plan. The Company shall submit any amendment of the 2008 Plan
to its stockholders for approval if the rules of the principal securities exchange on which the
shares are then listed or other applicable laws or regulations require stockholder approval of such
an amendment. No termination, suspension or amendment of the 2008 Plan or any agreement under the
2008 Plan may materially or adversely affect any right acquired by any participant under an award
granted before the date of termination, suspension or amendment, unless otherwise agreed to by the
participant in the agreement or otherwise, or required by law.
Federal Tax Considerations
The following summary sets forth the tax events generally expected for United States citizens under
current United States federal income tax laws in connection with awards under the 2008 Plan.
Incentive Stock Options. A recipient will realize no taxable income, and we will not be entitled
to any related deduction, at the time an incentive stock option is granted under the 2008 Plan. If
certain statutory employment and holding period conditions are satisfied before the recipient
disposes of shares acquired pursuant to the exercise of such an option, then no taxable income will
result upon the exercise of such option, and we will not be entitled to any deduction in connection
with such exercise. Upon disposition of the shares after expiration of the statutory holding
periods, any gain or loss realized by a recipient will be a long-term capital gain or loss. We
will not be entitled to a deduction with respect to a disposition of the shares by a recipient
after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the exercise of an incentive
stock option are disposed of by such recipient before the expiration of the statutory holding
periods (a disqualifying disposition), such recipient will be considered to have realized as
compensation, taxable as ordinary income in the year of disposition, an amount, not exceeding the
gain realized on such disposition, equal to the difference between the exercise price and the fair
market value of the shares on the date of exercise of the option. We will be entitled to a
deduction at the same time and in the same amount as the recipient is deemed to have realized
ordinary income. Any gain realized on the disposition in excess of the amount treated as
compensation or any loss realized on the disposition will constitute capital gain or loss,
respectively. Such capital gain or loss will be long-term or short-term based upon how long the
shares were held. If the recipient pays the option price with shares that were originally acquired
pursuant to the exercise of an incentive stock option and the statutory holding periods for such
shares have not been met, the recipient will be treated as having made a disqualifying disposition
of such shares, and the tax consequence of such disqualifying disposition will be as described
above.
The foregoing discussion applies only for regular tax purposes. For alternative minimum tax
purposes, an incentive stock option will be treated as if it were a non-qualified stock option, the
tax consequences of which are discussed below.
Non-Qualified Stock Options. A recipient will realize no taxable income, and we will not be
entitled to any related deduction, at the time a non-qualified stock option is granted under the
2008 Plan. At the time of exercise of a non-qualified stock option, the recipient will realize
ordinary income, and we will be entitled to a deduction, equal to the excess of the fair market
value of the stock on the date of exercise over the option price. Upon disposition of the shares,
any additional gain or loss realized by the recipient will be taxed as a capital gain or loss,
long-term or short-term, based upon how long the shares are held.
Stock Appreciation Rights and Performance Units. Generally: (a) the recipient will not realize
income upon the grant of a stock appreciation right or performance unit award; (b) the recipient
will realize ordinary income, and we will be entitled to a corresponding
deduction, in the year cash or shares of common stock are delivered to the recipient upon exercise
of a stock appreciation right or in payment of the performance unit award; and (c) the amount of
such ordinary income and deduction will be the amount of cash received plus the fair market value
of the shares of common stock received on the date of issuance. The federal income tax
consequences of a disposition of unrestricted shares received by the recipient upon exercise of a
stock appreciation right or in payment of a performance unit award are the same as described below
with respect to a disposition of unrestricted shares.
Restricted and Unrestricted Stock; Restricted Stock Units. Unless the recipient files an election
to be taxed under Section 83(b) of the Code: (a) the recipient will not realize income upon the
grant of restricted stock; (b) the recipient will realize ordinary income, and we will be entitled
to a corresponding deduction, when the restrictions have been removed or expire; and (c) the amount
of such ordinary income and deduction will be the fair market value of the restricted stock on the
date the restrictions are removed or expire. If the recipient files an election to be taxed under
Section 83(b) of the Code, the tax consequences to the recipient will be determined as of the date
of the grant of the restricted stock rather than as of the date of the removal or expiration of the
restrictions.
With respect to awards of unrestricted stock: (a) the recipient will realize ordinary income, and
we will be entitled to a corresponding deduction upon the grant of the unrestricted stock and (b)
the amount of such ordinary income and deduction will be the fair market value of such unrestricted
stock on the date of grant.
33
When the recipient disposes of restricted or unrestricted stock, the difference between the amount
received upon such disposition and the fair market value of such shares on the date the recipient
realizes ordinary income will be treated as a capital gain or loss, long-term or short-term, based
upon how long the shares are held.
A recipient will not realize income upon the grant of restricted stock units, but will realize
ordinary income, and we will be entitled to a corresponding deduction, when the restricted stock
units have vested and been settled in cash and/or shares of our common stock. The amount of such
ordinary income and deduction will be the amount of cash received plus the fair market value of the
shares of our common stock received on the date of issuance.
Withholding. The 2008 Plan permits us to withhold from awards an amount sufficient to cover any
required withholding taxes. In lieu of cash, the compensation committee may permit a participant
to cover withholding obligations through a reduction in the number of shares to be delivered to
such participant or by delivery of shares already owned by the participant.
New Plan Benefits
When and if this proposal is approved, and subject to Committee approval, it is anticipated that
initial awards under the 2008 Plan will result in the benefits described in the table below, which
would be subject to a three-year vesting schedule by which restrictions would lapse as to one third
of the shares on each of the first, second and third anniversaries of the grant date. Awards for
other plan participants have not yet been defined and will be at the discretion of the Committee.
StarTek, Inc. 2008 Equity Incentive Plan
|
|
|
|
|
|
|
Name and Position |
|
Dollar Value ($) (b) |
|
Number of Units |
Patrick M. Hayes, Executive Vice President and COO
|
|
|
43,050 |
|
5,000 shares of restricted stock |
Mary Beth Loesch, Senior Vice President of Business Development
|
|
|
25,830 |
|
3,000 shares of restricted stock |
All current executive officers as a group
|
|
|
111,930 |
|
13,000 shares of restricted stock |
All current non-executive directors as a group
|
|
|
|
|
(a) |
All employees, including all current officers who are not
executive officers, as a group
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120,540 |
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14,000 shares of restricted stock |
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(a) |
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If and when this proposal is approved, it is anticipated that the
board will provide a right to each non-employee director to receive,
upon initial election to the board and annually thereafter, a right to
receive either options to purchase 9,000 shares at fair market value
on the date of grant or 3,600 restricted stock units. |
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(b) |
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The dollar value of restricted stock awards is determined by
multiplying the number of shares proposed to be awarded by the closing
price of a share of our common stock on the NYSE on February 29, 2008. |
Vote Required and Board Recommendation
Under the rules of the New York Stock Exchange, approval of the 2008 Plan requires the affirmative
vote of the holders of a majority of the outstanding shares of common stock represented in person
or by proxy at the Annual Meeting, and at least a majority of the shares of common stock
outstanding must vote on this matter.
The board unanimously recommends that the stockholders vote for the approval of the StarTek, Inc.
2008 Equity Incentive Plan.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at our 2009 Annual Meeting of Stockholders must be
received at our executive offices at 44 Cook Street, 4th Floor, Denver, Colorado 80206,
Attention of the Secretary, no later than November 20, 2008, for inclusion in our proxy statement
relating to the 2009 Annual Meeting. Under our By-laws, the Secretary must receive notice at our
executive offices between February 4, 2009 and March 6, 2009 of any matters to be proposed by a
stockholder at the 2009 Annual Meeting in order for such matters to be properly considered at the
meeting. However, if the date of the 2009 Annual Meeting is a date that is more than 30 days
before or more than 60 days after May 5, 2009, the anniversary date of the 2008 Annual Meeting,
notice by the stockholder of a proposal must be received not earlier than the close of business on
the 90th day prior to the 2009 Annual Meeting and not later than the close of business
on the later of the 60th day prior to the 2009 Annual Meeting or the 10th day
following the day on which public announcement of the 2009 Annual Meeting is first made by us.
34
STOCKHOLDER COMMUNICATION WITH THE BOARD
Our board of directors believes that it is important for current and potential stockholders and
other interested parties to have a process to send communications to the board. Accordingly,
stockholders and other interested parties desiring to send a communication to the board of
directors, or to a specific director, may do so by sending a letter to our executive offices at 44
Cook Street, 4th Floor, Denver, Colorado 80206, attention of the Secretary. The mailing
envelope must contain a clear notation indicating that the enclosed letter is a stockholder-board
communication or stockholder-director communication. All such letters must identify the author
as either a stockholder or non-stockholder and clearly state whether the intended recipients of the
letter are all members of the board of directors or certain specified individual directors. The
Secretary will open such communications, make copies, and then circulate them to the appropriate
director or directors. Letters directed to our independent directors or outside directors will
be delivered to Dr. Zschau, our Chairman and lead independent director.
MISCELLANEOUS
Our Annual Report to Stockholders for the year ended December 31, 2007, will be made available with
this Proxy Statement to stockholders of record as of March 6, 2008. The Annual Report to
Stockholders for the year ended December 31, 2007, does not constitute a part of the proxy
soliciting materials.
Our board of directors and management team are not aware of any other business that may come before
the Annual Meeting. However, if additional matters properly come before the Annual Meeting,
proxies will be voted at the discretion of the proxy holders.
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By Order of the Board of Directors
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A. Laurence Jones |
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President and Chief Executive Officer |
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Our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, including consolidated
financial statements, required to be filed with the SEC pursuant to Rule 13a-1 of the Exchange Act,
as well as our Forms 10-Q and other SEC filings will be furnished, excluding exhibits, without
charge, to any stockholder upon written request. A copy may be requested by writing to the
Director of Investor Relations, StarTek, Inc., 44 Cook Street, 4th Floor, Denver,
Colorado 80206. Our Annual Report on Form 10-K as well as our Forms 10-Q and other SEC filings can
also be obtained over the Internet through the Investor Relations section of our web site. Our
Internet address is http://www.startek.com. We also make the charters for the compensation
committee, audit committee and governance and nominating committee of our board of directors, as
well as our Corporate Governance Guidelines and our Code of Ethics and Business Conduct, available
on the Investor Relations page of our web site. Any of these materials are available in print
upon request. Additionally, the Annual Report on Form 10-K and other information we file with the
SEC can be inspected at and obtained from the SEC at prescribed rates at public reference
facilities maintained by the SEC at Room 1024, 100 F St., NE, Washington, D.C. 20549. The SEC
maintains a web site at http://www.sec.gov that contains reports, proxies, information statements,
and other information regarding us that has been filed electronically with the SEC.
35
EXHIBIT A
StarTek Inc.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose and Scope of Plan. The purpose of this employee stock purchase plan (the Plan)
is to provide the employees of StarTek Inc. (the Company) and its subsidiaries with an
opportunity to acquire a proprietary interest in the Company through the purchase of its
common stock and, thus, to develop a stronger incentive to work for the continued success of
the Company. The Plan is intended to be an employee stock purchase plan within the
meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended, and shall be
interpreted and administered in a manner consistent with such intent.
2. Definitions.
2.1. The terms defined in this section are used (and capitalized) elsewhere in this
Plan:
(a) Affiliate means any corporation that is a parent corporation or
subsidiary corporation of the Company, as defined in Sections 424(e) and 424(f) of
the Code or any successor provision, and whose participation in the Plan has been
approved by the Board of Directors.
(b) Agent means a registered securities broker/dealer selected by the
Company to assist the Company in administering the Plan.
(c) Board of Directors means the Board of Directors of the Company.
(d) Code means the Internal Revenue Code of 1986, as amended from time to
time.
(e) Committee means two or more Non-Employee Directors designated by the
Board to administer the Plan under Section 13.
(f) Common Stock means the common stock, par value $.01 per share (as such
par value may be adjusted from time to time), of the Company.
(g) Company means StarTek Inc., a Delaware corporation.
(h) Compensation means the gross cash compensation (including wage,
overtime, salary, or commission) paid by the Company or any Affiliate to a
Participant in accordance with the terms of employment.
(i) Eligible Employee means any employee of the Company or an Affiliate
who has been employed for at least six months prior to the start of a Purchase
Period and whose customary employment is at least 20 hours per week; provided,
however, that Eligible Employee shall not include any person who would be deemed,
for purposes of Section 423(b)(3) of the Code, to own stock possessing 5% or more of
the total combined voting power or value of all classes of stock of the Company.
(j) Exchange Act means the Securities Exchange Act of 1934, as amended
from time to time.
(k) Fair Market Value of a share of Common Stock as of any date means, if
the Companys Common Stock is listed on a national securities exchange or traded in
the national market system, the closing price for such Common Stock on such exchange
or market on said date, or, if no sale has been made on such exchange or market on
said date, on the last preceding day on which any sale shall have been made. If
such determination of Fair Market Value is not
consistent with the then current regulations applicable to plans intended to qualify
as an employee stock purchase plan within the meaning of Section 423(b) of the
Code, however, Fair Market Value shall be determined in accordance with such
regulations. The determination of Fair Market Value shall be subject to adjustment
as provided in Section 14.
EX-1
(l) Non-Employee Director means a member of the Board of Directors who is
considered a non-employee director within the meaning of Exchange Act Rule 16b-3 or
any successor definition.
(m) Participant means an Eligible Employee who has elected to participate
in the Plan in the manner set forth in Section 4.
(n) Plan means this StarTek Inc. Employee Stock Purchase Plan, as amended
from time to time.
(o) Purchase Period means, except as otherwise determined by the
Committee, a quarterly period commencing January 1 and ending March 31, or
commencing April 1 and ending June 30, or commencing July 1 and ending September 30,
or commencing October 1 and ending December 31.
(p) Recordkeeping Account means the account maintained in the books and
records of the Company recording the amount withheld from each Participant through
payroll deductions made under the Plan.
3. Scope of the Plan. Shares of Common Stock may be sold to Eligible Employees pursuant to
this Plan as hereinafter provided, but not more than 200,000 shares of Common Stock (subject
to adjustment as provided in Section 14) shall be sold to Eligible Employees pursuant to
this Plan. All sales of Common Stock pursuant to this Plan shall be subject to the same
terms, conditions, rights and privileges. The shares of Common Stock sold to Eligible
Employees pursuant to this Plan may be shares acquired by purchase on the open market or in
privately negotiated transactions, by direct issuance from the Company (whether newly issued
or treasury shares) or by any combination thereof.
4. Eligibility and Participation. To be eligible to participate in the Plan for a given
Purchase Period, an employee must be an Eligible Employee on the first day of such Purchase
Period. An Eligible Employee may elect to participate in the Plan by filing an enrollment
form with the Company before the first day of such Purchase Period that authorizes regular
payroll deductions from Compensation beginning with the first payday in such Purchase Period
and continuing until the Eligible Employee withdraws from the Plan, modifies his or her
authorization, or ceases to be an Eligible Employee, as hereinafter provided.
5. Amount of Common Stock Each Eligible Employee May Purchase.
5.1. Subject to the provisions of this Plan, each Eligible Employee shall be offered
the right to purchase on the last day of the Purchase Period the number of whole shares of
Common Stock that can be purchased at the price specified in Section 5.2 with the entire
credit balance in the Participants Recordkeeping Account; provided, however, that the Fair
Market Value (determined on the first day of any Purchase Period) of shares of Common Stock
that may be purchased by a Participant during such Purchase Period shall not exceed the
excess, if any, of (i) $25,000 (or such lesser amount designated by the Committee) over (ii)
the Fair Market Value (determined on the first day of the relevant Purchase Period) of
shares of Common Stock previously acquired by the Participant in any prior Purchase Period
during such calendar year. Notwithstanding the foregoing, no Eligible Employee shall be
granted an option to acquire shares of Common Stock under this Plan that permits the
Eligible Employees rights to purchase shares of Common Stock under this Plan and all other
employee stock purchase plans within the meaning of Section 423(b) of the Code maintained
by the Company and the Affiliates to accrue at a rate that exceeds $25,000 of Fair Market
Value (determined at the time such option is granted) for each calendar year in which such
option is outstanding at any time. If the purchases by all Participants would otherwise
cause the aggregate number of shares of Common Stock to be sold under the Plan to exceed the
number specified
in Section 3, however, each Participant shall be allocated a ratable portion of the maximum
number of shares of Common Stock that may be sold.
EX-2
5.2. The purchase price of each share of Common Stock sold pursuant to this Plan shall
be established from time to time by the Committee, but shall be no less than the lesser of
(a) or (b) below:
|
(a) |
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85% of the Fair Market Value of such share on the first day of
the Purchase Period; or |
|
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(b) |
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85% of the Fair Market Value of such share on the last day of
the Purchase Period. |
6. Method of Participation.
6.1. The Company shall give notice to each Eligible Employee of the opportunity to
purchase shares of Common Stock pursuant to this Plan and the terms and conditions for such
offering. Such notice is subject to revision by the Company at any time prior to the date
of purchase of such shares. The Company contemplates that for tax purposes the first day of
a Purchase Period will be the date of the offering of such shares.
6.2. Each Eligible Employee who desires to participate in the Plan for a Purchase
Period shall signify his or her election to do so by delivering an executed election on a
form developed by the Committee. An Eligible Employee may elect to have any whole percent
of Compensation withheld, but not exceeding 10% per pay period. An election to
participate in the Plan and to authorize payroll deductions as described herein must be made
before the first day of the Purchase Period to which it relates and shall remain in effect
unless and until such Participant withdraws from the Plan, modifies his or her
authorization, or ceases to be an Eligible Employee, as hereinafter provided.
6.3. Any Eligible Employee who does not make a timely election, as provided in Section
6.2, shall be deemed to have elected not to participate in the Plan. Such election shall be
irrevocable for such Purchase Period.
7. Recordkeeping Account.
7.1. The Company shall maintain a Recordkeeping Account for each Participant. Payroll
deductions pursuant to Section 6 shall be credited to such Recordkeeping Accounts on each
payday.
7.2. No interest shall be credited to a Participants Recordkeeping Account.
7.3. The Recordkeeping Account is established solely for accounting purposes, and all
amounts credited to the Recordkeeping Account shall remain part of the general assets of the
Company.
7.4. A Participant may not make any separate cash payment into the Recordkeeping
Account.
8. Right to Adjust Participation or to Withdraw.
8.1. A Participant may, at any time during a Purchase Period, direct the Company to
adjust the amount withheld from his or her future Compensation, subject to the limitation in
Section 6.2. Upon any such action, future payroll deductions with respect to such
Participant shall be adjusted in accordance with the Participants direction.
8.2. Any Participant who stops payroll deductions may not thereafter resume payroll
deductions during such Purchase Period.
8.3. At any time before the end of a Purchase Period, any Participant may withdraw from
the Plan. In such event, all future payroll deductions shall cease and the entire credit
balance in the Participants Recordkeeping Account will be paid to the Participant, without
interest, in cash within 15
days. A Participant who withdraws from the Plan will not be eligible to reenter the Plan
until the next succeeding Purchase Period.
EX-3
8.4. Notification of a Participants election to increase, decrease, or terminate
deductions, or to withdraw from the Plan, shall be made by filing an appropriate form with
the Company. Notification to increase or decrease deductions will take effect as soon as
administratively feasible following such notification.
9. Termination of Employment. If the employment of a Participant terminates for any reason,
including death, disability, or retirement, the entire balance in the Participants
Recordkeeping Account shall be refunded in cash within 15 days. Solely for purposes of the
Plan, a Participants employment shall terminate on the date the Participant receives or
gives notice of termination of employment and neither any period of notice, if any, nor any
payment in lieu thereof shall be considered as extending the period of employment for the
purposes of the Plan. No cash or other compensation shall at any time be paid to any
Participant or any person claiming through a Participant, as damages or otherwise, in
respect of the termination of the Participants participation under the Plan pursuant to
this Section 9.
10. Purchase of Shares.
10.1. As of the last day of each Purchase Period, the entire credit balance in each
Participants Recordkeeping Account shall be used to purchase whole shares of Common Stock
(subject to the limitations of Section 5) unless the Participant has filed an appropriate
form with the Company in advance of that date (which elects to receive the entire credit
balance in cash). Any amount in a Participants Recordkeeping Account that is not used to
purchase shares pursuant to this Section 10.1 shall be refunded to the Participant, without
interest, in cash within 15 days after the end of the Purchase Period.
10.2. Shares of Common Stock acquired by each Participant shall be held in a general
securities brokerage account maintained for the benefit of all Participants with the Agent.
The Agent shall maintain individual sub accounts for each Participant in such general
account to which shall be allocated such Participants shares of Common Stock (including
fractional shares to four decimal places).
10.3. Prior to the last day of each Purchase Period, the Company shall determine
whether some or all of the shares of Common Stock to be purchased as of the last day of such
Purchase Period will be purchased by the Agent for the accounts of Participants on the open
market or in privately negotiated transactions. If some or all of such shares are to be so
purchased by the Agent, the Company shall advise the Agent of the number of shares to be so
purchased and shall provide to the Agent such funds, in addition to the funds available from
Participants Recordkeeping Accounts, as may be necessary to permit the Agent to so purchase
such number of shares (including all brokerage fees and expenses).
10.4. Each Participant shall be entitled to vote all shares held for the benefit of
such Participant in the general securities brokerage account maintained by the Agent.
10.5. Certificates for the number of whole shares of Common Stock, determined as
aforesaid, purchased by each Participant shall be issued and delivered to him or her,
registered in the form directed by the Participant, only upon the request of the Participant
or his or her representative. Any such request shall be made by filing an appropriate form
with the Company. No certificates for fractional shares will be issued. Instead,
Participants will receive a cash distribution representing any fractional shares.
11. Rights as a Stockholder. A Participant shall not be entitled to any of the rights or
privileges of a stockholder of the Company with respect to shares of Common Stock under the
Plan, including the right to receive any dividends that may be declared by the Company,
until (i) he or she actually has paid the purchase price for such shares and (ii) either the
shares have been credited to the general securities brokerage account maintained by the
Agent for the Participants benefit or certificates have been issued to the Participant,
both as provided in Section 10.
EX-4
12. Rights Not Transferable. A Participants rights under this Plan are exercisable only by
the Participant during his or her lifetime, and may not be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and distribution. Any
attempt to sell, pledge, assign or transfer the same shall be null and void and without
effect. The amounts credited to a Recordkeeping Account may not be assigned, transferred,
pledged or hypothecated in any way, and any attempted assignment, transfer, pledge,
hypothecation or other disposition of such amounts will be null and void and without effect.
13. Administration of the Plan. This Plan shall be administered by the Committee, which is
authorized to make such uniform rules as may be necessary to carry out its provisions.
Subject to the terms of this Plan, the Committee shall determine the term of each Purchase
Period and the manner of determining the purchase price of the shares of Common Stock to be
sold during such Purchase Period. The Committee shall also determine any other questions
arising in the administration, interpretation and application of this Plan, and all such
determinations shall be conclusive and binding on all parties. The Committee may also
adopt, amend and terminate such administrative arrangements, not inconsistent with the
intent or the terms of the Plan, as it may deem necessary or desirable to conform to
applicable requirements or practices of jurisdictions outside of the United States.
14. Adjustment upon Changes in Capitalization. In the event of any change in the Common
Stock by reason of stock dividends, split-ups, corporate separations, recapitalizations,
mergers, consolidations, combinations, exchanges of shares and the like, the aggregate
number and class of shares available under this Plan and the number, class and purchase
price of shares available but not yet purchased under this Plan, shall be adjusted
appropriately by the Committee.
15. Registration of Certificates. Stock certificates to be issued and delivered upon the
request of the Participant or his or her representative, as provided in Section 10.5, shall
be registered in the name of the Participant, or jointly, as joint tenants with the right of
survivorship, in the name of the Participant and another person, as the Participant or his
or her representative may direct on an appropriate form filed with the Company.
16. Amendment of Plan. The Board of Directors may at any time amend this Plan in any
respect which shall not adversely affect the rights of Participants pursuant to shares
previously acquired under the Plan, except that, without stockholder approval on the same
basis as required by Section 19.1, no amendment shall be made (i) to increase the number of
shares to be reserved under this Plan, (ii) to decrease the minimum purchase price, (iii) to
withdraw the administration of this Plan from the Committee, or (iv) to change the
definition of employees eligible to participate in the Plan.
17. Effective Date of Plan. This Plan shall be effective upon approval by the stockholders
of the Company. All rights of Participants in any offering hereunder shall terminate at the
earlier of (i) the day that Participants become entitled to purchase a number of shares of
Common Stock equal to or greater than the number of shares remaining available for purchase
or (ii) at any time, at the discretion of the Board of Directors, after 30 days notice has
been given to all Participants. Upon termination or suspension of this Plan, shares of
Common Stock shall be purchased for Participants in accordance with Section 10.1, and cash,
if any, remaining in the Participants Recordkeeping Accounts shall be refunded to them, as
if the Plan were terminated at the end of a Purchase Period.
18. Governmental Regulations and Listing. All rights granted or to be granted to Eligible
Employees under this Plan are expressly subject to all applicable laws and regulations and
to the approval of all governmental authorities required in connection with the
authorization, issuance, sale or transfer of the shares of Common Stock reserved for this
Plan, including, without limitation, there being a current registration statement of the
Company under the Securities Act of 1933, as amended, covering the shares of Common Stock
purchasable on the last day of the Purchase Period applicable to such shares, and if such a
registration statement shall not then be effective, the term of such Purchase Period shall
be extended until the first business day after the effective date of such a registration
statement, or post-effective amendment thereto. If applicable, all such rights hereunder
are also similarly subject to effectiveness of an appropriate
listing application to a national securities exchange or a national market system, covering
the shares of Common Stock under the Plan upon official notice of issuance.
EX-5
19. Miscellaneous.
19.1. This Plan shall not be deemed to constitute a contract of employment between the
Company or any Affiliate and any Participant, nor shall it interfere with the right of the
Company or any Affiliate to terminate any Participant and treat him or her without regard to
the effect which such treatment might have upon him or her under this Plan.
19.2. Wherever appropriate as used herein, the masculine gender may be read as the
feminine gender, the feminine gender may be read as the masculine gender, the singular may
be read as the plural and the plural may be read as the singular.
19.3. The Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Delaware.
19.4. Delivery of shares of Common Stock or of cash pursuant to the Plan shall be
subject to any required withholding taxes. A person entitled to receive shares of Common
Stock may, as a condition precedent to receiving such shares, be required to pay the Company
a cash amount equal to the amount of any required withholdings.
EX-6
EXHIBIT B
STARTEK, INC.
2008 EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the StarTek, Inc. 2008 Equity Incentive Plan (the Plan) is to
attract, motivate and retain the best available personnel and align their interests with those of
the Companys stockholders, thereby promoting the Companys long-term success and increases in
stockholder value.
2. Definitions. The capitalized terms used in the Plan have the meanings set forth below.
(a) Affiliate means any corporation that is a Subsidiary or Parent of the Company, and for
purposes other than the grant of Incentive Stock Options, any joint venture in which the Company or
any Subsidiary owns a 20% or greater equity interest.
(b) Agreement means any written or electronic agreement, instrument or document evidencing
the grant of an Award in a form approved by the Committee, including all amendments.
(c) Award means a grant made under the Plan in the form of Options, Stock Appreciation
Rights, Restricted Stock, Restricted Stock Units, Performance Units or Other Stock-Based Award.
(d) Board means the Board of Directors of the Company.
(e) Cause means what the term (or a word of like import) is expressly defined to mean in a
then-effective written agreement between the Participant and the Company or any Affiliate, or in
the absence of any such then-effective agreement or definition, the Participants (i) incompetence
or failure or refusal to perform satisfactorily any duties reasonably required of the Participant
by the Company; (ii) violation of any law, rule or regulation (other than traffic violations,
misdemeanors or similar offenses) or cease-and-desist order, court order, judgment, regulatory
directive or agreement; (iii) commission or omission of or engaging in any act or practice which
constitutes a material breach of the Participants fiduciary duty to the Company, involves personal
dishonesty on the part of the Participant or demonstrates a willful or continuing disregard for the
best interests of Company; or (iv) engaging in dishonorable or disruptive behavior, practices or
acts which would be reasonably expected to harm or bring disrepute to Company, its business or any
of its customers, employees or vendors.
(f) Change in Control means one of the following:
(1) An acquisition by any individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) (a Person), of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) which, together with other acquisitions by such Person, results in
the aggregate beneficial ownership by such Person of 30% or more of either:
(A) the then outstanding shares of Stock of the Company (the Outstanding Stock), or
(B) the combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the Outstanding Company Voting
Securities);
provided, however, that the following acquisitions will not result in a Change of Control:
(i) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company;
EX-7
(ii) an acquisition by the Participant or any group that includes the Participant; or
(iii) an acquisition by any entity pursuant to a transaction that complies with clauses (A),
(B) and (C) of Section 2(f)(3) below; or
(2) Individuals who, as of the effective date of the Plan, constitute the Board (the
Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the effective date of the Plan whose
election, or nomination for election by the Companys stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board will be considered as though
such individual were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial membership on the Board occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other actual or threatened
solicitation of proxies by or on behalf of a person or entity other than the Board; or
(3) Consummation of a reorganization, merger or consolidation of the Company with or into
another entity or sale or other disposition of all or substantially all of the assets of the
Company (Business Combination); excluding, however, such a Business Combination pursuant to
which:
(A) all or substantially all of the individuals and entities who were the beneficial owners of
the Outstanding Stock and Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, a majority of, respectively, the then
outstanding shares of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors (or comparable equity
interests), as the case may be, of the surviving or acquiring entity resulting from such Business
Combination (including, without limitation, an entity that as a result of such transaction
beneficially owns 100% of the outstanding shares of common stock and the combined voting power of
the then outstanding voting securities (or comparable equity securities) or all or substantially
all of the Companys assets either directly or indirectly) in substantially the same proportions
(as compared to the other holders of the Companys common stock and voting securities prior to the
Business Combination) as their respective ownership, immediately prior to such Business
Combination, of the Outstanding Stock and Outstanding Company Voting Securities;
(B) no person or entity (excluding (i) any employee benefit plan (or related trust) sponsored
or maintained by the Company or such entity resulting from such Business Combination or any entity
controlled by the Company or the entity resulting from such Business Combination, (ii) any entity
beneficially owning 100% of the outstanding shares of common stock and the combined voting power of
the then outstanding voting securities (or comparable equity securities) or all or substantially
all of the Companys assets either directly or indirectly and (iii) the Participant and any group
that includes the Participant) beneficially owns, directly or indirectly, 30% or more of the then
outstanding shares of common stock (or comparable equity interests) of the entity resulting from
such Business Combination or the combined voting power of the then outstanding voting securities
(or comparable equity interests) of such entity; and
(C) immediately after the Business Combination, a majority of the members of the board of
directors (or comparable governors) of the entity resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(4) approval by the stockholders of the Company of a complete liquidation or dissolution of
the Company.
EX-8
Notwithstanding anything herein stated, if any Award is determined to provide for the deferral of
compensation within the meaning of Code Section 409A, a Change in Control shall be deemed to occur
only if it would be deemed to constitute a change in ownership or effective control, or a change in
the ownership of a substantial portion of the assets, of the Company under Code Section 409A.
(g) Code means the Internal Revenue Code of 1986, as amended and in effect from time to
time, and the regulations promulgated there under.
(h) Committee means two or more Non-Employee Directors designated by the Board to administer
the Plan under Section 3.1, each member of which shall be (i) an independent director within the
meaning of the rules and regulations of the New York Stock Exchange, (ii) a non-employee director
within the meaning of Exchange Act Rule 16b-3, and (iii) an outside director for purposes of Code
Section 162(m).
(i) Company means StarTek, Inc., a Delaware corporation, or any successor thereto.
(j) Corporate Transaction means (i) dissolution or liquidation of the Company, (ii) a sale
of substantially all of the assets of the Company, or (iii) a merger or consolidation of the
Company with or into any other corporation, regardless of whether the Company is the surviving
corporation.
(k) Disability means any medically determinable physical or mental impairment that causes
the Participant to be unable to carry out his job responsibilities for a continuous period of more
than six months, in the sole determination of the Committee.
(l) Employee means an employee (including an officer or director who is also an employee) of
the Company or an Affiliate.
(m) Exchange Act means the Securities Exchange Act of 1934, as amended and in effect from
time to time.
(n) Fair Market Value of a Share means the closing sale price of a Share on the New York
Stock Exchange (or such other national securities exchange as may at the time be the principal
market for the Shares) on the date of determination (or if no sale occurred on that day, on the
next preceding day on which a sale of Shares occurred). If the Shares are not then listed and
traded upon a national securities exchange but are regularly quoted on an automated quotation
system or by a recognized securities dealer, Fair Market Value of a Share shall be the closing sale
price (or the average of the high bid and low asked prices if selling prices are not reported) on
such system or by such dealer on the date of determination (or if no such prices were reported on
that day, on the last day such prices were reported). In the absence of an established market for
the Shares as described above, Fair Market Value of a Share will be what the Committee determines
in good faith and in a manner consistent with Code Section 409A to be 100% of the fair market value
of a Share on that date.
(o) Full Value Award means an Award other than an Option or Stock Appreciation Right.
(p) Grant Date means the date on which the Committee approves the grant of an Award under
the Plan, or such later date as may be specified by the Committee on the date the Committee
approves the Award.
(q) Incentive Stock Option or ISO means any Option designated as such and granted in
accordance with the requirements of Code Section 422.
(r) Non-Employee Director means a member of the Board who is not an Employee.
(s) Non-Statutory Stock Option means an Option other than an Incentive Stock Option.
(t) Option means a right granted under the Plan to purchase a specified number of Shares at
a specified price.
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(u) Other Stock-Based Award means an Award described in Section 12 of this Plan.
(v) Parent means a parent corporation, as defined in Code Section 424(e).
(w) Participant means a person to whom an Award is or has been made in accordance with the
Plan.
(x) Performance-Based Compensation means an Award to a person who is, or is determined by
the Committee to likely become, a covered employee (as defined in Section 162(m)(3) of the Code)
and that is intended to constitute performance-based compensation within the meaning of Section
162(m)(4)(C) of the Code.
(y) Performance Period means the period of time specified in an Agreement over which Awards
subject to Performance Measures are to be earned.
(z) Performance Measures means any measures of performance established by the Committee in
connection with the grant of an Award. For any Award intended to constitute Performance-Based
Compensation, the Performance Measures shall consist of one or a combination of two or more of the
following performance criteria: net sales; net earnings; earnings before income taxes; earnings
before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings
per share (basic or diluted); profitability as measured by return ratios (including, but not
limited to, return on assets, return on equity, return on investment and return on net sales) or by
the degree to which any of the foregoing earnings measures exceed a percentage of net sales; cash
flow; market share; margins (including, but not limited to, one or more of gross, operating and net
earnings margins); stock price; total stockholder return; asset quality; non-performing assets;
revenue growth; operating income; pre- or after-tax income; cash flow per share; operating assets;
improvement in or attainment of expense levels or cost savings; economic value added; and
improvement in or attainment of working capital levels. Any Performance Measure utilized may be
expressed in absolute amounts, on a per share basis, as a growth rate or change from preceding
periods, or as a comparison to the performance of specified companies or other external measures,
and may relate to one or any combination of corporate, group, unit, division, Affiliate or
individual performance.
(aa) Performance Unit means the right to receive a unit valued by reference to a designated
number of Shares or a designated amount of cash upon the achievement of specified levels of one or
more Performance Measures as provided in this Plan and the applicable Agreement.
(bb) Plan means this StarTek, Inc. 2008 Equity Incentive Plan, as amended and in effect from
time to time.
(cc) Prior Plans means the StarTek, Inc. Stock Option Plan and the StarTek, Inc. Directors
Stock Option Plan.
(dd) Restricted Stock means Shares issued to a Participant that are subject to such
restrictions on transfer, forfeiture conditions and other restrictions or limitations as may be set
forth in this Plan and the applicable Agreement.
(ee) Restricted Stock Unit means a right to receive, in cash and/or Shares as determined by
the Committee, the Fair Market Value of a Share, subject to such restrictions on transfer,
forfeiture conditions and other restrictions or limitations as may be set forth in this Plan and
the applicable Agreement.
(ff) Service means the provision of services by a Participant to the Company or any
Affiliate in any Service Provider capacity. A Service Providers Service shall be deemed to have
terminated either upon an actual cessation of providing services or upon the entity for which the
Service Provider provides services ceasing to be an Affiliate. Except as otherwise provided in any
Agreement, Service shall not be deemed terminated in the case of (i) any approved leave of absence;
(ii) transfers among the Company and any Affiliates in any Service Provider capacity; or (iii) any
change in status so long as the individual remains in the service of the Company or any Affiliate
in any Service Provider capacity.
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(gg) Service Provider means an Employee, a Non-Employee Director, or any consultant or
advisor who is a natural person and who provides services to the Company or any Affiliate.
(hh) Share means a share of Stock.
(ii) Stock means the common stock, $0.01 par value, of the Company.
(jj) Stock Appreciation Right or SAR means the right to receive, in cash and/or Shares as
determined by the Committee, an amount equal to the appreciation in value of a specified number of
Shares between the Grant Date of the SAR and its exercise date.
(kk) Subsidiary means a subsidiary corporation, as defined in Code Section 424(f), of the
Company.
(ll) Substitute Award means an Award granted upon the assumption of, or in substitution or
exchange for, outstanding awards granted by a company or other entity acquired by the Company or
any Affiliate or with which the Company or any Affiliate combines.
3. Administration of the Plan.
(a) Administration. The authority to control and manage the operations and
administration of the Plan shall be vested in the Committee in accordance with this Section 3.
(b) Scope of Authority. Subject to the terms of the Plan, the Committee shall have
the authority, in its discretion, to take such actions as it deems necessary or advisable to
administer the Plan, including:
(1) determining the Service Providers to whom Awards will be granted, the timing of each such
Award, the types of Awards and the number of Shares covered by each Award, the terms, conditions,
performance criteria, restrictions and other provisions of Awards, and the manner in which Awards
are paid or settled;
(2) cancelling or suspending an Award, accelerating the vesting or extending the exercise
period of an Award, or otherwise amending the terms and conditions of any outstanding Award,
subject to the requirements of Sections 17(c) and (d);
(3) establishing, amending or rescinding rules to administer the Plan, interpreting the Plan
and any Award or Agreement made under the Plan, and making all other determinations necessary or
desirable for the administration of the Plan; and
(4) establishing such terms and conditions for Awards as deemed necessary or desirable to
conform to applicable requirements or practices of jurisdictions outside of the United States.
Notwithstanding the foregoing, the Board shall perform the duties and have the responsibilities of
the Committee with respect to Awards made to Non-Employee Directors.
(c) Acts of the Committee; Delegation. A majority of the members of the Committee
shall constitute a quorum for any meeting of the Committee, and any act of a majority of the
members present at any meeting at which a quorum is present or any act unanimously approved in
writing by all members of the Committee shall be the act of the Committee. To the extent not
inconsistent with applicable law or stock exchange rules, the Committee may delegate all or any
portion of its authority under the Plan to determine and administer Awards to Participants who are
not subject to Section 16 of the Exchange Act to one or more persons who are either Non-Employee
Directors or executive officers of the Company.
(d) Finality of Decisions. The Committees interpretation of the Plan and of any
Award or Agreement made under the Plan and all related decisions or resolutions of the Board or
Committee shall be final and binding on all parties with an interest therein.
EX-11
(e) Indemnification. Each person who is or has been a member of the Committee or of
the Board, and any other person to whom the Committee delegates authority under the Plan, shall be
indemnified and held harmless by the Company, to the extent permitted by law, against and from (i)
any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person
in connection with or resulting from any claim, action, suit or proceeding to which such person may
be a party or in which such person may be involved by reason of any action taken or failure to act,
made in good faith, under the Plan and (ii) any and all amounts paid by such person in settlement
thereof, with the Companys approval, or paid by such person in satisfaction of any judgment in any
such action, suit or proceeding against such person, provided such person shall give the Company an
opportunity, at the Companys expense, to handle and defend the same before such person undertakes
to handle and defend it on such persons own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such person or persons may be
entitled under the Companys Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them harmless.
4. Shares Available Under the Plan.
(a) Maximum Shares Available. Subject to Section 4(b) and to adjustment as provided
in Section 18, a total of 900,000 Shares shall be authorized for grant under the Plan, plus any
Shares remaining available for future grants under the Prior Plans on the effective date of this
Plan. All Shares authorized for grant under this Plan may be granted as Incentive Stock Options.
In determining the number of Shares to be counted against this limit in connection with any Award,
the following rules shall apply:
(1) Where the number of Shares subject to the Award is variable on the Grant Date, the number
of Shares to be counted against the limit prior to the settlement of the Award shall be the maximum
number of Shares that could be received under that particular Award.
(2) Where two or more types of Awards are granted to a Participant in tandem with each other,
such that the exercise of one type of Award with respect to a number of Shares cancels at least an
equal number of Shares of the other, the number of Shares to be counted against the limit shall be
the largest number of Shares that would be counted against the limit under either of the Awards.
(3) Substitute Awards shall not be counted against the limit, nor shall they reduce the Shares
authorized for grant to a Participant in any calendar year.
(b) Effect of Forfeitures and Other Actions. Any Shares subject to an Award, or to an
award granted under the Prior Plans that is outstanding on the effective date of this Plan (a
Prior Plan Award), that is forfeited, expires, is settled for cash or otherwise does not result
in the issuance of all or a portion of the Shares subject to such Award or Prior Plan Award
(including a payment in Shares on the exercise of a Stock Appreciation Right) shall, to the extent
of such forfeiture, expiration, cash settlement or non-issuance, again become available for Awards
under this Plan, and the total number of Shares available for grant under Section 4(a) shall be
correspondingly increased. In the event that (i) any Award or Prior Plan Award is exercised
through the tendering of Shares (either actually or by attestation) or by the withholding of Shares
by the Company in payment of the applicable exercise price, or (ii) any tax withholding obligations
arising from such Award or Prior Plan Award are satisfied by the tendering of Shares (either
actually or by attestation) or by the withholding of Shares by the Company, then the Shares so
tendered or withheld shall again become available for Awards under this Plan, and the total number
of Shares available for grant under Section 4(a) shall be correspondingly increased.
(c) Effect of Plans Operated by Acquired Companies. If a company acquired by the
Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available
under a pre-existing plan approved by stockholders and not adopted in contemplation of such
acquisition or combination, the shares available for grant pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other
adjustment or valuation ratio or formula used in such acquisition or combination to determine the
consideration payable to the holders of common stock of the entities party to such acquisition or
combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for
grant under the Plan. Awards using such available shares shall not be made after the date awards
or grants could have been made under the terms
of the pre-existing plan, absent the acquisition or combination, and shall only be made to
individuals who were not Employees or Non-Employee Directors prior to such acquisition or
combination.
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(d) Source of Shares. Shares issued under the Plan may come from authorized and
unissued shares or treasury shares. No fractional Shares may be issued under the Plan, but the
Committee may, in its discretion, pay cash in lieu of any fractional Share in settlement of an
Award.
(e) Individual Option and SAR Limit. The aggregate number of Shares subject to
Options and/or Stock Appreciation Rights granted during any calendar year to any one Participant
shall not exceed 750,000.
5. Eligibility. Participation in the Plan shall be limited to (i) Service Providers and
(ii) any individual the Company desires to induce to become a Service Provider, so long as any such
inducement grant is contingent upon such individual becoming a Service Provider. Incentive Stock
Options may only be granted to Employees.
6. General Terms of Awards.
(a) Award Agreement. Except for Other Stock-Based Awards that involve only the
immediate issuance of unrestricted and fully vested Shares, each Award shall be evidenced by an
Agreement setting forth the number of Shares subject to the Award together with such other terms
and conditions applicable to the Award (and not inconsistent with the Plan) as determined by the
Committee. An Award to a Participant may be made singly or in combination with any form of Award.
(b) Vesting and Term. Each Agreement shall set forth the period until the applicable
Award is scheduled to expire, which shall not be more than ten years from the Grant Date, and any
applicable Performance Period. The Committee may provide for such vesting conditions as it may
determine, subject to the following limitations:
(1) an Award that is not subject to the satisfaction of Performance Measures may not
fully vest or become fully exercisable earlier than three years from the Grant Date; and
(2) the Performance Period of a Performance Unit or other Award subject to Performance
Measures may not be shorter than one year.
The limitations in clauses (1) and (2) above will not, however, apply in the following situations:
(i) an Award made to attract a key executive to join the Company; (ii) upon a Change in Control;
(iii) termination of employment due to death or Disability; (iv) Restricted Stock or Restricted
Stock Units issued in exchange for other compensation; (v) a Substitute Award; and (vi) Awards
issued to Non-Employee Directors.
(c) Transferability. Except as provided in this Section 6(c), (i) during the lifetime
of a Participant, only the Participant or the Participants guardian or legal representative may
exercise an Option or Stock Appreciation Right, or receive payment with respect to any other Award;
and (ii) no Award may be sold, assigned, transferred, exchanged or encumbered other by will or the
laws of descent and distribution. Any attempted transfer in violation of this Section 6(c) shall
be of no effect. The Committee may, however, provide in an Agreement or otherwise that an Award
(other than an Incentive Stock Option) may be transferable by gift to any family member (as
defined by the general instructions to Form S-8 under the Securities Act of 1933) of the
Participant. Any Award held by a transferee shall continue to be subject to the same terms and
conditions that were applicable to that Award immediately before the transfer thereof. For
purposes of any provision of the Plan relating to notice to a Participant or to acceleration or
termination of an Award upon the death or termination of employment of a Participant, the
references to Participant shall mean the original grantee of an Award and not any transferee.
(d) Designation of Beneficiary. Each Participant may designate a beneficiary or
beneficiaries to exercise any Award or receive a payment under any Award payable on or after the
Participants death. Any such designation shall be on a form approved by the Committee and shall
be effective upon its receipt by the Company.
EX-13
(e) Termination of Service. Unless otherwise provided in an Agreement, and subject
to Sections 13 and 14 of this Plan, if a Participants Service with the Company and all of its
Affiliates terminates, the following provisions shall apply (in all cases subject to the scheduled
expiration of an Option or Stock Appreciation Right, as applicable):
(1) Upon termination of Service for Cause, all unexercised Options and SARs and all unvested
portions of any other outstanding Awards shall be immediately forfeited without consideration.
(2) Upon termination of Service for any other reason, all unvested and unexercisable portions
of any outstanding Awards shall be immediately forfeited without consideration.
(3) Upon termination of Service for any reason other than Cause, death or Disability, the
currently vested and exercisable portions of Options and SARs may be exercised within three months
of the date of such termination.
(4) Upon termination of Service due to death or Disability, the currently vested and
exercisable portions of Options and SARs may be exercised within six months of the date of such
termination.
(f) Rights as Stockholder. No Participant shall have any rights as a stockholder with
respect to any securities covered by an Award unless and until the date the Participant becomes the
holder of record of the Shares, if any, to which the Award relates.
(g) Performance-Based Awards. Any Award may be granted as a performance-based Award
if the Committee establishes one or more Performance Measures upon which vesting, the lapse of
restrictions or settlement in cash or Shares is contingent. With respect to any Award intended to
be Performance-Based Compensation, the Committee shall establish and administer Performance
Measures in the manner described in Section 21.
7. Restricted Stock Awards.
(a) Shares subject to a Restricted Stock Award shall be subject to vesting conditions, and the
corresponding lapse or waiver of forfeiture conditions and other restrictions, based on such
factors and occurring over such period of time as the Committee may determine in its discretion.
The Committee may provide whether any consideration other than Services must be received by the
Company or any Affiliate as a condition precedent to the grant of a Restricted Stock Award.
(b) Unvested Shares subject to a Restricted Stock Award shall be evidenced by a book-entry in
the name of the Participant with the Companys transfer agent or by one or more Stock certificates
issued in the name of the Participant. Any such Stock certificate shall be deposited with the
Company or its designee, together with an assignment separate from the certificate, in blank,
signed by the Participant, and bear an appropriate legend referring to the restricted nature of the
Restricted Stock evidenced thereby. Any book-entry shall be subject to transfer restrictions and
accompanied by a similar legend. Upon the vesting of Shares of Restricted Stock and the
corresponding lapse of the restrictions and forfeiture conditions, the transfer restrictions and
restrictive legend applicable to any book-entry evidencing such Shares will be removed, or a
certificate for the Shares bearing no restrictive legend shall be delivered to the Participant.
(c) Except as otherwise provided in this Plan and the applicable Agreement, a Participant with
a Restricted Stock Award shall have all the other rights of a stockholder, including the right to
receive dividends and the right to vote the Shares of Restricted Stock. Except as otherwise
provided in the applicable Agreement, any Shares or property other than regular cash dividends
distributed with respect to unvested Shares subject to a Restricted Stock Award shall be subject to
the same conditions and restrictions as the underlying Shares.
8. Restricted Stock Unit Awards. A Restricted Stock Unit Award shall be subject to vesting
conditions, and the corresponding lapse or waiver of forfeiture conditions and other restrictions,
based on such factors and occurring over such period of time as the Committee may determine in its
discretion. The Committee may provide whether any consideration other than services must be
received by the Company or any Affiliate as a condition precedent to
the grant of a Restricted Stock Unit Award. Following the vesting of a Restricted Stock Unit
Award, payment to the Participant shall be made in the form of cash, Shares or a combination of
cash and Shares as determined by the Committee, and within such time period after vesting as will
qualify such payment for the short-term deferral exemption from Code Section 409A.
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9. Stock Option Awards.
(a) Type and Exercise Price. The Agreement pursuant to which an Option is granted
shall specify whether the Option is an Incentive Stock Option or a Non-Statutory Stock Option. The
exercise price at which each Share subject to an Option may be purchased shall be determined by the
Committee and set forth in the Agreement, and shall not be less than the Fair Market Value of a
Share on the Grant Date, except in the case of Substitute Awards.
(b) Payment of Exercise Price. The purchase price of the Shares with respect to which
an Option is exercised shall be payable in full at the time of exercise, which may include, to the
extent permitted by the Committee, payment under a broker-assisted sale and remittance program
acceptable to the Committee. The purchase price may be paid in cash or, if the Committee so
permits, by withholding Shares otherwise issuable to the Participant upon exercise of the Option or
by delivery to the Company of Shares (by actual delivery or attestation) already owned by the
Participant (in each case, such Shares having a Fair Market Value as of the date the Option is
exercised equal to the purchase price of the Shares being purchased), or a combination thereof,
unless otherwise provided in the Agreement. A Participant exercising an Option shall not be
permitted to pay any portion of the purchase price with Shares if, in the opinion of the Committee,
payment in such manner could have adverse financial accounting consequences for the Company.
(c) Exercisability and Expiration. Each Option shall be exercisable in whole or in
part on the terms provided in the Agreement. In no event shall any Option be exercisable at any
time after its scheduled expiration. When an Option is no longer exercisable, it shall be deemed
to have terminated.
(d) No Reload Options. Options will not be granted under the Plan in consideration
for, and the grant of Options will not be conditioned on, the delivery of Shares to the Company in
payment of the exercise price and/or tax withholding obligation under any other Option.
(e) Incentive Stock Options.
(1) An Option will constitute an Incentive Stock Option only if the Participant receiving the
Option is an Employee, and only to the extent that (i) it is so designated in the applicable
Agreement and (ii) the aggregate Fair Market Value (determined as of Option Grant Date) of the
Shares with respect to which Incentive Stock Options held by the Participant first become
exercisable in any calendar year (under the Plan and all other plans of the Company and its
Affiliates) does not exceed $100,000. To the extent an Option granted to a Participant exceeds
this limit, the Option shall be treated as a Non-Statutory Stock Option.
(2) No Participant may receive an Incentive Stock Option under the Plan if, immediately after
the grant of such Award, the Participant would own (after application of the rules contained in
Code Section 424(d)) Shares possessing more than 10% of the total combined voting power of all
classes of stock of the Company or an Affiliate, unless (i) the option price for that Incentive
Stock Option is at least 110% of the Fair Market Value of the Shares subject to that Incentive
Stock Option on the Grant Date and (ii) that Option will expire no later than five years after its
Grant Date.
(3) The Agreement covering an Incentive Stock Option shall contain such other terms and
provisions that the Committee determines necessary to qualify the Option as an Incentive Stock
Option.
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10. Stock Appreciation Rights.
(a) Nature of Award. An Award of a Stock Appreciation Right shall entitle the
Participant, subject to terms and conditions determined by the Committee, to receive upon exercise
of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of Shares as of the date
of exercise of the Stock Appreciation Right over (ii) a specified exercise price that shall not be
less than 100% of the Fair Market Value of such Shares on the Grant Date of the Stock Appreciation
Right, except in the case of Substitute Awards.
(b) Exercise of SAR. Each Stock Appreciation Right may be exercisable in whole or in
part at the times, on the terms and in the manner provided in the Agreement. No Stock Appreciation
Right shall be exercisable at any time after its scheduled expiration. When a Stock Appreciation
Right is no longer exercisable, it shall be deemed to have terminated. Upon exercise of a Stock
Appreciation Right, payment to the Participant shall be made at such time or times as shall be
provided in the Agreement in the form of cash, Shares or a combination of cash and Shares as
determined by the Committee. The Agreement may provide for a limitation upon the amount or
percentage of the total appreciation on which payment (whether in cash and/or Shares) may be made
in the event of the exercise of a Stock Appreciation Right.
11. Performance Units.
(a) Initial Award.
(1) An Award of Performance Units under the Plan shall entitle the Participant to
future payments of cash, Shares or a combination thereof, as specified by the Committee in
the Agreement or otherwise, based upon the achievement of specified levels of one or more
Performance Measures over the course of the relevant Performance Period. The Agreement
shall specify the nature and requisite level(s) of achievement for each Performance Measure
and the length of the Performance Period applicable to an Award of Performance Units, and
may provide that a portion of a Participants Award will be paid for performance that
exceeds the minimum target but falls below the maximum target applicable to the Award. The
Agreement shall also provide for the timing of the payment, which shall be in a lump sum
occurring within the period necessary to cause it to qualify as a short-term deferral
within the meaning of Code Section 409A.
(2) Following the conclusion or acceleration of each Performance Period, the Committee
shall determine (i) the extent to which Performance Measures have been attained, (ii) the
number of Performance Units that have been earned and the value thereof, (iii) the extent to
which any other terms and conditions with respect to an Award relating to the Performance
Period have been satisfied and (iv) the amount of the payment due with respect to an Award
of Performance Units. Payment to the Participant of any Performance Unit Award shall be made
in the form of cash, Shares or a combination of cash and Shares as determined by the
Committee, and within such time period after vesting as will qualify such payment for the
short-term deferral exemption from Code Section 409A.
(b) Acceleration and Adjustment. The Agreement may permit an acceleration of the
Performance Period and an adjustment of Performance Measures and payments with respect to some or
all of the Performance Units awarded to a Participant upon the occurrence of certain events, which
may include a Change of Control, a Corporate Transaction, a recapitalization, a change in the
accounting practices of the Company, a change in the Participants title or employment
responsibilities, or the Participants death or Disability. The Agreement also may provide for a
limitation on the value of an Award of Performance Units that a Participant may receive.
12. Other Stock-Based Awards. The Committee may from time to time grant Stock and other
Awards that are valued by reference to and/or payable in whole or in part in Shares under the Plan.
The Committee, in its sole discretion, shall determine the terms and conditions of such Awards,
which shall be consistent with the terms and purposes of the Plan. The Committee may, in its sole
discretion, direct the Company to issue Shares subject to restrictive legends and/or stop transfer
instructions that are consistent with the terms and conditions of the Award to which the Shares
relate.
13. Effect of a Change in Control. Unless otherwise provided in an applicable Agreement,
the consequences of a Change in Control on outstanding Awards shall be as provided in this Section.
(a) Automatic Acceleration. If a Change in Control shall occur, then (i) each
outstanding Option and SAR Award that is not yet fully exercisable shall immediately become
exercisable with respect to 50% of the Shares
as to which such Award was not yet exercisable immediately prior to the Change in Control, and (ii)
each Full Value Award that is not yet fully vested shall immediately vest with respect to 50% of
the Shares as to which such Award was not yet vested immediately prior to the Change in Control.
EX-16
(b) Termination After Change in Control. If, in connection with a Change in Control,
outstanding Option, SAR and Full Value Awards are either (i) continued in effect by the Company, or
(ii) assumed or replaced by the surviving or successor corporation or its Parent, and if within two
years after the Change in Control a Participant experiences an involuntary termination of
employment by the Company (or such survivor or successor) for reasons other than Cause, then:
(1) such outstanding Option and SAR Awards issued to the Participant that are not yet fully
exercisable shall immediately become exercisable in full and shall remain exercisable for 24 months
(or such other period set forth in the applicable Agreement);
(2) such Full Value Awards issued to the Participant that are not yet fully vested shall
immediately vest in full.
For purposes of this Section 13(b), an Award shall be considered assumed or replaced if, following
the Change in Control, the Participant has received, in a manner that complies with Code Sections
424 and 409A, a comparable equity-based award that preserves the existing compensatory value of the
Award at the time of the Change in Control and includes a vesting or exercisability schedule that
is the same as or more favorable to the Participant.
(c) Performance-Based Awards. For purposes of Sections 13(a) and (b), the settlement
of any Performance Unit or other performance-based Full Value Award in connection with such
accelerated vesting shall be based on assumed target level performance for the Performance Period
during which the Change in Control or the termination of employment, as applicable, occurred.
14. Corporate Transaction. In the event of a proposed Corporate Transaction, the Committee
may, but shall not be obligated to:
(a) With respect to a Corporate Transaction that involves a merger or consolidation, make
appropriate provision for the protection of the outstanding Options and Stock Appreciation Rights
by the substitution of options, stock appreciation rights and appropriate voting common stock of
the corporation surviving any such merger or consolidation or, if appropriate, the Parent of the
Company or such surviving corporation, in lieu of such outstanding Options, Stock Appreciation
Rights and Shares; or
(b) With respect to any Corporate Transaction, including, without limitation, a merger or
consolidation, declare, prior to the occurrence of the Corporate Transaction, and provide written
notice to the each holder of an Option or Stock Appreciation Right of the declaration, that each
outstanding Option and Stock Appreciation Right, whether or not then exercisable, shall be canceled
at the time of, or immediately prior to the occurrence of, the Corporate Transaction in exchange
for payment to each holder of an Option or Stock Appreciation Right, within 20 days after the
Corporate Transaction, of cash (or, if the Committee so elects in lieu of solely cash, of such
form(s) of consideration, including cash and/or property, singly or in such combination as the
Committee shall determine, that the holders of Options and Stock Appreciation Rights would have
received as a result of the Corporate Transaction if such holders had exercised the Options and
Stock Appreciation Rights immediately prior to the Corporate Transaction) equal to, for each Share
covered by a canceled Option or Stock Appreciation Right, the amount, if any, by which the fair
market value (as defined in this Section 14(b)) per Share exceeds the exercise price per Share
covered by such Option or Stock Appreciation Right. At the time of the declaration provided for in
the immediately preceding sentence, each Option and Stock Appreciation Right shall immediately
become exercisable in full and each holder of an Option or Stock Appreciation Right shall have the
right, during the period preceding the time of cancellation of the Option or Stock Appreciation
Right, to exercise the Option or Stock Appreciation Right as to all or any part of the Shares
covered thereby in whole or in part, as the case may be. In the event of a declaration pursuant to
this Section 14(b), each outstanding Option and Stock Appreciation Right, to the extent that it
shall not have been exercised prior to the Corporate Transaction, shall be canceled at the time of,
or immediately prior to, the Corporate Transaction, as provided in the declaration.
Notwithstanding the foregoing, no holder of an Option or Stock Appreciation Right shall be entitled
to the payment
provided for in this Section 14(b) if such Option or Stock Appreciation Right shall have expired or
been forfeited. For purposes of this Section 14(b) only, fair market value per Share means the
fair market value, as determined in good faith by the Committee, of the consideration to be
received per Share by the stockholders of the Company upon the occurrence of the Corporate
Transaction, notwithstanding anything to the contrary provided in this Agreement.
EX-17
15. Plan Participation and Service Provider Status. Status as a Service Provider shall not
be construed as a commitment that any Award will be made under the Plan to that Service Provider or
to eligible Service Providers generally. Nothing in the Plan or in any Agreement or related
documents shall confer upon any Service Provider or Participant any right to Continuous Service
with the Company or any Affiliate, nor shall it interfere with or limit in any way any right of the
Company or any Affiliate to terminate the persons Continuous Service at any time with or without
Cause or change such persons compensation, other benefits, job responsibilities or title.
16. Tax Withholding. The Company or any Affiliate, as applicable, shall have the right to
(i) withhold from any cash payment under the Plan or any other compensation owed to a Participant
an amount sufficient to cover any required withholding taxes, and (ii) require a Participant or
other person receiving Shares under the Plan to pay a cash amount sufficient to cover any required
withholding taxes before actual receipt of those Shares. In lieu of all or any part of a cash
payment from a person receiving Shares under the Plan, the Committee may permit the individual to
cover all or any part of the required withholdings (up to the Participants minimum required tax
withholding rate or such other rate that will not trigger a negative accounting impact) through a
reduction in the number of Shares delivered or a delivery or tender to the Company of Shares held
by the Participant or other person, in each case valued in the same manner as used in computing the
withholding taxes under applicable laws.
17. Effective Date, Duration, Amendment and Termination of the Plan.
(a) Effective Date. The Plan shall become effective on the date it is approved by the
requisite vote of the Companys stockholders at the 2008 Annual Meeting of Stockholders or any
adjournment thereof.
(b) Duration of the Plan. The Plan shall remain in effect until all Shares subject to
it shall be distributed, all Awards have expired or terminated, the Plan is terminated pursuant to
Section 17(c), or the tenth anniversary of the date of stockholder approval of the Plan, whichever
occurs first (the Termination Date). Awards made before the Termination Date may be exercised,
vested or otherwise effectuated beyond the Termination Date unless limited in the Agreement or
otherwise.
(c) Amendment and Termination of the Plan. Except as limited in Section 17(d) below,
the Board may at any time and from time to time terminate, suspend or amend the Plan. The Company
shall submit any amendment of the Plan to its stockholders for approval if the rules of the
principal securities exchange on which the shares are then listed or other applicable laws or
regulations require stockholder approval of such amendment. No termination, suspension, or
amendment of the Plan or any Agreement may materially and adversely affect any right acquired by
any Participant under an Award granted before the date of termination, suspension, or amendment,
unless otherwise agreed to by the Participant in the Agreement or otherwise, or required as a
matter of law. It will be conclusively presumed that any adjustment for changes in capitalization
provided for in Sections 11(b) or 18, and any amendment to the Plan or any Agreement to avoid the
imposition of any additional tax under Code Section 409A does not adversely affect these rights.
(d) No Option or SAR Repricing. Except as provided in Section 18, no Option or Stock
Appreciation Right granted under the Plan may be amended to decrease the exercise price thereof, or
be cancelled in conjunction with the grant of any new Option or Stock Appreciation Right with a
lower exercise price, or otherwise be subject to any action that would be treated under accounting
rules or otherwise as a repricing of such Option or Stock Appreciation Right, unless such action
is approved by the Companys stockholders.
EX-18
18. Adjustment for Changes in Capitalization. In the event of any equity restructuring
(within the meaning of Statement of Financial Accounting Standards No. 123 (revised 2004), referred
to as FAS 123R) that causes the per share value of Shares to change, such as a stock dividend or
stock split, the Committee shall cause there to be made an equitable adjustment to the number and
kind of Shares or other securities issued or reserved for issuance pursuant to the Plan and to
outstanding Awards (including but not limited to the number and kind of Shares to which such
Awards are subject, and the exercise or strike price of such Awards) to the extent such other
Awards would not otherwise automatically adjust in the equity restructuring; provided, in each
case, that with respect to Incentive Stock Options, no such adjustment shall be authorized to the
extent that such adjustment would cause such Incentive Stock Options to violate Section 422(b) of
the Code or any successor provision; provided further, that no such adjustment shall be authorized
under this Section to the extent that such adjustment would cause an Award to be subject to adverse
tax consequences under Section 409A of the Code. In the event of any other change in corporate
capitalization, which may include a merger, consolidation, any reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the Code), or any partial
or complete liquidation of the Company to the extent such events do not constitute equity
restructurings or business combinations within the meaning of SFAS No. 123R, such equitable
adjustments described in the foregoing sentence may be made as determined to be appropriate and
equitable by the Committee to prevent dilution or enlargement of rights. In either case, any such
adjustment shall be conclusive and binding for all purposes of the Plan. Unless otherwise
determined by the Committee, the number of Shares subject to an Award shall always be a whole
number.
19. Dividend Equivalents. An Award (other than an Option or SAR) that does not involve the
issuance of Shares concurrently with the grant of the Award may, if so determined by the Committee,
provide the Participant with the right to receive dividend equivalent payments with respect to
Shares subject to the Award (both before and after the Shares are earned, vested or acquired),
which payments may be either made currently, credited to an account for the Participant, or deemed
to have been reinvested in additional Shares which shall thereafter be deemed to be part of and
subject to the underlying Award, including the same vesting and performance conditions. Dividend
equivalent amounts credited to an account for the Participant may be settled in cash or Shares or a
combination of both, as determined by the Committee, and shall be subject to the same vesting and
performance conditions as the underlying Award.
20. Substitute Awards. The Committee may also grant Awards under the Plan in substitution
for, or in connection with the assumption of, existing awards granted or issued by another
corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by
reason of a transaction involving a merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation to which the Company or an Affiliate is a party. The
terms and conditions of the Substitute Awards may vary from the terms and conditions set forth in
the Plan to the extent that the Board at the time of the grant may deem appropriate to conform, in
whole or in part, to the provisions of the awards in substitution for which they are granted.
21. Performance-Based Compensation.
(a) Designation of Awards. If the Committee determines at the time a Full Value Award
is granted to a Participant who is then an executive officer of the Company that such Participant
is, or is likely to be, a covered employee for purposes of Code Section 162(m) as of the end of
the tax year in which the Company would ordinarily claim a tax deduction in connection with such
Award, then the Committee may provide that this Section 21 will be applicable to such Award, which
shall be considered Performance-Based Compensation.
(b) Performance Measures. If an Award is subject to this Section 21, then the lapsing
of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as
applicable, shall be subject to the achievement of one or more of the Performance Measures
specified in the definition of that term in this Plan. When establishing Performance Measures for
a Performance Period, the Committee may exclude amounts or charges relating to an event or
occurrence that the Committee determines, consistent with the requirements of Code Section 162(m),
should appropriately be excluded. The Committee may also adjust Performance Measures for a
Performance Period to the extent permitted by Code Section 162(m) to prevent the dilution or
enlargement of a Participants rights with respect to Performance-Based Compensation. The
Committee will determine any amount payable in connection with an Award subject to this Section 21
consistent with the requirements of Code Section 162(m), and may adjust downward, but not upward,
any amount determined to be otherwise payable in connection with such an Award.
(c) Limitations. Subject to adjustment as provided in Section 18, no Participant may
be granted Performance-Based Compensation in any calendar year with respect to more than 300,000
Shares, for Awards denominated in Shares, and the maximum dollar value payable to any Participant
in any 12 month period with respect to Performance-Based Compensation denominated in cash is
$2,000,000.
EX-19
22. Other Provisions.
(a) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required
to segregate any assets that may at any time be represented by Awards under the Plan. Neither the
Company, its Affiliates, the Committee, nor the Board shall be deemed to be a trustee of any
amounts to be paid under the Plan nor shall anything contained in the Plan or any action taken
pursuant to its provisions create or be construed to create a fiduciary relationship between the
Company and/or its Affiliates, and a Participant. To the extent any person has or acquires a
right to receive a payment in connection with an Award under the Plan, this right shall be no
greater than the right of an unsecured general creditor of the Company.
(b) Limits of Liability.
(1) Any liability of the Company to any Participant with respect to an Award shall be based
solely upon contractual obligations created by the Plan and the Award Agreement.
(2) Except as may be required by law, neither the Company nor any member of the Board of
Directors or of the Committee, nor any other person participating (including participation pursuant
to a delegation of authority under Section 3(c) of the Plan) in any determination of any question
under the Plan, or in the interpretation, administration or application of the Plan, shall have any
liability to any party for any action taken, or not taken, in good faith under the Plan.
(c) Compliance with Applicable Legal Requirements. No Shares distributable pursuant
to the Plan shall be issued and delivered unless the issuance of the Shares complies with all
applicable legal requirements, including compliance with the provisions of applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act and the requirements of
the exchanges on which the Companys Shares may, at the time, be listed.
(d) Other Benefit and Compensation Programs. Payments and other benefits received by
a Participant under an Award made pursuant to the Plan shall not be deemed a part of a
Participants regular, recurring compensation for purposes of the termination, indemnity or
severance pay laws of any country and shall not be included in, nor have any effect on, the
determination of benefits under any other employee benefit plan, contract or similar arrangement
provided by the Company or an Affiliate unless expressly so provided by such other plan, contract
or arrangement, or unless the Committee expressly determines that an Award or portion of an Award
should be included to accurately reflect competitive compensation practices or to recognize that an
Award has been made in lieu of a portion of competitive cash compensation.
(e) Requirements of Law.
(1) To the extent that federal laws do not otherwise control, the Plan and all determinations
made and actions taken pursuant to the Plan shall be governed by the laws of the State of Delaware
without regard to its conflicts-of-law principles and shall be construed accordingly.
(2) If any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been included.
(3) It is intended that the Plan and all Awards granted pursuant to it shall be administered
by the Committee so as to permit the Plan and Awards to comply with Exchange Act Rule 16b-3. If
any provision of the Plan or of any Award would otherwise frustrate or conflict with the intent
expressed in this Section 22(e)(3), that provision to the extent possible shall be interpreted and
deemed amended in the manner determined by the Committee so as to avoid the conflict. To the
extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed
void as applied to Participants subject to Section 16 of the Exchange Act to the extent permitted
by law and in the manner deemed advisable by the Committee.
EX-20
(4) It is intended that (i) all Awards of Options, SARs and Restricted Stock under the Plan
will not provide for the deferral of compensation within the meaning of Code Section 409A and
thereby be exempt
from Code Section 409A, and (ii) all other Awards under the Plan will either not provide for
the deferral of compensation within the meaning of Code Section 409A, or will comply with the
requirements of Code Section 409A, and Awards shall be structured and the Plan administered in
accordance with this intent.
(f) Foreign Jurisdictions. The Committee may adopt, amend and terminate such
arrangements, not inconsistent with the intent of the Plan, as it may deem necessary or desirable
to make available tax or other benefits of the laws of any foreign jurisdiction to Employees who
are subject to such laws and receive Awards under the Plan.
EX-21
STARTEK, INC.
C/O COMPUTERSHARE
P.O. BOX 43078
PROVIDENCE, RI 02940-3078
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery
of information up until 11:59 P.M. Eastern Time the day before the cut-off date or
meeting date. Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS
If you would like to reduce the costs incurred by StarTek, Inc. in mailing proxy
materials, you can consent to receiving all future proxy statements, proxy
cards and annual reports electronically via e-mail or the Internet. To sign up for
electronic delivery, please follow the instructions above to vote using the Internet and,
when prompted, indicate that you agree to receive or access stockholder communications
electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to StarTek, Inc., c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
STRTK1
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
STARTEK, INC.
Vote On Directors
For
All
Withhold
All
For All
Except
To withhold authority to vote for any individual nominee(s), mark For All
Except and write the number(s) of the nominee(s) on the line below.
1. ELECTION
_____
OF DIRECTORS
Nominees:
01) Ed Zschau
02) P. Kay Norton
03) Albert C. Yates
04) A. Laurence Jones
05) Harvey A. Wagner
Vote
_____
On Proposals
2. TO RATIFY THE APPOINTMENT OF ERNST & YOUNG, LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2008.
3. TO APPROVE THE STARTEK, INC. EMPLOYEE STOCK PURCHASE PLAN:
4. TO APPROVE THE STARTEK, INC. 2008 EQUITY INCENTIVE PLAN:
For
_____
Against Abstain
Please sign exactly as name appears hereon. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, trustee or other
representative capacity, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer.
The signer hereby revokes all proxies heretofore given to vote at said meeting or any
adjournment thereof.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please indicate if you plan to attend this meeting.
Yes
_____
No
Signature [PLEASE SIGN WITHIN BOX]
Date
Signature (Joint Owners)
Date |
StarTek, Inc.
Proxy for the Annual Meeting of Stockholders May 5, 2008
This Proxy is solicited on behalf of the Board of Directors
This
_____
proxy is furnished in connection with the solicitation by the Board of
Directors of StarTek, Inc. of proxies for use at the
2008 Annual Meeting of Stockholders. The undersigned stockholder of StarTek, Inc., a
Delaware corporation (the Company),
hereby constitutes and appoints Ed Zschau or A. Laurence Jones, and each of them, his
attorney-in-fact and proxies (with full power
of substitution in each), and authorizes each of them to represent the undersigned at
the Annual Meeting of Stockholders of the
Company to be held on May 5, 2008, at 9:00 a.m., and at any adjournment thereof, and to vote the
common stock of the Company
held by the undersigned as designated on the reverse side on proposals 1, 2, 3 and
4 and in their discretion on all other matters coming before the meeting.
This proxy when properly executed will be voted in the manner directed by the stockholder, but if
no direction is made, this proxy will
be voted FOR proposals 1, 2, 3 and 4.
Properly executed proxies will be voted in the discretion of the proxy holder with
regard to any other matter that properly comes before the meeting. |