Definitive Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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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)
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2333 Waukegan Road, Suite 100
Bannockburn, Illinois 60015
(847) 374-4980
Notice of Annual Meeting of Shareholders
To Be Held On June 15, 2010
To the Shareholders of APAC Customer Services, Inc.:
The Annual Meeting of Shareholders of APAC Customer Services, Inc. will be held at the
Marriott Lincolnshire Resort, 10 Marriott Drive, Lincolnshire, Illinois 60069 on Tuesday, June 15,
2010, at 10:00 a.m. Central Daylight Time for the following purposes:
1. To elect seven directors.
2. To ratify the appointment of Ernst & Young LLP as the Companys independent registered
public accounting firm.
3. 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 20, 2010 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.
By Order of the Board of Directors
Robert B. Nachwalter
Senior Vice President, General Counsel and Corporate
Secretary
Dated: April 28, 2010
APAC Customer Services, Inc.
2333 Waukegan Road, Suite 100
Bannockburn, Illinois 60015
(847) 374-4980
Proxy Statement
Annual Meeting of Shareholders to be Held June 15, 2010
This Proxy Statement and the accompanying proxy card are being mailed to shareholders of APAC
Customer Services, Inc. (Company) on or about May 6, 2010, in connection with the solicitation of
proxies by the Board of Directors for the Annual Meeting of Shareholders to be held on June 15,
2010. 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 20, 2010, the record date for determining shareholders entitled to vote at the Annual
Meeting, 52,322,726 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 Corporate 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 BNY Mellon Shareowner Services, our transfer agent and inspector of
elections for the Annual Meeting. We will bear all expenses incurred in the solicitation of
proxies.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be
Held on June 15, 2010
A copy of this proxy statement and of our annual report to stockholders is available at:
http://ir.apaccustomerservices.com/proxy10.cfm.
The 2010 annual meeting will be held on June 15, 2010, at 10:00 a.m., Central Daylight Time,
at the Marriott Lincolnshire Resort, 10 Marriott Drive, Lincolnshire, Illinois 60069.
At the annual meeting, you will be asked to consider and vote on:
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To elect seven directors; |
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To ratify the appointment of Ernst & Young LLP as the Companys independent
registered public accounting firm; and |
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To consider and transact such other business as may properly come before the Annual
Meeting or any adjournment thereof. |
For the reasons set forth in more detail elsewhere in this proxy statement, our Board of
Directors recommends a vote FOR the approval of each of the proposals set forth above.
The materials available at the http://ir.apaccustomerservices.com/proxy10.cfm website include
a copy of this proxy statement, a copy of our annual report to stockholders and a copy of the form
of proxy.
You may contact the Corporate Secretary, at 1-800-776-2722 if you would like to obtain
directions to be able to attend the annual meeting and vote in person.
2
TABLE OF CONTENTS
COMMON SHARES BENEFICIALLY OWNED BY
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information, as of April 1, 2010, 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 APAC Customer Services, Inc.,
2333 Waukegan Road, Suite 100, Bannockburn, Illinois 60015.
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Common Shares Benefically Owned |
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Name |
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Number |
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Percent (1) |
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Theodore G. Schwartz |
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14,994,697 |
(2)(3) |
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27.8 |
% |
FMR LLC |
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5,284,674 |
(4) |
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9.8 |
% |
Ronald L. Chez |
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3,650,569 |
(5) |
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6.8 |
% |
Wells Fargo & Company |
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2,799,553 |
(6) |
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5.2 |
% |
Trust Four Hundred Thirty U/A/D 4/2/94 |
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2,040,000 |
(7) |
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3.8 |
% |
Trust Seven Hundred Thirty U/A/D 4/2/94 |
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2,040,000 |
(7) |
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3.8 |
% |
Trust 3080 |
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500,000 |
(7) |
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* |
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Trust 3081 |
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500,000 |
(7) |
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* |
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Katherine Andreasen |
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(3) |
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* |
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Cindy K. Andreotti |
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243,306 |
(3) |
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* |
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Kevin T. Keleghan |
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(3) |
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* |
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John C. Kraft |
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174,743 |
(3) |
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* |
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Michael P. Marrow |
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417,025 |
(3) |
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* |
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John J. Park |
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213,109 |
(3) |
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* |
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Samuel K. Skinner |
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43,874 |
(3) |
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* |
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John L. Workman |
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71,572 |
(3) |
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* |
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Arthur D. DiBari |
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130,000 |
(3) |
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* |
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Mark E. McDermott |
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287,816 |
(3) |
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* |
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Robert B. Nachwalter |
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30,000 |
(3) |
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* |
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Andrew B. Szafran |
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480,000 |
(3) |
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* |
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All directors, nominees and executive officers as a group (13 persons) |
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17,086,142 |
(3) |
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31.7 |
% |
3
Notes to Common Shares Beneficially Owned Table
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Indicates less than 1% |
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(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 or will be exercisable within 60 days after April 1, 2010, 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 53,971,603 Common Shares, which includes 52,322,726 Common Shares outstanding as of April 1, 2010, plus 1,648,877 Common Shares subject to options that will be exercisable within 60 days of April 1, 2010, as
detailed in Note 3 below. |
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(2) |
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Includes 5,011,218 Common Shares as to which Mr. Schwartz has sole voting and investment power, and 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. 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 April 1, 2010, or within 60 days thereafter, as follows: Mr. Schwartz (125,479 shares); Ms. Andreotti (155,006 shares); Mr. Kraft (140,243 shares); Mr. Marrow (390,000 shares); Mr. Park (179,663 shares); Mr. Skinner (23,874 shares); Mr. Workman (16,572
shares); Mr. DiBari (130,000 shares); Mr. McDermott (278,040 shares); Mr. Nachwalter (30,000 shares); Mr. Szafran (180,000 shares); and all directors, nominees and executive officers (as of April 1, 2010) as a group (1,648,877 shares). Ms. Andreasen and Mr. Keleghan did not have options exercisable as of April 1, 2010, or within 60 days
thereafter. |
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Based solely upon information provided in the Schedule 13G filed on January 20, 2010 by FMR LLC. FMR LLC has sole voting power over 2,189,190 Common Shares and dispositive power over 5,284,674 Common Shares. The address of FMR LLC is 82 Devonshire Street, Boston, Massachusetts 02109. |
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(5) |
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Based solely upon information provided in the Schedule 13D/A filed on February 24, 2009 by Ronald L. Chez, Mr. Chez has sole voting and dispositive power over 3,650,569 Common Shares. The address of Mr. Chez is c/o Howard Friedman, Attorney At Law, 6745 N. Kilpatrick Avenue, Lincolnwood, Illinois 60712. |
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(6) |
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Based solely upon information provided in the Schedule 13G filed jointly on January 21, 2010 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 2,728,753 Common Shares and sole dispositive power over 2,732,953 Common Shares. The address of Wells Fargo is 420 Montgomery Street, San Francisco, California 94014. |
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(7) |
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Tracy D. Schwartz and Scott Mordell serve as general trustees of Trust Four Hundred Thirty U/A/D 4/2/94 and Trust 3080, and Todd G. Schwartz and Scott Mordell serve as general trustees of Trust Seven Hundred Thirty U/A/D 4/2/94 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. Theodore G. 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 1 North Wacker Drive, Suite 4775, Chicago, Illinois 60606. |
4
PROPOSAL 1
THE ELECTION OF DIRECTORS
At the Annual Meeting, seven directors are to be elected to serve until the next Annual
Meeting of Shareholders.
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 |
Katherine Andreasen
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44 |
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Ms. Andreasen became a director in November
2009. Ms. Andreasen was recommended as a
nominee to join the Board during fiscal 2009
by one of the current directors. Ms.
Andreasen is Chief Human Resources Officer
for Orchard Brands, a portfolio company of
Golden Gate Capital and a leading
multi-channel marketer of apparel and home
products. From May 2008 to June 2009, she was
the senior executive for Human Resources at
Bill Me Later, Inc., one of the
fastest-growing divisions of eBay/PayPal.
Prior to that, from August 2006 to May 2008
she served as the Chief Human Resources
Officer for Orbitz Worldwide, managing global
human resources, real estate and facilities
management organizations. Before joining
Orbitz, from May 2002 to August 2006, she was
Senior Vice President, Human Resources,
Cendant Corporation. |
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Ms. Andreasen is a senior human resources
professional who brings considerable human
resources and talent management experience to
APAC. She has substantial experience in the
services industry and has been responsible
for large non-exempt workforces similar to
APAC which allows her to provide insight and
guidance on critical employment issues. She
has also designed and managed complex
compensation plans and programs for private
and public companies. |
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Kevin T. Keleghan
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52 |
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Mr. Keleghan became a director in November
2009. Mr. Keleghan was recommended as a
nominee to join the Board during fiscal 2009
by one of the current directors. Mr.
Keleghan is President and Chief Executive
Officer of Axiant, LLC a leading provider of
financial services and recovery management
solutions for issuers and investors in debt
products. Axiant, LLC filed for protection
under Chapter 11 of the U.S. Bankruptcy Code
which was converted to a Chapter 7
liquidation in December 2009. Prior to
joining Axiant, he was President and Chief
Executive Officer at Outsourcing Solutions,
Inc. (OSI) one of the largest providers of
outsourced services in the accounts
receivable management industry from 2002 to
2008. OSI filed for protection under Chapter
11 of the U.S. Bankruptcy Code in December
2002 and emerged from Chapter 11 protection
in May of 2003. From 1996 to 2002, he served
at Sears Holdings Corporation in various
roles including, President of Credit Card
Services, Vice President of Marketing Credit
Card Products and Vice President of
Operations for Sears Credit Services. |
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Mr. Keleghan is a seasoned professional with
considerable industry knowledge in the area
of outsourcing services. As a result of his
expertise, Mr. Keleghan is able to advise
APAC on the development of new services,
center operations and client management. He
has also had responsibility for large
non-exempt workforces which are similar to
APACs workforce. |
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Position |
Michael P. Marrow
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52 |
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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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Mr. Marrow is our CEO and has substantial
knowledge and expertise in the field of
business process outsourcing and information
technology solutions specifically the
operation of service delivery/call centers.
He has had extensive operational experience
in the outsourcing of services both
domestically and internationally. During
his career he has had responsibility for
contact centers with tens of thousands of
employees located in the U.S., and overseas. |
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John J. Park
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48 |
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John J. Park became a director in August
2004. Mr. Park was the Chief Financial
Officer at Hewitt Associates, a global human
resources outsourcing and consulting firm,
from November 2005 to January 2010. 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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Mr. Park has served in the role of Chief
Financial Officer for public companies which
results in him bringing substantial finance
experience to APAC specifically the Audit
Committee. Based on his considerable
finance experience, Mr. Park qualifies as an
audit committee financial expert which is
important to the Company. As a senior
finance professional he can provide guidance
and oversight on finance issues facing
public companies. Additionally, Mr. Park
served as a senior officer of one of the
worlds leading HR consulting and
outsourcing companies. As a result, he has
knowledge with outsourcing as well the field
of human resources which allows him to
advise on issues APAC similarly confronts. |
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Theodore G. Schwartz
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56 |
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Theodore G. Schwartz is Chairman of the
Board of Directors of the Company.
Mr. Schwartz is the founder of the Company
and has served as the Companys Chairman
since its formation in May 1973. He served
as the Companys Chief Executive Officer
until January 2000, and again from May 2001
until March 2004. |
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Mr. Schwartz is an award-winning pioneer in
the call center and outsourcing industry.
In his growing of APAC, Mr. Schwartz created
a number of innovative approaches and
systems for call centers. As the current
Chairman of the Board and the former
President and CEO of APAC, he led APAC to
becoming a leader in global outsourced
services and solutions. His insight and
institutional knowledge is of considerable
value to APAC. |
6
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Position |
Samuel K. Skinner
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71 |
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Samuel K. Skinner previously served on our
Board of Directors from July 2003 to June 2005.
He rejoined the Board in June 2008.
Mr. Skinner is of counsel to the law firm
Greenberg Traurig, LLP where he concentrates on
corporate, governmental and regulatory matters.
From 2000 to 2003, Mr. Skinner was president
and CEO of USF Corporation, and chairman from
January 1, 2000 through May 2003. Mr. Skinner
previously served as president of Commonwealth
Edison Company and its holding company, Unicom
Corporation (Exelon Corporation). He also was
formerly White House chief of staff to
President George H.W. Bush and, prior to that,
served as U.S. Secretary of Transportation from
February 1989 to December 1991. Mr. Skinner
previously was United States Attorney for the
Northern District of Illinois from 1975 to
1977, having served in that office for eight
years. Mr. Skinner also serves on the boards of
directors of Express Scripts, Inc., Navigant
Consulting, Inc., Echo Global Logistics, Inc.
and MedAssets, Inc. He previously served on the
boards of Diamond Management and Technology
Consultants, Dade Behring, Chicago Board
Options Exchange and Virgin America. |
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Mr. Skinner has had a distinguished career with
both the government and in the private sector.
As a lawyer with more than 40 years of
experience, he counsels APAC in a variety of
areas including advising on litigation,
regulatory and governmental matters and
corporate governance. Additionally, Mr.
Skinners impressive leadership positions both
with the government and private corporations
bring valuable management experience and
knowledge to the Board. He brings insights
into corporate governance and legal matters
that face the board, developed through his long
professional experience with such matters as an
attorney and member of numerous other boards. |
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John L. Workman
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57 |
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John L. Workman has served as a Director since
June 2008. Mr. Workman is currently Executive
Vice President and Chief Financial Officer of
Omnicare, Inc. a position which was appointed
to in November 2009. From September 2004 to
October 2009, Mr. Workman was Executive Vice
President and Chief Financial Officer of
HealthSouth Corporation. From 1998 to 2004,
Mr. Workman served in various management and
executive capacities with U.S. Can Corporation,
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 Corporation,
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 previously served on the boards of
Halozyme Therapeutics, Inc., U.S. Can
Corporation and ValueVision International, Inc.
Mr. Workman began his career in public
accounting, and was a partner with the public
accounting firm KPMG. |
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Mr. Workman has served in the role of Chief
Financial Officer for public companies which
results in him bringing substantial finance
experience to APAC specifically the Audit
Committee. Based on his considerable finance
experience, Mr. Workman qualifies as an audit
committee financial expert which is important
to the Company. Additionally, Mr. Workman
has held senior positions overseeing the area
of information technology and, therefore, can
share his experience and advise APAC on issues
in this area. Finally, as a partner in public
accounting, Mr. Workman can advise APAC on
accounting/audit issues that face public
companies. |
7
Meetings of our Board of Directors and Corporate Governance
Our Board of Directors met 18 times during fiscal year 2009 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 2009 during the
periods that such directors served.
We have a commitment to good corporate governance practices. These practices provide a
framework within which our Board of Directors and management can pursue the strategic objectives of
APAC and ensure the Companys long-term vitality for the benefit of stockholders. The foundation of
our practices is an independent and qualified Board of Directors. All directors are elected
annually by a majority of votes cast by stockholders. Our Board of Directors has determined that,
other than Messrs. Marrow and Schwartz, all current Board members, all nominees for election as
directors, and all individuals who served as Board members during fiscal year 2009, are or were
independent as defined by the NASDAQ listing standards. All Board committees are composed entirely
of independent directors. Our independent directors hold executive sessions periodically
throughout the year.
The Board carefully evaluates each incoming director candidate based on selection criteria and
overall priorities for Board composition that are periodically re-examined by the corporate
governance committee with input from the rest of the directors. As our directors commitments
change, the Board revisits their situations to ensure that they can continue to serve the best
interests of the Company and its stockholders. We also demand high standards of ethics from our
directors and management as described in the Code of Business Conduct and Ethics.
Director Independence
The Board of Directors has determined that the following seven of the Companys nine current
directors are independent as defined by applicable law and NASDAQ listing standards: Ms.
Andreasen, Ms. Andreotti, Messrs. Keleghan, Kraft, Park, Skinner and Workman. Each of our Audit,
Compensation and Nominating and Corporate Governance committees is composed only of independent
directors, as identified below under the heading Board Committees.
Based on such standards, Mr. Schwartz is not independent because of his significant ownership
interest in the Company which exceeds 10%. Mr. Marrow is not independent because he is an
executive officer of the Company.
Board Leadership Structure
The Companys Bylaws provide that the Chairman of the Board of Directors shall be appointed by
the Board of Directors. The Board is free to choose its Chairman in any way that the Board deems to
be in the best interest of the Company and its shareholders. The Chairman of the Board has general
authority over the Companys business and affairs, subject to the Board of Directors, and is
responsible for ensuring that the Boards directives are carried out. The Chairman may also serve
as the chief executive officer of the Company. The Board determines whether the role of the
Chairman and the Chief Executive Officer should be separated or combined based on its judgment as
to the structure that best serves the interests of the Company. The Board does not have a firm
policy as to whether the position of the Chairman and the position of the Chief Executive Officer
should be separate and intends to preserve the freedom to decide what is in the best interest of
the Company at any point in time.
Boards Role in Risk Oversight
Risk is an integral part of Board and committee deliberations throughout the year. The
Companys Board of Directors administers its risk oversight function directly and through both its
Audit Committee and Compensation Committee. The Audit Committee has oversight responsibility with
respect to the Companys financial risk assessment and financial risk management. The Audit
Committee meets regularly with management to review the Companys risk exposures, the potential
financial impact those risks may have on the Company, the steps management takes to address those
risks, and how management monitors emerging risks. With respect to the Companys compensation plans
and programs, the Compensation Committee structures such plans and programs to balance risk and
reward, while mitigating the incentive for excessive risk taking by the Companys officers and
employees. The full Board of Directors has oversight responsibility of enterprise risk management
and periodically requests management to review the Companys major enterprise risk exposures, the
potential financial or other impact on the Company, and the process for managing such risks.
8
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 each comprised of independent directors. 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 Corporate Secretary c/o APAC Customer Services, Inc.,
2333 Waukegan Road, Suite 100, Bannockburn, Illinois 60015.
Audit Committee
Our Audit Committee consists of Messrs. Workman (Chairman), Keleghan, Park and Skinner. 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 2009 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 NASDAQ. Our Board of Directors has determined that each member of our
Audit Committee is financially literate in accordance with the listing standards of NASDAQ and that
Messrs. Park and Workman are both an audit committee financial expert, as defined by the SEC. For
details regarding Mr. Parks and Mr. Workmans qualifications as an audit committee financial
expert, see Nominees for Election appearing in the Proposal 1. The Election of Directors
section of this Proxy Statement.
Compensation Committee
Our Compensation Committee consists of Ms. Andreotti (Chairperson), Ms. Andreasen and Messrs.
Kraft and Park. Bhaskar Menon also served as a member of the Compensation Committee during fiscal
2009. Mr. Menon was not re-nominated to serve as a director at the 2009 Annual Meeting of
Shareholders and, therefore, ceased serving as a director on June 3, 2009. 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 nine times in fiscal year 2009 and periodically took action by unanimous
written consent. All members of our Compensation Committee are independent directors as defined by
the listing standards of NASDAQ.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Messrs. Kraft (Chairman), Ms.
Andreasen, Ms. Andreotti and Mr. Skinner. The Nominating and Corporate 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 and Corporate Governance Committee met six times during
fiscal year 2009 and periodically took action by unanimous written consent. All members of our
Nominating and Corporate Governance Committee are independent directors as defined by the listing
standards of NASDAQ.
The Nominating and Corporate Governance Committee assists the Board in identifying qualified
persons to serve as directors of the Company. The Committee evaluates all proposed director
nominees, evaluates incumbent directors before recommending re-nomination, and recommends all
approved candidates to the Board for appointment or nomination.
Our Nominating and Corporate 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. Our directors play a
critical role in guiding the Companys strategic direction and oversee the management of the
Company. 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 and Corporate
Governance Committee for election or re-election 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.
9
Our Nominating and Corporate Governance Committee considers diversity in its nomination of
directors to the Board, and in its assessment of the effectiveness of the Board and its committees.
In considering diversity, the Nominating and Corporate Governance Committee looks at a range of
different personal factors in light of the business, customers, suppliers and employees of the
Company. The range of factors includes diversity of personal and business backgrounds and prior
board service, financial expertise, international experience, industry experience, leadership
skills, including prior management experience, and a variety of subjective factors. In addition to
diversity of experience and backgrounds, racial, ethnic and gender diversity are also considered in
the director selection process, but there is no specific policy regarding Board diversity. The
Nominating and Corporate Governance Committee regularly reports to the full Board on its assessment
of the composition and functioning of the Board.
Once a person has been identified by our Nominating and Corporate 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 and
Corporate 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 and Corporate 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.
Our Nominating and Corporate Governance Committee will consider director candidates
recommended by shareholders. In considering candidates submitted by shareholders, our Nominating
and Corporate Governance Committee will take into consideration the needs of our Board of Directors
and the qualifications of the candidate. Our Nominating and Corporate 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 and
Corporate 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 and Corporate Governance Committee and nominated by our Board.
The shareholder recommendation and information described above must be sent to our Corporate
Secretary c/o APAC Customer Services, Inc., 2333 Waukegan Road, Suite 100, Bannockburn, Illinois
60015 and must be received by our Corporate Secretary not later than the close of business on the
90th day, nor earlier than the close of business on the 120th day prior to
the anniversary date of our most recent annual meeting of shareholders.
Search Committee
The Company previously had a Search Committee which consisted of Messrs. Kraft, Park, Schwartz
and Ms. Andreotti. In connection with the search for a replacement for Mr. Keller, our former
Chief Executive Officer, this committee was formed to expedite changes in management and was
involved with the evaluation of potential candidates for the office of Chief Executive Officer as
well as to assist with the negotiation of mutually agreeable transition plans in the office of the
Chief Executive Officer. This Committee was formally dissolved on April 28, 2009.
Strategic Alternatives Committee
The Company previously had a Strategic Alternatives Committee which consisted of Mr. Park.
This Committee was formed to find and to evaluate alternate debt financing sources for the Company.
This Committee was formally dissolved on April 28, 2009.
10
Transition Oversight/Business Operations Committee
The Company previously had a Transition Oversight Committee which consisted of Messrs.
Schwartz, Marrow and Ms. Andreotti. This committee was formed to provide the Board an opportunity
to provide input to management with respect to various operational matters. This Committee was
formally dissolved on February 17, 2010.
Special Committee
The Company previously had a Special Committee. On January 29, 2009, we received a proposal
from Tresar Holdings LLC, an affiliate of Theodore G. Schwartz, our Companys chairman and
principal shareholder (Tresar), to acquire all of the outstanding shares of common stock of our
Company other than those shares held by Theodore G. Schwartz and certain related holders (the
Tresar Proposal). In response to the receipt of the Tresar Proposal, our Board of Directors
formed a special committee of independent directors to review the proposal. The Special Committee
consisted of Ms. Andreotti and Messrs. Kraft, Menon, Park and Workman. On March 9, 2009, we
announced that the Special Committee and Tresar had jointly agreed not to further pursue the Tresar
Proposal, and that Tresar had withdrawn its proposal. This Committee was formally dissolved on
April 28, 2009.
Compensation Committee Interlocks and Insider Participation
During fiscal year 2009, members of our Compensation Committee included Ms. Andreotti
(Chairperson), Ms Andreasen and Messrs, Menon, Park and Kraft. None of the members of the
Compensation Committee serve as, or formerly served as, officers of the Company.
During fiscal year 2009, 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 have ever been employed by us.
11
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 director or any group or committee of directors, correspondence
should be addressed to our Board of Directors or any such individual director, or group or
committee of directors, by either name or title. All such correspondence should be sent c/o
Corporate Secretary to APAC Customer Services, Inc., 2333 Waukegan Road, Suite 100, Bannockburn,
Illinois 60015.
All communications received as set forth in the preceding paragraph will be opened by the
office of the Corporate 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 2009 Annual Meeting.
Director Compensation
Our Nominating and Corporate 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 calculated by dividing $90,000 by the
average fair market value of a common share over the preceding twelve (12) month period. 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 $1,500 per day
depending on the circumstances. Directors are also reimbursed for certain expenses in connection
with attendance at Board and committee meetings as well as approved education programs and other
required travel.
12
2009 Director Compensation
The following table sets forth the information with respect to all compensation paid or earned
for services rendered to us by each member of our Board of Directors (other than Mr. Marrow, our
Chief Executive Officer) during fiscal year 2009. During fiscal year 2009, Mr. Marrow was an
employee of ours and did not receive any additional compensation for his services as a director.
|
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Fees Earned or |
|
|
Option |
|
|
All Other |
|
|
|
|
|
|
Paid in Cash |
|
|
Awards |
|
|
Compensation |
|
|
Total |
|
Name |
|
($)(1) |
|
|
($)(2) |
|
|
($) |
|
|
($) |
|
Katherine Andreasen (3) |
|
|
7,270 |
|
|
|
|
|
|
|
|
|
|
|
7,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cindy K. Andreotti (4) |
|
|
99,250 |
|
|
|
102,225 |
|
|
|
|
|
|
|
201,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin T. Keleghan (3) |
|
|
6,520 |
|
|
|
|
|
|
|
|
|
|
|
6,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John C. Kraft (4) |
|
|
72,000 |
|
|
|
102,225 |
|
|
|
|
|
|
|
174,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bhaskar Menon (5) |
|
|
24,500 |
|
|
|
|
|
|
|
|
|
|
|
24,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Park |
|
|
69,250 |
|
|
|
102,225 |
|
|
|
|
|
|
|
171,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Theodore G. Schwartz |
|
|
56,500 |
|
|
|
102,225 |
|
|
|
|
|
|
|
158,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Samuel K. Skinner |
|
|
58,000 |
|
|
|
102,225 |
|
|
|
|
|
|
|
160,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Workman |
|
|
62,000 |
|
|
|
102,225 |
|
|
|
|
|
|
|
164,225 |
|
Notes to 2009 Director Compensation Table
|
|
|
(1) |
|
The amounts shown in the table represent the actual amount of all fees earned for services rendered as a director during fiscal year 2009, regardless as to whether such fees were actually paid in fiscal year 2009. |
|
(2) |
|
Represents the grant date fair value of stock options determined in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 granted to each of our directors during fiscal year 2009. For a description of all assumptions included in the
calculation, 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 1, 2010. As of January 3, 2010, each non-employee director owned options to purchase an aggregate number of Common Shares as
follows: Ms. Andreotti (218,292 shares); Mr. Kraft (203,529 shares); Mr. Park (242,949 shares); Mr. Schwartz (188,765 shares); Mr. Skinner (77,956 shares) and Mr. Workman (70,654 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. Ms. Andreasen and Mr. Keleghan did not own any options to purchase Common Shares as of January 3, 2010. |
|
(3) |
|
Ms. Andreasen and Mr. Keleghan began serving as directors on November 10, 2009. |
|
(4) |
|
Ms. Andreotti and Mr. Kraft are retiring from the Board effective June 15, 2010 and, therefore they both have not been re-nominated to serve as directors. |
|
(5) |
|
Mr. Menons service as a director ended on June 3, 2009. Stock options granted to Mr. Menon during 2009, with a full grant date fair value of $33,756, have been excluded from the above table as the options were forfeited on June 3, 2009 due to failure to satisfy service-based vesting conditions. |
13
EXECUTIVE OFFICERS
Set forth below is certain information concerning the current executive officers of the
Company, which officers serve at the discretion of the Board of Directors.
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|
Name |
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Age |
|
Position and Business Experience |
Michael P. Marrow
|
|
|
52 |
|
|
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 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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Andrew B. Szafran
|
|
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43 |
|
|
Andrew B. Szafran has served as Senior Vice President and Chief Financial Officer of
APAC since May 2008. Mr. Szafran was previously Vice President and Chief Financial
Officer of Communications Supply Corp. (CSC), a nationwide distributor of low
voltage infrastructure products and industrial wire and cable with $700 million in
annual revenues. Serving in that capacity since 2002, he was responsible for
managing the finance and human resources functions as well as for legal affairs.
Mr. Szafran was a key member of the management team that diversified CSCs business
and significantly increased its revenue and profitability. In addition to his
operations finance and accounting experience, Mr. Szafran has extensive experience
in the areas of financial planning and analysis, corporate finance, mergers and
acquisitions, risk management and taxation. Prior to joining CSC, Mr. Szafran held
various financial positions of increasing responsibility with Alliant Exchange,
Inc. and its affiliate, Alliant Foodservice, Inc., for seven years. He served most
recently as Senior Vice President, Finance. |
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|
|
|
|
|
|
Christopher H. Crowley
|
|
|
39 |
|
|
Mr. Crowley joined APAC as Senior Vice President, Sales in March 2009. Mr. Crowley
was most recently at Cybernet Software Systems where he served as Senior Vice
President of Sales focusing on IT Solutions for technology companies. Prior to
that, he worked in the business process outsourcing industry in the role of Senior
Vice President of Sales for Teletech Holdings, Inc., and earlier, Senior Vice
President of Sales with Sutherland Global Services. Mr. Crowley also has several
years of operations and service delivery experience having worked as Director of
Operations for North American Service Delivery when he first started with
Sutherland in 1997. He began his career as a Business Development Manager
responsible for field sales at MCI Communications. |
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Arthur Di Bari
|
|
|
53 |
|
|
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. |
14
|
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|
|
|
|
Name |
|
Age |
|
Position and Business Experience |
Joseph R. Doolan
|
|
|
46 |
|
|
Mr. Doolan has served as 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 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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|
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|
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Eric Tinch
|
|
|
45 |
|
|
Mr. Tinch is our Senior Vice President,
Human Resources. He joined APAC on April
12, 2010. Prior to joining APAC, Mr. Tinch
served as Global HR Business Services Leader
for Convergys Corporation from 2006 to 2010
where he, oversaw a global business services
organization responsible for providing human
resources management services. Prior to
that, he worked for MarketSource, Inc. a
sales and marketing outsourcing organization
from 2003 to 2006 in the role of Vice
President Human Resources. Before that, Mr.
Tinch served as Senior Vice President
Business Strategies and Operations for CIT
Group, Inc. from 2002 to 2003 and Executive
Vice President Human Resources & Field
Operations for WH Smith Retail Travel from
2000 to 2002. Mr. Tinch began his career in
military intelligence with the Air Force and
subsequently spent eight years with the
Central Intelligence Agency in field
operations and human resources. |
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|
|
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Mark E. McDermott
|
|
|
49 |
|
|
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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|
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|
Robert B. Nachwalter
|
|
|
39 |
|
|
Mr. Nachwalter has served as our Senior Vice
President and General Counsel since November
2008. Prior to joining APAC, Mr. Nachwalter
was Senior Vice President and General
Counsel for Whitehall Jewelers Holdings,
Inc. (Whitehall), a publicly-traded
national retailer of fine jewelry with
approximately 375 stores in 39 states.
Whitehall filed for protection under Chapter
11 of the U.S. Bankruptcy Code in June 2008.
Before Whitehall, Mr. Nachwalter was senior
legal counsel with Ryder System, Inc., a
Fortune 500 transportation and logistics
company. |
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.
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 terms of the APAC Customer Services, Inc. Management Incentive Plan, as
amended and restated effective August 2, 2007 (the Management Incentive Plan). No annual cash
bonus is guaranteed. Mr. Marrow is eligible for a target bonus equal to 60% of his base salary and
a maximum bonus equal to 120% 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 annual 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 for
actual and reasonable expenses incurred by him in connection with his maintenance of a residence
near our headquarters facility.
15
On January 11, 2010, the Compensation Committee approved an annual management incentive
program pursuant to our MIP (the 2010 MIP) for Mr. Marrow and all other executive officers of the
Company. Under the terms of our 2010 MIP, Mr. Marrow is eligible to receive a cash bonus for
fiscal year 2010 based on our achieving certain financial performance goals established by the
Compensation Committee. Mr. Marrows 2010 MIP will be based 40% on our achieving the threshold or
maximum revenue amounts established by our Compensation Committee and 60% on our achieving the
threshold or maximum adjusted PTP amounts established by our Compensation Committee. PTP is
defined as pre-tax profit or net income before income taxes. For additional discussion on
2010 MIP, see Compensation Discussion and Analysis Annual Cash Incentive.
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.
The nature and amount of payments and benefits 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:
|
|
|
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. |
|
|
|
|
We will reimburse Mr. Marrow for payments by him to exercise his rights under COBRA for a
period of 12 months. |
|
|
|
|
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 him 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. |
|
|
|
|
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. |
16
Employment Arrangements with Messrs. Szafran, DiBari, McDermott and Nachwalter
Compensation
We entered into an Employment Agreement with Mr. Szafran on May 12, 2008 which provides that
he will be paid an annual base salary of $300,000 and will be eligible to participate in and earn
an annual bonus pursuant to our MIP. No annual cash bonus is guaranteed, but Mr. Szafran 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 to the above, when Mr. Szafran joined us, we granted him an option to
purchase 450,000 Common Shares. The option vests in five equal annual installments beginning on
May 14, 2009 and has an exercise price of $1.10 per share.
Mr. Szafran participates in the 2010 MIP described in detail in the Compensation Discussion
and Analysis. For information on Potential Payments Upon Change of Control, Retirement, Death or
Disability, Involuntary Termination (Not for Cause), Voluntary Termination and Termination for
Cause with respect to Mr. Szafran see discussion under Payments Made Upon Termination or Change in
Control.
We entered into an Employment Agreement with Mr. DiBari on March 11, 2008 which provides that
he will be paid an annual base salary of $285,000 and will be eligible to participate in and earn
an annual bonus pursuant to our MIP. No annual cash bonus is guaranteed, but Mr. DiBari is eligible
for a target bonus equal to 50% of his base salary and a maximum bonus equal to 150% of his base
salary. In addition to the above, when Mr. DiBari joined us, we agreed to pay him a sign-on bonus
of $45,000 and we granted him an option to purchase 300,000 Common Shares. The option vests in
five equal annual installments beginning on March 24, 2009 and has an exercise price of $.79 per
share.
Mr. DiBari participates in the 2010 MIP described in detail in the Compensation Discussion and
Analysis. For information on Potential Payments Upon Change of Control, Retirement, Death or
Disability, Involuntary Termination (Not for Cause), Voluntary Termination and Termination for
Cause with respect to Mr. DiBari see discussion under Payments Made Upon Termination or Change in
Control.
We entered into an Employment Agreement with Mr. McDermott on April 12, 2004 which provides
that he will be paid an annual base salary of $225,000 and will be eligible to participate in and
earn an annual bonus pursuant to our MIP. No annual cash bonus is guaranteed, but Mr. McDermott is
eligible for a target bonus equal to 40% of his base salary and a maximum bonus equal to 80% of his
base salary. In addition to the above, when Mr. McDermott entered into this Employment Agreement,
we granted him an option to purchase 25,000 Common Shares. The option vests in four equal annual
installments beginning on April 15, 2005 and has an exercise price of $2.955 per share.
Mr. McDermott participates in the 2010 MIP described in detail in the Compensation Discussion
and Analysis. For information on Potential Payments Upon Change of Control, Retirement, Death or
Disability, Involuntary Termination (Not for Cause), Voluntary Termination and Termination for
Cause with respect to Mr. McDermott see discussion under Payments Made Upon Termination or Change
in Control.
We entered into an Employment Agreement with Mr. Nachwalter on November 17, 2008 which
provides that he will be paid an annual base salary of $250,000 and will be eligible to participate
in and earn an annual bonus pursuant to our MIP. No annual cash bonus is guaranteed, but Mr.
Nachwalter 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 to the above, when Mr. Nachwalter joined us, we granted
him an option to purchase 150,000 Common Shares. The option vests in five equal annual
installments beginning on November 21, 2009 and has an exercise price of $1.18 per share.
Mr. Nachwalter participates in the 2010 MIP described in detail in the Compensation Discussion
and Analysis. For information on Potential Payments Upon Change of Control, Retirement, Death or
Disability, Involuntary Termination (Not for Cause), Voluntary Termination and Termination for
Cause with respect to Mr. Nachwalter see discussion under Payments Made Upon Termination or Change
in Control.
17
2009 Summary Compensation Table
The following table sets forth information with respect to all compensation paid or earned for
services rendered to us by the Named Executive Officers during fiscal years 2009, 2008 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
|
Option |
|
|
All Other |
|
|
|
|
Name and |
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Total |
|
Principal Position |
|
Year |
|
|
($) |
|
|
($)(1) |
|
|
($)(2) |
|
|
($)(3) |
|
|
($)(4) |
|
|
($) |
|
Michael P. Marrow (5) |
|
|
2009 |
|
|
|
363,462 |
|
|
|
|
|
|
|
266,747 |
|
|
|
477,975 |
|
|
|
18,882 |
|
|
|
1,127,066 |
|
President, Chief Executive Officer and Director |
|
|
2008 |
|
|
|
282,692 |
|
|
|
100,000 |
|
|
|
300,000 |
|
|
|
506,790 |
|
|
|
3,416 |
|
|
|
1,192,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew B. Szafran (5) |
|
|
2009 |
|
|
|
311,538 |
|
|
|
|
|
|
|
228,641 |
|
|
|
|
|
|
|
17,183 |
|
|
|
557,362 |
|
SVP, Chief Financial Officer |
|
|
2008 |
|
|
|
176,538 |
|
|
|
|
|
|
|
150,000 |
|
|
|
241,605 |
|
|
|
4,047 |
|
|
|
572,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur D. DiBari (5) |
|
|
2009 |
|
|
|
295,962 |
|
|
|
|
|
|
|
211,648 |
|
|
|
483,705 |
|
|
|
6,061 |
|
|
|
997,376 |
|
SVP, Operations |
|
|
2008 |
|
|
|
208,269 |
|
|
|
177,508 |
|
|
|
177,800 |
|
|
|
110,310 |
|
|
|
4,352 |
|
|
|
678,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark E. McDermott |
|
|
2009 |
|
|
|
257,538 |
|
|
|
|
|
|
|
148,800 |
|
|
|
|
|
|
|
16,160 |
|
|
|
422,498 |
|
VP and CIO |
|
|
2008 |
|
|
|
276,000 |
|
|
|
|
|
|
|
111,333 |
|
|
|
|
|
|
|
(1,541 |
) |
|
|
385,792 |
|
|
|
|
2007 |
|
|
|
291,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,861 |
|
|
|
304,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert B. Nachwalter (5) |
|
|
2009 |
|
|
|
259,615 |
|
|
|
|
|
|
|
187,500 |
|
|
|
|
|
|
|
1,526 |
|
|
|
448,641 |
|
SVP, General Counsel and Corporate Secretary |
|
|
2008 |
|
|
|
19,231 |
|
|
|
|
|
|
|
30,303 |
|
|
|
95,670 |
|
|
|
29 |
|
|
|
145,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Keller (6) |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
481,846 |
|
|
|
481,846 |
|
Former President, Chief |
|
|
2008 |
|
|
|
199,514 |
|
|
|
|
|
|
|
99,462 |
|
|
|
|
|
|
|
306,250 |
|
|
|
605,227 |
|
Executive Officer and Director |
|
|
2007 |
|
|
|
440,000 |
|
|
|
|
|
|
|
|
|
|
|
454,500 |
|
|
|
5,477 |
|
|
|
899,977 |
|
Notes to 2009 Summary Compensation Table
|
|
|
(1) |
|
Amounts for 2008 represent signing bonuses granted to Mr. Marrow ($100,000) and Mr. DiBari
($45,000), and a performance excellence plan award to Mr. DiBari ($132,508). |
|
(2) |
|
Amounts for 2009 represent non-equity incentive plan awards earned in 2009 under the 2009
MIP and paid in March 2010. Amounts for 2008 represent non-equity incentive plan awards earned
in 2008 under the 2008 MIP and paid in March 2009. |
|
(3) |
|
Represents the grant date fair value of stock awards and stock options determined in
accordance with FASB ASC Topic 718 for fiscal years 2009, 2008 and 2007. For a description of
all assumptions included in the calculation, see Accounting For Stock-Based Compensation in
Note 3 of the Notes to our Consolidated Financial Statements in our Form 10-K for the fiscal
year ended January 3, 2010 filed with the SEC on March 1, 2010. In accordance with current
SEC disclosure requirements, amounts reported for stock awards and stock options for fiscal
years 2008 and 2007, previously reported as based on amounts recognized as accounting expense
for such fiscal year, are now being reported above based on grant date fair values. |
|
(4) |
|
Represents compensation from us from the following sources: (i) our contributions for
excess employee life insurance coverage policy premiums, (ii) our match of the Named Executive
Officers contributions to (a) our 401(k) plan, and (b) our supplemental 401(k) restoration
plan (as described herein) for highly compensated employees, (iii) earnings on our match of
the Named Executive Officers contributions to (a) our 401(k) plan, and (b) our supplemental
401(k) restoration plan for highly compensated employees, (iv) our contributions for
short-term disability insurance coverage policy premiums and (v) a housing allowance for Mr.
Marrow in 2009 ($18,426) and 2008 ($3,074) to maintain a residence near our corporate
headquarters. This amount also includes severance payments for Mr. Keller for 2009 ($481,846)
and 2008 ($287,692). |
|
(5) |
|
Mr. Marrow began employment on February 25, 2008. Mr. Szafran began employment on May 14,
2008. Mr. DiBari began employment on March 24, 2008. Mr. Nachwalter began employment on
November 21, 2008. |
|
(6) |
|
Mr. Keller retired as President and Chief Executive Officer effective as of February 18,
2008. Pursuant to the terms of Mr. Kellers Amended Employment Agreement, Mr. Keller received
salary continuation for a period of two years. |
18
2009 Grants of Plan-Based Awards
The following table sets forth the number of restricted Common Shares and stock options, if
any, granted to the Named Executive Officers during fiscal year 2009 and details concerning each
Named Executive Officers annual non-equity incentive plan award opportunity under the 2009 MIP.
For further information see Compensation Discussion and Analysis Long-Term Equity Incentives
2009 Equity Grants to Named Executive Officers appearing elsewhere in the Executive Compensation
section of this Proxy Statement.
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
|
|
|
|
|
Payments Under |
|
|
|
|
|
|
All Other Stock |
|
|
Awards: |
|
|
Exercise or |
|
|
Fair Value of |
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
Payments Under |
|
|
Awards: Number |
|
|
Number of |
|
|
Base Price |
|
|
Stock and |
|
|
|
Compensation |
|
|
|
|
|
|
Incentive Plan |
|
|
Equity Incentive |
|
|
of Shares of Stock |
|
|
Securities |
|
|
of Option |
|
|
Option |
|
Name and |
|
Committee |
|
|
Grant |
|
|
Awards (1) |
|
|
Plan Awards |
|
|
or Units |
|
|
Underlying |
|
|
Awards |
|
|
Awards |
|
Principal Position |
|
Action |
|
|
Date |
|
|
($) |
|
|
(#) |
|
|
(#) |
|
|
Options |
|
|
($/Sh) |
|
|
($)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Marrow |
|
|
|
|
|
|
|
|
|
|
266,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Chief Executive Officer and Director |
|
|
4/13/2009 |
|
|
|
5/8/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
5.53 |
|
|
|
477,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
B. Szafran |
|
|
|
|
|
|
|
|
|
|
228,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur D. DiBari |
|
|
|
|
|
|
|
|
|
|
211,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Operations |
|
|
4/13/2009 |
|
|
|
5/8/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
5.53 |
|
|
|
159,325 |
|
|
|
|
8/18/2009 |
|
|
|
8/18/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
5.43 |
|
|
|
324,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
E. McDermott |
|
|
|
|
|
|
|
|
|
|
148,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VP and CIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
B. Nachwalter |
|
|
|
|
|
|
|
|
|
|
187,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, General Counsel and Corporate Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Keller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former President, Chief Executive
Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
Notes to 2009 Grants of Plan-Based Awards Table
|
|
|
(1) |
|
The amounts shown in the table represent the actual annual non-equity incentive plan
compensation amounts that were earned during 2009 based on the achievement of performance
goals under our 2009 MIP. For further information about our 2009 MIP, see Compensation
Discussion and Analysis Annual Cash Incentive 2009 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 FASB ASC Topic 718. For a description of all assumptions
included in the calculation, 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 1,
2010. |
19
Outstanding Equity Awards on January 3, 2010
The following table sets forth information regarding the outstanding equity awards held by the
Named Executive Officers as of January 3, 2010. The vesting dates for any equity awards not vested
on January 3, 2010 are set forth in the applicable footnotes. Some of the equity awards set forth
in this table have vested since the January 3, 2010 effective date of this table as noted in the
footnotes.
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|
Option Awards |
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|
Stock Awards |
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|
|
|
Equity Incentive |
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|
|
Equity |
|
|
Equity Incentive |
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|
|
|
Plan Awards; |
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|
|
|
|
Incentive Plan |
|
|
Plan Awards: |
|
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
|
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|
|
|
|
|
|
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|
|
|
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|
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Awards: |
|
|
Market or Payout |
|
|
|
Securities |
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Market Value |
|
|
Number of |
|
|
Value of |
|
|
|
Underlying |
|
|
Underlying |
|
|
Underlying |
|
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|
|
Shares or |
|
|
of Shares or |
|
|
Unearned |
|
|
Unearned Shares, |
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
|
|
|
|
Units of Stock |
|
|
Units of Stock |
|
|
Shares, Units |
|
|
Units or Other |
|
|
|
Options |
|
|
Options |
|
|
Unearned |
|
|
Exercise |
|
|
Option |
|
|
That Have Not |
|
|
That Have Not |
|
|
or Other |
|
|
Rights That Have |
|
Name and |
|
(#) |
|
|
(#) |
|
|
Options |
|
|
Price |
|
|
Expiration |
|
|
Vested |
|
|
Vested |
|
|
Not Vested |
|
|
Not Vested |
|
Principal Position |
|
Exercisable |
|
|
Unexercisable |
|
|
(#) |
|
|
($) |
|
|
Date |
|
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
Michael P. Marrow |
|
|
180,000 |
|
|
|
720,000 |
(1) |
|
|
|
|
|
|
1.21 |
|
|
|
2/25/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Chief Executive Officer and Director |
|
|
|
|
|
|
150,000 |
|
|
|
|
|
|
|
5.53 |
|
|
|
5/8/2019 |
|
|
|
|
|
|
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|
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|
|
|
Andrew
B. Szafran |
|
|
90,000 |
|
|
|
360,000 |
(2) |
|
|
|
|
|
|
1.10 |
|
|
|
5/14/2018 |
|
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|
|
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|
SVP, Chief Financial Officer |
|
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|
|
|
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|
Arthur
D. DiBari |
|
|
60,000 |
|
|
|
240,000 |
(3) |
|
|
|
|
|
|
0.79 |
|
|
|
3/24/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Operations |
|
|
|
|
|
|
50,000 |
|
|
|
|
|
|
|
5.53 |
|
|
|
5/8/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
100,000 |
|
|
|
|
|
|
|
5.43 |
|
|
|
8/18/2019 |
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|
|
|
|
|
|
Mark
E. McDermott |
|
|
6,500 |
|
|
|
|
(4) |
|
|
|
|
|
|
2.90 |
|
|
|
1/24/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VP and CIO |
|
|
211,540 |
|
|
|
60,000 |
|
|
|
|
|
|
|
1.62 |
|
|
|
2/8/2015 |
|
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|
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|
Robert
B. Nachwalter |
|
|
30,000 |
|
|
|
120,000 |
(5) |
|
|
|
|
|
|
1.18 |
|
|
|
11/21/2018 |
|
|
|
|
|
|
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|
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|
|
|
|
|
|
SVP, General Counsel and Corporate
Secretary |
|
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|
|
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|
|
Robert
J. Keller |
|
|
|
|
|
|
|
(6) |
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Former President, Chief Executive
Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
20
Notes to Outstanding Equity Awards on January 3, 2010 Table
|
|
|
(1) |
|
Mr. Marrows 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 |
February 25, 2008 |
|
|
900,000 |
|
|
February 25, 2009 |
|
|
180,000 |
|
|
(Vested) |
|
|
|
|
|
|
February 25, 2010 |
|
|
180,000 |
|
|
(Vested) |
|
|
|
|
|
|
February 25, 2011 |
|
|
180,000 |
|
|
|
|
|
|
|
|
|
February 25, 2012 |
|
|
180,000 |
|
|
|
|
|
|
|
|
|
February 25, 2013 |
|
|
180,000 |
|
|
|
May 8, 2009 |
|
|
150,000 |
|
|
May 8, 2010 |
|
|
30,000 |
|
|
|
|
|
|
|
|
|
May 8, 2011 |
|
|
30,000 |
|
|
|
|
|
|
|
|
|
May 8, 2012 |
|
|
30,000 |
|
|
|
|
|
|
|
|
|
May 8, 2013 |
|
|
30,000 |
|
|
|
|
|
|
|
|
|
May 8, 2014 |
|
|
30,000 |
|
|
|
|
|
|
(2) |
|
Mr. Szafrans 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 |
May 14, 2008 |
|
|
450,000 |
|
|
May 14, 2009 |
|
|
90,000 |
|
|
(Vested) |
|
|
|
|
|
|
May 14, 2010 |
|
|
90,000 |
|
|
|
|
|
|
|
|
|
May 14, 2011 |
|
|
90,000 |
|
|
|
|
|
|
|
|
|
May 14, 2012 |
|
|
90,000 |
|
|
|
|
|
|
|
|
|
May 14, 2013 |
|
|
90,000 |
|
|
|
21
|
|
|
(3) |
|
Mr. DiBaris 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 24, 2008
|
|
|
|
300,000 |
|
March 24, 2009
|
|
|
60,000 |
|
|
(Vested) |
|
|
|
|
|
|
March 24, 2010
|
|
|
60,000 |
|
|
(Vested) |
|
|
|
|
|
|
March 24, 2011
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
March 24, 2012
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
March 24, 2013
|
|
|
60,000 |
|
|
|
May 8, 2009
|
|
|
|
50,000 |
|
May 8, 2010
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
May 8, 2011
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
May 8, 2012
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
May 8, 2013
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
May 8, 2014
|
|
|
10,000 |
|
|
|
August 18, 2009
|
|
|
|
100,000 |
|
August 18, 2010
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
August 18, 2011
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
August 18, 2012
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
August 18, 2013
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
August 18, 2014
|
|
|
20,000 |
|
|
|
|
|
|
(4) |
|
As of February 8, 2010, all of Mr. McDermotts outstanding options are fully vested. |
|
(5) |
|
Mr. Nachwalters 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 |
November 21, 2008
|
|
|
|
150,000 |
|
November 21, 2009
|
|
|
30,000 |
|
|
(Vested) |
|
|
|
|
|
|
November 21, 2010
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
November 21, 2011
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
November 21, 2012
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
November 21, 2013
|
|
|
30,000 |
|
|
|
|
|
|
(6) |
|
Mr. Kellers employment terminated on April 19, 2008, at which time 300,000 unvested options
and 50,000 unvested awards immediately expired. Mr. Keller had 450,000 vested options which
expired on July 18, 2008 and 300,000 vested options which expired on October 19, 2008. |
22
2009 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 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Stock Awards |
|
|
|
Number of shares |
|
|
Value |
|
|
Number of shares |
|
|
Value |
|
|
|
acquired upon |
|
|
realized on |
|
|
acquired on |
|
|
realized on |
|
Name and |
|
exercise |
|
|
exercise |
|
|
vesting |
|
|
vesting |
|
Principal Position |
|
(#) |
|
|
($) |
|
|
(#) |
|
|
($) |
|
Michael P. Marrow |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, Chief Executive Officer and
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
B. Szafran |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur D. DiBari |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
E. McDermott |
|
|
122,504 |
|
|
|
389,569 |
|
|
|
|
|
|
|
|
|
VP and CIO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
B. Nachwalter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SVP, General Counsel and Corporate
Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Keller |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former President, Chief Executive
Officer and Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Compensation Tables
All other tables have been omitted because they are not applicable to us in fiscal year 2009.
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. Marrow was our
principal executive officer beginning in February 2008. Mr. Keller retired as our Chief Executive
Officer on February 18, 2008. Our principal executive officer, 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 2009
and Mr. Keller, our former Chief Executive Officer, are our Named Executive Officers for 2009. As
a result of severance payments made in 2009 to Mr. Keller, our former Chief Executive Officer, is
still listed in Summary Compensation for our Named Executive Officers for 2009.
Our Compensation Committee is composed of four independent directors. From time to time, we
retain independent compensation consultants to provide objective and expert advice on various
compensation plan design issues.
From time to time, we also use additional compensation data which we obtain from established
executive compensation survey sources.
23
In addition to Mr. Marrow, Mr. Szafran, our Senior Vice President and Chief Financial Officer
and Mr. Michael V. Hoehne, our Vice President, Human Resources 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 2009.
Compensation Consultant
In October 2009, the Compensation Committee retained the Delves Group (Delves), a
compensation consultant, to provide an overall assessment of our management and sales compensation
programs for our executive officers (including the Named Executive Officers) as well as certain
other identified employees. Delves and its affiliates did not provide any other services to us in
2009.
Delves was engaged to conduct a competitive analysis of our total compensation programs for
identified executives and managers examining base salary, annual incentives, long-term
incentives, benefits and perquisites. The analysis included a comparison of pay levels and
structure to benchmark data. Delves also reviewed our current employment terms for executives,
including, but not limited to severance, change-in-control provisions and other special provisions.
Delves and the Compensation Committee are in the process of making an assessment of the
effectiveness of our management and sales compensation programs, our equity granting practices,
and identifying the gaps, if any, between our current compensation programs and our present
compensation philosophy as well as the competitive market practices. With the compensation
assessment ongoing, it has not yet been determined what, if any, modifications will be made to our
current compensation policies and practices.
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 as well as other market
factors.
Risk Assessment
In designing compensation plans and programs for our employees including the Named Executive
Officers, the Compensation Committee structures such plans and programs to balance risk and reward,
while mitigating the incentive for excessive risk taking. The following characteristics of our
executive compensation plans and programs limit the possibility for excessive risk taking:
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The base salary is a fixed amount, and therefore does not encourage risk taking. |
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The annual incentive compensation opportunity is capped at a maximum amount. |
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All current outstanding long-term incentive opportunities are comprised of time-based options that vest over multiple years which align the option holders interests to the long-term stockholder interests. |
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Members of the Compensation Committee approve the final incentive compensation awards after reviewing the executive and corporate performance awards, and may utilize negative discretion based on a variety of performance objectives, thereby diversifying the risk. |
24
Elements of Compensation
To achieve our objectives, our executive compensation program includes the following
components:
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Base Salary: An annual base salary, subject to discretionary annual merit
increases based on the executives overall performance during the previous year; |
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Annual Cash Incentive: A potential annual cash bonus under our management
incentive plan based on our attaining certain specified financial performance measures; |
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Long-Term Equity Incentives: Long-term incentives consisting of stock options
and performance-based restricted share grants under our incentive stock plan; and |
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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 2009. See 2009 Summary Compensation Table
appearing elsewhere in the Executive Compensation section of this Proxy Statement. For fiscal
year 2009, 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 currently employed 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.
We compensate our currently employed 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 dependent 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.
25
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.
The following table sets forth the annualized 2009 and 2010 base salaries for each of the
currently employed Named Executive Officers.
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Named Executive Officer |
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2009 Base Salary |
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2010 Base Salary |
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Michael P. Marrow |
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$ |
350,000 |
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$ |
385,000 |
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Arthur D. DiBari |
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$ |
285,000 |
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$ |
309,000 |
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Mark E. McDermott |
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$ |
248,000 |
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$ |
251,720 |
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Robert B. Nachwalter |
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$ |
250,000 |
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$ |
256,250 |
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Andrew B. Szafran |
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$ |
300,000 |
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$ |
309,000 |
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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 and amended and
restated on August 2, 2007. 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 which take into consideration our overall philosophy with respect to risk management.
All performance targets for the Named Executive Officers are directly linked to the achievement of
our annual financial plan. Any annual bonuses earned by the Named Executive Officers are payable
in cash.
2009 MIP
For fiscal year 2009, all executive officers, including the Named Executive Officers were eligible
to receive annual cash bonus payments on either an annual or a quarterly basis based on us
achieving certain financial performance goals established by the Compensation Committee. No annual
cash bonus was guaranteed, but each executive officer was eligible for a MIP ranging from 0% to
150% of his or her base salary. For all executive officers, other than our Senior Vice President,
Sales who does not participate in the MIP, but instead participates in the Business Development
Sales Commission, the 2009 MIP was based 50% on us achieving the threshold or maximum revenue
amounts established by the Compensation Committee and 50% on us achieving the threshold or maximum
PTP amounts established by the Compensation Committee. The threshold and maximum financial
performance goals established by the Compensation Committee for the 2009 MIP were based on our 2009
financial plan approved by our Board of Directors. Revenue is defined as net revenue, as reported
in our quarterly and annual audited financial statements. PTP is defined as pre-tax profit or
net income before income taxes.
2009 Management Incentive Plan
Financial Measures
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Percentage of Target |
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REVENUE |
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Maximum |
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200 |
% |
Target |
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100 |
% |
Threshold |
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100 |
% |
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PTP |
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Maximum |
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200 |
% |
Target |
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100 |
% |
Threshold |
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100 |
% |
26
The range of potential annual incentive payments for the Named Executive Officers during
fiscal year 2009 was determined by our Compensation Committee. The fiscal year 2009 annual bonus
opportunity for Mr. Marrow at threshold, target and maximum levels was 50%, 50% and 100% of his
base salary. The annual bonus opportunity for the other Named Executive Officers at threshold,
target and maximum levels was 50%, 50% and 150% of base salary for Mr. DiBari, 50%, 50% and 90% of
base salary for Mr. Szafran, 50%, 50% and 75% of base salary for Mr. Nachwalter and 40%, 40% and
60% of base salary for Mr. McDermott. The structure of the fiscal year 2009 annual bonus ensured
that a significant portion of each Named Executive Officers total cash compensation was dependant
on our results for the year.
Management Incentive Plan bonuses awarded in 2010 for performance in fiscal year 2009 are
included in the 2009 Summary Compensation Table appearing elsewhere in the Executive
Compensation section of this Proxy Statement.
2009 Performance Plus Bonus
On April 6, 2009 the Compensation Committee approved an additional one-time potential
performance bonus (2009 Performance Plus Bonus) for the executive officers, including Named
Executive Officers for the 2009 fiscal year in lieu of salary increases. The 2009 Performance
Plus Bonus increased the maximum payout for each participant in the 2009 MIP, by an additional 10%
subject to our meeting certain pre-determined targets. In order for the 2009 Performance Plus
Bonus to be paid, we needed to achieve: (1) a minimum revenue target; (2) a PTP target; and (3)
certain sales goals. We did not meet all of the required pre-determined targets and, as a result,
there were no payments under the 2009 Performance Plus Bonus.
2010 MIP
Under the terms of the 2010 MIP, Messrs. Marrow and Szafran and all other executive officers,
including Named Executive Officers, are eligible to receive annual cash bonus payments on either an
annual or a quarterly basis based on us achieving certain financial performance goals established
by the Compensation Committee. No annual cash bonus is guaranteed, but each executive officer is
eligible for a MIP payment ranging from 0% to 150% of base salary.
The fiscal year 2010 annual bonus opportunity for Mr. Marrow at threshold, target and maximum
levels is 30%, 60% and 120% of his base salary. The annual bonus opportunity for the other Named
Executive Officers at threshold, target and maximum levels is 25%, 50% and 150% of base salary for
Mr. DiBari, 25%, 50% and 100% of base salary for Mr. Szafran, 25%, 50% and 100% of base salary for
Mr. Nachwalter and 20%, 40% and 80% of base salary for Mr. McDermott.
For all executive officers, other than our Senior Vice President, Sales who does not
participate in the MIP, but instead participates in the Business Development Sales Commission Plan,
the 2010 MIP will be based 40% on us achieving the threshold or maximum revenue amounts established
by the Compensation Committee and 60% on us achieving the threshold or maximum PTP amounts
established by the Compensation Committee. The threshold and maximum financial performance goals
established by the Compensation Committee for the 2010 MIP are based on our 2010 financial plan
approved by our Board of Directors. Revenue is defined as net revenue, as reported in our quarterly
and annual audited financial statements. All incremental PTP bonus dollars which exceed the MIP
100% bonus payout threshold are subject to a required split of 60% of the additional PTP dollars
going to the Companys retained earnings and 40% of the additional PTP dollars being paid in
bonuses to the employees.
Other Compensation Plans
In addition to the above-described plans for Named Executive Officers, the Company has compensation
plans for other executives which support the Companys overall business objectives by linking
compensation to the attainment of goals as well as the creation of long-term stockholder value. The
objective is to provide a total compensation package thatat expected levels of performance and
consistent with an executives area of responsibilityis competitive with compensation
opportunities available to executives of similar experience and standing in the competitive market.
27
Business Development Sales Commission Plan
For 2009 and 2010, we have the Customer Services Business Development Sales Commission Plan
(BDSCP). The BDSCP is intended to motivate business practices which are in the best interest of
our shareholders. The BDSCP seeks to accomplish several key objectives:
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Align Commission Compensation with Our Business Economics - A Business Development
executive will seek to close business that fits our strategic plan and will work diligently
to understand the operating cost models in order to negotiate favorable terms accordingly. |
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Motivate Performance - the BDSCP design is intended to reward superior sales production. |
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Focus on New Business - The BDSCP focuses the Business Development organization on the
development of new service relationships with prospects that are not currently clients. |
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Attract and Retain High Quality Talent - Business Development executives enjoy a highly
competitive earnings opportunity within our marketplace. |
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Maintain a Highly Competitive Sales Commission Plan within a Dynamic Marketplace - The
BDSCP will be reviewed annually to ensure that it remains highly competitive and supports
our strategic and business goals and, thus, management reserves the right to unilaterally
alter the plan at any time to align the BDSCP with changing business objectives. |
To ensure that compensation policies or practices are consistent with our risk management
philosophy, sales opportunities are subject to a review and approval process.
Client Solutions Sales Incentive Plan
For 2009 and 2010, the Compensation Committee adopted the Client Solutions Sales Incentive Program
(CSSIP). The CSSIP is also intended to motivate business practices which are in the best interest
of our shareholders. The CSSIP seeks to accomplish several key objectives:
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Align Incentive Compensation with Our Business Economics - A Client Solutions executive
will seek to build business that fits our strategic plan and will work diligently to
understand the operating cost models in order to negotiate favorable terms accordingly. |
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Motivate Performance - CSSIP design is intended to reward superior sales production. |
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Focus on New Business - CSSIP rewards the development of new service relationships with
prospects that are not currently clients. |
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Attract and Retain High Quality Talent - Client Solutions executives enjoy a highly
competitive earnings opportunity within our marketplace. |
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Maintain a Highly Competitive Sales Incentive Plan within a Dynamic Marketplace - The
CSSIP will be reviewed annually to ensure that it remains highly competitive and supports
our strategic and business goals and, therefore, management reserves the right to
unilaterally alter the CSSIP at any time to align the CSSIP with changing business
objectives. |
To ensure that compensation policies or practices are consistent with our risk management
philosophy, payments under the CSSIP must be consistent with revenues and profit targets set by the
Board and bonuses are paid based on target achievement. Target bonuses under the CSSIP are
weighted more heavily towards profits.
Long-Term Equity Incentives
We believe that equity compensation is an important component of our currently employed 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.
28
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 currently employed Named Executive Officer receives value from an
option is when the price of our Common Shares increases after the grant date. Restricted shares
provide currently employed 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 currently employed Named
Executive Officers over longer periods of time. Equity awards to currently employed Named Executive
Officers typically vest over time. Stock option grants to the currently employed 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 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 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.
2009 Equity Grants to Named Executive Officers
During fiscal year 2009, equity grants were issued the form of stock options to Mr. Marrow
(150,000 shares) and to Mr. DiBari (150,000 shares).
Stock Option Grant Guidelines and Procedures
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.
In May 2007, the Compensation Committee updated its guidelines for the granting of stock
options for fiscal years 2007 and beyond. Options granted (excluding non-employee director grants)
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.
Employment Agreements
We entered into employment agreements with Mr. Marrow, our current President, Chief Executive
Officer and Director, and with Messrs. Crowley, DiBari, McDermott, Nachwalter, Szafran and Tinch.
Additionally, we entered into an employment agreement with Mr. Keller, our former Chief Executive
Officer, under which we made severance payments during fiscal 2009. 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.
29
Other Employee Benefits
We structure our compensation to provide competitive benefit packages to our currently
employed 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 currently employed Named Executive Officers. We also make matching
contributions on behalf of these highly compensated employees to the restoration plan (including
any currently employed 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, 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
Each of our currently employed Named Executive Officers has a severance agreement that
provides that if the executives employment is terminated without cause, or, in the case of Mr.
Szafran, he voluntarily resigns for good reason or agreed reason, the executive will receive
specified payments and benefits. Additionally, we provide separate employment security agreements
to our currently employed 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. 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 currently employed 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.
30
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 currently employed 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.
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. The members of the Compensation Committee as of the date of this filing
are reflected below.
Respectfully submitted,
COMPENSATION COMMITTEE
Cindy K. Andreotti, Chairperson
Katherine Andreasen
John C. Kraft
John J. Park
31
Potential Payments Upon Termination or Change of Control
We have certain agreements that require us to provide compensation to our currently employed
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 currently employed 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 currently employed Named Executive Officers. Each
of our currently employed 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 currently employed 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 currently employed Named Executive
Officers tenure and performance, the currently employed 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 currently employed Named Executive Officers has signed an Agreement Protecting
Company Interests which provides that during the term of his employment with us and for a specified
period after his termination, he 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 Mr. Marrow and one year for Messrs. DiBari, McDermott,
Nachwalter and Szafran. In the event any of the currently employed 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 currently employed 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 currently employed Named Executive Officers is eligible to elect normal retirement
when he has completed at least ten years of continuous employment and the sum of his 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 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:
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The currently employed Name Executive Officer, or his beneficiary or estate, will be
entitled to receive payment of any and all base salary earned through the date of his
termination; |
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Some or all of the outstanding stock options that are not vested at the time of his death
or disability will accelerate and become immediately exercisable as described above under
Payments Made Upon Retirement; and |
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All then unvested restricted Common Shares will immediately vest. |
32
Payments Made Upon Involuntary Termination (Not for Cause)
In the event of involuntary termination of a currently employed Named Executive Officer not
for cause:
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Mr. Marrow will be entitled to severance payments in an amount equal to 12 months of his
then-current base salary payable over a period of two years from the termination date. Mr.
McDermott will be entitled to severance payments in an amount equal to twelve months of his
base salary. Mr. Szafran will be entitled to severance payments in an amount equal to nine
months of his base salary payable over a period over 12 months and Messrs. DiBari and
Nachwalter will be entitled to severance payments in amounts equal to six months of their
base salaries payable over a period of 12 months. |
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We will reimburse Mr. Marrow for payments by him to exercise his rights under COBRA for a
period of 12 months. |
Payments Made Upon Voluntary Termination and Termination for Cause
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
employment agreement), he is not entitled to receive any payments or benefits other than accrued
obligations earned by Mr. Marrow 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. Marrow may have in our company retirement plans.
For each of the other currently employed Named Executive Officers, if he voluntarily
terminates his employment with us, or if he is terminated for cause (as defined in his employment
agreement), the currently employed Named Executive Officer is not entitled to receive any payments
or benefits other than accrued obligations earned prior to the dated of his termination, unless, in
the case of Mr. Szafran, he resigns for Good Reason or Agreed Reason as that term is defined in
his employment agreement.
In the event Mr. Szafran voluntarily resigns for Good Reason, or Agreed Reason he 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 Mr. Szafrans employment
agreement as a termination prior to a change of control, if after notice and a period to cure,
(i) we materially reduce or diminish his duties, responsibilities or authority as an executive
officer, (ii) he no longer reports to our Chief Executive Officer, (iii) his base salary is reduced
and not in accordance with a compensation reduction applicable to all executive officers, or (iv)
any other material breach of the terms of his agreement or his employment in general.
As used in the employment agreements of all of the currently employed Named Executive
Officers, cause is defined as (i) gross misconduct or gross negligence in the performance of his
duties as set forth in employment agreement, (ii) willful disobedience of the lawful directions 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 currently employed 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 upon the change of control; and |
|
|
|
|
All then unvested restricted Common Shares will immediately vest. |
33
Payments Made Upon Termination in Connection with a Change of Control
Each of our currently employed 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
currently employed 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 resigns for good reason:
|
|
|
The currently employed Named Executive Officer is entitled to a lump sum severance
payment in an amount equal to his base salary for 18 months; |
|
|
|
|
The currently employed Named Executive Officer is entitled to receive, 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 termination shall become
immediately exercisable; and |
|
|
|
|
We will reimburse each of the currently employed Named Executive Officers for payments by
him to exercise his rights under COBRA for a period of 18 months. |
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
employment with us shall exist if, after notice and an opportunity to cure:
|
|
|
The currently employed Named Executive Officers principal place of work is moved more
than fifty (50) miles; |
|
|
|
|
The currently employed Named Executive Officers duties and responsibilities are
materially reduced or diminished; provided that such reduction is not, in the case of the
currently employed Named Executive Officers other than Mr. Marrow, solely as a result of our
acquisition and existence as a subsidiary of another entity; |
|
|
|
|
The currently employed Named Executive Officers base salary is reduced; |
|
|
|
|
The currently employed Named Executive Officer determines in good faith that, as a result
of the change of control, he is unable to carry out his or her job responsibilities; |
|
|
|
|
There is a material violation of his employment agreement; or |
|
|
|
|
We consummate a liquidation, dissolution or merger or transfer all or substantially all
of our assets and his employment agreement is not assumed by the surviving entity. |
34
Estimated Payments on Termination or Change of Control
The following table sets forth the estimated payments to each of the currently employed Named
Executive Officers under the circumstances outlined above. The amounts shown assume that such
termination and/or change of control was effective as of January 3, 2010, and thus includes amounts
earned through such time and are estimates of the amounts which would be paid out to the currently
employed 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 currently
employed Named Executive Officers separation from us and/or at the time of a change of control.
Pursuant to each currently employed 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 currently employed 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 |
|
M. Marrow |
|
|
A. Szafran |
|
|
A. DiBari |
|
|
M. McDermott |
|
|
R. Nachwalter |
|
|
|
(in dollars) |
|
Retirement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of stock options(1) |
|
$ |
867,900 |
|
|
$ |
437,400 |
|
|
$ |
325,100 |
|
|
$ |
235,697 |
|
|
$ |
143,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death or Disability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of stock options(1) |
|
|
867,900 |
|
|
|
437,400 |
|
|
|
325,100 |
|
|
|
235,697 |
|
|
|
143,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination (Not for Cause) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance payment(2) |
|
|
350,000 |
|
|
|
225,000 |
|
|
|
142,500 |
|
|
|
248,000 |
|
|
|
125,000 |
|
Continued health benefits |
|
|
9,600 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
359,600 |
|
|
|
225,000 |
|
|
|
142,500 |
|
|
|
248,000 |
|
|
|
125,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voluntary Termination (For Good Reason) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance payment(2) |
|
|
n/a |
|
|
|
225,000 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of stock options(1) |
|
|
1,742,250 |
|
|
|
874,800 |
|
|
|
657,650 |
|
|
|
130,200 |
|
|
|
286,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change of Control with Termination |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance payment(2) |
|
|
525,000 |
|
|
|
450,000 |
|
|
|
427,500 |
|
|
|
372,000 |
|
|
|
375,000 |
|
Prorated annual incentive(2) |
|
|
262,500 |
|
|
|
225,000 |
|
|
|
213,750 |
|
|
|
148,800 |
|
|
|
187,500 |
|
Continued health benefits |
|
|
14,400 |
|
|
|
11,052 |
|
|
|
14,400 |
|
|
|
14,400 |
|
|
|
11,052 |
|
Acceleration of stock options(1) |
|
|
3,484,500 |
|
|
|
1,749,600 |
|
|
|
1,315,300 |
|
|
|
260,400 |
|
|
|
573,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,286,400 |
|
|
|
2,435,652 |
|
|
|
1,970,950 |
|
|
|
795,600 |
|
|
|
1,147,152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
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 as of December 31, 2009 ($5.96 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
January 3, 2010. Target annual bonus payments are equal to 50% of such base salary for
Messrs. Marrow, DiBari, Nachwalter and Szafran and 40% of such base salary for Mr. McDermott.
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. |
PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP (E&Y) to serve as the Companys
independent registered public accounting firm for fiscal year 2010. E&Y has served as the Companys
independent registered public accounting firm since 2006 and is considered by management to be well
qualified.
Although shareholder ratification of the Audit Committees appointment of E&Y as our
independent registered public accounting firm is not required by the Companys Bylaws or otherwise,
the Board of Directors is submitting the appointment of E&Y to the shareholders for ratification.
If the shareholders fail to ratify the Audit Committees appointment, the Audit Committee will
reconsider whether to retain E&Y as the Companys independent registered public accounting firm. In
addition, even if the shareholders ratify the appointment of E&Y, the Audit Committee may in its
discretion appoint a different independent accounting firm at any time during the year if the Audit
Committee determines that a change is in the best interests of the Company.
Representatives of E&Y are expected to be present at the Annual Meeting of Shareholders, where
they will have the opportunity to make a statement, if they desire to do so, and be available to
respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the appointment of E&Y as
the Companys independent registered public accounting firm. Proxies received by the Board of
Directors will be so voted unless shareholders specify in their proxies a contrary choice.
During fiscal years 2009 and 2008, the Company retained Ernst & Young LLP (E&Y) to audit the
Companys consolidated financial statements for 2009 and 2008, among other things. Fees billed to
us by E&Y, for fiscal years 2009 and 2008, for audit and other professional services rendered were
as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Audit Fees |
|
$ |
617,400 |
|
|
$ |
643,519 |
|
Audit-Related Fees |
|
|
45,000 |
|
|
|
45,000 |
|
Tax Fees |
|
|
121,750 |
|
|
|
69,562 |
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
784,150 |
|
|
$ |
758,081 |
|
|
|
|
|
|
|
|
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.
36
All fees for services incurred in fiscal 2009 were approved by the Audit Committee. The Audit
Committee has considered whether the provision of non-audit services is compatible with maintaining
the Independent Auditors independence. A representative of E&Y is expected to be present at the
Annual Meeting of Stockholders and will have an opportunity to make a statement and to respond to
appropriate questions. Although the Company is not required to seek stockholder approval of this
appointment, the Board believes it to be sound corporate governance to do so. If the appointment is
not ratified, the Audit Committee will reconsider the appointment.
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 2009 and 2008.
37
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 four directors which
as of the date of this Proxy Statement are as follows: Messrs. Workman (Chairman), Keleghan, Park
and Skinner. Each member of the Audit Committee is independent as such term is defined under the
rules of the NASDAQ 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 2009, 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 January 3, 2010. The Audit Committee discussed
with E&Y the matters required to be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended and adopted by the Public Company Accounting
Oversight Board in Rule 3200T.
E&Y also provided to the Audit Committee the written disclosures and the letter required by
the PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning
Independence. 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 January 3, 2010, for filing with the SEC.
Respectfully submitted,
AUDIT COMMITTEE
John L. Workman, Chairman
Kevin T. Keleghan
John J. Park
Samuel K. Skinner
38
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
E&Y served as our independent registered public accounting firm for fiscal year 2009. The
Audit Committee has retained E&Y to serve as our independent registered public accounting firm for
fiscal year 2010. 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 or executive officer 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 and Corporate Governance
Committee. The conflict must be resolved to the satisfaction of the Nominating and Corporate
Governance Committee or the director must resign. Further, if a director or executive officer (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. Based on a review of the Forms 3, 4 and 5 furnished to us, during fiscal year
2009, 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 except for Mr.
McDermott who filed a late Form 4.
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
http://ir.apaccustomerservices.com/proxy10.cfm, or by writing to APAC Customer Services, Inc., 2333
Waukegan Road, Suite 100, Bannockburn, Illinois 60015, Attention: Robert B. Nachwalter, Senior Vice
President, General Counsel and Corporate Secretary.
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., 2333 Waukegan Road, Suite 100, Bannockburn,
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.
39
PROPOSALS OF SHAREHOLDERS FOR 2011 ANNUAL MEETING
A shareholder who intends to present a proposal at the 2011 Annual Meeting and who wishes to
have the proposal included in our proxy statement for that meeting must deliver the proposal to the
Corporate Secretary. All proposals must be received by the Corporate Secretary at our principal
executive office located at 2333 Waukegan Road, Suite 100, Bannockburn, Illinois 60015, no later
than January 6, 2011, 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 2011 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 Corporate Secretary in accordance with our Bylaws. To be timely, such notice must be
delivered to the Corporate Secretary at our principal executive offices between February 15, 2011
and March 17, 2011. However, if the date of our 2011 Annual Meeting is before May 16, 2011, or
after August 15, 2011, the notice must be delivered to the Corporate Secretary at our principal
executive office not more than 120 days prior to the 2011 Annual Meeting and not less than the
later of 90 days prior to the 2011 Annual Meeting or 10 days following the day on which we first
publicly announce the date of the 2011 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 CARD AND RETURN IT IN
THE ENCLOSED STAMPED ENVELOPE.
By Order of the Board of Directors
Robert B. Nachwalter
Senior Vice President, General Counsel and Corporate Secretary
40
APAC Customer Services, Inc.
WO#
73986
6 FOLD AND DETACH HERE 6
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. |
|
Please mark your votes as indicated in this example |
|
x |
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The Board of Directors Recommends a Vote FOR the following nominees. |
|
|
|
The Board of Directors Recommends a Vote FOR this proposal. |
|
1. Election of Directors: |
FOR ALL |
|
WITHHOLD FOR ALL |
|
*EXCEPTIONS |
|
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|
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|
|
FOR |
|
AGAINST |
|
ABSTAIN |
|
01Katherine Andreasen
02Kevin T. Keleghan
03Michael P. Marrow
04John J. Park
|
o |
|
o |
|
o |
|
|
|
2. |
|
|
Ratification of the appointment of Ernst & Young LLP as the Companys independent registered public accounting
firm. |
|
o |
|
o |
|
o |
05Theodore G. Schwartz
06Samuel K. Skinner
07John L. Workman
|
|
|
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|
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
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(INSTRUCTIONS: To withhold authority to vote
for any individual nominee, mark the Exceptions box above and write that nominees name in
the space provided below.)
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*Exceptions
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Mark
Here for Address Change or Comments SEE REVERSE |
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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.
You can now access your APAC Customer Services, Inc. account online.
Access your APAC Customer Services, Inc. account online via Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for APAC Customer Services, Inc., now makes it
easy and convenient to get current information on your shareholder account.
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Make address changes |
View certificate history
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Obtain a duplicate 1099 tax form |
View book-entry information
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Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical
Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose MLinkSM for fast, easy and secure 24/7 online access to your
future proxy materials, investment plan statements, tax documents and more.
Simply log on to Investor ServiceDirect® at
www.bnymellon.com/shareowner/isd where step-by-step instructions will prompt
you through enrollment.
Important notice regarding the Internet availability of Proxy materials for the Annual Meeting
of shareholders. The Proxy Statement and the 2009 Annual Report to Stockholders are available
at: http://ir.apaccustomerservices.com/proxy10.cfm.
▼ FOLD AND DETACH HERE ▼
APAC CUSTOMER SERVICES, INC.
Proxy is Solicited on Behalf of the Board of Directors
For the Annual
Meeting of Shareholders on June 15, 2010
The undersigned hereby appoints Michael P. Marrow, Robert B. Nachwalter and Andrew B. Szafran,
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 15, 2010, or at any adjournment thereof.
IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED
FOR THE SEVEN NOMINEES FOR ELECTION AS DIRECTORS AND FOR PROPOSAL 2.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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Address Change/Comments
(Mark the corresponding box on the reverse side)
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BNY
MELLON SHAREOWNER SERVICES
P.O. BOX 3550
SOUTH HACKENSACK, NJ 07606-9250
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(Continued
and to be marked, dated and signed on the reverse side) |
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