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
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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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Soliciting Material Pursuant to §240.14a-12 |
APAC CUSTOMER SERVICES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee 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
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Amount Previously Paid: |
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Filing Party: |
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Dear Fellow Shareholders:
I was thrilled this year when your
Board of Directors asked me to become President, CEO and a
member of APACs Board. APAC has a long history as a leader and
unequalled brand recognition in the industry. I am delighted to be a part of the APAC team.
Since joining the company in late February, I have had the opportunity to visit all of our centers
and speak with many of our clients. Im extremely impressed with the talent and dedication of
APACs team, the quality of customer care services we offer, and the trust our clients have placed
in us.
Our mission is clear to put APAC on a path to long-term, consistent, profitable growth. We are
laser-focused on service delivery, operational efficiency and the overall costs of running our
business. In the short time since I arrived, weve taken some significant steps to enhance our
service delivery and to improve our financial footing. I would like to share some of our actions
with you to give you a sense of what were doing:
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Weve aligned the organization so that Operations can focus on service delivery and
Sales can focus on relationship building. Everyone knows their roles and responsibilities.
Everyone understands how they will contribute to our success. |
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Our new organizational alignment has allowed us to significantly reduce our overhead.
We have trimmed excess costs in virtually every non-revenue generating function. |
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We have added two exceptional leaders. Art DiBari has joined APAC as our Senior Vice
President, Operations. Mark Anderson has joined APAC as our Senior Vice President, Sales
and Marketing. Art and Mark are both industry veterans with long track records of
delivering outstanding results. |
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We have implemented a formal profit improvement program. We meet weekly to review our
initiatives. Profit improvement is no longer a quarterly or annual event. It is part of
our daily lives. |
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Similarly, we have implemented weekly, formal, service delivery reviews. These reviews
will foster a proactive management approach and help to ensure we meet the expectations of
our clients. |
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We have also amplified our focus on finances. We now conduct a weekly financial review
that generates actions to accelerate our progress on improving space utilization, reducing
overhead costs, improving days sales outstanding and minimizing capital expenditures. |
Over the coming months, we plan to work on the following initiatives:
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Pushing authority and accountability down to the front-line supervisors. Every
supervisor at APAC will have the ability to take actions to enhance client satisfaction and
improve our overall profitability. |
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Creating an environment of ownership by giving our Center Leaders full P&L
accountability as well as full authority for decisions related to service delivery. |
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Enhancing our service-delivery standards to ensure consistent and predictable results
that our clients can count on. We know what to do and we will execute. |
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Pursuing new opportunities with our existing clients as well as prospective clients. We
have a tremendous reputation in the industry and are building a high-caliber team of
top-notch sales executives to share our story and bring on new business. |
There are many, many more initiatives that we are working on. Suffice it to say that they all have
four crucial things in common Client Satisfaction, Profitability, Growth and Employee Retention.
How will we measure our success? Three goals will be uppermost in our minds and can be used to
gauge the progress we make:
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High rates of renewals among our existing clients - This is a measure of our ability to
deliver what we promise and to satisfy the needs of our clients. |
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A return to profitability - This is a measure of our ability to manage the business,
make smart decisions about the use of capital and efficiently use our service delivery
resources. |
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Better-than-industry win rates with new clients - This is a measure of our reputation in
the industry, the willingness of current clients to provide references and our ability to
be cost competitive. |
The entire management team at APAC appreciates the continued support of our clients, our
shareholders and our employees. The steps we are taking will benefit all of our constituents. We
look forward to fulfilling the promise we see at APAC Customer Services.
Mike Marrow
President and Chief Executive Officer
May 2, 2008
Six Parkway North
Deerfield, Illinois 60015
(847) 374-4980
Notice of Annual Meeting of Shareholders
To Be Held On June 6, 2008
To the Shareholders of APAC Customer Services, Inc.:
The Annual Meeting of Shareholders of APAC Customer Services, Inc. will be held at our
corporate headquarters, Six Parkway North, Deerfield, Illinois on Friday, June 6, 2008, at
10:00 a.m. Central Daylight Time for the following purposes:
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To elect eight directors. |
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To consider and transact such other business as may properly come before the Annual
Meeting or any adjournment thereof. |
Information with respect to the above matters is set forth in the Proxy Statement which
accompanies this Notice.
Shareholders of record at the close of business on April 8, 2008 are entitled to notice of,
and to vote at, the Annual Meeting.
Even if you plan to attend the meeting in person, please read these proxy materials and date,
sign and mail the enclosed proxy in the envelope provided, which requires no postage for mailing in
the United States. A prompt response is helpful, and your cooperation will be appreciated.
Shareholders who are present at the Annual Meeting may withdraw their proxies and vote in person if
they so desire.
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By Order of the Board of Directors |
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Pamela R. Schneider |
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Secretary |
Dated: May 2, 2008
APAC Customer Services, Inc.
Six Parkway North
Deerfield, Illinois 60015
(847) 374-4980
Proxy Statement
Annual Meeting of Shareholders to be Held June 6, 2008
This Proxy Statement and the accompanying proxy card are being mailed to shareholders of APAC
Customer Services, Inc. (Company) on or about May 2, 2008, in connection with the solicitation of
proxies by the Board of Directors for the Annual Meeting of Shareholders to be held on June 6,
2008. The purpose of the Annual Meeting is to consider and act upon the matters specified in the
Notice of Annual Meeting of Shareholders accompanying this Proxy Statement.
Each shareholder is entitled to one vote for each Common Share (as defined in the Companys
Amended and Restated Articles of Incorporation, dated August 8, 1995, as subsequently amended) held
as of the record date. A majority of the outstanding Common Shares entitled to vote at this meeting
and represented in person or by proxy will constitute a quorum. As of the close of business on
April 8, 2008, the record date for determining shareholders entitled to vote at the Annual Meeting,
50,517,787 Common Shares were outstanding.
If the form of Proxy that accompanies this Proxy Statement is executed and returned, it will
be voted in accordance with the indicated direction. A Proxy may be revoked at any time prior to
the voting thereof by written notice to our Secretary, by executing and delivering a subsequently
dated proxy card or by voting in person at the Annual Meeting. Shareholders whose Common Shares are
held in the name of a bank, broker or other holder of record will receive voting instructions from
the holder of record.
The affirmative vote of the holders of a majority of the Common Shares entitled to vote and
represented in person or by proxy at the Annual Meeting is required for the election of directors
and for any other proposal submitted to a vote. Shareholders are not entitled to cumulate their
votes. Shares represented by proxies which are marked withhold or to deny discretionary authority
on any matter will be treated as shares present and entitled to vote, which will have the same
effect as a vote against any such matter. Broker non-votes and the shares as to which
shareholders abstain are included for purposes of determining whether a quorum of shares is present
at a meeting, except as to matters for which a non-vote is indicated on the brokers proxy. If a
non-vote is indicated on the brokers proxy with respect to a particular matter, the shares will
not be treated as represented at the meeting for the purposes of determining a quorum for such
matter. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial owner. Votes will be
tabulated by representatives of LaSalle Bank National Association, our transfer agent and inspector
of elections for the Annual Meeting. We will bear all expenses incurred in the solicitation of
proxies.
TABLE OF CONTENTS
COMMON SHARES BENEFICIALLY OWNED BY
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information, as of March 1, 2008, regarding the
beneficial ownership of Common Shares by (i) each person known by us to own beneficially more than
5% of our outstanding Common Shares, (ii) each director and nominee, (iii) each Named Executive
Officer (as defined in Compensation Discussion and Analysis Overview of Compensation Process
appearing in the Executive Compensation section of this Proxy Statement) and (iv) all directors,
director nominees and executive officers as a group. Except as otherwise indicated, we believe that
each beneficial owner of Common Shares listed below, based on information provided by such owner,
has sole investment and voting power with respect to such Common Shares. Unless otherwise
indicated, the address of each of the shareholders named below is c/o Six Parkway North, Deerfield,
IL 60015.
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Common Shares Beneficially Owned |
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Number |
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Percent(1) |
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Theodore G. Schwartz |
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19,759,227 |
(2)(3) |
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37.4 |
% |
Wells Fargo & Company |
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5,590,328 |
(4) |
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10.6 |
% |
Sidus Investment Partners, L.P. |
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3,616,927 |
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6.8 |
% |
Trust Four Hundred Thirty U/A/D 4/2/94 |
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2,115,000 |
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4.0 |
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Trust Seven Hundred Thirty U/A/D 4/2/94 |
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2,115,000 |
(6) |
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4.0 |
% |
Trust 3080 |
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500,000 |
(6) |
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Trust 3081 |
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500,000 |
(6) |
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Cindy K. Andreotti |
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64,992 |
(3) |
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John W. Gerdelman |
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178,784 |
(3) |
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John C. Kraft |
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49,850 |
(3) |
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Michael P. Marrow |
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15,000 |
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Bhaskar Menon |
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John J. Park |
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84,349 |
(3) |
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Lynn E. Refer |
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Samuel K. Skinner |
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John L. Workman |
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George H. Hepburn III |
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189,000 |
(3) |
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Robert J. Keller |
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1,173,500 |
(7) |
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2.2 |
% |
David J. LaBonte |
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403,137 |
(7) |
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James M. McClenahan |
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295,350 |
(3)(8) |
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Mark E. McDermott |
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363,706 |
(3) |
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Pamela R. Schneider |
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155,500 |
(3) |
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All directors and executive officers as a group (12 persons) |
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21,247,258 |
(3)(9) |
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40.2 |
% |
2
Notes to Common Shares Beneficially Owned Table
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Indicates less than 1%. |
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Beneficial ownership is shown on this table in accordance with the
rules of the Securities and Exchange Commission (SEC). Under those
rules, if a person holds options to purchase Common Shares that are
exercisable within 60 days after March 1, 2008, those shares are
included in that persons reported holdings and in calculating the
percentages of Common Shares beneficially owned. The percentages of
Common Shares beneficially owned are based on 52,897,465 Common
Shares, which includes 50,517,787 Common Shares outstanding as of
March 1, 2008, plus 2,379,678 Common Shares subject to options
exercisable as of March 1, 2008, or within 60 days thereafter as
detailed in Note 3 below. |
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Includes 9,858,000 Common Shares as to which Mr. Schwartz has sole
voting and investment power, 9,858,000 Common Shares held by a limited
partnership, as to which Mr. Schwartz disclaims beneficial ownership
except to the extent of his pecuniary interest therein, and 3,218
Common Shares held by Mr. Schwartzs spouse, as to which Mr. Schwartz
disclaims beneficial ownership. Mr. Schwartzs address is 19955 NE
Porto Vita Way #2903, Aventura, FL 33180. |
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Includes Common Shares which may be acquired pursuant to options
exercisable as of March 1, 2008, or within 60 days thereafter, as
follows: Mr. Schwartz (40,009 shares); Ms. Andreotti (59,692 shares);
Mr. Gerdelman (178,784 shares); Mr. Kraft (49,850 shares); Mr. Park
(84,349 shares); Mr. Hepburn (120,000 shares); Mr. McClenahan
(236,250 shares); Mr. McDermott (345,044 shares); Ms. Schneider
(120,000 shares); and all executive officers and directors (as of
March 1, 2008) as a group (2,379,678 shares). |
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Based solely upon information provided in the Schedule 13G/A filed
jointly on January 25, 2008 by Wells Fargo & Company as a parent
holding company (Wells Fargo), on its own behalf, and on behalf of
its subsidiaries Wells Capital Management Incorporated, Wells Fargo
Funds Management LLC and Wells Fargo Bank, National Association, Wells
Fargo (or one or more of its subsidiaries) has sole voting power over
5,576,428 Common Shares and sole dispositive power over 5,590,328
Common Shares. The address of Wells Fargo is 420 Montgomery Street,
San Francisco, California 94014. |
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Based solely upon information provided in the Schedule 13G filed
jointly on February 13, 2008 by (i) Sidus Investment Partners, L.P., a
Delaware limited partnership (Sidus Partners); (ii) Sidus
Investments Ltd., a Cayman Islands exempted corporation, (Sidus
Investments); (iii) Sidus Double Alpha Fund, L.P., a Delaware limited
partnership (Sidus Double Alpha); (iv) Sidus Double Alpha Fund Ltd.,
a Cayman Islands exempted corporation (Sidus Double Alpha Offshore);
(v) Sidus Investment Management, LLC, a Delaware limited liability
company (Manager), which serves as investment manager to Sidus
Partners, Sidus Investments, Sidus Double Alpha, and Sidus Double
Alpha Offshore; (vi) Messrs. Alfred V. Tobia, Jr. and
(vii) Michael J. Barone, who serve as the managing members of the
Manager, share, or could be deemed to share, voting and dispositive
power over all 3,616,927 Common Shares. Their address is 767 Third
Avenue, 15th Floor, New York, New York, 10017. |
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Robert H. Wicklein, John J. Abens and Scott Mordell serve as general
trustees of Trust Four Hundred Thirty U/A/D 4/2/94, Trust Seven
Hundred Thirty U/A/D 4/2/94, Trust 3080 and Trust 3081 (collectively,
the Trusts). All decisions regarding the voting and disposition of
Common Shares held by the Trusts must be made by a majority of the
general trustees and, as a result, each of the general trustees
disclaims beneficial ownership. M. Christine Schwartz, who is married
to Mr. Schwartz, serves as a special trustee of the Trusts and has
limited powers to designate successors to the general trustees at the
conclusion of their terms, but has no responsibilities or powers
regarding the voting or disposition of the Common Shares owned by the
Trusts and accordingly disclaims beneficial ownership of such shares.
The address of each of the Trusts is 650 Dundee Road, Suite 450,
Northbrook, Illinois 60062. |
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Includes Common Shares which may be acquired pursuant to options
exercisable as of March 1, 2008, or within 60 days thereafter, as
follows: Mr. Keller (850,000 shares); and Mr. LaBonte
(261,700 shares). Also includes restricted Common Shares owned by
Mr. Keller (100,000 shares). |
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Mr. McClenahan resigned as our Senior Vice President, Sales and
Marketing on March 28, 2008. Mr. McClenahans address is 279 Benson
Lane, Coppell, TX 75019. |
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Excludes shares beneficially owned by Messrs. Keller and LaBonte who
were not executive officers as of March 1, 2008. Mr. Keller retired
as our Chief Executive Officer on February 18, 2008. Mr. Kellers
address is 725 Sheridan Road, Lake Forest, IL 60045. |
3
PROPOSAL REGARDING THE ELECTION OF DIRECTORS
At the Annual Meeting, eight directors are to be elected to serve until the next Annual
Meeting of Shareholders. John W. Gerdelman has announced his intention to retire when his current
term as a member of our Board of Directors expires at the Annual Meeting. Lynn E. Refer, who was
appointed to the Board of Directors on December 13, 2007, has informed us that he will not stand
for election to the Board.
It is intended that the executed and returned proxy cards (except proxy cards marked to the
contrary) will be voted for the nominees listed below. Proxies cannot be voted for a greater number
of persons than the number of nominees listed below. It is expected that the nominees will serve,
but if any nominee declines or is unable to serve for any unforeseen cause, the proxies will be
voted to fill any vacancy so arising in accordance with the discretionary authority of the persons
named in the proxies.
The Board of Directors recommends a vote FOR the election of each of the following nominees:
Nominees for Election
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Position |
Cindy K. Andreotti
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52 |
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Cindy K. Andreotti became a director in April
2005. Currently, Ms. Andreotti is President
and Chief Executive Officer of The Andreotti
Group LLC, a strategic business advisory firm
serving domestic/global enterprise clients,
private equity and institutional firms and
international investment groups. Prior to the
launch of The Andreotti Group, Ms. Andreotti
was President, Enterprise Markets for MCI,
Inc., which filed for protection under
Chapter 11 of the U.S. Bankruptcy Code in July
2002 and emerged from Chapter 11 protection in
April 2004. Enterprise Markets consisted of
the Global Accounts Segment, Government
Markets, the Conferencing Business Unit, and
MCI Solutions, the managed services arm of
MCI. Ms. Andreottis previous assignments at
MCI included President of Business Markets and
President of Global Accounts and Strategic
Ventures and Alliances. Before joining MCI in
1990, Ms. Andreotti was with AT&T Corporation.
Ms. Andreotti is also Vice Chairman of the
Japan American Society, a cabinet member of
the Los Angeles Music Center, a member of the
Executive Committee for the Red Cross, a
member of the Accenture Womens Leadership
Forum and a member of the board of directors
for Rivermine Solutions, Inc., a leading
provider of enterprise telecommunications
expense management solutions. |
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John C. Kraft
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66 |
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John C. Kraft became a director in October
2005. Mr. Kraft was Vice Chairman and Chief
Operating Officer at Leo Burnett where he
oversaw the operations of the companys 50
offices located in 43 countries. He also
served on the companys Board of Directors.
After taking early retirement from Leo
Burnett, Mr. Kraft was the Executive Vice
President and Chief Administrative Officer and
a director of Young and Rubicam for two years.
Mr. Kraft is a member of the Board of
Directors of Chicago Central Area Committee. |
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Michael P. Marrow
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51 |
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Michael P. Marrow became a director in
February 2008 when he joined us as President
and Chief Executive Officer. From January 2003
to February 2008, Mr. Marrow was employed by
Affiliated Computer Services, Inc. (ACS), a
leader in business process outsourcing and
information technology solutions. From June
2007 through February 2008, he served as
Managing Director of Emerging markets and was
responsible for service delivery centers in
India, Mexico, Malaysia, Fiji, China, Ghana,
Guatemala, Jamaica, Dominican Republic,
Poland, Brazil and the Philippines with
approximately 15,000 employees. From January
2003 through June 2007, Mr. Marrow was the
Managing Director of ACSs Contact Center
Practice and managed 31 ACS contact centers
with over 16,000 employees located in the
U.S., Mexico, Argentina, India and the
Philippines. |
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Position |
Bhaskar Menon
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47 |
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Mr. Menon is an independent consultant and
owner of Circa Advisors LLC, consulting to
the US-India cross-border Information
Technology/Business Process Outsourcing
(BPO) industry. From 2000 to 2006, Mr. Menon
was employed by MphasiS Corporation, an
IT/BPO company based in New York and
Bangalore, India, where he held a variety of
executive positions, including President.
Prior to that time, Mr. Menon held various
executive positions with Citibank and
Citigroups E-Citi and Global Consumer
Internet Business, as well as Merrill Lynch,
Pierce Fenner & Smith. Mr. Menon was
recommended as a nominee to the Board by a
third party search firm. |
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John J. Park
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46 |
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John J. Park became a director in August
2004. Mr. Park has been the Chief Financial
Officer at Hewitt Associates, a global human
resources outsourcing and consulting firm,
since November 2005. Prior to joining
Hewitt, Mr. Park served as Chief Financial
Officer of Orbitz, Inc., an online travel
company, from October 2000 until February
2005, and as acting President from November
2004 until February 2005. Prior to joining
Orbitz, Mr. Park held various executive
positions with Sears, Roebuck and Co.,
including Vice President, Finance for its
services and credit card businesses. |
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Theodore G. Schwartz
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54 |
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Theodore G. Schwartz is Chairman of the
Board of Directors. Mr. Schwartz is our
founder and has served as our Chairman since
our formation in May 1973. He served as our
Chief Executive Officer until January 2000,
and again from May 2001 until March 2004. |
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Samuel K. Skinner
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69 |
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Samuel K. Skinner previously served on our
Board of Directors from July 2003 to June
2005. Mr. Skinner is the retired Chairman
and Chief Executive Officer of U.S.
Freightways Corporation, a transportation
and logistics business. He currently serves
as an Adjunct Professor of Management and
Strategy at the Kellogg School of Management
at Northwestern University. He is also
Of Counsel to the law firm of Greenberg &
Traurig, LLP. He formerly served as
Co-Chairman of Hopkins & Sutter, a law firm
based in Chicago. Mr. Skinner retired as
President of Commonwealth Edison Company and
its holding company, Unicom Corporation (now
known as Exelon Corporation). Prior to
joining Commonwealth Edison, he served as
Chief of Staff to former President George H.
W. Bush. Prior to his White House service,
Mr. Skinner served in the Presidents
cabinet for nearly three years as Secretary
of Transportation. From 1977 to 1989, Mr.
Skinner practiced law as a senior partner in
the Chicago law firm of Sidley & Austin (now
Sidley Austin LLP). He is currently a member
of the boards of directors of Navigant
Consulting, Inc., Express Scripts and
Diamond Management & Technology Consultants,
Inc. Mr. Skinner was recommended as a
nominee to the Board by the Nominating and
Corporate Governance Committee. |
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John L. Workman
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56 |
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Mr. Workman is currently Executive Vice
President and Chief Financial Officer of
HealthSouth Corporation, a position to which
he was appointed in September 2004. From
1998 to 2004, Mr. Workman served in various
management and executive capacities with
U.S. Can Company, including serving as its
Chief Financial Officer from 1998 to 2002,
as its Chief Operating Officer from 2002 to
2003, and its Chief Executive Officer from
2003 to 2004. Prior to joining U.S. Can
Company, Mr. Workman was employed by
Montgomery Ward & Company, Inc. for 14
years, where he held several management and
executive positions, including General
Auditor, Chief Financial Officer, and Chief
Restructuring Officer. Mr. Workman began
his career in public accounting, and was a
partner with the public accounting firm
KPMG. Mr. Workman was recommended as a
nominee to the Board by a partner at KPMG,
an independent registered public accounting
firm. |
5
Meetings of our Board of Directors and Corporate Governance
Our Board of Directors met 17 times during fiscal year 2007 and periodically took action by
unanimous written consent. All incumbent directors attended at least 75% of the aggregate of such
meetings and meetings of Board committees on which they served in fiscal year 2007.
Our Board of Directors has adopted Corporate Governance Guidelines which set forth the role
and functions of our Board of Directors, director qualifications and guidelines with respect to
Board of Director meetings and committees of the Board, among other things. Our Board of Directors
has determined that, other than Messrs. Keller, Marrow and Schwartz, all current Board members, all
nominees for election as Directors, and all individuals who served as Board members during the
fiscal year 2007, are independent as defined by The Nasdaq Stock Market, Inc. listing standards.
Our independent directors hold executive sessions periodically throughout the year.
Board Committees
Our Board of Directors has established three standing committees and has adopted written
charters for each committee: the Audit Committee, the Compensation Committee and the Nominating and
Corporate Governance Committee. Our Board of Directors appoints the members of each committee.
While our Boards committees are constituted as described below and vote on matters as described
below, other members of our Board, including directors not determined by our Board to qualify as
independent, are frequent participants (although not voting participants) in committee meetings and
proceedings.
Each committees charter and the Companys Corporate Governance Guidelines are available on
our website at www.apaccustomerservices.com. A copy of each charter is also available in print to
shareholders upon request, addressed to our Secretary c/o APAC Customer Services, Inc., Six
Parkway North, Deerfield, Illinois 60015.
Audit Committee
Our Audit Committee consists of Messrs. Gerdelman (Chairman), Park and Ms. Andreotti. Our
Audit Committee has direct responsibility for appointing our independent registered public
accounting firm, reviewing the proposed scope of the annual audit, overseeing the adequacy and
effectiveness of accounting and financial controls, and reviewing the annual and quarterly
financial statements with management and the independent registered public accounting firm. Our
Audit Committee met six times in fiscal year 2007 and periodically took action by unanimous written
consent. All members of our Audit Committee are independent as defined for audit committee members
by the listing standards of The Nasdaq Stock Market, Inc. Our Board of Directors has determined
that each member of our Audit Committee is financially literate in accordance with the listing
standards of The Nasdaq Stock Market, Inc. and that Mr. Park is an audit committee financial
expert, as defined by the United States Securities and Exchange Commission (the SEC). For
details regarding Mr. Parks qualifications as an audit committee financial expert, see Nominees
for Election appearing in the Proposal Regarding the Election of Directors section of this Proxy
Statement.
Compensation Committee
Our Compensation Committee consists of Messrs. Park (Chairman) and Kraft and Ms. Andreotti.
Our Compensation Committee is directly responsible for approving senior management compensation and
overseeing our equity compensation plans. For a more detailed description of the responsibilities
and authority of the Compensation Committee, see Compensation Discussion and Analysis Overview
of Compensation Process appearing in the Executive Compensation section of this Proxy Statement.
Our Compensation Committee met eight times in fiscal year 2007 and periodically took action by
unanimous written consent. All members of our Compensation Committee are independent directors as
defined by the listing standards of The Nasdaq Stock Market, Inc.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee, or Nominating/Governance Committee,
consists of Messrs. Kraft (Chairman) and Gerdelman and Ms. Andreotti. The Nominating/Governance
Committee is directly responsible for identifying and recommending to our Board of Directors
individuals qualified to serve as directors, recommending directors to serve on committees of our
Board of Directors, advising our Board of Directors with respect to matters of Board composition
and procedures, developing and recommending to our Board of Directors corporate governance
principles applicable to us, overseeing corporate governance matters generally, and reviewing on an
annual basis director compensation. The Nominating/Governance Committee met four times during
fiscal year 2007 and periodically took action by unanimous written consent. All members of our
Nominating/Governance Committee are independent directors as defined by the listing standards of
The Nasdaq Stock Market, Inc.
6
Our Nominating/Governance Committee will consider director candidates recommended by
shareholders. In considering candidates submitted by shareholders, our Nominating/Governance
Committee will take into consideration the needs of our Board of Directors and the qualifications
of the candidate. Our Nominating/Governance Committee may also take into consideration the number
of shares held by the recommending shareholder and the length of time that such shares have been
held. To have a candidate considered by our Nominating/Governance Committee, a shareholder must
submit the recommendation in writing and must include the following information: the name of the
shareholder and evidence of the persons ownership of Common Shares, including the number of shares
owned and the length of time of ownership; the name of the candidate; the candidates resume or a
listing of his or her qualifications to be a director; and the candidates consent to be named as
director if selected by our Nominating/Governance Committee and nominated by our Board.
The shareholder recommendation and information described above must be sent to our Secretary
c/o APAC Customer Services, Inc., Six Parkway North, Deerfield, Illinois 60015 and must be received
by our Secretary not less than 90 nor more than 120 days prior to the anniversary date of our most
recent annual meeting of shareholders.
Our Nominating/Governance Committee believes that the minimum qualifications for serving as a
director are the ability to apply good and independent judgment in a business situation and the
ability to represent the interests of all shareholders. A director also must be free from any
conflicts of interest that would interfere with his or her loyalty to us or our shareholders.
Candidates considered by our Nominating/Governance Committee for election or reelection to our
Board of Directors should possess the following qualifications: the highest level of personal and
professional ethics, integrity and values; an inquiring and independent mind; practical wisdom and
mature judgment; broad training and experience at the policy-making level in business, finance and
accounting, government, education or technology; expertise that is useful to us and complementary
to the background and experience of other Board members, so that an optimal balance of Board
members can be achieved and maintained; willingness to devote sufficient time and attention to
carrying out the duties and responsibilities of Board membership; commitment to serve on the Board
for several years to develop knowledge about our business; willingness to represent the best
interests of all shareholders and objectively appraise management performance; and involvement only
in activities or interests that do not conflict with the directors responsibilities to us and our
shareholders.
Once a person has been identified by our Nominating/Governance Committee as a potential
candidate, the committee may collect and review publicly available information regarding the person
to assess whether the person should be considered further. If our Nominating/Governance Committee
determines that the candidate warrants further consideration, our Chairman or another member of the
committee or of our Board of Directors, including directors who have not been designated as
independent, contacts the person. Generally, if the person expresses a willingness to be considered
and to serve on our Board, our Nominating/Governance Committee requests information from the
candidate, reviews the persons accomplishments and qualifications, including in light of any other
candidates that the committee might be considering, and conducts one or more interviews with the
candidate. Other members of our Board, including Messrs. Schwartz and Marrow, will also interview
the candidate. In certain instances, committee members may contact one or more references provided
by the candidate or may contact other members of the business community or other persons that may
have greater firsthand knowledge of the candidates accomplishments. The committees evaluation
process does not vary based on whether or not a candidate is recommended by a shareholder,
although, as stated above, our Board may take into consideration the number of shares held by the
recommending shareholder and the length of time that such shares have been held.
Compensation Committee Interlocks and Insider Participation
During fiscal year 2007, members of our Compensation Committee included Messrs. Park
(Chairman) and Kraft, Mr. Robert F. Bernard, Mr. Thomas M. Collins and Ms. Andreotti. Mr. Kraft
became a member of the committee in February 2007 upon the death of Mr. Bernard, and Ms. Andreotti
became a member of the committee in June 2007, following the retirement of Mr. Collins. None of
the members of the Compensation Committee serve as, or formerly served as, officers of the Company.
During fiscal year 2007, none of our executive officers served on the board of directors or
compensation committee of any other corporation where any member of our Compensation Committee or
our Board of Directors was engaged as an executive officer. None of the members of our Compensation
Committee has ever been employed by us.
7
Shareholder Communications with our Board of Directors
Our Board of Directors has established a process to receive communications from shareholders.
Shareholders may contact any member (or all members) of our Board by mail. To communicate with our
Board of Directors, any individual directors or any group or committee of directors, correspondence
should be addressed to our Board of Directors or any such individual directors, or group or
committee of directors, by either name or title. All such correspondence should be sent c/o
Secretary to Six Parkway North, Deerfield, Illinois 60015.
All communications received as set forth in the preceding paragraph will be opened by the
office of the Secretary for the sole purpose of determining the nature of the communications.
Communications that constitute advertising, promotions of a product or service, or patently
offensive material will not be forwarded to the directors. Other communications will be forwarded
promptly to the addressee or addressees.
Policy Regarding Director Attendance at Annual Meetings
We consider attendance and participation at the annual meeting of shareholders to be important
to effectively fulfill the responsibilities of our directors. Accordingly, it is our policy to
encourage each of our directors to attend the annual meeting. All of the directors then serving on
the Board were in attendance at the 2007 Annual Meeting, other than Mr. Collins, who retired
effective on the date of the 2007 Annual Meeting.
Director Compensation
Our Nominating/Governance Committee reviews and approves the compensation paid to each member
of our Board on an annual basis. Each director who is not employed by us is compensated for his or
her services as a director with: (i) an annual cash retainer of $22,000; (ii) a cash payment of
$1,500 for each board meeting attended in person and a cash payment of $750 for each board meeting
attended by telephone; and (iii) quarterly grants of options to purchase Common Shares. The total
number of options to be granted annually to each director is calculated as of the date of our
annual meeting of shareholders and is determined by dividing $90,000 by the average fair market
value of a Common Share over the preceding calendar year. Options are granted to directors in four
equal installments as of the first trading day of each calendar quarter. Options have an exercise
price equal to the fair market value of a Common Share on the date of grant. Additionally,
Mr. Schwartz receives an annual fee of $15,000 for his services as Chairman of the Board.
For Board committee service: (i) the Audit Committee chairman receives an annual fee of
$10,000; (ii) each of the other committee chairmen receives an annual fee of $5,000; and (iii) each
committee member, including the committee chairmen, receives a cash payment of $1,500 for each
committee meeting attended in person and a cash payment of $750 for each committee meeting attended
by telephone.
Directors who are requested to perform services beyond regular attendance at board and
committee meetings are compensated and receive cash payments ranging from $250 to $1500 per day
depending on the circumstances. Directors are also reimbursed for certain expenses in connection
with attendance at Board and committee meetings as well as approved education programs and other
required travel.
8
2007 Director Compensation
The following table sets forth the information with respect to all compensation paid or earned
for services rendered to us by each member of our Board of Directors (other than Mr. Keller, our
former Chief Executive Officer) during fiscal year 2007. During fiscal year 2007, Mr. Keller was
an employee of ours and did not receive any additional compensation for his services as a director.
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Change in Pension |
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Value and |
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Non-Equity |
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Nonqualified Deferred |
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Fees Earned or |
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Stock |
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Option |
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Incentive Plan |
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Compensation |
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All Other |
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Paid in Cash |
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Awards |
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Awards |
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Compensation |
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Earnings |
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Compensation |
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Total |
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Name |
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($)(1) |
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($) |
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($)(2) |
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($) |
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($) |
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($) |
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($) |
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Cindy K. Andreotti |
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55,000 |
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35,652 |
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90,652 |
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Robert F. Bernard |
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5,500 |
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62,615 |
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68,115 |
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Thomas M. Collins |
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23,250 |
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99,662 |
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122,912 |
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John W. Gerdelman |
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72,500 |
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43,950 |
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116,450 |
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John C. Kraft |
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57,167 |
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33,457 |
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90,624 |
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John J. Park |
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74,000 |
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41,617 |
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115,617 |
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Lynn E. Refer |
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4,833 |
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4,833 |
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Theodore G. Schwartz |
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65,500 |
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31,640 |
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97,140 |
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Notes to 2007 Director Compensation Table
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(1) |
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The amounts shown in the table represent the actual amount of all fees
earned for services rendered as a director during fiscal year 2007,
regardless as to whether such fees were actually paid in fiscal year
2007. |
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(2) |
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The amounts shown in the table reflect the expense to us for stock
options recognized in fiscal year 2007. These amounts were determined
in accordance with FAS 123(R), and may include amounts from options
granted prior to fiscal year 2007. The grant date fair value of stock
options determined in accordance with FAS 123(R) granted to each of
our directors during fiscal year 2007 was as follows: Ms. Andreotti
and Messrs. Gerdelman, Kraft, Park and Schwartz ($60,536). Mr. Bernard
($20,624), Mr. Collins ($47,070) and Mr. Refer ($0). See Accounting
For Stock-Based Compensation in Note 3 of the Notes to Consolidated
Financial Statements in our Form 10-K filed with the SEC on March 14,
2008. As of December 30, 2007, each non-employee director owned
options to purchase an aggregate number of Common Shares as follows:
Ms. Andreotti (133,835 shares); the Estate of Mr. Bernard
(145,080 shares); Mr. Gerdelman (252,927 shares); Mr. Kraft
(119,072 shares); Mr. Park (158,492 shares); Mr. Refer (0 shares) and
Mr. Schwartz (104,308 shares). These options vest ratably over three
years, have a term of ten years, and fully vest upon the death or
retirement of the director or upon a change of control of our company.
Each of Mr. Bernards death on February 2, 2007 and Mr. Collins
retirement on June 1, 2007 triggered the immediate vesting of his
unvested options, which had the effect of increasing the total option
expense for directors recognized in fiscal year 2007. |
9
EXECUTIVE OFFICERS
Set forth below is certain information concerning the current executive officers of the
Company (other than Mr. Marrow, whose background is described above under Nominees for Election
appearing in the Proposal Regarding the Election of Directors section of this Proxy Statement),
which officers serve at the discretion of the Board of Directors.
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Name |
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Age |
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Position and Business Experience |
George H. Hepburn, III
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48 |
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Mr. Hepburn has served as Senior Vice
President and Chief Financial Officer of
the Company since September 2005. Prior to
joining APAC, from 2004 to September 2005,
Mr. Hepburn was an independent financial
consultant. From 1993 to 2004, Mr.
Hepburn held the position of Senior Vice
President, Finance and Development for
Caremark Rx, Inc., a $26 billion provider
of pharmaceutical services. Prior to
Caremark, from 1987 to 1993 Mr. Hepburn
held a number of finance positions in
Heller International Corporation, a
commercial financial company, and was an
auditor with Ernst and Whinney (now Ernst
and Young) from 1984 to 1987. |
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Mark K. Anderson
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54 |
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Mr. Anderson serves as our Senior Vice
President, Sales and Marketing, a position
he has held since April 2008. Prior to
joining APAC, from 2006 to 2008, Mr.
Anderson was principal of WinningOutlook
Associates, a consulting services
association providing consulting services
to the contact center sales and
telecommunications industries. From 2000
to 2006, Mr. Anderson was Vice President
of Sales and Services for MCI
Communicationss Global Contact Center
Group. From 1982 to 2000, Mr. Anderson
was employed by MCI in a variety of sales
and operational roles. |
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Arthur Di Bari
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51 |
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Mr. Di Bari joined us as Senior Vice
President, Operations in March 2008. From
2005 to 2008 Mr. DiBari was Regional Vice
President, Emerging Markets for the
Americas for ACS, a leading provider of
business process outsourcing and
information technology solutions.
Mr. Di Bari joined ACS in 2004. Prior to
that, Mr. Di Bari spent over six years
with Aegis Communications Group, a
Texas-based customer care organization,
where he held numerous operational roles
of increasing responsibility, including
Senior Vice President of Operations. |
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Joseph R. Doolan
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44 |
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Mr. Doolan has served as our Vice
President and Controller since February
2006. Prior to joining APAC, from 2004 to
2006 Mr. Doolan was Vice President and
Controller for CNH Capital, a broad-based
financial services company and a
subsidiary of CNH Global N.V., where he
managed the North American and
International finance teams. Prior to
joining CNH Capital in from 2002 to 2003,
Mr. Doolan was Controller at GE Healthcare
Financial Services. From 1995 to 2002, Mr.
Doolan worked for Heller Financial Inc.
where he held various positions of
increasing responsibility in finance and
accounting. |
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Michael V. Hoehne
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44 |
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Mr. Hoehne serves as our Vice President,
Human Resources, a position he has held
since August 2006. Prior to Joining APAC,
from 2005 to 2006, Mr. Hoehne served as
Vice President of Human Resources for
Wickes Furniture Co. From 1995 to 2005,
Mr. Hoehne held several Human Resources
leadership roles with Sears, Roebuck and
Co. |
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Mark E. McDermott
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47 |
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Mr. McDermott is a Vice President of our
company and serves as our Chief
Information Officer a position he has had
since April 2004. Previously, Mr.
McDermott served as our Vice President,
Solutions. He has been employed by us in
various positions since March 1996. From
April 2004 until June 2007, Mr. McDermott
was our Senior Vice President and Chief
Information Officer. From June 2007 until
March 2008, Mr. McDermott was our Senior
Vice President, Operations and Chief
Information Officer. |
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Pamela R. Schneider
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48 |
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Ms. Schneider has served as our Senior
Vice President, Secretary and General
Counsel since June, 2005. Prior to
joining the Company, Ms. Schneider was
employed by Sears, Roebuck and Co. from
1996 to 2005, where her last position was
Vice President, Deputy General Counsel -
Retail Merchandising & Marketing. During
her nine years with Sears she also held
various executive positions in the Sears
Law Department supporting its retail
operations, home services and home stores
business areas. |
10
EXECUTIVE COMPENSATION
Employment Arrangements with Michael P. Marrow, President and Chief Executive Officer
Effective February 25, 2008, Mr. Michael P. Marrow was appointed our Chief Executive Officer
and joined our Board of Directors. Mr. Marrow replaced Mr. Robert J. Keller who announced his
intention to retire earlier this year and served as our Chief Executive Officer and a director from
March 2004 through February 18, 2008.
Compensation
We entered into an Executive Employment Agreement with Mr. Marrow which provides that he will
be paid an annual base salary of $350,000 and will be eligible to participate in and earn an annual
bonus pursuant to the our Amended and Restated 2005 Management Incentive Plan or under a successor
annual incentive plan (MIP). No annual cash bonus is guaranteed, but Mr. Marrow is eligible for a
target bonus equal to 50% of his base salary and a maximum bonus equal to 100% of his base salary.
In addition, we agreed to pay Mr. Marrow a sign-on bonus of $100,000 and granted him an option to
purchase 900,000 Common Shares. The option vests in five equal installments beginning on February
25, 2009 and has an exercise price of $1.21 per share. We also agreed to reimburse Mr. Marrow up
to $3,000 per month of actual expenses incurred by him in connection with his maintenance of a
residence near our headquarters facilities.
On March 20, 2008, the Compensation Committee approved an annual management incentive program
pursuant to our MIP (the 2008 MIP) for Mr. Marrow and all other executive officers of the
Company. Under the terms of our 2008 MIP, Mr. Marrow is eligible to receive a cash bonus for
fiscal year 2008 based on our achieving certain financial performance goals established by the
Compensation Committee. Mr. Marrows 2008 MIP will be based 50% on our achieving the threshold or
maximum revenue amounts established by our Compensation Committee and 50% on our achieving the
threshold or maximum adjusted EBITDA amounts established by our Compensation Committee.
The threshold and maximum financial performance goals established by our Compensation
Committee for the 2008 MIP are based on our 2008 financial plan approved by our Board of Directors.
Revenue is defined as net revenue, as reported in our quarterly and annual audited financial
statements. Adjusted EBITDA is defined as net income (loss) plus the provision (benefit) for
income taxes, depreciation and amortization, and interest expense, calculated from the information
contained in our quarterly and annual audited financial statements, and excludes the effects of
charges which would be split out from normal operating expenses (e.g. restructuring, asset
impairment and other charges or gains). The total incentive payout under the 2008 MIP to Mr.
Marrow and all other participants for any overachievement of financial performance goals beyond the
threshold amounts established by our Compensation Committee shall not exceed 50% of our incremental
adjusted EBITDA over 2008 financial plan levels.
In determining Mr. Marrows compensation package, our objective was to change the mix of
compensation provided to our Chief Executive Officer and place more weight on the long-term equity
component. As a result, Mr. Marrows annual base salary and annual incentive opportunity are less
than those provided to Mr. Keller, our former Chief Executive Officer; however, the number of stock
options granted to him is more than double the amount provided to Mr. Keller when he became our
Chief Executive Officer in March 2004.
Potential Payments Upon Termination or Change of Control
Mr. Marrows Executive Employment Agreement requires us to provide compensation to him in the
event of a termination of employment. Mr. Marrow also has an Employment Security Agreement which
provides for certain payments in the event of a change of control of our company. In addition, to
the extent not contemplated by his Executive Employment Agreement or the Employment Security
Agreement, Mr. Marrows stock option agreement provides for the acceleration of vesting in the
event of a change of control and upon termination under certain circumstances. Our Compensation
Committee retains discretion to determine the amount, if any, of any additional payments and
benefits which may be paid to Mr. Marrow upon termination of his employment. In making such a
determination, our Compensation Committee may consider a number of factors including the reasons
for the termination, his tenure and performance, his personal circumstances and the amount of
payments and benefits, if any, generally offered to executive officers at other companies in
similar positions.
Mr. Marrow has signed an Agreement Protecting Company Interests which provides that during the
term of his employment with us and for a period of two years after his termination, he will not
solicit our clients or employees and will refrain from working for or consulting with any of our
competitors. In the event Mr. Marrow violates his Agreement Protecting Company Interests, we may be
entitled to recover some or all of the payments and benefits that were paid by us upon termination
of employment.
11
The nature and amount of payments and benefits to Mr. Marrow is entitled to in the event of a
termination of employment as a result of retirement, death or disability, involuntary termination
(not for cause), voluntary termination, termination for cause, and termination in connection with a
change of control, as well as in the event of a change of control without termination of employment
are identical to the payments and benefits for the Named Executive Officers (other than Mr. Keller,
our former Chief Executive Officer) described under Potential Payments Upon Termination or Change
of Control appearing elsewhere in the Executive Compensation section of this Proxy Statement,
with the exception of the following:
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|
In the event of involuntary termination not for cause Mr. Marrow will be entitled to
severance payments in an amount equal to his base salary for a period of 12 months payable in
equal installments over a period of 24 months. |
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|
We will reimburse Mr. Marrow for payments by him to exercise his or her rights under COBRA
for a period of 12 months. |
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|
|
In the event Mr. Marrow voluntarily terminates his employment with us for any reason prior
to a change of control, or in the event Mr. Marrow is terminated for cause (as defined in
his Executive Employment Agreement), he is not entitled to receive any payments or benefits
other than accrued obligations earned by Mr. Marrow prior to the date of his termination.
Such accrued obligations generally consist of his then-current base salary through the
termination date to the extent not theretofore paid, and any accrued but unused vacation days
as of his termination date. |
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|
|
As used in Mr. Marrows Executive Employment Agreement, cause shall mean (i) the
commission by him of an act of malfeasance, dishonesty, fraud, or breach of trust against the
company or any of its employees, clients, or suppliers, (ii) the breach by him of any
fiduciary or common law duty to the company, or any obligations under his Executive
Employment Agreement, or any other agreement between him and the company, (iii) his willful
failure to comply with the companys material written policies, (iv) his failure, neglect, or
refusal to perform his duties under his Executive Employment Agreement, or to follow the
lawful written directions of the company (including, without limitation, from the our Board
of Directors), which failure is not cured (if curable) within ten (10) days after written
notice has been given by the company to him, (v) his conviction of, or plea of guilty or no
contest to, any felony, or (vi) any act or omission by him that is, or is reasonably likely
to be, materially injurious to our financial condition, business reputation or business
relationships, or that otherwise is materially injurious to the our employees, clients,
customers or suppliers. |
12
2007 Summary Compensation Table
The following table sets forth information with respect to all compensation paid or earned for
services rendered to us by the Named Executive Officers during fiscal years 2006 and 2007. The
amounts shown in the table reflect the expense to us for stock awards or stock options expenses, as
the case may be, recognized in fiscal years 2006 and 2007. These amounts were determined in
accordance with FAS 123(R), and may include amounts from awards granted prior to years 2006 and
2007. See Accounting For Stock-Based Compensation in Note 3 of the Notes to Consolidated
Financial Statements in our Form 10-K filed with the SEC on March 14, 2008.
No cash bonuses were awarded to the Named Executive Officers in 2008 relative to fiscal year 2007
performance. See Compensation Discussion and Analysis Annual Cash Incentive 2007 MIP
appearing elsewhere in the Executive Compensation section of this Proxy Statement. In lieu of an
annual cash bonus for fiscal year 2006 performance, on February 7, 2006, the Board of Directors
granted 65,000 restricted Common Shares to Mr. Keller, and 29,000 restricted Common Shares to each
of the Named Executive officers. Such restricted Common Shares vested on February 7, 2008.
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
Incentive Plan |
|
|
Compensation |
|
|
All Other |
|
|
|
|
Name and |
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Earnings |
|
|
Compensation |
|
|
Total |
|
Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Robert J. Keller (1) |
|
|
2007 |
|
|
|
440,000 |
|
|
|
|
|
|
|
253,107 |
|
|
|
311,887 |
|
|
|
|
|
|
|
|
|
|
|
5,477 |
|
|
|
1,010,471 |
|
Former
President, Chief |
|
|
2006 |
|
|
|
428,462 |
|
|
|
107,732 |
|
|
|
55,904 |
|
|
|
311,887 |
|
|
|
|
|
|
|
|
|
|
|
16,634 |
|
|
|
920,619 |
|
Executive
Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George H. Hepburn III |
|
|
2007 |
|
|
|
315,000 |
|
|
|
|
|
|
|
27,764 |
|
|
|
27,892 |
|
|
|
|
|
|
|
|
|
|
|
5,709 |
|
|
|
376,365 |
|
SVP, Chief Financial Officer |
|
|
2006 |
|
|
|
306,924 |
|
|
|
35,000 |
|
|
|
24,942 |
|
|
|
27,892 |
|
|
|
|
|
|
|
|
|
|
|
9,347 |
|
|
|
404,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. LaBonte (2) |
|
|
2007 |
|
|
|
262,788 |
|
|
|
|
|
|
|
27,764 |
|
|
|
29,322 |
|
|
|
|
|
|
|
|
|
|
|
4,126 |
|
|
|
324,000 |
|
General Manager, UPS |
|
|
2006 |
|
|
|
280,760 |
|
|
|
35,000 |
|
|
|
24,942 |
|
|
|
48,348 |
|
|
|
|
|
|
|
|
|
|
|
11,378 |
|
|
|
400,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James M. McClenahan (1) |
|
|
2007 |
|
|
|
315,000 |
|
|
|
|
|
|
|
27,764 |
|
|
|
71,240 |
|
|
|
|
|
|
|
|
|
|
|
4,845 |
|
|
|
418,849 |
|
Former SVP, Sales and |
|
|
2006 |
|
|
|
310,673 |
|
|
|
35,000 |
|
|
|
24,942 |
|
|
|
71,240 |
|
|
|
|
|
|
|
|
|
|
|
7,082 |
|
|
|
448,937 |
|
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark E. McDermott |
|
|
2007 |
|
|
|
291,346 |
|
|
|
|
|
|
|
27,764 |
|
|
|
74,163 |
|
|
|
|
|
|
|
|
|
|
|
12,861 |
|
|
|
406,134 |
|
SVP, Operations and CIO |
|
|
2006 |
|
|
|
264,231 |
|
|
|
50,000 |
|
|
|
24,942 |
|
|
|
77,646 |
|
|
|
|
|
|
|
|
|
|
|
10,063 |
|
|
|
426,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela R. Schneider |
|
|
2007 |
|
|
|
270,000 |
|
|
|
|
|
|
|
27,764 |
|
|
|
27,390 |
|
|
|
|
|
|
|
|
|
|
|
10,458 |
|
|
|
335,612 |
|
SVP, General
Counsel and Secretary |
|
|
2006 |
|
|
|
267,115 |
|
|
|
35,000 |
|
|
|
24,942 |
|
|
|
27,390 |
|
|
|
|
|
|
|
|
|
|
|
10,050 |
|
|
|
364,497 |
|
Notes to 2007 Summary Compensation Table
|
|
|
(1) |
|
Mr. Keller retired as President and Chief Executive Officer effective as of February 18,
2008. Mr. McClenahan resigned as Senior Vice President, Sales and Marketing on March 28,
2008. |
|
(2) |
|
Mr. LaBontes responsibilities and role changed in 2007. Previously, he was Senior Vice
President, Operations and currently he is General Manager, UPS. |
13
2007 Grants of Plan-Based Awards
The following table sets forth the number of restricted Common Shares and stock options, if
any, granted to the Named Executive Officers during fiscal year 2007 and details concerning each
Named Executive Officers annual bonus opportunity under the 2007 MIP. Except for a grant of
restricted Common Shares to Mr. Keller, no new options for Common Shares or restricted Common
Shares were granted to the Named Executive Officers in fiscal year 2007. For further information
see Compensation Discussion and Analysis Long-Term Equity Incentives 2007 Equity Grants to
Named Executive Officers appearing elsewhere in the Executive Compensation section of this Proxy
Statement.
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
Option |
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: |
|
|
Awards: |
|
|
Exercise or |
|
|
Fair Value of |
|
|
|
|
|
|
|
Estimated Future Payouts Under |
|
|
Estimated Future Payouts Under |
|
|
Number of |
|
|
Number of |
|
|
Base Price |
|
|
Stock and |
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards (1) |
|
|
Equity Incentive Plan Awards |
|
|
Shares of |
|
|
Securities |
|
|
of Option |
|
|
Option |
|
Name and |
|
Grant |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Stock or Units |
|
|
Underlying |
|
|
Awards |
|
|
Awards |
|
Principal Position |
|
Date |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
(#) |
|
|
(#) |
|
|
(#) |
|
|
(#) |
|
|
Options |
|
|
($/Sh) |
|
|
($)(2) |
|
Robert J. Keller |
|
|
|
|
|
|
220,000 |
|
|
|
330,000 |
|
|
|
660,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former
President, Chief Executive |
|
|
2/26/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
454,500 |
|
Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George H. Hepburn III |
|
|
|
|
|
|
31,500 |
|
|
|
126,000 |
|
|
|
252,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
SVP, Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. LaBonte |
|
|
|
|
|
|
25,000 |
|
|
|
100,000 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
General Manager, UPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James M. McClenahan |
|
|
|
|
|
|
31,500 |
|
|
|
126,000 |
|
|
|
252,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
Former SVP, Sales and Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark E. McDermott |
|
|
|
|
|
|
30,000 |
|
|
|
120,000 |
|
|
|
240,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
SVP, Operations and CIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela R. Schneider |
|
|
|
|
|
|
27,000 |
|
|
|
108,000 |
|
|
|
216,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
N/A |
|
SVP, General Counsel and
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to 2007 Grants of Plan-Based Awards Table
|
|
|
(1) |
|
The amounts shown in the table represent the annual cash incentive compensation amounts that
potentially could have been earned during 2007 based on the achievement of performance goals
under our 2007 MIP. For further information about our 2007 MIP, see Compensation Discussion
and Analysis Annual Cash Incentive 2007 MIP appearing elsewhere in the Executive
Compensation section of this Proxy Statement. |
|
(2) |
|
The amount shown in the table reflects the fair value of the entire grant on the grant date,
and was determined in accordance with FAS 123(R). Only a portion of this amount was expensed
by us in 2007. See Accounting For Stock-Based Compensation in Note 3 of the Notes to
Consolidated Financial Statements in our Form 10-K filed with the SEC on March 14, 2008. |
14
Outstanding Equity Awards on December 30, 2007
The following table sets forth information regarding the outstanding equity awards held by the
Named Executive Officers as of December 30, 2007. The vesting dates for any equity awards not
vested on December 30, 2007 are set forth in the applicable footnotes. Some of the equity awards
set forth in this table have vested since the December 30, 2007 effective date of this table as
noted in the footnotes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Incentive |
|
|
Equity Incentive |
|
|
|
|
|
|
|
|
|
|
|
Plan Awards; |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards: |
|
|
Plan Awards: |
|
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Market or Payout |
|
|
|
Securities |
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Market Value |
|
|
Unearned |
|
|
Value of |
|
|
|
Underlying |
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Shares or |
|
|
of Shares or |
|
|
Shares, Units |
|
|
Unearned Shares, |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
|
|
|
|
Units of Stock |
|
|
Units of Stock |
|
|
or Other |
|
|
Units or Other |
|
|
|
Options |
|
|
Options |
|
|
Unearned |
|
|
Exercise |
|
|
Option |
|
|
That Have Not |
|
|
That Have Not |
|
|
Rights That Have |
|
|
Rights That Have |
|
Name and |
|
(#) |
|
|
(#) |
|
|
Options |
|
|
Price |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
|
Not Vested |
|
|
Not Vested |
|
Principal Position |
|
Exercisable |
|
|
Unexercisable |
|
|
(#) |
|
|
($) |
|
|
Date |
|
|
(#)(1) |
|
|
($)(2) |
|
|
(#) |
|
|
($) |
|
Robert J. Keller |
|
|
300,000 |
|
|
|
100,000 |
(3) |
|
|
|
|
|
|
2.90 |
|
|
|
3/15/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former President, Chief |
|
|
300,000 |
|
|
|
450,000 |
|
|
|
|
|
|
|
1.62 |
|
|
|
2/8/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,000 |
|
|
|
76,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
118,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George H. Hepburn III |
|
|
120,000 |
|
|
|
180,000 |
(4) |
|
|
|
|
|
|
0.85 |
|
|
|
9/19/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,000 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. LaBonte |
|
|
25,400 |
|
|
|
|
(5) |
|
|
|
|
|
|
6.50 |
|
|
|
4/30/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Manager, UPS |
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
3.44 |
|
|
|
9/2/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,850 |
|
|
|
|
|
|
|
|
|
|
|
2.98 |
|
|
|
8/3/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
2.34 |
|
|
|
8/31/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
|
11.63 |
|
|
|
1/10/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000 |
|
|
|
|
|
|
|
|
|
|
|
2.89 |
|
|
|
12/2/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,125 |
|
|
|
|
|
|
|
|
|
|
|
2.90 |
|
|
|
1/24/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,500 |
|
|
|
|
|
|
|
|
|
|
|
3.57 |
|
|
|
8/1/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,825 |
|
|
|
|
|
|
|
|
|
|
|
2.81 |
|
|
|
2/10/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
|
2.31 |
|
|
|
3/9/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,000 |
|
|
|
|
|
|
|
0.86 |
|
|
|
7/1/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,000 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James M. McClenahan |
|
|
56,250 |
|
|
|
18,750 |
(6) |
|
|
|
|
|
|
1.77 |
|
|
|
6/10/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former SVP, Sales and Marketing |
|
|
120,000 |
|
|
|
180,000 |
|
|
|
|
|
|
|
1.62 |
|
|
|
2/8/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,000 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark E. McDermott |
|
|
5,000 |
|
|
|
|
(7) |
|
|
|
|
|
|
6.50 |
|
|
|
12/31/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Operations and CIO |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
6.50 |
|
|
|
12/31/2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,500 |
|
|
|
|
|
|
|
|
|
|
|
6.50 |
|
|
|
4/30/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
3.44 |
|
|
|
9/2/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,504 |
|
|
|
|
|
|
|
|
|
|
|
2.98 |
|
|
|
8/3/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
|
|
|
|
5.88 |
|
|
|
12/1/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,500 |
|
|
|
|
|
|
|
|
|
|
|
2.90 |
|
|
|
1/24/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
|
|
|
|
|
|
|
|
|
|
|
3.57 |
|
|
|
8/1/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,040 |
|
|
|
|
|
|
|
|
|
|
|
2.81 |
|
|
|
2/10/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750 |
|
|
|
6,250 |
|
|
|
|
|
|
|
2.86 |
|
|
|
3/7/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,750 |
|
|
|
6,250 |
|
|
|
|
|
|
|
2.96 |
|
|
|
4/14/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000 |
|
|
|
180,000 |
|
|
|
|
|
|
|
1.62 |
|
|
|
2/8/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,000 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela R. Schneider |
|
|
120,000 |
|
|
|
180,000 |
(8) |
|
|
|
|
|
|
0.88 |
|
|
|
6/13/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, General Counsel and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,000 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Outstanding Equity Awards on December 30, 2007 Table
(1) |
|
For each Named Executive Officer other than Mr. Keller, all restricted Common Shares vested
on February 7, 2008. Mr. Kellers 65,000 restricted Common Shares vested on February 7, 2008,
an additional 50,000 restricted Common Shares vested on February 26, 2008, and the remaining
50,000 restricted Common Shares were forfeited upon Mr. Kellers termination of employment on
April 19, 2008. |
(2) |
|
The market value of the restricted Common Shares shown is based on the closing price for our
Common Shares on The NASDAQ Stock Market, Inc. as of December 28, 2007 the last trading day
of our 2007 fiscal year ($1.18 per Common Share). |
15
(3) |
|
Mr. Kellers outstanding options include the grants, grant dates and vesting dates set forth
below. As Mr. Kellers employment terminated on April 19, 2008, all unvested options expired
by their terms. Mr. Keller has until October 19, 2008 to exercise the vested portion of his
March 15, 2004 option and until July 18, 2008 to exercise the vested portion of his February
8, 2005 option. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
Underlying |
|
|
Vesting Date & Number of Common Shares |
|
Grant Date |
|
Options |
|
|
Vesting on Such Date |
March 15, 2004 |
|
|
400,000 |
|
|
March 15, 2005 |
|
|
100,000 |
|
|
(Vested) |
|
|
|
|
|
|
March 15, 2006 |
|
|
100,000 |
|
|
(Vested) |
|
|
|
|
|
|
March 15, 2007 |
|
|
100,000 |
|
|
(Vested) |
|
|
|
|
|
|
March 15, 2008 |
|
|
100,000 |
|
|
(Vested) |
February 8, 2005 |
|
|
750,000 |
|
|
February 8, 2006 |
|
|
150,000 |
|
|
(Vested) |
|
|
|
|
|
|
February 8, 2007 |
|
|
150,000 |
|
|
(Vested) |
|
|
|
|
|
|
February 8, 2008 |
|
|
150,000 |
|
|
(Vested) |
|
|
|
|
|
|
February 8, 2009 |
|
|
150,000 |
|
|
(Expired) |
|
|
|
|
|
|
February 8, 2010 |
|
|
150,000 |
|
|
(Expired) |
(4) |
|
Mr. Hepburns outstanding options include the following grants, grant dates and vesting
dates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
Underlying |
|
|
Vesting Date & Number of Common Shares |
Grant Date |
|
Options |
|
|
Vesting on Such Date |
September 19, 2005 |
|
|
300,000 |
|
|
September 19, 2006 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
September 19, 2007 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
September 19, 2008 |
|
60,000 |
|
|
|
|
|
|
|
|
September 19, 2009 |
|
60,000 |
|
|
|
|
|
|
|
|
September 19, 2010 |
|
60,000 |
|
|
(5) |
|
Mr. LaBontes outstanding options include the following grants, grant dates and vesting
dates. All of Mr. LaBontes remaining options are fully vested. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
|
Underlying |
|
|
Vesting Date & Number of Common Shares |
Grant Date |
|
Options |
|
|
Vesting on Such Date |
July 1, 2005 |
|
|
180,000 |
|
|
July 1, 2008 |
|
|
60,000 |
|
|
|
|
|
|
|
|
July 1, 2009 |
|
|
60,000 |
| |
|
|
|
|
|
|
July 1, 2010 |
|
|
60,000 |
|
|
16
(6) |
|
Mr. McClenahans outstanding options include the following grants, grant dates and vesting
dates. As Mr. McClenahans employment was terminated on March 28, 2008, all unvested options
expired by their terms. Mr. McClenahan has until June 26, 2008 to exercise the vested
portions of his June 11, 2004 and February 8, 2005 options. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
Underlying |
|
|
Vesting Date & Number of Common Shares |
Grant Date |
|
Options |
|
|
Vesting on Such Date |
June 11, 2004 |
|
|
75,000 |
|
|
June 11, 2005 |
|
18,750 |
|
(Vested) |
|
|
|
|
|
|
June 11, 2006 |
|
18,750 |
|
(Vested) |
|
|
|
|
|
|
June 11, 2007 |
|
18,750 |
|
(Vested) |
|
|
|
|
|
|
June 11, 2008 |
|
18,750 |
|
(Expired) |
February 8, 2005 |
|
|
300,000 |
|
|
February 8, 2006 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
February 8, 2007 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
February 8, 2008 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
February 8, 2009 |
|
60,000 |
|
(Expired) |
|
|
|
|
|
|
February 8, 2010 |
|
60,000 |
|
(Expired) |
(7) |
|
Mr. McDermotts outstanding options include the following grants, grant dates and vesting
dates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
Underlying |
|
|
Vesting Date & Number of Common Shares |
Grant Date |
|
Options |
|
|
Vesting on Such Date |
March 8, 2004 |
|
|
25,000 |
|
|
March 8, 2005 |
|
6,250 |
|
(Vested) |
|
|
|
|
|
|
March 8, 2006 |
|
6,250 |
|
(Vested) |
|
|
|
|
|
|
March 8, 2007 |
|
6,250 |
|
(Vested) |
|
|
|
|
|
|
March 8, 2008 |
|
6,250 |
|
(Vested) |
April 15, 2004 |
|
|
25,000 |
|
|
April 15, 2005 |
|
6,250 |
|
(Vested) |
|
|
|
|
|
|
April 15, 2006 |
|
6,250 |
|
(Vested) |
|
|
|
|
|
|
April 15, 2007 |
|
6,250 |
|
(Vested) |
|
|
|
|
|
|
April 15, 2008 |
|
6,250 |
|
(Vested) |
February 8, 2005 |
|
|
300,000 |
|
|
February 8, 2006 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
February 8, 2007 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
February 8, 2008 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
February 8, 2009 |
|
60,000 |
|
|
|
|
|
|
|
|
February 8, 2010 |
|
60,000 |
|
|
(8) |
|
Ms. Schneiders outstanding options include the following grants, grant dates and vesting
dates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
Underlying |
|
|
Vesting Date & Number of Common Shares |
Grant Date |
|
Options |
|
|
Vesting on Such Date |
June 13, 2005 |
|
|
300,000 |
|
|
June 13, 2006 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
June 13, 2007 |
|
60,000 |
|
(Vested) |
|
|
|
|
|
|
June 13, 2008 |
|
60,000 |
|
|
|
|
|
|
|
|
June 13, 2009 |
|
60,000 |
|
|
|
|
|
|
|
|
June 13, 2010 |
|
60,000 |
|
|
17
2007 Options Exercised and Stock Vested
The following table sets forth information regarding the stock options exercised and
restricted Common Shares vested for each of the Named Executive Officers during fiscal year 2007.
Mr. LaBonte is the only Named Executive Officer who exercised any options for Common Shares during
2007.
|
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|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
Number of shares |
|
|
|
|
|
|
|
|
|
|
acquired upon |
|
|
Value realized on |
|
|
Number of shares |
|
|
Value realized on |
|
Name and |
|
exercise |
|
|
exercise |
|
|
acquired on vesting |
|
|
vesting |
|
Principal Position |
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
Robert J. Keller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former President, Chief
Executive
Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George H. Hepburn III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Chief Financial
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. LaBonte |
|
|
120,000 |
|
|
|
212,628 |
|
|
|
|
|
|
|
|
|
General Manager, UPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James M. McClenahan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former SVP, Sales and
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark E. McDermott |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Operations and CIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pamela R. Schneider |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, General Counsel and
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Compensation Tables
All other tables have been omitted because they are not applicable to us in fiscal year 2007.
Compensation Discussion and Analysis
Overview of Compensation Process
The Compensation Committee of our Board of Directors is responsible for establishing,
implementing and monitoring adherence with our compensation philosophy. The committee establishes
total compensation for our President and Chief Executive Officer and, with input from our Chief
Executive Officer, establishes compensation for our other Named Executive Officers. Our
Compensation Committee does not delegate any of its authority in this regard. Mr. Keller was our
principal executive officer during fiscal year 2007. Mr. Keller retired as our Chief Executive
Officer on February 18, 2008. Mr. Keller, our principal financial officer, our three most highly
compensated executive officers (other than our principal executive officer and principal financial
officer) who were serving as executive officers at the end of fiscal year 2007, and one additional
individual, Mr. David J. LaBonte, who would have been one of the three most highly compensated
executive officers but for the fact that he was not serving as an executive officer at the end of
fiscal year 2007 are our Named Executive Officers for 2007.
Our Compensation Committee is composed of three independent directors. From time to time, we
retain independent compensation consultants to provide objective and expert advice on various
compensation plan design issues, although in fiscal year 2007 we did not retain any such firm. In
February 2004, we engaged the services of RMS McGladrey to provide a competitive analysis to assist
us in creating an appropriate compensation package for Mr. Keller. In December 2004, we engaged
the services of Hewitt Associates to conduct an executive pay study and assist us in developing our
annual cash incentive and long term equity incentive programs for our executive officers (including
the Named Executive Officers) as well as certain other employees. From time to time, we also use
additional compensation data which we obtain from established executive compensation survey
sources.
18
In addition to Mr. Keller, the following executive officers participated in the preparation,
development and review of various executive compensation presentations made to our Compensation
Committee and our Board of Directors during fiscal year 2007: Mr. George H. Hepburn III, our
Senior Vice President and Chief Financial Officer; and Ms. Pamela R. Schneider, our Senior Vice
President, General Counsel and Secretary.
Compensation Objectives
We design our executive compensation policies with the objective of attracting, motivating and
retaining the highest quality executives. Our goal is to compete in the market for high caliber
individuals who possess the talent and capabilities we believe necessary to our success. We believe
the most effective executive compensation program is one that is designed to reward the achievement
of specific annual, long-term and strategic goals and which aligns executives interests with those
of our shareholders by rewarding performance which ultimately improves shareholder value.
Compensation Philosophy
We desire to attract and retain superior executive talent by offering a total compensation
package that is competitive with the compensation practices of those companies with which we
compete for executive talent. Such companies include both publicly-traded and private (i) companies
in our industry, (ii) companies having annual revenue comparable to ours (i.e., under
$500 million), and (iii) Chicago-area based Fortune 500 companies. We believe that total
compensation packages for our executive officers should reward individual performance, put a
significant portion of the executives compensation at risk of achieving pre-established
objectives, and align the interests of our executive officers with those of our shareholders. To
that end, our compensation packages contain both cash and stock-based compensation as well as
short-term and long-term incentives.
The market for suitable executive leadership is very competitive and we contend with many
larger companies for top executive-level talent. As a result, our practice is to target total
compensation levels for our executive officers at above-median levels. Accordingly, our
Compensation Committee determined that the total compensation packages for our executive officers
should be between the 50th percentile and the 75th percentile of the packages of executive officers
at companies with which we compete for executive talent. Variations to this objective may occur as
dictated by the performance and/or experience level of an individual and other market factors.
Elements of Compensation
To achieve our objectives, our executive compensation program includes the following
components:
|
|
|
Base Salary: An annual base salary, subject to discretionary annual merit
increases based on the executives overall performance during the previous year; |
|
|
|
|
Annual Cash Incentive: A potential annual cash bonus under our management
incentive plan based on our attaining certain specified financial performance measures; |
|
|
|
|
Long-Term Equity Incentives: Long-term incentives consisting of stock options
and performance-based restricted share grants under our incentive stock plan; and |
|
|
|
|
Other Employee Benefits: Other employee benefits including the right to
participate in company-sponsored benefit and welfare plans such as health, dental and
prescription drug insurance, the premiums of which are partly paid for by us,
company-sponsored flexible spending accounts for certain qualified medical, dental and
childcare expenses, matching contributions to our 401(k) plan and supplemental
401(k) restoration plan for highly compensated employees, and company-subsidized
supplemental life insurance. |
The Summary Compensation Table sets forth the amounts for these components that we paid each
of the Named Executive Officers in fiscal year 2007. See 2007 Summary Compensation Table
appearing elsewhere in the Executive Compensation section of this Proxy Statement. For fiscal
year 2007, we did not make any material changes to the weighting or amount of any components of the
compensation paid to our Named Executive Officers.
In addition, to provide for executive stability, we offer our Named Executive Officers
payments and benefits (i) in the event an executive officer is involuntarily terminated other than
for cause or resigns for good reason and (ii) in the event we experience a change of control. See
Potential Payments Upon Termination or Change of Control appearing elsewhere in the Executive
Compensation section of this Proxy Statement.
19
We compensate our Named Executive Officers (and other executive officers) primarily by using a
combination of short-term compensation (salary and annual cash incentive compensation) and
long-term compensation (stock options and restricted common shares). We have historically
determined the mix of short-term and long-term compensation and the mix of base and incentive
compensation by using market compensation information provided by an outside consultant or by
reference to established executive compensation surveys. We believe it is important that a portion
of our executive officers incentive compensation is dependant upon our stock price, and a
substantial portion of their overall compensation opportunity consists of equity compensation.
However, since the price of our Common Shares is subject to some factors outside our control and
the control of our executive officers, we also believe it is important that a portion of an
executive officers incentive compensation be tied to the performance of goals relating to the
operations of our company. Accordingly, we tie our executive officers annual cash incentive
compensation to the achievement of financial performance goals that we believe help to drive our
business and create value for our shareholders. On a total dollar value basis, other benefits
compensation is smaller when compared to cash and equity compensation portions of our total
executive compensation package.
Conversely, there are certain types of compensation that we have elected to omit from our
executive compensation packages, as we believe they are of limited value in attracting, retaining
and motivating the type of executive officers we seek. Examples of the types of executive
compensation that we deemed to be unnecessary include: (i) a defined benefit (pension) plan; (ii) a
stipend or expenses for a company car; and (iii) country club memberships. We believe that we are
not negatively affected by our failure to offer these types of benefits and perquisites to our
executive officers.
Base Salary
Annual base salary is a major component of overall cash compensation each year. Generally, we
determine base salaries for each Named Executive Officer by evaluating his or her experience,
performance, and any changes in the executives duties during the year. We also consider the
competitive market for executive talent, and compare salaries we pay our executive officers to
those paid to executive officers in comparable positions at companies with which we compete for
such talent. See Compensation Philosophy.
Salary levels are typically considered annually as part of our performance review process as
well as upon a promotion or other change in job responsibility. Merit increases in annual base
salary (if any) are discretionary, and are awarded depending upon the executive officers overall
performance during the prior year. For cost containment purposes, all of our Named Executive
Officers declined their merit increases in 2007. Mr. McDermotts annual base salary was increased
from $270,000 in fiscal year 2006 to $300,000 for fiscal year 2007 due to an increase in his
responsibilities resulting from his promotion to Senior Vice President, Operations and Chief
Information Officer. Prior to fiscal year 2007 Mr. McDermott was our Senior Vice President and
Chief Information Officer. Mr. LaBontes annual base salary was decreased from $285,000 in fiscal
year 2006 to $250,000 in fiscal year 2007 due to a reduction in his responsibilities. During
fiscal year 2006, Mr. LaBonte was our Senior Vice President, Operations.
Annual Cash Incentive
No annual cash bonus is guaranteed, but our Named Executive Officers are eligible for annual
bonuses under our MIP, which was approved by our shareholders on June 3, 2005. The MIP gives the
Compensation Committee the latitude to design cash and stock-based short-term and long-term
incentive compensation programs to promote exceptional performance and achievement of corporate
goals by key employees. Under the MIP, cash incentive opportunities are designed annually around a
strategic mix of corporate and individual performance objectives. All performance targets for the
Named Executive Officers are directly linked to the achievement of our annual financial plan. Any
annual bonus earned by Mr. Keller, our former Chief Executive Officer, may be paid one-half in cash
and one-half in restricted stock or deferrable restricted stock units which would vest 50% on grant
and 50% on the first anniversary of grant. Any annual bonuses earned by the other Named Executive
Officers are payable in cash.
2007 MIP
No annual cash bonuses were paid to any of the Named Executive Officer for fiscal year 2007 as
we failed to meet the threshold financial measures established by our Compensation Committee for
fiscal year 2007.
For fiscal year 2007, the Named Executive Officers were eligible to receive incentives under
the MIP based on our achieving certain threshold, target and maximum adjusted EBITDA, revenue and
earnings per share during fiscal year 2007. In addition, no payments under the MIP would have been
made to any participant unless the adjusted EBITDA threshold was met, and no payment would have
made on any individual financial measures unless the threshold for that financial measure was met.
20
We selected adjusted EBITDA, revenue and earnings per share as financial measures for the 2007
MIP to reward our executive officers for achieving three important business objectives top line
revenue growth, earnings growth and share price appreciation each of which we believe are
important drivers of our long-term financial success. The 2007 annual incentive bonus opportunity
was based 40% on our achieving threshold, target or maximum adjusted EBITDA for fiscal year 2007,
40% on our achieving threshold, target or maximum revenue for fiscal year 2007 and 20% on our
achieving threshold, target or maximum earnings per share for fiscal year 2007. In each case, the
thresholds, targets and maximums for each of the financial measures were based on our 2007 Plan. We
explain how we calculate adjusted EBITDA in the Managements Discussion and Analysis of Financial
Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year
ended December 30, 2007 filed with the SEC on March 14, 2007, under the heading Non-GAAP Financial
Measures.
The range of potential annual incentive payments for the Named Executive Officers during
fiscal year 2007 was determined by our Compensation Committee. For fiscal year 2007, the annual
bonus opportunity for Mr. Keller, our former Chief Executive Officer, at threshold, target and
maximum levels was 50%, 75% and 150% of his base salary, based solely on our performance against
annual financial measures established by the Compensation Committee. The fiscal year 2007 annual
bonus opportunity for the other Named Executive Officers at threshold, target and maximum levels
was 10%, 40% and 80% of each individuals base salary and was also conditioned on our performance
against the same annual financial measures that applied to Mr. Keller. The structure of the fiscal
year 2007 annual bonus ensured that a significant portion of each Named Executive Officers total
cash compensation was dependant on our results for the year.
Long-Term Equity Incentives
We believe that equity compensation is an important component of our Named Executive Officers
overall compensation package. We believe that shareholder value is best enhanced if our executive
officers are encouraged to strategically manage our company for long-term success. We grant
long-term incentive compensation in the form of stock options and restricted Common Shares under
our Amended and Restated 2005 Incentive Stock Plan (Incentive Stock Plan). We do not consider
outstanding options or restricted Common Shares held by a Named Executive Officer when making an
award.
While we believe that both forms of equity grants can be used to appropriately link the
creation of shareholder value to long-term executive officer incentive compensation, we have until
quite recently used only stock options for this purpose. Generally, we believe that stock options
provide a more leveraged upside incentive for our executive officers especially when the price of
our Common Shares is low and we are not profitable. Additionally, full-value restricted Common
Shares would have little retention value given the generally low price of our Common Shares. We
also prefer awarding executive officers stock options as incentives rather than restricted Common
Shares, because the only time the Named Executive Officer receives value from an option is when the
price of our Common Shares increases after the grant date. Restricted shares provide Named
Executive Officers compensation if our Common Shares maintain their value, and provide increased
compensation if the value of our Common Shares increases.
We structure our equity awards to promote the retention of our Named Executive Officers over
longer periods of time. Equity awards to Named Executive Officers typically vest over time. Stock
option grants to the Named Executive Officers vest in equal increments over four or five years
after their grant date and have ten year terms. The exercise price for stock options is the fair
market value of our Common Shares on the grant date. Until April 4, 2007, the fair market value of
such Common Shares as determined under the Incentive Stock Plan was the average of the high and low
selling prices of such Common Shares on The NASDAQ Stock Market, Inc. on the relevant valuation
date, or, if there were no sales on the valuation date, on the next preceding date on which such
selling prices were recorded. Effective April 4, 2007, the Incentive Stock Plan was amended to
provide that the fair market value would be the closing price of the Common Shares on The NASDAQ
Stock Market, Inc. on the valuation date. Grants of restricted Common Shares typically vest two
years from the date of grant, and vesting is sometimes conditioned on the achievement of specified
financial performance objectives established by the Compensation Committee.
2007 Equity Grants to Named Executive Officers
During fiscal year 2007, no equity awards were made to any Named Executive Officer other than
Mr. Keller, our former Chief Executive Officer.
On February 26, 2007, Mr. Keller received an equity award in the form of a grant of 100,000
restricted Common Shares. This grant was intended ensure the retention of Mr. Keller and to further
incent him to focus on increasing shareholder value over the long-term. These restricted Common
Shares were to become unrestricted and fully vested in two equal installments. On February 26,
2008, 50,000 of these Restricted Common Shares vested. The remaining 50,000 shares were forfeited
upon Mr. Kellers termination of employment effective on April 19, 2008. See Retirement
Arrangements with Mr. Keller appearing elsewhere in the Executive Compensation section of this
Proxy Statement.
21
Stock Option Grant Guidelines and Procedures
In May 2007, the Compensation Committee updated its guidelines for the granting of stock
options for fiscal years 2007 and beyond. Options granted pursuant to these guidelines vest
annually over a five-year period, as determined by the Compensation Committee, with partial
acceleration of vesting upon a change of control if the employee is then employed by us and full
vesting upon a termination of employment on or after a change of control in certain circumstances.
In October 2006, the Compensation Committee adopted standard policies and procedures regarding
the granting of stock options to employees, including executive officers. Stock option grants are
generally not timed to benefit the recipients, and are typically only approved during regularly
scheduled quarterly meetings of the Compensation Committee, except in limited circumstances. For
grants approved during the regularly scheduled Compensation Committee meetings, the issue date of
such grants is set to be the third trading day after the next subsequent quarterly earnings
announcement by us. We have not engaged in back-dating of options and do not grant options with
an exercise price below the fair market value of our Common Shares as defined under our Incentive
Stock Plan.
Employment Agreements
We entered into employment agreements with Mr. Marrow, our current Chief Executive Officer,
Mr. Keller, our former Chief Executive Officer and with Messrs. Hepburn, LaBonte, McClenahan,
McDermott, Mr. Arthur DiBari, Mr. Mark K. Anderson and Ms. Schneider. Other than the
aforementioned parties, we have not entered into any agreements or understandings with another
executive officer which guarantee continued employment or guarantee any level of compensation,
including incentive or bonus payments other than as described in Potential Payments Upon
Termination or Change of Control appearing elsewhere in the Executive Compensation section of
this Proxy Statement. We do not have a written policy regarding employment agreements.
Other Employee Benefits
We structure our compensation to provide competitive benefit packages to our Named Executive
Officers. These include company-sponsored benefit and welfare plans such as health, dental and
prescription drug insurance, the premiums of which are partly paid for by us, company-sponsored
flexible spending accounts for certain qualified medical, dental and childcare expenses, matching
contributions to our 401(k) plan, and company-subsidized supplemental life insurance. In addition,
we offer a supplemental 401(k) restoration plan to our highly compensated employees (as such
term is defined by the applicable regulations under the Internal Revenue Code), whose contributions
to our 401(k) plan are limited by the Internal Revenue Code, to make up for the limitations so
imposed. This restoration plan is available to all highly compensated employees, including all of
our Named Executive Officers. We also make matching contributions on behalf of these highly
compensated employees to the restoration plan (including any Named Executive Officer who elects
to participate). We believe the maintenance of our 401(k) restoration plan (and our matching
contributions to it) are necessary to maintain a competitive benefits package for our executive
officers, and so that they have the opportunity to defer the same percentage of their income, and
receive similar matching contributions, as our other employees.
Severance and Change in Control Agreements
We provide severance agreements to our Named Executive Officers as a retention incentive and
to ensure that in a potential change of control situation that could benefit our shareholders,
members of our management team retain their objectivity regarding the outcome of any transaction.
Each of our Named Executive Officers has a severance agreement that provides that if the
executives employment is terminated without cause, or, in the case of Messrs. Hepburn, McClenahan,
McDermott and LaBonte and Ms. Schneider, he or she voluntarily resigns for good reason, the
executive will receive specified payments and benefits. Our stock option and restricted stock award
agreements also provide for the acceleration of vesting in the event of termination and/or a change
of control. See Potential Payments Upon Termination or Change of Control appearing elsewhere in
the Executive Compensation section of this Proxy Statement.
Perquisites and Other Personal Benefits
Generally, we do not provide any perquisites or other personal benefits to our executive
officers (including the Named Executive Officers). Mr. Marrows employment agreement provides that
we will reimburse him up to $3,000 per month for reasonable, actual expenses incurred by him for
the purpose of his maintaining a residence near our corporate headquarters.
22
Tax Considerations
Deductibility of Executive Compensation
As part of its role, the Compensation Committee reviews and considers the deductibility of
executive compensation under Section 162(m) of the Internal Revenue Code (Section 162(m)), which
generally provides that we may not deduct compensation of more than $1,000,000 that is paid to
certain individuals, including the Named Executive Officers. Qualifying performance-based
compensation is specifically exempt from the deduction limit. We believe that the compensation paid
under the MIP is generally fully deductible for federal income tax purposes as it is based on
objective performance standards that are established by the Compensation Committee in accordance
with Section 162(m). However, in certain situations, the Compensation Committee may approve
compensation that does not meet the exemption requirements of Section 162(m) in order to ensure
competitive levels of total compensation for our executive officers.
Accounting for Stock-Based Compensation
Beginning on January 2, 2006, we began accounting for stock-based payments including stock
options and restricted Common Shares in accordance with the requirements of FAS Statement
No. 123(R) Share-Based Payment. See Accounting For Stock-Based Compensation in Note 3 of the
Notes to Consolidated Financial Statements in our Form 10-K filed with the SEC on March 14, 2008.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis
contained herein with management. Based on this review and discussion, the Compensation Committee
recommended to the Board of Directors that the Compensation Discussion and Analysis be included in
this Proxy Statement.
Respectfully submitted,
COMPENSATION COMMITTEE
John J. Park, Chairman
Cindy K. Andreotti
John C. Kraft
23
Potential Payments Upon Termination or Change of Control
We have certain agreements that require us to provide compensation to our Named Executive
Officers in the event of a termination of employment or a change of control of our company. The
payment and benefits due upon a Named Executive Officers termination of employment (other than in
connection with a change of control) are set forth in individual agreements between us and each of
the Named Executive Officers. Each of our Named Executive Officers also has an Employment Security
Agreement which provides for certain payments in the event of a change of control. In addition, to
the extent not contemplated by the employment agreements or the Employment Security Agreements, our
stock option agreements and restricted stock award agreements provide for the acceleration of
vesting in the event of a change of control and upon termination under certain circumstances. The
Compensation Committee retains discretion to determine the amount, if any, of any additional
payments and benefits which may be paid to a Named Executive Officer upon termination of his or her
employment. In making such a determination, the Compensation Committee may consider a number of
factors including the reasons for the termination, the Named Executive Officers tenure and
performance, the Named Executive Officers personal circumstances and the amount of payments and
benefits, if any, generally offered to executive officers at other companies in similar positions.
Each of the Named Executive Officers has signed an Agreement Protecting Company Interests
which provides that during the term of his or her employment with us and for a specified period
after his or her termination, he or she will not solicit our clients or employees and will refrain
from working for or consulting with any of our competitors. The term of the non-solicitation and
non-compete agreements is two years for Messrs. Keller and LaBonte, eighteen months for
Mr. McClenahan and twelve months for Mr. Hepburn and Ms. Schneider. In the event any of the Named
Executive Officers violates his or her Agreement Protecting Company Interests, we may be entitled
to recover some or all of the payments and benefits that were paid by us upon termination of
employment.
The following narrative describes the nature and amount of payments and benefits to each of
our Named Executive Officers in the event of a termination of employment as a result of retirement,
death or disability, involuntary termination (not for cause), voluntary termination, termination
for cause, and termination in connection with a change of control, as well as in the event of a
change of control without termination of employment.
Payments Made Upon Retirement
Each of the Named Executive Officers is eligible to elect normal retirement when he or she has
completed at least ten years of continuous employment and the sum of his or her age and continuous
service with us is equal to or greater than seventy. Upon normal retirement, some or all of the
outstanding stock options that are not vested at the time of his or her retirement will accelerate
and become exercisable. Generally, the vesting will be accelerated such that the options which
would otherwise vest on the next anniversary of the grant date vest on the date of retirement;
provided that the shares issuable upon exercise of such accelerated options are subject to certain
restrictions on transfer for a period of two years after termination.
Payments Made Upon Death or Disability
In the event of the death or disability of a Named Executive Officer:
|
|
|
The Name Executive Officer, or his or her beneficiary or estate, will be entitled to
receive payment of any and all base salary earned through the date of his or her
termination; |
|
|
|
Some or all of the outstanding stock options that are not vested at the time of his or
her death or disability will accelerate and become immediately exercisable as described
above under Payments Made Upon Retirement; |
|
|
|
All then unvested restricted Common Shares will immediately vest; and |
|
|
|
The Named Executive Officer, or his or her beneficiary or estate, will be entitled to
receive a pro rata payment of any MIP incentive award at a target level for the then current
performance period. |
24
Payments Made Upon Involuntary Termination (Not for Cause)
In the event of involuntary termination of a Named Executive Officer not for cause:
|
|
|
The Named Executive Officer will be entitled to severance payments in an amount equal to
his or her base salary for a period of 24 months, in the case of Mr. Keller, and for a
period of 12 months, in the case of the other Named Executive Officers; |
|
|
|
We will reimburse Messrs. Keller, Hepburn and McClenahan and Ms. Schneider for payments
by him or her to exercise his or her rights under COBRA for a period of time, which in the
case of Mr. Keller is 24 months and which is 12 months for Messrs. Hepburn and McClenahan
and Ms. Schneider; |
|
|
|
Mr. Keller is entitled to continuation of long term disability and life insurance
benefits for a period of 24 months or, in the event such continuation coverage is not
available and Mr. Keller elects to convert his benefits to an individual insurance contract,
we will reimburse him for the premiums incurred for a period of 24 months; and |
|
|
|
Mr. Keller is entitled to receive any unpaid MIP incentive award earned with respect to
the then-current performance period. |
Payments Made Upon Voluntary Termination and Termination for Cause
In the event Mr. Keller voluntarily terminates his employment with us for any reason prior to
a change of control, or in the event Mr. Keller is terminated for cause (as defined in his
employment agreement), he is not entitled to receive any payments or benefits other than accrued
obligations earned by Mr. Keller prior to his date of termination. Such accrued obligations
generally consist of unpaid base salary, pay for unused vacation time, expense reimbursements, and
any vested benefits Mr. Keller may have in our company retirement plans.
For each of the other Named Executive Officers, if he or she voluntarily terminates his or her
employment with us, or if he or she is terminated for cause (as defined in his or her employment
agreement), the Named Executive Officer is not entitled to receive any payments or benefits other
than accrued obligations earned prior to the dated of his or her termination, unless he or she
resigns for good reason as that term is defined in his or her employment agreement.
In the event any of Messrs. Hepburn, LaBonte, McClenahan or Ms. Schneider voluntarily resigns
for an Agreed Reason, each of them is entitled to receive the same payments and benefits
described above under Payments Made Upon Involuntary Termination (Not For Cause). Agreed Reason
is defined in each of Messrs. Hepburns, LaBontes, McClenahans and Ms. Schneiders employment
agreements as a termination prior to a change of control, if after notice and a period to cure,
(i) we materially reduce or diminish his or her duties, responsibilities or authority as an
executive officer, (ii) he or she no longer reports to our Chief Executive Officer or (iii) his or
her base salary is reduced and not in accordance with a compensation reduction applicable to all
executive officers. For Mr. LaBonte, an Agreed Reason also includes his being asked to relocate
more than 20 miles from his personal residence.
As used in the employment agreements of all of the Named Executive Officers, cause is
defined as (i) gross misconduct or gross negligence in the performance of his or her duties as set
forth in employment agreement, (ii) willful disobedience of the lawful directives of the Board of
Directors or of our companys policies, or (iii) commission of a crime involving fraud or moral
turpitude that can reasonably be expected to adversely affect the business of our company.
Payments Made Upon Change of Control
In the event we experience a change of control:
|
|
|
Some or all of the Named Executive Officers outstanding stock options that are not
vested at the time of the change of control will accelerate and become immediately
exercisable. Generally, the vesting will be accelerated such that fifty percent (50%) of the
previously unexercisable portion of such options shall become exercisable immediately
following the change of control; and |
|
|
|
All then unvested restricted Common Shares will immediately vest. |
25
Payments Made Upon Termination in Connection with a Change of Control
Each of our Named Executive Officers has an Employment Security Agreement which establishes a
double trigger severance plan that provides certain payments and benefits if the executive
officers employment is terminated within one year after the change of control either by us, or by
the executive for good reason as defined in the Employment Security Agreement (other than
termination by us for cause or a termination by reason of death or disability). In the event a
Named Executive Officer is terminated (other than termination by us for cause or a termination by
reason of death or disability) within one year after the change of control or if he or she resigns
for good reason:
|
|
|
The Named Executive Officer is entitled to a lump sum severance payment in an amount
equal to his or her base salary for 36 months, in the case of Mr. Keller, and 18 months for
each of the other Named Executive Officers; |
|
|
|
The Named Executive Officer is entitled to receive, in the case of Mr. Keller, an amount
equal to three times any annual MIP incentive award at target level for the then current
performance period and, in the case of each of the other Named Executive Officers, an amount
equal to one and one-half times any such annual MIP incentive award; |
|
|
|
Any stock options which remain unvested at the time of his or her termination shall
become immediately exercisable; and |
|
|
|
We will reimburse each of the Named Executive Officers for payments by him or her to
exercise his or her rights under COBRA for a period of time, which, in the case of
Mr. Keller is 36 months and, in the case of each of the other Named Executive Officers, is
18 months. |
Mr. Keller is also entitled to the above-mentioned benefits if he is terminated without
cause within six months prior to, and in anticipation of, a change of control of our company.
Generally, a change of control under the Employment Security Agreements and the relevant stock
option and restricted stock award agreements is deemed to occur if:
|
|
|
A tender offer is made and consummated for the ownership of more than 50% of our
outstanding voting securities; |
|
|
|
We merge or consolidate with another corporation and as a result of such merger or
consolidation less than 50% of the outstanding voting securities of the surviving or
resulting corporation are owned in the aggregate by our shareholders as they existed
immediately prior to such merger of consolidation; |
|
|
|
We sell all or substantially all of our assets to another company; |
|
|
|
The persons who were our directors cease to constitute a majority of our Board of
Directors under specific circumstances; or |
|
|
|
A person (as defined under the federal securities laws) shall acquire more than 50% of
our outstanding voting securities. |
Notwithstanding the foregoing, a change of control will not be deemed to occur merely due to
the death of Mr. Theodore G. Schwartz, our Chairman and a principal stockholder, or as a result of
an acquisition of our outstanding voting securities by Mr. Schwartz and one or more of his
affiliates in a going private transaction, except in certain limited circumstance where the
ownership interests of Mr. Schwartz and his affiliates falls below certain levels specified in the
agreements. See the Common Shares Beneficially Owned by Principal Shareholders and Management
section of this Proxy Statement.
As defined in the Employment Security Agreements and the relevant stock option and restricted
stock award agreements, good reason for any Named Executive Officer to voluntarily terminate his
or her employment with us shall exist if, after notice and an opportunity to cure:
|
|
|
The Named Executive Officers principal place of work is moved more than fifty
(50) miles; |
|
|
|
The Named Executive Officers duties and responsibilities are materially reduced or
diminished; provided that such reduction is not, in the case of the Named Executive Officers
other than Mr. Keller, solely as a result of our acquisition and existence as a subsidiary
of another entity; |
|
|
|
The Named Executive Officers base salary is reduced; |
26
|
|
|
The Named Executive Officer determines in good faith that, as a result of the change of
control, he or she is unable to carry out his or her job responsibilities; |
|
|
|
There is a material violation of his or her employment agreement; or |
|
|
|
We consummate a liquidation, dissolution or merger or transfer all or substantially all
of our assets and his or her employment agreement is not assumed by the surviving entity. |
27
Estimated Payments on Termination or Change of Control
The following table sets forth the estimated payments to each of the Named Executive Officers
under the circumstances outlined above. The amounts shown assume that such termination and/or
change of control was effective as of December 30, 2007, and thus include amounts earned through
such time and are estimates of the amounts which would be paid out to the Named Executive Officers
upon their termination and/or in the event of a change of control. The actual amounts to be paid
out can only be determined at the time of such Named Executive Officers separation from us and/or
at the time of a change of control. Mr. Keller retired as our Chief Executive Officer on February
18, 2008 and Mr. McClenahan resigned as our Senior Vice President, Sales and Marketing on March 28,
2008. See Retirement Arrangements with Mr. Keller and Severance Arrangements with Mr.
McClenahan appearing elsewhere in the Executive Compensation section of this Proxy Statement.
Pursuant to each Named Executive Officers Employment Security Agreement, the amounts payable
upon termination following a change of control may be reduced under certain circumstances in the
event any such payments are considered excess parachute payments under Section 280G of the Internal
Revenue Code. In addition, the Named Executive Officers have provisions in their employment
agreements that would delay the payments thereunder in order to avoid any negative impact to such
executive officer under Section 409A of the Internal Revenue Code. The calculations presented do
not give effect to any such provisions which would have the effect of reducing the amounts paid by
us to the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event |
|
Mr. Keller |
|
|
Mr. Hepburn |
|
|
Mr. LaBonte |
|
|
Mr. McClenahan |
|
|
Mr. McDermott |
|
|
Ms. Schneider |
|
|
|
|
|
|
|
|
|
|
|
(in dollars) |
|
|
|
|
|
|
|
|
|
Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of stock
options(1) |
|
$ |
|
|
|
$ |
19,800 |
|
|
$ |
11,520 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or Disability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prorated annual incentive(2) |
|
|
330,000 |
|
|
|
126,000 |
|
|
|
100,000 |
|
|
|
126,000 |
|
|
|
120,000 |
|
|
|
108,000 |
|
Acceleration of stock
options(1) |
|
|
|
|
|
|
19,800 |
|
|
|
11,520 |
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
Acceleration of restricted
Common Shares(1) |
|
|
194,700 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
524,700 |
|
|
|
180,020 |
|
|
|
145,740 |
|
|
|
160,220 |
|
|
|
154,220 |
|
|
|
160,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination (Not
for Cause) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance payment(2) |
|
|
880,000 |
|
|
|
315,000 |
|
|
|
250,000 |
|
|
|
315,000 |
|
|
|
300,000 |
|
|
|
270,000 |
|
Prorated annual incentive(2) |
|
|
330,000 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
Continued health benefits |
|
|
29,064 |
|
|
|
18,564 |
|
|
|
n/a |
|
|
|
8,832 |
|
|
|
n/a |
|
|
|
18,564 |
|
Continued long-term
disability and
life insurance benefits |
|
|
8,219 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,239,064 |
|
|
|
333,564 |
|
|
|
250,000 |
|
|
|
323,832 |
|
|
|
300,000 |
|
|
|
288,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination (For
Good Reason) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance payment(2) |
|
|
n/a |
|
|
|
315,000 |
|
|
|
250,000 |
|
|
|
315,000 |
|
|
|
300,000 |
|
|
|
270,000 |
|
Continued health benefits |
|
|
n/a |
|
|
|
18,564 |
|
|
|
n/a |
|
|
|
8,832 |
|
|
|
n/a |
|
|
|
18,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
n/a |
|
|
|
333,564 |
|
|
|
250,000 |
|
|
|
323,832 |
|
|
|
300,000 |
|
|
|
288,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of stock
options(1) |
|
|
|
|
|
|
59,400 |
|
|
|
28,800 |
|
|
|
|
|
|
|
|
|
|
|
27,000 |
|
Acceleration of restricted
Common Shares(1) |
|
|
194,700 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
194,700 |
|
|
|
93,620 |
|
|
|
63,020 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
61,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control with
Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance payment(2) |
|
|
1,320,000 |
|
|
|
472,500 |
|
|
|
375,000 |
|
|
|
472,500 |
|
|
|
450,000 |
|
|
|
405,000 |
|
Prorated annual incentive(2) |
|
|
990,000 |
|
|
|
189,000 |
|
|
|
150,000 |
|
|
|
189,000 |
|
|
|
180,000 |
|
|
|
162,000 |
|
Continued health benefits |
|
|
43,596 |
|
|
|
27,846 |
|
|
|
n/a |
|
|
|
13,248 |
|
|
|
n/a |
|
|
|
27,846 |
|
Acceleration of stock
options(1) |
|
|
|
|
|
|
59,400 |
|
|
|
57,600 |
|
|
|
|
|
|
|
|
|
|
|
54,000 |
|
Acceleration of restricted
Common Shares(1) |
|
|
194,700 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
34,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,548,296 |
|
|
|
782,966 |
|
|
|
616,820 |
|
|
|
708,968 |
|
|
|
664,220 |
|
|
|
683,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Notes to Estimated Payments on Termination or Change of Control Table
(1) |
|
The value of accelerated stock options and restricted Common Shares is based on the closing
price for our Common Shares on The NASDAQ Stock Market, Inc. as of December 28, 2007
($1.18 per Common Share). |
(2) |
|
Cash severance payments and annual incentive bonus calculations are based on the following
assumptions: The Named Executive Officers base pay is equal to his base salary effective
December 30, 2007. Target annual bonus payments are equal to 75% of such base salary for
Mr. Keller and 40% of such base salary for the other Named Executive Officers. Generally,
severance payments and health care reimbursements would be paid over a period of time on
regular pay dates, except upon termination following a change in control where the Named
Executive Officer is entitled to a lump sum payment. All other cash payments are paid in a
lump sum. |
Retirement Arrangements with Mr. Keller
In January 17, 2008, we announced that Mr. Keller, our former Chief Executive Officer, would retire
in 2008. In connection with his retirement, we entered into an agreement with Mr. Keller pursuant
to which he agreed to remain as Chief Executive Officer of the Company while the Board of Directors
completed a search for his successor and to facilitate an orderly transition to the new Chief
Executive Officer. In exchange for this commitment, we agreed to (i) treat Mr. Kellers departure
as a termination without cause under the terms of his Amended and Restated Executive Employment
Agreement, dated August 6, 2007 (Amended Employment Agreement); and (ii) guarantee the vesting of
certain stock options and restricted common shares that were scheduled to vest in February and
March 2008 regardless of the actual date of Mr. Kellers termination of employment.
Mr. Keller retired as our Chief Executive Officer and resigned from our Board of Directors on
February 18, 2008. Mr. Kellers employment with us terminated on April 19, 2008. Pursuant to the
terms of Mr. Kellers Amended Employment Agreement, Mr. Keller will receive salary continuation for
a period of two years and a pro rata portion of any incentive actually earned in fiscal year 2008,
as well as continuation of medical benefits and life and long-term disability insurance benefits
for a period of two years at our expense. See Potential Payments Upon Termination or Change of
ControlPayments Made Upon Involuntary Termination appearing elsewhere in the Executive
Compensation section of this Proxy Statement.
At the time of his termination, Mr. Keller had (i) vested options to purchase 400,000 Common Shares
at an exercise price of $2.90 per share which may be exercised on or prior to October 19, 2008 and
(ii) vested options to purchase 450,000 Common Shares at an exercise price of $1.62 per share which
may be exercised on or prior to July 18, 2008. Mr. Kellers remaining unvested stock options and
unvested restricted Common Shares expired upon his termination of employment with us. Under
certain limited circumstances, Mr. Keller may be entitled to certain additional payments and
benefits in the event of a change of control of the Company. See Potential Payments Upon
Termination or Change of ControlPayments Made Upon Termination in Connection with a Change of
Control appearing elsewhere in the Executive Compensation section of this Proxy Statement.
Severance Arrangements with Mr. McClenahan
Mr. McClenahan, our former Senior Vice President, Sales and Marketing resigned on March 28, 2008.
Pursuant to the terms of our employment agreement with Mr. McClenahan, he will receive salary
continuation for a period of twelve months. Mr. McClenahan agreed to relinquish his right to
receive reimbursement for COBRA medical benefits costs in excess of the amounts paid by employees
of the company for a modest cash payment. See Potential Payments Upon Termination or Change of
Control. At the time of his termination, Mr. McClenahan had vested options to purchase 56,250
Common Shares at an exercise price of $1.77 per share and vested options to purchase 120,000 Common
Shares at an exercise price of $1.62 per share which may be exercised on or prior to June 26, 2008.
His unvested options expired on the date of his resignation.
29
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
During fiscal year 2007, the Company retained Ernst & Young LLP (E&Y) to audit the Companys
consolidated financial statements for 2007, among other things. Fees billed to us by E&Y, for
fiscal year 2007, for audit and other professional services rendered were as follows:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Audit Fees |
|
$ |
612,500 |
|
|
$ |
786,411 |
|
Audit-Related Fees |
|
|
68,000 |
|
|
|
68,000 |
|
Tax Fees |
|
|
139,025 |
|
|
|
187,559 |
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
819,525 |
|
|
$ |
1,041,970 |
|
|
|
|
|
|
|
|
Audit Fees include fees associated with the annual audit, the reviews of our quarterly
reports on Form 10-Q, fees associated with the services normally provided by the independent
registered public accounting firm in connection with statutory and regulatory filings or
engagements, and fees associated with Section 404 attestation services.
Audit Related Fees include fees for information systems audits.
Tax Fees include tax compliance and assistance with tax audits.
2006 Change in Registered Public Accounting Firm
On May 15, 2006, we changed our registered public accounting firm. We dismissed Deloitte &
Touche LLP (D&T) as our independent registered public accounting firm and approved the engagement
of E&Y as our new independent registered public accounting firm for the fiscal year ended
December 31, 2006. The decision to end our relationship with D&T was made and approved by the Audit
Committee of our Board of Directors.
The reports of D&T on our financial statements for the fiscal years ended January 1, 2006 and
January 2, 2005 contained no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle.
During the fiscal years ended January 1, 2006 and January 2, 2005, and through May 15, 2006,
there were no disagreements with D&T on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of D&T would have caused D&T to make reference to the subject matter of the
disagreement in its reports on our financial statements for such years. During the fiscal years
ended January 1, 2006 and January 2, 2005, and through May 15, 2006, there were no reportable
events within the meaning of Item 304(a)(1)(v) of Regulation S-K.
We provided D&T with a copy of this disclosure prior to filing it on a Form 8-K with the SEC
and requested that D&T furnish us with a letter addressed to the SEC stating whether it agrees with
the above statements, and if not, stating the respects in which it does not agree. A copy of the
letter from D&T addressed to the SEC, dated May 30, 2006, was filed as Exhibit 16.1 to our Current
Report on Form 8-K/A, filed with the SEC on May 30, 2006.
During the fiscal years ended January 1, 2006 and January 2, 2005 and through May 15, 2006,
neither we nor anyone acting on our behalf consulted E&Y regarding either (1) the application of
accounting principles to a specified transaction, either completed or proposed, or the type of
audit opinion that might be rendered on our consolidated financial statements or (2) any matter
that was (a) either the subject of a disagreement with D&T on accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which, if not resolved to the
satisfaction of D&T, would have caused D&T to make reference to the subject matter of the
disagreement in their report, or (b) a reportable event as defined in Item 304(a)(1)(v) of
Regulation S-K.
We provided E&Y with a copy of this disclosure prior to filing it on a Form 8-K with the SEC.
Mr. Workman, one of our nominees for director, is the Chief Financial Officer of HealthSouth
Corporation. HealthSouth Corporation has filed a legal action against E&Y alleging that from 1996
through 2002, when E&Y served as HealthSouth Corporations independent auditors, E&Y acted
recklessly and with gross negligence in performing its duties, and specifically that E&Y failed to
perform reviews and audits of HealthSouth Corporations financial statements with due professional
care as required by law and by its contractual agreements with HealthSouth Corporation.
30
Policy Regarding the Pre-Approval of Audit and Non-Audit Services Provided by the Independent
Registered Public Accounting Firm
Our Audit Committee is responsible for appointing our independent registered public accounting
firm and approving the terms of the auditing and non-audit services provided by our independent
registered public accounting firm. Our Audit Committee has established a policy governing services
performed by our independent registered public accounting firm, which requires Audit Committee
pre-approval of all audit and non-audit services to be provided by our independent registered
public accounting firm, sets forth non-audit services which may not be performed by our independent
registered public accounting firm and provides for regular review by the Audit Committee of the
services performed by our independent registered public accounting firm and their fees. Our Audit
Committee approved 100% of the fees for audit, audit related, tax and other services provided E&Y
in fiscal year 2007.
31
REPORT OF THE AUDIT COMMITTEE
The following report of the Audit Committee shall not be deemed to be soliciting material or
to be filed with the SEC or incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or
under the Securities and Exchange Act of 1934, as amended, except to the extent that we
specifically request that the information be treated as soliciting material or that we specifically
incorporate this information by reference, and shall not otherwise be deemed filed under such Acts.
The Board of Directors has appointed the Audit Committee, consisting of three directors,
Messrs. Gerdelman (Chairman), Park and Ms. Andreotti. Each member of the Audit Committee is
independent as such term is defined under the rules of The Nasdaq Stock Market, Inc., listing
standards. The Board of Directors has adopted a written charter with respect to the
responsibilities of the Audit Committee, which includes, among other things, reviewing the proposed
scope of the internal audit, overseeing the adequacy and effectiveness of accounting and financial
controls, and reviewing our annual and quarterly financial statements with management and the
independent registered public accounting firm.
In fulfilling its responsibilities, the Audit Committee met and held discussions with
management, our internal auditor and E&Y, our independent registered public accounting firm for
fiscal year 2007, regarding the annual audit and our audited consolidated financial statements.
Management represented to the Audit Committee that our financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit Committee has reviewed and
discussed with management and E&Y the audited consolidated financial statements included in our
Annual Report on Form 10-K for the fiscal year ended December 30, 2007. The Audit Committee
discussed with E&Y the matters required to be discussed by Statement on Auditing Standards No. 61
(Codification of Statements on Auditing Standards, AU §380), as amended.
E&Y also provided to the Audit Committee the written disclosures and the letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as
amended. The Audit Committee has discussed the independence of E&Y with members of the firm.
Management is responsible for maintaining internal controls over our financial reporting
process and assessing the effectiveness of our internal control over our financial process. The
independent registered public accounting firm is responsible for performing an independent audit of
our consolidated financial statements in accordance with auditing standards generally accepted in
the United States of America and issuing a report thereon, and to express an opinion on our
managements assessment and an opinion of effectiveness of our internal control over financial
reporting based on their audit. As provided in its charter, the Audit Committees responsibilities
include the monitoring and oversight of these processes.
In its oversight role for these matters, the Audit Committee relies on the information and
representations made by management and the independent registered public accounting firm.
Accordingly, the Audit Committees oversight does not provide an independent basis to certify that
the audit of our financial statements has been carried out in accordance with generally accepted
accounting principles or that our independent registered public accounting firm is in fact
independent.
Based upon and in reliance upon the review and discussion referred to above and the review of
E&Ys report to the Audit Committee, the Audit Committee recommended to our Board of Directors that
the audited consolidated financial statements be included in our Annual Report on Form 10-K for the
fiscal year ended December 30, 2007, for filing with the SEC.
Respectfully submitted,
AUDIT COMMITTEE
John W. Gerdelman, Chairman
Cindy K. Andreotti
John J. Park
32
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
E&Y served as our independent registered public accounting firm for fiscal year 2007. The
Audit Committee has retained E&Y to serve as our independent registered public accounting firm for
fiscal year 2007. Representatives of E&Y are expected to be present at the Annual Meeting, where
they will be available to make a statement and respond to appropriate questions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Corporate Governance Guidelines outline our policies and procedures for the review,
approval or ratification of related party transactions and conflicts of interest. Our policy is
that a director must avoid any conflict of interest with our company. If a director develops an
actual, potential or apparent conflict of interest with us or is unsure whether a potential
situation might develop into a conflict of interest, he or she must report the conflict immediately
to our Chairman and the Chairman of our Nominating/Governance Committee. The conflict must be
resolved to the satisfaction of the Nominating/Governance Committee or the director must resign.
Further, if a director (or any member of his or her immediate family) has a personal interest in a
matter before our Board of Directors, he or she must disclose to the full Board the material facts
as to his or her relationship and interest. In addition to the approval processes described above,
our Code of Business Ethics and Conduct prohibits any director or employee from engaging in any
activity or association that conflicts with, or appears to conflict with, his or her ability to
exercise independent judgment in our best interest and dictates that such individuals must avoid
any situation that may create, or seem to create, a conflict between his or her personal interests
and our companys interests.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers,
directors, and persons who own more than ten percent of our outstanding Common Shares report their
beneficial ownership and changes in their beneficial ownership of our equity securities by filing
reports with the SEC. During fiscal year 2007, to our knowledge, our officers, directors, and
greater than ten percent beneficial owners filed the reports required by Section 16(a) on a timely
basis during such year.
ANNUAL REPORT ON FORM 10-K
A copy of our most recent Annual Report on Form 10-K filed with the SEC accompanies this Proxy
Statement. Additional copies of the Annual Report on Form 10-K may be obtained from our website at
www.apaccustomerservices.com, or by writing to APAC Customer Services, Inc., Six Parkway North,
Deerfield, Illinois 60015, Attention: George H. Hepburn III, Senior Vice President and Chief
Financial Officer.
MULTIPLE SHAREHOLDERS SHARING AN ADDRESS
The rules of the SEC permit companies to provide a single copy of an annual report and proxy
statement to households in which more than one shareholder resides. This process is known as
householding. Shareholders who share an address and who have been previously notified that their
broker, bank or other intermediary will be householding their proxy materials will receive only one
copy of our Proxy Statement and Annual Report to Shareholders unless they have affirmatively
objected to the householding notice.
Shareholders sharing an address who received only one set of these materials may request a
separate copy which will be sent promptly at no cost by writing our Investor Relations department
at: Investor Relations, APAC Customer Services, Inc., Six Parkway North, Deerfield, Illinois 60015.
For future annual meetings, a shareholder may request separate annual reports or proxy statements,
or may request the householding of such materials, by contacting us as noted above.
33
PROPOSALS OF SHAREHOLDERS FOR 2009 ANNUAL MEETING
A shareholder who intends to present a proposal at the 2009 Annual Meeting and who wishes to
have the proposal included in our proxy statement for that meeting must deliver the proposal to the
Secretary. All proposals must be received by the Secretary at our principal executive office
located at Six Parkway North, Deerfield, Illinois 60015, no later than December 31, 2008, and must
satisfy the applicable rules and regulations of the SEC to be eligible for inclusion in the proxy
statement for that meeting.
A shareholder who intends to nominate a candidate for director or to present a proposal that
is a proper subject for consideration at the 2009 Annual Meeting, even if the proposal is not
submitted by the deadline for inclusion in the proxy statement, must provide written timely notice
to the Secretary in accordance with our Bylaws. To be timely, such notice must be delivered to the
Secretary at our principal executive offices between February 5, 2009 and March 7, 2009. However,
if the date of our 2009 Annual Meeting is before May 6, 2009, or after August 5, 2009, the notice
must be delivered to the Secretary at our principal executive office not more than 120 days prior
to the 2009 Annual Meeting and not less than the later of 90 days prior to the 2009 Annual Meeting
or 10 days following the day on which we first publicly announce the date of the 2009 Annual
Meeting. The notice must describe certain information regarding the nominee and the shareholder
giving the notice, including information such as name, address, occupation and shares held.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors knows of no other business that may come before the Annual Meeting.
However, if any other matters are properly presented to the Annual Meeting, the persons named in
the proxies will vote upon them in accordance with their best judgment.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE PROXY AND RETURN IT IN THE
ENCLOSED STAMPED ENVELOPE.
By Order of the Board of Directors
Pamela R. Schneider
Secretary
34
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Mark Here for
Address Change or
Comments
PLEASE SEE REVERSE SIDE
1. Election of Directors:
The Board of Directors Recommends a Vote FOR the following nomin ees.
01-Cindy K. Andreotti
_____
FOR WITHHOLD FOR ALL
ALL
_____
ALL
_____
EXCEPT
02-John C. Kraft
03-Michael P. Marrow
04-Bhaskar Menon
05-John J. Park
06-Theodore G.
Schwartz 07-Samuel K.
Skinner
Nominee(s) Excepted
08-John L. Workman
SignatureSignatureDate
Please sign exactly as your name(s) appears hereon. Joint owners should each sign personally. If
signing in fiduciary or representative capacity, give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. |
APAC Customer Services, Inc.
Proxy is Solicited on Behalf of the Board of Directors For the Annual
Meeting of Shareholders on June 6, 2008
The undersigned hereby appoints Michael P. Marrow, George H. Hepburn, III and Pamela R.
Schneider, and each of them, as proxies, each with full power of substitution and revocation, to
represent and to vote, as designated on the reverse side hereof, all of the Common Shares of APAC
Customer Services, Inc. which the undersigned has the power to vote, with all powers which the
undersigned would possess if personally present, at the Annual Meeting of Shareholders of APAC
Customer Services, Inc. to be held on June 6, 2008, or at any adjo urnment thereof.
Unless otherwise marked, this proxy will be voted FOR the election of the
nominees named on the reverse side.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
(Continued and to be signed on reverse side.)
Address Change/Comments (Mark the corresponding box on the reverse side)
FOLD AND DETACH HERE
You can now access your APAC Customer Services, Inc. account online.
Access your APAC Customer Servic es, n I c. sharehold er account online via Investor
ServiceDirect® (ISD).
LaSal e Bank, N.A., Transfer Agent for APAC Customer Services, Inc., now makes t i easy and
convenient to get current in formatio n on your sharehold er account.
View account status View
certif icate history View
book-entry n i formation
View payment history for dividends
Make address changes Obtain a
duplicate 1099 tax form Establi
sh/change your PIN
Visit us on the web at http://www.lasalleshareholderservices.com
****TRY IT OUT**** www.lasalle
shareholderservices.com/isd/
Investor ServiceDirect®
Available 24 hours per day, 7 days per week |